ITO, Rohtak V. Smt. Uma, Rohtak

ITA 220/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3910 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 29-04-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 15-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: US AGGARWAL
• Keywords: Business income; TDS
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMEBR AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER I.T.A NO. 220/DEL/10 ASSTT. YEAR 2006-07 ITO, WARD-1, AAYAKAR BHAWAN, ROHTAK VS. UMA D/O SHRI PARKASH CHAND, PROP. PARSAD M/S. DURGA BUILDERS, H.NO. 653/14, GURU NANAK PURA, ROHTAK. (APPELLANT) (RESPONDENT) ITA NO. 221/DEL/2010 ASSTT. YEAR 2006-07 THE INCOME TAX OFFICER, VS. SHRI VIPIN SHARMA S/O SHRI BHUSHAN WARD-1, ROHTAK KUMAR, PROP. M/S. VIPIN BUILDCO N, H.NO.2061, SECTOR-1, ROHTAK (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI N.K. CHAND, SR. DR. RESPONDENT BY: SHRI U.S. AGGARWAL, ADVOCATE ORDER PER RAJPAL YADAV, JM: THE PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANC E OF REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 6.11.2009. ITA NOS.220,221 /DEL/10 ASSTT. YEAR 2006-07 2 2. LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET POINTED OUT THAT ISSUE IN DISPUTE IS SQUARELY COVERED BY THE ORDER OF THE TRI BUNAL IN ITA NO. 225, 230 AND 231/D/2010 IN THE CASES OF SMT. KAMLESH, SHRI LAKHM I CHAND, SHIR VIKRAM RESPECTIVELY. LD. DR ON THE OTHER HAND WAS UNABLE T O CONTROVERT THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT AN OBSERVATION BE MADE, CLARIFYING THE POSITION THAT FINDING RECORDED IN THE CASE OF A SSESSEE WHERE PROTECTIVE ADDITION WAS MADE WOULD NOT IMPACT THE ASSTT. ORDER IN THE C ASE WHERE SUBSTANTIAL ADDITIONS HAVE BEEN MADE. 3. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE RECORD CAREFULLY. LD. CIT (A) HAS DECIDED 16 APPEALS BY TH E COMMON ORDER WHICH IS IMPUGNED IN BOTH THESE APPEALS. A VERBATIM SAME GRO UND OF APPEAL WAS RAISED BY THE REVENUE IN THE CASES OF SMT. KAMLESH, SHRI LAKH MI CHAND AND SHRI VIKRAM. THESE APPEALS HAVE BEEN DECIDED BY THE TRIBUNAL VID E ORDER DATED 31 ST MARCH, 2010. THE GROUND OF APPEAL NOTICED BY THE TRIBUNAL AND IT S FINDING IN THOSE CASES READ AS UNDER :- ALL THESE APPEALS BY THE REVENUE ARE DIRECTED AGAIN ST THE COMMON ORDER IN RESPECT OF THREE ASSESSEES HEREIN OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), ROHTAK, DATED 06.11.2009 FOR THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING COMMON GROU NDS BEFORE US:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A) HAS ERRED IN DELETING ADDITIONS MADE IN THE HANDS OF TH E ASSESSEE ON THE PROTECTIVE BASIS, WHILE SUBSTANTIVE ADDITIONS MADE IN THE HANDS OF M/S. PACL INDIA LTD., NEW DELHI IN THE ASSESSMENT Y EAR 2006-07 WERE STILL PENDING AT THE FIRST APPELLATE STAGE. ITA NOS.220,221 /DEL/10 ASSTT. YEAR 2006-07 3 2 IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. C IT(A) HAS ERRED IN DIRECTING THE A.O. TO GIVE CREDIT OF TDS T O THE ASSESSEE EVEN AFTER HOLDING THAT THE AMOUNTS ON WHICH TAX HA S BEEN DEDUCTED AT SOURCE, HAS ACTUALLY NOT BEEN RECEIVED BY THE ASSESSEE. 3. THE ASSESSING OFFICER FOUND THAT THERE WERE CERT AIN DISCREPANCIES/ INCONSISTENCIES IN THE CASE OF CLAIM OF REFUNDS ON THE BASIS OF TDS CERTIFICATE ISSUED BY M/S. PACL INDIA LTD. THE ASS ESSING OFFICER FOUND THAT THERE WERE 128 SUCH CASES FROM ROHTAK WHO HAD UNDERTAKEN CONTRACT WORK FOR PACL LTD. AMOUNTING TO OVER RS.37.1 CRORES . THOSE PERSONS HAVE FILED THEIR INCOME-TAX RETURNS WITH DIFFERENT ASSESSING OFFICERS AT ROHTAK. THEY HAVE CLAIMED TO HAVE RECEIVED CONTRAC T RECEIPTS AND THE SAME WAS OFFERED FOR TAX UNDER SECTION 44AD OF THE ACT WHICH WORKED OUT TO 8% OF THE GROSS RECEIPTS AND SIMULTANEOUSLY CLAIMED CREDIT FOR TDS. THE ASSESSING OFFICER PROVIDED SEVERAL OPPORT UNITIES TO THOSE CLAIMANTS OF THE TDS WHO FAILED TO SUBSTANTIATE THE IR CLAIM FOR HAVING DONE THE WORK. THE ASSESSING OFFICER HELD THAT THE RE IS NO DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM OF DOING CONTRACT WORK FOR PACL INDIA LTD. THE ASSESSING OFFICER ALSO OBSERVED THAT THER E WERE TWO BANK ACCOUNTS, ONE ACCOUNT WAS OPENED TO DEPOSIT THE CHE QUES RECEIVED FROM PACL INDIA LTD. AND ANOTHER BANK ACCOUNT WAS OPENED TO DEPOSIT INCOME RECEIVED FROM REFUND. THE ENQUIRY AND THE STATEMEN T OF THE CONTRACTORS ITA NOS.220,221 /DEL/10 ASSTT. YEAR 2006-07 4 LED HIM TO BELIEVE THAT NO WORK WAS EXECUTED FOR PA CL INDIA LTD. AND ALL THESE ASSESSEES WERE MERELY A CONDUIT FOR CREATING A SERIES OF SHAM TRANSACTION ONLY ON PAPER WITH A VIEW TO INFLATE TH E EXPENSES OF PACL INDIA LTD. HE THEREFORE, HELD AS UNDER:- THEREFORE, IN VIEW OF ALL THE FACTS OF THE CASE AN D GUIDELINES ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME-TAX , ROHTAK RANGE, ROHTAK, I HOLD THAT THE ASSESSEE HAS NOT DON E ANY KIND OF CONTRACT WORK OF THE PACL INDIA LIMITED, NEW DELHI. SINCE NO WORK HAS BEEN DONE, NO EXPENSE CAN BE ALLOWED. EVE N THE PROVISIONS OF SECTION 44AD OF THE INCOME-TAX ACT, 1 961 SHALL NOT APPLY AS THIS SECTION PRESUMES EXPENSES AT A PRE-DE TERMINED RATE TO WORK OUT THE PROFITS OF A CIVIL CONTRACTOR. ACCORD INGLY, THE RECEIPTS OF THE ASSESSEE OF RS.29,40,000/- FROM M/S. PACL IN DIA LIMITED, NEW DELHI ARE TREATED AS INCOME OF THE ASSESSEE UND ER THE HEAD INCOME FROM OTHER SOURCES ON PROTECTIVE BASIS AND NECESSARY INTIMATION IS BEING SENT TO THE CONCERNED ASSESSING OFFICER HAVING JURISDICTION OVER THE CASE OF PACL INDIA LTD., NEW DELHI FOR MAKING SUBSTANTIVE ADDITIONS IN THE HANDS OF PACL F OR THE ASSESSMENT YEAR 2006-07. 3. THE LEARNED CIT(A) BY COMMON ORDER IN RESPECT OF 16 SUCH PERSONS INCLUDING THE PRESENT ASSESSES HELD AS UNDE R:- 4. THE ISSUE INVOLVED AND THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CONSIDERED KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES. FROM THE UNDISPUTED FACTS NOTED ABO VE, IT MAY BE SEEN THAT M/S. PACL INDIA LTD. HAVE USED THE APPELL ANTS, THE POOR PERSONS, AS CONDUITS FOR THE PURPOSE OF INFLATING I TS EXPENSES FOR SHOWING LESSER PROFIT FROM ITS BUSINESS ACTIVITY AN D FOR GENERATING CASH FOR THE PURPOSE BESET KNOWN TO M/S.PACL INDIA LTD. INCOME TAX RATE IN THE CASE OF COMPANIES IS 34% (INCLUDING SURCHARGE) OF ITA NOS.220,221 /DEL/10 ASSTT. YEAR 2006-07 5 THE TOTAL INCOME. BY INFLATING EXPENSES IN THE AFO RESAID MANNER M/S. PACL INDIA LTD. WOULD HAVE BENEFITED A LOT EVE N AFTER DECLARING INCOME @ 8% UNDER SECTION 44AD BY THE APP ELLANTS (CONDUITS). SECTION 44AD HAS BEEN MISUSED BECAUSE THERE ARE NO RECEIPTS FROM CONTRACT WORKS AS DISCUSSED BY THE AS SESSING OFFICER IN THE ASSESSMENT ORDERS AND THE FACT EMERGING FROM THE AFORESAID DISCUSSION ALSO. IT IS THE DUTY OF THE TAXING AUTHORITY TO PROBE WH AT LIES HIDDEN BEHIND A TRANSACTION AND THE ASSESSING OFFIC ER IN THIS CASE HAS DONE HIS DUTY TOO WELL. THE HONBLE SUPREME CO URT IN THE CASE OF CIT VS.DURGA PRASAD MORE 82 ITR 540 (SC) AT PAGES 545 AND 547 HAS LAID DOWN THAT `THE APPARENT MUST BE CO NSIDERED THE REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BE LIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUTHOR ITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TES T OF HUMAN PROBABILITIES. THIS CASE HAS BEEN REFERRED TO BY THE HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT 2 14 ITR (801) ALSO TO EXAMINE THE CIRCUMSTANCES IN SUMATI DAYALS CASE. THE ASSESSING OFFICER HAS TREATED THE ENTIRE RECEI PTS AS `INCOME FROM OTHER SOURCES WHEREAS THE APPELLANTS HAVE WITHDRAWN MONEY FROM THE BANK ACCOUNTS; THE ASSESSI NG OFFICER AHS NOT GIVEN CREDIT FOR THE WITHDRAWAL. AS NOTED ABOVE, THE AMOUNTS OF RECEIPTS APPEARING IN THE BANK ACCOUNTS ARE NOT FROM CONTRACT BUSINESS AND THAT THE SAME HAVE BEEN WITHD RAWN A FEW DAYS AFTER DEPOSIT OF THE CHEQUES; AND FURTHER THAT FOR ASSISTING A PERSON IN PASSING ITS UNDISCLOSED CASH THROUGH BANK ING CHANNELS TO THE SAME PERSONS AND VICE-VERSA. PREVALENT MARKET COST VARIES BETWEEN 2% TO 8% AND THE APPELLANTS HAVE SHOWN, NET PROFIT @ 8% OF THE RECEIPTS (OR THEIR INCOME HAD BEEN MADE TO D ECLARE @ 8% U/S 44AD). THE INCOME DESERVES TO BE ASSESSED AT 8% OF THE RECEIPTS BECAUSE THE APPELLANT MUST NOT HAVE ALLOWED THEIR N AMES TO BE USED WITHOUT ANY CONSIDERATION, IT IS POSSIBLE THAT THEY HAVE GOT SMALL ITA NOS.220,221 /DEL/10 ASSTT. YEAR 2006-07 6 AMOUNTS IN CASH OVER AND ABOVE THE PROFIT DECLARED IN THE INCOME TAX RETURNS. HOWEVER, THE INCOME IS TO BE ASSESSED NOT AS BUSINESS INCOME BUT AS INCOME FROM `OTHER SOURCES. THEREFO RE THE INCOME DECLARED IS DIRECTED TO BE ACCEPTED AND THE CREDIT FOR TDS IS ALSO DIRECTED TO BE GIVEN. 5. IN VIEW OF THE ABOVE DISCUSSION, KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES, THERE WAS NOTHING WRONG IN MAKIN G THE ASSESSMENTS ON PROTECTIVE BASIS AND ASSESSING THE I NCOME UNDER THE HEAD `OTHER SOURCES. THE GROUNDS OF APPEAL PERTAI NING TO THESE ITEMS ARE DISMISSED. 6. WHEN A PERSON MAKES A STATEMENT WITHOUT UNDUE IN FLUENCE, FRAUD OR COERCION, THE EVIDENTIARY VALUE OF THE STA TEMENT HAS TO BE RELIED UPON; EVEN OTHERWISE THE ASSESSING OFFICER H AS CORROBORATED THE FACTS EMERGING FROM THE STATEMENTS FROM THE OTH ER EVIDENCE I.E. WITHDRAWAL OF THE CASH AMOUNTS FROM THE BANK ACCOUN TS BY THE APPELLANTS WITHIN A FEW DAYS OF THE DEPOSIT OF THE SAME, THE BANK ACCOUNTS BEING IN ROHTAK WHEREAS THE WORK HAS BEEN SUBMITTED TO BE EXECUTED IN CHENNAI; THEREFORE THERE IS NO MERIT IN THE VERSION OF THE APPELLANT THAT THE STATEMENTS GIVEN BY THE APPE LLANTS DO NOT HAVE ANY EVIDENTIARY VALUE. THE GROUND OF APPEAL P ERTAINING TO THIS ITEM IS ALSO DISMISSED. THE REVENUE IS NOW IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE LEARNED DR. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE AND HENCE WITH THE HELP OF THE LEARNED DR WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IF THE ASSESSING OFFICER WAS OF THE VIEW THAT NO WORK HAS BEEN DONE BY ANY OF THE CONTRACTOR , THE AMOUNT RECEIVED ITSELF CANNOT BE CONSIDERED TO BE INCOME OF THE ASS ESSEE BUT ONLY THE PROFIT FROM SUCH RECEIPT CAN BE BROUGHT TO TAX. TH E ASSESSEE HEREIN BEING FOUND TO BE NAME LENDERS COULD HAVE CHARGED ONLY TH E COMMISSION FOR SO LENDING THE NAME. IN THE FORM OF BANK STATEMENT IT IS ALSO EVIDENT THAT THE ITA NOS.220,221 /DEL/10 ASSTT. YEAR 2006-07 7 AMOUNT RECEIVED WAS PURPORTED TO BE REFUNDED BACK T O PACL INDIA LTD. THEREFORE, INCOME OF THE PRESENT ASSESSES ARE ONLY TO THE EXTENT OF RECEIVING COMMISSION AND SINCE ALL THESE PERSONS HA VE OFFERED 8% OF THEIR INCOME, NO FURTHER AMOUNT IS TAXABLE. AT THE SAME TIME, THE LEARNED CIT(A) HAS FOUND THAT THE INCOME IS NOT ASSESSABLE AS BUSINESS INCOME OR UNDER SECTION 44AD OF THE ACT BUT ONLY AS INCOME FR OM OTHER SOURCES WHICH IN ANY CASE COULD NOT HAVE EXCEEDED THE AMOUN T OFFERED FOR TAX. SINCE CORRECT INCOME HAS BEEN OFFERED FOR TAX BY TH E ASSESSEES HEREIN, THE ASSESSING OFFICER WAS THEREFORE, IN ERROR IN TAXING THE ENTIRE SUM RECEIVED AS INCOME. WE, THEREFORE, DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE LEARNED CIT(A). 5. AS REGARDS CREDIT FOR TDS, SINCE THE INCOME HAS BEEN ASSESSED IN THE HANDS OF THE ASSESSEES AND THE TAX WAS DEDUCTED FROM THEIR INCOME, THE PERSONS ARE ENTITLED TO CREDIT FOR THE TAX DEDU CTED AT SOURCE. THEREFORE, HERE ALSO THERE IS NO INFIRMITY IN THE O RDER OF THE CIT(A). 6. IN THE RESULT, ALL THE THREE APPEALS ARE DISMISS ED. 4. SINCE THERE IS NO DISPARITY ON FACTS, THEREFORE WE DO NOT SEE ANY REASON TO TAKE A DIFFERENT STAND THAN THE ONE TAKEN BY THE TR IBUNAL IN THE APPEALS OF OTHER ASSESSES. HOWEVER BEFORE PARTING WITH THIS ORDER WE WOULD LIKE TO MAKE A MENTION THAT ANY OBSERVATION MADE BY US WHILE CONSIDERING T HE CASES OF THESE ASSESSES IN WHOSE HANDS PROTECTIVE ADDITIONS HAVE BEEN MADE, SU CH OBSERVATION WILL NOT IMPAIR OR INJURE THE CASE OF AO QUA THE ASSESSEE IN WHOSE HAND SUBSTANTIVE ADDITION HAS BEEN MADE. IT IS ALSO MADE CLEAR THAT THESE OBSERVA TIONS WERE ALSO NOT CAUSE PREJUDICE TO THE DEFENSE / EXPLANATION OF THE ASSES SEE WHERE SUBSTANTIVE ADDITION HAS BEEN MADE. ITA NOS.220,221 /DEL/10 ASSTT. YEAR 2006-07 8 5. IN THE RESULT ALL THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.5.2010. [R.C. SHARMA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER VEENA DATED 14.5.2010 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT