Shri Gurinder Kahlan, Baroda V. The Income tax Officer,Ward-1(1), Baroda

ITA 2219/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0887 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 05-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Salary income
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2219/AHD/2012 (ASSESSMENT YEAR: 2007-08) GURINDER KAHLON 23, DHANUSHYA SOCIETY , NEW SAMA ROAD, BARODA- 390008 V/S INCOME TAX OFFICER, WARD- 1 (1), BARODA (APPELLANT) (RESPONDENT) PAN: AAZPK4731H APPELLANT BY : SHRI M.K. PATEL, A.R. RESPONDENT BY : SHRI R.K. GUPTA, SR. D.R. ( )/ ORDER DATE OF HEARING : 16 -08-201 6 DATE OF PRONOUNCEMENT : 17 -08-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-I, BARODA DATED 25.07.2012 PERTAINING TO A.Y . 2007-08. ITA NO. 2219 /AHD/2012 . A.Y. 2007-08 2 2. THE ASSESSEE HAS RAISED FIVE GROUNDS OF APPEAL. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION O F RS. 7,10,920/- MADE ON ACCOUNT OF BUSINESS INCOME BY ESTIMATING NE T PROFIT @ 8% OF RS. 88,86,449/- AND TREATING THE SAME AS INCOME OF THE YEAR. 3. THE ASSESSEE STRONGLY CONTENDS THAT THE ENTIRE INCO ME EARNED HAS BEEN OFFERED FOR TAX IN THE SUBSEQUENT YEAR, WHEN T HE CONTRACT WAS EXECUTED AND THE INVOICES WERE RAISED. 4. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE CAREFUL LY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 5. THE ORIGINAL RETURN OF INCOME WAS FILED ON 31.03.20 09 DECLARING INCOME AT RS. 2,35,040/- WHICH COMPRISED OF SALARY INCOME. THE RETURN WAS ACCEPTED U/S. 143(1) OF THE ACT. 6. ON THE BASIS OF AN INFORMATION, THE A.O. CAME TO KN OW THAT ASSESSEE HAS RECEIVED RS. 88,86,449/- FROM M/S. ALFAGEO INDI A LIMITED ON WHICH THE PAYER HAS DEDUCTED TAX AT SOURCE. ON NOT FINDIN G THIS TRANSACTION IN THE RETURN OF INCOME ACCEPTED U/S. 143(1) OF THE ACT, THE ASSESSMENT WAS REOPENED BY ISSUE AND SERVICE OF NOT ICE U/S. 148 OF THE ACT. 7. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, THE A.O. ASKED THE ASSESSEE WHY AMOUNT RECEIVED FROM M/S. ALFAGEO INDI A LIMITED HAS NOT BEEN OFFERED FOR TAXATION. IT WAS EXPLAINED BY THE ASSESSEE THAT THE AMOUNT RECEIVED FROM M/S. ALFAGEO INDIA LIMITED WAS AN ADVANCE DURING THE YEAR AND THE SAME HAS BEEN OFFERED FOR T AXATION IN THE ITA NO. 2219 /AHD/2012 . A.Y. 2007-08 3 SUBSEQUENT YEAR, WHEN THE CONTRACT WAS EXECUTED AND THE INVOICES WERE RAISED. 8. THIS EXPLANATION OF THE ASSESSEE DID NOT FI ND ANY FAVOUR WITH THE A.O. WHO WAS OF THE OPINION THAT SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING IT SHOULD HAVE OFFE RED THE INCOME DURING THE YEAR UNDER CONSIDERATION. THE A.O. COMPU TED THE NET PROFITS @ 8% AND MADE AN ADDITION OF RS. 7,10,920/- . 9. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED THAT THE ASSESSEE HAS OFFERED ENTIRE AMOUNT OF RS. 1,31,32,037/- IN THE SUBSEQUENT FINANCIAL YEAR WHICH INCLUDED THE SU M OF RS. 88,86,449/- ON WHICH THE A.O. HAS ADOPTED 8% AS NET PROFIT AND MADE THE IMPUGNED ADDITIONS. THIS EXPLANATION OF THE ASS ESSEE WAS DISMISSED BY THE LD. CIT(A) FOR THE SAME REASON THA T THE ASSESSEE IS MAINTAINING BOOKS ON MERCANTILE SYSTEM OF ACCOUNTIN G AND HENCE SHOULD HAVE OFFERED THE INCOME IN THE YEAR UNDER CO NSIDERATION. 10. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 11. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS ONLY RECEIVED THE ADVANCE FROM M/S. ALFAGEO INDIA LIMITED. SINCE, THE INVOICES WERE RAISED IN THE SUBSEQUENT YEARS, THE INCOME HAS BEEN OFFERED FOR TAXATION IN THE SUBSEQUENT ASSESSMENT YEARS. IT IS THE SAY OF THE LD. COUNSEL THAT IF THE SAME INCOME IS TAXED DURING THE YEAR UNDER CONSIDERATION, IT WILL AMOUNT TO DOUBLE TAXATION OF THE SAME INCOME. ITA NO. 2219 /AHD/2012 . A.Y. 2007-08 4 12. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE REVENUE AUTHORITIES. 13. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE AS SESSEE HAS RECEIVED ADVANCE FROM M/S. ALFAGEO INDIA LIMITED DURING THE YEAR UNDER CONSIDERATION AMOUNTING TO RS. 88,86,449/-. WE FIND THAT THE ONLY BASIS FOR MAKING THE IMPUGNED ADDITION IS THAT M/S. ALFAGEO INDIA LIMITED HAS DEDUCTED TAX AT SOURCE ON THE SAID AMOU NT OF ADVANCE. IN OUR CONSIDERED OPINION, THE STATUTORY LIABILITY OF THE PAYER CANNOT DECIDE THE TAXABILITY OF THE INCOME IN THE HANDS OF THE PAYEE. IN OUR UNDERSTANDING OF THE LAW, THE PAYER IS LIABLE TO DE DUCT TAX AT SOURCE WHEN THE AMOUNT IS PAID OR CREDITED IN THE ACCOUNT OF THE PAYEE. SINCE, M/S. ALFAGEO INDIA LIMITED HAD CREDITED THE ADVANCE IN THE ACCOUNT OF THE ASSESSEE; IT WAS LIABLE TO DEDUCT TA X AT SOURCE. HOWEVER, THE SAME AMOUNT BECOMES INCOME OF THE PAYE E ONLY WHEN IT HAS A RIGHT TO RECEIVE THAT AMOUNT AS INCOME AND TH IS WILL HAPPEN ONLY WHEN THE CONTRACT IS EXECUTED AND THE INVOICES ARE RAISED. 14. SINCE, THE ASSESSEE HAS ACCOUNTED FOR THE IMPUGNED INCOME IN THE SUBSEQUENT YEAR WHEN IT HAS A RIGHT TO RECEIVE THAT AMOUNT AS INCOME; WE DO NOT FIND ANY REASON FOR MAKING THE AD DITIONS IN THE YEAR UNDER CONSIDERATION. 15. SINCE, THE LOWER AUTHORITIES HAVE ADMITTED THE FACT THAT THE ASSESSEE HAS SHOWN THE IMPUGNED AMOUNT IN HIS INCOM E IN THE SUBSEQUENT YEAR, AND SINCE THERE IS NO LOSS TO THE REVENUE AS THE RATE OF TAX IS THE SAME, WE SET ASIDE THE FINDINGS OF TH E LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 7,10, 920/- FROM THE YEAR ITA NO. 2219 /AHD/2012 . A.Y. 2007-08 5 UNDER CONSIDERATION. THE SUBSTANTIVE GRIEVANCE OF T HE ASSESSEE IS ALLOWED. 16. GROUND NOS. 2, 3 & 4 RELATE TO THE INITIATION OF PE NALTY PROCEEDINGS U/S. 271(1)(C), 271A & 271B OF THE ACT. THE GRIEVANCE RAISED VIDE THESE GROUNDS ARE PREMATURE AND ACCORDI NGLY DISMISSED. 17. GROUND NO. 5 RELATED TO THE LEVY OF INTEREST U/S. 2 34B & 234C OF THE ACT. CHARGE OF INTEREST IS MANDATORY THOUGH CON SEQUENTIAL; WE ACCORDINGLY DIRECT THE A.O. TO CHARGE INTEREST AS P ER THE PROVISIONS OF THE LAW. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 17 - 08- 20 16. SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD