Varadarajan Santhanaraman, CHENNAI V. DCIT, CHENNAI

ITA 2309/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8066 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 08-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: TDS; FORM 26AS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 40(a)(ia); 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.2309/MDS/2016 / ASSESSMENT YEAR:2012-13 SHRI VARADARAJAN SANTHANARAMAN, NO.9/5, BALAJI AVENUE, FIRST STREET, T. NAGAR, CHENNAI-600 017. VS. THE DY. CIT, NON-CORPORATE CIRCLE 2, CHENNAI-34. [PAN:AIYPS7092J] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : MS. G. BASKAR, ADVOCATE /RESPONDENT BY : MS. SHIVA SRINIVAS, JCIT / DATE OF HEARING : 08 .11.2016 / DATE OF PRONOUNCEMENT : 25 .1 . 201 7 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-2, CHENNA I, DATED 24.05.2015 IN ITA NO.204/CIT(A)-2/2014-15 PERTAININ G TO ASSESSMENT YEARS 2012-13. ITA NO.2309/MDS/2016 :- 2 -: 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD TO CONFIRMING THE DISALLOWANCE OF ` 15,45,187/- MADE U/S.40(A)(IA) OF THE ACT. 3. THE FACTS OF THE ISSUE ARE THAT THE AO FOUND TH AT THE ASSESSEE HAD CLAIMED ADVERTISEMENT EXPENSES OF ` 15,57,100/- WHICH INCLUDED A SUM OF ` 15,45,187/- PAID TO M/S.BHARADWAJ AGENCIES ON WHICH TAX WAS NOT DEDUCTED AT SOURCE BY THE ASSESSE E. HENCE, THE LD. ASSESSING OFFICER INVOKED THE PROVISIONS OF THE SEC TION 40(A)(IA) OF THE ACT AND DISALLOWED ` 15,45,187/- BEING ADVERTISEMENT EXPENDITURE ON WHICH TAX WAS NOT DEDUCTED. AGGRIEVED, THE ASSESSE E CARRIED THE APPEAL BEFORE THE LD.CIT(A). 3.1. ON APPEAL, THE LOWER AUTHORITIES PLACED RELIA NCE ON THE JUDGEMENT OF SPECIAL BENCH OF VISHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS.ADDL. CIT IN [2012] 136 IT D 23 AND STATED THAT WHEN THE AMOUNT IS NOT OUTSTANDING AT THE END OF THE CLOSE OF YEAR, THE SAID AMOUNT CANNOT BE DISALLOWED U/S.40(A )(IA) OF THE ACT. FURTHER, THE ASSESSEE PRODUCED A CERTIFICATE IN FOR M 26A BEFORE THE LD.CIT(A) ISSUED BYTHE CA SHRI C R KAILASHNATH, CHA RTERED ACCOUNTANTS OF M/S.BHARDWAJ AGENCIES (PAM AAEFB 457 0 G) CERTIFYING THE DISCLOSURE AND PAYMENT OF TAX OF A SUM OF OF ` 15,33,416/- RECEIVED FROM THE ASSESSEE. THE LD.CIT(A) OBSERVE D THAT THE SECOND PROVISO TO SEC. 40(A)(IA) OF THE ACT WAS INSERTED W.E.F. 01.04.2013 BY FINANCE ACT, 2012 AND HENCE, THIS CANNOT BE TAKEN I NTO ACCOUNT TO GIVE ITA NO.2309/MDS/2016 :- 3 -: RELIEF FOR THE ASSESSMENT YEAR 2012-13. THEREFORE, LD.CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE LD . ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF THE LD.A.R IS THAT N OTHING IS PAYABLE AT THE END OF THE CLOSE OF THE FINANCIAL YEAR, AS SUCH THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE SPECIAL BENCH OF THE T RIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CIT [20 12] 16 ITR (TRIB) 1 (VISAKHAPATNAM) [SB]. IN OUR OPINION, THERE IS A F ORCE IN THE ARGUMENT OF THE LD.A.R AND THE SPECIAL BENCH CITED SUPRA CONSIDERED THIS ISSUE AND DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE. FURTHER, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF S HRI N.PALANIVELU VS. ITO REPORTED IN [2015] 40 ITR (TRIB) 325 [CHENNAI] VIDE ORDER DATED 29.04.2015 WHEREIN HELD THAT:- 4. WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERI AL ON RECORD. WE FIND THAT THE SPECIAL BENCH OF THE TRIBU NAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CI T [2012] 16 ITR (TRIB) 1 (VISAKHAPATNAM) [SB] AND JUDGMENT O F THE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. VECTOR S HIPPING SERVICES (P.) LTD. IN [2013] 357 ITR 642 (ALL) HELD THAT SECTION 40(A)(IA) OF THE ACT IS NOT APPLICABLE WHEN THERE IS NO OUTSTANDING BALANCE AT THE END OF THE CLOSE O F THE YEAR RELEVANT TO THE ASSESSMENT YEAR IN RESPECT OF THESE PAYMENTS. HOWEVER, THE ASSESSEE HAS NOT ITA NO.2309/MDS/2016 :- 4 -: BROUGHT ON RECORD, THE DETAILS OF OUTSTANDING EXPEN SES OR SCHEDULE OF SUNDRY CREDITORS SHOWING WHETHER THE IM PUGNED AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR EITHER IN THE NAME OF THE PARTY OR OUTSTANDING EXPENSES. HENCE, IN THE IN TEREST OF JUSTICE, WE ARE REMITTING THE ISSUE BACK TO THE FIL E OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE CLAI M OF THE ASSESSEE AND THE ASSESSEE SHALL PLACE NECESSARY EVI DENCE IN SUPPORT OF HIS CLAIM. 5. FURTHER, WE MAKE IT CLEAR THAT IF THE IMPUGNED A MOUNT IS NOT OUTSTANDING AT THE END OF THE CLOSE OF THE ASSE SSMENT YEAR IN RESPECT OF THE EXPENSES EITHER AS OUTSTANDI NG EXPENSES OR AS SUNDRY CREDITORS, THIS AMOUNT CANNOT BE DISALLOWED. THIS GROUND IS REMITTED BACK TO THE ASS ESSING OFFICER FOR FRESH CONSIDERATION. IN VIEW OF THE ORDER OF THE TRIBUNAL, WE ARE INCLIN ED TO REMIT THIS ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER WITH SIMIL AR DIRECTION. THESE GROUNDS RAISED BY THE ASSESSEE U/S.40(A)(IA) OF THE ACT IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 5. THE SECOND GROUND IN THIS APPEAL IS WITH REGARD TO CONFIRMING THE DISALLOWANCE OF ENTIRE COMMISSION EX PENSES OF ` 1,62,43,200/-. 5.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE I S CARRYING ON BUSINESS IN REAL ESTATE BROKING. IN THIS BUSINESS, THE PAYMENT OF ITA NO.2309/MDS/2016 :- 5 -: COMMISSION TO VARIOUS SUB-AGENTS IS A NECESSITY, WH ICH COULD NOT BE AVOIDED AT ALL. THE ASSESSEE IN THE FINANCIAL YEAR 2011-12 HAD PAID COMMISSION AT ` 1,62,43,200/-. THE COMMISSION PAYMENTS WERE MADE BOTH BY CASH AND CHEQUE. DURING THE ASSESSMENT PR OCEEDINGS, THE AO DISALLOWED THE ENTIRE COMMISSION FOR THE FOLLOW ING REASONS. I) AMOUNT PAID BY CHEQUE BUT WITHOUT TDS AND DISALLOWANCE U/S.40(A)(IA) 82,95,070 II) AMOUNT PAID BY CASH IN VIOLATION OF S.40A(3) 2 1,51,000 III) COMMISSION DISALLOWED FOR WANT OF DETAILS 57,9 7,130 AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER, TH E ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 5.2.1 ON APPEAL, LD.CIT(A) OBSERVED THAT AS FAR AS THE DISALLOWANCE OF ` 57,97,130/- U/S.40(A)(IA) OF THE ACT IS CONCERNED, THE STAND OF THE AO THAT THE ASSESSEE HAS FAILED TO DIS CHARGE ITS ONUS OF PROVING NECESSARY FACTS, IS FOUND TO BE CORRECT AND HENCE, LD.CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO. 5.2.2 THE NEXT DISALLOWANCE U/S.40A(3) OF THE ACT , LD.CIT(A) DIRECTED THE AO TO VERIFY WHETHER THE PAYMENTS OF ` 1,25,000/- AND ` 4,16,000/- WERE MADE ON SUNDAYS, AS CLAIMED BY THE ASSESSEE. IN CASE, THE ASSESSEES CLAIM IS FOUND TO BE CORRECT, THE AO IS DIRECTED TO REDUCE THE SAID SUMS FROM THE TOTAL DISALLOWANCE OF COMMISSION ITA NO.2309/MDS/2016 :- 6 -: PAYMENTS. 5.2.3 ACCORDING TO LD.CIT(A), THE ASSESSEE HAD NOT MADE ANY SPECIFIC SUBMISSIONS EXPLAINING THE REASON FOR VIOL ATION U/S.40A(3), EXCEPT TO POINT OUT THAT TWO PAYMENTS VIZ. ` 1,25,000/- AND ` 4,16,000/- WERE MADE ON SUNDAYS , WHICH ARE COVERED UNDER THE EXCEPTION MENTIONED IN RULE 6DD(J) OF THE I.T.RULES , 1962. HENCE, THE LD.CIT(A) CONFIRMED THE ENTIRE DISALLOWANCE OF COMM ISSION, EXCEPT THE SUMS OF ` 1,25,000/- AND ` 4,16,000/- WHICH IS SUBJECT TO VERIFICATION BY THE AO. AGAINST THIS, THE ASSESSEE IS IN APPEAL B EFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THIS ISSUE CAME FOR CONSIDE RATION BEFORE THE DELHI BENCH OF THE INCOME TAX APPELLATE TRIBUNAL RE NDERED ON 22.5.2012 IN L.T.A.NO.3592/DEL/2011, WHICH HAD APPROVED THE RETR OSPECTIVE NATURE OF THE AMENDMENT BROUGHT IN BY WAY OF THE INSERTION OF THE PROVISO BELOW THE SECTION 40 (A) (IA) OF THE ACT. BEING SO, WHEN THE RECIPIENT PAID THE TAX ON THE COMMISSION RECEIVED BY THEM AND INCLUDED THE SA ME IN THEIR RETURN OF INCOME, THERE CANNOT BE ANY DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. THE SAME VIEW WAS TAKEN BY DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (I) PVT LTD., IN 377 ITR 635(DEL .) IN VIEW OF THE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO REMIT THE ISSUE TO THE FILE OF AO TO EXAMINE WHETHER THE RECIPIENT HAD PAID TAX ON RECEIPT OF COMMISSION AND DECIDE ACCORDINGLY. ITA NO.2309/MDS/2016 :- 7 -: 7. WITH REGARD TO DISALLOWANCE OF ` 16,10,000/- U/S.40A(3), AT THE TIME OF HEARING, THE LD.A.R DID NOT PRESS THIS GRO UND. ACCORDINGLY, THIS GROUND IS DISMISSED AS NOT PRESSED. 8. THE FOURTH GROUND IS WITH REGARD TO CONFIRMING THE ADDITION OF ` 13,11,800/- BEING UNEXPLAINED CASH DEPOSITS INTO TH E BANK ACCOUNTS. 9. THE FACTS OF THE ISSUE ARE THAT THE AO FOUND TH AT THE ASSESSEE HAS MADE CASH DEPOSITS OF ` 13,11,800/- INTO THE SAVINGS BANK ACCOUNT WITH STANDARD CHARTERED BANK ON VARIOUS DATES DURIN G THE RELEVANT PREVIOUS YEAR. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE ASSESSEE STATED THAT THE CASH DEPOSIT OF ` 8.75 LAKHS WAS RECEIVED BY THE ASSESSEE TOWARDS A TRANSACTION RELATING TO HIS PROPERTY AT T.NAGAR. THE AO POINTED OUT THE ASSESSEE HAS FAILED TO PRODU CE EVEN THE BASIC DETAILS SUCH AS NAME, ADDRESS, PAN DETAILS ETC., OF THE PERSON FROM WHOM HE RECEIVED THE ALLEGED PAYMENT/ADVANCE, WITH REGARD TO HIS CLAIM THAT CASH DEPOSITS OF ` 8.75 LAKHS INTO HIS ACCOUNT, IS PAYMENT TOWARDS HIS PROPERTY LOCATED IN T.NAGAR. IN THE ABS ENCE OF VITAL DETAILS LIKE IDENTITY AND CREDITWORTHINESS OF THE PAYER, TH E AO REJECTED THE ASSESSEES EXPLANATION. FINALLY, THE AO CONCLUDED T HAT THE ASSESSEES EXPLANATION IS RELATED TO ONLY A CASH DEPOSIT OF ` 8.75 LAKHS AS AGAINST THE TOTAL CASH DEPOSITS OF ` 13,11,800/- . HENCE, THE AO DISALLOWED THE ITA NO.2309/MDS/2016 :- 8 -: ENTIRE CASH DEPOSITS OF ` 13,11,800/-, WHICH IS CONFIRMED BY THE LD.CIT(A). AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD.A.R PLEADED THAT THE ASSESSEE MAY BE GIVEN ONE MORE OPPORTUNITY OF HEARING TO EXPLAIN THE SOURCE OF DEP OSIT. WE ACCEPT THE REQUEST OF THE LD.A.R AND THE ISSUE IS REMITTED TO THE FILE OF LD. ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE SOURCE OF DEPOSITS. HENCE, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 11. THE LAST GROUND IS WITH REGARD TO ADDITION OF ` 7,98,800/- ON THE GROUND OF BROKERAGE COMMISSION RECEIPTS SHORT OFFER ED. 12. THE FACTS OF THE ISSUE ARE THAT THE AO FOUND T HAT AS AGAINST THE BROKERAGE RECEIPTS AS PER FORM 26AS OF ` 2,72,07,000/-, THE ASSESSEE HAS CREDITED THE P&L A/C WITH A SUM OF ` 2,64,08,200/- TOWARDS BROKERAGE COMMISSION. SINCE THE ASSESSEE IS FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING, THE AO ADDED ` 7,98,800/- ON THE GROUND OF BROKERAGE COMMISSION RECEIPTS SHORT OFFERED, WHICH WAS CONFIRMED BY THE LD.CIT(A). ITA NO.2309/MDS/2016 :- 9 -: 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. LD.A.R PRAYED FOR ONE MORE OPPORTUNITY TO R ECONSIDER FORM- 26AS WITH BOOKS OF ACCOUNTS. ACCORDINGLY, THE ISSU E IS REMITTED TO THE FILE OF LD. ASSESSING OFFICER WITH A DIRECTION TO G IVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE DETAILS IN FORM 26AS. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 25 TH JANUARY, 2017 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF