P. SELVARAJAN, TIRUCHENGODE V. ITO, WARD-2, TIRUCHENGODE

ITA 2331/CHNY/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6233 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 15-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside

Judgement Text

आयकर अपीलीय अिधकरण, ‘सी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI Įी महावीर ͧसंह, उपाÚय¢ एवं डॉ दȣपक पी. ǐरपोटे, लेखा सदèय के सम¢ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND Dr. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 2331/CHNY/2019 िनधाᭅरण वषᭅ /Assessment Year: 2016-17 Shri P. Selvarajan, No.1380, SPB Colony, SPB Colony Post, Tiruchengode – 638 010. PAN: FTEPS 2732F vs. The Income Tax Officer, Ward 2, Tiruchengode. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri T. Vasudevan, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri Hema Bhupal, JCIT स ु नवाई कȧ तारȣख/Date of Hearing : 17.08.2022 घोषणा कȧ तारȣख/Date of Pronouncement :17.08.2022 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals), Salem in ITA No.169/2018- 19 dated 26.06.2019. The assessment was framed by the Income Tax Officer, Ward-2, Tiruchengode for the assessment year 2016-17 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 29.12.2018. 2 ITA Nos.2331/Chny/2019 2. The three interconnected issues in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in making addition of Rs.6,13,901/- by taking 8% of gross contract receipts and also making addition of commission income of Rs.12,000/- and also making addition of contract receipts credited in the bank account of Rs.1,65,486/-. For these three additions, the assessee has raised various grounds which need not to be reproduced. 3. Brief facts are that the assessee is an individual and derives income from contract receipts from supply of manpower i.e., commission income and also contract incomes declared u/s.44AD of the Act. The assessee’s case was taken up for limited scrutiny through CASS on account of “Whether contract receipts/fees have been correctly offered for tax”. Consequently, notice u/s.143(2) of the Act dated 21.07.2017 was issued and assessee was heard. The AO noted that the assessee is a contractor for Seshasayee Paper and Boards Limited, Erode for supplying of manpower as per agreement. The AO required the assessee to submit copy of contract agreement, Form 26AS, etc., and the AO after going through the Form 26AS noted that the assessee has received contract receipt of Rs.1,18,61,328/- from Seshasayee Paper and Boards Limited. The assessee filed complete details before AO i.e., 3 ITA Nos.2331/Chny/2019 contract agreement for supply of manpower and details of contract receipts which is being assessed u/s.44AD of the Act. But the AO noted that the assessee has taken gross receipts from contract at Rs.5,50,000/- and shown net profit of Rs.3,35,000/- u/s.44AD of the Act and claimed refund of Rs.99,420/-. Accordingly, a show cause notice was issued by the AO as to why on the gross contract receipts from Seshasayee Paper and Boards Limited amounting to Rs.1,18,61,328/-, profit rate of 8% be not applied. The AO in his show cause notice also required the assessee to explain as to why the commission income of Rs.10,000/- has been declared as against receipt of Rs.11,000/- per month, thereby there is short declaration of income of commission of Rs.12,000/-, be added. The AO also noted in the show cause notice that there is deposit in one bank account maintained by the assessee with Syndicate Bank bearing account No.61252010112715, wherein total credit of Rs.1,65,486/- being not treated as income of the assessee. The assessee replied to the show cause notice but the AO noted that the assessee is unable to prove by filing documentary evidence like books of accounts, bills and vouchers as prescribed under the provisions of section 44AA of the Act and thereby made following additions:- 1. Addition of non production of bills/vouchers - Rs.6,13,906/- 2. Undisclosed Commission income - Rs. 12,000/- 3. Addition of interest income - Rs. 1,65,486/- 4 ITA Nos.2331/Chny/2019 Aggrieved assessee came in appeal before the CIT(A). The CIT(A) simpliciter confirmed the action of the AO. Aggrieved, assessee came in appeal before the Tribunal. 4. Before us, ld.counsel for the assessee stated that the assessee has two units of business. First, he is engaged in the construction business for which he has declared income u/s.44AD of the Act amounting to Rs.3,35,000/-. Secondly, he is also engaged in the business of supply of manpower to Seshasayee Paper and Boards Limited on account of which the gross contract receipts in term of contract was received amounting to Rs.1,18,61,328/-. He explained that these are two businesses of the assessee and both are independent businesses. The ld.counsel stated that as far as assessee’s contract business, there is no dispute that there is income of Rs.3,35,000/- declared by assessee u/s.44AD of the Act. As regards to the business of assessee of manpower supply to Seshasayee Paper and Boards Limited, the ld.counsel explained that as per contract, the assessee has to supply manpower and he placed copy of manpower supply contract entered with Seshasayee Paper and Boards Limited. As per this contract, the assessee has to supply the manpower for a maximum limit of payment of Rs.7,11,339/- per month including the contractor’s margin. The 5 ITA Nos.2331/Chny/2019 assessee accordingly received this amount of Rs.1,18,61,328/- which was never the subject matter of declaration u/s.44AD of the Act but the assessee has separately declared the income under the head commission that sum of Rs.1,20,000/- because the assessee is receiving this commission and in this year, the commission was actually Rs.11,000/- per month i.e., Rs.1,32,000/-. The ld.counsel explained that another addition of Rs.1,65,486/- towards cash deposit or credit found in the Syndicate Bank of the assessee is out of the contract receipts for which neither CIT(A) nor AO has understood the issue. He stated that these three additions are interrelated and neither the AO nor the CIT(A) has examined any of the issue. According to him, none of the addition will sustain except the addition of commission of Rs.12,000/-. 4.1 When a query was put to the ld.counsel for the assessee, whether the books of accounts are submitted before the AO, he categorically stated that assessee is not maintaining any books of accounts and he is not required to maintain the books of accounts as per the provisions of section 44AA of the Act, for the reason that the assessee’s contract receipts are much below Rs.1 crore and the gross contract receipt is only Rs.5,50,000/- out of which he has declared net profit or net receipts at Rs.3,35,000/-. Secondly, as 6 ITA Nos.2331/Chny/2019 regards to the gross contract receipts of manpower supply to Seshasayee Paper and Boards Limited, the assessee is acting as an agent only and he is receiving commission and disclosing that commission in the return of income regularly. He stated that this commission is the only profit element of the assessee and nothing more. 5. When a query was put to ld. Senior DR, he only relied on the assessment order and the order of the CIT(A). 6. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the aspect of the assessee’s contract business which is a separate business and declared by assessee u/s.44AD of the Act being gross contract receipts at Rs.5,50,000/- out of which net receipts declared by the assessee in the return of income at Rs.3,35,000/- is a different business which needs verification. As regards to gross receipts on account of manpower supply contract with Seshasayee Paper and Boards Limited amounting to Rs.1,18,61,328/- added by the AO and confirmed by the CIT(A) is without examination of facts of the case. Hence, this issue needs to be reverted back to the file of the AO. Secondly, the aspect of addition of Rs.1,65,486/- in assessee’s Syndicate Bank account, the assessee claimed that the same is out 7 ITA Nos.2331/Chny/2019 of the assessee’s contract receipts i.e., separate contract business partly and partly out of the cash withdrawal from the bank account, needs verification. Hence, on all the three issues the orders of the lower authorities are set aside and the matter remanded back to the file of the AO for fresh adjudication. 7. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 17 th August, 2022 at Chennai. Sd/- Sd/- (डॉ दीपक पी. ᳯरपोटे) (Dr. DIPAK P. RIPOTE) लेखा सद᭭य /ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 17 th August, 2022 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.