ITO, Ward-1, Proddatur, Proddatur V. Araveti Satyanarayana (HUF), Proddatur, Proddatur

ITA 26/HYD/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2597 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 05-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: S VENUGOPAL
• Section: 44AD; 143(3); 142(1); 194C; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 26/HYD/2017 ASSESSMENT YEAR: 2009-10 INCOME-TAX OFFICER, WARD 1, PRODDATUR. VS. ARAVETI SATYANARAYANA (HUF), PRODDATUR. PAN AAFHA 4229 Q (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.J. RAO ASSESSEE BY : SHRI S. VENUGOPAL DATE OF HEARING : 06-04-2017 DATE OF PRONOUNCEMENT : 21-04-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS IS AN APPEAL OF THE REVENUE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A), KURNOOL, DATED 05/10/2016 FOR AY 2009-10. 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE, A H UF, FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 26/03/2010 DISCL OSING TOTAL INCOME OF RS. 3,23,540/- AND CLAIMED REFUND OF RS. 94,851/- OUT OF TOTAL TDS OF RS. 1,15,150/-. RETURN OF INCOME WAS P ROCESSED U/S 143(1) ON 31/03/2010 BY ACCEPTING THE RETURNED INCO ME. THE CASE WAS SELECTED FOR SCRUTINY BY CASS FOR EXAMINATION O F SOURCE OF CASH DEPOSITS ABOVE THE THRESHOLD LIMITS IN SAVINGS BANK ACCOUNT. ACCORDINGLY, NOTICES U/S 143(2) & 142(1) WERE ISSUE D AND SERVED. ASSESSMENT U/S 143(3) WAS COMPLETED ON 01/02/2011 B Y MAKING AN 2 ITA NO. 26/H/17 ARAVETI SATYANARAYANA (HUF) ADDITION OF RS. 1 LAKH AS WITHDRAWALS IN THE CAPITA L ACCOUNT WERE FOUND TO BE ON LOWER SIDE. 3. THE CIT, TIRUPATHI RANGE HAD CALLED FOR THE ASSE SSMENT RECORDS BY INVOKING SECTION 263. LD. CIT NOTICED THE FOLLOW ING DEFECTS IN THE ASSESSMENT ORDER WHICH MADE IT ERRONEOUS AND PREJU DICIAL TO THE INTERESTS OF REVENUE: (I) THE SOURCES FOR CASH DEPOSITS WERE NOT SUBSTA NTIATED WITH EVIDENCE, THE NECESSITY & USAGE OF CASH WITHDRAWALS & PAYMENTS & RECEIPTS WITH RESPECT TO BALANCE SHEET WERE NOT S UBSTANTIATED. (II) THE ASSESSEE HAS NOT DISCLOSED INCOME FROM CON TRACT RECEIPTS OF RS.32,79,171. (III) RECEIPT OF RS.637050 FROM K. UMA MAHESWARI UN DER THE HEAD 'CONTRACTS' REMAINS UNEXPLAINED. ACCORDINGLY, HE SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO REDO THE ASSESSMENT AFTER GIVING OPPORTUNITY TO ASSESSEE. 4. AS PER THE ABOVE DIRECTION, ASSESSMENT WAS REOPE NED AND INFORMATION WAS CALLED FOR. IN THE REASSESSMENT PRO CEEDING, ASSESSEE SUBMITTED AS BELOW: I SUBMIT THAT DURING THE YEAR (AY 2009-10) I AM IN RECEIPT OF RS.3279171 FROM THE CONTRACTEE FOR THE WORKS EXECUT ED IN EARLIER FINANCIAL YEAR. IN RESPECT OF THESE WORKS, I HAVE A DMITTED INCOME U/S. 44AD IN THE FINANCIAL YEAR 2007-08 RELEVANT TO ASSESSMENT YEAR 2008-09. IN THE FORM 26AS THE DEDUCTOR WHO PAI D ME COMMISSION OF RS.637050 HAS WRONGLY MENTIONED THE S ECTION IN TDS RETURN AS SECTION 194C INSTEAD OF 194H. THIS CA N BE VERIFIED FROM THE TDS CERTIFICATE FILED BEFORE YOU DURING AS SESSMENT PROCEEDINGS, WHICH WAS ISSUED BY THE DEDUCTOR. FURT HER THE RATE OF TDS APPLICABLE FOR 194C IS ONLY 1% AND FOR 194H APPLICABLE RATE OF 10%. TAX WAS DEDUCTED AT 10% ON COMMISSION. I HAVE ALSO ADMITTED THE COMMISSION RECEIVED IN PROFIT & L OSS ACCOUNT FILED BY ME. 3 ITA NO. 26/H/17 ARAVETI SATYANARAYANA (HUF) 4.1 AO EXAMINED THE BOOKS OF ACCOUNT AND FOUND THAT THE SUBMISSIONS OF THE ASSESSEE FOUND TO BE IN ORDER AN D THE FINDINGS OF THE AO ARE AS UNDER: EXAMINATION OF THE BOOKS OF ACCOUNT REVEALED THAT THE BOOKS OF ACCOUNTS ARE MAINTAINED FOR ALL THE THREE SOURCES O F INCOME, VIZ., MONEY LENDING, COMMISSION & CONTRACT RECEIPTS. THE GROSS RECEIPTS DURING THE FINANCIAL YEAR 2007-2008 FROM V ARIOUS 'BUSINESSES' RECORDED IN THE BOOKS OF ACCOUNTS ARE RS.49,22,233 (COMMISSION RS.503100 + INTEREST RECEIPTS RS,110238 3 + CONTRACT RECEIPTS RS.3316750). THE ASSESSEE DISCLOS ED LOSS OF RS.64008 FROM COMMISSION + INTEREST AND DISCLOSED P ROFIT OF RS.265340 FROM BEING 8% OF CONTRACT RECEIPTS, WHILE THE BOOKS ARE MAINTAINED SYSTEMATICALLY, CONTINUALLY AND REGU LARLY FOR THE PAST FEW DECADES, IT IS NOT UNDERSTOOD HOW THE DETA ILS OF THE ALLEGED CONTRACT RECEIPTS ARE NOT RECORDED IN SUCH SYSTEMATIC WAY. AS PER FORM 16A FILED ALONG WITH ROI IT IS NOT ICED THAT THE ASSESSEE RECEIVED CONTRACT AMOUNT OF RS.3316750 ON 31/03/2008 WHEREAS, AS PER THE AR'S LETTER, THE ASSESSEE HAS C ARRIED OUT THE CONTRACT WORK FROM 01/02/2008 TO 23/03/2008. THE AL LEGED CONTRACT IS STATED TO BE FOR EXECUTION OF PAINTING, ELECTRICAL & PLUMBING WORKS FOR THE CONTRACTEE M/S. SLR INFRASTR UCTURE PRIVATE LIMITED, HYDERABAD. IT IS NOT KNOWN FROM TH E BOOKS OF ACCOUNTS AS TO WHAT AMOUNT WAS SPENT BY THE ASSESSE E FOR PURCHASE OF POINTS, ELECTRICAL MATERIAL AND PLUMBIN G MATERIAL; AND FROM WHOM THESE MATERIAL WAS PROCURED. MOREOVER , THESE WORKS INVOLVE THE SERVICES OF LABOUR, SUPPORTING MA TERIAL, ETC. THE ASSESSEE HAS NOT SUBSTANTIATED WITH MATERIAL EV IDENCE(S) THE DETAILS OF MATERIAL PROCURED FOR EXECUTION OF THIS ALLEGED CONTRACT, NUMBER OF PERSONS/LABOUR ENGAGED IN EXECU TION, ETC. 4.2 AFTER RECORDING THE ABOVE FINDINGS, AO ISSUED S HOW CAUSE NOTICE TO THE ASSESSEE, REASON FOR DISCLOSURE OF IN COME UNDER PRESUMPTIVE BASIS AND REASON FOR NOT DEDUCTING TDS ON THE PAYMENT MADE IN THE EXECUTION OF CIVIL CONTRACT TO THE EXTE NT OF RS. 30,51,410/-. IN REPLY TO THE ABOVE, AR OF THE ASSES SEE SUBMITTED THAT THE PAYMENTS WERE RELATING TO PREVIOUS FY IN WHICH CONTRACT WORKS WERE EXECUTED AND INCOME WAS DECLARED U/S 44AD OF T HE ACT ON PRESUMPTIVE BASIS. HE, THEREFORE, SUBMITTED THAT CO NSEQUENTLY, THE PROVISIONS OF SECTIONS 28 TO 43C DO NOT APPLY FOR T HAT SOURCE OF INCOME AND, HENCE, DISALLOWANCE U/S 40(A)(IA) CANNO T BE APPLICABLE TO 4 ITA NO. 26/H/17 ARAVETI SATYANARAYANA (HUF) THE ASSESSEES CASE. MOREOVER, IN THE CURRENT AY, A SSESSEE HAS NOT CLAIMED ANY EXPENDITURE RELATING TO CONTRACT WORKS, HENCE, PROVISIONS OF SECTION 40(A)(IA) WILL NOT APPLY EVEN OTHERWISE. HOWEVER, AO DECLINED TO ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND MADE ADDITION U/S 40(A)(IA) CONSIDERING THE FACT THAT ASSESSEE CO ULD NOT SUBSTANTIATE THE PAYMENT, WHICH WAS MADE BY CASH. 5. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED AN APPEAL BEFORE THE CIT(A). THE CIT(A) CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO BY OBS ERVING THAT IT COULD BE SEEN FROM THE P&L A/C SUBMITTED BY THE ASS ESSEE, ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE WHICH ATTRACTS DISA LLOWANCE OF EXPENDITURE U/S 40(A)(IA) OF THE ACT DURING AY 2009 -10. HE OBSERVED THAT DISALLOWANCE OF EXPENDITURE U/S 40(A)(IA) ARIS ES ONLY WHEN THE ASSESSEE CLAIMS EXPENDITURE IN P&L A/C. IN THE INST ANT CASE, ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE UNDER THE HEAD P&L /C ONLY, THE DISALLOWANCE U/S 40(A)(IA) DOES NOT ARISE. 6. AGGRIEVED WITH THE ABOVE ORDER OF CIT(A), THE RE VENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF A PPEAL: 1. THE LD. CIT(A) ERRED ON FACTS AND IN LAW OF THE CASE. 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 30,51,410/- WITHOUT APPRECIATING THAT THE ASSESSEE HAS NOT PROVED THE EXPENDITURE THOUGH WRONGLY DISALLOWED BY THE AO U/S 40(A)(IA). 7. CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL FA CTS ON RECORD. ASSESSEE IS ENGAGED IN THE BUSINESS OF MONEY LENDIN G, COMMISSION INCOME AND CONTRACT WORKS AND FILED ITS RETURN OF I NCOME FOR THE AY 2009-10. IN THE AY UNDER CONSIDERATION, ASSESSEE HA S NOT ENGAGED ANY CONTRACT WORK AND DECLARED HIS INCOME RELATING TO MONEY LENDING AND COMMISSION BUSINESS. ASSESSEE HAS ENTERED INTO CIVIL CONTRACT DURING PREVIOUS AY AND RECEIVED CONTRACT RECEIPTS W HICH WERE 5 ITA NO. 26/H/17 ARAVETI SATYANARAYANA (HUF) PROPERLY DECLARED BY THE ASSESSEE U/S 44AD AND THE RETURN WAS DULY PROCESSED AND ACCEPTED BY THE DEPARTMENT. ASSESSEE MADE SOME PAYMENTS DURING CURRENT AY RELATING TO CONTRACT BUS INESS AND SUCH PAYMENTS WERE NOT CLAIMED AS EXPENDITURE IN THE P&L A/C. THESE PAYMENTS WERE NOTICED BY THE CIT AND REOPENED THE A SSESSMENT. WE HAVE NOTICED THAT EVEN THOUGH ASSESSEE HAS MADE PAY MENTS DURING THE CURRENT AY, BUT, THESE PAYMENTS WERE RELATING T O CONTRACT BUSINESS CARRIED ON BY THE ASSESSEE DURING THE PREV IOUS AY, FOR WHICH INCOME WAS DULY DECLARED U/S 44AD. EVEN THOUGH ALL THE FACTS RELATING TO CONTRACT BUSINESS WERE VERY MUCH AVAILABLE WITH THE AO AND ASSESSEE ALSO HAS NOT CLAIMED ANY EXPENDITURE DURIN G CURRENT AY RELATING TO CONTRACT BUSINESS, AO HAS QUESTIONED TH E BASIS OF DECLARING THE CONTRACT BUSINESS U/S 44AD, WHICH WAS NOT RELATING TO CURRENT AY. ANYHOW, IN OUR OPINION, ASSESSEE HAS NO T CLAIMED ANY EXPENDITURE IN P&L A/C RELATING TO PAYMENTS MADE IN CASH, THEREFORE, AO CANNOT DISALLOW ANY EXPENDITURE WHICH WAS NOT CL AIMED BY THE ASSESSEE IN P&L A/C BY INVOKING SECTION 40(A)(IA). IN VIEW OF THE ABOVE OBSERVATIONS, WE ARE IN AGREEMENT WITH THE FI NDINGS OF CIT(A) AND ACCORDINGLY WE UPHOLD THE ORDER OF THE CIT(A) A ND DISMISS THE APPEAL OF THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 21 ST APRIL, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 21 ST APRIL, 2017. KV 6 ITA NO. 26/H/17 ARAVETI SATYANARAYANA (HUF) COPY TO:- 1) ITO, WARD 1, VASANTHAPET, PRODDATUR 516 360. 2) SRI ARAVETI SATYANARAYANA (HUF), 3/1143, COOPERA TIVE COLONY, PRODDATUR, KADAPA (DIST.), AP. 3) CIT(A), KURNOOL 4 PR. CIT, KURNOOL 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE