Checkmate Services Pvt. Ltd., Ahmedabad V. The Dy.CIT.,Circle-1(1), Baroda

ITA 2920/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1624 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 19-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SUTARIA
• Keywords: Difference of opinion
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD, C BENCH BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA.NO.2920/AHD/2015 [ASSTT.YEAR 2009-2010] CHECKMATE SERVICES P.LTD. GROUND FLOOR, AMAR TOWERS FATEHGUNJ, BARODA. PAN : AAACC 8465 A VS DCIT, CIR.1(1) BARODA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI ANIL R. SHAH WITH MRS.KINJAL SHAH REVENUE BY : MR.DEEPAK SUTARIA, SR.DR / DATE OF HEARING : 30/03/2016 / DATE OF PRONOUNCEMENT: 18/05/2016 !'#/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD.CIT(A)-1, VADODARA DATED 4.8.2015 PASSED FOR THE ASSESSMENT YEAR 2009-10. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.5,20,000/- IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. ITA NO.2920/AHD/2015 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SECURITY PERSONNEL. IT H AS FILED ITS RETURN OF INCOME ELECTRONICALLY ON 29.9.2009 DECLARING TOTAL INCOME AT RS.42,25,34,110/-. THE LD.AO HAS PASSED THE ASSESS MENT ORDER ON 21.12.2011 UNDER SECTION 143(3) OF THE INCOME TAX A CT. HE DETERMINED TOTAL TAXABLE INCOME OF THE ASSESSEE AT RS.46,38,36 ,613/-. THE AO HAS MADE VARIOUS ADDITIONS. FOR THE PURPOSE OF PRESENT PENALTY PROCEEDINGS, WE ARE CONCERNED WITH TWO ADDITIONS VIZ. (A) DISALL OWANCES OF RS.1,30,577/- OUT OF DRESS MATERIAL/STITCHING CHARG ES CLAIMED BY THE ASSESSEE, AND (B) ADDITION OF RS.18,39,463/- FOR D IFFERENCE IN REVENUE RECEIPTS SHOWN IN THE BOOKS VIZ-A-VIS AVAILABLE IN TDS DETAILS. 4. BRIEF FACTS WITH RESPECT TO THESE ISSUES ARE THA T THE ASSESSEE COMPANY HAS PURCHASED CLOTH IN BULK AND PROVIDED DR ESS MATERIAL TO ITS EMPLOYEES AND ALSO TRANSFERRED TO ITS GROUP COMPANI ES. AS PER THE LEDGER ACCOUNT, THE ASSESSEE HAD SHOWN TOTAL PURCHA SE OF RS.4,06,51,838/- TOWARDS DRESS MATERIAL, AND IT REC OVERED RS.2,89,86,650/- FROM THE EMPLOYEES, AND RS.8,61,22 0/- FROM ITS GROUP COMPANIES. THE ASSESSEE HAD CLAIMED DEDUCTION OF R S.61,62,660/- TOWARDS DRESS MATERIALS. WITH REGARD TO THE RECOVE RY FROM ITS EMPLOYEES, IT WAS CONTENDED BY THE ASSESSEE THAT A LUMP SUM RECOVERY INCLUDING STITCHING CHARGES WAS MADE. ACCORDING TO THE AO, ON AN INVESTIGATION, IT REVEALED THAT FROM THE GROUP COMP ANIES THE ASSESSEE DID NOT RECOVER STITCHING CHARGES. THE ASSESSEE HAD RE COVERED A SUM OF RS.8,61,220/-. IT WAS MEANT FOR DRESS MATERIAL. T HEREFORE, DISALLOWED A SUM OF RS.1,30,557/-. WITH REGARD TO THE SECOND IS SUE, IT EMERGES OUT ITA NO.2920/AHD/2015 3 THAT ON VERIFICATION OF TDS DETAILS, THE LD.AO HAS OBSERVED THAT VARIOUS COMPANIES HAVE DEDUCTED TDS AND CREDITED THE ACCOUN TS OF THE ASSESSEE, BUT THE FIGURE OF RECEIPT DISCLOSED BY THE ASSESSE E IN THE BOOKS DOES NOT TALLY WITH THE AMOUNTS ON WHICH TDS WAS DEDUCTED. THE ASSESSEE HAS REPORTED A SHORT RECEIPT OF RS.18,39,463/-. THE AO ACCORDINGLY MADE ADDITION. 5. ON APPEAL, THE LD.CIT(A) DIRECTED THE AO TO GET INFORMATION UNDER SECTION 133(6) OR 131 OF THE ACT FROM THE CONCERNED PARTIES WHO HAVE DEDUCTED THE TAXES AND CREDITED THE AMOUNTS, BECAUS E, THE STAND OF THE ASSESSEE WAS THAT IT HAS NOT RECEIVED THE PAYMENT A ND IT WAS NOT MEANT FOR IT. THEREFORE, IF THOSE PARTIES HAVE SHOWN THE DEDUCTION OF TDS, THEN IT WAS AN ERROR COMMITTED AT THEIR END. WHILE GIVI NG EFFECT TO THE CIT(A)S ORDER, THE LD.AO MADE THE FOLLOWING OBSERV ATION: WITH REGARD TO DISALLOWANCE OF RS.18,39,463 ON ACCO UNT OF DIFFERENCE IN REVENUE RECEIPT, THE ID. CIT BARODA D IRECTED TO SEEK CONFIRMATION U/S 133(6) OR 131 FROM THE PARTIES CON CERNED WHETHER REMAINING AMOUNTS APPEARING INFORM 26AS OF APPELLANT WERE PAID BY THEM TO APPELLANT TOWARDS SERVICES TEN DERED BY APPELLANT OR NOT. IN COMPLIANCE TO THE SAME DIRECTI ON NOTICES HAVE BEEN ISSUED AND NO REPLY HAS BEEN RECEIVED YET. IF ANY REPLY RECEIVES THE SAME WILL BE INCORPORATED IN DUE COURS E AND ACCORDINGLY THE FATAL INCOME WILL BE DETERMINED. 6. THE AO REDUCED THE DISALLOWANCE TO RS.13,80,000/ - AS AGAINST RS.18,39,463/- MADE BY HIM IN THE ORIGINAL ASSESSME NT ORDER. THE AO HAS INITIATED PENALTY PROCEEDINGS FOR BOTH THESE AD DITIONS, AND ULTIMATELY ITA NO.2920/AHD/2015 4 LEVIED A PENALTY OF RS.5,20,000/- ON THE GROUND THA T THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 7. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 8. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. LET US FIST EXAMINE SECOND ISSUE. THE STAND OF THE ASSESSEE BEFORE THE AO WAS THAT THOUGH CERTAIN COMPANIES HAVE SHOWN DEDUCTION OF TAXES IN THEIR BOOKS, AND I T IS ALSO DISCERNIBLE FROM THE VERIFICATION OF TDS DETAIL GENERATED FROM COMPUTER SOFTWARE, BUT ACTUALLY THE ASSESSEE HAS NOT RECEIVED THIS AMO UNT NOR IT WAS MEANT FOR IT. IN OTHER WORDS, THE ASSESSEE HAS PLEADED T HAT RIGHT TO RECEIVE HAS ALSO NOT ACCRUED. THE LD.CIT(A) IN THE QUANTUM PRO CEEDINGS WAS SATISFIED WITH THIS PLEA OF THE ASSESSEE TO SOME EX TENT AND DIRECTED THE AO TO SEEK CONFIRMATION FROM THE PAYERS, AND ONLY T HEREAFTER COMPUTE THE INCOME. THE AO HAS PARTLY SOUGHT CONFIRMATION AND REDUCED THE ADDITION. WHEN THIS PLEA WAS RAISED BEFORE THE LD. CIT(A) IN THE PENALTY PROCEEDINGS, THE LD.CIT(A) HAS OBSERVED THAT THE CI T(A) IN THE QUANTUM PROCEEDING HAS NO POWER TO SET ASIDE THE ASSESSMENT ORDER. THE AO HAS GIVEN EFFECT TO THESE DIRECTIONS, WHICH HE COULD GI VE WITHIN THE TIME LIMIT AVAILABLE TO HIM. IN OUR OPINION, FIRSTLY, T HE AO SHOULD NOT HAVE MADE ADDITION IN THE ORIGINAL PROCEEDINGS WITHOUT V ERIFICATION OF FACTS. ONCE THE ASSESSEE HAS RAISED A SPECIFIC PLEA THAT N EITHER IT HAS RECEIVED NOR IT HAS A RIGHT TO RECEIVE, IN SPITE OF THAT, TH E AO HAS ASSUMED THAT SINCE THIRD PARTY HAS SHOWN DEDUCTION OF TAX, THERE FORE, IT IS TO BE PRESUMED THAT THE ASSESSEE HAS RECEIVED THIS RECEIP T. THIS FACT HAS TO BE VIEWED IN THE CONTEXT WHEREIN THE ASSESSEE HAS BEEN OFFERING AN INCOME ITA NO.2920/AHD/2015 5 OF MORE THAN RS.42 CRORES. THERE CANNOT BE ANY OCC ASION FOR THE ASSESSEE TO FURNISH OR FUDGE WITH THE DETAILS OF SU CH A SMALL AMOUNTS. IT IS NOT APPRECIABLE AT THE END OF THE AO TO MAKE ADD ITION BLINDLY. NOW, IN THE SECOND ROUND, WHEN THE PENALTY WAS IMPOSED, AND THE CIT(A) HAS GIVEN ONE MORE OPPORTUNITY TO FIRST ESTABLISH WHETH ER THIS ADDITION DESERVES TO BE MADE IN THE HANDS OF THE ASSESSEE OR NOT. HE ABSOLVED HIMSELF UNDER THE GARB OF LIMITATION FROM CARRYING OUT HIS RESPONSIBILITY, WHICH OTHERWISE, AN OBLIGATION UPON HIM TO ASSESS T HE CORRECT INCOME. INSTEAD OF DISCHARGING HIS FUNCTION, IN A FAIR AND JUDICIOUS MANNER, HE VISITED THE ASSESSEE WITH PENALTY ALSO. QUASI JUDICIAL AUTHORITIES ARE BEING RESPECTED, NOT ON ACCOUNT OF THEIR POWERS TO LEGALIZE THE INJUSTICE ON TECHNICAL GROUND, BUT FOR THEIR CAPABILITIES OF REMOVING INJUSTICE, AND ARE EXPECTED TO DO SO. THEREFORE, AS FAR AS THIS D ISALLOWANCE, THE ASSESSEE DOES NOT DESERVE TO BE VISITED WITH PENALT Y. AS FAR AS FIRST ISSUE IS CONCERNED, THE STAND OF THE ASSESSEE FROM VERY B EGINNING WAS THAT IT HAS NOT RECOVERED THE DRESS MATERIAL CHARGES AND ST ITCHING CHARGES INDEPENDENTLY, RATHER, IT HAS CLAIMED A LUMP-SUM AM OUNT ON PROVIDING DRESS. THE ASSESSEE HAS GIVEN COMPLETE FIGURES OF PURCHASES, EXPENSES RECOVERED ETC. THESE WERE EXPENSES INCURRED IN ROU TINE WAY OF RUNNING THE BUSINESS. WHERE IS QUESTION OF FURNISHING INAC CURATE PARTICULARS OF INCOME ? IT IS ONLY DIFFERENCE OF OPINION QUA A PARTICULAR ITEM OF EXPENDITURE. APART FROM THE ABOVE, OUR ATTENTION W AS BROUGHT TO THE SHOW CAUSE NOTICE DATED 3.10.2013. THE AO HAS NOT SPECIFICALLY SPELL OUT THE CHARGE FOR INITIATING PENALTY PROCEEDINGS A GAINST THE ASSESSEE, I.E. FOR FURNISHING INACCURATE PARTICULARS OR CONCEALING OF INCOME. ON THE ITA NO.2920/AHD/2015 6 BASIS OF THE SHOW CAUSE NOTICE, PENALTY CANNOT BE I MPOSED UPON THE ASSESSEE. FOR BUTTRESSING OUR VIEW, WE ARE SUPPORT BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NE W SORATHIYA ENGG. CO. VS. CIT, 282 ITR 642. IN VIEW OF THE ABOVE, W E ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 18 TH MAY, 2016 AT AHMEDABAD. SD/- SD/- ( N.K. BILLAIYA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER