Nishit Saxena, New Delhi V. ITO, New Delhi

ITA 2971/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7125 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 08-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 25-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH CHADHA
• Keywords: Reopening of assessment; Salary income; Source of fund; Tangible material; Reason to believe
• Section: 40A(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-3, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMB ER ITA NO. 2971/DEL/2016 AY: 2009- 10 SH. NISHIT SAXENA, VS. ITO, WARD 27(3), C-4/1, WELCOME GROUP COOPERATIVE NEW DELHI GROUP HOUSING SOCIETY, PLOT NO. 6, SECTOR-3, DWARKA, NEW DELHI 110 085 (PAN: ANZPS6159C) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VED JAIN, CA & SH. ASHISH CHADHA, CA RESPONDENT BY : ANIL KUMAR SHARMA, SR. DR ORDER THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R DATED 18.12.2015 PASSED BY THE LD.CIT(A)-15, NEW DELHI FO R ASSESSMENT YEAR 2009-10 ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD BOTH IN THE EYES OF LAW A ND ON FACTS. 2. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ORDER OF THE AO REJECTING THE CONTENTION OF THE ASS ESSEE THAT REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT 2 WITHOUT COMPLYING WITH THE STATUTORY CONDITIONS AND THE PROCEDURE PRESCRIBED UNDER THE LAW IS BAD AND LIABL E TO BE QUASHED. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LE ARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ORDER OF THE AO REJECTING THE CONTENTION OF THE ASS ESSEE THAT THE REASON RECORDED FOR REOPENING OF THE ASSESSMENT ARE BAD IN LAW, AND AS SUCH THE REOPENING OF THE ASSESSMENT IS ILLEGAL AND LIABLE TO BE QUASHED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN UPHOLDING THE REOPENING OF ASSESSMENT DONE BY THE A O, WITHOUT THERE BEING ANY LIVE NEXUS BETWEEN THE REAS ONS RECORDED AND THE BELIEF FORMED BY THE ASSESSING OFF ICER THAT ANY INCOME HAS ESCAPED ASSESSMENT. 4.(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L EARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ADDITION OF RS.12,38,253/- MADE BY THE AO ON ACCOUN T-OF SALARY INCOME. (II) THAT THE ABOVE SAID ADDITION-HAS BEEN CONFIRME D BY THE LEARNED CIT(A) DESPITE THE FACT THAT THE BANQUET TI P RECEIVED BY THE ASSESSEE IS TAXABLE UNDER THE HEAD 'PROFITS AND GAINS 3 FROM BUSINESS AND PROFESSION' AND NOT UNDER THE HEA D 'SALARY'. (III) THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING T HE SAID ADDITION DESPITE THE FACT THAT THE BANQUET TIP INCO ME RECEIVED BY THE ASSESSEE IS ON ACCOUNT OF THE REIMB URSEMENT OF VARIOUS EXPENSES INCURRED BY THE ASSESSEE. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALT ER ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED ON 24.09.2009 DECLARING AN INCOME OF RS. 3,95,432/- . THE ASSESSEE IS EMPLOYED IN THE HOTEL ITC MAURYA, NEW DELHI, THE M AIN SOURCES OF INCOME ARE SHOWN FROM SALARY, HOUSE PROPERTY, BUSIN ESS INCOME AND INCOME FROM OTHER SOURCES. GROSS RECEIPTS FROM BUSI NESS ARE SHOWN AT RS. 12,38,253/- ON WHICH NET PROFIT IS DECLARED AT RS. 2,25,526/-. IT WAS OBSERVED BY AO THAT AS PER 26AS STATEMENT, TOTA L RECEIPTS OF RS.13,91,076/- WERE SHOWN ON WHICH TAX WAS DEDUCTED AT SOURCE U/S 192B OF THE ACT, APPLICABLE TO SALARY PAYMENTS. AGAINST IT, INCOME UNDER THE HEAD 'SALARIES' WAS DECLARED AT RS. 2,88, 022/- ONLY IN THE RETURN. THUS, AS PER AO, THERE WAS A SHORT DECLARAT ION OF SALARY INCOME BY RS. 11,03,O54/-. INFORMATION WERE ALSO S OUGHT BY AO FROM ITC MAURYA, THE EMPLOYER WHO INFORMED THAT THE OTHE R INCOME INCLUDED 'BANQUET TIPS' WHICH SHOWED THAT THE AMOUN T OF RS. 9,33,420/- WAS ALSO PAID BY THE EMPLOYER TO THE ASSESSEE. IN VIEW 4 OF THIS DISCREPANCY, THE CASE WAS REOPENED AS PER P ROVISIONS OF SECTION 147 OF THE ACT AND NOTICE U/S 148 WAS ISSUED ON 16. 12.2012. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT WERE SUPPLIED TO ASSESSEE ON WHICH OBJECTIONS WERE RAISED BY HIM WHI CH WERE DISPOSED OF BY AO VIDE LETTER DATED 21.02.2014. DURING THE A SSESSMENT PROCEEDINGS, IT WAS OBSERVED BY A0 THAT THE AMOUNT OF RS. 9,33,420/- PAID BY EMPLOYER AS SHARE OF ASSESSEE OUT OF TOTAL BANQUET SERVICE CHARGES COLLECTED AND DIVIDED AMONGST EMPLOYEES. TH EREFORE, NO SEPARATE EXPENDITURE WAS INCURRED BY ASSESSEE IN OR DER TO EARN THE SAID BANQUET TIPS. HE, THEREFORE, PROPOSED TO DISAL LOW THE EXPENSES CLAIMED BY ASSESSEE. IN THE PROFIT AND LOSS ACCOUNT AGAINST THE AFORESAID RECEIPTS. IN REPLY, ASSESSEE EXPLAINED TH AT HE WAS HANDLING BANQUET SERVICES WHICH INCLUDED SERVICES LIKE HIRIN G OF BAR TENDERS, FLOWER DECORATION SERVICES, HIRING OF CASUAL STAFF AND RENTING OF EQUIPMENT ETC. IT WAS FURTHER EXPLAINED THAT AGAINS T THE AFORESAID RECEIPTS, EXPENSES HAVE BEEN INCURRED BY ASSESSEE W HICH ARE NOT IN THE KNOWLEDGE OF EMPLOYER, THE ITC MAURYA. THE ASSE SSEE ALSO OBJECTED TO THE REOPENING OF ASSESSMENT PROCEEDINGS BY AO. AFTER CONSIDERING THE EXPLANATION GIVEN BY ASSESSEE, AO C ONCLUDED THAT THERE WAS DEFINITE INFORMATION OF PAYMENT MADE AND TAX DEDUCTED AT SOURCE IN THE FORM OF 26AS STATEMENT FOR REOPENING THE ASSESSMENT PROCEEDINGS IN THE CASE OF ASSESSEE. ON MERIT, IT W AS OBSERVED BY AO THAT BILLS OF EXPENSES SUBMITTED BY ASSESSEE HAVE N O SERIAL NUMBERS 5 AND ALL THE BILLS ARE COMPUTER PRINTOUTS AND PAYMEN TS ARE MADE IN CASH JUST BELOW THE LIMIT OF RS.20,OOO/- SPECIFIED U/S 40A(3) OF THE ACT. FURTHER, THERE ARE NO CORRESPONDING WITHDRAWAL S AS PER BANK STATEMENTS FILED BY ASSESSEE ON THE DATES ON WHICH THE PAYMENTS ARE STATED TO BE MADE. IT IS ALSO OBSERVED BY AO THAT T HE INFORMATION CALLED FOR FROM ITC MAURYA CONFIRMED THAT THE AMOUN T OF RS. 9,33,420/- AS MENTIONED IN FORM NO. 16 WAS ON A CCOUNT OF BANQUET SERVICES AND THEY WERE NOT AWARE IF THE EMP LOYEE CONCERNED HAD INCURRED ANY EXPENSES AGAINST THIS BANQUET SERV ICE CHARGES AMOUNT. IN VIEW OF THIS, AO CONCLUDED THAT BANQUET SERVICE CHARGES RECEIVED BY ASSESSEE ARE IN LIEU OF HIS REGULAR DUT IES DONE BY HIM AS EMPLOYEE OF ITC MAURYA AND HE HAS NOT MAINTAINED AN Y SEPARATE OFFICE TO EARN THIS INCOME. THEREFORE, THIS INCOME COULD NOT BE SAID TO BE DERIVED FROM A SEPARATE BUSINESS AND SUCH RECEIP TS ARE PART AND PARCEL OF HIS SALARY INCOME. CONSEQUENTLY, AO TREAT ED THE AMOUNT OF RS.12,38,253/- IN LIEU OF SALARY UNDER THE HEAD 'SA LARIES' AND DISALLOWED THE EXPENSES CLAIMED BY ASSESSEE AND COM PLETED THE ASSESSMENT AT RS. 14,37,819/- VIDE HIS ORDER DATED 14.3.2014 PASSED U/S. 143(3)/147 OF THE I.T. ACT, 1961. 3. AGAINST THE AFORESAID ASSESSMENT ORDER, ASSESSE E PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUG NED ORDER DATED 18.12.2015 HAS DISMISSED THE APPEAL OF THE ASSESSEE . 6 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSE SSE STATED THAT CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ORDER OF THE AO REJECTING THE CONTENTION OF THE ASSESSEE THA T REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT WITHOUT CO MPLYING WITH THE STATUTORY CONDITIONS AND THE PROCEDURE PRESCRIBED U NDER THE LAW IS BAD AND LIABLE TO BE QUASHED. HE FURTHER STATED TH AT LD. CIT(A) HAS ALSO ERRED IN CONFIRMING THE ORDER OF THE AO REJECT ING THE CONTENTION OF THE ASSESSEE THAT THE REASON RECORDED FOR REOPENING OF THE ASSESSMENT ARE BAD IN LAW, AND AS SUCH THE REOPENING OF THE AS SESSMENT IS ILLEGAL AND LIABLE TO BE QUASHED. HE FURTHER STATED THAT LD . CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN UPHOLDING THE REOPENING OF ASSESSMENT DONE BY THE AO, WITHOUT THERE BEING ANY LIVE NEXUS BETWEEN THE REASONS RECORDED AND THE BELIEF FORMED BY THE ASSES SING OFFICER THAT ANY INCOME HAS ESCAPED ASSESSMENT. TO SUPPORT THIS CONTENTION HE RELIED UPON THE HONBLE DELHI HIGH COURT DECISION I N THE CASE OF CIT VS. ORIENT CRAFT LTD. 354 ITR 536 (DELHI). LD. COU NSEL OF THE ASSESSEE FURTHER STATED THAT AO HAS GROSSLY ERRED IN REOPENI NG THE ASSESSMENT OF THE ASSESSEE ONLY ON THE BASIS OF FORM 26AS AND THE TDS CERTIFICATE ISSUED BY THE EMPLOYER OF THE ASSESSEE, HENCE, NO TANGIBLE MATERIAL WAS BEFORE THE AO APART FROM THE TDS CERTI FICATE, TO FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. HE FURT HER STATED THAT IT 7 IS A SETTLED LAW THAT AN ASSESSMENT COULD NOT BE RE OPENED ONLY ON THE BASIS OF DIFFERENCE IN TDS CERTIFICATE AND RECEIPTS SHOWN IN THE P&L ACCOUNT. TO SUPPORT THIS CONTENTION HE PLACED RELIA NCE ON THE FOLLOWING TRIBUNALS DECISIONS:- I) RAFEEQ IQBAL VS. ITO (ITAT, HYDERABAD) ITA NO. 709/HYD/2013 DATED 13.9.2013. 2013 (11) TMI 8 ITAT HYDERABAD. II) MEHERIA REID & CO. VS. ITO ITA NO. 53 & 54 KOL OF 2010 DATED 28.12.2012 2013 (2) TMI 348 ITAT KOLKATA. III). M/S KRISHNA REDDY CONTRACTORS VS. ITO ITA N O. 1347/HYD/2013 DATED 30.6.21014 2014 (7) TMI 644 ITAT HYDERABAD. 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND REQUESTED THAT THE APPEAL OF THE ASSESSEE MAY BE DISMISSED. 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE LEVANT RECORDS, ESPECIALLY THE ORDERS OF THE AUTHORITIES BELOW AND THE REASONS RECORDED BY THE AO. I FIND THAT LD. COUNSEL OF THE ASSESSE E MAINLY OBJECTING THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND STATED THAT THE SAME IS WITHOUT COMPLYING WITH THE STATUTORY CONDITIONS AND THE PROCEDURE PRESCRIBED UNDER THE L AW IS BAD; THE REASON RECORDED FOR REOPENING OF THE ASSESSMENT ARE BAD; REOPENING OF 8 ASSESSMENT DONE BY THE AO, WITHOUT THERE BEING ANY LIVE NEXUS BETWEEN THE REASONS RECORDED AND THE BELIEF FORMED BY THE ASSESSING OFFICER THAT ANY INCOME HAS ESCAPED ASSESSMENT. FOR THE SAKE OF CONVENIENCE, THE CONTENTS OF THE REASONS RECORDED A RE REPRODUCED AS UNDER:- REASONS FOR THE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT IN THE CASE OF SH. NISHIT SAXENA (PAN: ANZPS6159C) FOR THE ASSESSMENT YEAR 2009-10. PAPER RETURN OF INCOME FOR AY 2009-10 WAS FILED BY SH. NISHIT SAXENA (PAN ANZPS6159C) ON 24.9.2009 DECLARING INCOME OF RS. 3,59,432/- AND CLAIMED A REFUND OF RS. 3,39,640/- OUT OF TOTAL TDS OF RS. 3,74,755/ -. IN THE COMPUTATION OF INCOME THE ASSESSEE HAS DECLARED HIS INCOME UNDER THE DIFFERENT HEADS AS UN DER:- 1. INCOME FROM SALARY RS. 2,88,022/- 2. INCOME FROM HOUSE PROPERTY RS. (-) 32,193/- 3. INCOME FROM BUSINESS AND PROFESSION RS. 1,95,877/- 4. INCOME FROM OTHER SOURCES : RS. 29,661/-. AS PER 26AS DATA IN THE CASE OF THE ASSESSEE, BASED ON THE DATA PROVIDED BY THE DEDUCTOR OF TAX IN ITS TDS RETURN, FOR FINANCIAL YEAR 2008-09 RELEVANT TO THE ASSESSMENT YEAR 2009-10 THE AMOUNT OF TOTAL TAX 9 DEDUCTED WAS RS. 3,74,755/- OUT OF TOTAL PAYMENTS COVERED U/S. 192B OF THE I.T. ACT I.E. SALARY PAYME NTS AMOUNTING TO RS. 13,91,076/-. THEREFORE, THERE IS SHORT DECLARATION OF SALARY INCOME OF RS. 11,03,05 4/- . PERUSAL OF THE FORM NO. 16 ISSUED BY ITC LTD. TO THE ASSESSEE FOR FINANCIAL YEAR 2008-09 RELEVANT TO THE ASSESSMENT YEAR 2009-10 TOTAL INOME (BEFORE DEDUCTION U/S. 80C) IS RS. 11,19,324/- AGAINST THE DECLARED INCOME OF RS. 3,59,432/-. ON THE BASIS OF THE ABOVE INFORMATION, I HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AS DEFINED BY SECTION 137 OF THE INCOME TAX ACT, 1961 BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS. THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THIS ASSESSMENT YEAR. THEREFORE, I T IS A FIT CASE FOR THE ISSUANCE OF NOTICE U/S. 148 OF T HE INCOME TAX ACT, 1961. DATE: 14-11-2012 SD/- (OMBIR SINGH) INCOME TAX OFFICER, WARD 27(3), NEW DELHI 10 7.1 AFTER GOING THROUGH THE ORDERS PASSED BY THE RE VENUE AUTHORITIES AND THE ARGUMENTS ADVANCED BY THE LD. C OUNSEL FOR THE ASSESSEE, REASONS RECORDED BY THE AO AND THE JUDGME NTS CITED BY THE ASSESSEE IN THE CASE OF CIT VS. ORIENT CRAFT LTD. 354 ITR 536 (DELHI), I FIND THAT IN THIS CASE THE HONBLE HAS HELD AS UND ER (HEAD NOTES):- HELD, DISMISSING THE APPEAL, THAT THE REASONS DISC LOSED THAT THE ASSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME ON GOING THROUGH THE RETURN OF INCOME FILE D BY THE ASSESSEE AFTER HE ACCEPTED THE RETURN UNDER SECTION 143(1) WITHOUT SCRUTINY, AND NOTHING MORE. THIS WAS NOTHI NG BUT A REVIEW OF THE EARLIER PROCEEDINGS AND AN ABUSE OF P OWER BY THE ASSESSING OFFICER. THE REASONS RECORDED BY THE AO DID CONFIRM THE APPREHENSION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS REASONS TO BELIEVE VIS--VIS AN INTIMAT ION ISSUED UNDER SECTION 143(1) COULD CAUSE TO THE TAX REGIME. THER E WAS NOTHING IN THE REASONS RECORDED TO SHOW THAT ANY TANGIBLE MATE RIAL HAD COME INTO THE POSSESSION OF THE AO SUBSEQUENT TO TH E ISSUE OF THE INTIMATION. THE NOTICE REFLECTED AN ARBITRARY EXER CISE OF THE POWER CONFERRED UNDER SECTION 147. 7.2 WHEN I EXAMINED THE FACTS OF THE ASSESSEES CAS E IN LIGHT OF THE RATIO LAID DOWN BY THE ABOVE DECISION OF THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. 354 ITR 536 (DELHI), I FIND THAT THE ABOVE DECISION WOULD BE SQUARELY A PPLICABLE IN THE 11 PRESENT CASE BECAUSE NO FRESH MATERIAL IS BROUGHT B Y THE REVENUE ON RECORD BUT THE ASSESSMENT HAS BEEN REOPENED ON THE BASIS OF THE FORM 26AS AND THE TDS CERTIFICATE ISSUED BY THE EMP LOYER OF THE ASSESSEE, HENCE, NO TANGIBLE MATERIAL WAS BEFORE TH E AO APART FROM THE TDS CERTIFICATE, TO FORM A BELIEF THAT INCOME H AS ESCAPED ASSESSMENT. I FURTHER FIND THAT IT IS A SETTLED LAW THAT AN ASSESSMENT COULD NOT BE REOPENED ONLY ON THE BASIS OF DIFFEREN CE IN TDS CERTIFICATE AND RECEIPTS SHOWN IN THE P&L ACCOUNT. MY AFORESAID VIEW IS FULLY SUPPORTED BY THE FOLLOWING DECISIONS: I) RAFEEQ IQBAL VS. ITO (ITAT, HYDERABAD) ITA NO. 709/HYD/2013 DATED 13.9.2013. 2013 (11) TMI 8 ITAT HYDERABAD. II) MEHERIA REID & CO. VS. ITO ITA NO. 53 & 54 KOL OF 2010 DATED 28.12.2012 2013 (2) TMI 348 ITAT KOLKATA. III). M/S KRISHNA REDDY CONTRACTORS VS. ITO ITA N O. 1347/HYD/2013 DATED 30.6.21014 2014 (7) TMI 644 ITAT HYDERABAD. 7.3 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENTS, I HOLD THAT THE REOPENIN G OF ASSESSMENT IS NOT VALID. HENCE, THE SAME IS QUASHED. 12 8. SINCE I HAVE ALREADY QUASHED THE ASSESSMENT ORDE R, THE OTHER GROUNDS RAISED BY THE ASSESSEE DO NOT REQUIRE ANY A DJUDICATION ON MERITS. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/1/2017. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 03/1/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES