THE ASSISTANT COMMISSIONER OF INCOME TAX-24(2), MUMBAI V. M/S. HONESH SECURITY SERVICES, MUMBAI

ITA 3094/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2777 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 02-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT C JHAVERI; DHARMIT A JHAVERI
• Keywords: Additional evidence; TDS
• Section: 143(3); 131; 145; 6

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE HONBLE SH. R. C. SHARMA , A M & HONBLE SH. SANDEEP GOSAIN , JM ./ I.T.A. NO . 3094 /MUM/2016 ( / ASSESSMENT YEAR: 20 10 - 11 ) ACIT CIR 24 (2 ), R. NO. 413 , PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI - 400 0 12 / VS. M/S HONEST SECURITY SERVICES, GAL NO. B - 32, 2 ND FLOOR, RAJ IND. COMPLEX, CO. OP. SOC. LTD. MILITARY ROAD, MAROL, ANDHERI (EAST), MUMBAI - 400059 ./ ./ PAN NO. AA A FH3684H ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI MANOJ KUMAR SINGH , DR / RESPONDENTBY : SHR I DHARMIT A. JHAVERI & SH. AMIT C. JHAVERI , AR S / DATE OF HEARING : 03.01 .201 9 / DATE OF PRONOUNCEMENT : 27.02.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMIS S IONER OF INCOME TAX (APPEALS) - 36 , 2 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, MUMBAI, DATED 24.02 .16 FOR AY 2010 - 11 ON THE GROUNDS MENTIONED HEREIN BELOW: - I. 'ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD.CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.5,19,95,8067 - MADE ON ACCOUNT OF NON - RECONCILIATION OF 26AS DETAILS, WITHOUT CONSIDERING THE FACT THAT SEVERAL OPPORTUNITI ES WERE GRANTED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO RECONCILE THE DIFFERENCE BUT THE ASSESSEE FAILED TO DO SO. THEREFORE, THE ORDER OF THE CIT(A) MAY BE SET ASIDE'. II. 'THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADMIT TING THE ADDITIONAL EVIDENCES WHILE ADJUDICATING THE GROUND RAISED, IN FAVOUR OF THE ASSESSEE, WITHOUT GIVING ANY OPPORTUNITY OF BEING HEARING TO THE ASSESSING OFFICER, THUS VIOLATING THE PROVISIONS OF RULE 46A OF IT RULES, 1962. THEREFORE, THE ORDER OF TH E CIT(A) MAY BE SET - ASIDE'. III. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD.CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNSECURED LOANS OF RS.2,34,79,676/ - WITHOUT TAKING INTO ACCOUNT THE ASSESSI NG OFFICER'S OBSERVATIONS THAT ASSESSEE HAS NEITHER FILED CONFIRMATIONS NOR FURNISHED DOCUMENTARY 3 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, EVIDENCE TO CONCLUSIVELY PROVE THAT THE SAID LIABILITY EXISTED. THEREFORE, THE ORDER OF THE CIT(A) MAY BE SET ASIDE'. IV. 'ON THE FACTS AND IN CIRCUMSTA NCES OF THE CASE AND IN LAW, WHETHER THE LD.CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNSECURED LOANS OF RS.2,34,79,676/ - TREATING THE SAME AS SALARY PAYABLE WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER AS TO WHETHER THE SAI D LIABILITY IS IN THE FORM OF SALARIES PAYABLE, AS HELD BY THE CIT(A). THEREFORE, THE ORDER OF THE CIT(A) MAY BE SET - ASIDE'. V. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY'. 2 . AS PER THE FACT S OF THE PRESENT CASE, THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF SUPPLYING OF SECURITY PERSONNE L . THE RETURN OF INCOME FOR THE YEAR UND ER CONSIDERATION WAS ELECTRONICALLY FILED ON 26.09.10 DECLARING TOTAL INCOME OF RS. 38,36,248 / - . SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND PROVIDING OPPORTUNITY OF HEARING, ASSESSMENT ORDER U/S 143(3) OF THE I.T. ACT WAS PASSED 4 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, ON 04.03.13 , THEREBY MAKING ADDITION S /DISALLOWANCE UNDER DIFFERENT HEADS. 3 . AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES ALLOWED THE APPEAL OF THE ASSESSEE. 4 . AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE HAS FILED APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. GROUND NO. (I) & (II) 5 . THESE GROUND S RAISED BY THE REVENUE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHAL LENGING THE ORDER OF LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS. 5,19,95,806/ - MADE ON ACCOUNT OF NON - RECTIFICATION OF 26AS DETAILS AND ALSO VIOLATING THE PROVISIONS OF RULE 46A OF THE I.T. RULES 1962 , THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 6 . WE HAVE HEARD THE CO UNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, 5 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. 6.1 BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE O RDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN PARA NO. 6.3 TO 6.10 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 6.3. I HAVE PERUSED THE ASSESSMENT ORDER AND VARIOUS SUBMISSIONS MADE BY THE APPELLAN T PROCEEDINGS. THE APPELLANT FOLLOWED CASH SYSTEM BY EXPLAINING THE NATURE OF ENTRIES, ASSETS OR LIABILITIES. THE ASSESSING OFFICER HAS TO APPLY HIS/HER MIND AND PROVE BEYOND DOUBTS THAT THERE HAS BEEN CHANGE IN THE METHOD OF ACCOUNTING AND THE SAME HAS TO BE SUBSTANTIATED WITH THE NATURE OF ENTRIES/ITEMS APPEARING IN THE INCOME AND EXPENDITURE STATEMENT OR ASSETS/ LIABILITIES. ASSESSING OFFICER ROUTINELY MENTIONED IN THE ASSESSMENT ORDER THAT APPELLANT IS FOLLOWING MERCANTILE SYSTEM. AO HAS NOWHERE GAVE HI S FINDINGS ON CASH SYSTEM FOLLOWED BY THE APPELLANT ESPECIALLY WHEN TAX AUDIT REPORT IN FORM NO.SCB & 3CD, BALANCE SHEETWERE AVAILABLE TO HIM AS MENTIONED IN PARA 1 OF THE ASSESSMENT ORDER. THEREFORE, THE APPELLANT HAS CORRECTLY STATED AND THE 6 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, SAME OUGHT T O HAVE BEEN CORRECTLY ACCEPTED THAT THE APPELLANT FOLLOWED CASH SYSTEM OF ACCOUNTING. IT HAS BEEN HELD BY KARNATAKA HIGH COURT IN THE CASE OF KARNATAKA STATE FOREST INDUSTRIES CORPORATION LTD., V/S. CIT (1993) 201 ITR 674,THAT WHEN THE ASSESSING OFFICER DO ES NOT ACCEPT THE ASSESSEE'S METHOD OF ACCOUNTING THEN HE HAS TO RESORT TO THE PROVISIONS OF LAW FOR COMPUTATION OF INCOME BY ADOPTING SUCH OTHER BASIS AS DETERMINED BY HIM. ASSESSING OFFICER'S POWERS ARE NOT ARBITRARY AND HE MUST EXERCISE HIS DISCRETION A ND JUDGMENT JUDICIALLY. BUT HERE IN THE INSTANT CASE, AO HAS NOT GIVEN ANY FINDING ON METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT. 6.4. IT IS APPARENT THAT AO HAS NOWHERE DEALT THE SYSTEM OF ACCOUNTING FOLLOWED BY THE APPELLANT. HE ARBITRARILY KEPT ON ADDING THE DIFFERENCE IN RECEIPTS SHOWN IN THE PROFIT AND LOSS ACCOUNT AND AS REFLECTED IN THE 26AS IN THE TOTAL INCOME. THE APPELLANT AS PER THE CASH SYSTEM WOULD ACCOUNT FOR THE BUSINESS /PROFESSION RECEIPTS AS INCOME, WHEN ACTUALLY RECEIVED BY HIM IN THE BANK. THE LEARNED ASSESSING OFFICER HAS WORKED OUT THE DIFFERENCE IN THE INCOME OF RS. 5,19,95,816/ - (I.E. RS. 15,06,50,566 - RS. 9,86,54,760), WHICH IS ON ACCOUNT OF THE DIFFERENCE IN THE INCOME AS PER TDS CERTIFICATE FILED AND THE ACTUAL BUSINESS RE CEIPTS AS REFLECTED IN PROFIT AND LOSS ACCOUNT. IT IS 7 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, WELL SETTLED PRINCIPLE OF ACCOUNTING THAT IN THE CASH SYSTEM, THE INCOME WOULD BE RECOGNIZED WHEN ACTUALLY RECEIVED BY THE ASSESSEE, AS AGAINST THE ACCRUAL OR MERCANTILE SYSTEM, WHEREIN THE INCOME IS RE COGNIZED WHEN ACCRUED BASED ON THE ACCOUNTING PERIOD , WHETHER RECEIVED OR NOT. THE LEARNED ASSESSING OFFICER HAS WORKED OUT THE INCOME BASED ON MERCANTILE SYSTEM WITHOUT DEALING WITH APPELLANT'S EXPLANATION. THE APPELLANT FOLLOWS CASH SYSTEM AND HENCE THE INCOME WOULD BE RECOGNIZED ONCE RECEIVED BY THE APPELLANT, WHEREAS THE CUSTOMER/ CLIENT, FOLLOWS MERCANTILE SYSTEM, WOULD RECOGNIZE THE EXPENSES BASED ON THE PERIOD ACCOUNTING AND WOULD PASS THE EXPENDITURE ENTRY IN THE BOOKS ACCORDINGLY. AS PER THE PROVI SIONS OF INCOME TAX ACT, THE TDS HAS TO BE DEDUCTED ON CREDIT TO PARTY'S ACCOUNT OR PAYMENT, WHICHEVER IS EARLIER. ACCORDINGLY, THE TDS WOULD REFLECT THE AMOUNT AS CREDITED IN THE BOOKS OF THE CUSTOMER/CLIENT, WHETHER PAID OR NOT. THE DIFFERENCE IN THE INC OME, PRINCIPALLY, HAS ARISEN DUE THIS MISMATCH OF THE AMOUNTS. 6.5 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT WAS ASKED TO SUBMIT CERTAIN DETAILS REGARDING 26AS OF THE YEAR UNDER CONSIDERATION AS TO WHEN THE REMAINING RECEIPTS ARE OFFERED TO TAX AND WHAT HAPPE NED ABOUT TDS CERTIFICATE SHOWN AS PR THE 26AS STATEMENT. APPELLANT HAS SUBMITTED AS UNDER: - 8 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, STATEMENT OF TURNOVERAS PER 26 AS (TIN) AND ACTUAL RECEIPT AS PER BANK STATEMENTS FINANCIAL YEAR ASSESSMENT YEAR TURNOVER MENTIONED IN AUDIT REPORT ( AS PER BANK RECEIPT INCLUDING TDS) TURNOVER AS PER 26ASTDS - NSDL BALANCE OPENING BALANCE OF TURNOVER TO WHOM SHOWN IN NEXT SUBSEQUENT PERIODS 2009 - 2010 2010 - 2011 98,319,374 150,650,566 (52,331,192)' (52,331,192) THE AMOUNT OF RS. 5,23,31,192/ - OF FINANCIAL YEAR : 2009 - 2010 IS RECE VABLE DURING THE FINANCIAL YEAR : 2010 - 2011 IS NOT RECEIVED DURING THE YEAR 2010 - 2011 2011 - 2012 133,060,779 140,497,891 (7,437,112) (7,437,112) THE AMOUNT OF RS.5,23,31,192/ - OF FINANCIAL YEAR : 2009 - 2010 IS RECEIVABLE DURING THE FINANCIAL YEAR : 2010 - 2011 IS NOT RECEIVED DURING THE YEAR AND THE PART PAYMENT OF RS.2,06,15,654/ - OUT OF RS.5,23,31,192/ - IS RECEIVED IN FINANCIAL YEAR : 2011 - 2012 2011 - 2012 2012 - 2013 87,063,865 66,448,211 20,615,654 20,615,654 CLOSING OF BALANCE TURNOVER TO SHOWN (39,152,650) THE BALANCE AMOUNT OF RS.3,17,15,538/ - OF FINANCIAL YEAR : 2009 - 2010 A PART PAYMENT OF RS.1,84,71,025/ - OUT OF RS.3,17,15,538/ - IS RECEIVED IN FINANCIAL YEAR : 2012 - 2013 2012 - 2013 2013 - 2014 49,149,457 30,678,432 18,471,025 18,471,025 ANOTHER CLOSING BALANCE TURNOVER TO SHOWN (20,681,625) / THE PART & FINAL BALANCE AMOUNT OF RS.1,32,44,513/ - OF FINANCIAL YEAR : 2009 - 2010 & RS.74,37,112/ - OF FINANCIAL YEAR : 2010 - 20 11 IS RECEIVED IN NEXT SUBSEQUENT FINANCIAL YEARS T OTAL RUPEES 367,593,475 388,275,100 | 20,681,625 6.6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLATE, FINDINGS MADE BY THE AO AND DETAILS SUBMITTED DURING THE APPELLATE PROCEEDINGS. MY OBSERVATIONS ARE AS DISCUSSED IN THE FOLLOWING PARAGRAPHS. 9 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, 6.7. THE APPELLANT HAS FOLLOWED MERCANTILE SYSTEM IN THE PRECEDING YEARS BUT HAS SWITCHED OVER TO CASH SYSTEM THIS YEAR. THIS IS APPARENT FROM THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION, WHERE CASH SYSTEM OF ACCOUNTING IS CLEARLY MENTIONED. IN THE CASH SYSTEM OF ACCOUNTING, RECEIPTS ARE ACCOUNTED FOR AS INCOME, AS & WHEN RECEIVED BY HIM DURING THE FINANCIAL YEAR. FOLLOWING THIS SYSTEM, TH E APPELLANT HAS RECOGNIZED RS. 9,86,54,7607 - AS INCOME FOR THE YEAR UNDER CONSIDERATION. AO WHILE EXAMINING THE FORM 26AS NOTICED THAT RECEIPTS ARE SHOWN THEREIN AT RS. 15,06,50,566/ - ON WHICH NECESSARY TDS IS DEDUCTED BY THE DEDUCTORS. DURING THE ASSESSME NT PROCEEDINGS, THE APPELLANT EXPLAINED BEFORE THE AO THAT WHILE HE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING, HIS CLIENTS WERE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. HENCE, THESE PARTIES ARE RECOGNIZING THE EXPENSES AS & WHEN THE EXPENDITURE ENTRIES ARE PASSED IN THEIR BOOKS OF ACCOUNTS & TDS ARE DEDUCTED IRRESPECTIVE OF WHETHER PAYMENTS ARE RELEASED OR NOT. IN VIEW OF THIS, IN THE TDS CERTIFICATES, APPROPRIATED TDS ALONG WITH CORRESPONDING AMOUNT WILL BE SHOWN, WHETHER THE AMOUNT IS PAID OR NOT. THIS HA S RESULTED IN THE DIFFERENCE IN INCOME/MISMATCH BETWEEN RECEIPTS AS PER APPELLANT'S BOOKS OF ACCOUNTS & AS PER TDS CERTIFICATE REFLECTED THROUGH FORM 26AS. I FULLY AGREE WITH THE 10 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, APPELLANT AS FAR THE BROAD REASONS FOR DIFFERENCE ARE CONCERNED. 6.8. THIS IS FURTHER EXAMINED IN THE FOLLOWING PARAGRAPHS: 6.8.1. IT NEEDS TO BE EXAMINED AS TO WHETHER THE APPELLANT HAS SUCCESSFULLY EXPLAINED THE DIFFERENCE IN DEDUCTIONS OR NOT AND IN WHICH YEAR THE BALANCE RECEIPT/INCOME IS RECEIVED/ RECOGNIZED IN HIS BOOKS OF ACCOUNTS. ON THIS ISSUE, IT WAS INCUMBENT UPON THE AO TO EXAMINE THE CLAIMS MADE DURING THE ASSESSMENT PROCEEDINGS AND TO CHECK WHETHER THE CLAIMED RECEIPTS ARE RECORDED IN THE SUBSEQUENT YEAR OR NOT IN VIEW OF THE FACT THAT DETAILED RECONCILIATION STATE MENT WAS SUBMITTED BY THE APPELLATE DURING ASSESSMENT PROCEEDINGS. 6.9. IT MAY BE SEEN IN THE WORKING THAT THE DIFFERENCE IN THE INCOME HAS BEEN WORKED OUT BASED ON THE INCOME REFLECTED IN THE TDS CERTIFICATE AS AGAINST THE INCOME PHYSICALLY RECEIVED B Y THE APPELLANT. IF WE PERUSE THE ABOVE TABLE AT PARA 5.5 IT EMANATES THAT THE AMOUNT OF RS.5,23,31,192/ - OF FINANCIAL YEAR: 2009 - 2010 WHICH IS RECEIVABLE DURING THE FINANCIAL YEAR 2010 - 11 WAS NOT RECEIVED DURING THE YEAR BUT THE PART PAYMENT OF RS.2,06,15 ,654/ - OUT OF RS.5,23,31,192/ - WAS RECEIVED IN FINANCIAL YEAR 2011 - 12.OUT OF BALANCE AMOUNT OF RS.3,17,15,538 / - OF FINANCIAL YEAR 2009 - 10 11 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, A PART PAYMENT OF RS.1,84,71,0257 - WAS RECEIVED IN FINANCIAL YEAR 2012 - 13. FINALLY REMAINING BA LANCE AMOUNT OF RS. 1 ,32,44,513/ - OF FINANC IAL YEAR 2009 - 10 & RS.74,37,112/ - OF FINANCIAL YEAR 2010 - 11 WAS RECEIVED IN NEXT SUBSEQUENT FINANCIAL YEARS. 6.10. IN THE RESULT, I FIND FORCE IN THE ARGUMENTS PUT FORTH BY THE APPELLANT AND ADDITIONS MADE CANNOT BE SUSTAINED. HENCE, GROUNDS OF APPEAL ARE ALLOWED. 6.2 AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AND HEARING THE PARTIES AT LENGTH, WE FIND THAT LD. CIT(A) WHILE APPRECIATING THE FACTS OF THE PRESENT CASE HAD RIGHTLY CONCLUDED BY HOLDING ON THE BASIS OF FACTS T HAT THE ASSESSEE HAD FOLLOWED THE MERCANTILE SYSTEM IN THE PRECEDING YEARS, HOWEVER THE ASSESSEE HAD SWITCHED OVER TO CASH SYSTEM THIS YEAR. THIS OBSERVATION WAS MADE BY LD. CIT( A) AFTER APPRECIATING THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION, WHEREIN CASH SYSTEM OF ACCOUNTING WAS CLEARLY MENTIONED. IT IS TRUE THAT IN THE CASH SYSTEM OF ACCOUNTING, RECEIPTS ARE ACCOUNTED FOR AS INCOME, AS & WHEN RECEIVED BY THE ASSESSEE . HENCE RS. 9,86,54,760/ - WAS RECOGNIZED AS INCOME FOR THE YEAR UNDER CONSIDERATION. ON THE 12 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, CONTRARY, THE AO WHILE EXAMINING THE FORM 26AS NOTICED THAT RECEIPTS ARE SHOWN THEREIN AT RS. 15,06,50,566/ - ON WHICH NECESSARY TDS WAS DEDUCTED BY THE DEDUCTORS. A S PER THE ASSESSEE, WHILE SINCE HE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AND HIS CLIENTS WERE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE, THESE PARTIES WERE RECOGNIZING THE EXPENSES AS & WHEN THE EXPENDITURE ENTRIES WERE PASSED IN THEIR BOOKS O F ACCOUNTS & TDS WERE DEDUCTED IRRESPECTIVE OF WHETHER PAYMENTS WERE RELEASED OR NOT. BECAUSE OF THIS,, IN THE TDS CERTIFICATES, APPROPRIATED TDS ALONG WITH CORRESPONDING AMOUNT WAS SHOWN, WHETHER THE AMOUNT WAS PAID OR NOT AND ONLY BECAUSE OF THIS REASON, THERE WAS DIFFERENCE IN INCOME/MISMATCH B ETWEEN RECEIPTS AS PER ASSESSEE 'S BOOKS OF ACCOUNTS & AS PER TDS CERTIFICA TE REFLECTED THROUGH FORM 26AS. 6.3 WHILE APPRECIATING THE ABOVE FACTS, LD. CIT(A) RIGHTLY HELD THAT THE DIFFERENCE IN THE INCOME HAD BEEN W ORKED OUT BASED ON THE INCOME REFLECTED IN THE TDS CERTIFICATE AS AGAINST THE INCOME PHYS ICALLY RECEIVED BY THE ASSESSEE . EVEN WE HAVE ALSO PERUSED THE T ABLE MENTIONED PARA 5.5 , WHEREIN THE AMOUNT OF RS.5,23,31,192/ - OF F Y: 2009 - 2010 WHICH WAS RECEIVABLE D URING 13 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, THE F Y R 2010 - 11 WAS NOT RECEIVED DURING THE YEAR . HOWEVER, THE PART PAYMENT OF RS.2,06,15,654/ - OUT OF RS.5,23,31,192/ - WAS RECEIVED IN F Y 2011 - 12. OUT OF BALANCE AMOUNT OF RS.3,17,15,538/ - OF F Y R 2009 - 10 A PART PAYMENT OF RS.1,84,71,025 / - WAS RECEIV ED IN F Y R 2012 - 13. FINALLY REMAINING BALANCE AMOUNT OF RS. 1,32,44,513/ - OF F Y 2009 - 10 & RS.74,37,112/ - OF F Y 2010 - 11 WAS RECEIVED IN NEXT SUBSEQUENT FINANCIAL YEARS. HENCE ON THE BASIS OF ABOVE FACTUAL FINDINGS, LD. CIT( A) HAD RIGHTLY ALLOWED THIS GROUND RAISED BY THE ASSESSEE AND DELETED THE ADDITIONS. 6.4 THE LD. DR ALSO COULD NOT POINT OUT AS TO HOW LD. CIT(A) HAD VIOLATED THE PROVISIONS OF RULE 46A OF I.T. RULES 1962. 6.5 M OREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND S RAISED BY THE REVENUE STANDS DISMISSED . 14 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, GROUND NO. (III) & (IV) 7 . THESE GROUNDS RAISED BY THE REVENUE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF UNSECURED LOANS OF RS. 2,34,79,676/ - , WITHOUT CONSIDERING THE AOS OBSERVATION THAT ASS ESSEE HAD NOT FILED CONFIRMATIONS OR DOCUMENTARY EVIDENCES TO PROVE THE SAID LIABILITY AND LD. CIT(A) ALSO WRONGLY TREATED THE SAME SALARY PAYABLE WITHOUT GIVING OPPORTUNITY TO THE AO , THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDE R. 8. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. 8.1 BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN PARA NO. 7.2 TO 7.5 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 15 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, 7.2. I HAVE GONE THROUGH ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE APPELLANT. ON PERUSAL OF AUDIT REPORT OF VARIOUS YEARS IN APPELLANT'S OWN CASE IT IS OBSERVED AS UNDER: ASSESSMENT YEARS UNSECURED LOANS SALARIES (DUE AND PAYABLE TO SECURITY PERSONNEL) FIG I N RS. 2005 - 06 78,0007 - 20,11,3367 - 2006 - 07 2,53,0007 - 28,26,8907 - 2007 - 08 2,53,0007 - 95,76,2037 - 2008 - 09 NIL 1,02,21,6837 - 2009 - 10 NIL 5,85,79,6767 - 2010 - 11 NIL 2,34,79,6767 - 2011 - 12 NIL 1,97,00,0007 - THESE FACTS CLEARLY ESTABLISH THAT RS.2,34,79,6767 - CANNOT BE CONSIDERED AS UNSECURED LOANS BY ANY STRETCH OF IMAGINATION. SECURITY PERSONAL CANNOT EXTEND LOANS TO THE APPELLANT WHEN THEY THEMSELVES EARN A VERY MEAGER SALARY IN THIS COMPETITIVE WORLD. IT IS A FACT THAT IN THE INDUSTRY OF SECURITY GUARDS EMPLOYERS GENERALLY PAY FULL SALARY AND PAYMENT IS KEPT IN ARREARS. APPELLANT SUPPLIES GUARDS TO VARIOUS ESTABLISHMENTS ON CONTRACTUAL BASIS.HE HAS RECEIVED THE ENTIRE CONTRACTUAL AMOUNT BY CHEQUES BEING SALARY 16 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, FOR THE GUARDS S UPPLIED TO THEM, AND THE SAME AMOUNT IS PAID TO THE GUARDS AFTER KEEPING CERTAIN PERCENTAGE. 7.3. SO FAR ISSUING OF SUMMONS U/S 131 OF THE ACT TO FEW SECURITY GUARDS, IT IS ALSO A FACT THAT SECURITY GUARDS DO NOT WORK FOR LONG IN ONE PLACE. THEY KEEP ON CHANGING JOBS. AO DID NOT GO FURTHER TO CONCLUDE HIS INVESTIGATIONS. SIMILARLY, INSPECTOR'S REP ORT IS NOT CONCLUSIVE INVESTIGATION. HE HAS JUST CONTACTED ONE MR. NAZIRTHAT TOO ON PHONE FOR ENQUIRY ABOUT GUARDS EMPLOYED BY THE APPELLANT AT THE PREMISE OF PIONEER INDIA DEVELOPERS PVT. LIMITED, COMMERCIAL SHOPPING CENTRE, EXTENSION OF MILAN SIGNAL, S.V . ROAD, SANTACRUZ(W), MUMBAI - 56. INVESTIGATION WAS NOT BROUGHT TO LOGICAL CONCLUSION. SIMILAR FATE OF INVESTIGATION IS IN THE CASE OF PREMISE OF SPINACH WADHAWAN RETAIL MARKET, CHIKUWADI, BORIVALI (W),MUMBAI. 7.4. ARGUMENTS OF APPELLANT APPEAR TO B E ACCEPTABLE WHEN HE STATES THAT, IT IS NOT POSSIBLE TO FIND OUT SECURITY PERSONNEL AFTER A LAPSE OF A PERIOD OF 4 YEARS. IT HAS GOT TO BE CONSIDERED ON THE GROUND OF 'EQUITY & JUSTICE,' HAVING REGARDS OF NATURE OF BUSINESS. IT IS DIFFICULT TO TRACE WORKER S AFTER A LAPSE OF 4 YEARS. HE ALSO SUBMITTED THAT WORKERS ARE ALWAYS IN SEARCH OF OTHER JOB AND AFTER TAKING THEIR ARREARS AND 17 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, EVEN IF THEY ARE PAID LITTLE HIGH SALARY, THEY WILL DISCONTINUE THEIR SERVICES. IT IS VERY DIFFICULT TO GET THE UNSKILLED WORKER S WHO CAN WORK AS WATCHMEN. THERE IS STEEP COMPETITION IN THE MARKET FOR UNSKILLED WORKER. THE ASSESSMENT UNDER REFERENCE IS FOR THE FINANCIAL YEAR 2009 - 10 RELEVANT TO ASSESSMENT YEAR 2010 - 11 WHEREAS THE SCRUTINY IS TAKEN IN THE YEAR 2013 I.E. AFTER 3 TO 4 YEARS. THE SAID AMOUNT OF RS. 2,34,79,6767 - IS NOT A PITAL INTRODUCED DURING THE YEAR NOR IT IS CASH INTRODUCED DURING THE YEAR UNDER THE HEAD UNSECURED LOANS. APPELLANT HAS BEEN SHOWING THE SALARY PAYABLE TO THE SECURITY PERSONNEL FOR EACH AND EVERY ASSE SSMENT YEAR. THE ASSESSMENT COMPLETED U/S 143 (3) FOR EVERY ALTERNATE YEAR HAS ALWAYS ACCEPTED APPELLANT'S CLAIM OF SALARY PAYABLE TO GUARDS. APPELLANT FURTHER SUBMITTED THAT THE AMOUNT SHOWN AS UNSECURED LOAN IS 'TYPOGRAPHICAL' MISTAKE AS AGAINST THE ACTUAL HEADING SHOULD HAVE BEEN 'AS SALARY PAYABLE OR ARREAR OF SALARY OUTSTANDING'. HOWEVER BY TAKING THE HEADING AS UNSECURED LOAN DOES NOT DIFFERENTIATE THE ARITHMETICAL CALCULATION OR SUPPRESSION OF ANY TAX LIABILITIES. THE ADDITION MADE AT RS.2,34,79, 676/ - IS AGAINST SPIRIT OF SECTION 145 WHERE THE A/C IS MAINTAINED ON CASH BASIS AND IS BAD IN LAW. DURING THE YEAR UNDER REFERENCE, THERE WERE ABOUT 1330 GUARDS AND THE ARREARPAYABLE TO THEM IS ON AN AVERAGE OF RS. 19500Y - (BEING THE 18 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, SALARY OF 2 TO 3 MONT HS). THE ENQUIRY MADE AFTER A LAPSE OF 4 YEARS IS IN VEIN AS ALMOST ALL THE PERSONS HAVE LEFT THEIR SERVICES WITH US AND ARE NOT TRACEABLE. APPELLANT RELIED ON THE FULL BENCH CASE OF 'DHAKESHWAR PRASAD V/S CIT. BY SIR COURTNEY TERRELC.J WHEREIN IT IS RENDE RED THAT'/ACCORD/NO: TO THE CASH BASIS A RECORD IS KEPT ON THE ACTUAL RECEIPTS AND ACTUAL PAYMENTS, ENTRY BEING MADE ONLY WHEN MONEY IS ACTUALLY COLLECTED OR DISBURSED AND OF THE PROFIT OF THE BUSINESS ARE ACCOUNTED FOR IN THIS WAY, THE TAX IS PAYABLE ON T HE DIFFERENCE BETWEEN FOR THE PERIOD IN QUESTION'. 7.5. ONGOING DISCUSSION CLEARLY ESTABLISHES THAT RS.2,34,79,676/ - IS SALARY PAYABLE TO THE SECURITY PERSONNEL NOT UNSECURED LOANS AS HELD BY THE AO. APPELLANT IS FOLLOWING CASH SYSTEM OF ACCOUNTING. AP PELLANT IS FOLLOWING CASH SYSTEM OF ACCOUNTS AS DISCUSSED SUPRA. IT IS WELL SETTLED PRINCIPLE OF ACCOUNTING THAT IN THE CASHSYSTEM, THE INCOME WOULD BE RECOGNIZED, WHEN ACTUALLY RECEIVED BY THE ASSESSEE, AS AGAINST THE ACCRUAL OR MERCANTILE SYSTEM, WHEREIN THE INCOME IS RECOGNIZED WHEN ACCRUED BASED ON THE ACCOUNTING PERIOD, WHETHER RECEIVED OR NOT. THE SO CALLED UNSECURED LOANS ARE IN - FACT SALARY PAYABLE TO SECURITY GUARDS/PERSONNEL AS TOTAL RECEIPTS WHICH ACCRUED DURING THE YEAR COULD NOT BE RECEIVED IN T HE SAME FINANCIAL YEAR, WHICH RESULTED INTO SHORT PAYMENT 19 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, OF SALARY TO THE SECURITY PERSONNEL. HENCE, LIABILITY IN THE FORM OF SALARY PAYABLE TO THE TUNE OF RS.2,34,79,676/ - ARISE AND MISTAKENLY SHOWN AS UNSECURED LOANS. IT IS NOT A CASE WHERE UNEXPLAINED C ASH/CAPITAL HAS BEEN INTRODUCED. IN VIEW OF ABOVE DISCUSSED FACTS AND CIRCUMSTANCES IT IS HELD THAT THE SALARY PAYABLE IS A CLEAR CUT LIABILITY WHICH HAS BEEN SHOWN AT LIABILITY SIDE BUT MISTAKENLY UNDER THE HEAD 'UNSECURED LOANS'. HENCE, ADDITION OF RS.2, 34,79,676/ - UNDER THE HEAD UNSECURED LOANS CANNOT BE SUSTAINED. GROUNDS OF APPEAL RAISED ARE ALLOWED. 8.2 AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AND HEARING THE PARTIES AT LENGTH, WE FIND THAT AS PER THE FACTS OF THE CASE, THE ASSESSEE HAD TAKEN UNSECURED LOANS FROM VARIOUS PERSONS, BUT THE FIGURES IN ALL THE LOANS WERE BELOW 20,000/ - , THEREFORE ON THE ASKING OF THE AO, THE ASSESSEE SUBMITTED THE NAME AND ADDRESSES OF THE PERSONS FROM WHOM LOANS WERE TAKEN. AS PER AO, SINCE ALL THE LOANS WERE SHOWN TO HAVE BEEN TAKEN FROM THE SECURITY PERSONNELS, THEREFORE CONSIDERING THE AUDIT REPORT OF VARIOUS YEARS, IT WAS OBSERVED BY LD. CIT(A) THAT SUM OF RS.2,34,79,676/ - CANNOT BE CONSIDERED AS UNSECURED LOANS BY A NY STRETCH OF IMAGINATION AS THE SECURITY PERSONAL CANN OT 20 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, EXTEND LOANS TO THE ASSESSEE WHEN THEY THEMSELVES EARN A VERY MEAGER SA LARY IN THIS COMPETITIVE WORLD AND EVEN THE ASSESSEE ADMITTED THAT THE AMOUNT SHOWN AS UNSECURED LOAN IS 'TYPOGRAPHICAL' MISTAK E AS AGAINST THE ACTUAL HEADING SHOULD HAVE BEEN 'AS SALARY PAYABLE OR ARREAR OF SALARY OUTSTANDING'. IT WAS CONSIDERED BY LD. CIT(A) THAT BY TAKING THE HEADING AS UNSECURED LOAN DOES NOT DIFFERENTIATE THE ARITHMETICAL CALCULATION OR SUPPRESSION OF ANY TA X LIABILITIES. IT WAS ALSO BY LD. CIT(A) THAT T HE ADDI TION MADE AT RS.2,34,79,676/ - WAS AGAINST SPIRIT OF SECTION 145 WHERE THE A/C IS MAINTAINED ON CASH BASIS . AS PER THE FACTUAL FINDINGS, THERE WERE ABOUT 1330 GUARDS AND THE ARREAR PAYABLE TO THEM WERE O N AN AVERAGE OF RS. 19 500/ - (BEING THE SALARY OF 2 TO 3 MONTHS). T HE FULL BENCH CASE OF 'DHAKESHWAR PRASAD V/S CIT. BY SIR COURTNEY TERRELC.J WHEREIN IT WAS HELD THAT ACCORDING TO THE CASH BASIS A RECORD IS KEPT ON THE ACTUAL RECEIPTS AND ACTUAL PAYMENTS, ENTRY BEING MADE ONLY WHEN MONEY IS ACTUALLY COLLECTED OR DISBURSED AND OF THE PROFIT OF THE BUSINESS ARE ACCOUNTED FOR IN THIS WAY, THE TAX IS PAYABLE ON THE DIFFERENCE BET WEEN FOR THE PERIOD IN QUESTION . THUS IN THIS WAY, IT WAS ESTABLISHED THAT RS.2,34, 79,676/ - WAS S ALARY PAYABLE TO THE 21 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, SECURITY PERSONNEL NOT UNSECURED LOANS AS HELD BY THE AO. SINCE THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING , WHEREIN THE INCOME WOULD BE RECOGNIZED, WHEN ACTUALLY RECEIVED BY THE ASSESSEE, AS AGAINST THE ACCRUAL OR MERCANTILE SYSTEM, WHEREIN THE INCOME IS RECOGNIZED WHEN ACCRUED BASED ON THE ACCOUNTING PERIOD, WHETHER RECEIVED OR NOT. THE SO CALLED UNSECURED LOANS WER E IN - FACT SALA RY PAYABLE TO SECURITY GUARDS/PERSONNEL AS TOTAL RECEIPTS WHICH ACCRUED DURING THE YEAR COULD NOT BE RECEIVED IN THE SAME FINANCIAL YEAR, WHICH RESULTED INTO SHORT PAYMENT OF SALARY TO THE SECURITY PERSONNEL. HENCE, LIABILITY IN THE FORM OF SALARY PAYABLE TO THE TUNE OF RS.2,34,79,676/ - ARO SE AND MISTAKENLY SHOWN AS UNSECURED LOANS. THEREFORE WHILE CONSIDERING THE ABOVE FACTS, THE LD. CIT(A) HAD RIGHTLY CONCLUDED THAT I T IS NOT A CASE WHERE UNEXPLAINED CASH/CAPITAL HAS BEEN INTRODUCED. THUS WAS CORRECTLY HE LD THAT THE SALARY PAYABLE WAS A CLEAR CUT LIABILITY WHICH HAD BEEN SHOWN AT LIABILITY SIDE , BUT MISTAKENLY UNDER THE HEAD ' UNSECURED LOANS '. HENCE , CONSIDERING THESE FACT, LD. CIT(A) HAD RIGHTLY DELETED THE ADDITION OF RS.2,34,79,676/ - UNDER THE HEAD UNS ECURED LOANS . 22 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, 8.3 MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THIS GROUND RAISED BY THE REVENUE STANDS DISMISSED . GR OUND NO. (V) 9 . THIS GROUND R AISED BY THE REVENUE IS GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 10 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH FEB , 2019 . SD/ - SD/ - ( R. C. SHARMA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 27 . 0 2 .201 9 SR.PS . DHANANJAY 23 I.T.A. NO. 3094 / MUM/201 6 M/S HONEST SECURITY SERVICES, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI