Tarun Grover, Delhi V. Addl. CIT, New Delhi

ITA 3216/DEL/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69686 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 28-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 30-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Section: 234B; 144

Judgement Text

ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.3350/DEL/2010 ASSESSMENT YEAR : 2006-07 ADDL. COMMISSIONER OF INCOME TAX, VS TARUNA GROVER, CIRCLE 21(1), F-2, VIKAS BHAWAN, R/O 183-184, POCKET E-21, NEW DELHI. SEC-03, ROHINI, DELHI. (PAN: AHZPG9959N) I.T.A.NO.3216/DEL/2010 ASSESSMENT YEAR : 2006-07 TARUNA GROVER, VS ADDL.COMMISSIONER OF INCO ME TAX, ROHINI, DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAJ KUMAR, CA RESPONDENT BY : SHRI SAMEER SHAR MA, SR. DR O R D E R PER CHANDRAMOHAN GARG, JUDICIAL MEMBER THE ABOVE CAPTIONED APPEALS HAVE BEEN PREFERRED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(A)-XXII, NEW DELHI D ATED 30.04.2010 IN APPEAL NO.207/08-09 FOR AY 2006-07. FOR THE SAKE O F BREVITY, CONVENIENCE AND CLARITY IN THE FINDINGS, THESE APPEALS HAVE BEE N CLUBBED AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 2 2. GROUND NO. 2 OF THE REVENUE AND GROUND NO. 2 OF THE ASSESSEE ARE RELATED TO THE ISSUE OF ESTIMATION OF NET PROFIT AN D WE FIND IT APPROPRIATE TO DECIDE THESE GROUNDS SIMULTANEOUSLY. 3. GROUND NO. 2 OF THE REVENUE READS AS UNDER:- THE LD. COMMISSIONER OF INCOME TAX(A) ERRED IN LAW AND ON FACTS IN RESTRICTING THE OTHER DISALLOWA NCE MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS.13,61,654/- I.E. 15% OF N.P. RATE. 4. GROUNDS NO. 2 OF THE ASSESSEE READS AS UNDER:- 2.1 THAT UNDER THE FACTS AND CIRCUMSTANCES, THERE IS ABSOLUTELY NO LEGALITY AND JUSTIFICATION IN NOT ACC EPTING THE DECLARED N.P. RATE OF 5.54% AND ESTIMATING THE SAME AT 15% THEREBY IN MAKING AND SUSTAINING AN ADDITION OF RS.13,61,654/-. 2.2 THAT THE LD. COMMISSIONER OF INCOME TAX(A), AF TER GIVING A CATEGORICALLY FINDING THAT NO ADVERSE INFE RENCE CAN BE DRAWN FROM THE STATEMENT OF THE AUDITOR, WAS LEGALLY AND FACTUALLY REQUIRED TO ACCEPT THE DECLAR ED BOOK RESULTS BASED ON AUDITED BOOKS OF ACCOUNTS. 2.3 THAT UNDER THE FACTS AND CIRCUMSTANCES, THE EX PENSES CLAIMED NEEDS TO BE ALLOWED IN TOTO. 2.4 THAT WITHOUT PREJUDICE, THE N.P. RATE APPLIED IS, AT ANY RATE VERY VERY EXCESSIVE. GROUND NO. 2 OF THE ASSESSEE AND REVENUE 5. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIES A ND CAREFULLY PERUSED THE RECORD INTER ALIA ASSESSMENT AND FIRST APPELLATE ORDER. THE ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 3 ASSESSEES REPRESENTATIVE (AR) SUBMITTED THAT THE A SSESSEE IS AN AGENT OF ICICI BANK AND HAD BEEN OPERATING FROM FOUR OFFICES WITH ABOUT 100 TELEPHONE LINES AND ABOUT 100 EMPLOYEES. THE AR FU RTHER SUBMITTED THAT THE ASSESSEE GETS COMMISSION FROM ICICI BANK ON SOLICIT ING PROPERTY LOANS, CAR LOANS AND OTHER LOANS AND COMMISSION IS DIRECTLY CR EDITED TO THE BANK ACCOUNT OF THE ASSESSEE AFTER TDS WHICH WAS RS.1,43 ,98,534/- DURING THE YEAR UNDER CONSIDERATION. THE AR FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT PRODUCE BOOKS OF ACCOUNTS AND COMPLETE VOUCHERS DURING THE ASSESSMENT PROCEEDINGS BUT MAXIMUM BILLS AND VOUCHERS WERE PRO DUCED BEFORE THE ASSESSING OFFICER. THE AR VEHEMENTLY CONTENDED THAT THE ASSESSING OFFICER DISALLOWED 94.64% OF THE TOTAL EXPENSES CLAIMED IN THE P&L ACCOUNT OF THE ASSESSEE WITHOUT ANY BASIS AND COGENT REASON AND MA XIMUM HEADS OF REJECTED CLAIM WERE ALLOWED DURING THE EARLIER AND SUBSEQUENT YEARS OF THE ASSESSMENT. 6. THE AR VEHEMENTLY CONTENDED THAT WHEN THE ASSESS ING OFFICER REJECTED THE DECLARED AND RETURNED INCOME OF THE AS SESSEE, THE ESTIMATION OF NET PROFIT HAS TO BE DONE ON THE BASIS OF DECLARED N.P. RATE FOR THE PRECEDING AND SUBSEQUENT ASSESSMENT YEARS BUT THE ASSESSING O FFICER DISALLOWED 94.64% EXPENSES CLAIMED BY THE ASSESSEE ON WRONG PR EMISE AND WITHOUT ANY BASIS. THE AR FURTHER CONTENDED THAT THE COMMISSIO NER OF INCOME TAX(A) ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 4 ESTIMATED THE NP AT 15% OF THE RECEIPTS ON THE BASI S OF RESULT OF AY 2005-06 WHICH WERE ACTUALLY SHOWING NP OF 9.23% OF THE REC EIPTS. THE AR ALSO CONTENDED THAT IF THE COMMISSIONER OF INCOME TAX(A) HAS CHOSEN TO ESTIMATE NET PROFIT ON THE BASIS OF PERCENTAGE OF R ECEIPTS BASED ON RESULT OF AY 2005-06, THEN THE COMMISSIONER OF INCOME TAX(A) WAS NOT JUSTIFIED IN ENHANCING THE NP RATE OF AY 2005-06 FROM 9.23% TO 1 5% FOR THE YEAR UNDER CONSIDERATION. 7. THE AR ALSO POINTED OUT THAT WHEN THE VARIOUS AU THORITIES PROCEEDED TO ESTIMATE NP RATE, THEN NP RATE IN ASSESSEES OWN EARLIER AND SUBSEQUENT YEAR ASSESSMENTS OR NP RATE OF OTHER SYNONYMOUS CON CERNS MUST BE CONSIDERED AS A BASIS OF ESTIMATION. THE AR POINTE D OUT THAT IN SIMILAR COMPARABLE CASE OF M/S MONEYLINE MARKETING (P) LTD. , THE DECLARED AND ACCEPTED NP RATE FOR AY 2005-06 AND 2006-07 WERE 1. 28% AND 1.60% OF THE COMMISSION RECEIPTS RESPECTIVELY. THE AR ALSO POIN TED OUT THE CASE OF ANOTHER SIMILAR CONCERN M/S TREASURE WHICH DECLARED NP RATE AT 2.8% OF RECEIPTS FOR THE AY 2007-08 WHICH WAS ACCEPTED BY T HE DEPARTMENT. THE AR FURTHER POINTED OUT THAT THE COMMISSIONER OF INC OME TAX(A) GROSSLY ERRED IN NOT ACCEPTING THE DECLARED NP RATE OF 5.54 % AND ESTIMATING THE SAME AT 15%. ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 5 8. REPLYING TO THE ABOVE, LD. DR SUBMITTED THAT WHE N THE ASSESSEE IS NOT FURNISHING BOOKS OF ACCOUNTS AND OTHER VOUCHERS AND BILLS PERTAINING TO CLAIM OF EXPENSES REFLECTED IN THE P&L ACCOUNT, THE N THE ASSESSING OFFICER HAD NO OPTION BUT TO DISALLOW THE CLAIM OF THE EXPE NSES AND THE ASSESSING OFFICER RIGHTLY DISALLOWED THE CLAIMED EXPENDITURE FOR WHICH THE ASSESSEE COULD NOT SUBMIT RELIABLE EVIDENTIARY PROOF. THE DR CONTENDED THAT SOME BILLS AND VOUCHERS PRODUCED BY THE ASSESSEE IN SUPP ORT OF CLAIMED EXPENSES WERE NOT FOUND TO BE CORRECT BY THE AO AND IN THIS SITUATION, THE ASSESSING OFFICER WAS RIGHT IN MAKING DISALLOWANCE AND ADDITI ONS IN THIS REGARD. THE DR ALSO CONTENDED THAT DURING THE FIRST APPELLATE P ROCEEDINGS, THE COMMISSIONER OF INCOME TAX(A) PROCEEDED TO ESTIMATE THE NP RATE ON THE BASIS OF 15% OF TOTAL RECEIPTS DURING THE YEAR AND THE COMMISSIONER OF INCOME TAX(A) ERRED IN LAW AND ON FACTS IN RESTRICT ING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS.13, 61,654/-. THE DR FURTHER POINTED OUT THAT SOME EXPENSES OF THE ASSES SEE WERE IN THE NATURE OF FIXED EXPENSES WHICH DO NOT INCREASE OR INFLATE IN THE SAME PROPORTION IN WHICH THE GROSS RECEIPTS INCREASE LIKE RENT, FIXED SALARY ETC. AND THERE WAS A SUBSTANTIAL INCREASE IN THE RECEIPTS OF THE ASSESSE E DURING THE YEAR AND THESE FACTORS OBVIOUSLY WILL INCREASE THE NET PROFITABILI TY OF A CONCERN, THEREFORE, ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 6 NP RATE OF 9.23% ON THE RECEIPTS FOR AY 2005-06 COU LD NOT BE A PROPER BASIS FOR ESTIMATION OF INCOME OF THE ASSESSEE FOR THE YE AR UNDER CONSIDERATION. 9. ON CAREFUL CONSIDERATION OF ABOVE RIVAL CONTENT IONS AND SUBMISSIONS OF BOTH THE PARTIES, AT THE OUTSET, WE OBSERVE THAT SINCE THE ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NOT SUBMIT HER BOOKS O F ACCOUNTS AND SOME BILLS AND VOUCHERS PERTAINING TO THE CLAIM OF EXPENSES WE RE NOT FOUND TO BE CORRECT. THEREFORE, THE ASSESSING OFFICER DISALLOW ED 94.64% OF THE EXPENSES CLAIMED BY THE ASSESSEE AND CONSEQUENTLY M ADE AN ADDITION OF RS.1,28,71,393 IN THIS REGARD. THE FIRST APPELLATE AUTHORITY I.E. COMMISSIONER OF INCOME TAX(A) WENT ON TO ESTIMATE THE NET PROFIT (NP) OF THE ASSESSEE ON THE BASIS OF SPECIFIC PERCENTAGE OF THE RECEIPTS DURING THE YEAR. THE COMMISSIONER OF INCOME TAX(A) NOTICED THE NP RATE OF AY 2005- 06 WHICH WAS 9.23% OF THE TOTAL RECEIPTS BUT THE CO MMISSIONER OF INCOME TAX(A) OBSERVED AND HELD THAT SOME EXPENSES LIKE RE NT, FIXED SALARY ETC. DO NOT INCREASE OR INFLATE IN THE SAME PROPORTION IN W HICH THE GROSS RECEIPTS INCREASE. HENCE, ON THIS BASIS, THE COMMISSIONER O F INCOME TAX(A) ADOPTED A HIGHER PERCENTAGE I.E. 15% OF THE RECEIPTS. THE ASSESSEE IS AGGRIEVED BY THE HIGHER ESTIMATION AND THE REVENUE IS AGGRIEVED BY THE RESTRICTION OF ADDITION TO THE TUNE OF RS.13,61,654 I.E. 15% OF GR OSS RECEIPTS BUT WHEN THE ASSESSEE IS NOT PRODUCING BOOKS OF ACCOUNTS BEFORE AUTHORITIES BELOW AND ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 7 BILLS AND VOUCHERS SUBMITTED BY HER WERE NOT FOUND TO BE CORRECT, THEN THE AUTHORITIES BELOW HAD NO OPTION BUT TO ESTIMATE THE PROFIT ON THE BASIS OF BEST ASSESSMENT AND JUDGMENT U/S 144 OF THE ACT. WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE ACTION OF THE COMMISSI ONER OF INCOME TAX(A) WHERE HE PROCEEDED TO ESTIMATE THE NP RATE BUT THE ASSESSING OFFICER DISALLOWED 94.64% OF EXPENSES IGNORING THE FACTS OF THE CASE AND ASSESSING OFFICER DID NOT CONSIDER THIS VERY FACT THAT MAXIMU M HEADS OF EXPENSES WERE ALLOWED DURING EARLIER AND SUBSEQUENT ASSESSMENTS, AND WE ARE NOT IN AGREEMENT WITH THIS ACTION OF THE ASSESSING OFFICER . 10. FROM THE IMPUGNED ORDER, WE OBSERVE THAT THE CO MMISSIONER OF INCOME TAX(A) HAS DEALT THE ISSUE FOR ESTIMATION OF 15% OF RECEIPTS AS NET PROFIT OF THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND FINDINGS:- 9.4 NOW, THE IMPORTANT QUESTION ARISES FOR CONSIDERATION THAT WHAT SHOULD BE THE BASIS AND THE METHOD FOR COMPUTING THE ASSESSABLE INCOME FROM THE SAID ACTIVITY. AS PER THE CHART GIVEN ABOVE, OUT OF TOTA L EXPENSES CLAIMED AT RS. 1,36,00,428/-, EXPENSES TO THE TUNE OF RS. 1,28,71,393/- HAVE BEEN DISALLOWED, THUS, ONLY RS. 7,29,035/- HAVE BEEN ALLOWED. IN TERMS OF PERCENTAG E, 94.64% OUT OF THE TOTAL EXPENSES STANDS DISALLOWED AND ONLY BALANCE 5.36% STANDS ALLOWED. ON EXAMINING THE DETAILS OF EXPENSES CLAIMED UNDER VARIOUS HEADS, AS PER THE CHART GIVEN EARLIER, IT IS CLEAR THAT MOST OF THE E XPENSES HAVE BEEN 100% DISALLOWED. TO QUOTE SOME EXAMPLES, 100% DISALLOWED EXPENSES INCLUDES MAJOR HEAD OF EXPENSES NAMELY CONVEYANCE, COMPUTER CONSUMABLES, INSURANCE, LEGAL CHARGES, MINERAL WATER, CONSULTATI ON, PHOTOSTAT, POSTAGE, BONUS TO STAFF, CONVEYANCE ALLO WANCE, ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 8 STAFF MEDICAL ALLOWANCE, NEWSPAPER ALLOWANCE, SALAR Y AND WAGES, HRA, STAFF INCENTIVE, STAFF WELFARE, UNIFORM , ADVERTISEMENT, BUSINESS PROMOTION, CONFERENCE EXPEN SES PRINTING AND STATIONERY, PROMOTIONAL BENEFIT TO BUS INESS TEAM, REMUNERATION TO SUB DSA, STAFF / MARKETING TE AM TELEPHONE EXPENSES, COMMISSION ON BUSINESS DEVELOPM ENT, ELECTRICITY, OFFICE MAINTENANCE, MISC., REPAIRS, ET C .. APART FROM 78% DISALLOWANCE OUT OF OFFICE TELEPHONE EXPEN SES AND 96% DISALLOWANCE OUT OF PETROL EXPENSES. THE NA TURE OF THESE EXPENSES AND THE EXTENT OF DISALLOWANCE MA DE (WHEREIN IN MOST OF THE CASES IT IS 100%) IS UNTHIN KABLY AND UNIMAGINABLY EXCESSIVE. THE NATURE OF INCOME IS COMMISSION / SERVICE CHARGES FROM ICICI BANK LTD. O N THE BUSINESS PROCURED BY THE APPELLANT FOR ICICI BANK I N THE NATURE OF LOAN CUSTOMERS PROVIDED BY THE APPELLANT TO ICICI BANK LTD. THIS NATURE OF BUSINESS NEEDS A BIG TEAM OF FIELD AND OFFICE WORKERS AND INTENSIVE COMMUNICA TION AND PERSUASION TO THE CUSTOMERS FOR SOLICITING THE BUSINESS BEING A COMPETITIVE LINE. THE TELEPHONE CONNECTIONS MORE THAN 70 AT A TIME AND THE OPERATION OF BUSINESS FRO M 4 OFFICES ITSELF PROVES THE MASSIVE INVOLVEMENT OF ST AFF, WHICH INVOLVES SUBSTANTIAL EXPENSES. THE BIGGEST HEAD OF EXPENDITURE IS SALARY, WAGES, COMMISSION, INCENTIVE S AND OTHER BENEFITS TO THE STAFF WHICH ARE PARTLY AS FIX ED AMOUNT AND PARTLY OUT OF THE COMMISSION INCOME EARNED BY T HE APPELLANT THROUGH THE EFFORTS OF THESE STAFF PERSON S. THUS, THE INCURRING OF SUBSTANTIAL EXPENSES TAKING AWAY A MAJOR PORTION OF THE GROSS COMMISSION RECEIPTS OF THE APP ELLANT CANNOT BE RULED OUT. IN THIS CASE, FROM THE ASSTT. ORDER IT IS EVIDENT THAT THE AO HAS DISALLOWED ALL SUCH EXPENSE FOR WHICH DOCUMENTARY EVIDENCE/ SUPPORTINGS UPTO THE SATISFACTION OF THE AO HAVE NOT BEEN FURNISHED. THE CASE OF THE APPELLANT IS THAT ALTHOUGH ALL THE SUPPORTINGS AND EVIDENCES DULY EXISTED AND WERE ALSO SUBJECTED TO A UDIT, HOWEVER, FOR THE REASONS ALREADY MENTIONED BY THE APPELLANT, THE SAME COULD NOT BE PRODUCED BEFORE TH E AO. UNDER THESE FACTS, THE BASIS OF DISALLOWANCE OF THE SE EXPENSES BY THE AO ON THE GROUND OF NON-PRODUCTION OF THE VOUCHERS CANNOT BE SUSTAINED. HOWEVER, AT THE SAME TIME, THE CLAIM OF THE APPELLANT FOR ALLOWING ALL THE EXP ENSES ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 9 CLAIMED, IN THE ABSENCE OF VOUCHERS CANNOT BE GIVEN A GO AHEAD. UNDER THESE CIRCUMSTANCES, THE ISSUE OF DETERMINING ASSESSABLE INCOME HAS TO BE DECIDED ON THE BASIS OF DECLARED AND ASSESSED RESULTS OF OTHER COM PARABLE YEARS. IN THE CASE OF MAHARAJA SHRI B.P. SINGH DEO 76 ITR 690 (SC) AND CIT V. PAWAN KUMAR (2008) 9 DTR (P & H ) 104, IT HAS BEEN HELD THAT POWER TO MAKE BEST JUDGM ENT ASSESSMENT IS NOT AN ARBITRARY POWER AND THE ASSESS MENT HAS TO BE BASED ON RELEVANT BASIS AND MATERIAL. IN THE CASE OF R. TAHILRAM 229 ITR 34 (AT) (AHD.) (TM), IT HAS BEEN HELD THAT WHERE THE CLAIM OF THE ASSESSEE THAT THE BOOKS WERE LOST WAS FOUND TO BE FALSE, THE ESTIMATE BASED ON PAST RECORDS AND PROFITS IN SIMILAR BUSINESS IS APPROPRI ATE BASIS. THUS, IN MY CONSIDERED OPINION, IN THIS CASE ALSO, FOR DETERMINING THE TAXABLE INCOME, THE INFERENCE, GUID ANCE AND SUPPORT NEEDS TO TAKEN FROM THE RESULTS DECLARE D BY THE APPELLANT IN OTHER YEARS. AS PER 1 COMPARATIVE STUD Y DETAILS IN HIS OWN CASE FILED BY THE APPELLANT, IT HAS BEEN NOTICED THAT IN A.Y. 2005 - 06 I.E. IN THE IMMEDIAT E PRECEDING YEAR, IN THE SIMILAR NATURE OF BUSINESS, N.P. RATE OF 9.23% HAS BEEN DECLARED. THE CLAIM THE APPELLANT IS THAT, THE CORRECT COMPARISON HAS TO BE MADE ONLY FR OM A.Y. 2007 - 08 WHERE THE NATURE OF BUSINESS WAS SIMILAR AND THE GROSS COMMISSION RECEIPT IN A.Y. 2007 - 08 WAS RS. 1.47 CR WHICH ARE COMPARATIVE TO A.Y. 2006-07, WHERE RECEIP TS WAS RS. 1.44 CR, WHEREAS IN A.Y.2005-06 THE RECEIPT S WAS ONLY RS. 37 LACS. HOWEVER, I DO NOT FIND MUCH SUBST ANCE IN THIS CONTENTION THE APPELLANT. AS PER VARIOUS AUTHO RITIES QUOTED ABOVE, MORE APPROPRIATELY, THE COMPARATIVE S TUDY SHOULD HAVE BEEN MADE FROM THE RESULTS OF PRECEDING YEARS. HENCE, I HOLD THAT IN THE CASE OF APPELLANT, THE BASIS SHOULD HAVE BEEN TAKEN FROM A.Y. 2005 - 06. NOW, TH E APPELLANT HAS HIMSELF DECLARED N.P. RATE 9.23% IN A .Y. 2005-06. IT IS A COMMON KNOWLEDGE THAT SOME EXPENSE S ARE THE NATURE OF FIXED EXPENSES, WHICH DO NOT INCREASE OR INFLATE IN THE SAN PROPORTION IN WHICH THE GROSS RE CEIPTS INCREASES, LIKE RENT, FIXED SALARY, ETC. ETC ... TH IS FACTOR, OBVIOUSLY, WILL INCREASE THE NET PROFITABILITY OF T HE CONCERN. KEEPING IN VIEW THIS ASPECT AND THE FACT THAT IN A. Y. 2005 - 06 THE DECLARED N.P. RATE IS 9.23%, I HOLD THAT IT WILL BE ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 10 MOST APPROPRIATE TO DETERMINE THE N.P. RATE IN THE YEAR UNDER CONSIDERATION AT 15% AGAINST DECLARED AT 5.54 %. THIS NP RATE WILL TAKE INTO ITS CONSIDERATION ALL DISALLOWANCES OUT OF EXPENSES FOR WHATEVER REASON M ADE BY THE AG. THE RESULT OF MY FINDING WILL BE THAT TH E N.P. WILL STAND CALCULATED AT RS.21,59,780/- AGAINST DEC LARED AT RS. 7,98,126/- BY THE ASSESSEE, THEREBY MAKING AND SUSTAINING THE ADDITION TO THE EXTENT OF RS. 13,61, 654/-. AT THIS STAGE, I NEED TO MENTION THAT THE APPELLANT HAS FILED COMPARATIVE RESULTS OF SIMILAR CASE NAMEL Y M/S MONEYLINE MARKETING (P) LTD. FOR A.Y. 2005 -06 WHER EIN N.P. RATE HAS BEEN DECLARED AT 1.28% ON GROSS RECEI PTS OF RS. 2.83 CR AND FOR A.Y. 2006 - 07 DECLARING N.P. R ATE OF 1.6% ON GROSS RECEIPTS OF RS. 1.10 CR. THE APPELLAN T HAS ALSO FILED COMPARATIVE DETAILS OF ANOTHER FIRM M/S. TREASURE FOR A.Y. 2007 - 08 WHEREIN ON DECLARED GRO SS RECEIPTS OF RS. 46.20 LACS, N.P. HAS BEEN DECLARED AT 2.82% WHICH HAS BEEN ACCEPTED U/S. 143 (3) WITH MINOR AND ROUTINE ADDITIONS IN EXPENSES AND HAS CLAIMED THAT ALL THESE COMPARATIVE RESULTS WERE ACCEPTED BY THE DEPT T. THUS THIS SHOULD BE THE BASIS FOR DETERMINING THE U LTIMATE N.P. RATE IN THE CASE OF APPELLANT AND THE DECLARED RESULTS SHOULD BE ACCEPTED AS IT IS. THIS CONTENTION OF THE APPELLANT CANNOT BE ACCEPTED WHEN THE COMPARATIVE RESULTS ARE AVAILABLE IN THE CASE OF APPELLANT HIMSELF. THERE R EMAINS NO NEED FOR TAKING ANY SUPPORT OR GUIDANCE FROM THE CASE OF OTHER APPELLANT. IN VIEW OF ABOVE, FOR THE REASONS ALREADY GIVEN, TH E N.P. RATE STANDS DETERMINED AT 15% WHICH SUSTAINS T HE ADDITION TO THE EXTENT OF RS.13,61,654/-, AS PER TH E CALCULATIONS GIVEN ABOVE. 11. ON CAREFUL PERUSAL OF THE ABOVE, WE OBSERVE THAT THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS AND COMPLETE RELEVANT BIL LS AND VOUCHERS BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER DIS ALLOWED 94.54% OF THE ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 11 EXPENSES CLAIMED BY THE ASSESSEE AND DURING THE FIR ST APPELLATE PROCEEDINGS, THE COMMISSIONER OF INCOME TAX(A) PROCEEDED TO ESTI MATE THE NET PROFIT OF THE ASSESSEE ON THE BASIS OF 15% OF TOTAL RECEIPTS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE REVENUE IS AGGRIEVED BY THE ACTION OF THE COMMISSIONER OF INCOME TAX(A) WHICH RESTRICTED THE DISALLOWANCE ON THE BASIS OF 15% OF NP RATE OF THE RECEIPTS BUT REVENUE AUTHORITIES ARE EXPECTED TO ACT ON THE COGENT JUSTIFIED BASIS AND THE BASIS OF ESTIMATION WAS RIGHTLY ADOPTED BY THE COMMISSIONER OF INCOME TAX(A). ACC ORDINGLY, WE HOLD THAT THE COMMISSIONER OF INCOME TAX(A) RIGHTLY PROC EEDED TO ESTIMATE THE NP ON THE BASIS OF TOTAL RECEIPTS OF THE ASSESSEE D URING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . WE ALSO HOLD THAT WHEN THE ASSESSEE COULD NOT PRODUCE BOOKS OF ACCOUNTS AN D OTHER RELEVANT COMPLETE BILLS AND VOUCHERS BEFORE THE ASSESSING OF FICER, THEN THE COMMISSIONER OF INCOME TAX(A) WAS JUSTIFIED IN ESTI MATION OF NP RATE ON THE BASIS OF TOTAL RECEIPTS. THE COMMISSIONER OF I NCOME TAX(A) RIGHTLY NOTICED THAT THERE WAS A SUBSTANTIAL INCREASE IN TH E RECEIPTS OF THE ASSESSEE DURING THE YEAR AND AT THE SAME TIME, SOME FIXED EX PENSES LIKE RENT AND FIXED SALARY ETC. DO NOT INFLATE IN PROPORTION TO INCREAS E IN RECEIPTS. HENCE, THE COMMISSIONER OF INCOME TAX(A) ADOPTED A BALANCED VI EW IN ADOPTING 15% OF TOTAL RECEIPTS FOR ESTIMATION OF NET PROFIT OF T HE ASSESSEE. THE OTHER ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 12 COMPARABLES ARE NOT RELEVANT WHEN THE ASSESSEE HERS ELF IS DECLARING HIGHER PERCENTAGE OF NP DURING EARLIER AND SUBSEQUENT YEAR S OF ASSESSMENT AND THE COMMISSIONER OF INCOME TAX(A) RIGHTLY REJECTED THE SAME. ON THE BASIS OF DISCUSSIONS MADE HEREINABOVE, WE ARE OF THE VIEW TH AT ACTION OF THE ASSESSING OFFICER IN DISALLOWING 94.64% OF THE EXPE NSES CLAIMED WAS NOT JUSTIFIED AND ON THE OTHER HAND, THE COMMISSIONER O F INCOME TAX(A) ADOPTED A REASONABLE AND BALANCED APPROACH IN PROCE EDING TO ESTIMATE THE NP RATE OF THE ASSESSEE ON THE BASIS OF TOTAL RECEI PTS DURING THE YEAR AND ALSO THE COMMISSIONER OF INCOME TAX(A) TOOK 15% OF TOTAL RECEIPTS AS NET PROFIT OF THE ASSESSEE AS PER FACTUAL MATRIX AND OTHER REL EVANT FACTS AND CIRCUMSTANCES OF THE CASE AND WE ARE UNABLE TO SEE ANY VALID OR JUSTIFIED REASON TO INTERFERE WITH THE IMPUGNED ORDER IN THIS REGARD. ACCORDINGLY, GROUND NO. 2 OF THE REVENUE AND GROUND NO. 2 OF THE ASSESSEE ARE DISMISSED. GROUND NO. 1 OF THE REVENUE 12. GROUND NO. 1 OF THE REVENUE READS AS UNDER:- THE LD. COMMISSIONER OF INCOME TAX(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.70, 170/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERE NCE IN SERVICE CHARGES AS CLAIMED BY THE ASSESSEE. 13. APROPOS ABOVE GROUND OF THE REVENUE, THE DR SUB MITTED THAT THE COMMISSIONER OF INCOME TAX(A) ERRED IN LAW AND ON F ACTS IN DELETING THE ADDITION OF RS.70,170/- MADE BY THE ASSESSING OFFIC ER ON ACCOUNT OF ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 13 DIFFERENCE IN SERVICE CHARGES AS CLAIMED BY THE ASS ESSEE. THE DR POINTED OUT THAT AS PER TDS CERTIFICATE, THE GROSS SERVICE CHAR GES HAD BEEN SHOWN AT RS. 1,44,68,704/- AS AGAINST RS.1,43,98,534/- AS DISCL OSED BY THE ASSESSEE. THEREFORE, THE SHORT AMOUNT HAD BEEN RIGHTLY ADDED BY THE ASSESSING OFFICER. 14. REPLYING TO THE ABOVE, THE AR SUBMITTED THAT TH E SERVICE CHARGES PAID TO THE ASSESSEE BY ICICI BANK WERE DIRECTLY CREDITE D TO THE BANK ACCOUNT. THE AR FURTHER CONTENDED THAT THE ASSESSEE WAS NOT AWARE OF THE REASON OF ALLEGED DIFFERENCE OF RS.70,170 AND IT WAS THE DUTY AND ONUS WAS ON THE ASSESSING OFFICER TO SPECIFICALLY ACKNOWLEDGE THE A SSESSEE ABOUT THIS DIFFERENCE AND THEREFORE, AT THE MOST, THE ASSESSEE COULD NOT HAVE ALLOWED THE CREDIT OF TDS RELATED TO RS.70,170. THE AR SUPPORT ED THE IMPUGNED ORDER. 15. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS A ND CONTENTIONS, WE OBSERVE THAT THE ASSESSING OFFICER MADE ADDITION WI TH FOLLOWING OBSERVATIONS:- 61. AS PER TDS CERTIFICATE ISSUED BY ICICI BANK, ENCLOSED WITH THE RETURN IT IS SEEN THAT TOTAL SERV ICE CHARGES OF RS. 1,44,68,704/- HAVE BEEN CREDITED BY THE BANK TO THE ASSESSEE DURING THE PERIOD 1/4/2005-31/ 3/2006. HOWEVER, AS PER RETURN FILED THE ASSESSEE HAS DISCL OSED ONLY A SUM OF RS. 1,43,98,534/-VIDE QUESTIONNAIRE D ATED 17/9/2008 THE ASSESSEE WAS ASKED TO EXPLAIN AS TO W HY THE TOTAL SERVICE CHARGES RECEIVED BY HER HAD NOT BEEN DISCLOSED IN THE RETURN. SHE WAS ALSO ASKED TO EXPL AIN AS TO ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 14 WHY THE DIFFERENCE OF RS. 70,170/-SHOULD NOT BE ADD ED TO HER INCOME. (ADDITION OF RS. 70,170/-) 62. NO EXPLANATION IN THIS REGARD HAS BEEN FURNISHE D BY THE ASSESSEE. ACCORDINGLY, THE AMOUNT OF RS. 70,170 / - BEING COMMISSION EARNED BY ASSESSEE IS ADDED TO INC OME OF THE ASSESSEE. 16. ON FIRST APPEAL BY THE ASSESSEE, THE COMMISSION ER OF INCOME TAX(A) DELETED THE ADDITION WITH FOLLOWING OBSERVATIONS:- 9.7 THE CONTENTION OF THE APPELLANT HAS BEEN CAR EFULLY CONSIDERED. IN THE TDS CERTIFICATE ISSUED BY ICICI BANK LTD. THE GROSS SERVICE CHARGES (COMMISSION) HAVE BE EN SHOWN AT RS. 1,44,68,704/- AGAINST RS. 1,43,98,534/ -AS DECLARED BY THE APPELLANT, THUS THE DIFFERENCE REMA INS OF RS. 70,170/- WHICH HAS BEEN ADDED BY THE AO. THE APPELLANT HAS CATEGORICALLY DENIED THE ACCRUAL OR R ECEIPT OF THIS SUM OF RS. 70,170/- AT ANY POINT OF TIME. T HE CLAIM OF THE APPELLANT THAT THIS SUM REMAINS UN-IDENTIFIE D AND UNSUBSTANTIATED IN THE BANK STATEMENT AS WELL AS FR OM ANY OTHER MATERIAL IN POSSESSION OF THE AO. THIS CONTEN TION REMAINS UN-REBUTTED IN THE ASSTT. ORDER. UNDER THES E FACTS, I AM CONSTRAINED TO AGREE WITH THE CONTENTIO N OF THE AR THAT IN THE ABSENCE OF DISCHARGE OF ONUS BY THE AO OF PROVING THE ACCRUAL OR RECEIPT OF SAID SUM, IT CANN OT BE CONSIDERED AS UNDECLARED INCOME SIMPLY ON THE BASIS OF MENTIONING OF A FIGURE ON THE TDS CERTIFICATE BY IC ICI BANK. IN CASE THE AO WANTED TO VERIFY THIS FACT, HE COULD HAVE SOUGHT THE DETAILS FROM THE ICICI BANK AND ONL Y AFTER FINDING THE SAME BEING NOT DECLARED, IT COULD HAD BEEN ADDED. HENCE AS PER THE DISCUSSION MADE ABOVE I DELETE THE ADDITION OF RS. 70,170/-. HOWEVER, IN TH E FITNESS OF THINGS, THE APPELLANT IS NOT ENTITLED FO R THE CREDIT OF TDS RELATABLE TO THIS SUM OF RS. 70,170/- IF ALLOWED TO THE APPELLANT. IN CASE IT ALREADY STAND S ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 15 ALLOWED, THE ASSESSING OFFICER IS DIRECTED TO WITHD RAW THE SAME. 17. IN VIEW OF ABOVE, WE OBSERVE THAT THE ASSESSEE DID NOT FURNISH ANY EXPLANATION ABOUT THE DIFFERENCE IN TDS CERTIFICATE AND BANK STATEMENT AND THE ASSESSING OFFICER MADE ADDITION IN THIS REGARD. DURING FIRST APPELLATE PROCEEDINGS, THE COMMISSIONER OF INCOME TAX(A) HELD THAT THE UNDECLARED INCOME CANNOT BE CONSIDERED ON THE BASIS OF TDS CER TIFICATE. THE ASSESSING OFFICER COULD HAVE VERIFIED THE SAME FROM ICICI BAN K (THE PAYER) AND ONLY AFTER FINDING THAT THE SAME WAS FOUND UNDECLARED BY THE ASSESSEE, THE ADDITIONS COULD HAVE BEEN MADE AND THE COMMISSIONER OF INCOME TAX(A) DELETED THE ADDITIONS. THE COMMISSIONER OF INCOME TAX(A) DIRECTED THE ASSESSING OFFICER NOT TO PROVIDE CREDIT OF TDS IN R EGARD TO RS.70170/- BUT THIS WAS NOT A PROPER APPROACH. THE ASSESSING OFFI CER SHOULD HAVE BEEN GIVEN AN OPPORTUNITY TO VERIFY THE AMOUNT SHOWN BY THE ASSESSEE AND SHOWN IN THE TDS CERTIFICATE ISSUED BY THE PAYER ICICI BA NK BUT THE COMMISSIONER OF INCOME TAX(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WITHOUT ANY VERIFICATION. HENCE WE FIND IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT THE ASSESSING OFFICER SHALL DECIDE THE ISSUE BY AFFORDING DUE OPPORTUNITY OF HE ARING TO THE ASSESSEE. THE ASSESSING OFFICER SHALL VERIFY THE CORRECTNESS OF THE AMOUNT SHOWN BY ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 16 THE ASSESSEE IN THE LIGHT OF TDS CERTIFICATE. ACCO RDINGLY, GROUND NO. 1 OF THE REVENUE IS DISPOSED OF IN THE MANNER AS INDICATED A BOVE AND DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 3 OF THE ASSESSEE 18. GROUND NO. 3 OF THE ASSESSEE READS AS UNDER:- THAT UNDER THE FACTS AND CIRCUMSTANCES AND MORE SO, IN VIEW OF THE FACT THAT COMPLETE RECEIPTS ARE SUBJECTED TO TDS, NO INTEREST U/S 234B SHOULD HAVE BEEN CHARGED. 19. APROPOS GROUND NO. 3, THE AR SUBMITTED THAT SIN CE COMPLETE RECEIPTS ARE SUBJECTED TO TDS, NO INTEREST U/S 234B SHOULD H AVE BEEN CHARGED. THE DR POINTED OUT THAT THE ISSUE OF LEVY OF INTEREST I S CONSEQUENTIAL TO THE MAIN ISSUE AND ALSO FAIRLY ACCEPTED THAT ALL RECEIPTS I. E. COMMISSION OF THE ASSESSEE WERE SUBJECTED TO TDS. FROM THE ORDERS OF THE AUTH ORITIES BELOW, WE OBSERVE THAT UNDISPUTEDLY ALL RECEIPTS OF THE ASSES SEE WERE SUBJECTED TO TDS AND A CERTIFICATE WAS ALSO ISSUED BY ICICI BANK IN THIS REGARD. IN THIS SITUATION, WE DIRECT THE ASSESSING OFFICER TO DECID E THE ISSUE OF LEVY OF INTEREST ON THE ASSESSEE U/S 234B OF THE ACT BY CON SIDERING THE RESULT OF GROUND NO. 1 OF THE REVENUE WHICH HAS BEEN RESTORED TO HIS FILE FOR A FRESH ADJUDICATION BY THE EARLIER PART OF THIS ORDER AND THE ASSESSING OFFICER IS DIRECTED TO GRANT APPROPRIATE RELIEF TO THE ASSESSE E IN THIS REGARD. ITA NO.3350 & 3216/DEL/2010 ASSTT.YEAR: 2006-07 17 ACCORDINGLY, GROUND NO. 3 OF THE ASSESSEE IS DISPOS ED OF WITH THE DIRECTION TO THE ASSESSING OFFICER AS MENTIONED HEREINABOVE. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED AND APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.12.2013. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 20TH DECEMBER 2013 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR