Yuvraj Singh Bundhel, Chandigarh V. ACIT, Chandigarh

ITA 326/CHANDI/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9163 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: VIKRANT
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SH. PRASHANT MAHARSHI, ACCOUNTANT MEMBER ITA NO. 326/CHD/2014 ASSESSMENT YEAR: 2010-11 SHRI YUVRAJ SINGH BUNDHEL, VS THE ACIT, 5904, MHC, MANI MAJRA CIRCLE 3(1), CHANDIGARH. CHANDIGARH. PAN: AFQPB8011D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIKRANT RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 08.08.2016 DATE OF PRONOUNCEMENT : 11.08.2016 O R D E R PER BHAVNESH SAINI, JM THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS), CHANDIGARH DATED 22.01.2014 FOR ASSESSMENT YEAR 2010-11. 2. THE GROUND NO. 1 IS GENERAL AND NEED NO ADJUDICATION. GROUND NOS. 3 & 4 OF APPEAL OF THE ASSESSEE ARE NOT PRESSED. SAME ARE DISMISSED BEING NOT PRESSED. 2 3. ON GROUND NO. 2, ASSESSEE CHALLENGED THE ORDER O F LD. CIT(APPEALS) IN CONFIRMING THE ADDITION OF RS. 55 LACS ON ACCOUNT OF AMOUNT RECEIVED FROM M/S UDEY DU TT ASSOCIATES PVT. LTD. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD SHOWN LIABILITY OF RS. 65 LACS TO ONE M/S UDEY DUTT ASSOCIATES PVT. LTD. WHEN THE ASSESSING OFFICER QUESTIONED ABOUT THIS LIABILITY, THE ASSESS EE HAD REPLIED AS UNDER : THE PARTY WANTED TO TAKE SERVICES OF THE ASSESSEE FOR BRAND PROMOTION ACTIVITIES OF HIS COMPANY. BUT THE ASSESSEE WAS NOT READY ON THE PAYMENT, TERMS & CONDITIONS OF AGREEMENT OF THE SAME. THEREFORE, THE AGREEMENT HAS NOT BEEN EXECUTED BETWEEN BOTH. THE AMOUNT GIVEN BY THE COMPANY HAS BEEN SHOWN AS UNSECURED LOAN. 4. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE COPY OF THE FORMAL AGREEMENT AND THE COUNSE L HAD SUBMITTED THAT IT WAS AN ORAL AGREEMENT AND NO FORMAL DOCUMENTATION HAD BEEN DONE. THE ASSESSING OFFICER FOUND THAT ASSESSEE HAD RECEIVED RS. 10 LAC S IN EARLIER YEAR AND RS. 55 LACS IN THE CURRENT YEAR. THE ASSESSING OFFICER OBSERVED THAT NO CONTRACTOR WOULD ADVANCE SUCH HUGE AMOUNT YEAR AFTER YEAR WITHOUT CONTRACT BEING FINALIZED AND AUTHENTICATED AND FINA LLY HELD AMOUNT OF RS. 65 LACS AS UNEXPLAINED BOGUS LIABILITY AND TREATED THE SAME AS UNACCOUNTED RECEI PT OF THE ASSESSEE. 3 5. THE ADDITION WAS CHALLENGED BEFORE LD. CIT(APPEALS) AND ASSESSEE FILED COPY OF THE CERTIFI CATE OF INCORPORATION, MEMORANDUM OF ASSOCIATION, ARTICLES OF ASSOCIATION, LAST AUDITED FINANCIAL STATEMENT, LEDG ER ACCOUNT AND BANK STATEMENTS OF M/S UDEY DUTT ASSOCIATES PVT. LTD. AND HAS SUBMITTED THAT IDENTIT Y AND CAPACITY OF THE CREDITOR AND GENUINENESS OF THE TRANSACTIONS IS APPROVED AND SO ONUS IS SHIFTED ON THE REVENUE TO PROVE THAT TRANSACTION IS NOT GENUINE. IT HAS ALSO BEEN SUBMITTED THAT DISTRICT COURT, SAKET, NEW DELHI VIDE ORDER DATED 22.07.2013 HAS DECLARED SHRI UDEY DUTT ABSCONDING AND SINCE WHEREABOUTS OF SHRI UDEY DUTT ARE NOT AVAILABLE, THE ASSESSEE IS SUO-MO TU PROPOSING TO OFFER THE AMOUNT OF RS. 65 LACS AS HIS INCOME DURING FINANCIAL YEAR 2013-14. THE LD. CIT(APPEALS), HOWEVER, DID NOT ACCEPT CONTENTION OF THE ASSESSEE AND UPHELD THE ADDITION OF RS. 55 LACS. H IS FINDINGS IN PARA 5.3 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER : I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL . THE ARGUMENT OF THE LD. COUNSEL IS THAT THIS ADDITION C OULD NOT BE MADE BECAUSE IDENTITY AND CAPACITY OF THE CREDIT OR IS PROVED. THE ISSUE HERE IS THAT THE IMPUGNED RECEIP T IS NOT A BORROWING, BUT ON ACCOUNT OF PROFESSIONAL RECEIPT, WHICH IS EVIDENT FROM THE FACT THAT THE AP PELLANT HAS SUBMITTED BEFORE ME THAT IT WILL BE DECLARED AS INCOME IN A.Y. 2013-2014. THE APPELLANT IS FOLLOW ING CASH SYSTEM OF ACCOUNTING AND SO ANY AMOUNT RECEIVE D DURING THE YEAR SHOULD HAVE BEEN DECLARED BY HIM AS HIS INCOME. THEREFORE, THE AMOUNT RECEIVED DURING THE Y EAR OF 4 RS. 55,00,000/- FROM M/S UDEY DUTT ASSOCIATES (P) L TD ; S TO BE INCLUDED IN THE INCOME OF THE APPELLANT. TH E ASSESSING OFFICER HAS MADE ADDITION OF RS. 65,00,00 0/-, BUT ONLY RS. 55,00,000/- WAS RECEIVED DUR ING THE YEAR UNDER CONSIDERATION AND SO ONLY RS. 55,00,000/- IS TO BE INCLUDED IN THE INCOME OF THE APPELLANT IN THIS YEA R. THEREFORE, OUT OF THE ADDITION MADE OF RS. 65,00,00 0/-, ADDITION OF RS. 55,00,000/- IS UPHELD. THE APPELLA NT GET RELIEF OF RS. 10,00,000/-. GROUND OF APPEAL NO. 4 I S PARTLY ALLOWED. 6. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT ASSESSEE IS FOLLOWING HYBRID SYSTEM OF ACCOUNTING A ND THAT IT IS NOT INCOME IN THE ASSESSMENT YEAR UNDER APPEAL. ON THE OTHER HAND, LD. DR RELIED UPON ORDE RS OF THE AUTHORITIES BELOW. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE. THE ASSESSEE IN THE STATEMENT OF FACTS BEFORE LD. CIT(APPEALS) HAS MENTIONED THAT HE IS INTO THE BUSI NESS OF BRAND PROMOTION/ENDORSEMENT ACTIVITIES. BEING A CELEBRITY, HE IS APPROACHED BY NUMBERS OF PROSPECTI VE AND INTERESTED CLIENTS FOR ENGAGEMENT OF HIS SERVIC ES. DURING YEAR IN APPEAL, ASSESSEE RECEIVED RS. 55 LAC S FROM ONE M/S UDEY DUTT ASSOCIATES, A PROSPECTIVE CLIENT. REPLY FILED BEFORE ASSESSING OFFICER ALSO SUPPORT THE FACT THAT ASSESSEE WAS PROVIDING SERVICES FOR B RAND PROMOTION OF DIFFERENT COMPANIES. THE AMOUNT IN 5 QUESTION WAS, THEREFORE, RECEIVED BY THE ASSESSEE O N ACCOUNT OF BUSINESS. THE ASSESSING OFFICER, THEREF ORE, RIGHTLY OBSERVED THAT NO CONTRACTOR WOULD ADVANCE S UCH HUGE AMOUNT YEAR AFTER YEAR WITHOUT THE CONTRACT BE ING FINALIZED AND AUTHENTICATED. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT DISTRICT COURT, SAKET, NEW DELHI HAS DECLARED SHRI UDEY DUTT AS ABSCONDER AND ASSESSEE I S SUO-MOTU PROPOSING TO OFFER RS. 65 LACS AS INCOME DURING FINANCIAL YEAR 2013-14. IT IS, THEREFORE, C LEAR THAT THE AMOUNT IN QUESTION RECEIVED BY ASSESSEE WA S ON ACCOUNT OF BUSINESS FOR PROVIDING SERVICES FOR BRAN D PROMOTION/ENDORSEMENT ACTIVITIES. THE IMPUGNED RECEIPT WAS, THEREFORE, NOT A BORROWING/LOAN AS WAS PLEADED BEFORE THE ASSESSING OFFICER. BUT THE AMOU NT IN QUESTION WAS RECEIVED ON ACCOUNT OF BUSINESS RECEIP T WHICH IS ALSO EVIDENT FROM THE FACT THAT ASSESSEE ADMITTED BEFORE LD. CIT(APPEALS) THAT HE WILL DECLA RE THE AMOUNT AS INCOME IN FINANCIAL YEAR 2013-14. THE LD . CIT(APPEALS) SPECIFICALLY NOTED THAT ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AND SO, ANY AMO UNT RECEIVED DURING THE YEAR SHOULD HAVE BEEN DECLARED BY HIM AS HIS INCOME. THE LD. COUNSEL FOR THE ASSESSE E, DURING THE COURSE OF ARGUMENTS DID NOT DISPUTE THAT ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, SUBMITTED TH AT SINCE ASSESSEE WAS FOLLOWING HYBRID SYSTEM OF ACCOUNTING, THEREFORE, NO ADDITION SHOULD BE MADE I N 6 ASSESSMENT YEAR UNDER APPEAL. HOWEVER, SECTION 145 OF THE INCOME TAX ACT WOULD NOT ALLOW THE ASSESSEE TO ADOPT MIXED SYSTEM OF ACCOUNTING. 7(I) ACCORDING TO SECTION 145 OF THE INCOME TAX ACT, WHICH PROVIDES METHOD OF ACCOUNTING, THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION OR 'INCOME FROM OTHER SOURCES' SHALL BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTI LE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. SECTION 145 HAS BEEN SUBSTITUTED BY FINA NCE ACT, 1995 W.E.F. ASSESSMENT YEAR 1997-98, WHEREBY O NLY CASH AND MERCANTILE SYSTEM OF ACCOUNTING ARE PERMIT TED, THE MIXED OR HYBRID SYSTEM OF ACCOUNTING HAS BEEN D ONE AWAY WITH. THEREFORE, MIXED OR HYBRID SYSTEM OF ACCOUNTING WILL NO LONGER BE RELEVANT IN ASSESSMENT YEAR UNDER APPEAL. THEREFORE, THERE IS NO QUESTION FOR ASSESSEE TO EMPLOY HYBRID SYSTEM OF ACCOUNTING IN T HE ASSESSMENT YEAR UNDER APPEAL. SINCE AMOUNT IN QUESTION HAS BEEN RECEIVED BY THE ASSESSEE FROM M/S UDEY DUTT ASSOCIATES PVT. LTD. FOR THEIR BRAND PROMOTION, IT WAS AN INCOME OF ASSESSEE ON ACCOUNT OF BUSINESS AND PROFESSION. WHEN ASSESSEE WAS FOLLOWI NG CASH SYSTEM OF ACCOUNTING, THE AMOUNT RECEIVED IN THE YEAR UNDER APPEAL SHOULD HAVE BEEN DECLARED AS INC OME OF THE ASSESSEE. THE ASSESSEE ALSO ADMITTED THIS F ACT BEFORE LD. CIT(APPEALS) THAT HE WOULD DECLARE THE AMOUNT IN QUESTION AS INCOME IN SUBSEQUENT YEAR, 7 HOWEVER, ASSESSEE COULD NOT EXPLAIN BASIS AS TO HOW THE AMOUNT RECEIVED IN ASSESSMENT YEAR UNDER APPEAL BY FOLLOWING CASH SYSTEM OF ACCOUNTING, COULD BE OFFER ED FOR TAXATION IN SUBSEQUENT FINANCIAL YEAR 2013-14. THE APPEAL OF THE ASSESSEE, THUS, HAS NO MERIT. THE LD . COUNSEL FOR THE ASSESSEE HAS FAILED TO POINT OUT AN Y ERROR IN THE ORDER OF LD. CIT(APPEALS) IN CONFIRMIN G ADDITION OF RS. 55 LCS. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE ON THIS GROUND. THE SAME IS, ACCORDINGLY, DISMISSED. 8. IN THE RESULT, GROUND NO. 2 OF APPEAL OF THE ASSESSEE IS DISMISSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (PRASHANT MAHARSHI) (BHAVN ESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH AUGUST,2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD