N.R. PRASAD, MUMBAI V. ADDL CIT 21(1), MUMBAI

ITA 330/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49172 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHA SARATHI NAIK
• Assessee Lawyers: VIPUL B JOSHI
• Keywords: Ignorance of law
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) ITA NO. 330/MUM/2010 ASSESSMENT YEAR- 2006-07 SHRI N.R. PRASAD, A-1, JAY APARTMENTS, SERVICE ROAD, VILE PARLE (E), MUMBAI-400 057 PAN-AAAP 1214N VS. THE ADDL. CIT 21(1), C-10 BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI-400 051 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIPUL B. JOSHI RESPONDENT BY: SHRI PARTHA SARATHI NAIK O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 18.11.2009 PASSED BY THE LD. CIT(A)-32 FOR TH E ASSESSMENT YEAR2006-07. 2. THE ASSESSEE DECLARED INCOME FROM M/S. JASPER IN TERNATIONAL WHICH IS ENGAGED IN THE BUSINESS OF RECRUITMENT OF MANPOWER ABROAD AND ALSO BOOKING OF AIR TICKETS ON COMMISSION. THE RET URN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 WAS FILED BY THE ASSESSEE O N 30.10.2006 DECLARING TOTAL INCOME OF RS. 88,40,921/-. THE SAI D RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE I.T. ACT ON 7.7. 2007. THE STATUTORY NOTICES U/S. 143(2) AND 142(1) WERE ISSUED AND SERVED ON TH E ASSESSEE. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE I.T. AC T. ITA NO. 330/M/2010 2 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSE SSEE WAS ASKED TO FILE DETAILS OF CANCELLATION CHARGES PAYABLE. FR OM THE DETAILS FILED, THE AO OBSERVED THAT THE ASSESSEE HAD PASSED THE ENTRY IN F.Y. 2004-05 AND HAD NOT MADE THE PAYMENT TO THE CONCERNED PERSON IN THE CHART TILL DATE. THE AO FURTHER HELD THAT THE ASSESSEE HAS AGREED TO OFFER THE SAME AS INCOME FOR THE YEAR VIDE ORDER SHEET ENTRY DT. 03.1 2.08. THE AO HELD THAT THE AMOUNT IS STILL OUTSTANDING AND NO CLAIM HAS BE EN RECEIVED BY THE ASSESSEE AND THEREFORE ADDED BACK A SUM OF RS.26,6 8,886/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A). THE LD. COUNSEL FOR THE ASSESSEE EXPLAINED BEFORE THE L D. CIT(A) THAT IN THE BOOKS OF ACCOUNTS MAINTAINED WITH M/S. JASPER INTER NATIONAL, THE ASSESSEE HAD SHOWN A SUM OF RS.26,68,886/- AS OUTST ANDING FROM THE ASSESSMENT YEAR 2004-05. THIS AMOUNT WAS COLLECTED FROM THE CANDIDATES WHO WERE TO BE SENT ABROAD ON JOBS AS PE R REQUIREMENTS OF FOREIGN CLIENTS. IT WAS STATED THAT THE ASSESSEE WA S NOT ABLE TO SEND THESE PEOPLE AS THEIR PAPERS COULD NOT BE PROCESSED WITHI N THE TIME AND THE AMOUNT THEREFORE REMAINED OUTSTANDING IN THE BOOKS OF ACCOUNT FOR THE LAST 2 YEARS. 5. THE LD. AR SUBMITTED BEFORE THE LD. CIT(A) THAT ON ENQUIRY BY THE AO FROM THE ACCOUNTANT OF THE ASSESSEE WHO WAS DEPU TED TO PRODUCE BOOKS OF ACCOUNTS AT THE TIME OF HEARING, THE ACCOU NTANT WAS NOT KNOWING ANYTHING ABOUT THE OUTSTANDING AMOUNT AND THEREFORE HE STATED BEFORE THE AO THAT THE AMOUNT MAY BE ADDED. ACCORDINGLY, THE ADDITION WAS MADE BY THE AO. IT WAS SUBMITTED BY T HE AR THAT THE STATEMENT OF SHRI C. ANTONY RAJ (ACCOUNTANT) WAS NO T BINDING ON THE ASSESSEE SINCE HE WAS GIVEN ONLY A SPECIFIC POWER O F ATTORNEY FOR SUBMISSION OF DOCUMENTS UNDER THE SCRUTINY ASSESSME NT PROCEEDINGS AND NOTHING MORE THAN THAT. THE AR SUBMITTED THAT S INCE THE AUTHORITY ITA NO. 330/M/2010 3 WAS SPECIFIC FOR SUBMISSION OF DOCUMENTS ONLY, THE ACCOUNTANT WAS NOT EMPOWERED TO AGREE FOR THE ADDITION OF HUGE AMOUNT OF RS. 26,68,886/-. THE LD. AR FURTHER CLAIMED THAT LIABILITY OF RS. 26 ,68,886/- IS ACCRUED AND GENUINE LIABILITY AND THEREFORE THERE IS NO QUE STION OF DISCHARGE OF THIS CLAIM. 6. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CAREFULLY CONSIDERED THE ISSUE. THE FACT O F THE MATTER IS THAT THE APPELLANTS CASE WAS REPRESENTED BY THE SAME ACCOUNTANT SHRI C. ANTONY RAJ WHOSE AUTHORITY IS BE ING QUESTIONED BY THE LD. AR NOW. HE IS THE ONLY ONE WHO REPRESEN TED THE ASSESSMENT PROCEEDINGS. THE PROFORMA FOR AUTHORITY IS NOT A PRESCRIBED ONE AND WHEN A PERSON IS AUTHORIZED TO A TTEND IN RESPONSE TO NOTICE 143(2), HE HAS TO BE PRESUMED TO HAVE ALL THE AUTHORITY IN RESPECT OF SUCH NOTICE. THE APPELLANT S CONTENTION IN THE APPELLATE PROCEEDINGS IS, THEREFORE, WITHOUT ANY BA SIS. FURTHER, IT IS SEEN THAT THIS AMOUNT HAS NOT BEEN D ISCHARGED TILL DATE AND THEREFORE, THE PROBABILITY THAT THE L IABILITY CREDITED IS ONLY FOR ULTIMATE WRITE OFF IS FAIRLY HIGH UNDER TH E GIVEN FACTS OF THE CASE. THE AO HAS, THEREFORE, CORRECTLY MADE THE AD DITION AFTER HE CAME TO KNOW THE TRUTH WITH THE HELP OF THE ACCOUNT ANT. THE APPELLANT SHOULD HAVE GRACEFULLY ACCEPTED THE ADDIT ION RATHER THAN AGITATING THE SAME. THIS GROUND OF APPEAL IS THERE FORE DISMISSED. 7. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE U S. THE LD. COUNSEL FOR THE ASSESSEE SHRI VIPUL JOSHI SUBMITTED AS FOLLOWS: THE BOOKS OF ACCOUNTS MAINTAINED FOR M/S. JASPER IN TERNATIONAL, THE ASSESSEE HAD SHOWN A SUM OF RS.26,68,886/- AS O UTSTANDING FROM THE ASSESSMENT YEAR 2004-05. THIS AMOUNT WAS C OLLECTED FROM THE CANDIDATES WHO WERE TO BE SENT ABROAD ON J OBS AS PER REQUIREMENTS OF FOREIGN CLIENTS. THE ASSESSEE COULD NOT SENT THESE PEOPLE AS THEIR PAPERS COULD NOT BE PROCESSED WITHI N TIME. THE AMOUNT, THEREFORE, REMAINED OUTSTANDING IN THE BOOK S OF ACCOUNT FOR LAST 2 YEARS. THE ASSESSING OFFICER HAS ENQUIRE D FROM THE ACCOUNTANT OF THE ASSESSEE WHO WAS DEPUTED TO ATTEN D THE SCRUTINY ITA NO. 330/M/2010 4 PROCEEDINGS AND THE ACCOUNTANT WAS NOT KNOWING ANYT HING ABOUT THIS OUTSTANDING AMOUNT AND, THEREFORE, HAD STATED BEFORE THE ASSESSING OFFICER THAT THIS AMOUNT MAY BE ADDED. TH E LD. COUNSEL STATED THAT THE ACCOUNTANTS AUTHORITY DID NOT EXTE ND TO ADMIT ANY ADDITIONS ON BEHALF OF THE ASSESSEE AND THE ACCOUNT ANT WAS NOT AWARE OF THE FACTUAL POSITION. HE FURTHER SUBMITTED THAT MOST OF THE CANDIDATES WHOSE LIST IS ATTACHED TO THE ASSESSMENT ORDER HAVE BEEN SENT ABROAD IN THE NEXT YEARS AS EVIDENCED FRO M THE LIST OF CANDIDATES WHO HAVE BEEN SENT ABROAD. APART FROM TH IS FACT, IT COULD BE SEEN FROM THE LIST ATTACHED TO THE ASSESSM ENT ORDER THAT IDENTICAL AMOUNTS ARE SHOWN AS OUTSTANDING FROM THE CANDIDATES WHICH ARE SUPPOSED TO GO TO DIFFERENT COUNTRIES, WH ICH WOULD ALSO CLEARLY SHOW THAT THE ASSESSEE WOULD NOT TAKE THE M ONEY FROM THE CANDIDATES AND APPROPRIATE THE SAME. 8. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDER OF THE LOWER AUTHORITIES. THE LD. COUNSEL/CHARTERED ACCOUNTANT A LSO RELIED ON FOLLOWING CASE LAWS FOR THE PROPOSITION THAT ADMISS ION BY THE COUNSEL IS NOT CONCLUSIVE. 1) CIT VS DAYARAM VASUDEO 193 ITR 602, 605(BOM 2) SWAMI KRISHNANAND GOVINANAND VS M.D. OSWAL HOSIERY 3 SCC 39 3) MAYANK PODDAR VS WTO 262 ITR 633 (CAL) 4) RAKESH WADHAWAN VS JAGDAMBA INDUSTRIAL CORPN. -5 SC C 440 9. THE CASE LAWS REFERRED BY THE LD. COUNSEL (SUPR A) SUPPORT THE VIEW TAKEN BY US WHICH IS AS FOLLOWS: I) THE ADMISSION MADE BY THE CHARTERED ACCOUNTANT SHRI ANTONY RAJ WHO APPEARED BEFORE THE AO WHICH IS ERR ONEOUS AND IN IGNORANCE OF LAW CANNOT BE USED AGAINST THE ASSESSEE ITA NO. 330/M/2010 5 TO BRING THE ITEM WHICH IS NOT TAXABLE AND TAX CANN OT BE LEVIED THERETO. II) ON MERITS, THE ISSUE CANNOT BE DECIDED AS THE LIABI LITY IS STILL OUTSTANDING AND THE SAME CANNOT BE CANCELLED AND AD DED TO THE INCOME UNLESS VERIFICATION IS MADE AS TO WHETHE R THE AMOUNTS HAVE NOT BEEN RETURNED TO THE PARTIES. 10. WE ARE OF THE OPINION THAT THE ACCOUNTANT WAS N OT EMPOWERED TO AGREE FOR THE ADDITION OF THE AMOUNT OF RS. 26,68,8 86/- AND SECONDLY SINCE LIABILITY HAS NOT BEEN WRITTEN OFF THE AMOUNT S REMAIN OUTSTANDING AND CANNOT BE ADDED AS CANCELLATION CHARGES HAS DON E BY THE AO AND CONFIRMED BY THE LD. CIT(A). 11. IN THESE CIRCUMSTANCES, WE DEEM IT FIT TO RESTO RE THE MATTER TO THE FILE OF THE AO TO REDO THE ASSESSMENT IN ACCORDANCE WITH LAW AND VERIFY AS TO THE OUTSTANDING LIABILITY. THE AO SHALL ALSO EXAMINE WHETHER THE ASSESSEE HAS RETURNED PART OF THE AMOUNT TO THE PER SONS FROM WHOM THE SAME HAS BEEN COLLECTED AS DEPOSITS ON ACCOUNT OF N ON FULFILLMENT OF THE PURPOSE FOR WHICH THE AMOUNTS HAVE BEEN INITIALLY D EPOSITED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 22 ND DAY OF JUNE, 2011 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 22 ND JUNE, 2011 RJ ITA NO. 330/M/2010 6 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 330/M/2010 7 DATE INITIALS 1 DRAFT DICTATED ON: 9 . 0 6 . 201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 10 .0 6 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______