ITO, New Delhi V. Smt. Trishla, New Delhi

ITA 3496/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3932 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 10-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 07-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: US AGGARWAL
• Keywords: Business income; Wrong claim; Accommodation entries; TDS
• Section: 44AD; 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A NO. 3496/DEL/09 ASSTT. YEAR 2006-07 THE INCOME TAX OFFICER WARD 33(2), NEW DELHI. VS. SMT. TRISHLA, 1675/35, NAIWALA, KAROL BAGH, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI N.K. CHAND, SR. DR RESPONDENT BY: SHRI U.S. AGGARWAL, ADVOCATE ORDER PER RAJPAL YADAV, JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LD. CIT(A) DATED 15 TH MAY, 2009 PASSED FOR ASSTT. YEAR 2006-07. THE GRIE VANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN CONFIRM ING THE ADDITION OF RS. 1,58,400/- AS AGAINST RS. 19,80,000/- MADE BY THE A O. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED HER RETURN OF INCOME ON 24 TH JULY, 2006 DECLARING IN INCOME OF RS. 1,56,400/-. IT ITA NO. 3496/DEL/2009 ASSTT. YEAR 2006-07 2 EMERGES OUT FROM THE ASSTT. ORDER THAT ASSESSEE HAS CLAIMED CARRYING OUT OF A CONTRACT WORK OBTAINED FROM M/S. PACL LTD. SHE HAD DECLARED CONTRACT RECEIPT OF RS. 19,80,000/- AND HAS DECLARE D AN INCOME OF RS. 1,58,400/- U/S 44AD OF THE ACT. THE ASSESSEE HAD CL AIMED BENEFIT OF TDS AMOUNTING TO RS. 44,432/-. HOWEVER NO CREDIT OF TDS CERTIFICATE WAS GIVEN TO THE ASSESSEE AT THE TIME OF RETURN BEC AUSE IT WAS SUSPECTED THAT TRANSACTIONS OF CONTRACT ARE NOT GEN UINE AND THERE IS POSSIBILITY OF BOGUS CLAIM OF REFUND. THE AO HAS RE CORDED THE STATEMENT OF ASSESSEE WHICH HAS BEEN REPRODUCED EXTENSIVELY I N THE ASSTT. ORDER. THE AO ULTIMATELY ARRIVED AT A CONCLUSION THAT ASSE SSEE HAS NOT CARRIED OUT ANY JOB WORK ON CONTRACT BASIS. HE ACCEPTED THE DECLARATION OF INCOME OF RS. 1,58,400/- U/S 44AD, BEING 8% OF THE TOTAL RECEIPT . SIMULTANEOUSLY HE DISALLOWED THE CLAIM OF EXPENDITU RE OF EARNING SUCH RECEIPT ON THE GROUND THAT NO CONTRACT WORK WAS CAR RIED OUT BY THE ASSESSEE. 3. ON APPEAL LD. CIT(A) HAS DELETED THE DISALLOWANC E OF EXPENDITURE ON THE GROUND THAT EITHER THE ASSESSEE HAS CARRIED OUT THE CONTRACT WORK WHICH HAS ENABLE HER TO EARN GROSS RECEIPT OF RS. 1 9,80,000/- OR SHE HAS PROVIDED THE ACCOMMODATION ENTRIES. IN ANY CASE, TH E INCOME CANNOT BE MORE THAN 8% OF THE TOTAL RECEIPT. THE TOTAL RECEIP T CAN NOT BE ASSESSED IN THE HANDS OF ASSESSEE. THE LD. CIT (A) FURTHER O BSERVED THAT SECTION ITA NO. 3496/DEL/2009 ASSTT. YEAR 2006-07 3 69C HAS NO APPLICATION IN THE CASE IN HAND. IN THE OPINION OF LD. FIRST APPELLATE AUTHORITY THE ADDITION HAS BEEN MADE ONLY ON SUSPICION BASIS. 4. LD. DR SUBMITTED THAT SIMILAR CASE HAS COME UP B EFORE TRIBUNAL EARLIER. THE LD. CIT(A) ROHTAK HAS DECIDED 16 APPEA LS OF SIMILAR ASSESSEE. THE ONLY DIFFERENCE IS THAT IN THOSE CASE S ADDITION WAS MADE PROTECTIVELY AND SUBSTANTIVE ADDITION HAS MADE IN T HE HANDS OF PACL. HE SUBMITTED THAT OBSERVATION MADE IN THESE CASES S HOULD NOT IMPAIR THE CASE OF AO IN THE CASE OF PACL. HE FURTHER POIN TED OUT THAT IN THE PRESENT CASE IT IS IMPLICITLY CLEAR THAT ASSESSEE H AS NOT CARRIED OUT CONTRACT WORK. SHE IS NEITHER COMPETENT NOR HAS THE BACK UP. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF LD. CIT(A) AS WELL AS ORDER OF THE TRIBUNAL PASSED IN I TA NO. 225, 230,231/D/2010. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. A SIMILAR ISSUE HAS BEEN CONS IDERED BY THE TRIBUNAL IN ITA NO.225,230,231/DEL/2010 THE OBSERVATION OF T HE TRIBUNAL READ AS UNDER :- ALL THESE APPEALS BY THE REVENUE ARE DIRECTED AGAIN ST THE COMMON ORDER IN RESPECT OF THREE ASSESSEES HEREIN OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), ROHTAK, DATED 06.11.2009 FOR THE ASSESSMENT YEAR 2006-07. ITA NO. 3496/DEL/2009 ASSTT. YEAR 2006-07 4 2. THE REVENUE HAS RAISED THE FOLLOWING COMMON GROU NDS BEFORE US:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A) HAS ERRED IN DELETING ADDITIONS MADE IN THE HANDS OF TH E ASSESSEE ON THE PROTECTIVE BASIS, WHILE SUBSTANTIVE ADDITIONS MADE IN THE HANDS OF M/S. PACL INDIA LTD., NEW DELHI IN THE ASSESSMENT Y EAR 2006-07 WERE STILL PENDING AT THE FIRST APPELLATE STAGE. 2 IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. C IT(A) HAS ERRED IN DIRECTING THE A.O. TO GIVE CREDIT OF TDS T O THE ASSESSEE EVEN AFTER HOLDING THAT THE AMOUNTS ON WHICH TAX HA S BEEN DEDUCTED AT SOURCE, HAS ACTUALLY NOT BEEN RECEIVED BY THE ASSESSEE. 3. THE ASSESSING OFFICER FOUND THAT THERE WERE CERT AIN DISCREPANCIES/ INCONSISTENCIES IN THE CASE OF CLAIM OF REFUNDS ON THE BASIS OF TDS CERTIFICATE ISSUED BY M/S. PACL INDIA LTD. THE ASS ESSING OFFICER FOUND THAT THERE WERE 128 SUCH CASES FROM ROHTAK WHO HAD UNDERTAKEN CONTRACT WORK FOR PACL LTD. AMOUNTING TO OVER RS.37.1 CRORES . THOSE PERSONS HAVE FILED THEIR INCOME-TAX RETURNS WITH DIFFERENT ASSESSING OFFICERS AT ROHTAK. THEY HAVE CLAIMED TO HAVE RECEIVED CONTRAC T RECEIPTS AND THE SAME WAS OFFERED FOR TAX UNDER SECTION 44AD OF THE ACT WHICH WORKED OUT TO 8% OF THE GROSS RECEIPTS AND SIMULTANEOUSLY CLAIMED CREDIT FOR TDS. THE ASSESSING OFFICER PROVIDED SEVERAL OPPORT UNITIES TO THOSE CLAIMANTS OF THE TDS WHO FAILED TO SUBSTANTIATE THE IR CLAIM FOR HAVING DONE THE WORK. THE ASSESSING OFFICER HELD THAT THE RE IS NO DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM OF DOING CONTRACT WORK FOR PACL INDIA LTD. THE ASSESSING OFFICER ALSO OBSERVED THAT THER E WERE TWO BANK ITA NO. 3496/DEL/2009 ASSTT. YEAR 2006-07 5 ACCOUNTS, ONE ACCOUNT WAS OPENED TO DEPOSIT THE CHE QUES RECEIVED FROM PACL INDIA LTD. AND ANOTHER BANK ACCOUNT WAS OPENED TO DEPOSIT INCOME RECEIVED FROM REFUND. THE ENQUIRY AND THE STATEMEN T OF THE CONTRACTORS LED HIM TO BELIEVE THAT NO WORK WAS EXECUTED FOR PA CL INDIA LTD. AND ALL THESE ASSESSEES WERE MERELY A CONDUIT FOR CREATING A SERIES OF SHAM TRANSACTION ONLY ON PAPER WITH A VIEW TO INFLATE TH E EXPENSES OF PACL INDIA LTD. HE THEREFORE, HELD AS UNDER:- THEREFORE, IN VIEW OF ALL THE FACTS OF THE CASE AN D GUIDELINES ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME-TAX , ROHTAK RANGE, ROHTAK, I HOLD THAT THE ASSESSEE HAS NOT DON E ANY KIND OF CONTRACT WORK OF THE PACL INDIA LIMITED, NEW DELHI. SINCE NO WORK HAS BEEN DONE, NO EXPENSE CAN BE ALLOWED. EVE N THE PROVISIONS OF SECTION 44AD OF THE INCOME-TAX ACT, 1 961 SHALL NOT APPLY AS THIS SECTION PRESUMES EXPENSES AT A PRE-DE TERMINED RATE TO WORK OUT THE PROFITS OF A CIVIL CONTRACTOR. ACCORD INGLY, THE RECEIPTS OF THE ASSESSEE OF RS.29,40,000/- FROM M/S. PACL IN DIA LIMITED, NEW DELHI ARE TREATED AS INCOME OF THE ASSESSEE UND ER THE HEAD INCOME FROM OTHER SOURCES ON PROTECTIVE BASIS AND NECESSARY INTIMATION IS BEING SENT TO THE CONCERNED ASSESSING OFFICER HAVING JURISDICTION OVER THE CASE OF PACL INDIA LTD., NEW DELHI FOR MAKING SUBSTANTIVE ADDITIONS IN THE HANDS OF PACL F OR THE ASSESSMENT YEAR 2006-07. 3. THE LEARNED CIT(A) BY COMMON ORDER IN RESPECT OF 16 SUCH PERSONS INCLUDING THE PRESENT ASSESSES HELD AS UNDE R:- 4. THE ISSUE INVOLVED AND THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CONSIDERED KEEPING IN VIEW THE FACTS AND ITA NO. 3496/DEL/2009 ASSTT. YEAR 2006-07 6 CIRCUMSTANCES. FROM THE UNDISPUTED FACTS NOTED ABO VE, IT MAY BE SEEN THAT M/S. PACL INDIA LTD. HAVE USED THE APPELL ANTS, THE POOR PERSONS, AS CONDUITS FOR THE PURPOSE OF INFLATING I TS EXPENSES FOR SHOWING LESSER PROFIT FROM ITS BUSINESS ACTIVITY AN D FOR GENERATING CASH FOR THE PURPOSE BESET KNOWN TO M/S.PACL INDIA LTD. INCOME TAX RATE IN THE CASE OF COMPANIES IS 34% (INCLUDING SURCHARGE) OF THE TOTAL INCOME. BY INFLATING EXPENSES IN THE AFO RESAID MANNER M/S. PACL INDIA LTD. WOULD HAVE BENEFITED A LOT EVE N AFTER DECLARING INCOME @ 8% UNDER SECTION 44AD BY THE APP ELLANTS (CONDUITS). SECTION 44AD HAS BEEN MISUSED BECAUSE THERE ARE NO RECEIPTS FROM CONTRACT WORKS AS DISCUSSED BY THE AS SESSING OFFICER IN THE ASSESSMENT ORDERS AND THE FACT EMERGING FROM THE AFORESAID DISCUSSION ALSO. IT IS THE DUTY OF THE TAXING AUTHORITY TO PROBE WH AT LIES HIDDEN BEHIND A TRANSACTION AND THE ASSESSING OFFIC ER IN THIS CASE HAS DONE HIS DUTY TOO WELL. THE HONBLE SUPREME CO URT IN THE CASE OF CIT VS.DURGA PRASAD MORE 82 ITR 540 (SC) AT PAGES 545 AND 547 HAS LAID DOWN THAT `THE APPARENT MUST BE CO NSIDERED THE REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BE LIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUTHOR ITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TES T OF HUMAN PROBABILITIES. THIS CASE HAS BEEN REFERRED TO BY THE HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT 2 14 ITR (801) ALSO TO EXAMINE THE CIRCUMSTANCES IN SUMATI DAYALS CASE. THE ASSESSING OFFICER HAS TREATED THE ENTIRE RECEI PTS AS `INCOME FROM OTHER SOURCES WHEREAS THE APPELLANTS HAVE WITHDRAWN MONEY FROM THE BANK ACCOUNTS; THE ASSESSI NG OFFICER AHS NOT GIVEN CREDIT FOR THE WITHDRAWAL. AS NOTED ABOVE, THE AMOUNTS OF RECEIPTS APPEARING IN THE BANK ACCOUNTS ARE NOT FROM CONTRACT BUSINESS AND THAT THE SAME HAVE BEEN WITHD RAWN A FEW DAYS AFTER DEPOSIT OF THE CHEQUES; AND FURTHER THAT FOR ASSISTING A PERSON IN PASSING ITS UNDISCLOSED CASH THROUGH BANK ING CHANNELS TO THE SAME PERSONS AND VICE-VERSA. PREVALENT MARKET COST VARIES BETWEEN 2% TO 8% AND THE APPELLANTS HAVE SHOWN, NET PROFIT @ 8% ITA NO. 3496/DEL/2009 ASSTT. YEAR 2006-07 7 OF THE RECEIPTS (OR THEIR INCOME HAD BEEN MADE TO D ECLARE @ 8% U/S 44AD). THE INCOME DESERVES TO BE ASSESSED AT 8% OF THE RECEIPTS BECAUSE THE APPELLANT MUST NOT HAVE ALLOWED THEIR N AMES TO BE USED WITHOUT ANY CONSIDERATION, IT IS POSSIBLE THAT THEY HAVE GOT SMALL AMOUNTS IN CASH OVER AND ABOVE THE PROFIT DECLARED IN THE INCOME TAX RETURNS. HOWEVER, THE INCOME IS TO BE ASSESSED NOT AS BUSINESS INCOME BUT AS INCOME FROM `OTHER SOURCES. THEREFO RE THE INCOME DECLARED IS DIRECTED TO BE ACCEPTED AND THE CREDIT FOR TDS IS ALSO DIRECTED TO BE GIVEN. 5. IN VIEW OF THE ABOVE DISCUSSION, KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES, THERE WAS NOTHING WRONG IN MAKIN G THE ASSESSMENTS ON PROTECTIVE BASIS AND ASSESSING THE I NCOME UNDER THE HEAD `OTHER SOURCES. THE GROUNDS OF APPEAL PERTAI NING TO THESE ITEMS ARE DISMISSED. 6. WHEN A PERSON MAKES A STATEMENT WITHOUT UNDUE IN FLUENCE, FRAUD OR COERCION, THE EVIDENTIARY VALUE OF THE STA TEMENT HAS TO BE RELIED UPON; EVEN OTHERWISE THE ASSESSING OFFICER H AS CORROBORATED THE FACTS EMERGING FROM THE STATEMENTS FROM THE OTH ER EVIDENCE I.E. WITHDRAWAL OF THE CASH AMOUNTS FROM THE BANK ACCOUN TS BY THE APPELLANTS WITHIN A FEW DAYS OF THE DEPOSIT OF THE SAME, THE BANK ACCOUNTS BEING IN ROHTAK WHEREAS THE WORK HAS BEEN SUBMITTED TO BE EXECUTED IN CHENNAI; THEREFORE THERE IS NO MERIT IN THE VERSION OF THE APPELLANT THAT THE STATEMENTS GIVEN BY THE APPE LLANTS DO NOT HAVE ANY EVIDENTIARY VALUE. THE GROUND OF APPEAL P ERTAINING TO THIS ITEM IS ALSO DISMISSED. THE REVENUE IS NOW IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE LEARNED DR. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE AND HENCE WITH THE HELP OF THE LEARNED DR WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IF THE ASSESSING OFFICER WAS OF THE VIEW ITA NO. 3496/DEL/2009 ASSTT. YEAR 2006-07 8 THAT NO WORK HAS BEEN DONE BY ANY OF THE CONTRACTOR , THE AMOUNT RECEIVED ITSELF CANNOT BE CONSIDERED TO BE INCOME OF THE ASS ESSEE BUT ONLY THE PROFIT FROM SUCH RECEIPT CAN BE BROUGHT TO TAX. TH E ASSESSEE HEREIN BEING FOUND TO BE NAME LENDERS COULD HAVE CHARGED ONLY TH E COMMISSION FOR SO LENDING THE NAME. IN THE FORM OF BANK STATEMENT IT IS ALSO EVIDENT THAT THE AMOUNT RECEIVED WAS PURPORTED TO BE REFUNDED BACK T O PACL INDIA LTD. THEREFORE, INCOME OF THE PRESENT ASSESSES ARE ONLY TO THE EXTENT OF RECEIVING COMMISSION AND SINCE ALL THESE PERSONS HA VE OFFERED 8% OF THEIR INCOME, NO FURTHER AMOUNT IS TAXABLE. AT THE SAME TIME, THE LEARNED CIT(A) HAS FOUND THAT THE INCOME IS NOT ASSESSABLE AS BUSINESS INCOME OR UNDER SECTION 44AD OF THE ACT BUT ONLY AS INCOME FR OM OTHER SOURCES WHICH IN ANY CASE COULD NOT HAVE EXCEEDED THE AMOUN T OFFERED FOR TAX. SINCE CORRECT INCOME HAS BEEN OFFERED FOR TAX BY TH E ASSESSEES HEREIN, THE ASSESSING OFFICER WAS THEREFORE, IN ERROR IN TAXING THE ENTIRE SUM RECEIVED AS INCOME. WE, THEREFORE, DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE LEARNED CIT(A). 5. AS REGARDS CREDIT FOR TDS, SINCE THE INCOME HAS BEEN ASSESSED IN THE HANDS OF THE ASSESSEES AND THE TAX WAS DEDUCTED FROM THEIR INCOME, THE PERSONS ARE ENTITLED TO CREDIT FOR THE TAX DEDU CTED AT SOURCE. THEREFORE, HERE ALSO THERE IS NO INFIRMITY IN THE O RDER OF THE CIT(A). 6. IN THE RESULT, ALL THE THREE APPEALS ARE DISMISS ED. 6. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HAV E EXAMINED THE STATEMENT OF ASSESSEE RECORDED BY THEY AO AND REPR ODUCED ON PAGE 2- 4 OF THE ASSTT. ORDER. FROM THE PERUSAL OF THE STAT EMENT IT INFER THAT ASSESSEE DOES NOT HAS THE POTENTIALITY TO CARRY OUT SUCH CONTRACT WORK BECAUSE SHE BELONGS TO CONSERVATIVE FAMILY RESIDING IN GRAIN MARKET, ROHTAK. IT WAS IMPRACTICAL FOR HER TO CARRY OUT SUC H JOB WORK CONTRACT AT CHANNAI. MORE SO WHEN VALUE OF THE CONTRACT IS ONLY RS. 19,80,000/- IT CANNOT BE VIOLABLE FOR SUCH TYPE OF ASSESSEE WHO H APPENS TO BE A ITA NO. 3496/DEL/2009 ASSTT. YEAR 2006-07 9 HOUSE WIFE. IT IS ALSO INTERESTING TO NOTE THAT SHE IS NOT CONVERSANT WITH THE LOCAL LANGUAGE OF CHANNAI. WHEN WE CONFRONTED T HE LD. COUNSEL FOR THE ASSESSEE WITH REGARD TO THESE ASPECT HE TRIED T O CONVINCE THAT SUCH TYPE OF WORK WAS CARRIED OUT WITH THE HELP OF LABOR ER HIRED AT CHANNAI BUT WE DO NOT FIND CREDENCE IN THIS STORY. THIS IS THE ONE ASPECT OF THE CASE. THE OTHER ASPECT IS EVEN IF ASSESSEE HAS NOT CARRIE D OUT THE CONTRACT WORK AT THE MOST SHE COULD HAVE PROVIDED ACCOMMODAT ION ENTRY AND INCOME IN THAT ACTIVITY WILL ALSO NOT BE MORE THAN 8% OF THE ALLEGED GROSS RECEIPT. CONSIDERING THESE ASPECT WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A). BEFORE PARTING WITH THIS ORDER WE WOULD LIKE TO OBSERVE THAT OBSERVATIONS MADE BY US WILL N OT IMPAIR OR INJURE THE CASE OF AO IN THE CASE OF PACL OR WOULD CAUSE ANY P REJUDICE TO THE ASSESSEE I.E. PACL IN ITS LITIGATION. 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 14.5.2010. [K.D. RANJAN] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER VEENA DATED: COPY FORWARDED TO: - 1. APPELLANT ITA NO. 3496/DEL/2009 ASSTT. YEAR 2006-07 10 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT