ITO, Rohtak V. Smt. Som Nath Prop., Rohtak

ITA 376/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3750 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 24-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 27-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS LEENA SRIVASTAVA
• Assessee Lawyers: US AGGARWAL
• Keywords: Business income
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A NO. 369/DEL/2010 ASSTT. YEAR 2006-07 INCOME TAX OFFICER, WARD-2, ROHTAK. VS. SURINDER KAPOOR, PROP. M/S. S.K. CONSTRUCTION H.NO. C-650, WARD NO. 25, PATEL NAGAR, ROHTAK I.T.A NO. 374/DEL/2010 ASSTT. YEAR 2006-07 INCOME TAX OFFICER, WARD-2, ROHTAK. VS. SH. SANJAY KUMAR PROP. M/S. S.V. CONTRACTOR, 1278/27, GANDHI NAGAR CAMP, ROHTAK I.T.A NO. 375/DEL/2010 ASSTT. YEAR 2006-07 INCOME TAX OFFICER, WARD-2, ROHTAK. VS. SH. SUDESH RANI PROP. M/S. SUDESH BUILDCON N.NO. 1054/30, CHINYOT COLONY ROHTAK ITA NOS. 369,374,375,376/DEL/2010 ASSTT. YEARS 2006- 07 2 I.T.A NO. 376/DEL/2010 ASSTT. YEAR 2006-07 INCOME TAX OFFICER, WARD-2, ROHTAK. VS. SOM NATH PROP. M/S. SHAKTI CONTRACTOR 694/25, CHINYOT COLONY ROHTAK (APPELLANT) (RESPONDENT) APPELLANT BY: MRS. LEENA, SRIVASTAVA, DR RESPONDENT BY: SHRI U.S. AGGARWAL, ADVOCATE ORDER PER BENCH THE PRESENT FOUR APPEALS ARE DIRECTED AT THE INSTA NCE OF REVENUE AGAINST THE COMMON ORDER OF LD. CIT(A) DATED 18.11. 2009 PASSED IN ASSTT. YEAR 2006-07 ON THE APPEALS OF RESPONDENTS. 2. LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE ORDER OF THE ITAT PASSED IN ITA NO. 225, 230, 231/D EL/2010 IN THE CASES OF SMT. KAMLESH, SHRI LAKHMI CHAND AND SHRI VIKRAM WHERE SIMILAR GROUNDS OF APPEAL WERE RAISED BY THE REVENUE AND H AS BEEN DEALT BY THE TRIBUNAL. HE ALSO SUBMITTED THAT AN IDENTICAL I SSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ITA NO. 3496/DEL/09 I N THE CASE OF SMT. TRISHLA AND ALSO IN ITA NO. 366/D/2010. HE PLACED ON RECORD COPIES OF ALL THESE ORDERS. LD. DR WAS UNABLE TO CONTROVERT T HE CONTENTION OF LD. ITA NOS. 369,374,375,376/DEL/2010 ASSTT. YEARS 2006- 07 3 COUNSEL FOR THE ASSESSEE. IN ITA NO. 225/DEL/2010 A ND OTHERS WE HAVE CONSIDERED ALL THE FACTS AND CIRCUMSTANCES, THE GRO UNDS OF APPEAL TAKEN BY THE REVENUE IN THESE FOUR APPEALS ARE VERBATIM SAME AS WERE RAISED IN THOSE APPEALS. THUS FOR SAKE OF BREVITY WE NOTE THE FACTS AND CIRCUMSTANCE FROM THE ORDER OF TRIBUNAL IN THREE APPEAL, WHICH READ AS UN DER :- ALL THESE APPEALS BY THE REVENUE ARE DIRECTED AGAIN ST THE COMMON ORDER IN RESPECT OF THREE ASSESSEES HEREIN OF THE LEARNED CO MMISSIONER OF INCOME-TAX (APPEALS), ROHTAK, DATED 06.11.2009 FOR THE ASSESSM ENT YEAR 2006-07. 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 THE ASSESSE E ON THE PROTECTIVE BASIS, WHILE SUBSTANTIVE ADDITIONS MADE IN THE HAND S OF M/S. PACL INDIA LTD., NEW DELHI IN THE ASSESSMENT YEAR 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 TO THE ASS ESSEE EVEN AFTER HOLDING THAT THE AMOUNTS ON WHICH TAX HAS BEEN DEDU CTED 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 ASSESSING OFFIC ER FOUND THAT THERE WERE 128 SUCH CASES FROM ROHTAK WHO HAD UNDERTAKEN CONTR ACT WORK FOR PACL LTD. AMOUNTING TO OVER RS.37.1 CRORES. THOSE PERSONS HA VE FILED THEIR INCOME-TAX RETURNS WITH DIFFERENT ASSESSING OFFICERS AT ROHTAK . THEY HAVE CLAIMED TO HAVE RECEIVED CONTRACT RECEIPTS AND THE SAME WAS OFFERED FOR TAX UNDER SECTION 44AD OF THE ACT WHICH WORKED OUT TO 8% OF THE GROSS RECE IPTS AND SIMULTANEOUSLY CLAIMED CREDIT FOR TDS. THE ASSESSING OFFICER PROV IDED SEVERAL OPPORTUNITIES TO THOSE CLAIMANTS OF THE TDS WHO FAILED TO SUBSTAN TIATE THEIR 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 THERE WERE TWO BANK ACCOUNTS, ONE ACCOUNT WAS OPENED TO DEPOSIT THE CHEQUES RECEIVED FROM PACL INDIA LTD. AND ANOTHER BANK ACCOUNT WAS OPENED TO DEPOSIT INCOME R ECEIVED FROM REFUND. THE ENQUIRY AND THE STATEMENT OF THE CONTRACTORS LED HI M TO BELIEVE THAT NO WORK WAS EXECUTED FOR PACL INDIA LTD. AND ALL THESE ASSE SSEES WERE MERELY A CONDUIT FOR CREATING A SERIES OF SHAM TRANSACTION O NLY ON PAPER WITH A VIEW TO INFLATE THE EXPENSES OF PACL INDIA LTD. HE THEREFO RE, HELD AS UNDER:- ITA NOS. 369,374,375,376/DEL/2010 ASSTT. YEARS 2006- 07 4 THEREFORE, IN VIEW OF ALL THE FACTS OF THE CASE AN D GUIDELINES ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME-TAX, ROHTAK R ANGE, ROHTAK, I HOLD THAT THE ASSESSEE HAS NOT DONE ANY KIND OF CON TRACT WORK OF THE PACL INDIA LIMITED, NEW DELHI. SINCE NO WORK HAS B EEN DONE, NO EXPENSE CAN BE ALLOWED. EVEN THE PROVISIONS OF SEC TION 44AD OF THE INCOME-TAX ACT, 1961 SHALL NOT APPLY AS THIS SECTIO N PRESUMES EXPENSES AT A PRE-DETERMINED RATE TO WORK OUT THE PROFITS OF A CIVIL CONTRACTOR. ACCORDINGLY, THE RECEIPTS OF THE ASSESSEE OF RS.29, 40,000/- FROM M/S. PACL INDIA LIMITED, NEW DELHI ARE TREATED AS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES ON PROTE CTIVE 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 UNDER:- 4. THE ISSUE INVOLVED AND THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CONSIDERED KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES. FROM THE UNDISPUTED FACTS NOTED ABOVE, IT MAY BE SE EN THAT M/S. PACL INDIA LTD. HAVE USED THE APPELLANTS, THE POOR PERSO NS, AS CONDUITS FOR THE PURPOSE OF INFLATING ITS EXPENSES FOR SHOWING L ESSER PROFIT FROM ITS BUSINESS ACTIVITY AND FOR GENERATING CASH FOR THE P URPOSE 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 INFL ATING EXPENSES IN THE AFORESAID MANNER M/S. PACL INDIA LTD. WOULD HAVE BE NEFITED A LOT EVEN AFTER DECLARING INCOME @ 8% UNDER SECTION 44AD BY T HE APPELLANTS (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 AF ORESAID DISCUSSION ALSO. IT IS THE DUTY OF THE TAXING AUTHORITY TO PROBE WH AT LIES HIDDEN BEHIND A TRANSACTION AND THE ASSESSING OFFICER IN T HIS CASE HAS DONE HIS DUTY TOO WELL. THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS.DURGA PRASAD MORE 82 ITR 540 (SC) AT PAGES 545 AND 547 HA S LAID DOWN THAT `THE APPARENT MUST BE CONSIDERED THE REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REA L AND THAT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDI NG CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSI DERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. THIS CASE HAS BEEN R EFERRED TO BY THE HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL V S. CIT 214 ITR (801) ALSO TO EXAMINE THE CIRCUMSTANCES IN SUMATI D AYALS CASE. ITA NOS. 369,374,375,376/DEL/2010 ASSTT. YEARS 2006- 07 5 THE ASSESSING OFFICER HAS TREATED THE ENTIRE RECEI PTS AS `INCOME FROM OTHER SOURCES WHEREAS THE APPELLANTS HAVE WIT HDRAWN MONEY FROM THE BANK ACCOUNTS; THE ASSESSING OFFICER AHS NOT GI VEN CREDIT FOR THE WITHDRAWAL. AS NOTED ABOVE, THE AMOUNTS OF RECEIPT S APPEARING IN THE BANK ACCOUNTS ARE NOT FROM CONTRACT BUSINESS AND TH AT THE SAME HAVE BEEN WITHDRAWN A FEW DAYS AFTER DEPOSIT OF THE CHEQ UES; AND FURTHER THAT FOR ASSISTING A PERSON IN PASSING ITS UNDISCLOSED C ASH THROUGH BANKING CHANNELS TO THE SAME PERSONS AND VICE-VERSA. PREVA LENT MARKET COST VARIES BETWEEN 2% TO 8% AND THE APPELLANTS HAVE SHO WN, NET PROFIT @ 8% OF THE RECEIPTS (OR THEIR INCOME HAD BEEN MADE T O DECLARE @ 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. THEREFORE THE INCOME DECLARED IS DIRECTED TO BE ACCEPTED AND THE CREDIT FOR TDS IS A LSO DIRECTED TO BE GIVEN. 5. IN VIEW OF THE ABOVE DISCUSSION, KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES, THERE WAS NOTHING WRONG IN MAKING TH E ASSESSMENTS ON PROTECTIVE BASIS AND ASSESSING THE INCOME UNDER THE HEAD `OTHER SOURCES. THE GROUNDS OF APPEAL PERTAINING TO THES E ITEMS ARE DISMISSED. 6. WHEN A PERSON MAKES A STATEMENT WITHOUT UNDUE IN FLUENCE, FRAUD OR COERCION, THE EVIDENTIARY VALUE OF THE STATEMENT HAS TO BE RELIED UPON; EVEN OTHERWISE THE ASSESSING OFFICER HAS CORROBORAT ED THE FACTS EMERGING FROM THE STATEMENTS FROM THE OTHER EVIDENC E I.E. WITHDRAWAL OF THE CASH AMOUNTS FROM THE BANK ACCOUNTS BY THE APPE LLANTS 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 A PPELLANT THAT THE STATEMENTS GIVEN BY THE APPELLANTS DO NOT HAVE ANY EVIDENTIARY VALUE. THE GROUND OF APPEAL PERTAINING TO THIS ITEM IS ALS O 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 THAT NO WORK HAS BEEN DONE BY ANY OF THE CONTRACTOR, THE AMOUNT RECEIVED ITSELF CANNOT BE CONSIDERED TO BE INCOME OF THE ASSESSEE BUT ONLY TH E PROFIT FROM SUCH RECEIPT ITA NOS. 369,374,375,376/DEL/2010 ASSTT. YEARS 2006- 07 6 CAN BE BROUGHT TO TAX. THE ASSESSEE HEREIN BEING F OUND TO BE NAME LENDERS COULD HAVE CHARGED ONLY THE COMMISSION FOR SO LENDI NG THE NAME. IN THE FORM OF BANK STATEMENT IT IS ALSO EVIDENT THAT THE AMOUN T RECEIVED WAS PURPORTED TO BE REFUNDED BACK TO PACL INDIA LTD. THEREFORE, INC OME OF THE PRESENT ASSESSES ARE ONLY TO THE EXTENT OF RECEIVING COMMISSION AND SINCE ALL THESE PERSONS HAVE OFFERED 8% OF THEIR INCOME, NO FURTHER AMOUNT IS TA XABLE. AT THE SAME TIME, THE LEARNED CIT(A) HAS FOUND THAT THE INCOME IS NOT ASS ESSABLE AS BUSINESS INCOME OR UNDER SECTION 44AD OF THE ACT BUT ONLY AS INCOME FROM OTHER SOURCES WHICH IN ANY CASE COULD NOT HAVE EXCEEDED THE AMOUNT OFFE RED FOR TAX. SINCE CORRECT INCOME HAS BEEN OFFERED FOR TAX BY THE ASSESSEES HE REIN, THE ASSESSING OFFICER WAS THEREFORE, IN ERROR IN TAXING THE ENTIRE SUM RE CEIVED AS INCOME. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER O F 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 FRO M THEIR INCOME, THE PERSONS ARE ENTITLED TO CREDIT FOR THE TAX DEDUCTED AT SOUR CE. THEREFORE, HERE ALSO THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A). 6. IN THE RESULT, ALL THE THREE APPEALS ARE DISMISS ED. 3. AS OBSERVED IN THE CASE OF SMT. KAMLESH & OTHERS THERE WERE 128 PERSONS / ENTITIES WHO HAD UNDERTAKEN CONTRACT WORK FOR PACL INDIA LTD. OF AMOUNTING TO RS. 3,64,74,150/-. ALL THESE PERSON S HAVE FILED THEIR INCOME TAX RETURN WITH DIFFERENT AO AT ROHTAK. THEY HAVE CLAIMED TO HAVE RECEIVED CONTRACT RECEIPTS AND SAME WAS OFFERE D FOR TAX U/S 44AD OF THE ACT. THE AO FOUND THAT THERE WERE CERTAIN DI SCREPANCIES INCONSISTENCIES IN THE CLAIM OF REFUND ON THE BASIS OF TDS CERTIFICATE ISSUED BY M/S. PACL INDIA LTD. THE TRIBUNAL IN THE CASE OF SMT. KAMLESH AND OTHERS HAS CONSIDERED THE ISSUE IN RESP ECT OF THREE ASSESSEE. IN THAT GROUP OF CASES LD. CIT(A) HAS DEC IDED APPEALS OF 19 ASSESSES BY A COMMON ORDER. IN THE PRESENT FOUR APP EALS WE FIND THAT LD. CIT(A) HAS DECIDED APPEALS OF 9 ASSESSEES BY TH E COMMON ITA NOS. 369,374,375,376/DEL/2010 ASSTT. YEARS 2006- 07 7 IMPUGNED ORDER. THUS THERE IS NO VARIATION ON FACTS . ALL THESE FACTS HAVE DULY BEEN DEALT WITH BY THE TRIBUNAL IN THESE DIFFE RENT ORDERS. RESPECTFULLY FOLLOWING THE ORDER OF TRIBUNAL EXTRAC TED SUPRA WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A). ALL THESE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.6.2010. SD/- [SHAMIM YAHYA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24.6.2010 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT