Manoj Kumar, Delhi V. ITO, Ward-1(4), Meerut

ITA 4815/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3872 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 27-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: V K GOEL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC , NEW DELHI BEFORE SH. N. K. SAINI, A CCOUNTANT M EMBER ITA NO. 4815/DEL/2017 : ASSTT. YEAR : 2013 - 14 SH. MANOJ KUMAR, C/O SH. VINOD KUMAR GOEL, 282, BOUNDRY ROAD, CIVIL LINES, MEERUT VS INCOME TAX OFFICER, WARD - 1(4), MEERUT (APPELLANT) (RESPONDENT) PAN NO. BEHPK9196P ASSESSEE BY : SH. V. K. GOEL, ADV. REVENUE BY : MS. ASHIMA NEB , SR. DR DATE OF HEARING : 12 .12 .201 7 DATE OF PRONOUNCEMENT : 30 .01 .201 8 ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 22.06.2017 OF LD. CIT(A) , MEERUT . 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE LD. A.O. HAS ERR ED IN COMPUTING THE ASSESSMENT U/S 144 OF IT, ACT INSTEAD OF SECTION 143(3)/145 OF IT. ACT. LD. CIT IGNORED THIS ISSUE HENCE, A.O. AS WELL AS CIT(A) ORDER IS AGAINST THE PRINCIPAL OF NATURAL JUSTICE. 2. THAT THE FOLLOWING DISALLOWANCES/ADDITIONS MADE OVER THE ABOVE RETURNED INCOME BEING UNTENABLE IN LAW AND ON FACTS OF THE FACTS, BE KINDLY DELETED : (A) ADDITION OF RS. 37,04,5017 / - U/S 40(A)(IA) (B) ADDITION OF RS. 4,52,255/ - TOWARDS INCOME FROM TRADING OF FMCG PRODUCTS LD. CIT(A) HAS GIVEN PART RELIEF HEN CE, ADDITION CONFIRM BY CIT(A) IS BAD IN LAW. ITA NO . 4815 /DEL /201 7 MANOJ KUMAR 2 3. THAT THE DEMAND OF RS. 22,63,060/ - CREATED IN PURSUANT ASSESSMENT IS DISPUTED DEMAND BE KINDLY STAYED TILL DECISION OF APPEAL. 4. THAT THE ASSESSEE HAS RIGHT TO ADD, MODIFY OR DELETE ANY GROUND DURING THE APPEAL PROCEEDING. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN SERVICE SECTOR DISTRIBUTOR OF IDEA CELLULAR LTD. IN THE NAME AND STYLE OF M/S R.K. COMMUNICATIONS (PROVIDING PRE - PAID RECHARGE, RECHARGE COUPONS & SIM CARDS ETC.) AND TRADING DISTRIBUTOR OF G.D. FOODS AND TRADING OF FMCG PRODUCTS. THE ASSESSEE FILED THE RETURN OF INCOME ON 01.10.2013 DECLARING AN INCOME OF RS.8,61,070/ - . LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE AO ASKED THE ASSESSEE TO FURNISH , BIFURCATED PR OFIT AND LOSS ACCOUNTS OF M/S R.K. COMMUNICATIONS & GD FOODS AND TRADING ACCOUNT OF FMCG PRODUCTS. ACCORDING TO THE AO, THE ASSESSEE NEITHER FURNISHED THE BIFURCATED PROFIT AND LOSS ACCOUNT AND NOR PRODUCED THE BOOKS OF ACCOUNTS. HE, THEREFORE, FRAMED THE ASSESSMENT U/S 144 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND WORKED OUT THE PROFIT OF THE TRADING BUSINESS BY APPLYING NET PROFIT RATE OF 15% AND MADE THE ADDITION OF RS.4,52,255/ - . THE AO ALSO OBSERVED THAT THE ASSESSEE HAD RECE IVED GROSS COMMISSION AT RS.46,85,155/ - OUT OF WHICH RS.37,04,517/ - HAD BEEN SHOWN AS INCENTIVE DISTRIBUTED TO RETAILERS ON WHICH TDS U/S 194H OF THE ACT HAD NOT BEEN DEDUCTED. HE, THEREFORE, DISALLOWED RS.37,04,517/ - U/S 40(A)(IA) OF THE ACT. THE AO ALSO ESTIMATED THE INCOME FROM PREPAID CALLING SERVICES AT RS.4,62,732/ - BY OBSERVING THAT THE ASSESSEE HAD SHOWN GROSS INCOME OF RS.7,71,220/ - WHICH WAS PURE INCOME AND THE EXPENSES WERE QUITE LESS ON SUCH RECEIPT. HE ESTIMATED THE TAXABLE INCOME @ 60%, THE A FORESAID GROSS RECEIPT AND MADE THE ADDITION OF RS.4,62,732/ - . ITA NO . 4815 /DEL /201 7 MANOJ KUMAR 3 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT WHEN THE AO HAS ESTIMATED THE NET PROFIT OF THE ASSESSEE, THERE WAS NO REQUIREMENT TO MAKE FURTHER ADDI TION U/S 40(A)(IA) OF THE ACT. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS JOGENDRA SINGH & CO. (2014) 361 ITR 78 (ALL.) CIT, PATIALA VS DULLA RAM, LABOUR CONTRACTOR, KOTKAPURA (2014) 223 TAXMAN 24 (P&H) CIT VS PURSHOTTAM LAL TAMRAKAR (2004) 270 ITR 314 (MP) DINESHBHAI DHANSUKHLAL MITHAIWALA VS ITO (2014) 49 TAXMAN 583 (AHD. - TRIB.) ACIT, AGRA VS SARV PRAKESH KAPOOR (2009) 199 ITD 197 (AGRA)(TM) 5. IT WAS FURTHER SUBMITTED THAT THE AO CALCULATED THE NET PROFIT BY APPLYING THE RATE OF 60% ON THE RECEIPT FROM PREPAID CALLING SERVICES WHICH WAS ON HIGHER SIDE AND THAT THE DETAILS IN FORM NO. 26AS WERE SIGNIFICANT AND RELIABLE SOURCE OF VERIFICATION OF DETAILS FILED BY THE ASSESSEE. 6. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE OBSERVED THAT THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS WAS UNCALLED FOR , ACCORDINGLY, THE ADDITION ON ACCOUNT OF ESTIMATED PROFIT AMOUNTING TO RS.4,52,255/ - WAS DELETED. HOWEVER, DISALLOWANCE @ 30% OUT OF THE SALARY CLAIMED BY THE ASSE SSEE WAS DIRECTED TO BE MADE. IN THIS MANNER, THE ESTIMATED PROFIT OF RS.4,52,255/ - WAS REPLACED BY DISALLOWANCE OF RS.2,71,709/ - . AS REGARDS TO THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD SHOWN GROSS RECEIPT OF RS.47,96,660/ - FROM IDEA CELLULAR LTD. ON WHICH THE TDS OF RS.4,79,669/ - WAS DEDUCTED WHICH WAS SHOWN IN ITS RETURN OF INCOME BUT NO DETAILS WERE FURNISHED REGARDING THE EXPENDITURE OF RS.37,04,517/ - ON WHICH THE ASSESSEE FAILED TO ITA NO . 4815 /DEL /201 7 MANOJ KUMAR 4 DEDUCT THE TDS U/S 194H OF THE ACT. THE LD. CIT(A) SUSTAINED THE ADDITION OF RS.37,04,517/ - . 7. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND IT WAS SUBMITTED THAT NEITHER THE AO NOR THE LD. CIT (A) PROVIDED DUE AND REASONABLE OPPORTUNITY OF BEING HEARD AND MADE/SUSTAINED THE ADDITIONS IN ARBITRARY MANNER. IT WAS FURTHER SUBMITTED THAT THE AMOUNT OF RS.37,04,517/ - CONSIDERED BY THE AO AS COMMISSION WAS ACTUALLY DISCOUNT GIVEN BY THE ASSESSEE TO TH E CUSTOMERS ON PREPAID CARDS ON WHICH NO TDS WAS REQUIRED TO BE DEDUCTIBLE AS IT WAS IN THE NATURE OF AN INCENTIVE. 8. IN HIS RIVAL SUBMISSIONS, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. I HAVE CONSIDERED THE SUBMISSIONS OF BO TH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE LD. CIT(A) ON THE ONE HAND STATED THAT BOOKS OF ACCOUNTS WERE WRONGLY REJECTED BY THE AO. ON THE OTHER HAND, HE HIMSELF DISALLOWED 30% OF THE SALAR Y CLAIMED BY THE ASSESSEE WHICH WAS RECORDED IN THE BOOKS OF ACCOUNTS. THEREFORE, THE LD. CIT(A) HAS TAKEN A CONTRARY STAND . IT IS ALSO NOT CLEAR AS TO WHETHER ALL THE EXPENSES CLAIMED BY THE ASSESSEE AMOUNTING TO RS.37,04,517/ - WERE SUBJECT TO TDS, PARTIC ULARLY WHEN, IT WAS NOT CLEAR AS TO WHETHER THE SAID AMOUNT WAS PAID BY THE ASSESSEE ON ACCOUNT OF INCENTIVES OR COMMISSION. I, THEREFORE, IN THE ABSENCE OF CLEAR FACTS ON RECORD, DEEM IT APPROPRIATE TO SET ASIDE THIS CASE BACK TO THE FILE OF THE AO TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO . 4815 /DEL /201 7 MANOJ KUMAR 5 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . (ORD E R P RON OUNCED IN THE COURT ON 30 /01 /201 8 ) SD/ - (N. K. SAINI) ACCOUNTANT MEMBER DAT ED: 30 /01/2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR