ACIT, New Delhi V. Sh. Sunil Dewan, New Delhi

ITA 4959/DEL/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7349 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 07-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHWANI TANEJA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G, NEW DELHI) BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.4959 /DEL/2011 ASSESSMENT YEAR : 2008-09 ACIT, CIRCLE 24(1), VS. SH. SUNIL DEWAN, NEW DELHI B-138, NAVARKAR BUILDING, 3 RD FLOOR, MOHAMMADPUR, NEW DELHI 110 066 GIR / PAN:AAHPD 9211D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH KUMAR, SR. DR RESPONDENT BY : SHRI ASHWANI TANEJA & SHRI SOMIL AGGARWAL, ADV. ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 23.08.2011. THE ONLY GROUND TAKEN IN THE APP EAL IS THE ACTION OF LD. CIT(A) BY WHICH HE HAD DELETED THE DISALLOWANCE OF RS.1,04,11,254/- MADE BY THE ASSESSING OFFICER UNDER THE HEAD COLLECTION CHARGES. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS PROPRIETOR OF A MANAGEMENT SERVICES COMPANY WHICH IS ENGAGED IN THE BUSINESS OF COLLECTION AND VERIFICATION SERVICES FOR BANKS. DU RING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DEBITED IN HIS P & L ACCOUNT AN AMOUNT OF RS.4,16,45,015/- WHICH WAS 65.03% OF TOTAL RECEIPT. THEREFORE, THE ASSESSEE WAS REQUIRE D TO FILE COMPLETE DETAILS OF ITA NO.4959/DEL/2011 2 COLLECTION CHARGES, GIVING NAMES AND ADDRESSES OF T HE PARTIES AS WELL AS TOTAL AMOUNT PAID AND AMOUNT OF TAX DEDUCTED THEREFROM. IN RESPONSE TO THE ABOVE QUERY, THE ASSESSEE FILED REPLY ON 24.10.2010 HOWEVER, THE ASSESSING OFFICER OBSERVED THAT THE REPLY FILED BY THE ASSESS EE WAS INCOMPLETE AS ADDRESS AND PAN OF PARTIES WERE NOT GIVEN BY THE AS SESSEE. IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT COL.3 WAS LE FT BLANK WHEREBY ASSESSING OFFICER HAD SOUGHT INFORMATION AGAINST TH E AMOUNT OF COLLECTION AGAINST WHICH PAYMENT WAS MADE. THE ASSESSING OFFI CER ALSO OBSERVED THAT ON THE SAME DATE, THE ASSESSEE FILED DETAILS OF COL LECTION CHARGES PAID TO THE SUB-CONTRACTOR FROM APRIL 2007 TO JUNE 2007 WHEREIN PAN, BUSINESS ADDRESS OF PARTIES WERE PROVIDED. THE ASSESSING OFFICER OB SERVED THAT THE ASSESSEE WAS NOT ABLE TO FILE COMPLETE ADDRESSES AND PAN IN RESPECT OF ABOUT 30% OF PAYMENTS AND FURTHER OBSERVED THAT ABOUT 30% VOUCHE RS WERE UNSIGNED. IT WAS FURTHER OBSERVED THAT MOST OF THE PAYMENTS WERE REPORTED ON SELF MADE VOUCHERS, THEREFORE, THE ASSESSEE WAS AGAIN REQUIRE D TO FILE THE COMPLETE DETAILS. HOWEVER, THE ASSESSEE DID NOT FILE THE COM PLETE DETAILS DESPITE BEING PROVIDED MANY OPPORTUNITIES. THEREFORE, THE ASSESS ING OFFICER DISALLOWED AN AMOUNT EQUAL TO 25% OF THE TOTAL COLLECTION CHAR GES. AGGRIEVED WITH THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A). LD. CIT(A) ON THE BASIS OF ASSESSEES SUBMISSION, D ELETED THE ADDITION BY HOLDING AS UNDER: {4} I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUB MISSIONS AND ALSO CALLED FOR AND EXAMINED THE CASE RECORDS. IN RESPEC T OF GROUND NO.1, THE APPELLANT HAS PRODUCED A LIST OF 5530 PERSONS T HROUGH WHOM HE CARRIED ON THE BUSINESS OF COLLECTION AND VERIFICAT ION FOR VARIOUS BANKS. AS STATED BY THE APPELLANT, ADDRESS AND/OR P AN COULD NOT BE PROVIDED FOR ONLY 203 PERSONS OUT OF THE LIST OF 55 30 AND THE TOTAL ITA NO.4959/DEL/2011 3 PAYMENT MADE TO SUCH PERSONS AMOUNTS TO RS. 3,25,69 4/-, OUT OF TOTAL PAYMENTS OF RS. 4,16,45,015/-. IT IS ALSO SUBMITTED THAT TAX HAS BEEN DEDUCTED AT SOURCE AND DEPOSITED IN THE GOVT. ACCOU NT IN EACH CASE WHERE THE PAYMENT EXCEEDED THE SPECIFIED LIMIT OF R S. 50,000/- FOR THE YEAR. THE TOTAL COLLECTION CHARGES ON WHICH TDS WAS DEDUCTED COMES TO RS. 3,31,59,145/-. ON THE BALANCE AMOUNT, TDS WA S NOT DEDUCTED AS THERE WAS NO LIABILITY TO DO SO, THE AMOUNTS BEI NG OF PETTY SUMS ONLY. THE APPELLANT HAS ALSO ARGUED THAT THE COMPLE TE DETAILS COULD NOT BE FILED BEFORE THE ASSESSING OFFICER BECAUSE OF PAUCITY OF TIME AS COLLECTION AND COMPILATION OF THESE DETAILS WAS EXT REMELY TIME- CONSUMING. IT IS ALSO CONTENDED THAT THE APPELLANT WAS NOT PROVIDED AN OPPORTUNITY TO SHOW-CAUSE WHY 25% OF THE COLLECT ION CHARGES SHOULD NOT BE DISALLOWED IN HIS CASE. {5} IT IS CONTENDED THAT THE APPELLANT'S BUSINESS O F COLLECTION AND VERIFICATION FOR PRIVATE BANKS AND NON-BANKING FINA NCIAL COMPANIES REQUIRES THE APPOINTMENT OF VARIOUS FIELD COLLECTOR S AND SUPERVISORS. THESE COLLECTORS/SUPERVISORS ARE RESPONSIBLE FOR CO LLECTION OF OVER DUE LOAN AMOUNTS OF THE BANKS FROM THE BORROWERS AND TH E COLLECTORS/ SUPERVISORS HAVE TO COLLECT THESE AMOUNTS BY VISITI NG EACH AND EVERY BORROWER. THE COLLECTORS ARE APPOINTED ON THE BASIS OF REFERENCES WHICH ARE CAREFULLY VERIFIED AS THEY HANDLE FAIRLY LARGE AMOUNTS OF CASH AND CHEQUES ON BEHALF OF THE APPELLANT. IT IS THE APPELLANT'S CONTENTION THAT MAINTENANCE OF RECORDS OF ADDRESS A ND IDENTITY PROOFS OF THE COLLECTORS IS ESSENTIAL TO PREVENT FRAUD OR MISAPPROPRIATION. HENCE, THERE IS NO QUESTION OF THE COLLECTORS NOT B EING IDENTIFIABLE OR VERIFIABLE. FROM THE DETAILS FILED BY THE APPELLANT , IT IS SEEN THAT DETAILED ADDRESSES, FULL NAMES AND PAN IS AVAILABLE IN RESPECT OF THE VAST MAJORITY OF COLLECTORS. THE APPELLANT'S ARGUME NT REGARDING ITS ESSENTIAL PROCEDURES FOR VERIFICATION OF IDENTITY, ADDRESS AND REFERENCES OF THE COLLECTORS IS WELL TAKEN. THE APP ELLANT WAS ALSO ASKED TO SUBMIT A COMPARISON OF COLLECTION CHARGES PAID WITH COLLECTION CHARGES RECEIVED FROM ITS CLIENT BANKS. IN THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2008- 09, THE CO LLECTION CHARGES PAID WORK OUT TO 65.03% OF CHARGES RECEIVED. THIS C OMPARES FAVOURABLY WITH THE EARS IN WHICH THE RATIO STANDS AT 69.25% IN ASSESSMENT YEAR 2005-06, 67.00% IN ASSESSMENT YEAR 2006-07 AND 66.04% IN ASSESSMENT YEAR 2007-08. THE NET PROFIT O F 7.05% IN THE ITA NO.4959/DEL/2011 4 ASSESSMENT YEAR 2008-09 IS ALSO HIGHER THAN THE NET PROFIT DISCLOSED IN EARLIER YEARS, RANGING FROM 6.01% TO 6.83% IN TH E PRECEDING THREE YEARS. THE ASSESSING OFFICER'S OBSERVATION THAT THE VOUCHERS FOR THE PAYMENTS ARE SELF MADE, CANNOT BE MADE A GROUND FOR THE DISALLOWANCE OF RS. 1,04,11,254/-, AS THE VOUCHERS IN SUCH A BUSINESS COULD ONLY BE SELF MADE. AFTER CONSIDERING THAT THE APPELLANT HAS DEDUCTED TAX ON COLLECTION CHARGES PAID OF RS. 3,31 ,59,145/-, AND THAT ADDRESS AND PAN ARE AVAILABLE IN RESPECT OF PAYMENT S OF RS. 4,13,19,321/-, OUT OF THE TOTAL PAYMENTS OF RS. 4,1 6,45,015/-, IT IS CONSIDERED THAT THE ASSESSING OFFICER'S ACTION IN D ISALLOWING THE PAYMENTS OF RS. 1,04,11,254/- AT 25% OF THE TOTAL P AYMENTS IS NOT JUSTIFIED. THE DETAILS FURNISHED BY THE APPELLANT A RE SUFFICIENT TO PROVE ITS CASE THAT IT HAS INCURRED THE EXPENDITURE OF RS . 4,16,45,015/- ON PAYMENT OF COLLECTION CHARGES TO VARIOUS COLLECTORS , IN AMOUNTS RANGING FROM AS LOW AS RS. 140/- TO A MAXIMUM OF RS . 35,000/- IN EACH CASE. ACCORDINGLY, THE APPELLANT SUCCEEDS AT G ROUND OF APPEAL NO. 1. 3. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE OUTSET, LD. D.R. READ FROM RELEVANT PORTI ON OF THE ASSESSMENT ORDER AND ARGUED THAT THE ASSESSEE WAS GIVEN SUFFIC IENT OPPORTUNITY TO PROVIDE FULL DETAILS OF ALL THE PARTIES WHICH WERE NOT FILED AND MOREOVER, PART OF FEW VOUCHERS WERE SELF GENERATED, WHICH COULD NO T BE RELIED AS THEY WERE PREPARED AS PER THE CONVENIENCE OF THE ASSESSEE. I T WAS FURTHER SUBMITTED THAT BEFORE MAKING ADDITION, AN OPPORTUNITY WAS PRO VIDED TO THE ASSESSEE, HOWEVER, HE DID NOT AVAIL THE OPPORTUNITY TO EXPLAI N. THEREFORE, THE ASSESSING OFFICER HAD RIGHTLY MADE THE DISALLOWANCE . 5. LD. A.R. ON THE OTHER HAND SUBMITTED THAT IN MAX IMUM CASES, TDS WAS DEDUCTED AND IN THIS RESPECT, OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 83-104 WHEREIN A LIST OF PARTIES CONTAINING NA MES, ADDRESSES, PAN, COLLECTION CHARGES PAID AND TDS DEDUCTED WAS PLACED . IT WAS SUBMITTED THAT ITA NO.4959/DEL/2011 5 MOST OF THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYE E CHEQUES AND SOME SMALL PAYMENTS WERE MADE IN CASH WHICH DID NOT EXCE ED ABOUT 1% OF THE TOTAL COLLECTION CHARGES. LD. A.R. ALSO TOOK US TO PAGE 240 WHERE COMPARISON OF COLLECTION CHARGES PAID IN PRECEDING YEAR WAS PLACED. IT WAS SUBMITTED THAT COLLECTION CHARGES IN ASSESSMENT YEA R 2007-08 WAS 66.28% WHEREAS IN ASSESSMENT YEAR 2008-09, IT WAS 65.03% A ND IN THE SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2009-10, THE COLLECTION C HARGES WERE 69.45% OF THE TOTAL COLLECTION RECEIVED. IT WAS FURTHER SUBMITTED THAT THE PERCENTAGE OF TOTAL COLLECTION CHARGES HAS DECREASED FROM 68.87% IN 200 4-05 TO 65.03%. IT WAS POINTED OUT FURTHER THAT IN THE SUCCEEDING YEAR , THE ASSESSEE HAD PAID 69.45% AS COLLECTION CHARGES AND THE ASSESSMENT WAS COMPLETED U/S 143(3) AND THERE WAS NO ADDITION IN THIS RESPECT. 6. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE HAD FILED COM PLETE DETAILS INTIMATING NAMES AND ADDRESSES OF PERSONS TO WHOM PAYMENTS OF RS.4,16,45,015/- WAS MADE AS IS APPARENT FROM PAGES 83-204 OF THE PAPER BOOK AND ONLY IN RESPECT OF A FEW PERSONS, THE PAN WERE NOT PROVIDED . THE NUMBER OF PERSONS FOR WHOM PANS WERE NOT PROVIDED IS INSIGNIF ICANT AS COMPARED TO TOTAL NUMBER OF PERSONS WHICH ARE 5530. THE ASSESS ING OFFICER HAD ARBITRARILY DISALLOWED THE AMOUNT EQUIVALENT TO 25% OF TOTAL PAYMENT WITHOUT CONSIDERING THE EARLIER HISTORY OF THE ASSE SSEE. LD. CIT(A) HAS MADE A FINDING OF FACT THAT OUT OF THE TOTAL PAYMENT AN AMOUNT OF RS.3,31,59,145/- THE ASSESSEE HAD DEDUCTED TDS AND IN MANY CASES TDS WAS NOT REQUIRED TO BE DEDUCTED AS THERE WAS NO LIABILITY TO DEDUCT TAX . LD. CIT(A) HAS ALSO MADE A FINDING OF FACTS THAT NET PROFIT @ 7.5% IN T HE YEAR UNDER ITA NO.4959/DEL/2011 6 CONSIDERATION WAS HIGHER THAN NET PROFIT DISCLOSED IN THE EARLIER YEARS RANGING FROM 6% TO 6.83%. IN VIEW OF THE ABOVE SPECIFIC FI NDINGS, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD. CIT(A). 7. IN VIEW OF THE ABOVE, APPEAL FILED BY THE REVENU E IS DISMISSED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH SEP., 2014. SD./- SD./- (GEORGE GEORGE K) (T .S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 10 TH SEP., 2014 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING DATE OF DICTATION DATE OF TYPING DATE OF ORDER SIGNED BY BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED.