Manish Gandhi, New Delhi V. ITO, Ward-61(2), New Delhi

ITA 5097/DEL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6739 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 24-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Period of limitation; Tax effect; Set aside
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC: DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA.NO.5097/DEL./2018 ASSESSMENT YEAR 2014-15 MANISH GANDHI G-184, NARAINA VIHAR, NEW DELHI. AAOPG1427B VS. INCOME TAX OFFICER, WARD 61(2), NEW DELHI. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI V. RAJA KUMAR, ADVOCATE FOR REVENUE : SHRI S.L. ANURAGI, SR. DR DATE OF HEARING : 1 8 .07 .201 9 DATE OF PRONOUNCEMENT : 01.08 .201 9 ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-20, NEW DELHI DATED 14.03 .2018 FOR AY 2014-15, CHALLENGING THE ADDITION OF RS. 8,70,00 0/- ON ACCOUNT OF UNDISCLOSED PROFESSIONAL RECEIPT U/S 69A OF THE INCOME TAX ACT. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. 2 ITA.NO.5097/DEL./2018 3. THE OFFICE HAS REPORTED THAT APPEAL IS TIME BARR ED BY 45 DAYS. THE ASSESSEE HAS FILED AN APPLICATION FOR CO NDONATION OF DELAY EXPLAINING THEREIN THAT ON RECEIPT OF IMPUGNE D ORDER BY COUNSEL SHRI BHUSHAN KHANDUJA, THE DOCUMENTS WERE P ASSED ON TO THE OFFICE STAFF FOR THE PURPOSE OF PREPARING APPEAL MEMO AND FILING THE APPEAL. HOWEVER, AT THE RELEVANT TI ME, THE SUPERVISORY STAFF AT THE COUNSELS CHAMBER WAS OCCU PIED WITH EXAMINATIONS AND FOR THIS REASON TIMELY COMPLIANCE COULD NOT BE MADE. THE APPLICATION IS SUPPORTED BY AN AFFIDA VIT OF MR. VIKAS BATRA WORKING WITH M/S KHANDUJA AND ASSOCIATE S SUPPORTING THE APPLICATION. ON CONSIDERATION OF TH E EXPLANATION OF THE ASSESSEE, I AM OF THE VIEW ASSES SEE WAS PREVENTED BY SUFFICIENT CAUSE IN NOT FILING THE APP EAL WITHIN THE PERIOD OF LIMITATION. THEREFORE, DELAY IN FILI NG THE APPEAL IS CONDONED. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE IS AN ADVOCATE AND HAS SHOWN INCOME FROM BUSINESS OR PROF ESSION, INCOME FROM CAPITAL GAIN AND INCOME FROM OTHER SOUR CES. THE 3 ITA.NO.5097/DEL./2018 ASSESSEE FILED RETURN OF INCOME AT RS. 3,14,061 ON 25.03.2015. THE CASE WAS SELECTED FOR LIMITED SCRUTINY, HOWEVER , IT WAS CONVERTED INTO COMPLETED SCRUTINY CASE BECAUSE OF T HE HUGE AMOUNT DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSE E ON WHICH NO TAXES HAVE BEEN PAID. THE AO IN THIS BACK GROUND NOTED THAT THERE IS A CASH DEPOSITED IN STATE BANK OF INDIA OF RS. 8,50,000/- WHICH ASSESSEE CLAIMED TO BE ADVANCE D CONSULTATION FEES, WHICH WAS DEPOSITED IN THE BANK ACCOUNT. THE ASSESSEE RECEIVED THE ADVANCE FEES FROM SHRI PR AMOD SHARMA, MS. AARTI JAIN, MS. NIMISHA BHAGAT AND MS. ASHA DEVI TOTALING TO RS. 8,70,000/-. THE AO NOTED THAT THE ASSESSEE BEING ADVOCATE HAS MAINTAINED HIS ACCOUNTS ON CASH BASIS, THEREFORE, THE CONSULTANCY CHARGES RECEIVED IN FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR SHOULD HAVE BEEN D ISCLOSED IN THE RETURN OF INCOME. IN THE BALANCE SHEET ENDI NG 31.03.2014 NO SUCH ADVANCES REFLECTED. THE AO ALSO NOTED THAT IN THE LEGAL PROFESSION FEES IS ALSO RECEIVED IN ADVANCE EXCEPT IN SOME EXCEPTIONS. THEREFORE, AO MADE ADDI TION OF RS. 8,70,000/- AS UNDISCLOSED PROFESSIONAL RECEIPT APPE ARING IN 4 ITA.NO.5097/DEL./2018 THE BANK ACCOUNT OF ASSESSEE U/S 69A OF THE ACT. T HE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(A) AND IT WAS CLAIMED THAT METHOD OF ACCOUNTING EMPLOYED BY THE A SSESSEE IS MERCANTILE AND NOT CASH AS STATED BY THE AO. IT WAS FURTHER STATED THAT IN THE BALANCE SHEET ENDING 31.03.2014 ASSESSEE HAS SHOWN AMOUNT OF RS. 8,50,000/- ON CREDIT SIDE A S ADVANCE FEES. THE LD. CIT(A), HOWEVER, DID NOT ACCEPT CONT ENTION OF THE ASSESSEE BECAUSE ALL THE COLUMNS IN THE BALANCE SHE ET OF RETURN OF INCOME SHOWS (ZERO), EXCEPT CASH IN HAN D. THE LD. CIT(A) NOTED THAT IT IS NOT IN DISPUTE THAT ASSESSE E HAS RECEIVED RS. 8,70,000/- AS PROFESSIONAL FEES IN ASS ESSMENT YEAR UNDER APPEAL WHICH SHOULD HAVE BEEN SHOWN IN T HE RETURN OF INCOME, THEREFORE, APPEAL OF ASSESSEE WAS DISMISSED. 5. LD. COUNSEL FOR ASSESSEE REITERATED THE SUBMISSI ONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT AS SESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND NOT C ASH. HE HAS REFERRED TO PB 5 WHICH IS STATEMENT OF AFFAIR E NDING 31.03.2014 IN WHICH ADVANCE FEES HAVE BEEN SHOWN IN A SUM 5 ITA.NO.5097/DEL./2018 OF RS. 8,50,000/-. HE HAS FURTHER SUBMITTED THAT T HE LEGAL MATTERS HAVE SETTLED IN THE PRESENT ACCOUNTING YEAR AND AS SUCH, ASSESSEE WOULD PAY THE TAX ON THE AMOUNT IN Q UESTION IN AY 2020-21. HE HAS SUBMITTED THAT ASSESSEE HAS PAID RS. 24,000/- AND 72,200/- RECENTLY IN AY 2020-21 AS ADV ANCE TAX ON SUCH ADVANCE RECEIPTS, COPIES OF THE SAME ARE FI LED ON RECORD. HE HAS SUBMITTED THAT ASSESSEE WOULD DISCL OSE RS. 8,70,000/- AS INCOME IN AY 2020-21 AND, AS SUCH, IT IS ONLY A TAX NEUTRAL EXERCISE. ON THE OTHER HAND, LD. DR RE LIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE AS SESSEE HAS FILED COPY OF THE STATEMENT OF AFFAIR IN WHICH ADVANCE FEES HAVE BEEN SHOWN IN A SUM OF RS. 8,50,000/-. ACCORD ING TO ASSESSEE THE ADVANCE FEES WAS RECEIVED FROM FOUR PA RTIES AND THEIR MATTERS ARE NOW SETTLED IN CURRENT FINANCIAL YEAR. ASSESSEE, THEREFORE, MADE A STATEMENT IN THE COURT THAT AMOUNT IN QUESTION I.E. RS. 8,70,000/- WOULD BE TEN DERED FOR TAXATION IN AY 2020-21. THE ASSESSEE HAS ALSO PAID ADVANCE 6 ITA.NO.5097/DEL./2018 TAX ON THE SAME AMOUNT FOR AY 2020-21 IN A SUM OF R S. 96,200/-. THESE FACTS CLEARLY SUPPORT THAT ASSESSE E RECEIVED THE AMOUNT IN QUESTION AS ADVANCE FROM THE PARTIES. ASSESSEE DENIED TO HAVE MAINTAINED CASH SYSTEM OF ACCOUNTING , THEREFORE, THERE WAS NO JUSTIFICATION TO MAKE ADDIT ION OF THE IMPUGNED AMOUNT IN ASSESSMENT YEAR UNDER APPEAL. I T IS SUBMITTED THAT TAX WOULD REMAIN SAME IN ASSESSMENT YEAR UNDER APPEAL AS WELL AS IN AY 2020-21. THEREFORE, IT WOULD NOT MAKE ANY DIFFERENCE FOR THE REVENUE. I ACCEPT THE EXPLANATION OF THE ASSESSEE THAT AMOUNT IN QUESTION WAS ADVANCE WHICH IS NOW TENDERED FOR TAXATION IN AY 20 20-21. THEREFORE, IT IS MERELY A TAX NEUTRAL EXERCISE. IT IS NOT A CASE AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRI ES LIMITED 358 ITR 295 HELD THAT THERE IS NO DISPUTE THAT IN SUBSEQUENT ACCOUNTING YEAR, THE ASSESSEE DID MADE IMPORT AND D ID DERIVE BENEFITS UNDER THE ADVANCE LICENSE AND DUTIES ENTIT LEMENT PASS BOOK AND PAID THE TAX, THEREFORE, IT IS NOT AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. WE ARE TOLD THAT RATE OF 7 ITA.NO.5097/DEL./2018 TAX REMAIN THE SAME IN PRESENT ASSESSMENT YEAR AS W ELL AS IN SUBSEQUENT ASSESSMENT YEAR. THEREFORE, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT THE BEST, MA DE FOR MINOR TAX EFFECT. THE HONBLE SUPREME COURT IN TH E CASE OF CIT VS. REALIST BUILDERS & SERVICES LIMITED 307 ITR 202 HAS HELD THAT ASSESSING OFFICER MUST GIVE FACTS AND FI GURES THAT THE IMPUGNED METHOD OF ACCOUNTING ADOPTED BY THE AS SESSEE RESULTS IN UNDER ESTIMATION OF PROFITS, FOR CHANGIN G THE METHOD OF ACCOUNTING U/S 145 OF THE ACT, OTHERWISE, IT WIL L BE PRESUMED THAT THE ENTIRE EXERCISE IS REVENUE NEUTRA L. CONSIDERING THE FACTS OF THE CASE AND THAT ASSESSEE HAS PAID ADVANCE TAX ON THE AMOUNT IN QUESTION IN AY 2020-21 AND UNDERTAKEN TO DECLARE THE AMOUNT FOR TAXATION, I AM OF THE VIEW THAT REVENUE IS NOT GOING TO LOSE ANYTHING. I T IS MERELY A TAX NEUTRAL EXERCISE. I, THEREFORE, DO NOT FIND AN Y JUSTIFICATION TO DOUBT THE EXPLANATION OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, I SET ASIDE THE ORDERS OF THE AUTHORITIES B ELOW AND DELETE THE ADDITION OF RS. 8,70,000/-. 8 ITA.NO.5097/DEL./2018 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED 01.08.2019 *KAVITA ARORA COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI. DATE OF DICTATION 1 8 .07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 1 9 .07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 01.08.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 01.08.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 01.08.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 01.08.2019 DA TE ON WHICH THE FILE GOES TO THE BENCH CLERK 01.08.2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER