ITO, New Delhi V. Safeways Insurance Brokers (P) Ltd., New Delhi

ITA 533/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65469 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 05-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR PRABHA KANT
• Keywords: Unexplained investment; Business income; Business expenditure; Source of fund; Additional evidence; Assessment record
• Section: 69

Judgement Text

ITA NO. 533/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 533/DEL/2010 A.Y. : 2006-07 INCOME TAX OFFICER, WARD 7(2), ROOM NO. 306, CR BUILDING, NEW DELHI VS. SAFEWAYS INSURANCE BROKERS P LTD., 284, JEEWAN DEEP ANNEXE, 10, PARLIAMENT STREET, NEW DELHI (PAN/GIR NO. : AAHCSS5255P) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. SAMEER KAPOOR, CA DEPARTMENT BY : DR. PRABHA KANT, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-X, NEW DELH I DATED 27.11.2009 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED READ AS UNDER:- 1. LD. COMMISSIONER OF INCOME TAX (A) ERRED, IN LAW AND ON THE FACT AND CIRCUMSTANCES OF THE CASE, IN DELET ING THE ADDITION OF ` 32,05,325/-. MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF 50% OF GROSS RECEIPTS. 2. LD. COMMISSIONER OF INCOME TAX (A) ERRED, IN LAW A ND ON THE FACT AND CIRCUMSTANCES OF THE CASE, IN DELET ING ITA NO. 533/DEL/2010 2 THE ADDITION OF ` 8510/- MADE BY THE ASSESSING OFFIC ER ON ACCOUNT OF 50% OF MANAGEMENT FEE RECEIPT. 3. LD. COMMISSIONER OF INCOME TAX (A) ERRED, IN LAW A ND ON THE FACT AND CIRCUMSTANCES OF THE CASE, IN DELET ING THE ADDITION OF ` 51,466/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST INCOME. 4. LD. COMMISSIONER OF INCOME TAX (A) ERRED, IN LAW A ND ON THE FACT AND CIRCUMSTANCES OF THE CASE, IN DELET ING THE ADDITION OF ` 80,210/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF RENT RECEIVED FROM ORIENTAL INSURANCE CO. LTD. 5. LD. COMMISSIONER OF INCOME TAX (A) ERRED, IN LAW A ND ON THE FACT AND CIRCUMSTANCES OF THE CASE, IN DELET ING THE ADDITION OF ` 77,854/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF FEE RECEIVED FOR PROFESSIONA L AND TECHNICAL SERVICES. 6. LD. COMMISSIONER OF INCOME TAX (A) ERRED, IN LAW A ND ON THE FACT AND CIRCUMSTANCES OF THE CASE, IN DELE TING THE ADDITION OF ` 2,19,223/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENT. THE APPELLANT CRAVES TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING T HE HEARING OF THIS APPEAL. 3. IN THIS CASE ASSESSMENT WAS FRAMED BY THE ASSESS ING OFFICER U/S. 144 OF THE I.T. ACT. ASSESSING OFFICER OBSER VED THAT ASSESSEE HAS ITA NO. 533/DEL/2010 3 NOT RESPONDED TO STATUTORY NOTICES. HENCE, ASSESSI NG OFFICER WAS CONSTRAINED TO MAKE THE FOLLOWING ADDITIONS:- I) 50% OF GROSS RECEIPTS (` 64,10,649) - ` 32,05 ,325 II) 50% OF MANAGEMENT FEES RECEIVED (` 17,019) - `8,510 III) 100% OF FDR INTEREST INCOME (`51,466) - ` 51,466 IV) RENT FROM ORIENTAL INSURANCE COMPANY LTD. - ` 80,210 V) FEE FOR PROFESSIONAL AND TECHNICAL SERVICES RECEI VED FROM - ORIENTAL INSURANCE CO. LTD. - ` 59,824 - CASTROL INDIA LTD. - ` 18,030/- 3.1 FURTHER THE ASSESSING OFFICER HELD THAT THE IN THE ABSENCE OF ANY EXPLANATION REGARDING SOURCE OF FUNDS OF ` 2 ,19,223/- INCURRED ON PURCHASE OF FIXED ASSETS SHOULD BE TREATED AS UNEX PLAINED INVESTMENT AS PER PROVISIONS OF SECTION 69 OF THE I.T. ACT, 19 61. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) CONSIDERED THE ASSESSEES SUBMISSIONS AND ASSESSING OFFICERS REMAND ON THE ISSUE OF GROSS RECEIPTS & MANAGEMENT F EE, FDR INTEREST. LD. COMMISSIONER OF INCOME TAX (A) OBSERVE D THAT THERE WAS NO BASIS FOR THE ASSESSING OFFICER TO DISALLOW 50% GROSS BROKERAGE RECEIPT OF ` 64,10,649/- + 50% MANAGEMENT FEES OF 1 7019/- + 100% OF FDR INTEREST INCOME 51466/-. LD. COMMISSIONER OF INCOME TAX (A) FURTHER OBSERVED THAT ASSESSING OFFICER HAS ERRED IN IGNORING THE AUDITED ACCOUNTS AND REJECTING THE BOOKS OF ACCOUNT S. FURTHER, LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT PROPER OPPORTUNITY WAS NOT GIVEN TO THE COMPANY FOR COMPLYING WITH THE NOTI CE ISSUED. LD. ITA NO. 533/DEL/2010 4 COMMISSIONER OF INCOME TAX (A) OBSERVED THAT IN ANY EVENT THE, THE EXPARTE ASSESSMENT MADE BY THE ASSESSING OFFICER WI THOUT LOOKING INTO THE AUDITED ACCOUNTS AS WELL AS PAST ASSESSMEN T RECORDS OF THE COMPANY IS ARBITRARY AND ALSO CONTRARY TO THE PROVI SIONS OF LAW. ACCORDINGLY, LD. COMMISSIONER OF INCOME TAX (A) HELD THAT THE ADDITION ON ACCOUNT OF GROSS RECEIPT AND MANAGEMENT FEES WAS LIABLE TO BE DELETED. 4.1 LD. COMMISSIONER OF INCOME TAX (A) HELD THAT INTEREST INCOME OF ` 51466/- CANNOT BE TREATED AS PART OF THE BUSINESS AND WAS HELD TO BE TREATED AS INCOME FROM OTHER SOURCES. LD. COMMISSION ER OF INCOME TAX (A) CONCLUDED THAT ASSESSING OFFICER IS DIREC TED TO ALLOW THE BUSINESS EXPENDITURE AS CLAIMED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT AGAINST ITS BUSINESS INCOME AND DISALLOW EX PENSES TO THE TUNE OF ` 2,58,854/- I.E. THE EXPENSES FOR WHICH NO EVID ENCE ARE AVAILABLE ON RECORD AS PER THE REMAND REPORT. 4.2 LD. COMMISSIONER OF INCOME TAX (A) THEREAFTER CONS IDERED THE ADDITION OF ` 80,210/- AS RENT AND ` 77,851/- AS FE E FOR PROFESSIONAL AND TECHNICAL SERVICES. ASSESSEE SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) THAT ASSESSING OFFICER HAS ADDED ` 80210/- AS RENTAL INCOME OF THE COMPANY AND ` 77584/- AS PROFESSIONAL / TECHNICAL FEE TO THE INCOME OF THE COMPANY. HOWEVER, ASSESSEE SUBMIT TED THAT THE SAME WAS BEING SHOWN AS BROKERAGE INCOME WHICH INCL UDED ` 80210/- AS RENT AND ` 59,824/- OF PROFESSIONAL / TECHNICAL FEE AND ` 6,95,398/- OF INCOME FROM COMMISSION OR BROKERAGE. A CERTIFICATE FROM ORIENTAL INSURANCE CO. LTD., CHANDIGARH WAS ALSO PRODUCED S TATING THAT THE BROKERAGE INCOME OF ` 80,210/- HAS BEEN WRONGLY STA TED AS RENT IN THE TDS RETURNS. FURTHER, ASSESSEE SUBMITTED THAT ` 18 ,030/- HAS BEEN ITA NO. 533/DEL/2010 5 SHOWN NET OF TDS AMOUNT OF ` 1,011/- IN THE MANAGEME NT FEE IN THE PROFIT AND LOSS ACCOUNT. CONSIDERING THE ABOVE, LD. COMMISSIONER OF INCOME TAX (A) HELD THAT ASSESSING OFFICER IS DIRE CTED TO DELETE THE ADDITION OF ` 80210/- AND ` 77851/- FROM THE INCOME OF THE ASSESSEE. FURTHER, LD. COMMISSIONER OF INCOME TAX (A) OBSERVED T HAT ASSESSEE HAS APPARENTLY UNDERSTATED THE MANAGEMENT FEE BY ` 1,011/- WHICH IS TO BE ADDED BACK TO THE INCOME OF THE ASSESSEE. 4.3 FURTHER, LD. COMMISSIONER OF INCOME TAX (A) OBSERV ED THAT ASSESSING OFFICER HAS MADE AN ADDITION OF ` 2,19, 223/- AS UNEXPLAINED INVESTMENT INCURRED FOR PURCHASE OF FIXED ASSETS. ASSESSEE SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) THAT ASS ESSING OFFICER HAS CALCULATED THE DIFFERENCE OF WDV AS ON 31.3.20 05 AMOUNTING TO ` 4,92,272/- AND WDV AS ON 31.3.2006 AMOUNTING TO ` 2, 73,049/-, AS ` 2,19,223/-. HENCE, IT WAS CLAIMED THAT THE INVEST MENT IN FIXED ASSETS HAS REDUCED IN THE FINANCIAL YEAR 2005-06 AS COMPARE D TO IMMEDIATELY PRECEDING FINANCIAL YEAR BY ` 2,19,223/-. HENCE, T HERE WAS NO UNEXPLAINED INVESTMENT IN THE FIXED ASSETS. CON SIDERING THE ABOVE, LD. COMMISSIONER OF INCOME TAX (A) HELD THAT HE AGREE D WITH THE CONTENTION OF THE ASSESSEE, HENCE, THE ASSESSING O FFICER WAS DIRECTED TO DELETE THE ADDITION OF ` 2,19,223/-, AFTER MAKI NG THE NECESSARY VERIFICATION AS PER LAW. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED. AS REGARDS ISSUE OF ADDITION ON ACCOUNT OF GROSS RECEIPTS AND MANAGEMENT FEE, ASSESSEE HAS SUBMITTED THE COPIE S OF VOUCHERS, BILLS, SALARY REGISTER AND OTHER DETAILS OF EXPEND ITURE AND THE SAME WERE SUBMITTED AS ADDITIONAL EVIDENCE UNDER RULE 46 A AND SENT FOR ITA NO. 533/DEL/2010 6 VERIFICATION BY THE ASSESSING OFFICER. CONSIDERIN G THE ASSESSING OFFICERS REMAND REPORT AND ASSESSEES SUBMISSIONS, LD. COMMISSIONER OF INCOME TAX (A) HAS GIVEN A FINDING T HAT THERE WAS NO BASIS OF ADDITION ON ACCOUNT OF GROSS RECEIPTS AND MANAGEMENT FEE. WE AGREE WITH THE LD. COMMISSIONER OF INCOME TAX (A) THAT ASSESSING OFFICER HAS ERRED IN IGNORING THE AUDITED ACCOU NTS AND REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE ALSO HELD THA T THE EXPARTE ASSESSMENT MADE BY THE ASSESSING OFFICER WITHOUT LO OKING INTO THE AUDITED ACCOUNTS AS WELL AS PAST ASSESSMENT RECORD S OF THE COMPANY IS ARBITRARY AND ALSO CONTRARY TO THE PROVISIONS OF LAW. WE AGREE WITH THE LD. COMMISSIONER OF INCOME TAX (A), THAT ASS ESSING OFFICER SHOULD HAVE BASED HIS JUDGEMENT ON THE RECORDS OF TH E COMPANY FOR EARLIER YEARS. MOREOVER, HE COULD HAVE ALSO DERIVE D SUPPORT FROM THE TREND IN THE TRADE DURING THE CONCERNED PREVIOUS YE AR. WE ALSO FIND THAT ON VERIFICATION OF THE VOUCHERS NO MAJOR DEFICIE NCY HAS BEEN NOTED BY THE INSPECTOR OF INCOME TAX DEPARTMENT/ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THE ISSUE OF DELETION OF ADDITION ON ACCOUNT OF GROSS RECEIPT A ND MANAGEMENT FEE. 7. AS REGARDS ADDITION ON ACCOUNT OF FDR INTEREST ` 51466/- , WE FIND THAT LD. COMMISSIONER OF INCOME TAX (A) HAS GIVEN A FINDING THAT THE SAME CANNOT BE TREATED AS PART OF THE BUSINESS INC OME AND HE HELD THAT IT WAS RIGHTLY TREATED AS INCOME FROM OTHER SO URCES. WE FIND THAT ON THIS ISSUE LD. COMMISSIONER OF INCOME TAX (A) HAS GIVEN A REASONABLE ORDER WHICH DOES NOT NEED ANY INTERFEREN CE ON OUR PART. 7.1 WE ALSO NOTE THAT THE REVENUE IN GROUND NO. 3 HAS RAISED THE ISSUE THAT LD. COMMISSIONER OF INCOME TAX (A) ERRED IN LAW AND ON ITA NO. 533/DEL/2010 7 FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF ` 51466/- MADE BY THE ASSESSING OFFICER ON ACCOUNT O F INTEREST INCOME. WE FIND THAT THIS GROUND IS MISCONCEIVED, AS LD. COM MISSIONER OF INCOME TAX (A) HAS NOT DELETED THE ADDITION ON THIS ACCOUNT. 8. AS REGARDS ISSUE OF ADDITION ON ACCOUNT OF RENT AND FEE FOR PROFESSIONAL AND TECHNICAL SERVICES, WE FIND THAT LD. COMMISSIONER OF INCOME TAX (A) HAS GIVEN A FINDING THAT THE SAME WER E ALREADY INCLUDED IN THE GROSS RECEIPT I.E. BROKERAGE INCOM E OF THE COMPANY. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ALSO CON SIDERED A CERTIFICATE OF ORIENTAL INSURANCE COMPANY THAT THE BROKERAGE INCOME OF ` 80210/- HAS BEEN WRONGLY STATED AS RENT IN THE TDS RETURNS. THUS, WE FIND THAT LD. COMMISSIONER OF INCOME TAX (A) IS CO RRECT FOR HOLDING THAT ADDITION IN THIS REGARD IS NOT SUSTAINABLE. THERE WAS PROPER EXPLANATION AND PROPER EVIDENCES WERE PRODUCED. HENCE, LD. COMMISSIONER OF INCOME TAX (A) IS CORRECT IN DELETI NG THE ADDITION IN THIS REGARD. 9. AS REGARDS THE ISSUE OF ADDITION ON ACCOUNT OF U NEXPLAINED INVESTMENT, ASSESSEE SUBMITTED BEFORE THE LD. COMMIS SIONER OF INCOME TAX (A) THAT THE AMOUNT OF ` 2,19,223/- WAS A DIFFERENCE BETWEEN WDV AS ON 31.3.2005 & 31.3.2006. HENCE, LD . COMMISSIONER OF INCOME TAX (A) HAS CORRECTLY HELD THAT THERE IS AN APPARENT MISTAKE WHILE CALCULATING THE UNEXPLAINED INVESTMENT. HEN CE, HE DELETED THE ITA NO. 533/DEL/2010 8 ADDITION. HE DIRECTED THE ASSESSING OFFICER TO C ONSIDER THE SAME AFTER MAKING NECESSARY VERIFICATION. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF ALL THE ISSUES AND WE UPHOLD THE SAME. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/9/2012. SD/- SD/- [ [[ [I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 14/9/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES