ACIT, New Delhi V. Smt. Shruti Nanda, New Delhi

ITA 5914/DEL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5377 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: S N NANDA
• Keywords: Assessment record
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES G : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA.NO.5914/DEL./2014 ASSESSMENT YEAR 2009-2010 THE ACIT, CIRCLE-23(1), ROOM NO.1302, 13 TH FLOOR, E-2, PRATYKSHYA KAR BHAWAN, SHAYAMA PRASAD MUKHERJEE CIVIC CENTRE, JAWAHAR LAL NEHRU MARG, MINTO ROAD, NEW DELHI 110002 PAN ADTPN8292R VS SMT. SHRUTI NANDA, F-2, EAST OF KAILASH, NEW DELHI 110 048. (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI KAUSHLENDRA TIWARI, SR.DR FOR ASSESSEE : SHRI S.N. NANDA, C.A. DATE OF HEARING : 20.03.2018 DATE OF PRONOUNCEMENT : 03.04.2018 ORDER PER BHAVNESH SAINI, J.M. THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-XXIII, NEW DELHI, DATED 28 TH AUGUST, 2014, FOR THE A.Y. 2009-2010, CHALLENGING THE DELET ION OF 2 ITA.NO.5914/DEL./2014 SMT. SHRUTI NANDA, NEW DELHI. ADDITION OF RS.35,97,470/- ON ACCOUNT OF PROFESSION AL EXPENSES/CHARGES. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT ASSESSE E WAS DIRECTED TO FILE DETAILS OF THE EXPENSES DEBITED TO P & L A/C UNDER THE HEAD PROFESSIONAL CHARGES. IN COMPLIANCE, THE ASSESSEE SUBMITTED COPY OF SOME VOUCHERS FOR PAYMENT OF PROF ESSIONAL CHARGES. A.O. NOTED THAT ASSESSEE HAS PAID ALL THE PROFESSIONAL CHARGES IN CASH AND NO TDS HAS BEEN DEDUCTED BY THE ASSESSEE ON THESE PAYMENTS. THE ASSESSEE WAS ASKED TO EXPLAI N THE REASONS FOR THE SAME AS TO WHY PAYMENTS ARE MADE IN CASH. THE ASSESSEE EXPLAINED THAT SHE HAS NOT DEDUCTED TAX ON THE PROFESSIONAL CHARGES PAID TO DIFFERENT PERSONS BECA USE ALL THE PAYMENTS ARE BELOW THE TAX DEDUCTIBLE LIMIT I.E., R S.20,000/- AND AS SUCH PROVISIONS OF TDS WOULD NOT APPLY. THE A.O. NOTED THAT ASSESSEE HAS PAID AMOUNT OF RS.35,97,470 UNDER THE HEAD PROFESSIONAL CHARGES/EXPENSES WHICH WAS PAID TO D IFFERENT PERSONS. THE A.O. REPRODUCED THE COMPLETE DETAILS I N THE ASSESSMENT ORDER AND NOTED THAT PROFESSIONAL CHARGE S ARE PAID 3 ITA.NO.5914/DEL./2014 SMT. SHRUTI NANDA, NEW DELHI. TO DIFFERENT PERSONS ONLY FOR ONE OR TWICE AND ARE NOT REPEATED IN WHOLE YEAR. THE PAYMENTS ARE MADE IN ROUND FIGUR E. THE ASSESSEE DID NOT PRODUCE THE PERSONS TO WHOM PROFES SIONAL CHARGES ARE PAID. THE ASSESSEE EXPLAINED THAT PROFE SSIONAL CHARGES ARE PAID TO DIFFERENT PERSONS AND THEY DO N OT COME CONTINUOUSLY. THEREFORE, SUCH PERSONS COULD NOT BE PRODUCED IN THE ABSENCE OF ANY RESIDENTIAL ADDRESS OF THE AG ENTS. THE A.O. HOWEVER, NOTED THAT IT IS NOT POSSIBLE THAT 80 TO 9 0 PROFESSIONALS COME TO RECEIVE PROFESSIONAL CHARGES ON DIFFERENT D ATES AND THAT TOO IN CASH. THE EXPLANATION OF ASSESSEE WAS REJECT ED AND ADDITION OF RS.35,97,470/- WAS MADE TO THE RETURNED INCOME. 3. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT A.O. MADE A MISTAK E IN HOLDING THAT ASSESSEE HAD NOT MADE ANY PAYMENT OF PROFESSIO NAL CHARGES OR THAT ALL PROFESSIONAL CHARGES HAD BEEN P AID IN CASH WITHOUT REALIZING THAT THE PAYMENT OF PROFESSIONAL CHARGES HAD BEEN MADE TO TEMPORARY STAFF WHO HAD WORKED WITH TH E ASSESSEE FOR SHORT DURATION AND ALSO THAT IN SUCH A LABOUR I NTENSIVE 4 ITA.NO.5914/DEL./2014 SMT. SHRUTI NANDA, NEW DELHI. INDUSTRY OF PROVIDING BACK OFFICE SUPPORT AND DATA ENTRY AND DATA BASE MANAGEMENT FOR MULTINATIONAL COMPANIES, PROFESSIONAL INCOME OF RS.1.62 CRORES CANNOT BE EAR NED WITHOUT ENGAGING PROFESSIONAL STAFF. NO TDS WAS DEDUCTED BE CAUSE PAYMENTS WERE BELOW RS.20,000/-. IT WAS EXPLAINED T HAT ASSESSEE IS RUNNING PROPRIETARY CONCERN AND IS PROV IDING I.T. RELATED SERVICE AND IS ALSO REGISTERED WITH INDUSTR IES DEPARTMENT OF GOVERNMENT OF HIMACHAL PRADESH. THE A SSESSEE WAS PROVIDING FULL RANGE OF I.T./BPO SERVICES TO IN TERNATIONAL CONSULTING ORGANISATIONS WHO ARE PROVIDING FINANCIA L CONSULTANCY, MARKET RESEARCH, COST ANALYSIS AND IND USTRY FORECAST. IT WAS SUBMITTED THAT ASSESSEES JOB REQU IRED DATA TO BE COLLECTED FROM VARIOUS SOURCES SUCH AS ANNUAL RE PORTS, WEBSITES, COMPANY REPRESENTATIONS AND DATA BASES AV AILABLE ON THE INTERNET. THE ASSESSEE IS PROVIDING SUCH SERVIC ES TO MULTINATIONALS LIKE M/S. MCKINZLE & CO. AND M/S. VI SUAL GRAPHICS. IT WAS SUBMITTED THAT ASSESSEE IS A PROPR IETARY CONCERN AND COVERED BY SECTION 80IC. IT WAS FURTHER SUBMITTED THAT A.O. NEVER DESIRED COMPLETE DETAILS OF PROFESS IONAL CHARGES 5 ITA.NO.5914/DEL./2014 SMT. SHRUTI NANDA, NEW DELHI. DURING RE-ASSESSMENT PROCEEDINGS,. THE A.O. ASKED F OR PRODUCTION OF FEW VOUCHERS VERBALLY. THE FINDINGS O F THE A.O. ARE FACTUALLY WRONG THAT ALL PROFESSIONAL CHARGES WERE MADE IN CASH. IN FACT, PAYMENTS TO THE TUNE OF RS.10,23,470/- WER E MADE TO VARIOUS TEMPORARY PROFESSIONAL STAFF BY CHEQUE DRAW N ON UNION BANK OF INDIA, WHICH IS SUPPORTED BY COPY OF THE BA NK STATEMENT. THE ACCOUNTS OF THE ASSESSEE WERE DULY A UDITED AND ALL FACTS WERE VERIFIED FROM THE RECORD. THE LD. CI T(A) CONSIDERING THE EXPLANATION OF ASSESSEE AND MATERIA L ON RECORD, DELETED THE ADDITION. HIS FINDINGS IN PARA 4.3 OF T HE ORDER IS REPRODUCED AS UNDER : 4.3. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R, THE REASONS GIVEN BY THE AO FOR MAKING AN ADDITION OF PROFESSIONAL CHARGES AMOUNTING TO RS.35,97,470/- AN D THE SUBMISSIONS AND ARGUMENTS OF THE ID. AR. I HAVE ALSO PERUSED THE ASSESSMENT RECORDS VERY CAREFULLY. I FIND THAT THE ORIGINAL ASSESSMENT U/S. 143(3) WAS FRAMED VIDE ORDER DT. 24.11 .2011. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S, THE AO ISSUED NOTICE U/S. 142(1) ALONG WITH QUESTIONNAIRE ASKING FOR 6 ITA.NO.5914/DEL./2014 SMT. SHRUTI NANDA, NEW DELHI. COPIES OF ALL THE BANK ACCOUNTS, BRIEF NOTE ABOUT T HE BUSINESS ACTIVITIES AND MOST IMPORTANTLY, DETAILS OF PAYMENT S ON WHICH TAX AT SOURCE IS DEDUCTED/DEDUCTIBLE BUT NOT DEDUCTED (I N A PROFORMA) AND ALSO THE COPIES OF ACCOUNTS OF MAJOR EXPENSES DEBITED IN THE TRADING AND P&L A/C. AND FURTHER DETAILS WITH REGARD TO PAYMENT OF SALARY, WAGES, COMMISSION AND E XPENSES ON FOREIGN TRAVEL IN PRESCRIBED PROFORMA, WHEREIN I T WAS ASKED OF THE ASSESSEE AS TO WHETHER THESE PAYMENTS WERE S UBJECT TO TDS. ALL THESE DETAILS WERE SUPPLIED BY THE ASSESSEE VIDE LETTER WHICH HAS BEEN PLACED ON THE ASSESSMENT RECORD. THE CASE WAS REOPENED AS A RESULT OF AN AUDIT OBSERVATION WITH RE GARDS TO NON- DEDUCTION OF TDS ON PROFESSIONAL CHARGES DEBITED IN THE P&L A/C. AMOUNTING TO RS.35,97,470/- AND THE APPLICABILI TY OF SECTION 40(A)(IA) ON THE SAME. FURTHERMORE, AFTER CO NSIDERATION OF ALL THE FACTS OF THE CASE AND THE DOCUMENTS AVAIL ABLE ON RECORD AND THE WRITTEN SUBMISSIONS GIVEN BY THE ID. AR, I FIND INCONSISTENCIES IN THE ASSESSMENT ORDER PASSED BY T HE AO U/S. 143(3) R.W. SECTION 147. IT IS CLEAR FROM THE BANK A CCOUNT THAT ALL THE PROFESSIONAL CHARGES HAVE NOT BEEN PAID IN CASH . PARTLY, THE PROFESSIONAL CHARGES HAVE BEEN PAID BY CHEQUES AMOU NTING TO 7 ITA.NO.5914/DEL./2014 SMT. SHRUTI NANDA, NEW DELHI. RS.10,23,470/-. FURTHER, IT IS ALSO IMPORTANT TO NO TE THAT PERMANENT EMPLOYEES OF THE APPELLANT HAVE BEEN PAID SALARY AMOUNTING TO RS.30,06,212/-. IT IS ONLY THE TEMPORA RY DATA ENTRY OPERATORS, WHO HAVE BEEN PAID PROFESSIONAL CHARGES AMOUNTING TO RS.35,97,470/-. I ALSO FIND THAT THE REASONING GI VEN BY THE AO IS MORE IN THE NATURE OF DOUBTS AND SUSPICIONS RAISE D BY HIM WITH REGARD TO THE PROFESSIONAL CHARGES. NOTHING PR EVENTED HIM FROM PROBING FURTHER TO ESTABLISH THE VERACITY OF T HE CLAIMS MADE BY THE APPELLANT. HE HAS CHOSEN NOT TO DO SO AND HAS MADE THE ADDITION OF ALL THE PROFESSIONAL CHARGES DEBITED TO THE P&L A/C. ON DOUBTS AND SUSPICIONS, CONJECTURES AND SURMISES. SUCH HALF BAKED ADDITIONS DO NOT STAND THE TEST OF JUDICIAL S CRUTINY. KEEPING IN VIEW THE FACTS OF THE CASE, THE DOCUMENT S ON RECORD AND THE ARGUMENTS OF THE ID. AR, I HEREBY DELETE THE ADDITION OF RS.35,97,470/-. 4. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. AND SUBMITTED THAT ASSESSEE FAILED TO PRODUCE THE PROFE SSIONALS FOR VERIFICATION BEFORE A.O. AND THAT ASSESSEE MADE ALL THE 8 ITA.NO.5914/DEL./2014 SMT. SHRUTI NANDA, NEW DELHI. PAYMENTS IN CASH, WHICH ARE NOT VERIFIABLE. THEREFO RE, ADDITION WAS CORRECTLY MADE BY THE A.O. 5. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE LD. CIT(A) ON PERUSAL OF THE ASSESSMENT RECORD FOUND THAT ORIGINA L ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 24.11.2011. DURING THE COURSE OF ORIGINAL ASS ESSMENT PROCEEDINGS, A.O. ASKED FOR THE COPIES OF THE BANK STATEMENT AND BUSINESS ACTIVITIES AND DETAILS OF PAYMENTS, ON WHICH, TAX AT SOURCE DEDUCTED/DEDUCTIBLE BUT NOT DEDUCTED AND ALSO COPIES OF THE MAJOR EXPENSES IN PRESCRIBED PROFORMA . THE ASSESSEE SUBMITTED ALL THE DETAILS BEFORE A.O. THE CASE WAS REOPENED AS A RESULT OF AUDIT OBSERVATION WITH REGA RD TO NON- DEDUCTION OF TDS ON PROFESSIONAL CHARGES. IT WAS CL EAR FROM THE BANK ACCOUNT THAT ALL PROFESSIONAL CHARGES HAVE NOT BEEN PAID IN CASH. PARTLY PROFESSIONAL CHARGES HAVE BEEN PAID THROUGH 9 ITA.NO.5914/DEL./2014 SMT. SHRUTI NANDA, NEW DELHI. CHEQUES AMOUNTING TO RS.10,23,470/-. IT WAS ALSO FO UND BY LD. CIT(A) THAT ONLY THE TEMPORARY DATA ENTRY OPERATORS HAVE BEEN PAID PROFESSIONAL CHARGES. IT WAS ALSO FOUND THAT F INDINGS OF THE A.O. ARE BASED ON DOUBTS AND SUSPICION. CONSIDERING THE FINDING OF FACT RECORDED BY THE LD. CIT(A), WHICH I S NOT REBUTTED THROUGH ANY EVIDENCE OR MATERIAL ON RECORD, IT IS C LEAR THAT ASSESSEE WAS PROVIDING FULL RANGE OF I.T./B.P.O SER VICES TO MULTINATIONAL CONSULTING ORGANISATIONS AND EARNED O F THE PROFESSIONAL INCOME OF ASSESSEE AT RS.1.62 CRORES, THE ASSESSEE WOULD NOT HAVE EARNED SUCH INCOME WITHOUT ENGAGING PROFESSIONAL STAFF. THE LD. CIT(A), ON VERIFICATION OF THE RECORD, FOUND THAT THE AMOUNT IN QUESTION IS PAID TO TEMPOR ARY DATA ENTRY OPERATORS. IT WOULD SUPPORT THE EXPLANATION O F ASSESSEE THAT SMALL AMOUNT WAS PAID TO DIFFERENT DATA ENTRY OPERATORS AT DIFFERENT TIMES, WHICH WERE BELOW THE PRESCRIBED LI MIT FOR DEDUCTION OF TDS. SO, THERE IS NOTHING WRONG IN THE EXPLANATION OF ASSESSEE FOR NOT DEDUCTING TDS ON THE AMOUNTS IN QUESTION. FURTHER, NOTHING IS MENTIONED IN THE ASSESSMENT ORD ER, AS TO ON WHICH DATE, A.O. ASKED THE ASSESSEE TO PRODUCE THE SAID DATA 10 ITA.NO.5914/DEL./2014 SMT. SHRUTI NANDA, NEW DELHI. ENTRY OPERATORS WHEN TEMPORARY DATA ENTRY OPERATORS WERE ENGAGED TIME TO TIME. IT WAS NOT POSSIBLE TO ASSESS EE TO PRODUCE THEM BEFORE THE A.O. THAT TOO WITHOUT GIVING ANY SH OW CAUSE NOTICE IN THIS REGARD. IT IS, THEREFORE, CLEAR THAT FINDINGS OF THE A.O. ARE MERELY BASED ON DOUBTS, SURMISES AND CONJE CTURES WITHOUT BRINGING ANY CONCRETE MATERIAL AGAINST THE ASSESSEE. THE PROFESSIONAL CHARGES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF ASSESSEE . THEREFORE, THERE IS NOTHING WRONG IN THE ORDER OF THE LD. CIT( A) IN DELETING THE ADDITION. THE FINDING OF FACT RECORDED BY THE L D. CIT(A) HAVE NOT BEEN REBUTTED THROUGH ANY EVIDENCE ON RECORD. T HEREFORE, NO INTERFERENCE IS CALLED FOR IN THE MATTER. 7. IN THE RESULT, DEPARTMENTAL APPEAL STANDS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (LP SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 03 RD APRIL, 2018 VBP/- 11 ITA.NO.5914/DEL./2014 SMT. SHRUTI NANDA, NEW DELHI. COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT G BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.