M/S. Khurmi Associates (p) Ltd., New Delhi V. ACIT, New Delhi

ITA 6221/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4084 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 21-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA WARNWAL
• Keywords: Additional evidence
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH D NEW DELHI BEFORE : S MT. DIVA SINGH , JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 6221/DEL./2013 ASSTT. YEAR : 2009 - 10 KHURMI ASSOCIATES (P) LTD., VS. A.C.I.T., CENTRAL CIRCLE 21, 16, JANGPURA EXTN. MARKET, NEW DELHI. NEW DELHI. (PAN: AAACK 4820D) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SALIL KAPOOR, ADVOCATE RESPONDENT BY : MS. ANIMA WARNWAL, SR. D.R. DATE OF HEARING : 28.07.2016 DATE OF PRONOUNCEMENT : 11 .08.2016 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) - IV, NEW DELHI DATED 23.09.2013 FOR THE ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING GROUNDS : 1. THAT THE LD. CIT(APPEAL) HAVE LEGALLY ERRED BY NOT ACCEPTING ADDITIONAL EVIDENCE UNDER RULES 46A WITHOUT GIVING ANY COGENT REASON AND WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT HAVE AGAIN ERRED LEGALLY BY CONFIRMING THE ADDITION OF RS.1,14,08,539/ - RECEIVED AS ADVANCE FROM CLIENTS AS THE INCOME OF THE APPELLANT, WITHOUT APPRECIATING THE FACTS OF THE CASE. ITA NO. 6221/DEL./2013 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.10.2009 DECLARING TAXABLE INCOME AT RS.59,69,070/ - . THE RETURN WAS PROCESSED U/S. 143(1) AND SELECTED FOR SCRUTINY. STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE WAS AN ARCHITECT AND RECEIVING PROFESSIONAL FEES FOR THE SERVICES RENDERED AND MAINTAINING BOOKS OF ACCOUNTS ON MERCANTILE SYSTEM OF ACCOUNTING . THE BOOKS OF ACCOUNT WERE AUDITED BY THE CHARTERED ACCOUNTANT. DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE AO NOTED THAT TOTAL TURNOVER OF PROFESSIONAL FEES CON SIDERED IN THE PROFIT AND LOSS ACCOUNT IN THE YEAR WAS RS.1,75,69,981/ - . THE ASSESSING OFFICER ALSO NOTED THAT THERE WAS RECEIPT OF RS.1,14,08,539/ - BY THE ASSESSEE BUT IT IS NOT REFLECTED IN THE PROFIT AND LOSS ACCOUNT. HE NOTED THAT THE TDS HAS BEEN DEDU CTED ON PAYMENTS OF RS. 1,14,08,539 / - AND THIS TDS HAS BEEN CLAIMED BY THE ASSESSEE DURING THE YEAR. IN THIS REGARD, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE RECEIPTS OF RS.1,14,08,539/ - ON WHICH TDS HAS BEEN CLAIMED, HAS NOT BEEN C REDITED IN THE PROFIT AND LOSS ACCOUNT OF THE YEAR. IN REPLY, THE ASSESSEE SUBMITTED THAT TWO COMPANIES NAMES TIRUPATI BUILDINGS AND OFFICES PVT. LTD. A ND ANUSH FINLEASE & CONSTRUCTION HAD GIVEN ADVANCE PAYMENT OF RS.80,12,050/ - AND RS.17,45,392/ - RESPECTI VELY ON WHICH TDS HAD BEEN DEDUCTED. HE ALSO SUBMITTED THAT THE WORK RELATED TO MORE THAN ONE YEAR AND THERE WAS UNCERTAINTY IN THE PERIOD OF COMPLETION. THE ASSESSEE ITA NO. 6221/DEL./2013 3 SUBMITTED BEFORE THE AO THAT THE LUMP SUM PAYMENT, WHICH INCLUDED ADVANCE TO BE ADJUSTED O VER THE EXECUTION OF THE PROJECT AND TDS WAS DEDUCTED ON THE ENTIRE SUM. THE AO FOUND THAT NO COPY OF THE AGREEMENT WITH THE PARTIES WAS FILED AND THE ASSESSEE HAS MAINTAINED THE ACCOUNTS IN MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSEE HAD RECEIVED THE P AYMENT AS PER TERMS AND CONDITIONS OF THE AGREEMENT. THEREFORE, THE AMOUNT RECEIVED IS THE INCOME OF THE YEAR DURING WHICH THE PROFESSIONAL FEE IS RECEIVED. THE ASSESSEE FILED CERTIFICATES FROM THE PARTIES IN WHICH THE TERMS AND CONDITIONS OF PAYMENTS ARE NOT CLEAR. THE AO ALSO NOTED THAT WHOLE OF THE AMOUNT OF TDS IN ONE YEAR HAS BEEN CLAIMED THEN WHY THE WHOLE RECEIPTS SHOULD NOT BE TAXED AND ADDED IN THE INCOME OF THE ASSESSEE. HE ACCORDINGLY COMPLETED THE ASSESSMENT BY ENHANCING THE INCOME BY RS.1,14,08 ,539/ - . AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY. THE ASSESSEE FILED SOME NEW EVIDENCES BEFORE THE FIRST APPELLATE AUTHORITY ON 26.02.2013 U/R. 46A AS FOLLOWS : 1) . M/S ANUSH FINLEASE AND C ONSTRUCTION PVT LTD. - DEVELOPING HOTEL AT PLOT NO - 11, CBD(EAST), SHAHADRA(AFCPL) 2) M/S TIRUPATI BUILDING AND OFFICES PVT. LTD. - DEVELOPING HOTEL AT PLOT NO . 3. SEC - 10, DWARKA.(TBOPL) 1. T HE HOTEL WAS PURCHASED BY AFCPL IN DECEMBER 2006, AN APPOINTMENT LE TTER WAS ISSUED TO US AND WE STARTED THE DESIGN WORK, THE STRUCTURE IS READY TILL DATE BUT SINCE THEY WANTED TO AVAIL ADDITIONAL FAR, AS ALLOWED BY MINISTRY OF URBAN DEVELOPMENT, THEY HAVE ASKED US TO ITA NO. 6221/DEL./2013 4 SUBMIT REVISED PLANS TO D.D.A, THE PROJECT HAS BEEN DEL AYED AND WILL NOW B E COMPLETE BY DECEMBER, 2013. (ENCLOSURES: APPOINTMENT LETTER GIVEN TO ARCHITECTS P - 01/02, LETTER FOR SUBMISSION TO DDA OF REVISED SANCTION PLANS WHICH SHOWS THAT THE WORK IS IN PROGRESS. P - 03/04, YEAR WISE STATEMENT OF AFCPL CONFIRMING ACCOUNT OF KHURMI ASSOCIATES PVT. LTD. - SHOWING PAYMENT HAS BEEN MADE TIL L AUG - 2012, THE SAME STARTS FROM MARCH 2008 - P - 05 TO 09) 2 THE HOTEL WAS PURCHASED BY TBOPL IR, AUGUST, 2007, AN APPOINTMENT LETTER WAS ISSUED AND WE STARTED THE DESIGN WORK, THE B UILDING GOT COMPLETE AND THE COMPLETION CERTIFICATE WAS ISSUED BY THE DDA IN THE MONTH OF JUNE 2012. (ENCLOSURES: APPOINTMENT LETTER GIVEN TO ARCHITECTS, P - 10 DDA COMPLETION CERTIFICATE ISSUED TO THE HOTEL IN JUNE 2012, P - 11/12, YEAR WISE STATEMENT OF TBO PL CONFIRMING PAYMENT HAS BEEN MADE TO KHURMI ASSOCIATES PVT LTD - SHOWING PAYMENT HAS BEEN MADE IN APRIL 2010 - P - 13 - 15) . 3. HE ALSO MENTIONED THE NAME OF ANOTHER PARTY, CHITRAKOOT DHAM CGHS LTD., FROM WHICH RS.16,50,000/ - IS CLAIMED TO HAVE BEEN RECEIVED WHICH IS REFLECTED IN THE BALANCE SHEET UNDER THE CURRENT LIABILITIES. THE ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT THESE DOCUMENTS WERE NOT FILED BEFORE THE AO FOR NOT GETTING PROPER OPPORTUNITY. THE ADDITIONAL EVIDENCES WERE SENT FOR COMMENTS TO THE AO , WHO OBJECTED THAT AMPLE OPPORTUNITIES WERE PROVIDED TO THE ASSESSEE, BUT HE DID NOT BOTHER TO PRODUCE THESE DOCUMENTS AND THEREFORE, THE CONDITIONS SPECIFIED IN RULE 46A ARE NOT SATISFIED. THE REMAND REPORT HAS BEEN INCORPORATED IN CIT(A) S ORDER IN P ARA NO. 6.3. THE OBJECTION S OF THE ASSESSING OFFICER WERE FORWARDED TO THE ASSESSEE AND IN THIS ITA NO. 6221/DEL./2013 5 REGARD, THE REJOINDER AGAINST REMAND REPORT OF THE ASSESSEE HA S BEEN INCORPORATED IN PARA NO. 6.4 OF THE FIRST APPE LLATE ORDER. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE APPELLANT, REMAND REPORT, ITS REJOINDER BY ASSESSEE , DID NOT ACCEPT THE ADDITIONAL EVIDENCE AND UPHELD THE ORDER OF THE ASSESSING OFFICER STATING THAT THE AO IS JUSTIFIED TO MAKE AN ADDITION OF RS.1,14,08,539/ - DURING THE YEAR UNDER CONSIDERATION AND REJECTED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD. AR OF THE ASSESSEE SUBMITTED THAT ASSESSEE IS ENGAGED IN THE ARCHITECTURE PROFESSION AND BOOKS OF ACCOUNTS WERE MAINTAINED ON THE MERCANTILE SYSTEM OF ACCOUNTING. AS PER APPOINTMENT LETTER ISSUED BY ANUSH FINLEASE & CONSTRUCTION PVT. LTD. AND TIRUPATI BUILDING AND OFFICES PVT. LTD., THE ASSESSEE WAS AWARDED A LONG DRAWN PROJECT OF CONSULTANCY FOR DEVEL OPING OF HOTEL PROJECT S . T HE HOTEL WAS PURCHASED BY AFCPL IN DECEMBER 2006, AN APPOINTMENT LETTER WAS ISSUED TO THE ASSESSEE AND DESIGN WORK WAS STARTED, THE STRUCTURE IS READY TILL DATE BUT SINCE THEY WANTED TO AVAIL ADDITIONAL FAR, AS ALLOWED BY MINISTRY OF URBAN DEVELOPMENT, THEY HAVE ASKED THE ASSESSEE TO SUBMIT REVISED PLANS TO D.D.A, THE PROJECT HAS BEEN DELAYED AND WILL NOW B E COMPLETE BY DECEMBER, 2013. IN RESPECT OF TIRUPATI BUILDINGS AND OFFICES PVT. ITA NO. 6221/DEL./2013 6 LTD., THE HOTEL WAS PURCHASED BY TBOPL I N , AUGUST, 2007, AN APPOINTMENT LETTER WAS ISSUED AND THE ASSESSEE STARTED THE DESIGN WORK, THE BUILDING GOT COMPLETE D AND THE COMPLETION CERTIFICATE WAS ISSUED BY THE DDA IN TH E MONTH OF JUNE 2012. THE PROJECT WAS RUN MORE THAN A YEAR, THEREFORE, ENTIRE FEES RECEIVED UPTO THE COMPLETION OF THE PROJECT CANNOT BE TAKEN IN THE YEAR OF RECEIPT. MERE DEDUCTION OF TDS ON PAYMENT RECEIVED AS ADVANCE FEE CANNOT BE CONSIDERED AS INCOME F OR THE YEAR OF RECEIPT UNTIL AND UNLESS THE ASSIGNED WORK IS COMPLETED. THE DEDUCTION OF TDS IS MANDATORY UNDER THE PROVISIONS OF SECTION 194C ON THE ADVANCE PAYMENT. THEREFORE, THE TDS WAS DEDUCTED BY THE PAYER. IN THE INCOME - TAX RETURN FILED BY THE ASSES SEE FOR THAT YEAR, THERE WAS NO PROVISION FOR DEFERMENT OF TDS DEDUCTED ON ADVANCE PAYMENT RECEIVED. IN THE APPOINTMENT LETTER, THE TERMS AND CONDITION OF FIXATION OF FEES WERE NOT CLEAR AND A L UMP SUM AMOUNT WAS RECEIVED FROM THE PARTIES. INCOME SHALL ACC RUE AS PER PROGRESS IN THE WORK. THEREFORE, ENTIRE ADVANCE PAYMENT SHOULD NOT BE TAXED IN THE YEAR OF RECEIPT. HE SUBMITTED THAT ABOVE ADDITIONAL EVIDENCES PRODUCED BEFORE THE LD. CIT(A), SHOULD THEREFORE, BE ADMITTED AND THE ASSESSEE PRAYED TO RESTORE THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION OF THE MATTER IN VIEW OF SUCH ADDITIONAL EVIDENCES. 5. THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. ITA NO. 6221/DEL./2013 7 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE APPELLANT HAD RECEIVED ADVANCE PAYMENTS TOWARDS ITS PROFESSIONAL FEES. THE TDS HAS BEEN DEDUCTED AS PER PROVISIONS OF SECTION 194C OF THE IT ACT. THE APPELLANT HAS MAINTAINED THE ACCOUNTS IN MERCANTILE SYSTEM OF ACCOUNTING. IN THIS SYSTEM OF ACCO UNTING, ONLY THE INCOME WHICH ACCRUE S IS CONSIDERED AS PER ACCOUNTING STANDARD (AS - 9) ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA FOR REVENUE RECOGNITION. MERELY DEDUCTION OF TDS ON PAYMENTS IS NOT AN INCOME FOR THE YEAR. THEREFORE, IT IS NECESSA RY TO EXAMINE THE ISSUE IN THE LIGHT OF SERVICES RENDERED, BILLS ISSUED BY THE SERVICE PROVIDER, ACCEPTANCE OF THE BILLS, NEGOTIATION OF BILLS BETWEEN THE PARTIES, IF ANY, TERMS AND CONDITIONS OF THE PAYMENTS ETC. IT ALSO NEEDS TO BE ENQUIRED/EXAMINED AS TO IN WHICH YEAR THESE PAYMENTS RECEIVED BY ASSESSEE AS ADVANCE, HAVE BEEN TAKEN INTO ACCOUNT AS REVENUE RECOGNITION. PROPER VERIFICATION COULD ALSO BE MADE FROM THE PAYER S/CONTRACTEE S LEDGER ACCOUNTS AS TO HOW THEY HAVE ACCOUNTED FOR THESE PAYMENTS. THE APPELLANT HAS CLAIMED TDS ONLY DURING THE YEAR. HE SUBMITTED ADDITIONAL EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY AS STATED ABOVE. THE LD. AUTHORITIES BELOW HAVE NOT DECIDED THE ISSUE AFTER CONSIDERING/EXAMINING THE ABOVE ASPECTS OF THE CASE. THE Y HAV E ALSO FAILED TO ADJUDICATE THE ISSUE IN THE LIGHT OF ADDITIONAL ITA NO. 6221/DEL./2013 8 EVIDENCES SUBMITTED AND SYSTEM OF MAINTAINING THE ACCOUNTS FOLLOWED BY THE APPELLANT. WE, THEREFORE, DEEM IT FIT TO RESTORE THE MATTER TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH AFTER MAKIN G PROPER EXAMINATION AS SUGGESTED ABOVE. THE AO MAY ALSO VERIFY THE ACTUAL PAYMENTS RECEIVED BY ASSESSEE, FROM THE SERVICE TAX RECORDS, IF THE ASSESSEE IS REGISTERED WITH THE SERVICE TAX DEPARTMENT . NEEDLESS TO SAY, THE ASSESSEE SHALL BE GIVEN REASONABLE O PPORTUNITY OF BEING HEARD. THE ASSESSEE IS ALSO DIRECTED TO COOPERATE WITH THE ASSESSING OFFICER IN THE MATTER. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11.08.2016 . SD/ - SD/ - ( DIVA SINGH ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11.08.2016 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI