ITO, Mohali V. Sh. Rajdeep Singh Randhawa L/H, Mohali

ITA 660/CHANDI/2011

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4944 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return; TDS
• Section: 133(6); 194C; 43

Judgement Text

I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH ‘B’, CHANDIGARH BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.660/Chandi/2011 Assessment Year:2006-07 Income Tax Officer, Ward-6(3), Mohali. Vs. Shri Rajdeep Singh Randhawa, L/h Shri Sukhjit Singh Randhawa #237, Sector-70, Mohali. PAN:AHMPR1738H (Appellant) (Respondent) O R D E R PER T. S. KAPOOR, A.M. This is an appeal filed by the Revenue against the order of learned CIT(A) dated 14/03/2011. In this appeal the Revenue has taken the following grounds: “1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief of Rs.1,54,782/- on account of consultancy charges by holding that consultancy services were not of such Appellant by Shri Akashdeep, JCIT, Sr.D.R. Respondent by Shri Parikshit Aggarwal, C.A. Date of hearing 20/09/2022 Date of pronouncement 21/09/2022 I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 2 nature which could involve such type of huge expenses debited in the profit & loss account. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief of Rs.5,95,000/- to the assessee on the addition made by the AO on account of petty receipts as the assessee has not cooperated during the course of assessment proceedings and has not produced complete books of account. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition of Rs.2,05,87,000/- by on account of contract from M/s Sahara India Commercial Corporation Ltd. By holding that no contract of Rs.2,05,87,000/- was executed between SICCL and assessee. 2. Learned D.R., at the outset, submitted that assessee had received an amount of Rs.2,05,87,000/- from Sahara India Commercial Corporation Ltd. for execution of some contractual work and for which the assessee had raised invoice also amounting to Rs.2,05,87,000/- and in this respect our attention was invited to page 24 of the paper book where a copy of such invoice was placed. It was submitted that Sahara India Commercial Corporation Ltd. had duly deducted tax at source and had issued Form 16A which proves that assessee had executed the work and received the consideration and which he had not included in the cimputation of income and therefore, the Assessing Officer had rightly made the addition and learned CIT(A), without considering these evidences, has deleted the additions. It was submitted that before learned CIT(A) the assessee claimed that these payments were received against purchase of land by Sahara India Commercial Corporation Ltd. from Mansa Land Developers. It was argued that these payments made by the assessee can not be said to be for purchase of land as the Sahara India Commercial Corporation Ltd. has confirmed that the assessee had executed some work and the payment I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 3 was received as a consideration for execution of work. The learned D.R. in this respect invited our attention to copy of written submissions already filed by Department and which was requested to be considered while adjudicating the issue, which we have made part of the order and is reproduced as under:\ In this regard, it is submitted that in the ground of the appeal, addition of Rs.2,05,87,500/- made by the Assessing Officer and deleted by the Ld. CIT(A), Chandigarh has been taken up. The facts of this addition of Rs.2,05,87,500/- made by the Assessing Officer is that there was non-compliance on the part of the assessee in submitting the information and production of books of account. Therefore, the Assessing Officer called for information u/s 133(6) of the Income Tax Act, 1961 from M/s Sahara India Commercial Corporation Ltd., (SICCL) Lucknow which was submitted by the SICCL vide letter dated 29.11.2008 which is placed on the record as Annexure —'A (pages 1 to 5) in which it was stated by SICCL that an agreement and work order was executed between the company SICCL and Sh. Sukhjit Singh Randhawa, Prop. M/s Sukhjit Singh Randhawa & Co., the assessee, on 22.09.2005 for the work of leveling of soil, including filing of gorges/nallah, removing of shrub, grass and rubbish etc. at Sahara City Homes Project, Chandigarh for total area of 13.5 acres of land for the contract amount of Rs.2,05,87,500/-. The SICCL also supplied to the Assessing Officer a copy of TDS certificate issued to M/s Sukhjit Singh Randhawa & Co. As per this TDS certificate, nature of payment to the assessee was stated as "Contractual payment" on which TDS of Rs.4,61,984/- was made and was deposited into Govt. Account on 07.10.2005. The remaining amount of Rs.2,01,25,516/- was paid to the assessee vide cheque No. 001255 dated 01.09.2005 and this amount was deposited by the assessee in his bank account No. 0850100069234 with Axis Bank, Mohah (Then The UTI Bank). As per terms and conditions of the contract, the work for contract had to be completed within two months from the date of receipt of order. Therefore, the contract work must have been completed within the previous year relevant to A.Y. 2006-07. Further, the SICCL clearly mentioned that the bills were raised by the assessee during the F.Y. 2005-06 itself. Accordingly, this contractual receipt of Rs.2,05,87,500/- should have been reflected by the assessee in his income tax return for the A.Y. 2006-07. But no such receipts were shown in the P/L account. I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 4 Neither the TDS amount was claimed in the return. Hence, the Assessing Officer vide letter dated 24.12.2008, confronted the above mentioned anomalies to the assessee for his explanation as to why this amount of Rs.2,05,87,500/- may not be treated as his unaccounted income not reflected in his income tax return for the relevant period. Interestingly, in the meantime, on 24.12.2008 and on 26.12.2008 the assessee for the first time produced books of accounts before the A.O which were incomplete. Therefore, complete books of accounts were requisitioned on 29.12.2008 but assessee failed to make compliance of the same. The assessee, for the first time, furnished reply to the queries of the A.O on the issues of non- reflection of contractual receipts. In this reply dated 29.12.2008, the assessee denied of having executed any agreement with SICCL. He even alleged that signature of his son Sh. Rajdeep Singh in the documents of agreement were forged by SICCL with ulterior motive in order to regularize the transactions of Rs.2,05,87,500/-. The assessee further stated that this amount of Rs.2,01,25,516/- was received for purchase of land from M/s Mansa Land Developers for SICCL and not for contractual receipts. Assessee was silent on the issue of filing legal suit against the SICCL for forging signatures of his son. The Ld. Assessing Officer did not accept the explanation given by the assessee. It was held by the A.O. that the assessee did not produce any documentary evidence to prove his justification that the said payments were received by him from SICCL for purchase of land from M/s Mansa Land Developers. The documents provided by SICCL clearly stated the nature of payments made to the assessee and accordingly even deducted TDS @ 2.2% u/s 194C on the advance contract amount. Genuineness of this transaction of contract payment gets further vindicated by the action of the assessee when he filed a revised return for A.Y. 2006" 07 on 29.12.2008 claiming refund arising on account of credit for TDS of Rs.4,61,984/- deducted by the SICCL from contractual payment of Rs.2,05,87,500/-. However, revised return could not be accepted since it was beyond time and hence illegal. This did show that assessee accepted the finding of the A.O. that it was contractual payment and not advance received from SICCL for purchase of land. The SICCL has also forwarded to the A.O. a copy of bills raised by the assessee reflecting the amount of Rs.2,05,87,500/- pertaining to contract work carried out by him as per the agreement executed earlier. This bill was prepared on a letter head of M/s Randhwa Colonizers and Developers Pvt. Ltd. This company was formed by the I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 5 assessee and his sons. The document was confronted to the assessee which he did not accept and rather pleaded that signatures on the paper were forged by the SICCL. Assessee further stated that letter head on which Contract bills were raised belonged to M/s Randhawa Colonizers and Developers Pvt. Ltd. which was not in existence on the date of issue of the bill on 22.09.2005. It was claimed that company was incorporated on November, 2005. This contention of the assessee did not have any force in it. The idea of floating a company named as Randhawa Colonizers and Developer Pvt. Ltd., must have been conceived much earlier than the date of incorporation. Application to the ROC must have been for forwarded much earlier. Therefore, explanation put forth by the assessee was not acknowledged by the Ld. Assessing Officer. As far as purchase of land by SICCL is concerned, the said company had signed an MOU with the assessee vide which the assessee was authorized to make arrangements for selection of land, to contact the owners of the land, to make preparations for registration and mutation etc. etc. It was clearly mentioned in the MOU that all expenses pertaining to sale consideration of land, registration and stamp charges, mutation related expenses shall be borne by the SICCL and not by the assessee and payments will be made to the sellers directly by the SICCL. On the basis of this MOU, the assessee was authorized to enjoy commission income of Rs.30 lacs approx. at the rate of Rs.50,000/- per acre of land as service/professional charges. The SICCL had purchased many pieces of land from M/s Mansa Land Developers. It is never established by the assessee that the payments shown to have been made to M/s Mansa Land Developers were made by him on behalf of the SICCL. Had the assessee produced all the books of accounts and relevant papers and documents before the A.O on time, these facts could have been verified much earlier and, if required, further follow up investigation could have been initiated at the hands of the SICCL. But for the reason best known to the assessee, same could not happen. The assessee also failed to prove that there was no other independent transaction of the assessee himself with M/s Mansa Land Developers. In view of the above facts and compelling circumstances, A.O. had to complete assessment proceedings which were getting barred by time limitation on 31.12.2008. An addition of Rs.2,05,87,500/- was made to the income of the assessee. No credit of expenses incidental to the contract work was given since the same had already been claimed in the profit and loss account. In profit and loss account there I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 6 were heads of expenses which did pertain to contract work of the nature which the assessee was assigned to by the SICCL. During the course of appellate proceedings before the Ld. CIT(A), a remand report was called for from the A.O. on this issue. In consequence of the said remand report, the A.O. deputed his inspector to verity the facts whether the assessee carried out any such land development work on the plots mentioned in the agreement of contract work with the SICCL. In his report, the inspector stated that "no development work in the area seems to have been made." This shows that the inspector was not sure as to whether development work took place or not. Therefore, on the basis of this report of the inspector, it was not justified to negate the documentary evidence provided by the SICCL and to delete the whole addition of Rs.2,05,87,500/-. The issue involved and discussed with the Ld.CIT(A), has been discussed in the remand report in detail which is placed at Annexure-'G' from page 44 to 102 of the document. Sd/. (Sraoj Bala) Income Tax Officer Ward 6(3), Mohali. 2.1 In view of these facts and circumstances it was argued that the order of learned CIT(A) in this respect be reversed and that of the AO be upheld. 2.2 As regards the other deletions made by learned CIT(A), learned D.R. relied on the order of the AO. 3. Learned counsel for the assessee, at the outset, submitted that the assessee is an individual and during the year under consideration, the assessee was carrying on contractorship business and also commission business for sale and purchase of property. It was submitted that during the year, the assessee had acted as land aggregator for and on behalf of Sahara’s new project near Chandigarh and for this activity he received commission of Rs.30.85 lacs which was equivalent to Rs.50,000/- per acre. Learned counsel for the assessee submitted that the assessee duly offered I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 7 this income in his profit & loss account and paid the taxes. It was submitted that the assessee had duly entered into an MOU with Sahara for acting as land aggregator and had aggregated more than 60 acres of land and our attention was invited to pages 8 to 14 of the paper book where a copy of MOU was placed. Learned counsel for the assessee submitted that more than 90% of the land, which the assessee had aggregated on behalf of Sahara, was purchased from Mansa Land Developers and there was some difference, which arose in the measurement of land and therefore, Sahara remitted an amount of Rs.2,01,25,516/- to the bank account of the assessee for making onward payment to Mansa Land Developers after due satisfaction about measurement of the land. Learned counsel for the assessee in this respect invited our attention to paper book page 45 where a copy of bank account of the assessee, evidencing the receipt of Rs.2,01,25,516/-, was placed. Learned counsel for the assessee submitted that ultimately the difference worked out to be only Rs.1,75,48,000/-, the payment of which was made to Mansa Land Developers and in this respect our attention was again invited to paper book page 45 where in the bank statement of assessee Rs.35 lacs was seen withdrawn in the form of cash and further Rs.1,40,00,000/- was debited for the Demand Drafts payable to Mansa Land Developers. Learned counsel for the assessee also took us to page 43 and 44 of the paper book where copy of drafts amounting to Rs.1.40 crore in the form of three demand drafts of Rs. One crore and Rs.20 lacs each was placed. Our attention was further invited to page 42 of the paper book where a copy of receipt of Rs.1,75,48,000/- issued by Mansa Land Developers certifying the receipt of money from assessee on behalf of Sahara India Commercial Corporation Ltd., was placed. Learned counsel for the assessee also invited our attention to page 47 of the paper book where a copy of affidavit, duly notarized and signed by the assessee, was placed and wherein the assessee had confirmed to have made these payments to I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 8 Mansa Land Developers on behalf of Sahara India Commercial Corporation Ltd. Learned counsel for the assessee further submitted that after making the payments of the above, an amount of Rs.25,76,764/- was left with the assessee and which he remitted back to Sahara India Commercial Corporation Ltd. and in this respect our attention was invited to page 39 of the paper book where a copy of draft issued in favour of Sahara India Commercial Corporation Ltd. for an amount of Rs.25,76,764/- was placed and further our attention was invited to page 40 of the paper book where a certificate issued by AXIS Bank was placed and wherein the bank has certified that such draft was made out of the current account of the assessee and the same was paid to Sahara India Commercial Corporation Ltd. on 10 th October, 2005. It was submitted that all these evidences prove that the assessee had not carried out any contractual work and instead had received the amount from Sahara India Commercial Corporation Ltd. for onward payment to one of the sellers of the land. Therefore, the contention raised by learned D.R. that such amount was received by the assessee as contractual payment and which he had not disclosed in his computation of income is not correct. It was submitted that learned CIT(A), before allowing relief to the assessee, has obtained 2-3 remand reports from the Assessing Officer and in the last remand report the Assessing Officer almost accepted the contentions of the assessee. It was further submitted that the Assessing Officer during remand proceedings had deputed an Inspector to the site also and on the basis of the report of the Inspector had held that no activity of land development had taken place on that land. Learned counsel for the assessee also submitted that the Assessing Officer had also issued notice u/s 133(6) to Mansa Land Developers and in response to the notice Mansa Land Developers had accepted to have received the payment from the assessee on behalf of Sahara India Commercial Corporation Ltd. and in this respect our attention was invited to page 77 of the paper book where a I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 9 copy of such confirmation was placed. As regards the copy of invoice on the letter head used by Sahara India Commercial Corporation Ltd., it was submitted that letter head related to another company of the assessee Randhawa Colonisers and Builders Pvt. Ltd. which came into existence on 22/11/2005 and in this respect our attention was invited to page 38 of the paper book where on the certificate of incorporation of such company, the date of incorporation was mentioned to be 22/11/2005. It was submitted that Sahara India Commercial Corporation Ltd. had already fabricated a document in the name of works contract on dated 22/09/2005 which is in the name of assessee. Therefore, it was submitted that the assessee had not at all raised any bill and the copy of invoice filed by Sahara India Commercial Corporation Ltd. is a fabricated one and do not belong to the assessee. Learned counsel for the assessee submitted that learned CIT(A) had carried out detailed investigation and after carrying out the detailed investigation has rightly deleted the addition and therefore, it was prayed that the order of learned CIT(A) be upheld. 3.1 Regarding other deletion made by learned CIT(A), learned counsel for the assessee submitted that the Assessing Officer had added back the total amount of gross receipts as income of the assessee for which learned CIT(A) has disagreed and has upheld the addition only to the extent of 15% after considering the expenses. Therefore, it was argued that there is no infirmity in the order of learned CIT(A). As regards another addition, the learned counsel for the assessee submitted that Assessing Officer had estimated the consultancy income @20% and which the learned CIT(A) had reduced to 15%. 4. We have heard the rival parties and have gone through the materials available on record. We find that the larger issue involved in these appeals is taken by the Revenue vide ground No. 4 which we will adjudicate first. I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 10 We find that is is undisputed fact that the assessee had received payment of Rs.2,01,25,516/- in his bank account with UTI Bank Limited which was credited to his bank account and copy of relevant bank statement is placed at page No. 29 of the paper book. From the said bank account, it is also evident that the assessee withdrew Rs.35 lacs on 10 th September, 2005 in cash and made Demand Draft of Rs.1,40,00,000/- after debiting to this bank account. The copy of drafts dated 10/09/2005 amounting to Rs. One crore and Rs.20 lacs each in favour of Mansa Land Developers is placed at pages 43 and 44 of the paper book. Mansa Land Developers has acknowledged the receipt of these drafts along with cash of Rs.35,48,000/-, the copy of receipt is placed at page 42 of the paper book. We further find that the said draft of Rs.1,40,00,000/- were got encashed by Sahara India Commercial Corporation Ltd. on 10 th October, 2005, a certificate to this effect issued by AXIS Bank is placed at page 40 of the paper book. The above financial evidences clearly demonstrate that the assessee had made payment to Mansa Land Developers through draft and through cash on behalf of Sahara India Commercial Corporation Ltd. The arguments of learned D.R. that assessee must have received such payment for contractual works done by him do not borne out from the facts and circumstances and evidences on record. The only evidence against the assessee is the confirmation by Sahara India Commercial Corporation Ltd. that such payment was made to the assessee on account of works contract. However, the detailed investigation done by the Assessing Officer during remand proceedings, demonstrates the following facts: (i) There is no sign of any development as mentioned in the invoice which is evidenced from the report of the Inspector who had physically visited the site and has submitted that there was no such development on the land. I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 11 (ii) The fact that no development had taken place on this land is strengthened from the fact that threer Panches of same village had confirmed that there was no development work executed on the relevant land. The copy of report of Inspector is placed at pages 65 to 70 of the paper book where the Inspector had reported that land appears to be in its original place and no development had taken place at any time. The Inspector had issued such report on the basis of the report of the Patwari and which he enclosed and is part of paper book pages 66 to 70. (iii) The Mansa Land Developers in reply to notice u/s 133(6), a copy of which is place at page 77 of the paper book, issued by the Assessing Officer has accepted to have received the payment of Rs.1,75,48,000/- from assessee on behalf of Sahara India Commercial Corporation Ltd. (iv) The argument of learned D.R. that assessee had issued invoices for the work done by him is also not correct as the copy of invoice, placed at page 24 of the paper book, is issued by a private limited company whereas the assessee is a proprietor and we further find from the copy of incorporation certificate of such company, placed at page 38 of the paper book, that such company came into existence on 22/11/2015 whereas the date of invoice is before 22/11/2005 which means that the invoice purported to have been given by Sahara India Commercial Corporation Ltd. is a fabricated document. I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 12 4.1 We also observe that assessee had returned back an amount of Rs.25,76,764/- to Sahara India Commercial Corporation Ltd. A copy of draft dated 15/09/2005 issued in favour of Sahara India Commercial Corporation Ltd. is placed in paper book page 39. On paper book page 40, there is placed a copy of certificate issued by AXIS Bank wherein it has certified that such draft was made out of current account of the assessee and was credited into the bank account of Sahara India Commercial Corporation Ltd. on 10/10/2005. We find that in earlier communication by Sahara India Commercial Corporation Ltd., the said firm had denied of having received back the amount of Rs.25,76,764/- and which it later on accepted that it had received such payment. All these facts and circumstances prove that contentions of the assessee are correct and learned CIT(A) has passed a very detailed and exhaustive order after relying on various remand reports issued by the Assessing Officer. The learned CIT(A), in his order, has reproduced the last remand report dated 03/03/2011, the contents of which has been made part of this order and for the sake of completeness is reproduced herein below: I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 13 I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 14 I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 15 I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 16 I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 17 In these remand reports issued by the Assessing Officer, the Assessing Officer has almost accepted the contentions of the assessee. The ld CIT(A), after going through the remand reports and complete facts of the cases, has passed an exhaustive order which for the sake of completeness is reproduced below: I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 18 I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 19 I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 20 I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 21 4.2 In view of the detailed order passed by learned CIT(A), narrating the complete facts, we do not find any infirmity in the same therefore, the same is upheld and therefore, ground No. 4 raised by Revenue is dismissed. I.T.A. No.660/CHANDI/2011 Assessment Year:2006-07 22 5. Now coming to ground No. 2, we find that the Assessing Officer had estimated the consultancy service income of the assessee at 20% of receipts. The learned CIT(A) has however, restricted it to 15% and has allowed relief of Rs.1,54,782/- only. We find that such restriction by learned CIT(A) from 20% to 15% is quite reasonable and we do not find any infirmity in the action of learned CIT(A) and therefore, ground No. 2 is dismissed. 6. Now coming to ground No. 3, we find that the Assessing Officer had made an addition of Rs.7,00,000/- on account of commission received by the assessee from other sources and has not allowed any expenses out of it whereas the learned CIT(A) has applied a net profit of 15% to arrive at the net income of Rs.1,05,000/- and thus has allowed relief to the extent of 5,95,000/- in the form of estimated expenditure to earn this income. We do not find any infirmity in the order of learned CIT(A) on this issue as the order of learned CIT(A) is quite reasonable and no effective argument was advanced by learned D.R. and therefore, ground No. 3 is also rejected. 7. In the result, the appeal of the Revenue is dismissed. (Order pronounced in the open court on 21/09/2022) Sd/- Sd/- (SUDHANSHU SRIVASTAVA) ( T. S. KAPOOR ) Judicial Member Accountant Member Dated:...21/09/2022 *Singh Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Chandigarh