M/s Batra & Associates, Chandigarh V. ITO, Chandigarh

ITA 681/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68369 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 04-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Principle of natural justice
• Section: 145; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.681/CHD/2013 (ASSESSMENT YEAR : 2006-07) M/S BATRA & ASSOCIATES, VS THE INCOME TAX OFFICER, SCO 39, SECTOR 21-C, WARD 2(3), CHANDIGARH. CHANDIGARH. PAN: AAFFB-6857K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI J.S.NAGAR DATE OF HEARING : 10.07.2013 DATE OF PRONOUNCEMENT : 02.08.2013 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH DA TED 15.04.2013 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORD ER PASSED UNDER SECTION 154 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1.THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW IN DECIDING THE APPEAL EX- PARTE WITHOUT AFFORDING PRO PER OPPORTUNITY OF HEARING WHICH IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND AS SUCH THE ORDER PASSED IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN HOLDING THAT THE PROC EEDINGS INITIATED U/S 154 WERE VALID WHEN IN FACT THERE WAS NO MISTAKE APPARENT FR OM RECORD WARRANTING ACTION 2 U/S 154 AND AS SUCH THE ADDITION OF RS. 1,58,858/- UPHELD IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 3. THAT WHETHER A PARTICULAR RECEIPT IS TO BE DECLARED ON CASH BASIS OR MERCANTILE BASIS IS A DEBATABLE ISSUE AND AS SUCH V ERY INITIATION OF PROCEEDINGS U/S 154 OF THE ACT IS ILLEGAL, ARBITRAR Y AND UNJUSTIFIED. 4. THAT THE LD. COMMISSIONER OF INCOME TAX(AP PEALS) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS. 1,58,858/- WHEN IN FA CT THE THIS RECEIPT WAS DULY ACCOUNTED WHEN ACTUALLY RECEIVED AND AS SUCH THE AD DITION MADE IS ARBITRARY AND UNJUSTIFIED. 5. THAT THE ORDER OF THE LD. COMMISSIONER OF I NCOME TAX (APPEALS) IS ERRONEOUS, ARBITRARY, OPPOSED TO LAW AND FACTS OF T HE CASE AND IS, THUS, UNTENABLE. 3. GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST TH E DISMISSAL OF APPEAL EX-PARTE BY THE CIT(APPEALS). THE LD. AR FO R THE ASSESSEE, HOWEVER SERIOUSLY DID NOT PRESS THE SAID GROUND OF APPEAL AND THE SAME IS DISMISSED. 4. THE GROUND NOS. 2 TO 4 RELATE TO THE ADDITION OF RS.1,58,858/- MADE VIDE ORDER PASSED UNDER SECTION 154 OF THE ACT . 5. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE WAS A PROFESSIONAL FIRM ENGAGED IN THE PROFESSION OF ARCH ITECTURE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FILE D THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 2,74,866/-. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DI SALLOWED 20% OUT OF CAR EXPENSES ON ACCOUNT OF PROFESSIONAL USE AND COMPUTED INCOME AT RS.3,20,000/- VIDE ORDER PASSED UNDER SECTION 1 43(3) OF THE ACT DATED 15.12.2008. THEREAFTER, THE ASSESSING OFFICE R ISSUED NOTICE UNDER SECTION 154 OF THE ACT AND SHOW CAUSED THE AS SESSEE TO EXPLAIN WHY THE PROFESSIONAL CHARGES OF RS. 168,300/- - RS. 9442/- I.E. TAX DEDUCTED AT SOURCE, EQUAL TO RS. 158,858/- RECEIVED FROM M/S 3 PARABOLIC DRUGS LTD. WAS NOT SHOWN IN THE RECEIPTS ACCOUNT. THE ASSESSEE WAS ALSO SHOW CAUSED THAT IN THE AUDIT REP ORT FURNISHED IN FORM NO. 3CD, THE ASSESSEE HAD ADOPTED MERCANTILE S YSTEM OF ACCOUNTING. IN REPLY, THE ASSESSEE SUBMITTED THAT THOUGH IT WAS MAINTAINING ITS ACCOUNTING ON MERCANTILE SYSTEM, BU T THE PROFESSIONAL RECEIPTS WERE ACCOUNTED FOR ONLY ON RECEIPT BASIS. THE ASSESSING OFFICER, REJECTING THE CLAIM OF THE ASSESSEE INCLUD ED THE SAID NET RECEIPTS OF RS.158,858/- AS INCOME OF THE ASSESSEE. IT WAS FURTHER NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HA D CLAIMED CREDIT OF TDS OF RS.9442/- IN ITS BOOKS OF ACCOUNT. THE C IT(APPEALS) DISMISSED THE PLEA OF THE ASSESSEE AND UPHELD THE A DDITION MADE BY THE ASSESSING OFFICER. 6. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED BY WAY OF RECTIFICATION UNDER SECTION 154 OF THE ACT W AS DEBATABLE AS THE ASSESSEE WAS SHOWING THE RECEIPTS ON CASH BASIS . HOWEVER, THE LD. AR FOR THE ASSESSEE FAIRLY ADMITTED THAT THE TD S DEDUCTED OUT OF SUCH RECEIPTS WAS CLAIMED IN THE BOOKS OF ACCOUNT A ND ALSO IN THE RETURN OF INCOME. 7. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE P ROFESSION OF ARCHITECTURE. THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION HAD FILED AUDITED ACCOUNTS ALONGWITH THE RETURN OF INCO ME, COPIES OF WHICH ARE PLACED AT PAGES 3 TO 18 OF THE PAPER BOOK . THE PERUSAL OF THE AUDIT REPORT IN FORM NO. 3CD REFLECTED THE ASSE SSEE TO HAVE FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING IN RESPECT OF ITS 4 PROFESSIONAL RECEIPTS. HOWEVER, THE CLAIM OF THE A SSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT VIS--VIS THE PROFESSION AL RECEIPTS, IT WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AND FOR OTHERS, IT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. IN VIEW THEREOF, THE ASSESSEE CLAIMS NOT TO HAVE DECLARED THE RECEIPTS DUE FROM M /S PARABOLIC DRUGS LTD. AMOUNTING TO RS.168,300/- IN ITS BOOKS O F ACCOUNT, THOUGH CREDIT FOR THE TAX DEDUCTED OF RS.9442/- WAS TAKEN DURING THE YEAR ITSELF. WE FIND NO MERIT IN THE PLEA OF THE ASSESS EE. AFTER THE AMENDMENT TO THE PROVISIONS OF SECTION 145 OF THE A CT, IT IS COMPULSORY FOR EACH ASSESSEE TO EITHER FOLLOW MERCA NTILE SYSTEM OF ACCOUNTING OR TO FOLLOW CASH SYSTEM OF ACCOUNTING. THE MIXED SYSTEM OF ACCOUNTING WHICH WAS EARLIER BEING FOLLOW ED BY PERSONS, WAS THUS HELD TO BE NOT APPLICABLE AFTER THE AMENDM ENT TO SECTION 145 OF THE ACT. THE ASSESSEE BEFORE US IS A FIRM OF PR OFESSIONALS, BUT AS ADMITTED IN THE AUDIT REPORT FILED IN FORM NO. 3CD HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING UNDER WHI CH BOTH THE RECEIPTS AND THE PAYMENTS ARE RECOGNIZED ON ACCRUAL BASIS. IN VIEW THEREOF, THE ASSESSEE HAD TO INCLUDE THE PROFESSION AL RECEIPTS DUE FROM M/S PARABOLIC DRUGS LTD. AS ITS RECEIPTS FOR T HE YEAR UNDER CONSIDERATION AS THE ASSESSEE WAS FOLLOWING MERCANT ILE SYSTEM OF ACCOUNTING. EVEN OTHERWISE, IN VIEW OF THE PROVISI ONS OF SECTION 199 OF THE ACT, WHERE THE ASSESSEE HAS CLAIMED CREDIT O F TAX DEDUCTED AT SOURCE, THEN RECEIPTS RELATING TO SUCH TAX DEDUCTED AT SOURCE ARE TO BE INCLUDED AS INCOME OF THE ASSESSEE IN THE YEAR OF T AKING THE SAID CREDIT. ADMITTEDLY, THE ASSESSEE HAD TAKEN THE CRE DIT FOR TAX DEDUCTED AT SOURCE OUT OF THE AFORESAID PAYMENTS, A ND THE SAME WAS ALLOWED TO THE ASSESSEE. IN VIEW THEREOF, THE RECE IPTS AGAINST WHICH THE SAID TAX HAD BEEN DEDUCTED AT SOURCE ARE ALSO T O BE 5 INCLUDED IN THE HANDS OF THE ASSESSEE. AS THE ASSE SSEE HAD FAILED TO INCLUDE THE SAID RECEIPTS IN THE YEAR UNDER CONSIDE RATION, THE ABOVESAID MISTAKE WAS CLEARLY RECTIFIABLE UNDER SEC TION 154 OF THE ACT. WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE IN THIS REGARD. IN VIEW THEREOF, WE UPHOLD THE ORDER OF THE CIT(APPEAL S) AND DISMISS THE GROUND OF APPEAL RAISED BY THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF AUG., 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 ND AUG.2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH