MARISSA CLARISSA DONIQUE ALVEYN, MUMBAI V. ITO 19(3)(3), MUMBAI

ITA 6901/MUM/2011

• Counselvise Citation: 690119914 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 11-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI I.P. BANSAL, (JM) AND B.R.BASKARAN (AM) . . , . . , ./I.T.A. NO.6901/MUM/2011 ( / ASSESSMENT YEAR : 2006-2007) MARISSA CLARISSA DOMNIQUE ALVEYN, 104, RODHOL APARTMENTS, ST.ROQUE ROAD, BANDRA (W), MUBMAI-400050 / VS. INCOME TAX OFFICER -19(3)(3), PIRAMAL CHAMBERS, LALBAUG, MUMBAI. ( / APPELLANT) .. ( ! / RESPONDENT) ./ '# ./PAN/GIR NO. :ABMPA2076M $ / ASSESSEE BY: NONE ! % $ / REVENUE BY:: SHRI VIVEK BATRA & ' % () / DATE OF HEARING : 5.1.2015 *+ % () /DATE OF PRONOUNCEMENT : 9. 1.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING TH E ORDER DATED 21.7.2011 PASSED BY THE LD. CIT(A)-30, MUMBAI AND I T RELATES TO THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF TH E INCOME TAX ACT, 1961 (THE ACT) FOR NOT DEDUCTING THE TAX AT SOURCE U/S 194J O F THE ACT FROM SOME OF THE EXPENSES INCURRED BY THE ASSESSEE. ITA NO.6901/M/2011 2 3. NONE APPEARED ON BEHALF OF THE ASSESSEE THOUGH, ON AN EARLIER OCCASION, THE CASE WAS ADJOURNED AT SPECIFIC REQUEST OF THE A SSESSEE. HENCE WE PROCEED TO DISPOSE OF THE APPEAL EX-PARTE, WITHOUT THE PRES ENCE OF THE ASSESSEE. 4. FACTS RELATING TO THE ISSUE UNDER CONSIDERATION ARE STATED IN BRIEF. THE ASSESSEE IS AN INDIVIDUAL AND WORKING AS CREATIVE C ONSULTANT ARTISTE. ACCORDING TO THE ASSESSEE, SHE IS ENGAGED IN THE BUSINESS OF CREATING PROMOTIONAL CAMPAIGNS FOR MEDICAL BRANDS ESPECIALLY FOR PHARMAC EUTICAL COMPANIES. IN THE IMMEDIATELY PRECEDING YEAR I.E. IN ASSESSMENT YEAR 2005-06, THE ASSESSEE HAD DISCLOSED GROSS RECEIPT OF RS.14,18,150/- AND DECLA RED PROFIT/INCOME AS BUSINESS INCOME. HOWEVER, IN THE YEAR UNDER CONS IDERATION (AY 2006-07), THE ASSESSEE DISCLOSED GROSS RECEIPT OF RS.24,00,382/- AND THE PROFIT WAS DECLARED AS PROFESSIONAL INCOME. IT IS PERTINENT TO NOTE THAT THE ASSESSEE GOT HER ACCOUNTS AUDITED U/S 44AB OF THE ACT AND FILED TAX AUDIT REPORT ALONG WITH HER RETURN OF INCOME FILED FOR AY 2006-07. IT IS ALSO PERTINENT TO NOTE THAT THE PROVISIONS OF SECTION 44AB OF THE ACT PRESCRIBE DIF FERENT MONETARY LIMITS FOR PERSONS CARRYING ON BUSINESS OR CARRYING ON PROFESS ION FOR GETTING THE ACCOUNTS AUDITED. AS PER THE PROVISIONS OF SEC. 44AB EXISTING AT T HE RELEVANT POINT OF TIME, THE MONETARY LIMIT OF TOTAL SALES, TURNOVER OR GROS S RECEIPTS, AS THE CASE MAY BE, FOR GETTING THE ACCOUNTS AUDITED WAS RS.40 LAKHS FO R BUSINESS AND RS.10 LAKHS FOR PROFESSION. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS INCURRED EXPENDITURE UNDER THE HEAD IL LUSTRATION CHARGES, ASSISTANT ARTISTE CHARGES, COMPUTER GRAPHICS AND VISUAL CHARG ES ETC., AGGREGATING TO RS.8,37,093/-. THE AO ALSO NOTICED THAT THE ASSESS EE HAS GOT HER ACCOUNTS AUDITED FOR THE YEAR UNDER CONSIDERATION TREATING H ER ACTIVITY AS PROFESSIONAL ACTIVITY. IN THE IMMEDIATELY PRECEDING YEAR, THE GROSS RECEIPTS DECLARED BY THE ASSESSEE HAD EXCEEDED RS.10.00 LAKHS, BUT THE ASSES SEE DID NOT GET HER ACCOUNTS AUDITED. AS PER THE PROVISO TO SEC. 194J OF THE ACT, THE TDS PROVISIONS OF SEC. 194J SHALL APPLY TO AN INDIVIDUAL, IF HIS G ROSS SALES OR GROSS RECEIPTS OR TURNOVER OF THE IMMEDIATELY PRECEDING YEAR HAS EXCE EDED THE MONETARY LIMITS PRESCRIBED IN SEC. 44AB OF THE ACT. SINCE THE ASS ESSEE HERSELF HAS TREATED HER ACTIVITY AS HER PROFESSIONAL ACTIVITY IN THE PRESEN T YEAR AND SINCE THE GROSS RECEIPTS OF THE IMMEDIATELY PRECEDING YEAR EXCEEDED THE MONETARY LIMIT OF ITA NO.6901/M/2011 3 RS.10.00 LAKHS, THE AO TOOK THE VIEW THAT THE PROV ISIONS OF PROVISO TO SEC. 194J SHALL APPLY AND HENCE THE ASSESSEE WAS LIABLE TO DE DUCT TAX AT SOURCE ON THE AFORESAID EXPENDITURE IN TERMS OF PROVISIONS OF SEC TION 194J OF THE ACT. SINCE, THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE, THE AO DISALLOWED AFORESAID EXPENDITURE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 6. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED T HAT HER ACTIVITY WAS BUSINESS ACTIVITY AND HENCE THE MONETARY LIMIT OF R S.40.00 LAKHS PRESCRIBED IN SEC. 44AB OF THE ACT SHALL APPLY. SINCE HER GROSS RECEIPTS DID NOT EXCEED THE MONETARY LIMIT, SHE CONTENDED THAT SHE WAS NOT LIAB LE TO DEDUCT TAX AT SOURCE U/S 194J OF THE ACT. THE LD. CIT(A), HOWEVER, REJECTED THE SAID CLAIM ON THE REASONING THAT THE ASSESSEE HAD DECLARED INCOME FOR THE YEAR UNDER CONSIDERATION AS PROFESSIONAL INCOME AND ALSO GOT H ER ACCOUNTS AUDITED UNDER SECTION 44AB OF THE ACT, EVEN THOUGH THE GROSS REC EIPTS WERE LESS THAN RS.40.00 LAKHS, MEANING THEREBY THE ASSESSEE HERSELF HAS ACC EPTED THAT SHE WAS CARRYING ON PROFESSION. ACCORDINGLY, THE LD. CIT(A) HELD TH AT THE PROVISIONS OF SECTION 194J ARE APPLICABLE TO THE ASSESSEE. ACCORDINGLY, HE CONFIRMED THE ADDITION MADE BY THE AO U/S 40(A)(IA). 7. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE NOTICE FROM THE PAPER BOOK FILED BY THE ASSESSEE THAT THE ASSESSEE HAS FURNISHED CERTAIN DOCUMENTS IN THE FORM OF INVOICE S ISSUED BY HER TO VARIOUS CLIENTS IN ORDER TO SUBSTANTIATE HER CLAIM THAT SHE WAS ACTUALLY ENGAGED IN THE BUSINESS ACTIVITY RELATING TO PROMOTIONAL CAMPAIGN. HOWEVER, WE NOTICE THAT THE FIRST APPELLATE AUTHORITY DID NOT CONSIDER THOSE MA TERIALS AND ALSO DID NOT EXPRESS ANY OPINION THEREON. THE LD. CIT(A) WAS SI MPLY CARRIED AWAY BY THE FACT THAT THE ASSESSEE GOT HER ACCOUNTS AUDITED U/S 44A B OF THE ACT DURING THE YEAR UNDER CONSIDERATION BY TREATING HER ACTIVITY AS PRO FESSIONAL ACTIVITY. 8. IN THE INSTANT CASE, THE CONTENTION OF THE ASSESSEE IS THAT SHE IS CARRYING ON BUSINESS. ACCORDINGLY IT IS CONTENDED THAT THE PRO VISIONS OF SECTION 44AB SHALL NOT APPLY TO HER, SINCE HER TURNOVER WAS LESS THAN RS.40 LAKHS FOR THE YEAR UNDER CONSIDERATION AS WELL AS FOR THE IMMEDIATELY PRECED ING YEAR. HOWEVER, BOTH THE TAX AUTHORITIES HAVE HELD THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE WAS IN THE NATURE OF PROFESSIONAL ACTIVITY AND ACCORDINGLY HEL D THAT PROVISIONS OF SECTION ITA NO.6901/M/2011 4 44AB SHALL APPLY, SINCE HER GROSS RECEIPT HAVE EXCE EDED RS.10 LAKHS DURING THE YEAR UNDER CONSIDERATION AND ALSO IN THE IMMEDIATEL Y PRECEDING YEAR. THE APPLICABILITY OF THE TDS PROVISIONS OF SEC. 194J WO ULD DEPEND UPON THE QUESTION AS TO WHETHER THE ACTIVITY CARRIED ON BY THE ASSES SEE WOULD FALL IN THE CATEGORY OF BUSINESS OR IN THE CATEGORY OF PROFESSION. 9. WE HAVE ALREADY NOTICED THAT THE TAX AUTHORI TIES HAVE FORMED THEIR VIEW ONLY ON THE BASIS OF THE FACT THAT THE ASSESSEE HAS GOT HER ACCOUNTS AUDITED IN THE YEAR UNDER CONSIDERATION U/S 44AB, EVEN THOUGH THE TURNOVER WAS LESS THAN RS.40 LAKHS. IN OUR VIEW, THE NATURE OF ACTIVITY C ARRIED ON BY THE ASSESSEE SHOULD BE EXAMINED OBJECTIVELY BY THE TAX AUTHORITIES. I T IS WELL SETTLED PROPOSITION OF LAW THAT THE CLAIM MADE BY THE ASSESSEE IN THE RETU RN OF INCOME OR BOOKS OF ACCOUNT CAN NOT BE CONSIDERED TO BE THE SOLE DETERM INING FACTOR FOR DECIDING ANY ISSUE AND THEY NEED TO EXAMINED OBJECTIVELY. FOR EXAMPLE, THE ACTIVITY OF A CIVIL ENGINEER PROVIDING MERE CONSULTANCY SERVICES WOULD FALL IN THE CATEGORY OF PROFESSION, WHILE THE ACTIVITY OF CONSTRUCTION AN D SALE OF BUILDINGS WOULD FALL IN THE CATEGORY OF BUSINESS. 10. WE NOTICE FROM THE PAPER BOOK FURNISHED B Y THE ASSESSEE THAT SHE HAS PLACED SOME DOCUMENTS TO SUBSTANTIATE HER CLAIM THA T SHE WAS CARRYING ON THE BUSINESS ACTIVITY. HOWEVER, NEITHER THE LD.CIT(A) NOR THE AO HAS EXAMINED THOSE DOCUMENTS. IN THE ABSENCE OF SUCH EXAMINATION AND ALSO IN THE ABSENCE OF A CLEAR FINDING THEREON, WE FIND IT DIFFICULT TO A DJUDICATE THE ISSUE RELATING TO THE NATURE OF ACTIVITY CARRIED ON BY THE ASSESSEE. WE HAVE ALREADY NOTICED THAT THE CLEAR DECISION ABOUT THE NATURE OF THE ACTIVITY OF THE ASSESSEE IS REQUIRED IN ORDER TO ADJUDICATE THE DISPUTE RELATING TO THE APPLICABI LITY OF PROVISIONS OF SEC. 194J / 40(A)(IA) OF THE ACT. 11. HENCE, IN OUR VIEW, THE ISSUE RELATING TO THE NATURE OF ACTIVITY OF THE ASSESSEE REQUIRES FRESH EXAMINATION AT THE END OF T HE LD. CIT(A). ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE A LL THE MATTERS TO HIS FILE WITH A DIRECTION TO EXAMINE WHETHER THE ACTIVITY OF THE AS SESSEE WOULD FALL IN THE CATEGORY OF BUSINESS OR PROFESSION BY DULY CONSIDER ING THE VARIOUS MATERIALS / EXPLANATIONS THAT MAY BE MAY BE FURNISHED BY THE AS SESSEE BEFORE HIM AND ACCORDINGLY DECIDE THE ISSUE OF APPLICABILITY OF PR OVISIONS OF SEC. 194J / 40(A)(IA) ITA NO.6901/M/2011 5 OF THE ACT. THE ASSESSEE IS ALSO DIRECTED TO CO-O PERATE WITH TAX AUTHORITIES FOR EXPEDITIOUS DISPOSAL OF THE APPEAL. 12. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 9TH JAN, 2015 . *+ & , - . 9TH JAN, 2015 + % /' 0 SD SD ( . . /I.P. BANSAL ) ( . . ,/ B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & ' MUMBAI: 9TH JAN,2015. . . ./ SRL , SR. PS ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. & 3( ( ) / THE CIT(A)- CONCERNED 4. & 3( / CIT CONCERNED 5. 6. 45 / (6 , ) 6 , & ' / DR, ITAT, MUMBAI CONCERNED /7 8' / GUARD FILE. 9 & / BY ORDER, TRUE COPY : ' (ASSTT. REGISTRAR) ) 6 , & ' /ITAT, MUMBAI