JYOTI RATILAL SHAH, MUMBAI V. ITO 24(2)(4), MUMBAI

ITA 7182/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8973 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 05-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 19-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K G KUTTY
• Assessee Lawyers: B V JHAVESI
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLA TE TRIBUNAL I BENCH, MUMBAI , . . , . . BEFORE SHRI RAJENDRA SINGH, AM & SHRI VIJAYPAL RAO, JM ./ ITA NOS.7182/MUM/2010 ( / ASSESSMENT YEARS:2006-07 ) JYOTI RATILAL SHAH, 108/6, PAWAN BAUG, CHINCHOLI FATAK, MALAD (W), MUMBAI-400 064. VS. ITO 24(2)(4),MUMBAI-51. ./ ./ PAN NO. AYKPS 999 D ( / APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : MR. B.V.JHAVESI / REVENUE BY : MR. K.G.KUTTY / DATE OF HEARING : 5 TH SEPT., 2012 / DATE OF PRONOUNCEMENT : 21 ST SEPT, 2012 / O R D E R PER VIJAY PAL RAO (J.M.) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 13-9-2010 OF CIT(A)-34, MUMBAI FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN THIS APPEAL, HOWEVER, THE ONLY ISSUE ARISES FOR OUR RECONSIDERATION AND ADJUDICATION IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDITION OF ` .7 LAKHS AS BUSINESS INCOME OF THE ASSESSEE WHEN THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE ONLY IN THE MONTH OF APRIL, 2006, BEING AN ADV ANCE FOR THE WORK OF RENOVATION ITA NO :7182/10 2 OF OFFICE PREMISES OF M/S S HAREKHAN LTD. AS UNDERTAKEN BY THE ASSESSEE. 2. DURING THE YEAR UNDER CONSI DERATION, THE ASSESSEE STARTED PROPRIETARY CONCERN IN THE NAME OF M/S SHREEJI INTERIORS DESIGNING WORK OF OFFICE AND RESIDENTIAL PREMIS ES. IN THE RETURN OF INCOME, THE ASSESSEE HAS DECLARED NIL SALES AND A NET LOSS OF ` .30,750/- FROM THE BUSINESS. IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS CLAIMED CREDIT OF TDS OF ` .17,210/-. ON THE VERIFICATI ON OF TDS CERTIFICATES, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS RECEIVED CONTRACT INCOME OF ` .7,00,000/- FROM M/S SHAREKHAN LTD. DURING THE YEAR UNDER CONSIDERATION, HOWEVER, THE SAME IS NOT DECLARED IN THE PROFIT AND LOSS ACCOUNT. IN RESPONSE TO THE QUERY FR OM THE ASSESSING OFFICER, THE ASSESSEE HAS CONTENDED BEFORE THE ASSESSING OFFICER THAT ` .7,00,000/- WERE RECEIVED AS ADVANCE ON 6 TH APRIL, 2006 AND NOT DURING THE YEAR UNDER CONSIDERATION. SINCE THE PAYMENT WAS MADE BY M/S SHAREKHAN LTD. AFTER DEDUCTING THE TDS OF ` .15,680/-, AS ON 31-3- 2006, THE ASSESSING OFFICER TREATED THE SAID AMOUNT OF ` .7,00,000/- AS INCOME OF THE ASSESSEE FOR THE ASSE SSMENT YEAR UNDER CONSIDERATION. ON APPEAL, THE CIT(A) HAS CONFIR MED THE ACTION OF THE ASSESSING OFFICER. 3. BEFORE US, LEARNED AR OF THE A SSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS GOT THE WORK OF RENOV ATION OF OFFICE PREMISES OF M/S SHAREKHAN LTD. IN THE MONTH OF MARC H, 2006. AS PER THE USUAL TERMS, ITA NO :7182/10 3 THE ASSESSEE HAS CALLED FOR THE ADVANCE OF ` .7,00,000/-, WHICH WAS SENT BY M/S SHAREKHAN LTD. AFTER DEDUCTING TAX AT SOURCE OF ` .15,680/-. THE LEARNED AR HAS FURTHER SUBM ITTED THAT THE SAID ADVANCE WAS RECEIVED BY THE ASSESSEE ON 6 TH APRIL, 2006. IN SUPPORT OF HIS CONTENTION, HE HAS REFERRED THE BANK STATEMENT WHICH SHOWS THAT THE AMOUNT OF ` .6,84,320/- WAS RECEIVED THROUGH TWO CHEQUES ON 6 TH APRIL, 2006. LEARNED AR OF THE A SSESSEE HAS FURTHER S UBMITTED THAT THIS AMOUNT HAS BEEN OFFERED TO TAX IN THE SUBSEQUENT YEAR I.E. 2007-08 BECAUSE THE WORK WAS EXECUTED IN T HE NEXT YEAR AND, THEREFORE, THE SAME CANNOT BE TAXED AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. LEARNED AR HAS THUS, SUBMITTED THAT THE ASSESSEE HAS RECEIVED THE SAID ADVANCE AFTER 31-3- 2006 AND IT WAS THE FIRST CONTRACT OF THE ASSESSEE, THEREFORE, THE QUESTION OF ASSESSING THE SAME AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION DOES NOT ARISE WHEN NO CORRESPONDING EXPENDITURE IN EXECUTION OF WORK WAS BOOKED BY THE ASSESSEE. HE HAS RE LIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF DCIT VS. M/S LLOYD INSULATION (INDIA) LTD., PASSED IN ITA NO.2400/DEL./11(DELHI), DATED 9 TH AUGUST, 2012 AS WELL AS THE DECISION IN THE CASE OF SMT. VARSHA VS. DCIT, REPORTED IN 98 ITD 147 AND SUBMITTED THAT THE DEDUCTION OF TDS WILL NOT AUTOMATICALLY MAKE ADVANCE RECEIPT AS ASSESSABLE IN THE YEAR UNDER CONSIDERATION. WHEN THE ASSESSEE HAS OFFERED THE INCOME IN THE SUBSEQUENT YEAR THEN ON THE BASIS OF TDS CERTIFICATE THE SAME CANNOT ITA NO :7182/10 4 BE ASSESSED IN THE YEAR UNDER CONSIDER ATION. HE HAS ALSO RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DINESH KUMAR GOYAL, REPORTED IN 331 ITR 10 . 4 . CONTRARY TO THIS, LEARNED DR HAS SUBMITTED THAT WHEN THE TDS WAS DEDUCTED ON 31-3-2006 FROM THE PAYMENT MADE TO THE ASSESSEE AGAINST THE WORK UNDERTAKEN THEN THE RECEIPT IN THE HAND OF THE ASSESSEE IS ASSESSABLE TO TAX IN T HE YEAR UNDER CONSIDERATION. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ASSESSEE HIMSELF HAS CLAI MED THE CREDIT OF TDS WITHOUT OFFERING THE CORRESPONDING RECEIPT AS INCOME THEN THE SAID RECEIPT IS SUBJECTED TO TAX AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 5 . WE HAVE CONSIDERED THE RIVAL S UBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER MADE THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS CLAIM ED CREDIT OF TDS IN RESPECT OF ` .7 PAID BY M/S SHAREKHAN LTD. AT THE OU TSET, IT IS PERTINENT TO NOTE THAT WHEN THE ASSESSING OFFICER HAS ASSESSED THE RECEIPT OF ` .7,00,000/- FOR THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION THEN THE CORRESPONDING EXPENDITURE FOR EXECUT ION OF THE WORK FOR WHICH THE SAID PAYMENT WAS RECEIPT BY THE AS SESSEE HAS ALSO TO BE TAKEN INTO CONSIDERATION. SINCE THE ASSESS EE HAS NOT BOOKED ANY EXPENDITURE WITH RESPECT TO THE EXECUTION OF WO RK UNDER TAKEN BY THE ASSESSEE AND THE EXPENDITURE BOOKED BY THE ASSESSEE IS ONLY INDIRECT EXPENDITURE IN ITA NO :7182/10 5 THE NATURE OF BANK CHARGES, PROF ESSIONAL AND LEGAL CHARGES AND TELEPHONE EXPENSES. THE DETAILS OF EXPENDITURE CLEARLY SHOWS THAT NO EXPENDITURE WAS INCURRED BY THE ASSE SSEE IN EXECUTI ON OF THE WORK, AND, THEREFORE, WHEN NO WORK WAS EXECUTED THEN THE RECEIPT OF ` .7,00,000/- DOES NOT REPRESENTS THE EXECUTION OF WORK AND ACCORDINGLY IS NOT AN INCOME ACCRUE TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. WE FURTHER NOTE TH AT THE FIRST BILL FOR THE EXECUTION OF THE WORK WAS RAISED BY T HE ASSESSEE ONLY ON 24-4-2006 OF ` .4,20,010/-, WHICH SHOWS THAT THE WORK WAS EXEC UTED ONLY IN THE NEXT YEAR AND THE ASSESSEE HAS RAISED THE FIRST BILL ONLY IN THE NEXT YEAR. THEREFORE, THE AMOUNT OF ` .7,00,000/- WAS IN THE NATURE OF ADVANCE AND CANNOT BE SAID TO BE AN INCOME OF THE ASSESSEE ACCRUED DURING THE YEAR UNDER CONSIDERATION. HENCE, ON THE BARE FACT THAT THE FIRST BILL WAS RAISED BY THE ASSESSEE IN T HE NEXT YEAR AND THAT TOO FOR AN AMOUNT OF ` .4,20,000/-, THE AMOUNT OF ` .7,00,000/- RECEIVED BY THE ASSESSEE DOES NOT REPRESENT THE SA LE PROCEED OF ANY WORK EXECUTED DURING THE YEAR UNDER CONSIDERATION. 6 . IN VIEW OF THE ABOVE DI SCUSSION AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE HOLD THAT THE AMOUNT OF ` .7,00,000/- RECEIVED BY THE ASSESSEE CANNOT BE A SSESSED AS INCOME FOR THE YEAR UNDER CONSIDERATION AS THE SAME WAS ONLY AN ADVANCE RECEIVED WITHOUT EXECUTION OF ANY WORK DURING THE YEAR UNDER CONSIDERATION. SINCE NO INCOME WAS ASSESSABLE TO TAX DURING THE YEAR UNDER ITA NO :7182/10 6 CONSIDERATION, THEREFORE, THE ASSESSEE IS NOT ENTITLED TO CLAIM CREDIT OF TDS AGAINST THE SAID AMOUNT. A CCORDINGLY, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER REGARDING THE ASSESSMENT OF INCOME OF ` .7,00,000/-. AT THE SAME TIME, THE TDS CREDIT CLAIMED BY THE ASSESSEE IS ALSO NOT PERMISSIBLE. 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPT., 2012 . 21 ST SEPT.,2012 SD/- SD/- ( ) ( ) ( RAJENDRA SINGH) ( VIJAY PAL RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED 21 ST / SEPT. /2012 . . / PKM . . . /PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI