Shri Harjit Ahuja, Secunderabad V. ITO, Ward 10(1), Hyderabad

ITA 774/HYD/2013

• Counselvise Citation: 77422514 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 17-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 774/HYD/2013 ASSESSMENT YEAR: 2008-09 SHRI HARJIT AHUJA, SECUNDERABAD [PAN: AAPPA7575B] VS INCOME TAX OFFICER, WARD-10(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A. SRINIVAS, AR FOR REVENUE : SHRI RAJAT MITRA, DR DATE OF HEARING : 17-08-2015 DATE OF PRONOUNCEMENT : 18-09-2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-18, MUMBAI HAVING CONCURRENT J URISDICTION AT HYDERABAD DATED 07-03-2013. ASSESSEE IS AGGRIEVED ON VARIOUS ADDITIONS MADE IN THE ASSESSMENT ORDER, AS CONFIRME D BY THE CIT(A) PARTLY. 2. BRIEFLY STATED, ASSESSEE IS PROPRIETOR OF M/S. D ISCOVERY GLOBAL SERVICES INC, A BUSINESS CONCERN, ENGAGED IN SOURCI NG CANDIDATES WITH NECESSARY SKILL SET FOR CORPORATE PLACEMENTS AND PR OVIDING TRAINING AS REQUIRED BY THE COMPANIES. HE FILED RETURN OF INCO ME FOR AY. 2008-09 ADMITTING TOTAL INCOME OF RS. 1,85,520/-. IN THE S CRUTINY ASSESSMENT I.T.A. NO. 774/HYD/2013 SHRI HARJIT AHUJA :- 2 -: COMPLETED BY THE ASSESSING OFFICER (AO), IT WAS NOT ICED THAT ASSESSEE HAS SHOWN TOTAL RECEIPTS AT RS. 27,30,457/- WHEREAS 26A S STATEMENT IN THE DEPARTMENTAL COMPUTE RECORDS INDICATE RECEIPT OF RS . 1,11,12,048/- IN THE NAME OF 24 PARTIES. IN THE COURSE OF ASSESSMEN T PROCEEDINGS, ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE IN THE RECEIPTS SHOWN IN THE P&L A/C AND AS PER FORM 26AS. IT WAS SUBMITTED BY A SSESSEE THAT HE HAD NOT RENDERED ANY SERVICES TO 1. M/S. GENPACT IN DIA, 2. BHARTI AIRTEL LIMITED, 3. MAAN HOSPITALITY LIMITED AND 4. BIZ ASS IST SERVICES PRIVATE LIMITED. AO ISSUED NOTICES U/S. 133(6) OF THE INCO ME TAX ACT [ACT] TO THESE FOUR PARTIES. IN RESPONSE, M/S. GENPACT INDI A AND MAAN HOSPITALITY LIMITED SUBMITTED INFORMATION. M/S. GE NPACT INDIA CONFIRMED THAT THEY HAVE PAID RS. 1,42,989/- AGAINS T TECHNICAL AND PROFESSIONAL SERVICES FOR THE PERIOD OF 01-04-2007 TO 31-03-2008. HOWEVER, THE AMOUNT REFLECTED IN FORM 26AS STATEMEN T WAS RS. 61,36,595/-. AO IN THE ASSESSMENT ORDER TOOK COGNI ZANCE OF RS. 1,42,989/- ACKNOWLEDGED BY M/S. GENPACT INDIA AND D ELETED THE BALANCE AMOUNT IN COMPUTATION OF RECEIPTS. M/S. MA AN HOSPITALITY LIMITED CONFIRMED PAYMENT OF RS. 30,000/- WHICH WAS ALSO REFLECTED IN 26AS STATEMENT. THUS, AO GOT CONFIRMATION TO AN EX TENT OF RS. 1,72,989/-. THERE WAS NO RESPONSE FROM THE OTHER T WO PERSONS I.E., BHARTI AIRTEL LIMITED AND BIZ ASSIST SERVICES PRIVA TE LIMITED. AO ACCORDINGLY OUT OF THE TOTAL RECEIPTS OF RS. 1,11,1 2,048/- CONSIDERED THE DISCLOSED RECEIPTS AT RS. 23,87,985/- AND MADE AN A DDITION OF DIFFERENCE AFTER EXCLUDING THE AMOUNT NOT CONFIRMED BY GENPACT .. 2.1 IN ADDITION TO THE ABOVE, AO ALSO NOTICED THAT ASSESSEE HAS MADE PAYMENTS OF RS. 2,95,226/- TOWARDS SUBSCRIPTION TO VARIOUS SEARCH ENGINES AND ANOTHER AMOUNT OF RS. 71,000/- TOWARDS PROFESSIONAL SERVICES. ON THE REASON THAT TDS WAS NOT MADE ON PA YMENT OF THESE AMOUNTS, AO DISALLOWED THE ABOVE AMOUNTS U/S. 40(A) (IA). I.T.A. NO. 774/HYD/2013 SHRI HARJIT AHUJA :- 3 -: 2.2 AO ALSO CONSIDERED THAT ASSESSEE WAS NOT ABLE T O PRODUCE BOOKS OF ACCOUNT, BILLS AND VOUCHERS. THEREFORE, IN THE ABS ENCE OF BOOKS OF ACCOUNT, INCOME OF ASSESSEE IS ESTIMATED AT 20% OF TOTAL RECEIPTS I.E., ACCOUNTED RECEIPTS OF RS. 27,30,457/- X 20% = 5,46, 091/-. THUS, TAKING THE PROFIT FROM THE P&L A/C OF RS. 2,84,000/-, AO M ADE ALL THE ABOVE SAID ADDITIONS AND ASSESSED INCOME OF RS. 35,84,302 /-. 3. ASSESSEE CONTESTED THE SAME BEFORE THE LD. CIT(A ) ALLEGING THAT THE INFORMATION IN 26AS STATEMENT IS NOT CORRECT AND FU RTHER, VARIOUS DISALLOWANCES MADE OR ESTIMATIONS MADE ARE NOT CORR ECT. IT IS ALSO FURTHER CONTENDED THAT THE PROFIT SHOULD HAVE BEEN TAKEN RS. 1,85,520/- RATHER THAN RS. 2,84,000/- TAKEN BY THE AO IN THE C OMPUTATION. LD. CIT(A) IN THE COURSE OF APPELLATE PROCEEDINGS ASKED THE AO TO MAKE FURTHER ENQUIRIES AND REPORT. ACCORDINGLY, AO MAD E FURTHER ENQUIRIES AND SENT REMAND REPORT WHICH WAS STATED IN PARA 2.2 . AFTER CONSIDERING THE REPLIES OF THE PARTIES AND ASSESSEE VIDE PARA 2 .3 OF THE ORDER, LD. CIT(A) CONFIRMED THE RECEIPTS OF M/S. AEGIS BPO SER VICES AT RS. 20,940/- IHRR HOSPITALITY SERVICES PVT. LTD., OF RS. 5,38,99 8/- AND BIZ ASSIST OF RS. 13,48,320/-. THE BALANCE OF THE AMOUNT WAS DEL ETED STATING THAT THESE ARE THE CASES OF INADVERTENT MISTAKES IN UPLO ADING THE TAN. WHILE CONFIRMING THE ABOVE AMOUNT PARTLY, LD. CIT(A) ALSO CONFIRMED THE ADDITIONS MADE U/S. 40(A)(IA) TO AN EXTENT OF RS. 3 ,66,226/-. 3.1 WITH REFERENCE TO THE ESTIMATION OF INCOME AT 2 0%, LD. CIT(A) MISTOOK THE SAME AS DISALLOWANCE OF 20% EXPENDITURE . HE WENT ON TO JUSTIFY THE DISALLOWANCE OF EXPENDITURE STATING THA T IN THE ABSENCE OF ANY EVIDENCE, AO HAS MADE DISALLOWANCE AT 20% OF TOTAL EXPENDITURE CLAIMED. LD. CIT(A) RELIED ON VARIOUS CASE LAW IN SUPPORT OF THE ABOVE AND DISMISSED ASSESSEES CONTENTIONS. 4. ASSESSEE HAS RAISED AS MANY AS 11 GROUNDS ON THE ABOVE ISSUES. GR. NOS. 2, 4, 6, 8 & 10 ARE THE GROUNDS RAISED BEF ORE THE CIT(A) ABOUT I.T.A. NO. 774/HYD/2013 SHRI HARJIT AHUJA :- 4 -: THE ACTION OF THE AO WHEREAS, GR. NOS. 3, 5, 7, 9 & 11 ARE GROUNDS PERTAINING TO ACTION OF CIT(A). GR. NOS. 1 & 12 AR E GENERAL IN NATURE. 5. LD. COUNSEL REFERRING TO THE ORDER OF THE AO AND CIT(A) SUBMITTED THAT IN THE IMPUGNED ASSESSMENT YEAR, SINCE COMPUTE RIZATION WAS NOT PROPERLY UNDERTAKEN BOTH BY THE DEPARTMENT AND ASSE SSEES, MOST OF THE ASSESSEES HAVE RESORTED TO UPLOADING DATA WITH WHAT EVER PAN AVAILABLE WITH THEM. THAT MAY BE THE REASON WHY, ASSESSEE WA S CREDITED WITH SO MUCH TURNOVER WHICH IS NOT CORRECT. HE REFERRED TO THE REPLY RECEIVED FROM M/S. GENPACT INDIA AND ORDER OF THE AO TO SUBM IT THAT AS MUCH AS RS. 59,93,606/- WAS NOT EVEN PAID TO ASSESSEE WAS R EFLECTED IN FORM 26AS STATEMENT. IT WAS ASSESSEES CONTENTION THAT WHATEVER THE TURNOVER HE HAS REPORTED, IS ON THE BASIS OF BOOKS OF ACCOUNT AND IN SUPPORT, FILED THE BANK STATEMENTS AS WELL. BUT AO IN THE ABSENCE OF ANY CONTRADICTORY INFORMATION, SIMPLY RELIED ON 26A S STATEMENT TO BRING THE ENTIRE AMOUNT TO TAX. WITH REFERENCE TO THE TU RNOVERS CONFIRMED DURING THE COURSE OF REMAND PROCEEDINGS BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE CONFIRMATION LETTERS FROM THOSE PARTIES WERE NOT GIVEN TO ASSESSEE AND ASSESSEE COULD NOT REPLY. IT WAS F URTHER SUBMITTED THAT AO HAS ADDED THE ENTIRE TURNOVER AS INCOME WHICH WA S ALSO PARTLY CONFIRMED BY THE LD. CIT(A). WITH REFERENCE TO THE DISALLOWANCE U/S. 40(A)(IA), IT WAS SUBMITTED THAT THERE IS NO LIABIL ITY FOR TDS AND EVEN IF IT WAS TO BE CONSIDERED THAT THERE WAS A LIABILITY, SI NCE THE ENTIRE AMOUNT WAS PAID DURING THE YEAR AND AS NO OUTSTANDING AMOU NT WAS AVAILABLE AT THE END OF THE YEAR, FOLLOWING THE SPECIAL BENCH DE CISION OF MERILYN SHIPPING & TRANSPORTS V. ACIT (2012) [136 ITD 23] [ 16 ITR 1] (SB) (VISAKHA.)(TRIB.) AS UPHELD BY THE ALLAHABAD HIGH C OURT AND PARTLY BY THE AP HIGH COURT, NO DISALLOWANCE CAN BE MADE U/S. 40(A)(IA). WITH REFERENCE TO 20% ESTIMATION OF INCOME ON RECEIPTS, IT WAS SUBMITTED THAT AO NOT ONLY TOOK THE AMOUNT FROM THE P&L A/C WRONGL Y, BUT ALSO ESTIMATED THE INCOME AT 20% OF THE TOTAL RECEIPTS W HICH ITSELF IS A DOUBLE ADDITION. APART FROM THAT, IT WAS SUBMITTED THAT O NCE INCOME IS I.T.A. NO. 774/HYD/2013 SHRI HARJIT AHUJA :- 5 -: ESTIMATED, OTHER DISALLOWANCES CANNOT BE RESORTED T O AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CO NSTRUCTIONS VS. CIT [232 ITR 776]. IT WAS SUBMITTED THAT NOT ONLY THE AO, BUT EVEN THE CIT(A) HAS WRONGLY CONFIRMED THE ADDITIONS. 6. LD. DR HOWEVER, SUBMITTED THAT AO EXCLUDED ALMOS T ENTIRE TURNOVER WHICH WAS CONFIRMED AS NOT BELONGING TO AS SESSEE, BUT MOST OF THE PEOPLE HAVE CONFIRMED THAT TURNOVERS BELONG TO ASSESSEE, THEREFORE, ADDITION WAS WARRANTED. IT WAS EXPLAINED THAT IN T HAT YEAR, UPLOADING OF RETURNS WITH UPTO 90% OF THE PANS IS MADE COMPULSOR Y. THEREFORE, THERE COULD BE SOME MISTAKES, BUT NOT AS STATED BY ASSESSEES COUNSEL. HE REFERRED TO THE ORDER OF CIT(A) THAT PARTIES HAV E CONFIRMED THE TURNOVERS AND THEREFORE, ORDER OF THE CIT(A) IS TO BE UPHELD. WITH REFERENCE TO 40(A)(IA), IT WAS SUBMITTED THAT ASSES SEE HAS NOT MADE TDS THEREFORE, DISALLOWANCE IS WARRANTED. WHILE ACCEPT ING THAT AO ESTIMATED 20% OF THE TOTAL RECEIPTS AS INCOME WHEREAS, CIT(A) CONFIRMED THE 20% AS DISALLOWANCE OF EXPENDITURE, HE SUPPORTED THE O RDER OF AO. WITH REFERENCE TO THE INITIAL FIGURE OF PROFIT FROM THE BUSINESS, HE AGREED THAT THIS CAN BE AS PER THE P&L A/C AND CAN BE REMITTED TO AO FOR VERIFICATION AND ADOPTION OF THE CORRECT AMOUNT. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE ORDERS OF THE AO AND CIT(A). AS SEEN FROM THE RECORD, THE RE ARE ABOUT 24 PARTIES WHO UPLOADED DATA IN FORM 26AS TOTALING TO RS. 1,11,12,048/-. OUT OF THESE 24 PARTIES, IN THE COURSE OF ASSESSMEN T PROCEEDINGS, ASSESSEE WAS DENYING RENDERING ANY SERVICES TO FOUR COMPANIES. THE RECEIPTS FROM TWO COMPANIES WHO HAVE CONFIRMED REND ERING SERVICES WAS ADDED BY THE AO HIMSELF. OUT OF THE BALANCE TWO CO MPANIES, BHARTI AIRTEL LIMITED DID NOT CONFIRM. THEREFORE, LD. CIT (A) DELETED THE SAME. BIZ ASSIST SERVICES PRIVATE LIMITED DID NOT CONFIRM IN THE COURSE OF ENQUIRY BY THE AO, BUT IT SEEMS THEY HAVE CONFIRMED IN THE COURSE OF REMAND PROCEEDINGS TO AN EXTENT OF RS. 13,48,320/-. WITH REFERENCE TO I.T.A. NO. 774/HYD/2013 SHRI HARJIT AHUJA :- 6 -: THE BALANCE OF THE COMPANIES, IT IS NOT CLEAR FROM THE ORDER WHY THEY ARE AGAIN BEING VERIFIED. IT SEEMS, CIT(A) ORDERED ENQ UIRY ON ALL COMPANIES AND SOME OF THEM MAY BE FROM ASSESSEES OWN ACCEPTE D TURNOVERS. IN THE ABSENCE OF ANY CLARITY ON THIS ISSUE FROM EITHE R PARTY, WE ARE UNABLE TO EXAMINE WHETHER THERE IS ANY DUPLICATION OF THE ACCOUNTED TURNOVER IN THE FINAL CONFIRMED TURNOVER. BE THAT AS IT MAY, T HE ENTIRE TURNOVER CANNOT BE THE INCOME. AS NOTED EARLIER, AO NOT ONL Y ADDED THE TURNOVER BUT ALSO ESTIMATED 20% OF THE ACCOUNTED RECEIPTS AS INCOME FROM BUSINESS. HOWEVER, WHILE COMPUTING THE INCOME, NO T ONLY HE CONSIDERED THE ESTIMATION OF THE INCOME BUT ALSO AC TUAL INCOME DECLARED BY ASSESSEE THAT TOO AT A HIGHER FIGURE. ACCORDING TO ASSESSEE, THE PROFIT FROM P&L A/C RS. 1,85,520/-, WHEREAS AO ADOPTED RS. 2,84,000/-. EVEN THOUGH IT WAS POINTED OUT BEFORE THE CIT(A), N O DIRECTION WAS GIVEN ON THIS. APART FROM THE ABOVE ESTIMATION, AO ALSO DISALLOWED INCOMES U/S. 40(A)(IA). SINCE NO OUTSTANDING AMOUNT WAS AV AILABLE AT THE END OF THE YEAR, DISALLOWANCE US 40(A)(IA) DOES NOT ARISE. NOT ONLY THAT, AO DID NOT EXAMINE WHETHER THE PAYMENTS ARE COVERED BY PRO VISIONS OF TDS OR NOT EXCEPT STATING THAT THEY ARE PROVISIONAL PAYMEN TS COVERED BY 194J. THE QUANTUM OF PAYMENT AS TO HOW MANY PARTIES IT WA S PAID AND FOR WHAT PURPOSE IT WAS PAID HAS NOT BEEN EXAMINED. BE THAT AS IT MAY, DISALLOWANCE OF STATUTORY AMOUNTS DOES NOT ARISE, O NCE THE PROFIT IS ESTIMATED BY AO BY REJECTING THE BOOKS OF ACCOUNTS, BASED ON THE ENTRIES IN THE BOOKS OF ACCOUNTS. IN VIEW OF THIS, THE ONLY WAY TO ADJUDICATE ALL THE ISSUES IS TO RESORT TO ESTIMATIO N OF INCOME IN ASSESSEES CASE. AO ESTIMATED 20% OF THE TOTAL RECEIPTS AS INC OME, (27,30,457 X 20%) IN THE ORDER. THERE IS NO BASIS FOR THAT. WE ARE OF THE OPINION THAT THE PROFIT CAN BE ESTIMATED AT 10% OF THE TOTAL REC EIPTS OF ACCOUNTED RECEIPTS OF RS. 27,30,457/- + CONFIRMED RECEIPTS ON ENQUIRY OF RS. 19,08,258/- I.E., RS. 46,38,715/- AS TURNOVER. IN ARRIVING AT 10% PROFIT, WE HAVE KEPT IN MIND OFFERED INCOME AS PER P&L A/C TAKEN BY THE AO(RS. 2,84,000/- OUT OF THE RECEIPTS OF RS. 27,30,450/- W HICH IS APPROXIMATELY 10%). EVEN THOUGH ASSESSEE CONTENDED THAT AMOUNT S HOULD BE TAKEN AT I.T.A. NO. 774/HYD/2013 SHRI HARJIT AHUJA :- 7 -: RS. 1,85,520/- THIS AMOUNT SEEMS TO BE AMOUNT OF R ETURNED INCOME NOT INCOME FROM P&L A/C. THEREFORE, TAKING THE AMOUNT ADOPTED BY AO AS BASIS, PROFIT CAN BE ESTIMATED AT 10% OF THE TURNOV ER WHICH CAN BE DETERMINED AS PROFIT FROM THE BUSINESS ACTIVITY. S INCE TOTAL PROFIT WAS ESTIMATED, THE DISALLOWANCE U/S. 40(A)(IA) DOES NOT ARISE. EVEN OTHERWISE, ADDITION IS NOT WARRANTED AS THE AMOUNT WAS NOT OUT STANDING AT THE END OF THE YEAR. CONSIDERING THESE FACTORS, WE DIRECT THE AO TO DETERMINE THE TOTAL INCOME AT RS. 4,63,870/- AND ALLOW OF ANY STA TUTORY DEDUCTIONS CLAIMED OUT OF THE GROSS TOTAL INCOME IN THE COMPUT ATION OF INCOME. WITH THESE DIRECTIONS, THE GROUNDS ARE CONSIDERED P ARTLY ALLOWED. 8. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH SEPTEMBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 18 TH SEPTEMBER, 2015 TNMM I.T.A. NO. 774/HYD/2013 SHRI HARJIT AHUJA :- 8 -: COPY TO : 1. SHRI HARJIT AHUJA, FLAT NO. 504, JADE ARCADE, O PP. PARADISE, MG ROAD, SECUNDERABAD. 2. INCOME TAX OFFICER, WARD-10(1), IT TOWERS, AC G UARDS, HYDERABAD. 3. CIT (APPEALS)-18, MUMBAI. 4. CIT (APPEALS)-VI, HYDERABAD. 5. CIT-V, HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.