KUNI SAMANTARAY,CUTTACK vs. ITO WARD-2(4), CUTTACK

O R D E R

Per Bench : These two appeals have been filed by the assessee against the separate orders of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, passed in ITBA/NFAC/S/250/2022-23/1046263198(1), dated 12.10.2022 and in ITBA/NFAC/S/250/2022-23/1047536032(1), dated 21.11.2022 for the assessment year 2011-2012. 2. is an appeal filed against the quantum addition and ITA No.12/CTK/2023 is an appeal filed by the assessee against the order of the ld.CIT(A), NFAC arising out of the levy of penalty u/s.271(1)(c) of the Act. 3. It was submitted by the ld.AR that the assessee is an individual, who is doing consultancy work. It was the submission that during the relevant assessment year, the assessee had raised a bill for Rs.1,35,02,430/- on M/s IL & FS Eco Smart Ltd.. M/s IL & FS Eco Smart Ltd. during the relevant assessment year paid the assessee Rs.93,52,180/- but had deducted the TDS on the full amount of Rs.1,35,02,430/-. It was the submission that the assessee being an individual had offered the receipt of Rs.93,52,180/- during the relevant assessment year. The AO on the ground that the form 26AS showed the TDS of Rs.14,04,066/- and professional receipt at Rs.1,35,02,430/- brought to tax, the differential amount of Rs.41,50,242/- as undisclosed fee received. The ld.AR has filed his written submissions as under :-

1. 1. Assessee assessed u/s.144 on dt.22/01l2014. Aggrieved filed appeal before CIT(A). CIT(A) Dismissed the appeal. Aggrieved filed appeal before the Hon'ble ITAT . The Hon'ble ITAT vide ITA No. 144/CTK/20 14 restored the file to AO to decide afresh.

2. Thereafter as per order of Hon'ble ITAT, 142( 1) Notice was issued but Assessee could not reply. Assessment was made u/s.254/144 of the LT. Act. Following the same assessment as earlier. CIT(A) Dismissed the appeal. Now the assessee is before this the Hon'ble ITAT, Cuttack Bench Cuttack for justice. . Facts of the Case - 3. As per 26AS the Assessee was paid professional charges to the tune of Rs.1,35,02,430/- by one M/s. IL & FS Ecosmart Ltd .. But assessee have only shown gross receipts of Rs.93,52,188/-.(as per receipts reflected in her Bank) Rest amount was received by the assessee in subsequent year which was duly shown as income in the return in the year it was received. Asst. Year Amount Receipts 2012-13 1,27,408.00 2013-14 No Receipts from IL & FS 2014-15 21,91,000.00 2015-16 No Receipts from IL &, FS 2016-17 12,54,113.00 (Collected by LT.Department against demand) Total Receipts from IL & FS 35,72,521.00 Till date part balance is due Rs.5,77,721/- Rs.12,54,113 has been received by I. T. Department from IL & FS against the demand raised for the aforesaid asst. year.

4. Service Tax was duly paid in the year the amount was received.

5. The Department was well known with the fact that the said IL & FS is holding the balance and as such notice for the recovery was issued to the said IL & FS and the amount ofRs.12,54,113/- was collected. Thus it clearly shows that the whole amount was not received in the year under consideration. The amount as and when received is duly reflected in the return of income in the year it is received. PRAYER: The appellant on the facts and circumstances of the case and in the interest of principal of natural justice requests your honour to kindly accept the receipt as income in the year it has been received by the appellant and has been reflected in that year's return of income. The appellant further requests the said receipts should be deleted from the year under consideration as assessed by the AO. Accordingly it is also further requests that the said TDS deducted should also be given credit proportionately in the year the income is reflected by the appellant. For this act of your kindness the appellant shall ever pray.

4. It was the submission that the AO refused to accept contention that the assessee has not received the amount of Rs.41,50,242/- during the relevant assessment year. It was the submission that the assessee realised Rs.1,27,408/- during the assessment year 2012-2013 and he has filed return of income showing the said amount in his total income and paid the taxes thereon. The ld.AR has placed before us a copy of the return filed for the assessment year 2012-2013. Subsequently the assessee received Rs.21,91,000/- during the assessment year 2014- 2015, which has also promptly been disclosed in his return of income and offered to tax. Ld.AR placed before us a copy of the return filed by the assessee for the assessment year 2014-2015. It was further submitted that for the assessment year 2016-2017 and an amount of Rs.12,54,113/- was recovered by the AO from IL&FS Eco Smart Ltd. against the demand which was pending against the assessee. It was the submission that the amount recovered by the department was treated as income of the assessee insofar as it had been adjusted on the tax demanded against the assessee and he has offered the same in his return for the assessment year 2016-2017. Ld.AR placed before us copy of return for the assessment year 2016-2017, wherein this amount has been included. It was the submission that an amount of Rs.5,77,721/- was still pending recovery from IL & FS Eco Smart Ltd.. It was the submission that as the assessee has not received the full amount for the relevant assessment year and the assessee has offered the income received during the assessment year to tax, no further addition should be made in the hands of the assessee. It was the submission that the ld. CIT(A) did not consider the explanation of the assessee and has rejected the appeal of the assessee holding that the assessee has not responded to the notice.

5. In reply, ld. Sr. DR submitted that the assessee is following mercantile system of account as has been mentioned by the ld. CIT(A) in his order. It was the submission that the assessee was entitled to TDS only in respect of the income which is offered to tax and it is the duty of the assessee to apply for the extension of the TDS if the entire income has not been offered to tax. The fact that the assessee has not claimed the said adjustment in regard to the TDS showed that the assessee has received the entire consultancy fee during the relevant assessment year. It was the submission that the order of the ld.AO and that of the ld. CIT(A) is liable to be upheld.

6. We have considered the rival submissions. A perusal of the facts of the present case, clearly show that it is an admitted fact that the assessee has raised the bill of professional charges to an extent of Rs.1,35,02,430/- . IL&FS Eco Smart Ltd. has deducted TDS on the full amount of Rs.1,35,02,430/-. It is also a fact that IL&FS has paid the assessee only Rs.93,52,180/-. The fact that the AO was able to recover an amount of Rs.12,54,113/- from IL&FS Eco Smart Ltd. during the assessment year 2016-2017, clearly shows that the revenue was aware that the assessee has not received the full amount. When the returns were filed disclosing the receipt the revenue did not do any assessment for those assessment years to give the assessee the necessary adjustment in his income computation. This recover would be possible only if the AO knew that the balance amount was very much shown by IL&FS Eco Smart in their balance sheet as a sundry creditor. A perusal of the returns filed by the assessee in the assessment year 2012-2013, 2014-2015 & 2016-2017 clearly shows that the assessee has offered the said income as received by the assessee from IL&FS Eco Smart Ltd. during the relevant assessment years. The assessee is an individual. An individual is fully entitled to claim cash system of accounts. This being so, the addition as made by the AO and as confirmed by the ld. CIT(A) of the amount of Rs.41,50,242/- during the relevant assessment year stands deleted.

7. However, as the assessee has only offered the amount of Rs.93,52,180/- as received during the relevant assessment year, the benefit of the TDS of Rs.14,04,068/- would stand restricted to the TDS applicable to the amount of Rs.93,52,180/-. The balance of the TDS shall be adjusted against the income offered for the assessment year 2012- 2013, 2014-2015 & 2016-2017, insofar as the appropriate income has ,been disclosed by the assessee on receipt. The TDS in respect of Rs.5,77,721/- would not be available to the assessee till such time the said amount is received and disclosed by the assessee. Thus, the appeal of the assessee in ITA NO.11/CTK/2022 is allowed.

8. With regard to appeal of the assessee in ITA No.12/CTK/2022, as we have already allowed the appeal of the assessee and has deleted the addition made by the AO of the amount of Rs.41,50,240/-, the penalty as levied by the AO and as confirmed by the ld.CIT(A) u/s.271(1)(c) of the Act in respect of alleged undisclosed fee received of Rs.4150,240/-, no more survives and consequently the penalty as levied stands deleted.

9. In the result, both the appeals of the assessee are allowed. Order dictated and pronounced in the open court on 21/07/2023. (GIRISH AGRAWAL) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER