SRI. MANZAR ALIKUNJU,KOLLAM vs. THE ACIT, ALAPPUZHA

Per CHANDRA POOJARI, AM:

These appeals filed by the assessee are directed against different orders of

the CIT(A), Kottayam dated 28/01/2016 and pertain to the assessment years

2008-09 and 2009-10.

year 2009-10. The assessee has raised the following grounds:

Teleservices Ltd. and also a dealer in automobile parts. The assessee filed its

return of income for the assessment year 2009-10 returning a total income of

Rs.6,78,150/-. The assessment u/s. 143(3) of the Act was completed on

28/12/2011 determining a total income of Rs.18,53,800/-. In pursuance of an

AIR information received, the Assessing Officer completed the assessment by

adding back Rs.11,10,650/- u/s. 69 of the Act. Though the assessee objected

the addition initially, the assessee agreed with the addition made by the

Assessing Officer. Subsequently, the Assessing Officer issued order u/s.

271(1)(c) of the Act, initiating penalty for concealment of income and furnishing

inaccurate particulars of his income in the return filed on 02/12/2009.

Accordingly, the Assessing Officer levied a minimum penalty of Rs.3,99,604/-

u/s. 271(1)(c) of the Act.

operated Savings Bank account with South Indian Bank Ltd., Karunagapally in

assessee’s name for his family and this account was not related to any of the

assessee’s business. It was submitted that the account was closed even before

the penalty order and this fact came to his knowledge very late. Since the

account was opened and operated in assessee’s name, it was submitted that he

had agreed to add the cash credits in the account of the assessee’s total income

to avoid litigation and for purchase of peace. The assessee submitted that the

mutually accepted demand was already paid by the assessee. Hence, it was

prayed that the penalty imposed u/s. 271(1)(c) of the Act may be dropped.

account from the Department. According to the CIT(A), the assessee had

furnished inaccurate particulars of his income in the return of income filed. The

CIT(A) rejected the explanation offered by the assessee and confirmed the levy

of penalty u/s. 271(1)(c) of the Act.

information, the assessee had a Savings Bank account with South Indian Bank

Ltd. and deposited a sum of Rs.11,10,650/-. On receipt of show cause notice

from the Assessing Officer on 15/11/2012, the assessee replied vide his letter

dated 23/11/2012 that he had no unexplained cash credit of Rs.11,10,650/- in

any of his bank accounts or bank accounts of the associated concerns. Later, it

was stated that the assessee’s brother, an NRI operated the Bank account and it

was closed before the receipt of notice of levy of penalty. However, the

assessee concealed the fact of unexplained amount deposited in the South

Indian Bank Ltd. and it was not disclosed to the Department. In our considered

opinion, this is a clear case where the assessee inspite of being offered

opportunity to explain the unaccounted bank account, the assessee concealed

the details of income. In other words, it becomes a case of concealment of true

and correct particulars of income chargeable to tax. The concealment of income

made by the assessee was to evade tax. The explanation offered by the

assessee is found to be false, then in these circumstances, the levy of penalty

u/s. 271(1)(c) is justified. It is also noticed that the assessee not only concealed

the correct income, but also attempted to give false explanation. In view of this,

we are of the opinion that the lower authorities were justified in levy of penalty us. 271(1)(c) of the Act. Hence, this ground of appeal of the assessee is

dismissed. The appeal of the assessee in ITA No. 132/Coch/2016 is dismissed.

the assessee has raised the following grounds:

and loss account attached with the return of income for the year under

consideration, the assessee had debited an amount of Rs.46,05,833/- on account

of commission payments, but he had not deducted tax u/s. 194H of the Act and

hence, was disallowable u/s. 40(a)(ia) of the Act. The assessee contended that

commission payment of Rs.46,05,833/- was made to end customers and out of

the said amount of Rs.34,36,733/-represented reimbursement of special scheme

payment by the Tata Teleservices Ltd. for which they had deducted TDS.

According to the Assessing Officer, as per the provisions of section 194H of the

Act, the assessee should have deducted tax from payments made by him

irrespective of whether Tata Teleservices Ltd. had deducted or remitted it to the government account. In view of this, the Assessing Officer made an addition of

Rs.46,05,833/- u/s. 40(a)(ia) of the Act.

Assessing Officer is not justified in reopening the assessment on the basis of

audit objection.” Before the CIT(A), the assessee further explained the ground

as follows:

“(a) Your appellant is not paying commission to the end customers. The amount consists of discounts given to various parties reimbursed by the company. It has been accounted as commission in books only because Tata Tele Services Ltd. deducted tax u/s. 194H and given it a nature of commission.

(b) Even if it is considered as commission, the amounts adjusted to individual parties do not exceed the exemption limit of Rs.2500/- mentioned in section 194H to attract disallowance u/s. 40(a)(ia) of the Act. This fact was already explained to the Assessing Officer and was almost convinced.

Bifurcation of total commission received in profit and loss account is given below:-

Less: Amount reimbursed by Tata Tele Services Ltd. Rs.51,47,543/- For giving discount to the end customers Rs.34,36,733/- Less: Additional discount given during the Year for fighting competition Rs.11,69,101/- Total expenditure as per Profit and Loss a/c Rs.46,05,834/- Balance being amount of commission included in the income of trading profits Rs. 5,41,709/-

Total amount received as per profit and loss account accounted as commission is Rs.51,47,543/- . This amount includes Rs.34,36,733/- given as recharge discount to end customers reimbursed by the company.

There had been no gain for your appellant in this arrangement. TDS for the said value has already been deducted and uploaded in your appellant’s name by the company. Your appellant is merely acting as an intermediary in handing over the benefit of this scheme to the customers. Copy of instruction letter from the company for giving discount to the customers for Rs.34,36,733/- is also attached herewith.

Further your appellant has given additional discount to customers amounting to Rs.11,69,102/- out of dealer commission received from the company to boost sale to fight competition. (The additional discount given to various parties has also been accounted as commission). In the case of Pareek Electricals vs. Assistant Commissioner of Income-tax Circle-2(1) Cuttack, it has been held that trade discount given to sub-franchisees as a compensation foregoing part of commission already subjected to tax at source by the company shall not attract 194H again and hence the disallowance was unjustified. The copy of judgment is attached here along for your kind perusal.

Additional Ground

As per the additional grounds raised by your appellant, the Assessing Officer is not justified in reopening the assessment on the basis of audit objection. The Hon’ble High Court of Gujarat in the case of Shree Ram Builders vs. Assistant Commissioner of Income-tax (2015) 121 DTR (Guj) 101) has upheld the same. The copy of judgment is attached here along for your kind perusal.”

10.1 The CIT(A) considered the issue on merit. The CIT(A) referred to a

letter produced by the assessee from Tata Teleservices Ltd. dt. 07/12/2010

stating that “following amounts are reimbursed to M/s. MS Communication.

Cricket Hungama Rs.31,16,766/- Miracle Recharge coupon Rs. 2,77,521/- Bakrid X mas Special Schemes Rs. 42,446/- Rs.34,36,733/- From the above, the CIT(A) observed that it is not clear how “Cricket Hangama”

is a scheme reimbursed by the Telephone Company. According to the CIT(A)

reimbursement means “monies actually had been paid to the Assessee”. The CIT(A) observed that if the assessee is claiming that it was a discount to the

customer, then the assessee should also receive a discount, instead of that, he

assessee had received commission. Hence the CIT(A) rejected the argument of

the assessee and it was treated as income of the assessee. Further, on

verification of the note book in which details of persons to whom the commission

was paid, the CIT(A) found that it was a handwritten ‘katcha note book’ in which

name and village of persons were written but no proper address was available

and the assessee was not able to produce any confirmation in this regard. The

CIT(A) observed that the case laws relied upon by the assessee were against the

facts of the assessee’s case. The assessee was not able to prove the

genuineness of the discount given by him. Hence, the CIT(A) justified the action

of the Assessing Officer and confirmed the addition.

the CIT(A) has not at all adjudicated the additional ground raised by the

assessee. In view of this, we vacate the findings of the CIT(A) which was

decided by him on merit and remit the entire issue to the file of the CIT(A) with

a direction to adjudicate the additional ground first and then, if he requires, he has to decide the other grounds afresh. Accordingly, the appeal of the assessee

is partly allowed for statistical purposes.

dismissed and the appeal of the assessee in ITA No.131/Coch/2016 is allowed for

statistical purposes. Order pronounced in the open Court on this 01st March, 2019

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 01st March, 2019 GJ Copy to: 1. Shri Manzar Alikunju, Pannampallil House, Thodiyoor North P.O., Karunagapally, Kollam. 2. The Assistant Commissioner of Income-tax, Circle-1, Alappuzha. 3. The Commissioner of Income-tax(Appeals), Kottayam. 4. The Pr. Commissioner of Income-tax, Kottayam 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin