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Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI KUL BHARAT & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order of the ld CIT(A)-3, New Delhi dated 18.01.2019 for Assessment Year 2016-17. 2. The assessee has raised the following grounds of appeal:- “1. Because the Commissioner Income Tax (Appeals) -03, New Delhi ['CIT (A)'] without any justification while exercising the purported authority under Section 250 of 1961 Act passed the order dated 10.08.2020 ('Impugned Order') confirmed the disallowance of Rs.26,88,147 under Section 68 of 1961 Act. The Assessing Officer without any justification discarded the books of account which were duly explained and also misapplied the relevant provisions of Section 139A r/w Rule 114B of 1962 Rules.
2. Because during the relevant FY 2015-16, from 01.04.2015 to 31.12.2015, there was no requirement to quote the Permanent Account Number in the documents pertaining to the transaction of Sales or Purchase of Goods or Services of any nature and no financial limit was also prescribed by the statute. Under the provision of sub clause C of Section 139A (5) r/w Sub Section 8 of Section 139A of 1961 Act, the Central Government amended the provisions of Rule 114B of 1962 Rules w.e.f. 01.01.2016 whereby the payee is mandated to quote his Permanent Account Number in all the transactions of Sales or purchases when the value of transaction exceeds 2 lakh rupees per transaction as mentioned at Serial No. 18 of the table given in the Rule 114B. In none of the transactions which were the subject matter of enquiry and scrutiny were more than Rs. 50,000/-. Therefore, the jurisdictional facts did not exist for the Assessing Officer to Page | 1 initiate and conclude the adverse findings under Section 68 of 1961 Act. Therefore, the Assessment Order dated 27.12.2018 and impugned order dated 10.08.2020 are without authority and jurisdiction.
3. Because during the relevant period there was no requirement to quote the PAN in the documents relating to the Sale & Purchase of services when the value of each transaction was less than Rs.2 lakh. Therefore, the impugned order is liable to be set aside.
Because there was no justification or occasion to reject/discard the explanation offered by the Appellant w.r.t. the nature & source of the sum credited in the books of account of the Appellant. The Appellant is engaged in the business of providing infrastructure support services including installation, activation and maintenance of the service levels. The Appellant has trade partner in the form of dealers, distributors, service franchise etc. all over the country. In order to activate and recharge the set top boxes of its customers, accounts of distributor/ dealer account are credited by the Company through electronic purchase recharge system (EPRS). EPRS is the mode of recharge distributors mobile with the amount, as requested, which facilitates the dealer/ distributor to pay activation amount to the ultimate customer. Distributors deposit money in the bank accounts of the Dish Infra Services Private Limited and fill details on the web portal mentioning the complete details of EPRS requirements and payments details. Post verification the EPRS recharge amount is transferred to distributors. The amount received against the recharge is duly taxed under the CGST Act, 2017 and applicable tax on the amount received is discharged. Thus, the onus is discharged by the Appellant and the explanation offered by the Appellant is acceptable.
Because the cash credits are not the loan advances but deposits towards recharge by small traders for purchasing of EPRS, therefore, there is no need to show the means or credit worthiness of the creditor. There is no legal requirement to show the source of the source by the appellant. This principal is traceable to Section 106 of Evidence Act and source of source is not within the knowledge of the appellant. In case revenue is not satisfied with the explanation offered it may choose to proceed against the creditors.
Because all the transactions including the transactions under examination have already been offered for taxation and there is no justification or reason to impose any tax under Section 115BBE. Hence the transaction of cash sale is duly disclosed they cannot be added back for dual taxation. Even otherwise only the profit margin can be assessed to any alleged liability not the entire receipts.
Because the Hon'ble CIT(A) has gravely erred in law and on the facts and circumstances of the case whilst confirming the disallowances of Rs. 26,88,147/- under Section 68 without considering documents/submission/ case law submitted for "Goods and Sufficient Reason" filed by the Appellant.
Because the Hon'ble CIT (A) erred in law as well as on facts in confirming disallowances on the deposits from the distributors in the Company's accounts for non-availability of PAN which were beyond the control of the appellant, to be liable for disallowance under Section 68 of the Act. The company had submitted the details of the Distributors and the sample ledger copies to the Commissioner (Appeal) in advance.
Because the Ld. CIT(A) failed to appreciate that the deposits of Rs. 26,88,147/- made by 18-20 distributors out of 4000 distributors, was in the nature of EPRS (Electronic Purchase Recharge System) recharge given to distributors, which had been disclosed in the Financial Statement & books of accounts and not any illegal cash deposits and therefore did not warrant any levy of disallowance u/s 68 of the Act; 10. Because assuming without admitting the arrangement with the distributor in the nature of seller of recharge, the Ld. AO/Ld. CIT (A) failed to appreciate that the distributors had the liberty to sell the electronic recharge balance on its own and therefore it was not possible for the company to collect the PAN of the parties, in such case the provisions of Rules 114B r/w Section 39A would fail and therefore could not be applied.
Because without prejudice to above, even if the limit of Rs. 50,000/- is concerned, an amount of Rs. 7,55,941/- is for the parties which are less than Rs. 50,000/- 12. Because the Ld. AO/CIT (A) erred in drawing an analogy with disallowances of Rs. 26,88,147/-, without appreciating that the said sum related to amount given to distributors for distribution of recharge, which had already been offered to tax and therefore the nature of such deposits was recharge income, which did not warrant any disallowance u/s 68 of the Act.
Because Ld. AO/CIT (A) has erred on facts that the penalty was levied by ignoring the basic submissions of the Appellant that advances was deposited by the distributors and not the Appellant and without asking for the third-party confirmation to be received is illegal and void.
The above grounds / sub-grounds are without prejudice to each other.”
Brief facts of the case shows that the assessee company engaged in the business of infrastructure support services to its customers. It filed its return of income on 30.09.2016 declaring income of Rs. 77,42,61,381/-. During the course of assessment proceedings the ld AO found that the assessee has claimed deposit of Rs. 705.50 crores. The ld AO asked assessee to justify the above deposit in view of the provision of section 68 of the Act. The assessee submitted details of advances and deposits along with PAN and addresses of all the parties except in case of small customers. The ld AO noted that the assessee could not given the PAN of advances received from small trade partners of Rs. 81,01,728/- as well as deposit from small customers amounting to Rs. 39,84,695/-. Therefore, the ld AO made addition u/s 68 of Rs. 1,20,86,423/- and disallowances of Rs. 40,00,020/- was also made out of e- stamping expenditure holding it to be capital expenditure as it was incurred the issue of debentures for raising funds for operations of the companies. The ld AO further made disallowances of Rs. 6,23,34,000/- out of interest expenditure holding it to be capital expenditure for the funds for purpose of acquisition of assets and investments for setting up of call centres. The assessment order u/s 143(3) of the Act was passed on 27.12.2018 determining the total income of the assessee at Rs. 85,26,81,824/- against the return income of Rs. 77,42,61,381/-.
4. Assessee preferred an appeal before the ld CIT(A). Out of additions of Rs. 1,20,86,423/- he confirmed the addition of Rs. 26,88,147/- u/s 68 of the act as assessee could not produce the permanent account number of those parties. The assessee also did not produce even the Ledger accounts or the addresses of these parties. He deleted the disallowances of e-stamp due to expenditure of Rs. 40 lakhs and also the interest expenditure of Rs. 6,23,34,000/-. Therefore, the assessee is aggrieved with the order of the ld CIT(A) in confirming the additions of Rs. 26,88,147/- u/s 68 of the Act. The learned CIT – A also noted in paragraph number 4 of his order that an opportunity was granted to the assessee by issuing hearing on 24 July 2020 but the assessee has submitted the details through email in the last such email was received on 10th of August 2020. Therefore the order was passed on the written submission of the assessee.
5. Assessee aggrieved with the order of the learned CIT – A as preferred this appeal and raised detailed grounds of appeal
which was reiterated before us and further it was stated that there is no requirement of obtaining PAN from the customers. The ld AR referred to the provisions of section 139A read with section 114D. He submitted that there was no requirement to call for the PAN and any other documents pertaining to purchase and sale of transactions. He further submitted that the above amount cannot be added u/s 68 of the Act because these are deposits towards recharge by small traders for purchase ERPS. It was also stated that the disallowance u/s 68 of the Act could not have been made in the hands of the assessee as these are trading transactions. He further stated that the sale amount represents pertaining to 18 to 20 depositors out of 4000 depositors. The learned authorised representative further submitted that the above credits have resulted into sales in subsequent period. He further submitted that the most of the accounts are pertaining to the various installations of various companies which naturally could not have permanent account number. Therefore, he submitted that the ld CIT(A) has confirmed the additions u/s 68 of the Act without any basis.
6. The ld DR referred to the order of the ld CIT(A) and submitted that the ld CIT(A) has noted that in all these cases the deposits are more than Rs. 50000/- and even the address of these parties are not available. He further submitted that Page | 4 the assessee even could not produce the ledger accounts of these depositors and therefore, the assessee has failed to show the identity, creditworthiness and genuineness of the transactions. He therefore, defended the orders of the lower authorities.
7. We have carefully considered the rival contentions and perused the orders of the lower authorities. The assessee is in the business of electronic recharge payment systems. Installation and activation are vital process for earning income in infrastructure services of the assessee company. The assessee company has subscribers all across India and for the smooth installation/activation and maintenance it has trade partners in the form of distributors/dealer/discharged centres/service franchisees et cetera all over the countries. In order to activate and recharge the set-top boxes of its customers, the accounts of distributors/dealers account is credited by the company through electronic recharge payment system. It is the motive to reach at distributors mobile with the amount which facilitates the dealer/distributor to pay activation amount to the ultimate customers. Distributors deposit money in the bank account of the assessee company and submits the details on the web portal mentioning the complete details of electronic recharge payment requirements and payment details. Post verification of the recharge amount same is transferred to the distributors. In this process the assessee received money from its trade partners, who are small customers. During the course of assessment proceedings the assessee was asked to submit the details of the outstanding advances of ₹ 705 crores out of which the assessee could not submit the permanent account number as well as the address of certain parties and the learned assessing officer has made the addition of those some u/s 68 of the income tax act. On appeal before the learned CIT – A the amount of addition was restricted to ₹ 2,688,147/– for the reason that assessee could not submit the address/permanent account number of these parties. The learned CIT – A also noted that the assessee one could not produce the Ledger accounts of the deposits of the sum which is the primary onus lying on the assessee. Therefore the above addition was confirmed. On consideration of the rival contentions we find that the amount of the above sum of ₹ 2,688,147 is respect to several parties noted in paragraph number 5.3 of the order of the learned CIT – A wherein at serial number 11 – 29 except at serial number 20. It is the contention of the assessee that above sum is a trade deposit. In all the cases the assessee has submitted the detailed address of the parties. Many of the Page | 5