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Income Tax Appellate Tribunal, ‘A’ BENCH : CHENNAI
Before: SHRI ABRAHAM P. GEORGE & SHRI DUVVURU RL REDDY]
आदेश / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER These are appeal and cross objection of the Revenue and assessee respectively directed against an order dated 30.11.2017 of ld. Commissioner of Income Tax (Appeals)-15, Chennai.
Appeal of the Revenue is taken up first for disposal. 2.
/2018 :- 2 -: & CO 112/18
Revenue has taken altogether eight grounds of which ground No.1 & 8 are general needing no specific adjudication. Ground Number 7 is also, more or less general and assails various directions given by the ld. Commissioner of Income Tax (Appeals) to the ld. Assessing Officer, which as per Revenue was akin to exercising a ‘’power to set side’’ which was not there with the ld. Commissioner of Income Tax (Appeals). Since, this ground of the Revenue is relevant to almost all other grounds raised, it will be dealt by us at the appropriate places.
Vide its ground No.2, grievance of the Revenue is on the 4. directions of the ld. Assessing Officer to verify the submission of the assessee with regard to disallowance of �17,25,125/- made u/s.40(a)(ia) of the Income Tax Act, 1961 (in short ‘’the Act’’).
Facts apropos are that assessee engaged doing business as architects, interior decorators and designers had filed her return for the impugned assessment year disclosing income of �96,76,870/-.
During the course of assessment proceedings, it was noted by the ld. Assessing Officer that assessee had effected payments aggregating �17,25,125/- on which no tax was deducted at source u/s.194A, 194H, 194J and 194I of the Act. Break-up of such expenditure as given by the ld. Assessing Officer is reproduced hereunder:- /2018 :- 3 -: & CO 112/18
Nature of Applicable Paid to Amount in payment Section � Interest Paid 194A M/s. India Bulls Financial 14,043 Services
Interest Paid 194A Mr. Premkumaar K. 36,866 Sheth Interest Paid 194A Mrs. Bharti P.Sheth 36,866 Interest Paid 194A Mrs. Bharti P.Sheth 8,611 Interest Paid 194A Mr. Premkumaar K. 8,611 Sheth Commission paid 194H Mr. Premkumaar K. 1,20,000 Sheth (HUF) Commission paid 194H J. Golden Davy 2,25,000 Consultancy 194J Ghulam Hussin A 40,000 charges Engineering fees 194J Collate Consultants P. 5,40,000 Ltd Consultancy 194J Sivasankar S 45,000 charges Repairs and 194C Vehicle Service 82,500 Maintenance Repairs and 194C Acacia Dreams 3,00,000 Maintenance Travelling 194C Paid to Amex Card 3,72,625 Expenses
Total in � 17,25,125 Ld. Assessing Officer made a disallowance invoking Section 40(a)(ia) of the Act. /2018 :- 4 -: & CO 112/18
In its appeal before ld. Commissioner of Income Tax (Appeals), argument of the assessee was that recipients of the interest commission and consultancy fees had included such amounts in their respective Income Tax return and paid tax thereon. Relying on the first proviso to Section 201 (1) of the Act and second proviso to Section 40(a) (ia) of the Act, assessee argued that once the payee had shown the receipts as part on their income and paid taxes thereon, there could be no disallowance u/s.40(a)(ia) of the Act. It was also submitted by the assessee that part of consultancy charges claimed was actually incurred for fabrication work. Similarly according to her some of the payments made under the head ‘’repairs and maintenance’’ included purchase cost of granite.
Assessee also pointed out that travelling expenditure which was included as a part of consultancy charges, was paid in foreign currency and did not attract tax deduction provision. Ld. Commissioner of Income Tax (Appeals) considering the submissions of the assessee directed the ld. Assessing Officer to verify Form No.26A in respect of each of the parties, as well as the submissions made by the assessee and to give appropriate relief to the assessee.
Now before us, ld. Departmental Representative submitted 7. that ld. Commissioner of Income Tax (Appeals) had no powers for giving directions which were akin for setting aside order. According to /2018 :- 5 -: & CO 112/18 him, after the amendment made to Section 251(1) (a) of the Act through Finance Act, 2001 the power earlier available with the Commissioner of Income Tax (Appeals) for setting aside orders was no more there.
Per contra, ld. Authorised Representative submitted that 8.
directions given by the ld. Commissioner of Income Tax (Appeals) were fair and did not warrant interference.
We have heard rival submissions and perused the orders. 9.
Claim of the assessee was that many of the parties to whom payments were effected had shown such receipts in their respective returns and by virtue of second proviso to Section 40(a) (ia) of the Act read alongwith first proviso to Section 201(1) of the Act, the recipients having shown the income and paid taxes, assessee could not be saddled with a disallowance u/s.40(a)(ia) of the Act. Ld.CIT (Appeals) considering this argument had directed the ld. Assessing Officer to verify form No.26A of the recipients and give appropriate relief to the assessee. Ld. Commissioner of Income Tax (Appeals) also directed ld. Assessing Officer to examine the claim of the assessee that payments to three parties were below threshold limit for attracting tax provision. We are of the opinion that such directions cannot be considered as a setting aside order or an order directing /2018 :- 6 -: & CO 112/18 reexamination of what was available on records. Ld. Commissioner of Income Tax (Appeals) had clearly stated that he was partly allowing the claim of the assessee. Directions given by him to the ld. Assessing Officer was only to give effect to his order and in our opinion was well within his powers. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). Ground No.2 of the Revenue stands dismissed.
Vide its ground No. 3, grievance of the Revenue that ld. 10.
Commissioner of Income Tax (Appeals) directed the ld. Assessing Officer to verify a claim of gift of �1,34,157/- received by assessee’s minor child.
Ld. Assessing Officer had added with the income of the assessee, a gift of �1,34,157/- received by her minor child Ms.Karishma R. Seth relying on Section 64(1A) of the Act. Assessee had before ld. Assessing Officer stated that Ms.Karishma R. Seth had received such money from her close relatives like Mother, Father and Grandfather. This was not accepted by the ld. Assessing Officer. When the matter reached the ld. Commissioner of Income Tax (Appeals), he directed the ld. Assessing Officer to verify all supporting documents filed by the assessee and allow the claim to be extent the gifts were /2018 :- 7 -: & CO 112/18 received from relatives coming within the meaning of Explanation (e) to Section 56(2) (vii) of the Act.
Now before us, argument of the ld. Departmental Representative was that ld. CIT (A) had no such powers. Arguments similar to what were advanced with reference to ground 2 were raised here also.
Per contra, ld. Authorised Representative strongly supported 13.
the order of the ld. Commissioner of Income Tax (Appeals).
We have perused the orders and heard the rival contentions.
Contention of the ld. Departmental Representative is that directions given by the ld. Commissioner of Income Tax (Appeals) were akin to a setting aside or for re-examining records already available with the ld. Assessing Officer. It is true that Ld. Commissioner of Income Tax (Appeals) had directed the ld. Assessing Officer to verify the supporting documents filed by the assessee before him during the appellate proceedings and give appropriate relief. Nevertheless, ld. Commissioner of Income Tax (Appeals) had specifically stated that he was partly allowing the ground raised by the assessee on the gifts received by assessee’s minor daughter. We are of the opinion that directions of the ld. Commissioner of Income Tax (Appeals) did not amount to setting aside or re-examination of the issue. It might be /2018 :- 8 -: & CO 112/18 true that ld. Commissioner of Income Tax (Appeals) could have invoked Rule 46A of Income Tax Rules, 1961 (in short ‘’the Rules’’) and sought a remand report from ld. Assessing Officer. However, such technical niceties in our opinion should not come in way of administration of justice, especially when the issue is on small gifts received by a minor child. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). Ground No.3 of the Revenue stands dismissed.
Vide its ground No.4, grievance of the Revenue is that ld. 15.
Commissioner of Income Tax (Appeals) directed the ld. Assessing Officer to verify the claim of sundry creditors in the books of M/s.
Clover Design and in the name of one M/s. KGS Milestone Construction Ltd, for giving appropriate relief to the assessee.
Assessee had shown sundry creditors aggregating to 16. �60,90,889/- in the books of her proprietorship concern named M/s. Clover Design, a sundry credit of �10,00,000/- in the name of M/s.
KGS Milestone Construction Ltd in the books of the business conducted in her individual name. However, it seems assessee could not file any confirmation from these creditors nor any details. Ld. Assessing Officer made additions aggregating to �70,90,889/-, on account of /2018 :- 9 -: & CO 112/18 failure of the assessee to provide confirmation and details. When the matter reached ld. Commissioner of Income Tax (Appeals), assessee filed confirmations from various parties. Ld.CIT (Appeals) after taking into account the confirmations submitted by the assessee directed the ld. Assessing Officer to verify the claim of sundry creditors and delete the additions, if proper supporting documents were filed by the assessee. Now the contention of the ld. Departmental Representative before us is that ld. Commissioner of Income Tax (Appeals) had no powers for giving such directions. As against this, ld. Authorised Representative strongly supported the order of the ld. Commissioner of Income Tax (Appeals).
We have perused the orders and heard the rival contentions.
It is true that ld. Commissioner of Income Tax (Appeals) could have invoked Rule 46A and sought a remand report instead of directing a verification by the ld. Assessing Officer. As already mentioned by us, such technical niceties should not come in the way of application of tax laws. What can be collected as tax is only what is allowed as per the statute and nothing more nor nothing less. Assessee had before ld. Commissioner of Income Tax (Appeals) submitted that many of the creditors were paid in subsequent year and that too though banking channels. In the circumstances of the case, we are of the opinion that /2018 :- 10 -: & CO 112/18 directions by the ld. Commissioner of Income Tax (Appeals) cannot be considered as inappropriate. Ld. Assessing Officer can verify the supporting documents filed by the assessee for corroborating the balances in various sundry creditors and give appropriate relief to the assessee. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). Ground No.4 of the Revenue stands dismissed.
Vide its ground No.5, grievance of the Revenue is that ld. 18.
Commissioner of Income Tax (Appeals) directed the ld. Assessing Officer to verify the claim of business promotion and salary expenditure aggregating �12,99,384/-.
Assessee had claimed total expenditure of �25,98,767/- against business promotion and salary. Ld. Assessing Officer had made a disallowance of 50% thereof due to failure of the assessee to produce bills and vouchers. When the matter reached ld. Commissioner of Income Tax (Appeals), ld. CIT(A) noting that the payments were mostly through banking channels directed the ld. Assessing Officer to verify the bills and vouchers and allow the claim to the extent it was properly supported. As mentioned by us, we do not find any lacuna in the directions given by the ld. Commissioner of /2018 :- 11 -: & CO 112/18 Income Tax (Appeals) for verifying the evidence filed by the assessee.
Ground No.5 of the Revenue stands dismissed.
Vide its ground No.6, grievance of the Revenue is that deduction of �22,500/- claimed u/s.80G of the Act for donation made was allowed by the ld. Commissioner of Income Tax (Appeals).
Ld. Assessing Officer had disallowed such claim for want of evidence. It seems, before the ld. Commissioner of Income Tax (Appeals), assessee had produced evidence for donees approval under Section 80G of the Act. Ld. Commissioner of Income Tax (Appeals) had given directions to the ld. Assessing Officer to verify the claim and allow to the extent, as per law. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). Ground No.6 of the Revenue stands dismissed.
As already mentioned by us, Revenue has raised a general issue in its ground No.7, assailing directions given by the ld. Commissioner of Income Tax (Appeals) for examining the evidence filed by the assessee and for giving appropriate relief to the assessee.
It is true that Finance Act, 2001 omitted words ‘’ powers to set aside’’ or ‘’examining the issue afresh’’ from Section 251(1) ( a) of the Act.
However, as already mentioned by us, directions of the ld. Commissioner of Income Tax (Appeals) were not akin to a direction for /2018 :- 12 -: & CO 112/18 examining the issue afresh. There was no setting aside as well. What was directed by the ld. Commissioner of Income Tax (Appeals) was to examine the evidence filed by the assessee and give appropriate relief. Ground No.7 of the Revenue stands dismissed.
Now, we take up Cross objections filed by the assessee. 23.
Cross Objections have been filed with a delay of thirty two 24. days. Condonation petition has been filed. Reasons shown for the delay seems to be justified. Ld. Departmental Representative did not raise any serious objection. Delay is condoned. Cross Objections are admitted.
Assessee has raised four grounds in Cross Objection, which 25. are reproduced hereunder:-
‘’For that the ld. Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction, is contrary to law, facts and circumstances of the case and is opposed to the principles of equity, natural justice and fair play.
For that the ld. Commissioner of Income Tax (Appeals) erred in confirming the addition made on account of gifts received from the relatives, which is not taxable as per the provisions of Section 56(2) (vii). 3. For that the ld. Commissioner of Income Tax (Appeals) failed to appreciate that the ld. Assessing Officer ought not to have added the agricultural income as income from other sources. 4. The appellant craves leave to add /alter any of the grounds of appeal before or at the time of hearing’’.
/2018 :- 13 -: & CO 112/18 Apart from this, assessee had also filed an additional ground, which reads as under:-
‘’For that the ld. Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer erred in disallowing the expenses incurred for the purpose of business as personal expenses’’.
Ld. Assessing Officer had denied the claim of exemption on 26. gifts aggregating �93,200/- made by the assessee, relying on Explanation (e) to Section 56(2) (vii) of the Act. Assessee had given the breakup of the sum of �93,200/- as under:-
Sl.No Name Relationship Amount in � 1 Rakesh P. Sheth Husband 25,000
2 JyothiChundur Mother 15,000 3 Premsaichundur Brother 15,000 4 Staff Staff 5,000 5 Premkumaar K.Sheth Father-in-law 33,200
Total 93,200 Ld. Assessing Officer made the addition, since assessee could not prove her relationship with the donors nor filed any confirmations. /2018 :- 14 -: & CO 112/18 Even before ld. Commissioner of Income Tax (Appeals), assessee did not produce any confirmations in this regard.
Now before us, ld. Authorised Representative submitted that the gifts were received from close relatives and assessee would be able to produce confirmations if given one more opportunity. Ld. Departmental Representative did not raise any strong objections to this. Considering the submissions made by the ld. Authorised Representative, we are of the opinion that assessee can be given one more chance for explaining the gifts of �93,200/-. We set aside the orders of the lower authorities and remit the issue back to the file of the ld. Assessing Officer for consideration afresh in accordance with law. Assessee should be given an opportunity to file evidence in support of its claim. Ground No. 2 of the cross objection is allowed for statistical purpose.
Vide its ground No.3, grievance of the assessee is that 28. agricultural income claimed by it was not allowed but added as ‘’income from other sources’’.
Assessee has claimed agricultural income of �5,00,000/- but 29. did not produce any evidence before ld. Assessing Officer. In its appeal before ld. Commissioner of Income Tax (Appeals), assessee had produced Chitta and Adangal for confirming the nature of the /2018 :- 15 -: & CO 112/18 land and also a receipt voucher for �5,00,000/-. Ld. Commissioner of Income Tax (Appeals) was of the opinion that evidence filed by the assessee in the nature of self voucher did not reveal any agricultural activities carried out by the assessee. In our opinion, mere production of Chitta and Adangal would not show that assessee was doing agricultural activities or earning any agricultural income. Ld. Commissioner of Income Tax (Appeals) had specifically noted that vouchers produced by the assessee did not give address of the parties. In such circumstances, we are of the opinion that lower authorities were justified in rejecting the claim of agricultural income.
We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). Ground No.3 of the cross objection of the assessee stands dismissed.
In the additional grounds filed, grievance of the assessee 30. is that expenditure aggregating �10,63,769/- was disallowed by the lower authorities considering, it to be personal in nature.
Ld. Assessing Officer had found that assessee had deducted 31. a sum of �10,63,769/- from the net profit of her proprietorship /2018 :- 16 -: & CO 112/18 concern called M/s. Clover Design Studio. Breakup of the such expenditure given by the assessee was as under:-
PERSONAL EXPENSES CLAIMED Interest paid 78,619 Audit fees 1,750 General expenses 4,06,747 Bank charges & processing fees 1,24,820 Printing and Stationery 11,221 Electricity charges 71,076 Repairs & Maintenance 74,356 Telephone expenses 18,930 Travelling expenses 92,005 Business Promotion Expenses 1,84,245
Total in � 10,63,769 Since assessee did not offer any business income other than her income from M/s. Clover Design Studio, ld. Assessing Officer disallowed the claim. Ld.CIT (Appeals) had confirmed the disallowance observing that assessee could not give any evidence to prove that expenditure was exclusively incurred for business of the assessee. /2018 :- 17 -: & CO 112/18
Now before us, ld. Authorised Representative argued that assessee, in addition to her proprietorship M/s. Clover Design Studio, was also doing business in her individual name. As per the ld. Authorised Representative, the expenditure of �10,63,769/- was incurred in the business conducted in individual name. As against this, ld. Departmental Representative submitted that assessee could not produce any evidence for this.
We have perused the orders and heard the rival contentions.
The claim was disallowed for a reason that the expenses were personal in nature. However a perusal of the break-up of the claim reproduced by us at para 30 above, clearly shows that, it included audit fees, bank charges, travelling expenses etc. We cannot brush aside the claim of the assessee that she was doing business in her individual name also in addition to business in the name of M/s.
Clover Design Studio. Considering the facts and circumstances of the case, we are of the opinion that ends of justice will be met if 50% of the claim is allowed. Accordingly, we direct the ld. Assessing Officer to allow 50% of the claim of �10,63,769/-. Additional ground of the assessee are partly allowed. /2018 :- 18 -: & CO 112/18
To summarize the results, appeal of the Revenue is dismissed whereas that of cross objection of the assessee is party allowed. Order pronounced on Tuesday, the 20th day of November, 2018, at Chennai.