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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.
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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:-
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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. 2. 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’’.
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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.
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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
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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
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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.
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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.
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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.
Sd/- Sd/- (धु�वु� आर.एल रे�डी) (अ�ाहम पी. जॉज�) (DUVVURU RL REDDY) (ABRAHAM P. GEORGE) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य /ACCOUNTANT MEMBER चे�नई/Chennai �दनांक/Dated: 20th November, 2018. KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF