DIPENDRA NATH BASU,KOLKATA vs. ITO, WARD - 56(3), KOLKATA, KOLKATA

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ITA 2084/KOL/2017Status: DisposedITAT Kolkata02 February 2018AY 2009-105 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to compute income on the undisclosed receipts using the net profit rate. However, for the rent payment issue, the Tribunal remanded the matter to the AO to verify if tax was deducted under Section 194I, and if so, to delete the disallowance. The disallowance of other expenses for non-deduction of TDS was confirmed.

What were the facts?

The assessee, an advertisement agency owner, had a discrepancy of Rs. 2,88,235 between his business receipts and the 26AS statement, which he could not reconcile. Additionally, the Assessing Officer disallowed Rs. 3,28,800 paid as rent for advertising space, treating it under Section 194C instead of 194I, and also disallowed expenses totaling Rs. 3,29,434 for non-deduction of TDS.

What were the issues?

Whether the addition of unexplained business receipts is justified, and whether disallowances for non-deduction of TDS on rent and other expenses are correct.

Which sections of the Income-tax Act were involved?

Section 26AS,Section 194C,Section 194I,Section 40(a)(ia)

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Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA

Before: Hon’ble Sri N.V.Vasudevan, JM ]

Dipendra Nath Basu -vs.- I.T.O., Ward-56 (3) Kolkata Kolkata [PAN : ADBPB 5261 E] (Respondent) (Appellant) For the Appellant : Shri T.P.Kar, FCA For the Respondent : Md. Ghayas Uddin, Addl. CIT Date of Hearing : 25..01.2018. Date of Pronouncement : 02.02.2018. ORDER This is an appeal by the assessee against the order dated 24.07.2017 of CIT(A)- 12, Kolkata relating to A.Y.2009-10.

2.

Ground No.1 raised by the assessee reads as follows :- “(1) That in the facts and in the grounds of appeal how far the commissioner (Appeal) is correct in affirming the addition as made by the Assessing Officer the sum of Rs.2,88,235/- without considering the explanations of the appellant and the comparative statement with 26AS which displayed wrong information. “

3.

The Assessee is an individual. He carries on the business of running an advertisement agency. There was a difference of Rs.2,88,235/- between the receipts from business as disclosed by the assessee in the books of accounts and as per 26AS statement (AIR information) available with the income tax department. It is not in dispute that the assessee could not reconcile the differences. Hence a sum of Rs.2,88,235/- was added to the total income of the assessee.

4.

Before the CIT(A) the assessee made an alternative submission that the entire receipts cannot be added as income of the assessee. The CIT(A) accepted the plea of the Dipendra Nath Bssu A.Yr.2009-10 assessee and directed the AO to apply the net profit rate as per the return and compute the income on the undisclosed receipts of Rs.2,88,235/-.

5.

Before me the ld. Counsel for the assesse was unable to reconcile the discrepancy between the receipts as per 26AS and as per the assessee’s books of accounts. In these circumstances, I am of the view that the order of CIT(A) is just and proper and does not call for any interference.

6.

Ground No.2 raised by the assesse reads as follows :- “(2) That in the facts and in the grounds of appeal how far the CIT(A} is correct in affirming the order of the Assessing Officer for the sum of Rs.3,28,800/- being paid as rent for utilising the land space under section 194-1 in terms of the agreement with the landlord but the Assessing Officer has considered it U/s 194C of the Income Tax Act.”

7. The assessee as I have already explained is in the business of acting as an advertising agent. In the course of his business the assessee takes space for hire from different agencies for display of advertisement hoardings. The amount paid to these parties were treated as in the nature of rent. The order of the AO is silent as to whether tax was deducted by the assessee u/s 194I of the Income Tax Act, 1961 (Act) treating the payments as rent. The AO has however observed that the payments to the parties will fall within the ambit of payment for carrying out work u/s 194C of the Act. Under section 194C of the Act higher rate of tax have to be deducted at source. If the assessee had deducted tax at source u/s 194I of the Act then it would be a case of short deduction of tax at source. The AO disallowed a sum of Rs.3,28,800/- which were payments made without any deduction u/s 194C of the Act.

8. The CIT(A) confirmed the order of AO. It is seen from one of the submissions made by the assessee before CIT(A) that he had placed reliance on the decision of the Hon’ble Calcutta High Court in the case of S.K.Tekriwal 361 ITR 432(Cal) wherein it 2

Dipendra Nath Bssu A.Yr.2009-10 was held that there can be no disallowance u/s 40(a)(ia) of the Act in the case of short deduction of tax at source and such disallowance could be made only when there is no deduction. In other words if tax is deducted at source at a lesser rate then no disallowance u/s 40(a)(ia) could be made. The Order of CIT(A) is silent on this issue. I am therefore of the view that it would meet the ends of justice if the addition made by CIT(A) is set aside and the issue remanded to the AO. If the assessee had deducted tax at source in terms of section 194I of the Act then the disallowance u/s 40(a)(ia) of the Act should be deleted. The AO will afford opportunity of being heard to the assessee in the set aside proceedings.

9.

Ground No.3 raised by the assessee reads as follows :- “(3) That in the facts and in the grounds of appeal how far the CIT(A) is correct in affirming the decision of the Assessing Officer for disallowing the following expenses for not deducting the tax at source U/s 40(a)(ia) -

a) Repair and Maintenance Rs. 60,750/- b) Production Charge Rs. 96,184/- c) Display Charges Rs.1,72,500/- Total = Rs.3,29,434/-“

10.

It is not disputed in respect of the expenses set out in the grounds of appeal, tax has not been deducted at source. The only argument of the assessee before the CIT(A) was that as on the last date of the previous year none of the amounts remained outstanding. The assessee relied on decision of the Special Bench Visakahapatnam in the case of Merilyn Shipping & Shipping Transports vs Addl. CIT 136 ITD 23 wherein it was held that the provision of section 40(a)(ia) of the Act is applicable only when the amounts remain payable on the last date of the relevant previous year and not when the amounts have already been paid as on the said date. The CIT(A) rejected this argument by placing reliance on the decision of the Hon’ble Calcutta High Court in the case of CIT vs Crecent Export Syndicate in ITAT No.20 of 2013 in GA No.190 of 2013 judgment dated 03.04.2013. 3

Dipendra Nath Bssu A.Yr.2009-10 11. Before me the ld. Counsel for the assessee could not substantiate as to how the provision of TDS are not applicable on the aforesaid payments. I am of the view that the order of CIT(A) does not call for any interference in view of the decision of the Hon’ble Calcutta High Court in the case of Crescent Export Syndicate (supra). Ground no.3 is accordingly dismissed.

12.

In the result the appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the Court 02.02.2018.

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