NISHIT SAXENA,NEW DELHI vs. ITO, NEW DELHI

This appeal filed by the Assessee against the Order dated 18.12.2015 passed by the Ld.CIT(A)-15, New Delhi for Assessment Year 2009-10 on the following grounds:-

“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax

(Appeals) [CIT(A)] is bad both in the eyes of law and on facts.

2. (i) On the facts and circumstances of the case, learned

CIT(A) has erred both on facts and in law in confirming the order of the AO rejecting the contention of the assessee that reopening the assessment under Section 147 of the Act without complying with the statutory conditions and the procedure prescribed under the law is bad and liable to be quashed.

(ii) On the facts and circumstances of the case, learned

CIT(A) has erred both on facts and in law in confirming the order of the AO rejecting the contention of the assessee that the reason recorded for reopening of the assessment are bad in law, and as such the reopening of the assessment is illegal and liable to be quashed.

3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in upholding the reopening of assessment done by the AO,

without there being any live nexus between the reasons recorded and the belief formed by the assessing officer that any income has escaped assessment.

4.(i) On the facts and circumstances of the case, learned

CIT(A) has erred both on facts and in law in confirming the addition of Rs.12,38,253/- made by the AO on account-of salary income.

(ii) That the above said addition-has been confirmed by the learned CIT(A) despite the fact that the banquet tip received by the assessee is taxable under the head 'profits and gains from business and profession' and not under the head

'salary'.

(iii) That the Ld. CIT(A) has erred in confirming the said addition despite the fact that the banquet tip income received by the assessee is on account of the reimbursement of various expenses incurred by the assessee.

2. The brief facts of the case are that the return of Income was filed on 24.09.2009 declaring an income of Rs. 3,95,432/-. The assessee is employed in the Hotel ITC Maurya, New Delhi, The main sources of Income are shown from salary, house property, business Income and Income from other sources. Gross receipts from business are shown at Rs. 12,38,253/- on which net profit is declared at Rs. 2,25,526/-. It was observed by AO that as per 26AS statement, total receipts of Rs.13,91,076/- were shown on which tax was deducted at source u/s 192B of the Act, applicable to salary payments. Against it, income under the head 'Salaries' was declared at Rs. 2,88,022/- only in the return. Thus, as per AO, there was a short declaration of salary income by RS. 11,03,O54/-. Information were also sought by AO from ITC Maurya, the employer who informed that the other income included "Banquet Tips" which showed that the amount of Rs. 9,33,420/- was also paid by the employer to the assessee. In view of this discrepancy, the case was reopened as per provisions of Section 147 of the Act and notice u/s 148 was issued on 16.12.2012. The reasons recorded for reopening the assessment were supplied to assessee on which objections were raised by him which were disposed of by AO vide letter dated 21.02.2014. During the assessment proceedings, it was observed by A0 that the amount of Rs. 9,33,420/- paid by employer as share of assessee out of total banquet service charges collected and divided amongst employees. Therefore, no separate expenditure was incurred by assessee in order to earn the said banquet tips. He, therefore, proposed to disallow the expenses claimed by assessee. In the profit and loss account against the aforesaid receipts. In reply, assessee explained that he was handling banquet services which included services like hiring of bar tenders, flower decoration services, hiring of casual staff and renting of equipment etc. It was further explained that against the aforesaid receipts, expenses have been incurred by assessee which are not in the knowledge of employer, the ITC Maurya. The assessee also objected to the reopening of assessment proceedings by AO. After considering the explanation given by assessee, AO concluded that there was definite information of payment made and tax deducted at source In the form of 26AS statement for reopening the assessment proceedings In the case of assessee. On merit, it was observed by AO that bills of expenses submitted by assessee have no serial numbers and all the bills are computer printouts and payments are made in cash just below the limit of RS.20,OOO/- specified u/s 40A(3) of the Act. Further, there are no corresponding withdrawals as per bank statements filed by assessee on the dates on which the payments are stated to be made. It is also observed by AO that the information called for from ITC Maurya confirmed that the amount of Rs. 9,33,420/- as mentioned in Form No. 16 was on account of banquet services and they were not aware If the employee concerned had incurred any expenses against this banquet service charges amount. In view of this, AO concluded that banquet service charges received by assessee are in lieu of his regular duties done by him as employee of ITC Maurya and he has not maintained any separate office to earn this Income. Therefore, this Income could not be said to be derived from a separate business and such receipts are part and parcel of his salary Income. Consequently, AO treated the amount of Rs.12,38,253/- in lieu of salary under the head 'Salaries' and disallowed the expenses claimed by assessee and completed the assessment at Rs. 14,37,819/- vide his order dated 14.3.2014 passed u/s. 143(3)/147 of the I.T. Act, 1961.

3. Against the aforesaid assessment order, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 18.12.2015 has dismissed the appeal of the assessee.

4. Aggrieved with the order of the Ld. CIT(A), assessee is in appeal before the Tribunal.

5. At the time of hearing Ld. Counsel for the assesse stated that CIT(A) has erred both on facts and in law in confirming the order of the AO rejecting the contention of the assessee that reopening the assessment under Section 147 of the Act without complying with the statutory conditions and the procedure prescribed under the law is bad and liable to be quashed. He further stated that Ld. CIT(A) has also erred in confirming the order of the AO rejecting the contention of the assessee that the reason recorded for reopening of the assessment are bad in law, and as such the reopening of the assessment is illegal and liable to be quashed. He further stated that Ld. CIT(A) has erred, both on facts and in law in upholding the reopening of assessment done by the AO, without there being any live nexus between the reasons recorded and the belief formed by the assessing officer that any income has escaped assessment. To support this contention he relied upon the Hon’ble Delhi High Court decision in the case of CIT vs. Orient Craft Ltd. 354 ITR 536 (Delhi). Ld. Counsel of the assessee further stated that AO has grossly erred in reopening the assessment of the assessee only on the basis of Form 26AS and the TDS certificate issued by the employer of the assessee, hence, no tangible material was before the AO apart from the TDS certificate, to form a belief that income has escaped assessment. He further stated that it is a settled law that an assessment could not be reopened only on the basis of difference in TDS certificate and receipts shown in the P&L account. To support this contention he placed reliance on the following Tribunal’s decisions:-

i) Rafeeq Iqbal vs. ITO (ITAT, Hyderabad) – ITA No.

709/Hyd/2013 dated 13.9.2013. – 2013 (11) TMI 8 –

ITAT Hyderabad. ii) Meheria Reid & Co. vs. ITO & 54 Kol of 2010 dated 28.12.2012 – 2013 (2) TMI 348 – ITAT

Kolkata. iii). M/s Krishna Reddy Contractors vs. ITO – ITA No. 1347/Hyd/2013 dated 30.6.21014 – 2014 (7) TMI 644 – ITAT Hyderabad.

“Reasons for the belief that the income has escaped assessment in the case of Sh. Nishit Saxena (PAN:

ANZPS6159C) for the assessment year 2009-10.

Paper return of income for AY 2009-10 was filed by Sh. Nishit Saxena (PAN ANZPS6159C) on 24.9.2009 declaring income of Rs. 3,59,432/- and claimed a refund of Rs. 3,39,640/- out of total TDS of Rs. 3,74,755/-.

In the computation of income the assessee has declared his income under the different heads as under:-

1,95,877/-

As per 26AS data in the case of the assessee, based on the data provided by the deductor of tax in its TDS return, for financial year 2008-09 relevant to the assessment year 2009-10 the amount of total tax deducted was Rs. 3,74,755/- out of total payments covered u/s. 192B of the I.T. Act i.e. salary payments amounting to Rs. 13,91,076/-. Therefore, there is short declaration of salary income of Rs. 11,03,054/-

. Perusal of the form no. 16 issued by ITC Ltd. to the assessee for financial year 2008-09 relevant to the assessment year 2009-10 total inome (before deduction u/s. 80C) is Rs. 11,19,324/- against the declared income of Rs. 3,59,432/-.

On the basis of the above information, I have reason to believe that income has escaped assessment as defined by section 137 of the Income

Tax Act, 1961 by reason of the failure on the part of the assessee to disclose fully and truly all material facts. The income chargeable to tax has escaped assessment for this assessment year. Therefore, it is a fit case for the issuance of notice u/s. 148 of the Income Tax Act, 1961.

Date: 14-11-2012