KALPANA KUTTY,MUMBAI vs. ASST CIT 11(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI N.K. PRADHAN, AM ITA No.3586/Mum/2016 (A.Y:2007-08) Ms. Kalpana Kutty Addl. Commissioner of Income Tax Flat No.1, Sunder House, Ground 11-1 Aayakar Bhavan, K.K. Floor, Shivaji Park, Keluskar Vs. Road, New Marine Lines, Road, Dadar(W), Mumbai-400020 Mumbai-400028 PAN No.AGIPK4160H Appellant .. Respondent Assessee by .. Shri SC Tiwari, AR & Ms. Rutuja Pawar, AR Revenue by .. Shri. MV Rajguru, DR Date of hearing .. 16-09-2016 Date of pronouncement .. 16-09-2016 O R D E R PER MAHAVIR SINGH, JM:

This appeal by the assessee is arising out of the order of CIT(A)-4, Mumbai, in appeal No. CIT (A)-4/Tr-12/Appeal (3)/ACIT 11(1)/2014-15 dated 29-04-2016. The Assessment was framed by ACIT Circle-11(1), Mumbai for the A.Y. 2007-08 vide order dated 30-11-2009 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

“1. That on the facts and in the circumstances of the appellant’s case and in law, learned Commissioner of Income-tax has erred in upholding the disallowance of Rs.17,50,681/- made by the AO on account of alleged Non-Deduction of Tax at Source. 2. That on the facts and in the circumstances of the appellant’s case and in law, learned Commissioner of Income-tax has erred in not appreciating that learned AO is not justified in invoking the provisions of Section 40(a)(ia). 3. That on the facts and in the circumstances of the appellant’s case and in law, learned Commissioner of Income-tax has erred in not allowing deduction of expenditure where the payee have paid their taxes.”

ITA No.3586/Mum/2016 3. Briefly stated facts are that the assessee is engaged in the business of production of television commercials and add films. The assessee submitted the details of production expenses, camera hire charges and editing charged before the AO which are as under: -

Sl Head of expenses Name of the party Total Amount Amount No. payment on which on which TDS tax not deducted deducted (i) (ii) (iii) (iv) (v) 1. Production Yogesh sarmath 62,000 - 62,000 expenses V.P. B. Production 2,50,000 2,50,000 T.Zone 1,29,076 1,29,076 Sparkle Production 1,28,272 1,29,272 Kas Movie Makers P. 1,00,000 1,00,000 Ltd Sailesh Chandrakant 1,51,000 1,51,000 Soni Ramchandani 1,23,078 1,23,078 Thar Films 1,92,842 1,92,842 2. Camera Hire Third Eye Camera 1,27,406 1,27,406 3. Editing Charges Prime Focus 4,86,007 4,86,007 Total 17,50,681

The AO noted that no TDS was deducted, but he has not specified under which section the assessee is liable to deduct TDS, and made disallowance by invoking the provision of Section 40a(ia) of the Act vide para 4.2 of his order as under: -

“Therefore, Rs.46,74,076/- (Rs.17,50,681/- + Rs.29,23,395/-) is disallowed u/s 40(a)(ia) of the IT. Act, 1961 and added back to the total income of the assessee for A.Y. 2007- 08.” 4. Aggrieved assessee preferred the appeal before the CIT(A), who also confirmed the action of the AO, but he has also not mentioned the default of the assessee that under which Section the assessee has committed default and the relevant findings in Para 3.2 reads as under: -

“I have considered the findings of the AO in original order and rival submission, remand report and rejoinder of the Appellant, carefully. I find from the clarification of the Appellant that entire payment of Rs. 17,50,681/- was related to production expenses, Camera Hire charges and Editing charges which come under provision of law of TDS. It is also evident that the TDS on such payment had not been made, hence, the Assessee is liable for disallowance u/s 40a(ia) of the Income-Tax Act…………………. ”

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ITA No.3586/Mum/2016 5. Before us, the learned counsel for the assessee argued that the lower authorities have not brought out the specific charge under which section he has to deduct the TDS. For this reason alone the orders of the lower authorities are bad and hence, be quashed. He also stated that this issue is also covered by the proviso inserted by finance Act 2012 w. e. f. 01- 04-2013, which held to be retrospective by Hon’ble Delhi High Court in the case of CIT Vs. Ansal Landmark Townships Pvt. Ltd. (2015) 377 ITR 635 (Del) wherein, Hon’ble High court held as under: -

“11. The first proviso to Section 210 (1) of the Act has been inserted to benefit the Assessee. It also states that where a person fails to deduct tax at source on the sum paid to a resident or on the sum credited to the account of a resident such person shall not be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfillment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a) (ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies.” Before us, the learned Counsel claimed that the payee’s have paid the tax on such sum income and furnished the returns of Income by the respective payees. The learned Counsel for the assessee stated that the CIT(A) should have consider the issue and he has erred in not addressing this issue. On the other hand, the leaned Sr. DR supported the order of the AO.

ITA No.3586/Mum/2016 7. The next issue in this appeal of the assessee is as regards to the order CIT(A) confirming the disallowance on travelling expenses, for this assessee has raised following ground No.4: -

“4. That on the facts and in the circumstances of the appellant’s case and in law, learned Commissioner of Income-tax had erred in upholding the disallowance or Rs.14,38,166/- from out of travelling expenses claimed by the appellant.” 8. We have heard the rival contentions and gone through the facts and circumstance of the case. We find from the facts of the case that the assessee has incurred a total travelling expense and stay expense at Rs.44,27,981/-. The AO disallowed the sum of 50% out of the total travelling and stay expenses as the assessee could not produce the bills and vouchers of travelling and stay expenses. The AO recorded the finding in Para 8.2 which reads as under: -

“Assessee could not produce bills of Travel and Stay expenses for verification. As such, Rs. 22,13,990/-, being 50% of travelling expenses of 44,27,981/-, is disallowed for want of verification and added back to the total income of the assessee for A.Y. 2007-08.” 9. The CIT(A) after considering the submissions of the assessee and part of the bills and vouchers examined by him and after that he restricted the disallowance at Rs.14,13,166/- by observing in Para 7.2 as under: -

“7.2 I have considered the issue under appeal, carefully, I find that even during the course of remand report proceeding the Appellant has not been able to produced 100% bills and vouchers of all the Travelling Expenses of Rs.44,27,981/-. The Ld. AO has mentioned that the Appellant has not produced bills & vouchers of expense of rs. 14,38,166/-. Therefore, such expenditure cannot be allowed. Considering the failure on the part of the Appellant to produce the verifiable bills & vouchers of the expenditure, the disallowance of expenditure is restricted to Rs.14,38,166/-, hence, balance amount of Rs. 71,75,824/- is deleted.” Aggrieved, now assessee is in second appeal before Tribunal.

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ITA No.3586/Mum/2016 No.089647 as advance for Hotel during Asian Games. Further, an amount of Rs. 2.50 lakhs was paid to Kvoni Travels vide cheque No. 078064 for hotel for Asian Game, which is at page No.62 of the assessee’s paper book. From these details, it is clear that the assessee has paid this amount of Rs. 7,50,0000/- to M/s Sita Kuoni Travels and to that extent the assessee can be allowed relief. For the balance sum of Rs.6,88,166/-, the assessee could not produce any bill and voucher and for the same a reasonable estimated disallowance can be made. Accordingly, we estimate the disallowance at Rs. 50% of this amount i.e. 3,44,083/-, which should be restricted. We direct the AO to restrict the disallowance of Rs. 3,44,083/-. This ground is partly decided in favour of the assessee.

That on the facts and in the circumstances of the appellant’s case and in law, learned Commissioner of Income-tax has erred in upholding the addition of Rs. 41,15,526/- made by the AO without appreciating that these amounts represented advanced received by the appellant during the year resulting into accrual of income in subsequent year.” 12. Briefly stated facts are that the assessee has received payment from two parties namely M/s Contract Advertising India P Ltd. and Marico Industries Ltd and they have disclosed the following payments in F.Y. 2007-08 as under: -

But during the course of hearing, the learned Counsel for the assessee stated that the payments from Marico Ltd was finally received on 28-03-2007 amounting to Rs.18,80,020/-. Similarly, in the case of Contract Travelling P Ltd. the payments were received on 08-02-207 and 21-03-2007 and subsequently finally the final payment was Page 5 of 7

ITA No.3586/Mum/2016 received only on 07-05-2007. From the records, it is seen that these are contradictory facts and moreover the finding of CIT(A) is that work has been completed in the F.Y. 2006-07 relevant to this A.Y. 2007-08 and the payment had also been received in this assessment year only. The claim of the assessee that the amounts were advances and work was completed during the F.Y. 2007-08 relevant to the A.Y. 2008-09 is not supported by the evidence. The findings recorded by the CIT(A) in Para 6.2 reads as under: -

“6.2 I have considered the issue under appeal, carefully. I find that in this year itself, Appellant has received advances and work has already been completed by the AO in remand report dated 22.11.2014. Only part of it has been received. However, it is important to pointed out that when advance has been received and work has been done in F.Y. 2006-07, there is no point for not offering such income in this year. The Ld. AO has rightly mentioned that the Appellant has not established that such amount of Rs.41,15,526/- is merely on advance and no work was done rather both have certified that the work has been done hence, income has already been accrued in this year itself. Therefore, I find no merit in such argument that income has been accrued in A.Y. 2008- 09. Considering the facts of the case. I hold the Ld. AO has rightly made the addition as income of this year, hence, additions so made of Rs.41,15,526/-.” 13. We find from the above facts and circumstances that there is contradiction in the date of receipt of payment from these parties and also there is no adjudication by CIT(A) by a speaking order that how work is completed by these two parties in this year i.e. A.Y. 2007-08. This fact need to be brought on record and hence, we are of the view that let this issue be examined afresh by CIT(A) after allowing reasonable opportunity of being heard to the assessee. The issue of assessee’s appeal is remanded back to the file of the AO and allowed for statistical purpose.

Sd/- Sd/- (N.K. PRADHAN) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 16-09-2016 Sudip Sarkar /Sr.PS

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ITA No.3586/Mum/2016 Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT (A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// Assistant Registrar ITAT, MUMBAI

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