Income Tax Appellate Tribunal - Delhi
Nishit Saxena, New Delhi vs Ito, New Delhi on 3 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'SMC-3', NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
ITA No. 2971/Del/2016
AY: 2009-10
Sh. Nishit Saxena, VS. ITO, WARD 27(3),
C-4/1, Welcome Group Cooperative NEW DELHI
Group Housing Society,
Plot No. 6, Sector-3, Dwarka,
New Delhi - 110 085
(PAN: ANZPS6159C)
(Appellant) (Respondent)
Appellant by : Sh. Ved Jain, CA &
Sh. Ashish Chadha, CA
Respondent by : Anil Kumar Sharma, Sr. DR
ORDER
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 2 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.
5. The appellant craves leave to add, amend or alter any of the grounds of appeal."
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 3 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 4 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. 5
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 6 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 ITA No. 53 & 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.
6. On the other hand, Ld. DR relied upon the orders of the authorities below and requested that the appeal of the Assessee may be dismissed.
7. I have heard both the parties and perused the relevant records, especially the orders of the authorities below and the reasons recorded by the AO. I find that ld. Counsel of the assessee mainly objecting the reopening of the assessment under Section 147 of the Act and stated that the same is without complying with the statutory conditions and the procedure prescribed under the law is bad; the reason recorded for reopening of the assessment are bad; reopening of 7 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. For the sake of convenience, the contents of the reasons recorded are reproduced as under:-
"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. Income from salary Rs. 2,88,022/-
2. Income from House property Rs. (-) 32,193/-
3. Income from business and profession Rs.
1,95,877/-
4. Income from other sources : Rs. 29,661/-.
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 8 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 Sd/-
(Ombir Singh) Income tax Officer, Ward 27(3), New Delhi 9 7.1 After going through the orders passed by the Revenue Authorities and the arguments advanced by the Ld. Counsel for the Assessee, reasons recorded by the AO and the judgments cited by the assessee in the case of CIT vs. Orient Craft Ltd. 354 ITR 536 (Delhi), I find that in this case the Hon'ble has held as under (Head Notes):-
"Held, dismissing the appeal, that the reasons disclosed that the Assessing Officer reached the belief that there was escapement of income 'on going through the return of income' filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This was nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer. The reasons recorded by the AO did confirm the apprehension about the harm that a less strict interpretation of the words 'reasons to believe' vis-à-vis an intimation issued under section 143(1) could cause to the tax regime. There was nothing in the reasons recorded to show that any tangible material had come into the possession of the AO subsequent to the issue of the intimation. The notice reflected an arbitrary exercise of the power conferred under section 147."
7.2 When I examined the facts of the assessee's case in light of the ratio laid down by the above decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Orient Craft Ltd. 354 ITR 536 (Delhi), I find that the above decision would be squarely applicable in the 10 present case because no fresh material is brought by the Revenue on record but the assessment has been reopened on the basis of the 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. I further find 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. My aforesaid view is fully supported by the following 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 ITA No. 53 & 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.
7.3 In the background of the aforesaid discussions and respectfully following the precedents, I hold that the reopening of assessment is not valid. Hence, the same is quashed.
11
8. Since I have already quashed the assessment order, the other grounds raised by the Assessee do not require any adjudication on merits.
9. In the result, the appeal filed by the Assessee stand allowed.
Order pronounced in the Open Court on 03/1/2017.
Sd/-
[H.S. SIDHU] JUDICIAL MEMBER Date 03/1/2017 "SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Benches 12