Income Tax Appellate Tribunal - Delhi
Jeetender Gupta, Faridabad vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "D" NEW DELHI
BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN
ITA No. 3874/Del/2010
Asstt. Yr: 2007-08
ACIT Cir. 1, Faridabad. Vs. Sh. Jeetender Gupta,
H. No. 150, Sector-7A,
Faridabad.
PAN/GIR No. AHLPG7762M
C.O. No. 322/Del/2010
( In ITA No. 3874/Del/2010 )
Asstt. Yr: 2007-08
Sh. Jeetender Gupta, Vs. ACIT Cir. 1, Faridabad.
H. No. 150, Sector-7A,
Faridabad.
(Appellant ) ( Respondent )
Department by : Shri Jayant Mishra DR
Respondent by : Shri Tarun Kumar & Shri Kunal Nagpal Adv.
ORDER
PER BENCH :
This is Revenue's appeal and assessee's cross-objection against CIT(A)'s order dated 15-6-2010 relating to A.Y. 2007-08. Respective grounds taken are as under:
ITA no. 3874/Del/2010 (Revenue's appeal):
"1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in committed illegality by failing to consider all material facts and evidence brought on record that during the assessment proceedings, the assessee could not establish the genuineness of his claim regarding fire incident and veracity of his claim of loss of his books of accounts despite the assessee was given numerous opportunities 2 ITA 3874 & CO 322 Jeetender Gupta and further failed to record the finding on all the objections raised in remand report and even admission of additional evidence was strongly opposed in remand report submitted o the Ld. CIT(A).
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs. 2,24,45,752/- made by the Assessing Officer on account of variation in commission even though the assessee had failed to produce any supporting documentation as evidence, details of developers/ builders, transactions, accounts, or any other documentation that could support this claim despite granting number of opportunities to the assessee which resulted into addition on account of variation in commission.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs. 64,13,493/- made by the Assessing Officer on account of commission discount expenses claimed to be paid by the assessee even though the assessee had failed to substantiate the veracity of expenses and deleted the addition without discussing the disallowance on the ground of genuineness of payment in question in his appeal order which go to the very root of the matter.
4. That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal.
C.O. No. 322/Del/2010:
"1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the addition fully as made by Ld. AO and has further erred in sustaining the addition to the extent of Rs. 19,26,640/- on account of alleged difference between commission as per TDS certificate and commission as shown in the profit & loss account.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making a disallowance of Rs. 72,770/- out of commission expenses paid to Sh. Surinder Gupta, allegedly on account of the same being non verifiable.
3 ITA 3874 & CO 322 Jeetender Gupta
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the addition fully as made by Ld. AO and has further erred in sustaining the addition to the extent of Rs. 5,20,023/- out of commissions expenses on account of the same being non verifiable.
4. That the cross objector craves the leave to ad, amend, modify, delete any of the ground(s) of cross objection before or at the time of hearing."
2. Brief facts are: Assessee is engaged in the business of real estate and claims to earn income by way of commission on booking of flats constructed by real estate developers. During the course of assessment proceedings AO observed difference between the commission income shown in the profit and loss account and receipts shown in the TDS certificates. Assessee was asked vide letter dated 3.12.2009 to reconcile the difference and produce the books of accounts in support thereof. It was explained by the assessee that books of accounts and supporting documents were not readily available as they were destroyed in the fire which broke out in assessee's premises. Assessee vide his letter dated 17.12.2009 explained the reasons of difference between the figure in P & L a/c and TDS claim.
2.1. Explanation of the assessee was rejected and following additions were made:
i) Non reconciliation of TDS : Rs. 2,43,72,392/-
ii) Commission to relatives u/s 40A(2)(b) : Rs. 11,96,542/-
iii) Commission to other parties : Rs. 20,75,809/-
iv) Discount to customers : Rs. 64,13,493/-
v) Travelling : 1,92,561/-
vi) Car & telephone maintenance : Rs. 44,956/-
2.2. Disallowance was made by AO merely on the ground that the details of TDS & expenses etc. were not supported by vouchers and commission 4 ITA 3874 & CO 322 Jeetender Gupta paid. There was non compliance of section 40(a)(ia), assessment was, however, framed u/s 143(3).
2.3. Aggrieved assessee preferred 1st appeal before CIT(A) and filed application for additional evidence as the same could not be filed before AO. Petition for additional evidences was also moved citing the reason of fire and consequent destruction of records and producing the compiled information and documents gathered from external sources also. It was pleaded that the evidences could not be submitted before AO due to destruction of record by this fire in his premises. Evidence from Fire Authorities certifying this fire incidence was also filed. CIT(A) forwarded the assessee's petition and additional evidence to AO for his counter comments and remand report, the same was duly filed by AO. After considering the material available on record and AOs counter submissions, CIT(A) admitted the additional evidence by following observations:
"11. Once the incidence of fire is accepted, the non- production of books of accounts and other relevant documents before the AO stands fully and genuinely explained, as it resulted in their destruction and hence their loss. The Ld. A/R has made all out attempts to produce the remaining documents and details in the application under clauses (b), (c) and (d) of rule 46A(1) after compiling, collecting and collating them from various quarters from page 38 to 799 of P.B. Since the AO had asked for such necessary evidences during the course of assessment proceedings, the appellant could not produce them on account of the fire accident which stands testified as above. Therefore, the appellants case falls under the clause (b) of Rule 46A(1). Similarly, such additional evidences are generic for disposal of all the grounds of appeal and thus are covered under the provisions of Rule 46A(1)(c). In submitting these documents at the appellate stage, sufficient opportunities were not provided during the regular assessment and as per clause (d) of Rule 46A(1), the principles of natural justice remain violated. All things considered then, the conditions prescribed 5 ITA 3874 & CO 322 Jeetender Gupta under rule 46A(1)(b), (c) and (d) stand satisfied under the given facts and circumstances. Hence, as per my powers under Rule 46A(4) of the I.T. Rules, 1962, all of them are admitted for adjudication under those clauses of Rule 46A(1).
12. In view of the above discussion then, the additional evidences submitted by the Ld. AR in both her applications under Rule 46A(1) having been admitted for adjudication for all the grounds of appeal, were to be sent to the AO for examination under Rule 46A(3), after reasons having been recorded for their admission under Rule 46A(2) above. However, as is evident from the above proceedings and records, the AO was allowed sufficient opportunities to examine these additional evidences, but she has not been able to state anything contrary or adverse against them except that she ahs harped upon the same and only one tune that they were not submitted during the assessment proceedings. In this regard, clearly she has failed to appreciate the provisions of Rule 46A which are framed for the facilitation of the assessment process and ensure a reasonable and equitable approach for the determination of the total taxable income of any assessee, as per law and Rules. Therefore, after considering the AO's comments u/s 46A(3) dated 23-4-2010 and the Ld. AR's replies, especially in her letter dated 21-5-2010, I proceed to decide the various grounds of appeal as below."
2.4. After admission of additional evidence, CIT(A) considered the merits of the additions/ disallowances. It was held that books of accounts were lost in fire and not available to the assessee. The income was to be estimated on the basis of audited statements of accounts, informations, additional evidence and supporting material, filed by assessee. The reconciliation filed by the assessee explaining the deference between the figures of commission in his P & L a/c and TDS certificates was verified and accepted by CIT(A). Various additions were deleted relevant extracts of his order are as under:
6 ITA 3874 & CO 322 Jeetender Gupta "20. I have carefully considered the contentions of the Ld. AR and perused the impugned order of assessment along with the assessment records and all the material produced in the shape of additional evidence as well as the collated information gathered by the Ld. AR and placed on record from the available resources and documents at the behest of the appellant. It is observed that the AO has not commented on the admissibility and genuineness of the evidences submitted u/r 46A. Although the AO has been constantly harping on the absence of the books of accounts for ascertaining the veracity of the appellant's claim in reconciling the difference on account of commission declared in the P&L Account and collected as per the TDS certificates, and even though the appellant through his Ld. AR has submitted the requisite books of accounts and supportive documents to meet the AO's such objections, yet I am of the considered and firm view that such documentary evidences produced in the shape of books of accounts under Rule 46A, are not in themselves indispensable in determining and reconciling the difference of Rs. 2,43,72,392/-, simply because the TDS certificates are in themselves the authentic evidences (and those have not been found defective or unreliable by the AO herself either) and all of them were duly annexed with the return of income filed u/s 139(1). The AO has not declared them in genuine and has rather relied upon them herself in reaching out the impugned difference.. And thus the requisite and necessary reconciliation could possibly and cogently be made from such documents already on record. The very fact that the AO had made verifications of the assessee's transactions as revealed from the TDS certificates acquired from the realtors like M/s RPS Associates and M/s Omaxe Limited u/s 133(6) of the Income Tax Act, 1961, which submitted their accounts confirming the amount of commission paid, and also other confirmations of accounts lying in the assessment records, strengthens the reliability and acceptance of the commission receipts declared in the returned TDS certificates. The submissions of additional evidences under Rule 46A is only to meet the requirements of the Assessing Officer and are considered to be supplementary and explanatory to all the material already on the assessment records. Accordingly, I have examined the reconciliation figures of commissions income as shown in the P&L Account with those of the TDS certificates from various documents submitted by the Ld. AR along with her explanations and the AO's objections.
7 ITA 3874 & CO 322 Jeetender Gupta
21. I have gone through the reconciliation of income and party-wise reconciliation of such income for the assessment year 2007-08 submitted by the Ld. AR at pages 36 and 37 of the P.B. I find that undoubtedly, the credits as per TDS certificates claimed in the income tax return (ITR) amount to Rs. 4,83,43,043/- and income booked as commission in the P&L account is shown at Rs. 2,39,70,651/-. The first difference of Rs. 5,00,000/- has occurred due to credit of TDS certificates wrongly claimed this year, which is evidenced from the claim of TDS at Rs. 28,050/- twice as per the certificate issued by M/s Triveni Infrastructure Development Company enclosed in the PB, and hence needs to be excluded from the credits reached as per the ITR TDS certificates. The other factors causing such difference are the following items included in TDS certificates but do not constitute income for the year under context:-
(i) Service Tax component in billing of Rs. 28,66,619/-
assessment year 2007-08
(ii) Advances received from Triveni Rs. 1,32,29,686/-
infrastructure development company
(iii) Outstanding (closing balances of Rs. 44,30,198/-
A.Y. 2006-07 received in A.Y. 2007-08
(iv) Commission reversed during the year on Rs. 12,29,345/-
which TDS deducted.
(v) Commission Discount received from BPTP Rs. 19,26,640/-
22. I have verified the bills raised showing service tax component, their copies, copy of service tax ledger along with entries in the TDS certificates showing deduction of TDS on gross amount from pages 36 to 76 of the P.B. read with the figures of sales tax shown in the P&L account and computation of income for the assessment year 2006-07. I find the contentions of the Ld. AR in this context to be quite appropriate and hence dependable. Further, I have examined the confirmed copies of account of Triveni Infrastructure along with the letter dated 15-12-2009 at pages 114-120 of the P.B. along with computation of income, acknowledgement of return balance-sheet and profit & loss account of assessment year 2008-09 reflecting the income of Rs. 146 lacs from M/s Triveni Infrastructure in financial year 2007-08 at pages 138 of the P.B. I have also studied the MOU with M/s Triveni Infrastructure along with sample booking from (PB 139-140) and the details of allotment with allotment letter made in the financial year 2007-08 (pages 141-250 of the P.B.). All these 8 ITA 3874 & CO 322 Jeetender Gupta documentary evidences on record show that income by virtue of such advances from M/s Triveni Infrastructure did not crystallize in the year under reference, though TDS was made as per the provisions of section 194H of the Income tax Act, 1961. Since the appellant has shown such income in the assessment year 2008-09, the amount of Rs. 1,32,29,686/- not being the final income of the present year, should be excluded from the credits as per TDS certificates counted and enclosed in the ITR.
23. Similarly, I have gone into the chart of partywise reconciliation of income as per TDS certificates and as per P&L Account for assessment year 2007-08, along with the details showing income of the parties from whom opening balances received in this year in financial year 2005-06 but income reflected in the TDS certificates issued by them showing that the balance amount was received in the impugned assessment year 2007-08, though the commission income was booked in the earlier years (pages 105, 111-113 of the P.B). In view of the Ld. AR's clarifications as above, the amount of Rs. 44,30,198/- should be excluded from the credits enclosed in the ITR of this year. S far as the amount of Rs. 12,29,345/- is concerned, I have perused the evidences (pages 251 to 266 of the P.B.) showing the reversal of commission on account of cancellation of booking along with party ledgers showing payments, confirmed company ledger showing reversals and bank statement of ICICI Bank, Faridabad showing payment of commission having been reversed. Since the TDS has already been made on such reversed commission and claimed in the return of income, it should also be excluded from the credits of TDS as per the ITR.
24. I have studied the copy of account of BPTP in the books of the assessee for the financial year 2007-08 pertaining to the assessment year 2008-09 and the copy of the bills raised to BPTP by the assessee in financial year 2007-08 (pages 269 to 271). I find that the contentions of the Ld. AR in this regard are not correct and hence not tenable. The said amount of Rs. 19,26,640/- had accrued as income in the year under consideration and since the appellant is following the mercantile system of accounting regularly in the previous years also, the credits of Rs. 19,26,640/- as per the TDS certificates from BPTP should be accounted for in the income of the present year assessment year 2007-08, whatever be the circumstances, e.g. as outlined by the Ld. AR above. Therefore, the addition to that extent stands upheld. Hence the amount of Rs. 2,24,45,752/- (Rs. 2,43,72,392 - Rs.
9 ITA 3874 & CO 322 Jeetender Gupta 19,26,640) having been fully explained as above, the addition to that extent deserves to be cancelled."
Aggrieved, both the parties are before us, revenue has come up in appeal and the assessee is in cross objection on respective grievances.
3. Ld counsel for the assessee at the outset contended that revenue has not raised any specific ground challenging action of CIT(A) u/r 46A admitting the additional evidence and they have challenged his orders on merits only. Ld DR in the counter contends that the first ground raised by revenue talk about the AOs objection to the additional evidence, this amounts to raising the ground against admission of additional evidence. Though in specific terms a separate ground has not been taken, the overall ground 1 may be construed to agitate the admission of additional ground.
3.1. After hearing both the parties we are inclined to accept the contention of ld CIT (DR) that the issue of additional evidence is built in the ground taken. Revenue should have been diligent in taking a specific ground about additional evidence.
4. Adverting to merits, ld. CIT (DR) contends that assessee was deliberately avoiding the production of a/c books and incident of fire is a make believe story to avoid the scrutiny of books. The report from fire brigade was not produced before the AO, besides no FIR was lodged in the police. Therefore CIT(A) should not have accepted the additional evidence. 4.1. It is pleaded that CIT(A) merely on the basis of evidence and documents furnished by assessee has deleted the addition, without appreciating the facts that assessee was avoiding scrutiny of books. CIT(A) called for remand report from AO, which was duly submitted, AO could not 10 ITA 3874 & CO 322 Jeetender Gupta conduct proper inquiries which were hampered by non-production of books by the assessee. CIT(A) ought to have conducted more inquires and the witnesses should have been called to verify the documents filed by they assessee. Since, this has not been done, the relief to assessee is not proper. The matter may be set aside, restored back, to the file of AO to enable him to conduct proper inquiries.
4.2. Ld CIT(DR) further pleads that CIT(A) has co-terminus powers of enquiry to AO, besides power to call further enquires. However in this case he has failed to exercise his powers to verify and call before him the third party evidence or witnesses for his examination. What could not be done by AO in assessment due to non production of evidence, could have been accomplished by CIT(A) by conducting relevant enquiries. In this case except considering the AOs remand report, no independent enquiry has been conducted by CIT(A).
5. Assessee by oral written submissions contends that assesses books of accounts are duly audited u/s 44AB, the return of income for this year was accompanied by all the relevant statements and TDS certificates. During the course of assessment the inability to produce books of accounts consequent to fire was made known to AO. On various queries raised by him about reconciliation of commission same could not be complied, collected and collated before the assessment proceedings. and that adequate opportunity was not given in as much as the show cause was given on 03/12/2009 and Assessment Order was passed 23.12.2009 and the details were complied on the basis of last years ledgers, cheque books, copy of bank statements, copy of TDS certificates, TDS return, booking records of developers companies. Before CIT(A) it was submitted that in any case these evidence go to the 11 ITA 3874 & CO 322 Jeetender Gupta root of the matter and in view of peculiar circumstances these should be admitted.
5.1. Whatever information and evidence could be collected was duly filed along with explanation in the course of assessment proceedings. Thereafter by hectic follow-up and efforts additional evidence was procured from third parties which was filed as additional evidence. CIT(A) justifiably held that the assessee, was thus prevented by sufficient cause in producing the required compliance before AO due to the fire which is certified by fire authorities of Faridabad.
5.2. Along with the applications for additional evidence assessee submitted the bill raised by the Fire Department for extinguishing the fire, memorandum issued by the fire station office, receipt issued by fire station dept. and all these details were obtained with great efforts on 04/05/2010 5.3. There is no justification in revenues raising doubts about the authenticity of report. AO neither cross verified the fire report not conducted any further enquiry. By way of surmises doubts has been raised on Fire Department's report to create prejudice about the veracity of report. The report being from competent Fire authority which is a Govt. agency, same can not be held to unreliable without bringing on record adequate material. CIT(A) relying on this report and after considering the AOs objections and remand report admitted the additional evidence in accordance with rule 46A. Therefore, the additional evidence was rightly accepted by CIT(A), his order is relied.
6. We have heard the rival contentions on the issue of Admission of additional evidence. It has not been disputed that the in support of his contention about fire, assessee produced a certificate from the fire authorities 12 ITA 3874 & CO 322 Jeetender Gupta affirming this fact. Fire department is a govt. department and it's certificate cannot be doubted or brushed aside as an afterthought of assessee, without there being any evidence to support the AOs surmise. Under these circumstances admission of additional evidence by CIT(A) u/r 46A cannot be found fault with. More so when the fire report and evidence was duly forwarded to AO for his remand report and counter comments. AO did not adduce any evidence except raising his unfounded doubt. It is undisputed that AO was provided opportunity by Commissioner (Appeals) to examine, verify and controvert the additional evidences filed by assessee. Commissioner (Appeals) having taken into account the objections of the assessing officer, there is no justification in the stand of the Revenue. Hence ground no. 1 of the Revenue's appeal is dismissed. 6.1. In view thereof we uphold the order of CIT(A) on admission of additional evidence.
7. Coming to revenue's ground no. 2, it relates the addition of Rs.2,24,45,752/- made by Ld. A.O. on account of alleged difference in the commission shown i.e.
i) Commission as per TDS certificates = Rs.4,83,43,043/-
at a figure of
ii) commission income in = Rs.2,39,70,651/-
profit & loss account
iii) The difference comes to = Rs. 2,43,72,392/-
iv) Out of above an addition of Rs. 19,26,640/- has been sustained
by Ld. CIT(A) and the balance amount of Rs.2,24,45,752/- has been deleted.
7.1. Revenue is an appeal against the relief of Rs.2,24,45,752/- whereas assessee is in cross objection for the balance amount of Rs.19,26,640/-
13 ITA 3874 & CO 322 Jeetender Gupta 7.2. Assessee's reconciliation of difference in TDS a/c is as under:.
i) Difference due to mistakenly claimed twice = Rs. 5,00,000/-
TDS certificate issued by Triveni Infrastructure Development Com. Ltd. (PB 46) deducting TDS on 5,00,000 on 15/01/2007, was typed twice in Computation of Income, by mistake which was reduced from claim.
ii) Service tax -due to accounting difference
between assessee & deductors =Rs. 28,66,619
(a) Assessee submitted bill wise detail (PB 48 ) showing gross amount of
bill, service tax included thereon, the net billing amount which tallies with the amount shown in the P&L A/c ( PB 36)
(b) Copies of all bills (PB 49-73)
(c) Copies of service tax ledger account (PB 74-75),showing service tax payable during the year amounting to Rs. 28,66,619/-.
(d) Detail relating to a few bills correlated with TDS certificates to show that TDS has been deducted on gross amount of the bill including service tax (PB 76)
(e) Amount of Rs. 44,30,198/- is attributable to income of previous years on which TDS has been deducted in this year. The income has been already
(f) Party-wise reconciliation of income as per TDS certificates and as per P&L A/c for the year ended 31.03.2007 showing TDS deducted on opening balances of parties amounting to Rs. 44,30,198/- (PB 37)
(g) Copies of ledger account of M/s Omaxe RPS, Omaxe & BPTP for the year ended 31.03.2006 showing balances outstanding for the receipt, which were received during the year and on which TDS was deducted (PB 107-110).
14 ITA 3874 & CO 322 Jeetender Gupta
(h) Details of debtors and their breakup for the year ended on 31.03.2006 and listing the above stated debtors and their amounts outstanding for receipt (PB 91, 87)
(i) An amount of 12,29,345/- is attributable to commission income reversed during the year
(j) Party-wise reconciliation of income as per TDS certificates and as per P&L A/c for the year ended 31.03.2007 showing TDS deducted on opening balances of parties amounting to Rs. 44,30,198/-( PB 37)
(k) Details of commission reversed on account of cancelled booking (PB 251)
(l) CIT(A) verified al these details. Assessee submitted its account in the books of OMaxe Ltd. confirming reversal of commission amounting to Rs. 5,26,253/- (PB 252-253)
(m) Assessee descriptive ledger account is the books of Omaxe (PB 259-262)
(n) Ledger account of BPTP in the books of assessee showing reversal of commission (PB 263 )
(o) copy of bank account showing receipt of commission reversed in bank (PB 265) 7.3. Rs. 1,32,29,686/- difference is attributable to commission of M/s Treveni Infrastructure Development Company Ltd. which was in effect income of the succeeding year.
7.4. Assessee submitted each and every detail before CIT(A) which was forwarded to AO for remand report. AO has made comments thereon. CIT(A) has deleted the addition after due verification.
8. Revenue's Ground no. 3 relates to the addition of Rs.64,13,493/- made by A.O. on account of commission and discount expenses deleted by Ld. CIT(A) 15 ITA 3874 & CO 322 Jeetender Gupta 8.1. Ld. A.O. has made the addition by following observations "7. Commission discount: During the year the assessee claimed an expenses of Rs. 6413493/- on account of commission discount. Vide this office letter dated 03-12-2009 (Q. No. 12) the assessee was asked to furnish details of commission discount expenses claimed in the Income and Expenditure account. The assessee has not furnished names and addresses of the parties/ persons to whom commission discount was paid. Even the assessee has not submitted any explanation in this regard. The assessee furnished three letters dated 15.12.2009, 17.12.2009 and 18.12.2009 in response to letter dated 03-12-2009 but on the point of commission discount the assessee kept mum. In these circumstances it is presumed that the assessee has nothing to say in the matter. As discussed in the para 5 hereinabove and pointed out by the Auditor of the company, the assessee has failed to complied with the provisions of chapter XVII of the I.T> Act, therefore, the allowability of expenses on account of commission discount payment in view of provisions of section 40a(ia) of the I.T. act puts a question mark on the payment on this account. The assessee has failed to produce the books of accounts for verification of expense. In that situation the claim of the assessee regarding expenses on account of commission discount payment remained unverified. In view of the above, the expenses of Rs. 64,13,493/- on account of commission discount paid are disallowed and added to the income of the assessee for the year under consideration. For the reasons discussed above, penalty proceedings u/s 271(1)© f the I.T. act are initiated for concealment of particulars of income and furnishing inaccurate particulars of income.
8.2. Ld. CIT(A) considered this issue as under
"31. I have carefully considered the contentions of the Ld. AR and perused the impugned order of assessment. I have also gone into the nature of real estate business carried on by the realtors. The Ld. AR has very cogently explained the nature of commission discount allowed by Real Estate agents, which is not exactly the commission or brokerage as envisaged under the 16 ITA 3874 & CO 322 Jeetender Gupta provisions of Section 194H of the Income Tax Act, 1961. Since the commission discount is allowed to the clients who had booked the flats directly and is thus not covered u/s 194H. Hence the provisions of section 40(a)(ia) become inapplicable to the instant case. Therefore, the disallowance of Rs. 64,13,493/- stands deleted."
8.3. It is pleaded that assessee works as booking agent for the flats offered for sale by real estate developers in their projects and earns commission income from such developers. During the course of this business activity some commission is passed on to the customers by way of discount. During the year assessee passed on to the customers such discount aggregating to Rs.64,13,493/-. The payment of discount was established by the assessee with the help of confirmations, bank statements, showing payment made, TDS returns, evidence of the bookings, e-mail communications etc. 8.4. Before Ld. CIT(A )assessee made following submissions "Ld. AO has disallowed a sum of Rs. 64,13,493/- on account of "commission discount" expense on the ground that such expenses remained unverifiable and no explanation was submitted by the assessee and there could be disallowance u/s 40(a)(ia) also.
It is respectfully submitted that as submitted above appellant does bookings for the developers in their projects against the commission to be received from the developers. As a matter of trade practice and also as a understanding with the customers, a discount is required to be passed to those customers and the aggregate amount of Rs. 64,13,493/- represents such kind of discount expenses passed on to the customers themselves.
Enclosed in the paper book is the complete details of such expenses, confirmations, bank statement showing payments made, TDS returns and evidence of the booking (application for allotment) made by these customers with the developer through the appellant, e-mail communications with the applicants 17 ITA 3874 & CO 322 Jeetender Gupta pressing for discount. All these evidences would show that impugned expense was an expense incurred wholly & exclusively for the purpose of the business of the appellant and is thus allowable.
Regarding the disallowance u/s 40(a)(ia), it is submitted that TDS was not required to be deducted out of such payments as it is not covered with in definition "commission or brokerage" as defined u/s 194H.
Without prejudice to above, it is submitted that if it is held that section 40(a)(ia) is applicable, a sum of Rs. 12,81,316/- would be the sum in respect of which the tax was not deducted/ deposited.
In fact all these details and evidences could not be filed before Ld. AO due to various reasons as submitted in petition for admission for additional evidences also. One of the reasons was that Ld. AO asked about these details vide her questionnaire dated 03-12-2009 and assessment was framed on 23-12-2009 and thus time allowed was not sufficient. The other reason was that due to part of the books of accounts having been destroyed, it was not possible to compile/ collate all the details and data to be furnished before Ld. AO with in such short span of time. Your goodself would kindly appreciate that when books of accounts were not available, there is no option with the assessee except to compile the record with the help of last year's ledger, copy of cheque books, copy of bank statement, copy of TDS Certificate and TDS returns, booking records of the developer companies and that is what has been done by the appellant now and it took some time and default happened due to the reasons beyond the control of the appellant."
8.5. All the details of discount were furnished which include the names of the parties / customers to whom discount was extended, TDS deducted, net amount at appearing in the bank statement .
8.6. Copy of accounts, bank statements on all the issues i.e. 18 ITA 3874 & CO 322 Jeetender Gupta
(i) Developers from whom the commission is received.
(ii) Subagents to whom commission is paid.
(iii) Discount offered to customers.
(iv) List of all the bookings.
(v) Deals which are completed with the names, addresses of
purchasers.
8.7. It is claimed in written submissions that department has not raised the issue about disallowance of commission u/s40a(ia) in their grounds of appeal. This indicates that the particulars of commission paid and TDS deducted therefrom submissions are accepted by the department. 8.8. Assessee thus pleads the CIT(A)'s order on both the issues on merits is based on proper material, remand report, reconciliation and explanation, the relief has been given on just and proper consideration. Order of CIT(A) is relied on.
8.9. Ld DR in rejoinder replies that the main case of the revenue rests on the fact that so far assessee has not produced books of account and in the name destruction of books of accounts by fire he has not allowed the proper enquiries to take place. Consequently the matter may be set aside back to the file of AO to make in-depth enquiries and frame a fresh assessment. Alternatively it is pleaded that that the relief given by CIT(A) is excessive the same may be reduced.
10. We have considered the respective arguments, the orders passed by the authorities below, remand report and counter comments submitted by AO before the ld CIT(A) and written submissions and contents of paper book. We proceed to dispose the merits about the appeal of the revenue and the cross objection of the assessee in the following terms:
19 ITA 3874 & CO 322 Jeetender Gupta
11. The first issue raised by revenue challenges the CIT(A)'s finding that the assessee's books were destroyed in fire and this is an after thought of assessee to avoid scrutiny of books. In our considered opinion, CIT(A) has given a finding of fact, based on the report of Fire Department. The same was sent to AO for remand report. If AO had any issue in this behalf, proper enquires could have been conducted by him. The fire department officer could have been called. AO has not carried out any enquiry from his side. The report of a govt. department which is substantiated by payment of corresponding service charges cannot be brushed aside unless there is material against it. In these circumstances, CIT(A)'s finding being based on the facts is to be upheld.
11.1. Besides, non-production of books do not stop the process of Income tax Act; in this eventuality best judgment assessment u/s 144 is the alternative. AO in any case relied on the assessee's audit statements and passed the order u/s 143(3). Consequently, no interference is called in the order of CIT(A), who decided the issue on merits after considering the material available on record.
11.2. CIT(A) having properly admitted the additional evidence and forwarded to AO for remand has followed a proper process prescribed by the Act.
11.3. It cannot be assumed by revenue that CIT (A) should have carried out this or that kinds of investigation. Having followed the due course prescribed by the law, we are unable to hold that CIT(A) did not conduct proper enquiries.
11.4. No useful purpose will be served in setting aside the matter as books of accounts are not available and cannot be made available. In these circumstances, the appeals are to be decided on the basis of material 20 ITA 3874 & CO 322 Jeetender Gupta available on record i.e. audited statements, assessee's compliance, reconciliations, remand report and CIT(A)'s findings on issues.
12. Coming to ground no. 2 of the Revenue's appeal i.e. difference in commission in P &L a/c and TDS certificates; it is seen that addition was made by AO to the tune of Rs. 22445752/- on the ground of variation in amount of commission as mentioned in TDS certificates and in the profit and loss account. Out of the said addition, CIT(A) sustained a sum of Rs. 1926640/- and deleted the balance amount. During the course of 1st appeal, the difference has been reconciled and explained by the assessee which has been considered by Commissioner (Appeals); AOs remand report and comments have been considered.
12.1. This difference in commission as per the evidences available in the paper book is on account of working out the amount of Rs. 5 lacs based on double typing of figure of TDS of Rs. 28050/- in the computation of income. Consequently, no addition can be made in this behalf. 12.2. Other difference as explained by the assessee and examined by CIT(A) based on the evidences in the paper book is attributed to service tax component included in the billing resulting into the difference of Rs. 2866619/-. This has been amply demonstrated that in assessee's accounts service tax is separately credited and not included in commission account. Assessee has filed proper reconciliation in this behalf hence, this difference also stands reconciled by assessee.
12.3. Other reason of difference is a sum of Rs. 13229686/- which is claimed to be received as advance from Triveni Infrastructure Development company on which TDS was deducted by the said company on payment basis while paying the amount as per the requirement of section 194H. However this income, according to assessee pertained to next year and is 21 ITA 3874 & CO 322 Jeetender Gupta factually offered to tax by the assessee in next year. This was matter of record as by the time remand report was submitted by AO the return for next asst. year was already on record. In the absence of any pertinent comment from AO it is to be implied that this version is correct. CIT(A) has given proper factual findings that such difference has been offered to tax by the assessee in the profit and loss account for the A.Y. 2008-09. 12.4. It is further seen that an aggregate amount of Rs. 4430198/- was the amount received in the year under appeal but which was pertaining to earlier year and that is why there was no question of this amount accounting for as income in the year under appeal.
12.5. Other component of Rs. 1229345/- represents initial commission received by the assessee on booking, due to cancellation of such bookings, such commission was to be reversed. This commission was not be accounted for as income in such peculiar facts and circumstances due to cancellation; this fact has not been controverted by AO is his remand report. CIT(A) has considered the explanation, reconciliation and has given adequate factual findings explaining this discrepancy and as a consequence thereof sustained the addition to the tune of Rs. 1926640/-. In the absence of any contrary comments in remand report or the revenue arguments we see no infirmity in the order of CIT(A) in allowing part relief. Assessee is following mercantile system of accounting and thus the sum of Rs. 1926640/- having accrued in the year is to be taxed as the income of the assessee for the year under appeal. Assessee may make a claim for relief of this income in accordance with provisions of law in A.Y. 2008-09.
12.6. Revenue's ground no. 2 of its appeal and corresponding ground no.1 of Assessee's cross objection both are dismissed.
22 ITA 3874 & CO 322 Jeetender Gupta
13. Adverting to the revenue's ground no. 3, as already mentioned assessee is booking agent for the flats in real estate developer projects and earns commission from such developers. Assessee has proved the expense in question by leading voluminous evidences filed in the paper book and referred in the synopsis filed at the time of hearing & considered by us. We find that the expense in question was the expenditure incurred during the course of carrying on the business of the assessee. Assessee has filed person wise details and evidences to whom such discount was allowed by it, various supporting documents and evidence have been referred to above. 13.1. ITAT Delhi in the revenue's appeal no. 477/Del/2011 while dealing with the case of real estate agent allowed similar claim by following observations:
"7. We have heard the rival contentions and perused the material on record. We find merit in the arguments of the learned counsel for the assessee. The deals of discount clearly show that against the booking of builders, assessee gave a portion by way of discount to the consumers/ customers. The assessee has maintained proper details in respect of sub- brokerage on which TDS has been deducted and discount to consumers i.e. impugned payments. The same being discount is not liable for TDS as held by the Assessing Officer. In our view, the CIT(A) has given proper reasons for accepting the assessee's plea. We find no infirmity in the order of CIT(A) and the same is upheld."
13.2. In our view department except pointing out some suspicion, and raising a specious plea that AO should be given opportunity to enquire it again and CIT(A) should have conducted further enquiries and called these persons, which in our view cannot be acceded. Consequently, this ground of revenue is dismissed.
23 ITA 3874 & CO 322 Jeetender Gupta
14. We may like to observe that the Income Tax Act is a complete code in itself. It prescribes adequate parameter for dealing with assessments in which complete information was not available with AO. In such circumstances, ideally AO should make a best judgment assessment u/s 144; in this case the assessment has been framed u/s 143(3). It is not the case of department that during the assessment assessee did not co-operate, documents in his possession were filed and assessment record of A.Y. 2006- 07 was available.. From record it emerges that assessee submitted possible evidence, reconciliation and third party confirmations, which could be obtained before assessment.
15. The evidence and information is forwarded by CIT(A) to AO. The income tax act contemplates that the AO being entrusted with the job of assessment will verify the information from departmental record, summoning third parties and examining the evidence. If further time is needed it would have been allowed by CIT(A), in this case no such request for time has been made by AO. The revenue's plea is that though AO did not discharge these functions, CIT(A) should have summoned the witnesses and conducted further enquiries. CIT(A) is an appellate authority and law has conferred co-terminus powers like AO, this does not mean that CIT(A) will go on making assessments while disposing the appeals. If the evidence, remand report, comments and assesses explanation enable him to decide the issue, law allows him to decide the issues in appeal. A power conferred by law, making an appellate authority more functional can not be interpreted to making him as assessing officer. Besides in this case assessee produced voluminous evidence in support of his claim. In view of the foregoings we are unable to accede to revenue request that matter may be set aside to AO 24 ITA 3874 & CO 322 Jeetender Gupta for fresh enquiries or CIT(A) may be directed to summon witnesses and enquiries be conducted.
16. The material/ information and confirmations have not been disputed to be of the business of the assessee i.e. real estate brokerage business. TDS is deducted and paid as per law which is substantiated. Revenue has not raised the ground of section 40(a)(ia) in its ground of appeal. Revenue except raising suspicions could not indicate any valid basis to reject these documentary evidences. Thus we do not find any infirmity in the relief allowed and we hold that there was no justification for making the disallowance. Hence this ground of appeal of the Revenue is also rejected.
17. Adverting to the assessee's cross objection Ld. Counsel of the assessee could not make out as to why ground no. 2 and 3 of the cross objection be decided in his favour. If the assessee's books are not available for verification for any reason, an element of estimate is necessary. In these circumstance, no interference is called for in CIT(A)'s order. Hence, these grounds of cross objections are dismissed.
18. In the result, Revenue's appeal and assessee's cross objections both are dismissed.
Order pronounced in open court on 16-12-2011.
Sd/- Sd/-
(K.D. RANJAN ) ( R.P. TOLANI )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 16-12-2011.
MP
Copy to :
1. Assessee
2. AO
3. CIT
4. CIT(A)
5. DR
25 ITA 3874 & CO 322
Jeetender Gupta