Kalpana Kutty v. Addl. Commissioner of Income-tax, Mumbai
[Citation -2016-LL-0916-181]

Citation 2016-LL-0916-181
Appellant Name Kalpana Kutty
Respondent Name Addl. Commissioner of Income-tax, Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 16/09/2016
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags opportunity of being heard • reasonable opportunity • non-deduction of tax • deduct tax at source • account payee cheque • accrual of income • speaking order • hire charges
Bot Summary: 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 1. 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/- 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. 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. 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 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/-. 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. 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/-.


IN INCOME TAX APPELLATE TRIBUNAL 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 ORDER PER MAHAVIR SINGH, JM: This appeal by assessee is arising out of 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. Assessment was framed by ACIT Circle-11(1), Mumbai for A.Y. 2007-08 vide order dated 30-11-2009 u/s 143(3) of Income Tax Act, 1961 (hereinafter Act ). 2. first issue in this appeal of assessee against order of CIT(A) confirming action of AO disallowing expenses of production, camera hire and editing charges for non-deduction of TDS u/s 40a(ia) of Act. For this assessee has raised following three grounds: - 1. That on facts and in circumstances of appellant s case and in law, learned Commissioner of Income-tax has erred in upholding disallowance of Rs.17,50,681/- made by AO on account of alleged Non-Deduction of Tax at Source. 2. That on facts and in circumstances of appellant s case and in law, learned Commissioner of Income-tax has erred in not appreciating that learned AO is not justified in invoking provisions of Section 40(a)(ia). 3. That on facts and in circumstances of appellant s case and in law, learned Commissioner of Income-tax has erred in not allowing deduction of expenditure where payee have paid their taxes. ITA No.3586/Mum/2016 3. Briefly stated facts are that assessee is engaged in business of production of television commercials and add films. assessee submitted details of production expenses, camera hire charges and editing charged before AO which are as under: - Sl Head of expenses Name of 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 AO noted that no TDS was deducted, but he has not specified under which section assessee is liable to deduct TDS, and made disallowance by invoking provision of Section 40a(ia) of 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 IT. Act, 1961 and added back to total income of assessee for A.Y. 2007- 08. 4. Aggrieved assessee preferred appeal before CIT(A), who also confirmed action of AO, but he has also not mentioned default of assessee that under which Section assessee has committed default and relevant findings in Para 3.2 reads as under: - I have considered findings of AO in original order and rival submission, remand report and rejoinder of Appellant, carefully. I find from clarification of 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 TDS on such payment had not been made, hence, Assessee is liable for disallowance u/s 40a(ia) of Income-Tax Act . Page 2 of 7 ITA No.3586/Mum/2016 5. Before us, learned counsel for assessee argued that lower authorities have not brought out specific charge under which section he has to deduct TDS. For this reason alone orders of lower authorities are bad and hence, be quashed. He also stated that this issue is also covered by proviso inserted by finance Act 2012 w. e. f. 01- 04-2013, which held to be retrospective by Hon ble Delhi High Court in case of CIT Vs. Ansal Landmark Townships Pvt. Ltd. (2015) 377 ITR 635 (Del) wherein, Hon ble High court held as under: - 11. first proviso to Section 210 (1) of Act has been inserted to benefit Assessee. It also states that where person fails to deduct tax at source on sum paid to resident or on sum credited to account of resident such person shall not be deemed to be assessee in default in respect of such tax if such resident has furnished his return of income under Section 139 of Act. No doubt, there is mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but intention of legislature is not to treat Assessee as person in default subject to fulfillment of conditions as stipulated in first proviso to Section 201(1). insertion of second proviso to Section 40(a) (ia) also requires to be viewed in same manner. This again is proviso intended to benefit Assessee. effect of legal fiction created thereby is to treat Assessee as person not in default of deducting tax at source under certain contingencies. Before us, learned Counsel claimed that payee s have paid tax on such sum income and furnished returns of Income by respective payees. learned Counsel for assessee stated that CIT(A) should have consider issue and he has erred in not addressing this issue. On other hand, leaned Sr. DR supported order of AO. 6. We have heard rival contentions on this issue and gone through facts and circumstances of case. We find from order of lower authorities that none of authority s below have invoked specific charge under which Section assessee is liable to deduct TDS, whether production expenses, camera higher charges and editing charges which in nature of technical fee or contractual payments and once this is not established, AO cannot disallow expenses by invoking provision of section 40A(ia) of Act. We delete disallowance and allowed issue of this appeal. As regards to second leading issue of applicability of proviso of Section 40a(ia) of Act as brought in by Finance Act 2012 w. e. f. 01-04-2013 when payee has paid taxes, need not to be adjudicated for reason that we have allowed relief to assessee on main issue. Page 3 of 7 ITA No.3586/Mum/2016 7. next issue in this appeal of assessee is as regards to order CIT(A) confirming disallowance on travelling expenses, for this assessee has raised following ground No.4: - 4. That on facts and in circumstances of appellant s case and in law, learned Commissioner of Income-tax had erred in upholding disallowance or Rs.14,38,166/- from out of travelling expenses claimed by appellant. 8. We have heard rival contentions and gone through facts and circumstance of case. We find from facts of case that assessee has incurred total travelling expense and stay expense at Rs.44,27,981/-. AO disallowed sum of 50% out of total travelling and stay expenses as assessee could not produce bills and vouchers of travelling and stay expenses. AO recorded 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 total income of assessee for A.Y. 2007-08. 9. CIT(A) after considering submissions of assessee and part of bills and vouchers examined by him and after that he restricted disallowance at Rs.14,13,166/- by observing in Para 7.2 as under: - 7.2 I have considered issue under appeal, carefully, I find that even during course of remand report proceeding Appellant has not been able to produced 100% bills and vouchers of all Travelling Expenses of Rs.44,27,981/-. Ld. AO has mentioned that Appellant has not produced bills & vouchers of expense of rs. 14,38,166/-. Therefore, such expenditure cannot be allowed. Considering failure on part of Appellant to produce verifiable bills & vouchers of expenditure, 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. 10. After hearing both sides and going through facts of case, we find that assessee could not produce bills and vouchers to tune of Rs. 14,38,166/- before lower authorities but assessee claimed that sum of Rs. 7,50,0000/- was paid to M/s Sita Kuoni Travels by account payee cheque and he filed copy of ledger account and bank statement of assessee to support this claim. He took us through page 59 of assessee s paper book, wherein payment of Rs. 5,19,317/- was made vide cheque Page 4 of 7 ITA No.3586/Mum/2016 No.089647 as advance for Hotel during Asian Games. Further, 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 assessee s paper book. From these details, it is clear that assessee has paid this amount of Rs. 7,50,0000/- to M/s Sita Kuoni Travels and to that extent assessee can be allowed relief. For balance sum of Rs.6,88,166/-, assessee could not produce any bill and voucher and for same reasonable estimated disallowance can be made. Accordingly, we estimate disallowance at Rs. 50% of this amount i.e. 3,44,083/-, which should be restricted. We direct AO to restrict disallowance of Rs. 3,44,083/-. This ground is partly decided in favour of assessee. 11. next issue in this appeal of assessee is against order of CIT(A) confirming addition of Rs.41,15,526/- being advance received not resulting into accrual of income of this year but accrued in subsequent year. For this assessee has raised following ground No.5:- That on facts and in circumstances of appellant s case and in law, learned Commissioner of Income-tax has erred in upholding addition of Rs. 41,15,526/- made by AO without appreciating that these amounts represented advanced received by appellant during year resulting into accrual of income in subsequent year. 12. Briefly stated facts are that assessee has received payment from two parties namely M/s Contract Advertising India P Ltd. and Marico Industries Ltd and they have disclosed following payments in F.Y. 2007-08 as under: - But during course of hearing, learned Counsel for assessee stated that payments from Marico Ltd was finally received on 28-03-2007 amounting to Rs.18,80,020/-. Similarly, in case of Contract Travelling P Ltd. payments were received on 08-02-207 and 21-03-2007 and subsequently finally final payment was Page 5 of 7 ITA No.3586/Mum/2016 received only on 07-05-2007. From records, it is seen that these are contradictory facts and moreover finding of CIT(A) is that work has been completed in F.Y. 2006-07 relevant to this A.Y. 2007-08 and payment had also been received in this assessment year only. claim of assessee that amounts were advances and work was completed during F.Y. 2007-08 relevant to A.Y. 2008-09 is not supported by evidence. findings recorded by CIT(A) in Para 6.2 reads as under: - 6.2 I have considered issue under appeal, carefully. I find that in this year itself, Appellant has received advances and work has already been completed by 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. Ld. AO has rightly mentioned that 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 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 facts of case. I hold Ld. AO has rightly made addition as income of this year, hence, additions so made of Rs.41,15,526/-. 13. We find from above facts and circumstances that there is contradiction in date of receipt of payment from these parties and also there is no adjudication by CIT(A) by 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 view that let this issue be examined afresh by CIT(A) after allowing reasonable opportunity of being heard to assessee. issue of assessees appeal is remanded back to file of AO and allowed for statistical purpose. 14. In result, appeal of assessee is partly allowed for statistical purposes. Order pronounced in open court on 16-09-2016. Sd/- Sd/- (N.K. PRADHAN) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 16-09-2016 Sudip Sarkar /Sr.PS Page 6 of 7 ITA No.3586/Mum/2016 Copy of Order forwarded to: 1. Appellant 2. Respondent. 3. CIT (A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// Assistant Registrar ITAT, MUMBAI Page 7 of 7 Kalpana Kutty v. Addl. Commissioner of Income-tax, Mumbai
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