2021 (3) TMI 1192 - AT - Income Tax

Disallowance u/s 40(a)(ia) - Non deduction of TDS - HELD THAT - As the assessee had not deducted tax at source on the service tax component by following the CBDT Circular No. 4/2008 dated 28.4.2008 in that regard. We find that the ld CITA had rightly appreciated the same and directed the ld AO to delete the disallowance made u/s 40(a)(ia) of the Act for this sum. Sub-contractor (labour charges), we find that the assessee had during the remand proceedings explained that he had deducted tax at source in respect of expenditure to the tune of ₹ 1,12,32,333/-. With regard to the remaining sum of ₹ 11,290/-, it was proved by the assessee before the ld AO that he was not required to deduct tax at source. We find that the ld CITA had rightly appreciated these facts and the same was also confirmed by the ld AO in the remand report. Accordingly the ld CITA rightly directed the ld AO to delete the disallowance u/s 40(a)(ia) of the Act to the tune of ₹ 48,16,981/-. Legal and Professional fees, we find that the assessee had explained that out of disallowance of ₹ 1,16,715/- made by the ld AO, expenditure to the tune of ₹ 41,715/- was not liable for deduction of tax at source for which necessary documentary evidences were duly furnished before the ld AO in remand proceedings and assessee accepted for confirmation of disallowance of remaining ₹ 75,000/-.Accordingly, we find that the ld CITA had rightly deleted the disallowance in the sum of ₹ 41,715/- and rightly sustained the disallowance for ₹ 75,000/- u/s 40(a)(ia) of the Act. Testing and Surveying Charges (labour contract charges), we find that the ld AO observed that the assessee had not deducted tax at source on payment made to Kuber Trading Co. to the tune of ₹ 10,00,000/- in respect of interior work. We find that the ld AO in the remand proceedings verified the fact that assessee had purchased material from Kuber Trading Co. for ₹ 14,36,045/- plus MVAT of ₹ 57,442/- thereon, which is not liable for deduction of tax at source u/s 194C of the Act. It was proved before the ld AO that only a sum of ₹ 1,17,476/-was debited to interior work labour charges for which due TDS compliance was made by the assessee. We find that this was duly appreciated by the ld CITA by rightly directing the ld AO to delete the disallowance of ₹ 10,00,000/- u/s 40(a)(ia) of the Act. Consultancy Charges, we find that the ld AO had observed that tax was not deducted at source on payment of ₹ 9,69,573/- out of total expenditure of ₹ 29,64,463/-. We find that in the remand proceedings, the assessee proved that tax was duly deducted at source on the total expenditure of ₹ 23,97,633/-. In respect of ₹ 5,66,800/-, it was explained that tax is not deductible at source for ₹ 5,61,800/-, being the payment made to National Institute of Oceanography (Government Company) and similarly, tax is not deductible at source for ₹ 5000/- being payment made to PR Consultancy. It was further explained that remaining sum of ₹ 4,02,773/- was out of the purchase of material from Kuber Trading Co. of ₹ 14,93,487/- supra. We find that the ld CITA on perusal of the remand report had rightly sustained the disallowance u/s 40(a)(ia) of the Act to the tune of ₹ 5,61,800/- being the amount paid to National Institute of Oceanography for want of submission of certificate for non deduction of TDS. Hence we do not find any infirmity in the said order of the ld CITA in respect of this issue. All the aforesaid items were practically accepted by the ld AO in the remand proceedings by not making any adverse comments on the evidences submitted by the assessee. Hence when the ld CITA grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grievance for the revenue. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon ble Madras High Court in the case of B Jayalakshmi vs ACIT 2018 (8) TMI 208 - MADRAS HIGH COURT - Gound No. 1 raised by the revenue is dismissed. Disallowance made on account of BMC expenses - verification of the ledger account of those expenses and bills submitted by the assessee, some of the bills were not in the name of the assessee nor in any of its project name - HELD THAT - We find that the assessee had explained that he has various projects for which he had paid the charges to Bombay Municipal Corporation (BMC) by account payee cheques. Copy of receipts for the payment and relevant pages of the bank statements reflecting the payments made together with the copy of ledger accounts were duly furnished by the assessee in the remand proceedings. As stated that the BMC raised the bill in the name of original landlord even though the original landlord sold the property or entered into development agreement. As per the agreement, the buyer is liable to pay all the BMC charges for the property purchased. This explanation was practically accepted by the ld AO in the remand proceedings by not making any adverse comments on the evidences submitted by the assessee. Hence when the ld CIT-A grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grievance for the revenue. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon ble Madras High Court in the case of B Jayalakshmi vs ACIT 2018 (8) TMI 208 - MADRAS HIGH COURT - Accordingly, the Ground No. 2 raised by the revenue is dismissed. Disallowance on account of SRA Project expenses - HELD THAT - We find that the assessee submitted evidences to prove the fact these expenses are included in the closing stock of work in progress and therefore addition made by the ld AO would result in double addition. We find that the ld CITA had given a categorical finding that the SRA project expenses are duly substantiated and supported by proper documents which was not controverted by the ld DR before us. We find that the ld CIT-A had duly appreciated the fact that this disallowance made by the ld AO would only result in double addition, on which we find no infirmity and accordingly order of the ld CITA is not interfered with. Hence the Ground No. 3 raised by the revenue is dismissed. Levy of penalty u/s 271(1)(c ) - HELD THAT - Once the quantum additions are deleted, then the penalty on those additions would have no legs to stand, which has been rightly deleted by the ld CIT-A. Accordingly, the appeal of the revenue challenging the deletion of penalty is hereby dismissed. Penalty u/s 271(1)(c) on Disallowance of genuine expenditure incurred for the purpose of business u/s 40(a)(ia) - HELD THAT - We find that the ld AO had made an addition towards personal expenses of ₹ 50,000/- on an estimated basis. It is well settled that there cannot be any levy of penalty on an estimated addition. Moreover, from the perusal of the quantum assessment order, we find that the ld AO had chosen not to initiate any penalty proceedings u/s 271(1)(c ) of the Act in respect of this addition, whereas while passing the penalty order, he has directly levied the penalty. On this ground also, the penalty levied deserves to be deleted and is hereby deleted. Shifting of head of income i.e from income from house property shown by the assessee to income from business by not allowing 30% flat deduction for repairs among others - We find that the ld CIT-A had gone by the premise that the levy of penalty is automatic since the quantum addition is confirmed and had attained finality. We find that the assessee in the instant case had duly disclosed the rental income under the head income from house property in the return of income, which was sought to be shifted by the revenue under the head income from business . Hence there cannot be any concealment of income or furnishing of inaccurate particulars of income that could be attributed on the assessee. We hold that there was absolutely no concealment of income or furnishing of inaccurate particulars of income by the assessee in the return of income as every detail thereon could be deciphered easily from the return itself. Reliance in this regard is placed on the decision of the Hon ble Supreme Court in the case of Pricewaterhouse Coopers 2012 (9) TMI 775 - SUPREME COURT - no hesitation in directing the ld AO to delete the penalty levied u/s 271(1)(c ) of the Act in respect of this addition. Addition of Cash Payment to the retiring partner - addition based on loose papers - HELD THAT - As the name of the brokers and the details of the property in respect of which brokerage paid was nowhere mentioned on the said impounded loose paper. We find that the ld. CIT(A) had categorically observed that the said impounded paper does not have any acceptable narration and do not bear the certificate of the assessee or any authorised person and they are merely in the nature of dumb documents having no evidentiary value and hence, cannot be taken as the sole basis for making the addition in the hands of the assessee. He has also recorded a finding that the ld. AO had neither in the assessment proceedings nor in the remand proceedings corroborated noting in the loose paper by bringing some cogent material on record and conclusively prove that the noting in the impounded paper reveal the unaccounted transaction of the assessee. We also find on perusal of the remand report of the ld. AO that the ld. AO had indeed accepted to the contentions of the assessee and that is the reason he had not drawn any adverse inference on the explanation furnished by the assessee in the remand proceedings. Hence, it could be safely concluded that the ld. AO had indeed accepted to the contentions of the assessee in the remand report. Moreover, when the ld CIT(A) grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grievance for the revenue. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon ble Madras High Court in the case of B Jayalakshmi vs ACIT 2018 (8) TMI 208 - MADRAS HIGH COURT . Accordingly, the ground No.4 raised by the Revenue is dismissed. Addition made on account of differential net profit - HELD THAT - From the perusal of the aforesaid remand report, it could be safely concluded that the ld. AO had not drawn any adverse inference against the explanations given by the assessee in the remand proceedings. Hence, it could be safely concluded that the ld. AO had indeed accepted to the contentions of the assessee in the remand report. Moreover, when the ld CIT-A grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grievance for the revenue. B Jayalakshmi vs ACIT 2018 (8) TMI 208 - MADRAS HIGH COURT . Accordingly, the ground No.5 raised by the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of disallowance under Section 40(a)(ia) of the Income Tax Act.
2. Deletion of disallowance of BMC expenses.
3. Deletion of disallowance of SRA Project expenses.
4. Penalty under Section 271(1)(c) of the Income Tax Act.
5. Deletion of additions based on impounded materials during survey proceedings.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance under Section 40(a)(ia):
The first issue addressed was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the disallowance of ?62,94,857/- under Section 40(a)(ia) of the Income Tax Act. The assessee, a builder cum developer, had certain expenses disallowed by the Assessing Officer (AO) for non-deduction of tax at source. The CIT(A) deleted these disallowances based on detailed explanations and documentary evidence provided by the assessee during remand proceedings, which the AO did not contest. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO had accepted the assessee's contentions in the remand report.

2. Deletion of Disallowance of BMC Expenses:
The second issue was the deletion of disallowance of ?61,67,802/- made on account of BMC expenses. The AO disallowed these expenses as the bills were not in the name of the assessee or its project. The CIT(A) deleted the disallowance after the assessee provided evidence of payments made to BMC by account payee cheques, which were accepted by the AO in the remand report. The Tribunal upheld the CIT(A)'s decision, noting that the AO had accepted the assessee's explanations during remand proceedings.

3. Deletion of Disallowance of SRA Project Expenses:
The third issue was the deletion of disallowance of ?1,26,37,560/- made on account of SRA Project expenses. The AO disallowed these expenses, stating they should be carried forward as work in progress. The CIT(A) found that these expenses were included in the closing stock of work in progress and were substantiated by proper documents. The Tribunal upheld the CIT(A)'s decision, noting that the AO had accepted the assessee's contentions in the remand report.

4. Penalty under Section 271(1)(c):
The fourth issue was the imposition of penalty under Section 271(1)(c) of the Income Tax Act. The CIT(A) had restricted the penalty to ?11,17,600/- and deleted the remaining penalty of ?79,12,106/-. The Tribunal upheld the CIT(A)'s decision, noting that the penalty could not stand once the corresponding quantum additions were deleted. The Tribunal also deleted the sustained penalty, finding that the additions were either based on genuine business expenses or were estimated and thus did not warrant penalty.

5. Deletion of Additions Based on Impounded Materials:
The fifth issue involved several additions made based on impounded materials during a survey. The Tribunal addressed the following specific additions:

- Addition of ?14,58,14,389/- (Jogeshwari Project): The CIT(A) deleted this addition, finding that the impounded document was an unsigned, estimated project report that was not executed. The Tribunal upheld this decision, noting that the AO had accepted the assessee's explanations in the remand report.

- Addition of ?49,38,84,500/- (Vile Parle Project): The CIT(A) deleted this addition, finding that the impounded document was an estimated project report that never took off. The Tribunal upheld this decision, noting that the AO had accepted the assessee's explanations in the remand report.

- Addition of ?75,00,000/- (Cash Payments to Retiring Partners): The CIT(A) deleted this addition, finding that the impounded documents were unsigned and undated, and the alleged retiring partners denied receiving any payments. The Tribunal upheld this decision, noting that the AO had accepted the assessee's explanations in the remand report.

- Addition of ?25,00,000/- (Brokerage Expenses): The CIT(A) deleted this addition, finding that the impounded document was a dumb document with no corroborative evidence. The Tribunal upheld this decision, noting that the AO had accepted the assessee's explanations in the remand report.

- Addition of ?8,35,871/- (Differential Net Profit): The CIT(A) deleted this addition, finding that the difference in profit was explained and accepted by the AO in the remand report. The Tribunal upheld this decision, noting that the AO had accepted the assessee's explanations in the remand report.

Conclusion:
The Tribunal dismissed the revenue's appeals and allowed the assessee's appeal, upholding the CIT(A)'s decisions on all issues. The Tribunal emphasized that the AO had accepted the assessee's explanations in the remand report, and there was no logical grievance for the revenue to appeal further.