ITA NO. 533/Del/2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G", NEW DELHI
BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 533/Del/2010
A.Y. : 2006-07
Income Tax Officer, Ward 7(2), vs. Safeways Insurance Brokers P
Room No. 306, CR Building, Ltd.,
New Delhi 284, Jeewan Deep Annexe, 10,
Parliament Street, New Delhi
(PAN/GIR NO. : AAHCSS5255P)
(Appellant ) (Respondent )
Assessee by : Sh. Sameer Kapoor, CA
Department by : Dr. Prabha Kant, Sr. D.R.
ORDER
PER SHAMIM YAHYA: AM
This appeal by the Revenue is directed against the order of the
Ld. Commissioner of Income Tax (Appeals)-X, New Delhi dated
27.11.2009 pertaining to assessment year 2006-07.
2. The grounds raised read as under:-
"1. Ld. Commissioner of Income Tax (A) erred, in law and
on the fact and circumstances of the case, in deleting
the addition of ` 32,05,325/-. Made by the Assessing
Officer on account of 50% of gross receipts.
2. Ld. Commissioner of Income Tax (A) erred, in law and
on the fact and circumstances of the case, in deleting
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the addition of ` 8510/- made by the Assessing Officer
on account of 50% of management fee receipt.
3. Ld. Commissioner of Income Tax (A) erred, in law and
on the fact and circumstances of the case, in deleting
the addition of ` 51,466/- made by the Assessing
Officer on account of interest income.
4. Ld. Commissioner of Income Tax (A) erred, in law and
on the fact and circumstances of the case, in deleting
the addition of ` 80,210/- made by the Assessing
Officer on account of rent received from Oriental
Insurance Co. Ltd.
5. Ld. Commissioner of Income Tax (A) erred, in law and
on the fact and circumstances of the case, in deleting
the addition of ` 77,854/- made by the Assessing
Officer on account of fee received for professional and
technical services.
6. Ld. Commissioner of Income Tax (A) erred, in law and
on the fact and circumstances of the case, in deleting
the addition of ` 2,19,223/- made by the Assessing
Officer on account of unexplained investment.
The appellant craves to amend, modify, alter, add or forego
any ground of appeal at any time before or during the
hearing of this appeal."
3. In this case assessment was framed by the Assessing Officer
u/s. 144 of the I.T. Act. Assessing Officer observed that assessee has
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not responded to statutory notices. Hence, Assessing Officer was
constrained to make the following additions:-
i) 50% of gross receipts (` 64,10,649) - ` 32,05,325
ii) 50% of Management fees received (` 17,019) - `8,510
iii) 100% of FDR interest income (`51,466) - ` 51,466
iv) Rent from Oriental Insurance Company Ltd. - ` 80,210
v) Fee for professional and technical services received from
- Oriental Insurance Co. Ltd. - ` 59,824
- Castrol India Ltd. - ` 18,030/-
3.1 Further the Assessing Officer held that the in the absence of
any explanation regarding source of funds of ` 2,19,223/- incurred on
purchase of fixed assets should be treated as unexplained investment
as per provisions of section 69 of the I.T. Act, 1961.
4. Upon assessee's appeal Ld. Commissioner of Income Tax (A)
considered the assessee's submissions and Assessing Officer's
remand on the issue of gross receipts & management fee, FDR
interest. Ld. Commissioner of Income Tax (A) observed that there was
no basis for the Assessing Officer to disallow 50% gross brokerage
receipt of ` 64,10,649/- + 50% management fees of 17019/- + 100%
of FDR interest income 51466/-. Ld. Commissioner of Income Tax (A)
further observed that Assessing Officer has erred in ignoring the
audited accounts and rejecting the books of accounts. Further, Ld.
Commissioner of Income Tax (A) observed that proper opportunity was
not given to the company for complying with the notice issued. Ld.
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Commissioner of Income Tax (A) observed that in any event the, the
exparte assessment made by the Assessing Officer without looking
into the audited accounts as well as past assessment records of the
company is arbitrary and also contrary to the provisions of law.
Accordingly, Ld. Commissioner of Income Tax (A) held that the addition
on account of gross receipt and management fees was liable to be
deleted.
4.1 Ld. Commissioner of Income Tax (A) held that interest income of
` 51466/- cannot be treated as part of the business and was held to be
treated as income from other sources. Ld. Commissioner of Income
Tax (A) concluded that Assessing Officer is directed to allow the
business expenditure as claimed by the assessee in the profit and loss
account against its business income and disallow expenses to the tune
of ` 2,58,854/- i.e. the expenses for which no evidence are available on
record as per the Remand Report.
4.2 Ld. Commissioner of Income Tax (A) thereafter considered the
addition of ` 80,210/- as rent and ` 77,851/- as fee for professional and
technical services. Assessee submitted before the Ld. Commissioner
of Income Tax (A) that Assessing Officer has added ` 80210/- as rental
income of the company and ` 77584/- as professional / technical fee to
the income of the company. However, assessee submitted that the
same was being shown as brokerage income which included ` 80210/-
as rent and ` 59,824/- of professional / technical fee and ` 6,95,398/-
of income from commission or brokerage. A certificate from Oriental
Insurance Co. Ltd., Chandigarh was also produced stating that the
brokerage income of ` 80,210/- has been wrongly stated as rent in the
TDS returns. Further, assessee submitted that ` 18,030/- has been
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shown net of TDS amount of ` 1,011/- in the management fee in the
profit and loss account. Considering the above, Ld. Commissioner of
Income Tax (A) held that Assessing Officer is directed to delete the
addition of ` 80210/- and ` 77851/- from the income of the assessee.
Further, Ld. Commissioner of Income Tax (A) observed that assessee
has apparently understated the management fee by ` 1,011/- which is
to be added back to the income of the assessee.
4.3 Further, Ld. Commissioner of Income Tax (A) observed that
Assessing Officer has made an addition of ` 2,19,223/- as unexplained
investment incurred for purchase of fixed assets. Assessee submitted
before the Ld. Commissioner of Income Tax (A) that Assessing Officer
has calculated the difference of WDV as on 31.3.2005 amounting to `
4,92,272/- and WDV as on 31.3.2006 amounting to ` 2,73,049/-, as `
2,19,223/-. Hence, it was claimed that the investment in fixed assets
has reduced in the financial year 2005-06 as compared to immediately
preceding financial year by ` 2,19,223/-. Hence, there was no
unexplained investment in the fixed assets. Considering the above,
Ld. Commissioner of Income Tax (A) held that he agreed with the
contention of the assessee, hence, the Assessing Officer was directed
to delete the addition of ` 2,19,223/-, after making the necessary
verification as per law.
5. Against the above order the Revenue is in appeal before us.
6. We have heard the rival contentions in light of the material
produced. As regards issue of addition on account of gross receipts
and management fee, assessee has submitted the copies of vouchers,
bills, salary register and other details of expenditure and the same
were submitted as additional evidence under Rule 46A and sent for
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verification by the Assessing Officer. Considering the Assessing
Officer's remand report and assessee's submissions, Ld.
Commissioner of Income Tax (A) has given a finding that there was no
basis of addition on account of gross receipts and management fee.
We agree with the Ld. Commissioner of Income Tax (A) that Assessing
Officer has erred in ignoring the audited accounts and rejecting the
books of account of the assessee. He also held that the exparte
assessment made by the Assessing Officer without looking into the
audited accounts as well as past assessment records of the company
is arbitrary and also contrary to the provisions of law. We agree
with the Ld. Commissioner of Income Tax (A), that Assessing Officer
should have based his judgement on the records of the company for
earlier years. Moreover, he could have also derived support from the
trend in the trade during the concerned previous year. We also find
that on verification of the vouchers no major deficiency has been noted
by the Inspector of Income Tax Department/Assessing Officer in the
assessment proceedings. Accordingly, we do not find any infirmity in
the order of the Ld. Commissioner of Income Tax (A) on the issue of
deletion of addition on account of gross receipt and management fee.
7. As regards addition on account of FDR interest ` 51466/- , we find
that Ld. Commissioner of Income Tax (A) has given a finding that the
same cannot be treated as part of the business income and he held
that it was rightly treated as income from other sources. We find that
on this issue Ld. Commissioner of Income Tax (A) has given a
reasonable order which does not need any interference on our part.
7.1 We also note that the Revenue in ground no. 3 has raised the
issue that Ld. Commissioner of Income Tax (A) erred in law and on
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facts and circumstances of the case in deleting the addition of `
51466/- made by the Assessing Officer on account of interest income.
We find that this ground is misconceived, as Ld. Commissioner of
Income Tax (A) has not deleted the addition on this account.
8. As regards issue of addition on account of rent and fee for
professional and technical services, we find that Ld. Commissioner of
Income Tax (A) has given a finding that the same were already
included in the gross receipt i.e. brokerage income of the company.
The Ld. Commissioner of Income Tax (A) has also considered a
certificate of Oriental Insurance Company that the brokerage income
of ` 80210/- has been wrongly stated as rent in the TDS returns. Thus,
we find that Ld. Commissioner of Income Tax (A) is correct for holding
that addition in this regard is not sustainable. There was proper
explanation and proper evidences were produced. Hence, Ld.
Commissioner of Income Tax (A) is correct in deleting the addition in
this regard.
9. As regards the issue of addition on account of unexplained
investment, assessee submitted before the Ld. Commissioner of
Income Tax (A) that the amount of ` 2,19,223/- was a difference
between WDV as on 31.3.2005 & 31.3.2006. Hence, Ld. Commissioner
of Income Tax (A) has correctly held that there is an apparent mistake
while calculating the unexplained investment. Hence, he deleted the
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addition. He directed the Assessing Officer to consider the same
after making necessary verification. Accordingly, we do not find any
infirmity in the order of all the issues and we uphold the same.
10. In the result, the appeal filed by the Revenue stands dismissed.
Order pronounced in the open court on 14/9/2012.
Sd/- Sd/-
SUDHIR]
[I.C. SUDHIR] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date 14/9/2012
"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
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