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M/s. Udbhav Constructions Versus Deputy Commissioner of Income-tax, Circle -1, Udupi

2016 (5) TMI 162 - ITAT BANGALORE

Jurisdiction of DCIT, Circle -1, Udupi, to assess the assessee - Held that:- There is no case for the assessee that DCIT was exercising jurisdiction over Udupi, without a direction or order issued under sub-sections (1) or (2) of Section 120. Assessee had never raised any objection before the DCIT during the course of assessment proceedings. In such a situation we are of the opinion that not only DCIT had the necessary jurisdiction to do an assessment on the assessee, but assessee by virtue of n .....

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m Shri. Shravan Nayak who was brother of one of the partners of the assessee, is something which require deep analysis. As mentioned by the Ld. AR it could be for a reason that Shri. Shravan Nayak was not readily having money with him for giving the loans. In any case what we find is that the AO had not examined Shri. Shravan Nayak nor Shri. Praveen Bhaskar Shetty. Though we cannot say that assessee had discharged its full onus with regard to the credits, it is a matter of fact that it had filed .....

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on afresh in accordance with law

Disallowance of interest - Held that:- Despite opportunities given by the AO and CIT (A) assessee was unable to show the business purpose of loans. Even before us Ld. AR was not able to produce any records which would show that the loans were for commercially expedient reasons. We therefore have no hesitation to uphold the disallowance made.

Disallowane of ‘car expenses’ - Held that:- Disallowance was made for a reason that assessee could no .....

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uction of tax at source was made confirmed - I.T.A No.828/Bang/2014 - Dated:- 30-3-2016 - SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAY PAL RAO, JUDICIAL MEMBER For The Assessee : Shri. S. Ramasubramanian, CA For The Revenue : Shri. Sunil Kumar Agarwala, JCIT ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : This is an appeal filed by the assessee against an order dt.16.12.2013, of CIT (A), Mysuru, for the impugned assessment year. 02. Grounds taken by assessee run into 13 numbers of .....

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ned income of ₹ 9,50,350/- lay with ITO, Ward -1, Udupi. However, as per the Ld. AR notice for hearing u/s.143(2) of the Income-tax Act, 1961 ( the Act in short), was issued by DCIT, Circle -I, Udupi. As per the Ld. AR DCIT, Circle -I, had thereafter completed assessment inter alia making various additions. According to the Ld. AR, it was true that assessee had not objected to the assumption of jurisdiction by DCIT, Circle -I, Udupi. However, according to him, lack of jurisdiction by DCIT, .....

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ook an erroneous view that it could not raise such objection before the latter. Submission of the Ld. AR was that CIT (A) fell in error in relying on Section 124(3) of the Act which, as per the Ld. AR, applied only to territorial jurisdiction and not with regard to other jurisdictions mentioned in Section 120(3) of the Act. Relying on the decision of a coordinate bench of this Tribunal in the case of Ziaulla Sheriff [(2009) 316 ITR (AT) 92], Ld. AR submitted that such a ground could be raised fo .....

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on three classifications, namely, territorial area, persons or classes of persons, incomes or classes of income and cases or classes of cases. As per the Ld. AR, Instruction No.1/2011 was issued by CBDT u/s.119 of the Act and it was required to be mandatorily followed. Ld. AR pointed out that by virtue of this Instruction, jurisdiction to assess noncorporate entities filing returns in mofussil areas, vested with the AO for income of upto ₹ 15 lakhs. As per the Ld. AR in assessee s case adm .....

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had no jurisdiction over it for making the assessment. As per the Ld. DR, assessee had appeared before the DCIT, Circle -I, Udupi, and supplied the information called for. Thus according to him, no prejudice was caused to the assessee when the assessment was done by the DCIT, Circle -I, Udupi. In any case, according to the Ld. DR, DCIT, Circle -I, Udupi, also had territorial jurisdiction over Udupi and this has not been disputed. As per the Ld. DR, Instruction No.1/2011, relied on by the assess .....

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T was excluded from making an assessment since its income fell below ₹ 15 lakhs. There is no doubt that assessee s declared income was below ₹ 15 lakhs. Relevant Instruction relied on by the assessee is reproduced hereunder for brevity : 07. It is not disputed that DCIT, Circle -I, Udupi Range, who had finally done assessment on the assessee was having territorial jurisdiction over Udupi and assessee was a resident of Udupi. So the question before us, is whether the above Instruction .....

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s Act shall observe and follow such orders, instructions and directions of the Board: Provided that no such orders, instructions or directions shall be issued-(a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner ; or(b) so as to interfere with the discretion of the Commissioner (Appeals) in the exercise of his appellate functions. (2) Without prejudice to the generality of the foregoing power,- (a) the Board may, .....

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incomes @or fringe benefits or class of cases, setting forth directions or instructions (not being prejudicial to assessee) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manne .....

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ccordance with law. (c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely:- (i) the default in complyi .....

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large number of tax payers especially from mofussil areas for assigning cases to Assessing Officers located at areas far from them causing hardship to them. There also exists a subsequent Instruction No.6/2011 (F. No.187/12/2010 - ITA -I), dt.08.04.2011, which reconsidered the Instruction No.1/2011, dt.31.01.2011. In the latter Instruction, it was stated that if the application of limits mentioned in the former one led to substantially uneven distribution of work load between DCs and ITOs, then .....

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rd, an Instruction issued by the Board and a Direction issued by the Board. Judgment of Hon ble Apex Court in the case of UCO Bank v. CIT (237 ITR 889) nodoubt pointed out that Board could not issue circulars over riding, amending or in effect modifying the provisions of the Act. There is no case for the assessee that the instruction called in question before us now had the effect of over-riding, modifying or amending any provisions of the Act. It was a simple instruction for administrative conv .....

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s objections regarding territorial jurisdiction. Section 124 of the Act is reproduced hereunder : JURISDICTION OF ASSESSING OFFICERS (1) Where by virtue of any direction or order issued under subsection (1) or sub-section (2) of section 120, the Assessing officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction- (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or professi .....

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s one relating to areas within the jurisdiction of different Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned or, if they are not in agreement, by the Board or by such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the official Gazette, specify. (3) No person shall be entitled to call in question the jurisdiction of an Assessing officer- (a) where he has made a return .....

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nder sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing officer, whichever is earlier. (4) Subject to the provisions of sub-section (3), where an assessee calls in question the jurisdiction of an Assessing Officer, then the Assessing officer shall, if not satisfied .....

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rders issued under subsection (1) or sub-section (2) of section 120. If the argument of Ld. AR is to be accepted, it would mean that sub-section (3) should be read as a proviso to sub-section (1). We are afraid we cannot accept this contention for the simple reason that sub-section (3) does not contain any such mandate. 10. Coming to the aspect whether DCIT can be considered as an AO, definition of AO as given in sub-section (7A) of Section 2, is reproduced hereunder : (7A) "Assessing Offic .....

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ll or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ; There is no case for the assessee that DCIT was exercising jurisdiction over Udupi, without a direction or order issued under sub-sections (1) or (2) of Section 120. Assessee had never raised any objection before the DCIT during the course of assessment proceedings. In such a situation we are of the opinion that not only DCIT had the necessary jurisdiction to do an assessment on the assessee .....

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nt previous year in its books of account showed loans totalling to ₹ 17,83,100/- from one Shri. Shravan Naik, who was the brother of one of the partners of the assessee firm, namely, Shri. Sweekar Nayak. Entries in respect of these loans read as under : 30.04.2008 By cash 50,000 11.07.2008 -do- 33,100 25.07.2008 -do- 2,00,000 26.07.2008 Credited to Bank A/c HDFC CA 77 3,00,000 27.09.2008 Credited to Corporation Bank CC A/c 080001 12,00,000 Total Rs.17,83,100 Assessee was required to establ .....

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8377; 2 lakhs on 25.07.2008. As per assessee, Shri. Praveen Bhaskar Shetty had advanced such sum to the assessee based on instructions of Shri Shravan Nayak from abroad. Further as per the assessee, amount which was given by Shri. Praveen Bhaskar Shetty was transferred to the latter s account from the account of one Shri. Naveen, who was the brother of Shri. Shravan Nayak. Vis-à-vis, credit of ₹ 3 lakhs on 26.07.2008 also and ₹ 12,00,000/- on 27.09.2008, similar submissions we .....

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re withdrawals and transfers of ₹ 2lakhs, ₹ 3 lakhs and ₹ 12 lakhs in the account of Shri. Praveen Bhaskar Shetty. These amounts were correctly reflected in the accounts of the assessee and credited in the name of Shravan Nayak, since Shri. Praveen Bhaskar Shetty had given such sums on the instructions of Shri. Shravan Nayak. However, CIT (A) was not impressed. According to him, Shri. Shravan Nayak admittedly was the brother of one of the partners of the assessee. As per the CI .....

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reason, these affidavits were disbelieved. As per the Ld. AR, bank account statement of Shri. Praveen Bhaskar Shetty was available before the AO. Sum of ₹ 2 lakhs dt.25.07.2008 was reflected in the said account placed at paper book page.34, as cash withdrawal, which in turn was used by him for giving money to the assessee. Similarly, according to him, on 26.07.2008, there was an RTGS transfer of ₹ 3 lakhs from the account of Shri. Praveen Bhaskar Shetty to the assessee. Last sum of & .....

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e, as per the ld. AR, addition was made. Reliance was placed by the Ld. AR on the decision of Hon ble jurisdictional High Court in the case of Tam Tam Pedda Guruva Reddy v. CIT (291 ITR 44) and of Gauhati High Court in the case of Nemichand Kothari v. CIT (264 ITR 254). 15. Per contra, Ld. DR submitted that assessee all along was saying that the money was coming from Shri. Shravan Nayak. As per the Ld. DR, Shri. Shravan Nayak was the brother of one of the partners of the assessee. There was no r .....

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the money given by Shri. Praveen Bhaskar Shetty to the assessee. Thus according to him assessee had not proved the genuineness of the credits nor the credit worthiness of the creditor. In such circumstances, Ld. DR submitted that lower authorities were justified in making the addition. 16. We have perused the orders and heard the rival contentions. In so far as a sum of ₹ 50,000/- received on 30.04.2008 and a sum of ₹ 33,100/- received on 11.07.2008 by the assessee in cash, no serio .....

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appear in the account of Shri. Praveen Bhaskar Shetty. It is also supported by an addidavit of Shri. Praveen Bhaskar Shetty, placed at paper book page nos.41 & 42. In the said affidavit it is mentioned by Shri. Praveen Bhaskar Shetty that the said sum was being given to the assessee on behalf of Shri. Shravan Nayak. Similar is the claim in respect of the amount of ₹ 3 lakhs alleged to have been received on 26.07.2008. Only difference is that receipt here was by a cheque. Last amount of .....

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ay that each one of these amounts were given by him on behalf of Shri. Shravan Nayak. Assessee has also filed affidavit of Shri. Shravan Nayak which say that he had requested Shri. Praveen Bhaskar Shetty to give the above money to the assessee on his behalf. But as mentioned by the Ld. DR why the assessee opted for a circuitous route for getting money from Shri. Shravan Nayak who was brother of one of the partners of the assessee, is something which require deep analysis. As mentioned by the Ld. .....

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such circumstances, we are of the opinion that the matter equires a fresh look by the AO. We set aside the orders of the lower authorities and remit the addition in so far as it relates to credit of ₹ 2 lakhs on 25.07.2008 and credit of ₹ 3 lakhs on 26.07.2008 and credit of ₹ 12 lakhs on 27.09.2008 back to the file of AO for consideration afresh in accordance with law. Ground 4 of assessee is partly allowed for statistical purpose. 17. Vide its ground 5, grievance raised by th .....

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und 5 is dismissed. 18. Vide grounds 6 and 7, grievance raised by assessee is that sum of ₹ 79,273/- was disallowed under car expenses . Assessee had claimed total car expenditure of ₹ 3,96,364/- which inter alia consisted the maintenance expenditure of ₹ 83,433/-, interest of ₹ 1,03,620/- and depreciation of ₹ 2,09,311/-. Disallowance was made for a reason that assessee could not produce any evidence for expenditure claimed. Even before us nothing was brought to sh .....

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ce was made. In respect of another similar payment of ₹ 2,44,075/-, assessee had deducted tax at the rate of 1% only relying on Section 194J of the Act. As per the AO on such payments deduction should have been made at the rate of 10%. Thus a sum of ₹ 2,60,000/- was disallowed for want of TDS and a sum of ₹ 2,44,075/- was disallowed for short deduction of tax at source, relying on Section 40(a)(ia) of the Act. 20. Assessee s appeal before the CIT (A) did not meet with any succe .....

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. Ld. AR submitted that Section 40(a)(ia) would not be attracted for short deduction of tax. 22. Per contra, Ld. DR supported the orders of authorities below. 23. We have perused the orders and heard the rival contentions. In so far as ₹ 2,60,000/- is concerned, it is not disputed that the amounts were paid during the relevant previous year, but without effecting any deduction of tax at source. No doubt the Special Bench in the case of Merilyn Shipping & Transports (supra), had held th .....

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ayable as on the last day of the financial year. In other words Hon ble jurisdictional High Court preferred to go by the view taken by Hon ble Calcutta High Court in the case of CIT v. Crescent Export Syndicate [(2015) 236 CTR 525]. However, vis-a-vis ₹ 2,44,075/- , it is an admitted position that assessee had deducted tax at source at the rate of 1%. Claim of the Revenue was that deduction ought have been done at the rate of 10% u/s.194J of the Act. In the case of S. K. Tekriwal (supra), .....

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d the previous provisions of section 194-I of the Act are applicable. According to the Revenue, the assessee has deducted tax at 1 per cent. under section 194C(2) of the Act as against the actual deduction to be made at 10 per cent. under section 194-I of the Act thereby lesser deduction of tax. The Revenue has made out a case of lesser deduction of tax and that also under dif ferent head and accordingly disallowed the payments proportionately by invoking the provisions of section 40(a)(ia) of t .....

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f the view that the conditions laid down under section 40(a)(ia) of the Act for making addition is that tax is deductible at source and such tax has not been deducted. If both the conditions are satisfied then such payment can be disallowed under section 40(a)(ia) of the Act but where tax is deducted by the assessee, even under bona fide wrong impression, under wrong provisions of TDS, the provisions of section 40(a)(ia) of the Act cannot be invoked. Here, in the present case before us, the asse .....

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