Reassessment-TDS certificate-PL Account Receipt Difference. Reopening based on difference in TDS certificates and receipts shown in P&L account bad-ITAT

Reassessment-TDS certificate-PL Account Receipt Difference. It is a settled law that an assessment could not be reopened only on the basis of difference in TDS certificate and receipts shown in the P&L account.-ITAT

ABCAUS Case Law Citation:
ABCAUS 1097 (2017) (01) ITAT

Assessment Year : 2009-10

Important Case Laws Cited:
CIT vs. Orient Craft Ltd
Rafeeq Iqbal vs. ITO
Meheria Reid & Co. vs. ITO
M/s Krishna Reddy Contractors vs. ITO

Brief Facts of the Case:
The assessee was employed in a 5 Star luxury hotel. As per his return of income the sources of Income were shown from salary, house property, business Income and Income from other sources. Gross receipts from business were shown at Rs. 12,38,253/- on which net profit declared was Rs. 2,25,526/-.

The Assessing Officer (AO) observed that as per 26AS statement, total receipts of Rs.13,91,076/- were shown on which tax was deducted at source u/s 192B of the Act, applicable to salary payments. Against it, income under the head ‘Salaries’ was declared at Rs. 2,88,022/- only in the return. Thus, as per AO, there was a short declaration of salary income by RS. 11,03,O54/-. The AO sought information from the Hotel (the employer) who informed that the other income included “Banquet Tips” which showed that the amount of Rs. 9,33,420/- was also paid by the employer to the assessee. In view of this discrepancy, the case was reopened as per provisions of Section 147 of the Act and notice u/s 148 was issued.

During the re-assessment proceedings, the AO observed that amount paid by employer as share of the assessee out of total banquet service charges collected and divided amongst employees. Therefore, no separate expenditure was incurred by assessee in order to earn the said banquet tips. The assessee explained that he was handling banquet services which included services like hiring of bar tenders, flower decoration services, hiring of casual staff and renting of equipment etc. It was further explained that against the aforesaid receipts, expenses had been incurred by assessee which are not in the knowledge of employer. The assessee also objected to the reopening of assessment proceedings by AO.

The AO concluded that there was definite information of payment made and tax deducted at source In the form of 26AS statement for reopening the assessment proceedings In the case of assessee. On merit, it was observed by AO that bills of expenses submitted by assessee have no serial numbers and all the bills are computer printouts and payments are made in cash just below the limit of Rs. 20000/- specified u/s 40A(3). Also there were no corresponding withdrawals as per bank statements filed by assessee on the dates on which the payments are stated to be made. It is also observed by the AO that the information called for from the Hotel confirmed that the amount of Rs. 9,33,420/- as mentioned in Form No. 16 was on account of banquet services and they were not aware If the employee concerned had incurred any expenses against this banquet service charges amount. In view of this, AO concluded that banquet service charges received by assessee are in lieu of his regular duties done by him as employee of the Hotel and he had not maintained any separate office to earn this Income. Therefore, banquet service charges paid to the assessee could not be said to be derived from a separate business and such receipts are part and parcel of his salary Income. Consequently, AO treated the amount of Rs.12,38,253/- in lieu of salary under the head ‘Salaries’ and disallowed the expenses claimed by assessee and completed the assessment.

CIT(A) dismissed the appeal of the assessee.

Contentions of the Appellant Assessee:
It was submitted that the reopening the assessment u/s 147 was without complying with the statutory conditions and the procedure prescribed under the law and was bad and liable to be quashed. It was submitted that reopening of assessment done by the AO was without there being any live nexus between the reasons recorded and the belief formed by the assessing officer that any income has escaped assessment. It was further stated that AO had grossly erred in reopening the assessment of the assessee only on the basis of Form 26AS and the TDS certificate issued by the employer of the assessee, hence, no tangible material was before the AO apart from the TDS certificate, to form a belief that income has escaped assessment.

Observations made by the Tribunal:
The Tribunal after going through the reason recorded observed that no fresh material was brought by the Revenue on record but the assessment had been reopened on the basis of the Form 26AS and the TDS certificate issued by the employer of the assessee, hence, no tangible material was before the AO apart from the TDS certificate, to form a belief that income has escaped assessment.

The ITAT also observed that it is a settled law that an assessment could not be reopened only on the basis of difference in TDS certificate and receipts shown in the P&L account.

Held:
Reopening of assessment was held not valid and the same was quashed.