2019 (2) TMI 1363 - AT - Income Tax

Tribunal Partially Allows Appeal, Remands Specific Issues for Fresh Verification

CSN Estates Pvt. Ltd. Versus ACIT Circle-3 (1) New Delhi

CSN Estates Pvt. Ltd. Versus ACIT Circle-3 (1) New Delhi - TMI Issues Involved:1. Disallowance of Rs. 2,58,00,000 for non-deduction of TDS under Section 194H read with Section 40(a)(ia) of the IT Act.2. Disallowance of Rs. 43,93,291 (20% of salary and wages).3. Unexplained cash credit of Rs. 48,00,000 under Section 68 of the IT Act.4. Disallowance of Rs. 50,00,000 paid for facilitating possession of land under Section 194H read with Section 40(a)(ia) of the IT Act.5. Disallowance of Rs. 42,84,375 paid for various movables and structures on the land purchase under Section 194H read with Section 40(a)(ia) of the IT Act.Issue-wise Detailed Analysis:1. Disallowance of Rs. 2,58,00,000 for non-deduction of TDS under Section 194H read with Section 40(a)(ia):The assessee argued that the relationship between the consolidators and the assessee was on a principal-to-principal basis, not an agency relationship. The MOU defined the 'consolidation charges' as the difference between the agreed price and sale price, which was considered an incentive or profit, not commission or brokerage. The Tribunal agreed, noting that the MOU indicated a contract of sale with a guarantee period, not a contract of agency. The principal-agent relationship required for Section 194H was absent. Citing the Delhi High Court's decision in CIT vs. Mother Dairy India Ltd., the Tribunal allowed the ground, concluding that the provisions of Section 194H were not applicable.2. Disallowance of Rs. 43,93,291 (20% of salary and wages):The assessee contended that the ad-hoc addition of 20% was arbitrary and excessive. The CIT(A) had reduced the initial 80% disallowance by the Assessing Officer to 20%, considering the nature of the assessee's business and its turnover. The Tribunal found no reason to interfere with the CIT(A)'s findings, as the ratio of salary and wages to turnover was consistent with the previous year. Therefore, this ground was dismissed.3. Unexplained cash credit of Rs. 48,00,000 under Section 68:The assessee argued that the addition was confirmed due to the non-production of the cash creditor, Shri Surjeet Singh, and the absence of his income tax particulars. The Tribunal noted that the Assessing Officer had recorded Surjeet Singh's confirmation but could not verify his presence due to the short time frame. The Tribunal remanded the issue back to the Assessing Officer for fresh verification, including the presence of Shri Surjeet Singh, ensuring the assessee's right to a hearing. This ground was partly allowed for statistical purposes.4. Disallowance of Rs. 50,00,000 paid for facilitating possession of land:The assessee claimed that the payment to Shri Mange Ram was for giving possession of the land, not commission. The CIT(A) treated it as a commission subject to TDS under Section 194H. The Tribunal found that the Assessing Officer had not verified the whereabouts of Shri Mange Ram and some evidence was not considered. The issue was remanded back to the Assessing Officer for fresh verification, ensuring the assessee's right to a hearing. This ground was partly allowed for statistical purposes.5. Disallowance of Rs. 42,84,375 paid for various movables and structures on the land purchase:The assessee clarified that the payment was for built-up structures and other assets, not commission. The Tribunal noted that the evidence of the identity and address of Shri Dharm Raj and the receipt of payment had not been considered by the revenue authorities. The issue was remanded back to the Assessing Officer for fresh verification, ensuring the assessee's right to a hearing. This ground was partly allowed for statistical purposes.Conclusion:The appeal was partly allowed for statistical purposes, with specific issues remanded back to the Assessing Officer for fresh verification and consideration, ensuring adherence to the principles of natural justice. The order was pronounced in the open court on 20th February 2019.