Maxima Estates Pvt.Ltd.,, Hyderabad v. DCIT, Central Circle-2, Hyderabad

ITA 834/HYD/2011 | 2005-2006
Pronouncement Date: 31-10-2013 | Result: Allowed

Appeal Details

RSA Number 83422514 RSA 2011
Assessee PAN AAACN7323G
Bench Hyderabad
Appeal Number ITA 834/HYD/2011
Duration Of Justice 2 year(s) 5 month(s) 24 day(s)
Appellant Maxima Estates Pvt.Ltd.,, Hyderabad
Respondent DCIT, Central Circle-2, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 31-10-2013
Assessment Year 2005-2006
Appeal Filed On 06-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER ITA NOS. 834 835 & 836/HYD/2011 ASSESSMENT YEARS : 2005-06 2006-07 & 2007-08 MAXIMA ESTATES PVT. LTD. HYDERABAD. PAN: AAACN7323G VS. COMMISSIONER OF INCOME-TAX- IV HYDERABAD. (APPELLANT) (RESPONDENT) AND ITA NOS. 192 193 & 194/HYD/2013 ASSESSMENT YEARS : 2005-06 2006-07 & 2007-08 MAXIMA ESTATES PVT. LTD. HYDERABAD. PAN: AAACN7323G VS. COMMISSIONER OF INCOME-TAX- IV HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SRI S. RAMA RAO REVENUE BY : SRI P. SOMA SEKHAR REDDY DATE OF HEARING : 28 -10- 2013 DATE OF PRONOUNCEMENT : 31 -10- 2013 O R D E R PER B. RAMAKOTAIAH A.M.: THESE ARE ASSESSEES APPEALS FOR THE ASSESSMENT YE ARS 2005- 06 TO 2007-08. THE FIRST BATCH OF THREE APPEALS BEI NG ITA NOS. 834 TO 836/HYD/2011 ARE DIRECTED AGAINST THE SEPARATE ORD ERS OF LD.CIT-IV HYDERABAD U/S 263 OF THE IT ACT DATED 28-03-2011. REST THREE APPEALS BEING ITA NOS. 192 TO 194/HYD/2013 ARE ON T HE 2 ITA NOS. 834 TO 836/H/11 & 192 TO 196/H/13 MAXIMA ESTATES (P) LTD. CONSEQUENTIAL ORDERS PASSED BY THE AO CONSEQUENT TO SETTING ASIDE THE ORDERS BY THE CIT U/S 263. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS THEY ARE CLUBBED AND HEARD TOGETHER AND DECIDED BY THIS COMMON ORDER. 2. IN ALL THESE APPEALS FACTS ARE SIMILAR BEING THA T THE COMMISSION PAID BY ASSESSEE WAS DIRECTED TO BE DISALLOWED ON T HE REASON THAT THESE AMOUNTS ARE NOT PROVED IN TERMS OF GENUINENES S OF THE CLAIM AS WELL AS IN TERMS OF SECTION 40(A)(IA) OF THE IT ACT . 3. BRIEFLY STATED ASSESSEE IS A COMPANY BEING ASSE SSED FROM ASSESSMENT YEARS 1995-96 ONWARDS. ASSESSEE IS IN TH E BUSINESS OF PURCHASE OF AGRICULTURAL LANDS PLOTTING OF LANDS DEVELOPING WITH PLANTATIONS AND THEN SALE OF PLOTS. ASSESSEE COMMEN CED VARIOUS VENTURES AND EACH VENTURE TAKES SUBSTANTIAL PERIOD FOR COMPLETION. WHEN THE PLOTS ARE MADE AND REACHED FOR DEVELOPMENT THEY ARE SOLD TO VARIOUS INVESTORS GENERALLY ON INSTALLMENT BAS IS RUNNING TO 60 MONTH PERIOD. ASSESSEE ENGAGED AGENTS FOR MARKETING PLOTS AND PAID COMMISSION TO THE SAID AGENTS. ASSESSEE ENTERS INTO AGREEMENT WITH DIFFERENT AGENTS DETERMINING THE COMMISSION TURNOV ER ETC. GENERALLY ENTIRE COMMISSION IS PAID AS AND WHEN 50% OF THE AG REED SALE PRICE WAS RECEIVED FROM THE PURCHASER. HOWEVER IN THE BO OKS OF ACCOUNT ASSESSEE IS NOT CLAIMING COMMISSION IN THE YEAR OF PAYMENT BUT WHEN ULTIMATE SALE IS RECORDED AS REVENUE RECEIPT. TILL SUCH TIME THE ADVANCES RECEIVED FROM SALE OF PLOTS IS SHOWN AS SU CH AND CORRESPONDING COMMISSION PAID IS ALSO ACCOUNTED AS SUCH IN THE BOOKS OF ACCOUNT WITHOUT CREDITING AND DEBITING TO THE P&L A/C RESPECTIVELY. ONLY WHEN REGISTRATION IS EFFECTED THE SALE PRICE WAS TAKEN AS REVENUE RECEIPT AND THE CORRESPONDING COMM ISSION PAID ON THE PLOT IS TRANSFERRED TO THE P&L A/C. ASSESSEE IS CONSISTENTLY FOLLOWING SAME METHOD OF ACCOUNTING AND HAS GIVEN R ELEVANT DATA AS UNDER: 3 ITA NOS. 834 TO 836/H/11 & 192 TO 196/H/13 MAXIMA ESTATES (P) LTD. FINANCIAL YEARS OPENING BALANCE ADDITIONS TOTAL COMMISSION P&L DR. ADVANCE RECOVERABLE IN CASH OR KIND 1994-95 0 2383335 2383335 432000 1951335 1995-96 1951335 9662834 11614169 1653220 9960949 1996-97 9960949 12678430 22639379 2921795 19717584 1997-98 19717584 10229219 29946803 3071211 26875591 1998-99 26875592 7458358 34333950 3175943 31158007 1999- 2000 31158007 3262090 34420097 3020807 31399290 2000-01 31399290 1815252 33214542 5403264 27811278 2001-02 27811278 787294 28598572 5752030 22846542 2002-03 22846542 97186 22943728 2164895 20778833 2003-04 20778833 2400 20781233 3882100 16899133 2004-05 16899133 7000 16906133 5122100 11784033 2005-06 11784033 5520 11789553 2958600 8830953 2006-07 8830953 0 8830953 3018500 5812453 2007-08 5812453 0 5812453 1430000 4382453 IN THE IMPUGNED ASSESSMENT YEARS 2005-06 2006-07 A ND 2007-08 ASSESSEE CLAIMED COMMISSION OF RS. 51 22 100/- RS. 29 58 600/- AND RS. 30 18 500/- RESPECTIVELY IN THE P&L A/C. 4. ASSESSMENTS IN THESE CASES HAD BEEN ORIGINALLY C OMPLETED U/S 143(3). CONSEQUENT TO SEARCH OPERATION NOTICES WER E ISSUED U/S 153A. ASSESSEE ADMITTED AN AMOUNT OF RS. 5 18 000/- ON THE REASON OF EXCESS CLAIM ON ACCOUNT OF COMMISSION IN AY 2005 -06 IN THE RETURN UNDER THE PROVISIONS OF SECTION 153C. IN OTHER YEAR S THE ADMITTED/ ASSESSED INCOMES WERE DECLARED IN THE RETURNS. FOR THE YEARS IN THE SIX YEAR BLOCK ASSESSMENTS HAVE BEEN COMPLETED BY THE AO ACCEPTING THE INCOME RETURNED U/S 143(3) READ WITH SECTION 153C VIDE ORDERS DATED 31-12-2008. LD.CIT-IV HYDERABAD ISSUE D SHOW CAUSE NOTICE TO ASSESSEE THAT THE AMOUNT OF COMMISSION PA ID IN THE RESPECTIVE YEARS ARE COVERED BY THE PROVISIONS OF S ECTION 194H AND SINCE ASSESSEE HAS NOT MADE ANY TDS THE AMOUNTS AR E TO BE DISALLOWED U/S 40(A)(IA). ON THE REASON THAT ASSESS MENT ORDER PASSED BY THE DCIT CENTRAL CIRCLE -2 HYDERABAD APPEARS TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE SINCE HE HAS NOT EXAMINED OR APPLIED HIS MIND TO THE ABOVE ISSUE CI T THEREFORE ISSUED 4 ITA NOS. 834 TO 836/H/11 & 192 TO 196/H/13 MAXIMA ESTATES (P) LTD. A SHOW CAUSE NOTICE VIDE LETTER DATED 04-02-2011 AN D AFTER OBTAINING THE EXPLANATION FROM ASSESSEE INCLUDING FURTHER CLA RIFICATIONS VIDE LETTER DATED 11-03-2011 COMPLETED THE PROCEEDINGS U /S 263 AND HELD THAT THE SAID AMOUNT CLAIMED WAS TO BE DISALLOWED I N THE RESPECTIVE ASSESSMENT YEARS BUT HOWEVER SET ASIDE THE ASSES SMENTS TO AO. 5. CONTESTING THE OBSERVATIONS OF LD.CIT LD.COUNSE L SUBMITTED THAT THE BUSINESS MODEL ADOPTED BY ASSESSEE AND ACC EPTED BY REVENUE IN ALL THE YEARS IS SIMILAR AND COMMISSION WAS NOT CLAIMED AS A DEDUCTION IN THE YEAR OF PAYMENT BUT ONLY IN THE YEAR WHEN CORRESPONDING SALE OF PLOT WAS TAKEN AS REVENUE. HE REFERRED TO PROVISIONS OF SECTION 194H TO SUBMIT THAT AFTER INT RODUCTION OF THE PROVISIONS WITH EFFECT FROM 01-06-2001 ASSESSEE WA S DEDUCTING TAX ON THE COMMISSION PAID TO THE AGENTS FROM THAT DATE EVEN THOUGH THE SAME WAS NOT CLAIMED AS EXPENDITURE IN THE P&L A/C. HE ALSO REFERRED TO THE SUBMISSIONS MADE BEFORE THE CIT AND OBSERVAT IONS OF THE LD.CIT TO SUBMIT THAT THERE IS NO DISPUTE WITH REFE RENCE TO THE DEDUCTION OF TAX AFTER 01-06-2001 ON THE COMMISSION BEING PAID. IT WAS THE CONTENTION THAT UNDER THE PROVISIONS OF SEC TION 194H TDS IS TO BE DEDUCTED AS AND WHEN THE AMOUNTS ARE PAID TO THE AGENTS AND NOT WHEN DEBITED TO P&L A/C. ACCORDINGLY AMOUNTS W HICH ARE CREDITED TO THE RESPECTIVE AGENTS PRIOR TO 01-06-20 01 CANNOT BE SUBJECTED TO TAX U/S 194H.. SIMPLY BECAUSE THAT WAS CLAIMED AS AN EXPENDITURE IN THE YEAR UNDER CONSIDERATION THE SA ME CAN NOT BE DISALLOWED. WITH REFERENCE TO OBSERVATIONS OF THE L D.CIT THAT ASSESSEE HAS NOT PROVED GENUINENESS OF THE CLAIM L D. COUNSEL REFERRED VOLUMINOUS DATA FILED BEFORE THE CIT IN TH E COURSE OF 263 PROCEEDINGS CONSEQUENT TO SHOW CAUSE NOTICE DATED 11-03-2011 AND THE DATA FURNISHED TO AO AT THE TIME OF ASSESSMENT TO SUBMIT THAT RIGHT FROM THE AY 1995-06 AO HAS NEVER DOUBTED ABO UT PAYMENT OF COMMISSION NOR DISALLOWED ANY AMOUNT ON THE BASIS O F NON- GENUINENESS OF THE COMMISSION PAYMENTS. THE ONLY IS SUE WHICH LD.CIT INVOKED IS WITH REFERENCE TO APPLICATION OF PROVISION OF SECTION 5 ITA NOS. 834 TO 836/H/11 & 192 TO 196/H/13 MAXIMA ESTATES (P) LTD. 194H WHICH THE SHOW CAUSE NOTICE MENTIONED. LD. CO UNSEL CONTENDED THAT SINCE LAW IS IN SUPPORT OF ASSESSEE LD. CIT DOUBTED THE GENUINENESS OF THE CLAIM WITHOUT ESTABLISHING O R BRINING ANYTHING ON RECORD WHICH IS NOT PROPER AS ASSESSEE WAS STRI CTLY FOLLOWING THE METHOD OF ACCOUNTING AND WAS CLAIMING COMMISSION ON LY AS AND WHEN THE CORRESPONDING SALE WAS TAKEN AS INCOME. IN THES E FACTS OF THE CASE IT WAS THE SUBMISSION OF LD. COUNSEL THAT THE CLAIM OF ASSESSEE IS GENUINE WHICH RESPECTIVE AOS HAVE ACCEPTED IN V ARIOUS ASSESSMENTS DONE U/S 143(3) WITHOUT ANY DISALLOWAN CE OF COMMISSION AS UNDER: SL.NO. AY ROI FILED ON INCOME ADMITTED 143(3) REMARKS 1 1996-07 29-11-96 (-)3480543 24-03-99 APPEALS WERE FILED 2 1997-98* DETAILS NOT AVAILABLE 3 1998-99 - (-) 2093736 30-03-00 ACCEPTED THE LOSS 4 1999-00 31-12-99 (-)8153165 07-03-02 FILED APPEALS 5 2000-01 DETAILS NOT AVAILABLE 6 2001-02* 7 2002-03 07-03-03 3009148 31-01-05 UNDER 115J 8 2003-04 01-12-03 NIL 28-02-06 9 2004-05* 10 2005-06* 11 2006-07* 12 2007-08 06-11-07 3625340 31-12-08 * DETAILS IN OTHER YEARS WERE NOT FURNISHED. 6. REFERRING TO THE ORDER IN AY 1999-2000 BY THE CO ORDINATE BENCH OF ITAT HYDERABAD DATED 29-9-2006 IN ITA NO. 267/H YD/2003 IT WAS SUBMITTED THAT THE BOOKS OF ACCOUNT WERE ACCEPTED A ND THE CLAIMS WERE THOROUGHLY EXAMINED IN THAT YEAR AND DISALLOW ANCE MADE ON AD- HOC BASIS WAS DELETED BY THE LD.CIT(A) WHICH WAS C ONFIRMED BY THE ITAT. IT WAS HIS SUBMISSION THAT LD. CITS OBSERVAT ION ABOUT GENUINENESS OF CLAIM IS NOT BASED ON ANY EVIDENCE. SHOW CAUSE ISSUED PER SE ON APPLICATION OF SEC. 194H DOES NOT APPLY TO THE FACTS 6 ITA NOS. 834 TO 836/H/11 & 192 TO 196/H/13 MAXIMA ESTATES (P) LTD. OF THE CASE. ACCORDINGLY LD. COUNSEL SUBMITTED THA T THE ORDERS OF CIT ARE BAD IN LAW. 7. FURTHER WITH REFERENCE TO GROUND NO. 5 RAISED O N THE DIRECTIONS TO INITIATE PROCEEDINGS U/S 271B LD. COUNSEL PLACE D ON RECORD VARIOUS TAX AUDIT REPORTS COMPLETED IN RESPECTIVE A SSESSMENT YEARS ENCLOSED TO THE RETURNS ORIGINALLY AT THE TIME OF F ILING THE ORIGINAL RETURNS. JUST BECAUSE THE SAME COPY WAS NOT ENCLOSE D TO THE RETURNS U/S 153C PROCEEDINGS CAN NOT BE INITIATED. IT WAS HIS SUBMISSION THAT DIRECTION TO INITIATE PROCEEDINGS IS NOT BASED ON A NY FACTS. MOREOVER THAT WAS NOT THE ISSUE AT THE TIME OF INITIATION OF PROCEEDINGS U/S 263 AND LD. CIT CANNOT DIRECT TO INITIATE PROCEEDINGS U /S 271B BECAUSE A DECISION WHICH WAS TAKEN BY THE AO/NOT TAKEN BY THE AO CANNOT BE REVIEWED U/S 263. IT WAS THE SUBMISSION THAT IN BOT H ISSUES THE IMPUGNED ORDERS OF CIT ARE BAD IN LAW. 8. THE LD. CIT-DR HOWEVER RELIED ON THE ORDER OF CIT AND SUBMITTED THAT SINCE ASSESSEE IS SHOWING THE AMOUNT S AS ADVANCE IN THE BOOKS OF ACCOUNT APPLICATION OF PROVISIONS OF SECTION 194H ARISES ONLY AND THE SAME WAS CLAIMED AS COMMISSION THER EFORE THE ORDER OF CIT IS JUSTIFIED. 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND EXAMINE D THE FACTS ON RECORD INCLUDING 4 VOLUMINOUS PAPER BOOKS PLACED ON RECORD. THERE IS NO DISPUTE WITH REFERENCE TO ASSESSEES ME THOD OF ACCOUNTING AND RECOGNITION OF INCOMES. AS STATED BR IEFLY ABOVE ASSESSEE DEVELOPS VARIOUS LANDS AND SALES HAVE BEEN GENERALLY ON INSTALLMENT BASIS SPREAD OVER 60 MONTHS PERIOD. AS AND WHEN THE PURCHASER RENDERS THE FULL AMOUNT OR REGISTERS A PL OT IN THEIR NAME ASSESSEE TAKES SALE CONSIDERATION AS A REVENUE OF T HAT YEAR AND CORRESPONDING EXPENDITURE WAS BEING CLAIMED. EVEN T HOUGH THE COMMISSION WAS DETERMINED AT THE TIME OF EITHER APP OINTING AGENT OR RECEIPT OF MONIES AT THE TIME OF SALE OF PLOT ENTI RE COMMISSION BEING 7 ITA NOS. 834 TO 836/H/11 & 192 TO 196/H/13 MAXIMA ESTATES (P) LTD. PAID WHEN 50% OF THE SALE CONSIDERATION WAS RECEIVE D FROM THE PURCHASER AND THE COMMISSION WAS NOT CLAIMED ON THE BASIS OF PAYMENT IN THE YEAR BUT WAS SHOWN IN THE BOOKS OF ACCOUNT AS AN ADVANCE EXPENDITURE PENDING FINALIZATION OF THE SAL E/REGISTRATION. IT IS AN ADMITTED FACT THAT ASSESSEE WAS RECORDING SALE A ND CORRESPONDING COMMISSION IN THE SAME YEAR EVEN THOUGH ADVANCE O F SALE AMOUNT AND PAYMENT OF COMMISSION HAVE BEEN SHOWN IN THE EA RLIER YEARS IN ADVANCES ACCOUNTS. IN THIS METHOD OF ACCOUNTING IT IS TO BE SEEN WHETHER ASSESSEES CLAIM OF COMMISSION IS COVERED B Y THE PROVISIONS OF SECTION 194H AS INITIALLY RAISED BY LD. CIT IN T HE SHOW CAUSE LETTER. 10. BEFORE THAT ONE ASPECT WHICH REQUIRES CONSIDER ATION IS OBSERVATIONS OF THE LD. CIT THAT CLAIM IS NOT GENUI NE. THIS SEEMS TO BE PASSING REFERENCE BY THE LD. CIT ONLY TO SET ASI DE THE ISSUE WHEN IN FACT ON THE LEGAL PRINCIPLES OF PROVISIONS OF SE CTION 194H DISALLOWANCE U/ 40(A)(IA) WHICH LD. CIT ORIGINALLY CONSIDERED DOES NOT ARISE WHICH WILL BE DISCUSSED LATER IN DETAIL. THEREFORE IN OUR OPINION HE HAS ALSO RAISED THE ISSUE OF GENUINENES S OF CLAIM TO JUSTIFY HIS ACTION OF INITIATING PROCEEDINGS U/S 26 3. HOWEVER THE FACTS INDICATE THAT ASSESSEES CLAIM OF COMMISSION WAS BE ING EXAMINED IN THE RESPECTIVE YEARS AND IN ALL YEARS THERE IS NO SUCH DISALLOWANCE BEING BOGUS CLAIM AND EVEN UNDER ASSESSMENTS U/S 15 3C CONSEQUENT TO SEARCH AND SEIZURE OPERATIONS THERE IS NO ALLEGATION OF BOGUS NATURE OF COMMISSION CLAIMED. KEEPING IN MIND THAT SEARCH AND SEIZURE OPERATIONS ALSO DID NOT RESULT IN ANY ALLEG ATION OF BOGUS CLAIM THE OBSERVATION OF LD. CIT HAS TO BE LOOKED WITH SU SPICION. THERE IS NO BASIS FOR OBSERVATIONS OF CIT ON THIS. AS STATED EARLIER ASSESSEE FILED ALL DETAILS BEFORE HIM WHEN A SHOW CAUSE WAS SPECIFICALLY ISSUED IN THE COURSE OF PROCEEDINGS U/S 263. ASSESSEE HAS ALREADY PLACED ALL THE DETAILS BEFORE THE AO IN REGULAR PROCEEDINGS. C ONSEQUENT TO SEARCH IN AY 2005-06 IT WAS NOTICED THAT THE AMOUN T OF RS. 5 18 000/- WAS EXCESS CLAIMED OUT OF THE COMMISSION IN THAT YEAR WHICH WAS OFFERED AS INCOME AND THE SAME WAS ACCEPT ED BY THE AO 8 ITA NOS. 834 TO 836/H/11 & 192 TO 196/H/13 MAXIMA ESTATES (P) LTD. IN THE ORDER PASSED. THIS INDICATES THAT THE ISSUE OF GENUINENESS OF CLAIM WAS EXAMINED AND CONSIDERED BY THE AO NOT ONL Y IN THE REGULAR ASSESSMENTS BUT ALSO IN THE ASSESSMENTS MADE CONS EQUENT TO SEARCH. THEREFORE WE DO NOT AGREE WITH THE OBSERVA TIONS OF LD. CIT THAT ASSESSEE HAS NOT PROVED THE GENUINENESS OF THE CLAIM. 11. COMING TO THE ISSUE OF APPLICATION OF PROVISION S OF SECTION 194H ON THE COMMISSION CLAIM WE REFER TO THE PROVISIONS OF SECTION 194H WHICH ARE AS UNDER: 194H: ANY PERSON NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY WHO IS RESPONSIBLE FOR PAYING O N OR AFTER THE 1ST DAY OF JUNE 2001 TO A RESIDENT ANY INCO ME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFER RED TO IN SECTION 194D) OR BROKERAGE SHALL AT THE TIME OF C REDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER DEDUCT INCOME-TAX THEREON AT THE RATE OF [TEN] PER CENT : PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION IN A CASE WHERE THE AMOUNT OF SUCH INCOME OR AS THE CASE MAY BE THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CR EDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR TO THE ACCOUNT OF OR TO THE PAYEE DOES NOT EXCEE D [FIVE THOUSAND RUPEES] [ PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY WHOSE TOTAL SALES GROSS RECEIPTS OR TURNO VER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEE D THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUS E (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH COMMISSION OR BRO KERAGE IS CREDITED OR PAID SHALL BE LIABLE TO DEDUCT INC OME-TAX UNDER THIS SECTION:] [ PROVIDED ALSO THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION ON ANY COMMISSION OR BROKERAGE PAYABLE BY BHARAT SANCHAR NIGAM LIMITED OR MAHANAGAR TELEPHONE NIGAM LIMITED TO THEIR PUBLIC CALL OFFICE FRANCHISEES.] EXPLANATION.FOR THE PURPOSES OF THIS SECTION 9 ITA NOS. 834 TO 836/H/11 & 192 TO 196/H/13 MAXIMA ESTATES (P) LTD. (I) 'COMMISSION OR BROKERAGE' INCLUDES ANY PAYMEN T RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (N OT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TR ANSACTION RELATING TO ANY ASSET VALUABLE ARTICLE OR THING NOT BEING SECURITIES; (II) THE EXPRESSION 'PROFESSIONAL SERVICES' MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON A LEGAL MEDICAL ENGINEERING OR ARCHITECTURAL PROFESSION O R THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA; (III) THE EXPRESSION 'SECURITIES' SHALL HAVE THE M EANING ASSIGNED TO IT IN CLAUSE (H) OF SECTION 2 OF THE S ECURITIES CONTRACTS (REGULATION) ACT 1956 (42 OF 1956) ; (IV) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT WHETHER CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THI S SECTION SHALL APPLY ACCORDINGLY.] 12. AS CAN BE SEEN THE PROVISIONS OF SECTION 194H W ILL APPLY ONLY WHEN THE AMOUNT IS BEING PAID OR CREDITED TO THE AC COUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH C HEQUE DRAFT OR ANY OTHER MODE WHICHEVER IS EARLIER. THIS PROVISION IS EFFECTIVE FROM 01- 06-2001 AND ASSESSEE IS COMPLYING WITH THE SAID PRO VISION AND WHATEVER COMMISSION OR BROKERAGE PAID ON OR AFTER 0 1-06-2001 TAX WAS DEDUCTED AS PER THE SECTION ON WHICH THERE IS NO DISPUTE. PROVISIONS OF SECTION 194H CAN ONLY BE APPLIED ONLY WHEN AMOUNT IS BEING PAID OR CREDITED TO THE ACCOUNT OF PAYEE BUT NOT WHEN THE AMOUNT WAS DEBITED TO THE P&L A/C. AS BRIEFLY STATE D EARLIER IN THE METHOD OF ACCOUNTING BEING FOLLOWED COMMISSION AMO UNT PAID AT LEAST 2/3 YEARS PRIOR TO THE DATE OF CLAIM AND THE SALE WAS RECORDED ONLY AFTER THE END OF 60 TH INSTALLMENT OR AS AND WHEN THE FULL CONSIDERATION WAS RECEIVED (EVEN PRIOR TO THE 60 TH MONTH)/ AFTER REGISTRATION TO THE PURCHASER. THE CORRESPONDING EX PENDITURE WAS 10 ITA NOS. 834 TO 836/H/11 & 192 TO 196/H/13 MAXIMA ESTATES (P) LTD. CLAIMED WHICH INCLUDED THE COMMISSION PAYMENT PARTL Y PAID AT THE TIME OF REGISTERING INITIAL SALE OR COMPLETELY PAI D WHEN 50% OF SALE CONSIDERATION WAS RECEIVED. IN THESE CIRCUMSTANCES THE CLAIM OF THE CORRESPONDING COMMISSION CANNOT BE CONSIDERED UNDER THE PROVISIONS OF SECTION 194H AS CREDIT TO THE ACCOUNT OF PAYEE OR PAYING TO THE SAID PERSON HAS ARISEN MUCH EARLIER. THERE IS NO D ISPUTE WITH REFERENCE TO THE PAYMENT OF TDS ON THE COMMISSION P AID ON OR AFTER 1 ST JUNE 2001. FOR THE AMOUNTS CREDITED TO THE RESPEC TIVE AGENTS PRIOR TO THAT DATE THERE IS NO APPLICATION OF PROV ISIONS OF SECTION 194H AS IT CAME ON STATUTE ONLY WITH EFFECT FROM 01-06-2 001. THEREFORE ASSESSEES CLAIM OF COMMISSION PERTAINING TO EARLIE R YEARS ON THE BASIS OF METHOD OF ACCOUNTING CANNOT BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA) AS PROVISIONS OF S ECTION 194H ARE NOT APPLICABLE TO THAT PART OF THE CLAIM. IN THESE CIR CUMSTANCES WE ARE OF THE OPINION THAT THE CLAIM OF COMMISSION CANNOT BE DISALLOWED U/S 40(A)(IA) AS CONSIDERED BY LD. CIT. 13. LOOKING AT THE ISSUE BOTH FROM THE POINT OF DI SALLOWANCE U/S 40(A)(IA) OR U/S 37(1) WE ARE OF THE VIEW THAT THE CLAIM OF ASSESSEE HAS BEEN EXAMINED AND GENUINELY ALLOWED BY THE AO IN THE ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTIO N 153C. THEREFORE THERE IS NO ERROR OR PREJUDICE CAUSED TO THE REVENUE ON THAT ORDER AND CONSEQUENTLY THE ORDER OF LD. CIT U /S 263 BECOMES BAD IN LAW. WE ARE NOT IN A POSITION TO UPHOLD THE ORDERS OF LD.CIT AND ACCORDINGLY THE SAME ARE SET ASIDE. MOREOVER H IS DIRECTION TO INITIATE PROCEEDINGS U/S 271B IS ALSO NOT CORRECT. NO OPPORTUNITY WAS GIVEN TO ASSESSEE BEFORE SUCH DIRECTION. IF ASSESSE E HAD NOT ENCLOSED THE TAX AUDIT REPORT ALONG WITH THE RETURN IN RESPONSE TO A NOTICE U/S 153A THE THE SAME SHOULD BE TREATED AS DEFECTIVE RETURN. THE FACT THAT THE RETURN WAS ACCEPTED AND ASSESSMEN T WAS COMPLETED INDICATES THAT AO WAS SATISFIED WITH THE EVIDENCE O N RECORD THAT AUDIT WAS ALREADY COMPLETED EARLIER AND REPORT FILED. SO THE ACTION OF CIT IS NOT JUSTIFIABLE. THEREFORE ALL ORDERS PASSED U/S 2 63 FOR THE RESPECTIVE 11 ITA NOS. 834 TO 836/H/11 & 192 TO 196/H/13 MAXIMA ESTATES (P) LTD. ASSESSMENT YEARS ARE SET ASIDE AND APPEALS OF ASSES SEE ON THIS ISSUE ARE ALLOWED. ITA NOS. 192 TO 194/HYD/2013 14. THE ORDERS PASSED IN THESE APPEALS ARE CONSEQU ENTIAL TO THE ORDERS U/S 263. AS BRIEFLY STATED EVEN THOUGH THE ASSESSMENTS WERE SET ASIDE LD. CIT DIRECTED THE AO TO DISALLOW THE CORRESPONDING AMOUNTS WHICH THE AO DID IN THE CONSEQUENTIAL PROC EEDINGS. AS DISCUSSED ABOVE THE CLAIM IS GENUINE WHICH WAS ALL OWED ORIGINALLY BY THE AO. AS WE HAVE SET ASIDE THE ORDERS PASSED BY L D. CIT-IV U/S 263 CONSEQUENTIAL ORDERS PASSED BECOME AB INITIO VOID . IN THESE CIRCUMSTANCES ASSESSEES GROUNDS RAISED IN THE SAI D APPEALS ARE TO BE ALLOWED AND ACCORDINGLY THE SAME ARE ALLOWED. 15. IN THE RESULT ALL THE APPEALS UNDER CONSIDERA TION ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THE 31 ST DAY OF OCTOBER13. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. RA MAKOTAIAH) JUDICIAL MEMBER ACCO UNTANT MEMBER HYDERABAD DATED: 31 ST OCTOBER 2013. KV COPY TO:- 1) M/S MAXIMA ESTATES PVT. LTD. C/O SRI S. RAMA RA O ADVOCATE FLAT NO. 102 SHRIYAS ELEGANCE H.NO. 3-6-643 ST.NO. 9 HIMAYATNAGAR HYDERABAD 500 029. 2) DCIT CENTRAL CIRCLE 2 HYDERABAD . 3) CIT-IV HYDERABAD. 4) THE DEPARTMENTAL REPRESENTATIVE I.T. A.T. HYDERABAD.