Sh. Shealinder Kumar Singh Kaintal, Patiala V. ACIT, Patiala

ITA 1009/CHANDI/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6152 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 29-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Advance ruling; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1009/CHD/2013 ASSESSMENT YEAR: 2005-06 SH. SHEALINDER KUMAR SINGH KAINTAL VS. THE ACIT , PROP. KAINTAL SCHOOL, 26 CIRCLE PATIALA PATIALA PAN NO. ABCPK3111D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI AKHILESH GUPTA DATE OF HEARING : 20/05/2014 DATE OF PRONOUNCEMENT : 09/06/2014 ORDER PER T.R.SOOD, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 27/09/2013 OF CIT(APPEALS), PATIALA 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS:- 1. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS), PATIALA HAS ERRED IN HOLDING THAT THE NOTICE ISSUED U/S 148 DATED 29/03/2010 FOR REOPENING THE ASSESSMENT U/S 147 IS NOT WITHOUT JURISDICTION AND AS SUCH IS NOT ILLEGAL AND VOID-AB -INITIO AS CLAIMED BY THE APPELLANT. 2. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) PATIALA HAS ERRED IN HOLDING THAT THE TEACHING IS A PROFESSION AND AS SUCH COVERED UNDER THE PROVISIONS OF SECTION 194 J OF THE INCOME-TAX ACT, 1961. 2 3. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) PATIALA HAS ERRED UPHOLDING THE ADDITION OF RS. 6,2 7,048/- U/S 40(A)(IA)OF THE ACT MADE BY THE ASSESSING OFFICER. 4. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) PATIALA HAS ERRED IN NOT DISPOSING OF GROUND NO. 4 OF THE GROUNDS OF APPEAL WITH REGARD TO CHARGING OF INTEREST U/S 2 34B ATRS.1,86,080/- AND U/S 234C AMOUNTING TO RS. 2470/ -. 5. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) PATIALA HAS ERRED IN NOT DISPOSING OF GROUND NO. 5 OF THE GROUNDS OF APPEAL WITH REGARD TO ISSUE OF PENALTY NOTICE U/ S 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. OUT OF ABOVE, GROUND NO.5 WAS NOT PRESSED, THERE FORE, THE SAME IS DISMISSED AS NOT PRESSED. 4. GROUND NO.1 : AFTER HEARING BOTH THE PARTIES WE FIND THAT ORIG INALLY RETURN WAS FILED DECLARING INCOME OF RS. 12,90,630 /-. THE ASSESSMENT WAS FRAMED U/S 143(3) BY COMPUTING THE INCOME AT RS. 59 ,61,530/- PLUS AGRICULTURAL INCOME OF RS. 2,34,000/-. THE ADDITIONS WERE MADE O N ACCOUNT OF DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS. 1,93,544/-, ON ACC OUNT OF PROFIT ON SALE OF PROPERTY AMOUNTING TO RS. 44,28,660/- AND OTHER DIS ALLOWANCE OF RS. 15,000/-. LATER ON, A NOTICE U/S 148 WAS ISSUED ON 29.3.2010 . THE FOLLOWING REASONS WERE RECORDED FOR REOPENING:- THE ASSESSEE FILED RETURN OF INCOME ON 30.09.2005 DECLARING INCOME OF RS. 12,90,630/- PLUS AGRICULTURAL INCOME OF RS. 2,34,000/- AND THE SAME WAS PROCESSED U/S 143(1) ON 02.11.2005. SUBSEQ UENTLY THE CASE WAS COMPLETED U/S 143(3) ON 01.08.2007 AT AN INCOME OF RS. 59,61,530/- PLUS AGRICULTURAL INCOME OF RS. 2,34,00 0/- AFTER MAKING FOLLOWING ADDITIONS:- RS. 1,93,544/-DISALLOWANCE OF DEPRECIATION ON BUSE S RS. 44,28,660/-PROFIT ON PURCHASE AND SALE OF PROP ERTY RS. 15,000/- DISALLOWANCE OUT OF DIESEL EXPENSES 3 2. ON GOING THROUGH THE P&L A/C, IT IS NOTICED THAT THE ASSESSEE PAID VOCATIONAL TRAINING CHARGES OF RS. 7,29,380/- TO VARIOUS PERSONS. AS PER LIST ENCLOSED / FURNISHED BY THE AS SESSEE, THERE ARE 18 PERSONS TO WHOM PAYMENTS MADE FOR THEIR SERVICES DURING THE YEAR EXCEEDED RS. 20,000/- BUT THE ASSESSEE FAILED TO MA KE ANY TDS AS REQUIRED U/S 194 J, HENCE PROVISIONS OF SECTION 40( A)(IA) CLEARLY ATTRACT FOR THESE PAYMENTS AMOUNTING TO RS. 6,27,04 8/- AND HENCE THE SAME REQUIRES TO BE DISALLOWED AND ADDED TO THE INC OME OF THE ASSESSEE. 3. FURTHER, IT IS NOTICED THAT THE ASSESSEE RECEIVE D A GIFT OF RS. 2 LACS FROM ONE SMT. SITA RAM SABLOK, NEW DELHI, FOR WHICH NO SATISFACTORY EVIDENCE HAS BEEN FURNISHED BY THE ASS ESSEE AND THUS THE GENUINENESS THEREOF HAS NOT BEEN PROVED BY THE ASSE SSEE. THIS AMOUNT REQUIRES TO BE ADDED TO THE INCOME OF THE AS SESSEE. ACCORDINGLY, I HAVE REASON TO BELIEVE THAT THE INCO ME OF THE ASSESSEE AS STATED SUPRA, HAS ESCAPED ASSESSMENT WI THIN THE MEANING OF SECTION 147 OF THE I.T. ACT. IN RESPONSE, THE ASSESSEE SUBMITTED THAT ORIGINAL R ETURN MAY BE TREATED AS FILED IN RESPONSE TO THIS NOTICE. DURING THE ASSESSMENT PROCEEDINGS, IT WAS MAINLY SUBMITTED THAT LATER ON OBJECTION WAS RAISED REGARD ING REOPENING OF THE ASSESSMENT AS SECTION 194J IS NOT APPLICABLE TO THE ASSESSEE BECAUSE THE SAME IS APPLICABLE IN RESPECT OF SERVICED RENDERED BY THE V ARIOUS PROFESSIONALS. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE WITH T HIS AND PASSED AN ORDER REJECTING THE OBJECTIONS. 5. ON APPEAL ACTION OF THE ASSESSING OFFICER WAS CO NFIRMED BY THE LD. CIT(A). 6. BEFORE US LD. COUNSEL FOR THE ASSESSEE CARRIED U S THROUGH THE FACTS AND POINTED OUT THAT ORIGINALLY THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) AFTER 4 ISSUING DETAILED QUESTIONNAIRE. HE POINTED OUT THAT IN THE ORIGINAL QUESTIONNAIRE DETAILS REGARDING VOCATIONAL TRAINING EXPENSES WERE ASKED WHICH BECOMES CLEAR FROM THE QUESTIONNAIRE, COPY OF WHICH IS AVAILABLE AT PAGE 5. A REPLY WAS GIVEN TO THIS QUESTIONNAIRE, COPY OF WHICH IS AVAILABLE A T PAGES 7 & 8. IT WAS ALSO STATED THAT NAMES AND ADDRESSES OF VARIOUS TEACHERS WERE ALSO ENCLOSED. IN THE ASSESSMENT U/S 143 (3), HEAVY ADDITIONS WERE MADE WHICH HAVE BEEN LATER ON DELETED BY THE CIT(A) AND CONFIRMED BY THE TRIBUNAL AS WELL AS THE HIGH COURT BUT NO ADDITION WAS MADE AGAINST THE EXPENSES UNDER THE HEAD VOCATIONAL TRAINING CHARGES, THEREFORE, ONCE THE ASSESSMENT H AS BECOME FINAL AFTER THE ORDER OF THE TRIBUNAL THEN THE REOPENING WAS NOT PO SSIBLE ON THE SAME ISSUE WHICH HAS ALREADY BEEN EXAMINED. IN ANY CASE, NO M ATERIAL HAS COME TO THE POSSESSION OF THE ASSESSING OFFICER TO FORM AN OPI NION THAT INCOME HAS ESCAPED ASSESSMENT AND IT IS MERELY A CASE OF CHANGE OF OPI NION WHICH IS NOT POSSIBLE AND IN THIS REGARD HE RELIED ON THE DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF CIT V (1) KELVINATOR OF INDIA LTD & (2) EIC HER LTD, 320 ITR 561 (SC).. 7. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDER OF CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3). BEFORE FRAMING T HE ASSESSMENT, DETAILED QUESTIONNAIRE WAS ISSUED AND ALL THE ISSUES WERE EX AMINED INCLUDING THE ISSUE OF VOCATIONAL TRAINING EXPENSES. HEAVY ADDITIONS TO TH E EXTENT OF APPROXIMATELY RS. 46 LAKHS WERE MADE BUT NO ADDITION WAS MADE IN RESP ECT OF VOCATIONAL TRAINING EXPENSES. NO FRESH INFORMATION OR MATERIAL HAS COME INTO THE POSSESSION OF ASSESSING OFFICER AND IT IS CLEARLY STATED IN THE REASONS FOR REOPENING THAT ON GOING THROUGH THE PROFIT AND LOSS ACCOUNT IT WAS NO TICED THAT THE ASSESSEE PAID VOCATIONAL TRAINING CHARGES OF RS. 7,29,380/- TO VA RIOUS PERSONS. AS PER LIST ENCLOSED / FURNISHED BY THE ASSESSEE, THERE ARE 18 PERSONS TO WHOM PAYMENTS MADE FOR THEIR SERVICES DURING THE YEAR EXCEEDED RS . 20,000/- BUT THE ASSESSEE FAILED TO MAKE ANY TDS AS REQUIRED U/S 194 J, HENCE PROVISIONS OF SECTION 5 40(A)(IA) CLEARLY ATTRACT FOR THESE PAYMENTS AMOUNT ING TO RS. 6,27,048/- AND HENCE THE SAME REQUIRES TO BE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. FURTHER, IT IS NOTICED THAT THE ASSESSEE RECEIVED A GIFT OF RS. 2 LACS FROM ONE SMT. SITA RAM SABLOK, NEW DELHI, FOR WHICH NO SATISFACTORY EVIDENCE HAS BEEN FURNISHED BY THE ASSESSEE AND THUS THE GEN UINENESS THEREOF HAS NOT BEEN PROVED BY THE ASSESSEE. THIS AMOUNT REQUIRES T O BE ADDED TO THE INCOME OF THE ASSESSEE. THESE ASPECTS HAD ALREADY BEEN EXAMI NED IN THE ORIGINAL ASSESSMENT U/S 143(3). THIS MAKES IT CLEAR THAT IT IS A SIMPLE CASE OF CHANGE OF OPINION BECAUSE PROFIT AND LOSS ACCOUNTS AND DETAIL S OF VOCATIONAL EXPENSE WERE CLEARLY AVAILABLE AND EXAMINED DURING ORIGINAL ASSE SSMENT PROCEEDINGS WHICH WERE CONDUCTED DURING THE SCRUTINY ASSESSMENT. THER EFORE, IN OUR OPINION, THE ASSESSMENT HAS BEEN WRONGLY REOPENED ON THE BASIS O F CHANGE OF OPINION. THE HON'BLE SUPREME COURT IN THIS REGARD HAS OBSERVED I N THE CASE OF CIT V (1) KELVINATOR OF INDIA LTD & (2) EICHER LTD , (SUPRA) AS UNDER;- THE CONCEPT OF 'CHANGE OF OPINION' ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION OF SECTION 147 O F THE INCOME-TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMEND MENT) ACTS, 1987 AND 1989. AFTER THE AMENDMENT, THE ASSES SING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT, BUT THIS DOES NOT IMPLY THAT THE ASSESS ING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF 'CHANGE OF OPINION' MUST BE TREATED AS A N IN-BUILT TEST TO CHECK THE ABUSE OF POWER. HENCE AFTER APRIL 1, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN AN ASSESS MENT, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO TH E CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMAT ION OF THE BELIEF. 9. THE ABOVE CLEARLY SHOWS THAT EVEN IN THE AMENDED PROVISION CONCEPT OF CHANGE OF OPINION IS RELEVANT. THEREFORE, IT IS A CLEAR CASE OF CHANGE OF OPINION AND ACCORDINGLY WE ANNUL THE REASSESSMENT PROCEEDIN G. 6 10. GROUND NO. 2 AND 3 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURIN G ASSESSMENT PROCEEDINGS, A QUERRY WAS RAISED THAT ASSESSEE HAS PAID VOCATIONAL TRAINING CHARGES AMOUNTING TO RS. 7,29,380/- TO VAR IOUS PERSONS OUT OF WHICH PAYMENT TO 18 PERSONS EXCEEDED THE SUM OF RS. 20,00 0/- AND SINCE ASSESSEE HAD FAILED TO DEDUCT THE TAX, THEREFORE, ASSESSEE WAS S HOW CAUSED TO REPLY WHY THIS AMOUNT SHOULD NOT BE DISALLOWED. IT WAS MAINLY SUB MITTED THAT SECTION 194J WAS NOT APPLICABLE. A REFERENCE WAS ALSO MADE TO THE N OTIFICATION OF THE BOARD WHERE VARIOUS PERSONS WERE LISTED WHICH WERE COVERE D UNDER THE PROVISIONS OF SECTION 194J AND INCLUDE SPORT PERSONS, UMPIRES AND REFEREES, COACHES AND TRAINERS, TEAM PHYSICIANS AND PHYSIOTHERAPISTS, EVE NT MANAGERS, COMMENTATORS, ANCHORS AND SPORTS COLUMNISTS. IT WAS POINTED OUT THAT THIS NOTIFICATION COVERS ONLY SPORTS ACTIVITIES AND SINCE THE ASSESSEE HAS P AID THE TRAINING CHARGES TO THE TEACHERS, THEY ARE NOT COVERED. THE ASSESSING OFFIC ER DID NOT ACCEPT THE SUBMISSIONS AND MADE ADDITION OF RS. 6,27,048/- VID E GROUND NO.2 OF THE APPEAL, TO THE INCOME OF THE ASSESSEE. 11. ON APPEAL THE ACTION OF THE ASSESSING OFFICER W AS CONFIRMED BY THE LD. CIT(A). 12. BEFORE US LD. COUNSEL OF THE ASSESSEE IN RESPEC T OF MERITS, SUBMITTED THAT VOCATIONAL TRAINING EXPENSES WERE IN RESPECT OF PAY MENT OF SALARY TO TEACHERS AND, THEREFORE, PROVISIONS OF SECTION 194J WERE NOT APPLICABLE. THE TEACHERS WERE ON TEMPORARY BASIS AND BECAUSE OF THAT THE SAL ARY PAID TO THEM WAS SHOWN AS VOCATIONAL TRAINING EXPENSES. HE REFERRED TO SE CTION 194J AND POINTED OUT THAT THE PROFESSIONAL SERVICES ITSELF HAS BEEN DE FINED IN THE EXPLANATION AND TEACHERS WILL NOT BE COVERED BY THAT DEFINITION. T HERE WAS EMPLOYER EMPLOYEE RELATION WITH THE TEACHERS AND, THEREFORE, THEY CAN NOT BE TREATED AS PROFESSIONALS. IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF AUTHORITY OF ADVANCE RULINGS IN THE CASE OF MAX MULLER BHAVAN, IN RE (A. A.R) 268 ITR 31. 13. ON THE OTHER HAND LD. DR STRONGLY SUPPORTED THE ORDER OF CIT(A). 7 14. AFTER CONSIDERING THE RIVAL SUBMISSION WE FIND THAT EVEN THEN ON MERITS THE SECTION 194J IS APPLICABLE ONLY IN RESPECT OF FEE F OR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES ETC. ACCORDING TO REVENUE, T HE PAYMENT OF VOCATIONAL CHARGES IS COVERED UNDER THE DEFINITION OF PROFESS IONAL SERVICES I.E. NOT TRUE. PROFESSIONAL SERVICES HAVE BEEN DEFINED IN EXPLANAT ION ON 194J AS UNDER:- (A) PROFESSIONAL SERVICES' MEANS SERVICES RENDERE D BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROF ESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DE CORATION OR ADVERTISING OR SUCH OTHER PROFESSION AS IS NOTIF IED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA OR OF THIS SECTION; B) THE ABOVE CLEARLY SHOWS THAT PROFESSIONAL SERVICES WOULD RELATE TO ESTABLISHED PROFESSIONALS LIKE CHARTERED ACCOUNTANTS, LEGAL ADV ISORS, MEDICAL CONSULTANTS, ENGINEERS OR ARCHITECTURES ETC. TEACHING IS NOT A P ROFESSION. MOREOVER, THE TEMPORARY TEACHERS EMPLOYED BY THE ASSESSEE WOULD L EAD TO A RELATIONSHIP OF EMPLOYER - EMPLOYEE AND SAME CANNOT BE TERMED AS RE NDERING OF PROFESSIONAL SERVICES. THEREFORE, IN OUR OPINION, SECTION 194J I S NOT APPLICABLE TO THE ASSESSEE AND THERE WAS NO NEED TO DEDUCT THE TAX. ACCORDINGLY, THE PROVISIONS OF SECTION 40A(IA) CANNOT BE APPLIED TO THIS CASE. THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DELETE THE ADDITION. 15. GROUND NO.4 RAISED BY THE ASSESSEE IS CONSEQUEN TIAL IN NATURE, THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO LEVY THE INTER EST AS PER PROVISION OF LAW. 16. IN THE RESULT, THE APPEAL FIELD BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.06.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09 TH JUNE, 2014 RKK COPY TO:1.THE APPELLANT,2.THE RESPONDENT,3.THE CIT, 4.THE CIT(A),5.THE DR