CHETAN SHANTIAL SHAH, BARODA V. ITO (IT) 2(1), MUMBAI

ITA 102/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2717 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 08-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HIMANSHU SHARMA
• Assessee Lawyers: NIRMIT ME H TA
• Keywords: Permanent establishment; Revised return
• Section: 143(3); 234B

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL L BENCH MUMB AI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.102/MUM/2016 (ASSESSMENT YEAR 2011-12 ) SHRI CHETAN SHANTILAL SHAH 36, LAVKUSH APARTMENT, PRATAPGANJ, BARODA-390002 PAN: BLNPS4745R VS. ITO (INTERNATIONAL TAXATION)- 2(1), MUMBAI. APPELLANT RESPONDEN T APPELLANT BY : SHRI NIRMIT MEHTA (AR) RESPONDENT BY : SHRI HIMANSHU SHARMA (SR. DR) DATE OF HEARING : 08.08.2018 DATE OF PRONOUNCEMENT : 13.08.2018 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER O F INCOME-TAX (APPEALS) [THE LD. CIT(A)]- 56, MUMBAI DATED 2 ND NOVEMBER 2015 WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT ON 24 TH MARCH 2014 FOR ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROU ND OF APPEAL; (I) THE LEARNED COMMISSIONER (APPEALS) ERRED IN FACTS A ND IN LAW IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKIN G ADDITION OF RS. 21,76,154/- TO THE TOTAL INCOME OF THE ASSESSEE. (II) THE LEARNED COMMISSIONER (APPEALS) ERRED IN FACT AN D IN LAW IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN TAXIN G THE INCOME OF RS. 21,76,154/- AT NORMAL RATE ENLISTED OF APPLYING SPE CIAL RATE OF 10%. (III) THE LEARNED COMMISSIONER (APPEALS) ERRED IN FACT AN D IN LAW IN CONFIRMING ACTION OF ASSESSING OFFICER IN NOT APPLY ING PROVISIONS OF SECTION 115A(1)(B)(BB) OF THE INCOME TAX ACT FOR DE TERMINING THE RATE OF TAX APPLICABLE ON FEES FOR TECHNICAL SERVICES. ITA NO. 102/MUM/2016- SHRI CHETAN SHANTILAL SHAH 2 (IV) THE LEARNED COMMISSIONER (APPEALS) ERRED IN FACTS A ND IN LAW IN NOT APPRECIATING THAT THE CONTENTION OF ASSESSEE, THAT HE HAD NO PERMANENT ESTABLISHMENT (PE) IN INDIA. (V) THE LEARNED COMMISSIONER (APPEALS) ERRED IN FACT AN D IN LAW IN CONFIRMING THE ACTION OF AO IN DISALLOWING THE TAX CREDIT ON THE ADDITION OF RS. 21,76,154/-. (VI) THE LEARNED COMMISSIONER (APPEALS) ERRED IN FACTS A ND IN LAW IN CONFIRMING ACTION OF ASSESSING OFFICER IN CHARGE IN TEREST UNDER SECTION 234B OF THE ACT. (VII) THE LEARNED COMMISSIONER (APPEALS)ERRED IN FACTS AN D IN LAW IN CONFIRMING ACTION OF ASSESSING OFFICER IN CHARGING INTEREST UNDER SECTION 234D OF THE ACT. (VIII) THE LEARNED COMMISSIONER (APPEALS) ERRED IN FACTS A ND IN LAW IN CONFIRMING ACTION OF ASSESSING OFFICER IN INITIATIN G THE PENALTY PROCEEDING UNDER SECTION 271 (1)(C) OF THE ACT. (IX) YOUR APPELLANT CRAVES THE RIGHT TO ADD TO OR ALTER, AMEND, SUBSTITUTE, DELETE OR MODIFIED ALL OR ANY OF THE ABOVE GROUNDS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR DECLARING TOTAL INCOME AT RS. 3,13,743/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT ORDER UNDER SECTION 143(3) WAS PASSED ON 24 TH MARCH 2014. THE ASSESSING OFFICER ON THE BASIS OF AIR INFORMATION NOTED THAT ASSESSEE HAS RECEIVED RS. 25,62,202/- FROM VARIOUS COMPANIES ON WHICH TDS HAS BEEN DEDUCTED, HOWEVER, THE ASSESSEE HAS NOT DISCLOSED T HIS INCOME IN HIS RETURN. WHEN THE ASSESSEE WAS CONFRONTED ABOUT THE DIFFERENCE OF INCOME OFFERED, THE ASSESSEE CONTENDED THAT HE IS RESIDING IN UNITED STATES OF AMERICA, HENCE, THE INCOME WAS NOT OFFERED IN INDIA . THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER HOLDING THAT ASSESSEE EARNED INCOME IN INDIA ON WHICH TDS WAS DEDUCTED. T HEREFORE, THE ASSESSING OFFICER HELD THE INCOME EARNED BY ASSESSE E IS LIABLE FOR TAXATION IN INDIA. THE ASSESSING OFFICER ADDED THE DIFFERENC E OF INCOME OF RS. ITA NO. 102/MUM/2016- SHRI CHETAN SHANTILAL SHAH 3 21,76,154/- AND TREATED THE SAME AS INCOME FROM OT HER SOURCES. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSESSI NG OFFICER WAS CONFIRMED. HENCE, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A) THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSION OF LEARNED AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND LEARNED DEPARTMENTAL REPRESENTA TIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. AT THE OUTSET OF HEARING THE LEARNED AR OF THE ASSESSEE SUBMITS THAT HE IS NOT PRESSING GROUND NO. 1 & 4. CONSIDERING THE SUBMISSION OF LEA RNED AR FOR THE ASSESSEE GROUND NO. 1 & 4 OF THE APPEAL IS DISMISSE D AS NOT PRESSED. FOUR REMAINING GROUNDS OF APPEAL. THE LEARNED AR OF THE ASSESSEE FILED WRITTEN SYNOPSIS IN THE FORM OF CHART. 4. GROUND NO.1 RELATES TO TAXING THE INCOME OF RS. 21, 76,154/- AT NORMAL RATE INSTEAD AT SPECIAL RATE. THE LEARNED AR OF THE ASSESSEE SUBMITS THAT ASSESSEE IS A NON-RESIDENT INDIAN, ENGAGED IN PROVI DING TECHNICAL CONSULTANCY SERVICES TO VARIOUS INDUSTRIES. THE ASS ESSEE RECEIVED THE FEE FOR CONSULTANCY SERVICES OF RS. 21,76,154/-WHICH WA S TREATED BY ASSESSING OFFICER AS INCOME FROM UNDISCLOSED SOURCE S AND TAXED IT UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LEARNED A R FURTHER SUBMITS THAT THE NATURE AND SOURCE OF THE INCOME RECEIVED B Y ASSESSEE HAS BEEN ACCEPTED BY ASSESSING OFFICER AS WELL AS LEARNED CI T(A). IT WAS ALSO ACCEPTED BY LOWER AUTHORITIES THAT TDS HAS BEEN DUL Y DEDUCTED. ITA NO. 102/MUM/2016- SHRI CHETAN SHANTILAL SHAH 4 THEREFORE, THERE IS NO DISPUTE ABOUT THE NATURE AND SOURCE OF THE INCOME. THE ASSESSING OFFICER CANNOT TREAT THIS INCOME AS U NEXPLAINED INCOME AND TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCE S. IN SUPPORT OF HIS SUBMISSION, THE LEARNED AR OF THE ASSESSEE RELIED U PON THE DECISION OF PRASHANTI SURYA CONSTRUCTION CO. P. LTD. VERSUS DCI T[2017] 56 ITR (T) 202 (CHANDIGARH), GAURISH STEELS (P.) LTD. VERSUS A CIT [2015] 43 ITR (T) 414 (CHANDIGARH) AND DEV RAJ HI-TECH MACHINES L TD. VERSUS DCIT [2015] 174 TTJ 9 (AMRITSAR). 5. ON THE OTHER HAND, THE LEARNED DR FOR THE REVENUE S UPPORTED THE ORDER OF LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THE ASSESSING OFFICER HAS ACCEPTED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 25,62,202/- FROM VARIOUS COMPANIES IN INDIA FOR PRO VIDING CONSULTANCY SERVICES, ON WHICH TDS HAS BEEN DEDUCTED. THE LEARN ED CIT (A) ALSO ACCEPTED THE FACT THAT TDS WAS DEDUCTED ON THE PAYM ENT MADE TO THE ASSESSEE. WE HAVE NOTED THAT NEITHER THE ASSESSING OFFICER NOR THE LEARNED CIT (A) DISPUTED THE STATUS OF ASSESSEE BEI NG NON-RESIDENT INDIAN. ONCE THE STATUS OF THE ASSESSEE IS NOT DISPUTED, NO R THE SOURCE OF INCOME WAS DISPUTED, THE INCOME CANNOT BE TREATED AS INCOM E FROM UNEXPLAINED SOURCES AND HAS TO BE TAXED UNDER THE SPECIFIC HEAD . THE ASSESSING OFFICER TREATED THE INCOME RECEIVED ON ACCOUNT OF F EES FOR TECHNICAL ITA NO. 102/MUM/2016- SHRI CHETAN SHANTILAL SHAH 5 SERVICES AS INCOME FROM OTHER SOURCE IN PLACE OF INCOME FROM BUSINESS AND PROFESSION. THE TREATMENT OF INCOME FROM INCO ME FROM BUSINESS AND PROFESSION CANNOT BE TREATED AS INCOME FROM O THER SOURCE. WE HAVE FURTHER NOTED THAT INCOME RECEIVED BY ASSESSEE IS I N THE NATURE OF FEE FOR TECHNICAL SERVICE( FTS) AND THE ASSESSEE IS NON-RES IDENT, THEREFORE, THE INCOME IS TO BE TAXED AT THE SPECIAL RATE PRESCRIBE D UNDER THE ACT. CONSIDERING THE ABOVE FACTUAL DISCUSSION WE DIRECT THE ASSESSING OFFICER TO TAX THE INCOME OF RS. 21,76,154/- AS SPECIAL RAT E PRESCRIBED UNDER THE ACT. IN THE RESULT GROUND NO.2 OF THE APPEAL IS ALL OWED. 7. GROUND NO.3 RELATES TO NOT APPLYING THE PROVISION O F SECTION 115A OF THE ACT. THE LD AR FOR THE ASSESSEE SUBMITS THAT THE A SSESSEE RECEIVED RS. 20,79,626/- AS FTS FROM HEUBACH COLOUR PVT LTD, WHI CH IS LIABLE TO TAXED @ 10% UNDER SECTION 115A(1)(B)(BB), THE DETAI LS OF WHICH WERE PROVIDED TO LOWER AUTHORITIES, WHICH WAS ACCEPTED B Y THEM. FURTHER RS. 10,528/- RECEIVED ON ACCOUNT OF INTEREST IS CHARGEA BLE @ 20% AS PER SECTION 115A(B)(A)(B). ON THE CONTRARY THE LD. DR F OR THE REVENUE SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. AS WE HAVE ALREADY NOTED THAT THE INCOME OF THE ASSESSEE IS TO BE TAXED AT THE SPECIA L RATE PRESCRIBED UNDER THE ACT AND DIRECTED THE ASSESSING OFFICER TO TAX T HE INCOME OF RS. 21,76,154/- AS SPECIAL RATE PRESCRIBED UNDER THE AC T. THEREFORE, THE ITA NO. 102/MUM/2016- SHRI CHETAN SHANTILAL SHAH 6 ASSESSING OFFICER IS FURTHER DIRECTED TO TAX RS. 20 ,79,626/- AS RECEIVED ON ACCOUNT OF FTS FROM HEUBACH COLOUR PVT LTD, @ 10% U NDER SECTION 115A(1)(B)(BB), AND RS. 10,528/- RECEIVED ON ACCOU NT OF INTEREST @ 20% AS PER SECTION 115A(B)(A)(B). IN THE RESULT GRO UND NO.3 OF THE APPEAL IS ALLOWED. 9. GROUND NO.5 RELATES TO NOT ALLOWING THE CREDIT OF T AX ON THE ADDITION. THE LD. FOR THE ASSESSEE SUBMITS THAT ASSESSING OFFICER HAS NOT ALLOWED THE CREDIT OF TAX DEDUCTED AT SOURCE ON THE INCOME RECE IVED BY ASSESSEE. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE I S ENTITLED TO RAISE ADDITIONAL CLAIM BEFORE APPELLATE AUTHORITIES AS PE R THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS PRUTHVI BROKERS & SHAREHOLDERS 349 ITR 336 (BOM). THE LD. AR FOR THE ASSESSEE PRAY ED FOR GIVING NECESSARY DIRECTION TO THE ASSESSING OFFICER TO GIV E CREDIT OF TAX DEDUCTED AT SOURCE. ON THE CONTRARY THE LD. DR FOR THE REVE NUE HAS NO OBJECTION IF THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE FAC T AND TO GIVE CREDIT OF TAX DEDUCTED AT SOURCE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THE LD CIT(A) NOT ALLOWED THE ASSESSEE TO RAISE ADDITIONAL GROUND OF APPEAL HOLDING THAT THE ASSESSEE HAS NOT FILE REVISED RETURN ON INCOME NOR THE ASSESSEE RAISED SUCH CLAIM WAS RAISED BY THE ASSESSEE. CONSIDERING THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS PRUTHVI BROKERS & SHAREHOLDERS ITA NO. 102/MUM/2016- SHRI CHETAN SHANTILAL SHAH 7 349 ITR 336 (BOM) THE ASSESSEE IS ENTITLED TO RAISE ADDITIONAL CLAIM BEFORE APPELLATE AUTHORITIES, WE ADMIT THIS GROUND OF APPEAL RAISED BY ASSESSEE AND DIRECT THE ASSESSING OFFICER TO VERIFY THE FIGURES OF TAX DEDUCTED AT SOURCE AND ALLOW THE CREDIT OF THE SAME TO THE ASSESSEE. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED FOR STATIST ICAL PURPOSE. 11. GROUND NO. 6 TO 8 ARE CONSEQUENTIAL AND NEED NO AD JUDICATION 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH AUGUST 2018 SD/- SD/- G.S. PANNU PAWAN SINGH ACCOUNTANT MEMBER JUDICI AL MEMBER MUMBAI, DATE: 13.08.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR L BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI