SMT. SARLA GUPTA, JAGDALPUR (CG) V. I.T.O., JAGDALPUR (CG)

ITA 110/BIL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3521 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 28-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S R RAO
• Keywords: Audit objection; Difference of opinion; Change of opinion; TDS; Set aside
• Section: 142(1); 40(a)(ia); 194C; 147; 148; 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH , RAIPUR BEFORE S HRI N.K. BILLAIYA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 110 /RPR /20 1 5 ASSESSMENT YEAR: 2011 - 12 ITA NO. 111/RPR /201 5 ASSESSMENT YEAR: 2007 - 08 & ITA NO. 112/RPR /201 5 ASSESSMENT YEAR: 2008 - 09 SMT. SARLA GUPTA, W/O LATE MUKESH GUPTA, PROP. M/S ELECTRONICS TRADERS, VADHERA COMPLEX, JAGDALPUR (C.G.) PAN: ADCPG9930C VS. THE INCOME TAX OFFICER, AAYAKAR BHAWAN, BEHIND JHANKAR TLKIES, CIVIL LINES, JAGDALPAUR (C.G.) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.R. RAO ( ADVOCATE ) REVENUE BY : SHRI SANJAY KUMAR (DR ) DATE OF HEARING: 09 /03 /201 8 DATE OF PRONOUNCEMENT: 25 / 05 /201 8 O R D E R PER RAM LAL NEGI, JM THESE APPEAL H AVE BEEN FILED BY THE ASSESSEE AGAINST THE THREE ORDER S DATED 09.02.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - I RAIPUR , FOR THE A S S ESSMENT YEAR S 2007 - 08, 2008 - 09 AND 2011 - 12 RESPECTIVELY , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APP EAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT) PERTAINING TO THE A.Y. 2007 - 08 AND 2008 - 09. THE LD. CIT (A) DISMISSED THE APPEAL PERTAINING TO 2 ITA NO S . 110, 111 & 112 / RPR /201 5 ASSESSMENT YEAR S : 20 07 - 08, 2008 - 09 & 2011 - 12 THE A.Y. 2011 - 12. SINCE, ALL THE THREE AP PEALS PERTAIN TO THE SAME ASSESSEE AND THE ISSUES INVOLVED IN ALL THE THREE APPEALS ARE COMMON, ALL THE THREE APPEALS WERE CLUBBED, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDER FOR THE SAKE OF BREVITY AND CONVENIENCE. ITA NO. 111/RPR/2015 (ASSESSMENT YEAR 2007 - 08 ) 2. IN THE PRESENT CASE, ASSESSMENT U/S 143 (3) HAD BEEN COMPLETED DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 2,64,540/ - . LATER ON, IT WAS NOTICED THAT THE ASSESSEE HAD DEBITED RS. 45,83,010/ - IN PROFIT AND LOSS ACCOUNT ON ACCOUNT OF EXPENSES UNDER THE HEAD COMMISSION. THE AO HOLDING THAT ASSESSEE WAS REQUIRED TO DEDUCT THE TAX AT SOURCE UNDER THE PROVISIONS OF CHAPTER XVII OF THE ACT AND SINCE THE ASSESSEE HAS FAILED TO DEDUCT AND DEPOSIT TDS ON THE PAY MENT OF SAID AMOUNT, THE ASSESSMENT WAS RE - OPENED U/S 147 AFTER GIVING NOTICE U/S 148 OF THE ACT. THE ASSESSEE FILED WRITTEN REPLY IN RESPONSE TO NOTICE U/S 143 (2) AND 142(1) STATING THAT PROVISIONS OF SECTION 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF TD S DEFAULT IF THE AMOUNT IS PAYABLE. IF, THE AMOUNT IS ACTUALLY PAID AND THE TAX IS NOT DEDUCTED SECTION 40(A)(IA) OF THE ACT DOES NOT APPLY. HOWEVER, THE AO REJECTING THE CONTENTION OF THE ASSESSEE INTER ALIA MADE ADDITION OF RS 45,83,010/ - U/S 40(A)(IA) A ND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 48,47,550/ - . IN THE FIRST APPEAL, THE LD. CIT (A) CONFIRMED THE ADDITION MADE BY THE AO. 3. AGGRIEVED BY THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUND S : - 3 ITA NO S . 110, 111 & 112 / RPR /201 5 ASSESSMENT YEAR S : 20 07 - 08, 2008 - 09 & 2011 - 12 1. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) HAS GROSSLY ERRED IN UPHOLDING THE RE - ASSESSMENT PROCEEDINGS INITIATED U/S 147 OF THE INCOME TAX ACT, 1961, WHICH WERE BASED ON AUDIT OBJECTION AND AFTER CHANGE OF OPINION. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS. 45,83,010/ - MADE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. 3. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS) IS BAD IN LAW AND ON FACTS. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS A FRANCHISEE OF BSNL FOR MARKETING AND DISTRIBUTION OF RECHARGE COUPONS AND SIM CARDS. THE ASSESSEE ALLOWED DISCOUNT TO THE RETAILERS TO P ROMOTE HER BUSINESS. THEREFORE, THE VIEW TAKEN BY THE AO, THAT THE ASSESSEE PAID COMMISSION TO THE RETAILERS IS FACTUALLY INCORRECT. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS COVERED BY THE DECISION OF THE ITAT RENDER ED IN THE CASE OF PAREEK ELECTRICALS VS. ACIT 55 SOT 338 ( CUTTACK ) , I N WHICH IT HAS BEEN HELD THAT TRADE DISCOUNT CANNOT BE CONSTRUED AS COMMISSIONS AND IS NOT LIABLE FOR TAX DEDUCTION U/S 194H OF THE ACT. SINCE, THE FINDINGS OF THE LD. LD. CIT(A) IS CONTR ARY TO THE DECISION OF THE CUTTA C K BENCH OF THE ITAT , THE SAME IS LIABLE TO BE SET ASIDE . 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE PROVISIONS OF CHAPTER XVII ARE APPLICABLE IN ALL THE EXPENSES PAID OR CREDITED. TH E ASSESSEE HAS FAILED TO DISCHARGE THE ABOVE 4 ITA NO S . 110, 111 & 112 / RPR /201 5 ASSESSMENT YEAR S : 20 07 - 08, 2008 - 09 & 2011 - 12 STATUTORY PROVISIONS, THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. HENCE, THERE IS NO INFIRMITY IN THE FINDINGS OF THE LD. CIT (A). 6. WE HAV E HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. SINCE, THE ASSESSEE DOES NOT WANT TO PRESS GROUND NO 1 OF THE APPEAL , WE DISMISS GROUND NO 1 OF THE ASSESSEES APPEAL AS NOT PRESSED. 7. VIDE GROUND NO 2, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) OF THE ACT. WE NOTICE THAT THE CUTTA C K BENCH OF THE ITAT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER: - 4. WE HAVE HEARD THE RIVAL CONT ENTIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO HOLD THAT THE AGREEMENTS AS PRODUCED BY THE RIVAL PARTIES IN SUPPORT OF T HE CONTENTIONS THAT THE ASSESSEE FALLS IN LINE AS IN ACCORDANCE WITH THE CASE LAWS CITED IN THE C A SE OF VODAFONE ESSAR CELLULAR LTD. V S. ACIT (2010) 194 TAXMAN 518, WE ARE OF THE CONSIDERED VIEW THAT THE FACTS IN THOSE CASE LAWS WERE NOT IN THE LIGHT OF S ALES OF GOODS ACT AS WERE IN THE CASE OF THE PUBLIC SECTOR UNDERTAKINGS BSNL WHO WANTED TO SELL ITS PRODUCTS THROUGH ITS FRANCHISEES VIZ . , THE ASSESSEE. THIS IS CLARIFIED FROM THE PRIME FACT THAT THE COMMISSION WAS ACKNOWLEDGED BY THE ASSESSEE FOREGONE BY THE SERVICES PROVIDER NAMELY, BSNL AT THE THRESHOLD WHEN THE ASSESSEE BOOKS THE PURCHASES OF THE PRODUCTS BY DISCLOSING THE GROSS MARGIN THEREIN BOOKING THE SALES AT THE MRP PROVIDED BY BSNL. IN OTHER WORDS, THE PURCHASES AND SALES CLEARLY INDICATE THAT TH E COMMISSION EARNED BY THE ASSESSEE WAS TO BE SUBJECTED TO DEDUCTIN G OF TAX AT SOURCE U/S 194H WHICH AS PER THE BILLS PRODUCED BY THE LEARNED COUNSEL FOR THE ASSESSEE 5 ITA NO S . 110, 111 & 112 / RPR /201 5 ASSESSMENT YEAR S : 20 07 - 08, 2008 - 09 & 2011 - 12 AS OF NOW IN THE PAPER BOOK SUBMITTED ALONG WITH OTHER DOCUMENTARY EVIDENCES THAT THE COM MISSION WAS BETWEEN THE ASSESSEE AND THE BSNL LOST ITS IDENTITY OF COMMISSION AGAIN WHEN THE A SSESSEE CHOSE TO FOREGO PART OF ITS MARGIN BY GIVING VARIOUS DISCOUNTS TO ITS AUTHORIZED DEALERS OR SUB - FRANCHISEES AS NOTIFIED BY IT TO BSNL AS PER THE AGREEMENT BROUGHT ON RECORD. IT WAS NEVER THE CASE OF BSNL BEING THE SERVICE PROVIDER TO RAISE BILLS FOR THE SAME PRODUCT WHICH HAD BEEN BILLED BY THE ASSESSEE ON THE DISTRIBUTORS AT THE MRP BEING THE RECHARGE COUPON , TOP UP COUPONS AND OTHER SIM CARDS ETC. IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. V S. ACIT (2010) 194 TAXMAN 518, IT HAS BEEN CLEARLY HELD THAT THE FOREGOING OF COMMISSION AS A MATTER OF DISCOUNT CANNOT ARISE TO A DIFFERENT PERSON INSOFAR AS THE SALE PRICE REMAINS THE SAME WHICH PURCHASES HAVE BEEN BOOKED BY THE ASSESSEE ALONE AT THE DISCOUNTED PRICE BEING THE COMMISSION SUBJECT TO DEDUCTION OF TAX AT SOURCE U/ S 194H . THE LEARNED DRS SUBMISSION THAT IN CASE THE ASSESSEE HAS FOREGONE A PART OF ITS PROFIT WAS A MATTER OF CONTRACT ENTERED INTO BETWEEN THE ASSESSEE AND THE DISTRIBUTOR WAS MADE KNOWN TO THE SERVICE PROVIDER NAMELY, BSNL. THIS IN ITSELF TO HAVE GIVEN A REASON TO INVOKE THE PROVISIONS UNDER CHAPTER XVIIB DEMOLISHES THE STAND TAKEN BY THE LEARNED CIT (A) AFTER RELYING ON THE DECISION OF VO DAFONE ESSAR CELLULAR LTD. (SUPRA) AND CIT V. IDEA CELLULAR LTD. (2010) 325 ITR 148 (DEL). IT IS NOT THE CASE OF THE SERVICE PROVIDER TO KEEP TRACK OF ITS COMMISSION FOREGONE AT THE SAME SELLING PRICE OF ITS PRODUCTS WHICH ARE SHARED AMONGST THE VARIOUS F RANCHISEES AND SUB - FRANCHISEES WOULD LOST ITS IDENTITY AS COMMISSION IN THE FIRST PLACE AND ALSO CANNOT BE APPRECIATED AS A MATTER OF CONTRACT BETWEEN THE SERVICE PROVIDER AND THE ASSESSEES FRANCHISEES OR DISTRIBUTORS. PURCHASE AND SALES HAVE BEEN ACKNO WLEDGED BY THE SERVICE PROVIDER WHEN THE MAXIMUM RETAIL PRICE HAS BEEN RENDERED TO TAX BY THE SERVICE PROVIDER FOR THE PURPOSE OF DEDUCTION OF TAX AT SPRUCE BEING COMMISSION U/S 194H. THE SAME INCOME CANNOT BE TAXED AGAIN IN THE HANDS OF DIFFERENT RECIPI ENTS WHICH ARE A MATTER OF BUSINESS CONDUCTED BEING THE FAST NET WORK AVAI LABILITY OF BSNL PRODUCTS WAS NOT CONSIDERED BY THE LEARNED CIT (A) TO ESTABLISH THAT THE DISCOUNT AVAILABLE TO THE SECOND AND THIRD TIER FRANCHISEES WAS A MATTER OF AVAILA BILITY 6 ITA NO S . 110, 111 & 112 / RPR /201 5 ASSESSMENT YEAR S : 20 07 - 08, 2008 - 09 & 2011 - 12 OF PRODUCTS AT ITS MAXIMUM RETAIL PRICE AND NOT BECAUSE THEY HAD MADE INCOME FROM THE SERVICE PROVIDER. IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. AND IDEA CELLULAR LTD., (SUPRA) IT WAS MARKING OF THE SELLING PRICE BELOW THE PRICE THEY WERE SOLD RESULTED IN CONSIDERATION OF INVOKING THE PROVISIONS OF SECTION 194H OR SECTION 194C WAS CONSIDERED BY THE HONBLE HIGH COURTS IN THE CASE ESSAR CELLULAR LTD. AND CIT V. IDEA CELLULAR LTD. (SUPRA). IN THIS VIEW OF THE MATTER, WE ARE INCLINED TO CONSIDER THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR THE TRADE DISCOUNT MADE AVAILABLE TO THE SUB - FRANCHISEES WAS A COMPENSATION BY FOREGOING THE PART OF THE COMMISSION ALREADY SUBJECTED TO TAX AT SOURCE BY THE SERVICE PROVIDER COULD NOT HAVE SUFFERED TAXATION U/S 194H INSOFAR AS THE PRODUCT NEVER BELONGED TO THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS DISTINGUISHED THE CASE LAWS CITED AT BAR WITH THAT OF FACTS OF THE ASSESSEE AS MENTIONED ABOVE, WHICH WE ARE INCLINED TO UPHOLD. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE OF RS. 1,74,00,814 U/S 40(A)(IA) OF THE I.T. ACT MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT (A) IS NOT JUSTIFIED AND AS SUCH, THE SAME IS HEREBY DELETED. 8. T HE CUTTACK BEN CH OF THE ITAT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF PAREEK ELECTRICALS (SUPRA) . T HE ISSUE INVOLVED IN THE PRESENT CASE IS IDENTICAL TO THAT OF THE CASE DISCUSSED ABOVE . THE LD. DR DID NOT PRODUCE ANY CASE LAW CONTRARY TO THE DECISION OF THE CUTTACK BENCH OF THE ITAT DISCUSSED ABOVE. HENCE, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE VIEW TAKEN BY THE ITAT. WE THEREFORE , RESPECTFULLY FOLLOWING THE DECISION OF THE CUTTA C K BENCH OF THE ITAT, ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE AND SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT (A). ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITION MADE U/S 40(A)(IA) OF THE ACT. 7 ITA NO S . 110, 111 & 112 / RPR /201 5 ASSESSMENT YEAR S : 20 07 - 08, 2008 - 09 & 2011 - 12 ITA NO. 112 /RPR/2015 (ASSESSMENT YEAR 20 08 - 09 ) THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER P ASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS: - 1. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) HAS GROSSLY ERRED IN UPHOLDING THE RE - ASSESSMENT PROCEEDINGS INITIATED U/S 147 OF THE INCOME TAX ACT, 1961, WHICH WERE BASED ON AUDIT OBJECTION AND AFTER CHANGE OF OPINION. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) IS NOT JUSTIFIED IN CONFIR MING THE DISALLOWANCE OF RS. 72,11,325/ - MADE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. 3. THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) IS BAD IN LAW AND ON FACTS. 2. THE FACTS AND THE ISSUES INVOLVED IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE CASE OF THE ASSESSEE ITA NO. 111/RPR/2015 A YEAR 2007 - 08 EXCEPT THE QUANTUM OF ADDITION MADE BY THE AO U/S 40(A)(IA) OF THE ACT. SINCE, WE HAVE DECIDED THE SOLE ISSUE RAISED BY THE ASSESSEE IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR THE AY 2007 - 08 AFORESAID BY FOLLOWING T HE DECISION OF THE CUTTA C K BENCH OF ITAT IN THE CASE OF PAREEK ELECTRICALS (S UPRA) , CONSISTENT WITH OUR FINDINGS, WE ALLOW THE SOLE GROUND OF THE APPEAL OF THE ASSESSEE IN THIS CASE FOR THE SAME REASONS. WE DISMISS GROUND NO 1 OF THE APPEAL AS NOT PRESSED. ITA NO. 110 /RPR/2015 (ASSESSMENT YEAR 20 11 - 12 ) THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) BY RAISING THE FOLLOWING GROUNDS OF APPEAL: - 8 ITA NO S . 110, 111 & 112 / RPR /201 5 ASSESSMENT YEAR S : 20 07 - 08, 2008 - 09 & 2011 - 12 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS. 50,23,955/ - MADE U /S 40(A)(IA) OF THE INCOME TAX ACT, 1961. 2. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS BAD IN LAW AND ON FACTS. 2. THE FACTS AND THE ISSUES INVOLVED IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE CASE AND THE ISSUES INVOLVED IN T HE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 EXCEPT THE QUANTUM OF ADDITION MADE BY THE AO U/S 40(A)(IA) OF THE ACT. SINCE, WE HAVE DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE AFORESAID CASES BY FOLLOWING THE DECISIO N OF THE CUTTA C K BENCH OF ITAT THE CASE OF PAREEK ELECTRICALS (SUPRA), CONSISTENT WITH OUR FINDINGS, WE ALLOW THE SOLE GROUND OF THE APPEAL OF THE ASSESSEE IN THE PRESENT APPEAL FOR THE SAME REASONS. IN THE RESULT, APPEAL S FILED BY THE ASSESSEE FOR A SSE SSMENT YEAR S 2007 - 08, 2008 - 09 AND 20 11 - 12 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MAY , 2018 . SD/ - SD/ - ( N.K. BILLAIYA) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDI CIAL MEMBER RAIPUR, DATED: 25 / 05 / 201 8 ALINDRA, PS 9 ITA NO S . 110, 111 & 112 / RPR /201 5 ASSESSMENT YEAR S : 20 07 - 08, 2008 - 09 & 2011 - 12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , RAIPUR / DR, ITAT, RAIPUR 6. / GUARD FILE . / BY ORDER, //TRUE COPY// PRIVATE SECRETARY ITAT, RAIPUR