M/s Lavanya Enterprises, Eluru V. The Commissioner of Income Tax, Rajahmundry

ITA 118/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56779 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 19-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Keywords: Non-deduction of tax
• Section: 143(3); 263

Judgement Text

ITA NO118/V/2011 LAVANYA ENT., ELURU. 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 118 /VIZAG/ 20 10 ASSESSMENT YEAR : 2005 - 06 M/S. LAVANYA ENTER PRISES ELURU VS. CIT RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AAAFL 4446R APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH.L. PETER, CIT(DR) ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT PASSED U/S 263 OF THE I.T. ACT ON VARIOUS GROUNDS W HICH ARE AS UNDER: 1. THE ORDER DATED 22 ND JANUARY, 2010 UNDER SECTION 263 OF THE COMMISSIONER OF INCOME TAX, RAJAHMUNDRY IN F.NO.CIT/RJY/263/4/08-09 REVISING THE ASSESSMENT OR DER PASSED BY THE ADDITIONAL COMMISSIONER OF INCOME-TAX, ELURU RA NGE, ELURU U/S 143(3) DATED 17 TH DECEMBER, 2007, IS CONTRARY TO LAW, THE WEIGHT OF EVIDENCE AND PROBABILITIES OF THE CASE. 2. THE LD. CIT SHOULD HAVE SEEN THAT THERE WAS NO ERRO R IN THE ORDER OF THE ADDITIONAL COMMISSIONER OF INCOME TAX SO AS TO REVISE THE ORDER U/S 263. 3. THE LD. CIT OUGHT TO HAVE SEEN THAT IN THE SHOW CAU SE NOTICE NO ERROR HAS BEEN POINTED OUT IN ANY OF THE ISSUES TAK EN UP FOR REVISION AND, AS SUCH, THERE WAS NO CASE FOR INITIA TION OF REVISION PROCEEDINGS U/S 263. 4. THE LD. CIT ERRED IN HOLDING THAT THE ORDER OF THE ADDITIONAL COMMISSIONER OF INCOME TAX WAS PREJUDICIAL TO THE I NTEREST OF REVENUE. 5. THE LD. CIT OUGHT TO HAVE SEEN THAT THE VIEWS TAKEN BY THE ADDL. CIT WERE NOT UNSUSTAINABLE IN LAW. 6. THE LD. CIT SHOULD HAVE SEEN THAT THE APPELLANT FIL ED ALL THE RELEVANT INFORMATION THAT WAS REQUIRED FOR THE PURP OSE OF ASSESSMENT BEFORE THE ADDITIONAL CIT AND HENCE THER E WAS NO CASE WERE REVISION U/S 263. 7. THE LD. CIT SHOULD HAVE ACCEPTED THE COPIES OF FORM S 15G FOR NON DEDUCTION AT SOURCE IN RESPECT OF INTEREST PAID TO 8 PARTIES AND THE EVIDENCE OF FILING THEREOF. 8. THE LD. CIT FAILED TO SEE THAT THE COPIES OF FORMS 15G IN RESPECT OF 8 PARTIES SHOWED THAT THEY DID NOT HAVE TAXABLE INC OME. ITA NO118/V/2011 LAVANYA ENT., ELURU. 2 9. THE LD. CIT IN THE CIRCUMSTANCES ERRED IN HOLDING T HAT THE INTEREST PAID TO 8 PARTIES OF 76,960/- WAS LIABLE FOR DISALL OWANCE U/S 40(A)(IA). 10. THE LD. CIT FAILED TO SEE THAT THE APPELLANT ACTUAL LY SUSTAINED LOSS ON ACCOUNT OF DOLLAR RATE FLUCTUATION WITH REGARD T O INVOICE NOS.03/19.04.2004 AND 01/08.04.2004 DUE TO NEGOTIAT ION OF PRICE WITH BANKER AND HENCE HIS REWORKING OF THE LOSS ON ACCOUNT OF DOLLAR FLUCTUATIONS WAS NOT CORRECT. 11. THE LD. CIT SHOULD HAVE SEEN THAT THE SHIPPING CHAR GES PAID TO VARIOUS AGENTS OF FOREIGN SHIPPING LINES AMOUNTING TO RS.3,27,679.71 WAS NOT LIABLE FOR TDS AND HENCE WAS NOT LIABLE FOR DISALLOWANCE U/S 40(A)(IA). 12. THE LD. CIT FAILED TO SEE THAT THE FREIGHT CERTIFIC ATE OF THE SHIPPING AGENTS CONTAINED THE DETAILS OF THE RESPECTIVE FORE IGN SHIPPING LINES, WHICH WERE AVAILABLE ON RECORD. 13. THE LD. CIT OUGHT TO HAVE SEEN THAT THE FACT THAT T HE EXPENDITURE OF RS.12,02,840/- INCURRED BY THE AGENTS AT HARBOR AND AIRPORT ON BEHALF OF THE APPELLANT WAS AVAILABLE ON RECORD WHI CH WAS, EVEN OTHERWISE, AN ALLOWABLE EXPENDITURE NOT LIABLE FOR TDS. HE HENCE SHOULD NOT HAVE HELD THAT THE AMOUNT WAS LIABLE FOR DISALLOWANCE U/S 40(A)(IA). 14. FOR THESE AND OTHERS THAT MAY BE URGED AT THE TIME OF APPEAL HEARING, APPELLANT PRAYS THE APPEAL MAY BE ALLOWED. 2. GROUND NOS.1 TO 6 ARE OF GENERAL IN NATURE AND N EEDS NO INDEPENDENT ADJUDICATION. 3. WITH REGARD TO GROUND NOS.7 TO 9 WHICH RELATE TO NON-DEDUCTION AT SOURCE IN RESPECT OF INTEREST PAID ON ACCEPTANCE OF FORM 15G, THE FACTS BORNE OUT FROM THE RECORD ARE THAT ON SCRUTINY, THE CIT H AS NOTICED THAT NO TDS WAS DEDUCTED ON INTEREST PAID TO 8 PARTIES ON THE G ROUND THAT SUCH PARTIES HAVE FILED FORM NO.15G FOR NON-DEDUCTION OF TAX AT SOURCE. DURING THE COURSE OF HEARING BEFORE THE CIT, THE AUTHORIZED REPRESENT ATIVE OF THE ASSESSEE WHEN REQUIRED TO FURNISH THE EVIDENCE OF HAVING FUR NISHED THE NECESSARY FORMS BEFORE THE CIT BY THE PRESCRIBED DUE DATES, N O CREDIBLE EVIDENCE WAS FURNISHED EXCEPT FOR A COPY OF CERTIFICATE OF POSTI NG ADDRESSED TO CIT, RAJAHMUNDRY. HAVING NOTED THAT CERTIFICATE OF POST ING IS NOT A SUFFICIENT EVIDENCE TO PROVE THAT FORM 15G WERE FILED BEFORE T HE CIT, HE HELD THAT ASSESSEE HAS FAILED TO DEDUCT THE TAX AT SOURCE ON INTEREST PAYMENT TO 8 PARTIES AGGREGATING TO RS.76,960/- WITHOUT VALID RE ASONS. THEREFORE, THE DISALLOWANCE ON SUCH AMOUNTS U/S 40(A)(IA) OF THE A CT ARE LIABLE TO BE MADE. ITA NO118/V/2011 LAVANYA ENT., ELURU. 3 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US AND THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER H AS RAISED A SPECIFIC QUERY WITH REGARD TO THE TDS MADE AND IN RESPONSE THERETO , A SPECIFIC REPLY WAS FILED THAT TDS WAS NOT DEDUCTED DUE TO FILING OF FO RM 15G. SINCE THE ISSUE WAS EXAMINED BY THE ASSESSING OFFICER DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, HIS ORDER CANNOT BE REVISED AND SET AS IDE ON THE GROUND THAT IT WAS NOT EXAMINED BY THE A.O. THE LD. COUNSEL FOR T HE ASSESSEE FURTHER CONTENDED THAT THE ASSESSEE HAS ALSO FURNISHED THE EVIDENCE FOR SUBMITTING THE FORM 15G FOR NON-DEDUCTION OF TAX. 5. THE LD. D.R. BESIDES PLACING HEAVY RELIANCE UPON THE ORDER OF THE CIT HAS CONTENDED THAT BEFORE THE ASSESSING OFFICER ASS ESSEE HAS NOT FILED THE EVIDENCE WITH REGARD TO THE SUBMISSION OF FORM NO.1 5G FOR NON-DEDUCTION OF TAX AT SOURCE. THEREFORE, THE CIT HAS RIGHTLY SET ASIDE THE ASSESSMENT ORDER. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF RECORD, WE FIND THAT THE ASSESSING OFFICER HAS RAIS ED A SPECIFIC QUERY VIDE HIS LETTER DATED 9.5.2007 WITH REGARD TO THE DEDUCTION OF TDS AND IN RESPONSE THERETO, THE ASSESSEE HAS FILED A REPLY STATING THE REIN THAT NO TDS WAS DEDUCTED DUE TO FILING OF 15G. A.OS LETTER AND AS SESSEES REPLY ARE AVAILABLE AT PG.NOS.7 & 8 OF THE COMPILATION OF THE ASSESSEES . SINCE THE A.O. HAS EXAMINED THIS ISSUE AND APPLIED HIS MIND BEFORE ACC EPTING THE CLAIM OF THE ASSESSEES, WE ARE OF THE OPINION THAT THE VIEW TAKE N BY THE A.O. WITH REGARD TO THIS CLAIM CANNOT BE SET ASIDE/REVISED. IT IS A SETTLED POSITION OF LAW THAT THE ASSESSING OFFICER IS NOT REQUIRED TO RECORD THE REASONS FOR THE ACCEPTANCE OF EACH AND EVERY CLAIM OF THE ASSESSEES. THEREFOR E, ON THIS ISSUE, WE DO NOT FIND ANY MERIT IN THE ORDER OF THE CIT. WE, ACCORD INGLY SET ASIDE HIS ORDER. 7. GROUND NO.10 WHICH RELATE TO DOLLAR RATE FLUCTUA TION. THE FACTS IN BRIEF BORNE OUT FROM THE ORDER OF THE CIT ARE THAT ON SCR UTINY, THE CIT HAS OBSERVED THAT AFTER ADJUSTMENT OF DEBIT AND CREDITS THE NET AMOUNT OF RS.16,46,560/- WAS TRANSFERRED TO THE PROFIT & LOSS ACCOUNT, WHEREAS, THE AMOUNT WHICH HAS BEEN DEBITED OUGHT TO HAVE BEEN CR EDITED AS THE ASSESSEE HAD GAINED ON ACCOUNT OF HIGHER RATE AT THE TIME OF REALIZATION. THE CIT ITA NO118/V/2011 LAVANYA ENT., ELURU. 4 ACCORDINGLY CANCELLED THE DEBIT ENTRIES AND THERE A FTER CREDITING THE RATE DIFFERENCE ACCOUNT. HE ACCORDINGLY DIRECTED THE A. O. TO MAKE A DISALLOWANCE OF RS.14,95,214/- AFTER SETTING ASIDE HIS ORDER. 8. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS INVITED OUR ATTENTION TO THE QUERY RAISED BY THE A. O. WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO FUR NISH THE DETAILS OF FOREIGN EXCHANGE FLUCTUATIONS OF RS.16,46,560/-. CONSEQUEN T THERETO, THE ASSESSEE HAS FURNISHED THE DETAILED EXPLANATION ALONG WITH T HE FULL DETAILS OF RATE DIFFERENCE ACCOUNT FOR 2004-05. THE SAME ARE AVAIL ABLE AT PG.NOS.7, 8 & 20 OF THE COMPILATION OF THE ASSESSEES. THE LD. COUNS EL FOR THE ASSESSEE FURTHER CONTENDED THAT SINCE THE COMPLETE DETAILS ARE FURNI SHED BEFORE THE ASSESSING OFFICER AND HE HAS APPLIED HIS MIND TO THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE BEFORE ACCEPTING THE CLAIM, HIS ORDER CANN OT BE REVISED BY THE CIT FOR THE SIMPLE REASON THAT THE ISSUE WAS NOT PROPER LY EXAMINED AND THE DEBIT ENTRIES WERE WRONGLY ALLOWED. 9. THE LD. D.R. ON THE OTHER HAND HAS SUBMITTED THA T THE CIT HAS POINTED OUT THE DEFECTS IN THE ASSESSMENT ORDER AND AFTER H AVING NOTED THAT THIS ISSUE WAS NOT PROPERLY EXAMINED BY THE ASSESSING OFFICER BY MAKING NECESSARY INVESTIGATION, HE HAS RIGHTLY REVISED THE ASSESSMEN T ORDER ON THIS ISSUE. 10. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOWER A UTHORITIES, WE FIND THAT THOUGH THE ASSESSING OFFICER HAS NOT MADE ANY DISCU SSION IN HIS ASSESSMENT ORDER ON THIS ISSUE, YET HE HAS RAISED A PROPER QUE RY VIDE ITS LETTER DATED 9.5.2007 WHICH WAS DULY REPLIED BY THE ASSESSEE, FU RNISHING THE COMPLETE DETAILS OF RATE FLUCTUATIONS. SINCE THE ASSESSING OFFICER HAS EXAMINED THE DETAILS FURNISHED BY THE ASSESSEE BEFORE ACCEPTING THE CLAIM, IT CANNOT BE SAID THAT ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO THE IMPUGNED ISSUE. IT IS A SETTLED POSITION OF LAW THAT ASSESSING OFFICER IS N OT REQUIRED TO RECORD HIS REASONS IN THE ASSESSMENT ORDER WHILE ACCEPTING THE CLAIM OF THE ASSESSEES. IF, HE HAS DULY APPLIED HIS MIND, HIS ORDER CANNOT BE REVISED BY THE CIT ON HIS WHIMS. IN THE INSTANT CASE ALSO, THE A.O. HAS PROP ERLY EXAMINED THIS ISSUE ITA NO118/V/2011 LAVANYA ENT., ELURU. 5 BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE. THEREF ORE, HIS ORDER CANNOT BE REVISED. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT IN THIS REGARD. 11. WITH REGARD TO GROUND NOS.11 TO 13 WHICH RELATE TO SHIPPING CHARGES AND THE EXPENDITURE INCURRED BY THE AGENTS AT HARBO UR AND AIRPORT ON BEHALF OF THE ASSESSEES. THE CIT NOTICED THAT VARIOUS PAY MENTS HAVE BEEN MADE TO SHIPPING AGENTS AT CHENNAI FOR RENDERING SERVICES A T CHENNAI PORT AND CHENNAI AIRPORT IN CONNECTION WITH THE SHIPMENT OF THE ASSESSEES PRODUCTS ABROAD. IT WAS ALSO NOTED BY THE CIT FROM PERUSAL OF COPIES OF INVOICE RAISED BY DIFFERENT AGENTS THAT EXPENDITURE UNDER VARIOUS HEADS INCLUDING SERVICE TAX HAVE BEEN SHOWN FOR HAVING RENDERED SERVICES TO THE ASSESSEE AND BY ITS OWN ADMISSION THE ASSESSEE HAS PAID SHIPPING CHARGES TO THE EXTENT OF ONLY RS.3,27,680/- AS AGAINST THE EXPENSES INCURRED FOR SERVICES RECEIVED AT CHENNAI HARBOUR AND CHENNAI AIRPORT AT RS.12,02,840 /-. THE CIT FURTHER OBSERVED THAT ATLEAST AN AMOUNT OF RS.12,02,840/- C ANNOT BE SAID TO HAVE BEEN INCURRED TOWARDS PAYMENT OF FOREIGN SHIPPING C OMPANIES FOR FREIGHTING ABROAD AND GOODS OF THE ASSESSEES IN THEIR SHIPS. EVEN OTHERWISE, EXCEPT FOR A COPY OF CERTIFICATE FROM ONE PARTY NAMELY M/S. SE AHORSE SHIPPING AGENCIES PVT. LTD., PRECIOUS LITTLE HAS BEEN DONE TO ESTABLI SH WITH EVIDENCE THAT THE SHIPS IN WHICH THE GOODS OF THE ASSESSEE WERE FREIG HTED ABROAD WERE OWNED OR CHARTERED BY SUCH FOREIGN COMPANIES WHOSE AGENCY THE SAID PARTY SEAHORSE SHIPPING AGENCY CLAIMED. IN RESPECT OF OT HER AGENTS NEITHER ANY UNDERTAKINGS HAS BEEN FURNISHED NOR SPECIFIC EVIDEN CE RELATING TO THE SHIPS IN WHICH SUCH PARTIES ARRANGE THE FREIGHT OF THE GOODS OF THE ASSESSEE HAVE BEEN FURNISHED AND AS SUCH, ONE CANNOT HELP BUT OBS ERVE THAT ASSESSEE IS MAKING MERELY AN AVERMENT WITHOUT SUBSTANTIATING IT S CLAIM TO ESCAPE FROM THE DEFAULT OF HAVING NOT DEDUCTED TAX AT SOURCE IN RESPECT OF PAYMENTS MADE TO VARIOUS PARTIES BASED AT CHENNAI FOR RENDERING S ERVICES TO IT FOR FREIGHTING ITS GOODS ABROAD. THE CIT FURTHER OBSERVED THAT TH ESE DETAILS HAVE NOT BEEN FURNISHED FOR OBVIOUS REASONS. THE CIT FURTHER OBS ERVED THAT ASSESSEE HAS DEFAULTED REGARDING DEDUCTION OF TAX AT SOURCE IN R ESPECT OF SHIPPING CHARGES DEBITED OF RS.15,30,520/-. THEREFORE, THE ENTIRE A MOUNT IS LIABLE TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT, AS THE ASSESSI NG OFFICER HAS NOT EXAMINED THIS ISSUE IN THE ASSESSMENT ORDER. ITA NO118/V/2011 LAVANYA ENT., ELURU. 6 12. DURING THE COURSE OF HEARING, THE LD. COUNSEL F OR THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE WAS ALSO EXAMINED BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE ACCEPTING THE CLAIM O F THE ASSESSEES. THEREFORE, THE ASSESSMENT ORDER IN THIS REGARD CANN OT BE SET ASIDE. 13. THE LD. D.R. ON THE OTHER HAND HAS SUBMITTED TH AT THIS ISSUE WAS NOT AT ALL EXAMINED BY THE ASSESSING OFFICER EITHER IN THE ASSESSMENT ORDER OR BY MAKING ANY QUERIES. THEREFORE, THERE IS NO APPLICA TION OF MIND OF THE A.O. ON THIS ISSUE AND THUS THE CIT IS JUSTIFIED IN SETTING ASIDE THE ORDER AS IT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 14. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THIS ISSUE WAS NEITHER ADJUDICATED IN THE ASSESSMENT ORDER NOR ANY QUERY W AS RAISED BY THE A.O. DURING THE ASSESSMENT PROCEEDINGS. DURING THE COUR SE OF HEARING, NOTHING HAS BEEN PLACED ON RECORD TO ESTABLISH THAT THIS IS SUE WAS EVER EXAMINED BY THE ASSESSING OFFICER. WE, THEREFORE, OF THE VIEW THAT THERE IS NO APPLICATION OF MIND BY THE A.O. ON THIS ISSUE AND THE CIT HAS M ADE OUT A CASE THAT BY ACCEPTING THE CLAIM OF THE ASSESSEE THE ASSESSMENT ORDER OF THE A.O. HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT I N THIS REGARD, WE CONFIRM HIS ORDER. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 3.8.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JU DICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 3 RD AUGUST, 2011 ITA NO118/V/2011 LAVANYA ENT., ELURU. 7 COPY TO 1 M/S. LAVANYA ENTERPRISES, EASTERN STREET, ELURU - 534 001 2 CIT, RAJAHMUNDRY 3 THE CIT (A) , RAJAHMUNDRY 4 THE DR, ITAT, VISAKHAPA TNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM