The ITO, TDS-2, Ahmedabad V. M/s. Gujarat Teleling Pvt. Ltd., Ahmedabad

ITA 1283/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8624 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 16-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief
• Section: 271(1)(c); 201(1); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE ITO, TDS - 2, AHMEDABAD (APPELLANT) VS M/S. GUJARAT TELELINK PVT. LTD. 202, SAHJANAND SHOPPING CENTRE, 2 ND FLOOR, OPP. SWAMINARAYAN MANDIR, SHAHIBAUG, AHMEDABAD - 380004 PAN: AACCG6676M (RESPONDENT) REVENUE B Y : S H RI S.K. DEV , SR. D . R. ASSESSEE BY: SHRI TUSHAR HEMANI, A.R. DATE OF HEARING : 30 - 11 - 2 018 DATE OF PRONOUNCEMENT : 13 - 12 - 2 018 / ORDER P ER : AMARJIT S INGH, ACCOUNTANT MEMBER : - THESE TWO APPEALS FILED BY REVENUE FOR A. Y. 2009 - 10 , ARI SE FROM ORDER OF THE CIT(A) - 8, AHMEDABAD DATED 14 - 03 - 2 016 , IN PROCEEDINGS UNDER SECTION 201(1 ) /201(1A) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE H AS RAISED FOLLOWING SUBSTANTIVE GROUND OF APPEAL: - ITA NO. 1282/AHD2016 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION MADE U/S. 201(1) OF THE IT. ACT OF RS.28,16,220/ - AND INTEREST CHARGED UNDER SECTION 201(1A) OF THE IT ACT OF RS.32,52,734/ - FOR NON DEDUCTION OF TDS ON ADVANCE PAYMENT FOR NON COMPETE FEES COVERED WITHIN THE MEANING OF 'FEES FOR TECHNICAL SERVICES ' U/S 194 - J OF THE ACT. I T A NO S . 1282 & 1283 / A HD/20 16 A SSESSMENT YEAR 200 9 - 10 I.T.A NO. 1282 & 1283 /AHD/20 16 A.Y. 2009 - 10 PAGE NO IT O VS. M/S. GUJARAT TELELINK PVT. LTD. 2 2. THE LD. CIT(A) HAS ERRED ON FACTS AS WELL AS IN LAW IN DELETING THE ADDITIONS RELYING ON THE DECISION IN THE CASE OF RAJKOT ENGINEERING ASSOCIATION V. UNION OF INDIA (162 ITR 28) (GUJ) AND HE HAS OVER LOOKED THE FACT. HOWEVER, IT IS NOTICED THAT THE FACTS OF THE CASE ARE DIFFERENT FROM EACH OTHER. 3. THE LD. CIT(A) HAS FURTHER ERRED ON FACT S AND IN LAW IN NOT GIVING ANY REASON TO SUBSTANTIATE HIS DECISION WITH ANY MATERIAL THAT THE APPELLANT WAS UNDER BONAFIDE BELIEF FOR NON - DEDUCTION OF TAX U/S 194 - J IN RESPECT OF ADVANCE PAYMENT FOR NON COMPETE FEES COVERED WITHIN THE MEANING OF 'FEES FOR TECHNICAL SERVICES '. 3. ALL THE GROUNDS OF APPEAL OF THE REVENUE ARE RELATED TO DELETING ADDITION MADE U/S. 201(1)/201(1A) OF THE ACT AND INTEREST CHARGED U/S. 201(1A) OF THE I.T. ACT BY THE LD. CIT(A), THEREFORE, THE SAME ARE ADJUDICATED TOGETHER. 4. THE BRIEF FACT OF THE CASE IS THAT ON VERIF ICATION OF THE AUDIT, THE ITO , TDS HAS NOTICED THAT DURING THE YEAR THE ASSESSE E HAS MAD E PAYMENT OF RS. 2.51 CRORES ON ACCOUNT OF NON - COMPETE FEES TO S HRI GHANSHYAM N. JADEJA ON WHICH NO TDS WAS MADE. THEREFORE , THE ITO , TDS OBSERVED THAT ASSESSEE HAS FAILED TO MAKE COMPLIANCE WITH THE PROVISION OF SECTION 194J OF THE ACT AND SHOW CAUSE D THE ASSESSEE THAT WHY DEMAND IS NOT RAISED U/S. 201(1) AND INTEREST U/S. 201(1A) FOR NON - DEDUCTION OF TDS FROM THE SAID AMOUNT . THE ASSESSEE EXPLAINED THAT AUDITOR HAS WR ONGLY STATED IN FORM NO. 3CD THAT ADVANCE PAYMENT WAS MADE FOR NON - COMPETE FEES TO SHRI GHANSHYAM N. JADEJA. HOWEVER, ACTUAL PAYMENT WAS MADE AS INVESTMENT IN THE PARTNERSHIP FIRM. THE ASSESSING OFFICER HAS N OT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND PASSED ORDER U/S. 201(1)/201(1A) AND RAISED TOTAL PAYMENT OF RS. 6068954/ - . 5. AGGRIEVED ASSSESSEE AGAINST ITO, TDS HAS PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF TH E A SSESSEE. RELEVANT PART OF THE DECISION OF THE LD. CIT(A) IS REPRODUCED AS UNDER: - 5. APPELLATE FINDINGS: THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT HAS BEEN CONSIDERED CAREFULLY. AFTER GOING THROUGH THE ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT, IT IS NOTICED THAT THE AO HAS TREATED THE AMOUNT IN QUESTION AS NON COMPETE FEE ON THE BASIS OF OPINION OF THE AUDITOR GIVEN IN THE AUDIT REPORT. THE DETAILS AND EVIDENCES GIVEN AT THE TIME OF ASSESSMENT PROCEEDINGS WHICH WERE EXPLAINED TO THE AO AND ALSO THE BOOKS OF ACCOUNTS MAINTAIN BY THE APPELLANT ARE NOT APPRECIATED BY THE AO IN VIEW OF THE FACTS OF I.T.A NO. 1282 & 1283 /AHD/20 16 A.Y. 2009 - 10 PAGE NO IT O VS. M/S. GUJARAT TELELINK PVT. LTD. 3 THE CASE. THE AR HAS CLEARED THE APPREHENSION OF THE AO IN HIS SUBMISSION BEFORE HIM AND ALSO .VIDE DETAILED SUBMISSION FILED DURING THE APPEL LATE PROCEEDINGS WHICH IS QUOTED ABOVE. MOREOVER, THE CASE FOR A.Y.2009 - 10 (THE ASSESSMENT YEAR UNDER APPEAL) WAS REOPENED BY THE DCIT CIRCLE - 2(L)(L), AHMEDABAD ON THE BASIS OF AUDITOR'S SAID COMMENT IN 3CD REPORT FOR A.Y.2009 - 10 ON THE REASON THAT THE ASS ESSEE HAS PAID AN AMOUNT OF RS.2.51 CRORES TO SHRI GHANSHYAM N. JADEJA AS NON COMPETE FEES IN ADVANCE ON WHICH TDS WAS REQUIRED TO BE DEDUCTED AND DUE TO NON DEDUCTION OF TDS THIS AMOUNT WAS REQUIRED TO BE DISALLOWED U/S.40(A)(IA) OF THE ACT. AFTER EXAMINI NG THE FACTS, THE AO HAS FOUND THAT THE ASSESSEE HAS NOT CLAIMED THE PAYMENT TO SHRI GHANSHYAM N. JADEJA AS EXPENDITURE IN P&L ACCOUNT AND DID NOT FIND IT DISALLOWABLE U/S.40(A)(IA). LOOKING AT THE DETAILS PROVIDED BY THE AR, IT IS CLEAR THAT THE APPELLANT HAS SHOWN THE AMOUNT PAID TO SHRI GHANSHYAM N. JADEJA AS ADVANCES FOR NETWORK ACQUISITION IN HIS BALANCE SHEET FOR F.Y.2008 - 09 AND IS TAKEN AS INVESTMENT IN THE YEAR 2009 - 10 IN VIEW OF THE PARTNERSHIP ENTERED WITH SHRI GHANSHYAM N. JADEJA. THE COPY OF INC OME TAX RETURN AND LEDGER ACCOUNT OF THE APPELLANT IN THE BOOKS OF SHRI GHANSHYAM N. JADEJA ALSO SHOW THAT PAYMENT IS RECEIVED BY HIM AS ADVANCE WHICH IS TAKEN AS PARTNERS CAPITAL CONTRIBUTION IN NEXT YEAR. IN VIEW OF THESE FACTS THE APPELLANT CANNOT BE DE CLARED AS ASSESSEE IS DEFAULT ONLY ON THE BASIS OF OPINION OF THE AUDITOR. THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF RAJKOT ENGINEERING ASSOCIATION V. UNION OF INDIA (162 ITR 28)(GUJ) ALSO SUPPORTS THIS VIEW. THE DCIT CIRCLE - 2(1)(1) HAS ALS O MADE IT CLEAR THAT THE PAYMENT IS NOT AN EXPENDITURE AND IS NOT COVERED BY TDS PROVISIONS. HENCE, LOOKING AT OVER ALL FACTS AND CIRCUMSTANCES THE DEFAULT COMPUTED BY THE AO U/S.201(L) IS DELETED. CONSEQUENTIALLY, THE INTEREST U/S.201(LA) ALSO BECOMES INF RUCTUOUS, HENCE DELETED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSING OFFICER HA S PASSED ORDER U/S. 201(1)/201(1A) TREATING THE ASSESSEE IN DEFAULT FOR NOT DEDUCTING TAX IN ACCORDANCE W ITH THE PROVISI ONS OF SECTION 194J OF TH E ACT ON THE GROUND TH A T ASSESSEE HAD PAID ADVANCE PAYMENT FOR NON - COMPETE FEES TO THE AMOUNT OF RS. 2.51 CRORES TO MR. SHRI GHANSHYAM N. JADEJA IN ASSESSMENT YEAR 2009 - 10. THE LD. CIT(A) HAS DELETED THE ADDITION MADE UNDER SECT ION 201(1)/201(1A) BY THE ASSESSING OFFICER O N THE REASONING TH A T THE NATURE OF SAID ADVANCE PAYMENT WAS THE CAPITAL CONTRIBUTION FROM THE ASSESSEE IN THE PARTNERSHIP FIRM. IT IS NOTICED THA T THE ASSESSING OFFICER HAS TREATED THE IMPUGNED PAYMENT AS NON - C OMPETE FEE ON THE BASS OF AUDITOR S COMMENT IN 3CD REPORT FOR ASSESSMENT YEAR 200 9 - 10. T HE ASSESSEE HAS EXPLAINED THAT THE AUDITOR HAS WRONGLY STATED THAT SAID ADVANCE PAYMENT TO SHRI GHANSHYAM N. JADEJA AS NON - COMPETE FEES. THE ASSESSEE HAS SUBMITTED THAT DURING THE ASSESSMENT YEAR 2009 - 10 THE COMPANY HAD PAID ADVANCES OF RS. 2.51 CRORES TO SHRI GHANSHYAM N. JADEJA (PROP. OF PEARL COM) FOR JOINING THE I.T.A NO. 1282 & 1283 /AHD/20 16 A.Y. 2009 - 10 PAGE NO IT O VS. M/S. GUJARAT TELELINK PVT. LTD. 4 PARTNERSHIP BUSINESS. DURING THE ASSESSMENT YEAR 2009 - 10 , THE ASSESSEE HAS ENTERED INTO PARTNERSHIP DEED AND THE DEED WAS EXECUTED ON 23 - 03 - 2010. T HE ASSES SEE HAS ALSO SUBMITTED THE COP IES OF RETURN O F INCOME AND LEDGER A/C OF SHRI GHANSHYAM N. JADEJA SHOWING THE ADVANCE FOR PARTNERSHIP IN THE ASSESSMENT YEAR 2008 - 09. THE ASSESSING OFFICER HAS FAILED TO DISPROVE ABOVE MATERIAL FACTS. IN THE LIGHT OF THE ABOVE FA CTS AND THE DETAILED FINDINGS OF THE LD. CIT(A) AS SUPRA IN THIS ORDER, WE CONSIDER THAT THE ORDER U/S. 201(1)AND 201(1A) IS NOT JUSTIFIED. THEREFORE, THE APPEAL OF THE RE V ENUE IS DISMISSED. ITA NO. 1283/AHD/2016 7. THE REVENUE HAS RAISED FOLLOWING SUBS TANTIVE GROUNDS OF APPEAL: - 1 . THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE PENALTY U/S. 271C OF THE IT. ACT OF RS.28, 16,220/ - LEVIED BY THE ADDL.CIT, AHMEDABAD (HEREIN AFTER REFERRED AS AO) FOR THE REASON GIVEN DURING THE APPELLATE PROC EEDINGS FOR APPEAL NO.355 AGAINST THE ORDER U/S 2. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION MADE U/S. 201(1) OF THE IT. ACT OF RS.28,16,220/ - AND INTEREST CHARGED UNDER SECTION 201 (1A) OF THE IT ACT OF RS.32,52,734/ - FOR NON DE DUCTION OF TDS ON ADVANCE PAYMENT FOR NON COMPETE FEES COVERED WITHIN THE MEANING OF 'FEES FOR TECHNICAL SERVICES ' U/S 194 - J OF THE ACT IN THE APPEAL NO.355. 3. THE LD. CIT(A) HAS ERRED ON FACTS AS WELL AS IN LAW IN DELETING THE PENALTY U/S. 271 C OF THE IT. ACT RELYING ON THE DECISION IN THE CASE OF RAJKOT ENGINEERING ASSOCIATION V. UNION OF INDIA (162 ITR 28) (GUJ) AND HE HAS OVER LOOKED THE FACT. HOWEVER, IT IS NOTICED THAT THE FACTS OF THE CASE ARE DIFFERENT FROM EACH OTHER. 8. THIS APPEAL OF THE REV ENUE IS AGAINST THE DECISION OF LD. CIT(A) OF DELETING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT OF RS. 2816220/ - BY THE ADDITIONAL CIT, AHMEDABAD ON TREATING THE ASSESSEE AS DEFAULTER FOR NON - DEDUCTION OF TAX AT SOURCE AS PER ORDER U/S. 201(1)/201(1A) OF THE ACT DATED 1 ST JAN, 2015 RAISI NG TOTAL DEMAND OF RS. 6068954/ - . THE ASESSEE HAS PAID NON - COMPETE FEES WITHOUT DEDUCTING TAX AT SOURCE U/S. 194J OF THE ACT AS EXPLAINED SUPRA IN ITA 18 8 2/AHD /2016 9. DURING THE COURSE OF PENALTY PROCEEDINGS THE AS SESSEE HAS REITERATED THE SAME ARGUMENT AND SUBMISSION WHICH WAS MADE AT THE TIME OF PROCEEDINGS U/S. 201(1)/201(1A) AS MENTIONED SUPRA IN THIS ORDER. HOWEVER, THE ADDITIONAL CIT I.T.A NO. 1282 & 1283 /AHD/20 16 A.Y. 2009 - 10 PAGE NO IT O VS. M/S. GUJARAT TELELINK PVT. LTD. 5 HAS NOT AGREED WITH THE CONTENTION OF THE ASSESSEE AND LEVIED PENALTY U/S. 2 71(1)(C) OF RS. 2816002/ - . 10. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER . 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. VIDE ORDER U/S .271C OF THE ACT DATED 27/01/2015 THE ADDL. CIT, TDS HAS LEVIED PENALTY U/S. 271 FOR FAILURE TO DEDUCT TDS U/S. 194J OF THE ACT BY THE ASSESSEE AS PER ORDER U/S. 201(1)/201(1A) AS SUPRA PASSED BY THE ITO, TDS - 2, AHMEDABAD IN WHICH DEMAND OF RS. 60 , 68 , 954/ - W AS RAISED. CONSEQUENTLY, THE ADDL. CIT, TDS HAS LEVIED PENALTY U/S. 271C OF RS. 28,16,220/ - . THE LD. CIT(A) HAS DELETED THE AFORESAID PENALTY U/S. 271C HOLDING THAT THE SAME HAS BECOME IRRELEVANT ONCE THE LD. CIT(A) HAS DELETED THE ADDITION MADE 201(1)/201(1A) IN THE CASE OF THE ASSESSEE. SINCE THE APPEAL OF THE REVENUE VIDE ITA NO. 1282/AHD/2016 BY THIS ORDER AS SUPRA HAS BEEN DISMISSED, THEREFORE, THE PENALTY LEVIED U/S. 271C HAS BECOME INFRUCTUOUS. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. 12. IN THE RESULT, BOTH THE APPEALS FILED BY REVENUE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 13 - 12 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 13 /12 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. I.T.A NO. 1282 & 1283 /AHD/20 16 A.Y. 2009 - 10 PAGE NO IT O VS. M/S. GUJARAT TELELINK PVT. LTD. 6 BY ORDER/ , / ,