New Prime Network, Dehradun V. ACIT, Dehradun

ITA 1494/DEL/2012

• Counselvise Citation: 149420114 RSA 2012
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 11-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 30-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AROOP SINGH
• Assessee Lawyers: ASHUTOSH JAIN; AMIT A RORA CAS
• Keywords: Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 142(1); 194C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: E NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, A.M AND SHRI RAJPAL YADAV, JM ITA NO: 1494/DEL/2012 ASSESSMENT YEAR : - 2005-06 NEW PRIME NET WORK VS. CIT(A), CIRCLE 1 11 A, RAJPUR ROAD DEHR ADUN 248 001 DEHRADUN, UTHARAKHAND PAN: AAAAN 3463H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHUTOSH JAIN & SH.AMIT A RORA, CAS RESPONDENT BY : SHRI AROOP SINGH, SR.D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE CIT(A)-I, DEHRADUN DATED 25.11.2011 PERTAINI NG TO THE ASSESSMENT YEAR 2005-06. 2. FACTS IN BRIEF :- THE ASSESSEE IS AN AOP AND IS A CABLE OPERATOR. IT FIELD ITS RETURN OF INCOME ON 29.3.2007, DECLARING LOSS OF RS.4,78,905/-. THE RETURN WAS PROCESSED ON 31.3.2007. LATER NOTIC E UNDER SECTION 143(2) AND 142(1) OF THE INCOME TAX ACT, 1961 WERE ISSUED ON 16.10.2007 AND THE ASSESSMENT WAS COMPLETED UNDER S ECTION 142(3) OF THE INCOME TAX ACT, 1961 VIDE ORDER DT. 17.12.2007. IN THIS ASSESSMENT ORDER IT HAS BEEN STATED THAT A SURVEY HAS BEEN CAR RIED OUT AT THE ITA 1494/DEL/2012 PAGE 2 OF 9 ASSESSMENT YEAR 2005-06 NEW PRIME NET WORK BUSINESS PREMISES OF THE ASSESSEE ON 1.9.2003 AND 2 .9.2003 AND IT WAS CONCLUDED THAT NO GENUINE PARTNERSHIP FIRM WAS IN E XISTENCE AND THE ASSESSMENT WAS COMPLETED IN THE STATUS OF ASSOCIATI ON OF PERSONS(AOP). 3. THE ASSESSMENT WAS COMPLETED BY MAKING VARIOUS DISA LLOWANCES AND DETERMINING TOTAL INCOME AT RS.1,17,370/-. THER EAFTER NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 WAS ISSUED ON 23.3.2010 PROPOSING REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961. THE REASONS FOR REOPENING AS STATED IN THE FIRST PAGE LAST PARA OF THE COMMISSIONER OF INCOME TAX (APPEALS)S ORDER WHICH IS EXTRACTED FOR READY REFERENCE. IN THIS CASE ASSESSMENT HAS BEEN MADE UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961 ON 17.12.2007. SUBSEQUENT LY, IT HAS COME TO OUR NOTICE THAT THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS.1,16,55,900/- AS SUBSCRIPTION TO VARIOUS TELE CASTERS AND SERVICES PROVIDES DURING THE RELEVANT PREVIOUS YEA R. ON THESE PAYMENTS ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURC E UNDER SECTION 194C READ WITH EXPLANATION (III)(B) OF THE INCOME TAX ACT, 1961. SINCE NO TAX HAS BEEN DEDUCTED AT SOURCE, AS PER PROVISION OF S.40A(IA) INTRODUCED W.E.F.01.04.2005) AN EXPENDITURE OF RS.1,16,55,900/- IS LIABLE TO BE DIS ALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE FOR THE ASSESSM ENT YEAR 2005-06. THE FACT OF THIS MATTER AND ISSUE WERE N OT EXAMINED AND DISCUSSED AT THE TIME OF FRAMING ASSESSMENT UND ER SECTION 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSME NT YEAR 2005-06. 4. THE ASSESSEE VIDE LETTER DT. 9 TH APRIL,2010 SUBMITTED THAT THE ORIGINAL RETURN OF INCOME FILED ON 29.3.2007, BE TR EATED AS THE RETURN FILED IN COMPLIANCE OF THE NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961. THEREAFTER A SHOW CAUSE NOTICE DT. 7 TH DECEMBER,2010 WAS ISSUED TO THE ASSESSEE, CALLING FOR EXPLANATION AS TO WHY AN AMOUNT OF ITA 1494/DEL/2012 PAGE 3 OF 9 ASSESSMENT YEAR 2005-06 NEW PRIME NET WORK RS.1,16,55,900/- SHOULD NOT BE DISALLOWED UNDER SEC TION 40A(IA) OF THE INCOME TAX ACT, 1961, AS THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE UNDER SECTION 194 OF THE INCOME TAX ACT, 1961 READ WITH EXPLANATION 3(B). IN REPLY IT WAS SUBMITTED THAT THE PROVISION S OF S.40A(IA) APPLIED IN A SITUATION WHETHER THE AMOUNT, ON WHICH TAX WAS D EDUCTIBLE, REMAINED PAYABLE AT THE END OF THE PREVIOUS YEAR AND THAT THE ASSESSEE HAS ACTUALLY PAID THE SAID AMOUNT DURING THE PREVIOUS Y EAR AND HENCE THE PROVISION DOES NOT APPLY TO IT. 5. ASSESSEES SUBMISSIONS ARE BROUGHT OUT IN PARA 1 .1 OF THE COMMISSIONER OF INCOME TAX (APPEALS)S ORDER WHICH IS EXTRACTED FOR READY REFERENCE. 1.1. THE ASSESSEES SUBMISSION IN APPEAL IS SUMMA RIZED BELOW; I. THE ADDITION COULD NOT BE MADE SINCE THE INCOME HAD BEEN ASSESSED ON THE BASIS OF ESTIMATES IN THE FIRST PLACE; II. THE DISALLOWANCE UNDER PROVISION OF S.40A(IA) COMES INTO PLAY ONLY IN CASES WHERE THE AMOUNTS (ON WHICH THE TAX WAS DE DUCTIBLE AT SOURCE BUT WAS NOT DEDUCTED) REMAINS PAYABLE AT T HE END OF THE PY. IT DOES NOT APPLY IN CASES WHERE SUCH AMOUNTS HAD ACTUALLY BEEN PAID; III. THE PAYMENTS IN QUESTION DID NOT ATTRACT THE PROVIS ION OF TDS. HENCE, DISALLOWANCE UNDER SECTION 40A(IA) WAS ALSO NOT ATTRACTED. 6. THE A.O. REJECTED THE CONTENTIONS OF THE ASSESSE E AND MADE A DISALLOWANCE OF RS.1,16,55,900/-. 7. ON APPEAL, THE FIRST APPELLATE AUTHORITY OBSERV ED THAT THEY ARE CONTRARY DECISIONS OF THE TRIBUNAL ON THE ISSUE AS TO WHETHER THE PROVISION WOULD APPLY IN CASES WHERE AT THE END OF THE PY THERE IS NO AMOUNT PAYABLE. HE ALSO RECORDED THAT THE ISSUE WA S REFERRED TO A ITA 1494/DEL/2012 PAGE 4 OF 9 ASSESSMENT YEAR 2005-06 NEW PRIME NET WORK SPECIAL BENCH OF THE TRIBUNAL AT VISAKHAPATNAM. TH EREAFTER HE CHOSE TO FOLLOW THE DECISIONS OF THE TRIBUNAL WHICH ARE IN F AVOUR OF THE REVENUE AND DECIDED THE ISSUE AGAINST THE ASSESSEE. AS THE ASSESSEE CLAIMED THAT IT HAD DEDUCTED SOME TAXES, THE ISSUE WAS SET ASIDE FOR PROPORTIONATE ALLOWANCE OF EXPENDITURE TO THE EXTENT TAX WAS DEDU CTED AT SOURCE. 8. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS. BASED UPON THE FACTS OF THE CASE, THE ASSESSEE RES PECTFULLY SUBMITS THE FOLLOWING GROUNDS WHICH ARE WITHOUT PREJUDICE TO AN D INDEPENDENT OF EACH OTHER: ADDITION QUA DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF SUBSCRIPTION TO VARIOUS TELECASTERS AND SERVICE PROVIDERS UNDER SEC TION 40A(IA). THE LD.CIT(A)-I, DEHRADUN (HEREINAFTER REFERRED TO AS COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE ORD ER OF THE ASSESSING OFFICER THAT THE EXPENDITURE OF RS.1,16,55,900/- UN DER THE HEAD SUBSCRIPTION TO VARIOUS TELECASTERS AND SERVICE PR OVIDERS WAS NOT ALLOWABLE UNDER THE PROVISIONS OF S.40A(IA) OF THE INCOME TAX ACT, 1961. YOUR APPELLANT PRAYS THAT THE ERRONEOUS ORDER BE CA NCELLED AND APPROPRIATE RELIEF MAY BE GRANTED TO THE APPELLANT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL AND/OR THE RELIEF CLAIM ED, AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, SO AS TO E NABLE THE LD.CIT(A)-I, DEHRADUN TO DECIDE THIS APPEAL ACCORDING TO LAW. 9. THE ASSESSEE FILED ADDITIONAL GROUNDS OF APPEAL WHICH READ AS FOLLOWS. 1. THAT THE IMPUGNED REASSESSMENT MADE BY THE LD. AO IS BAD IN LAW, BEYOND JURISDICTION AND VOID AB INITIO AS THERE EXI STS NO REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IN THE INSTANT C ASE. 2. THAT THERE IS NO ALLEGATION AGAINST THE APPELLAN T TO HAVE NOT MADE TRUE AND FAIR DISCLOSURE OF ALL MATERIAL FACTS AND THE R EASSESSMENT IS BASED ON MERE REAPPRAISAL OF THE SAME FACTS FORMING PART OF RECORD IN THE ORIGINAL ASSESSMENT. ITA 1494/DEL/2012 PAGE 5 OF 9 ASSESSMENT YEAR 2005-06 NEW PRIME NET WORK 3. THAT NO FRESH INFORMATION HAS COME INTO THE POS SESSION OF LD.AO, AND, THEREFORE, THE IMPUGNED REASSESSMENT IS BAD IN LAW BEING BASED ON MERE CHANGE OF OPINION. 10. THE LD.COUNSEL FOR THE ASSESSEE MR.ASHUTOSH JAI N SUBMITTED THAT THE ADDITIONAL GROUNDS OF APPEAL, ON THE ISSUE OF R EOPENING HAS TO BE ADMITTED FOR THE REASON THAT ALL THE RELEVANT FACTS AND MATERIAL WERE AVAILABLE ON RECORD. HE RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. EXPEDITORS INTERNATIO NAL INDIA P.LTD. IN ITA NO.596/2000 ORDER DT. 8.12.2011. 11. THE LD.D.R. MR.AROOP KUMAR SINGH OPPOSED THE CO NTENTIONS AND SUBMITTED THAT THE ISSUE HAS NOT BEEN RAISED EITHE R BEFORE THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME TAX (APPEALS) AND HENCE THE TRIBUNAL SHOULD NOT ENTERTAIN THESE ADDITIONAL GRO UNDS. 12. AFTER HEARING RIVAL PARTIES WE ADMIT THESE ADDI TIONAL GROUNDS AS THESE PERTAIN TO JURISDICTION AND AS ALL THE MATERI AL AND FACTS ARE ON RECORD AND NO NEW MATERIAL OR FRESH EVIDENCE IS ADD UCED BEFORE US. THE ISSUE GOES TO THE ROOT OF THE MATTER. 13. ON REOPENING THE LD.COUNSEL SUBMITS THAT THE RE OPENING IS BAD IN LAW AS: A) THERE IS NO MATERIAL WHICH HAS COME TO THE POSSESS ION OF THE ASSESSING OFFICER, WHICH HAS A NEXUS WITH REASONS F OR REOPENING. IT IS SUBMITTED THAT THERE IS NO REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND HENCE THE INITIATION OF REOP ENING IS BAD IN LAW. ITA 1494/DEL/2012 PAGE 6 OF 9 ASSESSMENT YEAR 2005-06 NEW PRIME NET WORK B) HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR INDIA 320 ITR 561 (S.C.) AND SUB MITTED THAT THE REOPENING CANNOT BE BASED ON MERE CHANGE IN OPINION . C) ON MERITS HE REITERATED THE CONTENTIONS RAISED BEFO RE THE COMMISSIONER OF INCOME TAX (APPEALS). HE RELIED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ME RILYN SHIPPING & TRANSPORTS, VISAKHAPATNAM IN ITA 477/VIZ./2008 OR DER DT. 29 TH MARCH, 2012. 14. THE LD.D.R. ON THE OTHER HAND OPPOSED THE CONTE NTIONS AND SUBMITTED THAT THE ISSUE WHETHER THE ASSESSEE HAD D EDUCTED TAX AT SOURCE OR WHETHER A DISALLOWANCE IS CALLED FOR UND ER SECTION 40A(IA) HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER IN THE O RIGINAL ASSESSMENT. THUS HE SUBMITTED THAT THERE WAS NON APPLICATION OF MIND AND THIS RESULTED IN REOPENING OF THE ASSESSMENT. HE JUSTIF IED THE REOPENING BY ARGUING THAT THE REOPENING OF THE ASSESSMENT IS WIT HIN A PERIOD OF 4 YEARS, AND THAT THERE IS NO OPINION FORMED IN THE O RIGINAL ASSESSMENT ON THIS ISSUE AND THE QUESTION OF CHANGE IN OPINION DO ES NOT ARISE. HE ARGUED THAT THERE WAS EXCESSIVE RELIEF UNDER THE I NCOME TAX ACT, 1961 AND HENCE THE REOPENING WAS CORRECTLY MADE. HE REL IED ON THE DECISION OF THE FULL BENCH OF THE HONBLE DELHI HIGH COURT I N THE CASE OF CIT VS. USHA INTERNATIONAL LTD. IN ITA 2026/2010 DT. 21 ST SEPTEMBER,2012. 15. ON MERITS, WHILE NOT LEAVING HIS GROUND, AGREED THAT THE SPECIAL BENCH OF THE TRIBUNAL HAD RESOLVED THE ISSUE IN FAV OUR OF THE ASSESSEE, THOUGH A NUMBER OF TRIBUNAL DECISIONS ARE IN FAVOU R OF REVENUE. ITA 1494/DEL/2012 PAGE 7 OF 9 ASSESSMENT YEAR 2005-06 NEW PRIME NET WORK 16. WE HAVE HEARD RIVAL CONTENTIONS. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE HOLD AS FOLL OWS:- 17. ON THE ISSUE OF REOPENING, WE FIND THAT NO QUER Y WAS RAISED DURING THE COURSE OF ORIGINAL ASSESSMENT ON THE ISSUE OF DISALLOWANCE UNDER SECTION 40A(IA) AND THUS THERE IS NO FORMATION OF O PINION. HENCE THE QUESTION OF CHANGE OF OPINION DOES NOT ARISE. AS T HE REOPENING IS WITHIN A PERIOD OF 4 YEARS, THERE IS NO QUESTION OF APPLYI NG THE PROVISO TO S.147 WHICH IS ON THE REQUIREMENT OF FULL AND TRUE DISCL OSURE OF ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. 18. WE FIND THAT THE ASSESSING OFFICER HAS NOT STAT ED THAT THERE IS ANY FRESH INFORMATION OR MATERIAL THAT HAS COME INTO HI S POSSESSION WHICH LEAD TO THE ASSESSING OFFICER TO RECORD REASONS FOR REOPENING. BUT EVEN IN THE ABSENCE OF FRESH MATERIAL, AND WHEN REOPENI NG IS BASED ON WHATEVER MATERIAL IS AVAILABLE ON RECORD, WE ARE OF THE OPINION THAT THE REOPENING CAN BE UPHELD IF THERE IS ESCAPEMENT OF I NCOME FROM ASSESSMENT. THERE SHOULD BE MATERIAL AND THE MATER IAL SHOULD HAVE A LIVE NEXUS WITH THE REASONS RECORDED FOR REOPENING. SUCH MATERIAL MAY BE MATERIAL ALREADY ON RECORD. THIS IS A CASE WHER E THE ASSESSING OFFICER FIND THAT IT IS A DEEMED CASE WHERE INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT AS THERE WAS UNDER ASSESSMENT. THUS W E REJECT THESE CONTENTIONS OF THE ASSESSEE AND UPHOLD THE REOPENIN G OF ASSESSMENT. ITA 1494/DEL/2012 PAGE 8 OF 9 ASSESSMENT YEAR 2005-06 NEW PRIME NET WORK 19. COMING TO THE MERITS OF THE CASE WE FIND THAT T HE UNDISPUTED FACT IS THAT THE ASSESSEE HAS ALREADY PAID THE AMOUNTS I N QUESTION DURING THE PREVIOUS YEAR ENDED 31.3.2005. IN OTHER WORDS THER E IS NO AMOUNT PAYABLE TOWARDS SUBSCRIPTION TO VARIOUS TELECAST SE RVICE PROVIDERS AS ON 31 ST MARCH, 2005. THERE IS NO OUTSTANDING AMOUNT. UND ER THE CIRCUMSTANCES WE APPLY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS, V ISAKHAPATNAM IN ITA 477/VIZ./2008 ORDER DT. 29 TH MARCH, 2012 (SUPRA) AND HOLD THAT S.40A(IA) OF THE INCOME TAX ACT, 1961 IS APPLICABLE ONLY TO EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND CANNOT BE INVOKED TO DISALLOW THE AMOUNTS WHICH HAVE ALREADY BEEN PAI D DURING THE PREVIOUS YEAR. IN THE RESULT ON MERITS ALSO THE AS SESSEE HAS TO SUCCEED. 20. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOVEMBER, 2012. SD/- SD/- (RAJPAL YADAV) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 9 TH NOVEMBER2012 *MANGA ITA 1494/DEL/2012 PAGE 9 OF 9 ASSESSMENT YEAR 2005-06 NEW PRIME NET WORK COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR; 6.GUARD FILE BY ORDER DY. REGISTRAR 1. DATE OF DICTATION: 31.10.2012 2. DRAFT PLACED BEFORE THE AUTHOR ON: 01.11.2012 3. DRAFT PROPOSED AND PLACED BEFORE SECOND MEMBER ON: 4. DRAFT DISCUSSED/APPROVED BY THE SECOND MEMBER ON: 5. APPROVED DRAFT CAME TO SR.P.S. ON: 6. DATE OF PRONOUNCEMENT : 7. FILE SENT TO BENCH CLERK ON : 8. DATE ON WHICH FILE GIVEN TO HEAD CLERK ON: 9. DATE OF DISPATCHING THE ORDER ON: