Delta Paper Mills Ltd, Vendra V. ACIT, Eluru

ITA 155/VIZ/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6975 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 01-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKARCIT
• Keywords: Assessment record
• Section: 194C; 263

Judgement Text

PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.155/VIZAG/2009 ASSESSMENT YEAR: 2005-06 DELTA PAPER MILLS LTD., VENDRA VS. ACIT, CIRCLE-1, ELURU (APPELLANT) (RESPONDENT) PAN NO: AAACD6022 C APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI SUBRATA SARKAR,CIT (DR) ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19-02- 2009 PASSED BY THE LD CIT, RAJAHMUNDRY U/S 263 OF T HE INCOME-TAX ACT FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING T HE ORDER OF LD CIT PASSED U/S 263 OF THE ACT BY GIVING DIRECTION TO THE ASSES SING OFFICER TO REVISE THE ASSESSMENT ORDER PASSED U/S 143 (3) BY MAKING DISAL LOWANCE OF EXPENDITURE RELATING TO TRANSMISSION CHARGES U/S 40 (A)(IA) OF THE ACT. 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF PAPER. THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 WAS COMPLETED U/S 143 (3) O F THE ACT BY THE AO. THE LD CIT CALLED THE ASSESSMENT RECORD AND NOTICED TH AT THE ASSESSEE HAS NOT FURNISHED DETAILS IN SUPPORT OF VARIOUS CLAIMS DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. HENCE THE LD CIT PROPOSED TO INITIATE ACTION U/S 263 OF THE ACT AND ACCORDINGLY ISSUED SHOW CAUSE LETTER TO THE ASS ESSEE CALLING FOR DETAILS OF CERTAIN CLAIMS MADE IN THE RETURN OF INCOME AND ALS O CALLING FOR OBJECTIONS FOR REVISING THE ORDER U/S 263. IN RESPONSE THERE TO, THE ASSESSEE SUBMITTED PAGE 2 OF 4 VARIOUS DETAILS CALLED FOR BY THE LD CIT. FROM THE DETAILS SO FURNISHED, THE COMMISSIONER NOTICED THAT THE ASSESSEE HAS PAID A S UM OF RS.78,15,393/- AS TRANSMISSION CHARGES TO M/S GAIL FOR SUPPLY OF GAS. THE LD CIT WAS OF THE VIEW THAT THE TRANSMISSION CHARGES FALL WITHIN THE EXPRE SSION WORK AS DEFINED U/S 194C OF THE ACT AND HENCE THE ASSESSEE IS LIABLE TO DEDUCT THE TAX ON SUCH PAYMENT U/S 194C OF THE ACT. SINCE THE ASSESSEE HA S FAILED TO DEDUCT TAX, THE TRANSMISSION CHARGES ARE LIABLE TO BE DISALLOWED U/ S 40(A) (IA) OF THE ACT. ACCORDINGLY, THE LD CIT DIRECTED THE AO TO REVISE T HE ASSESSMENT ORDER. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. THE SCOPE OF POWER OF LD CIT FOR REVISION OF THE ASSESSMENT U /S 263 OF THE ACT HAS BEEN LUCIDLY BROUGHT OUT BY THE BOMBAY HIGH COURT IN THE CASE OF GRASIM INDUSTRIES LTD., VS. CIT REPORTED IN (2010) 321 ITR 92. THE R ELEVANT OBSERVATIONS ARE EXTRACTED BELOW: SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS T HE COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASSESSING OFFICER IS E RRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTER A N ENQUIRY AS IS NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTI NG A FRESH ASSESSMENT. THE KEY WORDS THAT ARE USED BY SE CTION 263 ARE THAT THE ORDER MUST BE CONSIDERED BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS B EEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMEN TS TO WHICH IT IS NOW NECESSARY TO TURN. IN MALABAR INDUS TRIAL CO. LTD., V. CIT (2000) 243 ITR 83, THE SUPREME COURT H ELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH A ND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APPLICATION OF L AW, WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATU RAL JUSTICE OR WITHOUT APPLICATION OF MIND, WOULD BE AN ORDER FALL ING IN THAT CATEGORY. THE EXPRESSION PREJUDICIAL TO THE INTERE STS OF THE REVENUE, THE SUPREME COURT HELD, IT IS OF WIDE IMP ORT AND IS NOT CONFINED TO A LOSS OF TAX. WHAT IS PREJUDICI AL TO THE PAGE 3 OF 4 INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMEN T OF THE SUPREME COURT (HEADNOTE): THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER P ASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, C ANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY T HE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 13. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALAB AR INDUSTRIAL CO. LTD.,(2000) 243 ITR 83 (SC) HAS BEEN FOLLOWED AND EXPLAINED IN A SUBSEQUENT JUDGMENT OF THE SUPRE ME COURT IN CIT V. MAX INDIA LTD. (2007) 295 ITR 282. 5. KEEPING IN VIEW THE PROPOSITION OF LAW CITED ABOVE, WE HAVE TO LOOK AT THE FACTS OF THE CASE ON HAND. IT WAS BROUGHT TO OUR NOT ICE THAT THE DEPARTMENT INITIATED PENALTY PROCEEDINGS IN THE HANDS OF THE A SSESSEE FOR NON DEDUCTION OF TAX AT SOURCE ON THE VERY SAME TRANSMISSION CHARGES AND THE ASSESSEE CONTESTED THE SAME IN APPEAL. WHEN THE ISSUE CAME BEFORE THE TRIBUNAL, THE TRIBUNAL, AFTER CONSIDERING THE FACTS OF THE ISSUE, GAVE RELIEF TO THE ASSESSEE. THE RELEVANT OBSERVATIONS FROM THE ORDER DATED 11-1 2-2007 PASSED BY THE SMC BENCH OF THE TRIBUNAL IN ITA NOS. 444 TO 448/VIZAG/ 2007 ARE EXTRACTED BELOW: THE SALE OF COMMODITIES SUCH AS GAS NECESSARILY INVOLVES DELIVERY AT THE DOOR STEP OF THE CUSTOMER FOR THE R EASON THAT IT IS A HIGHLY INFLAMMABLE PRODUCT WITH CONTINUOUS SUPPLY AND CANNOT BE DELIVERED AT THE SELLERS PREMISES, B UT NECESSARILY HAS TO BE DELIVERED AT THE CUSTOMERS P REMISES FROM THE POINT VIEW OF PUBLIC SAFETY. THE SELLER H AS A TECHNICAL EXPERTISE TO TRANSMIT THE GAS TO THE CUST OMERS FACTORY PREMISES AND IN THE CASE OF SUPPLY OF GAS, THE LEARNED DR WAS NOT ABLE TO POINT OUT ANY INSTANCE O F SALE WHERE DELIVERY WAS GIVEN OUTSIDE THE FACTORY PREMIS ES. THUS BIFURCATION OF CHARGES, I.E., ONE FOR SUPPLY A ND THE OTHER FOR TRANSMISSION, WAS ONLY FOR THE SAKE OF CO NVENIENCE, MAINLY ON ACCOUNT OF THE FACT THAT THE BASIC PRICE OF GAS IS FIXED BY THE AUTHORITIES WHEREAS, THE TRANSMISSION CHARGES WERE DEPENDENT ON THE LOCATION OF THE CUSTOMERS AND THUS SEPARATE CHARGES SHOWN IN THE INVOICE PRICE CANNOT BE A PAGE 4 OF 4 POINTER TO COME TO THE CONCLUSION THAT IT WAS AN IN DEPENDENT WORKS CONTRACT ATTRACTING PROVISIONS OF SECTION 194 C OF THE ACT. 6. FROM THE OBSERVATIONS OF THE SMC BENCH OF TH E TRIBUNAL CITED ABOVE, IT CAN BE NOTICED THAT THERE IS A POSSIBILITY OF ONE M ORE VIEW THAT THE TRANSMISSION CHARGES WILL NOT FALL IN THE DEFINITION OF WORK A S DEFINED U/S 194C OF THE ACT. THE DECISION OF THE SMC BENCH CITED ABOVE WAS LATER FOLLOWED BY THE DIVISION BENCH OF VISAKHAPATNAM, ITAT IN THE CASE OF ROLEX P APER MILLS LTD., I ITA NOS. 433 TO 436/VIZAG/2007. THUS IT CAN BE SEEN THAT TH E AO HAS FOLLOWED ONE OF THE POSSIBLE VIEWS AND IN THAT CASE, THE ASSESSMENT ORDER CANNOT BE TERMED AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO INTERES TS OF THE REVENUE. FURTHER IT IS NOT THE CASE OF THE LD CIT THAT THE SAID VIEW OF TH E AO IS NOT SUSTAINABLE UNDER LAW. HENCE THE REVISION ORDER PASSED BY THE LD CIT IS LIABLE TO BE QUASHED AND WE ORDER ACCORDINGLY. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 23-3-2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 23 RD MARCH, 2010. COPY TO 1 M/S DELTA PAPER MILLS, VENDRA 534 201, PAL AKODERU MANDAL, WEST GODAVARI DISTT. 2 THE ACIT, CIRCLE-1, ELURU 3 THE CIT RAJAHMUNDRY 4 THE DR, ITAT, VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM