Universal Power Systems P. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1650/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9669 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 11-06-2014
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: B RAMAKRISHNANC A
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' #! ' $ . %& ' () BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.1649 & 1650 /MDS./2014 ( / ASSESSMENT YEARS :2006-07 & 2007-08) M/S.UNIVERSAL POWER SYSTEMS PVT. LTD ., 9,ATHIPATTAN STREET, CHENNAI 600 002. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(3), CHENNAI 600 034. PAN AAACU 0880 H ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) / APPELLANT BY : MR.B.RAMAKRISHNAN,C.A / RESPONDENT BY : MR.A.V.SREEKANTH,JCIT, D.R / DATE OF HEARING : 31.03.2016 /DATE OF PRONOUNCEMENT : 13.04.2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INC OME TAX(A)- ITA NOS.1649,1650/MDS/2014 2 III, CHENNAI DATED 14.03.2014 PERTAINING TO THE ASS ESSMENT YEAR 2006-07 & 2007-08. SINCE ISSUES INVOLVED IN THESE TWO APPEALS ARE COMMON IN NATURE, THESE APPEALS ARE CLUBBED TOGETHE R, HEARD TOGETHER, DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE 2. 1 THE FIRST COMMON GROUND RAISED IN THESE APPEAL S IS WITH REGARD TO CONFIRM THE VALIDITY OF REOPENING THE ASSESSMENT . 2.2 THE SECOND COMMON GROUND IS WITH REGARD TO R ESTRICT THE TDS CLAIM OF ` 1,97,193 INSTEAD OF ` 5,70,943 (A.Y 2006-07) & OF ` 7,13,670/- INSTEAD OF ` 15,87,185/- (A.Y 2007-08). 3. FIRST WE TAKE UP THE LEGAL ISSUE. THE BRIEF FA CTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRA DING IN ELECTRICAL, ELECTRONIC AND MECHANICAL ITEMS. THE ASSESSEE FILED E-RETURN ON 12.02.2007 FOR ASSESSMENT YEAR 2006-07 AND ON 15.11 .2007 FOR ASSESSMENT YEAR 2007-08. SUBSEQUENTLY, THE CASE WA S REOPENED FOR BOTH THE ASSESSMENT YEARS AS THE LD. ASSESSING OFFI CER NOTICED THAT ITA NOS.1649,1650/MDS/2014 3 THERE WAS ESCAPEMENT OF INCOME AS THE ASSESSEE HAD BILLED ROYALTY FOR ` 1,68,59,935/- FOR ASSESSMENT YEAR 2006-07 BUT OFFER ED ONLY ` 52,31,511 FOR ASSESSMENT UNDER THE HEAD OTHER INC OME AND SIMILARLY FOR A.Y 2007-08, BILLED ROYALTY OF ` 1,83,01,929/- INSTEAD OF ` 75,37,050/-. THE AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT RESTRICTING THE TDS CLAIM TO RS.1,97,193/- (A.Y 2006-07) & 7,13,670/-(A.Y 2007-08). AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFICER, THE ASSESSEE WAS IN APPEAL BEFORE THE LD.C IT(A). ON APPEAL, THE LD.CIT(A) OBSERVED THAT THE ASSESSEE IS ELIGIBL E FOR TDS CREDIT ONLY TO THE EXTENT OF THEIR INCOME STATED IN THE FI NANCIAL STATEMENTS FOR THE FINANCIAL YEAR FOLLOWING THE DECISION OF TRIBUN AL IN THE CASE OF DCIT VS. SMT.K.BHAGYALAKSHMI IN ITA NO.1289/MDS,.20 13 DATED 30.09.2013 WHEREIN HELD THAT A PERUSAL OF SECTION 1 99 R.W.RULE 37BA MAKES IT CLEAR THAT, THE CREDIT FOR TAX DEDUCTED AT SOURCE SHALL BE GIVEN IN THE YEAR IN WHICH THE RECEIPTS AGAINST WHI CH HE TAX IS DEDUCTED AT SOURCE ARE ASSESSED TO TAX. ACCORDINGL Y, THE ASSESSEE IS ENTITLED TO CLAIM CREDIT OF THE TDS IN THE YEAR IN WHICH THE ASSESSEE ACCOUNTS FOR THE INCOME OF RS.3.41 CRORES. THIS GR OUND OF APPEAL OF REVENUE IS ALLOWED. THE LD.CIT(A) FURTHER OBSERVED THAT THE ITA NOS.1649,1650/MDS/2014 4 ASSESSEE ADMITTED DURING THE COURSE OF APPELLATE PR OCEEDINGS THAT THE AMOUNT OUTSTANDING AS ROYALTY PAYABLE DUE TO NO N-IDENTIFICATION OF COPY RIGHT HOLDERS WAS TREATED AS INCOME AND HENCE OFFERED FOR TAXATION ALSO. HENCE, THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE ASSESSMENT WAS REOPENED TO CO NSIDER THE RELEVANT TDS RELATING TO THE INCOME OFFERED BY THE ASSESSEE AND INCOME INCLUDED IN THE TDS CERTIFICATE, WHICH INCLU DES SHARE OF OTHER ASSESSEE ALSO. THE ASSESSMENT WAS REOPENED BY RECO RDING REASONS AS FOLLOWS:- I) ON PERUSAL OF THE RECORDS, IT IS SEEN FROM THE T DS CERTIFICATES IN RELATION TO ROYALTY, THE ASSESSEE WAS IN RECEIPT OF ` 2,61,08,623/-. HOWEVER, THE ASSESSEE HAS SHOWN ` 75,37,500/- ONLY AS RECEIPT IN THE PROFIT AND LOSS ACCOUNT. IT IS ALSO VERIFIED FROM THE 3CD REPORT THAT THE ASSES SEE HAS NOT PAID ` 1,85,71,573/- TO THOSE, TO WHOM THE ROYALTY IS PAYABLE AND AS SUCH THE TDS HAS NOT BEEN DEDUCTED A S PER ITA NOS.1649,1650/MDS/2014 5 THE PROVISIONS OF SECTION 194J OF THE ACT. HENCE TH E AMOUNT UNPAID OF ` 1,85,71,573/- IS NOT ALLOWABLE U/S. 40A(IA). II) SIMILARLY, THE ASSESSEE HAS CLAIMED TDS CREDIT FOR ` 15,87,185/- AS AGAINST THE TDS CERTIFICATES FILED F OR THE ASST. YEAR 2007-08 OF ` 11,04,795/-. BUT CREDIT FOR TDS HAS BEEN GIVEN AS CLAIMED BY THE ASSESSEE. THIS RESULTE D IN EXCESS ALLOWANCE OF TDS TO THE EXTENT OF ` 4,82,390/-. AFTER REOPENING THE ASSESSMENT, THERE IS NO ADDITIO N TO INCOME DECLARED IN THE ORIGINAL INCOME DETERMINED BY THE A O. THE INCOME OF ASSESSEE IS THE SAME AS EARLIER ASSESSED INCOME EIT HER U/S.143(1) OR 143(3) OF THE ACT. THUS, IN THE INSTANT CASE, TH E ASSESSMENT WAS REOPENED ON THE GROUND THERE IS A DIFFERENE BETWEEN THE INCOME DECLARED BY THE ASSESSEE AND THE INCOME SHOWN IN TH E TDS CERTIFICATE. IN OTHER WORDS, THE INCOME INCLUDED I N THE TDS CERTIFICATE NOT ENTIRELY BELONGED TO THE ASSESSEE, IT INCLUDES CERTAIN PORTION OF INCOME OF COPYRIGHT HOLDERS. HENCE, ON RE-ASSESSME NT THE AO GIVEN CREDIT ONLY TO THE EXTENT OF INCOME IS OFFERED BY T HE ASSESSEE AND OTHER PORTION OF TDS RELATED TO THE OTHER ASSESSEE STAND WITHDRAWN. ITA NOS.1649,1650/MDS/2014 6 THUS, ONLY FOR THE PURPOSE OF REQUIREMENT OF VERIFI CATION TO FIND OUT ANY EXCESS TDS BENEFIT HAS BEEN GIVEN TO THE ASSESS EE, ASSESSMENT WAS REOPENED. THERE IS NOTHING IN THE REASONS TO I NDICATE THAT THERE IS AN ESCAPEMENT OF INCOME. TO CONSIDER THE VARIAT ION IN THE TDS BENEFIT TO BE GIVEN TO THE ASSESSEE, THE ASSESSMENT WAS REOPENED. THE VARIATION IN THE TDS BENEFIT TO BE GIVEN DOES N OT NECESSARILY LEAD TO ESCAPEMENT OF INCOME. MERE NEED TO VERIFY THE D ISCREPANCY DOES NOT BRING MATTER WITHIN THE SCOPE OF THE CASES IN W HICH RE-ASSESSMENT PROCEEDINGS CAN BE VALIDLY INITIATED. THERE IS DIS TINCTION BETWEEN THE REASONS TO BELIEVE AND REASON TO SUSPECT WHILE THE FORMER IS GOOD ENOUGH TO HOLD THAT INCOME HAS ESCAPED ASSESSMENT AND TO INITIATE SUITABLE REMEDIAL MEASURES IN RESPECT THEREOF, THE LATTER CAN, AT BEST, BE THE GROUND TO VERIFY AND EXAMINE THE MATTER FURT HER. MERE FACT THAT MATTERS NEED TO BE VERIFIED AND EXAMINED FURTHER CA N NEVER BE A REASON GOOD ENOUGH TO BELIEVE THAT INCOME HAS ESCA PED ASSESSMENT AND RE-OPEN THE ASSESSMENT PROCEEDING S, THAT TOO, THE VERY INITIATION OF PROCEEDINGS BUT THE FACTS OF THE INSTANT CASE WAS DEVOID OF MERIT AND RE-ASSESSMENT IS BAD IN LAW. A SIMILAR HAD TAKEN BY THIS TRIBUNAL IN THE CASE OF RAFEEQ IQBAL VS. IT O IN ITA ITA NOS.1649,1650/MDS/2014 7 NO.709/HYD../2013 DATED 13.09.2013 AND ALSO BY CALC UTTA BENCH IN THE CASE OF MEHERA REID & CO., VS. ITO REPORTED I N 81 DTR (CAL. TRIB) 376. ACCORDINGLY, WE QUASH THE RE-ASSESSME NT ORDER. 5. SINCE WE HAVE QUASHED THE RE-ASSESSMENT ITSELF , AT THIS STAGE WE ARE NOT GOING INTO OTHER GROUNDS RAISED BY THE A SSESSEE ON MERITS OF THE ISSUES. 6. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 13 TH OF APRIL, 2016 AT CHENNAI. SD/- SD/- ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) ( ( () * + ) ) ! CHANDRA POOJARI ', JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 13 TH APRIL,2016. K S SUNDARAM. -.,, /0,10 /COPY TO: , 1. /APPELLANT 2. /RESPONDENT 3. , 2,!' /CIT(A) 4. , 2 /CIT 5. 034, 5 /DR 6. 4&,6 /GF