DCIT 6(2)(1), MUMBAI V. CREDIT ANALYSIS AND RESEARCH LTD, MUMBAI

ITA 1671/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0361 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 09-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Section: 143(3)

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE HONBLE SH. R. C. SHARMA, AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 1671 /MUM/201 7 ( / ASSESSMENT YEAR: 2012 - 13 ) DCIT - 6(2) (1) R. NO. 563 , 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400020 / VS. CREDIT ANALYSIS AND RESEARCH LTD. 5 TH FLOOR, RBC MAHINDRA TOWER, RD. NO. 13, WORLI, MUMBAI - 4000 18 ./ ./ PAN NO. AA ACC4587F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI H. N. SINGH , DR / RESPONDENTBY : NONE / DATE OF HEARING : 2 4 .09 .2018 / DATE OF PRONOUNCEMENT : 22.11.2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 12, MUMBAI DATED 01.12 .16 F OR AY 20 12 - 13 ON THE GROUNDS MENTIONED HEREIN BELOW: - 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION ON 2 I.T.A. NO. 1671 /MUM/201 7 CREDIT ANALYSIS AND RESEARCH LTD. ACCOUNT OF SURVEILLANCE FEES AMOUNTING TO RS.19,78,92,9247 - IGNORING THE FACT THAT THE ASSESSEE HAS BEEN FOLLOWING METHOD OF ACCOUNTING OF OFFERIN G AMOUNT OF SURVEILLANCE FEE @ 100% IN THE YEAR OF RECEIPT, THAT IS AS PER THE MERCANTILE SYSTEM OF ACCOUNTING BEING REGULARLY FOLLOWED BY THE ASSESSEE FOR MANY YEARS.' 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APPEALS) ON THE ABOVE GROUNDS BE SE T ASIDE AND THAT OF THE AO BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NEW GROUND, WHICH MAY BE NECESSARY. 2. AT THE VERY OUTSET, IT IS NOTICED THAT NONE HAS APPEARED ON BEHALF OF ASSESSEE IN SPITE OF SEVERAL CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED. ON THE OTHER HAND L D. DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. THEREFORE WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PA RTE WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD. 3 I.T.A. NO. 1671 /MUM/201 7 CREDIT ANALYSIS AND RESEARCH LTD. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF CREDIT RATING, EVALUATION, APPRAISAL OF DEBTS AND COMMITMENTS, INFORMATION SERVICES, CONSULTANCY AND ADVISORY SERVICES. T HE RETURN OF INCOME FO R THE YEAR UND ER CONSIDERATION WAS FILED ON 28.09.12 DECLARING TOTAL INCOME OF RS 1,26,46,31,880/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND AFTER SERVING STATUTORY NOTICES AND PROV IDING OPPORTUNITY OF HEARING, ASSESSMENT ORDER U/S 143(3) OF THE I.T. ACT WAS PASSED THEREBY MAKING ADDITIONS DUE TO 26AS MISMATCH /CHANGE OF ACCOUNTING POLICY AND OTHER HEADS ALSO. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A ) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE REVENUE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. 4 I.T.A. NO. 1671 /MUM/201 7 CREDIT ANALYSIS AND RESEARCH LTD. GROUND NO. 1 4 . THIS GROUND RAISED BY THE REVENUE RELATES TO CHALLENGING THE ORDER OF LD. CIT (A) IN DELETING THE ADDITION ON ACCOUNT OF SURVEILLANCE FEES AMOUNTING TO RS.19,78,92,924/ - IGNORING THE FACT THAT THE ASSESSEE HAS BEEN FOLLOWING METHOD OF ACCOUNTING OF OFFERING AMOUNT OF SURVEILLANCE FEE @ 100% IN THE YEAR OF RECEIPT, THAT IS AS PER THE MERCANTILE SYSTEM OF ACCOUNTING BEING REGULARLY FOLLOWED BY THE ASSESSEE FOR MANY YEARS. 5 . WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSE D THE MATERIAL PLACED ON RECORD, JUDGME NT CITED BY THE PARTY AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE ADDITIONS WERE MADE BY THE AO ON ACCOUNT OF 26AS MISMATCH /CHANGE OF ACCOUNTING POLICY AND THE SAME IS CONTAINED IN PARA NO. 7 OF THE ORDER OF AO, WHICH IS REPRODUCED BELOW: - 7. ADDITION DUE TO 26AS MISMATCH / CHANGE IN ACCOUNTING POLICY: IT HAS BEEN FOUND OUT THAT THE ASSESSEE HAS CHANGED THE METHOD OF ANTING REGULARLY FOLLOWED BY IT IN EARLIER 5 I.T.A. NO. 1671 /MUM/201 7 CREDIT ANALYSIS AND RESEARCH LTD. ASSESSMENT YEARS. IT USED TO ACCOUNT THE SURVEILLANCE FEE IN THE YEAR OF RECEIPT, BUT AS PER THE SUBMISSION OF THE ASSESSEE, FROM THIS ASSESSMENT YEAR ONWARDS THEY HAVE OFFERED 60% OF THE SURVEILLANCE FEE IN THE YEAR OF RECEIPT AND BALANCE AMOUNT IN THE FOLLOWING ASSESSMENT YEARS. THE ASSESSEE WAS ASKED AS TO WHY NOT THE REVENUE OF SURVEILLANCE BE RECOGNIZED ON THE BASIS OF METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE IN EARLIER ASSESSMENT YEAR. THE ASSESSEE HAS REPLIED THAT THE CHANGE WILL RESULT IN MORE RELIABLE AND RELEVA NT INFORMATION OF THE OPERATIONS OF THE COMPANY. THE ASSESSEE'S CONTENTION IS CONSIDERED BUT IT IS NOT FOUND ACCEPTABLE DUE TO FOLLOWING REASONS: (I) THE ASSESSEE HAS BEEN FOLLOWING THE ACCOUNTING OF OFFERING REVENUE OF SURVEILLANCE FEE ON 100% IN TH E YEAR OF RECEIPT WHICH IS AS PER MERCANTILE SYSTEM, THIS METHOD HAS BEEN REGULARLY FOLLOWED BY THE ASSESSEE SINCE LAST MANY YEARS. (II) AS PER SUBMISSION OF THE ASSESSEE, 'WHILE DISCUSSING THE AUDITED ACCOUNT FOR FY ENDING MARCH 2012 STATUTORY AUDITO R RECOMMENDED TO AUDIT COMMITTEE AT MEETING HELD ON JUNE 16, 2012, CHANGE IN ACCOUNTING POLICY RELATED TO REVENUE RECOGNITION ON SURVEILLANCE INCOME. THEY ADVISED THE SURVEILLANCE 6 I.T.A. NO. 1671 /MUM/201 7 CREDIT ANALYSIS AND RESEARCH LTD. REVENUE MAY BE BOOKED ON TIME PROPORTION BASIS'. THE BOOKS OF ACCOUNT ARE FR EEZED ON 31.03.2012 AND THE ASSESSEE HAD PAID ADVANCE TAX ON THE BASIS OF OLD METHOD OF ACCOUNTING OF SURVEILLANCE FEE AND ALL THESE DISCUSSION AND CHANGE OF METHOD OF ACCOUNTING AFTER THE END OF FINANCIAL YEAR IS JUST A PLOY TO DEFRAUD THE REVENUE OF THE RIGHTFUL DUES OF THE TAXES. IT WAS CLEARLY AN AFTER THOUGHT TO REDUCE THE TAXABLE INCOME. (III) THE ASSESSEE HAS NOT OFFERED SURVEILLANCE FEE OF RS. 19,78,92,924/ - DUE TO CHANGE IN THE METHOD OF REVENUE RECOGNITION. THIS AMOUNT IS REFLECTED IN 26AS AND HAS NOT BEEN OFFERED TO TAX BY THE ASSESSEE. ON THE OTHER HAND THE ASSESSEE HAS CLAIMED FULL TDS ON THIS AMOUNT ALSO. THIS CLEARLY SHOWS THE INTENTION OF THE ASSESSEE. AS PER RULE 37BA(3)(I) CREDIT FOR TAX DEDUCTED AT SOURCE AND PAID TO THE CENTRAL GOVERN MENT SALARY GIVEN FOR THE ASSESSMENT YEAR FOR WHICH SUCH INCOME IS ASSESSABLE. THUS ON ONE HAND THE ASSESSEE HAS NOT OFFERED INCOME TO TAX AND ON THE OTHER HAND IN CLEAR VIOLATION OF LAW HAS CLAIMED THE CREDIT OF TDS. WHEN THIS POINT WAS BROUGHT TO THE NOT ICE OF THE ASSESSEE, HE HAS NOW OFFERED THAT HE IS READY TO FORGO THE TDS CLAIMED. THE ASSESSEE HAS NOT COME CLEAN ON ITS OWN AND ALL THESE ACCOUNTING JUGGLERY HAS BEEN DONE TO GET REFUND. 7 I.T.A. NO. 1671 /MUM/201 7 CREDIT ANALYSIS AND RESEARCH LTD. THUS ON THE BASIS OF ABOVE DISCUSSION RS. 19,78,92,924/ - IS ADDED T O THE TOTAL INCOME AS UNDISCLOSED SURVEILLANCE FEE / 26AS MISMATCH. PENALTY U/S 271(L)(C) IS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. 6. ON APPEAL, LD. CIT(A) DELETED THE ADDITIONS BY HOLDING THAT AO HAS NOT DEM ONSTRATED AS TO HOW THE CHANGE IN REVENUE RECOGNITION WOULD RESULT IN ESTIMATION OF PROFIT AND NOT GIVING THE CORRECT FINANCIAL YEAR OF THE PROFIT AND ALSO HELD THAT CHANGE IN METHOD OF REVENUE ACCOUNTING WITH RESPECT TO SURVEILLANCE FEES WAS BONAFIDE. 7. WE FIND THAT LD. CIT(A) WHILE REACHING TO THE SAID CONCLUSION HAD NOT MENTIONED THE BAS IS OR THE REASONS FOR CONCLUDING THAT THE CHANGE IN METHOD OF REVENUE ACCOUNTING WITH RESPECT TO SURVEILLANCE FEES IS BONAFIDE AND MOREOVER, IF THE AO HAD NOT DEMONST RATED AS TO AS TO HOW THE CHANGE IN REVENUE RECOGNITI ON WOULD RESULT IN ESTIMATION OF PROFIT AND N OT GIVING CORRECT FINANCIAL RESULT OF THE PROFIT, THEN IN THAT EVENTUALITY, THE 8 I.T.A. NO. 1671 /MUM/201 7 CREDIT ANALYSIS AND RESEARCH LTD. LD. CIT(A) SHOULD HAVE RESTORED THE MATTER BACK TO THE FILE OF AO TO CARRY OUT NECESSARY VERIFICATIONS/INVESTIGATIONS. 8. IN THIS RESPECT, WE DRAW STRENGTH FROM THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF KAPURCHAND SHRIMAL VRS. CIT 1981 131(ITR) PAGE 451 , WHEREIN IT WAS HELD THAT T HE DUTY OF THE TRIBUNAL DOES NOT END WITH MAKING A DECLARATION THAT THE ASSESSMENTS ARE ILLEGAL AND IT IS DUTY BOUND TO ISSUE FURTHER DIRECTIONS. THE APPELLATE AUTHORITY HAS THE JURISDICTION AS WELL AS THE DUTY TO CORRECT ALL ERRORS IN THE PROCEEDINGS UNDER APPEAL AND TO ISSUE, IF NECESSARY, APPROPRIATE DIRECTIONS TO THE AUTHORITY AGAINST WHOSE DECISION THE APPEAL IS PREFERRED TO DISPOSE OF THE WHOLE OR ANY PART OF THE MATTER AFRESH UNLESS FORBIDDEN FROM DOING SO BY THE STATUTE AND THE STATUTE DOES NOT SAY THAT SUCH A DIRECTION CANNOT BE ISSUED BY THE APPELLATE AUTHORITY IN A CASE OF THIS NATURE. 9. THEREFORE, C ONSIDERING THE ABOVE JUDGMENT AND KEEPING IN VIEW THE INTEREST OF JUSTICE, WE SET ASIDE THE O RDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO CARRY OUT NECESSARY INVESTIGATIONS /VERIFICATION AND THEREAFTER 9 I.T.A. NO. 1671 /MUM/201 7 CREDIT ANALYSIS AND RESEARCH LTD. PASS AFRESH ORDER . IT IS NEEDLESS HERE TO MENTION THAT BEFORE PASSING THE ORDER OF ASSESSMENT, THE AO SHALL P ROVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESS E E. BEFORE PARTING, WE MAY MAKE IT CLEAR THAT OUR DECISION TO RESTORE THE MATTER BACK TO THE FILE OF AO SHALL IN NO WAY BE CONSTRUED AS HAVING ANY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISPUTE, WHICH SHALL BE ADJUDICATED BY THE AO INDEPENDENTLY IN ACCORDANCE WITH LAW. WITH THESE DIRECTIONS, THIS GROUND OF APPEAL FILED BY THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. GROUND NO. 2 & 3 . 10 . THESE GROUNDS RAISED BY THE REVENUE ARE GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 11 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOV , 2018 . SD/ - SD/ - ( R. C. SHARMA ) (SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 22 . 11 .201 8 SR.PS . DHANANJAY 10 I.T.A. NO. 1671 /MUM/201 7 CREDIT ANALYSIS AND RESEARCH LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI