SHRI GAJANAN MAHADEORAO MENDHE, Nagpur V. C.I.T-4, Nagpur

ITA 187/NAG/2017

• Counselvise Citation: [2014] 117 COUNSELVISE.COM (IT) 8905 (ITAT-NAGPUR)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 23-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANOJ MARYANI
• Keywords: Bonafide belief; Reasonable cause; Tax effect; TDS
• Section: 40(a)(ia); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI , JUDICIAL MEMBER ITA NO. 187 /NAG. / 2017 ( ASSESSMENT YEAR : 2009 - 10 ) GAJANAN MAHADEORAO MENDHE 122, GAJAVANDAN SHANKAR NAGAR, BAJI PRABHU NAGAR, NAGPUR - 10 PAN AAUPM 9125 A APPELLANT V/S CIT 4, AAYAKAR BHAVAN, NAGPUR .... RESPONDENT A S SESSEE BY : SHRI MANOJ MARYANI REVENUE BY : SHRI GITESH KUMAR DATE OF HEARING 10.05.2018 DATE OF ORDER 01.06. 2018 O R D E R PER SHAMIM YAHYA , A .M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX PASSED U/S. 263 OF THE INCOME TAX ACT, 1961. 2. IN THIS CASE IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD EXAMINED THE ISSUE OF DISALLOWANCE U/S. 40(A)( IA) OF THE ACT. THE SAME RELATE D TO PAYMENTS U/S. 194C. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE PAYMENT OF RS.12,29,162/ - NEEDS TO BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. 3. AGAINST THIS ASSESSMENT OR DER, THE ASSESSEE WA S IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX . 4. THE LD. COMMISSIONER OF INCOME TAX CONFIRMED THE ADDITION. THE MATTER TRAVELLED TO THE ITAT. THE ITAT GRANTED RELIEF TO THE ASSESSEE. WHEN THE ABOVE MATTER WAS UNDERGOING APPELLAT E PROCEEDINGS, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ITA NO. 187/NAG./2017 GAJANAN MAHADEORAO MENDHE 2 INVOKED HIS REVISIONARY POWER U/S. 263 OF THE I. T. ACT. HE NOTED THAT THE ASSESSEE HAS DEDUCTED TAX OF RS.68 , 644/ - AT SOURCE U/S. 194C FROM SUB CONTRACT PAYMENT OF RS.66 , 64 , 466/ - . HE OPINED THAT AS PER THE PROVISION OF SECTION 40(A)(IA) OF THE ACT, THE ASSESSEE WAS REQUIRED TO DEPOSIT THE TDS ON OR BEFORE THE DUE DATE SPECIFIED U/S. 139(1) OF THE ACT. THAT IN THE INSTANT CASE, THE DUE DATE WAS 30.09.2009. HOWEVER, HE NOTED THAT THE SAID TDS WAS DE POSITED IN THE GOVERNMENT ACCOUNT ON 14.10.2009. HENCE, HE WAS OF THE OPINION THAT UNDER THE CONCERNED ASSESSMENT YEAR, THE SAID AMOUNT WAS TO BE DISALLOWED. IN RESPONSE TO HIS NOTICE U/S. 263 OF THE I. T. ACT, THE ASSESSEE RESPONDED THAT THE SUB CONTRACTO RS WERE ALSO FILING THE RETURN OF INCOME REGULARLY AND, HENCE, THE ASSESSEE HAS DEPOSITED THE AMOUNT AFTER DUE DATE FOR REASONS BEYOND ITS CONTROL. THE ASSESSEE FURTHER CONTENDED THAT AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE PAYMENT TO TH E SUB CONTRACTORS HAS TO BE ALL OWED UNDER THE PREVIOUS YEAR IN WHICH THE PAYMENTS OF THE TDS HAS BEEN MADE. IT WAS SUBMITTED THAT , IN ANY CASE, THE ASSESSEE WAS ENTITLED TO THE SAID DEDUCTION IN ASSESSMENT YEAR 2010 - 11. HOWEVER, THE LD. COMMISSIONER OF INCOME TAX WAS NOT CONVINCED. HE DIRECTED THE ASSESSING OFFICER TO MAKE THE DISALLOWANCE OF RS.66,64,266/ - . 5. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. AT THE THRESHOLD, IT IS NOTED THAT THERE IS A DELAY OF 1108 IN FILING THIS APPEAL. IN REASONABLE CAUSE FOR THE DELAY IT HAS BEEN SUBMITTED THAT EARLIER THE COUNSEL OF THE ASSESSEE WAS MR. VIJAY TIWARI. IT IS SUBMITT ED THAT THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE APPEAL AGAINST THE ABOVE ORDER OF THE LD. COMMISSIONER OF INCOME TAX HAS BEEN FILED WITH THE ITAT. HOWEVER, LATER ON IT TRANSPIRED THAT THE SAID COUNSEL OF THE ASSESSEE HA S NOT FILED THE APPEAL. THE REFORE, IT HAS BEEN SUBMITTED THAT IT WAS DUE TO THE ITA NO. 187/NAG./2017 GAJANAN MAHADEORAO MENDHE 3 WRONG ACTION AND ADVICE OF THEN COUNSEL OF THE ASSESSEE THAT THE APPEAL WAS NOT FILED IN TIME . W HEN THE ASSESSEE CONTACTED ANOTHER COUNSEL , H E ADVISED FOR FILING OF THE APPEAL. IN THIS BACKGROUND, IT HAS BEEN SUBMITTED THAT THE DELAY IN FLING OF THE APPEAL IS SOLELY ATTRIBUTABLE TO THE WRONG ADVICE OF THE ASSESSEES COUNSEL. HENCE, IT WAS PRAYED THAT THE DELAY MAY BE CONDONED IN THE SUBSTANTIAL INTEREST OF JUSTICE. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRE SENTATIVE DID NOT HAVE ANY SERIOUS OBJECTION IN THE CONDONATION OF THE DELAY IN THE SUBSTANTIAL INTEREST OF JUSTICE. 8. UPON CAREFUL CONSIDERATION, WE FIND THAT THE REASONABLE CAUSE ATTRIBUTED FOR DELAY BEING WRONG ADVICE OF THE LD. COUNSEL OF THE ASSESSEE HAS SUFFICIENT COGENCY. ACCORDINGLY, IN THE SUBSTANTIAL INTEREST OF JUSTICE, THE DELAY IS CONDONED AND THE APPEAL IS ADMITTED. 9. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. AS REGARDS THE MERITS OF THE CASE, THE LD. COUNSEL OF THE ASSESSEE HAS CONTENDED THAT THE ISSUE OF DISALLOWANCE U/S. 40(A)(IA) OF THE ACT WAS DULY EXAMINED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS MADE A DISALLOWANCE OF RS.12,29,162/ - . REGARDING THE OTHER ITEMS OF PAYMENT , IN THIS REGARD THE ASSESSING OFFICER HAS A CCEPTED THE ASSESSEES SUBMISSION THAT SINCE THE SUBCONTRACTORS WERE ALSO FILING THERE RETURN, THE DISALLOWANCE U/S. 40(A)(IA) OF THE ACT NEED NOT TO BE DONE. THEREAFTER, THIS MATTER WAS UNDER APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX AND ITAT. 10. IN THIS FACTUAL BACKGROUND, THE LD. COUNSEL OF THE ASSESSEE MADE TWO SUBMISSIONS. FIRSTLY, HE SUBMITTED THAT WHEN ON THE ISSUE OF DISALLOWANCE U/S. 40(A)(IA), THE ASSESSING OFFICER HAS APPLIED HIS MIND AND TAKEN ONE POSSIBLE VIEW WITH WHICH THE LD. ITA NO. 187/NAG./2017 GAJANAN MAHADEORAO MENDHE 4 COMMISSIO NER OF INCOME TAX DID NOT AGREE, THE SAME CANNOT BE THE SUBJECT MATTER OF REVISIONARY JURISDICTION U/S. 263 OF THE ACT. FURTHERMORE, THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT WHEN T H E ISSUE OF DISALLOWANCE U/S. 40(A)(IA) OF THE ACT WAS ALREADY A SUBJE CT MATTER OF APPELLATE PROCEEDINGS BEFORE THE LD. COMMISSIONER OF INCOME TAX, THE LD. COMMISSIONER OF INCOME TAX U/S. 263 OF THE ACT CANNOT EXERCISE JURISDICTION ON THE SAME ISSUE. FURTHERMORE, THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT THE ISSUE IS AL SO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. [2013] 358 ITR 295 (SC) , WHEREIN THE HONBLE APEX COURT HAD EXPOUNDED THAT THE REVENUE SHOULD NOT BE AGGRIEVED IF IT WAS NO T DEPRIVED OF ANY TAX. IT WAS HELD THAT THE RATE OF TAX REMAINED THE SAME IN THE PRESENT ASSESSMENT YEAR AS WELL AS IN THE SUBSEQUENT ASSESSMENT YEAR. THEREFORE, IT WAS HELD THAT THE DISPUTE RAISED BY THE REVENUE WA S ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX EFFECT. THEREFORE, IT WAS HELD THAT THERE WAS NO NEED FOR THE REVENUE TO CONTINUE WITH THIS LITIGATION WHEN IT WAS QUITE CLEAR THAT NOT ONLY WAS IT FRUITLESS (ON MERITS) BUT ALSO THAT IT MAY NOT HAVE ADDED ANYTHING MUCH TO THE PUBLIC COFFERS. RE FERRING TO THE ABOVE, THE HONBLE APEX COURT DECISION, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE RATIO OF THE ABOVE SAID DECISION FULLY APPLIES IN THE PRESENT CASE. THE ASSESSEE HAS DULY POINTED OUT BEFORE THE LD. COMMISSIONER OF INCOME TAX THAT I N ANY CASE THE EXPENDITURE WAS ALLOWABLE IN THE NEXT ASSESSMENT YEAR. HENCE , THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ON THE TOUCH STONE OF THE ABOVE SAID HONBLE APEX COURT DECISION, THERE WAS NO LOSS TO THE REVENUE SO AS TO ENTITLE THE LD. COMMISSI ONER OF INCOME TAX TO EXERCISE JURISDICTION U/S. 263 OF THE ACT. THE LD. COUNSEL OF THE ASSESSEE FURTHER RELIED UPON THE FOLLOWING CASE LAWS: ITA NO. 187/NAG./2017 GAJANAN MAHADEORAO MENDHE 5 1. CIT VS. GABRIEL INDIA LTD. 203 ITR 108 (BOM. HC); 2. CIT VS. ARVIND JEWELLERS (2003) 259 ITR 502 (GUJ. HC); 3. CIT VS. MAX INDIA LTD. (2004) 268 ITR 128 (P & H); 4. SMT. LILA CHOUDHAR VS. CIT (2007) 289 ITR 226 (GAU. HC); AND 5. ASHOK LEYLAND FINANCE LTD. VS. ASST. CIT (1997) 59 TTJ 736 (MAD.) 11. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX . 12. UPON CAREFUL CONSIDERATION, WE FIND THAT THERE IS A CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE. FIRSTLY , WE FIND THAT THE ISSUE OF DISALLOWANCE U/S. 40(A)(IA) OF THE ACT WAS CONSIDERED BY THE ASSE SSING OFFICER. HE HAD MADE CERTAIN DISALLOWANCES. THIS DISALLOWANCE WAS SUBJECT MATTER OF APPELLATE PROCEEDINGS . SECTION 263 OF THE I. T. ACT IN EXPLANATION 1 (C ) PROVIDES THAT WHERE ANY ORDER REFERRED TO IN THIS SUB - SECTION AND PASSED BY THE ASSESSING OFFI CER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL, THE POWERS OF THE COMMISSIONER UNDER THIS SUB - SECTION SHALL EXTEND TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. HENCE, ON THE TOUCH STONE OF THE ABOVE SAID PROVISION OF LAW, WHEN THE DISALLOWANCE OF EXPENSES U/S. 40(A)(IA) FOR VIOLATION OF PROVISI ON OF SECTION 194C WAS ALREADY THE SUBJECT MATTER OF APPELLATE PROCEEDINGS CON SIDERATION AND THE MATTER HAD NOT BEEN DECIDED BY THEM, THE LD. COMMISSIONER OF INCOME TAX COULD NOT HAVE EXERCISE JURISDICTION U/S. 263 TO PASS A REVISIONARY ORDER FOR THE SAME ISSUE OF DISALLOWANCE U/S. 40(A)(IA) OF THE ACT FOR THE VIOLATION OF PROVISION OF SECTION 194C. HENCE, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX IS LIABLE TO BE QUASHED ON THIS GROUND IT SELF. 13. FURTHERMORE, WE FIND THAT IT IS THE SETTLED LAW THAT WHEN TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER EXERCISES / ADOPT S ONE VIEW, THE LD. COMMISSIONER OF INCOME TAX CANNOT EXERCISE JURISDICTION U/S. 263 , SIMPLY BECAUSE HE IS HAVING ANOTHER VIEW. IN THE ITA NO. 187/NAG./2017 GAJANAN MAHADEORAO MENDHE 6 PRESENT CASE, THE ASSESSING OFFICER HAS EXAMINED THE ISSUE AND QUA THE OTHER ITEMS OF PAYMENT IN THIS REGARD, I.E., SUB CONTRACTOR PAYMENT, THE ASSESSING OFFICER HAD ACCEPTED THE ASSESSEES PLEA THAT THE SU B CONTRACTORS WERE ALSO FILING RETURN OF INCOME AND , HENCE , THERE WAS NO REQUIREMENT ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. THE ASSESSING OFFICER HAS ACCEPTED THIS VIEW. WE FIND THAT THIS VIEW IS A POSSIBLE ONE AND T HE LD. COMMISSIONER OF INC OME TAX CANNOT EXERCISE HIS JURISDICTION U/S. 263 ON TH I S COUNT ALSO. FURTHERMORE, AS EXPOUNDED BY THE HONBLE APEX COURT IN THE CASE OF EXCEL INDUSTRIES LTD. ( SUPRA), WHEN THERE IS NO REVENUE LOSS TO THE REVENUE , WHEN ONLY THE YEAR OF ALLOWANCE WAS UNDER DISPUTE, AND THERE WAS NO CHANGE IN THE TAX RATE OR EVEN MINOR EFFECT, THE HONBLE APEX COURT HAS EXPOUNDED THAT THE REVENUE SHOULD NOT ENGAGE INTO LITIGATION. IN THE PRESENT CASE ALSO , ON THE BASIS OF THE REVISIONARY POWER EXERCISE D BY THE LD. COMMISSIONE R OF INCOME TAX, THE SAID PAYMENT WAS ALSO ALLOWABLE IN THE NEXT ASSESSMENT YEAR. NO CASE HAS BEEN MADE OUT THAT THERE WAS A DIFFERENCE IN TAX OF RATE OR SUBSTANTIAL TAX EFFECT. HENCE, ON THE TOUCH STONE OF THE ABOVE SAID HONBLE APEX COURT DECISION, THE L D. COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN EXERCISING JURISDICTION U/S. 263 OF THE ACT. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT , WE QUASH THE ORDER PASSED U/S. 263 BY THE LD. COMMISSIONER OF INCOME TAX. 14. IN THE RESULT, THE ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 1 . 0 6 . 2 0 1 8 SD/ - RAM LAL NEGI JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER NAGPUR , DATED : 0 1 . 0 6 . 2 0 1 8