ITO 2(1)(2), MUMBAI V. DAMODAR SHATARAM & CO. P. LTD, MUMBAI

ITA 1871/MUM/2010

• Counselvise Citation: 187119914 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-04-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 10-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: VENUGOPAL C NAIR
• Keywords: Tangible material
• Section: 148; 54; 154; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI RAJENDRA ( A.M.) ITA NO. 1871/MUM/2010 ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER 2(1)(2), R. NO. 543, 5 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 400 020. VS. M/S DAMODAR SHANTARAM & CO. PVT. LTD., R. NO. 103, NARAYAN BHAVAN, IST FLOOR,, 82/86, BAZARGATE ST., FORT. MUMBAI- 400 001. PAN : AAACD 3843P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.G.K. NAIR RESPONDENT BY : SHRI VENUGOPAL C. NAIR DATE OF HEARING 12.4.2012 DATE OF PRONOUNCEMENT 25.4.2012 O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 18.12.2009 PASSED BY THE LD. CIT (A) FOR THE A.Y. 2004-05. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS A CUSTOM HOUSE AGENT HANDLING MAINLY EXPORT CONSIGNME NTS FOR REPUTED CUSTOMERS. THE RETURN WAS FILED DECLARING TOTAL IN COME OF RS.1,59,910/-. AFTER PROCESSING OF THE RETURN U/S 143(1) OF THE IN COME TAX ACT, 1961 (THE ACT) THE A.O. NOTED THAT AS PER TDS CERTIFICAT E, THE ASSESSEE HAS NOT FULLY CREDITED TOTAL RECEIPT OF RS. 20.67,041/- REC EIVED TOWARDS BROKERAGE ITA NO.1871/MUM/2010 DAMODAR SHANTARAM & CO. PVT. LTD. 2 AND COMMISSION, JOB WORK AND CONTRACT PAYMENT ETC. HE FURTHER NOTED THAT INSTEAD, SERVICE CHARGES AND MISCELLANEOUS INC OME OF RS. 7,44,897/- WAS CREDITED IN THE PROFIT AND LOSS ACCOUNT. HOWEV ER, CREDIT OF TDS RS. 42,858/- WAS CLAIMED. ACCORDINGLY, HE ISSUED NOTICE U/S 154 OF THE ACT COMMUNICATING THAT THE ASSESSEE HAS CREDITED THE TO TAL RECEIPTS LESS BY RS. 13,22,144/- AND SINCE THE MISTAKE IS APPARENT F ROM RECORDS, THE SAME NEEDS TO BE RECTIFIED. IN RESPONSE TO THIS, T HE ASSESSEE SUBMITTED THAT AGENCY COMMISSION WHICH WAS RAISED AGAINST VAR IOUS CUSTOMERS INCLUDES SERVICE CHARGES AND OTHER EXPENSES, HOWEVE R, THE TDS DEDUCTED BY THE CUSTOMERS ON WHOLE OF THE INVOICE AMOUNT. I T WAS FURTHER SUBMITTED THAT SERVICE CHARGES AND EXPENSES ARE REI MBURSED BY THE CUSTOMERS IN REGULAR COURSE OF BUSINESS BUT INSTEAD OF DEDUCTING THE TDS ON SERVICE CHARGES, SAME WAS DEDUCTED ON WHOLE OF THE PAYMENT MADE BY THE CUSTOMERS. HOWEVER, THE A.O. DID NOT A CCEPT THE ASSESSEES EXPLANATION AND HE ADDED THE DIFFERENCE OF SERVICE CHARGES OF RS. 13,22,144/- (RS. 20,67,041 (-) RS. 7,44,897) TO THE TOTAL INCOME OF THE ASSESSEE AND THEREBY PASSED ORDER DTD. 28.3.2006 U/ S 154 OF THE ACT. 3. ON APPEAL AGAINST THE ORDER PASSED U/S 154 OF TH E ACT, THE LD. CIT(A) OBSERVED THAT ON A PLAIN READING OF SECTION 199 AND 203 IT APPEARS THAT THE BENEFIT OF TAX DEDUCTED AT SOURCE HAS NOT HING TO DO WITH THE INCOME RETURNED. HE FURTHER OBSERVED THAT THE CLAR IFICATION OF INSTITUTE OF CAS OF INDIA IN ITS GUIDANCE NOTE ON TAX AUDIT, IT HAS BEEN ADVISED TO CONSIDER THE NET AGENCY COMMISSION WHICH IS ARRIVE D AT BY MAKING ITA NO.1871/MUM/2010 DAMODAR SHANTARAM & CO. PVT. LTD. 3 ADDITION OF SURPLUS AND DEDUCTION OF DEFICIT ON REI MBURSABLE EXPENSES TO GROSS AGENCY COMMISSION. THE LD. CIT(A) WHILE RELY ING ON CERTAIN DECISIONS OF THE TRIBUNAL AND THE DECISION OF THE H ONBLE APEX COURT IN THE CASE OF BALARAM (T.S.) ITO VS. VOLKART BROTHERS REPORTED IN [1971] 82 ITR 50 (SC) HELD THAT THE ORDER PASSED BY THE A.O. U/S 154 OF THE ACT IS NOT SUSTAINABLE AND ACCORDINGLY CANCELLED THE SAME. 4. SUBSEQUENTLY, THE A.O. AFTER CONSIDERING THE ORD ER PASSED BY THE LD. CIT(A) CANCELLING THE ORDER PASSED U/S 154 OF T HE ACT HAS ISSUED NOTICE U/S 148 FOR THE SAME REASONS AND AFTER CONSI DERING THE ASSESSEES SUBMISSIONS THAT THERE IS NO ESCAPEMENT OF INCOME O N THE PART OF THE ASSESSEE WHILE OBSERVING THAT THE ASSESSEE HAS UNAB LE TO RECONCILE THE DIFFERENCE OF RS. 13,22,144/-, ADDED THE SAME TO TH E INCOME OF THE ASSESSEE AND COMPLETED THE ASSESSMENT AT AN INCOME OF RS. 14,82,054/- VIDE ORDER DTD. 31.12.2008 PASSED U/S 143(3) R.W.S. 147 OF THE ACT. ON APPEAL, THE LD. CIT(A) WHILE OBSERVING THAT THE LD. CIT (A) IN HIS ORDER DTD. 14.8.2007 HAS ALREADY HELD THAT THE ASSESSEE HAS RE CONCILED THE DIFFERENCE WITH TDS CERTIFICATES AND GROSS RECEIPTS , CANCELLED THE RE- ASSESSMENT ORDER DTD. 31.12.2008 PASSED BY THE A.O. ITA NO.1871/MUM/2010 DAMODAR SHANTARAM & CO. PVT. LTD. 4 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF AP PEAL AND ADDITIONAL GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW CIT(A) ERRED IN OBSERVING THAT THE ASSESSING OFFICER COULD NOT INVOKE THE PROVISIONS OF SECTION 147 SINC E THE ASSESSMENT WAS EARLIER SOUGHT TO BE RECTIFIED U/S 1 54 ON THE SAME GROUND. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW CIT(A) ERRED IN CANCELLING THE ORDER U/S 147 /143(3) IGNORING THE FACT THAT ASSESSMENT CAN BE REOPENED U /S 147 IF THERE IS TANGIBLE MATERIAL ON RECORD TO THE EFFECT THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW CIT(A) ERRED IN CANCELLING THE ORDER 147/143 (3) IGNORING THE FACT THERE IS LEGAL BAR ON REOPENING ASSESSMENT U/S 147 SUBJECT TO THE FULFILMENT OF THE REQUISITE CONDITIO NS, MERELY BECAUSE THE ASSESSMENT WAS EARLIER SOUGHT TO BE REC TIFIED U/S 154 OF THE ACT. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ADDITIONAL GROUNDS: 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACT S OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE H AS RECONCILED THE DIFFERENCE OF RS. 13,33,144/- BETWEE N THE AMOUNTS APPEARING IN THE TDS CERTIFICATES AND THOSE REFLECTED AS GROSS RECEIPTS. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED. 6. AT THE TIME OF HEARING THE LD. D.R. SUBMITS THAT SINCE THE ASSESSEE HAS FAILED TO RECONCILE THE DIFFERENCE BETWEEN THE AMOUNT APPEARING IN ITA NO.1871/MUM/2010 DAMODAR SHANTARAM & CO. PVT. LTD. 5 THE TDS CERTIFICATE AND THOSE REFLECTED AS GROSS RE CEIPTS IN THE BOOKS OF ACCOUNT, THE LD. CIT(A) WAS NOT JUSTIFIED IN OBSERV ING THAT THE A.O. COULD NOT INVOKE THE PROVISIONS OF SECTION 147 OF THE ACT SINCE THE ASSESSMENT WAS ALREADY SOUGHT TO BE RECTIFIED U/S 154 OF THE A CT ON THE SAME GROUND. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE A.O. BE RESTORED. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WHILE STRONGLY RELYING ON THE APPELLATE ORDER ON THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE A.O. U/S 154 OF THE ACT SUB MITS THAT SINCE THE LD. CIT(A) IN THE SAID ORDER AFTER CONSIDERING THE RECONCILIATION STATEMENT FILED BY THE ASSESSEE APPEARING AT PAGE 32 TO 34 OF THE ASSESSEES PAPER BOOK HAS CANCELLED THE ORDER PASSED BY THE A.O. U/S 154 OF THE ACT AND THE DEPARTMENT HAS NOT FILED ANY SECOND APPEAL BEFO RE THE TRIBUNAL AGAINST THE SAID ORDER, IT MEANS THAT THE DEPARTMEN T HAS ACCEPTED THE ORDER PASSED BY THE LD. CIT(A), THEREFORE, THE PRO CEEDINGS INITIATED UNDER SECTIONS 147/148 FOR THE SAME REASON ARE BAD IN LAW AND HENCE THE ORDER PASSED BY THE LD. CIT(A) IN CANCELLING THE RE ASSESSMENT ORDER DTD. 31.12.2008 BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE F IND THAT THE FACTS ARE NOT IN DISPUTE IN AS MUCH AS IT IS ALSO NOT IN DISP UTE THAT THE ASSESSEE IN THE PROCEEDING INITIATED U/S 154 OF THE ACT, HAS RE CONCILED THE DIFFERENCE ITA NO.1871/MUM/2010 DAMODAR SHANTARAM & CO. PVT. LTD. 6 BEFORE THE A.O. VIDE STATEMENTS APPEARING AT PAGE 3 0-34 OF THE ASSESSEES PAPER BOOK THAT AS PER TDS CERTIFICATES THE AGENCY COMMISSION COMES TO RS. 435951/- (RS. 53096/- + RS. 382855/-) AGAINST W HICH THE ASSESSEE HAS SHOWN HIGHER INCOME OF RS. 744897/- AS INCOME F ROM SERVICE CHARGES AND MISCELLANEOUS INCOME IN THE PROFIT AND LOSS ACCOUNT. THUS, THE ASSESSEE HAS NOT ONLY RECONCILED THE DIFFERENCE BUT HAS ALSO SHOWN THE HIGHER INCOME. WE FURTHER FIND THAT THE LD. CI T(A) IN AN APPEAL FILED AGAINST THE ORDER PASSED U/S 154 , AFTER EXAMINING THE SAME HAS CANCELLED THE ORDER PASSED BY THE A.O. U/S 154 OF T HE ACT. SINCE THE ABOVE MATERIAL WAS BEFORE THE A.O. AND NO TANGIBLE MATERIAL HAS COME TO THE NOTICE OF THE A.O., AND KEEPING IN VIEW THAT TH E ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS NE CESSARY FOR ASSESSMENT FOR THE YEAR UNDER CONSIDERATION, WE ARE OF THE VIE W THAT THE ORDER PASSED BY THE A.O. U/S 148 IS NOT SUSTAINABLE IN LAW AND T HE LD. CIT(A) WAS FULLY JUSTIFIED IN CANCELLING THE SAME. THE GROUNDS TAKE N BY THE REVENUE INCLUDING THE ADDITIONAL GROUNDS ARE THEREFORE REJE CTED. 9. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED ON THIS 25 TH DAY OF APRIL, 2012. SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/- (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 25 TH APRIL, 2012. ITA NO.1871/MUM/2010 DAMODAR SHANTARAM & CO. PVT. LTD. 7 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 4 MUMBAI 4. COMMISSIONER OF INCOME TAX 2, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI