AB Visual Productions Pvt. Ltd., Cuttack V. ITO, Ward-2(2), Cuttack, Cuttack

ITA 189/CTK/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3855 (ITAT-CUTTACK)
• Duration Of Justice: 4 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-04-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 21-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Keywords: Reopening of assessment; Audit objection; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 194C; 147; 6

Judgement Text

1 ITA NO.189/CTK/2013 ASSESSMENT YEAR : 2005 - 06 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND KULDIP SINGH JUDICIAL MEMBER ITA NO.189/CTK/2013 ASSESSMENT YEAR : 2005 - 06 AB VISUAL PRODUCTIONS PVT LTD., GAYATRI SALES AND SUPPLY COMPLEX, MADHUPATNA, CUTTACK VS. ITO, WARD 2(2), CUTTACK PAN/GIR NO. AAHFA 2005 J (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI SANDEEP KUMAR JENA, AR REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 17 /04/ 2017 DATE OF PRONOUNCEMENT : 21 /04/ 2017 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - CUTTACK, DATED 7.12.2012 FOR THE ASSESSMENT YEAR 2005 - 06 . 2. THE FIRST ISSUE IS THAT THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT FOR DISALLOWANCE OF EXPENSES BY INVOKING SECTION 40(A)(IA) OF THE ACT BASED ON AN AUDIT OBJECTION WAS BAD IN LAW. 3. AT THE TIME OF HEARING, LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE ARGUED THAT THE ASSESSEE FILED THE RETURN OF INCOME FOR ASSESSMENT YEAR 2 ITA NO.189/CTK/2013 ASSESSMENT YEAR : 2005 - 06 20 05 - 06 ON 31.10.2005 SHOWING TOTAL INCOME OF RS.4,26,320/ - . THE RETURN WAS PROCESSED U/S.143(1) ON 14.3.2006. NO NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE. 4. LATER ON, THE ASSESSING OFFICER ON VERIFICATI ON OF THE PROFIT & LOSS ACC OUNT FOUND THAT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.1,11,24,614/ - TOWARDS PAYMENT OF SERIAL PRODUCERS (SSP). BUT IN THE TAX AUDIT REPORT, THE STATUTORY AUDITORS HAD NOT MENTIONED ABOUT TDS FROM SUCH PAYMENT U/S.194C. THEREFORE, THERE WAS UNDERASSE SSMENT OF INCOME OF RS.1,11,24,614/ - DUE TO NON - DISALLOWANCE OF THIS EXPENDITURE UNDER SECTION 40(A)(IA) AND CONSEQUENT SHORT CHARGE OF TAX OF RS.57.95 LAKHS INCLUDING INTEREST OF RS.1.29 LAKHS. THEREFORE, NOTICE U/S.148 OF THE ACT WAS ISSUED AND SERVED O N THE ASSESSEE ON 22.2.2011. HE ARGUED THAT AFTER PROCESSING OF THE RETURN OF INCOME UNDER SECTION 143(1) OF THE ACT, NO NEW MATERIAL CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICER, WHICH WOULD TRIGGER THE PROCEEDINGS UNDER SECTION 147 OF THE ACT FOR REO PENING OF ASSESSMENT ON THE GROUND OF ESCAPEMENT OF INCOME CHARGEABLE TO TAX. HE ARGUED THAT THE TAX AUDIT REPORT WAS FILED WITH THE RETURN OF INCOME BY THE ASSESSEE. BASED ON THE VERY SAME TAX AUDIT REPORT, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT TDS FROM THE EXPENDITURE OF RS.1,11,24,614/ - TOWARDS PAYMENT TO SERIAL PRODUCERS. HENCE, THE SAME WAS LIABLE TO DISALLOWED U/S.40(A)(IA) OF THE ACT AND, THEREFORE, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT WAS 3 ITA NO.189/CTK/2013 ASSESSMENT YEAR : 2005 - 06 ARGUED THAT THIS AMOUNT S TO CHANGE OF OPINION WHICH WAS NOT PERMISSIBLE IN LAW. FOR THIS, HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., 320 ITR 561 (SC). 5. HE FURTHER ARGU ED THAT AS PER FORM 3CD PART 21 (B), THE TAX AUDITOR WAS REQUIRED TO STATE IN HIS REPORT THE AMOUNT INADMISSIBLE U/S 40(A) OF THE ACT. THE ASSESSING OFFICER IN HIS ORDER HAS STATED THAT IN THE TAX AUDIT REPORT, THE AUDITORS HAVE NOT MENTIONED ABOUT TAX DE DUCTED AT SOURCE FROM THE PAYMENT OF RS.1,11,24,614/ - U/S.194C OF THE ACT. THEREFORE, HE PRESUMED THAT NO TAX WAS DEDUCTED FROM THE SAME AND EXPENDITURE WAS NOT ALLOWABLE U/S.40(A)(IA) OF THE ACT. HE POINTED OUT THAT THE REQUIREMENT AS PER FORM 3CD OF TH E AUDITOR WAS THAT HE HAS TO POINT OUT THE AMOUNT INADMISSIBLE U/S.40(A) OF THE ACT. THERE IS NO REQUIREMENT FOR THE AUDITORS TO STATE WHETHER TDS WAS DEDUCTED FROM THE PAYMENT MADE BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER HAS MISREAD THE PROVIS IONS OF FORM 3CD. 6. LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT HE HAS TAKEN INVESTIGATION O F THE ASSESSMENT RECORDS WHEREFROM , IT IS SEEN THAT THERE WAS AN AUDIT OBJECTION WITH REMEDIAL ACTION, WHICH READS AS UNDER: GIST OF OBJECTION : THE ASSESSEE HAD CLAIMED EXPENDITURE TO THE EXTENT OF RS 1.11 CRORE TOWARDS PAYMENT OF TELEVISION SERIAL PRODUCTION COST. IN THE TAX AUDIT REPORT THE STATUTORY AUDITOR HAVE NOT MENTIONED ABOUT TAX DEDUCTED AT SOURCE FROM SUCH PAYMENTS U /S 194C OF THE IT. ACT 1961. THE AO HAD NOT APPLIED 4 ITA NO.189/CTK/2013 ASSESSMENT YEAR : 2005 - 06 THE PROVISIONS OF SECTION 40 (A) (IA) OF THE IT.ACT IN RESPECT OF SUCH EXPENDITURE OF RS.1.11 CRORES. CONSEQUENTIAL SHORT CHARGE OF TAX IS RS.57.95 LAKHS INCLUDING INTEREST OF RS.1.29 LAKHS. REMEDIAL A CTION POSSIBLE WITH LIMITATION SUGGESTED FURTHER ON VERIFICATION OF RECORD FOR THE AY - 2005 - 06 FOR THE SAID ASSESSEE IT IS FOUND THAT THE PAYMENTS TO SERIAL PRODUCERS (SSP) IS RS 1,11,24,614/ - . NO SCRUTINY ASSESSMENT HAS BEEN MADE FOR TH E ASST YEAR 2005 - 06 . NO INFORMATION IS AVAILABLE IN RECORD TO SUGGEST DEDUCTION OR NON DEDUCTION AT SOURCE ON THE PAYMENT TO SSPS. THE SAME MAY BE VERIFIED IF THE CASE IS RECORDED U/S 147. 7. HENCE, IT WAS HIS SUBMISSION THAT AS THE REOPENING OF ASSESSMENT WAS BASED ON AN AUDIT OBJECTION AND NOT ON THE INDEPENDENT INFORMATION OF THE ASSESSING OFFICER HIMSELF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THEREFORE, THE REOPENING OF ASSESSMENT WAS BAD IN LAW. FOR THIS, HE RELIED ON THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF CIT VS. LUCAS TVS LTD., (2011) 249 ITR 306 (SC) WHERE, IT WAS HELD THAT APART FROM THE INFORMATION FURNISHED BY THE AUDIT PARTY, THE INCOME TAX OFFICER HAD NO OTHER INFORMATION FOR REOPENING THE ASSESSMENT U/S.147(B) OF I.T.ACT, 1961 THAT THE OPINION OF THE AUDIT PARTY WAS TO THE EFFECT THAT THE INCOME TAX OFFICER FAILED TO APPLY SECTION 35 TO THE FACTS OF THE CASE, AND THAT THIS WOULD AMOUNT TO POINTING OUT THE LAW AND THE INTERPRETATION OF THE PROVISIONS OF SECTION 35, WHICH WAS CLEA RLY BARRED IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF INDIAN AND EASTERN NEWSPAPER SOCIETY VS CIT (1979) 119 ITR 996 (SC). 8. ON THE OTHER HAND, LD DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF LOWER AUTHORITIES. 5 ITA NO.189/CTK/2013 ASSESSMENT YEAR : 2005 - 06 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, NOTICE U/S.148(2) OF THE ACT WAS ISSUED ON 22.2.2011 FOR THE ASSESSMENT YEAR 2005 - 06. THE REASONS FOR ISSUANCE OF NOTICE U/S.148(2) READS AS UNDER: SUBSEQUENTLY, ON VERIFICATION OF RECORD AND PROFIT & LOSS ACCOUNT, IT IS APPARENT THAT THE ASSESSEE HAS CLAIMED EXPENDITURE TO THE TUNE OF RS.1,11,24,614/ - TOWARDS PAYMENT TO SERIAL PRODUCERS 9SSP). BUT IN THE TAX AUDIT REPORT, THE STATU TORY AUDITORS HAVE NOT MENTIONED ABOUT TAX DEDUCTED AT SOURCE FROM SUCH PAYMENT U/S.194C OF THE I.T.ACT, 1961. AS SUCH THERE IS UNDERASSESSMENT OF INCOME OF RS.1,11,24,614/ - DUE TO NON - DISALLOWANCE OF THIS EXPENDITURE UNDER SECTION 40(A)(IA) AND CONSEQUENT SHORT CHARGE OF TAX OF RS.57.95 LAKHS INCLUDING INTEREST OF RS.1.29 LAKHS. THEREFORE, ACTION U/S.147 OF THE I.T.ACT WAS INITIATED. NOTICE U/S.148 WAS ISSUED AND SERVED ON THE ASSESSEE ON 22.2.2011 HAVE REASON TO BELIEVE THAT RS.1,11,24,614/ - HAS ESCAPED ASSESSMENT FOR THE PREVIOUS YEAR 2005 - 06. 10. FROM A PERUSAL OF ABOVE RECORDING, IT IS EVIDENT THAT REASONS WERE RECORDED NOT ONLY AFTER ISSUANCE OF NOTICE U/S.148 BUT ALSO AFTER SERVICE OF SUCH NOTICE. THE ASSESSING OFFICER HIMSELF IN HIS RECORDING HAS STATED THAT THEREFORE, ACTION U/S.147 OF THE I.T.ACT WAS INITIATED. NOTICE U/S.148 WAS ISSUED AND SERVED ON THE ASSESSEE ON 22.2.2011 HAVE REASON TO BELIEVE THAT RS.1,11,24,614/ - HAS ESCAPED ASSESSMENT FOR THE PREVIOUS YEAR 2005 - 06. 11. SECTION 148( 2) READ AS UNDER: THE ASSESSING OFFICER SHALL, BEFORE ISSUING ANY NOTICE UNDER SECTION, RECORD HIS REASONS FOR DOING SO. 12. A PERUSAL OF THE ABOVE PROVISIONS SHOW S THAT IT IS MANDATO RY FOR THE ASSESSING OFFICER TO RECORD REASONS AND THEREAFTER ISSUE N OTICE U/S.148 OF 6 ITA NO.189/CTK/2013 ASSESSMENT YEAR : 2005 - 06 THE ACT. THE REASONS CANNOT BE RECORDED SUBSEQUENTLY TO SUPPORT THE NOTICE U/S.148 OF THE ACT, WHICH HAS BEEN ALREADY ISSUED. THUS, WE FIND THAT NO VALID REASON IS RECORDED BEFORE ISSUANCE OF NOTICE U/S.148 OF THE ACT. THE REASONS RECO RDED SUBSEQUENT TO ISSUE OF NOTICE CANNOT BE A VALID COMPLIANCE OF PROVISIONS OF SECTION 148(2) OF THE ACT. 13. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, THE NOTICE ISSUED U/S.148 OF THE ACT ON 22.2.2011 WAS BAD IN LAW AND INVALID AND CONSEQUENTLY THE IMPUGNED ORDER OF REASSESSMENT IS NOT TENABLE. WE, THEREFORE, QUASH THE IMPUGNED REASSESSMENT ORDER . 14. IN VIEW OF OUR ABOVE DISCUSSION, THE OTHER ARGUMENTS ADVANCED BY THE LD A.R. OF THE ASSESSEE REGARDING ISSUANCE OF NOTICE NOT BASED ON FRESH TANG IBLE MATERIAL COMING TO THE NOTICE OF THE ASSESSING OFFICER AND REGARDING MISREADING OF THE AUDIT REPORT E TC ARE NOT REQUI RED TO BE ADJUDICATED BECAUSE THEY HAVE BECOME ACADEMIC IN NATURE. THUS, GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 15. IN THE RESU LT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON 21 /04/2017 IN THE PRESENCE OF PARTIES. SD/ - SD/ - (KULDIP SINGH) ( N.S SAINI) JUDICIAL MEMBER A CCOUNTANT MEMBER CUTTACK; DATED 21 /04/2017 B.K.PARIDA, SPS 7 ITA NO.189/CTK/2013 ASSESSMENT YEAR : 2005 - 06 COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : AB VISUAL PRODUCTIONS PVT LTD., GAYATRI SALES AND SUPPLY COMPLEX, MADHUPATNA, CUTTACK 2. THE RESPONDENT. ITO, WARD 2(2), CUTTACK 3. THE CIT(A) CUTTACK 4. PR.CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//