Shri. Kanthula Ravishankar, Bangalore V. Assistant Commissioner of Income-Tax, Bangalore

ITA 1897/BANG/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5659 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 11-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH
• Assessee Lawyers: A C RAJU
• Keywords: Opportunity of being heard; Deemed to accrue or arise in india

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1897/B ANG/2016 (ASST. YE AR 2012-13) KANTHULA RAVISHANKER, RAVSHAN NO.7, BRUTON ROAD, BANGALORE. . APPELLANT VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(3)(1), BANGALORE . RESPONDENT APPELLANT BY : SHRI A.C R AJU, C.A RESPONDENT BY : SHRI B.R RAM ESH, CIT DATE OF HEARING : 03-1-2018 DATE OF PRONOUNCEMENT : 19-1-2018 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) 7, BANGALORE DATED 30/8/2016 FOR ASST. YEAR 2012-13. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UND ER:- 2.1 THE ASSESSEE, PROP. K.K CORPORATION, ENGAGED IN BUSINESS AS SELLING AGENTS FOR M/S RAYMONAL LTD., PRODUCTS FOR THE STATES OF ITA NO.1 897/B/16 2 KARNATAKA GOA, FILED HIS RETURN FOR ASST. YEAR 2012 -13 ON 30/9/2012 DECLARING INCOME OF RS.3,92,56,910/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3 ) OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT), WHEREIN THE ASS ESSEES INCOME WAS DETERMINED AT RS.3,97,60,968/- IN VIEW OF AN ADDITI ON OF RS.5,04,063/-U/S 198 OF THE ACT ON ACCOUNT OF TDS C REDITED UPTO 31/3/2012. ON APPEAL, THE LD CIT(A) DISMISSED THE ASSESSEES APPEAL VIDE ORDER DATED 30/8/2016. 3.1 AGGRIEVED BY THE ORDER OF THE LD CIT(A)-7, BANG ALORE DATED 30/8/2016 FOR ASST. YEAR 2012-13, THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL, WHEREIN THE FOLLOWING GROUNDS ARE RAISED:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -7, BANGALORE IS OPPOSED TO LAW AND F ACTS OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (A) IS NO T CORRECT IN HOLDING THAT TAX DEDUCTED IS DEEMED INCO ME UNDER SECTION 198 OF THE INCOME TAX ACT, 1961 AND ADDING THE TAX DEDUCTED AT SOURCE AS INCOME OF THE APPELLANT. 3.2 THE SOLE ISSUE RAISED IN THE GROUNDS (SUPRA) FO R CONSIDERATION BEFORE US IS AS TO WHETHER THE ACTIONS OF THE AUTHO RITIES BELOW WERE CORRECT IN HOLDING THAT THE TDS OF RS.5,04,063/- IS DEEMED INCOME U/S 198 OF THE ACT AND ADDING THE TDS AS INCOME OF THE ASSESSEE. ITA NO.1 897/B/16 3 3.3 BEFORE US, THE LD AR FOR THE ASSESSEE PUT FORTH ORAL SUBMISSIONS BEFORE THE BENCH WHICH WERE A REITERATION OF THE WR ITTEN SUBMISSIONS DATED 3/1/2018 WHICH ARE EXTRACTED BELOW:- 2. THE APPELLANT IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING AND FILED THE RETURN OF INCOME AS MENTIO NED ABOVE. 3. THE APPELLANT IS A SELLING AGENT OF M/S. RAYMOND LTD., THE RAYMOND LIMITED BEING A COMPANY REGISTERED UNDE R THE COMPANIES ACT, 1956 IS FOLLOWING THE MERCANTILE BASIS OF ACCOUNTING. SINCE, THE APPELLANT IS FOLLOWING CA SH BASIS OF ACCOUNTING THE INCOME RECEIVED DURING THE YEAR I S OFFERED FOR TAX AS AGAINST THE ACCRUAL BASIS OF INC OME. 4. WHILE FILING THE RETURN OF INCOME THE APPELLANT HAS SHOWN THE DETAILS OF INCOME OFFERED AND TAXES APPLI CABLE CLAIMING THE TAX DEDUCTED AT SOURCE PROPORTIONATELY TO THE INCOME RECEIVED AND THE BALANCE OF TAX DEDUCTED AT SOURCE (TDS) RELATING TO THE INCOME NOT RECEIVED IS CARRIE D FORWARD FOR SUBSEQUENT YEARS FOR TAX CREDIT AS PROV IDED UNDER SECTION L99OFTHE INCOME TAX ACT, 1961 R.W.R 37BA(3)(I)(II). 5. THE LEARNED ASSESSING OFFICER WHILE COMPLETING T HE ASSESSMENT TREATED RS.5,04,063/- BEING THE UNUTILIZ ED TDS CARRIED FORWARD AS UNDISCLOSED TDS AND HAS INVOKED THE PROVISIONS OF SECTION 198 OF THE INCOME TAX ACT, 19 61 AND MADE ADDITIONS OF RS. 5,04,063/- DURING THE YEAR. ITA NO.1 897/B/16 4 6. THE LEARNED ASSESSING OFFICER HAS FAILED TO APPR ECIATE THAT UNDER SECTION 198, THE AMOUNT OF TAX DEDUCTED AT SOURCE UNDER THE PROVISIONS OF SECTION 192 TO 196D IS, SO FAR AS AFFECTED PERSON IS CONCERNED, TO BE TREATED AS INCOME RECEIVED BY HIM. FOR THE PURPOSE OF COMPUTAT ION OF HIS TOTAL INCOME, GROSS SALARY, GROSS DIVIDEND OR G ROSS INTEREST OR GROSS COMMISSION, ETC., I.E., THE AMOUN T ACTUALLY RECEIVED PLUS THE AMOUNT OF TAX DEDUCTED AT SOURCE WILL HAVE TO BE CONSIDERED. IN THE PRESENT CASE YOUR APP ELLANT HAS SHOWN THE INCOME AT GROSS INCLUDING THE TDS. TH E AMOUNT OF INCOME RECOGNISED ON GROSS BASIS HAS NEVE R BEEN A MATTER OF DISPUTE BY THE ASSESSING OFFICER. THE LEARNED ASSESSING OFFICER HAS ADDED THE TDS AS UNDISCLOSED TDS AMOUNTING TO RS.5,04,063/- INSTEAD OF IT BEING CARRY FORWARD TO THE YEAR IN WHICH INCOME IS RECEIVED. THE FACT IS THAT THERE IS NO UNDISCLOSED TDS, SINCE THE ASSESSEE HAS DISCLOSED THE INCOME ON RECE IPT BASIS & HAS CLAIMED TDS ONLY TO THE EXTENT OF THE I NCOME RECEIVED DURING THE YEAR. THE BALANCE OF TDS CANNOT BE TREATED AS UNDISCLOSED TDS. 7. WHILE FILING THE RETURN OF INCOME THE APPELLANT HAS SHOWN THE DETAILS OF INCOME OFFERED AND TAXES APPLI CABLE CLAIMING THE TAX DEDUCTED AT SOURCE PROPORTIONATELY TO THE INCOME RECEIVED AND THE BALANCE OF TAX DEDUCTED AT SOURCE (TDS) RELATING TO THE INCOME NOT RECEIVED IS CARRIE D FORWARD FOR SUBSEQUENT YEARS FOR TAX CREDIT AS PROV IDED ITA NO.1 897/B/16 5 UNDER SECTION 199 OF THE INCOME TAX ACT, 1961. THE DETAILS OF CLAIM OF TDS ARE AS BELOW: 8. IT IS SUBMITTED THAT THE ASSESSING OFFICER HAS A DDED TDS FROM RAYMONDS LTD AMOUNTING TO RS.5,04,063/- FOR TH E ASSESSMENT YEAR 2012-13 THE BREAK OF WHICH IS AS FO LLOWS : IT IS SEEN FROM THE ABOVE THAT THE ASSESSING OFFICE R HAS ADDED RS. 5,04,063/- TDS, AS UNDISCLOSED TDS WHICH IS ADDED TO INCOME. 9. THE LEARNED COMMISSIONER OF INCOME TAX (A) IS N OT CORRECT IN HOLDING THAT TAX DEDUCTED IS DEEMED INCO ME UNDER SECTION 198 OF THE INCOME TAX ACT, 1961 AND ADDING THE TAX DEDUCTED AT SOURCE AS INCOME OF THE APPELLANT. THE LEARNED CIT(A) IN PARA 5.2 OF THE APPELLATE ORD ER HAS STATED THAT: 'AS PER THE PROVISIONS OF SECTION 198 OF THE ACT AL L TAX DEDUCTED IS AN INCOME OF THAT PERSON. IT TALKS ABOU T THE ITA NO.1 897/B/16 6 INCOME BEING RECEIVED AND IT DOES NOT ASSIGN IT A S TATUE OF BEING ACCRUED. THE ACTUAL CREDIT OF THE TAX DEDU CTED AMOUNT IS GIVEN AS PER THE PROVISIONS OF SECTION 19 9 OF THE ACT. THE RULE 37BA FURTHER CLASSIFIES THAT THE CREDIT OF TAX DEDUCTED AT SOURCE SHALL BE ALLOWED ACROSS T HE YEARS IN PROPORTION TO THE ASSESSED INCOME. IN THE INSTANT CASE, THE A 0, AFTER GOING THROUGH THE RECONCILIATI ON DATA FURNISHED BY THE APPELLANT HAS FOUND THAT INCOME CORRESPONDING TO RS.4,53,657 IS NOT ASSESSED IN THE YEAR UNDER CONSIDERATION THUS IT WAS RIGHTFULLY ALLOWED TO BE CARRIED FORWARD TO THE SUBSEQUENT YEAR. SIMILARLY, ON THE BASIS OF SAME DATA PROVIDED BY THE APPELLANT, THE A 0 HAS FOUND THAT A SUM OF RS.5,04,063 NOT BEING A PART OF TOTAL TDS RS. 54,79,160/-. AS PER THE PROVISIONS OF SECTI ON 198, THE AMOUNT OF TDS IS DEEMED INCOME OF THE DEDUCTEE AND IN THE INSTANT CASE THE TDS AMOUNT WHI CH IS NOT DISCLOSED IS ACCORDINGLY, HAS TO BE ADDED AS IN COME OF THE APPELLANT. THE APPELLANT HAS TOTAL PRE-PAID TAX CREDIT OF RS. 1,20,29,159/- WHICH INCLUDES RS. 65,5 0,000/- AS ADVANCE TAX AND RS. 54,79,160/- OF TDS. THE A.O HAS ALLOWED THE CREDIT OF PREPAID TAXES OF RS. 1,20,79, 565/- INCLUDING PROPORTIONATE TDS ON THE AMOUNT OF UNDISCLOSED TDS WHICH IS TREATED AS INCOME OF THE I NSTANT YEAR. THE PROPORTIONATE CREDIT OF TDS AT 10% HAS BE EN ALLOWED BY THE A.O OUT OF THE UNDISCLOSED TDS OF RS . 5,04,063/-. THE AMOUNT OF THIS UNDISCLOSED TDS HAS ITA NO.1 897/B/16 7 NEVER BEEN A POINT OF DISPUTE. BUT THE ONLY CONTENT ION REGARDING THE AMOUNT IS REGARDING THE ADDITION TO T HE TOTAL INCOME.' SECTION 199 READS AS FOLLOWS: (1) ANY DEDUCTION MADE IN ACCORDANCE WITH THE FOREG OING PRO-VISIONS OF THIS CHAPTER AND PAID TO THE CENTRAL GOVERNMENT SHALL BE TREATED AS A PAYMENT OF TAX ON BEHALF OF THE PERSON FROM WHOSE INCOME THE WAS MADE , OR OF THE OWNER OF THE SECURITY, OR OF THE DEPOSITOR O R OF THE OWNER OF PROPERTY OR : E UNIT-HOLDER, OR OF THE SHAREHOLDER, AS THE CASE MAY BE. (2) ANY SUM REFERRED TO IN SUB-SECTION (1A) OF SECT ION 192 AND PAID TO THE CENTRAL GOVERNMENT SHALL BE AS THE TAX PAID ON BEHALF OF THE PERSON IN RESPECT OF WHOSE IN COME SUCH PAYMENT OF TAX HAS BEEN MADE. (3) THE BOARD MAY, FOR THE PURPOSES OF GIVING CREDI T IN RESPECT OF TAX DEDUCTED OR TAX PAID IN TERMS OF THE PROVISIONS OF THIS CHAPTER, MAKE SUCH RULES AS MAY BE NECESSARY, INCLUDING THE RULES FOR THE PURPOSES OF PING CREDIT TO A PERSON OTHER THAN THOSE REFERRED TO IN SUB- SECTION (1) AND SUB-SECTION (2) AND ALSO THE ASSESS MENT YEAR FOR WHICH SUCH CREDIT MAY BE GIVEN. RULE 37 BA READS AS FOLLOWS: (1) CREDIT FOR TAX DEDUCTED AT SOURCE AND PAID TO T HE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE PROVISION S OF CHAPTER XVII, SHALL BE GIVEN TO THE PERSON TO WHOM ITA NO.1 897/B/16 8 PAYMENT HAS BEEN MADE OR CREDIT HAS BEEN GIVEN (HEREINAFTER REFERRED TO AS DEDUCTEE) ON THE BASIS OF INFORMATION RELATING TO DEDUCTION OF TAX FURNISHED BY THE DEDUCTOR TO THE INCOME-TAX AUTHORITY OR THE PERSON AUTHORISED BY SUCH AUTHORITY. (2) .......................... (3) (I) CREDIT FOR TAX DEDUCTED AT SOURCE AND PAID TO THE CENTRAL GOVERNMENT, SHALL BE GIVEN FOR THE ASSESSME NT YEAR FOR WHICH SUCH INCOME IS ASSESSABLE. (II) WHERE TAX HAS BEEN DEDUCTED AT SOURCE AND PAID TO THE CENTRAL GOVERNMENT AND THE INCOME IS ASSESSABLE OVER A NUMBER OF YEARS, CREDIT FOR TAX DEDUCTED AT SOURCE SHALL BE ALLOWED ACROSS THOSE YEARS IN THE SAME PROPORTION IN WHICH THE INCOME IS ASSESSABLE TO TAX . (4) ...................................... THE ABOVE RULE PROVIDES FOR CONSIDERING THE TDS AS INCOME OF THE YEAR IN WHICH THE INCOME IS ASSESSABL E TO TAX. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT RS. 5,04,063/- IS RIGHTLY ASSESSED AS UNDISCLOSED TDS A ND TAXABLE UNDER SECTION 198. THE LEARNED CIT(A) HAS OVERLOOKED THE ASPECT OF INCOME RETURNED AT GROSS A S PER SECTION 198 AND TO THE EXTENT OF THE INCOME RECEIVE D DURING THE YEAR AND THERE IS NO UNDISCLOSED INCOME/ TDS. SECTION 198 IS NOT A COMPUTATION PROVISION. WHERE T HE ACCOUNTS ARE MAINTAINED UNDER CASH BASIS, THE INCOM E ITA NO.1 897/B/16 9 WILL BE TAXABLE ONLY ON RECEIPT BASIS. IN SUCH A CA SE, SECTION 198 HAS TO BE UNDERSTOOD AS APPLICABLE FOR THE YEAR IN WHICH SUCH INCOME IS ASSESSABLE. THERE IS N O BAR FOR THE TAX DEDUCTED TO BE REFUNDED IN THE YEAR OF DEDUCTION THOUGH THE RECEIPT IS NOT TAXED IN THE SA ME YEAR. IN VIEW OF THE ABOVE SUBMISSIONS, WE PRAY THAT THE ADDITIONS MADE BE DELETED. 3.4 PER CONTRA, THE LD DR RELIED ON AND SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. 3.5.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. AS CAN BE SEEN FROM THE ORDER OF ASSESSMENT (PAGE1/COLUMN 8) AND THE ASSESSEES SUBM ISSIONS, ADMITTEDLY, THE ASSESSEE IS FOLLOWING THE CASH SYST EMS OF ACCOUNTING AND PROFESSIONAL RECEIPTS ARE DECLARED ON RECEIPT B ASIS. FROM A PERUSAL OF THE RECONCILIATION STATEMENT OF PROFESSI ONAL RECEIPTS AND TDS FURNISHED, THE AO WAS OF THE VIEW THAT THE ASSE SSEE HAS NEITHER DECLARED THE INCOME OF THE CORRESPONDING AMOUNT NOR CLAIMED TDS OF RS.5,04,063/- PERTAINING TO IT AND PROCEEDED TO MAKE AN ADDITION THEREOF AS INCOME OF THE ASSESSEE AS PER THE PROVIS IONS OF SEC. 198 OF THE ACT. ON APPEAL, WE FIND THAT THE LD CIT(A) UPH ELD THE AOS ORDER, BRUSHING ASIDE THE ASSESSEES CONTENTIONS TH AT HIS CASE CLEARLY FALLS UNDER THE PROVISIONS OF SEC. 199(3) OF THE AC T (CREDIT FOR TAX DEDUCTED) R.W RULE 37BA(3)(II) OF THE IT RULES, 196 2 (CREDIT FOR TAX DEDUCTED AT SOURCE FOR THE PURPOSES OF SEC. 199) AN D THAT TDS CREDIT ITA NO.1 897/B/16 10 SHOULD BE ALLOWED ACROSS THOSE YEARS. WE ALSO OBSE RVED THAT THE LD CIT(A) DID NOT CONSIDER AND DISPOSE OFF THE ASSESS EES CLAIM THAT CARRY FORWARD OF EARLIER YEARS TDS COMMENCING FROM F.Y 2008-09 SHOULD BE ALLOWED FOR REDUCING YEARWISE UTILIZATION ADMITTEDLY MADE BEFORE HIM. 3.5.2 SECTION 199(3) OF THE ACT PROVIDES THAT THE CBDT, FOR THE PURPOSES OF GIVING CREDIT IN RESPECT OF TDS OR TAX PAID IN TERMS OF THE PROVISIONS OF CHAPTER XVII-B, MAKE SUCH RULES AS MA Y BE NECESSARY, INCLUDING FOR THE PURPOSES OF GIVING CREDIT TO A PE RSON OTHER THAN THOSE REFERRED TO IN SUB-SECTION (1) AND (2) AND AL SO THE ASST. YEAR FOR WHICH SUCH CREDIT MAY BE GIVEN. RULE 37BA(3)(II) O F THE RULES SPECIFIES THAT WHERE TDS HAS BEEN MADE AND PAID TO THE CENTRAL GOVERNMENT AND THE INCOME IS ASSESSABLE OVER A NUMB ER OF YEARS, CREDIT FOR TDS SHALL BE ALLOWED ACROSS THOSE YEARS IN THE SAME PROPORTION IN WHICH THE INCOME IS ASSESSABLE TO TAX . FROM A PERUSAL OF THE FACTS ON RECORD, AS DISCUSSED ABOVE, IT IS S EEN THAT THE LD CIT(A) IN THE IMPUGNED ORDER HAS BRUSHED ASIDE AND NOT EXAMINED OR CONSIDERED THE ASSESSEES CONTENTIONS THAT SINCE HI S CASE FALLS CLEARLY UNDER THE PROVISIONS OF SEC. 199(3) R.W. RULE 37BA( 3)(II), CARRY FORWARD OF EARLIER YEARS TDS COMMENCING FROM FINAN CIAL YEAR 2008-09 SHOULD BE ALLOWED FOR REDUCING YEAR WISE UT ILIZATION, BY GIVING CREDIT THEREOF ACROSS THE VARIOUS YEARS IN W HICH SUCH INCOME WAS ASSESSABLE TO TAX. THIS FACT ON RECORD, THAT T HE LD CIT(A) HAD FAILED TO ADDRESS THE AFORESAID CLAIM OF THE ASSESS EE, WAS NOT CONTROVERTED BEFORE US BY REVENUE. IN THIS FACTUAL AND LEGAL MATRIX OF THE CASE, AS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE AFORESAID ITA NO.1 897/B/16 11 CLAIM OF THE ASSESSEE AS LAID OUT IN HIS WRITTEN SU BMISSIONS (SUPRA) AND IN PARAS 3.5.1 AND 3.5.2 (SUPRA), THAT HIS CLAI M AND CASE IS SQUARELY COVERED BY THE PROVISIONS OF SEC. 199(3) R .W. RULE 37BA(3)(III) WHICH WAS NOT ADDRESSED BY THE LD CIT( A) IN THE IMPUGNED ORDER REQUIRES TO BE EXAMINED AND CONSIDER ED. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE FINDING OF THE AUTH ORITIES BELOW ON THIS ISSUE AND REMAND THE SAME FOR EXAMINATION, VERIFICA TION AND CONSIDERATION TO THE FILE OF THE LD CIT(A) AND FOR ADJUDICATION THEREON AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THE AO AND ALSO TO FILE DETAILS/SUBMISSIONS IN THIS REGARD. WE HOLD AND DIRECT ACCORDINGLY. CONSEQUENTLY GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 4. IN THE RESULT, THE ASSESSEES APPEAL FOR ASST. Y EAR 2012-13 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY, 2018 . SD/- SD/- (SUNIL KUMAR YADAV) (JASON P B OAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE DATED : 19/1/2018 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGAL ORE