ACIT, New Delhi V. M/s. Manish Jain, HUF, New Delhi

ITA 195/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6318 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJA
• Keywords: Audit objection; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 143(3); 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 195/DEL/2014 AY: 20 07-08 ACIT, VS MANISH JAIN, HUF CIRCLE-24(1), 13 TH FLOOR, C-1/51, E-2 BLOCK, CIVIC CENTRE, SAFDARJUNG DEVELOPMENT AREA, NEW DELHI. NEW DELHI. (PAN: AAEHM7211D) (APPELLANT) (RESPONDENT ) APPELLANT BY : SHRI P. DAMKANUNJA, SR. DR RESPONDENT BY : S/SHRI R.S. SINGHVI, SATYAJEET GOEL, CAS DATE OF HEARING: 05.01.2016 DATE OF PRONOUNCEMENT: 22.03.2016 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINS T THE IMPUGNED ORDER DATED 10.10.2013 PASSED BY THE LD. C IT(A)-XXIII, NEW DELHI FOR ASSESSMENT YEAR 2007-08. 2. THE BRIEF FACTS OF THE CASE ARE THAT RETURN DECL ARING INCOME OF RS. 1,68,29,330/- WAS FILED BY THE ASSESSEE ON 3 1.12.2007 WHICH WAS PROCESSED U/S 143(1) AND LATER SELECTED F OR SCRUTINY UNDER CASS AND ASSESSMENT PROCEEDINGS WERE COMPLETE D U/S 143(3) VIDE ORDER DATED 30.10.2009 AT THE RETURNED INCOME. I.T.A. NO. 195/D/2014 ASSESSMENT YEAR 2007-08 2 2.1 HOWEVER, CONSEQUENT UPON ASSESSMENT, IT WAS NOT ED BY THE ASSESSING OFFICER THAT ASSESSEE HAD DEBITED A SUM O F RS.61,24,658/- ON ACCOUNT OF COMMISSION PAID TO OVE RSEAS FOREIGN PARTIES ON WHICH NO TDS WAS DEDUCTED. KEEPI NG THIS FACT IN VIEW AND PROVISIONS OF THE ACT, ASSESSING OFFICE R INITIATED PROCEEDINGS U/S 147 OF THE ACT AND ISSUED NOTICE U/ S 148 ON 30.03.2012 WHICH WAS DULY SERVED UPON THE ASSESSEE. IN RESPONSE TO THE ABOVE NOTICE, ASSESSEE FILED LETTER DATED 17 LH APRIL, 2012 CONTENDING THEREIN THAT ORIGINAL RETURN FILED FOR THE YEAR UNDER CONSIDERATION MAY BE TREATED AS FILED IN RESPONSE TO NOTICE U/S 148. THEREAFTER, ASSESSING OFFICER ISSUE D STATUTORY NOTICES U/S 143(2)/142(1) OF THE ACT WHICH WERE DUL Y COMPLIED BY THE ASSESSEE FROM TIME TO TIME AND WRITTEN SUBMI SSIONS WERE FILED BEFORE THE ASSESSING OFFICER. HOWEVER, ASSESS ING OFFICER FOUND THE SUBMISSIONS OF THE ASSESSEE NOT CONVINCIN G AND DISALLOWED THE CLAIM OF THE ASSESSEE AND INVOKED TH E PROVISIONS OF SECTION 40(A)(IA) OF THE ACT MAKING AN ADDITION OF RS.61,24,658/- ON A/C OF COMMISSION PAID TO FOREIGN PARTIES WITHOUT DEDUCTING TAX AT SOURCE AND TAXABLE INCOME WAS COMPUTED AT RS.2,30,13,870/- AS AGAINST THE RETURNE D INCOME OF RS. 1,68,29,330/-. I.T.A. NO. 195/D/2014 ASSESSMENT YEAR 2007-08 3 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHEREIN THE APPEAL OF THE ASSESSEE WAS ALLOWED BY H OLDING THAT THE ISSUE OF NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 AND RE- OPENING OF THE ASSESSMENT U/S 147 WAS WITHOUT JURIS DICTION AND NULL AND VOID AB INITIO. 4. NOW, THE DEPARTMENT IS IN APPEAL BEFORE US AND H AS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD CIT(A) HAS ERRED IN HOLDING THAT THE ISSUE OF NOTICE U/S 1 48 AND REOPENING OF THE ASSESSMENT U/S 147 WAS WITHOUT JURISDICTION, NULL AND VOID AB-INITIO DESPITE THE F ACT THAT THE AO HAD BONAFIDE REASON TO BELIEVE THAT ASSESSEES I NCOME HAD ESCAPED ASSESSMENT IN VIEW OF ISSUE OF CIRCULAR DATED 22.10.2009 BY THE CBDT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 61,24,658 /- ON ACCOUNT OF COMMISSION PAID TO OVERSEAS FOREIGN PART IES ON WHICH TDS WAS DEDUCTED, BY WRONGLY RELYING ON CIRCU LAR NO. 786 DT. 7/2/86 OF CBDT, WHICH WAS ALREADY WITHDRAWN BY ISSUE OF CBDT CIRCULAR NO. 7/2009 DT 22.10.2009. 5. LD. DR RELIED AND SUPPORTED THE ORDER OF THE ASS ESSING OFFICER WHEREAS THE LD. AR PLACED HEAVY RELIANCE ON THE ORDER OF THE LD. CIT(A). 6. WE HAVE CONSIDERED THE FACTUAL MATRIX OF THE CAS E AND HAVE ALSO PERUSED THE IMPUGNED ORDER. IT IS OBSERVED THA T THE LD. CIT(A) HAS GIVEN A DETAILED FINDING ON THE ISSUE IN PARA 4.1 OF HIS I.T.A. NO. 195/D/2014 ASSESSMENT YEAR 2007-08 4 ORDER WHICH IS BEING REPRODUCED HEREUNDER FOR A REA DY REFERENCE:- 4.1 IN GROUND NOS. 1 & 2, THE APPELLANT HAS IMPUGN ED THE REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT BY ISSUE OF NOTICE U/S. 148. THE APPELLANT HAS SUBMITT ED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REO PENING THE ASSESSMENT U/S. 147 AS THERE WAS NO CASE OF INC OME ESCAPING ASSESSMENT. IT HAS FURTHER BEEN SUBMITTED THAT THE CASE HAS BEEN REOPENED ON THE BASIS OF ' A CHANGE OF OPINION ON THE PART OF THE AO AS THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING T HE TRUE AND RELEVANT PARTICULARS OF ITS INCOME DURING THE C OURSE OF ASSESSMENT U/S. 143(3). THE LD. AR OF THE APPELL ANT SUBMITTED THAT THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT U/S. 147 REVEAL THAT THERE WAS NO CASE OF ANY OMISSION OR FAILURE ON THE PART OF THE ASSESSEE IN FURNISHING FULL AND COMPLETE PARTICULAR S RELATING TO ITS INCOME. IT IS NOT EVEN THE CASE OF THE AO THAT THIS ISSUE WAS NOT EXAMINED DURING ORIGINAL PROCEEDINGS. THE ONLY ALLEGATION IN THE REASONS RECORDED FOR THE PURPOSE OF REASSESSMENT IS THAT TDS HAS NOT BEEN DEDUCTED ON THE PAYMENT OF COMMISSION TO OVERSEAS FOREIGN PARTIES. IT IS THUS EVIDENT THAT THE PROCEEDINGS U/S 148 HAD BEEN INITIATED MER ELY ON THE BASIS OF CHANGE OF OPINION. THE LD. AR HAS R ELIED UPON THE CASE OF CIT VS KELVINATOR OF INDIA LTD. 32 0 ITR 561 (SC), IN WHICH THE HON'BLE COURT HAS HELD THAT THE CONCEPT OF 'CHANGE OF OPINION MUST BE TREATED AS A N IN- BUILT TEST TO CHECK THE ABUSE OF POWER. HENCE, AFTE R 01.04.1989, THE ASSESSING OFFICER HAS POWER TO REOP EN THE ASSESSMENT, PROVIDED THERE IS 'TANGIBLE MATERIA L TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT AND REASONS RECORDED MUST HAVE A LINK WITH THE FORMATION OF BELIEF. THE LD. A R HAS ALSO RELIED UPON THE CASE OF M/S. REPLIKA PRESS PVT . LTD. AND ANR. VS. DCIT 92 DTR 153 (DEL). I HAVE CAREFULL Y PERUSED THE SUBMISSIONS OF THE APPELLANT AND THE ARGUMENTS PUT FORTH BY THE LD. AR. I HAVE CAREFULLY PERUSED THE ASSESSMENT RECORDS, WHEREIN I FIND THAT NOTICE U/S 142(1) OF THE ACT WAS ISSUED BY THE AO D URING I.T.A. NO. 195/D/2014 ASSESSMENT YEAR 2007-08 5 ORIGINAL ASSESSMENT PROCEEDINGS U/S. 143(3) ON 15.09.2009, WHEREIN THE AO HAD DIRECTED THE ASSESSE E TO FURNISH THE DETAILS OF SUNDRY CREDITORS VIDE POI NT NO. 10 AND TO PROVIDE DETAILS OF TDS DEDUCTED IN A GIVE N FORMAT VIDE POINT NO. 11. FURTHER, ANOTHER NOTICE U /S. 142(1) WAS ISSUED ON 07.10.2009, WHEREIN THE FIRST QUERY RAISED BY THE AO ITSELF DIRECTED THE ASSESSEE TO FURNISH COMPLETE PARTY-WISE DETAILS OF COMMISSION P AID IN A PARTICULAR FORMAT. THESE DETAILS WERE PROVIDED BY THE ASSESSEE VIDE LETTERS DT. 22.09.2009 AND 12.10.2009, WHEREIN THE ASSESSEE HAS CLEARLY INDICATED THAT COMMISSION OF RS.61,24,658/- HAS BEEN PAID TO M/S. ASHI COLLECTION FOR BOOKING ORDERS ON BEHALF OF THE ASSESSEE AND NO TDS HAS BEEN DEDUCTED THEREON. FURTHER, COMPLETE LEDGER ACCOUNT OF COMMISSION ON SALES (OVERSEAS) WAS SUBMITTED TO THE AO WHEREIN IT HAS BEEN CLEARLY SHOWN THAT ALL AMOUNTS HAVE BEEN PAID THROUGH BANK IN USD TO M/S. ASHI COLLECTIONS. THESE DETAILS WERE TAKEN INTO ACCOUNT BY THE AO BEFORE PASSING ORDER U/S. 143(3). THEREAFTER, AN INTERNAL AUDIT OBJECTION WAS RAISED DT. 03.11.2009 WHEREIN IT HAS BEEN STATED THAT NOTHING HAS BEEN PLACED ON RECORD TO PR OVE THAT TDS WAS NOT DEDUCTIBLE ON PAYMENT OF RS.61,24,658/- TOWARDS COMMISSION TO OVERSEAS FOREI GN PARTIES AND THEREFORE, IN VIEW OF SECTION 195(1) AN D SECTION 40(A)(IA), THIS AMOUNT SHOULD HAVE BEEN ADD ED BACK TO THE INCOME OF THE ASSESSEE. THE AO REPLIED TO THE AUDIT PARTY VIDE LETTER DT. 15/18.01.2010, QUOTING CBDT 'S CIRCULAR NO. 786 DT. 07.02.2000, AS PER WHI CH IT WAS CLARIFIED THAT WHERE THE NON-RESIDENT AGENT WAS OPERATING OUTSIDE THE COUNTRY AND NO PART OF ITS IN COME AROSE IN INDIA, PAYMENT MADE TO SUCH PARTIES WERE N OT TAXABLE IN INDIA AND THEREFORE NO TAX WAS DEDUCTIBL E U/S 195(1) OF THE ACT. THE AO THEREFORE, REQUESTED FOR THE AUDIT OBJECTION TO BE SETTLED. SUBSEQUENTLY, THERE WAS A CHANGE OF INCUMBENT AND THE NEW AO REOPENED THE ASSESSMENT GIVING THE REASONS THAT RS.61,24,658/- W AS DEBITED TO THE P&L A/C OF THE ASSESSEE TOWARDS COMMISSION TO OVERSEAS FOREIGN PARTIES AND THAT THE RE WAS NOTHING ON RECORD TO PROVE THAT TDS WAS NOT DEDUCTIBLE ON SUCH PAYMENTS U/S. 195(1). THEREFORE, IN I.T.A. NO. 195/D/2014 ASSESSMENT YEAR 2007-08 6 THE LIGHT OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE ENTIRE AMOUNT WAS REQUIRED TO BE ADDED BACK TO THE INCOME OF THE ASSESSEE. HOLDING THAT THE AMOUNT OF RS.61,24,658/- HAD ESCAPED ASSESSMENT, THE NEW INCUMBENT AO REOPENED THE ASSESSMENT U/S 147 AND ISSUED NOTICE U/S 148. IN MY CONSIDERED OPINION, TH E ABOVE SEQUENCE OF EVENTS CLEARLY INDICATE THAT ALL THE RELEVANT FACTS PERTAINING TO THE ISSUE WERE CLEARLY BROUGHT ON RECORD BY THE ASSESSEE DURING ORIGINAL ASSESSMENT U/S 143(3) AND THE AO AT THAT TIME HAD CLEARLY CONSIDERED THE ISSUE BEFORE PASSING THE ASSESSMENT ORDER. HE HAD ALSO REPLIED TO THE AUDIT MEMO QUOTING CIRCULAR NO. 786 DT. 07.02.2000 OF THE CBDT, REQUESTING FOR THE AUDIT OBJECTION TO BE DROP PED. THEREAFTER, THE REOPENING OF THE ASSESSMENT ON THE SAME GROUNDS TANTAMOUNTS TO CHANGE OF OPINION, WHICH I S NOT PERMITTED BY LAW AS PER THE JUDGMENT OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA). THEREFORE, I HOLD THAT THE ISSUE OF N OTICE U/S. 148 AND REOPENING OF THE ASSESSMENT U/S. 147 W AS WITHOUT JURISDICTION AND NULL AND VOID AB-INITIO. 7. IN OUR CONSIDERED OPINION, THE LD. CIT(A) HAS CO RRECTLY DEALT THE ISSUE BEFORE HIM AND HAS RIGHTLY HELD THAT IN T HE FACTS AND CIRCUMSTANCES OF THE CASE, THE RE-OPENING AND REASS ESSMENT WAS WITHOUT JURISDICTION AND VOID AB INITIO. WE FIND N O REASON TO INTERFERE WITH THE CONCLUSION AND ADJUDICATION OF T HE LD. CIT(A) AND WE UPHOLD THE SAME. 8. IN RESULT, THE APPEAL OF THE DEPARTMENT IS DISM ISSED. I.T.A. NO. 195/D/2014 ASSESSMENT YEAR 2007-08 7 ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND OF MARCH, 2016. SD/- SD/- (J.S. REDDY) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED: THE 22ND OF MARCH, 2016 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR