ACIT, Tambaram V. Jahan Leather Exports, CHENNAI

ITA 1962/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8209 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVASJCIT
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Additional evidence
• Section: 43B; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , .. ' #$,& '( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ITA NOS.1962 & 1963/MDS/2016 ASSESSMENT YEARS: 2009-10 & 2011-12 THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE -22, NO.7, RAMAKRISHNA STREET, WEST TAMBARAM, CHENNAI 600 045. V. M/S.JAHAN LEATHER EXPORTS, NO.103, BAZAAR STREET, PALLAVARAM, CHENNAI 600 045. PAN : AAEFJ3206B ( )* /APPELLANT) ( +,)* /RESPONDENT) ./ ITA NO.1964/MDS/2016 & CO NO.121/MDS/2016 - .- /ASSESSMENT YEAR : 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE -22, TAMBARAM. V. M/S.JAHAN LEATHER EXPORTS, NO.103, BAZAAR STREET, PALLAVARAM, CHENNAI 600 045. PAN : AAEFJ3206B ( )* /APPELLANT) ( +,)* /RESPONDENT/ CROSS OBJECTOR) ASSESSEE BY : SHRI A.S.SRIRAMAN, ADVOCATE DEPARTMENT BY : SHRI SHIVA SRINIVAS, JCIT ' /0& / DATE OF HEARING : 19.09.2016 12. /0& / DATE OF PRONOUNCEMENT : 28.10.2016 2 I.T.A. NO.1962, 1963 & 1964/MDS/2016 & C.O.NO.121/MDS/2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: ALL THE APPEALS OF THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE CIT (A) -10, CHENNAI DATED 29.03.2016 AND PERTAINS TO ASSESSMENT YEARS 2009-10, 2011-12 & 2012-13. THE ASSESSEE HAS FILED CROSS OBJECTION FOR THE ASSESSMENT YEAR 2012-13. THEREFOR E, WE HEARD ALL THE APPEALS OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE TOGETHER AND DISPOSING OFF THE SAME BY A COMMON ORDER. 2. SHRI SHIVA SRINIVAS, THE LEARNED DEPARTMENT REPR ESENTATIVE SUBMITTED THAT THE ASSESSEE PAID COMMISSION TO NON-RESIDENT W ITHOUT DEDUCTING TAX. THEREFORE, THE ASSESSING OFFICER BY APPLYING THE PR OVISIONS OF SECTION 40(A)(I) DISALLOWED THE PAYMENT OF COMMISSION FOR NON DEDUCT ION OF TAX AT SOURCE FOR ALL THE THREE ASSESSMENT YEARS UNDER CONSIDERATION. HOWEVER, THE CIT(A) AFTER CONSIDERING THE AGREEMENT SAID TO BE ENTERED INTO B Y THE ASSESSEE AND THE FOREIGN AGENT FOUND THAT THE COMMISSION PAID BY THE ASSESSEE TO NON-RESIDENT AGENT IS NOT TAXABLE IN INDIA. ACCORDINGLY, THE CIT (A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE LEARNED DEPARTME NT REPRESENTATIVE FURTHER SUBMITTED THAT THE SO CALLED AGREEMENT BETWEEN THE ASSESSEE AND THE NON- RESIDENT AGENT WAS NOT FILED BEFORE THE ASSESSING O FFICER. IN FACT, THE ASSESSING OFFICER SPECIFICALLY OBSERVED IN THE ORDER THAT THE AGREEMENT SAID TO BE ENTERED INTO BETWEEN THE ASSESSEE AND THE NON-RESIDENT AGEN T WAS NOT FILED BEFORE 3 I.T.A. NO.1962, 1963 & 1964/MDS/2016 & C.O.NO.121/MDS/2016 HIM. THE CIT(A) BY ADMITTING THE ADDITIONAL EVIDENC E FILED BY THE ASSESSEE ALLOWED THE CLAIM WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSING OFFICER. THEREFORE, ACCORDING TO THE LEARNED DEPARTMENT REPR ESENTATIVE, THERE IS A CLEAR VIOLATION OF THE RULE 46A OF THE INCOME TAX RULES. 3. THE LEARNED DEPARTMENT REPRESENTATIVE FURTHER SU BMITTED THAT WHENEVER THE CIT(A) ADMITS ADDITIONAL EVIDENCE , AN OPPORTUNITY SHALL BE GIVEN TO THE ASSESSING OFFICER TO CONTROVERT THE CONTENT OF THE ADDITIONAL EVIDENCE. THE CIT(A) WITHOUT GIVING ANY SUCH OPPORTUNITY TO T HE ASSESSING OFFICER SIMPLY ALLOWED THE CLAIM OF THE ASSESSEE. THEREFORE, THE M ATTER MAY BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. 4. ON THE CONTRARY, SHRI A.S.SRIRAMAN, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT FILED THE AGREEMENT BEFORE THE ASSESSING OFFICER. IN FACT, THE ASSESSING OFFICER O BSERVED THAT IN THE IMPUGNED ASSESSMENT ORDER THAT THE COPY OF THE AGREEMENT EXE CUTED BY THE ASSESSEE AND THE FOREIGN AGENT WAS NOT FURNISHED. HOWEVER, T HE SAME WAS FURNISHED BEFORE THE CIT(A). THE CIT(A) AFTER EXAMINING THE A GREEMENT FILED BY THE ASSESSEE ALLOWED THE CLAIM OF THE ASSESSEE. PLACING RELIANCE ON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE O CIT VS. FAIZ AN SHOES PVT.LTD. REPORTED IN (2014) 367 ITR 0155 (MAD). THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT WHEN THE ASSESSEE ENTERED INTO AN AGENCY AGREE MENT WITH THE NON- RESIDENT TO SECURE ORDERS FROM VARIOUS CUSTOMERS FO R EXPORT OF GOODS TO FOREIGN 4 I.T.A. NO.1962, 1963 & 1964/MDS/2016 & C.O.NO.121/MDS/2016 CURRENCY, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX. THE MADRAS HIGH COURT FOUND THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX ON TH E COMMISSION PAID TO THE NON- RESIDENT AGENT. IN VIEW OF THIS JUDGMENT OF MADRAS HIGH COURT, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, ON MERIT, THE ASS ESSEE IS HAVING A GOOD CASE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ON THE BA SIS OF THE COPY OF THE AGENCY AGREEMENT FILED BY THE ASSESSEE, THE CIT(A) CONCLUDED THAT THE COMMISSION PAID TO NON-RESIDENT AGENTS ARE NOT TAXA BLE IN INDIA. HOWEVER, THE COPY OF THE SAID AGREEMENT FOR PAYMENT OF AGENCY CO MMISSION IS NOT FILED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAD NO BENEFIT OF GOING THROUGH THE SO CALLED AGREEMENT. THE CIT(A) ON THE BASIS OF THE AGREEMENT SAID TO BE FILED BY THE ASSESSEE ALLOWED THE CLAIM OF THE ASSESSEE WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER. 6. RULE 46A CLEARLY SAYS THAT WHENEVER AN ADDITIONA L EVIDENCE WAS ADMITTED BY THE CI T(A), AN OPPORTUNITY SHALL BE GI VEN TO THE ASSESSING OFFICER TO CONTROVERT THE CONTENTS OF THE ADDITIONAL EVIDENCE. IN THIS CASE, THE CIT(A) HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSING OFFICER AFTER ADMISSION OF THE ADDITIONAL EVIDENCE. 7. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE FAIZAN SHOES PVT.LTD. CITED SUPRA . ON MERIT, THE MADRAS HIGH COURT FOUND THAT WHEN THE SERVICES ARE RENDERED OUT SIDE THE COUNTRY BY THE NON-RESIDENT AGENT, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX ON THE 5 I.T.A. NO.1962, 1963 & 1964/MDS/2016 & C.O.NO.121/MDS/2016 COMMISSION PAID TO NON-RESIDENT AGENT. IN THE CASE BEFORE US, THE ASSESSING OFFICER HAS NO OCCASION TO EXAMINE THE COPY OF THE AGREEMENT. IN OTHER WORDS, THE ASSESSING OFFICER HAS NO OCCASION TO EXAMINE TH E SERVICES SAID TO BE PROVIDED BY THE NON-RESIDENT AGENT. THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT THE JUDGMENT OF THE MADRAS HIGH COURT IN FAIZA N SHOES PVT.LTD. (SUPRA) WOULD BE APPLICABLE IF THE SERVICES RENDERED BY THE NON-RESIDENT AGENT IS SIMILAR TO ONE RENDERED BY THE AGENT IN FAIZAN SHOE S PVT.LTD. (SUPRA). THEREFORE, FOR THE PURPOSE OF EXAMINING THE NATURE OF SERVICES RENDERED BY THE NON-RESIDENT AGENT, THE ASSESSING OFFICER HAS TO NE CESSARILY EXAMINE THE SO CALLED AGREEMENT SAID TO BE ENTERED INTO BY THE ASS ESSEE AND THE NON-RESIDENT AGENT. IN THE CASE BEFORE US, THE CIT(A) ADMITTED T HE ADDITIONAL EVIDENCE AND HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSING OFFI CER. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE WAS A CLEAR VIOLATION OF RULE 46A OF THE INCOME TAX RULES. THEREFORE, AS RIGHTLY SUBMITTED B Y THE DEPARTMENT REPRESENTATIVE, AN OPPORTUNITY SHALL BE PROVIDED TO THE ASSESSING OFFICER TO EXAMINE THE SO CALLED AGREEMENT SAID TO BE ENTERED INTO BY THE ASSESSEE AND THE NON-RESIDENT AGENT. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE DISALLOWANCE OF COMMISSION PA ID TO NON-RESIDENT AGENT IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE- EXAMINE THE MATTER AFRESH AFTER CONSIDERING THE SO CALLED AGREEMENT BETWEEN THE ASSESSEE AND THE NON-RESIDENT AGENT AND THEREAF TER DECIDE THE SAME IN THE 6 I.T.A. NO.1962, 1963 & 1964/MDS/2016 & C.O.NO.121/MDS/2016 LIGHT OF THE JUDGMENT OF THE MADRAS HIGH COURT IN F AIZAN SHOES PVT.LTD. (SUPRA) AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE . 8. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AR E ALLOWED FOR STATISTICAL PURPOSES. 9. NOW COMING TO THE CROSS OBJECTION OF THE ASSESSE E, THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF EMPLOYE ES CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI. THE ASSESSING OFFICER DISAL LOWED THE EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND ON THE GROUND T HAT THE ASSESSEE COULD NOT DEPOSIT THE SAME ON OR BEFORE THE DUE DATE PROVIDED UNDER THE EMPLOYEES PROVIDENT FUND ACT. ACCORDING TO THE LEARNED COUNSE L FOR THE ASSESSEE, SECTION 43B OF THE INCOME TAX ACT PROVIDES FOR PAYMENT OF C ONTRIBUTION TO PROVIDENT FUND AND ESI, BEFORE DUE DATE FOR FILING OF THE RET URN OF THE INCOME UNDER SECTION 139 (1) OF THE ACT. IN THE CASE BEFORE US, THE ASSESSEE HAS PAID THE EMPLOYEES AND EMPLOYERS CONTRIBUTION TOWARDS PROVI DENT FUND AND ESI BEFORE THE DUE DATE FOR FILING OF RETURN OF INCOME UNDER S ECTION 139(1) OF THE ACT. THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN CONFIRMIN G THE ORDER OF THE ASSESSING OFFICER. THE LEARNED REPRESENTATIVE PLACED HIS RELI ANCE ON THE UNREPORTED JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF CI T VS. M/S.INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT.LTD. IN TAX CASE (APPEAL) NOS. 585 AND 586 OF 2015 DATED 24.07.2015. THE ASSESSEE HAS FILED THE C OPY OF THE UNREPORTED JUDGMENT OF THE MADRAS HIGH COURT. 7 I.T.A. NO.1962, 1963 & 1964/MDS/2016 & C.O.NO.121/MDS/2016 10. ON THE CONTRARY, SHRI SHIVA SRINIVAS, THE LEARN ED DEPARTMENT REPRESENTATIVE SUBMITTED THAT THE EMPLOYEES CONTRI BUTION TO PROVIDENT FUND AND ESI HAS TO BE DEPOSITED BY THE ASSESSEE WITHIN THE DUE DATE PRESCRIBED IN THE RELEVANT PROVISIONS OF LAW. EMPLOYEES CONTRIBU TION IS COLLECTED BY THE ASSESSEE FROM THE RESPECTIVE EMPLOYEES AND THEREFOR E, THE SAME HAS TO BE PAID WITHIN THE DUE DATE PROVIDED UNDER THE RELEVAN T PROVISIONS OF LAW. THE ASSESSEE AFTER COLLECTING THE MONEY FROM THE RESPEC TIVE EMPLOYEES TOWARDS PROVIDENT FUND AND ESI CONTRIBUTION MISUSED THE SAM E WITHOUT PAYING THE SAME TO THE GOVERNMENT ACCOUNT. SINCE THE ASSESSEE COULD NOT PAY THE MONEY WHICH WAS COLLECTED FROM THE RESPECTIVE EMPLOYEES T OWARDS PROVIDENT FUND AND ESI CONTRIBUTION, THE CIT(A) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSES SING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE TOWARDS THE EMPLOYEES CONTRI BUTION TO PROVIDENT FUND AND ESI ON THE GROUND THAT THE ASSESSEE AFTER COLLE CTING MONEY FROM THE RESPECTIVE EMPLOYEES COULD NOT PAY THE SAME WITHIN THE TIME LIMIT PRESCRIBED UNDER THE RELEVANT PROVISIONS OF LAW. THE EXACT DAT E ON WHICH THE AMOUNT WAS PAID, IS NOT AVAILABLE ON RECORD. 12. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS O F SECTION 43B OF THE ACT AND ALSO THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. 8 I.T.A. NO.1962, 1963 & 1964/MDS/2016 & C.O.NO.121/MDS/2016 M/S.INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT.LT D. (SUPRA). THE MADRAS HIGH COURT AFTER RELYING UPON THE JUDGMENT OF THE APEX C OURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. REPORTED IN 319 ITR 306 AND AL SO THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. AMIL LTD. REPORTE D IN 321 ITR 508 FOUND THAT IN CASE THE ASSESSEE DEPOSITED THE EMPLOYEES CONTRI BUTION TOWARDS PROVIDENT FUND AND ESI AFTER THE DUE DATE PRESCRIBED UNDER TH E RELEVANT ACT BUT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME UNDER IN COME TAX ACT, NO DISALLOWANCE COULD NOT BE MADE IN VIEW OF SECTION 4 3B OF THE ACT. THIS JUDGMENT OF THE MADRAS HIGH COURT IS BINDING ON ALL THE AUTHORITIES IN THE STATE OF TAMIL NADU AND PONDICHERRY. THEREFORE, THE CIT(A ) IS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE PAYMENT WAS SAID TO BE MADE B Y THE ASSESSEE BEFORE THE DUE DATE FOR FILING OF THE RETURN OF INCOME UND ER SECTION 139(1) OF THE ACT, THE CIT(A) OUGHT TO HAVE VERIFIED THE ACTUAL DATE O F THE PAYMENT AND ALLOWED THE CLAIM OF THE ASSESSEE. SINCE THE DATE OF ACTUAL PAYMENT OF THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESI IS NOT AVAIL ABLE ON RECORD, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ACTUAL DATE O F PAYMENT TOWARDS PROVIDENT FUND AND THE ESI HAS TO BE ASCERTAINED AND THEREAFT ER IT HAS TO BE ALLOWED IN CASE IT WAS PAID BEFORE THE DUE DATE FOR FILING OF THE RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE DISALLOWANCE OF EMPLOYEES CO NTRIBUTION TOWARDS PROVIDENT FUND AND ESI IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE 9 I.T.A. NO.1962, 1963 & 1964/MDS/2016 & C.O.NO.121/MDS/2016 ASSESSING OFFICER SHALL EXAMINE THE ACTUAL DATE OF PAYMENT BY THE ASSESSEE TOWARDS EMPLOYEES CONTRIBUTION TO PROVIDENT FUND A ND ESI AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AND IN THE L IGHT OF THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF M/S.INDUSTRIAL SEC URITY & INTELLIGENCE INDIA PVT.LTD. 13. IN THE RESULT, ALL THE THREE APPEALS OF THE REV ENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE ALLOWED FOR STATISTIC AL PURPOSES. ORDER PRONOUNCED ON 28 TH OCTOBER, 2016 AT CHENNAI. SD/- SD/- ( . . ' #$) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) & / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 6 /DATED, THE 28 TH OCTOBER, 2016. SP. / +0#7 87.0 /COPY TO: 1. )* /APPELLANT 2. +,)* /RESPONDENT 3. ' 90 () /CIT(A) 4. ' 90 /CIT, 5. 7: +0 /DR 6. - ; /GF.