Muthoot Finance corporation P.Ltd, Trivandrum V. Joint Commissioner of Incometax, Trivandrum

ITA 239/COCH/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4583 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 29-04-2013
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA; M ANIL KUMAR
• Keywords: Revision of order; Principle of natural justice
• Section: 143(3); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 239/COCH/2013 ASSESSMENT YEAR : 2008-09 MUTHOOT FINCORP LTD., MUTHOOT CENTRE, PUNNEN ROAD, STATUE,THIRUVANANTHAPURAM. [PAN: AACCM 1453E] VS. THE JOINT COMMISSIONER OF INCOME-TAX ,RANGE-1, TRIVANDRUM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI R. SREENIVASAN, CA REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR AND SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 03/07/2013 DATE OF PRONOUNCEMENT 16/08/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE REVISION ORDER DATED 28-03- 2013 PASSED BY THE LD. CIT, THIRUVANANTHAPURAM FOR THE ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL, THE ASSESSEE IS CHALLENGING THE VALIDITY OF THE REVISION ORDER PASSED BY THE LD. CIT. 3. THE FACTS RELATING TO THE ABOVE STATED ISSUE ARE DISCUSSED IN BRIEF. THE ASSESSMENT IN THE HANDS OF THE ASSESSEE FOR THE ASS ESSMENT YEAR UNDER CONSIDERATION WAS COMPLETED BY THE ASSESSING OFFICER ON 24.12.201 0 U/S. 143(3) OF THE ACT. ON EXAMINATION OF THE RECORD, THE LD. CIT NOTICED THAT THE ASSESSEE HAD CLAIMED A SUM OF RS. 10.53 CRORES UNDER THE HEAD ADMINISTRATIVE CHA RGES AND THE SAID AMOUNT WAS SEEN TO BE PAID TO M/S. MUTHOOT PAPPACHAN CONSULTANCY AN D MANAGEMENT SERVICES (MPCMS). THE ASSESSEE HAD DEDUCTED TAX AT SOURCE U /S. 194J OF THE ACT ONLY IN RESPECT I.T.A. NO. 239/COCH/2013 2 OF RS. 2.00 CRORES OUT OF THE AGGREGATE AMOUNT OF R S.10.53 CRORES STATED ABOVE. FOR THE BALANCE AMOUNT OF RS. 8.53 CRORES, THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE. THE LD. CIT TOOK THE VIEW THAT THE ASSESSEE IS LIABLE T O DEDUCT TAX AT SOURCE ON THE BALANCE AMOUNT OF RS. 8.53 CRORES ALSO AND HENCE INITIATED REVISION PROCEEDINGS U/S. 263 OF THE ACT. 4. BEFORE THE LD. CIT, THE ASSESSEE SUBMITTED THAT THE AMOUNT OF RS. 8.53 CRORES REPRESENT AMOUNTS REIMBURSED TO M/S. MPCMS. IT WAS FURTHER SUBMITTED THAT, AS PER THE PROVISION OF SEC. 194J OF THE ACT, TAX NEED NOT BE DEDUCTED ON REIMBURSEMENT OF EXPENSES. THE LD. CIT DID NOT AGREE WITH THE SAID SUBMISSIONS MADE BY THE ASSESSEE. THE LD. CIT TOOK THE VIEW THAT THE ASSESSEE HAS REI MBURSED EXPENSES TO THE TUNE OF RS.8.53 CRORES AS PER THE CONTRACT ENTERED BY THE A SSESSEE WITH M/S. MPCMS AND HENCE, THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOU RCE ON THE ABOVE SAID AMOUNT U/S. 194C OF THE ACT. AS THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO SO DEDUCT TAX AT SOURCE, THE LD. CIT TOOK THE VIEW THAT THE AMOUNT O F RS. 8.53 CORES IS DISALLOWABLE U/S. 40A(IA) OF THE ACT. ACCORDINGLY, THE LD. CIT SET A SIDE THE ASSESSMENT ORDER WITH A DIRECTION TO THE ASSESSING OFFICER TO CONSIDER THE DISALLOWANCE UNDER SECTION 40A(IA) OF THE ACT. AGGRIEVED BY THE ORDER OF THE LD. CIT, TH E ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS. WE HA VE GONE THROUGH THE ASSESSMENT ORDER. WE NOTICE THAT THE ASSESSING OFFICER DID NO T DISCUSS ANYTHING ABOUT THE TDS LIABILITY ON THE AMOUNT OF RS.8.53 CRORES REFERRED ABOVE. IT APPEARS THAT THE AO DID NOT EXAMINE THE SAID ISSUE DURING THE COURSE OF ASSESSM ENT PROCEEDINGS. WE FEEL IT PERTINENT TO REFER TO THE DECISION RENDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GRASIM INDUSTRIES LTD. V CIT (321 ITR 92), WHEREIN THE COURT HAS DISCUSSED ABOUT THE SCOPE OF PROVISIONS OF SECTION 263 AS UND ER: SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS TH E COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASS ESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTER A N ENQUIRY AS IS I.T.A. NO. 239/COCH/2013 3 NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE KE Y WORDS THAT ARE USED BY SECTION 263 ARE THAT THE ORDER MUST BE CONSIDERE D BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMENTS TO WHICH IT IS NOW NECESSARY TO TURN. IN MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83, THE SUPREME COURT HELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ON LY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APP LICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE OR W ITHOUT APPLICATION OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY . THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE SUPREME COURT HELD, IT IS OF WIDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX. W HAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMEN T OF THE SUPREME COURT (HEAD NOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE O F THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF T HE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE I N LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR I NDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BEEN FOLLOWED AND EXPLAI NED IN A SUBSEQUENT JUDGMENT OF THE SUPREME COURT IN CIT V. MAX INDIA L TD. [2007] 295 ITR 282. THERE MAY NOT BE ANY DISPUTE THAT THE REVISION PROC EEDING SHALL NOT LIE ON THE ISSUES ON WHICH THE ASSESSING OFFICER HAS TAKEN A PLAUSIBLE V IEW AFTER EXAMINING AND APPLYING HIS MIND ON IT. IF THE AO DID NOT MAKE ANY ENQUIRY ON ANY OF THE PERTINENT ISSUE, IT WILL RESULT IN LACK OF APPLICATION OF MIND. I.T.A. NO. 239/COCH/2013 4 6. THE HONBLE DELHI HIGH COURT, IN THE CASE OF TOYOTO MOTOR CORPORATION (306 ITR 49), HAS HELD THAT THE PROCEEDINGS BEFORE THE AO AR E QUASI JUDICIAL PROCEEDINGS AND A DECISION TAKEN BY THE AO IN THIS REGARD MUST BE SUP PORTED BY REASONS. IN THE CASE BEFORE THE DELHI HIGH COURT, THE ASSESSING OFFICER PASSED A CRYPTIC ORDER DROPPING THE PENALTY PROCEEDINGS WITHOUT GIVING ANY REASON AND H ENCE THE SAID ORDER WAS REVISED BY THE LD CIT U/S 263 OF THE ACT. THE ASSESSEE CHALLE NGED THE REVISION ORDER BEFORE THE TRIBUNAL AND COULD SUCCEED. THE DEPARTMENT CARRIED THE MATTER IN APPEAL BEFORE THE HONBLE DELHI HIGH COURT, WHICH UPHELD THE REVISION ORDER PASSED BY LD CIT U/S 263 OF THE ACT FOR THE REASONS STATED ABOVE. THE SAID ORD ER OF THE DELHI HIGH COURT HAS BEEN APPROVED BY THE HONBLE SUPREME COURT IN THE CASE O F TOYOTO MOTOR CORPORATION (306 ITR 52) WITH THE OBSERVATION THAT THE ASSESSING OFF ICER SHOULD PASS A REASONED ORDER. THESE DECISIONS CLEARLY BRING OUT THAT THE ASSESSME NT ORDER SHOULD BE PASSED WITH OR CONTAIN PROPER REASONS ON VARIOUS ISSUES. 7. SINCE THE AO DID NOT EXAMINE THE APPLICABILIT Y OF TDS PROVISIONS AND SEC. 40(A)(IA) IN RESPECT OF RS.8.53 CRORES DISCUSSED ABOVE, IN OU R VIEW, THE ASSESSMENT ORDER IS RENDERED ERRONEOUS. SINCE THE DISALLOWANCE, IF ANY MADE U/S 40(A)(IA) WOULD HAVE TAX IMPLICATION, IN WHICH EVENT, THE IMPUGNED ASSESSMEN T ORDER WOULD BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 8. IN VIEW OF THE FOREGOING DISCUSSIONS, IN OUR VIEW, THE LD CIT WAS JUSTIFIED IN PASSING THE IMPUGNED REVISION ORDERS BY INVOKING TH E PROVISIONS OF SEC. 263 OF THE ACT. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEES IS DISMISSED. PRONOUNCED ACCORDINGLY ON 16-08- 2013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 16TH AUGUST, 2013 GJ I.T.A. NO. 239/COCH/2013 5 COPY TO: 1. MUTHOOT FINCORP LTD., MUTHOOT CENTRE, PUNNEN ROA D, STATUE,THIRUVANANTHAPURAM. 2.THE JOINT COMMISSIONER OF INCOME-TAX, RANGE-1, TR IVANDRUM. 3 THE COMMISSIONER OF INCOME-TAX, THIRUVANANTHAPURA M. 4. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN