Sowrya Consultancy Private Limited , Hyderabad V. Income Tax Officer, Ward-3, Hyderabad

ITA 257/Hyd/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8757 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 25-06-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 28-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Keywords: Unexplained cash credit
• Section: 68; 143(3); 40(a)(ia); 195; 13; 20

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 25 7 /HYD/20 19 ASSESSMENT YEAR: 20 15 - 16 SOWRYA CONSULTANCY PRIVATE LIMITED, HYDERABAD. PAN: AAMCS 0214 M VS. ITO, WARD - 3, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI C.P. RAMASWAMI REVENUE BY: SRI NILANJAN DEY, DR DATE OF HEARING: 25/06/2019 DATE OF PRONOUNCEMENT: 12 /07/2019 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - 3, HYDERABAD DATED 28/11/2018 IN APPEAL NO. 0106/ITO - 3(3)/HYD/CIT(A) - 3/2017 - 18, PASSED U/S. 143(3) & 250(6) OF THE ACT FOR THE ASSESSMENT YEAR 2015 - 16. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED 5 GROUNDS. HOWEVER, THE CRUX ES OF THE ISSUES ARE THAT THE LD. CIT(A) HAS ERRED IN (I) CONFIRMING THE ADDITION OF RS. 2,67,50,000/ - ON ACCOUNT OF UNSECURED LOANS AND 2 (II) CONFIRM ING THE DISALLOWANCE OF EXPENDITURE INCURRED TOWARDS ADVERTISEM ENT AMOUNTING TO RS. 40,86,048/ - BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TAX U/S. 195 OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CONSULTANCY FILED ITS E - RETURN OF INCOME ON 31/03/2017 DECLARING TOTAL INCOME OF RS. 98,19,060/ - . THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND FINALLY ASSESSMENT WAS COMPLETED U/S. 143(3) OF TH E ACT BY THE LD. AO WHEREIN THE LD. AO MADE ADDITION U/S. 68 OF THE ACT FOR RS. 2,67,50,000/ - BEING UNEXPLAINED CREDIT ON ACCOUNT OF LOANS TAKEN FROM VARIOUS PARTIES AND FURTHER MADE A DISALLOWANCE OF RS. 40,86,048/ - INVOKING THE PROVISIONS OF SECTION 40( A)(IA) OF THE ACT TOWARDS PAYMENT MADE TO NON - RESIDENTS VIZ., GOOGLE AND FACEBOOK ON ACCOUNT OF ONLINE ADVERTISEMENT AGAINST WHICH TAX WAS NOT DEDUCTED AT SOURCE AS PER THE PROVISIONS OF SECTION 195 OF THE ACT. ON APPEAL, THE LD. CIT (A) ALSO CONFIRMED TH E ORDER OF THE LD. AO BY AGREEING WITH THE VIEW OF THE LD. AO. 4. GROUND NO.1 ADDITION OF RS. 2,67,50,000/ - TOWARDS UNEXPLAINED CREDIT U/S. 68 OF THE ACT: 3 5. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD. AO THAT THE ASS ESSEE HAD RECEIVED UNSECURED LOANS AS DETAILED HEREINBELOW DURING THE RELEVANT AY: 2015 - 16. (I) SRI VARADARAJA BANDARI & SMT. GEETA BANDARI - RS. 2,04,00,000/ - (II) SRI B. SRINIVAS - RS. 13,50,000/ - (III) SRI T. SRINIVASA REDDY (DIRECTOR OF THE ASSESSEE - COMPANY) - RS. 50,00,000/ - TOTAL: - RS. 2,67,50,000/ - 6. THE LD. AO THEREAFTER DIRECTED THE ASSESSEE TO FURNISHED THE FOLLOWING PARTICULARS OF THE PERSONS FROM WHOM THE ASSESSEE HAS OBTAINED THE LOAN I.E., COMPLETE DETAILS OF THE LOAN SUCH AS NAME OF THE PERSON WHO HAVE EXTENDED THE LOAN, ADDRESS OF THE LENDER , PAN OF THE LENDER , DATE OF RECEIPT OF LOAN, DATE OF REPAYMENT OF LOAN, OPENING AND CLOSING BALANCE OF THE LOAN, DETAILS OF LOAN TRANSACTIONS DURING THE YEAR, DETAILS OF INTEREST PAID AND PAYABLE ALONG WITH CONFIRMATION LETTERS FROM LENDERS , SOURCE FOR THE LOAN EXTENDED BY THE LENDER, COPIES OF THE INCOME TAX RETURN OF THE LENDER ALONG WITH COMPUTATION STATEMENT AND BANK PASS BOOK EXTRACT CONTAINING THE LOAN TRANSACTIONS. THEREAFTER, THE ASSESSEE THROUGH ITS AR FILED VARIOUS DETAILS. HOWEVER, THE LD. AO OP INED THAT THE ASSESSEE HAD NOT SUBMITTED ENOUGH PARTICULARS IN ORDER TO ESTABLISH THE GENUINENESS OF THE LOAN TRANSACTIONS AND THEREFORE TREATED THE ENTIRE AMOUNT OF RS. 2,67,50,000/ - AS UNEXPLAINED CASH CREDITS U/S. 68 OF THE ACT AND ACCORDINGLY ADDED THE SAME TO THE INCOME 4 OF THE ASSESSEE. ON APPEAL, THE LD. CIT (A) ENDORSED THE VIEW THE OF THE LD. AO AND CONFIRMED HIS ORDER. 7. THE LD. AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD FURNISHED ALL THE REQUISITE PARTICULARS OF THE LENDERS BUT THE LD. AO SI MPLY DISBELIEVING THE PARTICULARS SUBMITTED BY THE ASSESSEE AND WITHOUT CROSS - EXAMINING THE LENDERS WHOSE ADDRESSES WERE FURNISHED, INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT AND THEREBY MADE ADDITION WHICH IS ERRONEOUS. THE LD. AR FURTHER PLEADED THA T THE MATTER MAY BE REMITTED BACK TO THE FILE TO THE LD. AO IN ORDER TO EXAMINE THE LENDERS AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AND MERITS . THE LD . DR ON THE OTHER HAND ARGUED VEHEMENTLY IN SUPPORT OF THE ORDERS OF THE LD. REVENUE AUTHO RITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE ASSESSEE HAS SUBMITTED THE NAMES AND ADDRESS OF ALL THE LENDERS BEFORE THE LD. AO. IN SUCH SITUATION IT WOULD HAVE BEEN A PPROPRIATE ON THE PART OF THE LD. AO TO SUMMON AND EXAMINE THE LENDERS BEFORE ARRIVING AT SUCH CONCLUSIONS. THEREFORE, IN THE INTEREST OF JUSTICE WE HEREBY REMIT THE MATTER BACK TO THE FILE TO THE LD. AO FOR DE - NOVO CONSIDERATION . 5 9 . GROUND NO.2 DISALLO WANCE U/S. 40(A)(IA) OF THE ACT AMOUNTING TO RS. 40,86,048/ - FOR NON - COMPLIANCE OF SECTION 195 OF THE ACT TOWARDS PAYMENT MADE TO NON - RESIDENTS. 10. DURING THE COURSE OF SCRUTINY PROCEEDINGS, IT WAS OBSERVED BY THE LD . AO THAT THE ASSESSEE HAD MADE PAYMEN TS OUTSIDE INDIA TO NON - RESIDENTS VIZ., GOOGLE AND FACEBOOK TOWARDS ONLINE ADVERTISING, ICONS AND GRAPHICS AGGREGATING TO RS. 40,86,048/ - WITHOUT DEDUCTING TAX AT SOURCE THEREBY VIOLAT ED THE PROVISIONS OF SECTION 195 OF THE ACT. THEREFORE, THE LD. AO INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE EXPENDITURE OF RS. 40,86,048/ - . ON APPEAL, THE LD. CIT (A) UPHELD THE ORDER OF THE LD. AO BY AGREEING WITH HIS VIEW . 11. BEFORE US THE LD. AR SUBMITTED THAT AS PER THE TREATY BETWEEN INDIA AND USA, THE ASSESSEE IS NOT BOUND TO DEDUCT TAX AT SOURCE TOWARDS PAYMENT MADE FOR ONLINE ADVERTISEMENT IN USA. IT WAS THEREFORE ARGUED THAT THE PROVISIONS OF SECTION 195 OF THE AC T IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE AND THEREFORE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WOULD NOT BE ATTRACTED. HENCE IT WAS PLEADED THAT THE ADDITIONS MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT MAY BE DELETED. THE LD . AR FURTHER RELIED ON THE VARIOUS DECISIONS CITED HEREIN VIZ., ( 1 ) GE INDIA TECHNOLOGY CEN. (P.) LTD VS. CIT [2010] 327 ITR 456 (SC) ( 2 ) ITAT, MUMBAI BENCH DECISION IN THE CASE OF YAHOO 6 INDIA (P.) LTD VS. DCIT [2011] 11 TAXMANN.COM 431 (MUMBAI). THE LD. DR ON THE OTHER HAND ARGUED IN SUPPORT OF THE ORDERS OF THE LD. REVENUE AUTHORITIES BY REITERATING THE ARGUMENTS AND REASONS STATED IN THEIR RESPECTIVE ORDERS. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FROM THE ORDERS OF THE LD. REVENUE AUTHORITIES IT IS APPARENT THAT THERE IS NO DISCUSSION WITH RESPECT TO THE APPLICABILITY OF DTA AGREEMENT IN THE CASE OF THE ASSESSEE. FURTHER, IT IS ALSO APPARENT THAT THE ONLINE ADVERTISEMENT ETC., MADE BY THE ASSESSEE THROUGH GOOGLE AND FACEBOOK COVERS THE INDIAN TERRITORY ALSO WHEREIN ONE HAS TO PONDER WHETHER THE SERVICES ARE RECEIVED IN INDIA. FURTHER THE ASSESSEE HAS ALSO RELIED ON VARIOUS CASE LAWS WHICH IS REQUIRED TO BE LOOKED INTO BY THE LD. REVENUE AUTHORITIES . SINCE, ALL THESE ASPECTS ARE LACKING IN ORDERS OF THE LD. REVENUE AUTHORITIES WE ARE OF THE CONSIDERED VIEW THAT THE MATTER REQUIRES A REVISIT BY THE LD. REVENUE AUTHORITIES. THEREFORE , IN THE INTEREST OF JUSTICE WE HEREBY REMIT THE MATTER BACK TO THE FILE OF THE LD. AO FOR FRESH CONSIDERATION. 13 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7 PRONOUNCED IN THE OPEN COURT ON 12 TH JULY, 2019. SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 12TH JULY , 2019 OKK COPY TO: - 1) SOWRYA CONSULTANCY PRIVATE LIMITED, 141/B, RAGHU RAJ NILAYAM, 3 RD FLOOR, DR. DEVENDER REDDY CHILDR4ENS HOSPITAL LANE, SR NAGAR, HYDERABAD. 2) INCOME TAX OFFICER, WARD - 3(3), 7 TH FLOOR, ROOM NO.708, SIGNATURE TOWERS, KONDAPUR, HYDERABAD. 3) THE CIT(A) - 3 , HYDERABAD 4) THE PR. CIT - 3 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE