Income Tax Officer-Ward-49(2), Kolkata, Kolkata V. Piyush Agarwal, Surat

ITA 2713/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4559 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 05-12-2013
• Court: TRIBUNAL
• Department Lawyers: P B PRAMANIK
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 194C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI M.BA LAGANESH, AM ] I.T.A NO. 2713/KOL/20 13 ASSESSMENT YEAR : 2005-0 6 I.T.O., WARD-49 (2) -VS.- PIYUSH AGARWA L KOLKATA KOLKATA [PAN : ADKPA 7120 L] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI P.B.PRAMANIK, JCIT, SR.DR FOR THE RESPONDENT : SHRI SUBASH AGARWAL, AD VOCATE DATE OF HEARING : 09.06.2016. DATE OF PRONOUNCEMENT : 08.07.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 04.09.2013 OF CIT(A)- XXXII, KOLKATA RELATING TO AY 2005-06. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN DECIDING THAT THE RE-ASSESSMENT OF THE CASE WAS ILLEGAL IN SPITE OF T HE FACT THAT THE CASE WAS RE-OPENED AS PER LAW. II) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A) HAS ERRED IN HOLDING THAT THERE WAS MERE CHANGE OF OPINION, WHERE THE A.O. HA D TOTALLY OVERLOOKED THE ISSUE IN THE ORIGINAL ASSESSMENT. III) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT(A) HAS ERRED TO DELETE THE ADDITION MADE BY THE A.O. U/S. 40(A)(IA) BY DISCUSS ING THE PROVISION OF SECTION 194C(1), WHERE THE A.O. HAS APPLIED THE PROVISION OF SECTION 194C(2) OF THE ACT WHILE MAKING THE DISALLOWANCE U/S.40(A)(IA) OF THE ACT. IV) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A) HAS ERRED TO APPLY THE PROVISION OF SECTION 194C(1) OF THE ACT, WHERE THE ASSESSEE, BEING CONTRACTOR, MADE PAYMENT TO SUB-CONTRACTOR AND VIOLATED THE PROVISIO N OF SECTION 194C(2) OF THE ACT. V) THE APPELLANT CRAVES LEAVE TO ADD, MODIFY ANY QU ESTION OF LAW IN COURSE OF HEARING OF THIS APPEAL. 2 ITA NO.2713/KOL/2013 PIYUSH AGARWAL A.YR.2005-06 2 3. THE ASSESSEE IS AN INDIVIDUAL. FOR A.Y.2005-06 THE ASSESSEE FILED RETURN OF INCOME ON 21.10.2005 DECLARING TOTAL INCOME OF RS.2,95,370 /-. THE ASSESSEE CARRIED ON THE BUSINESS OF TRADING OF ART SILK FABRICS. AO IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 (ACT) ISSUED A NOTICE DATED 17.12.2007 TO THE ASSESSEE IN WHICH THE AO SPECIFICALLY ASKED THE ASS ESSEE AS TO WHETHER THE ASSESSEE HAD DEDUCTED TAX AT SOURCE ON THE PAYMENTS MADE ON DYEI NG AND PRINTING CHARGES, CUTTING, CHECKING AND PACKAGING EXPENSES. AFTER GETTING A RE PLY FROM THE ASSESSEE ON THE ABOVE QUERY THE AO COMPLETED THE ORDER OF ASSESSMENT U/S 143(3) OF THE ACT ON 28.12.2007 IN WHICH HE DID NOT MAKE ANY DISALLOWANCE OF DYING AN D PRINTING CHARGES FOR NON DEDUCTION OF TAX AT SOURCE ON THE AFORESAID SUM BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. 4. ON 10.10.2011 AO ISSUED A NOTICE U/S 148 OF T HE ACT FOR MAKING AN ASSESSMENT U/.S 147 OF THE ACT I..E. INCOME ESCAPING ASSESSMENT. TH E REASONS RECORDED BY THE AO BEFORE ISSUING NOTICE U/S 148 OF THE ACT IS AS FOLLOWS :- 'ACCORDING TO SECTION 194C, TAX REQUIRED TO BE DEDU CTED FROM THE PAYMENT TO CONTRACTORS/SUB-CONTRACTORS WHERE THE AMOUNT OF PAY MENT EXCEEDS RS.20, 000/- IN CASE OF SINGLE PAYMENT AND RS. 50,000/- IN AGGREGATE DURING THE FINANCIAL YEAR. AS PER RECORDS, IT IS NOTED THAT YOU HAVE NOT DEDUC TED TAX AT SOURCE WHILE MAKING PAYMENTS TOWARDS DYEING & PRINTING CHARGES TO VARIO US PARTIES AS PER LEDGER. THEREFORE. YOU ARE DIRECTED TO SHOW CAUSE AS TO WHY RS.63,11,804/- CLAIMED AS 'DYEING & PRINTING CHARGES' SHOULD NOT DISALLOWED U/S.40(A)(I A) OF THE IT. ACT, 1961 AND ADDED BACK TO THE TOTAL INCOME FOR THE RELEVANT A. Y UNDER CON SIDERATION. IT IS FURTHER CONFIRMED THAT YOU ARE STILL ASSESSED UNDER THIS JURISDICTION AND NO FILE HAS BEEN TRANSFERRED TO SURAT 1. T. OFFICE '. 5. IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF TH E ACT THE ASSESSEE SENT A LETTER ON 21.10.2005 REQUESTING THE AO TO TREAT THE RETURN OR IGINALLY FILED ON 21.10.2005 AS A RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE A CT. IN THE RE-ASSESSMENT PROCEEDINGS THE QUESTION THAT AROSE FOR CONSIDERATION WAS AS TO WHETHER THERE WAS AN OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE IN TERMS OF SECITON 194C OF THE ACT. THE STAND OF THE ASSESSEE WAS THAT IN SO FAR AS THE OBL IGATION OF AN INDIVIDUAL TO DEDUCT TAX AT 3 ITA NO.2713/KOL/2013 PIYUSH AGARWAL A.YR.2005-06 3 SOURCE ON PAYMENTS MADE TO CONTRACTOR IS CONCERNED, THE OBLIGATION WAS IMPOSED BY THE PROVISION OF SECTION 194C (1)(K) OF THE ACT WHICH CAME INTO EFFECT ONLY FROM 01.06.2007. THE STAND OF THE REVENUE WAS THAT THE P ROVISION OF SECTION 194C(2) PROVISO IMPOSED ON OBLIGATION EVEN ON INDIVIDUALS PRIOR TO 01.06.2007. THE AO ACCORDINGLY DISALLOWED A SUM OF RS.63,11,804/- WHICH WAS DYEING AND PRINTING CHARGES PAID BY THE ASSESSEE TO VARIOUS PROCESS HOUSES. 6. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE PREF ERRED APPEAL BEFORE CIT(A). BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT INITIATION OF RE ASSESSMENT PROCEEDINGS U/S.147 OF THE ACT IS BAD IN LAW FOR THE FOLLOWING REASONS :- THE ORIGINAL ASSESSMENT WAS MADE U/S.143(3) ON 28.1 2.2007. THE ASSESSMENT YEAR INVOLVED WAS ASST. YEAR 2005-06 AND THE NOTICE U/S.148 WAS ISSUED ON 10.10.2011 I. E. AFTER EXPIRY OF 4 YRS FROM THE END OF ASST. Y EAR 2005/06. THE ASSESSEE HAD FURNISHED ALL THE MATERIAL FACTS AT THE TIME OF ORI GINAL ASSESSMENT. THE LD.A.O. VIDE HIS LETTER DATED 17.12.2007 HAD ASKED THE APPELLANT THE REASON FOR NON-DEDUCTION OF TDS FROM THE PAYMENTS MADE DYEING PRINTING CHARGES. ON BEING SATISFIED BY THE REPLY OF THE ASSESSEE, THE LD A.O. HAD ACCEPTED THE CONTENTION I N ORIGINAL ASSESSMENT. THE LD.A.O. HAD ALSO VERIFIED BOOKS OF A/C ALONG WITH VOUCHER O F DYEING & PRINTING CHARGES WHICH WERE PRODUCED BY THE ASSESSEE BEFORE HIM AND IS DE EMD TO HAVE ACCEPTED THE PLEA OF THE ASSESSEE AS HE DID NOT MAKE ANY ADDITION U/S.40 (A)(IA) OF THE ACT. 7. IT WAS FURTHER SUBMITTED THAT AS PER PROVISIONS OF SECTION 194C OF THE ACT AS APPLICABLE FOR THE ASST. YEAR 2005/06, NO TDS WAS D EDUCTABLE BY THE INDIVIDUAL OR HUF FROM CONTRACTORS. ONLY A CONTRACTOR (BEING INDIVIDU AL OR HUF) HAD TO DEDUCT TAX @ L% ON PAYMENTS MADE TO SUB-CONTRACTOR AND THIS WAS THE PURPORT OF PROVISO TO SEC.194C(2) OF THE ACT. IT WAS SUBMITTED THAT THE RE-ASSESSMEN T PROCEEDING U/S.147 WAS INITIATED ON MERE CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE. THE ASSESSE IN THIS REGARD PLACED 4 ITA NO.2713/KOL/2013 PIYUSH AGARWAL A.YR.2005-06 4 RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS I N WHICH IT HAS BEEN LAID DOWN THAT REASSESSMENT PROCEEDINGS CANNOT BE INITIATED ON A M ERE CHANGE OF OPINION. SARTHUK SECURITIES CO. PVT. LTD. VS ITO (2010) 329I TR 110 (DELHI). INDIVEST PTE LTD. VS ADDITIONAL DIRECTOR OF IT & OR S (2012) 250 CTR (BOMBAY) 15. C.I.T VS M/S. KELVINATOR OF INDIA LTD. (2010) 320 I TR 561 (S.C). AS PER DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS USHA INTERNATIONAL LTD. 253 CTR (DELHI) 113 (FB.) NO ASSESSMENT CAN BE RE-OPENE D WHERE AN ISSUE OR QUERY IS RAISED AND ANSWERED BY THE ASSESSEE IN ORIGINAL ASS ESSMENT PROCEEDING BUT THEREAFTER THE ASSESSING OFFICER DOES NOT MAKE ANY ADDITION IN ORI GINAL ASSESSMENT. IT WAS ALSO SUBMITTED THAT THERE WAS NO FAILURE OR OMISSION ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY AT THE TIME OF ORIGINAL ASSESSMENT. ' 8. ON CONSIDERATION OF THE ABOVE SUBMISSIONS THE C IT(A) HELD AS FOLLOWS :- (1)THE FACTS OF THE CASE, THE GROUNDS OF APPEAL, T HE SUBMISSIONS AND THE ARGUMENTS MADE DURING APPELLATE PROCEEDINGS ARE DULY CONSIDERED. T HE ASSESSEE'S APPEAL IS ALLOWED FOR THE FOLLOWING REASON :- (L) THE FACT THAT THE A.O. HAD CATEGORICALLY EXAMIN ED THE ISSUE OF TDS APPLICABILITY ON DYEING AND PRINTING CHARGES DURING THE ORIGINAL ASS ESSMENT PROCEEDINGS LEADS TO THE ONLY CONCLUSION THAT THE REASSESSMENT PROCEEDINGS IS BAS ED ON A MERE CHANGE OF OPINION ONLY. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS :- (A) CIT V. KELVINATOR OF INDIA LTD(2010) 320 ITR 56 1 (S.C.) (B) CIT V. USHA INTERNATIONAL LTD (2012) 251 CTR 11 3 (FB) (DELHI) THE GROUND OF APPEAL NO.1 OF THE ASSESSEE IS ALLOWE D AND THE REASSESSMENT ORDER IS CANCELLED. (2) THE PROVISIONS OF SECTION 194C AS APPLICABLE DU RING A. Y. 2005-06 DID NOT COVER THE CASES OF INDIVIDUALS AND HUFS. THE AMENDMENT RELIED UPON BY THE A.O. CAME TO FORCE JONLY W.E.F. 0L.06.2007 WHEN CLAUSE (K) WAS INSERTE D IN SECTION 194C(1) OF THE ACT. THE ASSESSEE HAS NOT MADE ANY PAYMENT TO A SUB-CONTRACT OR. ALL HIS PAYMENTS ARE TO CONTRACTORS. THUS THE ACTION OF THE A.O. IN MAKING A DISALLOWANCE U/S.40(A)(IA) OF THE ACT IS MISPLACED. RELIANCE IS PLACED ON THE FOLLOWING A MONG OTHERS :- (A) CBDT CIRCULAR NO.3 OF 2008 DATED 12.03.2008 (B) CIT V. PRASHANT H. SHAH (2013) 29 TAXMANN.COM 2 96(GUJ) (C) CIT V. VISHNUDUTT SHARMA (2013) 33 TAXMANN.COM 284 (GUJ) (D) ACIT V. SMT. KEYA SETH ITA NO.842 & 843/KOLL201 0 DATED 11.03.2011 (ITAT KOLKATA) 5 ITA NO.2713/KOL/2013 PIYUSH AGARWAL A.YR.2005-06 5 (E) RAJ KISHORI LAL ' PATODIA V. ACIT, ITA NO.89671 MUM/2010 DATED 23.0S.2013(ITAT MUMBAI) IN VIEW OF THE ABOVE, THE ASSESSEE'S GROUND OF APPE AL NO. 2&3 ARE ALLOWED. (3) SINCE ON TECHNICAL GROUNDS AS ALSO ON MERITS TH E APPEAL OF THE ASSESSEE IS ALLOWED, THE OTHER GROUNDS OF APPEAL ARE NOT REQUIRED TO BE ADJU DICATED. 9. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE HAS PREFERRED THE INSTANT APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO PLACED RELAINCE ON THE ORDER OF AO. THE LD. COUNSEL FOR THE ASSESSE E PLACED RELIANCE ON THE ORDER OF CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS W E HAVE ALREADY SEEN WHILE CONCLUDING THE ORIGINAL ASSESSMENT PROCEEDINGS THE ISSUE OF TDS ON DYEING AND PRINTING CHARGES WAS RAISED BY THE ASSESSEE AND IN THE ORDER PASSED U/S 143(3) OF THE ACT DATED 28.12.2007 NO ADDITION WHATSOEVER WAS MADE U/S 40(A )(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE. THUS IT IS CLEAR THAT THE QUESTIO N AS TO WHETHER DYEING AND PRINTING CHARGES PAID BY THE ASSESSEE HAD TO SUFFER TDS IN T HE HANDS OF THE ASSESSEE, WHO IS AN INDIVIDUAL IS DEEMED TO HAVE BEEN CONSIDERED BY THE AO AND ORDER OF ASSESSMENT WAS ALREADY PASSED ACCEPTING THE CLAIM OF THE ASSESSEE THAT SUCH TDS OBLIGATION HAD NOT EXTENDED TO THE ASSESSEE, WHO IS AN INDIVIDUAL. FRO M THE REASONS RECORDED BY THE AO U/S 148 OF THE ACT IT IS CLEAR THAT WITHOUT ANY NEW MAT ERIAL COMING TO THE POSSESSION OF THE AO HAD MERELY A CHANGE OF OPINION, REASSESSMENT PRO CEEDINGS HAVE BEEN INITIATED BY THE AO. SUCH A COURSE IS NOT PERMISSIBLE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS M/S. KELVINATOR OF INDIA LTD. (SUPRA ). WE THEREFORE ARE OF THE OPINION THAT THE CONCLUSION OF CIT(A) THAT INITIATION OF RE -ASSESSMENT PROCEEDINGS WAS MERELY A CHANGE OF OPINION AND THEREFORE INVALID IS JUST AND PROPER AND CALLS FOR NO INTERFERENCE. WE ARE OF THE VIEW THAT THE PROVISION OF SECTION 19 4C (2) OF THE ACT APPLY TO A CONTRACTOR AND NOT TO A PERSON SUCH AS THE ASSESSEE WHO WAS A TRADER IN ART SILK FABRICSS. WHEN THE PROVISION OF SECTION 194C(2) OF THE ACT AR E NOT ATTRACTED THE QUESTION OF 6 ITA NO.2713/KOL/2013 PIYUSH AGARWAL A.YR.2005-06 6 INVOKING THE PROVISO TO SECTION 194C(2) DOES NOT AR ISE. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE INDIVIDUALS WHOSE TOTAL SA LES, GROSS RECEIPTS OR TURN OVER FROM THE BUSINESS IF IT EXCEEDS THE MONETARY LIMIT SPECI FIED U/S 44AB OF THE ACT DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH A SUM IS CREDITED OR PAID THE ACCOUNT OF THE CONTRACTOR IS COVERED U/S 1 94C (1)(K) OF THE ACT WHICH ADMITTEDLY CAME INTO EFFECT ONLY FROM 01.06.2007. IN VIEW OF THE ABOVE CONCLUSIONS WE DO NOT FIND ANY MERIT IN THIS APPEAL BY THE REVENUE . CONSEQUENTLY THE SAME IS DISMISSED. 11. IN THE RESULT THE APPEAL BY THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 08.07.2016. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08.07.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.PIYUSH AGARWAL, S-1231, SURAT TEXTILE MARKET, RIN G ROAD, P.O.SURAT, PIN-395002, GUJARAT. 2. I.T.O., WARD-49(2), KOLKATA. 3.. CIT(A)-XXXII, KOLKATA 4. CIT-XVI I, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 7 ITA NO.2713/KOL/2013 PIYUSH AGARWAL A.YR.2005-06 7