M/s. Ideal Carpet Industries, New Delhi V. ITO, New Delhi

ITA 2957/DEL/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7480 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 12-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIS GILL
• Assessee Lawyers: SAUBHAGYA AGARWAL
• Keywords: Non passing of speaking order
• Section: 143(3); 142(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI G.D. AGARWAL, VICE PRESIDENT & SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 2957/DEL/2014 ASSESSMENT YEAR: 2009-10 IDEAL CARPET INDUSTRIES, VS. ITO, C-4/118, SAFDURJUNG DEVELOPMENT AREA, WARD 24(1), NEW DELHI. NEW DELHI. AAAFI1556K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SAUBHAGYA AGARWAL, ADV. RESPONDENT BY : SH. RIS GILL, CIT(DR) ORDER PER H.S. SIDHU, J.M. THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 28.03.2014 PASSED BY THE COMMISSIONER O F INCOME TAX (APPEALS)-VIII, NEW DELHI FOR A.Y. 2009-10. 2. THE ASSESSEE FILED ITS RETURN OF INCOME ON 10/09 /2009 AT RS. 705627/- WHICH WAS PROCESSED U/S 143(1) OF THE INCO ME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). THE CASE OF THE ASSE SSEE WAS SELECTED FOR SCRUTINY THROUGH CESS AND NOTICE U/S 143(2) WAS ISS UED ON 20/08/2010 AND WAS SERVED UPON THE ASSESSEE. IN RESPONSE TO T HE SAME AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FURNISHED REQUISITE DETAILS/INFORMATION. 3. AFTER EXAMINING THE PROFIT AND LOSS ACCOUNTS AND THE OTHER DETAILS OF EXPENSES ALONG WITH ORIGINAL BILLS/VOUCHERS DEBI TED TO THE PROFIT AND LOSS ACCOUNTS THE AO FINALLY MADE THE ADDITION OF R S. 1,86,147/- ON ITA NO. 2957/D/2014 M/S IDEAL CARPETS 2 ACCOUNT OF NON PRODUCTION OF VOUCHERS COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT ON 09/06/2011. 4. LD. CIT, DELHI-VIII, NEW DELHI EXAMINED THE ACCO UNTS OF THE ASSESSEE AND FOUND THAT ASSESSEE HAD DEBITED RS. 21 ,91,329/- UNDER THE HEAD SALES COMMISSION. OUT OF THIS AMOUNT, TDS H AD BEEN DEDUCTED ON PAYMENT AGGREGATING TO RS. 3,69,123/- MADE TO FI VE DIFFERENT PARTIES. BUT BALANCE COMMISSION AMOUNT OF RS. 18,22,206/- WH ICH HAD BEEN PAID TO M/S XXXLUTX, GMBH, NO TDS HAD BEEN DEDUCTED AS R EQUIRED U/S 195 OF THE ACT. HE IS OF THE VIEW THAT THIS AMOUNT SHO ULD HAVE BEEN ADDED BACK TO THE TOTAL TAXABLE INCOME OF THE ASSESSEE AS PER PROVISION OF SECTION 40A(IA) OF THE INCOME TAX ACT, 1961 AND HE ISSUED NOTICE TO THE ASSESSEE U/S 263 OF THE ACT ON 01/11/2013. IN RESP ONSE TO THE SAME AR OF THE ASSESSEE APPEARED AND FILED A REPLY DATED 16 /12/2013. AFTER HEARING THE PARTIES, LD. CIT HAS HELD THAT PAYMENT MADE TO THE AUSTRALIAN PARTY HAS BEEN CLAIMED AS REIMBURSEMENT OF PUBLICIT Y CHARGES. BUT IT IS NOT CLEAR WHETHER THEY WERE MERELY REIMBURSEMENT OR PUBLICITY EXPENSES WHICH WERE INCURRED FOR THE AUSTRALIAN PARTY BY THE ASSESSEE FIRM ON WHICH TDS SHOULD HAVE BEEN DEDUCTED IN VIEW OF THE SERVICES RENDERED BY THE INDIAN ENTITY. SINCE THIS ASPECT HAS NOT BE EN VERIFIED BY THE AO. IT IS POSSIBLE THAT SOME INCOME HAS ESCAPED ASSESSMENT AND CONSEQUENTLY HE FINDS THAT ASSESSMENT COMPLETED U/S 143(3) ON 09 /06/2011 AT AN INCOME OF RS. 891774/- INCLUDING THE ADDITION OF RS . 1,86,147/- IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HE C ANCELLED THE SAME WITH DIRECTION TO THE AO TO MAKE THE FRESH ASSESSMENT AS PER LAW AFTER VERIFYING ALL THE FACTS AND EVIDENCES SUBMITTED BY THE ASSESSEE AS WELL AS MATERIAL ON RECORD VIDE IMPUGNED ORDER DATED 28/03/ 2014 PASSED U/S 263 OF THE I.T. ACT. AGGRIEVED BY THE IMPUGNED ORDER D ATED 28/03/2014 PASSED BY THE CIT THE ASSESSEE FILED THE PRESENT AP PEAL. ITA NO. 2957/D/2014 M/S IDEAL CARPETS 3 5. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSE SSEE STATED THAT THE AO HAS CALLED EACH AND EVERY DETAILS OF INCOME AND EXPENDITURES ALONG WITH VARIOUS OTHER DOCUMENTARY EVIDENCES BY ISSUING A NOTICE U/S 143(2)(I) ALONG WITH QUESTIONNAIRING FIXING THE DAT E OF THE ASSESSEE FOR VARIOUS OCCASIONS. AFTER EXAMINING ALL DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE THE AO HAS COMPLETED THE ASSESSMENT ON 09/ 06/2011 U/S 143(3) OF THE I.T. ACT. BUT THE LD. CIT HAS WRONGL Y EXERCISED HIS POWER U/S 263 OF THE I.T. ACT AS THE ASSESSMENT ORDER IS NEIT HER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. HE FURTHER STATED THAT AO HAS MADE A DETAILED ENQUIRY ABOUT SALES COMMISSION SUBJ ECT TO TDS DURING THE COURSE OF ASSESSMENT PROCEEDINGS INCLUDING IMPU GNED PAYMENT OF RS. 18,22,206/- TO AUSTRALIAN PARTY. THEREFORE, TH E IMPUGNED ORDER U/S 263 OF THE ACT MAY BE DECLARED AS NULL AND VOID IN VIEW OF THE VARIOUS DECISIONS RENDERED BY THE HONBLE HIGH COURTS. IN SUPPORT OF HIS CONTENTION HE FILED A COPY OF JUDGMENT OF THE HONB LE JURISDICTIONAL HIGH COURT PASSED IN THE CASE OF CIT VS. SUNBEAM AUTO LT D., 332 ITR 167 (DEL.). 6. LD. DR RELIED UPON THE IMPUGNED ORDER PASSED BY THE LD. CIT AND STATED THAT AO HAS PASSED A NON SPEAKING ORDER AND HAS NOT DISCUSSED IN DETAIL ABOUT THE EXPENSES INCURRED BY THE ASSESSEE I.E. PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, LD. CIT HAS RIGHTL Y INVOKED THE PROVISIONS OF SECTION 263 IN THE CASE OF ASSESSEE. 7. WE HAVE HEARD THE BOTH PARTIES AND PERUSED THE R ECORD AVAILABLE WITH US AND WE ARE OF THE VIEW THAT ASSESSEE FILED ITS RETURN OF INCOME ON 10/09/2009 AND 20/08/2010 THE AO ISSUED A NOTICE TO THE ASSESSEE U/S 143(2) OF THE I.T. ACT. ON 11/02/2010 THE AO HAS A LSO ISSUED NOTICE TO THE ASSESSEE U/S 142(1) ALONG WITH QUESTIONNAIRE FI XING THE CASE OF THE ASSESSEE FOR 03/03/2011. ON 03/03/2011 ASSESSEE SE EK ADJOURNMENT FOR 10/03/2011. ON THAT DATE THE AR OF THE ASSESSEE AP PEARED AND FILED PART ITA NO. 2957/D/2014 M/S IDEAL CARPETS 4 DETAILS. AS PER SUMMARY PROCEEDINGS THE AO ASKED T HE AR OF THE ASSESSEE TO FILE REMAINING DETAILS AND ADJOURN THE CASE OF THE ASSESSEE FOR 02/03/2011. ON 21/03/2011 AGAIN ASSESSEES COU NSEL FILED PART DETAILS AND AGAIN THE AO ASKED THE ASSESSEE COUNSEL TO FILE REMAINING DETAILS. ON 07/04/2011 ASSESSEES COUNSEL FILED TH E FOLLOWING DETAILS: 07/04/2011 PRESENT SH. PARVEEN GOEL, ADVOCATE AN D FILED PART DETAILS. HE IS ASKED TO FILE FOLLOWING DETAILS: 1. DETAILS OF OTHER INCOME 2. DETAILS OF FOLLOWING EXPENSES: A) LEGAL & AUDIT CHARGES B) PHOTO EXPENSE C) FABRICATION EXPENSES D) CARPET FAIR EXPENSES E) SUBSCRIPTION & FABRIC EXPENSES 3. DETAILS OF SALE COMMISSION PAID & TDS THEREON. 4. CONFIRMATION OF SUNDRY CREDITORS 5. COPY OF LEDGER ACCOUNT OF PURCHASE 6. BOOKS OF ACCOUNTS WITH ORIGINAL BILLS AND THE CASE ADJOURNED FOR 20.04.2011. 8. AFTER FILING THE AFORESAID DETAILS AS WELL AS TH E OTHER DOCUMENTARY EVIDENCE THE AO ADJOURN THE CASE OF THE ASSESSEE FO R 29/04/2011 FOR FILING THE REMAINING DETAILS AND ON 29/04/2011 THE ASSESSEE HAS ALSO FILED DETAILS AND DOCUMENTS TO THE AO FOR THE SAKE OF CON VENIENCE THE CONTENTS OF THE LETTER DATED 29/04/2011 FILED BY THE ASSESSE E ARE REPRODUCED AS UNDER: 29 TH APRIL 2011 INCOME TAX OFFICER WARD 24(1), NEW DELHI CENTRAL REVENUE BUILDING NEW DELHI. REF: ASSESSMENT PROCEEDINGS U/S 143(3) OF THE I.T. ACT, 1961 M/S IDEAL CARPET INDUSTRIES, A.Y: 2009-2010 SIR, ITA NO. 2957/D/2014 M/S IDEAL CARPETS 5 WITH REFERENCE TO THE ABOVE MATTER AND QUARRIES RAI SED BY YOU ON LAST DATE OF HEARING, WE ARE FURNISHING HEREWITH FOLLOWI NG DETAILS & DOCUMENTS: 1. LEDGER ACCOUNT COPY OF OTHER INCOME IS ENCLOSED. 2. DETAILS OF FOLLOWING EXPENSES ARE ENCLOSED: A) LEGAL & AUDIT CHARGES LEDGER A/C. B) PHOTO EXPENSES LEDGER A/C ALONG WITH COPY OF BILL . C) FESTIVAL EXPENSES D) CARPET FAIR EXPENSES LEDGER A/C ALONG WITH COPY O F BILL E) SUBSCRIPTION & MEMBERSHIP FEE LEDGER A/C ALONG WI TH COPY OF BILL. 3. PARTYWISE DETAILS SALES COMMISSION PAID AND TAX DE DUCTED THEREON IS ENCLOSED. THE ASSESSEE FIRM HAS DISCLOS ED SALES COMMISSION EXPENSES OF RS. 21,91,329/- IN ITS PROFI T &Y LOSS ACCOUNT, HOWEVER, THE ACTUAL EXPENSES INCURRED ON S ALES EXPENSES IS RS. 3,69,123/- ONLY. THE ASSESSEE FIRM HAS WRONGLY INCLUDED RS. 18,22,206/- PAID TO XXXLUTZ, GMBH, AUS TRIA ON ACCOUNT OF REIMBURSEMENT OF PUBLICITY CHARGES UNDER THE HEAD OF SALES COMMISSION. COPY OF LEDGER ACCOUNT AND FOREX STATEMENT ISSUED BY BANK IS ENCLOSED IN THIS REGARD . 4. CONFIRMATION OF ACCOUNTS OF 8 PARTIES (SUNDRY CREDI TORS) ARE ENCLOSED. 5. LEDGER ACCOUNTS OF FOLLOWING PARTIES (PURCHASE) ARE ENCLOSED: I) ARCHANA CARPETS II) IDEAL CARPETS LIMITED III)EASTERN HANDICRAFT 6. BOOKS OF ACCOUNTS ALONGWITH SUPPORTED BILLS AND VO UCHERS ARE PRODUCED HEREWITH FOR YOUR VERIFICATION. WE WILL BE PLEASED TO SUBMIT FURTHER DETAILS AND DO CUMENTS AFTER HEARING FROM YOU. THANKING YOU, FOR PRAKASH K. PRAKASH CHARTERED ACCOUNTANTS SD/- (PRAKASH K. GUPTA) 9. THE AO PERUSED THE PROFIT AND LOSS ACCOUNTS AND EXAMINED ALL THE DETAILS OF EXPENSES ALONG WITH ORIGINAL BILL AND VO UCHERS DEBITED TO THE PROFIT AND LOSS ACCOUNTS AND FINALLY HE FOUND THAT THERE ARE SOME INCOMPLETE VOUCHERS/BILLS AND HE DISALLOWED 1/10 TH OF THE TOTAL EXPENSES ITA NO. 2957/D/2014 M/S IDEAL CARPETS 6 I.E. 186147/- OF RS. 1861466/- AND COMPLETED THE AS SESSMENT AT THE TOTAL INCOME AT RS. 891774/- ON 09/06/2011 U/S 143(3) OF THE I.T. ACT. 10. KEEPING IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE AO HAS ISSUED A NOTICE U/S 142(1) ALONG WITH DETAILS QUESTIONNAIRE ASKING THE ASSESSEE TO FILE A LL THE DOCUMENTARY EVIDENCE FOR SUBSTANTIATING ITS CLAIM. IN RESPONSE TO THE SAME ASSESSEE FILED ALL THE DETAILS ALONG WITH DOCUMENTARY EVIDEN CE BEFORE THE AO ON VARIOUS DATES FIXED BY THE AO AND THE AO HAS EXAMIN ED THE SAME THOROUGHLY AND COMPLETED THE ASSESSMENT BY TAKING A POSSIBLE VIEW AS PER LAW. MEANING THEREBY THE AO HAS MADE DETAILED ENQUIRIES ABOUT THE SALES COMMISSION SUBJECT TO TDS DURING THE COURSE O F ASSESSMENT PROCEEDINGS INCLUDING THE IMPUGNED PAYMENT OF RS. 1 822206/- TO THE AUSTRALIAN PARTY. IT IS EVIDENT FROM THE LETTER DA TED 29/04/2011 BY THE ASSESSEE TO THE AO FURNISHED ALL THE DETAILS AND EV IDENCES. THE ASSESSEE HAS ALSO FILED ALL THE EVIDENCES BEFORE US IN THE SHAPE OF SMALL PAPER BOOK ALONG WITH CASE LAW SUPPORTING THE ARGUM ENT ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE. 11. KEEPING IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT WHERE THE ASSESSEE HAD MADE AN ENQUIRY BEFORE COMPLETION OF ASSESSMENT, THE SAME COULD NOT BE SET ASIDE FOR THE REASONS OF INADEQUATE ENQUIRY. LD. CIT HAS SET ASI DE THE ASSESSMENT OF THE ASSESSEE ONLY FOR THE REASON THAT AO HAS NOT VE RIFIED ALL THE FACTS AND EVIDENCES SUBMITTED BY THE ASSESSEE AS WELL AS MATE RIAL ON RECORD. IN OUR CONSIDERED VIEW THE FINDING GIVEN BY THE LD. CI T IN THE IMPUGNED ORDER IS NOT AS PER LAW AND IS CONTRARY TO THE RECORDS OF THE ASSESSEES CASE AND IS NOT SUSTAINABLE IN THE EYE OF LAW BECAUSE AS DISCUSSED ABOVE, THE AO HAD MADE AN ENQUIRY BEFORE COMPLETION OF ASSESSM ENT BY CALLING THE EXPLANATION ALONG WITH DOCUMENTARY EVIDENCE ON THE ISSUE IN DISPUTES FROM THE ASSESSEE. THEREFORE, THE IMPUGNED ORDER I S DESERVED TO BE ITA NO. 2957/D/2014 M/S IDEAL CARPETS 7 CANCELLED IN VIEW OF THE DECISION OF HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD., 332 ITR 167 (DEL.). THE ORDER OF THE AO CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS N OT IN ACCORDANCE WITH LAW IF AN INCOME TAX OFFICER ACTING IN ACCORDING WI TH LAW MAKE A CERTAIN ASSESSMENT THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE ACCORDING TO HIM, THE O RDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES N OT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FO R THAT OF THE INCOME TAX OFFICER WHO PASSED THE ORDER UNLESS THE DECISIO N IS HELD TO BE ERRONEOUS. WE FIND THAT AO HAD CALLED FOR EXPLANAT ION ON THESE VERY ITEMS FROM THE ASSESSEE AND THE ASSESSEE HAS FURNIS HED ITS EXPLANATION VIDE LETTER DATED 29/04/2011 WHICH CLEARLY SHOWS TH AT THE AO HAD UNDERTAKEN THE EXERCISE OF EXAMINING ON THE ISSUE I N DISPUTE. IT APPEARS THAT SINCE THE AO WAS SATISFIED WITH THE EXPLANATIO N GIVEN BY THE ASSESSEE, HE ACCEPTED THE SAME BEFORE COMPLETION OF ASSESSMENT. IN OUR VIEW THE SAME COULD NOT BE SET ASIDE FOR THE REASON OF INADEQUATE ENQUIRY AS PER THE DECISION OF THE HONBLE JURISDICTIONAL H IGH COURT PASSED IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. (SUPRA). 12. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES EXPLAIN ABOVE, WE ARE OF THE VIEW THAT IMPUGNED ORDER IS NOT SUSTAINA BLE IN THE EYE OF LAW. THEREFORE, WE CANCELLED THE IMPUGNED ORDER DATED 28 /03/2014 PASSED BY THE CIT BY ACCEPTING THE APPEAL FILED BY THE ASSESS EE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.12.2014 SD/- SD/- (G.D. AGARWAL) (H.S. SIDHU) VICE PRESIDENT JUD ICIAL MEMBER DATED: 19/12/2014 *KAVITA, P.S. ITA NO. 2957/D/2014 M/S IDEAL CARPETS 8 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR ITA NO. 2957/D/2014 M/S IDEAL CARPETS 9