Vishnu Kumar Agarwal, Vizianagaram V. The Income Tax Officer (International Taxation), Visakhapatnam

ITA 313/VIZ/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8237 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 20-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SONAWAL
• Keywords: Transfer pricing; Rectification of order; TDS; Set aside
• Section: 143(3); 201(1); 195; 6; 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER IT (IT) A NO S . 313, 314, 293 & 294 /VIZ/2019 (ASST. YEAR : 20 1 2 - 1 3 ) 1. VISHNU KUMAR AGARWAL, D.NO. 5 - 16 - 18/1, NCS ROAD, VIZIANAGARAM. PAN NO. ABDPA 3336 K VS. ITO (INTERNATIONAL TAXATION), VISAKHAPATNAM 2. SANJEEV KUMAR AGARWAL, D.NO. 5 - 16 - 18/1, NCS ROAD, VIZIANAGARAM. PAN NO. ABCPA 4510 B 3. GOPAL KUMAR AGARWAL, D.NO. 5 - 16 - 18/1, NCS ROAD, VIZIANAGARAM. PAN NO. ABCPA 5398 J 4. SMT. MEGHNA AGARWAL, W/O SRI GOPAL KUMAR AGARWAL, D.NO. 5 - 16 - 18/1, NCS ROAD, VIZIANAGARAM. PAN NO. AFXPA 7432 A ( APPELLANTS ) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI A DV OCATE . DEPARTMENT BY : SHRI D.K. SONAWAL - SR. DR DATE OF HEARING : 1 0 / 1 2 /201 9 . DATE OF PRONOUNCEMENT : 22 / 01 /20 20 . 2 IT(IT)A NO S . 313, 314, 293 & 294 /VIZ/2019 ( VISHNU KUMAR AGARWAL & OTHERS ) O R D E R PER V. DURGA RAO , JUDICIAL MEMBER THESE APPEALS BY THE DIFFERENT ASSESSEE S ARE DIRECTED AGAINST THE SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX ( INTERNATIONAL TAXATION & TRANSFER PRICING ) , HYDERABAD - 4 , ALL DATED 01 /0 3 /201 9 FOR THE ASSESSMENT YEAR 20 1 2 - 1 3 . SINCE FACTS AND ISSUES ARE COMMON, CLUBBED AND HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. IT (IT) A NO. 313/2019 2. FACTS OF THE CASE IN BRIEF ARE THAT ASSESSEE ALONG WITH SRI SANJEEV KUMAR AGARWAL HAD PURCHASED AN IMMOVABLE PROPERTY OF T.S.NO. 1452/ A1, ADMEASURING 357 SQ.YDS., D.NO. 30 - 15 - 151 , DABAGARDENS MAIN ROAD, VISAKHAPATNAM FROM SRI PULIMI NARENDRA , NON - RESIDENT FOR A CONSIDERATION OF RS. 1.75 CRORES , BUT NOT DEDUCTED TDS , THEREFORE SHOW - CAUSE NOTICE WAS ISSUED AND SUBSEQUENTLY ORDER U/SEC. 201(1) & 201(1A) DATED 30/03/2018 WAS PASSED. THEREAFTER , THE ASSESSEE FILED AN APPLICATION DATED 23/04/2018 FOR RECTIFICATION OF THE ORDER WHEREIN HE STATED THAT NRI HAS FILED HIS RETURN OF INCOME BEFORE THE ITO (INTERNATIONAL TAXATION), NELLORE AND ASSESSMENT WAS COMPLETED ON 27/07/2016 U/SEC. 143(3) R.W.S. 147 ACCEPTING THE INCOME ADMITTED BY THE 3 IT(IT)A NO S . 313, 314, 293 & 294 /VIZ/2019 ( VISHNU KUMAR AGARWAL & OTHERS ) NRI . THEREFORE, REQUESTED TO RECTIFY THE ORDER PASSED U/SEC. 201(1) & 201(1A) DATED 30/03/2018 . THE ASSESSING OFFICER AFTER CONS I DER I NG THE EXPLANATION OF THE ASSESSEE RECTIFIED THE O RDER ON 14/06/2018 WHEREIN HE CATEGORICALLY MENTIONED THAT ASSESSEE NEED NOT TO PAY ANY TAX . SUBSEQUENTLY , THE COMMISSIONER BY EXERCISING HIS POWERS CONFERRED IN HIM U/SEC. 263 SET ASIDE THE RECTIFICATION ORDER ON THE GROUND THAT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BY OBSERVING AS UNDER: - 14.2 .. .... AS STATED EARLIER SEC. 195 OF THE INCOME - TAX ACT, MANDATES DEDUCTION OF TAX IN CASE OF PAYMENTS MADE TO A NON - RESIDENT AT THE TIME OF CREDIT OF SUCH INCOME AT THE RATES IN FORCE. THE SEC. 195, IS NOT A CHARGING SECTION NOR A SECTION PROVIDING FOR DETERMIN ATION OF THE TAX LIABILITY OF THE NON - RESIDENT. THE SECTION ITSELF OCCURS IN CHAPTER XVII PROVIDING FOR COLLECTION, AND RECOVERY BY WAY OF A DEDUCTION EFFECTED AT SOURCE OF PAYMENT AND THE DEDUCTION IS IN ADVANCE I.E., EVEN BE1OR THE DETERMINATION OF THE A CTUAL TAX LIABILITY OF THE NON - RESIDENT. A NON - RESIDENT MAY BE OR MAY NOT BE LIABLE TO PAY ANY TAX. THE AMOUNT WHICH IS DEDUCTED BY MAKING PAYMENT AND WHICH IS AT A FIXED PERCENTAGE OF THE AMOUNT MAY BE EVEN MUCH MORE THAN THE ACTUAL TAX LIABILITY OF THE N ON - RESIDENT COMPANY AND EVEN MAY BE LESS THAN THE ACTUAL TAX LIABILITY OF THE NON - RESIDENT COMPANY IN A GIVEN CASE. ONLY THE SECTION 195(2) PROVIDES FOR A LIMITED EXTENT OF A POSSIBLE REDUCTION IN THE ACTUAL AMOUNT TO BE DEDUCTED AT SOURCE BY THE RESIDENT PAYER IF THE RESIDENT PAYER IS ABLE TO DEMONSTRATE BEFORE THE AO THAT THE ENTIRE PAYMENT DOES NOT BEAR THE CHARACTER OF INCOME, BUT ONLY A PART OF THE PAYMENT BEARS TH E CHARACTER OF INCOME. THE ONLY SCOPE AND THE MANNER OF REDUCING TH E OBLIGATION FOR DEDUC TION IMPOSED ON A RESIDENT PAYER IN TERMS OF SEC. 195 (1) IS BY THE METHOD OF INVOKING THE PROCEDURE CONTEMPLATED UNDER SUB - SEC. (2 ) OF SEC. 195. THERE IS NO SUCH APPLICATION U / S 195(2). SINCE THE ASSESS E E FAILED TO DEDUCT TAX AT SOURCE AT THE TIME OF CREDIT / PAYMENT OF THE 4 IT(IT)A NO S . 313, 314, 293 & 294 /VIZ/2019 ( VISHNU KUMAR AGARWAL & OTHERS ) CONSIDERATION, THEY WERE LIABLE TO BE TREATED AS ASSESSEE IN DEFAULT . ACCORDINGLY ORDER UNDER SEC. 201(1) AND 201(1A) R.W.S. 195 PASSED BY TH E A O IS VALID ORDER. THE RECTIFICATION ORDER PASSED BY THE AO SUBSEQUENTLY, WHEREIN THE CLAIM OF THE ASSESSEE WAS ACCEPTED AND THE DEMAND RAISE D UNDER SEC. 201(1) AND 201(1A) WAS REDUCED TO NIL, IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE I HOLD THAT THE ORDER U/ S 154 DATED 14 - 06 - 2018 PASSED BY THE AO IS TO BE CANCELLED. THE AO I S DIRECTED TO RESTORE THE ORIGINAL ORDER FINALISED U/S 201(1) AND 201(1A) OF TH E ACT. 3 . ON BEING AGGRIEVED , ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THIS TRIBUNAL. 4 . LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE , THEREFORE 263 ORDER PASSED BY THE LD.COMMISSIONER IS NOT CORRECT AND THE SAME HAS TO BE SET ASIDE . 5. ON THE OTHER HAND, LD.DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 7 . WE FIND THAT ASSESSEE HAS PURCHASED THE PROPERTY FROM NRI AND NO TDS WAS DEDUCTED WHICH IS SUPPOSED TO BE DEDUCT ED U/SEC. 195 OF THE ACT. THEREFORE, THE ASSESSING OFFICER HAS PASSED THE ORDER U/SEC. 201(1) & 201(1A) DATED 30/03/2018 TREATING THE ASSESSEE IS IN DEFAULT IN NON - DEDU C TION OF TDS . SUBSEQUENTLY , THE 5 IT(IT)A NO S . 313, 314, 293 & 294 /VIZ/2019 ( VISHNU KUMAR AGARWAL & OTHERS ) ASSESSEE HAS FILED THE DETAILS BEFORE THE ASSESSING OFFICER BY STATING THAT NRI HAS OFFERED THE ENTIRE INCOME FOR TAXATION BY FILING RETURN OF INCOME BEFORE THE ASSESSING OFFICER ( INTERNATIONAL TAXATION), NELLORE AND THEREFORE TREATING TH E ASSESSEE IS IN DEFAULT IS NOT CORRECT AND REQUESTED TO RECTIFY THE ORDER . B Y CONSIDERING THE EXPLANATION OF THE ASSESSEE , THE ASSESSING OFFICER IS OF THE OPINION THAT NRI HAS ALREADY FILED HIS RETURN OF INCOME BY OFFERING THE INCOME FOR TAXATION, THEREFORE HE RECTIFIED HIS ORDER ON 14/06/201 8 . WE FIND THAT LD.COMMISSIONER IS NOT ABLE TO ESTABLISH WHAT THE PREJUDICE IS CAUSED TO THE REVENUE IN THE RECTIFICATION ORDER PASSED BY THE ASSESSING OFFICER . T O INVOKE SECTION 263 , BOTH THE CONDITIONS HA VE TO BE FULFILLED I.E. ORDER PASSED BY THE ASSESSING OFFICER NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE PRESENT CASE, LD.COMMISSIONER NOT ABLE TO ESTABLISH THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, THEREFORE IT IS NOT A FIT CASE TO INVOKE SECTION 263 . ACCORDINGLY, THE ORDER PASSED BY THE LD.COMMISSIONER IS REVERSED AND RESTORE THE ORDER OF THE ASSESSING OFFICER. IT (IT) A NOS. 314, 293 & 294/VIZ/2019 8. THE FACTS INVOLVED IN THESE APPEALS ARE SIMILAR TO THE FACTS INVOLVED IN IT (IT) A NO. 313/VIZ/2019 . THEREFORE, OUR DECISION IN 6 IT(IT)A NO S . 313, 314, 293 & 294 /VIZ/2019 ( VISHNU KUMAR AGARWAL & OTHERS ) IT (IT) A NO. 313/VIZ/2019 SHALL APPLY MUTATIS MUTANDIS TO THESE APPEALS ALSO. 9. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEE S ARE ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON TH IS 22 ND DAY OF JAN . , 2020 . SD/ - SD/ - (D.S. SUNDER SINGH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND JANUARY , 20 20 . VR/ - COPY TO: 1. THE ASSESSEE A) VISHNU KUMAR AGARWAL B) SANJEEV KUMAR AGARWAL C) GOPAL KUMAR AGARWAL D) SMT. MEGHNA AGARWAL, ALL RESIDENTS OF D.NO. 5 - 16 - 18/1, NCS ROAD, VIZIANAGARAM . 2. THE REVENUE ITO (INTERNATIONAL TAXATION) , VISAKHAPATNAM . 3. THE CIT (IT & TP) , HYDERABAD . 4. THE D.R . , VISAKHAPATNAM. 5. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.