Nadimpally Venkata Sankar Rama Krishnam Raju, Visakhapatnam V. The ITO, Visakhapatnam

ITA 322/VIZ/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3918 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEBAKUMAR SONOWAL
• Keywords: Non-deduction of tax; Assessment record; TDS; Set aside
• Section: 143(3); 40(a)(ia); 263

Judgement Text

ITA NO.322 /VIZAG/2017 N. VENKATA SANKAR RAMA KRISHNAM RAJU, VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.322/VIZAG/2017 ( / ASSESSMENT YEAR: 2008-09) N. VENKATA SANKAR RAMA KRISHNAM RAJU VISAKHAPATNAM ITO, WARD - 1(3), VISAKHAPATNAM [PAN NO. ABZPN9699N ] ( ' / ASSESSEE) ( ()' / RESPONDENT) / ASSESSEE BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI DEBA KUMAR SONOWAL, DR / DATE OF HEARING : 15.03.2018 / DATE OF PRONOUNCEMENT : 0 4.04.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX-1,(PCIT) VISAK HAPATNAM VIDE F.NO.PR.CIT-1/VSP/263/2016-17 DATED 31.3.2017 FOR T HE ASSESSMENT 2008-09. ITA NO.322 /VIZAG/2017 N. VENKATA SANKAR RAMA KRISHNAM RAJU, VSKP 2 2. THE ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF MALVIKA MARKETING & FINANCIAL SERVICES, VISAKHAPATNAM FILED HIS RETUR N OF INCOME ON 21.01.2009 FOR THE ASSESSMENT YEAR 2008-09 ADMITTIN G TOTAL TAXABLE INCOME OF ` 4,80,690/- AND DERIVING FROM BUSINESS AND INCOME F ROM OTHER SOURCES. THE ASSESSEE IS CARRYING ON BUSINES S AS RECOVERY AGENT FOR BANKS AND FINANCIAL CORPORATIONS UNDER THE NAME MALVIKA MARKETING & FINANCIAL SERVICES. THE ASSESSMENT U/S. 143(3) O F THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WAS COM PLETED IN THE CASE OF THE ASSESSEE ON 16.04.2010 ON TOTAL INCOME OF RS.6,28,330/-. SUBSEQUENTLY, THE ASSESSMENT, SO COM PLETED WAS REOPENED BY ISSUE OF NOTICE U/S.148 OF THE ACT AND THE REASSESSMENT U/S.143(3) R.W.S. 147 OF THE INCOME-TA X ACT 1961 WAS COMPLETED ON 31.03.2015 BY DETERMINING THE TOTAL IN COME AT RS.6,82,016/-. THE LD.PCIT HAS TAKEN UP THE CASE FO R REVISION U/S 263 AND OBSERVED FROM THE PROFIT & LOSS A/C FOR TH E YEAR UNDER CONSIDERATION THAT AN AMOUNT OF RS.84,82,547/- WAS DEBITED TO THE PROFIT & LOSS A/C UNDER THE HEAD 'STAFF SALARIES' A ND THERE WAS HUGE VARIATION IN THE TOTAL NUMBER OF EMPLOYEES TO WHOM THE SALARIES WERE STATED TO HAVE BEEN PAID EVERY MONTH. THE PATTERN OF PAYMENTS AND THE VARYING NUMBER OF EMPLOYEES TO WHO M THE SALARIES WERE SHOWN TO HAVE BEEN MADE EVERY MONTH S UGGEST THAT ITA NO.322 /VIZAG/2017 N. VENKATA SANKAR RAMA KRISHNAM RAJU, VSKP 3 THE PAYMENTS WERE IN THE NATURE OF COMMISSION FOR T HE SERVICES, IF ANY, RENDERED BY THESE PERSONS TO THE ASSESSEE. FUR THER, FROM THE DETAILS PLACED ON ASSESSMENT RECORD, THE LD. PCIT C OULD NOT MAKE OUT WHETHER THE ASSESSEE HAS DEDUCTED THE PF, ESI E TC. FROM THE PAYMENTS MADE TO SUCH EMPLOYEES OR NOT AND IN THE A BSENCE OF ANY EVIDENCE FOR SUCH STATUTORY PAYMENTS UNDER PF, ESI ACT ETC., THE LD. PCIT WAS OF THE VIEW THAT THE PAYMENTS CANN OT BE REGARDED AS 'SALARIES' BUT ARE IN THE NATURE OF COM MISSION PAYMENTS FOR LOAN RECOVERIES, AND ATTRACT THE TDS U /S.194H OF THE INCOME-TAX ACT. SINCE THE ASSESSEE HAS FAILED TO DE DUCT THE TAX AT SOURCE AS REQUIRED U/S 194H, THE PCIT WAS OF THE VI EW THAT THE PROVISIONS OF SEC.40(A)(IA) OF THE I T ACT ARE ATTR ACTED TO SUCH PAYMENTS AND THE EXPENDITURE OF RS.84,82,547/ REQU IRED TO BE DISALLOWED. SINCE THE ASSESSING OFFICER FAILED TO E XAMINE ALL THESE ASPECTS IN THE REASSESSMENT , THE PCIT HELD THAT TH E ASSESSMENT ORDER DT.31.03.2015 PASSED U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT FOR ASST. YEAR 2008-09 WAS PRIMA FACIE ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCO RDINGLY ISSUED THE NOTICE UNDER SECTION 263 OF THE ACT. THE LD. A. R. OF THE ASSESSEE CONTENDED BEFORE THE PR. CIT THAT THE ASSE SSMENT WAS COMPLETED U/S 143(3) OF THE ACT AFTER CONSIDERING T HE ABOVE ISSUE ITA NO.322 /VIZAG/2017 N. VENKATA SANKAR RAMA KRISHNAM RAJU, VSKP 4 AND THE A.O. HAS TAKEN CONSCIOUS VIEW THAT PAYMENT DO NOT ATTRACT TDS U/S 194H OF THE ACT. ACCORDINGLY THE VIEW TAKE N BY THE AO FOR NOT INVOKING THE PROVISIONS OF SEC. 194H IS ONE OF THE POSSIBLE VIEWS AND HENCE INVOKING OF PROVISIONS OF SEC. 263 OF THE IT ACT ARE NOT WARRANTED IN THIS CASE. THE CONTENTIONS OF THE LD. A.R. WERE NOT ACCEPTED BY THE PR. CIT AND HELD THAT THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE IT ACT FOR T HE ASST. YEAR 2008-09 IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE. CONSEQUENTLY, PR. CIT DIRECTED THE A.O. TO DISALLOW EXPENDITURE OF RS. 84,82,547/- CLAIMED UNDER THE HEAD 'STAFF SALAR IES' AS PER SEC. 40(A)(IA) OF THE IT ACT AS THE ASSESSEE HAS NOT COM PLIED WITH THE PROVISIONS OF SEC. 194H OF THE IT ACT. 3. AGGRIEVED BY THE ORDER OF THE PR. CIT, THE ASSES SEE IS IN APPEAL BEFORE THIS TRIBUNAL. 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE, THE INITIAL ASSESSMENT WAS COM PLETED U/S 143(3) OF THE ACT BY AN ORDER DATED 16.4.2010. IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT, THE A.O. HAS CA LLED FOR THE DETAILS OF THE SALARIES PAID VIDE QUESTIONNAIRE DAT ED 5.11.2009 AND ITA NO.322 /VIZAG/2017 N. VENKATA SANKAR RAMA KRISHNAM RAJU, VSKP 5 THE ASSESSEE HAS SUBMITTED THE RELEVANT DETAILS. T HE ASSESSEE HAS SUBMITTED ALL THE DETAILS OF SALARIES AND INCENTIVE S PAID FOR THE PERIOD FROM APRIL, 2007 TO MARCH, 2008 AS PER THE P APER BOOK PAGE NO.28 AND 29 AND THE NOTICE U/S 142 OF THE ACT DATE D 5.11.2009 IN PAPER BOOK PAGE NO.26. THEREFORE, FROM THE ABOVE, IT IS CLEAR THAT THE A.O. HAS VERIFIED THE DETAILS OF SALARIES PAID AND ACCEPTED THAT THE PAYMENT AS SALARIES PAID TO VARIOUS EMPLOYEES A ND COMPLETED THE ASSESSMENT. FURTHER, THE A.O. REOPENED AND COMP LETED THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT VIDE OR DER DATED 31.3.2015 WHICH IS ALSO ENCLOSED BY THE ASSESSEE AS PAGE NO.68 & 69 OF THE PAPER BOOK. FROM THE BODY OF THE ASSESSM ENT ORDER IT IS NOTED THAT THE ASSESSMENT WAS REOPENED FOR THE PURP OSE OF VERIFICATION OF PAYMENT OF HUGE SALARIES. AFTER VE RIFICATION OF THE DETAILS FILED BY THE ASSESSEE, THE A.O. COMPLETED T HE REASSESSMENT WITHOUT MAKING ANY ADDITION RELATING TO TAX DEDUCTI ON AT SOURCE. IN THE ORDER U/S 263 OF THE ACT, THE LD.PCIT DIRECT ED THE A.O. TO DISALLOW THE EXPENDITURE OF ` 84,82,547/- FOR THE ASSESSEES FAILURE TO DEDUCT TAX U/S 194H OF THE ACT. IN THIS CASE, T HE ASSESSEE HAS ACCOUNTED THE EXPENDITURE UNDER THE HEAD SALARIES P AID TO THE EMPLOYEES AND THE LD. PRINCIPAL CIT WAS OF THE VIEW THAT THE PAYMENT WAS IN THE NATURE OF COMMISSION. THE ASSES SEE DURING ITA NO.322 /VIZAG/2017 N. VENKATA SANKAR RAMA KRISHNAM RAJU, VSKP 6 THE APPEAL HEARING ARGUED THAT THE ASSESSEE IS ENGA GED IN THE FINANCE OF AUTOMOBILE INDUSTRY AND REQUIRE NUMBER O F EMPLOYEES DEPENDING ON THE OUTSTANDING DUES. THE ASSESSEE EN GAGED ITS EMPLOYEES AS PER THE REQUIREMENT ON MONTH TO MONTH BASIS INCLUDING SHORT TERM AND TEMPORARY EMPLOYEES. THER EFORE, THERE WAS VARIATION IN MONTHLY EXPENDITURE. THE A.O. HAS VERIFIED THE PAYMENT OF SALARIES ON BOTH THE OCCASIONS OF ORIGIN AL ASSESSMENT AS WELL AS REVISED ASSESSMENT AND THE LD. A.R. ARG UED THAT INVOKING THE JURISDICTION U/S 263, IS INCORRECT AND ORDER PASSED U/S 263 OF THE ACT REQUIRED TO BE QUASHED. IT IS A FAC T THAT THE A.O. HAS TAKEN UP THE CASE FOR SCRUTINY AND VERIFIED THE SALARIES, WHICH IS EVIDENT FROM THE PAPER BOOK FILED BY THE ASSESSE E AND THIS FACT WAS NOT DISPUTED BY THE LD. D.R. AT THE TIME OF HEA RING. THE REASSESSMENT WAS ALSO TAKEN UP FOR VERIFICATION OF SALARIES DEBITED TO PROFIT & LOSS ACCOUNT AND THE A.O. COMPLETED THE REASSESSMENT AFTER DULY VERIFYING THE DETAILS. THEREFORE, IT IS ESTABLISHED BEYOND DOUBT THAT THE A.O. HAS CONSIDERED THE ISSUE AND TA KEN A CONSCIOUS DECISION THAT THE PAYMENT WAS SALARIES AND THERE WA S NO REQUIREMENT OF DISALLOWANCE. THEREFORE, THERE IS NO CASE FOR REVISION U/S 263 OF THE ACT, HENCE, WE SET ASIDE TH E ORDER PASSED ITA NO.322 /VIZAG/2017 N. VENKATA SANKAR RAMA KRISHNAM RAJU, VSKP 7 BY THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT AND ALLOW THE APPEAL OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 4 TH APR18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 04.04.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE ASSESSEE NADIMPALLY VENKATA SANKAR RAMA KR ISHNAM RAJU, D.NO.49-14-19/1, LALITHA NAGAR, VISAKHAPATNAM 2. / THE RESPONDENT THE ITO, WARD-1(3), VISAKHAPATN AM 3. + / THE PRINCIPAL CIT-1, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM