ITO (TDS) 1(2)(1), MUMBAI V. DELOITTE TAX OVERSEAS SERVICES LLC, MUMBAI

ITA 3274/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8494 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Department
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 29-05-2015
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Audit objection; Retrospective amendment; Tax effect
• Section: 260A; 12

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL F , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO . 3274/MUM/2015 ( ASSESSMENT YEAR :200 7 - 08 ) ITO (TDS) 1(2)(1), MUMBAI VS. M/S. DELOITTE TAX OVERSEAS SERVICES LLC, BLOCK NO.A, RMZ F UTURA, PLOT NO.14, ROAD NO.2, HI TEC CITY LAYOUT, MADHAPUR, ANDHRA PRADESH 500 081 T AN NO. : MUMD13176C ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY : MS. POOJA SWAROOP ASSESSEE BY : SHRI V.A. MEHTA DATE OF HEARING : 31 / 01 /201 7 D ATE OF PRONOUNCEMENT : 31 / 01/2017 / O R D E R PER SHRI R.C.SHARMA(AM) : THIS IS AN APPEAL FILE D BY THE REVENUE AGAINST THE O RDER OF CIT(A) - FOR THE ASSESSMENT YEAR 2007 - 2 008 , IN THE MATTER OF ORDER PASSED U/S. 201 & 201(A) OF THE I.T.ACT. 2 . AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STATED THAT IN ORDER TO CUT DOWN ON FRIVOLOUS LITIGATION AND TA XPAYERS GRIEVANCE, THE CBDT, WHICH FORMULATES POLICIES FOR THE INCOME TAX DEPARTMENT, HAS ISSUED RECENT INSTRUCTION NO.21/2015 DATED 10.12.2015 REVISING THE MONETARY THRESHOLD FIXING THE TAX EFFECT LIMIT OF RS.10 LACS FOR THE REVENUE TO FILE APPEAL BEFORE THE ITAT AND SINCE IN THIS APPEAL, THE TAX EFFECT IS BELOW RS.10 LAKHS, THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE AND LIABLE TO BE DISMISSED IN LIMINE . 3 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE RECORD. RECENTLY, THE CBDT IN ITS CIRCULAR NO.21/2015 DATED 10 TH DECEMBER, 2015 HAVE REVISED THE MONETARY LIMIT TO RS.10 LAKHS FROM RS.4 LAKHS TO FILE THE APPEAL BEFORE THE ITA NO.3274/MUM/2015 M/S. DELOITTE TAX OVERSEAS SERVICES LLC 2 TRIBUNAL BY THE REVENUE. ON SCRUTINY OF APPEAL FILED BY THE REVENUE, IT IS FOUND THAT THE TOTAL TAX DEMAND IS BELOW THE PRESCRIBED LIMIT OF RS.10 LAKHS. THE CBDT ALSO CLARIFIES THAT THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH COURTS/TRIBUNAL. T HE INCOME TAX ACT WAS AMENDED AND SECTION 268A HAS BEEN INTRODUCED ON THE STATUTE BOOK WITH RETROSPECTIVE EFFECT. SECTION 268A CARVES OUT AN EXCEPTION FOR FILING OF APPEALS AND REFERENCES UNDER SECTION 260A OF THE ACT. THE LEGISLATURE HAS PRESCRIBED THAT THE CBDT IS EMPOWERED TO ISSUE CIRCULARS AND INSTRUCTIONS FROM TIME TO TIME, WITH REGARD TO FILING OF APPEALS DEPENDING ON THE TAX EFFECT INVOLVED. THE RELEVANT CIRCULAR ISSUED BY CBDT READS AS UNDER: REFERENCE IS INVITED TO BOARD'S INSTRUCTION NO 5/2014 DATED 10 - 07 - 2014 WHEREIN MONETARY LIMITS AND OTHER CONDITIONS FOR FILING DEPARTMENTAL APPEALS (IN INCOME - TAX MATTERS) BEFORE APPELLATE TRIBUNAL AND HIGH COURTS AND SLP BEFORE THE SUPREME COURT WERE SPECIFIED. 2. IN SUPERSESSION OF THE ABOVE INSTRUCTION, IT HAS BEEN DECIDED BY THE BOARD THAT DEPARTMENTAL APPEALS MAY BE FILED ON MERITS BEFORE APPELLATE TRIBUNAL AND HIGH COURTS AND SLP BEFORE THE SUPREME COURT KEEPING IN VIEW THE MONETARY LIMITS AND CONDITIONS SPECIFIED BELOW. 3. HENCEFORTH APPEALS/SLPS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HEREUNDER: - SL.NO. APPEALS IN INCOME - TAX MATTERS MONETARY LIMITS (IN RS.) 1. BEFORE APPELLATE TRIBUNAL 10,00,000 2. BEFORE HIGH COURT 20,00,000 3. BEFORE SUPREME COURT 25,00,000 IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FIL ED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETARY LIMITS PRESCRIBED ABOVE. FILING OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE. 4. FOR THIS PURPOSE, 'TAX EFFECT' MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSE SSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF THE ISSUES AGAINST WHICH APPEAL IS INTENDED TO BE FILED (HEREINAFTER REFERRED TO AS 'DISPUTED ISSUES'). HOWEVER THE ITA NO.3274/MUM/2015 M/S. DELOITTE TAX OVERSEAS SERVICES LLC 3 TAX WILL NOT INCLU DE ANY INTEREST THEREON, EXCEPT WHERE CHARGEABILITY OF INTEREST ITSELF IS IN DISPUTE. IN CASE THE CHARGEABILITY OF INTEREST IS THE ISSUE UNDER DISPUTE, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. IN CASES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS I NCOME, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX ON DISPUTED ADDITIONS. IN CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QUANTUM OF PENALTY DELETED OR REDUCED IN THE ORDER TO BE APPEALED AGAINST. 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX EFFECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES IN THE CASE OF EVERY ASSESSEE. IF, IN THE CASE OF AN ASSESSEE, THE DISPUTED ISSUES ARISE IN MORE THAN ONE ASSESSMENT YEAR, APPEAL, CAN BE FILED IN RESPECT OF SUCH ASSESSMENT YEAR OR YEA RS IN WHICH THE TAX EFFECT IN RESPECT OF THE DISPUTED ISSUES EXCEEDS THE MONETARY LIMIT SPECIFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RESPECT OF AN ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. IN OTHER WORDS, HENCEFORTH, APPEALS CAN BE FILED ONLY WITH REFERENCE TO THE TAX EFFECT IN THE RELEVANT ASSESSMENT YEAR. HOWEVER, IN CASE OF A COMPOSITE ORDER OF ANY HIGH COURT OR APPELLATE AUTHORITY, WHICH INVOLVES MORE THAN ONE ASSESSMENT YEAR AND COMMON ISS UES IN MORE THAN ONE ASSESSMENT YEAR, APPEAL SHALL BE FILED IN RESPECT OF ALL SUCH ASSESSMENT YEARS EVEN IF THE 'TAX EFFECT' IS LESS THAN THE PRESCRIBED MONETARY LIMITS IN ANY OF THE YEAR(S), IF IT IS DECIDED TO FILE APPEAL IN RESPECT OF THE YEAR( S) IN WH ICH 'TAX EFFECT' EXCEEDS THE MONETARY LIMIT PRESCRIBED. IN CASE WHERE A COMPOSITE ORDER/JUDGMENT INVOLVES MORE THAN ONE ASSESSEE, EACH ASSESSEE SHALL BE DEALT WITH SEPARATELY. 6. IN A CASE WHERE APPEAL BEFORE A TRIBUNAL OR A COURT IS NOT FILED ONLY ON AC COUNT OF THE TAX EFFECT BEING LESS THAN THE MONETARY LIMIT SPECIFIED ABOVE, THE COMMISSIONER OF INCOME - TAX SHALL SPECIFICALLY RECORD THAT 'EVEN THOUGH THE DECISION IS NOT ACCEPTABLE, APPEAL IS NOT BEING FILED ONLY ON THE CONSIDERATION THAT THE TAX EFFECT I S LESS THAN THE MONETARY LIMIT SPECIFIED IN THIS INSTRUCTION'. FURTHER, IN SUCH CASES, THERE WILL BE NO PRESUMPTION THAT THE INCOME - TAX DEPARTMENT HAS ACQUIESCED IN THE DECISION ON THE DISPUTED ISSUES. THE INCOME - TAX DEPARTMENT SHALL NOT BE PRECLUDED FROM FILING AN APPEAL AGAINST THE DISPUTED ISSUES IN THE CASE OF THE SAME ASSESSEE FOR ANY OTHER ASSESSMENT YEAR, OR IN THE CASE OF ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASSESSMENT YEAR, IF THE TAX EFFECT EXCEEDS THE SPECIFIED MONETARY LIMITS. 7. IN TH E PAST, A NUMBER OF INSTANCES HAVE COME TO THE NOTICE OF THE BOARD, WHEREBY AN ASSESSEE HAS CLAIMED RELIEF FROM THE TRIBUNAL OR THE COURT ONLY ON THE GROUND THAT THE DEPARTMENT HAS IMPLICITLY ACCEPTED THE DECISION OF THE TRIBUNAL OR COURT IN THE CASE OF TH E ASSESSEE FOR ANY OTHER ASSESSMENT YEAR OR IN THE CASE OF ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASSESSMENT YEAR, BY NOT FILING AN APPEAL ON THE SAME DISPUTED ISSUES. THE DEPARTMENTAL ITA NO.3274/MUM/2015 M/S. DELOITTE TAX OVERSEAS SERVICES LLC 4 REPRESENTATIVES/COUNSELS MUST MAKE EVERY EFFORT TO BRING TO THE N OTICE OF THE TRIBUNAL OR THE COURT THAT THE APPEAL IN SUCH CASES WAS NOT FILED OR NOT ADMITTED ONLY FOR THE REASON OF THE TAX EFFECT BEING LESS THAN THE SPECIFIED MONETARY LIMIT AND, THEREFORE, NO INFERENCE SHOULD BE DRAWN THAT THE DECISIONS RENDERED THERE IN WERE ACCEPTABLE TO THE DEPARTMENT. ACCORDINGLY, THEY SHOULD IMPRESS UPON THE TRIBUNAL OR THE COURT THAT SUCH CASES DO NOT HAVE ANY PRECEDENT VALUE. AS THE EVIDENCE OF NOT FILING APPEAL DUE TO THIS INSTRUCTION MAY HAVE TO BE PRODUCED IN COURTS, THE JUDIC IAL FOLDERS IN THE OFFICE OF CIT MUST BE MAINTAINED IN A SYSTEMIC MANNER FOR EASY RETRIEVAL. 8. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE 'OR THERE IS NO TAX EFFECT: (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR (B) WHERE BOARD'S ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULT RA VIRES, OR (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT, OR (D) WHERE THE ADDITION RELATES TO UNDISCLOSED FOREIGN ASSETS/ BANK ACCOUNTS. 9. THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE SHALL NOT APPLY TO WRIT M ATTERS AND DIRECT TAX MATTERS OTHER THAN INCOME TAX. FILING OF APPEALS IN OTHER DIRECT TAX MATTERS SHALL CONTINUE TO BE GOVERNED BY RELEVANT PROVISIONS OF STATUTE & RULES. FURTHER, FILING OF APPEAL IN CASES OF INCOME TAX, WHERE THE TAX EFFECT IS NOT QUANTI FIABLE OR NOT INVOLVED, SUCH AS THE CASE OF REGISTRATION OF TRUSTS OR INSTITUTIONS UNDER SECTION 12 A OF THE IT ACT, 1961, SHALL NOT BE GOVERNED BY THE LIMITS SPECIFIED IN PARA 3 ABOVE AND DECISION TO FILE APPEAL IN SUCH CASES MAY BE TAKEN ON MERITS OF A P ARTICULAR CASE. 10. THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH COURTS/ TRIBUNALS. PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRAWN/ NOT PRESSED. APPEALS BEFORE THE SUPREME COURT WILL BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. 11. THIS ISSUE UNDER SECTION 268A (1) OF THE INCOME - TAX ACT 1961. 4 . C CONSIDERING THE ABOVE CBDT CIRCULAR, WE FOUND THAT THIS APP EAL OF THE REVENUE IS NOT MAINTAINABLE AS THE TAX EFFECT IN THIS APPEAL IS BELOW RS.10 LAKHS. ACCORDINGLY, WE DISMISS THE APPEAL OF THE REVENUE. ITA NO.3274/MUM/2015 M/S. DELOITTE TAX OVERSEAS SERVICES LLC 5 5. EVEN ON MERITS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN SO FAR AS WITH REGARD TO CHARGING OF INTEREST U/S.201(1A) , THE CIT(A) HAS RESTORED THE MATTER TO THE FILE OF AO WITH THE FOLLOWING DIRECTION: - 4.1 THE A.O IS DIRECTED TO CALCULATE THE INTEREST U/S. 201 (1A) FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTED TO THE DATE ON WHICH SUCH TAX IS ACTUAL LY PAID. THE APPELLANT HAS STATED THAT THERE IS DELAY IN PAYMENT OF TAX DEDUCTED AND CONSEQUENTIAL INTEREST U/S. 101(1A) OF RS. 12,21,136/ - HAS ALREADY BEEN PAID BY THE APPELLANT. THE A.O IS DIRECTED TO GIVE CREDIT FOR THE INTEREST PAID OF RS. 12,21,136/ - AFTER PROPER VERIFICATION . 6. WITH REGARD TO THE INTEREST CHARGED U/S.220(2) / 221(1), THE CIT(A) AFTER CALLING FOR THE REMAND REPORT HELD AS UNDER: - 4.3 IT WAS OBSERVED THAT THE INTEREST OF RS. 8,53,584/ - WAS LEVIED BY THE SYSTEM. INTEREST U/S. 220(2) O R 221 (1) CAN BE LEVIED ONLY IF THE DEMAND NOTICE IS ISSUED AND SERVED ON THE ASSESSEE AFTER THE ORDER IS COMPLETED U/S. 201 (1) / 201 (1A). THEREFORE THE ISSUE WAS REMANDED TO THE ASSESSING OFFICER TO REPORT WAS RECEIVED ON 27.02.2015 STATING THAT NO SEP ARATE DEMAND NOTICE U/S. 156 WAS ISSUED PRIOR TO LEVY OF INTEREST U/S. 220(2) OR U/S. 221(1) OF THE ACT.' 4.4. FOR LEVY OF INTEREST U/S. 220(2) OR 221(1) OF THE ACT, IT IS IMPERATIVE THAT THE DEMAND NOTICE U/S. 156 IS REQUIRED TO BE ISSUED AND SERVED ON THE ASSESSEE AND THEN IF THAT DEMAND IS NOT PAID WITHIN 30 DAYS THEN ONLY INTEREST CAN BE LEVIED. SINCE IN THE INSTANT CASE THE DEMAND NOTICE IS NOT SERVED ON THE ASSESSEE PRIOR TO LEVY OF INTEREST AS EVIDENCED FROM REMAND REPORT, THE LEVY OF INTEREST. O F RS. 8,53,670 / - STANDS DELETED. 7. IT IS CLEAR FROM THE RECORD THAT CIT(A) HAS CALLED FOR A REMAND REPORT WHEREIN AO HAS CONFIRMED THAT NO DEMAND NOTICE WAS SERVED ON ASSESSEE PRIOR TO LEVY OF INTEREST, ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF CIT(A) FOR DELETING THE LEVY OF INTEREST U/S. 220 (2) / 221(1) OF THE IT ACT. ITA NO.3274/MUM/2015 M/S. DELOITTE TAX OVERSEAS SERVICES LLC 6 8 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED O RDER PRONOUNCED IN THE OPEN COURT ON THIS 31 / 01/2017 SD/ - ( SANDEEP GOSAIN ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 31 /0 1 /201 7 KARUNA , SR. PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//