DCIT Circle 5 (1), V. Kamino International Logistics Pvt. Ltd.,

ITA 3323/DEL/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2207 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-10-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 18-10-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 271(1)(c); 143(3); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NOS. 3323/DEL/2006 & 1167DEL/2007 ASSESSMENT YEAR : 2003-04 THE DCIT, CIRCLE 5(1), NEW DELHI. VS. M/S. KAMINO INTERNATIONAL LOGISTICS PVT. LTD., L-49, MAHIPALPUR EXTN., NATIONAL HIGHWAY-8, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. KAVITA BHATNAGAR, CIT D. R. RESPONDENT BY : SHRI RS. SINGHVI, C.A. O R D E R PER BENCH: THESE TWO APPEALS, FILED BY THE REVENUE, ARE DIREC TED AGAINST TWO SEPARATE ORDERS DATED 24.07.2006 AND 05.01.2009 PASSED BY TH E LD. CIT(A) IN THE MATTER OF AN ASSESSMENT MADE U/S 143(3) OF THE INCOME TAX ACT , 1961 AND IN THE MATTER OF A PENALTY LEVIED U/S 271(1)(C) OF THE ACT RESPECTIV ELY FOR THE ASSESSMENT YEAR 2003-04. 2. WE SHALL FIRST TAKE ITA NO. 3323/DEL/2006 IN REL ATION TO THE CIT(A)S ORDER PASSED IN THE MATTER OF ASSESSMENT MADE U/S 143(3) OF THE ACT. 3. THE VARIOUS GROUNDS OF APPEAL RAISED BY THE REVE NUE IN THIS APPEAL ARE AGAINST THE LD. CIT(A)S ORDER IN RESTRICTING THE D ISALLOWANCE U/S 40(A)(I) TO 7% OF THE TOTAL TRANSACTION WITHOUT CONSIDERING THE PROVI SIONS CONTAINED IN SECTION 40(A)(I) READ WITH SECTION 195OF THE ACT. ITA NOS. 3323/DEL/06 &1167/D/09 2 4. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 5. IN THE COURSE OF HEARING, IT HAS BEEN POINTED OU T BY BOTH THE PARTIES THAT THE A.O. HAS HIMSELF COMPLETED THE ASSESSMENT U/S 143(3 ) IN SUBSEQUENT ASSESSMENT YEARS BY ALLOCATING ONLY 7% OF THE TOTAL REMITTANCE S AS A SUM ATTRIBUTABLE TO THE BUSINESS ACTIVITIES CARRIED OUT IN INDIA WITHOUT GI VING ANY RESERVATION OR QUALIFICATION TO TAX THE WHOLE AMOUNT OF REMITTANCE S BY INVOKING PROVISIONS OF SECTION 40(A)(I) OF THE ACT. 6. WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS GRO UND RAISED BY THE REVENUE AND DIRECT THE A.O. THAT IN CASE ASSESSEE IS FOUND TO BE LIABLE TO DEDUCT TAX AT SOURCE U/S 195 OF THE ACT, THE ASSESSEE SHALL BE LI ABLE ONLY TO DEDUCT TAX WITH REFERENCE TO THE 7% OF THE TOTAL PAYMENT WHICH IS A TTRIBUTABLE TO THE BUSINESS ACTIVITIES CARRIED OUT IN INDIA AS SO RIGHTLY WORKE D OUT BY THE LD. CIT(A) AND AS SO ACCEPTED BY THE REVENUE IN OTHER ASSESSMENT YEARS. THEREFORE, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 7. NOW, WE SHALL COME TO THE ITA NO. 1167/DEL/2009 PERTAINING TO THE PENALTY LEVIED BY THE A.O. U/S 271(1)(C) OF THE ACT . 8. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 9. THIS ISSUE HAD ARISEN FOR OUR CONSIDERATION IN T HE ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2004-05 WHERE WE HAVE TAKEN A V IEW THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY INASMUCH AS THAT THE ISSUE INVOLVED WAS HIGHLY ITA NOS. 3323/DEL/06 &1167/D/09 3 DEBITABLE AND THE DISALLOWANCE HAS BEEN MADE BY THE A.O. BECAUSE OF APPLICATION OF SECTION 40(A)(I) OF THE ACT IN RESPECT OF THE PA YMENT MADE TO NON-RESIDENT. OUR ORDER IN THE ASSESSMENT YEAR 2004-05 RUNS AS UN DER:- 32. THE DISALLOWANCE U/S 40(A)(I) IN RESPECT OF WH ICH PENALTY HAS BEEN IMPOSED HAS BEEN RESTORED BACK TO THE FILE OF THE A.O. FOR HIS FRESH ADJUDICATION. THEREFORE, THIS PENALTY AT THIS STAGE DOES NOT SURVIVE. HOWEVER, IT IS SEEN THAT WHETHER THE ASSESSEE WAS O BLIGED TO DEDUCT TAX AT SOURCE U/S 195 OF THE ACT IS UNDOUBTEDLY A MATTE R OF DEBATE AND DELIBERATIONS IN RESPECT OF WHICH THE ASSESSEE HAS SUBMITTED FULL PARTICULARS. THE ISSUE INVOLVED IS UNDOUBTEDLY HIG HLY DEBATABLE, AND BECAUSE OF SECTION 40(A)(I), THE PAYMENT TO NON-RES IDENT HAS BEEN DISALLOWED BY THE A.O. THIS ASPECT OF THE MATTER C ANNOT BE A GROUND TO LEVY PENALTY U/S 271(1)(C) OF THE ACT AS THE CLAIM OF THE ASSESSEE HAS BEEN DISALLOWED IN THE LIGHT OF THE STATUTORY PROVI SIONS CONTAINED IN SECTION 40(A)(I) OF THE ACT AND NOT ON THE GROUND T HAT THE PAYMENT MADE TO NON-RESIDENT WAS BOGUS OR SHAME. WE, THEREFORE, UPHELD THE ORDER OF LD. CIT(A) IN DELETING THE PENALTY. 10. IN THE RESULT, THE ORDER OF LD. CIT(A) IN DELET ING THE PENALTY IS UPHELD. 11. IN THE RESULT, BOTH THESE APPEALS FILED BY THE REVENUE ARE DISMISSED. 12. THIS DECISION IS PRONOUNCED IN THE OPEN COURT I MMEDIATELY AFTER HEARING WAS OVER ON 16.12.2009. (K.D. RANJAN) ACCOUNTANT MEMBER (C.L. SETHI) JUDICIAL MEMBER DATED: 16 TH NOVEMBER, 2009. MAMTA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. BY ORDER DEPUTY REGISTRAR