M/s Avestagenome Projects International Pvt Ltd , Bangalore V. The Deputy Commissioner of Income Tax(TDS) Circle-16(1), Bangalore

ITA 428/BANG/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8093 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-07-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 13-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAVAMSHI B ENGALURU
• Assessee Lawyers: H N KHINCHA
• Keywords: TDS
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER SP NO.174/BANG/2019 [IN ITA 428/BANG/2018] & ITA NO.428/BANG/2018 ASSESSMENT YEAR : 2009-10 AVESTAGENOME PROJECT INTERNATIONAL PVT. LTD., REGUS-UB CITY, CONCORDE, 15 TH FLOOR, VITTAL MALLYA ROAD, BENGALURU 560 001. TAN: BLRA 07291 E VS. THE DEPUTY COMMISSIONER OF INCOME TAX (TDS), CIRCLE 16(1), BENGALURU. APPELLANT RESPONDENT ITA NO.433/BANG/2018 ASSESSMENT YEAR : 2009-10 AVESTAGEN QUALITY AGRICULTURAL SERVICES PVT. LTD., REGUS-UB CITY, CONCORDE, 15 TH FLOOR, VITTAL MALLYA ROAD, BENGALURU 560 001. TAN: BLRA 06507 E VS. THE DEPUTY COMMISSIONER OF INCOME TAX (TDS), CIRCLE 16(1), BENGALURU. APPELLANT RESPONDENT APPELLANTS BY : SHRI H.N. KHINCHA, CA RESPONDENT BY : SHRI VIKAS SURYAVAMSHI, ADDL.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 01.07.2019 DATE OF PRONOUNCEMENT : 17.07.2019 SP NO.174/B/19 & ITA NO.428/B/18 PAGE 2 OF 12 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT ITA NO.428/BANG/2018 IS AN APPEAL BY THE ASSESSEE BY NAME M/S. AVASTAGEN PROJECT INTERNATIONAL PVT. LTD. , AGAINST THE ORDER DATED 30.11.2017 OF CIT(APPEALS)-13, BENGALUR U, RELATING TO ASSESSMENT YEAR 2009-10 WHEREIN ORDER PASSED BY THE AO U/S 201(1) AND 201(1A) OF THE INCOME-TAX ACT, 1961 [THE ACT] WAS UPHELD. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS A SUBSIDIARY OF M/S AVESTAGEN LTD. A SURVEY WAS CONDU CTED IN THE CASE OF THE ASSESSEE U/S 133A OF THE I.T. ACT O N 26-07-2013. DURING THE COURSE OF SURVEY, IT WAS IDENTIFIED FROM THE ASSESSEE'S BOOKS OF ACCOUNTS THAT TDS DUES BY THE AS SESSEE FOR THE FY 2008-09 STOOD AT RS. 7,271/- . IT WAS AL SO NOTICED FROM THE ASSESSEE'S BOOKS OF ACCOUNTS THAT TAX DEDUC TION ENTRIES FOR SUM RS. 92,67,940 WERE REVERSED AT THE END OF THE YEAR. THESE DEDUCTION ENTRIES PERTAINED TO R & D EX PENSES WHICH WERE SUPPOSED TO BE PAYABLE TO THE ASSESSEE'S PARENT COMPANY, AVESTAGEN LTD. HOWEVER, IT WAS DECIDED THA T NO SUMS WOULD BE PAID BY THE ASSESSEE TO THE PARENT COMPANY AND THEREFORE THE ENTRIES FOR PAYMENT OF R&D EXPENSES A ND FOR DEDUCTION OF TAX AT SOURCE WERE REVERSED AT THE END OF THE SAME FINANCIAL YEAR. THE PARENT COMPANY TOO IN ITS BOOKS OF ACCOUNTS SP NO.174/B/19 & ITA NO.428/B/18 PAGE 3 OF 12 HAD REVERSED THE ENTRIES FOR INCOME. NO TDS WAS CLA IMED BY THE PARENT COMPANY IN RESPECT OF THE ABOVE TAX DEDUCTIO NS WHICH WERE SUBSEQUENTLY REVERSED. 3. IN THE PROCEEDINGS U/S. 201(1) AND 201(1A) OF THE A CT, THE FACT THAT THE ENTRIES OF TDS & PAYMENT OF R&D EXPEN SES HAVE BEEN REVERSED IS NOT DISPUTED. HOWEVER, THE AO HAS HELD THAT TAX ONCE DEDUCTED CANNOT BE REVERSED. HE DISREGARDE D THE ENTRIES FOR REVERSAL OF TDS AND TREATED THE ASSESSE E IN DEFAULT U/S 201(1) WITH RESPECT TO THE ABOVE TDS OF RS. 92, 67,940/-. IN TOTAL, THE ASSESSEE WAS TREATED AS DEDUCTOR IN DEFA ULT FOR A SUM OF RS.92,75,211/- [RS. 7,271/- + RS. 92,67,940/-]. FURTHER, A SUM OF RS. 85,88,563/- WAS COMPUTED AND LEVIED AS INTER EST U/S 201(1A) OF THE I.T. ACT. 4. AGGRIEVED BY THE ORDER U/S 201(1) AND 201(1A), THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(APPEALS). 5. BEFORE THE CIT(APPEALS), THE ASSESSEE REITERATED IT S SUBMISSIONS MADE BEFORE THE AO. THE ASSESSEE RELIE D ON THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN ITA NO. 908 / 2007 HELD IN CASE OF WIPRO HEALTH CARE IT LTD ., WHEREIN IT WAS HELD THAT WHEN THE AGREEMENT TO PAY ROYALTY WAS CAN CELLED BEFORE THE CLOSURE OF ACCOUNT, THOUGH EARLIER THE D EBIT ENTRIES WERE MADE MONTHLY FOR ROYALTY, NO TDS LIABILITY ARI SES WHEN SP NO.174/B/19 & ITA NO.428/B/18 PAGE 4 OF 12 ONCE THE ENTRIES ARE CANCELLED SUBSEQUENTLY. THE OB SERVATIONS OF THE HONBLE HIGH COURT ARE AS FOLLOWS:- 'FROM THE AFORESAID MATERIAL ON RECORD, IT IS CLEAR THAT AGREEMENT WITH REGARD TO PAYMENT OF ROYALTY WAS CANCELLED, NO ROYALTY WAS PAYABLE AND THEREFORE, TH E QUESTION OF DEDUCTING TDS ON SUCH ROYALTY DOES NOT ARISE. THESE FACTS ARE NOT IN DISPUTE. THEREFORE, I N THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE V IEW THAT THE ORDER PASSED BY THE TRIBUNAL IS CORRECT. H ENCE, WE PASS THE FOLLOWING ORDER: APPEAL IS ALLOWED.' 6. THE ASSESSEE SUBMITTED THAT ITS CASE WAS SQUARELY COVERED BY THE ABOVE JUDGMENT. IT WAS FURTHER SUBM ITTED THAT AS THE PRINCIPAL SUM OF RS. 92,67,940/- ITSELF IS NOT PAYABLE BY THE ASSESSEE, THE CONSEQUENT INTEREST LIABILITY IS ALSO NOT PAYABLE AND HAS TO BE DELETED. 7. THE CIT(APPEALS), HOWEVER, DID NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE. THE CIT(A) CALLED UPON THE ASSESSEE TO FILE A COPY OF AGREEMENT BETWEEN THE AS SESSEET AND AVESTAGEN LTD. FOR ASSIGNMENT OF WORK, BASED ON WHICH CONSULTANCY PAYMENTS WERE MADE AND ALSO EVIDENCE RE GARDING CANCELLATION OF THE SAID AGREEMENT. A TYPED COPY O F A LETTER SIGNED BY MANAGING DIRECTOR OF AVESTAGEN LTD, ADDRE SSED TO THE ASSESSEE WAS FILED WHICH LETTER IT WAS STATED THAT 'THE AGREEMENT MADE BY AND BETWEEN THE AVESTAGEN LTD AND SP NO.174/B/19 & ITA NO.428/B/18 PAGE 5 OF 12 AVESTAGENOME PROJECTS INTERNATIONAL PVT. LTD BEARIN G REGISTERED NO. U73100KA2007PTC044724 DATED 10TH DAY OF JANUARY , 2008 STANDS TERMINATED WITH IMMEDIATE EFFECT. ' 8. THE CIT(A) ON AN EXAMINATION OF THIS LETTER CAME TO THE CONCLUSION THAT THE REVERSAL OF ENTRIES MADE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS WELL AS AVESTAGEN LTD., WAS BOGUS FOR THE FOLLOWING REASONS: A) AS PER THE AGREEMENT THE ASSESSEE HAS TO REIMBURSE AVASTHAGEN LTD., SUCH AMOUNT AS IS INCLU SIVE OF THE COST INCURRED, WITHIN 15 DAYS OF THE DATE OF INVOICE AND THE INVOICES SHALL BE RAISED AT THE END OF EACH CALENDAR QUARTER. THEREFORE THE SEQUENCE OF EVENTS MUST BE FIRST RAISING INVOICE AND THEN MAKING PAYME NT. THE ASSESSEE HOWEVER DID NOT PRODUCE THE INVOICES, ALTHOUGH THE SAME WERE SPECIFICALLY ASKED FOR VIDE NOTE- SHEET ENTRY DATED 31.03.2017. LOGICAL INTERFERENCE IS THAT THE PAYMENTS CREDITED TO THE ACCOUNT OF AVESTA GEN LTD. IN THE BOOKS OF THE ASSESSEE WERE AFTER THE SE RVICES WERE RENDERED BY AVESTAGEN LTD. TO THE ASSESSEE AND THEREFORE THERE IS NO CASE FOR REVERSAL OF ENTRIES. B) THE REVERSAL OF ENTRIES IS NOT SUPPORTED BY ANY VALID DOCUMENT. THE AGREEMENT TO RENDER SERVICES BY AVASTHAGEN LTD., IS DATED 13.4.2008 AND THE CANCELLATION ENTRIES IS DATED 15.4.2008. WITHIN TW O DAYS THE AGREEMENT HAS BEEN TERMINATED. NO ACCEPTABLE REASON HAS BEEN GIVEN FOR CANCELLATION OF THE AGREEMENT. C) THE STAMP PAPER ON WHICH THIS AGREEMENT WAS SIGNED WAS PURCHASED ON 27.11.2007; THE AGREEMENT SP NO.174/B/19 & ITA NO.428/B/18 PAGE 6 OF 12 WAS MADE ON 10.01.2008 AND SIGNED ON 13.04.2008 (AS PER THE DETAILS ON THE AGREEMENT). THUS IT TOOK A MINIMUM PERIOD OF FOUR MONTHS (FROM 27.11.2007 TO 13.04.2008) TO DELIBERATE AND REDUCE IN WRITING THE DECISION TO ENTER AN AGREEMENT. IT DOESN'T APPEAL TO COMMON SENSE THAT IN NEXT TWO DAYS, IT WAS DECIDED TO BE CANCELLED WITHOUT ANY REASON. D) THE DECISION OF HON'BLE THE KARNATAKA HIGH COURT IN THE CASE OF WIPRO HEALTH CARE (SUPRA) IS N OT APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. IN THE CASE OF WIPRO HEALTH CARE, THE CANCELLATION OF THE AGREEMENT WAS NOT IN DOUBT. 9. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED COUNSEL F OR THE ASSESSEE REITERATED STAND OF THE ASSESSEE AS PUT FO RTH BEFORE THE AO/CIT(A). THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE ASSESSEE IS IN THE BUSINESS OF RESEARCH IN BIO SCIE NCE. THERE WAS A SURVEY U/S. 133A OF THE ACT IN THE BUSINESS P REMISES OF THE ASSESSEE WITH A VIEW TO VERIFY WHETHER TDS ARE BEING PROPERLY REMITTED. IN THE COURSE OF SURVEY, THE OF FICER CONDUCTING THE SURVEY FOUND THAT THERE WERE REVERSA L OF ENTRIES FOR PAYMENT TO AVASTAGEN LTD., PARENT COMPANY OF TH E ASSESSEE. ENTRIES FOR TDS ON THE AFORESAID PAYMENT ENTRIES WERE ALSO FOUND. BUT NO TDS HAD BEEN DEDUCTED AND PAID TO SP NO.174/B/19 & ITA NO.428/B/18 PAGE 7 OF 12 THE GOVERNMENT. EVEN IN THE COURSE OF SURVEY THE O FFICER CONDUCTING THE SURVEY FOUND THAT THE ENTRIES IN THE NAME OF AVASTAGEN LTD., WERE REVERSED. THE CASE OF THE ASS ESSEE WAS THAT PAYMENTS WERE TO BE MADE TO AVASTAGEN LTD., FO R COMMON RESEARCH WHICH THEY WERE TO DO FOR ALL THE GROUP EN TITIES AND THE BENEFIT OF SUCH COMMON RESEARCH WOULD BE PASSED ON TO THE ASSESSEE. THERE WAS AN AGREEMENT DATED 13.4.2008 B ETWEEN AVASTAGEN LTD., AND THE ASSESSEE FOR PROVIDING BENE FIT OF RESEARCH CARRIED OUT BY THE FORMER TO THE ASSESSEE. HOWEVER THAT AGREEMENT WAS TERMINATED BY A LETTER DATED 15. 4.2008 AND THEREFORE THE ENTRIES FOR PAYMENTS TO BE MADE TO AV ASTAGEN LTD., WERE MADE IN THE BOOKS OF ACCOUNTS AND SUBSEQUENTLY THERE WERE REVERSAL OF ENTRIES AND THEREFORE THERE WAS NE ITHER ENTRY FOR PAYMENT IN THE BOOKS OF ACCOUNTS NOR ANY ACTUAL PAY MENT AND THEREFORE THERE WAS NO QUESTION OF DEDUCTION OF ANY TAX AT SOURCE SO AS TO ATTRACT PROVISIONS OF SEC.201(1) & 201(1A) OF THE ACT. 10. THE PLEA OF THE ASSESSEE WAS SUPPORTED BY DOCUMENTS WHICH WERE DISBELIEVED BY THE REVENUE AUTHORITIES F OR TWO REASONS, VIZ., (I) THAT THE ENTRIES FOR PAYMENT AND REVERSAL OF ENTRIES WERE MADE IN THE BOOKS OF ACCOUNTS EVEN AFT ER THE ALLEGED TERMINATION OF THE AGREEMENT BETWEEN THE AS SESSEE AND AVASTAGEN LTD., I.E., AFTER 15.4.2008. (II) TH E CANCELLATION CANNOT BE BELIEVED TO BE TRUE BECAUSE THERE WERE NO REASONS SP NO.174/B/19 & ITA NO.428/B/18 PAGE 8 OF 12 ASSIGNED FOR CANCELLATION OF THE AGREEMENT AND THE CANCELLATION THEORY DID NOT APPEAL TO COMMON SENSE. 11. IN OUR VIEW BOTH THE REASONS ASSIGNED BY THE REVENU E AUTHORITIES CANNOT BE THE BASIS TO HOLD THAT THERE WAS IN FACT AN ENTRY FOR PAYMENT WHICH OBLIGATES THE ASSESSEE TO D EDUCT TAX AT SOURCE. ADMITTEDLY, EVEN AT THE TIME OF SURVEY, TH E ENTRIES FOR PAYMENTS AS WELL AS THE ENTRY FOR REVERSAL OF THOSE ENTRIES WERE FOUND. THE THEORY OF REVERSAL CANNOT THEREFORE BE AN AFTER- THOUGHT. HAD THERE BEEN NO REVERSAL OF ENTRIES IN THE BOOKS OF ACCOUNTS THE LIABILITY OF THE ASSESSEE TO DEDUCT TA X AT SOURCE WOULD EXIST. IT IS ONLY OWING THE MISTAKE IN MAKIN G THE ENTRIES FOR PAYMENT DESPITE THE AGREEMENT HAVING BEEN TERMI NATED THAT THE REVERSAL OF ENTRIES BECAME NECESSARY. THEREFOR E THE REVERSAL OF ENTRIES CANNOT BE SAID TO BE AN AFTER- THOUGHT. SECONDLY, THE TERMINATION OF AGREEMENT BETWEEN THE PARTIES WAS UNILATERAL AND THERE IS NO MATERIAL ON RECORD TO SH OW THAT THE PLEA OF TERMINATION OF THE AGREEMENT WAS NOT TRUE. THE PARTIES TO AN AGREEMENT ARE AT LIBERTY TO VARY THE TERMS OF THE AGREEMENT OR TERMINATE THE AGREEMENT. THE CONCLUSIONS OF THE REVENUE AUTHORITIES IN THIS REGARD ARE PURELY BASED ON SURM ISES AND CANNOT BE SUSTAINED. 12. IN THE CASE OF CIT VS. WIPRO HEALTHCARE IT LTD., (2013) 34 TAXMANN.COM 74 (KARNATAKA) , THE FACTS WERE THAT THE ASSESSEE SP NO.174/B/19 & ITA NO.428/B/18 PAGE 9 OF 12 IN THAT CASE ENTERED INTO A COLLABORATION AGREEMENT WITH M/S. GE INFORMATION TECHNOLOGY INC., USA (GEMS IT, USA). ACCORDING TO THE CONTRACT, THE USA COMPANY HAD GIVE N LICENSE TO THE ASSESSEE, THE RIGHT TO USE THE IPRS BELONGIN G TO THAT COMPANY AND ALSO TO PARTICIPATE IN GLOBAL TECHNOLOG Y DEVELOPMENT EFFORTS FUNDED BY THEM. THE ASSESSEE WA S TO PAY ROYALTY AT 15% ON INTERNAL AND EXPORT SALES OF ALL PRODUCTS MADE, SOLD, ASSEMBLED AND LICENCED BY THE ASSESSEE. ACCOR DING TO THE ASSESSEE THE AGREEMENT CAME TO BE EXECUTED ON 6TH SEPTEMBER, 2000. IN THE FINANCIAL YEAR 2001-02 THE ASSESSEE- COMPANY MADE DEBIT ENTRIES ON MONTHLY BASIS IN ROYA LTY ACCOUNT SINCE ROYALTY WAS PAYABLE TO THE US COMPANY. HOWEVE R, BEFORE CLOSURE OF THE ACCOUNT A REVERSE ENTRY WAS MADE IN RESPECT OF THE ROYALTY PAYABLE AT RS. 1,92,42,304/-, THE REASO N BEING THAT THE ROYALTY PAYMENT WAS CANCELLED FROM THE VERY INC EPTION, FROM THE TERMS OF THE AGREEMENT ENTERED INTO BETWEEN THE PARTIES, WHICH WAS SUPPORTED BY THE LETTER DATED 09.07.2002 ISSUED BY US COMPANY. THE ASSESSING OFFICER HELD THAT THE AGR EEMENT WAS NOT CANCELLED BUT ONLY THE PAYMENT OF ROYALTY W AS CANCELLED. THEREFORE, HE PASSED AN ORDER UNDER SECT ION 201(1) OF THE IT ACT RAISING DEMAND OF TAX OF RS. 30,46,18 8/- AND ALSO HELD THAT THE INTEREST IS PAYABLE THEREON. ON APPEA L THE TRIBUNAL HELD THAT SINCE THE AGREEMENT WAS CANCELLED THERE W AS NO OBLIGATION TO DEDUCT TAX AT SOURCE. ON FURTHER APP EAL, THE SP NO.174/B/19 & ITA NO.428/B/18 PAGE 10 OF 12 HONBLE HIGH COURT HELD THAT F ROM THE MATERIAL ON RECORD, IT WAS CLEAR THAT IF AGREEMENT WITH REGARD TO PAYMENT OF R OYALTY WAS CANCELLED, NO ROYALTY WAS PAYABLE AND THEREFORE, TH E QUESTION OF DEDUCTING TDS ON SUCH ROYALTY DOES NOT ARISE. THERE FORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER PASSE D BY THE TRIBUNAL WAS CORRECT. 13. THE AFORESAID DECISION OF THE KARNATAKA HIGH COURT IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CAS E. APART FROM THE ABOVE, ENTRIES IN THE BOOKS OF ACCOUNTS ARE NOT CONCLUSIVE WITH REGARD TO LIABILITY TO TAX WHEN IT IS SHOWN TH AT THE TAXABLE EVENT HAD IN FACT NOT TAKEN PLACE OR WAS GIVEN UP O R ABANDONED. WE THEREFORE HOLD THAT THERE WAS NO OBLIGATION ON T HE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE AND THEREFORE THE ORDERS U/S.201(1) & 201(1A) OF THE ACT ARE LIABLE TO BE VA CATED AND ARE HEREBY VACATED. 14. THE APPEAL OF THE ASSESSEE IS ALLOWED. SINCE THE A PPEAL IS ALLOWED, THE STAY PETITION BECOMES INFRUCTUOUS AND HENCE THE SAME IS DISMISSED. ITA NO.433/BANG/18. 15. THIS IS AN APPEAL BY THE ASSESSEE BY NAME AVASTAGEN QUALITY AGRICULTURAL PVT. LTD. AGAINST THE ORDER DA TED 30.11.2017 OF CIT(A)-13, BENGALURU, RELATING TO AY 2011-12. SP NO.174/B/19 & ITA NO.428/B/18 PAGE 11 OF 12 16. THIS COMPANY IS ALSO A GROUP COMPANY OF AVASTAGEN L TD. THIS APPEAL ALSO ARISES PURSUANT TO PROCEEDINGS U/S .201(1) & 201(1A) OF THE ACT. THE ORDER WAS PASSED IN THE CA SE OF THIS ASSESSEE PURSUANT TO THE SURVEY U/S.133A OF THE ACT CONDUCTED ON 26.7.2013. THE FACTS ARE IDENTICAL AS IN THE CA SE OF THE ASSESSEE IN ITA NO. 428/BANG/18. THE REVERSAL OF E NTRIES IN THE CASE OF THIS ASSESSEE WAS ON ACCOUNT OF SALARY PAID TO EMPLOYEES OF PARENT COMPANY WHO WERE SENT ON DEPUTA TION. THESE EMPLOYEES WERE PAID SALARY BY THE PARENT COMP ANY AND TDS ON THE SAME WAS ALSO DEDUCTED BY THE PARENT COM PANY. THE ASSESSEE REIMBURSED PAYMENTS TO THE PARENT COMP ANY. BESIDES THE ABOVE, THE ASSESSEE ALSO REIMBURSED THE PARENT COMPANY RENT, ELECTRICITY COST AND OFFICE MAINTENAN CE EXPENSES IN RESPECT OF OFFICE SPACE OF THE PARENT COMPANY UT ILIZED BY THE ASSESSEE. THE ASSESSEE MADE ENTRIES FOR PAYMENT AS WELL AS FOR TDS ON THE ABOVE PAYMENTS BUT THESE ENTRIES WER E REVERSED AND IT WAS CLAIMED THAT SINCE THERE WAS REVERSAL OF ENTRIES THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE. NO REAS ONS WHATSOEVER WERE ASSIGNED BY THE ASSESSEE FOR REVERS AL OF ENTRIES IN THE BOOKS OF ACCOUNTS. IN THE CIRCUMSTA NCES, WE ARE OF THE VIEW THAT LIABILITY TO DEDUCT TAX AT SOURCE DID EXIST AT THE TIME WHEN ENTRIES WERE MADE IN THE BOOKS OF ACCOUNT S. SINCE REVERSAL OF THESE ENTRIES WERE MADE WITHOUT ANY BAS IS, THE REVERSAL OF ENTRIES WILL NOT HAVE THE EFFECT OF TAK ING AWAY THE SP NO.174/B/19 & ITA NO.428/B/18 PAGE 12 OF 12 OBLIGATION OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. IN THE CIRCUMSTANCES, WE UPHOLD THE ORDER OF CIT(A) CONFIR MING THE ORDER OF THE AO PASSED U/S.201(1) & 201(1A) OF THE ACT. 17. THE APPEAL OF THE ASSESSEE IS THEREFORE DISMISSED. 18. IN THE RESULT, ITA NO. 428/BANG/2018 IS ALLOWED , WHILE ITA NO.433/BANG/2018 IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 17TH DAY O F JULY, 2019. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 17 TH JULY, 2019. / DESAI SMURTHY/VMS COPY TO: 1. APPELLANTS (2) 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.