Saint Gobain Glass India Limited, Kancheepuram V. DCIT, CHENNAI

ITA 433/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95913 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 12-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR U ANJENEYALU
• Assessee Lawyers: R VIJAYARAGHAVAN; S P CHIDAMBARAM S
• Keywords: Principle of natural justice
• Section: 143(3); 115JB; 147; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ , % ' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO . 433/MDS/2013 ( / ASSESSMENT YEAR: 2007-08) M/S. SAINT GOBAIN GLASS INDIA LTD. PLOT NO.A, SIPCOT INDL PARK SRIPERUMBUDUR, KANCHEEPURAM DIST. VS. DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, CHENNAI-600 101. PAN:AABCS4338M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.R.VIJAYARAGHAVAN, & MR.S.P.CHIDAMBARAM, ADVOCATES /RESPONDENT BY : DR.U.ANJENEYALU, CIT /DATE OF HEARING : 23 RD JUNE, 2015 /DATE OF PRONOUNCEMENT : 19 TH AUGUST, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE ORDER OF THE COMMISSIONER OF INCOME TAX, LTU, CHENN AI DATED 28.12.2012 PASSED UNDER SECTION 263 OF THE AC T IN ASSUMING JURISDICTION UNDER SECTION 263 AND HOLDING THAT ASSESSMENT ORDER PASSED UNDER SECTION 143(3) ON 30.12.2010 IS ERRONEOUS AND PREJUDICIAL TO THE INTE RESTS OF THE REVENUE AND IN DIRECTING THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT AFRESH AFTER GIVING EFFECTIVE OPPORT UNITY TO THE ASSESSEE. 2 ITA NO.433/MDS/2013 2. BRIEF FACTS ARE THAT ASSESSEE, A LIMITED COMPANY ENGAGED IN MANUFACTURE AND SALE OF FLOAT GLASS, MIR ROR AND TRADING IN FLOAT GLASS. THE ASSESSEE FILED ITS RETU RN OF INCOME ON 15.11.2007 DECLARING LOSS OF ` 32,13,27,441/- UNDER THE HEAD INCOME FROM BUSINESS AND DECLARED CAPITAL GAIN S AT ` 1,55,48,532/- UNDER THE NORMAL PROVISIONS OF THE AC T AND INCOME OF ` 40,99,30,416/- UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 144C(13) OF THE ACT WAS COMPLETED ON 19.10.2011 DETERMINING LOSS AT ` 23,52,67,331/- UNDER THE NORMAL PROVISIONS OF THE ACT AND INCOME AT ` 47,78,83,022/- UNDER SECTION 115JB OF THE ACT. SUBSEQUENTLY, COMMI SSIONER OF INCOME TAX PASSED ORDER UNDER SECTION 263 OF THE ACT ON 28.12.2012 HOLDING THAT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) READ WITH SE CTION 144C IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE FOR THE REASON THAT THE ASSESSING OFFICER F AILED TO EXAMINE THE PAYMENTS MADE TO NON-RESIDENT AGENTS T OWARDS SALES COMMISSION AND APPLICABILITY OF PROVISIONS OF SECTION 40(A)(I) READ WITH SECTION 9(1)(VII) OF THE ACT. C OMMISSIONER OF INCOME TAX ON EXAMINING THE RECORDS HELD THAT AS SESSING 3 ITA NO.433/MDS/2013 OFFICER FAILED TO EXAMINE THE CORRECT FACTS RELATIN G TO PAYMENTS MADE TO SAINT GOBAIN GLASS EXPROVER PARTIC ULARLY WITH REFERENCE TO LIABILITY OF DEDUCTION OF TAX UND ER SECTION 195 OF THE ACT AND THE APPLICABILITY OF PROVISIONS OF SECTION 40(A)(I) OF THE ACT. COMMISSIONER OF INCOME TAX OBS ERVED THAT IN RESPECT OF COMMISSION PAID TO VARIOUS OTHER AGENTS THE ASSESSEE HAS MENTIONED ONLY THAT COMMISSION WAS PA ID AT 5% AND NO DETAILS WERE FURNISHED REGARDING ANY SP ECIFIC AGREEMENT FOR PAYMENT OF COMMISSION FOR THE DETAILS OF SERVICES RENDERED BY THE AGENTS WERE ALSO NOT FURNI SHED. COMMISSIONER OF INCOME TAX OBSERVED THAT THIS GOES TO SHOW THAT ASSESSING OFFICER DID NOT CALL FOR RELEVA NT INFORMATION AND ALSO DID NOT EXAMINE WHETHER PAYMEN TS MADE TO AGENTS WERE IN THE NATURE OF TECHNICAL SERV ICES WITHIN THE MEANING OF CLAUSE (VII) READ WITH EXPLANATION 2 OF SECTION 9(1)(VII) OF THE ACT. BEFORE THE COMMISSIONER OF I NCOME TAX, ASSESSEE CONTENDED THAT ASSESSING OFFICER IN THE CO URSE OF ASSESSMENT PROCEEDINGS HAD TAKEN A VIEW ON THE ISS UE WHICH IS FAVOURABLE TO THE ASSESSEE AND IT IS NOT O PEN TO THE COMMISSIONER OF INCOME TAX TO TAKE A DIFFERENT VIEW ON THE SAME ISSUE. IT WAS OBSERVED BY THE COMMISSIONER OF INCOME 4 ITA NO.433/MDS/2013 TAX THAT RECORDS SHOW THAT ASSESSING OFFICER DID NO T CALL FOR RELEVANT DETAILS AND ALSO DID NOT EXAMINE THE NATUR E OF PAYMENT MADE TO NON-RESIDENT AGENTS AND HE NEVER EXAMINED WHETHER THE PAYMENTS WERE IN THE NATURE OF TECHNICAL SERVICES WITHIN THE MEANING OF CLAUSE (VI I) OF SECTION 9(1) OF THE ACT. THEREFORE, IN SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT ASSESSING OFFICER HAD TAKEN ONE OF THE TW O POSSIBLE VIEWS ON THE ISSUE. COMMISSIONER OF INCOME TAX THER EFORE HELD THAT ASSESSING OFFICER IN THE PRESENT CASE FAI LED TO EXAMINE CORRECT FACTS RELATING TO EXPORT AGENCY CO MMISSION PAID TO THE NON-RESIDENTS WHICH WERE ACTUALLY PAID FOR VARIOUS MARKET SERVICES PARTAKING THE CHARACTER OF TECHNICAL SERVICES. IN THE CIRCUMSTANCES, COMMISSIONER OF IN COME TAX HELD THAT ASSESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND TH US THIS IS A FIT CASE FOR ASSUMING JURISDICTION UNDER SECTION 26 3 OF THE ACT. ACCORDINGLY, COMMISSIONER OF INCOME TAX SET ASIDE T HE ASSESSMENT ORDER DATED 30.12.2010 WITH A DIRECTION TO ASSESSING OFFICER TO COMPLETE THE ASSESSMENT AFRESH AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE TO PLAC E ALL RELEVANT FACTS AND SUBMISSIONS. 5 ITA NO.433/MDS/2013 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THE COU RSE OF ASSESSMENT PROCEEDINGS ASSESSING OFFICER EXAMINED T HE NATURE OF PAYMENTS AND COMMISSION PAID AND HAS TAK EN ONE OF THE POSSIBLE VIEWS THAT SALES COMMISSION PAID BY THE ASSESSEE OUTSIDE INDIA IS ALLOWABLE AS DEDUCTION WI THOUT DEDUCTING TDS. REFERRING TO THE REPLY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, COUNSEL SUBMITS THAT ALL PARTICULARS OF EXPORT COMMISSION WERE SUBMITTED BEF ORE THE ASSESSING OFFICER. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF M/S. MALABAR INDUSTRIAL CO.LTD. VS. CIT (2 43 ITR 83) SINCE THE ASSESSING OFFICER HAS TAKEN ONE OF THE VI EWS POSSIBLE NO TDS IS REQUIRED TO BE MADE ON THE COMMI SSION PAID TO FOREIGN AGENTS. THUS, THE COMMISSIONER OF I NCOME TAX IS NOT JUSTIFIED IN HOLDING THAT ASSESSMENT OR DER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME TAX IN HOLDING THAT ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ W ITH SECTION 144C IS ERRONEOUS AND PREJUDICIAL TO THE IN TERESTS OF 6 ITA NO.433/MDS/2013 THE REVENUE. DEPARTMENTAL REPRESENTATIVE SUBMITS TH AT ASSESSING OFFICER HAS NOT EXAMINED SALES COMMISSION SAID TO HAVE BEEN PAID BY THE ASSESSEE TO FOREIGN AGENTS AND APPLICABILITY OF PROVISIONS OF SECTION 9(1)(VII) RE AD WITH SECTION 40(A)(I) OF THE ACT AND THEREFORE COMMISSIONER OF I NCOME TAX IS PERFECTLY JUSTIFIED IN INVOKING THE PROVISIONS O F SECTION 263 AND SETTING ASIDE THE ASSESSMENT FOR FRESH ASSESSME NT. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION RELIED ON. IN THE COURSE OF ASSESS MENT PROCEEDINGS, IT APPEARS THAT ASSESSEE SUBMITTED T HAT EXPORT COMMISSION OF ` 10,78,21,791/- WAS PAID FOR THE INCOME EARNED OUTSIDE INDIA AND THEREFORE THE INCOME DOES NOT ACCRUE OR ARISE IN INDIA, HENCE NO TDS IS APPLICABL E. THE ASSESSING OFFICER ACCEPTED THE SUBMISSIONS OF THE A SSESSEE AND NO DISALLOWANCE WAS MADE IN RESPECT OF SALES COMMISSION PAID BY THE ASSESSEE. THE COMMISSIONER O F INCOME TAX PASSED ORDER UNDER SECTION 263 OF THE AC T HOLDING AS UNDER:- 3.2. SO FAR AS THE COMMISSION PAID TO VARIOUS OTHE R AGENCIES WERE CONCERNED THE ASSESSEE HAD ONLY MENTIONED THAT COMMISSION WAS PAID TO SUCH AGENTS A T 7 ITA NO.433/MDS/2013 THE RATE OF 5%. NO DETAILS WERE FURNISHED REGARDING ANY SPECIFIC AGREEMENT FOR PAYMENT OF COMMISSION. THE DETAILS OF SERVICES RENDERED BY THESE AGENTS HAVE A LSO NOT BEEN FURNISHED. THIS WOULD SHOW THAT THE A.O. D ID NOT CALL FOR THE RELEVANT INFORMATION AND ALSO DID NOT EXAMINE WHETHER THE PAYMENT MADE TO THE AGENTS WERE IN THE NATURE OF TECHNICAL SERVICES WITHIN THE MEAN ING OF CLAUSE (VII) READ WITH EXPLANATION 2 OF SECTION 9(1 )(VII) OF IT ACT. 3.3. THE ASSESSEE HAS CONTENDED THAT THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS HAD TAKEN A VIEW ON THE ISSUE WHICH IS FAVOURABLE TO THE ASSESS EE AND IT IS NOT OPEN TO THE COMMISSIONER TO TAKE A DI FFERENT VIEW ON THE SAME ISSUE. AS ALREADY POINTED OUT, THE RECORDS SHOW THAT THE ASSESSING OFFICER DID NOT CAL L FOR THE RELEVANT DETAILS AND ALSO DID NOT EXAMINE THE N ATURE OF THE PAYMENTS MADE TO THE NON-RESIDENT. ACCORDING LY IT WAS NEVER EXAMINED WHETHER THE PAYMENTS WERE IN THE NATURE OF TECHNICAL SERVICES WITHIN THE MEANING OF CLAUSE (VII) OF SECTION 9(1) OF IT ACT. AS SUCH IT CANNOT BE SAID THAT THE A.O. HAD TAKEN ONE OF THE TWO POSSIBLE VIE WS ON THE ISSUE. THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD VS CL'T .(243 ITR 83) HAD CLEARLY NOTED THAT THE COMMISSIONER OF INCOME-TAX I S WITHIN HIS JURISDICTION TO SET ASIDE THE ORDER IF I T IS PASSED WITHOUT EXAMINATION OF THE RELEVANT DETAILS AND PRO VISION OF LAW. THE HON'BLE COURT OBSERVED AS FOLLOWS: 'THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN I NCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FAL L ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND'. THE AO IN THE PRESENT CASE FAILED TO EXAMINE THE CO RRECT FACTS RELATING TO THE EXPORT AGENCY COMMISSION PAID TO THE NON-RESIDENTS WHICH WERE ACTUALLY PAID FOR VARIOUS MARKET SERVICE PARTAKING THE CHARACTER OF 'TECHNICAL SERVICES'. IN THE ABOVE CONTEXT, THE DECISIONS CITED BY THE ASSESSEE (AS DISCUSSED IN PARA 2.1 OF THIS ORDER) H AVE NO. APPLICABILITY TO THE FACTS OF THE PRESENT CASE. 8 ITA NO.433/MDS/2013 6. ON GOING THROUGH THE ABOVE FINDINGS OF THE COMMISSIONER OF INCOME TAX AND THE ASSESSMENT ORDER , WE FIND THAT THE ASSESSING OFFICER HAS NOT EXAMINED T HE COMMISSION PAID TO VARIOUS AGENTS WITH REGARD TO NA TURE OF SERVICES RENDERED BY THEM, PROCUREMENT OF ORDERS BY THEM, AGREEMENTS ENTERED INTO WITH THEM ETC. 7. IN THE CASE OF M/S. MALABAR INDUSTRIAL CO.LTD., (243 ITR 83), THE HONBLE SUPREME COURT HELD THAT AN IN CORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF L AW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S. SIMILARLY, ORDERS PASSED WITHOUT APPLYING THE PRINC IPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND ARE ALSO ERRONEOUS. IN THE INSTANT CASE, THE ASSESSING OFF ICER WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) RE AD WITH SECTION 147 DID NOT EXAMINE THE PAYMENTS MADE TO NO N- RESIDENT AGENTS TOWARDS SALES COMMISSION AND APPLIC ABILITY OF PROVISIONS OF SECTION 40(A)(I) READ WITH SECTION 9(1)(VII) OF THE ACT. THE ASSESSING OFFICER HAS PASSED THE ASSE SSMENT ORDER ALLOWING THE CLAIM OF THE ASSESSEE WITHOUT CA LLING FOR THE DETAILS AND EXAMINING THEM. THEREFORE, THE ORDE R PASSED 9 ITA NO.433/MDS/2013 BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIN D IS CERTAINLY AN ERRONEOUS ORDER AND IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF MANNULAL MATADEEN VS. CIT (277 ITR 346) H ELD THAT THE INCOME TAX OFFICER HAD NOT MADE NECESSARY ENQUI RIES BEFORE ALLOWING THE DEDUCTION OF INTEREST TO MANNUL AL MATADEEN ON THE CREDIT BALANCE AND THEREFORE, THE O RDER PASSED WAS ERRONEOUS AND PREJUDICIAL TO THE INTERES TS OF THE REVENUE. 8. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS.SESHASAYEE PAPER AND BOARDS LTD. (242 ITR 490) W HILE EXAMINING THE POWERS OF COMMISSIONER OF INCOME TAX UNDER SECTION 263 OBSERVED AS UNDER:- THAT THE COMMISSIONER FOUND THAT THE INCOME- TAX OFFICER WAS NOT CORRECT IN GRANTING RELIEF WIT H RESPECT TO SOME OF THE ITEMS CONSIDERED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND FROM THE INSTANCES OR SPECIMENS OF SOME OF THE CASES EXAMINED BY HIM, HE CAME TO THE CONCLUSION THAT THE INCOME-TAX OFFICER HAD NOT COMPLETED THE ASSESSMENT BY FOLLOWING THE PROCEDURE EXPECTED OF HIM. IT WAS NOT NECESSARY FOR THE COMMISSIONER TO EXAMINE EACH ITEM IN DETAIL AND RECORD A CLEAR FINDING THAT THE ORDER PASSED BY THE INCOME-TAX OFFICER WAS ERRONEOUS. 10 ITA NO.433/MDS/2013 9. IN THE INSTANT CASE, FROM THE DETAILS FURNISHED BEFORE US, WE COULD SEE THAT THE ASSESSING OFFICER HAS NOT EX AMINED THE PAYMENTS MADE TO NON-RESIDENT AGENTS TOWARDS SA LES COMMISSION AND APPLICABILITY OF PROVISIONS OF SECTI ON 40(A)(I) READ WITH SECTION 9(1)(VII) OF THE ACT WHILE COMPLE TING THE ASSESSMENT. 10. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE ORDER PASSED BY THE AS SESSING OFFICER UNDER SECTION 143(3) READ WITH SECTION 147 ALLOWING THE CLAIM OF THE ASSESSEE WITHOUT EXAMINING THE PA YMENTS MADE TO NON-RESIDENT AGENTS TOWARDS SALES COMMISSIO N AND APPLICABILITY OF PROVISIONS OF SECTION 40(A)(I) REA D WITH SECTION 9(1)(VII) OF THE ACT IS CERTAINLY AN ORDER PASSED E RRONEOUSLY AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. TH EREFORE, WE HOLD THAT THE COMMISSIONER OF INCOME TAX RIGHTLY IN VOKED THE PROVISIONS UNDER SECTION 263 OF THE ACT DIRECTING THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT AFRE SH AFTER PROVIDING EFFECTIVE OPPORTUNITY TO THE ASSESSEE. AC CORDINGLY, WE UPHOLD THE IMPUGNED ORDER OF THE COMMISSIONER OF 11 ITA NO.433/MDS/2013 INCOME TAX AND DISMISS THE APPEAL OF THE ASSESSEE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST, 2015. SD/- SD/- ( # ) ( & (# ) ( CHANDRA POOJARI ) ( CHALLA NAGENDRA PRASAD ) * / ACCOUNTANT MEMBER ( * / JUDICIAL MEMBER ( /CHENNAI, , /DATED 19 TH AUGUST, 2015 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .