M/s Compaq International , Jagadhri V. DCIT, Circle, Yamunanagar

ITA 563/CHANDI/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0016 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 26-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VANDANA MOHINTE
• Keywords: Audit objection; Tangible material; Difference of opinion; Reason to believe; Change of opinion; TDS; Set aside
• Section: 143(3); 194C; 195; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH , !' # $ % &' , '( BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 563/CHD/2019 / ASSESSMENT YEAR : 2010-11 M/S COMPAQ INTERNATIONAL, VPO-SHADIPUR, TEHSIL-JAGADHARI, DISTT.YAMUNANAGAR THE DCIT , CIRCLE OFFICE, INCOME TAX OFFICE, YAMUNNAGAR ./PAN NO: RTKCO2239G / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI SUDHIR SEHGAL, ADVOCATE ' ! / REVENUE BY : SMT. VANDANA MOHINTE, SR DR # $ % /DATE OF HEARING : 31/10/2019 &'() % / DATE OF PRONOUNCEMENT : 23/12/2019 ')/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 22.02.2019 OF THE COMMISSIONER OF INCOM E TAX (APPEALS)-4, LUDHIANA [HEREINAFTER REFERRED TO AS CIT (A)]. 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE ORDER OF THE LD. CIT(A) 4 LUDHIANA IS WRONG, ILLEGAL AND AGAINST THE FACTS OF THE CASE. ITA NO. 563-CHD-2019 M/S COMPAQ INTERNATIONAL, YAMUNAGAR 2 2. THAT THE LD. CIT(A)-4,LUDHIANA IS WRONG IS NOT ALLOWING RELIEF OF RS. 20,65,171/- U/S 250(6) OF TH E INCOME TAX ACT, 1961. 3. THE APPELLANT RESERVES A RIGHT TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 4. THE APPELLANT PRAYS THAT THE APPEAL MAY VERY KINDLY BE ALLOWED IN TOTAL. 3. APART FROM THIS, THE ASSESSEE HAS TAKEN THE FOLL OWING ADDITIONAL LEGAL GROUNDS OF APPEAL:- 1 . 'THAT THE LD. ASSESSING OFFICER HAS ERRED IN REOPENING THE CASE U/S 148 AND, THEREBY, RESORTING TO THE ASSESSMENT MADE U/S 143(3)/147. 2. THAT THERE WAS NO REASON TO BELIEVE WITH THE ASSESSING OFFICER FOR THE PURPOSES OF REOPENING OF THE CASE AND NOR THERE WAS ANY APPLICATION OF MIND INDEPENDENTLY BY THE ASSESSING OFFICER, AS THE RE- OPENING PROCEEDINGS ARE PURELY BASED ON AUDIT OBJECTION, AND, AS SUCH, THE REOPENING IS BAD IN LA W. 3. THAT THE ENTIRE DETAILS RELATING TO THE FREIGHT CHARGES AMOUNTING TO RS. 20,17,397/- AND INTEREST O N PARTNER'S CAPITAL WERE FILED DURING THE 143(3) PROCEEDINGS AND THUS, THE REOPENING OF THE CASE IS NOTHING BUT CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER. 4. THE ASSESSEE THROUGH THE ADDITIONAL GROUNDS OF A PPEAL HAS RAISED THE LEGAL ISSUE REGARDING VALIDITY OF THE REOPENING OF THE ASSESSMENT; HENCE, THE SAME IS TAKEN FIRST FOR ADJUDICATION. AS POINTED OUT THROUGH THE AFORESAID GROUNDS OF APP EAL AND FURTHER FROM THE PERUSAL OF THE PAPER BOOK PAGES 81A TO 81F , IT IS REVEALED THAT THE AUDIT PARTY POINTED OUT THAT THE ASSESSEE HAD N OT DEDUCTED THE TAX AT ITA NO. 563-CHD-2019 M/S COMPAQ INTERNATIONAL, YAMUNAGAR 3 SOURCE ON THE PAYMENTS MADE ON ACCOUNT OF FREIGHT T O M/S MOVERS INTERNATIONAL PVT LTD., NEW DELHI, M/S MOVERS MUMBA I AND M/S DHL LEMUR LOGISTIC PVT LTD ETC. AND, HENCE, THERE WAS A VIOLATION OF PROVISIONS OF SECTION 194C OF THE ACT. 5. NOW THE COUNSEL FOR THE ASSESSEE HAS CONTENDED T HAT THE ASSESSING OFFICER HAD NO REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THAT IT WAS A CHANGE OF OPINION OF THE ASSESSING OFFICER. THAT THE ENTIRE DETAILS WERE ALREADY SUPPL IED TO THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS CARRIED OUT US 143(3) OF THE ACT. HOWEVER, THE LD. COUNSEL COULD NOT POINT OUT F ROM RECORD THAT THE AFORESAID ISSUE OF NO DEDUCTION OF FREIGHT PAYMENTS WAS EVER EXAMINED BY THE ASSESSING OFFICER DURING THE ASSESSMENT PRO CEEDINGS. SO FAR AS THE ISSUE THAT THE INFORMATION SHOULD COME TO THE A SSESSING OFFICER THROUGH SOME TANGIBLE MATERIAL, THE ASSESSEE ITSELF HAS FURNISHED COPIES OF THE AUDIT OBJECTIONS ETC. WHICH SHOWS THAT THE A FORESAID INFORMATION OF NON-DEDUCTION OF TDS ON THE FREIGHT PAYMENTS WAS SUPPLIED TO THE ASSESSING OFFICER BY THE AUDIT PARTY BY WAY OF AUDI T OBJECTIONS, THUS, THE INFORMATION HAD COME TO THE ASSESSING OFFICER T HROUGH TANGIBLE MATERIAL ABOUT THE ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM TAXATION. 6. IN VIEW OF THIS, THE ASSESSING OFFICER HAD GOT T HE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSM ENT AFTER GETTING ITA NO. 563-CHD-2019 M/S COMPAQ INTERNATIONAL, YAMUNAGAR 4 INFORMATION FROM TANGIBLE MATERIAL. WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND, ON THIS ISSUE, HENCE, THE LEGAL GRO UNDS RAISED BY THE ASSESSEE REGARDING THE REOPENING OF THE ASSESSMENT ARE HEREBY DISMISSED. 7. NOW COMING TO THE MERITS OF THE CASE, THE ASSESS EE IN THIS APPEAL HAS RAISED TWO ISSUES, FIRSTLY, IN RESPECT OF THE A DDITION OF RS.20,17,393/- ON ACCOUNT OF DISALLOWANCE OF EXPEND ITURE ON ACCOUNT OF NON-DEDUCTION OF TDS AND, SECONDLY, REGARDING VAL IDITY OF THE ADDITION OF RS. 4,774/- ON ACCOUNT OF DIFFERENCE IN INTEREST CALCULATION ON THE PARTNERS CAPITAL. 8. SO FAR AS THE ISSUE RELATING TO THE NON-DEDUCTIO N OF TDS ON ACCOUNT OF EXPENDITURE ON EXPORT FREIGHT IS CONCERN ED, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE W AS NOT LIABLE TO DEDUCT TDS ON PAYMENTS MADE TO THE RESIDENT SHIPPING COMPA NIES WHICH WERE ACTING AS AGENTS TO THE NON-RESIDENT COMPANY. HE, IN THIS RESPECT HAS RELIED UPON THE CBDT CIRCULAR NO. 723 DATED 19.9.19 95 AND FURTHER HAS ALSO SUBMITTED THAT SINCE THE PROVISIONS OF SECTION 172 OF THE ACT WERE APPLICABLE TO THE CASE OF THE ASSESSEE AND AS PER L AW LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN CIT VS V.S. DEMPO AND CO. (2016) 66 TAXMAN.COM 93 (BOMBAY), THE PROVISIONS OF CHAPT ER XVII OF THE ACT FOR COLLECTION OF THE RECOVERY OF THE TAX AND ITS DEDUCTION AT SOURCE VIDE ITA NO. 563-CHD-2019 M/S COMPAQ INTERNATIONAL, YAMUNAGAR 5 SECTION 195 OF THE ACT, WOULD NOT BE APPLICABLE. THE LD. COUNSEL HAS FURTHER SUBMITTED THAT LD. CIT(A) WHILE DECIDING TH E ISSUE HAS RELIED UPON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE TAX APPEAL NO.7/2005 IN THE CASE OF CIT VS M/S ORIENTAL GOA P VT LTD. DATED 16.10.2009, WHICH ISSUE IS NOT APPLICABLE TO THE FA CTS AND CIRCUMSTANCES OF THE CASE, WHEREAS, THE DECISION OF THE DELHI BEN CH OF THE TRIBUNAL IN THE CASE OF ITO VS ARUN KUMAR ITA NO. 5063/DEL/ 2012 VIDE ORDER DATED 4.12.2015 WAS DULY CITED BEFORE THE LD. CIT(A ), HOWEVER, THE LD. CIT(A) FAILED TO REFER TO THE SAME IN THE IMPUGNED ORDER. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE AFO RESAID PAYMENTS WERE MADE TO THE RESIDENT COMPANIES WHICH WERE AGENTS TO THE FOREIGN COMPANIES AND, THEREFORE, AS PER CBDT CIRCULAR NO. 723 OF 1995 DATED 19.9.1995, THE PAYMENT WAS DEEMED TO BE MADE TO THE FOREIGN COMPANIES AND THAT THE LAW LAID DOWN BY THE HON'BLE BOMBAY H IGH COURT IN CIT VS V.S. DEMPO AND CO. IS SQUARELY APPLICABLE. 9. THE LD. DR, ON THE OTHER HAND, HAS SUBMITTED TH AT THE ASSESSEE HAS NOT PROVED WITH RELIABLE EVIDENCE THAT THE AFOR ESAID COMPANIES TO WHOM THE PAYMENTS WERE MADE, WERE AGENTS OF THE FOR EIGN COMPANIES. THAT EVEN THE PAYMENTS WERE NOT MADE TO THEIR FOREI GN OFFICE. 10. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT FROM THE BILLS AND VOUCHERS, IT CAN BE ASCERTAINED THAT THE PAYMENTS WERE ITA NO. 563-CHD-2019 M/S COMPAQ INTERNATIONAL, YAMUNAGAR 6 MADE TO THE FOREIGN COMPANIES THROUGH THEIR AGENT INDIAN RESIDENT COMPANIES. 11. BOTH THE LD. REPRESENTATIVES OF THE PARTIES, AT THIS STAGE, HAVE SUBMITTED THAT BOTH THE ISSUES REQUIRE FACTUAL EXAM INATION AT THE HANDS OF THE ASSESSING OFFICER. IN VIEW OF THIS, THE ORD ER OF THE CIT(A) IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FACTUAL EXAMINATION OF THE ASPECTS AND THEN TO DECI DE THE ISSUES AFRESH IN ACCORDANCE WITH LAW. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS AL LOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2019. ( # $ % &' / ANNAPURNA GUPTA) '( / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 23.12.2019 .. '+ ,-.- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , %2 , 34516 / DR, ITAT, CHANDIGARH 6. 157$ / GUARD FILE '+ # / BY ORDER, 8' / ASSISTANT REGISTRAR