SUSHILA SURESH MALGE, MUMBAI V. JCIT TDS RANGE, THANE

ITA 6189/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6827 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2016-2017
• Appeal Filed On: 30-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Opportunity of being heard; Application of stay; Non-deduction of tax; TDS
• Section: 201(1); 201; 44AB; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH , AM ITA NO S . 6189 / MUM/20 1 8 & 6190/MUM/2018 ( ASSESSMENT YEAR : 2016 - 2017 & 2017 - 2018 ) SA NO S .501/MUM/2018 & 502/MUM/2018 (ARISING OUT OF ITA NO. 6189 /MUM/20 18 & 6190/MUM/2018 ( ASSESSMENT YEAR : 2016 - 2017 & 2017 - 2018 ) MRS. SUSHILA SURESH MALGE 1 ST FLOOR, SONAL APARTMENT, OPP. JOSHIWADA CHARAI, THANE (WEST) MAHARASHTRA VS. JCIT, TDS RANGE THANE PAN/GIR NO. AGTPM6884A ( APPELLANT ) .. ( RESPOND ENT ) ASSESSEE BY SHRI ANIL SATHE REVENUE BY SHRI CHAUDHARY ARUN KUMAR SINGH DATE OF HEARING 26 / 02 /201 9 DATE OF PRONOUNCEMENT 28 / 02 /201 9 / O R D E R PER M. BALAGANESH (A.M) : ITA NOS.6189/MUM/2018 & 6190/MUM/2018 THESE APPEA LS FILED BY ASSESSEE ARE DIRECT ED AGAINST THE ORDER OF CIT(A) - 1 , THANE DATED 4 TH OCTOBER 2018 FOR A.Y. S 2016 - 17 & 2017 - 18 IN THE MATTER OF IMPOSITION OF PENALTY U/S.271C OF THE INCOME TAX ACT . SINCE ITA NO. 6189/MUM/2018 AND OTHER APPEALS MRS. SUSHILA SURESH MALGE 2 IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATE D ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY COMMON ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING LEVY OF PENALTY U/S.271C OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE . 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS A PROPRIETR IX OF MOUNT MARY BUILDERS AND IS ENGAGED IN REAL ESTATE DEVELOPMENT AND CONSTRUCTION OF FLATS. THE A SSESSEE ENTERED INTO AN AGREEMENT DATED 22 ND JANU ARY, 2013 WITH M/S INDIABULLS DISTRIBUTION SERVICES LTD. APPOINTING THEM AS MARKETING REPRESENTATIVE AND UNDERWRITER TO SELL THE UNITS OF THE PROJECT - GREEN WORLD HAVING ADDRESS AT NAVI MUMBAI. IN CONSIDERATION, M/S INDIABULLS WAS ENTITLED TO RECEIVE MARK ETING FEES. 3.1 IN A SURVEY ACTION CARRIED OUT AT THE A SSESSEE 'S BUSINESS PREMISES, IT WAS FOUND THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON PAYMENT MADE TO M/S INDIABULLS DISTRIBUTION SERVICES LTD. ACCORDINGLY, THE A SSESSEE WAS TREATED AS 'ASSESS EE - IN - DEFAULT' UNDER SEC. 201{1) AND FURTHER PENALTY WAS LEVIED UNDER SEC. 271C FOR FAILURE TO DEDUCT TAX AT SOURCE. 3.2 THE ASSESSEE PREFERRED AN APPEAL BEFORE LEARNED CIT(A). THE LEARNED CIT(A) ON THE BASIS OF CERTIFICATE OF CHARTERED ACCOUNTANT FURNISHE D BY THE A SSESSEE UNDER PROVISO TO SEC. 201(1) HELD THAT THE ITA NO. 6189/MUM/2018 AND OTHER APPEALS MRS. SUSHILA SURESH MALGE 3 A SSESSEE IS NOT AN 'ASSESSEE - IN - DEFAULT'; HOWEVER UPHELD THE PENALTY LEVIED U/S 271C. 3.3 THE ASSESSEE HAD MOVED A RECTIFICATION APPLICATION TO THE ASSESSING OFFICER TO THE EFFECT THAT THE CORRE CT AMOUNT OF MARKETING FEES PAID TO M/S INDIABULLS IS NOT RS. 36,38,29,318/ - { RS. 17,26,66,232 FOR A.Y. 2017 - 18} AS CONSIDERED BY A.O. BUT RS. 27,95,30,959/ - { RS.11 ,75,70,500 FOR A.Y. 2017 - 18} AS BORNE OUT BY THE CERTIFICATE OF CHARTERED ACCOUNTANT AS WELL AS STATEMENT FROM INDIABULLS AND ACCORDINGLY, DEFAULT AMOUNT UNDER SEC. 201 AS WELL AS PENALTY UNDER SEC. 271C WOULD REDUCE. THE RECTIFICATION APPLICATION WAS REJECTED BY THE A.O. AGAINST WHICH THE APPEAL WAS FILED WITH LEARNED CIT(A) WHO ALLOWED THE APPE AL. THE LEARNED CIT(A) WHILE DISPOSING OF F APPEAL UNDER SEC. 271C ALSO GAVE A DIRECTION TO REDUCE THE QUANTUM OF PENALTY IN VIEW OF THE RECTIFICATION SOUGHT BY THE ASSESSEE . 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SU BMISSIONS. WE FIND THAT THE PRIME ARGUMENTS OF THE LD. DR WAS THAT PURSUANT TO THE SURVEY, THIS ISSUE OF NON - DEDUCTION OF TAX AT SOURCE IN RESPECT OF PAYMENT OF MARKETING FEES TO M/S. INDIA BULLS CAME TO LIGHT AND ACCORDINGLY, ASSESSEE IS ENTITLED TO BE IN VITED WITH THE PENALTY U/S.271C OF THE ACT. THE LD. DR PLACED RELIANCE ON THE PARA S 5 TO 5.5 OF THE ORDER OF THE LD. CIT(A) IN SUPPORT OF HIS ITA NO. 6189/MUM/2018 AND OTHER APPEALS MRS. SUSHILA SURESH MALGE 4 ARGUMENTS. WE FIND THAT THE LD. A R STATED THAT ASSESSEE BEING A BUILDER , IS FOLLOWING THE PROJECT COMPLETION METH OD AND THAT THE INCOME DERIVED FROM THE SAID PROJECT SHALL BE RECOGNIZED ON COMPLETION OF THE PROJECT. ADMITTEDLY, DURING THE YEAR UNDER CONSIDERATION, THERE WAS NO COMPLETION OF ANY PROJECT WARRANTING RECOGNITION OF REVENUE THEREON. WE FIND THAT ASSESSEE HAD PLEADED BEFORE THE LOWER AUTHORITIES THAT THE ADVANCES RECEIVED FROM VARIOUS CUSTOMERS WERE DULY TAKEN AS LIABILITIES IN THE BOOKS OF THE ASSESSEE AND NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE IN VIEW OF PROJECT COMPLETION METHOD BEIN G FOLLOWED BY THE ASSESSEE. IN THIS SCENARIO, IT WOULD BE PERTINENT TO UNDERSTAND AS TO WHETHER THE PROVISIONS OF SECTION 44AB OF THE ACT PER SE COULD BE INVOKED ON THE ASSESSEE. 5.1. THE LD. AR FAIRLY STATED THAT THERE ARE CONTRARY DECISIONS IN THIS REGA RD BY VARIOUS DECISIONS OF THE TRIBUNAL , WHEREIN , THE SOME OF THE DECISIONS HAD HELD THAT ADVANCE RECEIVED ALSO SHOULD BE CONSTRUED AS TURNOVER FOR THE PURPOSE OF RECKONING THE LIMITS U/S.44AB OF THE ACT AND SOME OF THE DECISIONS HAD HELD THAT THE SAME SHA LL NOT FORM PART OF TURN OVER FOR THE PURPOSE OF SECTION 44AB OF THE ACT. BUT THE CRUCIAL POINT WHICH THE LD. AR WAS TRYING TO DRIVE HOME WAS THAT THE VERY FACT OF THIS ISSUE RESULTED IN CONTRARY DECISION S RENDERED BY VARIOUS TRIBUNALS MAKES THE ISSUE COMPL ETELY DEBATABLE. HENCE, ON A DEBATABLE ISSUE, NO PENALTY COULD BE LEVIED. WE FIND THAT THE LD. CIT(A) HAD CATEGORICALLY RECORDED A ITA NO. 6189/MUM/2018 AND OTHER APPEALS MRS. SUSHILA SURESH MALGE 5 FINDING IN PARA 5 OF HIS ORDER THAT UP TO A.Y.2015 - 16, ASSESSEE HAD INDEED DEDUCTED TAX AT SOURCE U/S.194H WHILE MAKING PAYME NT OF MARKETING FEES / COMMISSION TO M/S. INDIA BULLS DISTRIBUTION SERVICES. WE HAVE GONE THROUGH THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE FOR THE YEARS UNDER CONSIDERATION WHICH WAS FILED ON RECORD BY THE LD. AR. FROM THE SAME, WE FIND THAT NO INCOME H AS BEEN RECOGNIZED BY THE ASSESSEE FROM PROJECTS. THE PERUSAL OF THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE GOES TO PROVE THAT THE ASSESSEE IS NOT LIABLE FOR TAX AUDIT U/S.44AB OF THE ACT FOR THE YEAR UNDER CONSIDERATION . WE FIND THAT TH E SECOND PROVISO TO SECTION 194H STIPULATES THAT IF THE ASSESSEE IS LIABLE FOR TAX AUDIT IN A.Y.2015 - 16 THEN, HE IS BOUND TO DEDUCT TAX AT SOURCE AND COMPLY WITH THE PROVISIONS OF CHAPTER XVII B OF THE ACT IN RESPECT OF TRANSACTIONS CARRIED OUT BY HIM IN A. Y.2016 - 17. WE FIND THAT THERE IS NO EVIDENCE BROUGHT ON RECORD BY BOTH THE PARTIES OR FROM THE ORDERS OF THE LOWER AUTHORITIES THAT WHETHER ASSESSEE WAS LIABLE FOR TAX AUDIT IN THE A.Y.2015 - 16. FOR THIS LIMITED PURPOSE, WE DEEM IT FIT AND APPROPRIATE TO RE MAND THIS ISSUE TO THE FILE OF THE LD. AO TO VERIFY THE SAME AND DECIDE THE ISSUE IN ACCORDANCE WITH SECOND PROVISO TO SECTION 194H OF THE ACT, AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. 2 . IN VIEW OF THE AFORESAID FINDING, T HE OTHER PROPOSITIONS MADE BY THE LD. AR ARE NOT REQUIRED TO BE ADJUDICATED AS IT IS A SIMPLE CASE OF FACTUAL VERIFICATION FOR THE A.Y. 2016 - 17 . THE ASSESSEE IS ALSO AT A LIBERTY TO RAISE ITA NO. 6189/MUM/2018 AND OTHER APPEALS MRS. SUSHILA SURESH MALGE 6 FRESH PROPOSITIONS AND ADDUCE FRESH EVIDENCES IN SUPPORT OF HER CONT ENTIONS BEFORE THE LD. AO IN THE FRESH ROUND OF PROCEEDINGS. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE FOR THE ASST YEAR 2016 - 17 ARE ALLOWED FOR STATISTICAL PURPOSES. 6. SINCE WE HAD GIVEN A FINDING SUPRA THAT THE ASSESSEE WAS NOT LIABLE FOR TAX AUD IT U/S 44AB OF THE ACT DURING THE F.Y. 2015 - 16 RELEVANT TO ASST YEAR 2016 - 17, WE HOLD THAT AS PER SECTION 194H OF THE ACT, THE ASSESSEE IS NOT LIABLE FOR DEDUCTING TAX AT SOURCE IN RESPECT OF PAYMENT OF MARKETING FEES / COMMISSION TO M/S INDIA BULLS DISTRI BUTION SERVICES IN ASST YEAR 2017 - 18. IN VIEW OF THE AFORESAID FINDING, THE OTHER PROPOSITIONS MADE BY THE LD. AR ARE NOT REQUIRED TO BE ADJUDICATED. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE FOR THE ASST YEAR 2017 - 18 ARE ALLOWED. SA NOS.501/MUM/2 018 & 502/MUM/2018 7 . THESE STAY APPLICATIONS AROSE OUT OF ITA NO S .6189/MUM/2018 & 6190/MUM/2018 . 7 .1. AS WE HAVE ALREADY DISPOSED ASSESSEES APPEALS, T HESE STAY PETITIONS OF THE ASSESSEE ARE DISMISSED AS INFRUCTUOUS. ITA NO. 6189/MUM/2018 AND OTHER APPEALS MRS. SUSHILA SURESH MALGE 7 8 . IN THE RESULT, APPEAL OF THE ASS ESSEE FOR ASST YEAR 2016 - 17 IS ALLOWED FOR STATISTICAL PURPOSES ; APPEAL OF THE ASSESSEE FOR ASST YEAR 2017 - 18 IS ALLOWED AND STAY PETITIONS ARE DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 / 02 /201 9 SD/ - ( MAH AVIR SINGH ) SD/ - ( M. BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 28 / 02 /201 9 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//