ITO, Wd-41(2), Kolkata, Kolkata V. M/s Image Sign, Kolkata

ITA 650/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9417 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 27-01-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 10-04-2014
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN
• Assessee Lawyers: D K BANDYOPADHYAY
• Keywords: Rectification of order; Non-deduction of tax
• Section: 143(3); 194C; 147; 54; 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.650/KOL/2014 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, WD-41(2), KOLKATA. VS. M/S. I MAGE SIGN (PAN: AABFI6986L) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 27.01.2017 DATE OF PRONOUNCEMENT: 03.02.2017 FOR THE APPELLANT: MD. GHAYAS UDDIN, JCIT FOR THE RESPONDENT: SHRI D. K. BANDYOPADHYAY, FC A ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XIX, KOLKATA VIDE APPEAL NO. 349/CIT(A)-XIX/WARD-41(2)/KOL/12-13 DATE D 10.01.2014. ASSESSMENT WAS FRAMED BY ITO, WD-41(2), KOLKATA U/S. 143(3) R.W.S. 154(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASS ESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 26.05.2011. 2. THE FIRST PRIMARY ISSUE TO BE DECIDED IN THIS AP PEAL IS AS TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE MA DE U/S. 40(A)(IA) OF THE ACT IN THE PROCEEDINGS U/S. 154 OF THE ACT IN THE FACTS AND CI RCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE I S A PARTNERSHIP FIRM FILED ITS RETURN OF INCOME FOR AY 2006-07 AND ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 24.12.2008 DETERMINING THE TOTAL INCOME AT RS.2,57, 100/-. THE AO SUBSEQUENT TO THE FRAMING OF ASSESSMENT ON PERUSAL OF THE TDS RECORD NOTICED THAT THE ASSESSEE HAD MADE CERTAIN PAYMENTS TOWARDS PRINTING CHARGES IN THE SU M OF RS.26,52,754/- WITHOUT DEDUCTING TAX AT SOURCE AND HENCE, THE PROVISIONS O F SECTION 40(A)(IA) OF THE ACT GET ATTRACTED THEREON. SIMILARLY, THE AO ALSO NOTED TH AT THE ASSESSEE HAD REFLECTED A SUM OF RS.7,39,511/- IN ITS CLOSING STOCK AS ON 31.03.2006 IN THE STOCK STATEMENT SUBMITTED TO THE BANK IN RESPECT OF CASH CREDIT LIMITS AVAILED F ROM THE BANK, WHEREAS THERE WAS NO CLOSING STOCK AS ON 31.03.2006 REFLECTED IN THE P&L ACCOUNT AND IN THE BALANCE SHEET 2 ITA NO.650/K/2014 M/S. IMAGE SIGN, AY 2006-07 OF THE ASSESSEE WHICH WAS FILED ALONG WITH THE RETU RN OF INCOME. THE AO THOUGHT THESE TWO ITEMS NOT BEING CONSIDERED IN THE ASSESSMENT TO BE FRAMED U/S. 143(3) OF THE ACT, WOULD BECOME MISTAKES APPARENT FROM RECORD WARRANTI NG RECTIFICATION U/S. 154 OF THE ACT AND ACCORDINGLY, ISSUED NOTICE THEREON TO THE A SSESSEE. DURING THE PROCEEDINGS U/S 154 OF THE ACT, THE ASSESSEE FILED THE DETAILS OF P RINTING CHARGES PAID TO FIVE PARTIES AS BELOW: ROY PRINTING HOUSE RS. 9,73,462/- SHREE KRISHNA PLASTICS RS. 2,75,252/- GOLDEN COMPUTER FORMS PVT. LTD. RS. 2,66,090/- SIGN-N-GRAPH RS. 5,57,112/- V-TECH WORK PVT. LTD. RS. 63,060/- RS.21,34,976/- THE ASSESSEE ALSO FILED DETAILS OF PAYMENT OF VINYL E PRINTING CHARGES TO B. K. ENTERPRISE AMOUNTING TO RS.5,17,778/-. THE TOTAL OF THESE TWO SUMS I.E. RS.21,34,976/- AND RS.5,17,778/- WORKS OUT TO RS.26,52,754/- WHICH THE AO THOUGHT WAS PAID WITHOUT DEDUCTION OF TAX AT SOURCE. IN RESPONSE, THE ASSES SEE REPLIED THAT PAYMENT MADE UNDER THE HEAD PRINTING CHARGES AND VINYLE PRINTING CHARG ES ARE ACTUALLY PURCHASES I.E. CONTRACT FOR SALE AND NOT LABOUR CHARGES OR JOB WORK. THE A SSESSEE ALSO PLEADED THAT IN THE SAID BILL VAT WAS ALSO CHARGED BY THE CONCERNED SUPPLIER WHICH GOES TO PROVE THAT THE SUBJECT MENTIONED PAYMENTS WERE MADE ONLY TOWARDS P URCHASES AND NOT ATTRIBUTABLE TO ANY LABOUR CHARGES OR JOB WORK. ACCORDINGLY, IT PL EADED THAT NO TAX DEDUCTION AT SOURCE WOULD NEED TO BE MADE ON THE SAID PAYMENT. THE AO, HOWEVER, BY PLACING RELIANCE ON THE CBDT CIRCULAR NO. 715 DATED 08.08.2995 PROCEEDE D TO HOLD THAT THE PRINTED MATERIAL WAS DONE AS PER THE PRESCRIBED SPECIFICATI ON OF THE ASSESSEE AND TO SUIT THE REQUIREMENT OF THE ASSESSEE AND ACCORDINGLY, CONCLU DED THAT THE SAME WOULD FALL UNDER THE AMBIT OF PROVISIONS OF SECTION 194C OF THE ACT AND CONSEQUENTLY DISALLOWANCE U/S. 40(A)(IA) OF THE ACT IS TO BE MADE THEREON. 4. THE LD. CIT(A), HOWEVER, WENT INTO THE PRELIMINA RY ISSUE OF ADJUDICATING THE SUBJECT MENTIONED DISALLOWANCE U/S. 40(A)(IA) OF TH E ACT IN THE PROCEEDINGS U/S. 154 OF THE ACT, IN ACCORDANCE WITH THE GROUND RAISED BY TH E ASSESSEE THEREON. HE CONCLUDED THAT WHETHER THE PAYMENT MADE UNDER THE ABOVEMENTIO NED PARTIES BY THE ASSESSEE WAS TOWARDS PURCHASE OF PRINTING MATERIALS OR JOB WORK CARRIED OUT BY THE SAID PARTIES IN TUNE 3 ITA NO.650/K/2014 M/S. IMAGE SIGN, AY 2006-07 WITH THE SPECIFICATION OF THE ASSESSEE WOULD FALL W ITHIN THE AMBIT OF DEFINITION OF WORK AS DEFINED U/S. 194C OF THE ACT ITSELF IS A DEBATAB LE ISSUE AND ALSO REQUIRES DETAILED INVESTIGATION OF FACTS. ACCORDINGLY, HE CONCLUDED THAT THE SAME CANNOT BE CONSTRUED AS A MISTAKE APPARENT FROM THE FACE OF THE RECORD WHICH WOULD WARRANT INITIATION OF RECTIFICATION PROCEEDINGS U/S. 154 OF THE ACT. IN SUPPORT OF THIS, THE LD. CIT(A) ADJUDICATED VARIOUS DECISIONS OF HIGH COURTS AND SU PREME COURT IN THAT REGARD. SIMILARLY, IN RESPECT OF CLOSING STOCK FILED BY THE ASSESSEE IN THE STOCK STATEMENT SUBMITTED TO THE BANK IN CONNECTION WITH THE CASH C REDIT LIMITS AVAILED OF BY THE ASSESSEE FROM THE BANK, THE LD. CIT(A) CONCLUDED THAT THE SA ME CANNOT BE BROUGHT TO TAX AS THE AO DID NOT FIND ANY DIFFERENCE IN THE STOCK OF PHY SICAL VERIFICATION VIS--VIS THE STOCK FOUND RECORDED IN THE BOOKS OF ACCOUNT. IN SUPPORT OF THIS, HE PLACED RELIANCE ON VARIOUS HIGH COURT DECISIONS. ACCORDINGLY, HE CONCLUDED TH AT THIS ITEM IS ALSO A DEBATABLE ISSUE AND ANNULLED THE ORDER PASSED U/S. 154 OF THE ACT S TATING THAT THESE TWO ITEMS COULD NOT BE ADJUDICATED IN THE PROCEEDINGS U/S. 154 OF THE A CT. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THAT ON THE FACT AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) ERRED BOTH IN LAW AND FACTS IN HOLDING THAT THE RECTIFICATION ORDER P ASSED BY THE A.O. AS ULTRA VIRES ORDER IGNORING THE FACTS THAT A GLARING MISTAKE OCCURRED IN THE ASSESSMENT ORDER MADE U/S. 143(3) OF THE INCOME TAX ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN HOLDING THAT THE ISSUES REGARDING APPLICABILITY OF SECTION 40(A)(IA) OF THE INCOME TAX ACT IS DEBATABLE WHILE MATERIALS ON RECORD CLEARLY SHOW THAT PAYMENTS WERE MADE FOR SUB-CONTRACTORS TO GET WORK DONE AND THEREFORE ASSESSEE WAS LIABLE TO DEDUCT TA X AT SOURCE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) IGNORED THE FACTS THAT A GLARING MISTAKE HAS OCCURRED IN THE ASSESSMENT ORDE R INASMUCH AS ASSESSMENT ORDER WAS PASSED WITHOUT APPLYING THE PROVISION OF SECTION 40 (A)(IA) OF THE INCOME TAX ACT, 1961. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN LAW IN NOT DEALING IN THE ISSUE REGARDING ADDITION ON ACCOUNT OF DIFFEREN CE IN CLOSING STOCK ON THE GROUND THAT THE ORDER U/S. 154 WAS ULTRA VIRES ORDER AND THEREF ORE THE GROUND BECOME INFRUCTUOUS. 5. THE LD. DR REITERATED THE FINDINGS OF THE AO AND VEHEMENTLY ARGUED THAT THERE WERE APPARENT MISTAKE ON THE FACE OF THE RECORD AND ACCORDINGLY, THE ORDER OF THE AO BY MAKING THESE TWO ADDITIONS IN 154 PROCEEDINGS IS VA LID AS PER LAW. HE ALSO ARGUED ON MERITS THAT THESE TWO ADDITIONS WERE DEFINITELY REQ UIRED TO BE MADE AS ASSESSEE IS ENGAGED IN REPROGRAPHIC BUSINESS WHEREIN HE GETS CO NTRACT AND PREPARES ADVERTISEMENT MATERIALS FOR BIG COMPANIES IN TUNE WITH THEIR SPEC IFICATION, FOR WHICH PURPOSE, PRINTING CHARGES WERE INCURRED BY THE ASSESSEE BY GETTING TH E SPECIFIC JOB DONE IN THE FIELD OF 4 ITA NO.650/K/2014 M/S. IMAGE SIGN, AY 2006-07 PHOTO SHOPPING, VINYLE PRINTING, COMPUTER DESIGNING AND COMPUTER GRAPHICS, WHICH INVOLVES SPECIALIZED SKILLS TO BE CARRIED OUT BY TH E INDEPENDENT PARTIES AND ANY PAYMENT MADE PURSUANT TO SUCH EXECUTION OF WORK WOULD FALL WITHIN THE AMBIT OF WORKS CONTRACT AS DEFINED IN SECTION 194C OF THE ACT. ACCORDINGLY , DISALLOWANCE U/S. 40(A)(IA) OF THE ACT MADE THEREON IS JUSTIFIED. WITH REGARD TO CLOS ING STOCK ADDITION IN THE SUM OF RS.7,39,511/- HE ARGUED THAT THE ASSESSEE HAS SHOWN CLOSING STOCK IN ITS BALANCE SHEET AS RS. NIL WHEREAS HE HAS REFLECTED A SUM OF RS.7,3 9,511/- AS CLOSING STOCK SUBMITTED TO THE BANK. HENCE, IT WAS A MISTAKE APPARENT FROM RE CORD WHICH REQUIRES TO BE RECTIFIED IN THE INSTANT CASE. IN RESPONSE TO THIS, THE LD. AR ARGUED THAT WHETHER WHAT WAS DONE BY THE ASSESSEE IN RESPECT OF PRINTING CHARGES WAS EIT HER TOWARDS MATERIAL PURCHASE THEREON OR JOB WORK THEREON ITSELF IS A DEBATABLE ISSUE WHI CH COULD BE DECIDED ONLY BASED ON DETAIL INVESTIGATION OF FACTS AND HENCE, IT WOULD N OT FALL WITHIN THE PURVIEW OF SECTION 154 PROCEEDINGS. HE ALSO ARGUED THAT THE AO PLACIN G RELIANCE ON THE CIRCULAR NO. 715 IS NOT APPLICABLE AS THE SAME IS BINDING ONLY ON TH E TAX AUTHORITIES AND NOT ON THE ASSESSEE. WITH REGARD TO THE ADDITION MADE TOWARDS CLOSING STOCK, HE STATED THAT THE LD. CIT(A) HAD RIGHTLY RELIED ON VARIOUS DECISIONS OF T HE HONBLE HIGH COURTS WHEREIN NO ADDITION COULD BE BASED ON STOCK STATEMENT SUBMITTE D TO THE BANK WITHOUT FINDING ANY DEFECTS IN THE BOOKS OF ACCOUNT. HE ARGUED THAT TH IS AGAIN CANNOT FALL WITHIN THE PURVIEW OF SECTION 154 OF THE ACT AND ACCORDINGLY, VEHEMENT LY RELIED ON THE ORDER OF THE CIT(A). 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIALS AVAILABLE ON RECORD AND THE ORDERS OF THE LOWER AUTHORITIES. TH E FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED FO R THE SAKE OF BREVITY. WE FIND THAT THE AO HAD MERELY SOUGHT TO INVESTIGATE IN DETAIL T HE BASIC FACTS AS TO WHETHER THE ASSESSEE HAD INDULGED IN MAKING PURCHASE OF PRINTIN G MATERIAL FOR THE PURPOSE OF ITS BUSINESS OR HAD ENGAGED CONTRACTORS AND HAVE THE PR INTING JOB DONE IN TUNE WITH ITS REQUIREMENTS IN THE PROCEEDINGS INITIATED U/S. 154 OF THE ACT. WE HOLD THAT THE SAME OUGHT TO HAVE BEEN CARRIED OUT BY THE AO ONLY IN TH E ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT OR IF NECESSARY, AVENUES OPEN TO THE RE VENUE ARE BY EITHER RESORTING TO SECTION 263 OF THE ACT (REVISION PROCEEDINGS) BY THE LD. CI T OR BY REOPENING THE ASSESSMENT U/S. 147 OF THE ACT. WE HOLD THAT THE ISSUE BEING SQUARELY DEBATABLE CANNOT BE CARRIED OUT U/S. 154 OF THE ACT. IN THIS REGARD, WE PLACE RELIANCE ON THE DECISION OF THE HONBLE 5 ITA NO.650/K/2014 M/S. IMAGE SIGN, AY 2006-07 SUPREME COURT IN THE CASE OF T. S. BALARAM, ITO VS. VOLKART BROS. (1971) 82 ITR 50 (SC) WHEREIN IT HAS BEEN HELD AS UNDER: IT IS NOT OPEN TO THE ITO TO GO INTO THE TRUE SCO PE OF RELEVANT PROVISIONS OF THE ACT IN PROCEEDING U/S 154 OF THE ACT. A MISTAKE APPARENT O N THE RECORD MUST BE AN BVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTAB LISHED BY A LONG DRAWN PROCESS OF REASONING OF POINTS ON WHICH THERE MAY, CONCEIVABLY BE TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FR OM RECORD. THE POWER OF RECTIFICATION U/S 154 OF THE ACT CANNOT BE UNDERSTOOD TO REVIEW, REVISE OR RE-CONSIDER THE SUBSTANTIAL DECISIONS, TAKEN AFTER DUE CONSIDERATION OF LAW AND FACTS. IN A NUT-SHELL, MISTAKE APPARENT FROM RECORD, U/S. 154 OF THE ACT MUST BE SELF EVIDE NT, OBVIOUS AND PATENT MISTAKE OF FACTS OR LAW WHICH IS FLOATING ON THE SURFACE OF THE RECO RD AND NOT THE MISTAKE WHICH CAN BE DISCOVERED OR DISCERNED OR ESTABLISHED BY WAY OF DI SCUSSIONS, DEBATE AND INVESTIGATION INTO THE ISSUE. 7. WE ALSO HOLD THAT WHAT COULD BE RECTIFIED U/S. 1 54 OF THE ACT ARE MISTAKES THAT ARE PATENT, GLARING AND APPARENT FROM RECORD. MISTAKE, IF ANY, WHICH HAS TO BE DISCOVERED BY A LONG DRAWN PROCESS OR REASONING OR EXAMINATION OF ARGUMENTS ON POINTS WHERE THERE MAY CONCEIVABLY BE TWO OPINIONS CANNOT BE SAID TO B E MISTAKE OR ERROR APPARENT FROM RECORD. RELIANCE IN THIS REGARD IS PLACED ON THE D ECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ARVIND N. MAFATLAL VS. T. A. BALAKRI SHNAN (1968) 67 ITR 449 (BOM). WE ALSO APPRECIATE THE CIRCULAR OF CBDT NO. 715 IS BIN DING ONLY ON THE TAX AUTHORITIES AND NOT ON THE ASSESSEE AS ADMITTEDLY THE CIRCULAR CANN OT DETRACT FROM THE PROVISIONS OF THE ACT. RELIANCE IN THIS REGARD IS PLACED ON THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF STATE BANK OF TRAVANCORE VS. CIT (1986) 158 ITR 102 (SC). 8. WITH REGARD TO ISSUE OF ADDITION MADE ON ACCOUNT OF CLOSING STOCK IN THE SUM OF RS.7,35,911/-, WE FIND THAT THE NECESSITY OF MAKING SUCH ADDITION HAD BEEN UNDERSTOOD AND ACCEPTED AS A DISPUTE AND THE SAID DISPUTE HAS REACHED THE CORRIDORS OF THE FOLLOWING HIGH COURTS IN THE FOLLOWING CASES AND HENCE, THE S AME WOULD MAKE THE ISSUE DEBATABLE: I) CIT VS. PIONEER BREEDING FARMS 295 ITR 78 (MAD), II) CIT VS. UDAIPUR CHEMICALS & FERTILIZERS (P) LTD . 211 CTR 191, III) COIMBATORE SPINNING & WEAVING CO. LTD. VS. CIT 95 ITR 375 (MAD), IV) DHANSIRAM AGARWALLA VS. CIT 111 CTR 39 (GAU), V) CENTURY FOAMS (P) LTD. VS. CIT 123 CTR 342 (ALL) AND VI) V. RAJAN VS. CIT 96 ITR 64 (MAD). SINCE THE SUBJECT MENTIONED ISSUE ALSO IS DEBATABLE THE SAME CANNOT BE ADJUDICATED IN SECTION 154 PROCEEDINGS. HENCE, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED AND 6 ITA NO.650/K/2014 M/S. IMAGE SIGN, AY 2006-07 THE ORDER OF THE LD. CIT(A) DOES NOT REQUIRE ANY IN TERFERENCE AND THE SAME IS HEREBY UPHELD. HENCE THE GROUNDS RAISED BY THE REVENUE A RE DISMISSED. 9. SINCE THE APPEAL OF THE REVENUE IS DISMISSED ON PRELIMINARY GROUND OF SECTION 154 PROCEEDINGS ITSELF, WE REFRAIN TO GIVE OUR OPIN ION ON MERITS OF THE CASE. 10. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 11. ORDER IS PRONOUNCED IN THE OPEN COURT 03.02.201 7 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 3 RD FEBRUARY, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO, WARD-41(2), KOLKATA. 2 RESPONDENT M/S. IMAGE SIGN, 24B, HARISH NEOGY ROAD , KOLKATA-700 067 3 . THE CIT(A), KOLKATA 4. 5. ACIT , KOLKATA. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .