CENTURY TEXTILES AND INDUSTRIES LTD, MUMBAI V. Income Tax Officer (IT & TP), Bhopal

ITA 850/Ind/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6994 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 29-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIB JAIN
• Keywords: Transfer pricing; Principle of natural justice; Permanent establishment; TDS; Set aside
• Section: 195; 195A

Judgement Text

[ITA NO.850/IND/2018] [CENTURY TEXTILES AND INDUSTRIES LTD., MUMBAI] , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.850/IND/2018 ASSESSMENT YEAR: 2016-17 CENTURY TEXTILES AND INDUSTRIES LIMITED CENTURY BHAVAN, 2 ND FLOOR, DR. ANNIE BEASANT ROAD WORLI, MUMBAI-400 030 / VS. ITO(IT&TP) BHOPAL ( APPELLANT ) ( REVENUE ) P.A. NO. AAACC2659Q APPELLANT BY SHRI MANISH SHRI SUMIT JAIN, A.RS RESPONDENT BY SHRI RAJIB JAIN, SR. D.R. DATE OF HEARING: 05.12.2019 DATE OF PRONOUNCEMENT: 06.02.2020 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER O F THE CIT(A)-13, AHMEDABAD DATED 14.8.2018 PERTAINING T O [ITA NO.850/IND/2018] [CENTURY TEXTILES AND INDUSTRIES LTD., MUMBAI] 2 THE ASSESSMENT YEAR 2016-17. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) [CIT(A ) FOR SHORT] HAS ERRED IN CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER (INTERNATIONAL TAXATION), BHOPAL [ITO, FOR SHORT] U /S 201(1A) OF THE INCOME TAX ACT, 1961 (IT ACT). THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ORDER PASSED BY THE ITO WAS IN VALID AND BAD IN LAW BEING VIOLATIVE OF PRINCIPLES OF NATURAL JUSTIC E SINCE THE MATERIAL RELIED ON BY THE ITO WAS NOT PROVIDED TO THE APPELL ANT FOR VERIFICATION/CROSS EXAMINATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPELLANT HAS DEFAULTED IN WITHHOLDING OF TAX U/S 195 OF THE I.T. ACT FROM PAY MENTS MADE TO SORPA DISALLOWANCE TICARET A.S. FOR PURCHASE OF EQU IPMENT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT SORPA DISALLOW ANCE TICARET A.S. HAS A BUSINESS CONNECTION/PERMANENT ESTABLISHMENT I N INDIA IN THE FORM OF DEPENDENT AGENT WITHOUT APPRECIATING THAT T HE INDIAN AGENT WAS MERELY ACTING AS A COMMUNICATION CHANNEL FOR WH ICH IT WAS REMUNERATED AT ARMS LENGTH. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THAT 10% OF THE GROSS PAYMENT MADE TO SORPA DISALLOWANCE TICARET A.S. IS THE PROFIT ATTRIBUTABLE TO THE ACTIVITIES OF ITS AGENT IN INDI A WITHOUT APPRECIATING THAT IN THE TRANSFER PRICING ASSESSMENT OF THE AGEN T THE COMMISSION RECEIVED HAS BEEN ACCEPTED TO BE AT ARMS LENGTH. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE APPLICABILIT Y OF PROVISION OF SECTION 195A OF I.T. ACT MERELY ON THE FACT THAT TH E PURCHASE ORDER WAS SILENT ON TAXES APPLICABLE ON THE TRANSACTION. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE LEVY OF INTE REST U/S 201(1A) OF THE I.T. ACT. [ITA NO.850/IND/2018] [CENTURY TEXTILES AND INDUSTRIES LTD., MUMBAI] 3 7. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND OR DELETE THE AFORESAID GROUNDS OF APPEAL FROM TIME TO TIME AS IT MAY BE ADVISED UP TO THE DATE OF HEARINGS. 2. THE FACTS GIVING RISE TO THE PRESENT APPEAL ARE THAT THE ASSESSEE IS A MANUFACTURER OF TEXTILES, CEMENT, PAPER AN D ENGAGED IN THEIR EXPORTS. THE ASSESSING OFFICER (IN SHORT A.O.) ISSUED A NOTICE FOR VERIFICATION OF PAYMENTS MADE TO NON-RESIDENTS DURING THE FINANCIAL YEAR 2014-15 AND 2015-16 WITHOUT DEDUCTING OF TAX U/S 195 OF THE ACT . IN RESPONSE THERETO, A REPLY DATED 4.6.2016 WAS FILED. HOWEVER, THE A.O. FINDING DISCREPANCIES IN THE RESPO NSE OF THE ASSESSEE TREATED THE ASSESSEE LIABLE FOR DEDUCTION OF TAX U/S 195 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALL ED AS THE ACT) AND TREATED IT AS ASSESSEE IN DEFAULT. THE A.O. THUS MADE ASSESSEE LIABLE FOR DEDUCTION OF TAX OF RS.65,346/-, INTEREST THEREON OF RS.17,643/- QUA THE FINANCIAL YEAR 2014-15 AND IN RESPECT OF FINANCIAL YEAR 2015-16 THE A.O. MADE THE ASSESSEE LIABLE FOR TDS DEF AULT [ITA NO.850/IND/2018] [CENTURY TEXTILES AND INDUSTRIES LTD., MUMBAI] 4 U/S 195 OF THE ACT OF RS.21,05,883/- AND INTEREST TH EREON OF RS.4,31,108/-. 3. AGGRIEVED AGAINST THIS, THE ASSESSEE PREFERRED APPE AL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) {IN SHORT CIT(A)}, WHO AFTER CONSIDERING SUBMISSIONS SUSTAIN ED THE ADDITIONS MADE BY THE A.O. IN RESPECT OF NON-DEDUCTI ON OF TAX AND INTEREST THEREON. NOW THE ASSESSEE IS IN APPE AL BEFORE THIS TRIBUNAL. 4. GROUND NO.1 OF THE ASSESSEES APPEAL IS AGAINST NOT PROVIDING SUFFICIENT OPPORTUNITY TO REBUT THE MATERI AL GATHERED BY THE ASSESSING OFFICER ON THE BASIS OF WHI CH ADDITIONS HAVE BEEN MADE. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE A.O. HAS MADE ADDITION ON THE BASIS OF THE MATERIAL GATHERED AT THE BACK OF THE ASSESSEE . IT IS SUBMITTED THAT NO OPPORTUNITY TO CROSS EXAMINE GRAFITE INDIA WAS GIVEN TO THE ASSESSEE BEFORE MAKING [ITA NO.850/IND/2018] [CENTURY TEXTILES AND INDUSTRIES LTD., MUMBAI] 5 ADVERSE FINDING AGAINST THE ASSESSEE. IT WAS FURTHER CONTENDED THAT THE A.O. OUGHT NOT TO HAVE MADE ADDITION WITHOUT SUPPLYING MATERIAL GATHERED DURING THE ASSESSME NT PROCEEDINGS RELATED TO ASSESSEE FROM THIRD PARTIES. S UCH MATERIAL COULD NOT BE USED AGAINST THE ASSESSEE WITHOUT CONFRONTING THE SAME TO THE ASSESSEE. LD. COUNSEL F OR THE ASSESSEE PLACED RELIANCE ON THE JUDGEMENT OF THE HON'B LE SUPREME COURT RENDERED IN THE CASE OF DHAHESHWAR COTTO N MILLS LTD. VS. CIT 26 ITR 775 AND KESHAVCHAND CHELLARAM VS. CIT 125 ITR 775 IN SUPPORT OF THE CONTENTION TH AT ASSESSING OFFICER OUGHT TO HAVE PROVIDED OPPORTUNITY TO CROSS EXAMINE IN RESPECT OF MATERIAL GATHERED AT THE BACK OF THE ASSESSEE. 5. PER CONTRA, LD. D.R. OPPOSED THESE SUBMISSIONS AND SUBMITTED THAT THE LD. CIT(A) AS WELL AS THE A.O. HAS G IVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE. THE CLAIM OF THE ASSESSEE IS WITHOUT ANY BASIS THAT HE WAS NOT GIVEN [ITA NO.850/IND/2018] [CENTURY TEXTILES AND INDUSTRIES LTD., MUMBAI] 6 OPPORTUNITY. HE FURTHER CONTENDED THAT IT WAS INCUM BENT UPON THE ASSESSEE TO PROVE THAT IT WAS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE. MOREOVER, THE ASSESSEE S TATED WRONG FACTS REGARDING THE TRANSACTION IN QUESTION BEFOR E THE A.O. IT WAS CATEGORICALLY STATED THAT TRANSACTIONS HAVE BEEN CARRIED OUT WITH THE NON-RESIDENT DIRECTLY AND N O DOMESTIC AGENT WAS INVOLVED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORDS. WE FIND THAT THE ASSESSEE HAD TAKEN A SPECIFIC GROUND FOR NOT PROVIDING SUFFICI ENT OPPORTUNITY IN THE FORM OF GROUND NO.1 IN FORM NO.3 5. LD. CIT HAS DULY REPRODUCED THE SAME. HOWEVER, WHILE DISPOSING OF THE APPEAL, THE LD. CIT(A) HAS NOT ADJUDI CATED THIS GROUND. LD. CIT(A) HAS ONLY DECIDED THE OTHER GROUNDS. THEREFORE, CONSIDERING THE FACTS AND MATERI AL PLACED BEFORE US, WE SET ASIDE THE IMPUGNED ORDER BEI NG CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE. THE L D. CIT(A) [ITA NO.850/IND/2018] [CENTURY TEXTILES AND INDUSTRIES LTD., MUMBAI] 7 OUGHT TO HAVE ADJUDICATED THIS GROUND. THEREFORE, TH E IMPUGNED ORDER DESERVES TO BE SET ASIDE ON THIS GROU ND ALONE. WE THEREFORE, SET ASIDE THE IMPUGNED ORDER TO THE FILE OF THE LD. CIT(A) TO DECIDE ALL THE GROUNDS AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. 7. GROUND NOS.2 TO 7 ARE ON MERIT. SINCE WE HAVE ALREADY SET ASIDE THE IMPUGNED ORDER TO THE FILE OF TH E LD. CIT(A) FOR NON-PROVIDING OPPORTUNITY OF CROSS EXAMIN ATION TO THE ASSESSEE, THE ORDER OF THE LD. CIT(A) ON THES E ISSUES IS ALSO SET ASIDE. THE LD. CIT(A) WOULD DECIDE THE G ROUNDS AFRESH AFTER GIVING SUFFICIENT OPPORTUNITY TO THE ASSE SSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 06. 02.2020. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIAL MEMBER INDORE; DATED : 06/02/2020 VG/SPS [ITA NO.850/IND/2018] [CENTURY TEXTILES AND INDUSTRIES LTD., MUMBAI] 8 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR, INDORE