Rajasekhar Buggaveeti, Hyderabad V. Asst.CIT,Circle 9(1), Hyderabad

ITA 899/HYD/2014

• Counselvise Citation: 89922514 RSA 2014
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 12-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA B
• Assessee Lawyers: S RAMA RAO
• Keywords: Non-deduction of tax; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 147; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.899/HYD/14 : ASSESSMENT YEAR 2008 - 09 SHRI RAJASEKHAR BUGGAVETI , HYDERABAD (PAN AEEPB 7610 R) V/S. ASST. COMMISSIONER OF INCOME - TAX CIRCLE 9(1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.RAMA RAO RESPONDENT BY : S HRI RAMAKRISHNA B., DR DATE OF HEARING 10.12.2014 DATE OF PRONOUNCEMENT 31.12.2014 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) VI, HYDERABAD, DATED 13.12.2013. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO THIS APPEAL ARE AS FOLLOWS : THE ASSESSEE IS AN INDIVIDUAL, WHO IS ENGAGED IN THE BU S IN ES S OF IMPARTING TRAINING IN MULTIMEDIA IN THE NAME AND STYLE O F HI S PROPRIETARY CONCERN, M/S. CR E ATIVE MULTIMEDIA SERVICES. TH E RETURN OF INCOM E FOR THE YEAR UN D ER CONSIDERATION WAS FIL E D BY HIM ON 6.9.2008 DECLARING TOTAL INCOME OF R S .2,50,01,949. IN THE ASSESSMENT ORIGINALLY COMPLETED UNDER S.143(3 ) V I DE ORDER DATED 30.12.2010, TOTAL IN C OM E O F TH E ASSESSEE WAS COMPU T ED BY THE ASSESSING OFFICER AT RS.2,50,35,090. SUBSEQUENTLY, THE SAID ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER AND IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER S.148, A LETTER DATED 13.2.2013 WAS FILED BY THE ASSESSEE STATING THEREIN THAT THE I TA NO. 899/H YD/20 14 SHRI RAJASEKHAR BUGGAVETI, HYDERABAD 2 RETU R N ORIGINALLY FIL E D MAY BE TREATED AS TH E R ETURN FIL E D IN R E SPON S E TO THE NOTICE UNDER S .148. IN THE RE - ASSESSMENT COMPL E TED UNDER S.143(3) R E AD W I T H S.147, VIDE O R D E R DATED 27.12.2013, A SUM OF RS.2,43,47,134 PAID BY THE ASSESSEE TO M/S. APTEC H L IMITED UNDER THE FRANCHISE AGREEMENT DATED 27.4.2007 WAS DISALLOWED BY THE ASSESSING OFFICER BY INVOKING THE PR O V IS I ON S OF S.40(A)(IA) FOR THE FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOU R CE, AS REQUIRED BY THE PROVISIONS OF S.194J. 3. AGAIN S T THE ORDER P A SS ED BY THE ASSESSING OFFICER UNDER S.143(3) READ WITH S.147, AN APP E AL WAS FIL E D BY THE ASSESSEE BEFORE THE LEARNED CIT(A), CHALLE NG ING THE VALIDITY OF TH E SAID ASSESSMENT AS WELL AS DISPUTING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UN D ER S.40(A)(I A). AFTER CO N SI DE RIN G THE SUBMI S SION S MADE BY THE ASSESSEE AS WELL AS TH E M A TE R IAL AVAILABLE ON RECORD, THE LEARNED CIT(A) DID N O T FIND MERIT IN TH E G R OUN D S RAISED BY TH E ASSESSEE CHALLENGING THE VALIDITY OF THE ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER S.143(3) READ WITH S.147 AND REJ E CTING THE SAME, HE UPHELD THE VALIDITY O F THE SAID ASSESSMENT FOR THE FOLLO WI N G R E ASON S GIVEN IN PARAGRAPH 5.2 OF HIS IMPU G N E D ORD E R. 5.2 PERUSED THE SUBMISSIONS OF THE APPELLANT AND THE INFORMATION AS AVAILABLE ON RECORD. AS COULD BE SEEN FROM THE ORIGINAL ASSESSMENT ORDER U/S. 143(3) DATED 30.12.2010, THERE IS NO ADDITION/DISALLOWANCE ON ACCOUNT OF NON DEDUCTION OF TAX. ON THE PAYMENT OF PROFESSIONAL CHARGES PAID BY THE APPELLANT TO M/S. APTECH LTD. THERE IS NO DISCUSSION EITHER ON THE SUBJECT MATTER IN THE ASSESSMENT ORDER. HENCE, IT APPEARS THAT THE ARGUMENT OF THE APPELLANT THAT THE A.O HAS TAKEN A LL THE INFORMATION INTO CONSIDERATION AND HAD C O MPLETED THE ASSESSMENT AND WAS OF THE VIEW THAT DISALLOWANCE U/S. 40A(IA) NEED NOT BE MADE, IS FACTUALLY INCORRECT. AS PER THE INFORMATION BROUGHT ON RECORD, THERE IS A MENTION IN THE AUDIT REPORT THAT ASSESSEE HAS COMPLIED WITH THE TDS PROVISIONS AND TAX DEDUCTED AND AMOUNTS DEDUCTED PAID TO GOVERNMENT ACCOUNT (CO L .27(A ) OF FORM 3CD), WHICH IS NO DISCLOSURE OF TRUE INFORMATION, WHEREAS IT IS A FACT THAT AN AMOUNT OF RS. I TA NO. 899/H YD/20 14 SHRI RAJASEKHAR BUGGAVETI, HYDERABAD 3 2,43,47,130/ - WAS PAID TO AS ROYALTY TO M/S APTECH LTD. THE CASE LAW RELIED UPON BY THE APPELLANT IS DISTINGUISHABLE ON FACTS. IN THE CASE OF CIT VS. KE LVINATOR INDIA LTD (SUPRA), HON'BLE SUPREME COURT, WAS OF THE OPINION THAT WHERE INFORMATION WAS AVAILABLE ON RECORD, WITH NO FRESH INFORMATION BROUGHT IN, THE REASSESSMENT MAY AMOUNT TO CHANGE OF OPINION, AND THAT IS NOT THE INTENTION OF LEGISLATION FOR A MENDING THE PROVISIONS W.E.F. 01.04.1989 , IN THIS CASE, NO SUCH INFORMATION WAS FURNISHED BY THE APPELLANT AND THE INFORMATION ABOUT NON - DEDUCTION OF TAX ON PROFESSIONAL FEE/ROYALTY, AND HAS COME TO LIGHT ONLY SUBSEQUENTLY, THUS JUSTIFYING THE INITIATION OF PROCEEDINGS U/S. 148. AS IT HAS BEEN OBSERVED, THE INFORMATION AS PROVIDED IN AUDIT REPORT INDICATES THAT THE ASSESSEE SHOWN TO HAVE DE DUCTED TAX AND REMITTED INTO GOVERNMENT ACCOUNT, WHICH IS FACTUALLY INCORRECT AND THE NON DEDUCTION OF TAX ON ROYALTY OR FEE, WAS THE NEW INFORMATION AVAILABLE TO THE ASSESSEE DURING THE SUBSEQUENT PERIOD. THIS FACT SURELY ENABLED THE AO TO HAVE HIS REASO N TO BELIEF THAT THE INCOME HAS ESCAPED IN THE HANDS OF ASSESSEE, AS SUCH PAYMENTS OF ROYALTY OR FEE, WITHOUT DEDUCTION OF TAX, HAS ESCAPED DI S A LLOWANCE U/S. 40A(IA). AS PER THE INFORMATION BROUGHT ON RECORD, THE APPELLANT COULD NOT PROVE THAT THE STAND TA KEN BY THE AO TO DISALLOW THE AMOUNTS OF RS. 2,43,47,134/ - IN THE REASSESSMENT PROCEEDINGS IS ONLY CHANGE OF THE OPINION. IT IS ALSO RELEVANT TO OBSERVE THAT WHEN THERE IS NO DISCUSSION ON THE ISSUE IN THE ORIGINAL ASSESSMENT ORDER AND NO DETAILS WERE CA LLED FOR BY THE AO OR FILED BY THE ASSESSEE ON THE ISSUE AND NO FINDING EITHER POSITIVE OR NEGATIVE, WAS ARRIVED AT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, AS SUCH THERE IS NO CHANGE OF OPINION JUDICIAL DECISION OF HON'BLE SUPREME COURT IN TH E CASE OF ALA. FIRM VS. CIT(MAD) 102 ITR 622, SUPPORT THIS VIEW. THUS , C O NSIDERING THE FACTS OF THE CASE AND THE RATIO OF THE JUDICIAL DECISION (SUPRA), I AM OF THE CONSIDERED OPINION THAT THERE IS NO CHANGE OF OPINION ON THE PART OF THE AO AND THE ASSESSMENT WAS REOPENED U/S. 148, ON THE BASIS OF NEW INFORMATION THAT EMERGED FROM THE RECORD SUBSEQUENTLY, AND AS SUCH THE REASSESSMENT PROCEEDINGS UY/S. 147, STAND UPHELD. THE LEARNED CIT(A) ALSO C O NFIR M E D THE DISALLOWANCE MADE BY TH E ASSESSING OFFIC ER UNDER S.40(A)(IA) ON ACCOUNT O F AM O UN T PAID BY THE ASSESSEE TO M/S. APTECH LTD. UNDER THE FRANCH I SE AGRE E MENT WITHOUT DEDUCTION OF TAX AT SOU R CE, REJECTING THE CONTENTION RAISED BY THE ASSESSEE RELYING ON THE DECISION OF THE S P E CIAL BENCH OF THE TRIBU NAL IN TH E C A S E OF MERYLIN SHIPPING AND TRANSPORTS V/S. ACIT (2012)(20 TAXMANN.COM.244) THAT THE DISALLOWANCE, IF AT ALL, BE I TA NO. 899/H YD/20 14 SHRI RAJASEKHAR BUGGAVETI, HYDERABAD 4 RESTRICTED ONLY TO THE EXTENT OF THE AMOUNT PAYABLE AT THE END O F THE RELEVANT YEAR OF RS. 7 , 33,527. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), ASSESSEE HAS FIELD THIS APPEAL ON THE FOLLOWING GROUNDS - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN L A W. 2. THE LEARNED COMMISSIONER OF INCOME - TAX( APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INITIATING THE PROCEEDINGS U/S. 147 OF THE I.T. ACT. 3. THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) OUGHT TO H A VE SEEN THAT THE ASSESSING OFFICER, AT THE TIM E OF REGULAR ASSESSMENT , AFTER DULY CONSIDERING TH E FACTS OF TH E CA S E, HAS DETERMINED THE TOTAL INCOME, AND , THER EF ORE, WITHOUT ANY FRE S H IN F ORM A TION, THE ASSESSING OFFICER SHOULD NOT HAVE INITIATED PROCEEDINGS U/S. 147 OF THE I.T. A CT. 4. THE LEARNED COMMISSIONER OF INCOME - TAX(A PPEALS) ERRED IN CONFIRMING THAT THE P R OV I SION S OF S.40(A)(IA) OF THE I.T. ACT ARE APPLI C ABL E TO THE FACTS OF TH E APPELLANTS CA S E AND FURTHER ERRED IN CON F I R MING THE DISALLOWANCE OF R S .2,43,47,134/ - REPR E SENTIN G THE AMOUNTS PAID TO APTECH LTD., AS LICENCE FEE. 5. THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) OUGHT TO H A VE SEEN THAT THE SAID AMOUNTS W E RE PAID DURING TH E PREVIOUS Y E AR AND THAT THE SAID CONCERN FIL E D RETURN OF INCOME ADMITTING SUCH AMOUNT RECEIVED F R OM THE APPELLANT. 6. THE DISALLOWED COMMISSIONER OF INCOME - TAX(APPEALS) ERRED IN CON F IR M IN G TH E AC T ION OF THE ASSESSING OFFICER IN CHARGING INTEREST U/S. 234B AND 234C OF TH E I.T. ACT. 7. ANY OTHER G R OUN D THAT MAY B E URGED AT THE TIME FOE H E ARING. 4. WE HAVE HEARD THE ARGUMENTS OF BOT H THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. GROUN D NO S .1 AND 7 R AISED BY TH E ASSESSEE IN ITS APPEAL ARE GENERAL IN NATURE SEEKING N O SPECIFIC ADJU D I C ATION. A S REGARDS THE ISSUE INVOLVED IN GROUNDS NO.2 AND 3 CHALLENGING TH E VALIDITY O F REOPENIN G O F TH E ASSESSMENT , ALTHOUGH T H E LEARNED COUNSEL FOR TH E ASSESSEE HAS MADE AN ATTEMPT I TA NO. 899/H YD/20 14 SHRI RAJASEKHAR BUGGAVETI, HYDERABAD 5 TO CONTEND THAT THE RE - OPENIN G WAS BASED MERELY ON CHANGE OF OPINION, HE HAS ADMITTE D THAT THE IS S U E R ELATING TO THE DISALLOWANCE UNDER S.40(A)(IA) ON AC C OUN T O F P AY M E N T MADE BY TH E ASSESSEE TO M/S. APTECH LTD. UN DE R FRANCHISE AGREEMENT, WAS NO T EXAMIN E D BY TH E ASSESSING OFFICER DURING TH E COU R SE OF ASSESSMENT PROCEEDINGS ORIGINALLY CO M PL E TED UNDER S .143(3). AS HELD BY THE FULL BEN C H OF THE HON'BLE DELHI HIGH C OURT IN TH E CASE OF CIT V/S. USHA INTERNATIONAL LTD. (IT APPEAL NO.2026/2010 DATED 23.4.2012) , TH E RE WAS THUS NO EXPRESSION OF ANY OPINION BY THE ASSESSING OFFICER ON THIS ISSUE DURING THE COURSE O F O RI GINAL ASSESSMENT PROCEEDINGS AND CONSEQU ENTLY, THERE IS NO QUESTION OF ANY CHANGE OF OPINION. WE THEREFORE FIND NO MERIT IN TH E PRELIMINARY I S SUE RAISED BY TH E ASSESSEE CHALLENGING VALIDITY O F THE RE - ASSESSMENT IN GROUNDS NO.2 AND 3, AND DISMISS THE SAME. 5. AS RE G A R DS THE I S SUE INVOL V ED IN GR OUNDS NO.4 A ND 5 RELATING TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UN D ER S.40(A)(IA) AND CON F IRM E D BY TH E CIT(A) ON AC C OUN T O F THE AMOUNT PAID TO M / S. APTECH LTD. UNDER THE FRANCHISE AGREEMENT, THE LEARNED REPR E SEN TA TIVES OF BOTH THE SI D ES H A VE AGREED THAT THIS I S SUE IS REQUIRED TO B E R E STORED TO THE FILE O F THE ASSESSING OFFICER FOR DECIDING THE SAME AFR E SH, DEPENDING ON TH E DECISION OF THE HON'BLE ANDHRA PRA D ESH HIGH COU R T TO BE RENDERED IN TH E CASE OF MERYLIN SH I PPING AND TRANSPORTS (SUPRA) . THE L EARNED REPR E SENTATIVES OF BOTH THE SID E S H A VE ALSO AGREED THAT THE ASSESSING OFFICER MAY BE DIRECTED TO CON S ID E R THE ALTERNATIVE PL E A OF THE ASSESSEE IN THE LIGHT OF THE DECISION TH E HON'BLE SUPREME COURT IN TH E CA S E OF HINDUSTAN COCA COLA BEVERAGES P. LTD. V/S CIT ( 293 ITR 226 ) THAT THE AMOUNT IN QUESTION HAVING BEEN A LR E ADY OFFERED AS INCOME BY THE R ECIPIENT M/S. APTECH LTD. AND TAX T H E REON ALSO HAVING BEEN PAID BY TH E SAID CONCERN, THE ASSESSEE CANNOT BE TRE A TED AS IN DEFAULT FOR ITS FAILURE TO DEDUCT TAX AT SOU R CE F R OM TH E I TA NO. 899/H YD/20 14 SHRI RAJASEKHAR BUGGAVETI, HYDERABAD 6 SAID AMOUNT AND NO DISALLOWANCE UNDER S.40(A)(IA) CAN ALSO BE MADE. ACCO RD INGLY, WE SET ASIDE THE IMPU G N E D ORD E R OF TH E LEARNED CIT(A) ON THIS IS S UE AND RESTORE THE MATT E R TO THE FILE O F THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE TH E SAME AFR E SH IN TH E LI G HT OF TH E DECISION OF THE HON'BLE SUPREME COURT IN TH E C A SE OF HINDUSTAN COCA COLA BEVERAGES P. LTD. (S UPRA) AS WELL AS AFTER CON S ID E RING THE DECISION OF THE HON'BLE ANDHRA PRADESH HIGH COU R T IN THE CASE OF M ERYLIN SHIPPING AND TRANSPO R TS (SUPRA) , WHICH IS STILL PENDING. G ROUNDS NO.4 AND 5 ARE ACCORD I NGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NO.6 RELATING TO CHARGING OF INTEREST UNDER S.234B AND 234C IS MERELY C ONSEQUENTIAL. ASSESSING OFFICER IS DIRECTED T O GIVE APPROPRIATE RELIEF ACCORDINGLY. 7 . IN THE RESULT, ASSESSEES APPEAL I S TREATED AS PAR T LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 31 ST DECEMBER, 2014 SD/ - SD/ - ( ASHA VIJAYARAGHAVAN ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 31 ST DECEMBER, 2014 COPY FORWARDED TO: 1. SHRI RAJASEKHAR BUGGAVETI (HYDERABAD) C/O. SHRI S.RAMA RAO, FLAT NO.102, SHIRYA'S ELEGANCE, NO.3 - 6 - 643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 2 . ASSTT. COMMISSIONER OF INCOME - TAX CIRCLE 9(1) , HYDERABAD I TA NO. 899/H YD/20 14 SHRI RAJASEKHAR BUGGAVETI, HYDERABAD 7 3. COMMISSIONER OF INCOME - TAX(APPEALS) VI HYDERABAD 4. COMMISSIONER OF INCOME - TAX V , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S