DCIT 13(3)(3), V. DEVJI NENSHI PALAN I,

MA 407/MUM/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7258 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 11-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 01-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

MA NO. 407/MUM/2011 ARISING OUT OF ITA NO. 932/MUM/2010 ASSESSMENT YEAR: 2006-07 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) AND SHRI VIJAY PAL RAO (JUDICIAL MEMBER) MA NO. 407/MUM/2011 ARISING OUT OF ITA NO. 932/MUM/2010 ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 13(3), MUMBAI ...APPELLANT VS. DEVJI NENSHI PALANI RESPONDENT 601, JEWEL MAHAL, J P ROAD SEVEN BUNGALOWS CIRCLE, ANDHERI (WEST) MUMBAI 400 061 [PAN : AAAPP8794E] APPEARANCES: A K NAYAK, FOR THE APPLICANT S R PARIKH, FOR THE RESPONDENT DATES OF HEARING : NOVEMBER 11, 2011 DATE OF PRONOUNCEMENT : NOVEMBER 11 , 2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS RECTIFICATION PETITION, THE PETIT IONER ASSESSING OFFICER POINTS OUT THAT THE ORDER DATED 29 TH OCTOBER 2010 PASSED BY US MA NO. 407/MUM/2011 ARISING OUT OF ITA NO. 932/MUM/2010 ASSESSMENT YEAR: 2006-07 PAGE 2 OF 8 IS VITIATED BY AN ERROR APPARENT ON RECORD INASMUCH WHILE GROUND NO. 1 IN ASSESSING OFFICERS APPEAL IS DISMISSED AS COV ERED AGAINST HIM BY THIRD MEMBER DECISION IN THE CASE OF VARSHA G SALUN KE VS DCIT (98 ITD TM 147), THE ISSUE RAISED IN THIS GROUND OF APPEAL IS NOT COVERED BY THE SAID DECISION. 2. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IN T HE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT WHILE THE ASSESSEE HAS SHOWN COMMISSION INCOME OF RS 1,96,27, 793, IT DOES NOT INCLUDE RS 42,87,133 WHICH IS SAID TO REPRESENT REB ATE ALLOWED AGAINST THE COMMISSION RECEIVED. THE ASSESSING OFFICER FURT HER NOTED THAT FROM THE RETURN OF INCOME, IT WAS FOUND THAT THE A SSESSEE HAS CLAIMED TDS CREDIT OF RS 13,09,082 AGAINST THE COMMISSION A ND THE TDS IS DEDUCTED @5.6%. IT WAS NOTED THAT THE THE CORRESP ONDING AMOUNT OF COMMISSION COMES TO RS 2,33,76,464 AND THEN HE INF ERRED AS FOLLOWS: ..IT MEANS THAT THE ASSESSEE HAS NOT OFFERED THE ENTIRE RECEIPT ON WHICH TDS WAS DEDUCTED AND CLAIM FOR SUC H TDS CERTIFICATES IS TAKEN IN THE RETURN OF INCOME. AS P ER THE PROVISIONS OF SECTION 199 OF THE ACT, THE INCOME CORRESPONDING TO THE TDS DEDUCTION HAS TO BE OFFERE D IN THE RELEVANT ASSESSMENT YEAR 3. THE ASSESSING OFFICER ALSO NOTICED THAT NO PART OF THE SAID COMMISSION EARNING OF RS 2,33,76,464 WAS OFFERED TO TAX IN THE SUBSEQUENT ASSESSMENT YEAR. IT WAS ALSO NOTED THAT THERE WAS NO FORMAL AGREEMENT FOR ALLOWING REBATE AND THE REBATE WAS ONLY ALLOWED TO SOME OF THE PARTIES AND NOT ALL THE PARTIES. IT WAS, INTER ALIA, IN THIS BACKDROP THAT THE ASSESSING OFFICER PROCEEDED TO AD D BACK THE MA NO. 407/MUM/2011 ARISING OUT OF ITA NO. 932/MUM/2010 ASSESSMENT YEAR: 2006-07 PAGE 3 OF 8 COMMISSION AS PER TDS CERTIFICATES MINUS COMMISSION DISCLOSED IN THE BOOKS OF ACCOUNTS, AS INCOME OF THE ASSESSEE. AGGRI EVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND CONTENDED THAT THE DISALLOWANCE MADE BY RESORTING TO SECTION 199 OF TH E INCOME TAX ACT IS NOT WARRANTED BECAUSE IN THIS CASE THE APPELLANT CA N BE TAXED ON REAL INCOME ONLY AND NOT ANY INCOME WHICH HAS NOT BEEN R ECEIVED BY THE APPELLANT BECAUSE AS PER TRADE PRACTICE OF THE APPE LLANT, THE CREDIT NOTES HAVE BEEN ISSUED WHICH HAVE GONE TO REDUCE TH E COMMISSION RECEIVABLE BY THE APPELLANT AND THE ONLY WAY IN WHI CH THE APPELLANT CAN CLAIM THE ADJUSTMENT OF TAX PAID BY THE PRINCIPALS BY WAY OF TDS IS TO CLAIM IT IN THE RETURN OF INCOME, AND THAT THE FA CT OF MISMATCH BETWEEN THE INCOME RETURNED AND TDS CREDIT TAKEN BY THE APPELLANT CANNOT LEAD TO DISALLOWANCE BY THE VIRTUE OF SECTIO N 199 WHEN IN FACT THE COMMISSION RECEIVED BY THE ASSESSEE IS AT A LES SER FIGURE. THESE CONTENTIONS WERE UPHELD BY THE CIT(A). THE CIT(A) H ELD THAT THE CREDIT NOTES FOR REBATE ARE GENUINE IN NATURE AND THE P LEA THAT APPELLANT HAS TAKEN CREDIT OF THESE TDS CERTIFICATES UNDER S ECTION 199 OF THE INCOME TAX ACT AND THERE IS A MISMATCH BETWEEN THE INCOME OFFERED AND TDS CREDIT TAKEN BY THE APPELLANT IS UNTENAB LE. THE ASSESSING OFFICER WAS NOT SATISFIED BY THE STAND SO TAKEN BY THE CIT(A) AND HE CARRIED THE MATTER IN APPEAL BEFORE THIS TRIBUNAL O N THE FOLLOWING GROUNDS: 1. (A) THE LD CIT(A), ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, ERRED IN DELETING THE ADDIT ION OF RS 42,87,133 MADE BY THE AO ON ACCOUNT OF COMMISSION. 1.(B) THE LD CIT(A), ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE AND IN LAW, ERRED IN NOT APPRECIATING T HE FACT THAT MA NO. 407/MUM/2011 ARISING OUT OF ITA NO. 932/MUM/2010 ASSESSMENT YEAR: 2006-07 PAGE 4 OF 8 AS PER THE PROVISIONS OF SECTION 199 OF THE INCOME TAX ACT, THE INCOME CORRESPONDING TO TDS HAS TO BE OFFERED TO TA X IN THE RELEVANT ASSESSMENT YEAR. 4. THE GRIEVANCES SO RAISED BY THE ASSESSING OFFICE R WERE REJECTED BY US, AND, WHILE DOING SO, WE OBSERVED AS FOLLOWS: 25. IN GROUND NO. 1, THE REVENUE IS AGGRIEVED OF DE LETING THE ADDITION OF RS 42,87,133 MADE BY THE AO ON ACCOUNT OF COMMISSION. 26. THE REPRESENTATIVES AGREE THAT THE ISSUE IS COV ERED BY THE THIRD MEMBER DECISION IN THE CASE SMT VARSHA G SALU NKE VS DCIT 98 ITD 147 TM, COPY OF WHICH IS PLACED BEFORE US, EVEN AS LEARNED DEPARTMENTAL REPRESENTATIVE SIMPLY RELIED U PON THE ORDER OF THE ASSESSING OFFICER. LEARNED DEPARTMENTA L REPRESENTATIVE DID NOT DISPUTE THE ISSUE BEING COVE RED BY THE THIRD MEMBER ORDER. 27. HAVING HEARD THE RIVAL CONTENTIONS, WE FIND THA T THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY DECISION O F THE TRIBUNAL IN THE CASE OF VARSHA G SALUNKE (SUPRA), A ND, THEREFORE, WE SEE NO REASONS TO INTERFERE IN THE FI NDINGS OF THE CIT(A) IN DELETING THE DISALLOWANCE OF RS 42,87,733 . ACCORDINGLY, THIS GROUND IS DISMISSED. 5. IT IS NOW POINTED OUT THAT THE ABOVE CONCLUSIONS ARRIVED AT BY US ARE VITIATED BY A MISTAKE APPARENT ON RECORD INASMU CH AS THE VARSHA G SALUNKE DECISION (SUPRA) DOES NOT COVER THE CONTROV ERSY REQUIRING OUR MA NO. 407/MUM/2011 ARISING OUT OF ITA NO. 932/MUM/2010 ASSESSMENT YEAR: 2006-07 PAGE 5 OF 8 ADJUDICATION IN THIS CASE. IT IS SUBMITTED THAT VAR SHA SALUNKE DECISION DEALT WITH THE TIMING ISSUE OF INCOME, WHEREAS THE CASE BEFORE DEALS WITH A SITUATION IN WHICH INCOME WAS NOT OFFERED TO TAX IN THE SUBSEQUENT YEAR ALSO, AND, THEREFORE, TIMING ISSUE DOES NOT ARISE AT ALL. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. 7. WE HAVE NOTED THAT WHEN THIS APPEAL HAD COME UP FOR HEARING, IT WAS AN AGREED POSITION BETWEEN THE PARTIES THAT SO FAR AS THE ADDITION IN RESPECT OF COMMISSION IS CONCERNED, THE SAID ISS UE IS COVERED BY VARSHA SALUNKE DECISION (SUPRA). LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT DISPUTE THAT FACT EVEN TODAY, BUT SUBMITS THAT THIS STAND OF THE THEN DEPARTMENTAL REPRESENTATIVE, IN ACCEPTING SO, WAS NOT CORRECT. THAT IS A VERY UNUSUAL SITUATION. LEARNED DR FIRST CONCEDES AN ISSUE AS COVERED MATTER, AND HIS SUCCESSOR IS NOW IN RECTIFI CATION PETITION AND SUBMITS THAT HIS PREDECESSORS STAND WAS INCORRECT. IT WAS OPEN TO THE DEPARTMENTAL REPRESENTATIVE TO ADVANCE ARGUMENTS ON ANY OF THE ASPECTS OF THE IMPUGNED ADDITION AND JUSTIFY THE AD DITION, BUT HE DID NOT DO SO. HE ACCEPTED THAT THE ISSUE IS COVERED AG AINST HIM. BE THAT AS IT MAY, IN ANY EVENT, IT IS INCORRECT TO SAY THAT T HE DEPARTMENTAL REPRESENTATIVE WAS INCORRECT AT THAT POINT OF TIME OF ORIGINAL HEARING. AS WE HAVE NOTED EARLIER IN THIS ORDER, THE ASSESSI NG OFFICER DID SPECIFICALLY RAISE THE ISSUE OF TAXABILITY OF ENTIR E COMMISSION BECAUSE OF THE SCOPE OF SECTION 199, AS HE SAW IT, BUT THEN THAT PRECISELY WAS THE PLEA WHICH WAS REJECTED BY THIRD MEMBER IN VARS HA SALUKES CASE , WHEN LEARNED THIRD MEMBER STATED THAT SECS. 198 AND 199, IT MAY MA NO. 407/MUM/2011 ARISING OUT OF ITA NO. 932/MUM/2010 ASSESSMENT YEAR: 2006-07 PAGE 6 OF 8 AGAIN BE STRESSED, DO NOT IN ANY WAY DETERMINE THE YEAR OF ASSESSABILITY OF PROFITS AND GAINS OF BUSINESS. THE Y ONLY DEAL WITH THE YEAR IN WHICH THE TDS CERTIFICATES HAVE TO BE G IVEN CREDIT TO . THE ISSUE BEFORE US, TO THAT EXTENT, WAS A CLEARLY COVERED ISSUE. THE FACTS OF THE CASE IN VARSHA SALUNKES CASE ARE INDE ED DIFFERENT BUT THEN THE PROPOSITION OF LAW WHICH HAS BEEN SO LAID DOWN BY THE LEARNED THIRD MEMBER IS OF APPLICATION IN ALL SITUATIONS DE ALING WITH THIS ISSUE AND NOT ESSENTIALLY CONFINED TO THE SITUATIONS IN W HICH TIMING DISPUTE IS THE ISSUE. A JUDICIAL PRECEDENT MAY LAY DOWN P ROPOSITIONS WHICH MAY HAVE APPLICATION IN THE SAME SET OF FACTS, OR E VEN THE PROPOSITIONS WHICH TRAVEL MUCH BEYOND THOSE FACTS AND ARE OF SOM EWHAT GENERAL APPLICATIONS. TO THE EXTENT WE HAVE APPLIED THE VA RSHA SALUKE DECISION (SUPRA), WE ARE OF THE VIEW THAT IT FALLS IN THE LATTER CAT EGORY. IT IS NOT EVEN DISPUTED THAT, IN THE COURSE OF ORIG INAL HEARING, NO ARGUMENTS WERE ADVANCED ON FACTUAL ASPECTS OR ON DI STINGUISHING FEATURES. MAYBE, SOMEONE COULD HAVE MADE OUT A CASE AT THAT STAGE, AS HAS BEEN MADE OUT VERY AGGRESSIVELY TODAY, BUT THEN IT IS TOO LATE IN THE DAY TO SALVAGE THE SITUATION. BY NO STRETCH OF LOGIC, IN OUR CONSIDERED VIEW, HOLDING THAT VARSHA SALUNKE DECISI ON APPLIES TO THE FACTS OF THIS CASE CONSTITUTE A MISTAKE APPARENT ON RECORD. EVEN IF HOLDING THAT THE ISSUE BEFORE WAS COVERED BY VARSHA SALUKE DECISION (SUPRA) COULD INDEED BE VIEWED AS A MISTAKE, IT WAS CERTA INLY WAS NOT A MISTAKE ON WHICH NO TWO VIEWS ARE POSSIBLE, WHICH IS GLARING AND SELF-EVIDENT AND WHICH CAN, THEREFORE, BE COVERED B Y INHERENTLY LIMITED SCOPE OF SECTION 254(2) OF THE ACT. THAT AS PECT OF THE MATTER IS, EVEN AT BEST, A HIGHLY CONTENTIOUS ISSUE AND, FOR T HIS REASON ALONE, IT WILL BE OUTSIDE THE AMBIT OF LIMITED SCOPE OF SECTI ON 254(2).. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIR ETY OF THE CASE, WE SEE NO MERITS IN THIS RECTIFICATION PETITION. ACCOR DINGLY, WE REJECT THE SAME. MA NO. 407/MUM/2011 ARISING OUT OF ITA NO. 932/MUM/2010 ASSESSMENT YEAR: 2006-07 PAGE 7 OF 8 8. IN THE RESULT, THE RECTIFICATION PETITION IS DIS MISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 11 TH NOVEMBER, 2011. SD/- SD/- (VIJAY PAL RAO ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 11 TH DAY OF NOVEMBER, 2011 . COPY FORWARDED TO : 1. THE APPLICANT 2. THE RESPONDENT 3. COMMISSIONER-24, MUMBAI 4. DEPARTMENTAL REPRESENTATIVE, BENCH, MUMBAI 5. GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI