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Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: SRI SANJAY GARG & DR. MANISH BORAD
order
: September 22nd, 2023 ORDER
Per Manish Borad, Accountant Member:
This appeal filed by the assessee pertaining to the Assessment Year (in short ‘AY’) 2018-19 is directed against the order passed u/s 263 of the Income Tax Act, 1961 (in short the “Act”) by Pr. Commissioner of Income Tax (in short ld. 'Pr. CIT') dated 25.03.2023 arising out of the assessment order framed u/s I.T.A. No.: 505/KOL/2023 Assessment Year: 2018-19 New Tea Co Ltd. 143(3) read with Sections 143(3A) & 143(3B) of the Act dated 25.03.2021.
The assessee is in appeal before the Tribunal raising the following grounds: “
1. a) For that on the facts and in the circumstances of the case, the order passed by the Ld. Pr. CIT u/s 263 of the Act is bad in law and is liable to be quashed. (b) For that on the facts and in the circumstances of the case, the Ld. Pr. CIT was not justified in initiating proceedings u/s 263.
2. For that order passed u/s 143(3) dated 25.03.2021 is not valid in the eye of law. As such, the instant order passed u/s 263 dated 25.03.2023 by the Pr. CIT, Kolkata-2 revising the said order u/s 143(3) is also not sustainable in law and is liable to be quashed.
3. For that the Ld. Pr. CIT, Kolkata-2 was not justified in holding that the order passed u/s 143(3) for the instant year was erroneous and prejudicial to the interest of the revenue inasmuch as the amount of Rs. 68,40,169/- being Dividend Distribution Tax and Rs. 28,04,441/- being interest for delay of Dividend Distribution Tax for A.Y.: 2017- 2018 was not verified by the A.O. while framing the said assessment.
4. For that the appellant craves leave to add, alter or delete all or any of the grounds of appeal.”
3. The facts in brief are that are that the assessee is a limited company and assessment u/s 143(3) read with Sections 143(3A) & 143(3B) of the Act was completed on 25.03.2021 accepting the returned income. Ld. Pr. CIT called for the assessment records and on observing certain issues relating to non-payment of Dividend Distribution Tax issued a show cause notice. The contents of the same are as follows: “2.1 On examination of the assessment records and Books of accounts for the year ended 31.03.2018, it is observed that the assessee had recommended a dividend @30% on the share capital of the company (Rs. 15 per share), subject to payment of dividend tax Page 2 of 7 I.T.A. No.: 505/KOL/2023 Assessment Year: 2018-19 New Tea Co Ltd. for the financial year 2017-18. It is further noticed that before transferring the balance amount to the Balance Sheet, the respective amount separated for Dividend and Tax on Dividend were Rs. 1,44,00,000/- & Rs. 29,29,962/- respectively for the F.Y. 2017-18 and such figures for F.Y. 2016-17 was Rs. 3,36,00,000/- & Rs. 27,26,067/- respectively. From the Income Tax Return for the A.Y. 2017-18, furnished on 31.10.2017, it is observed that a Dividend of Rs. 3,36,00,000/- along with Tax on Dividend of Rs. 27,36,067/- had been appropriated from the available balance. Here, the date of filing of return for A.Y. 2018-19 (31.10.2017) could be taken as the date of declaration of Dividend. Since that date falls in the F.Y. 2017-18, any DDT thereon would qualify for the A.Y. 2018-19. But neither in the return of income for the A.Y. 2018-19 nor in the scrutiny assessment order thereof had such DDT been quantified. Therefore, it could be held that although Dividend was declared, no DDT has been paid. Since the Dividend was declared as per section 1150 and 115P of the Act, the assessee was required to pay DDT and interest for failure of pay such tax but such tax and interest had not been demanded/quantified in the assessment order. Omission to do so resulted in non levy of DDT on the total amount of Dividend declared (Rs. 3,36,00,000/-) by the assessing officer. Therefore, the assessment order dated 25,03.2021, prima facie, appears to be erroneous in so far as it is prejudicial to the interest of revenue.”
4. In compliance to the notice, the assessee replied stating that the Assessing Officer (in short ld. 'AO') had made proper enquiries in respect of the issues in question. It was also submitted that the assessee has duly deposited the Dividend Distribution Tax and the same has been duly filed in the income tax return. However, ld. Pr. CIT was not satisfied and he held the order of the AO as erroneous and prejudicial to the interests of the revenue giving direction to examine the issue of Dividend Distribution Tax and the relevant finding of ld. Pr. CIT reads as follows: “5. The submission of the assessee is considered. From the details submitted it is found that provision for Dividend of Rs. 1,44^00,000 was created and the tax on dividend of Rs. 29,29,962 was payable on the said provision for financial year 2017-18. The Dividend Distribution Tax (DDT) was paid on 14-02-2019. However, the Page 3 of 7 I.T.A. No.: 505/KOL/2023 Assessment Year: 2018-19 New Tea Co Ltd. assessee company has not furnished any submission regarding the payment of Dividend Distribution Tax (DDT) and amount of dividend declared for earlier financial year i.e. F.Y. 2016-17 relevant to Assessment Year 2017-18. As the said dividend was declared in financial year 2016-17, Dividend Distribution Tax (DDT) was on the said dividend of Rs. 3,36,00,000/- was payable in the F.Y. 2017-18 relevant to the assessment year under consideration i.e. 2018-19. Neither any payment details of Dividend Distribution Tax (DDT) nor any copy of the challan has been produced regarding the dividend declared in preceding year. The assessee was liable to pay Dividend Distribution Tax (DDT) of Rs. 68,40,169/- and the interest for the delay of the Dividend Distribution Tax (DDT) u/s. 115P comes to Rs. 28,04,441/-. Accordingly, the total amount of Dividend Distribution Tax (DDT) and interest thereupon payable by the assessee during financial year 2017-18 was Rs. 96,44,610/- which have not been paid even till date. Being the case under the complete scrutiny by CASS selection, Assessing Officer was required to enquire into the amount payable on dividend declared in preceding year, payment of which has fallen in relevant financial year 2017-18 relevant to assessment year 2018-19. This has not been done by the Assessing Office in this case. It is a clear case of omission on the part of the Assessing Officer. Further, failure on the part of the assessing officer, by not levying DDT while framing the assessment order, rendered the assessment order to be erroneous. The erroneous order of the Assessing Officer has caused prejudice to the revenue by the amount equal to DDT and interest thereon on total amount of Dividend declared Rs. 3,36,00,000/-. As regard to case laws, upon which reliance has been placed by the assessee, content of these cases does not squarely fit in the instant case.”
Aggrieved, the assessee is now in appeal before this Tribunal. Ld. Counsel for the assessee referring to the documents placed in the paperbook and specifically to page 34 & 36 submitted that the Dividend Distribution Tax for AY 2017-18 has been duly deposited. It was also submitted that all the relevant information about the Dividend Distribution Tax were very much available in the audited financial statement and once the assessee declares the dividend has to pay the Dividend Distribution Tax and he cannot escape the said liability. Page 4 of 7 I.T.A. No.: 505/KOL/2023 Assessment Year: 2018-19 New Tea Co Ltd.
On the other hand, ld. D/R vehemently argued supporting the order of ld. Pr. CIT.
We have heard rival contentions and perused the records placed before us. Revisionary proceeding u/s 263 of the Act has been carried out by ld. Pr. CIT on the issue of payment of Dividend Distribution Tax. Ld. Pr. CIT has held that dividend was declared as per Section 115O & 115P of the Act but the assessee failed to deposit such tax and interest has not been demanded/quantified in the assessment order and omission to do so resulted in non-levy of Dividend Distribution Tax on the total amount of dividend declared. Before us, ld. Counsel for the assessee has referred to the details of dividend paid for FY 2016-17 and the same is appearing at page 34 of the paperbook and the details filed therein are reproduced below:
Details of dividend for the Financial Year 2016-17 INTERIM -1 INTERIM -II Total Dividend Paid 1,44,00,000 1,92,00,000 3,36,00,000 Date of Declaration 02/01/2017 06/03/2017 Dividend paid on 04/01/2017 08/03/2017 Amount of Dividend Tax 11,72,600 15,63,467 27,36,067 Dividend Tax paid on 10/01/2017 14/03/2017 Date of Filing of Return 31/10/2017 31/10/2017 Date of Filing of Tax Audit Report 28/10/2017 28/10/2017 I) Due date for payment of Dividend is within 14 days from the date of declaration or payment of dividend which ever is earlier. II) Disclosure with regard to Dividend and Dividend Tax Payment were made in Tax Audit Report for the F.Y.2016-17.
The assessee has also enclosed the copy of challan depositing the Dividend Distribution Tax of Rs. 11,72,600/- on 10.01.2017 and Rs. 15,63,467/- deposited on 14.03.2017 pertaining to FY 2016-17. Even though the assessee has claimed that all the details have been filed before the AO which as per ld. Pr. CIT has not been considered but even otherwise when these details were filed before Page 5 of 7 I.T.A. No.: 505/KOL/2023 Assessment Year: 2018-19 New Tea Co Ltd. ld. Pr. CIT, he ought to have considered the same and drop the revisionary proceedings. Therefore, since the issue raised by ld. Pr. CIT relates to payment of Dividend Distribution Tax for AY 2017- 18 which as per ld. Pr. CIT ought to have been deposited subsequent to the completion of financial year, we under the given facts and circumstances of the case notice that the assessee has deposited the Dividend Distribution Tax before the close of FY 2016-17 relevant to AY 2017-18 and therefore, the accounting treatment and the details of Dividend Distribution Tax were duly incorporated in the return for AY 2017-18 filed on 31.10.2017 and therefore, ld. Pr. CIT erred in raising the alleged issue in the show cause notice u/s 263 of the Act for AY 2018-19.
We therefore, quash the order passed u/s 263 of the Act and restore the assessment order framed u/s 143(3) read with Sections 143(3A) & 143(3B) of the Act dated 25.03.2021. Thus, ground nos. 1, 2 & 3 raised by the assessee are allowed.
Ground no. 4 is general in nature which needs no adjudication.