THE INCOME TAX OFFICER, WARD-3(2), VIJAYAWADA vs. FUSION VOICE SOLUTIONS(INDIA)PRIVATE LIMITED, VIJAYAWADA

At the outset, ld.counsel for the assessee has submitted that the very basis on which 263 order passed by the Pr.Commissioner has been quashed by the ITAT, therefore ld.CIT(A) has cancelled the consequential order passed by the AO and submitted that appeal has to be dismissed.

Ld.DR simply relied on the orders of the authorities below.

We have heard both the sides, perused the material available on record and orders of the authorities below.

In this case, the assessee is a private limited company derives income from sale of Nokia products, filed its return of income for the A.Y. 2014-15 admitting total income of Rs.10,86,812/-. The assessment was originally completed u/sec. 143(3) on 20/12/2016 determining the total income of Rs.14,31,630/-. The Pr.Commissioner, Vijayawada vide order u/sec. 263, dated 15/03/2019 set aside the order passed by the AO and directed the AO to redo the assessment by examining the applicability of section 194H of the Act in relation to trade incentives allowed by the assessee to its retailers. Accordingly, the AO has taken up the issue and after issuing notice, he passed a consequential order by disallowing an amount of C.O.No.28/VIZ/2020 (M/s. Fusion Voice Solutions (India) Pvt. Ltd.) Rs.6,72,98,783/- u/sec. 40(a)(ia) of the Act being trade incentives paid to its retailers for the default of non-compliance to the provisions of section 194H of the Act.

Meanwhile, the assessee has contested the order of the Pr.Commissioner passed u/sec. 263 dated 15/03/2019 before the ITAT, Visakhapatnam. The ITAT vide its order dated 31/12/2019 in relying on its order in assessee’s case itself for the A.Y. 2012-13 held that assessment order passed by the AO is neither erroneous nor prejudicial to the Revenue. Similarly, the incentives paid to its employees taken the character of salaries u/sec. 192 and no disallowance is warranted u/sec. 40(a)(ia) for the payment of salaries and set aside the order of the Pr.Commissioner u/sec. 263 and restored the original assessment order passed by the AO u/sec. 143(3) dated 20/12/2016. We find that ld. CIT(A) has correctly quashed the order passed by the AO for the reason that consequential order is passed on the basis of the order passed by the ld.Pr.Commissioner u/sec. 263 dated 15/03/2019. The very same order has been quashed by the ITAT in ITA No.151/VIZ/2019 dated 31/12/2019, therefore, the consequential order passed by the AO cannot survive. Thus, the ld. CIT(A) has rightly cancelled the order C.O.No.28/VIZ/2020 (M/s. Fusion Voice Solutions (India) Pvt. Ltd.) passed by the AO. We find no infirmity in the order passed by the ld. CIT(A). Thus, this appeal filed by the Revenue is dismissed.

So far as cross objection filed by the assessee is concerned, it is only supportive to the order of the ld. CIT(A). As there is no grievance against the order of the ld. CIT(A), no separate orders are required to be passed, therefore the same is dismissed.

In the result, appeal filed by the Revenue and the cross objection filed by assessee are dismissed. Order Pronounced in open Court on this 27th day of Nov., 2020.