Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “ A ” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI AMARJIT SINGH
आदेश / O R D E R
PER SHRI RAJPAL YADAV, JUDICIAL MEMBER : The present appeal is directed at the instance of the Revenue against the order of Ld.Commissioner of Income Tax(Appeals)-VI, Ahmedabad [‘CIT(A)’ in short] dated 30/06/2014 passed for Assessment Year (AY) 2003-04.
ITA No.2392/Ahd/2014 ACIT vs. Arvind Ltd. Asst.Year – 2003-04 - 2 - 2. The solitary ground of appeal projects the grievance of Revenue as under:
(1) The CIT(A) has erred in law and on facts in annulling the order u/s.143(3) r.w.s.147 of the Act particularly when the assessee has not objected the re-opening of assessment. (2) The CIT(A) has erred in law and on facts in not adjudicating on merit the ground relates to disallowance of non-deduction of TDS of Rs.1,82,66,292/- made by the AO.
Brief facts of the case are that the assessee is engaged in the business of textile, garments, telecommunication and filed its return of income on 31/01/2002 declaring total income at ₹NIL and book profit u/s.115JB of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). An assessment order was passed u/s.143(3) of the Act on 31/03/2006 determining total income of ₹ NIL. The Assessing Officer thereafter initiated re-assessment proceedings by recording following reasons:
"Assessment of non-resident and foreign companies is governed by the Income -tax Act as well as DTAAs. Section 90(2) provides mat a treaty Overrides the provisions of the Act and in cases where the provisions of the Act are more beneficial, the latter shall apply. Consequently, even though in the case of foreign companies, business income may accrue or arise in India the same shall not be taxable in India unless there is a permanent establishment (PE) in terms of the relevant treaty. PE is defined and explained in the Articles 5 of each treaty to which India is a signatory. The tax may be leviable only in respect of the income attributable to the PE. However, royalties, fees for technical services, interest income and dividends arising in India are taxable in India even in the absence of a PE of the foreign company.
ITA No.2392/Ahd/2014 ACIT vs. Arvind Ltd. Asst.Year – 2003-04 - 3 - The assessee company engaged in the business of textile, garments and telecommunications filed the return of income for the year AY. 2003-04 declaring nil income. The case was selected for scrutiny and finalized u/s 143(3) of the I.T. Act, assessing the income at Rs. Nil. During audit scrutiny of the assessment record it was seen from the expenditure in foreign currency at Sl.No.27 of Notes forming parts of accounts at page no.40 of the annual report that the assessee had incurred expenditure of Rs.2.02 crores on professional consultation fees. The assessee had paid professional consultation fees to various parties in Dhaka, Swiss, Germany, Philippines, Belgium, U.K., U.S.A and Hong Kong. As India has DTAA with all these countries, the assessee was liable to deduct TDS on professional Consultancy fees as per Section 195, either in accordance with DTAA with respective countries or Income Tax Act whichever is applicable. The rates of TDS are specified in the respective DTAA's. However, it was seen that the assessee had not deducted TDS on professional consultancy fees. Failure to deduct TDS on professional consultancy fees resulted in non levy of TDS of Rs.4011817 shown below: (in Rupees) Name of Amount paid Rates of Amount of TDS Non levy of country TDS to be deducted TDS
Dhaka 224885 10% 22489 22489
Swiss 257043 10% 25074 25074
U.K. 6256100 15% 938415 938415
Philippines 40522 15% 6078 6078
U.S.A. 8544856 15% 1281728 1281728
Hong Kong 431118 10% 43112 43112
Germany 1617314 10% 161731 161731 Belgium 894454 10% 89445 89445 Total 2568702
ITA No.2392/Ahd/2014 ACIT vs. Arvind Ltd. Asst.Year – 2003-04 - 4 -
As seen from the above table there was total short levy of Rs.11,54,300/-. In view of the same, the provision of sec.40(a)(i), the concerned payments of professional consultancy fees are not allowable.”
After hearing of the assessee, Ld.AO passed the assessment order on 21/12/2010 u/s.143(3) r.w.s.147 of the Act. He made disallowance of Rs.1,82,66,292/- on account of non-deduction of TDS by the assessee while making payments to foreign consultant.
Dissatisfied with the action of Assessing Officer, assessee carried the matter before the CIT(A). It has challenged reopening of the assessment proceedings. It was contended that notice u/s.148 of the Act was issued after expiry of four years from the end of relevant assessment year and Assessing Officer failed to point out which material fact was not disclosed by the assessee fully and truly. The Ld.first appellate authority accepted the contentions of the assessee and quashed the reassessment order. The relevant finding recorded by the Ld.CIT(A) reads as under:
“4.2. As seen from impugned order the return of income was filed on 31-10- 2002. Assessment order u/s.143(3) was passed on 31-03-2006. Notice u/s.148 was issued and served on 31-03-2010. Copy of the reasons recorded for re- opening was furnished to the appellant on 28-10-2010. 4.3. The contentions of the Ld.AR are that though the notice u/s.148 was served with 6 years from the end of the assessment year, copy of the reasons recorded was furnished beyond 6 years from the end of the assessment year
ITA No.2392/Ahd/2014 ACIT vs. Arvind Ltd. Asst.Year – 2003-04 - 5 - and therefore re-opening is bad-in-law. In support thereof reliance was placed on two decisions of the Delhi Tribunal. It was further contended by the AR that the re-opening was done relying on the audit scrutiny of annual accounts filed by the appellant during the course of assessment proceedings u/s.143(3); thus appellant made full and true disclosure of all material facts; there was no failure on the part of the appellant and therefore re-opening the assessment beyond 4 years was bad-in-law. In support thereof he relied on four High Court decision [including one Guj.High Court decision] and one Supreme Court decision. It was contended further that as may be seen from the reasons recorded from the re-opening assessment, AO had relied on the audit scrutiny; AO failed to form his own opinion regarding the escapement of the income; therefore re-opening the assessment solely on account of audit objection/observation is bad-in-law. In support thereof he relied on to three decisions of the Guj.High Court and on decision of the Jaipur Tribunal.
4.4. Having considered the facts of the matter, I am inclined to accept the contentions of the appellant that re-opening was bad-in-law. As seen from the reasons recorded for re-opening [re-produced at para-2 of the impugned order] it was stated that “during the audit scrutiny of the assessment record…..” Thus the reopening was apparently on the basis of audit objection/observation. The formation of opinion independently by the AO is lacking. Similarly, there is nothing on record to suggest that there was any failure on the part of the appellant to disclose the material facts. Therefore, re-opening the assessment beyond 4 years from the end of the assessment is not in accordance with law. AO’s observations at para-4 of the order regarding the validity of re-opening the general. Having given my careful consideration to the facts of the case and in the light of the case-laws relied on by the Ld.AR. I hold that re-opening of the assessment is bad-in-law, Impugned order u/s.143(3) r.w.s. 147 is annulled. This ground of appeal is allowed.”
With the assistance of Ld.Representatives, we have gone through the record carefully. The proviso appended to section 147 of the Act puts an embargo upon the powers the Assessing Officer to re-open an assessment, where an assessment u/s.143(3) was made and four years have expired from
ITA No.2392/Ahd/2014 ACIT vs. Arvind Ltd. Asst.Year – 2003-04 - 6 - the end of the relevant assessment year. The Assessing Officer cannot take any action unless it is established that assessee failed to disclose fully and truly all material facts necessary for assessment or that assessment year. We have extracted the reasons recorded by the Assessing Officer. A perusal of those reasons would indicate that during audit scrutiny of the assessment record, it came to notice that expenditure in foreign currency shown at Serial Number 27 of the notes forming part of accounts have been reported as incurred. This was the information which was available in the original scrutiny assessment. Same material and fact have been reappraised. There is no allegation against the assessee that it failed to disclose any material fact fully and truly. Ld.first appellate authority has appreciated this fact in the finding extracted supra. Therefore, taking into consideration the finding of the Ld.CIT(A) on this issue, we do not see any reason to interfere with the order of the Ld.CIT(A). This appeal is devoid of any merit.
In the result, appeal of the Revenue is dismissed. Order pronounced in the Court on 15th February-2019 at Ahmedabad.
Sd/- Sd/- ( AMARJIT SINGH ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 15/ 02 /2019 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
ITA No.2392/Ahd/2014 ACIT vs. Arvind Ltd. Asst.Year – 2003-04 - 7 -
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-VI, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation ..14.2.2091 (dictation-pad 6- pages attached at the end of this File) 2. Date on which the typed draft is placed before the Dictating Member ..15.2.2019 3. Other Member... 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….15.2.19 7. Date on which the file goes to the Bench Clerk…………………15.2.19 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………