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आदेश/Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 22.02.2019 of the Commissioner of Income Tax (Appeals)-4, Ludhiana [hereinafter referred to as ‘CIT (A)’].
The assessee in this appeal has taken following grounds of appeal:- That the order of the Ld. CIT(A) 4 Ludhiana is 1. wrong, illegal and against the facts of the case.
ITA No. 563-Chd-2019 M/s Compaq International, Yamunagar 2 2. That the Ld. CIT(A)-4,Ludhiana is wrong is not allowing relief of Rs. 20,65,171/- u/s 250(6) of the Income Tax Act, 1961. 3. The appellant reserves a right to add, amend or alter any of the grounds of appeal. 4. The appellant prays that the appeal may very kindly be allowed in total. 3. Apart from this, the assessee has taken the following additional
legal grounds of appeal:- 1. "That the Ld. Assessing Officer has erred in reopening the case u/s 148 and, thereby, resorting to the assessment made u/s 143(3)/147.
That there was no reason to believe with the Assessing Officer for the purposes of reopening of the case and nor there was any application of mind independently by the Assessing Officer, as the re- opening proceedings are purely based on audit objection, and, as such, the reopening is bad in law.
That the entire details relating to the freight charges amounting to Rs. 20,17,397/- and interest on Partner's Capital were filed during the 143(3) proceedings and thus, the reopening of the case is nothing but change of opinion on the part of the Assessing Officer.
The assessee through the additional grounds of appeal has raised
the legal issue regarding validity of the reopening of the assessment;
hence, the same is taken first for adjudication.
As pointed out through the aforesaid grounds of appeal and further
from the perusal of the paper book pages 81A to 81F, it is revealed that
the Audit party pointed out that the assessee had not deducted the tax at
ITA No. 563-Chd-2019 M/s Compaq International, Yamunagar 3 source on the payments made on account of freight to M/s Movers
International Pvt Ltd., New Delhi, M/s Movers Mumbai and M/s DHL
Lemur Logistic Pvt Ltd etc. and, hence, there was a violation of
provisions of section 194C of the Act.
Now the counsel for the assessee has contended that the Assessing
Officer had no reason to believe that the income of the assessee had
escaped assessment. That it was a change of opinion of the Assessing
Officer. That the entire details were already supplied to the Assessing
Officer during the assessment proceedings carried out us 143(3) of the
Act. However, the Ld. counsel could not point out from record that the
aforesaid issue of no deduction of freight payments was ever examined
by the Assessing Officer during the assessment proceedings. So far as
the issue that the information should come to the Assessing Officer
through some tangible material, the assessee itself has furnished copies
of the audit objections etc. which shows that the aforesaid information
of non-deduction of TDS on the freight payments was supplied to the
Assessing Officer by the audit party by way of audit objections, thus,
the information had come to the Assessing Officer through tangible
material about the escapement of the income of the assessee from
taxation.
In view of this, the Assessing Officer had got the reason to believe
that the income of the assessee has escaped assessment after getting
ITA No. 563-Chd-2019 M/s Compaq International, Yamunagar 4 information from tangible material. We, therefore, do not find any merit
in this ground, on this issue, hence, the legal grounds raised by the
assessee regarding the reopening of the assessment are hereby
dismissed.
Now coming to the merits of the case, the assessee in this appeal
has raised two issues, firstly, in respect of the addition of
Rs.20,17,393/- on account of disallowance of expenditure on account of
non-deduction of TDS and, secondly, regarding validity of the addition
of Rs. 4,774/- on account of difference in interest calculation on the
partner’s capital.
So far as the issue relating to the non-deduction of TDS on
account of expenditure on export freight is concerned, the Ld. Counsel
for the assessee has submitted that the assessee was not liable to deduct
TDS on payments made to the resident shipping companies which were
acting as agents to the non-resident company. He, in this respect has
relied upon the CBDT Circular No. 723 dated 19.9.1995 and further has
also submitted that since the provisions of section 172 of the Act were
applicable to the case of the assessee and as per law laid down by the
Hon'ble Bombay High Court in ‘CIT vs V.S. Dempo and Co.’ (2016)
66 taxman.com 93 (Bombay), the provisions of Chapter XVII of the Act
for collection of the recovery of the tax and its deduction at source vide
ITA No. 563-Chd-2019 M/s Compaq International, Yamunagar 5 section 195 of the Act, would not be applicable. The Ld. counsel has
further submitted that Ld. CIT(A) while deciding the issue has relied
upon the decision of the Hon'ble Bombay High Court in the Tax Appeal
No.7/2005 in the case of ‘CIT Vs M/s Oriental Goa Pvt Ltd.’ dated
16.10.2009, which issue is not applicable to the facts and circumstances
of the case, whereas, the decision of the Delhi Bench of the Tribunal in
the case of ‘ITO vs Arun Kumar’ ITA No. 5063/Del/2012 vide order
dated 4.12.2015 was duly cited before the Ld. CIT(A), however, the Ld.
CIT(A) failed to refer to the same in the impugned order. The Ld.
Counsel for the assessee has submitted that the aforesaid payments were
made to the resident companies which were agents to the foreign
companies and, therefore, as per CBDT Circular No. 723 of 1995 dated
19.9.1995, the payment was deemed to be made to the foreign companies
and that the law laid down by the Hon'ble Bombay High Court in ‘CIT
vs V.S. Dempo and Co.’ is squarely applicable.
The Ld. DR, on the other hand, has submitted that the assessee
has not proved with reliable evidence that the aforesaid companies to
whom the payments were made, were agents of the foreign companies.
That even the payments were not made to their foreign office.
On the other hand, Ld. Counsel for the assessee has submitted that
from the bills and vouchers, it can be ascertained that the payments were
ITA No. 563-Chd-2019 M/s Compaq International, Yamunagar 6 made to the foreign companies through their agent ‘Indian resident companies’.
Both the Ld. representatives of the parties, at this stage, have submitted that both the issues require factual examination at the hands of the Assessing Officer. In view of this, the order of the CIT(A) is set aside and the matter is restored to the file of the Assessing Officer for factual examination of the aspects and then to decide the issues afresh in accordance with law. In the result, the appeal of the assessee stands allowed for statistical purposes Order pronounced in the Open Court on 23.12.2019.
(अ�नपूणा� गु�ता / ANNAPURNA GUPTA) (संजय गग� / SANJAY GARG) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member Dated : 23.12.2019 “आर.के.”
आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File
आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar