CHETAN SHANTIAL SHAH,BARODA vs. ITO (IT) 2(1), MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “L” BENCH MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No.102/Mum/2016 (Assessment Year 2011-12) Shri Chetan Shantilal Shah ITO (International Taxation)- 36, Lavkush Apartment, 2(1), Mumbai. Pratapganj, Vs. Baroda-390002 PAN: BLNPS4745R Appellant Respondent Appellant by : Shri Nirmit Mehta (AR) Respondent by : Shri Himanshu Sharma (Sr. DR) Date of Hearing : 08.08.2018 Date of Pronouncement : 13.08.2018 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER;

is directed against the order of Ld. Commissioner of Income-tax (Appeals) [the ld. CIT(A)]- 56, Mumbai dated 2nd November 2015 which

in turn arises from the Assessment Order passed by Assessing Officer under section 143(3) of the Act on 24th March 2014 for assessment year

2011-12. The assessee has raised the following ground of appeal;

(i) The learned Commissioner (Appeals) erred in facts and in law in confirming the action of assessing officer in making addition of Rs. 21,76,154/- to the total income of the assessee. (ii) The learned Commissioner (Appeals) erred in fact and in law in confirming the action of assessing officer in taxing the income of Rs. 21,76,154/- at normal rate enlisted of applying special rate of 10%. (iii) The learned Commissioner (Appeals) erred in fact and in law in confirming action of assessing officer in not applying provisions of section 115A(1)(b)(BB) of the income tax Act for determining the rate of tax applicable on fees for technical services.

ITA No. 102/Mum/2016- Shri Chetan Shantilal Shah

(iv) The learned Commissioner (Appeals) erred in facts and in law in not appreciating that the contention of assessee, that he had no Permanent Establishment (PE) in India. (v) The learned Commissioner (Appeals) erred in fact and in law in confirming the action of AO in disallowing the tax credit on the addition of Rs. 21,76,154/-. (vi) The learned Commissioner (Appeals) erred in facts and in law in confirming action of assessing officer in charge interest under section 234B of the Act. (vii) The learned Commissioner (Appeals)erred in facts and in law in confirming action of assessing officer in charging interest under section 234D of the Act. (viii) The learned Commissioner (Appeals) erred in facts and in law in confirming action of assessing officer in initiating the penalty proceeding under section 271 (1)(c) of the Act. (ix) Your appellant craves the right to add to or alter, amend, substitute, delete or modified all or any of the above grounds.

relevant Assessment Year declaring total income at Rs. 3,13,743/-. The

return of income was selected for scrutiny and the Assessment Order under section 143(3) was passed on 24th March 2014. The Assessing

Officer on the basis of AIR information noted that assessee has received

Rs. 25,62,202/- from various companies on which TDS has been

deducted, however, the assessee has not disclosed this income in his

return. When the assessee was confronted about the difference of income

offered, the assessee contended that he is residing in United States of

America, hence, the income was not offered in India. The contention of

the assessee was not accepted by Assessing Officer holding that assessee

earned income in India on which TDS was deducted. Therefore, the

assessing officer held the income earned by assessee is liable for taxation

in India. The Assessing Officer added the difference of income of Rs. 2

ITA No. 102/Mum/2016- Shri Chetan Shantilal Shah

21,76,154/- and treated the same as ‘Income from Other Sources’. On

appeal before the ld. CIT(A), the action of Assessing Officer was

confirmed. Hence, further aggrieved by the order of ld. CIT(A) the

assessee has filed the present appeal before us. 3. We have heard the submission of learned authorised representative (AR)

of the assessee and learned departmental representative (DR) for the

revenue and perused the material available on record. At the outset of

hearing the learned AR of the assessee submits that he is not pressing

Ground No. 1 & 4. Considering the submission of learned AR for the

assessee Ground No. 1 & 4 of the appeal is dismissed as not pressed. Four

remaining grounds of appeal. The learned AR of the assessee filed written

synopsis in the form of chart. 4. Ground No.1 relates to taxing the income of Rs. 21,76,154/- at normal

rate instead at special rate. The learned AR of the assessee submits that

assessee is a non-resident Indian, engaged in providing technical

consultancy services to various industries. The assessee received the fee

for consultancy services of Rs. 21,76,154/-which was treated by

Assessing Officer as Income from undisclosed sources and taxed it under

the head ‘Income from Other Sources’. The learned AR further submits

that the nature and source of the income received by assessee has been

accepted by Assessing Officer as well as learned CIT(A). It was also

accepted by lower authorities that TDS has been duly deducted. 3

ITA No. 102/Mum/2016- Shri Chetan Shantilal Shah

Therefore, there is no dispute about the nature and source of the income.

The Assessing Officer cannot treat this income as unexplained income

and to tax under the head ‘Income from Other Sources’. In support of his

submission, the learned AR of the assessee relied upon the decision of

Prashanti Surya Construction Co. P. Ltd. versus DCIT[2017] 56 ITR (T)

202 (Chandigarh), Gaurish Steels (P.) Ltd. versus ACIT [2015] 43 ITR

(T) 414 (Chandigarh) and Dev Raj Hi-tech Machines Ltd. versus DCIT

[2015] 174 TTJ 9 (Amritsar). 5. On the other hand, the learned DR for the revenue supported the order of

lower authorities. 6. We have considered the rival submission of the parties and have gone

through the orders of authorities below. We have noted that the Assessing

Officer has accepted that the assessee has received an amount of Rs.

25,62,202/- from various companies in India for providing consultancy

services, on which TDS has been deducted. The learned CIT (A) also

accepted the fact that TDS was deducted on the payment made to the

assessee. We have noted that neither the Assessing Officer nor the

learned CIT (A) disputed the status of assessee being non-resident Indian.

Once the status of the assessee is not disputed, nor the source of income

was disputed, the income cannot be treated as income from unexplained

sources and has to be taxed under the specific head. The Assessing

Officer treated the income received on account of fees for technical 4

ITA No. 102/Mum/2016- Shri Chetan Shantilal Shah

services as income from ‘other source’ in place of ‘income from business

and profession’. The treatment of income from ‘income from business

and profession’ cannot be treated as income from ‘other source’. We have

further noted that income received by assessee is in the nature of fee for

technical service( FTS) and the assessee is non-resident, therefore, the

income is to be taxed at the special rate prescribed under the Act.

Considering the above factual discussion we direct the assessing officer

to tax the income of Rs. 21,76,154/- as special rate prescribed under the

Act. In the result ground No.2 of the appeal is allowed. 7. Ground No.3 relates to not applying the provision of section 115A of the

Act. The ld AR for the assessee submits that the assessee received Rs.

20,79,626/- as FTS from Heubach Colour Pvt Ltd, which is liable to

taxed @ 10% under section 115A(1)(b)(BB), the details of which were

provided to lower authorities, which was accepted by them. Further Rs.

10,528/- received on account of interest is chargeable @ 20% as per

section 115A(b)(a)(B). On the contrary the ld. DR for the revenue

supported the order of the authorities below. 8. We have considered the rival submission of the parties and have gone

through the orders of authorities below. As we have already noted that the

income of the assessee is to be taxed at the special rate prescribed under

the Act and directed the assessing officer to tax the income of Rs.

21,76,154/- as special rate prescribed under the Act. Therefore, the 5

ITA No. 102/Mum/2016- Shri Chetan Shantilal Shah

assessing officer is further directed to tax Rs. 20,79,626/- as received on

account of FTS from Heubach Colour Pvt Ltd, @ 10% under section

115A(1)(b)(BB), and Rs. 10,528/- received on account of interest @

20% as per section 115A(b)(a)(B). In the result ground No.3 of the appeal

is allowed. 9. Ground No.5 relates to not allowing the credit of tax on the addition. The

ld. for the assessee submits that assessing officer has not allowed the

credit of tax deducted at source on the income received by assessee. The

ld. AR for the assessee submits that the assessee is entitled to raise

additional claim before appellate authorities as per the decision of

Hon’ble Bombay High Court in CIT Vs Pruthvi Brokers & Shareholders

349 ITR 336 (Bom). The ld. AR for the assessee prayed for giving

necessary direction to the assessing officer to give credit of tax deducted

at source. On the contrary the ld. DR for the revenue has no objection if

the assessing officer is directed to verify the fact and to give credit of tax

deducted at source. 10. We have considered the rival submission of the parties and have gone

through the orders of authorities below. We have noted that the ld CIT(A)

not allowed the assessee to raise additional ground of appeal holding that

the assessee has not file revised return on income nor the assessee raised

such claim was raised by the assessee. Considering the decision of

Hon’ble Bombay High Court in CIT Vs Pruthvi Brokers & Shareholders 6

ITA No. 102/Mum/2016- Shri Chetan Shantilal Shah

349 ITR 336 (Bom) the assessee is entitled to raise additional claim

before appellate authorities, we admit this ground of appeal raised by

assessee and direct the assessing officer to verify the figures of tax

deducted at source and allow the credit of the same to the assessee. In the

result this ground of appeal is allowed for statistical purpose.

Sd/- Sd/- G.S. PANNU PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 13.08.2018 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4.The concerned CIT 5. DR “L” Bench, ITAT, Mumbai 6. Guard File BY ORDER, Dy./Asst. Registrar ITAT, Mumbai