Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, Kolkata Bench, Kolkata
Before: SHRI ABY. T. VARKEY & SHRI M. BALAGANESH
IN THE INCOME TAX APPELLATE TRIBUNAL Kolkata Bench, Kolkata (Bench – “D”)
BEFORE SHRI ABY. T. VARKEY, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER
I.T.A. No.1638/Kol/2016 Assessment year 2006-07 M/s. Waycon Commerce Pvt. Ltd. I.T.O, Ward -6(4), Kolkata [PAN : AAACW2311F] -Vs- (Appellant) (Respondent)
For the Appellant Smt. Parnashree Banerjee, Advocate For the Respondent Shri D. C. Mandol, JCIT Date of Hearing 25.05.2017 Date of Pronouncement 07.07.2017
ORDER Per M. BALAGANESH, AM
This appeal by assessee is arising out of order of CIT(A)-2, Kolkata vide Appeal No.1124/CIT(A)-2/2014-15 dated 12.05.2016 against the order of the assessment framed by I.T.O, Ward -6(4), Kolkata under Section 147 read with Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for Assessment Year 2006-07 vide his order dated 18.11.2011.
We find that the assessee has raised two additional grounds before us vide Additional Ground no.7 and 8. During the course of hearing, the Ld. AR stated that Additional Ground no.7 is not pressed by her. The same is reckoned as a
2 I.T.A. No.1638/KOL/2014 Assessment Year 2006-07 M/s. Waycon Commerce Pvt. Ltd. statement from the bar and accordingly, the Additional Ground no.7 is dismissed as not pressed. 3. The Additional Ground no.8 has been raised in the context of disallowance of brokerage and commission paid by the assessee amounting to 8,87,000/- in reassessment proceedings, when the said issue was already examined in original reassessment proceedings u/s 143(3) of the Act, thereby questioning the validity of the said addition in the reassessment proceedings. The Additional Ground no.8 raised by the assessee is as under: “8. That on the facts and circumstances of the case, the Ld. AO erred in having made additions of Rs.8,87,000/- disallowing the appellant’s claim of brokerage and commission paid when the said issue was already examined in original assessment u/s 143(3) of the Income Tax Act, 1961 which amounted to mere change of opinion and nothing else”
The brief facts of this issue are that the assessee filed the return of income for A.Y 2006-07 on 21.11.2006. The return was selected for scrutiny and in the original scrutiny assessment proceedings, the Ld. AO issued notices u/s 133(6) of the Act to various brokers of the assessee inquiring about their services rendered to the assessee for justifying the payment of commission / brokerage in the sum of Rs.8,87,000/- by the assessee. The said notices u/s 133(6) of the Act were issued by Ld. AO on 10.06.2008. The replies were duly filed by brokers in response to u/s 133(6) notices confirming the services rendered by them by enclosing their copies of Income Tax Returns and confirming the fact and receipt of brokerage from the assessee vide their letters dated 12.06.2008 and 13.06.2008. The Ld. AO completed the assessment u/s 143(3) of the Act on 30.06.2008 disallowing preliminary expenses amounting to Rs.7,056/- in the assessment. Later, a notice u/s 148 of the Act was issued on 04.03.2011 for the A.Y 2006-07. The assessee replied that the return filed already may be treated as a return in replies to notice u/s 148 of the Act. In the reassessment proceedings, the Ld. AO again sought to
3 I.T.A. No.1638/KOL/2014 Assessment Year 2006-07 M/s. Waycon Commerce Pvt. Ltd. re-verify the eligibility of claim of commission or brokerage in the sum of Rs.8,87,000/- and ultimately concluded that the assessee being a non-banking finance company registered with RBI, deriving interest income from advancing of loan, had advanced loans to 18 parties in toto and out of which 16 parties to whom moneys were lent were interest free. The Ld. AO also observed that the assessee had totally earned interest income only to the tune of Rs.38,34,158/-. He stated that for earning this interest income from 2 (two) parties there is no need for the assessee to pay commission/brokerage in the sum of Rs.8,87,000/- to the following parties. A.Y 2006-07 Details of brokerage & Commission paid as on 31.03.2006
Sl. Name of the party Gross Amount T.D.S No. 1. Inder Chand Chamaria (HUF) 110,000.00 6,171.00 26/1, Narsingh Bose Lane, Howrah -711101 2. Pragati Vanijya (P) Ltd. 274,400.00 15,394.00 52, Weston Street,4th Floor, Room No.415, Kolkata - 700 012 3. Sandeep Kumar Singhi (HUF), 115,500.00 6,480.00 133, Canning Street,3rd Floor, Room No.1, Kolkata - 700 001 4. Saktidham Enclave (P) Ltd. 269,500.00 15,119.00 52, Weston Street,4th Floor, Room No.415, Kolkata -700 012 5. Sanjay Kumar Singhi (HUF) 117,600.00 6597.00 133, Canning Street,3rd Floor, Room No.1, Kolkata - 700 001 887,000.00 49,761.00
The Ld. AR vehemently relied on the details filed in the paper book and argued that this issue of eligibility of commission/brokerage had been verified extensively by the Ld. AO in the original assessment proceedings and there is no need to take a divergent stand with regard to the subject mentioned issue in the reassessment
4 I.T.A. No.1638/KOL/2014 Assessment Year 2006-07 M/s. Waycon Commerce Pvt. Ltd. proceedings, when the documents from the paper book, which were very much placed before the lower authorities except copies of agreements between the assessee and the brokers and copies of communication between the assessee and the brokers (included in pages 26 to 42 of the Paper Book). He argued that the Ld. AO on verification of these documents had arrived at a conscious conclusion that the assessee is entitled for deduction towards commission and brokerage in the original assessment proceedings, and changing the said conclusion in the reassessment proceedings merely tantamount to change of opinion on the part of the Ld. AO on the very same set of facts and evidences. She placed reliance on the following decisions in support of our contentions:
INDEX TO CASE LAWS Sl. No. Particulars The Hon'ble Supreme Court of India in the case of CIT vs. 01. Kelvinator of India Ltd. reported [2010] 320 ITR 561 (SC) 02. The Hon'ble Delhi High Court in the case of CIT vs. Usha International Ltd. reported in [2012] 348 ITR 485 (Del) 03. The Hon'ble Delhi High Court in the case of Allied Strips Ltd. vs.ACIT, CC15, WP(C) 2526/2015 04. The Hon'ble Bombay High Court in the case of Asian Paints Ltd.vs. Deputy Commissioner Of Income-Tax And Another reported in [2009] 308 ITR 195 (Bom) 05. The Hon'ble ITAT, Kolkata in the case of DCIT vs. E.I.H Ltd., ITANo.1742/Kol/2008
In response to this, the Ld. DR vehemently relied on the orders of the lower authorities.
We have heard the rival submissions and perused the materials available on records including the paper book-I and II submitted by the assessee is as under:
5 I.T.A. No.1638/KOL/2014 Assessment Year 2006-07 M/s. Waycon Commerce Pvt. Ltd. INDEX TO PAPER BOOK - I Sl. No. Particulars Page No. 01. A copy of Balance Sheet of the assessee for the F.Y. ended 01 31..03.2006 02. A copy of details of broker's and commission and brokerage 02 paid 03. Copies of bills raised by the brokers on the 03-07 assessee 04. Copies of replies to notices u/s 133(6) of the 08-22 Income Tax Act, l96l along with confirmation of accounts of the brokers and return acknowledgment of the brokers 5. Copy of Assessment Order passed u/s 143(3) of 23-25 the Income Tax Act, 1961 for the A.Y. 2006-07 .
INDEX TO PAPER BOOK - II Sl. No. Particulars Page No. 01. Copies of notices issued u/s 133(6) of the Income Tax Act, 1961 01-05 on 10.06.2008 02. Copy of reasons recorded by the Ld. AO 06-07 03. Copy of notice issued u/s 148 of the Income Tax Act, 1961 08
7.1. We find that assessee has paid commission/brokerage in the sum of Rs.8,87,000/- to the aforesaid parties for sourcing the customers to the assessee for the purpose of advancing of loans and derived interest income thereon. It is not in dispute that the said details were duly examined by the Ld. AO by issuing separate notices u/s 133(6) of the Act to the aforesaid brokers which were duly replied by them in writing by enclosing their respective income tax return and confirmation statement for receipt of commission from the assessee. The Ld. AO, though, had carried out the due verification of the commission / brokerage in the original scrutiny assessment proceedings, did not give any findings to that effect in the assessment order. In this regard, we hold that the assessee cannot be expected to have control over the manner in which the Ld. AO records his findings in his assessment order. After due examination of the details filed by the Ld. AO, it is
6 I.T.A. No.1638/KOL/2014 Assessment Year 2006-07 M/s. Waycon Commerce Pvt. Ltd. the general practice for the Ld. AO to record his findings only on the issues on which he is not in agreement with the assessee. Hence, It would be safely concluded that the Ld. AO duly and extensively examined the veracity of the claim of deduction towards commission / brokerage in the original assessment proceedings.
7.2. We find that the Ld. AO had tried to completely shift his stand by changing his opinion by taking a divergent view on the propriety of the incurrence of expenditure towards commission / brokerage in the reassessment proceedings by stating that assessee need not to have paid this expenditure at all for earning interest income of Rs.38,34,158/-. This action of the Ld. AO, in our considered opinion, would clearly tantamount to change of opinion on the very same set of facts available before him. There are absolutely no tangible materials available with the Ld. AO for drawing a different conclusion on the very same set of facts available on record. Reliance in this regard placed on the aforesaid decisions by the Ld. AR are well founded. The Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. Reported [2010] 320 ITR 561 held as follows:
“The concept of “change of opinion” on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen on assessment on mere change of opinion. The concept of "change of opinion" must be treated as an in-built test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief. 7.2.1. The Hon'ble Delhi High Court in the case of CIT vs. Usha International Ltd. reported in [20l2]348 ITR 485 (Del) held that "Re-assessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not
7 I.T.A. No.1638/KOL/2014 Assessment Year 2006-07 M/s. Waycon Commerce Pvt. Ltd. make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The re-assessment will be invalid because the Assessing Officer had formed on opinion in the original assessment, though he had not recorded his reasons."
The following was thus observed by the Hon'ble Delhi High Court in the case of CIT vs. Usha International Ltd. (supra):
"64. On the first question referred to this Full Bench as to the meaning of the term "change of opinion", I have nothing to add to the draft proposed. As to the first part of the second question my answer would be that the assessment proceedings cannot be validly reopened under section 147 of the Act even within four years, if an assessee has furnished full and true particulars at the time of original assessment with reference to the income alleged to have escaped assessment, if the original assessment was made under section 143(3). My answer to the second part of the second question is that the issue is concluded by the judgment of the Full Bench of this court in Kelvinator (supra).
My answer to the third question is this. So long as the assessee has furnished full and true particulars at the time of original assessment and so long as the assessment order is framed under section 143(3) of the Act, it matters little that the Assessing Officer did not ask any question or query with respect to one entry or note but had raised queries and questions on other aspects. Again, the answer to this question stands concluded by the judgment of the Full Bench of this court in Kelvinator (supra). My answer to question No. (iv), in respectful agreement with the judgment of the Full Bench of this court in Kelvinator (supra), is a limited answer. It is that section 114(e) of the Evidence Act can be applied to an assessment order framed under section 143(3) of the Act, provided that there has been a full and true disclosure of all material and primary facts at the time of original assessment. In such a case if the assessment is reopened in respect of a matter covered by the disclosure, it would amount to change of opinion. I do not in the circumstances consider it necessary to answer the broad question as to what are all the circumstances under which section 114(e) of the Evidence Act can be applied."
7.3. Respectfully following the aforesaid decisions, we hold that the reassessment in the instant case has been made by the Ld. AO by change of opinion which is impermissible as per law for disallowance of commission / brokerage. Hence, we hold that no disallowance of commission or brokerage in the sum of Rs.8,87,000/-
8 I.T.A. No.1638/KOL/2014 Assessment Year 2006-07 M/s. Waycon Commerce Pvt. Ltd. could be made in the reassessment proceedings. Accordingly, the Additional Ground No.8 raised by the assessee is allowed. 8. Since the Additional Ground No.8 raised by the assessee is allowed, the other grounds raised by the assessee vide Grounds 1 to 6 are merely academic in nature and does not require any adjudication.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the Court on 07.07.2017. Sd/- Sd/-
[Aby. T. Varkey] [M. Balaganesh] Judicial Member Accountant Member
Dated : 07.07.2017 {RS SPS} Copy of the order forwarded to: 1. Appellant/Assessee –M/s Waycon Commerce Pvt. Ltd., Hitec Chambers, 7th Floor, 84/1B, Topasia Road(south), Kolkata 700 046. 2. Revenue/Respondent- I.T.O, Ward-6(4), Kolkata. 3. CIT(A)- Kolkata 4. CIT – , Kolkata 5. CIT(DR), Kolkata Benches, Kolkata