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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI RAVISH SOOD
This appeal by the assessee is directed against order of Ld. CIT (A) dated 27/16/2011 and pertains to assessment year 2005 - 06. 2. The grounds of appeal read as under:
Permanent Prestress P.Ltd. i). The learned Commissioner of Income Tax (Appeals)-2, Mumbai, hereinafter referred to as the 'CIT(A), erred in holding that the proceedings u/s 148 of the IT Act were validly initiated. Your appellants submit that, or the facts and in the circumstances of their case, the provisions section 147 of the IT Act are not applicable, and, therefore, the notice issued u/s 148 of the IT Act is bad-in-Law and without jurisdiction and consequently dated 27-12-20101 made u/s 143(3) r.w.s. 147 of the IT Act requires to be quashed. ii). Without prejudice to the ground of appeal no.1, it is submitted that, the CIT(Appeals) having deleted the only addition made by the Assessing Officer amounting to Rs.54,15,809/- in the reassessment proceedings, the re assessment order dated 27-12-2010 made u/s 143(3) r w s 147 of the IT Act does not survive, and, therefore, requires to be quashed. iii.) Without prejudice to the above grounds, it is submitted that, the CIT(A), while directing the Assessing Officer to withdraw excess credit for TDS granted to the appellant company for the assessment year 2005-06, ought to have directed him to allow credit for the said tax deducted at source being withdrawn from this year in the year(s) to which such tax deducted at source relate. iv.) The CIT(A) erred in not directing the Assessing Officer to cancel the interest charged u/s 234B of the IT Act.
Permanent Prestress P.Ltd. Your appellants submit that, on the facts and in the circumstances of their case, no interest u/s 234B of the IT Act is chargeable. v). The CIT(Appeals) failed to appreciate that interest u/s 234D cannot be increased pursuant to order u/s 147 of the IT Act. Your appellants submit that, on the facts and in the circumstances of their case, they are Liable to pay interest u/s 234D of the IT Act on the excess amount refunded u/s 143(1) of the IT Act when - compared with the refund due on original assessment made u/s 143(3) of the IT Act, from the date of granting the refund to the date of regular assessment. Your appellants crave Leave to add, to alter, or amend all or any of the aforesaid grounds of appeal
3. Briefly the case of the assessing officer is that in the P&L A/c the appellant has shown income from contracts of Rs. 13,33,10,878/- and other income of Rs.2,55,579/- and claimed credit for TDS of Rs. 28,50,544/- on the basis of 29 certificates enclosed alongwith the return. The appellant was allowed credit for TDS of Rs.28,41,332/- excluding TDS of Rs.9212 for interest income from SBH as the same was not pertaining to the relevant assessment year.) on verification of remaining 28 TDS certificates in respect of income received out of contract, consultancy services and interest from bank, it came to notice that during the relevant previous year appellant has received Permanent Prestress P.Ltd. Rs.13,84,26,687/- on which TDS of Rs.28,41,332/- has been deducted. Thus, the appellant did not disclose income of Rs.54,15,809/- which consequently escaped assessment”. Therefore, the Assessing Officer has given a show cause notice to the appellant that why this wrong claim should not be disallowed.
4. The assessee responded as under; "In Profit & Loss Account the assessee has shown income from contracts of Rs.13,33,10,878/- and other income of Rs.2,55,5791/- and claimed credit for TDS of Rs.28,50,544/- on the basis of 29 certificates enclosed alongwith the return. The assessee was allowed credit for TDS of Rs.28,41,3321/- (excluding TDS of Rs. 9,212/- for interest income from State Bank of Hyderabad as the same was not pertaining to the relevant assessment year).
5. However, the A.O observed that “on verification of remaining 28 TDS certificates in respect of income received out of contract, consultancy services and interest form bank, it came to notice that during the relevant previous year assessee has received income from above sources of Rs.13,87,26,6871- on which TDS of Rs28,41,3321/- has been deducted. Thus the Permanent Prestress P.Ltd. Rs.54,15,8091/- which consequently escaped assessment." 5.1 The assessee vide letter issued from this office was called to show cause why this wrong claim should not be disallowed. The assessee vide letter dated 7th August, 2010 submitted as under:- "Firstly, you must appreciate that, the TDS amount will not determine the income assessable for a particular year. In fact, it is other way round that, based on the income s for a particular year, on the basis of method of accounting regularly followed by an assessee, credit for tax deducted at source has to be allowed for that year. In this view of the matter alone, it is submitted that, the basis on which the amount of income escaping assessment has been worked out, is incorrect on facts and in law. Without prejudice, enclosed please find copies of our letter dated 28/04/2009 and 28/07/2009 wherein a detailed reconciliation is given with regard to the income offered for tax and claim for tax deducted at source for the above year. From the enclosed letters, you will please observe that, there are certain advances [not income] on which tax has been deducted at source. Similarly, there is some income which has been Permanent Prestress P.Ltd. assessed to tax in earlier year in respect of which the certificate was made available during the current year and accordingly claim for TDS has been made in current year. Also, enclosed please find a copy of the decision for the assessment year 1999- 2000 in our clients' own case by the Hon'ble Tribunal, which we understand, has been accepted by the Department where it has been categorically decided that the amount of TDS will not determine the income assessable for a particular year. The income is assessable for particular year based on the method of accounting regularly employed by the assessee and credit for tax deducted at source has to be allowed in that year. From the above submissions which were already made before the Assessing Officer during the course of proceedings u/s 154/155 for the very year, according to us, there is no fresh material with the Assessing Officer on the basis of which the assessment has been reopened.”
6. However, the assessing officer was not satisfied. He held as under; ”The submission of the duly considered. However, the same is not found to be acceptable for the reason that assessee has claimed credit for TDS whereas the income was not offered Permanent Prestress P.Ltd. for taxation. It is to be noted that if TDS credit is claimed by the assessee, income from such TDS credit ought to have been included in the income of the assessee. Section 199 of the IT Act alongwith the relevant rules states that credit for TDS will be allowable in the year in which income is assessable. In this case the assessee has claimed credit of TDS as a natural corollary, the income from such TDS should have been assessed in the year under reference.”
7. Against above the order assessee appeared before the Ld. CIT (A). Assessee agitated the issue of reopening as well as merits of the case. The Ld. CIT (A) held as under: “After careful examination of the facts and circumstances of the case, I find that the appellant company had claimed excess credit of TDS in the assessment year 2005-06 without matching the claim of the TDS visa vis income offered for taxation in the A.Y.2005-06. Credit for TDS certificates of earlier years were also claimed in this year by the appellant company without matching and correlating the same with the income offered in earlier years. Apparently, credit for such TDS certificates needed to be disallowed. This wrong claim of TDS by the appellant company has resulted in tremendous confusion all Permanent Prestress P.Ltd. round. As per Section 199 of the l.T. Act, 1961 alongwith relevant rules credit for TDS is allowable in the year in which corresponding income is offered for taxation by an assessee. This lead to a situation where by assessing officer had reasons to believe that the appellant company had suppressed its gross receipts Therefore, the assessing officer rightly proceeded to reopen the assessment in this case. The appellant company is responsible for causing such confusion. Therefore, I hold that the proceedings u/s.148 were validly initiated. Coming to the issue regarding the addition of Rs.54,15,809/- on merits, I find that assessing officer has wrongly worked out income/gross receipts of the appellant company based on the TDS certificates, credit for which was claimed by the appellant company during the year but the income of the same was not offered for taxation in the current year, was not a correct method for working out suppression of receipts correctly. The addition made by the assessing officer is totally uncalled for because proper verification and correlation of the TDS certificates with the income offered by the appellant company in the assessment year 2005-06 has not been done by the assessing officer. Consequently, the addition made by the assessing officer amounting to Rs.54,15,809/- is directed to be deleted in the Permanent Prestress P.Ltd. Hon'ble ITAT in the appellant's own case for the assessment year 1999-2000. Further, the Assessing Officer is directed to allow correct credit of TDS by linking the income offered for taxation in the F.Y. relevant to the A.Y.2005- 06 with the TDS certificates pertaining the A.Y.2005-06. The credit for TDS certificates where such income has been offered for taxation only needs to be given and excess claim of TDS by the appellant company pertaining to any other assessment year, need not be given in the assessment year 2005-06. The assessing officer is directed to withdraw the excess credit for TDS granted to the appellant company in the assessment year 2005-06.”
Against above order assessee is in appeal before the ITAT.
We have heard both the counsel and perused the records.
Learned counsel of the assessee submitted that the reopening in this case is bad in law. He submitted that on the merits of identical issue in earlier year the tribunal had decided the issue in favour of the assessee. Hence he submitted that in these circumstances it cannot be said that the assessing officer had any reason to reopen the case. He further submitted that the additions made on merits have been deleted by the Ld.CIT (A). Hence he pleaded that the direction of Ld. CIT (A) to disallow and withdraw the tax deducted at Permanent Prestress P.Ltd. source credit doesn't survive. The learned counsel further submitted that rectification proceedings had been initiated which were later on dropped. In such situation learned counsel pleaded that reopening of the case was not justified. Further, more he pleaded that the reopening is based upon audit objection, hence the reopening is not valid.
Per Contra learned departmental representative relied upon the orders of the learned Commissioner of income tax appeals. He further submitted that since the audit objection were related to matter of facts and not issues of law, the reopening on objections relating to facts cannot be said to vitiate reopening.
We have carefully considered the submissions and gone through the records and the case laws submitted. Up on careful consideration we note that the core of the issue in dispute is the claim of tax deduction at source credits by the assessee on the basis of certificate which do not relate to income of the present assessment year. Grant of credit on the basis of tax deduction at source certificates relating to other assessment year is a matter of fact and it cannot be said that it requires any exposition of law. Hence reopening on the basis of an audit objection which is based upon for the cannot be said to vitiate the reopening. This is a settled law. As regards the decision of the Tribunal in earlier year wherein it was held that income represented Permanent Prestress P.Ltd. by the deduction at source certificates relating to other years cannot be added as income of the year in which the same was claimed, the same is also related to facts of the case of the particular year and cannot be said to be laying down any blanket ratio. As regards the issue of dropping of rectification proceedings we find that the matter of reconciliation of TDS certificates is a matter which requires analysis and examination of the facts and cannot be said to be subject matter of rectification of apparent mistake. Hence the assessing officer has rightly dropped the rectification proceeding and has initiated reopening of the case. Further more the plea that since addition have been deleted, direction to withdraw T.D.S credit does not survive is also not cogent, as the addition and T.D.S credits are intertwined matter.
In the background of aforesaid discussion and precedent we are of the considered opinion that the reopening in this case was valid. Accordingly, we uphold the order of Ld. CIT (A)on the issue of validity of reopening proceedings.
As regards the merits of the issue we find that Ld. CIT (A) has drawn adverse inference by observing that assessing officer has made the addition without proper verification and correlation of the tax deduction at source certificates with the income offered by the assessee in assessment year 2005 —06. We find that it is settled law Permanent Prestress P.Ltd. Ld. CIT(A) are coterminous with that of the assessing officer. When the Ld. CIT (A) has found an error in the proceedings of the authorities below. It was his duty as well as jurisdiction to correct the error. This proposition is supported by the case law from honourable Supreme Court in the case of Kapoorchand shrimal 131 ITR 451.
Hence we are of the considered opinion that the Ld. CIT(A) was not correct in directing the deletion of the addition without verification and correlation of the tax deduction at source certificates with the income of the assessee which was offered for assessment year 2005 —06. In this regard we also find that there is justification in the pleading of the Ld. Counsel of the assessee that the credit should be granted for the tax deduction at source for the years in which the actually relate.
But this requires follow up of proper procedure to claim tax refund. The plea of Ld. Counsel goes on to prove that assessee has claimed credit of T.D.S certificate in the current year without offering concerned income to tax in the current year. Hence the offer of income as well claim of T.D.S is not at all in accordance with law. Accordingly, in the interest of justice we remit the issue raised the file of the assessing officer. The assessing officer is directed to examine the TDS certificates with the income offered by the assessee Permanent Prestress P.Ltd. and compute income accordingly. The assessing officer is also directed to grant credit to the assessee for the tax deduction at source for the years for which they actually relate if the same is claimed as per law. Needless to add assessee should be granted adequate opportunity of being heard.
As regards the issue of charging of interest is concerned learned counsel of the assessee has submitted that the same was not adjudicated by the Ld. CIT (A) though the issue has been raised before him. Since we have already remitted the main issue to the file of the assessing officer, this issue should also be considered by him afresh. In the result this appeal filled by the assessee is partly allowed statistical purposes.