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1 ITA Nos. 605 & 606/Nag/2016.
IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. Nos. 605 & 606/Nag/2016 Assessment Years: 2008-09 & 2009-10. Shri Chandrashekhar Mudrika Singh, The Income-tax Officer, Nagpur. Vs. Ward-5(2), Nagpur. PAN ADIPS6014P. Appellant. Respondent. Appellant by : Shri K.M. Gupta. Respondent by : Shri A.R. Ninawe. Date of Hearing : 05-01-2016 Date of Pronouncement : 6th January, 2017.
O R D E R.
These appeals by the assessee are directed against respective orders of Learned CIT(Appeals)-4, Nagpur pertaining to concern assessment years .
Since the issues are common and connected and the appeals were heard together, these are being disposed of by this common order.
The common grounds of appeal read as under : 1. In the facts and circumstances of the case and in law applicable thereto, the Commissioner of Income Tax (Appeals)-4 and Assessing Officer has committed mistake in treating the salary earned for services rendered in Indonesia as income taxable in India, when the appellant worked at Indonesia (Out of India) for more than 182 days in a given financial year and that the same is accepted by both the authorities.
In the facts and circumstances of the case and law applicable thereto,
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the Commissioner of Income Tax (Appeals)-4 has committed mistake in accepting the submission made by the counsel of assessee as admission made by the assessee himself. 3. In the facts and circumstances of the case and law applicable thereto, the Commissioner of Income Tax (Appeals)-4 has committed mistake in accepting the submission made by the counsel in the course of assessment proceedings, when :- a. a concession/submission is made on a point of law which is contrary to the provision of law. b. the Assessing Officer has passed the order on merits and not on the basis of the concession/submission made by the assessee’s counsel. Since facts are identical I am referring to figures and facts from ITA 605/Nag/2016..
The brief facts of the case are as under : The assessee was paid the salary of Rs.8,57,941/- in India and the employer M/s SMS Infrastructure Ltd., Nagpur deducted TDS of Rs.1,79,092 from the salary. In the computation of total income (Part B of the ITR-2) the assessee shown salary received from M/s SMS Infrastructures Ltd. at Rs.2,59,453/- after reducing exempt income therefrom. The said amount of Rs.5,98,488/- was shown as Exempt Income as Salary earned in Indonesia in Schedule E1 of ITR2 claiming the status of NRI and claiming that the salary was received for working in Indonesia. In support of such a claim the assessee enclosed a copy of passport and calculation sheet showing stay outside of country during period from 16-7-2007 to 13-8-2007 (27 days). 04-9-2007 to 05- 10-2007 (31 days). 01-11-2007 to 24-01-2008 (83 days) and 06-02-2008 to 20- 3-2008 (44 days) stating total stay outside of India for 185 days during the F.Yr. 2007-08.
In response to assessee's reply to a notice issued in this regard the Assessing officer recorded the assessee’s submissions as under :
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“ The claim of tax free income of Shri C.M. Singh, due to his NRI status is withdrawn. Though there is NRI status for him but it is not possible to produce any documents filed with Tax Authorities of Indonesia The bifurcation of Salaries received in India and Indonesia was done as per his appointment letter, entries in his passport of stay out of India and monthly salary received by him. The claim of tax free income shown in the return, may be disallowed and taxed accordingly. The income figures were shown correctly in the return by the assessee under the assumption that the NRI status makes his income tax free. And never claimed that he has paid any taxes outside country. The TDS is also properly on his salary. Considering the facts and circumstances of the case, asst. may be done accordingly and kindly no penalty may be levied.”
However the Assessing Officer did not consider the asseessee’s submission as above. He proceeded to refer to the provisions of India and Indonesia DTAA, and the section 5 of the Income Tax Act. The Assessing Officer also referred to the decision of authority of advance ruling. Referring to the provisions of above DTAA and the ruling of authority of advance ruling the Assessing Officer proceeded to hold that assessee’s claim for exemption in respect of salary earned in Indonesia as invalid and has rejected the same.
Against the above order assessee appealed before the Learned CIT(Appeals). Learned CIT(Appeals) elaborately reproduced the assessee’s submissions and case law referred in extenso. Learned CIT(Appeals) concluded as under : 1. “4.1 I have considered the assessment order framed by the AO, the grounds of appeal and the submission made by the appellant and various. judicial pronouncements relied upon by the appellant. It is an undisputed fact that the appellant has stayed outside India for more than 182 days during the year and therefore as per the provisions of Sec. 6 of the I.T. Act, 1961, the appellant is not a resident of India for the given assessment year. From the facts of the case, it also appears that salary income has been earned outside India and that the appellant's
4 ITA Nos. 605 & 606/Nag/2016.
salary has been paid by the employer Mls SMS Infrastructure Ltd., Nagpur from India and TDS has been deducted on the salary. 4.2 The provisions of Sec. 9 deals with income deemed to accrue to arise in India. The provisions of Se. 9 (1)(ii) & (iii) deal with:
"(ii) income which falls under the head "Salaries", if it is earned in India. [Explanation> For the removal of doubts, it is hereby declared that the income of the nature referred to in this clause payable for _ (a) Service rendered in India; and (b) The rest period or leave period which is preceded and succeeded by services rendered in India and forms part of the service contract of employment, Shall be regarded as income earned in India;] (iii) income chargeable under the head "Salaries" payable by the Government to a citizen of India for service outside India,"
4.3 A plain perusal of this section shows that any salary income which is earned outside India will not fall under salary income which is deemed to accrue or arise in India.
4.4 However, on the other hand, I find that the AO has made the addition mainly on account of letter dtd, 12.11.2010, withdrawing the claim of tax free income of Shri C.M. Singh (the appellant), due to his NRI status considering inability to produce tax documents filed with tax authorities of Indonesia. The AO has also relied on the ratio of judgment of Authority For Advance Rulings in case of S. Mohan (2007) 294 ITR 177 (AAR)where ruling has been given that the option of tax salary incorne even in case where the assessee stays outside India for more than 182 days rests with both the countries. Since, the addition has been made by the AO based on assesses claim of withdrawal of tax free income from salary earned in Indonesia, I am not going into the merits of addition made. The fact of the case shows that the offer of taxation of salary income was made by the appellant in good faith subject to the condition that no penalty is imposed. The appellant at no stage tried to conceal the particulars of income or agreed that an addition could be made on merits by the AO. The disclosure was apparently to buy peace of mind.
4.5 The Hon'ble Court Karnataka HC in case of T.P. Indrakumar Vs. ITO (2010) 322 fTR 454 (Karnataka He)has held that where the appellants case was taken up for scrutiny and the assessee voluntarily offered income for taxation to the extent of Rs. 10 Lacs to avoid any further scrutiny by the AO then it could be acted upon at its face value without further probe. The Hon'ble High Court held that the entire exercise by the AO was to determine the income of the assessee whereupon tax liability is automatically fixed in terms of the rates as provided by the Finance Act. The Hon'ble Court held that if an assessee himself voluntarily offered income for taxation then there is nothing else for AO to probe as the assessee himself is
5 ITA Nos. 605 & 606/Nag/2016.
volunteering to offer the amount as his income. 5.0 Accordingly, relying on the ratio of the above mentioned judgment, I am confirming the addition made by the AO. The grounds of appeal filed by the appellant are dismissed.”
Against the above order assessee is in appeal before the ITAT. 7. I have heard both the counsel and perused the records. I find that the assessee has submitted a letter before Assessing Officer offering to withdraw the claim of exemption but the Assessing Officer has not at all considered the said letter offering withdrawal of the claim. He has decided the issue purely on merit by considering the provisions of the direct tax avoidance agreement between India and Indonesia and the rulings from authority of advance ruling.. 8. Upon assessee's appeal Learned CIT(Appeals) has erroneously noted that the Assessing Officer has levied the tax only on assessee's concession by withdrawing the claim of exemption. This is an erroneous appreciation of the fact. There is no whisper in the Assessing Officer’s order that he is levying the tax on the basis of assessee's concession. In such circumstances Learned CIT(Appeals)’ reliance upon the decision of Honourable High Court of Karnataka in the case of T. P. Indrakumar (supra) is also not applicable, as in the said case it was noted that by offering income for taxation there was nothing else for the Assessing Officer to probe. Here the case is not so.
In the background of aforesaid discussion I am of the considered opinion that the order of learned CIT(Appeals) is not liable to be sustained. Both the counsel fairly agreed that the issue may be remitted to the file of Learned CIT(Appeals) to consider the issue on merits .Accordingly I remit the issue to the file of Learned CIT(Appeals). The Learned CIT(Appeals) shall consider the issue afresh and pass a speaking order on the merits of the case after giving the assessee an opportunity of being heard.
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In the result these appeals by the assessee are allowed for statistical purposes.
Order pronounced in the Open Court on this 6th day of January., 2017.
Sd/- ( SHAMIM YAHYA) ACCOUNTANT MEMBER.
Nagpur, Dated: 6th January, 2017.