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Income Tax Appellate Tribunal, Delhi Bench “G”: New Delhi
Before: Shri M. Balaganesh & Shri Anubhav Sharma
Income Tax Appellate Tribunal Delhi Bench “G”: New Delhi Before Shri M. Balaganesh, Accountant Member and Shri Anubhav Sharma, Judicial Member ITA No. 9214/Del/2019 (Assessment Year: 2017-18) Schench Process Europe GambH, Vs. DCIT, Pallaswiesenstrasse 100, CPC, Bangalore Darmstadt, Germany (Appellant) (Respondent) PAN: AAOCS8500Q
Assessee by : Shri Vishal Kalra, Adv Shri S. S. Tomar, Adv Shri Ankit Sahni, Adv Revenue by: Shri Anuj Garg, Sr. DR Date of Hearing 05/10/2023 Date of pronouncement 10/10/2023
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.9214/Del/2019 for AY 2017-18, arises out of the order of the Commissioner of Income Tax (Appeals)-42, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 94/2019-20/CIT(A)-42 dated 30.09.2019 against the order of assessment passed u/s 154 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 14.05.2019 by the Assessing Officer, DCIT, CPC, Bangalore (hereinafter referred to as ‘ld. AO’).
The assessee has raised the following grounds of appeal :-
“1. That on the facts and in the circumstances of the case and in law, the order passed by the Commissioner of Income-tax (Appeals) - 42. New Delhi ('CIT(A)") under section 250 of the Income-tax Act, 1961 (the Act), is grossly incorrect and bad in law.
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1.1 That on the facts and in the circumstances of the case and in law, the CIT(A) completely ignored that intimation issued under section 143(1) of the Act was modified by the Deputy Commissioner of Income tax, CPC (Assessing Officer) under section 154 without passing a written order. 2. That on the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the amendment made by the Assessing Officer under section 154 of the Act. in the intimation issued under section 143(1) of the Act. determining total income of the Appellant at INR 7,32,67,650 and consequential net tax liability of INR 73,26,765. resulting in additional demand of INR 54,05,774. 2.1 That on the facts and in the circumstances of the case and in law, the CIT(A) has completely lost sight to the fact that assessed income of INR 7,32,67,650 included INR 4,60,86,733 which did not even represent any accrued income to the Appellant. much less the "real income'. 2.2 That on the facts and in the circumstances of the case and in law, the CIT(A) grossly erred in holding that Assessing Officer cannot reduce the returned income under the provisions of section 154 read with section 143(1) of the Act. While holding so, the CIT(A) completely ignored the fact that Assessing Officer had abridged TDS credit claimed by the Appellant without making proportionate reduction in total income. 2.3 That on the facts and in the circumstances of the case and in law, the CIT(A) failed to appreciate that the appellate authority has wider powers to pass such order or to modify the order of the Assessing Officer, as may be required in the interest of justice. 3. That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in confirming interest under Section 234A, 234B and 234C of the Act.”
Though the assessee has raised several grounds, the only effective issue to be decided in this appeal is as to whether the ld CIT(A) was justified in confirming the action of the ld AO in not reducing the income of the assessee in consonance with reduction of TDS credit thereon as per revised Form No. 26AS.
We have heard the rival submissions and perused the materials available on record. The assessee is a foreign company engaged in rendering technical services. The assessee filed its return of income for AY 2017-18 on 23.12.2017 declaring fee for technical services
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income (FTS) on gross basis of Rs. 7,32,67,650/- as per the then Form 26AS claiming TDS credit of Rs. 95,67,745/-. In other words, based on the figures of income and TDS reflected in the form 26AS, the assessee had filed its return of income on 23.12.2017. This return was duly processed u/s 143(1) of the Act by CPC dated 03.06.2018 accepting the claim of the assessee and determining the refund of Rs. 22,40,980/- as claimed by the assessee in the return of income. The break-up of income earned by the assessee and TDS credit thereon as reflected in the original 26AS is as under:-
Sl. Name of the party Technical TDS No. fee income Schenck Process Solutions 14427809 1443150 1. India Private Limited Schenck Process India Private 58839839 8124595 2. Total 73267648 9567745
Later, the aforesaid two deductors revised their TDS returns and accordingly, the actual fees applicable to the assessee was worked out at lesser figure with corresponding reduction in TDS. In other words, the aforesaid deductors had originally mentioned wrong PAN while filing their original TDS returns and accordingly had revised their TDS returns, pursuant to which, the assessee’s income figure and TDS figure got reduced. This revised income figure and TDS figure was reflected in Form 26AS of the Assessee which is as under:-
Sl. Name of the party Technical TDS No. fee income Schenck Process Solutions 14427809 1443150 1. India Private Limited Schenck Process India Private 12753108 1454459 2. Total 27180917 2897609
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The ld CPC passed suo moto rectification order by giving the revised intimation u/s 143(1) read with section 154 of the Act retaining the income figure of Rs. 7,32,67,650/- and reducing the TDS credit to the tune of Rs. 28,97,609/-. Aggrieved by this revised intimation, the assessee preferred an appeal before the ld CIT(A). When the appeal was pending before the ld CIT(A), the aforesaid two deductors found further mistakes in their TDS returns by mentioning wrong PAN and further revised their TDS returns. Pursuant to this, the revised figures got reflected in Form 26AS of the assessee as under:-
Sl. Name of the party Technical TDS No. fee income Schenck Process Solutions 15233819 1523751 1. India Private Limited Schenck Process India Private 13776549 1454459 2. Total 29010368 2978210
The assessee accordingly before the ld CIT(A) pleaded that the correct income of the assessee should be assessed at Rs. 2,90,10,368/- and TDS credit should be given at Rs. 29,78,210/- in view of the fact that income of the assessee is only FTS assessed on gross basis and assessee being a foreign company had not maintained books of account in India. This request of the assessee was rejected by the ld CIT(A) on the ground that as per section 143(1) of the Act, prima facie adjustment could be carried out by the CPC only for addition to income on the basis of Form 26AS and there is no scope for the revenue to reduce the income offered by the assessee. Accordingly, the ld CIT(A) ignored the plea of the assessee.
The ld. DR vehemently supported the order of the ld CIT(A). It is a fact that the ld CPC passed an order u/s 154 of the Act revising the earlier intimation u/s 143(1) of the Act wherein, the income
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figure has been retained as it is (as declared by the assessee in the return) but TDS credit figure thereon has been reduced to Rs. 28,97,609/-. Admittedly, this rectification and TDS figure was made by the CPC on suo moto basis by taking recourse to first revised 26AS of the assessee which is enclosed at page 65 of the paper book. In this first revised 26AS, the income of the assessee reflected thereon is only Rs. 2,71,80,917/- but this income figure has not been considered by the ld CPC. Again, Form 26AS had undergone change because of filing of revised TDS for the second time by the aforesaid two deductors having great impact on the income and TDS of the assessee. Hence, the assessee had rightly brought out this fact before the ld CIT(A). We are unable to comprehend ourselves to accept the argument advanced by the ld DR as the provisions of section 154 of the Act are meant only to rectify any mistake apparent on record. The assessee in the instant case had duly brought to the knowledge of the ld CIT(A) that income of the assessee had been wrongly determined by the ld CPC and that the correct income figure of the assessee would be Rs. 2,90,10,368/- and TDS thereon of Rs. 29,78,210/-. Infact the provisions of section 154(5) of the Act also provides for reduction in the income of the assessee for which rectification u/s 154 could be done. For the sake of convenience, the provisions of section 154(5) of the Act are reproduced hereunder:
“Where any such amendment has the effect of reducing the assessment or otherwise reducing the liability of the assessee or the deductor, the Assessing Officer shall make any refund which may be due to such assessee or the deductor..” 9. If the contention of the revenue has to be accepted then the provisions of section 154(5) of the Act would become otiose. In any case, it is well settled that the revenue cannot be unjustly enriched and in genuine cases, the assessed income could very well go below the returned income. Reliance in this regard is placed on the decision
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of the Hon’ble Gujarat High Court in the case of Gujarat Gas Company Vs. JCIT reported in 245 ITR 84 (Guj). Similarly, the Hon’ble Gujarat High Court in the case of CIT Vs. Milton Laminates Ltd reported in 37 taxmann.com 249 (Guj) had held that assessed income could go below the returned income if the circumstances of the case so warrant.
In view of the aforesaid observations and respectfully following the judicial precedents relied herein above, we direct the ld AO to determine the income of the assessee of Rs. 2,90,10,368/- and grant TDS credit of Rs. 29,78,210/-. Accordingly, grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 10/10/2023.
-Sd/- -Sd/- (Anubhav Sharma) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10/10/2023 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi