Income Tax Appellate Tribunal - Delhi
Ideal Carpet Industries, New Delhi vs Assessee on 19 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'C', NEW DELHI
BEFORE SHRI G.D. AGARWAL, VICE PRESIDENT
&
SHRI H.S. SIDHU, JUDICIAL MEMBER
ITA No. 2957/Del/2014
Assessment Year: 2009-10
Ideal Carpet Industries, vs. ITO,
C-4/118, Safdurjung Development Area, Ward 24(1),
New Delhi. New Delhi.
AAAFI1556K
(Appellant) (Respondent)
Appellant by : Sh. Saubhagya Agarwal, Adv.
Respondent by : Sh. RIS Gill, CIT(DR)
ORDER
PER H.S. SIDHU, J.M.
The assessee has filed the present appeal against the impugned order dated 28.03.2014 passed by the Commissioner of Income Tax (Appeals)-VIII, New Delhi for A.Y. 2009-10.
2. The assessee filed its return of income on 10/09/2009 at Rs. 705627/- which was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called the Act). The case of the assessee was selected for scrutiny through cess and notice u/s 143(2) was issued on 20/08/2010 and was served upon the assessee. In response to the same Authorized Representative of the assessee appeared from time to time and furnished requisite details/information.
3. After examining the profit and loss accounts and the other details of expenses along with original bills/vouchers debited to the profit and loss accounts the AO finally made the addition of Rs. 1,86,147/- on ITA No. 2957/D/2014 M/s Ideal Carpets 2 account of non production of vouchers completed the assessment u/s 143(3) of the Act on 09/06/2011.
4. Ld. CIT, Delhi-VIII, New Delhi examined the accounts of the assessee and found that assessee had debited Rs. 21,91,329/- under the head "sales commission". Out of this amount, TDS had been deducted on payment aggregating to Rs. 3,69,123/- made to five different parties. But balance commission amount of Rs. 18,22,206/- which had been paid to M/s XXXLUTX, GMBH, no TDS had been deducted as required u/s 195 of the Act. He is of the view that this amount should have been added back to the total taxable income of the assessee as per provision of section 40A(ia) of the Income Tax Act, 1961 and he issued notice to the assessee u/s 263 of the Act on 01/11/2013. In response to the same AR of the assessee appeared and filed a reply dated 16/12/2013. After hearing the parties, ld. CIT has held that payment made to the Australian party has been claimed as reimbursement of publicity charges. But it is not clear whether they were merely reimbursement or publicity expenses which were incurred for the Australian party by the assessee firm on which TDS should have been deducted in view of the services rendered by the Indian entity. Since this aspect has not been verified by the AO. It is possible that some income has escaped assessment and consequently he finds that assessment completed u/s 143(3) on 09/06/2011 at an income of Rs. 891774/- including the addition of Rs. 1,86,147/- is prejudicial to the interest of the Revenue and he cancelled the same with direction to the AO to make the fresh assessment as per law after verifying all the facts and evidences submitted by the assessee as well as material on record vide impugned order dated 28/03/2014 passed u/s 263 of the I.T. Act. Aggrieved by the impugned order dated 28/03/2014 passed by the CIT the assessee filed the present appeal.
ITA No. 2957/D/2014 M/s Ideal Carpets 35. At the time of hearing, ld. Counsel for the assessee stated that the AO has called each and every details of income and expenditures along with various other documentary evidences by issuing a notice u/s 143(2)(i) along with questionnairing fixing the date of the assessee for various occasions. After examining all documentary evidence filed by the assessee the AO has completed the assessment on 09/06/2011 u/s 143(3) of the I.T. Act. But the ld. CIT has wrongly exercised his power u/s 263 of the I.T. Act as the assessment order is neither erroneous nor prejudicial to the interest of Revenue. He further stated that AO has made a detailed enquiry about sales commission subject to TDS during the course of assessment proceedings including impugned payment of Rs. 18,22,206/- to Australian party. Therefore, the impugned order u/s 263 of the Act may be declared as null and void in view of the various decisions rendered by the Hon'ble High Courts. In support of his contention he filed a copy of judgment of the Hon'ble Jurisdictional High Court passed in the case of CIT vs. Sunbeam Auto Ltd., 332 ITR 167 (Del.).
6. Ld. DR relied upon the impugned order passed by the ld. CIT and stated that AO has passed a non speaking order and has not discussed in detail about the expenses incurred by the assessee i.e. prejudicial to the interest of Revenue. Therefore, ld. CIT has rightly invoked the provisions of section 263 in the case of assessee.
7. We have heard the both parties and perused the record available with us and we are of the view that assessee filed its return of income on 10/09/2009 and 20/08/2010 the AO issued a notice to the assessee u/s 143(2) of the I.T. Act. On 11/02/2010 the AO has also issued notice to the assessee u/s 142(1) along with questionnaire fixing the case of the assessee for 03/03/2011. On 03/03/2011 assessee seek adjournment for 10/03/2011. On that date the AR of the assessee appeared and filed part ITA No. 2957/D/2014 M/s Ideal Carpets 4 details. As per summary proceedings the AO asked the AR of the assessee to file remaining details and adjourn the case of the assessee for 02/03/2011. On 21/03/2011 again assessee's counsel filed part details and again the AO asked the assessee counsel to file remaining details. On 07/04/2011 assessee's counsel filed the following details:
"07/04/2011 Present Sh. Parveen Goel, Advocate and filed part details. He is asked to file following details:
1. Details of other income
2. Details of following expenses:
a) Legal & audit charges
b) Photo expense
c) Fabrication expenses
d) Carpet fair expenses
e) Subscription & Fabric expenses
3. Details of Sale Commission paid & TDS thereon.
4. Confirmation of sundry creditors
5. Copy of ledger account of purchase
6. Books of accounts with original bills and the case adjourned for 20.04.2011."
8. After filing the aforesaid details as well as the other documentary evidence the AO adjourn the case of the assessee for 29/04/2011 for filing the remaining details and on 29/04/2011 the assessee has also filed details and documents to the AO for the sake of convenience the contents of the letter dated 29/04/2011 filed by the assessee are reproduced as under:
29th April 2011 Income Tax Officer Ward 24(1), New Delhi Central Revenue Building New Delhi.
Ref: Assessment Proceedings u/s 143(3) of the I.T. Act, 1961 M/s Ideal Carpet Industries, A.Y: 2009-2010 Sir, ITA No. 2957/D/2014 M/s Ideal Carpets 5 With reference to the above matter and quarries raised by you on last date of hearing, we are furnishing herewith following details & documents:
1. Ledger Account copy of other income is enclosed.
2. Details of following expenses are enclosed:
a) Legal & Audit Charges - Ledger A/c.
b) Photo Expenses - Ledger A/c along with copy of bill.
c) Festival Expenses
d) Carpet Fair Expenses - Ledger A/c along with copy of bill
e) Subscription & Membership Fee - Ledger A/c along with copy of bill.
3. Partywise details Sales Commission paid and tax deducted thereon is enclosed. The assessee firm has disclosed sales commission expenses of Rs. 21,91,329/- in its Profit &Y Loss Account, however, the actual expenses incurred on Sales expenses is Rs. 3,69,123/- only. The assessee firm has wrongly included Rs. 18,22,206/- paid to XXXLUTZ, GmbH, Austria on account of reimbursement of Publicity Charges under the head of Sales Commission. Copy of Ledger Account and FOREX Statement issued by bank is enclosed in this regard.
4. Confirmation of Accounts of 8 parties (Sundry Creditors) are enclosed.
5. Ledger Accounts of following parties (Purchase) are enclosed:
i) Archana Carpets
ii) Ideal Carpets Limited
iii)Eastern Handicraft
6. Books of Accounts alongwith supported bills and vouchers are produced herewith for your verification.
We will be pleased to submit further details and documents after hearing from you.
Thanking you, For PRAKASH K. PRAKASH CHARTERED ACCOUNTANTS Sd/-
(PRAKASH K. GUPTA)
9. The AO perused the profit and loss accounts and examined all the details of expenses along with original bill and vouchers debited to the profit and loss accounts and finally he found that there are some incomplete vouchers/bills and he disallowed 1/10th of the total expenses ITA No. 2957/D/2014 M/s Ideal Carpets 6 i.e. 186147/- of Rs. 1861466/- and completed the assessment at the total income at Rs. 891774/- on 09/06/2011 u/s 143(3) of the I.T. Act.
10. Keeping in view of the aforesaid discussion, we are of the considered view that the AO has issued a notice u/s 142(1) along with details questionnaire asking the assessee to file all the documentary evidence for substantiating its claim. In response to the same assessee filed all the details along with documentary evidence before the AO on various dates fixed by the AO and the AO has examined the same thoroughly and completed the assessment by taking a possible view as per law. Meaning thereby the AO has made detailed enquiries about the sales commission subject to TDS during the course of assessment proceedings including the impugned payment of Rs. 1822206/- to the Australian party. It is evident from the letter dated 29/04/2011 by the assessee to the AO furnished all the details and evidences. The assessee has also filed all the evidences before us in the shape of small paper book along with case law supporting the argument advanced by the ld. Counsel for the assessee.
11. Keeping in view of the aforesaid discussion, we are of the considered view that where the assessee had made an enquiry before completion of assessment, the same could not be set aside for the reasons of inadequate enquiry. Ld. CIT has set aside the assessment of the assessee only for the reason that AO has not verified all the facts and evidences submitted by the assessee as well as material on record. In our considered view the finding given by the ld. CIT in the impugned order is not as per law and is contrary to the records of the assessee's case and is not sustainable in the eye of law because as discussed above, the AO had made an enquiry before completion of assessment by calling the explanation along with documentary evidence on the issue in disputes from the assessee. Therefore, the impugned order is deserved to be ITA No. 2957/D/2014 M/s Ideal Carpets 7 cancelled in view of the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Sunbeam Auto Ltd., 332 ITR 167 (Del.). The order of the AO cannot be termed as erroneous unless it is not in accordance with law if an Income Tax Officer acting in according with law make a certain assessment the same cannot be branded as erroneous by the Commissioner simply because according to him, the order should have been written more elaborately. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the Income Tax Officer who passed the order unless the decision is held to be erroneous. We find that AO had called for explanation on these very items from the assessee and the assessee has furnished its explanation vide letter dated 29/04/2011 which clearly shows that the AO had undertaken the exercise of examining on the issue in dispute. It appears that since the AO was satisfied with the explanation given by the assessee, he accepted the same before completion of assessment. In our view the same could not be set aside for the reason of inadequate enquiry as per the decision of the Hon'ble Jurisdictional High Court passed in the case of CIT vs. Sunbeam Auto Ltd. (supra).
12. Keeping in view of the facts and circumstances explain above, we are of the view that impugned order is not sustainable in the eye of law. Therefore, we cancelled the impugned order dated 28/03/2014 passed by the CIT by accepting the appeal filed by the assessee.
13. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 19.12.2014 Sd/- Sd/-
(G.D. AGARWAL) (H.S. SIDHU) VICE PRESIDENT JUDICIAL MEMBER Dated: 19/12/2014 *Kavita, P.S. ITA No. 2957/D/2014 M/s Ideal Carpets 8 Copy forwarded to: - 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY By Order, ASSISTANT REGISTRAR ITA No. 2957/D/2014 M/s Ideal Carpets 9