Income Tax Appellate Tribunal - Delhi
International Cargo Carrier(P) Ltd., ... vs Department Of Income Tax on 19 February, 2010
ITA NO. 2151/Del/2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C" NEW DELHI
BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 2151/Del/2010
A.Y. : 2000-01
DCIT, Circle 11(1), vs. M/s International Cargo Carrier (P)
N.D., CR Bldg., Ltd., Jet Air House,
New Delhi-110002 13, Community Centre,
Yusuf Sarai,
New Delhi
(PAN/GIR NO. : AAACI 0147B)
(Appellant ) (Respondent )
Asseessee by : Sh. Arvind Sonde, Adv.
Department by : Smt. Mona Mohanty, Sr. D.R.
ORDER
PER SHAMIM YAHYA: AM This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals) dated 19.2.2010 pertaining to assessment year 2000-01.
2. Although this appeal is by the Revenue, but Ld. Authorised Representative of the assessee has raised an objection by stating that reopening was bad in law.
3. We have heard rival contentions and perused the records. We find that the original assessment order in this case was passed u/s 143(3) of the IT Act vide order dated 23.12.2002. Notice pertaining to 1 ITA NO. 2151/Del/2010 reopening was issued on 30.7.2007. The reasons recorded for reopening were as under:-
"The assessee has filed return of income on 30.11.2000 declaring NIL income after setting off current years income of ` 16,93,629/- with brought forward losses under normal provisions of the Income Tax Act, 1961 ("The Act") and ` 3,95,626/- u/s 115JA of the Act. The assessment u/s 143(3) of the Act was completed on 23.12.2002 at the returned income u/s. 115JA and at ` 17,43,629/- which was set off against brought forward losses under normal provisions of the Act. Examination of records reveals that a claim of ` 11,71,573/- has been made by the assessee on account of TDS. The receipts on which the TDS has been claimed includes interest income of ` 46,97,730/- and commission income of ` 65,32,222/- whereas the assessee has shown incomes in the profit and loss account under these head of ` 45.07 lacs and ` 55.40 lacs respectively.
A perusal of TDS Certificates reveals that the dates of payment /credit falls within the financial year 1999-2000 i.e. relevant to A.Y. 2000-01. Thus, total receipts on account of interest and commission should have been taken at ` 2 ITA NO. 2151/Del/2010 46,97,730/- and ` 65,32,222/- instead of ` 45.07 lakhs and ` 55.40 lakhs respectively. I, therefore, have reasons to believe that a sum of ` 11,82,952/- being the difference of ` 1,12,29,952/- (46,97,730 + 65,32,222) and ` 1,00,47,000/-
(45,07,000 + 55,40,000) has escaped assessment within the meaning of section 147 explanation 2(c) of the Act."
3.1 It is a case of the assessee that all the necessary particulars were duly disclosed before the Assessing Officer. Reassessment has been made after 4 years from the end of the relevant assessment year and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment in this regard. We can gainfully refer here the provision of section 147 which read as under:-
"Income escaping assessment - 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)."
Provided that where an assessment under sub-section(3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four year from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year 3 ITA NO. 2151/Del/2010 by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section(1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year."
3.2 We find that in the reasons for reopening itself, Assessing Officer has stated that he has found some shortcomings on the perusal of TDS certificates and details which was duly disclosed with the return of income. Hence, it can be said that there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Hence reopening after 4 years from the end of relevant assessment year is hit by the proviso to section 147. There is also no allegation that there was any concealment of material facts. The action of the Assessing Officer cannot be sustained. Hence, we hold that reopening was bad in this case and hence, the reassessment is liable to be quashed on this account itself. Hence, this ground raised by the assessee is allowed.
4. Revenue's appeal is on merits of the addition as follows:-
5. The first issue raised in the Revenue's Appeal reads as under:-
"On the facts and circumstances of the case and in law, Ld. Commissioner of Income Tax (Appeals) has erred in deleting the disallowance of ` 1,90,730/- made by the Assessing Officer on account of different between the amount of interest as shown in the P&L account and as per TDS Certificates submitted."
6. On this issue Assessing Officer observed that the receipts on which TDS has been claimed includes interest income of ` 4697730/- whereas the assessee has shown income under this head at ` 45.07 4 ITA NO. 2151/Del/2010 lakhs. Thus, as per Assessing Officer on account difference between the amount of interest income as shown in the P&L a/c and as shown in the TDS Certificate a sum of ` 190730/- was liable for addition.
7. Upon assessee's appeal Ld. Commissioner of Income Tax (Appeals) considered the issue elaborately and held as under:-
"I have considered the submissions of the appellant, the findings of the Assessing Officer and the facts on record. As regard to the contention of the Assessing Officer that since the appellant is following the mercantile system of accounting, the income on which TDS has been claimed must be offered for taxation, is not the correct view that since the appellant is following had correctly followed the mercantile system of accounting in the relevant assessment year. As per the mercantile system of accounting, income and expense are booked as and when they accrue, i.e. revenues are recognized and earned when they are realized or become realizable irrespective of when the cash /funds are received. As per this system, the interest income on Fixed Deposits for a particular financial year is recognized and booked as and when it accrues, irrespective of whether the same has been paid by the bank or not. On the contrary, the banks had deducted TDS on payment basis, i.e. TDS is deducted when the interest is paid/ payable by the banks to the appellant, irrespective of the financial year to which the interest belongs.
The interest income on which TDS has been deducted by the banks includes income of the previous assessment 5 ITA NO. 2151/Del/2010 year, which was shown by the appellant as interest income in that year, as per the mercantile system of accounting. Further, no TDS has been deducted by the bank on the accrued interest income of the relevant assessment year which has been recognized by the appellant as per the mercantile system of accounting. The appellant has submitted the reconciliation of interest income as per the TDS certificate and P&L a/c as under:-
Reconciliation of interest income as per TDS Certificate and Profit and Loss A/c Particulars Amount Remarks Interest income as per TDS 4697730 As per the TDS Certificates Certificates, interest income from banks is ` 4676694/- and from other deposits is ` 21036/-.
Less : Interest income on 21036 The same was
other deposits as per TDS netted off with
Certificates the interest
expenses payable
by the appellant.
Interest income from banks 4676694
as per TDS certificates
Less : Interest income 924124 TDS was
accrued but not due in A.Y. deducted by the
1999-2000 bank in A.Y. 2000-
01 but since the
appellant is
following
mercantile
system of
accounting, the
same was+
6
ITA NO. 2151/Del/2010
offered for tax in
A.Y. 1999-00.
Add : Interest income 570589 No TDS was
accrued but not due in A.Y. deducted by the
2000-01 bank in A.Y. 2000-
01 but since the
appellant is
following
mercantile
system of
accounting, the
same was offered
for tax in A.Y.
2000-01.
Interest income from banks 4323159
as per TDS Certificates on the
basis for mercantile system
of accounting
Interest income from banks 4337000
as per profit and loss account
Add: Interest income from 170000
other deposits as per profit
and loss account
Total interest income as per 4507000
profit and loss account
7.1 The details of the reconciliation submitted by the appellant show that the interest income has been properly accounted for as per the mercantile system of accounting followed by the appellant. In view of the findings above this disallowance made by the Assessing Officer is factually incorrect. The addition made by the AO is deleted."
8. Against this order the Revenue is in appeal before us.
9. We have heard the rival contentions and perused the records.
We find that Ld. Commissioner of Income Tax (Appeals) has deleted the addition by correctly appreciating the reconciliation in this regard.
7ITA NO. 2151/Del/2010 9.1 Ld. Departmental Representative could not controvert the submissions.
10. Accordingly, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (Appeals) and uphold the same.
11. The next issue raised in the Revenue's appeal reads as under:-
"On the facts and circumstances of the case and in law, Ld. Commissioner of Income Tax (Appeals) has erred in deleting the disallowance of ` 9,92,222/- made by the Assessing Officer on account of difference between the commission income as shown in the P&L account and as per TDS certificates submitted."
12. On this issue as per the Assessing Officer, the TDS certificates claimed by the assessee, the assessee has earned commission income of ` 6532222/- during the relevant assessment year whereas an amount of ` 55,40,000/- was shown by the assessee in its profit and loss account as commission income. Accordingly, the Assessing Officer came to the conclusion that the assessee has understated its commission income of ` 992222/- (` 6532222 minus ` 5540000) being the difference of the commission income as per TDS certificate and as per the profit and loss account and added the same to the total income of the assessee.
13. Before the Ld. Commissioner of Income Tax (Appeals) assessee submitted elaborately, it was contended that Assessing Officer has not appreciated the proper facts of the case. After duly considered the submission, Ld. Commissioner of Income Tax (Appeals) held as under:-
8ITA NO. 2151/Del/2010 "I have considered the submissions of the appellant, the findings of the Assessing Officer and the facts on record. Perusal of the record show that the TDS certificate of ` 138059/- were claimed in respect of TDS deducted on contractual receipt u/s 194C of the IT Act, and TDS certificate of ` 1033514/- were claimed in respect of TDS deducted on interest u/s 194A. The appellant is a General Sales Agent for cargo / freight operation of Kuwait Airways. The appellant in turn has appointed various agents all over the country for cargo sales and these agents deal with the appellant and not with Kuwait Airlines. The entire cargo sales of the airlines are routed through the appellant's bank account. Since the foreign airline is not taxable in India by virtue of DTAA, hence, the foreign airline is not liable to file the return of income and therefore cannot claim TDS. Since the agents are dealing with the appellant who is a General Sales Agent and not the airlines, therefore, the agents deduct TDS u/s 194C on the remittance made to the general sales agent and issue the TDS certificate in the name of the general sales agent. The appellant being the GSA claimed the TDS in its return of income. The Assessing Officer has compared the commission income earned by the appellant during the relevant assessment year with the contractual receipt on which the TDS were deducted u/s 194C and since the contractual receipt was more than the commission income of the appellant by ` 992222/-, the Assessing Officer added the above to the appellant's income. The Assessing Officer has not appreciated the fact that the appellant is the GSA and since the entire sales which are routed to the appellant's bank account are remitted to the airlines so they will not be reflected 9 ITA NO. 2151/Del/2010 in the appellant's P&L account. Thus the contention of the Assessing Officer that commission income has been understated odes not hold goods. The appellant is entitled only to the GSA commission on the sales. In view of the discussion above the addition made by the Assessing Officer on account of the difference in commission income as per contractual receipt and the commission income shown in the P&L a/c is not correct. The appellant is entitled to only the commission income and not the entire contractual receipt. In view of the findings above the addition made by the Assessing Officer of ` 992222/- on account of commission income is not correct and hence deleted."
14. Against this order the Revenue is in appeal before us.
15. We have heard the rival contentions and perused the records.
We agree with the contention that Assessing Officer has not properly appreciated the facts on this issue. We find that the Assessing Officer has compared the commission income earned by the appellant during the relevant assessment year with the contractual receipt on which the TDS were deducted u/s 194C and since the contractual receipt was more than the commission income of the appellant by ` 992222/-, the Assessing Officer added the above to the appellant's income. The Assessing Officer has not appreciated the fact that the appellant is the GSA and since the entire sales which are routed to the appellant's bank account are remitted to the airlines so they will not be reflected in the appellant's P&L account. The Ld. Commissioner of Income Tax 10 ITA NO. 2151/Del/2010 (Appeals) has properly appreciated the issue and made an appropriate order. Hence, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (Appeals) and hence, we uphold the same.
16. In the result, the appeal filed by the Revenue stands dismissed.
Order pronounced in the open court on 10/6/2011.
Sd/- Sd/-
[I.P. BANSAL]
BANSAL] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date 10/6/2011
SRB
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches 11