TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 660
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....gh foreign commission agents, it was part of the sale transaction, commission due to the foreign commission agents, was deducted by the foreign purchaser, was paid by the foreign purchaser and sale consideration was remitted to the assessee after deduction of commission, the net amount through banking channels, hence section 195 was inapplicable, the deduction was allowable as expenditure for business purposes, no certificate by the C.A. was required to be furnished. 1.2 That there was no lack of enquiry or verification and otherwise also the reliance on newly inserted Explanation 2(a) to Section 263(1) from 1.6.2015 is bad as the order is dated 29.1.2015. This insertion is prospective and applicable on order made on or after 1.6.20 15 and not on earlier order. 2. That supervision charges paid to Shri Pratap Singh of Rs. 33,000/- was not commission u/s. 194H and there was no liability to deduction under the said section. Hence disallowance u/s. 40(a)(ia) is bad on facts and in law. It was duly explained and accepted by the Assessing Officer. 3. That the learned Principal Commissioner of Income-tax has not properly considered, appreciated and understood replies dated 24.02.....
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....d reason. Still further, on a perusal of the records it came to the notice of the Principal CIT that the assessee had also debited local commission of Rs. 44,446/-, on which no tax was deducted at source under Sec. 194H of the Act. 4. That on the basis of his aforesaid observations the Principal CIT observed that the A.O had failed to examine the facts of the case, and without making proper verifications had wrongly allowed the claim of the assessee towards foreign commission and local commission while framing the assessment. The Principal CIT in the backdrop of his aforesaid conviction, holding a conviction that the assessment order passed by the A.O was erroneous in so far as it was prejudicial to the interest of the revenue, therefore, issued a notice under Sec. 263(1) of the Act and called upon the assessee to show cause as to why the assessment framed by the A.O under Sec. 143(3) may not be revised. 5. The assessee in his reply submitted before the Principal CIT that as the A.O after making necessary verifications had allowed the claim of the assessee as regards the local and foreign commission, therefore, the assessment order passed by him was not amenable for revision unde....
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....re of the A.O to make necessary verifications and disallow the commission amount under Sec. 40(a)(ia), the order passed by him under Sec. 143(3) on the said count too was rendered as erroneous in so far as it was prejudicial to the interest of revenue. The Principal CIT on the basis of his aforesaid conviction, cancelled the assessment framed by the A.O under Sec. 143(3), dated 29.01.2015, and directed him to determine the income on the basis of proper inquiries after affording an opportunity to the assessee. 7. The assessee being aggrieved with the order passed by the Principal CIT under Sec. 263 of the Act had carried the same in appeal before us. The ld. Authorized Representative (for short 'A.R') for the assessee drew our attention to the 'Show cause' notice (for short 'SCN') issued by the Principal CIT under Sec. 263(1) of the 'Act' (Page 41) of assesse's paper book (for short 'APB'). The ld. A.R further took us through the various pages of his APB. The ld. A.R referring to the observations of the Principal CIT that the assessee had not submitted either an order under Sec. 195 of the Act, nor the prescribed certificate in Form No. 15CA of the Chartered Accountant, specifying ....
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....dgement of the Hon'ble High Court of Gujarat in the case of CIT Vs. Vallabhdas Vithaldas (2015) 232 taxman 57 (Guj). It was thus submitted by the ld. A.R that now when the two fold issues on the basis of which the assessment order passed by the A.O had been revised by the Principal CIT in exercise of his powers under Sec. 263 of the 'Act', were duly clarified by the assessee before the A.O in the course of the assessment proceedings, as well in his reply to the notice issued by him under Sec. 133(6) prior to initiation of the revision proceedings, which after necessary deliberations and application of mind was accepted by the A.O, therefore, the Principal CIT could not have revised the assessment order on the said issues on which a plausible view had already been arrived at by the A.O. The ld. A.R submitted that now when the A.O had made necessary verifications as regards both the issues on the basis of which his order had been revised under Sec. 263 of the Act, viz. (i). Foreign commission; and (b). local commission, therefore, the Principal CIT could not have revised the order passed by the A.O, for the reason that observations in respect of the said issues were not found recorde....
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....d specific queries as regards the foreign commission of Rs. 9,84,862/- that was paid by the assessee during the year under consideration. We find that the assessee vide his reply dated 19.11.2014 filed with the A.O during the course of the assessment proceedings, had furnished details as regards the 'foreign commission' as well as 'local commission' that was paid by him during the year under consideration (Page 22 of 'APB'). The assessee still further had in his reply dated 16.01.2015, furnished with the A.O details of the commission paid along with supporting documents. We find that the assessee had by way of an enclosure to his aforesaid reply, specifically submitted before the A.O that the amount of Rs. 33,000/- which was paid to Shri Pratap Singh, formed a part of the salary. We further find that the assessee had in the details of the foreign commission paid by him divulged the details of the foreign buyers (Page 3 of APB). We further find that specific queries after the culmination of the assessment proceedings and prior to initiation of the revision proceedings by the Principal CIT under Sec. 263, were raised by the A.O vide his notice issued to the assessee under Sec. 133(6)....
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....agents was furnished with the A.O, both during the course of the assessment proceedings and in reply to the notice under Sec. 133(6), therefore, it can safely be concluded that the latter after deliberating on the said reply of the assessee had accepted the same. We are of the considered view that now when irrefutable documentary evidence was placed on record by the assessee to substantiate the fact that the foreign commission was paid to foreign commission agents, therefore, the acceptance of the said claim of the assessee after necessary deliberations by the A.O could not be held to be erroneous in so far as it was prejudicial to the interest of the revenue. 9. We are not oblivious of the fact that the legislature, vide the Finance Act, 2015, by making available Explanation 2 to Sec. 263 on the statute w.e.f 01.06.2015, had therein provided certain circumstances, under which the order passed by the A.O, if, it is in the opinion of the Principal Commissioner or Commissioner so, shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue. However, exercise of such deemed powers conferred on the revisional authority as per Explanation 2 have to con....
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....urse of the assessment proceedings, as well as his reply to the notice under Sec.133(6). We find that the assessee had through out been claiming that the amount of Rs. 33,000/- was paid to Shri Pratap Singh towards supervision charges and formed part of his salary. We have given a thoughtful consideration to the aforesaid facts in the backdrop of the material available on record and are of the considered view that the A.O only after necessary deliberations on the aforesaid claim of the assessee had accepted the same. We are of the considered view that now when the A.O after necessary deliberations had accepted that the payment made to Sh. Pratap Singh was by of salary, therefore, the provisions of Sec. 194H contemplating an obligation for deduction of tax at source on payment of commission was not attracted. We are of the considered view that the observation of the Principal CIT that the amount paid to Sh. Pratap Singh was by way of commission and not salary, on which the assessee had defaulted to deduct tax at source, without pointing out as to on what basis he had so concluded, and as to what all inquiries or verification the A.O should have made, thus, cannot be accepted. We are....