2019 (8) TMI 1401 - AT - Income Tax

Revision u/s 263 - non-deduction of TDS in respect of export fright made to Inter Ocean Shipping and Logistics Services - non furnishing of audit report in form 3CEB - AO accepted return income - HELD THAT - We have gone through material on record placed in the paper book which was furnished before the AO during the course of assessment year. Regarding issue of non-deduction of TDS in respect of export fright made to Inter Ocean Shipping and Logistics Services, it is discerned from the detail that as per page no. 11 of the paper book, the assessee has called copies of ledger account of parties along with detail of TDS payment in respect of payment of export freight. The assessee has furnished the ledger account of export payment along with copies of sample invoices. Further, it is noticed that Indian Ocean Shipping and Logistics Services was an India agent acting on behalf of non-resident shipping company for collecting freight demurrage and other charges and reimburse the same to the shipping company. CBDT Circular No. 723 dated 19th Sep, 1995 also clarifies that where payment is made to the shipping agents of non-resident, ship owner or charter, the agent steps into the shoe of the Principal i.e. shipping company. Accordingly, provision of section 172 shall apply and section 194C or 195 shall not be applicable. On identical issue and facts, the ITAT (Chennai) in the case of T. Mathimaran Vs. CIT ( 2015 (10) TMI 311 - ITAT CHENNAI ) held that as per Circular issued by the CBDT No. 723 dated 19th Sep, 1995 where the provision section 172 apply provisions of section 194C and 195 relating to tax deduction at source are not applicable. Similarly, the ITAT Ahmedabad in the case of Steelco Gujarat Ltd. vs. ACIT (2017 (1) TMI 1573 - ITAT AHMEDABAD) after giving reference to circular no. 723 held that where provision of section 172 applies and provisions of section 194C or 195 are not applicable. CIT has failed to consider that during the course of assessment proceedings the assessee has furnished the relevant material in respect of export freight payment and the ld. Pr. CIT has also not controverted the these undisputed facts and findings brought to his notice by the assessee during the course of proceedings u/s. 263 - we observe that the Pr. CIT has failed to justify how the order passed u/s. 143(3) of the act in respect of non-deduction of tax on payment of export freight was erroneous and prejudicial to the interest of revenue. Therefore, we are not inclined with the decision of Pr. CIT on the issue of non-deduction of TDS on freight payment as the Ld. Pr. CIT has failed to substantiate that order passed by the assessing officer is erroneous and prejudicial to the interest of Revenue. Therefore, the decision of Pr. CIT to revise the order u/s. 263 on the issue of export freight payment is not justified. This part of ground of appeal of the assessee is allowed. Non-submission of form 3CEB electronically - assessee submitted that it has filed form 3CEB manually on 30th Sep, 2013 - HELD THAT - We consider that the assessee has not filed the aforesaid report electronically and as result the case of the assessee could not be referred to the TPO by the AO. We consider that this issue was not examined by the assessing officer as the assessee has also not brought on record that why the aforesaid report in 3CEB was not filed electronically. To this extent, we find that ld. Pr. CIT was justified in invoking the provision of section 263 of the act holding that the order passed by the assessing officer as erroneous and prejudicial to the interest of revenue to the extent of non-filing of form 3CEB report. The assessee may submit corresponding reasons for not filing the form 3CEB electronically before CIT(A) at the time of appellate proceedings. In the light of the above facts and circumstances, we do not find any anomalies in the decision of the ld. CIT(A) for revision u/s 263 of the act to the extent of default in filing form 3CEB report in electronic mode as prescribed in the I.T. Rule 1962. - Appeal of the assessee is partly allowed

Summary

Issues Involved:
1. Initiation of revision proceedings under section 263 of the Act.
2. Disallowance of export freight of ?2,03,66,683 paid to Inter Ocean Shipping and Logistic Services.
3. Direction in respect of invoking penal provisions under section 271BA of the Act.

Detailed Analysis:

1. Initiation of Revision Proceedings under Section 263 of the Act:
The assessee challenged the initiation of revision proceedings under section 263 by the Principal Commissioner of Income Tax (Pr. CIT), arguing that the assessment order passed by the Assessing Officer (AO) was neither erroneous nor prejudicial to the interests of revenue. The Pr. CIT had initiated the proceedings on the grounds that the AO failed to make proper inquiries regarding the non-deduction of TDS on export freight payments and the non-filing of Form 3CEB electronically. The Pr. CIT observed that these failures resulted in an underassessment of income and a short levy of tax.

2. Disallowance of Export Freight of ?2,03,66,683:
The Pr. CIT directed the AO to disallow the export freight paid to Inter Ocean Shipping and Logistic Services due to non-deduction of tax at source, citing section 40(a)(ia) of the Act. The assessee argued that the payment was made to an Indian agent of a non-resident shipping company, and as per CBDT Circular No. 723 dated 19 September 1995, no TDS was required. The Tribunal noted that the assessee had furnished relevant material during the assessment proceedings, including ledger accounts and invoices, and that the AO had allowed the claim based on this information. The Tribunal found that the Pr. CIT failed to justify how the AO's order was erroneous and prejudicial to the revenue and allowed this part of the appeal, stating that the Pr. CIT's decision to revise the order under section 263 was not justified.

3. Direction in Respect of Invoking Penal Provisions under Section 271BA:
The Pr. CIT held that the AO's order was erroneous and prejudicial to the interest of revenue because the assessee did not file Form 3CEB electronically, as required by Rule 12(2) of the Income Tax Rules, 1962. The assessee contended that it had filed the form manually before the due date. The Tribunal acknowledged that the mandatory requirement to file Form 3CEB electronically came into effect from 01-04-2013 and that the assessee had failed to comply with this requirement. Consequently, the Tribunal upheld the Pr. CIT's decision to invoke section 263 for this issue, allowing the Pr. CIT to direct the AO to make a fresh assessment and consider the non-filing of Form 3CEB electronically.

Conclusion:
The Tribunal partly allowed the appeal of the assessee. It set aside the Pr. CIT's decision to revise the AO's order regarding the disallowance of export freight payments but upheld the Pr. CIT's decision concerning the non-filing of Form 3CEB electronically. The AO was directed to make a fresh assessment after proper inquiries and verification, including reference to the Transfer Pricing Officer (TPO) and consideration of penalty proceedings under section 271BA.