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Facts
The assessee claimed interest on late deposit of TDS (Rs. 5,26,747) as an allowable expenditure. The Pr. CIT found this claim erroneous as the interest on late TDS was not allowable under Section 37 for business purposes, and thus invoked Section 263 of the Act to set aside the assessment order (passed u/s 153A/143(3)) for re-computation of income on this specific issue.
Held
The Tribunal upheld the Pr. CIT's Section 263 order, distinguishing the assessee's reliance on a High Court judgment by noting that the Section 153D approval was granted by a JCIT, while the revision under Section 263 was exercised by the higher authority of Pr. CIT, who possesses the necessary jurisdiction. The Tribunal found no infirmity in the Pr. CIT's order to direct the AO to recompute the income.
Key Issues
Whether the Pr. CIT validly exercised revisionary jurisdiction under Section 263 to disallow interest on late TDS payments, despite the original assessment being completed under Section 153A with prior approval under Section 153D, given that the revisionary authority was superior to the approving authority.
Sections Cited
263, 153A, 143(3), 37, 153D
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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: SRI SANJAY GARG & SRI SANJAY AWASTHI
M/s. Inland Teevra Pvt. Ltd. ………. Appellant 26, Stand Road, 2nd Floor, Kolkaeta-700001. (PAN: AAECI8919H) Vs. DCIT, Central Circle-3(2), Kolkata ......... Respondent Appearances: Appellant represented by : Shri Rakesh Jain, AR Respondent represented by : Shri P. N. Barnwal, CIT, DR Date of concluding the hearing : 16.01.2025 Date of pronouncing the order : 03.02.2025 ORDER
Per Sanjay Garg, Judicial Member:
The present appeal filed by the assessee is directed against the revision order dated 18.03.2024 of the Pr. Commissioner of Income Tax (Central), Kolkata-2 [hereinafter referred to as Ld. “Pr. CIT'] passed u/s. 263 of the I.T.A. No.: 1027/KOL/2024 Assessment Year: 2020-21 Inland Teevra P. ltd. Income Tax Act, 1961 (hereinafter referred to as the “Act”) for Assessment Year 2020-21.
The assessee in this appeal has contested the validity of the action of the Ld. Pr. CIT in assuming revision jurisdiction u/s. 263 of the Act.
Brief facts of the case are that the Ld. Pr. CIT noticed that the assessee had claimed interest on TDS amounting to Rs.5,26,747/- as an expenditure and has not suo moto disallowed the same. He observed that the aforesaid expenditure in the form of interest on late deposit of TDS was not an allowable expenditure u/s. 37 of the act as the same had not been incurred solely for the purpose of business. He, therefore, held that no deduction was allowable in respect of the said expenditure. He, therefore, held that the income of the assessee to that extent has escaped assessment. He, therefore, invoked his jurisdiction u/s. 263 of the Act and set aside the assessment order dated 26.03.2022 passed u/s. 153A/143(3) of the Act directing the Assessing Officer to make necessary verification/enquiry on the instant issue and pass a fresh assessment order and recompute the income of the assessee accordingly on the aforesaid limited issue.
So far as the issue of allowability of interest paid/incurred on late payment of TDS is concerned, the issue has been settled in favour of the revenue and against the assessee by the decision of the Co-ordinate Bench of the Tribunal in the case of Premier Irrigation Adritec P. Ltd. Vs. ACIT (2023) 146 taxmann.com 389. The said decision has also been followed by various other Benches of the Tribunal. This issue has also covered by the ITAT Bangalore Bench in the case of Enzen Global Solutions Pvt. Ltd. (2022) 144 taxmann.com 2. The Ld. Counsel for the assessee has not disputed the aforesaid proposition of law. However, the only contention raised by the Ld. Counsel for the assessee was that in this case the assessment order was passed u/s. 153A of the Act. That the said order was passed by the Assessing Officer after taking approval from the Joint Commissioner u/s. 153D of the Act. The ld. Counsel for the assessee in this respect has relied upon the Page 2 of 4
I.T.A. No.: 1027/KOL/2024 Assessment Year: 2020-21 Inland Teevra P. ltd. decision of the Hon’ble M. P. High Court at Indore Bench in the case of PCIT Vs. Prakhar Developments Pvt. Ltd., Income Tax Appeal No. 179/2023 decided vide order dated 01.04.2024, wherein, the Hon’ble High Court in para 8 of the said order has made the following observation:
“Even otherwise, as per Section 263 of the Act, the Principal Chief Commissioner or Principal Commissioner or Commissioner may call tor and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Assessing Officer, is erroneous in so far as it is prejudicial to the interests of the Revenue, he may make enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify for passing any order under Sections 143(3) & 153A of the Act prior approval of Joint Commissioner is required under Section 153A of the Act, or Principal Commissioner or Commissioner as the case may be. Therefore, once prior approval had already been taken by the Assessing Officer and accepted the return submitted by the assessee, then the same authority cannot exercise the power under section 263 of the Act to reverse the order of Assessing Officer.”
A perusal of the above observations of the Hon’ble High Court would reveal that the Hon’ble High Court has held that once prior approval had already been taken by the Assessing Officer and accepted the return submitted by the assessee, then the same authority cannot exercise the power u/s. 263 of the Act to reverse the order of the Assessing Officer. However, in this case, admittedly, the approval u/s. 153D of the Act has been granted by the Ld. JCIT (Central), Range-3, Kolkata, whereas the revision jurisdiction has been exercised by the Ld. Pr. CIT, Kolkata-2, which is a higher authority than JCIT. The Ld. JCIT does not have any jurisdiction to pass any order u/s. 263 of the Act. The said jurisdiction lies either with the Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner of Income Tax and not with any authority below the rank of the Commissioner of Income Tax. Therefore, the proposition of law laid down by the Hon’ble M. P. High Court is not applicable to the facts of the present case. 5.1. Even otherwise, when the assessment order is apparently erroneous and prejudicial to the interest of revenue and no deep investigation into the facts of the case is required then, in our view, the Ld. Pr. CIT has rightly exercised his revision jurisdiction in this case u/s. 263 of the Act and thereby
I.T.A. No.: 1027/KOL/2024 Assessment Year: 2020-21 Inland Teevra P. ltd. directed the Assessing Officer to recompute the income of the assessee. We do not find any infirmity in the order of the Ld. Pr. CIT and the same is hereby upheld. There is no merit in the appeal of the assessee and the same is hereby dismissed. 6. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 3rd February, 2025.