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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
आदेश /O R D E R PER MAHAVIR SINGH, VP: This appeal by the assessee is arising out of the revision order passed by Principal Commissioner of Income Tax, Chennai-4 u/s.264 of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide Revision No.PCIT, Chennai-4/Revision-263/1000000192539/2021 dated 17.03.2021. The assessment was framed by the DCIT, Non-
Corporate Circle 8(1), Chennai for the assessment year 2015-16 u/s.143(3) of the Act vide order dated 30.12.2017.
At the outset, it is noticed that this appeal is time barred by 58 days and assessee has filed condonation application stating that the revision order u/s.263 of the Act by the PCIT was received via e- mail on 17.03.2021 and appeal ought to have been filed on or before 16.05.2021. But the appeal was actually filed on 14.07.2021. The ld.AR stated that the delay has occurred due to Covid period and the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has condoned the during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. In term of the directions of Hon’ble Supreme Court, we condone the delay in filing of this appeal by assessee and admit the appeal for adjudication.
The only issue in this appeal of assessee is as regards to revision order passed is bad in law as the assessment order is not prejudicial to the interest of Revenue and moreover, the AO has applied his mind to the facts of the case as regards to allowance of expenses of Rs.1,36,61,354/- after deduction of TDS u/s.194J &
194C of the Act and taxes paid but deposited beyond the due date of filing of return of income u/s.139(1) of the Act. The assessee has raised grounds on jurisdiction as well as on merits. But, issue is as narrated above and hence, we need not to reproduce the grounds raised by the assessee.
Brief facts are that the assessee is an individual and deriving income from film direction and production. The assessee’s case was selected for scrutiny assessment under the category limited scrutiny under CASS. The AO framed assessment u/s.143(3) of the Act and accepted the returned income after issuing notice u/s.143(2) of the Act and calling for certain details by issuing notice u/s.142(1) of the Act. Subsequently, the PCIT issue show-cause notice, after perusal of assessment records dated 04.02.2020 that the assessment order passed by AO u/s.143(3) of the Act dated 30.12.2017 is erroneous and therefore prejudicial to the interest of Revenue for the reason of non-deduction of TDS in respect of payment of Rs.3.30 lakhs and non-remittance of TDS into Government account amounting to Rs.1,36,61,354/-. The PCIT noticed from Form No.3CD certified by Chartered Accountant that the assessee has deducted TDS u/s.194J and 194C on the total payment of Rs.1,36,61,354/- which has not been paid by the assessee to the Government account before the due date of filing of return of income u/s.139(1) of the Act. The assessee replied that these payments were made after deducting tax in the Government account as under:- Period of Delay in Gross Amount on Due Date for Date of remittance into Section which Tax was payment Payment Govt. of India deducted Account 194J Rs.65,48,500/- 31.10.2015 30.01.2016 3 Months 194C Rs.71,12,854/- 31.10.2015 30.01.2016 3 Months 4.1 The assessee contented that due to ill health of the assessee, return of income could be filed only on 13.03.2016 but the amount of TDS was remitted into the Government account on 30.01.2016 and this is only a technical and venial breach which does not create any loss to the exchequer but PCIT was not convinced with the reply of the assessee and he set aside the assessment order holding the same as erroneous in so far as it is prejudicial to the interest of Revenue for the reason given in para 6 as under:- “6. The facts of the case and the submission of the Authorized Representative were carefully considered. It is evident that the assessee has violated the provision of sec 40(a)(ia) with respect to payment of Rs.1,36,61,354/- which has not been paid to the Government Account within the stipulated time and the tax was not deducted with respect to payment of Rs.3,30,000/-. This aspect has not been considered by the Assessing Officer at the time of completing the Assessment u/s.143(3) of the Act.”
4.2 Accordingly, PCIT directed the AO to pass fresh order after providing adequate opportunity of being heard to the assessee. Aggrieved against the revision order, the assessee preferred appeal before the Tribunal.
Before us, ld.AR argued on behalf of the assessee whereas ld. CIT-DR relied on the revision order. We noted that during the course of original assessment proceedings in notice u/s.143(2) along with show-cause notice u/s.142(1) of the Act was issued vide dated 27.07.2016 wherein the following issue was identified for examination:- i. Other expenses claimed in the Profit & Loss a/c It was a limited case for scrutiny just to examine the other expenses claimed in the profit & loss account. The ld.AR for the assessee before us argued that the assessee had deducted TDS u/s.194J & 194C of the Act on the payments of Rs.1,36,61,354/- but the same was deposited beyond the due dates of filing of return of income u/s.139 of the Act, as the assessee was ill and was unable to file the return of income as on the due date but ultimately the same was filed on 30.03.2016. The assessee remitted the amount of TDS into the Government account only on 30.01.2016. The ld.AR stated that in any event the assessee is entitled for claim of deduction of TDS was deducted and payment made for a sum of Rs.1,36,61,354/-. The assessee has paid after the due date, the amount of TDS into the Government account only on 30.01.2016 and assessee is entitled for claim of deduction qua this payment made in the immediate next year.
5.1 In view of the above, the ld.AR stated that this is not a case of non-enquiry on the part of the AO being limited scrutiny assessment and even the twin condition prescribed u/s.263 of the Act that the order revised should be erroneous and prejudicial to the interest of Revenue, the second condition that it is prejudicial to the interest of Revenue is not at all satisfied. This argument was raised on the reason that the assessee is eligible for making claim of payment of Rs.1,36,61,354/- in the immediate next year, when the assessee has deposited the tax and hence, it cannot be said that any prejudice is caused to the Revenue. The ld.AR before us also explained that another aspect raised by assessee is as regards to payment of Rs.3.30 lakhs without deduction of TDS, which is not at all the issue from the accounts of the assessee and the PCIT has raised this issue, from where, he is not aware and for this, question can be asked to the Revenue that how this issue came into existence.
When the above arguments and facts were confronted to ld.CIT-DR, he supported the revision order passed by PCIT and stated that the order of AO framing assessment u/s.143(3) of the Act is erroneous and once it is erroneous, the same is prejudicial to the Revenue because in this year, if it is taxed the Revenue will be benefited. Apart from this, the ld.CIT-DR relied on the revision order passed by PCIT.
We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the original assessment was framed u/s.143(3) of the Act on the basis of limited scrutiny assessment under CASS. This fact is noted by the AO and the AO has also issued show-cause notice and raised the issue of limited scrutiny by identifying the issue i.e., “other expenses claimed in profit & loss account” and no other issue was to be examined by the AO. The assessee has replied this issue and accordingly the AO framed assessment. We noted that the assessee has deposited TDS amount to the Government account on 30.01.2016 in respect of payment of Rs.1,36,61,354/- claimed as expenses and tax deducted u/s.194J & 194C of the Act. It seems that there is a delay in remitting the amount of TDS into the Government account which does not pertain to this year but actually
Rs.1,36,61,354/- as the same was paid on 30.01.2016 i.e., financial year 2015-16 relevant to assessment year 2016-17 and not financial year 2014-15 relevant to this assessment year 2015-16. In any event, the assessment order can be said to be erroneous but it cannot be said that the same is prejudicial to the interest of Revenue. Before resorting to revision proceedings u/s.263 of the Act, the PCIT himself should be satisfied about the twin conditions mentioned in the provisions of section 263 of the Act. The Hon’ble Supreme Court has categorically held in Malabar Industrial Co. Ltd., vs. CIT, (2000) 243 ITR 83 that “A bare reading of section 263(1) makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the AO is erroneous insofar as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent—if the order of the AO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue”
7.1 In view of the above principle laid down by Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd., supra, we are of the view that in the present case there is no prejudice caused to Revenue as the assessment order is not prejudicial to the interest of Revenue for the reason that the assessee is entitled to claim deduction of expenditure not in this year but next year. Hence, we
PCIT u/s.263 of the Act and allow the appeal of the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 22nd June, 2022 at Chennai.