TDS MANAGEMENT CONSULTANTS P.LTD.,MOHALI vs. PR.CIT-1, CHANDIGARH

Upon perusal of assessment order, it could be seen that the assessee is stated to be engaged in manpower supply and placement services. The case was subjected to scrutiny and during the course of assessment proceedings, notices u/s 142(1) were issued to the assessee which were duly been responded to by the assessee. The Ld. AR made disallowance u/s 14A and framed the assessment.

Subsequently, Ld. Pr. CIT, upon perusal of case records, alleged that due enquiries were not made by Ld. AO to arrive at correct income of the assessee. As per return of income, the assessee paid amount of Rs.1.20 Lacs for professional / consultancy fees whereas as reported by Tax Auditor, the assessee deducted TDS u/s 194J on professional payments of Rs.64.30Lacs. The differential payment was, therefore, unexplained expenditure for the assessee. Since the assessee failed to make any substantial representation, the assessment order was cancelled and Ld. AO was directed to pass fresh order in accordance with the law. Aggrieved, the assessee is in further appeal before us.

From the revision order, it is crystal clear that the allegation of unexplained expenditure has been made on the ground that the assessee claimed professional expenditure which was much less than the figures as reported by Tax Auditor u/s 194J. Pertinently, the Tax Audit Report is based on the books of accounts as maintained by the assessee and there could be no allegation of unexplained expenditure / out of books expenditure based on Tax Audit Report only. The Tax Audit Report is prepared upon examination of regular books of accounts as maintained by the assessee. From assessee’s financial statement as placed on record, it could be seen that the assessee has paid legal and professional charges of Rs.1.20 Lacs. The same are apparently in the nature of Audit expenses and fees for professional engagements. However, the assessee is engaged as professional consultant and during the course of its business, it hires professionals to carry out its business. The payment so made by the assessee is covered u/s 194J which is separately debited in the financial statements as operational expenses and there is no unexplained expenditure by the assessee. This aspect has completely been overlooked in the revisionary order. Therefore, the allegation of Ld. Pr. CIT is without any basis. The assessment order could not be said to be prejudicial to the interest of revenue from any angle. Since twin conditions of Sec.263 are not fulfilled, the impugned revision of the order could not be sustained in law. We quash the same and restore the assessment order as framed by Ld. AO.

The appeal stand allowed in terms of our above order. Order pronounced on 21-04-2025.