RIGHT TIGHT FASTNERS PRIVATE LIMITED,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX -11, MUMBAI

आदेश / O R D E R

Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2014-15 contest the invocation of revisional jurisdiction u/s 263 by Ld. Principal Commissioner of Income-Tax-11 [Pr.CIT], Mumbai on 19/03/2018 by raising the following grounds of appeal:-

2. The learned Pr. CIT-11, Mumbai, erred in passing the Order u/s 263, even though the details of TDS are made available at the time of Assessment as well as during the proceedings u/s 263 before her. Therefore, it is prayed to hold that the order passed u/s 263 is null & void. 3. The Commissioner of Income tax failed to appreciate that the conditions precedent to passing an Order under the said section were not satisfied and hence the Order u/s.263 of the Income-tax act, 1961 is ultra vires and void. 4. The Commissioner of Income tax has erred in holding that the assessment Order dated 13 October 2016 passed by the Assessing Officer was erroneous and prejudicial to the interest of revenue and hence erred in passing an Order u/s. 263 of the Income-tax Act in respect of the same. 5. The appellant submits that considering the facts and circumstance of its case and the law prevailing on the subject the assessment framed by the Assessing Officer was after due consideration of the facts and the law by the Assessing Officer and hence the setting aside of the same by the Commissioner of Income tax u/s 263 of the Income tax act, 1961 is erroneous & is beyond jurisdiction and bad in law.

3. Subsequently, the said assessment order was subjected to exercise of revisional jurisdiction u/s 263 by Ld. Pr.CIT vide show cause notice dated 02/02/2018 on the premise that the issue of non-deduction of TDS on certain payments as reported in column No. 34(a) of Tax Audit Report remained to be examined by Ld. AO to consider disallowance u/s 40(a)(ia). The relevant extract of the notice read as under:-

ITA.No.3102/Mum/2018 Right Tight Fastners Private Limited Assessment Year-2014-15 On perusal of Form 3CD for the said assessment year, it was observed that the details of deduction or collection of tax required by the assessee as per provision of the I.T.Act has been tabulated in column No. 34(a) of the Form No.3CD, which reflects the amount on which TDS deducted or collected at less than specified rate and amount of tax deducted or collected on the same shown at nil. The details of the expenses on which TDS not made are as under: Sr.No. Particulars Amount in Rs. 1 Interest other than Interest on securities 23,03,308/- 2 Commission or Brokerage 6,71,000/- 3 Rent 4,05,000/- 4 Payment to contractor 3,74,53,255/- 5 Fees paid for professional 23,19,803/- 6 Payment to contractors 6,34,64,718/- 7 Commission or Brokerage 6,71,000/- Total 10,72,88,084/- Further, the Assessing Officer in the assessment order has not disallowed the above u/s 40(a)(ia) even though no TDS has been deducted on the same as was noticed in Form 3CD, which resulted in under assessment. Also, it is pertinent that details in respect of TDS made on various expenses have not been found in the record, hence, in absence of the same, these facts whether TDS is made or not on the above expenses could not be verified.

4. Therefore, I, the undersigned, in exercise of powers conferred on me in terms of provisions of section 263 of the act, propose to consider the above matter and pass such order as the circumstances of the case may justify. Before doing so, I hereby give you an opportunity to show cause as to why such an order should not be passed u/s.263 setting aside the aforesaid assessment order dated 13.10.2016, with a direction to the AO to frame the assessment de novo, after conducting necessary verification / enquiries. The assessee defended the same by submitting that complete details in this regard was already filed during the course of assessment proceedings and the issue of Tax Deduction at Source [TDS] was duly examined by Ld. AO for the purpose of considering disallowance u/s 40(a)(ia) . It was further submitted that the data reported in the Tax Audit Report was erroneous and the same crept into the Tax Audit Report due to clerical error. However, Ld. Pr.CIT rejected the same on the premise that all the items as reported in the Tax Audit report were not examined and further mere denying the data / transaction reported in own Audit ITA.No.3102/Mum/2018 Right Tight Fastners Private Limited Assessment Year-2014-15 Report did not absolve the assessee from the requirement to submit evidence in support of his claim. Finally, treating the quantum order as erroneous and prejudicial to the interest of the revenue, the Ld. AO was directed to verify the same and pass a speaking order, in this regard, in accordance with law. Aggrieved by the aforesaid action of Ld. Pr.CIT, the assessee is in further appeal before is.

The Annexure as referred to above contains the head-wise as well as branch wise details of expenditure incurred by the assessee during the impugned AY. The further details in respect of each of the major expenses, in the format as desired by Ld. AO, was furnished along with details of TDS deducted thereupon as placed on page numbers 11 to 36 of the paper-book. After perusal of the same, Ld. AO, vide another notice u/s 142(1) dated 06/09/2016, raised a specific query relating to the same which is extracted below:- 6. On perusal of details of processing charges furnished by you, it is seen that TDS has not been deducted on payment made to Bimbh Mechanical Work and Mahindra Vehicle Manufacturing of Rs.2,70,240/- and Rs.1,13,125/- respectively. Reasons to showcause as to why the same should not be disallowed u/s 40a(ia) of the Income-tax Act, 1961.

ITA.No.3102/Mum/2018 Right Tight Fastners Private Limited Assessment Year-2014-15 7. Details of professional fees furnished by you included professional fees paid to Chandrakant B Nikha of Rs.60,000/- on which TDS has not been deducted. Reasons to showcause as to why the same should not be disallowed u/s 40a(ia) of the Income-tax Act, 1961.

The response / explanation of the same has been furnished by the Assessee vide its reply dated 03/10/2016. 6.2 The perusal of chronology of above events makes it crystal clear that Ld. AO, during assessment proceedings, was clinched with the issue of TDS compliance on expenditure claimed by the assessee and had raised specific queries in this regard. The requite details / response / reply to the same was duly furnished by the assessee from time to time, apparently, to the satisfaction of Ld. AO since no disallowance u/s 40(a)(ia) has been made in the quantum assessment order. 6.3 Upon perusal of above factual matrix, we find that it is not a case of lack of inquiry or inadequate inquiry which warrants exercise of revisional jurisdiction u/s 263 by higher authorities. The Ld. AO, with due application of mind, examined the claim of the assessee in this regard and took a conscious decision not to make any disallowance u/s 40(a)(ia). Nothing on record suggest that the view of the Ld. AO was erroneous, in any manner. This being the case, the order of Ld. Pr.CIT, in invoking jurisdiction u/s 263 could not be sustained and the same, in our opinion, was bereft of any merits. Therefore, we quash the same and restore the quantum assessment order of Ld. AO. The above conclusion reached upon by us is further fortified by the decision of Hon’ble Bombay High Court rendered in Moil Ltd. Vs. CIT [81 Taxmann.com 420] wherein Hon’ble court has held as under:-

ITA.No.3102/Mum/2018 Right Tight Fastners Private Limited Assessment Year-2014-15 5. On a perusal of the orders passed by the Authorities, it appears that before the assessment order was passed, a notice was served on the assessee under Section 142 (1) of the Act and 20 queries pertaining to different heads were made therein. The ninth query in the notice under Section 142 (1) of the Act pertains to the expenditure for the Corporate Social Responsibility. By the said query, the assessee was directed to give a detailed note of expenditure for the Corporate Social Responsibility along with bifurcation of the expenses under different heads. An exhaustive reply was submitted by the assessee to the notice under Section 142 (1) of the Act. In paragraph 8 of the reply, the assessee gave the detailed note pertaining to the expenditure for the Corporate Social Responsibility under different heads that runs into several pages. The heads under which the expenses were made towards the Corporate Social Responsibility were specifically mentioned as health, environment, sports, education etc. and for each of the different heads, particulars were given in respect of every minor or major expenses. A detailed note on the expenditure on the Corporate Social Responsibility claim was given in paragraph 8 which runs into more than five pages. It is not disputed that the appellant - assessee is a Government of India undertaking and the Government has a control over the expenses of the undertaking. It is pertinent to note that during the previous assessment years, similar claims were made by the assessee - Company and the assessment orders allowing the claims have attained finality. We have minutely perused the assessment order. The claims for deductions were made by the assessee at least under 20 heads and queries were made in the notice under Section 142 (1) of the Act to the assessee in respect of nearly all of them. We, however, find from the assessment order that the Assessing Officer has dealt with nearly nine claims of deductions. These claims have been specifically mentioned in the assessment order and they have been discussed therein because the Assessing Officer appears to have disallowed those claims either partially or totally. In respect of the claim for the Corporate Social Responsibility and some other claims that were allowed by the Assessing Officer, the Assessing Officer has not made a specific reference in the assessment order. It is apparent from the assessment order that the Assessing Officer has expressed in detail about the claims that were disallowable. Where the claims were allowable, as we find from the reading of the assessment order, the Assessing Officer has not referred to those claims. The Corporate Social Responsibility claim is one of them. It is apparent from the notice under Section 142 (1) of the Act that a specific query in regard to the claim pertaining to the Corporate Social Responsibility was made and a detailed note after giving bifurcation of the expenses under different heads was sought. We have perused the response in respect of this query which is exhaustive. We find that the assessee has given the details, as are sought under query no.9 in the notice under Section 142 (1) of the Act. If that is so, the judgments, reported in Fine Jewellery (India) Ltd. (supra) and Nirav Modi (supra) and on which the learned Counsel for the assessee has placed great reliance would come into play. It is held in the judgments referred to herein above by relying on the judgment in the case of Idea Cellular Ltd. (supra) that if a query is raised during the assessment proceedings and the query is responded to by the assessee, the mere fact that the query is not dealt with in the assessment order would not lead to a conclusion that no mind has been applied to it. In the case of Fine Jewellery (India) Ltd. (supra) this Court found that from the nature of the expenditure as explained by the assessee in that case the Assessing Officer took a ITA.No.3102/Mum/2018 Right Tight Fastners Private Limited Assessment Year-2014-15 possible view and therefore, it was not a case where the provisions of Section 263 of the Act could have been resorted to. Considering the explanation of the assessee in this case, we are also of the view that the Assessing Officer had taken a possible view. In the case of Nirav Modi (supra) this Court held that the Tribunal was justified in that case in cancelling the order under Section 263 of the Act as the assessee had responded to the query made to it during the assessment proceedings and merely because the assessment order did not mention the same, it would not lead to a conclusion that the Assessing Officer had not applied his mind to the case. In the instant case, we find that the Assessing Officer has applied his mind to the claims made by the assessee and wherever the claims were disallowable they have been discussed in that assessment order and there is no discussion or reference in respect of the claims that were allowed. In view of the law laid down in the judgments in the case of Fine Jewellery (India) Ltd. (supra) and Nirav Modi (supra) it would be necessary to hold that in the circumstances of the case, it cannot be said that merely because the Assessing Officer had not specifically mentioned about the claim in respect of the Corporate Social Responsibility, the Assessing Officer had passed the assessment order without making any enquiry in respect of the allowability of the claim of Corporate Social Responsibility. In our view, the provisions of Section 263 of the Act could not have been invoked by the Commissioner of Income Tax in the circumstances of this case. The Tribunal was not justified in holding that the query under Section 142 (1) of the Act was very general in nature and the reply of the assessee was also very general in nature. In our considered view, the query pertaining to Corporate Social Responsibility was exhaustively answered and the appellant - assessee had provided the data pertaining to the expenditure under each head of the claim in respect of Corporate Social Responsibility, in detail. The Tribunal was not justified in holding that the reply/explanation of the assessee was not elaborate enough to decide whether the expenditure claim was admissible under the provisions of the Income Tax Act. The Assessing Officer is not expected to raise more queries, if the Assessing Officer is satisfied about the admissibility of claim on the basis of the material and the details supplied. In the facts and circumstances of the case, we answer the question of law in the negative and against the Revenue. Viewed from any angle, the impugned order, in our opinion, could not find validity in the eyes of law.