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Facts
The assessee filed an appeal against the order passed by the Principal Commissioner of Income Tax (Pr.CIT) under Section 263 of the Income Tax Act, 1961. The Pr.CIT initiated proceedings because the Assessing Officer (AO) had not disallowed certain payments made towards freight charges as per Section 40(a)(ia) of the Act, despite the assessee having debited Rs. 16,66,609/- under this head without deducting TDS. The Pr.CIT found the AO's order erroneous and prejudicial to the interest of revenue.
Held
The Tribunal condoned the delay in filing the appeal after noting the assessee's explanation regarding the Chartered Accountant's medical condition. The Tribunal observed that the assessee had a 'reasonable cause' for the delay. After considering the rival submissions, the Tribunal noted that the assessee was liable for TDS on freight charges and that the AO's order was erroneous and prejudicial to revenue interest by not adhering to the TDS provisions.
Key Issues
Whether the Pr.CIT's order under Section 263 was justified, and whether the AO's original assessment order was erroneous and prejudicial to the revenue's interest due to non-disallowance of freight charges for non-deduction of TDS.
Sections Cited
263, 40(a)(ia), 147, 143(3), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “PATNA BENCH”, PATNA
O R D E R
PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
This is an appeal filed by the assessee against the order passed u/s 263 of the Income Tax Act, 1961 (hereafter “the Act”) by the Ld. Principal Commissioner of Income Tax, Patna-1 [hereafter “the Ld. Pr.CIT] dated 31.03.2025, DIN & order No. ITBA/COM/F/17/2024- 25/1075332349(1) on the following grounds of appeal:
“1. For that, the order passed by The Learned Pr. Commissioner of Income Tax, Patna -1 is against the weight of facts, evidences on record and contrary to the law and circumstances of the case.
Deepak Shrawan Budhia 2. For that the learned The Ld. Pr. Commissioner of Income Tax has erred in invoking powers u/s 263 and passing order holding the order of assessment to be both erroneous and prejudicial to the interest of the revenue.
3. For that the learned Commissioner of Income Tax has erred in invoking powers u/s 263 and directing the AO to pass fresh assessment order.
4. For that, the order passed u/s 263 of the I.T. Act, 1961 on account of disallowance of expenditure on account of non-deduction of TDS on freight as per provisions of section 40(a)(ia) of the 1. T. Act, 1961 was passed without considering all provisions of Sec 147 and without considering its exemption provisions.
5. For that, the order was passed without considering that no single payment above Rs. 30,000/-or total payment exceeding Rs. 1,00,000/- was paid to a single party during FY 2017-18 other than two parties which have also submitted declaration for non deduction of TDS.
6. For that, the order was passed with a predetermined mindset. The Assessing Officer has totally ignored the evidence submitted at the time of hearing.
For that, any other grounds, if any, to be urged at the time of hearing, the order is otherwise bad in law and facts and fit to be quashed.”
At the outset, we noted that the appeal filed by the assessee is time barred by 68 days before the ITAT in this regard, the assessee has given explanation which is as under:
“Sub: Application for Condonation of Delay in filing of Appeal against the Order- in-Original bearing DIN & Order No. ITBA/COM/F/17/2024- 25/1075332349(1) dated 31/03/2025 Dear Sir, We have filed the Appeal against the Order-in-Original bearing DIN & Order No. ITBA/COM/F/17/2024-25/1075332349(1) dated 31/03/2025. This Appeal is being filed on 07/08/25 but it should have been filed within 60 days by 31/05/2025 as per the normal period of limitation prescribed for filing of the Appeal. However, as our Chartered Accountant, CA Vikas Chhapolika was suffering from severe back issues since April onwards and he also had to undergo back surgery in the month of May due to which he was on bed rest for 2 months, the appeal could not be filed within due date. My affidavit detailing the aforesaid facts is attached herewith. These may kindly be placed before the Hon'ble Appellate Tribunal for condonation of the delay in submission of the appeal.
Deepak Shrawan Budhia We humbly request Your Honour to please register the Appeal as regular and allow us an opportunity of hearing on merits of the case in larger interest of justice. Hoping for an early and favourable action.”
On going through the above condonation application, we noted that the assessee has “reasonable cause” for not filing appeal within the specified time, in the case of Collector, Land Acquisition vs Mst. Katiji, (1987) 167 ITR 171 (SC) the hon’ble Apex Court has observed that in case of not filling appeal within the specified period and the appellant had “reasonable cause” then the delay may be condoned. The same judgment was also relied by the assessee. We condone the delay and taking up for adjudication.
Briefly stated the facts of the case are that the Ld. Pr.CIT called the assessment record and observed that order passed by the AO u/s 147 r.w.s. 143(3) r.w.s. 144B of the Act was completed on 19.03.2023 assessed the total income at Rs. 68,24,861/- in which he observed that that as per section 40(a)(ia) of the Act the AO has not disallowed the certain payments made towards freight charges are covered under the TDS provision , the TDS default is made by the assessee in respect of payment/credit given to resident on 30% of such expenditure should have been disallowed in the hands of the tax payer u/s 40(a)(ia) of the Act and after examination of the assessment records revealed that the assessee had debited Rs. 16,66,609/- under the head freight charges but TDS was not deducted therefore, the reassessment order passed by the AO is erroneous and prejudicial to the interest of revenue. Accordingly, show cause notice issued to the assessee on 31.10.2025 vide DIN and order No. ITBA/COM/F/17/2024-25/1072763841(1). In response to the show cause notice, the assessee furnish reply after examination of the details furnished by the assessee. It was observed that the assessee has made payment more than Rs. 30,000/- to the 13 parties as observed by Deepak Shrawan Budhia the Ld. Pr.CIT at Para No. 7. Accordingly, the Ld. Pr.CIT gave direction to the AO to re-calculating the income of the assessee and also directed to verify and make enquiries.
Aggrieved by the above order of ld. Pr.CIT, the assessee is in appeal before ITAT.
The Ld. counsel reiterated the submissions made before the authorities below and himself he considered that in some instances the assessee was liable for payment of TDS deduction and the payment is more than the specified limit but no TDS was deducted and submitted that entire documents were furnished during the course of reassessment proceeding and the AO had examined the records and completed the reassessment proceeding, therefore, the Ld. Pr.CIT cannot exercise his jurisdiction u/s 263 of the Act. Once, the information provided to the AO, the Ld. PCIT has no jurisdiction, it will be change of opinion.
7. On the other hand, the Ld. DR relied on the order of Ld. Pr.CIT and submitted that the assessee is liable for payment of TDS and during the course of argument himself considered that the assessee is liable for payment of TDS, therefore, there is no error in the order passed by the Ld. Pr.CIT and the Ld. Pr.CIT has given direction to the AO for enquiry and verification and instruction. He has not directed apparently for disallowance.
Considering the rival submissions, the Ld. Pr.CIT after examination of the records noted that the assessee is liable for TDS on the freight charges paid. However, during the course of reassessment proceedings the detailed documents were furnished by the assessee as per submission made before the Ld. Pr. CIT. The ld. Counsel for the assessee during the course of arguments himself conceded before us that the assessee was liable for deduction of TDS on certain payments .
Deepak Shrawan Budhia Accordingly, the order passed by the AO is erroneous and prejudicial to the interest of revenue. The order passed by the AO is erroneous if the AO has passed the order without following the provisions of the Act. Here in the case The TDS provisions were applicable as well as section 40(a)(ia) of the Act to the assessee and AO ignored it Therefore the order passed by the AO is erroneous and prejudicial to the interest of the revenue, we do not find any infirmity in the order of Ld. PCIT.
In the result, appeal of the assessee is dismissed.
Order pronounced on 19.01.2026