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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Waseem Ahmed & Shri Soundararajan K.
Appellant by: Shri K. Gopi, CA Respondent by: Shri Sanjit Kumar Das, CIT-DR Date of Hearing: 03.10.2024 Date of Pronouncement: 21.10.2024 O R D E R Per Bench This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 27.02.2024 for Assessment Year (AY) 2018-19.
The only issue raised by the assessee is that the learned PCIT erred in setting aside the assessment order under section 263 of the Act.
The facts in brief are that the assessee, a public company, is engaged in the business of operating passenger boat services. The assessee was selected for scrutiny assessment which was finalized under section 143(3) of the Act vide order dated 19-05-2021 wherein addition u/s 69C of the Act was made on account of treating the certain expenses as bogus/unexplained in nature.
Kerala Shipping and Inalnd Navigtation Corporation 4. Subsequently the learned PCIT from the assessment record noticed that assessee has declared interest income of Rs. 80,70,207/- only whereas the amount of interest as per form 26AS was of Rs. 1,44,87,670/- only. Thus, the assessee has declared less interest income by Rs. 64.18 Lakh but claimed credit of entire amount of TDS for Rs. 14,48,676/- as per Form 26AS. The AO without making necessary inquiry allowed the claim of the TDS credit.
Likewise, the learned PCIT noticed that the AO made addition of Rs. 85,60,650/- under section 69C of the Act. However, the same was adjusted towards current year business loss which is against the provisions of section 115BBE of the Act.
In view of the above the learned PCIT proposed to hold the assessment order as erroneous insofar prejudicial to the interest of the revenue by issuing notice under section 263 of the Act.
The assessee in response to notice under section 263 of the Act submitted that in the immediate previous assessment year 2017-18, it has declared interest income for Rs. 104.59lacs only. However, in the form 26AS, interest income was only showing for Rs. 38.92/- lacs. Thus, the interest income for Rs. 64.18 lakh reflected in current year already offered to tax in A.Y. 2017-18 without claiming credit of corresponding TDS amount. The amount of TDS on the same was claimed in the year under consideration as the same has been reflected in the current year in the form 26AS.
Regarding the setoff of addition under section 69C of the Act against the current year loss, the assessee submitted that no setoff of current loss was provided by the AO against the addition made under section 69 of the Act which can be verified from the computation sheet by the AO forming part of Kerala Shipping and Inalnd Navigtation Corporation assessment. The current year loss as per return stand at Rs. 1.41crore and addition under section 69C of the Act made was of Rs. 85.6 lakh, if the same adjusted against the loss, the income for the year would be at NIL whereas in the computation, the income was computed at Rs. 85.6 lakh and tax on the same was levied as per the rate applicable under section 115BBE of the Act.
Thus, the assessee in view of the above contended that there no error in the assessment order which needs to be revised under section 263 of the Act.
However, the learned PCIT disagreed with the contention of the assessee and held that as per the provision of section 199 r.w.r. 37BA of the Rules, the credit of TDS can be claimed only in the year to which the corresponding income is taxable. The amount of TDS on corresponding interest income of Rs. 64,17,463/-belong to assessment year 2017-18 whereas TDS was claimed in the year under consideration which was allowed by the AO without conducting necessary inquiry. Therefore, the order of the AO is erroneous and prejudicial to the interest of the assessee.
Likewise, the AO in the body of the assessment has allowed the adjustment of addition made under section 69C of the Act against the current year business loss though in the computation correctly taxed the entire amount under section 115BBE Act of the Act. Thus, the assessment order is erroneous and prejudicial to the interest of the revenue. Hence the learned PCIT by exercising power conferred under section 263 of the Act set aside the assessment order for fresh assessment with the following direction: “Hence, the Assessment Order u/s 143(3) dated 19/05/2021 is set aside to the Assessing Officer to consider the below matter: 1) For AY 2018-19 assessee had declared Rs.80,70,207/- as the interest Income (Income from other Source) in the return of Income and Book of accounts and claimed a TDS u/s 194A amounting to Rs.14,48,767/- in the ITR. Whereas in the Kerala Shipping and Inalnd Navigtation Corporation 26AS for the FY 2017-18 assessee has received a total Interest income of Rs.1,44,87,670/-. The assessee has claimed TDS credit due to him for the AY 2017-18 in the AY 2018-19 which should not have been 2) In the assessment order u/s 143(3) dated 19/05/2021 the AO has erroneously adjusted the addition made u/s 69C of the act amounting to Rs.85,60,650/- towards the current year business loss of Rs.1,41,23,290/- instead of the Total Income in the body of the order and need to be corrected. Also, In accordance with the disallowance of the TDS claim that is not due to him as stated in previous para. The AO is directed to re-verify the interest component shown in the form 26AS for the AY 2017-18 and AY 2018-19 comparing with the books of accounts and Bank Accounts for the relevant period, in accordance with law and pass a speaking order as per time limit specified under relevant Section of the Income Tax Act, 1961 after affording due opportunity to the Assessee.”
Being aggrieved by the order of the learned PCIT the assessee is in appeal before us.
The learned AR before us filed a paper book having 19 pages and reiterated the submissions made before the authorities below whereas the ld. DR supported the order of the ld. PCIT passed under section 263 of the Act.
We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case have been elaborated in the preceding paragraphs therefore we are not inclined to repeat the same for the sake of brevity. The provision of section 263 of the Act empowers the commissioners to set aside/ revise the order passed by the AO in any proceeding under the Act, if such order passed is erroneous insofar prejudicial to the interest of revenue. Thus, to invoke the provision of section 263 of the Act there must be fulfillment of twin condition that the order passed is erroneous which led to prejudice to the interest of revenue. Mere the order passed is erroneous but not prejudicial or the vice versa, the order passed is prejudicial but not erroneous, the power conferred under section 263 of the Act cannot be exercised. In holding so, we draw support and guidance from Kerala Shipping and Inalnd Navigtation Corporation the judgment of Hon’ble Supreme Court in the case of Malabar Industries Co. Ltd vs. CIT reported in 243 ITR 83 wherein it was held as under:
A bare reading of section 263(1) makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO 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 Assessing Officer 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 ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1).
Coming to the fact of the case on hand, we note the assessee in the immediate previous assessment year 2017-18 has offered interest income however the TDS on the same has been deposited by the deductor in the year under consideration and accordingly the same has been reflected in the form 26AS of the year under consideration. The credit of such tax deducted at source has not been claimed by the assessee in the year A.Y. 2017-18. As such the assessee could have claimed the same in the A.Y. 2017-18 but the same was not reflecting in the form 26AS generated for the A.Y. 2017-18 therefore the assessee offered the income in the A.Y. 2017-18 itself but the corresponding credit of TDS claimed in the year under consideration when same reflected in form 26AS. Therefore, in our considered view there is no prejudice caused to the revenue by this. Thus, the condition precedent for invoking the provision of section 263 of the Act fails on the issue on hand.
Likewise, we note the AO in the body of assessment shown assessed loss for the year under consideration after adjusting the amount of addition made under section 69C of the Act. However, the AO in the computation of tax liability which forming the part of assessment order has computed the taxable income under section 115BBE of the Act without any adjustment toward current year business loss and accordingly worked the tax liability of Kerala Shipping and Inalnd Navigtation Corporation the assessee. Therefore, in our considered opinion the AO may have made some error in the body of assessment while computing assessed current year loss, but such error does not lead to prejudice to the revenue for the reason that the AO correctly computed the tax liability of the assessee, which was also admitted by the learned PCIT.
Thus, in view of the above detailed discussion we hereby hold that the condition precedent for invoking the provision of section 263 of the Act is not fulfilled in the case on hand. Therefore, we hereby set aside the finding of the learned PCIT and restore the assessment order. Hence the ground of appeal of the assessee is hereby allowed.