SH. KAMAL DEEN SHEKH,CHAMBA vs. ACIT, CIRCLE, PALAMPUR

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ITA 1151/CHANDI/2017Status: DisposedITAT Chandigarh02 August 2018AY 2007-082 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the lower authorities misinterpreted the audit report. The auditor's 'N.A.' (Not Applicable) response to the applicability of Chapter XVII-B indicated that TDS provisions were not considered applicable, not that TDS was deductible but not deducted. Therefore, the addition under Section 154 was incorrect.

What were the facts?

The assessee argued that the tax deductibility at source on machinery hiring charges was a debatable issue and thus not rectifiable under Section 154. The Assessing Officer and CIT(A) believed a mistake was apparent from the audit report (Form 3CD) for not disallowing expenses under Section 40(a)(ia).

What were the issues?

Whether a debatable issue regarding TDS applicability on machinery hiring charges can be rectified under Section 154. Whether the interpretation of Form 3CD by the lower authorities was correct.

Which sections of the Income-tax Act were involved?

Section 154,Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

ITA No. 1151/Chd/2017- Sh Kamal Deen Sheikh, Palampur 2

assessee has contended that whether the tax was deductible at source

or not in respect to payments made by the assessee on account of

machinery hiring charges was a debatable issue. That the addition

could not be made u/s 154 of the Act in respect of the debatable issue

as the same does not constitute the mistake apparent on record. The

Ld. counsel has further invited our attention to the observation made

by the Assessing officer as well as the CIT(A) on the basis of the

audit report in form No. 3CD, from the perusal of which the

Assessing officer formed an opinion that a mistake apparent on

record had occurred in not making disallowance u/s 40(a)(ia)

because of the failure of the assessee to deduct TDS on the payments

made for hiring charges. The Ld. counsel has submitted that the

lower authorities have wrongly interpreted the relevant column in

audit report in form 3 CD. In fact, in column No.27, the auditor

had reported that assessee had not deducted TDS and further in

relation to the question : “if the provisions of Chapter XVII-B have

not been complied with, please give the following details”. The

assessee has answered as “N.A.”, which means ‘not applicable’.

Therefore, it was mentioned in the audit report that the provisions of

Chapter XVII- B were not applicable to the case of assessee.

However, the lower authorities wrongly interpreted this information

to form an opinion that it was mentioned in the form 3CD that TDS

was deducible but the assessee had not deducted the same. The Ld.

Counsel, therefore, has submitted that the lower authorities have

exceeded their jurisdiction in making the impugned addition on the

debatable issue under the provisions of section 154 of the Act.

ITA No. 1151/Chd/2017- Sh Kamal Deen Sheikh, Palampur 4

The appeal of the assessee is hereby allowed. Order pronounced in the Open Court on 02.08.2018

Sd/- Sd/- (B.R.R KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 02.08. 2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR

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