2022 (3) TMI 288 - AT - Income Tax

Appeal allowed, revision order quashed under section 263. Original order quashed on limitation grounds. Judgment in favor of assessee.

The Tribunal allowed the appeal in favor of the assessee, dismissing the revision order under section 263. The original order under sections 201(1) and ... Revision u/s 263 - order passed under section 201(1) and 201(1A) is erroneous and prejudicial to the interest of the revenue - HELD THAT:- We find the CIT(A) has considered the facts, circumstances, provisions of law and judicial decisions and dealt on the issue of limitation and allowed the appeal. Now, CIT(TDS) has passed revision order u/sec 263 of the Act setting aside the order passed under section 201(1) and 201(1A) of the Act. But the fact remains that, the assessee has challenged the order before the CIT(A) and the CIT(A) has quashed the order.The Ld.DR submitted that the revenue has not filed the appeal against the CIT(A) order with the Honble Tribunal due to low tax effect. We find the revision order of the CIT-TDS does not subsists as the order under section 201(1) and 201(1A) of the Act is annulled. Accordingly, We dismiss the revision order U/sec 263 of the Act on non-maintainability and allow the grounds of appeal in favour of the assessee. Issues Involved:1. Validity of the order under section 263 of the Income Tax Act, 1961.2. Delay in filing the appeal due to the pandemic.3. Short deduction of TDS under sections 201(1) and 201(1A) of the Act.4. Jurisdiction and limitation period for passing the order under section 201(1)/201(1A) of the Act.5. Application of Explanation 2 to Section 263 of the Act.Detailed Analysis:Validity of Order under Section 263 of the Act:The primary issue raised by the assessee was the validity of the order passed under section 263 by the CIT(TDS). The CIT(TDS) deemed the order dated 23 March 2018 by the TDS Officer under sections 201(1) and 201(1A) as erroneous and prejudicial to the revenue's interest, leading to its revision. The assessee contended that the original order was neither erroneous nor prejudicial to the revenue's interest and argued that the revision was erroneous and bad in law. Furthermore, the assessee argued that the CIT(TDS) improperly applied Explanation 2 to Section 263, which was not applicable to the financial year under consideration (FY 2010-11).Delay in Filing the Appeal:The assessee acknowledged a delay of 263 days in filing the appeal, attributing it to the COVID-19 pandemic. The Tribunal found the reasons for the delay reasonable and not a result of willful neglect. Consequently, the delay was condoned, and the appeal was admitted for hearing.Short Deduction of TDS:The case involved a survey under section 133A on the Runwal Group, revealing that the assessee deducted TDS at 2% under section 194C for common area maintenance charges instead of 10% under section 194I. The AO determined a short deduction of TDS amounting to Rs. 21,67,296, with an additional interest of Rs. 19,50,566, totaling Rs. 41,17,862. The AO passed an order under sections 201(1) and 201(1A) on 23 March 2018.Jurisdiction and Limitation Period:The CIT(TDS) found that the AO's order did not disallow expenses aggregating to Rs. 3,23,15,376 under section 40(a)(ia) and issued a notice under section 263. The assessee argued that the order under section 201(1)/201(1A) was barred by limitation, as it was passed after the statutory period of two years from the end of the financial year in which the TDS statements were filed. The CIT(A) upheld this argument, noting that the order should have been passed by 31 March 2014, but was instead passed on 23 March 2018, making it time-barred and invalid.Application of Explanation 2 to Section 263:The CIT(TDS) applied Explanation 2 to Section 263 while passing the revision order. However, the assessee contended that this explanation, effective from 1 June 2015, was not applicable to the financial year 2010-11. The Tribunal concurred with the assessee's argument, noting that the CIT(A) had already quashed the original order under sections 201(1) and 201(1A) on the grounds of limitation. As the original order was annulled, the revision order under section 263 could not subsist.Conclusion:The Tribunal found that the CIT(A) had correctly quashed the original order on the grounds of limitation. Consequently, the revision order under section 263 by the CIT(TDS) was deemed non-maintainable. The Tribunal allowed the appeal in favor of the assessee, dismissing the revision order under section 263.Final Judgment:The appeal filed by the assessee was allowed, and the order pronounced in the open court on 21 February 2022.