2022 (10) TMI 345 - AT - Income Tax

Tribunal overturns PCIT's Section 263 order on TDS, aligns with Malabar Industries Ltd.

Airlink Communications Pvt. Ltd. Versus The PCIT -1, Surat.

Airlink Communications Pvt. Ltd. Versus The PCIT -1, Surat. - TMI Issues Involved:1. Validity of the revisionary order passed under Section 263 of the Income Tax Act, 1961.2. Disallowance under Section 40(a)(ia) for depositing TDS after the due date.3. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) in passing the revisionary order when the assessment order is under appeal.Issue-wise Detailed Analysis:1. Validity of the Revisionary Order Passed Under Section 263:The assessee challenged the revisionary order passed by the Learned Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961, arguing that the original assessment order was neither erroneous nor prejudicial to the interest of revenue. The PCIT had exercised jurisdiction under Section 263 because the assessee had deducted tax but deposited it after the due date. The PCIT issued a show-cause notice, but the assessee did not appear, leading to the revisionary order.The tribunal noted that the Assessing Officer (AO) had considered the assessee's submission regarding the late deposit of TDS and had taken a possible view that the disallowance under Section 40(a)(ia) was not required since the recipient had paid the due taxes. The tribunal held that the AO's order was not erroneous and prejudicial to the interest of revenue, as the TDS was deposited subsequently, and there was no loss to the revenue. The tribunal quashed the PCIT's revisionary order, citing the Supreme Court's decision in Malabar Industries Ltd. vs. CIT, which requires both conditions (erroneous and prejudicial to the interest of revenue) to be satisfied for exercising jurisdiction under Section 263.2. Disallowance Under Section 40(a)(ia) for Depositing TDS After the Due Date:The PCIT argued that disallowance should be made under Section 40(a)(ia) because the assessee deposited the TDS after the due date. The tribunal observed that the AO had issued a show-cause notice during the assessment proceedings and accepted the assessee's explanation that the recipient had declared the income and paid taxes. The tribunal noted that the AO had taken a possible view, and the order was not erroneous. Furthermore, since the TDS was deposited in the subsequent year, there was no loss to the revenue, making the order not prejudicial to the interest of revenue.3. Jurisdiction of the PCIT in Passing the Revisionary Order When the Assessment Order is Under Appeal:The assessee contended that the revisionary order under Section 263 could not be passed as the assessment order was under appeal before the Commissioner of Income Tax (Appeals). The tribunal did not specifically address this issue separately but focused on the validity of the revisionary order under Section 263. Since the tribunal quashed the revisionary order on the grounds that the original assessment order was neither erroneous nor prejudicial to the interest of revenue, this issue became moot.Conclusion:The tribunal quashed the revisionary order passed by the PCIT under Section 263, holding that the original assessment order was not erroneous and prejudicial to the interest of revenue. The tribunal emphasized that the AO had taken a possible view, and the subsequent deposit of TDS did not result in any loss to the revenue. Consequently, the appeal filed by the assessee was allowed.