2022 (12) TMI 70 - AT - Income Tax

Tribunal quashes Section 263 revision order, rules in favor of assessee

The Tribunal allowed the appeal of the assessee, quashing the revision order passed under Section 263 of the Income Tax Act. The Tribunal found that the ... Revision u/s 263 by CIT - WIP for multiple years - HELD THAT:- The assessee in his reply, which has been extracted in Pr.CIT’s order, submitted that he has explained that the mistake was on account of the typographical error. To substantiate this that the assessee has produced the WIP in respect of the assessment years i.e. for the F.Ys.2012-2013, 2013-2014 and for the relevant F.Y.2014-2015, it is at this point that the ld. Pr.CIT took the stand that the WIP is identical as closing stock for multiple years. Therefore, this is not the issue which was raised in the show cause notice. Once it is not the issue that was raised in the show cause notice, such an issue cannot be directed in a revision proceeding u/s.263 of the Act. TDS in respect of payments made towards equipment hire charges, location/camp hire charges and vehicle hire charges - receipt u/s.194C & 194J of the Act as per 26AS are more than the receipt shown in the ITR - HELD THAT:- TDS has been looked into by the AO in the course of the assessment proceedings. He has already taken a view. The assessee has also categorically admitted that to such extent where TDS is liable to be done, the TDS has been deducted and where payment was less than Rs.30,000/-, no TDS has been deducted. Admittedly, the Pr.CIT in his wisdom failed to consider the issue even after receipt of the reply of the assessee. This clearly shows that the Pr.CIT has not conducted any enquiry after receipt of the reply of the assessee. This is not permitted under the provisions of Section 263 of the Act. Ld. Pr.CIT cannot brush aside the reply of the assessee and set aside the issue to the file of AO for readjudication u/s.263 of the Act without doing any primary investigation. As the first issue of WIP is not an issue arising from the show cause notice issued u/s.263 of the Act and the second issue is an issue which has already been considered by the AO and no investigation has been done by the ld. Pr.CIT, we are of the view that the order passed u/s.263 of the Act is unsustainable and consequently we quash the same. Appeal of the assessee is allowed. Issues Involved:1. Condonation of delay in filing the appeal.2. Validity of the revision order passed under Section 263 of the Income Tax Act.3. Examination of Work-in-Progress (WIP) discrepancies.4. Examination of TDS on equipment hire charges, location/camp hire charges, and vehicle hire charges.Detailed Analysis:1. Condonation of Delay:The appeal by the assessee was barred by 505 days. The assessee's representative filed an application stating sufficient reasons for the delay. The CIT-DR did not object to this application. Consequently, the delay was condoned, and the appeal was heard on merits.2. Validity of the Revision Order under Section 263:The appeal was against the order passed under Section 263 by the Principal Commissioner of Income Tax (Pr.CIT) on 19.03.2020. The Pr.CIT had revised the assessment order on the grounds that it was erroneous and prejudicial to the interests of the revenue. The Pr.CIT's revision was based on discrepancies in the WIP figures and the non-deduction of TDS on certain expenses. The Pr.CIT argued that the Assessing Officer (AO) had failed to apply the correct law and had not conducted a proper investigation, rendering the assessment order erroneous.3. Examination of Work-in-Progress (WIP) Discrepancies:The Pr.CIT noted that the closing WIP for the preceding year (AY 2014-15) was Rs.2,22,834, whereas the opening stock for the current year (AY 2015-16) was Rs.22,12,834. The assessee claimed this discrepancy was due to a typographical error and provided WIP details for previous years to substantiate this. The Tribunal found that the issue of identical WIP figures for multiple years was not raised in the show cause notice issued under Section 263. Therefore, it could not be directed in a revision proceeding under Section 263.4. Examination of TDS on Equipment Hire Charges, Location/Camp Hire Charges, and Vehicle Hire Charges:The Pr.CIT argued that the AO allowed these expenses without proper TDS compliance, violating Section 40(a)(ia) read with Sections 194C/194J of the Act. The Tribunal noted that the AO had considered the TDS issue during the assessment proceedings and had taken a view. The assessee had explained that TDS was deducted where applicable, and no TDS was deducted for payments below Rs.30,000. The Tribunal found that the Pr.CIT had not conducted any further investigation after receiving the assessee's reply, which is not permissible under Section 263. The Tribunal cited the decision in the case of M/s Earth Minerals Co. Ltd. and the Orissa State Police Housing & Welfare Corporation Ltd., emphasizing that the Pr.CIT cannot set aside issues for re-adjudication without primary investigation.Conclusion:The Tribunal concluded that the revision order under Section 263 was unsustainable. The first issue regarding WIP was not raised in the show cause notice, and the second issue regarding TDS was already considered by the AO without further investigation by the Pr.CIT. Therefore, the Tribunal quashed the order passed under Section 263.Result:The appeal of the assessee was allowed. The order was pronounced and dictated in the open court on 30/11/2022.