2023 (1) TMI 664 - AT - Income Tax

Appellate Tribunal affirms decision on non-deduction of TDS, stresses compliance with tax laws

The Appellate Tribunal upheld the Principal Commissioner's decision under section 263 of the Income Tax Act, finding the assessment order erroneous and ... Revision u/s 263 by CIT - Non deduction of TDS u/s 194C on account of freight charges as paid to Railway and to different parties - HELD THAT:- Though assessee has submitted that entire details were examined by the AO and that no further enquiry was needed, however, after going through the relevant part of the order of the PCIT, we find that the PCIT has rightly held that the relevant issue relating to non-deduction of TDS and corresponding declarations submitted by the payees have not been properly examined by the AO. PCIT has categorically found error/discrepancy relating to the non-furnishing of required declarations by certain parties - PCIT rightly restored the issue to the AO for examination of this factual aspect. It is pertinent to mention here that the PCIT thoroughly examined the issue and held that no deduction was required to be made in respect of payment made to railways, whereas, the issue relating to payment to private parties without deduction of TDS and corresponding declarations furnished by the respective parties, is required to be examined by the AO - No prejudice will be cause to the assessee if the AO will examine the aforesaid factual aspect and arrive at a correct conclusion. Appeal of the assessee stands dismissed. Issues:1. Revision jurisdiction under section 263 of the Income Tax Act regarding non-deduction of TDS on freight charges.2. Examination of declarations submitted by payees for TDS deduction.3. Assessment order being erroneous and prejudicial to the interest of revenue.Issue 1: Revision jurisdiction under section 263 of the Income Tax Act regarding non-deduction of TDS on freight charges:The appellant appealed against the order of the Principal Commissioner of Income Tax Kolkata, challenging the revision jurisdiction exercised under section 263 of the Income Tax Act. The Principal Commissioner noted that the assessee had made expenditure on freight without deducting Tax Deducted at Source (TDS) as required under section 194C. The Principal Commissioner found that the Assessing Officer failed to disallow 30% of the freight charges, leading to the order being considered erroneous and prejudicial to the revenue's interest. The appellant argued that TDS was not required for payments made to railways and certain parties based on declarations submitted under section 194C(6). However, the Principal Commissioner observed discrepancies in the declarations submitted by the assessee and held that the assessment order was erroneous for non-examination of the TDS issue.Issue 2: Examination of declarations submitted by payees for TDS deduction:The Principal Commissioner examined the declarations submitted by the assessee's payees and found discrepancies. While some declarations were in order, others did not match the actual recipients of the payments made. The Principal Commissioner highlighted that certain parties did not submit the required declarations, leading to the conclusion that the assessment order was erroneous and prejudicial to the revenue's interest. The appellant argued that the Assessing Officer had thoroughly examined the details, but the Principal Commissioner disagreed, emphasizing the need for proper examination of the TDS issue and declarations by the payees.Issue 3: Assessment order being erroneous and prejudicial to the interest of revenue:The Appellate Tribunal upheld the Principal Commissioner's decision, stating that the TDS issue and declarations submitted by payees were not adequately examined by the Assessing Officer. The Tribunal agreed that the Principal Commissioner rightly restored the issue for further examination by the Assessing Officer to arrive at a correct conclusion. The Tribunal dismissed the appeal, noting that no prejudice would be caused to the assessee by reexamining the factual aspects related to TDS deduction. Consequently, the appeal was dismissed, affirming the Principal Commissioner's decision regarding the erroneous assessment order being prejudicial to the revenue's interest.In conclusion, the Appellate Tribunal upheld the decision of the Principal Commissioner under section 263 of the Income Tax Act, emphasizing the importance of proper examination of TDS issues and declarations submitted by payees to ensure compliance with tax regulations and prevent prejudice to the revenue's interest.