TaxTMI 
TaxTMI 
2019 (3) TMI 1588
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....the Act, on the following issues : i) TDS provisions are attracted on the various liabilities provided for, which has not suffered TDS and therefore disallowance u/s 40(a)(ia) was called for ii) Depreciation claim @ 100% on the "Effluent treatment plant" when the records show that the assets were put to use for a period less than 180 days Similarly, for A.Y 2009-10, the assessee filed return of income showing income of Rs. 78,60,19,800/- subsequently revised to Rs. 77,35,19,800/-. The case was selected for scrutiny and assessment order u/s 143(3) dated 21.12.2011 was passed assessing the income at Rs. 96,16,99,983/-. Subsequently the CIT, Bangalore -3 initiated proceedings u/s 263 of the Act, on the following issues : i) TDS provisions are attracted on the various liabilities provided for, which has not suffered TDS and therefore disallowance u/s 40(a)(ia) was called for. ii) Depreciation claim @ 100% on the "Effluent treatment plant" when the records show that the assets were put to use for a period less than 180 days. iii) Interest u/s 244A amounting to Rs. 17,38,707 was allowed in contravention of the provisions of the Act, as the amount of refund is less than....
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....enquiry by the A.O, the tribunal had held that the invocation of powers u/s 263 was not correct. The points made by the learned AR was that, i) The assessee is a listed company and accounts are subjected to multiple audits by expert professionals. The assessment is also carried out on year-to-year basis. In such a scenario, Ordinarily, it is only in a very gross case of inadequacy in inquiry and lack of application of mind that the order of AO is open to attack as erroneous ii) The CIT ought to have made inquiry on the issue himself if so considered expedient to at least prima facie demonstrate that the action of the AO, which rendered the order erroneous, has also caused prejudice to the Revenue. Merely because the expectations of the Revisional Commissioner are purportedly not met, it should not necessarily trigger revisional action under s.263 of the Act in every case. The discretion given to the supervisory authority is expected to exercise in a judicial manner having regard to the totality of facts. iii) The CIT has not given any cogent rebuttal in its order as to how the so called inadequacies in the enquiries made has dented the ultimate outcome in assessment order.....
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.... accounts on estimate basis as suppliers' bills/ invoices were not received. The Note referred to by the CIT itself mentions that TDS is not applicable and that the note has been reported as a matter of abundant precaution. Also, the Appendix to the Audit report referred to in the note shows clearly that the provisions have been made only under expenditure accounts and not on supplier's accounts and has been done on an estimate basis. It was also on record that such provisions have been adjusted against the bills received in the months of April/ May of the next year and TDS has been paid on such bills/ invoices before the due date of return. The various decisions of the Hon'ble tribunal that in such cases TDS is not applicable are squarely applicable to the facts of the case. If the CIT has considered the submissions and recorded filled by the assessee, he would have come to know that TDS was not applicable at all. The details were available on record. The Ld A.R submitted that the Ld CIT has taken support of provisions of sec.194C(2) to hold that the assessee should have deducted tax at source from the provisions so made. He submitted that the assessee had not received the bills f....
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....oceedings u/s 201 and 201A and has since accepted that the payments have been made. The AR, during the course of hearing, furnished a copy of order passed under 201 and 201A confirming the deposit of TDS before the due date for filing the return of income. In the ITO (TDS) order, it was mentioned as under: Order U/s.201(1A) and demand notice for A.Y. 2008-09: Order U/s.201(1A) and demand notice for A.Y. 2009-10 : Depreciation on Effluent/ Sewage treatment plant 7.5 On this issue, the learned AR submitted that the Certificate from the Pollution Control Board (PCB) dated 15.08.2007 allowing the company to operate the plant w.e.f that date shows that the plant was put to use in August 2007. Also, even in the document relied upon by the CIT, all the invoices relating to supply and installation are before August and only few invoices related to installation like additional pipes, painting etc., and commissioning are after August. 08. Per contra, the learned DR strongly defended the order of the CIT and drawn our attention to various paragraphs of order and She relied upon the order giving effect order passed by the AO dated 26.08.2013, in which, AO had confirmed the additions ....
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....l to the Revenue or if it is not erroneous but is prejudicial to the Revenuerecourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase "prejudicial to the interest of the Revenue" has to be read in conjunction with an erroneous order....
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....ise of the revisional jurisdiction, bereft of such satisfaction and/or finding that the order of the Assessing Officer is erroneous and that it is prejudicial to the interests of the Revenue and that too, based on tangible materials on record, is impermissible rendering the resultant order void. 10. Judged on the above touchstone, we are of the unhesitant opinion, having regard to the materials on record, that no interference with the impugned order of the learned Tribunal is warranted, in the facts and circumstances of the case. No substantial question of law, as contemplated by section 260A of the Act, exists to be examined. The principle that emerges out of the above cited decisions are that the twin requirement of the order being erroneous and prejudicial to the interests of revenue should be satisfied and that the CIT should invoke the powers u/s 263 only after an enquiry by him to establish the twin conditions. 10. There is one more condition imposed upon the Ld CIT before invoking revisional power u/s 263 of the Act. In the matter of Pr. CIT v. Delhi Airport Metro Express P. Ltd [ITA.705/2017, dt.05.09.2017], ITO v. D.G. Housing Projects Ltd. 2012 (343) ITR 329 (Delhi....
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....pect/question...." Similar view has been expressed by Hon'ble Madras High Court in the case of CIT Vs. Amalgamations Ltd (238 ITR 963). The law interpreted by the High Courts makes it clear that the Ld Pr. CIT, before holding an order to be erroneous, should conduct minimum enquiries or verification in order to show that the finding given by the assessing officer is erroneous. 11. On the basis of above discussed legal propositions on the revisional power of Ld CIT, we are required to examine whether the action of the CIT fulfilled the twin test or not and whether the Ld CIT has conducted minimal enquiry or not. With respect to the ground pertaining non-deduction of TDS from the year-end provisions, the CIT has relied on the Form 3CD forming part of the audit report, where the auditor has mentioned Clause 27B(i) is reproduced below: As far as the issue of TDS on year-end provisions, admittedly the CIT has based his decision on the observations made in the Audit report, which was very much before the A.O when he made the assessment. Also, the assessee has submitted the full invoice-wise details of the payments made out of the liabilities created, which was very much on record. ....
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....diting the account of "Provision for expenses". Accordingly it was submitted that the credit is not in respect of suppliers account but to expenditure account. Accordingly it was submitted that the "Provision for expenses account" cannot be considered as "Suspense Account" as referred to in sec. 194C(2) of the Act, since the expenses were accounted for on estimate basis. Accordingly, the auditors have also expressed the opinion that the TDS liability shall not arise on the provisions of expenses so made on estimate basis. In our view, there is merit in the contentions of the assessee. There is no dispute with regard to the fact that the assessee has deducted tax at source when the actual bills were received by the assessee from the suppliers/service providers. The said bills were debited to the "Provision for expenses" account and hence there is no question of any double deduction. The TDS so deducted has been paid within the due dates. On these set of facts, we are of the view that the interpretation given by Ld CIT to the provisions of sec.194C(2) of the Act does not appear to be correct, since the liability to the assessee to make payment shall arise only upon receipt of bil....
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....04.2012], holding that the provision is retrospective in nature and would be applicable from 01.04.2005. However the CIT while invoking the jurisdiction u/s.263 of the Act, mainly relied upon the circular issued by the Board in the year 2009 and had ignored the amendment brought into the statute by the Finance Act, 2010. In our view, the order passed by the CIT u/s.263 was based on a wrong premise and on incorrect interpretation of the provisions of sec. 194C. Further the CIT has also not considered the amended provision which came into effect from 01.04.2010, which was held to applicable retrospectively from 01.04.2005. In this view of the matter, we are of the view that the Ld CIT has failed in his duty to make minimal enquiry as mandated u/s 263 of the Act. Since there is no requirement to make any disallowance u/s 40(a)(ia) of the Act as per the amended provision and also as per the provisions of sec.194C(2) of the Act, it cannot be held that the impugned assessment orders are prejudicial to the interests of the revenue. Hence one of the twin mandatory conditions fails in the facts of the present cases. 14. Further we also notice that the CIT in para 5.2 records that the deta....
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....ussions made earlier, it can also be said that the AO has taken a plausible view in not making the addition u/s 40(a)(ia) of the Act. 17. The Ld D.R placed her reliance on the decision rendered by the jurisdictional High Court in the case of Infosys Technologies Ltd (supra). We have gone through the said decision and notice that the issue that was considered by Ld CIT in the above said case was with regard to the deduction of tax claimed under DTAA entered with Canada and Thailand. The AO allowed the deduction as claimed by the assessee without specifying the manner of computation in the assessment order. It is in the above said context, the Hon'ble Karnataka High Court has held that the assessment order is rendered erroneous and accordingly rejected the contentions that the assessee had submitted the relevant details before AO and hence there should be a conclusion that the AO has applied his mind. Thus, we notice that the Hon'ble jurisdictional High Court has rendered its decision on the facts prevailing in the above said case. Hence we are of the view that the revenue cannot take support of the above said decision. 18. To sum up, the order of the Commissioner setting aside t....