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TaxTMI 
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TaxTMI 
2019 (10) TMI 978
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....ec. 205 read with sec. 199(1) in allowing the credit of TDS to the assessee when the income earned on which TDS has been deducted has duly been accounted for and assessed in the hands of the assessee. 5. That rule 37BA cannot override sec. 199(1). 6. That the Ld. Pr. CIT has erred in relying on the non-existent four conditions of Rule 37BA by ignoring the retrospective amendment to the said rule on 01.11.2011. 7. That filing of declaration u/r 37BA is procedural requirement and can be filed at any time as no time limit or form has been prescribed for the same. 8. That the demand notice is excessive and incorrect in so far as credit for amount collected from assessee's bank account has not been allowed. 9. That the appellant prays for leave, to add, alter, amend or vary any of the grounds either before or at the time of hearing of the appeal. 2. The assessment in the case of assessee was completed by the Assessing Officer for the assessment years 2010-11 and 2011-12 on 18.03.2013 and 14.02.2014 respectively. At paragraph 5 of the order for A.Y. 2010-11, it was mentioned by the Assessing Officer as under : 5. Credit of TDS: The assessee has submitted its note ....
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....ssessee concern or in the account of Sh. Madhukar Kapoor shall be allowed subject to the verification that credit of TDS has not been claimed by the Sh. Madhukar Kapoor. 2.1 Similarly in paragraph No. 2 of the order for assessment year 2011-12, it was mentioned as under : 2 The assessee engaged in the business of Security Printing & Ice Cream Manufacturing. The business of ice cream manufacturing is done m the name of ICES Product since last many years from the factory at A-6. Site-B, UPSIDC Artoni, Agra. The assessee is also engaged in security printing. The assessee has claimed credit of TDS of Rs. 33475G8/-. It has been submitted that out of TDS claimed at Rs. 3347508/-. TOS of Rs. 106492/- is appearing in 26AS of the assessee company and Rs. 1539198/- is appearing m the 26AS of its director Sh. Madhukar Kapur. it has been submitted that remaining amount of TDS Rs. 1701818/- is neither reflected in 26AS of the company nor in 26AS of its director Madhukar Kapur it has been submitted that the TDS of Rs. 1539198/- appearing in 26AS of its director Madhukar Kapur has not been claimed in his return of income as the job work was done by the assessee company and the amount of rece....
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....ntioned as under : Para 8.2 of CIT(A) order page 16 - not found 5. As the Assessing Officer has allowed the credit of TDS reflected in Form 26AS in the account of Madhukar Kapur subject to verification, the credit of TDS has not been claimed by Madhukar Kapur, the Principal CIT had invoked the jurisdiction u/s. 263, as the PCIT was of the opinion that the assessee does not fall within an of the four categories mentioned in clause (i) of Rule 37BA(2) red with section 199(3) of the Act. 6. The PCIT had issued notice on 17.03.2015 calling upon the assessee to file the reply to the show cause notice. In pursuance thereto, the assessee filed the reply and raised following objections : (i). Reopening of assessment will amount to change of opinion since credit of TDS in the name of person other than the assessee is allowed after due deliberation on the matter. (ii). The order of the Assessing Officer allowing credit of TDS after due verification is not prejudicial to the interest of revenue. (iii). The order of the Assessing Officer is not prejudicial to the interest of revenue in view of section 205 of the Act. (iv). The matter is pending before the Hon'ble Allahabad Hig....
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....S of Mr. Madhukar Kapur. The reason for the same was that due to secrecy, the assessee company did not enter into the contract for printing but in the name of its director. However, since, the business was relating to the assessee, the income was offered by the assessee company and also claimed TDS credit for the same. (4) The CIT observed (Page No. 1 of the Order - at Page 54 ol the Paper Book) that as per sub seciion (3) of section 199. the credit can be claimed by the person other than the person referred in sub-section (1}. us per the rule made by the board in this regard. Board prescribed Rule 37BA of the Rule, which provided four cases prior to its substitution on 1.11.2011. Further as per the proviso to the said Rule, the deductee was required to file with the deductor a declaration in this regard. (5) The CIT did not appreciate the following points: - (i) Section 199 of the Act, for credit of TDS to the assessee in whose income the amount on which TDS is deducted. Ii also allows the credit to any other person as per subsection (3) of the Act. (ii) Though the Rule 37BA prescribed by CBDT requires certain procedure but it cannot supersede the provisions of law. Se....
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.... by the deductee and other persons and the income is assessable in their hands in the same proportion as their ownership of the asset: Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax. referred to in sub-rule (1). " (7) Clause (2) of the said Rule 37BA was substituted w.e.f. 1.11.2011 as under: - (i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee: Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other pi. non in the information relating to deduction of tax referred to in sub-rule (1). " (8) W.e.f. 1.11.2011, the four conditions which were required as per Rule 37BA were deleted and stated that where under any provisions of the Act, the whole or any part of the income is assessable in ....
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...., then credit of the TDS cannot be taken by anybody. This is not the spirit and intention of law. 21. Therefore, in our view, the Assessing Officer erred in denying the benefit of the TDS mentioned in the TDS certificates filed by the assessees on the ground that the TDS certificate is issued in the name of the joint venture or a Director and not the assessee. CIT Vs. Relcom [234 Taxman 6931 (Delhi) [Page - 30 to 34 of case laws paper book] The revenue having assessed REPL's income in respect of such TDS claim, which it has not availed, cannot deny the assessee's claim on the mere technical ground that the income in respect of the said TDS claim was not that of the assessee, given that the assessee and REPL are sister concerns and RFI'L has not raised any objection with regard to the assessee's TDS claim Rs. 1,20,73,097 Para 7) The revenue's contention that the assessee, instead of claiming the entire TDS amount, ought to have sought a correction of the vendor's mistake, would unnecessarily prolong the entire process of seeking refund based on TDS credit. (Para 10) Parmanand Tiwari Vs. ITO [20151 54 taxinann.com 25 (Kolkata - Trib.) (Copy encl....
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....o the interest of the revenue' has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of the order of the assessing officer cannot be treated as prejudicial to the interests of the revenue. For example, if the assessing officer has adopted one of the courses permissible in Ui\ v and it has resulted in loss of revenue, or where two views are possible and the assessing officer has taken one view with which the commissioner does not agree, if cannot be seated as an erroneous order prejudicial to the interests of the revenue, _while the view taken by theassessing officer is unsustainable in law. Where a sum not earned by a person is assessed as income in his hands on his so offering the order passed by the assessing officer accepting the same without application of mind as such will be erroneous and prejudicial to the interest of the revenue. CIT vs. R.K. Construction Co., Hon'ble Gujarat High court 313 ITR 65 (Guj.) The detail^ of sub-contractors examined by (he AO as per the directions of CIT in revision proceedings, inter alia, include the names of these sub-contractors, their permanent account numb....
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....t these contractors were related to the assessee or were associates or sister concerns of the assessee. The Tribunal has also given finding that the Revenue has not discharged the onus that the payments to sub-contractors were not genuine. Thus the Tribunal has come to the conclusion that no disallowances can be made merely on the basis of suspicion, howsoever strong may it be, and the suspicion cannot take the place of actuality. AO has taken a particular view on the basis of evidence produced before him. On the basis of the said material and materials which were collected by the CIT in revisional proceedings, the CIT has taken u different view. However, in the revisional proceedings under s. 263. it is no/ open for the CIT to take such a different view. No substantial questions of law arise out of the order of the Tribunal and hence, the appeal filed by the Revenue deserves to be dismissed. - CIT vs. Arvirid Jewellers (2002) 177 CTR (Guj) 546 : (2003) 259 ITR 502 (Gttj) and Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) I : (2000) 243 ITR 83 (SC) relied on). CIT vs. Max India Limited, 295 ITR 282 The phrase "prejudicial to the interests of the Revenue" in sectio....
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.... delegated to the board vide section 199(3) is only to make rules for allowing credit of TDS. The same cannot be read to mean that the board is empowered to disallow the credit of TDS by inserting rules. In this regard, reliance is placed on the judgement of the Hon'ble Apex Court in the case of CIT Vs. Taj Mahal Hotel [19711 82 ITR 44 (SO that "The Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or whittle down its effect. " (20) Rule 37BA mitigates the hardship faced by the assessee and not to create hardship. It is a beneficial provision mitigating the hardship of the assessee. (21) Further, the order of the AO was also not prejudicial to the interest of the revenue. The assessee company offered the income and claimed credit of TDS. The director of the assessee in whose name the TDS certificates were issued did not offer the income and did not claim any credit for TDS. Thus, the order of the AO was also not prejudicial to the interest of the revenue. (22) So far the challenge of the order on merit is concerned, I rely on my aforesaid submission made on the basis of provisio....
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....the opinion that the issue has not been subject matter of scrutiny before the ld. CIT(A) and in view thereof, clause (c) of Explanation 1 to sub-sec. (1) of section 263 is not applicable. Further, we would like to reproduce ground No. 8 raised by the assessee before the ld. CIT(A) as mentioned by the ld. CIT(A) at page 2 of the order to the following effect : "8. Calculation of Income Tax and Interest is wrong." The ld. CIT(A) at page 15 had reproduced the submission of the assessee and thereafter had recorded the finding on ground No. 8 in para 8.2. Paragraph No. 801 & 8.2 of the order of ld. CIT(A) are as under : 8.1 In Ground no.8, the appellant has disputed calculation of income tax and interest. While putting up his argument in respect of this ground, the Id. AR filed a written submission on 19.11.2014 as under: - "Under this ground, we dispute the conclusion of the Ld. AO that TDS on Advances received from customers is to be allowed only in the year in which the Income in respect of the same is accounted for. It is submitted that the allowability of Credit of TDS is governed by sec 199(1) which reads as under : "199. (1) Any deduction made in accordance with ....
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....edit for TDS after making necessary verification of TDS certificate filed by the assessee company and give credit for TDS as per the provisions of section 199 read with Rule 37BA. In view of my above direction, ground No. 8 is decided accordingly." From the bare reading of the above finding and the question of law and the ground urged before the ld. CIT(A), it is abundantly clear that the issue "whether TDS credit in the account of Madhukar Kapur, as mentioned in Form 26AS , can be credit to the account of the assessee" was not a subject matter of appeal before the ld. CIT(A). 12. It is settled proposition of law that the finding recorded by the judicial and quasi judicial authorities are required to be read in the context of grounds urged before them and should not be read in isolation and out of the context. Thus, it is crystal clear that the subject matter of the proceedings u/s. 263 was not the subject matter of the proceedings before the ld.CIT(A) and in view thereof, the primary ground raised by the assessee is without merit and accordingly, the same is dismissed. 13. The second ground raised by the ld. AR by written submissions is that the PCIT has failed to notice the....
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....the Revenue". For example, when the Assessing Officer takes recourse to one of the two legally viable courses or where there are two views possible and the Commissioner does not agree with the view taken by the Assessing Officer which has resulted in a loss.[See CITv. Max India Ltd. [2007] 295 ITR 282/[2008] 166 Taxman 188 (SC)] (vi) There is no requirement of issuance of a notice before commencing proceedings under Section 263 of the Act. What is required is adherence to the principles of natural justice by granting to the assessee an opportunity of being heard before passing an order under Section 263. [CIT v. Electro House [1971] 82 ITR 824 (SC)]. (vii) If the Assessing Officer acts in accordance with law his order cannot be termed as erroneous by the Commissioner, simply because according to him, the order should have been written more elaborately". Recourse cannot be taken to Section 263 to substitute the view of the Assessing Officer with that of the Commissioner.[See Gabriel India Ltd. (supra)] (viii) The exercise of statutory power under Section 263 of the Act is dependent on existence of objective facts ascertained from prima facie material on record. The evaluati....
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....the reasons alluded we are of the opinion that the present is a fit case for exercise of the suomotu revisional powers of the learned C.I.T. under Section 263 of the Act. The order of the learned C.I.T., therefore, is restored and those of the learned Tribunal dated 28th August, 2007 and the High Court dated 7th August, 2008 are set aside. The appeal of the Revenue is allowed. 23. Leave granted. 24. Pursuant to the revisional order dated 20th March, 2006 under Section 263 of the Income Tax Act setting aside the assessment order for the assessment year 2001-2002 and directing fresh assessment, a fresh assessment had been made by the Assessing Officer by order dated 29th December, 2006. Against the said order the respondent assessee filed an appeal before the learned Commissioner of Income Tax (Appeals). By order dated 18th October, 2007 the learned Commissioner of Income Tax (Appeals) had set aside the assessment order dated 29th December, 2006 as in the meantime, by order dated 28th August, 2007 of the learned Income Tax Appellate Tribunal the revisional order dated 20th March, 2006 under Section 263 of the Act was set aside. The Revenue's appeal before the learned Tribun....
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....nd order was not sustainable in the eyes of law. In the matter of Meerut Sugar Mills, wherein it was held as under : "7. There can be no doubt that 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 High Court of Calcutta in Dawjee Dadabhoy & Co. v. S.P. Jain [1957] 31 ITR 872, the High Court of Karnataka in CIT v. T. Narayana Pai [1975] 98 ITR 422, the High Court of Bombay in CIT v. Gabriel India Ltd. [1993] 203 ITR 208 and the High Court of Gujarat in CIT v. Smt. Minalben S. Parikh [1995] 215 ITR 81/ 79 Taxman 184 treated loss of tax as prejudicial to the interests of th....
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....t placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts, the conclusion that the order of the ITO was erroneous is irresistible. We are, therefore, of the opinion that the High Court has rightly held that the exercise of the jurisdiction by the Commissioner under Section 263(1) was justified." 15. In the present case, the CIT himself while relying upon the reply submitted by the assessee had partially accepted the claim as far as investment in share capital was concerned but it did not accept the documentary evidence and reply submitted by the assessee before the Assessing Officer as far as unsecured loans and creditors are concerned. The reliance placed by the counsel for the Department on the aforesaid judgment is of no help to him as he has failed to point out how the order of the Assessing Officer was erroneous insofar as it is prejudicial to the interest of the revenue. While the couns....
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....ed the question whether discussion of queries and reply received from assessee, in assessment order, is necessary or not. Relying on two judgments of Delhi High Court in CIT Vs. Vikash Polymers [2012] 341 ITR 537/ [2010] 194 Taxman 57 and CIT v. Vodafone Essar South Ltd. [2012] 28 taxmann.com 273/ [2013] 212 Taxman 184 (Delhi), it held that once inquiry was made, a mere non discussion or nonmention thereof in assessment order cannot lead to assumption that Assessing Officer did not apply his mind or that he has not made inquiry on the subject and this would not justify interference by Commissioner by issuing notice under Section 263 of the Act. 10. In Vikash Polymers (supra) relevant part of the observations in this regard read as under (page 548 of 341 ITR): "This is for the reason that if a query was raised during the course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer was reflected in the assessment order, that would not, by itself, lead to the conclusion that the order of the Assessing Officer called for interference and revision." 11. Further, the relevant observation made i....
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....considered opinion that merely because the Incometax Officer had not written lengthy order it would not establish that the assessment order passed under Section 143(3)/148 of the Act is erroneous and prejudicial to the interests of the Revenue without bringing on record specific instances, which in the present case, the Commissioner of Income Tax has failed to do." 21. It is clear that after the notice was issued by the Assessing Officer raising 28 queries from the assessee, which was also replied by him along with the documentary evidence in regard to each of the query, thus the assessment order passed under Section 143(3) of the Act would not render the same as erroneous and prejudicial to the interest of Revenue, unless the Commissioner exercising power under Section 263 brings on record to show that the order of the Assessing Officer is erroneous, as the same was passed without application of mind or the Assessing Officer had made an incorrect assessment of fact or incorrect application of law, but the same not being the case, and the CIT relying upon the reply and the documentary evidence submitted by the assessee granted partial relief, as such the order dated 09.02.2012 p....