TaxTMI 
TaxTMI 
2019 (10) TMI 978
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....he Ld. AO was correct in law and facts in view of provisions of sec. 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 mention....
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.... is requested to furnish the details for verification. Subject to above, the credit of TDS reflected in form No. 26AS of the assessee 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 directo....
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.... Assessing Officer, the assessee filed appeal before the ld. CIT(A) and at page 16 of the order, the CIT(A) in paragraph No. 8.2 had mentioned 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 Asses....
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....aken one of the possible view, it cannot be said that the order passed by the A.O. was erroneous. (3) In the case at present is that the assessee claimed TDS credit for the amount which was reflecting in the 26AS 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....
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....d in the name of a deductee, being a partner of a firm or a karta of a Hindu undivided family, is assessable as the income of the firm, or Hindu undivided family, as the case may be; (d) the income from a property, deposit, security, unit or share held in the name of a deductee is owned jointly 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 t....
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....Rules, 2011 notified vide Notification No. 57/2011 dated 24-10-2011. being procedural in nature, would have retrospective effect and has to be given effect to. 20. The Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. If credit of tax is not allowed to the assessee, and the joint venture has not filed a return of income, 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 wit....
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.... 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 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 offe....
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....ce were drawn by him from the details collected by him during the revisional proceedings. Those details were thoroughly checked and examined by the Tribunal and it arrived at a factual finding that there was no illegality committed by the assessee in entrusting the work to sub-contractors nor there was any illegality in making all due payments to them. The Tribunal has also given specific finding to the effect that there was no evidence on record that 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 suc....
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.... and claimed credit. (18) This is settled law that the provisions under which the rules are made, even the rule does not state when and how the declaration has to be filed by the other person. (19) CIT opined that the board powers to create rules entitles the board to overrule the right of the assessee granted by the parliament, in this case by enacting section 199(1). - It is against the constitution which has always held that the parliament enactments are supreme. The authority 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 hards....
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....n form No. 26AS of the assessee and of Shri Madhukar Kapur shall be allowed to the assessee subject to the verification that the credit of TDS has not been laimed by Shri Madhukar Kapur. In view of the categorical finding given by the Assessing Officer in favour of the assessee that the credit of the TDS mentioned in 26AS of Madhukar Kapur shall be given to the assessee firm, in view thereof, there would not have been any grievance to the assessee to challenge the said order by way of appeal before the ld. CIT(A). In view of the above, we are of 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 ....
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....arties, TDS deducted on total amount received from parties and TDS amounts on advances received. We submit that this contention of the assessee has been accepted by the Ld. A.O. in the assessment proceedings for AY 2011-12 (copy of order enclosed) and in view of the same, your honour is requested to allow the entire credit of TDS (including that deducted on advances)." 8.2 I have considered the above argument taken by the Id. AR. For giving credit for TDS, the provisions of section 199 of the Act read with Rule 37BA of Income-tax Rule 1962 is to be followed. Therefore, the A.O. is directed to give credit 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 ....
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.... is, is stereotyped, in as much as, the Assessing Officer, accepts what is stated in the return of the assessee without making any enquiry called for in the circumstances of the case, that is, proceeds with undue haste". [Gee Vee Enterprises v. Asstt. CIT [1975] 99 ITR 375 (Delhi)] (iv) The expression "prejudicial to the interest of the Revenue" while not to be confused with the loss of tax will certainly include an erroneous order which results in a person not paying tax which is lawfully payable to the Revenue. [See Malabar Industrial Co. Ltd.]. (v) Every loss of tax to the Revenue cannot be treated as being "prejudicial to the interest of 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 ....
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.... in respect of which deduction has been claimed has been incurred and thereafter abandoning/withdrawing the same gives rise to the necessity of further enquiry in the interest of the Revenue. The notice issued under Section 69-C of the Act could not have been simply dropped on the ground that the claim has been withdrawn. We, therefore, are of the opinion that the learned C.I.T. was perfectly justified in coming to his conclusions insofar as the issue No. (iii) is concerned and in passing the impugned order on that basis. The learned Tribunal as well as the High Court, therefore, ought not to have interfered with the said conclusion. 22. In the light of the discussions that have preceded and for 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 Sec....
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....concerned, it means the record available at the time of examination by the Commissioner of Income Tax and not any material or record available subsequent to his examination or exercise of power under Section 263. Thus, any order passed by the AO in the assessment proceedings after the remand by the CIT cannot be looked upon and the argument made by the counsel for the revenue for relying upon the fresh assessment order made on 7.3.2004 under Section 263/143(3) of the Act cannot be accepted in view of the above provision of law. 27. In the present case, the Tribunal had recorded specific finding of fact that the assessing authority had examined each and every aspect of the case on which the remand order hinges, as such the remand 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 th....
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....O is unsustainable in law. It has been held by this Court that 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 as such will be erroneous and prejudicial to the interests of the revenue- Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT, [1973] 88 ITR 323 (SC). 10. In the instant case, the Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant- company was not 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. W....
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....directed. This Court refused to interfere in the findings of the Commissioner as the order of the ITO was prejudicial to the revenue. 18. Similarly, the case relied upon by the Department in case of Bhagwan Das (supra) also is not applicable in the present case, as in the case in hand the Assessing Officer after duly putting the assessee under notice and requiring him to produce all the relevant documents had passed the assessment order. 19. The argument of the counsel for the assessee that mere non-discussion and non-mentioning about the reply in the order of the assessing authority would not lead to an assumption that there was no application of mind and the order is erroneous. In Krishna Capbox (P.) Ltd. (supra), this Court held as under:- 9. The Tribunal further considered 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 ....
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....tself is not sufficient reason to brand the assessment order as erroneous and prejudicial to the interests of the Revenue and it was for the Commissioner to point out as to what error was committed by the Income-tax Officer in having reached to its conclusion and in the absence of which proceedings under Section 263 of the Act is not warranted. 12. In the case of Belal Nisa [1988] 171 ITR 643 the Patna High Court has held that where the Income-tax Officer had not carried out the necessary enquiry enjoined by section 143(1) of the Act the Commissioner is within his power in taking action in terms of Section 263(1) of the Act. Similar view has been taken in by the Patna High Court in the case of Smt. Kaushalya Devi [1988] 171 ITR 686. 14. As held by this Court in the case of Goyal Private Family Specific Trust [1988] 171 ITR 698, we are of the 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 Commis....