TaxTMI 
TaxTMI 
2025 (6) TMI 37
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....3(3) r.w.s. 144B dated 21.04.2021 passed by the AO is neither erroneous nor prejudicial to the interest of the revenue, the PCIT has erred on facts and in law in holding it to be otherwise, the order passed u/s 263, be quashed. 3. Because the order passed u/s 143(3) r.w.s. 144B was the result of the case being selected under CASS and the assessment being framed after deep scrutiny accompanied with detailed questionnaire, all the issues being examined, the PCIT has erred on facts and in law in holding the same to be erroneous and prejudicial to the interest of the revenue, the order passed u/s 263 is bad in law, be quashed. 4. Because the order passed u/s 143(3) r.w.s. 144B, having being passed after scrutiny of the accounts and the documents filed is neither a case of no enquiry nor lack of enquiry or inadequate enquiry, the order passed by the PCIT u/s 263 is bad in law, be quashed. 5. Because the PCIT has failed to make any independent enquiry which is the core mandate of section 263 nor has demonstrated as to how the order is erroneous or prejudicial to the Interest of revenue, failure to conduct independent enquiry by the PCIT makes the order passed u....
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....t is noticed that in Profit and Loss Account assessee company had debited the sum of Rs. 70,06,972/- towards commission and Rs. 23,04,000/- towards directors remuneration. The assessee was liable to deduct TDS u/s 194H and 194J of IT Act, 1961 but the same was not done. The copy of 3CD is also not placed in file. Hence, 30% of the above said amount Rs. 27,93,292/- [(30% of Rs. 93,10,972/-) (70,06,972/- + 23,04,000/-] was required to be disallowed and added back to the total income of the assessee. The AO has not examined the issue of deduction of TDS u/s 194H and 194J of IT Act, 1961 of the Act on payment of Rs. 93,10,972/- (70,06,972/- plus 23,04,000/-) on commission and directors remuneration. From the above, it is clear that the AO has failed to examine the issues/facts while completing the assessment. In view of above facts, the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue and is liable to be set aside under the provisions of section 263 of the I.T. Act 1961. You are hereby given an opportunity to explain as to why the assessment order passed by the Assessing Officer should not be set aside and a fresh order may....
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.... was also debited: Richa Gupta Rs. 6,00,000/- Pratima Gupta Rs. 3,60,000/- Om Gupta Rs. 3,60,000/- Total Rs. 13,20,000/- On perusal of case records, it is noticed that the FAO has not made necessary verification to ascertain genuineness of payment of salary to employee to the extent of Rs. 13,20,000/-. Before allowing the aforementioned expenses, the FAO was required to verify that services had been actually rendered by such person to whom salary was paid. Further, the FAO needed to ensure that the above employees were not covered under Section 40A(2)(b) of the I.T. Act, 1961. In view of the facts mentioned above, it is clear that the assessment order passed by AO is erroneous as well as prejudicial to the interest of the revenue. Accordingly, in exercise of the power u/s 263 of the IT Act, 1961 I set aside the order passed by the FAO u/s 143(3) r.w.s 144B of IT. Act, 1961 on 21.04.2021 for A.Y. 2018-19. The Assessing Officer is directed to pass a fresh assessment order, after considering all the facts of the case and the Observations above and after providing an opportunity of being heard to the assessee, within the time limit as given in the Incom....
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...., tax audit report. Name, PAN, Address of the party to whom the commission has been paid. e Copy of agreement, if any. Provide following details of sale/ purchase with respect fo which the commission has been paid: 1. Date of sale/ purchase 2. Name, PAN, address of the party to whom the sale/ purchase has been made. 3. Nature of the item 4. Quantity Para 7. Provided following details of the commission paid: e Basis for current year. Basis for last year. Date on which commission has been paid. Amount TDS deducted." 3. That in response to the query at SI. No.5 and 7, the assessee filed complete details vide letter e-filed on 31/01/2021 alongwith complete detail of party wise commission paid and tax deducted thereon together with date of deposit of TDS. A perusal of the detail would show that assessee company has deducted tax at source u/s 194H where ever applicable i.e. in those cases where commission paid to the party is less than Rs. 15,000/- no tax was deducted in accordance with provision contained in section 194H. The aforesaid details were placed at Annexure B of the repl....
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....Officer failed to examine the issue relating to deduction of tax on commission u/s 194H is contrary to facts on record. 6. That as regards Director's remuneration, it is submitted as follows: There are three directors in the company: (a) Mr. Lokesh Gupta (b) Mr. Krishan Gopal Gupta (c) Mr. Manoj Gupta 7. Out of the above three directors, only two Directors were paid salary as follows: Lokesh Gupta Rs. 8,40,000 Krishan Gopal Gupta Rs. 1,44,000 Total Rs. 9,84,000 The accounting system followed by the assessee in respect of payment of salary & wages is as follows: (i) Salary of directors and other employees (excluding Medical representatives) is debited under the head "salary & wages others' (ii) Salary of Medical representatives is debited under the head "Salary A/c (M.R.) others'. (iii) Incentives to Medical representatives is debited under the head Incentive. In the account 'salary & wages other" apart from salary to directors Rs. 9,84,000/-, salary of following employees was also debited: Richa Gupta Rs. 6,00,000/- Pratima Gupta Rs. 3,60,000/- ....
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....exure-8. 15. Presuming without admitting in any manner, even if tax was deductible u/s 194 and assessee has wrongly deducted tax u/s 192, then too no disallowance u/s 40a(ia) could be made as it is not a case of failure to deduct & deposit tax but a case of deduction under a wrong section In its aforesaid averments assessee places reliance on following decisions: (i) CIT v. 8.K. Takriwal (2014) 361 ITR 432 (Cal) (ii) Dish tndia TV India Ltd. v. ACIT (2017) 86 Taxmann.com 177 (Mum- Trib). Further still the deductees (director) have filed their Income Tax returns and as can be seen from their return of income (refer para 14 herein fore and Annexure-7) refund is due in their cases. Therefore also no disallowance could be made u/a 40a(ia) as assessee company is not deemed to be default under the first proviso to section 201(1) - kindly refer second proviso to section 40a(ia) as reproduced herein fore. 16. That a perusal of submissions at para 13 to 15 would show that on facts too no disallowance u/s 40a(ia) could be made. In any way it is clear that no prejudice has been caused to the revenue. 17. That the allegation that tax Audit ....
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....der of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the [TO is unsustainable in law. That where there are two views possible and Assessing Officer has taken one of the possible view, the order of Assessing Officer cannot be said to be erroneous or prejudicial to the interest of revenue as held by Hon'ble Apex Court in the case of CIT v. Max India Ltd. [2007] 295 {TR 282; Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC); CIT v. Embassy Brindavan Developers (2023) 153 taxmann.com 461 (SC). That if no enquiry was made by the Assessing Officer, the Commissioner would have jurisdiction u/s 263 but if enquiry was made by the Assessing Officer and the objection of the Commissioner is that such enquiry is not adequate the Commissioner would have no jurisdiction u/s 263, as held in the case of H....
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.... taxmann.com 315 (Delhi-Trib). The facts of the above case are that Assessee Company is engaged in providing telecommunication services. The company paid roaming charges to other telecom operators without deducting tax at source. It was the case of the appellant company that roaming payments made to other telecom operators for allowing use of their network were in nature of provision of standard facility which did not involve any human intervention, therefore such payments could not be classified as FTS. The Hon'ble Tribunal held that where the Assessing Officer has taken one of the plausible view after enquiry and the CIT has also not appreciated the fact that other telecom operators, to whom roaming charges have been paid, would have offered income arising from roaming charges received from the appellant to tax causing no prejudice to the revenue, therefore initiation of proceedings u/s 263 was bad in law and void ab inito. Assessee also places reliance on the observations of Hon'ble ITAT, Mumbai Bench in the case of Naryan Tatu Rane (TS-290 ITAT 2016 (Mum) (2016) 70 taxmann.com 227 wherein it was observed that explanation to Section 263(3) cannot be sai....
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....1) of RTI Act, 2005 dated 26.07.2024. 2. Copy of letter addressed to Jt. CIT, Range- 2(1) regarding notice u/s.263 of the Act, 1961 issued from ITO-2(3)(1), Kanpur. 3. Copy of Case Laws relied upon: 1. Ahlcon Parenterals (India) Ltd. vs. Pr. CIT [2024] 162 taxmann.com 759 (Delhi-Trib.) Order dt. May 21, 2024. 2. M/s. Arun Kumar Garg HUF vs. Pr. CIT ITA No. 339/Del/2018 Order dt. 08.01.2019. (B.4) On perusal of the records, it is found that the assessee had obtained a copy of letter dated 01.01.2024 of the Assessing Officer, containing the Assessing Officer's comments on the aforesaid submissions made by the assessee during the proceedings under section 263 of the Act in the office of the Ld. PCIT. The relevant portion of the aforesaid letter dated 01.01.2024 reproduced as under: - (C) At the time of hearing before us, the Ld. Counsel for the assessee drew our attention to the contents of paper books [already mentioned in foregoing paragraph no. (B.3)]. In particular, he drew our attention to the written submissions filed from the assessee's side in the office of the Ld. PCIT, in the course of proceedings under section 263 of the Act (relevant portion....
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.... as well as the assessee's aforesaid written submissions into consideration, and after providing reasonable opportunity to the assessee. The Ld. PCIT will be at liberty to drop action under section 263 of the Act, if in his view, revision of assessment order under section 263 of the Act is not warranted in the facts and circumstances of the case. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 18/03/2025. ============= Document 1 Government of India Office of the Income Tax Officer - 2[3][1] 15/295-A, Vaibhav Building, Civil Lines, Kanpur F.No. ITO-2(3)(1)/Knp./ reply u.s.263/2023-24/ 493 Dated : 01.01.2024 To The Jt. Commissioner of Income Tax Range-2(1). Kanpur. Sir. "Sub : Notice u/s.263 of the Income Tax Act, 1961 in the case of M/s. Future Pharma Pvt. Ltd. (PAN : AABCF3392E) , 119/471, Darshan Purwa, Kanpur for the Assessment year 2018-19 - Reg. Kindly refer to your goodself endorsement letter vide JCIT-2(1)/KNP/264/23-24/1347 dt 24/01/2024 received in this office on 25/01/2024 on the above mentioned subject. Vide this letter I have been directed to submit specific a....