2014 (3) TMI 1005 - AT - Income Tax

Revision u/s 263 - applicability of provisions of section 40(a)(ia) and 194H - Held that - As regards the applicability of provisions of section 40(a)(ia) and 194H of the Act we are convinced with the arguments made by the Ld. counsel before the Ld. CIT (Central) Ludhiana and before us that the TDS provisions under section 194H are applicable if the gross receipts exceeds Rs. 40 lacs in the immediately preceding year whereas in the present case the assessee s turnover is just Rs. 5.43 lacs and therefore TDS provisions u/s 194H of the Act cannot be made applicable in the impugned year. Accordingly the provisions of section 40(a)(ia) of the Act are not applicable. Therefore the ld. CIT (Central) Ludhiana is not justified in concluding that the order of the AO is erroneous or prejudicial to the interest of the revenue and the same is cancelled to that extent. As regards the surrender made there was surrender and statement u/s 132(4) of the assessee is available at PB-5 where categorically it was stated that the surrender was made in order to buy peace and to get immunity from penal action u/s 271(1)(c) or 276 of the Act. Therefore penal provisions cannot be made applicable in the facts and circumstances of the present case. As regards filing of the return within due date as prescribed under the Act we are convinced with the arguments made by the ld. counsel for the assessee Mr. S.S. Kalra CA that due date includes return filed under section 139(4) of the Act in view of the decisions referred to by the Ld. counsel for the assessee. Therefore on this account as well the Ld. CIT(Central) Ludhiana is not justified in concluding the order of the assessment as erroneous and prejudicial to the interest of the Revenue. Accordingly the order of the ld. CIT(Central) Ludhiana is cancelled on this account as well. As regards the levy of penalty under section 44AA & 44AB of the Act they are independent of assessment proceedings which could be levied independent of the assessment. Therefore the views of the ld. CIT(Central) Ludhiana to hold that assessment was made erroneous and prejudicial to the interest of the revenue cannot be upheld and the same is reversed. As regards the arguments made by the Ld. CIT(Central) Ludhiana that the AO has not made application of mind with regard to levy of penalty cannot be held good in view of our decision hereinabove. Accordingly on all the three counts the order of the Ld. CIT(Central) Ludhiana is directed to be cancelled - Decided in favour of assessee in part.

Summary

Issues involved:
1. Assessment order challenged under section 263 of the Income Tax Act.
2. Lack of opportunity for the assessee to offer comments on the AO's report.
3. Non-deduction of tax on commission payment and disallowance under section 40(a)(ia).
4. Non-initiation of penalty proceedings under section 271(1)(c) read with Explanation 5A.
5. Discrepancy in penalty initiation based on different standards for different assessees.
6. Applicability of TDS provisions, section 40(a)(ia), and penalty provisions under section 271(1)(c) and 44AA & 44AB.

Analysis:

1. The appeal challenged the assessment order under section 263 of the Income Tax Act, alleging it to be erroneous and prejudicial to revenue. The CIT (Central) Ludhiana issued a show cause notice, and the AO was directed to reframe the order in accordance with the Act.

2. The assessee raised concerns about lack of opportunity to comment on the AO's report, but the tribunal dismissed this ground as not pressed.

3. The issue of non-deduction of tax on commission payment of Rs. 47,925 and its disallowance under section 40(a)(ia) was a key point. The tribunal found that the TDS provisions did not apply to the assessee based on turnover, leading to the cancellation of the order on this ground.

4. Regarding non-initiation of penalty proceedings under section 271(1)(c) read with Explanation 5A, the assessee argued that an agreement with the department existed for non-levy of penalty, which was not considered. The tribunal agreed with the assessee's arguments and reversed the CIT's decision.

5. The tribunal noted discrepancies in penalty initiation based on different standards for different assessees, highlighting the need for consistent application of the law.

6. The tribunal analyzed the applicability of TDS provisions, section 40(a)(ia), and penalty provisions under section 271(1)(c) and 44AA & 44AB. It found in favor of the assessee, emphasizing that the orders were not erroneous or prejudicial to revenue, leading to the partial allowance of the appeal.

This detailed analysis of the judgment provides insights into the various issues raised by the assessee and the tribunal's findings on each, ensuring a comprehensive understanding of the legal aspects involved.