2015 (2) TMI 317 - AT - Income Tax

Revision u/s 263 - non deduction of tds on sales commission including impugned payment to Australian party - Held that - AO has issued a notice u/s 142(1) along with details questionnaire asking the assessee to file all the documentary evidence for substantiating its claim. In response to the same assessee filed all the details along with documentary evidence before the AO on various dates fixed by the AO and the AO has examined the same thoroughly and completed the assessment by taking a possible view as per law. Meaning thereby the AO has made detailed enquiries about the sales commission subject to TDS during the course of assessment proceedings including the impugned payment of ₹ 1822206/- to the Australian party. It is evident from the letter dated 29/04/2011 by the assessee to the AO furnished all the details and evidences. The assessee has also filed all the evidences before us in the shape of small paper book along with case law supporting the argument advanced by the ld. Counsel for the assessee. We are of the considered view that where the assessee had made an enquiry before completion of assessment, the same could not be set aside for the reasons of inadequate enquiry. Ld. CIT has set aside the assessment of the assessee only for the reason that AO has not verified all the facts and evidences submitted by the assessee as well as material on record. In our considered view the finding given by the ld. CIT in the impugned order is not as per law and is contrary to the records of the assessee s case and is not sustainable in the eye of law because as discussed above, the AO had made an enquiry before completion of assessment by calling the explanation along with documentary evidence on the issue in disputes from the assessee. Therefore, the impugned order is deserved to be cancelled. - Decided in favour of assessee.

Summary

Issues:
1. Assessment under section 263 of the Income Tax Act, 1961 for A.Y. 2009-10.
2. Addition of commission amount without TDS deduction.
3. Validity of assessment order under section 143(3).
4. Compliance with notice u/s 142(1) and furnishing of details by the assessee.
5. Adequacy of enquiry conducted by the Assessing Officer.

Analysis:

1. Assessment under section 263:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals)-VIII, New Delhi for A.Y. 2009-10. The Commissioner found that the assessment completed under section 143(3) was prejudicial to the interest of Revenue due to non-deduction of TDS on a commission amount paid to an Australian party. The Commissioner directed the Assessing Officer to make a fresh assessment after verifying all facts and evidences submitted by the assessee.

2. Addition of commission amount without TDS deduction:
The Commissioner observed that TDS was not deducted on a commission amount paid to an Australian party, which should have been added back to the total taxable income of the assessee as per section 40A(ia) of the Income Tax Act, 1961. The Commissioner held that the assessment completed under section 143(3) was prejudicial to the Revenue's interest, leading to the cancellation of the assessment order.

3. Validity of assessment order under section 143(3):
The Assessing Officer disallowed a portion of expenses for incomplete vouchers/bills and completed the assessment under section 143(3) at a total income of Rs. 891,774. The Tribunal noted that the Assessing Officer had called for explanations and documentary evidence from the assessee before completing the assessment. The Tribunal found that the assessment was made after detailed enquiries and was in accordance with the law.

4. Compliance with notice u/s 142(1) and furnishing of details by the assessee:
The assessee filed all details and documentary evidence in response to notices issued by the Assessing Officer under section 142(1). The Tribunal observed that the assessee diligently provided all required details and evidences, including a letter dated 29/04/2011 containing comprehensive information related to expenses and income.

5. Adequacy of enquiry conducted by the Assessing Officer:
The Tribunal concluded that the Assessing Officer had adequately examined the issues in dispute, including the commission subject to TDS and payments made to the Australian party. The Tribunal found that the Assessing Officer's enquiry was thorough, as evidenced by the details and evidences submitted by the assessee. The Tribunal held that the Commissioner's decision to set aside the assessment for inadequate enquiry was not in accordance with the law and, therefore, cancelled the impugned order.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of a thorough assessment process and compliance with legal provisions during income tax assessments.