2015 (11) TMI 1777 - AT - Income Tax

Revision u/s 263 - Short deduction of TDS - payment paid to Amin Stone towards hire charges of JCB Machine - TDS u/s 194C or 194I - HELD THAT - AO has requisitioned details of expenses mentioned u/s 40(a)(ia) along with details of deposit of amount of the TDS. Vide letter dated 10-8-2009 vide para 15 the assessee has mentioned that the details were enclosed therewith. The details were enclosed running into four pages submitted in paper book page Nos. 16 to 19. It cannot be said that the AO had not made necessary enquiries and the details were not furnished. Hence this plank of learned CIT s argument that necessary enquiry is not made is not sustainable. CIT s assuming jurisdiction is that the rate of TDS applied is short. We find that this issue is duly covered in the case of DCIT vs. M/s S.K. Tekriwal 2011 (10) TMI 10 - ITAT, KOLKATA and DCIT vs. M/s Chandabhoi and Jassobho 2011 (7) TMI 956 - ITAT MUMBAI wherein as held that section 40(a)(ia) is attracted in case of non deduction of tax and not where there is application of different rates and hence short deduction of tax. These decisions were cited before the learned CIT who has chosen to ignore the same. In our considered opinion, this approach of the learned CIT is not proper. Judicial discipline mandates that we adhere to the doctrine of stare decisis . Since the issue is covered in favour of the assessee, the jurisdiction assumed by the learned CIT is not proper and legal. - Decided in favour of assessee.

Summary

Issues:
1. Correct application of TDS provisions under sections 194C and 194I of the I.T. Act.
2. Jurisdiction of the Commissioner of Income Tax under section 263 of the I.T. Act.

Analysis:

Issue 1: Correct application of TDS provisions under sections 194C and 194I of the I.T. Act:
The case involved a dispute regarding the correct application of TDS provisions under sections 194C and 194I of the I.T. Act concerning machinery hire charges. The Commissioner of Income Tax (CIT) observed that the assessee had debited the profit and loss account with a specific amount towards machinery hire charges. It was noted that tax was deducted at a rate of 2.24% under section 194C instead of the correct section 194I. The CIT further mentioned that for a significant amount, no details were submitted, leading to a potential disallowance under section 40(a)(i)(a). The assessee argued that TDS was deducted for some payments and contended that section 40(a)(ia) does not apply in cases of short deduction of TDS. However, the CIT found discrepancies in the submissions made by the assessee, leading to the conclusion that the AO's order was erroneous and prejudicial to the revenue's interest. The CIT set aside the order with directions for a fresh assessment.

Issue 2: Jurisdiction of the Commissioner of Income Tax under section 263 of the I.T. Act:
The appeal challenged the CIT's exercise of jurisdiction under section 263 of the I.T. Act. The Appellate Tribunal noted that the AO had indeed made necessary inquiries and the details were furnished by the assessee. Additionally, the Tribunal referred to previous ITAT decisions that clarified section 40(a)(ia) is applicable in cases of non-deduction of tax, not in instances of short deduction. The Tribunal criticized the CIT for ignoring these decisions and failing to adhere to the doctrine of stare decisis. Consequently, the Tribunal quashed the CIT's order under section 263 of the I.T. Act, ruling in favor of the assessee and allowing the appeal.

In conclusion, the Tribunal's detailed analysis of the issues surrounding the correct application of TDS provisions and the jurisdiction of the CIT under section 263 of the I.T. Act resulted in the appeal being allowed in favor of the assessee.