2019 (8) TMI 1536 - AT - Income Tax

Revision u/s 263 - non-deduction of tax at source u/s 195 on payments - HELD THAT - Assessee has deducted tax at source on payment. Though the details in respect of the same was provided to the CIT(A) the same was not considered. The issue has been duly examined by the AO during the original assessment proceeding but in the absence of any reflection of the same in the order passed by the AO would not lead to a conclusion that the order of Learned AO calls for interference by the CIT u/s 263 of the Act. The alternative submission made by the Learned assessee s counsel is this respect that when two views are possible as regards a particular issue and the AO adopts either of two such views then jurisdiction u/s 263 cannot be invoked by the Learned CIT is also acceptable. We take inspiration from the judgment passed in the matter of Malabar Industrial Co. Ltd. as been relied upon in this respect.Hence, we find that order impugned u/s 263 cannot satisfy any of the conditions envisaged in the provision of law as discussed above. Fulfillment of twin conditions so as to the claim of the order being erroneous or prejudicial to the interest of Revenue also fails as already been discussed by us hereinabove. Thus the order impugned does not justify/fulfill any of the conditions within the four corners of law and hence liable to be quashed. Resultantly, the impugned addition upon invocation of jurisdiction u/s 263 of the Act by the Learned CIT is deleted. Assessee s appeal is allowed.

Summary

Issues:
1. Under-assessment of service income based on TDS
2. Disallowance of provision for non-achievement of targets
3. Failure to deduct TDS on certain payments leading to under-assessment of income

Issue 1: Under-assessment of service income based on TDS
The appeal was filed against an assessment order that found discrepancies in the service income declared by the assessee. The Principal CIT identified under-assessment due to TDS claims and refunds, resulting in an under-assessment of income. The CIT invoked jurisdiction under section 263 to rectify the issues. The assessee argued that the TDS discrepancies were due to timing differences and provided detailed explanations. However, the CIT found the assessment order erroneous and directed a fresh assessment. The ITAT analyzed the case, considering the arguments presented by both parties. The ITAT concluded that the original assessment adequately addressed the TDS issues, and the CIT's invocation of section 263 was not justified. The ITAT ruled in favor of the assessee, deleting the addition made under section 263.

Issue 2: Disallowance of provision for non-achievement of targets
The assessment order disallowed a provision for non-achievement of targets, leading to an under-assessment of income. The CIT raised this issue under section 263, questioning the AO's decision. The assessee argued that the AO had already examined this provision during the original assessment, and the CIT cannot interfere based on differing views. The ITAT reviewed the case and found that the AO's decision was valid, considering the examination of the provision during the original assessment. The ITAT relied on legal precedents to support its decision. Consequently, the ITAT ruled in favor of the assessee, rejecting the CIT's addition under section 263.

Issue 3: Failure to deduct TDS on certain payments
The CIT identified a failure to deduct TDS on specific payments, resulting in under-assessment of income. The CIT invoked section 263 to rectify this issue. The assessee provided evidence of TDS deductions and argued that the AO had examined this during the original assessment. The ITAT reviewed the evidence and found that the TDS issue had been adequately addressed during the original assessment. The ITAT emphasized the importance of fulfilling the twin conditions for invoking section 263. Relying on legal judgments, the ITAT concluded that the CIT's invocation of section 263 was not justified. Therefore, the ITAT ruled in favor of the assessee, deleting the addition made under section 263.

In conclusion, the ITAT allowed the assessee's appeal, ruling in their favor on all issues raised in the appeal. The ITAT found that the CIT's invocation of section 263 was not justified, and the additions made under that section were deleted.