2018 (12) TMI 1878 - AT - Income Tax

Revision u/s 263 - AO has not made inquiry in regards to receipt shown in service tax return of the assessee vis a vis as per P L A/C and that the foreign Principals have paid taxes in India u/s 172 of the Act or not - HELD THAT - We have noted that in the assessment order the Assessing Officer has not discussed the issue which is sought to be revised by ld. PCIT. However the Assessing Officer during the assessment vide its notice dated 18.12.2015 raised the specific enquiry vide question no. 19 which we have reproduced below 19. Please file copies of service tax return along with the enclosures. It is observed that higher turnover reported in service tax return than the IT Return please reconciles. Assessee furnished re-conciliation income as per income tax return as well as service tax return. The assessee also furnished the complete details of service tax return. The assessee furnished Note on return filed with service tax authority and has clearly mentioned that assessee is an agent of various foreign shipping lines. The assessee on behalf of the principle collected the charges for shipping from consumer which are freight and terminal handling charges out of freight and terminal handling charges no handling charges is liable to be service tax and freight is exempt from payment of service tax. The service tax is collected and paid on such income on behalf of the agent. Therefore the income of principle is included in the service tax return of assessee. The assessee is an agent earned fixed percentage of commission on export and import on freight. The assessee also collected documentation and other charges which service is taxable income. Thus we have seen that the assessee has furnished complete details to the Assessing Officer. The Assessing Officer after his satisfaction and without mentioning anything about the issue accepted the contention of assessee. Hon ble jurisdictional High Court in CIT vs. Gabriel India 1993 (4) TMI 55 - BOMBAY HIGH COURT held that when the Income Tax Officer (ITO) made enquiries with regard to the expenditure incurred by assessee. The assessee furnished detailed explanation in this regard by a letter in writing. All are part of the record of the assessee and the claim was allowed by ITO on being satisfied with the explanation of assessee. Such decision of ITO cannot be held to be erroneous in his order; he has not made elaborate discussion in this regard. Also in SHRI ASHISH RAJPAL 2009 (5) TMI 18 - DELHI HIGH COURT held that merely because the assessment order does not refer to query raised by Assessing Officer during the scrutiny and response of the assessee thereto it cannot be said that there was no enquiry and the assessment order is erroneous and prejudicial. As we have already noted and referred that the Assessing Officer made specific enquiry with regard to service tax return and receipt of income in the original assessment and accepted the same therefore in our view the order passed by assessing officer is not erroneous. Therefore the precondition for exercise of power under section 263 is not fulfilled. - Decided in favour of assessee.

Summary

Issues:
1. Revision order under section 263 of the Income Tax Act
2. Whether the assessment order was erroneous and prejudicial to the interest of revenue

Issue 1: Revision order under section 263 of the Income Tax Act

The appeal by the assessee was directed against the order of the Principal Commissioner of Income-tax-5, Mumbai, dated 28th February 2018, passed under section 263 of the Income Tax Act for Assessment Year 2013-14. The revision order was challenged on the grounds that the Assessing Officer had already examined and verified the details during the original assessment proceeding. The assessee contended that the revision under section 263 was not justified as complete details of foreign remittance, reconciliation of accounts, and various receipts were provided to the Assessing Officer. The assessee further argued that a similar issue in the preceding assessment year had been accepted by the revenue, indicating consistency in treatment. The Tribunal noted that the ld. PCIT had not provided any specific findings on how the original order was erroneous or prejudicial to the interest of revenue. The Tribunal concluded that the revision order under section 263 was unjustified and set it aside.

Issue 2: Whether the assessment order was erroneous and prejudicial to the interest of revenue

The assessee, engaged in the business of Shipping and forwarding agent, filed its return of income for Assessment Year 2011-12, which was selected for scrutiny. The Assessing Officer made adhoc disallowances in the assessment order. The Principal Commissioner, before revising the assessment order, raised several issues requiring verification, including TDS deductions, tax exemptions for principals, and payment details. The assessee provided detailed responses, stating that the principals had paid taxes under section 172 of the Income-tax Act and had not applied for exemption certificates. The Principal Commissioner, however, deemed the assessment order erroneous due to lack of inquiry by the Assessing Officer and set it aside for a fresh assessment after detailed inquiry. The Tribunal held that the Assessing Officer had indeed made specific inquiries during the original assessment, and the assessee had provided comprehensive details. Citing legal precedents, the Tribunal concluded that the original assessment order was not erroneous, as the Assessing Officer had considered and accepted the explanations provided by the assessee. Therefore, the Tribunal found that the revisionary jurisdiction under section 263 was not warranted, and the order passed by the Principal Commissioner was set aside, allowing the appeal of the assessee.

This comprehensive analysis of the judgment highlights the key issues involved, the arguments presented by the parties, and the Tribunal's reasoning in arriving at its decision to set aside the revision order under section 263 of the Income Tax Act.