2016 (4) TMI 416 - AT - Income Tax

Revision u/s 263 - non invoking the provisions of section 194C - Held that - In the present case, the ld. CIT has not brought on record any material to point out that some specific payment on account of labour charges has been made on which TDS u/s. 194C has not been deducted at source and therefore, the decision of the ld. CIT cannot be based on the whims and caprice being a revisionary authority. As held by the Hon ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. (2009 (9) TMI 633 - Delhi High Court ) even if there was any enquiry, even inadequate, that would not by itself give any occasion to the Commissioner to pass orders u/s. 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of lack of enquiry that such a course of action would be open. In the present case, there is no lack of enquiry on the part of the Assessing officer and in such circumstances and facts of the case, the order of the Ld. CIT in revising the assessment u/s. 263 is a bad order and is liable to be quashed. - Decided in favour of assessee

Summary

Issues Involved:
1. Legality of the CIT's order under Section 263.
2. Justification for restoring the assessment order for re-examination.
3. Adequacy of the Assessing Officer's (AO) examination of accounts and details.
4. Sufficiency of reasons for the CIT's finding that the order under Section 143(3) was erroneous and prejudicial to the interest of revenue.
5. Evidence for TDS deductibility on labor charges.
6. Applicability of Section 194C regarding TDS on labor charges.
7. Applicability of Section 40(a)(ia) for disallowance due to non-deduction of TDS.

Detailed Analysis:

1. Legality of the CIT's Order Under Section 263:
The assessee argued that the CIT's order under Section 263 was illegal, arbitrary, and against the facts on record. The CIT had restored the assessment order to the AO for re-examination, but the assessee contended that the AO had already examined the accounts, bills, vouchers, and other details. The Tribunal found that the AO had indeed conducted adequate inquiries and verified all relevant documents, and thus, the CIT's order was not justified.

2. Justification for Restoring the Assessment Order for Re-examination:
The CIT restored the assessment order to the AO for re-examination, citing discrepancies in labor charges and the need for verification of TDS deductibility. The Tribunal noted that the AO had already examined the books of account and found no defects in the vouchers for labor payments. Therefore, the CIT's decision to restore the order for re-examination was not justified.

3. Adequacy of the AO's Examination of Accounts and Details:
The AO had asked for and examined the complete books of account, bills, and vouchers, including specific details of labor charges. The Tribunal confirmed that the AO had verified all payments made to laborers and found no discrepancies. The AO's examination was deemed adequate and thorough.

4. Sufficiency of Reasons for the CIT's Finding:
The CIT found the order under Section 143(3) to be erroneous and prejudicial to the interest of revenue due to the lack of verification of TDS deductibility on labor charges. However, the Tribunal held that the AO had conducted sufficient inquiries and found no defects, making the CIT's reasons insufficient to support the finding.

5. Evidence for TDS Deductibility on Labor Charges:
The CIT argued that TDS was deductible on labor charges, but the assessee contended that the payments were made directly to laborers, not subcontractors, and thus did not attract TDS under Section 194C. The Tribunal agreed with the assessee, noting that the AO had verified the payments and found them to be below the threshold for TDS applicability.

6. Applicability of Section 194C Regarding TDS on Labor Charges:
The Tribunal found that the payments to laborers did not exceed the limit specified under Section 194C, and therefore, TDS was not applicable. The AO had examined the books and vouchers and found that no individual payment exceeded the threshold, supporting the assessee's claim.

7. Applicability of Section 40(a)(ia) for Disallowance Due to Non-deduction of TDS:
The Revenue's appeal argued that the assessee failed to produce evidence to substantiate the claim that payments were made directly to laborers. The Tribunal, however, found that the AO had verified the payments and the CIT(A) had correctly deleted the disallowance under Section 40(a)(ia). The Tribunal upheld that the payments were made to individual workers, not subcontractors, and thus did not require TDS deduction.

Conclusion:
The Tribunal allowed the assessee's appeal, finding no error in the AO's order and deeming the CIT's order under Section 263 to be unjustified. The Tribunal dismissed the Revenue's appeal, confirming that the provisions of Section 194C and 40(a)(ia) were not applicable to the labor payments made by the assessee. The order was pronounced in the open court on 13.1.2016.