2017 (8) TMI 959 - HC - Income Tax

Revision u/s 263 - requirement of deducting tax at source while the petitioner made remittances of translation charges to the recipient who were non-residents - Held that - In facts of the case, where the Commissioner of Income Tax has merely issued a notice for taking the order of assessment in revision, we are not inclined to thrash out all these issues leaving it open for both sides to raise all contentions before the Commissioner and thereafter, take the matter further as may be found necessary. At a stage, where we are dealing only with the notice of the Commissioner taking the order of assessment in revision, we would be well advised not to enter into such legal arena and lay down any proposition of law. This is not to suggest that in a given case, the Commissioner s notice would not be amenable to scrutiny by the High Court in a writ jurisdiction if it can be demonstrated ex facie that the Commissioner lacks jurisdiction and it would therefore, not be proper to subject the assessee to the entire gamut of submitting to the jurisdiction of the Commissioner in exercise of his revisional powers. We may refer to the decision of Supreme Court in case of Commissioner of Income Tax and ors vs. Chhabil Dass Agarwal 2013 (8) TMI 458 - SUPREME COURT in which the Court observed that barring some exceptions, the rule would be that the jurisdiction under Article 226 of the Constitution should not be invoked where there is availability of an equally efficacious alternative remedy under the statute. It was emphasized that this would be more so in taxation statute where the statute statute provides complete machinery for assessment, re-assessment of tax, imposition of penalty and appeals.

Summary

Issues:
Challenge to notice seeking revision of assessment under section 263 of the Income Tax Act for the assessment year 2011-12 due to non-deduction of tax at source on translation charges paid to non-resident recipient.

Analysis:

Issue 1: Non-deduction of Tax at Source
- The petitioner, a company engaged in computer-based training and software development, incurred substantial translation charges paid directly to a foreign agency without deducting tax at source.
- The Assessing Officer conducted detailed inquiries and accepted the explanation provided by the petitioner's auditor, certifying that no TDS was required as the service was provided outside India by a non-resident.
- The Commissioner issued a notice for revision, citing retrospective amendment in section 195 of the Act, requiring TDS on such payments to non-residents.
- The petitioner argued that the Assessing Officer's decision was plausible, as evidenced by subsequent acceptance of similar claims in later years by the Commissioner (Appeals).
- Legal precedents were cited to emphasize that when two plausible views exist, the Commissioner should not revise the Assessing Officer's order.

Issue 2: Jurisdiction of Commissioner for Revision
- The Commissioner's power of revision under section 263 is limited to cases where the Assessing Officer's order is both erroneous and prejudicial to revenue.
- Legal precedents highlighted the necessity for the Commissioner to satisfy these twin conditions before revising an assessment.
- The Commissioner's reliance on the retrospective amendment in section 195 was contested by the petitioner, arguing that the statutory change occurred after the payments were made, raising questions about its applicability.

Conclusion:
- The High Court dismissed the petition, leaving all contentions open for further consideration by the Commissioner.
- Emphasized the availability of alternative remedies under the tax statute, discouraging the invocation of Article 226 of the Constitution unless necessary.
- The Court refrained from delving into the legal complexities of the case at the notice stage, advising both parties to present their arguments before the Commissioner for a comprehensive review.

This detailed analysis encapsulates the intricacies of the legal judgment, focusing on the issues of non-deduction of tax at source and the jurisdiction of the Commissioner for revision under the Income Tax Act.