2017 (11) TMI 1076 - AT - Income Tax

Revision u/s 263 - some payments were made without making the TDS - Held that - From the plain reading of order u/s 263 it is clear that the assessee had accepted that some payments were made without making the TDS and assured to pay tax on such amount and the CIT directed to verify all such payments liable for TDS and apply the provisions of section 40(a)(ia) of I.T.Act which shows that the Ld.CIT has not directed the AO to make the addition of the entire sum of ₹ 33,63,840/- and the assessee also did not accept for such addition. In the consequential order, the assessing officer has verified the payments made for binding charges, computer charges and freight charges etc. and given a finding that the provisions of section 40(a)(ia) are not applicable for binding charges, computer maintenance and printing charges and only in the case of freight charges 40(a)(ia) is applicable to the extent of ₹ 2,56,961/- for non deduction of tax at source. Since the assessing officer has followed the instructions correctly, there is no case for making revision u/s 263 and the Ld.Pr.CIT misunderstood the direction given by the Ld.CIT u/s 263. Therefore, the order passed by the AO u/s 143(3) r.w.s. 263 is neither erroneous nor prejudicial to the interest of the revenue - Decided in favour of assessee.

Summary

Issues:
1. Discrepancies in sales and VAT amounts declared in tax returns and accounts.
2. Non-deduction of tax at source and discrepancies in VAT payments.
3. Assessment order challenged under section 263 due to errors in the original assessment.

Analysis:

Issue 1: Discrepancies in Sales and VAT Amounts
The appeal was filed against the order of the Principal Commissioner of Income Tax for the assessment year 2008-09. Discrepancies were noted in the sales figures declared in VAT returns compared to income tax returns, along with differences in VAT payments. The CIT observed variations in the amounts declared in the Profit & Loss account and VAT returns, leading to a revision under section 263.

Issue 2: Non-Deduction of Tax at Source and VAT Payment Discrepancies
The CIT found discrepancies related to non-deduction of tax at source and discrepancies in VAT payments. The assessment was deemed erroneous and prejudicial to the revenue's interest, leading to a direction for reassessment. The assessing officer was instructed to verify payments liable for TDS and apply relevant provisions of the Income Tax Act.

Issue 3: Challenge under Section 263
The Principal Commissioner initiated a revision under section 263, noting that the assessing officer did not comply with earlier directions. Disagreements arose regarding the treatment of expenses under section 40(a)(ia), specifically concerning printing, binding charges, and freight charges. The CIT directed the AO to redo the assessment due to non-compliance with the initial directions.

Conclusion:
The Tribunal, after considering arguments from both parties, found that the assessing officer correctly followed the CIT's directions regarding TDS and expenditure examination. The CIT's misunderstanding of the directions led to the erroneous revision under section 263. Consequently, the Tribunal set aside the CIT's order and allowed the appeal of the assessee, concluding that the assessment order was neither erroneous nor prejudicial to the revenue's interest.