2018 (6) TMI 216 - AT - Income Tax

Validity of the revisionary order passed under section 263 - Held that - Inspite of clear explanation given by assessee, in its reply to the show cause notice, Ld.CIT did not give any findings on the issues but held that AO has completed assessment without proper enquiry and overlooking the vital aspects - thus we are of the opinion that the order of AO is neither erroneous nor prejudicial to the interest of Revenue. Since the twin conditions are not satisfied and since CIT has not given any specific instance of overlooking the vital aspects , we cannot uphold the order U/s. 263 - thus order u/s 263 is set aside and order of original assessment u/s 143(3) is restored. - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction of invoking revisionary proceedings under Section 263.
2. Short admission of hire charges.
3. Disallowance under Section 43B for delay in payment of PF.
4. Disallowance under Section 40(a)(ia) for non-deduction of tax on rent and professional fees.
5. Non-reporting of capital gains/loss on sale of shares.
6. Excess depreciation claims on vehicles and office equipment.
7. Discrepancies in balance sheet figures and Form 3CD.
8. Examination of share application money pending allotment.

Issue-wise Detailed Analysis:

1. Jurisdiction of Invoking Revisionary Proceedings under Section 263:
The assessee contested the jurisdiction of the Commissioner of Income Tax (CIT) in invoking revisionary proceedings under Section 263 of the Income Tax Act. The CIT believed that the Assessing Officer’s (AO) order was erroneous and prejudicial to the interests of the revenue due to insufficient inquiry on several issues.

2. Short Admission of Hire Charges:
The CIT observed a discrepancy between the hire charges reported in the Profit & Loss account (?21.37 lakhs) and the related party disclosures (?26.68 lakhs), suggesting a short admission of ?5.31 lakhs. The assessee clarified that the Profit & Loss account figure was exclusive of taxes, while the related party disclosures included taxes. The difference was attributed to service tax and VAT, which were duly paid and documented.

3. Disallowance under Section 43B for Delay in Payment of PF:
The CIT noted that the employee share of PF amounting to ?5,39,149 was remitted beyond the stipulated dates, proposing disallowance under Section 43B. The assessee argued that the payments were made within the financial year and before the due date for filing the return under Section 139(1), making the disallowance inapplicable as per amended provisions and judicial precedents.

4. Disallowance under Section 40(a)(ia) for Non-deduction of Tax on Rent and Professional Fees:
The CIT found that the assessee did not deduct tax on rent (?18,71,796) and professional fees (?5,30,000), proposing disallowance under Section 40(a)(ia). The assessee countered that the amounts were added back to income in the assessment year 2012-13, and deductions were claimed only for amounts where TDS was subsequently paid.

5. Non-reporting of Capital Gains/Loss on Sale of Shares:
The CIT observed that the balance sheet showed investments sold during the year without reporting capital gains or losses. The assessee clarified that profits from the sale of shares were included under ‘Other Income’ in the Profit & Loss account, and no capital loss was claimed in the tax return.

6. Excess Depreciation Claims on Vehicles and Office Equipment:
The CIT noted excess depreciation claims on vehicles (?5,17,244) and office equipment (?32,898). The assessee explained that the vehicles were used for hire, justifying the 30% depreciation rate. For office equipment, the assessee claimed 15% depreciation, consistent with past practices and the Income Tax Act.

7. Discrepancies in Balance Sheet Figures and Form 3CD:
The CIT identified variations in unsecured loans and total balance sheet figures between the balance sheet and Form 3CD. The assessee attributed the differences to presentation/classification under different heads and provided reconciliations, which the CIT did not address.

8. Examination of Share Application Money Pending Allotment:
The CIT questioned the lack of examination of share application money received (?75,29,73,245) pending allotment. The assessee provided details of the investor, compliance with the Companies Act, and documentation of allotment, which were not considered by the CIT.

Conclusion:
The Tribunal found that the AO conducted necessary inquiries and that the CIT did not provide specific findings on the issues raised. The Tribunal held that the AO’s order was neither erroneous nor prejudicial to the revenue’s interest, as the twin conditions for invoking Section 263 were not satisfied. Consequently, the Tribunal set aside the CIT’s order and restored the original assessment order dated 27-03-2015. The appeal by the assessee was allowed.

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