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2019 (10) TMI 978 - AT - Income TaxRevision u/s 263 - credit of TDS reflected in form No. 26AS - AO has allowed the credit of TDS reflected in Form 26AS in the account of Madhukar Kapur director of assessee company subject to verification, the credit of TDS has not been claimed by Madhukar Kapur - PCIT was of the opinion that the assessee does not fall within an of the four categories mentioned in clause (i) of Rule 37BA(2) red with section 199(3) of the Act - HELD THAT - From the bare reading of the above finding and the question of law and the ground urged before the ld. CIT(A), it is abundantly clear that the issue whether TDS credit in the account of Madhukar Kapur, as mentioned in Form 26AS , can be credit to the account of the assessee was not a subject matter of appeal before the ld. CIT(A). It is settled proposition of law that the finding recorded by the judicial and quasi judicial authorities are required to be read in the context of grounds urged before them and should not be read in isolation and out of the context. Thus, it is crystal clear that the subject matter of the proceedings u/s. 263 was not the subject matter of the proceedings before the ld.CIT(A) and in view thereof, the primary ground raised by the assessee is without merit and accordingly, the same is dismissed. Admittedly, there is no denial in the written submissions filed by the assessee before PCIT and before us that at the relevant time, the order was passed by the Assessing Officer, Rule 37BA was applicable. Furth3r, the assessee has failed to mention that the case of the assessee would fall in any of the ingredients mentioned in Rule 37BA, as reproduced by the ld. PCIT in para 2 of the impugned order. In view of the legal position, the opinion formed by the PCIT that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of revenue cannot be faulted. As is clear from the assessment order, the assessee was doing job works in the name of the company and there was separate job work done by the director Shri Madhukar Kapur. Therefore, the obligation to deduct TDS of the deductor was in respect of the payment made to the assessee and also to Madhukar Kapur separately. Similarly, the other decisions are also not applicable. As mentioned herein above, recently by the decision dated 20.08.2019, Hon ble Jurisdictional High Court had held that the order of the PCIT is required to be tested based on the material and the record available at the time of examining the assessment proceedings. Once the material now cited before us was not available with the Pr. CIT, therefore, we do not find any mistake in the order passed by the PCIT. Lastly, before the PCIT, it was contended by the assessee that the matter is sub-judice before the jurisdictional High Court by way of writ petition. As during the course of arguments, the assessee had not informed about the outcome of the proceedings initiated by the assessee before the Hon ble High Court. In our view, the adverse inference is required to be drawn as nothing has been brought on record de hors the pendency of writ petition before the High Court. We do not find any merit in the submissions of the assessee. Accordingly, both the appeals of the assessee are dismissed.
Issues Involved:
1. Incorrect interpretation of law and facts by the Principal Commissioner of Income Tax (Pr. CIT). 2. Jurisdictional error in invoking Section 263 of the Income Tax Act, 1961. 3. Erroneous and prejudicial nature of the Assessing Officer’s (AO) order under Section 143(3). 4. Allowance of Tax Deducted at Source (TDS) credit under Section 205 read with Section 199(1). 5. Overriding effect of Rule 37BA on Section 199(1). 6. Retrospective amendment to Rule 37BA and its implications. 7. Procedural requirements for filing declarations under Rule 37BA. 8. Excessive and incorrect demand notice due to non-allowance of credit for amounts collected from the assessee's bank account. Detailed Analysis: 1. Incorrect Interpretation of Law and Facts by the Pr. CIT: The assessee argued that the order by the Pr. CIT was against facts and law, based on wrong interpretations, and thus liable to be struck down. The Pr. CIT’s decision to invoke Section 263 was challenged on the grounds that the AO’s order was neither erroneous nor prejudicial to the interests of the revenue. 2. Jurisdictional Error in Invoking Section 263: The assessee contended that the Pr. CIT incorrectly invoked jurisdiction under Section 263 of the Income Tax Act, 1961. The AO had allowed TDS credit after due verification, and this decision was not prejudicial to the revenue. The Pr. CIT’s action was seen as a change of opinion rather than correction of an error. 3. Erroneous and Prejudicial Nature of the AO’s Order: The AO had allowed TDS credit reflected in Form 26AS of the director, Mr. Madhukar Kapur, in the hands of the assessee company, subject to verification that it was not claimed by Mr. Kapur. The Pr. CIT, however, believed this action was erroneous and prejudicial to the revenue, as the assessee did not fall within the categories mentioned in Rule 37BA(2) read with Section 199(3). 4. Allowance of TDS Credit Under Section 205 Read with Section 199(1): The assessee argued that the AO was correct in allowing TDS credit as per Section 205 read with Section 199(1). The income on which TDS was deducted was accounted for in the hands of the assessee, and thus the credit should be allowed. 5. Overriding Effect of Rule 37BA on Section 199(1): The assessee contended that Rule 37BA could not override the provisions of Section 199(1). The Pr. CIT’s reliance on the conditions of Rule 37BA was challenged, arguing that Section 199(1) clearly allows TDS credit to the person in whose income the deduction was made. 6. Retrospective Amendment to Rule 37BA: The assessee highlighted that Rule 37BA was amended retrospectively on 01.11.2011. The Pr. CIT’s reliance on the non-existent four conditions of Rule 37BA was erroneous. The amendment should be considered procedural and thus applicable retrospectively. 7. Procedural Requirements for Filing Declarations Under Rule 37BA: The assessee argued that filing a declaration under Rule 37BA is a procedural requirement and can be done at any time, as no specific time limit or form was prescribed. This procedural aspect should not affect the substantive right to claim TDS credit. 8. Excessive and Incorrect Demand Notice: The demand notice was deemed excessive and incorrect as it failed to allow credit for amounts collected from the assessee's bank account. The assessee sought rectification of this error. Judgment Analysis: On Jurisdiction and Erroneous Nature: The tribunal examined whether the AO’s order was erroneous and prejudicial to the revenue. It was noted that the AO had allowed TDS credit after proper verification, and this constituted a possible view supported by various case laws. The tribunal emphasized that an order cannot be deemed erroneous if the AO has taken a legally permissible view. On Rule 37BA and Section 199(1): The tribunal acknowledged that Rule 37BA, as amended, should be applied retrospectively as it is procedural. However, the assessee failed to demonstrate that their case fell within the conditions of Rule 37BA. Thus, the Pr. CIT's interpretation was upheld. On Procedural Requirements: The tribunal agreed that procedural requirements for filing declarations under Rule 37BA should not override substantive rights. However, the assessee’s failure to meet these procedural requirements justified the Pr. CIT’s decision. On Demand Notice: The tribunal found merit in the assessee’s contention regarding the excessive demand notice and directed appropriate rectification. Conclusion: The tribunal upheld the Pr. CIT’s invocation of Section 263, confirming that the AO’s order was erroneous and prejudicial to the revenue. The appeals by the assessee were dismissed, and the tribunal emphasized the importance of adhering to procedural requirements while claiming TDS credits. The decision reinforced the principle that procedural amendments are retrospective unless explicitly stated otherwise.
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