2020 (2) TMI 711 - AT - Income Tax

Revision u/s 263 - TDS u/s 195 - income admitted by the NRI - non- deduction of tds - o rder u/sec. 201(1) 201(1A) - HELD THAT - Assessee has filed the details before the Assessing Officer by stating that NRI has offered the entire income for taxation by filing return of income before the Assessing Officer (International Taxation), Nellore and therefore treating the assessee is in default is not correct and requested to rectify the order. By considering the explanation of the assessee, the Assessing Officer is of the opinion that NRI has already filed his return of income by offering the income for taxation, therefore he rectified his order on 14/06/2018. We find that ld.Commissioner is not able to establish what the prejudice is caused to the Revenue in the rectification order passed by the Assessing Officer. To invoke section 263, both the conditions have to be fulfilled i.e. order passed by the Assessing Officer not only erroneous but also prejudicial to the interest of the Revenue. In the present case, ld.Commissioner not able to establish that the order passed by the Assessing Officer is prejudicial to the interest of the Revenue, therefore it is not a fit case to invoke section 263. Accordingly, the order passed by the ld.Commissioner is reversed and restore the order of the Assessing Officer. - Decided in favour of assessee

Summary

Issues:
1. Non-deduction of TDS on property purchase from a Non-Resident.
2. Rectification of order u/sec. 201(1) & 201(1A) by the Assessing Officer.
3. Validity of the order passed by the Commissioner u/sec. 263.
4. Application of section 263 - erroneous and prejudicial to the interest of the Revenue.
5. Similarity of facts in multiple appeals.

Detailed Analysis:
1. The case involved the purchase of an immovable property from a Non-Resident where TDS was not deducted as required under section 195 of the Income Tax Act. The Assessing Officer passed an order u/sec. 201(1) & 201(1A) treating the assessee as in default for non-deduction of TDS.
2. The assessee filed for rectification of the order by providing details that the Non-Resident had already offered the income for taxation by filing a return of income before the relevant authority. The Assessing Officer, after considering the explanation, rectified the order on 14/06/2018, stating that the assessee need not pay any tax.
3. The Commissioner, exercising powers under section 263, set aside the rectification order, deeming it erroneous and prejudicial to the interest of the Revenue. The Commissioner held that the original order passed by the Assessing Officer was valid, as non-deduction of TDS made the assessee liable to be treated as in default.
4. The Tribunal, upon appeal, found that the Commissioner failed to establish any prejudice caused to the Revenue by the rectification order. To invoke section 263, both conditions of an order being erroneous and prejudicial to the Revenue must be met. As the Commissioner could not establish the latter, the Tribunal reversed the Commissioner's order and restored the Assessing Officer's order.
5. In other similar appeals, the Tribunal applied the decision from the main appeal, stating that the facts were analogous. Consequently, all appeals filed by the assessees were allowed, with the order pronounced on 22nd January 2020.