2021 (7) TMI 443 - AT - Income Tax

Revision u/s 263 - penalty paid for late payment of tax inadvertently omitted to be disallowed in the computation of total income - HELD THAT - In this case, the PCIT took up the issue u/s. 263 of the Act after giving due opportunity of being heard to the assessee. He set aside the order of AO and directed him to examine the aforesaid issues and to redo the assessment afresh. At the time of hearing, it is pointed out by the ld. AR that the assessee is only challenging the issues on merits which is not decided by the ld. PCIT and he has only remitted the matter back to the AO for fresh consideration in his order u/s. 263. As such, the ld. AR conceded that the issue raised by the assessee is pending before the AO for passing consequential order to the order passed u/s. 263 of the Act. He submitted that the appeal may be dismissed, as not pressed, with liberty to challenge the issues on merits, after passing the consequential order by the AO. Appeal by the assessee is dismissed as withdrawn.

Issues:
1. Whether the assessment order passed by the assessing authority is erroneous and prejudicial to the interests of revenue under section 263 of the Income-tax Act, 1961.
2. Applicability of TDS on commission paid to a non-resident.
3. Treatment of interest on delayed payment of taxes in the profit and loss account.
4. Disallowance of expenditure towards entry tax.
5. Disallowance of interest payable under section 201(1A).

Analysis:
1. The Principal CIT observed that the assessment concluded by the AO for the assessment year 2015-16 was erroneous and prejudicial to the revenue's interest due to various discrepancies. The PCIT identified issues such as non-deduction of tax on commission payments, interest on delayed tax payment not disallowed, entry tax expenditure not treated correctly, and interest payments not disallowed in the computation.
2. The PCIT raised concerns regarding the applicability of TDS on commission paid to a non-resident vendor, emphasizing the need for compliance with section 195 of the Income-tax Act. The PCIT referred to a ruling indicating that income deemed to accrue or arise in India should be subject to TDS, suggesting a prima facie case for disallowance under section 40(a)(i).
3. Regarding interest on delayed payment of taxes, the assessee argued that the amount was compensatory in nature and eligible for deduction under section 37. However, the PCIT highlighted the necessity for the AO to consider the Supreme Court's decision in Bharat Commerce & Industries Ltd. v. CIT, emphasizing the nature of the interest payment.
4. The treatment of expenditure towards entry tax was another issue raised, with the PCIT directing the AO to verify and disallow the entry tax and interest on entry tax related to capital assets, irrespective of the year incurred. The PCIT emphasized the need to capitalize such expenses.
5. The PCIT concluded that the AO failed to conduct adequate verification on the identified issues, indicating a lack of application of mind. Consequently, the assessment was set aside for the AO to re-examine the issues and redo the assessment, ensuring a reasonable opportunity for the assessee to be heard.

Conclusion:
The Appellate Tribunal dismissed the appeal by the assessee as withdrawn, as the issues raised were pending before the AO for further consideration following the order under section 263 of the Income-tax Act. The decision highlighted the importance of thorough assessment procedures and compliance with tax regulations to safeguard the revenue's interests and ensure accurate tax computations.

← Previous Next →