2022 (8) TMI 124 - AT - Income Tax

TDS u/s 194J - Disallowance u/s. 40(a)(ia) - short deduction of tds - payments on account of Training and Refresher - HELD THAT - With reference to the order u/s. 201(1) there has been non/short deduction of tax at source by the assessee, which is required to be disallowed u/s. 40(a)(ia). It may be that the order u/s. 201(1) dated 28/03/2014, as indeed would be the case, came to the notice of the AO after the passing of the order u/s. 143(3) on 28/03/2014. Even so, unless the reason recorded informs as to what fact had been misstated or misrepresented by the assessee in its reply dated 27/03/2014, and on the basis of which no disallowance, save for Rs. 4,96,350, was made, i.e., with reference to the facts mentioned or found in sec. 201(1) order, there could be no valid reason to believe escapement of income in law, except of course where there is a change in law retrospectively or a judicial decision clarifying the law comes to the notice of the AO, impinging clearly on facts of the case. Needless to add, no such fact or statement of law is stated in the reason/s recorded, on the basis of which jurisdiction to reassess stands assumed by the assessing authority. Why, even the amount disallowed in assessment has been included as income escaping assessment. As fairly not disputed before us by the Ld. CIT-DR, it is in our view a clear case of mechanical recording of reasons u/s. 148(2), and lack of application of mind, both by the AO as well as by the authority approving the same u/s. 151, or at best a change of opinion consequent to a review. We, accordingly, hold the impugned order as bad in law for want of jurisdiction, accepting Ground Nos. 1 to 4 of the assessee's CO, i.e., on which the arguments and pleadings were made before us.

Summary

Issues:
Appeal and Cross Objection against CIT(A)'s Order dated 21/09/2020 for AY 2011-12.

Analysis:
The case involved an Appeal and a Cross Objection by the Revenue and the Assessee against the CIT(A)'s Order. The initial assessment was completed on 28/03/2014, with adjustments including disallowance under section 40(a)(ia). The AO passed an order holding the assessee as an assessee-in-default for payments without deduction of tax at source. A notice u/s. 148(1) was issued on 29/03/2018, leading to reassessment proceedings. The CIT(A) allowed relief to the assessee on merits but dismissed the legal grounds. The Revenue challenged the relief granted, while the assessee contested the non-acceptance of its legal grounds. The Tribunal found the reopening of assessment to lack a valid basis, as the AO failed to specify any new material or misrepresentation by the assessee. The order was deemed bad in law due to a mechanical recording of reasons under section 148(2) and lack of application of mind. Consequently, the assessee's Cross Objection was allowed, and the Revenue's appeal was dismissed as infructuous/academic. The judgment was pronounced on July 22, 2022.