2022 (10) TMI 166 - AT - Income Tax

Revision u/s 263 - As per CIT, failure on the part of the AO to examine the assessee s claim qua freight, allowed in full despite the fact that he had deducted tax at source only on payments partly resulting in short deduction of tax at source - HELD THAT - The assessee before the AO admits to the non-compliance of sec. 194C(7), even as he explains the same as due to the non-availability of the prescribed form; the erstwhile Form 15J u/r. 29D having been discontinued w.e.f. 01/10/2009. AO accepts it, i.e., inferably, even as he did not, as afore-noted, issued any finding in the matter. The Pr. CIT finds the same unacceptable due to, even so, the failure to furnish Form 26Q, failing which the benefit of the changed law could not be extended, as had been per the impugned assessment. In our considered view, the arguments advanced, both for and against, by either side, are untenable - Assessee had indeed received the stated declaration qua the ownership of ten (or less) goods carriages from the contractor is clearly a false statement, and if even regarded as true despite there being no reason in law for obtaining it, to no consequence, as indeed its subsequent filing with the AO, who, without stating any reason for the same, found it acceptable . The only obligation on the assessee was to furnish the prescribed particulars to the prescribed income-tax authority within the prescribed time, and which the assessee claims as non-prescribed and the ld. Pr. CIT as F/26Q, both of which we find as incorrect. There is no change in the prescribed form, i.e., F/15-J. Form 26Q, on the other hand, is a statement in respect of tax deducted at source (as against not deducted u/s. 194C), obliged to filed u/s. 200, and which continues to obtain both prior and subsequent to 01/10/2009. There is no interface between the two. Thus, while the assessee is clearly in the wrong to say that no Form stood prescribed for him to have complied therewith, with we having found him to have made a false statement qua receipt of declaration/s from the contractor, as required u/s. 194C(6), which assumes significance as it is only on receipt thereof that the obligation u/s. 194C(7) comes into play, and the CIT rightly finds it as incorrect, yet quotes the prescribed Form, which the assessee ought to have therefore filed, wrongly, which rather is in respect of tax deducted at source as against tax not deducted at source. We, accordingly, while upholding the finding by the ld. Pr. CIT as to the non-compliance by the assessee of sec. 194C(7), modify his reference to Form 26Q, to Form 15-J. We have considered it relevant to specify the correct Form despite the admission by the assessee of non-compliance of s. 194C(7) as, in the absence of a prescribed Form, containing the prescribed particulars, along with the prescription as to time by which, and authority before whom, it is to furnished, the same could not possibly be complied with. We may consider the assessee s claim before us of s. 194C(7) being independent of s. 194C(6), so that even a non-compliance of the former would not imply the assessee being in default for non-deduction of tax at source. Toward this, we have firstly found the claim of compliance of s. 194C(6), as it stood at the relevant time, to be false. Two, the argument of compliance of s. 194C(7) as not relevant for the purpose, is, before us, misplaced. The ld. Pr. CIT has set aside the assessment for proper consideration and a decision in accordance with law, so that the proper forum for the said argument by the assessee would be before the assessing authority in the set aside proceedings. It would be a different matter, we clarify, if the revisionary authority had, upon issuing a definite finding in the matter, directed the AO to, for that reason, effect a disallowance u/s. 40(a)(ia). Our scope in the instant proceedings is limited to the validity or otherwise of the impugned order qua each of the separate reasons on which the assessment is found deficient for want of proper inquiry/verification, to find it as valid qua both, also specifying the error therein. A perusal of the file of the ld. Pr. CIT reveals an Office Note appended to the assessment order - The same unequivocally confirms that no inquiry on the aspect raised by the ld. Pr. CIT, i.e., the cumulative satisfaction of the conditions of ss. 194C(6) 194C(7), as against s. 194C(6) alone, qua which only the AO has limited his inquiry and issued his finding, had been made in assessment. The same simultaneously confirms that the sum of Rs. 107.15 lacs on which TDS stands deducted by the assessee pertained to the period 01/10/2009 to 31/3/2010, directed for verification per para 5.5 of this order. The same is unwarranted under the circumstances, and the AO shall in the set aside proceedings limit his adjudication to that stated at para 5.8 of this order, and which, in effect, is the legal consequence of the non-furnishing of Form 15-J, as required u/s. 194C(7). Assessee s appeal is dismissed.

Summary

Issues Involved:
1. Validity of assessment made in the name of a deceased person.
2. Validity of the notice and order under section 263 issued in the name of the deceased.
3. Compliance with section 194C(7) of the Income Tax Act, 1961 regarding non-deduction of tax at source on freight payments.

Detailed Analysis:

1. Validity of Assessment Made in the Name of a Deceased Person:
The appellant argued that the assessment made in the name of his deceased father was a nullity in law, as his father had died during the assessment proceedings. The Tribunal agreed that an assessment made on a deceased person is a nullity but noted that the assessment in this case was initiated while the deceased was alive and was continued and concluded after hearing the legal representative (LR), i.e., the appellant. The Tribunal emphasized that the legal representative is deemed by law to be the assessee and is liable to be assessed in respect of the deceased's income. The assessment was considered valid as the LR participated in the proceedings, and the assessment was essentially on him as the representative of his late father. The Tribunal referenced several legal precedents to support this view, including CIT v. Kaushalyabai and Swarn Kanta v. CIT, and concluded that the assessment was legally firm and saved by section 292B of the Act.

2. Validity of the Notice and Order under Section 263 Issued in the Name of the Deceased:
The appellant contended that the notice and order under section 263 were invalid as they were issued in the name of the deceased. The Tribunal found this reliance misplaced, explaining that the notice under section 263 is not a jurisdictional notice but is meant to provide an opportunity of hearing to the assessee. The Tribunal referred to several Supreme Court decisions, including CIT v. Amitabh Bachchan, which clarified that section 263 does not require a specific show-cause notice but only an opportunity of hearing. The Tribunal also noted that the notice under section 263 was duly served on the appellant, and the proceedings were validly initiated. The Tribunal rejected the appellant's claim of non-receipt of the notice, finding positive material on record to establish service. The Tribunal concluded that the notice and order under section 263 were valid, as they were understood to be on the appellant in his capacity as the LR of the deceased.

3. Compliance with Section 194C(7) Regarding Non-Deduction of Tax at Source on Freight Payments:
The Tribunal examined the issue of non-compliance with section 194C(7) of the Act, which mandates furnishing particulars to the prescribed authority when claiming exemption from TDS under section 194C(6). The appellant argued that the short deduction of tax was due to a change in law and that the obligation to file the declaration in Form 15J became redundant. The Principal Commissioner of Income Tax (Pr. CIT) found the assessment order erroneous and prejudicial to the interests of the Revenue due to non-application of mind by the Assessing Officer (AO) and non-verification of facts. The Tribunal upheld the Pr. CIT's finding, noting that the AO's order lacked inquiry and verification. The Tribunal clarified that the prescribed form for compliance was Form 15-J, not Form 26Q as stated by the Pr. CIT. The Tribunal directed the AO to verify the relevant aspects in the set-aside proceedings and decide in accordance with the law. The Tribunal also rejected the appellant's claim that section 194C(7) is independent of section 194C(6), stating that the proper forum for this argument would be the assessing authority in the set-aside proceedings.

Conclusion:
The Tribunal found no reason to interfere with the impugned order and dismissed the assessee's appeal, upholding the validity of the assessment and the revision order under section 263. The Tribunal directed the AO to verify compliance with section 194C(7) in the set-aside proceedings.