2022 (10) TMI 345 - AT - Income Tax

Revision u/s 263 by CIT - late deposit of TDS amount in the Government Account - HELD THAT - Assessee has deposited the TDS in the subsequent year, hence there is no loss to the Revenue, therefore the order passed by the assessing officer is not prejudicial to the interest of Revenue, however it can be erroneous order. No doubt, as per provisions of the Act, the assessee can be treated as assessee in default , but for the purpose of section 263 order passed by the AO is not prejudicial to the interest of Revenue, as the assessee has deposited the TDS amount in subsequent year, hence there is no loss of revenue. We note that AO in the assessee s case under consideration has taken possible view, therefore order passed by the assessing officer is neither erroneous nor prejudicial to the interest of Revenue. The impugned order passed u/s. 143(3) was passed by assessing officer, after calling for relevant information and after detailed examination of the same. AO has passed the assessment order after calling for details on the issue and after considering the reply and documents and after verification of the same and after due application of mind passed the assessment order, so it cannot be termed as erroneous and prejudicial to the interest of the revenue. PCIT s finding fault, with the order of the Assessing Officer is erroneous as well as prejudicial to the interest of revenue, on account of lack of inquiry, has to fail. Based on these facts and circumstances, we quash the order passed by the ld PCIT u/s 263. Appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Validity of the revisionary order passed under Section 263 of the Income Tax Act, 1961.
2. Disallowance under Section 40(a)(ia) for depositing TDS after the due date.
3. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) in passing the revisionary order when the assessment order is under appeal.

Issue-wise Detailed Analysis:

1. Validity of the Revisionary Order Passed Under Section 263:
The assessee challenged the revisionary order passed by the Learned Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961, arguing that the original assessment order was neither erroneous nor prejudicial to the interest of revenue. The PCIT had exercised jurisdiction under Section 263 because the assessee had deducted tax but deposited it after the due date. The PCIT issued a show-cause notice, but the assessee did not appear, leading to the revisionary order.

The tribunal noted that the Assessing Officer (AO) had considered the assessee's submission regarding the late deposit of TDS and had taken a possible view that the disallowance under Section 40(a)(ia) was not required since the recipient had paid the due taxes. The tribunal held that the AO's order was not erroneous and prejudicial to the interest of revenue, as the TDS was deposited subsequently, and there was no loss to the revenue. The tribunal quashed the PCIT's revisionary order, citing the Supreme Court's decision in Malabar Industries Ltd. vs. CIT, which requires both conditions (erroneous and prejudicial to the interest of revenue) to be satisfied for exercising jurisdiction under Section 263.

2. Disallowance Under Section 40(a)(ia) for Depositing TDS After the Due Date:
The PCIT argued that disallowance should be made under Section 40(a)(ia) because the assessee deposited the TDS after the due date. The tribunal observed that the AO had issued a show-cause notice during the assessment proceedings and accepted the assessee's explanation that the recipient had declared the income and paid taxes. The tribunal noted that the AO had taken a possible view, and the order was not erroneous. Furthermore, since the TDS was deposited in the subsequent year, there was no loss to the revenue, making the order not prejudicial to the interest of revenue.

3. Jurisdiction of the PCIT in Passing the Revisionary Order When the Assessment Order is Under Appeal:
The assessee contended that the revisionary order under Section 263 could not be passed as the assessment order was under appeal before the Commissioner of Income Tax (Appeals). The tribunal did not specifically address this issue separately but focused on the validity of the revisionary order under Section 263. Since the tribunal quashed the revisionary order on the grounds that the original assessment order was neither erroneous nor prejudicial to the interest of revenue, this issue became moot.

Conclusion:
The tribunal quashed the revisionary order passed by the PCIT under Section 263, holding that the original assessment order was not erroneous and prejudicial to the interest of revenue. The tribunal emphasized that the AO had taken a possible view, and the subsequent deposit of TDS did not result in any loss to the revenue. Consequently, the appeal filed by the assessee was allowed.