2023 (1) TMI 853 - AT - Income Tax

Revision u/s 263 by CIT - interest on the TDS was alleged to have not been disallowed - HELD THAT - As it is noticed that the interest of the TDS has already been added back by the assessee in its computation of total income the revision proceedings in respect of this issue stands quashed. Details of liability for expenses and the provision for salary had not been examined by the AO - As it is noticed that the said provision is not in respect of the salary but it is in respect of the income tax and it is carried forward from the earlier years admittedly this issue is not one which can fall within the purview of revision u/s.263 of the Act and consequently the revisionary proceedings on this issue stands quashed. Net profit from the business of the assessee appears to be low but was not examined by the AO - A perusal of the query raised by the AO in the course of original assessment clearly shows that he has looked into the purchases sales and the expenses thereto. The same have not been disturbed except for an addition in respect of telephone expenses. Thus once the expenses have been accepted and the purchases and sales figures have already been accepted the result in net profit cannot be tinkered with. This being so we are of the view that the issue has already been considered by the AO and the revisionary proceeding on this issue is unsubstantiated and consequently the same is quashed. Software expenses whether was capital or revenue in nature had not been examined by the AO - As it is noticed that the issue has already been considered by the AO in reply to the query No.12 and also as it is noticed that the expenses in relation to the renewal of the tally software license the same is purely revenue in nature also. The figure is only Rs.23, 750/- and not Rs.6, 86, 817/- as proposed by the ld. Pr.CIT. Consequently the revisionary proceeding on this issue stands quashed. Puja expenses did not relate to business of the assessee and the same need to be disallowed - The facts in the present case clearly show that the issue was part of the reply to the query No.12 raised by the AO in the course of original assessment. When the said query has been addressed and answered it is to be presumed that this issue has also been looked into by the AO in the course of assessment. Just because there is no specific finding of the AO in respect of each of the issues does not mean that the issue has not been examined by the AO. In fact the disallowance under the head telephone Internet charges are the expenses under selling distribution and administration overheads. Thus it must be presumed that the AO has examined each of the expenses mentioned therein. This being so we are of the view that the revision proceedings on this issue is unsubstantiated and consequently the same is quashed. Propriety of the claim of interest under the house property had not been examined by the AO - A perusal of the facts of the present case clearly shows that this amount has been specifically shown in the computation of the total income and is also supported by the return of income filed by the assessee. Admittedly this issue has not been examined by the AO nor any specific query has been raised by the AO in the assessment proceedings. This being so we are of the view that the ld. Pr.CIT is right in invoking his powers u/s.263 of the Act on this issue. Consequently the revisionary proceeding on this issue stands upheld. Nature of the business of the partnership firm and the relation to the assessee s business had not been examined by the AO - It is noticed that when passing the assessment order u/s.143(3) of the Act the AO has adopted the total income as per the return of income. This is supported by the computation of total income wherein the interest on the capital remuneration from the firm and profit of the firm in respect of the two partnership firm are also included. This being so we are of the view that this issue has also been considered by the AO and the revisionary proceeding on this issue is unsubstantiated and consequently the same stands quashed. Here we may also mention that though the ld. Pr.CIT mentions that no reply has been filed by the assessee the facts evident that replies have been filed to the shows cause notice. Though clearly on this ground itself the revisionary proceedings would have been quashed still as we noticed that one of the issues have not been examined by the AO the revisionary proceedings is to be upheld only to in respect of that single issue being the propriety of the claim of the interest under house property not examined by the AO. Appeal of the assessee stands partly allowed.

Summary

Issues involved:
1. Revision of assessment order under section 263 of the Income Tax Act for the assessment year 2017-2018 based on specific issues proposed by the ld. Pr.CIT.

Analysis:
1. The ld. Pr.CIT proposed various issues for revision, including interest on TDS, liability for expenses, net profit examination, software expenses, puja expenses, and more.

2. The assessee responded to the show cause notice, providing detailed replies and supporting documents through the online portal of the income tax department.

3. The Tribunal found that the interest on TDS had already been added back by the assessee in the computation of total income, leading to the quashing of revision proceedings on this issue.

4. Regarding liability for expenses and provision for salary, the Tribunal observed that these issues had been examined by the AO during the original assessment, and the expenses were paid before the due date, resulting in the annulment of revisionary proceedings.

5. The provision for salary was clarified as a provision for income tax carried forward from the previous year, not subject to revision under section 263.

6. The Tribunal determined that the net profit issue had been adequately addressed by the AO during the original assessment, considering expenses and sales figures, leading to the quashing of revisionary proceedings on this matter.

7. The software expenses were found to be significantly lower than proposed by the ld. Pr.CIT, and the nature of expenses for software renewal was clarified, resulting in the quashing of revisionary proceedings on this issue.

8. Puja expenses were defended as necessary for business operations and were considered part of the expenses examined by the AO during the original assessment, leading to the quashing of revisionary proceedings.

9. The claim of interest under house property was supported by documentation in the computation of total income and the return of income filed by the assessee, leading to the validation of revisionary proceedings on this issue.

10. The income from partnership firms and its relation to the proprietary business were found to be adequately considered by the AO during the original assessment, resulting in the quashing of revisionary proceedings on this issue.