2023 (9) TMI 1347 - AT - Income Tax

Revision u/s 263 - Non deduction of TDS u/s 194I - Threshold limit for deduction of TDS - assessee paid rent to four different persons - HELD THAT - We find that there is no reference of the issue of claim rental expenses in the assessment order, identified by the ld. Pr.CIT. CIT identified the issue with regard to applicability of TDS Proviso on the rental expenses incurred by assessee which were more than Rs. 1.80 lacs per annum. The assessee in his reply before ld Pr CIT has clearly submitted that he had paid the rent to four different persons, therefore, the regress of section 194I or 40a(ia) is not applicable. The assessee also filed copy of the rent agreement executed by four different persons. We find that the ld Pr CIT has not given his finding on the reply of the assessee. Before us, assessee filed copy of rent agreement showing the tenancy of assessee with four different landlords/owners. Assessee also shown evidence of payment of rent to different four persons @ Rs. 96,000/- per annum only. Such payment of rent to four different persons are clearly disenable in the bank account of assessee. Thus, the threshold limit of attracting the provisions of Section 194I of the Act is not applicable on the payment of rent by assessee, thus, in our considered view, the order of the Assessing Officer is not prejudicial to the interest of revenue. Appeal of assessee is allowed.

Summary

Issues:
The appeal concerns the order passed under Section 263 of the Income Tax Act, 1961 for the Assessment Year 2018-19.

Issue 1: Proper verification of expenses
The Assessing Officer accepted the returned income without proper verification of the godown rent expenses, leading to the non-deduction of TDS as required by law. The Principal Commissioner found this to be erroneous and prejudicial to the revenue's interest, setting aside the assessment order. The assessee argued that the rent was paid to four different individuals for separate premises, thus not exceeding the threshold for TDS applicability. The Tribunal agreed with the assessee, stating that the order was not prejudicial to the revenue and did not meet the conditions for revision under Section 263.

Issue 2: Compliance with Section 194I and 40(a)(ia)
The Principal Commissioner contended that the Assessing Officer failed to disallow 30% of the godown rent expenses, which was necessary due to non-deduction of TDS. The assessee maintained that the provisions of Section 194I and 40(a)(ia) did not apply as the rent payments were made to four different persons for distinct premises. The Tribunal upheld the assessee's argument, noting the lack of verification by the Assessing Officer and ruling that the order was not prejudicial to the revenue, hence allowing the appeal.

Separate Judgement:
The Tribunal, comprising Shri Pawan Singh and Dr. Arjun Lal Saini, set aside the order passed under Section 263, emphasizing that the conditions for revision were not met in this case. The Tribunal found that the Assessing Officer's order was not erroneous or prejudicial to the revenue's interest, ultimately allowing the appeal.