2022 (11) TMI 1526 - HC - Income Tax

Revision u/s 263 - TDS u/s 195 - disallowance of expenditure u/s 40(a)(ia) - ITAT was of the view that the direction by the CIT to the AO to add the aforementioned sum without a direction to the AO to re-examine the issue was beyond the scope of the powers of the CIT u/s 263 - HELD THAT - ITAT has noted that the AO had in fact allowed the aforementioned sum, which was paid towards import of raw materials utilized in the turnover of the Assessee and was therefore in accordance with the scheme of the business of the Assessee . ITAT was of the view that the direction by the CIT to the AO to add the aforementioned sum without a direction to the AO to re-examine the issue was beyond the scope of the powers of the CIT u/s 263 - As held that the CIT could not unilaterally direct the AO to disallow the same when the procedure to adopt assuming jurisdiction under the provisions of Section 263 remained unfulfilled by the learned CIT. ITAT further noted the decision of the Supreme Court in GE India Technology Cen. (P) Ltd 2010 (9) TMI 7 - SUPREME COURT to the effect that if there is a remittance abroad, the requirement u/s 195(1) of the Act to deduct tax would arise only if the tax is assessable in India. Since this involved payment made for import, the issue required re-examination by the AO. The impugned order of the CIT was quashed only to that extent. This Court has heard the submissions of Mr. T. K. Satapathy, learned Senior Standing Counsel for the Revenue Department and has carefully perused the orders of the CIT as well as the ITAT. The conclusion reached by the ITAT that the CIT could not have unilaterally directed the AO to add back the aforementioned sum by holding that it was disallowable as expenditure could not have been issued u/s 263 of the Act without the AO again examining the issue. To that extent, the said direction was indeed beyond the jurisdiction of the CIT u/s 263. The said conclusion of the ITAT suffering from no legal infirmity, no substantial question of law arises for consideration.

Summary

The High Court dismissed the appeal against the ITAT order for the Assessment Year 2007-08. The CIT's direction to disallow expenditure of Rs.1344,63,25,000 under Section 40(a)(ia) was found to be beyond the scope of Section 263. The ITAT quashed the CIT's order to that extent, citing the need for re-examination by the AO. The Court upheld the ITAT's conclusion, stating no substantial question of law arises.