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2016 (10) TMI 893 - AT - Income TaxRevision u/s 263 - as per CIT(a) A.O. has completed the assessment without examining the issue of applicability of TDS provisions u/s 194C on hire charges paid by the assessee - Held that - It is true that the issue involved in revision proceedings i.e. disallowance of hire charges u/s 40(a)(ia) of the Act is covered by the special bench decision of ITAT, Visakhapatnam in the case of Merilyn Shipping & Transports Vs. ACIT ( 2012 (4) TMI 290 - ITAT VISAKHAPATNAM ). Although, no prejudice is caused to the revenue as pointed out by the Ld. A.R., the assessee failed to offer any explanation why he could not appear before the Principal CIT and explained the fact that the question raised by the Principal CIT is considered by the A.O. and also the provisions of section 194C of the Act are not applicable, as the impugned amount has been paid before the end of the relevant financial year. It is also an admitted fact that the A.O. has not examined the issue at the time of completion of assessment, however, there is no revenue loss is caused to the exchequer because the issue is covered by the decision of ITAT, special bench (SB), wherein the ITAT held that no disallowance can be made u/s 40(a)(ia) of the Act, on the amounts paid within the end of the financial year. Since, the assessee failed to appear before the CIT, we are of the opinion that the CIT cannot presume things which is in the minds of assessee, as such opined that CIT has rightly assumed his jurisdiction to revise the assessment order based on the information available on record and his order is upheld. Thus we deem it appropriate to modify the directions given by the CIT to disallow impugned expenditure and set aside the assessment order passed by the A.O. u/s 143(3) and direct the A.O. to re-do the assessment afresh in the light of above discussion in accordance with law, after affording an opportunity of hearing to the assessee. - Decided partly in favour of assessee
Issues:
1. Revision of assessment order under section 263 of the Income Tax Act, 1961 based on non-deduction of tax at source on subcontract payments. 2. Disallowance of hire charges under section 40(a)(ia) of the Act due to non-deduction of tax at source on payments exceeding ?75,000 to subcontractors. 3. Jurisdiction of Principal CIT to revise assessment order and the correctness of the order. Analysis: 1. The appeal was against the revision of the assessment order for the assessment year 2011-12 under section 263 of the Income Tax Act, 1961. The Principal CIT proposed revision due to non-deduction of tax at source on subcontract payments, as the AO failed to verify the applicability of TDS provisions. The CIT observed that certain omissions in the assessment order were prejudicial to the revenue's interest. The CIT directed the AO to disallow hire charges amounting to ?12,05,000 claimed by the assessee, leading to the appeal. 2. The assessee contended that the AO had examined the issue of TDS on hire charges and made adhoc disallowances after receiving satisfactory explanations. The assessee argued that the CIT erred in finding the assessment order erroneous and prejudicial to the revenue. The issue was whether the AO adequately examined the TDS applicability on hire charges. The ITAT found that the AO did not conduct a proper inquiry, leading to an erroneous assessment order. However, considering the special bench decision, no revenue prejudice was caused, and the CIT's order was upheld with modifications to re-do the assessment. 3. The Principal CIT's jurisdiction to revise the assessment order was based on the AO's failure to examine TDS provisions on hire charges. The ITAT acknowledged that the issue was covered by a special bench decision, and no revenue loss occurred. Despite the lack of appearance by the assessee before the CIT, the ITAT upheld the CIT's jurisdiction to revise the assessment order. The ITAT modified the directions to disallow expenditure and directed the AO to re-do the assessment, providing an opportunity for the assessee to be heard. In conclusion, the ITAT partly allowed the appeal, upholding the Principal CIT's jurisdiction to revise the assessment order while modifying the directions for disallowance and instructing a fresh assessment by the AO.
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