2017 (3) TMI 383 - AT - Income Tax

Revision u/s 263 - claim of TDS - Held that - We note the facts marshaled on behalf of the assessee that the income towards differential amount of ₹ 16,03,521/- noticed by the Commissioner has been already offered for taxation in the year prior to the impugned AY 2006-07. The TDS has been claimed in the current assessment year as per certificate issued by the deductor as per its books of accounts. This has given rise to the mismatch in the figures of job-work. However, the impugned income has not escaped assessment at all. On the contrary, the income has been offered prior to the year in which it is sought to be taxed by the Commissioner. These facts could not be rebutted on behalf of the revenue at any stage of the proceedings before us. Clearly, the return of income filed by the assessee in not offering the job work charges in the assessment year 2006-07 when the income has already been offered in the earlier assessment year cannot be said to be erroneous by any stretch of imagination. Consequently, the assessment order passed u/s 143(3) of the Act cannot be said to be suffering from any error on this score. Thus, one of the two conditions, as noted above, is clearly not satisfied. The order u/s 263 is, therefore, liable to be struck down on this score alone. In the absence of any demonstrable loss of revenue, interference in exercise of power under Section 263 cannot be justified. - Decided in favour of assessee

Summary

Issues:
1. Jurisdiction of CIT under Section 263 of the Income-tax Act, 1961 regarding the order of the Assessing Officer.
2. Correctness of assessment order passed under Section 143(3) of the Act for AY 2006-07.
3. Prejudicial impact on Revenue's interests due to alleged under-assessment by the assessee.

Issue 1: Jurisdiction of CIT under Section 263:
The case involved an appeal concerning the assessee for AY 2006-07 against the CIT's order passed under Section 263 of the Income-tax Act, 1961. The CIT observed a discrepancy in the declaration of labor charges by the assessee in the TDS certificates compared to the Profit & Loss Account, leading to an alleged under-assessment of income. The CIT directed the Assessing Officer to modify the assessment to include the under-assessed income. The assessee contended that the assessment order was not erroneous or prejudicial to Revenue's interests. The discrepancy arose due to different accounting treatment between the assessee and the payer, resulting in the income being recorded in different financial years. The Tribunal held that the income had been offered for taxation in the previous year, and no error or prejudice to Revenue was evident. Consequently, the CIT's assumption of jurisdiction under Section 263 was deemed wrongful and quashed.

Issue 2: Correctness of Assessment Order under Section 143(3):
The Tribunal analyzed whether the assessment order passed under Section 143(3) for AY 2006-07 was erroneous and prejudicial to Revenue's interests. It was established that the income in question had already been reported in the previous year, and the TDS was claimed in the current assessment year. The Tribunal found that the assessment order was not erroneous as the income had been offered for taxation earlier. Additionally, no prejudice to Revenue was demonstrated as the income had not escaped assessment. Therefore, the Tribunal concluded that the assessment order was not suffering from any error or prejudice, leading to the quashing of the CIT's order under Section 263.

Issue 3: Prejudicial Impact on Revenue's Interests:
The Tribunal further examined whether the order passed under Section 143(3) was prejudicial to Revenue's interests due to the alleged under-assessment by the assessee. It was emphasized that the income in question had been reported in the prior year, and no revenue loss was evident. As a result, the Tribunal found that the action of the assessee was tax-neutral, and no prejudice to Revenue was established. The absence of any demonstrable loss of revenue led to the conclusion that the CIT's interference under Section 263 was not justified. Consequently, the Tribunal allowed the appeal of the assessee in both cases, quashing the CIT's orders and rendering the assessment orders infructuous.

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