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2017 (12) TMI 806 - AT - Income TaxRevision u/s 263 - Belated payment of employees contribution to PF - Held that - We find that the issue of belated payment of employees contribution to PF has been examined by the A.O. in assessment proceedings by issuing a specific questionnaire dated 13.01.2015 for which the assessee has filed a letter dated 16.02.2015 explaining the reason for delay in payment of PF. The assessee has also explained in the light of the decision of the Hon ble Kerala High Court in the case of Kerala State Warehousing Corporation Limited (2009 (12) TMI 1010 - KERALA HIGH COURT) and argued that the employees contribution remitted after due date prescribed under respective Acts, but before the date of filing of return of income as per section 139(1) of the Incometax Act, 1961, cannot be disallowed in view of the amended provisions of section 43B. The A.O. after considering the explanation of the assessee has taken one of the possible views with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the A.O. is unsustainable in law. We are of the view that the assessment order passed by the A.O. is neither erroneous nor prejudicial to the interests of the revenue. Therefore, we set aside the order passed by the CIT u/s 263 and restore the assessment order passed by the A.O. u/s 143(3) of the Act. - Decided in favour of assessee
Issues Involved:
1. Reopening of assessment under Section 263 of the Income-tax Act, 1961. 2. Examination of delayed payment of employees' Provident Fund (PF) contributions. 3. Validity of the assessment order passed under Section 143(3) of the Income-tax Act, 1961. 4. Application of judicial precedents and legal principles in determining the erroneous and prejudicial nature of the assessment order. Issue-wise Detailed Analysis: 1. Reopening of Assessment under Section 263 of the Income-tax Act, 1961: The assessee contested the reopening of the assessment under Section 263, arguing that the original assessment was completed after due verification of relevant facts and law. The Principal Commissioner of Income-tax (CIT) issued a show cause notice for revision under Section 263, citing that the assessment order was erroneous and prejudicial to the revenue's interest due to the failure to examine the delayed remittance of employees' PF contributions for March 2012. 2. Examination of Delayed Payment of Employees' Provident Fund (PF) Contributions: The CIT observed that the delayed remittance of PF contributions beyond the due date specified under respective Acts should be treated as income under Section 2(24)(x) read with Section 36(1)(va) of the Income-tax Act. The assessee argued that the Assessing Officer (AO) had considered this issue during the original assessment, as evident from the show cause notice issued by the AO and the subsequent explanation provided by the assessee. The AO allowed the claim based on the Kerala High Court's decision in the case of Kerala State Warehousing Corporation Ltd. 3. Validity of the Assessment Order Passed under Section 143(3) of the Income-tax Act, 1961: The CIT set aside the assessment order passed under Section 143(3) and directed the AO to pass a de novo assessment order. The assessee appealed, arguing that the AO had taken a possible view based on judicial precedents, and the CIT's disagreement with this view did not render the order erroneous or prejudicial to the revenue's interest. The Tribunal noted that the AO had issued a specific questionnaire regarding the belated payment of PF, and the assessee had provided a satisfactory explanation. The AO's decision was based on the jurisdictional High Court's ruling, which was a possible view. 4. Application of Judicial Precedents and Legal Principles: The Tribunal emphasized that for the CIT to invoke jurisdiction under Section 263, the twin conditions of the order being erroneous and prejudicial to the revenue's interest must be satisfied. The AO's view, supported by judicial precedents, was one of the possible views. The Tribunal cited various judicial decisions, including the Supreme Court's ruling in CIT v. Vegetable Products Ltd., which stated that if two reasonable constructions of a taxing provision are possible, the one favoring the assessee must be adopted. The Tribunal concluded that the CIT's assumption of jurisdiction under Section 263 was incorrect, as the AO's order was neither erroneous nor prejudicial to the revenue's interest. Conclusion: The Tribunal set aside the CIT's order under Section 263 and restored the assessment order passed by the AO under Section 143(3). The appeal filed by the assessee was allowed, emphasizing that the AO's decision, based on judicial precedents and a possible view, could not be deemed erroneous or prejudicial to the revenue's interest. The Tribunal's decision reinforced the principle that the CIT cannot assume jurisdiction under Section 263 merely based on a difference in opinion with the AO's view, provided the AO's view is legally sustainable.
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