2022 (2) TMI 107 - AT - Income Tax

Revision u/s 263 by CIT - disallowance of audit fee and payment of sub-contract expenses - HELD THAT - PCIT's behest is that of sub-contract payments only which in any case stands covered in the foregoing estimation of income being on debit side of the turnover. Same reasoning applies qua assessee's audit fee payment without non-deduction of TDS as well. As decided in Indwell Constructions Vs. CIT 1998 (3) TMI 121 - ANDHRA PRADESH HIGH COURT that such disallowances/additions are no more exigible in case of estimation of gross receipts of an assessee. We lastly refer to landmark decision in Malabar Industrial Co. 2000 (2) TMI 10 - SUPREME COURT held that an assessment has to be fell erroneous as well as prejudicial to the interest of the Revenue; simultaneously, before the CIT or the PCIT; as the case may be, invokes his Section 263 revision jurisdiction. We accordingly are of the opinion that the learned PCIT has erred in law and on facts in exercising his Section 263 revision jurisdiction in both these assessment years. This impugned action to this effect stands reversed. - Decided in favour of assessee.

Summary

Issues involved:
1. Revision of Section 143(3) assessments under Section 263 of the Income Tax Act, 1961 for AYs 2011-12 & 2012-13.
2. Disallowance of audit fee, non-deduction of TDS, and difference in turnover.

Analysis:

Issue 1: Revision of Section 143(3) assessments under Section 263
The appeals arose from the PCIT-Hyderabad-4's orders for AYs 2011-12 & 2012-13 under Section 263 of the Income Tax Act, 1961. The PCIT termed the Section 143(3) assessments as erroneous, causing prejudice to the Revenue's interest. The Assessing Officer had framed assessments on 26-04-2017, and the PCIT found discrepancies related to TDS, audit fee, and turnover differences. The PCIT concluded that necessary facts were not verified in the assessments.

Issue 2: Disallowance of audit fee, non-deduction of TDS, and difference in turnover
The search operation in the assessee's case led to Section 153A proceedings, and the Assessing Officer accepted the income returned by the assessee. The PCIT highlighted issues of non-deduction of TDS, audit fee, and turnover differences. The Tribunal analyzed the revision directions and found no merit in them. It was reasoned that the disallowances were not significant as the Assessing Officer had estimated the gross receipts of the assessee. The Tribunal referred to relevant case laws, including Indwell Constructions Vs. CIT and Malabar Industrial Co. Vs. CIT, to support its decision. It concluded that the PCIT erred in exercising Section 263 revision jurisdiction in both assessment years, and the actions were reversed.

In conclusion, the Tribunal allowed the assessee's appeals, reversing the PCIT's revision orders. The Tribunal found that the PCIT's revision directions were not valid as the issues raised were not substantial considering the estimation of the assessee's gross receipts. The Tribunal's decision was based on legal precedents and the requirement for an assessment to be both erroneous and prejudicial to the Revenue's interest for Section 263 revision jurisdiction to be invoked.