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2022 (11) TMI 654 - AT - Income TaxRevision u/s 263 by CIT - Disallowance u/s 40(a)(ia) - Applicability of TDS on payment of commission, labour charges and advertisement - According to the assessee, section 40(a)(ia) is applicable on the amounts, which are payable and not on the amounts, which already paid - distinction between lack of inquiry or inadequate inquiry - HELD THAT - Assessee has explained the issues before the ld. Assessing Officer. It is a different thing that ld. Assessing Officer did not translate his satisfaction in the assessment order. It is pertinent to observe that how to draft assessment order is in the discretion of the ld. Assessing Officer and assessee has not controlled over it. But a perusal of the ld. Commissioner s order would indicate that ld. Commissioner has not applied his mind on any of the details available on the assessment record. We failed to note what type of examination he has made when assessee has demonstrated that these are Credit Card sales. Such plea was supported with the Bank details, then Commissioner ought to have cross verified all these aspects from the assessment record including the Bank details and thereafter should have doubted about the finding of the AO. The amounts referred under three Heads do not require deduction of any TDS and in this situation, no disallowance u/s 40(a)(ia) is called for. Commissioner has failed to examine the issue analytically in right perspective and, therefore, it is not sustainable in the eyes of law. We allow the appeal of the assessee and quash the impugned order. Appeal of the assessee is allowed.
Issues Involved:
1. Validity of the Commissioner's action under Section 263 of the Income Tax Act. 2. Examination of the assessment records and the alleged errors. 3. Applicability of Section 40(a)(ia) regarding non-deduction of TDS on various payments. 4. Adequacy of inquiries made by the Assessing Officer. Issue-wise Detailed Analysis: 1. Validity of the Commissioner's Action under Section 263: The appeal was directed against the order of the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act. The assessee argued that the CIT erred in taking cognizance under Section 263 and setting aside the assessment order for fresh assessment. The Tribunal noted that the CIT has the power to revise an order if it is erroneous and prejudicial to the interest of the revenue. However, this power should be exercised based on material on record and not merely because the CIT holds a different opinion. 2. Examination of the Assessment Records and Alleged Errors: The CIT observed that the assessment order was erroneous and prejudicial to the interest of the revenue due to the failure of the Assessing Officer (AO) to make necessary inquiries. The CIT identified specific expenditures that were allegedly not scrutinized properly: - Commission paid on Credit Card Sales. - Labour charges paid to tailors. - Advertisement expenses. - Sundry creditors not cross-verified. The CIT issued a show-cause notice and concluded that the AO's order was erroneous because the AO did not make adequate inquiries into these expenditures. 3. Applicability of Section 40(a)(ia) Regarding Non-deduction of TDS: The CIT argued that the AO failed to disallow certain expenditures under Section 40(a)(ia) due to non-deduction of TDS. The expenditures in question included: - Commission paid on Credit Card Sales (Rs. 70,90,580/-). - Labour charges to tailors (Rs. 7,85,900/-). - Advertisement expenses (Rs. 2,81,700/-). The assessee contended that these were not commissions but sales on credit cards, and no TDS was required. For labour charges, the payments were made on a job work basis, and no single bill exceeded Rs. 20,000/-. For advertisement expenses, the bills were below the threshold for TDS deduction. 4. Adequacy of Inquiries Made by the Assessing Officer: The Tribunal examined whether the AO made adequate inquiries during the assessment process. The assessee provided detailed submissions and supporting evidence to the AO, including: - Explanation and bank statements for credit card sales. - Break-up of labour charges and job work bills. - Bills for advertisement expenses. The Tribunal noted that the AO had indeed made inquiries and was satisfied with the explanations provided by the assessee. The CIT, however, did not consider these explanations and supporting documents adequately. Conclusion: The Tribunal concluded that the CIT failed to apply his mind to the material on record and did not analytically examine the issues. The AO had made necessary inquiries and was satisfied with the explanations provided by the assessee. The Tribunal held that the order of the CIT under Section 263 was not sustainable in law and quashed the impugned order. The appeal of the assessee was allowed. Order Pronounced: The appeal of the assessee was allowed, and the order pronounced in the open Court on August 30th, 2022.
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