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2023 (9) TMI 1112 - AT - Income TaxRevision u/s 263 - PCIT observed that in the computation of STCG, the amount debited on account of addition made during the year under consideration, without any documentary evidence, PF and ESI contribution received from employees but deposited after the due date, failure to pay service tax upto the date of filing of return of income and interest paid on late payment of TDS are not allowable as per the income Tax Act, 1981 - HELD THAT - We note that regarding the claim of deduction being the amount debited on addition made during the year under consideration, from the STCG on sale of the Multiplex, we find merit in the submission of Counsel. We note that information regarding addition to multiplex account was available in the Schedule (2.3) of Fixed assets and the depreciation was a part of Statutory Audit Report and the assesses has disclosed the details in Form No. 3CD attached with the return of income (ROI). Assessment order was finalised after perusal of ROI, material available on record and replies filed in response to notice issue u/s 142(1) of the Act, therefore order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue, hence we allow this issue of the assessee. Late payment of PF ESI - We note that this issue is covered against the assessee by the judgment of the Hon ble Supreme Court in the case of CHECKMATE SERVICES P. LTD 2022 (10) TMI 617 - Supreme Court Therefore, we dismiss this ground of assessee. Claim of service tax expense - We note that as per the Provisions of Service tax Act, assessee had paid service tax under reverse charge mechanism and 0.5 % of Swatchh Bharat Abhiyan and 0.5 % of Krishi Kalyan Cess, out of total service tax was claimed, as expenditure and remaining portion of service tax @ 14% was set off against the amount payable. Therefore the AO has rightly allowed the claim of Service tax Expense, hence we allow this ground of assessee. Claim of interest on TDS - We note that issue before us for interest component and not the TDS. We find merit in the submission of ld Counsel to the effect that the amount of TDS is not income tax for the assessee but it is the amount of income tax deducted and paid by the assessee on behalf of the third party. Thus, it is not a payment of income tax, the said expenditure incurred by the assessee is wholly and exclusively for the purpose of business and the delay in making payment of TDS late, is not like a penalty, and it does not amount to payment for breach of law or illegal act or prohibited act, therefore we allow this ground raised by the assessee. As in Malabar Industries Ltd. 2000 (2) TMI 10 - Supreme Court wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the PCIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. The Hon ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the AO has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law . Therefore, we note that order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue except to the ground relating to PF and ESI which we have dismissed. In case of other grounds of assessee, AO has taken a possible and reasonable view, therefore order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue (except PF and ESI), therefore we allow the appeal of the assessee partly.
Issues Involved:
1. Validity of the order under section 263 of the Income Tax Act, 1961. 2. Disallowance of Rs. 3,85,407/- from Short Term Capital Gain (STCG). 3. Disallowance of Rs. 43,433/- for late payment of PF & ESI. 4. Disallowance of Rs. 3,145/- as Service Tax expense under section 43B. 5. Disallowance of Rs. 194/- as interest on late payment of TDS under section 37(1). Summary: 1. Validity of the order under section 263: The assessee challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax (Pr. CIT) under section 263, asserting that the original assessment order under section 143(3) was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal noted that the Pr. CIT must satisfy twin conditions before exercising revisional jurisdiction under section 263: the order must be erroneous and prejudicial to the interest of the revenue. The Tribunal found that except for the issue of PF and ESI, the Assessing Officer (AO) had taken a possible and reasonable view, thus the order was neither erroneous nor prejudicial to the interest of Revenue. 2. Disallowance of Rs. 3,85,407/- from STCG: The Tribunal found merit in the assessee's submission that the information regarding the addition to the multiplex account was available in the Schedule (2.3) of Fixed Assets, and the depreciation was part of the Statutory Audit Report. The details were disclosed in Form No. 3CD attached with the return of income. The assessment order was finalized after perusal of the return of income, material available on record, and replies filed in response to notice issued under section 142(1). Therefore, the order passed by the AO was neither erroneous nor prejudicial to the interest of revenue, and this issue was allowed in favor of the assessee. 3. Disallowance of Rs. 43,433/- for late payment of PF & ESI: The Tribunal noted that this issue is covered against the assessee by the judgment of the Hon'ble Supreme Court in the case of CHECKMATE SERVICES P. LTD., where it was held that contributions paid after the due date are not eligible for deduction under section 36(1)(va). Therefore, this ground was dismissed. 4. Disallowance of Rs. 3,145/- as Service Tax expense under section 43B: The Tribunal found that the assessee had paid service tax under the reverse charge mechanism and claimed 0.5% of Swatchh Bharat Abhiyan and 0.5% of Krishi Kalyan Cess as expenditure, while the remaining portion of service tax at 14% was set off against the amount payable. The AO rightly allowed the claim of Service Tax Expense, and this ground was allowed in favor of the assessee. 5. Disallowance of Rs. 194/- as interest on late payment of TDS under section 37(1): The Tribunal agreed with the assessee's submission that the amount of TDS is not income tax for the assessee but is deducted and paid on behalf of a third party. The interest on late payment of TDS is not a penalty or payment for breach of law. Therefore, this ground was allowed in favor of the assessee. Conclusion: The appeal filed by the assessee was partly allowed. The order passed by the AO was found to be neither erroneous nor prejudicial to the interest of Revenue, except for the issue relating to PF and ESI of Rs. 43,433/-. The Tribunal allowed the other grounds raised by the assessee.
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