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TMI Blog2019 (4) TMI 1375X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajpal Yadav, Judicial Member And Shri Waseem Ahmed, Accountant Member For the Assessee : Shri Vartik R. Chokshi, C.A For the Revenue : Smt Vibha Bhalla, CIT, D.R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Principal Commissioner of Income Tax, Vadodara, [Ld.CIT in short], dated 27/03/2015 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) dated 30/04/2012 relevant to Assessment Year (AY) 2010-11. 2. The assessee has raised the following grounds of appeal. 1. In law and in the facts and circumstances of the case, the notice issued u/s 263 is void and without jurisdiction. 2. In law and in the facts and circumstances of the case the CIT- I has erred in holding that the assessment order passed by the Assessing Officer is erroneous as well as prejudicial to the interests of the revenue u/s 263 of the Act. 3. In law and in the facts and circumstances of the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO was proposed to be held as erroneous in so far prejudicial to the interest of the Revenue on account of the reasons detailed as under: 1. Out of the total commission of ₹ 46,72,681/- a sum of ₹ 42,17,628/- was paid to the commission agents based in foreign countries. The amount of commission was paid to these agents without deducting the TDS u/s 195 r.w.s 40(a)(i) of the Act. The fact of commission paid to foreign parties without deducting the TDS was not verified by the AO in the light of Circular No.7 dated 22/10/2009 issued by the CBDT. 2. There were production registration fees of ₹ 72,02,617/- which is capital in nature. Thus the same was not allowable as deduction. Therefore the same being a capital expenditure needs to be disallowed. 3. The assessee has claimed prior period expenses of ₹ 2,07,900/- in its Financial Statements but the same was allowed as a deduction by the AO without proper verification/examination. 4. The AO while computing the tax under the provision of 115JB of the Act levied a short tax amounting to ₹ 13,066/- only. 5. The Ld.AR, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous in so far prejudicial to the interest of Revenue. 9. Being aggrieved by the order of Ld.CIT assessee is in appeal before us. 10. The Ld.AR, before us, filed a paper book running from pages 1 to 203 and submitted that in the subsequent assessment years the amount of commission was allowed by the AO in the assessment framed u/s 143(3) of the Act. 10.1 The Ld.AR, in support of his claim, drew our attention on pages 44 to 47 and 156 to 162 where the copies of the assessment orders were placed pertaining to the AYs 2011-12 and 2012-13 respectively. 10.2 The commission paid to the foreign parties were not chargeable to tax in India. Therefore there was no question of deducting the TDS u/s 195 of the Act. The AO framed these assessment orders after due application of mind. 11. On the other hand the Ld. DR, submitted that it is not clear whether the commission was paid to the same parties in the subsequent years. 11.1 There was no inquiry conducted by the AO, and it is settled law that the non-verification of certain facts will render the order of the AO as erroneous. 11.2 The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Therefore, we are not convinced with the argument of the learned counsel for the assessee. 12.3 Regarding the contention of the Ld. Counsel for the assessee that there was not initiated any proceedings under section 263/ 147 of the Act in respect of the assessments framed under section 143(3) of the Act pertaining to the assessment year 2011-12 and 2012-13, we find force in his argument. It is because the Revenue has admitted the claim of the assessee for the commission expenses to the foreign parties without deducting the TDS under section 195 of the Act in the assessment years 2011-12 and 2012-13 which has reached to the finality. Accordingly, we are of the view that the Ld. CIT under section 263 of the Act was under the obligation to initiate the proceedings under section 263 of the Act, for the assessment years as discussed above. Thus in our considered view after considering the facts circumstances of the case, the order of the AO cannot be held as erroneous insofar prejudicial to the interest of Revenue. In this regard, we find support and guidance from the judgment of Hon ble Delhi High Court in the case of CIT Vs. Escorts Ltd reported in 338 ITR 435 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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