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TMI Blog2022 (4) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the assessment order. For invoking jurisdiction u/s.263 of the Act, it is essential to first ingrain that the point in question could have been decided against the assessee, which the AO either did not examine or decided wrongly after examination. But if the point is of such a nature that it cannot go against the assessee, even after thorough examination, that would not lead to classifying the assessment order erroneous even if there is no discussion of it in the assessment order. As such, it becomes sine qua non on the part of the PCIT to specifically point out as to how the decision of the AO in expressly or impliedly allowing deduction on a particular point is erroneous. Adverting to the factual matrix of the case, it is seen that the assessee company sold its products to distributors at a price lower than the Maximum Retail Price (MRP), which difference has been opined by the ld. PCIT as Commission requiring deduction of tax at source u/s 194H of the Act. It is simple and plain that a manufacturer would sell his goods to Stockists or Distributors at a price below the MRP, who, in turn, will add up their margin and then sell the products to the retailers. MRP is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2012-13. 2. Briefly stated, the facts of the case are that the assessee is engaged in manufacturing and trading of pharmaceutical products. The return was filed on 29-11-2012 declaring total income of ₹ 86.68 crore. The assessment was completed u/s.143(3) of the Act on 04-05-2016 determining total income at ₹ 109.55 crore. The ld. PCIT, on examination of the relevant material, observed that the Assessing Officer (AO) failed to carry out necessary inquiry and the resultant order passed was erroneous and prejudicial to the interest of Revenue. He, therefore, set-aside the assessment order on certain issues and directed the AO to re-frame the assessment after proper verification. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. 3. We have heard the rival submissions and perused the relevant material on record. The ld. PCIT invoked jurisdiction on four counts, which we will take up in seriatim . 4. The first issue is not adding back of the Provision for doubtful debts amounting to ₹ 31.73 crore [including ₹ 29.35 crore pertaining to provision made for Duty Entitlement Passbook (DEPB)] in the computation of book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.40(a)(ia) to that extent. As regards the remaining sum of ₹ 24,32,529/-, the assessee submitted that it was in process of collation of details. However, no further reply was submitted till the passing of the impugned order. This led to the declaration of the assessment order erroneous and prejudicial to the interest of Revenue. 6.2. On a specific query, the ld. AR submitted that the AO in his order u/s.143(3) r.w.s. 263 has allowed deduction of expenses amounting to ₹ 2.77 crore on which tax was deposited before the due date. The issue to this extent has, therefore, become infructuous. 6.3. As regards the remaining amount of ₹ 24,32,529/-, the ld. AR submitted that it was a case of short deduction of tax at source and not that of non-deduction of tax. Relying on certain judgments including CIT Vs. S.K. Tekriwal (2014) 361 ITR 432 (Cal), the ld. AR submitted that no disallowance can be made u/s.40(a)(ia) for short deduction of tax at source. This argument was countered by the ld. DR who submitted that the assessee failed to furnish any details of short deduction of tax at source either before the ld. PCIT or at the stage of the Tribunal. 6.4. Having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to deduct tax at source from Commission/brokerage paid by the assessee. On being called upon to produce the details of the parties to whom commission or brokerage was paid and the rate at which deduction of tax at source was made, the assessee failed to furnish any such detail. The same position prevailed at the level of the ld. PCIT as well. In the absence of the assessee having produced details of commission or brokerage, the case of short deduction of tax at source is not established. Be that as it may, it is an admitted position that the assessee reported shortfall on account of lower TDS in its Tax Audit report but the AO did not conduct any inquiry on this point. It is a clear case of non-application of mind by the AO which empowered the ld. PCIT to invoke jurisdiction u/s.263 of the Act. 7.1. The last issue raised by the ld. PCIT is about the non-deduction of tax at source on discount to Stockists/Distributors. On perusal of record, the ld. PCIT observed that the assessee company provided discount to Stockists/Distributors ranging between 0 to 30% of gross sales. He held such amount as an equivalent of commission paid to Stockists/Distributors on which deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Here is a case in which the assessee sold its products to Stockists on principal-to-principal basis, who, in turn, sold the same products to Retailers again on principal-to-principal basis for onward sale to customers again on principal-to-principal basis. In that view of the matter, the relation between the assessee and its stockists cannot be described as that of principal and agent. We, therefore, hold that the ld. PCIT was not justified in holding the assessment order to be erroneous and prejudicial to the interest of the Revenue on account non-deduction of tax at source from such amount warranting any disallowance u/s.40(a)(ia) of the Act. As there is no involvement of any commission payment to Stockists on this score, we hold that the AO correctly accepted the assessee s claim in this regard even though impliedly. The impugned order is overturned on this score. 8. In view of the fact that the order passed by the ld. PCIT is sustainable on three out of four counts as taken note of by him, the impugned order on an overall basis cannot be declared as unlawful. It is, therefore, held that the ld. PCIT was justified in invoking his revisionary power u/s.263 of the Act on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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