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TMI Blog2023 (8) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of assessment proceedings. Mere furnishing of sales ledger, credit note, etc., by itself would not be a determining factor whether the sales incentive would be in the nature of commission or discount . We fail to understand how the AO has allowed the impugned expenditure without examining / verifying the agreement entered into between the assessee (the payer) and its dealers (the payees). Therefore, Assessment Order has been passed without verification, which should have been made, and the PCIT was well within the jurisdiction to have invoked the revisionary powers u/s 263. Appeal filed by the assessee is dismissed. - ITA No. 362/Bang/2023 - - - Dated:- 1-8-2023 - Shri George George K, Vice President And Shri Laxmi Prasad S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 263. 2.2 The learned Pr. CIT erred in concluding that the assessment order passed under section 143(3) was made without making proper inquiries or verification regarding the allowability of certain expenditures. 2.3 The learned Pr. CIT failed to appreciate that: a) the issues proposed to be revised in the order passed under section 263 were verified by the learned AO during the assessment proceedings under section 143(3). b) Inadequacy of enquiry by the learned AO during the assessment proceedings under section 143(3) cannot be a ground to assume jurisdiction under section 263. c) the principles of res-judicata are inapplicable to appellate proceedings under the Act and that assessment of one year cannot gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed invocation of the provisions of section 194H in relation to the payment made towards sales incentives to dealers is bad in law and deserves to be quashed. 4. Grounds relating to addition of deferred tax 4.1 The learned Pr. CIT erred in holding that a deduction was claimed to the tune of Rs. 42,87,627 towards provision for deferred tax under section 40(a)(ii) of the Act. 4.2 The learned Pr. CIT failed to appreciate that the provision for deferred tax was added back to book profits to arrive at the figure of taxable profits for the purposes of the Act. 4.3 Without prejudice to the above, addition of an amount of Rs. 42,87,627 towards provision for deferred tax would lead to double addition and the same is against the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 263 of the Act vide notice dated 02.03.2022. The PCIT was of the view that the Assessment Order passed under section 143(3) dated 26.03.2021 was erroneous and prejudicial to the interest of the Revenue as the AO had failed to make enquiries / verification, which should have been made. In this context, the PCIT relied on clause (a) of explanation 2 to section 263 of the Act. The assessee, in response to the notice, filed written submissions dated 10.03.2023. The summarized written submissions have been reproduced at para 2.1 of the impugned order of the PCIT, hence, the same is not reiterated herein. The PCIT, by placing reliance on explanation 2 to section 263 of the Act and various judicial pronouncements, held that the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. The assessee also relied on various case laws relating to the provisions of section 194H of the Act and contended on the facts of the instant case that sales incentives are nothing but discounts and not commission per se. Therefore, the learned AR submitted that the PCIT s order may be quashed. 6. The learned DR, on the other hand, submitted that for identical issue in Assessment Years 2016-17 and 2017-18, disallowance of expenditure was made by invoking provisions of section 40(a)(ia) of the Act. It was submitted by the learned DR that when identical issue had come up for the relevant Assessment Year, the AO ought to have examined / scrutinized the matter carefully before allowing the claim of deduction since there was no deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] 8. The major issue for the PCIT to invoke revisionary jurisdiction is regarding the allowability of sales promotion incentive which was admittedly not subjected to TDS under section 194H of the Act. If the sales incentive is a payment made on principal-to-principal basis, the same need not be subjected to TDS under section 194H of the Act. However, if the said expenditure incurred is on a principal to agent basis, the said payment would come within the purview of commission under section 194H of the Act, and non-deduction of TDS would entail the expenditure to be disallowed under section 40(a)(ia) of the Act. To deter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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