INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial under - Lack of proper enquiry on mismatch of TDS as per Form 26 AS receipts/turnover and as per books of account -

AO had completed assessment under section 143(3) without referring the matter to TPO that as per accounts there were three categories of revenue earned by the assessee during the year viz. (i) sales of products (Schedule 18A of P&L account), (ii) sales of scrap (Schedule 18B of P&L account), and (iii) other income (Schedule 19 of P&L account). Hence, incidence of TDS can apply only to other income, which as per the accounts was to the tune of Rs. 8.40 Crores (Rs. 873.53L less foreign exchange gain of Rs. 33.82L). Thus, even if TDS was deducted on entire other income, there was a short credit income. The same was not properly verified by the AO accordingly to Pr. CIT. Held: The assessee's case was selected for scrutiny under CASS inter alia on the ground that there was a mismatch in turnover as per audit report and ITR. Tribunal noted that this aspect was specifically enquired into by the AO at the time of assessment. The CASS reason was examined by the AO and did not find any factual infirmity in the assessee's explanation. Nor any falsity was found by the Pr. CIT in the impugned order. There was merit in the AR's submission that the Pr.CIT proceeded on an erroneous assumption that the tax was deducted at source only from the receipts, the appellant's Profit and Loss Account under the head 'other income' and no tax was deducted from receipts reported under other accounting heads in the Profit and Loss Account. In response to the SCN, the assessee had filed a statement, reconciling receipts which suffered tax deduction at source during the relevant year with receipts accounted under respective accounting heads and which were credited in the relevant year's Profit & Loss Account. The assessee had established before the AO as well as before the Pr. CIT that all receipts certified in the TDS certificates had been fully accounted in the assessee's books for the relevant year. Although these documents and explanations were admittedly filed before the lower authorities, no factual infirmity or falsity was shown by the Pr. CIT or by the CIT, DR appearing on behalf of the revenue. Order under section 263 on this issue was to be unsustainable because not only did the AO had enquired into this issue but had consciously applied his mind to the facts made available before him and adopted the permissible view in law. On the contrary. Pr. CIT did not bring on record any material to disprove the assessee's explanations which showed that receipts certified in the TDS Certificates totaling Rs. 972 lakhs were fully accounted in the assessee's books of the relevant year but merely restored the issue for fresh examination by the AO. The order of the Pr. CIT was therefore set aside.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 263 Section 92BA Section 40A(2)(b)

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