INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - AO failed to make disallowance under section 40(a)(ia) for failure to deduct tax at source in respect of incentive and commission paid by assessee -

Assessee was engaged in business of whole sale distribution of SIM cards. AO completed assessment under section 143(3) in case of the assessee. Subsequently, CIT observed that the assessee failed to deduct tax at source under section 194H in respect of incentive and commission paid to retailers for SIM cards, therefore, he was of the view that disallowance of expenses under section 40(a)(ia) should have been made by the AO. Accordingly, he concluded that the order passed by the AO was erroneous and prejudicial to the interest of Revenue. Assessee submitted that his books of account were not audited in preceding financial year; therefore, he would not fall under the purview of section 194H. Held: On perusal of section 194H, it was clear that in case of Individual or HUF, if the books of account were not audited under section 44AB in immediately preceding financial year, then the said provision would not be applicable in current financial year. In instant case, the assessee was an individual and his turnover for immediately preceding financial year was below Rs. 60 lakhs, which was not required to be audited under section 44AB. Therefore, the assessee was out of the purview of section 194H for making deduction on payment made to the retailers as incentive and commission. Hence, the order passed by the AO was not erroneous and prejudicial to the interest of Revenue.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13

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