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2025 (5) TMI 1580 - AT - Income TaxRevision u/s 263 - assessee s claim of TDS which corresponded to professional receipts - as alleged said receipts were not accounted for in the turnover during the relevant assessment year - PCIT rejected the assessee s contentions and the Assessing Officer s observation accepting the reconciliation HELD THAT - It is pertinent to note that this very issue had been examined in the assessee s own case 2010 (12) TMI 851 - ITAT MUMBAI wherein the coordinate bench ruled in favour of the assessee as held Revenue has not controverted the submissions made by the assessee before the Assessing Officer during the assessment proceedings as well as the remand proceedings that all professional fees were received through cheques which were duly deposited into his bank account. In the absence of any contrary material brought on record by the Revenue to establish that the assessee had received income in excess of what was declared no addition was warranted. It is also on record that the professional income declared by the assessee exceeded the amount reported in the AIR. Various legitimate reasons such as lower or non-deduction of tax reimbursement of expenses etc. may account for discrepancies between the AIR data and the income reported. Further the assessee explained that a detailed party-wise break-up of fee receipts was impractical as payments were received either directly from clients or through instructing advocates or chartered accountants. No justification for invoking section 263 in the guise of a difference of opinion. Assessee appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of the Revisionary Order under Section 263 Relevant legal framework and precedents: Section 263 of the Income-tax Act empowers the PCIT to revise an assessment if the order is found to be erroneous and prejudicial to the interests of the revenue. However, it is well settled that mere difference of opinion between the AO and the PCIT is not sufficient to invoke this power. The revisionary order must be founded on clear illegality or material irregularity. Court's interpretation and reasoning: The Tribunal examined whether the PCIT's order under section 263 was justified. The PCIT held that since the AO accepted the TDS claim without disallowing income not offered to tax, the assessment was erroneous and prejudicial to revenue. However, the Tribunal noted that the AO had considered the issue during assessment and accepted the assessee's explanation after verifying the reconciliation of TDS and income. Key evidence and findings: The assessment order contained detailed observations regarding the TDS claims and income offered. The AO accepted the cash system of accounting followed by the assessee and the timing differences arising due to deductors following mercantile system. The PCIT did not bring any new evidence to establish undisclosed income or unaccounted receipts. Application of law to facts: The Tribunal held that the PCIT's order was based on a difference of opinion with the AO's findings rather than on any material illegality or error. The issue had been examined and accepted by the AO, and the PCIT failed to demonstrate any error warranting revision. Treatment of competing arguments: While the PCIT emphasized the mismatch between TDS and income offered, the assessee relied on earlier judicial precedents and detailed reconciliations. The Tribunal favored the latter, noting that the PCIT's observations did not amount to an error of law or fact. Conclusions: The revisionary order under section 263 was unsustainable and liable to be quashed as it constituted an impermissible difference of opinion. Issue 2: Reconciliation of TDS Claimed with Income Offered to Tax Relevant legal framework and precedents: The Act requires that TDS credit claimed by the assessee should correspond to income offered to tax in the relevant assessment year. The case law cited by the PCIT included a decision holding that TDS credit on particular income claimed in a certain year must have corresponding income offered in that year. However, the Tribunal relied on coordinate bench decisions and the Hon'ble High Court ruling in the assessee's own case, which accepted the cash system of accounting and explained timing differences between TDS and income recognition. Court's interpretation and reasoning: The Tribunal recognized that the assessee followed cash system accounting where income is recognized on receipt basis, whereas deductors follow mercantile system, leading to timing mismatches. The Tribunal emphasized that the income was deposited in the assessee's bank account and reflected in Form 26AS, and no evidence of unaccounted income was brought forth. Key evidence and findings: The assessee submitted detailed party-wise reconciliations explaining the mismatch and disputes regarding certain amounts not received. Prior assessments and judicial pronouncements accepted these explanations. The Tribunal noted that the PCIT failed to provide any contrary material. Application of law to facts: The Tribunal applied the principle that timing differences arising from different accounting systems do not automatically lead to disallowance or addition of income. The earlier ITAT and High Court rulings in the assessee's own case were binding and supported the assessee's position. Treatment of competing arguments: The revenue's argument focused on strict matching of TDS and income in the same year, relying on judicial pronouncements. The Tribunal distinguished those by highlighting the factual matrix and accepted accounting practices of the assessee. Conclusions: The Tribunal concluded that no addition was warranted on account of non-reconciliation of TDS and professional receipts, and the AO's acceptance of the assessee's explanation was justified. Issue 3: Applicability of Earlier Tribunal and High Court Rulings Relevant legal framework and precedents: The principle of consistency and binding nature of coordinate bench and High Court rulings in the same matter was considered. The Tribunal relied on its own earlier decisions and the High Court's dismissal of revenue's appeal. Court's interpretation and reasoning: The Tribunal noted that the issue had been repeatedly adjudicated in the assessee's favour, with detailed reasoning accepting the cash system of accounting and the nature of professional receipts. The High Court had held that the issue did not raise any substantial question of law and upheld the Tribunal's decision. Key evidence and findings: The Tribunal reproduced relevant portions of the earlier orders and noted that the facts and issues in the present case were identical or substantially similar. Application of law to facts: The Tribunal applied the doctrine of precedent and consistency, holding that the present case was governed by these earlier rulings. Treatment of competing arguments: The revenue's attempt to distinguish or challenge these rulings was rejected due to lack of any new material or change in facts. Conclusions: The Tribunal held that the earlier rulings were binding and decisively supported the assessee's case. 3. SIGNIFICANT HOLDINGS The Tribunal made the following crucial legal determinations: "The revisionary order passed by the Ld. PCIT under section 263 is unsustainable in law and liable to be quashed." "The Assessing Officer had considered this very issue during the assessment proceedings and made appropriate observations in the assessment order. Therefore, there is no justification for invoking section 263 in the guise of a difference of opinion." "The discrepancy highlighted by the Ld. PCIT is merely a matter of reconciliation between AIR data and the return of income, which had been adequately addressed by the assessee." "The professional income declared by the assessee exceeded the amount reported in the AIR. Various legitimate reasons-such as lower or non-deduction of tax, reimbursement of expenses, etc.-may account for discrepancies between the AIR data and the income reported." "In the absence of any contrary material brought on record by the Revenue to establish that the assessee had received income in excess of what was declared, no addition was warranted." Core principles established include:
Final determinations on each issue were in favour of the assessee, resulting in the quashing of the revisionary order and upholding the original assessment order.
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