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2016 (5) TMI 619 - ITAT PUNE

2016 (5) TMI 619 - ITAT PUNE - TMI - Revision u/s 263 - non tds u/s 194A - Held that:- If the AO has adopted one of courses permissible in law which resulted in loss of revenue or where two views are possible and AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of revenue unless the view taken by the AO is unsustainable in law. The assessee in the instant case has not replied to the show cause notice issued by the Ld. .....

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the issue before the Ld.CIT was a debatable one and since the AO has taken a possible view, therefore, the Ld.CIT in our opinion is not justified in invoking jurisdiction u/s.263 of the I.T. Act. - Decided in favour of assessee. - ITA No.1168/PN/2014 - Dated:- 6-4-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Appellant : Shri S.N. Doshi For The Respondent : Shri S.K. Rastogi ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 18-03-20 .....

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ted that the assessee has borrowed secured loans from Tata Finance and Tata Motors Ltd. for purchase of vehicles. The assessee during the year has paid interest to the tune of ₹ 17,45,830/- to the said non banking financial companies without deduction of tax as per the provisions of section 194A. Since tax was not deducted u/s.194A from the payment of interest to the tune of ₹ 17,45,830/-, therefore, the amount deserves to be disallowed u/s.40(a)(ia) of the Act. Since the AO has not .....

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s.40(a)(ia) r.w.s. 194A of the I.T. Act. 3. Aggrieved with such order of the CIT, the assessee is in appeal before us with the following grounds : 1. On the facts and in the circumstances of the case CIT has erred in invoking provision of 263 as the order passed by Assessing Officer cannot be said to be erroneous in so far as prejudicial to the interest of revenue 2. On the facts and in the circumstances of the case the fact that payee M/s Tata Motors and Tata Finance have duly offered the inter .....

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s namely Tata Motors and Tata Finance and nothing was payable on 31.03.2009 Refer: CIT vs. Vector Shipping Services Pvt Ltd Allahabad High Court 357 ITR 642 and Special Bench of Vishukhapatnam Tribunal in the case of M/s. Merilyn Shipping and Transport -136 ITD 23 4. On the facts and in the circumstances of the case and in the presence of contrary view taken by Gujarat High Court in CIT vs. Sikanderkhan Tunvar 33 taxmann.com 133 and in case of CIT vs. Cresent Export Syndicate Kolkatta High Court .....

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of the I.T. Act. Referring to page 4 of the paper book filed the Ld. Counsel for the assessee submitted that prior to invoking action u/s.263 by the CIT, the AO had initiated proceedings u/s.154 on the very same issue by proposing to rectify the assessment order for making disallowance of ₹ 17,45,839/- u/s.40(a)(ia) of the I.T. Act. Referring to page 5 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the reply given by the assessee vide letter dated 12- .....

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is due to change of opinion the proceedings should be dropped. 5. Referring to page 6 of the paper book he drew the attention of the Bench to the order passed u/s.154 of the I.T. Act wherein the AO has dropped the proceedings initiated u/s.154 of the I.T. Act. He submitted that there was no amount payable at the end of the year to Tata Finance and Tata Motors Ltd., Therefore, in view of the various decisions prevailing at that time including the decision of Hon ble Allahabad High Court in the ca .....

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Hon ble Supreme Court in the case of CIT Vs. Max India Ltd. reported in 295 ITR 282 he submitted that the Hon ble Supreme Court in the said decision has held that when divergent views are possible on a particular issue and the AO has adopted one of the possible views the CIT cannot invoke jurisdiction u/s.263 of the I.T. Act. It has further been held in the said decision that every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the reve .....

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3. CIT Vs. Kelvinator of India Ltd. reported in 332 ITR 231 4. CIT Vs. Mepco Industries Ltd. reported in 294 ITR 121 5. CIT Vs.D.P. Karai reported in 266 ITR 113 6. Anik Development Corporation Vs. ACIT reported in 134 TTJ 17 7. Trinity Charitable Trust Vs. ITO reported in 153 ITD 247 7. The Ld. Counsel for the assessee referring to the proviso to section 40(a)(ia) inserted w.e.f. 01-04-2013 submitted that where the payee has offered the relevant income and paid the taxes thereon the payer canno .....

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not deducted any tax u/s.194A from the interest paid to Tata Finance and Tata Motors Ltd., therefore, no disallowance u/s.40(a)(ia) was required which the AO has failed to do. Therefore, the order passed by the AO has become erroneous as well as prejudicial to the interest of the revenue. Therefore, the CIT was justified in invoking the jurisdiction u/s.263 of the I.T. Act. 9. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper boo .....

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well as prejudicial to the interest of the revenue. In absence of any compliance to the show cause notice issued u/s.263 the Ld.CIT directed the AO to give effect to his order passed u/s.263 by making addition of ₹ 17,45,839/- u/s.40(a)(ia) r.w.s. 194A of the I.T. Act. From the details furnished by the assessee in the paper book we find the AO had issued a notice u/s.154 dated 04-09-2012 proposing to rectify the following mistake : The verification of records revealed that the assessee fir .....

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,45,830/- under section 40a(ia) of the Act. Your submission for the proposed rectification may please be sent to this office on or before the aforesaid date. 10. We find the assessee vide letter dated 12-09-2012 had replied to the above rectification notice issued by the AO stating that each and every details/information which was necessary as well as asked by the AO to complete the assessment proceedings were provided and after considering the said details the AO had not made any disallowance u .....

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find from the submission of the assessee as well as the order of the Ld.CIT that the interest has actually been paid during the year and nothing was payable at the end of the financial year. During the relevant period of time there are decisions both in favour of the assessee as well as against the assessee on account of disallowance u/s.40(a)(ia) when no amount is outstanding. While decision of Hon ble Allahabad High Court in the case of Vector Shipping Service Pvt. Ltd. reported in 357 ITR 64 .....

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ors Ltd. is a debatable issue when the Ld.CIT invoked jurisdiction u/s.263 of the I.T. Act. 12. The Hon ble Supreme Court in the case of Max India Ltd. (Supra) has held that every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the revenue. When the AO has adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the AO has taken one view with which Commissioner does not agre .....

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