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2016 (7) TMI 271 - ITAT VISAKHAPATNAM

2016 (7) TMI 271 - ITAT VISAKHAPATNAM - TMI - Revision u/s 263 - non deduction of tds towards rent and hire a charge - A.R.submitted that the assessee has incurred the expenditure towards rent and hire a charge which was paid before the end of the financial year - Held that:- We find force in the arguments of the assessee for the reason that in view of the special Bench decision of ITAT, Visakhapatnam in the case of Merilyn Shipping & Transporters(2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) no disal .....

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rder is erroneous, it is not prejudicial to the interest of revenue, as the issue raised by the CIT towards disallowance u/s 40(a)(ia) of the Act is not disallowable, because the assessee has proved that the impugned expenditure is paid during the same financial year. Therefore, we are of the view that the assessment order passed by the A.O. is not erroneous, in so far as it is prejudicial to the interest of the revenue, as there is no loss of revenue on account of non compliance with TDS provis .....

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i C.R. Hemanth Kumar, AR For The Respondent : Shri G. Guruswamy, DR ORDER PER G. MANJUNATHA, Accountant Member: This appeal filed by the assessee is directed against the order of CIT, Visakhapatnam dated 11.6.2013 u/s 263 of the Income Tax Act, 1961 (hereinafter called as the Act ) for the assessment year 2009-10. 2. The brief facts of the case are that the assessee is a partnership firm which is engaged in the business of civil contracts, filed its return of income for the assessment year 2009- .....

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ow-cause notice dated 2.5.2013 and asked to explain why the assessment order shall not be revised u/s 263 of the Act. The CIT proposed to revise the assessment order for the reasons that on examination of assessment records, certain omissions and commissions were noticed, which rendered the assessment order erroneous in so far as it is prejudicial to the interest of the revenue in terms of section 263 of the Act. The CIT, in the said show cause notice observed that the assessee has declared a lo .....

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the income under the head profits & gains of business or profession. On examination of assessment records, it was noticed that the assessment records did not contain any evidence for having deduction of tax at source in respect of rent and hire charges coupled with the fact that no evidence or vouchers could be produced towards such expenditure. Thus, not only the genuineness of such expenditure is in doubtful but also mandatory disallowance for non compliance to the provisions of section 1 .....

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the interest of the revenue, as the A.O. has examined the issue of TDS in respect of rent and hire charges. The assessee further submitted that it has furnished books of accounts and other relevant information at the time of assessment, the A.O. after satisfied with the details furnished by the assessee has accepted the income declared and completed the assessment. It was further submitted that it has been executing civil works for last two years and the income for the earlier 2 years was also .....

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A.O. u/s 143(3) of the Act is erroneous in so far as it is prejudicial to the interest of the revenue. The CIT further held that the net profit from the business is very low when compared to the nature of business carried on by the assessee. The CIT(A) further observed that the assessee has failed to explain whether the TDS has been deducted in respect of rent and hire charges. The A.O. without examining whether assessee has complied with TDS provisions in respect of rent and hire charges, simp .....

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rieved by the CIT order, the assessee is in appeal before us. 5. The Ld. A.R. for the assessee submitted that the assessment order passed by the A.O. u/s 143(3) of the Act is not erroneous in so far as it is prejudicial to the interest of the revenue, as the A.O has examined the issue of net profit and also TDS on rent and hire charges at the time of completion of assessment. The A.R. further submitted that the CIT was not correct in directing the A.O. to enhance the assessment to give effect to .....

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in respect of any expenditure on which TDS has not been deducted which remains payable at the end of the financial year. The assessee has incurred the expenditure and paid the entire expenditure during the same financial year, therefore, no disallowance can be made u/s 40(a)(ia) of the Act. The CIT(A) revised the assessment order for a simple reason that the A.O. has not examined the issue, ignoring the fact that whether any loss of revenue to the Government. The CIT cannot revise the assessmen .....

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ssessment, thereby the assessment order passed by the A.O. u/s 143(3) of the Act is erroneous in so far as it is prejudicial to the interest of the revenue. The CIT revised the assessment order for the reason that the net profit declared by the assessee is less and also the assessee has not proved whether TDS has been deducted in respect of expenditure incurred under the head rent and hire charges. It is the contention of the assessee that the issues raised by the CIT have been examined by the A .....

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y paid during the same financial year. We find force in the argument of the assessee for the reason that the A.O. has examined the issue of net profit and TDS on rent and hire charges at the time of completion of assessment. The A.O. after satisfied with the explanations furnished by the assessee had accepted the income returned and completed the assessment. Therefore, the CIT was not correct in coming to the conclusion that the A.O. has not conducted proper enquiry of the issues before completi .....

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ment. On perusal of the paper book filed by the assessee, we find that the A.O. has issued a detailed questionnaire in respect of net profit and also TDS in respect of rent and hire charges. The A.O. after satisfied with the explanations furnished by the assessee has accepted the income returned. Therefore, we are of the view that once the issues which are subject matter of revision u/s 263 of the Act, have been examined by the A.O. at the time of assessment, the CIT has no jurisdiction to enter .....

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d i.e. (1) the order of the A.O. is erroneous and (2) Further it must be prejudicial to the interest of the revenue. Unless both the conditions are satisfied, the CIT cannot assume jurisdiction u/s 263 of the Act. It is not necessary that every order which is erroneous may not be prejudicial to the interest of the revenue or vice versa. Unless the assessment order is erroneous, no action can be taken by the CIT u/s 263 of the Act, this is because the twin conditions i.e. the order is erroneous a .....

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