TMI Blog2018 (12) TMI 1065X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction. In the instant case, there is no dispute that the assessee has made the payment to the NRI and the payment attracts the TDS provisions u/s 195 of the Act and the assessee has neither deducted the TDS nor paid such tax to Govt. of India account. The assessee has claimed the expenditure in the impugned A.Y. and the same is covered by section 40(a)(i) and the AO has not examined the issue at the time of assessment. Therefore, the AO has committed an error in the assessment by not examining the issue which required to be examined consequently, which caused prejudice to the revenue. Therefore, we hold that Ld. Pr. CIT has rightly invoked the jurisdiction u/s 263 and we do not see any reason to interfere with the order of the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dors of the property by name Sri Manthani Padmanabh Reddy, is an NRI and is represented by GPA holder Sri Manthani Ram Reddy. The assessee has made the payment of ₹ 50,40,500/- vide two cheques dated 30.06.2010 to Sri Manthani Padmanabh Reddy, the NRI towards his share without deduction of tax at source as required u/s 195 of the Act. The assessee has debited the said expenditure towards the purchase of lands under the head Work in Progress to the P L account of the year under consideration. Since the assessee did not deduct the tax at source, as required u/s 195 of the act, the Ld. Pr. CIT was of the view that the expenditure debited to P L account under the head Work-in-Progress required to be disallowed u/s 40(a)(i) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be made irrespective of nature of transaction under the provision of deduction of tax at source in both the cases. 5. The Ld. Pr. CIT has addressed another contention of the assessee that the scrutiny assessment was completed in this case after verification of the details furnished by the assessee thus argued that there is no error in the assessment order which warrants revision u/s 263, observing that from perusal of the assessment order and assessment record, there is no material available to establish that the AO has examined the issue during the assessment proceedings. Accordingly, the Pr.CIT rejected the argument of the assessee and held that the assessment made u/s 143(3) dated 11.02.2015 is erroneous and prejudicial to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, the first time, the assessee has debited the expenditure in the P L a/c in the impugned A.Y., and as per section 40(a)(i) of the Act, the time of allowability of deduction u/s 40(a)(i) is the year in which the tax was deducted and remitted to Government account but not the year of claim. There was no mention in the Act to allow the expenditure on the basis of method of accounting followed by the AO. The very purpose of introducing the provision of section 40(a)(i) in the Income Tax Act is to allow the deduction in the previous year in which such amount was paid to Government account is to ensure the deduction of tax at source and at the same time allow the deduction after remitting the same to the Government account. Accordingly, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has not filed the P L account before the Income Tax Authorities. There was no assessment made u/s 143(3) for the A.Y. 2010-11 and 2011-12. Therefore, the assessee has neither claimed the expenditure nor filed the P L account, thus, there was no occasion to the AO either to make the disallowance or to go through the nature of expenditure. However, in the balance sheet for the A.Y. 2011-12, the assessee has shown Work-in-Progress under the head site for an amount of ₹ 1,02,69,000/- which establishes that the said purchase of piece of land is a business asset. First time, the assessee has furnished the P L account for the A.Y. 2011-12 and claimed the expenditure under the head Work-in-Progress , which was skipped from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made the payment to the NRI and the payment attracts the TDS provisions u/s 195 of the Act and the assessee has neither deducted the TDS nor paid such tax to Govt. of India account. The assessee has claimed the expenditure in the impugned A.Y. and the same is covered by section 40(a)(i) and the AO has not examined the issue at the time of assessment. Therefore, the AO has committed an error in the assessment by not examining the issue which required to be examined consequently, which caused prejudice to the revenue. Therefore, we hold that Ld. Pr. CIT has rightly invoked the jurisdiction u/s 263 and we do not see any reason to interfere with the order of the Ld. Pr. CIT. Accordingly, we dismiss the appeal of the assessee and uphold the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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