TMI Blog2019 (10) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings u/s. 263 was not the subject matter of the proceedings before the ld.CIT(A) and in view thereof, the primary ground raised by the assessee is without merit and accordingly, the same is dismissed. Admittedly, there is no denial in the written submissions filed by the assessee before PCIT and before us that at the relevant time, the order was passed by the Assessing Officer, Rule 37BA was applicable. Furth3r, the assessee has failed to mention that the case of the assessee would fall in any of the ingredients mentioned in Rule 37BA, as reproduced by the ld. PCIT in para 2 of the impugned order. In view of the legal position, the opinion formed by the PCIT that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of revenue cannot be faulted. As is clear from the assessment order, the assessee was doing job works in the name of the company and there was separate job work done by the director Shri Madhukar Kapur. Therefore, the obligation to deduct TDS of the deductor was in respect of the payment made to the assessee and also to Madhukar Kapur separately. Similarly, the other decisions are also not applicable. As mentioned herein abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... override sec. 199(1). 6. That the Ld. Pr. CIT has erred in relying on the non-existent four conditions of Rule 37BA by ignoring the retrospective amendment to the said rule on 01.11.2011. 7. That filing of declaration u/r 37BA is procedural requirement and can be filed at any time as no time limit or form has been prescribed for the same. 8. That the demand notice is excessive and incorrect in so far as credit for amount collected from assessee's bank account has not been allowed. 9. That the appellant prays for leave, to add, alter, amend or vary any of the grounds either before or at the time of hearing of the appeal. 2. The assessment in the case of assessee was completed by the Assessing Officer for the assessment years 2010-11 and 2011-12 on 18.03.2013 and 14.02.2014 respectively. At paragraph 5 of the order for A.Y. 2010-11, it was mentioned by the Assessing Officer as under : 5. Credit of TDS: The assessee has submitted its note on credit of TDS by its letter dated 11.03.13, 14.03.13 and 15.03.13 which are placed on record. The sum and substance of the submission ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to the verification that credit of TDS has not been claimed by the Sh. Madhukar Kapoor. 2.1 Similarly in paragraph No. 2 of the order for assessment year 2011-12, it was mentioned as under : 2 The assessee engaged in the business of Security Printing Ice Cream Manufacturing. The business of ice cream manufacturing is done m the name of ICES Product since last many years from the factory at A-6. Site-B, UPSIDC Artoni, Agra. The assessee is also engaged in security printing. The assessee has claimed credit of TDS of ₹ 33475G8/-. It has been submitted that out of TDS claimed at ₹ 3347508/-. TOS of ₹ 106492/- is appearing in 26AS of the assessee company and ₹ 1539198/- is appearing m the 26AS of its director Sh. Madhukar Kapur. it has been submitted that remaining amount of TDS ₹ 1701818/- is neither reflected in 26AS of the company nor in 26AS of its director Madhukar Kapur it has been submitted that the TDS of ₹ 1539198/- appearing in 26AS of its director Madhukar Kapur has not been claimed in his return of income as the job work was done by the assessee company and the amount of receipts has also been account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.2 had mentioned as under : Para 8.2 of CIT(A) order page 16 not found 5. As the Assessing Officer has allowed the credit of TDS reflected in Form 26AS in the account of Madhukar Kapur subject to verification, the credit of TDS has not been claimed by Madhukar Kapur, the Principal CIT had invoked the jurisdiction u/s. 263, as the PCIT was of the opinion that the assessee does not fall within an of the four categories mentioned in clause (i) of Rule 37BA(2) red with section 199(3) of the Act. 6. The PCIT had issued notice on 17.03.2015 calling upon the assessee to file the reply to the show cause notice. In pursuance thereto, the assessee filed the reply and raised following objections : (i). Reopening of assessment will amount to change of opinion since credit of TDS in the name of person other than the assessee is allowed after due deliberation on the matter. (ii). The order of the Assessing Officer allowing credit of TDS after due verification is not prejudicial to the interest of revenue. (iii). The order of the Assessing Officer is not prejudicial to the interest of revenue in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiries and examining the records taken one of the possible view, it cannot be said that the order passed by the A.O. was erroneous. (3) In the case at present is that the assessee claimed TDS credit for the amount which was reflecting in the 26AS of Mr. Madhukar Kapur. The reason for the same was that due to secrecy, the assessee company did not enter into the contract for printing but in the name of its director. However, since, the business was relating to the assessee, the income was offered by the assessee company and also claimed TDS credit for the same. (4) The CIT observed (Page No. 1 of the Order - at Page 54 ol the Paper Book) that as per sub seciion (3) of section 199. the credit can be claimed by the person other than the person referred in sub-section (1}. us per the rule made by the board in this regard. Board prescribed Rule 37BA of the Rule, which provided four cases prior to its substitution on 1.11.2011. Further as per the proviso to the said Rule, the deductee was required to file with the deductor a declaration in this regard. (5) The CIT did not appreciate the following points: - (i) Section 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the hands of members of the association of persons, or in the hands of trustees, as the case may be; (c) the income from an asset held in the name of a deductee, being a partner of a firm or a karta of a Hindu undivided family, is assessable as the income of the firm, or Hindu undivided family, as the case may be; (d) the income from a property, deposit, security, unit or share held in the name of a deductee is owned jointly by the deductee and other persons and the income is assessable in their hands in the same proportion as their ownership of the asset: Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax. referred to in sub-rule (1). (7) Clause (2) of the said Rule 37BA was substituted w.e.f. 1.11.2011 as under: - (i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1968 SC 1286 it was held that alterations in the form of procedure are alv\ays retrospective, unless there is some good reason or other why they should not be. The amendment to Rule 37 BA mentioned above which has been introduced by the Income Tax (8th amendment) Rules, 2011 notified vide Notification No. 57/2011 dated 24-10-2011. being procedural in nature, would have retrospective effect and has to be given effect to. 20. The Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. If credit of tax is not allowed to the assessee, and the joint venture has not filed a return of income, then credit of the TDS cannot be taken by anybody. This is not the spirit and intention of law. 21. Therefore, in our view, the Assessing Officer erred in denying the benefit of the TDS mentioned in the TDS certificates filed by the assessees on the ground that the TDS certificate is issued in the name of the joint venture or a Director and not the assessee. CIT Vs. Relcom [234 Taxman 6931 (Delhi) [Page - 30 to 34 of case laws paper book] The revenue having assessed REPL's income in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amely, (i) the order of the assessing officer sought to he revised /.v erroneous; and (iij is prejudicial to (he interests of' the revenue. If one of them is absent- if the order of the Assessing office is erroneous but is not prejudicial to the revenue - recourse cannot be had to section 263(1). There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the assessing officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of the order of the assessing officer cannot be treated as prejudicial to the interests of the revenue. For example, if the assessing officer has adopted one of the courses permissible in Ui\ v and it has resulted in loss of revenue, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... labourers and examined them and their statements were recorded under s. 131. Since all necessary details were furnished by the assessee, there was no reason for /he CIT to invoke the revisional jurisdiction under s. 263. The CIT has not stopped merely by issuance of notice under s. 263. Once compliance is made, he went on issuing notice after notice and certain adverse inference were drawn by him from the details collected by him during the revisional proceedings. Those details were thoroughly checked and examined by the Tribunal and it arrived at a factual finding that there was no illegality committed by the assessee in entrusting the work to sub-contractors nor there was any illegality in making all due payments to them. The Tribunal has also given specific finding to the effect that there was no evidence on record that these contractors were related to the assessee or were associates or sister concerns of the assessee. The Tribunal has also given finding that the Revenue has not discharged the onus that the payments to sub-contractors were not genuine. Thus the Tribunal has come to the conclusion that no disallowances can be made merely on the basis of suspicion, howsoever str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the foregoing provisions of this Chapter, the assessee shall not be called upon to pay the tax himself to the extent of which the tax has been deducted from that income. (17) If the section 205 and 199 are read simultaneously, when the tax was deducted at source, no direct demand can be made from the assessee as per section 205. Section 199 provides the credit for tax deducted. The assessee offered the income and claimed credit. (18) This is settled law that the provisions under which the rules are made, even the rule does not state when and how the declaration has to be filed by the other person. (19) CIT opined that the board powers to create rules entitles the board to overrule the right of the assessee granted by the parliament, in this case by enacting section 199(1). - It is against the constitution which has always held that the parliament enactments are supreme. The authority delegated to the board vide section 199(3) is only to make rules for allowing credit of TDS. The same cannot be read to mean that the board is empowered to disallow the credit of TDS by inserting rules. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Rule 37BA. Therefore, the order passed by the ld. PCIT is correct and the order passed by the Assessing Officer was erroneous and prejudicial to the interest of revenue. 11. We have heard the rival contentions and perused the material available on record. In paragraph No. 5 for the assessment year 2010-11, reproduced herein above, it is abundantly clear that the Assessing Officer has granted the relief to the assessee, as the Assessing Officer in the order had mentioned that the credit of TDS reflected in form No. 26AS of the assessee and of Shri Madhukar Kapur shall be allowed to the assessee subject to the verification that the credit of TDS has not been laimed by Shri Madhukar Kapur. In view of the categorical finding given by the Assessing Officer in favour of the assessee that the credit of the TDS mentioned in 26AS of Madhukar Kapur shall be given to the assessee firm, in view thereof, there would not have been any grievance to the assessee to challenge the said order by way of appeal before the ld. CIT(A). In view of the above, we are of the opinion that the issue has not been subject matter of scrutiny before the ld. CIT(A) and in view thereof, clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such income is assessed. From the above, it is dear that the requirement of TDS credit being allowed for the year in which the income is assessable has been done away with vide the Finance Act 2008 and no longer is there a need to establish a nexus between the Credit of TDS, being claimed and the corresponding Income being offered to tax. In any case, the amounts appearing as dosing advances from customers have been included in the income of the assessee in the subsequent years. We have prepared and enclosed a party-wise summary of the total amount received from parties, TDS deducted on total amount received from parties and TDS amounts on advances received. We submit that this contention of the assessee has been accepted by the Ld. A.O. in the assessment proceedings for AY 2011-12 (copy of order enclosed) and in view of the same, your honour is requested to allow the entire credit of TDS (including that deducted on advances). 8.2 I have considered the above argument taken by the Id. AR. For giving credit for TDS, the provisions of section 199 of the Act read with Rule 37BA of Income-tax Rule 1962 is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 263 of 1961 Act: (i) The power is supervisory in nature, whereby the Commissioner can call for and examine the assessment records. (ii) The Commissioner can revise the assessment order if the twin conditions provided in the Act are fulfilled, that is, that the assessment order is not only erroneous but is also prejudicial to the interest of the Revenue. The fulfilment of both the conditions is an essential prerequisite. [See Malabar Industrial Co. Ltd. (supra)] (iii) An order is erroneous when it is contrary to law or proceeds on an incorrect assumption of facts or is in breach of principles of natural justice or is passed without application of mind, that is, is stereotyped, in as much as, the Assessing Officer, accepts what is stated in the return of the assessee without making any enquiry called for in the circumstances of the case, that is, proceeds with undue haste . [Gee Vee Enterprises v. Asstt. CIT [1975] 99 ITR 375 (Delhi)] (iv) The expression prejudicial to the interest of the Revenue while not to be confused with the loss of tax will certainly include an erroneous order which resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. However, the above is not the situation in the present case in view of the reasons stated by the learned C.I.T. on the basis of which the said authority felt that the matter needed further investigation, a view with which we wholly agree. Making a claim which would prima facie disclose that the expenses in respect of which deduction has been claimed has been incurred and thereafter abandoning/withdrawing the same gives rise to the necessity of further enquiry in the interest of the Revenue. The notice issued under Section 69-C of the Act could not have been simply dropped on the ground that the claim has been withdrawn. We, therefore, are of the opinion that the learned C.I.T. was perfectly justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the decision of jurisdictional High Court in the matter of Commissioner of Income Tax, Meerut Vs. Vam Resorts Hotels Pvt. Ltd. (Income Tax Appeal No. 107 of 2015), wherein, it was held as under : 25. As, Clause (c) of Explanation 1 to Section 263 of the Act provides that when an appeal is pending before the Commissioner, the exercise of jurisdiction under Section 263 of the Act by CIT is barred. Thus, in the present case, the CIT wrongly exercised jurisdiction under Section 263 of the Act by remanding back the matter to assessing authority on 25.3.2013, while the appeal was decided by CIT (A) on 5.6.2013. Thus, the order passed by the ITAT does not suffer from any irregularity and needs no interference. 26. As far as the word record appearing in Clause (b) of Explanation-1 to Section 263 is concerned, it means the record available at the time of examination by the Commissioner of Income Tax and not any material or record available subsequent to his examination or exercise of power under Section 263. Thus, any order passed by the AO in the assessment proceedings after the remand by the CIT cannot be looked upon and the argument made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. 9. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue- Rampyari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the assessment order which cannot be called as erroneous. 17. Reliance has also been placed on the judgment of Swarup Vegetable Products (supra), wherein this Court while dealing with a case, where assessee received refund of excise duty and placed the said amount in suspense account and not in profit and loss account and claimed that this amount should not be included in his income, and stated before the Assessing Officer that large part of this amount was claimed by one Sugar Mill who had filed a suit and also a writ petition claiming the said amount and as such, this amount should not be included in his taxable income. This claim was accepted by the ITO. However, when the matter came to the notice of Commissioner, he exercising power under Section 263 held that the ITO had not made proper inquiries before accepting the claim of assessee, and the assessment order was set aside and fresh assessment was directed. This Court refused to interfere in the findings of the Commissioner as the order of the ITO was prejudicial to the revenue. 18. Similarly, the case relied upon by the Department in case of Bhagwan Das (supra) also is not applicable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xman 641/55 taxmann.xom 514 (Bom.) decided on February 3, 2015, wherein also Bombay High Court, following its earlier decision in Idea Cellular Ltd. Vs. Dy. CIT [2008] 301 ITR 407 (Bom.) has taken a similar view and said as under (page 307 of 372 ITR): ......if a query is raised during assessment proceedings and responded to by the assessee, the mere fact that it is not dealt with in the Assessment Order would not lead to a conclusion that no mind had been applied to it. 20. In case of Mahendra Kumar Bansal (supra), this Court held that merely because the order of the ITO is not lengthy, it would not establish that the assessment order passed under Section 143(3) of the Act is erroneous and prejudicial to the interest of the revenue. Relevant Para Nos. 11,12 and 14 are extracted hereinasunder:- 11. In the case of Goyal Private Family Specific Trust [1988] 171 ITR 698, this court has held that the order of the Income-tax Officer may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment order as erroneous and prejudicial to the interests of the Revenue and it was for the Commissioner to point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no denial in the written submissions filed by the assessee before PCIT and before us that at the relevant time, the order was passed by the Assessing Officer, Rule 37BA was applicable. Furth3r, the assessee has failed to mention that the case of the assessee would fall in any of the ingredients mentioned in Rule 37BA, as reproduced by the ld. PCIT in para 2 of the impugned order. In view of the legal position, the opinion formed by the PCIT that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of revenue cannot be faulted. 18. The ld. AR in the written submissions has also raised additional ground which was not raised before the PCIT that the Rule 37BA which was substituted w.e.f. 01.11.2011 was retrospective in nature and for that purposes, the ld.AR relied upon the decision of A.P. High court in the matter of CIT vs. Bhooratnam Co., 357 ITR 396, CIT vs. Relcom, 234 Taxman 693 (Delhi), Parmanand Tiwari vs. ITO, 54 taxmann.com 25 (Kol. Trib.). We have occasion to go through all these decisions and in our respectful understanding, none of the decisions are applicable. In the first case of Bhooratnam Co. , the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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