M/s J.C.Sharma & Sons, Bhopal V. Pr CIT -1, Bhopal

ITA 139/Ind/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5025 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 18-07-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; TDS; Set aside
• Section: 37; 263; 143(3); 37(1)

Judgement Text

आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER (Conducted through Virtual Court) ITA No.139/Ind/2021 Assessment Year: 2016-17 J.C. Sharma And Sons Bhopal Vs. Pr. CIT-1 Bhopal (Appellant / Assessee) (Respondent/ Revenue) PAN: AAEFJ6447 L Assessee by Shri, Ashish Goyal & N.D. Patva, ARs Revenue by None Date of Hearing 13.07.2022 Date of Pronouncement 21.07.2022 O R D E R Per B.M. Biyani, A.M.: 1. This appeal filed by the assessee is directed against the revision- order dated 18.03.2021 passed by learned Pr. Commissioner of Income-Tax-1, Bhopal [“Ld. PCIT)”] u/s 263 of the Income-tax Act, 1961 [“the Act”], which in turn arises out of the order of assessment dated 15.12.2018 passed by learned ACIT-5(1), Bhopal [“the Ld. AO”] u/s 143(3) for Assessment-Year 2016-17. 2. Brief facts are such that the assessee filed return of income for the relevant assessment year on 14.10.2016 declaring a total income of Rs.1,35,44,080/-. The case was selected under scrutiny and the assessment was completed u/s 143(3) after making certain adjustments, at a total ITA No.139/Ind/2021 J.C. Shar ma & Sons Assessment Year 2016-17 Page 2 of 4 income of Rs. 1,40,92,444/-. Subsequently, Ld. PCIT initiated action u/s 263 by issuing notice dated 01.03.2021 and finally completed revision- proceeding by order dated 18.03.2021 wherein the assessment-order was set aside and the Ld. AO was directed to make a de novo assessment. 3. Aggrieved by aforesaid revision-order dated 18.03.2021, the assessee has filed this appeal and now before us. 4. The reason of revision mentioned by Ld. PCIT in the order u/s 263 is reproduced below: “2. Perusal of the order u/s 143(3) dated 15.12.2018 and related records, reveals that the assessee has debited an amount of Rs. 2,01,061/- in profit and loss account on account of “interest on taxes” (not specific for interest on which tax). This expenditure is not allowable u/s 37 of IT Act, and should have to be disallowed and added back to the income of the assessee. The omission resulted in under-assessment of income to extent Rs. 2,01,061/- involving short levy of tax and interest of Rs. 92,518/-. 3. In this case, assessment order u/s 143(3) dated 15.12.2018 was finalized without considering the above mentioned facts. The omission on part of the Assessing Officer, renders the order u/s 143(3) dated 15.12.2018 for A.Y. 2016-17 erroneous as well as prejudicial to the interest of revenue. Accordingly, vide this office notice dated 01.03.2021 the assessee was required to show cause as to why action u/s 163 should not be resorted to. Shri Sanjay Kumar Jain, CA and counsel of the assessee filed written submission on 09.03.2021 which was placed on record.” 5. Ld. AR appearing on behalf of the assessee submitted that the Ld. PCIT has considered the assessment-order passed by Ld. AO as erroneous in so far as it is prejudicial to the interest of assessee on the ground that the Ld. AO has not examined “Interest on tax” of Rs. 2,01,061/- debited by assessee in P&L A/c. According to Ld. AR, the Ld. PCIT conceived that the said interest of Rs. 2,01,061/- was not an allowable deduction u/s 37(1) of the act. Continuing his submission, Ld. AR carried out attention to Para No. 4 of the assessment-order reproduced below: ITA No.139/Ind/2021 J.C. Shar ma & Sons Assessment Year 2016-17 Page 3 of 4 “4. It is seen from the audited books that Rs.14,221/- has been debited as interest on TDS which is not a permitted expense and the same is being disallowed under provision of section 37 of I.T. Act. In Haji Aziz & Abdul Shakoor Bros vs. CIT (1961) 41 ITR 350 (SC), it was held that a penalty imposed for breach of any law during the course of trade etc, cannot be described as a commercial loss. If a sum is paid by an assessee conducting his business, because in conducting it he has acted in a manner which has rendered him liable to penalty, it cannot be claimed as a deductible expense. Infraction of law is not a normal incident of business & therefore, no expense which is paid by way of penalty for a breach of law can be said to be an amount wholly & exclusively laid out for the purpose of business.” 6. Analysing above para, Ld. AR submitted that the Ld. AO has already disallowed a sum of Rs. 14,221/- being “interest on TDS” which was not allowable u/s 37(1). Ld. AR submitted that the disallowance of Rs. 14,221/- was made after examining, during the course of assessment proceeding, the impugned interest of Rs. 2,01,061/- debited by assessee to P&L A/c. Ld. AR submitted that the total interest of Rs. 2,01,061/- debited to P&L A/c consists of two components, viz. (i) Interest on TDS of Rs. 14,221/- and (ii) Interest on indirect-taxes of Rs.1,86,840/-. According to the Ld. AR, the first component i.e. the interest on TDS of Rs.14,221/- is not allowable u/s 37(1) of the Act but the second component i.e. the interest on indirect-taxes of Rs. 1,86,840/- is allowable u/s 37(1) because of the decision of Hon’ble Supreme Court in Bharat Commerce & Industries Ltd. 230 ITR 733. Ld. AR submitted that having examined the nature of components comprised in the said interest of Rs. 2,01,061/-, the Ld. AO has rightly made a disallowance of Rs. 14,221/- and refrained from making disallowance of remaining sum of Rs. 1,86,840/- and hence there is no fault on the part of Ld. AO in making necessary enquiries with regard to the claim of Rs. 2,01,061/-. With this submission, the Ld. AR argued that the Ld. AO has done whatever was required as per law and therefore, neither there is any error in the order of assessment nor the order of assessment is prejudicial to the interest of revenue. Therefore, the Ld. AR requested to quash the order passed by Ld. PCIT. Ld. DR could not controvert the submissions of Ld. AR. ITA No.139/Ind/2021 J.C. Shar ma & Sons Assessment Year 2016-17 Page 4 of 4 7. We have considered submissions and perused the record. We find that the order passed by the Ld. AO does not have any infirmity since the Ld. AO has already disallowed a sum of Rs. 14,221/- which was disallowable out of the impugned interest of Rs.2,01,061/-. We further observe that the Ld. AO has rightly allowed remaining portion out of Rs. 2,01,061/- as a deduction because the same, being interest on indirect taxes, is held to be allowable by Hon’ble Supreme Court. As the order passed by Ld. AO is neither having any error nor prejudicial to the interest of revenue, we find that the revision- proceeding conducted by Ld. PCIT is not justified and deserves to be quashed. Therefore, we quash the order of Ld. CIT(A) passed u/s 263 of the Act. 8. In the result, appeal of assessee is allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 21.07.2022. Sd/- Sd/- (MAHAVIR PRASAD) (B.M. BIYANI) Judicial Member Accountant Member Indore, Dated : 21 st July, 2022 Patel/ Sr. P.S. Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore