Shri Girdharilal Jagdish Prasad Agarwal, Surat V. Principal Commissioner of Income Tax - 1, Surat

ITA 183/SRT/2023

AI Insights

The case involves an appeal by Shri Girdharilal Jagdish Prasad Agarwal against the order of the Principal Commissioner of Income Tax-1, Surat, which revised the assessment order for the Assessment Year 2018-19 under Section 263 of the Income Tax Act, 1961. The revision was based on the non-deduction of TDS on godown rent expenses exceeding Rs. 1.80 lacs. The assessee argued that the rent was paid to four different landlords, each receiving less than the threshold amount individually, and thus no TDS was required. The Tribunal agreed with the assessee, noting that the revision did not meet the twin conditions of being erroneous and prejudicial to the interests of the revenue as stipulated under Section 263.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302083 (ITAT-SURAT)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-05-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 14-03-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SURESH K. KABRA
• Keywords: Revision of order; TDS; Set aside
• Section: 263; 143(3); 142(1); 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 183/SRT/2023 (AY: 2018-19) (Hearing in Physical Court) Shri Girdharilal Jagdish Prasad Agarwal, N-3752-53, Millenium Market, Ring Road, Surat. PAN: ABUPA 7414 M Vs. Pr.C.I.T.-1, Surat. APPELLANT RESPONDEDNT Assessee by Shri Suresh K. Kabra, CA Department by Shri Ravinder Sindhu, CIT-DR Date of Institution of appeal 15/03/2023 Date of hearing 01/06/2023 Date of pronouncement 01/06/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned Principal Commissioner of Income Tax-1, Surat [in short the ld. Pr.CIT] dated 22/02/2023 passed under Section 263 of the Income Tax Act, 1961 (in short, the Act) for the Assessment Year (AY) 2018-19. The assessee has raised following grounds of appeal:- “1. The ld. PCIT, Surat-1 has erred and was not just and proper on the facts of the case and in law in considering the assessment order passed u/s 143(3) as erroneous and prejudicial to the interest of the revenue and accordingly passing order u/s 263 of the Act to set aside the assessment order. 2. Prayer 2.1 The order u/s 263 may kindly be quashed. 2.2 Personal hearing may be granted. 2.3 Any other relief that your honours may deem fit may be granted. ITA No. 183/SRT/2023 Shri Girdharilal Jagdish Prasad Agarwal Vs Pr.CIT 2 3. The assessee craves leave to add, amend, modify alter or delete any of the grounds at the time of hearing.” 2. Brief facts of the case are that the assessee is individual, filed his return of income for the A.Y. 2018-19 on 04/09/2018 declaring income of Rs. 55,99,350/-. The case was selected for scrutiny. Assessment was completed under Section 143(3) r.w.s. 143(3A) and 143(3B) of the Act on 15/02/2021 in accepting return of income of assessee. The Assessing Officer while completing the assessment order noted that notice under Section 142(1) of the Act dated 10/11/2020 was issued to assessee through National e-Assessment Centre, Delhi for furnishing reason for reduction of profit because of application of ICDS as per item No. 13(E) of audit report and furnishing computation of income, details of opening and closing stock. The assesse replied and uploaded the required details, accordingly, the Assessing Officer accepted the returned income of assessee. 3. The assessment order was revised by ld. Pr.CIT-1, Surat vide his order dated 22/02/2023 by invoking his jurisdiction under Section 263 of the Act. Before revising the assessment order, the ld. Pr.CIT recorded that on going through the record, he noted that the assessee had debited Rs. 3,84,000/- in Profit & Loss Account (P&L Account) under the head ‘godown rent expenses’. The rent amount is paid in excess of Rs. 1.80 lacs, thus as per Proviso to Section 194I, TDS was deductible on such rent expenses, therefore, 30% of godown rent expenses in absence of ITA No. 183/SRT/2023 Shri Girdharilal Jagdish Prasad Agarwal Vs Pr.CIT 3 TDS was required to be disallowed, which was not disallowed by the Assessing Officer. The Assessing Officer passed the assessment order without proper verification/enquiry on the issue which should have been made during the course of assessment proceedings which shows non- application of mind thereby rendered assessment order dated 15/02/2021 as erroneous in so far as prejudicial to the interests of revenue within the meaning of Section 263 of the Act. On the basis of aforesaid observation, the ld. Pr.CIT issued show cause notice under section 263 asking the assesse to file his reply on 18/11/2022. 4. The assesse filed his reply to the show cause notice in time. In the reply, the assessee stated that he has paid rent to four different persons for four different premises. The assessee explained that he had paid Rs. 96,000/- to Ashok Kumar Agarwal for shop No. 4030/4031, Rs. 96,000/- to Benigopal Agarwal for Shop No. 4032/4033, Rs. 96,000/- to Gourishankar Agarwal for shop No. 4028/4029 and Rs. 96,000/- to Purshotam Agarwal for shop No. 4026/4027 per annum, all in Silk Plaza Market, Ring Road, Surat. The assesse submitted that there is no failure on part of assessee to deduct the tax as the provisions of Section 194I and 40(a)(ia) nor contravened as the payments were made to four different persons for four different premises, hence, the limit of Rs. 1.80 lacs applied for each four persons individually. ITA No. 183/SRT/2023 Shri Girdharilal Jagdish Prasad Agarwal Vs Pr.CIT 4 5. The reply of assessee was not accepted by the ld. Pr.CIT. The ld. Pr.CIT held that the Assessing Officer has not enquired/verified the issue of payment of rent of Rs. 3,84,000/- and the relevant issue was not available on record. Further the assessee failed to provide godown document to prove the ownership of four persons. The Assessing Officer was required to disallow Rs. 1,15,200/- being 30% of godown rent expenses which was not disallowed by the Assessing Officer, which shows non-application of mind thereby rendered assessment order as erroneous and so far as prejudicial to the interest of revenue. The ld. Pr. CIT set aside the assessment order and directed the Assessing Officer to pass fresh assessment order after taking into consideration the issue which may have been already considered together with the issue discussed hereinabove by giving opportunity to the assessee. Aggrieved by the order of ld. Pr.CIT, the assessee has filed present appeal before this Tribunal. 6. We have heard the submissions of learned Authorised Representative (ld. AR) of the assessee and the learned Commissioner of Income Tax- Departmental Representative (ld. CIT-DR) for the revenue and perused the record carefully. The ld. AR of the assessee submits that the case of assessee was selected for issue of ICDS compliance and adjustments. Such issue was found in order. The Assessing Officer after considering the other issues/claim, accepted the returned income. The ld. AR of the ITA No. 183/SRT/2023 Shri Girdharilal Jagdish Prasad Agarwal Vs Pr.CIT 5 assessee fairly accepted that admittedly there is no reference about examination of issue of rental expenses. The ld. AR of the assessee submits that the provisions of Section 194I or 40(a)(ia) of the Act is not at all applicable in the case of assessee. The assessee entered into agreement with four different co-owners of different units/shops bearing No. 4026 to 4033, Silk Plaza Market, Ring Road, Surat, vide agreement dated 01/07/2017, copy of such agreement is placed on record. The assessee paid rent to four different persons @ Rs. 96,000/- per annum. The assessee has also filed his bank statement showing the payment of Rs. 96,000/- each to all four persons. The ld. AR of the assessee while referring the bank entry has invited the attention of the Bench and shown the payment of rent in his bank statement. In one of the entry, the bankers of assessee has clearly mentioned as rent. The assessee has also filed his ledger account showing the payment to four different persons. The ld. AR of the assessee submits that the order is not prejudicial to the interests of revenue, even if it is presumed that the order is erroneous, the twin condition prescribed under Section 263 of the Act does not meet out, therefore, the order passed by the ld. Pr. CIT does not qualify the twin conditions of section 263 and thus, the impugned order is liable to be quashed. The ld. AR of the assessee submits that though, the assessment order was revised only on the issue of payment of rent expenses, yet the ld. CIT(A) while setting aside the entire assessment ITA No. 183/SRT/2023 Shri Girdharilal Jagdish Prasad Agarwal Vs Pr.CIT 6 order and gave direction to the assessing Officer to pass fresh assessment order after taking into consideration the issue as may have already been considered together with the issue discussed by him. Thus, the direction given by ld. Pr. CIT is not in accordance with the mandate of Section 263 as before setting aside the entire assessment order neither any show cause notice was issued nor any opportunity of hearing on all such issues was given, therefore, prayed that entire order of ld. Pr.CIT may be quashed. 7. On the other hand, the ld. CIT-DR for the revenue after going through the contents of assessment order and order of ld. Pr. CIT would submit that he supports the order of ld. Pr. CIT. the ld CIT-DR for the revenue submits that the assessment order is silent on the issue which was identified by the ld Pr CIT while exercising his jurisdiction. 8. We have considered the submissions of both the parties and perused the record as well as orders of lower authorities. We find that there is no reference of the issue of claim rental expenses in the assessment order, identified by the ld. Pr.CIT. The ld Pr CIT identified the issue with regard to applicability of TDS Proviso on the rental expenses incurred by assessee which were more than Rs. 1.80 lacs per annum. The assessee in his reply before ld Pr CIT has clearly submitted that he had paid the rent to four different persons, therefore, the regress of section 194I or 40a(ia) is not applicable. The assessee also filed copy of the rent ITA No. 183/SRT/2023 Shri Girdharilal Jagdish Prasad Agarwal Vs Pr.CIT 7 agreement executed by four different persons. We find that the ld Pr CIT has not given his finding on the reply of the assessee. Before us, the ld. AR of the assessee filed copy of rent agreement showing the tenancy of assessee with four different landlords/owners. The ld. AR of the assessee also shown evidence of payment of rent to different four persons @ Rs. 96,000/- per annum only. Such payment of rent to four different persons are clearly disenable in the bank account of assessee. Thus, the threshold limit of attracting the provisions of Section 194I of the Act is not applicable on the payment of rent by assessee, thus, in our considered view, the order of the Assessing Officer is not prejudicial to the interest of revenue. Even, for the want of verification by assessing officer, if it is considered that assessment order is erroneous, still, the twin condition as enunciated in Section 263 of the Act is not meet out in the present case. Thus, the order passed by the ld. Pr. CIT, if not meet out the qualification of twin conditions, is not sustainable which we set aside/quash. 9. In the result, this appeal of assessee is allowed. Order pronounced on 01/ 06/2023 in open court. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 01/06/2023 *Ranjan ITA No. 183/SRT/2023 Shri Girdharilal Jagdish Prasad Agarwal Vs Pr.CIT 8 Copy to: 1. Assessee – 2. Revenue - 3. Pr.CIT 4. CIT 5. DR 6. Guard File By Order Sr. Private Secretary, ITAT Surat