If the AO neglected to inquire about the non-deduction of TDS on CFS costs, then the use of section 263 is justified
Fact and issue of the case
This appeal filed by the assessee is directed against the order of Principal Commissioner of Income Tax-6, Chennai, passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) dated 05.03.2019 and pertains to assessment year 2014-15.
The brief facts of the case are that, the assessee is in the business of clearing and forwarding agency service, filed its return of income for the assessment year 2014-15 on 26.05.2015, admitting total income of Rs. 77,930/-. The assessment has been completed u/s. 143(3) of the Act, on 30.12.2016 and determined total income of Rs. 2,31,064/-, by making additions towards disallowance u/s. 40(a)(ia) of the Act for Rs. 1,43,376/- towards CFS charges for non-deduction of TDS u/s. 194C of the Act. The case has been subsequently taken up for revision proceedings and show cause notice u/s. 263 of the Act, dated 28.01.2019 was issued and served on the assessee. In the said show cause notice, the PCIT was of the opinion that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the revenue, because the AO failed to carry out required enquiries he ought to have been carried out on the issue of CFS charges paid to Continental Warehousing Corporation and thus, rejected arguments of the assessee and set aside the assessment order in terms of provisions of section 263 of the Act. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
Observation of the court
None appeared for the assessee. We have heard the ld. DR and considered relevant materials available on record. We find that the PCIT had given a categorical finding that the AO has not carried out any enquiries on the issue of CFS charges paid to Continental Warehousing Corporation in light of relevant provisions of the Act which render the assessment order to be erroneous and prejudicial to the interest of the revenue. The assessee neither appeared nor filed any details to justify its case and argue that the assessment order passed by the AO on the issue of TDS on CFS charges paid to Continental Warehousing Corporation does not come under the provisions of section 194C of the Act and consequently, payment cannot be disallowed u/s. 40(a)(ia) of the Act. Therefore, we are of the considered view that there is no error in the reasons given by the PCIT to invoke his jurisdiction u/s. 263 of the Act and set aside the assessment order and thus, we are inclined to uphold the findings of the ld. PCIT and dismiss appeal filed by the assessee.
In the result, appeal filed by the assessee is dismissed.
Order pronounced in the Open court on 10th April, 2023 at Chennai.
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
