Non-response by payee to statutory notice u/s 133(6) directly issued by AO, is not within reach and control of assessee – ITAT
In a recent judgment, ITAT has held that non-response by a payee to statutory notice u/s 133(6) directly issued by AO, is not within reach and control of assessee
ABCAUS Case Law Citation:
ABCAUS 3865 (2024) (02) ITAT
In the instant case, the assessee had challenged the revisionary order passed by the Pr. Commissioner of Income-Tax (PCIT) u/s 263 of the Income Tax Act, 1961 (the Act).
The assessee was a Private Limited Company engaged in the business of real estate. The return of income was selected under CASS scrutiny-assessment for “verification of genuineness of expenses” and statutory notices u/s 143(2)/142(1) were issued.
Ultimately, the Assessing Officer (AO), National e-assessment Centre completed assessment u/s 143(3) accepting the returned income declared by assessee. Subsequently, the PCIT examined the record of assessment-proceeding and viewed that the assessment-order passed by AO was erroneous in so far it is prejudicial to the interest of revenue which attracts revisionary-jurisdiction u/s 263.
Accordingly, the PCIT issued show-cause notice. As per the notice alleging that AO has not verified whether the job work for which the large payment was made, actually done by the party or they were just bogus entries. According to the PCIT., the AO should have called for the complete vouchers details of the job work done by referring the matter to the Verification Unit for physical verification but the AO failure to do so, resulted in the under assessment of income.
The PCIT rejected assessee’s reply. Further, the PCIT also observed that since the section 263 has been amended and Explanation 2 had been introduced therein, the assessment-order is deemed to be erroneous-cum-prejudicial to the interest of revenue if the same had been passed without inquiries or verification which should have been made.
The Tribunal found that the AO had made queries and the assessee had filed all details/documents to AO. These documents clearly showed that it was not a case of “no enquiry” as alleged by PCIT.
The assessee submitted that the PCIT had wrongly mentioned in revision-order that the “assessing officer has not considered and examined the issue for which the selection for scrutiny was made” whereas the AO clearly noted in the assessment-order that the case was selected for scrutiny for verification of Genuineness of Expenses with his remark that on the said issue, no addition is made and the returned income of the assessee is accepted.
The Tribunal observed the AO had made repeated enquiries from assessee through series of notices u/s 142(1) to examine the expenses claimed by assessee in general and payments made to the party in question in particular. The assessee also filed complete replies to those questionnaires. To this extent, there cannot be any dispute or rebuttal by revenue. Clearly, therefore, the AO had considered those replies/submissions and thereafter taken a plausible view.
Further the Tribunal observed that the action of AO in accepting the replies/submissions of assessee cannot not lack bona fides and cannot be said to be faulty specially when the assessment of assessee had been made by National e-assessment Centre, Delhi.
The Tribunal noted that with regard to various objections raised by PCIT in revision-order the assessee filed complete point-wise replies to AO; that all payments were made through banking channel and bank statements were duly filed; that the assessee deducted TDS and filed copies of TDS returns/challans; that the assessee filed PAN, current address and phone number of proprietor of the party. In fact, the assessee had also filed details of payments made Enterprises not only in current year but also the payments made in preceding year and subsequent year.
Non response of notice u/s 133(6) by party not under the control of assessee
The Tribunal opined that assessee was also justified in submitting that non-filing of income-tax return and no response of the notice u/s 133(6) by the party was not under the control of assessee and the assessee cannot be punished for this.
The Tribunal opined that submission of assessee that it was engaged in the business of real estate and the services taken from the party in the nature of various job works like moram filling, chambers, road, boundary wall, drainage line, etc. were very much required by assessee to build the structures, was also meritorious.
Further, the Tribunal observed that the assessee had deducted substantial amount of TDS from payments made to party, remitted the proceeds of TDS to income-tax department and also filed statutory returns of TDS giving each item of payment, TDS etc. against the payee. The TDS returns also contained PAN of the proprietor. The PAN so mentioned was verified and accepted as valid and correct by TDS Wing of Income-tax Department and that is why they have not created demand of higher amount of TDS u/s 206AA of the Act. Therefore, just by saying that the payee has not filed income-tax return, the authorities cannot punish the assessee.
Regarding the non-response of notice u/s 133(6), the Tribunal opined that assessee had very much discharged his duty by providing current address and current phone number of Proprietor which has enabled the AO to issue notice u/s 133(6). But thereafter, non-response by the payee to the statutory notice directly issued by AO, is not within the reach and control of assessee. Hence, the assessment-order can not be considered as erroneous for no fault of assessee.
In view of the above, the ITAT opined that the present case do not warrant application of section 263. Therefore, the revision-order passed by Ld. PCIT is not a valid order.
Accordingly, the Tribunal quashed the revision-order and restored the original assessment-order passed by AO.
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