ITAT held that CIT(LTU) was justified in assuming jurisdiction u/s 263 (of Income Tax Act, 1961)

1. The assessee was a company registered under the provisions of the Companies Act, 1956. It was engaged in the business of manufacture as well as dealing in tractors, trailers and bus-chassis. Return of income for the assessment year 2008-09 was filed declaring a total income of Rs.311,55,75,940/-. After issuing notice u/s 143(2) (of Income Tax Act, 1961), the assessment was completed u/s 143(3) (of Income Tax Act, 1961) r.w.s.144C (of Income Tax Rules, 1962) of the Act on a total income of Rs.347,04,06,832/- after making several disallowances. Being aggrieved by the disallowance, an appeal was filed and pending disposal.

2. CIT(LTU) had issued notice u/s 263 (of Income Tax Act, 1961) calling upon the assessee-company to show cause as to why the assessment order cannot be revised, as the AO had failed to disallow a sum of Rs.2,36,07,661/- as no tax deduction was made. In response to show cause notice, assessee-company submitted that provision for expenses was made at the end of the accounting year without any reference to any vendor and in the beginning of the next accounting year, this provision was reversed and actual invoice was raised for the actual expenditure incurred. Only at the time of raising the actual invoice, TDS is effected and therefore, the TDS provisions are not applicable and the assessment cannot be termed as erroneous and prejudicial to the interests of revenue. The ld.CIT(LTU), after considering the explanation of the assessee-company observed that TDS on an amount of Rs.2,36,07,661/- was not made in any of the years but it is claimed as deduction in the year under consideration and therefore, held that the amount cannot be claimed as a deduction under the provisions of sec.40(a)(ia) (of Income Tax Act, 1961). The ld.CIT(LTU) held that this claim of the assessee was not examined by the AO during the course of assessment proceedings. Therefore, he set aside the assessment order to examine this issue after affording an opportunity of hearing to the assessee-company.

3. On appeal, the ITAT held as under:

“When the ld.CIT remanded the matter to the AO to examine the issue afresh, it cannot be termed as beyond the jurisdiction of the CIT. Respectfully following the judgment of the Hon'ble jurisdictional High Court in the case of Infosys Technologies Ltd.(supra), we hold that the ld.CIT(LTU) was justified in assuming jurisdiction u/s 263 (of Income Tax Act, 1961) and directing for de novo assessment.

4. In the result, the appeal of the assessee-company is dismissed.”

Case Reference - M/s.Volvo India Pvt. Ltd. V Commissioner of income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, BANGALORE

BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND

SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER

ITA No.687/Bang/2015

(Assessment year: 2008-09)