Facts of the Case

The assessee, Deepak Shrawan Budhia, filed an appeal against the revision order passed under Section 263 dated 31.03.2025 by the Principal Commissioner of Income Tax, Patna-1 for Assessment Year 2018-19. The appeal before the Tribunal was delayed by 68 days, which was explained on account of the assessee’s Chartered Accountant undergoing medical treatment and surgery. The delay was supported by affidavit. The original reassessment was completed under Sections 147 read with 143(3) and 144B on 19.03.2023 assessing total income at ₹68,24,861. On examination of records, the Pr. CIT observed that freight charges amounting to ₹16,66,609 were debited without deduction of tax at source, attracting disallowance under Section 40(a)(ia). Holding that the Assessing Officer failed to make necessary disallowance, the Pr. CIT invoked revisionary jurisdiction under Section 263 and directed fresh examination.

Issues Involved

Whether the delay in filing the appeal deserved condonation, whether the Principal Commissioner was justified in invoking revisionary powers under Section 263, whether failure to apply TDS provisions and Section 40(a)(ia) rendered the assessment order erroneous and prejudicial to the interests of the Revenue, and whether the revision amounted to a mere change of opinion.

Petitioner’s Arguments

The assessee contended that the assessment was completed after due examination and that all relevant details relating to freight payments were furnished during reassessment proceedings. It was argued that invocation of Section 263 amounted to a change of opinion. The assessee also submitted that except for limited cases, freight payments did not exceed the prescribed thresholds and, therefore, no disallowance was warranted. The assessee sought quashing of the revision order.

Respondent’s Arguments

The Revenue supported the order passed under Section 263 and submitted that the Assessing Officer failed to apply mandatory provisions relating to deduction of tax at source on freight payments. It was argued that the assessee itself conceded liability for deduction of TDS on certain payments and that the Principal Commissioner had merely directed verification and fresh consideration, which was within jurisdiction.

Court Order / Findings

The ITAT Patna condoned the delay of 68 days after being satisfied that sufficient cause was shown and relied on the decision of the Supreme Court in Collector, Land Acquisition vs. Mst. Katiji. On merits, the Tribunal observed that the assessee was liable for deduction of tax at source on freight charges and that the Assessing Officer failed to apply the provisions of Section 40(a)(ia). The Tribunal noted that the assessee’s own submissions indicated applicability of TDS provisions in certain cases. It was held that an assessment order passed without following mandatory statutory provisions is erroneous and prejudicial to the interests of the Revenue. Accordingly, the Tribunal found no infirmity in the order passed by the Principal Commissioner under Section 263.

Important Clarification

The Tribunal clarified that where statutory provisions relating to TDS and consequential disallowance are not examined or applied by the Assessing Officer, the assessment order becomes erroneous and prejudicial to the interests of the Revenue, justifying invocation of revisionary jurisdiction under Section 263. Such revision does not amount to a mere change of opinion.

Final Outcome

The appeal filed by the assessee was dismissed, the delay was condoned, and the revision order passed under Section 263 of the Income-tax Act by the Principal Commissioner of Income Tax, Patna-1 was upheld in full.

 

Link to download order https://www.mytaxexpert.co.in/uploads/1769074121_DEEPAKSHRAWANBUDHIAMUMBAIVS.PR.COMMISSIONEROFI.T.PATNA1PATNA.pdf

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