This article provides a detailed analysis of the case identified by ITA No. 1336/DEL/2020, involving the appellant JCIT (OSD) Circle-77(1), New Delhi, and the respondent Sistema Shyam Teleservices Ltd., New Delhi. The appeal pertains to the assessment year 2013-14 and was filed on 30th June 2020. The final tribunal order was pronounced on 1st August 2023.
The case revolves around the issue of shortfall in Tax Deducted at Source (TDS) on year-end provisions reported in Form 3CD by Sistema Shyam Teleservices Ltd. for the financial year 2012-13. The Assessing Officer (AO) found that the assessee was required to deduct TDS amounting to Rs. 15,59,44,667/- on a gross amount of Rs. 2,87,53,24,755/- under various sections of the Income Tax Act, 1961, which the assessee failed to do.
The AO issued a notice dated 18th January 2017 under section 154 of the Income Tax Act to rectify an earlier order passed on 27th March 2015, which had raised a demand of Rs. 4,39,84,927/-. The assessee responded to this notice, but the explanation was not accepted by the AO, who subsequently raised a higher demand.
The assessee appealed against the AO’s order before the Commissioner of Income Tax (Appeals) [CIT(A)], who quashed the AO’s order, noting that the issue involved was debatable and not apparent from the record, thus not suitable for rectification under section 154.
The Revenue, dissatisfied with the CIT(A)’s decision, appealed to the Income Tax Appellate Tribunal (ITAT). The case was heard by Shri G.S. Pannu, President, and Ms. Astha Chandra, Judicial Member, at the Delhi Bench “D” of the ITAT.
The grounds raised by the Revenue included the assertion that the CIT(A) failed to appreciate the applicability of TDS on year-end provisions and incorrectly quashed the AO’s order based on the audit report in Form 3CD.
The Revenue argued that the AO was justified in initiating action under section 154 as there was a mistake apparent from the record regarding the TDS shortfall on year-end provisions. The CIT(A), however, quashed the AO’s order, citing that the issue was debatable and required detailed examination, which is beyond the scope of section 154.
The Tribunal noted that the CIT(A) had not recorded any finding on the merits of the case, focusing instead on the procedural aspects. The Tribunal held that the issue of TDS on year-end provisions is indeed debatable and not suitable for rectification under section 154.
The Tribunal concluded that the action of the AO to resort to the provisions of section 154 was procedurally correct, given the apparent shortfall reported in Form 3CD. However, the Tribunal also acknowledged the need for a detailed examination of the merits of the case. Therefore, the issue was remanded back to the AO with directions to decide the matter afresh in accordance with the law after allowing the assessee a reasonable opportunity to explain its case.
The appeal of the Revenue was treated as allowed for statistical purposes, and the matter was remanded to the AO for fresh adjudication.
This case highlights the importance of procedural correctness in tax assessments and the need for a thorough examination of facts and merits in cases involving debatable issues.
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