Thenmozhi Ganesan vs. The Principal Commissioner of Income Tax

Parties Involved

Facts Summary

Assessee is an individual carrying on the business of exporting coconut fibre. The assessee e-filed her return of income for the Assessment Year 2014-15 on 11.10.2014 declaring a total income of Rs.4,19,060/- and agricultural income of Rs.2,59,655/-. The case was selected for scrutiny under the CASS and assessment was completed u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) on 09.12.2016 accepting the income admitted by the assessee. Later, it was noticed that the assessee had made payments towards baling and pressing charges to M/s. Shri SRM Press Factory and M/s.Hari Tec to the tune of Rs.10,13,550/- and Rs.8,57,660/- respectively without deducting tax at source. Hence, assessment was reopened and order u/s 147 r.w.s 144B of the Act was completed by the Faceless Assessing Officer (FAO) on 10.03.2022 by disallowing Rs.5,61,363/-, being 30% of the payments made towards baling and pressing charges of Rs.18,71,210/- for non-compliance of provisions of Section 40(a)(ia) of the Act. An amendment was made to section 40(a)(ia) of the I.T.Act, 1961 restricting disallowance u/s 40(a)(ia) to 30% with effect from 01.04.2015. Prior to the amendment, the rate of disallowance u/s 40(a)(ia) was 100%. However, while making disallowance u/s 40(a)(ia), the FAO erroneously disallowed 30% as per the amended provisions applicable with effect from the AY 2015-16 instead of making 100% as applicable to pre-amended provisions applicable for the Asst. Year 2014-15. Due to this said reas…

Legal Issues

• 1. The order of the learned PCIT is bad and erroneous in law.
• 2. The learned PCIT erred in not considering the submission filed by the appellant in proper perspective.
• 3. The learned PCIT erred in not considering the scope and effect of the amendment made in Section 40(a)(ia) in proper perspective.
• 4. The order by the learned PCIT directing the Assessing Officer to pass a fresh assessment order by disallowing 100 percent u/s. 40(a)(ia), WITHOUT CANCELLING THE EARLIER ASSESSMENT ORDER, as mandated by Section 263 is bad in law.
• 5. Invoking Section 263, when the issue of disallowance u/s. 40(a)(ia), at the time of passing the assessment order dated 10/03/2022 u/s.148, was not free from doubt, is not legally tenable.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

Similar Judgements

• Ozhur Service Co-op. Bank Ltd. vs. The Income Tax Officer (TDS)

  Cochin bench

• Changanachery North Service Co-op. Bank Ltd. vs. The Income Tax Officer

  Cochin bench

• LinkedIn Technology Information Pvt Ltd Vs. The P.C.I.T

  Delhi 'D' Bench benchAY 2018-19Partly Allowed

• M/s. SOCOMEC India Pvt. Ltd vs. Dy. CIT, TDS Circle, Gurgaon

  Delhi Bench benchAY 2018-19Allowed

• M/S. SMART EYE SECURITY SYSTEM Vs. INCOME TAX OFFICER

  Delhi bench

• Deliverhealth Services Private Limited vs. DCIT, Circle 7 (1), Delhi

  Delhi Bench benchAY 2021-22Allowed