By TIOL News Service

MUMBAI, MAY 01, 2019: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether the Commissioner is permitted to exercise his revisional power u/s 263 in matters of debatable nature. NO IS THE VERDICT.

Facts of the case:

The Revenue Department preferred the present appeal challenging the action of ITAT in deleting the order passed u/s 263 claiming that it was a debatable issue as two opinions could be formed and AO had taken possible view of non-disallowance ignoring the fact that TDS assessment order u/s 201(1)(1A) on record was not taken into consideration before the assessment and thus non application of mind by AO thus being erroneous and prejudicial to the interest of the Revenue.

High Court held:

++ it is seen that the Commissioner u/s 263 was of the opinion that the Assessee, while reimbursing the charges for bank guarantee commission, ought to have deducted tax at source. The Tribunal however, quashed such order, observing that if there is any shortfall due to any difference of opinion as to taxability of an item or nature of payment falling under various provisions of TDS, the only solution left with this is that the assessee can be declared as assessee in default under the provisions of section 201 but no disallowance can be made by invoking provisions of section 40(a)(ia). Thus, the Tribunal came to the conclusion that the question of deducting the tax at source under the relevant provision of the Income Tax Act was highly debatable issue and that, therefore, the Commissioner was not correct in exercising revisional power. There is therefore no error in the view of the Tribunal.

(See 2019-TIOL-943-HC-MUM-IT)