PCIT Vs TE Connectivity India Pvt. Ltd. (Karnataka High Court)
Revision proceedings under section 263 upheld on the grounds of absence of detailed order about the relevant issue in the assessment order : Karnataka High Court
Overview: The case involves the revision of an assessment order under Section 263 of the Income Tax Act. The PCIT alleged that the AO failed to disallow ₹36.34 crore paid as commission without TDS, making the order erroneous and prejudicial to the Revenue. While the ITAT held that the AO had taken a plausible view after examining the issue, the High Court disagreed.
Facts- The respondent’s assessment was selected for scrutiny and a Draft Assessment Order was passed under section 143(3) & 144C(13) on 18.12.2018. The final order followed on 25.10.2019. Aggrieved by the DAO, the respondent assessee filed objections which were disposed off. The AO passed the final assessment order. Subsequently, the appellant Principal Commissioner of Income Tax(PCIT) initiated the proceeding to revise the final assessment order of the AO on the ground that the AO failed to disallow ₹36.34 Cr. commission paid without TDS under Section 40(a)(ia), resulting in a loss to the Revenue. Subsequently, ITAT quashed the PCIT’s order on the ground that the AO had duly examined the commission payment during the assessment, distribution agreements and debit notes were on record, AO took a “plausible view” not to disallow under Section 40(a)(ia), for AYs 2016–17 to 2018–19, similar payments were not disallowed.
Issue:- Whether on facts and circumstances of the case, ITAT was justified in quashing the revisionary order when the assessment order passed was erroneous and prejudicial to the interest of the revenue and when it is not a case where AO has taken one of legally plausible views and the disallowance was erroneously not made?
Observations of the High Court-
