Unproved Reimbursement Claim Supports Section 263 Revision: Calcutta HC

Deepak Bajaj Vs ITO (Calcutta High Court)

Summary: The Calcutta High Court dismissed Deepak Bajaj’s appeal against the Income Tax Appellate Tribunal’s decision sustaining revision under Section 263 of the Income Tax Act, 1961 on one issue concerning payments and tax deducted at source (TDS). The case concerns Assessment Year 2010–11. Bajaj, who produced motion pictures, had returned taxable income of Rs.9,43,459/-. After scrutiny, the Assessing Officer assessed income at Rs.13,88,460/- by an order dated 19 March 2013. The Commissioner’s notice of 2 January 2015 identified three proposed errors: expenses of Rs.1,80,53,232/- paid for artists, technicians and various hire charges without TDS and an outstanding TDS liability of Rs.18,42,097/-; an apparent difference of Rs.25,14,302/- between programme-sale receipts shown in TDS details and the profit and loss account; and unpaid service tax of Rs.35,00,000/- potentially attracting Section 43B. The assessee replied that almost half of certain payments represented reimbursements, the receipts difference reflected service tax included in the payer’s figures, and the service tax liability had not been claimed as an expense.

The Commissioner set aside the assessment for fresh examination, citing inadequate enquiry and verification. The Tribunal condoned a delay of 1914 days in the assessee’s appeal and rejected revision on the receipts and service tax issues, but upheld it on the TDS expenses issue. It found no sufficient record of TDS deposits or the extent of deductions on the claimed expenses; the assertion about reimbursements did not establish the claim. The High Court agreed that the first issue required examination of documents and evidence, and held that the assessment was erroneous and prejudicial to the Revenue to that extent. It did not examine the merits of the other two issues because their findings were not challenged. The appeal failed, with no order as to costs.