G. Manjunatha, Accountant Member - This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Visakhapatnam dated 20-03-2013 and it pertains to the A.Y. 2010-11.
2. The brief facts of the case are that the assessee is a society, registered under the Societies Registration Act, 1860 with the main objects of imparting education. There was a survey operation u/s. 133A of the Income Tax Act, 1961 [Act] was conducted in the business premises of assessee on 23-09- 2010. Consequent to survey operations, the A.O. called upon the assessee to furnish various information of TDS deductions and remittances, in respect of various payments including salaries paid to staff, advertisement expenditure, interest payments, rent and building constructions. In spite of repeated opportunities given on various dates, the assessee did not furnish any information with regard to the details sought by the A.O. Since, assessee has not chosen to furnish the required information despite repeated reminders, the A.O. has completed the assessment with the available information on record and held assessee as assessee in default u/s. 201(1) and 201(1A) of the Act and computed tax and interest.
3. Thereafter, the assessee has filed a rectification petition u/s. 154 of the Act, by bringing into the notice of the A.O. that due to unforeseen reasons and circumstances, there was no representation from the assessee side; accordingly, sought an opportunity to submit the information. During the course of rectification proceedings, the A.O. after considering the explanation furnished by the assessee, passed order u/s. 154 of the Act, on 06-04-2011 and held that there was no liability to deduct tax at source insofar as salaries, advertisement, interest, professional fee, rent and remuneration. However, in respect of building construction, the A.O. stated that since assessee has accepted TDS liability in the course of survey proceedings, it cannot disown the same now for any reasons.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee submitted that the A.O. was erred in rejecting the application filed by the assessee u/s. 154 of the Act, as the levy of TDS on building constructions is a mistake apparent from the records which needs to be rectified u/s. 154 of the Act. The assessee further submitted that during the course of survey proceedings, while recording statement, the Secretary of the assessee-society has admitted that there is a lapse on TDS compliance; therefore, he would complied with the TDS provisions as per law. But, the fact is that the impugned amount was not incurred for the relevant financial year, therefore, the question of deduction of TDS u/s. 194C of the Act does not arise which is evident from the assessment order passed by the AO u/s. 201(1) and 201(1A) of the Act. The Ld. CIT(A) after considering the explanations of the assessee held that the assessee sought to rectify the order passed by the A.O. u/s. 154 on the basis of fresh facts which were not before the A.O. The CIT(A) further held that u/s. 154 of the Act, any mistake apparent from record only can be rectified. Since the assessee never submitted details before the A.O., it cannot be said that the A.O. has committed any mistake liable for rectification u/s. 154 of the Act. With these observations, dismissed the appeal filed by the assessee. Aggrieved by the order of CIT(A), assessee is in appeal before us.
5. The Ld. AR for the assessee submitted that the Ld. CIT(A) ought to have appreciated the fact that the A.O. has computed short deduction of tax and interest u/s. 201(1) and 201(1A) in respect of building constructions based on the admission of the assessee. The Ld. A.R. further submitted that the impugned payments are not incurred during the relevant financial year. The assessee has constructed building in the Financial Year 2005-06 and claimed depreciation over a period of four years.
The A.O. has taken the opening balance of written down value of assets as per the provisional Balance Sheet and levied the TDS u/s. 194C of the Act. The AO has not examined whether provisions of Section 194C are applicable or not, without doing so, simply computed short deduction of tax based on the opening balance of WDV, which is a mistake apparent from the records which needs to be rectified u/s. 154. But, the AO has rejected the application filed by the assessee by stating that the assessee has admitted the TDS lapses during the course of survey proceedings. The A.R. further submitted that if the provisions of Section 194C comes into play, the A.O. ought to have bifurcated the total value of works contract into value of materials and value of labour component and without bifurcating the total works contracts, computed short deduction of TDS on total value of building which is not correct.
6. On the other hand, the Ld. DR strongly supported the order of the CIT(A).
7. We have heard both the parties and perused the material available on record. The factual matrix of the case is that there was a survey operation u/s. 133A in the business premises of the assessee. During the course of survey proceedings, the Secretary of the Society has admitted that there is a lapse in respect of TDS compliance towards building constructions; therefore, he would complied with the TDS provisions as per law. The A.O. computed short levy of TDS and interest based on the admission of the assessee. The assessee filed a rectification application u/s. 154 and submitted that there is a mistake apparent on the record in respect of TDS on building constructions as the impugned payment is not incurred during the relevant financial year. The AO without examining the applicability of provisions of Section 194C, simply held assessee as assessee in default and levied TDS and interest, which is a mistake apparent from the face of the order which needs to be rectified.
8. Section 154 of the Act provides for rectification of mistake apparent from the records. As per the said Section, mistake not confined to mere clerical or arithmetical mistake. The only point is that the mistake must be obvious and patent and not involving a debatable point. In the present case on hand, on perusal of the facts available on record, we find that the A.O. has levied TDS on the opening balance of written down value of building which was constructed in the year 2005-06. The assessee has not incurred any amount towards building constructions for the year under consideration. The A.O. without examining the applicability of the provisions of Section 194C, merely on the basis of admission of assessee held assessee as assessee in default u/s. 201(1) and 201(1A) in respect of building construction. In our considered opinion, the said mistake is a mistake apparent from the record which needs to be rectified u/s. 154 of the Act. The CIT(A) without appreciating the facts rejected the appeal filed by the assessee. Therefore, we set aside the order passed by the CIT(A) and remit the issue back to the file of A.O. and direct the A.O. to examine whether any amount is incurred during the financial year towards building constructions; in case the amount is not incurred during the relevant financial year, the A.O. cannot hold assessee as assessee in default u/s. 201(1) and 201(1A) of the Act for the assessment year 2010-11.
9. In the result, appeal filed by the assessee is allowed for statistical purposes.