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TMI Blog2013 (7) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... act works. For the assessment year under dispute, the assessee had filed its return of income declaring a total income of Rs.27,17,754/-. In the course of scrutiny assessment proceedings, the Assessing Officer made ad hoc disallowance of Rs.1,50,000 and completed the assessment u/s 143(3) of the Act vide order dated 27-2-2006 by determining the total income at Rs.28,67,750/-. The CIT in exercise of powers u/s 263 of the Act called for assessment records and after examining it was of the view that the assessment order passed u/s 143(3) of the Act was erroneous and prejudicial to the interests of the revenue. Therefore he issued a notice u/s 263 of the Act to the assessee directing him to show cause as to why the assessment order shall not be revised on the following issues:- i) The assessee in its balance-sheet for the year under dispute had shown unsecured loan of Rs.10 lakhs from M/s. Paramananda Reddy and Company, whereas such loan is not reflected in the balance-sheet of M/s. Paramananda Reddy and Company as on 31-3-2003. Hence, the unsecured loan of Rs.10 lakhs being not genuine should have been added u/s 68 of the Act. ii) The accounting practice followed by the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctitious as the said loan has stood discharged during the previous year under consideration having been adjusted against payments due from it to the assessee and after adjustment, the amount payable to the assessee by M/s K. Paramanda Reddy & Co., as on 31-3-2003 amounted to Rs.32,28,292/-. He therefore directed the Assessing Officer to bring to tax the amount of Rs.32,28,292/- and also unsecured loan of Rs.10 lakh total amounting to Rs.42,28,292/-. 2. The accounting policy followed by the assessee was not correct and hence the CIT directed the Assessing Officer to examine all the receipts from all the sources and brought to tax he receipts which accrued but which have been withheld by the assessee form Profit & Loss A/c. 3. The CIT directed the Assessing Officer to determine profit from sub-cntractors work of Rs.5,12,63,659/- after properly examining the sub-contract agreement, books of accounts of sub-contracts as well as of the assessee. 4. The CIT directed the Assessing Officer to disallow the excess claim made towards sales-tax payment amounting to Rs.4,75,850/- u/s 43B and the amount of Rs.1,22,885/- being interest accrued but not paid. 5. Lastly, the CIT directed the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raising some queries and thereafter has not at all applied his mind to the various issues and has passed his order u/s 143(3) of the Act in a summary manner by making an adhoc disallowance of Rs.1,50,000/-. As can be seen from the facts on record the unsecured loan of Rs.10 lakh appearing in the balance-sheet of the assessee as on 31-3-2003 was not reflected in the balance sheet of the creditor M/s K. Paramanda Reddy and Company. When M/s K. Paramanda Reddy and Company was an assessee with the same Assessing Officer, it is the primary duty of the Assessing Officer to cross check whether the credit amount appearing in the balance sheet of the assessee was genuine or not. It appears that the Assessing Officer has not at all examined this issue. Similarly, the other issues on which the CIT has held the assessment order to be erroneous and prejudicial to the interests of revenue, have not at all been examined by the Assessing Officer. The assessment order reveals complete nonapplication of mind. In aforesaid view of the matter, the initiation proceedings u/s 263 of the Act cannot be said to be invalid and without jurisdiction. Hence, the action of the CIT in exercising the jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on without being influenced by any observation made by the CIT in the order passed u/s 263 of the Act. 11. In ground Nos. 6,7 and 8, the assessee has raised the issue of direction by the CIT to determine the profit from sub- contract work of Rs.5,12,63,659/-. We have considered the submissions of the parties on this issue. It is the contention of the assessee that there is no profit element in the sub-contract work as it is executed on back to back basis. After considering the submissions of the parties, we are inclined to remit this issue to the file of the Assessing Officer who shall consider it afresh after affording a reasonable opportunity of being heard to the assessee. 12. The next issue as raised in ground No.9 relates to the direction of the CIT to disallow an amount of Rs.4,75,850/- u/s 43B of the Act on account of excess claim made by the assessee towards sales tax payment. After considering the submissions of the assessee that the entire sales tax due was made within the due date of filing of the return, we direct the Assessing Officer to verify this fact and not to make any disallowance u/s 43B if it is found that the entire sales tax amount claimed to have been paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the interest of revenue because of non initiation of proceedings u/s 201(1A) of the Act. Therefore, in our view, the CIT has no jurisdiction to direct the Assessing Officer to initiate proceedings u/s 201(1A) of the Act. In aforesaid view of the matter, we direct the Assessing Officer to redo the assessment keeping in view our observations made herein above. We further make it clear that the Assessing Officer shall not be influenced by any observation made by the CIT in his order u/s 263 of the Act and come to his own conclusion after verifying the facts and materials on record and after affording a reasonable opportunity of being heard to the assessee. 20. In the result, the appeal is treated as allowed for statistical purposes. ITA No.1202/Hyd/2011 (Departmental Appeal):- 21. In this appeal, the department has challenged the order of the CIT (A) passed in appeal against the consequential order of the Assessing Officer in pursuance to the directions of CIT u/s 263 of the Act. Since we have directed the Assessing Officer to re-examine the issues while considering assessee's appeal against the order passed u/s 263 of the Act, we consider it just and proper to set aside the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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