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Das Enterprise Versus Commissioner of Income Tax-12, Kolkata

2016 (3) TMI 1006 - ITAT KOLKATA

Revision u/s 263 - AO could not make the verification for the amount towards the income of labour charges which was not disclosed by assessee in his return of income - Held that:- AR had not brought anything on record that the disputed income was declared by the assessee in the subsequent year and the TDS was also deducted in the subsequent year. The case cited by the ld. AR above regarding the labour charges income is different from the facts of the instant case. The case law was on the issue o .....

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the instant case, it is admitted by the Income Tax Department that the Assessing Officer had made some enquiries though according to them it was not a proper enquiry. In our view of the fat that some enquiry was made is sufficient to debar the authorities from exercising the powers u/s 263 of the Act. The Tribunal was accordingly justified in setting aside the order passed u/s 263 of the Act. We do not find any substantial question of law arising for consideration the appeal is accordingly dismi .....

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ountant Member and Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant : Shri K.M.Ray, FCA For The Respondent : Shri S.Srivastava, CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by assessee is against the order passed by Ld. Commissioner of Income Tax-12, Kolkata No. M.No.cit-12/KOL /Tech/ 263/ 2014-15/2021-24 dated 22.01.2015. Assessment was framed by ACIT, Circle- 34, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order da .....

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to the bank for an amount of ₹ 30,48,968.00 whereas the same amount of labour charges was not reflecting in its profit and loss account and balance sheet submitted to the income tax office. The ld. CIT also observed that the assessee is following mercantile system of accounting. Accordingly, Ld. CIT issued show cause notice under section 263 of the Act for the clarification of discrepancy as stated above. 1.1 In compliance to the notice, the assessee submitted that it follows the cash syst .....

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e held as erroneous and prejudicial to the interest of revenue. 1.2 However, Ld. CIT has disregarded the claim of assessee by holding that the assessee is not following cash system of accounting, therefore labour charges cannot be accounted on cash basis. Accordingly the ld. CIT also observed that there is clear violation of section 145 of the Act with regard to the method of accounting adopted for working out the total income of the assessee. 2. The assessee for the year under consideration has .....

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2010 only. The AO has allowed the commission expenses without cross verifying the same from the Government of West Bengal as to whether there was the involvement of any middle person in relation to the award of the contract and settling the transaction for the same. There was also a need to establish whether the commission expenses have been incurred wholly and exclusively for the purpose of the business. 2.1 In response to the notice issued under section 263 of the Act, the assessee submitted t .....

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bmitted that order of the AO on the issue of commission has been merged with the order of the ld. CIT(A). The issue of the commission has been duly considered by the ld. CIT(A) during the appellate proceedings. 2.2 However the ld. CIT has disregarded the plea of the assessee by observing as under : 1) That the assessee failed to produce any document for the services rendered by the commission agent in connection with the contract of the assessee with the Govt. of West Bengal. 2) The AO has also .....

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an amount of ₹ 4,87,115.00. The issue of commission expense whether it was incurred wholly and exclusively for the purpose of the business was never before the ld. CIT(A). Accordingly, Ld. CIT held that order passed by AO is erroneous and prejudicial to the interest of revenue. 3. Now, being aggrieved by this order of Ld. CIT assessee came in appeal before us. Shri K.M.Ray, Ld. Authorized Representative appearing on behalf of assessee and Shri S.Srivastava, Ld Departmental Representative a .....

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ls available on record. Ld. AR submitted before us that labour charges income was duly recognized in the subsequent year along with the TDS certificates. The bills for labour charges were also raised only in the subsequent year. However, the reason for the mismatch between the details submitted before Department and submitted in its bank was to show higher amount of recoverable in order to avail the bank loan facilities in connection with the business of the assessee. The ld. AR also relied in s .....

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urther submitted by Ld. AR that once the order of Ld. CIT(A) has passed on the issue raised by assessee in its appeal then the order of the AO gets merged with the order of ld. CIT(A) and in that event Ld. CIT cannot reopen the case u/s 263 of the Act. The ld. AR in support of his claim relied in the order of Hon ble Gujrat High Court in the case of Bilag Industries Pvt. Ltd. Vs CIT, special Civil Application No. 24128 of 2005 where it was held that the order of the AO was merged with the order .....

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rder of AO erroneous and prejudicial to the interest of revenue is correct. Ld. DR vehemently relied on the order of Ld. CIT. 4.3 From the aforesaid discussion, we find that AO could not make the verification for the amount of ₹30,48,968/- towards the income of labour charges which was not disclosed by assessee in his return of income. Therefore, Ld. CIT held that order of AO is erroneous and prejudicial to the interest of revenue. However before us the ld. AR submitted that the same incom .....

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in the subsequent year and the TDS was also deducted in the subsequent year. The case cited by the ld. AR above regarding the labour charges income is different from the facts of the instant case. The case law was on the issue of project completion method and percentage completion method for working out the profit of the assessee engaged in the construction of commercial and residential premises. Accordingly we are not inclined to interfere in the order of the ld. CIT. In view of this matter, th .....

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ter was also examined by the AO and travelled up to ld. CIT(A) but the issue was altogether different. Here the ld. CIT held the issue has not been examined by the AO so as to ascertain whether the expenses were incurred wholly and exclusively for the business of the assessee. The AO has also not confirmed from the Government of West Bengal which awarded the contract to the assessee by issuing notice u/s 133(6) of the Act to ascertain what services were rendered by the commission agent. Accordin .....

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