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TMI Blog2011 (3) TMI 1665X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee is directed against order of the Commissioner of Income Tax - I, Ahmedabad dated 18th March, 2010 challenging the order u/s 263 of the IT Act for assessment year 2005-06. 2. Briefly, the facts of the case are that the assessee company is engaged in the business of earth filling work. Return of income was filed at ₹ 4,96,290/-. The case was selected for scrutiny and the AO completed the assessment on 20-12-2007 u/s 143(3) assessing the total income at ₹ 6,46,286/- by making disallowance of ₹ 1,50,000/- on account of labour payments. The assessment records were examined by the learned Commissioner of Income Tax. It was observed that during the year, the assessee company has received subcontract work from M/s. Simplex Concrete Piles (India) Ltd. (in short SCPIL) to carry out manual dredging, formation of dyke with dredged earth berths of Gujarat Adani Port Ltd. (GAPL) at Mundra. The consideration of the sub-contract did not cover the cost of any materials and was only for executing the work without any material. The said fact is confirmed by other clauses in the work order. In view of the fact, the expenditure claimed by the assessee company toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... access road behind the existing/ proposed berths of GAPL at Mundra. The break up of the consideration of ₹ 4,89,54,750/- work-wise reveal that a sum of ₹ 3,75,00,000/- was against work of manual dredging, transportation of dredged material and, construction of earthen dyke in the back up areas of the berth with the dredged earth. Further, the cons/aeration for work such as box cutting or fifing in road embankment including, uprooting and removing plants and jungles as necessary; mixing clean, crushed graded stone aggregate and granular material premixed with water in a power mixer, etc. was fixed at ₹ 1,14,54,750/-. For both these works your company was required to supply all plant, equipment, labourers, etc. 4. Thus, the work order did not require your company to procure or supply materials like brick, stone, cement, concrete, etc. The earthen dyke was to be constructed with dredged earth. The consideration of ₹ 4,89,54,750/- did not cover the cost of any materials and was only for executing the work without material. Further, your submission dated 15.2.2007, made during the course of assessment proceedings confirm that your company had executed the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it provided consultancy services to your company in the project for carrying out manual dredging, formulation of dyke with dredged earth, etc. and that the entire project was completed under its supervision. It also claims to have provided plant and machinery, equipments, etc. against the consideration of ₹ 60,00,000/-. However, following facts emerge from the work order. • In clause 6 of Annexure III to the work order, your company is required to return to SCPIL all plant and equipment supplied in connection with execution of work in good working condition. • In clause 3 ibid it is stated that the rates fixed include the cost of 'all small tools and appliances and labourers deployed by your company. It also allows your company to take the small tools and appliances out of the project premises after satisfactory completion of work. Thus, it is clear that the consideration to your company included only the cost for labour and small tools/ appliances. Plant and equipments; were supplied by SCPIL and your company was not required to mobilize them. Your company was to acquire only small tools. • Clause 15 of Annexure III to the work order given by SCP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on merits". 3. In response to same, assesses has submitted as under: "We have received the notice dt. 04/02/2010 for the initiation of the proceedings u/s 263 of the Income Tax Act, 1961. We herewith submit our submission in our case for your kind consideration: Sir, during the year under consideration, we have received the work order of ₹ 4,89,54,750/- for carrying out manual dredging, formation of dyke with dredged earth and construction of access road behind the existing/proposed berths of GAPL at Mundra from Simplex Concrete Piles (India) Limited. It is alleged in the notice that the work order did not require our company to procure or supply materials like brick, stone, cement concrete etc. Further, the reference has been quoted of Clause 7 of Annexure- lll of work order dated 5th August, 2004, where it is stated that all the construction materials issued to us is to be reconciled by us. In this regard, we would like to submit that our company was liable to incur the expenses of all the construction materials and work order of ₹ 489.54 lacs was a composite contract. We would like to state that clause 7 of Annexure-/// of work order dated 5th Aug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Government. If the road is not proper after taking the sample, they sometimes give direction to reconstruct. In the same manner, our work was also supervised by the project manager of the Simplex Concrete Piles (India) Limited and giving the guidelines from time to time. Clause 6 of Annexure- lll to the work order states that plant and machinery supplied to us should be returned. Sir, here it is understood that any specialized equipment necessary for the work given to us should be returned. This is normal condition of the work order and it does not change our position or the nature of the work to be done. Clause 3 of Annexure-III to the work order rates are inclusive the cost of all small tools and appliances and the labourers. It does not mean that consideration to company includes the cost of labour and small appliances only. It is clearly clarified in the clause 7 of the Work Order that all the value of construction materials issued to us on site should also be borne by us. Clause 15 of Annexure- lll to the work order number of labour should be decided by the Project Manager. The main intention of this clause was that the number of the labour of skilled and semi-skilled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der was without material, than the gross margin of profit would be 84% of the total work order value and no company will give any job/work order where there is a margin of 84%. From the submission of the assessee, it is clear that the revised clause 7 referred to above was not furnished before the Assessing Officer. The same, therefore, needs verification by the Assessing Officer. "5.1 On the issue of consultancy expenses paid to B2C India Ltd., it is submitted that the assessee company was new in this field of work so they have appointed B2C India Ltd. for consultation to execute the work order. On the payment made to B2C India Ltd., tax has also been deducted at the appropriate rate. Supervision from SCPIL was from time to time only. It is further stated that clause 6 to Annexure III regarding plant and machinery is of general nature and is normal condition of the work. However, submission of the assessee on the issue was not obtained by the Assessing Officer neither it was examined by the Assessing Officer. It is, therefore, required to be examined / verified on the part of the Assessing Officer. 6. From the facts narrated above it is evident that the Assessing Officer had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary enquiries before allowing deduction of interest. 7. In view of above referred facts and legal position it is held that the assessment order u/s 143(3) dated 20/12/2007 passed by the AO for A.Y. 2005-06 in the case of the assessee is erroneous and prejudicial to the interest of Revenue, to the extent of non-verification of issues of claim of expenditure towards purchase of materials of ₹ 3,40,00,000/- and claim of consultancy fees of ₹ 60,00,000/- need to be set aside to the file of the Assessing Officer for re-adjudication, as the details and explanations submitted by the assessee during the course of proceedings u/s 263 of the Act were not adjudicated by the Assessing Officer. 8. Accordingly, the above referred assessment order dated 20/12/2007 is set aside to the extent that the Assessing Officer will adjudicate on the issues of claim of expenditure towards purchase of materials of ₹ 3,40,00,000/- and claim of consultancy fees of ₹ 60,00,000/- afresh and decide the same as per law in accordance with the above said discussion. Needless to say that, the Assessing Officer will provide sufficient opportunities to the assessee of being heard. 5. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Counsel for the assessee submitted that the learned Commissioner of Income Tax did not discuss the reply of the assessee in the impugned order and the order of revision is passed without considering the explanations of the assessee. Therefore, the order of revision is not valid. He has relied upon the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. 243 ITR 83 in which it was held that "when the AO adopts one of the two courses permissible under law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one of the views with which the Commissioner does not agree, it cannot be treated as erroneous or prejudicial to the interest of the revenue, unless the view taken by the AO is unsustainable in law." He has submitted that for making no adequate inquiry, the case would not fall within the parameters of section 263 of the IT Act. He has submitted that since the assessee submitted required details before the AO and the AO has considered and applied his mind on the same, therefore, no interference is called for in the matter. The learned Counsel for the assessee reiterated the submissions made before the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the revisional proceedings under section 263, it was not open for the Commissioner to take such a different view. There was nothing on record to suggest that the view taken by the Assessing Officer was unsustainable in law". 7.2 The Hon'ble Rajasthan High Court in the case of CIT Vs Girdhari Lal 258 ITR 331 held as under: "Held, that when the Assessing Officer after going through the material on record and after considering the explanation of the assessee, made some additions and rejected the books of account, it would not be said that he had not applied his mind. It is not always necessary that every assessee in the line of the business should have the same rate of profit. The Tribunal was correct in canceling the orders under section 263 of the Income-tax Act for the assessment years 1977-78, 1979-80 to 1981- 82". 7.3 The Hon'ble Punjab & Haryana High Court in the case of CIT Vs Deepak Mittal 324 ITR 411 held as under: "Change of opinion by reappraising the evidence is not within the parameters of revisional jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961. Held, dismissing the appeal, that the Tribunal had found that the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If the obtaining of factual matrix is tested on the anvil of the aforesaid pronouncement of law, it is quite clear that the Commissioner has really made an effort to cause a routine inquiry with regard to the matter that had already been concluded. The Commissioner, as it appears, has thought that he has the authority to begin a fresh litigation because of the view entertained by him. The aforesaid inexhaustible approach is not permissible. He was required to arrive at a definite conclusion but he had not done so." 7.6 The learned Counsel for the assessee also relied upon the decision of the Hon'ble Delhi High Court in the case of CIT Vs M/s. Vikas Polymers (supra) copy of which is also placed on record in which in Para 15 and 18 it was held as under: "15. Applying the aforesaid law to the facts of the present case, we are of the view that the exercise of revisional power by the Commissioner in the instant case was uncalled for and unjustified. It was more in the nature of roving and fishing enquiry. The Commissioner has proceeded on the assumption that no such information, as was furnished to him, was furnished at the time of assessment. The Commissioner has mentioned that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion that the order of the assessing officer called for interference and revision. In the instant case, for example, the Commissioner has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the Commissioner that the assessing officer had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the Commissioner, was duly reflected in the respective assessments of the partners who were income-tax assessees and the unsecured loan taken from M/s. Stutee Chit & Finance (P) Ltd. was duly reflected in the assessment order of the said Chit Fund which was also an assessee." 8. Considering the facts of the case in the light of the above decisions, it is clear that the impugned order is not sustainable in law. The AO while finalizing the assessment issued notice u/s 142(1) of the IT Act dated 29-1-2007 (PB-1) seeking details of legal and professional fees of ₹ 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction u/s 263 of the IT Act on both the issues. However, it is a fact that the AO considered both the issues at the original assessment stage and took one of the possible views permissible under law. Thus, change of opinion by reappraising the evidences and materials on record would not be within the parameters of revisional jurisdiction of the Commissioner of Income Tax u/s 263 of the IT Act. It is also a fact that the assessee filed the relevant details before the learned Commissioner of Income Tax in the proceedings u/s 263 of the IT Act and explained that the relevant clause of Annexure III of the work order was misleading; therefore, it was rectified by M/s. SCPIL vide letter dated 12-8-2004 clarifying that all the construction materials and consumables issued to the assessee shall be charged and deducted from the assessee's bill payment and the final bill shall be accompanied with such reconciliation statement. Even on going through the original clause 7 of annexure III as is noted above would not say that M/s. SCPIL would issue the construction materials to the assessee free of cost. The language of the original clause would also support the contention of the assessee that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d prejudicial to the interest of the revenue. The learned Commissioner of Income Tax has not given any finding that the order of the AO was not sustainable in law. The learned Commissioner of Income Tax was also not justified in holding that the submission of the assessee was not obtained by the AO with regard to consultancy expenses paid to M/s. B2C India Ltd. Since complete details were filed before the AO which have been examined by the AO and the AO took one of the possible views under law and that complete details were furnished before the learned Commissioner of Income Tax on which no finding has been given by him would show that the learned Commissioner of Income Tax without any justification quashed the impugned order u/s 263 of the IT Act just for the purpose of making routine inquiry with regard to the matters in issue which had already been concluded by the AO. In view of the above, the order of the learned Commissioner of Income Tax cannot be sustained under law. 9. Considering the facts and circumstances of the case as noted above in the light of the above discussions, we find that the impugned order is not sustainable in law. We accordingly, set aside the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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