TMI Blog2017 (10) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... under Sec. 263. We thus decline to accept the aforesaid contentions raised by the ld. D.R before us. We thus after giving a thoughtful consideration to the order passed by the CIT under Sec. 263 in the backdrop of the submissions raised by the authorized representatives of both the parties, perusing the order passed by the A.O under Sec. 143(3) deliberating on the judicial pronouncements relied upon by the parties and the material available on record, thus, focusing on the proprietary of the order passed by the CIT by invoking his powers under s. 263, keeping in view the scope of the said statutory provision, are unable persuade ourselves to uphold the order passed by the CIT under Sec. 263 of the ‘Act’. We thus in light of the observations and reasonings recorded hereinabove, set aside the order passed by the CIT under Sec. 263. The appeal of the assessee is allowed. - I.T.A. No. 2895/Mum/2014 - - - Dated:- 11-9-2017 - SHRI B.R. BASKARAN, AM AND SHRI RAVISH SOOD, JM For The Appellant :Shri Vijay Mehta, A.R. For The Respondent : Shri Suman Kumar, D.R. ORDER PER RAVISH SOOD, JUDICIAL MEMBER The present appeal filed by the assessee is directed agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k done by the sub-contractor of the assessee, viz. M/s. Urja Infrastructure; (ii).that during the course of the assessment proceedings no supporting details/documentary evidence was filed by the assessee in respect of the heavy labour charges which were claimed as an expenditure by the assessee in its Profit and loss A/c , and had thus failed to verify/examine the issue of disallowance of labour charges amounting to ₹ 1,30,22,495/- in the absence of any documentary evidence in support thereof; (iii). the A.O had failed to examine the basis of valuation of WIP at ₹ 60,00,000/- by the assessee on 31.03.2009; (iv). the A.O had failed to deliberate upon the fact that though the assessee was engaged in the execution of the same project in A.Ys. 2007-08, 2008-09 and 2009-10, however, the net profit reflected by the assessee during the year under consideration at 2.01% was substantially lower than the net profit rate of 6.65% shown in A.Y. 2007-08; (v) that though the balance sheet of the assessee revealed VAT liability of ₹ 1,20,000/- payable /outstanding on 31.03.2009, however, the A.O failed to examine/verify as to whether the said liability was discharged before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1,30,22,475/- received by the assessee from the client, i.e Vidharbha Irrigation Development Corporation has been directly transferred to M/s Urja Infrastructure and claimed as expense by the assessee under the head Labour charges was also not verified by the A.O; (ix). The A.O had not verified the exact breakup of the amount paid by the assessee to the sub-contractor, viz. M/s Urja Infrastructure , viz. its component elements such as labour, material, overheads, reimbursements, TDS etc; (x). The A.O had failed to verify the exact nature of work carried out by M/s Urja Infrastructure, nor any bills/challans etc. submitted by the said concern were called for and verified by the A.O during the course of the assessment proceedings. (xi). That the A.O had failed to verify the documents forming the basis of valuation of the WIP, as claimed by the assessee during the course of the revisional proceedings; (xii). The A.O had failed to verify that as to how the assessee had paid an amount of ₹ 1,30,22,495/- to M/s Urja Infrastructure, i.e without calling for or, examining and estimating the actual expenditure incurred by the sub-contractor; and (xiii.) The A.O had f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt bill ( RA Bill) raised on the government department after making statutory deductions, viz. VAT, TDS against the bills submitted by M/s Urja Infrastructure etc. The ld. A.R averred that during the year under consideration, viz. A.Y 2009-10 the assessee had received contract receipts of ₹ 73,97,282/-, against which an amount of ₹ 70,22,495/- was paid towards sub-contracting charges to M/s Urja Infrastructure, which was debited by the assessee under the head Labour Charges . It was submitted by the ld. A.R that the assessee after making the aforesaid payment to the sub-contractor, viz. M/s Urja Infrastructure, was left with a balance amount of ₹ 3,74,787/-, out of which the VAT liability of ₹ 1,47,946/- was paid. The ld. A.R submitted that from the remaining balance amount as was left available with the assessee, the administration and establishment expenses aggregating to ₹ 78,013/- were adjusted and the balance amount of ₹ 1,48,828/- was offered as Income/Profit by the assessee for tax. 8. The ld. A.R submitted that though it remained as a matter of fact that the A.O had during the course of the assessment proceedings called for the requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on the government department in stages, i.e after receipt of the bill from the sub contractor and verification and inspection of the site by the Ex. Engineer or Site Engineer of the government department. It was submitted before the CIT that the WIP represents the aggregate value of the bills received from sub-contractors for work completed on their part, against which corresponding RA bill had not been raised by assessee on the government department, due to pending inspection of the site etc. by the department on 31st day of March of the relevant financial year. The ld. A.R submitted that vide its reply dated 10.01.2014 (Page 49 of APB ), the entire basis of the valuation of WIP was demonstrated before the CIT, and thereafter no query was raised on his part. The ld. A.R further submitted that the complete details of the expenses claimed by the assessee was furnished before the CIT, alongwith an explanation supported by facts and figures, both as regards the reason for high expenses and lower net profit in comparison to the preceding year, viz. A.Y. 200708 (Page 49 of APB ). It was averred by the ld. A.R that the CIT after perusing the details of the expenses furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, however, the latter without pin pointing out any infirmity in the explanation of the assessee, had acted most arbitrarily, and without any rhyme and reason concluded that he does not find any merit in the objections/submissions made by the assessee. The ld. A.R averred that the CIT had most casually set aside the assessment and directed the A.O to frame de novo assessment. The ld. A.R in order to drive home his contention that the order passed by the CIT under Sec. 263 was not sustainable in the eyes of law, relied on the following judicial pronouncements: (i). CIT Vs. Vikas Polymers (2012) 341 ITR 537 (Del) (ii). DIT Vs. Jyoti Foundation (2013) 357 ITR 388 (Del) (iii). CIT Vs. Escorts Ltd. (2011) 338 ITR 435 (Del) (iv). A.V. Industries Vs. DCIT (Mum) (ITA No. 3469/Mum/2010; dated. 06.11.2015) (v). Jayanth Murthy Vs. DCIT (ITA No. 870 and 1234/Ahd/2014; dated. 20.05.2016) (vi).Narayan Tatu Rane Vs. ITO (70 taxmann.com 227) 9. Per contra, the ld. Departmental representative (for short D.R ) submitted that as the order passed by the A.O was erroneous and prejudicial to the interest of the revenue, therefore, the CIT had rightly exercised his revisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed under Sec. 143(3) by the same A.O for A.Y. 2007-08 (Page 78 of APB ) and for A.Y. 200809 (Page 80 of APB ). The ld. A.R took us through Page 7 Para 9 of the judgment of the Hon ble High Court in the case of Ashok Logani (supra) relied upon by the ld. D.R, and submitted that the facts involved in the said case were distinguishable as against those involved in the case of the present assessee. 11. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities, judicial pronouncements relied upon by both the parties and the material available on record. We have deliberated on the facts of the case and find that the assessee which is a Joint Venture (AOP) engaged in the business of civil construction was awarded a contract for construction of C.C lining (by paver) of Branch Canal-1 from Km. 1.00 to 19.28 of Bawanthadi Project by Vidarbha Irrigation Development Corporation, Nagpur, through Medium Project Division, Gondiaya, vide agreement No B-1/97/Divisional/2006-07, dated 7.11.2006. The assessee vide a Sub-Contractors Agreement , dated. 20.12.2006, had sub-contracted the execution of the complete project to M/s Urja I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted after scrutinizing the case of the assessee in the preceding years. We find that our aforesaid view stands fortified by the judgment of the Hon ble High Court of Delhi in the case of CIT Vs. Escorts Ltd. (2011) 338 ITR 435 (Del), wherein the Hon ble High Court in context of order passed by the CIT under Sec. 263, therein deliberating on the issue as to whether the Department could reopen an assessment based on a fresh inference of transactions which have been carried on by the assessee and accepted in turn by the revenue for several preceding years on the pretext of dubbing them as erroneous, had observed as under:- 13. Therefore, in our opinion, given the fact that the assessee had been engaged in these transactions in the preceding assessment years, CIT could have had no occasion to take recourse to revisional powers under s. 263 of the Act on the fundamental aspects of the transactions in issue on which a view had been taken and, not shown to us as having been challenged. 12. We are of the view that it is only where an order passed by the A.O is considered by the CIT to be erroneous and prejudicial to the interest of the revenue, it is only then that the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain as to why in the backdrop of the aforesaid facts which rendered the assessment order passed by the A.O under Sec. 143(3) as erroneous and prejudicial to the interest of the revenue, the same may not be revised. 13. We find that as observed by us at length hereinabove, the assessee by way of exhaustive replies filed with the CIT in respect of all of the aforesaid issues, on the basis of which the order passed by the A.O was sought to be revised, had thus furnished clarifications as regards all of the said issues and demonstrated that the assessment order was not erroneous and prejudicial to the interest of the revenue. However, we find that the CIT without pointing out any infirmity in the reply/explanation of the assessee, and as to why the same could not be accepted had rather hushed through the matter and concluded that the assessment order passed by the A.O was found to be erroneous and prejudicial to the interest of the revenue. 14. We have given a thoughtful consideration to the order passed by the CIT and are unable to persuade ourselves to uphold the same. We find that as per the mandate of Sec. 263, a statutory obligation is cast upon the CIT to afford an opportun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee on the issues on which the order of the A.O is sought to be revised as a mere formality, would therein render the very affording of opportunity of being heard to the assessee as nothing better than being a farce and an eye wash, defeating the very legislative intent. We are afraid that in the case of the present assessee, though the CIT had placed on record the reply of the assessee in respect of the issues on which the order passed by the A.O was sought to be revised and had also referred about the same in the body of his order passed under Sec. 263, however, neither any reason had been given by the CIT, nor it can be gathered from the impugned order, as to why the explanation of the assessee that the order passed by the A.O was not erroneous and prejudicial to the interest of the revenue on the issues on which it was sought to be revised, was not found to be acceptable. We may clarify that though there is no doubt that the jurisdiction to revise the order passed by the A.O remains within the exclusive domain of the jurisdiction of the CIT, but however, the internal safeguard provided by the legislature by affording an opportunity of being heard to the assessee would f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er investigation or enquiry as might be necessary. 15. We further find that the CIT had in the course of the revisional proceedings taken recourse to certain fishing and roving enquiries, which neither did form the basis on which the order passed by the A.O was sought to be revised, nor were relevant to the issues under consideration. We find that the CIT while deliberating on the issue as regards the labour charges of ₹ 1,30,22,495/- paid by the assessee to the sib-contractor, viz. Urja Infrastructure, had therein observed that no documentary evidence such as bills pertaining to expenditure incurred on sand, cement, brick, steel and other things required/essential for constructing pipeline by M/s Urja Infrastructure Ltd., were submitted by M/s Metakaps Engineering Mahendra Construction Co, J.V, i.e the assessee. We are of the considered view that seeking of the aforesaid information in respect of the expenses incurred by the sub-contractor, viz. M/s Urja Infrastructure can safely be characterized as a fishing and roving enquiry on the part of the CIT, which had never formed the basis on which the order of A.O was sought to be revised by the CIT. We are further of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and, left to the Commissioner, he would have estimated the income at a higher figure than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that, in the opinion of the Commissioner, the order in question is prejudicial to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said material facts, i.e either as regards the disclosure made by the assessee or the validity of the retraction made by him thereafter did find a mention in the assessment order passed by the A.O, had thus for the said reason revised the order u/s 263, which thereafter was upheld by the Hon be High Court. We are of the considered view that as the facts involved in the said case are distinguishable as against those involved in the case of the present assessee, therefore, the reliance placed by the ld. D.R would not assist his case. That still further we are also unable to persuade ourselves to be in agreement with the contention raised by the ld. D.R that the Explanation 2 of Section 263 which had been made available on the statute vide the Finance Act, 2015 , w.e.f 01.06.2015, was to be construed as being retrospective in nature and thus would be applicable to the present case of the assessee for A.Y. 200910. We are not impressed by the contention of the ld. D.R that as the A.O had passed the assessment order without making inquiries and verifications which he should have made in the opinion of the CIT, therefore, the same rendered the order passed by him amenable for revis ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
