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TMI Blog2025 (3) TMI 1412X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case as well as law on the subject, the learned Pr. Commissioner of the Income Tax has erred in violating the principles of natural justice by not the mentioning the grounds for initiating action u/s.263 of Income Tax Act, 1961 in the show cause notice issued. As such the order passed u/s.263 is void ab-initio. The action of the Ld. Pr. CIT was wholly unreasonable, uncalled for the bad in law. 4. On the facts and in the circumstances of the case as well as law on the subject, that the order of u/s.263 is merely 'change in opinion'. The action of the Ld. Pr. CIT was wholly unreasonable, uncalled for and bad in law. 5. On the facts and in the circumstances of the case as well as law on the subject, the learned Pr. Commissioner of Income Tax has grievously erred in assuming that the Learned Assessing Officer had not verified the Return of Income, Computation of income, Tax Audit Report along with Financial Account, books of account etc. during the course of assessment proceedings and without made proper inquiry on finalized the orders of assessment is contrary to the fact of the case. 6. On the facts and in the circumstances of the case as well as law on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the head 'Profits and gains of a business and profession'. This has resulted in short levy of tax of Rs. 4,41,37,397/-. 3.1 The PCIT also observed that the assessee had wrongly shown income from house property at Rs. 51,75,850/- instead of declaring it as income from capital gain on the sale of land at Survey No.344/1/B at Olpad, Surat. The sale consideration declared was Rs. 1,62,04,000/- but the stamp duty value of the land was Rs. 1,78,06,122/-. For capital gain purpose, there was short declaration of sale to the extent of Rs. 16,02,122/- having tax effect of Rs. 4,36,522/-. In view of these facts, the PCIT observed that the AO has not properly inquired into the aforesaid issues and passed the assessment order without proper verification/inquiry, application of mind and correct law. Hence, the order was erroneous in so far as it is prejudicial to the interests of revenue within the meaning of section 263 of the Act. The PCIT has extracted contents of the show cause notice dated 08.09.2023 at page 5 to 7 of the order u/s 263 of the Act. The assessee furnished reply on 20.02.2024, which is reproduced at page 8 and 9 of the said order. The assessee submitted that all expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled appeal before the Tribunal. The learned Authorised Representative (ld. AR) of the assessee filed two paper books enclosing therein details of ongoing projects during FY.2017-18, tax audit report and audited accounts, reply to notices u/s 263, submissions to AO during assessment proceedings, TDS chart (TDS on payment for the period 01.04.2017 to 31.03.2018), TDS returns for all quarters for FY.2017-18 in Form 26Q and 24Q, Form 26A, daily wage payment sheet, assessment orders for AY.2016-17, 2014-15 and 2004-05, decision of Hon'ble Gujarat High Court in case of assessee for AY.2004-05 and working of variation of stamp duty value and sale consideration. The other paper book contains various judgments in favour of assessee. He submitted that the assessee is a contractor engaged in Government projects, mainly related to water supply in various States such as Madhya Pradesh, Gujarat having large number of sites. The assessee is executing various turnkey projects (work contracts). The assessee is maintaining cash book, bank book, purchase register, sale register and general ledger etc., which have been duly audited by a reputed Chartered Accountant from Mumbai, namely, M/s N. R. Panc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Punjabhai Vanzara (Form 26A attached) AZDPV7852K 458,000 29 Other small Sub Contractor - 55,21,841 TOTAL 205,263,834 List of Labour Contractors for the period from: 1-Apr-2017 to 31-Mar-2018 Sr. No Name PAN Amount 194C - Labour Charges & Wages: TDS Deducted & Deposited 1 Pawan Narayan Pawar (TDS Deducted) CEEPP6492M 52,400 2 Favvar Dinesh (TDS Deducted) CYIPP6369P 20,000 3 Ivakashbhai Labhubhai Katrodiya (TDS Deducted) AUNPK8813E 95,000 4 Rambhai Bhikhabhai Madam (TDS Deducted) AMHPM0088M 70,000 5 Vipul Chhaganbhai Aniala (TDS Deducted) ARFPA5002L 350,000 6 Govindbhai Patel (Form 26A attached) ANRPP6788L 7,249,421 7 Amount paid to various small parties amount not more that Rs. 1.00 lacs (Total 1 1 6 parties) 4.502J07 8 Daily Wages & Labour Charges - 83,152,162 TOTAL 95,491,190 192B - TDS on Salary: 1-Apr-2017 to 31-Mar-2018 Sr. No. Name Amount 1 Rajesh Kumar Jain (TDS Not Applicable) ACDPJ4261D 282,000 2 Ritu Jain (TDS Not Applicable) ABTPJ5084F 276,000 3 Kalpesh Mangukiya (TDS Deducted) AOAPM5092C 900,000 TOTAL 1,458,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that as the difference between the sale consideration received by assessee and value of stamp valuation authority was less than 10%, no addition u/s 50C was necessary. The ld. AR has filed a paper book containing some decisions in favour of the assessee where it was held that where the variation in actual consideration qua assessable value for the purpose of stamp duty does not exceed 10%, no further action is needed. 5. On the other hand, the learned Commissioner of Income-Tax - Departmental Representative (ld. CIT-DR) of the Revenue supported the order of the PCIT. He submitted that the assessment order was picked up for completed scrutiny on the issue of refund claim, contract receipts or fees and income from house property. The AO has passed a cryptic order without discussing the issues for which the case was selected for complete scrutiny. The AO has not made proper inquiry and verification, which he was required to do. He has also not applied his mind and accepted the returned income. The audit report was silent on deduction of TDS, which should not have been ignored by the AO. The AO also did not raise any query on wrong head of income declared by the assessee. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Chapter XVII-B or XVII-BB of the Act are blank. It is, therefore, evident that the AO has not conducted even the basic inquiry and verification before passing the assessment order. He was required to put specific query to the assessee on the issue of TDS because huge expenses of more than Rs. 31 crore has been claimed by the assessee on various expenses, which are prima facie covered under provisions of section 194C, 194J and 192 of the Act. It is not necessary that addition is a must in case of scrutiny assessment; however, it is certainly the duty of the AO to call for the required details and verify the same as to whether the statutory provisions are complied with or not. If the details given by the assessee are inadequate, the AO is required to seek further details and clarification from the assessee to come to a logical conclusion, as per the mandate of the Act. From the facts on record and the discussion made herein above, it is clear that the AO has failed to discharge the duty cast on him while performing the duty of an Assessing Officer. It is well settled that the AO performs dual role, i.e., he is not only an adjudicator but also an investigator. He is supposed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) An order modifying the order under section 92CA; or (iii) An order cancelling the order under section 92CA and directing a fresh order under the said section]." (emphasis supplied) 7.1 It is clear from bare reading of the provisions that opportunity of hearing to the assessee is a sine qua non before passing an order u/s 263 of the Act. The ld. PCIT is also required to make or cause to be made such inquiry as necessary before passing the order. This is clear from the word 'and' between the two phrases "after giving the assessee an opportunity of being heard" and "after making or causing to be made such inquiry as he deems necessary". The appellant had submitted TDS returns, Form 26A with Annexure, returns of incomes of directors and samples of daily payment receipts of daily wages and labourer charges to the PCIT. These documents are the supporting evidence to prove that appellant had complied with the provisions of section 194C, 194J and 192 of the Act. Therefore, the appellant was entitled to claim the impugned expenses without disallowance of 30% of such expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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