Income Tax Appellate Tribunal - Pune
Deepak Kumar Sitaram Singh, Satara vs Assessee on 5 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench A, Pune
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri G.S. Pannu, Accountant Member
I.T.A. No. 395/PN/2010 : A.Y. 2007-08
Shri Deepak Kumar S. Singh,
Prop. M/s. Prakash Construction
Plot No. 4, Amrai Shahunagar, Godali, Satara. ... Appellant
PA No.AQFPS6598A
Vs.
Asst. Commissioner of Income-tax,
Satara Circle, Satara ... Respondent
Assessee by: Shri Pramod S. Shingte
Revenue by: Shri V. Anandrajan, CIT
Date of hearing: 05-03-2012
Date of pronouncement: 27 -04-2012
ORDER
PER G.S. PANNU, AM
This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-III, Pune dated 27-01- 2010 passed under section 263 of the Income-tax Act, 1961 (in short 'the Act'), setting aside the order passed by the Assessing Officer under section 143(3) of the Act for the assessment year 2007-08.
12. The Grounds of appeal raised by the assessee in this appeal read as follows :
"1. On the facts and in the circumstances of the case and in law, the Ld CIT erred in passing an order U/s.263 of I.T. Act, 1961 setting aside the assessment de novo and to make fresh assessment without considering the fact that all the relevant details were submitted and verified in proceedings U/s. 143(3) of the I.T. Act, 1961, directions of the Commissioner amounted to change of opinion.
"2. On the facts and in the circumstances of the cases and in law, the Ld CIT gravely erred in passing an order U/s. 263 of I.T. Act 1961 without arriving at the finding that order U/s. 143 (3) of I.T. Act was erroneous in so far as it is prejudicial to revenue and thus the said order ought to be quashed as null and void and bad in law".
3. The facts, in brief, are that for the assessment year 2007-08 a scrutiny assessment in this case was made by the Assessing Officer under section 143(3) of the Act on 24-04-2008 determining the assessee's total income at Rs. 1,08,77,410/-. On a perusal of the assessment records, the Commissioner of Income-tax noticed that the assessment order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interests of Revenue. He accordingly issued a show-cause 2 notice under section 263 of the Act to the assessee on the following points :
i. that the assessee has incurred various direct expenses during the year, and the Assessing Officer has not taken on record the party-wise details of various expenses, such as excavation charges, Dumper and Roller Hire charges, Labour charges, Transport expenses etc; that the Assessing Officer has not obtained party-wise details of major purchases; and that the genuineness of these expenses was not verified by the Assessing Officer, but the verification was done only of the sundry creditors of such expenses.
ii that from the details of sundry creditors furnished, it was seen that the assessee has not deducted tax at source in respect of 12 parties as enumerated by the Commissioner of Income-tax in his order; and, iii. that on verification of confirmation received from a creditor namely M/s. Y M Nikam courier service, Prop. Yogesh Manasingh Nikam, it was seen that there was an opening debit balance (payable amount) of Rs. 10,79, 640/-, and no enquiry has made in this behalf; and that a sum of Rs. 5 lakhs was paid to this concern in violation of the provisions of section 40A(3) of the Act, which aspect was not verified by the Assessing Officer.3
4. In response, the assessee submitted written submissions, which have been extracted by the Commissioner of Income-tax in the impugned order. The Commissioner of Income-tax was not satisfied with the explanation of the assessee and came to the conclusion that the Assessing Officer has not made necessary enquiries on the above points and this made the assessment order dated 24-04-2009 erroneous in so far as it was prejudicial to the interests of Revenue. The Commissioner of Income-tax accordingly set aside the assessment order in its entirety and directed the Assessing Officer to pass an order de novo after giving the assessee reasonable opportunity of being heard and in accordance with law. The relevant portion of the order of the Commissioner of Income-tax is as follows :
"3. I have carefully considered the submission of the assessee and perused the material on record. Having done so it is clear that the enquiries which required to be made prima-facie on the facts of the case on aspects mentioned in the notice u/s. 263 of the Income-tax Act, 1961were not made by the A.O. In this regard following points may be mentioned by way of illustration :
i. On a number of issues such as that in respect of a Bedge the submission of the assessee is that through oversight the narration was written as 'sub-contract'. This does not detract from the position brought out in the notice u/s. 263 that the narration was sub-contract and, therefore, 4 applicability of TDS provisions was to be examined by the AO, which has not been done.
ii. Similarly, though the payment of Rs. 5 lakhs by Cheque No. 3389 dated 10-11-2006 has been made otherwise than through account payee cheque or bank draft in excess of limit prescribed u/s. 40A (3), no disallowance has been made by the A.O. iii. From the material on record, it is clear that no enquiry has been conducted in respect of genuineness of the creditors amounting to Rs. 10,79, 640. This enquiry was very much called for on the face of it on the facts of the case.
5. Being aggrieved, the assessee is in appeal before us.
6. Before us Learned counsel for the appellant has vehemently submitted that the commissioner erred in setting aside the assessment and to make a de novo assessment without considering the fact that all the relevant details were submitted and verified by the Assessing Officer in the proceedings carried out u/s. 143 (3) of the Act. It was also pointed out that with regard to the charge of the commissioner that the applicability of TDS provisions were not examined, it was pointed out that before the Assessing Officer, in response to query raised, assessee had submitted the necessary clarifications vide communication dated 15-04-2009, copy of which has been placed on record. It was also pointed out that vide communication dated 26-03-2009, a 5 copy of which has been placed on Page 8 of the Paper Book, the reconciliation of the gross contract receipts and the details of TDS deducted on behalf of the assessee was also furnished. Apart there from, it has also been pointed out that before the commissioner also assessee had made detailed submissions to point out that no TDS was deductible on the points referred by the commissioner, but the detailed submissions have been brushed-aside without finding fault and the assessment has been set-aside to be made afresh.
7. Even with regard to issue relating to the debit balance appearing in the account of the creditor, namely, M/s. Y M Nikam Courier Service, it was pointed out the issue was adequately clarified and that there was no necessity to set aside the assessment on this point also. Even with regard to the applicability of sub section 40A(3) of the Act regarding cash payments made it was pointed out that the Assessing Officer had raised queries on this aspect as is evident from the questionnaire dated 09-04-2009, placed at Page 6 of the Paper Book. The assessee had given due clarifications in the course of the assessment proceedings, but with regard to the payment of Rs. 5 lakhs to M/s. Y M Nikam courier services, pointed out by the commissioner, no such query was raised by the Assessing Officer. However, it is pointed out that other than the aforesaid specific issue there is no other error pointed out by the commissioner so as to render the entire assessment to be set aside u/s. 263 of the Act.
68. On the other hand, the learned DR has relied upon the order of the commissioner in support of the case of the Revenue.
9. We have carefully considered the rival submissions. It is quite well settled that the suo-moto revisionary powers contained in section 263(1) of the Act can be exercised by the commissioner only if the circumstances specified therein exist. The two circumstances, which are prerequisite to invoke section 263 of the Act are namely, that the order should be erroneous and that such error had resulted in a prejudice to the Revenue. It is therefore to be appreciated that not only the order should be erroneous but the error found by the commissioner should also have resulted in prejudice to the Revenue and it is only under such a situation the commissioner shall be empowered to invoke his supervisory jurisdiction contained in section 263(1) of the Act.
10. In this case the first point sought to be made out by the commissioner is that party-wise details were not obtained with regard to certain expenses of excavation charges, etc., and for purchases made. The commissioner however observed that only the details of sundry creditors in respect of such expenses were verified by the Assessing Officer. In the entire order of the commissioner there is no assertion as to in what manner non- obtaining of the information in the manner required by the commissioner, resulted in an erroneous order by the Assessing Officer. Only a doubt has been cast that the genuineness of the expenses were not verified, so however the same is a bald 7 assertion without any specific infirmity or ingenuity brought out by the commissioner.
11. Secondly with regard to non-deduction of TDS on certain amounts, we find that the assessee made detailed submissions, which has been reproduced by the commissioner in his order whereby for each of the item, it has been explained as to why the TDS provisions were not attracted. No effort has been made by the commissioner to point out as to how the assertions of the assessee were untenable in law. In the absence of any adverse finding of the commissioner on this aspect, there cannot be an error in the assessment order as understood for the purposes of section 263 of the Act.
12. In so far as the issue relating to payment of Rs. 5 lakhs to M/s. Y M Nikam courier services in violation of section 40A(3) of the Act is concerned, on this aspect we find that there is no case made out by the assessee. The payment in question is in violation of Section 40A(3) of the Act and is liable to suffer disallowance.
13. Considering the aforesaid, we hold that the commissioner was not justified in a blanket setting aside of the assessment order dated 24-04-2009 and instead he ought to have invoked his jurisdiction u/s. 263 only with regard to errors found in the assessment order. On this court, we therefore deem it fit and proper to uphold the invoking of section 263 of Act by the commissioner only on the limited issue of the disallowance 8 U/s.40A(3) of the Act with regard to the payment of Rs.5,00,000/- Lakhs made to M/s. Y M Nikam courier services in cash. We conclude by modifying the directions of the Commissioner by requiring the Assessing Officer to amend the assessment order dated 24-04-2009 by making the purported disallowance u/s. 40A(3) of the Act only and re-determine the total income accordingly.
14. Thus in the final analysis, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 27th April 2012.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (G.S. PANNU)
Judicial Member Accountant Member
Pune Dated: 27th April 2012
satish
Copy of the order forwarded to :
1. Assessee
2. Department
3. CIT(A) I Pune
4. CIT II Pune
5. The D.R, Pune Bench
By order
Assistant Registrar,
ITAT, Pune Bench, Pune
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