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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: Sh. N. S. Saini & Sh. N. K. Choudhry
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR Before Sh. N. S. Saini, Accountant Member And Sh. N. K. Choudhry, Judicial Member ITA No. 211/Asr./2017 : Asstt. Year : 2012-13 Dharmapal Contractor Hot Vs Pr. Commissioner of Income Tax, Mix Plant, Vill. Danewala, Bathinda Sardulgarh, Distt. Mansa (APPELLANT) (RESPONDENT) PAN No. AAEFD2575M Assessee by : Shri. P. N. Arora, Adv. Revenue by : Smt. Parwinder Kaur, DR Date of Hearing :15.05.2019 Date of Pronouncement : 14.06.2019 ORDER Per N. S. Saini, Accountant Member: This is an appeal filed by the assessee against the order of Pr. Commissioner of Income Tax, Bathinda dated 29/31.03.2017.
The assessee has raised following grounds of appeal: “1. The Ld. Principal Commissioner of Income Tax, Bathinda erred on facts and law in cancelling the order of the AO passed u/s 143(3) dated 05.11.2014, by invoking the provisions of section 263 of the I.T Act, 1961, without providing any proper opportunity of hearing. 2. That the Ld. Principal Commissioner of Income Tax, Bathinda erred on facts and law in assuming the jurisdiction u/s 263 of the IT Act, 1961 to pass an order cancelling the order u/s 143(3) dated 05.11.2014 of the AO because all the issues which have been set aside to the AO had
ITA No.211/Asr./2017 2 Dharampal Contractor Hot Mix Plant been examined in detail during the course of assessment proceedings and the order u/s 143(3) had been passed by the AO after due application of mind. 3. That the Ld. Principal Commissioner of Income Tax, Bathinda erred on facts and law in cancelling the order of the AO in complete violation of powers vested u/s 263 of the Income Tax Act, 1961 because the explanation furnished by the assessee has been rejected without rebutting the same. Hence, the order u/s 263 of the Principal Commissioner of Income, Bathinda deserves to be quashed as the order passed by the AO u/s 143(3) is neither erroneous nor prejudicial to the interest of the revenue. 4. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.” 3. The brief facts of the case are that the return of income for assessment year 2012-13 was filed by the assessee on 29.09.2012 at an income of Rs.49,47,604/- which was processed u/s 143(1) of the Income Tax Act at returned income. Thereafter, assessment u/s 143(3) of the Act was completed by the Assistant Commissioner of Income Tax, Circle-1, Bathinda on 05.11.2014 determining income at Rs.52,77,604/-.
Thereafter, the Pr. Commissioner of Income Tax, Bathinda issued notice u/s 263 of the Act on 04.03.2015 which reads as under: “4. Perusal of the records reveals that the AO has made addition of Rs.1,30,000/- out of total expenditure of Rs.2.66 crores claimed by you under the head “hiring charges of machinery” and
ITA No.211/Asr./2017 3 Dharampal Contractor Hot Mix Plant Rs.19.28 lakhs under the head “fuel expenses” since all such payments were stated to be made in cash supported by self made vouchers. Perusal of the “machinery hiring” account placed on record reveals that these payments have been made to many different persons on almost daily basis. For example, on 30.03.2012, such payments each less than Rs.20,000/- have been made to 50 different persons. Similarly, such payments have been made to 21 different persons on 21.03.2012. The persons mentioned against entries made on 21.03.2012 are different from the persons mentioned on 31.03.2012. Similarly, numerous such payments have been allegedly made to various persons on various other dates of the accounting year. The AO has neither enquired regarding the genuineness of such persons nor has he made any enquiry as to what services have been rendered by such persons. 5. It is apparent from the said ledger account that the said payments are certainly not machinery hiring charges. It is not expected that you will enter into agreements with hundreds of persons for hiring their machinery for which payments are allegedly made on daily or weekly basis. You have apparently manipulated its accounts by restricting each of the hundreds of payments below Rs.20,000/- in order to avoid disallowance u/s 40A(3) of the I.T. Act, 1961. Prima facie, the entire expenditure of Rs.2.66 crores under this head appears to be either inflated or bogus. Since the AO had not applied mind on the facts on record mentioned above, this issue needs to be considered for the revision of the assessment order u/s 263 of the I.T. Act, 1961. 6. Perusal of the capital accounts of the partners reveals the following:- (i) There is a deposit of Rs.10 lakh in the account Of the partner Mr. Dharampal and Rs.4 lakh in the account of Mr. Jiwan Lai. The AO has not examined the sources of funds for these deposits. (ii) The household drawings of these partners namely Sh. Bheem Sain, Sh. Bharat Bhushan and
ITA No.211/Asr./2017 4 Dharampal Contractor Hot Mix Plant Sh. Jiwan Kumar are Rs. 60,000/- only for the entire year. The AO has not examined the total household expenses vis-a-vis the total household drawings of the said partners. 7. There are substantial amounts of cash deposits in your various bank accounts. The statements of such bank accounts are placed on record. For example, an amount of cash of Rs. 7.20 lakh has been deposited in the month of March in the HDFC Bank, Sardulgarh Branch. There are similarly many cash deposits in this bank and your many other bank accounts. The AO has not examined the sources of the funds of such cash deposits. 8. In view of the above, you are hereby given an opportunity to explain as to why the above referred assessment order dated 05.11.2014 may not be cancelled u/s 263 of the Income Tax Act, 1961 for making fresh assessment since the said order passed by the Assessing Officer prima facie appears to be erroneous and prejudicial to the interest of the Revenue.” 5. Thereafter, the Pr. Commissioner of Income Tax passed order u/s 263 of the Act holding the order of assessment to be erroneous and prejudicial to the interest of Revenue and cancelling the assessment order with a direction to make de novo assessment as per the directions given by him.
Being aggrieved against the said order, the assessee is in appeal before us. 7. The Authorized Representative of the assessee submitted that similar order u/s 263 of the Act was passed by the Pr. Commissioner of Income Tax in the case of assessee itself in the assessment years 2010-11 and 2011-12 and this Bench of the Tribunal in ITA Nos. 219 & 672/Asr./2015 vide order dated 01.06.2016 cancelled the order passed u/s 263 of the Act and
ITA No.211/Asr./2017 5 Dharampal Contractor Hot Mix Plant upheld the assessment order of the Assessing Officer. It was his submission that the facts and issue involved in the year under appeal are identical and therefore, following the order of the Tribunal for assessment years 2010-11 and 2011-12, the order passed u/s 263 of the Act by the Pr. Commissioner of Income Tax should be cancelled and the order of the Assessing Officer should be upheld. 8. On the other hand, the Departmental Representative fully justified the order of the Pr. Commissioner of Income Tax passed u/s 263 of the Act.
We have heard the rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the assessee filed its return of income disclosing income at Rs.49,47,604/-. Assessment was completed u/s 143(3) of the Act vide order dated 05.11.2014 determining total income at Rs.52,77,610/-. The impugned order was passed u/s 263 of the Act revising the said order of assessment.
The revision order has been passed by the Ld. Pr. Commissioner of Income Tax in respect of 4 issues.
The first issue relates to the expenses incurred under the head hiring charges of machinery. The assessee claimed expenses of Rs.2,66,42,000/- under the head. The Assessing Officer noticing certain defects in respect of these expenses have disallowed Rs.1,30,000/- out of the said expenses. The Pr. Commissioner of Income Tax after observing the defects as pointed out by the Assessing Officer in the order of assessment
ITA No.211/Asr./2017 6 Dharampal Contractor Hot Mix Plant was not satisfied with the amount disallowed by the Assessing Officer and it appears that in his view more disallowance ought to have been made.
We find that the Assessing Officer in the assessment order after disallowing Rs.1,30,000/- has allowed deduction for Rs.2,65,12,000/- in respect of expenses incurred under the head hiring charges for machinery. No material has been brought on record by the Ld. Pr. Commissioner of Income Tax to show that the view taken by the Assessing Officer in the assessment order is unsustainable. We find that similar order u/s 263 of the Act was also passed in respect of expenses under this head in the case of assessee itself for assessment years 2010-11 and 2011-12 which was set aside by the Tribunal vide its order dated 01.06.2016 passed in ITA Nos. 219 & 672/Asr./2015.
In view of the above, we find that the order of the Ld. Pr. Commissioner of Income Tax passed u/s 263 of the Act in respect of this issue is unsustainable.
The next issue raised in the impugned order is in respect of capital contribution by partners of Rs.10,00,000/- in the account of Mr. Dharampal and Rs.4,00,000/- in the account of Jiwan Lal. The Ld. Pr. CIT admitted that documents in support of capital contribution made by partners were asked by the Assessing Officer during the assessment proceedings and the same were also furnished by the assessee. However, in his opinion the same was not enough and the Assessing Officer ought to have made further inquiries in respect of this issue. Thus, we find that it is not the case of lack of inquiry by the
ITA No.211/Asr./2017 7 Dharampal Contractor Hot Mix Plant Assessing Officer. The Ld. Pr. CIT could not point out any error in the conclusion of the Assessing Officer which was arrived at by the Assessing Officer. In the above circumstances, in our considered view, order u/s 263 of the Act could not have been validly passed in respect of this issue.
The third issued dealt by the Ld. Pr. CIT relates to low withdrawal by partners. The Ld. Pr. CIT observed that partners, namely, Shri. Bheem Sain, Shri. Bharat Bhushan and Jiwan Kumar has withdrawn Rs.60,000/- each during the year which was considered as low. It is observed that the other partners Shri. Dharam Pal and Shri. Jivan Singla has withdrawn Rs.14,50,000/- and Rs.5,00,000/-. We find that exactly in respect of the very same issue order u/s 263 of the Act passed in the case of the assessee for assessment years 2010-11 and 2011-12 was cancelled by the Tribunal vide order dated 01.06.2016 in ITA Nos. 219 & 672/Asr./2015. We, therefore, following the same hold that order passed u/s 263 of the Act in respect of this issue is also unsustainable.
The last issue relates to cash deposit in HDFC Bank, Sardulgarh Branch of Rs.7,20,000/- and other bank.
According to the Ld. Pr. CIT, the source of aforesaid cash deposit in bank was not enquired into by the Assessing Officer. We find that it is not in dispute that the related bank accounts and cash deposit made therein were duly recorded in the books of account of the assessee. These books of account were not rejected by any authority. The books of account of the assessee itself shows the source of the said deposit in the bank account in absence of any error being pointed out in the books
ITA No.211/Asr./2017 8 Dharampal Contractor Hot Mix Plant of account or in absence of any finding that the cash deposit in question were not recorded in the books of account. In our considered view, no interfere with the order of the Assessing Officer was warranted on this issue by invoking power u/s 263 of the Act. Thus, the order passed u/s 263 of the Act in respect of this issue is also not sustainable.
Therefore, we set aside the impugned order passed u/s 263 of the Act and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 14 t h day of June 2019 at Amritsar)
Sd/- Sd/- (N. K. Choudhry) (N. S. Saini) Judicial Member Accountant Member Dated: 14/06/2019 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT
ASSISTANT REGISTRAR