SLR INFRASTRUCTURE PRIVATE LIMITED,HYDERABAD vs. DCIT., CIRCLE-3(1), HYDERABAD

ITA 544/HYD/2024Status: DisposedITAT Hyderabad17 October 2025AY 2018-1927 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessment order passed by the AO was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal noted that the AO had thoroughly examined the issues questioned by the Pr. CIT during the assessment proceedings, as evidenced by the notice issued under Section 142(1) and the assessee's reply. The Tribunal further observed that the Pr. CIT did not specify how the assessment order was erroneous and prejudicial, and that setting aside the assessment for further verification was not permissible under Section 263, even after the insertion of Explanation (2). Relying on various case laws, including CIT Vs. Max India Ltd., CIT Vs. Tamilnadu Warehousing Corpn., CIT Vs. Nahar Exports Ltd., CIT Vs. Mepco Industries Ltd., CIT Vs. Arvind Jewellery, CIT Vs. Bharat Aluminum Co. Ltd., and Commissioner of Income-tax v. Sunbeam Auto Ltd., the Tribunal concluded that the Pr. CIT erred in invoking Section 263. The assessment order was neither erroneous nor prejudicial to the revenue, and the Pr. CIT's order was quashed. The appeal filed by the assessee was allowed.

What were the facts?

The assessee, SLR Infrastructure Private Limited, filed its return of income for AY 2018-19 declaring Rs. 2,28,44,290. The case was selected for scrutiny to verify the genuineness of expenses. The assessment was completed under Section 143(3) r.w.s. 143(3A) & 143(3B) on 09-04-2021, accepting the returned income. Subsequently, the Principal Commissioner of Income Tax (Pr. CIT) initiated revision proceedings under Section 263, issuing a show-cause notice on 21-04-2024. The Pr. CIT alleged the assessment order was erroneous and prejudicial to revenue as the Assessing Officer (AO) allowed deduction for sub-contract expenditure to Malreddy Dharma Reddy and Venkat Rami Reddy Nimmanpalli without sufficient inquiry, despite them not filing returns. The assessee contended that the AO had verified these payments by issuing a Section 142(1) notice, calling for details and TDS, which were furnished.

What were the issues?

1. Whether the order passed by the Assessing Officer under Section 143(3) r.w.s. 143(3A) & 143(3B) for AY 2018-19 is erroneous and prejudicial to the interest of the revenue, thereby warranting revision under Section 263 of the Income Tax Act, 1961, concerning the genuineness of sub-contract expenditure? Assessee's contentions: The Pr. CIT erred in invoking Section 263 powers. The AO conducted necessary inquiries by issuing a Section 142(1) notice and verified the sub-contract payments, including bills, banking channel payments, and TDS. The non-filing of returns by sub-contractors, particularly when one was deceased, should not invalidate the payments, as the assessee's role is to deduct TDS. The Pr. CIT failed to appreciate these facts and wrongly set aside the assessment order. Revenue's contentions: The Pr. CIT's order is supported. The assessee failed to file the relevant income tax returns of the sub-contractors and relevant bills furnished by them. The Pr. CIT rightly observed that the AO did not carry out adequate inquiries regarding the genuineness of the expenditure.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 143(3A),Section 143(3B),Section 142(1),Section 194C

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Income Tax Appellate Tribunal, Hyderabad A‘ Bench, Hyderabad

For Respondent: Shri A. Srinivas, Advocate, Ms. U. Mini Chandran CIT-DR

PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the Principal Commissioner of Income Tax, Hyderabad - 1, dated 25.03.2024 passed under Section 263 of the Income Tax Act, 1961 (for short "the Act") and pertains to the assessment year 2018-19. 2. The brief facts of the case are that, the ass

The order continues below.

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