AMARA RAJA POWER SYSTEMS LIMITED,TIRUPATI vs. DCIT., CIRCLE-1(1), TIRUPATI

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ITA 790/HYD/2025Status: DisposedITAT Hyderabad10 September 2025AY 2020-202133 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Pr. CIT's order under Section 263 was not without jurisdiction and did not violate principles of natural justice. The Pr. CIT had issued two show-cause notices, and the assessee had provided written replies, which were considered. Therefore, the assessee was afforded a sufficient opportunity of being heard. Regarding the twin conditions of Section 263, the Tribunal found that the AO had failed to make necessary inquiries regarding the non-deduction of TDS on payments to contractors amounting to Rs. 252,49,94,775/-. This failure to verify, as contemplated by Explanation 2(a) to Section 263, rendered the assessment order erroneous and prejudicial to the interest of the revenue. The Tribunal relied on the Supreme Court's decision in Daniel Merchants (P) Ltd. Vs. ITO. Consequently, the Pr. CIT rightly set aside the assessment order to the AO for re-adjudication after proper verification and affording a reasonable opportunity to the assessee. The Tribunal found no infirmity in the Pr. CIT's order and upheld it. The appeal filed by the assessee was dismissed.

What were the facts?

The assessee, Amara Raja Power Systems Limited, filed its return of income for Assessment Year 2020-21. The Assessing Officer (AO) completed the assessment under Section 143(3) r.w.s. 144B of the Income Tax Act, 1961, determining the income at Rs. 40,62,93,856/-. The Principal Commissioner of Income-Tax (Pr. CIT), Tirupati, initiated revision proceedings under Section 263 of the Act. The Pr. CIT observed that the assessee made payments to contractors totaling Rs. 335,23,02,114/-, but only deducted tax at source (TDS) under Section 194C on Rs. 82,64,73,583/-. The Pr. CIT believed the AO failed to verify the reasons for non-deduction of TDS on the balance amount of Rs. 252,58,28,531/-, rendering the assessment order erroneous and prejudicial to the revenue. The Pr. CIT issued a show-cause notice, and after considering the assessee's reply, passed an order setting aside the assessment to the AO for fresh adjudication.

What were the issues?

1. Whether the order passed by the Principal Commissioner of Income-Tax under Section 263 of the Income Tax Act, 1961, is without jurisdiction and bad in law, as it was not based on facts and circumstances and violated principles of natural justice by not granting a personal hearing? - Assessee's contention: The Pr. CIT's order is bad in law as it lacks jurisdiction, is not factually based, and violates natural justice by denying a personal hearing. The twin conditions of Section 263 (erroneous and prejudicial to revenue) are not satisfied, and the revision was based on suspicion. - Revenue's contention: Not recorded. 2. Whether the Principal Commissioner of Income-Tax erred in invoking revisionary jurisdiction under Section 263 of the Income Tax Act, 1961, as the assessment order passed by the Assessing Officer does not satisfy the statutory twin conditions? - Assessee's contention: The assessment order is neither erroneous nor prejudicial to the revenue, and the Pr. CIT invoked revisionary jurisdiction based on suspicion, failing to satisfy the statutory twin conditions of Section 263. - Revenue's contention: Not recorded. 3. Whether Explanation 2 to Section 263 of the Income Tax Act, 1961, empowers the Principal Commissioner to revise an assessment order based on suspicion? - Assessee's contention: Explanation 2 to Section 263 does not permit revision based on suspicion. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 144B,Section 194C

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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad

For Respondent: Shri E. Phalguna Kumar, Shri U. Mini Chandran
Pronounced: 10.09.2025

आदेशकी प्रयतयलयप अग्रेयर्त/ Copy of the order forwarded to:- 1. यनर्ााररती/The Assessee : M/s Amar Raju Power Systems Limited, Renigunta Kadapa Road, Karakambadi, Tirupati 2. राजस्व/ The Revenue : The Deputy Commissioner of Income Tax, Circle- 1(1), Tirupati 3. The Principal Commissioner of Income Tax, Tirupati 4. यवभागीय प्रयतयनयर्, आयकर अपीलीय अयर्करण, हैदराबाद / DR, ITAT, Hyderabad 5. गार्ाफ़ाईल / Guard file

आदेशानुसार / BY ORDER

Sr. Private Secretary ITAT, Hyderabad

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