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

प्रयत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.

The present appeal filed by the assessee company is directed against the order passed by the Principal Commissioner of Income-Tax, Tirupati (for short, “Pr. CIT”) under Section 263 of 2
the Income Tax Act, 1961 (For short, “the Act”) dated 27.03.2025, which in turn arises from the order passed by the Assessing
Officer (for short, “A.O”) under Section 143(3) r.w.s. 144B of the Act, dated 26.09.2022 for A.Y. 2020-21. 2. The assessee company has assailed the impugned order on the following grounds of appeal before us:

“1. The Order of the Ld. Principal Commissioner of Income Tax
(hereinafter referred to as "Principal CIT"), Tirupati, is without juri iction and is not based on facts and circumstances of the case.
Hence the same is bad in law and the decision of Ld. Principal CIT,
Tirupati needs to be reversed.

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6. The appellant therefore prays the hon'ble Income Tax Appellate
Tribunal to i)
Uphold the fact that the Assessment Order is neither erroneous nor prejudicial to the interests of the revenue ii)
Set-aside the Order of the Principal Commissioner of Income
Tax passed under Sec 263 of the Income Tax Act 1961. 7. The appellant craves leave to add, amend, alter, modify, substitute, abridge and/or rescind any or all of the above grounds with the kind permission of the Hon'ble Tribunal at any time either before or on the date of hearing.”

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5. The Pr. CIT, after the culmination of the assessment proceedings, called for the assessment record of the assessee company. On examination of the record, it was observed by him that though the assessee company had, during the subject year, made payments to the contractors of Rs. 335,23,02,114/-, but had deducted tax at source (TDS) under Section 194C of the Act of Rs.
1,36,78,178/- on the contract payments of only
Rs.
82,64,73,583/-. The Pr. CIT, based on the aforesaid facts, held a firm conviction that as the “Faceless Assessing Officer” (for short,
“FAO”) had, while framing the assessment not verified the reason for non-deduction of tax at source by the assessee company u/s 194C of the Act on the balance amount contract payments to the of Rs. 252,58,28,531/-, therefore, the same had rendered the order passed by him as erroneous insofar as it was prejudicial to the interest of the revenue within the meaning of Section 263 of the Act.
6. The Pr. CIT, backed by his aforesaid observation, issued a “Show-Cause Notice” (“SCN”) dated 17.03.2025 to the assessee company, wherein it was called upon to explain as to why the 5
assessment order passed under Section 143(3) r.w.s. Section 144B of the Act, dated 26.09.2022, may not be revised by him under Section 263 of the Act. We hereby deem it apposite to cull out the SCN, dated 17.03.2025, which reads as under:

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7. In reply, the assessee company submitted that the payments to contractors of Rs. 252.49 crores (approx.) comprised of expenditure of Rs. 242.87 crores (approx.) that was incurred for the purchase of material and their consumption, on which no tax was liable to be deducted at source. The assessee company submitted that its auditors had by mistake wrongly included the material consumption in the expenditure on which tax was required to be deducted at source u/s 194C of the Act. Apropos, the balance amount of Rs. 9,62,30,234/- [Rs. 252,49,94,775/- (-)
Rs. 242,87,64,541/-], the assessee company submitted that the non-deduction of tax at source on the said amount was attributable to multiple reasons, viz. (i). GST levied on the basic amount that was not exigible for deduction of tax at source ; (ii).
exemption of certain expenditure from deduction of tax at source u/s 194C; (iii). payments made towards materials billed in the invoices i.e printing and stationary, purchase of electrical items etc.; and (iv). expenditure incurred and paid to various parties, who were not crossing the basis limits mentioned in Section 194C of the Act. Also, it was the claim of the assessee company that among the other expenses, some of the major expenses

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aggregating to Rs. 2,37,49,913.69 were incurred towards expenses that were not liable for deduction of tax at source, viz. (i). travel expenses of staff; (ii). travel fare (air); (iii). travel fare (train); (iv).
other travelling expenses; (v). travel fare (cab); (vi). foreign travel expenses; (vii). Travel fare of inspectors; and (viii). directors travel expenses. Accordingly, the assessee company, based on its aforesaid submissions, claimed that there was no failure on its part to deduct tax at source on the balance amount of Rs.
252,58,28,531/-. For the sake of clarity, the submissions dated
25.03.2025 filed by the assessee company before the Ld. Pr. CIT are culled out as under:

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8. The Pr. CIT, after deliberating on the contentions advanced by the assessee company, did not find favour with the same. The Pr. CIT observed that the assessee company, on being queried regarding non-deduction of tax at source on payments made to contractors of Rs. 252.49 crores (supra) as required under Section 194C of the Act, which, thus, entailed disallowance of 30% of such expenditure u/s 40(a)(ia) of the Act, had submitted that its auditor had wrongly included the other head of expenditure in payments to contractors. Further, the Pr. CIT observed that the assessee company had tried to explain the aforesaid discrepancy based on multi-facet reasons, viz. (i). that out of Rs. 252.49 crores (approx.), an expenditure of Rs. 242.87 crores (approx.) was incurred towards purchase of material and their consumption that was not liable for deduction of tax at source and had wrongly been included under the head “payments to the contractors”; (ii). that expenditure of Rs. 2,37,49,913/- represented the expenditure incurred towards ticket costs and travel expenses that were also not liable for deduction of tax at source but had wrongly been included under the head “payments made to contractors”; and (iii).
that the remaining/difference expenditure of Rs. 7,24,80,321/-

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pertain to, viz. (a). GST levied on the basic amount that was not liable for deduction of tax at source; (b). exemption of certain expenditure from deduction of tax at source u/s 194C; (c).
payments made towards materials billed in the invoices, i.e., printing and stationary expenses, purchase of electrical items, etc.; and (d). expenditure incurred and paid to various parties who were not crossing the threshold limits mentioned in Section 194C of the Act; but were wrongly included under the head “payments made to contractors”. The Pr. CIT observed that the assessee company had itself admitted that there were mistakes in the classification of expenditure from one head to another head.
9. The Pr. CIT, based on the aforesaid facts, held a firm conviction that the A.O., while framing the assessment, ought to have examined the aforesaid issues. It was observed by him that, now when the assessee company had itself shown an amount of Rs. 252,49,94,775/- as payments to contractors, but had deducted tax at source only on the payments of Rs.
82,64,73,583/-, therefore, the A.O. ought to have made enquiries about the non-deduction of tax at source on the balance amount.

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The Pr. CIT was of the view that as the A.O. had failed to make any inquiries or verification whatsoever about the non-deduction of tax at source on the balance amount of RS. 252,49,94,775/- (supra), therefore, the same had rendered the assessment order passed by him as erroneous insofar as it was prejudicial to the interest of the revenue. The Pr. CIT further observed that the assessee company had only on being put to notice u/s 263 of the Act about the aforesaid failure on its part in not deducting tax at source on the entire amount of payments made to contractors, had come forth with an explanation stating that the same was for the reason, viz.
(i). that out of Rs. 252.49 crores (approx.) an expenditure of Rs.
242.87 crores (approx.) was incurred towards purchase of material and their consumption that were not liable for deduction of tax at source and had wrongly been included under the head “payments to the contractors”; (ii). that expenditure of Rs. 2,37,49,913/- represented the expenditure incurred towards ticket costs and travel expenses that were also not liable for deduction of tax at source and had wrongly been included under the head “payments made to contractors”; and (iii). that the remaining/difference expenditure of Rs. 7,24,80,321/- was attributable to, viz. (a). GST

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levied on the basic amount that was not exigible for deduction of tax at source; (b). exemption of certain expenditure from deduction of tax at source u/s 194C; (c). payments made towards materials billed in the invoices, i.e., printing and stationary expenses, purchase of electrical items, etc.; and (d). expenditure incurred and paid to various parties who were not crossing the threshold limits mentioned in Section 194C of the Act; but were wrongly included under the head “payments made to contractors”, but in the same breath had submitted that due to paucity of time, it was unable to submit the bills supporting its aforesaid claim. Although it was submitted by the assessee company that there was no expenditure on which there was any default on its part to deduct tax at source, but the Pr. CIT was of the view that the veracity of the said claim of the assessee company could not be summarily accepted and was required to be examined by the A.O.
10. The Pr. CIT, based on his aforesaid observations, concluded that as the A.O. had passed the assessment order u/s 143(3) r.w.s.
144B of the Act, dated 26.09.2022, without making inquiries or verifications which should have been made by him regarding the 14
subject issue, i.e., failure of the assessee company in not deducting tax at source on the balance payments to contractors of Rs. 252,49,94,775/- (supra), therefore, as per “Explanation 2(a)”
to Section 263(1) of the Act, as had been made available on the statute by the Finance Act, 2015, w.e.f. 01.06.2015, the order passed by him was to be deemed to be erroneous insofar as it was prejudicial to the interest of the revenue. Accordingly, the Pr. CIT, based on his aforesaid observations, partially set aside the assessment order with a direction to the A.O. to verify the subject issue and re-adjudicate the same after making all necessary enquiries or verifications and affording a reasonable opportunity of being heard to the assessee company.
11. The assessee company, being aggrieved with the order passed by the Pr. CIT u/s 263 of the Act, dated 27.03.2025, has carried the matter in appeal before us.
12. Shri
Phalguna
Kumar,
C.A, the Ld.
Authorized
Representative (“A.R”, for short) for the assessee company, at the threshold of hearing of the appeal, submitted that the Pr. CIT had grossly erred in law and on the facts of the case in revising the 15
order passed by the A.O. under Section 143(3) r.w.s. 144B of the Act, dated 26.09.2022, by exercising the juri iction vested with him under Section 263 of the Act. Elaborating on his contention, the Ld. AR submitted that the Pr. CIT had grossly erred in passing the order under Section 263 of the Act, dated 27.03.2025, without affording sufficient opportunity of being heard to the assessee company. Elaborating on his contention, the Ld. AR submitted that the Pr. CIT had issued “Show-Cause Notice” u/s 263 of the Act, dated 17.03.2025, directing the assessee company to put forth its explanation along with supporting documents on or before
21.03.2025. In compliance, the assessee company submitted its reply alongwith the requisite details. The Ld. AR submitted that the Pr. CIT had thereafter issued another “SCN”, dated
22.03.2025, wherein the assessee company was called to explain by 25.03.2025, as to why the assessment order may not be revised by him under Section 263 of the Act. The Ld. A.R. submitted that the assessee company complied with the aforesaid SCN, dated
22.03.2025, and appeared and furnished its reply, but no personal hearing was given by the revisional authority. The Ld. AR submitted that on both the aforesaid dates, the assessee company

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had filed its reply with the office of Pr. CIT, Tirupati, physically.
The Ld. AR relied upon certain judgments to drive home his contention that the failure on the part of the revisional authority to afford an opportunity of hearing to the assessee rendered the order thereafter passed by him as legally fragile not only on the ground of juri iction but also on the ground of violation of the principles of natural justice. Apart from that, the Ld. AR submitted that the Pr. CIT had failed to demonstrate that as to how the twin conditions prescribed u/s 263 of the Act, viz., (i). that the order of assessment is erroneous; and (ii). that the order of assessment is prejudicial to the interest of the revenue, were found to be cumulatively satisfied. Elaborating further on his contention, the Ld. AR submitted that the auditor of the assessee company in Clause 21(b)(ii) of their audit report in “Form 3CA/3CD” had stated that the amount of expenditure liable for disallowance u/s 40(a)(ia) of Rs. 79 lacs was disallowed by the assessee company in its computation of total income. Further, the auditor had in Clause
34(a) of its audit report in “Form 3CD”, stated that out of total payments made to the contractors of Rs. 335,23,02,114/-, the total amount on which tax at source was liable to be deducted

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(TDS) was Rs. 82,73,07,339/- only. The Ld. A.R. submitted that on a conjoint reading of Clause 34(a) and Clause 21(b)(ii) of “Form
3CD”, it can safely be gathered that the auditor of the assessee company had expressed in clear terms that the tax was deducted at source to the extent the same was deductible. It was, thus, submitted by the Ld. AR that the reliance placed by the Pr. CIT on the contents of the audit report to justify the revision of the assessment order was out of context and did not require consideration, as the auditor himself had not qualified his report on the aspect of non-deduction of tax at source in respect of the payments to the contractors.
13. The Ld. AR further submitted that though the assessee in the course of the revisional proceedings had demonstrated at length the reasons for not having deducted tax set source on the balance amount of Rs. 252,49,94,775/-, but the Pr. CIT, without dislodging the veracity of the said claim, had summarily held the order passed by the A.O. as erroneous in so far it was prejudicial to the interest of the revenue and set aside the same in exercise of the powers vested with him u/s 263 of the Act. The Ld. AR, to 18
buttress his aforesaid claim, had taken us through the “Show-
Cause Notice” dated 17-03-2025 issued by the Pr. CIT, and the reply filed by the assessee company on 25-03-2025. The Ld. AR submitted that, as the Pr. CIT in his entire order failed to point out how the order passed by the A.O. was erroneous and prejudicial to the interest of the revenue, therefore, the order so passed by him cannot be sustained and is liable to be set aside. The Ld. AR to support its claim, relied on the judgment of the Hon’ble Delhi
14. The Ld. A.R. further submitted that the reliance placed by the Pr. CIT on the “Explanation 2” to Section 263 of the Act did not vest with him any juri iction to revise any order of assessment based on suspicion. Elaborating on his contention, the Ld. AR submitted that the A.O./NFAC, Delhi had in the course of the assessment proceeding, made all the inquiries and verifications which should have been made. The Ld. AR submitted that, as there were no further disallowances arising out of the payments made to the contractors, therefore, the Pr. CIT had wrongly observed that 19
the A.O. had passed the assessment order without making inquiries or verification that should have been made. The Ld. A.R.
further submitted that the Pr. CIT had, based on his incorrect observations, triggered the “Explanation 2(a)” to Section 263 of the Act, and set aside the assessment order passed by the A.O u/s 143)3) r.w.s 144B of the Act, dated 26.09.2022 by treating it as deemed to be erroneous in so far it was prejudicial to the interest of the revenue.
15. The Ld. AR further submitted that the Pr. CIT, before holding the order passed by the A.O. to be erroneous, should have conducted necessary verifications to show that the findings given by the A.O. were erroneous and the view taken by him was unsustainable in law. Also, the Ld. AR submitted that the new
“Explanation 2(a)” to Section 263 of the Act does not authorize or give unfettered powers to the Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. The Ld.
CIT in the course of the revisional proceedings the reasons as to why no tax was deducted at source on the balance amount of payments of Rs. 252,49,94,775/-, but he had, without considering the said explanation, summarily discarded the same and held the order passed by the A.O. to be erroneous and prejudicial to the interest of the revenue. The Ld. AR, based on his aforesaid contentions, submitted that as the Pr. CIT had failed to conduct necessary enquiries or verification in order to show that the finding given by the A.O. was erroneous and unsustainable in law, and had summarily set aside the well-reasoned order passed by the A.O. u/s 143(3) r.w.s. 144B of the Act dated 26.09.2022, therefore, the order passed by him cannot be sustained and is liable to be set aside, and that of the A.O. be restored.
17. Per contra,
Ms.
U.
Mini
Chandran, learned
CIT-
Departmental Representative (for short, the “Ld. CIT-DR”), relied

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upon the order passed by the Pr. CIT under Section 263 of the Act, dated 27-03-2025. The Ld. CIT-DR submitted that as the Faceless
Assessing Officer (FAO) had failed to look into the aspect that the auditor of the assessee company in his report in “Form 3CD” had mentioned that payments of Rs. 335,23,02,114/- were made to contractors, but the tax was deducted at source under Section 194C of the Act only on the contract payments of Rs.
82,64,73,583/-, therefore, had grossly erred in not calling for any explanation and verifying as to why the tax at source was not deducted on the balance amount of Rs. 252,49,94,775/-. Apart from that, the Ld. CIT-DR submitted that as the assessee company, in the course of the revisional proceedings, had failed to substantiate based on supporting documentary evidence that, as to why the balance amount of Rs. 252,558,28,531/- of the amounts disclosed under the head "Payments to Contractors" was not liable for deduction of tax at source, therefore, the Pr. CIT, taking cognizance of the said serious lapse had, in all fairness, set aside the matter to the file of the A.O. with a direction to verify the aforesaid issue after carrying out necessary enquiries and verification, and affording a reasonable opportunity of being heard

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to the assessee company. The Ld. CIT-DR submitted that the Pr.
CIT remaining well within his juri iction and taking cognizance of the fact that the AO had failed to carry out necessary enquiries or verification on the issue in hand, i.e the reason as to why the assessee company had not deducted tax at source on the balance payments to contractors supported by documentary evidences, had, thus, rightly set aside the same to his file for fresh adjudication after carrying out necessary enquiries and verification. The Ld. CIT-DR submitted that as no infirmity arises from the order passed by the Pr. CIT under Section 263 of the Act, therefore, the appeal filed by the assessee company/appellant, being devoid and bereft of any substance, was liable to be dismissed.
18. We have heard the learned Authorised Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.

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19. Admittedly, it is a matter of fact discernible from the record that the auditor of the assessee company in his audit report in “Form No. 3CD” had at Sr. No. 34(a) reported that out of contractor payments of Rs.335,23,02,114/-, tax was deducted at source u/s 194C of the Act on the contract payments of only Rs.
82,64,73,583/-. For the sake of clarity, we deem it fit to cull out
Sr. No. 34(a) of the audit report, which reads as under:

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to the contractors of Rs. 252,58,28,531/-, but the said fact was not looked into, much less queried by the A.O. while framing the assessment, vide his order passed under Section 143(3) r.w.s.
144B of the Act dated 26.09.2022. At this stage, we may herein observe that neither anything is discernible from the record which would reveal that the A.O. had in the course of the assessment proceedings called upon the assessee company to explain as to why tax was not deducted at source on the balance contract payments of Rs. 252,58,28,531/-; nor anything has been brought on our record by the Ld. AR, which could prove that the necessary verifications on the subject issue were carried out by the A.O. while framing the assessment. We are of the firm conviction that it is not the case that the A.O. had verified the reasons for the assessee company for not deducting tax at source on the substantial amount of payments made to contractors of Rs. 252,58,28,531/-
(as reported by the auditor), and after such verification, being satisfied with its explanation had taken a conscious call and not drawn any adverse inferences on the said issue. Rather, it is a case where the A.O. has failed to carry out the bare minimum inquiries and verification on the aforesaid material aspect. We are unable to 25
persuade ourselves to concur with the Ld. AR’s claim that as the conjoint perusal of Sr. No. 34(a) and Sr. No. 21(b)(ii) of the audit report of the assessee company in “Form 3CD” reveals, that the auditor had expressed in clear terms that the tax at source was properly deducted to the extent as required per the mandate of law, therefore, the A.O./NFAC, Delhi being satisfied with the said reporting found no reason to carry out any further verification on the said aspect. We are of the firm conviction that, as there was concrete information available with the A.O. that the assessee company had not deducted tax at source u/s 194C of the Act on the balance payments to contractors of Rs. 252,58,28,531/-, therefore, the failure on his part to carry out necessary inquiries and verifications on the said material aspect had rendered the order passed by him as erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Section 263 of the Act. We are of the view that the Pr. CIT had rightly exercised the juri iction vested with him under “Explanation 2(a)” to Section 263 of the Act, and taking cognizance of the fact that the assessment order was passed without carrying out necessary verifications or enquiry on the subject issue, i.e., the reason as to 26
why the assessee company had not deducted tax at source on the payments to contractors of Rs. 252,58,28,531/-, rendered the order passed by him under Section 143(3) r.w.s 144B of the Act, dated 26.09.2022 as erroneous in so far it was prejudicial to the interest of the revenue under Section 263 of the Act.
21. Apropos, the Ld. AR’s claim that the assessee company in the course of the revisional proceedings had filed its replies on 21-
03-2025 (Pages 137-140 of APB) and 25.03.2025 (Pages 131-133
of the APB), and had demonstrated at length the reason for not having deducted tax at source on the amount of Rs.
252,58,28,531/- (supra), therefore, the Pr. CIT, without rebutting the said explanation, had grossly erred in summarily setting aside the order passed by the A.O. under Section 263 of the Act, we are unable to persuade ourselves to concur with the same. We have perused the reply filed by the assessee company in the course of the revisional proceedings. We find that the assessee company had, vide its reply, inter alia, claimed that an expenditure of Rs.
242,87,64,541/- was incurred towards the purchase of material that was not liable for deduction of tax at source, but the same

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was by mistake wrongly disclosed under the head “Payment to Contractors”. However, we find that the assessee company to support its aforesaid claim, had failed to place on record any material which would irrefutably substantiate to the hilt that the said expenditure, which though was disclosed by its auditor in his audit report in “Form 3CD” – Sr. No. 34(a) as “Payments made to Contractors,” was in fact an expenditure incurred towards purchase of material. We, thus, are of the firm conviction that it is not correct on the part of the assessee company to claim that it had duly established before the A.O. that the expenditure of Rs.
242,87,64,541/- (supra) was not liable for deduction of tax at source.
22. Also, on a similar footing, we find that it has been the claim of the assessee company before the Pr. CIT that an expenditure of Rs. 2,37,49,913/- was incurred towards ticket cost and travel expenses that were not liable for deduction of tax at source, but the same were by mistake wrongly included under the head
“Payment to Contractors”. However, we find that nothing is either

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discernible from the record nor produced before us by the Ld. A.R.
to substantiate his aforesaid claim.
23. Further, the claim of the assessee company that the remaining/difference in the expenditure of Rs. 7,24,80,321/- was attributable to viz, (a). GST levied on the basic amount that was not liable for deduction of tax at source; (b). exemption of certain expenditure from deduction of tax at source u/s 194C; (c).
payments made towards materials billed in the invoices, i.e., printing and stationary expenses, purchase of electrical items, etc.; and (d). expenditure incurred and paid to various parties who were not crossing the threshold limits mentioned in Section 194C of the Act; but the same were wrongly included under the head
“payments made to contractors”, we find that the said claim is also in the thin air and not supported by any irrefutable evidence.
Rather, we may herein observe that the assessee company in the course of the revisional proceedings, had submitted that due to paucity of time, it was unable to submit the bills supporting its aforesaid claim. We find that even before us the assessee company

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has failed to produce any material which would fortify the veracity of its aforesaid claim.
24. We are of the firm conviction that as the assessee company had in the course of the proceedings before the Pr. CIT, failed to substantiate based on clinching documentary evidence that the amount of Rs. 252,49,94,775/- (supra) was for the aforesaid multi-facet reasons expense that were not liable for deduction of tax at source, but were wrongly included under the head
“Payments to Contractors” by the auditor in his report in “Form
3CD”, therefore, no infirmity arises from the order passed by the Ld. Pr. CIT, who, in all fairness, had set aside the matter, to the file of the A.O. to carry out necessary verification and enquiries on the subject issue and re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee company.
25. Apropos the Ld. AR’s claim that the Pr. CIT had passed the order u/s 263 of the Act without affording a reasonable opportunity of being heard to the assessee company, we find no substance in the same. As is discernible from the record, the Pr.
CIT had issued two SCN’s dated 17.03.2025 (date of compliance:

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21.03.2025) and 22.03.2025 (date of compliance: 25.03.2025), wherein the assessee company was clearly put to notice about the reason for which the assessment order passed by the A.O u/s 143(3) r.w.s 144B of the Act, dated 26.09.2022 was sought to be revised, i.e., the failure of the “Faceless Assessing Officer” (FAO), while framing the assessment, in not verifying and inquiring as to why no tax was deducted at source by the assessee company on the “payments to contractors” of Rs. 252,58,28,531/-(as was gathered from the disclosure made by the auditor of the assessee company in his audit report in “Form 3CD”). We find that the assessee company had duly complied with the aforesaid SCN’s and furnished its replies dated 21.03.2025 and 25.03.2025. We find that the Pr. CIT had passed his order u/s 263 of the Act, dated
27.03.2025, after duly considering the replies filed by the assessee company. We are unable to comprehend on what basis the assessee claims that the Pr. CIT has passed the order u/s 263 of the Act, dated 27.03.2025, without affording to it a sufficient opportunity of being heard. We, thus, find no substance in the claim of the assessee company that the Pr. CIT has passed the 31
order u/s 263 of the Act, dated 27.03.2025, without affording to it a sufficient opportunity of being heard.
26. Apropos the claim of the Ld. A.R. that the Pr. CIT had exceeded his juri iction while setting aside the matter to the file of the A.O. in exercise of the powers vested with him under “Explanation 2(a)” to Section 263 of the Act, we are unable to persuade ourselves to subscribe to the same. We, say so, for the reason that, as per “Explanation 2(a)” to Section 263 of the Act, an order passed by the A.O. shall be deemed to be erroneous insofar as it is prejudicial to the interest of the revenue, if, in the opinion of the Pr. CIT, the order is passed without making any enquiry or verification which should have been made. As in the case of the present assessee before us, the A.O., while framing the assessment had lost sight of the material aspect and had failed to carry out necessary enquiry or verification as to why tax at source was not deducted on the payments made to contractors of Rs.
252,49,94,775/- (supra) under Section 194C of the Act, therefore, we find that the same clearly brings the same within the meaning of “Explanation 2(a)” to Section 263 of the Act, rendering the order

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passed by the A.O. as erroneous and prejudicial to the interest of the revenue. Our aforesaid view is supported by the judgment of the Hon'ble Apex Court in the case of Daniel Merchants (P) Ltd.,
Vs. ITO, [2018] 95 taxmann.com 366 (SC)., wherein the Hon'ble
Apex Court while approving the view taken by the High Court, had observed, that as in the case before them, the A.O had not made any proper enquiry while making assessment and accepting the explanation of the assessee in so far receipt of share application money was concerned, therefore, the CIT(Appeals) had rightly set- aside such assessment order u/s. 263 of the Act.
27. We, thus, in terms of our aforesaid deliberations, find no infirmity in the view taken by the Pr. CIT, who based on his well- reasoned order, set aside the assessment order passed by the A.O under Section 143(3) r.w.s. 144B of the Act, dated 26-09-2022, with a direction to re-adjudicate the subject issue, i.e., non- deduction of tax at source by the assessee company on the payments of Rs. 252,49,94,775/- (supra), after carrying out necessary enquiries and verification and affording a reasonable

33
opportunity of being heard to the assessee company, and uphold the same.
28. Resultantly, the appeal filed by the assessee company, being devoid and bereft of any substance, is dismissed.
Order pronounced in the Open Court on 10th September, 2025. (मंजूनाथ जी)
(MANJUNATHA G.)
लेखा सदस्य/ACCOUNTANT MEMBER - (श्री रवीश सूद)
(RAVISH SOOD)
न्यायिक सदस्य/JUDICIAL MEMBER Hyderabad, dated 10.09.2025. #*TYNM/sps

आदेशकी प्रयतयलयप अग्रेयर्त/ Copy of the order forwarded to:-

आदेशानुसार / BY ORDER

Sr. Private Secretary
ITAT, Hyderabad