SRI SAI CONSTRUCTION CO,NIZAMABAD vs. DCIT., CIRCLE-1, NIZAMABAD

Dr. Sachin Kumar, learned Sr. AR for Revenue on the other hand strongly opposed for condonation of delay and submitted that, the assessee could not explain reasons for delay in filing appeal before the Tribunal and, therefore, submitted that, the delay condonation petition filed by the assessee should be dismissed in the interest of justice.

We have gone through the affidavit filed by the assessee. We find that, the reasons explained by the assessee in his affidavit are seems to be genuine and bonafide by taking note of chronology of dates and events furnished by the assessee. The Hon’ble Supreme Court in the case of Collector, Land Acquisituon vs., MST Katiji [1987] 167 ITR 471 (SC) has laid down certain principles for condoning the delay and also directed the lower courts to follow a lenient approach for condoning the delay. Going by the principles laid down by the Hon’ble Supreme Court in the case of MST Katiji (supra), there is no dispute if an 4 ITA.No.670/Hyd./2025 appeal is dismissed on account of technicalities, a meritorious case may be thrown-out of judicial review. Therefore, while condoning the delay, the courts must have a liberal approach or lenient approach considering the reasons given by the petitioners or appellants. Therefore, going by the principles laid down by the Hon’ble Supreme Court in the case of MST Katiji (supra) and also considering the submissions of the assessee, we condone the delay of 321 days in filing the appeal before the Tribunal and admit the appeal for adjudication.

Brief facts of the case are that, the assessee is a partnership firm and engaged in the business of civil construction of roads, culverts buildings etc. The assessee filed it's return of income for the assessment year 2018- 2019 on 26.10.2018 admitting total income of Rs.18,68,480/- with the refund claim of Rs.19,07,250/-. The case was selected for scrutiny under CASS to verify large refund claims and contract receipts or fees. During the course of assessment proceedings, the Assessing Officer issued notice under section 143(2) and 142(1) of the Act on 5 ITA.No.670/Hyd./2025 various dates and called-upon the assessee to file various evidences. In response, the assessee has filed relevant details as called for by the Assessing Officer and the same were examined with respect to documents submitted and information available on record. The Assessing Officer after examining all the details/evidences filed by the assessee, completed the assessment and accepted the returned total income as declared by the assessee.

The case has been, subsequently taken-up for revision proceeding by the learned PCIT and a show cause notice under section 263 of the Income Tax Act, 1961 [in short "the Act"] dated 27.01.2023 was issued and served on the assessee. In the said show cause notice, the learned PCIT has issued a general show cause notice without any specific issues for examination. The PCIT issued three more notices on 31.08.2023, 06.10.2023 and 07.11.2023. However, no issues has been taken up for examination. The learned PCIT issued another show cause notice on 22.01.2024 and for the first time, he has taken-up three issues for examination in the revision proceedings. In the 6 ITA.No.670/Hyd./2025 said show cause notice, the learned PCIT observed that, there is a mismatch of turnover as per the books of accounts of the assessee and the turnover as per TDS claimed for Rs.3,48,436/- which was not examined by the Assessing Officer. The learned PCIT further noted that, the assessee debited an amount of Rs.24,08,648/- to profit and loss account under the Head “Government Recoveries” and the same pertains to Income Tax [TDS] which is also obvious from the Form 26AS and the same is not allowable deduction under section 36/37 and the same needs to be disallowed. However, the same was not done. The PCIT further noted that, the assessee has debited an amount of Rs.65,24,310/- towards Rents/JCB/ Tipper/Crane. However, as seen from the Form-3CD, no TDS was made on the above amount and there is no disallowance under section 40(a)(ia) of the Act, either in the ITR of the assessee are in the assessment order. The Assessing Officer failed to verify the above three issues in light of relevant facts which render the assessment order erroneous and prejudicial to the interests of Revenue. Therefore, called-upon the 7 ITA.No.670/Hyd./2025 assessee to file it's objections, if any, for the proposed revision.

In response to the showcase notice, the assessee submitted that, all three issues taken by yourselves for revision proceedings has been verified by the Assessing Officer in the assessment proceedings by calling for specific details, for which, the assessee has filed details submissions, including reconciliation between differences in turnover as per books and as per Form TDS. The assessee had also explained debit under the Head “Government Recoveries” in the P & L account and explained that the said amount is other than TDS. The assessee had also explained non-deduction of TDS on Rent/JCB/Tipper/Crane in light of provisions of section 194C of the Act and explained that, payment to individual person does not exceed the specified sum of Rs.1,00,000/- in a financial year and accordingly, the requirement of TDS does not arise. The Assessing Officer after considering the relevant facts has completed the assessment by accepting the explanation of assessee

The PCIT, after considering the relevant submissions of the assessee and also taken note of various evidences held that, the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of Revenue because, the Assessing Officer has failed to verify the above three issues, in light of Explanation-2 to Section-263 of the Income Tax Act, 1961 which render the assessment order erroneous and prejudicial to the interests of Revenue. The PCIT discussed the above three issues and held that, although, there is a difference in turnover, but, the same was not verified by the Assessing Officer. Similarly, the assessee has debited a sum of Rs.24,08,648/- under the Head “Government Recoveries” which is nothing, but, Income Tax [TDS], which is not an allowable expenditure, but, the Assessing Officer has not examined the same in light of relevant provisions of section 9 ITA.No.670/Hyd./2025 36/37 of the Income Tax Act, 1961. Similarly, although, the assessee has not deducted TDS on Rents/JCB/Tipper/ Crane, but, the Assessing Officer has simply accepted the explanation of assessee in light of few ledger of parties, where the payment in a financial year does not exceed Rs.1,00,000/-. Further, neither the assessee has furnished complete details nor Assessing Officer has verified the expenses in light of provisions of section 194C of the Act. Therefore, observed that, the assessment order passed by the Assessing Officer is erroneous and thus, set-aside the assessment order passed by the Assessing Officer and directed the Assessing Officer to re-do the assessment de novo, after due consideration of the facts and law on the above issues.

Aggrieved, by the order of the learned PCIT, the assessee is now, in appeal before The Tribunal.

CA, K A Sai Prasad, Learned Counsel for the Assessee submitted that, the learned PCIT is erred in assuming jurisdiction and set-aside the assessment order in 10 ITA.No.670/Hyd./2025 terms of section 263 of the Act, even though, the assessment order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue on the above three issues. The assessee has explained all three issues during the course of assessment proceedings, in response to specific notices issued by the Assessing Officer. The assessee has filed complete details and also reconciled the difference in turnover on account of interest income from bank account and the same has been noticed by the learned PCIT. The assessee had also explained Government Recoveries and proved that, it is other than TDS and allowable as deduction. The assessee had also proved non- deduction of TDS on Rents/JCB/ Tipper/Crane in light of relevant ledger accounts. The Assessing Officer after considering all facts, accepted the claim of the assessee. Therefore, the learned PCIT, without bringing on record, how the assessment order passed by the Assessing Officer is erroneous, simply set-aside the assessment order on wrong assumption of facts, which is clearly evident from the assessment order passed by the Assessing Officer, in 11 ITA.No.670/Hyd./2025 consequent to order passed under section 263, where, the Assessing Officer has accepted the issue of debit to Profit and Loss account under the Head “Government Recoveries” and also difference in turnover as noticed by the learned PCIT. The Assessing Officer had also accepted the issue of expenditure under the Head “Rents/JCB/Tipper/Crane” on the issue of non-deduction of TDS. However, made an ad- hoc disallowance of 10% expenditure for want of evidences, but, the fact remains that, the ad-hoc disallowance of expenditure is beyond the scope of show cause notice issued by the learned PCIT. Therefore, from the above, it is abundantly clear that, the revision proceedings taken-up by the learned PCIT is not in accordance with law and, therefore, the Order of the PCIT should be quashed.

Shri Narender Kumar Naik, learned CIT-DR, on the other hand, supporting the order of the learned PCIT submitted that, although, the two issues, out of three issues, taken by the learned PCIT has been not yielded any taxes in the consequential proceedings, but, what is required to be seen is, to verify the correctness of 12 ITA.No.670/Hyd./2025 assumption of jurisdiction by the learned PCIT, whether there is a scope for revision of the assessment order in light of relevant assessment order passed by the Assessing Officer and the issues taken-up for revision, but, it is not required to be seen, whether revision of assessment order yield the tax revenue or not. In the present case, going by the issues considered by the learned PCIT for revision proceedings, it is undisputedly clear that, the Assessing Officer has not verified the issues, in light of relevant facts, while completing the assessment, which is evident from the assessment order passed by the Assessing Officer, where the assessee has submitted sample copies of the ledger accounts of few parties, in respect of expenditure debited under the Head “Profit and Loss Account” under the Head “Rents/JCB/Tipper/Crane”, but, the Assessing Officer without verifying relevant details, has simply accepted the claim of the assessee. Therefore, he submitted that, invocation of jurisdiction by the learned PCIT is in accordance with the provisions of section 263 of the Act and thus, the order of the learned PCIT should be upheld.

Admittedly, the original assessment in the present case is under section 143(3) of the Income Tax Act, 1961, where the Assessing Officer has issued specific notices under section 143(2) and 142(1) of the Act on various dates and called for specific details about various

Coming back to the specific issues questioned by the learned PCIT in the revision proceedings. The first issue that was taken-up by the learned PCIT is, difference in turnover of Rs.3,48,436/-. The assessee has filed details and explained to the learned PCIT that, the said difference is, on account of interest income received from banks on term deposits, otherwise, there is no difference in turnover when compared to books of accounts and TDS certificates, as claimed by the PCIT. This fact is further strengthened by the assessment order passed by the Assessing Officer, in consequent to directions of the learned PCIT, where the Assessing Officer has not made any addition on this issue and accepted the explanation of assessee. Similarly, the learned PCIT has discussed the issue of “Government Recoveries” debited to Profit and Loss account and observed that, it is nothing, but, Income Tax [TDS] and not allowable under section 36/37 of the Income Tax Act, 1961. Once again, the assessee has filed relevant evidences and 16 ITA.No.670/Hyd./2025 explained that, debits in the Profit and Loss account under the Head “Government Recoveries” is not TDS, but, it is other recoveries in the running bills submitted by the assessee to the principals and the same is allowable as deduction. Once again, this issue has been verified by the Assessing Officer in the consequent assessment order passed in pursuance with directions of the learned PCIT and has not made any addition on this issue and accepted the explanation of assessee.

Finally the learned PCIT has taken-up the issue of non-deduction of TDS on the Rents/JCB/Tipper/Crane and observed that, even though, the assessee has made payments, which is liable for TDS, but, there is no TDS under section 194C of the Act and further, for non- deduction of TDS, no disallowance has been made under section 40(a)(ia) of the Income Tax Act, 1961. The assessee has explained with relevant ledger account of parties to whom payment has been made and claimed that, in individual case the payment does not exceed the specific sum of Rs.1,00,000/- in a financial year for making TDS

In the result appeal of the assessee is allowed.