MECH ENGINEERS AND ERECTORS PRIVATE LIMITED,HYDERABAD vs. DEPUTY COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE -2(1), HYDERABAD

We notice at the outset that the PCIT’s impugned Section 263 revision directions terming the corresponding twin Section 143(3) r.w.s.153A assessments framed on 26-04-2017 as erroneous ones, causing prejudice to interest of the Revenue. A combined perusal of both these files indicates that this :- 2 -: & 171/Hyd/2021 assessee had filed its regular returns u/s.139(1) of the Act on 12-09-2011 and 13-09-2012; assessment-year wise; respectively. There is further no dispute even as per the assessment discussion in the latter assessment year that the Assessing Officer had framed his Section 143(3) assessment on 16-03-2015 assessing the total income at Rs.3,57,59,890/-.

It is further an admitted fact between the parties that the department had carried out a search operation in assessee’s case on 14-12-2015 leading to initiation of Section 153A proceedings vide notice(s) dt.26-12-2016. The Assessing Officer thereafter framed his impugned twin assessments on 26-04-2015 accepting the income(s) returned at the assessee’s behest. It is in this backdrop of facts that the learned PCIT holds in his Section 263 revision orders in issue that on account of the assessee having not deducted TDS, audit fee and difference in turnover of Rs.35,95,785/- in AY.2011-12 and similar differential amount of Rs.33,32,664/-; respectively, deserve to be revised since the impugned twin assessments have not verified all necessary facts.

We have given our thoughtful consideration to rival pleadings against and in support of the correctness of the PCIT’s foregoing revision directions and find no merit in the same. This is for the clinching reason that all the three foregoing issues i.e., disallowance of audit fee and payment of sub-contract expenses are not more material factors in both these assessment years once the Assessing Officer had :- 3 -: & 171/Hyd/2021 subjected the assessee’s gross receipts on estimation basis only. Coupled with this the fact remains that the issue raised at the PCIT’s behest is that of sub-contract payments only which in any case stands covered in the foregoing estimation of income being on debit side of the turnover. Same reasoning applies qua assessee’s audit fee payment without non- deduction of TDS as well. We quote hon'ble jurisdictional high court’s decision in Indwell Constructions Vs. CIT [232 ITR 776] (AP) that such disallowances/additions are no more exigible in case of estimation of gross receipts of an assessee. We lastly refer to hon'ble apex court’s landmark decision in Malabar Industrial Co. Vs. CIT [243 ITR 83] (SC) held that an assessment has to be fell erroneous as well as prejudicial to the interest of the Revenue; simultaneously, before the CIT or the PCIT; as the case may be, invokes his Section 263 revision jurisdiction. We accordingly are of the opinion that the learned PCIT has erred in law and on facts in exercising his Section 263 revision jurisdiction in both these assessment years. This impugned action to this effect stands reversed.