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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI DUVVURU R.L. REDDY & SHRI S. JAYARAMAN
आदेश / O R D E R PER SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER:
The assessee filed this appeal against the order of the Principal Commissioner of Income Tax-2, Chennai, passed u/s.263 of IT Act, in C.No.1228/Pr.CIT-2/263/2016-17 dated 28.03.2017 for the AY 2012-13.
The only grievance in the assessee’s case is that the Pr.CIT erred in passing the order u/s.263 of the IT Act and made an addition with respect to net retention money during the AY 2012-13 of Rs.1,85,48,026/-. Brief facts of the case are that the assessee had filed its return of income for the AY 2012-13 on 28.09.2012 admitting a total income of Rs.12,04,96,429/-. The assessment was completed u/s.143(3) of the Act on 16.03.2015 and assessed the income of Rs.12,61,36,818/-. As per the order of the Pr.CIT, the assessee had deducted a sum of Rs.3,11,25,156/- as retention money during the AY 2012-13 and at the same time added a sum of Rs.1,25,77,130/- as retention money pertaining to the earlier years realized during the financial year relevant to the AY 2012-13. The difference of retention money realized and withheld i.e. Rs.1,85,48,026/- had been excluded from the profit for the relevant FY. It was further noticed that although the assessee company had excluded the withheld amount from the profit amount of the relevant AY 2012-13 corresponding expenditure thereon had not been excluded. In other words, the entire gross receipts (retention money not realized) had been excluded without considering the corresponding expenditure. Hence, the profits of the assessee’s company had been under stated to that extent. The Pr.CIT has observed that the net profit ratio of the company is declared at 15.12%, hence the gross expenditure component is 84.88%. If this ratio is applied on the withheld amount of retention money Rs.1,84,48,026/- an amount of Rs.1,57,43,565/- is to be added back to the total income for the AY 2012-13. Under these circumstances, the Pr.CIT stated that the order of the assessment u/s.143(3) of IT Act for the AY 2012-13 is erroneous and prejudicial to the interest of the Revenue. The show cause notice was issued to the assessee on 03.03.2017 proposing to revise the Assessment Order u/s.263 of the Act. In response to the notice, the assessee filed his submissions vide letter dated 15.03.2017 & 17.03.2017 and submitted that the retention money is offered to tax in the year of realization and no expenditure is relating to that part of the income is claimed as deduction.
However, the Pr.CIT has not satisfied with the explanation given by the assessee and set aside the Assessment Order and he has given a direction to consider the issue de novo in accordance with law and passed the order u/s.263 of the Act.
On being aggrieved, the assessee preferred an appeal before us.
Now, the point for consideration before us is whether the order passed by the Pr.CIT u/s.263 is erroneous and prejudicial to the interest of the Revenue or not? The Ld.Counsel for the assessee has submitted that the retention money is offered to tax in the year of realization and no expenditure that part of the claim as deduction. Therefore, the order passed by the Pr.CIT u/s.263 is liable to be set aside. On the other hand, Ld.DR submitted that the AO had not examined this issue at all. He further submitted that the AO neither examined the scope and nature of the retention money received by the assessee nor the method of accounting followed by it in respect thereof. Therefore, the Assessment Order passed u/s.143(3) is prejudicial to the interest of the Revenue.
Therefore, the order passed u/s.263 by the Pr.CIT is to be confirmed.
We have heard both the parties, perused the materials available on record and gone through the orders of authorities below including paper book filed by the assessee.
In this case, the only grievance of the Revenue is that the AO had not examined this issue at all and also he has not examined the scope and retention money received by the assessee and also the method of accounting followed by the assessee. Apart from this, the Pr.CIT has given a direction to the AO to examine this issue since the Ld.AO failed to look into this issue. Therefore, we do not find any infirmity in the order passed by the Pr.CIT u/s.263 of the Act. Therefore, the grounds raised by the assessee are dismissed and it’s devoid of merits.
In the result, the appeal filed by the assessee is dismissed.