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Income Tax Appellate Tribunal, KOLKATA BENCH “C”, KOLKATA
Before: SH. S.S.GODARA & DR. A.L.SAINI
PER DR.Arjun Lal Saini, AM
The captioned appeal filed by the Assessee, pertaining to A.Y. 2010-11, is directed against an order dated 30.03.2015, passed by Commissioner of Income Tax (CIT)-14, Kolkata, under section 263 of the Income Tax Act, 1961 (In short “Act”).
The appeal filed by the assessee, for Assessment Year 2010-11, is barred by limitation by 409 days. The assessee has moved a petition requesting the Bench to condone the delay. Shri S.K. Tulsiyan submitted before the Bench that there is a delay of 409 days in filing this appeal before the this Tribunal. The bona fide reasons for such delay have been explained in the condonation petition as well as Affidavit filed by the assessee. The bona fide reasons were explained by the ld Counsel stating that the tax matters were being looked after by one Sri Syed M. Azam, legal advisor and
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A.R. The assessment order u/s.143(3) of the Act was passed on 26.02.2013. Subsequently after a gap of one year three months, the assessee received a show-cause notice u/s.263 of the Act, issued by the Ld. C.I.T.-14, Kolkata on 09.05.2014, which was handed over to his said A.R. for proceeding with the representation of the case of the Ld. C.I.T. The order u/s. 263 of the Act was finally passed on 30.03.2015 for de novo assessments on the issues as mentioned in the said 263 order and the order was received by the assessee on 31.03.2015. The assessee thereafter handed over the order to his said A.R., Sri Syed M. Azam, for future course of action to be taken in this regard. However, the said A.R. did not opt for filing any appeal against the said 263 order nor intimated anything to the assessee for any future course of action needs to be taken. In the meantime, the assessee received several notices u/s.142(1) of the Act from the A.O. in pursuance of the said order u/s.263 of the Act and assessment order u/s.263/143(3) was passed on 18.03.2016. Experiencing inaction on the part of the A.R., the assessee himself then contacted a senior lawyer, who opined that the order of Ld. C.I.T. u/s. 263 of the Act dated 30.03.2015 was an appealable order before the Hon'ble Tribunal and an appeal should be filed. In the meantime, there occurred a delay of 409 days in filing the appeal before this Tribunal. That the assessee was not much aware of intricacies in the income-tax matters and thus used to rely on suggestion/advice from his legal advisor A.R. Sri Syed M. Azam. On the above facts, therefore, since the said A.R. did not give proper advice at the right time and since the assessee has filed the present appeal on taking an opinion from a senior lawyer, the delay in filing the appeal was not deliberate and was due to unavoidable reasons. Furthermore, there is no mala fide intention behind not filing the appeal within the prescribed time and hence the assessee will be put to serious stress if the delay is not Page | 2
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condoned. On the above facts, therefore, a liberal approach in condoning the said delay of 409 days should be given in view of the decision of Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji (1987) 167 ITR. 471 (SC).
However, Shri G. Mallikaarjuna, Ld. CIT- DR for the Revenue, opposed the prayer for condonation of delay and submitted that ignorance of law is no excuse. Further he submitted that the delay is more than one year therefore the appeal should be dismissed.
Having heard both the parties and after having gone through the affidavit as well the delay condonation, application, we note that the reasons given in the affidavit for condonation of delay were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing the appeal. The sequence of events clearly demonstrated that the assessee was pursuing the proceedings before the Assessing officer pursuant to the orders under section 263 and only on receipt of the assessment order under section 263/143(3) dated 18.03.2016, the assessee contacted the senior advocate and based on his opinion filed the present appeal. There was no deliberateness or negligence or mala fides on the part of the assessee. We are of the considered opinion that assessee was under a bona fide belief that the impugned order of ld CIT under section 263 of the Act was not appealable before this Tribunal since he was not advised by his Tax Consultant about this legal right. Later on, when a Senior Lawyer advised assessee to file an appeal, the assessee immediately took steps to file the appeal. Therefore, the delay caused. We note that delay was because of the wrong advice of the Tax Professional for which assessees cannot be penalized. We also rely on the decision of the Coordinate Bench of this tribunal, in the case of M/s. Garg Bros. Pvt. Ltd. & Others vs. DCIT, in ITA Nos.2519 to 2521/Kol/2017, order dated 18.04.2018, wherein under similar set of facts and reasons, the Tribunal was pleased to condone the delay of 211 days. For the ends of justice and having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing. 5. By way of this appeal, the assessee appellant has challenged correctness of the order dated 30.03.2015, passed by the learned Commissioner of Income Tax (CIT)-14, Page | 3
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Kolkata, for the assessment year 2010-11. Grievances raised by the assessee are as follows. (1) That on the facts and in the circumstances of the case, the Ld. CIT erred in initiating and passing the order u/s.263 of the Income Tax Act, 1961. (2) That on the facts and in the circumstances of the case, the Ld. CIT failed to apply his mind in proper perspective of the facts of the case and erred in setting aside the order passed u/s.143(3) of the Income Tax Act, 1961 by the Ld. A.O. (3) That on the facts and in the circumstances of the case, the Ld. CIT erred in setting aside the assessment order passed by the Ld. A.O. u/s.143(3) directing to examine, verify and ascertain again the allowability of payments made on account of 'Transportation Charges'. (4) That on the facts and in the circumstances of the case, the Ld. CIT erred in setting aside the assessment order passed by the Ld. A.O. u/s.143(3) directing to examine and verify again the amount of expenditure made on account of 'Labour Charges' u/s.40(a)(ia) & 40A(3) of the Income Tax Act, 1961. (5) That on the facts and in the circumstances of the case, the Ld. CIT erred in setting aside the assessment order passed by the Ld. A.O. u/s.143(3) directing to verify and examine again the amount paid on account of Machinery Hire Charges in terms of Sections 40(a)(ia) and 40A(3) of the Income Tax Act, 1961. (6) That on the facts and in the circumstances of the case, the Ld.CIT erred in setting aside the assessment order passed by the Ld. A.O. u/s.143(3) directing to examine again the payments made on account of employer's contribution in E.P.F. (7) That on the facts and in the circumstances of the case, the Ld.CIT erred in setting aside the assessment order passed by the Ld. A.O. u/s.143(3) directing to examine again the veracity of cash deposit amounting to Rs.16,53,000/- into his savings bank account. (8) That on the facts and in the circumstances of the case, the Ld.CIT erred in setting aside the assessment order passed u/s.143(3) directing to verify again the quantum of materials purchased and used and to verify again the work in progress and consumable stores as claimed and assessed u/s.143(3). (9) That the order passed by the Ld. CIT u/s.263 of the I.T. Act,1961 was arbitrary, bad in law and unjust.
(10) That the assessee craves leave to urge such other ground or grounds before or at the time of hearing of appeal.”
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The facts of the case which can be stated quite shortly are as follows: The assessee filed his return of income on 17.03.2011, declaring total income to the tune of Rs.15,07,430/-. The return of income was processed u/s 143(1) of the Act. Later on, the assessee’s case was selected for scrutiny u/s 143(2) of the Act and the Assessing officer completed the assessment u/s 143(3) of the Act. During the proceedings, under section 143(3) of the Act, the assessing officer examined the details of various expenses and after doing detailed scrutiny made the disallowance on account of material purchased to the tune of Rs.1,44,880/-, disallowance on account of freight charges to the tune of Rs.1,62,680/- and disallowance on account of site camp expenses to the tune of Rs.17,195/-.
Later on, Ld. Commissioner of Income Tax (CIT) has exercised his jurisdiction u/s 263 of the Act. The Ld. Commissioner of Income Tax, on examination of the material on record, assessment order and assessment record, it was noted by him that the assessment order under section 143(3) dated 26.02.2013 is erroneous and prejudicial to the interests of revenue on the following counts, reproduced below:
(i) On perusal of the record, it is noticed that assessee had not deducted tax at sources at the bill amount/payment on account of Transport Charges of Rs.1,62,67,980/-. Labour charges of Rs.1,49,35,423/- & Machinery Hire Charges of Rs.3,45,650/- credited/paid to various parties on which the propositions of Chapter XVII-B are applicable relating to deduction of tax. In the facts & circumstances, the amount on which TDS was not deducted U/s. 194C is not allowable as deduction in computing the income chargeable under the head "Profit & Gain of business or profession of U/s 40(a)(ia) of the Income Tax Act. (ii).On perusal of the Profit & Loss a/c., it is noticed that debited Rs.19,20,891/- under the head EPF contribution in P&L Account for the year ended on 31.03.2010 after reducing employees contribution of Rs.10,14,045/- out of total employer & employees contribution of Rs.29,34,936/-. Further it is noticed from the record that the amount of employees contribution was of Rs.13,56,154/- where assessee deducted the amount of employees contribution Page | 5
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of Rs.10,14,045/-. Thus, assessee claimed amount of employees contribution of Rs.3,42,109/- (Rs.13,56,1544 - Rs.10,14,045). The details of employees and employer contribution is as under:
Month Employer Employee Total Contribution Contribution April, 2009 959 845 1804 May, 2009 959 845 1804 June, 2009 959 845 1804 July, 2009 7404 6529 13933 Aug, 2009 35722 31497 67219 Aug 2009 210192 185328 395520 Sept 2009 100887 88953 189840 Sept 2009 114424 100888 215312 Oct 2009 151407 133497 284904 Nov 2009 342900 302337 645237 Dec 2009 205096 165283 370379 Jan 2010 187374 153645 341019 Feb 2010 112361 93776 206137 March 2010 108138 91886 200024 Total 1578782 1356154 2934936 As such employee contribution of Rs.3,42,109/- claimed as expenses is required to be disallowed.
(iii).Further it is noticed that assessee is engaged in civil construction works where construction material is purchased continuously till the month of March, 2010 for running project even though assessee neither made valuation of works under work-in-progress nor reflected in the closing stock at the end of the year. Thus, it has resulted in underassessment of income. The receipts of the payment filed shows that there was closing stock but there is no work-in-progress as per the P&L A/c.
(iv) On perusal of the record, it is noticed that as per AIR information, assessee deposited cash of Rs.16,53,000/- in the saving Bank account during the year and the Assessing officer has not examined the issue.
(v) On perusal of the assessment records, it is noticed that assessee claimed expenses on account of purchases of materials of Rs.l,44,87,985/·, Transport Charges of Rs.l,62,67,980/-, Labour Charges of Rs.l,49,35,423/-& Machinery Hire Charges of Rs.3,45,650/- and consumable store of Rs.6,54,188/- during Page | 6
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the year and you have not provided fully supporting vouchers & bills as well as detail of payment & mode of payment. Hence, genuineness expenses which were claimed in Profit & Loss A/c. seemed doubt full in absence of supporting bills & vouchers and further provision of Section 40A(3) of the Act. Are attracts if any the payment in cash exceeding Rs.20,000/- by single entries. (vi) Further, assessee neither provided evidences in support of valuation of works under work-in progress nor reflected closing stock at the end of the year even though assessee was engaged in civil construction works where construction materials is purchased continuously till the month of March, 2010 for running project. Thus, it has resulted in underassessment of income in absence of proper valuation of work-in progress & valuation of closing stock of raw materials.
Based on the reasons, as narrated in the para No.7 of this order, the ld CIT issued a show cause notice dated 09.05.2014, to the assessee, proposing to pass a suitable order u/s.263 of the Income Tax Act, 1961. 9. In response, the assessee submitted a written submission before the ld.CIT, on 24.02.2015, which is reproduced below: “Transporters came to me from many local sources & supplied vehicles, JCP etc. to supply materials i.e. Stone chips, sand, Cement etc. & cutting as well as lifting soils time to time. They took payment on daily basis. So there is no scope to deduct tax. Labours were also from local sources & many parts of Murshidabad District who worked on daily basis. There were no fixed agencies to supply labours. Same incident occurred against machinery hire charges. We always debit Employer's part in the P&L Account. It includes contribution, Adm. Charges, EDLI & of course late fine & interest Rs. 3,42,109/- is late fine & interest paid by the employer. In works contract business, we always take 'Gross Receipts' in our account. Work-in-progress normally billed & payment receipts will be in next year & will be considered fully in next year account. Purchase, labour charges, transport etc. All the expenses made in daily basis mostly by the hand of driver & 8-10 men group leader in the case of labour charges. Apart from that most of the main materials are supplied by the principal employer.
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During the proceedings under section 263 of the Act, the assessee was asked to produce any other details regarding Labour charges, Transport charges etc. and explanation to show cause notice u/s.263. In response, the AR of the assessee appeared before the ld CIT and filed a written submission, relevant portion of which is reproduced as under: As regards work-in progress and closing stock, I have submitted details before the assessing officer which is clearly reflected in my Profit & Loss Account & Balance Sheet as on 31·03·2010 As regards savings bank a/c, it is jointly with my family member, so, I think it was not examined by the Assessing officer. The assessee has also filed party wise details of purchase for Rs. 60,34,719/-, party wise details of Transport & Hire charges for Rs. 38,00,000/-, details of Closing stock & work-in-progress and copies of Profit & Loss Account and Balance Sheet. The assessee was asked to furnish details of PAN of the person to whom payment was made in relation to transportation & labour charges. In response, Mr. S. M. Azam, authorized representative of the assessee, appeared and filed payment sheet of wages for the month of July, 2009 and Register of attendance of persons for the Month of November, 2009.
However, the ld CIT, rejected the contentions and submissions of the assessee and held that the assessment order u/s. 143(3) of the Income Tax Act dated 26-02-2013 passed by assessing officer, is erroneous in so far as it is prejudicial to the interest of revenue due to inadequate scrutiny of detailed facts and making such assessment in haste, without proper enquiries & verification and without examination of books of accounts & other records, and accordingly the order u/s.143(3) of the Income Tax Act dated 26-02-2013 was set aside with the direction to pass a fresh assessment order.
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Aggrieved by the order of Ld. CIT u/s 263 of the Act, the assessee is in appeal before us.
Shri S.K. Tulsiyan, first of all, drew our attention and explained the Bench that the Assessing officer has made a detailed inquiry by issuing notice under 142(1) of the Act. The inquiry and the documents demanded by the assessing officer, during the scrutiny proceedings, by issuing notice u/s 142(1) of the Act. The documents, evidences and explanations demanded by the assessing officer by notice under section 142(1) of the Act, are given below for ready reference:
“OFFICE OF THE DEPUTY COMISSIONER OF INCOME TAX:CIRCLE-MURSHIDABAD 39 R N TAGORE ROAD, BERHAMPORE: MURSIDABAD. MSD/SCRUTINY/CASS/2011-12 DATED:18/10/2011 Shabuddin Quadiri Prop:H.S.Enterprise Saratpally, Chuanpur, Berhampore, Murshidabad, West Bengal-742101. Sir, Sub:- Scrutiny assessment proceedings in respect of your Return for the Assessment Year 2010-11. Notice u/s.143(2)-Non-compliance. Issue of notice u/s. 142(1). PAN:AAAPQ7976P.
In connection with the assessment proceedings noted in subject above, notice u/s.143(2) was issued 25/08/ 2011 and served on you on 30th August 2011. You are requested to find enclosed a Notice u/s. 142(1) for compliance. The date of hearing is refixed on 3rd November 2011 at 12.30.P.M. as noted in the notice u/s. 142(1). You are requested appear before the undersigned at Aayakar Bhawan(2nd floor), Berhampore to produce/submit following papers / documents etc. on the aforesaid date of hearing :- 1. Hard copy of the return of income for the A.Y.20I0-l1 along with accounts and supporting enclosures/annexure. In case, the account is tax audited, the report of audit to be submitted with each & every schedule to the accounts detailing respective heads of accounts. 2. From the return of income submitted online for the A. Y. 2010-11 it appears that the nature of business is 'Contractor'. If this is true, please submit copy of each & every TDS/TCS certificates, payment certificates of respective contractees containing every information regarding individual bills. Submit a report narrating the nature of job done by your firm.
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Details of Sundry Creditors (Rs.11,50,755/-) mentioning (a) Name & mailing address & PAN of the parties (b) Opening Balance, if any (c) Bill No.& date of the fresh purchase during the year (d) Description of the item/ materials bill-wise (e)Value/amount of bill (d) Amount paid mentioning cheques no. and names & addresses of the drawee banks (e) Closing Balance, if any. 4. Self-certified copy of all bank accounts & statements along with original ones. 5. Rs.18,99,579/- has been shown in the balance sheet under the head Finished /Traded goods under the head 'Current Assets'. In this regard submit a statement depicting detailed method of valuation of such finished/traded goods explaining input of raw materials vis-a-vis each lot of such finished/traded goods.
Details of party-wise cost of contract mentioning (a) Names & mailing address of the party, concerned (b) copy of Work Order (c) cost of raw-materials consumed (c) other expenditures, like cost of wages/labour charges etc. (d) value of contract received.
No VAT/Sales Tax is found debited or credited in the P&L A/c. Submit a statement on purchase bill-wise payment of VAT if your proprietorship firm paid any such taxes. If such expenditure is incurred then how the same has been accounted for? If maintained, produce VAT/ Sales Tax assessment record along copy of return (quarterly/ annual) showing assessment and payment -of - tax challans. Originals of all evidence to be produced.
Submit details of interest (Rs.1,24,225/-) paid which appears to have been paid against bank loan. So submit certified copy of the connected bank statement along with Xerox copy of letter of sanction for the loan, containing all the terms & conditions.
Submit the list of bills put up before the contractees concerned during the relevant financial year under scrutiny but no payment received during the year stating (i) Names & address, PAN of the contractees (ii) Bill Nos. with description and Inspection report if any (iii) Date of filing the Bills (iv)BilI value.
Furnish details of 'Other Expenses' (Rs.7,21,237/-). A party-wise statement, mentioning bills & voucher, date of payment etc. requires to be submitted. 11. Produce Xerox copy of Form 26Q.
A sum of Rs.l,62,67,980/- has been incurred on account of freight. So furnish detailed statement with (i) name & address of the transporter (ii) PAN if there be any (iii) Opening balance of transaction (iv) bill-wise details of goods carried (v) Amount & value of the bill (vi) party-wise date & amount of payment during the year "mentioning mode of payment (vii) statement of TDS made party-wise & quoting payment challans (viii) Closing Balance. 12. Submit details of expenditure on Salary & Wages (Rs.l,51,13,823/-) with statement containing (i) name & address of the employee/ wage-earning labour labour sardar (ii) Person-wise date & amount of salary/wages due/ accrued (iii) person-wise amount paid during the current year (iv) Mode of payment (v) outstanding closing balance person- wise (vi) TDS if any made. Produce evidence of receipt of salary/wages by the respective employee/labour.
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Purchase made by your firm during year under scrutiny is Rs.l,44,87,985/-. Produce details of party-wise purchase with statement incorporating (i) name & address , PAN of the party (ii) Opening Balance if any (iii) Bill No. & Date (iv)Bill-wise description & Quantity of goods purchased (iv)Value/amount of the purchase bills (v) amount paid during the year mentioning cheques no. & name and address of the drawee bank/s (vi) Closing balance.
Furnish computation of 'Balance with Revenue Authorities ( Rs.6,44,300/-).
Submit a statement of account regarding personal income & expenditure etc. and cash flow statement
17.Furnish details of 'Other current assets' (Rs.9,22,989/-). 18. You have claimed deduction of 'contribution to recognized provident Fund' (Rs.19,20,891/-). Produce the challans depositing such contribution within specified date/s. Also produce the recognition certificate from the appropriate authority. 19. Books of accounts, bills & vouchers, cash memos, Salary & wages registers and other registers etc. if any maintained. Enclo : Notice u/s. 142(1). Yours faithfully, Sd/- [S K SARKAR] DCIT, CIRCLE: MURSHIDABAD.
Shri Tulsiyan explained the Bench that whatever, the documents, evidences and explanations demanded by the assessing officer by issuing notice under section 142(1) of the Act, as noted above, have been submitted by the assessee during the scrutiny proceedings under section 143 (3) of the Act. The assessing officer after doing detailed examination of the documents, evidences and explanations, passed the order under section 143(3) of the Act, therefore, the order passed by the assessing officer U/s 143(3) dated 26.02.2013 is neither erroneous nor prejudicial to the interest of the Revenue. The Ld. assessing officer has made every kind of inquiry and detailed examination of each and every aspects of the assessee’s case, therefore, it cannot be said that there is a lack of inquiry on the part of the Ld. assessing officer. Page | 11
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Shri Tulsiyan also argued that the order sheet of the assessing officer clearly demonstrates that the assessing officer had conducted thirteen hearings with the assessee and from time to time demanded the required documents, explanation and evidences from the assessee during the assessment proceedings under section 143 (3) of the Act. The assessee had participated actively and submitted all the details, evidences and explanations required by the assessing officer. Therefore, Ld. assessing officer has made a detailed inquiry and examination of the return of income filed by the assessee, hence, the order passed by the assessing officer is neither erroneous nor pre-judicial to the interests of the Revenue. For ready-reference, the order sheet of the
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ASSESSING OFFICER are given below:-
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SAHABUDDIN QUADIRI ITA No.1617/KOL/2016 [Assessment Year: 2010-11]
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Shri Tulsiyan submitted before the Bench that above mentioned order sheet ( in brief O/S) abundantly explains that ld assessing officer conducted thirteen hearings with the assessee and discussed and examined all the documents and details on the same heads of expenses for which ld CIT has exercised his jurisdiction under section 263 of the Act. That is, the main reasons and heads of expenses for which ld CIT has exercised his jurisdiction under section 263 of the Act, had been examined by the assessing officer in detail during the assessment proceedings under section 143 (3) of the Act, therefore, there should not be any lack of inquiry or improper inquiry on the part of
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the assessing officer, hence the order passed by the assessing officer is neither erroneous nor pre-judicial to the interests of the Revenue.
On other hand, Ld. DR for the Revenue primarily reiterated the stand taken by Ld. Commissioner of Income Tax, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
We have given a careful consideration to the rival submissions, and perused the material available on record. We note that main grievance of the ld CIT to exercise the jurisdiction under section 263 of the Act is that order under section 143 (3) of the Act was passed by the assessing officer in haste, without proper enquiries and verification and without examination of books of accounts & other records. The concluding remark of ld CIT, under section 263 is given below for ready reference:
“11. It is observed that, the assessment order u/s. 143(3) of the Income Tax Act dated 26-02- 2013 passed by erstwhile ACIT, Murshidabad amounts to inadequate scrutiny of detailed facts and making such assessment in haste, without proper enquiries & verification and without examination of books of accounts & other records rendering it erroneous and prejudicial to the interest of revenue. In view of aforesaid errors, inadequacies and omission on part of A.O., the order passed u/s. 143(3) of the Income Tax Act, 1961 dated 26-02-2013 is considered erroneous in so far as it is prejudicial to the interest of revenue and accordingly the order u/s.143(3) of the Income Tax Act dated 26-02-2013 is set aside with the direction to pass a fresh assessment order after examining the evidence and documents and after giving opportunity to the assessee and in accordance with the law” We note that the assessee is a Govt. Licenced Electrical Contractor & General Order Suppliers. For the assessment year under appeal, he filed his return of income accompanied by tax audit report (TAR) under section 44AB of the Act, declaring total income of Rs.15,07,430/-, which was processed by the Department under section 143(1) of the Act. Thereafter the case was selected for scrutiny under CASS and in response to notices u/s. 143(2) and 142(1) dated 18.10.2011 and another notice u/s. 142(1) dated 5.06.2012, the Authorised Representative (AR) of the assessee appeared and filed the required information, books of accounts, details and evidences as per requisitions. As would be evident from the Order Sheet entries, there were as many as 13 occasions when the assessee was called for submission of details/documents and hearings were conducted accordingly. Thereafter, after thorough examinations of the Page | 18
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details and documents and explanations submitted by the Ld. A.R. of the assessee as per requisitions sought by the ld A.O. and as deemed fit for computing the true taxable income, the assessment was completed u/s. 143(3) of the Act on 26.02.2013 on a total assessed income of Rs.l8,32,180/- by making the following additions:
i) On account of material purchase Rs.l,44,880 ii) On account of freight charges Rs.l,62,680 iii) On account of site camp expenses Rs. 17,195
Therefore, order under section 143(3) of the Act was passed by the assessing officer after conducting thirteen hearings and after doing detailed scrutiny of books of accounts and evidences. During the assessment proceedings U/s 143(3), the assessee submitted a plethora of documents, evidences, books of accounts and explanations as required by ld AO by issuing notice under section 142(1) of the Act, ( the entire notice U/s 142 (1) is reproduced in para No. 13 of this order). These entire documents, evidences, books of accounts and explanations were carefully examined by the assessing officer. The assessing officer conducted thirteen (13) hearings, with the assessee, as mentioned in the order sheet entry. The entire order sheet ( in brief O/S) is reproduced in para 14 of this order for ready reference. The thirteen hearings were conducted by the assessing officer as per his convenience. The assessee has been actively cooperated with the assessing officer during these thirteen (13) hearings. These thirteen hearings were conducted by the assessing officer within a period of one year and five Months. Therefore, it can not be said that assessment under section 143(3) was completed “in haste, without proper enquiries & verification and without examination of books of accounts & other records” as alleged by the ld CIT in his order under section 263 of the Act. Hence, we do not agree with the ld CIT that assessment under Page | 19
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section 143(3) was completed in haste, without proper enquiries & verification and without examination of books of accounts & other records.
We note that the Ld. CIT issued show-cause notice u/s. 263 of the Act dated 07- 01-2016 on his alleged supposition that the A.O. passed assessment order in haste by making inadequate scrutiny of details facts and without examining the books of accounts and other records. We note that during the course of 263 proceeding, as recorded by the Ld. CIT, himself in his order, that the assessee had filed written submissions before him with various information and evidences which, inter alia, included the following: (a) Transporters from local source and many parts of Murshidabad District supplied vehicles, JCP etc. to supply stone chips, sand, cement etc. and cutting as well as lifting soils. They were not from any fixed agencies of supply labours. They took payment on daily basis and, therefore, there was no scope to deduct tax. Identical situation was in respect of machinery hire charges. (b) Employer's part of contribution is debited in Profit and Loss Account. It includes contribution, administration charges, EDLI etc. Late fine and interest of Rs.3,42,109/- was paid by the employer. (c) In works contract business, gross receipts are taken in the account. WIP normally billed and payment receipts will be in the next year and will be considered fully in the account of the next year. (d) All the expenses on account of purchase, labour charges, transport etc. were made in daily basis mostly by hand of drivers and 08-10 men group leader in the case of labour charges. Most of the main materials are supplied by the principal.
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(e) Details of WIP and closing stock duly reflected in the Profit and Loss Account & Balance Sheet were already submitted before the A.O. and the same were filed before the Ld. C.I.T. (f) Party-wise details of purchase, Transport & Hire charges, details of closing stock & WIP, copies of Profit & Loss Account, Balance Sheet, payment sheet of wages for the Month of July, 2009, register of attendance etc. were filed before the Ld. C.I.T. (g) It is pertinent to mention here that in respect of cash deposit of Rs.16,53,000/- made on the basis of AIR information, no such material was provided to the assessee to verify the contents of such information. However, after receipt of the order u/s.263 of the Act, the assessee wrote letter to the Ld. C.I.T. filed on 09.05.2018 and reminder on 16.09.2018 (P/B pages 31 to 34) intimated him that on going through the Saving Bank Pass Book, no such huge cash deposits could be found. Hence request was made to him to provide the assessee the name of the bank & branch, S.B. A/c. No. and certified copy of order sheet of proceedings u/s.263 of the Act to enable the assessee to verify the genuineness of such AIR information and also for the purpose of appeal pending before the Hon'ble Tribunal against the said 263 order, but as per assessee, till date, nothing is received from the ld CIT. 18. We note that according to the Ld. C.I.T., the assessing officer, during 143(3) proceeding, did not make proper verification to ascertain genuineness as well as applicability of section 40(a)(ia) and 40A(3) of the Act. The allegations made in the 263 show-cause notice and the A.O.'s conducting enquiry by issuing 142(1) notice as well as requisition through order sheet during the course of the assessment proceeding are summarized below to reveal that the A.O. got enquired the issues raised in the impugned show-cause notice before framing 143(3) assessment for the assessment Page | 21
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year under consideration. It is pertinent to mention here that even if the so-called
short-falls pointed out in 263 notice, may not match in verbatim with the requisitions
vide 142(1) notice, but the facts remain that during the course of the assessment
proceedings and hearings taken place before the Ld. A.O., the assessee submitted all
such information and documents, which were considered before passing the impugned
assessment order. The table below summarizes the issues as per notice U/s 263 issued
by ld CIT, the same issues were covered by the notices issued under section 142(1) of
the Act by assessing officer and on each issue the observation was made by the
assessing officer while passing order under section 143 (3) of the Act:
Sr.No. Issues as per Notice u/s 263 Issues covered by Observation of A.O. in P/B pages. issued by Ld.C.I.T. Notices u/s. 142(1) 143(3) order dated 18.10.2011, 10.07.2012 & Order sheet Entries: A TDS u/s.194C of the Act has not 1) Point-2 of notice Page2- 01 to 03 been made on payment of dated 18.10.2011; The AR produced 04 & 05 Transport Charges computer generated 06 to 10 Rs.1,62,67,980/-, Labour charges 2) Point-12 of notice books of a/c. including Rs. 1,49,35,423/- and Machinery dated B/S, P/L A/c, payment Hire Charges of Rs.3,45,650/- 18, 10.2011; certificates to various credited to various parties. parties, bank statement, 3) Point-I of notice list of gross payments Dated 10.07.2012; received, bill payments received by cheque, 4) Point-12 of notice insurance charges. dated Details of freight & 10.07.2012; labour charges, salaries verified from register 5) O/S dt. 03.11.11 and placed on record. stating submission Gross receipt/sales, of copy of Form security deposit details, 26AS, Audit Report TDS paid has been accounted for. Closing stock details have also been seen, verified and placed on record. B Employees' contribution towards I)Points-13 & 18 of 01 to 03 EPF was accounted for less by notice dated Rs.3,42,109/- and required to be 18.10.2011; 04 & 05 disallowed. 2)Points-13 & 18 of notice dated 06 to 10 10.07.2012 3) O/S dt. 06.08.12 stating submission of P.F. details C Valuation of construction 1)Points-6, 7, 9 & 01 to 03 Page | 22
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material purchased in civil 14 of notice construction works was not made dated 18.10.20 11 04 & 05 under WIP nor the same was reflected in the closing stock at 2)Points-6, 8 & 11 06 to 10 the end of the year, which has notice dt. 10.07.12 resulted in underassessment of income. 3) O/S dt. 19.12.12 stating submission of more purchase details
D As per AIR information, 1) Point-4 of 01 to 03 assessee deposited cash of notice dated Rs.16,53,000/- in his S.B. 18.10.2011; 04 & 05 Account which remained 2)Point- 3 notice dt. unverified by the A.O. 10.07.2012; 06 to 10 3) O/S dt. 30.07.12 acknowledging filing of bank statement. E Fully supporting voucher/bills I)Points-7, 12, 13, 01 to 03 were not provided in support of 14 of notice expenses on purchase of material Dated I8.10.2011; 04 & 05 of Rs.1,44,87,985/-, Transport 2)Points- 5, 11, 12 of charges Rs.1,62,67,980/-, Labour notice dated 06 to 10 charges Rs.1,49,35,423/-, 10.07.2012. Machinery Hire Charges 3) O/S dt. 07.11.12 Rs.3,45,650/- & consumable mentioning store Rs.6,54,188/-. discussion on authenticity of labour payment details. 3) O/S dt. 19.12.12 acknowledging filing of more purchase details.
We note that it is abundantly clear from the above noted table that entire details and
evidences in relation to queries raised in notice U/s 142(1) of the Act, and additional
evidences submitted during the course of the assessment proceedings were before the
assessing officer. After examining and verifying the above evidences vis-a-vis the
queries made in notice U/s 142(1) of the Act, and after hearing the assessee on
various dates as per order sheet entries, the Ld. A.O. as an adjudicator passed the
assessment order u/s. 143(3) of the Act, assessing the total income under normal
provision and thereby disallowed sum of Rs.3,24,755/- under three heads as noted in
para 16 of this order. Page | 23
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Therefore, at this juncture, it is pertinent to mention here that the way in which assessment should be finalized falls in the exclusive domain of the Assessing officer. Section 142(1) speaks of inquiry before assessment and gives immense power to the A.O. for conducting enquiry. Therefore, the A.O. u/s 142(1)(ii) & (iii) can ask the assessee almost any information which he things necessary for passing assessment order and information can be asked in a proforma, which is given in para 13 of this order. The assessing officer has conducted a detailed scrutiny and thorough enquiry in respect of each and every item of expenses. After going through the information furnished in table above, we note that it is not a case of inadequate scrutiny as noted by the ld CIT in his order U/s 263 of the Act.
We note that it is within the province of the Assessing officer to decide that which points he wants to take up for enquiry and to what extent and, as such, the Ld. C.I.T. cannot interfere with the same and even if Ld. Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceeding. On the facts of the case it would not be out of the context to state that the impugned scrutiny assessment was not for reason of any information, search result and directions from higher authorities, inasmuch as nothing has been recorded to that effect in the assessment order. As a matter of normal procedure, the assessee’s case was selected for scrutiny assessment. The objective of scrutiny assessment u/s. 143(3) is to confirm that the taxpayer has not understated the income or has not computed excessive loss or had not underpaid the tax in any manner. To confirm the above, the Assessing officer carried out a detailed scrutiny of the return of income, as deemed fit, and satisfied himself regarding various claims, deductions etc. made by an assessee in Page | 24
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the return of income. The Ld. C.I.T. has subjected the assessment order to proceeding u/s. 263 of the Act mainly on the ground that the order passed by the A.O. amounts to inadequate scrutiny of detailed facts and making such assessment in haste, without proper enquiries and verification of books of account. We note that in the assessee`s case under consideration the scrutiny assessment u/s.143(3) of the Act continues from 25.08.2011 till 26.02.2013 and during this long period of 1 Year and five Months, thirteen hearings on several dates were conducted, A.R. of the assessee appeared, submitted required details/evidences and explained the same. After hearing and discussing the matters with the A.R. on several dates and receiving requisite information/evidences in response to notices u/s.142( 1) of the Act, on as many as 18 issues, the Ld. A.O. was satisfied on his own perceptions about the correctness or otherwise of the return of income filed by the assessee. The issues on which he was dissatisfied, additions were made on those accounts. Therefore, the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi-judicial functions vis-a-vis passing the assessment order u/s. 143(3) of the Act. Therefore, certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. However, what is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the Assessing officer, and even if Commissioner does not agree with the results of such enquiries, the resultant order cannot be subjected to revision proceedings. For this, we rely on the decision of Coordinate Bench of this Tribunal in the case of Smt. Juthika Kar vs. ITO [I.T.A. No.1128/Kol/2009, dated 16.5.2012 ], wherein it has been held as under :- Page | 25
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"8. With the leave and consent of my learned brother, however, I may add a few words to my learned brother's analysis of Hon'ble Delhi High Court's judgment in the case of Gee Vee Enterprises (supra). Undoubtedly, as noted by their Lordships in that case, an Assessing officer cannot remain passive in the face of a return which is apparently in order but calls for further enquiry. In such a case, revision proceedings can indeed be initiated and there seems to be no serious controversy in this respect. The fine point, however, one must bear in mind is the distinction between adequate enquiries not having been conducted and the result of such enquiries not having been dealt with by way of a speaking order or not having resulted in the conclusion that could be, in the wisdom of a person other than the Assessing officer, more appropriate. Here is a case in which sufficient enquiries were conducted. As learned brother has rightly noted, the Assessing officer called for specific details, confirmations and even copies of bills. It could not, therefore, be said that sufficient enquiries were not conducted. However, what is opinion formed as a result of these enquiries is something which is in exclusive domain of the Assessing officer, and even if Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceedings. The conclusions arrived at as a result of enquiries cannot be tinkered with in the revision proceedings. The conclusions being drawn up as a result of enquiry is a highly subjective exercise and as to what is appropriate conclusion is something on which perceptions vary from person to persons. These variations in the perceptions of the Assessing officer vis-a-vis that of the Commissioner, cannot render an order erroneous and prejudicial to the interest of the revenue. 9. Viewed in this perspective, and having noted that the Commissioner has subjected the assessment order mainly on the ground that the Assessing officer did not reach the right conclusions as a result of his enquiry, the impugned revision order is indeed unsustainable in law. It is not a case in which adequate enquiries has not been carried out. "
The aforesaid position gets further strength from the decision of Hon'ble jurisdictional High Court in the case of CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (Cal), the relevant finding of which is applicable to the facts of the present assessee are given below: "85. Whether the assessment order dated March 28, 2008, was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order- sheets go to show that appropriate enquiry was made and the Assessee was heard from time to time. In deciding the question, the court has to Page | 26
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bear in mind the presumption in law laid down in section 114 clause (e) of the Evidence Act: "that judicial and official acts have been regularly performed.” 86. Therefore, the court has to start with the presumption that the assessment order dated March 28, 2008, was regularly passed. There is evidence to show that the Assessing officer had required the Assessee to answer 17 questions and to file documents in regard thereto. If the A.O. cannot be shown to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind".
We note that in the assessee`s case under consideration the Ld. C.I.T. invoked jurisdiction u/s. 263 of the Act on the expectation of a fishing and roving enquiry and solely on the presumption in his own term that "the assessment order u/s. 143(3) of the Income Tax Act dated 26-02-2013 passed by erstwhile ACIT, Murshidabad amounts to inadequate scrutiny of details facts and making such assessment in haste, without proper enquiries & verification and without examination of books of accounts & other records". From the above allegation which was the basis for initiating proceeding u/s. 263 of the Act, it is evident that the Ld. C.I.T. himself has not denied enquiry conducted by the A.O., rather he suspected that not much investigation which should have been done by the A.O. Therefore, the requisite enquiries conducted by the Ld. A.O. (details of which have been given in Table above in para No. 18 of this order) would not definitely go to establish the baseless allegation of the Ld. C.I.T. that the assessment order has been found to be passed without proper enquiry and in haste, more so as would be evident from the order sheet entries, the scrutiny proceeding continued during in the span of 1.5 years ( one year & five months) and there were 13 occasions when the assessee was called for submission of details/documents and hearings were conducted accordingly. Thereafter, after thorough examinations of the details and documents and explanations submitted by the Ld. A.R. of the assessee as Page | 27
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per requisitions sought by the A.O. and as deemed fit for computing the true taxable income, the assessment was completed u/s. 143(3) of the Act on 26.02.2013. Therefore, it is not a case on inadequate scrutiny, for that we rely on the judgment of Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), wherein it was held that: "if there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act, 1961, merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open."
On the same facts we also rely on the judgment of the Coordinate Bench of this Tribunal in the case of Chroma Business Ltd. vs. DCIT (2004) 82 TTJ 540 (Cal). Further our view is fortified by the decision of the Hon'ble Delhi High Court in the case of CIT vs. Vikas Polymers (2012) 341 ITR 537 (Del). Relevant part of the observation in this regard reads as under: "This is for the reason that if a query is raised during the course of scrutiny by the Assessing officer which was answered to the satisfaction of the Assessing officer but neither the query nor the answer was reflected in the assessment order that would not by itself lead to the conclusion that the order of the Assessing officer called for interference and revision."
We are of the view that it is a settled position in law that provisions of section 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the Ld. C.I.T. cannot be sustained on the principle of 'erroneous' nature of the order of the A.O., as it is not erroneous. Further, in the instant case, to reiterate, there was no allegation by the Ld. revenue authorities that the evidences produced were fictitious or invented, thus accepted the authenticity of the same. Such an order cannot be called erroneous and prejudicial to interests of revenue. Hence, we are of the view Page | 28
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that that revisionary jurisdiction exercised by the Ld. C.I.T. u/s. 263 of the Act was not in tune with the facts and evidences on record duly explained to the A.O. and verified by him in detail, that being so the order passed u/s. 263 of the Act on such erroneous stand is liable to be quashed. We accordingly quash the order u/s 263 of the Act and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed
Order pronounced in the open court on 22.11.2018.
Sd/- Sd/- (S.S.GODARA) (A.L.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Date: 22/11/2018 *Amit Kumar* Copy of the Order forwarded to : 1. The Assessee- Sahabuddin Quadiri, Saratpally, Chuanpur, Berhampore, Murshidabad-742101. 2. The Respondent- DCIT, Circle-42, Laldighi, 57, R.N.Tagore Road, Berhampore, Murshidabad-742101. 3. The CIT(A) 4. CIT 5. DR, ITAT, Kolkata 6. Guard file.
Assistant Registrar ITAT, Kolkata