SRI. R. LOKESH,BANGALORE vs. CIT, BANGALORE

Briefly, the facts of the case are that the assessee is an individual engaged in the business of execution of civil contracts. The return of income for the assessment year 2009-10 filed on 25.09.2009, declaring total income of Rs.1,86,57,660/-. After issuing the requisite notice under section 143(2), the assessment was completed under section 143(3) of the Act vide order dated 30.12.2011 at total income of Rs.1,96,57,660/-.

Subsequently, the CIT(A)-III, Bangalore had issued a show cause notice under section 263 of the Income Tax Act proposing to revise the assessment, as a sum of Rs.74,19,860/- on which tax was deducted at source by city municipal corporation was not offered to tax and therefore it was proposed vide show cause notice to bring the same to tax. In response to the show cause notice, the appellant had submitted that the said sum of Rs.74,19,860/- represents earnest money deposit which was retained by the contractee till the completion of the project on which TDS was made. It was further submitted that the contractee i.e., BBMP has erroneously deducted TDS and it was further submitted that as against the total claim for TDS credit of Rs.60,29,160/-, the AO granted credit only to the extent of Rs.52,05,831/- on the basis of information available on Form 26AS, and thus it was submitted that the order of assessment which was sought to be revised is neither erroneous nor prejudicial to the interest of revenue. Thus it was submitted that CIT had no jurisdiction to revise the impugned Assessment Order.

The learned CIT(A), after considering the above submission of the appellant held as follows:

Thus the learned CIT concluded that the assessee had not offered the said amount of Rs.74,19,860/- as income and AO had failed to cause necessary enquiry on this aspect while passing impugned order and placing reliance on the decision of jurisdictional High Court in the case of CIT Vs. Infosys Technologies Ltd. 341 ITR 293 and Thalibai Jain Vs. ITO 101 ITR 1 held that such order is not only erroneous but also prejudicial to the interest of revenue and therefore set aside to the file of the AO for denovo examination of the issue after affording an opportunity to be heard to the assessee.

Being aggrieved, the appellant is before us in the present appeal. The learned authorized representative reiterated before us the same submissions made before the learned CIT and contended that the said sum is not in the nature of income in the hands of the assessee and therefore the learned CIT ought not have exercised the power of revision. On the other hand, the learned CIT(DR) placed reliance on the order of the CIT passed under section 263.

We heard the rival submission and perused the material on record. The issue in the present appeal is whether the learned CIT is justified in exercising the power of revision in the present case. It is trite law that assumption of jurisdiction u/s 263 of the Act was justified in cases where the AO without application of mind on any issue had passed assessment order. In the present case when the AO had noticed that there was a claim for credit of TDS on a sum of Rs.74,19,860/- he is duly bound to examine whether the said sum has been offered to tax or not. Failure to do so by the AO renders the assessment order erroneous and prejudicial to the interest of the revenue and it is not the case of the appellant that this issue was examined by the AO during the course of regular assessment proceeding nor the appellant made any effort to demonstrate before us that any enquiry was caused by the AO during the course of assessment proceedings on this aspect. Therefore, it was held by the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd., Vs. CIT 243 ITR 83 that non examination of an issue by the AO renders the assessment erroneous and prejudicial to the interests of the revenue and even in the decision of the jurisdictional High Court in the case of CIT Vs. Infosys Technologies Ltd. 341 ITR 293 is squarely applicable to the fact of the case. We may add here that the learned CIT had only set aside the issue for denovo examination by the AO, which is permissible as per the decision of the jurisdictional High Court in the case of Infosys Technologies Ltd.

In the result, the appeal filed by the appellant is dismissed.