M/S. ADITYA EARTH MOVERS,JAGATSINGHPUR vs. CIT, CUTTACK, CUTTACK

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.09/CTK/2015 Assessment Year : 2010-2011

Vs. CIT, Cuttack M/s. Aditya Earth Movers, At: Bijayachandrapur, Paradeep. PAN/GIR No. AAKFA 3612 N (Appellant) .. ( Respondent)

Assessee by : Shri S.K.Jena, AR Revenue by : Shri Kunal Singh, CIT DR

Date of Hearing : 15/06/ 2017 Date of Pronouncement : 27 /06/ 2017

O R D E R Per N.S.Saini, AM This is an appeal filed by the assessee against the order u/s.263 of

the Act of CIT, Cuttack, dated 27.11.2014, for the assessment year 2010-

2011.

”1. For that the impugned order u/s. 263 of the Act, to revise the assessment order passed u/s. 143 (3) of the Act, is mere change of opinion by the Ld. CIT, Cuttack Charge. For the reasons that the issue as regards to depreciation was subject matter in appeal before the First Appellate Authority and which merged the assessment order for the self same assessment year, further during the course of assessment the Ld. AO has examined the details thereafter passed the assessment order. Therefore the statutory revision power vested u/s. 263(1) Act has been

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incorrectly exercised by the Ld. CIT, in order to make more disallowances thus impermissible under law. 2. For that despite books of accounts, bills and supporting documents were produced before the Ld.CIT during the course of proceeding us.263 of the Act, without verifying the same he simply directed the AO to examine the same and reframe the assessment order, which is absolutely impermissible under law. Thus the order of u/s263 is liable to be quashed.

hiring out its excavator/Rock breakers and supply of labour to the different

organization. The assessee filed return of income for assessment year

2010-2011 on 13.10.2010 disclosing total income of Rs.73,733/-. The

assessment was completed u/s.143(3) of the Act on 19.12.2012

determining the income of the assessee at Rs.2,83,130/-.

assessment year and observed from the audited profit and loss account for

the year ended on 31.3.2010, as per the schedule of fixed assets as on

31.03.2010, assessee has claimed depreciation of Rs.16,44,301/-. Out of

such fixed assets, assessee has claimed depreciation on KOBOLO 210

Loader @12.5%, whereas depreciation @15% of the W.D.V is allowable as

actual depreciation on such assets in general and half of allowable rate

where the assets are put to use is less than 180 days during the previous

year. He observed that this asset was purchased on 19.2.2010 which is

less that 180 days used during the financial year 2009-2010 and,

accordingly, depreciation of the block of asset was allowable @ 7.5% but it

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has been allowed @ 12.5%. Hence, he concluded that excess depreciation

on this vehicle amounting to Rs.2,48,010/- is liable to disallowed.

debited Rs.1,45,000/-, Rs.19,21,035/-, Rs.8,06,708/- towards expenses

of mobilization expenses, oil and fuel, repair and maintenance,

respectively. On verification of the ledger account of the expenses, he

found that the following payments were made in cash other than by A/c

payee cheque or A/c payee bank draft and thus, there was violation of

provisions contained in section 40A(3) of the I.T.Act, 1961.

a day exceeding Rs.20,000/- then same was to be disallowed u/s.40A(3)

of the Act. Hence, the disallowance was required to be u/s.40A(3) of the

Act , which was not examined by the Assessing Officer during the

assessment proceedings.

was apparently in error in not examining the aforesaid issues having direct

impact on the computation of the assessable total income. He, therefore,

held that the assessment order dated 19.12.2012 passed u/s.143(3) of the

Act was erroneous and prejudicial to the interest of the revenue.

us.

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Officer has examined both the issues considered by the CIT in detail and

thereafter passed an order u/s.143(3) of the Act. He referred to page 11

& 12 of PB filed before us and pointed out therefrom that the Assessing

Officer has issued a questionnaire , wherein, he required the assessee to

furnish the details of depreciation of Rs.16,44,301/- alongwith depreciation

chart at point No.6 of the questionnaire. He further submitted that at Sl.

No.9 of the questionnaire, the Assessing Officer required the assessee to

submit the details of oil and fuel expenses of Rs.19,21,035/-, repair and

maintenance of Rs.8,06,708/-, salary and wages of Rs.9,26,000/- and

other expenses of Rs.3,90,521/- etc, with supporting documents. This

shows that the Assessing Officer has examined the issues and thereafter

being satisfied has allowed the deduction for the same.

was taken by the CIT(A) on the audit objection and, therefore, the order

passed u/s.263 was bad in law. For this, he relied on the decision of Hon’ble

P&H High Court in the case of CIT vs. Sohana Woolen Mills, 296 ITR 398

(P&H), wherein, it was held that where the CIT initiated proceeding u/s.263

of the Act on the strength of audit note, the same was bad in law.

higher depreciation than that allowable under the Income Tax Act, which

was allowed by the Assessing Officer without any discussion in the

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assessment order. Further, the CIT also found that the assessee has made

payments in cash in violation of provisions of section 40A(3) of the Act and

there is no discussion in the assessment order about the same and,

therefore, he held that the order passed by the Assessing Officer is

erroneous as well as prejudicial to the interest of the revenue. He

submitted that it is a settled law that where there is no application of mind

by the Assessing officer,263 proceedings can be invoked. He submitted

that the assessee has argued that proceedings u/s.263 were initiated by

the CIT on audit objection but has not produced any evidence to that effect.

He argued that even if there is an audit objection and thereafter the CIT

has applied his mind and after verification comes to his own conclusion that

the order was erroneous and prejudicial to the interest of the revenue, he

can exercise his power u/s.263 of the Act and direct the Assessing Officer

to rectify the order.

authorities and materials available on record. In the instant case, the CIT

initiated proceedings u/s.263 of the Act after verifying the assessment

records from where he found that the assessee was entitled to depreciation

@ 15% on excavator/rock breakers as per the Income tax Act but it has

claimed higher depreciation @ 25%, which was allowed by the Assessing

officer without verification. The CIT also found that payment exceeding

Rs.20,000/- in a day was made in cash by the assessee and the Assessing

Officer without verification has allowed the same but the same was required

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to be disallowed u/s.40A(3) of the Act. The contention of ld A.R. of the

assessee is that during the course of assessment proceedings, the

Assessing Officer verified all the details as per questionnaire issued by him

and for this he referred to page 11 & 12 of the paper book. We find that

in the assessment order, there is no discussion about the depreciation and

payment made in cash by the Assessing Officer. Thus, it is a non-speaking

order. Further, ld A.R. of the assessee on a query from the bench to show

what was the reply and evidence filed by the assessee in response to the

questionnaire issued by the Assessing Officer on 14.5.2012 placed at 11

and 12 of paper book, ld A.R. expressed his inability to produce the same.

Thus, only from the questionnaire issued by the Assessing Officer to the

assessee produced before us without the reply of the assessee to same, it

cannot be concluded by us that the Assessing Officer had verified both the

issues on which the ld CIT has exercised his jurisdiction u/s.143(3) of the

Act. In these circumstances, the observations of the CIT is correct that the

Assessing Officer has not verified these issues before passing the order

u/s.263 of the Act and, therefore, was fully justified in invoking the

provisions of section 263 of the Act.

section 263 of the act was invoked by the CIT on an audit objection.

However, he could not produce any evidence before us to show that

proceedings u/s.263 of the Act were initiated by the CIT on the audit

objection. Therefore, this plea of ld A.R. is un-substantiated and cannot be

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accepted. Thus, we find no infirmity in the order of the CIT in passing order

u/s.263 of the Act. Accordingly, we uphold the same and dismiss the

grounds of appeal of the assessee.

SR.PRIVATE SECRETARY ITAT, Cuttack