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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
Before: ARUN KHODPIA & ARUN KHODPIA & ARUN KHODPIA
IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/ S/SHRI CHANDRA MOHAN GARG, JUDICIAL JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.404/CTK/2014 Assessment Year : 2009-2010 2010 M/s. B.Banamber & Co., M/s. B.Banamber & Co., Vs. CIT, Bhubaneswar CIT, Bhubaneswar Bhairabi Sahi, Talcher. Bhairabi Sahi, Talcher. PAN No.AADFB 2121 Q PAN No.AADFB 2121 Q (Appellant (Appellant) .. ( Respondent Respondent) Assessee by Assessee by : S/Shri S.N..Sahu, & Somanath Sahu S.N..Sahu, & Somanath Sahu, ARs Revenue by : Shri M.K.Goutam, M.K.Goutam, CIT (DR) Date of Hearing : 10/3/ 20 / 2022 Date of Pronouncement : 29/ /3/2022 O R D E R Per C.M.Garg g, JM
This is an appeal filed by the assessee a This is an appeal filed by the assessee against the order of the CIT gainst the order of the CIT, Bhubaneswar dated 30.3.2014 u/s.263 of the Act for the assessment year for the assessment year 2009-2010.
This appeal was This appeal was decided by the Tribunal vide order dated 10.5.2018. decided by the Tribunal vide order dated 10.5.2018. However, vide order dated 4.2.2022 in M.A. No.28/CTK/2018, the appeal However, vide order dated 4.2.2022 in M.A. No.28/CTK/2018, the appeal However, vide order dated 4.2.2022 in M.A. No.28/CTK/2018, the appeal was recalled for fresh consideration. was recalled for fresh consideration. 3. The assessee has raised the following grounds: The assessee has raised the following grounds:
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“1. That the order u/s. 263 of the I.T. Act, 1961 is illegal, uncalled for, and without any basis. 2. That no order shall be made u/s 263 (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. The order u/s 143 (3) was passed on 16-11- 2011. Therefore the order u/s. 263 is barred by limitation,- because though the date of order is purported to have been passed on 30.03.2014, but the same assessee has not been received by the assessee as yet even, after the assessee has requested to supply the same vide letter dtd 14.10.2014. This appeal is being filed only on the basis of Zerox copy obtained from ITO's office. 3. That it is settled law that an order of an authority cannot be said to be passed unless it is in someway pronounced or published or party affected have the means of knowing it. It is not enough if the order is made, signed and kept in the file, because such order may be liable to change at the hands of the authority who may modify it or even destroy it, before it is made known based on subsequent information, thinking or change of opinion. To make the order complete and effective, it should be issued, so as to be beyond the control of the authority concerned, for any possible change or modification therein. This should be done within the prescribed period. Case laws referred : a. CIT Vs. Shree Narayan Chandrika Trustee 212 ITR 456 (Ker) b. Shelat (B. J.) State of Guj'rat AIR 1978 SC 1109.
That once learned AO has resorted to estimate by way of adhoc disallowance of expenses claimed, it is an implied way of rejection of accounts. There can be no further addition relying on the same accounts. Case laws cited : a. Teja Construction - 129 TTJ - 57 b. Indwell Construction Vs. CIT 232 ITR 776 (A.P.) 5. That the written reply submitted on behalf of the appellant, in compliance to notice u/s. 263 of the I.T. Act, 1961 should have been judicially considered by the learned CIT. the (earned CIT was duty bound to examine the points raised and record definite conclusions in respect of each one of them. [A. Venkat Rao Vs. CIT, 203 ITR 64]. Not doing so the order has become in- abnitio void u/s. 263 and not doing so, the order is illegal.
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That the learned AO should have considered that where two views are possible and the CIT does not agree with that view taken by the AO and the same has resulted in loss of revenue, it cannot be treated as erroneous and prejudicial to the interest of the revenue. 7. That other grounds if any will urged at the time of hearing of appeal..” 4. The assessee has also raised additional ground of appeal, as under:
“1. That the communication is a condition precedent and an order takes effect only on communication. Since the order u/s.263 was not issued to the assessee within the period of limitation, the same is barred by limitation as has been decided by Supreme Court of India, High Courts and Co-ordinate Bench of Tribunal.” 5. Facts of the case are that the assessee is a works contractor, maintains regular books of accounts audited u/s. 44AB of the I.T. Act, 1961. The assessment was completed u/s. 143(3) vide order dated 16.11.2011 after due scrutiny and examining and verifying the audited accounts, making 10% disallowance of expenses claimed on adhoc basis. The same was reduced in first appeal by the CIT(Appeals) vide order dated 02.04.2013 modifying the disallowance from 10% to 5%. In further appeal before the I.T.A.T. it was further reduced to the extent of Rs. 50,000/- vide order dated 22.10.2014. 6. Thereafter, the learned CIT, Bhubaneswar initiated proceeding vide his show cause notice u/s.263(1) dated 15.01.2014 alleging that the current liability on account of material purchased and labour charges payable shown in the balance sheet to an amount of Rs. 18,60,581/- were not verified and examined by the AO as claimed in the accounts. Further it is alleged that P a g e 3 | 9
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the sales tax deducted from contract bills has not been verified by the AO. The assessee replied vide letter dated 07.02.2014 submitted that the assessee had shown current liability as on 31.03.2008 (Audited Balance Sheet submitted) which was also the opening balance as on 01.04.2008 was Rs. 34,72,381/- and closing balance of the liability as on 31.03.2009, and their O.B. as on 1.4.2008 covers up the liability, shown in the balance sheet during the relevant year. Therefore there should not be any inference by the learned CIT regarding the genuineness of the same. So as to set-a- aside the issue again to the A.O. for roving enquiry which is not permissible under law. So far as the claim of deduction of sales tax payment is concerned, it was submitted that the same has been deducted at source out of the gross bills of contract works and since the assessee has taken the gross bill receipt figure in the Profit & Loss Account and debited the sales tax payment, there was absolutely no error for invoking section 263 because the learned AO has completed the assessment after due scrutiny, verification and examination of accounts. It was submitted that the assessment was subject matter of appeal before the ld CIT(A) and after passing the first appellate order, the assessment order has merged with the order of appeal and, therefore, the ld CIT(A) will not have the jurisdiction u/s.263 of the Act. 7. The ld CIT examined the facts of the case as well as the reply of the assessee. The ld CIT set aside the assessment order and restored to the
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file of the AO with a direction to redo the assessment after examining the issues raised in the show cause letter issued for initiation of proceedings u/s.263 of the Act., as under: “ I have carefully examined the facts of the case, assessment record and the submissions made on behalf of the assessee. On careful examination of the assessment order, it is noted that in the order, the AO disallowed Rs.3,09,063/- being 10% of expenses claimed under the head “ Excavator Maintenance” and “truck & tipper maintenance” on estimation basis because of non-production of bills and vouchers in support of such expenses. This clearly shows that the AO disallowed certain expenses on estimation basis only. The books of account of the assessee has not been rejected by the AO. Therefore, the contention of the AR of the assessee that since the income was estimated, no further disallowances can be made is baseless and not verifiable from records. In so far as the question of doctrine of merge is concerned, it is noticed that Explanation (c) of Section 261(1) of the Act states that where any order passed by the AO had been the subject matter of any appeal, the powers of the Commissioner under sub-section(1) of Section 263 shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. In the instant case, the estimated disallowance of expenditure made by the AO in the assessment order was the subject matter of appeal before the CIT(A), who vide his appeal order directed to limit such disallowance to 5% of the total claim instead of 10% of the claimed disallowed by the AO. Therefore, issues raised in the show letter issued for the purpose of section 263 were not the subject matter of appeal before the ld CIT(A) and hence, the principles of doctrine of merge do not apply. After carefully examining the case record and submissions made on behalf of the assessee, it is noted that the AR of the assessee has not given any specific explanation with respect to issues raised in the show cause letter issued for initiation of proceedings u/s.263 of the Act. Therefore, the matter is set aside and restored to the file of the AO with a direction to redo the assessment after examining/verifying/enquiring the issues raised in the show cause letter issued for initiation of proceedings u/s.263 of the Act.”
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At the outset, ld A.R. drew our attention towards Ground Nos.1 to 7 submitted alongwith Form No.36 of the appeal record that these grounds have not been adjudicated while passing the order dated 10.5.2018. However, he agreed to the objection of the Ld CIT DR that assessee’s Ground Nos.1 , 2 & 3 are similar to the additional Ground No.1 of the assessee as in all these grounds, the assessee has challenged the impugned revisonary order u/s.263 on account of barred by limitation and this issue has been adjudicated and dismissed by the Tribunal by passing order dated 10.5.2018 dismissing additional ground of the assessee. Therefore, agreeing with the contention of ld CIT DR, we hold that Ground Nos.1 to 3 of the assessee have already been adjudicated in the Form of additional Ground of the assessee, therefore, these are not required to be adjudicated again. 9. Ground No.7 is general in nature. 10. Pressing into service Ground No.4 of the assessee, ld counsel for the assessee submitted that the AO has resorted to estimate by way of adhoc disallowance of expenses claimed. Once the AO has resorted to estimate the expenses on adhoc basis, it is an implied way of rejection of books of account, therefore, there can be no further addition made in the hands of the assessee relying on the same grounds. For this proposition, ld A.R. has relied on the decision of Hon’ble A.P.High Court in the case of Indwell Construction vs CIT, 232 ITR 776 (AP) and also the decision of the Tribunal
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in the case of Teja Construction, 129 TTJ 57. Ld counsel pointed out that as per judgment reported in A Venkat Rao vs CIT, 203 ITR 64, the written reply in compliance to notice u/s.263 of the Act should have been judicially considered by the ld CIT and he is duty bound to examine the points raised and record definite conclusions in respect of each one of them. Since the CIT has not bothered to consider the reply of the assessee u/s.263 of the Act, therefore, the revisionary order has become abnitio void, bad in law and illegal. 11. Ld counsel for the assessee submitted that when the two views are possible on an issue and the AO has adopted one view and merely because Pr. CIT does not agree with the view taken by the AO, same cannot be held as erroneous and prejudicial to the interest of the revenue merely because there was some loss of revenue due to the view adopted by the AO. 12. Replying to above, ld CIT DR, first of all, submitted that the assessee himself in Ground no.4 has admitted that the AO has resorted to estimate by way of adhoc disallowance of expenditure claimed and thus, it is an implied way of rejection books of account. Ld CIT DR submitted that from reading of the assessment order dated 16.11.2011, it is clear that the AO has not rejected books of account of the assessee and has only made adhoc disallowance of 10% of expenditure claimed in the profit and loss account as the assessee could not be able to produce the details of creditors and bills/vouchers in support of expenses claimed. Ld CIT DR vehemently
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contended that books of account have not been rejected by the AO, therefore, case laws are not applicable to the present case. 13. On careful consideration of the rival submissions of both the sides and scrutiny assessment order dated 16.11.2011, we clearly observe that the AO has not rejected books of account of the assessee but has made disallowance of 10% of claim of expenses on account of failure of the assessee to produce details of bills and vouchers in support of such claim of expenses made in the profit and loss account. Therefore, the contention that no further addition can be made on the basis same account, being devoid of merits, is dismissed. 14. So far as non-consideration of reply to notice u/s.263 of the Act is concerned, on careful and vigilant reading of order dated 30.3.2014 u/s.263 of the Act, we are of the considered view that the CIT has given thoughtful consideration to the submission of the assessee in para 6 and also noted that the ld A.R. has not given any specific explanation with respect to issues raised in the show cause letter issued for initiation of proceedings u/s.263. In view of this, the legal contention of the assessee as placed in Ground Nos.5 & 6 cannot be held as allowable and the same are also dismissed being devoid of merits. 15. Before, we part with this order, in the interest of justice, we find it just and proper to direct the AO to consider the contention,. Explanation and relevant documentary evidences during reassessment proceedings in
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pursuance to order u/s.263 of the Act by the AO and also during first appellate proceedings by the CIT(A). The CIT(DR) did not object to the prayer of the assessee for giving above direction to the AO. Needless to say that the assessee shall be given due opportunity of hearing. 16. In the result, appeal of the assessee is dismissed as per the direction indicated above.
Order pronounced on 29/3/2022.
Sd/- sd/- (Arun Khodpia) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 29 /03/2022 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : M/s. B.Banamber & Co., Bhairabi Sahi, Talcher 2. The Respondent. CIT, Bhubaneswar. 3. The CIT(A)-, Bhubaneswar 4. DR, ITAT, Cuttack 5. Guard file. //True Copy//
By order
Sr.Pvt.secretary ITAT, Cuttack
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