2021 (12) TMI 981 - AT - Income Tax

Revision u/s 263 by CIT - payment of job work charges - HELD THAT - From the assessment record as placed in the paper book, it is seen that the Assessing Officer has raised specific query with regard to the job work payment and asked for the details including the bills as well as the TDS deducted on every payment. In response the assessee had filed party-wise details, bills and vouchers, details of payments which were made through account payee cheques and thereafter TDS certificate deducted under Section 194C with regard to every job work payment along with the confirmations given by the parties. This fact was brought specifically to the ld. PCIT in reply to the show cause notice filed before him and nowhere has he disputed that the details were not filed during the course of assessment proceedings or the AO has not verified before him Sole reason on which he has held that assessment order is erroneous and prejudicial to the interest of revenue is that the Assessing Officer should have conducted enquiry under Section 133(6) of the Act from these parties and since enquiry has not been conducted under Section 133(6) of the Act, therefore, he came to the conclusion that no enquiry has been done by the Assessing Officer. First of all, nowhere the ld. PCIT has disputed the details which were available on assessment record placed before him. If the job work payment is supported by bills and vouchers and has been made through banking channels, that is, the payments were made through account payee cheques and also confirmed by the parties, then where was the question that these are non genuine. Most importantly, the entire payment is reconciled with the TDS certificates as all the payments were subject to TDS u/s 194C. The job work in the form of labour are done on the different locations and once the project is completed, the workers move out to different places or migrate back their homes and, therefore, it is impossible to get their current addresses so as to enable the Assessing Officer to issue notice under Section 133(6) of the Act, which actually would have been completely futile exercise. Mere saying that failure to issue notice under Section 133(6) by the Assessing Officer to the labourers, the assessment order is erroneous and prejudicial to the interest of revenue de-hors the nature of business activity carried out by the assessee cannot render the assessment order erroneous and prejudicial to the interest of revenue. Nowhere Ld. CIT has, stated that how can notice under Section 133(6) can be served on the labour force who are mobile and having no permanent address. PCIT has not brought any record or himself conducted any enquiry that such a payment of job work charges are bogus and non-genuine, or are inflated expenditure debited in the profit and loss account. Accordingly, the reasons given by the ld. PCIT for setting aside the assessment order cannot be upheld - Decided in favour of assessee.

Summary

Issues Involved:
1. Assumption of power under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (Pr. CIT).
2. Verification of large other expenses claimed in the Profit and Loss (P&L) Account.
3. Verification of payment to related parties under Section 40A(2)(b).
4. Verification of other current liabilities.
5. Verification of payment to contractors.
6. Verification of stamp duty paid.

Issue-wise Detailed Analysis:

1. Assumption of Power under Section 263 of the Income Tax Act by the Pr. CIT:
The assessee challenged the assumption of power by the Pr. CIT under Section 263 of the Income Tax Act, arguing that the assessment order dated 12.10.2017 was neither erroneous nor prejudicial to the interest of revenue. The Pr. CIT assumed jurisdiction on the grounds that no independent enquiry or verification of details was made by the Assessing Officer (AO). The Tribunal noted that the AO had indeed conducted enquiries and verifications, and the Pr. CIT's assumption of power was not justified as the AO had taken one of the permissible views based on the details provided by the assessee.

2. Verification of Large Other Expenses Claimed in the P&L Account:
The Pr. CIT raised concerns about the large other expenses claimed by the assessee, amounting to ?13,22,53,761/-, and noted inconsistencies in the job work bills submitted by the assessee. The Tribunal observed that the AO had called for details and examined the expenses, including party-wise details, bills, and TDS certificates. The Tribunal found that the AO had conducted adequate verification and the Pr. CIT's conclusion that the AO had not made any effort to cross-examine the parties was not justified.

3. Verification of Payment to Related Parties under Section 40A(2)(b):
The Pr. CIT identified issues related to payments made to related parties under Section 40A(2)(b). However, the Tribunal noted that this issue was outside the scope of limited scrutiny and that the AO had conducted necessary verifications. The Tribunal held that the Pr. CIT's assumption of power under Section 263 on this ground was not proper.

4. Verification of Other Current Liabilities:
The Pr. CIT raised concerns about other current liabilities, but the Tribunal noted that this issue was also outside the scope of limited scrutiny. The AO had conducted verifications as required, and the Tribunal found that the Pr. CIT's assumption of power under Section 263 on this ground was not justified.

5. Verification of Payment to Contractors:
The Pr. CIT raised concerns about short deduction/non-deduction of TDS on payments to contractors. The Tribunal observed that the AO had specifically scrutinized job work charges and TDS deductions, and the payments were made through account payee cheques. The Tribunal found that the AO had conducted adequate verification and the Pr. CIT's conclusion that the AO had failed to examine the issue was not justified.

6. Verification of Stamp Duty Paid:
The Pr. CIT raised concerns about stamp duty paid, but the Tribunal noted that this issue was also outside the scope of limited scrutiny. The AO had conducted verifications as required, and the Tribunal found that the Pr. CIT's assumption of power under Section 263 on this ground was not justified.

Conclusion:
The Tribunal concluded that the Pr. CIT's assumption of power under Section 263 was not justified as the AO had conducted adequate verifications and enquiries. The Tribunal set aside the Pr. CIT's order and upheld the assessment order accepting the job work charges. The appeal of the assessee was allowed.