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2019 (8) TMI 851 - HC - Income TaxRevision u/s 263 - disallowance u/s 40 (a) (ia) when books of accounts was rejected - HELD THAT - As decided in M/S. HYCONS INFRASTRUCTURE (INDIA) LTD. 2014 (7) TMI 1306 - ANDHRA PRADESH HIGH COURT while dismissing the Revenue s appeal, the Division Bench observed that amendment or no amendment, if the profit is estimated on any ground, whether ignoring books of accounts or rejection thereof, then there is no scope for allowability/disallowability of any deduction. In our considered view, the above provision mentions how to consider the same when the books of accounts are available and the same shall be accepted on fact by the authorities below. We are now informed by Ms. K. Mamatha, learned senior counsel for Revenue, that the aforestated order of the Division Bench has been confirmed by the Supreme Court by virtue of the dismissal of the SLP at the threshold. It is not open to the Revenue to assert any right to allow or disallow any deductions once the books of accounts are rejected. Such an option would arise only in the event the books of accounts are accepted. In the light of the aforestated decision, which we are not inclined to disagree with, the main questions of law sought to be raised presently stand settled against the Revenue.
Issues:
1. Disallowance under section 40(a)(ia) of the Income Tax Act, 1961. 2. Jurisdiction of the Assessing Officer and Commissioner of Income Tax. 3. Interpretation of statutory provisions. 4. Scope of deduction in case of estimated profits. 5. Applicability of High Court and Supreme Court judgments. Analysis: 1. The primary issue in this case pertains to the disallowance under section 40(a)(ia) of the Income Tax Act, 1961. The court deliberated on whether the ITAT was correct in holding that the assessment order was not erroneous or prejudicial to the interests of revenue, even though the disallowance under this section was not examined by the Assessing Officer. The court examined the legality of the ITAT's decision in deleting the disallowance made under section 40(a)(ia) of the Act. 2. Another significant issue raised was regarding the jurisdiction of the Assessing Officer and the Commissioner of Income Tax. The court analyzed whether the CIT had the authority to revisit the issue of gross contractual receipts, which was already considered by the Assessing Officer. The court also assessed whether the Assessing Officer could make any disallowance under section 40(a)(ia) once the income of the assessee was estimated by rejecting the books of account. 3. The interpretation of statutory provisions was a crucial aspect of the judgment. The court examined the correctness of the ITAT's decision in deleting the disallowance under section 40(a)(ia) by relying on a previous High Court judgment. The court also analyzed the interpretation of the term "payable" in section 40(a)(ia) and the applicability of different judicial precedents in determining the scope of the provision. 4. The court discussed the scope of deduction in cases where profits are estimated. It considered whether statutory disallowances under sections 43B and 40(a)(ia) applied to all assesses irrespective of the method of profit determination. The court examined whether the estimation of profit precluded the allowability or disallowability of any deduction under the Income Tax Act. 5. The judgment also addressed the applicability of High Court and Supreme Court judgments in similar matters. The court referred to a previous Division Bench decision and the subsequent confirmation of that decision by the Supreme Court. The court emphasized that once the books of accounts are rejected and profits are estimated, there is no scope for further allowability or disallowability of deductions. Consequently, the main questions of law raised by the Revenue were settled against them, leading to the dismissal of the appeal.
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