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TMI Blog2012 (9) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has challenged the validity of order passed u/s 263 of the Act. Facts of the case, in brief, are that the assessee is engaged in the business of executing contract work which are in the nature of earth works and road works. During the assessment year under dispute, the assessee filed its return of income declaring net profit of Rs.1,08,84,352/- on a gross receipts of Rs.15,69,52,797. After claiming deduction towards, depreciation, payment of salary and interest to the partners, taxable income was shown at Rs.50,12,857. In course of assessment proceedings, the assessee produced its books of account, bank statements, vouchers etc. As called upon by the AO. The AO completed the assessment u/s 143(3) by making addition of a total amount of Rs.28,47,221/- which comprised of the following heads:- i) Commission on sub-contract works Rs. 1,01,245 ii) Metal Rs. 3,73,957 iii) Labour Charges Rs.14,61,479 iv) Temp. Staff quartaers Rs. 7,50,540 v) Deduction u/s 40A(3) Rs. 1,60,000 Total Income ------------------- Rs.28,47,221/- ------------------- 5. The CIT in exercise of his powers vested under sec. 263 of the Act, called for the assessment records of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted a break-up according to which an amount of Rs.45,36,282/- had been disbursed to Krishnam Raju. Though there are several debits starting from 2-5-2003 and ending on 31- 3-2004 and there is absolutely no credit entry. Had the sub-contractor i.e., Sri Krishnam Raju executed any work, the value of such work ought to have been credited in this account and this fact has not been examined by the AO. v) During the assessment proceedings, the assessee produced details of work-in-progress and as per this statement, the total work-in-progress was Rs.52,05,886/- and as against this in the balance-sheet it was disclosed at a lesser figure of Rs.51,45,706/- thereby understatement of Rs.60,180/- which has not been brought to tax. 6. The validity of the order passed u/s 263 of the Act has to be considered vis-a-vis the issues on the basis of which the CIT set aside the assessment order and which were challenged by the assessee by raising specific grounds. We therefore propose to deal with the grounds raised by the assessee on the aforesaid specific issues. The CIT has invoked his jurisdiction u/s 263 and set aside the assessment on the ground that the AO has not made proper enquiry an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2003-04. When compared to the gross receipts and proportionate expenditure on bitumen between the assessment year 2003-04 and 2004-05, the CIT found huge difference of Rs.82 lakhs. After considering the TDS certificate the CIT found that the length of road completed for assessment year 2003-04 is more than the length of road completed in assessment year 2004-05. Therefore, the explanation submitted by the assessee for more consumption of bitumen is found to be doubtful. These factors have not been examined by the AO while completing the assessment. The CIT after considering all these aspects of the matter has directed the AO to make detailed enquiry and find out the actual consumption of bitumen. Since the AO has not made any enquiry into this aspect and CIT has simply directed the AO to make proper enquiry to finding out the claim of the assessee with regard to expenditure incurred on purchase of bitumen, we find no infirmity in the order of the CIT on this issue. Hence this ground raised by the assessee is rejected. 9. Ground No.5 relates to the direction of CIT for addition of an amount of Rs.15,80,256/- towards quality control charges. In course of proceedings before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year and the payment made to him being in the nature of advance cannot be allowed as expenditure. He therefore directed the AO to bring to tax the amount of Rs.45,36,282/-. It is seen from the documents available before us that the assessee has entered into sub-contract agreement with Krishna Kumar Raju in pursuance to such an agreement. Certain amount has also been paid towards subcontract work. It is therefore necessary to ascertain whether in fact any work has been executed by sub-contractor for which payment was made to him by the assessee. These facts have not been properly brought on record. In this view of the matter, it will not be proper to direct addition of Rs.45,36,282/- on this count without ascertaining facts as to whether the payment to Krishna Kumar Raju is towards any work executed by him under sub-contract agreement. We therefore direct the AO to make necessary enquiry in this regard before making any addition in this count. Hence, this ground of the assessee is allowed for statistical purpose. 11. In the result, the assessee's appeal is treated as partly allowed for statistical purpose. ITA No.1204/Hyd/2011- Revenue's appeal 12. In this appeal, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifically directed the AO to obtain necessary information from IOCL regarding the payment made by the assessee. The CIT (A) has also not made any attempt to finding out whether the assessee has actually made any payment towards outstanding liability to IOCL. We therefore set aside the order of the CIT (A) on this issue and restore the matter to the file of the AO and direct him to conduct necessary enquiry with IOCL and find out the actual liability as on 31-3-2004 and the payments made by the assessee towards outstanding liability to IOCL as per the directions of the CIT in the order passed u/s 263. 15. Ground No.3 relates to deletion of an amount of Rs.83,49,434/-. Brief facts are during the relevant previous year, the assessee claimed expenditure towards purchases and consumption of bitumen at Rs.83,49,434/- which was accepted in the assessment order passed u/s 143(3) of the Act. The CIT set aside the assessment in his order passed u/s 263 and directed the AO to examine the claim of expenditure on bitumen by taking into consideration the contractual norms and other aspects. Pursuant to the order of the CIT, assessment proceedings were taken up by the AO. The AO in course of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.18,87,924/- claimed under the head quality control. At the outset, we must point out that Rs.18,87,924 comprises of two items which are quality control charges of Rs.15,80,625/- excess claim of sales tax payment for Rs.3,07,668/-. As can be seen from the assessment order, the AO has disallowed the claim of quality control amount of Rs.15,80,256/- on the ground that the assessee could not produce any evidence regarding deduction towards quality control either in TDS certificate or any other evidence. Further, the AO found that out of the claim of Rs.9,56,372/- towards payment of sales tax, the assessee was able to produce proof regarding payment of sales-tax of Rs.4,05,718/-,Rs.20,744/-, Rs.66,308/- and Rs.1,56,204 only. Before the CIT (A), the assessee while challenging the addition, contended that the amount towards quality control is deducted by Government from the running bills while making payments. Before the CIT (A), the assessee submitted the details of bills received during the relevant previous year and the amount deducted towards quality control against each of the bill. The CIT (A) after examining materials available before him, found that an amount of Rs.15,80,256 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue is rejected. 19. In the result, the appeal of the revenue is treated as partly allowed for statistical purpose. ITA No.957/Hyd/2011- Assessee's Appeal:- 20. In this appeal, the assessee has raised the following grounds:- i) The order of the ld. CIT (A) is erroneous to the extent it is prejudicial to the appellant. ii) The ld. CIT (A) erred in confirming the addition of Rs.45.36,282/- made by the AO without considering the explanation submitted in this regard. iii) The ld. CIT (A) ought to have considered the following additions made and ought to have decided the same on merits without rejecting the claim on the ground that such additions were made in the regular assessment and were accepted by the assessee. a) Disallowance of commission on sub contract works Rs.1,01,245/- b) Disallowance of expenses on account of metal purchases Rs.3,73,957/- c) Disallowance on account of labour charges Rs.14,61,479/- d) Disallowance on account of staff temporary quarters Rs.7,50,540/- e) Disallowance u/s 40A(3) of the IT Act Rs.1,60,000/- iv) Any other ground that may be urged at the time of hearing." 21. Ground Nos. (i) and (iv) are general in nature and they do not require any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee challenged the disallowances made before the CIT(A) by contending that the additions as were made in the original assessment having been set aside by the CIT u/s 263, the additions made therein no more survive unless the AO specifically dealt with the additions in the assessment order. The CIT (A) rejected the contention of the assessee on the ground that the additions made in the original assessment were accepted by the appellant and it did not file any appeal against the original assessment order. 24. We have heard the contentions of the rival parties and perused the material available on record. As can be seen from the order passed u/s 263, the CIT has not directed the AO to make a de novo assessment. The CIT has directed the AO to consider specific issues as pointed out by the CIT. Therefore, the assessee's contentions that the addition made in the original assessment does not survive as the assessment has been set aside, does not hold good. We are of the view that the CIT (A) was correct in holding that the assessee having accepted the additions made in the original assessment cannot raise the issue again. The ground raised by the assessee in this regard is dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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