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TMI Blog2011 (3) TMI 1665X X X X Extracts X X X X X X X X Extracts X X X X ..... 0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; mso-bidi-font-size:10.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} <![endif]--><!--[if gte mso 9]> <![endif]--><!--[if gte mso 9]> <![endif]--> SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL, AM For the Appellant :Shri S. N. Soparkar and P.D. Shah,AR For the Respondent : Shri Shelly Jindal, CIT. DR ORDER PER BHAVNESH SAINI: This appeal by the assessee is directed against order of the Commissioner of Income Tax - I, Ahmedabad dated 18th March, 2010 challenging the order u/s 263 of the IT Act for assessment year 2005-06. 2. Briefly, the facts of the case are that the assessee company is enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is noticed that in your company filed its return of income for A.Y. 2005-06 on 31.08.2005 declaring total income of ₹ 4,96,290/-. An assessment order U/s 143(3) has been passed on 20.12.2007 determining total income of ₹ 6,46,286/-. 3. On verification of record, it is noticed that during the year under consideration, your company was engaged in earth filling work. During the previous year relevant to A.Y.2005-06, your company executed the sub-contract (work order) given by M/s. Simplex Concrete Piles (India) Ltd. (now on SCPIL) for a consideration of ₹ 4,89,54,750/-. SCPIL had received the contract (work order] for construction of berths and other works at the port from M/s. Gujarat Adani Port Ltd. (now on GAPL). A part of the contract was subcontracted to your company by SCPIL. The sub-contract required your company to carry out manual dredging, formation of dyke with dredged earth and construction of access road behind the existing/ proposed berths of GAPL at Mundra. The break up of the consideration of ₹ 4,89,54,750/- work-wise reveal that a sum of ₹ 3,75,00,000/- was against work of manual dredging, transportation of dredged material and, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- incurred for purchase of materials like bricks, cement, concrete, stone, etc. from M/s. B2C India Ltd. However, according to the work order, construction materials and consumables were issued by SCPJL; therefore, question of its purchase by your company from M/s.B2C India Ltd. did not arise. 7. In view of the fact, that the contract did not require your company to procure any materials and the expenditure claimed by your company towards purchase of materials amounting to ₹ 3,40,00,000/- cannot be considered to have been expended wholly and exclusively for the purpose of its business, which has not been disallowed by the assessing officer . Thus, the order is erroneous and prejudicial to the interest of revenue in this respect. 8. Further, your company has debited an amount of ₹ 60,00,000/- being Consultancy fees paid to M/s. B2C India Ltd. (BIL). BIL in its letter dated nil to the assessing officer claimed that it provided consultancy services to your company in the project for carrying out manual dredging, formulation of dyke with dredged earth, etc. and that the entire project was completed under its supervision. It also claims to have provided plant and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical consultants/ supervisors as the work was to be executed as per the directions of the Project Manager. Similarly, the plant and equipments were, as per the terms of contract supplied by SCPIL. Therefore, the expenditure of ₹ 60,00,000/- claimed by your company has not been properly verified and needs to be disallowed. 10. In view of foregoing, the order passed U/s 143(3) of the I.T. Act 1961 dated 20/12/2007 appears to be not only erroneous but also prejudicial to the interest of revenue. It is proposed to pass appropriate order u/s.263 (l) in your case for assessment year 2005-06. 11. You are, therefore, requested to show cause as to why appropriate Order U/s 263 (1) be not passed in your case. Hearing in your case is fixed on 12/02/2010 at 12.15 P.M. In case nothing is heard from you by the said date, it shall be presumed that you have no objection to the proposed action and matter shall be decided on merits . 3. In response to same, assesses has submitted as under: We have received the notice dt. 04/02/2010 for the initiation of the proceedings u/s 263 of the Income Tax Act, 1961. We herewith submit our submission in our case for your kin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l work order value. Sir, no company will give any job/work order, where there is margin of 84%. Sir, to take a view that work order was only of the labour will give an absurd result and not according to accepted commercial practice. Sir, our company is a new company in this filed of work and therefore we have appointed M/s B2C India Ltd. (BIL) for getting the consultation for executing the work order. We have paid ₹ 60 lacs to BIL for the consultancy and also deducted the appropriated TDS from the payment. It is mentioned in the notice that entire project was under close supervision. Sir, we would like to submit that project was supervised by the project manager of Simplex Concrete piles (India) Limited from time to time, like it happen in any other contract. For e.g. in the road construction contract the road work done by the contractor, is measured and checked/supervised by the officer of Road Development Authority of the Government. If the road is not proper after taking the sample, they sometimes give direction to reconstruct. In the same manner, our work was also supervised by the project manager of the Simplex Concrete Piles (India) Limited and giving the guidel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to incur the expenses of all the construction materials. In this regard, it is further stated that the clause 7 of annexure 3 of work order dtd. 05/08/2004 was misleading and the same was rectified by SCPIL on 12/08/2004 and the same is reproduced as under:- All construction materials and consumables issued to you in connection with the above work shall have to be reconciled and accounted for as and when required, to the entire satisfaction of Project Manager at site and/or the authorized representative to be nominated by him. All construction materials and consumables issued to you, shall be charged and deducted from your bill payment. The final bill shall be accompanied with such reconciliation statement. Unless such reconciliation statement is accompanied with the final bill, we reserve the right to withhold any amount from the payment of your final bill as may be deemed fit. It is also stated that if the work order was without material, than the gross margin of profit would be 84% of the total work order value and no company will give any job/work order where there is a margin of 84%. From the submission of the assessee, it is clear that the revised clause 7 ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and prejudicial to the interest of revenue. c. CIT vs. South India Shipping Corporation Ltd. 233 ITR 546 (Mad)- Whereby the Hon ble Court held that the order of the AO may be erroneous in law or fact. It may be erroneous in the sense that the AO had passed the order without properly conducting the inquiry in completion of the assessment and the order may also be erroneous when the expenditure allowed was against the provision of law. d. CIT vs. Emery Stone Mfg. Co. 213 ITR 843 (Raj) - Whereby the Hon ble Court held that allowing certain claim or deduction without proving the claim or without proper verification in ignorance of the provisions of law are the various instances on the basis of which the order could be considered prejudicial to the Revenue and could be set right in revisional jurisdiction. e. Mannulal Matadeen vs. CIT 277 ITR 346 (AH) - Whereby the Hon ble Court held that the order of the revision was valid as the AO had not made necessary enquiries before allowing deduction of interest. 7. In view of above referred facts and legal position it is held that the assessment order u/s 143(3) dated 20/12/2007 passed by the AO for A.Y. 2005-06 in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied his mind to all the evidences and material on record after considering the reply and submissions of the assessee. The learned Counsel for the assessee, therefore, submitted that such an approach is unsustainable in law and even no definite finding has been given that any case u/s 263 of the IT Act is made out. He has submitted that accounts of the assessee are audited. He has relied upon the following orders of the Hon ble Delhi High Court: 1) CIT Vs International Travel House Ltd. ITA No.94/2010 dated 13-09-2010 2) CIT Vs M/s.Vikas Polymers ITR3/1991 dated 16-08-2010 The learned Counsel for the assessee submitted that when query is raised by the AO during the scrutiny proceedings which have been answered to the satisfaction of the AO, but neither of the query nor the answers were reflected in the assessment order, would not by itself lead to the conclusion that the order of the AO called for any revision as is held in the case of M/s. Vikas Polymers (supra). The learned Counsel for the assessee submitted that the learned Commissioner of Income Tax did not discuss the reply of the assessee in the impugned order and the order of revision is passed without considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law . 7.1 The Hon ble Gujarat High Court in the case of CIT Vs R. K. Construction Co. 313 ITR 65 held as under: Held, dismissing the appeal, that since all the necessary details were furnished to the Assessing Officer, there was no reason for the Commissioner to invoke the revisional jurisdiction under section 263 of the Act. The Assessing Officer had taken a particular view on the basis of the evidence produced before him. On the basis of the evidence before the Assessing Officer and materials which were collected by the Commissioner in revisional proceedings, the Commissioner had taken a different view. However, in the revisional proceedings under section 263, it was not open for the Commissioner to take such a different view. There was nothing on record to suggest that the view taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice, the petitioner submitted an elaborate reply. The Commissioner on receipt of the reply of the petitioner could not have ignored the same. Rather, it was incumbent on the Commissioner to consider the explanations offered and on that basis to record his opinion/conclusion. Moreover, the competent criminal court had exonerated the son-in-law of the petitioner from any liability on account of the house property in question holding it to belong to the petitioner. The findings recorded by the criminal court in this regard could not be brushed aside. Hence, any de novo proceedings at this stage would be futile. The order of revision had to be quashed. The assessment of the petitioner for the assessment year 1992-93 made by order dated May 16, 1994, had to be considered complete and final. 7.5. The learned Counsel for the assessee relied upon the decision of the Hon ble Delhi High Court in the case of CIT Vs International Travel House Ltd. (supra) copy of which is placed on record in which in Para 19 it was held as under: 19. If the obtaining of factual matrix is tested on the anvil of the aforesaid pronouncement of law, it is quite clear that the Commissioner has real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss such order thereon as the circumstances of the case justify. The twin requirement of the Section is manifestly for a purpose. Merely because the Commissioner considers on examination of the record that the order have been erroneously passed so as to prejudice the interest of the revenue will not suffice. The assessee must be called, his explanation sought for and examined by the Commissioner, and thereafter if the Commissioner still feels that the order is erroneous and prejudicial to the interest of the revenue, the Commissioner may pass revisional orders. If, on the other hand, the Commissioner is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the revenue, he may chose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the assessing officer, which was answered to the satisfaction of the assessing officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the assessing officer called for interference and revision. In the instant case, for example, the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue the AO called for the explanation of the assessee along with details and evidences and on filing the same reply and evidences before the AO, the AO has examined the evidences and material before him in the light of the submissions of the assessee on both the issues under consideration. It is also a fact that the successor AO after completion of the assessment proceedings sent a proposal to the learned Commissioner of Income Tax u/s 263 of the IT Act dated 30-12-2009. Copy of the same is filed in the paper book filed by the learned DR at page 3 to 5 in which the AO interpreting the documents and materials on record of the AO formed his opinion that M/s. SCPIL has issued the construction materials for completion of the project free of cost and further it appeared to him that expenditure on account of consultancy fees was unjustified. It is, therefore, clear that the successor AO on interpreting the evidences and documents, on his own way came to the contrary finding and sent the proposal to the learned Commissioner of Income Tax for invoking jurisdiction u/s 263 of the IT Act on both the issues. However, it is a fact that the AO considered both the issues at the original assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, clear from the above discussions that the assessee filed complete details before the AO which have been examined by the AO and he came to the final conclusion on the same and no adverse finding has been given against the assessee. Complete details and submissions were also filed before the learned Commissioner of Income Tax on which the learned Commissioner of Income Tax did not consider the explanation of the assessee in proper perspective and without considering the explanation of the assessee passed the order. Therefore, such order of the learned Commissioner of Income Tax would not be valid. We rely upon the decision of the Hon ble Gauhati High Court in the case of Smt. Lila Choudhury (supra). It is also clear from the facts of the case that it is a case of mere change of opinion by the successor AO and the learned Commissioner of Income Tax by reappraising the evidences which is not permissible u/s 263 of the IT Act. The learned Commissioner of Income Tax had not come to any definite conclusion that the order of the AO was erroneous and prejudicial to the interest of the revenue. The learned Commissioner of Income Tax has not given any finding that the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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