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TMI Blog2016 (12) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... by : Shri S.K. Kulkarni ORDER Per Sushma Chowla, JM The cross appeals filed by the assessee and the Revenue are against order of CIT(A), Kolhapur, dated 04.01.2012 relating to assessment year 2008-09 against the order passed under section 143(3) of the Income Tax Act, 1961 (in short the Act ). 2. The cross appeals filed by the assessee and the Revenue were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee in ITA No. 458/PN/2012 has raised the following grounds of appeal :- 1. The learned Commissioner of Income Tax (Appeals) erred on facts and in law in upholding disallowance of labour payments of ₹ 18,53,885 being 20% of total labour payments of ₹ 92,69,429. He failed to appreciate the facts and circumstances as well as arguments advanced by the assessee in proper perspective. 2. The learned Commissioner of Income Tax (Appeals) erred on facts and in law in enhancing the assessment by ₹ 21,70,537 on account of treatment of expenditure on G.I. sheets as capital expenditure (net of depreciation) as against revenue as claimed by the assessee. He ought to have given proper notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r contractors payments of R s.92,69,429 erred in ignoring the assessee's failure to substantiate even a part of the payment with respect to the various projects carried out or with respect to individual recipients of the amounts whereby the assessee failed to discharge his onus of substantiating the claim of expenditure made. (5) On the facts and in the circumstance s of the case and in law the C IT(A ) erred in giving relief to the assessee on the disallowance u/s 40(a)(ia) of the I T A ct 1961 of interest paid by the assessee to a co-operative credit society without deducting tax at source by directing the assessing officer to verify the position of share capital of the C o-operative Society and allow the deduction claimed on the basis of such verification as the same amounted to setting aside the assessment. (6) On the facts and in the circumstance s of the case and in law the C IT(A ) erred in holding that a Co-operative Credit Society is required to be treated as a C o-operative Bank if its share capital exceeds R s.1 lakh in absence of any such claim made by the C o-operative Credit Society or any such recognition granted by the Reserve Bank of India. (7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of Survey. The Assessing Officer further noted that total income declared by the assessee in the return of income at ₹ 81,64,590/- was mostly due to disallowance of various amounts including disallowance of ₹ 68,31,574/- due to violation of provisions of section 40(a)(ia) of the Act. The Assessing Officer thus, noted that the assessee had failed to disclose normal business income of the year and had also not declared the additional income, which was admitted during the course of Survey. 7. The Assessing Officer in the first para mentions that the case was selected for scrutiny under the existing scrutiny norms through CASS. Notice under section 143(2) of the Act was issued by the DCIT, Circle (1), Sangli on 18.09.2008. The jurisdiction of the case was vested with the Joint Commissioner of Income Tax, Range-1, Sangli by the Commissioner of Income Tax-I, Kolhapur vide order dated 18.02.2010. Thereafter, notices were issued to the assessee under section 143(2) and 142(1) of the Act. The assessee participated in the assessment proceedings and produced the books of account for verification along with other details. During the course of assessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions mentioned in the press release have not been fulfilled by the assessee simultaneously and hence, the case would be liable to be picked up for regular assessment. 9. The assessee is in appeal against the order of CIT(A) and the first issue raised by the assessee is the jurisdictional issue against the validity of assessment order made in the case. 10. The learned Authorized Representative for the assessee pointed out that the assessee was engaged in road construction and building of projects. He pointed out that during the course of Survey on 30.01.2008, the assessee had made a declaration of ₹ 33,18,000/- + ₹ 12 lakhs + ₹ 13,467/- which was included in the return of income filed by the assessee. He further stated that the case of assessee was picked up for scrutiny. The learned Authorized Representative for the assessee brought to our attention, the application made under the Right to Information Act, as to the basis for selection of case of the assessee for the relevant year under scrutiny. It was specifically asked whether the case was selected for scrutiny under CASS. In reply, the Central Public Information Officer stated that the case of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 256 (Del) for the proposition that where the guidelines are laid down for selection of cases for scrutiny and if the case of the assessee was taken up for scrutiny in violation of CBDT Instructions, then the assessment order has to be set aside. He further referred to the decision of Hon ble Bombay High Court in Bombay Cloth Syndicate Vs. CIT (1995) 214 ITR 210 (Bom) for the proposition that the CBDT Instructions were binding. 11. The learned Departmental Representative for the Revenue on the other hand, pointed out that as per the guidelines of CBDT, the cases could be selected, may be not through CASS. Our attention was drawn to the order of Assessing Officer, wherein he has elaborately dealt with the issue that income increased during the year only because of notional disallowance of expenses under section 40(a)(ia) of the Act and not because of declaration of additional income by the assessee. He stresses that the case was selected under normal scrutiny proceedings and excess expenditure of bad debts claimed by the assessee were disallowed by the Assessing Officer. He then went into merits of the case. It was also stressed by the learned Departmental Representative for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the assessee had not included the additional income of ₹ 45,93,467/-, where it had declared the business income at only ₹ 11,62,084/-, though it had filed the return of income declaring income of ₹ 81,64,590/-. The case of authorities below is that the assessee had not fulfilled the conditions laid down in the guidelines for taking up the case for scrutiny assessment year under consideration and hence, there was no merit in the claim of assessee that it had fulfilled the conditions laid down in guidelines. The whole gamut of arguments and discussion in the orders of Assessing Officer and CIT(A) is on this account that the assessee had not fulfilled the conditions relating to Survey cases for financial year and the case of the assessee could be picked up for scrutiny. The assessment order was passed on 09.09.2010 and the appellate order was passed on 04.01.2012. The assessee thereafter moved an application under the Right to Information Act, wherein a specific question asked was with regard to selection of scrutiny and other relevant information relating to assessment year 2008-09. The specific question asked by the assessee was whether its case was selected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has come into existence after the date of passing of assessment order and appellate order, the first thing to be taken note of is that the case of assessee was not selected for scrutiny in CASS which is the reply given in answer to RTI query as per letter dated 12.04.2012. The second aspect is that the case of assessee was selected for scrutiny in view of the guidelines contained in F.No.225/93/2009/ITA.II . The assessee has placed the copy of said guidelines on record at page 23 of the Paper Book, wherein it is provided that the case of any assessee may be selected for scrutiny after recording reasons and after obtaining the approval of CCIT / DGIT. In other words, the case of assessee could be picked up for scrutiny manually but the same had to be after recording reasons for such an action and after obtaining the approval of CCIT / DGIT. However, the Assessing Officer vide letter dated 13.05.2013 has categorically mentioned that no previous approval of CCIT was obtained to select the case manually for scrutiny for assessment year 2008-09. In the above circumstances, where the order has been passed against the norms laid down by the CBDT vide its guidelines which were bindi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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