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TMI Blog2022 (3) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... sumption of jurisdiction u/s. 263 which is well within the limited scrutiny for which the matter was initially selected for examination by the Assessing officer. Where the matter is selected for precise reason for examination of labour and wages payable, certain basic questions arises for consideration which a person of reasonable intellect and understanding should raise and examine. Firstly, who are these persons - whether regular employees or hired through a third party, name and address and other basic identification particulars of these persons who are hired and terms of such hiring in terms of salary/wages/social security, etc., work/project for which they are hired and their attendance records, etc to establish actual rendering of services and period/hours of service, payment/muster rolls etc showing salary/wages payable, actual payment and whether liable for TDS and actual TDS done and deposited in their respective accounts. And in respect of old outstandings, the persons in respect of whom the amount has remained outstanding, the period and reasons for such outstandings and whether any payments have been made during the year or not and applicability of TDS on such paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and in the circumstances of the case, the learned Principal Commissioner of Income Tax (hereafter, the Pr. CIT ) had no occasion to initiate proceedings under section 263 of the Income Tax Act, 1961 (hereafter, the Act ) as the assessment order sought to be revised is neither erroneous nor prejudicial to the interests of the revenue. 2. The impugned order of the learned Principal Commissioner of Income Tax is bad in law as there is no specific finding in the order that the order of assessment is erroneous insofar as it is erroneous in respect of any of the issues raised. 3. The learned Pr. CIT acted without jurisdiction in passing an order in respect of agreed addition and verification of creditors and wages payable already carried out by the Ld. AO before passing order u/s. 143(3). 4. For these and other grounds that may be adduced at the time of hearing, the order of the learned Pr. CIT may be quashed and the appeal allowed. The appellant craves leave to add to, or, amend/alter/withdraw any of the above grounds of appeal. All the grounds of appeal are without prejudice to each other. 2. Briefly, the facts of the case are that the assessee, who is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 26,04,889/- including interest income of ₹ 4,14,969/- on total sales turnover of ₹ 2,59,18,414/- and after deducting the interest income from the net profit, the net profit percentage declared by him is 8.45%, which is in excess of the presumptive rate accepted in number of judicial pronouncements in the case of contractors. It was further submitted that as against the sundry creditors of ₹ 76,58,117/- mentioned in the show cause notice, the total sundry creditors are only at ₹ 19,84,695/- and list of the sundry creditors forms part of the audited financial statements. It was further submitted that the ledger account for these creditors was verified during the course of assessment proceedings and most of these balances were independently confirmed by the parties and their confirmation also form part of the assessment records. Regarding the labour wages payable amounting to ₹ 56,73,422/-, it was submitted that the same was also duly verified during the course of assessment proceedings and bill vouchers and labour wage muster rolls were produced. Regarding the fact that the wages were paid in cash, it was submitted that the wages were paid at differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Revenue and in the light of Explanation-2 to section 263 of the Act, the AO has passed the order without making enquiries or verification which should have been made thereafter relying on certain judicial authorities on the subject of invoking of provisions of section 263 of the Act, the Ld. Pr. CIT has set aside the order so passed by the AO and has directed him to re-assess and recompute the income of the assessee in the light of the directions so contained in the impugned order by conducting further enquiries after providing reasonable opportunity to the assessee. 5. Against the said order and findings of the Ld. Pr. CIT, the assessee is in appeal before us. Firstly, it was submitted by the Ld. AR that the Ld. Pr. CIT has not applied his independent mind while initiating the proceedings u/s. 263 of the Act as the balance of sundry creditors in the financial statements of the assessee company has been reflected at ₹ 19,84,695/- and not ₹ 76,58,117/- which has been stated by the Ld. Pr. CIT while issuing the show cause notice. It was submitted that the labour and wages payable has been duly reflected under the separate head of 'labour wages payable' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the bill vouchers and labour wages muster rolls were produced during assessment proceedings. It was accordingly submitted that where the AO has duly examined the matter and has applied his independent mind and basis thereof, an addition by way of disallowance of labour/wages expenses has also been made, the order so passed by the AO cannot be termed as erroneous and prejudicial to the interest of the Revenue. 6. Per contra, the ld. CIT DR submitted that the ld. AR is trying to make distinction between the wages payable and other sundry creditors. However, such a distinction which is more in the form of a nomenclature cannot escape the fact that all these expenses are in the nature of sundry creditors having not been paid at the year-end and remained outstanding for either goods purchased or services availed by the assessee and whether payable to the labourers/employees or to outside third parties and, therefore, the contention advanced by the Ld. AR that the Ld. Pr. CIT has initiated the proceedings on wrong facts and exceeded his jurisdiction u/s. 263 in terms of examining the matter of labour and wages payable as beyond the scope of limited scrutiny assessment cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 974, Rajmandir Estates Pvt. vs Principal Commissioner of Income Tax G.A. No. 509 of 2016 with ITAT No. 113 of 2016 High Court of Delhi dated 13.05.2016. 7. We have heard the rival contentions and perused the material available on record. Firstly, we refer to the contention advanced by the ld. AR that the proceedings initiated by the Ld. Pr. CIT were on wrong figures and misinterpretation of details available on record and secondly, being a limited scrutiny case, it has been contended that the Ld. Pr. CIT cannot initiate the proceedings u/s. 263 of the Act, on the issue of labour and wages payable amounting to ₹ 56,73,422/-, which are beyond the scope of limited scrutiny for verification of sundry creditors. In this regard, we find that the case of the assessee was selected for limited scrutiny through CASS to examine inter-alia the issue of sundry creditors. The information and documentation which forms the basis for said computerized selection is the return of income disclosing computation of income under various heads of income as well as the particulars of income and expenditure as well as particulars of assets and liabilities. In the return of income in Form 4 so filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test-checked. It has been stated by the AO that some of the outstandings were old which was confronted to the AR and to which, the ld. AR had submitted that the wages and labour charges were paid on demand and considering the submissions so made and after discussions with the AR, an addition of ₹ 3 lacs was made by the AO which was accepted by the AR on behalf of the assessee as so stated in the assessment order. We therefore that it is not a case where the AO has not examined the matter for which the case was selected for scrutiny and he did examine the matter and basis such examination and submissions so made on behalf of the assessee, an addition of ₹ 3 lacs was made while passing the assessment order. 10. Now, let's examine as to how the ld. PCIT arrive at a finding that the AO has passed the assessment order without making proper enquiries or verification which should have been made and therefore, the order so passed was erroneous in so far as prejudicial to the interest of the Revenue. 11. Firstly, the ld. PCIT has stated that there is a mismatch in the figures as debited in the profit/loss account and as reflected in the balance sheet which shows that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to establish actual rendering of services and period/hours of service, payment/muster rolls etc showing salary/wages payable, actual payment and whether liable for TDS and actual TDS done and deposited in their respective accounts. And in respect of old outstandings, the persons in respect of whom the amount has remained outstanding, the period and reasons for such outstandings and whether any payments have been made during the year or not and applicability of TDS on such payments. Therefore, where the ld. PCIT has stated that besides ledger account, there is no documentation on record in support of such expenses, we agree that the Assessing officer did not make proper and adequate enquiries while making the assessment. The explanation in support of cash payments and reasons for such payments not liable for TDS can only be tested once the complete details are available on record and in absence of the same, the same will remain contention which cannot be accepted without leading any evidence in support thereof. It is ordinarily expected that the Assessing officer examine these transactions thoroughly rather than just relying on the information submitted by the assessee company and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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