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TMI Blog2022 (4) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... direct the AO to consider the contention, Explanation and relevant documentary evidences during reassessment proceedings in pursuance to order u/s. 263 by the AO and also during first appellate proceedings by the CIT(A). The CIT(DR) did not object to the prayer of the assessee for giving above direction to the AO. - ITA No. 404/CTK/2014 - - - Dated:- 29-3-2022 - Chandra Mohan Garg , Member ( J ) And Arun Khodpia , Member ( A ) For the Appellant : S.N. Sahu and Somanath Sahu, ARs For the Respondents : M.K. Goutam, CIT (DR) ORDER Per C M Garg , JM This is an appeal filed by the assessee against the order of the CIT, Bhubaneswar dated 30.3.2014 u/s. 263 of the Act for the assessment year 2009-2010. 2. This appeal was decided by the Tribunal vide order dated 10.5.2018. However, vide order dated 4.2.2022 in M.A. No. 28/CTK/2018, the appeal was recalled for fresh consideration. 3. The assessee has raised the following grounds: 1. That the order u/s. 263 of the I.T. Act, 1961 is illegal, uncalled for, and without any basis. 2. That no order shall be made u/s. 263 (1) after the expiry of two years from the end of the financial year in which the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal.. 4. The assessee has also raised additional ground of appeal, as under: 1. That the communication is a condition precedent and an order takes effect only on communication. Since the order u/s. 263 was not issued to the assessee within the period of limitation, the same is barred by limitation as has been decided by Supreme Court of India, High Courts and Co-ordinate Bench of Tribunal. 5. Facts of the case are that the assessee is a works contractor, maintains regular books of accounts audited u/s. 44AB of the I.T. Act, 1961. The assessment was completed u/s. 143(3) vide order dated 16.11.2011 after due scrutiny and examining and verifying the audited accounts, making 10% disallowance of expenses claimed on ad hoc basis. The same was reduced in first appeal by the CIT(Appeals) vide order dated 02.04.2013 modifying the disallowance from 10% to 5%. In further appeal before the I.T.A.T. it was further reduced to the extent of ₹ 50,000/- vide order dated 22.10.2014. 6. Thereafter, the learned CIT, Bhubaneswar initiated proceeding vide his show cause notice u/s. 263(1) dated 15.01.2014 alleging that the current liability on account of material purchased and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed certain expenses on estimation basis only. The books of account of the assessee has not been rejected by the AO. Therefore, the contention of the AR of the assessee that since the income was estimated, no further disallowances can be made is baseless and not verifiable from records. In so far as the question of doctrine of merge is concerned, it is noticed that Explanation (c) of Section 261(1) of the Act states that where any order passed by the AO had been the subject matter of any appeal, the powers of the Commissioner under sub-section (1) of Section 263 shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. In the instant case, the estimated disallowance of expenditure made by the AO in the assessment order was the subject matter of appeal before the CIT(A), who vide his appeal order directed to limit such disallowance to 5% of the total claim instead of 10% of the claimed disallowed by the AO. Therefore, issues raised in the show letter issued for the purpose of section 263 were not the subject matter of appeal before the Ld. CIT(A) and hence, the principles of doctrine of merge do not apply. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of each one of them. Since the CIT has not bothered to consider the reply of the assessee u/s. 263 of the Act, therefore, the revisionary order has become ab initio void, bad in law and illegal. 11. Ld. counsel for the assessee submitted that when the two views are possible on an issue and the AO has adopted one view and merely because Pr. CIT does not agree with the view taken by the AO, same cannot be held as erroneous and prejudicial to the interest of the revenue merely because there was some loss of revenue due to the view adopted by the AO. 12. Replying to above, Ld. CIT DR, first of all, submitted that the assessee himself in Ground No. 4 has admitted that the AO has resorted to estimate by way of ad hoc disallowance of expenditure claimed and thus, it is an implied way of rejection books of account. Ld. CIT DR submitted that from reading of the assessment order dated 16.11.2011, it is clear that the AO has not rejected books of account of the assessee and has only made ad hoc disallowance of 10% of expenditure claimed in the profit and loss account as the assessee could not be able to produce the details of creditors and bills/vouchers in support of expens ..... X X X X Extracts X X X X X X X X Extracts X X X X
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