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TMI Blog2022 (4) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is not erroneous or prejudicial to the interests of the revenue. Difference in receipt vis a vis TDS reflected in 26AS - sales were exceeding ₹ 10.00 lacs as reflected in Form 26AS which was not shown in the list of the details of the sales exceeding ₹ 10 lacs during the assessment proceedings - Assessee furnished reconciliation of Form No. 26AS and sales in tabular form, even during the course of assessment proceedings, the assessee reconciled the same with reference to the credit in the bank accounts. The assessee again explained in respect of first three parties viz. Weal Developers, Synergy Developers and Sar Infracon, the advances were received on which the TDS was made for which the sales was accounted in succeeding years in respect of the advances. For the fourth party i.e. Gaurang Yogeshbhai Shah, it was submitted that no advances were received and therefore the sales were shown in the list of sales exceeding ₹ 10 lacs. The fourth party i.e Gaurang Yogeshbhai Shah, who is the proprietor of Tejasvi Construction and the sales were shown in the name of Tejasvi Construction (Gaurang Shah) in the list. The allegation of the ld. Pr.CIT that the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n set aside with direction to frame the assessment denovo and not appreciating the overall facts and circumstances of the case and in the process overlooked the legality of the claim made by the Appellant. 3. The appellant craves leave to add, amend or alter the aforesaid grounds of appeal at the time of hearing, if the need arise. 2. Brief facts of the case are that the assessee is a company engaged in business of electrical installation and commissioning activities, filed its return of income for Assessment Year (AY) 2013-14 declaring income of ₹ 96,72,140/-. The return of income was selected for scrutiny. The Assessing Officer after making various enquiries made various additions/disallowance consisting of disallowance on account of delay in deposit in contributions of employ EPF and ESI, disallowance of interest under section 40A(ia)(a) of the Income Tax Act, 1961 (in short, the Act) and disallowance out of interest paid on TDS and disallowance under section 14A, while passing assessment order 15.01.2016. The assessment order was revised ld. Pr.CIT by exercising his jurisdiction under section 263 dated 20.03.2018. Before passing, the revision order, the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown the same as income whereas payment of the same has been taken as expenditure. On aforesaid observations, the ld. Pr. CIT issued show cause notice dated 07.07.2018 to the assessee that the assessment order is erroneous and prejudicial to the revenue. The assessee was asked to attend the hearing on 16.02.2018 with written submission. The ld. Pr. CIT recorded that assessee filed its reply dated 12.03.2018. The relevant part of reply is extracted by ld PR.CIT in para3 of his order. 4. Reconciliation of 26AS and sales. Sr No Name Amount of sale of services(Rs.) TDS deducted(Rs.) Advance Received Year in which sales booked 1. Weal Developers 1526795 30557 1175280 F.Y. 203-14 2. Synegry Developers 1000650 20013 997877 F.Y. 2014-15 3. Sar Infracon 5241574 104 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally received or accrued or deemed to be received or accrued. The above said companies had deducted tax and the assessee had claimed the TDS amount in the return of income and shown the sale income in the year when work is completed. Hence, onus lies upon the assessee to shown the sales income in return of income on accrual basis. The assessee had not offered the sale income and the same is not verified by Assessing Officer during the assessment proceedings which makes the assessment order erroneous and prejudicial to the interest of revenue. Secondly, in case of Gaurang Yogeshbhai Shah (Pro. of Tejasvi Const.), during the assessment the assessee has not submitted the above mentioned case as sale receipt during FY 2012-13 in its submission dated 23.11.2015. Though, the assessee claim TDS of ₹ 1,62,489/- on sales deducted by Gaurang Yogeshbhai Shah. Thus, it required to verify details of whether the assessee had offered the income receipt from sales or not. And thirdly in Note 22 of Audit report, of column of other expenses of service tax and VAT debiting from profit and loss account of ₹ 68,75,826/- and ₹ 8,78,073/- respectively. The assessee stated that auditor s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on 05.06.2015 and again on 12.10.2015. In the notices, the Assessing Officer has specifically asked about the various explanation including details at para no. (i), (vi), (x) and (xvi) of this said notices. The ld. AR of the assessee invited out attention on various such questionnaire which were required. (i) Furnish the copy of the return of income filed for A.Y. 2012-13, Audit Report and all its enclosures. Also furnish the copies of returns of income filed by directors of the company for A.Y. 2013-14 (vi) Furnish the name and address of the persons / parties to whom sales exceeding ₹ 10 lacs made during the year with supporting / documentary evidences. (x) Furnish the complete details of the following expenses debited in P L A/c with supporting/documentary evidences: (a) Office expenses ₹ 13,88,547/- (b) Office Rent ₹ 4,05,000/- [copy of rent agreement, if any] (c) Room Rent ₹ 38,94,500/- [copy of rent agreement, if any] (d) Service Tax ₹ 68,75,826/- [along with Service Tax returns and proof of payments made] (xvi) Please furnish i) Copies of claimed TDS/TCS/prepaid taxes or 26AS statement. Plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on account of suppressed receipt with reference to TDS in Form- No AS 26. Though, the assessing officer made additions on other various issues. 11. On the issue of service tax and VAT, the ld AR for the assessee submits that the assessee is following inclusive method of accounting in respect of accounting of taxes and government levies, which is in accordance with the mandates of section 145A of the Income Tax Act. The service tax and VAT are collected as a part of sales. The liability of service tax and VAT is separately debited in Profit and loss accounts. The assessee has shown revenue from operation of ₹ 25,32,92,741/- which is mentioned in the audited accounts includes service tax and VAT. The assessee has debited service tax of ₹ 68,75,826/- and VAT of ₹ 8,78,073/- under Schedule -22 of other expenses forming part of profit and loss account. In exclusive method of accounting the service tax and VAT are separately credited in the accounts and when payments are made this account is debited. So both income and expenses are not taken into accounts. Thus, both method of accounting are revenue neutral. And the assessee is following same method of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vi Construction (Gaurang Shah) in the list. The allegation of the ld. Pr.CIT that the sales in respect of Gaurang Yogeshbhai Shah were not shown in the list was wrong. For fifth party i.e. Hazira Lng Pvt. Ltd. the assessee stated that the sales were less than ₹ 10 lacs and therefore were not shown in the list. The amount of ₹ 6,45,286/- as referred by the ld. PR.CIT in his show cause notice was in respect of Adani Hazira Port Pvt. Ltd. and therefore it was a clerical mistake committed by the ld. PR.CIT. The ld. AR further submits before the ld. Pr.CIT that during the scrutiny assessment for A.Y. 2013-14, Form 26AS has already been reviewed in the submission filed vide letter dated 23.11.2015. On the second allegation in the show cause notice, the ld. AR submits that the Auditor has made clerical mistake while preparing Form No. 3CD and accordingly, certificate from the auditor was filed with the submission before the ld.Pr. CIT. Before the ld. PR.CIT, the assessee also furnished the ledger accounts of all five parties and the ledger accounts were Adani Hazira Port Pvt. Ltd. The ledger accounts of succeeding years in case of Weal Developers, Synergy Developers and Sar In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be branded as erroneous. To support his submissions, the ld. AR of the assessee has relied upon the following decisions: 1. CIT vs. Max India Ltd. [295 ITR 0282 (SC)] 2. Malabar Industries Co. Ltd. vs CIT [243 ITR 0083] (SC) 3. CIT vs G.M. Mittal Stainless Steel Pvt Ltd [263 ITR 0255] (SC) 4. CIT vs Amit Corporation [81 CCH 0069] (Guj HC) 5. CIT vs Arvind Jewellers [259 ITR 0502] (Guj HC) 6. Bilag Industries Pvt. Ltd. vs. CIT (A) [SCA No. 24128 of 2005] (Guj HC) 7. CIT vs. R. K. Construction Co. [313 ITR 0065] (Guj HC) 8. CIT vs. Nirma Chemicals Works. Pvt. Ltd. [309 ITR 0067] (Guj HC) 9. Rayon Silk Mills vs. CIT (A) [221 ITR 0155] (Guj HC) 10. PR.CIT v/s. Shreeji Prints Pvt. Ltd. [Tax Appeal No. 828 of 2019] (Guj HC) 11. CIT vs. Nirav Modi [390 ITR 0292 (Bom. HC)] 12. CIT vs Gabriel India Ltd. [203 ITR 108(Bom)] 13. Moil Ltd. vs CIT [81 taxmann.com 420 (Bom. HC)] 14. CIT vs. Fine Jewellery India Ltd. 55 taxmann.com 514] (Bom HC) 15. Anil Kumar Sharma [335 ITR 0083] (Delhi HC) 16. ITO vs. DG Housing Projects Limited [343 ITR 329](Del HC)] 17. CIT vs. Sunbeam Auto Ltd. [189 Taxman 0436 (Del.)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order was passed by ignoring the vital issues and the assessment order is erroneous. Accordingly, the twin conditions as prescribed under Section 263 of the Act are clearly meet out in the present case. Therefore, the ld. Pr.CIT has rightly assumed the jurisdiction under Section 263 of the Act. The ld. Pr.CIT while setting aside the assessment order, gave clear direction to the assessing officer that before examining the issue, the assessee be given reasonable opportunity of hearing. Thus, no harm is likely to cause to assessee when the assessee would have an opportunity to explain the fact before the assessing officer which was not examined by him during the scrutiny assessment. To support his submissions, the ld. CIT-DR for the Revenue relied upon the decisions of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs CIT (2000) 109 Taxman 66 (SC), Rajmandir Estates (P) Ltd. Vs Pr.CIT (2017) 77 taxmann.com 285 (SC), Deniel Merchants P Ltd. Anr. Vs ITO SLP (C) No. 23976/2017 dated 29/11/2017, Hon'ble Calcutta High Court decision in the case of CIT Vs RKBK Fiscal Services (P) Ltd. (2013) 32 taxmann.com 153 (Calcutta) and the decision of this Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through profit and loss account and in accordance with inclusive method of accounting. Therefore, the assessment order on second issue is not erroneous or prejudicial to the interests of the revenue. 18. Now adverting to the first issue, we find that during the assessment, the assessing officer vide his questionnaire dated 12/10/2015 specifically asked the assessee to furnish the name, address of the parties to whom the assessee made sale exceeding ₹ 10.00 lacs or more. The assessee vide its reply dated 23/11/2015 furnished the required details. The assessee again vide its reply filed on 23/12/2015 furnished the reconciliation of 26AS with TDS reflected in the bank and claimed in income tax return. The assessee also furnished difference in TDS claimed as per Form 26AS was only ₹ 48,794/-. The said difference was comprising TDS reported by Rahul Raj Estate Pvt. Ltd. of ₹ 46,917/- and ₹ 1,877/-. We find that the assessing officer after receipt of reply of assessee, accepted the contention of assessee and no addition on account of difference in receipt vis a vis TDS reflected in 26AS was made. 19. We find that assessee while filing its reply vide dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. But that by itself will not be enough to vest the Commissioner with the power of suo-moto revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the revenue, then also the power of suo-moto revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irma Chemical Works (P) Ltd (2009) 309 ITR 67, the Hon ble High Court also held that when assessing officer after making due inquiries had adopted one of the view and granted partial relief, merely because Commissioner took a different view of the matter, it would not be sufficient to permit Commissioner to exercise his powers under section 263. The Hon ble Court in para 22 of its order on the objection of the revenue that there is no discussion of the issue in the assessment order held that the contention on behalf of the revenue that the assessment order does not reflect any application of mind as to the eligibility or otherwise under section 80-I of the Act requires to be noted, to be rejected. An assessment order cannot incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic some. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he carries and the period of limitation within which an order is required to be made; and, secondly, the order is an appealable order. An appeal lies, would be filed, only again ..... X X X X Extracts X X X X X X X X Extracts X X X X
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