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TMI Blog2022 (11) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... aspects (TDS on various payments and allowability of deduction for labour charges), the order passed by the ld. Assessing Officer is not erroneous and prejudicial to the interest of the revenue. Regarding the scope of enquiry u/s 263 of the Act, it may be useful to refer to jurisdictional Gujarat High Court decision in the case of Principal Commissioner of Income Tax-3 v. Minal Nayan Shah [ 2020 (9) TMI 825 - GUJARAT HIGH COURT] . We are of the view that ld. Pr. CIT has erred in facts and in law invoking the provisions of section 263 in the instant set of facts. Accordingly, we direct that the order passed by the Pr. CIT u/s. 263 may be set aside - Decided in favour of assessee. - ITA No. 185/Ahd/2022 - - - Dated:- 14-10-2022 - Shri P. M. Jagtap , Vice President And Shri Siddhartha Nautiyal , Judicial Member Assessee by : Shri Hitesh M. Shah , A. R. Revenue by : Shri James Kurian , CIT - D. R. ORDER PER : SIDDHARTHA NAUTIYAL , JUDICIAL MEMBER : - This is an appeal filed by the assessee against the order of the ld. Principal Commissioner of Income Tax (Appeals)-3, Ahmedabad in vide order dated 30/03/2022 passed for the assessment year 2017-18. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had filed return of income for assessment year 2017-18 declaring total income at Rs. Nil. Thereafter, the case was selected for scrutiny and assessment u/s 143(3) of the Act was passed determining the total income at Rs. 1,97,640/- by making various additions/disallowances. On examination of the assessment records, the Pr. CIT observed that the assessee had claimed deduction with regard to various expenses like consultation charges, professional fees, security charges, professional expenses, brokerage expenses etc. on which no TDS was deducted. Therefore, as per provisions of section 40(a)(ia) of the Act, the disallowance of 30% amounting to Rs. 28,04,823/- of the total amount of Rs. 93,49,410/- was required to be made. According to the Pr. CIT, omission to deduct TDS should have called for disallowance by the Assessing Officer u/s. 40(a)(ia) of the Act and hence the assessment order was erroneous in as much as prejudicial to the interest of the revenue. The Pr. CIT further observed that sum of Rs. 48,72,350/- was paid to S.V. Construction for construction of club house and underground water tank and the same was allowed as labour charges by the Assessing Officer during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly reflected in the Quarterly return of TDS i.e. 26Q. However, on perusal of the ledger account, it is noticed that although, the basic information about the person to whom payment has been made and tax has been deducted is provided but the assessee has failed to submit the requisite supporting documentary evidences to prove the factum as actually such deduction was made and if yes, how much deduction was made in respect of each transaction. The information is lacking in this aspect. Therefore, it is not possible to verify the claim of the assessee that due compliance of the TDS provision has been made or not. b) The assessee has submitted a chart in the form of Annexure- F for consultancy charges, PMC charges, Professional Fees, Rent, Salary and labour charges. This chart contains the name of the party to whom payment has been made, PAN, address, amount paid/payable, date of payment, Bank Statement page number highlighting the payment and mode of payment made to the party concerned. However, it its support, the assessee has not submitted relevant supporting documentary evidence to verify the claim of assessee about TDS and its payment. c) The assessee has submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lthough the assessee has claimed that TDS was deducted from the amount paid/payable to various parties but failed to verify its claim that the amount has been deposited into the government account in timely manner. As such the explanation offered by the assessee is not found acceptable for the reasons mentioned above. 8.1 So far as the issue related to labour charges expenses of Rs. 50,76,850 is concerned , it is noticed that out of the above amount, Rs 48,72,350 was paid to S.V. Construction on various dates. It was noticed from the submission of the invoices raised by the recipient that the work carried out was for construction of club house and underground water tank. In this regard, the assessee failed to prove the allowability of the expenditure with supporting ledger account as well as invoice/payment vouchers etc to substantiate the nexus of his claim of expenditure with business activities of the assessee. Further, the invoice issued by the S.V. Construction did not mention the address of the site of work done. Therefore, the expenditure incurred cannot be said to have been incurred wholly and exclusively for the purpose of business of the assessee. The assessee vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Regarding the expenses of Rs. 48,72,350/- incurred for construction of underground water tank and club house, the assessee submitted that the Pr. CIT was unable to appreciate the nature of business carried out by the process. The assessee is not engaged in carrying on any construction on the plots but only provides infrastructural facilities and related amenities like internal roads, water supply, sewage systems, electricity through cables and poles and other essential facilities as part and parcel of the project. The water tank was constructed by SV Construction is underground water tank for common utilization for all the plot owners and it is not an individual water tank. The purpose of constructing the same was that Dholera has more of salty water and it was necessary to provide basic water facilities to the plot holders and it was with this object that the common underground water tank was constructed by S.V. Construction. The club house is also common facility provided to the plot owners as part of the scheme. The said scheme is approved by collector and related authorities for the residential plotting system. Further, the aforesaid expenditure has already been capitalized a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... labour charges), the order passed by the ld. Assessing Officer is not erroneous and prejudicial to the interest of the revenue. Regarding the scope of enquiry u/s 263 of the Act, it may be useful to refer to jurisdictional Gujarat High Court decision in the case of Principal Commissioner of Income Tax-3 v. Minal Nayan Shah [2020] 121 taxmann.com 30 (Gujarat), which has made the following observations in this regard: 9.1 As pointed out on behalf of the assessee, two pre-requisites must coexist before the designated authority could exercise the revisional jurisdiction conferred on him namely; the order should be (I) erroneous (ii) the error must be such that it is prejudicial to the interests of the Revenue. However, an erroneous order does not necessarily mean an order with which the Pr. CIT is unable to agree. The AO while passing an order of assessment, performs judicial functions. An order of assessment passed by the AO cannot be interfered only because an another view is also possible on the issue as held in CIT v. Greenworld Corporation [2009] 181 Taxman 111 (SC). If in given facts and circumstances of the case, two views are possible and one view as legally plausible ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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