Laxminarayana Associates, Pune V. CIT - II, Pune

ITA 1087/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1901 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 15-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Keywords: Revision of order; Opportunity of being heard; Audit objection; Difference of opinion; Change of opinion
• Section: 143(3); 147; 148; 54; 263; 154

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.1087/PN/2013 ASSESSMENT YEAR : 2005-06 LAXMINARAYAN ASSOCIATES, C/O SHRI NIVRUTTI N. MOHITE, 16/1/12, HINGANE KHURD, NEAR HOTEL GIRIJA SINHAGAD ROAD, PUNE 411 041. PAN : AABFL5554D . APPELLANT VS. THE COMMISSIONER OF INCOME TAX II, PUNE. . RESPONDENT / APPELLANT BY : SHRI S. N. PURANIK / RESPONDENT BY : SHRI S. K. RASTOGI, CIT / DATE OF HEARING : 11.04.2016 / DATE OF PRONOUNCEMENT: 27.04.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THE ABOVE CAPTIONED APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX-II, PUNE (IN SHORT THE CIT) DATED 31.03.2013 RELATING TO ASSESSMENT YEAR 2005-06 PASSED UNDER SE CTION 263 OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL, THE ASSESSEE CHALLENGING THE ACT ION OF THE CIT UNDER SECTION 263 OF THE ACT HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL :- 1) PROCEEDING U/S 263 AND ORDER U/S 263 PASSED BY CIT IS BAD IN LAW AND WITHOUT JURISDICTION. APPELLANT PRAYS TO CANCEL THE SAME. 2) ASSESSING OFFICER HAS ACCEPTED THAT HE DID NOT A SSUME JURISDICTION U/S 147/148, HENCE DROPPED THE PROCEEDINGS U/S 152(2); CIT HAS NO JURISDICTION U/S 263 ON CONSCIOUS DECISION OF ASSESSING OFFICER. 2 ITA NO.1087/PN/2013 3) ASSESSING OFFICER HAS ON FULL APPLICATION OF MIN D, DROPPED THE PROCEEDINGS. ASSESSING OFFICER HAS NOT PASSED ANY ORDER ON 'OBJE CTIONS TO PROCEEDINGS' FILED BY ASSESSEE. ASSESSING OFFICER HAS ACCEPTED THE OBJECT IONS THAT PROCEEDING U/S 147 ITSELF WERE BAD IN LAW. SUCH DECISION OF DROPPING PROCEEDI NGS CANNOT BE SAID TO BE ERRONEOUS OR ALSO NOT DEBATABLE. APPELLANT PRAYS FO R CANCELLATION OF CIT'S ORDER U/S 263. 4) APPELLANT PRAYS FOR JUST AND EQUITABLE RELIEF. 5) APPELLANT PRAYS TO ADD, ALTER, AMEND AND /OR WIT HDRAW THE GROUND/S AS THE OCCASION MAY DEMAND DURING APPELLATE PROCEEDINGS. 3. THE RELEVANT FACTS CONCERNING THE ISSUE, IN BRIE F, ARE THAT FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSMENT UNDER SECTIO N 143(3) OF THE ACT WAS FRAMED VIDE ORDER DATED 31.12.2007. THE RETURNED I NCOME OF RS.2,08,94,180/- WAS ACCEPTED. SUBSEQUENTLY, THE ASSESSMENT WAS RE- OPENED UNDER SECTION 147 OF THE ACT BY ISSUING NOTICE UNDER SECTION 148 DATE D 30.03.2010. HOWEVER, PROCEEDINGS WERE DROPPED VIDE ORDER SHEET ENTRY DAT ED 28.12.2010. WHILE DROPPING THE PROCEEDINGS, THE ASSESSING OFFICER DIS CUSSED THE ASSESSEES REPLY DATED 27.12.2010 AND MADE THE FOLLOWING ORDER SHEET ENTRY :- LETTER DATED 27/12/2010 IS FILED GIVING DETAILED S UBMISSION. IT IS SEEN THAT THE DISALLOWANCES U/S. 40(A)(IA) HAVE BEEN CORRECTLY MA DE AND THERE IS NO DISCREPANCY IN THE DISALLOWANCE. PENALTY U/S. 271B HAS BEEN LE VIED AS PER ORDER ON RECORD. PENALTY U/S. 271F NOT INITIATED AND IN VIEW OF THE QUANTUM OF RS.5000/- AND DELAY OF ALMOST 3 YEARS, NO FURTHER ACTION IS TAKEN. PROCEEDINGS ARE DROPPED U/S. 152(2). 4. ON SUBSEQUENT REVIEW OF THE IMPUGNED ORDER, IT W AS NOTICED BY THE CIT THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON CERTAIN PAYMENTS MADE BY IT. ACCORDING TO HIM, THESE EXPENSES OUGHT TO HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE AC T. HOWEVER, THE ASSESSING OFFICER FAILED TO DISALLOW THE EXPENSES IN COMPLIAN CE OF SECTION 40(A)(IA) OF THE ACT, WHILE DROPPING THE PROCEEDINGS UNDER SECTION 1 47 OF THE ACT. THE CIT OBSERVED THAT SINCE THE ASSESSING OFFICER HAS ASSUM ED INCORRECT FACTS AND ALSO INCORRECTLY APPLIED THE LAW WHILE DROPPING THE PROC EEDINGS UNDER SECTION 147 OF THE ACT, THE ORDER OF THE ASSESSING OFFICER DROP PING THE PROCEEDINGS INITIATED UNDER SECTION 147 WAS CONSIDERED ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORD INGLY, SHOW-CAUSE NOTICE UNDER SECTION 263 OF THE ACT WAS ISSUED ON 10.12.20 12 GIVING THE ASSESSEE AN 3 ITA NO.1087/PN/2013 OPPORTUNITY OF BEING HEARD TO EXPLAIN AS TO WHY THE ORDER OF THE ASSESSING OFFICER REFERRED ABOVE SHOULD NOT BE REVISED. THE RELEVANT EXTRACT OF THE SHOW- CAUSE NOTICE IS REPRODUCED HEREUNDER :- IN RESPECT OF ABOVE MENTIONED ASSESSMENT YEAR, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS. 13,81,403/- AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE IT ACT, 1961 IN RESPECT OF COMMISSION/ BROKERAG E, GARDEN EXPENSES, TRANSPORT CHARGES AND LABOUR CHARGES. HOWEVER, THE ASSESSING OFFICER FAILED TO MAKE THE DISALLOWANCE OF RS. 8,84,827/- AND RS. 3,56,838/- I N RESPECT OF LABOUR CHARGES AND PROFESSIONAL FEES RESPECTIVELY U/S 40(A)(IA) ON WHI CH AMOUNTS ALSO TAX WAS NOT DEDUCTED AT SOURCE. THE CASE WAS REOPENED FOR RE-AS SESSMENT U/S 147 OF THE IT ACT 1961. DURING THE COURSE OF THE RE-ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER HOWEVER DROPPED THE PROCEEDINGS U/S 147 VIDE ORDER SHEET ENTRY DATED 28/12/2010. THE DISALLOWANCE PURSUANT TO PROVISIONS OF SECTION 40(A)(IA) ON LABOUR PAYMENT AND PROFESSIONAL FEES AMOUNTING TO RS. 12,41,665/ - WAS NOT EFFECTED EVEN THOUGH IT WAS REQUIRED TO BE MADE AS PER THE PROVISIONS OF LA W. THE ORDER PASSED BY THE ASSESSING OFFICER IS THEREFORE CONSIDERED TO BE ERR ONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 5. IN RESPONSE TO SHOW-CAUSE NOTICE ISSUED UNDER SE CTION 263, THE ASSESSEE FILED SUBMISSIONS DATED 21.12.2012 REPRODUCED HEREU NDER :- YOUR HONOUR HAS NOTED IN PARA 1 OF THE NOTICE, THA T ORDER U/ S. 143(3) FOR A. Y. 2005-06 IS PASSED ON 31/12/2007 ASSESSING INCOME AT RS. 2,08,94,180/- INCLUDING DISALLOWANCE MADE BY ASSESSEE OF RS. 13,81,403/- AS PER DETAILS FURNISHED. THEREAFTER, NOTICE U/S.154 WAS ISSUED BY ASSESSING OFFICER PROPOSING RECTIFICATION FOR ADDITIONAL DISALLOWANCE U/S. 40(A )(IA) OF RS. 15,15,781/ - ON THE BASIS OF AUDIT OBJECTION. IN RESPONSE TO THE SAME, ASSESSEE MADE DETAILED SUB MISSION DATED 02/03/2009 ACKNOWLEDGED ON 03/03/2009. THEREAFTER, WE WERE TOLD THAT ASSESSING OFFICER HAS DISCUSSED AND SENT REPLY TO A UDIT OBJECTION AND BOTH HAVE EXPRESSED SATISFACTION AS TO 'NO ADDITIONS ARE CALL ED FOR '. HOWEVER, TO OUR SURPRISE WE RECEIVED NOTICED U/S. 1 48 DATED 30/03/2010 ON 31/03/2010. IN RESPONSE TO SAME, WE SUBMITTED LETTE R DTED 30/04/2010 INTER ALIA REQUESTING COPY OF REASONS RECORDED AND STATED THAT 'ORIGINAL RETURN FILED MAY BE TREATED AS RETURN U/S. 148'. WE WERE TOLD THAT THE NOTICE IS ISSUED TO KEEP ALIV E THE AUDIT OBJECTION, AS FINAL ACCEPTANCE LETTER IS NOT RECEIVED FROM AUDIT PARTY. AGAIN IN RESPONSE TO ASSESSING OFFICER'S LETTER DAT ED 27/12/2010 WE SUBMITTED THE LETTER DATED 27/12/2010 ON SAME DAY. WE WERE FURNISHED LETTER OF REASONS RECORDED ON 27/ 12/2010 TO WHICH WE SUBMITTED OBJECTION ON 28/12/2010 VIDE LETTER DATED 27/12/2010 ALONGWITH COPY OF OUR EARLIER SUBMISSION DATED 02/03/2009. CASE WAS HEARD ON 28/12/2010 AND AFTER DETAILED VER IFICATION, ASSESSING OFFICER DROPPED THE PROCEEDINGS U/S. 147. IN THE ORDER SHEET ASSESSING OFFICER HAS NOTED MRS M.N. KULKARNI CA ATTENDED ALONGWITH CA S.N. P UARNIK FROM GADRE & BHIDE 4 ITA NO.1087/PN/2013 LETTER DATED 27/12/2010, IS FILED GIVING DETAILED S UBMISSION. IT IS SEEN THAT THE DISALLOWANCE U/S. 40A(IA) HAS BEEN CORRECTLY MA DE AND THERE IS NO DISCREPANCY IN DISALLOWANCE. ' WE SUBMITTED A LETTER DATED 31ST JANUARY 2011, REQU ESTING COPY OF THE ORDER PASSED IF ANY. WE WERE TOLD NO ORDER IS PASSED - NOTINGS ARE MADE ONLY ON ORDERSHEET, AND WE WERE ALLOWED TO COPY THE SAME. HOWEVER, HE LEVIED PENALTY U/S. 271B BY SAME ORDER SHEET ENTRY IN VIEW OF THE ABOVE FACTS WE SUBMIT AS UNDER: 1) PROVISIONS OF SECTION 263 ARE NOT ATTRACTED TO T HE FACTS AND ON LEGAL GROUNDS: A) THERE IS NO ORDER PASSED BY ASSESSING OFFICER, U /S. 143(3) R. W.S 147. PROCEEDINGS CAN BE INITIATED ONLY AGAINST ORDER AND NOT ORDER S HEET ENTRY. FOR EXAMPLE: IF ASSESSING OFFICER TAKES HEARING OF SCRUTINY CASE U/S. 143(2) AND WRITES IN ORDER SHEET THAT CASE IS HEARD. BUT H E DOES NOT PASS ORDER AND / OR SERVE THE ORDER U/S.143(3) WITH DEMAND NOTICE, CAN IT BE SAID THAT ASSESSING OFFICER HAS PASSED THE ORDER. ANSWER IS CLEARLY NO. THEREFO RE, WE SUBMIT, YOUR HONOUR WILL BE HAVE NO JURISDICTION U/S. 263 OF THE INCOME TAX ACT, 1961. B) PRESUMING AGAINST US, WITHOUT ACCEPTING AS STATE D IN PARA(A) THE ORDER SHEET ENTRY MADE IS AN ORDER', STILL, SINCE, ASSESS ING OFFICER AFTER FULL VERIFICATION OF FACTS AND DETAILED SUBMISSIONS HAS CONCLUDED, ACCEP TED THAT THERE IS 'NO DISCREPANCY'. THIS DECISION IS CONSCIOUS AND THOUGH TFUL. HE HAS NOT FAILED TO APPLY HIS MIND, HIS ACTION IS NOT ERRONEOUS. AS SUCH, ONLY BECAUSE AUDIT PARTY OR YOUR HONOUR HAS DIFFERENT OP INION, CIT DOES NOT GET JURISDICTION U/S 263 OF THE INCOME TAX ACT. C) ACTION U/S 263 AGAINST ORDER U/S 143(3) DATED 31 /13/2007, IF AT ALL, IS TIME BARRED. D) JUST BECAUSE IN YOUR OPINION, THE DECISION OF AS SESSING OFFICER OF NOT DISALLOWING LABOUR PAYMENT & PROFESSIONAL FEE OF RS . 12,41,665/- WAS NOT EFFECTED EVEN THOUGH WAS REQUIRED TO BE MADE AS PER PROVISIONS OF THE LAW. THE ALLEGED ORDER OF ASSESSING OFFICER CANNOT BE CONSID ERED PREJUDICIAL TO REVENUE. MUCH LESS IT IS ERRONEOUS IN SO FAR AS 'PREJUDICIAL TO THE INTEREST OF REVENUE'. AS REASONS OF NON APPLICABILITY OF SECTION 40(A)(IA) A RE STATED AND ACCEPTED BY ASSESSING OFFICER. WE HUMBLY AND RESPECTFULLY SUBMIT THAT SAME CANNOT BE REVISED. 2) WITHOUT PREJUDICE TO ABOVE SUBMISSION, WE FURTHE R SUBMIT THAT A) IT IS NOT CLEAR HOW THIS FIGURE OF 8,84,827/- AN D 3,56,838/- ARE WORKED OUT? B) CONSIDERING THE MERITS OF THE CASE AS SUBMITTED IN REPLY TO NOTICE U/S 154, PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE, AS CONCLUDED BY ASSESSING OFFICER AFTER VERIFICATION. 3) IN FACT, THE PROCEEDINGS U/S 147/148, ITSELF WER E BAD IN LAW. FOR: A) REASONS RECORDED ARE NOTHING BUT CHANGE OF OPINI ON. AS PER SUPREME COURT DECISION, ASSESSING OFFICER DOES NOT GET JURISDICTI ON U/S 148/147, IN THE CASE OF CHANGE OF OPINION. CIT VS. KELVINATOR INDIA 320 ITR 561. (REASONS RECORDED) ANNEXURE VI B) ASSESSING OFFICER HAVING EXAMINED THE CLAIM THOR OUGHLY BEFORE PASSING THE ASSESSMENT ORDER, SUCH SCRUTINY ASSESSMENT CANNOT B E REOPENED EVEN WITHIN FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR SINC E IT AMOUNTS TO CHANGE OF 5 ITA NO.1087/PN/2013 OPINION.- ASHWAMEGH CO-OPERATIVE HOUSING SOCIETY LT D. VS. DY. CIT & ANR. (GUJ) 79 DTR 449 C) ASSESSING OFFICER HAS NOT PASSED ORDER IN 'OUR O BJECTIONS TO REOPENING' WHICH WAS MANDATORY IN TERMS OF SUPREME COURT DECIS ION IN CASE OF GKN DRIVESHAFTS (INDIA) LTD. 259 ITR 19. HE HAS ACCEPTED THE OBJECTIONS. ON RAISING THE OBJE CTIONS; IMPLIEDLY ACCEPTING THE SAME, HE HAS NOT PASSED THE ORDER. WE HAVE REQUESTED ASSESSING OFFICER VIDE OUR LETTER DATED 27.12.2010 FOR A) XEROX COPY OF THE ORDER SHEET RECORDING REASONS. B) COPY OF AUDIT OBJECTION LETTER AND REPLY SUBMITT ED BY ASSESSING OFFICER TO AUDIT PARTY. THIS WILL PROVE THAT ASSESSING OFFICER WAS NOT SATI SFIED ON REASONS RECORDED, BUT WAS REQUIRED SO TO DO AT THE INSTANCE OF AUDIT PARTY & / OR HIGHER AUTHORITY. C) WHEN ASSESSEE'S SUBMISSION U/S 154 WAS ACCEPTED, BY NOT PASSING ORDER OF REJECTION U/S 154(8) WITHIN SIX MONTHS, AS SESSING OFFICER HAS RIGHTLY, DROPPED PROCEEDING AND FINALIZED THE PROCE EDINGS, THEREFORE, COULD'NT HAVE ISSUED NOTICED U/S 148 SECTION 152(2) WITHOUT ACCEPTING- EVEN 154 ORDER IS DEEMED TO HAVE PASSED ACCEPTING ASSESSEE'S SUBMISSION: DATE OF DEEMED ORDER WILL BE 30.09.2009. AS SUCH EVEN REVISION U/S 263 FOR ORDER U/S 154 IS TIME BARRED. WHERE RECTIFICATION ON THE BASIS OF AUDIT OBJECTION WAS DROPPED, REVISION U/S 263 ON TH E SAME AUDIT OBJECTION INDICATES NON-EXISTENCE OF THE MIND ON THE PART OF CIT, SO TH AT REVISION IS INVALID, B & A PLANTATION & INDUSTRIES LTD. VS. CIT 290 ITR 395 (G AU). SEC. 263, CORRECTLY SUBMITS DR. SARAF, DOES NOT VIS UALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE CIT FOR THAT OF THE SUBORDINATE AUT HORITY WHO PASSED THE ORDER WHICH IS SOUGHT TO BE REVISED. THE ORDER PASSED BY A SUBORDINATE AUTHORITY IN EXERCISE OF ITS QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW, CANNOT BE TERMED ERRONEOUS MERELY BECAUSE THE CIT DOES NOT FE EL SATISFIED WITH THE CONCLUSIONS REACHED. IN THIS REGARD, REFERENCE MAY BE MADE TO THE DECISION OF THE BOMBAY HIGH COURT IN CIT VS. GABRIEL INDIA LTD. (19 93) 114 CTR (BOM) 81 : (1993) 203 ITR 108 (BOM), WHEREIN IT WAS HELD AS UN DER: ' THE CIT, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE CIT HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE ITO. THAT WOULD NOT VEST THE CIT WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGH ER FIGURE. IT IS BECAUSE THE ITO HAS EXERCISED THE QUASI- JUDICIAL POWER VES TED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CON CLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE CIT THE ORDER IN QUESTION IS PREJUDI CIAL TO THE INTERESTS OF THE REVENUE. BUT THAT BY ITSELF WILL NOT BE ENOUGH TO V EST THE CIT WITH THE POWER OF SUO-MOTO REVISION BECAUSE THE FIRST REQUIREMENT, VIZ. THAT THE ORDER IS ERRONEOUS, IS ABSENT.' IN VIEW OF THESE FACTS, WE SUBMIT THAT, PROVISIONS OF SECTION 263 ARE NOT APPLICABLE TO THE CASE BOTH ON LEGAL GROUND OF JURI SDICTION, FACTS OF THE CASE, AND SUBMISSION DATED 03-03-2009 ON MERITS. IN VIEW OF THE SUBMISSION, PROCEEDINGS INITIATED MA Y PLEASE BE DROPPED'. 6 ITA NO.1087/PN/2013 6. THE CIT DID NOT FIND MERIT IN THE EXPLANATION OF FERED BY THE ASSESSEE AND CONSEQUENTLY SET-ASIDE THE IMPUGNED ORDER UNDER SECTION 147 PASSED BY ORDER SHEET ENTRY TO THE FILE OF THE ASSESSING OFFI CER. PURSUANT TO THE ORDER UNDER S. 263, THE ASSESSING OFFICER WAS DIRECTED TO DISALLOW RS.1,42,940/- UNDER SECTION 40(A)(IA) TOWARDS PAYMENT MADE BY ASS ESSEE TO ONE JD FABRICATORS AND WAS FURTHER DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE WITH REGARD TO THE PAYMENT OF RS.3,45,000/- MADE TO SHRI AVINASH NAVATHE CLAIMED AS PURCHASE INSTEAD OF PROFESSIONAL CHARGE. 7. AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE AT THE OUTSET REFERRED TO COPY OF THE REASONS FOR REOPENING THE CASE UNDER SECTION 147 OF THE ACT FOR THE ASSESSMENT YEAR 2005-06 AS RECORDED BY THE ASSE SSING OFFICER ANNEXED AT PAGE 149 OF THE PAPER BOOK. FOR THE SAKE OF READY REFERENCE, THE ORDER REASONS RECORDED UNDER S. 148(20 OF THE ACT ARE REPRODUCED HEREUNDER: REASONS FOR REOPENING THE CASE FOR A.Y. 2005-06 WHILE FRAMING THE ASSESSMENT UNDER S. 143(3), THE A O DISALLOWED AN AMOUNT OF RS. 13,81,403 AS PER THE PROVISIONS OF S. 40(A)(IA) OF THE IT ACT, IN RESPECT OF COMMISSION/BROKERAGE, GARDEN EXPENSES, TRANSPORT CH ARGES AND LABOUR CHARGES, HOWEVER, THE ACTUAL DISALLOWANCE REQUIRED TO BE MADE WAS RS. 26,23,068/- WHICH INCLUDES PROFESSIONAL FEES. THE SAME WAS POINTED OUT BY INTE RNAL AUDIT PARTY. HENCE, THERE HAS BEEN UNDERSTATEMENT TO THE EXTENT OF RS. 12,41,665/- AS PER PROVISIONS OF S. 147 OF IT ACT. ISSUE NOTICE U/S 148. 8.1 LD. AR FURTHER REFERRED TO THE ORDER SHEET ENTR Y DATED 28.12.2010 NOTED BY THE ASSESSING OFFICER AS ALREADY REPRODUCED IN P ARA 3 SUPRA. HE SUBMITTED THAT AFTER CONSIDERING THE DETAILED REPLY DATED 27. 12.2010 FILED BY THE ASSESSEE, THE ASSESSING OFFICER HAS UNEQUIVOCALLY RECORDED TH AT DISALLOWANCES UNDER SECTION 40(A)(IA) OF THE ACT HAVE BEEN CORRECTLY DE TERMINED AND THERE IS NO DISCREPANCY IN THE DISALLOWANCE SO MADE. 7 ITA NO.1087/PN/2013 8.2 THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE SUBMITTED THAT IN THE BACKGROUND OF THESE OBSERVATIONS, THE PROCEEDINGS I NITIATED UNDER S. 147 WERE DROPPED UNDER SECTION 152(2) OF THE ACT. 8.3 THE LD. AR EMPHASIZED THAT A BARE READING OF RE ASONS FOR REOPENING NOTED ABOVE WOULD SHOW THAT THE CASE WAS REOPENED O WING TO ALLEGED INACCURATE QUANTUM OF DISALLOWANCE UNDER SECTION 40 (A)(IA) OF THE ACT. HE THEREFORE SUBMITTED THAT THE VERY BASIS OF REOPENIN G WAS ALLEGED INACCURACY IN DISALLOWANCE UNDER S. 40(A)(IA). THE PROCEEDINGS W ERE DROPPED AFTER VERIFICATION EXERCISE ON THE ISSUE. THUS, THE ORDER OF THE ASSESSING OFFICER DROPPING PROCEEDINGS UNDER SECTION 147 CANNOT BE SA ID TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REV ENUE UNDER THESE CIRCUMSTANCES. 8.4 HE THEREAFTER SUBMITTED THAT PRIOR TO THE ACTIO N UNDER SECTION 147, A NOTICE UNDER SECTION 154 WAS ALSO SERVED UPON THE A SSESSEE SEEKING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT ON ACCOUNT OF LABOUR CHARGES OF RS.11,58,943/- AND ON ACCOUNT OF PROFESSIONAL CHARG ES OF RS.3,56,838/-. THE NOTICE WAS COMPLIED WITH VIDE LETTER DATED 02.03.20 09 APPEARING AT PAGE 31 OF THE PAPER BOOK. IT IS NOT CLEAR WHETHER ANY FORMAL ORDER UNDER SECTION 154 HAS BEEN PASSED OR NOT IN THE ABSENCE OF ANY SERVICE OF SUCH ORDER ON THE ASSESSEE. HE THEREAFTER SUBMITTED THAT THE PROCEEDINGS UNDER S. 147 WERE DROPPED UNDER S. 152(2) OF THE ACT. ACCORDING TO THE LD. AR, IN V IEW OF THE PROVISO TO SECTION 152(2), THE ASSESSING OFFICER IS NOT ENTITL ED TO REOPEN THE MATTER CONCLUDED BY AN ORDER UNDER SECTION 154 OF THE ACT. IT IS ALSO THE STAND OF THE LD. AR THAT PRIOR TO INVOCATION OF SECTION 152(2) O F THE ACT, THE ORDER UNDER SECTION 154 OUGHT TO HAVE BEEN PASSED. IN NUTSHELL , THE LD. AR PLEADED THAT ISSUE OF DISALLOWANCE UNDER S. 40(A)(IA) WAS EXAMIN ED BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THEREAFTER UNDER S. 1 54 AND AGAIN UNDER S. 147. THUS, IN THE CIRCUMSTANCES, THE NON APPLICATION OF MIND CAN NOT BE ALLEGED. THE DIFFERENT OPINION OF THE CIT ON THE ISSUE WILL NOT ENTITLE HIM TO INVOKE JURISDICTION UNDER S. 263 OF THE ACT. IT WAS THUS S UBMITTED THAT THE ORDER OF 8 ITA NO.1087/PN/2013 COMMISSIONER UNDER SECTION 263 IS BAD IN LAW AND HE NCE REQUIRES TO BE QUASHED. 9. THE LD. DR RELIED UPON THE ORDER OF THE CIT APPE ALED AGAINST. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE APPELLANT HEREIN HAS IMPUGNED THE REVISIONAL PROCEEDINGS OF T HE COMMISSIONER OF INCOME TAX UNDER S. 263 AS BAD IN LAW AND WITHOUT J URISDICTION. IN EXERCISE OF POWER CONFERRED UNDER S. 263, THE CIT CONCERNED IN THE INSTANT CASE, HAS SET ASIDE THE ORDER OF THE ASSESSING OFFICER PASSED VID E ORDER SHEET ENTRY DATED 28/12/2010 WHEREBY PROCEEDINGS INITIATED UNDER S. 1 47 WERE DROPPED. THE REVISIONAL ACTION UNDER S. 263 WAS TAKEN AGAINST TH E IMPUGNED ORDER U/S 147 ON THE PREMISE THAT SUCH ORDER DROPPING THE PROCEEDING S UNDER S. 147 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF R EVENUE. 10.1 WE NOTICE THAT AN ORDER UNDER S. 143(3) DATED 31/12/2007 WAS PASSED IN THE INSTANT CASE. THEREAFTER, A NOTICE UNDER S. 154 WAS ISSUED BY THE ASSESSING OFFICER FOR CARRYING OUT CERTAIN RECTIFICATION TOWA RDS ALLEGED DEFAULT IN NON DEDUCTION OF TAX AT SOURCE ON CERTAIN PAYMENTS IN T ERMS OF S. 40(A)(IA). THE REPLY THERETO DATED 02/03/2009 WAS FILED BY THE ASS ESSEE SEEKING TO ADDRESS THE CONCERN RAISED BY THE ASSESSING OFFICER IN THE AFORESAID NOTICE UNDER S. 154 OF THE ACT. NO ORDER PURSUANT TO SUCH NOTICE UN DER S. 154 IS STATED TO BE SERVED ON THE ASSESSEE. PENDING DISPOSAL OF NOTICE UNDER S 154, ANOTHER NOTICE UNDER S. 148 DATED 30/03/2010 WAS ISSUED FOR THE SA ME CAUSE OF ACTION AS CAN BE OBSERVED FROM THE REASONS RECORDED FOR ISSUE OF SUCH NOTICE. THE EXPLANATION FILED BY THE ASSESSEE WERE ACCEPTED IN TOTO BY AN ORDER SHEET ENTRY AND AN ORDER WAS PURPORTEDLY PASSED (REPRODUCED IN PARA 3 SUPRA) DROPPING THE PROCEEDINGS UNDER S. 147 IN TERMS OF S. 152(2) OF T HE ACT. THIS ORDER PASSED VIDE ORDER SHEET ENTRY WAS SET ASIDE BY THE CIT INV OKING JURISDICTION UNDER S. 263 OF THE ACT. 9 ITA NO.1087/PN/2013 10.2 IN THE BACKGROUND OF THE FACTS NARRATED ABOVE, WE ARE TOTALLY AT LOSS TO PERCEIVE SUCH ACTION OF THE CIT. THE ASSESSING OFF ICER IN EXERCISE OF QUASI JUDICIAL POWERS AND ON CONSIDERATION OF REPLY OF TH E ASSESSEE ON THE ISSUE WHICH IS SUBJECT MATTER OF AGITATION, HAS CATEGORIC ALLY RECORDED THAT THE DISALLOWANCES HAVE BEEN CORRECTLY MADE AND NO DISCR EPANCY SUBSISTS. THUS, THE VERY ISSUE FOR WHICH S. 147 WAS INVOKED WAS ADDRESS ED TO THE SATISFACTION OF THE ASSESSING OFFICER ON FACTS. 10.3 WE ALSO INTER ALIA NOTICE A COMMUNICATION DATED 02/09/2011 BY THE ASSESSING OFFICER TO THE CIT CAPTIONED FINAL REPLY IN RESPECT OF INTERNAL AUDIT OBJECTION IN THE CASE OF M/S LAXMINARAYAN ASSOCIATE S A.Y 2005-06 WHEREIN IT WAS EXPLAINED TO THE CIT THAT THE DISALLOWANCE UNDE R S. 40(A)(IA) COULD NOT BE INVOKED OWING TO ITS INAPPLICABILITY CITING OBJECTI VE FACTS. THE CIT HAS NOT DEMONSTRATED ANY PERVERSITY IN SUCH CONCLUSION ON F ACTS WHILE INVOKING POWERS UNDER S. 263 OF THE ACT. NEEDLESS TO SAY, ON CE AN ENQUIRY ON THE ISSUE HAS BEEN CARRIED OUT AND A CONCLUSION THEREON HAS B EEN ARRIVED AT BY THE ASSESSING OFFICER, THE SAME CANNOT BE INTERFERED WI TH UNDER S. 263 MERELY BECAUSE THE COMMISSIONER WANTS IT TO BE CARRIED OUT IN PARTICULAR WAY. MERE DISAGREEMENT OF THE CIT WITH THE ORDER OF THE ASSES SING OFFICER WOULD NOT IN OUR VIEW RENDER SUCH ORDER ERRONEOUS. WE FIND THAT IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS ACTED PERFUNCTORILY WHILE DRO PPING THE PROCEEDINGS. MERE IPSE DIXIT OF THE CIT IS NOT THE BEST FOUNDATION FOR INVOKING POWERS UNDER S. 263 OF THE ACT. 11. HENCE, WE FIND CONSIDERABLE MERIT IN THE ARGUME NTS CANVASSED ON BEHALF OF THE ASSESSEE FOR CANCELLATION OF THE ORDER OF CI T. IN VIEW OF SUCH CONCLUSION, THE OTHER ASPECT OF CONTENTION RAISED O N BEHALF OF THE ASSESSEE FOR APPLICABILITY OF S. 152(2) IN MATTERS CONCLUDED UND ER S. 154 IS NOT CONSIDERED. 12. ACCORDINGLY, WE FIND THAT THE ORDER OF THE CIT UNDER S. 263 IS WITHOUT AUTHORITY OF LAW AND THUS DESERVES TO BE QUASHED. 10 ITA NO.1087/PN/2013 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON THIS 27 TH DAY OF APRIL, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 27 TH APRIL, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT II, PUNE; 4) THE DR A BENCH, I.T.A.T., PUNE; 5) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE