M/s. M.M. Engineers and Consultants, Cuttack V. Principal Commissioner of Income Tax, Cuttack

ITA 151/CTK/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2755 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 09-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 20

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री जाजज माथन, न्याययक सदस्य एवं श्री अरुण खोड़पऩया ऱेखा सदस्य के समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.151/CTK/2020 (नििाारण वषा / Asses s m ent Year :2015-2016) M/s M. M.En ginee rs and Consul tants, 2 nd F loor , Sum it ra Pla za, Behind Go vt. Bu s S tand, Badam badi, Cuttac k-753012 P AN No. AAH F M 0 973 H ... ......... ..... A ssessee Versus Prin cipa l Com m is si oner of Incom e T ax, Cuttack Cha r ge, C uttack ... ......... ...... R evenue Shri K.K.Bajoria, FCA and Shri P.K.Mishra, Advocate for the assessee Shri S.K.Mohapatra, CIT-DR for the Revenue Date of Hearing : 09/05/2022 Date of Pronouncement : 09/05/2022 आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. Pr.CIT, Cuttack, dated 17.03.2022 in DIN & Letter No.ITBA/COM/F/17/2019-20/1026691282(1) for the assessment year 2015-2016 in respect of the order passed u/s.263 of the Act. 2. It was submitted by the ld. AR that the assessee is a partnership firm which is doing the business of construction work of residential complexes, service & renting of immovable property and consultancy ITA No.151/CTK/2020 2 services. It was the submission that the return filed by the assessee for the assessment year 2015-2016 was the subject matter of a limited scrutiny as the same was selected under CASS. The limited scrutiny was specifically for the purpose as mentioned below :- “i) High turnover reported in Service Tax Return compared to ITR; ii) Large increase in sundry creditors with respect to turnover as compared to preceding year; iii) Higher turnover reported in Service Tax Return compared to ITR; and iv) the assessee has deposited large amount of cash in savings bank account.” 3. It was the submission of the ld. AR that the AO completed the assessment u/s.143(3) of the Act on 04.07.2017 after considering all the evidences submitted by the assessee as also the written submission and accepted the return of income. It was the submission that various details have been called for by the AO in his notice u/s.142(1) of the Act issued on 23.01.2017 along with questionnaire consisting of two pages. It was the submission that the assessment order passed u/s.143(3) of the Act was the subject matter of a revision u/s.263 of the Act by the ld. Pr.CIT wherein the Pr.CIT was of the view that the AO had not verified the sundry creditors. It was the submission that the assessee does not have any sundry creditors in its balance sheet and for this purpose the ld. AR drew our attention to page 20 of the paper book, which was the copy of the balance sheet. It was the submission that the assessee did have under the current liabilities and provisions “advanced from customers” to the tune of Rs.4,89,01,363.80. It was the submission that this could not be ITA No.151/CTK/2020 3 considered as sundry creditors insofar as the assessee was following the project completion method and the said advance for the purpose of projects received by the assessee from the customers and these have specifically been converted into profit and offered for taxation as and when the projects were completed. These were not creditors for cash received by the assessee. These were also not the loan creditors. It was the submission that the ld. Pr.CIT, in para 14 of his order, was of the view that, „the AO had failed to make necessary verification and inquiry before passing the assessment order. He has failed to consider the issue of sundry creditors in proper perspective. The onus to prove the identity, creditworthiness of the creditors and genuineness of transactions was with assessee itself, but the assessee was not confronted on the issue to reach a logical conclusion. The AO had failed to apply the correct provisions of law. Thus, the assessment order so passed by the AO on 04.07.2017 under section 143(3) of the I.T.Act, 1961, is found erroneous and prejudicial to the interests of revenue within the meaning of section 263 of the I.T.Act, 1961.‟ This finding of the ld. Pr.CIT itself is erroneous insofar as there are no sundry creditors in the balance sheet of the assessee. In para 4 of the order, the ld. Pr.CIT has taken a view that the major chunk of current liabilities was shown under the head “advance from customers” as sundry creditors in the return of income filed by the assessee. It was the submission that as there was no sundry creditors, no error in the order of ld. AO was liable to be pointed out just by interpreting the various terms in the balance sheet of the assessee. Thus, it was the ITA No.151/CTK/2020 4 prayer of the ld. AR that the order of the ld. Pr.CIT passed u/s.263 of the Act is liable to be quashed. 4. In reply, ld. CIT-DR vehemently supported the order of the Pr.CIT passed u/s.263 of the Act. It was the submission of the ld. CIT-DR that the advance from customers were nothing but sundry creditors and the same was liable to be verified by the AO and this has not been done by the AO. It was the submission that there was failure on the part of the AO to examine the details. It was also the submission of the ld. CIT-DR that as there was an error in the order of the AO, the ld. Pr.CIT was compelled to invoke his powers u/s.263 of the Act. It was also submitted that non- consideration of any issue to a logical conclusion by the AO, could be corrected by the Pr.CIT by invoking his powers u/s.263 of the Act. 5. We have considered the rival submissions. 6. At the outset, a perusal of the balance sheet clearly shows that there is nothing in the balance sheet of the assessee under the term “sundry creditors”. We are alive to the fact that this is a limited scrutiny assessment, which is done under CASS. In the limited scrutiny direction, the direction was to verify the large increase in the sundry creditors with respect to the turnover as compared to the preceding year. The hands of the AO are, at the outset, tied when the terms sundry creditors were used in the limited scrutiny. The interpretation of the “advance from the customers” as “sundry creditors” cannot be done when the limited scrutiny direction was given. When an assessment is under limited scrutiny, the powers of the Commissioner u/s.263 of the Act, also get curtailed to the ITA No.151/CTK/2020 5 issues directed in the limited scrutiny. It is not open to the Pr.CIT to bring interpretation in respect of other issues within the nomenclature of the terms used in the limited scrutiny. If the limited scrutiny is for “sundry creditors”, the powers of the Pr.CIT u/s.263 of the Act is limited to the “sundry creditors”. The ld. Pr.CIT is in total error in assuming that the “advance from customers” can be treated as “sundry creditors”, especially when the “sundry creditors” are not there in the balance sheet. In any case, the “advances from customers” have been absorbed and offered as income in the subsequent years when the respective projects relating to the advance received from the customers, have been completed. It is further noticed that the ld. Pr.CIT has alleged that the AO has failed to make necessary verification and inquiry before passing the assessment order and he has failed to consider the issue of sundry creditors in proper perspective. In fact, to make this allegation against the AO when the assessment itself has a limited scrutiny and to say that no action has been taken against the AO for violation of limited scrutiny direction is farfetched. The ld. Pr.CIT goes on to hold that the assessee was not confronted on the issue to reach a logical conclusion. We failed to understand what is the logical conclusion that the Pr.CIT desired the AO to reach. Just because a returned income has been accepted, does not postulate it an error in the order of the ld. AO. Non-application of correct law, admittedly, could give powers for revision to be activated but the AO having done what was expected of him under a limited scrutiny, just because no addition has been made, it cannot be said that there was ITA No.151/CTK/2020 6 failure on the part of the AO. This being so, we are of the view the fact clearly shows that the order u/s.263 of the Act is unsustainable and consequently the same stands quashed. 7. In the result, appeal of the assessee is allowed. Order dictated and pronounced in the open court on 09/05/2022. Sd/- (अरुण खोड़पऩया) (ARUN KHODPIA) Sd/- (जाजज माथन) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 09/05/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीऱाथी / The Appellant- M/s M. M.En ginee rs and Consul tants, 2 nd F loor , Sum it ra Pla za, Behind Go vt. Bu s S tand, Badam badi, Cuttac k-753012 2. प्रत्यथी / The Respondent- Prin cipa l Com m is si oner of Incom e T ax, Cuttack Cha r ge, C uttack 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. पिभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 6. गार्ज पाईऱ / Guard file. सत्यापऩत प्रयत //True Copy//