M/s Kishore Constructions, Khammam Dist V. ITO, Ward - 2, Kothagudem

ITA 212/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66596 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 09-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H SRINIVASULU
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Rejection of books of accounts; Principle of natural justice; Assessment record
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO .212/HYD/12 ASST. YEAR 2008-09 M/S. KISHORE CONSTRUCTIONS, KHAMMAM DISTRICT. PAN:AAHFK 2382 A V/S. ITO, WARD-2, KOTHAGUDEM. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI M. CHANDRAMOULESWARA RAO RESPONDENT BY : SRI H. SRINIVASULU (CIT) DATE OF HEARING 31 - 10 - 2012 DATE OF PRONOUNCEMENT 20-12-2012 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THE ASSESSEE HAS FILED THIS APPEAL BEING AGGRIEVED BY THE ORDER DATED 23-11-2011 PASSED BY THE CIT, VIJAYAWADA U/S 263 OF THE ACT PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. THE SOLE ISSUE ARISING FOR CONSIDERATION FROM THE GR OUNDS RAISED BY THE ASSESSEE IS WITH REGARD TO VALIDITY AND LEGALITY OF THE ORDER PASSED U/S 263 OF THE ACT. BRIEFLY THE FACTS ARE, THE ASSE SSEE IS A PARTNERSHIP FIRM, ENGAGED IN THE BUSINESS OF LABOUR AN D SUPPLY CONTRACTOR FOR OPERATION AND PREVENTIVE MAINTENANCE OF M/S NAVA BHARAT PROJECTS LIMITED, PALVONCCHA OF KHAMMAM DISTRIC T OF A.P. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RET URN OF ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 2 INCOME DECLARING A TOTAL INCOME OF 3,02,650/-. INITIA LLY, THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSEE S CASE WAS SELECTED FOR SCRUTINY ASSESSMENT. IN RESPONSE TO THE NOTI CE ISSUED BY THE ASSESSING OFFICER U/S 143(2), THE ASSESSEE APPEARED AN D PRODUCED BOOKS OF ACCOUNT AND OTHER INFORMATION AS CALLED FOR BY THE ASSESSING OFFICER. THE ASSESSING OFFICER AFTER EXAMINING TH E BOOKS OF ACCOUNTS, NOTICED THAT DURING THE RELEVANT FINANCIAL YEA R, THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.89,27,182/- FROM CONTRACT T OWARDS LABOR SUPPLY. AGAINST THE AFORESAID GROSS RECEIPTS, THE ASSESSEE HA S DECLARED AN INCOME OF RS.3,02,650/- WHICH WORKS OUT TO 3.65%. O N EXAMINING THE PROFIT AND LOSS A/C OF THE ASSESSEE, THE ASSESSING OFFICE R NOTICED THAT THE MAJOR EXPENSES OF RS.58,38,500/- WAS TOWARDS LA BOUR PAYMENT. ON FURTHER VERIFICATION, THE ASSESSING OFFICER FOUND THAT THE LABOUR PAYMENT WAS NOT SUPPORTED BY PROPER BILLS AND V OUCHERS AND MOST OF THE EXPENDITURE WAS SUPPORTED BY SELF MADE VOUCH ERS WHICH COULD NOT BE VERIFIED PROPERLY. THE ASSESSEE ACCEPTING UN VERIFIABLE NATURE OF THE EXPENDITURE CLAIMED AGREED FOR A REASO NABLE ESTIMATION OF THE NET PROFIT. THE ASSESSING OFFICER CONSIDERING ALL TH ESE ASPECTS PROCEEDED TO ESTIMATE THE NET PROFIT AT 8.30% OF THE GROSS BILLS RECEIVED AND THEREAFTER ALLOWED DEDUCTION TOWARDS REMU NERATION AND INTEREST PAID TO PARTNERS. 3. THE CIT IN EXERCISE OF HIS POWERS VESTED WITH HIM U/S 263 OF THE ACT CALLED FOR THE ASSESSMENT RECORDS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR FOR EXAMINATION. AFTER EXAMINING THE ASSESSMENT RECORDS, THE CIT WAS OF THE VIEW THAT THE ASSESSMENT ORDER PASSED U/S 143(3) FOR THE IMPUGNED ASSESSMENT YEAR IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE DUE TO THE FOLLOWING REASO NS. ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 3 I) THE ASSESSING OFFICER WITHOUT REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT HAS ESTIMATED THE PROFIT BY APPLYING THE RATE OF 8.30%. II) THE ASSESSING OFFICER HAS NOT FOLLOWED THE DECISION OF THE INCOME-TAX APPELLATE TRIBUNAL IN THE CASE OF KNR CONSTRUCTIONS LIMITED AND M/S. KRISHNA MOHAN CONSTRUCTIONS WHEREIN THE INCOME-TAX APPELLATE TRIBUNAL HAS UPHELD THE ESTIMATION OF PROFIT AT THE RATE OF 12 .5% ON MAIN CONTRACT AND 8% ON THE SUB-CONTRACT RECEIPTS. 4. ACCORDINGLY, THE CIT ISSUED A NOTICE U/S 263 DIRECT ING THE ASSESSEE TO SHOW CAUSE ON THE ISSUES RAISED THEREIN. THE A SSESSEE IN REPLY TO SHOW CAUSE AS WELL AS IN COURSE OF HEARING OF RE VISION PROCEEDINGS BEFORE THE CIT SUBMITTED THAT DUE TO UNVER IFIABLE NATURE OF THE EXPENDITURE CLAIMED TOWARDS LABOUR PAYMENT WHEN THE ASSESSING OFFICER PROPOSED FOR ESTIMATION OF THE NET PROFIT ON T HE GROSS RECEIPTS THE ASSESSEE ACCEPTED SUCH PROPOSAL AND AGREED FOR REASONABL E ESTIMATION AND ACCORDINGLY THE ASSESSMENT WAS COMPLETED ESTI MATING THE NET PROFIT. HENCE, THERE IS IMPLIED REJECTION OF BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER WHICH THE ASSESSEE ALSO ACCEPTED. IN THE SE CIRCUMSTANCES, THE INFERENCE DRAWN BY THE CIT THAT PROFIT WAS ESTIMATED WITHOUT REJECTING THE BOOKS OF ACCOUNT IS NOT C ORRECT. WITH REGARD TO THE RATE OF PROFIT APPLIED BY THE ASSESSING O FFICER WHICH ACCORDING TO THE CIT IS LOW COMPARED TO THE RATE ADOPTE D BY INCOME- TAX APPELLATE TRIBUNAL IN SIMILAR CASES. THE ASSESSEE SUBMIT TED THAT THE TRIBUNAL IS ADOPTING DIFFERENT RATES WHILE ESTIM ATING THE PROFIT FROM CONTRACT WORK BY CONSIDERING THE FACTS AND MERITS OF THE CA SE. THEREFORE, THERE IS NO UNIFORMITY OF RATE APPLIED WH ILE ESTIMATING THE PROFIT. IT WAS SUBMITTED BY THE ASSESSEE THAT CONSIDERING THE FACTS AND ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 4 MERITS OF THE CASE, THE ASSESSING OFFICER HAS ESTIMATED THE P ROFIT AT THE RATE OF 8.30% ON THE GROSS RECEIPTS. IT WAS SUBMITTED BY THE ASSESSEE THAT THE ESTIMATION OF THE INCOME MADE BY THE ASSESSING OFFICER CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE SIMPLY BECAUSE IN THE OPINION OF THE CIT HE HAS ADOPTED A LOWER RATE OF PROFIT. IN THIS CONTEXT, THE ASSESSEE RELIED UPON A DECISIO N OF THE INCOME-TAX APPELLATE TRIBUNAL., DELHI BENCH IN THE CAS E OF PRAMOD KUMAR SAXENA V/S. CIT (2011) 136 TTJ (DEL) (UO) 73. THE CIT, HOWEVER, DID NOT ACCEPT THE CONTENTIONS RAISED BY THE ASSE SSEE. THE CIT OBSERVED THAT THAT THERE IS NO APPLICATION OF TH E MIND ON THE PART OF THE ASSESSING OFFICER AS HE HAS NOT GIVEN ANY BASIS FOR ESTIMATING THE ASSESSEES INCOME AT THE RATE OF 8.30% AS AGAINST 3.65% RETURNED BY THE ASSESSEE. ACCORDING TO THE CIT, THE ASSESSING OFFICER SHOULD HAVE QUANTIFIED THE EXPENDITURE THAT WAS PROPERLY VO UCHED ALONG WITH BILLS, THE EXPENDITURE NOT VOUCHED AND EXPENDITURE WH ERE ONLY VOUCHERS ARE AVAILABLE WITHOUT BILLS AND THEREAFTER SHOULD HAVE COME TO A CONCLUSION AS WHAT WOULD BE REASONABLE AMOUNT FOR DISA LLOWANCE. 5. THE CIT FURTHER OBSERVED THAT THE ASSESSING OFFICER H AS NOT MADE ANY ENQUIRY REGARDING THE CIRCUMSTANCES IN WHICH THE ASSESSEE HAS ADOPTED THE LOW PROFIT RATE AT 3.65% THAN THAT O F THE ESTIMATION MADE BY THE ASSESSING OFFICER. THE CIT HELD THAT THE ESTIMATION OF PROFIT AT 8.30% OF THE GROSS BILLS IS WITHOUT ANY BASIS WHICH RENDERS THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE CIT REFERRING TO THE JUDGMENT OF HONBLE A.P. HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS V/S. CIT (23 2 ITR 776) HELD THAT WHEN AN ESTIMATION HAS BEEN MADE BY REJECTI NG THE BOOKS OF ACCOUNTS, THEN NO FURTHER DEDUCTION CAN BE ALLOWED FRO M THE PROFITS SO ESTIMATED. ON THE AFORESAID CONCLUSION, THE CIT CANCELLED THE ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 5 ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AND DIRECTED THE ASSESSING OFFICER TO REDO THE ASSESSMENT AFTER CONSIDERING TH E JUDGMENT OF THE HONBLE HIGH COURT IN CASE OF M/S INDWEL L CONSTRUCTIONS (SUPRA) AND ESTIMATE THE INCOME OF THE ASSESSE E AS THE ASSESSING OFFICER MAY THINK FIT. 6. THE LEARNED AR SUBMITTED THAT REVISIONARY JURI SDICTION U/S 263 CAN BE EXERCISED IF THE ORDER SOUGHT TO BE REVISED IS ERR ONEOUS AND AT THE SAME TIME PREJUDICIAL TO THE INTERESTS OF REVENUE. THE LEARNED AR SUBMITTED THAT THE GROUNDS ON WHICH THE CIT HAS REVISED THE ASSESSMENT ORDERS HOLDING TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ARE CERTAINLY NOT VALID GROUND O N THE BASIS OF WHICH JURISDICTION U/S 263 CAN BE ASSUMED. THE LEARNED A R SUBMITTED THAT THE ASSESSING OFFICER AFTER FINDING CERTAIN EXPENDIT URE CLAIMED TO BE UNVERIFIABLE HAD PROPOSED FOR ESTIMATION OF INCOME. THE ASSESSEE HAVING AGREED TO SUCH ESTIMATION, THE ASSESSING OFFICER COM PLETED THE ASSESSMENT BY ESTIMATING THE PROFIT AT THE RATE OF 8.30% ON THE GROSS BILL AMOUNT. SUCH ESTIMATION OF THE PROFIT IMPLIES T HAT THE ASSESSING OFFICER HAS NOT ACCEPTED THE BOOK RESULTS AND THE BOOKS O F ACCOUNTS HAVE BEEN REJECTED. THEREFORE, IT CANNOT BE SAID THAT THE ORDER IS ERRONEOUS AS THE ASSESSING OFFICER HAS RESORTED TO ESTIMATI ON OF PROFIT WITHOUT REJECTING THE BOOKS OF ACCOUNTS. IN THIS CONTEXT , THE LEARNED AR HAS RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF DHONDI RAM DALLICHAND V/S. CIT (81 ITR 609). WI TH REGARD TO THE RATE OF ESTIMATION OF PROFIT ADOPTED BY THE ASSESSING OF FICER, THE LEARNED AR SUBMITTED THAT IT CANNOT BE A GROUND FOR EXERCISING JURISDICTION U/S 263 OF THE ACT. THE LEARNED AR SUBMI TTED THAT ESTIMATION HAS TO BE MADE AFTER TAKING INTO CONSIDERATI ON VARIOUS FACTORS LIKE NATURE OF BUSINESS OF THE ASSESSEE, GENERAL ECON OMICAL ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 6 CONDITION AND DEMAND AND SUPPLY OF LABOUR IN THE AREA . THE ASSESSING OFFICER AFTER TAKING INTO CONSIDERATION ALL THESE FACTO RS HAS ESTIMATED THE PROFIT. ONLY BECAUSE THE PROFITS SO ESTIMATED BY TH E ASSESSING OFFICER APPEARS TO BE LOW IN THE OPINION OF THE CIT, ON THAT GROUND ALONE THE ASSESSMENT ORDER CANNOT BE HELD TO BE EITHER E RRONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE. SO FAR AS A LLOWANCE OF FURTHER DEDUCTION TOWARDS PAYMENT OF INTEREST AND REMUNERATIO N TO THE PARTNERS ALLOWED BY THE ASSESSING OFFICER IS CONCERNED, THE LEARNED AR SUBMITTED THAT THE SAME IS IN ACCORDANCE WITH THE CONSISTEN T VIEW OF THE INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH IN ITA NO.168/HYD/2006 , ITA NO.1347/HYD/2010 WHEREIN THE TR IBUNAL AFTER CONSIDERING THE JUDGMENT RENDERED BY THE AP HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS (SUPRA) HAS ALLOWED DEDUCTION ON ACCO UNT OF PAYMENT AND REMUNERATION TO THE PARTNERS AFTER ESTIMA TING THE PROFIT. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE O THER HAND, SUPPORTED THE ORDER OF THE CIT. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PART IES AND PERUSED THE MATERIALS ON RECORD. THE CIT HAS EXERCISED HIS POWERS U/S 263 OF THE ACT HOLDING THE ASSESSMENT ORDER TO BE ERRONE OUS AND PREJUDICIAL ON THE FOLLOWING THREE GROUNDS:- I) THE ASSESSING OFFICER HAS ESTIMATED THE PROFIT WITHOUT REJECTING THE BOOKS OF ACCOUNTS. II) THE PROFIT ESTIMATED BY APPLYING THE RATE OF 8.30% IS WITHOUT ANY BASIS AND NOT IN CONSONANCE WITH THE DECISIO NS OF THE TRIBUNAL AS MENTIONED IN THE ORDER OF THE CIT . ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 7 III) THE ASSESSING OFFICER AFTER ESTIMATING THE PROFIT SHOULD NOT HAVE ALLOWED FURTHER DEDUCTION TOWARDS INTEREST AND REMUNERATION PAYMENT TO THE PARTNERS. 9. ON A CAREFUL CONSIDERATION OF SUBMISSIONS MADE BY THE PARTIES, WE ARE OF THE VIEW THAT THE EXERCISE OF THE POWERS U/S 263 OF THE ACT HAS TO BE MADE ON EXISTENCE OF TWO PRE-CONDITIONS. THE ORDER SOUGHT TO BE REVISED SHOULD NOT ONLY BE ERRONEOUS BUT IT MUST ALSO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE FACTS OF THE PRESENT CASE, IN COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER FINDING THAT THE MAJOR EXPENDITURE CLAIMED BY THE ASSE SSEE TOWARDS LABOUR PAYMENT IS NOT VERIFIABLE IN ABSENCE OF PROPER BILLS AND VOUCHERS PROPOSED FOR ESTIMATING THE PROFIT. THE ASSESSEE ALSO AGR EED FOR ESTIMATION OF PROFIT. THE ASSESSING OFFICER THEREAFTER CO NSIDERING ALL ASPECTS, ESTIMATED THE PROFIT AT THE RATE OF 8.30% OF GROSS RECEIPTS AND THEREAFTER ALLOWED DEDUCTION TOWARDS INTEREST AND REMU NERATION PAYMENT TO THE PARTNERS. ONLY BECAUSE THE ASSESSING OFFICE R DID NOT SPECIFICALLY MENTION ABOUT REJECTION OF THE BOOKS OF ACCOU NTS IN THE ASSESSMENT ORDER, IT CANNOT BE SAID THAT THE ORDER PASSED I S ERRONEOUS. WHEN THE ASSESSING OFFICER RESORTS FOR ESTIMATION OF PROFIT , IT IS OBVIOUS THAT HE DOES NOT RELY UPON THE BOOK RESULTS. THEREFOR E, ESTIMATION OF PROFIT AMOUNTS TO REJECTION OF BOOKS OF ACCOUNT. SO FA R AS THE RATE OF PROFIT APPLIED BY THE ASSESSING OFFICER WHILE ESTIMATING AT 8.30% , THE CIT HAS OBSERVED THAT THE RATE APPLIED BY THE ASSESSING O FFICER IS WITHOUT ANY BASIS AND THERE IS NON APPLICATION OF MIND BY THE ASSESSING OFFICER IN VIEW OF THE FACT THAT THE INCOME-TAX APPEL LATE TRIBUNAL, HYDERABAD BENCH IN CASES OF SIMILAR NATURE REFERENCE OF W HICH HAS BEEN GIVEN IN THE ORDER OF THE CIT, HAS ADOPTED THE RATE OF PROFIT RANGING BETWEEN 9% TO 12.5%. SO FAR AS THE AFORESAID OBSERVATION OF ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 8 THE CIT IS CONCERNED, IT HAS TO BE SAID THAT THE RATE O F PROFIT WHILE MAKING ESTIMATION CANNOT BE APPLIED UNIFORMLY AS IT DE PENDS UPON THE FACTS OF EACH CASE. THE DECISIONS OF THE TRIBUNAL RELIED UPON BY THE CIT INVOLVES ESTIMATION OF PROFIT WITH REGARD TO EXECU TION OF CIVIL CONTRACT WORK, WHEREAS THE ASSESSEE IS ONLY LABOUR SUPPLY CON TRACTOR. THEREFORE, THE RATE OF PROFIT APPLICABLE TO CIVIL CONST RUCTION WORK CANNOT BE THE SAME FOR LABOUR SUPPLY CONTRACT. IT IS EVIDENT FROM THE ORDER OF THE ASSESSING OFFICER THAT BEING SATISFIED THAT THE EXPE NDITURE CLAIMED BY THE ASSESSEE ARE UNVERIFIABLE, THE ASSESSING OFFICER HAS PROCEEDED TO ESTIMATE THE PROFIT. THEREFORE, IT CANNOT BE SAID THAT THERE IS NO APPLICATION OF MIND BY THE ASSESSING OFFICER ONLY BECAUSE THE RATE OF PROFIT ESTIMATED BY THE ASSESSING OFFICER, IN VIEW OF T HE CIT, APPEARS TO BE LOW. THIS ALONE CANNOT BE A REASON TO HOLD TH E ASSESSMENT ORDER TO BE EITHER ERRONEOUS OR PREJUDICIAL TO THE INTEREST S OF REVENUE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S. GABR IEL INDIA LIMITED (203 ITR 108) HAS OBSERVED IN THE FOLLOWING MANNER:- FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDAN CE WITH LAW. IF AN INCOME-TAX OFFICER ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS E RRONEOUS BY THE CIT SIMPLY BECAUSE, ACCORDING TO HIM, THE OR DER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION D OES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE CIT FOR THAT OF THE ITO, WHO PASSED THE ORDER, UNLESS THE D ECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHER E THE INCOME-TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMI NES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATE H IMSELF. THE CIT ON PERUSAL OF THE RECORDS, MAY BE OF THE OP INION THAT ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 9 THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON T HE LOWER SIDE AND LEFT TO THE CIT HE WOULD HAVE ESTIMATED TH E INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE ITO. THAT WOULD NOT VEST THE CIT WITH POWER TO RE-EXAMINE THE ACCOU NTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. I T IS BECAUSE THE ITO HAS EXERCISED THE QUASI-JUDICIAL POWER VEST ED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION 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 PREJUDICIAL TO THE INTERESTS OF THE REV ENUE. BUT THAT BY ITSELF WILL NOT BE ENOUGH TO VEST THE CIT WITH T HE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, VI Z., THAT THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY, IF AN OR DER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE , THEN ALSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. AN Y AND EVERY ERRONEOUS ORDER CANNOT BE THE SUBJECT MATTER OF REV ISION BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILL ED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION OF LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. 10 . IT IS WELL SETTLED PRINCIPLE OF LAW THAT THE JURISDICTIO N OF THE CIT U/S 263 IS A SUPERVISORY JURISDICTION. IT IS INTENDED FOR INTERFERENCE IN SPECIAL CASES TO COUNTERACT ORDERS WHICH ARE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE. THE EXPRESSIO N PREJUDICIAL TO THE INTERESTS OF REVENUE IS OF WIDER IMPORT AND MUST B E REGARDED AS INVOLVING A CONCEPTION OF ACTS OR ORDERS WHICH ARE SUBVERSI VE OF THE ADMINISTRATION OF THE REVENUE. THE SCOPE OF INTERFEREN CE U/S 263 IS NOT ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 10 TO SET ASIDE MERELY UNFAVORABLE ORDERS AND BRING INTO COFFERS OF THE REVENUE, SOME MORE MONEY. THE REVISIONARY POWER U/S 263 IS ALSO NOT MEANT TO SET RIGHT ESCAPEMENT OF REVENUE FOR WHICH THER E ARE OTHER PROVISIONS, LIKE S.147, UNDER THE ACT TO TAKE CARE OF. THE ERROR AND PREJUDICE TO THE REVENUE, AS ENVISAGED U/S 263, IS THUS OF WIDER IMPORT. THE ERROR MUST BE SO GRIEVOUS THAT IT CAUSES PRE JUDICE TO THE REVENUE ADMINISTRATION ITSELF. THE HONBLE SUPREME CO URT IN MALABAR INDUSTRIAL COMPANY V/S. CIT (SUPRA) EXAMINING THE SCOPE OF PROVISIONS OF S. 263 OF THE ACT, HAS OBSERVED AS FOLLOWS - 7 . THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ASSESSING OFFICER. IT IS ONLY WHEN AN ORDER IS ERR ONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHO UT APPLICATION OF MIND. 10. 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 ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN ITO ADOPTED ONE O F HE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OR R EVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS T AKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINAB LE IN LAW. IT HAS BEEN HELD BY THIS COURT THAT WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING, THE ORDER PASSED BY THE ASSESSING OFFICER ACCEPTING THE SAME AS SUCH , WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 11 11. IN THE LIGHT OF THE PRINCIPLES OF LAW DISCUSSED HER EIN ABOVE, IT CANNOT BE SAID THAT THE ASSESSMENT ORDER IS ERRONEOUS OR PR EJUDICIAL TO THE INTERESTS OF REVENUE. SIMILARLY, THE OBSERVATION OF THE CIT WITH REGARD TO ALLOWANCE OF FURTHER DEDUCTION TOWARDS PAYM ENT OF REMUNERATION AND INTEREST TO THE PARTNERS TO BE NOT IN ACCORDANCE WITH THE JUDGMENT OF THE HONBLE A.P. HIGH COURT IN THE CA SE OF INDWELL LIMITED (SUPRA) AND THEREFORE THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE IS NOT CORRECT. THIS TRIBUNAL IN A NUMBER OF ITS DECISIONS AFTER TAKING NOTE OF THE DECISIO N OF HONBLE A.P. HIGH COURT IN INDWELL LIMITED (SUPRA) HAD HELD THAT I N CASE OF PARTNERSHIP FIRM ENGAGED IN EXECUTION OF CIVIL CONTRAC T WORK FURTHER DEDUCTION TOWARDS REMUNERATION AND INTEREST PAYMENT TO THE PARTNERS IS ALLOWABLE AFTER ESTIMATING THE PROFIT AT A FIXED R ATE. IN SUCH VIEW OF THE MATTER, THE ASSESSMENT ORDER CANNOT BE HELD TO BE E RRONEOUS AND PREJUDICIAL O THE INTERESTS OF REVENUE. IN FACT, THE CIT IN PARA 4.3 OF THE ORDER HAS HIMSELF REFERRED TO ONE OF THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCHES WHEREIN THE TRI BUNAL HAS UPHELD THE ESTIMATION OF PROFIT AT 8% AND THEREAFTER ALLOWED REMUNERATION AND INTEREST PAYMENT TO THE PARTNERS. I T IS FURTHER SEEN FROM THE ORDER OF THE CIT THOUGH HE HAS HELD THE ASSESS MENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AS THE ESTIMATION OF PROFIT AT 8.30% IS WITHOUT ANY BASIS. U LTIMATELY, THE CIT HIMSELF HAS SET ASIDE THE ASSESSMENT AND DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE INCOME OF THE ASSESSEE AS THE ASSESSING OFFI CER MAY THINK FIT. THE ABOVE DIRECTION OF THE CIT MAKES TWO THINGS VERY CLEAR, FIRSTLY, THE CIT AGREES THAT ESTIMATION OF INCOME HAS TO BE MADE IN THE CASE OF THE ASSESSEE AND SECONDLY THE CIT HIMSELF IS NOT SURE WHAT RATE OF PROFIT TO BE APPLIED. WHEN THE CIT HIMSELF IS NOT SURE OF THE ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 12 RATE OF PROFIT TO BE APPLIED AND LEFT IT TO THE DISCR ETION OF THE ASSESSING OFFICER, THE ASSESSMENT ORDER COULD NOT HAVE BEEN HELD T O BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS TO REVENUE ONLY BECAUSE THE PROFIT HAS BEEN ESTIMATED BY APPLYING THE RATE OF 8.30%. CONSID ERING THE TOTALITY OF FACTS AND CIRCUMSTANCES AND IN THE CONTEXT OF DISCUSSIONS MAD E HEREIN ABOVE, WE ARE OF THE VIEW THAT THE CIT IS NOT JUSTIFIED IN INVOKING HIS JURISDICTION U/S 263 OF THE ACT TO CANCEL THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. ACCORDINGLY, THE ORDER PASSE D BY THE CIT U/S 263 IS SET ASIDE AND GROUND RAISED BY THE ASSESSEE IS ALL OWED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE COURT ON 20 -12-2012. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/- 20 TH DECEMBER, 2012 COPY FORWARDED TO: 1. M/S. KISHORE CONSTRUCTIONS, D.NO.5-4-196, GANDHI NAGAR , PALVONCHA, KHAMMAM DISTRICT. 2. 3. ITO, WARD-2, KOTHAGUDEM. COMMISSIONER OF INCOME-TAX, VIJAYAWADA. 4 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. JMR * ITA NO.212 OF 2012 M/S KISHORE CONSTRUCTIONS, KHAMMAM. 13