Bontala Aleem Miah , Kurnool V. Asst. Commissioner of Income Tax, Circle-1, Kurnool

ITA 454/Hyd/2020

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5682 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2015-2016
• Appeal Filed On: 24-08-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y.V.S.T. SAI
• Keywords: Revision of order; Set aside
• Section: 263; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) B EFORE SH RI SA TBEER SING H GODA RA, JU DI CIA L MEM BER AND SHR I L AXMI PR AS A D SAHU , AC COUNT ANT MEMBE R ITA No. 454/H/2020 Assessment Year: 2015-16 Bontala Aleem Miah, Kurnool. PAN – AGRPM 2246D Vs. Asst. Commissioner of Income-tax, Circle – 1, Kurnool. (Appellant) (Respondent) Assessee by: Shri B. Satyanarayana Moorthy Revenue by: Shri Y.V.S.T. Sai, CIT-DR Date of hearing: 20/12/2021 Date of pronouncement: 23/12/2021 O R D E R PER L.P. SAHU, A.M.: This appeal filed by the assessee is directed against Pr. CIT, Tirupati’s order dated 13/03/2020 for AY 2015-16 involving proceedings u/s 263 of the Income Tax Act, 1961 ; in short “the Act on the following grounds of appeal: “1. The order of the Honorable Principal Commissioner of Income Tax is contrary to the facts of the case and provisions of the law. ITA No.. 454/Hyd/2020 S r i B o n t a l a A l e e m M i a h, K u r n o o l . :- 2 -: 2. The order of the Honorable Principal Commissioner of Income Tax Vis 263 in setting aside, the Assessment is illegal and incorrect as the Assessment Order is not Erroneous and not Prejudicial to the Interest of the Revenue. 3. The Honorable Principal Commissioner of Income Tax is not correct in deciding the matter exparte when there was representation on 28/02/2020 in response, when a letter dated 25/02/2020 was filed before the PCIT in the course of hearing. 4. The Honorable Principal Commissioner of Income Tax erred in setting aside the said Assessment when the Assessment was completed after due inquiries in the proper hearings that took place before the Assessing officer. 5. The Honorable Principal Commissioner of Income Tax is incorrect in so far as the quantum of Income was estimated after inquiries and with reference to the Percentage of Income of apellant in the earlier years. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the PCIT be set aside or modified as may be deemed fit.” 2. Briefly the facts of the case are that the assessee, an individual, who is deriving income from business of Civil Contracts filed return of income for the A.Y. 2015-16 on 30.10.2015 admitting income at Rs. 35,99,800/-. The return of income was processed u/s 143(1). The case was selected for 'Limited scrutiny' to verify (i) Refund Claim ii) Other expenses claimed in the Profit & Loss A/c. The Scrutiny ITA No.. 454/Hyd/2020 S r i B o n t a l a A l e e m M i a h, K u r n o o l . :- 3 -: assessment u/s 143(3) was completed on 26,09.2017 with the assessed income at Rs. 98,13,753/--. 3. By virtue of powers vested u/s 263 of the Income Tax Act, 1961, the Pr. CIT called for the assessment records of the assessee for A.Y. 2015-16 and on verification, Pr. CIT noticed from the assessment order passed by the Assessing Officer on 26.09.2017 that the AO had not examined certain issues properly and hence the assessment order passed by the AO was considered as erroneous in so far it is prejudicial to the interest of revenue within the scope of Section 263(1) of the I.T. Act, 1961 for the following reasons: “i) Income from contract works is estimated at 6% and 3% on main contract and sub-contract works given by rejecting books of accounts by invoking the provisions of Section 145(3). But the Department as a whole is adopting percentage rate of 8% in respect of main contracts without deducting departmental deductions. The rate of 8% is also upheld by ITATs and the Hon'ble High Court of AP in various cases. Hence in this case, income is to be estimated at 8% on the gross contract receipts at Rs. 17,12,55,804/- without deducting the departmental deductions” . 3.1 He therefore initiated proceedings u/s 263 of the IT Act 1961 vide show cause notice dated 14.02.2020 in which above infirmities were pointed out and was asked the assessee to state as to why the Assessment Order passed on 26.09.2017 should not be revised as being erroneous and ITA No.. 454/Hyd/2020 S r i B o n t a l a A l e e m M i a h, K u r n o o l . :- 4 -: prejudicial to the interest of revenue. However, the assessee failed to comply with the said notice. 3.2 Therefore, the Pr. CIT proposed revision of assessment u/s 263 as per the material available on record as under: 3.2.1. This case was selected for Scrutiny and the Scrutiny assessment u/s 143(3) was competed on 26.09.2017 with the assessed income at Rs. 98,13,753/- as against the returned income of Rs. 35,99,800/-. After estimating the income at 6% on main contracts and 3% on sub contacts in contravention to the general practice and to the various judgements by the ITATs and Hon'ble High court of Andhra Pradesh. 3.2.2. The Pr. CIT observed that the assessment was completed without making proper enquiry and verification thereby rendering the assessment erroneous and prejudicial to the interest of Revenue. He, therefore, relying on the judgments of the Hon’ble Supreme Court in the case of Rampyari Devi Sarogi Vs. CIT, 67 ITR 84 (SC) and in the case of Tara Devi Agarwal Vs. CIT, 88 ITR 323 as well as referring to the provisions of section 263(1) of the Act, observed as under: 10. For the purposes of invoking the Jurisdiction uls 263, it is settled law that the revisional authority should apply the tests as to whether such an order ITA No.. 454/Hyd/2020 S r i B o n t a l a A l e e m M i a h, K u r n o o l . :- 5 -: contains some apparent error of reasoning or of law or of the fact on the face of it and also whether it is an order wherein the AO simply accepted what the assessee has stated in its return &/ or in the other particulars and failed to make examination/ verification/ enquiries which are called for on the facts and circumstances of the case which he as an investigator of that case was duty bound to do. If we apply above tests to the facts and circumstances of this case and the material available on record, it is clear that the order passed by the AO u/s 143(3) on 26.09.2017 for the A.Y. 2015-16 is erroneous in so far as it is prejudicial to the interests of revenue within the scope of section 263 of the Act and hence it is set-aside. The AO is directed to re-do the assessment! de-novo, in accordance with law and established procedure on such issues and after affording a reasonable opportunity of being heard to the assessee. 4. Aggrieved by the order of Pr. CIT passed u/s 263 of the Act, the assessee is in appeal before the ITAT. 5. Before us, the ld. AR of the assessee submitted that Pr. CIT is not correct in deciding the matter exparte when there was representation on 28/02/2020 in response, when a letter dated 25/02/2020 was filed before the Pr. CIT in the course of hearing. 7. The ld. DR, on the other hand, relied on the order of the pr. CIT and placed reliance on the case law, on which, reliance placed by the Pr. CIT and copies of which are filed before us by way of paper book containing pages 1 to 10. ITA No.. 454/Hyd/2020 S r i B o n t a l a A l e e m M i a h, K u r n o o l . :- 6 -: 8. We have considered the rival submissions and perused the material available on record as well as the orders of revenue authorities. The ld. Pr. CIT set aside the order of AO by exercising the powers vested u/s 263 by observing that “the AO simply accepted what the assessee has stated in its return &/ or in the other particulars and failed to make examination/ verification/ enquiries which are called for on the facts and circumstances of the case which he as an investigator of that case was duty bound to do.” Recently, the Hon’ble jurisdictional High Court has passed an order in respect of civil contracts for determining the profit on main contract at 9% and on sub- contract at 6% in ITTA No. 40 & 41/2020 vide judgment dated 24/02/2021. The relevant findings of the Hon’ble Court are extracted below for the sake of clarity: “18. We are of the view that the above finding of the Tribunal is based on the finding recorded by the Commissioner of Income Tax (Appeals) himself that the Net Profit of the assessee is to be estimated at 9% on main contract works and 6% on sub-contract works. 19. The Tribunal specifically observed that the Commissioner of Income Tax (Appeals) could not have adopted 9% net profit on this entire amount and he ignored the fact that the appellant was also working both as a main contractor and a sub-contractor. 20. Therefore, the finding of the Tribunal appears to be in consonance with the findings of the Commissioner of Income Tax (Appeals), and it did not commit any error in directing the Assessing Officer to recompute the Net Profit at 9% of the turnover on the main contracts and at 6% of the turnover on the sub-contract works. These ITA No.. 454/Hyd/2020 S r i B o n t a l a A l e e m M i a h, K u r n o o l . :- 7 -: are finding of facts and no substantial question of law arises for consideration in Appeal under Section 260-A of the Income Tax Act, 1961.” Respectfully following the ratio laid down by the Hon’ble Court cited supra, we find no infirmity in the order of the Pr. CIT passed u/s 263 and upholding the same, we dismiss the grounds raised by the assessee. 9. In the result, appeal of the assessee is dismissed in above terms. Pronounced in the open court on 23 rd December, 2021. Sd/- Sd/- (S.S. GODARA) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 23 rd December, 2021. Kv Copy to : 1 Sri Bontala Aleem Miah C/o Venugopal & Chenoy, CAs., 4-1-889/16/2, Tilak Road, Hyderabad – 500 001 2 ACIT, Circle – 1, Kurnool 3 Pr. CIT, Tirupati 4 JCIT, Kurnool Range, Kurnool 5 ITAT, DR, Hyderabad. 6 Guard File. ITA No.. 454/Hyd/2020 S r i B o n t a l a A l e e m M i a h, K u r n o o l . :- 8 -: S.No. Details Date 1 Draft dictated on 2 Draft placed before author 3 Draft proposed & placed before the Second Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement 7 File sent to Bench Clerk 8 Date on which the file goes to Head Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order