Malineni Venkata Ranga Prasad, Vijayawada V. THE CIT, Vijayawada

ITA 457/VIZ/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8995 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 21-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEVA RATNA KUMAR
• Assessee Lawyers: A S R S S SIVA PRASADAR
• Keywords: Opportunity of being heard
• Section: 143(3); 263; 63

Judgement Text

ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.457/VIZAG/2014 ( / ASSESSMENT YEAR: 2009-10) M. VENKATA RANGA PRASAD VIJAYAWADA CIT, VIJAYAWADA [PAN NO. ADOPM6262B ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.383/VIZAG/2015 ( / ASSESSMENT YEAR: 2009-10) M. VENKATA RANGA PRASAD VIJAYAWADA ACIT, CIRCLE - 2(1), VIJAYAWADA ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI A.S.R.S.S. SIVA PRASAD,AR / RESPONDENT BY : SHRI DEVA RATNA KUMAR, DR / DATE OF HEARING : 17.04.2017 / DATE OF PRONOUNCEMENT : 21.04.2017 / O R D E R PER SHRI MANJUNATHA, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST ORDER OF THE CIT, VIJAYAWADA U/S 263 OF THE INCOME TAX ACT, 1961 ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 2 (HEREINAFTER CALLED AS 'THE ACT') AND ORDER OF THE CIT(A), VIJAYAWADA U/S 250 OF THE ACT, FOR THE ASSESSMENT YEAR 2009-10. S INCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CIVIL CONTRACTOR, FILED ITS RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2009-10 ON 26.11.2010 DECLARING TOTAL INCOME OF ` 83,48,267/-. THE CASE HAS BEEN SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S 14 3(2) OF THE ACT DATED 29.9.2010 WAS ISSUED. IN RESPONSE TO NOTICE, THE A UTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FURNISH ED THE INFORMATION CALLED FOR. THE ASSESSMENT WAS COMPLETED U/S 143(3 ) OF THE ACT ON 17.11.2011, DETERMINING THE TOTAL INCOME OF ` 92,89,285/-, INTER-ALIA BY MAKING ADDITIONS OF ` 4,36,108/- TOWARDS DISALLOWANCE OF INTEREST U/S 40(A)(IA) OF THE ACT FOR FAILURE TO DEDUCT TDS AND ADHOC DISALLOWANCE OF ` 5,04,910/- TOWARDS EXPENDITURE CLAIMED UNDER VARIO US HEADS SUPPORTED BY SELF-MADE VOUCHERS. 3. THE CIT, VIJAYAWADA ISSUED A SHOW CAUSE NOTICE U /S 263 OF THE ACT AND ASKED TO EXPLAIN AS TO WHY THE ASSESSMENT O RDER PASSED BY THE A.O. U/S 143(3) OF THE ACT, DATED 17.11.2011 SHALL NOT BE REVISED UNDER THE PROVISIONS OF SECTION 263 OF THE ACT. THE CIT, PROPOSED TO REVISE THE ASSESSMENT ORDER FOR THE REASON THAT ON EXAMINATION OF ASSESSMENT ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 3 RECORDS, IT WAS NOTICED THAT CERTAIN OMISSIONS AND COMMISSIONS WERE NOTICED, WHICH RENDERED THE ASSESSMENT ORDER ERRONE OUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CI T, IN THE SAID SHOW CAUSE NOTICE, OBSERVED THAT THE ASSESSING OFFICER H AS FAILED TO EXAMINE THE TURNOVER DECLARED BY THE ASSESSEE WITH REFERENC E TO TDS CREDIT CLAIMED AS PER THE TDS CERTIFICATE AND ALSO FORM 26 AS AS PER WHICH THERE IS A DIFFERENCE OF ` 1,10,00,000/- RECEIVED FROM M/S. NPCIL. THE CIT, FURTHER OBSERVED THAT THE ASSESSEE HAS UNDER S TATED HIS TURNOVER TO THE TUNE OF ` 1,10,00,000/- WHEN COMPARED TO THE TOTAL PAYMENT RECEIVED FROM M/S. NPCIL AS PER THE TDS CERTIFICATE S, WHEREAS THE CREDIT FOR TDS HAS BEEN CLAIMED IN FULL, THEREFORE, OPINED THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE H AS FILED A WRITTEN SUBMISSION ON 5.2.2014 AND CLAIMED THAT THE DIFFERE NCE IN TURNOVER OF ` 1,10,00,000/- IS REFLECTED IN OUR BOOKS OF ACCOUNTS AS PART OF CLOSING WORK IN PROGRESS ON THE CREDIT SIDE OF THE PROFIT & LOSS ACCOUNT. THIS WAS DONE DUE TO LACK OF RECEIPT OF SALE BILLS FROM THE CUSTOMER BEFORE THE FINALIZATION OF OUR ACCOUNTS FOR THE ASSESSMENT YEAR 2009-10. THE ASSESSEE FURTHER SUBMITTED THAT THERE IS NO LOSS OF REVENUE TO THE GOVERNMENT, SINCE THE ASSESSEE HAS ALREADY CONSIDER ED PART OF WORK ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 4 DONE TO M/S. NPCIL IN THE FORM OF CLOSING WORK IN P ROGRESS, HOWEVER, SOME ADJUSTMENTS ARE MADE IN OUR BOOKS OF ACCOUNTS TO SQUARE UP CLOSING WORK IN PROGRESS TOWARDS AMOUNT RECEIVED FR OM THE CUSTOMERS. THE ASSESSEE FURTHER SUBMITTED THAT THE CONTRACT WO RK RECEIVED FROM M/S. NPCIL HAS BEEN GIVEN ON SUB CONTRACT BASIS TO SRI M. SUBRAMANIAN IN TOTAL, RETAINING A GROSS MARGIN OF ` 49,49,017/- WHICH WORKS OUT TO 4.385% OF TOTAL CONTRACT VALUE, THEREFORE, CONSIDER ING ENTIRE RECEIPT AS UNACCOUNTED PROFIT FROM THE BUSINESS IS INCORRECT. TO THIS EFFECT, FURNISHED RECONCILIATION STATEMENT EXPLAINING THE T OTAL CONTRACT AMOUNT RECEIVED FROM M/S. NPCIL AND TOTAL SUB CONTRACT CHA RGES PAID TO THE SUB CONTRACTOR. THE ASSESSEE FURTHER SUBMITTED THAT AL L THESE DETAILS HAVE BEEN FURNISHED TO THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT AND THE A.O. AFTER SATISFIED WITH THE DETAILS FURNISHED HAS COMPLETED ASSESSMENT U/S 143(3) OF THE ACT, THEREFORE, THE OR DER PASSED BY THE A.O. CANNOT BE TERMED AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. THE CIT AFTER CONSIDERING THE EXPLANATIONS OF TH E ASSESSEE, HELD THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 14 3(3) OF THE ACT, DATED 19.11.2011 IS ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTEREST OF THE REVENUE AS THE A.O. HAS FAILED TO EXAMINE TH E TOTAL TURNOVER DECLARED BY THE ASSESSEE WITH REFERENCE TO CREDIT C LAIMED FOR TDS AND ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 5 ALSO FORM NO.26AS GENERATED FROM THE ONLINE ACCOUNT ING SYSTEM OF THE DEPARTMENT. THE CIT, FURTHER HELD THAT THE A.O. NO T ONLY FAILED TO EXAMINE THE ISSUE, BUT ALSO FAILED TO APPLY HIS MIN D BEFORE COMPLETION OF ASSESSMENT, WHICH RENDERED THE ASSESSMENT ORDER ERR ONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE . THE CIT FURTHER OBSERVED THAT THERE IS NO MERITS IN THE ASSESSEES CLAIM THAT THE PART OF TURNOVER HAS BEEN ALREADY INCLUDED IN THE CLOSING W ORK IN PROGRESS FOR THE YEAR AS THE ASSESSEE HAS FAILED TO CONSIDER THE MOBILIZATION ADVANCE RECEIVED FROM THE PRINCIPALS IN THE TOTAL TURNOVER ACCOUNTED IN THE BOOKS OF ACCOUNTS. THE CIT, FURTHER OBSERVED THAT THE AS SESSEE HAS RECEIVED TWO PAYMENTS ON 1.8.2008 AND 4.9.2008 ON WHICH TDS OF ` 2,49,260/- WAS DEDUCTED, FAILED TO ACCOUNT SAID RECEIPT IN THE BOOKS OF ACCOUNTS. IT WAS FURTHER OBSERVED THAT MOBILIZATION ADVANCE P AID ON TWO OCCASIONS HAS BEEN RECOVERED IN THE SUBSEQUENT PAYMENT MADE T O THE ASSESSEE ON VARIOUS DATES WITHIN THE FINANCIAL YEAR 2008-09, THEREFORE, THERE IS NO MERITS IN THE CLAIM OF THE ASSESSEE THAT INCOMPLETE INFORMATION RECEIVED FROM THE PRINCIPALS IS THE REASON FOR NON-CONSIDERA TION OF TURNOVER IN THE BOOKS OF ACCOUNTS. THE TDS CERTIFICATE ISSUED BY T HE PRINCIPALS HAS CLEARLY STATED THAT THEY HAVE PAID AN AMOUNT OF ` 11,28,56,905/- AS AGAINST THIS THE ASSESSEE HAS CONSIDERED TURNOVER O F ` 10,18,56,905/- ONLY IN THE P&L ACCOUNT. THUS, THERE IS A DIFFEREN CE OF ` 1,10,00,000/- ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 6 WHICH REPRESENTS MATERIAL ADVANCES RECEIVED ON 1.8. 2008 AND 4.9.2008, WHICH HAS BEEN KEPT OUTSIDE THE BOOKS OF ACCOUNTS. 6. THE CIT, FURTHER OBSERVED THAT ON VERIFICATION O F THE DETAILS FILED BY THE ASSESSEE, IT WAS NOTICED THAT THE ASSESSEE H AS GIVEN THE WORK ON SUB CONTRACT BASIS TO SHRI M. SUBRAMANIAN FOR AN AM OUNT OF ` 9,77,50,000/- AND THUS MADE A PROFIT OF ` 1,24,79,000/-. THE DETAILS FURNISHED BY THE ASSESSEE IN THE FORM OF AGREEMENT WITH M/S. NPCIL AND WITH SUB CONTRACTOR SHRI M. SUBRAMANIAN CLEARLY EST ABLISHES THAT THE ASSESSEE HAS MADE A CLEAR PROFIT OF ` 1,24,79,000/-. IT WAS FURTHER OBSERVED THAT SINCE THE TOTAL TURNOVER OF ` 1,10,00,000/- WAS OUTSIDE THE BOOKS OF ACCOUNTS AND ALSO FACT THAT THE ENTIRE EXPENDITURE INCURRED FOR THE ABOVE WORKS HAS ALREADY BEEN DEBITED TO THE P&L ACCOUNT AND ALSO THE ASSESSEE DID NOT FURNISH ANY MATERIAL TO S HOW THAT ANY EXPENDITURE RELATED TO THE IMPUGNED RECEIPT WAS NOT DEBITED TO THE P&L ACCOUNT, THERE IS NO BASIS FOR SEEKING ESTIMATION O F INCOME AT A CERTAIN PERCENTAGE ON THE RECEIPT. THE CIT FURTHER OBSERVE D THAT ALTHOUGH THE ASSESSEE HAS EARNED A PROFIT OF ` 1,24,79,000/- FROM THE CONTRACT, DID NOT ACCOUNT THE SAME IN ITS BOOKS OF ACCOUNTS. HAV ING REALIZED THE SAME, HE MADE CERTAIN EXPLANATIONS BUT COULD NOT SU BSTANTIATE. THE ASSESSEE HAS MADE A REQUEST FOR ESTIMATION OF INCOM E BASED ON THE GENERAL ESTIMATES MADE IN OTHER CONTRACT CASES WITH OUT DISCLOSING FULLY ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 7 AND TRULY ALL THE MATERIAL FACTS, WHICH ARE NECESSA RY FOR THE PURPOSE OF HIS ASSESSMENT FOR THE REASON THAT THE INCOME, IF A NY THAT COULD BE DETERMINED ON THE BASIS OF SUCH GENERAL RATIOS OR E STIMATE ON OTHER CONTRACT CASES WOULD BE MUCH MORE BENEFICIAL TO HIM . IN VIEW OF THE ABOVE, IT IS CLEAR FROM THE ABOVE MATERIAL THAT ASS ESSEE HAS MADE A NET PROFIT OF ` 1,24,79,000/- ON THE GROSS CONTRACT RECEIPT OF ` 11,28,56,905/- FROM M/S. NPCIL THROUGH THE SUB CONT RACT AND HENCE THIS SUM SHOULD BE ASSESSED AS AN ESCAPED INCOME. ACCOR DINGLY, SET ASIDE THE ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT AND DIRECT THE A.O. TO RE-DO THE ASSESSMENT AS INDICATED IN PARA-8, IN ACC ORDANCE WITH LAW AND ESTABLISHED PROCEDURE, AFTER AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. AGGRIEVED BY THE CIT O RDER, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT WAS ERRED IN ASSUMING JURISDICTION U/S 263 OF THE ACT, AS THE ORDER PASSED BY THE A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE IN TEREST OF THE REVENUE. THE A.R. FURTHER SUBMITTED THAT THE A.O. HAS EXAMIN ED THE ISSUE OF TURNOVER WITH REFERENCE TO BOOKS OF ACCOUNTS AND TD S CERTIFICATES CLAIMED BY THE ASSESSEE AND AFTER SATISFIED WITH TH E EXPLANATIONS FURNISHED HAS COMPLETED THE ASSESSMENT U/S 143(3) O F THE ACT, THEREFORE, THE ASSESSMENT ORDER PASSED BY THE A.O. CANNOT BE TERMED ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 8 AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN SO FAR AS MERITS OF THE CASE, THE LD. A.R. SUBMI TTED THAT THE LD. CIT WAS ERRED IN DIRECTING THE A.O. TO ASSESS DIFFERENC E TURNOVER OF ` 1,24,79,000/- AS ESCAPED INCOME, IGNORING THE FACT THAT THE ASSESSEE HAS MADE A PROFIT OF ` 49,49,017/- FROM THE PROJECT, THE DETAILS OF WHICH HAS BEEN FURNISHED ALONG WITH NECESSARY EVIDENCES I N THE FORM OF AGREEMENTS WITH M/S. NPCIL AND SUB CONTRACT AGREEME NT WITH SHRI M. SUBRAMANIAN. THE A.R. FURTHER SUBMITTED THAT THE A SSESSEE HAS FURNISHED LEDGER ACCOUNT EXTRACT OF THE SUB CONTRAC TOR ALONG WITH A CERTIFICATE, WHICH CLEARLY ESTABLISHES THAT THE ASS ESSEE HAS MADE A PAYMENT OF ` 10,79,07,888/- AS AGAINST THE TOTAL CONTRACT VALUE OF ` 11,28,56,905/-, THEREBY EARNING A GROSS PROFIT OF ` 49,49,107/-. THE CIT IGNORING THE EVIDENCES FILED BY THE ASSESSEE, S IMPLY DIRECTED THE A.O. TO CONSIDER THE GROSS DIFFERENCE OF ` 1,24,79,000/- WITHOUT ANY BASIS. 8. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED ORDER OF THE CIT. THE D.R. FURTHER SUBMITTED THAT THE ISSUE IS WHETHER THE REVISIONAL AUTHORITY HAS EXERCISED HIS JURISDICTION CORRECTLY OR NOT HAS TO BE DECIDED BASED ON THE RECORDS AND ORDER PASSED BY THE A.O. U /S 143(3) OF THE ACT. THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 1 43(3) OF THE ACT DATED 17.11.2011 IS CRYPTIC AND STEREO TYPED. THE A.O. NEITHER CALLED ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 9 FOR ANY SPECIFIC DETAILS FROM THE ASSESSEE NOR EXAM INED THE TURNOVER DECLARED BY THE ASSESSEE WITH REFERENCE TO CREDIT C LAIMED FOR TDS AS PER TDS CERTIFICATE ISSUED BY THE PRINCIPALS, THEREBY F AILED TO EXAMINE THE ISSUE WITH REFERENCE TO EVIDENCES, WHICH RENDERED T HE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. THE D.R. FURTHER SUBMITTED THAT THE CIT HAS BROUGHT OUT A CLEAR FACT TO THE EFFECT THAT THE TURNOVER TO THE EXTENT OF ` 1,24,79,000/- IS OUTSIDE THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THOUGH THE ASSE SSEE CLAIMED CREDIT FOR TDS FAILED TO INCORPORATE TURNOVER IN THE BOOKS OF ACCOUNTS, WHICH CAUSED PREJUDICE TO THE INTEREST OF THE REVENUE. T HOUGH THE ASSESSEE EXPLAINS THAT HE HAS MADE A SUB CONTRACT PAYMENT OF ` 10,79,07,888/-, THEREBY EARNED NET PROFIT OF ` 49,49,107/-, THE CIT(A) HAS ANALYSED THE PROFIT EARNED BY THE ASSESSEE IN PARA-7 OF HIS ORDE R, WHEREIN HE HAS NARRATED THE FACTS, WHICH CLEARLY ESTABLISHES THAT THE ASSESSEE HAS EARNED A NET PROFIT OF ` 1,24,79,000/- FROM THIS CONTRACT, THEREFORE, THERE IS NO MERITS IN THE CLAIM OF THE ASSESSEE THA T HE HAS MADE A SUB CONTRACT PAYMENT OF ` 10,79,07,888/-. THE ORDER PASSED BY THE A.O. IS ERRONEOUS AND ACCORDINGLY, THE CIT HAS RIGHTLY ASSU MED JURISDICTION TO REVISE THE ASSESSMENT ORDER AND HIS ORDER SHOULD BE UPHELD. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE CIT ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 10 ASSUMED JURISDICTION TO REVISE THE ASSESSMENT ORDER FOR THE REASON THAT THE A.O. HAS NOT CONDUCTED PROPER ENQUIRY BEFORE CO MPLETION OF ASSESSMENT, THEREBY THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. ACCORDING TO THE CIT, THE A.O. NOT ONLY FAILED TO E XAMINE THE TURNOVER DECLARED BY THE ASSESSEE WITH REFERENCE TO CREDIT C LAIMED FOR TDS AND ALSO FORM NO.26AS GENERATED FROM OLTS, BUT ALSO FAI LED TO APPLY HIS MIND BEFORE COMPLETION OF ASSESSMENT. THE CIT FURT HER OBSERVED THAT THE DETAILS FURNISHED BY THE ASSESSEE CLEARLY ESTAB LISHES ESCAPEMENT OF INCOME IN THE FORM OF UNDERSTATEMENT OF TURNOVER FR OM M/S. NPCIL, WHICH HAS NOT BEEN CONSIDERED BY THE A.O. AT THE TI ME OF ASSESSMENT. THE CIT FURTHER OBSERVED THAT ALTHOUGH THE ASSESSEE CLAIMS TO HAVE MADE SUB CONTRACT PAYMENTS, THEREBY EARNED A NET PR OFIT OF ` 49,49,017/- FAILED TO SUBSTANTIATE THE CLAIM WITH N ECESSARY EVIDENCES. ON THE OTHER HAND, THE MATERIALS ON RECORD CLEARLY ESTABLISHES THAT THE ASSESSEE HAS MADE A CLEAR PROFIT OF ` 1,24,79,000/-. 10. IT IS THE CONTENTION OF THE ASSESSEE THAT THE A .O. HAS VERIFIED THE ISSUE OF TURNOVER WITH REFERENCE TO BOOKS OF ACCOUN TS AND TDS CERTIFICATE FURNISHED AT THE TIME OF ASSESSMENT, TH EREFORE, THE ASSESSMENT ORDER PASSED BY THE A.O. CANNOT BE TERME D AS ERRONEOUS. THE ASSESSEE FURTHER CONTENDED THAT IN SO FAR AS DI FFERENCE IN TURNOVER, ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 11 HE HAS GIVEN THE CONTRACT ON SUB CONTRACT BASIS TO SHRI M. SUBRAMANIAN AND MADE PAYMENT OF ` 10,79,07,888/- RETAINING NET MARGIN OF ` 49,49,017/-. THE CIT IGNORING THE EVIDENCES FILED BY THE ASSESSEE IN THE FORM OF AGREEMENT WITH THE PRINCIPALS M/S. NPCIL AN D THE SUB CONTRACTOR SHRI M. SUBRAMANIAN HAS ARRIVED AT A DIFFERENCE OF ` 1,24,79,000/- WITHOUT ANY BASIS. THEREFORE, THE CIT WAS ERRED IN DIRECTING THE A.O. TO TREAT THE DIFFERENCE OF ` 1,24,79,000/- AS ESCAPED INCOME FROM THE CONTRACT WORKS. 11. HAVING HEARD BOTH THE SIDES, WE FIND THAT THE A SSESSEE HIMSELF HAS ADMITTED BEFORE THE CIT THAT A TURNOVER OF ` 1,10,00,000/- WAS OUTSIDE THE BOOKS OF ACCOUNTS. INITIALLY, THE ASSESSEE TRI ED TO EXPLAIN THE DIFFERENCE WITH CLOSING WORK IN PROGRESS FOR THE YE AR UNDER CONSIDERATION, LATER PLEADED FOR ESTIMATION OF INCO ME ON SUCH TURNOVER, WHICH CLEARLY SHOWS THAT TURNOVER IS NOT ACCOUNTED IN BOOKS OF ACCOUNTS. ALL THE EVIDENCES FILED BY THE ASSESSEE IN THE FORM OF AGREEMENTS AS WELL AS TDS CERTIFICATES, ESTABLISHES THAT ASSESSEE DID NOT CONSIDER SAID TURNOVER IN THE BOOKS. WE FURTHER OBSERVED THAT TH E A.O. HAS FAILED TO CONSIDER THE ISSUE WITH REFERENCE TO CREDIT CLAIMED FOR TDS AND ALSO FORM NO.26AS GENERATED FROM OLTS. THEREFORE, WE AR E OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 12 12. THE PRIMARY OBJECT OF SECTION 263 OF THE ACT, I S TO VEST A SUPERVISORY POWER TO THE CIT TO MODIFY OR CANCEL AN Y ORDER INCLUDING THE ASSESSMENT ORDER MADE BY THE A.O., IF HE IS OF THE OPINION THAT SUCH AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL T O THE INTEREST OF THE REVENUE. BUT TO INVOKE THE PROVISIONS OF SECTION 2 63 OF THE ACT, THE TWIN CONDITION EMBEDDED IN THE SECTION MUST BE SATISFIED I.E. THE ORDER OF THE A.O. IS ERRONEOUS AND IT MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. UNLESS BOTH CONDITIONS ARE SATISFIED, THE CIT CANNOT ASSUME JURISDICTION U/S 263 OF THE ACT. IN THIS CASE, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND THAT THE ASSESSMENT OR DER PASSED BY THE A.O. IS ERRONEOUS, BECAUSE THE A.O. HAS FAILED TO E XAMINE THE DIFFERENCE IN TURNOVER WHEN COMPARED TO THE BOOKS OF ACCOUNTS AND CREDIT CLAIMED FOR TDS. THE ORDER PASSED BY THE A.O. IS ALSO PREJ UDICIAL TO THE INTEREST OF THE REVENUE, AS THE ASSESSEE HAS FAILED TO CONSI DER THE TURNOVER FROM M/S. NPCIL IN ITS BOOKS OF ACCOUNTS. THOUGH THE AS SESSEE TRIED TO EXPLAIN THE DIFFERENCE WITH AGREEMENT ENTERED INTO WITH SUB CONTRACTOR, HE FAILED TO SUBSTANTIATE THE CLAIM WITH NECESSARY EVIDENCES TO JUSTIFY THE PAYMENT MADE TO SUB CONTRACTORS. ON THE OTHER HAND, THE CIT CLEARLY BROUGHT OUT THE FACTS TO THE EFFECT THAT TH E ASSESSEE HAS NOT CONSIDERED PART OF TURNOVER IN BOOKS. THEREFORE, W E ARE OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOU S IN SO FAR AS IT IS ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 13 PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCO RDINGLY, THE CIT HAS RIGHTLY ASSUMED JURISDICTION TO REVISE THE ASSESSME NT ORDER. HENCE, WE UPHOLD THE ORDER PASSED BY THE CIT U/S 263 OF THE A CT AND SET ASIDE THE ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO.383 OF 2015: 14. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A CIVIL CONTRACTOR FILED HIS RETURN OF INCOME FOR THE ASSES SMENT YEAR 2009-10 ON 26.11.2010 DECLARING TOTAL INCOME OF ` 83,48,270/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 17.11.2011 DETERMINING THE TOTAL INCOME AT ` 92,89,285/-. SUBSEQUENTLY, THE CIT, VIJAYAWADA HA S PASSED ORDER U/S 263 OF THE ACT AND SET ASIDE ORDER PASSED BY TH E A.O. U/S 143(3) OF THE ACT AND DIRECT THE A.O. TO RE-DO THE ASSESSMENT IN ACCORDANCE WITH LAW. CONSEQUENT TO DIRECTIONS OF THE CIT U/S 263 O F THE ACT, THE A.O. HAS PASSED ORDER U/S 143(3) R.W.S. 263 OF THE ACT, ON 10.2.2015 AND DETERMINED TOTAL INCOME OF ` 2,17,68,285/- INTER-ALIA MAKING ADDITIONS OF ` 1,24,79,000/- TOWARDS DIFFERENCE IN TURNOVER ADMIT TED IN THE BOOKS OF ACCOUNTS. 15. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED APPEAL FIL ED BY THE ASSESSEE BY OBSERVING THAT THE A.O. HAS PASSED ORDER U/S 143 (3) R.W.S. 263 OF THE ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 14 ACT IN PURSUANCE TO A SPECIFIC DIRECTION OF CIT, TH EREFORE, THE CIT(A) CANNOT ADJUDICATE THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE A.O. U/S 143(3) R.W.S. 263 OF THE ACT . AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 16. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 246A OF THE ACT, ANY ORDER PASSED U/S 14 3(3) OF THE ACT, EXCEPT AN ORDER PASSED IN PURSUANCE OF DIRECTIONS O F THE DISPUTE RESOLUTION PANEL, ARE SUBJECT TO SCRUTINY BY THE AP PELLATE AUTHORITIES INCLUDING THE FIRST APPELLATE AUTHORITY, WHETHER OR NOT THE SAID ORDER IS PASSED AS PER THE DIRECTIONS OF THE CIT U/S 263 OF THE ACT. THE A.R. FURTHER SUBMITTED THAT IN THIS CASE, THE CIT HAS GI VEN AN OPEN DIRECTION TO THE ASSESSING OFFICER TO RE-DO THE ASSESSMENT IN ACCORDANCE WITH LAW AND ESTABLISHED PROCEDURES AFTER AFFORDING AN OPPOR TUNITY OF HEARING TO THE ASSESSEE. THE DIRECTIONS GIVEN BY THE CIT IS N OT SPECIFIC DIRECTIONS, THEREFORE, ORDER PASSED BY THE A.O. U/S 143(3) R.W. S. 263 OF THE ACT SHOULD PASS THE TEST OF APPELLATE AUTHORITIES INCLU DING THE FIRST APPELLATE AUTHORITY. THE D.R. STRONGLY SUPPORTED CIT(A) ORDE R. 17. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE CIT(A) HAS DISMISSED THE APPEAL FILED BY THE ASSESS EE AGAINST THE ORDER PASSED BY THE A.O. U/S 143(3) R.W.S. 263 OF THE ACT , FOR THE REASON THAT ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 15 THE CIT AND THE CIT(A) ARE PARALLEL AUTHORITIES AND HENCE, AN APPEAL AGAINST THE ASSESSMENT COMPLETED AS PER THE SPECIFI C DIRECTIONS OF THE CIT, U/S 263 OF THE ACT, CANNOT BE DECIDED BY THE C IT(A). WE DO NOT FIND ANY MERITS IN THE FINDINGS OF THE CIT(A), FOR THE REASON THAT AS PER THE PROVISIONS OF SECTION 246A OF THE ACT, ANY ORDE R PASSED U/S 143(3) OF THE ACT, WHETHER OR NOT SAID ORDER WAS PASSED AS PE R THE DIRECTIONS OF THE CIT U/S 263 OF THE ACT, THE FIRST APPEAL ALWAYS SHALL LIE WITH THE FIRST APPELLATE AUTHORITY. WE FURTHER OBSERVED THAT THE CIT, HAS GIVEN AN OPEN DIRECTION TO THE ASSESSING OFFICER TO RE-DO TH E ASSESSMENT IN ACCORDANCE WITH DISCUSSIONS IN HIS ORDER AS PER THE ESTABLISHED PROCEDURE OF LAW. THEREFORE, WE ARE OF THE VIEW TH AT, ANY ORDER PASSED IN PURSUANCE OF OPEN DIRECTIONS OF CIT U/S 263 OF T HE ACT, SHALL PASS THE TEST OF APPELLATE AUTHORITIES, INCLUDING FIRST APPE LLATE AUTHORITY. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) HAS A JURISDICTION TO EXAMINE THE ISSUES ON MERIT, HENCE, WE SET ASIDE TH E ISSUE TO THE FILE OF THE CIT(A) AND DIRECT THE CIT(A) TO EXAMINE THE ISS UE ON MERIT, AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE IN ACC ORDANCE WITH LAW, AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING . ITA NOS.457/VIZAG/2014 & 383/VIZAG/2015 MALINENI VENKATA RANGA PRASAD, VIJAYAWADA 16 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 21 ST APR17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 21.04.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SHRI M. VENKATA RANGA PRASAD, D. NO.60-3-23, ASHOK NAGAR, VIJAYAWADA-520 010. 2. / THE RESPONDENT THE CIT, VIJAYAWADA 3. / THE RESPONDENT THE ACIT, CIRCLE-2(1), VIJAYAWA DA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY //