M/S DEORA ELECTRIC WORKS,ALLAHABAD V. .DY. COMMISSIONER OF INCOME TAX, CIRCLE -1, ALLAHABAD

ITA 99/ALLD/2020

AI Insights

The case involves two appeals related to the reassessment of M/s Deora Electric Works for the assessment year 2009-10. The primary contention was the validity of the reopening of the original assessment under section 143(3) and the subsequent additions made under section 148. The assessee argued that the reopening was based solely on a change of opinion and lacked tangible material, while the Department contended that the CIT(A) erred in deleting the additions made. The tribunal found that the reopening was justified based on the audit objection, but the additions were not sustainable as they were made without considering all relevant receipts and TDS deductions.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 38879 (ITAT-ALLAHABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Other Referred Cases: CIT vs. P.V.S. Beedies Pvt. Ltd, CIT vs. Kelvinator of India, Shri Ram Builders vs. ACIT, N.K. Roadways Private Limited vs. ITO, P.C. Patel and Co. vs. DCIT, PCIT vs. G & G Pharma Ltd, Subodh Agarwal vs. State of U.P., CIT vs. Juhi Medical Works, Nagrath Chemical Works (P.) Limited vs. CIT, CIT vs. Abhoji Rao Phalke, Vashishtha Bhargav vs. ITO, CIT vs. First Leasing Co. of India Limited, Bharat Ply Wood and Timber Products Limited vs. CIT, New Light Trading Co. vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A.K. SINGH
• Assessee Lawyers: PRAVEEN GODBOLE; WAY OF
• Keywords: Difference of opinion; Change of opinion; Reopening of assessment; TDS; Audit objection; Tangible material; Borrowed satisfaction; FORM 26AS
• Section: 147; 148; 143(3); 250; 13; 194C; 145(3)

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.99/Alld/2020 A.Y. 2009-10 M/s Deora Electric Works, Prabh Kripa Tower, 58A, S.P. Marg, Civil Lines, Allahabad vs. Dy. Commissioner of Income Tax, Circle-1, Allahabad PAN:AADFD7479B (Appellant) (Respondent) ITA No.101/Alld/2020 A.Y.2009-10 Dy. Commissioner of Income Tax, Circle-1, Allahabad vs. M/s Deora Electric Works, Prabh Kripa Tower, 58A, S.P. Marg, Civil Lines, Allahabad PAN: AADFD7479B (Appellant) (Respondent) Assessee by: Sh. Praveen Godbole, C.A. Revenue by: Sh. A.K. Singh, Sr. DR Date of hearing: 25.10.2024 Date of pronouncement: 27.12.2024 O R D E R PER NIKHIL CHOUDHARY, A.M.: These two appeals have been filed against the orders of the ld. CIT(A), Allahabad passed under section 250 of the Act on 28.07.2020 by the assessee and the Department, respectively. The grounds of appeal in these two cases are as under:- ITA No.99/Alld/2020 “1. That in any view of the matter reopening of original assessment vide the order dated 30/12/2011 framed u/s 143(3) of the IT Act by issue of notice u/s 148 of the IT ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 2 Act dated 30/03/2016 (last day of limitation) is nothing but simply based on \"change of opinion\". 2. That in any view of the matter since there was no \"tangible material\" found which compelled the assessing officer to issue the notice u/s 148 of the IT Act for reassessment u/s 148 of the Act hence the action of assessing officer is illegal. 3. That in any view of the matter reopening of concluded assessment after through verification of receipts in the light of form no. 16A is totally unfair and illegal hence notice u/s 148 of the IT Act is unsustainable as such reassessment proceeding imperssible and liable to be withdrawn. 4. That in any view of the matter declared receipt were received were from government department through cheque supported by form no. 16A and accepted by AO in original assessment hence action of the assessing officer under the proceeding u/s 148 of the IT Act. is not correct. 5. That in any view of matter declared income is liable to be accepted in the facts and circumstances of the case. 6. That in any view of the matter the appellant reserves his right to take any further ground before hearing of the appeal.” ITA No.101/Alld/2020 “1. The Ld. CIT(A) has erred in deleting the addition of Rs. 1,99,86,679/ on account of non-disclosed receipt on the basis of 26AS without considering the fact that the Assessing Officer has clearly established that the assessee could not explain the 6 (Six) credits made in TDS certificate in respect of BSNL ED. Jodhpur. 2. The Ld. CIT(A) has erred in deleting the addition of Rs. 1,99,86,679/- on account of contractual receipt despite the fact that as per Rule 37BA the credit for TDS and paid to the Central Government shall be given for the assessment year for which such income is assessable, the assessee has failed to do so. 3. The Ld. CIT(A) has failed to appreciate the fact that after reconciliation of both A.Y. 2007-08 (Rs. 5,94,99,990/-) and A.Y. 2008-09 (Rs. 8,49,81,648/-) the contract receipt of the assessee is not matched with receipt shown in 26AS and shown by assessee in its return. 4. The Ld. CIT(A) has failed to appreciate the fact that the assessee has shown Rs. 4,00,82,454/- as sales in Trading a/c in which no TDS is deductible but the assessee has taken the above for reconciliation of contractual receipt which is without any documents. 5. Right is reserve to alter, modify and to file any fresh ground of appeal.” ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 3 2. As both these appeals emanate out of the same order, they are being taken up together for the sake of convenience. 3. The facts of the case are, that the assessee filed a return of income on 29.9.2009, declaring a total income of Rs.17,40,230/-. Assessment in this case was completed under section 143(3) on 30.12.2011. Subsequently, it was noticed that the assessee had not shown its contractual receipts correctly. In the details of receipts, the assessee had shown only Rs.55,05,722/-, whereas the actual receipts as reflected in Form 16 A was Rs.7,54,92,401/-. This led the ld. AO to conclude, that there were unreported receipts of the assessee to the tune of Rs.1,99,86,679/-. Therefore, he initiated proceedings under section 148 on 30.03.2016. Thereafter, in the course of proceedings, the assessee submitted that some of the institutions (office) for whom some supply work had been done, had deducted tax at source while making to the payment to the firm, on both the payments made for works and also for sale and supply. Therefore, the conclusion that the total amount reflected in Form 16 was only out of works contract, was not correct. In evidence of its contention, the assessee submitted the ledger copy along with sale bill and Form 16 of one party i.e. BSNL ED. Jodhpur, to whom only supply had been made and yet the party i.e. BSNL ED, Jodhpur had deducted TDS under section 194C, over such supply. The assessee also submitted a chart showing the parties that had deducted TDS on supply made along with works contract. It was submitted, that in view of the same, the amount of supply, which was reflected in the trading and profit and loss account under the head, ‘sales’, was also to be included while considering Form 16 and not only the amount as reflecting in, ‘contract receipts’ in the trading and profit and loss account. The ld. AO considered the submissions of the assessee, but did not them to be convincing. He pointed out that the assessee’s AR could not explain the six credits made through the TDS certificate submitted by the assessee and observed if it was payments towards purchases, then the amounts must tally with the amounts of Rs.3,50,237/- and Rs.3,45,911/- shown in the ledger account as sales, because it ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 4 could not be presumed that the payment for supply of a 30 KV generator set could be made in parts. Therefore, he held that the explanation of the assessee was not acceptable and accordingly he added back the difference of contractual receipts of the assessee as shown in P & L account and as per Form 16A, i.e. Rs.1,99,86,679/-. 3. Aggrieved with this addition, the assessee went in appeal to the ld. CIT(A), Allahabad. Before the ld. CIT(A), it was submitted that the difference of Rs.1,99,86,671/- was not on the basis of any suppression, but simply because of a glaring error committed by the ld. AO in considering the actual receipt disclosed by the assessee, by giving too much weightage to Form No.16 (TDS Certificate) which action was not correct. It was submitted that the case had originally been assessed under section 143(3) on 30.12.2011 by the same ld. AO and all aspects relating to the assessment had been considered in the said assessment proceedings. It was only after that, that the order under section 143(3) of the Act was passed. The assessee contended that on the basis of certain audit objection, a query was made in respect of amounts reflecting in Form No.16 and 26 AS and for their re-conciliation with their declared receipt. Despite the fact that detailed explanations had been furnished before the ld. AO on different dates and even the books of accounts were produced, which were verified and examined, the ld. AO still issued a notice under section 148 of the Act, simply because there was an audit objection against the original assessment. It was submitted that since the proceedings had been initiated solely on the basis on an audit objection, there was no independent application of mind by the ld. AO and hence the entire proceedings were void ab initio. The assessee objected to the validity of the assessment, as framed under section 147 of the Act and contended that there was no escapement of even a single paisa, but the lower authorities had not acted judiciously. In support of its contentions, the following was submitted:- ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 5 a. That in the return of income filed on 29.09.2009, the receipt was declared at Rs.9,55,88,156/-, which itself proves that the declared receipts were higher than the alleged receipts of Rs.5,55,05,722/- as pointed out in the assessment order. b. In the aforesaid reasons, the receipt as per the ld. AO was Rs.7,54,92,401/- and as a result, the ld. AO had incorrectly deducted the amount of contract receipts from this figure to arrive at a concealment of Rs.1,99,86,669/-. 3.1 Thus, the ld. AO had come to a wrong conclusion, without verifying the trading and profit and loss account of the assessee which showed that the actual receipt of the assessee was Rs.9,55,88,176/-. Since, this so called undisclosed receipt had already been included in the total receipt of Rs.9,55,88,176/-, hence the addition was unjustified, because a duplicate addition was not permissible under the Act. It was further submitted that the disputed amount was already included in the P & L account, under the head, ‘sales account receipt’ which was also the part of contract receipt. On such receipts, TDS was deducted, but the entire receipt was recorded in the books of accounts and included in its sales accounts. Accordingly, it was pointed out that of the amount of Rs.1,87,75,679/- disclosed as sales (Central), receipts of alleged undisclosed receipts to the extent of Rs.1,10,33,111/- were already included. Similarly, from the amount disclosed in P & L account of Rs.1,83,86,650/- as, ‘sales Jaipur’, alleged undisclosed receipts of Rs.89,53,568/- were already included. Hence, the amount of Rs.1,99,86,679/- had already been offered to tax before the Department. It was also submitted, that while computing the tax, the ld. AO had allowed the benefit of TDS of Rs.9,95,168/- on a total receipt of Rs.8,16,81,932/-, but still held that the receipts disclosed by the assessee were only Rs.5,55,05,722/-. It was further submitted that the ld. AO had accepted the book results and that the proviso to section 145(3) had not been invoked. The expenditure claimed in the profit and loss account had been accepted in both assessments, the balance-sheet had been accepted, the audit report had been accepted and the bank accounts, in which the receipts were credited, had also been ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 6 accepted. Thus, there was no justification to say that receipts to the extent of Rs.1,99,86,679/- were suppressed, when the same were received from Government Departments through banking channel. The assessee further pointed out that in addition to the fact that a higher receipt than what was alleged by the ld. AO, had been disclosed by it in its return of income, the tax had been deducted under section 194C by many vendors on contracts for sale of material to them also, which had been included under the figure of sales, and this aspect had not been considered by the ld. AO. In support of his contentions, the assessee submitted complete details of all parties, as per the chart, showing how vendors had deducted tax on supplies made, which was not supposed to be done, resulting in this anomaly. The ld. CIT(A) held that perusal of the profit and loss account shows that the total amount of receipts disclosed in the profit and loss account are Rs.9,55,88,176/-, of which Rs.5,55,05,722/- are classified as contract receipts while the balance is classified as sales receipts. He held that it was clear from the assessment order that while passing the order, the ld. AO did not consider the receipts shown under the sales account and passed the order in haste,without the examining the TDS certificates and bills shown by the assessee in the case of BSNL & ED, Jodhpur, as an example. The ld. CIT(A) recorded that the reason given by the appellant that tax was deducted at source by respective department on sales had been found to be true. The ld. CIT(A) also observed that the ld. AO has allowed total credits of TDS on total receipts of Rs.8,16,81,932/- while computing the income and thereafter, proceeded to tax a sum of Rs.1,99,86,679/- holding the same to be undisclosed on the grounds that the assessee had only disclosed contract receipts of Rs.5,55,05,722/-. This action of the ld. AO was not correct. He further observed that the ld. AO had not invoked section 145(3) while making the assessment. He also observed that the ld. AO incorrectly treated interest income received from Bank of Baroda under section 194A, also as contract receipt. The ld. CIT(A) recorded his finding that the actual amount of receipts were Rs.9,55,88,176/- which had been bifurcated in the profit and loss account under two heads of income as Rs.5,55,05,722/- under the contract ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 7 receipts and Rs.4,82,454/- under sales head, due to indirect taxation as contract receipts attract service tax and sales head attract VAT. The ld. AO had only compared the total of Form 16A from contract receipts and not considered the sales head of income of Rs.4,82,454/-. He, therefore, held that the additions made by the ld. AO were not sustainable. However, he observed that the assessee was following mercantile system of accounting and had submitted that some income reflecting in Form 16A belonged to earlier financial years. Therefore, he desired that the ld. AO to do thorough re-conciliation of which income was offered to tax in the particular assessment year and only allow the TDS in respect of that income, while giving the appeal effect. Accordingly, while deleting the addition made by the ld. AO, he directed the ld. AO to do this exercise. On the issue of reopening of the assessment on the basis of the audit objection, the ld. CIT(A) quoted from the judgment of the Hon’ble Supreme Court in the case of CIT vs. P.V.S. Beedies Pvt. Ltd (1998) 9 SCC 272 to hold the action of the ld. AO to be valid. The ld. CIT(A) held that an audit objection giving factual information can be construed as information based on which the ld. AO was satisfied, that a reasonable ground exists to believe that a part of the turnover of the appellant, had escaped assessment. Hence, grounds relating to the reopening of the assessment were accordingly dismissed. 4. Both the assessee and the Department are aggrieved with the order of the ld. CIT(A) for different reasons. While the assessee is aggrieved that the ld. CIT(A) upheld the reopening of assessment on the basis of the audit objection, the Department is aggrieved about the decision of the ld. CIT(A) to delete the addition on various grounds. 5. Shri. Praveen Godbole, C.A. (hereinafter referred to as the ‘ld. AR’) appearing on behalf of the assessee submitted that the initiation of proceedings under section 148 had been taken up simply on the basis of audit objection and there was no independent application of mind by the ld. AO. Nor was there any tangible material brought on record, nor any fresh material brought on record. He ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 8 emphasized that the earlier proceedings had taken placed under section 143(3) of the Act and all necessary information had been placed before the ld. AO. Therefore, the reopening of the case amounted to a, ‘change of opinion’ by the ld. AO, who was the same person who had conducted the assessment under section 143(3). It was submitted that in the original proceedings, the ld. AO had duly verified and adjudicated upon the said issue, therefore, there was no occasion for reopening the matter in the absence of finding any tangible material or anything outside the records, that was not before the ld. AO when he did the assessment under section 143(3). It was submitted that therefore, it was clear that the case had been reopened only on the basis of the audit objection and since the same was based on borrowed satisfaction from a third party and there was no independent application of mind by the ld. AO, hence the entire proceeding under section 148 of the Act was voidable and liable to be annulled. For this proposition, he relied upon the following decisions:- i. CIT vs. Kelvinator of India 320 ITR 561 (SC) ii. Shri Ram Builders vs. ACIT, OSD 2015 377 ITR 631 (Gujarat). iii. N.K. Roadways Private Limited vs. ITO, OSD 2014 362 ITR 522 (Gujarat). iv. P.C. Patel and Co. vs. DCIT (2015) 379 ITR 151 (Gujarat). v. PCIT vs. G & G Pharma Ltd, 2016 384 ITR 147 (Delhi). Accordingly, he prayed that on the basis of the aforesaid, the assessment framed against the assessee under section 147 / 143(3) was not correct and it was liable to be annulled. In arguing against the Departmental appeal, ld. AR submitted on the merits of the matter, that the ld. CIT(A) had clearly pointed out that the ld. AO had failed to appreciate the fact that in some composite contracts and in some sale contracts also, the parties had deducted tax under section 194C, which they were not required to do. He had submitted details of all such deductions before the ld. AO. Despite this and without considering the fact that the assessee had in fact disclosed ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 9 much more receipts under the two heads of contract receipts and sales receipts, as compared to what was alleged by the ld. AO, the ld. AO had proceeded to disregard the sales receipts and worked out an artificial difference between what was reflected in the Form 26 AS and Form 16 A and the profit and loss account, to make an unjustified addition. Since, the ld. CIT(A) had appreciated the arguments of the assessee in this regard properly, he had granted the relief and there was no merit in the Department’s case. 6. On the other hand, Shri. A.K. Singh, ld. Sr. DR (hereinafter referred to as the ‘ld. DR’) appearing on behalf of the assessee submitted that it had been held in a number of cases that an assessment under section 147 could be reopened on the basis of an audit objection. He filed a paper book containing the following decisions in support of this contention. i. Subodh Agarwal vs. State of U.P. (2023) 149 taxman.com 448 (Alld) ii. CIT vs. Juhi Medical Works (2003) 263 ITR 287 (Alld). iii. Nagrath Chemical Works (P.) Limited vs. CIT (2004) 265 ITR 401 (Alld) iv. CIT vs. P.V.S. Beedies Private Limited (1999) 237 ITR 13 (SC). v. CIT vs. Abhoji Rao Phalke 156 ITR 604 1995(MP) vi. Vashishtha Bhargav vs. ITO, (1975) 99 ITR (148) Delhi. vii. CIT vs. First Leasing Co. of India Limited (2000) 241 ITR 248 (Madras). viii. Bharat Ply Wood and Timber Products Limited vs. CIT (1992) 198 ITR 692 (Kerela) xi. New Light Trading Co. vs. CIT (2002) 256 ITR 391 (Delhi). The ld. DR pointed out that in all these judgments, it had been held that an audit objection can constitute information on the basis of which re-assessment proceeding could be initiated. That the audit note was only drawing the attention of ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 10 the ITO to a fact or to a law which had escaped the notice of the ITO while effecting the original assessment and therefore, it amounted to, ‘information’ within the meaning of section 147(b). It had been pointed out that since Revenue audit had the power and duty to guide the functioning of the income tax authorities, advice and instructions given by them, had to be regarded, ‘information’ within the meaning of section 147(b) and therefore, on the basis of such reasoning in all the aforesaid cases, reassessments opened on the basis of audit objections had been held to be valid. Our attention was invited to the reasons recorded by the ld. AO and it was pointed out that there was no mention of the audit objection in the said reasons. Therefore, it could not be said that the ld. AO had not applied his independent mind to the facts of the case upon receipt of the, ‘information’. The ld. DR further pointed out, that the fact that the officer who did the assessment under section 143(3) was the same as the one who reopened the case, in fact indicated that he accepted his oversight in overlooking this aspect, while doing the assessment under section 143(3). Therefore, this should not be construed as a change of opinion, but rather as an acknowledgment of oversight. Finally, the ld. DR pointed out that the correctness or otherwise of a certain set of facts at the time of reopening, could not determine whether the reopening was valid or not. Rather what had to be seen was whether there was tangible material at that point of time, giving rise to the belief that income had escaped assessment and if that were the case, then the reopening ought to be upheld. While arguing on the merits, ld. Sr. DR invited our attention to the grounds of appeal filed in the Departmental appeal. He pointed out that the ld. CIT(A) had failed to consider that the ld. AO had clearly established that the assessee could not explain the six credits made in the TDS certificate in respect of BSNL, ED, Jodhpur. He further pointed out that the ld. CIT(A) had erred in deleting the addition on account of contractual receipt, despite the fact that as per Rule 37BA, the credit for TDS paid to the Central Government was only to be given for the assessment year for which such income was assessable and the assessee had failed to furnish this information. Finally, it was submitted that the ld. CIT(A) had failed to appreciate the ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 11 fact that assessee had shown Rs.4,82,454/- as sales in trading account on which no TDS was deductible, but taken the same for re-conciliation of contractual receipts, which was without any documentation. In conclusion, he argued that the contract receipts of the assessee for the assessment year was not matched with the receipt shown in 26AS, even after re-conciliation of both assessment years 2007-08 and 2008-09. On these accounts, ld. Sr. DR held that the decision of the ld. CIT(A) to delete the addition was unjustified. 7. We have duly considered the facts and circumstances of the case, the case laws presented before us and the arguments of both parties. As the assessee has raised a legal issue, it is important to consider that first. In doing so, we have taken note of the fact that the reasons to believe, as recorded by the ld. AO do not make any specific reference to an audit objection as being the motivating factor for the reopening of the assessment. We also observed, that a perusal of the assessment order under section 143(3) dated 30.12.2011, does not reveal that the discrepancy between the form 16A and the figures in the profit and loss account was examined and adjudicated upon by the ld. AO in the course of these proceedings. Nor has the assessee filed any copy of correspondence made during the original assessment proceedings, that would show that a specific query had been raised and answered to in this regard and accordingly, formed the subject matter of adjudication. Therefore, we are in agreement with the view of the ld. Sr. DR that the fact that the ld. AO came to a conclusion that income had escaped assessment, was in fact an admission of oversight rather than a change of opinion and therefore, we find no infirmity in his decision to reopen the assessment upon being informed of the said discrepancy. We have also noted that the ld. CIT(A), while rejecting the assessee’s contention that the assessment could not be reopened on the basis of an audit objection has quoted from the decision of the Hon’ble Supreme Court in the case of P.V.S. Beedies Pvt. Ltd. (supra), that the audit party has merely pointed out a fact which has been overlooked by the ITO in the assessment and the reopening of a case on the basis of ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 12 a factual error pointed out by the audit party is permissible under law. The numerous other case laws by the ld. DR are squarely on the subject. The only caveat to such are, that the ld. AO must independently examine the information provided and formulate his reasons to believe on that basis. All the case laws cited by the appellant are found to be cases where the ld. AO, in fact, disagreed with the observation of audit and yet chose to reopen the cases of the respective assessee. In the case of Shri Ram Builders vs. ACIT (supra) the Hon’ble Gujarat High Court held that when the ld. AO tried to justify the assessment order and requested the audit party to drop the objections, there was no independent application of mind by the ld. AO for initiation of re-assessment proceedings but that he was influenced by the opinions of the audit party. Similarly, in the case N.K. Roadways Pvt. Ltd. vs. ITO, OSD, Gujarat (supra), the ld. AO had contested the observations of audit and reiterated her order and in the circumstances, the Court held that there was no independent belief formed by her that income had escaped assessment. Similarly, in P.C. Patel & Co. vs. DCIT (supra), the Court observed that from the correspondence between the ld. AO and the higher authority, it was observed that while the ld. AO maintained that the audit objection raised by the audit party was incorrect, he still chose to initiate re-assessment proceedings in order to safeguard the interest of Revenue. The Hon’ble held that in such circumstances, the re-assessment was solely based on the audit objections, without independent application of mind. The case of PCIT vs. G & G Pharma (supra) relates to information received from the investigation wing and therefore is not immediately relevant to the present case. Finally, the decision of the Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. (supra), is on the issue that there must be tangible material with the ld. AO. On this issue, we observe that the information that there was a discrepancy between the amounts reflected in the Form 16A and in the profit and loss account, constitutes tangible material, therefore, that case would not have the applicability to the facts of the assessee’s case. In the present case, the assessee has also not brought any material on record to show that the ld. AO disagreed with the audit objection ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 13 that was raised and therefore, the case laws cited by the assessee in this regard being different from the facts of the assessee’s case, would not apply. We are, therefore, inclined to agree with the ld. Sr. DR and in view of the decisions cited by him, we concur with the view of the ld. CIT(A) that the proceedings under section 148 were validly initiated by the ld. AO. Accordingly, the appeal of the assessee is dismissed. 8. Now coming to the Departmental Appeal, we observe that the ld. CIT(A) has quite clearly observed that the ld. AO has made the disallowance without considering the TDS certificates and the chart that was presented before him, showing that some of the parties which had given composite contracts i.e. (both works and supply) had, while making the payment, deducted tax at source on the supply component also and by omitting to consider the fact these were reflected in the profit and loss account of the assessee under different heads, due to the requirements of indirect taxes which had separate levies upon separate kinds of receipts. Therefore, the disallowance had been made by incomplete appreciation of the facts and since the ld. AO had failed to consider the entire extent of receipts by the assessee, the addition made by him could not be sustained. While doing so, the ld. CIT(A) has also noted, that the assessee keeps its accounts on mercantile basis and therefore, he has pointed out that only such part of the TDS, for which income had been shown in this assessment year, could be allowed to the assessee by way of tax deduction. Therefore, in view of these findings of the ld. CIT(A), there is no merit in ground nos. 1, 2 and 4 of the department’s appeal. It has been argued that no TDS is deductible on sales, ignoring the fact that evidence has been presented during the course of assessment to show that, in fact TDS has been deducted on sales. It has also been argued that the ld. CIT(A) erred in deleting the addition in spite of Rule 37BA, while in fact the ld. CIT(A) has clearly pointed out that the credit for tax should only be given to the extent the income that has been offered for tax and he had advised re-computation of the tax credit after considering the income offered. ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 14 Finally, the ld. CIT(A) had observed that in mercantile system of accounting, some receipts may be accruing in one year and received in another. Therefore, the fact that six credits in the TDS certificate issued by BSNL ED. Johdpur could not be reconciled immediately with the cost of generator sets, cannot justify the addition made by the ld. AO, when the assessee has submitted an entire chart pointing out under which sales contracts, tax were deducted and accordingly reflected in Form16A and/26AS. Furthermore, we observe that all these receipts were from Government Departments and it was well within the power of the ld. AO to make enquiries with the Departments to find out regarding on which payments TDS had been deducted. The ld. AO has not conducted this exercise. Therefore, we believe that it is not open to him to controvert the details submitted by the assessee pointing out that in some cases the parties had deducted tax on sales as well as on works, even though they were not required to do so. Since, as per the ld. CIT(A) and the ld. AO, the assessee has submitted a reconciliation chart regarding the receipts of the ld. AR as shown in the income tax return with the Form 26AS, without pointing out any discrepancy in the said reconciliation chart, any addition made by the ld. AO is not sustainable. Ground Nos. 1, 2 & 4 are accordingly dismissed and the decision of the ld. CIT(A) to delete the addition, is accordingly upheld. With regard to ground no.3, we observed that the said ground does not emanate from the orders of either the ld. AO or the ld. CIT(A). There is no discussion in the order of the ld. AO with regard to re-conciliation of the figures of assessment years 2007-08 and 2008- 09 with the contract receipt of assessment year 2009-10. Nor could be find any discussion with regard to this in the order of the ld. CIT(A). Therefore, in our opinion, the said ground of appeal does not emanate out of either the assessment order or the appeal order and accordingly is not maintainable, as a ground of appeal before us. This ground of appeal is therefore, dismissed as such. Accordingly, the appeal of the Department against the deletion of the addition on merits, is also dismissed. ITA Nos.99,101/Alld/2020 A.Y.2009-10 M/s Deora Electric Works 15 9. In the result, both appeals i.e. of the assessee in ITA No.99/Alld/2020 and the Department in ITA No.101/Alld/2020 are dismissed. Order pronounced on 27.12.2024 at Lucknow U.P. Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27/12/2024 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR , ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S. "