Tribunal rules in favor of assessee on appeal, upholding original assessment order and rejecting disallowance.

The Tribunal allowed the appeal filed by the assessee, ruling in favor of the assessee on both issues. The Tribunal upheld the AO's decision on Issue 1 regarding disallowance under section 40(a)(ia) but quashed the order under section 154. On Issue 2, the Tribunal upheld the original assessment order under section 143(3) and rejected the disallowance of outstanding hire charges of machinery under section 40(a)(ia).

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Issues:
1. Initiation of proceedings u/s 154 based on AG Objection after passing assessment order u/s 143(3).
2. Disallowance u/s 40(a)(ia) on outstanding hire charges of machinery.

Issue 1:
The appeal was filed against the order of Ld. CIT(A)-III, Jaipur for assessment year 2007-08. The ld. AR requested an adjournment, which was denied due to previous adjournments. The AO initiated proceedings u/s 154 post passing assessment order u/s 143(3). The assessee contended that after a conscious assessment order, there should be no basis for further proceedings u/s 154. The Tribunal upheld the AO's decision, citing the overriding nature of section 40(a)(ia) and the mistake apparent from the records. Various case laws were considered, and the addition made by the AO was confirmed.

Issue 2:
The assessee, a partnership firm engaged in civil construction work, declared a net income with a net profit rate of 2.39%. The AO rejected the books of accounts u/s 145(3) and estimated the net profit rate at 5.05% on an agreed basis. The AO disallowed outstanding hire charges of machinery u/s 40(a)(ia). The ld. CIT(A) upheld the AO's decision. The ld. AR argued against the rectification order u/s 154 and the disallowance u/s 40(a)(ia) based on the agreed net profit rate. The Tribunal noted discussions between the AO and the assessee regarding the net profit rate. Citing relevant case laws, including decisions of the Kolkatta High Court and Jaipur ITAT, the Tribunal quashed the order u/s 154 and upheld the original assessment order u/s 143(3).

In conclusion, the Tribunal allowed the appeal filed by the assessee, ruling in favor of the assessee on both issues.

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