TaxTMI 
TaxTMI 
2014 (11) TMI 342
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.... which were rejected to make specific disallowances. iii.The CIT(A) ought to have considered the fact that the recently, the Board vide its circular No. 10/DV/2013 (Departmental view) in F.No. 279/Misc/M-61/2012-ITJ (Vol.II) dated 16/12/2013 held that in case of ACIT, Circle-4(2), Mumbai Vs. Rishti Stock and Shares Pvt. Ltd. in ITA No. 112/Mum/2012, Hon'ble ITAT, Mumbai in its order dated 2-8-2013 held the decision in favour of department." 3. Briefly the facts are, assessee a company is engaged in executing civil construction works. For the AY under dispute, assessee filed its return of income on 15/11/2007 declaring income of Rs. 1,02,51,027. Assessment proceeding in case of assessee was initiated by AO by issuing a notice u/s 143(2....
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....ng u/s 263 of the Act. Though, assessee appeared and objected to proposed disallowance u/s 40(a)(ia) of the Act on the payments of Rs. 3,88,33,495 to sub-contractors, but, AO rejecting submissions of assessee, completed the assessment vide order dated 07/01/.2013 by disallowing the amount of Rs. 3,88,33,495 u/s 40(a)(ia) of the Act. Being aggrieved of such disallowance made by AO, assessee preferred appeal before the CIT(A) by challenging the assessment order both on the issue of validity of proceeding u/s 147 as well as on the merits of the disallowance made u/s 40((a)(ia). 4. In course of hearing of appeal, assessee challenged the validity of proceeding initiated u/s 147 and submitted that the original assessment u/s 143(3) of the Act ....
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....wances. Accordingly, CIT(A) quashed the assessment order passed u/s 143(3) read with section 147. Since the assessment order passed u/s 143(3) read with section 147 was quashed on the legal issue of validity of proceeding u/s 147, CIT(A) did not go into the merits of disallowance u/s 40(a)(ia) of the Act. 5. The learned DR submitted before us that CIT(A) was not justified in holding the assessment order to be invalid. It was submitted that even though the original assessment was completed by estimating the profit, but, the books of account were not rejected as the assessee did not produce the books of account. It was submitted that even in a case of estimation of profit, AO can still make statutory disallowances as otherwise there will b....
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....s not justified in making disallowance u/s 40(a)(ia) when profit has been estimated by rejecting books of account. In this context, he relied on the decision of ITAT, Hyderabad Bench in case of Teja Constructions Vs. ITO. 7. We have considered the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. We have also examined the decisions relied upon by the parties before us. As can be seen from the facts and materials on record, in the present case, the original assessment was completed u/s 143(3) on 24/09/09. After completion of the original assessment, CIT initiated proceeding u/s 263 of the Act by issuing show cause notice to assessee on 04/08/11 for the following reasons: ....
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.... proceeding was pending before the CIT, AO reopened the assessment u/s 147 of the Act. The reasons recorded for reopening of the assessment as communicated to assessee vide letter dated 16/07/12 are as under: "It is observed that an amount of Rs. 3,88,33,945/- was debited to P&L account towards payment to sub-contractors. Out of this, an amount of Rs. 3,31,14,977/- was paid to Shri L. Sudarshan Rao (sub-contractor) and TDS needs to be deducted. The details of deduction and remittance to government account are not forthcoming from the ledger account enclosed with the return. For failure to deduct tax u/s 194C of IT Act the entire expenditure was required to be disallowed u/s 40(a)(ia) of IT Act, 1961." As can be seen from the reasons r....
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.... was completed, AO has reopened the assessment u/s 147 of the Act. Therefore, there being no fresh and tangible material before AO to reopen assessment, initiation of proceeding u/s 147 of the Act on reappraisal of same facts and materials considered in original assessment amounts to change of opinion and therefore is invalid. In this context, we refer to the decision of the Hon'ble Supreme Court in case of CIT v Kelvinator of India Ltd., 320 ITR 561 SC wherein it was held that the AO should have come into possession fresh material, something tangible which has live nexus with the income escaping assessment. Though the DR has submitted before us that books of account were not rejected as assessee has never produced books of account, in our ....