TaxTMI 
TaxTMI 
TaxTMI 
2013 (2) TMI 730
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....d and is uncalled for and therefore, needs to be quashed because there is no evidence or material or basis to arrive at the conclusion that the AO passed his order in a casual manner in undue hurry and further erred in arriving at the conclusion that the learned AO did not consider the applicability of sec. 40(a)(ia) and sec. 194C(2) of the Act. The learned AO has applied his mind and did arrive at the conclusion of non-applicability of these sections and his order therefore, could not be in law, subjected to review merely because other view was possible. The order passed by the learned CIT therefore, needs in law to be dislodged. 2. That there is no evidence and/or material on record on the basis of which the learned CIT arrived at the conclusion that the learned AO failed to verify the genuineness of the transport expenses of Rs. 44,30,940, and that the learned AO failed to consider the applicability of TDS provisions. The order passed by the learned AO is passed after careful examination of the record and is not open to be subjected to review. That the learned AO had granted opportunity to assessee about work-in-progress and was satisfied by reply that the practice is being fo....
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....source since the assessee made payment to the sub-contractor/supervisors, tax was admittedly required to be deducted as per provisions of sec. 194C of the Act. The learned CIT also pointed out that the major work of the assessee related to wire fencing at the border where major component of cost was contributed by barbed wires and poles, etc. but there was nothing on record on the basis it could be ascertained as to whether the assessee purchased wires or it was supplied by the Government and that it was not known as to whether the poles were made of cement or steel and whether the same were supplied by the Government or fabricated by the assessee. He also pointed out that the cement and steel were purchased at Rs. 42,19,720 and Rs. 32,18,542 respectively and observed that whether those material were specifically used and that this expenditure claimed was too less when compared with the gross receipts of Rs. 12.01 crores which shows that the assessment order so passed by AO was erroneous. The learned CIT also pointed out that the assessee claimed a staggering sum of Rs. 2,37,90,644 towards diesel expenses alone against the gross receipts of Rs. 12.01 crores and the AO failed to ver....
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....for the assessee submitted that the learned CIT had not given any basis and also had not recorded any finding to the fact that the order of the AO was erroneous or it was prejudicial to the interest of Revenue, therefore, it does not satisfy both the prerequisites of sec. 263 of the Act. It was contended that the AO completed the assessment under sec. 143(3) of the Act on 14th March, 2008 at an income of Rs. 39,35,440 as against the returned income of Rs. 26,54,000. It was further contended that the AO examined the books of account consisting of cash book, journal, ledger and vouchers and examined them on test check basis. A reference was made to the page No. 2 of the assessment order. It was further stated that the AO found various defects which he had stated at page No. 3 of the assessment order as under : "(i) The assessee firm has not maintained stock register of material consumed on day-to-day basis, quantitative details and stock in hand and in absence thereof, the consumption of materials is not fully 1 verifiable. (ii) The assessee has not disclosed any value of material at the site and work-in-progress at the end of the year while it is beyond doubt that in this line o....
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....y GP rate of 9.50 per cent as against 8.50 per cent as declared by the assessee, after examination of the books of account and records and considering the defects therein. It was submitted that once the books of account were rejected and income was estimated by applying the GP rate and allowing certain specific disallowances, there was no decision of making/suggesting item-wise addition in the income referring to the books of account which had already been rejected. It was stated that learned CIT had given direction under sec. 263 of the Act relying on altogether different method of assessment of the assessee's income although he had fully endorsed the action of the AO rejecting the books of account but found the assessment order as passed by him erroneous on the following grounds : (i) To apply GP rate of 10 per cent in place of 9.5 per cent; (ii) Applicability of provisions of sec. 40(a)(ia) on alleged payments to sub-contractors of labour; (iii) Unreasonably high expenditure on account of material and labour; (iv) Non-accounting of closing stock; (v) Suspicion as to violation of sec. 269SS; (va) Inquiry about cash deposit in bank; (vi) Suspicion as to violation of sec....
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....against this, the learned CIT in his order under sec. 263 of the Act suggested of doing various inquiries and thereby making addition and had taken altogether different approach of the assessment which is not permitted by the provisions of sec. 263 of the Act. Reliance was placed on the following case law. (i) CIT v. R.K. Construction Co. [2009] 313 ITR 65 (ii) CIT v. Jai Mewar Wine contractors (Raj.). 12. As regards the issues on the basis of which learned CIT set aside the AO's order, the learned counsel for the assessee stated that the assessee had done contract work for CPWD and PWD which are the Government departments and the TDS was deducted from all the payments of the assessee and complete details of work done along with income-tax deducted at source were duly submitted along with Form No. 16A during the course of assessment proceedings. A reference was made to page Nos. 69 to 80 of the assessee's paper book. It was stated that the receipts of the assessee were fully vouched and there was no doubt on the same. It was contended that the assessee's accounts were duly audited under sec. 44AB of the Act and the copies of the audit report, audited balance sheet, P....
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....t was submitted that the AO had examined the complete books of account and records and also copies of account of the parties and thus completed the assessment. Therefore, the valuation of the parties account was also a suspicion of the learned CIT. As regards to the transport payments, it was stated that the assessee did not have any regular transport contract as the same were in the nature of hire charges of vehicles and individual transport charges, the payments were below the minimum amount liable for deduction for tax at sources, therefore, there was no need of TDS from transport payments. A reference was made to the Circular No. 715, dt. 8th Aug., 1995 [(1995) 127 CTR (St) 13]issued by the CBDT. It was accordingly submitted that the grounds as taken by the learned CIT for invoking his powers under sec. 263 did not establish that the order of the AO was erroneous and prejudicial to the interest of the Revenue. It was further submitted that the AO had examined all the aspects as raised by the learned CIT and thereafter came to the conclusion and rejected the books of account and applied GP rate of 9.50 per cent as against declared GP rate of 8.50 per cent. It was emphasized that....
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....In the absence thereof, the consumption of material was not fully verifiable. The learned CIT was of the view that separate addition was to be made, for non-part disclosure of closing stock of raw material and/or work-in-progress. However, this fact was already verified by the AO while framing the assessment and this defect was also ( one of the reasons for rejecting the books of account. The A.O. categorically stated in the assessment order dt. 14th March, 2008 that...."(ii) the assessee has not disclosed any value of material at the site and work-in-progress at the end of the year while it is beyond doubt that in this line of business complete work may not be finished before the end of the financial year. Hence, there are chances of remaining closing stock or materials in hand and work-in-progress. (iii) The assessee firm has not maintained any register to verify part of work completed, expenditure incurred or various items materials used at different sites of contract works." Therefore, it cannot be said that the AO did not apply his mind while rejecting the books of account. The learned CIT also mentioned that the high expenditure on account of material and labour work was unre....
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....ant case, neither the AO nor the assessee placed on record results of any comparable cases. Thus, the only alternative available with the AO was to look into the past records of the appellant. This view has beer consistently followed by the Hon'ble jurisdictional Tribunal Bench as well as various other Courts. The assessee was not maintaining stock records and other supporting vouchers etc. and none of such records was produced before the AO and therefore, the genuineness of the expenditures, as claimed in the trading account, was under grave doubt. Under these circumstances, the AO was required to apply GP rate of 10 per cent as applied in the asst. yr. 2005-06 and as accepted by the assessee, after rejecting book results under sec. 145(3) of the Act". 15. From the above observation of the learned CIT it is crystal clear that the only alternative available with the AO after rejecting the books of account, was to look into the past records of the assessee while applying the GP rate. In the present case, the GP rate declared by the assessee was 8.5 per cent while in the preceding year GP rate of 10 per cent was applied by the AO after rejecting the books of account. However, th....
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....ough reference to such enquiries had not been made in the order of assessment, it was apparent from the record, without anything to show how and why the enquiry conducted by the AO was not in accordance with law, the invocation of jurisdiction by the CIT was unsustainable. The finding of the Tribunal that the AO had passed the assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him was a finding of fact. The basis on which the jurisdiction was assumed by the CIT being non-existent his order must be held to be not sustainable." 16. In the present case also, the AO made the enquiries and pointed out various defects in the books of account and reached to a conclusion that books were not reliable, he, therefore, rejected the books of account and after rejecting the books of account applied the GP rate of 9.5 per cent against the GP rate of 8.5 per cent declared by the assessee. On the contrary, the learned CIT although pointed out the defects in the books of account, however, he was of the view that the GP rate of 10 per cent ought to have been applied instead of 9.5 per cent. Therefore, when the AO as well as CIT....
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....led explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of the assessee. This decision of the ITO could not be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the CIT himself, even after initiating 'proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the CIT under sec. 263." 20. In the present case also while making the assessment, the AO examined the accounts, made enquires, pointed out certain defects in the books of account maintained by the assessee in regular course of its business and after applying his mind rejected the books of account, thereafter he determined the income by applying GP rate at 9.5 per cent by considering the past history of the....