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TaxTMI 
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2022 (3) TMI 466
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....Commissioner of Income Tax is bad in law as there is no specific finding in the order that the order of assessment is erroneous insofar as it is erroneous in respect of any of the issues raised. 3. The learned Pr. CIT acted without jurisdiction in passing an order in respect of agreed addition and verification of creditors and wages payable already carried out by the Ld. AO before passing order u/s. 143(3). 4. For these and other grounds that may be adduced at the time of hearing, the order of the learned Pr. CIT may be quashed and the appeal allowed. The appellant craves leave to add to, or, amend/alter/withdraw any of the above grounds of appeal. All the grounds of appeal are without prejudice to each other." 2. Briefly, the facts of the case are that the assessee, who is in the business of civil construction, filed his return of income declaring total income of Rs. 22,92,890/-, which was selected for limited scrutiny as per CASS to examine sundry creditors and sales turnover mis-match and thereafter notices u/s. 143(2) and 142(1) were issued to the assessee. In response, the Ld. AR on behalf of the assessee attended the proceedings and filed necessary information and docume....
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....total sundry creditors are only at Rs. 19,84,695/- and list of the sundry creditors forms part of the audited financial statements. It was further submitted that the ledger account for these creditors was verified during the course of assessment proceedings and most of these balances were independently confirmed by the parties and their confirmation also form part of the assessment records. Regarding the labour wages payable amounting to Rs. 56,73,422/-, it was submitted that the same was also duly verified during the course of assessment proceedings and bill vouchers and labour wage muster rolls were produced. Regarding the fact that the wages were paid in cash, it was submitted that the wages were paid at different locations all over Himachal Pradesh and Punjab where the assessee was working as a contractor and local and outside labourers were engaged at the respective sites. It was further submitted that the wages to the labourers do not attract TDS since all were drawing salary below the taxable limit. It was submitted that the assessee employ these people who work far-away from their homes and only draw enough money to buy foods and normally draw their wages while going homes.....
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....der by conducting further enquiries after providing reasonable opportunity to the assessee. 5. Against the said order and findings of the Ld. Pr. CIT, the assessee is in appeal before us. Firstly, it was submitted by the Ld. AR that the Ld. Pr. CIT has not applied his independent mind while initiating the proceedings u/s. 263 of the Act as the balance of sundry creditors in the financial statements of the assessee company has been reflected at Rs. 19,84,695/- and not Rs. 76,58,117/- which has been stated by the Ld. Pr. CIT while issuing the show cause notice. It was submitted that the labour and wages payable has been duly reflected under the separate head of 'labour wages payable' amounting to Rs. 56,73,422/-. It was accordingly submitted that the proceedings as initiated by the Ld. Pr. CIT on wrong figures and mis-interpretation of details, which form part of the assessment records, are bad in law and deserves to be set aside. It was further submitted that the case of the assessee was selected for limited scrutiny for examining sundry creditors and sales mismatch and the AO after due examination of the sundry creditors and sales mis-match which were duly explained during....
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.... the wages payable and other sundry creditors. However, such a distinction which is more in the form of a nomenclature cannot escape the fact that all these expenses are in the nature of sundry creditors having not been paid at the year-end and remained outstanding for either goods purchased or services availed by the assessee and whether payable to the labourers/employees or to outside third parties and, therefore, the contention advanced by the Ld. AR that the Ld. Pr. CIT has initiated the proceedings on wrong facts and exceeded his jurisdiction u/s. 263 in terms of examining the matter of labour and wages payable as beyond the scope of limited scrutiny assessment cannot be accepted. It was further submitted that when the matter was selected for limited scrutiny and that too specifically for examining the matter relating to sundry creditors which includes labour and wages payable, it was incumbent on the part of the AO to verify complete facts and carry out thorough enquiries. However, it can be seen as rightly pointed out by the ld. PCIT in the impugned order that no documentary evidence in the form of labour register containing name, addresses of the labourers and labour paymen....
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....ot initiate the proceedings u/s. 263 of the Act, on the issue of labour and wages payable amounting to Rs. 56,73,422/-, which are beyond the scope of limited scrutiny for verification of sundry creditors. In this regard, we find that the case of the assessee was selected for limited scrutiny through CASS to examine inter-alia the issue of sundry creditors. The information and documentation which forms the basis for said computerized selection is the return of income disclosing computation of income under various heads of income as well as the particulars of income and expenditure as well as particulars of assets and liabilities. In the return of income in Form 4 so filed and submitted online by the assessee, we find that as part of current liabilities and provisions, the assessee has shown sundry creditors at Rs. 76,58,117/- and other provisions at Nil as part of his balance sheet as on 31.03.2015. At the same time, we also note that in the hard copy of the financial statements so filed subsequently by the assessee, as part of current liabilities and provisions, the assessee has shown sundry creditors at Rs. 19,84,695/- and labour wages payable as part of provisions at Rs. 56,73,42....
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....e did examine the matter and basis such examination and submissions so made on behalf of the assessee, an addition of Rs. 3 lacs was made while passing the assessment order. 10. Now, let's examine as to how the ld. PCIT arrive at a finding that the AO has passed the assessment order without making proper enquiries or verification which should have been made and therefore, the order so passed was erroneous in so far as prejudicial to the interest of the Revenue. 11. Firstly, the ld. PCIT has stated that there is a mismatch in the figures as debited in the profit/loss account and as reflected in the balance sheet which shows that the AO should have examined this aspect of the matter and has not examined In this regard, on perusal of the ledger account of labour and wages payable, which was submitted during the course of assessment proceeding and has also been referred by the ld. PCIT though in context of other findings, we find that there is an opening balance of Rs. 65,60,420/-, there are credits during the year amounting to Rs. 47,41,630/- in form of fresh labour and wages expenses incurred during the year, there are payments to the tune of Rs. 56,28,628/- and then, there is ....
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....n record in support of such expenses, we agree that the Assessing officer did not make proper and adequate enquiries while making the assessment. The explanation in support of cash payments and reasons for such payments not liable for TDS can only be tested once the complete details are available on record and in absence of the same, the same will remain contention which cannot be accepted without leading any evidence in support thereof. It is ordinarily expected that the Assessing officer examine these transactions thoroughly rather than just relying on the information submitted by the assessee company and making an ad hoc addition without specifying the basis thereof. It is not a question of kind and extent of enquiry and hence, a difference of approach and methodology of examination of a particular transaction as done by the AO and as suggested by the ld. PCIT. No doubt every Assessing officer has his unique style of functioning and no hard and fast rule can be laid down as to how he should conduct the enquiry in discharge of his statutory functions. However, where the factual scenario of a case prima facie indicates abnormalities and cry for looking deep into it as rightly high....