TaxTMI 
TaxTMI 
2022 (11) TMI 1196
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....ntractors in ITA No. 473/Chd/2022 was taken as the lead case for the purposes of present discussions, 2.1. The brief facts in this case are that the Department was in possession of a certain information that the assessee firm had been used by another company M/s. S.P. Singla Constructions (Pvt.) Ltd. to book bogus expenses to bring down it profits and that the assessee firm had allegedly received bogus entries of Rs. 22,84,130/- from M/s. S.P. Singla Construction (Pvt.) Ltd. and Rs. 9,69,388/- from M/s. SPS Structures Ltd. during the year under consideration. Allegedly, no actual work had been done by this assessee firm as per the information. The AO proceeded to make inquires u/s. 133(6) of the Income Tax Act, 1961 [in short 'the Act'] but the assessee firm did not furnish the required details. Therefore, the AO proceeded to issue notice u/s. 148 of the Act. In response to this notice, the assessee filed its return of income declaring income of Rs. 20,340/- from business u/s. 44AD of the Act. The assessee also filed objections against issuance of notice u/s. 148 of the Act. 2.2. During the course of assessment proceedings, the AO observed that a perusal of material a....
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.... year shown by the assessee firm to have been received from M/s. S.P. Singla Constructions (Pvt.) Ltd. and M/s. S.P.S. Structures were mere paper entries for allegedly reducing the profits of S.P. Singla Group of Companies and were in the nature of accommodation entries as no details of business activity done during the year had been provided by the assessee. 2.6. Thereafter, the AO required the assessee firm to show cause as to why commission at the rate of 8% on the total receipt of Rs. 33,00,133/-, as shown in the income Tax Return, may not be taken as income of the firm. The assessee was also required to show cause as to why the expenses of Rs. 1,76,400/- and Rs. 2,68,578/- being remuneration and interest respectively paid to partners may not be disallowed for the reason that the assessee had failed to provide a copy of partnership deed in this regard. 2.7. In response, it was the assessee's submission that it had carried out the work as a subcontractor and had filed the return of income u/s. 44AD of the Act on gross receipts of Rs. 33,00,133/- on which tax had duly been deducted at source by the two concerns from which the payments had been received i.e. M/s. S.P. Si....
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....the act which reads as under:- "(6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to-- (i) a person carrying on profession as referred to in sub-section (1) of section 44AA; (ii) a person earning income in the nature of commission or brokerage; or (iii) a person carrying on any agency business." As such whole gross receipts of Rs. 33,00,133/- are required to be treated as commission income and the difference of Rs. 30,36,122/- (33,00,133 - 2,64,011) has been taken into account as income by the AO while framing the assessment. From the aforesaid facts and circumstances of the case, it is noticed that the AO has failed to verify/enquire the aforesaid facts and has not made any enquiry in this regard. Therefore, the assessment order dated 30.12.2019 passed by the AO u/s. 147/143(3) of the Act is erroneous in as much as it is prejudicial to the interests of the Revenue." 3.1. In response to the aforementioned Show Cause Notice, the assessee submitted before the Ld. PCIT that the assessee firm had carried out the work as sub-contractor for which the payment had been....
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....t it was also prejudicial to the interest of the Revenue. The Ld. PCIT also invoked Explanation 2 to section 263 of the Act and set aside the assessment order to the file of the AO for passing a fresh order in accordance with law in respect of the issue highlighted in the order passed u/s. 263 as well as in the Show Cause Notice issued u/s. 263(1) of the Act. 4. Against the aforesaid order and findings of the Ld. PCIT, the assessee has approached this Tribunal challenging the order passed u/s. 263 of the Act by raising the following grounds of appeal:- 1. That order passed u/s. 263 of the Income Tax Act, 1961 by the Learned Principal Commissioner of Income Tax, Patiala is against law and facts on the file in as much he has failed to show as to how the assessment order passed by the Learned Assessing Officer is erroneous in as much as prejudicial to the interest of revenue. 2. That the Learned Pr. CIT was not justified to hold that the order was passed by the Learned Assessing Officer without making enquiries and verifications and without properly examining the case thereby ignoring the fact that the matter had already been considered by the Learned Assessing Of....
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.... the copies of the work contracts, the fact that the AO had chosen to reject the assessee's claim of having carried out sub-contract work and had treated the assessee's income as income from commission proves that there was due application of mind by the AO to the facts of the case. It was submitted that, therefore, the allegation of the Ld. PCIT that the AO had not carried out the required verification was not correct. It was further submitted that the AO had chosen to form a view by rejecting the assessee's claim of being a sub-contractor and by applying a rate of 8% for commission on gross receipts which was one of the possible view and the Ld. PCIT cannot, under the provisions of section 263, direct that the AO should take another view i.e. of taxing the gross amount, as receipts. 4.3. The Ld. AR also placed reliance on the decision of the Coordinate Chandigarh Benches in case of sister concerns, M/s. Shiv Shakti vs. Pr. CIT & others (ITA No. 481-485/CHD/2022 dated 30.09.2022) and submitted that under identical facts and circumstances of the case, the matter has been decided in favour of the respective assessees. 4.4. The Ld. AR reiterated that the other seven....
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.... and others (Supra) wherein the relevant observations/findings are contained at para 6 to 6.13 of the order which read as under: "6.0 We have heard the rival submissions and have also perused the material on record. The facts are not in dispute. It is seen that the assessee's case was reopened for the reason that a search had taken place in the S.P. Singla Group of cases, wherein during the course of search, the statement of the auditor of the said group Shri G.K. Garg was recorded, wherein it was stated that the S.P. Singla Group was involved in booking bogus expenses through a network of firms who were shown as sub-contractors. It was stated in the said statement that although these sub-contractors did not execute any work, they were given payments which were debited as expenses in the books of accounts of S.P. Singla Group. The name of the assessee firm also figured in the list of such sub-contractor firms. Based on this information, the AO reopened the case of the assessee in terms of section 147 of the Act and in response thereto the assessee filed its return of income in terms of Section 44AD of the Act and also claimed deduction of salary and interest paid to pa....
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.... assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, [including,-- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1.--For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-- (a) an order passed on or before or after the 1st day of June, 1988] by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall include-- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer [or the Transfer Pricing Officer, as the case may be,] ....
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.... (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.--In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 6.4 From the perusal of the aforesaid section, it is apparent that the powers of the revision can be exercised suo motu by the Ld. Commissioner. The Ld. Commissioner may call for and examine the records and any proceedings under the Act and for this purpose he need not show or record any reason. If, after calling for and examining the records, the Ld. Commissioner considers that the order of the AO as erroneous in so far as it is prejudicial to the interest of the Revenue, he is bound to give oppor....
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....roceeded to hold that the assessee's work was in the nature of providing accommodation entries and based on this conclusion, the AO held that a rate of 8% should be applied being percentage of commission earned on providing the accommodation entries. Thus, in view of the questionnaires issued by the AO and the replies submitted by the assessee, the conclusion reached by the AO of rejecting the assessee's claim apparently proves that the AO had made proper inquiries and had also duly applied his mind to the facts of the case. Therefore, the contention of the Ld. PCIT that no enquiry was made by the AO is factually incorrect. It is not a case, where no inquiry had been made by the AO. Merely because the Ld. PCIT felt that further inquiry should have been made does not make the order of the AO erroneous and prejudicial to the interest of the Revenue. 6.6 We also note that there is no incorrect application of law by the AO in the present case and further, the AO, after making inquiries and examining the records, has taken a view which is one of the possible views, and since this view is not unsustainable in law, it cannot be said that the order passed by the AO was err....
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....not undertaken any inquiry to reach a conclusion that the order is erroneous and prejudicial to the interest of the revenue. 6.10 We may further add that there is a difference between lack of inquiry and inadequate inquiry and it is for the Assessing Officer to decide the extent of inquiry to be made and it is his satisfaction which is required under the law. The Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Sunbeam Auto Ltd. reported in reported in (2010) 332 ITR 167 (Delhi) has held that if there was any inquiry, even inadequate, that would by itself not give occasion to the Commissioner to pass order u/s. 263 of the Act merely because the Commissioner had a different opinion in the matter. It is a settled law that the Ld. Pr. CIT cannot pass the order u/s. 263 on the ground that thorough inquiry should have been made by the Assessing Officer. 6.11 Although, there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 has been inserted w.e.f. 1.6.2015 but the same does not give unfettered powers to the Ld. Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Of....
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....e revisionary powers u/s. 263 of the Act and we have no option but to quash the same. It is so ordered accordingly." 7. In the instant case as well, we find that the AO had made necessary inquiries regarding assessee's claim of having earned income from sub-contract work and, thereafter, after considering the reply submitted by the assessee, the AO has rejected such claim of the assessee regarding its working as a subcontractor. Thereafter, the AO proceeded to hold that the assessee's work was in the nature of providing accommodation entries and based on this conclusion, the AO held that a rate of 8% should be applied being percentage of commission earned on providing the accommodation entries. Thus, in view of the questionnaires issued by the AO and the replies submitted by the assessee, the conclusion reached by the AO of rejecting the assessee's claim apparently proves that the AO had made proper inquiries and had also duly applied his mind to the facts of the case. Therefore, the contention of the Ld. PCIT that no enquiry was made by the AO is factually incorrect. Having said that, in the present case, the Ld. PCIT has not specifically pointed out as to what furt....
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....ed Total costract receipts Notice us 148 issued on Resam fled is response to notice u/s 148 Copy of reasons recorded by the Ld AO Income assessed is 1433y147 de 30.12.19 Copy of show cause notice as 263 ITA No. 473/Chundi/2012 M's Ambey Engineers And Contractors 28.03.2013 Rs. 20,543 Rs 33,00,131 30.03 2019 01.102019 Pages 12-14 of the Paper Book Rs. 2,04,011 Pages 1-2 of the Paper Book Pages 3-8 of the Paper Dool Copy of reply to show cause actice w/263 Copy ef notice w/s 142(1) dated 27.11.2019/29.11.2019 and 20.12.2019 issued Pages 15-26 of the Paper Book by the L4 AO Copies of reply dated 30 11 201903 12 2019 and 21.12.2019 fled before the id A. O Pages 27.50 of the Paper Book ITA No. 474 Chandi/2022 Ms Iliad Constructions Engineers Contractors Finn 28.03 2013 R 3,800 Rs. 59,54,898-1 3003 2019 01.10.2019 Pages 12-14 of the Paper Book Rs 4.79.592- ITA No. 475/Chandi2022 M/s Garga Constructions Fm 23.03.2013 Rs. 21,970 Rs. 59.8938 30.03.2019 01.10.2019 ITA No. 476 Chandi/2022 TEA No. 477/Codi/2622 M Adarsh Constractions and Ms Anand Engin....