TaxTMI 
TaxTMI 
2025 (9) TMI 275
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....t were not applicable to the case of the appellant. 3. The learned Pr. CIT has erred in law as well as on facts in setting aside the assessment order passed by the ld. assessing officer u/s 143(3) of the Act and directing de-novo assessment regarding verification of issues viz., increase in labour expenses & subcontract expense, fall in the NP ratio and increase in sundry creditors. The appellant craves leave to add, alter, amend, delete or withdraw one or more grounds of appeal." 3. Succinctly, the factual panorama of the case is that assessee before us is a construction company and had filed his return of income on 16-10- 2016, showing therein income of Rs. 2,95,21,590/-. The case was selected for scrutiny under Manual (compulsory) scrutiny to verify whether additional income of Rs. 1,90,24,350/- disclosed during the survey was offered to tax or not. 4. Later on, Learned Principal Commissioner of Income Tax, [in short 'the Ld. 'PCIT'], exercised his jurisdiction under section 263 of the Income Tax Act, 1961. On perusal of records, it was noticed by the ld. PCIT, that during the previous year 2015-16, relevant to assessment year (A.Y.) 2016-17, the assessee....
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....sub-contract expenses. Depending upon the nature and requirement of a particular contract, the composition of these 3 ingredients keeps on fluctuating. For example, composition of labour is high in metalling contract work whereas composition of material is high in asphalt contract work. In the show cause notice, the percentage of labour expenses and sub-contract expenses has been worked out only with reference to direct contract work income. This working is incorrect and erroneous due to the following two reasons: (A). Even for sub-contract work income and other construction income, the labour expenses or sub-contract work expenses have to be incurred. Hence, it is not correct to work out percentage of labour expenses and sub-contract work expenses only with reference to direct contract work income. This gives distorted picture. (B). Material is also a significant ingredient which changes according to the kind of contract work and also affects the labour expenses and/or sub contract expenses. In some of the contracts such as metalling work, composition of labour remains high whereas in some other such as asphalt work, the composition of material remains h....
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.... Gross profit ratio (A/B) 12.62% 11.04% In view of the above, it is respectfully submitted that the first contention in the show cause notice is based on incorrect and incomplete working. The correct working as aforesaid clearly shows that the picture of contract work in the year under consideration is better than the preceding year. Hence, there is no good ground or logic for drawing any adverse inference on the basis of isolated view of labour expenses or sub-contract expenses. Second contention: 1. In the second contention, it has been stated that the net profit before interest and remuneration has fallen over the years. 2. In this regard, it is submitted that this issue was examined by the assessing officer, and the same was duly explained to the AO in the assessment proceedings. We are enclosing herewith our submission dated 26,11.2018 before the A.O, in the course of assessment proceedings wherein this issue was clarified in detail. 3. As the A.O. had already examined this issue in assessment proceedings after due application of mind, the revision u/s 263 on the contention that this issue was not examined by the A.O, in asses....
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....practice in our business. In the creditors, major amounts are in respect of sub-contractors. It is a general practice to keep the dues of sub-contractor pending until we receive the payment of our contract work from our parties. Our major customer is Government itself and it takes time and lengthy formalities before we receive payment from Government in respect of our contract work. Till then, we do not make payment to sub-contractors. This is a well accepted term in our business and your goodself will find this feature in case of every government contractor. 3. From the balance sheet as on 31.03,2016, it may please be seen that there was Work-in- progress to the extent of Rs. 12.23 crores and debtors of Rs. 6.52 crores aggregating to Rs. 18.75 crores. As against this, the figure of creditors of Rs. 14.42 crores is clearly justified. 4. We are also furnishing hereunder comparative figures of creditors to direct expenses from which it can be observed that the figures are comparable and there is no major variance in the ratio: Particulars AY 2016-17 AY 2015-16 AY 2014-15 Creditors (A) 14,42,52,531 17,85,12,637 18,86,96,360 Direct expenses ....
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.... the above facts, the learned PCIT held that the assessment order is passed without making proper inquiries or verification which should have been made by the assessing officer during the assessment proceedings. Resultantly, the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue. Therefore, ld. PCIT directed the assessing officer to make a fresh assessment order only to the extent of the issues discussed (supra). 7. Aggrieved by the order of Ld. PCIT, the assessee is in appeal before us. 8. The Ld. Counsel for the assessee, argued that there is no independent view of the Ld. PCIT, as he has merely initiated the proceedings, based on the facts, which were already examined by the assessing officer. The assessing officer examined contract work which involves three ingredients viz. construction material, labour expenses and sub-contract expenses. The assessee has submitted comparative chart of gross profit (GP) for the assessment year (AY) 2016-17 and 2015-16, to explain the gross profit and assessee explained that the GP result is better than the last year. The assessee also explained the quantum of creditors as comp....
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....l new and additional unsecured loans/deposits accepted by the firm during the year (including the accounts squared up within the previous year itself) furnish a. date-wise account in books (also showing mode of payment) duly confirmed by lender, b. specify complete address, identity, proof, PAN & Assessing Officer of lender & evidence to show availability of investible surplus in the hands of lender and 4. Please furnish the details of New capital introduced by the partners and source thereof along with bank statement/pass book, copy of return, capital a/c and balance sheet for FYs 2014-15 & 2015-16 of all the partners 5. Reasons for fall in gross profit margin in detail, if any, may be explained with supporting evidences. 6. Please furnish details ledger account of expenses debited to trading/profit and loss account in excess of Rs. 50,000/- 7. Please furnish the inventory of opening and closing stock. Also give the supporting evidence for valuation of closing stock. 11. In response to the above notice of the assessing officer, the assessee submitted its detailed reply, along with documents and supporting evidences before th....
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.... enquiry' or 'lack of enquiry' or verification, because the Ld. Pr. C.I.T. himself found all the details/evidences in the assessment record, i.e. well within the assessing officer`s possession and what he alleged was about the plausible view taken by the assessing officer, as against his perception and understanding on the same set of facts and documents. Therefore, the notices issued for examination of the issues during the assessment proceedings and submission and verification of the same has not been shown to be fallacious. In this connection it is pertinent to mention here that the way in which assessment should be finalized falls in the exclusive domain of the Assessing Officer. Section 142(1) speaks of inquiry before assessment and gives immense power to the assessing officer for conducting enquiry. Therefore, the assessing officer (A.O.) u/s 142(1)(ii) & (iii) can ask the assessee almost any information which he thinks necessary for passing assessment and even if Ld. PCIT has such results of enquiries, the resultant order cannot be subjected to revision proceedings. Therefore, the very initiation of proceeding u/s. 263 of the Act by the Ld. Pr. C.I.T. is in violation of the ....
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....an the Assessing Officer, more appropriate. Here is a case in which sufficient enquiries were conducted. As learned brother has rightly noted, the Assessing Officer called for specific details, confirmations and even copies of bills. It could not, therefore, be said that sufficient enquiries were not conducted. However, what is opinion formed as a result of these enquiries is something which is in exclusive domain of the Assessing Officer, and even if Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceedings. The conclusions arrived at as a result of enquiries cannot be tinkered with in the revision proceedings. The conclusions being drawn up as a result of enquiry is a highly subjective exercise and as to what is appropriate conclusion is something on which perceptions vary from person to persons. These variations in the perceptions of the Assessing Officer vis-à-vis that of the Commissioner, cannot render an order erroneous and prejudicial to the interest of the revenue. 9. Viewed in this perspective, and having noted that the Commissioner has subjected the assessment order mainly on the ground that the Assessing O....