ITAT RAJKOT BENCH
Rana Builders
versus
Income-tax Officer, Ward 1(2), Junagadh
IT Appeal Nos. 523 & 524 (Rajkot) of 2012
[ASSESSMENT YEAR 2006-07]
JANUARY 24, 2013
ORDER
D.K. Srivastava, Accountant Member
Both the appeals have been filed by the assessee. They relate to assessment year 2006-07. While the appeal bearing ITA No. 524/Rjt/2011 is directed against the order passed by the Commissioner of Income-tax on 18-03-2011 u/s 263 of the Income-tax Act by which he has set aside the original order of assessment passed by the AO u/s. 143(3) on 19-11-2008, the other appeal bearing ITA No.523/Rjt/2012 is directed against the order passed by the Commissioner of Income-tax (Appeals) on 20-06-2012. They are being disposed of by a consolidated order for the sake of convenience.
2. The assessee is a firm. It is engaged in the business as a civil contractor. It filed its return of income for the assessment year under appeal on 29-12-2006 returning total income at Rs. 38,960/-. Assessment u/s 143(3) was completed on 19-11-2008 assessing the total income at Rs. 97,670/- after disallowing a sum of Rs. 40,000/- out of labour expenses and 10% out of telephone expenses, petrol expenses and travelling expenses.
3. In exercise of powers conferred by section 263 of the Income-tax Act, the ld. Commissioner of Income-tax called for the records and examined them. He found that the Assessing Officer has completed the assessment without examining the issue in the light of the provisions of section 40(a)(ia). He noticed that a sum of Rs. 70,47,160/- and Rs. 20,82,537/- was paid to M/s. Rajdhani Construction and M/s. Parth Construction without deduction of tax at source. According to him, the AO was required to consider the applicability of section 40 (a)(ia) of the Income-tax Act in respect of the aforesaid two amounts but the AO did not do so while competing the assessment. He therefore set aside the assessment order passed by the AO u/s 143(3) on 19-11-2008, with the following observations:-
“5. Assessing Officer is directed to disallow the sub-contract payment to M/s. Rajdhani Construction of Rs. 70,47,160/- u/s.40(a)(ia) of the I.T. Act. Similarly, sub-contract payment of Rs. 20,82,537/- to M/s. Parth Construction should also be verified with reference to payment being made in the Govt. Account on or before the due date of filing of return. In view of these facts and circumstances, I hereby set-aside the original 143(3) order dated 19.11.2008 by ITO, Ward 2 (2), Junagadh. Assessing Officer is directed to make proper disallowance u/s.40(a)(ia) of the I. T. Act after giving due opportunity of being heard to the assessee before framing the new assessment order.”
4. In pursuance of the aforesaid directions, the Assessing Officer has passed another assessment order on 28-09-2011 u/s143(3) r.w.s. 263 of the I-T Act assessing the total income at Rs. 71,44,830/- after disallowing a sum of Rs. 70,47,160/-, with the following observations:-
“5. Hence, the assessee cannot get benefit of amendment to section 40(a)(ia) in the assessment year under consideration. As per provisions of section 194C and 200(1) of the I.T. Act, T.D.S. on payment of Rs. 70,47,160/-was required to be deducted and deposited into Govt. A/c. by 31.03.2006 Deposit in Govt. A/c. was made much later i.e. on 05-10-2006 instead on before 31.03.2006. Therefore the sub contract payment of Rs. 70,47,160/- is disallowed u/s. 40(a)(ia) of the Act.”
5. Aggrieved by the aforesaid order of assessment, the assessee filed appeal before the CIT (A), which was dismissed by him with the following observations:-
“6. I have gone through the assessment order and submissions of appellant. The assessment order has been passed by the Assessing Officer in pursuance of the directions of CIT-III, Rajkot u/s.263 of the I.T. Act with the remark that:
“Assessing Officer is directed to disallow the sub contract payment to M/s. Rajdhani Construction of Rs. 7047160/- u/s.40(a)(ia) of the IT Act. Similarly, sub-contract payment of Rs. 2082537/- to Ms. Parth Construction should also be verified with reference to payment being made in the Govt. Account on or before the due date of filing of return.”
CIT-III, Rajkot has given clear directions to the Assessing Officer in respect of disallowance of sub contract payment to M/s. Rajdhani Construction of Rs. 7047160/-. The assessment order of the Assessing Officer is simply giving effect to the direction of CIT-III, Rajkot in respect of disallowance of sub contract payment to M/s. Rajdhani Construction of Rs. 7047160/-.
Therefore no appeal can be filed before CIT (A) u/s.246A of the I.T. Act in respect of directions of CIT-III, Rajkot u/s.263 of the I.T. Act in respect of disallowance of sub contract payment to M/s. Rajdhani Construction of Rs. 7047160/-. The only possibility of filing appeal against the order of the Assessing Officer could arise in respect of the other direction of CIT-III, Rajkot where he directed the Assessing Officer to verify the TDS payment being made in the Govt. Account on or before the due date of filing of return. As far as other directions of CIT-III, Rajkot in respect of sub-contract payment of Rs. 2082537/ to M/s. Parth Construction is concerned, the Assessing Officer verified that the TDS of such payment made in March 2006 was deposited before the due date for filing the return of income in Gujarat Region and therefore did not make any disallowance and therefore the question of filing any appeal before CIT (A) by the appellant does not arise. In nutshell, I find that appellant had accepted the directions of CIT-III, Rajkot in respect of disallowance of sub contract payment to M/s. Rajdhani Construction of Rs.7047160/- when the order u/s.263 was passed by CIT-III, Rajkot and did not prefer an appeal before Hon’ble ITAT where any appeal against the order u/s.263 could be filed. Appellant has filed appeal against the assessment order giving effect to the order of CIT u/s.263 in respect of disallowance of sub contract payment to M/s. Rajdhani Construction of Rs.7047160/- where there was no discretion with the Assessing Officer against which the appellant could have filed appeal u/s.246A of the I.T. Act. Therefore, I find that appellant has incorrectly filed appeal u/s.246A against the order of Assessing Officer giving effect to clear directions of CIT-III, Rajkot of disallowance of sub contract payment to M/s. Rajdhani Construction of Rs. 7047160/- u/s.263 of the I.T. Act. The appeal of the appellant in this regard before CIT (A) is invalid and therefore is dismissed.”
6. Aggrieved by the order passed by the ld. Commissioner of Income-tax u/s 263 and the order passed by the ld. CIT (A) on 20-06-2012, the assessee is now in appeal before this Tribunal.
7. In ITA No.524/Rjt/2011, the assessee has taken the following grounds of appeal:-
1. The Learned C.I.T.-III, Rajkot erred in issuing notice u/s.263 of the Act, as a consequence of which order u/s.263 passed by him is bad in law.
2. The Learned C.I.T.-III, Rajkot erred in setting aside the original order u/s.143(3) passed by the I.T.O. Ward 2(2), Junagadh and further erred in directing the I.T.O. to make disallowance u/s.40(a)(ia) of the Act.
3. The earlier C.I.T.-III, Rajkot failed to appreciate that the Proviso to clause (ia) was clarificatory in nature and hence it ought to have been applied to the year under appeal.
8. The aforesaid appeal filed by the assessee is barred by limitation by as many as 485 days. The assessee has applied for condonation of delay. Written submissions filed by the assessee in this behalf read as under:-
“The appellant abovenamed has preferred appeal before the Hon’ble Tribunal against order u/s.263 passed by the C.I.T.-III, Rajkot. The said appeal is delayed by 485 days. An affidavit from the appellant in support of the reasons for the said delay is enclosed herewith. The relevant dates of the history of assessment for the year under appeal may be stated here as under:-
