Priya Construction Vs DCIT (ITAT Chennai)
ITAT Chennai held that invocation of revisionary power under section 263 of the Income Tax Act by PCIT justified since AO erroneously accepted the returned income without complete enquiry. Accordingly, appeal of assessee dismissed and revisionary proceedings upheld.
Facts- The assessee is a firm engaged in the business of civil constructions on contract basis. Post completion of scrutiny assessment, the PCIT issued notice u/s.263 of the Act on 21.02.2025 directing the assessee firm to explain why income ought not to be calculated at 8% of the gross receipts which comes to Rs.2,08,28,436/-. Further, the PCIT directed the assessee firm to explain why interest and other income totaling to Rs.23,75,119/- ought not to be included in the total income.
The objections of the assessee firm were rejected and PCIT set aside the assessment order dated 07.04.2022 directing the AO to consider the assessment afresh. Being aggrieved, the present appeal is filed.
Conclusion- Held that there is total lack of enquiry by the AO during the course of assessment proceedings and had erroneously accepted the returned income. Therefore, the PCIT is justified in invoking his revisionary powers u/s.263 of the Act. However, we notice in para 6, the PCIT has given a specific direction to add 8% of the gross receipts. It is the claim of the assessee firm that its books of accounts are audited. If assessee is able to prove before the AO that its net profit rate is less than 8% by producing the necessary evidence and explain the expenditure claimed as allowable deduction, necessarily the AO dehors the observation of the PCIT, shall conclude the assessment in accordance with law. It is ordered accordingly. In the result, the appeal filed by the assessee is dismissed.
