Vedicattu Engineering Co. vs Commissioner of Income Tax

C.N. Ramachandran Nair, J.—The question raised in this appeal filed by the assessee is against the validity of suo motu revisional proceedings completed by the Commissioner u/s 263 of the Income Tax Act, 1961 and upheld by the Tribunal. The assessee was admittedly a contractor engaged in civil work. The receipt pertaining to income from contract was estimated at 10 per cent, of the gross receipt and the balance 90 per cent, was allowed as deduction. The assessee had raised a dispute in arbitration, got an award and got it confirmed by the sub-court. Following the estimation of income made in respect of the original contract receipt, the assessee returned 10 per cent, of the arbitration award amount towards income. Even though the Assessing Officer accepted it, the Commissioner reversed the order u/s 263 of the Income Tax Act and remanded the matter for computation of income. On further appeal, the Tribunal confirmed the order of the Commissioner, against which this appeal is filed.

We do not find any grievance for the assessee inasmuch as the assessment was only set aside and remanded by the Commissioner u/s 263 wherein it is open to the assessee to contest the estimation of income. So far as the validity of Section 263 proceedings is concerned, we are unable to accept the assessee''s contention that the order passed by the officer is not prejudicial to the interests of the Revenue. If 90 per cent, of the expenses was allowed in the computation of income from contract, then the further claim of 90 per cent, against the arbitration award amount is not tenable. If the Commissioner has not exercised the suo motu revisional power, then the consequence would have been loss of revenue and so much so the Commissioner was justified in invoking powers u/s 263. Since the issue of determination of additional income from the arbitration award is left open, this appeal is dismissed leaving freedom to the assessee to contest the matter on the merits.