TMI Blog2020 (11) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for assessment year 2012-13 was against the income received and shown in the profit and loss account, no expenditure has been booked against impugned higher contract amount as assessed by the AO, therefore, we decline to accept the contention of ld CIT DR that the ld CIT(A) in the last sentence at top para 6 has considered and appreciated wrong fact that the assessee has not shown these receipts as income and not claimed expenses linked with them. CIT(A) after observing that the assessee has claimed higher TDS in the compelling circumstances under the given totality of the facts and circumstances of the case, it would be appropriate to levy an appropriate rate of net profit on the differential amount between the bill raised by the assessee and the amount claimed by it and compute the profit element embedded in these gross receipts. Estimation of profit - percentage of net profit - CIT(A) should have directed the AO to adopt the gross profit rate (before salary interest to partners) of 39.87% instead of net profit rate of 16.22% (after salary interest to partners) on the undisclosed turnover - HELD THAT:- In the facts and circumstances of the present case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the same. Estimation of percentage of net profit in the hands of the assessee - HELD THAT:- Percentage picked up by the AO, ld CIT(A) and percentage of calculation submitted by the assessee is not similar and there is vast difference between them, therefore, this requires examination and verification at the end of the AO. Ld Representatives of both the parties have agreed that the percentage of net profit of undisclosed receipts/turnover has to be estimated before payment of salary and interest on capital to partners. Therefore, we direct the AO to estimate the net profit before payment of salary and interest on capital to partners on the amount of undisclosed turnover/receipts. Accordingly, Ground Nos.1 to 5 of appeal of revenue are dismissed. Unexplained unsecured loan - FAA right or indeed the duty to admit additional evidence which is wilfully withheld from the Assessing Officer - HELD THAT:- As alleged by ld CIT DR, has been considered by the ld CIT(A) at appellate stage without confronting the same with the Assessing officer, we deem it fit and proper to remit the issue back to the file of the Assessing officer with the direction to the assessee to furnish the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in addition. Hence, as agreed by both the parties, we adjudicate the appeal for assessment year 2012-13 as a lead case. Ground Nos.1, 2 3 for assessment year 2012-13 read as follows: 1. Undisclosed Receipts of ₹ 4,23,65,658/- from ECIL BEL Ground No. 1 : On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in giving wrong finding of fact that the undisclosed turnover of ₹ 4,23,65,658/- [₹ 2,94,39,408 from Electronics Corporation of India Limited (ECIL) + ₹ 1,29,26,250 from Bharat Electronics Limited (BEL)] is not taxable as it had not accrued to the assessee, ignoring the fact the assessee had duly raised bills for such amount including service tax after having executed the work and the Contractees i.e. ECIL and BEL had duly credited the above amounts to the assessee's account and had deducted TDS on such undisclosed turnover, which the assessee had also duly claimed in its return of income. Ground No. 2 : On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have confirmed the above additions of ₹ 4,23,65,658/- made by the Assessing Officer keeping in view the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that there were different payment schedules for the three principal types of work involved i.e Bulk Data entry, Biometric entry and LRVR printing. The terms of payment for the different categories was stated to be as under-: i) Data Entry:- 50% of payment within two weeks of bill submission 30% alongwith bills of Biometric completion. 10% after completion of the activity in the respective centre. 10% after completion of the project and acceptance by end customer. ii) Biometric 80% of payment within two weeks of the bills submission Entry: 10% after completion of Biometric activity in the state. 10% after completion of the project and acceptance by the end customer. iii) LRVR printing: 90% of the payment within two weeks of submission of the bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m details and that the AO had erroneously assumed that the total bill value was the amount which had accrued to the assessee. The assessee submitted that the amount of ₹ 4,23,65,658/-, added by the AO as suppressed receipts from M/s. ECIL and BEL had in fact been disclosed by the assessee in subsequent assessment years when it was certified by the appointed supervisors of M/s. ECIL and BEL. By enhancing the income of the Assessee from ₹ 1,09,41,480/- to ₹ 5,88,41,230/-, the net profit of the assessee has been enhanced to 45%, which is excessive. Lastly, the assessee also clarified that the expenditure booked by him for the year under consideration was against the income received and no expenses had been booked against the much higher contract receipts as assessed by the AO. 8. The ld CIT(A) calculated the income of the assessee at ₹ 68,71,709 (16.22% of ₹ 4,23,65,658/-) and allowed relief of ₹ 3,54,93,949/- to the assessee, by observing as under: The AO analysed the bills raised by the assessee and concluded that only that revenue had been disclosed which has been received by the assessee as per the payment schedule stipulated in the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded by the AO as suppressed receipts from M/s. ECIL and M/s. BEL respectively, have in fact been disclosed by the assessee in subsequent assessment years when it was certified by the appointed supervisors of M/s. ECIL and M/s. BEL. By enhancing the income of the Assessee from ₹ 1,09,41,480/- to ₹ 5,88,41,230/- the net profit of the assessee has been enhanced to 45% which is excessive and devoid of all reasoning. Lastly, the assessee also clarified that the expenditure booked by him in AY.- 2012-13 was against the income received and no expenses had been booked against the much higher contract receipts as assessed by the AO. I have perused the facts of the case and have examined in detail the assessment order u/s. 143(3) for AY.-2012-13 dt. 30.3.2015 and also the detailed submissions tendered by the assessee. The central issue that needs to be addressed here is the point and the magnitude of accrual of income to the assessee. In other words, what needs to be identified is the precise moment when the assessee can be said to have earned the income from the services rendered by it to M/s. Electronics Corporation of India Ltd and M/s. Bharat Electronics Ltd., and also th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in AY.- 2012-13 from these two entities. However, as has been pointed out by the Assessing Officer in the order u/s. 143(3) dt. 30.03.2015, TDS has been deducted by both M/s. ECIL and M/s. BEL on the full bill amount of ₹ 12,65,16,555/- and ₹ 4,75,25,512/- respectively and the assessee, too, has claimed credit of the entire tax deducted at source while computing his taxable income. So now there exists a situation, where even though a particular income has not accrued to the assessee, the payer has deducted TDS on it and the assessee has been left with no alternative but to claim credit of the same since the credit for TDS would not have been given to him in the succeeding or in any other year. Under these circumstances, it would be appropriate to levy an appropriate rate of net profit on the differential amount between the bill raised by the assessee and the amount claimed by it and compute the profit element embedded in these gross receipts. It is seen that in AY: 2012-13, the assessee has shown a net profit of 16.22% of gross receipts and, therefore, the same rate will be adopted to complete the profit accruing to the assessee from the additions made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed bills from ECIL and BEL amounting to ₹ 2,94,39,408/- and ₹ 1,29,26,250/-respectively, submitted that the total billing made to ECIL and BEL (NPR-Aadhar) is as per the Central Government Guidelines issued from time to time and billing is made accordingly, hence the assessee had claimed bill value for ₹ 9,28,19,340/- against total work value or claimed value of ₹ 12,65,16,555/- in case of ECIL and ₹ 3,01,61,250/- against total work value or claimed value of ₹ 4,75,25,512/- in case of BEL and same is done as per the Certification of work completed by ECIL and BEL authorized officers. He submitted that the AO, at page 2, has also noted these glaring facts He submitted that they certify according to the RFQ standard fixed by NPR. Hence, the revenue has been recognized on the basis of the payment schedule as per the Terms of Payment of the PO is not correct, as per PO the assessee can claim only after certification of NPR authorized officers and they certified only 80%, 50% or further 20%, 30%, 10% (Subsequent Claims) as per the work completed and certified. 12. Ld A.R. submitted that the assessee had booked all the expenditure against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50% or further 20, 30, and 10% of the bill raised by the assessee depending upon whether the work done pertains to data entry, biometric entry or LRVR card printing. Although, the assessee can claim only what is certified, 100% of the bill value has to be mentioned on the face of the bill as per the normal billing practice followed in this line of business. We are in agreement with the contention of assessee that as per para 4.1 of assessment order at page 2, the claimed value is higher but bill value is lesser which actually accrued to the assessee and same amount has been disclosed and shown as actual amount which was included in the turnover. 15. Further, on perusal of the detailed turnover declared by the assessee and determined by the department for a consecutive period of five years, (filed in the assessee s paper book for A.Y. 2011-12 pages 38 to 41) which seems to be same with no difference, thereby, there cannot be any suppression of turnover. However, since the payer has deducted TDS on the total and the assessee has been left with no alternative to claim the credit of the same during the impugned year of assessment, as the credit of the TDS would not have been grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hesitation to hold that the ld CIT(A) was right in accepting the explanation and contention of the assessee on the mis-match of turnover. 17. We also observe that the assessee furnished copies of contract agreement with ECIL and BEL before the authorities below and noted that revenue becomes due to the assessee only after the bills raised by it are certified by the supervisors appointed by M/s. ECIL and M/s. BEL and till the bills is certified by the designated officers of M/s. ECIL and M/s. BEL, the assessee can have no claim on income and it cannot be said that income accrued to the assessee. It was also observed by ld CIT(A) after considering the relevant contract and documents that only the quantum of bill amount raised by the assessee which has been certified and approved by the supervisor of M/s. ECIL and M/s. BEL can be said to have accrued to the assessee. Ld CIT DR before us could not controvert the fact that only the supervisors certified the work done by the assessee can be said to have acquired the right to receive that amount. From the observations of the ld CIT(A) at page 5, we also note that ld CIT(A) after considering the stand of the AO and explanation of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2012-13 has rightly concluded that the expenditure booked by him for assessment year 2012-13 was against the income received only and no expenses has been booked against much higher contract receipts as picked up and assessed by the AO. On the basis of foregoing discussion and after appreciating the factual matrix of the case, in our considered opinion, the inflated amount of ₹ 12,65,16,555/- and ₹ 4,75,25,512/- are not the actual amount accrued to the assessee by ECIL and BEL, respectively and are not the amount of actual turnover which has accrued to the assessee for assessment year 2012-13. 20. In the totality of facts and circumstances of the case, since the assessee has satisfactorily established that the amount of work certified by the respective supervisors has been claimed and shown as turnover and the expenditure booked by the assessee for assessment year 2012-13 was against the income received and shown in the profit and loss account, no expenditure has been booked against impugned higher contract amount as assessed by the AO, therefore, we decline to accept the contention of ld CIT DR that the ld CIT(A) in the last sentence at top para 6 has consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld CIT(A) was right in directing the AO to calculate and tax only profit element embedded in the impugned amount of turnover. 24. Apropos Ground Nos.4 5 of revenue, it was argued by ld CIT DR that ld CIT(A) has erred in directing the AO to estimate only 16.22% on the undisclosed receipts based on the net profit rate disclosed by the assessee for the year under consideration by giving a wrong finding of fact that above receipts were not shown as income by the assessee. The corresponding expenses has not been shown and claimed by the assessee, even though there was no such claim by the assessee during the course of assessment proceedings. The ld CIT DR also contended that the ld CIT(A) has also erred in directing the AO to estimate net profit @ 16.22% of undisclosed turnover and thereby directing the allowance of expenses to the extent of 83.87% of undisclosed receipts, some of which was not explained by the assessee. Ld CIT (A) has failed to direct inclusion of the same amount in the total income of the assessee u/s.69C of the Act being undisclosed expenditure . 25. The ld CIT DR, pressing into service alternative ground No.6, submitted that the ld CIT(A) should have dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at would have consequent effect on the subsequent year and since the assessee is in the highest tax slab rate, therefore, such an exercise would be revenue neutral and there is no loss of revenue to the exchequer in this regard. Therefore, the ld CIT(A) was right in directing the AO to estimate and calculate the net profit embedded in the undisclosed turnover/receipts. 28. Apropos alternative ground No.6 of revenue, ld counsel vehemently pointed out that the authorities below have taken a wrong figure i.e. 16.22% as net profit and actually, the AO and ld CIT(A) has not taken up right percentage of net profit. Ld counsel, in all fairness, submitted that the assessee has no objection if net profit is estimated before salary and interest on capital to partners but the percentage taken up by ld CIT(A) and AO and in grounds of appeal No.4 to 6 is incorrect and cannot be applied for estimating net profit in the hands of the assessee. Therefore, estimation and calculation work may kindly be restored to the file of the AO for a fresh calculation keeping in view books of account and final financial statement of the assessee for relevant assessment year. 29. Placing rejoinder to above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red some unexplained expenditure out of books of account by using unaccounted money and the ld CIT(A) has also not adjudicated this issue by way of show cause notice or any other mode. Since in earlier part of this order while adjudicating Ground Nos.1,2 3 of revenue, we have upheld the findings arrived at by the ld CIT(A) that profit percentage embedded in the undisclosed receipts/turnover can only be taxed in the hands of the assessee. Therefore, remaining part of amount pertains to allowance of expenditure to the assessee incurred against such undisclosed receipts/turnover. But at the same time, we have no hesitation to hold that when the AO and ld CIT(A) has not made a case of undisclosed expenditure and the dispute between the assessee and the department is only confined to that as to whether the mismatch between 26AS and turnover/receipts shown by the assessee may entitle the AO for making addition in the hands of the assessee as there was no dispute on this fact that the expenditure incurred were recorded in the books of account and dispute was only about the claiming of such expenditure. 32. After considering the stand of the AO and findings arrived at by the ld CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is restored to the file of the AO for limited purposes for estimation of net profit as per direction above. Needless to mention here that the assessee should be allowed due and proper opportunity of hearing by the AO. Ground No.7 of appeal of revenue for A.Y. 2012-13 34. Apropos Ground No.7, we have heard the rival submissions and perused the record of the case. The Assessing Officer on examination of books of account of the assessee noticed that the assessee had received ₹ 1,93,506/- from OCAC which includes ₹ 1,56,245/-. As the assessee could not explain the nature of receipt of ₹ 1,56,245/-, the AO disallowed the same. 35. On appeal, it was explained before the ld CIT(A) that the amount of ₹ 1,56,245/- was an advance received from OCAC for preparation of Electoral Photo Identity Cards and after deducting the expenditure, balance amount was booked as income of the assessee, which fact has been found to be correct after examining the profit and loss account of the assessee by the ld CIT(A). Hence, ld CIT(A) deleted the same. 36. Before us, the ld CIT DR could not controvert the findings of the ld CIT(A). Hence, we confirm the findings of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions entered into by the assessee with the service providers were purely business nature and no loans were taken or repaid by any party. The mere fact that inadvertently the assessee has shown the outstanding expenditures against three entities as unsecured loan in the balance sheet is not a ground to treat the same as unsecured loan. It is also submitted by the assessee that it is a mistake of nomenclature as really the amounts were in the nature of reimbursement the expenses already incurred by them. 41. It is also a fact that the agreements/contracts on the basis of which, ld CIT(A) has deleted the addition was not furnished before the Assessing Officer. Ld CIT DR has vehemently pointed out that the ld CIT(A) has admitted the fresh evidences without confronting the same with the Assessing Officer. 42. It is relevant to quote here Rule 46A of the I.T.Rules, which is as under: - 46A (1) The appellant shall not be entitled to produce before the CIT(A), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the AO, except in the following circumstances, namely:- (a) Where the AO has refused to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the evidence or the document or to cross examine witnesses produced by the assessee or to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the assessee. Under sub-rule (4) of Rule 46A, the first appellate authority has the right or indeed the duty to admit additional evidence which is wilfully withheld from the Assessing Officer. Crucial evidence is a matter necessary for rendering justice, so that no objection could ordinarily be taken, where the appellate authority in its discretion chooses to admit relevant evidence. In fact, he may be expected to call for such evidence, even where neither party has produced the same, where such evidence is necessary for rendering justice. 44. On carefully perusing the impugned order of the ld CIT(A), we do not find any substance that the ld CIT(A) has himself called the required documents for deciding the issue in favour of the assessee. But he has considered the relevant documents and reproduced the same in his order for giving relief to the assessee. Therefore, we hold that this omission is clear violation of Rule 46A of the Rules by the ld CIT(A). 45. Be that as it may, in view of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n alternative Ground No.6 for assessment year 2012-13, alternative Ground No.5 for assessment year 2011-12 and alternate Ground No.5 for assessment year 2013-14 are also restored to the file of the AO with the same direction as has been given for A.Y. 2012-13 Ground No.6 of Revenue for A.Y. 2013-14. 49. Ground No.6 relates to deletion of addition of ₹ 50,562/- made under the head undisclosed receipts from Hindustan Unilever Ltd. 50. LD CIT DR submitted that the assessee could not explain before the AO regarding receipt of ₹ 50,562/- from M/s. Hindustan Unilever Ltd., towards service rendered by the assessee for providing identity cards to Hindustan Unilever Ltd. He submitted that in the balance sheet as at 31.3.2013, there is no such item as salary payable . ld DR submitted that ld CIT(A) has deleted the addition without granting opportunity to the AO in violation of Rules 46A of I.T.Rules. 51. Replying to above, ld A.R. supported the order of the ld CIT(A). 52. On careful consideration of the rival submissions, we find that the amount of ₹ 50,562/- received from M/s. Hindustan Unilever ltd., towards the services rendered by the assessee for provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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