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TMI Blog2022 (8) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the learned Pr. CIT is ultra vires to the scope of Section 263 and requires to be cancelled under the facts and circumstances of the Appellant's case. 3. The Ld. Pr. CIT failed to appreciate that the direction to make fresh assessment amounts to ordering for making fishing and roving enquires without any material in support thereof and consequently the impugned order passed is bad in law is liable to be cancelled. 4. The Pr. Commissioner of Income Tax is not justified in directing the assessing officer to compute the income derived from the execution of huge project worth Rs. 1,37,21,75,327/- under the facts and circumstances of the Appellant's case. 5. The Pr. Commissioner of Income Tax is not justified in directing to examine the difference of Rs. 1,10,53,576/- under the facts and circumstances of the Appellant's case. 6. The Pr. CIT ought to have considered the fact that there are no amounts which have been transferred by the Appellant as bank guarantee nor any collateral security given by the Appellant, under the facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be cancelled. The assessee is an Association of Person, formed as a special purpose vehicle (SPV) having two Joint Venture partners namely M/s Rithwik Projects Private Limited & M/s R.K. Infra & Engineering (India) Private Limited. The assessee filed its return of income for the year under consideration on 30.09.2011 declaring total income at Nil. The assessee also filed revised return of income on 31.08.2012 declaring total income at Nil but claimed refund on account of TDS of Rs. 5,37,892/-. The case was selected for scrutiny under CASS and scrutiny assessment was completed under section 143(3) on 07.03.2014 by accepting the return of income at Nil. Thereafter, the Pr. CIT on examination of the assessment record, noticed that M/s Ratna Infrastructure Project Private Limited was awarded a contract of Rs. 1,37,21,75,327/- on 18.05.2010 by Meja Urja Nigam Private Limited for side levelling and infrastructure work package. Subsequently, a work contract agreement was signed between Meja Urja Nigam Private Limited and M/s Ratna Infrastructure Project Private Limited on 21.9.2010. This project work was further sub-contracted by M/s Ratna Infrastructure Project Private Limited to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order passed by the Assessing Officer be not treated as erroneous and prejudicial to the interest of the Revenue and be cancelled to be revised under the provisions of section 263 of the Income Tax Act. The assessee represented before the Pr. CIT through his Authorized Representative and filed its submissions / reply to the show cause notice. The Commissioner was not satisfied with the reply and explanation of the assessee on the various issues raised in the show cause notice and held that the assessment order passed by the Assessing Officer was not only erroneous but also prejudicial to the interest of the Revenue and consequently the same was cancelled with the directions to the Assessing Officer to frame fresh assessment in accordance with specific directions on each of the issues. 4. Before the Tribunal, the learned AR of the assessee has submitted that the assumption of the jurisdiction by the learned Pr. CIT is bad in law and consequently the order passed under section 263 of the Act is required to be cancelled in toto. It is submitted that the jurisdiction under section 263 of the Act can be assumed only when the assessment order is erroneous so far as prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... execution of work, the sub contract is on 100% back to back basis with 50% share to each of the Joint Venture partners and accordingly the Assessing Officer has accepted the total income at nil as returned by the assessee. The learned AR has referred to the various clauses of the sub contract / Joint Venture agreement to show that the Joint Venture was constituted by Joint Venture agreement for execution of work on 100% back to back basis with 50% share for each of the Joint Venture partners and consequently the income from the work contract has to be assessed in the hand of the Joint Venture partners. The assessee passed on the receipts in the ratio of 50-50 to each of the Joint Venture partners after deduction of TDS which is a matter of record. Further, the various issues raised by the Pr. CIT at the time of issuing the show cause notice were duly explained and are reconciled by the assessee as there is no discrepancy either in the actual receipts or receipts in the balance sheet in comparison to the receipts reflected in the bank account of the Joint Venture as well as the amount shown as receivable from M/s Ratna Infrastructure Project Private Limited. He has explained that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .taxmann.com 64 2. CIT vs. Sun Beam Auto Limited 332 ITR 167 3. CIT vs. Gabriel India Limited 203 ITR 108 4. CIT vs. Vikas Polymers 194 taxman 57 5. CIT vs. G.M. Mittal Stainless Steel (P) Ltd.203 ITR 255 6. Sarvana Developers vs. CIT in ITA No. 620/Bang./2011 7. Malbar Industrial Co. Ltd. vs. CIT2 43 ITR 83 8. CIT vs. Max India Limited 295 ITR 282 9. CIT vs. D.G. Gopala Gowda 254 ITR 501 10. Linde AD, Linde Engineering Division VWP No.3917/2012 vs. DDIT 11. CIT vs. Oriental Structural Engineers Pvt. Ltd. ITA No. 444/2014 12. KCL AMRCL JV vs. ITO ITA No. 1409/H/16 6. On the other hand, the learned CIT DR has referred to the show cause notice issued by the Commissioner and submitted that the Pr. Commissioner has observed from the record that there are various points and discrepancies on the record which were not examined by the Assessing Officer and submitted that the assessee has evaded the tax liability by not showing even the quantum of profit from the business activity carried out. He has further submitted that once the assessee has raised the invoices to M/s Ratna Infrastructure Project Private Limited and received the contract receipt then the profit on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as the receivables reported by the assessee was claimed by the assessee on account of deposits of mobilization advance received from M/s Ratna Infrastructure Project Private Limited which was to be adjusted against the subsequent running bills however the correctness of the claim was not verified. Further, the funds were released by Meja (NTPC) to M/s Ratna Infrastructure Project Private Limited after making various deduction mobilization advance recovery, interest on mobilization advance, Income Tax TDS, Work Contract Tax, TDS, Labour Cess, liquidation damages etc., which was released to the Joint Venture after making further deductions in IT TDS, its markup commission etc. Therefore, the assessee failed to explain the difference of the said amount of Rs. 1,10,43,576/- as raised by the Pr. Commissioner. The Assessing Officer never asked for these details and did not verify them to cross check the correctness of the details therefore, the lack of enquiry on the part of the Assessing Officer renders the assessment order passed by him as erroneous and prejudicial to the interest of the Revenue. The ld. CIT DR has placed reliance on explanation 2 to section 263(1) of the Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The assessee filed its return of income declaring nil income by claiming that Joint Venture was created to enter into sub contract with M/s Ratna Infrastructure Projects Private Limited on 100% back to back basis. The Assessing Officer accepted return income while passing the assessment order under section 143(3) on 7.3.2014 as under:- "In this case assessee has e-filed his revised return of income for A.Y. 2011-12 declaring taxable income at Nil vide acknowledgement no. 47819688310812 on 31.08.2012. Original ITR was e-filed on 30.09.2011 vide acknowledge no. 300342981300911. The case was selected for scrutiny. Notice U/s 143(2) dt. 12.08.2013 was issued fixed hearing on 02.09.2013 and was served through registered post. Thereafter notice u/s 142(1) of the income tax was issued on 17.10.2013 along with questionnaire requiring assessee to furnish required information and documents. Shri Pawan Kumar Chakrapani FCA attended on 21.10.2013 and submitted power of attorney. He also received a copy of notice u/s 142(I) dt. 17.10.2013. On change of incumbent again notice u/s as issued fixing date of compliance on 11.02.2014. RITHWIK- RK JOINT VENTURE is joint venture constituted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Bylaws of the society/trust constituted under society registration act, 1860/ copy of registered trust deed established under the Indian Trust Act, 1882 and registered with the concerned authorities as applicable in your case. 2. Copy of registration certificate under Section 12AA, U/s 10 (23C) (vi)/(via) and approval u/s 80G (5)(vi) of the IT Act, 1961. 3. Details of bank A/c and copies bank statements for the period under consideration. Details of FDRs and other investments made with the Banks and other persons/institutions. 4. Details of additions made to the fixed assets with evidences/copies of invoices and vouchers etc. 5. Copy of return of income alongwith audited account and audit report duly signed by the CA in Form No. 10B for earlier two years to show the option exercised under Section 1191) of the IT Act, 1961. 6. Details of grants receipts during the period under consideration with documentary support/ sanctioned orders of the concerned Department/organization 7. Evidences/Vouchers of expenditure made during the period under consideration debited in the income and expenditure account. 8. Details of the secured Loan. i. Name and address of the Bank. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank statements. i. 3 February 2011 Union Bank of India 4,90,00,000 ii. 16 November 2010 Union Bank of India 10,000 iii. 11 February 2011 Union Bank of India 6,36,13,531 iv. 27 October 2010 Axix Bank 2,58,18,852 As is apparent from the above data, the joint venture received Rs. 13,84,42,388/- from Ratna. Further Rs. 7,59,45,359/- have been shown as receivable from Ratna. As such the total receipts for the year to be considered for the assessment of income is at Rs. 21,43,87,742/- . As such the joint venture has suppressed the receipts to the extent of Rs. 1,10,43,576/-. Accordingly, the assessment order passed by the assessing officer is erroneous in as much as the receipts of Rs. 1,10,53,576/- have not been included in the income and accordingly you are hereby required to explain why the assessment order be not cancelled and passed after taking into consideration the undisclosed receipts as noted above for the purposes of assessment of income. It is also noticed that the amounts received from Ratna have been passed on to the two members of the joint venture i.e. Rithwik Projects Private Limited and RK Infra and Engineering (India) Pvt. Ltd. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the show cause notice, the Commissioner has raised various points / issues which were not taken up by the Assessing Officer in the scrutiny assessment. Most of these issues are factual in nature and can be considered only by examination and verification of the relevant record including the various contract / agreements. Apart from the issue of taxability of the contract receipts in the hand of the assessee Joint Venture, the Pr. Commissioner has pointed out various other issues of discrepancies in the receipts declared by the assessee in comparison to the figures appearing in the bank account of the assessee and the amount shown by the assessee as receivable. Secondly, the Pr. Commissioner has also raised the issue of violation of provisions of section 40(a)(ia) which was not even taken up by the Assessing Officer in the assessment proceedings. Though the assessee has submitted that all the contract receipts and payments are subjected to TDS however, this fact is also required to be verified from the record. 11. The next issue raised by the Pr. CIT was regarding bank guarantee of Rs. 10 Crore and advance mobilization of 2% of the contract value as well as additional mobilization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the income in the hand of each of the parties cannot be determined. Further when the Pr. Commissioner has raised various other issues and discrepancies with respect to the total contract receipts compliance of provisions of section 40(a)(ia) and non disclosure of bank guarantee and mobilization advances in the books of the assessee which were not taken up by the Assessing Officer clearly manifest that there is a complete lack of enquiry on the part of the Assessing Officer on these issues, much less an appropriate enquiry. Once the Assessing Officer has not conducted a proper enquiry and the case falls in the category of complete lack of enquiry then it would render the order passed by the Assessing Officer as erroneous so far as prejudicial to the interest of Revenue. It may turn out to be not prejudicial to the interest of the Revenue if the assessee is able to establish that the income is not assessable in the hands of the assessee as the total receipts were passed on to the Joint Venture partners in the ratio of 50-50. However, without conducting an enquiry and examination of relevant record including the agreements and memorandum of understanding bringing into the existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only to the extent of Rs. 20.33 crores , then the income cannot be computed by considering the entire contract amount of Rs. 137.21 Crores. Further, the learned AR has contended that once the sub contract was given to M/s Rithwik Projects Private Limited on 100% back to back basis which in turn formed the Joint Venture with M/s R.K. Infra & Engineering (India) Private Limited which is a Special Purpose Vehicle just to get the experience certificate of execution of a big size of project though the work was executed by the Joint Venture partners themselves and not by the assessee Joint Venture. The assessee have just passed on the entire contract receipts to the Joint Venture partners in the ratio of 50-50. Thus, the learned AR has submitted that the income from the execution of the work contract is not assessable in the hand of the assessee which is only a pass through entity formed by the two partners who had executed the work. The assessee Joint Venture was not formed to execute the project. The learned AR has relied upon the judgment of Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. M/s Oriental Structual Engineers Private Limited and KMC Construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order of the Pr. Commissioner. 16. We have considered the rival submissions as well as relevant material on record. The first question arises is whether the assessee is a taxable entity or not? We are of the considered opinion that the assessee a Joint Venture clearly falls in the definition of persons provided under section 2(31) being an association of persons or a body of individuals whether incorporated or not? However, the income which is derived from the execution of the work under consideration is liable to be assessed in the hands of the assessee or in the hands of the Joint Venture partners depends upon the specific arrangements and facts including the risk and reward undertaken by the parties in terms of the various contracts and agreements entered into. Therefore without examination of a true nature of the arrangements which is complexed structure created by way of various agreements / contracts and sub contracts in respect of the execution of the work original awarded by Meja Urja Nigam Private Limited to M/s Ratna Infrastructure Projects Private Limited this question of taxability of income in the hand of JV cannot be answered. Further, the assessee though claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he directions given to the Assessing Officer to examine the difference of Rs. 1,10,53,573/- between contract receipts declared by the assessee and the receipts reflected in the bank account as well as outstanding. The learned AR of the assessee has submitted that the Commissioner has misunderstood the facts regarding the contract receipts of the assessee during the year under consideration. He has pointed out that the assessee has declared the correct contract receipt during the year under consideration which is against the running bill raised by the assessee after adjustment of the mobilization advance which were already received and reflected in the bank account of the assessee. He has pointed out that during the year under consideration, the assessee has raised three bills of total value of Rs. 20,33,34,166/- against which the assessee received a sum of Rs. 11,26,13,531/- and further deduction was made towards mobilization advance of Rs. 32,29,354/-. He has further submitted that there was a TDS @ 2%, WCT @2%, labour cess @ 1%, interest @ 14.5%, retention L.D. of Rs. 36,01,960/- which comes to a total amount of deduction made by the NTPC of Rs. 1,42,62,384/-. Further, the TDS wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Pr. CIT is produced before the Assessing Officer for his examination and verification. 19. We have considered the rival submissions as well as relevant material on record. The Pr. CIT has considered this issue as under:- "On The first issue, the assessee submitted that the deposit of Rs. 2,58,18,852/- on 27.10.2010 in Axis Bank received from Ratna is Mobilization advance which have been recovered by them subsequently in the running bills. Further, it has been submitted that Meja (NTPC) released funds to Ratna after making various deductions like Mobilization Advance recovery, Interest on Mobilization advance, Income Tax TDS, WCT TDS, labour Cess, Liquidated Damages etc., Ratna, in turn, while releasing funds to JV made further deductions like IT TDS, its Markup Commission etc., therefore, to arrive receivable amount from Ratna, the above mentioned deduction entries have also to be considered. The submission of the assessee on the account was examined. The assessee failed to explain the difference of Rs.1,10,43,576/- as raised at point no.1 of the notice u/s 263. Vide order sheet entry dated 9/10th Dec., 2015, the assessee was required to furnish evidence in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner or Commissioner. (a) The order is passed without making inquiries or verification which should have been made; The AO did not carry out any investigation worth its name rendering the order passed by him as erroneous and prejudicial to the interests of revenue." 20. Thereafter, the Pr. CIT has given its finding on this issue and directed the Assessing Officer as under:- "The assessee has failed to explain the reason for the suppression of Rs. 1,10,43,576/- which difference between the receipts to be considered for assessment (Bank deposits + receivable from Ratna) and the one shown by it in the profit and loss account. The AO is directed to examine the difference of Rs. 1,10,53,576/- between the disclosed receipts of Rs. 20,33,34,166/- and the deposits in the bank account receivable amounting to Rs. 21,43,84,742/-." 21. Thus, it is clear that the Pr. CIT has held that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue because the Assessing Officer did not carry out any investigation on this point. The Commissioner has not accepted the explanation of the assessee and directed the Assessing Officer to examine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 24. We have considered the rival submissions as well as relevant material on record. At the outset, we note that though the Pr. Commissioner has raised this issue in the show cause notice however, this issue was not specifically discussed by the Pr. CIT in the impugned order except the finding and direction as under:- "The assessee failed to explain how it had shown the transactions mentioned in the agreement with Ratna or how the transactions regarding bank guarantee as submitted in the reply have been reflected in its balance sheet. The AO is directed to examine how the transactions regarding the bank guarantee of Rs. 10.0 crores, the securities to be offered, the mobilization advance of 2% of the contract value and an additional mobilization advance of Rs. 3.0 crores have been reflected in the balance sheet of the assessee." 25. The assessee has referred to the relevant record which includes the bank A/c copy, the copy of the bank guarantee issued by the Punjab National Bank in favour of Meja Urja Nigam Private Limited, vide letter dated 1st October, 2010 as well as bank guarantee deed placed at pages 134 & 135 to 435 including the bank guarantee deeds for renewa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to be correct then there will be no question of violation of provision of section 40(a)(ia) or deduction of TDS. 28. Ground no. 8 does not emanate from the impugned order of the Pr. CIT hence, the same is dismissed. 29. Ground No. 3 stands disposed of in terms of finding on ground No. 4 to 7 of the appeal. 30. For the assessment year 2012-13, the assessee has raised the following grounds:- 1. The order of the learned Principal Commissioner of Income Tax, Allahabad, passed under Section 263 of the Act, in so far as it is against the appellant is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant's case. 2. The learned Pr. CIT has grossly erred in revising the order passed by the learned assessing officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the ld. Pr. CIT is ultra vires to the scope of Section 263 and requires to be cancelled under the facts and circumstances of the Appellant's case. 3. The Ld. Pr. CIT failed to appreciate that the direction to make fresh assessment amounts to ordering for making fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income Tax has erred by not appreciating the settled position of law that, where there are two opinions possible on an issue, section 263 cannot be exercised to invoke such an issue. 13. The Ld. Pr. Commissioner of Income tax has grossly erred in revising the order passed by the Ld. Assessing Officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the Ld. Pr. Commissioner of Income tax is ultra vires to the scope of Section 263 an requires to be cancelled under the facts and circumstances of the Appellant's case. 14. The Ld. Pr. Commissioner of income Tax failed to appreciate that the learned assessing officer had passed the order after verifying the books, records and other documents produced and more specifically all the agreements as is evident from the order sheet nothing and submissions and hence section 263 cannot be invoked under the facts and circumstances of the case. 15. Without prejudice to the above the Ld. Pr. Commissioner of income Tax ought to have appreciated that the aforesaid issue on which the learned Pr. Commissioner of Income Tax has sought ..... X X X X Extracts X X X X X X X X Extracts X X X X
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