TMI Blog2022 (11) TMI 1455X X X X Extracts X X X X X X X X Extracts X X X X ..... s or lacs only. Documentary evidences in support of its contention that all the expenses incurred and debited in the profit and loss account were genuine and incurred exclusively for the purpose of business were duly filed by the assessee. The assessee further demonstrated that it did not make any payment in cash to a single person in a single day in excess of Rs.20,000/- so as to warrant the invoking of the provisions of Section 40A(3) of the Act. The assessee also explained that it was not liable to deduct TDS on several other payments made during the year and consequently, no disallowance was called for under Section 40(a)(ia) of the Act. We further find that the Co-ordinate Bench in the case of the assessee itself for the A.Y. 2009-10 approved the net profit rate of 5% in the business carried on by the assessee whereas the net profit rate declared by the assessee for the A.Y. 2010-11 was 5.88% which was higher than the accepted net profit rate of 5%. Accordingly, additions made by the Ld. AO on account of disallowance of various expenses were not justified even on this count. Thus, considering the entire aspect of the matter, we are of the considered opinion that there was no j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings of the Ld. CIT(A) have not been controverted by the Ld. CIT-DR by bringing any contrary material on record. Hence, we do not find any infirmity in the findings of the Ld. CIT(A) and accordingly, the deletion of addition. Addition u/s 68 - share application money received - HELD THAT:- In the case in hand, the Ld. AO accepted the amount of Rs. 95,00,000/- received from the same investor company during the A.Y. 2010-11 as genuine and no addition was made to the total income of the assessee on this count. Hence, in our considered opinion, there was no justification for doubting the genuineness of the amount of share application money received from the same investor company during the A.Y. 2011-12. We also find that in the instant case by producing various documents, the assessee had proved that balance of convenience was in its favour. Thus, considering the entire aspect of the matter, we are of the considered opinion that there was no rationale for making addition to the total income of the assessee on account of share application money received from M/s SKS Ispat and Power Limited more so when the assessee by filing ample documentary evidences has satisfactorily discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us reassessment proceedings initiated in the case of the assessee were illegal, bad in law and void-ab-initio - Decided in favour of assessee. Mobilization advance - Addition on account of amount received from GSPPL not shown as income during the year - HELD THAT:- There was no justification for making addition to the total income of the assessee on account of amount received from GSPPL not shown as income more so when the assessee categorically explained that the said amount of advance was duly offered as income in the subsequent year i.e. in A.Y. 2013-14 when the work was actually performed by the assessee. The addition made by the Ld. AO cannot be said to be justified in view of the observations made hereinabove. Further, the findings of the Ld. CIT(A) have not been controverted by the Ld. CIT-DR. Hence deletion of addition made by the Ld. CIT(A) is confirmed. Decided against revenue. Accrual of income - gross income v/s net income - difference between gross receipts and receipts actually accounted for as income from SCCPPL - HELD THAT:- Assessee had correctly offered the net amount received from SCCPPL as its income during the year. It is an undisputed fact that the amount of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on facts in deleting the addition of Rs.13,39,555/- made on account of disallowance of blasting expense and has overlooked the findings of the AO mentioned in the assessment order. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.75,23,136/- made on account of disallowance of site expense and has overlooked the findings of the AO mentioned in the assessment order. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.8,12,755/- made on account of disallowance of u/s 40A(3) and has overlooked the findings of the AO mentioned in the assessment order. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.18,91,316/- made on account of disallowance of communication, conveyance etc expense and has overlooked the findings of the AO mentioned in the assessment order. 6. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.16,01,614/- made on account of disallowance u/s 40a(ia) and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks contract for construction of roads. The income-tax return of the assessee for the A.Y. 2010-11 was filed on 15.10.2010 declaring total income at Rs.1,38,40,330/-. The case of the assessee was selected for scrutiny manually as per the statutory prescribed guidelines. The Ld. AO during the course of assessment proceedings made additions to the total income of the assessee on account of disallowance of various expenses debited in its profit and loss account for the year ended 31st March, 2010. On merits of the case, we find that the Revenue through all the seven grounds in the instant appeal has challenged the deletion of additions made by the Ld. AO on account of disallowance of various expenses debited in the profit and loss account of the assessee. The brief facts leading to the departmental grounds are that the assessee is engaged in the business as a work contractor. The turnover of the assessee during the year under consideration increased to Rs.2355.53 lacs as against Rs.1915.32 lacs in the preceding year. The Ld. AO disallowed expenses mainly for the reason that the assessee could not produce the books of accounts and bills and vouchers and also for the reason that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y approved by the Hon ble ITAT Indore Bench vide order dated 10.11.2014. Accordingly, it was argued by the Ld. Counsel that since the assessee itself declared net profit at the rate of 5.88% for the A.Y. 2010-11, there was no justification for making further addition to the total income of the assessee in the A.Y. 2010-11 on account of disallowance of various expenses in light of the decision of the Hon ble ITAT, Indore Bench in the case of the assessee itself for the A.Y. 2009-10. We find that the Ld. CIT(A) while allowing the most of the grounds of appeal raised by the assessee observed as follows: 4.1 Ground No 1:- Through this ground of appeal, the appellant has challenged addition of Rs.19,30,429/- made on account of non genuine expenditure. The AO during the course of assessment proceedings found that assessee has made payment of Rs. 19,30,429/- to Shri Rakesh Joshi for labour expenses and the said party has not shown the said amount in his return of income, therefore, the AO treating the same as non-genuine expenditure made addition to the income of the assessee. The appellant has made the payment of Rs. 19,30,429/- to Shri Rakesh Joshi and deducted the TDS of Rs.19,304/- wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of assessment proceedings has not pointed out any defect in the books of accounts. Most of the expenses were incurred through account payee cheque. The appellant has deducted the TDS payable wherever applicable. Therefore, the addition made by the Assessing Officer amounting to Rs. 75,23,136/- is Deleted. Therefore, the appeal on this ground is Allowed. 4.4 Ground No 4:- Through this ground of appeal, the appellant has challenged addition of Rs. 8,12,755/- on account of disallowance of expenses u/s 40A(3) of the Act. The Assessing Officer made disallowance on the ground that appellant has made the payment in excess of Rs.20,000/- in contravention to the provision of section 40A(3) of the I.T. Act. The appellant submitted the details of payment made. No individual payment has been made in cash to single person in excess of Rs.20,000/-. Therefore, the addition made by the Assessing Officer amounting to Rs. 8,12,755/- is Deleted. Therefore, the appeal on this ground is Allowed. 4.5 Ground No 5:- Through this ground of appeal, the appellant has challenged addition of Rs.18,91,316/- on account of disallowance of employees remuneration and benefits. The Assessing Officer during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er applicable. Further, all the expenses have been incurred by the assessee for the purpose of business. Merely because increase in turnover from 19.15 crores in the preceding year to 23.55 crores during the year, such expenses could not have been doubted. We noticed that the turnover of the assessee increased resulting into increase in expenses during the year. However, the Ld. AO allowed credit of increase in expenses only to the extent of percentage increase in turnover which was not correct since the turnover of the assessee was in crores whereas the various expenses incurred by the assessee were in thousands or lacs only. Documentary evidences in support of its contention that all the expenses incurred and debited in the profit and loss account were genuine and incurred exclusively for the purpose of business were duly filed by the assessee. The assessee further demonstrated that it did not make any payment in cash to a single person in a single day in excess of Rs.20,000/- so as to warrant the invoking of the provisions of Section 40A(3) of the Act. The assessee also explained that it was not liable to deduct TDS on several other payments made during the year and consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is before this Tribunal in the instant cross objection. 11. Before us, the Ld. DR supported the orders of Ld. AO and Ld. CIT(A). Per contra Ld. Counsel for the assessee submitted that amount of Rs. 1,55,000/- was deducted by PWD as compensation for delay in completion of work. The Ld. Counsel submitted that though such amount was debited under the head penalty , yet, such amount was compensatory in nature and not penal in nature so as to warrant any disallowance. The Ld. Counsel also took us through the bills raised and correspondence made between the assessee and PWD wherein it was categorically stated that compensation amount shall be deducted at the rate of 4.06% for any delay in completion of work. It was further submitted that case of the assessee was reopened for the A.Y. 2015-16 for examination of the very similar issue regarding disallowance of amount deducted by PWD for time extension but the then Assessing Officer after examination of all the relevant material placed on record reached to a conclusion that the amount deducted by PWD for delay in completion of work was compensatory in nature and not penal in nature and accordingly, no addition was made to the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see s cross objection is allowed. Accordingly, the appeal filed by the Revenue is dismissed whereas cross objection filed by the assessee is allowed. ITA No.217/Ind/2021 A.Y. 2011-12 13. The instant appeal filed by the Revenue is directed against the order dated 16.08.2021 passed by the Ld. CIT(A)-3, Bhopal (hereinafter referred to as Ld. CIT(A) ) arising out of the order dated 12.03.2014 passed by the DCIT, Circle 2(1), Indore (hereinafter referred to as Ld. AO ) under Section 143(3) of the Income-Tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year (hereinafter referred to as A.Y. ) 2011-12 with the following grounds: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,04,60,184/- made on account of Net Profit estimated at 6% on contract receipts and has overlooked the findings of the AO mentioned in the assessment order. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,10,00,000/- made u/s 68 of the Act and has overlooked the findings of the AO mentioned in the assessment order. 14. Brief facts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her with bills/ vouchers. The Ld. Counsel thereafter explained that the assessee declared loss during the year mainly for the reason that it made huge investment in plant and machinery out of the amount financed which resulted in increased burden of depreciation and finance charges debited in the profit and loss account for the year. It was for the said reason that loss was declared in the profit and loss account of the assessee for the year ended 31st March, 2011. The Ld. Counsel submitted that percentage of net profit declared by the assessee during the year after ignoring the effect of increase in depreciation and finance charges came to 4.83% which was approximately equal to the net profit rate of 5% approved by the Hon ble ITAT Indore Bench vide order dated 10.11.2014 in the case of the assessee itself for the A.Y. 2009-10. The Ld. Counsel also submitted that the Assessing Officer himself accepted the loss declared by the assessee in its books of accounts during the course of assessment proceedings for the A.Y. 2012-13. 16.1 We have further considered inter alia the following submission made by the assessee in the synopsis submitted before us: 1.6.1] The department has challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eased in this year is verifiable from the copy of account of SREI Equipment Finance P Limited in the book of the respondent assessee is enclosed on Page No 121 of the Compilation. 1.8.2] The interest amount was increased due to increase in the finance for purchase of Plant machinery. Hence, increase in the amount of Finance Expenses is duly verifiable and justified 1.9] The amount of depreciation increased in this year is duly verifiable from the cost of new plant Machinery as purchased by the respondent assessee through the finance of SREI Equipment Finance P Limited. 1.10] That loss was incurred by the respondent assessee was due to increase in the amount of Depreciation and Finance Charges which are independently verifiable and therefore the assessing officer was not right in estimating the income of the assessee at Rs 2,04,60,184/- as against loss of Rs 67,64,838/- as claimed by the respondent assessee in its return of total income. 1.12.1] That in remand report, the assessing officer simply on the basis of finding as recorded in the Asst Year 2009-10 try to justify its stand for estimation of total income at 6%. The assessing officer failed to appreciate the following facts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the NP adoption in AY 2009-10 @ 6% made addition to the year under consideration. 4.1.1 I have considered the facts of the case, plea raised by the appellant and findings of the AO. On perusal of evidences filed by the appellant it was observed that assessee has purchased plant and machinery to the tune of Rs. 11,97,36,203/-, Skoda car for Rs. 18,50,000/-, Bitumen Sprayer for Rs. 6,46,910/- and site equipments for Rs. 7,24,947/-. The loan of Rs. 9,50,66,771/- was financed by M/s SREI Equipments Pvt Ltd. The appellant has also filed comparison chart of finance charges paid and amount of deprecation allowed on the cost of assets increased during the year under consideration and the same with last year. The same is reproduced as under:- S.No Nature Expenses of For the Period ended on Increased in this year 31.03.2010 31.03.2011 1 Finance Charges 3,15,245 1,51,31,945 1,48,16,700 2 Depreciaiton 14,96,344 1,17,69,466 1,02,73,122 2,50,89,822 The increase in finance charges is due to purchase of plant and machinery and other site equipments purchased by appellant and is verifiable from ledger account of M/s SREI Equipments Pvt Ltd in the books of appellant. Further, the appellant has p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it has already shown NP @ 4.83% when the effect of increase in finance cost and deprecation are ignored. The brief detail of NP shown by appellant after ignoring increase in finance cost and deprecation is as under:- S.No Description Amount[Rs] 1 Income from Operation 34,41,03,054 2.1 Net Profit as declared in the books of account [-] 84,77,805 2.2 Increase in the amount of Finance Exp and Depreciation 2,50,89,822 Net Profit after ignoring the effect of Dep Finance Cost 1,66,12,017 3 % of Net Profit after ignoring the effect of Dep finance Cost 4.83% Clearly, the appellant has already shown NP @ 4.83%, however, the AO has adopted NP @5% keeping in view the adoption of NP in AY 2009-10. The Hon ble Supreme Court in its several decisions have held that the principle of res judicata is inapplicable in tax matters and the general rule is not to apply this doctrine. In Installment Supply P Ltd. AIR 1962 SC 53, Hon ble Apex Court held that in the tax matters, there is no question of res judicata because each year s assessment is final only for that year and does not govern later years. In Radhaswami Satsang 193 ITR 321, the Hon ble Supreme Court observed that each assessment is a sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h approximated the net profit rate of 5% approved by the Hon ble Co-ordinate Bench itself in the case of the assessee for the A.Y. 2009-10. It is also an uncontroverted finding of fact that the Ld. AO himself accepted the amount of loss declared by the assessee in the subsequent year i.e. A.Y. 2012-13 which further strengthens the contentions of the assessee that its book results ought to be accepted for the year under consideration as well. In light of the factual matrix of the case, we are inclined to accept the book results declared by the assessee and we are in agreement with the findings of the Ld. CIT(A) in deleting the addition made by the Ld. AO on account of estimation of net profit. Thus, considering the entire aspect of the matter, we are of the considered opinion that there was no justification for making addition of Rs. 2,04,60,184/- on account of estimation of net profit. The addition made by the Ld. AO on account of estimation of net profit cannot be said to be justified in view of the observations made hereinabove. Further, we find that the above findings of the Ld. CIT(A) have not been controverted by the Ld. CIT-DR by bringing any contrary material on record. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as share application form, confirmation of accounts, acknowledgement of income-tax return, audited financial statements and bank statement of M/s SKS Ispat and Power Limited so as to substantiate the identity and creditworthiness of the investor company and genuineness of the amount of share application money of Rs. 1,10,00,000/- received during the year. The Ld. Counsel further submitted the investor company showed net profit before taxes of 32.95 crores in its audited financial statements and total income of 6.19 crores in its income-tax return which proved the identity and creditworthiness of the investor company beyond any doubt. It was further submitted that the amount of investment made by the investor company in the share capital of the assessee was duly reflected in Schedule 6 Investments Long Term in its audited financial statements. The Ld. Counsel submitted that the Ld. AO did not conduct any independent enquiry during the course of assessment proceedings and that the Ld. AO doubted the genuineness of the transaction simply for the reason that the assessee could not furnish copy of ITR and bank statement during the course of assessment proceedings which was not justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of share application money and loans were received from the share applicant having major shareholding in the respondent assessee company. The amount of share application / capital is duly reflected in the face of the balance sheet of the share applicant. The capacity of the share applicant is also proved. Hence, there is no reason for having any doubt about the identity, genuineness and capacity of the share applicant. 2.5] That from the copy of confirmation letter it seems that an amount of Rs 95,00,000/- were received during the previous year relevant to the Asst Year 2010-11. The case of the respondent assessee was scrutinized in the Asst year 2010-11 also in scrutiny but the said amount of Rs 95,00,000/- as received from M/s SKS Ispat and Power Limited was accepted as genuine. Hence, there was no justification for adding the amount of Rs 1,10,00,000/- as received in this Asst Year. 2.6.1] That in the present case, the respondent assessee had filed sufficient documents as to justify the identity of the shareholders and genuineness of the transactions. That, if for any reason the assessing officer s is not satisfied with the source of amount invested by these share-holders in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any has been fully explained by the appellant and the same has been accepted by the AO. Regarding the genuineness of the transaction the appellant submitted copies of ledger account of appellant in the books of the investor company, bank account statement. The investor company has made all the transaction through banking channel and no cash was found deposited prior to fund transfer to appellants bank account. Further, copy of ledger account of the appellant in the books of the investor company and copy of confirmation has also been filed. The appellant had duly issued shares against funds received from the investor company. The appellant company has received total sum sum of Rs. 1,35,00,000/- against which 1,35,000 shares were allotted. All the transactions are recorded in books of accounts. Thus, the appellant has proven genuineness of the transaction beyond any doubt. In order to prove creditworthiness of the investor, the appellant has filed copies of audited financial statements of the investor company and ITR of the investor company. On perusal of evidences on record it is seen that the investor company has shown income of Rs. 6,54,74,660/- in AY 2011-12 in its ITR filed on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually incorrect. Simply by pointing out that the claim of the appellant was factually incorrect. Simply by pointing out that the applicant companies did not have sufficient income or that the bank accounts indicated credits and debits in rapid succession leaving little balance does not discharge the burden cast upon the revenue to take an adverse view in the matter. Further, if there was statement of a person or any other material indicating tax evasion by the appellant, or persons in control of its management, the material relied upon should have been made available to the appellant in its entirety. From the records, it appears that this was not done . It has been held by the Hon ble Apex Court that taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and not a partisan manner. Although it is part of their duty to ensure that no tax which is legitimately due from the assessee should remain unrecovered, they must also at the same time not act in a manner as might indicate that scales are weighted against the assessee. It is impossible to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rketing PL AAECS0505K 9,55,500 4,06,97,791 15 Super Deal Sales P Ltd AAECS2143K 1,79,58,750 25,00,46,932 16 Quicker Impex Credit PL AAACQ0433E 1,07,69,250 3,27,11,907 17 Satyam Credit P Ltd AADCS6627H 65,39,250 99,88,429 18 Mudrika Fiscal Services PL AABCM7362B 1,69,42,500 15,04,12,130 19 Graceful Traders P Ltd AABCG7432L 1,52,26,500 3,00,05,878 20 Goodward Agency P Ltd AABCG7433M 1,73,29,500 1,50,42,806 21 Vishnupriya Prop. P Ltd. AAACV8829P 46,48,500 38,92,620 22 Zenith Goods Services PL AAACZ0908P 1,43,87,250 2,00,27,787 23 Concert Tradelink P Ltd AABCC9445K 1,40,70,000 9,99,93,410 8. It is quite evident from the CIT(A) s reasoning, that the materials clearly pointed to the share applicants possessing substantial means to invest in the assessee s-Co. The AO seized certain material to say that minimal or insubstantial amounts was paid as tax by such share applicants and did not carry out a deeper analysis or rather chose to ignore it. In these circumstances, the inferences drawn by the CIT(A) are not only factual but facially accurate. 9. Having regard to these circumstances, the Court discerns no que of law, least a substantial que, having regard to the fact that Lovely Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f documents Page No. 6.1 Copy of ledger account of M/s SKS Inpat and Power Limited in the books of accounts of the respondent 121 6.2 Copy of confirmation of accounts of M/s SKS Inpat and Power Limited duly signed and stamped 122-123 6.3 Copy of application dated 24-08-2010 for allotment of equity shares as issued to the respondent from M/s SKS Inpat and Power Limited 124 6.4 Copy of acknowledgement of income-tax return along with computation of income of M/s SKS Inpat and Power Limited for the Assessment Year 2011-12 125-126 6.5 Copy of the Audited financial statement of M/s SKS Ispat and Power Limited for the year ended 31 st March 2011 127-142 6.6 Copy of ledger account of the respondent in the books of accounts of M/s SKS Inpat and Power Limited for the Financial Year 2010-11 143 6.7 Copy of relevant extract of bank statement of M/s SKS Inpat and Power Limited duly reflecting the amount of share application money received by the respondent 144-153 23. On consideration of the above documentary evidences, we find that M/s SKS Ispat and Power Limited was not a mere paper company but was a company engaged in active business operations. The said observation finds force from the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial on record. Hence, we do not find any infirmity in the findings of the Ld. CIT(A) and accordingly, the deletion of addition of Rs. 1,10,00,000/- made by the Ld. CIT(A) is confirmed. Thus, ground No. 2 of the appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed. Accordingly, the appeal filed by the Revenue for the Assessment Year 2011-12 is dismissed. ITA No.232/Ind/2021 (A.Y. 2012-13) 24. The instant appeal filed by the Revenue is directed against the order dated 16.08.2021 passed by the Ld. CIT(A)-3, Bhopal (hereinafter referred to as Ld. CIT(A) ) arising out of the order dated 28.09.2018 passed by the ACIT (Central)- 1, Indore (hereinafter referred to as Ld. AO ) under Section 143(3) r.w.s. 147 of the Income-Tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year (hereinafter referred to as A.Y. ) 2012-13. Upon receipt of the notice on Revenue s appeal, the assessee also filed the aforesaid Cross Objection. Both are disposed of by this common order. The Revenue has raised the following grounds of appeal bearing ITA 232/Ind/2021: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in law in dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sence of any tangible material and live link of concealment of income that could lead to a formation of belief that income chargeable to tax has escaped from assessment. 25. Brief facts as culled out from the records are that the assessee is a private limited company engaged in the business of government works contract for construction of roads. The income-tax return of the assessee for the A.Y. 2012-13 was filed on 29.09.2012 claiming total loss of Rs. 1,79,88,391/-. The case of the assessee was selected for scrutiny through CASS. The then Assessing Officer examined all the relevant material placed on record and passed assessment order under Section 143(3) of the Act on 25.03.2015 wherein loss of Rs. 1,79,88,391/- claimed by the assessee was duly accepted. Subsequently, it was noticed on verification of the documents available on record that the assessee had shown lesser amount of interest and contract receipts as compared to the amount reflected in Form 26AS. Accordingly, case of the assessee was reopened and notice under Section 148 of the Act was issued on 18.12.2017 and served on the assessee. The assessee filed its income-tax return on 20.01.2018 in response to the notice iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eopened and notice under Section 148 of the Act was issued on 18.12.2017 i.e. after the expiry of four years from the end of the relevant assessment year. The assessee therefore challenged the maintainability of the reassessment proceedings before the Ld. CIT(A). However, the Ld. CIT(A) dismissed all the legal grounds raised by the assessee superficially without going into the detail of each of those grounds. Hence, the instant cross objection has been filed before this Tribunal. 28. Before us, the Ld. DR supported the orders of Ld. AO and Ld. CIT(A). Per contra Ld. Counsel for the assessee submitted that case of the assessee was reopened on account of mere change of opinion which was impermissible within the garb of Section 147 of the Act. The Ld. Counsel submitted that the then Assessing Officer raised specific query at the time of original assessment proceedings to reconcile the receipts shown in profit and loss account with the receipts reflected in Form 26AS in response to which the assessee categorically explained the reasons for such difference. The then Assessing Officer accepted the contentions of the assessee after going through all the relevant material placed on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of original assessment proceedings itself and that there was no failure on the part of the assessee either to furnish its return of income or to disclose any fact, much less any material fact necessary for the purpose of assessment. Hence, the Ld. Counsel submitted that reassessment proceedings initiated in the case of the assessee after the expiry of four years from the end of the relevant assessment year suffered from legal infirmity and were bad in law. He also relied upon the following judgments in support of his contentions:- (i) ACIT v. Lambda Therapeutic Research Ltd. [2018] 100 taxmann.com 81 (SC) (ii) CIT v. M.G. Motors [2011] 9 taxmann.com 290 (Delhi) (iii) Gujarat Eco Textile Park Ltd. v. ACIT [2015] 60 taxmann.com 296 (Gujarat) (iv) Oracle India (P.) Ltd. v. DCIT [2015] 53 taxmann.com 514 (Delhi) (v) SKY Diamonds v. ACIT [2015] 55 taxmann.com 77 (Gujarat) (vi) Swarovski India (P.) Ltd. v. DCIT [2014] 50 taxmann.com 57 (Delhi) (vii) Wel Intertrade (P.) Ltd. v. ITO [2009] 178 Taxman 27 (Delhi) (viii) Noida Power Company Limited v. CIT 99 CCH 0010 (ix) Akshar Developers v. ACIT, Central Circle [2018] 95 taxmann.com 104 (Bombay) (x) Sabh Infrastructure Ltd. v. ACIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings initiated in the case of the assessee were not maintainable on multiple grounds as discussed hereinabove. 32. We have heard the rival submissions made by the respective parties and perused the relevant materials available on record and case laws relied upon by the Ld. Counsel for the assessee. We would like to deal with the legal ground before proceeding further in the matter. Firstly, as regards the contention of the Ld. Counsel that case of the assessee was reopened on account of mere change of opinion, we observe that the then Assessing Officer during the course of assessment proceedings raised a specific query requiring the assessee to reconcile the difference in receipts shown in the profit and loss account as compared to receipts reflected in Form 26AS. We have also gone through the submissions of the assessee filed during the course of original assessment proceedings which have been placed on Page No. 134-142 of the Paper Book. On perusal of these submissions, it is evident that the assessee duly explained the reason for difference in receipts shown in the profit and loss account as compared to receipts reflected in Form 26AS at the time of original assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 of the Act. However, on receipt of representations from the companies against omission of the words reason to believe , Parliament re-introduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the AO. We quote herein below the relevant portion of Circular No. 549, dt. 31st Oct., 1989 [(1990) 82 CTR (St) 1], which reads as follows: 7.2 Amendment made by the Amending Act, 1989, to re-introduce the expression. reason to believe in s. 147.A number of representations were received against the omission of the words .reason to believe. from s. 147 and their substitution by the opinion of the AO. It was pointed out that the meaning of the expression, reason to believe had been explained in a number of Court rulings in the past and was well settled and its omission from s. 147 would give arbitrary powers to the AO to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended s. 147 to reintroduce the expression has reason to believe in place of the words .for reasons to be recorded by him in writing, is of the opinion. Other provisions of the new s. 147, however, remain the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observe that the Ld. AO reopened the case of the assessee on the basis of same set of facts which were available at the time of original assessment proceedings and in respect of which the assessee had furnished due explanation at that time itself. There was no failure on the part of the assessee to disclose any fact, much less any material fact, at the time of original assessment proceedings itself. Hence, in our considered opinion, there was no failure on the part of the assessee either to furnish its return of income or to disclose fully and truly all the material facts necessary for assessment so as to warrant the initiation of reassessment proceedings after the expiry of four years from the end of the relevant assessment year. We also observe that there was not even a whisper of allegation in the reasons recorded by the Ld. AO himself that failure on the part of the assessee to disclose material facts necessitated the initiation of reassessment proceedings. 36. In this regard, we have considered the judgment of the Hon ble Delhi High Court in the case of Wel Intertrade (P.) Ltd. v. ITO [2009] 178 Taxman 27 (Delhi) wherein it was held as under: - 9 ..A plain reading of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd are of the view that in the present case also, the Assessing Officer has acted wholly without jurisdiction. The invocation of section 147, the issuance of the notice under section 148 and the subsequent order on the objections are all without jurisdiction. The impugned notice as well as the proceedings pursuant thereto are quashed. 37. We have further considered the judgment of the Hon ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. v. CIT [2008] 175 Taxman 262 (Delhi) relied upon by the Ld. Counsel. While discussing the issue the Hon ble Court has been pleased to observe as follows:- 20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the proceedings without disposing off the objections raised by the assessee which again is bad in law. The Hon ble Supreme Court in its landmark judgment in the case of GKN Driveshafts (India) Ltd. v. ITO [2002] 125 Taxman 963 categorically laid down the law that the Assessing Officer is bound to dispose off the objections raised by the assessee by passing a speaking order before proceeding further. While discussing the issue the Hon ble Supreme Court has been pleased to observe as follows:- We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the considered opinion that reassessment proceedings initiated in the case of the assessee were illegal, bad in law and void-ab-initio for the reasons discussed hereinabove and accordingly, order passed by the Ld. AO under Section 143(3) r.w.s. 147 of the Act cannot be sustained and is hereby quashed and set aside. We thus set aside the findings of Ld. CIT(A) on this count. Hence, all the grounds raised in assessee s cross objection are allowed. Revenue s appeal in ITA 232/Ind/2021: 43. Now, we shall take up the Revenue s appeal for adjudication. Despite the fact that the cross objections filed by the assessee have been allowed and it has been held that reassessment proceedings initiated in the case of the assessee were not maintainable, we are also adjudicating the grounds raised by the Revenue on merits of the case as the Ld. CIT(A) had also decided the said grounds of appeal on merits during the course of first appellate proceedings. Ground No. 1:- 44. The Revenue through this ground of appeal has challenged the deletion of addition of Rs. 3,75,50,000/- made by the Ld. AO on account of amount received from GSPPL not shown as income during the year. The brief facts leading to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reflected in Form 26AS to substantiate the fact that the amount of advance received by the assessee during the year had already been offered for tax in the subsequent year i.e. A.Y. 2013-14. The Ld. Counsel also made us go through the various supporting documentary evidences annexed on Page No. 242-272 of the Paper Book in support of his contentions. The Ld. Counsel also relied upon a few judicial precedents to substantiate his arguments that the entire exercise undertaken by the Ld. AO was tax-neutral since the amount of advance in dispute during the year had already been offered for tax in the subsequent year. Accordingly, the Ld. Counsel argued that there was no justification for treating the amount of advance received by the assessee from GSPPL during the year as income of the assessee. 46. We have considered rival contentions and gone through the material available on record. We find that the Ld. CIT(A) gave detailed factual finding while allowing the appeal preferred by the assessee and observed as follows: 4.2 Ground No 7 8:- Through these grounds of appeal the appellant has challenged the addition of Rs.3,75,50,000/- on account of advance payment received from M/s Guna Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt in immediate net assessment year. The brief details relating to the impunged contract receipts shown by appellant in books of accounts are as under:- S.No Assessment Year As per books of accounts As per Form No. 26AS Difference [in Rs] Income [in Rs] TDS [in Rs] Income[in Rs] TDS [in Rs] 1 2012-13 NIL 7,51,00 0 3,75,50,000 7,51,00 0 [3,75,50,000] 2 2013-14 26,12,00,000 44,73,001 22,36,50,028 44,73,001 3,75,49,97 2 3 2014-15 16,31,00,000 32,62,000 16,30,99,975 32,62,000 25 4 2015-16 4,14,00,00 0 8,28,00 0 4,14,00,000 8,28,000 NIL Total 46,57,00,000 93,14,001 46,57,00,003 93,14,001 Clearly there is a difference in contract receipts as per books of accounts and as per Form No 26AS which is nothing but an advance amount received by appellant from M/s Guna Sheopur Pathways Private Limited. The appellant before me as well as before AO has filed copies of EPC Contract. The AO observed that 13 payments aggregating to Rs. 3,7550,000/- were made as per Milestone Schedule of payments an were made after completion of work for each milestone. On perusal of EPC Contract it was observed that the payments shall be made as per clause 5.2 terms of payment which as per sub clause 5.2.1 reads as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich actually accrued in AY 2013-14 and are duly accounted for . 4.2.2 In view of the above discussion, the AO was not justified in treating advance receipts as accrued contract receipts. Thus, addition made by the AO amounting to Rs. 3,75,50,000/- is Deleted. Therefore, appeal on these grounds is Allowed. 47. We have considered rival contentions and gone through the material available on record. The facts discussed above squarely reveal that the assessee received an amount of Rs. 3,75,50,000/- from GSPPL as mobilization advance which was not shown as income during the year since the assessee did not perform any work but merely received the amount of advance for shifting its plants to the site of GSPPL. The said amount of advance of Rs. 3,75,50,000/- received by the assessee during the year was shown as liability in the audited financial statements of the assessee as on 31st March, 2012. Further, it is an uncontroverted finding of fact that the assessee duly offered the amount of advance received during the year as income in the subsequent year itself i.e. in A.Y. 2013-14. The assessee also produced a table containing the year-wise break-up of the amount of income and TDS accounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,75,50,000/- to the total income of the assessee on account of amount received from GSPPL. 50. Further, we also find force in the contention made by the Ld. Counsel that it is only the accrual of real income which is chargeable to tax and not the hypothetical/ notional income. 51. In this regard, we have considered the judgment of the Hon ble Supreme Court in the case of CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC) relied upon by the Ld. Counsel in support of his case relevant portion whereof is as follows:- 20.It follows from these decisions that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. 21. Insofar as the present case is concerned, even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the observations made hereinabove. Further, the findings of the Ld. CIT(A) have not been controverted by the Ld. CIT-DR. Hence, we do not find any infirmity in the findings of the Ld. CIT(A) and accordingly, the deletion of addition of Rs. 3,75,50,000/- made by the Ld. CIT(A) is confirmed. Hence, Ground No. 1 of the appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed. Ground No. 2:- 54. The Revenue through this ground of appeal has challenged the deletion of addition of Rs. 7,42,880/- made by the Ld. AO on account of difference between gross receipts and receipts actually accounted for as income from SCCPPL. The brief facts leading to the case are that the assessee received contract receipts from SCCPPL during the year. SCCPPL deducted TDS on the gross amount of bill of Rs. 7,12,71,805/- which included the component of labour cess of Rs. 7,42,880/-. However, SCCPPL deposited the amount of labour cess of Rs. 7,42,880/- itself and remitted only the net amount of Rs. 7,05,28,925/- (Rs. 7,12,71,805/- less Rs. 7,42,880/-) to the assessee which was offered as income. However, the Ld. AO was of the opinion that the assessee should have offered the gross re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent assessee. 2.3] That M/s SCC Projects Private Limited has deducted TDS on the gross amount of bill of Rs. 7,12,71,800/- which also included labour cess of Rs. 7,42,875/-. However, M/s SCC Projects Private Limited itself deposited the amount of labour cess and therefore net amount of Rs. 7,05,28,925/- as received was rightly offered for tax by the appellant. 2.4] Copy of ledger account of M/s SCC Projects Private Limited in the books of the respondent assessee along with copy of income account in respect of bills as raised by the respondent assessee is enclosed for your ready reference. On perusal of the income account, it is clear that labour cess was deducted by M/s SCC Projects Private Limited. However, TDS was deducted by M/s SCC Projects Private Limited on the gross amount of bill of Rs. 7,12,71,800/- which included the amount of labour cess of Rs. 7,42,875/-. Hence, the respondent assessee was required to offer only net amount of bill of Rs. 7,05,28,925/- as its income which was rightly offered as income by the appellant. 2.5] The assessing officer was of the view that the respondent assessee first offered gross receipt and then claimed deduction on account of labour cess. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur cess is on M/s SCC Projects Pvt Ltd which has been deducted and remitted to government. The appellant in its books of accounts has claimed gross bill raised, however, amount was received after deducting labour cess, therefore, deduction of the said amount was claimed. The appellant has not received gross amount as per bill raised, then how the amount gross amount can be brought to tax. Once, it has been established that appellant has received less amount and appellant has claimed revenue receipts on the basis of amount actually received, the AO was not justified in making addition on this account. Thus, addition made by the AO amounting to Rs. 7,42,880/- is Deleted. Therefore, appeal on this ground is Allowed. 57. We have heard the rival submissions made by the respective parties and we have gone through the materials available on record. We find that the facts discussed above squarely reveal that the assessee had correctly offered the net amount of Rs. 7,05,28,925/- received from SCCPPL as its income during the year. It is an undisputed fact that the amount of labour cess of Rs. 7,42,880/- was directly deposited by SCCPPL and only the balance amount of Rs. 7,05,28,925/- was rem ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
