Tribunal decision: Assessments adjusted, issues referred back for verification.

The tribunal allowed the assessee's appeals partly, directing the deletion of additions related to unexplained cash credits, share application money, and unsecured loans. The tribunal upheld the 8% profit assessment on contractual receipts but directed a 5% assessment on sub-contract receipts. Scrap sales income was to be assessed under the business head at 8%. Issues regarding TDS credit and differences in contract receipts were referred back to the Assessing Officer for verification. The tribunal pronounced the order on 06-04-2021.

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Issues Involved:
1. Admission of additional grounds at a belated stage.
2. Correctness of estimating profit element of gross contractual receipts and treatment of scrap sales income.
3. Unexplained cash credits.
4. Share application money treated as unexplained cash credits.
5. Unsecured loans treated as unexplained cash credits.
6. Granting of TDS credit and difference in contract receipts.

Issue-wise Detailed Analysis:

1. Admission of Additional Grounds:
The assessee sought to admit additional grounds at a belated stage. The Revenue objected, citing the assessee’s conduct. However, the tribunal found no merit in the Revenue’s technical stand, referencing the Supreme Court’s decision in National Thermal Power Co. Ltd. vs. CIT, which allows raising additional grounds to determine the correct tax liability if all relevant facts are on record. The tribunal accepted the assessee’s petition to raise additional grounds for both assessment years.

2. Estimating Profit Element of Gross Contractual Receipts and Treatment of Scrap Sales Income:
The assessee challenged the lower authorities’ action of estimating an 8% profit element on gross contractual receipts and the treatment of scrap sales income. The tribunal noted that the correct turnover figures were Rs. 40,42,82,012 for AY 2010-11, as per the assessee’s audited books. The tribunal affirmed the 8% profit assessment on contractual receipts but directed the Assessing Officer to assess sub-contract receipts at 5%, referencing a similar decision in M/s. Maa Highways.

Regarding scrap sales income, the tribunal observed that such income, arising from the ordinary course of civil construction business, should be treated as business income. The tribunal directed that the scrap sales income be assessed under the business head at 8%.

3. Unexplained Cash Credits:
The issue involved unexplained cash credits of Rs. 5,53,66,019 for AY 2010-11 from four investors, including the assessee’s Managing Director. The tribunal found that the Managing Director had provided confirmation and supportive documents, and the Gujarat High Court’s decision in PCIT vs. Gyscoal Alloys Ltd. supported that such related party transactions should not be treated as unexplained. The tribunal directed the deletion of the addition.

For the other three investors, the tribunal noted that the Assessing Officer had not found fault with the evidence provided, including confirmations and banking transactions. The tribunal concluded that the assessee had discharged its burden of proving identity, genuineness, and creditworthiness, and directed the deletion of the addition.

4. Share Application Money Treated as Unexplained Cash Credits:
For AY 2011-12, the issue of share application money treated as unexplained cash credits involved Rs. 40 lakhs out of Rs. 1 crore. The tribunal found that the relevant facts were similar to those in AY 2010-11, where confirmations and evidence were provided, and no suspicious circumstances were found. The tribunal directed the deletion of the addition.

5. Unsecured Loans Treated as Unexplained Cash Credits:
The issue involved unsecured loans of Rs. 50 lakhs treated as unexplained cash credits. The tribunal noted that the sum was received through banking channels, and the Assessing Officer’s remand report had accepted the verification of the sum as a performance deposit. The tribunal concluded that the assessee had proved the genuineness of the sum and directed the deletion of the addition.

6. Granting of TDS Credit and Difference in Contract Receipts:
The assessee raised issues regarding the non-granting of TDS credit as per books and Form 26AS and differences in contract receipts. The tribunal restored these issues to the Assessing Officer for necessary verification within three effective opportunities of hearing.

Conclusion:
The assessee’s appeals were partly allowed, with directions for necessary computation as per law. The tribunal pronounced the order in the open court on 06-04-2021.

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