TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 903
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....Rs. 61,77,71,512/- claimed by the Assessee. 3. Subsequent to the passing of the said assessment order dated 25.03.2014, the Ld. Principal C.I.T. (CIT) issued a show-cause notice u/s. 263 of the Act dated 28/09/2015 alleging that: (i) the assessee had debited in its P/L Account a sum of Rs. 14,83,51,419/- being provision for future losses on construction contracts and claimed the same as deduction while computing income from business. According to the CIT this was an anticipated and unascertained liability and could not have been construed as an accrued liability allowable as deduction while computing business income for AY 2011-12. According to the said show-cause notice, such anticipated losses were not allowable in mercantile system of accounting. (ii) According to the CIT, the assessee had taken accommodation entries in the nature of bogus expenditure amounting to Rs. 5.42 crores from M/s. Sintex Infra Projects Ltd. which was not admissible expenditure. On the basis of the above alleged reasons, the CIT wanted to hold the order of the AO erroneous and prejudicial to the interest of the revenue and called upon the Assessee to show-cause why appropriate orders should not be pa....
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....al nature. I, therefore, have no hesitation in holding that the assessment order dated 25.03.2014 for the Asst. Year 2011-12 is erroneous in so far as prejudicial to the interest of the revenue." 6. On the other issue of alleged bogus expenditure of Rs. 5.42 crores paid to M/s. Sintex Infra Projects Ltd., the Assessee had contended that the A.O. had not made any enquiry while completing the assessment because the information regarding the payment to M/S.Sintex Infra Projects ltd., being in the nature of an accommodation entry and therefore bogus was received from JCIT, Range-8, Ahmedabad much after the conclusion of the Assessment proceedings by the AO and therefore there was no basis on which the AO could have made any investigation on the said sum being genuine or not. The CIT did not accept this contention of the Assessee also and he held as under :- "On consideration of the assessee's submission and arguments, I find that although the assessee has stated that the services rendered by the said company to the assessee was also established but has not been able to produce any material or evidence from which it can be conclusively established that M/s. Sintex Infra Projects....
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....ether M/s. Sintex Infra Projects Ltd had rendered any service to the assessee in lieu of the payment made by the assessee was conducted by the A.O. The A.O. had also not examined the bank statements to look into the movement of the fund out of the payment made by the assessee. As these enquiries which were required to be made before accepting the claim of the assessee were not made, the assessment order is erroneous in so far as prejudicial to the interest of revenue as deduction of the sum of Rs. 5.42 Crores was allowed without making any enquiry. I, therefore, hold that the assessment order dated 25.03.2014 completed u/s. 143(3) for the Asst. Year 2011-12 is erroneous and prejudicial to the interest of revenue, which is therefore with a direction for fresh assessment after giving assessee opportunity of being heard. 8. Aggrieved by the aforesaid order the assessee has preferred the present appeal before the Tribunal. 9. We have heard the submissions of the ld. Counsel for the assessee and the ld. DR. The ld. Counsel for the assessee submitted that as per AS-7 issued by Institute of Chartered Accounts of India (ICAI), provision for foreseeable loss in the case of assessee engag....
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....ed Accommodation entry. It was submitted that the conclusion of the CIT that the order of AO was erroneous for not making proper enquiries, in the given facts and circumstances cannot be sustained. It was again highlighted that in respect of payments made to M/s. Sintex Infra Projects Ltd tax has been deducted at source and all the payments were through banking channels. It was highlighted that the payee company is found in the rolls of register of companies and has been an active business. It was therefore submitted that identity of the payee company cannot be disputed. It was also argued that the CIT has passed the impugned order u/s 263 of the Act on the basis of material obtained behind the back of the assessee and this was not permissible under law. Reference was made to the decision of the Hon'ble Delhi High Court in the case of CIT vs Rajesh Kumar 306 ITR 27 (Delhi) and the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise 281 CTR 241(SC). The ld. Counsel for the assessee prayed that the order of 263 be quashed. 11. The ld. DR placed reliance on the order of CIT and submitted that on both the issues the AO did ....
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.... are therefore of the view that exercise of jurisdiction u/s 263 of the Act in respect of provision for future losses on construction contract was fully justified. 13. With regard to the payments made to M/s. Sintex Infra Projects Ltd of Rs. 5.42 crores is concerned, it is no doubt true that the information with regard to payments being in the nature of accommodation entry came into the possession of the AO after the conclusion of the assessment proceedings. It is however seen that at the time when the CIT invoked the provision u/s 263 of the Act, information in question was available on the record of the assessment. The definition of "record "as contained in Explanation 1(b) to section 263(1) of the Act makes its clear that record shall include and shall be deemed always to have included all records relating to any proceedings under this act available at the time of examination by the Commissioner. It is permissible for the CIT to invoke jurisdiction u/s 263 of the Act on the basis of the material which comes to the possession of the AO after conclusion of the assessment proceedings, and which is part of the record before CIT when the jurisdiction u/s.263 of the Act is being invo....