TaxTMI 
TaxTMI 
2019 (11) TMI 26
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....and 222 to 226/Hyd/2019 [against consequential order giving effect to CIT(A)'s order] for AYs 2009-10 to 2012-13 by the revenue. 2. The above appeals are cross appeals by both Assessee and Revenue and are filed against common order dated 30-03-2017, passed by the PCIT (A) - 11, Hyderabad. These appeals are being disposed by a common and consolidated order for the sake of convenience, because of common issues and identical submissions. 2.1 The assessee company, not being one in which public are substantially interested, is in the business of execution of contracts relating to infrastructure projects. Search and seizure operations u/s. 132 of the I.T. Act were conducted in the case of the assessee on 30/11/2011. Particulars of income originally returned, income returned in response to notice u/s.153A dated 05/12/2012 (for A.Yrs. 2006-07, to 2011-12), and income assessed, are tabulated as under: S.No. AY Original return of income u/s 139(1) Original return of income u/s 139(1) Date of filing Income returned (Rs.) Income assessed (Rs.) Date of filing Income returned (Rs.) Income assessed (Rs.) 1 2006-07 11/12/06 14381022 16183590 14....
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....ses (represented by Sri S. Janardhan Reddy). Similar features were noticed in payments made to M/s. Gee Constructions, M/s. Surya Erectors, M/s. Prasad Reddy & Co, M/s. Siri Engg. & Enterprises, Sri B. Narasimha Reddy, Sri M. Krishna Reddy and Sri T. Srinivas. The Assessing Officer noted that RTGS payments made by the assessee-company to these parties was immediately withdrawn - in cash, by employees of the assessee company (and not the payee), at the instance of the Managing Director or CFO of the assessee company. 3.1 The assessee objected to the Assessing Officer's proposal for the disallowance by stating that the expenses included payments for sub-contracted work actually executed by downstream parties as well as payments for material really purchased. In so far as execution of work is concerned, it was stated that a part of the work was executed by the assessee while the other part of it was entrusted to the sub-contractors, with whom agreements were entered into. The bills raised upon execution of the work were verified and paid for by the principal, which shows that work was actually executed. The contractors acknowledged the receipt by admitting it in their returns o....
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....aim was made initially in the return filed u/s.139(1). He further noticed that this claim was not made even in the return filed on 14/02/2013 in response to notice u/s.153A dt. 05/12/2012. This claim was made in the course of a 'revised return' filed on 06/02/2014. He also noticed that the notice u/s. 153A called for the return to be filed by 09/01/2013 whereas it was filed 36 days later on 14/02/2013. On both counts, therefore, the Assessing Officer held that the claim u/s.80IA was belated and hence invalid. He further held that the revised return filed on 06/02/2014 was no return of income, since Section 153A did not provide for revision of returns. In response, the assessee submitted that Section 153A(1)(a) provided for treating a return filed u/s.153A as if it was a return filed u/s.139(1). Being so, the assessee possessed the rights vested in terms of Section 139(5). It was further submitted that wherever the Act intended to deny such right it was specifically stated - as for example in the second proviso below Section 158BC(a). It was also pointed out that there was no statutory time limit provided under the Act for filing a return u/s.153A. On an analogy, the assesse....
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....d The principal contractor accepted the bill and paid the amount J) if the said payment is disallowed the profit derived by the assessee is working out to more than 95%. The assessee in this regard, may be permitted to refer to the decision of the Hon'ble lTAT, Hyderabad in the case of DCIT vs, KNR Constructions Pvt Ltd. ln the said case, the concern made payments to the sub contractors. The Assessing Officer was of the view that certain payments were not genuine. The CIT(A) found that the works were actually completed; all the payments were offered to tax by the sub contractors. If such disallowance is accepted the profit rate would be 19%. lt was also found that the said company had a sub contract agreement and the work as per the sub contract agreement was found completed. ln such circumstances, the CIT(A) held that the disallowance is not justified. The Department filed an appeal before the Hon'ble ITAT and the Hon'ble ITAT confirmed the order passed by the CIT(A). Similar are the circumstances in the case of the assessee In the case of assessee, the assessee received the amount from other companies on sub contract basis. 95% of the work w....
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....CIT(A) observed that a careful perusal of the assessment order and the search related details found in the records of the Assessing Officer bring out the following features that are relevant to understand the nature and quality of the expenditure booked by the assessee. "7.1.1 A statement was recorded from Sri D. Sreedhar Reddy, the M.D of the assessee Company, where inter alia the following was noticed in respect of two persons recorded in the books of the assessee Company as sub-contractors: "18. During the course of Search & Seizure operation u/s 132 today- it is seen from the books of accounts that SSIL, has paid the following amounts in F.Y 2007-08 to 2010-11 to M/s Sushi Udyog Constructions Company on sub-contract basis. Financial Year Amount Rs. 2007-08 9,81,23,862 2008-09 7,06,15,319 2009-10 12,52,31,641 2010-11 10,75,25,000 As per your records the address of M/s Sushi Udyog Constructions Company is No.21,1st Floor, Madhuvan Complex, Highway way Road, Mehsana-384 002. Today, on verification, it has come to the notice of the Department that the above concern does not exist at the given address which was occupied by a G....
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.... sites M/s Sushee Udyog Constructions Company executed works and what is the nature of work Ans: The basic records are maintained. I will submit the same later. 7.2 The CIT(A) observed that it would appear from the above that both 'sub-contractors' - to whom substantial works were allegedly assigned, were not found at the address as per the records of the assessee, even as on 30/11/2011. It was claimed that works were entrusted to them based on their execution capabilities, and the fact that they possessed a PAN. The details of the basis on which the execution capabilities of such persons was assessed, is not available. The credibility of these persons having execution capabilities to handle multi-crore contracts is not borne out by their profile as would be apparent from the ensuing paragraphs. 7.3 He observed that subsequent to the Search, and after much persuasion, Sri S. Janardhan Reddy, who operated the bank account of Sushi Udyog Construction Co. and J.K. Enterprises, two of the main 'sub-contractors' of the assessee company, was made available for examination. A statement was recorded u/s.131 of the I.T. Act on 13/01/2012, 11/02/2012 and 27/02/....
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....ely, I consulted Mr. Gopal of Nandyal, Income-tax Practitioner and filed returns of MIs. Sushi Udyog Constructions Company for A.Y. 2008-09 to 2010-11 and my individual returns for two years A.Y. 2009-10 and 2010-11... 7.5 CIT(A) noted that it is further claimed that books of account were not maintained by Sushi Udyog Constructions Company as well as J.K.Enterprises. When asked about how control was exercised over works done and the receipts and payments of the business he stated in his answer to Question No.15 (on 11/02/2012) that "I used to make payments as and when required never kept record of any thing." He, however, could recollect details of works executed in January, 2007 and August, 2008 at various locations in Andhra Pradesh, Karnataka and Orissa, for the assessee company in the name of Sushi Udyog Construction Company as well as J.K. Enterprises. Though he never worked in the state of Orissa he could recollect purchasing stone and stone dust for the assessee company from two local suppliers at Paradip, Orissa, by name Mr. Pathikanta and Mr. Jitendra Sahoo - whom he met on a visit to Paradip. He claimed that it was not necessary to keep their address because "They used....
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....umar or Sri T. Shankar affixed on the reverse side of the instrument. Sri Janardhan Reddy stated that all of them were employees of the assessee company including Sri M.Chandra Sekhar Reddy - who signed as 'M.S.Reddy'. It was stated that MIs. Sai Sudhir Infrastructures Ltd. (the assessee company) had faced liquidity problems, because of which he handed over signed blank cheques to Sri N.Chandra Sekhar Reddy who would withdraw cash whenever possible, and keep it with him so that it could collected and carried to Paradip. Sri Janardhan Reddy was also confronted with the fact that supplies at Paradip were allegedly made in February & March, 2010 whereas payments for these supplies were withdrawn much later, and as late as December, 2010. It was simply stated that the suppliers were willing to extend credit to Sri Janardhan Reddy considering the profile of assessee company. 7.7 CIT(A) observed that the 'sub-contractor' is a person who was not found at his address, and apparently never operated out of that address, had no expertise or resources or track record that could - to a reasonable mind, sustain multi-crore operations, and yet the assessee Company saw execution....
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....eddy, he did not find it necessary to file a return of income till he was prompted to do so by "Sai Sudhir Infrastructure people" and did not maintain any books of account. He was, however, able to recollect details of work executed for the assessed Company, including identical instances of 'purchase' and supply of stone and stone dust for works at Paradip. The circumstances of the transactions - including supply of material at Paradip, were identical. He claimed to have met one Mr. Sahoo and Mr. Mohanti at Paradip who agreed to provide the required quantities of stone and stone-dust. Shri Chandrakanth Reddy states that he does not know their full name, address or even phone number. There was no written agreement or any other record of transactions. The said Mr. Mohanti and Mr. Sahoo were content to arrange supplies because they received payment in cash. The total payments made of this account for supplies made in February and March, 2010 is about Rs. 27 crores. The bank accounts operated by Sri Chandrakanth Reddy showed withdrawals of only Rs. 2.99 crores during this period. There is, therefore, no correlation between the amount claimed to have been spent and amount withdr....
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....ka Bank Raj Bhavan Road, ale No.3342000100036301) f. T. Srinivas (Corporation Bank Film Nagar, a/c No. 27530200000163 & a/c No. CBCA 101100019). 7.10 The CIT(A) observed that the above 8 persons referred to at para 7.2.4, 7.3 and 7.4 above had 9 business entities which operated between them 12 bank accounts. These details are tabulated as under: S.No. Name of the 'subcontractor' Bank/Branch /Account Number Cash 1 MIs GEE Construction company HDFC Bank, Nacharam 78189000 2 MIs Surya Erectors HDFC Bank, Nacharam 96590000 3 MIs Spectrum Infrastructure Corporation Bank, Filmnagar 428307350 4 MIs Sushi Udyog Construction Company Corporation Bank, Filmnagar - CBCA/01/000149 210132650 5 -do- Karnataka Bank, Rajbhavan Road, 3342000100032701 136165000 6 MIs JK Enterprises Corporation Bank, Filmnagar - CBCA/01/000148 77645000 7 -do- HDFC Bank, Pet Basheerbagh 646100000 8 MIs Prasad Reddy & Company Karnataka Bank, Rajbhavan Road, 70122561 9 Mr. B. Narsimha Reddy -do- 52456920 10 Mr. M. Krishna Reddy Karnataka Bank, Rajbhavan Road, 3342000100035901 545....
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....Reddy, Managing Director of the assessee company u/s.132(4) on 01/12/2011. It is seen that after taking him through various details of transactions with Spectrum Infrastructure and Sushi Udyog at Q.No.30 he was confronted with the details of cash withdrawn by his employees from the accounts of the alleged sub-contractor. The Question and Answer are extracted hereunder for ready reference. "30: As a part of investigation the debit instruments of the above two accounts have been obtained from the bank It is seen from the debit instruments that cash was withdrawn from the above accounts by Mr. M S. Reddy; Mr. Ajay and Mr. T Shankar. Today- during the course of search and seizure operation u/s 132, it is known that Mr. M S. Reddy's full name is Mr. M Chandrashekhar Reddy and he is working as an Asst Manager (Co-ordination) in MIs SSlL. Similarly, Mr. T. Shankar is a. Driver of MIs SSIL. Mr. K Ajay is Asst Manager (Finance) of MIs SSlL. I am showing you statements of Mr. T Shankar and Mr. M S. Reddy recorded u/s 132(4) today wherein they have stated that the cash was withdrawn from the above accounts as per the instructions of yourself and Mr. A VKS Prasad, CFO of MIsSSIL. ....
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....ned expenditure on account of sub-contract expenses recorded in the books of Sai Sudhir Infrastructures Limited in the course of a statement recorded u/s. 132(4) on 28/01/2012 vide his answer to Question No.3, relevant part of which is as under: "As far as the company is concerned, this is to submit that the explanation of Mr. K Ramchander Rao, Technical Director, with reference to certain entries in the papers found during the search operation at Bangalore, vide his statement dt. 30.11.2011, that such entries represented business promotion expenses paid to various persons for facilitating award of contracts and also release of payments, is tactually incorrect. After a detailed discussion with the said director, it appears to us that the entries in question were only rough estimates prepared by the site in-charges. In this regard, I would like to state that no such payments were made by us to anybody for the said purpose. In fact, the company had never authorized nor encouraged such payments. This fact is also evident from the accounts of the company, as no such expenditure was debited to P&L account. It is further submitted that all the sub-contracts were genuine and acco....
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....ctor once again re-affirmed that additional income of Rs. 55.17 crores has been offered to cover for all such deficiencies as may be possible in these circumstances. 7.16 It follows therefore, that an admission of undisclosed income to cover for expenditure liable to be seen as not satisfactorily explained has been made initially on 1/12/2011, and thereafter affirmed on 29/12/2011, 28/01/2012, and again on 19/04/2012. 7.17 The CIT(A) observed that in appellate proceedings, however, it was stated by the Ld. A.R. that the statements recorded were made available only on 15/01/2015, and hence the submissions before the Assessing Officer were incomplete, and opportunity extended was not adequate. In the affidavit notarised on 01/06/2015 and introduced as additional evidence, the Managing Director contradicted his admission during Search and post-Search proceedings by stating that the Search proceedings initiated on 30/11/2011 continued till 8.00 a.m. the next day and, therefore, the deposition was made "under confusion", It was also stated that facts were not fully recorded in the statement and that the statement was signed under pressure and duress. On the merits of the expenditu....
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.... 153A was issued within a few months of the last of the depositions affirming the admission of income, it hardly stands to reason that the assessee was unaware of the issue(s) under examination in consequence of the Search. That the statements were furnished later, will, therefore, not make any difference to the fact that the retraction made in the Return (filed in response to the notice u/s 153A dated 05/12/2012) is not maintainable. 7.19 In view of the above observations, the CIT(A) rejected the cases relied upon by the assessee, and held as under: "9.3 On a conspectus of the above facts and consideration of various submissions made, it is seen that the assessee claims the expenditure booked in the name of the various subcontractors described herein-above, is admissible business expenditure. The Assessing Officer on the other hand, relied on the information collected during the Search and post Search verifications, that bank accounts belonging to certain 'sub-contractors' were operated by employees of the assessee company, to withdraw cash by presenting the 'self' cheques signed by these persons, to hold that the expenditure was not genuinely incurred.....
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...., in declaring the transaction as non-genuine- discarded a host of documentary evidences filed or relied upon by the assessee-assessee That documentary evidences are not by themselves conclusive, and the truth of the matter or the documents could be determined on the basis of or on the anvil of the surrounding facts and circumstances of the case is well settled, and for which the Revenue relies on the decision in the case of Durga Prasad More (supra). What is relevant, more so where the genuineness ofthe transaction is in issue, is the truth of the document/s furnished in substantiation, as well as the substance of the transaction and not its form, and which is to be determined on the basis of and on the conspectus of the entirety of the facts and circumstances of the case ...." [EMPHASIS SUPPLIED] 4.5 ... We find the observations by the AO as valid and relevant; to no satisfactory answer or explanation by the assessee, i.e., to the questions, incidents or the phenomenon observed dismissing the same as mere suspicions, as does the ld. ClT(A), is, to our mind glossing over the many attendant facts and incidents, the most vital, and on which We observe complete silence or ab....
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....ect in cash, the very payments that have been made to such persons by cheque. Whether the assessee is a IV partner, Principal Contractor or sub-contractor, and whether assessee in the circumstances could have been the beneficiary of cash generated, is not the primary issue. In the facts of the case noticed herein above the assessee is liable to explain the utilization of cash seen to have been mopped up by its employees. The onus in this case does not get discharged by merely claiming that the cash was in turn handed back to the payees, for utilization at respective work sites in the neighboring states. It is also noteworthy that such payees who needed the assistance of the assessee to encash cheques in Hyderabad, for expenses to be defrayed in Karnataka and Orissa were in the first place persons who had no demonstrable execution capabilities. It is held, therefore, that the assessee has not been able to make out a case that the impugned amounts have been "laid out or expended wholly and exclusively for the purpose of the business." The disallowance of business expenditure made in the assessments for AY 2007-08 to 2011-12 is therefore upheld." 8. Aggrieved by the order of CIT(A)....
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....dition. 11. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that in case the sub contract payments were to be considered as not genuine, the profit rate would be abnormal which fact clearly indicates that the sub contract payments are genuine. 12. The learned Commissioner of Income-Tax (Appeals) erred in confirming levy of interest u/s 234A, u/s 234B and u/s 234C of the I.T. Act. 13. Any other ground that may be urged at the time of hearing." 9. Before us, ld. AR of the assessee filed written submiIssions, which are as under: "1. The appeals filed by the assessee are for the assessment years 2007-08 to 2011-12; whereas the appeals filed by the Department are for the assessment years 2009-10 to 2012-13. 2. In so far as the appeals filed by the assessee are concerned they are against the disallowance of the payments made to some of the sub contractors against the works entrusted by the assessee to its sub contractors. The details of the sub contractors and the works entrusted to them are separately furnished in a statement annexed. The said details were already filed in the paper books earlier filed by....
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....he Assessing Officer, the sub contractors received the cheques from the assessee and deposited the same with the bank. At the time of withdrawal, the said sub contractors issued the cheques but on the back side, the assessee's employees and the sub contractors signed. c) The Assessing Officer mentioned that the cheques drawn by the sub contractors were shown to the employees and the employees confirmed that they signed on the backside of the cheques. d) The Assessing Officer also referred to the statements of Sri D.Sridhar Reddy, M.D. and the employees of the company. According to the Assessing Officer, the MD accepted for admission of additional income of Rs. 75 crores. e) The Assessing Officer mentioned that the cash withdrawal from out of RTGS credits amounted to Rs. 65 crores. f) The Assessing Officer is of the view that the sub contracts have come into existence to provide bogus bills to siphon off the money. Accordingly the assessing officer made the following additions: 2007-08 - Rs. 6,84,09,128 2008-09 - Rs. 20,94,13,127 2009-10 - Rs. 35,63,94,957 2010-....
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.... the assessment proceedings. b) That the enquiry was not limited to 3 sub contractors but was extended to 7 sub contractors. The aggregate of which works out to Rs. 62,54,61,833/-. c) The Assessing Officer at para 5.4 accepted the contention of the assessee that the work was entrusted to the assessee as per the agreement and that the work was completed through the work orders or the agreements with the sub contractors and also agreed that the assessee produced the bills raised by the sub contractors. d) With regard to affidavits filed by the sub-contractors, the Assessing Officer accepted that there are affidavit from Sri Prasad Reddy , Sri Krishna Reddy, Sri Narasimha Reddy, Sri P.Srinivas, Sushee Udyog Constructions, J.K.Enterprises, Spectrum Infra etc. He referred to the cases where the affidavits were not filed i.e. Gee Constructions, Proprietor Sri KVV Satyanarayana, Surya Erectors, Proprietor Sri K.V.V.Satyanarayana. However, the Assessing Officer did not bring on record anything contrary to the facts narrated by the sub contractors in the affidavits. e) With regard to assessments made in the case of sub-contractors, the Assessing Officer m....
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....avits of the sub contractors filed before him. On the other hand, the learned CIT (A) mentioned that the retraction made by the M.D. is not acceptable. He referred to various decisions which are distinguishable. He held that the retraction is not acceptable at this point of time. 14. The learned Commissioner of Income Tax (Appeals) passed an order on 30.03.2017 wherein he discussed the ground raised by the assessee against disallowance of expenditure incurred on payments to the sub contractors. The learned Commissioner of Income Tax (Appeals) held - a) that the retraction made by the Managing Director after a long period is not justified. b) the examination of the sub contractors show that they do not have an office and they do not have the expertise or the track record; c) at the time of withdrawal of the amounts by the sub contractors each and every cheque was endorsed by one or the other of the employees of the assessee and that, therefore, the money was received by the assessee. d) During the course of search and seizure operations, statement was recorded from Sri D.Sridhar Reddy who accepted that he would admit an additional income ....
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....ract works. They explained in detail as to how the work was rendered. They also explained as to how the amounts were utilised by them. The fact remains that none of the sub contractors denied having rendered the work. Or supplied the material or having received the amounts. c) All the amounts were paid by the assessee through crossed cheques and were deposited in the accounts of the sub contractors. d) The principal contractors accepted that the works were done and paid the bills raised against them. This fact clearly shows that the works were rendered by the assessee against which payments were received by the assessee. The fact that a third party accepted the work and paid the amount clearly indicates that there is no collusion. The allegation that there was "collusion" is not proved by the authorities and the CIT (Appeals) is not justified in using the word "collusion". e) The learned CIT (A) obviously ignored the fact that agreements with sub contractors are not collusive as the work of a third party is involved. And the receipt from the principal contractor is accepted as true and correct. ` These facts are agreed to by the Assessing Officer....
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.....O did not apply his mind to the details about the agreements entered into; the payments made to the sub-contractors and the amounts debited to the P&L account. A statement to this effect is submitted as an annexure. 24. The decisions relied upon by the CIT (A) are not relevant to the facts of the cases. They are listed hereunder: (1) 172 ITR 250 - Chuharmal Vs. CIT - Supreme court of India. The said case has no application to the facts of the assesse's case. In the said case the Hon'ble Supreme Court found that the searching party found foreign made wrist watches, the source for which was not explained. The value was offered by the assessee. In such circumstances the admission made can't be retracted. It is submitted that in the case of assessee no evidence was found at the preMIses of the assessee to prove that the money has come back to him. The authorities did't find any assets or cash. The Learned Addl.CIT in his remand report observed that there is no such evidence except the statement recorded. (2) 83 ITD page 102 - Video Master Vs JCIT - In the said case the disclosure was Rs. 3 crores. The Hon'ble ITAT found that the disclosure ....
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....s have found that additions are required to be made based on the material and that the admission made is only based on such information. Further, the courts also found that no evidence was brought on record to show that the retraction is true. In the last case referred to above, the Hon'ble High Court on 30.7.2003 held that when there was retraction and the assessee was not provided with opportunity to explain the case was remanded back to the Assessing Officer. In the case of the assessee, no material was found during search to prove that the money was received back by the assessee. The authorities did not find any undisclosed assets, undisclosed cash or any other material to prove the undisclosed income. The only basis is the cheques encashed by the sub contractors with the support of the employees of the assessee. This cannot be considered as the evidence for receipt of money by the assessee. The assessee further submits as under: a) Copies of the statements were provided on 02.01.2015 and not before the assessment was completed. b) The Assessing Officer did not confine to the amount disclosed in the statements. The admission in the case of the company was Rs. ....
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....he Managing Director. The authorities did not find any evidence to show acquisition of any properties or not recorded in the books of account or any evidence showing outflow of cash outside books In the circumstances, the view of the learned DR is only a presumption and not based on any facts. 31. The Income tax authorities conducted search and seizure operations at the preMIses of the assessee and at various places connected with the assessee. They did not find any cash or Jewellery or any other assets which was not explained by the assessee. This clearly indicates that no cash was received by the assessee. 32. The learned CIT DR mentions that encashed cheques were impounded from the premises of the assessee. The encashed cheques are with the bank. They were brought from the bank by the authorities. These cheques are to be in possession of the bank and not with the assessee. They would not be supplied by the banker to any other outsider. The Assessing officer, while passing the assessment order extracted the statements of the employees wherein a question is referred to the encashed cheques. There the DDIT mentions that the cheques were obtained from the bank. The....
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.... as to why the affidavits are required to be considered. It was also submitted that during remand proceedings the AO did neither deny nor counter the content of the affidavits filed. On the other hand, the Addl CIT in his report dated 17.12.2015 at page No.76 of the common paper book mentioned that "there is no specific reference" in any other seized diary / documents depicting the backward flow of money. The Addl CIT continued to mention that at least the AO's remand report does not mention any such evidence. The observation of the Addl. CIT about backward flow of money would clarify that there was no evidence to the effect that the amount paid by the assessee through RTGS to the sub contractor did not flow back ward and was not received by the assessee company. 37. The CIT DR relied on various statement to say that the amounts were given back to the assessee. It is submitted that the observations of the learned CIT-DR are not correct. Sri A. Chandrakanth Reddy in his statement dated 23.2.2012 (Page No. 334 of the DPB) stated that "I Submit that I supplied stone and dust at the site office of IOCL at Paradip and paid my suppliers by drawing cash from my Hyderabad bank acc....
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.... Sridhar Reddy without verification. Similarly, even in the case of the assessee he accepted some amounts without reference to any seized material. There is no seized material supporting the admission. The Assessing Officer provided copies of the statements recorded on 2.1.2015 and the same were examined. On detailed examination, it was seen by the assessee that the admission is not correct. The company was allotted sub contract works by reputed companies/government/government bodies. Such works were in turn were allotted to the sub contractors either on back-to-back basis or partly. The assessee is submitting details of the work orders taken by the assesee; the details of the principal contractors and the payments made to sub-contractors. This fact also shows that the statement of Sri Sridhar Reddy was taken when he was in a confused state Therefore, he filed an affidavit before the CIT (A) explaining the circumstances in which the statement was recorded and the circumstances under which the additions accepted cannot be considered as correct. This is particularly so, when the Assessing Officer and the Addl.CIT in their remand reports did not counter the contents of the affidavit. ....
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....hdraw cash from the bank and the sub contractors alone have withdrawn the amount; b) The employees have signed as a witness facilitating the withdrawal and the amounts were taken by the sub contractors and was spent by the sub contractors themselves. 50. As stated earlier, in the statements of sub contractors, they have categorically mentioned that they withdrew the amounts and spent the amount. For the purpose of company's work. Therefore, the observations made by the CIT-DR are not correct particularly in view of the statement of the sub contractors recorded by the department. 51. In clauses (d) of para 6, the CIT-DR expressed doubt about the purchase of stone and stone dust from different concerns. In this regard it is categorically mentioned by the sub contractors that they supplied the goods; that they withdrew the amount and paid the same to the suppliers. Both the persons were examined on oath. They stated categorically all the details. Further, a suggestion was made to them by the ADIT regarding the statement that the transaction is not genuine. In response they stated that the transaction is genuine. These facts clearly indicate that the observat....
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....essment order passed by the Assessing officer in the case of the sub contractors. Invariably, the assessments in the cases of the sub-contractors were completed on an estimate basis which clearly indicate that there is no requirement for disallowance u/s 40A(3) or Sec.40(a)(ia) of the I.T. Act. 56. The learned CIT-DR mentions that the suppliers to the sub contractors are unidentifiable persons. The observation of the learned CIT-DR is MIsplaced. There is no requirement in the case of the assessee to look into the details of the supplies to the sub contractors. Firstly, the principal contractor accepted the fact that he ordered for stone and stone dust; rate was fixed by the principal contractor; the assessee placed the order on the sub contractors for supply of the said stone and stone dust by adding his margin. Such supply was made; the principal contractor paid the amount and the assessee in turn paid the amount to the sub contractor. In the circumstances, it is humbly submitted that the observations of the learned CIT-DR are MIsplaced and do not constitute any supporting evidence for his subMIssions. 57. The learned CIT-DR mentions that the supplies were made o....
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....losed a sum of Rs. 55.17 crores and furnished the year-wise break up. It is submitted that the MD filed affidavit clarifying as to how he gave admission of Rs. 55.17 crores. The learned CIT-DR mentions that the disclosure was made in the year 2011 and the retraction was afterwards. It is humbly submitted that the copies of the statements recorded are provided much later and immediately on receipt of the copies of the statements on 2.1.2015, affidavit were filed. The learned CIT-DR is not justified in mentioning that the withdrawals made by the sub contactors were utilized for the purpose of making cash payments. This is not justified as neither the Assessing officer nor the CIT (Appeals) made any comment about the same. 61. The learned CIT-DR mentions that the amounts paid to the persons should be treated as income u/s 69C of the I.T. Act and deduction u/s 80IA(4) shall not be allowed on the said amount. In this regard the assessee humbly submits that no payments as presumed by the CIT-DR were made by the assessee. Further, the assessee company did not debit any expenditure which is not allowable as a deduction. 62. The Assessing Officer at the time of assessment ....
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....ee is concerned, it is a sub contract payment made as per the agreement and the assessee proved the fact that the work entrusted to the sub contractor was completed and the principal contractor paid consideration. (4) The decision of the High Court of Calcutta in the case of Kalyani Medical Stores reported in 80 taxmann.com158: This decision has no relevance to the facts of the assessee's case. It is distinguishable on facts. In the said case, the assessee is required to prove the purchases. The assessee failed to prove the genuineness of the purchases. In so far as the assessee is concerned, it is a sub contract payment made as per the agreement and the assessee proved the fact that the work entrusted to the sub contractor was completed and the principal contractor paid consideration. (5) Decision of ITAT Mumbai in the case of Soman Sun City in ITA No.2960/Mumi2016 dated 23.10.2017: This decision has no relevance to the facts of the assessee's case. It is distinguishable on facts. In the said case, the assessee is required to prove the purchases. Assessing Officer made the addition by applying the provisions of Sec.69C of the I.T. Act. ....
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....2000) 112 Taxman 480 dated 4.8.2000. In the said case, the issue is with regard to the discharge of the burden enforced on an assessee u/s 68 of the I.T.Act. The Hon'ble High Court is of the view that no question of law arises when the Tribunal found that based on the evidences the claim that certain parties advanced amounts is found to be non genuine. The burden of proof as required u/s 68 is totally different than the claim of expenditure. In the case of the assessee the question is allowability of the sub contract payments made. The assessee proved beyond any amount of doubt that the sub contracts were given and the works entrusted were all genuine. Therefore, the facts are distinguishable. (10) The decision of the High Court of Madras and the Supreme Court in the case of B. Kishore Kumar Vs DCIT, Chennai. In this case, addition was made by applying the provisions of Sec.69A of the Income-Tax Act. The assessee admitted that he had separate business income which was not disclosed to the department and that the investments were made from out of the same. The facts in the said case are different to the facts ascertained in the case of the assessee. ....
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.... The decision of the High Court of Andhra Pradesh in the case of Kermex Micro Systems (India) Ltd. Reported in (2014) 47 taxmann.com 375 dated 2.1.2014. In the said case, the addition was made by applying the provisions of Sec.69C of the I.T Act. In the said case, the assessee did not retract at the time of assessment. He admitted additional income by making voluntary disclosure. He paid tax. Before the CIT (Appeals) the issue was raised without even raising a ground of appeal. The circumstances in the said case are totally different. 64. In view of the above submissions, the observations made by the Assessing officer, the learned Commissioner of Income-Tax (Appeals) and learned CIT-DR may please be rejected and the addition made by the Assessing officer towards disallowance of sub contract payments may kindly be deleted." 10. Ld. DR, on other hand, also filed written submissions, which are as under: "6. It is humbly submitted that the following anomalous features are noticed with regard to payments made to the alleged sub-contract works and suppliers: a) The alleged sub-contractors are of men of meagre means and there is no proof that they ex....
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....the cash was duly handed over to Shri D. Sreedhar Reddy, MD of the assessee and Mr. AKVS Srinivas, CFO of the assessee. There is a serious contradiction in the statements of the employees of the assessee as well as Mr. Sreedhar Reddy/Mr. AVKS Prasad on one hand and the sub-contractors on the other hand. While it is admitted by the first side that the amounts were withdrawn and handed over to the MD/CFO at their directions, the sub-contractors claim that the employees withdrew the amounts at their request and handed over cash to them. Which of the statements was correct was not explained by either side except for retractions in February, 2015 which are an afterthought as already submitted. e) The alleged sub-contractors/suppliers claimed to have carried huge amounts of cash to distant locations to make payments to the vendors and service providers several months after the purchases or execution of labour work. Except for stating that they travelled by train and road, no proof is shown for carrying the cash and even the dates of travel are not specified. f) Admittedly, the sub-contractors did not maintain any books of accounts and have no records or documents except....
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.... withdrawals immediately after making payments through RTGS was confronted to Shri D. Sreedhar Reddy in the course of his Statement u/s 132(4) on 29-12-2011. He did not produce the sub-contractors for verification. These alleged sub-contractors are also shown to have executed works at Karnataka, waited for payments for more than one year and immediate after payments are made into their accounts, the employees of the assessee withdrew the amounts in cash and handed over to the MD and CFO of the assessee. In the assessment proceedings also, the details were confronted to the assessee. k) The material impounded during survey conducted at the office of the assessee at Bangalore on 30/11/2011, the statement of Shri K. Ramachandra Rao, director recorded during the survey as well as the statement recorded on the same day from Mr. Gani Verma during search clearly reveal that the assessee is engaged in systematic activity of inflating the expenditure to meet inadmissible cash payments. In his statement during survey, Mr. K. Ramachandra Rao, Technical director of the assessee admitted that payments were made in cash for award of contracts and for release of payments. The evidence wa....
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....r "confusion" is a mere afterthought to avoid taxes. This is because firstly, one cannot be in a confused state for months and secondly, no evidence is produced countering the evidence confronted to the assessee by the Department in the search, post-search and assessment proceedings. On the contrary, there is credible evidence to the fact that the assessee was making in adMIssible payments in cash for obtaining contracts and for release of payments. Also, when the transactions were confronted, there was clear admission that the money was used for expenditure which cannot be explained. It is humbly submitted that considering the quantum value of the transactions and the fact that they occurred over a long period of time, there is no way the persons behind these transactions like the MD and CFO would be in "confused state" as the activity is systematic and conducted with a view to siphon off cash. 8. In the face of mounting evidence of huge cash withdrawals by the assessee from the accounts of sub-contractors after transferring huge amounts to alleged sub-contractors, the claim that the work was completed to the satisfaction of the assessee by sub-contractors and the princip....
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....can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings". 13. Reliance is also placed on the decision of Hon'ble Supreme Court in the case of Sun Engineering Works Pvt Lt (198 ITR 297) and in the case of Chettinad Corporation Pvt. Ltd. Vs. CIT reported in (200 ITR 320) on the point that fresh claim of deductions cannot be made in reassessment proceedings. In the present case, the proceedings are in the nature of reassessment proceedings because the original assessments were concluded earlier for most of the years.The return in response to notice u/s 153A is also not filed within the time specified. In light of the above, it is submitted that a search assessment cannot be used for the benefit of the assessee to make new claims of deduction in case of completed assessments because the search assessment is only a "reassessment" on the basis of material relate to search action u/s 132. 14. It is also submitted that it was also not correct on the part of the learned CIT(A) to remit the matter back to the AD for appropriat....
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....re Gems, Jaipur - II, 88 Taxmann.com 476 5. Kalyani Medical Stores, 80 Taxmann.com 158 6. Soman Sun citi, ITA No. 2960/Mumi16, dt. 23rd October, 17 7. Shoreline Hotel (P) Ltd., [2018] 98 Taxmann.com 234 8. Sun Steel Industries (P) Ltd., ITA No. 531/Kol/2016, dt. 19.02.18 9. Narender Kumar Gupta, [2015] Taxmann.com 371 10. RB Mittal, [2000] 112 Taxman 480 11. B. Kishore Kumar, [2015] 62 Taxmann.com 449 (Mad.) 12. Hotel Kiran, [2002] 82 ITD 453 (Pune) 13. Kermex Micro Systems (India) Ltd., [2014] 47 Taxmann.com 375 14. Jai Steel (India), Jodhpur, [2013] 36 Taxmann.com 523 15. Plastiblends India Ltd., [2017] 86 Taxmann.com 137 (SC) 16. K. Venkataramaiah Vs. A. Setharam Reddy & Ors., 1963 AIR 1526 17. ITO vs. B.N. Bhattacharya, 112 ITR 423 18. R. Dalmia Vs. CIT (Central), 113 ITR 522 19. Anaikar Traders & Estates Pvt. Ltd. Vs. CIT, 186 ITR 313 11. Considered the rival submissions and perused the material on record. From the records submitted before us, we notice that assessee is a civil contractor engaged in the development of infrastructure faciliti....
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....e assessee has completed the contracts themselves and some contracts were awarded to sub-contractors on back to back basis. It is pertinent to note that the contracts awarded to sub-contractors are always relating to execution of excavation or filling of land, which are always regarded as work of unorganized sector. And the work executed by the sub-contractors are categorized of this nature. The assessee has submitted before tax authorities that all these works were completed and the assessee has raised respective bills and got compensation for the same. The execution of the work is important and how they executed is the issue before us and the facility extended by the assessee to sub-contracts in withdrawing the cash is also under scanner. 11.1 In our view, considering the submissions and peculiarity of the industry under consideration, there are two types of sub-contracts depending upon the nature of works to be executed. They are independent sub-contractors, who execute the work independently and submit the bills with the proof of completing the work. Whereas, the second type are dependent sub-contractors, who are well versed with the execution of technical side but are lacki....
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...., the sub-contractors commonly would settle only for cash payments. It cannot be ruled out that cash were supplied to such places by the sub-contractor themselves or was helped by the assessee. 11.6 Assessee has submitted a combined statement for execution of contract work, the same are given below for the sake of clarity: Project: a) Megha - for earthwork excavation for laying MS Pipeline concrete pedestals at required intervals and back filling of trench. b) Krishnapatnam Port c) Ratna SRMC Executed in AY 2008-09; Value : Rs. 24.07 crores Sub-contract - Sushi Udyog Constructions-Rs. 9.92 crores - Siri Engg. - Rs. 4.36 - B. Narasimha - Rs. 1.49 crores - Rs. M. Krishna - Rs. 0.50 crores - T. Srinivas - Rs. 1.02 crores - Surya Erectors - 2.50 crores - Gee Constructions - Rs. 0.39 crores. d) Execution of hard rock excavation for the foundations at our Chitrapuri Housing Project at all depths as per the drawings upto the foundation level. Executed in AY 2010-11 Value - Res. 4.20 crores Sub-contact - Sushi Udyog Constructions - Rs. 1.68 crores e) Multi villages rur....
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....ssessee. Further, we propose to freeze the income earned by the sub-contractor @ 5% as the normal profit in this line of business. By this, we are technically upholding 10% of the sub-contract revenue as income. Accordingly, grounds raised by the assessee on this issue are partly allowed. 12. Let us now consider the Revenue's appeals for the respective A.Ys. 2009-10 to 2012-13 against the order of the CIT (A)-II, Hyderabad, dated 30.03.2017 and the order of CIT(A) - II dated 19/10/2018. Appeals filed by the department against the orders dated 10/10/2018 of CIT(A) -II, Hyderabad are to the effect that the assessee is not entitled for deduction u/s 80IA of the IT Act. 12.1 As stated in the above paragraphs, during the assessment proceedings u/s 143(3) r.w.s. 153A of the Act, the AO noticed that consequent to search operations, a notice u/s 153A dated 5.5.2012 was issued calling for the return of income giving 30 days' time to furnish the same and that the said notice was acknowledged on 10.12.2012 and therefore, according to the AO, the return ought to have been filed on or before 9.1.2013 but the assessee filed the returns on 14.2.2013 with a delay of 36 days and that too the ....
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....her on the facts and in the circumstances of the case, the Ld.CIT(A) erred in holding that there is no legal sanction for the time limit prescribed by the AO in the notice u/s 153A without appreciating that the section 153A itself empower the AO to prescribe the period within which such return is to be filed by the assessee and thus the return filed after prescribed time has been rightly treated as belated and thus the return filed u/s 153A is to be governed by the provisions of section 139(4) which precludes the assessee from filing any revised return. 4. Whether on the facts and in the circumstances of the case, the CIT(A) failed to appreciate that the assessee failed to obtain report of Audit in Form 10CCB on or before the due date as specified in section 139(1) of the Act and failed to furnish the report of such Audit with the return filed u/s 139(1) or return originally filed u/s 153A as required u/s 80IA(7) read with Rule 18BBB. 5. Whether on the facts and circumstances of the case, and in law, the Id. CIT(A) erred in allowing the claim of deduction u/s 80-IA which was made first time in the return filed u/s 153A without appreciating the fact that the provis....
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....l Service Coop. Bank Ltd vs. CIT (2016) 384 ITR 490 (Ker.) v) ITAT Ahmedabad Bench in the case of Parmeshwar Cold Storage (P) Ltd vs. ACIT (2012) 49 SOT 67 (Ahd.) (URO) 14. For the A.Y 2012-13, the provisions of section 153A are not covered as the search was conducted on 30.11.2011 and the revised return of income was filed within the time allowed u/s 139(5) of the Act. 15. Having regard to the rival contentions and the material on record, we find that the restrictions to making the claim u/s 80IA are prescribed u/s 80AC of the Act which reads as under: "Deduction not to be allowed unless return furnished. 80AC. Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139. 16. Thus, it can be seen that to be eligible ....
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....fore the due date prescribed for completion of assessment u/s. 153A. However, such return filed beyond the time limit provided in notice u/s.153A or extended by the AO or in case there is no specific extension granted also, the return, if any, filed by the assessee before the completion of the proceedings shall be considered as valid return of income. On the other hand, the assessee has to face the consequences for not filing the return of income within the time limit provided in the notice u/s. 153A or beyond the time extended by the AO in terms of- a. interest u/s. 234A(3) subsequent to completion of assessment from the date of expiry of time provided u/s. 153A till the date of filing the return of income or in case no return of income is filed, up to the date of completion of the assessment; b. the assessee is liable to penal provisions u/s. 271F; and c. assessee may be tried for prosecution u/s. 276CC. In all the above three provisions, it is clearly stated that in the event of non-filing the return of income within the time provided in notice issued u/s. 153A, the assessee is liable for interest, penalty and prosecution accordingly. In view ....
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....tained by the CIT(A) are to be considered as valid. It was further submitted that Ld.CIT(A) has taken all steps by sending the documents filed before him for the comments of the AO, not only regarding computation of income and self-assessment tax but also other additions made. The AO indirectly accepted that the computation of income to be correct and no self-assessment tax would arise. It was submitted that Ld.CIT(A) also accepted the computation of income as there was no incriminating material and even though he has not mentioned very clearly that Section 249(4) is not attracted, the fact that he has disposed-off the appeals on merits do indicate that he has considered the revised computation and has taken into account the fact that no taxes are payable on that computations. It was further submitted that Ld.CIT(A) has not directed the AO to make the assessments on the basis of the revised computations. Therefore, assessee is in appeal. Ld. Counsel relied on various judicial proceedings that incomes which were wrongly included should not have been brought to tax and the various judicial precedents relied on is as under: i. Shri C. Radhakrishna Kumar Vs. Asst. Commissioner....
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....n of income ignoring the revised return filed by the assessee. We, therefore, decide this issue in favour of the assessee on merit and delete the addition made by the AO and confirmed by the learned CIT(A) on this issue. 10.2....................................................................................10.3....................................................................................11..................................................................................... 12.......................................................................................13....................................................................................... 14.. At the same time, it is also to be noted that the tax has to be collected in accordance with law and any legal claim which is not properly made by inadvertence or ignorance should not be denied merely because assessee did not make a claim in the return of income. The Income Tax Act is meant for collection of correct tax and it cannot be treated as a lis between two parties but a tax adjustment as explained by the Hon'ble Madras High Court in the case of CIT Vs. Indian Express (Madurai) Pvt. Ltd.....
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.... wherein while dealing with a similar issue, the main features of the relevant provisions were noticed by the Tribunal and after analysing the same, it was held by the Tribunal that any deduction claimed by the assessee in the proceedings under section 153A could not be rejected simply on the ground that it was not claimed in the original assessment. The relevant observations recorded by the Tribunal as contained in paragraph Nos. 6 to 9 of its order are extracted below : "6. From the prescription of the above section the following features are noticeable in so far as we are concerned with the instant appeal :- _ Assessment pursuant to search is to be made notwithstanding anything contained inter alia in section 147 ; - Clause (a) of sub-section (1) provides that the relevant provisions shall apply as if the return filed in response to notice u/s 153A(1) is a return required to be furnished under section 139 ; - First proviso to sub-section (1) states that the Assessing Officer is required to assess or reassess "total income" in respect of each assessment falling within the relevant six assessment years. - The second proviso to sub-secti....
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....dering the provisions of section 147 and it was held that once an assessment is validly reopened it is not open to an assessee to seek a review of concluded items unconnected with the escapement of income. Here it is pertinent to note that the conditions for taking action u/s 147 vis- vis under section 153A are altogether different. Even though assessment u/s 147 is made read with section 143(3), but the initiation of assessment or reassessment u/s 147 originates from the belief of the AO, on the basis of some tangible material, that income chargeable to tax has escaped assessment. After forming such belief, the AO is called upon to record reasons for the reopening of the assessment before issuing mandatory notice u/s 148. If the foundation of reassessment, being the reasons about the escapement of some income do not exist, then it is impermissible to go ahead with the assessment u/s 147. It is sine qua non that some escaped income must be brought to charge in order to make a fresh assessment u/s 147. On the contrary, the search action itself mandates on the Assessing Officer to pass orders u/s. 153A computing total income for all the relevant six assessment years, irrespective of ....
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....fter going through the Judgment of Hon'ble Rajasthan High Court in the case of Jai Steel (India) vs. ACIT (supra), we find that the facts involved therein were materially different from the facts involved in the present case as rightly pointed out by the Ld. Counsel for the assessee. First of all, the claim made by the assessee in the said case in the return filed in response to the notice undersection 153A for the first time was that the Sales Tax incentive received by it was a capital receipt and the same being a subject matter of claim and not a regular allowable deduction as per the provisions of the Act, it was considered that the same required the initiation of claim and conclusion on the basis of facts and other judicial pronouncements. Moreover, no incriminating material was found in the said case before the Hon'ble Rajasthan High Court during the course of search and in the absence of such incriminating material, it was held by their Lordships that the assessment or re-assessment under section 153A would not result in any addition and the assessment passed earlier may have to be reiterated. In this regard, Hon'ble Rajasthan High Court referred to the decision o....
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....High Court in the case of Jai Steel (India) vs. ACIT (supra), thus is not applicable to the fact situation involved in the present case and the reliance of the Ld. CIT(A) thereon to hold that the assessee is not entitled to make a new claim for deduction under section 80IA for A.Ys. 2006-07 to 2008-09 wherein the assessments had been originally completed under section 143(3) is clearly misplaced. 5. At the time of hearing before us, the learned CIT/DR has relied on the decision of Hon'ble Bombay High Court in the case of CIT vs. Murali Agro Products Ltd., (I.T. Appeal No.36 of 2009 dated 29.10.2010) and that of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (Income Tax Appeal No.707 of 2014 and others dated 28th August, 2015) in support of Revenue's case. It is, however, observed that the issue involved in both these cases was whether the A.O. was empowered to make additions to the total income of the assessee in the assessments completed under section 153Awithout there being any incriminating material found during the course of search and it was held in this context by the Hon'ble Bombay High Court as well as Hon'ble Delhi High Court ....
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....er section 153A cannot be denied on the ground that the claim was not made earlier. The Tribunal also relied on the decision of its Coordinate Bench in the case of DCIT vs. Eversmile Construction Co. P. Ltd., (supra) and held that the returns filed by the assessee under section 153A are to be treated as returns filed under section 139(1) by virtue of the law stated in section 153A(1)(a) and the assessees therefore, are entitled for deduction available under section 80IB(1). 7. It is thus that the decision of Mumbai Bench of this Tribunal in the case of Eversmile Construction Co. P. Ltd., (supra) as well as the Chennai Bench in the case of V.N. Devodoss (supra) is based on the relevant provisions of law including especially that of section 153A(1)(a). In the case of Hyderabad Chemicals Supplies Ltd., (ITA.No.352/Hyd/2005 dated 21.01.2011) it was held that when the decision of the Tribunal is based on the relevant provisions of law, the same is to be followed over the decision of the non-jurisdictional High Court that has been rendered without considering such statutory provisions that are directly relevant. We, therefore, follow the decision of the Chennai Bench of this Tri....
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....h the Finance Act 33/2009 with effect from 1.4.2013 after the insertion of section 80AC as per the Finance Act of 2006 with effect from 1.4.2006. This clearly evidences the legislative intendiment that the inhibition contained in subsection 5 of section 80A would operate by itself. In cases where returns have been filed, the question of exemptions or deductions referable to section 80P would definitely have to be considered and granted if eligible. 20. Here, questions would arise as to whether belated returns filed beyond the period stipulated under section 139(1) or section 139(4) as well as following sections 142(1) and 148 proceedings could be considered for exemption. If those returns are eligible to be accepted in terms of law, going by the provisions of the statute and the governing binding precedents, it goes without saying that the claim for exemption will also stand effectuated as a claim duly made as part of the returns so filed, for due consideration. 21. When a notice under section 142(1) is issued, the person may furnish the return and while doing so, could also make claim for deduction referable to section 80P. Not much different is the situation whe....
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.... his order, held that the AO has disallowed the claim u/s 80IA only on the ground that the belated return of the assessee cannot be considered and that the contract agreements specific to each of the project claimed to be eligible, have not been examined by the AO. At Para 13.2 of his order, the CIT (A) has brought out the project-wise details of net profit transferred to the income computation which is claimed as a deduction u/s 80IA in the form of a table. Thereafter, he has directed the AO to evaluate the credentials of the contractor as a developer with reference to the specific facts of each contract where such claim is made and also directed the assessee to provide all the necessary details to the AO. The CIT (A) also observed that section 80IA(4)(i)(b) requires that the development of infrastructure facility should be pursuant to an agreement entered into by the assessee with the Central Govt./State Govt./local authority/any other statutory bodies. After verifying the information furnished in the table, the CIT (A) observed that some of these agreements are prima facie, not with the Govt. or any other such authority but are with private parties such as Ratna Infrastructure P....
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....24. Aggrieved, the assessee's preferred appeals before the CIT(A) and submitted that the AO estimated the income at 12.5% of the gross receipts. It was submitted that the AO impliedly accepted that 87.5% of the receipt was spent by the assessee and, therefore, the AO was not justified in holding that there is no sub-contract work undertaken by the assessee. Further, it was submitted that the AO was not justified in estimating the income at 12.5% of the gross contract receipts, as the ITAT, in a number of cases held that the income from sub-contract activities would be 5%. 24.1 As regards applicability of proceedings u/s 153C of the Act, the assessee submitted as under: "The assessee humbly submits that no information was found during the course of search and seizure operations. Therefore, the proceedings initiated u/s 153C of the IT. Act are not valid The said proceedings can be initiated only if some information is found during search and seizure operations of other person. In the case of the assessee no such information was found during search operations in the case of Sai Sudhir Infrastructures Ltd According to the provisions of Sec. 153C as they existed at the relev....
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.... Being so, an independent assessment of these persons/entities in respect of alleged contract work and related payments allegedly received would have no legs to stand on. He, therefore, directed the AO to delete the income brought to tax protectively in the hands of the assessee. 26. Aggrieved, the revenue as well as assessee are in appeal before us raising similar grounds as discussed in para12 above. 27. Ld. DR relied on the grounds of appeal and submitted that even though ld. CIT(A) found that it is protective assessment, but still, the sub-contractors must have earned income either as profit from the business or as commission. 28. Ld. AR relied on the written submissions. 29. Considered the rival submissions and perused the material on record. As per our discussion in Para 11 above and conclusions drawn therein, we held that Ld. CIT(A) has confirmed the addition based on human probabilities and presumptions and not relying on any material on record. The revenue declared by sub contractors is to be treated as income from business and the income from main contract, in this line of business, the Hyderabad benches have treated 8% as normal, for sub contract business, it....
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....s under: "For the Assessment year 2008-09- the assessee received contract receipts of Rs. 9,92,48,346 and arrived at a profit of Rs. 36,61,230/-. The books of account are properly maintained and the books were audited by the Chartered Account The audit report as required u/s: 44AB was obtained on 25.09.2008. There was a delay in filing the return of income and the assessee filed the return of income on 15.09.2011 enclosing the Audit Report After the said return of income was filed, the Income Tax Authorities conducted search and seizure operations at the premises of Sai Sudhir Infrastructure Pvt Ltd 30.11.2011 and the Assessing Officer initiated proceedings u/s. 153C of the I.T. Act The Assessing Officer completed the assessment u/s 144 r.w.s.153C on 12.03.2014. In the said assessment order, the Assessing Officer did not mention that proceedings u/s 271B were being initiated However, the Assessing Officer by his order dated 12.03.2014 levied a penalty of Rs; 1,00,000/- holding that there was failure to respond to the provisions of Sec 44AB of the I.T. Act. The Assessing Officer in the said order mentioned that there was a requirement for the assessee to get the books of ac....
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....y the AO u/s 271B by observing as under: "7. I have gone through the facts of the case and submissions of the assessee. On careful consideration for A.Yrs. 2008-09, 2009-10 & 2010-11, it is seen that in the circumstances of the case, characterized by non-compliance with the notices issued, the Assessing Officer had to necessarily assume that the required Tax Audit was not carried out. It is the stand of the Ld. AR that the Assessing Officer might not have had any earlier occasion to notice the Tax Audit report, but now that such a report dt 25.09.2008, 25.09.2009 and 20.09.2010 respectively have been brought on record, it has to be held that the audit was indeed carried out by the prescribed date, because of which the impugned penalty has to be deleted. In other words, the Assessing Officer might have had a valid reason for the erroneous assumption based on which the penalty had been levied. The fact however, is that in the light of the documents (respective Tax Audit Reports) now submitted, and in the absence of anything to show that the report was ante-dated, it has to necessarily be held that the assessee's accounts were audited by the prescribed date. However, a pl....
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.... times during assessment as well as penalty proceedings were never availed, leading to ex-parte decisions. It is not the case of the assessee that business operations ceased during the year of account. The assessee, however, claims that he merely ceased to maintain books of account. This new claim introduced for the first time in appellate proceedings after substantial efflux of time, is neither credible nor probable. Seen in this light of the matter the non-compliance with provisions of section 44AB is not satisfactorily explained, as a result of which the order of penalty dated 12/03/2014 for AY 2011-12 does not call for any interference. 7.2 It is also stated in the written submission that the Assessing Officer did not record initiation of penalty proceedings u/s.271B in the assessment order. It was further submitted that penalty proceedings could not have been initiated because earlier proceedings abate once a notice under section 153C is issued. These objections do not hold water because penalty proceedings u/s.2718 are independent of assessment proceedings and there is no requirement that they should necessarily have been initiated in the course of assessment proceed....