TaxTMI 
TaxTMI 
2022 (8) TMI 125
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....by the learned assessing officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the learned Pr. CIT is ultra vires to the scope of Section 263 and requires to be cancelled under the facts and circumstances of the Appellant's case. 3. The Ld. Pr. CIT failed to appreciate that the direction to make fresh assessment amounts to ordering for making fishing and roving enquires without any material in support thereof and consequently the impugned order passed is bad in law is liable to be cancelled. 4. The Pr. Commissioner of Income Tax is not justified in directing the assessing officer to compute the income derived from the execution of huge project worth Rs. 1,37,21,75,327/- under the facts and circumstances of the Appellant's case. 5. The Pr. Commissioner of Income Tax is not justified in directing to examine the difference of Rs. 1,10,53,576/- under the facts and circumstances of the Appellant's case. 6. The Pr. CIT ought to have considered the fact that there are no amounts which have been transferred by the Appellant as bank guarantee nor a....
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.... invoking of the provisions of section 263 of the Income Tax Act and consequently the impugned revision order passed under section 263 is sought to be cancelled. The assessee is an Association of Person, formed as a special purpose vehicle (SPV) having two Joint Venture partners namely M/s Rithwik Projects Private Limited & M/s R.K. Infra & Engineering (India) Private Limited. The assessee filed its return of income for the year under consideration on 30.09.2011 declaring total income at Nil. The assessee also filed revised return of income on 31.08.2012 declaring total income at Nil but claimed refund on account of TDS of Rs. 5,37,892/-. The case was selected for scrutiny under CASS and scrutiny assessment was completed under section 143(3) on 07.03.2014 by accepting the return of income at Nil. Thereafter, the Pr. CIT on examination of the assessment record, noticed that M/s Ratna Infrastructure Project Private Limited was awarded a contract of Rs. 1,37,21,75,327/- on 18.05.2010 by Meja Urja Nigam Private Limited for side levelling and infrastructure work package. Subsequently, a work contract agreement was signed between Meja Urja Nigam Private Limited and M/s Ratna Infrastructu....
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.... Commissioner issued a show cause notice under section 263 dated 7.10.2015 whereby the assessee was asked to show cause and explain as to why the assessment order passed by the Assessing Officer be not treated as erroneous and prejudicial to the interest of the Revenue and be cancelled to be revised under the provisions of section 263 of the Income Tax Act. The assessee represented before the Pr. CIT through his Authorized Representative and filed its submissions / reply to the show cause notice. The Commissioner was not satisfied with the reply and explanation of the assessee on the various issues raised in the show cause notice and held that the assessment order passed by the Assessing Officer was not only erroneous but also prejudicial to the interest of the Revenue and consequently the same was cancelled with the directions to the Assessing Officer to frame fresh assessment in accordance with specific directions on each of the issues. 4. Before the Tribunal, the learned AR of the assessee has submitted that the assumption of the jurisdiction by the learned Pr. CIT is bad in law and consequently the order passed under section 263 of the Act is required to be cancelled in toto....
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....ed and placed on record. The case was discussed at length. The Assessing Officer has accepted the fact that as per the Joint Venture agreement for execution of work, the sub contract is on 100% back to back basis with 50% share to each of the Joint Venture partners and accordingly the Assessing Officer has accepted the total income at nil as returned by the assessee. The learned AR has referred to the various clauses of the sub contract / Joint Venture agreement to show that the Joint Venture was constituted by Joint Venture agreement for execution of work on 100% back to back basis with 50% share for each of the Joint Venture partners and consequently the income from the work contract has to be assessed in the hand of the Joint Venture partners. The assessee passed on the receipts in the ratio of 50-50 to each of the Joint Venture partners after deduction of TDS which is a matter of record. Further, the various issues raised by the Pr. CIT at the time of issuing the show cause notice were duly explained and are reconciled by the assessee as there is no discrepancy either in the actual receipts or receipts in the balance sheet in comparison to the receipts reflected in the bank acc....
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....ther enquiries rather than accepting the explanation. The learned AR has also relied upon the following decisions:- 1. CIT vs. Amit Corporation 21.taxmann.com 64 2. CIT vs. Sun Beam Auto Limited 332 ITR 167 3. CIT vs. Gabriel India Limited 203 ITR 108 4. CIT vs. Vikas Polymers 194 taxman 57 5. CIT vs. G.M. Mittal Stainless Steel (P) Ltd.203 ITR 255 6. Sarvana Developers vs. CIT in ITA No. 620/Bang./2011 7. Malbar Industrial Co. Ltd. vs. CIT2 43 ITR 83 8. CIT vs. Max India Limited 295 ITR 282 9. CIT vs. D.G. Gopala Gowda 254 ITR 501 10. Linde AD, Linde Engineering Division VWP No.3917/2012 vs. DDIT 11. CIT vs. Oriental Structural Engineers Pvt. Ltd. ITA No. 444/2014 12. KCL AMRCL JV vs. ITO ITA No. 1409/H/16 6. On the other hand, the learned CIT DR has referred to the show cause notice issued by the Commissioner and submitted that the Pr. Commissioner has observed from the record that there are various points and discrepancies on the record which were not examined by the Assessing Officer and submitted that the assessee has evaded the tax liability by not showing even the q....
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....rification of the relevant details certainly renders assessment order erroneous and prejudicial to the interest of the Revenue. Though the difference in the total receipts shown by the assessee and reflected from the bank account as well as the receivables reported by the assessee was claimed by the assessee on account of deposits of mobilization advance received from M/s Ratna Infrastructure Project Private Limited which was to be adjusted against the subsequent running bills however the correctness of the claim was not verified. Further, the funds were released by Meja (NTPC) to M/s Ratna Infrastructure Project Private Limited after making various deduction mobilization advance recovery, interest on mobilization advance, Income Tax TDS, Work Contract Tax, TDS, Labour Cess, liquidation damages etc., which was released to the Joint Venture after making further deductions in IT TDS, its markup commission etc. Therefore, the assessee failed to explain the difference of the said amount of Rs. 1,10,43,576/- as raised by the Pr. Commissioner. The Assessing Officer never asked for these details and did not verify them to cross check the correctness of the details therefore, the lack of e....
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....) 80 TTJ 915 (Cal.-T) (T.M.)" 7. We have considered the rival submissions as well as relevant material on record. The assessee Joint Venture was formed by its two partners namely M/s Rithwik Projects Private Limited & M/s R.K. Infra & Engineering (India) Private Limited. The assessee filed its return of income declaring nil income by claiming that Joint Venture was created to enter into sub contract with M/s Ratna Infrastructure Projects Private Limited on 100% back to back basis. The Assessing Officer accepted return income while passing the assessment order under section 143(3) on 7.3.2014 as under:- "In this case assessee has e-filed his revised return of income for A.Y. 2011-12 declaring taxable income at Nil vide acknowledgement no. 47819688310812 on 31.08.2012. Original ITR was e-filed on 30.09.2011 vide acknowledge no. 300342981300911. The case was selected for scrutiny. Notice U/s 143(2) dt. 12.08.2013 was issued fixed hearing on 02.09.2013 and was served through registered post. Thereafter notice u/s 142(1) of the income tax was issued on 17.10.2013 along with questionnaire requiring assessee to furnish required information and documents. Shri Pawan Kumar Chakr....
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....Assessing Officer issued notice under section 142(1) alongwith the questionnaire. We find that the questionnaire annexed to the notice under section 142(1) for the assessment year 2011-12 is placed at page no. 439 of the paper book filed by the assessee which is reproduced as under:- 1. Copy of Memorandum and Bylaws of the society/trust constituted under society registration act, 1860/ copy of registered trust deed established under the Indian Trust Act, 1882 and registered with the concerned authorities as applicable in your case. 2. Copy of registration certificate under Section 12AA, U/s 10 (23C) (vi)/(via) and approval u/s 80G (5)(vi) of the IT Act, 1961. 3. Details of bank A/c and copies bank statements for the period under consideration. Details of FDRs and other investments made with the Banks and other persons/institutions. 4. Details of additions made to the fixed assets with evidences/copies of invoices and vouchers etc. 5. Copy of return of income alongwith audited account and audit report duly signed by the CA in Form No. 10B for earlier two years to show the option exercised under Section 1191) of the IT Act, 1961. ....
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....ssues which were taken up by the Pr. CIT while invoking the provisions of section 263 of the Income Tax Act. For ready reference, we reproduce the show cause notice issued by the Pr. CIT dated 7.10.2015 as under:- "It was the 1st year of business and the assessee showed receipts of Rs. 20,33,34,166/- the bank statements available on record have been examined and it has been noticed that the following receipts are reflected in the bank statements. i. 3 February 2011 Union Bank of India 4,90,00,000 ii. 16 November 2010 Union Bank of India 10,000 iii. 11 February 2011 Union Bank of India 6,36,13,531 iv. 27 October 2010 Axix Bank 2,58,18,852 As is apparent from the above data, the joint venture received Rs. 13,84,42,388/- from Ratna. Further Rs. 7,59,45,359/- have been shown as receivable from Ratna. As such the total receipts for the year to be considered for the assessment of income is at Rs. 21,43,87,742/- . As such the joint venture has suppressed the receipts to the extent of Rs. 1,10,43,576/-. Accordingly, the assessment order passed by the assessing officer is erroneous in as much as the receipts of Rs. 1,10,53,57....
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.... give your comments with regard to how these amounts have been handled in your account. In view of the above observations you are hereby required to appear before the undersigned on 29.10.2015 at 11:00 AM at 38, MG Marg, Civil lines, Allahabad and explain why the assessment order passed in your case be not treated as erroneous and prejudicial to the interests of revenue and be cancelled to be revised under the provisions of Section 263 of the I.T. Act, 1961." 10. As it is evident from the show cause notice, the Commissioner has raised various points / issues which were not taken up by the Assessing Officer in the scrutiny assessment. Most of these issues are factual in nature and can be considered only by examination and verification of the relevant record including the various contract / agreements. Apart from the issue of taxability of the contract receipts in the hand of the assessee Joint Venture, the Pr. Commissioner has pointed out various other issues of discrepancies in the receipts declared by the assessee in comparison to the figures appearing in the bank account of the assessee and the amount shown by the assessee as receivable. Secondly, the Pr. Commissioner....
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.... M/s Ratna Infrastructure Projects Private Limited and M/s Rithwik Projects Private Limited and further forming a Joint Venture between M/s Rithwik Projects Private Limited & M/s R.K. Infra & Engineering (India) Private Limited. Without going through the terms and conditions of each of these contracts and memorandum of understanding the true nature of arrangements between the parties and flow of work as well as the contract receipts including the mark up of intermediateries parties the taxability of the income in the hand of each of the parties cannot be determined. Further when the Pr. Commissioner has raised various other issues and discrepancies with respect to the total contract receipts compliance of provisions of section 40(a)(ia) and non disclosure of bank guarantee and mobilization advances in the books of the assessee which were not taken up by the Assessing Officer clearly manifest that there is a complete lack of enquiry on the part of the Assessing Officer on these issues, much less an appropriate enquiry. Once the Assessing Officer has not conducted a proper enquiry and the case falls in the category of complete lack of enquiry then it would render the order passed by ....
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....33,34,166/- which is net of mobilization charges which were already received as mobilization advance by the assessee and adjusted against the running bills @ of 2% of bill amount. Therefore, the Pr. CIT has misconceived the amount of contract receipt by considering the entire deposits in the bank account of the assessee which includes mobilization advance receipt without verifying the correct details on this issue. He has further contended that when the contract receipts for the year under consideration is only to the extent of Rs. 20.33 crores , then the income cannot be computed by considering the entire contract amount of Rs. 137.21 Crores. Further, the learned AR has contended that once the sub contract was given to M/s Rithwik Projects Private Limited on 100% back to back basis which in turn formed the Joint Venture with M/s R.K. Infra & Engineering (India) Private Limited which is a Special Purpose Vehicle just to get the experience certificate of execution of a big size of project though the work was executed by the Joint Venture partners themselves and not by the assessee Joint Venture. The assessee have just passed on the entire contract receipts to the Joint Venture partn....
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....x Act being association of persons and a separate taxable entity and hence is liable to be assessed for the income arising from execution of the project. The assessee has disclosed the receipts in its profit and loss account and also shown in the bank account which is liable to be assessed. The net result of the business carried out by the assessee may be a profit or loss but the income from the activity undertaken by the assessee Joint Venture is liable to be assessed to tax. He has relied upon the impugned order of the Pr. Commissioner. 16. We have considered the rival submissions as well as relevant material on record. The first question arises is whether the assessee is a taxable entity or not? We are of the considered opinion that the assessee a Joint Venture clearly falls in the definition of persons provided under section 2(31) being an association of persons or a body of individuals whether incorporated or not? However, the income which is derived from the execution of the work under consideration is liable to be assessed in the hands of the assessee or in the hands of the Joint Venture partners depends upon the specific arrangements and facts including the risk and rewa....
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.... on the facts as well as terms and conditions of the various contracts, sub contracts, agreements as well as arrangements made between the parties. Needless to say the legal precedents relied upon by the parties are also required to be considered on the specific facts arrived as a result of the enquiry. Further, the income if any assessable to tax in the hand of the assessee shall be by considering the actual receipt during the year and not on the total value of the project. 17. Ground no. 5 is regarding the directions given to the Assessing Officer to examine the difference of Rs. 1,10,53,573/- between contract receipts declared by the assessee and the receipts reflected in the bank account as well as outstanding. The learned AR of the assessee has submitted that the Commissioner has misunderstood the facts regarding the contract receipts of the assessee during the year under consideration. He has pointed out that the assessee has declared the correct contract receipt during the year under consideration which is against the running bill raised by the assessee after adjustment of the mobilization advance which were already received and reflected in the bank account of the assess....
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....r considered nor examined these details. Therefore, in the absence of any enquiry, the order of the Assessing Officer is erroneous and the correctness of the details can be accepted only after verification and examination of the same. He has further contended that the Pr. CIT has directed the Assessing Officer to examine and verify the difference on account of the contract receipt hence, no prejudice is caused to the assessee if the correctness of the details and re-conciliation of the difference as pointed out by the Pr. CIT is produced before the Assessing Officer for his examination and verification. 19. We have considered the rival submissions as well as relevant material on record. The Pr. CIT has considered this issue as under:- "On The first issue, the assessee submitted that the deposit of Rs. 2,58,18,852/- on 27.10.2010 in Axis Bank received from Ratna is Mobilization advance which have been recovered by them subsequently in the running bills. Further, it has been submitted that Meja (NTPC) released funds to Ratna after making various deductions like Mobilization Advance recovery, Interest on Mobilization advance, Income Tax TDS, WCT TDS, labour Cess, Liquidate....
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....rder sheet entry dated 09/10th December, 2015, the assessee was required to furnish evidences in support of its submission. On both the above issue, the assessment order passed by the AO was squarely hit by the mischief of sub-clause (a) of explanation 2 to clause (1) of Section 263 which reads as under: Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, it, in the opinion of the Principal Commissioner or Commissioner. (a) The order is passed without making inquiries or verification which should have been made; The AO did not carry out any investigation worth its name rendering the order passed by him as erroneous and prejudicial to the interests of revenue." 20. Thereafter, the Pr. CIT has given its finding on this issue and directed the Assessing Officer as under:- "The assessee has failed to explain the reason for the suppression of Rs. 1,10,43,576/- which difference between the receipts to be considered for assessment (Bank deposits + receivable from Ratna) and the one sh....
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....en the question of showing the same in the balance-sheet does not arise. The Pr. CIT cannot pick up such an issue for revising the order of the Assessing Officer and directing the Assessing Officer to examine without giving specific directions. 23. On the other hand, the learned DR has submitted that it is evident from the record that the Assessing Officer has not conducted any enquiry therefore, the Pr. CIT is justified in directing the Assessing Officer to verify this issue as to why the bank guarantee of Rs. 10 crores on addition guarantee Rs. 3 Crore was not shown in the books of accounts of the assessee. 24. We have considered the rival submissions as well as relevant material on record. At the outset, we note that though the Pr. Commissioner has raised this issue in the show cause notice however, this issue was not specifically discussed by the Pr. CIT in the impugned order except the finding and direction as under:- "The assessee failed to explain how it had shown the transactions mentioned in the agreement with Ratna or how the transactions regarding bank guarantee as submitted in the reply have been reflected in its balance sheet. The AO is directed....
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....ent itself that the assessee has filed the statement of TDS submitted under section 200(3) in Form No. 26Q placed at page nos. 104 and 105 and the summary of the TDS as deducted by the assessee from the payment made to M/s R.K. Infra & Engineering (India) Private Limited & M/s Rithwik Projects Private Limited giving challan numbers is placed at page no. 106 of the paper book. Therefore, prima facie it appears that the assessee has duly deducted the tax at source (TDS) and paid the same to the account of the Government however, the Assessing Officer is directed to verify these details of payment of TDS and if the same are found to be correct then there will be no question of violation of provision of section 40(a)(ia) or deduction of TDS. 28. Ground no. 8 does not emanate from the impugned order of the Pr. CIT hence, the same is dismissed. 29. Ground No. 3 stands disposed of in terms of finding on ground No. 4 to 7 of the appeal. 30. For the assessment year 2012-13, the assessee has raised the following grounds:- 1. The order of the learned Principal Commissioner of Income Tax, Allahabad, passed under Section 263 of the Act, in so far as it is against the appellant....
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....s bank guarantee nor any collateral security given by the Appellant, under the facts and circumstances of the case. 10. The Ld. Pr. Commissioner of Income tax ought to have considered the facts that, the amount of bank guarantee an amount being Rs. 10crores, and additional mobilization advances an amount being Rs. 3crores, were not related to the impugned assessment year 2012-13, under the facts and circumstances of the case. 11. The Ld. Pr. Commissioner of Income Tax ought to have considered the facts that, the learned Assessing officer has already considered the T DS documents before passing the order of assessment, under the facts and circumstances of the case. 12. The Ld. Pr. Commissioner of Income Tax has erred by not appreciating the settled position of law that, where there are two opinions possible on an issue, section 263 cannot be exercised to invoke such an issue. 13. The Ld. Pr. Commissioner of Income tax has grossly erred in revising the order passed by the Ld. Assessing Officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by th....