AI Drafter 
TaxTMI 
TaxTMI 
2022 (11) TMI 1455
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....961 (hereinafter referred to as 'the Act') for Assessment Year (hereinafter referred to as 'A.Y.') 2010-11. Upon receipt of the notice on Revenue's appeal, the assessee also filed the aforesaid Cross Objection. Both are disposed of by this common order. 3. The Revenue has raised the following grounds of departmental appeal bearing ITA 216/Ind/2021: "1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.19,30,429/- made on account of disallowance of labor expense and has overlooked the findings of the AO mentioned in the assessment order. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.13,39,555/- made on account of disallowance of blasting expense and has overlooked the findings of the AO mentioned in the assessment order. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.75,23,136/- made on account of disallowance of site expense and has overlooked the findings of the AO mentioned in the assessment order. 4. ....
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....2022, cross objections inadvertently remained to be filed and it was only at the time of hearing of the case fixed on 23rd June, 2022 that it was noticed that cross objections had to be filed in respect of addition confirmed by the Ld. CIT(A) on one of the grounds. Having heard both the sides and perused the material on record, it appears that there is a bona fide reason for filing the instant cross objection with a delay of 113 days. Therefore, we condone delay in filing the instant cross objection. Likewise, there is delay of few days in filing departmental appeal. We find that due to Covid-19, the same happened. Therefore, the same is also condoned. 5. Brief facts as culled out from the records are that the assessee is a private limited company engaged in the business of government works contract for construction of roads. The income-tax return of the assessee for the A.Y. 2010-11 was filed on 15.10.2010 declaring total income at Rs.1,38,40,330/-. The case of the assessee was selected for scrutiny manually as per the statutory prescribed guidelines. The Ld. AO during the course of assessment proceedings made additions to the total income of the assessee on account of disallow....
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....idences were also filed before the lower authorities so as to substantiate the genuineness of various expenses incurred and debited in the profit and loss account. It was also submitted that no disallowance was justified under Section 40A(3) and Section 40(a)(ia) of the Act since the assessee did not make payment in cash to a single person on a single day in excess of Rs.20,000/- and that the assessee did not deduct TDS in respect of various other payments since those payments were not liable for deduction of TDS as per the provisions of the Act. The Ld. Counsel heavily emphasized on the fact that assessment in the case of the assessee was completed for the A.Y. 2009- 10 as well wherein the Ld. AO rejected the books of accounts of the assessee and estimated the net profit of the assessee at the rate of 6% which was later on reduced to 5% by the Ld. CIT(A) and the net profit rate of 5% was subsequently approved by the Hon'ble ITAT Indore Bench vide order dated 10.11.2014. Accordingly, it was argued by the Ld. Counsel that since the assessee itself declared net profit at the rate of 5.88% for the A.Y. 2010-11, there was no justification for making further addition to the total income....
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....lasting is necessary for construction and the person to whom the blasting payment has been made were having the blasting license. All the payments were made by account payee cheques. The appellant has also deducted the TDS on the above payment made. Therefore, the addition made by the Assessing Officer amounting to Rs. 13,39,555/- is Deleted. Therefore, the appeal on this ground is Allowed. 4.3 Ground No 3:- Through this ground of appeal, the appellant has challenged addition of Rs. 75,23,136/- on account of disallowance of site expenses. The Assessing Officer during the course of assessment proceedings observed that the site expenses have increased from Rs.28,20,853/- in the earlier year to Rs.1,09,92,329/- during the year under consideration. The appellant submitted that during the year under consideration, the contract receipt has been increased from Rs.19,15,31,078/- to Rs.23,55,53,052/- i.e. by Rs.4,40,21,344/-. The Assessing Officer during the course of assessment proceedings has not pointed out any defect in the books of accounts. Most of the expenses were incurred through account payee cheque. The appellant has deducted the TDS payable wherever applicable. Therefor....
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....nd of appeal, the appellant has challenged addition of Rs. 12,37,512/-/- on account of disallowance of artificial estimation of expenses of company. The Assessing Officer made the disallowance out of communication, conveyance, water & electricity, office running & maintenance expense, printing & accessory and travelling expenses. The above expenses are integral part of the business and appellant have to make the expenditure on this account. Therefore, the Assessing Officer is not justified in making the disallowance out of above expenses. Therefore, the addition made by the Assessing Officer amounting to Rs. 12,37,512/- is Deleted. Therefore, the appeal on this ground is Allowed." 9. Upon perusal of the above, we find that the facts discussed above squarely reveal that the Ld. AO did not point out any defects in the books of accounts of the assessee. It is also an undisputed fact that payment towards most of these expenses was made by the assessee through banking channels after deduction of TDS, wherever applicable. Further, all the expenses have been incurred by the assessee for the purpose of business. Merely because increase in turnover from 19.15 crores in the preceding year....
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....ns made by the Ld. AO on account of disallowance of various expenses. Thus, all the seven grounds of appeal preferred by Revenue are found to be devoid of any merits and, thus, dismissed. Assessee's Cross objection No. 17/Ind/2022: 10. The sole ground raised by the assessee in the instant cross objection is in respect of the addition of Rs. 1,55,000/- confirmed by the Ld. CIT(A) on account of amount deducted by PWD for delay in completion of work. 10.1 The brief facts leading to the case is this that there was delay in completion of site work allotted to the assessee by the PWD. Accordingly, PWD deducted an amount of Rs. 1,55,000/- on account of time extension for delay in completion of such work and the said amount of Rs. 1,55,000/- was debited in the books of accounts under the head 'Penalty' as a result of which the Ld. AO made addition and the Ld. CIT(A) confirmed the addition of Rs. 1,55,000/- made to the total income of the assessee by considering such payment to be penal in nature. Being aggrieved, the assessee is before this Tribunal in the instant cross objection. 11. Before us, the Ld. DR supported the orders of Ld. AO and Ld. CIT(A). Per contra Ld. Counsel for t....
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.... the assessment order dated 26.08.2021 passed under Section 147 of the Act in the case of the assessee for the A.Y. 2015-16 which is placed on Page No. 349-357 of the Paper Book wherein the then Assessing Officer did not make any addition to the total income of the assessee and duly accepted the fact that amount deducted by PWD was compensatory in nature and not penal in nature. Thus, considering the entire aspect of the matter, we find no justification for sustaining addition of Rs. 1,55,000/- on account of amount deducted by PWD for delay in completion of work particularly for the reason that the assessee has categorically explained with the help of ample documentary evidences that such deduction of amount was compensatory in nature and not penal in nature. Hence, in our considered opinion, addition of Rs. 1,55,000/- made to the total income of the assessee on account of disallowance of the amount deducted by PWD is not sustainable and, thus, deleted. We thus set aside the findings of Ld. CIT(A) on this count. Hence, assessee's cross objection is allowed. Accordingly, the appeal filed by the Revenue is dismissed whereas cross objection filed by the assessee is allowed. ITA No.....
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....to verification. Accordingly, the Ld. AO adopted the net profit rate at 6% as was adopted in the A.Y. 2009-10 and made addition of Rs. 2,04,60,184/- to the total income of the assessee. 16. Before us, the Ld. CIT-DR vehemently supported the order of Ld. AO. Per contra Ld. Counsel for the assessee supported the findings of Ld. CIT(A) and submitted that the Ld. AO estimated the net profit rate for the year to be 6% merely on the basis of net profit rate of 6% as was estimated for the A.Y. 2009-10 without pointing out any defects in the books of accounts and without even rejecting the books of accounts of the assessee which were duly audited in terms of Statutory Provisions. The Ld. Counsel further submitted that the findings of the Ld. AO in the assessment order were self-contradictory as the Ld. AO estimated the net profit of the assessee by stating that the books of accounts of the assessee were not produced whereas the Ld. AO himself in other paragraphs of the assessment order specifically mentioned the fact that the assessee produced its books of accounts together with bills/ vouchers. The Ld. Counsel thereafter explained that the assessee declared loss during the year mainly ....
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....M/s SREI Equipment Finance P Limited and loan of Rs 9,50,66,771/- was shown as payable in the books of account of the respondent assessee as on 31.03.2011. 1.7.3] The amount of finance charges as paid in this year and the amount of depreciation as allowable on the cost of assets increased in this year as compared the same with last year is as under:- S.No Nature of Expenses For the Period ended on Increased in this year 31.03.2010 31.03.2011 1 Finance Charges 3,15,245 1,51,31,945 1,48,16,700 2 Depreciation 14,96,344 1,17,69,466 1,02,73,122 2,50,89,822 1.7.4] That if the effect of the increase in the amount of increase in the finance cost and Depreciation is ignored the revised amount of net Profit and percentage of Net profit is calculated as under:- S.No Description Amount[Rs] 1 Income from Operation 34,41,03,054 2.1 Net Profit as declared in the books of account [-] 84,77,805 2.2 Increa....
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....eased from Rs 2,08,083 to Rs 10,84,486/-. Since, due to addition to the value of Plant & Machinery and vehicle, the consequential amount of insurance was also increased 5 That due to new contract and time limit for completion of the contract, machineries were taken on hire for which Rent was paid to the tune of Rs 2,03,09,678/- as against rent of Rs 6,20,485/- paid in last year 1.12.2] The assessee had produced its books of account with supporting vouchers before the assessing officer and in these books of account, no defects were pin- point by the assessing officer. Hence, there was no justification for estimating the total income of the assessee. 1.14] That in view of the above, the assessing officer was not justified in estimating the net income of the assessee at Rs 2,04,60,184/- as against loss of Rs 67,64,838/- declared in the return of total income even without rejecting the books of account as maintained by the respondent assessee." 17. We find that the Ld. CIT(A) while allowing the appeal preferred by the assessee observed as follows: "4.1 Ground No. 1:- Through this ground of appeal the appellant has challenged the addition of Rs.....
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....see has stated that for execution of work contract the appellant has purchased plant and machinery worth Rs. 8 crores which were delivered on time but the machinery being technically operated, the appellant has also hired Indian machinery on rent and has paid rent of Rs. 3 crores. Further, the machinery has been purchased throughout the years and has claimed deprecation. In support appellant has filed copies of bills along with ledger account of fixed assets purchased by appellant. On perusal of the same it was found that majority of plant and machinery were purchased before 30th September 2010 and only four equipments were purchased during later half of the year. The AO on the other hand has only placed reliance on written submission dated 06.03.2014 which no where states that the plant and machinery was not put to use, the appellant has only stated that being automatic machinery, the Indian operator find it difficult to operate and for smooth function and execution of work contract in time machinery in addition to purchased machinery were hired on rent. Thus, the appellant has used both purchased and hired machinery for execution of work contract. Further, the AO has not brought ....
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....be implied to other assessment years. 4.1.3 In view of the above discussion, the AO firstly was not justified in disallowing entire deprecation claimed by appellant and secondly not justified in estimating NP @ 5%. Thus, addition made by the AO amounting to Rs. 2,04,60,184/- is Deleted. Therefore, appeal on this ground is Allowed." 18. We have considered rival contentions and gone through the material available on record. We find that the facts discussed above squarely establish that the Ld. AO neither pointed out any defects in the books of accounts nor did he reject the books of accounts maintained by the assessee. The sole reason for estimating the net profit rate of the assessee to be 6% was that the same rate of net profit was estimated for the A.Y. 2009-10. We find that the Ld. AO utterly failed to appreciate the fact that the assessee made huge investment of 11.97 crores in plant and machinery during the year out of the amount financed by M/s SREI Equipment Finance Pvt. Ltd. which resulted in huge increase in the amount of depreciation and finance charges during the year as compared to the preceding year. The amount of depreciation increased from Rs. 14,96,344/- ....
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....f any merit and, thus, dismissed. Ground No. 2:- 19. The Revenue through this ground of appeal has challenged the deletion of addition of Rs. 1,10,00,000/- made by the Ld. AO under Section 68 of the Act on account of share application money received from M/s SKS Ispat and Power Limited. 19.1 The brief facts leading to the issue are that the assessee received share application money of Rs. 1,10,00,000/- from M/s SKS Ispat and Power Limited during the year. The assessee furnished copies of confirmation of accounts, PAN, bank statement and audited financial statements of the investor. The Ld. AO observed that the assessee did not furnish copy of ITR and bank account of the company inspite of specific query being raised during assessment proceedings. Accordingly, the Ld. AO observed that genuineness of the transaction could not be proved and he made addition of Rs. 1,10,00,000/- to the total income of the assessee under Section 68 of the Act. The assessee filed all the documentary evidences before the Ld. CIT(A) during the course of appellate proceedings including the documentary evidences such as copy of ITR and bank account of the company which could not be filed before the ....
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....ed by the assessee in the remand report submitted by him. The Ld. Counsel also submitted that an amount of Rs. 95,00,000/- was received from the same investor company during the A.Y. 2010-11 wherein also the case of the assessee was selected for scrutiny but no addition was made to the total income of the assessee on this count and accordingly, there remained no justification for doubting the genuineness of the amount of share application money of Rs. 1,10,00,000/- received from the investor company during the year. We have further considered inter alia the following submission made by the assessee in the synopsis submitted before us: "2.1] The department in this ground of appeal has challenged the deletion of addition as made by the assessing officer in respect of share application money of Rs 1,10,00,000/- 2.2] The respondent assessee company received share application money of Rs 1,10,00,000/- in this year from M/s SKS Ispat and Power Limited. That M/s SKS Ispat and Power Limited is one of the promoter and major shareholder of the assessee company. 2.3] That as to justify the Identity, genuineness and capacity of the share applicant, in respect of an a....
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....n that case, necessary addition if any be made in the case of the share-holders but in no case any addition is justified in the case of the respondent assessee company. 2.6.2] The respondent assessee has proved the Identity and genuineness of the shareholder regarding share application money received by it. The amounts of share application money/ share capital were received through account payee cheques. The respondent assessee had filed complete details as to justify the amount of share application money received by it. Once, the respondent assessee had filed documents as to justify the identity of the shareholder in that case if the assessing officer has any doubt about the source of share application money in that case the assessing officer is free to take action against the persons who have contributed the same but in no case the same is to be added to the income of the assessee." 21. We find that the Ld. CIT(A) while allowing the appeal preferred by the assessee observed as follows: "4.2 Ground No. 2 and 3:- Through these grounds of appeal the appellant has challenged the addition of Rs.1,10,00,000/- being share application money u/s 68 of the Act. During ....
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....own income of Rs. 6,54,74,660/- in AY 2011-12 in its ITR filed on 29.03.2013. Also, on perusal of audited balance sheet it was observed that the investor company was having funds by way of share capital/premium and reserves and surplus of Rs. 605,81,91,000/-. Thus, in nutshell the investor company has surplus funds to be invested in appellant company. The investor companies has furnished the confirmation, copy of bank account, audited balance sheet having sufficient funds and proof of filing of the return. By filing the above documents the appellant is able to establish the - i. Identity of the Investor - the Investor is income tax payer and filed the confirmations. ii. Genuineness of the transaction- the appellant has taken the share application money through banking channel. The appellant is in the receipt all amounts by cheque. Copies of bank statement of Investor Company is placed on record and perused. From perusing the bank statements of the Investor companies as furnished in the paper book, it is found that no cash was deposited in the bank account prior to issuance of cheque to the appellant for the said investment. iii. Creditworthiness ....
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.... are weighted against the assessee. It is impossible to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the revenue and consequently most adverse to the assessee, they should be deemed to have exercised it in a proper and judicious manner- Simon Carves Ltd (1976) (SC). In the present facts of the case, the addition is not legally sustainable and is deleted. Appellant gets relief of Rs.25,00,96,500." 4. The ITAT concurred with this view. 5. The revenue urges that the CIT(A) and the ITAT both grievously erred in cancelling the additions made. It is submitted that the genuineness of the transactions and the credit worthiness is suspect in the circumstances of the case. Ld counsel relied upon a tabular chart prepared by the AO to submit that most of the share applicants had paid little or no IT and that analysis of the bank statements furnished by such investors revealed that the amounts were deposited in cash and also routed through different entities. It was submitted that whereas the identity of the investors was no doubt established, neither the genuineness nor credit worthiness could be said to have b....
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.... Graceful Traders P Ltd AABCG7432L 1,52,26,500 3,00,05,878 20 Goodward Agency P Ltd AABCG7433M 1,73,29,500 1,50,42,806 21 Vishnupriya Prop. P Ltd. AAACV8829P 46,48,500 38,92,620 22 Zenith Goods & Services PL AAACZ0908P 1,43,87,250 2,00,27,787 23 Concert Tradelink P Ltd AABCC9445K 1,40,70,000 9,99,93,410 8. It is quite evident from the CIT(A)'s reasoning, that the materials clearly pointed to the share applicants' possessing substantial means to invest in the assessee's-Co. The AO seized certain material to say that minimal or insubstantial amounts was paid as tax by such share applicants and did not carry out a deeper analysis or rather chose to ignore it. In these circumstances, the inferences drawn by the CIT(A) are not only factual but facially accurate. 9. Having regard to these circumstances, the Court discerns no que of law, least a substantial que, having regard to the fact that Lovely Exports (SC) was cited and applied. For these reasons, there is no merit in the appeal; the same is accordingly dismissed." ....
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....ger account of M/s SKS Inpat and Power Limited in the books of accounts of the respondent 121 6.2 Copy of confirmation of accounts of M/s SKS Inpat and Power Limited duly signed and stamped 122-123 6.3 Copy of application dated 24-08-2010 for allotment of equity shares as issued to the respondent from M/s SKS Inpat and Power Limited 124 6.4 Copy of acknowledgement of income-tax return along with computation of income of M/s SKS Inpat and Power Limited for the Assessment Year 2011-12 125-126 6.5 Copy of the Audited financial statement of M/s SKS Ispat and Power Limited for the year ended 31^st March 2011 127-142 6.6 Copy of ledger account of the respondent in the books of accounts of M/s SKS Inpat and Power Limited for the Financial Year 2010-11 143 6.7 Copy of relevant extract of bank statement of M/s SKS Inpat and Power Limited duly reflecting the amount of share application money received by the respondent 144-153 23. On consideration of the above documentary evidences, we find that M/s SKS Ispat and Power Limited was not a mere paper company but was a company engaged in active business operations....
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....overted by the Ld. CIT-DR by bringing any contrary material on record. Hence, we do not find any infirmity in the findings of the Ld. CIT(A) and accordingly, the deletion of addition of Rs. 1,10,00,000/- made by the Ld. CIT(A) is confirmed. Thus, ground No. 2 of the appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed. Accordingly, the appeal filed by the Revenue for the Assessment Year 2011-12 is dismissed. ITA No.232/Ind/2021 (A.Y. 2012-13) 24. The instant appeal filed by the Revenue is directed against the order dated 16.08.2021 passed by the Ld. CIT(A)-3, Bhopal (hereinafter referred to as 'Ld. CIT(A)') arising out of the order dated 28.09.2018 passed by the ACIT (Central)- 1, Indore (hereinafter referred to as 'Ld. AO') under Section 143(3) r.w.s. 147 of the Income-Tax Act, 1961 (hereinafter referred to as 'the Act') for Assessment Year (hereinafter referred to as 'A.Y.') 2012-13. Upon receipt of the notice on Revenue's appeal, the assessee also filed the aforesaid Cross Objection. Both are disposed of by this common order. The Revenue has raised the following grounds of appeal bearing ITA 232/Ind/2021: "1. On the facts and in the ....
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....ase and in law, the Ld CIT(A) erred in upholding the action of the Ld Assessing Officer in reopening the case of the respondent in absence of any tangible material and live link of concealment of income that could lead to a formation of belief that income chargeable to tax has escaped from assessment." 25. Brief facts as culled out from the records are that the assessee is a private limited company engaged in the business of government works contract for construction of roads. The income-tax return of the assessee for the A.Y. 2012-13 was filed on 29.09.2012 claiming total loss of Rs. 1,79,88,391/-. The case of the assessee was selected for scrutiny through CASS. The then Assessing Officer examined all the relevant material placed on record and passed assessment order under Section 143(3) of the Act on 25.03.2015 wherein loss of Rs. 1,79,88,391/- claimed by the assessee was duly accepted. Subsequently, it was noticed on verification of the documents available on record that the assessee had shown lesser amount of interest and contract receipts as compared to the amount reflected in Form 26AS. Accordingly, case of the assessee was reopened and notice under Section 148 of the Act ....
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.... had shown lesser amount of interest and contract receipts as compared to the amount reflected in Form 26AS. Accordingly, case of the assessee was reopened and notice under Section 148 of the Act was issued on 18.12.2017 i.e. after the expiry of four years from the end of the relevant assessment year. The assessee therefore challenged the maintainability of the reassessment proceedings before the Ld. CIT(A). However, the Ld. CIT(A) dismissed all the legal grounds raised by the assessee superficially without going into the detail of each of those grounds. Hence, the instant cross objection has been filed before this Tribunal. 28. Before us, the Ld. DR supported the orders of Ld. AO and Ld. CIT(A). Per contra Ld. Counsel for the assessee submitted that case of the assessee was reopened on account of mere change of opinion which was impermissible within the garb of Section 147 of the Act. The Ld. Counsel submitted that the then Assessing Officer raised specific query at the time of original assessment proceedings to reconcile the receipts shown in profit and loss account with the receipts reflected in Form 26AS in response to which the assessee categorically explained the reasons f....
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....return of income or to disclose fully and truly all the material facts necessary for assessment. The Ld. Counsel submitted that all the relevant facts were placed before the then Assessing Officer during the course of original assessment proceedings itself and that there was no failure on the part of the assessee either to furnish its return of income or to disclose any fact, much less any material fact necessary for the purpose of assessment. Hence, the Ld. Counsel submitted that reassessment proceedings initiated in the case of the assessee after the expiry of four years from the end of the relevant assessment year suffered from legal infirmity and were bad in law. He also relied upon the following judgments in support of his contentions:- (i) ACIT v. Lambda Therapeutic Research Ltd. [2018] 100 taxmann.com 81 (SC) (ii) CIT v. M.G. Motors [2011] 9 taxmann.com 290 (Delhi) (iii) Gujarat Eco Textile Park Ltd. v. ACIT [2015] 60 taxmann.com 296 (Gujarat) (iv) Oracle India (P.) Ltd. v. DCIT [2015] 53 taxmann.com 514 (Delhi) (v) SKY Diamonds v. ACIT [2015] 55 taxmann.com 77 (Gujarat) (vi) Swarovski India (P.) Ltd. v. DCIT [2014] 50 ta....
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....[2017] 88 taxmann.com 690 (Bombay) (v) Gujarat Eco Textile Park Ltd. v. ACIT [2015] 60 taxmann.com 296 (Gujarat) (vi) Martech Peripherals (P.) Ltd. v. DCIT [2017] 81 taxmann.com 73 (Madras) (vii) Mgm Exports v. DCIT [2010] 323 ITR 331 (Gujarat) (viii) Rabo India Finance Ltd. v. DCIT [2012] 27 taxmann.com 163 (Bombay) (ix) Vishwanath Engineers v. ACIT [2012] 21 taxmann.com 5 (Gujarat) Accordingly, the Ld. Counsel contended that reassessment proceedings initiated in the case of the assessee were not maintainable on multiple grounds as discussed hereinabove. 32. We have heard the rival submissions made by the respective parties and perused the relevant materials available on record and case laws relied upon by the Ld. Counsel for the assessee. We would like to deal with the legal ground before proceeding further in the matter. Firstly, as regards the contention of the Ld. Counsel that case of the assessee was reopened on account of mere change of opinion, we observe that the then Assessing Officer during the course of assessment proceedings raised a specific query requiring the assessee to reconcile the difference in receipts shown in....
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.... inbuilt test to check abuse of power by the AO. Hence, after 1st April, 1989, AO has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to s. 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in s. 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the AO. We quote herein below the relevant portion of Circular No. 549, dt. 31st Oct., 1989 [(1990) 82 CTR (St) 1], which reads as follows: "7.2 Amendment made by the Amending Act, 1989, to re-introduce the expression. reason to believe in s. 147.A number of representations were received against the omission of the words .reason to believe. from s. 147 and their substitution by the opinion of the AO. It was poin....
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....fully and truly all material facts^16 necessary for his assessment, for that assessment year:" 35. Thus, it appears that the first proviso to Section 147 of the Act places a bar on issue of notice under Section 148 of the Act after the expiry of four years from the end of the relevant assessment year in cases wherein assessment was originally completed under section 143(3)/ 147 of the Act and the assessee filed its return of income and disclosed all the material facts at the time of original assessment proceedings itself. In the case in hand, we observe that the Ld. AO reopened the case of the assessee on the basis of same set of facts which were available at the time of original assessment proceedings and in respect of which the assessee had furnished due explanation at that time itself. There was no failure on the part of the assessee to disclose any fact, much less any material fact, at the time of original assessment proceedings itself. Hence, in our considered opinion, there was no failure on the part of the assessee either to furnish its return of income or to disclose fully and truly all the material facts necessary for assessment so as to warrant the initiation of reasse....
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....aced with a similar situation. The court noted that there was not even a whisper of an allegation that the escapement in income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The court observed that absence of this finding, which is the sine qua non for assuming jurisdiction under section 147 of the Act in a case falling under the proviso thereto, makes the action taken by the Assessing Officer wholly without jurisdiction. We agree with these observations of the Punjab and Haryana High Court and are of the view that in the present case also, the Assessing Officer has acted wholly without jurisdiction. The invocation of section 147, the issuance of the notice under section 148 and the subsequent order on the objections are all without jurisdiction. The impugned notice as well as the proceedings pursuant thereto are quashed." 37. We have further considered the judgment of the Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. v. CIT [2008] 175 Taxman 262 (Delhi) relied upon by the Ld. Counsel. While discussing the issue the Hon'ble Court has been pleased to observe as....
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....ted under Section 143(3) of the Act and there was no failure on the part of the assessee either to furnish his return of income or to disclose fully and truly all the material facts necessary for his assessment. 39. Thirdly, as regards the contention of the Ld. Counsel that the Ld. AO completed the reassessment proceedings without disposing off the objections raised by the assessee by passing a speaking order, we observe that the assessee filed detailed objections dated 18.09.2018 before the Ld. AO challenging the legality/ validity of reassessment proceedings. However, it seems that the Ld. AO completed the proceedings without disposing off the objections raised by the assessee which again is bad in law. The Hon'ble Supreme Court in its landmark judgment in the case of GKN Driveshafts (India) Ltd. v. ITO [2002] 125 Taxman 963 categorically laid down the law that the Assessing Officer is bound to dispose off the objections raised by the assessee by passing a speaking order before proceeding further. While discussing the issue the Hon'ble Supreme Court has been pleased to observe as follows:- "We see no justifiable reason to interfere with the order under challenge. Howe....
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....s not been followed and exercise of power can be said as not only vitiated, but the order of assessment cannot be sustained." 41. In light of the facts re-iterated above and after going through the findings of the Hon'ble Supreme Court and High Court cited supra, we are of the considered opinion that order passed by the Ld. AO under Section 143(3) r.w.s. 147 of the Act cannot be sustained since the Ld. AO proceeded with the reassessment proceedings without following the mandatory procedure of disposing off the objections raised by the assessee by passing a speaking order. 42. Thus, considering the entire aspect of the matter, we are of the considered opinion that reassessment proceedings initiated in the case of the assessee were illegal, bad in law and void-ab-initio for the reasons discussed hereinabove and accordingly, order passed by the Ld. AO under Section 143(3) r.w.s. 147 of the Act cannot be sustained and is hereby quashed and set aside. We thus set aside the findings of Ld. CIT(A) on this count. Hence, all the grounds raised in assessee's cross objection are allowed. Revenue's appeal in ITA 232/Ind/2021: 43. Now, we shall take up the Revenue's appeal for adjudica....
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....he 'real income' theory and argued that only real income could have been subject to tax and notional income could not have been taxed. Reliance was also placed on the judgment of the Hon'ble Supreme Court in the case of CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC) wherein the Hon'ble Court categorically held that 'income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount." The Ld. Counsel further drew our attention to a table produced on Page No. 296 of the synopsis containing the year-wise comparison of the amount of income and TDS accounted for in the books of accounts and as reflected in Form 26AS to substantiate the fact that the amount of advance received by the assessee during the year had already been offered for tax in the subsequent year i.e. A.Y. 2013-14. The Ld. Counsel also made us go through the various supporting documentary evidences annexed on Page No. 242-272 of the Paper Book in support of his contentions. The Ld. Counsel also relied upon a few judicial precedents to substantiate his arguments that the entire exercise undertaken by the Ld. AO was tax-neutral since the amount of adva....
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....3,75,50,000/- from M/s Guna Sheopur Pathways Private Limited on which TDS of Rs. 7,51,000/- was deducted, as per provisions of section 194C of the Act, at the time of payment of advance. Since, the advance amount was received merely for mobilization of plants to the site of M/s Guna Sheopur Pathways Private Limited, therefore, the advance amount was shown as liability in the audited financial statements for the year ended 31st March 2012 and the income earned from the entire contract was shown in AYs 2013-14 to 2015-16. As per AO there was a shortfall in contract receipts by Rs. 3,75,50,000/-, however, the AO has failed to consider the excess contract receipts with approx same amount in immediate net assessment year. The brief details relating to the impunged contract receipts shown by appellant in books of accounts are as under:- S.No Assessment Year As per books of accounts As per Form No. 26AS Difference [in Rs] Income [in Rs] TDS [in Rs] Income[in Rs] TDS [in Rs] 1 2012-13 NIL 7,51,00 0 3,75,50,000 7,51,00 0 ....
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.... advance amount for shifting of plant and machinery and not for construction of road for which EPC was executed. Furthermore, the entire amount received as an advance is fully recorded in books of accounts in the payer as well as of the appellant as an advance. The appellant has shown the said advance as contract receipt in AY 2013-14 and has paid due taxes when the same were accrued as per Milestone payment Schedule. It is now a settled law that even under mercantile system of accounting; it is only the accrual of real income which is chargeable to tax and not the hypothetical income. Furthermore, income accrues when it becomes due but it must be accompanied by a corresponding liability entry by the other party to pay the amount as held by Hon'ble Apex Court in the case of CIT vs Excel Industries Ltd (2013) 358 ITR 295/219. In the instant case, the concessionaire has not shown the impunged amount as liability in its books of accounts and the same was shown as advance against EPC Contract. Thus, there was no liability in the books of accounts of the Concessionaire and therefore, the impunged amount cannot be treated as accrued contract rece....
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.... when the work was actually undertaken by the assessee. The Ld. Counsel also relied upon the following documentary evidences in support of his contentions:- S. No Particulars 1 Copy of Form No. 26AS of the respondent assessee for the Assessment Years 2012-13 to 2015-16 2.1 Copy of account of M/s Guna Sheopur Pathways Private Limited in the books of the respondent assessee for the period from 01-04-2012 to 31-03-2015 2.2 Copy of account of the respondent assessee in the books of M/s Guna Sheopur Pathways Private Limited for the period from 01-04-2012 to 31-03-2015 3 Copy of relevant pages of EPC Contract as executed between the respondent assessee and M/s Guna Sheopur Pathways Private Limited duly containing the details with respect to total contract amount and payment schedule which includes advance payments 4 Copy of audited financial statement of the respondent assessee for the year ended 31^st March, 2012 wherein the amount of advance received from M/s Guna Sheopur Pathways Private Limited was shown as a liability and was included in the figure of Trade Payables in Note No. 6 of the audited financial statement 49. Upon consideration of a....
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....as follows:- "32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers. 33. For the aforesaid reasons, we dismiss the civil appeals with no order as to costs, but with the hope that the Revenue implements its litigation policy a little more practically and a little more seriously." 53. Thus, considering the entire aspect of the matter in light of the facts reiterated above and the findings in the judgments cited....
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....ed from SCCPPL as its income since the amount of labour cess of Rs. 7,42,880/- was deposited directly by SCCPPL and only the balance amount was thereafter remitted to the assessee. The Ld. Counsel further submitted that the assessee duly offered the amount actually received by it from SCCPPL as its income and the assessee could not have been expected to offer the gross amount which was never received by it. The ledger account of SCCPPL in the books of the assessee along with the copy of various other ledger accounts in respect of bills raised by the assessee were filed and relied upon by the Ld. Counsel. The Ld. Counsel also explained that the sole grievance of the Ld. AO was that the assessee should have offered the gross receipts of Rs. 7,12,71,805/- as income against which the assessee could have claimed deduction on account of payment of labour cess of Rs. 7,42,880/- which ultimately would have made no difference in the amount of income offered by the assessee. We have further considered inter alia the following submission made by the assessee in the synopsis submitted before us: "2.1] The department in this ground of appeal has challenged the deletion of addition of R....
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....ssed the said issue in detail and deleted the addition as made by the assessing officer. 2.8] That in view of the above, addition of Rs. 7,42,880/- as made to the total income of the respondent assessee on account of difference in gross receipts and receipts actually accounted for as income from M/s SCC Projects Private Limited was rightly deleted by the Ld CIT(A). Hon'ble bench is hereby requested to approved the order as passed by the Ld CIT(A)." 56. We find that the Ld. CIT(A) while allowing the appeal preferred by the assessee observed as follows: "4.3 Ground No 9:- Through this ground of appeal the appellant has challenged the addition of Rs.7,42,880/- on account of difference between gross receipts and actual receipts from SSC Projects Pvt Ltd (SCCPPL). The AO during the course of assessment proceedings observed a difference in gross receipts and actual receipts from M/s SCC Projects Pvt Ltd. Therefore, the AO required the assessee to explain the reason for difference in gross and actual receipts. The assessee in reply submitted that the payer has deducted TDS on entire amount which includes labour cess. The AO did not find any merit in the contentions ra....
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....nst which the assessee could have claimed deduction on account of payment of labour cess of Rs. 7,42,880/- would have made absolutely no difference in the amount of income that would have been offered by the assessee and it was merely an issue of presentation in the books of accounts. Thus, considering the entire aspect of the matter, we are of the considered opinion that there was no justification for making addition of Rs. 7,42,880/- to the total income of the assessee on account of difference between gross receipts and receipts actually accounted for as income from SCCPPL. The addition made by the Ld. AO on account of difference between gross receipts and receipts actually accounted for as income from SCCPPL cannot be said to be justified in view of the observations made hereinabove. We find that the findings of the Ld. CIT(A) have not been controverted by the Ld. DR by bringing any contrary material on record. Hence, we do not find any infirmity in the findings of the Ld. CIT(A) and accordingly, the deletion of addition of Rs. 7,42,880/- made by the Ld. CIT(A) is confirmed. Accordingly, ground No. 2 of the appeal preferred by Revenue is found to be devoid of any merit and, thus....