TaxTMI 
TaxTMI 
2025 (3) TMI 2002
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....1067066854(1) 26.07.2024 Asst. CIT(A), CC-5(1), Mumbai 31.03.2023 143(3) 2015-16 Assessee 2. 5235/Mum/2024 ITBA/APL/S/250/2024-25/1067066854(1) 26.07.2024 Asst. CIT(A), CC-5(1), Mumbai 31.03.2023 143(3) 2015-16 Revenue 3. 4568/Mum/2024 ITBA/APL/S/250/2024-25/1067069387(1) 26.07.2024 Asst. CIT(A), CC-5(1), Mumbai 31.03.2023 143(3) 2015-17 Assessee 4. 5234/Mum/2024 ITBA/APL/S/250/2024-25/1067069387(1) 26.07.2024 Asst. CIT(A), CC-5(1), Mumbai 31.03.2023 143(3) 2015-17 Revenue 5. 4532/Mum/2024 ITBA/APL/S/250/2024-25/1067068943(1) 26.07.2024 Asst. CIT(A), CC-5(1), Mumbai 08.06.2023 143(3) r.w.s. 147 2019-20 Assessee 6. 4620/Mum/2024 ITBA/APL/S/250/2024-25/1067077893(1) 26.07.2024 Asst. CIT(A), CC-5(1), Mumbai 08.05.2023 143(3) r.w.s. 147 2015-16 Assessee 7. 5232/Mum/2024 ITBA/APL/S/250/2024-25/1067077893(1) 26.07.2024 Asst. CIT(A), CC-5(1), Mumbai 08.05.2023 143(3) r.w.s. 147 2015-16 Revenue 2. Common issues are involved in all these appeals and therefore taken up together by way of passing a consolidated o....
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....ecified under the Income Tax Act, b. Section 149 of the new regime provides three crucial benefits to the assesses: (i) the four-year time limit for all situations has been reduced to three years, (ii) the first proviso to Section 149 ensures that re-assessment for previous assessment years cannot be undertaken beyond six years, and (iii) the monetary threshold of Rupees fifty lakhs will apply to the re- assessment for previous assessment years, c. The relaxations provided under Section 3(1) of TOLA apply "notwithstanding anything contained in the specified Act." Section 3(1), therefore, overrides the time limits for issuing a notice under Section 148 read with Section 149 of the Income Tax Act; d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime; e. The Finance Act 2021 substituted the old regime for re-assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income Tax Act including Sections 149 and 151 of the new regime. O....
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....2024 wherein re-assessment action for Assessment Year 2015-16 was held to be not sustainable. Hon'ble Court quashed the notice issued u/s.148 as well as order passed u/s. 148A(d), dated 23.07.2022 for Assessment Year 2015-16 by following the decision in the case of Rajeev Bansal (supra). 3.5. In the assessee's case, since the notice issued u/s.148 is dated 25.07.2022, a period of six years expired on 31.03.2022 and is thus barred by limitation. Accordingly, the notice so issued and assessment completed thereafter u/s. 147 is liable to be quashed, in view of the decision of Hon'ble Supreme Court in the case of Rajeev Bansal (supra) which was followed by Hon'ble Delhi High Court in the case of IBIBO (supra). These observations and findings apply mutatis mutandis to the appeal in the case of ITD ITD Cem Joint Venture for Assessment Year 2015-16 in ITA No. 4620/Mum/2024 and 5232/Mum/2024. 4. Assessee also raised a legal issue of re-opening of the proceedings being bad in law which have been initiated for Assessment Year 2016-17 in the case of ITD Cementation India Ltd., in ITA No.4568/Mum/2024. In this case, re-assessment proceedings were initiated by issuing notice u....
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....e also deal with the merits of the case, since it relates to legacy issue travelling since Assessment Year 2004-05 and has a bearing on the appeals for subsequent years. 6. On the merits of the case, we first take up ground no.2 in respect of disallowance made by ld. Assessing Officer u/s. 37(1) for Rs. 3,78,68,000/- towards amount debited to the profit and loss account for "Provisions for foreseeable losses" accounted as per Accounting Standard-7 : "Construction contract", issued by Institute of Chartered Accountants of India (ICAI). 6.1. It was found that assessee has claimed a sum of Rs. 4,22,02,468/- on account of foreseeable losses. Assessee was asked about the above losses and their allowability. It was submitted that as the assessee is engaged in construction activity, it has executed projects at various places. In some of the contracts, the total cost exceeds the contract value of the project and thus, it has incurred losses. Assessee relied on Accounting Standard (AS) 7 for accounting of construction contracts prescribed by ICAI and stated that the same is allowable. It was further stated that the co-ordinate Bench in assessee's own case has allowed such losses a....
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....e under the provisions of the Act, Following the decision of the coordinate Bench in case of L'Oreal India in ITA No.1198/Mum/2021, claim was rejected. With respect to the earlier decisions of co-ordinate Bench in assessee's own case it was held that rule of consistency cannot be a substitute for perpetuating an error. It was further held that the claim of foreseeable losses would be allowable in the year of incurring expenses and not in the year prior to that. It further rejected the contention of the assessee that if the expenses are allowed in the subsequent year without incurring, instead of the year in which the provision is made for foreseeable losses, the coordinate Bench rejected the same stating that unless the expenditure quantified, these arguments cannot be accepted. The co-ordinate bench also did not restore the issue in dispute to the file of the learned Assessing Officer for the reason that there is nothing to verify for this year by ld. AO. Accordingly, the appeal of the Revenue to that extent is allowed. Thus, the learned Departmental Representative submitted that now the issue has been decided by the co-ordinate Bench in favor of the Revenue, all the earlier year ....
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....ch 2016, shall be recognized as per the method of accounting followed. He further referred to several judicial precedents of the co-ordinate Benches and Hon'ble High Court to support his claim. He submitted that the co-ordinate Bench for A.Y. 2016-17 disagreed with the earlier year's orders of the co-ordinate Benches in assessees" own case should have referred the matter to the Special Bench if it wishes for any reason to deviate from the same. However, it has been decided against the assessee. He also referred to chart and submitted that the accepted additional cost provided in A.Y. 2017-18 is far less than the additional cost incurred actually by the assessee in subsequent A.Y. 2018-19. To precisely state that the provision of Rs. 84.52 crores for A.Y. 2017-18 culminated into actual additional cost of Rs. 119.48 crores thus, excess cost incurred for the provision in A.Y. 2018-19 is Rs. 34.96 crores. Thus, it is not the case that the claim of the assessee is not supported by robust working or followed by universally accepted account practices and principles. He submits that anyway for this year the decision of coordinate bench which decided issue against the assessee does not ....
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....cantile system of accounting and claimed the same as deduction. Since it had not deducted tax at source from the above said provision claimed as deduction, the assessee voluntarily disallowed 30% of the above said claim u/s 40(a)(ia) of the Act. The AO treated the above said provision as "unascertained liability" and accordingly took the view that the same is not allowable as deduction. Thus, it was not the case of the deductibility of foreseeable losses but deduction of normal expenses. 018. Foreseeable loss is a claim u/s 28 as it is not a claim of expenses u/s 37(1) of The Act. It is determined by looking at total revenue generated, less cost of expenses to be incurred for the contract and if there is a profit same is not recognized but if there is a loss, same is recognized as loss in the books as per principle of "prudence" in accounting. It is same method where the closing stock is valued at cost or market value whichever is less, when market value is higher than the actual cost, such profit is ignored and when market value is less than actual cost such losses are recognized immediately in books . This is also based on the principle of prudence in accounting. The pru....
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....ard where there is no contrary provision in the Income tax Act, requires to be accepted, as accounting standards are based on sound principle of Accounting and determines real income. 023. Determination of Income as per As-7 "Construction Contract'' is also judicially accepted in Panchsheel Colonizers (P.) Ltd.[2019] 111 taxmann.com 460 (SC) By Honourable Supreme court . 024. In earlier decision of the ITAT in assessee's own case are also based on the above concept and we have drawn above analogy also from those decisions and as facts are different from Ay 2016-17, and as the Honourable High court has also admitted the issue on appeal of Revenue in earlier years, we hold that assessee is entitles to expected loss provided in the manner explained by the Accounting Standard 7 "Construction Contracts‟ Issued by ICAI. Thus, on principle assessee is entitled to the same." 6.5. Thus, the Coordinate Bench held that per se claim of the assessee towards foreseeable losses is an allowable expenditure. However, it restored the issue before the file of ld. Assessing Officer for the purpose of verification of the claim to quantify it for the purpose of allowin....
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....total loss recognised till 31.03.2015 is of Rs. 14,390.54 lakhs which includes foreseeable loss of Rs. 1,003.21 lakhs as per AS-7. Assessee had reported cumulative foreseeable loss till 31.03.2014 amounting to Rs. 624.53 lakhs. Thus, the differential amount of Rs. 378.68 lakhs (1,003.21-624.53) was charged to profit and loss account for the year under consideration as foreseeable loss. In this respect, claim of the assessee is that it has already incurred actual cost on the project which it is not able to recover from its client and hence recognised the same as loss of the project. In terms of requirement of AS-7, this loss is required to be disclosed separately as "foreseeable loss on contract" in the profit and loss account. Accordingly, assessee submitted that this loss is not towards any provision for future cost to be incurred but it is the excess of actual cost incurred over the project revenue. Hence, it is not a provision for any unascertained liability but is the actual cost incurred by the assessee till 31.03.2015. This aspect has been elaborately dealt by the Coordinate Bench in the decision for Assessment Year 2017-18 in para 18 which is already reproduced above. 7.2....
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....to be bad in law on the legal issue, for the purpose of adjudicating on the merit of the case, we respectfully follow the findings arrived at by the Coordinate Bench in assessee's own case for Assessment Year 2017-18 (supra). 7.5. Considering the facts on records, elaborate discussions made above, both on fact and applicable law and respectfully following the decision of Coordinate Bench in assessee's own case, as well as in the case of International Seaport Regime Pvt. Ltd. (supra), it is held that assessee is entitled to the claim of foreseeable loss provided in accordance with the AS-7, issued by ICAI. Accordingly, disallowance made by the ld. Assessing Officer is deleted. Ground no.2 raised by the assessee is allowed. 7.6. Since the issue involved in appeal for ITD ITD Cem Join Venture in ITA No. 4620/Mum/2024 for the same Assessment Year is identical, our observations and findings above, apply mutatis mutandis. Accordingly, disallowance made in this case is also deleted and ground so raised is allowed. 8. We now take up appeal on merits in the case of ITD Cementation India Ltd. for Assessment Year 2016-17 in ITA No.4568/Mum/2024, whereby addition is made on account of....
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....ontingency expenses amounting to Rs. 36,90,000/- is challenged. This identical issue is also contested in Assessment Year 2016-17 in ITA No.4568/Mum/2024 and also in the case of ITD ITD Cem Joint Venture for Assessment Year 2015-16 in ITA No.4620/Mum/2024 with varying amounts of disallowance so sustained. 9.1. As a cross appeal, Revenue has also challenged the relief granted by ld. CIT(A) to the extent of 97.5% of these very contingency expenses in all the three aforesaid appeals. The issue is common in all these appeals, both by assessee and Department and therefore, we take up these together by considering facts from ITA No.4539/Mum/2024 for Assessment Year 2015-16 in case of ITD Cementation India Ltd. 10. Brief facts specific to the aforesaid issue are that ld. Assessing Officer made addition disallowing contingency expenses of Rs. 14,76,00,000/-.Ld. CIT(A) restricted the disallowance to 2.5% (on adhoc basis) of the total expenditure which amounts to Rs. 36,90,000/-. During the course of survey action carried out on the group on 26.10.2021 where certain MIS reports (CTC reports) were impounded by the Income-tax Authorities. The Cost to Complete Reports (CTC reports) were t....
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....dhoc 2.5% of the contingency expenses disallowed by the Ld. AO which amounts to Rs. 36,90,000/-. 10.3. Ld. Counsel pointed out that the said issue is covered by the order of Coordinate Bench in case of sister concern of the assessee, i.e., ITD Cem India JV for AY 2016-17 (ITA No. 4556/Mum/2024), 2017-18, 2018-19 and 2022-23 dated 22-10-2024 and in case of ITD ITD Cem JV for AY 2016-17 (ITA No. 4618/Mum/2024) dated 25-10-2024. In these orders, the Coordinate Bench deleted the entire ad hoc addition of 2.5% which was sustained by the ld. CIT(A) based on similar CTC reports relating to respective entities, impounded during the course of survey. Relevant extract of the order passed in case of ITD Cem India JV in ITA No. 4556/Mum/2024, dated 22.10.2024, is reproduced below for ready reference: "10. The entire addition revolves around the contingency expenditure recorded in the CTC report. As mentioned above, the contingency expenditure is mentioned at the time of preparation of the budget but when the actual figures are known, the same are recorded in the books of accounts. Therefore, it cannot be said that that the contingency figure are not recorded in the books of account....
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....d by the ld. Assessing Officer were duly submitted by the assessee during assessment proceeding and is duly recorded by the ld. Assessing Officer in his assessment order. It was further submitted that non-compliance of SOP which in fact is an internal check of the appellant cannot be the basis for disallowance of expenses incurred and claimed by the assessee. 11. Following the rule of consistency, since there is no change in factual matrix and the issue has already been elaborately dealt by the Coordinate Bench, as reproduced above, respectfully following the same, we delete the addition so sustained by ld. CIT(A). Since the issue has already been held in favour of the assessee in respect of disallowance of contingency expenses as discussed above, ground raised by the Revenue in its appeal, contesting for the balance 97.5% of the same expenses for which relief was granted by ld. CIT(A) is rendered infructuous. Accordingly ground so raised by Revenue is dismissed. Our above observations and findings apply mutatis mutandis to other two appeals in ITA Nos. 4568/Mum/2024 and 5234/Mum/2024 as well as ITA Nos. 4620/Mum/2024 and 5232/Mum/2024. 12. We now take up appeal in the case o....
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....ereon. On a specific query by the Bench to this fact, nothing cogent was placed on record to counter the contentions made by the assessee. In the given set of facts and circumstances and nothing contrary brought on record, we find that the basis for initiating the re-assessment proceedings was the information on claim of management consultancy fees as an expense relating to AGV Consultants which was held by ld. Assessing Officer as not allowable and taxable in the hands of the assessee. However, the said addition stands deleted by the order of ld. CIT(A) and has attained finality in absence of Department not coming in appeal before the Tribunal. 12.3. We find that in the present facts and circumstances, the legal maxim 'sublato fundamento cadit opus' is applicable, meaning thereby - 'a foundation being removed, the superstructure falls'. Once the basis of a proceeding is gone, the action taken thereon would fall to the ground. Thus, in the absence of such foundation, exercise of reopening the case and making the reassessment stands vitiated. In light of these facts and discussion made above, we are in agreement with the contention made by the assessee and accordingly, hold that ....