ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), HYDERABAD V. RITHWIK PROJECTS PRIVATE LIMITED , HYDERABAD

ITA 533/HYD/2020

AI Insights

The case involves an appeal by the Revenue against the order of the learned CIT (A) which deleted the additions made by the Assessing Officer for the Assessment Year 2011-12. The additions pertained to an amount of Rs. 5,00,00,000 received from PACL India Ltd and sub-contract payments totaling Rs. 29,50,36,734 made to Megacity Infrabuilders Pvt Ltd and Timeless Developers Pvt. Ltd. The Revenue contended that these transactions were not genuine and the assessee failed to establish the genuineness of the sub-contracts. However, the CIT (A) found that the assessee had offered reasonable profit on the works contract and the transactions were recorded in the books and subjected to TDS. The Tribunal agreed with the CIT (A) and dismissed the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 652768 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2011-2012
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Difference of opinion; Change of opinion; Corroborative evidences; Income from undisclosed sources; TDS; Search and seizure; Accommodation entries; Tangible material; Bogus
• Section: 148; 143(3); 68; 133A

Judgement Text

" ITA No 533 of 2020 Rithwik Projects P Ltd Page 1 of 19 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ DB-A ‘ Bench, Hyderabad Before Shri Vijay Pal Rao, Vice-President A N D Shri Manjunatha, G. Accountant Member आ.अपी.सं /ITA No.533/Hyd/2020 (िनधाŊरण वषŊ/Assessment Year: 2011-12) ACIT Central Circle 2(2) Hyderabad Vs. Rithwik Projects (P) Ltd Hyderabad PAN:AABCR5748L (Appellant) (Respondent) राज̾ व Ȫारा/Revenue by: Smt. U Mini Chandran, CIT(DR) िनधाŊįरती Ȫारा/Assessee by: Shri P Murali Mohan Rao, CA सुनवाई की तारीख/Date of hearing: 22/04/2025 घोषणा की तारीख/Pronouncement: 16p/06/2025 आदेश/ORDER Per Vijay Pal Rao, Vice President This appeal filed by the Revenue is directed against the order dated 27/07/2020 of the learned CIT (A)-12, Hyderabad, relating to A.Y.2011-12. 2. The Revenue has raised the following grounds of appeal: “1. The learned CIT (A) erred boith in law and on facts of the case. 2. The learned CIT (A) erred in deleting the addition of Rs.5,00,00,000/- towards amount received from M/s. PACL India Ltd stating that the amount received was towards works contract and the assessee had offered reasonable ITA No 533 of 2020 Rithwik Projects P Ltd Page 2 of 19 profit on the same when the genuineness of the sub-contract itself was not established by the assessee. 3. The learned CIT (A) erred in deleting the addition of Rs.29,50,36,734/- u/s 68 of the Act towards sub- contract poayments made to M/s. Megacity Infrabuilders Pvt Ltd and M/s. Timeless Developers Pvt. Ltd. 4. The learned CIT (A) failed to appreciate the fact that the assessee did not bring any evidence on record to prove the actual rendering of services by M/s. Megacity Infrabuilders Pvt Ltd and M/s. Timeless Developers Pvt. Ltd and hence genuineness of the sub-contracts”. 3. Ground No.1 is general in nature and does not require any specific adjudication. 4. Ground No.2 is regarding the addition of Rs.5.00 crores made by the Assessing Officer towards the amount claimed as received from M/s. PACL India Ltd on account of work contract has been deleted by the learned CIT (A). 5. The learned DR has submitted that the Assessing Officer received information from the DDIT (Inv.) Gurgaon that during the search and seizure operation conducted in case of PACL India Ltd and survey operation in case of the assessee on 20th June, 2013, the statement of Shri Velchuri Srinivasa Rao, DGM (Finance/Accounts) of the assessee company was recorded wherein he had admitted that the assessee company has received Rs.5.00 crores on 18th and 19th Nov. 2010 from PACL India Ltd against the work agreement. However, the assessee did not execute any work or gave any sub-contract for execution of the alleged work from PACL but raised a R.A Bill dated 13/12/2010 to PACL. The learned DR has referred to the statement of Shri ITA No 533 of 2020 Rithwik Projects P Ltd Page 3 of 19 Velchuri Srinivasa Rao and in reply to question No.9, he has explained the facts regarding the receipt of Rs.5.00 crores from PACL without execution of any work by the assessee or through any sub-contract. Thus, the learned DR has submitted that when the assessee has neither executed any work nor refunded the said amount, then it is clear that the entire amount of Rs.5.00 crores is liable to be assessed as income of the assessee from other sources in the absence of any expenditure incurred by the assessee. Thus, the learned DR has relied upon the order of the Assessing Officer and submitted that the learned CIT (A) is not justified in deleting the said addition when the assessee itself has admitted the fact that the amount was received without execution of any work or incurred any expenditure towards the alleged execution of work. 6. On the other hand, the learned AR of the assessee has submitted that the assessee filed its return of income on 30/09/2011 declaring total income of Rs.40,63,52,120/-. The case was selected for scrutiny and the assessment u/s 143(3) was completed on 27/03/2014 on total income of Rs.68,30,04,589/-. Thereafter, the case was reopened by issuance of notice u/s 148 on 10/10/2014 and the assessment was completed u/s 143(3) r.w.s. 147 on 31/03/2016 on a total income of Rs.68,30,04,589/- . Subsequently, the assessment was again reopened vide notice u/s 148 of the Act dated 29/03/2018. Therefore, the impugned assessment order passed b y the Assessing Officer u/s 143(3) r.w.s. 147 of the Act on 29/12/2018 is invalid as no new tangible material was in the possession of the Assessing Officer after ITA No 533 of 2020 Rithwik Projects P Ltd Page 4 of 19 completion of the earlier re-assessment on 31/03/2016. The learned AR of the assessee has thus, submitted that the 2nd reopening of the assessment is not sustainable in law as it is based on change of opinion and therefore, the same is bad in law and liable to be quashed. The learned AR has further submitted that this transaction of Rs.5 crores was duly recorded in the books of account as well as in the bank account of the assessee and therefore, this fact was very much available with the Assessing Officer at the time of scrutiny assessment passed u/s 143(3) on 27/03/2014 and thereafter on 31/03/2016. Hence, the same cannot be considered as income of the assessee in the 2nd re-assessement proceedings. The learned AR has submitted that though the assessee has raised this issue of validity of reopening before the learned CIT (A), however, the same has been decided against the assessee and therefore, as per Rule 27 of the ITAT Rules, 1963, the assessee can support the impugned order of the learned CIT (A) by raising this issue of validity of reopening before the Tribunal. Even otherwise on merits, the addition is not sustain able as it is based only on the alleged statement of the DGM (Finance) of the assessee recorded u/s 133A of the I.T. Act, 1961 on 20/06/2013 which was very much available with the Assessing Officer at the time of passing the re-assessement order dated 31/03/2016. Therefore, the addition made by the Assessing Officer is not sustainable and liable to be deleted. He has supported the impougned order of the learned CIT (A). The learned AR has also referred to the work order as well as the sub- contract work order placed at Page Nos.82 to 104 of the paper book. ITA No 533 of 2020 Rithwik Projects P Ltd Page 5 of 19 7. We have considered the rival contentions as well as the relevant material available on record. The Assessing Officer has made an addition of Rs.5 crores by giving the reasons in para 5 & 6 of the assessment order as under: “5. The submission of the assessee company has been considered along with information received. However, as already mentioned above, that during the course of survey proceedings in the case of assessee company, the Deputy General Manager (Finance) of assessee Company, Shri Velchuri Srinivasa Rao in answer to Question No. 9 of his sworn statement recorded on 20.06.2013, has clearly stated that assessee company entered into agreement with PACL for execution of work but neither executed any Work nor gave it for sub-contract for execution of work for PACL. The relevant portions of the sworn statement of Shri Velchuri Srinivasa Rao is reproduced hereunder for the sake of clarity: ………………. Q9. What is the nature of work done for PACL Limited? When the work was completed? Whether have you executed the Work or do you given it for sub-contract? Please furnish bills and vouchers etc. in support of the work done. A. We have entered into agreement for execution of development work with M/s. PACL India Limited. But we have neither executed any work nor given for sub-contract for execution of work for M/s. PACL Limited. We cannot produce any bills and Vouchers. However we have received an amount of Rs.5,00,00,000/-including TDS of Rs.10 Lakhs on 18th & 19th of November, 2010 against the agreement and then we raised the RA Bill on 13. 12.2010. Q10. When you have not executed the work why you have received the amount? Have you returned the money? If not what was the purpose of receiving money from M/s. PACL India Limited? A. I can say the work was not executed but received the money. I have no idea or purpose of recejpt and we have not returned the amount.... “ 6. Further, assessee company could not furnish any supporting evidence viz. bills/vouchers etc. to establish that work was executed by it or given to any sub-contractor for execution. Also, the assessee company failed to prove the nexuS between the credits from PACL at Rs.5.00,00,000/- and the debits claimed by it to have been given under Sub- ITA No 533 of 2020 Rithwik Projects P Ltd Page 6 of 19 contract to M/s. Nakshatra Commercial P Ltd at Rs.8,97,44.800/-. Therefore, it is clear from the above, that the assessee company received 5 Crore however, did not execute any work against the same and hence did not incur any expenditure wholly and exclusively for the purpose of earning of Rs.5 Crore. In view of the above, the above receipt of Rs.5 Crore is treated as income from other sources and brought to tax. Penalty proceedings u/s. 271(1) (c) are initiated initiated separately for furnishing inaccurate particulars of income. (Addition: Rs.5,00,00, 000/-)” 8. Thus, the addition has been made by the Assessing Officer only on the basis of the statement of Shri Velchuri Srinivasa Rao, DGM (Finance) of the assessee company recorded during the survey on 20th June, 2013. It is pertinent to norte that the said statement was recorded by the Assessing Officer of the assessee itself on 20/06/2013 whereas the earlier re-assessment order u/s 143(3) r.w.s. 147 of the I.T. Act, 1961 was passed by the Assessing Officer on 31/03/2016. The Assessing Officer has recorded the relevant facts of the return of income filed by the assessee and scrutiny assessment completed u/s 143(3) and thereafter, the re-assessment completed u/s 143(3) r.w.s. 147 in para No.1 of the assessment order as under: ITA No 533 of 2020 Rithwik Projects P Ltd Page 7 of 19 9. Therefore, undisputedly the scrutiny assessment was completed on 27/03/2014 and thereafter, re-assessment was completed on 31/03/2016. However, the Assessing Officer has not found anything wrong in respect of the said amount of Rs.5 crores received by the assessee from PACL on account of execution of the work awarded by PACL to the assessee. In the 2nd re-assessment, the Assessing Officer has made this addition solely on the basis of the statement recorded during the survey u/s 133A of the Act on 20/06/2013 which was very much in the knowledge of the Assessing Officer as well as available with the Assessing Officer when the first re-assessment order was passed on 31/03/2016. Once the Assessing Officer has not doubted the transaction of Rs.5 crores received by the assessee against the development work awarded by M/s PACL under the agreement/work order for execution of the work at the time of completing the scrutiny assessment as well as first re- assessment, then the said transaction cannot be doubted and added to the income of the assessee in the absence of any new material to establish that the said amount was received back by the assessee as his on unaccounted income. The learned CIT (A) has deleted the addition after considering the remand report of the Assessing Officer in para 7.5 to 7.5.3 as under: ITA No 533 of 2020 Rithwik Projects P Ltd Page 8 of 19 ITA No 533 of 2020 Rithwik Projects P Ltd Page 9 of 19 10. Accordingly, in view of the facts and circumstances as discussed above, we do not find any error or illegality in the impugned order of the learned CIT (A), qua this issue. 11. Ground No.3 is regarding the addition made by the Assessing Officer u/s 68 of the Act towards sub-contract payment made to M/s. Megacity Infra Builders (P) Ltd and M/s Timelsss Developers (P) Ltd. The learned DR has submitted that the Assessing Officer received information from the Dy. CIT, Central Circle-1 Kolkata that Megacity Infra Builders (P) Ltd (MIPL) has issued a bogus bill to the assessee company for sub-contract payment to the tune of Rs.20,68,36,734/- and also received the confirmation that M/s. Timeless Developers (P) Ltd (TDPL) has provided accommodation entries to the tune of Rs.8,82,00,000/-. The Assessing Officer has also recorded the fact that there was a survey operation u/s 133A of the Act conducted on 10/02/2015 ITA No 533 of 2020 Rithwik Projects P Ltd Page 10 of 19 on Aakash Agarwal Group, a well known entry operator during which the statements of the Director of MIPL and TDPL were recorded by the Dy. Director of Income Tax (Inv.) Kolkata wherein these parties have accepted the fact that they have provided accommodation entries of bogus sales, bogus bills for contractual receipts, bogus share and sub-contractual payments. The learned DR has further submitted that even after the survey proceedings, the Director of MIPL vide letter dated 15/11/2016 submitted to the DIT (Central-1), Kolkata has confirmed the fact that during the year under consideration, MIPL received work order from 5 principals including the assessee company for Rs.20.68 crores for development of village road and contract job work. However, the said work was not executed but MIPL has recorded the expenditure in the books of account and reported a meagre income in the return of income for the A.Y 2011-12. Similarly, the Director of TDPL also admitted the fact that they received Rs.8.82 crores from the assessee company and raised bills/vouchers for the contract work. All these facts establish that the assessee has claimed bogus expenditure to the tune of Rs.29,50,36,734/- which was brought to tax by the Assessing Officer. She has relied upon the impugned order of the Assessing Officer. 12. On the other hand, the learned AR of the assessee has submitted that these expenses are duly recorded in the books of account and also examined by the Assessing Officer in the scrutiny assessment passed u/s 143(3) of the Act and 1st re- assessment us 143(3) r.w.s. 147 of the Act, therefore, no new material or fact was found by the Assessing Officer except the ITA No 533 of 2020 Rithwik Projects P Ltd Page 11 of 19 alleged statements of the Director of MIPL and TDPL recorded by the DIT (Kolkata) in the survey proceedings. The learned AR has further submitted that the payments were made through banking channels and subjected to TDS. There were work contracts issued by the assessee to these parties for execution of the work which were not doubted by the Assessing Officer during earlier assessments. The assessee has received the amount for execution of the work which was subcontracted to these parties, therefore, once the receipt and payment of the amount is not in dispute, then both the amounts of receipts as well as the payment cannot be treated as income of the assessee. He has further submitted that the learned CIT (A) has called for a remand report and after examining the relevant record including the work orders for execution of the work as well as for sub-contract work given by the assessee to these parties has decided this issue. 13. We have considered the rival submissions as well as the relevant material on record. It is not in dispute that on the one hand, the assessee has received payments from PACL as well as PNC Infratech Ltd for execution of the work and on the other hand, the assessee has paid the majority of the contract receipt amount to these companies under the sub-contract for getting the work executed awarded to the assessee. The receipt of the payment by the assessee as well as the payment of the same is not in dispute and the assessee has reported a profit from these transactions of Rs.1,94,63,300/- and offered to tax. Both the transactions of receipt as well as payment was subjected to TDS and through banking channels. The assessee has recorded these ITA No 533 of 2020 Rithwik Projects P Ltd Page 12 of 19 transactions in the books of account and also supported the same with the underlined work contract as well as bills/vouchers. The Assessing Officer has disallowed the claim of expenditure solely on the basis of the information received from the Dy. CIT (Central) Kolkata making reference of the statements of the Directors of MIPL and TDPL in the course of survey proceedings u/s 133A of the Act. Therefore, the addition made by the Assessing Officer on the basis of the statement of 3rd party recorded by the Investigation Wing, Kolkata is not sustainable in absence of any corroborative evidence to show that the transaction recorded by the assessee is in the books of account are bogus. Further, when both the transactions of receipts and payments are treated as bogus, then the addition cannot be made on account of receipt as well as payment which would amount to double addition of the same amount which is recorded in the books as receipts and then transferred to the sub-contractors. The learned CIT (A) after considering the relevant facts has decided this issue in para 7.5.6 as under: ITA No 533 of 2020 Rithwik Projects P Ltd Page 13 of 19 ITA No 533 of 2020 Rithwik Projects P Ltd Page 14 of 19 ITA No 533 of 2020 Rithwik Projects P Ltd Page 15 of 19 ITA No 533 of 2020 Rithwik Projects P Ltd Page 16 of 19 ITA No 533 of 2020 Rithwik Projects P Ltd Page 17 of 19 ITA No 533 of 2020 Rithwik Projects P Ltd Page 18 of 19 14. Accordingly, in view of the facts and circumstances as discussed above, we do not find any error or illegality in the order of the learned CIT (A) qua this issue and the same is upheld. 15. In the result, appeal filed by the Revenue is dismissed. Order pronounced in the Open Court on 16th June, 2025. Sd/- Sd/- (MANJUNATHA, G.) ACCOUNTANT MEMBER (VIJAY PAL RAO) VICE-PRESIDENT Hyderabad, dated 16th June, 2025 Vinodan/sps ITA No 533 of 2020 Rithwik Projects P Ltd Page 19 of 19 Copy to: S.No Addresses 1 ACIT Central Circle 2(2) Room No.616, 6th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad 500004 2 M/s. Rithwik Projects (P)Ltd, Plot Nos. 37 & 39, Road No.2, Navodaya Colony, Banjara Hills, Hyderabad 500034 3 Pr. CIT – Central, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order "