M/s. Well Worth Wire Ropes Pvt. Ltd., New Delhi V. ITO, New Delhi

CO 110/DEL/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9705 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 24-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Keywords: Opportunity of being heard
• Section: 69C; 234B; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI A.T. VARKEY, JM ITA NO.1080/DEL/2011 ASSESSMENT YEAR : 2007-08 CO NO.110/DEL/2011 (IN ITA NO.1254/DEL/2011) ASSESSMENT YEAR : 2007-08 WELL WORTH WIRE ROPES PVT. LTD., C/O O.P. SAPRA & ASSOCIATES, ADVOCATES, C-763, NEW FRIENDS COLONY, NEW DELHI. PAN : AAACW0726E VS. ITO, WARD 18(3), CR BUILDING, NEW DELHI. ITA NO. 1254 /DEL/20 11 ASSESSMENT YEAR : 2007-08 ITO, WARD 18(3), CR BUILDING, NEW DELHI. VS. WELL WORTH WIRE ROPES PVT. LTD., 4045, FIRST FLOOR, AJMERI GATE, NEW DELHI. PAN : AAACW0726E ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI SANDEEP SAPRA, ADVOCATE DEPARTMENT BY : S HRI SAMEER SHARMA, SR. DR ITA NOS.1080 & 1254/DEL/2011 CO NO.110/DEL/2011 2 ORDER PER R.S. SYAL, AM: THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE AND THE CROSS OBJECTION BY THE ASS ESSEE ARISE OUT OF THE ORDER PASSED BY THE CIT(A) ON 24.12.2010 IN RELATION TO THE ASSESSMENT YEAR 2007-08. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN ITS A PPEAL IS AGAINST CONFIRMATION OF ADDITION OF ` 49,79,000/- MADE BY THE AO U/S 69C OF THE ACT. BRIEFLY STATED, THE FACTS OF THE GROUND ARE THAT THE AO GOT AIR INFORMATION RELATING TO CERTAIN BANK DEPOSI TS MADE BY THE ASSESSEE TOTALING ` 49,79,000/-. THE ASSESSEE WAS CALLED UPON TO FURNISH SOURCE OF THESE TRANSACTIONS. IN THE ABSEN CE OF ANY INFORMATION FORTHCOMING FROM THE SIDE OF THE ASSESS EE, AS RECORDED IN THE ASSESSMENT ORDER, THE AO MADE ADDIT ION FOR THIS AMOUNT BY APPLYING THE PROVISIONS OF SECTION 69C. IN REACHING THIS CONCLUSION, HE RELIED ON THE VIEW TAKEN BY HIM FOR THE AY 2006-07, IN WHICH YEAR ALSO ADDITION U/S 69C WAS MA DE, BUT WITHOUT RECOURSE TO ANY AIR INFORMATION. THE LD. C IT(A) ECHOED ITA NOS.1080 & 1254/DEL/2011 CO NO.110/DEL/2011 3 THE ASSESSMENT ORDER ON THIS POINT BY HOLDING THAT SIMILAR ADDITION MADE BY THE AO FOR THE AY 2006-07 WAS NOT CHALLENGED BY THE ASSESSEE BEFORE THE APPELLATE AUTHORITIES. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT T HE BASIS FOR THE INSTANT ADDITION U/S 69C WAS THE AIR INFORMATION IN DICATING THAT THE ASSESSEE DEPOSITED A SUM OF ` 49.79 LACS IN ITS BANK ACCOUNT, WHICH IN THE OPINION OF THE AO, THE SOURCE OF WHICH WAS NOT DISCLOSED. THE DETAILS OF SUCH AIR INFORMATION ARE CONTAINED ON PAGES 6-9 OF THE PAPER BOOK. PAGE 10 OF THE PAPER B OOK INDICATES THAT THE AO INQUIRED ABOUT THESE TRANSACTIONS AND R EQUESTED THE ASSESSEE TO PRODUCE CASH BOOK FOR VERIFICATION. IN REPLY, THE ASSESSEE FILED A LETTER DATED 14.12.09 STATING THAT ALL THE ENTRIES OF CASH DEPOSITS IN THE BANK WERE DULY REFLECTED IN ITS BANK ACCOUNT AND THE SAME COULD BE VERIFIED FROM THE CAS H BOOK. THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER ABOU T SUCH DETAILS HAVING BEEN FILED BY THE ASSESSEE OR THE AO MATCHIN G THE INFORMATION CONTAINED IN AIR WITH THE ASSESSEES BO OKS OF ACCOUNT. THE LD. CIT(A) UPHELD THE ADDITION BY REL YING ON THE VIEW ITA NOS.1080 & 1254/DEL/2011 CO NO.110/DEL/2011 4 TAKEN BY THE AO FOR THE AY 2006-07, WHICH THE AO AD MITTED TO BE NOT BASED ON ANY AIR INFORMATION, AS WAS THE CASE F OR THE YEAR UNDER CONSIDERATION. THE LD. AR CONTENDED THAT ALL THE DEPOSITS IN THE BANK, REFERRED TO IN THE AIR INFORMATION, WERE DULY RECORDED IN THE BOOKS OF ACCOUNT PRODUCED BEFORE THE AO AND, AS SUCH, THERE COULD HAVE BEEN NO REASON FOR MAKING ADDITION U/S 6 9C OF THE ACT. AT THIS JUNCTURE, IT IS RELEVANT TO NOTE THE MANDAT E OF SECTION 69C WHICH PROVIDES THAT: WHERE IN ANY FINANCIAL YEAR A N ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATI ON ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE A SSESSING OFFICER, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITUR E OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE TH E INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. A BARE PERU SAL OF THIS PROVISION INDICATES THAT THE ADDITION U/S 69C IS CO NTEMPLATED ONLY WHEN THE ASSESSEE HAS INCURRED SOME EXPENDITURE AND THERE IS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE. PER CONTRA , IF A PARTICULAR EXPENDITURE IS RECORDED IN THE BOOKS OF ACCOUNT, IT IMPLIES THAT THE SOURCE OF SUCH EXPENDITURE EMANATE S FROM THE BOOKS OF ACCOUNT, FOR WHICH THERE CAN BE NO QUESTIO N OF MAKING ITA NOS.1080 & 1254/DEL/2011 CO NO.110/DEL/2011 5 ANY ADDITION U/S 69C. HERE IS A CASE IN WHICH THE A SSESSEE STATED THAT THE AMOUNTS REFERRED TO IN AIR TOTALING TO ` 49.79 LACS WERE DULY RECORDED IN THE BOOKS OF ACCOUNT BY MEANS OF C ASH DEPOSITS. WHEN THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE AO, IT WAS INCUMBENT UPON HIM TO VERIFY THE VERACITY OF THE AS SESSEES CONTENTION AS PUT FORTH BEFORE HIM THROUGH ITS LETT ER DATED 14.12.09. THE LD. CIT(A) SUSTAINED THE ADDITION BY BASING HIS OPINION ON SIMILAR ADDITION MADE FOR THE PRECEDING YEAR, WITHOUT VERIFYING THE ASSESSEES CONTENTION, MORE SO, WHEN THE AO HIMSELF ADMITTED THAT THE BASIS OF ADDITION FOR THE INSTANT YEAR WAS DIFFERENT FROM THAT OF THE PRECEDING YEAR. IN O UR CONSIDERED OPINION, THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS RESTO RED TO THE FILE OF THE AO. WE ORDER ACCORDINGLY AND DIRECT HIM TO V ERIFY WHETHER SUCH TRANSACTIONS OF DEPOSIT IN BANK, CONTAINED IN AIR INFORMATION, WERE REFLECTED IN THE BOOKS OF ACCOUNT. IF SUCH EN TRIES ARE THERE IN THE BOOKS OF ACCOUNT, THEN, OBVIOUSLY, THERE CAN BE NO POINT IN MAKING ANY ADDITION U/S 69C. IN THE OTHERWISE SITU ATION, THE AO WILL DECIDE THE ISSUE AS PER LAW, AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NOS.1080 & 1254/DEL/2011 CO NO.110/DEL/2011 6 4. THE ONLY OTHER GROUND IN THE ASSESSEES APPEAL A BOUT THE LEVY OF INTEREST U/S 234B IS CONSEQUENTIAL AND, ACC ORDINGLY, DISPOSED OF. 5. THE REVENUE IS AGGRIEVED AGAINST THE DELETION OF ADDITION OF ` 1,67,62,500/- WHICH WAS MADE BY THE AO. 6. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESS EE OBTAINED A CONTRACT FOR JOB WORK RELATING TO INSTALLATION, COM MISSIONING AND TESTING OF WAGON, SHUNTING WINCHES AND ANCILLARY WO RKS FOR KAKINADA SEA PORT LTD. DURING THE YEAR, THE ASSESS EE RECEIVED FIVE PAYMENTS TOTALING TO ` 1,25,71,875/-, WHICH AMOUNT WAS DIRECTLY TAKEN TO THE BALANCE SHEET WITHOUT ROUTING THROUGH THE PROFIT & LOSS ACCOUNT. THE AO OBSERVED THAT THE VA LUE OF THE ENTIRE CONTRACT WAS ` 1,67,62,500/-. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THE ASSESSEE DID NOT OFFER THIS I NCOME, IT WAS SUBMITTED THAT THE PROJECT OF KAKINADA SEA PORT LTD . WAS IN PROGRESS DURING THE YEAR WHICH COMPLETED IN THE SUB SEQUENT YEAR. THE ASSESSEE STATED THAT SINCE IT WAS FOLLOW ING PROJECT COMPLETION METHOD, RESULTANTLY, THE ENTIRE INCOME E MANATING ITA NOS.1080 & 1254/DEL/2011 CO NO.110/DEL/2011 7 FROM SUCH CONTRACT WAS DULY OFFERED FOR TAXATION IN THE IMMEDIATELY SUCCEEDING YEAR. NOT CONVINCED WITH TH E ASSESSEES SUBMISSIONS, THE AO HELD THAT THE AMOUNT OF ` 1.67 CRORE WAS LIABLE TO BE TAXED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE CONTENDED B EFORE THE LD. CIT(A) THAT IT INCURRED EXPENSES AMOUNTING TO ` 1,00,01,925/- IN THE YEAR UNDER CONSIDERATION IN RESPECT OF THE ABOV E CONTRACT OF ` 1.67 CRORE AND A FURTHER SUM OF ` 66,29,222/- WAS INCURRED IN SUBSEQUENT YEAR AGGREGATING TO TOTAL EXPENDITURE OF ` 1,66,31,148/-. THE LD. CIT(A) OBSERVED THAT ONLY T HE PROFIT ELEMENT FROM THE CONTRACT AT ` 1,31,352/- SHOULD HAVE BEEN CHARGED TO TAX. HE, THEREFORE, WORKED OUT PROPORTI ONATE NET PROFIT OF ` 98,514/- ON THE BASIS OF THE CONTRACT RECEIPTS DUR ING THE YEAR VIS-A-VIS THE TOTAL VALUE OF THE CONTRACT AND RESTRICTED THE ADDITION TO THIS LEVEL. THAT IS HOW, THE LD. CIT(A) DIRECTED THE AO TO TAX PROPORTIONATE NET PROFIT OF ` 98,514/- IN THIS YEAR AND GIVE CONSEQUENTIAL BENEFIT OF SUCH ADDITION IN THE SUBSE QUENT YEAR BECAUSE THE ASSESSEE HAD OFFERED THE ENTIRE INCOME TO TAX IN THE SUCCEEDING YEAR. THE REVENUE IS AGGRIEVED AGAINST T HE VIEW CANVASSED BY THE LD. CIT(A). THE ASSESSEE IN ITS C ROSS OBJECTION IS ITA NOS.1080 & 1254/DEL/2011 CO NO.110/DEL/2011 8 AGGRIEVED AGAINST THE SUSTENANCE OF ADDITION AT ` 98,514/- FOR THE INSTANT YEAR. 7. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED AS UNDISPUTED FA CT THAT THE TOTAL RECEIPTS DURING THE YEAR FROM THIS CONTRACT AMOUNTE D TO ` 1.25 CRORE. THE VALUE OF THE CONTRACT WAS ` 1.67 CRORE. THE ASSESSEE NOT ONLY TOOK RECEIPTS OF ` 1.25 CRORE TO ITS BALANCE SHEET DIRECT, BUT ALSO SIMULTANEOUSLY CAPITALIZED EXPENSES INCURR ED ON THIS PROJECT AT ` 1.00 CRORE DURING THE YEAR AND TOOK SUCH EXPENDITU RE ALSO FOR CONSIDERATION IN THE SUCCEEDING YEAR. THE CASE OF THE ASSESSEE IS THAT IT WAS FOLLOWING PROJECT COMPLETIO N METHOD AND THE ENTIRE INCOME WAS OFFERED TO TAX IN THE SUBSEQU ENT YEAR. THE FACT RECORDED BY THE LD. CIT(A) THAT THE ASSESSEE I NCURRED A SUM OF ` 1.00 CRORE IN THIS YEAR AND ` 66.29 LAC IN THE SUBSEQUENT YEAR TOWARDS THIS CONTRACT, HAS NOT BEEN CONTROVERTED BY THE LD. DR. THIS SHOWS THAT THE ACTION OF THE AO IN TAXING THE GROSS SUM OF ` 1.67 CRORE HAS NO LEGS TO STAND ON, BECAUSE TAX IS LEVIED ON THE INCOME AND NOT ON THE RECEIPT. THE AO, BY INC LUDING A SUM OF ` 1.67 CRORE IN THE TOTAL INCOME OF THE ASSESSEE FOR THE CURRENT ITA NOS.1080 & 1254/DEL/2011 CO NO.110/DEL/2011 9 YEAR HAS, IN FACT, CHARGED THE ENTIRE RECEIPT TO TA X IGNORING THE FACT THAT THE ASSESSEE HAD ALSO INCURRED EXPENDITUR E ON THIS CONTRACT. THE FINDING OF THE LD. CIT(A) TO THIS EX TENT IS UPHELD. 8. AS THE SUBSTANTIAL PART OF THE CONTRACT WAS COMPLETED BY THE ASSESSEE DURING THE YEAR, IN VIEW OF WHICH IT ALSO RECEIVED A SUM OF ` 1.25 CRORE, IN OUR CONSIDERED OPINION, THE PERCENT AGE COMPLETION METHOD, AS IMPLIEDLY USED BY THE LD. FIR ST APPELLATE AUTHORITY, IS CORRECTLY APPLICABLE TO THE FACTS AN D CIRCUMSTANCES OF THE INSTANT CASE. WE, THEREFORE, HOLD THAT THE PROPORTIONATE INCOME OF ` 98,514/- WAS RIGHTLY CHARGEABLE TO TAX AND THERE I S NO BASIS FOR EITHER UPHOLDING THE ACTION OF THE AO IN TAXING THE GROSS RECEIPT AT ` 1.67 CRORE OR THE VIEW OF THE LD. AR THAT NO AMOUN T BE CHARGED TO TAX IN THE INSTANT YEAR. WHEN CONFRONTED , THE LD. AR WAS FAIR ENOUGH NOT TO PRESS THE CROSS OBJECTION FI LED BY THE ASSESSEE AGAINST THE SUSTENANCE OF ADDITION OF ` 98,514/-. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS ISSUE. ITA NOS.1080 & 1254/DEL/2011 CO NO.110/DEL/2011 10 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES, THE APPEAL OF THE REVENUE IS DISMISSED AND CO OF THE ASSESSEE IS ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.07.2014. SD/- SD/- [ A.T. VARKEY ] [ R.S. SYAL ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 25 TH JULY, 2014. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.