M/s Tyazhprom India Pvt. Ltd., New Delhi V. DCIT, New Delhi

CO 407/DEL/2010

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8354 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 20-12-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 16-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RANU MUKHERJEE
• Section: 143(3); 115JB

Judgement Text

ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.4971/DEL/2010 ASSESSMENT YEAR : 2002-03 DY.COMMISSIONER OF INCOME TAX, VS TYAZHPROM INDIA PVT. LTD., CIRCLE 16(1), B-6/91, 1 ST FLOOR, NEW DELHI. SAFDARJUNG ENCLAVE, NEW DELHI-110029 (PAN: AAACT2843D) C.O.NO.407/DEL/2010 (IN I.T.A.NO.4971/DEL/2010) ASSESSMENT YEAR : 2002-03 TYAZHPROM INDIA PVT. LTD., VS DCI T, NEW DELHI. APPELLANT BY: SMT. RANU MUKHERJEE, SR.DR RESPONDENT BY : SHRI G.N. GUPTA O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-XIX, NEW DELHI IN APP EAL NO. 104/2009- 10 DATED 16.08.2010 FOR AY 2002-03. THE ASSESSEE H AS FILED CROSS OBJECTION AND WE ARE ADJUDICATING BOTH THESE CASES BY THIS CO NSOLIDATED ORDER. 2. THE MAIN GROUNDS RAISED IN REVENUES APPEAL READ AS UNDER:- ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 2 '1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW BY DELETING THE DISALLOWANCE OF RS. 37,35,253/- WITHOU T DECIDING ON MERITS THE CONTENTIONS OF THE ASSESSING OFFICER AND BY IGNORING THAT: (I) THE LIABILITY WAS DISPUTED AND HAD NOT ACTUALLY CRYSTALLIZED DURING THE YEAR. (II) THE SETTLEMENT PROPOSAL DATED 2 LL2.200 I CANNOT BE SAID TO HAVE ENDED THE DISPUTE SINCE IT WAS SENT TO THE HEAD OFFICE OF M/S L & T LTD. FOR APPROVAL AND NO APPROVAL WAS RECEIVED DURING THE YEAR. (III) THE ASSESSEE COULD NOT EXPLAIN WHY THE ENTRY WAS MADE ON 31.03.2002 IN THE BOOKS OF THE ACCOUNTS INSTEAD OF ON 21.12.2001IF THE SETTLEMENT PROPOSAL INDEED ENDED THE DISPUTE. (IV) THE ASSESSEE COULD NOT FURNISH THE CONFIRMATIO N OF LARSEN AND TOUBRO LTD. THAT THE DISPUTE HAD ENDED. 2. THE LD CIT (A) HAS ERRED ON FACTS AND IN LAW BY DELETING THE DISALLOWANCE OF RS. 31,42,500/-WITHOUT DECIDING ON MERITS THE CONTENTIONS OF THE AO AND BY IGNORING TH AT: (I) THE ASSESSEE COULD NOT FURNISH SATISFACTORY EV IDENCE TO PROVE THAT THE LIABILITY HAD ACTUALLY CRYSTALLIZED DURING THE YEAR. (II) THE ASSESSEE COULD NOT FURNISH EVIDENCE TO SH OW THAT RELEVANT BILL WAS RAISED AND ACCEPTED DURING THE YE AR. (III) THE ASSESSEE COULD NOT EXPLAIN WHY THE ENTRY WAS MADE ON 31.03.2002 IN THE BOOKS OF THE ACCOUNTS IF THE L ETTER/FAX DATED 19.06.200, 24.09.2001 AND 01.09.2001 ARE HELD BY AS EVIDENCE OF CRYSTALLIZATION OF THE LIABILITY. ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 3 3. BRIEF FACTS GIVING RISE TO THIS APPEAL ARE THAT THE ASSESSEE FILED A RETURN DECLARING LOSS OF RS.65,63,600 UNDER NORMAL PROVISIONS OF THE ACT AND DECLARING NIL INCOME U/S 115JB OF THE I.T. ACT. THE ASSESSING OFFICER PASSED AN ORDER DATED 22.03.2005 U/S 143(3) OF THE ACT BY ASSESSING TOTAL TAXABLE INCOME AT RS.1,19,35,950/-. THE ASSESSMENT ORDER WAS APPEALED BY THE ASSESSEE BEFORE COMMISSIONER OF INCOME TAX(A) WHO DECIDED THE APPEAL ON 15.01.2007. THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) WAS CHALLENGED BY THE REVENUE BEFO RE ITAT H BENCH DELHI DATED 2.11.2008 WHICH WAS PARTLY ALLOWED AND THE ISSUE OF LIABILITY WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER F OR FRESH ADJUDICATION AFTER HEARING THE ASSESSEE. 4. ON THE DIRECTION OF ITAT H BENCH DELHI, T HE ASSESSING OFFICER PASSED AN ORDER U/S 254 R/W SECTION 143(3) OF THE A CT ON 30.09.2009. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE C OULD NOT FURNISH CONFIRMATION OF L&T LTD. TO CONFIRM THAT THE DISPUT E IN THIS REGARD HAS ENDED AND THE LIABILITY HAS ACTUALLY CRYSTALLIZED D URING THE YEAR UNDER CONSIDERATION. ON THE ISSUE OF CLAIM FOR RECOVERY BY BHILAI STEEL PLANT, THE ASSESSING OFFICER CONCLUDED THAT FROM THE LETTE R SUBMITTED BY THE ASSESSEE, IT COULD NOT BE ASCERTAINED AS TO WHETHER THE LIABILITY HAS ACTUALLY CRYSTALLIZED DURING THE YEAR UNDER CONSIDE RATION. THE ASSESSING ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 4 OFFICER ALSO DISALLOWED AN AMOUNT OF RS. 9,85,000 R ELATED TO NON-SUPPLY OF M/S COMPOUND EQUIPMENT, RS. 14,01,372 RELATED TO CLAIM AGAINST BUILDING STRUCTURE ERECTION AND TECHNOLOGICAL STRUC TURE ERECTION AND RS.1,79,000 PERTAINING TO THE PAYMENT MADE TO ANDRE W YULE & COMPANY IN TWO PARTS, ONE FOR THE COST OF EQUIPMENT , INCLUDING EXCISE DUTY AND SALES TAX AND PACKING CHARGES ETC. AND ANO THER FOR FREIGHT ONLY. 5. THE AGGRIEVED ASSESSEE FILED AN APPEAL BEFO RE THE COMMISSIONER OF INCOME TAX(A) WHICH WAS PARTLY ALLOWED BY THE IMPUG NED ORDER. NOW, THE REVENUE IS BEFORE THIS TRIBUNAL WITH THE TWO GR OUNDS MENTIONED HEREINABOVE. SIMULTANEOUSLY, THE ASSESSEE HAS ALSO FILED CROSS OBJECTION PERTAINING TO THE CONFIRMATION OF DISALLOWANCE MADE BY THE COMMISSIONER OF INCOME TAX(A) RELATED TO ADDITIONS OF RS.9,85,000, RS.14,01,372 AND RS.1,79,000. GROUND NO.1 6. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF ASSESSEE AMOUNTING TO RS.37,35,253/- WITH FOLLOWING OBSERVATIONS:- 4.3. IN THE MATTER OF CLAIM AGAINST EXTRA QUANTIT Y OF RS. 37,35,253/-, THE EXPENSE HAS BEEN ENTERED IN THE BO OKS OF THE ASSESSEE ON 31.03.2002 AND IT HAS BEEN STATED T HAT IT WAS CLAIMED AGAINST EXTRA QUANTITY MADE BY L & T LT D. FOR THE PROOF OF THIS CLAIM IT HAS BEEN STATED THAT M/S L & T LTD. WAS TO SUPPLY EQUIPMENTS WITHIN THEIR BILLIN G SCHEDULE TO THE ASSESSEE AS PER PROVISIONS OF THE C ONTRACT. SINCE, THE ASSESSEE'S CONTRACT WITH BHILAI STEEL PL ANT ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 5 (BSP) WAS ON TURN KEY BASIS, L & T SUPPLIED THE EQUIPMENTS IN ACCORDANCE WITH THE DRAWINGS APPROVED BY BSP. THIS RESULTED IN NET SURPLUS VARIATION IN QUAN TUM OF EQUIPMENTS. THUS TPI PURCHASED THE ADDITIONAL EQUIPMENTS FROM L & T (THE ADDITIONAL QUANTITY OF EQUIPMENTS OVER THEIR BILLING SCHEDULE). THEREAFTER THE QUANTUM OF EQUIPMENTS AND RATE WAS RECONCILED BETWE EN TPI AND L T AND ON MUTUAL SETTLEMENT THE STATEMENT WAS SIGNED ON 21.12.2001 AND ACCORDINGLY EXPENDITURE AMOUNTING TO RS. 37.35 LAKHS WAS DEBITED TO P & L A /C IN THE ACCOUNTING YEAR 2001-02. FROM THE EVIDENCES SUBMITTED BY THE ASSESSEE IT HAS BEEN FOUND THAT TH ERE WAS A NOTE SHEET DATED 21.12.2001 IN WHICH IT HAS B EEN SPECIFICALLY WRITTEN THAT THIS RECONCILIATION IN TH E NOTE SHEET IS A PROPOSAL WHICH MAY BE FORWARDED TO HEAD OFFICE FOR THEIR APPROVAL BEFORE ALLOWING THE CREDI T TO L & T LTD. IN THE NOTE SHEET IT HAS BEEN WRITTEN THAT T HE PROPOSAL IS SUBMITTED FOR ONWARD SUBMISSION TO HEAD OFFICE FOR THEIR SCRUTINY AND APPROVAL. THIS PROPOS AL CAN NOT BE SAID TO HAVE ENDED THE DISPUTE REGARDING THE SUPPLY OF EXTRA QUANTITY OF S. S. LINERS AND CHUTES BY L & T LTD. IT COULD ALSO NOT BE EXPLAINED THAT IF THIS WAS END OF DISPUTE THEN WHY THIS WAS NOT ENTERED IN THE BOO KS ON 21.12.2001. WHY HAS ASSESSEE ENTERED THIS ENTRY IN THE BOOKS ONLY ON 31.03.2002. THE ASSESSEE COULD NOT FU RNISH CONFIRMATION OF L & T LTD. TO CONFIRM THAT DISPUTE IN THIS REGARD HAS ENDED AND THE LIABILITY HAS ACTUALLY CRYSTALLIZED. THEREFORE, THIS CLAIM IS HEREBY DISAL LOWED. 7. ON APPEAL BY THE ASSESSEE, THE COMMISSIONER OF INCOME TAX(A) DELETED THE ABOVE ADDITION WITH FOLLOWING OBSERVATI ONS AND FINDINGS:- 12.1 CLAIM AGAINST EXTRA QUANTITY BY M/S LARSEN & TOUBRO: LARSEN & TOUBRO [HEREAFTER CALLED L & T FOR SHORT] WAS TO SUPPLY THE EQUIPMENT WITHIN THEIR BILLING SCHEDULE TO M/S TPI AS PER PROVISION OF THE CONTRACT. SINCE TPI'S C ONTRACT WITH BHILAI STEEL PLANT [HEREAFTER CALLED BSP FOR S HORT] ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 6 WAS TURN-KEY BASIS, L&T SUPPLIED EQUIPMENTS IN ACCORDANCE WITH DRAWINGS APPROVED BY BSP. THIS RESU LTED IN NET SURPLUS VARIATION IN QUANTUM OF EQUIPMENTS S UPPLIED BY L & T. THUS TPI PURCHASED ADDITIONAL EQUIPMENT F ROM L&T ADDITIONAL QUANTITY OF EQUIPMENTS OVER THE BILL ING SCHEDULE.] THEREAFTER THE QUANTUM OF EQUIPMENTS AND THE RATE WAS RECONCILED BETWEEN TPI & L&T AND A MUTUAL SETTLEMENT WAS SIGNED ON 21 DECEMBER 2001 FOR AN AM OUNT OF RS. 37,35,253.00 IN RESPECT OF SAID ADDITIONAL E QUIPMENT SUPPLIED BY L&T AS AGAINST THEIR CLAIM OF RS.38.68 LAKH CLAIMED VIDE THEIR LETTER DATED 27TH AUGUST 2001. ACCORDINGLY, AN EXPENDITURE AMOUNTING TO RS. 37,35,253.00 ONLY WAS DEBITED TO P&L ACCOUNT IN THE ACCOUNTING YEAR 2001-02. ACCORDING TO AO A NOTE SHE ET DATED 21.12.2001 WITH REGARD TO RECONCILIATION OF EQUIPMENT IS IN THE FORM OF PROPOSAL AND HENCE, HE CONCLUDED THAT THE DISPUTE CONTINUED. SINCE THERE I S SUPPLY OF EQUIPMENT, THE AMOUNT OF RS.37,35,253.00 IS RIGH TLY CLAIMED BY THE ASSESSEE AS EXPENDITURE IN IMPUGNED YEAR. THE AO IS HEREBY DIRECTED TO DELETE THE ADDITION. RELIEF: RS. 37,35,253/- 8. AFTER CAREFUL CONSIDERATION OF RIVAL SUBMISSI ONS OF BOTH THE PARTIES ON THIS ISSUE AND CAREFUL PERUSAL OF RECORD, INTER ALIA, EARLIER ORDERS AND THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW, WE OB SERVE THAT SINCE THE TPI CONTRACT WITH BHILAI STEEL PLANT WAS ON TURN KE Y BASIS AND THE L&T SUPPLIED EQUIPMENTS IN ACCORDANCE WITH DRAWINGS APP ROVED BY BSP, THE DISPUTED AMOUNT WAS DEBITED TO THE P&L ACCOUNT IN T HE ACCOUNTING YEAR 2001-02 AND THERE WAS ACTUAL SUPPLY OF EQUIPMENT AM OUNTING TO RS. 37,35,253. THEREFORE, THE ASSESSEE COMPANY RIGHTLY CLAIMED THE EXPENDITURE IN THE YEAR UNDER CONSIDERATION. THESE FACTS HAVE NOT BEEN ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 7 DISPUTED BY THE DR THAT THE ASSESSEE COMPANY MADE A BOVE PAYMENT DURING THE YEAR UNDER CONSIDERATION FOR THE PURCHAS E OF ADDITIONAL EQUIPMENT FROM L&T AS PER DRAWINGS APPROVED BY BSP. IN VIEW OF ABOVE, THIS FINDING OF THE ASSESSING OFFICER IS NOT SUSTAINABLE THAT THE LIABILITY WAS NOT ACTUALLY CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. PER CONTRA, THE COMMISSIONER OF INCOME TAX(A) RIGHT LY OBSERVED THE MODE OF TRANSACTION RECORDED BY THE ASSESSEE COMPAN Y IN ITS BOOKS OF ACCOUNTS. ACCORDINGLY, WE ARE UNABLE TO SEE ANY PE RVERSITY OR INFIRMITY IN THE IMPUGNED ORDER IN THIS REGARD AND WE UPHOLD THE SAME. HENCE, GROUND NO. 1 OF THE REVENUE IS DISMISSED. GROUND NO. 2 9. LD. DR SUBMITTED THAT THE ASSESSING OFFICER R IGHTLY HELD THAT THE ASSESSEE COULD NOT FURNISH SATISFACTORY EVIDENCE TO PROVE THAT THE LIABILITY HAD ACTUALLY CRYSTALLIZED DURING THE YEAR BECAUSE T HE ASSESSEE COULD NOT FURNISH EVIDENCE TO SHOW THAT THE RELEVANT BILLS WE RE RAISED AND ACCEPTED DURING THE YEAR UNDER CONSIDERATION. THE DR FURTHE R SUBMITTED THAT THE ASSESSEE COULD NOT EXPLAIN WHY THE ENTRY WAS MADE O N THE LAST DATE OF FINANCIAL YEAR I.E. 31.3.2002 IN THE BOOKS OF ACCOU NTS DESPITE THE FACT THAT THE LETTERS AND FAX MESSAGES DATED 19.06.2001, 24.0 8.2001AND 01.09.2001 ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 8 WERE RECEIVED BY THE ASSESSEE AS AN EVIDENCE OF CRY STALLIZATION OF LIABILITY. 10. REPLYING TO THE ABOVE SUBMISSIONS, THE ASSE SSEES COUNSEL SUBMITTED THAT THE RECOVERY OF DISPUTED AMOUNTS HAV E BEEN TAKEN INTO P&L ACCOUNT DURING THE YEAR UNDER CONSIDERATION SIN CE THE TPI HAS COMMISSIONED THE PLANT ON 12.12.2001. THEREFORE, T HE ASSESSING OFFICER WAS NOT JUSTIFIED IN OBSERVING THAT THE LIABILITY W AS NOT CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. 11. THE ASSESSING OFFICER DISALLOWED THE DISPUT ED PAYMENT WITH FOLLOWING OBSERVATIONS:- 4.5. THE AMOUNT OF RS. 31,42,500/- HAS BEEN ENTERE D IN THE BOOKS BY THE ASSESSEE 31.03.2002 AS A CLAIM FOR RECOVERY BY BSP FOR NO RE-SUPPLY OF P.U. DECK EQUIP MENT. ASSESSEE WAS TO SUPPLY P.U. DECK (PART OF EQUIPMENT ) TO M/S BSP FOR WHICH BSP WAS TO RS. 31.42 LAKHS TO ASS ESSEE AS PER BILLING SCHEDULE BETWEEN ASSESSEE AND BSP. B SP MADE THE PAYMENT AS PER CONTRACTUAL TERMS WHEN SUP PLY WAS MADE. HOWEVER AT THE TIME OF TRIAL RUN/COMMISS IONING OF THE PROJECT, IT WAS FOUND THAT THE SUPPLIED PU D ECK WAS DEFECTIVE BSP DIRECTED ASSESSEE EITHER TO RE-SUPPLY THE PU DECK OR RECOVERY FOR RS. 31.42 LAKHS WAS TO BE MADE FROM ASSESSEE. HOWEVER, AS THE MARKET PRICE OF THE PU DE CK HAD GONE UP DURING PAST YEARS, ASSESSEE DECIDED NOT TO RE- SUPPLY THE P U DECK. SINCE, ASSESSEE WAS TO CONSTRU CT THE PROJECT ON TURN KEY BASIS, ASSESSEE WAS NOT SUPPOSE D TO GET THE MONEY FROM BSP FOR RE-SUPPLY OF PU DECK. THEREFORE, BSP DECIDED TO RECOVER THE MONEY/COST OF PU DECK AS PER BILLING SCHEDULE. ACCORDINGLY ASSESSEE HAD TO DEBIT THIS EXPENSE OF RS. 31.42 LAKHS IN ITS BOOKS OF ACCOUNT. FROM THE DETAILS FURNISHED BY THE ASSESSEE AS ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 9 PROOF OF THE SAME IT HAS BEEN FOUND THAT THE ASSESS EE HAS FURNISHED THE COPY OF THREE LETTERS. FIRST LETTER H AS BEEN WRITTEN BY THE ASSESSEE TO BHILAI STEEL PLANT DATED 19.06.2001 IN WHICH A PROPOSAL HAS MADE BY ASSESSEE TO THE GENERAL MANAGER (PROJECTS) OF BHILAI STEEL PLAN T TO CONSIDER THE ACCEPTANCE OF WOVEN WIRE DECKS IN PLAC E OF P. U. DECKS BUT THIS LETTER CLEARLY SHOWS THAT THIS JU ST A PROPOSAL WHETHER IT HAS BEEN ACCEPTED OR NOT IS NOT CLEAR. IN THE LETTER DATED 24.08.2001 THE ASSESSEE HAS FUR THER REMINDED TO BSP ABOUT THEIR DECISION ON THE BELT CH ANGING DEVICE AND ACCEPTANCE OF WOVEN WIRE DECKS. SINCE, N O COMMUNICATION COULD BE MADE TILL THEN BY THE BSP. T HIRD LETTER A FAX MESSAGE BY BSP DATED 01.09.2001 IN WHI CH IT HAS BEEN COMMUNICATED THAT THE ASSESSEE SHOULD SUPP LY BELT CHANGING DEVICE OF STATIONARY TYPE AS PER PROV ISION OF THE CONTRACT. IN THE MATTER OF PU DECKS FOR VIBRAT ING SCREEN IT HAS BEEN STATED THAT THE ASSESSEE SHOULD SUPPLY PU DECKS AS PER THE CONTRACT. FROM THESE LETTERS IT COULD NOT BE ASCERTAINED AS TO WHETHER THE LIABILITY HAS ACTUALLY CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION AND TH E BILL WAS RAISED AND ACCEPTED BY THE ASSESSEE. IT WAS ALS O ASKED FROM THE ASSESSEE AS TO WHY THE ENTRY HAS BEEN ENTE RED IN THE BOOKS OF ACCOUNTS IN THE LAST DATE OF FINANCIAL YEAR BUT NO COGENT EVIDENCE OF THE SAME COULD BE FURNISHED. THEREFORE, IN ABSENCE OF CONFIRMATION OF BSP AND IN ABSENCE OF ANY OTHER COGENT PROOFS CLEARLY DEPICTIN G THE CRYSTALLIZATION OF LIABILITY IN THIS YEAR ONLY, THE CLAIM OF THE ASSESSEE IS HEREBY DISALLOWED. 12. ON APPEAL BY THE ASSESSEE, THE COMMISSIONER OF INCOME TAX(A) DELETED THE ABOVE ADDITION WITH FOLLOWING OBSERVATI ONS AS REPRODUCED BELOW FOR THE SAKE OF CLARITY:- 12.2 RECOVERY OF DAMAGED PU DECKS BY BSP : TPI WAS TO SUPPLY PU DECKS [PART OF EQUIPMENT] TO BSP F OR WHICH SSP WAS TO PAY RS.31,42,500.00 TO TPI AS PER BILLING SCHEDULE BETWEEN TPI & BSP. BSP MADE THE ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 10 PAYMENT AS PER CONTRACTUAL TERMS WHEN SUPPLY WAS HOWEVER AT THE TRIAL RUN, IT WAS FOUND THAT THE SUP PLIED PU DECKS WAS DEFECTIVE AND BSP DIRECTED TPI EITHER TO RE-SUPPLY THE PU DECKS OR SUFFER A RECOVERY OF RS. 31,42,500.00. HOWEVER THE MARKET PU DECK HAD MEANWHILE GONE UP, TPI INFORMED TO BSP TO RECOVER T HE ABOVE COST. THUS THE RECOVERY AMOUNTING TO RS.31,42,500.00 HAVE BEEN TAKEN INTO P&L ACCOUNT IN THE ACCOUNTING YEAR 200102, SINCE TPI HAS COMMISSIONED THE PLANT ON 12TH DECEMBER 2001. THE FOLLOWING ARE THE CONTENTS OF THE FAX MESSAGE DATED 01.09.2001 WITH REGARD TO SUPPLY OF PU DECKS FROM BSP TO THE ASSESSEE: '2) PU DECKS FOR VIBRATING SCREEN M/S TPI SHOULD SUPPLY PU DECKS AS PER PROVISIONS OF THE CONTRACT. YOU ARE THEREFORE REQUESTED TO GO AHEAD AND SUPPLY THE ITEMS IN TERMS OF THE CONTRACT. YOU ARE ALSO RE QUESTED THAT AIR CLEANER OF THE SCREEN SHOULD ALSO BE COMMISSIONED IMMEDIATELY FOR IMPROVED PERFORMANCE. WITH KIND REGARDS.' SINCE THE ASSESSEE DID NOT DISPUTE, THE LIABILITY I S TO BE ALLOWED IN THE IMPUGNED YEAR ONLY. RELIEF: RS.31,42,500/- 13. AFTER THOUGHTFUL CONSIDERATION OF THE FACTS AND SUBMISSIONS OF BOTH THE PARTIES, AT THE OUTSET WE OBSERVE THAT THE REVE NUE HAS NOT DISPUTED THE POINT THAT THE ASSESSEE MADE A PAYMENT OF RS.31,42, 500 AS DAMAGES PU DECKS AS PER CONTRACTUAL TERMS WHEN SUPPLY WAS MADE . THIS FACT ALSO HAS NOT BEEN DISPUTED BY THE REVENUE THAT AT THE TRIAL RUN IT WAS FOUND THAT THE ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 11 SUPPLIED PU DECKS WERE DEFECTIVE AND THE BSP DIRECT ED THE TPI TO RE- SUPPLY THE PU DECKS OR TO SUFFER A RECOVERY OF RS.3 1,42,500 AND DUE TO RISE IN THE PRICE OF PU DECKS, THE TPI CHOSE TO PAY THE DAMAGES AND THE RECOVERY WAS MADE ACCORDING TO CONTRACTUAL TERMS DU RING THE YEAR UNDER CONSIDERATION. WHILE THE SAME AMOUNT OF RECOVERY H AS BEEN TAKEN INTO ACCOUNT BY THE ASSESSEE DURING THE FINANCIAL YEAR 2 001-02, THE LD. COMMISSIONER OF INCOME TAX(A) RIGHTLY HELD THAT THE CLAIM OF THE ASSESSEE WAS TO BE ALLOWED DURING THE YEAR UNDER CO NSIDERATION. IN VIEW OF ABOVE, WE HAVE NO REASON TO INTERFERE WITH THE F INDINGS OF THE COMMISSIONER OF INCOME TAX(A) AND WE UPHOLD THE SAM E. HENCE, GROUND NO. 2 IS DISMISSED. CROSS OBJECTION NO. 407/DEL/2010 14. THE GROUNDS RAISED IN C.O. OF THE ASSESSEE READ AS UNDER: - 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - XIX, NEW DELHI ERRED IN CONFIRMING THE ACTION OF DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 16(1), NEW DELHI IN DISALLOWING THE APPELLANTS CLA IM IN RESPECT OF FOLLOWING DEDUCTIONS: I) RS. 9,85,000/-- CLAIMED AS RECOVERY OF COST OF MST COMPOUND BY BSP. II) RS. 14,01,372/- CLAIMED AGAINST ERECTION OF BUI LDING STRUCTURE AND TECHNOLOGICAL BY M/S. HINDUSTAN STEELWORKS CONSTRUCTION LTD. ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 12 III) RS. 1,79,000/-CLAIMED AGAINST FINAL PAINTING B Y M/S ANDREW YULE & CO. LTD. 15. WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PARTIES ON THE CROSS OBJECTIONS AND OBSERVE THAT THE ASSESSING OFFICER M ADE CERTAIN ADDITIONS RELATED TO RECOVERY OF COST OF MST COMPOUND BY BSP, CLAIM OF THE ASSESSEE AGAINST THE ERECTION OF BUILDING STRUCTURE AND TECHNOLOGICAL STRUCTURE AND CLAIM OF THE ASSESSEE AGAINST FINAL P AINTING BY M/S ANDREW YULE & CO. LTD.. THE ABOVE THREE ADDITIONS WERE CO NFIRMED BY THE COMMISSIONER OF INCOME TAX(A) WITH THE FOLLOWING OB SERVATIONS:- 12.3 RECOVERY OF COST OF MST COMPOUND BY SSP : TPI WAS TO SUPPLY MST CHEMICAL COMPOUND TO BSP FOR WHICH BSP WAS TO PAY RS. 9,85,000.00 TO TPI AS PER BILLING SCHEDULE BETWEEN TPI & BSP. TPI DID NOT SUP PLY THE SAME BEFORE COMMISSIONING OF THE PROJECT, BSP REDUCED THE CONTRACT PRICE BY THE SAID ALLOTTED MON EY FOR THIS EQUIPMENT IN BILLING SCHEDULE. AS PER THE LETT ER DATED 09.07.2002, THE CASE OF THIRTY BARRELS OF MST CHEMI CALS IS ON ESTIMATE BASIS. IT CANNOT BE SAID THAT THE LI ABILITY HAS ACCRUED IN THE IMPUGNED YEAR. ACCORDINGLY, THE ACTION OF THE AO IS JUSTIFIED. CONFIRMED: RS. 9,85,000/- 12.4 CLAIM AGAINST ERECTION OF BUILDING STRUCTURE AND TECHNOLOGICAL BY M/S HINDUSTAN STEELWORKS CONSTRUCTION LTD. [HEREAFTER CALLED HSCL FOR SHORT] : THE BHILAI PROJECT WAS COMMISSIONED ON 12TH DECEMBE R 2001 AND THEREFORE, THE ENTIRE AMOUNT OF CONTRACTUA L RECEIPT WERE ACCOUNTED BY TPI IN FINANCIAL YEAR END ING 31ST MARCH 2002. TPI HAS ENGAGED M/S HSCL AS SUB-CONTRACTOR FOR EXECUTION OF ERECTION OF BUILDIN G STRUCTURES AND TECHNOLOGICAL STRUCTURES. DISPUTE AR OSE ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 13 BETWEEN TPI AND HSCL REGARDING THE EXACT QUANTUM TH E MEASUREMENT OF THE WORK EXECUTED BY HSCL AND AMOUNT PAYABLE BY TPI TO HSCL. THESE DISPUTES WERE RESOLVE D IN A MEETING BETWEEN TPI & HSCL HELD ON 12TH JUNE 2002 WHEREIN IT WAS AGREED THAT TPI WILL PAY AN AMOUNT O F RS. 14,01,372.00 TO HSCL. ACCORDINGLY, HSCL RAISED THE INVOICES ON 15TH JUNE 2002. HENCE THE ACTION OF THE AO IS JUSTIFIED IN TREATING THE LIABILITY AS NOT RELAT ED TO THE IMPUGNED YEAR. CONFIRMED: RS. 14,01,372/- 12.5 CLAIM AGAINST FINAL PAINTING M/S ANDREW YULE & CO. LTD. [HEREAFTER CALLED AYCL FOR SHORT] : ACCORDING TO THE ASSESSEE THE BHILAI PROJECT WAS COMMISSIONED ON 12 TH DECEMBER 2001 AND THEREFORE, THE ENTIRE AMOUNT OF CONTRACTUAL RECEIPTS WERE ACCOUNTED BY TPI IN FINAN CIAL YEAR ENDING 31 ST MARCH 2002. THE TPI HAD ENGAGED M/S AYCL, A GOVERNMENT OF INDIA UNDERTAKING AS SUB- CONTRACTOR FOR SUPPLY AND ERECTION OF BAG FILTERS F OR SYSTEM B-1 & B-2. THE LAST & FINAL INVOICE FOR RS.1,79,000.00 WAS SUBMITTED BY AYCL ONLY ON 12 TH JULY 2002 FOR WHICH WORK WAS COMPLETED BEFORE THE COMMISSIONING OF THE PLANT . SINCE TPI HAD ACCOUNTED FOR ALL THE CONTRACTUAL RECEIPTS IN THIS ACCOUNTING YEA R ENDING 31 ST MARCH 2002 AND SINCE THE BOOKS OF ACCOUNT FOR FINANCIAL YEAR 2001-02 KEPT ON MERCANTILE BASIS WERE STILL OPEN ON 12 TH JULY 2002, TPI ACCOUNTED FOR RS.1,79,000.00 IN THE BOOKS OF ACCOUNT FOR THE FINA NCIAL YEAR 2001-02 ON THE BASIS OF THE WELL KNOWN MATCHIN G PRINCIPLE OF ACCOUNTANCY. THE ASSESSING OFFICER ST ATED THAT AYCL ISSUED THE BILLS ON 12.07.2002 AFTER SETT LEMENT. HE FURTHER STATED THAT LIABILITY WAS NOT CRYSTALLIZ ED BEFORE 12.07.2002. THE CONCLUSION OF THE ASSESSING OFFICE R IS ON CORRECT FOOTING. THE ACTION OF THE ASSESSING OF FICER IS UPHELD. CONFIRMED: RS.1,79,000/- 16. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT CLAIM OF THE ASSESSEE WAS JUSTIFIED BECAUSE IT WAS RELATED TO THE YEAR UN DER CONSIDERATION AND ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 14 THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOW ING THE SAME. THE COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) CONFIRMED THE ABOVE ADDITION ON ERRON EOUS GROUNDS. THEREFORE, THE AR REQUESTED THAT THE FINDINGS OF TH E AUTHORITIES BELOW BE SET ASIDE BY DELETING THE ADDITIONS MADE BY THE ASS ESSING OFFICER. 17. LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY SEPARATE APPEAL IN THIS REGARD AND HE HAS FILED CROSS OBJECTION WIT H AN INTENTION TO RESIST THE APPEAL OF THE REVENUE. THE DR FURTHER SUBMITTE D THAT THE ASSESSEE IS NOT SERIOUS ABOUT CROSS OBJECTIONS BECAUSE THE ASSE SSEE HAS NOT FURNISHED ANY SUSTAINABLE EVIDENCE NEITHER BEFORE THE AUTHORI TIES BELOW NOR BEFORE THIS TRIBUNAL TO SHOW THAT THE EXPENDITURE AS CLAIM ED BY THE ASSESSEE WERE RELATED TO THE YEAR UNDER CONSIDERATION. 18. ON BARE READING OF THE IMPUGNED ORDER AND A LSO THE ASSESSMENT ORDER ON THE ISSUES DISPUTED IN CROSS OBJECTION, WE OBSERVE THAT THE FINANCIAL YEAR ENDED ON 31.3.2002 AND THE ASSESSEE COMPANY HAS MADE ALL PAYMENTS AFTER END OF FINANCIAL YEAR. WE ARE, THER EFORE, OF THE OPINION THAT THE LD. COMMISSIONER OF INCOME TAX(A) RIGHTLY HELD THAT THE RECOVERY OF COST OF MST COMPOUND BY BSP, THE PAYMEN T FOR ERECTION OF BUILDING STRUCTURES AND TECHNOLOGICAL STRUCTURES TO M/S HSCL AND PAYMENT TO M/S ANDREW YULE & CO. LTD. AGAINST FINAL PAINTING WAS ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 15 ACTUALLY SETTLED AND MADE AFTER THE END OF FINANCIA L YEAR. ACCORDINGLY, WE HAVE NO REASON TO INTERFERE WITH THE FINDINGS OF THE AUTHORITIES BELOW IN THIS REGARD AND WE UPHOLD THE SAME. FINALLY, WE ARE INCLINED TO HOLD THAT THE CROSS OBJECTIONS RAISED BY THE ASSESSEE AR E NOT SUSTAINABLE AND ARE DEVOID OF MERITS AND DESERVE TO BE DISMISSED AND WE DISMISS THE SAME. 19. IN THE RESULT, THE APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.02.2013 . SD/- SD/- ( S.V. MEHROTRA ) (CHANDRA MOHAN GARG ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 7TH FEBRUARY 2013 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR TRUE CO PY BY ORDER ASSTT. REGISTRAR ITA NO. 4971/D/2010 & CO 407/D/2010 ASSTT. YEAR: 2002-03 16