Deputy Commissioner of Income tax, Pune V. Ravi Sellappan, Pune

ITA 1277/PUN/2017

AI Insights

The case involves an appeal by the Assistant Commissioner of Income Tax (ACIT), Circle-7, Pune against Mr. Ravi Sellappan concerning the assessment year 2008-09. The primary issue was the deletion of an addition of Rs.6,56,89,219/- by the CIT(A), which was initially added by the Assessing Officer as unexplained work in progress. The CIT(A) had reversed the Assessing Officer's decision, leading to the Revenue's appeal. The Tribunal examined the validity of the reopening of the assessment and the merits of the addition made. The Tribunal found that the assessee had not disclosed the work in progress in his books and that the addition was rightly made as unexplained work in progress.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137025 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2023
• Appeal Filed By: Department
• Order Result: AllowedAllowed
• Bench Allotted: A
• Next Hearing Date: 16-10-2022
• Assessment Year: 2008-2009
• Appeal Filed On: 18-05-2017
• Other Referred Cases: Peter Vaz vs. CIT, Commissioner vs. Dilip Kumar & Co., Ahmedabad Electricity Co. Ltd. vs. CIT, CIT vs. Gilbert & Barker Manufacturing
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Tangible material; Set aside
• Section: 148; 271(1)(c); 143(3); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA.No.1277/PUN./2017 Assessment Year 2008-09 The ACIT, Circle-7, Aaykar Sadan, Room No.316, 3 rd Floor, Bodhi Tower, 548/2B, Salisbury Park, Gultekdi, Pune. PIN 411 037 vs. Mr. Ravi Sellappan, Flat No.6, Building No.44, Hermes Paras Cooperative Housing Society, Pune. PIN 411 006. PAN AEKPS0589J (Appellant) (Respondent) For Revenue : Shri Deepak Garg For Assessee : Shri Jitendra Jain Date of Hearing : 17.10.2022 Date of Pronouncement : 05.01.2023 ORDER PER SATBEER SINGH GODARA, J.M. This Revenue’s appeal for the assessment year 2008- 09, arises against the CIT(A), Pune-5, Pune’s order dated 22.12.2016, passed in case No.PN/CIT(A)-5/ITO Wd- 7(3)/Pune/40/2016-17, involving proceedings under Section 147 r.w.s. 143(3) of the Income Tax Act, 1961 (in short “the Act”). 2. Heard both the parties. Case file perused. 3. The Revenue pleads the following substantive grounds in the instant appeal : 2 ITA.No.1277/PUN./2017 Mr. Ravi Sellappan, Pune. “1. Whether on the facts and circumstances of the case, the learned CIT(A)-5, Pune has erred in deleting the addition of Rs.6,56,89,219/- on account of claim made to Samcon Infrastructure Corporation (SIC) by the assessee since it was clearly established that the assessee had executed the work SIC to the tune of Rs.6,56,89,219/-. 2. It is prayed that the order of Commissioner of Income tax (Appeals)-5, Pune be set aside and that of assessing officer be restored. 3. The appellant craves leave to add or amend the grounds of appeal on or before the appeal is heard and disposed off.” 4. We next note that the CIT(A)'s detailed discussion reversing assessment findings making the addition in issue of Rs.6,56,89,210/- read as follows : “5.5. I have perused the material on record and the submissions of the Appellate carefully. I find that, the AO has made the addition only on the ground that the letter issued by the Appellant claimed a certain amount, to be receivable by him. The AO, has not even investigated or reasoned, as to how a receivable claim can be treated as income in the said Assessment Year. Nowhere in the 3 ITA.No.1277/PUN./2017 Mr. Ravi Sellappan, Pune. Assessment Order, has it been pointed out that the claim was settled for it to become income of this Assessment Year. 5.6. I also tend to agree with the contention of the Appellant that, such claims are not recognized as income since they are contingent in nature. Secondly, the right to receive the amount of additional claim was not established as the claim was not approved by the SIC. This amount at the best could be treated as notional income. Thus, the addition made by the AO cannot be sustained. The AO is directed to delete the addition made on this count. The Appellant succeeds in these Grounds of Appeal.” 4.1. We further deem it to appropriate to advert to the assessment discussion making the impugned addition of the assessee’s work in progress of Rs.6,56,89,219/- as under : 06. I have carefully considered reply given by the assessee which is not acceptable. In his reply stated that the contract was awarded to Shree Satav Constructions Pvt. Ltd. (known as “SSCPL”) in the year 2003 from Jabalpur, Madhya Pradesh Govt. In the same year 20 th Jan 2003 SSCPL entered in agreement for work order with M/a Samcon Infrastructure Corp. (known as "SIC”) and SIC execution agent on behalf of SSCPL for lumpsum of Rs.15.90 crores. In the year 2003 April SIC and assesses entered into agreement for sub-contacting the work 4 ITA.No.1277/PUN./2017 Mr. Ravi Sellappan, Pune. allocated to SIC by SSCPL. In the month of Dec. 2006 SIC abandoned the project work sub-contracted by SSCPL due to disputes among the parties and SSCPL blacklisted SIC and terminated the agreement entered with SIC. SSCPL approached assessee and made agreement with assessee on 1 st Jan. 2007. Assessee stated in his letter that SSCPL raised various claims for additional amount on the Govt. of Madhya pradesh and same was rejected by the M P Govt. Assessee addressed a letter to M/s. Samcon Infrastructures Corporation, Baner Pune on 04.01.2008 and made a claim of Rs.6,56,89,219/- as receivable. When assessee himself stating that the various claim made by SSCPL rejected by the M.P. Govt. then the question raised why an assessee made claim of Rs.6,56,89,219/- after the reality. That means the assesses’s claim does not show after made a claim by SSCPL assessee also putting his claim. It is prove and clear that assessee has carried-out civil contract work to the tune of Rs.6,56,89,219/-. Assessee claimed that this work is clone during the financial year 2007-08 relevant to A Y .2008-09. This amount should have been shown as either receivable of work in progress. However, assessee has shown as work in progress of Rs.3,88,39,410/- no sundry debtors also shown in his balance sheet, it is also seen from the balance sheet that the said amount Rs.6,56,89,219/- in the 5 ITA.No.1277/PUN./2017 Mr. Ravi Sellappan, Pune. financial year 2008-09 relevant to A Y 2009-10. Hence, it is clear that the assessee has carried out cavil contract work to the tune of Rs.6,56,89,219/- Far M/s Samcon Infrastructure Corporation, Pune for A Y 2008-09 and not shown Rs.6,56,89,219/- as receivable. 07. On the basis of the above facts and information the Assessing Officer rightly reopens the case and issued a notice U/s 148 of the 1 T Act, 1961. Vide notice dated 31.03.2015 and same was served upon the assessee. 08. It is seen from the above discussion the reason recorded by the Assessing Officer is correct and satisfactory. Hence, it is clearly escapement of income. An amount of Rs.6,56,89,219/- added in the hands of the assessee. Penalty proceeding U/s 274 r.w.s 271(1)(c) for concealment and furnishing inaccurate particulars of income initiated separately.” 4.2. It is at this stage, the learned counsel raised his multiple arguments quoting Rule-27 of Appellate Tribunal Rules, 1963 that the Assessing Officer wrongly initiated sec.148/147 proceedings against the assessee after recording his reasons that the assessee’s taxable income liable to be assessed had ‘escaped assessment’. Learned counsel quoted hon'ble jurisdictional high court’s decision [2021] 436 ITR 616 (Bom.) Peter Vaz vs. CIT that assessee herein is very much 6 ITA.No.1277/PUN./2017 Mr. Ravi Sellappan, Pune. entitled to challenge validity of the impugned reopening itself inter alia on the ground that not only the Assessing Officer had not recorded the appropriate reasons of reopening based on independent opinion but also the relevant notice u/s.148 had not been served on him. Mr. Jain took us to the assessee’s objections taken before Assessing Officer vide various letters to dispel the Revenue’s technical stand relying on sec.292BB of the Act that such alleged irregularities do not vitiate the proceedings at this stage. 4.3. All these assessee’s legal arguments based on the hon'ble jurisdictional high court’s above stated decision hardly deserve to be accepted. It is noted that the issue before their lordships was that of correctness of the tribunal’s order wherein the learned coordinate bench had refused to condone delay in filing of the assessee’s cross-objections. As against this, the taxpayer herein had not pressed very grounds raised before the CIT(A) as per para-4.1 page-4 in the lower appellate order. We thus are of the view that the assessee’s instant legal arguments could not be allowed to be raised under Rule-27 once he has not pressed the same in the lower appellate proceedings. We also wish to make it clear that this assessee had filed both its Cross-Objection No.15/PUN./2017 and cross appeal ITA.No.180/PUN./2022 against the CIT(A)'s order under challenge which stood dismissed as withdrawn vide order dated 14.07.2022 with liberty to raise all these pleas as per hon'ble 7 ITA.No.1277/PUN./2017 Mr. Ravi Sellappan, Pune. jurisdictional high court’s above stated decision. The same is not found to be applicable in the given peculiar facts and circumstances. 4.4. Learned counsel at this stage sought to refer to Rule 27 (supra) which are also not found as applicable once the CIT(A) had not “decided” any of these grounds against the assessee in the lower appellate proceedings. Faced with the situation, we adopt stricter interpretation as per Commissioner vs. Dilip Kumar & Co. [2018] 9 SCC 1 (SC) (FB) to reject the assessee’s instant legal arguments. 5. Learned counsel further argued that the Assessing Officer had not applied his independent mind before setting into motion sec.148/147 mechanism as it is evident from his reopening reasons dated 26.03.2015 forming part of the case file. He sought to buttress the point that the Assessing Officer had in fact gone by the audit party’s objections only than forming reasons based on tangible material regarding assessee’s taxable income having escaped assessment. We find no merit in the assessee’s instant latter argument as well as it is evident from the perusal of the case file that the assessee was found to have not disclosed “fully” and “truly” all the material facts once it is an admitted position that the work in progress of Rs.6,56,89,219/- had seen light of the day only as per his letter dated 04.01.2008 addressed to M/s. Samcon Infrastructure 8 ITA.No.1277/PUN./2017 Mr. Ravi Sellappan, Pune. Corp. We thus reject the assessee’s instant last legal argument, not raised before the CIT(A), in the Revenue’s appeal. 6. Next comes the sole issue of correctness of the impugned addition of Rs.6,56,89,219/- on merits. We wish to clarify here that there is hardly dispute between the parties that the same had nowhere been declared or disclosed or recorded in the relevant books of accounts up to 04.01.2008 or thereafter. Learned counsel vehemently supported CIT(A)'s detailed discussion that “accrual” principle of revenue recognition does not apply once the other party has refused to honour its commitment of the assessee’s work in progress in question. Mr. Jain further took us to the said letter dated 04.01.2008 at pages 24 to 38 that the impugned work in progress even did not pertain to the relevant financial year 2007-08 so as to be assessed in assessment year 2008-09. 7. We find no merit in the assessee’s instant arguments on merits as well. Suffice to say, it is an admitted fact that the assessee has nowhere declined the department’s clinching stand all along that he had never disclosed the work in progress at all in his books through-out. The Assessing Officer’s foregoing detailed discussion has also not invoked the so-called accrual principle which could be held to have been rightly appreciated in the CIT(A)'s impugned order. This is thus a clearcut instance wherein the impugned addition ought had been assessed as 9 ITA.No.1277/PUN./2017 Mr. Ravi Sellappan, Pune. “unexplained” work in progress only. The question as to whether such a change in the head of income, if at all, could be allowed to be made in sec.254 proceedings is concerned, we find that not only the hon'ble jurisdictional high court’s landmark decision in Ahmedabad Electricity Co. Ltd. vs. CIT [1993] 199 ITR 351 (Bom.) has settled the law long back that the clinching statutory expression “may pass such orders thereon as it thinks fit” has to be interpreted in wider than in narrower terms but also their lordships hold in CIT vs. Gilbert & Barker Manufacturing [1978] 111 ITR 521 (Bom.) indeed affirm our jurisdiction to change even head of income, as the case may be, after putting the parties to notice. The assessee’s further contention that the impugned vouchers does not relate to F.Y. 2007-08 also fails to cut any ice as we can very well direct the Assessing Officer to assess the same in the concerned earlier assessment years u/s.153(6) of the Act. And also the impugned sum of Rs.6,56,89,219/- stood crystalised and became due on demand only in assessment year 2008-09 in issue. Faced with this situation, we restore the Assessing Officer’s action adding the impugned sum of Rs.6,56,89,219/- in assessee’s hands in above terms. Ordered accordingly. 8. To sum-up, this Revenue’s appeal ITA.No.1277/PUN./2017 is allowed in above terms. Order pronounced in the open Court on 05.01.2023. 10 ITA.No.1277/PUN./2017 Mr. Ravi Sellappan, Pune. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 05 th January, 2023 VBP/- Copy to 1. The appellant 2. The respondent 3. The Ld. CIT(A) concerned. 4. The CIT concerned 5. D.R. ITAT, Pune “A” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches Pune.