Prisam Logistics Pvt. Ltd., Kolkata V. PCIT, Cir. 1, Kolkata

ITA 129/KOL/2021

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2881 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 12-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TUSHAR DHUNI SINGH
• Assessee Lawyers: MANISH TIWARI
• Keywords: Principle of natural justice; Set aside
• Section: 44AD; 143(3); 147; 263

Judgement Text

ITA NO.129/KOL/2021 PRISM LOGISTICS PVT. LTD., A.Y. 2011-12 1 | P A GE , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI J. SUDHAKAR REDDY, AM AND SHRI A. T. VARKEY, JM] I.T.A. NO. 129/KOL/2021 ASSESSMENT YEAR: 2011-12 PRISM LOGISTICS PVT. LTD. (PAN: AADCP0377P) VS. PR. COMMISSIONER OF INCOME-TAX-1, KOLKATA APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 12.05.2021 DATE OF PRONOUNCEMENT 18.06.2021 FOR THE APPELLANT SHRI MANISH TIWARI, AR FOR THE RESPONDENT SHRI TUSHAR DHUNI SINGH, CIT, DR ORDER PER SHRI A. T. VARKEY, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E REVISIONAL ORDER OF LD. PCIT-1, KOLKATA DATED 31.03.2021 PASSED U/S 263 OF INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2011-12. 2. AT THE OUTSET, THE LD. AR SHRI MANISH TIWARI, CHALLENGED THE USURPATION OF JURISDICTION BY THE LD. PCIT FOR EXERCISING REVISIO NAL JURISDICTION U/S. 263 OF THE ACT WITHOUT SATISFYING THE CONDITION PRECEDENT AS LAID DOWN IN SECTION 263 OF THE ACT I.E. WITHOUT SPELLING OUT AS TO HOW THE ORDER OF THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE . ACCORDING TO THE LD. AR, THE LD. PCIT FAILED TO DEMONSTRATE IN THE IMPUGNED ORDER THAT AOS ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE, THEREFORE, ACCORDING TO HIM, LD. PCIT DID NOT ENJOY JURISDICTION U/S. 263 OF THE ACT TO INTERDICT THE ORDER PASSED BY THE AO DAT ED 24.12.2018 AND, THEREFORE, HE PLEADS THAT THE ORDER OF THE LD. PCIT MAY BE QUASHED. 3. BRIEF FACTS OF THE CASE IS THAT THE LD. PCIT NOT ED THAT IN THIS CASE FOR AY 2011-12 THE AO HAD REOPENED THE ASSESSMENT U/S. 147/143(3) OF THE ACT AND HAS PASSED THE ITA NO.129/KOL/2021 PRISM LOGISTICS PVT. LTD., A.Y. 2011-12 2 | P A GE REASSESSMENT ORDER ON 24.12.2018. ACCORDING TO LD. PCIT THE PREMISE ON WHICH THE CASE OF ASSESSEE WAS REOPENED WAS IN RESPECT OF ESCAPEME NT OF INCOME TO THE TUNE OF RS.2,75,40,000/- THROUGH ACCOMMODATION ENTRY PROVID ED BY AKASH AGARWAL GROUP IN THE GARB OF BOGUS BILLING. HOWEVER, ACCORDING TO THE L D. PCIT, THE AO COMPLETED THE REASSESSMENT BY TAKING A DIFFERENT APPROACH AND REC OMPUTED ASSESSEES INCOME BY INVOKING THE PROVISION OF SECTION 44AD OF THE ACT. FURTHER, ACCORDING TO THE LD. PCIT, THE GROSS CONTRACT RECEIPT OF THE ASSESSEE FROM M/S . USHA MARTIN GROUP EXCEEDED RS. 60 LACS DURING THE RELEVANT PREVIOUS YEAR 2010-11, THE REFORE, SECTION 44AD OF THE ACT WAS NOT APPLICABLE. IN THE AFORESAID CIRCUMSTANCES, ACCORD ING TO THE LD. PCIT THERE WAS UNDER- ASSESSMENT OF THE INCOME TO THE TUNE OF RS.2,37,44, 120/- (RS.2,75,40,000/- - RS.37,95,880/-) WHICH RESULTED IN POTENTIAL TAX EFF ECT OF RS.78,87,203/-. THEREFORE, HE ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE STATING TH AT SINCE THE ACTION OF THE AO IN FRAMING THE REASSESSMENT ORDER DATED 24.12.2018 HAS BEEN F OUND BY HIM TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE HE PROPO SED TO INTERFERE WITH THE ORDER INVOKING SECTION 263 OF THE ACT. PURSUANT TO THE SHOW CAUSE NOTICE, THE ASSESSEE FILED WRITTEN SUBMISSION WHICH HAS BEEN REPRODUCED BY THE LD. PCI T WHEREIN THE ASSESSEE CONTENDED THAT IT IS A GENUINE CONTRACT AND THAT IT IS ENGAGE D IN THE BUSINESS OF CARRYING OUT CONTRACTUAL WORKS FOR VARIOUS PRESTIGIOUS ENTITIES SUCH AS M/S. BHEL, LARSON & TOUBRO LTD., USHA MARTIN LTD. ETC. ACCORDING TO THE ASSES SEE, IT HAD SUB-CONTRACTED CERTAIN WORKS PROCURED FROM M/S. USHA MARTIN LTD. IN THE REMOTE AREAS SITUATED IN THE IRON ORE MINES AT BARAJAMBA, JHARKHAND, OXYGEN PLANT, JHARKHAND AND O THER REMOTE AREAS WHERE THE ASSESSEE WAS NOT HAVING ADEQUATE INFRASTRUCTURE FOR EXECUTION OF CONTRACT. THEREFORE, THE ASSESSEE SUB-CONTRACTED THE WORK FROM M/S. USHA MAR TIN LTD. THROUGH ANOTHER ENTITY M/S. SIMPLEX INFRA PROJECT PVT. LTD. AND IN ORDER TO PRO VE THAT THE WORKS WERE EXECUTED ON GROUND/FIELD SUBMITTED PHOTOGRAPHS AND OTHER EVIDEN CES IN SUPPORT OF THE EXECUTION OF WORKS AT VARIOUS SITES. ACCORDING TO THE ASSESSEE, SINCE THE AO HAS LOOKED INTO THE VERACITY OF ITS CLAIM/EXPENDITURE BECAUSE IT HAS EX ECUTED ITS WORK/PROJECT THROUGH SUB- CONTRACTOR M/S. SIMPLEX, THE EXPENDITURE INCURRED B Y IT FOR CONSTRUCTION CANNOT BE DISALLOWED EVEN IF THERE IS SOME DISCREPANCY IN THE BILLS. ACCORDING TO LD. AR WITHOUT INCURRING EXPENDITURE, THE CONSTRUCTION COULD NOT H AVE BEEN POSSIBLE IN THE REMOTE AREAS. SO THE EXPENDITURE INCURRED BY THE ASSESSEE COULD N OT HAVE BEEN FULLY DISALLOWED AND AT ITA NO.129/KOL/2021 PRISM LOGISTICS PVT. LTD., A.Y. 2011-12 3 | P A GE ANY RATE ONLY THE NET PROFIT EMBEDDED IN THE TRANS ACTION COULD HAVE BEEN BROUGHT TO TAX AND NOT THE ENTIRE EXPENDITURE MADE TO THE SUB-CONT RACTOR. THEREFORE, ACCORDING TO THE ASSESSEE, THE AO AFTER MAKING THOROUGH ENQUIRY ON T HE ISSUE OF CLAIM OF EXPENDITURE AND WAS SATISFIED WITH THE EXPLANATION AND PROOF SUBMIT TED BY THE ASSESSEE IN RESPECT OF THE EXECUTION OF WORK BY THE SUB-CONTRACTOR, HE (THE AO ) HAS DECIDED NOT TO TAX THE ENTIRE EXPENDITURE GIVEN BY THE ASSESSEE TO M/S. SIMPLEX. HOWEVER, THE AO TAKING NOTE OF THE ASSESSEE SUBMITTING BILL OF M/S. SIMPLEX ON THE EXP ENDITURE, AND THE FACT THAT ASSESSEE HAD EXECUTED THE WORK, PRESUMED THAT THE BILLING OF M/S . SIMPLEX MIGHT HAVE BEEN MADE BY THE ASSESSEE TO INFLATE THE EXPENSES. SO, IN ORDER TO G UARD THE LEAKAGE OF REVENUE, HE APPLIED 8% AS PER PROVISION OF SEC. 44AD OF THE ACT TO DETE RMINE THE PROFIT IN RELATION TO CONTRACT WORK OF M/S. USHA MARTIN LTD IN THE PROJECT FOR WHI CH THE ASSESSEE CLAIMED THE EXPENDITURE IN QUESTION. THEREFORE, THE ASSESSEE P RAYED BEFORE THE LD PCIT THAT THE AOS ORDER IS NOT ERRONEOUS AS WELL AS PREJUDICIAL TO TH E INTEREST OF THE REVENUE. HOWEVER, THE LD. PCIT DID NOT AGREE. ACCORDING TO HIM, THE INCO ME OF RS.2,75,40,000/- HAS ESCAPED ASSESSMENT THROUGH ACCOMMODATION ENTRY PROVIDED BY AKASH AGARWAL GROUP IN THE GARB OF BOGUS BILLING AND SINCE THE CONTRACT RECEIPT BY ASSESSEE FROM M/S. USHA MARTIN LTD. EXCEEDED RS. 60 LAKHS, THEREFORE, SECTION 44AD OF T HE ACT WAS NOT APPLICABLE. ACCORDING TO HIM, THE ENTIRE BOGUS SUB CONTRACTUAL PAYMENTS T O THE PAPER ENTITY SHOULD HAVE BEEN ADDED TO THE INCOME OF THE ASSESSEE AND THEREFORE, HE WAS PLEASED TO HOLD THAT THE ASSESSMENT ORDER DATED 24.12.2018 AS ERRONEOUS IN S O FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, HE SET ASIDE THE REASSE SSMENT ORDER DATED 24.12.2018 AND DIRECTED THE AO TO FRAME THE ASSESSMENT AFRESH. AG GRIEVED BY THE AFORESAID ACTION OF THE LD. PCIT, THE ASSESSEE IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE HAD FILED RETU RN DECLARING INCOME OF RS.80,47,179/- BY FILING IT ON 27.09.2011. THEREAFTER THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 28.02.2014 DETERMINING THE ASSESSED INCOME AT RS.82 ,30,050/-. THEREAFTER, THE ASSESSEES CASE WAS REOPENED ON AN INFORMATION RECEIVED FROM T HE DCIT, CIRCLE-14, KOLKATA ON 10.08.2017 WHEREIN AN INFORMATION WAS RECEIVED THAT DURING A SURVEY CONDUCTED ON AKASH AGARWAL GROUP ON 10.02.2015 BY THE INVESTIGATION WI NG, KOLKATA A STATEMENT OF SHRI AKASH AGARWL AND SHRI NAVIN KR. SHARMA WAS RECORDED AND AS PER THEIR STATEMENT THEY ITA NO.129/KOL/2021 PRISM LOGISTICS PVT. LTD., A.Y. 2011-12 4 | P A GE HAD ACCEPTED THAT THEY WERE PROVIDING BOGUS ENTRY T HROUGH THEIR COMPANIES. FURTHER IT WAS STATED THAT THEY HAD PROVIDED ACCOMMODATION ENTRY I N THE FORM OF BOGUS BILLING FOR CONTRACTUAL RECEIPT AND SUB-CONTRACTUAL PAYMENTS TH ROUGH THEIR JAMAKHARCHI COMPANIES TO SEVERAL BENEFICIARIES. BASED ON THIS INFORMATION T HE AO NOTED THAT THE ASSESSEE COMPANY M/S. PRISM LOGISTICS PVT. LTD. HAS AVAILED ACCOMMOD ATION ENTRY FOR BOGUS BILLING IN THE FORM OF SUB-CONTRACTUAL PAYMENT TO M/S. SIMPLEX INF RA PROJECTS TO THE TUNE OF RS.2,75,40,000/-. THEREAFTER, THE SCRUTINY ASSESSM ENT WAS REOPENED U/S. 147 OF THE ACT AFTER SERVING OF STATUTORY NOTICES AS PER LAW THE AO HAS OBSERVED AS UNDER: 3. IN RESPONSE TO THE ABOVE THE ASSESSEE SUBMITTE D A WRITTEN SUBMISSION, GIST OF WHICH IS AS UNDER: THE ASSESSEE HAS SUBMITTED THAT IT IS A GENUINE CO NTRACTOR AND HAS CARRIED OUT CONTRACTUAL ON WORK FOR MANY ENTITIES IN ITS COURSE OF BUSINESS, AND HA S ALSO DONE CONTRACTUAL WORK ON BEHALF OF BHEL (A GOVERNMENT ENTERPRISES), LARSEN & TOUBRO LTD. WH ICH ARE BIG NAMES. DURING THE YEAR THE ASSESSEE ALSO CARRIED OUT SOME WORK ON BEHALF OF PR INCIPLE M/S. USHA MARTIN LTD. THE CONTRACT OF M/S. USHA MARTIN WAS SUB-CONTRACTED TO M/S. SIMPLEX INFRA PROJECT PVT. LTD.. DETAILS OF CONTRACT CARRIED OUT OF M/S. USHA MARTIN LTD. IS AS UNDER: NAME OF THE CONTRACTEE ORDER NUMBER SCOPE OF WORK BILLING QUANTITY RATE BILLING AMOUNT USHAMARTIN LTD. CALMD/AM/2010 -33115 CONSTRUCTION OF NEW ROAD HAVING WIDTH 8 MTRS. IN THE NEW LEASE AREA AT VIJAYA II IRON ORE MINE BARAJAMDA, JHARKHAND 11 KM 20,00,000 2,20,00,000 USHAMARTIN LTD. JSR/USAD/UM/20 10-33803 LEVELLING AND GRADING USING MECHANIZED MACHINERY ALONG WITH TOOLS, TACKLES & LABOUR FOR SITE AT OXYGEN PLANT, JHARKHAND 77,000 (CUM) 150 1,15,50,000 USHA MARTIN LTD. JSR/USAD/UM/20 10-33802 FORMATION OF VILLAGE ROAD ON EITHER SIDE OF RAILWAY TRACK FOR SHIFTING OF LEVEL CROSSING ALONG WITH MATERIALS, TOOLS, TACKES AND LABOUR FOR SITE AT GAMHARIA STATION YARD JHARKHAND 1,76,000 (CUM) 110 1,93,60,000 TOTAL 5,29,10,000 ITA NO.129/KOL/2021 PRISM LOGISTICS PVT. LTD., A.Y. 2011-12 5 | P A GE THIS JOB WAS OUTSOURCED TO M/S. SIMPLEX INFRA PROJE CT PVT. LTD. IT IS AWARE ABOUT THE FULL CREDENTIALS OF M/S. SIMPLEX INFRA PROJECT PVT. LTD. BUT THE WORK WAS CARRIED OUT IN REMOTE AREAS WHERE IT DID NOT HAVE ANY REGULAR NETWORK OF CONTRA CTORS OR READILY AVAILABLE INFRASTRUCTURE. IT HAD TO RELY ON RECOMMENDATIONS OF LOCAL PROJECT INCHARG E AND OTHER CONTRACTORS ASSOCIATED WITH THE NEARBY PROJECTS. IN SUPPORT THE ASSESSEE HAD SUBMI TTED FULL PROFILE OF ITS COMPANY AND SOME PHOTOGRAPHS RELATED TO WORK CARRIED OUT ON BEHALF O F M/S. USHA MARTIN LTD. 4. CONCLUSION; THE ASSESSEE SUBMISSION WAS ANALYZED IN DETAIL, AND IT WAS SEEN THAT ACTUAL CONTRACTUAL WORK WAS CARRIED OUT BY THE ASSESSEE. THE CREDENTIALS OF THE SUB-CONTRACTEE M/S SIMPLEX INFRA PROJECT LTD. COULD NOT BE VERIFIED AS ITS NOT TRACEABLE. HOWEVER, THERE IS NO DOUBT THAT THE ACTUAL WORK WAS CARRIED OUT BY SOME OTHER ENTITY AND THE BILLII1GS WERE MADE IN THE NAME OF M/S SIMPLEX INFR A PROJECT LTD. FOR REASONS BEST KNOWN TO THE ASSESSEE. AS SOME CONTRACTUAL WORK SEEMS TO HAVE BEEN CARRIED OUT, THE ONLY OSTENSIBLE PURPOSE OF THE ASSESSEE SEEMS TO BE INFLATION OF EXPENSES. IN VIEW OF THE ABOVE AS WORK SEEMS TO HAVE BEEN CAR RIED OUT AND THE CREDITABILITY OF THE EXPENSES RELATED TO WORK OF M/S USHA MARTIN LTD. CANNOT BE V ERIFIED IN TOTALITY BEYOND DOUBT THE ONLY RECOURSE LEFT IS TO ADJUDICATE PROFITS AS PER PROVI SIONS OF SEC. 44AD OF THE I.T. ACT. HENCE, THE PROFIT DETERMINE IN RELATION TO CONTRACT WORK OF M/S USHA MARTIN LTD. IS AS UNDER: 8% OF RS.5,29,10,000/- = RS.42,32,800/- ON PRINCIPLES OF NATURAL JUSTICE, THE ABOVE ADDITIO N IS BEING REDUCED BY QUANTUM IN TERMS OF PERCENTAGE OF OVERALL PROFIT ALREADY DISCLOSED BY T HE ASSESSEE. THE ASSESSEE DISCLOSED, PROFITS IN COMPUTATION OF I NCOME OF RS. 80,47,179 ON TURNOVER OF RS. 58,27,26,985/-. THIS PROFIT WAS INCLUSIVE OF INTERE ST INCOME OF RS.7,90,080/-. THE RATE OF DISCLOSED PROFITS COMES TO 1.2% OF CONTRACTUAL RECEIPTS. HENC E, THE QUANTUM OF PROFIT ESTIMATED ON CONTRACTUAL WORK OF M/S. USHA MARTIN LTD. IS BEING REDUCED BY 1.2%. THEREFORE. RS.6,34,920/- IS BEING REDUCED FROM THE PROPOSED QUANTUM OF ADDITION I.E. RS, 42,32,800/-. 5. THIS ACTION OF AO THE LD. PCIT HAS INTERDICTED B Y INVOKING HIS REVISIONAL JURISDICTION U/S. 263 OF THE ACT BY PASSING THE IMP UGNED ORDER. THE ASSESSEE HAS CHALLENGED BEFORE US THE JURISDICTION OF LD. PCIT T O INVOKE THE REVISIONAL JURISDICTION U/S. 263 OF THE ACT WITHOUT SATISFYING THE CONDITION PRE CEDENT AS STIPULATED IN SEC. 263 OF THE ACT. 6. BEFORE WE ADVERT TO THE FACTS AND LAW INVOLVED I N THIS LIS BEFORE US, LET US REVISE THE LAW GOVERNING THE ISSUE BEFORE US. THE ASSESSEE HAS CHALLENGED IN THE FIRST PLACE, THE VERY USURPATION OF JURISDICTION BY LD. PRINCIPAL CIT TO INVOKE HIS REVISIONAL POWERS ENJOYED U/S 263 OF THE ACT. THEREFORE, FIRST WE HAVE TO SEE WHE THER THE REQUISITE JURISDICTION NECESSARY TO ASSUME REVISIONAL JURISDICTION IS EXISTING IN TH IS CASE BEFORE THE PR. CIT RIGHTFULLY ITA NO.129/KOL/2021 PRISM LOGISTICS PVT. LTD., A.Y. 2011-12 6 | P A GE EXERCISES HIS REVISIONAL POWER. FOR THAT, WE HAVE T O EXAMINE AS TO WHETHER IN THE FIRST PLACE THE ORDER OF THE ASSESSING OFFICER FOUND FAULT BY T HE PRINCIPAL CIT IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR THA T, LET US TAKE THE GUIDANCE OF JUDICIAL PRECEDENCE LAID DOWN BY THE HONBLE APEX COURT IN M ALABAR INDUSTRIES LTD. VS. CIT [2000] 243 ITR 83(SC) WHEREIN THEIR LORDSHIP HAVE H ELD THAT TWIN CONDITIONS NEEDS TO BE SATISFIED BEFORE EXERCISING REVISIONAL JURISDICTION U/S 263 OF THE ACT BY THE CIT. THE TWIN CONDITIONS ARE THAT THE ORDER OF THE ASSESSING OFFI CER MUST BE ERRONEOUS AND SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE FOLLOWING CIRCUMSTANCES, THE ORDER OF THE AO CAN BE HELD TO BE ERRONEOUS ORDER, THAT IS (I) I F THE ASSESSING OFFICERS ORDER WAS PASSED ON INCORRECT ASSUMPTION OF FACT; OR (II) INCORRECT APPLICATION OF LAW; OR (III)ASSESSING OFFICERS ORDER IS IN VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE; OR (IV) IF THE ORDER IS PASSED BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIN D; (V) IF THE AO HAS NOT INVESTIGATED THE ISSUE BEFORE HIM;[ BECAUSE AO HAS TO DISCHARGE DUAL ROLE OF AN INVEST IGATOR AS WELL AS THAT OF AN ADJUDICATOR ]THEN IN AFORESAID ANY EVENT THE ORDER PASSED BY TH E ASSESSING OFFICER CAN BE TERMED AS ERRONEOUS ORDER. COMING NEXT TO TH E SECOND LIMB, WHICH IS REQUIRED TO BE EXAMINED AS TO WHETHER THE ACTIONS OF THE AO CAN BE TERMED AS PREJUDICIAL TO THE INTEREST OF REVENUE. WHEN THIS ASPECT IS EXAMINED ONE HAS TO UN DERSTAND WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES (SUPRA) HELD THAT THIS PHRASE I.E. PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. THEIR LORDSHIP HELD THAT IT HAS TO BE REMEMBERED THAT EVERY LOSS O F REVENUE AS A CONSEQUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WHEN THE ASSESSING OFFICER ADOPTED ONE OF THE COURSES PERMIS SIBLE IN LAW AND IT HAS RESULTED IN LOSS TO THE REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT B E TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 7. THEREFORE, IN ORDER TO ADJUDICATE AS TO WHETHER LD. PCIT IS JUSTIFIED TO INVOKE POWER U/S. 263 OF THE ACT BY OBSERVING THAT THE AO S ACTION OF APPLYING U/S. 44AD OF THE ACT I.E. 8% ON THE PURPORTED ACCOMMODATION ENTRY TO THE TUNE OF RS.2,75,40,000/- FROM AKASH AGARWAL GROUP IS ERRONEOUS AND RESULTED IN UN DER ASSESSMENT OF INCOME. NOW, WE ITA NO.129/KOL/2021 PRISM LOGISTICS PVT. LTD., A.Y. 2011-12 7 | P A GE HAVE TO EXAMINE WHETHER THE ACTION OF AO IN THE FAC TS AND CIRCUMSTANCES WAS PLAUSIBLE OR AN ACTION WHICH WAS UNSUSTAINABLE IN LAW. 8. IT IS NOTED THAT AO HAS REOPENED THE SCRUTINY A SSESSMENT ORDER DATED 28.02.2014 AND HAS TAKEN NOTE OF THE BACKGROUND OF THE CASE W HICH TRIGGERED THE REOPENING AS UNDER: BACKGROUND OF THE CASE: 1. INFORMATION WAS RECEIVED FROM THE OFFICE OF DCI T, CENTRAL CIRCLE-1(4), KOLKATA ON 10.08.2017 WHICH WAS RELATED TO THE ASSESSEE. THE INFORMATION RECEIVED IS SUMMARIZED AS UNDER: IT HAS BEEN REPORTED BY THE DCIT, CENTRAL CIRCLE-1 (4), KOLKATA THAT A SURVEY WAS CONDUCTED ON AKASH AGARWAL GROUP ON 10.02.2015 BY THE INVESTI GATION WING, KOLKATA AND A STATEMENT OF SRI AKASH AGARWAL ND SRI NAVIN KUMAR SHARMA WERE RECORDED. AS PER STATEMENT, THEY ACCEPTED THAT THE PROVIDED BOGUS ACCOMMODATION ENTR Y THROUGH THEIR COMPANIES. IT HAS BEEN STATED THAT THEY HAD PROVIDED ACCOMMODATION ENTRY I N THE FORM OF BOGUS BILLINGS FOR CONTRACTUAL RECEIPT AND SUB-CONTRACTUAL PAYMENT THR OUGH THEIR JAMA KHARCHI COMPANIES TO SEVERAL BENEFICIARIES. IT HAS BEEN FOUND THAT THE ASSESSEE COMPANY M/S. PRISM LOGISTICS (P) LTD. HAD AVAILED ACCOMMODATION ENTRY FOR BOGUS BILL ING IN FORM OF SUB-CONTRACTUAL PAYMENTS TO M/S. SIMPLEX INFRA PROJECT DURING THE FY 2010-1 1 TO THE TUNE OF RS.2,75,40,000/-. 9. THUS IT IS NOTED THAT AO HAD REOPENED THE ASSESS MENT BASED ON INFORMATION FROM THE DCIT, CC-1(4), KOLKATA THAT A SURVEY CONDUCTED ON AKASH AGARWAL GROUP ON 10.02.2015 BY THE INVESTIGATION WING REVEALED THAT THEY WERE INVOKED IN PROVIDING BOGUS ACCOMMODATION ENTRY THROUGH THEIR JAMA KHARCHI COMP ANIES TO THEIR BENEFICIARIES. AND IT WAS FOUND THAT ASSESSEE HAD AVAILED ACCOMMODATION E NTRY FROM M/S. SIMPLEX INFRA PROJECT IN THE FORM OF BOGUS BILLING AS SUB-CONTRACTUAL PAY MENT TO THE TUNE OF RS.2,75,40,000/-. 10. BASED ON THE AFORESAID INFORMATION, THE AO REOP ENED THE ASSESSMENT AND AFTER CALLING FOR RELEVANT DETAILS/MATERIAL/EVIDENCES (S UPRA) HAS CONCLUDED BY MAKING A FINDING OF FACT THAT ASSESSEE HAD CARRIED OUT ACTUAL CONTRA CTUAL WORK BY OBSERVING THAT THERE IS NO DOUBT THAT THE ACTUAL WORK WAS CARRIED OUT BY SOME OTHER ENTITY AND THE BILLING WERE MADE IN THE NAME OF M/S. SIMPLEX INFRA PROJECT LTD.. AND IN THE LIGHT OF THE AFORESAID FACT THAT SINCE ACTUAL CONTRACTUAL WORK (CONSTRUCTION OF NEW ROAD (11 KM.), LEVELING, FORMATION OF VILLAGE ROAD ETC. AS GIVEN IN THE TABLE SUPRA) HAS BEEN FOUND TO HAVE BEEN EXECUTED BY SOME OTHER PERSONS IN THE REMOTE AREAS OF MINES SIT UATED AT BARAJAMDA, JHARKHAND, THE AO PRESUMED THAT THE PURPOSE OF AVAILING THE BILLING F ROM M/S. SIMPLEX MUST BE FOR INFLATION OF EXPENSES AND THEREAFTER ADOPTED THE PRESUMPTIVE TAX RATE AS ENVISAGED U/S. 44AD OF THE ACT. ITA NO.129/KOL/2021 PRISM LOGISTICS PVT. LTD., A.Y. 2011-12 8 | P A GE 11. SINCE THE AOS AFORESAID FINDING IS BASED ON TH E EVIDENCE IN THE FORM OF PHOTOS/WORK, COMPLETION REPORT AND THE PAYMENT REL EASED BY REPUTED COMPANIES FOR THE SUCCESSFUL COMPLETION/EXECUTION OF WORKS CONTRACT, THE FINDING OF THE AO IS A PLAUSIBLE VIEW AND CANNOT BE TERMED PERVERSE. IT IS TRITE LA W THAT ONLY THE NET INCOME CAN BE BROUGHT TO TAX. FOR THAT EXPENDITURE INCURRED BY THE ASSES SEE HAS TO BE ALLOWED TO DETERMINE THE NET INCOME OF THE ASSESSEE. IN THIS CASE, THE AO HAS F OUND THAT ASSESSEE HAS EXECUTED THE CONTRACT THROUGH SOME ONE. FOR EXECUTION OF THE WO RK CONTRACT, THE ASSESSEE RECEIVED PAYMENT FROM THE CONTRACTOR AND THE ASSESSEES EXPE NDITURE INCURRED NEED TO BE ALLOWED. FOR DOING THAT AO HAS FOUND THAT THOUGH BOGUS BILLI NG HAS BEEN MADE THROUGH M/S. SIMPLEX, WORK CONTRACT HAS BEEN EXECUTED THROUGH SO ME ONE. SO, HE WAS OF THE OPINION THAT PROCURING THE BILLS THROUGH M/S. SIMPLEX WAS F OR INFLATION OF EXPENSES AND TO PLUG THE REVENUE LOSS ON ACCOUNT OF THAT HE APPLIED THE PRES UMPTIVE TAX RATE U/S. 44AD OF THE ACT, WHICH IS IN LINE WITH VARIOUS JUDICIAL PRECEDENTS A S GIVEN BELOW: 1. CIT-XII VS. SUBODH GUPTA, 54 TAXMANN.COM 343 ( DELHI) [2015] 2. CIT-XIII VS. LOVISH OBEROI, 54 TAXMANN.COM 23 (DELHI) [2015] 3. ECOASFALT SA VS. ADDL. DIT, INTERNATIONAL TAXATI ON,RANGE-3, NEW DELHI, 24 TAXMANN.COM 349 (DELHI) [2012] 4. ALLIED ENGINEERS VS. CIT, KARNAL, 180 TAXMAN 7 0 (DELHI) (MAG) [2009] 5. CLT VS. JAIN CONSTRUCTION CO., 34 TAXMANN.COM 84 (RAJASTHAN) [2013] 6. EASTERN CONSTRUCTION COMPANY VS. ITO, 59 ITJ 7 23 (DELHI) [1997] 7. ITO VS. D.G. HOUSING PROJECTS LTD., 20 TAXMANN.COM 58-7 (DELHI) [2012] 12. THEREFORE, THE ACTION OF AO ON THE FACTS AND CI RCUMSTANCES AS DISCUSSED IS A PLAUSIBLE ACTION AND CANNOT AT ANY RATE BY TERMED A S UNSUSTAINABLE IN LAW. THEREFORE, THE ACTION OF LD. PCIT TO INVOKE THE REVISIONAL JURISDI CTION IS ABSENT AND THEREFORE, THE IMPUGNED ACTION OF LD. PCIT IS HELD TO BE BAD IN LA W AND SO QUASHED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 18 TH JUNE, 2021 SD/- SD/- (J.S. REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18.06.2021 SB, SR. PS ITA NO.129/KOL/2021 PRISM LOGISTICS PVT. LTD., A.Y. 2011-12 9 | P A GE COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- M. PRISM LOGISTICS PVT. LTD., 33A, CHATT ERJEE INTERNATIONAL CENTRE, JAWAHARLAL NEHRU ROAD, ROOM NO. 3, 4 TH FLOOR, KOLKATA-700 071. 2. RESPONDENT PCIT-1, KOLKATA 3. THE DCIT, CIRCLE- 8(2), KOLKATA 4. CIT- , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES, KOLKATA