ACIT, Circle -16(2), Hyderabaad, Hyderabad V. Prajay Engg. Syndicate Ltd., Hyderabad, Hyderabad

ITA 131/Hyd/2015

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3957 (ITAT-HYDERABAD)
• Duration Of Justice: 6 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 15-09-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 05-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Keywords: Opportunity of being heard; Earning of tax free income; Additional evidence; TDS; Set aside; FORM 26AS
• Section: 133A; 14A; 115JB; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER IT A NO. 1 31 /H/20 15 ASSESSMENT YEAR: 2 0 1 1 - 12 ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 16(2), HYDERABAD. VS. PRAJAY ENGG. SYNDICATE LTD., HYDERABAD. PAN AACCP 2287M (APPELLANT) (RESPONDENT) REVENUE BY: S HRI Y.V.S.T. SAI ASSESSEE BY: S HRI MOHD. AFZAL DATE OF HEARING: 15 /0 9 /2021 DATE OF PRONOUNCEMENT: 01 / 10 /2021 O R D E R PER L.P. SAHU, A.M. : TH IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST CIT (A) - V , HYDERABAD S ORDER DATED 18 / 11 / 20 1 4 FOR AY 20 1 1 - 1 2 INVOLVING PROCEEDINGS U/S 14 3(3) OF THE INCOME TAX ACT, 1961 ; IN SHORT THE ACT , ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, T HE CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE U / S 14A. I TA NO. 131 /HYD /20 1 5 PRAJAY ENGG. SYNDICATE LTD., HYD. : - 2 - : 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, THE CIT(A) ERRED IN ADMITTING ADDITIONAL EVIDENCE IN CONTRAVENTION OF RULE 46A IN RESPECT OF BOGUS - S UBCONTRACT EXPENDITURE AND LIQUOR PURCHASES. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXPENDITURE IN RESPECT OF BOGUS SUB - CONTRACTS. 4 . ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, THE CIT (A) ERRED IN DELETING THE DISALLOWANCE IN RESPECT OF EXCESS DEBIT OF LIQU OR PURCHASES. S. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND, WHICH MAY BE NECESSARY. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION AND HOSPITALITY BUSINESS, FILED ITS RETU RN OF INCOME FOR THE AY 2011 - 12 ON 30/09/2011 DECLARING A TOTAL INCOME OF RS. 4,38,31,920/ - . BOOK PROFIT U/S 115JB WAS ADMITTED AT RS. 83,89,085/ - . THE AO COMPLETED THE ASSESSMENT DETERMINING THE TOTAL INCOME AT RS. 22,25,48,181/ - BY MAKING VARIOUS ADDITIO NS. 3. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY CONFIRMING SOME OF THE ADDITIONS MADE BY THE I TA NO. 131 /HYD /20 1 5 PRAJAY ENGG. SYNDICATE LTD., HYD. : - 3 - : AO AND DELETED SOME OF THE ADDITIONS MADE BY THE AO, AGAINST WHICH THE REVENUE I S IN APPEAL BEFORE THE ITAT. 4. AS REGARDS GROUND NO.1 RELATING TO DELETION OF DISALLOWANCE U/S 14A, THE AO OBSERVED FROM THE BALANCE SHEET THAT THE ASSESSEE HAD INVESTMENTS WORTH RS. 40.13 CRORES IN SEVERAL SUBSIDIARY COMPANIES AND THE ASSESSEE DEBITED AN AMOUNT OF RS. 8,09,22,589/ - TO THE P&L ACCOUNT TOWARDS INTEREST EXPENDITURE. BEFORE THE AO, THE ASSESSEE CONTENDED THE INVESTMENT IN THE SHARES OF THE SUBSIDIARIES OR OTHER ENTITIES UNDER THE CONTROL OF KEY MANAGEMENT PERSONNEL AND THEIR RELATIVES WAS P URELY OF BUSINESS PERSPECTIVE OR THE ENTITIES WERE PURELY PROJECT SPECIFIC WHERE THE ENTIRE WORK OF THE COMPANY WILL BE TAKEN UP BY THE HOLDING COMPANY ONLY. THE AO DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND OPINED THAT ALL THE SUBSIDIARY COMPANIE S WERE SEPARATE LEGAL ENTITIES AND THEREFORE, DISALLOWED AN AMOUNT OF RS. 1,77,16,522/ - U/S 14A R.W.R 8D. 4.1 BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SUBMISSION, IN WHICH, INTER - ALIA STATED THAT SIMILAR INTEREST EXPENDITURE WAS ALLOWED DURING THE A YS 2009 - 10 AND 2010 - 11, THEREFORE, THE SAME MAY BE ALLOWED DURING THE AY UNDER CONSIDERATION. I TA NO. 131 /HYD /20 1 5 PRAJAY ENGG. SYNDICATE LTD., HYD. : - 4 - : 4.2 THE CIT(A) FOLLOWING HIS OWN ORDER DURING THE AYS 2009 - 10 AND 2010 - 11, DELETED THE DISALLOWANCE OF RS. 1,77,16,522/ - MADE U/S 14A RWR 8D OF THE ACT. 4.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. ON GOING THROUGH THE FINANCIAL STATEMENTS OF THE ASSESSEE, WE FIND THAT THE ASSESSMENT HAD MAD INVESTMENTS AND INTEREST WAS DEBITED TO P&L ACCOUNT, BUT, SUO - MOTO, THE ASSESSEE HAS NOT DISALLOWED ANY EXPENDITURE U/S 14A OF THE ACT. FURTHER, IT WAS OBSERVED THAT THERE IS NO EXEMPT INCOME RECEIVED BY THE ASSESSEE DURING THE IMPUGNED AY. THEREFORE, THE DISALLOWANCE MADE BY THE AO U/S 14A R.W.R. 8D IS NOT CORRECT. IT IS A SETTLED LAW THAT IF THERE IS NO EXEMPT INCOME, NO DISALLOWANCE CAN BE MADE AS THERE ARE CATENA OF JUDGEMENTS OF HONBLE TRIBUNAL THAT IF THERE IS NO EXEMPT INCOME, NO DISALLOWANCE CAN BE MADE U/S 14A OF THE ACT. TH EREFORE, WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE MADE U/S 14A RWR 8D OF THE ACT. THUS, THE GROUND RAISED BY THE REVENUE ON THIS ISSUE IS DISMISSED. 5. AS REGARDS GROUND NOS. 2 & 3 RELATING TO DELETION OF DISALLOWANCE OF EXPENDITURE OF RS. 14,39,96,963/ - IN RESPECT OF SUBCONTRACT PAYMENTS, THE AO OBSERVED THAT A SURVEY U/S 133A WAS CONDUCTED BY THE ADIT, UNIT I, IN WHICH CERTAIN BOGUS SUB - CONTRACT EXPENSES CAME TO LIGHT. I TA NO. 131 /HYD /20 1 5 PRAJAY ENGG. SYNDICATE LTD., HYD. : - 5 - : THE ASSESSEE HAD BOOK ED EXPENSES TO THE EXTENT OF RS. 14,39,96,9 63/ - FOR THE AY 2011 - 12 UNDER THE HEAD M/S BSK DISMANTLING EXCAVATION AND STONE CUTTING. THE AO HELD THAT THE WORKS OF EXCAVATION AND STONE CUTTING WAS NOT GENUINE IN NATURE AND DISALLOWED THE SAME. 5.1 BEFORE THE CIT(A), THE ASSESSEE FILED ADDITIONAL EVIDENCES CONSISTING OF LETTERS FROM BSK REGARDING DISMANTLING, EXCAVATION AND STONE CUTTING LEDGER EXTRACTS, BANK STATEMENT SHOWING THE PAYMENTS MADE TO BSK ETC. AND THE CIT(A) FORWARDED TO THE AO CALLING F OR A REMAND REPORT ON THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE BEFORE HIM. 5.2 SINCE THE AO HAD NOT SUBMITTED REMAND REPORT , THE CIT(A) ACCEPTED THE ADDITIONAL INFORMATION FURNISHED BY THE ASSESSEE AND HELD THAT THE PARTIES ARE GENUINE AND THE P AYMENTS WERE MADE TO THEM IN THE FORM OF CHEQUES PROPER L Y TOWARDS THE WORKS EXECUTED BY THE PARTIES WERE GENUINE. HE, THEREFORE, CONCLUDED THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE EXPENSES INCURRED IN THE NAME OF M/S BSK WE R E NOT GENUINE IN NATURE AND MAKING ADDITION OF RS. 14,39,96,963/ - AND HENCE, DELETED THE ADDITION. 5.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. THE REVENUE HAS ALLEGED THAT I TA NO. 131 /HYD /20 1 5 PRAJAY ENGG. SYNDICATE LTD., HYD. : - 6 - : THE CIT(A) ACCEPTED THE ADDITIONAL EVIDENCE AND ON THE BASIS OF WHICH THE CIT(A) DELETED THE ADDITION. WE FIND THAT THE CIT(A) ACCEPTED THAT THE PAYMENTS MADE BY WAY OF CHEQUES AND THE TDS MADE ON THE PAYMENTS MADE TO SUB - CONTRACTORS. HOWEVER, THE CIT(A) HAS NOT EXA MINED THE GENUINENESS OF THE WORKS UNDERTAKEN BY THE SUB - CONTRACTORS AND HE DID NOT EXAMINE ANY OTHER RELATED DOCUMENTS FOR SUBSTANTIATING SUB - CONTRACT WORKS DONE BY THE SUB - CONTRACTORS. MERELY CONSIDERING THAT THE TDS WAS DEDUCTED ON THE PAYMENTS MADE TO SUB - CONTRACTORS IS NOT SUFFICIENT REASON TO DELETE THE ADDITION. WE ALSO FIND THAT THE CIT(A) BRUSHED ASIDE THE OBJECTIONS RAISED BY THE AO IN HIS ORDER. THEREFORE, KEEPING IN VIEW THE FINDINGS RECORDED BY THE AO AND IN THE INTEREST OF JUSTICE, WE REMIT TH IS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE THE CIT(A) AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE MATTER . THUS, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. AS REGARDS GROUND NO. 4 RELATING TO THE ADDITION OF RS. 43,06,952/ - TOWARDS EXCESS DEBIT, T HE A O OB SERVED THAT THE ASSESSEE OBTAINED PERMISSION FROM EXCISE DEPT. OF THE STATE TO SELL LIQUOR IN THE HOTELS IT RUNS. THE DEPT. DOES TCS IN CASE OF THE PURCHASES MADE BY THE ASSESSEE. AS THE PERMISSION IS OBTAINED BY THE DIRECTORS SRI D. VIJAY SEN I TA NO. 131 /HYD /20 1 5 PRAJAY ENGG. SYNDICATE LTD., HYD. : - 7 - : REDDY AND SR I NANDI RAVINDER REDDY , TCS DETAILS WERE OBTAINED IN THEIR RESPECTIVE 26AS. THE A O OBSERVED THAT THE TOTAL PURCHASES ON WHICH TCS MADE WAS RS.1,2 5 ,92,944, BUT THE PURCHASE OF LIQUOR DEBITED IN THE P&L ACCOUNT WAS RS.1,68,99,896 AND THERE WAS AN EXCESS OF RS.43,06,952 / - , WHICH WAS ADDED BACK TO THE TOTAL INCOME. 6.1 DURING THE APPEAL PROCEEDINGS, THE APPELLANT FURNISHED ITS SUBMISSIONS AS UNDER: IT IS HEREBY BROUGHT TO YOUR KIND NOTICE THAT THE APPELLANT HAS ALL THE RELEVANT DOCUMENTS RELATING TO THE PURCHASE OF LIQUOR. ASSESSING OFFICER HAS ADDED AN AMOUNT OF RS.43,06,952JTO THE RETURNED INCOME TREATING IT AS AN EXCESS DEBIT TO P&L ACCOUNT WITH RESPECT TO LIQUOR PURCHASES. THE DIRECTORS OF THE COMPANY, POSSESSING THE LICENSES HAVE PURCHASED LIQUOR ON BEHALF OF THE COMPANY AND THE ASSESSEE COMPANY ALSO PURCHASED THE LIQUOR ON ITS NAME FROM A P BEVERAGES CORPORATION LTD (HERE AFTER REFERRED AS APB CL ) WHI CH IS A GOVERNMENT COMPANY. APBCL COLLECTS THE TAX WHILE SELLING THE LIQUOR TO LICENSED PARTIES AND THE TAX AMOUNT AND THE AMOUNT CREDITED GETS REFLECTED IN THE FORM 26AS. 6.2 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) DELETED THE ADDIT ION MADE BY THE AO BY OBSERVING AS UNDER: 7.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT ORDER. I FIND FORCE IN THE CONTENTION OF THE APPELLANT THAT THE A.O. HAS NOT CONSIDERED THE PURCHASE OF LIQUOR BY THE APPELLANT FROM A.P. BEVERAGES CORPORATION LIMITED (APBCL), THE SAME I TA NO. 131 /HYD /20 1 5 PRAJAY ENGG. SYNDICATE LTD., HYD. : - 8 - : IS ALSO EVIDENT FROM THE FORM.26AS OF THE APPELLANT COMPANY REFLECTING TCS MADE BY THE APBCL, AMOUNTING TO RS,43,39,330. SINCE THE A O HAD NOT SUBMITTED REMAND REPORT ON THIS ADDITION, INSPITE OF REP EATED REMINDERS, I HOLD THAT THE A. O . WAS NOT JUSTIFIED IN NOT CONSIDERING THE FORM.26AS OF THE APPELLANT COMPANY AND HENCE, BASED ON THE FACTS OF THE CASE, ADDITIONAL INFORMATION SUBMITTED BY THE APPELLANT IS ACCEPTED UNDER POWERS VESTED U/S 250 RWR RULE 46A OF THE IT ACT. HENCE, THE ADDITION OF RS,43,06,952 IS DELETED. 6.3 BEFORE US, THE LD. DR RELIED ON THE ORDER OF THE AO, WHILE THE LD. AR BESIDES RELYING ON THE ORDER OF THE CIT(A), FILED ITS SUBMISSIONS IN THE PAPER BOOK, WHICH ARE AS UNDER: I N ADDITION TO DEVELOPMENT OF PROPERTIES THE ASSESSEE IS ALSO IN HOSPITALITY BUSINESS, MANAGING A RESORT AND RESTAURANT IN THE NAME OF CELEBRITY RESORTS. THIS CLUB IS HAVING LICENSE FROM THE EXCISE DEPARTMENT TO PURCHASE AND SELL LIQUOR. THE LICENSE IS IN TH E NAME OF ASSESSEE COMPANY AND ALSO IN THE NAMES OF DIRECTOR SRI.D.VIJAYSEN REDDY & SRI.NANDI RAVINDER REDDY. THE LEARNED ASSESSING OFFICER HAS NOT RAISED ANY QUERY IN HER SHOW CAUSE LETTER 18.03.2014, HOWEVER, BASING ON THE INFORMATION PROVIDED IN 26AS PE RTAINING TO THE DIRECTORS,' D.VIJAYSEN REDDY AND NANDI RAVINDER REDDY, WHERE IN TCS DETAILS WERE PROVIDED, THE LEARNED ASSESSING OFFICER OPINED THAT THERE IS AN EXCESS DEBIT OF PURCHASES TO AN EXTENT OF RS.43,06,952/ - , THEREFORE, DISALLOWED THE SAME. 6.4 IT WAS FURTHER STATED THAT THE AO HAS NOT CONSIDERED THE PURCHASES REFLECTED IN 26AS IN RESPECT OF ASSESSEE. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED FORM NO. 26AS OF ALL THE PERSONS FOR CONSIDERATION, AS THE AO HAS NOT I TA NO. 131 /HYD /20 1 5 PRAJAY ENGG. SYNDICATE LTD., HYD. : - 9 - : SOUGHT CLARIFICATION IN RESP ECT OF THE TURNOVER EITHER ORALLY OR IN SHOW CAUSE LETTER ISSUED ON 18/03/2014. 6.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. WHILE DELETING THE ADDITION MADE BY THE AO, THE CATEGORICAL FINDING OF THE CIT(A) IS THAT THE AO WAS NOT JUSTIFIED IN NOT CONSIDERING THE FORM 26AS OF THE APPELLANT COMPANY WHEREIN THE PURCHASE OF LIQUOR BY THE APPELLANT FROM A.P. BEVERAGES CORPORATION LIMITED (APBCL) IS EVIDENT. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND UPHOLDING THE SAME, WE DISMISS THE GROUND RAISED BY THE REVENUE ON THIS I SSUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN ABOVE TERMS. PRONOUNCED IN THE OPEN COURT ON 1 ST OCTOBER , 2021 . SD/ - SD/ - ( S.S. GODARA ) (L . P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 1 ST OCTOBER , 20 2 1 . K V I TA NO. 131 /HYD /20 1 5 PRAJAY ENGG. SYNDICATE LTD., HYD. : - 10 - : C OPY TO : 1 ACIT, CIRCLE 16(2), ROOM NO. 611, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 033. 2 PRAJAY ENGG. SYNDICATE LTD., H.NO. 8 - 2 - 293/82/A, PLOT NO. 1091, ROAD NO. 41, NEAR PEDDAMMA TEMPLE, JUBILEE HILLS, HYDERABAD 500 033. 3 C I T(A) - V , HYDERABAD 4 CIT - IV , HYDERABAD 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.