M/s SPML Infra Ltd., Kolkata V. THE PCIT, KOLKATA-3, Kolkata

ITA 134/KOL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4464 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 11-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 01-02-2016
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Assessee Lawyers: SAJJAN KUMAR TULSIYAN
• Keywords: Opportunity of being heard; Retrospective amendment; Corroborative evidences; Accommodation entries; Assessment record
• Section: 143(3); 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 134/KOL/201 6 ASSESSMENT YEAR : 2011-1 2 M/S. SPML INFRA LTD. -VS.- PR.C.I.T.-3, KOLKATA KOLKATA [PAN : AADCS 2469 K) (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SAJJAN KUMAR TULSIYAN, ADVOCATE FOR THE RESPONDENT : SHRI G.MALLIKARJUNA, CI T(DR) DATE OF HEARING : 11.07.2016. DATE OF PRONOUNCEMENT : 15.07.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 01.12.2015 OF C.I.T., KOLKATA-3, KOLKATA PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (ACT). 2. THE ASSESSEE IS A COMPANY AND IT IS ENGAGED IN T HE BUSINESS OF CONSTRUCTION OF WATER, ENVIRONMENT, ELECTRICAL AND CIVIL INFRASTRUCTURE WO RKS ON CONTRACT BASIS. THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011 -12 DECLARING TOTAL INCOME OF RS.2,70,10,360/-. THE ASSESSING OFFICER (A.O.) COM PLETED THE ASSESSMENT U/S 143(3) OF THE ACT DATED 25.3.2014 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS.68,01,50,080/- UNDER NORMAL PROVISIONS AND RS.31,32,70,078/- U/S. 115JB OF THE ACT. IN THE ASSESSMENT SO COMPLETED THE AO DISALLOWED/ ADDED BA CK UNDER SEVERAL HEADS AGGREGATING TO RS.6,23,78,564/- AND ALSO DENIED EXE MPTION U/S 80-LA OF THE ACT OF RS.61,77,71,512/- CLAIMED BY THE ASSESSEE. 2 ITA NO.134/KOL/2016 M/S. SPML INFRA LIMITED . A.YR.2011-12 2 3. SUBSEQUENT TO THE PASSING OF THE SAID ASSESSM ENT ORDER DATED 25.03.2014, THE LD. PRINCIPAL C.I.T. (CIT) ISSUED A SHOW-CAUSE NOTICE U /S. 263 OF THE ACT DATED 28/09/2015 ALLEGING THAT: (I) THE ASSESSEE HAD DEBITED IN ITS P/L ACCOUNT A S UM OF RS.14,83,51,419/- BEING PROVISION FOR FUTURE LOSSES ON CONSTRUCTION CONTRAC TS AND CLAIMED THE SAME AS DEDUCTION WHILE COMPUTING INCOME FROM BUSINESS. ACCORDING TO THE CIT THIS WAS AN ANTICIPATED AND UNASCERTAINED LIABILITY AND COULD NOT HAVE BEEN CONSTRUED AS AN ACCRUED LIABILITY ALLOWABLE AS DEDUCTION WHILE COMPUTING BUSINESS INC OME FOR AY 2011-12. ACCORDING TO THE SAID SHOW-CAUSE NOTICE, SUCH ANTICIPATED LOS SES WERE NOT ALLOWABLE IN MERCANTILE SYSTEM OF ACCOUNTING. (II) ACCORDING TO THE CIT, THE ASSESSEE HAD TAKEN A CCOMMODATION ENTRIES IN THE NATURE OF BOGUS EXPENDITURE AMOUNTING TO RS.5.42 CRORES FR OM M/S. SINTEX INFRA PROJECTS LTD. WHICH WAS NOT ADMISSIBLE EXPENDITURE. ON THE BASIS OF THE ABOVE ALLEGED REASONS, THE CIT WANTED TO HOLD THE ORDER OF THE AO ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE AND CALLED UPON THE ASSESSEE TO SHOW-CAUSE WHY APPROPRIATE ORDERS SHOULD NOT BE PAS SED U/S.263 OF THE ACT. 4. THE ASSESSEE BY REPLY DATED 29.10.2015 EXPLA INED THAT WITH REGARD TO ANTICIPATED LOSS ON CONSTRUCTION CONTRACTS WHICH WERE CLAIMED A ND ALLOWED AS DEDUCTION IN THE ASSESSMENT PROCEEDINGS, THAT QUERIES IN RESPECT OF FUTURE LOSSES WITH REFERENCE TO ACCOUNTING STANDARD FOLLOWED BY THE AUDITOR AND VER IFICATION OF THE SAME DONE BY THE A.O. DURING ASSESSMENT PROCEEDING IN THE LIGHT OF S EVERAL JUDICIAL PRONOUNCEMENTS ON THE ISSUES. WITH REGARD TO THE ALLEGATION OF ACCOMM ODATION ENTRIES OF BOGUS EXPENDITURE IT WAS EXPLAINED THAT THE ASSESSEE MADE PAYMENTS SU BJECT TO TDS THROUGH BANKING CHANNEL TO M/ S. SINTEX INFRA PROJECTS LTD. FOR THE SERVICES RENDERED BY THEM AS SUB- CONTRACTOR. THE ASSESSEE SUBMITTED THAT THE DETAILS AND BACKGROUND OF THE SAID COMPANY AND OTHER DOCUMENTS EVIDENCING THEIR FINANCIAL WORT H ARE IN PUBLIC DOMAIN AND THE SAME WERE ALSO FILED BEFORE THE CIT. IT WAS THUS SU BMITTED CIT THAT THE A.O. WHILE 3 ITA NO.134/KOL/2016 M/S. SPML INFRA LIMITED . A.YR.2011-12 3 COMPLETING THE ASSESSMENT HAD ADOPTED ONE OF THE CO URSES PERMISSIBLE IN LAW AND, THEREFORE, THE PROVISIONS OF SEC. 263 OF THE ACT AR E NOT ATTRACTED. IT WAS, THEREFORE, REQUESTED TO DROP PROCEEDING INITIATED U/S.263 OF T HE ACT. 5. THE CIT WAS, HOWEVER, NOT SATISFIED WITH THE EXP LANATION OF THE ASSESSEE AND SUPPORTING EVIDENCES ETC. FILED. ON THE ISSUE OF FUTURE LOSS ON CONSTRUCTION CONTRACTS OF RS.14,83,51,419/-, WHICH WAS CLAIMED AND ALLOWED AS DEDUCTION IN THE ASSESSMENT PROCEEDINGS, HE HELD AS UNDER:- 'ON GOING THROUGH THE ASSESSMENT RECORDS, I FIND TH AT THE A.O. HAD NOT MADE ANY ENQUIRY WHATSOEVER TO ASCERTAIN THE NATURE OF THE T RANSACTION OR THAT OF THE CONTRACT AND THE CIRCUMSTANCES THAT LED TO PREMATURE TERMINA TION OF THE CONTRACT. IT IS APPARENT THAT WITHOUT ASCERTAINING THESE FACTS, IT IS NOT POSSIBLE TO ARRIVE AT A FINDING REGARDING ALLOWABILITY OF THE IMPUGNED DEDUCTION. O N GOING THROUGH THE ASSESSMENT RECORDS. I FIND THAT NEITHER THE DETAILS OF THE CIRCUMSTANCES LEADING TO PREMATURE TERMINATION ON THE PART OF THE CONTRACT N OR TERMS AND CONDITIONS OF THE CONTRACT WERE LOOKED INTO BY THE A.O. WITHOUT WHICH THE NATURE OF THE PROVISIONS OF RS.14,83,51,419/- CANNOT BE ASCERTAINED. THE FAILUR E ON THE PART OF THE ASSESSEE THUS, CERTAINLY MAKES THE ASSESSMENT ORDER ERRONEOU S IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE AS THE DEDUCTION OF RS.14,83,51 ,419/- WAS ALLOWED BY THE A.O. WITHOUT EVEN ASCERTAINING ITS REAL NATURE. I, THERE FORE, HAVE NO HESITATION IN HOLDING THAT THE ASSESSMENT ORDER DATED 25.03.2014 FOR THE ASST. YEAR 2011-12 IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REV ENUE.' 6. ON THE OTHER ISSUE OF ALLEGED BOGUS EXPENDITURE OF RS.5.42 CRORES PAID TO M/S. SINTEX INFRA PROJECTS LTD., THE ASSESSEE HAD CONTENDED THA T THE A.O. HAD NOT MADE ANY ENQUIRY WHILE COMPLETING THE ASSESSMENT BECAUSE THE INFORMA TION REGARDING THE PAYMENT TO M/S.SINTEX INFRA PROJECTS LTD., BEING IN THE NATURE OF AN ACCOMMODATION ENTRY AND THEREFORE BOGUS WAS RECEIVED FROM JCIT, RANGE-8, AH MEDABAD MUCH AFTER THE CONCLUSION OF THE ASSESSMENT PROCEEDINGS BY THE AO AND THEREFORE THERE WAS NO BASIS ON WHICH THE AO COULD HAVE MADE ANY INVESTIGATION O N THE SAID SUM BEING GENUINE OR NOT. THE CIT DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE ALSO AND HE HELD AS UNDER :- 'ON CONSIDERATION OF THE ASSESSEE'S SUBMISSION AND ARGUMENTS, I FIND THAT ALTHOUGH THE ASSESSEE HAS STATED THAT THE SERVICES RENDERED BY THE SAID COMPANY TO THE 4 ITA NO.134/KOL/2016 M/S. SPML INFRA LIMITED . A.YR.2011-12 4 ASSESSEE WAS ALSO ESTABLISHED BUT HAS NOT BEEN ABLE TO PRODUCE ANY MATERIAL OR EVIDENCE FROM WHICH IT CAN BE CONCLUSIVELY ESTABLIS HED THAT M/S. SINTEX INFRA PROJECTS LTD. HAD RENDERED THE SERVICES IN LIEU OF THE PAYMENT RECEIVED BY IT. IN A COLLUSIVE TRANSACTION, IT ALWAYS HAPPENS THAT THE P AYMENTS ARE MADE THROUGH BANKING CHARMELS AND TDS IS DEDUCTED IN CONFIRMATIO N WITH THE RELEVANT PROVISIONS SO AS TO RENDER A COVER OF GENUINENESS T O OTHERWISE NOT A GENUINE TRANSACTION IN REALITY. THE REAL NATURE OF THE TRAN SACTION CAN ONLY BE ASCERTAINED IF THE A.O. MAKES ENQUIRIES IN THIS REGARD. HOWEVER, F ROM THE ASSESSMENT ORDER, I FIND THAT NO SUCH ENQUIRY TO ASCERTAIN THE GENUINEN ESS OF THE TRANSACTION, MORE SPECIFICALLY WHETHER M/ S. SINTEX INFRA PROJECTS LT D. HAD RENDERED ANY SERVICE TO THE ASSESSEE IN LIEU OF THE PAYMENT MADE BY THE ASSESSE E WAS CONDUCTED BY THE A.O. THE A.O. HAD ALSO NOT EXAMINED THE BANK STATEMENTS TO LOOK INTO THE MOVEMENT OF THE FUND OUT OF THE PAYMENT MADE BY THE ASSESSEE. A S THESE ENQUIRIES WHICH WERE REQUIRED TO BE MADE BEFORE ACCEPTING THE CLAIM OF T HE ASSESSEE WERE NOT MAKE, THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS PREJUDIC IAL TO THE INTEREST OF REVENUE AS DEDUCTION OF THE SUM OF RS.5.42 CRORES WAS ALLOWED WITHOUT MAKING ANY ENQUIRY.' 7. THE CIT ACCORDINGLY SET ASIDE THE ORDER OF THE AO AND DIRECTED THE AO TO MAKE PROPER INQUIRIES WITH REGARD TO THE CLAIM OF THE AS SESEE FOR DEDUCTION ON ACCOUNT OF PROVISION FOR FUTURE LOSS OF RS.14.83,51,419. THE C IT ALSO SET ASIDE THE ORDER OF THE AO IN SO FAR AS IT RELATES TO THE PAYMENT OF RS.5.42 C RORES TO M/S. SINTEX INFRA PROJECTS LTD WITH THE FOLLOWING OBSERVATIONS :- 'ON CONSIDERATION OF THE ASSESSEE'S SUBMISSION AND ARGUMENTS, I FIND THAT ALTHOUGH THE ASSESSEE HAS STATED THAT THE SERVICES RENDERED BY T HE SAID COMPANY TO THE ASSESSEE WAS ALSO ESTABLISHED BUT HAS NOT BEEN ABLE TO PRODUCE ANY MA TERIAL OR EVIDENCE FROM WHICH IT CAN BE CONCLUSIVELY ESTABLISHED THAT IS. SINTEX INFRA PROJ ECTS LTD. HAD RENDERED THE SERVICES IN LIEU OF THE PAYMENT RECEIVED BY IT. IN A COLLUSIVE TRANS ACTION, IT ALWAYS HAPPENS THAT THE PAYMENTS ARE MADE THROUGH BANKING CHANNELS AND TDS IS DEDUCTED IN CONFORMATION WITH THE RELEVANT PROVISIONS SO AS TO RENDER A COVER OF GENUINENESS TO OTHERWISE NOT A GENUINE TRANSACTION IN REALITY. THE REAL NATURE OF THE TRAN SACTION CAN ONLY BE ASCERTAINED IF THE A.O. MAKES ENQUIRIES IN THIS REGARD. HOWEVER, FROM THE A SSESSMENT ORDER, I FIND THAT NO SUCH ENQUIRY TO ASCERTAIN THE GENUINENESS OF THE TRANSAC TION, MORE SPECIFICALLY WHETHER M/S. SINTEX INFRA PROJECTS LTD HAD RENDERED ANY SERVICE TO THE ASSESSEE IN LIEU OF THE PAYMENT MADE BY THE ASSESSEE WAS CONDUCTED BY THE A.O. THE A.O. HAD ALSO NOT EXAMINED THE BANK STATEMENTS TO LOOK INTO THE MOVEMENT OF THE FU ND OUT OF THE PAYMENT MADE BY THE ASSESSEE. AS THESE ENQUIRIES WHICH WERE REQUIRED TO BE MADE BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE WERE NOT MADE, THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE AS DEDUCTION OF THE SUM OF RS.5.42 CRORES WAS ALLOWED WITHOUT MAKING ANY ENQUIRY. I, THEREFORE, HOLD THAT THE ASS ESSMENT ORDER DATED 25.03.2014 COMPLETED U/S. 143(3) FOR THE ASST. YEAR 2011-12 IS ERRONEOUS AND PREJUDICIAL TO THE 5 ITA NO.134/KOL/2016 M/S. SPML INFRA LIMITED . A.YR.2011-12 5 INTEREST OF REVENUE, WHICH IS THEREFORE WITH A DIRE CTION FOR FRESH ASSESSMENT AFTER GIVING ASSESSEE OPPORTUNITY OF BEING HEARD. 8. AGGRIEVED BY THE AFORESAID ORDER THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUN SEL FOR THE ASSESSEE AND THE LD. DR. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER AS-7 ISSUED BY INSTITUTE OF CHARTERED ACCOUNTS OF INDIA (ICAI), PROVISION FOR F ORESEEABLE LOSS IN THE CASE OF ASSESSEE ENGAGED IN CONSTRUCTION BUSINESS AND FOLLO WING PERCENTAGE CONSTRUCTION METHOD IS ALLOWABLE AS DEDUCTION. IN PARTICULAR OUR ATTENTION WAS DRAWN TO COLUMN 17(K) OF THE TAX AUDIT REPORT WHEREIN THE BASIS ON WHICH PROVISION FOR FUTURE LOSSES WERE CLAIMED AS DEDUCTION HAS BEEN CLEARLY SET OUT BY TH E ASSESSEE AS FOLLOWS :- RS.14,83,51,419/- BEING PROVISION FOR FUTURE LOSSE S ON CONSTRUCTION CONTRACTS IN TERMS OF ACCOUNTING STANEARD-7 NOTIFIED BY THE COMPANIES ACC OUNTING STANDARD RULES, 2006 (AS EMENDED). THE COMPANY HAS RELIED ON THE DECISION OF THE MUMBAI INCOME TAX APPELLATE TRIBUNAL (ITAT) (AIT-2009-285-ITAT) IN THE CASE OF JACOB ENG. INDIA PVT. LTD. AND ACCORDINGLY IT HAS CONSIDERED FORESEEABLE LOSS, IN RESPECT OF AN INCOMPLETE CONTRACT COMPUTED IN ACCORDANCE WITH AS-7, AS AN ALLOWABLE E XPENSE. ' IT WAS SUBMITTED THAT IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD, THE AO ACCEPTED THE CLAIM OF THE ASSESSEE. IT WAS SUBMITTED BY HIM THAT THE FACT THAT THE AO DID NOT MAKE ANY ENQUIRIES IN THIS REGARD BEFORE ALLOWING THE CL AIM OF THE ASSESSEE WOULD NOT BE MATERIAL AS ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD IT CAN BE PRESUMED THAT THE AO HAS ACCEPTED THE CLAIM OF THE ASSESSEE AFTER DUE CONSIDERATION OF THE TAX AUDIT REPORT REFERRED TO ABOVE AND THE JUDICIAL PRONOUNCE MENTS REFERRED TO THEREIN. REFERENCE WAS MADE TO THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF MALABAR INDUSTRIAL CO.LTD. VS CIT 243 ITR 83 (SC). IT WAS S UBMITTED THAT TWO VIEWS ARE POSSIBLE ON THE QUESTION OF ALLOWING FORESEEABLE LOSSES AS D EDUCTION AND THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS AND THE CIT IN EXERCISE OF POWER S U/S 263 OF THE ACT CANNOT REVISE THE ORDER OF AO ON THE GROUND THAT HE DOES NOT AGRE E WITH THE VIEW OF THE AO. 6 ITA NO.134/KOL/2016 M/S. SPML INFRA LIMITED . A.YR.2011-12 6 10. WITH REGARD TO THE BOGUS EXPENDITURE OF RS.5 .42 CRORE PAID TO M/S. SINTEX INFRA PROJECTS LTD THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE AO COMPLETED THE ORDER OF ASSESSMENT ON 25.03.2014. THEREAFTER I.E. 30.03. 2014 INFORMATION WAS RECEIVED FROM JCIT, RANGE-8, AHMEDABAD WHICH WAS TO THE EFFECT T HAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES IN RESPECT OF EXPENDITURE PAI D TO M/S.SINTEX INFRA PROJECTS LTD., AND THESE EXPENSES WERE THEREFORE BOGUS. IT WAS S UBMITTED THAT SINCE INFORMATION IN QUESTION WAS RECEIVED AFTER THE CONCLUSION OF THE A SSESSMENT PROCEEDINGS, IT CANNOT BE SAID THAT THE AO OUGHT TO HAVE MADE ENQUIRIES INTO THE ALLEGED ACCOMMODATION ENTRY. IT WAS SUBMITTED THAT THE CONCLUSION OF THE CIT THAT T HE ORDER OF AO WAS ERRONEOUS FOR NOT MAKING PROPER ENQUIRIES, IN THE GIVEN FACTS AND CIR CUMSTANCES CANNOT BE SUSTAINED. IT WAS AGAIN HIGHLIGHTED THAT IN RESPECT OF PAYMENTS M ADE TO M/S. SINTEX INFRA PROJECTS LTD TAX HAS BEEN DEDUCTED AT SOURCE AND ALL THE PAYMENT S WERE THROUGH BANKING CHANNELS. IT WAS HIGHLIGHTED THAT THE PAYEE COMPANY IS FOUND IN THE ROLLS OF REGISTER OF COMPANIES AND HAS BEEN AN ACTIVE BUSINESS. IT WAS THEREFORE S UBMITTED THAT IDENTITY OF THE PAYEE COMPANY CANNOT BE DISPUTED. IT WAS ALSO ARGUED THAT THE CIT HAS PASSED THE IMPUGNED ORDER U/S 263 OF THE ACT ON THE BASIS OF MATERIAL O BTAINED BEHIND THE BACK OF THE ASSESSEE AND THIS WAS NOT PERMISSIBLE UNDER LAW. RE FERENCE WAS MADE TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS RAJESH KUMAR 306 ITR 27 (DELHI) AND THE DECISION OF THE HONBLE SUPREME COURT IN TH E CASE OF ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTR AL EXCISE 281 CTR 241(SC). THE LD. COUNSEL FOR THE ASSESSEE PRAYED THAT THE OR DER OF 263 BE QUASHED. 11. THE LD. DR PLACED RELIANCE ON THE ORDER OF C IT AND SUBMITTED THAT ON BOTH THE ISSUES THE AO DID NOT MAKE ANY ENQUIRIES AND THEREF ORE THE CIT WAS FULLY JUSTIFIED IN PASSING THE IMPUGNED ORDER. IT WAS SUBMITTED BY HIM THAT THE ASSESSEE COULD ALWAYS EXPLAIN THE MERITS OF THE CLAIM WITH REGARD TO ALLO WING THE PROVISION FOR FUTURE LOSSES AND ALSO PAYMENTS TO M/S. SINTEX INFRA PROJECTS LTD AND THEREFORE THE ASSESSEE CANNOT 7 ITA NO.134/KOL/2016 M/S. SPML INFRA LIMITED . A.YR.2011-12 7 HAVE ANY GRIEVANCES. RELIANCE WAS PLACED BY HIM ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE.ENTERPRISES 99 IT R 375 (DEL). 12. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION T O THE RIVAL SUBMISSIONS. IT IS CLEAR FROM THE MATERIAL ON RECORD THAT THE AO WHILE COMPL ETING THE ASSESSMENT U/S 143(3) OF THE ACT DID NOT MAKE ANY ENQUIRIES WHATSOEVER WITH REGARD TO THE PROVISION FOR FUTURE LOSSES ON CONSTRUCTION CONTRACT OF RS.14,83,51,419/ - CLAIMED BY THE ASSESSEE. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT SINCE THE BASIS ON WHICH THIS LOSS WAS CLAIMED WAS SET OUT IN THE TAX AUDIT REPORT IN COL. 17(K) AND SINCE THIS MATERIAL WAS AVAILABLE BEFORE THE AO, THE AO IS DEEMED TO HA VE APPLIED HIS MIND TO THE CLAIM OF THE ASSESSEE FOR DEDUCTION. WE ARE OF THE VIEW THAT THIS STAND TAKEN BY THE ASSESSEE CANNOT BE SUSTAINED. THE BASIS ON WHICH THE LOSS WA S ARRIVED HAS NOT BEEN ENQUIRED INTO BY THE AO. AS TO WHETHER AS-7 WILL APPLY TO THE CA SE OF THE ASSESEE AND AS TO WHETHER THE COMPUTATION OF THE LOSS DONE BY THE ASSESSEE I N ACCORDANCE WITH AS-7 IS A MATTER WHICH OUGHT TO HAVE BEEN ENQUIRED INTO BY THE AO. H IS FAILURE TO MAKE AN ENQUIRY ON THESE ASPECTS AND ACCEPTING THE CLAIM OF THE ASSESS EE FOR DEDUCTION WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LAW IS WELL SETTLED THAT IF THE AO FAILS TO MAKE AN ENQUIRY ON AN ISSUE, WHICH IN THE GIVEN FAC TS AND CIRCUMSTANCES OF THE CASE, CALLS FOR AN ENQUIRY THEN THE ORDER OF THE AO SHOUL D HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE (SUPRA) CLEARLY SUPPORTS OF THE STAND OF THE REVENUE IN THIS REGARD. THE HONBLE DELHI HIGH COURT IN THE AFORESAID DECISION HAS HELD THAT THE ITO BEING NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR, HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE WORD `ERRONEOUS' IN S. 263 INCL UDES THE FAILURE TO MAKE SUCH AN ENQUIRY. WE ARE THEREFORE OF THE VIEW THAT EXERCIS E OF JURISDICTION U/S 263 OF THE ACT IN RESPECT OF PROVISION FOR FUTURE LOSSES ON CONSTRUCT ION CONTRACT WAS FULLY JUSTIFIED. 8 ITA NO.134/KOL/2016 M/S. SPML INFRA LIMITED . A.YR.2011-12 8 13. WITH REGARD TO THE PAYMENTS MADE TO M/S. SINT EX INFRA PROJECTS LTD OF RS.5.42 CRORES IS CONCERNED, IT IS NO DOUBT TRUE THAT THE I NFORMATION WITH REGARD TO PAYMENTS BEING IN THE NATURE OF ACCOMMODATION ENTRY CAME INT O THE POSSESSION OF THE AO AFTER THE CONCLUSION OF THE ASSESSMENT PROCEEDINGS. IT I S HOWEVER SEEN THAT AT THE TIME WHEN THE CIT INVOKED THE PROVISION U/S 263 OF THE ACT, I NFORMATION IN QUESTION WAS AVAILABLE ON THE RECORD OF THE ASSESSMENT. THE DEFINITION OF RECORD AS CONTAINED IN EXPLANATION 1(B) TO SECTION 263(1) OF THE ACT MAKES ITS CLEAR T HAT RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDINGS UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMIS SIONER. IT IS PERMISSIBLE FOR THE CIT TO INVOKE JURISDICTION U/S 263 OF THE ACT ON THE BA SIS OF THE MATERIAL WHICH COMES TO THE POSSESSION OF THE AO AFTER CONCLUSION OF THE ASSESS MENT PROCEEDINGS, AND WHICH IS PART OF THE RECORD BEFORE CIT WHEN THE JURISDICTION U/S. 263 OF THE ACT IS BEING INVOKED BY THE CIT. WE ARE SUPPORTED IN THE ABOVE CONCLUSIONS BY THE DECISION OF THE HONBLE SUPREME COURT IN CIT VS. SHREE MANJUNATHESWARE PACK ING PRODUCTS & CAMPHOR WORKS 231 ITR 53 (SC) WHEREIN THE HONBLE SUPREME COURT A FTER EXAMINING THE LEGISLATIVE AMENDMENT TO S. 263 INCLUDING THE AMENDMENT MADE WI TH RETROSPECTIVE EFFECT FOR AMPLIFYING THE SCOPE OF THE TERM RECORD, DID NOT ACCEPT THE NARROW INTERPRETATION OF THE WORD RECORD WHICH HAD APPEALED TO THE CALCUTTA HI GH COURT IN THE CASE OF GANGA PROPERTIES VS. ITO 118 ITR 447 (CAL) AND THE APEX COURT HELD AS UNDER : '. . . . THE REVISIONAL POWER CONFERRED ON THE CIT UNDER S. 263 IS OF WIDE AMPLITUDE. IT ENABLES THE CIT TO CALL FOR AND EXAMI NE THE RECORD OF ANY PROCEEDING UNDER THE ACT. IT EMPOWERS THE CIT TO MA KE OR CAUSE TO BE MADE SUCH ENQUIRY AS HE DEEMS NECESSARY IN ORDER TO FIND OUT IF ANY ORDER PASSED BY THE AO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE IN TERESTS OF THE REVENUE. AFTER EXAMINING THE RECORD AND AFTER MAKING OR CAUSING TO BE MADE AN ENQUIRY, IF HE CONSIDERS THE ORDER TO BE ERRONEOUS, THEN HE CAN PA SS THE ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY. OBVIOUSLY, AS A RESULT OF THE ENQUIRY HE MAY COME INTO POSSESSION OF NEW MATERIAL AND HE WOULD B E ENTITLED TO TAKE THAT NEW MATERIAL INTO ACCOUNT. IF THE MATERIAL, WHICH WAS N OT AVAILABLE TO THE ITO WHEN HE MADE THE ASSESSMENT COULD THUS BE TAKEN INTO CON SIDERATION BY THE CIT AFTER HOLDING AN ENQUIRY, THERE IS NO REASON WHY THE MATE RIAL WHICH HAD ALREADY COME ON RECORD THOUGH SUBSEQUENT TO THE MAKING OF THE AS SESSMENT CANNOT BE TAKEN 9 ITA NO.134/KOL/2016 M/S. SPML INFRA LIMITED . A.YR.2011-12 9 INTO CONSIDERATION BY HIM. MOREOVER, IN VIEW OF THE CLEAR WORDS USED IN CL. (B) OF THE EXPLN. TO S. 263(1), IT HAS TO BE HELD THAT WHI LE CALLING FOR AND EXAMINING THE RECORD OF ANY PROCEEDING UNDER S. 263(1), IT IS AND IT WAS OPEN TO THE CIT NOT ONLY TO CONSIDER THE RECORD OF THAT PROCEEDING BUT ALSO THE RECORD RELATING TO THAT PROCEEDING AVAILABLE TO HIM AT THE TIME OF EXAMINAT ION.' THE HONBLE CALCUTTA HIGH COURT ITSELF IN A SUBSEQU ENT DECISION IN B.P.AGARWALLA & SONS LTD. VS. CIT 208 ITR 863 (CAL) MADE A REMARK T HAT THE CIT CAN CERTAINLY TAKE INTO CONSIDERATION SUBSEQUENT INFORMATION FOR THE PURPOS E OF INITIATING PROCEEDINGS UNDER S. 263 SO THAT AN ASSESSMENT ORDER WHICH WAS GOOD WHEN IT WAS MADE IN THE LIGHT OF SUCH SUBSEQUENT INFORMATION MAY APPEAR ERRONEOUS. UNDER THE ANALOGOUS PROVISIONS OF THE WT ACT, 1957, THE KERALA HIGH COURT IN CWT VS. SMT. B.INDIRA DEVI 208 ITR 26 (KER) OPINED THAT THE AMENDMENT OF SEC.25(2) OF THE WEALT H TAX ACT, 1957 IS RETROSPECTIVE, AND IS DECLARATORY OF WHAT THE LAW ALWAYS WAS. THE HIGH COURT HENCE HELD THAT EVEN FOR THE ASST. YRS. 1976-77 AND 1977-78 'RECORD' WOULD I NCLUDE ALL RECORDS RELATING TO ANY PROCEEDING UNDER THE WT ACT, AVAILABLE AT THE TIME OF EXAMINATION BY THE CWT; CONSEQUENTLY REPORT OF THE VALUATION CELL RECEIVED SUBSEQUENT TO THE COMPLETION OF ASSESSMENT CAN BE CONSIDERED BY THE CWT WHILE EXERC ISING HIS SUO-MOTU POWER OF REVISION. 14. WE THEREFORE ARE OF THE VIEW THAT THE CIT WA S JUSTIFIED IN INVOKING THE JURISDICTION U/S 263 OF THE ACT EVEN IN RESPECT OF THE PAYMENTS MADE TO M/S. SINTEX INFRA PROJECTS LTD. 15. IN THE GIVEN FACTS AND CIRCUMSTANCES WE DO NO T FIND ANY GROUND TO INTERFERE IN THE ORDER OF CIT. AS RIGHTLY CONTENDED BY THE CIT DR B EFORE US, THE ASSESSEE IS AT LIBERTY TO PUT FORTH ALL CONTENTIONS WITH REGARD TO THE ALLOWA BILITY OF THE PROVISION FOR FUTURE LOSSES ON CONSTRUCTION CONTRACT AND ALSO AS TO HOW THE PAY MENTS MADE TO M/S. SINTEX INFRA PROJECTS LTD IS NOT IN THE NATURE OF ACCOMMODATION ENTRIES AND ARE GENUINE. THE AO WILL LOOK INTO THE SUBMISSIONS OF THE ASSESSEE AND AFTER TAKING INTO CONSIDERATION THE EVIDENCE AND MATERIALS BEFORE HIM, HE IS FREE TO CO ME TO THE CONCLUSION AS TO WHETHER 10 ITA NO.134/KOL/2016 M/S. SPML INFRA LIMITED . A.YR.2011-12 10 THE CLAIM MADE BY THE ASSESSEE HAS TO BE ACCEPTED O R NOT, UNINFLUENCED BY THE FACT THAT THE ASSESSMENT IS BEING MADE TO DIRECTION U/S.263 O F THE ACT. WITH THESE OBSERVATIONS, WE DISMISS THE APPEAL OF THE ASSESSEE. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 15.07.2016. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 15.07.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. SPML INFRA LIMITED, 22, CAMAC STREET, A-BLO CK, 3 RD FLOOR, KOLKATA-700016. 2. PRINCIPAL C.I.T.-3, KOLKATA. 3. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES