DCIT, Circle - 2, Kolkata, Kolkata V. M/s. Vai Engineering & Automation Pvt. Ltd., Kolkata

ITA 1578/KOL/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1510 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-05-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 18-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU CITSR
• Assessee Lawyers: SAURBH KEDIA
• Keywords: Business income; Transfer pricing; Audit objection; Difference of opinion; Tax effect; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

ITA NO.1578/KOL/2011 AND CO NO.72/KOL/2011 M/S. VAI ENGINEERING AUTOMATION P.LTD A.Y.2003-04 1 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. 1578/KOL/2011 ASSES SMENT YEAR : 2003-04 D.C.I.T., CIRCLE-2, -VS.- M/S. VAI ENGINEERIN G & AUTOMATION KOLKATA PVT. LTD.., KOLKATA [PAN : AAACV 1014 E] (APPELLANT) (RESPONDENT) C.O.NO.72/KOL/2011 (A/O ITA NO.1578/KOL/2011) ASSESSMENT YEAR : 2003-04 M/S. VAI ENGINEERING & AUTOMATION -VS- D.C.I.T., CI RCLE-2, PVT. LTD., KOLKATA KOLKATA [PAN : AAACV 1014E] (CROSS OBJECTOR) (RESPONDENT) FOR THE DEPARTMENT : SHRI DAVID Z.CHAWNGTHU, ADDL.CIT(SR.DR) FOR THE ASSESSEE : SHRI SAURBH KEDIA, A R DATE OF HEARING : 26.07.2017 DATE OF PRONOUNCEMENT : 31.07.2017. ORDER PER N.V.VASUDEVAN, JM I.T.NO.1578/KOL/2011 IS AN APPEAL BY THE REVENUE AG AINST THE ORDER DATED 02.08.2011 OF CIT(A)-I, KOLKATA, RELATING TO AY 200 3-04. THE ASSESSEE HAS FILED CROSS OBJECTION NO.72/KOL/2011 AGAINST THE VERY SAM E ORDER OF CIT(A). 2. GROUNDS OF APPEAL RAISED BY THE REVENUE IN IT S APPEAL READ AS FOLLOWS :- 1. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE L D. CIT(A) ERRED BOTH ON THE FACTS & IN LAW IN DELETING THE ADDITION OF RS.4,99, 36,753/ - MADE ON ACCOUNT OF UNACCOUNTED SALE PROCEEDS. ITA NO.1578/KOL/2011 AND CO NO.72/KOL/2011 M/S. VAI ENGINEERING AUTOMATION P.LTD A.Y.2003-04 2 2. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE LD . CIT(A) ERRED IN RELYING ONLY ON THE REMAND REPORT OF THE AO, WHERE THE AO COULD NOT UNDERSTAND HOW THE DIFFERENCE WAS WORKED OUT. 3. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN NOT DECIDING THE ISSUE ON THE FACTS OF THE CASE, PARTIC ULARLY THAT THE ASSESSEE DID NOT ACCOUNT FOR THE BILLS TO BE RAISED FOR THE YEAR ALT HOUGH IT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING 4. THE APPELLANT CRAVES LEAVE TO AMEND, MODIFY AND ALTER ANY GROUNDS OF APPEAL DURING COURSE OF HEARING OF THE CASE. 3. GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE CROSS OBJECTION READ AS FOLLOWS :- 1.THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CLT(A) ERRED IN CONFIRMING THAT THE ORDER PASSED BY THE ASSESSING O FFICER U/S 147/143 (3) OF THE ACT WAS NOT BARRED BY LIMITATION, ALTHOUGH IT WAS S ERVED ON THE APPELLANT ON 15 TH MAY 2009 MUCH AFTER THE DUE DATE OF COMPLETION OF A SSESSMENT (I.E 31 ST DECEMBER 2008) WHICH IS AGAINST THE PRINCIPLES LAID DOWN BY VARIOUS COURTS REGARDING COMPLETION OF ASSESSMENT PROCEEDINGS. 2.THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN NOT ADJUDICATING ON THE ISSUE THAT THE REASSESSMENT PROCEEDINGS WAS NOT VALID WHICH WAS INITIATED WITHOUT HAVING ANY 'REASONS TO BELIEF' SINCE NO EXPLANATIONS WERE OFFERED BY THE ASSESSING OFFICER NEITHER DURIN G THE RE-ASSESSMENT PROCEEDINGS NOR IN THE ORDER U/S 147/143(3) AS TO H OW THE INCOME ESCAPING ASSESSMENT AMOUNTING TO RS.4, 99,36,753/- HAVE BEEN ARRIVED AT. 3.THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN NOT ADJUDICATING ON THE ISSUE THAT THE RE-ASSESSMEN T PROCEEDINGS U/S 147 OF THE ACT WAS NOT VALID ON A POINT WHICH HAD BEEN EXAMINE D BY THE ASSESSING OFFICER AT THE TIME OF SCRUTINY ASSESSMENT PROCEEDINGS U/S.143 (3) OF THE ACT, IN VIEW OF PRINCIPLE LAID DOWN BY THE APEX COURT IN THE CASE O F CIT VS KELVINATOR OF INDIA LTD REPORTED IN 320 ITR 561 THAT RE-ASSESSMENT PROC EEDINGS CANNOT BE INITIATED ON THE BASIS OF A MERE CHANGE IN OPINION. 4.THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR ALTER, AMEND, MODIFY OR RESCIND THE GROUNDS HEREINABOVE BEFORE OR AT THE TI ME OF HEARING OF THIS APPEAL. 4. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSI NESS OF ACTING AS CONSULTING ENGINEERS DOING DESIGNING AND CONSTRUCTION AND ALSO AUTOMATION. THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y.2003-04 ON 28.11.2003 DISC LOSING LOSS OF RS.1,78,44,440/-. AN ORDER OF ASSESSMENT DATED 30.03.2006 WAS PASSED U/S 143(3) OF THE INCOME TAX ITA NO.1578/KOL/2011 AND CO NO.72/KOL/2011 M/S. VAI ENGINEERING AUTOMATION P.LTD A.Y.2003-04 3 ACT, 1961 (ACT) DETERMINING THE TOTAL LOSS OF THE A SSESSEE AT RS.59,76,533/-. SUBSEQUENTLY THE ON THE ALLEGED GROUND THAT THAT IN COME OF THE ASSESSEE CHARGEABLE TO TAX FOR A.Y.2003-04 HAD ESCAPED ASSESSMENT, THE AO INITIATED REASSESSMENT PROCEEDINGS U/S.147 OF THE ACT. ACCORDINGLY THE AO, AFTER RECORDING REASONS FOR INITIATING PROCEEDINGS U/S 147 OF THE ACT, ISSUED A NOTICE U/S 148 OF THE ACT DATED 18.02.2008. THE REASONS RECORDED BY THE AO FOR INI TIATING PROCEEDINGS U/S 147 OF THE ACT WAS AS FOLLOWS :- ASSESSEE SUBMITTED ITS ROI AY 2003-04 ON 28/11/03 DISCLOSED LOSS OF RS.1,78,44,440/-. THE CASE WAS DULY PROCESSED ON 30 .3.2005 U/S 143(1) AND SUBSEQUENTLY U/S 143(3) ON 30.3.2006. ON SCRUTINY O F FORM 3CEB IT IS REVEALED THAT TOTAL SALES DURING THE YR WAS RS.20,66,10,752/ - INSTEAD OF RS.15,66,73,999/-. THUS THE RESULTING ESCAPEMENT OF INCOME BY RS.4,99, 36,753/- INVOLVING POTENTIAL TAX EFFECT OF RS.,2,16,72,238/- INCLUDING INTEREST U/S 58,81,886/- TOTALING TO RS.2,38,68,613/-. SCRUTINY FURTHER REVEALED THAT DURING THE F.Y. THE ASSESSEE HAD REIMBURSED RS.31.10 LAKH BY ITS ASSOCIATED ENTERPRISES FOR PRO VIDING SERVICES AT THEIR PREMISES. BUT THE ABOVE REIMBURSEMENT HAD NOT BUT T AKEN INTO ACCOUNT AS INCOME IN AMOUNT. NON CONSIDERATION HAD RESULTED IN OVER A SSESSMENT OF LOSS OF RS.31.16 LAKH INVOLVING POTENTIAL TAX EFFECT OF 11.45 LAKH. SO, THERE IS ENOUGH REASON TO BELIEVE THAT THE CASE IS A FIT CASE REOPENING U/S 147 OF I.T.ACT 1961. ISSUE OF NOTICE U/S 148 FOR A.Y. 2 003-04. 5. IN THE RE-ASSESSMENT PROCEEDINGS, THE AO AFTE R MAKING A REFERENCE TO THE AUDIT OBJECTION BASED ON WHICH REASONS FOR INITIATING PRO CEEDINGS U/S 147 OF THE ACT WERE RECORDED BY THE AO, CONCLUDED THAT THE ASSESSEE HAD SUPPRESSED THE INCOME TO THE EXTENT OF RS.4,99,36,753/-. THE FOLLOWING WERE THE AUDIT OBJECTIONS IN THIS REGARD :- (I) SCRUTINY OF RECORDS REVEALED THAT TOTAL SALES OF RS.15,66,73,999/- WAS CREDITED TO P&L A/CS FOR THE YEAR 2002-03 WHICH INCLUDED RS. 5,40,30,570/- RECEIVED/RECEIVABLE FROM THREE ASSOCIATES ENTERPRIS ES AS SERVICE CHARGES. FROM THE DETAILS OF SALES, IT WAS SEEN THAT TOTAL SALES INCLUDED SALES TO 12 DOMESTIC COMPANIES AND SALE OF SPARE PARTS AND SERVICE CHARG ES FROM 3 FOREIGN COMPANIES (ASSOCIATES ENTERPRISES IN AUSTRIA AND U.K.). FURTH ER SCRUTINY OF THE DETAILS OF SALES REVEALED THAT SALES TO SOME OF THE DOMESTIC C OMPANIES WERE ARRIVED AT AS FOLLOWS:- AMOUNT AGAINST INVOICE RAISED FOR THE PERIOD 02-03 ADD:- AMOUNT AGAINST INVOICE RAISED AS PER LAST YEA R (01-02) LESS:- AMOUNT AGAINST INVOICE TO BE RAISED FOR THE YEAR 02-03 TOTAL AMOUNT OF SALES FOR THE YEAR 2002-03 ( AS SHO WN) ITA NO.1578/KOL/2011 AND CO NO.72/KOL/2011 M/S. VAI ENGINEERING AUTOMATION P.LTD A.Y.2003-04 4 AS THE ASSESSEE FOLLOWED MERCANTILE METHOD OF ACCOU NTS, THE AMOUNT OF SALES FOR THE YEAR 2002-03 WAS REQUIRED TO BE CALCULATED AS F OLLOWS:- AMOUNT AGAINST INVOICE RAISED FOR THE PERIOD 02-03 LESS: - AMOUNT AGAINST INVOICE RAISED FOR THE LAST YEAR (01-02) ADD:- AMOUNT AGAINST INVOICE TO BE RAISED FOR THE Y EAR 02-03 TOTAL AMOUNT OF SALES FOR THE YE AR 2002-03 FROM ANNEXURE 'B' TO FORM 3CEB IT WAS REVEAL ED THAT TOTAL AMOUNT OF SERVICES RENDERED TO 3 ASSOCIATE ENTERPRISES DURING THE YEAR WAS RS. 5,47,38,201 INSTEAD OF RS. 5,40,30,570. THUS, BY ADOPTING THE MERCANTILE SYSTEM OF A CCOUNTING AS CALCULATED ABOVE, THE TOTAL SALES FOR THE YEAR 2002-03 WOULD WORK OUT TO BE RS. 20,66,10,752/- INSTEAD OF RS. 15,66,73,99 THIS RESULTED IN UNDER A SSESSMENT OF INCOME OF RS. 4,99,36,753/-. 6. THE STAND OF THE ASSESSEE ON THE ABOVE OBJEC TIONS WAS THAT THE DIFFERENCE BETWEEN THE ASSESEES DECLARATION OF QUANTUM OF REVENUE FRO M EXECUTION OF CONTRACTS AND THE DEPARTMENTS QUANTUM OF REVENUE FROM CONTRACTS IS B ECAUSE THE ASSESSEE WAS FOLLOWING ACCOUNTING STANDARD-7 (AS-7) OF THE INSTI TUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) FOR REVENUE RECOGNITION PURPOSE, THAT IS PERCENTAGE COMPLETION METHOD OF REVENUE RECOGNITION WHEREAS THE DEPARTMENT HAS P ROCEEDED ON A DIFFERENT BASIS IGNORING THE REGULAR METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE AND ACCEPTED BY THE REVENUE IN ASSESSEES OWN CASE IN THE PAST ASSE SSMENT. THIS OBJECTION WAS REJECTED BY THE AO FOR THE FOLLOWING REASONS :- OVERALL IT IS STATED BY THE A/R AND IN WRITTEN SUB MISSION THAT THE DIFFERENCE BETWEEN THE ASSESSEE'S CONSIDERATION OF THE QUANTUM OF REVENUE AND THE DEPARTMENT'S CONCLUSION ABOUT THAT IS MAINLY BASED ON THE FACT THAT PROPER RECONCILIATION HAS NOT BEEN MADE BY THE DEPARTMENT. IT IS ALSO STATED THAT THE COMPANY IS CONSISTENTLY FOLLOWING ACCOUNTING STANDA RD-7 FOR ITS REVENUE RECOGNITION PURPOSE. AS-7 IS ADOPTED BY THE COMPANY AND AS PER THAT STANDARD THE COMPANY IS FOLLOWING PERCENTAGE COMPLETION METH OD FOR REVENUE RECOGNITION. IT HAS BEEN EMPHASIZED AT THE TIME OF HEARING THAT BY FOLLOWING THIS METHOD, CONTRACT COSTS ARE USUALLY RECOGNIZED AS AN EXPENSE IN THE STATEMENT OF PROFIT AND LOSS IN THE ACCOUNTING PERIODS IN WHICH THE WORK TO WHICH THEY RELATE IS PERFORMED. THE TOTAL REVENUE IS DETERMINED ON PERCE NTAGE COMPLETION METHOD WHICH IS ARRIVED BY THE FOLLOWING FORMULA.- P.O.C. REVENUE = TOTAL ACTUAL COST X TOTAL REVENUE TOTAL ESTIMATED COST ITA NO.1578/KOL/2011 AND CO NO.72/KOL/2011 M/S. VAI ENGINEERING AUTOMATION P.LTD A.Y.2003-04 5 THOUGH THE ASSESSEE COMPANY HAD TRIED TO ESTABLISH THEIR REASONING BY CITING SEVERAL EXAMPLES BUT THEY FAILED TO RECONCILE THE A CTUAL FIGURE OF SALE DURING THE YEAR AND THE DISCREPANCIES MENTIONED ABOVE AMOUNTIN G RS. 4,99,36,753/-, WHICH ULTIMATELY REMAINED AS IT IS. IN VIEW OF THIS, THE TOTAL SALE OF THE COMPANY IS TO BE TAKEN AS RS. 20,66,10,752/- INSTEAD OF RS. 15,66,73 ,999/- AS CLAIMED BY THE ASSESSEE AND THEREBY A SUM OF RS. 4,99,36,753/- TO BE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. SINCE THE ASSESSEE HAS NOT FURNISHED ACCURATE PARTICULARS OF HIS INCOME AND SALES REMAIN SUPPRESSED TO THE TU NE OF RS.4.99 CRORES., 7. NO OTHER ADDITION WAS MADE IN THE ORDER OF ASSE SSMENT PASSED U/S 147 OF THE ACT DATED 31.12.2008. 8. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). BEFORE CIT(A) THE ASSESSEE RAISED CONTENTION THAT T HE INITIATION OF RE-ASSESSMENT PROCEEDINGS BY THE AO WAS BARRED BY LIMITATION AND THERE WAS NO VALID REASON TO BELIEVE BASED ON WHICH THE AO COULD HAVE INITIATED REASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE AND THAT THE INITIATION OF RE-ASSESSME NT PROCEEDINGS WAS PURELY BASED ON CHANGE OF OPINION AND THAT RE-ASSESSMENT PROCEEDING S CANNOT BE INITIATED MERELY BASED ON CHANGE OF OPINION. BESIDES THE ABOVE, THE ASSESSEE ALSO POINTED OUT THAT THE METHOD OF ACCOUNTING REGULARLY EMPLOYED IN RECOGNIZ ING REVENUE FROM CONTRACTS AND SUBMITTED THAT IT HAD PROPERLY RECOGNISED REVENUE F ROM CONTRACTS AS PER AS-7 OF ICAI. 9. THE CIT(A) CALLED FOR A REMAND REPORT FROM AO. THE AO, AFTER GOING THROUGH ALL THE DETAILS FILED BY THE ASSESSEE, GAVE A REMAND RE PORT DATED 16.03.2011 TO CIT(A)IN WHICH HE ACCEPTED THAT THE ASSESSEE HAS DULY RECOGN ISED INCOME FROM EXECUTION OF VARIOUS CONTRACTS. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS BY THE AO IN HIS REMAND REPORT :- EACH OF THE PROJECT-WISE REVENUE WORKINGS WERE GON E THROUGH. SIMILAR INVOICES AND PARTY-WISE DETAILS WERE ALSO SUBMITTED DURING T HE REGULAR SCRUTINY ASSESSMENT AND THE TOTAL REVENUE AS SHOWN IN SCHEDULE-8 OF THE ACCOUNTS TALLIED WITH THE DETAILS FURNISHED DURING THE HEARING, EXCEPT FOR AN AMOUNT OF RS.6,002/- (I.E. RS.15,66,73,999 15,66,67,997). HOWEVER, THIS DIFF ERENCE DOES NOT IMPACT THE REVENUE AS HIGHER FIGURE IS CONSIDERED IN THE BOOKS OF ACCOUNT AS WELL AS TOTAL INCOME OF THE ASSESSEE. ITA NO.1578/KOL/2011 AND CO NO.72/KOL/2011 M/S. VAI ENGINEERING AUTOMATION P.LTD A.Y.2003-04 6 THAT APART, IT WAS AGAIN NOT UNDERSTOOD AS HO W THE DIFFERENCE OF SALES VALUE WAS ARRIVED AT BY THE AO AGGREGATING TO RS.4.99 CRO RE AND PRESUMABLY A GAP EXISTS IN HIS FINDINGS WHICH COULD NOT BE RECONCILE D. 10. IT IS ALSO PERTINENT TO MENTION THAT IN THE REMAND REPORT THE AO HAS OBSERVED THAT THE INITIATION OF REASSESSMENT PROCEEDINGS WERE BAS ED ON THE AUDIT OBJECTION WHICH REFERS TO ANNEXURE-1 TO THE AUDIT OBJECTION WHEREIN COMPUTATION OF THE MANNER OF ARRIVING AT THE SUPPRESSION OF REVENUE BY THE ASSES SEE HAS BEEN SET OUT. IN THE REMAND REPORT THE AO HAS OBSERVED THAT THE MANNER OF WORKI NG OF SUPPRESSED REVENUE WAS WORKED OUT AS PER ANNEXURE-1 BUT ANNEXURE-1 WAS NOT ANNEXED WITH THE MEMO OF OBJECTION (AUDIT OBJECTION). 11. THE CIT(A) ON CONSIDERATION OF THE REMAND RE PORT HELD THAT THERE WAS NO BASIS FOR THE ADDITION MADE BY THE AO AND HE ACCORDINGLY DELETED THE ADDITION MADE BY THE AO. THE FOLLOWING WERE THE OBSERVATIONS OF CIT(A) : - THE A.O. HAD MADE THE ADDITION OF RS.4,99,36,753/- ON ACCOUNT OF UNACCOUNTED SALES. IN THIS REGARD, REMAND REPORT CALLED FROM TH E A.O. AND IT WAS SUBMITTED BY THE A.O. AS REPRODUCED BELOW: EACH OF THE PROJECT-WISE REVENUE WORKINGS WERE GON E THROUGH. SIMILAR INVOICES AND PARTY-WISE DETAILS WERE ALSO SUBMITTED DURING THE REGULAR SCRUTINY ASSESSMENT AND THE TOTAL REVENUE AS SHOWN IN SCHEDULE-8 OF THE ACCOUNTS TALLIED WITH THE DETAILS FURNISHED DURING THE HEARING, EXCEPT FOR AN AMOUNT OF RS. 6,002/- (I. E. RS. 15,66,73,999 - 15,66,67,997). HOWEVER, THIS DIFFERENCE DOES NOT IMPACT THE REVENU E AS HIGHER FIGURE IS CONSIDERED IN THE BOOKS OF ACCOUNT AS WELL AS TOTAL INCOME OF THE ASSESSEE. THAT APART, IT WAS AGAIN NOT UNDERSTOOD AS HOW THE DIFFERENCE OF SALES VALUE WAS ARRIVED AT BY THE AO AGGREGATING TO RS.4.99 CRARE AND PRESUMABLY A GAP EXISTS IN HIS FINDINGS WHICH COULD NOT BE RECONCILED. ' THUS, THE A.O. HAS ADMITTED THAT IT WAS NOT UNDERST OOD HOW THE ADDITION WAS MADE AGGREGATING RS.4.99 CRORES. HE HAS FURTHER SUB MITTED PRESUMABLY A GAP EXISTS IN THE FINDINGS WHICH COULD NOT BE RECONCILE D. THE APPELLANT HAS GIVEN REPLY TO THE REMAND REPORT AND IT WAS STATED THAT T HE ENTIRE ADDITION WAS MADE ON SHEER SURMISE AND WITHOUT ANY MATERIAL ON RECORD. IN VIEW OF THE FOREGOING DISCUSSION, THE A.O. IS DI RECTED TO DELETE THE ADDITION. THE APPELLANT GETS RELIEF ON THIS ISSUE. ITA NO.1578/KOL/2011 AND CO NO.72/KOL/2011 M/S. VAI ENGINEERING AUTOMATION P.LTD A.Y.2003-04 7 12. AS FAR AS THE VALIDITY OF INITIATING OF REAS SESSMENT PROCEEDINGS IS CONCERNED THE CIT(A) DID NOT GO INTO THE MERITS OF THE VALIDITY O F INITIATION OF REASSESSMENT PROCEEDING BECAUSE HE WAS OF THE VIEW THAT SINCE TH E ASSESSEE HAS SUCCEEDED ON MERITS THE RELEVANT GROUNDS NEED NOT BE ADJUDICATED. 13. AGGRIEVED BY THE ORDER OF CIT(A) DELETING TH E ADDITION MADE BY THE AO THE REVENUE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL. A GGRIEVED BY THE ORDER OF CIT(A) IN NOT ADJUDICATING THE GROUNDS WITH REGARD TO THE VAL IDITY OF INITIATING OF REASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FILED CROSS OBJECTION BEFORE THE TRIBUNAL. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. DR COULD NOT POINT OUT BEFORE US AS TO HOW THE CONCLUSIONS ARRIVED AT BY CIT(A) ARE NOT CORRECT. HIS PRAYER WAS THAT THE ISSUE SHOULD BE REMANDED TO THE AO TO VERIFY ALL TH E DETAILS AND THEN COME TO A CONCLUSION THAT THERE WAS NO SUPPRESSION OF REVENUE FROM CONTRACTS. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE ORDER OF CI T(A) AND ALSO BROUGHT TO OUR NOTICE THAT EVEN IN THE ORIGINAL ASSESSMENT PROCEEDINGS TH E ASSESSEE HAS GIVEN COMPLETE BREAK-UP OF THE REVENUE FROM CONTRACTS AND THE MANN ER IN WHICH THE REVENUE HAS RECOGNISED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS . THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THERE WAS NO BASIS FOR THE AO O R THE REVENUE AUDIT TO COME TO A CONCLUSION THAT THERE WAS SUPPRESSION OF RECEIPTS F ROM CONTRACTS TO THE EXTENT OF RS.4,99,36,753/-. HE HIGHLIGHTED THE FACT THAT NO B ASIS FOR WORKING WAS GIVEN EVEN IN THE AUDIT OBJECTION OR BY THE AO IN THE ORDER OF RE -ASSESSMENT. IT WAS HIS SUBMISSION THAT THE INITIATION OF REASSESSMENT PROCEEDINGS WAS ALSO INVALID FOR THE REASON THAT THE MATERIAL BEFORE THE AO WAS NOT SUFFICIENT TO FORM B ELIEF REGARDING ESCAPEMENT OF INCOME. 15. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION T O THE RIVAL SUBMISSIONS AND ARE OF THE VIEW THAT ORDER OF CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR HAD BOOKED SALES WORTH RS. 15,66,67,997/-. THE BASIS ON WHICH THIS SALE WAS RECOGNISED HAS BEEN EXPLAINED C LEARLY BY THE ASSESSEE AS FOLLOWS :- ITA NO.1578/KOL/2011 AND CO NO.72/KOL/2011 M/S. VAI ENGINEERING AUTOMATION P.LTD A.Y.2003-04 8 THE REVENUE RECOGNISED BY THE COMPANY FOR THE AY 2 003-04 ON THE BASIS OF ABOVE MENTIONED PERCENTAGE COMPLETION METHODS ARE A S FOLLOWS:- BHILAI RAIL MILL A PROJECT :- POC REVENUE AS ON 31.03.2003(CUMULATIVE) = 9,73,453/105,968,186X115507144 = 43,31,132/ - REVENUE RECOGMZED TILL 31.03.2002 = (SINCE THE PROJECT HAS STARTED IN THE CURRENT FINAN CIAL YEAR) NIL (A) REVENUE FOR THE PERIOD = 43,31,132/ - BHILAI RAIL MILL B PROJECT :- POC REVENUE AS ON 31.03.2003(CUMULATIVE) = 6,333 ,656/- 58,09,340/206,337,561X224960349 == REVENUE RECOGNIZED TILL 31.03.2002 == NIL SINCE THE PROJECT HAS STARTED IN THE CURRENT FINANC IAL YEAR) (B) REVENUE FOR THE PERIOD = 63,33,656/- ISPL BBC PROJECT:- IN THE SAME WAY AS MENTIONED ABOVE, CUMULATIVE POC REVENUE FOR THE PROJECT AS ON 31.03. 2003 = 57,971,388/- REVENUE RECOGNIZED TILL 31.03.2002 = 104,84,356 /- (C) REVENUE FOR THE PERIOD = 47,487,032/ - PROJECT VARDHAMAN SPECIAL STEELS CUMULATIVE POC REVENUE FOR THE PROJECT AS ON 31.03. 2003 = 35,554,225/- REVENUE RECOGNIZED TILL 31.03.2002 = 33,688,180/ - (D) REVENUE FOR THE PERIOD = 18,66,045/ - PROJECT UMI VD CUMULATIVE POC REVENUE FOR THE PROJECT AS ON 31.03. 2003 = 27,833,199/- REVENUE RECOGNIZED TILL 31.03.2002 = 26,889,596/ - (E) REVENUE FOR THE PERIOD = 9,43,523/ - PROJECT UMI FES CUMULATIVE POC REVENUE FOR THE PROJECT AS ON 31.03. 2003 37,732,280/- REVENUE RECOGNIZED TILL 31.03.2002 = 35,676,44 3/- (F)REVENUE FOR THE PERIOD = 20,55,837/- PROJECT JVSL CUMULATIVE POC REVENUE FOR THE PROJECT AS ON 31.03. 2003 = 10,578,210/- ITA NO.1578/KOL/2011 AND CO NO.72/KOL/2011 M/S. VAI ENGINEERING AUTOMATION P.LTD A.Y.2003-04 9 REVENUE RECOGNIZED TILI 31.03.2002 = - 53,37,352 /- (G) REVENUE FOR THE PERIOD = 52,40,858/- PROJECT BHILAI STEEL PLANT CUMULATIVE POC REVENUE FOR THE PROJECT AS ON 31.03. 2003 = 166,759,418/- REVENUE RECOGNIZED TILL 31.03.2002 = 158,521, 943/ - (H) REVENUE FOR THE PERIOD = 82,37,475/- PROJECT AARTI STEELS LIMITED CUMULATIVE POC REVENUE FOR THE PROJECT AS ON 31.03. 2003 = 27,707,785/- REVENUE RECOGNIZED TILL 31.03.2002 = 26,476,1 68/ - (1) REVENUE FOR THE PERIOD = 12,31,617/- PROJECT TISCO CTC CUMULATIVE POC REVENUE FOR THE PROJECT AS ON 31.03. 2003 = 13,54,378/- REVENUE RECOGNIZED TILL 31.03.2002 = NIL (SINCE THE PROJECT HAS STARTED IN THE CURRENT FINAN CIAL YEAR) G) REVENUE FOR THE PERIOD = 13,54,378/- PROJECT TISCO BF CUMULATIVE POC REVENUE FOR THE PROJECT AS ON 31.03. 2003 = 42,49,214/- REVENUE RECOGNIZED TILL 31.03.2002 = NIL SINCE THE PROJECT HAS STARTED IN THE CURRENT FINANC IAL YEAR) (K) REVENUE FOR THE PERIOD = 42,49,214/- THEREFORE, ADDING (A) TO (K), TOTAL POC REVENUE = 83,330,765/- ADD: SALE OF ISPAT BF = 170,52,500/- ADD: SPARES & SERVICES = 56,284,732/- TOTAL REVENUE' FOR THE YEAR 156,667,997/- 16. THE ASSESSEE HAS ALSO FILED THE SALES INVOIC ES IN SUPPORT OF HIS CLAIM WHICH ARE AT PAGES 5 TO 83 OF THE ASSESSEES PAPER BOOK. THE BAS IS ON WHICH THE AUDIT OBJECTION OF SUPPRESSION REVENUE BY THE ASSESSEE HAS BEEN ARRIVE D AT IS NOT SPELT OUT EITHER IN THE AUDIT OBJECTION OR IN THE ORDER OF RE-ASSESSMENT BY THE AO. IN FACT THE AO IN THE REMAND REPORT HAS CLEARLY ADMITTED THAT DETAILS GIV EN BY THE ASSESSEE WERE CORRECT. THE AO HAS ALSO ACCEPTED THAT THERE IS NO MATERIAL BASE D ON WHICH THE SUPPRESSION OF REVENUES BY THE ASSESSEE HAS BEEN QUANTIFIED. THUS IT IS CLEAR THAT THERE WAS NO BASIS FOR THE IMPUGNED ADDITION AND THE SAME WAS RIGHTLY DELETED BY CIT(A). WE FIND NO ITA NO.1578/KOL/2011 AND CO NO.72/KOL/2011 M/S. VAI ENGINEERING AUTOMATION P.LTD A.Y.2003-0410 GROUNDS TO INTERFERE IN THE ORDER OF CIT(A). ACCORD INGLY THE APPEAL OF THE REVENUE IS DISMISSED. 17. AS FAR AS THE CROSS OBJECTION OF THE ASSESS EE IS CONCERNED, WE ARE OF THE VIEW THAT IN THE LIGHT OF DISMISSAL OF THE REVENUES APP EAL, THE GROUNDS RAISED IN THE CROSS OBJECTION NEED NOT BE ADJUDICATED. ACCORDINGLY BOTH THE APPEAL AND THE CROSS OBJECTION ARE DISMISSED. 18. IN THE RESULT THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 31.07.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31.07.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. VAI ENGINEERING & AUTOMATION PVT. LTD., BLO CK-EP, PLOT Y-9, SECTOR-V, KOLKATA-700091. 2. D.C.I.T., CIRCLE-2, KOLKATA. 3. CIT(A)-I, KOLKATA. 4. C.I.T.-I, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D. D.O., ITAT, KOLKATA BENCHES