Paxton Infrastructure Pvt Ltd, New Delhi V. ITO WARD - 14(2), New Delhi

ITA 1643/DEL/2020

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M/s Paxton Infrastructure Pvt. Ltd. appealed against the order of the Commissioner of Income Tax (Appeals)-38, New Delhi, which confirmed the addition of Rs. 14,30,02,204 to the Assessee's income for the assessment year 2011-12. The addition was initially made by the Assessing Officer due to the Assessee's failure to provide contract agreements and other necessary documents to substantiate the subcontractor payments. The Tribunal noted that the Assessee had multiple opportunities to present the required documents during the assessment and appellate proceedings but failed to do so satisfactorily. The Tribunal also considered the remand reports from the Assessing Officer, which reiterated the lack of evidence supporting the Assessee's claims.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 112765 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 14-12-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 30-09-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; TDS
• Section: 142(1); 250; 143(2)

Judgement Text

1 ITA no. 1643/Del/2020 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER ITA No. 1643/Del/2020 Asstt. Yr: _2011-12 M/s Paxton Infrastructure Pvt. Ltd., 405C (4 th Floor), Single Tower, Labour Chowk, Dipak Vihar, Kohara, Sector 62, Noida-201301 PAN-AAFCP3067Q Vs Income-tax Officer, Ward-14(2), New Delhi APPELLANT RESPONDENT Assessee represented by None Department represented by Sh. A.K. Arora, Sr. DR Date of hearing 15.12.2022 Date of pronouncement 28.12.2022 O R D E R PER N.K. CHOUDHRY, JM: The Assessee has preferred the instant appeal against the order dated 03.08.2020, impugned herein passed by the Ld. Commissioner of Income tax (Appeals)-38, New Delhi, (in short “Ld. Commissioner”) u/s 250 of the Income Tax Act, 1961 (in short “the Act”), pertaining to the assessment year 2011-12. 2 ITA no. 1643/Del/2020 2. In this case notice of hearing on dated 15.12.2022 was sent to the Assessee through speed post. Still none appeared on behalf of the Assessee. Even notices for the dates of hearings on 7.7.2022, 28.9.2022 have also been sent to the Assessee at the address mentioned in form no. 36, but the same were returned back by the postal authority with the remark “un-served”. Considering the peculiar facts, we are inclined to proceed with the case as ex parte. 3. In this case the Assessee by filing return of income on 24.9.2011 declared its income at Rs. 8,42,478/-. The case of the Assessee was selected for scrutiny which resulted into issuance of notice u/s 143(2) of the Act on 1.8.2012 by which the assessment proceedings were fixed on 16.8.2012. Subsequently a questionnaire along with notice u/s 142(1) was also issued on 20.6.2013. In response, the Assessee appeared and filed submissions and details as called for and claimed to be engaged in the business of civil construction on contract basis was awarded a contract for site clearance, demolition, removal of debris etc. from M/s Era Infra Engineering Ltd. during the preceding 3 ITA no. 1643/Del/2020 assessment year 2010-11. The Assessee had sub-contracted the awarded project on back to back basis to the parties mentioned below for execution of the contract: a) M/s AMR Constructions Ltd.; b) M/s Blue Prints Securities Ltd.; and c) Conception Infrastructure Pvt. Ltd. 4. As per Assessee’s claim, part of the said contract was executed in preceding assessment year 2010-11 and the remaining part was completed during the A.Y. 2011-12, which is under consideration. The Assessee earned an amount of Rs. 14.39 crores during the year under consideration from the said contracts and paid a sum of Rs. 14.30 crores to the parties referred to above on account of work executed by them for this contract. The Assessee further claimed that all the payments to the above said parties were made through account payee cheques only and after deducting TDS as per the provisions of the Act and all the expenses incurred qua contract expenses are supported by proper bills and vouchers and claimed on account of the work executed by the said parties. Further, all the parties are regular income of the Assessee and confirmed the transactions. 4 ITA no. 1643/Del/2020 5. The AO though considered the claim of the Assessee but disallowed the entire contract expenditure of Rs. 14.30 crores paid to the said parties and project expenses for the assessment year 2010- 11 to the tune of Rs. 7,60,73,733/- mainly on the pretext that the Assessee had failed to furnish copy of the contracts with the said parties. Further during the assessment proceedings on 17.1.2014 the Assessee was asked to file certain documents as mentioned at page no. 2 of the assessment order and thereafter a notice u/s 142(1) of the Act was also issued on 21.2.2014 and again on 14.3.2014. However, the Assessee failed to file the relevant documents as asked for. 6. The Assessee, being aggrieved, challenged the said additions before the learned Commissioner, who vide impugned order though deleted the addition of Rs. 7,60,73,733/- on account of disallowance of contract expenses of A.Y. 2010-11, however, affirmed the addition of Rs. 14,30,02,204/- by concluding as under: 5 ITA no. 1643/Del/2020 “4.2 Ground of appeal No.2 and 4- The appellant is a contractor. The Assessing Officer during assessment proceedings asked for copy of agreements with M/s Era Infra Engineering Ltd. M/s AMR Constructions Ltd., M/s Blue Prints Securities Ltd. and M/s Conception Infrastructure Pvt. Ltd., alongwith their copy of audit report, balance sheet & P&L A/c with annexures. The Assessing Officer noted from the submission that even though TDS had been deducted, the appellant failed to file any contract agreement with sub contract to M/s AMR constructions Ltd., M/s Blue Prints Securities Ltd., M/s Conception Infrastructure Pvt. Ltd. The Assessing Officer noticed that the Assessee Company was incorporated on 14.01.2010. The year under assessment was the second year of operation where the turnover is shown at Rs.14,39,45,918/- and the turnover for 2.5 months in the immediately preceding year was Rs.7,69,48,495/-. The company had also received advances to the tune of Rs.195 crores in the period ending 31.03.2010 which had been advanced to other parties in the same accounting period. The Assessee Company was also not able to produce copy of income tax return of Directors. The Assessing Officer also asked for details of contracts received along with terms and conditions and the details of parties to whom sub-contract was awarded. Apart from a two page agreement with M/s Era Infra Engineering Ltd., no other 6 ITA no. 1643/Del/2020 agreement was produced. Even the agreement produced seemed to be a self serving document. Perusal of bank statement of the company showed that all the payments had been received from Era Infra from 29.04.2010 to 30.07.2010 and on the same date nearly whole of the amount had been transferred to so called sub contractors. There was no evidence of the subcontractors issuing running bills from the subcontractors and the contractor issuing bills thereafter. The records and bank statements of the assessee also did not provide any proof. The Assessing Officer also searched the data on the website of Ministry of Corporate Affairs. In the case of M/s Blue Print Securities Ltd., nowhere in P&L A/c the contract receipts of Rs. 1,01,92,733/- was mentioned as received from the assessee company. In the case of M/s Conception Infrastructure Pvt. Ltd. also showed that the nature of work as per contract agreement with Era Infra Engineering Ltd. was of site clearance, excavation and removal of debris, temporary walk way fixing which were mainly expenses on labour and not purchases as claimed by the assessee company. The records of M/s AMR Constructions Ltd. could not be traced from the MCA website/lTD system. The Assessing Officer concluded that all the contract receipts were a sham and bogus and were 7 ITA no. 1643/Del/2020 disallowed. In view of this, the total project expenses of Rs. 14,30,02,204/- were added back to the income of the Assessee. Remand Report was called for from the Assessing Officer and received dated 08.08.2019 which is reproduced below:- “In this regard, I would like to draw your kind attention towards Rule 46A of I. T. Rules 1962 vide that, the rule specifically bars an assessee from producing any oral or documentary evidence other than the evidence produced by him during the course of proceedings before the Assessing Officer except under the conditions provided in clause (a), (b), (c) & (d) of sub-rule (1) of rule 46A. 3. In this regard, it is submitted that the AO During the course of assessment proceedings has examined in the detail about the veracity and allow-ability/justification of project expenses of Rs. 7,60,73,333/-. It has specifically been mentioned by the AO in its assessment order that the transactions of Rs. 7,60,73,333/- as claimed by the assessee in AY 2010-11, belongs to AY 2011-12 by giving ample justification of the same. The assessee during the assessment proceedings was unable to prove the genuineness of subcontractors and its expenses. The documents submitted by the assessee during appellate proceedings do not have any fresh evidences that prove that whether the subcontractors are genuine or the works 8 ITA no. 1643/Del/2020 actually carried out by the sub contractors alongwith the debtors and creditors. In fact, it has been corroborated by the AO r. examining the documentary evidences such as nil outstanding of sundry creditors and debtors shown by the assessee company in the AY 2010-11. Therefore, it is justified that the AO has rightly made the additions of Rs. 7,60,73,333/- considering it for the AY 2011-122.”' 2.12 Rejoinder to remand report on dated 17.02.2020 is reproduced hereunder:- With regard to the addition of Rs. 14,30,02,201/-on account of contract expenses, it is submitted that the relevant documents in support of expenses were forwarded to Ld. AO in remand proceedings. The documents and other objections/discrepancies as observed by then AO in the assessment proceedings were properly replied/filed in the remand proceedings. In support of the contract expenses, the appellant has already filed copy of contract agreements with the parties, copy of account and confirmation regarding contract charges paid to different parties, their audited Balance Sheets. ITRs and master data from MCA records. Copy of bank statement evidencing payment made to parties through cheques, copy of TDS certificates evidencing TDS deducted on contract charges etc. were filed/forwarded in the remand proceedings. With reference to the submission of documents in the remand proceedings, the Ld. AO in the remand report dated 06.03.2018 stated as under: “Now the assessee has filed the relevant documents in the paper book. These have been perused. ” 9 ITA no. 1643/Del/2020 Thus, the Ld. AO in the remand report has not pointed out any discrepancy with reference to the documents filed. In fact the Ld. AO has accepted the relevant documents filed in support of contract expenses. However, the Ld. AO has only made objection for admission of additional evidence by stating that “ample opportunities was granted to the company at the time of assessment proceedings and the assessee failed to file the necessary documentary evidence”. Since, the contract expenses were incurred wholly & exclusively for the purpose of business and were duly supported by contract agreements, confirmation from parties, through cheques payments, after deducting TDS thereon etc. , thus the action of Ld. AO on disallowance of entire contract expenditure of INR 14,30,02,204,/- rejecting all the documents and evidences is arbitrary and deserve to be quashed. 1. With regard to the addition of Rs. 7,60,73,733/- on account of contract expenses pertaining to and claimed in AY 2010-11 which were disallowed in this assessment year i.e AY 2011-12, the documents and objections as observed by them AO in the assessment proceedings were properly replied/filed in the remand proceedings. To prove that these expense have not been claimed in AY 2011-12 and income & expenditure pertain & reflected in ITR for AY 2010-11, the appellant has submitted bank reconciliation statement in which it was clearly showing that these transaction relates to AY 2010-11. The appellant has filed copy of Audited Balance Sheet as on 31.03.2010, IT Return for AY 2010-11, Tax Audit Report, copy of bank statement for FY 2009-10, copy of Contract income & 10 ITA no. 1643/Del/2020 expenditure, copy of TDS certificates etc. were filed/forwarded in the remand proceedings. With reference to the submission of documents in the remand proceedings, the Ld. AO has not made any comments and only made objection of additional evidence by stating that “ample opportunities was granted to the company at the time of assessment proceedings and the assessee failed to file the necessary documentary evidence”. With regard to the objection for admission of additional evidence, it is submitted that a detailed reply in this regard has been made in the appellate proceedings before your honour. Moreover, principles of natural justice require that before charging a person with financial liability, he should be informed of the material on which the charge was going to be imposed and the assessee must be given an opportunity to rebut the effect of the material, if he can. Thus, on this account too, the comments of the Ld. AO for non-acceptance of additional evidence are erroneous and not sustainable in law. In view of various judicial pronouncements, the additional evidence furnished by the appellant be admitted as the same is crucial to decide the issues under consideration. ” Another remand report was called for from the Assessing Officer which was received on 06.03.2018 and is reproduced as under: - “The written submission filed by assessee have been perused. The addition of income of Rs.14,30,02,201/- was made on account of expenses claimed for payment made to sub contractors. The payment made to sub contractors has been doubted by the Assessing Officer. During the course of assessment proceedings, in spite of providing sufficient opportunities, the assessee failed to file the necessary documentary evidence in support of its claim 11 ITA no. 1643/Del/2020 Now the assessee has filed the relevant document in the paper book. These have been perused. The assessee failed to produce these evidences during assessment proceedings in spite of ample opportunities given. The AO has given valid reasons for making disallowance. While disallowing the contract payments the AO has discussed the financials of sub contractors and filing of document now does not change the state of fact noted by the AO. The assessee has failed to substantiate its claim during the assessment proceedings. 2.1 The AO has made another addition of Rs. 7,60,73,733/- holding that contract receipt were also received during the year under consideration. Therefore, it cannot be said that AO has missed all the accounting principles jn making this addition. The addition of expenses was rightly made by the AO. The submission of assessee to exclude the income from revenue is not acceptable. It was duty of assessee to submit all evidences during the assessment proceedings before the AO to substantiate its claim. The assessee failed to file evidences which the AO has noted in the assessment order. Therefore, submission of assessee is not acceptable. Comment of admission of additional evidences: 1 .Here it would be relevant to mention that assessee was given sufficient opportunity to file the evidences in its support during assessment proceedings. However, assessee failed to file the evidences. As per rule 46A the assessee is not entitled to produce additional evidence whether oral or documentary other than the evidence produced by him during the course of assessment. In view of above facts it is requested to not allow any relief to the assessee and additional evidences may not be admitted as the assessee does not fulfill the conditions laid down in rule 46A. ” 12 ITA no. 1643/Del/2020 The Assessing Officer has objected to the admission of additional evidences but these are being admitted in the interest of justice. It is observed that the assessee company has not submitted any new evidence to substantiate its claim. The conclusion made by the Assessing Officer from the information from the MCA website as well as the credentials of the payments show that the contracts have not been proved. Therefore, the ground is dismissed.” 7. Being aggrieved, the Assessee is in appeal before us . Heard the Ld. DR and perused the orders passed by the authorities below. We observe that during the course of appellate proceedings, the learned Commissioner sought remand report from the AO which was submitted on 8.8.2019, which is reproduced here-in-below: “In this regard, I would like to draw your kind attention towards Rule 46A of I.T. Rules 1962 vide that, the rule specifically bars an assessee from producing any oral or documentary evidence other than the evidence produced by him during the course of proceedings before the Assessing Officer except under the conditions provided in clause (a), (b), (c) & (d) of sub-rule (1) of rule 46A. 3. In this regard, it is submitted that the AO During the course of assessment proceedings has examined in the detail 13 ITA no. 1643/Del/2020 about the veracity and allow-ability/justification of project expenses of Rs. 7,60,73,333/-. It has specifically been mentioned by the AO in its assessment order that the transactions of Rs. 7,60,73,333/- as claimed by the assessee in AY 2010-11, belongs to AY 2011-12 by giving ample justification of the same. The assessee during the assessment proceedings was unable to prove the genuineness of subcontractors and its expenses. The documents submitted by the assessee dunng appellate proceedings do not have any fresh evidences that prove that whether the subcontractors are genuine or the works actually carried out by the sub contractor alongwith the debtors and creditors. In fact, it has been corroborated by the AO z. examining the documentary evidences such as nil outstanding of sundry creditors a-: debtors shown by the assessee company in the AY 2010-11. Therefore, it is justifies a the AO has rightly made the additions of Rs. 7,60,73,333/- considering it for the AY 2011-12.” 8. The Ld. Commissioner provided opportunity to the Assessee to file its reply to the Remand Report and therefore the Assessee preferred to file its reply dated 17.2.2020 to the remand report. Thereafter, another remand report was sought from the AO, which was 14 ITA no. 1643/Del/2020 received by the learned Commissioner on 6.3.2018, which is reproduced herein below: “The written submission filed by assessee have been perused. The addition of income of Rs.14,30,02,201/- was made on account of expenses claimed for payment made to sub contractors. The payment made to sub contractors has been doubted by the Assess ig Officer. During the course of assessment proceedings, in spite of providing sufficient opportunities, the assessee failed to file the necessary documentary evidence in support of its claim. Now the assessee has filed the relevant document in the paper book. These have been perused. The assessee failed to produce these evidences during assessment proceedings in spite of ample opportunities given. The AO has given valid reasons for making disallowance. While disallowing the contract payments the AO has discussed the financials of sub contractors and filing of document now does not change the state of fact noted by the AO. The assessee has failed to substantiate its claim during the assessment proceedings.” 15 ITA no. 1643/Del/2020 9. Ultimately the learned Commissioner affirmed the addition by affirming the reasons given by the AO for making the addition to the effect that even though TDS had been deducted from the payments made to M/s Era Infra Engineering Ltd., M/s AMR Constructions Ltd.; M/s Blue Prints Securities Ltd.; and Conception Infrastructure Pvt. Ltd., however, the Assessee failed to file any contract agreement qua sub-contracts with M/s AMR Constructions Ltd.; M/s Blue Prints Securities Ltd.; and Conception Infrastructure Pvt. Ltd. There was no evidence of the sub-contractors issuing running bills from the sub- contractors and the contractor issuing bills thereafter. The records and bank statements of the Assessee also did not provide any proof. Though the date on the website of Ministry of Corporate Affairs was searched, however, the records M/s AMR Constructions Ltd. could not be traced from the MCA website/ITD system. That all the contract receipts were a sham and bogus and in view of the same total project expenses of Rs. 14,30,02,204/- have been added to the income of the Assessee. 16 ITA no. 1643/Del/2020 10. The learned Commissioner also held that the AO has objected to the admission of additional evidence but these are being admitted in the interest of justice. The learned Commissioner further observed that the Assessee company has not submitted any new evidence to substantiate its claim. The conclusion made by the AO from the information from the MCA website as well as the credentials of the payments shows that the contracts have not been proved. 11. We have given thoughtful consideration to the peculiar facts and circumstances of the case and the conclusion drawn by the learned Commissioner. The ld. Commissioner before deciding the appeal not only analyzed the peculiar facts and circumstances of the case but also sought remand report from the AO and gave proper opportunity to the Assessee to controvert the remand report, however still the Assessee failed to file relevant documents which were necessary for proper adjudication of the issue. The Assessee before us also failed to substantiate its claim. Even otherwise we do not find any material and/or reasons to controvert the finding of the learned Commissioner. Hence, we are inclined not to interfere in the impugned order. Consequently, the appeal is liable to be dismissed. 17 ITA no. 1643/Del/2020 12. In the result, appeal filed by the Assessee stands dismissed. Order pronounced in the open court on 28.12.2022. Sd/- Sd/- (ANIL CHATURVEDI) (N.K. CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI