Anil Constructions, Aurangabad V. Asst. Comm. of Income-tax, Pune

ITA 1717/PUN/2011

• Counselvise Citation: 171724514 RSA 2011
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-10-2013
• Assessment Year: 1998-1999
• Appeal Filed On: 30-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K MODI; P S WALIMBE
• Keywords: Revision of order
• Section: 143(3); 147; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI G.S. PANNU, ACCOUNTANT MEMBER. ITA.NO.07/PN/2011 (ASSESSMENT YEAR 1998-99) ANIL CONSTRUCTIONS, SATYAM DHARAM COMPLEX, JALNA ROAD, AURANGABAD-431001 .. APPELLANT PAN NO.AAJFA4302L VS. ACIT, CIRCLE-2, AURANGABAD .. RESPONDENT ITA.NO.1717/PN/2011 (ASSESSMENT YEAR 1998-99) ANIL CONSTRUCTIONS, SATYAM DHARAM COMPLEX, JALNA ROAD, AURANGABAD-431001 .. APPELLANT PAN NO.AAJFA4302L VS. CIT, AURANGABAD .. RESPONDENT ASSESSEE BY : SHRI C.H. NANIWADEKAR REVENUE BY : SHRI A.K. MODI & SHRI P.S. WALIMBE DATE OF HEARING : 21-03-2014 DATE OF PRONOUNCEMENT : 30-04-2014 ORDER PER SHAILENDRA KUMAR YADAV, JM : BOTH THE APPEALS PERTAIN TO SAME ASSESSEE FOR SAME ASSESSMENT YEAR BUT UNDER DIFFERENT PROVISIONS. THE REFORE, THEY 2 ARE BEING DISPOSED OF BY A COMMON ORDER FOR THE SAK E OF CONVENIENCE. ITA NO.07/PN/2011: 2. THE ASSESSEE FILED THE APPEAL ON FOLLOWING GROUN DS : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ORDER O F THE A.O. PASSED U/S. 144 R.W.S. 263 OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED ON FACTS AND IN LAW IN UPHOLDING THAT AN AMOUNT OF RS.3,86,54,487/- RECEIVED BY THE ASSESSEE AS A RESU LT OF ARBITRATION PROCEEDINGS BETWEEN THE ASSESSEE AND TH E IRRIGATION DEPARTMENT OF GOVT. OF MAHARASHTRA IS AS SESSABLE TO TAX WITHOUT GIVING CORRESPONDING DEDUCTION FOR EXPENDITURE INCURRED IN CONNECTION WITH WORKS EXECU TED DURING THE YEAR, WHICH WERE ALSO THE SUBJECT MATTER OF THE ARBITRATION PROCEEDINGS. IN PARTICULAR, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN OBSER VING THAT 'THE APPELLANT HAS NOT ESTABLISHED AS TO HOW HIS CL AIM IS FACTUALLY CORRECT', WHEN IT WAS EXPRESSLY BROUGHT T O HIS NOTICE THAT IN THE ORIGINAL ASSESSMENT PASSED U/S 143(3) A S ALSO IN RE-OPENED PROCEEDINGS U/S 147, THE RESPECTIVE A. O.S HAVE, AFTER DUE SCRUTINY, ACCEPTED THE ASSESSEE'S C LAIM. THE REASONS ASSIGNED BY THE LEARNED CIT (A) ARE WRONG, UNTENABLE IN LAW, BASED ON SURMISES AND WITHOUT APPRECIATING THE FACTS IN ITS PROPER PERSPECTIVE. 3. FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF CIVIL CONSTRUCTION MAINLY WORK FOR GOVE RNMENT DEPARTMENT, SUCH AS IRRIGATION DEPARTMENT, PUBLIC W ORKS DEPARTMENT ETC. DURING F.Y. 1990-91, THE ASSESSEE W AS AWARDED CONTRACT FOR CONSTRUCTION OF A CANAL OF IRRIGATION DEPARTMENT, GANGAKHED DIST. PARBANI. TENDER AMOUNT WAS RS.1.88 CRORES AND WAS TO BE COMPLETED WITHIN 30 MONTHS HOWEVER, D UE TO VARIOUS ISSUES, THE CONTRACT COULD NOT BE COMPLETED IN THE GIVEN TIME FRAME. AS A RESULT, THERE WAS CONSIDERABLE COST ESC ALATION. ACCORDINGLY, ASSESSEE REQUESTED FOR RATE REVISION F ROM THE IRRIGATION 3 DEPARTMENT. DUE TO THIS ISSUE AND VARIOUS OTHER ISS UES, THE MATTER WAS REFERRED TO AN ARBITRATOR WHO GAVE HIS AWARD IN OCTOBER 1996. THE COPY OF THE AWARD IS AVAILABLE ON PAGE NO.31 TO PAGE NO.53 OF THE PAPER BOOK FILED BY ASSESSEE. THE ARBITRATOR, AMONG ST OTHER THINGS, AWARDED RATE REVISION OF 57.5% OF THE TENDERED RATE S AS MENTIONED IN PARA 6.4 AND 6.5 OF THE AWARD - PAGE 47 OF PAPER BO OK FILED BY ASSESSEE. THE ARBITRATOR ALSO AWARDED OTHER SMALL A MOUNTS SUCH AS COMPENSATION OF IDLE CHARGES FOR MACHINERY ETC, WHI CH ARE NOT SIGNIFICANT. THIS AWARD WAS BASICALLY FOR RATE REVI SION OF THE TENDERED RATES AND AS SUCH WAS APPLICABLE TO THE WORK SO FAR EXECUTED BY THE ASSESSEE AS ALSO FOR THE BALANCE WORK REMAINING TO BE EXECUTED. THE ASSESSEE CONTINUED AND FINALLY COMPLETED THE WO RK ON 30.6.1999 FOR WHICH ALSO THE REVISED RATES WERE APPLICABLE AN D PAID. 3.1 DURING FY 1997-98 (AY 1998-99), THE ASSESSEE RECEIVED AN AMOUNT OF RS.3,86,78,000 FROM IRRIGATION DEPARTMENT WHICH, INTER ALIA, INCLUDED AMOUNTS TOWARDS THIS RATE REVISION ( AWARD) WHICH WAS FOR THE WORK DONE UP TO FINANCIAL YEAR 1996-97 AS A LSO FOR THE WORK DONE IN FY 1997-98. THE ASSESSEE HAS OFFERED THIS A MOUNT AS INCOME AND IS INCLUDED IN THE CONTRACT RECEIPTS OF RS.4,70 ,32,066/- AS DETAILED AT PAGE 18 OF PAPER BOOK FILED BY ASSESSEE . 3.2 THE ASSESSEE FILED ITS RETURN OF INCOME FOR A Y 98-99 DECLARING A TOTAL INCOME OF RS. 1,42,15,100/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) AND THE A.O. AFTER GOING THROU GH ALL THE EXPENSES, MADE CERTAIN DISALLOWANCE OUT OF THEM AND COMPUTED THE INCOME AT RS.1,48,26,610/- AS DETAILED AT PAGE 8 TO 12 OF PAPER BOOK FILED BY ASSESSEE. THEREAFTER THE ASSES SEE'S CASE WAS REOPENED U/S 147 AND ONE OF THE REASONS FOR REOPENI NG WAS AS UNDER: 'THE ASSESSEE HAS RECEIVED AN AWARD OF RS.3,86,78,0 00/- ON 07.08.1997 FROM THE IRRIGATION DEPARTMENT. AS TH IS AWARD WAS RECEIVED BY THE ASSESSEE FOR THE WORKS NO T PERTAINING TO THIS YEAR, NO EXPENSES SHOULD HAVE BE EN ALLOWED AGAINST THE AWARD AND THE ENTIRE AMOUNT NEEDS TO BE TREATED AS ASSESSEE'S INCOME. ' 4 3.3 THE ASSESSING OFFICER COMPLETED THE ASSESSMEN T U/S 147 ON 09.03.2004. HOWEVER, ON THE AFORESAID ISSUE, REASSE SSMENT PROCEEDINGS WERE DROPPED AND FOR DOING SO, THE ASSE SSING OFFICER PUT AN OFFICE NOTE WHICH IS AS UNDER: 'AS REGARDS THE AWARD AMOUNT, IT WAS NOT THE CASE O F THE THEN AO THAT THE AWARD AMOUNT HAS BEEN CONCEALED. HIS CASE IS THAT THE ENTIRE AWARD AMOUNT SHOULD BE TREATED AS INCOME , WITHOUT ALLOWING EXPENSES. AS EXPLAINED, THESE AWARD ARE AL SO PART THE EARLIER CONTRACT AND IN FACT ARE FOR MODIFYING THE RATE SPECIFIED IN THE CONTRACT. AS SUCH, THE CONTENTION OF THE AO IS NOT TENABLE. OTHERWISE, THE AWARD HAS BEEN SHOWN IN THE BOOKS, THE EXPENSES INCURRED HAVE BEEN EXAMINED BY THE AO PASS ING THE ORIGINAL ASSESSMENT ORDER. THERE IS NO REASON TO BE LIEVE THAT THE EXPENSES CLAIMED ARE INCORRECT. HENCE, IT HAS NOT B EEN DISTURBED. ' THE REASONS AND THE AFORESAID ISSUE OFFICE NOTE IS AVAILABLE IN CIT'S ORDER U/S 263 AT PAGE LAND 2 OF SAID ORDER. 3.4 THEREAFTER, ON THE SAME ISSUE, CIT INVOKED SE CTION 263 AND SET ASIDE THE ASSESSMENT TO RE-EXAMINE THE ISSUE AS TO WHETHER THE AWARD RELATES ONLY TO EARLIER YEARS AND CONSEQU ENTLY EXPENDITURE OF RS.2,39,80,267 CLAIMED BY THE ASSESS EE CAN BE ALLOWED. THE ASSESSEE HAS ALSO FILED AN APPEAL AGAI NST THIS ORDER U/S 263. 3.5 THUS THE MOOT POINT IS WHETHER THE RATE REVISI ON WHICH IS INCLUDED IN AFORESAID AMOUNT OF RS.3.86 CRORES RELA TES ONLY TO EARLIER YEARS OR ALSO RELATES TO CURRENT YEAR. 3.6 IN CONSEQUENTIAL PROCEEDINGS OF SECTION 263 OR DER, UNFORTUNATELY, THE ASSESSEE, DUE TO VARIOUS PROBLEM S FACE BY HIM, COULD NOT ATTEND. THE AO, THEREFORE COMPUTED THE IN COME U/S 144 AS UNDER: RECEIPTS OF AWARD (+) RS.3,86,54,487 (NET OF ARBITRATION EXPENSES) (+) PROFIT ESTIMATED @ 6% ON BALANCE RECEIPTS RS. 6,68,368/- (4,70,32,606 - 3,86,78,000= 83,54,606) TOTAL RS.3,93,22,855 5 3.7 BEFORE CIT(A), THE ASSESSEE EXPLAINED THAT, T HE AWARD WAS RECEIVED ALSO FOR THE CONTRACT WORK WHICH WAS CARRI ED OUT DURING THE YEAR. THE CIT(A) HAS NOT APPRECIATED SUBMISSIONS FI LED BY ASSESSEE. 3.8 THE ASSESSEE ENCLOSED ANNEXURE 1, GIVING YEAR WISE DETAILS OF WORK DONE IN RESPECT OF THIS CONTRACT. (SAME CHART IS ALSO ENCLOSED AT PAGE 57 OF PAPER BOOK). IT CAN BE SEEN FROM THE SAI D ANNEXURE THAT, TOTAL WORK DONE UP TO FY 1997-98 WAS RS.2.86 CRORES . NOW IF THE AWARD OF RS.3.86 CRORES RELATED ONLY TO THE WORK DO NE UP TO 1996- 97, IT AMOUNTS TO ABOUT 135% RISE IN THE RATES. THE ARBITRATOR HOWEVER, HAS GRANTED RISE ONLY 57.5%. THIS ITSELF S HOWS THAT THE RISE INCLUDED NOT ONLY WORK DONE UP TO 1996-97 BUT ALSO THE WORK EXECUTED IN 1997-98. LOOKED FROM A DIFFERENT ANGLE, IF THE ENTIRE AMOUNT OF RS. 3.86 CRS. RELATED TO RATE REVISION FO R EARLIER YEARS, THEN THE WORK DONE UPTO FY 1996-97 OUGHT TO HAVE BE EN RS.6.71 CRS., HOWEVER THE ACTUAL WORK DONE UPTO FY 1996-97 AS PER AUDITED ACCOUNTS IS ONLY RS. 2.86 CRS. THIS ITSELF SHOWS TH AT THE AMOUNT OF RS. 3.86 CRS. RELATES NOT ONLY TO EARLIER YEARS, BU T ALSO TO THE YEAR UNDER CONSIDERATION (I.E. AY 1998-99). 3.9 BASED ON THE 57.5% RISE, THE RATE REVISION UPT O FY 1996-97 WORKS OUT TO RS. 1.65 CRS. AND IF THIS AMOUNT OF RS . 1,65 CRS. IS EXCLUDED FROM CURRENT YEAR'S RECEIPTS OF RS.4.53 CR S., THEN CURRENT YEARS WORK EXECUTION AMOUNTS TO RS. 2.89 CRS. THE E XPENSES OF RS. 2.39 CRS. FOR THE CURRENT YEAR WORK OUT TO 83% OF T HESE RECEIPTS AND ARE QUITE REASONABLE. 3.10 NONE OF THE AUTHORITIES BELOW HAVE GONE INT O THIS ASPECT AND HAVE HELD THAT ENTIRE AMOUNT OF RS. 3.86 CRS. RELAT E TO EARLIER YEARS UPTO FY 1996-97 AND THEREFORE THE CURRENT YEAR'S RE CEIPTS ARE RS. 83 LACS (AFTER EXCLUDING RS, 3.86 CRS FROM CURRENT YEARS RECEIPTS) AND THEREFORE EXPENSES OF RS. 2.39 CRS. AGAINST THE SE RECEIPTS OF RS. 83 LACS ARE UNJUSTIFIABLE. IN SUM AND SUBSTANCE, T HE ISSUE IS 6 WHETHER THE AWARD AMOUNT PERTAINS TO WORK OF ALL YE ARS INCLUDING ASSESSMENT YEAR UNDER CONSIDERATION. IF SO, THEN H OW MUCH EXPENSES ARE RELATABLE TO WORK OF THIS YEAR. SO, I N THE INTEREST OF JUSTICE, WE RESTORE THIS WHOLE ISSUE TO THE ASSESSI NG OFFICER WITH A DIRECTION TO DECIDE THIS AS PER FACT AFTER PROVIDIN G DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. SINCE, WE ARE RESTORING T HIS ISSUE TO THE ASSESSING OFFICER FOR ABOVE REASON, WE ARE REFRAINI NG FROM COMMENTING ON MERIT OF THE ISSUE AT HAND. 5. AS A RESULT, THIS APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1717/PN/2011: 6. THE ASSESSEE FILED THE APPEAL ON FOLLOWING GROUN DS : 1. THE LEARNED COMMISSIONER OF INCOME TAX ERRED ON FACTS AND IN LAW IN ASSUMING JURISDICTION U/S 263, ESPECI ALLY IN RESPECT OF TAXABILITY OF RECEIPT OF ARBITRATION AWA RD OF RS.3,86,78,000 FROM THE IRRIGATION DEPARTMENT AND A LLOWANCE OF EXPENSES OF RS.2,39,80,258 WHEN BOTH THESE ISSUE S WERE CONSIDERED BY THE A.O. IN DETAIL IN HIS ORDERS U/S 143(3) AS ALSO U/S 143(3) R.W.S. 147. HE OUGHT TO HAVE APPREC IATED THAT THE A.O., AFTER DUE SCRUTINY, HAS TAKEN A POSSIBLE VIEW AND THUS THE ORDERS OF THE A.O. WERE NOT ERRONEOUS. 2. THE LEARNED COMMISSIONER OF INCOME TAX ERRED O N FACTS AND IN LAW IN NOT APPRECIATING THAT THE RECEIPT OF AWARD OF RS.3,86,78,000 FROM THE IRRIGATION DEPARTMENT HAS A LREADY BEEN OFFERED TO TAX BY THE ASSESSEE IN HIS ORIGINAL RETURN ITSELF. HE FURTHER FAILED TO APPRECIATE THAT THE EXPENDITUR E OF RS.2,39,80,258 WAS DULY SCRUTINIZED BY THE A.O. IN ASSESSMENT PROCEEDINGS U/S 143(3) AND CERTAIN DISAL LOWANCES HAVE BEEN MADE BY HIM. THE LEARNED AUTHORIZED REPRESENTATIVE DID NOT PRESS THIS APPEAL. SO, SAME IS DISMISSED AS NOT PRESSED. 7. AS A RESULT, ITA NO.07/PN/2011 IS ALLOWED FOR ST ATISTICAL PURPOSES AND ITA NO.1717/PN/2011 IS DISMISSED. 7 PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF APRIL, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YA DAV) ACCOUNTANT MEMBER JUDICIAL MEMBER SATISH/GCVSR PUNE, DATED 30 TH APRIL 2014 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A), AURANGABAD 4. THE CIT, AURANGABAD 5. THE DR B BENCH, PUNE. 6. GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUN E