DY CIT CENT. CIR.-8(2), MUMBAI V. M/S. RAJ WESPOWER P. LTD., MUMBAI

ITA 1884/MUM/2020

AI Insights

The case involves multiple appeals by the Revenue against M/s JSW Energy (Barmer) Limited concerning the assessment years 2009-10 to 2014-15. The primary issues revolved around the capitalisation of expenses related to the construction of a thermal power plant and the subsequent depreciation claimed on these expenses. The Revenue challenged the decisions of the CIT(A) which had allowed the capitalisation and depreciation, arguing that the expenses were not genuine and the companies involved were not engaged in the actual work but were merely providing accommodation entries. The Tribunal, after examining the facts and the submissions, upheld the CIT(A)'s decisions, finding that the expenses were genuine and related to the business activities of the assessee.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 123325 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 17-10-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 27-10-2020
• Other Referred Cases: PCIT v. Purnima Sunil Agrawal, PCIT v. Era Infrastructure (India) Ltd., Goetze (India) Ltd. Vs CIT, CIT v. Bengal Finance & Investment Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Business expenditure; Search and seizure; Earning of tax free income; Question of law; Tax effect; Rule 8D; Set aside
• Section: 131; 132; 143(3); 14A; 115JB; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No. 580/MUM/2016 Assessment Year: 2009-10 & ITA No. 2983/MUM/2015 Assessment Year: 2010-11 & ITA No. 2984/MUM/2015 Assessment Year: 2011-12 & ITA No. 5299/MUM/2018 Assessment Year: 2012-13 & ITA No. 5300/MUM/2018 Assessment Year: 2013-14 & ITA No. 1884/MUM/2020 Assessment Year: 2014-15 DCIT-CC-8(3), Room No. 656, 6 th floor, Aayakar Bhavan, M.K. Road, Mumbai-400020. Vs. M/s JSW Energy (Barmer) Limited, (Formerly known as M/s Raj Westpower Pvt. Ltd.), Jindal Mansion, 5A, Dr. G. Deshmukh Marg, Mumbai-400026. PAN No. AAACR 8812 L Appellant Respondent Revenue by : Mr. T. Shankar, CIT-DR & Smt. Mahita Nair, DR Assessee by : Mr. Rakesh Joshi, AR Date of Hearing : 18/10/2022 Date of pronouncement : 30/12/2022 PER OM PRAKASH KANT, AM These appeals by the separate orders of even date of Income-tax (Appeals) assessment year 2009 appeals common ground of ‘depreciation’ claimed there on connected grounds, all these appeals were heard together and disposed off by way of this consolidated order for convenience and avoid repetition of facts. 2. Firstly, we take up the appeal for assessment year 2009 The Revenue filed revised F filing appeal) on 03/02/2016 ground dated 17/10/2022 in view of chang assessee company from M/s Rajwest Power Private Limited to M/s JSW Energy (Barmer) Ltd. The revised grounds are reproduced as under: 1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleing the disallowance of Rs. 88,44,00,000/ expenses in the work in progress relying on the appeal orders of the assessee's own case for M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 ORDER PER OM PRAKASH KANT, AM These appeals by the Revenue have been preferred separate orders of even date, passed by the learned tax (Appeals)-47, Mumbai [in short ‘the Ld. CIT(A) assessment year 2009-10 to assessment year 2014- appeals common ground of ‘expenditure capitalised claimed there on, is involved ,therefore connected grounds, all these appeals were heard together and off by way of this consolidated order for convenience and avoid repetition of facts. Firstly, we take up the appeal for assessment year 2009 venue filed revised Form No. 36 (i.e. the form prescribed for on 03/02/2016, modifying/ revising the original 17/10/2022 in view of change in from M/s Rajwest Power Private Limited to M/s (Barmer) Ltd. The revised grounds are reproduced as On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleing the disallowance of Rs. 88,44,00,000/- on account of capitalization of expenses in the work in progress relying on the appeal orders of the assessee's own case for the A Y 2010 M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 2 preferred against passed by the learned Commissioner the Ld. CIT(A)’] for -15. In all these expenditure capitalised’ and therefore, being connected grounds, all these appeals were heard together and off by way of this consolidated order for convenience and Firstly, we take up the appeal for assessment year 2009-10. rm prescribed for modifying/ revising the original e in name of the from M/s Rajwest Power Private Limited to M/s (Barmer) Ltd. The revised grounds are reproduced as On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleing the disallowance of on account of capitalization of expenses in the work in progress relying on the appeal the A Y 2010-11 & 2011-12 on similar issue without appreciating the fact that no work has been carried out at the site for Earth work, Excavation and Disposal of Earth for Raw Water Reservoir by M/s. Sunil Hi decision of the Ld case for the AY 2010 accepted by the department and further appeal has been filed in the ITAT and the same is pending." 2. On the facts and in the circumstances of the case and in law, the Ld.CI Rs.39.26,00,000/ expenses in the work in progress on account of the work done by MIs. sancia Infraprojects Ltd. Without appreciating the fact that M/s. sancia Infraprojects Ltd. had accepted during the course of its assessment proceedings that no work has been carried out by them at the Barmer site. 3. We find that on behalf of the assessee on 26/04/2018 filing ground in support of the order of the Ld. CIT(A) under rule 27 of the application under Rule 27 are reproduced “1). On the facts and circumstances of the case as well as in law, the Learned Assessing Officer has erred in initiating the proceedings us.153C of the Income Tax Act, 1961, without appreciating the fact that no satisfaction recorded before issuing notice u M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 12 on similar issue without appreciating the fact that no work has been carried out at the site for Earth work, Excavation and Disposal of Earth for Raw Water Reservoir by M/s. Sunil Hi-Tech Engineers Ltd. and the decision of the Ld. CIT(A) orders in the assessee's own case for the AY 2010-11 & 2011-12 have not been accepted by the department and further appeal has been filed in the ITAT and the same is pending." On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleing the disallowance of Rs.39.26,00,000/- on account of capitalization of expenses in the work in progress on account of the work done by MIs. sancia Infraprojects Ltd. Without appreciating the fact that M/s. sancia Infraprojects Ltd. accepted during the course of its assessment proceedings that no work has been carried out by them at the Barmer site. e find that on behalf of the assessee, an application was filed on 26/04/2018 filing ground in support of the order of the Ld. ) under rule 27 of the ITAT rules, 1963. The ground raised in application under Rule 27 are reproduced as under : 1). On the facts and circumstances of the case as well as in law, the Learned Assessing Officer has erred in initiating the proceedings us.153C of the Income Tax Act, 1961, without appreciating the fact that no satisfaction recorded before issuing notice us. 153C of the Income Tax Act, 1961, in both M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 3 12 on similar issue without appreciating the fact that no work has been carried out at the site for Earth work, Excavation and Disposal of Earth for Raw Water Tech Engineers Ltd. and the . CIT(A) orders in the assessee's own 12 have not been accepted by the department and further appeal has been On the facts and in the circumstances of the case and in T(A) erred in deleing the disallowance of on account of capitalization of expenses in the work in progress on account of the work done by MIs. sancia Infraprojects Ltd. Without appreciating the fact that M/s. sancia Infraprojects Ltd. accepted during the course of its assessment proceedings that no work has been carried out by them application was filed on 26/04/2018 filing ground in support of the order of the Ld. . The ground raised in as under : 1). On the facts and circumstances of the case as well as in law, the Learned Assessing Officer has erred in initiating the proceedings us.153C of the Income Tax Act, 1961, without appreciating the fact that no satisfaction recorded before s. 153C of the Income Tax Act, 1961, in both the capacity as a Assessing Officer of "searched person" and the "other person". 3.1 However during the course of the hearing before us, the Ld Counsel of the assessee did not press above ground and therefore same is dismissed as infructuous. 4. Briefly stated facts of the case that consideration, the assessee c constructing a ‘thermal power plant capacity (8x135 MW) at Village Rajasthan. For the year return of income on 28/09/2009 declaring income of ₹1,04,03,241/-being interest on fixed deposits. 4.1 Subsequently, a search and seizure action under section 13 of the Income-tax Act, 1961 ( 16/03/2011 at the premises of the J of accounts and other documents belonging to t company were seized section 153C of the appropriate notices. In response, the assessee filed return of income on 29/12/2012 reiterating the income of which was declared in regular statutory notices we commenced. During assessment proceeding, the Assessing Officer noted that in view of incriminating material found during the course M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 the capacity as a Assessing Officer of "searched person" and the "other person". owever during the course of the hearing before us, the Ld l of the assessee did not press above ground and therefore same is dismissed as infructuous. riefly stated facts of the case that during the year under the assessee company was in the process of thermal power plant’ of 1080 megawatt MW) at Village ‘Bhadresh’, District Barmer Rajasthan. For the year under consideration, the assessee filed return of income on 28/09/2009 declaring income of being interest on fixed deposits. Subsequently, a search and seizure action under section 13 tax Act, 1961 (in short ‘the Act’) was carried out on 16/03/2011 at the premises of the JSW group of cases, and books accounts and other documents belonging to t company were seized, therefore, consequent proceedings under f the Act were taken up by way of issue of appropriate notices. In response, the assessee filed return of income on 29/12/2012 reiterating the income of in regular return of income filed. Subsequently, statutory notices were issued and assessment proceedings were During assessment proceeding, the Assessing Officer noted that in view of incriminating material found during the course M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 4 the capacity as a Assessing Officer of "searched person" and owever during the course of the hearing before us, the Ld. l of the assessee did not press above ground and therefore ng the year under was in the process of of 1080 megawatt (MW) , District Barmer, consideration, the assessee filed return of income on 28/09/2009 declaring income of Subsequently, a search and seizure action under section 132 ) was carried out on SW group of cases, and books accounts and other documents belonging to the assessee consequent proceedings under ct were taken up by way of issue of appropriate notices. In response, the assessee filed return of income on 29/12/2012 reiterating the income of ₹1,04,03,241/- return of income filed. Subsequently, issued and assessment proceedings were During assessment proceeding, the Assessing Officer noted that in view of incriminating material found during the course of the search, the JSW group made a disclosure of of which an amount of writing back off/reversal of capital work in progress in the books of accounts of the assessee. A assessee, the assessment under section 143(3) read with section 153C of the Act was completed on 28/03/2013 wherein the Assessing Officer disallowed capitalisation of expenses in two parties namely M/s Sunil Hitech engineers Ltd (SHEL) and M/s Gremach Infrastructure known as M/s Sancia On further appeal by the assessee, the Ld. CIT(A) allowed the claim of capitalisation of the expenses by the assessee finding of the Ld. CIT(A) Income-tax Appellate Tribunal (ITAT) by way of raising grounds as reproduced above. 5. The ground No. disallowance of ₹ 88, 44, 00, 000/ capitalisation of the expenses on Earth work, exca disposal of Earth for Raw water reservoir for Thermal Plant at Barmer (Rajasthan) shown to have been incurred SHEL during the year under consideration. 6. The brief facts qua planned to meet water requirement of the thermal power plant at Barmer from the Rajasthan Canal ( Now known as Indira Gandhi M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 of the search, the JSW group made a disclosure of ₹ ount of ₹183,07,07,660/- was made by way of writing back off/reversal of capital work in progress in the books of accounts of the assessee. After considering submission of the assessee, the assessment under section 143(3) read with section was completed on 28/03/2013 wherein the Assessing Officer disallowed capitalisation of expenses in M/s Sunil Hitech engineers Ltd (SHEL) and M/s nfrastructure Equipments and projects Ltd ( ncia Global Info Projects Ltd or in short SGIPL) On further appeal by the assessee, the Ld. CIT(A) allowed the claim of capitalisation of the expenses by the assessee. Aggrieved with the finding of the Ld. CIT(A), the Revenue is in appeal before the tax Appellate Tribunal (ITAT) by way of raising grounds as The ground No. 1 of the appeal relates to deletion of 88, 44, 00, 000/-made by the Assessing Officer for capitalisation of the expenses on Earth work, exca disposal of Earth for Raw water reservoir for Thermal Plant at ) shown to have been incurred SHEL during the year under consideration. qua the issue in dispute are that water requirement of the thermal power plant at Barmer from the Rajasthan Canal ( Now known as Indira Gandhi M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 5 262 Crores, out was made by way of writing back off/reversal of capital work in progress in the books of fter considering submission of the assessee, the assessment under section 143(3) read with section was completed on 28/03/2013 wherein the Assessing Officer disallowed capitalisation of expenses in respect of M/s Sunil Hitech engineers Ltd (SHEL) and M/s quipments and projects Ltd (subsequently rojects Ltd or in short SGIPL). On further appeal by the assessee, the Ld. CIT(A) allowed the claim . Aggrieved with the n appeal before the tax Appellate Tribunal (ITAT) by way of raising grounds as of the appeal relates to deletion of made by the Assessing Officer for capitalisation of the expenses on Earth work, excavation and disposal of Earth for Raw water reservoir for Thermal Plant at ) shown to have been incurred through M/s the issue in dispute are that the assessee water requirement of the thermal power plant at Barmer from the Rajasthan Canal ( Now known as Indira Gandhi Canal ) through a 185 km the assessee that due to closure of release of water from the canal at the time of periodical maintenance, it was imperative for the project to have a buffer planned requirement during any unforeseen circumstances. The assessee therefore planned to have a water reservoir having capacity of approximately 80 Lakhs cubic dimensions of (1300m x800m x8m ). The assessee claimed that the contract for excavation and disposal of Earth for reservoir was awarded to M/s SEW construction Ltd, Hyderabad which was subsequently assigned to M/s SHEL at contract value of ₹ 216 crore, against which expenditure of found to be incurred as in the date of search 16/03/2011. During the course of assessment proceeding ledger account of SHEL in the books of accounts of the assessee and the ledger account of the assessee SHEL, it was observed that SHEL raised a 24/01/2011 for ₹ 108 crores, out of which written back by the assessee running bills of work done for the Barmer thermal project aggregating to ₹ 127, 40, 89, 361/ with invoice numbers for assessment years 2009 year 2011-12 have been reproduced by the Assessing Officer in para 5.1 of the impugned assessment order. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 through a 185 kms long dedicated pipeline. It is stated by the assessee that due to closure of release of water from the canal e of periodical maintenance, it was imperative for the project to have a buffer reservoir, which could restore water to meet planned requirement during any unforeseen circumstances. The assessee therefore planned to have a water reservoir having f approximately 80 Lakhs cubic meters(m) dimensions of (1300m x800m x8m ). The assessee claimed that the contract for excavation and disposal of Earth for reservoir was awarded to M/s SEW construction Ltd, Hyderabad which was subsequently assigned to M/s SHEL at contract value of 216 crore, against which expenditure of ₹ 241, 81, 69, 768/ found to be incurred as in the date of search/survey 16/03/2011. During the course of assessment proceeding ledger account of SHEL in the books of accounts of the assessee and the ledger account of the assessee in the books of account of , it was observed that SHEL raised an 108 crores, out of which ₹ 107 crore had been by the assessee. Besides this invoice the SHEL raise running bills of work done for the Barmer thermal project 127, 40, 89, 361/-. Detailed running will along with invoice numbers for assessment years 2009-10 to assessment 12 have been reproduced by the Assessing Officer in para 5.1 of the impugned assessment order. The Assessing Officer M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 6 long dedicated pipeline. It is stated by the assessee that due to closure of release of water from the canal e of periodical maintenance, it was imperative for the which could restore water to meet planned requirement during any unforeseen circumstances. The assessee therefore planned to have a water reservoir having meters(m) having dimensions of (1300m x800m x8m ). The assessee claimed that the contract for excavation and disposal of Earth for the Raw water reservoir was awarded to M/s SEW construction Ltd, Hyderabad, which was subsequently assigned to M/s SHEL at contract value of 241, 81, 69, 768/-was /survey action i.e. 16/03/2011. During the course of assessment proceeding, from the ledger account of SHEL in the books of accounts of the assessee in the books of account of n invoice dated 107 crore had been . Besides this invoice the SHEL raised running bills of work done for the Barmer thermal project . Detailed running will along 10 to assessment 12 have been reproduced by the Assessing Officer in The Assessing Officer has further noted that in the books of SHEL ledger of the assessee was having total debit at year 2009 -10 to AY 2011 amount of ₹127,40,89, 6.1 After referring to the amount of expenditure claimed by the assessee in relation to work assigned to SHEL, the Ld Assessing Officer referred to fact of inflation of expenses by SHEL, without incurring any actual expenditure. The Ld Assessing Officer referred to the statement dated 22/12/2009 recorded during survey action by the investigation wing of of the subcontractor of SHEL namely of M/s Four Pillars communication private limited , who stated that he had received payment from SHEL in respect of excavation at Barmer, but neither his company or their subcontractor done any such excavation work. He further deposed that payment was made by the SHEL to subcontractor with the intention to get cash in return of payment made after deducting certain charges. Shri Kailash Sharma, admitted that 10.21 Crores received by his company for financial year 2008 and 2009-10 from SHE returned back in cash to them either directly or through subcontractors without carrying out any work. also provided name of the person Sh Amit consultant, to whom, service charges at the rate of 0.1% of the total M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 has further noted that in the books of SHEL ledger of the assessee was having total debit at ₹ 128, 91, 84, 138/- (from 10 to AY 2011-12) which was aggregate of running will 127,40,89,361/-plus other expenses of ₹ After referring to the amount of expenditure claimed by the in relation to work assigned to SHEL, the Ld Assessing Officer referred to fact of inflation of expenses by SHEL, without incurring any actual expenditure. The Ld Assessing Officer referred to the statement dated 22/12/2009 recorded during survey action y the investigation wing of Income-tax department Mumbai of the subcontractor of SHEL namely, Sh Kailash Sharma, director M/s Four Pillars communication private limited , who stated that he had received payment from SHEL in respect of excavation armer, but neither his company or their subcontractor done any such excavation work. He further deposed that payment was made by the SHEL to subcontractors without doing any work with the intention to get cash in return of payment made after deducting certain charges. Shri Kailash Sharma, admitted that received by his company for financial year 2008 10 from SHEL for excavation work at Barmer back in cash to them either directly or through s without carrying out any work. She Kailash Sharma also provided name of the person Sh Amit Agrawal, consultant, to whom, service charges at the rate of 0.1% of the total M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 7 has further noted that in the books of SHEL ledger of the assessee (from assessment 12) which was aggregate of running will ₹1,50,94,777-. After referring to the amount of expenditure claimed by the in relation to work assigned to SHEL, the Ld Assessing Officer referred to fact of inflation of expenses by SHEL, without incurring any actual expenditure. The Ld Assessing Officer referred to the statement dated 22/12/2009 recorded during survey action tax department Mumbai, on one Sh Kailash Sharma, director M/s Four Pillars communication private limited , who stated that he had received payment from SHEL in respect of excavation work armer, but neither his company or their subcontractors had done any such excavation work. He further deposed that payment without doing any work with the intention to get cash in return of payment made after deducting certain charges. Shri Kailash Sharma, admitted that ₹ received by his company for financial year 2008-09 L for excavation work at Barmer, was back in cash to them either directly or through She Kailash Sharma Agrawal, service tax consultant, to whom, service charges at the rate of 0.1% of the total bill was paid for financial liasioning for Barmer project for SHEL. Relevant part of the statement has been reproduced by the Assessing Officer on page 6 to 9 of the assessment order. above observations, the Assessing Officer issued show cause to the assessee as why the amount of capital work in progress debited for the year under consideration in should be reduced from the total capital work in progress on Barmer Project. 6.2 The assessee refuted the allegation that no work was done by SHEL and submitted t images of the site pertaining to those images showed excavation for water reservoir at the site. It was submitted that the plant was fully functional and the water reservoir at the site could also be physic submitted that no separate expenses have been claimed by the assessee in respect of the work done by SHEL on the Raw reservoir under any other head of account. The assessee sought details of the investigation by the and its subcontractors and requested for cross examination of SHEL. 7. The Assessing Officer issued summon u/s 131 of the SHEL asking to arrange cross-examination by the assessee. Tiwari, vice president of SHEL attended on 21/03/2013 and stated M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 bill was paid for financial liasioning for Barmer project for SHEL. vant part of the statement has been reproduced by the Assessing Officer on page 6 to 9 of the assessment order. , the Assessing Officer issued show cause to the s why the amount of capital work in progress debited for the year under consideration in relation to work should be reduced from the total capital work in progress on The assessee refuted the allegations of the Assessing Officer that no work was done by SHEL and submitted tw images of the site pertaining to year 2006 and 2009 and stated that those images showed excavation for water reservoir at the site. It was submitted that the plant was fully functional and the water at the site could also be physically verified. It was submitted that no separate expenses have been claimed by the assessee in respect of the work done by SHEL on the Raw reservoir under any other head of account. The assessee sought details of the investigation by the Income- tax department in relation to SHEL and its subcontractors and requested for cross examination of The Assessing Officer issued summon u/s 131 of the arrange appearance of their responsible officer for examination by the assessee. In response Sh Radheshyam S Tiwari, vice president of SHEL attended on 21/03/2013 and stated M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 8 bill was paid for financial liasioning for Barmer project for SHEL. vant part of the statement has been reproduced by the Assessing Officer on page 6 to 9 of the assessment order. In view of , the Assessing Officer issued show cause to the s why the amount of capital work in progress debited for given to SHEL should be reduced from the total capital work in progress on of the Assessing Officer wo Google Earth and 2009 and stated that those images showed excavation for water reservoir at the site. It was submitted that the plant was fully functional and the water ally verified. It was submitted that no separate expenses have been claimed by the assessee in respect of the work done by SHEL on the Raw reservoir under any other head of account. The assessee sought details of the ment in relation to SHEL and its subcontractors and requested for cross examination of The Assessing Officer issued summon u/s 131 of the Act to responsible officer for In response Sh Radheshyam S Tiwari, vice president of SHEL attended on 21/03/2013 and stated that work had been carried out by SHEL in respect of excavation and disposal of raw water reservoir for Barmer plant. He further admitted that expenditure in relation to some subcontractors appropriate disclosure in this regard had been made in the hands of SHEL and taxes were also paid. performed half of the excavation work fo dumpingof approximately 38,00,000 rocks. He submitted that due to certain disputes, the assessee M/s Rajwest power private limited serve which, SHEL raised performance claim of was initially settled in March 2011 for at₹ 3.72 corrodes in January 2012. He submitted that details regarding completion of the work had been submitted during the course of their assessment proceed Officer. He further submitted that he did not have knowledge about exact site location of the examination by the authorised representative of the assessee company, he submitted that the assess private limited had nothing to do with the subcontractor who had supposedly not rendered any service to SHEL. 7.1 The ld. Assessing Officer (i) In view of cross that he was not having knowledge of the actual work M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 that work had been carried out by SHEL in respect of excavation and disposal of raw water reservoir for Barmer plant. He further admitted that theSHEL was not able to substantiate the expenditure in relation to some subcontractors appropriate disclosure in this regard had been made in the hands of SHEL and taxes were also paid. He further stated that SHEL performed half of the excavation work for water Reservoir and approximately 38,00,000 Cubic meter( m³ rocks. He submitted that due to certain disputes, the assessee M/s Rajwest power private limited served termination notice against which, SHEL raised performance claim of ₹ 108 Crores was initially settled in March 2011 for ₹ one crore and finally settled 3.72 corrodes in January 2012. He submitted that details regarding completion of the work had been submitted during the course of their assessment proceeding before their Assessing Officer. He further submitted that he did not have knowledge about exact site location of the execution of the contract examination by the authorised representative of the assessee company, he submitted that the assessee M/s Rajwest power private limited had nothing to do with the subcontractor who had supposedly not rendered any service to SHEL. Assessing Officer arrived at following conclusions : n view of cross-examination of Sh. Tiwari, the AO he was not having knowledge of the actual work M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 9 that work had been carried out by SHEL in respect of Earthwork excavation and disposal of raw water reservoir for Barmer plant. He as not able to substantiate the expenditure in relation to some subcontractors therefore appropriate disclosure in this regard had been made in the hands of He further stated that SHEL r water Reservoir and m³) of soils and rocks. He submitted that due to certain disputes, the assessee M/s termination notice against Crores. This claim one crore and finally settled 3.72 corrodes in January 2012. He submitted that details regarding completion of the work had been submitted during the ing before their Assessing Officer. He further submitted that he did not have knowledge about of the contract. On cross- examination by the authorised representative of the assessee ee M/s Rajwest power private limited had nothing to do with the subcontractor who had arrived at following conclusions : . Tiwari, the AO opined he was not having knowledge of the actual work carried out a the excavation site Reservoir site and (ii) The original contract which was awarded to SEW construction Ltd was for Earth work, excavation and disposal of Earthfor RAW water reservoir for the project whereas the assignment and disposal of earth for raw water reservoir and this variance did not find any mention in the dea assignment. (iii) The SHEL, and 2010-11 has disclosed amount of Rs. 40,00,00,000/ with regard to bogus expenditure in connection with Barmer project of the assessee in Rajasthan (iv) From the Google Earth images, it w Reservoir site was adjacent to the project site, whereas in the earlier part of the submission by the assessee it was claimed that reservoir was 7.2 In view of conclusions the Ld Assessing Officer held that aggregate expenditure of incurred by SHEL up to 31/03/2011 was fictitious because no work was executed against SHEL, therefore payments accordingly held as dis M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 carried out at Barmer site, not aware of exact location of the excavation site and not aware of distance between the Reservoir site and Project site. The original contract which was awarded to SEW ction Ltd was for Earth work, excavation and disposal of Earthfor RAW water reservoir for the project whereas the assignment to SHEL was only for excavation and disposal of earth for raw water reservoir and this variance did not find any mention in the dea assignment. The SHEL, in assessments for assessment year 2009 11 has disclosed amount of Rs. 40,00,00,000/ with regard to bogus expenditure in connection with Barmer project of the assessee in Rajasthan rom the Google Earth images, it was observed that Reservoir site was adjacent to the project site, whereas in the earlier part of the submission by the assessee it was that reservoir was 185 km away from the site. In view of conclusions the Ld Assessing Officer held that gate expenditure of ₹128, 91, 84, 138/-claimed incurred by SHEL up to 31/03/2011 was fictitious because no against the payments made by the assessee to , therefore payments were not considered for the business and disallowable. The amount of sum M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 10 Barmer site, not aware of exact location of not aware of distance between the The original contract which was awarded to SEW ction Ltd was for Earth work, excavation and disposal of Earthfor RAW water reservoir for the project was only for excavation and disposal of earth for raw water reservoir and this variance did not find any mention in the deal of in assessments for assessment year 2009-10 11 has disclosed amount of Rs. 40,00,00,000/- with regard to bogus expenditure in connection with Barmer project of the assessee in Rajasthan as observed that Reservoir site was adjacent to the project site, whereas in the earlier part of the submission by the assessee it was 185 km away from the site. In view of conclusions the Ld Assessing Officer held that ed to have been incurred by SHEL up to 31/03/2011 was fictitious because no ts made by the assessee to were not considered for the business and sum capitalised of ₹ 88, 44, 00, 000/-up to 31/03/2009 in connection with excavation and disposal of Earth for water reservoir was accordingly reduced from the capital work in progress and disallowed for capitalisat for the year under consideration. 7.3 On further appeal, the Ld. CIT(A) following the finding of his predecessor, while adjudicating appeals for assessment year 2010 11 and 2011-12, rejected the finding of the Assessing Officer for disallowance of capitalisation of expenses of relation to SHEL.The Ld. CIT(A) Assessing Officer of non any credible evidences “5.1.1 On perusal of appea 2011-12, I find that the same issue came up for adjudication before my id. Predecessor and was duly allowed vide orders no.CIT(A)-36/AP.462/14 dated 10.03.2015. 2010-11 is as 6.7 I have examined the facts of the case, statement of witness and other facts marshalled in the assessment order as wei as the submission of appellant before AO (as reproduced in assessment order) and aiso that mage during appellate proceedings. It is neticed from para 3 cf the assessment order that the AC b inflation of nveices by said contractor Sunit High Engineers Ltd. (SHES) on the basis of statement of director of M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 up to 31/03/2009 in connection with excavation and disposal of Earth for water reservoir was accordingly reduced from the capital work in progress and disallowed for capitalisat for the year under consideration. On further appeal, the Ld. CIT(A) following the finding of his while adjudicating appeals for assessment year 2010 12, rejected the finding of the Assessing Officer for of capitalisation of expenses of ₹ 88, 44, 00, 000/ The Ld. CIT(A) rejected the contention of the Assessing Officer of non-genuineness of the expenses in absence of any credible evidences, observing as under: 5.1.1 On perusal of appeal orders for A.Ys.2010 12, I find that the same issue came up for adjudication before my id. Predecessor and was duly allowed vide orders 36/AP.462/14-15 and CIT(A)-37/AP. 463/14 dated 10.03.2015. The relevant portion of the order 11 is as follows: 6.7 I have examined the facts of the case, statement of witness and other facts marshalled in the assessment order as wei as the submission of appellant before AO (as reproduced in assessment order) and aiso that mage during appellate proceedings. It is neticed from para 3 cf the assessment order that the AC b-gan with allegation of inflation of nveices by said contractor Sunit High Engineers Ltd. (SHES) on the basis of statement of director of M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 11 up to 31/03/2009 in connection with excavation and disposal of Earth for water reservoir was accordingly reduced from the capital work in progress and disallowed for capitalisation On further appeal, the Ld. CIT(A) following the finding of his while adjudicating appeals for assessment year 2010- 12, rejected the finding of the Assessing Officer for 88, 44, 00, 000/-in rejected the contention of the genuineness of the expenses in absence of l orders for A.Ys.2010-11 and 12, I find that the same issue came up for adjudication before my id. Predecessor and was duly allowed vide orders 37/AP. 463/14-15 The relevant portion of the order for AY. 6.7 I have examined the facts of the case, statement of witness and other facts marshalled in the assessment order as wei as the submission of appellant before AO (as reproduced in assessment order) and aiso that mage during appellate proceedings. It is neticed from para 3 cf the gan with allegation of inflation of nveices by said contractor Sunit High Tech Engineers Ltd. (SHES) on the basis of statement of director of one of the sub contractor and then concluded that no work has been executed by the said contractor at Barmer the appellant against invoices amounting to 128.91 Crores without adducing any further evidence. The relev statement of Shri Kailash Sharma, Managing Director of Four Pillars Communications Pt Limited, the sub recorded on 22.12.2009 during the course of search on SHEL has been reproduced in para 3.1 of the assessment order. In response to Q 18 and 19, the deponent had stated that though they had received payment from SHEL in respect of excavation work at Barmer, neither them nor their further sub contractors had done any such excavation work. Further the deponent admitted that p sub-contractor without doing any work with intention to get cash in return of payment made. However, in the entire statement, no reference of appellant is found to indicate that the bogus payments to said sub instance of appellant or appeliant was dealing with the sub contractor. 6.8 The statement dated 21.03.2013 of Shri Redheyshyam Tiwari, senior executive of SHEL, recorded by AC u/s 131 of the Act spells out that the work has been carried out by SHEL in respect of earth work excavation and disposai of Raw Water Reservoir for the thermal power plant at Bhadresh, Barmer He admitted that during the search action on SHEL some of their sup therefore appropriate disc M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 one of the sub-contractors of SHES during search action on the contractor and then concluded that no work has been executed by the said contractor at Barmer Power Plant Site of the appellant against invoices amounting to 128.91 Crores without adducing any further evidence. The relevant extract of statement of Shri Kailash Sharma, Managing Director of Four Pillars Communications Pt Limited, the sub-contractor of SHEL recorded on 22.12.2009 during the course of search on SHEL has been reproduced in para 3.1 of the assessment order. In response to Q 18 and 19, the deponent had stated that though they had received payment from SHEL in respect of excavation work at Barmer, neither them nor their further sub contractors had done any such excavation work. Further the deponent admitted that payment was made by SHEL to the contractor without doing any work with intention to get cash in return of payment made. However, in the entire statement, no reference of appellant is found to indicate that the bogus payments to said sub-contractor was m instance of appellant or appeliant was dealing with the sub The statement dated 21.03.2013 of Shri Redheyshyam Tiwari, senior executive of SHEL, recorded by AC u/s 131 of the Act spells out that the work has been carried out by SHEL in respect of earth work excavation and disposai of Raw Water Reservoir for the thermal power plant at Bhadresh, Barmer He admitted that during the search action on SHEL some of their sup-contractors were found to be non therefore appropriate disclosure in this regard has been made M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 12 of SHES during search action on the contractor and then concluded that no work has been Power Plant Site of the appellant against invoices amounting to 128.91 Crores ant extract of statement of Shri Kailash Sharma, Managing Director of Four contractor of SHEL recorded on 22.12.2009 during the course of search on SHEL has been reproduced in para 3.1 of the assessment order. In response to Q 18 and 19, the deponent had stated that though they had received payment from SHEL in respect of excavation work at Barmer, neither them nor their further sub- contractors had done any such excavation work. Further the ayment was made by SHEL to the contractor without doing any work with intention to get cash in return of payment made. However, in the entire statement, no reference of appellant is found to indicate that contractor was made at instance of appellant or appeliant was dealing with the sub- The statement dated 21.03.2013 of Shri Redheyshyam Tiwari, senior executive of SHEL, recorded by AC u/s 131 of the Act spells out that the work has been carried out by SHEL in respect of earth work excavation and disposai of Raw Water Reservoir for the thermal power plant at Bhadresh, Barmer He admitted that during the search action on SHEL contractors were found to be non-genuine, losure in this regard has been made in the hands of SHEL and taxes have been paid. But he also submitted that excavation work at power plant site of appellant for raw water reservoir was indeed done by SHEl by deploying its own man and machinery and other subcontractors and the invoices had been raised as per work done under terms of contract. During cross examination by appellant, he admitted the contract was performed by SHEL and appellant had nothing to do with bogus sub SHEL. The AQ has d solely on the ground that he did not nave knowledge about exact site location of the execution of contract, despite him stating that he never visited the site and the distance between plant and reservoir be known to th persons. i find that the testimony of Mr Tiwari is important and does not deserve such summary dismissal purely on the ground that he was examined on oath by AC as witness of revenue to cull cut the truth of transaction against deman made by appellant during assessment proceecings for cross examination of the person who had admitted bogus nature of transaction between appellant and SHEL as alleged. in the entire statement of Shr Tiwari, there is no admission in this regard On the con contract work was executed by SHEL be emploving its own resources as well as other sub He also states that SHEL had undertaken excavation of hal of he reservoir by excavation, transporting quantity of 38 Lakh cubic meter for all kinds of soils and rocks for total RA bills of 128.91 Crores till 31.3.2011 before M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 in the hands of SHEL and taxes have been paid. But he also submitted that excavation work at power plant site of appellant for raw water reservoir was indeed done by SHEl by deploying its own man and machinery and other subcontractors and the invoices had been raised as per work done under terms of contract. During cross examination by appellant, he admitted the contract was performed by SHEL and appellant had nothing to do with bogus sub-contractors of SHEL. The AQ has disregarded the testimony of Mr Tiwari solely on the ground that he did not nave knowledge about exact site location of the execution of contract, despite him stating that he never visited the site and the distance between plant and reservoir be known to the technical/ execution persons. i find that the testimony of Mr Tiwari is important and does not deserve such summary dismissal purely on the ground that he was examined on oath by AC as witness of revenue to cull cut the truth of transaction against deman made by appellant during assessment proceecings for cross examination of the person who had admitted bogus nature of transaction between appellant and SHEL as alleged. in the entire statement of Shr Tiwari, there is no admission in this regard On the contrary, he categorically states that the contract work was executed by SHEL be emploving its own resources as well as other sub-contracions who were boous. He also states that SHEL had undertaken excavation of hal of he reservoir by excavation, transporting and dumping approx. quantity of 38 Lakh cubic meter for all kinds of soils and rocks for total RA bills of 128.91 Crores till 31.3.2011 before M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 13 in the hands of SHEL and taxes have been paid. But he also submitted that excavation work at power plant site of appellant for raw water reservoir was indeed done by SHEl by deploying its own man and machinery and other subcontractors and the invoices had been raised as per work done under terms of contract. During cross examination by appellant, he admitted the contract was performed by SHEL contractors of isregarded the testimony of Mr Tiwari solely on the ground that he did not nave knowledge about exact site location of the execution of contract, despite him stating that he never visited the site and the distance between e technical/ execution persons. i find that the testimony of Mr Tiwari is important and does not deserve such summary dismissal purely on the ground that he was examined on oath by AC as witness of revenue to cull cut the truth of transaction against demand made by appellant during assessment proceecings for cross examination of the person who had admitted bogus nature of transaction between appellant and SHEL as alleged. in the entire statement of Shr Tiwari, there is no admission in this trary, he categorically states that the contract work was executed by SHEL be emploving its own contracions who were boous. He also states that SHEL had undertaken excavation of hal of and dumping approx. quantity of 38 Lakh cubic meter for all kinds of soils and rocks for total RA bills of 128.91 Crores till 31.3.2011 before termination of contract, which matches with claim of adoellant. 6.9 As seen as coming out from the statements of sub contractor and Senior Executive of SHEL, the appellant was not a party to the boous transaction between SHEL and some of its sub-contractors for which SHEL had alreacy admitted a tax liability. There is noticed by AO in the original contract document and assignment document regarding contract for Raw Water Reservoir and Project in so ter as both documents talk about scope of work as Earthwork, Excavation and Disposal of Carth to the extent or so Lakh cum for a total contract orice of 216 Crores. The core issue is whether any actual work was executee on huge raw water reservoir of dimension: 1300m X 800m. X Sm as claimed by appelant a its Barmer Power Plant. There is no d for this reservoir under an International Compel tie Bidding Process supervised by independent agencies arc then the contract was assigned to SHEL on same terms. The genuineness of awerd of contract, rates and not been disputed. The AD as also at re'erred to any docurent impounded during the survey action which is fabricated or bogus or whose genuineness is in doubt. The sole ground on which AO has based his conclusion regarding no work being executed is his finding that the alleged contract work on reservoir has been claimed to be executed at a site 185 Kms away from power plant whereas all the evidences namely plant layout design, Google Earth Images etc indicate M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 termination of contract, which matches with claim of 6.9 As seen as coming out from the statements of sub contractor and Senior Executive of SHEL, the appellant was not a party to the boous transaction between SHEL and some contractors for which SHEL had alreacy admitted a tax liability. There is no substance in miner discrepancies noticed by AO in the original contract document and assignment document regarding contract for Raw Water Reservoir and Project in so ter as both documents talk about scope of work as Earthwork, Excavation and Disposal of Carth to the extent or so Lakh cum for a total contract orice of 216 Crores. The core issue is whether any actual work was executee on huge raw water reservoir of dimension: 1300m X 800m. X Sm as claimed by appelant a its Barmer Power Plant. There is no dispute thet the concract was awarded to Ms SEW for this reservoir under an International Compel tie Bidding Process supervised by independent agencies arc then the contract was assigned to SHEL on same terms. The genuineness of awerd of contract, rates and the process has not been disputed. The AD as also at re'erred to any docurent during the survey action which is proved to be fabricated or bogus or whose genuineness is in doubt. The sole ground on which AO has based his conclusion regarding work being executed is his finding that the alleged contract work on reservoir has been claimed to be executed at a site 185 Kms away from power plant whereas all the evidences namely plant layout design, Google Earth Images etc indicate M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 14 termination of contract, which matches with claim of 6.9 As seen as coming out from the statements of sub- contractor and Senior Executive of SHEL, the appellant was not a party to the boous transaction between SHEL and some contractors for which SHEL had alreacy admitted a no substance in miner discrepancies noticed by AO in the original contract document and assignment document regarding contract for Raw Water Reservoir and Project in so ter as both documents talk about scope of work as Earthwork, Excavation and Disposal of Carth to the extent or so Lakh cum for a total contract orice of 216 Crores. The core issue is whether any actual work was executee on huge raw water reservoir of dimension: 1300m X 800m. X Sm as claimed by appelant a its Barmer Power Plant. ispute thet the concract was awarded to Ms SEW for this reservoir under an International Compel tie Bidding Process supervised by independent agencies arc then the contract was assigned to SHEL on same terms. The the process has not been disputed. The AD as also at re'erred to any docurent proved to be fabricated or bogus or whose genuineness is in doubt. The sole ground on which AO has based his conclusion regarding work being executed is his finding that the alleged contract work on reservoir has been claimed to be executed at a site 185 Kms away from power plant whereas all the evidences namely plant layout design, Google Earth Images etc indicate that reservoir sit of AO are found to be sort of distortion of facts and devoid of merit. I do not find any document, statement or submission which claims that the reservoir site was 185 Kms away from project site. The submissi assessment proceedings and reproduced in assessment order vide para 3.3 states as follows: "It is submitted that the thermal power project at Barmer is in desert area and one of the main inputs he water is drawn from Rajasthan C line. As there is no local water source and the Canal goes into periodical maintenance, it was imperative for the project to have a buffer reservoir which could store water to meet plant requirement during such un find attached a copy of plant layout and engineering drawing wherein the location and size of huge raw water reservoirs (1300 X 800 X 8 M) can be easily located. Therefore, contract was awarded to excavate approx 80 types of soil including grading, shorting, compaction of pits and approaches etc." The aforesaid statement does not claim any reservoir at 185 kms distance from project but merely speaks of a 185 kms long dedicated pipeline through which wa site from Rajasthan Canal. In the statement appellant talks of requirement of a buffer reservoir and submits a detailed plant layout and engineering drawing wherein the location and size of huge water reservoir can be located. The Goo images of reservoir also indicate the location of reservoir at the M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 that reservoir site is adiacent to project site. The observations of AO are found to be sort of distortion of facts and devoid of merit. I do not find any document, statement or submission which claims that the reservoir site was 185 Kms away from project site. The submission of appellant made during assessment proceedings and reproduced in assessment order vide para 3.3 states as follows: "It is submitted that the thermal power project at Barmer is in desert area and one of the main inputs he water is drawn from Rajasthan Canal through a 185 kms long dedicated pipe line. As there is no local water source and the Canal goes into periodical maintenance, it was imperative for the project to have a buffer reservoir which could store water to meet plant requirement during such unforeseen circumstances. Please find attached a copy of plant layout and engineering drawing wherein the location and size of huge raw water reservoirs (1300 X 800 X 8 M) can be easily located. Therefore, contract was awarded to excavate approx 80 Lakh Cubie Meters of all types of soil including grading, shorting, compaction of pits and approaches etc." The aforesaid statement does not claim any reservoir at 185 kms distance from project but merely speaks of a 185 kms long dedicated pipeline through which water is drawn to plant site from Rajasthan Canal. In the statement appellant talks of requirement of a buffer reservoir and submits a detailed plant layout and engineering drawing wherein the location and size of huge water reservoir can be located. The Goo images of reservoir also indicate the location of reservoir at the M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 15 e is adiacent to project site. The observations of AO are found to be sort of distortion of facts and devoid of merit. I do not find any document, statement or submission which claims that the reservoir site was 185 Kms away from on of appellant made during assessment proceedings and reproduced in assessment order "It is submitted that the thermal power project at Barmer is in desert area and one of the main inputs he water is drawn anal through a 185 kms long dedicated pipe line. As there is no local water source and the Canal goes into periodical maintenance, it was imperative for the project to have a buffer reservoir which could store water to meet plant foreseen circumstances. Please find attached a copy of plant layout and engineering drawing wherein the location and size of huge raw water reservoirs (1300 X 800 X 8 M) can be easily located. Therefore, contract e Meters of all types of soil including grading, shorting, compaction of pits The aforesaid statement does not claim any reservoir at 185 kms distance from project but merely speaks of a 185 kms ter is drawn to plant site from Rajasthan Canal. In the statement appellant talks of requirement of a buffer reservoir and submits a detailed plant layout and engineering drawing wherein the location and size of huge water reservoir can be located. The Google Farth images of reservoir also indicate the location of reservoir at the same place as per plant layout. Hence, the observation of AO regarding discrepancy in location of raw water reservoir and contract site is without any basis and cannot be consider a ground for rejecting claim of appellant. Besides this observation, AO has not referred to any report or finding which concludes non crecution of work for earthwork at water reservoir site. 6.10 in view of the above, it is held that AOs action of ho the contract work executed by ShEL in respect of earthwork excavation and disposal for Raw Water Reservoir at Bhadresh, Barmer Thermal Power Plant site of appeliant being non-genuine in absente of any evidence is not proper. The Ground of appeal is a As the facts leading to the AO's conclusion in the year under consideration are unchanged, following my id. Predecessor's decision, the disallowance of Rs. 88,44,00,000/ year under consideration is deleted and the ground raised by the appellant is allowed. 8. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. is claiming that work of excavation and disposal of construction of reservoir at Barme said party has executed /invoices of ₹128,91,84, However the Revenue is of the view that no work was carried out by the SHEL for excavatio M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 same place as per plant layout. Hence, the observation of AO regarding discrepancy in location of raw water reservoir and contract site is without any basis and cannot be consider a ground for rejecting claim of appellant. Besides this observation, AO has not referred to any report or finding which concludes non crecution of work for earthwork at water reservoir site. 6.10 in view of the above, it is held that AOs action of ho the contract work executed by ShEL in respect of earthwork excavation and disposal for Raw Water Reservoir at Bhadresh, Barmer Thermal Power Plant site of appeliant being genuine in absente of any evidence is not proper. The Ground of appeal is allowed." As the facts leading to the AO's conclusion in the year under consideration are unchanged, following my id. Predecessor's decision, the disallowance of Rs. 88,44,00,000/- year under consideration is deleted and the ground raised by e appellant is allowed.” We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. is claiming that work of excavation and disposal of construction of reservoir at Barmer plant was assigned to SHEL and executed the work assigned and raised bills 28,91,84,138/- up to the period of 31/03/2011. evenue is of the view that no work was carried out by the SHEL for excavation and disposal of the reservoir M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 16 same place as per plant layout. Hence, the observation of AO regarding discrepancy in location of raw water reservoir and contract site is without any basis and cannot be considered as a ground for rejecting claim of appellant. Besides this observation, AO has not referred to any report or finding which concludes non crecution of work for earthwork at water 6.10 in view of the above, it is held that AOs action of hoiding the contract work executed by ShEL in respect of earthwork excavation and disposal for Raw Water Reservoir at Bhadresh, Barmer Thermal Power Plant site of appeliant being genuine in absente of any evidence is not proper. The As the facts leading to the AO's conclusion in the year under consideration are unchanged, following my id. Predecessor's made for the year under consideration is deleted and the ground raised by We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The assessee is claiming that work of excavation and disposal of earthwork for r plant was assigned to SHEL and the work assigned and raised bills p to the period of 31/03/2011. evenue is of the view that no work was carried out by l of the reservoir. Therefore, the issue in dispute before us SHEL for excavation and disposal of Earth for Raw water reservoir site for the Barmer thermal plant of the Assessing Officer has mainly relied upon t statement of subcontractor of SHEL that no work was done by subcontractor company in relation to excavation work for Barmer project, secondly, acceptance of bogus expenses by SHEL in the assessment. 8.1 The Ld. CIT(A) however observed that (i) In Kailash Shrama , director of Four Pillars communication private limited relied upon by the Assessing Officer, there was no reference that bogus payments to made at the instance of the assessee or the assessee was dealing with the subcontractor. (ii) Sh Radheyshaym Tiwari , Vice President of SHEL stated that excavation work was indeed done by SHEL by deploying its own men and machinery and raised as per work done under the terms of contract (iii) During cross representative of the assessee, sh Tiwari admitted M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 before us is whether any actual work SHEL for excavation and disposal of Earth for Raw water reservoir site for the Barmer thermal plant of the assessee. We note that Assessing Officer has mainly relied upon two evidences. tatement of subcontractor of SHEL that no work was done by subcontractor company in relation to excavation work for Barmer , acceptance of bogus expenses by SHEL in the The Ld. CIT(A) however observed that In the entire statement of subcontractor sh Kailash Shrama , director of Four Pillars communication private limited relied upon by the Assessing Officer, there was no reference that bogus payments to said subcontractors was made at the instance of the assessee or the assessee was dealing with the subcontractor. Sh Radheyshaym Tiwari , Vice President of SHEL stated that excavation work was indeed done by SHEL by deploying its own men and machinery and other subcontractors and invoices had been raised as per work done under the terms of contract uring cross-examination by the authorised representative of the assessee, sh Tiwari admitted M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 17 actual work was done by SHEL for excavation and disposal of Earth for Raw water reservoir We note that The evidences.Firstly , tatement of subcontractor of SHEL that no work was done by subcontractor company in relation to excavation work for Barmer , acceptance of bogus expenses by SHEL in their the entire statement of subcontractor sh Kailash Shrama , director of Four Pillars communication private limited relied upon by the Assessing Officer, there was no reference that subcontractors was made at the instance of the assessee or the assessee was dealing with the subcontractor. Sh Radheyshaym Tiwari , Vice President of SHEL stated that excavation work was indeed done by SHEL by deploying its own men and machinery other subcontractors and invoices had been raised as per work done under the terms of examination by the authorised representative of the assessee, sh Tiwari admitted that contract was performed by SHEL and assessee had nothing to do subcontractor of SHEL. (iv) Relying on Assessing Officer did not have knowledge about exact site location of the statement that he never visi distance between the plant and the reservoir would be known to the technical persons justified. (v) There is no substance in minor discrepancy noticed by the contract document and the assignment document, insofar as both documents talk about scope of work as Earthwork excavation and disposal of earth to the extent of 80,00,000 m³ for total contract price of Rs. 216 Crores. (vi) The Assessing Officer has not referred to any document impounded during the the premises of the assessee, which proved to be fabricated or bogus or genuineness was in doubt. (vii) The observation of the Assessing Officer of submission of the assessee of distance of M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 that contract was performed by SHEL and assessee had nothing to do with the bogus subcontractor of SHEL. Relying on the testimony of Mr Tiwari by the Assessing Officer, solely on the ground that he did not have knowledge about exact site location of the execution of the contract statement that he never visited the site and the distance between the plant and the reservoir would be known to the technical persons justified. There is no substance in minor discrepancy noticed by the Assessing Officer contract document and the assignment cument, insofar as both documents talk about scope of work as Earthwork excavation and disposal of earth to the extent of 80,00,000 m³ for total contract price of Rs. 216 Crores. The Assessing Officer has not referred to any document impounded during the survey action at the premises of the assessee, which proved to be fabricated or bogus or genuineness was in doubt. The observation of the Assessing Officer of submission of the assessee of distance of M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 18 that contract was performed by SHEL and with the bogus the testimony of Mr Tiwari by the solely on the ground that he did not have knowledge about exact site location of the contract, ignoring his ted the site and the distance between the plant and the reservoir would be known to the technical persons, is not There is no substance in minor discrepancy Assessing Officer in the original contract document and the assignment cument, insofar as both documents talk about scope of work as Earthwork excavation and disposal of earth to the extent of 80,00,000 m³ for total contract price of Rs. 216 Crores. The Assessing Officer has not referred to any survey action at the premises of the assessee, which proved to be fabricated or bogus or genuineness was in doubt. The observation of the Assessing Officer of submission of the assessee of distance of reservoir a site submission was regarding distance of pipeline of 185 km from Canal to project site. 8.2 In view of the above observation, the Ld. CIT(A) deleted the disallowance of capitalisation of expenses by the assessee with the above observation of the Ld. CIT(A) on the issues discussed by him. We find that survey proceedings have b the premises/site and other offices of the assessee alongwith search proceedings at the JSW group, but no adverse o survey teams on the earth work activity or construction work of the Plant has been brought on record either by the Assessing Officer or by the department representative during appellate before us, which could suggest that no wo The assessee during assessment proceedings pro and google images to show that work of earth excavation was duly done and those evidences have not been rejected by the assessing Officer. Further, in behalf of SHIL) when being asked by the of the assessee company, he clearly stated that statements of subcontractors had nothing to do with the assessee company. We also note that expenses claimed by SH subcontractors, has already been offered for tax by the SHIL. In view of above, in our opinion, the finding of the Ld. CIT(A) on the M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 reservoir at a distance of 185 km from the project site is distortion of the facts and actual submission was regarding distance of pipeline of 185 km from Canal to project site. In view of the above observation, the Ld. CIT(A) deleted the disallowance of capitalisation of expenses by the assessee with the above observation of the Ld. CIT(A) on the issues discussed him. We find that survey proceedings have been carried out at site and other offices of the assessee alongwith search proceedings at the JSW group, but no adverse observation by the on the earth work activity or construction work of the Plant has been brought on record either by the Assessing Officer or by the department representative during appellate , which could suggest that no work was done by the SHIL. The assessee during assessment proceedings produced photogrpahs and google images to show that work of earth excavation was duly done and those evidences have not been rejected by the assessing cross examination of Sh Tiwari behalf of SHIL) when being asked by the authorized of the assessee company, he clearly stated that statements of subcontractors had nothing to do with the assessee company. We also note that expenses claimed by SHIL in respect of the subcontractors, has already been offered for tax by the SHIL. In view of above, in our opinion, the finding of the Ld. CIT(A) on the M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 19 distance of 185 km from the project is distortion of the facts and actual submission was regarding distance of pipeline of 185 km from Canal to project site. In view of the above observation, the Ld. CIT(A) deleted the disallowance of capitalisation of expenses by the assessee. We agree with the above observation of the Ld. CIT(A) on the issues discussed een carried out at site and other offices of the assessee alongwith search servation by the on the earth work activity or construction work of the Plant has been brought on record either by the Assessing Officer or by the department representative during appellate proceedings rk was done by the SHIL. duced photogrpahs and google images to show that work of earth excavation was duly done and those evidences have not been rejected by the assessing on of Sh Tiwari, (Person on authorized representative of the assessee company, he clearly stated that statements of subcontractors had nothing to do with the assessee company. We IL in respect of the subcontractors, has already been offered for tax by the SHIL. In view of above, in our opinion, the finding of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any infirmity in the same. Accordingly we uphold the appeal of the revenue is accordingly dismissed. 9. The ground No. deletion of disallowance of capitalization of work M/s Sancia Global Infraprojects Ltd 10. Brief facts qua the issue in dispute are that the assessee awarded a contract amounting to work and cranable approach road’ at Barmer site of thermal plant to M/s Gremach Infrastructure Equipm &PL) , now known as SGIL. Income-tax department observed incurring of contract at Rs.39,25,54,897/ certain discrepancies in documentation of this firstly, contract drafting completion of contracted assessee company, secondly, no entry of inward of material in inward Register, thirdly ,fabricated measurement sheets, fourthly, irregularities in award of contract. 10.1 During the course of assessment proceeding, the Assessing Officer made two observations. was mainly engaged in the providing of rental of M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 issue in dispute is well reasoned and we do not find any infirmity in the same. Accordingly we uphold the same. The ground No. one of the appeal of the revenue is accordingly dismissed. The ground No. 2 of the appeal of the revenue relates to deletion of disallowance of ₹39,26,00,000/- on account of capitalization of work-in-progress for expenses in re M/s Sancia Global Infraprojects Ltd. (SGIL). Brief facts qua the issue in dispute are that the assessee ded a contract amounting to ₹39,67,25,187/ work and cranable approach road’ at Barmer site of thermal plant to M/s Gremach Infrastructure Equipments & Projects Ltd. ( &PL) , now known as SGIL. During search/survey proceedings , the tax department observed incurring of expenditure on said 39,25,54,897/-. The search/survey team found in discrepancies in documentation of this contract, contract drafting was mere a paper work and clause of completion of contracted were ante-dated on advice of official of assessee company, secondly, no entry of inward of material in thirdly ,fabricated measurement sheets, fourthly, irregularities in award of contract. During the course of assessment proceeding, the Assessing observations. Firstly, that the contractor company was mainly engaged in the providing of rental of M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 20 issue in dispute is well reasoned and we do not find any infirmity in the same. The ground No. one of of the appeal of the revenue relates to on account of progress for expenses in relation of bill of Brief facts qua the issue in dispute are that the assessee 39,67,25,187/- of ‘Structural work and cranable approach road’ at Barmer site of thermal plant ents & Projects Ltd. (GIE During search/survey proceedings , the nditure on said The search/survey team found contract, interalia, paper work and clause of on advice of official of assessee company, secondly, no entry of inward of material in thirdly ,fabricated measurement sheets, fourthly, During the course of assessment proceeding, the Assessing hat the contractor company was mainly engaged in the providing of rental of construction/earthmoving infrastructure activity mainly catering to public sector undertakings, whereas the nature of work contracted is for structural work and road construction which is not the business activity of said contractor. contractor i.e. the DCIT Central Circle, Kolkatta SGIL admitted the fact of providing accommodation entry to M/s Rajwest power private limited ( 2008-09 ( i.e. the assessment year sales/contract of ₹36,60,40, copy of submissions made by the SGIL by its letter dated 31/07/2012 before DCIT, Kolkata to the assessee. 10.2 In view of above observations during the course of as well as during the course of the assessment proceedings, the Assessing Officer show cause of ₹36,60,40,395/- claimed by the assessee might not be disallowed. 10.3 The assessee denied t that the contractor was engaged only in rental of machinery/equipment the said contractor for the year under consideration and stated that the contractor was not only engage and infrastructure but also in the trading of commodities. It was also submitted that all the documents related to project, Ledger M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 construction/earthmoving machineries to companies engaged in the infrastructure activity mainly catering to public sector undertakings, whereas the nature of work contracted is for structural work and road construction which is not the business activity of said contractor. Secondly, the Assessing Officer of the e DCIT Central Circle, Kolkatta, intimated that SGIL admitted the fact of providing accommodation entry to M/s Rajwest power private limited (i.e. the assessee) in the financial year 09 ( i.e. the assessment year under consideration) being 36,60,40,395/-. The Assessing Officer provided copy of submissions made by the SGIL by its letter dated 31/07/2012 before DCIT, Kolkata to the assessee. of above observations during the course of as well as during the course of the assessment proceedings, the Assessing Officer show caused to the assessee as why the expenses claimed by the assessee on work in progress might not be disallowed. The assessee denied the allegation of the Assessing Officer that the contractor was engaged only in rental of machinery/equipment. The assessee referred to annual report of the said contractor for the year under consideration and stated that was not only engaged in the business of construction and infrastructure but also in the trading of commodities. It was also submitted that all the documents related to project, Ledger M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 21 to companies engaged in the infrastructure activity mainly catering to public sector undertakings, whereas the nature of work contracted is for structural work and road construction which is not the business ssing Officer of the , intimated that SGIL admitted the fact of providing accommodation entry to M/s i.e. the assessee) in the financial year under consideration) being . The Assessing Officer provided copy of submissions made by the SGIL by its letter dated of above observations during the course of the search as well as during the course of the assessment proceedings, the s why the expenses work in progress he allegation of the Assessing Officer that the contractor was engaged only in rental of . The assessee referred to annual report of the said contractor for the year under consideration and stated that in the business of construction and infrastructure but also in the trading of commodities. It was also submitted that all the documents related to project, Ledger accounts, running account bills, measurement sheets et were examined and impou during the course of survey/search proceeding. Regarding the of SGIL, the assessee submitted that according to the letter admission was without prejudice to their right buying piece of the mind circumstances said letter was submitted by the contractor . The assessee sought of copy of of accommodation entry by SGIL along with cross the contractor SGIL. 11. The Assessing Officer issued however none attended on the stipulated date and written submission was filed subsequently wherein the SGIL submitted that books of accounts were destroyed in fire occurred while shifting of corporate office from Mumbai to Kolkata and due to financial difficulties and being operated through one staff registered office, it was not possible to proceedings. The relevant part of the providing accommodation entry to the Assessing officer on page 27 of the assessment order , is extracted as under: “Further, without prejudice to our right and contentions and buy peace of mind we would like to clarify that dur 2008-09 we have provided the entry of sales amounted to Rs. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 accounts, running account bills, measurement sheets et were examined and impounded by the Income- during the course of survey/search proceeding. Regarding the of SGIL, the assessee submitted that according to the letter admission was without prejudice to their right and piece of the mind , therefore it is not clear under what circumstances said letter was submitted by the contractor . The copy of entire documents related to acceptance of accommodation entry by SGIL along with cross the contractor SGIL. The Assessing Officer issued summon to the said contractor, however none attended on the stipulated date and written submission was filed subsequently wherein the SGIL submitted that books of accounts were destroyed in fire occurred while orate office from Mumbai to Kolkata and due to financial difficulties and being operated through one staff it was not possible to attend proceedings. The relevant part of the letter of the SGIL providing accommodation entry to the assessee, reproduced by the Assessing officer on page 27 of the assessment order , is extracted Further, without prejudice to our right and contentions and buy peace of mind we would like to clarify that dur 09 we have provided the entry of sales amounted to Rs. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 22 accounts, running account bills, measurement sheets etc in original -tax authorities during the course of survey/search proceeding. Regarding the letter of SGIL, the assessee submitted that according to the letter and contention of therefore it is not clear under what circumstances said letter was submitted by the contractor . The entire documents related to acceptance of accommodation entry by SGIL along with cross-examination of to the said contractor, however none attended on the stipulated date and written submission was filed subsequently wherein the SGIL submitted that books of accounts were destroyed in fire occurred while orate office from Mumbai to Kolkata and due to financial difficulties and being operated through one staff at attend the summon letter of the SGIL admitting of reproduced by the Assessing officer on page 27 of the assessment order , is extracted Further, without prejudice to our right and contentions and buy peace of mind we would like to clarify that during the FY 09 we have provided the entry of sales amounted to Rs. 152,47,01,711/ 0.25% and taken the eniry of purchases of Rs.120,41,23,721/ (As per Exhibit have earned the net commission of Rs.20.05.569/ and the same we 11.1 In view of above, was done by the SGIL in re assessee, thus expense claimed not being for business same can’t be allowed for capitalization. 12. On further appeal, the Ld. CIT(A) after considering submission of the assessee deleted the disallowance o “5.2.3 I have carefully considered the facts and I find force in the contentions of the appellant. The AO has based his conclusion on the observation that the line of business of SPIL was not that of the nature of work it was stated to h engaged for by the appellant. In this respect, it is noted that the appellant's assertion that structural work and construction of a craneable road had been carried out on the site was not controverted by the AO. In response to the observation of AO that the sales break Ltd. did not reflect the name of the appellant, the appellant has furnished copy of the Final Accounts of M/s Sancia Global Infraprojects Ltd. (then known as M/s Gremach Infrastructure Equipments & Projects Ltd.) for the year ended March 2009 and drawn attention to the fact that the said company declared M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 152,47,01,711/- (As per Exhibit-i) in lieu of commission of 0.25% and taken the eniry of purchases of Rs.120,41,23,721/ (As per Exhibit-1) on commission of 0.15% and this way we arned the net commission of 0.10% which is amount Rs.20.05.569/-11524701711 * 0.25% -1204123721 * 0.15%) and the same we are disclosing for the AY 2009-10 above, the Assessing officer concluded that no work was done by the SGIL in respect of the contract awarded by the assessee, thus expense claimed not being for business same can’t be allowed for capitalization. On further appeal, the Ld. CIT(A) after considering submission of the assessee deleted the disallowance observing as under: 5.2.3 I have carefully considered the facts and I find force in the contentions of the appellant. The AO has based his conclusion on the observation that the line of business of SPIL was not that of the nature of work it was stated to h engaged for by the appellant. In this respect, it is noted that the appellant's assertion that structural work and construction of a craneable road had been carried out on the site was not controverted by the AO. In response to the observation of AO that the sales break-up of M/s Sancia Global Infraprojects Ltd. did not reflect the name of the appellant, the appellant has furnished copy of the Final Accounts of M/s Sancia Global Infraprojects Ltd. (then known as M/s Gremach Infrastructure ments & Projects Ltd.) for the year ended March 2009 and drawn attention to the fact that the said company declared M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 23 i) in lieu of commission of 0.25% and taken the eniry of purchases of Rs.120,41,23,721/- 1) on commission of 0.15% and this way we 0.10% which is amounted to 1204123721 * 0.15%) 10.” the Assessing officer concluded that no work spect of the contract awarded by the assessee, thus expense claimed not being for business expenditure, On further appeal, the Ld. CIT(A) after considering submission bserving as under: 5.2.3 I have carefully considered the facts and I find force in the contentions of the appellant. The AO has based his conclusion on the observation that the line of business of SPIL was not that of the nature of work it was stated to have been engaged for by the appellant. In this respect, it is noted that the appellant's assertion that structural work and construction of a craneable road had been carried out on the site was not controverted by the AO. In response to the observation of the up of M/s Sancia Global Infraprojects Ltd. did not reflect the name of the appellant, the appellant has furnished copy of the Final Accounts of M/s Sancia Global Infraprojects Ltd. (then known as M/s Gremach Infrastructure ments & Projects Ltd.) for the year ended March 2009 and drawn attention to the fact that the said company declared 'income from operations' to the tune of Rs.2,06,80,30,318/ also debited sub Rs.1,27,63,47,970/ the Accounts, the said company has shown earth equipment of Rs.1,05,50,65,242/ Equipments of Rs.41,81,04,048/ back drop, the observations of the AO are not mate has observed that some of the measurement sheets did not bear the dated signatures of one Mr. Lalit. In this regard the appellant produced copies of the said measurement sheets forming part of Annexure 1 and on perusal of the same it is seen that invoice maintained by the appellant company in respect of the work done by M/s Sancia Global Infraprojects Ltd. The invoices and measurement sheets contain detailed descriptions of the work items, quantity, rate, amoun which the invoice is raised e.g. switch yard', 'boundary wall for material storage yard for L&T', 'station building staircase of the invoices and those sheets that bear the so full narrative of the work for which the invoice is raised and corroborate each other. In the light of these facts, the mere absence of dates on a few meas mind, establish that the expenses incurred is bogus, especially when the fact that the road was duly constructed is not controverted The AO has placed reliance on the fact that the 'inward register' did not show entries of ma M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 'income from operations' to the tune of Rs.2,06,80,30,318/ also debited sub-contract and hire charges of Rs.1,27,63,47,970/-. It is also pointed out that in Schedule 5 of the Accounts, the said company has shown earth equipment of Rs.1,05,50,65,242/- and Machinery and Equipments of Rs.41,81,04,048/- Thus it is argued that in this back drop, the observations of the AO are not mate has observed that some of the measurement sheets did not bear the dated signatures of one Mr. Lalit. In this regard the appellant produced copies of the said measurement sheets forming part of Annexure 1 and on perusal of the same it is hat invoice-wise account statements have been maintained by the appellant company in respect of the work done by M/s Sancia Global Infraprojects Ltd. The invoices and measurement sheets contain detailed descriptions of the work items, quantity, rate, amount and narrate the activities for which the invoice is raised e.g. 'structural boundary wall for switch yard', 'boundary wall for material storage yard for L&T', 'station building staircase - temporary - Unit I' etc. A test check of the invoices and measurement sheets showed that even those sheets that bear the so-called dateless signatures contain full narrative of the work for which the invoice is raised and corroborate each other. In the light of these facts, the mere absence of dates on a few measurement sheets does not, to my mind, establish that the expenses incurred is bogus, especially when the fact that the road was duly constructed is not controverted The AO has placed reliance on the fact that the 'inward register' did not show entries of materials and that Mr. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 24 'income from operations' to the tune of Rs.2,06,80,30,318/- and contract and hire charges of o pointed out that in Schedule 5 of the Accounts, the said company has shown earth \ moving and Machinery and Thus it is argued that in this back drop, the observations of the AO are not material. The AC has observed that some of the measurement sheets did not bear the dated signatures of one Mr. Lalit. In this regard the appellant produced copies of the said measurement sheets forming part of Annexure 1 and on perusal of the same it is wise account statements have been maintained by the appellant company in respect of the work done by M/s Sancia Global Infraprojects Ltd. The invoices and measurement sheets contain detailed descriptions of the work t and narrate the activities for 'structural boundary wall for switch yard', 'boundary wall for material storage yard for L&T', Unit I' etc. A test check measurement sheets showed that even called dateless signatures contain full narrative of the work for which the invoice is raised and corroborate each other. In the light of these facts, the mere urement sheets does not, to my mind, establish that the expenses incurred is bogus, especially when the fact that the road was duly constructed is not controverted The AO has placed reliance on the fact that the terials and that Mr. Pravin Bhansali GM Finance could not refute the absence of the name of M/s Gremach Infrasiructure Equipments & Projects Ltd. in this respect, from the stalement of Mr. Pravin Bhensali GM Finance, it is seen that in answer stated that contract for excavation & structural work & approach road was awarded to M/s Gremach Infrastructure Equipments & Projects Ltd.. From Qn. No.13 it is seen that he was asked to explain the absence of name of the vendor M/s Gremach Infras response, he has only said that the reply will be given after 7 days. The AO has also drawn support from the statement of Mr. Jayantilal Joshi, AGM (Civil), stating that he could not identify what work was don shows that Mr. Joshi has started working with the appellant company from August 2010 and in answer to Q.No.8 has stated that as on the date of the recording of the statement he is not aware of M/s Gremach Infrastructure Equ Projects Ltd. and that no work was being done by the said company for the appellant at that point of time. To my mind, neither of the statements contain any admission of the work stated to have been done by Gremach as bogus. The other observations of the AO include objection to the phraseology adopted by the AO regarding a time date of award of contract being given and the participation of other parties based on the same address as M/s Gremach Infrastructure Equipments for the contract taken as evidence to show the expenses claimed with regard to M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 Pravin Bhansali GM Finance could not refute the absence of the name of M/s Gremach Infrasiructure Equipments & Projects Ltd. in this respect, from the stalement of Mr. Pravin Bhensali GM Finance, it is seen that in answer to question 8 stated that contract for excavation & structural work & approach road was awarded to M/s Gremach Infrastructure Equipments & Projects Ltd.. From Qn. No.13 it is seen that he was asked to explain the absence of name of the vendor M/s Gremach Infrastructure Equipments & Projects Ltd. and in his response, he has only said that the reply will be given after 7 days. The AO has also drawn support from the statement of Jayantilal Joshi, AGM (Civil), stating that he could not identify what work was done. Perusal of the said statement shows that Mr. Joshi has started working with the appellant company from August 2010 and in answer to Q.No.8 has stated that as on the date of the recording of the statement he is not aware of M/s Gremach Infrastructure Equ Projects Ltd. and that no work was being done by the said company for the appellant at that point of time. To my mind, neither of the statements contain any admission of the work stated to have been done by Gremach as bogus. The other s of the AO include objection to the phraseology adopted by the AO regarding a time-line of 5-6 months from the date of award of contract being given and the participation of other parties based on the same address as M/s Gremach Infrastructure Equipments & Projects Ltd. In the tender process for the contract - both factors which by themselves cannot be taken as evidence to show the expenses claimed with regard to M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 25 Pravin Bhansali GM Finance could not refute the absence of the name of M/s Gremach Infrasiructure Equipments & Projects Ltd. in this respect, from the stalement of Mr. Pravin Bhensali question 8, he has stated that contract for excavation & structural work & approach road was awarded to M/s Gremach Infrastructure Equipments & Projects Ltd.. From Qn. No.13 it is seen that he was asked to explain the absence of name of the vendor M/s tructure Equipments & Projects Ltd. and in his response, he has only said that the reply will be given after 7 days. The AO has also drawn support from the statement of Jayantilal Joshi, AGM (Civil), stating that he could not e. Perusal of the said statement shows that Mr. Joshi has started working with the appellant company from August 2010 and in answer to Q.No.8 has stated that as on the date of the recording of the statement he is not aware of M/s Gremach Infrastructure Equipments & Projects Ltd. and that no work was being done by the said company for the appellant at that point of time. To my mind, neither of the statements contain any admission of the work stated to have been done by Gremach as bogus. The other s of the AO include objection to the phraseology 6 months from the date of award of contract being given and the participation of other parties based on the same address as M/s Gremach & Projects Ltd. In the tender process both factors which by themselves cannot be taken as evidence to show the expenses claimed with regard to the construction of craneable road as bogus. Thus after careful consideration I find that the conjecture and inference as against any fact on record. That the said road was constructed is not proved incorrect, No evidence of any funds having found their way back to the appellant company after payments were made to M/s Infraprojects Ltd. is placed on record. Other than the contents of letter dated 31.07.2012 from M/s Sancia Global Infraprojects Ltd. to the AO in its own case, which reiterates that the fixed assets owned are genuine and that depreciation is and that the offer of commission income on accommodation entries is being made to buy peace of mind. Perusal of the assessment order and appeal order in the case of M/s Sancia Global Infraprojects Ltd. (on which heavy reliance is placed for the appellant's assessment) shows that therein the A0 has indeed gone largely on the admission made by the said company vide letter dated 31.07.2012 which was after the initial assertion wherein sales and purchase for the year under consideration had been stat and supported by details collected from concerned parties. Aiso the issue decided by the CIT(A) related to the methodology and rate adopted by the AO for the computation of commission income.” 13. Before us the Ld. the fact of providing accommodation entry by SGIL has been confirmed by his own admission , which has not been retraced even at the appellate stage M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 the construction of craneable road as bogus. Thus after careful consideration I find that the AO has based his conclusion on conjecture and inference as against any fact on record. That the said road was constructed is not proved incorrect, No evidence of any funds having found their way back to the appellant company after payments were made to M/s Sancia Global Infraprojects Ltd. is placed on record. Other than the contents of letter dated 31.07.2012 from M/s Sancia Global Infraprojects Ltd. to the AO in its own case, which reiterates that the fixed assets owned are genuine and that depreciation is and that the offer of commission income on accommodation entries is being made to buy peace of mind. Perusal of the assessment order and appeal order in the case of M/s Sancia Global Infraprojects Ltd. (on which heavy reliance is placed for appellant's assessment) shows that therein the A0 has indeed gone largely on the admission made by the said company vide letter dated 31.07.2012 which was after the initial assertion wherein sales and purchase for the year under consideration had been stated to have been duly reconstructed and supported by details collected from concerned parties. Aiso the issue decided by the CIT(A) related to the methodology and rate adopted by the AO for the computation of commission Ld. Departmental Representative the fact of providing accommodation entry by SGIL has been by his own admission , which has not been retraced even at the appellate stage, therefore there was no dispute as to the fact M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 26 the construction of craneable road as bogus. Thus after careful AO has based his conclusion on conjecture and inference as against any fact on record. That the said road was constructed is not proved incorrect, No evidence of any funds having found their way back to the appellant Sancia Global Infraprojects Ltd. is placed on record. Other than the contents of letter dated 31.07.2012 from M/s Sancia Global Infraprojects Ltd. to the AO in its own case, which reiterates that the fixed assets owned are genuine and that depreciation is allowable and that the offer of commission income on accommodation entries is being made to buy peace of mind. Perusal of the assessment order and appeal order in the case of M/s Sancia Global Infraprojects Ltd. (on which heavy reliance is placed for appellant's assessment) shows that therein the A0 has indeed gone largely on the admission made by the said company vide letter dated 31.07.2012 which was after the initial assertion wherein sales and purchase for the year under ed to have been duly reconstructed and supported by details collected from concerned parties. Aiso the issue decided by the CIT(A) related to the methodology and rate adopted by the AO for the computation of commission mental Representative submitted that the fact of providing accommodation entry by SGIL has been by his own admission , which has not been retraced even , therefore there was no dispute as to the fact that SGIL had only provi contract work and no actual work was done by the Ld. CIT(A) is not justified in deleting the disallowance. 14. The learned counsel on the finding of the Ld. has not brought on record any evidence that such road or the infrastructure referred in the said contract was not found in existence during the course of search or survey action carried out at the premises of the a existence of road and infrastructure mention has not been disputed by the Assessing Officer, disallowing the corresponding expenses merely for the reason that the contractor admitted of being eng justified. He also supported the finding of the Ld. CIT(A) that no funds had been shown to have been ro and merely on the basis of admission of third capitalisation of expend 15. We have heard rival submission of the parties on the issue in dispute and perused the relevant disallowing, capitalisation of the expenses under dispute, the Assessing Officer has relied on the admission of the contractor in assessment proceeding. S crenable Road and other infrastructure which was contract has also not been denied by the Assessing Officer. In such M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 that SGIL had only provided accommodation entry of sales of contract work and no actual work was done by that the Ld. CIT(A) is not justified in deleting the disallowance. counsel of the assessee on the other hand relied on the finding of the Ld. CIT(A) and submitted that IT authorities has not brought on record any evidence that such road or the infrastructure referred in the said contract was not found in existence during the course of search or survey action carried out at the premises of the assessee company. He submitted that when existence of road and infrastructure mentioned under the contract has not been disputed by the Assessing Officer, disallowing the corresponding expenses merely for the reason that the contractor admitted of being engaged in providing accommodation entry, is not justified. He also supported the finding of the Ld. CIT(A) that no funds had been shown to have been routed back to the assessee and merely on the basis of admission of third capitalisation of expenditure cannot be disallowed. We have heard rival submission of the parties on the issue in dispute and perused the relevant material o disallowing, capitalisation of the expenses under dispute, the Assessing Officer has relied on the admission of the contractor in proceeding. Simultaneously, we find that existence of crenable Road and other infrastructure which was mentioned in the contract has also not been denied by the Assessing Officer. In such M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 27 ded accommodation entry of sales of that party, therefore the Ld. CIT(A) is not justified in deleting the disallowance. of the assessee on the other hand relied CIT(A) and submitted that IT authorities has not brought on record any evidence that such road or the infrastructure referred in the said contract was not found in existence during the course of search or survey action carried out at ssessee company. He submitted that when under the contract has not been disputed by the Assessing Officer, disallowing the corresponding expenses merely for the reason that the contractor aged in providing accommodation entry, is not justified. He also supported the finding of the Ld. CIT(A) that no ted back to the assessee and merely on the basis of admission of third-party, the We have heard rival submission of the parties on the issue in on record. For disallowing, capitalisation of the expenses under dispute, the Assessing Officer has relied on the admission of the contractor in imultaneously, we find that existence of mentioned in the contract has also not been denied by the Assessing Officer. In such circumstances, only inference could be might have carried out the contract work of construction of road and infrastructure through coordinate benches of the T purchases has held that where bills are obtained from one party and actual purchases gets benefit on account of cash dealings the factor of benefit in cash purchases of those assessee’s deserved to be suitably enhanced. it has been noted circumstances of the cases, estimated certain percentage of the bogus expenses. In the case of PCIT v. Purnima Sunil Agrawal [2017 the Hon’ble Gujarat High Court has held as under: “3. Facts on record would show that certain pur assessee would found to be bogus upon which, the Assessing Officer made addition on the entire amount. Commissioner of Income Tax (Appeals) restricted the addition by adopting the net profit rate of 2% on the basis that in similar trade in th worked out is 0.5% to 0.75%. The assessee has disclosed profit ratio of 1.10%. The Commissioner of Income Tax (Appeals) increased it to 2%. This view of the Commissioner of Income Tax (Appeals) was confirmed by the Tribunal. 4. It can thus be seen that this entire issue if appreciation of record and therefore factual. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 circumstances, only inference could be drawn is that the assessee might have carried out the contract work of construction of road through somebody else that too coordinate benches of the Tribunal in various cases of bogus purchases has held that where bills are obtained from one party purchases are made from another party, and assessee on account of cash dealings, therefore for or of benefit in cash purchases, gross profit or net profit rate s deserved to be suitably enhanced. it has been noted that considering the peculiar facts and circumstances of the cases, Hon’ble Courts and Tribunals have estimated certain percentage of the bogus expenses. In the case of PCIT v. Purnima Sunil Agrawal [2017-TIOL-2160 the Hon’ble Gujarat High Court has held as under: 3. Facts on record would show that certain purchases of the assessee would found to be bogus upon which, the Assessing Officer made addition on the entire amount. Commissioner of Income Tax (Appeals) restricted the addition by adopting the net profit rate of 2% on the basis that in similar trade in the region, the profit rate worked out is 0.5% to 0.75%. The assessee has disclosed profit ratio of 1.10%. The Commissioner of Income Tax (Appeals) increased it to 2%. This view of the Commissioner of Income Tax (Appeals) was confirmed by the Tribunal. can thus be seen that this entire issue if appreciation of record and therefore factual. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 28 is that the assessee might have carried out the contract work of construction of road that too in cash. The ribunal in various cases of bogus purchases has held that where bills are obtained from one party are made from another party, and assessee e for compensating , gross profit or net profit rate s deserved to be suitably enhanced. In this regard, considering the peculiar facts and ourts and Tribunals have estimated certain percentage of the bogus expenses. In the case of 2160-HC-AHDM.-IT], chases of the assessee would found to be bogus upon which, the Assessing Officer made addition on the entire amount. Commissioner of Income Tax (Appeals) restricted the addition by adopting the net profit rate e region, the profit rate worked out is 0.5% to 0.75%. The assessee has disclosed profit ratio of 1.10%. The Commissioner of Income Tax (Appeals) increased it to 2%. This view of the Commissioner of Income Tax (Appeals) was can thus be seen that this entire issue if appreciation of record 5. No question of law arises. Tax Appeals are therefore dismissed.” 15.1 Even, the Hon’ble Mumbai ITAT in the case of (ITA No. 3780/Mum/2017) certificate along with the quantitative details established the consumption of materials for the purpose of construction of building, have held uphold the addition to the extent of 2% of bogus purchases. 15.2 Respectfully, following the ratio of above cases, we feel that in view of the inference of expenses on contract incurred in cash, 2% of the value of the contract is treated as the benefit to the assessee in the expenses claimed accordingly two percent of t value of ₹36,29,00, ₹72,58,000/-. The ground accordingly partly allowed. 16. The ground of the appeal of the 2010-11 in ITA No.2983/Mum/2015 1. Whether in the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in allowing the sum of Rs.28,20,00,000/ account of work done by M/s.Sunil Hi Ltd (SHEL) during the year?. Tax effect M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 5. No question of law arises. Tax Appeals are therefore dismissed.” Even, the Hon’ble Mumbai ITAT in the case of o. 3780/Mum/2017) in view of the fact that the architect’s certificate along with the quantitative details established the consumption of materials for the purpose of construction of building, have held uphold the addition to the extent of 2% of bogus Respectfully, following the ratio of above cases, we feel that in view of the inference of expenses on contract incurred in cash, 2% of the value of the contract is treated as the benefit to the assessee in the expenses claimed accordingly two percent of t 36,29,00,000/-is disallowed which works out to . The ground No. 2 of the appeal of the revenue accordingly partly allowed. The ground of the appeal of the Revenue for assessment year 11 in ITA No.2983/Mum/2015 is reproduced as under: Whether in the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in allowing the sum of Rs.28,20,00,000/- in the capital Work in Progress on account of work done by M/s.Sunil Hi-Tech Engineers HEL) during the year?. Tax effect - Rs.9,58,51,800/- M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 29 5. No question of law arises. Tax Appeals are therefore dismissed.” Even, the Hon’ble Mumbai ITAT in the case of Triveni Homes in view of the fact that the architect’s certificate along with the quantitative details established the consumption of materials for the purpose of construction of building, have held uphold the addition to the extent of 2% of bogus Respectfully, following the ratio of above cases, we feel that in view of the inference of expenses on contract incurred in cash, 2% of the value of the contract is treated as the benefit to the assessee in the expenses claimed accordingly two percent of the contract is disallowed which works out to of the appeal of the revenue is for assessment year is reproduced as under: Whether in the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in allowing the sum in the capital Work in Progress on Tech Engineers 2. Whether in the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in directing the Assessing Officer to recomputed the income from other sources after excluding the sum of account of foreign exchange fluctuations gains?. Tax effect 17. The ground No. adjudicated while deciding the ground assessment year 2009 following our finding in assessment year 2009 one of the appeal is accordingly 18. The ground of appeal no.2 relates to the issue as to whether the ld. CIT(A) is justified in directing the Assessing O recompute the Income from Other Sources after excluding the sum of Rs.1,48,76,941/- gains. 19. Brief facts qua this issue are that the assessee com declared income of Rs. Other Sources in its return of income for the year under consideration. In the Profit & Loss A/c. for the year under consideration, the assessee has shown “O of Rs.1,65,48,062/- the same as Income from Other Sources. A of Rs.1,48,76,941/-, the assessee preferred appeal before the ld. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 Whether in the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in directing the Assessing Officer to recomputed the income from other sources after excluding the sum of Rs.1,48.76,941/ account of foreign exchange fluctuations gains?. Tax effect - Rs.50,56,670/- No. 1 raised in this appeal has already been adjudicated while deciding the ground No. one of the appeal for assessment year 2009-10 in ITA No. 580/Mum/2016, therefore following our finding in assessment year 2009-10, this ground of the appeal is accordingly dismissed. The ground of appeal no.2 relates to the issue as to whether the ld. CIT(A) is justified in directing the Assessing O recompute the Income from Other Sources after excluding the sum on account of foreign exchange fluctuation Brief facts qua this issue are that the assessee com declared income of Rs.16,71,121/- under the hea Other Sources in its return of income for the year under consideration. In the Profit & Loss A/c. for the year under consideration, the assessee has shown “Other Income” to the tune and accordingly, the Assessing Officer t the same as Income from Other Sources. Aggrieved by the addition , the assessee preferred appeal before the ld. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 30 Whether in the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in directing the Assessing Officer to recomputed the income from other Rs.1,48.76,941/- on account of foreign exchange fluctuations gains?. has already been one of the appeal for 580/Mum/2016, therefore 10, this ground No. The ground of appeal no.2 relates to the issue as to whether the ld. CIT(A) is justified in directing the Assessing Officer to recompute the Income from Other Sources after excluding the sum on account of foreign exchange fluctuation Brief facts qua this issue are that the assessee company had under the head Income from Other Sources in its return of income for the year under consideration. In the Profit & Loss A/c. for the year under ther Income” to the tune and accordingly, the Assessing Officer treated ggrieved by the addition , the assessee preferred appeal before the ld. CIT(A) who deleted the said addition and allowed this issue in favour of the assessee. Aggrieved by the decision of th the revenue is in appeal before us. 20. We have heard the rival contentions made before us and perused the material on record. The ld. Departmental Representative for the revenue relied on the assessment order. The ld. Counsel of the assessee treated the entire Other Income of Rs. interest income amounting to Rs. fluctuation gain of Rs. without appreciating the fact that the foreign exchange fluctuation gain of Rs. 1,48,76,941/ Income from Business and Profession. Thus, this has resulted into double taxation of the same amount of Rs. 1,48,76,941/ both the heads of income i.e. Income from Business and Profession as well as Income from Other Sources. The ld. Counsel of the assessee explained that since the commercial operations of the assessee company had commenced and the foreign exchange fluctuation gain is assessee, it has to be considered as business income and not income from other sources. 20.1 We agree with the contention of the ld. Counsel of the assessee and find that the assessee has Rs.16,71,121/- as Income from Other Sources while the foreign M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 CIT(A) who deleted the said addition and allowed this issue in favour of the assessee. Aggrieved by the decision of th the revenue is in appeal before us. We have heard the rival contentions made before us and perused the material on record. The ld. Departmental Representative for the revenue relied on the assessment order. The ld. Counsel of the assessee explained that the Assessing Officer has the entire Other Income of Rs.1,65,48,062/ nterest income amounting to Rs.16,71,121/- and foreign e fluctuation gain of Rs.1,48,76,941/- as Income from Other Sources ing the fact that the foreign exchange fluctuation gain of Rs. 1,48,76,941/- is already offered to tax under the head Income from Business and Profession. Thus, this has resulted into double taxation of the same amount of Rs. 1,48,76,941/ eads of income i.e. Income from Business and Profession as well as Income from Other Sources. The ld. Counsel of the assessee explained that since the commercial operations of the assessee company had commenced and the foreign exchange fluctuation gain is directly associated with the business of the assessee, it has to be considered as business income and not income from other sources. We agree with the contention of the ld. Counsel of the assessee and find that the assessee has offered interest income as Income from Other Sources while the foreign M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 31 CIT(A) who deleted the said addition and allowed this issue in favour of the assessee. Aggrieved by the decision of the ld. CIT(A), We have heard the rival contentions made before us and perused the material on record. The ld. Departmental Representative for the revenue relied on the assessment order. The explained that the Assessing Officer has 1,65,48,062/- comprising of and foreign exchange as Income from Other Sources ing the fact that the foreign exchange fluctuation is already offered to tax under the head Income from Business and Profession. Thus, this has resulted into double taxation of the same amount of Rs. 1,48,76,941/- under eads of income i.e. Income from Business and Profession as well as Income from Other Sources. The ld. Counsel of the assessee explained that since the commercial operations of the assessee company had commenced and the foreign exchange directly associated with the business of the assessee, it has to be considered as business income and not We agree with the contention of the ld. Counsel of the assessee offered interest income of as Income from Other Sources while the foreign exchange fluctuation gain of Rs. business income without excluding the same from the Profit as per P&L A/c. while computing Income from Business and Profession. On one hand, the Assessing Officer has accepted the business income as computed by the assessee in the return of income whereas on other hand, he has Rs.1,48,76,941/- under the head Income from Other Sources without any justificati commenced its business operations and the foreign exchange fluctuation gain is arising in the ordinary course of its business, it would be proper to treat the same as business income only and not income from other sources led to taxation of same income twice which is not permissible. Even the order of the Assessing Officer under which the said addition is made, is passed u/s. 143(3) r.w.s. 153C of the Act but there is no finding of any incriminating material in regard to the said issue of foreign exchange fluctuation gain. Accordingly, the Assessing Officer is directed to delete the addition of Rs. 1,48,76,941/ account of foreign exchange fluctuation gain and hence, this ground of appeal of revenue is dismissed. 21. The grounds raised by the revenue in assessment year 2011 12 in ITA No. 2984/Mum/2015 is reproduced as under: 1. Whether in the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in allo M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 xchange fluctuation gain of Rs.1,48,76,941/- business income without excluding the same from the Profit as per P&L A/c. while computing Income from Business and Profession. one hand, the Assessing Officer has accepted the business income as computed by the assessee in the return of income whereas on other hand, he has again made the addition of under the head Income from Other Sources without any justification. Since the assessee has already commenced its business operations and the foreign exchange fluctuation gain is arising in the ordinary course of its business, it would be proper to treat the same as business income only and not income from other sources. The action of the Assessing Officer has led to taxation of same income twice which is not permissible. Even the order of the Assessing Officer under which the said addition is is passed u/s. 143(3) r.w.s. 153C of the Act but there is no any incriminating material in regard to the said issue of foreign exchange fluctuation gain. Accordingly, the Assessing Officer is directed to delete the addition of Rs. 1,48,76,941/ account of foreign exchange fluctuation gain and hence, this ground f appeal of revenue is dismissed. The grounds raised by the revenue in assessment year 2011 12 in ITA No. 2984/Mum/2015 is reproduced as under: Whether in the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in allowing the sum of Rs. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 32 is offered as business income without excluding the same from the Profit as per P&L A/c. while computing Income from Business and Profession. one hand, the Assessing Officer has accepted the business income as computed by the assessee in the return of income again made the addition of under the head Income from Other Sources on. Since the assessee has already commenced its business operations and the foreign exchange fluctuation gain is arising in the ordinary course of its business, it would be proper to treat the same as business income only and not . The action of the Assessing Officer has led to taxation of same income twice which is not permissible. Even the order of the Assessing Officer under which the said addition is is passed u/s. 143(3) r.w.s. 153C of the Act but there is no any incriminating material in regard to the said issue of foreign exchange fluctuation gain. Accordingly, the Assessing Officer is directed to delete the addition of Rs. 1,48,76,941/- on account of foreign exchange fluctuation gain and hence, this ground The grounds raised by the revenue in assessment year 2011- 12 in ITA No. 2984/Mum/2015 is reproduced as under: Whether in the facts and in the circumstances of the case wing the sum of Rs. 16,34,00,000/ work done by M/s.Sunil Hi the year?. 22. The sole ground raised in this appeal is connected to the ground No. one of the appeal of the assess 2009-10 in ITA No. 580/Mum/2015, therefore following our finding in assessment year 2009 dismissed. 23. The grounds raised by the revenue in assessment year 2012 13 in ITA No. 5299/Mum/2018 are 1. Whether on the facts and in the circumstances of the case and in the law, the 14 of depreciation of Rs.3,12,95,521/ capitalized in earlier years through Capital W (CWIP) on account of work done by M/s.Sunil Hi Engineers Ltd. Equipments & Project Ltd. Tax effect - Rs.96,70,316/ 2. Whether on the facts and circumstances of the case and in the law, the Ld. CIT(A) was justified in deleting the disallowance of Rs.5,91,520/ holding that no disallowance u/ s.14A of the 1.T. Act, is called for, once the the assessee during the relevant previous year as held by the Ld. CIT(A) without considering the circular No.5 of 2014 dated M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 16,34,00,000/- in the capital Work in Progress on account of work done by M/s.Sunil Hi-Tech Engineers Ltd (SHEL.) during sole ground raised in this appeal is connected to the ground No. one of the appeal of the assessee for assessment year 10 in ITA No. 580/Mum/2015, therefore following our finding in assessment year 2009-10, this ground of the appeal is also The grounds raised by the revenue in assessment year 2012 13 in ITA No. 5299/Mum/2018 are reproduced as under: Whether on the facts and in the circumstances of the case and in the law, the 14 CIT(A) was justified in allowing the claim of depreciation of Rs.3,12,95,521/-with respect to the amount capitalized in earlier years through Capital Work In Progress (CWIP) on account of work done by M/s.Sunil Hi Engineers Ltd. (SHEL) and M/s.Germach Infrastructure Equipments & Project Ltd. Rs.96,70,316/- 2. Whether on the facts and circumstances of the case and in the law, the Ld. CIT(A) was justified in deleting the disallowance of Rs.5,91,520/ - made u/s.14A of the LT. Act, by holding that no disallowance u/ s.14A of the 1.T. Act, is called for, once there is no exempt income received or receivable by the assessee during the relevant previous year as held by the Ld. CIT(A) without considering the circular No.5 of 2014 dated M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 33 in the capital Work in Progress on account of Tech Engineers Ltd (SHEL.) during sole ground raised in this appeal is connected to the ee for assessment year 10 in ITA No. 580/Mum/2015, therefore following our finding 10, this ground of the appeal is also The grounds raised by the revenue in assessment year 2012- reproduced as under: Whether on the facts and in the circumstances of the case CIT(A) was justified in allowing the claim with respect to the amount ork In Progress (CWIP) on account of work done by M/s.Sunil Hi-Tech (SHEL) and M/s.Germach Infrastructure 2. Whether on the facts and circumstances of the case and in the law, the Ld. CIT(A) was justified in deleting the made u/s.14A of the LT. Act, by holding that no disallowance u/ s.14A of the 1.T. Act, is called re is no exempt income received or receivable by the assessee during the relevant previous year as held by the Ld. CIT(A) without considering the circular No.5 of 2014 dated 11th February 2014, issued by the Central Board of Direct Taxes which clearly prov expenditure even where taxpayer in a particular year has not earned any exempt income? Tax effect - Rs. 1,82,779/ 3. Whether on the facts and in the circumstances of the case and in the law, the Ld. addition of Rs. 5,91,520/ u/s.14A for the purpose of computing Book Profit u/s.115]B of the Act without considering that as per Explanation 1(f) to Section 115]B, the book profits have to be increased by the expenditure incurred for earning the exempt income and without appreciating the fact that the Department is in appeal before the Hon'ble Supreme Court on this issue? 24. The ground No. depreciation of the capital work in pro and GIE &PL. The issue of capitalisation of the expenses in respect of SHEL and GIE &PL has already been adjudicated in earlier assessment years 2009 be eligible for depreciation on th capitalisation in those assessment years. Therefore, we direct the Assessing Officer to allow the claim of the depreciation accordingly. The ground No. one of the appeal of the revenue is accordingly allowed partly for stat M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 11th February 2014, issued by the Central Board of Direct Taxes which clearly provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income? Rs. 1,82,779/- Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT(A) was justified in del addition of Rs. 5,91,520/- made by the Assessing Officer u/s.14A for the purpose of computing Book Profit u/s.115]B of the Act without considering that as per Explanation 1(f) to Section 115]B, the book profits have to be increased by the ture incurred for earning the exempt income and without appreciating the fact that the Department is in appeal before the Hon'ble Supreme Court on this issue? No. one of the appeal is in respect of the depreciation of the capital work in progress pertaining to M/s SHEL and GIE &PL. The issue of capitalisation of the expenses in respect of SHEL and GIE &PL has already been adjudicated in earlier assessment years 2009-10 to 2011-12, therefore the assessee will be eligible for depreciation on the amount of expenses allowed for capitalisation in those assessment years. Therefore, we direct the Assessing Officer to allow the claim of the depreciation accordingly. one of the appeal of the revenue is accordingly allowed partly for statistical purposes. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 34 11th February 2014, issued by the Central Board of Direct ides for disallowance of the expenditure even where taxpayer in a particular year has not Whether on the facts and in the circumstances of the case CIT(A) was justified in deleting the made by the Assessing Officer u/s.14A for the purpose of computing Book Profit u/s.115]B of the Act without considering that as per Explanation 1(f) to Section 115]B, the book profits have to be increased by the ture incurred for earning the exempt income and without appreciating the fact that the Department is in appeal one of the appeal is in respect of the gress pertaining to M/s SHEL and GIE &PL. The issue of capitalisation of the expenses in respect of SHEL and GIE &PL has already been adjudicated in earlier 12, therefore the assessee will e amount of expenses allowed for capitalisation in those assessment years. Therefore, we direct the Assessing Officer to allow the claim of the depreciation accordingly. one of the appeal of the revenue is accordingly 25. The ground no. 2 of the appeal relates to the disall Rs.5,91,520/- made by the Assessing Officer u/s. 14A of the Act and deleted by the ld. CIT(A). 26. Brief facts qua this issue are that the assessee company has suo moto disallowed a sum of Rs. 1,01,520/ of income for the year under consideration being in the nature of administrative expenditure being 1% of various com aggregating to Rs.1,01,51,959/ Assessing Officer was dissatisfied with the amount of disallowance made u/s. 14A of the Act by the assessee and applied Rule 8D of the Income Tax Rules. Accordingly, in furtherance to the suo moto disallowance made u/s. 14A of the Act by the assesse made a disallowance of Rs. in Rule 8D(2)(iii) i.e. 0.5% of the average of opening and closing investments. Aggrieved by the said disallowance, the assessee preferred appeal before the ld. CIT(A) who deleted the disallowance. Aggrieved by the order of the ld. CIT(A), the revenue is in appeal before us. 27. We have heard the rival contentions and perused the material on record. The ld. Departmental Representative for the revenue argued that the Assessing Offic jurisdictional High Court in the case of Ltd. v. DCIT (194 Taxman 213) of Rule 8D while computing disallowance u/s. 14A of the Act and M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 The ground no. 2 of the appeal relates to the disall made by the Assessing Officer u/s. 14A of the Act and deleted by the ld. CIT(A). Brief facts qua this issue are that the assessee company has disallowed a sum of Rs. 1,01,520/- u/s. 14A in the return of income for the year under consideration being in the nature of administrative expenditure being 1% of various com 1,01,51,959/-. In the assessment completed, the sessing Officer was dissatisfied with the amount of disallowance made u/s. 14A of the Act by the assessee and applied Rule 8D of the Income Tax Rules. Accordingly, in furtherance to the disallowance made u/s. 14A of the Act by the assesse made a disallowance of Rs.4,90,000/- as per the method prescribed in Rule 8D(2)(iii) i.e. 0.5% of the average of opening and closing investments. Aggrieved by the said disallowance, the assessee preferred appeal before the ld. CIT(A) who deleted the disallowance. Aggrieved by the order of the ld. CIT(A), the revenue is We have heard the rival contentions and perused the material on record. The ld. Departmental Representative for the revenue argued that the Assessing Officer relying on the decision of Hon’ble jurisdictional High Court in the case of Godej and Boyce Mfg. Co. Ltd. v. DCIT (194 Taxman 213) has rightly invoked the provisions of Rule 8D while computing disallowance u/s. 14A of the Act and M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 35 The ground no. 2 of the appeal relates to the disallowance of made by the Assessing Officer u/s. 14A of the Act Brief facts qua this issue are that the assessee company has u/s. 14A in the return of income for the year under consideration being in the nature of administrative expenditure being 1% of various common expenses . In the assessment completed, the sessing Officer was dissatisfied with the amount of suo moto disallowance made u/s. 14A of the Act by the assessee and applied Rule 8D of the Income Tax Rules. Accordingly, in furtherance to the disallowance made u/s. 14A of the Act by the assessee, he as per the method prescribed in Rule 8D(2)(iii) i.e. 0.5% of the average of opening and closing investments. Aggrieved by the said disallowance, the assessee preferred appeal before the ld. CIT(A) who deleted the said disallowance. Aggrieved by the order of the ld. CIT(A), the revenue is We have heard the rival contentions and perused the material on record. The ld. Departmental Representative for the revenue er relying on the decision of Hon’ble Godej and Boyce Mfg. Co. has rightly invoked the provisions of Rule 8D while computing disallowance u/s. 14A of the Act and hence, the same shall b submitted that no exempt income has been earned by the assessee company in the year under consideration and hence, the suo moto disallowance made u/s. 14A of the Act is sufficient and no further disallowance over and above should have been made in light of the decision of Hon’ble Apex Court in the case of Ltd. v. CIT [2018] 91 taxmann.com 154 (SC) of which is reproduced as under: “40. We note from the facts in the State Ba that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8D of the Rules and holding that section 14A of the Act applicable. In spite of this exercise of apportionment of expenditure carried out by the AO, CIT(A) disallowed the entire deduction of expenditure. That view of the CIT(A) was clearly untenable and rightly set aside by the ITAT. Therefore, on fact the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of the ITAT, though we are not subscribing the theory of dominant intention applied by the High Court...” 27. The ld. Counsel of the assessee further relied on va jurisdictional High court decisions also viz. Enterprise (ITA no. 110/2009), PCIT v. Ballarpur Industries Ltd. (ITA no. 51/2016), PCIT v. Zee News Ltd. [2018 M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 hence, the same shall be sustained. The ld. Counsel of the assessee submitted that no exempt income has been earned by the assessee company in the year under consideration and hence, the suo moto disallowance made u/s. 14A of the Act is sufficient and no further r and above should have been made in light of the decision of Hon’ble Apex Court in the case of Maxopp Investment Ltd. v. CIT [2018] 91 taxmann.com 154 (SC), the relevant extract of which is reproduced as under:- “40. We note from the facts in the State Bank of Patiala cases that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8D of the Rules and holding that section 14A of the Act applicable. In spite of this exercise of apportionment of expenditure carried out by the AO, CIT(A) disallowed the entire deduction of expenditure. That view of the CIT(A) was clearly untenable and rightly set aside by the ITAT. Therefore, on fact the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of the ITAT, though we are not subscribing the theory of dominant intention applied by the High Court...” The ld. Counsel of the assessee further relied on va jurisdictional High court decisions also viz. CIT v. Delite Enterprise (ITA no. 110/2009), PCIT v. Ballarpur Industries Ltd. (ITA no. 51/2016), PCIT v. Zee News Ltd. [2018 M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 36 e sustained. The ld. Counsel of the assessee submitted that no exempt income has been earned by the assessee company in the year under consideration and hence, the suo moto disallowance made u/s. 14A of the Act is sufficient and no further r and above should have been made in light of the Maxopp Investment , the relevant extract nk of Patiala cases that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8D of the Rules and holding that section 14A of the Act would be applicable. In spite of this exercise of apportionment of expenditure carried out by the AO, CIT(A) disallowed the entire deduction of expenditure. That view of the CIT(A) was clearly untenable and rightly set aside by the ITAT. Therefore, on facts, the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of the ITAT, though we are not subscribing the theory of dominant intention applied by the The ld. Counsel of the assessee further relied on various CIT v. Delite Enterprise (ITA no. 110/2009), PCIT v. Ballarpur Industries Ltd. (ITA no. 51/2016), PCIT v. Zee News Ltd. [2018-TIOL- 263](Bom.) apart from other non jurisdictional decisions referred in the order of the ld. CIT(A). 28. We agree with the submission of the ld. Counsel of the assessee that in absence of any exempt income earned in the year under consideration, no disallowance u/s. 14 made by the Assessing Officer over and above the suo moto disallowance made by the assessee. Further, although an Explanation has been inserted in the Finance Act, 2022 u/s. 14A to clarify that the provisions of section 14A shall apply an to have always applied in a case where exempt income has not accrued or arisen or has not been received during the previous year The said amendment has taken place effective from 01.04.2022 and should therefore be applied prospectively and not Gainful reference in this regard is made from the decision of Hon’ble Delhi High Court in the case of PCIT v. Era Infrastructure (India) Ltd. (ITA no. 204/2022). Respectfully referred decision, we direct the Assessing disallowance of Rs. 5,91,520/ ground of appeal of the revenue is dismissed. 29. The ground no. 3 of the appeal relates to making adjustment of disallowance made u/s. 14A of Rs. 5,91,520/ Book Profits u/s. 115JB of the Act. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 apart from other non jurisdictional decisions referred in the order of the ld. CIT(A). We agree with the submission of the ld. Counsel of the assessee that in absence of any exempt income earned in the year under consideration, no disallowance u/s. 14A could have been made by the Assessing Officer over and above the suo moto disallowance made by the assessee. Further, although an Explanation has been inserted in the Finance Act, 2022 u/s. 14A to clarify that the provisions of section 14A shall apply an to have always applied in a case where exempt income has not accrued or arisen or has not been received during the previous year he said amendment has taken place effective from 01.04.2022 and should therefore be applied prospectively and not Gainful reference in this regard is made from the decision of Hon’ble Delhi High Court in the case of PCIT v. Era Infrastructure (India) Ltd. (ITA no. 204/2022). Respectfully following referred decision, we direct the Assessing Officer to delete the disallowance of Rs. 5,91,520/- made u/s. 14A. Accordingly, this ground of appeal of the revenue is dismissed. The ground no. 3 of the appeal relates to making adjustment of disallowance made u/s. 14A of Rs. 5,91,520/- in computing Book Profits u/s. 115JB of the Act. M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 37 apart from other non jurisdictional decisions referred in We agree with the submission of the ld. Counsel of the assessee that in absence of any exempt income earned in the year A could have been made by the Assessing Officer over and above the suo moto disallowance made by the assessee. Further, although an Explanation has been inserted in the Finance Act, 2022 u/s. 14A to clarify that the provisions of section 14A shall apply and be deemed to have always applied in a case where exempt income has not accrued or arisen or has not been received during the previous year. he said amendment has taken place effective from 01.04.2022 and retrospectively. Gainful reference in this regard is made from the decision of Hon’ble Delhi High Court in the case of PCIT v. Era Infrastructure following the above Officer to delete the made u/s. 14A. Accordingly, this The ground no. 3 of the appeal relates to making adjustment in computing the 29.1 Since the disallowance u/s. 14A made by the Assessing Officer is already deleted in ground no. 2, there is no question of making any adjustment towards the same in computing the Book Profits u/s. 115JB of the Act. Even otherwise, the disallowance made u/s. 14A r.w.r. 8D is not to be considered or adjusted in computing the Book Profits u/s. 115JB of the Act in view of the decision of the Hon’ble jurisdictional High Court in the case of CIT v. Bengal Finance & Investment Pvt. Ltd. (ITA no. 337 of 2013), relevant extract of which is reproduced below: “8. As already held in ground No. 1 the provisions of Rule 8D are not applicable to the present A.Y. under consideration. Therefore, disallowance of expenditure by app Further, no actual expenditure was debited in the profit & loss account relating to the earning of exempt income. Therefore the provisions of Sec. 14A cannot be imported into while computing the book profit u/s. 115JB of the Explanation to Sec. 115JB refers to the amount debited to the profit & loss account which can be added back to the book profit while computing book profit u/s. 115JB of the Act. In this connection, reliance can be placed upon Bench in the case of Goetze (India) Ltd. Vs CIT (2009) 32 SOT 101 (Del), wherein it has been held that provisions of Sub of Sec. 14A cannot be imported into clause (f) of the Explanation to Sec. 115JA of the Act. delete the disallowance of expenses confirmed by the CIT(A) while computing book profit u/s. 115JB of the Act. In other words, no addition to the book profit shall be made on account of alleged M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 Since the disallowance u/s. 14A made by the Assessing Officer is already deleted in ground no. 2, there is no question of making any adjustment towards the same in computing the Book Profits Act. Even otherwise, the disallowance made u/s. 14A r.w.r. 8D is not to be considered or adjusted in computing the Book Profits u/s. 115JB of the Act in view of the decision of the Hon’ble jurisdictional High Court in the case of CIT v. Bengal vestment Pvt. Ltd. (ITA no. 337 of 2013), relevant extract of which is reproduced below: “8. As already held in ground No. 1 the provisions of Rule 8D are not applicable to the present A.Y. under consideration. Therefore, disallowance of expenditure by applying Rule 8D is not justified. Further, no actual expenditure was debited in the profit & loss account relating to the earning of exempt income. Therefore the provisions of Sec. 14A cannot be imported into while computing the book profit u/s. 115JB of the Act inasmuch as clause (f) of Explanation to Sec. 115JB refers to the amount debited to the profit & loss account which can be added back to the book profit while computing book profit u/s. 115JB of the Act. In this connection, reliance can be placed upon the decision of ITAT Delhi Bench in the case of Goetze (India) Ltd. Vs CIT (2009) 32 SOT 101 (Del), wherein it has been held that provisions of Sub of Sec. 14A cannot be imported into clause (f) of the Explanation to Sec. 115JA of the Act. In this view of the matter, we therefore, delete the disallowance of expenses confirmed by the CIT(A) while computing book profit u/s. 115JB of the Act. In other words, no addition to the book profit shall be made on account of alleged M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 38 Since the disallowance u/s. 14A made by the Assessing Officer is already deleted in ground no. 2, there is no question of making any adjustment towards the same in computing the Book Profits Act. Even otherwise, the disallowance made u/s. 14A r.w.r. 8D is not to be considered or adjusted in computing the Book Profits u/s. 115JB of the Act in view of the decision of the Hon’ble jurisdictional High Court in the case of CIT v. Bengal vestment Pvt. Ltd. (ITA no. 337 of 2013), relevant “8. As already held in ground No. 1 the provisions of Rule 8D are not applicable to the present A.Y. under consideration. Therefore, lying Rule 8D is not justified. Further, no actual expenditure was debited in the profit & loss account relating to the earning of exempt income. Therefore the provisions of Sec. 14A cannot be imported into while computing Act inasmuch as clause (f) of Explanation to Sec. 115JB refers to the amount debited to the profit & loss account which can be added back to the book profit while computing book profit u/s. 115JB of the Act. In this the decision of ITAT Delhi Bench in the case of Goetze (India) Ltd. Vs CIT (2009) 32 SOT 101 (Del), wherein it has been held that provisions of Sub-Sec. (2) & (3) of Sec. 14A cannot be imported into clause (f) of the Explanation to In this view of the matter, we therefore, delete the disallowance of expenses confirmed by the CIT(A) while computing book profit u/s. 115JB of the Act. In other words, no addition to the book profit shall be made on account of alleged expenditure incurred income u/s. 115JB of the Act. Thus ground No. 2 is decided in favour of the assessee.” 29.2 In view of the above, the ground no. 3 of the appeal of the Revenue is dismissed. 30. The grounds raised by the revenue 14 and ITA No. 5300/Mum/2018 are reproduced as under: 1. Whether on the facts and in the circumstances of the case and in the law, the 14. claim of depreciation of Rs.3,12,95,521/; with respect to the amount capitalized in earlier years through Capital Work In Progress(CWIP) on account of work done by M/s.Sunil Hi Engineers Ltd. Equipments & Project Ltd. Tax effect - Rs.96.70.316/ 2. Whether on the facts and the law, the Ld. CIT(A) was justified in deleting the disallowance of Rs.7,64,060/ by holding that no disallowance w/ s.14A of the 1.T. Act, is called for, once there is no exempt income recei receivable by the assessee during the relevant previous year as held by the Ld. CIT(A) without considering the circular No.5 of 2014 dated 11th February 2014, issued by the Central Board of Direct Taxes which clearly provides for disallowance M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 expenditure incurred to earn exempt income while computing income u/s. 115JB of the Act. Thus ground No. 2 is decided in favour of the assessee.” In view of the above, the ground no. 3 of the appeal of the is dismissed. The grounds raised by the revenue in assessment year 2013 14 and ITA No. 5300/Mum/2018 are reproduced as under: Whether on the facts and in the circumstances of the case and in the law, the 14. CIT(A) was justified in allowing the claim of depreciation of Rs.3,12,95,521/; with respect to the amount capitalized in earlier years through Capital Work In Progress(CWIP) on account of work done by M/s.Sunil Hi Engineers Ltd. (SHEL) and M/s.Germach Infrastructure Equipments & Project Ltd. Rs.96.70.316/- Whether on the facts and circumstances of the case and in the law, the Ld. CIT(A) was justified in deleting the disallowance of Rs.7,64,060/- made w/s.14A of the LT. Act, by holding that no disallowance w/ s.14A of the 1.T. Act, is called for, once there is no exempt income recei receivable by the assessee during the relevant previous year as held by the Ld. CIT(A) without considering the circular No.5 of 2014 dated 11th February 2014, issued by the Central Board of Direct Taxes which clearly provides for disallowance M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 39 to earn exempt income while computing income u/s. 115JB of the Act. Thus ground No. 2 is decided in In view of the above, the ground no. 3 of the appeal of the sessment year 2013- 14 and ITA No. 5300/Mum/2018 are reproduced as under: Whether on the facts and in the circumstances of the case CIT(A) was justified in allowing the claim of depreciation of Rs.3,12,95,521/; with respect to the amount capitalized in earlier years through Capital Work In Progress(CWIP) on account of work done by M/s.Sunil Hi-Tech (SHEL) and M/s.Germach Infrastructure circumstances of the case and in the law, the Ld. CIT(A) was justified in deleting the made w/s.14A of the LT. Act, by holding that no disallowance w/ s.14A of the 1.T. Act, is called for, once there is no exempt income received or receivable by the assessee during the relevant previous year as held by the Ld. CIT(A) without considering the circular No.5 of 2014 dated 11th February 2014, issued by the Central Board of Direct Taxes which clearly provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income? Tax effect - Rs.2,36,095/ 3. Whether on the facts and in the circumstances of the case and in the law, the Ld. addition of Rs.7,64 us.14A for the purpose of computing Book Profit u/s.1151B of the Act without considering that as per Explanation 1() to Section 115]B, the book profits have to be increased by the expenditure incurred for earning the ex without appreciating the fact that the Department is in appeal before the Hon'ble Supreme Court on this issue? Tax effect - Rs.1,45,591/ 31. The issues raised in identical to issues raised in adjudicated by us in the appeal of the revenue for assessment 2012-13, therefore following our finding in assessment year 2012 13, the ground No. one of the appeal is allowed partly for statistical purposes, whereas grou dismissed. 32. The ground raised by reproduced as under: 1. Whether on the facts and in the circumstances of the case and in the law, the 14. CIT(A) was justified in allowing the M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 expenditure even where taxpayer in a particular year has not earned any exempt income? Rs.2,36,095/- Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT(A) was justified in deleting the addition of Rs.7,64,060/- made by the Assessing Officer us.14A for the purpose of computing Book Profit u/s.1151B of the Act without considering that as per Explanation 1() to Section 115]B, the book profits have to be increased by the expenditure incurred for earning the exempt income and without appreciating the fact that the Department is in appeal before the Hon'ble Supreme Court on this issue? Rs.1,45,591/- issues raised in ground No. one to 3 of this appeal issues raised in grounds of the appeal of the revenue in the appeal of the revenue for assessment 13, therefore following our finding in assessment year 2012 13, the ground No. one of the appeal is allowed partly for statistical purposes, whereas ground No. two and three of the appeal The ground raised by Revenue in assessment reproduced as under: Whether on the facts and in the circumstances of the case and in the law, the 14. CIT(A) was justified in allowing the M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 40 expenditure even where taxpayer in a particular year Whether on the facts and in the circumstances of the case CIT(A) was justified in deleting the made by the Assessing Officer us.14A for the purpose of computing Book Profit u/s.1151B of the Act without considering that as per Explanation 1() to Section 115]B, the book profits have to be increased by the empt income and without appreciating the fact that the Department is in appeal this appeal, are of the appeal of the revenue in the appeal of the revenue for assessment year 13, therefore following our finding in assessment year 2012- 13, the ground No. one of the appeal is allowed partly for statistical nd No. two and three of the appeal are in assessment year 2014-15 is Whether on the facts and in the circumstances of the case and in the law, the 14. CIT(A) was justified in allowing the claim of depreciation of Rs.3,12,95,521/ amount capitalized in earlier years through Capital Work In Progress (CWIP) Tech Engineers Ltd. (SHEL) and M/s.Germach Infrastructure Equipments & Project Ltd. Tax effect - Rs. 1,06,37,348/ 33. The sole ground raised by the revenue in this appeal is identical to ground No. one raised in ass therefore following our finding in assessment year 2012 ground of the appeal of the revenue is allowed partly for statistical purposes. 34. In the result, all the appeals of the for statistical purposes. Order pronounced under Rule 34(4) of the ITAT Rules, 1963 on 30/12/2022. Sd/- (ABY T VARKEY JUDICIAL MEMBER Mumbai; Dated: 30/12/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 claim of depreciation of Rs.3,12,95,521/-with respect to the amount capitalized in earlier years through Capital Work In Progress (CWIP) on account of work done by M/s.Sunil Hi Tech Engineers Ltd. (SHEL) and M/s.Germach Infrastructure Equipments & Project Ltd. Rs. 1,06,37,348/- sole ground raised by the revenue in this appeal is identical to ground No. one raised in assessment year 2012 therefore following our finding in assessment year 2012 ground of the appeal of the revenue is allowed partly for statistical In the result, all the appeals of the Revenue are allowed partly purposes. Order pronounced under Rule 34(4) of the ITAT Rules, 12/2022. Sd/ ABY T VARKEY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 41 with respect to the amount capitalized in earlier years through Capital Work In on account of work done by M/s.Sunil Hi- Tech Engineers Ltd. (SHEL) and M/s.Germach Infrastructure sole ground raised by the revenue in this appeal is essment year 2012-13 and therefore following our finding in assessment year 2012-13, this ground of the appeal of the revenue is allowed partly for statistical are allowed partly Order pronounced under Rule 34(4) of the ITAT Rules, Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 BY ORDER, (Sr. Private Secretary) ITAT, Mumbai M/s JSW Energy (Barmer) Ltd. ITA Nos. 580/M/2016, 2983 , 2984/M/2015 , 5299, 5300/M/2018 & 1884/M/2020 42 BY ORDER, (Sr. Private Secretary) ITAT, Mumbai