Income Tax Officer,Ward-1(4), Nagpur V. SMSL-UANRCL(JV), Nagpur

ITA 203/NAG/2009

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3007 (ITAT-NAGPUR)
• Duration Of Justice: 9 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 04-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSARI
• Assessee Lawyers: M MANI
• Keywords: Advance ruling; TDS
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D. T. GARASIA, HONBLE JUDICIAL MEMBER I.T.A. NO .203 / NAG / 09 ASSESSMENT YEAR: 2006 - 2007 INCOME TAX OFFICER, VS. M/S SMCL - UANRCL (JV), WARD - 1(4), 267, GANESH PHADHNAVIS BHAWA N, NAGPUR. NEAR TRIKONI PARK, DHARAMPETH, NAGPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : DR. MILIND BHUSARI, CIT, D. R. RESPONDENT BY : SHRI M. MANI, ADVOCATE DATE OF HEARING :09/10/2012 DATE OF PRONOUNCEMENT : 07/12/2012 ORDER PER P. K. BANSAL: THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A) - I, NAGPUR DATED 22/06/2009 RELATING TO ASSESSMENT YEAR 2006 - 2007 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1. THE CIT(A) ERRED IN GRANTING RELIEF ADMITTING THE ASSESSEES PLEA THAT THE INCOME OUT OF THE SAID CONTRACT IS TO BE TAXED IN THE HANDS OF THE MEMBER OF THE AOP, AND NOT IN THE HANDS OF THE ASSESSEE WHICH IS THE JOINT VENTU RE COMPANY/AOP WHICH IS THE ASSESSEE. I.T.A. NO. 203/NAG/09 2 2. THE CIT(A) OUGHT TO HAVE GATHERED PARTICULARS IN THE FORM OF A REMAND REPORT AND APPLIED THE RATIO LAID DOWN BY THE SUPREME COURT IN THE CASE OF A CHHAIYA 218 ITR 239 WHICH IS BINDING ON ALL THE AUTHORITIES. 3. TH E CIT(A) OUGHT TO HAVE ENHANCED THE ASSESSMENT OTHERWISE APPLYING THE IMPUGNED CASE LAW, SINCE IT IS THE JUDGMENT OF APEX COURT WHICH IS BINDING ON ALL THE AUTHORITIES. 4. THE CIT(A) OUGHT NOT TO HAVE IGNORED THE CONTENTS OF THE JOINT VENTURE AGREEMENT WH ICH CLEARLY SHOW THAT THERE WAS COMMON DESIGN, COMMON PURPOSE TO PRODUCE INCOME AND HENCE THE INCOME WAS TO BE SUBJECTED TO TAX IN THE HANDS OF THE ASSESSEE AOP ONLY. 5. THE CIT(A) OUGHT NOT TO HAVE IGNORED THE FACT THAT THE SECOND DOCUMENT CITED BY THE A SSESSEE IS ONLY AN INTERNAL ARRANGEMENT WHICH IS OF NO CONSEQUENCE AND SHALL NOT HAVE ANY BEARING ON THE ASSESSMENT OF THE JOINT VENTURE AS ON AOP. 6. THE CIT(A) OUGHT TO HAVE NOTICED THAT THE CONTRACT WAS AWARDED IN THE NAME OF JOINT VENTURE AND THE TDS CERTIFICATES ESTABLISHED THAT THE INCOME WAS RECEIVED BY THE JOINT VENTURE AND TDS CREDIT IS ALSO TO BE AVAILED OF BY THE JOINT VENTURE ALONE, AND HENCE THE INCOME IS TO BE TAXED IN THE HANDS OF THE ASSESSEE ONLY. 7. THE CIT(A) OUGHT TO HAVE FOLLOWED IN T HE RATIO LAID DOWN BY THE AUTHORITY FOR ADVANCE RULING IN THE CASE OF GEO CONSULT ZT GMB H 304 ITR 283 (AAR), WHICH IS BINDING ON THE LOWER AUTHORITIES . 8. THE CIT(A) OUGHT TO HAVE APPLIED THE PRINCIPLE LAID DOWN BY THE SUPREME COURT IN THE CASE OF C. H. ACHHAIYA 218 ITR 239 AND MADRAS HIGH COURT IN THE CASE OF MURUGESA NAICKER MANSION REPORTED IN 244 ITR 461 TO STATE THAT ASSESSING OFFICER IS NOT PRECLUDED FROM TAXING THE RIGHT PERSON MERELY ON THE GROUND THAT A WRONG PERSON IS TAXABLE 9. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. I.T.A. NO. 203/NAG/09 3 2. IN THIS CASE THE REVENUE HAS TAKEN AS MANY AS NINE GROUNDS, WHICH ARE ARGUMENTATIVE IN NATURE. HOWEVER, THE MAIN GRIEVANCE OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN GRANTING RELIEF TO ASSESSEE ON ACCOUNT OF ASSUMED SUB LETTING OF WORK AND INCOME ASSESSED ON THE BASIS OF TDS CERTIFICATES . 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A JOINT VENTURE (AOP) WHICH WAS FORMED ON 26 TH AUGUST 2004 BETWEEN THE TWO COMPANIES NAMELY M/ S SHAKTIKUMAR M. SANCHETI LTD., OF NAGPUR AND U.A.N. RAJU CONSTRUCTION LTD . OF VISAKHAPATNAM. THE TWO COMPANIES JOINTLY, IN THE NAME OF JOINT VENTURE WERE AWARDED A CONTRACT BY GOVT. OF ANDHRA PRADESH TO EXECUTE A WORK. THE PROFIT/LOSS SHARING RATIO OF T HE MEMBERS OF AOP WAS AS UNDER: SHAKTIKUMAR M. SANCHETI LTD. 51% UAN RAJU CONSTRUCTIONS LTD. 49% 3.1 THE MEMBERS OF THE AOP EXECUTED ANOTHER MEMORANDUM OF UNDERSTANDING ON 13/02/2005 IN WHICH IT WAS AGREED THAT THE WORK ALLOTTED TO JOINT VENTURE SHALL B E EXECUTED BY SMSL ONLY AND ALL THE PROFITS/LOSSES OF THIS WORK SHALL BE BORNE BY SMSL ONLY. THE ASSESSEE JV FILED RETURN OF INCOME ON 31/10/2006 DECLARING INCOME OF RS.2,19,990/ - . IN THE RETURN, THE ASSESSEE CLAIMED CREDIT OF TDS OF RS.30,14,718/ - . DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER RAISED A QUERY THAT THE WORK RECEIPT IN RESPECT OF TDS CERTIFICATES WERE NOT SHOWN IN THE PROFIT & LOSS ACCOUNT OF THE JV. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT M/S SMS INF RASTRUCTURE LTD. (FORMERLY KNOWN AS S HAKTIKUMAR M. SANCHETI LTD.) IS A MEMBER OF THIS JV, WHICH HAS ACTUALLY EXECUTED THE WORK. ALL THE RECEIPTS AND EXPENSES IN RESPECT OF WORK WERE DULY RECORDED IN THE BOOKS OF ACCOUNT OF M/S SMS INFRASTRUCTURE LTD. AND ARE SHOWN IN PROFIT & LOSS ACCOUNT AND RETURN OF INCOME FOR ASSESSMENT YEAR 2006 - 2007. THAT DUE TO OVERSIGHT AND INADVERTENTLY, CREDIT OF TDS HAS BEEN I.T.A. NO. 203/NAG/09 4 CLAIMED IN RETURN OF SMSL - UANRCL (JV), WHEREAS THE WORK DONE RECEIPT IS SHOWN IN PROFIT & LOSS ACCOU NT OF SMC INFRASTRUCTURE LTD., THEREFORE, THE CREDIT SHOULD HAVE BEEN CLAIMED IN THE RETURN OF SMS INFRASTRUCTURE LTD. THE ASSESSEE, THEREFORE, INTENDED TO WITHDRAW CLAIM OF TDS AND REQUESTED THE ASSESSING OFFICER TO RETURN THE TDS CERTIFICATE SO THAT THE CLAIM CAN BE MADE AT THE APPROPRIATE PLACE, WHERE THE INCOME HAS BEEN SHOWN. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER U/S 143(3), WITHOUT FULLY APPRECIATING THE FACTS OF THE CASE, ASSUMED THAT THE ASSESSEE JV HAS SUB - CONTRACTED THE WORK TO SMSL AND ESTIMATED INCOME FROM SUB - LETTING OF THE CONTRACT AT 3% OF THE TOTAL WORK DONE OF RS.22,81,01,353/ - AND MADE THE ADDITION OF RS.68,43,040/ - . THE ASSESSING OFFICER ALSO MADE ADDITION OF RS.30,14,718/ - U/S 198 OF THE ACT BEING THE AMOUNT OF TDS DEDUCTED BY THE DEPARTMENT. 4. THE ASSESSEE CARRIED THE MATTER TO CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER HAS OVERLOOKED THE FACT THAT THE INCOME FROM THE PROJECT HAS ALREADY BEEN SHOWN IN THE RETURN OF SMS INFRASTRUCTURE LTD AND ACCEPTED BY THE ASSESSING OF FICER IN ASSESSMENT MADE U/S 153A READ WITH SECTION 143(3) OF THE ACT, THEREFORE, SAME INCOME CANNOT BE TAXED AGAIN IN THE HANDS OF THE ASSESSEE. THE ASSESSEE FURTHER CONTENDED BEFORE THE CIT(A) THAT THE ASSESSING OFFICERS ASSUMPTION ABOUT ESTIMATION OF PROFIT @3% ON CONTRACT AMOUNT IS NOTHING BUT GUESS WORK WITHOUT BRINGING ANY EVIDENCE ON RECORD TO PROVE THAT THE ASSESSEE HAS ACTUALLY EARNED ANY INCOME @3% OF THE CONTRACT AMOUNT. WITH REGARD TO ADDITION OF RS.30,14,718/ - , THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT WHEN M/S SMS INFRASTRUCTURE LTD. HAS SHOWN THE GROSS CONTRACT RECEIPT AS ITS INCOME, THERE IS NO NEED OF MAKING SEPARATE ADDITION OF TDS AMOUNT U/S 198 OF THE ACT. 4.1 THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE D OCUMENTS FILED RELATING TO THE ISSUE , OPINED THAT THE ASSESSING OFFICER HAS COMPLETELY CHANGED THE DIRECTION OF THE CASE AND HAS BUILT HIS CASE ON A I.T.A. NO. 203/NAG/09 5 COMPLETELY WRONG PREMISE WHICH HAS RESULTED IN DOUBLE TAXATION OF THE ONE AND S AME INCOME DERIVED BY M/S SM S INFRASTRUCTURE LTD. THE ASSESSEE HAS CLEARLY STATED THAT THE AID INCOME OF M/S SMS INFRASTRUCTURE LTD. STANDS ASSESSED BY ORDER PASSED U/S 153A READ WITH SECTION 143(3) OF THE I.T. ACT. THIS FACT WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER OF PRESENT APPELLANT, THEREFORE, THERE IS NO JUSTIFICATION ON THE PART OF ASSESSING OFFICER TO AGAIN BRING THE SAME INCOME FROM PROJECT INTO THE TAX NET. THE ASSESSING OFFICER HAS ADOPTED SELF CONTRADICTORY APPROACH IN DECIDING THE ISSUE. ON THE ONE HAND T HE ASSESSING OFFICER STATES THAT THE WORK WAS SUBLET BY THE ASSESSEE TO M/S SMS INFRASTRUCTURE LTD. AND ON THE OTHER HAND HE HOLDS THAT THE WORK REFLECTED IN SAID TDS CERTIFICATES HAS BEEN DONE BY THE PRESENT APPELLANT. THE CIT(A) FURTHER OBSERVED THAT TH ERE IS NO DENYING THE FACT THAT THE CONTRACT FOR PROJECT WAS AWARDED TO THE ASSESSEE JV, BUT UNDER THE MUTUAL ARRANGEMENT WAS HANDED OVER FOR EXECUTION TO M/S SMS INFRASTRUCTURE LTD. THE ENTIRE INCOME ARISING TO M/S SMS INFRASTRUCTURE LTD. WAS SHOWN IN IT S HAND AND ALSO ASSESSED BY THE RELEVANT ASSESSING AUTHORITY. THE CIT(A) FURTHER OPINED THAT THE ONLY BASIS OF THE ADDITION OF RS.68,43,040/ - AND RS.30,14,718/ - IS THE BALANCE SHEET OF UANRCL WHEREIN THE SAID COMPANY HAS SHOWN A SHARE OF 49% OF THE INCOME FROM THE BUSINESS OF THE ASSESSEE. IT IS FURTHER MENTIONED THAT THE PRESENT ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT. THE ASSESSEE HAS ADMITTED THAT THE WORK WAS EXECUTED BY SMS INFRASTRUCTURE LTD. THE ASSESSING OFFICER, THEREFORE, CONCLUDED TH AT THE WORK HAS BEEN SUB - LET TO THE MEMBERS OF JV AND FURTHER HELD THAT 3% OF THE SAME IS THE INCOME OF THE ASSESSEE JV. THE LEARNED CIT(A) RELIED ON THE JUDGMENTS IN THE CASE OF CBI VS. V. C. SHUKLA 1998 AIR SC, CHUHARMAL VS. CIT 172 ITR 250, 255 (SC), M ALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC), ROOP KUMAR VS. MOHAN THEDANI [2003] 6 SUPREME COURT CASES 595 AND CONCLUDED THAT ENTRIES MADE BY UANRCL IN ITS BOOKS/BALANCE SHEET WILL NOT IMPACT THE TRUTH OF THE MATTER, IN ANY WAY. THE ASSESSMENT OF M /S SMS INFRASTRUCTURE LTD. HAS ALREADY ATTAINED FINALITY. THE SAID ASSESSMENT IS LEGALLY I.T.A. NO. 203/NAG/09 6 SOUND AND VALID AS PER THE MOU DATED 13/02/2005. THERE IS ABSOLUTELY NOTHING ON RECORD TO JUSTIFY ASSESSING OFFICERS ASSUMPTION THAT THE ASSESSEE JV HAS EARNED 3% I NCOME ON ACCOUNT OF SUB - LETTING OF PROJECT TO M/S SMS INFRASTRUCTURE LTD. THERE IS NO LEGAL BASIS TO ESTIMATE INCOME IN THE CASE OF THE ASSESSEE JV ON THE BASIS OF TDS CERTIFICATES. THE CIT(A) ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO DELETE BOTH THE ADDITIONS. 5. BEFORE US, THE LEARNED D. R. REITERATED THE SUBMISSIONS MADE IN THE GROUNDS OF APPEAL AND HEAVILY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. HE FURTHER SUBMITTED THAT THE I NCOME OUT OF THE SAID CONTRACT IS TO BE TAXED IN THE HANDS OF TH E MEMBER OF THE AOP, AND NOT IN THE HANDS OF THE ASSESSEE WHICH IS THE JOINT VENTURE COMPANY/AOP . THE LEARNED D. R. ALSO SUBMITTED THAT THE CIT(A) HAS IGNORED THE CONTENTS OF THE JOINT VENTURE AGREEMENT WHICH CLEARLY SHOW S THAT THERE WAS COMMON DESIGN, COMMON PURPOSE TO PRODUCE INCOME AND HENCE THE INCOME WAS TO BE SUBJECTED TO TAX IN THE HANDS OF THE ASSESSEE AOP ONLY . HE ALSO SUBMITTED THAT CONTRACT WAS AWARDED IN THE NAME OF JOINT VENTURE AND THE TDS CERTIFICATES ESTABL ISHED THAT THE INCOME WAS RECEIVED BY THE JOINT VENTURE AND TDS CREDIT IS ALSO TO BE AVAILED OF BY THE JOINT VENTURE ALONE, THEREFORE, THE INCOME IS TO BE TAXED IN THE HANDS OF THE ASSESSEE ONLY. HE SUBMITTED THAT CIT(A) HAS ERRED IN GRANTING RELIEF TO T HE ASSESSEE, THEREFORE, THE ORDER OF CIT(A) BE REVERSED. 6. ON THE OTHER HAND LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A) AND THE CONTENTIONS RAISED BEFORE HIM AND VEHEMENTLY CONTENDED THAT THE ASSESSING OFFICER HAS PASSED THE ORDER IN A CONFUSED STATE OF MIND AND HAS GIVEN CONTRARY FINDINGS. WHILE MAKING ADDITION OF RS.68,43,040/ - HE HAS HELD THAT THE ASSESSEE JV HAS BEEN AWARDED THE WORK WHICH IT HAS SUBLET TO ITS MEMBERS WHEREAS WHILE MAKING OTHER ADDITION OF RS.30,14,718/ - , HE H AS HELD THAT THE WORK HAS BEEN DONE BY THE ASSESSEE JV ONLY. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS PASSED THE ORDER IN HASTE AND WITHOUT I.T.A. NO. 203/NAG/09 7 FULLY APPRECIATING THE FACTS OF THE CASE. HE SUBMITTED THAT THE CIT(A) HAS R IGHTLY DELETED THE ADDITION AFTER CONSIDERING ENTIRE FACTS OF THE CASE IN RIGHT PERSPECTIVE AND VARIOUS CASE LAWS . 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT IT IS NOT IN DISPUTE THAT THE A SSESSEE JOINT VENTURE (AOP) WAS FORMED ON 26/08/2004 BETWEEN M/S SHAKTIKUMAR M. SANCHETI LTD. NAGPUR AND UAN RAJU CONSTRUCTION LTD. VISA KHAPATNAM TO EXECUTE THE WORK. THE MEMBERS OF THE AOP EXECUTED ANOTHER MEMORANDUM OF UNDERSTANDING ON 13/02/2005 IN WHIC H IT WAS SPECIFICALLY AGREED BETWEEN BOTH THE MEMBERS THAT THE WORK ALLOTTED TO J.V. SHALL BE EXECUTED BY SMSL ONLY AND ALL THE PROFITS/LOSSES OF THIS WORK SHALL BE BORNE BY SMSL ONLY. THE ASSESSEE JV FILED RETURN OF INCOME OF RS.2,19,990/ - AND CLAIMED CR EDIT OF TDS OF RS.30,14,718/ - IN RESPECT OF WORK AWARDED TO SMSL - UANRCL (JV). ON A QUERY RAISED BY THE ASSESSING OFFICER THAT THE WORK RECEIPT IN RESPECT OF ABOVE TDS CERTIFICATES WERE NOT SHOWN IN THE PROFIT & LOSS ACCOUNT OF JV, THE ASSESSEE SUBMITTED THAT DUE TO OVERSIGHT AND INADVERTENTLY, CREDIT OF TDS, RELATING TO WORK HAS BEEN CLAIMED IN RETURN OF SMSL - UANRCL (JV) WHEREAS THE WORK DONE RECEIPT IS SHOWN IN PROFIT & LOSS ACCOUNT OF SMS INFRASTRUCTURE LTD. THE ASSESSEE ALSO REQUESTED TO WITHDRAW THE CLAIM OF THE TDS BEFORE THE ASSESSING OFFICER. IN OUR OPINION, THE ASSESSING OFFICER HAS OVERLOOKED THE FACT THAT THE INCOME FROM THE WORK HAS BEEN SHOWN IN THE RETURN OF SMS INFRASTRUCTURE LTD. AND ACCEPTED BY THE ASSESSING OFFICER IN ASSESSMENT MADE U/S 153A READ WITH SECTION 143(3) OF THE ACT, THEREFORE, THE SAME INCOME CANNOT BE TAXED AGAIN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO ESTIMATED THE PROFIT ON THE CONTRACT RECEIPT @3% WITHOUT BRINGING ANY EVIDENCE ON RECORD. WHEN SMS INFRASTRUCTURE LTD. HAS SHOWN THE GROSS CONTRACT RECEIPT AS ITS INCOME, THERE IS NO NEED OF MAKING SEPARATE ADDITION OF TDS AMOUNT U/S 198 OF THE ACT. THE ENTRIES MADE BY UANRCL IN ITS BOOKS/BALANCE SHEET AND ITS ANNUAL REPORT WILL NOT IMPACT I.T.A. NO. 203/NAG/09 8 THE TRUTH OF THE MATTER. THE ASSESSMENT OF M/S SMS INFRASTRUCTURE LTD., ON THE INCOME RECEIVED FROM THE PROJECT, HAS ALREADY ATTAINED FINALITY. THERE IS NO LEGAL BASIS TO ESTIMATE INCOME ON THE BASIS OF TDS CERTIFICATES RELATED TO THE WORK, WHICH WERE INADVERTENT LY FILED WITH THE RETURN OF ASSESSEE - JV. WE ARE OF THE VIEW THAT CIT(A), AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS JUSTIFIABLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND NO INTERFERENCE IS CALLED FOR IN THE DECISION TAKEN BY CIT(A). THUS, THE GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ( O RDER PRONOUNCED IN THE OPEN COURT ON 07/12/2012 ) SD/. SD/. ( D. T. GARASIA ) ( P. K. BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07/12/2012 * CL SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR