THE ITO, Eluru V. M/s Nara Constructions, Eluru

ITA 246/VIZ/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9000 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 08-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SATYANADHAM
• Keywords: Additional evidence; Reason to believe
• Section: 143(3); 142(1); 147; 148

Judgement Text

ITA NO.246/VIZAG/2015 CO NO.33/VIZAG/2015 M/S. NARA CONSTRUCTIONS, ELURU 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.246/VIZAG/2015 ( / ASSESSMENT YEAR: 2007-08) ITO, WARD - 2, ELURU M/S. NARA CONSTRUCTIONS, ELURU [PAN NO. AADFN6957C ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NO.33/VIZAG/2015 (ARISING OUT OF I.T.A.NO.246/VIZAG/2015) ( / ASSESSMENT YEAR: 2007-08) M/S. NARA CONSTRUCTIONS, ELURU ITO, WARD - 2, ELURU ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI T. SATYANADHAM, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 12.04.2017 / DATE OF PRONOUNCEMENT : 21.04.2017 ITA NO.246/VIZAG/2015 CO NO.33/VIZAG/2015 M/S. NARA CONSTRUCTIONS, ELURU 2 / O R D E R PER SHRI MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON FILED BY THE ASSESSEE ARE DIRECTED AGAINST ORDER OF THE CIT( A), RAJAHMUNDRY DATED 30.3.2015 AND IT PERTAINS TO THE ASSESSMENT Y EAR 2007-08. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORD ER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM, A SUB CONTRACTOR, FILED ITS RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2007-08 ON 30.10.2007 DECLARING TOTAL INCOME OF ` 32,62,850/-. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND THE ASSESSME NT HAS BEEN COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (H EREINAFTER CALLED AS 'THE ACT') ON 1.12.2009 DETERMINING TOTAL INCOME AT ` 39,38,566/-. SUBSEQUENTLY, THE CASE HAS BEEN RE-OPENED U/S 147 O F THE ACT, FOR THE REASON THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAP ED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE ASSESSMENT HAS BEEN RE-OPENED FOR THE REASON THAT ON VERIFICATION OF FI NANCIAL STATEMENTS AND TDS CERTIFICATES FILED BY THE ASSESSEE, IT WAS NOTI CED THAT THERE WAS SHORT ADMISSION GROSS RECEIPTS TO THE TUNE OF ` 78,32,354/- IN THE PROFIT ITA NO.246/VIZAG/2015 CO NO.33/VIZAG/2015 M/S. NARA CONSTRUCTIONS, ELURU 3 & LOSS ACCOUNT. THEREFORE, THE ASSESSING OFFICER H AS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSES SMENT AND HENCE, ISSUED NOTICE U/S 148 OF THE ACT. 3. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCO RDINGLY, NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED. IN RES PONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAILS AS CALLED FOR. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ASKED THE ASSESSEE TO RECONCI LE THE TURNOVER DIFFERENCE NOTICED FROM THE BOOKS OF ACCOUNTS WHEN COMPARED TO THE TDS CERTIFICATE ISSUED BY THE CONTRACTOR M/S. G.V. REDDY & COMPANY. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAS FIL ED A RECONCILIATION STATEMENT EXPLAINING THE DIFFERENCE QUANTIFIED BY T HE A.O. IN GROSS TURNOVER BETWEEN BOOK OF ACCOUNTS AND TDS CERTIFICA TES. THE ASSESSEE FURTHER SUBMITTED THAT THE PRINCIPAL CONTRACTOR HAD PAID MATERIAL ADVANCE ON WHICH TDS HAS BEEN DEDUCTED. SUBSEQUENT LY, WHEN R.A. BILLS ARE SUBMITTED, THE PRINCIPAL CONTRACTOR HAS D EDUCTED TDS ON GROSS VALUE OF CONTRACT INCLUDING RECOVERY TOWARDS MATERI AL ADVANCE, WHICH WAS PAID EARLIER. THEREFORE, TDS WAS DEDUCTED TWIC E ON THE MATERIAL ADVANCE WHICH IS THE REASON FOR DIFFERENCE IN TURNO VER. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE REJECT ED THE EXPLANATION AND MADE ADDITION OF ` 78,32,354/- TO THE TOTAL INCOME. WHILE DOING SO, ITA NO.246/VIZAG/2015 CO NO.33/VIZAG/2015 M/S. NARA CONSTRUCTIONS, ELURU 4 THE A.O. OBSERVED THAT THE ASSESSEE HAS FAILED TO R ECONCILE THE DIFFERENCE IN TURNOVER AS PER BOOKS OF ACCOUNTS AND TURNOVER AS PER TDS CERTIFICATES. THOUGH THE ASSESSEE CLAIMS THAT TDS HAS BEEN DEDUCTED TWICE ON MATERIAL ADVANCE AS WELL AS GROSS CONTRACT BILLS, THE DATES ON WHICH MATERIAL ADVANCE STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ARE NOT APPEARED IN THE TDS CERTIFICATE ISSUED BY T HE PRINCIPAL CONTRACTOR. THEREFORE, OPINED THAT THERE IS A DIFF ERENCE IN TURNOVER AS PER BOOKS OF ACCOUNTS AND TDS CERTIFICATE FOR WHICH THE ASSESSEE HAS NOT OFFERED ANY EXPLANATIONS. THE A.O. FURTHER OBS ERVED THAT SINCE THE ASSESSEE HAS DEBITED EXPENDITURE UNDER DIFFERENT HE ADS TO THE P&L ACCOUNT, THERE IS NO FURTHER ALLOWANCE OF ANY EXPEN DITURE IN RESPECT OF GROSS RECEIPTS SHORT ADMITTED BY THE ASSESSEE. HEN CE, THE DIFFERENCE IN GROSS CONTRACT RECEIPTS AMOUNTING TO ` 78,32,354/- IS ADDED BACK TO THE TOTAL INCOME. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. WAS ERRED IN MAKING ADDITIONS TOWARDS MATERIAL ADVANCE, WHICH IS PART OF GROSS TURNOVER CONSIDERED BY THE A SSESSEE. THE ASSESSEE FURTHER SUBMITTED THAT THE PRINCIPAL CONTR ACTORS HAVE PAID MATERIAL ADVANCE ON WHICH TDS HAD BEEN DEDUCTED. T HE PRINCIPAL ITA NO.246/VIZAG/2015 CO NO.33/VIZAG/2015 M/S. NARA CONSTRUCTIONS, ELURU 5 CONTRACTOR HAS DEDUCTED TDS ONCE AGAIN ON GROSS CON TRACT AMOUNT INCLUDING MATERIAL ADVANCE RECOVERED, THEREFORE, TD S HAD BEEN DEDUCTED TWICE ON THE SAME AMOUNT, WHICH IS THE REA SON FOR DIFFERENCE IN TURNOVER AS PER BOOKS OF ACCOUNTS AND AS PER TDS CERTIFICATE. IN SUPPORT OF HIS ARGUMENTS, FILED NECESSARY RECONCILI ATION STATEMENT ALONG WITH CERTIFIED STATEMENT OF BILLS PAID BY THE PRINC IPAL CONTRACTOR M/S. G.V. REDDY & COMPANY. THE CIT(A) AFTER CONSIDERING THE RELEVANT EXPLANATIONS HELD THAT THE DIFFERENCE BETWEEN THE A MOUNT REFERRED IN THE TDS CERTIFICATE AND THE AMOUNT SHOWN IN THE P&L ACCOUNT RELATED TO MATERIAL ADVANCE AND HENCE THE IMPUGNED ADDITION MA DE BY THE A.O. OF ` 78,32,354/- IS NOT WARRANTED. AGGRIEVED BY THE CI T(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) ERRED IN NOT RECORDING THE REASONS FOR ADMISSION OF ADDITIONAL EVIDENCE AS PER RULE 46A OF I.T. RULES, WHICH WERE NEVER PRODUCED BEFORE THE A.O. T HE LD. CIT(A) OUGHT TO HAVE ALLOWED AN OPPORTUNITY TO THE A.O. AS PROVIDED IN THE RULE 46A, BEFORE CONSIDERING THE ADDITIONAL INFORMATION/ EVIDENCE FURNISHED BY THE ASSESSEE, SINCE THE ADDITION WAS MADE IN THE AB SENCE OF ANY SUBSTANTIVE EVIDENCE TO SHOW THAT THE DIFFERENCE IN THE GROSS RECEIPTS RELATES TO THE MATERIAL ADVANCES RECEIVED. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTED ORDER OF T HE CIT(A). ITA NO.246/VIZAG/2015 CO NO.33/VIZAG/2015 M/S. NARA CONSTRUCTIONS, ELURU 6 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. MADE ADDITION OF ` 78,32,354/- TOWARDS DIFFERENCE IN GROSS CONTRACT RECEIPTS AS PER BOOKS OF ACCOUNTS AND GROSS RECEIPT S AS PER TDS CERTIFICATE ISSUED BY THE PRINCIPAL CONTRACTOR M/S. G.V. REDDY & COMPANY. ACCORDING TO THE A.O., THERE IS A DIFFERE NCE IN GROSS RECEIPTS BUT THE ASSESSEE FAILED TO EXPLAIN THE DIFFERENCE W ITH NECESSARY MATERIAL EVIDENCES. THOUGH THE ASSESSEE CLAIMS THAT TDS HAS BEEN DEDUCTED TWICE ON MATERIAL ADVANCES, FAILED TO CORRELATE THE MATERIAL ADVANCES RECEIVED FROM THE PRINCIPAL CONTRACTOR TO THE GROSS CONTRACT RECEIPTS, SO AS TO RECONCILE THE DIFFERENCE QUANTIFIED AS PER BO OKS OF ACCOUNTS AND TDS CERTIFICATES. THE ASSESSEE CLAIMS THAT THE PRI NCIPAL CONTRACTOR HAS DEDUCTED TDS TWICE ON MATERIAL ADVANCES, I.E. WHEN MATERIAL ADVANCE IS RELEASED AND ALSO WHEN THE FINAL CONTRACT RECEIPTS RELEASED FOR PAYMENT, THEREFORE, THERE IS A DIFFERENCE IN TURNOVER, WHICH HAS BEEN RECONCILED BY FILING NECESSARY ADVANCES IN THE FORM OF RUNNING BILLS, MATERIAL ADVANCE PAYMENT ADVICES AND TDS CERTIFICATES. THE ASSESSEE FURTHER CONTENDED THAT IT HAD CONSIDERED GROSS CONTRACT REC EIPT ON THE BASIS OF R.A. BILLS, WHICH INCLUDES MATERIAL ADVANCE RECEIVE D IN THE EARLIER OCCASIONS, WHEREAS THE TDS CERTIFICATE ISSUED BY TH E CONTRACTOR INCLUDES GROSS CONTRACT RECEIPTS CERTIFIED AS WELL AS MATERI AL ADVANCE RELEASED IN ITA NO.246/VIZAG/2015 CO NO.33/VIZAG/2015 M/S. NARA CONSTRUCTIONS, ELURU 7 THE EARLIER OCCASION, THEREFORE, THERE IS A DIFFERE NCE OF ` 78,32,354/-. THE ASSESSEE HAS FILED NECESSARY EVIDENCE IN THE FO RM OF LETTER FROM THE PRINCIPAL CONTRACTOR CERTIFYING THE GROSS BILLS PAI D FOR THE YEAR. 7. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATER IAL ON RECORD, WE FIND THAT THE A.O. HAS MADE ADDITIONS SOLELY ON THE BASIS OF TDS CERTIFICATES AND TURNOVER ADMITTED IN THE BOOKS OF ACCOUNTS WITHOUT VERIFYING THE MATERIAL ADVANCES RECEIVED BY THE ASS ESSEE ON WHICH TDS HAS BEEN DEDUCTED. THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING DETAILS OF RUNNING BILLS, LEDGER EXTRACTS, LETTER I SSUED BY THE PRINCIPAL CONTRACTOR M/S. G.V. REDDY & COMPANY AND TDS CERTIF ICATES. ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, WE FIND THAT THE ASSESSEE HAS RECEIVED MATERIAL ADVANCE ON 4 OCCASIONS ON WHI CH THE PRINCIPAL CONTRACTOR HAS DEDUCTED TDS. WE FURTHER OBSERVED T HAT WHILE CERTIFYING THE GROSS CONTRACT RECEIPTS, THE PRINCIPAL CONTRACT OR HAS RECOVERED MATERIAL ADVANCES PAID IN THE EARLIER OCCASION, HOW EVER, DEDUCTED TDS ON GROSS CONTRACT RECEIPTS, BECAUSE OF WHICH THERE IS A DIFFERENCE IN TURNOVER ADMITTED IN THE BOOKS OF ACCOUNTS AND TURN OVER AS PER P&L ACCOUNT. THE ASSESSEE HAS FILED A RECONCILIATION E XPLAINING THE REASONS FOR DIFFERENCE IN TURNOVER AS PER BOOKS OF ACCOUNTS AND TURNOVER AS PER TDS CERTIFICATES. THE DIFFERENCE IN TURNOVER IS MA INLY ON ACCOUNT OF TDS DEDUCTED TWICE ON MATERIAL ADVANCES. IF THE MATERI AL ADVANCE HAS BEEN ITA NO.246/VIZAG/2015 CO NO.33/VIZAG/2015 M/S. NARA CONSTRUCTIONS, ELURU 8 EXCLUDED FROM THE GROSS CONTRACT RECEIPTS, THE GROS S CONTRACT RECEIPTS ADMITTED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS A ND GROSS CONTRACT RECEIPTS AS PER TDS CERTIFICATES ARE MATCHING. THE REFORE, WE ARE OF THE VIEW THAT THERE IS NO DIFFERENCE IN TURNOVER ADMITT ED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS AND TURNOVER AS PER TDS CERTI FICATES ISSUED BY THE PRINCIPAL CONTRACTOR. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAILS HAS RIGHTLY DELETED ADDITIONS MADE BY THE A.O. WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A), HENCE, WE INC LINED TO UPHOLD CIT(A) ORDER AND DISMISS APPEAL FILED BY THE REVENUE. 8. THE ASSESSEE HAS FILED CROSS OBJECTION IN SUPPOR T OF ORDER OF THE CIT(A). THEREFORE, FOR THE REASONS RECORDED IN THE PRECEDING PARAGRAPH, WE DISMISS CROSS OBJECTION FILED BY THE ASSESSEE AS NOT MAINTAINABLE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 21 ST APR17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 21.04.2017 VG/SPS ITA NO.246/VIZAG/2015 CO NO.33/VIZAG/2015 M/S. NARA CONSTRUCTIONS, ELURU 9 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-2, ELURU 2. / THE RESPONDENT M/S. NARA CONSTRUCTIONS, DR.NO. 24A-16-9, ALLASANI PEDDANNA STREET, ASHOK NAGAR, ELURU 3. + / THE CIT, RAJAHMUNDRY 4. + ( ) / THE CIT (A), RAJAHMUNDRY 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY //