NATHPA JHAKRI JOINT VENTRURE, MUMBAI V. ASST CIT 29(2), MUMBAI

ITA 2632/MUM/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1907 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 07-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Assessee Lawyers: H P MAHAJANI
• Section: 263; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE SHRI JOGINDER SINGH, JM AND SHRI RAJESH KUMA R, AM ./ I.T.A. NO 2632/MUM/2015 ( / ASSESSMENT YEAR: 2010-11) NATHPA JHAKRI JOINT VENTURE, HINCON HOUSE, LBS MARG, VIKHROLI (WEST), MUMBAI-400 083. / VS. THE ASST. COMMISSIONER OF INCOME TAX -29(2),2 ND FLOOR, ROOM NO.202, C-10 PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX MUMBAI-400 051. ./ ./PAN/GIR NO. AAAAN 1127C ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI H.P.MAHAJANI / RESPONDENT BY : SHRI N.P. SINGH / DATE OF HEARING : 29/10/2015 !'# / DATE OF PRONOUNCEMENT : 18/12/2015 $% / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 05-03-2015 OF COMMISSIONER OF INCOME TAX-29, MUMBAI (HEREINAFTER CALLED AS THE CIT) FOR ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED FO LLOWING GROUNDS OF APPEAL: 2 ITA NO. 2632/MUM/2015 (A.Y. 2010-11) NATHPA JHAKRI JOINT VENTURE, VS. THE ASST. CIT 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT ERRED IN INITIATING PROCEEDINGS U/S263 OF THE A CT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT HAS ERRED IN OBSERVING THAT THE AO HAD NOT OBTA INED ANY DETAILS REGARDING THE EXCLUSION OF MANGLAD FLASH FLOOD CLAI M AMOUNTING TO RS.13,45,47,750/- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT HAS ERRED IN CONCLUDING THAT THE ORDER OF THE A O IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE IGNORIN G THE FACT THAT THE INCOME SO EXCLUDED IN AY 2010-11 IS OFFERED TO TAX IN AY 2011-12. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT HAS ERRED IN NOTHING THAT THE DISPUTED AMOUNT S HOULD HAVE BEEN PROVIDED IN THE BOOKS OF ACCOUNTS WHICH IN FACT IT WAS AS NOTED BY THE LEARNED CIT HIMSELF AT PARA 3 OF HIS ORDER 2. THE COMMON ISSUE RAISED IN ALL THE GROUNDS OF AP PEAL IS AGAINST PROCEEDINGS U/S263 OF THE IT ACT ON THE GROUND THAT AO HAD NOT OBTAINED ANY DETAILS REGARDING THE EXCLUSION OF MANGLAD FLASH FLOOD CLAIM AMOUNTING TO RS.13,45,47,750/- AND THEREFORE, THE ORDER MADE BY THE AO IS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. CIT PASSED AN ORDER DATED 08.02.20 15 U/S 263 SETTING ASIDE THE ASSESSMENT FRAMED BY ASSESSING OFFICER U/S U/S143(3 ) OF THE ACT VIDE ORDER DATED 15.02.2013 ON THE GROUND THAT THE ORDER PASSED BY T HE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AS A SSESSMENT WAS COMPLETED WITHOUT VERIFYING THE VERACITY OF CLAIM OF MANGLAD FLASH FL OOD CLAIM AMOUNTING TO RS.13,45,47,750/- AND DIRECTED THE ASSESSING OFFICE R TO RE-FRAME THE ASSESSMENT 3 ITA NO. 2632/MUM/2015 (A.Y. 2010-11) NATHPA JHAKRI JOINT VENTURE, VS. THE ASST. CIT AFRESH AFTER MAKING COMPLETE INQUIRIES ON THE GENU INENESS OF THE SAID CLAIMS MADE BY THE ASSESSEE. 3. THE LD. AR SUBMITTED THAT THE LD. ASSESSING OFFI CER RAISED SPECIFIC QUERY QUA THE CLAIM OF MANGLAD FLASH FLOOD DURING THE ASSESSM ENT PROCEEDINGS WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 12.09.201 2 FILED ON PAGE NO. 11 OF THE PAPER BOOK, WHEREIN IT HAD BEEN MENTIONED IN PARAGRAPH 2 THAT THE ASSESSEE HAD BOOKED AN AMOUNT OF RS.10.47 CRORES AS INCOME ON ACCOUNT OF A WARDS BY THE ARBITRAL TRIBUNAL IN RESPECT OF MANGLAD FLASH FLOOD AND MINIMUM WAGES. H OWEVER, THE CONTRACTEE M/S. SJVN LTD DECIDED TO CONTEST THESE AWARDS BEFORE THE HIGH COURT OF DELHI AND THEREFORE, THE SAME HAD BEEN EXCLUDED FROM THE CURR ENT YEAR INCOME AS THIS WAS A DISPUTED CLAIM AND NOT ACTUALLY RECEIVED BY THE ASS ESSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT NO ENFORCEABLE RIGHT TO RECEIVE THE SAID MONEY WAS CREATED IN FAVOUR OF THE ASSESSEE AND THEREFORE, THE ASSESSEE HAD RIGHTL Y EXCLUDED THE SAID AMOUNT FROM THE CURRENT YEARS INCOME. THE LD. COUNSEL FURTHER SUBM ITTED THAT THIS WAS CLEARLY MENTIONED IN THE STATEMENT OF TOTAL INCOME FILED AL ONG WITH THE RETURN OF INCOME AND ALSO MENTIONED BY WAY OF NOTES TO ACCOUNTS(NOTE NO 4) TO THE ANNUAL ACCOUNTS OF THE ASSESSEE COPIES OF WHICH WERE NOW FILED AT PAGE NO. 01 AND PAGE NO.09 OF THE PAPER BOOK RESPECTIVELY. THE LD. COUNSEL VIDE LETTER DATE D 06-02-2015 REPLIED THE SHOW CAUSE NOTICE BY THE CIT DURING PROCEEDINGS U/S.263 OF THE IT ACT BY SUBMITTING THAT 4 ITA NO. 2632/MUM/2015 (A.Y. 2010-11) NATHPA JHAKRI JOINT VENTURE, VS. THE ASST. CIT THE CLAIM OF RS. 13,45,47,750/- TOWARDS MANGLAD FLA SH FLOOD, WAS BOOKED IN THE AY 2010-11 BUT THE SAME WAS DISPUTED BY THE CLIENT. HE ALSO ARGUED THAT DURING THE YEAR UNDER CONSIDERATION , THE WORK IN PROGRESS REPRESEN TS THE AMOUNTS CLAIMED BY THE ASSESSEE TOWARDS COST COMPENSATION FOR EXPENSES INC URRED DUE TO THE MANGLAD FLASH FLOOD CLAIM AMOUNTING TO RS.13,45,47,750/- AS REDUC ED BY THE COUNTERCLAIM BY CLIENT FOR RECOVERY OF ADVANCES GIVEN BY THEM TOWARDS MINI MUM WAGES RS.2,98,90,277/- AND THUS NET CLAIM WORKED OUT TO RS.10,46,57,473/-. THE LD. COUNSEL STRONGLY PLACED RELIANCE ON THE JUDGEMENTS OF SUPREME COURT IN THE CASE OF E.D. SASSON & CO. (26 ITR 27), SHOORJI VALLABHDAS & CO (46 ITR 144) AND C IT VS. HINDUSTAN HOUSING & LAND DEVELOPMENT TRUST LTD. (161 ITR 524) . THE LD. COUNSEL FURTHER SUBMITTED THAT IN ORDER TO INVOKE SECTION 263 THE TWIN CONDITIONS WERE TO BE SATISFIED. THE ORDER PROPOSED TO BE SET ASIDE MUST BE ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE. IT WAS ARGUED THAT THE LD. CIT SET ASIDE T HE ORDER BY INVOKING PROVISIONS OF SECTION 263 ON THE GROUNDS THE ASSESSING OFFICER DI D NOT CALL FOR THE DETAILS OF MANGLAD FLASH FLOOD WHICH WAS EXCLUDED IN THE COMPU TATION OF INCOME. WHEREAS THE DETAILS AS TO EXCLUSION OF CLAIM OF MANGLAD FLASH F LOOD WAS DULY FILED VIDE LETTER DATED 12-09-2012 BEFORE THE ASSESSING OFFICER AND H E WAS PROVIDED COPY OF THE CASE FILED IN THE DELHI HIGH COURT BY M/S. SJVN LTD DISP UTING THE SAID CLAIM. 5 ITA NO. 2632/MUM/2015 (A.Y. 2010-11) NATHPA JHAKRI JOINT VENTURE, VS. THE ASST. CIT 4. THE LD. COUNSEL FURTHER SUBMITTED THAT THE SAID CLAIM WAS OFFERED FOR TAXATION IN THE IMMEDIATELY SUCCEEDING YEAR I.E. AY 2011-12 WHE N THE CLAIM ATTAINED FINALITY, THE ASSESSEE ENTERED INTO AN AGREEMENT WITH THE CLIENT WHICH GAVE THE UNFETTERED RIGHT TO RECEIVE THE INCOME FROM HIS CLIENT QUA THE CLAIM AN D THEREFORE, THERE WAS NO LOSS OF REVENUE TO THE INCOME TAX DEPARTMENT AS WHAT WAS EX CLUDED IN THE AY 2010-11 WAS OFFERED TO TAX IN AY 2011-12 BY RELYING ON THE DE CISION IN THE CASE OF CIT VS. G.R. THANGAMALIGAI PASSED BY THE HONBLE MADRAS HIGH COU RT WHEREIN IT HAS BEEN UPHELD THAT WHERE THERE IS NO LOSS OF REVENUE, INTE RFERENCE U/S 263 IS NOT JUSTIFIED. THE LD. DR ON THE OTHER HAND RELIED HEAVILY ON THE ORDE R OF THE CIT AND FURTHER SUBMITTED THAT U/S 263 WAS RIGHTLY INVOKED AS THE AO FAILED T O OBTAIN ALL THE DETAILS REGARDING MANGLAD FLASH FLOOD CLAIM AND ALSO THAT THE AO NOWH ERE DISCUSSED IN THE ASSESSMENT ORDER, THE ISSUE OF SAID CLAIM. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE CIT INVOKED THE PROVISIONS OF U/S 26 3 OF THE ACT TO SET ASIDE THE ASSESSMENT ORDER DATED 15/02/2013 AND DIRECTING THE AO TO FRAME THE ASSESSMENT AFRESH ON THE GROUND THAT THE AO FAILED TO OBTAIN D ETAILS IN RESPECT OF CLAIM OF MANGLAD FLASH FLOOD OF RS. RS.13,45,47,750/-. IN TH E COMPUTATION OF TOTAL INCOME THE ASSESSEE HAD EXCLUDED THE SAID CLAIM FROM ITS INCOM E ON THE GROUND THAT THE AMOUNT WAS NOT FINALLY SETTLED AS THE ASSESSEE CLIENT SJVN LTD FILED A CASE AGAINST THE ARBITRAL 6 ITA NO. 2632/MUM/2015 (A.Y. 2010-11) NATHPA JHAKRI JOINT VENTURE, VS. THE ASST. CIT AWARD IN THE HIGH COURT OF DELHI AND A NOTE NO 4 WA S ALSO APPENDED TO NOTES TO ACCOUNTS IN THE ANNUAL ACCOUNTS AS AT 31.03.2010 T O THIS EFFECT WHICH IS REPRODUCED BELOW. THE JV HAS ALSO BOOKED AN AMOUNT OF RS.10.47 CRORE S (NET) AS INCOME ON ACCOUNT OF AWARDS BY THE ARBITRAL TRIBUNAL IN RESPE CT OF MANGLAD FLASH FLOOD AND MINIMUM WAGES DURING THE CURRENT YEAR. HOWEVER, THE MANGLAD FLASH FLOOD AND MINIMUM WAGES AWARDS HAVE BEEN FURTHER DI SPUTED WITH SJVN BEFORE THE HIGH COURT OF DELHI. 6. THE BRIEF HISTORY OF THE CLAIM IS THAT AN UNPREC EDENTED FLASH FLOOD OCCURRED ON 11.08.1997 AT MANGLAD KHAD THE PROJECT SITE WAS FLO ODED WITH LARGE AMOUNT OF WATER ALONG WITH DEBRIS, SILT, BOULDERS, WOOD, TREES ETC, RESULTING INTO COMPLETE/PARTIAL DESTRUCTION OF MACHINERY AND EQUIPMENT WITH LOSS OF HUMAN LIFE WHICH LED TO ADDITIONAL COST BEING INCURRED BY THE ASSESSEE FOR CLEARING THE DEBRIS FROM THE PROJECT SITE AS WELL AS LOSS ON ACCOUNT OF EXTENSION OF THE PROJECT PERIOD DUE TO LOSS OF MACHINERY, EQUIPMENT AND MATERIALS THAT WERE NECESS ARY FOR CARRYING OUT THE CONSTRUCTION ACTIVITY. THE ASSESSEE HAD TO TAKE ADV ANCE FROM HIS CLIENTS IN ORDER TO CARRY OUT SUCH WORK WHICH WAS NOT RECOVERED IN SUBS EQUENT YEARS BY THE CLIENT. THE DISPUTE AROSE BETWEEN THE ASSESSEE AND HIS CLIENT R EGARDING CHARGING INTEREST ON THE SAID ADVANCE WHICH WAS DEDUCTED THE PAYMENT MADE TO ASSESSEE FOR THE WORK DONE. WHEREAS, ON THE OTHER HAND, THE ASSESSEE MAINTAINED THAT NO INTEREST WAS CHARGEABLE ON THE ADHOC ADVANCE MADE. THE MATTER WAS TAKEN TO THE DISPUTE REVENUE BOARD, 7 ITA NO. 2632/MUM/2015 (A.Y. 2010-11) NATHPA JHAKRI JOINT VENTURE, VS. THE ASST. CIT WHEREIN IT WAS DECIDED THAT THE RATE OF INTEREST CH ARGED BY THE CLIENT WAS EXCESSIVE AND IT SHOULD BE @ 10%, BEING THE RATE OF INTEREST SPEC IFIED IN THE CONTRACT DOCUMENT. THE CLIENT M/S. SJVN LTD. DID NOT ACCEPT THE DECISION O F DRB REFERRED THE MATTER TO ARBITRATION. ARBITRATORS ALSO AGREED WITH THE DRB O RDER AND THEREAFTER THE CLIENT CHALLENGED THE ORDER OF ARBITRATORS BEFORE THE DELH I HIGH COURT. WE FIND THAT THE ASSESSEE HAD BEEN FOLLOWING THE PRACTICE OF OFFERIN G CLAIM TO TAXATION IN THE YEAR IN WHICH THE CLAIM WAS FINALLY SETTLED AND THIS HAD BE EN ACCEPTED BY THE DEPARTMENT IN THE ASSESSMENT PROCEEDING IN THE ASSESSMENT YEAR 20 07-08 ON IDENTICAL FACTS. THE AO REQUIRED THE DETAILS OF THIS CLAIM WHICH WAS SUPPLI ED BY LETTER DATED 12/09/12 BY THE ASSESSEE AND THUS, THE AO FORMED AN OPINION ON THE SUBMISSIONS OF ASSESEE MADE BY LETTER DATED 12/09/12 BY ACCEPTING THE STAND OF THE ASSESSEE. IN ORDER TO INVOKE THE PROVISION OF SECTION 263 OF THE ACT, THE ORDER PASS ED BY THE AO HAS TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WHE REAS IN THE PRESENT CASE THE ORDER IS NOT ERRONEOUS NOR PREJUDICIAL. THE AO HAD CALLED FO R DETAILS FROM THE ASSESSEE IN RESPECT OF MANGLAD FLASH FLOOD CLAIM AND AFTER CONS IDERING THE REPLY FILED BY THE ASSESSEE ALLOWED AND ACCEPTED THE TREATMENT GIVEN T O DISPUTED CLAIM IN RESPECT OF MANGLAD FLASH FLOOD WHICH HAD BEEN ACCEPTED FOR THE ASSESSMENT YEAR 2007-08. THE ORDER IS ALSO NOT PREJUDICIAL TO THE INTEREST OF TH E REVENUE AS THE ASSESSEE ITSELF OFFERED THE AMOUNT OF CLAIM OF MANGLAD FLASH FLOOD IN THE A SSESSMENT YEAR 2011-12, WHEN THE CLAIM ATTAINED FINALITY AND THUS, NO PREJUDICE WAS CAUSED TO THE REVENUE. IN THE 8 ITA NO. 2632/MUM/2015 (A.Y. 2010-11) NATHPA JHAKRI JOINT VENTURE, VS. THE ASST. CIT CASE E.D. SASSON & CO. (26 ITR 27) THE HONBLE SUPR EME COURT HAS HELD THAT INCOME CAN BE SAID TO ACCRUE OR ARISE WHEN A DEBT COMES IN TO EXISTENCE IN FAVOUR OF THE ASSESSEE BUT THE ASSESSEE MUST HAVE ALSO ACQUIRED T HE RIGHT TO RECEIVE THE PAYMENT. THE REAL TEST OF INCOME IS WHETHER OR NOT THE ASSES SEE HAS AN UNFETTERED RIGHT TO RECEIVE THE SAME. HOWEVER, IN THE PRESENT CASE M/S. SJVN LT D. FILED A CASE IN THE DELHI HIGH COURT AGAINST THE ARBITRAL AWARD WHICH SHOWS THAT T HE ASSESSE DOES NOT HAVE AN UNFETTERED RIGHT TO RECEIVE THE CLAIM. IN THE CASE OF SHOORJI VALLABHDAS &CO (46 ITR 144) THE HONBLE SUPREME COURT HAS HELD THAT IF INC OME DOES NOT RESULT AT ALL THERE CANNOT BE A TAX, THOUGH IN THE BOOKS OF ACCOUNTS AN ENTRY IS MADE OF HYPOTHETICAL NATURE WHICH DOES NOT MATERIALIZE. IN THE CASE OF C IT VS. HINDUSTAN HOUSING &LAND DEVELOPMENT TRUST LTD (161 ITR 524) THE HONBLE SUP REME COURT HAS HELD THAT ALTHOUGH AN AWARD MAY BE MADE IN FAVOUR OF THE ASSE SSEE BY THE ARBITRATOR, BUT NO INCOME CAN BE SAID TO ACCRUE OR ARISE IN THE HANDS OF THE ASSESSEE WHEN THE SAID ARBITRATION AWARD WAS IN ITSELF IN DISPUTE. IN THE CASE OF CIT VS. GREENWORLD CORPORATION THE HONBLE SUPREME COURT HELD THAT AN ORDER OF ASSESSMENT PASSED BY AN ITO SHOULD NOT BE INTERFERED WITH ONLY BECAUSE A NOTHER VIEW IS POSSIBLE. SIMILARLY IN THE CASE OF CIT VS. MAX INDIA LIMITED (2007) 295 ITR 282 & MALBAR INDUSTRIES CO. LTD. VS. CIT (2000 243 ITR 83) THE SUPREME COUR T HAS LAID DOWN THE PRINCIPLE THAT WHEN THE ASSESSING OFFICER TAKEN ONE OF THE TW O VIEWS PERMISSIBLE IN LAW AND WHICH THE COMMISSIONER DOES NOT AGREE WITH AND WHIC H RESULTS IN A LOSS OF REVENUE, IT 9 ITA NO. 2632/MUM/2015 (A.Y. 2010-11) NATHPA JHAKRI JOINT VENTURE, VS. THE ASST. CIT CANNOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS COMPLETELY U NSUSTAINABLE IN LAW. CONSIDERING THE FACTS OF THE ASSESSEE AND RESPECTFULLY FOLLOWIN G THE RATIO LAID DOWN IN VARIOUS JUDGEMENETS (SUPRA) WE ARE OF THE CONSIDERED VIEW T HAT THE ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE AND THEREFORE, THE ORDER PASSED BY THE CIT U/S 263 IS ANNULLED/CANCELLED. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2015 SD/- SD/- (JOGINDER SINGH) (RAJESH KUMAR) &' $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ( ) MUMBAI; *$ DATED : 18.12.2015 PS. ASHWINI GAJAKOSH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE 10 ITA NO. 2632/MUM/2015 (A.Y. 2010-11) NATHPA JHAKRI JOINT VENTURE, VS. THE ASST. CIT / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI