DCIT, Circle-2, Noida V. Optima-Era Infra Joint Venture, Noida

ITA 2971/DEL/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0696 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts
• Section: 144; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Anubhav Sharma, Judicial Member ITA No. 2971 /Del/2018 : Asstt. Year : 2012-13 DCIT, Circle-2, Noida-201301 Vs M/s Optima-Era Infra Joint Vehntrue, C-56/41, Sector-62, Nodia (APPELLANT) (RESPONDENT) PAN No. AAAAO1865A Assessee by : Sh. Chinu Bhasin, CA Revenue by : Ms. Rinku Singh, Sr. DR Date of Hearing: 05.05.2022 Date of Pronouncement: 31.05.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the Revenue against the order of ld. CIT(A)-1, Noida dated 27.10.2017 2. The assessee is engaged in the business of construction. The accounts were audited and the copy of audit report with Form No. 3CB, 3CD was furnished. The assessee furnished details in support of its income as called for during various hearing. During the course of assessment proceedings, the assessee has not furnished books of accounts, bills & vouchers etc. For the sake of ready reference, the relevant portion of the Assessment Order is reproduced as under: “ As per order sheet entry dated 12.12.2014, the assessee was requested to furnish the complete details with documentary evidences regarding project contract expenses of Rs.21,68,24,502/- ITA No. 2971/Del/2018 Optima-Era Infra Joint Venture 2 and labour charges of Rs.2,93,69,885/- total of Rs.24,61,94,387/-. But no complete explanation/submission was offered by the assessee in this regard in spite of sufficient opportunity provided to the assessee. In absence of incomplete details, the expenses of project contract and labour charges of Rs.24,61,94,387/- during the year has been fund unexplained. Therefore, facts and circumstances of the case, 1/5 th of above expenses are disallowed and added to the income of the assessee. The disallowance comes to an amount of Rs.4,92,38,877/- of project contract expenses and labour charges of Rs.24,61,94,387/-. Hence, addition/disallowance of Rs.4,92,38,877/- is being made.” 3. Aggrieved the assessee filed appeal before the ld. CIT(A) who deleted the addition holding as under: “The AO has failed to follow the correct procedure as is mandatory under the Income Tax Act, 1961. Once, the AO was not satisfied with the conduct of the assessee in furnishing the information and details called for by the AO. The AO, if it considered to be so necessary, could have assumed jurisdiction u/s 144 of the Income Tax Act, 1961 and proceeded to frame the best judgment assessment. However, it is seen that the AO did not choose to assume jurisdiction u/s 144 of the Income Tax Act, 1961 and therefore, it cannot be held against the assessee that it failed to comply with the requirements of the AO regarding furnishing the details and other information. Conversely, once there was no circumstances to invoke the provisions of Section 144 of the Income Tax Act, 1961 the AO could not have estimated the income of the assessee and as the assessment was framed under the provisions of Section 143(3) of the Income Tax Act, 1961 by disallowing the expenses purely on estimate basis as assessment was to be framed only on the basis of the material on record of the AO and the AO has brought no material on record to justify the ITA No. 2971/Del/2018 Optima-Era Infra Joint Venture 3 disallowance of 20% of the gross expenses purely on estimate basis which in any case could not have been done under the provisions of Section 143(3) of the Income Tax Act, 1961. It is seen that the AO has referred to no material at all in the impugned assessment order except to the claimed failure of the assessee to furnish the details called for by the AO. Either there was material on record of the AO to frame an assessment u/s 143(3) or the assessee has not complied with the requirements of the AO to furnish the information called for by the AO and thus calling for the assumptions of jurisdictions u/s 144 of the Income Tax Act, 1961. Since, the impugned assessment order was framed u/s 143(3), the assessee cannot be faulted with or not furnishing the details called for by the AO. On the other hand, the AO has no material to base its conclusions u/s 143(3) of the Income Tax Act, 1961 to disallow 1/5 th of the gross expenses on the ground of alleged failure of the assessee to furnish the details called for by the AO as in such a case the AO could have proceeded against the assessee under the provisions of Section 144 to frame the assessment in the estimation of the AO. The AO is vested with the authority and jurisdiction to reject the books of accounts of the assessee in case the same is found not to be maintained according to the accounting standards issued by the Central Government and thereafter proceed to frame the assessment as per the judgment of the Assessing Officer. However, the law provides for a specific procedure for rejection of books of accounts and for estimation of the income of the assessee. In the present case, the AO has estimated the income of the assessee but without rejecting the books of accounts of the assessee in so many words though, the effect of the impugned assessment order and estimation of income of the assessee is the same i.e. rejection of the books of accounts. In any case, the principle of natural justice is a strict ITA No. 2971/Del/2018 Optima-Era Infra Joint Venture 4 requirement in law for rejection of books of accounts and estimation of income.” 4. Aggrieved the revenue filed appeal before us. The Co- ordinate bench of Tribunal concurred with the order of the ld. CIT(A) in a similar case namely, KMB Era Joint Venture (the assessee being Optima Era Joint Venture) involving the same AO and the same ld. CIT(A), wherein the AO disallowed 1/5 th of contract expenses. 5. For the sake of ready reference and completeness, the Tribunal ruling of the Tribunal is reproduced as under: “We have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to the deletion of adhoc disallowance made by the AO. We find that ld. CIT(A) has come to the conclusion that the disallowance of the expenses has been made purely on estimated basis and AO has not brought any material on record to justify the disallowance. He has further noted that if the assessee had not furnished required details called for by the AO, the AO should have rejected the books of accounts and should have invoked the provision of Section 144 of the Income Tax Act, 1961. He noted that the AO has neither rejected the books of accounts nor has framed assessment u/s 144. Before us, no fallacy in the findings of ld. CIT(A) has been pointed out by the Revenue. In such a situation we find no reason to interfere with the order of the ld. CIT(A) and thus the ground of revenue is dismissed.” 6. Thus, we find that the AO has summarily disallowed 1/5 th of contract expenses to the tune of Rs.24.61 crores, the ld. CIT(A) deleted the addition holding that the AO did not invoke the relevant provisions of Section 144 and rejection of books of accounts, and the Co-ordinate Bench of Tribunal affirmed the ITA No. 2971/Del/2018 Optima-Era Infra Joint Venture 5 action of the ld. CIT(A) holding that the disallowance has been purely on estimate basis and the AO has not brought any material on record to justify the disallowance. Hence, keeping in view the entire facts of the case, we hereby decline to interfere with the order of the ld. CIT(A). 7. In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 31/05/2022. Sd/- Sd/- (Anubhav Sharma) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 31/05/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR