DCIT, New Delhi V. M/s. Airport of Authority of India., New Delhi

ITA 3074/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65661 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 18-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS ANURADHA MISRA
• Assessee Lawyers: VENKATESH MOHAN CAS
• Keywords: Additional evidence; Question of law; Non-deduction of tax; Wrong claim; Valuation report; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.2816/DEL/2010 ASSESSMENT YEAR : 2006-07 AIRPORTS AUTHORITY OF INDIA, RAJIV GANDHI BHAWAN, SAFDARJUNG AIRPORT, NEW DELHI. PAN : AACCA6412D VS. ACIT, RANGE-1, NEW DELHI. ITA NO.3074/DEL/2010 ASSESSMENT YEAR : 2006-07 DCIT, CIRCLE 1 (1), ROOM NO.390, CR BUILDING, NEW DELHI. VS. AIRPORTS AUTHORITY OF INDIA, A-WING, RAJIV GANDHI BHAWAN, SAFDARJUNG AIRPORT, NEW DELHI. PAN : AACCA6412D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN & SHRI VENKATESH MOHAN, CAS REVENUE BY : MRS. ANURADHA MISRA, CIT, DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THESE ARE CROSS APPEALS FOR ASSESSMENT YEAR 2006-07 AGAINST THE ORDER DATED 14.04.2010 PASSED BY THE LD. CIT (A)- IV, DELHI. ITA NO.2816/DEL/2010 HAS BEEN FILED BY THE ASSESSEE, WHEREAS ITA NO.3074/DEL/2010 IS PREFERRED BY THE DEPARTMENT. ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 2 2. IN THE ASSESSEES APPEAL, THE FOLLOWING GROUNDS HAVE B EEN RAISED:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDE R PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) [CIT (A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF A.O. IN DISALLOWING AN AMOUNT OF RS.50 CRORES ON ACC OUNT OF PROVISION FOR REHABILITATION AND EVICTION OF ILLEGAL ENCROACHMENTS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF A.O. IN DISALLOWING AN AMOUNT OF RS.80.44 CRORES ON ACCOUNT OF PROVISION FOR RETIRED MEDICAL BENEFIT SCHEME. 4. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRM ING THE DISALLOWANCE OF RS.2,09,38,390/- UNDER SECTION 40(A) (IA) OF THE ACT. (II) THAT THE DISALLOWANCES HAS BEEN MADE BY WRONG INTERPRETATION OF SECTION 194C/194J READ WITH SECTION 4 0(A) (IA) OF THE ACT. 2.1 T HE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS IN ITS APPEAL:- 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO DELETE THE ADDITION OF RS.10,61,38,514/- MADE BY THE A. O. ON ESTIMATE BASIS FOR THE WORK UNDERTAKEN ON BEHALF OF O THERS AGENCIES. THE LD. CIT HAS FAILED TO APPRECIATE THAT TH OUGH THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEMS OF ACCOUNT ING, REVENUE HAS NOT BEEN RECOGNIZED IN RESPECT OF DEPOSIT WORK UND ERTAKEN. 2. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO DELETE THE ADDITION OF RS.14,36,68,882/- NETTED OFF BY THE ASSESSEE AGAINST PRIOR INCOME UNDER THE HEAD PRIOR PERIOD INCOME. THE LD. CIT HAS FAILED TO APPRECIATE THAT IN M ERCANTILE SYSTEMS FOLLOWED BY ASSESSEE THERE IS NO PROVISION TO ALLOW PRIOR PERIOD EXPENSES. 3. GROUND NO.1 IN THE ASSESSEES APPEAL IS GENERAL. 4. GROUND NO.2 IN THE ASSESSEES APPEAL CONCERNS DISALLOWA NCE OF ` 50 CRORES ON ACCOUNT OF PROVISION FOR REHABILITATION AND EVICTION OF ALL ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 3 ILLEGAL ENCROACHMENTS. THE ASSESSING OFFICER MADE THE D ISALLOWANCE, HOLDING THAT THE PROVISION FOR EXPENSES ON ACCOUNT OF REHABILITATION AND EVICTION OF ILLEGAL ENCROACHMENTS WAS TO BE TREATED A S A CAPITAL EXPENDITURE, AS IT WAS INCURRED IN RELATION TO A CAPI TAL ASSET OF LAND. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE SAID AMOU NT WAS ONLY A PROVISION AND NOT AN ASCERTAINED LIABILITY AND THAT M OREOVER, IT WAS DISALLOWED IN THE EARLIER YEARS AND THE ATTENDING FAC TS FOR THE YEAR UNDER CONSIDERATION WERE THE SAME. THE ASSESSING OFFICE R RELIED ON THE DECISION DATED 15.10.2001 OF THE HONBLE DELHI H IGH COURT IN THE ASSESSEES OWN CASE IN ITA NO.37 OF 1983 WHEREIN THE ASSESSEE S APPEAL HAD BEEN DISMISSED AND IT HAD BEEN HELD THAT TH E EXPENDITURE ON ACCOUNT OF REHABILITATION WAS IN CONNECTION WITH THE ACQUISITION AND PHYSICAL CONTROL OF LAND, AND THAT THE ASSESSEE, BY SPEND ING THE AMOUNT, WAS TO GET AN ENDURING BENEFIT FROM THE LAND ACQUIRED FOR THE PURPOSE OF EXPANSION OF INTERNATIONAL AIRPORTS, AND IT WAS A CAPITAL EXPENDITURE. 5. VIDE THE IMPUGNED ORDER, THE LD. CIT (A) REJECTE D THE ASSESSEES CHALLENGE TO THE AFORESAID FINDINGS OF THE ASSESSING OFFI CER. IT WAS OBSERVED AS FOLLOWS:- THE CONTENTION OF THE ASSESSEE THAT THE PROVISION WAS TO WARDS EVICTION OF HUTMENTS AND ILLEGAL OCCUPANTS OF THE LAND OWNED BY THE AIRPORTS AUTHORITY OF INDIA CANNOT BE ACCEPTED AS THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE AMOUNT OF EXPENDITURE MADE OUT OF THE PROVISION TILL DATE. THERE FORE, I AM OF THE OPINION THAT THE PROVISION MADE BY THE AIRPORTS AU THORITY OF INDIA IS AN UNASCERTAINED LIABILITY WHICH CANNOT BE ALLOWED. THE ISSUE HAS BEEN EXAMINED IN EARLIER YEARS BY MY PREDECESSORS, MORE PERTINENTLY THE ISSUE HAS BEEN DECI DED AGAINST THE ASSESSEE IN ASSESSMENT YEAR 1996-97 TO 2002 -03 AND IN ASSESSMENT YEARS 2004-05 & 05-06 AND THE DISAL LOWANCE MADE BY THE A.O. HAS BEEN CONFIRMED. I THEREFORE CON FIRM THE ADDITION OF RS.50 CRORES MADE BY THE ASSESSING OFFICE R. THIS GROUND IS DISMISSED. 6. BEFORE US, THE ASSESSEE HAS, WHILE CHALLENGING THE AFO RESAID FINDINGS RECORDED BY THE LD. CIT (A), PLACED RELIANC E ON THE JUDGEMENT ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 4 DATED 16.12.2011 PASSED BY THE HONBLE DELHI HIGH COU RT IN THE CASE OF THE ASSESSEE IN ITA NOS. 432, 433, 437, 517, 792, 125 0 AND 1251 OF 2008, IN THE ASSESSEES OWN CASE. A COPY THEREOF HAS BEEN FILED BEFORE US BY WAY OF PAGES 1-14 OF THE ASSESSEES PAPER BOOK. TH EREIN, THE HONBLE HIGH COURT HAS OBSERVED AS FOLLOWS:- 19. IT IS A MATTER OF RECORD THAT CERTAIN GOVERNMENT DEPARTMENT LIKE CUSTOMS, IMMIGRATION, METEOROLOGICAL DEPARTMENT, POST OFFICE, POLICE AGENCIES INCLUDING BS F, CISF, SPECIAL BUREAU OF GOVT., FRRO, INTELLIGENCE BUREAU ETC . HAVE BEEN PROVIDED ACCOMMODATION IN THE TERMINAL BUILDINGS AND OTHER TECHNICAL AREAS BY THE ASSESSEE. IT IS THE CASE OF THE ASSESSEE THAT THESE DEPARTMENTS HAVE THEIR OFFICES TO FACI LITATE THE FUNCTIONING OF THE ASSESSEE AND THEY DO NOT AGREE TO PAY ANY LICENCE FEE OF THE SPACE OCCUPIED BY THEM ON THE PLEA THAT THEY ARE REGULATORY BODIES TO PROVIDE SPECIAL SERVICES IN TERMS OF THE GOVERNMENT DIRECTIONS. STILL THE ASSESSEE HAD RAISE D THE PROFORMA INVOICES IN ALL THESE YEARS AND KEPT IN MEMO RANDA ACCOUNT FOR EXAMPLE IN THE ASSESSMENT YEAR 1998-99. TH E PROFORMA INVOICES WERE TO THE TUNE OF RS. 19.66 CRORE S. ACCORDING TO THE ASSESSEE THESE MEMORANDA ACCOUNTS ARE MAINTAINED BY THE ASSESSEE ONLY BECAUSE ITS AUDITORS NA MELY CAG OF INDIA HAD SUGGESTED/EMPHASIZED THE ASSESSEE TO MAINTAIN THESE ACCOUNTS. THE ASSESSEE ALSO EMPHASIZED THAT SUCH USE BY GOVERNMENT DEPARTMENT SHOULD NOT BE TREATED AS COMMERCIAL DEPARTMENTS SINCE THEY HAVE TO BE PROVIDED SPACE FOR THE PERFORMANCE OF DUTY. THEREFORE, NO REGULAR RE VENUE WAS BEING GENERATED. THE ADVICES WERE ONLY PROFORMA IN NATURE. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE AFORESA ID PLEA AND TREATED THE AMOUNT OF PROFORM ADVICES AS INCOME OF THE ASSESSEE. THE PLEA OF THE ASSESSEE THAT THERE WAS NO REAL INCOME ACCRUED TO THE ASSESSEE WAS TURN DOWN. THE CIT (A) UPHELD THE AFORESAID ADDITION, ON THE GROUND THAT SOME O F THESE GOVERNMENT AGENCIES HAD IN FACT PAID THE AMOUNT. ON THIS VERY REASONING, THE TRIBUNAL HAS ALSO REJECTED THE GROUND O F THE ASSESSEE. THE QUESTION IS AS TO WHETHER THERE IS A REAL INCOME WHICH HAS ACCRUED TO THE ASSESSEE THIS REAL INCOME THE ORY IS ACCEPTED BY THE APEX COURT IN STATE BANK OF TRAVANCORE STATE BANK OF TRAVANCORE STATE BANK OF TRAVANCORE STATE BANK OF TRAVANCORE VS. CIT, CIT, CIT, CIT, (1986) 158 ITR 102. AS PER THIS JUDGMENT, THE CONCEPT O F REAL INCOME IS APPLICABLE IN JUDGING WHETHER THERE HAS BEE N INCOME OR NOT. IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT B E A TAX, EVEN THOUGH IN BOOK-KEEPING, AN ENTRY IS MADE ABOUT A HYPOTHETICAL INCOME WHICH DOES NOT MATERIALIZED. THIS P RINCIPLE IS APPLICABLE WHETHER THE ACCOUNTS ARE MAINTAINED ON CA SH SYSTEM OR UNDER MERCANTILE SYSTEM. IF THE ACCOUNTS ARE MAINTAINED UNDER THE MERCANTILE SYSTEM, WHAT HAS TO BE S EEN WHETHER INCOME CAN BE SAID TO HAVE BEEN REALLY ACCRUE D TO THE ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 5 ASSESSEE COMPANY. (SEE GODHARA ELECTRICITY CO. LTD. GODHARA ELECTRICITY CO. LTD. GODHARA ELECTRICITY CO. LTD. GODHARA ELECTRICITY CO. LTD. VS. COMMISSIONER OF INCOME COMMISSIONER OF INCOME COMMISSIONER OF INCOME COMMISSIONER OF INCOME- -- -TAX, TAX, TAX, TAX, 225 ITR 746). IT IS NOT IN DISPUTE THAT THERE IS SOME REALIZATION FROM THE AFORESAID GOVER NMENT AGENCIES THOUGH DETAILS ARE NOT AVAILABLE. IN THE YEAR 1998-99 RS. 19.66 CRORES TOWARDS PROFORMA ADVICES WERE MADE. THESE INCLUDED PRIVATE PARTIES AS WELL AS GOVERNMENT DEPART MENTS. INSOFAR AS PRIVATE PARTIES ARE CONCERNED, THERE IS NO ISSUE THAT THE INCOME HAS ACCRUED AND WOULD BE TAXABLE IN THE YE AR IN WHICH THESE INVOICES IS MADE. IN CASE MONEY FROM THES E PRIVATE PARTIES IS NOT REALIZED LATER ON, THAT CAN ALWAYS BE CLA IMED AS BAD DEBT. WE ARE HERE CONCERNED WITH THE PROFORMA BILL S IN RESPECT OF GOVERNMENT PARTIES IN RESPECT OF WHICH PROF ORMA ADVICES TOTALING RS. 5.33 5.33 5.33 5.33 CRORES WERE MADE. HOWEVER, IN RESPECT OF ASSESSMENT YEAR 1998-99 AGAINST THE TOTAL PROFORMA I NVOICE OF RS. 5.33 CRORES, THE PAYMENT RECEIPT WAS OF A MEA GER SUM OF RS. 10.30 LACS. THE SAME IS THE POSITION IN RESPECT O F EARLIER ASSESSMENT YEARS. 20. WE ARE OF THE OPINION THAT THE TRIBUNAL IS NOT CORRE CT THAT MERELY BECAUSE A MEAGER SUM OF RS. 10.33 LACS IS RECEIVED, THE ENTIRE AMOUNT OF RS. 5.33 CRORES IS TO BE TREATED AS INCOME AND SAME TREATMENT IS TO BE GIVEN IN OTHER ASSESSMENT YEA RS. WHAT WAS TO BE SEEN AS TO WHICH GOVERNMENT DEPARTMENT IS REMITTING THE AMOUNT. FROM THE DETAILS FURNISHED, IT IS OBVIOUS THAT SOME OF THE DEPARTMENTS HAVE NEVER MADE ANY PAYMEN T. 21. WE THUS RESTORE THIS ISSUE BACK TO THE ASSESSING OFF ICER TO EXAMINE THE MATTER IN THE LIGHT OF OUR AFORESAID DISCUS SION. IN RESPECT OF THE GOVERNMENT AGENCIES, LIKE POLICE, CUSTOM S WHO HAVE NEVER PAID ANY AMOUNT TO THE ASSESSEE, ON THE APPL ICATION OF REAL INCOME THEORY AND TAKING A REALISTIC VIEW, IT IS HELD THAT NO INCOME HAS ACCRUED MERELY BECAUSE PROFORMA ADVIC ES WERE RAISED, THAT TOO, AT THE INSTANCE OF THE CAG OF INDIA. 22. THIS QUESTION OF LAW IS ANSWERED ACCORDINGLY WI TH THE DIRECTION TO THE ASSESSING OFFICER TO DETERMINE THE TAXABI LITY OF PROFORMA INVOICES IN RESPECT OF THOSE PARTIES WHO HAVE BEEN REMITTING PART PAYMENTS AND HAVE ACCEPTED THEIR LIABILITY AND NOT IN RESPECT OF THOSE GOVERNMENT AGENCIES WHO HAVE NE VER PAID ANY AMOUNT. 7. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDE D THAT THE SLP FILED BY THE DEPARTMENT AGAINST THE AFORESAID HIG H COURT ORDER SINCE STANDS DISMISSED VIDE ORDER DATED 07.09.2012 (COP Y AT APB 15). ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 6 8. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRONG R ELIANCE ON THE IMPUGNED ORDER IN THIS REGARD. IT HAS BEEN CONTENDED THAT IT REMAINS UNDISPUTED THAT THE ASSESSEE WAS UNABLE TO SPEND THE AMO UNT OF EXPENDITURE MADE OUT OF THE PROVISION TILL DATE; AND THAT SO, THE LD. CIT (A) WAS CORRECT IN HOLDING THAT THE PROVISION MADE BY THE ASSESSEE WAS AN UNASCERTAINED LIABILITY WHICH COULD NOT BE ALLOWE D. 9. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED TH E MATERIAL ON RECORD. THIS ISSUE, IT IS SEEN, STANDS SQUARELY COVER ED BY THE DECISION (SUPRA) OF THE HONBLE HIGH COURT IN THE ASSESSE ES OWN CASE. THEREIN, THE MATTER WAS RESTORED TO THE FILE OF THE A SSESSING OFFICER TO RE-EXAMINE IT IN THE LIGHT OF THE OBSERVATIONS (SUPRA ) MADE BY THEIR LORDSHIPS IN PARAS 19 AND 20 OF THE JUDGEMENT, WHICH STANDS REPRODUCED IN THE PRECEDING PARAGRAPH OF THIS ORDER. ACCORDINGLY, THE ISSUE FOR THIS YEAR ALSO IS REMITTED TO THE FILE OF THE ASSESSING OFFICER TO BE EXAMINED AND RE-DECIDED IN THE LIGHT OF THE AFOR ESAID OBSERVATIONS OF THE HONBLE HIGH COURT. 10. COMING TO GROUND NO.3, THE ASSESSING OFFICER DISALLO WED AN AMOUNT OF ` 80.44 CRORES REPRESENTING MEDICAL RETIREMENT BENEFIT S CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER OBSERVED TH AT THE ASSESSEE HAD MADE PROVISION FOR MEDICAL BENEFITS WITHOUT STATING AS TO HOW THIS AMOUNT WAS BEING TREATED AS AN ASCERTAINED LI ABILITY OF THE ASSESSEE; THAT THE COST OF MEDICAL BENEFITS INCURRED BY T HE ASSESSEE WAS AN ALLOWABLE EXPENDITURE ONLY ON ACTUAL BASIS; THA T HOWEVER, SINCE THE ASSESSEE HAD CLAIMED THE PROVISION OF SUCH MEDICAL BE NEFITS, THE SAME COULD NOT BE ALLOWED; THAT THE DETAILS FORMING B ASIS OF ARRIVING AT THE PROVISION HAD NOT BEEN FURNISHED BY THE ASSESSEE AND , AS SUCH, THERE WAS NO JUSTIFICATION FOR CLAIMING THE AMOUNT OF ` 80.44 CRORES AS AN EXPENSE. ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 7 11. THE LD. CIT (A) UPHELD THE ASSESSING OFFICERS ORDER ON THIS ISSUE, HOLDING THAT THE ASSESSEE HAD ARRIVED AT THE PROVISION F OR MEDICAL BENEFITS ONLY ON ESTIMATE BASIS, WHICH WAS NOT BASED ON A NY SCIENTIFIC OR ACTUARIAL VALUATION; THAT IT WAS ONLY AT THE TIME THE APPELLATE PROCEEDINGS [BEFORE THE LD. CIT (A)] THAT THE ASSESSEE H AD CONTENDED THAT THE ACTUARIAL VALUATION FOR ARRIVING AT THE PR OVISION WAS AVAILABLE AND IT OUGHT TO BE CONSIDERED; AND THAT THIS WAS ONLY AN AFTERTHOUGHT AND THE ACTUAL CLAIM OF PROVISION FOR MEDICAL BENEFI TS WAS NOT BASED ON ANY SCIENTIFIC OR LOGICAL CALCULATION. 12. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS C ONTENDED THAT THOUGH BOTH THE AUTHORITIES BELOW, I.E., THE ASSE SSING OFFICER, IN HIS REMAND REPORT AND THE LD. CIT (A) IN THE ORDER U NDER APPEAL, HAVE CONCURRENTLY HELD THE EXPENDITURE BY WAY OF PROVISIO N FOR RETIRED MEDICAL BENEFIT SCHEME TO BE AN ALLOWABLE EXPENDITUR E, THE LD. CIT (A) HAS ERRED IN NOT ADMITTING THE ACTUARIAL VALUATION R EPORT SUBMITTED BY THE ASSESSEE BY WAY OF ADDITIONAL EVIDENCE AND IN THERE BY REJECTING THE CLAIM OF THE ASSESSEE. IT HAS BEEN SUBMITTED THAT T HE ACTUARIAL VALUATION REPORT, EVEN AS PER THE IMPUGNED ORDER, IS TO FORM THE BASIS OF THE ALLOWANCE/DISALLOWANCE OF THE ASSESSEES CLAIM AN D SO, THE SAME NEEDS TO BE TAKEN IN EVIDENCE AND THE MATTER NEEDS TO BE REMITTED TO THE ASSESSING OFFICER TO BE DECIDED AFRESH ON CONSIDERING THE SAID ACTUARIAL VALUATION REPORT. 13. THE LD. DR, PER CONTRA HAS STRONGLY RELIED ON THE IMPUGNED ORDER IN THIS REGARD. IT HAS BEEN AVERRED THAT THE ASSESSEE HA S NOT BEEN ABLE TO COUNTER THE FINDING GIVEN BY THE LD. CIT (A) THA T THE ACTUARIAL VALUATION REPORT WAS FILED AT A VERY BELATED STAGE IN THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT (A) AND THAT IT WAS NO THING OTHER THAN A MERE AFTERTHOUGHT DESIGNED TO SOME-HOW GET THE ASSESSEE S FALSE CLAIM ALLOWED. ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 8 14. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED T HE MATERIAL ON RECORD. THE LD. CIT (A), IT IS SEEN, REJECTED THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. THIS ADDITIONAL EVIDENCE COMPRISE D AN ACTUARIAL VALUATION REPORT. THE LD. CIT (A) REJECTED THIS EVI DENCE, EVEN THOUGH IT WAS HELD THAT THE PROVISION FOR REHABILITATION AND EV ICTION OF ILLEGAL ENCROACHMENTS, AS CLAIMED BY THE ASSESSEE, NEEDED TO BE A LLOWED IN VIEW OF VARIOUS JUDICIAL PRONOUNCEMENTS. IN HIS REMA ND REPORT, A COPY WHEREOF HAS BEEN FILED BEFORE US BY THE ASSESSEE, THE ASSESSI NG OFFICER HIMSELF AGREED THAT THE EXPENDITURE WAS AN AL LOWABLE EXPENDITURE. HE, HOWEVER, OBJECTED TO THE ADMISSION OF THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE, WHICH OBJECTION WAS ENTE RTAINED BY THE LD. CIT (A). 15. NOW, IN VIEW OF THE FACT THAT BOTH THE TAXING A UTHORITIES PRINCIPALLY AGREE, AS ABOVE, THAT THE EXPENDITURE CL AIMED IS AN ALLOWABLE EXPENDITURE AND FINDING THAT THE ACTUARIA L VALUATION REPORT FILED BY THE ASSESSEE IS A PIECE OF DOCUMENTARY EVIDENC E WHICH NEEDS TO BE TAKEN INTO CONSIDERATION FOR DECIDING THE ISSUE, WE REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ACTUARIAL REPORT AND TO RE-DECIDE THE ISSUE ON THE BASIS THEREOF. 16. AS PER GROUND NO.4, THE LD. CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ` 2,09,38,390/- UNDER THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT BY MIS-INTERPRETING THE PROVISIONS OF SECTIONS 194C/194J OF THE ACT. 17. THE ASSESSING OFFICER MADE THE DISALLOWANCE DUE TO SH ORT/NON- DEDUCTION OF TAX AT SOURCE. THE LD. CIT (A) CONFIRM ED THE DISALLOWANCE. 18. THIS MATTER, IT IS SEEN, AS CORRECTLY CONTENDED ON BEHALF OF THE ASSESSEE, IS COVERED BY THE DECISION DCIT VS. CHANDA BHOY JASSA BHOY 49 SOT 448 (MUM), AS PER WHICH, FOR SHORTFALL OF DEDUCTION OF ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 9 TAX, SECTION 40 (A) (IA) OF THE ACT IS NOT ATTRACTED . THE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) CAN BE INVO KED ONLY IN THE EVENT OF NON-DEDUCTION OF TAX, BUT NOT FOR LESSER DED UCTION OF TAX, WHICH IS ALSO THE CASE HEREIN. THEREFORE, GROUND NO.3 IS ACCEPTED. 19. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY AL LOWED AS INDICATED. ITA NO.3074/DEL/2010 (DEPARTMENTS APPEAL) 20. THE FIRST GROUND IN THE DEPARTMENTS APPEAL STATES THAT THE LD. CIT (A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` 10,61,38,514/-, MADE ON ESTIMATE BASIS, FOR THE WORK UNDERTAKEN BY THE ASSESSEE ON BEHALF OF OTHER AGENCIES, FAILING TO APPRECIATE THAT THOUGH THE ASSESSEE WAS FOLLOWING THE ME RCANTILE SYSTEM OF ACCOUNTING, THE REVENUE HAD NOT BEEN RECOGN IZED IN RESPECT OF THE DEPOSIT WORK UNDERTAKEN. 21. THE ASSESSING OFFICER MADE THE ADDITION ON AN ESTIMA TE BASIS FOR THE WORK UNDERTAKEN BY THE ASSESSEE ON BEHALF OF OTHER AGENCIES. IT WAS OBSERVED THAT THE ASSESSEE WAS REQUIRED TO SHOW WORK-I N-PROGRESS FOR THE VARIOUS PROJECTS AND JOBS UNDERTAKEN BY IT A T THE CLOSE OF THE FINANCIAL YEAR, WHICH THE ASSESSEE HAD NOT DONE. THE ASSESSING OFFICER ESTIMATED THE AMOUNT OF WORK-IN-PROGRESS AS AT THE END OF THE YEAR, AT ` 10,61,38,514/-, BEING THE AMOUNT OF 50% OF THE DEP OSIT AGAINST WORKS RECEIVED BY THE ASSESSEE. 22. THE LD. CIT (A), WHILE DECIDING THE ISSUE IN FAVO UR OF THE ASSESSEE, OBSERVED THAT THERE WAS A CONSISTENCY IN THE ACCO UNTING POLICY OF THE ASSESSEE AND THAT THE INCOME AGAINST DEPO SITS WORKS HAD BEEN CONSISTENTLY ACCOUNTED FOR ON COMPLETION OF THE PROJECT/JOBS. THE LD. CIT (A) FOLLOWED THE FIRST APPELLATE ORDERS FOR A SSESSMENT YEARS 1992-93 AND 2005-06 WHERE SIMILAR ADDITIONS HAD BEEN DELETED. ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 10 23. THE LD. DR, AGAINST THE ABOVE FINDINGS OF THE LD . CIT (A), HAS CONTENDED THAT THE LD. CIT (A) HAS ERRED IN FAILING TO APPRECIATE THAT THE ASSESSEE DID NOT RECOGNIZE THE REVENUE IN RESPECT OF THE DEPOSITS WORK UNDERTAKEN, DESPITE THE FACT THAT THE ASSESSEE WAS F OLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING; AND THAT THE ASSESSING O FFICER HAD CORRECTLY ESTIMATED THE WORK UNDERTAKEN BY THE ASSESSEE ON BEHALF OF OTHER AGENCIES, WHICH ESTIMATE HAS WRONGLY BEEN DIRECT ED BY THE LD. CIT (A) TO BE DELETED. 24. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS CONTENDED THAT THIS ISSUE HAS BEEN REMITTED TO THE ASSESSIN G OFFICER BY THE HONBLE HIGH COURT AND THE SLP FILED BY THE DEP ARTMENT BEFORE THE HONBLE SUPREME COURT AGAINST THE JUDGEMENT OF THE H ONBLE HIGH COURT STANDS DISMISSED. 25. THIS ISSUE WAS BEFORE THE HONBLE HIGH COURT BY WAY OF QUESTION OF LAW (II) I.E., AS TO WHETHER THE ITAT WAS JUSTIFIE D IN TREATING THE AMOUNT RAISED IN PROFORMA INVOICES AS INCOME, RELYING ON ITS ORDER FOR A.Y. 1998-99. THE HONBLE HIGH COURT REMITTED THE MATTER TO THE FILE OF THE ASSESSING OFFICER, TO BE DECIDED AFRESH IN THE LIGHT OF THEIR LORDSHIPS OBSERVATIONS MADE IN PARA NOS.19 AND 20 OF T HE JUDGEMENT, AS REPRODUCED HEREINABOVE. THERE IS NO DENIAL THAT T HE FACTS FOR THE YEAR UNDER CONSIDERATION ARE EXACTLY SIMILAR TO THOSE PRESENT BEFORE THE HONBLE HIGH COURT. THE SLP AGAINST THE JUDGEM ENT OF THE HONBLE HIGH COURT STANDS DISMISSED BY THE HONBLE SUPREME COU RT, AS AVAILABLE FROM THE HONBLE SUPREME COURT ORDER DATE D 07.09.2012, A COPY WHEREOF IS PLACED AT PAGE 15 OF THE ASSESSEES PAPER BOOK. 26. ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF THE ASSESSING OFFICER, TO BE DECIDED AFRESH IN THE LIGHT OF THE OB SERVATIONS IN THE PARAS 19 AND 20 OF THE HIGH COURT JUDGEMENT (SUPRA). ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 11 27. APROPOS GROUND NO.2 RAISED BY THE DEPARTMENT, IT IS CONTENDED THAT THE LD. CIT (A) HAS ERRED IN DIRECTING THE ASSESSIN G OFFICER TO DELETE THE ADDITION OF ` 14,36,68,882/- NETTED OFF BY THE ASSESSEE AGAINST PRIOR INCOME UNDER THE HEAD PRIOR PERIOD I NCOME, FAILING TO APPRECIATE THAT IN THE MERCANTILE SYSTEM OF ACCOUNTIN G FOLLOWED BY THE ASSESSEE, THERE IS NO PROVISION TO ALLOW PRIOR PERIOD EXP ENSES. 28. AFTER ADJUSTING PRIOR PERIOD EXPENDITURE OF ` 14,36,68,882, THE ASSESSEE HAD DECLARED A NET AMOUNT OF ` 7,79,85,811/-. THE ASSESSING OFFICER, HOWEVER, MADE ADDITION OF THE AMOUNT NETTE D OFF BY THE ASSESSEE AGAINST THE PRIOR PERIOD INCOME UNDER THE HEAD PRIOR PERIOD ACCOUNTS AGAINST PRIOR PERIOD INCOME. THE ASSESSING OFF ICER OBSERVED THAT THE ASSESSEE WAS REQUIRED TO MAINTAIN ITS ACCOUNTS ON THE ACCRUAL BASIS OF ACCOUNTING AND THAT THERE WAS NO PROVISION UND ER THE INCOME- TAX ACT FOR ALLOWING ANY EXPENDITURE WHICH ACCRUED IN THE FINANCIAL YEAR. 29. THE LD. CIT (A) FOLLOWED THE FIRST APPELLATE ORD ERS IN THE ASSESSEES OWN CASE FOR A.YS 2004-05 AND 2005-06 WHILE DIR ECTING THE ASSESSING OFFICER TO DELETE THE ADDITION. IT WAS ALSO NO TED THAT THE COD HAD REFUSED PERMISSION TO THE DEPARTMENT TO FILE A PPEAL BEFORE THE TRIBUNAL FOR A.Y. 2001-02. 30. THE LD. DR HAS CONTENDED THAT THE LD. CIT (A), W HILE WRONGLY DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION , HAS NOT TAKEN INTO CONSIDERATION THE FINDING RECORDED BY THE ASSESSING OFFICER THAT IN THE MERCANTILE SYSTEM OF ACCOUNTING, THERE IS NO PROVI SION TO ALLOW PRIOR PERIOD EXPENSES. 31. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS SUBMITTED THAT THE MATTER IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER, FOR A.Y.S 2007-08 AND 2008-09 IN THE ASSESSEES OWN ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 12 CASE, DATED 16.03.2012 (COPY AT APB 16-23) AND THE T RIBUNAL ORDER DATED 22.06.2012, IN THE ASSESSEES OWN CASE FOR A.Y. 200 8-09 (COPY AT APB 24-26). 32. FOR A.Y. 2007-08, IT IS SEEN, THE TRIBUNAL OBSERVE D AS FOLLOWS:- 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL PLACED BEFORE US. WE FIND THAT WITH REGARD TO PRIOR PE RIOD EXPENSES ALSO, THE LEARNED CIT(A) HAS RECORDED THE FI NDING THAT SIMILAR ISSUE WAS DECIDED BY HIM FOR AY 2005-06 IN FAVOUR OF THE ASSESSEE WHICH WAS ACCEPTED BY THE DEPARTMENT. THE FAC TS OF THE YEAR UNDER CONSIDERATION ARE ADMITTEDLY IDENTICAL . MOREOVER, IT WAS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THOUGH THE PRIOR PERIOD EXPENSES WERE TO TH E TUNE OF `9.24 CRORES BUT, THE ASSESSEE HAS DISCLOSED MUCH MORE INCOME OF THE PRIOR PERIOD AND, IN FACT, IF THE ASSESS EES PROFIT & LOSS ACCOUNT IS LOOKED INTO, THERE IS NET CREDIT OF THE PRIOR PERIOD INCOME AMOUNTING TO `71.55 CRORES. THUS, THE PRIOR P ERIOD INCOME OFFERED BY THE ASSESSEE WAS MORE BY `71.55 CR ORES THAN THE PRIOR PERIOD EXPENSES CLAIMED IN THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS ASSESSED TH E PRIOR PERIOD INCOME AND DISALLOWED PRIOR PERIOD EXPENSES. HE CANNOT ADOPT DIFFERENT YARDSTICK FOR ASSESSING THE INCOME AND ALLOWING THE EXPENDITURE. CONSIDERING THE TOTALITY OF THE ABOVE FA CTS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) IN THIS REGARD. THE SAME IS SUSTAINED AND GROUND NO.2 OF THE REVENUES APPEAL IS REJECTED. 33. FOR A.Y. 2008-09, THE TRIBUNAL FOLLOWED THE AFO RESAID ORDER FOR A.Y.2007-08. IN THE TRIBUNAL ORDER FOR A.Y. 2007-0 8, IT WAS TAKEN INTO CONSIDERATION THAT THE PRIOR PERIOD INCOME OFFERED B Y THE ASSESSEE WAS MORE THAN THE PRIOR PERIOD EXPENSES CLAIMED. THE SITU ATION IS MUCH THE SAME FOR THE YEAR UNDER CONSIDERATION ALSO. THIS Y EAR TOO THE PRIOR PERIOD INCOME IS MORE THAN THE PRIOR PERIOD EXPENSES C LAIMED. THIS IS AVAILABLE FROM THE ASSESSMENT ORDER ITSELF, WHEREIN THIS FACT STANDS TAKEN NOTE OF. THEREFORE, FOLLOWING THE TRIBUNAL O RDER (SUPRA) FOR A.Y.S 2007-08 AND 2008-09, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE, REJECTING GROUND NO.2 RAISED BY THE DEPARTMENT. ACC ORDINGLY, THE APPEAL OF THE DEPARTMENT IS PARTLY ALLOWED AS INDICAT ED. ITA NO.2816/DEL/2010 (ASSESSEE) ITA NO.3074/DEL/2010 (DEPTT.) 13 34. IN THE RESULT, BOTH THE APPEALS, FILED RESPECTIVE LY BY THE ASSESSEE AND THE DEPARTMENT, ARE PARTLY ALLOWED AS INDICATED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 12.10.20 12. SD/- SD/- [G.D. AGRAWAL] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED, 12.10.2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES