TVH Energy Resources Pvt Ltd., CHENNAI V. DCIT Central Circle 1(2), CHENNAI

ITA 3183/CHNY/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1535 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 26-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SRINIVASA RAO
• Assessee Lawyers: G GANESH BABU
• Keywords: Additional evidence; Deemed dividend
• Section: 69C; 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ! ' ! # . $ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.3183/CHNY/2017 ( / ASSESSMENT YEAR: 2012-13) M/S. TVH ENERGY RESOURCES PVT. LTD., NO.16/17, 3 RD CROSS STREET, TVH NOVELLA, R A PURAM, CHENNAI 28. VS THE DCIT, TAX CENTRAL CIRCLE-1(2), CHENNAI. PAN: AACCT8802G ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.3117/CHNY/2017 ( / ASSESSMENT YEAR: 2012-13) THE DCIT, TAX CENTRAL CIRCLE-1(2), CHENNAI. VS M/S. TVH ENERGY RESOURCES PVT. LTD., NO.16/17, 3 RD CROSS STREET, TVH NOVELLA, R A PURAM, CHENNAI 28. PAN: AACCT8802G ( /APPELLANT) ( /RESPONDENT) /ASSESSEE BY : SHRI G. GANESH BABU, FCA /REVENUE BY : SHRI B. SRINIVASA RAO, CIT !' /DATE OF HEARING : 14.08.2018 !' /DATE OF PRONOUNCEMENT : 08.11.2018 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THE APPEAL BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- 2 ITA NO.3183 & 3117/CHNY/2017 18, CHENNAI, DATED 22.09.2017 IN ITA NO.39/15-16 FO R THE ASSESSMENT YEAR 2012-13 PASSED U/S. 250(6) R.W.S. 1 43(3) OF THE ACT. 2. ASSESSEES APPEAL:- THE ASSESSEE HAS RAISED TWO GROUNDS IN ITS APPEAL WHICH IS BRIEFLY STATED HEREIN BELOW FOR ADJUDICATION:- (I) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION MADE BY THE LD.AO AMOUNTING TO RS.15,66,57,691/- TOWARDS DEEMED INTEREST @ 21% PER ANNUM ON THE LOAN AMOUNT OF RS.74,59,89,0 06/- EXTENDED BY THE ASSESSEE COMPANY TO ITS SISTER CONC ERN M/S. TRUE VALUE HOMES (I) PVT. LTD. (II) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDI TION MADE BY THE LD.AO AMOUNTING TO RS.7,60,32,100/- TOWARDS UNACCOU NTED CASH EXPENDITURE UNDER SECTION 69C OF THE ACT. 3. REVENUES APPEAL: THE REVENUE HAS RAISED THREE GROUNDS IN ITS APPEA L HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE LD.AO U/S. 40 (A)(IA) OF THE ACT TOWARDS PAYMENT MADE FOR CIVIL CONTRACT WORKS WITHO UT DEDUCTING TDS FROM THE SUB-CONTRACTORS VIZ., M/S. R R TULSI BUILD ERS(INDIA) PVT. LTD., 3 ITA NO.3183 & 3117/CHNY/2017 M/S. TAVAS CONSTRUCTIONS PVT. LTD. AND M/S. SASTA C ONSTRUCTIONS BASED ON THE FRESH EVIDENCE PRODUCED WHICH WAS NOT PRODUCED BEFORE THE LD.AO THEREBY VIOLATING RULE 46A OF THE IT RULES. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF WIND TUR BINE OPERATIONS, ENERGY CONSERVATION PROJECTS, CIVIL CON STRUCTIONS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-1 3 ON 30.09.2012 ADMITTING NIL INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) & 142(1) OF THE ACT WAS ISSUED ON 19.08. 2013 AND 17.06.2014 RESPECTIVELY. FINALLY ASSESSMENT ORDER W AS PASSED U/S.143(3) OF THE ACT ON 31.03.2015 WHEREIN THE LD. AO MADE SEVERAL ADDITIONS ALONG WITH ADDITIONS TOWARDS DEEMED INTER EST, UNACCOUNTED CASH EXPENDITURE AND DISALLOWANCE OF EXPENDITURE IN VOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ASSESSEES APPEAL: 5. GROUND NO.2 (I): ADDITION OF RS.15,66,57,691/- TOWARDS DEEMED INTEREST:- DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDIN GS, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE COMPANY HAD EXTENDED 4 ITA NO.3183 & 3117/CHNY/2017 LOAN TO ITS SISTER CONCERN M/S. TRUE VALUE HOMES (I ) PVT. LTD., FOR RS.74,59,89,006/-. IT WAS FURTHER NOTICED THAT M/S. TRUE VALUE HOMES (I) PVT. LTD., WAS HOLDING SHARES WORTH RS.15,71,85 ,000/- OUT OF THE TOTAL EQUITY SHARES ISSUED BY THE ASSESSEE COMPANY AMOUNTING TO RS.5210,10,00,000/-. THUS 30% OF THE SHARES OF THE ASSESSEE COMPANY WERE HELD BY M/S. TRUE VALUE HOMES (I) PVT. LTD. IT WAS FURTHER NOTICED THAT THE ASSESSEE COMPANY WAS HAVIN G ACCUMULATED RESERVES AND SURPLUS OF RS.18,08,50,648/-. SINCE TH E ASSESSEE COMPANY HAD EXTENDED LOAN TO THE COMPANY WHO WAS HO LDING SUBSTANTIAL SHARES OF THE ASSESSEE COMPANY THE LD.A O WAS OF THE VIEW THAT PROVISIONS OF SECTION 2(22)(E) OF THE ACT WILL BE ATTRACTED. ACCORDINGLY THE LD.AO TREATED 30% OF THE ACCUMULATE D PROFIT AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE WHICH WORKS OUT TO RS.5,45,62,397/- REJECTING THE PLEA OF THE LD.AR TH AT DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT CAN ONLY BE TAXED IN THE HANDS OF THE RECIPIENT OF THE ADVANCES AND NOT IN THE HANDS OF T HE COMPANY WHO HAS ADVANCED THEM. 5.1 ON APPEAL, THE LD.CIT(A) AGREED WITH THE VIEW OF THE LD.AR THAT DEEMED DIVIDEND SHALL BE TAXABLE ONLY IN THE H ANDS OF THE RECIPIENT OF THE ADVANCES AND NOT IN THE HANDS OF T HE COMPANY WHO 5 ITA NO.3183 & 3117/CHNY/2017 HAD ADVANCED THE AMOUNT AND ACCORDINGLY HE DELETED THE ADDITION MADE BY THE LD.AO INVOKING THE PROVISIONS OF SECTIO N 2(22)(E) OF THE ACT. HOWEVER THE LD.CIT(A) WAS OF THE VIEW THAT SIN CE THE ASSESSEE COMPANY HAD EXTENDED INTEREST FREE LOAN TO ITS SIST ER COMPANY, INTEREST @ 21% ON THE LOAN EXTENDED WHICH WORKS OUT TO RS.15,66,57,691/- SHOULD BE TAXABLE AS DEEMED INTER EST IN THE HANDS OF THE ASSESSEE COMPANY, REJECTING THE PLEA OF THE ASSESSEE THAT THE LOAN WAS EXTENDED DUE TO COMMERCIAL EXIGENCIES. ACC ORDINGLY THE LD.CIT(A) ENHANCED THE ADDITION TO RS.15,66,57,691/ - AS DEEMED INTEREST. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSESSEE IN APPEAL BEFORE US. 5.2 AT THE OUTSET, WE DO NOT FIND ANY MERIT IN TH E ORDER OF THE LD.CIT(A) WITH RESPECT TO THE ADDITION MADE FOR RS. 15,66,57,691/- THOUGH WE AGREE WITH THE VIEW OF THE LD.CIT(A) FOR DELETING THE ADDITION OF RS.5,45,62,397/- MADE BY THE LD.AO INVO KING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IT IS OB VIOUS THAT THE ADDITION WITH RESPECT TO SECTION 2(22)(E) OF THE ACT CAN BE ONLY INVOKED IN THE HANDS OF THE REGISTERED / BENEFICIAL SHAREHOLDER HA VING 10% OR MORE SHARES IN THE COMPANY WHICH HAS ADVANCED THE LOAN A S PER THE RECENT JUDGMENT DATED 04.01.2017 OF THE HONBLE APE X COURT IN THE 6 ITA NO.3183 & 3117/CHNY/2017 CASE GOPAL & SONS HUF VS. CIT IN CIVIL APPEAL NO.12 274 OF 2016. IN THE CASE OF THE ASSESSEE, THE SHAREHOLDER HAVING SU CH SUBSTANTIAL INTEREST IN THE ASSESSEE COMPANY IS M/S. TRUE VALUE HOMES (I) PVT. LTD. THEREFORE PROVISIONS OF SECTION 2(22)(E) OF TH E ACT CANNOT BE INVOKED IN THE HANDS OF THE ASSESSEE COMPANY WHICH HAS EXTENDED LOAN TO ITS SISTER COMPANY. 5.3 FURTHER FROM THE FACTS OF THE CASE, IT IS APPA RENT THAT THE ASSESSEE COMPANYS EQUITY SHARE CAPITAL IS RS.5210, 10,00,000/- COUPLED WITH RESERVES & SURPLUS AMOUNTING TO RS.18, 08,50,648/-. THUS THE ASSESSEE POSSESS NON-INTEREST BEARING FUND OF RS.5228,18,50,648/- (RS.5210,10,00,000 + RS.18,08,5 0,648). THE ASSESSEE HAS EXTENDED LOAN ONLY TO THE EXTENT OF RS .74,59,89,006/- FROM ITS NON-INTEREST BEARING FUND OF RS.5228,18,50 ,648/-. THERE IS NO RESTRICTION ON THE ASSESSEE TO DEPLOY ITS NON-INTER EST BEARING OWN FUND IN WHATEVER MANNER IT DESIRES. ONLY IF INTERES T BEARING FUNDS ARE DEPLOYED OUTSIDE THE BUSINESS OF THE ASSESSEE WITHO UT RECOVERING INTEREST, ADDITIONS CAN BE MADE, BECAUSE IN SUCH CA SE IT WOULD BE A DUBIOUS METHOD TO SHIFT THE PROFIT OF THE ASSESSEE TO ANOTHER ASSESSEE WHICH CANNOT BE ACCEPTED AS PER THE PROVIS IONS OF THE ACT, AND THAT IS NOT THE CASE OF THE ASSESSEE COMPANY. T HEREFORE THE 7 ITA NO.3183 & 3117/CHNY/2017 ADDITION MADE BY THE LD.CIT(A) TREATING THE AMOUNT OF 21% OF DEEMED INTEREST ON RS.74,59,89,006/- WHICH WORKS OU T TO RS.15,66,57,691/- IS NOT JUSTIFIED. HENCE WE HEREBY DELETE THE ENHANCEMENT MADE BY THE LD.CIT(A) AMOUNTING TO RS.1 5,66,57,690/- TOWARDS DEEMED INTEREST AND FURTHER UPHOLD THE ORDE R OF THE LD.CIT(A) FOR DELETING THE ADDITION OF RS.5,45,62,3 97/- MADE BY THE LD.AO TOWARDS DEEMED DIVIDEND INVOKING THE PROVISIO NS OF SECTION 2(22)(E) OF THE ACT. THUS THE GROUND RAISED BY THE ASSESSEE IS ALLOWED IN ITS FAVOUR. 6. GROUND NO.2(II) : ADDITION OF RS.7,60,32,100/- TOWARDS UNACCOUNTED CASH EXPENDITURE UNDER SECTION 69C OF T HE ACT:- DURING THE COURSE OF SCRUTINY ASSESSMENT IT WAS OBS ERVED BY THE LD.AO THAT THE LD.DDIT(INV) UNIT (2), PUNE HAD CONDU CTED A SEARCH ON THE ASSESSEE COMPANY AND SEIZED VARIOUS DOCUMENTS A ND MATERIALS. AS PER THE SEIZED MATERIALS THE UNACCOUNTED CASH EXPEN SES MADE BY THE ASSESSEE COMPANY DURING THE RELEVANT ASSESSMENT YEA R WORKED OUT TO RS.5,00,22,100/- AND CASH PAYMENTS MADE OUTSIDE THE BOOKS OF ACCOUNTS TO VARIOUS SUB-CONTRACTORS AGGREGATED TO R S.2,60,00,000/-. SINCE THE AMOUNT OF RS.7,60,22,100/- (RS.5,00,22,10 0 + RS.2,60,00,000) WAS NOT RECORDED IN THE BOOKS OF AC COUNTS, THE LD.AO 8 ITA NO.3183 & 3117/CHNY/2017 MADE ADDITION OF RS.7,60,22,100/- IN THE HANDS OF T HE ASSESSEE INVOKING PROVISIONS OF SECTION 69C OF THE ACT.. 6.1 BEFORE THE LD.CIT(A) THE ASSESSEE HAD MADE SUBM ISSION THAT IT HAD NEITHER INCURRED SUCH CASH EXPENDITURE NOR M ADE SUCH CASH PAYMENT TO SUB-CONTRACTORS. HOWEVER THE LD.CIT(A) UP HELD THE ORDER OF THE LD.AO BY OBSERVING AS UNDER:- WHILE DEALING WITH SIMILAR ISSUE FOR THE A.Y.2011-1 2 IN ITA NO. 196/16-17 DATED 08.08.2017, I HAVE OBSERVED IN MY ORDER AS UN DER: (I) 'FIRST OF ALL, THE SO-CALLED DETAILS OF CASH PAYMEN TS WERE NOT WRITTEN ON ANY LOOSE SHEETS WHICH CAN BE BRUSHED ASIDE AS SCRI BBLING. IN FACT, THESE DETAILS HAVE BEEN FOUND IN THE EXCEL SHEETS A ND WERE RETRIEVED BY THE DEPARTMENT FROM THE 'DELETED RECORDS'. IN RESPE CT OF A PARTICULAR PAYMENT, CASH VOUCHER FOR RS. 50,00,000/- WAS PREPA RED, WHICH WAS APPROVED BY SHRI T. SELVA MANI, DIRECTOR AND SIGNED BY SHRI MANOJ C, REPRESENTATIVE OF M/S. LEITNER SHRIRAM IN THE 'RECE IVED PAYMENT' COLUMN. IT IS SEEN THAT THE ABOVE TRANSACTION RELAT E TO THE A. Y. 2013-14 AND THE APPELLANT ADMITTED THE ABOVE AMOUNT IN THE RETURN OF INCOME FILED. ACCORDINGLY, AGAINST THE ASSESSMENT ORDER, T HE APPELLANT DID NOT PREFER ANY APPEAL AGAINST THE QUANTUM AND ONLY FILE D AN APPEAL AGAINST THE LEVY OF PENALTY U/S. 271 (1)(C). THIS ITSELF IS AN INDICATION THAT THE AMOUNTS SHOWN IN THE EXCEL SHEETS WERE REALLY PAYME NTS MADE TO VARIOUS AGENCIES IN THE FORM OF KICKBACKS AND THAT IS THE REASON WHY THE APPELLANT IS HESITANT TO ADMIT THE REAL TRUTH. (II) FROM THE ABOVE, IT CAN BE ASSERTED THAT THE CLAIM O F THE APPELLANT THAT OUT OF THE ENTIRE PAYMENTS CONTAINED IN THE EXCEL S HEET, THE ONE AND ONLY PAYMENT ACTUALLY MADE WAS THE ABOVE RS. 50,00,000/- CANNOT BE BY ANY MEANS ACCEPTABLE. EITHER THE APPELLANT SHOULD HAVE PROVED THAT NOT EVEN A SINGLE PAYMENT WAS MADE OR IT SHOULD HAVE AC CEPTED THAT ALL PAYMENTS WERE MADE. (III)IT IS SEEN THAT THE ENTRIES CONTAINED IN THE E XCEL SHEET RELATE TO THE PERIOD 3.8.2010 TO 31.5.2012. AMONGST THE ENTRIES T HERE APPEAR 9 ITA NO.3183 & 3117/CHNY/2017 PAYMENTS RELATING TO 'TNEB LIAISON EXP'. EVERYONE K NOWS THAT TNEB DOES NOT COLLECT ANY 'LIAISON CHARGES'. HENCE IT IS TO BE CONSTRUED THAT THE SO CALLED TNEB LIAISON EXP' IS NOTHING BUT PAYM ENT OF MAMOOL TO THE SAID AGENCY. FROM THIS IT IS ANYBODY'S GUESS TH AT THE AMOUNTS MENTIONED IN THESE EXCEL SHEETS ARE NOTHING BUT PAY MENT OF MAMOOL TO VARIOUS PERSONS/AGENCIES. IN FACT, THE PAYMENT UNDE R THE CAPTION '21- MAY-12 SHRIRAM LEITNER 50,00,000' WAS OFFERED BY TH E APPELLANT IN THE ASSESSMENT YEAR 2013-14. PENALTY PROCEEDINGS WAS AL SO INITIATED FOR THE ASSESSEE'S FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE APPELLANT DID NOT PREFER ANY APPEAL AGAINST THE QUANTUM AND ONLY FILED AN APPEAL AGAINST THE LEVY OF PENALTY. THE NON-FILING OF APPEAL AGAINST THE QUANT UM ITSELF BRINGS TO SURFACE THE FACT THAT THE AMOUNTS MENTIONED IN THE EXCEL SHEETS WERE REALLY PAID AND THAT ONLY MADE THE ASSESSEE TO ACCE PT THE SAID ADDITION BY NOT FILING AN APPEAL AGAINST THE QUANTUM. (IV) NO PRUDENT BUSINESS MAN WOULD PREPARE A LIST CONTAI NING DETAILS OF CASH PAYMENTS UNLESS IT REALLY HAPPENED AND MORE SO , KEEP THE SAME WITHOUT DESTROYING IT. GOING BY THIS EVIDENCE, THE APPELLANT'S SUBMISSION THAT EXCEPT THIS LONE AND SOLITARY TRANS ACTION OF CASH PAYMENT, NO OTHER CASH PAYMENTS AS EVIDENCED BY THE EXCEL SHEETS WERE MADE, CANNOT BE ACCEPTED BY ANY STRETCH OF IMAGINAT ION AS TRUE. THE IRRESISTIBLE CONCLUSION THAT ONE CAN ARRIVE WILL CE RTAINLY BE THAT THE APPELLANT IS NOT COMING FORWARD WITH THE TRUTH IN T HAT IT SAYS ALL THE TRANSACTIONS DID NOT HAPPEN EXCEPT THE ONE FOR WHIC H THE DEPARTMENT HAD THE UNEQUIVOCAL AND UNAMBIGUOUS EVIDENCE IN THE FORM OF THE ABOVE SAID VOUCHER. (V) THE AD HAS PROVED BEYOND DOUBT THAT ONE SUCH TRANSA CTION AMONG THE WHOLE TRANSACTIONS THAT APPEAR IN EXCEL SHEET HAS T AKEN PLACE. IN SUCH CIRCUMSTANCES, THE LOGICAL COROLLARY AND THE PREPON DERANCE OF HUMAN PROBABILITY INDICATES THAT ALL THE TRANSACTIONS FIN DING A PLACE IN THE EXCEL SHEET HAVE ACTUALLY TAKEN PLACE. THIS IS IN T HE LIGHT OF THE FACT THAT IT HAS WELL BEEN ESTABLISHED THAT ONE AMONG THOSE T RANSACTIONS APPEARING IN THE EXCEL SHEET HAS BEEN UNDERTAKEN BY THE APPELLANT. IN THIS REGARD, IT WOULD BE WORTHWHILE TO NOTE THAT TH E HON'BLE SUPREME COURT IN THE CASE OF SUMA DAYAL (214 ITR 801) AND I N THE CASE OF DURGA PRASAD MORE (82 ITR 540) HAS HELD THAT WHERE PREPONDERANCE OF HUMAN PROBABILITY INDICATES THAT A TRANSACTION H AS TAKEN PLACE, IT MAY WELL BE TAKEN TO HAVE OCCURRED. FURTHER THE ONU S CAST UPON THE APPELLANT HAS NOT BEEN DISCHARGED BY IT SATISFACTOR ILY IN ANY MANNER 10 ITA NO.3183 & 3117/CHNY/2017 WHATSOEVER. HENCE, I AM OF THE CONSIDERED VIEW THAT ALL THE TRANSACTIONS IN THE EXCEL SHEETS HAVE TAKEN PLACE. (VI) THE VERY FACT THAT MS. KUZHALI, THE EX-EMPLOYEE WAS NOT AWARE OF THESE TRANSACTIONS IS A CLEAR PROOF THAT THE SAID TRANSAC TIONS BEING SHADY, THE TOP MANAGEMENT WANTED TO KEEP THESE AS SECRET AND D ID NOT WANT TO INVOLVE LOWER LEVEL CADRE AND THAT IS THE REASON EV EN MS. KUZHALI WAS KEPT ALOOF. 6.1 BASED ON THE ABOVE FINDINGS AND RESPECTFULLY FO LLOWING THE APEX COURT'S DECISIONS CITED SUPRA, I AM OF THE CONSIDERED VIEW THAT CERTAINLY THE EXPLANATIONS OF THE APPELLANT CANNOT BE ACCEPTABLE AND THE ACTION OF THE AO IN BRUSHING ASIDE THE APPELLANT'S SUBMISSION AND ADDIN G THE ENTIRE CASH PAYMENTS FOUND IN THE EXCEL SHEETS AS 'UNACCOUNTED CASH EXPE NSES' IS BY ALL MEANS A RIGHT APPROACH AND HENCE NO INTERFERENCE IS NEEDED. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED' AS THE FACTS ARE SIMILAR FOR THIS YEAR ALSO AS HELD IN THE ABOVE CITED ORDER, I UPHOLD THE ACTION OF THE AD IN ADDING A SUM OF RS. 7,60,22,100/. HENCE, THIS GROUND OF APPEAL IS DISMISSED. 6.2 BEFORE US THE LD.AR SUBMITTED THAT THE HONBLE TRIBUNAL VIDE ORDER DATED 30.11.2017 IN ITA NO.2484/MDS/2017 FOR T HE ASSESSMENT YEAR 2011-12 IN THE ASSESSEES OWN CASE HAD REMITTE D THE MATTER BACK TO THE FILE OF LD.AO IN ORDER TO PASS SPEAKING ORDE R. THE LD.AR FURTHER SUBMITTED THAT THE TRIBUNAL HAD ALSO MADE SERIOUS O BSERVATIONS AGAINST THE FUNCTIONING OF THE REVENUE AUTHORITIES IN ITS O RDER. THE LD.AR FURTHER ARGUED STATING THAT THE LD.AO HAD NOT PASSED A SPEA KING ORDER FOR THE RELEVANT ASSESSMENT YEAR ALSO AND FURTHER DECIDED T HE ISSUE ONLY BASED ON THE OBSERVATIONS OF THE INVESTIGATION UNIT OF TH E REVENUE WHICH WAS NOT SUBSTANTIATED WITH ANY EVIDENCE OTHER THAN CERT AIN NOTING OF THE 11 ITA NO.3183 & 3117/CHNY/2017 ASSESSEE COMPANIES ERSTWHILE EMPLOYEES. THE LD.AR F URTHER SUBMITTED THAT THERE WAS NO CORROBORATIVE EVIDENCE TO ESTABLI SH THAT THE ASSESSEE HAD INCURRED UNACCOUNTED CASH EXPENDITURE AND MADE CASH PAYMENT TO SUB-CONTRACTORS. FURTHER THE LD.CIT(A) IN THE RELEVA NT ASSESSMENT YEAR HAS UPHELD THE ORDER OF THE LD.AO BY RELYING ON HIS EARLIER ORDER PASSED FOR THE ASSESSMENT YEAR 2011-12 WHICH WAS REMITTED BACK BY THE HONBLE TRIBUNAL TO THE LD.AO WITH DIRECTIONS TO RE -EXAMINE THE MATTER AND PASS A SPEAKING ORDER. THEREFORE IT WAS PLEADED THAT THE ADDITION MADE BY THE LD.AO TOWARDS UNACCOUNTED CASH EXPENDIT URE AND CASH PAYMENT AGGREGATING TO RS.7,60,22,100/- MAY BE DELE TED. THE LD.DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE LD.RE VENUE AUTHORITIES AND ARGUED IN SUPPORT OF THE SAME. 6.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE MATERIALS ON RECORD. FROM THE ORDER OF THE LD.AO , IT IS APPARENT THAT THE LD.AO HAD SIMPLY ENDORSED THE OBSERVATION OF TH E LD.DDIT(INV) WITHOUT MAKING ANY FURTHER RELEVANT ENQUIRY OR ENQU IRING FROM THE PERSONS WHO HAD RECEIVED THE PAYMENT FROM ASSESSEE COMPANY OR OBTAINING ANY CORROBORATIVE EVIDENCE TO JUSTIFY THE INFERENCE MADE OUT FROM THE SEIZED MATERIALS. IN FACT, THE LD.AO HAS A LSO NOT MENTIONED IN HIS ORDER AS TO WHAT ARE THE SEIZED MATERIALS WHICH JUSTIFIES THE ADDITION, THE VERACITY OF THE SEIZED MATERIALS AND TO WHAT EX TENT RELIANCE COULD BE 12 ITA NO.3183 & 3117/CHNY/2017 PLACED ON THE SAME. FURTHER IT IS APPARENT THAT THE ORDER OF THE LD.CIT(A) FOR THE ASSESSMENT YEAR 2011-12 WAS REMIT TED BACK TO THE FILE OF LD.AO BY THE TRIBUNAL VIDE ORDER DATED 30.11.2017 (WITH THE FOLLOWING OBSERVATIONS) WHICH WAS RELIED BY THE LD.CIT(A) WHIL E PASSING THE ORDER FOR THE RELEVANT ASSESSMENT YEAR: 4. WE HEARD SHRI SRIRAM BHARATH, THE LD. DEPARTMEN TAL REPRESENTATIVE ALSO. IT IS NOT IN DISPUTE THAT THIS TRIBUNAL DIRE CTED THE ASSESSING OFFICER TO RE-EXAMINE THE MATTER AFRESH AND PASS A SPEAKING OR DER. THIS TRIBUNAL SPECIFICALLY OBSERVED THAT IT IS INCUMBENT UPON THE ASSESSING OFFICER TO DISCUSS THE REASON IN THE ASSESSMENT ORDER WHILE AL LOWING OR DISALLOWING THE CLAIM OF THE ASSESSEE. INSPITE OF THE SPECIFIC DIR ECTION OF THE TRIBUNAL, THE ASSESSING OFFICER HAS SIMPLY REFERRED THE ISSUE IN THE ASSESSMENT ORDER WHICH WAS SET ASIDE BY THE PRINCIPAL COMMISSIONER A ND CONFIRMED BY THIS TRIBUNAL AND MADE ADDITION. THEREFORE, AS RIGHTLY SUBMITTED BY THE LD. REPRESENTATIVE FOR THE ASSESSEE, THE ASSESSING OFFI CER HAS NOT COMPLIED WITH THE DIRECTION OF THE TRIBUNAL. THE ASSESSING OFFIC ER IS BOUND TO COMPLY WITH THE DIRECTION OF THE TRIBUNAL. IF AT ALL THE ASSES SING OFFICER FEELS THAT HE IS AGGRIEVED BY THE ORDER OF THIS TRIBUNAL, IT IS OPEN TO HIM TO TAKE UP THE MATTER IN APPEAL BEFORE THE HIGH COURT. IN THIS CA SE, ADMITTEDLY, NO APPEAL WAS FILED BEFORE THE HIGH COURT. THE DEPARTMENT AL LOWED THE ORDER OF THIS TRIBUNAL TO ATTAIN FINALITY, THEREFORE, THE ASSESSI NG OFFICER IS NOT JUSTIFIED IN MAKING ADDITION ON THE BASIS OF THE ORDER DATED 24. 03.2014, WHICH WAS NOT IN EXISTENCE AT ALL. THEREFORE, THE CIT(APPEALS) IS ALSO NOT CORRECT IN DISPOSING OF THE MATTER ON MERIT. 5. IN VIEW OF THE ABOVE, WE ARE UNABLE TO UPHOLD TH E ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE ORDERS OF BOTH THE AUT HORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE TH E MATTER AS DIRECTED BY THIS TRIBUNAL IN THE ORDER DATED 06.08.2015, BRING ON RECORD ALL THE FACTS AND MATERIAL AND PASS A SPEAKING ORDER BY RECORDING REASONS FOR THE CONCLUSION REACHED THEREIN. 6. IT IS MADE CLEAR THAT THE ASSESSING OFFICER CANN OT IGNORE THE OBSERVATION AND DIRECTION ISSUED BY THIS TRIBUNAL. THE DISOBED IENCE OR NON-COMPLIANCE OF OBSERVATION AND DIRECTION OF THIS TRIBUNAL WILL BE VIEWED SERIOUSLY AND APPROPRIATE REMEDIAL PROCEEDING WILL BE INITIATED I N FUTURE. 13 ITA NO.3183 & 3117/CHNY/2017 7. WITH THE ABOVE OBSERVATION, THE APPEAL OF THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSES. FROM THE ABOVE, IT IS ABUNDANTLY CLEAR THAT THE REVE NUE HAS NOT PRODUCED ANY COGENT MATERIALS BEFORE US TO SUBSTANT IATE THE ADDITION MADE FOR RS.7,60,22,100/-. HENCE WE DO NOT HAVE AN Y OTHER OPTION BUT TO DELETE THE ADDITION MADE AND SUSTAINED BY THE LD .CIT(A). ACCORDINGLY WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION O F RS.7,60,22,100/- MADE BY THE LD.AO WHICH WAS FURTHER SUSTAINED BY TH E LD.CIT(A). THUS THESE GROUNDS RAISED BY THE ASSESSEE ARE ALSO DECID ED IN ITS FAVOUR. REVENUES APPEAL:- 7. GROUND NO.3: DISALLOWANCE U/S. 40(A)(IA) OF THE ACT TOWARDS PAYMENT MADE FOR CIVIL CONTRACT WORKS WITHOUT DEDUC TING TDS :- DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD DEDUCTE D TAX AT SOURCE AMOUNTING TO RS.16,84,056/- AGAINST PAYMENT MADE TO SUB- CONTRACTORS INSTEAD OF DEDUCTING RS.19,85,498/- AS DETAILED HEREIN BELOW: 14 ITA NO.3183 & 3117/CHNY/2017 SL. NO. NAME OF THE PARTY AMOUNT PAID TDS DEDUCTED TDS DEDUCTABLE SHORT DEDUCTION PROPORTIONATE CONTRACT VALUE 1 M/S. R.R. THULASI BUILDERS INDIA PRIVATE LIMITED 5,63,26,285 10,60,000 11,26,526 66,525 33,26,285 2 M/S. TAVAS CONSTRUCTION PRIVATE LIMITED 1,57,35,737 2,30,612 3,14,715 84,103 42,05,152 3 M/S. SASTHAA CONSTRUCTIONS 5,23,99,329 3,80,000 5,23,993 1,43,993 1,43,99,329 4 M/S. R.S.R. EARTH MOVERS 10,62,310 7,000 10,623 3,623 3,62,310 5 M/S. M.R. CONSTRUCTIONS 9,64,112 6,444 9,641 3,197 3,19,712 TOTAL 12,64,87,773 16,84,056 19,85,498 3,01,441 2,26,12,788 THUS THERE WAS A SHORT DEDUCTION OF TAX OF RS.3,01 ,441/-. THEREFORE THE LD.AO DISALLOWED PROPORTIONATE PAYMEN TS MADE TO SUB-CONTRACTORS WITH RESPECT TO THE SHORT DEDUCTION OF TAX AT SOURCE AS ALLOWABLE EXPENDITURE WHICH WORKS OUT TO RS.2,26 ,12,788/-, INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ON APPEAL THE LD.CIT(A) AFTER VERIFYING FORM 16A ISSUED TO TH E SUB- CONTRACTORS DELETED THE ADDITION MADE WITH RESPECT TO VIZ., M/S.R.R. THULASI BUILDERS INDIA PVT. LTD., M/S. TAVAS CONSTR UCTIONS PVT. LTD., AND M/S.SASTHAA CONSTRUCTIONS AND CONFIRMED THE ADD ITION MADE WITH RESPECT TO SUB-CONSTRUCTOR M/S.R.S.R.EARTH MOV ERS AND M/S.M.R. CONSTRUCTIONS. AGGRIEVED BY THE ORDER OF T HE LD.CIT(A) THE ASSESSEE IS NOW IN APPEAL BEFORE US. 15 ITA NO.3183 & 3117/CHNY/2017 7.1 THE LD.DR ARGUED BEFORE US BY STATING THAT THE LD.CIT(A) FAILED TO COMPLY WITH RULE 46A OF THE RULES BECAUSE HE HAD NOT OBTAINED REMAND REPORT FROM THE LD.AO WITH RESPECT TO THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE BEFORE HIM VIZ., THE FORM 16 ISSUED TO THE SUB-CONTRACTORS. THUS THE LD. AO WAS DEPRIVED FROM VERIFYING THE DOCUMENTS PRODUCED BEFO RE THE LD.CIT(A) FOR THE FIRST TIME. HENCE IT WAS PLEADED THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF LD.AO IN ORDER TO PROVIDE AN OPPORTUNITY FOR THE LD.AO TO VERIFY THE DOCUMENTS W HICH WAS PRODUCED BEFORE THE LD.CIT(A) FOR THE FIRST TIME. T HE LD.AR COULD NOT CONTROVERT TO THE SUBMISSION OF THE LD.DR. 7.2 AFTER HEARING BOTH SIDES, WE ARE OF THE VIEW TH AT THE MATTER NEEDS TO BE REMITTED BACK TO THE FILE OF LD.AO IN O RDER TO PROVIDE THE LD.AO WITH AN OPPORTUNITY TO VERIFY THE DOCUMEN TS PRODUCED BEFORE THE LD.CIT(A) FOR THE FIRST TIME AND THEREBY COMPLY WITH THE RULE 46A OF THE RULES. ACCORDINGLY THE ISSUE WITH R ESPECT TO INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS HEREBY REMITTED BACK TO THE FILE OF LD.AO FOR DE-NOVA CONS IDERATION. 16 ITA NO.3183 & 3117/CHNY/2017 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED AND THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED ON THE 8 TH NOVEMBER, 2018 AT CHENNAI. SD/- SD/- ( ! ' ! # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) % & /JUDICIAL MEMBER ' & / ACCOUNTANT MEMBER '% /CHENNAI, (& /DATED 8 TH NOVEMBER, 2018 RSR & *+ ,+ /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. / ( )/CIT(A) 4. / /CIT 5. +01 2 /DR 6. 13 /GF