M/s. Rites Ltd., Gurgaon V. DCIT, New Delhi

ITA 4149/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3681 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 06-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 25-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Keywords: Question of law; Difference of opinion; Competent authority; Revised return; Reason to believe; Change of opinion
• Section: 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO.4149/DEL/2014 A.Y. : 2007-08 M/S RITES LTD., RITES BHAWAN, PLOT NO. 1, SECTOR-29, GURGAON-122001 HARYANA (PAN: AAACR0830Q) VS. DCIT, CIRCLE 15(1), NEW DELHI C.R. BUILDING, NEW DELHI 110 002 (ASSESSEE) (RESPONDENT) ASSESSEE BY : SH. R.S. SINGHVI, CA DEPARTMENT BY : SH. F.R. MEENA, SR. DR ORDER PER H.S. SIDHU : JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 16.6.2014 OF THE LD. CIT(A)-XVIII, NEW DELHI RELEVANT TO ASSESSM ENT YEAR 2007-08 ON THE FOLLOWING GROUNDS:- 1(I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING INITIATION OF PROCE EDINGS U/S. 148 WITHOUT APPRECIATION OF FACTS AND LEGAL PROVISIONS. (II) THAT INITIATION OF PROCEEDINGS U/S. 148 BEING BARRED BY LIMITATION, THE SAME IS ILLEGAL AND WITHOUT JURISDICTION. 2 (III) THAT EVEN OTHERWISE, REASSESSMENTS PROCEEDING S WERE MERELY ON THE BASIS OF CHANGE OF OPINION AND NOT ON THE BASIS OF NEW FACT OR EVIDENCE AND AS SUCH SAME ARE NOT IN CONFORMITY WIT H SCOPE OF SEC. 148 OF THE INCOME TAX ACT, 1961. 2(I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, ACTION OF THE LOWER AUTHORITIES IN SUSTAINING ADDITION OF RS. 20 1.66 LACS IS ILLEGAL, ARBITRARY AND WITHOUT ANY BASIS. (II) THAT THERE IS NO CASE OF ACCRUAL OF ANY INCOME AND AS SUCH THERE IS NO LEGAL BASIS FOR IMPUGNED ADDITION. 3. THAT ORDERS OF THE LOWER AUTHORITIES ARE NOT JUS TIFIED ON FACTS AND SAME ARE BAD IN LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS E-RETURN DECLARING A TOTAL INCOME OF RS. 175,65,69,970/- ON 30/10/200 7 AND THE SAME WAS FOLLOWED BY REVISED RETURN WHICH WAS FILED ON 27.3. 2009 DECLARING INCOME OF RS. 175,73,31,970/-. THE SAME WAS PROCESSED U/S 14 3(1) OF THE I.T. ACT, 1961 THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE DATE D 23.9.2008 U/S 143(2) OF THE ACT WAS ISSUED. SUBSEQUENTLY, NOTICES U/S. 143(2) / 142(1) OF THE ACT ALONGWITH QUESTIONNAIRE WAS ISSUED FROM TIME TO TIME. IN RE SPONSE TO THESE STATUTORY NOTICES, THE REPRESENTATIVES OF THE COMPANY ATTENDE D THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME AND FILED THE DETAILS AS CALLED FOR. THE ASSESSEE IS 3 ENGAGED IN THE BUSINESS OF CONSULTANCY IN ALL THE T RANSPORT SECTORS IN ADDITION TO TECHNICAL INSPECTIONS, EXPORTS AND LEASING AND FORE IGN CONSULTANCY SERVICES. ON EXAMINATION OF RECORDS THE ASSESSING OFFICER OBSERV ED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 113.31 LACS TOWARDS PRIOR PERIOD EXPENSES IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE FOLLOWS MERCANTILE S YSTEM OF ACCOUNTING AND, THEREFORE, THE ASSESSING OFFICER HELD THAT ASSESSEE HAS SQUARELY FAILED TO ESTABLISH THAT PRIOR PERIOD EXPENSES OF RS. 1,13,54 ,696/- CRYSTALLIZED FOR PAYMENT IN THIS ASSESSMENT YEAR, HENCE, THE CLAIM O F DEDUCTION ON ACCOUNT OF PRIOR PERIOD EXPENSES OF RS. 1,13,54,696/- WAS DISA LLOWED AND ASSESSEES INCOME WAS ASSESSED AT RS. 176,86,56,670/- U/S. 143 (3) OF THE I.T. ACT, 1961 VIDE ASSESSMENT ORDER DATED 10.12.2010. SUBSEQUENTL Y, IT WAS NOTICED BY THE AO THAT PERUSAL OF SCHEDULE M OF NOTES TO ACCOUN T, PARA NO. 14.2 REVEALS THAT INTEREST OF RS. 201.66 LACS (RS. 379.28 177. 62 LACS) ON MOBILIZATION ADVANCE WAS DUE FROM THE EXECUTING AGENCY AND WAS NOT RECOGNIZED AS INCOME BY THE ASSESSEE. THIS AMOUNT SHOULD HAVE BEEN INCLU DED IN THE INCOME OF THE ASSESSEE AND TAXED ACCORDINGLY. ACCORDINGLY, THE A O OBSERVED THAT HE HAS REASON TO BELIEVE THAT INCOME OF RS. 201.66 LACS (R S. 379.28 LACS RS. 177.62 LACS) HAS ESCAPED ASSESSMENT WITHIN MEANING OF SECT ION 147 AND ACCORDINGLY, AFTER RECORDING THE REASONS, NOTICE U/S. 148 OF TH E ACT WAS ISSUED ON 23.3.2012 AND REASONS SO RECODED WERE ALSO COMMUNICATED TO T HE ASSESSEE. THE ASSESSEE FILED ITS OBJECTION AGAINST THE INITIATION OF REASS ESSMENT PROCEEDINGS ON 13.3.2013 WHICH AFTER DUE CONSIDERATION WERE DISPOS ED OFF VIDE THIS OFFICE LETTER 4 DATED 13.3.2013. SUBSEQUENTLY, NOTICE U/S. 143(2) A ND 142(1) WERE ISSUED. IN RESPONSE TO THE SAME STATUTORY NOTICES THE REPRESEN TATIVES OF THE ASSESSEE ATTENDED THE PROCEEDINGS AND SUBMITTED THE DOCUMENT S. THE ASSESSEE IN ITS SUBMISSION DATED 13.3.2013 BEFORE THE AO HAS STAT ED THAT IT IS NOT JUSTIFIABLE TO MAKE ADDITION OF RS. 201.66 LACS BY CONTEMPLATING I NTEREST ON MOBILIZATION ADVANCE ON NOTIONAL AND HYPOTHETICAL BASIS EVEN THO UGH THERE WERE NO SUCH INCOME OR ENTRY IN THE BOOKS OF ACCOUNT. AO HELD THAT REPLY OF THE ASSESSEE WAS NOT FOUND TENABLE AND ADDED BACK THE ADDITION OF RS. 201.66 LACS FOR THE ASSESSMENT YEAR 2007-08 AND RE-ASSESSED THE INCOME U/S. 147/143(3) OF THE ACT AT A TOTAL INCOME OF RS. 178,88,22,670/- VIDE HIS ORDER DATED 16.3.2013. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICE R, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUG NED ORDER DATED 16.6.2014 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE THRESHOLD, LD. COUNSEL OF THE ASSESSEE ON LY ARGUED THE GROUND NO. 2 RELATING TO ADDITION OF RS. 201.66 LACS AND STATE D THAT THE SAID ISSUE IS SQUARELY COVERED IN FAVOR OF THE ASSESSEE BY THE DECISION DA TED 20.1.2016 OF THE ITAT, F BENCH, NEW DELHI IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 PASSED IN ITA NO. 2149/DEL/2013 & ORS. HE FURTHER S TATED THAT AGAINST THE ORDER OF THE TRIBUNAL DATED 20.1.2016, AS AFORESAID, THE DEPARTMENT WENT IN APPEAL 5 BEFORE THE HONBLE DELHI HIGH COURT AND THE HONBLE HIGH COURT HAS DISMISSED THE DEPARTMENTS APPEAL TITLE AS PR. CIT- 7 VS. RITES LTD. PASSED IN ITA NO. 404/2016 VIDE ORDER DATED 6.12.2016. IN VIE W OF ABOVE, HE REQUESTED THAT THE ORDER OF THE HONBLE HIGH COURT, AS AFORE SAID MAY BE FOLLOWED AND ADDITION IN DISPUTE MAY BE DELETED AND APPEAL OF TH E ASSESSEE MAY BE ALLOWED ACCORDINGLY. 6. AT THE TIME OF HEARING, LD. DR RELIED UPON THE O RDER OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REV ENUE AUTHORITIES AND THE ORDER OF THE TRIBUNAL AND THE HONBLE HIGH COURT IN ASSES SEES OWN CASE. WE FIND THAT THE ITAT, F BENCH, NEW DELHI VIDE ITS DECISI ON DATED 20.1.2016 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 PASSED IN ITA NO. 2149/DEL/2013 & ORS HAS HELD AS UNDER:- 10. WE HAVE PERUSED THE RELEVANT PAGES OF THE PAPER BOOK AND ARE CONVINCED THAT AS THE AMOUNT HAS NOT BEEN CRYSTALLIZED THE SAME CANNOT BE TREATED AS INCOME IN THE HANDS OF THE ASSESEE. THE ASSESSEE BEING A GOVERNMENT UNDERTAKING HAS BEEN FOLLOWING A SYSTEM OF ACCOUNTING AS PER WHICH ALL ITEMS OF INC OME AND EXPENDITURE ARE TREATED AS ACCRUED ONLY AFTER T HE 6 APPROVAL IS GRANTED BY COMPETENT AUTHORITY. THIS SYSTEM HAS BEEN FOLLOWED CONSISTENTLY IN RESPECT OF BOTH INCOME AND EXPENDITURE ITEMS WHICH HAS NOT BEEN DISPUTED BY THE REVENUE IN ANY OF THE PRECEDIN G YEARS. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION CONFIRMED BY THE LD. CIT(A) IS WITHOUT ANY BASIS AND NEEDS TO BE DELETED. 10.1 ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ALLOWED. 7.1 WE FURTHER FIND THAT THE HONBLE HIGH COURT OF DELHI HAS DISMISSED THE DEPARTMENTS APPEAL TITLE AS PR. CIT-7 VS. RITES LT D. PASSED IN ITA NO. 404/2016 VIDE ORDER DATED 6.12.2016 BY HOLDING AS U NDER:- 3. IT IS URGED BY THE REVENUE THAT THE ITATS REASONING IS FLAWED. THE LEARNED COUNSEL CONTENDS THAT RIGHTS OF THE ASSESSEE TO RECEIVE THE AMOUNT FROM RPCL HAD ACCRUED WHICH MEANT THAT APPROPRIATE RECOGNITION OF THE REVENUE HAD TO BE REFLECTED. IT WAS SUBMITTED THAT ARBITRARILY OF THE DISPUTE WAS QUESTIONED AS THERE COULD BE NO DOUBT THAT UNDER THE CONTRACT, THE MOBILIZATION ADVANCE WAS GIVEN BY 7 THE ASSESSEE AND THEREFORE IT WAS ENTITLED TO THE INTEREST. 4. IT IS EVIDENT FROM THE ABOVE DISCUSSION THAT THE ENTIRE MATTER IS CONTENTIOUS IN THE SENSE THAT THE THIRD PARTY RPCL WHICH WAS AWARDED THE CONTRACT CLAIMED THAT IT HAS PERFORMED IT IN ACCORDANCE WITH THE AGREEMENT WITH THE PARTIES. THE ASSESSEE, HOWEVER, FELT OTHERWISE AND TERMINATED THE CONTRACT. THERE COULD BE SEVERAL LIKELY OUTCOMES IN THESE PROCEEDINGS MANY OF THEM POSSIBILITY IMPINGING UPON THE RIGHTS OF THE ASSESSEE TO RECEIVE ADVANCE AMOUNT ITSELF ALONG WITH INTEREST EITHER IN WHOLE OR IN PART. IN THESE CIRCUMSTANCES, THE ITATS CONCLUSIONS THAT THERE WAS NO CRYSTALLIZED RIGHT TO RECEIVE ANY PARTICULAR AMOUNT OR AMOUNTS, CANNOT BE FAULTED. NO QUESTION OF LAW ARISES. THE APPEAL, IS THEREFORE, DISMISSED. 8 8. AFTER PERUSING THE AFORESAID FINDINGS OF THE ITA T, DELHI BENCH AND HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE, W E ARE OF THE CONSIDERED OPINION THAT THE ISSUE IN DISPUTE IS SQUARELY COVER ED BY THE AFORESAID FINDINGS, HENCE, RESPECTFULLY FOLLOWING THE AFORESAID PRECEDE NTS OF THE ITAT, F BENCH, DELHI IN ASSESSEES OWN CASE AND THE DECISION DATED 6.12.2016 OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE T ITLE AS PR. CIT-7 VS. RITES LTD. IN ITA NO. 404/2016, WE ALLOW THE APPEAL OF T HE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/04/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 07/04/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES