DCIT, Central Circle-2(1), Hyd, Hyderabad V. KNR Constructions Ltd., Hyd, Hyderabad

ITA 985/HYD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98580 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 27-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KONDA RAMESH
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Search and seizure; Tangible material; Capital receipt; Revised return; Revenue expenditure
• Section: 143(3); 153A; 147; 37; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA.NO. A.Y. APPELLANT RESPONDENT 946/H/2015 2006 - 07 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. PAN AAACK8316L DCIT, CENTRAL CIRCLE-3 HYDERABAD. 947/H/2015 2007 - 08 948/H/2015 2008 - 09 ITA.NO. A.Y. APPELLANT RESPONDENT 983/H/2015 2009 - 10 DCIT, CENTRAL CIRCLE-2(1) HYDERABAD. M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. PAN AAACK8316L 984/H/2015 2010 - 11 985/H/2015 2011 - 12 986/H/2015 2012 - 13 FOR ASSESSEE : MR. S. RAMA RAO FOR REVENUE : MR. KONDA RAMESH DATE OF HEARING : 1 4 . 1 0.2015 DATE OF PRONOUNCEMENT : 16 . 1 0.2015 ORDER PER BENCH : OUT OF THESE SEVEN APPEALS, THREE APPEALS BEING ITA.NOS.946, 947 & 948/HYD/2015 ARE THE APPEA LS FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST TH E COMMON ORDER OF LD. CIT(A)-12, HYDERABAD DATED 21.05.2015 FOR A.YS. 2006-07, 2007-08 AND 2008-09, WHILE OUT OF THE REMAINING FOUR APPEALS THAT ARE FI LED BY THE REVENUE, TWO APPEALS BEING ITA.NO.983 & 984/H/1 5 2 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. CI T(A)- 12, HYDERABAD DATED 21.05.2015 FOR A.YS. 2009-10 AN D 2010-11, THE THIRD APPEAL BEING ITA.NO.985/HYD/2015 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-12, HYDERA BAD, DATED 21.05.2015 FOR A.Y. 2011-12 AND THE 4 TH APPEAL BEING ITA.NO.986/HYD/2015 IS DIRECTED AGAINST THE O RDER OF LD. CIT(A)-12, HYDERABAD DATED 21.05.2015 FOR A. Y. 2012-13. SINCE THE MAIN ISSUE INVOLVED IN ALL THESE APPEALS IS COMMON, THE SAME HAVE BEEN HEARD TOGETHE R AND ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A COMPANY WHICH IS ENGAGED IN THE CONSTRUCTION BUSINESS. PRIOR TO THE SEARCH AND SEIZURE ACTION TA KEN IN ITS CASE ON 08.12.2011, THE ASSESSEE HAD FILED ITS RETURNS OF INCOME FOR SIX OUT OF THE SEVEN YEARS UNDER CONSIDERATION I.E., A.YS. 2006-07 TO 2011-12 AND ASSESSMENTS UNDER SECTION 143(3) WERE ALSO COMPLETE D FOR THE FIRST THREE YEARS I.E., A.YS. 2006-07, 2007-08 AND 2008-09. CONSEQUENT TO THE CONCLUSION OF THE SEARCH AND SEIZURE ACTION ON 03.02.2012 WHEN THE LAST OF THE AUTHORIZATIONS WAS EXECUTED, NOTICES UNDER SECTION 153A WERE ISSUED BY THE A.O. ON 09.10.2012 FOR THE SIX Y EARS I.E., A.YS. 2006-07 TO 2011-12. IN RESPONSE TO THE SAID NOTICES, THE RETURNS OF INCOME FOR THE RELEVANT SIX YEARS WERE FILED BY THE ASSESSEE CLAIMING THEREIN DEDUCTI ON UNDER SECTION 80IA. MEANWHILE, THE RETURN OF INCOME FOR A.Y. 2012-13 WAS ALSO FILED BY THE ASSESSEE ON 29.0 9.2012 CLAIMING DEDUCTION UNDER SECTION 80IA. THEREAFTER, 3 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. NOTICES UNDER SECTION 143(2) WERE ISSUED BY THE A.O . TO THE ASSESSEE ON 07.08.2013 FOR ALL THE SEVEN YEARS UNDER CONSIDERATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) READ WITH SECTION 153A FOR A.YS. 2006-07 TO 2011-12 AND UNDER SECTION 143( 3) FOR A.Y. 2012-13, THE CLAIM OF THE ASSESSEE FOR DEDUCTI ON UNDER SECTION 80IA WAS EXAMINED BY THE A.O. ON SUCH EXAMINATION, HE FOUND THAT THE DEDUCTION UNDER SECT ION 80IA WAS NOT CLAIMED BY THE ASSESSEE EITHER IN ITS RETURNS ORIGINALLY FILED FOR THE RELEVANT SIX YEARS I.E., A .YS. 2006-07 TO 2011-12 OR EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE SAID YEARS AND THE SAME WAS MAD E FOR THE FIRST TIME IN THE RETURNS FILED IN RESPONSE TO NOTICES UNDER SECTION 153A FOR THE SAID YEARS. RELYING ON T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. SUN ENGINEERING PVT. LTD., 198 ITR 297 AND THAT OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JAI STE EL (INDIA) VS. ACIT (2013) 259 CTR 281 (RAJ.), HE HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM SUCH A NEW R ELIEF FOR DEDUCTION UNDER SECTION 80IA IN THE RETURNS FIL ED IN RESPONSE TO THE NOTICES ISSUED UNDER SECTION 153A. ACCORDINGLY, THE CLAIM MADE BY THE ASSESSEE FOR DED UCTION UNDER SECTION 80IA FOR A.YS. 2006-07 TO 2011-12 IN THE RETURNS FILED IN RESPONSE TO THE NOTICE ISSUED UNDE R SECTION 153A WAS HELD TO BE NOT ALLOWABLE BY THE A. O. HE ALSO CONSIDERED THE CLAIM OF THE ASSESSEE FOR DEDUC TION UNDER SECTION 80IA ON MERIT AND HELD THAT SINCE THE INFRASTRUCTURE FACILITY DEVELOPED BY THE ASSESSEE W AS NOT OWNED BY IT, THE BASIC CONDITION STIPULATED IN SUB- CLAUSE 4 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. (A) OF CLAUSE (1) SUB-SECTION (4) OF SECTION 80IA W AS NOT SATISFIED AND THE ASSESSEE THEREFORE, WAS NOT ENTIT LED FOR DEDUCTION UNDER SECTION 80IA ON MERIT ALSO. IN SUPP ORT OF THIS CONCLUSION, HE RELIED ON THE DECISION OF THE M UMBAI SPECIAL BENCH OF ITAT IN THE CASE OF BB PATIL & SON S BELGAUM CONSTRUCTIONS P. LTD., VS. ACIT 35 SOT 171 (MUM.) (SB). ACCORDINGLY, THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IA WAS DISALLOWED BY THE A.O. ON MERIT ALSO IN THE ASSESSMENTS COMPLETED UNDER SE CTION 143(3) READ WITH SECTION 153A FOR A.Y. 2006-07 TO 2 011- 12 AND UNDER SECTION 143(3) FOR A.Y. 2012-13. 2.1. THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF ITS CLAIM FOR DEDUCTION UNDER SECTION 80IA IN AL L THE SEVEN YEARS UNDER CONSIDERATION WAS CHALLENGED BY ASSESSEE IN THE APPEALS FILED BEFORE LD. CIT(A). DU RING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT( A), VARIOUS SUBMISSIONS WERE MADE BY THE ASSESSEE IN SUPPORT OF ITS CLAIM FOR DEDUCTION UNDER SECTION 80 IA, WHICH AS SUMMARIZED BY THE LD. CIT(A) IN HIS IMPUGN ED ORDERS, WERE AS UNDER : A) SECTION 153A CLEARLY STATES THAT THE RETURN FILED IN RESPONSE TO THE NOTICE U/S 153A(1)(A) IS A RETURN WHICH IS REQUIRED TO BE FURNISHED U/S 139 OF THE I.T. ACT. FURTHER THE SECTION STARTS WITH A NON- OBSTANTE CLAUSE. THUS, A RETURN FILED U/S 153A IS LIKE A FRESH RETURN AND ALL CLAIMS CAN BE MADE IN THAT NOTWITHSTANDING THE EARLIER RETURNS FILED IN REGULAR COURSE. B) THE RETURN FILED BY THE ASSESSEE IN RESPONSE TO RETURN U/S 153A STEPS INTO THE SHOES OF THE RETURNS 5 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. FILED BY THE ASSESSEE U/S 139(1) AND THE ASSESSMENT HAS TO BE COMPLETED AFRESH ON THE BASIS OF THE RETURN FILED U/S. 153A. C) TOTAL INCOME AS PER SECTION 2(45) IS DEFINED AS INCOME COMPUTED IN THE MANNER LAID DOWN IN THE ACT AND VARIOUS DEDUCTIONS WHICH ARE TO BE GIVEN WHILE COMPUTING THE SAID INCOME HAVE TO BE GIVEN INCLUDING CLAIM OF DEDUCTION U/S 80IA. D) EXPLANATION TO SUB-SECTION 2 OF SECTION 153A PROVIDES THAT ALL OTHER PROVISIONS OF THE ACT SHALL APPLY TO THE ASSESSMENT MADE UNDER THIS SECTION. THEREFORE, DEDUCTION U/S 80IA WHICH IS THERE IN THE REST OF THE PROVISIONS OF THE ACT, WILL APPLY. E) THE HONBLE ITAT MUMBAI IN THE CASE OF EVERSMILE CONSTRUCTIONS PVT LTD., (ITA NO.423/MUM/2010) HAS CLEARLY HELD THAT DEDUCTION CLAIMED UNDER 153A CANNOT BE REJECTED BECAUSE IT WAS NOT CLAIMED IN THE ORIGINAL ASSESSMENT OR WAS DISALLOWED. F) THE APPELLANT ALSO CITED THE DECISION OF HON'BLE CHENNAI BENCH, ITAT IN THE CASE OF ACIT VS V.N. DEVADOSS (I.T. APPEAL NO.1219 TO 1223 OF 2012) IN SUPPORT OF ITS CLAIM. G) THE APPELLANT SUBMITTED THAT THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS SUN ENGINEERING PVT. LTD., IS NOT APPLICABLE TO ITS CAS E SINCE THE SAID DECISION DEALT WITH THE ASSESSMENT/REASSESSMENT U/S 147/148 AND NOT WITH A SEARCH ASSESSMENT U/S 153A. SECTION 148/147 TALKS OF ASSESSMENT OF ESCAPED INCOME WHICH IS CLEARLY DISTINCT FROM THE ASSESSMENT OF TOTAL INCOME WHICH IS MENTIONED IN SECTION 153A. FURTHER, THIS DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SUN ENGINEERING WAS ALREADY DISTINGUISHED BY THE HON'BLE ITAT IN THE CASE OF M/S EVERSMILE CONSTRUCTIONS CITED SUPRA. 6 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. H) THE APPELLANT ALSO SUBMITTED THAT THE FACTS OF THE CASE OF M/S JAI ENGG (HON'BLE RAJASTHAN HIGH COURT DECISION) DIFFER. THE AO HAS TO ASSESS THE TOTAL INCOME UNDER 153A (B) AND PROVISO THERE UNDER, WHICH IS NOT JUST THE INCOME UNEARTHED DURING THE SEARCH. WHEN THE WORD TOTAL INCOME IS USED IN SECTION 153A THE COMPUTATION IS NOT COMPLETE UNTIL DEDUCTIONS UNDER CHAPTER VI-A ARE GIVEN. I) POWERS OF THE CIT(A) ARE THERE TO ENTERTAIN FRESH CLAIM OF DEDUCTION AND ALLOW THE SAME IF THE ASSESSEE IS ELIGIBLE THOUGH THE SAME POWERS ARE NOT THERE WITH THE AO. RELIANCE WAS PLACED UPON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS PRUTHVI BROKERS AND SHAREHOLDERS PVT. LTD., (ITA NO.3908/2010 DATED 21.06.2012) TO CLAIM THAT APPELLATE AUTHORITIES HAVE POWERS TO ENTERTAIN FRESH CLAIM OF DEDUCTION EITHER IN THE FORM OF GROUNDS OF APPEAL OR ADDITIONAL GROUNDS OF APPEAL WHEN THE SAME WAS REJECTED BY THE AO ON THE GROUND THAT CLAIM WAS NOT MADE BY THE ASSESSEE EITHER IN THE ORIGINAL RETURN OR REVISED RETURN OR IN THE ASSESSMENT PROCEEDINGS. J) THE APPELLANT CITED CBDT CIRCULAR NO.14 (F.NO.35, DATED 11.04.1955) TO SUBMIT THAT THE DEPARTMENT SHOULD NOT TAKE ADVANTAGE OF THE IGNORANCE OF ASSESSEE TO ITS RIGHTS. K) THE A.O. TOTALLY IGNORED THE RETURNS FILED U/S 153A BUT ASSESSED THE INCOME ON THE BASIS OF PREVIOUS RETURNS OF INCOME AND THE EARLIER COMPLETED ASSESSMENT U/S 143(3). L) THE A.O. TOOK A COMPLETELY WRONG VIEW THAT A INFRASTRUCTURE PROJECT FACILITY HAS TO BE OWNED BY A PERSON TO BE ELIGIBLE FOR DEDUCTION. THE AO MISINTERPRETED THE CLAUSE 4(A) OF SECTION 80IA. IT IS THE OWNERSHIP OF THE ENTERPRISE WHICH IS DEVELOPING THE INFRASTRUCTURE FACILITY WHICH IS BEING DISCUSSED IN THE SUB-SECTION. THE ENTERPRISE SHOULD BELONG TO A COMPANY OR A CONSORTIUM OF 7 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. COMPANIES REGISTERED IN INDIA. THE APPELLANT CITED THE FOLLOWING DECISIONS OF JURISDICTIONAL TRIBUNAL ITAT TO CLAIM THAT IT IS ELIGIBLE FOR DEDUCTION U/S 80IA. (I) KMC CONSTRUCTIONS VS. ACIT (ITA NO.338/HYD/2009). (II) KOYA & COMPANY CONSTRUCTIONS PVT. LTD., VS., ACIT (ITA.NO. 180/HYD/2006, 167 AND 168/HYD/2008 AND 221/HYD/2008). (III) OCEAN SPARKLE LTD., VS DCIT. (IV) GVPR ENGINEERS LTD., VS ACIT (ITA NO.347/HYD/2008). (V) HONBLE ITAT, MUMBAI E BENCH DECISION IN THE CASE OF PRATIBHA INDUSTRIES LTD VS., ACIT (ITA.NO.2197 TO 2199/MUM/2008). (VI) DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS., ABG HEAVY INDUSTRIES LTD., (2010) 323 ITR 323. 2.2. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, MATERIAL AVAILABLE ON RECORD AND THE CASE LAWS CITED IN SUPPORT, THE LD. CIT(A) FOUND MERIT IN THE STAND OF THE ASSESSEE THAT THE OWNERSHIP OF THE INFRASTRUCTU RE FACILITY WAS NOT THE CONDITION FOR CLAIMING DEDUCTI ON UNDER SECTION 80IA. HE HELD THAT WHAT IS CONTEMPLAT ED BY SUB-CLAUSE (A) OF CLAUSE (1) OF SUB-SECTION (4) OF SECTION 80IA IS THE OWNERSHIP OF THE ENTERPRISE AND NOT THE OWNERSHIP OF THE INFRASTRUCTURE FACILITY. FOR THIS CONCLUSION, HE RELIED ON THE VARIOUS CASE LAWS CITE D BY THE ASSESSEE WHEREIN A SIMILAR PROPOSITION WAS PROPOUND ED. HE THEREFORE, DID NOT AGREE WITH THE VIEW OF THE A. O. THAT 8 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION UNDER S ECTION 80IA ON MERIT. 2.3. AS REGARDS THE DECISION OF THE A.O. THAT ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80IA FOR THE FIRST TIME IN THE RETURNS OF I NCOME FILED IN RESPONSE TO THE NOTICE ISSUED UNDER SECTIO N 153A FOR A.YS. 2006-07 TO 2011-12, THE LD. CIT(A) FOUND THAT THERE WERE TWO DIFFERENT SITUATIONS INVOLVED IN THE RELEVANT SIX YEARS INASMUCH AS THE ASSESSMENTS FOR A.YS. 200 6-07 TO 2008-09 HAD ALREADY BEEN COMPLETED BEFORE THE DA TE OF SEARCH WHEREAS THE ASSESSMENTS FOR A.YS. 2009-10 TO 2011-12, WHICH WERE PENDING ON THE DATE OF SEARCH, HAD GOT ABATED. 2.4. AS REGARDS THE A.YS. 2006-07 TO 2008-09, HE HELD THAT THE ORIGINAL ASSESSMENTS HAVING BEEN ALRE ADY COMPLETED BEFORE THE DATE OF SEARCH, THE ASSESSMENT S THAT WERE MADE BY THE A.O. UNDER SECTION 143(3) READ WIT H SECTION 153A WERE RE-ASSESSMENTS DURING THE COURS E OF WHICH, ASSESSEE WAS NOT ENTITLED TO MAKE A NEW CLAI M FOR DEDUCTION UNDER SECTION 80IA WHICH HAD NOT BEEN MAD E IN THE ORIGINAL ASSESSMENT. ACCORDINGLY, RELYING ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF JAI STEEL (INDIA) VS. ACIT (SUPRA), HE UPHELD THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF ASSESSE ES CLAIM FOR DEDUCTION UNDER SECTION 80IA FOR A.YS. 20 06-07 TO 2008-09. AS REGARDS A.YS. 2009-10 TO 2011-12, H E HELD THAT THE ORIGINAL ASSESSMENT PROCEEDINGS HAVIN G GOT 9 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. ABATED, THE PROCEEDINGS UNDER SECTION 153A CONSTITU TED ORIGINAL PROCEEDINGS AND THE ASSESSEE THEREFORE, WA S ENTITLED TO MAKE THE CLAIM FOR DEDUCTION UNDER SECT ION 80IA. FOR THIS CONCLUSION, HE AGAIN RELIED ON THE D ECISION OF RAJASTHAN HIGH COURT IN THE CASE OF JAI STEEL (I NDIA) VS. ACIT (SUPRA), WHEREIN THESE TWO DISTINCT SITUATIONS WERE CONSIDERED AS BASIS FOR DECIDING WHETHER ASSESSEE I S ENTITLED OR NOT FOR MAKING A NEW CLAIM DURING THE C OURSE OF PROCEEDING UNDER SECTION 153A. THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IA THUS WAS ALLOWED BY THE LD. CIT(A) FOR A.YS. 2009-10 TO 2012 -13 WHEREAS, THE ACTION OF THE A.O. IN DISALLOWING SUCH CLAIM FOR A.YS. 2006-07 TO 2008-09 WAS UPHELD BY THE LD. CIT(A). AGGRIEVED BY THE SAME, THE ASSESSEE HAS RAI SED THIS ISSUE IN ITS APPEALS FOR A.YS. 2006-07 TO 2008 -09 FILED BEFORE THE TRIBUNAL WHILE THE REVENUE HAS RAISED TH E SAID ISSUE IN THE PRESENT APPEALS FILED BEFORE THE TRIBU NAL FOR A.YS. 2009-10 TO 2012-13. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON REC ORD. AT THE TIME OF HEARING BEFORE US, THE LEARNED REPRESEN TATIVES OF BOTH THE SIDES, BESIDES STRONGLY RELYING ON THE RELEVANT PORTIONS OF THE ORDERS OF THE AUTHORITIES BELOW WHI CH ARE IN THEIR FAVOUR, HAVE ALSO CITED VARIOUS CASE LAWS IN SUPPORT OF THEIR RESPECTIVE STAND ON THE ISSUE RELA TING TO THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80 IA. WE HAVE CAREFULLY GONE THROUGH AND DELIBERATED UPON TH E 10 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. JUDICIAL PRONOUNCEMENTS CITED BY THE LEARNED REPRESENTATIVES OF BOTH THE SIDES. 3.1. AS REGARDS THE PRELIMINARY ISSUE AS TO WHETH ER THE ASSESSEE IS ENTITLED TO MAKE A NEW CLAIM FOR DE DUCTION UNDER SECTION 80IA IN THE RETURNS OF INCOME FILED I N RESPONSE TO NOTICES ISSUED UNDER SECTION 153A AS IN VOLVED IN SIX OUT OF SEVEN YEARS UNDER CONSIDERATION I.E., A.YS. 2006-07 TO 2011-12, THE LD. COUNSEL FOR THE ASSESSE E HAS RELIED ON THE DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. EVERSMILE CONSTRUC TION CO. P. LTD., (SUPRA), WHEREIN WHILE DEALING WITH A SIMILAR ISSUE, THE MAIN FEATURES OF THE RELEVANT PROVISIONS WERE NOTICED BY THE TRIBUNAL AND AFTER ANALYSING THE SAM E, IT WAS HELD BY THE TRIBUNAL THAT ANY DEDUCTION CLAIMED BY THE ASSESSEE IN THE PROCEEDINGS UNDER SECTION 153A COULD NOT BE REJECTED SIMPLY ON THE GROUND THAT IT WAS NO T CLAIMED IN THE ORIGINAL ASSESSMENT. THE RELEVANT OBSERVATIONS RECORDED BY THE TRIBUNAL AS CONTAINED IN PARAGRAPH NOS. 6 TO 9 OF ITS ORDER ARE EXTRACTED BE LOW : 6. FROM THE PRESCRIPTION OF THE ABOVE SECTION THE FOLLOWING FEATURES ARE NOTICEABLE IN SO FAR AS WE ARE CONCERNED WITH THE INSTANT APPEAL :- _ ASSESSMENT PURSUANT TO SEARCH IS TO BE MADE NOTWITHSTANDING ANYTHING CONTAINED INTER ALIA IN SECTION 147 ; - CLAUSE (A) OF SUB-SECTION (1) PROVIDES THAT THE RELEVANT PROVISIONS SHALL APPLY AS IF THE RETURN FI LED IN RESPONSE TO NOTICE U/S 153A(1) IS A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139 ; 11 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. - FIRST PROVISO TO SUB-SECTION (1) STATES THAT THE ASSESSING OFFICER IS REQUIRED TO ASSESS OR REASSESS 'TOTAL INCOME' IN RESPECT OF EACH ASSESSMENT FALLIN G WITHIN THE RELEVANT SIX ASSESSMENT YEARS. - THE SECOND PROVISO TO SUB-SECTION (1) PROVIDES THAT THE ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY OF THE SIX ASSESSMENT YEARS PENDING ON THE DATE OF SEARCH U/S 132 OR MAKING REQUISITION U/S 132A, SHALL ABATE . - SUB-SECTION (2) OF SECTION L53A PROVIDES THAT IF DU E TO ONE REASON OR THE OTHER THE ASSESSMENT MADE U/S L53A IS ANNULLED IN ANY APPEAL OR ANY OTHER PROCEEDINGS THEN THE ASSESSMENT OR REASSESSMENT WHICH HAD ABATED IN SECOND PROVISO TO SUBSECTION (1) SHALL STAND REVIVED WITH EFFECT FROM THE DATE O F RECEIPT OF THE ORDER OF SUCH ANNULMENT. 7. A CLOSE LOOK AT THE ABOVE PROVISION MANIFESTS TH AT THE ASSESSING OFFICER IS REQUIRED TO MAKE ASSESSMENT AFRESH AND COMPUTE THE 'TOTAL INCOME' IN RESPECT OF EACH OF THE RELEVANT SIX ASSESSMENT YEARS. AS THERE IS NO SPECIFIC INHIBITION ON THE JURISDICTION OF THE ASSESSING OFFICER IN NOT INCLUDING ANY NEW INCOME TO SUCH FRESH TOTAL INCOME PURSUANT TO SEARCH WHICH WAS NOT ADDED DURING THE ORIGINAL ASSESSMENT, IN THE LIKE MANNER, THERE IS NO RESTRICTION ON THE ASSESSEE TO CLAIM AN Y DEDUCTION WHICH WAS NOT ALLOWED IN THE ORIGINAL ASSESSMENT. THE REQUIREMENT OF SECTION 153A IS TO COMPUTE THE TOTAL INCOME OF EACH OF SUCH ASSESSMENT YEARS. SUCH DETERMINATION OF THE TOTAL INCOME HAS TO BE DONE AFRESH WITHOUT ANY REFERENCE TO WHAT WAS DONE IN THE ORIGINAL ASSESSMENT. OF COURSE, THE AO IS ENTITLED TO MAKE ANY ADDITION IN THE FRESH ASSESSMENT, WHICH HE MADE IN THE ORIGINAL ASSESSMENT, PROVIDED HE IS SATISFIED WITH THE MERITS OF THE ADDITION. BUT THE MERE FACT THAT THERE WAS SOME ADDITION IN THE ORIGINAL ASSESSMENT, WOULD NOT PRECLUDE THE ASSESSEE FROM CONTESTING THE ADDITION IN THE SUBSEQUENT PROCEEDINGS. AS IT IS GOING TO BE A 12 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. FRESH EXERCISE OF FRAMING ASSESSMENT OR REASSESSMENT OF THE TOTAL INCOME AT THE END OF THE AO, THE ASSESSEE CANNOT BE STOPPED FROM NOT EVEN ARGUING ABOUT THE MERITS OF HIS CASE QUA THE ADDITION WHICH WAS MADE IN THE ORIGINAL ASSESSMENT. DEBARRING THE ASSESSEE FROM MAKING A CLAIM ABOUT THE DEDUCTIBILITY OF ANY ITEM, WHICH WAS EARLIER DISALLOWED, COUNTERS THE VERY CONCEPT OF FRESH ASSESSMENT OF TOTAL INCOME. 8. THE RELIANCE OF THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS PVT. LTD [ (1992) 198 ITR 297 (SC) ] IS MISCONCEIVED. THE REASON FOR THE SAME IS THAT IN THAT CASE THE HON'BLE SUPREME COURT WAS CONSIDERING THE PROVISIONS OF SECTION 147 AND IT WAS HELD THAT ONCE AN ASSESSMENT IS VALIDLY REOPENED IT IS NOT OPEN TO AN ASSESSEE TO SEEK A REVIEW OF CONCLUDED ITEMS UNCONNECTED WITH THE ESCAPEMENT OF INCOME. HERE IT IS PERTINENT TO NOTE THAT THE CONDITIONS FOR TAKING ACTION U/S 147 VIS- VIS UNDER SECTION 153A ARE ALTOGETHER DIFFERENT. EVEN THOUGH ASSESSMENT U/S 147 IS MADE READ WITH SECTION 143(3), BUT THE INITIATION OF ASSESSMENT OR REASSESSMENT U/S 147 ORIGINATES FROM THE BELIEF OF THE AO, ON THE BASIS OF SOME TANGIBLE MATERIAL, THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AFTER FORMING SUCH BELIEF, THE AO IS CALLED UPON TO RECORD REASONS FOR THE REOPENING OF THE ASSESSMENT BEFORE ISSUING MANDATORY NOTICE U/S 148. IF THE FOUNDATION OF REASSESSMENT, BEING THE REASONS ABOUT THE ESCAPEMENT OF SOME INCOME DO NOT EXIST, THEN IT IS IMPERMISSIBLE TO GO AHEAD WITH THE ASSESSMENT U/S 147. IT IS SINE QUA NON THAT SOME ESCAPED INCOME MUST BE BROUGHT TO CHARGE IN ORDER TO MAKE A FRESH ASSESSMENT U/S 147. ON THE CONTRARY, THE SEARCH ACTION ITSELF MANDATES ON THE ASSESSING OFFICER TO PASS ORDERS U/S. 153A COMPUTING TOTAL INCOME FOR ALL THE RELEVANT SIX ASSESSMENT YEARS, IRRESPECTIVE OF THE FACT WHETHER SOME CONCEALED INCOME HAS SURFACED AS A RESULT OF SEARCH OR NOT. I T 13 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. IS THUS APPARENT THAT THE AMBIT OF ASSESSMENT U/S 147 CANNOT BE IMPORTED INTO THE SCOPE OF SECTION 153A. 9. IT IS FURTHER IMPORTANT TO NOTE THAT THE PROVISI ONS OF ASSESSMENT IN THE CASE OF SEARCH U/S L53A ETC. HAVE BEEN INSERTED BY THE FINANCE ACT, 2003 WITH EFFECT FROM 01.06.2003. THESE PROVISIONS ARE' SUCCESSOR OF THE SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES UNDER CHAPTER XIV -B STARTING WITH SECTION 158B. WHEREAS CHAPTER XIV - B REQUIRED THE ASSESSMENT OF 'UNDISCLOSED INCOME' AS A RESULT OF SEARCH, WHICH HAS BEEN DEFINED IN SECTION 158B(B), SECTION 153A DEALING WITH ASSESSMENT IN CASE OF SEARCH WITH EFFECT FROM 01.06.2003 REQUIRES THE ASSESSING OFFICER TO DETERMINE 'TOTAL INCOME' AND NOT 'UNDISCLOSED INCOME. 3.2. FOR THE REASONS GIVEN ABOVE, IT WAS HELD BY T HE TRIBUNAL THAT THE STARTING POINT OF THE ASSESSMENT UNDER SECTION 153A IS THE AMOUNT OF INCOME DECLARED IN TH E RETURN OF INCOME AND WHEN THE A.O. HAS TO COMPUTE T HE TOTAL INCOME OF THE ASSESSEE ON THE BASIS OF THE RE TURN OF INCOME, THERE MAY NOT BE ANY SCOPE FOR ARGUING THAT THE ASSESSEE HAS BEEN RENDERED POWERLESS TO EVEN LODGE A CLAIM IN RESPECT OF WHICH DEDUCTION WAS NOT ALLOWED EARLIER. IN THE SAID CASE BEFORE THE TRIBUNAL, RELI ANCE WAS PLACED BY THE LEARNED D.R. IN SUPPORT OF REVENUES STAND ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF SUN ENGINEERING (SUPRA) AS IN THE PRESENT CASE, BUT THE SAME WAS FOUND TO BE MISCONCEIVED BY THE TRIBUNAL F OR THE REASONS GIVEN IN PARAGRAPH NO.8 OF ITS ORDER WH ICH ARE ALREADY EXTRACTED ABOVE. 14 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. 4. BESIDES THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUN ENGINEERING (SUPRA), THE A.O. HA S RELIED UPON THE DECISION OF HONBLE RAJASTHAN HIGH COURT I N THE CASE OF JAI STEEL (INDIA) VS. ACIT (SUPRA) TO HOLD THAT ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION UNDER S ECTION 80IA FOR THE FIRST TIME IN THE RETURNS FILED IN RES PONSE TO NOTICE ISSUED UNDER SECTION 153A FOR THE RELEVANT S IX YEARS I.E., A.YS. 2006-07 TO 2011-12. THE LD. CIT(A ) HAS ALSO RELIED ON THE SAID DECISION OF HONBLE RAJASTH AN HIGH COURT TO UPHOLD THE DECISION OF THE A.O. ON THIS IS SUE IN SO FAR AS THE A.YS. 2006-07 TO 2008-09 ARE CONCERNE D WHERE THE ORIGINAL ASSESSMENTS UNDER SECTION 143(3) HAD ALREADY BEEN COMPLETED PRIOR TO THE DATE OF SEARCH. AFTER GOING THROUGH THE JUDGMENT OF HONBLE RAJASTHAN HIG H COURT IN THE CASE OF JAI STEEL (INDIA) VS. ACIT (SU PRA), WE FIND THAT THE FACTS INVOLVED THEREIN WERE MATERIALL Y DIFFERENT FROM THE FACTS INVOLVED IN THE PRESENT CA SE AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE ASSE SSEE. FIRST OF ALL, THE CLAIM MADE BY THE ASSESSEE IN THE SAID CASE IN THE RETURN FILED IN RESPONSE TO THE NOTICE UNDER SECTION 153A FOR THE FIRST TIME WAS THAT THE SALES TAX INCENTIVE RECEIVED BY IT WAS A CAPITAL RECEIPT AND THE SAME BEING A SUBJECT MATTER OF CLAIM AND NOT A REGULAR ALLOWABLE DEDUCTION AS PER THE PROVISIONS OF THE AC T, IT WAS CONSIDERED THAT THE SAME REQUIRED THE INITIATIO N OF CLAIM AND CONCLUSION ON THE BASIS OF FACTS AND OTHE R JUDICIAL PRONOUNCEMENTS. MOREOVER, NO INCRIMINATING MATERIAL WAS FOUND IN THE SAID CASE BEFORE THE HON BLE RAJASTHAN HIGH COURT DURING THE COURSE OF SEARCH AN D IN 15 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. THE ABSENCE OF SUCH INCRIMINATING MATERIAL, IT WAS HELD BY THEIR LORDSHIPS THAT THE ASSESSMENT OR RE-ASSESSMEN T UNDER SECTION 153A WOULD NOT RESULT IN ANY ADDITION AND THE ASSESSMENT PASSED EARLIER MAY HAVE TO BE REITER ATED. IN THIS REGARD, HONBLE RAJASTHAN HIGH COURT REFERR ED TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. ANIL KUMAR BHATIA (2013) 352 ITR 493 (DEL.) WHE REIN IT WAS HELD THAT WHERE AN ASSESSMENT ORDER HAS ALRE ADY BEEN PASSED EITHER UNDER SECTION 143(1)(A) OR 143(3 ), THE A.O. IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND R E- ASSESS THE TOTAL INCOME TAKING NOTE OF THE UNDISCLO SED INCOME, IF ANY, UN-EARTHED DURING THE SEARCH. WHILE HIGHLIGHTING THESE OBSERVATIONS OF THE HONBLE DELH I HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA), HON BLE RAJASTHAN HIGH COURT HOWEVER, APPEARS TO HAVE NOT T AKEN COGNIZANCE OF THE FURTHER OBSERVATIONS MADE BY THE HONBLE DELHI HIGH COURT IN THE SAME PARAGRAPH NO.2 0 THAT ALL THE STOPS HAVING BEEN PULLED OUT, THE A.O. UNDER SECTION 153A HAS BEEN ENTRUSTED WITH THE DUTY OF BR INGING TO TAX THE TOTAL INCOME OF THE ASSESSEE WHOSE CASE IS COVERED UNDER SECTION 153A, BY EVEN MAKING RE- ASSESSMENTS WITHOUT ANY FETTERS, IF NEED BE. 4.1. HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JAI STEEL (INDIA) VS. ACIT (SUPRA) ALSO DID NOT ACC EPT THE ARGUMENTS OF THE ASSESSEE THAT THE NEW CLAIM CAN BE MADE FOR THE FIRST TIME EVEN IN THE RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 153A WHEN THE ORIGINAL ASSESSMENT HAD ALREADY BEEN COMPLETED BY OBSERVING THAT 16 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. IF THE SAME IS TAKEN TO ITS LOGICAL END WOULD MEAN THAT EVEN IN CASES WHERE THE APPEAL ARISING OUT OF THE COMPLETED ASSESSMENT HAS BEEN DECIDED BY THE LD. CI T(A), ITAT AND THE HIGH COURT, ON A NOTICE ISSUED UNDER S ECTION 153A OF THE ACT, THE A.O. WOULD HAVE POWER TO UN-DO WHAT HAS BEEN CONCLUDED UP TO THE HIGH COURT. IT WAS HEL D THAT ANY INTERPRETATION WHICH LEADS TO SUCH CONCLUSION H AS TO BE REPELLED AND/OR AVOIDED. IT IS PERTINENT TO NOTE HERE THAT WHEN ANY NEW CLAIM IS MADE BY THE ASSESSEE FOR DEDUCTION IN RESPONSE TO THE NOTICE UNDER SECTION 1 53A WHICH WAS NOT MADE IN THE ORIGINAL ASSESSMENT PROCEEDINGS AS IN THE PRESENT CASE, THE SITUATION A S CONTEMPLATED BY THE HONBLE RAJASTHAN HIGH COURT WO ULD NOT ARISE AT ALL AS THERE IS NO OCCASION IN SUCH CA SE FOR THE A.O. TO UN-DO SOMETHING WHICH HAS BEEN CONCLUDED UP TO THE HIGH COURT AS THE ASSESSEE HAVING NOT MADE ANY SUCH CLAIM DURING THE COURSE OF ORIGINAL PROCEEDINGS, TH ERE WOULD NOT BE ANY CONCLUSION ARRIVED AT ON THE SAID ISSUE EVEN UP TO THE HIGH COURT LEVEL ARISING FROM THE OR IGINAL ASSESSMENT PROCEEDINGS. IN OUR OPINION, THE DECISIO N OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JAI STE EL (INDIA) VS. ACIT (SUPRA), THUS IS NOT APPLICABLE T O THE FACT SITUATION INVOLVED IN THE PRESENT CASE AND THE RELI ANCE OF THE LD. CIT(A) THEREON TO HOLD THAT THE ASSESSEE IS NOT ENTITLED TO MAKE A NEW CLAIM FOR DEDUCTION UNDER SE CTION 80IA FOR A.YS. 2006-07 TO 2008-09 WHEREIN THE ASSESSMENTS HAD BEEN ORIGINALLY COMPLETED UNDER SEC TION 143(3) IS CLEARLY MISPLACED. 17 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. 5. AT THE TIME OF HEARING BEFORE US, THE LEARNED CIT/DR HAS RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MURALI AGRO PRODU CTS LTD., (I.T. APPEAL NO.36 OF 2009 DATED 29.10.2010) AND THAT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA (INCOME TAX APPEAL NO.707 OF 2014 AND OTHERS DATED 28 TH AUGUST, 2015) IN SUPPORT OF REVENUES CASE. IT IS, HOWEVER, OBSERVED THAT THE ISSUE INVOL VED IN BOTH THESE CASES WAS WHETHER THE A.O. WAS EMPOWERED TO MAKE ADDITIONS TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENTS COMPLETED UNDER SECTION 153A WITHOUT TH ERE BEING ANY INCRIMINATING MATERIAL FOUND DURING THE C OURSE OF SEARCH AND IT WAS HELD IN THIS CONTEXT BY THE HO NBLE BOMBAY HIGH COURT AS WELL AS HONBLE DELHI HIGH COU RT THAT WHEN THE ORIGINAL ASSESSMENTS HAD ALREADY BEEN COMPLETED PRIOR TO THE DATE OF SEARCH, THE ADDITION S IN THE ASSESSMENT UNDER SECTION 153A COULD BE MADE ONLY ON THE BASIS OF MATERIALS GATHERED DURING THE COURSE O F SEARCH. THE ISSUE INVOLVED IN THE CASE OF CIT VS. M URALI AGRO PRODUCTS LTD., (SUPRA) BEFORE HONBLE BOMBAY HIGH COURT AS WELL AS CIT VS. KABUL CHAWLA (SUPRA) BEFOR E HONBLE DELHI HIGH COURT THUS WAS ENTIRELY DIFFEREN T THAN THE ISSUE INVOLVED IN THE PRESENT CASE AND THE RATI O OF THE SAID DECISIONS CITED BY THE LEARNED D.R. IS NOT APP LICABLE IN THE PRESENT CASE. 6. IN THE CASE OF ACIT VS. VN DEVODOSS 157 TTJ 165 CITED BY THE LD. COUNSEL FOR THE ASSESSEE, THE CHENNAI BENCH OF THIS TRIBUNAL HAD AN OCCASION TO D ECIDE 18 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. A SIMILAR ISSUE AS INVOLVED IN THE PRESENT CASE. IN THIS CONTEXT, RELIANCE WAS PLACED BY THE TRIBUNAL ON THE PROVISIONS OF SECTION 153A(1)(A) WHICH PROVIDE THAT WHERE A SEARCH IS INITIATED UNDER SECTION 132, THE A.O. S HALL ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURNIS H WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTI CE, THE RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS IN THE PRESCRIB ED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND THE PROVI SIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDIN GLY AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139. IT WAS HELD BY THE TRIBUNAL THAT IT IS BECAUSE OF THIS PROVISION OF LAW STATED IN SECTION 153A(1)( A) THAT A STATUTORY PRESUMPTION IS MADE THAT A RETURN FILED U NDER SECTION 153A IS A RETURN REQUIRED TO BE FILED UNDER SECTION 139(1) OF THE ACT. THE TRIBUNAL ALSO TOOK NOTE OF T HE NON- OBSTANTE CLAUSE CONTAINED IN SECTION 153A AND HELD THAT SAID PROVISION OVER-RIDES ALL OTHER PROVISIONS STAT ED IN THE ACT IN MATTERS OF FILING OF RETURN OF INCOME CONSEQ UENT TO A SEARCH AND THEREFORE, THE RETURN FILED IN PURSUANCE OF NOTICE ISSUED UNDER SECTION 153A IS AS GOOD AS A RE TURN FILED UNDER SECTION 139(1). IT WAS ALSO HELD THAT W HERE AN ASSESSEE HAS FILED ITS RETURN OF INCOME AS PRESCRIB ED BY LAW, EVEN IF AS A CONSEQUENCE OF SEARCH CARRIED OUT UNDER SECTION 132 AND IN CONSEQUENCE OF NOTICE ISSUED UND ER SECTION 153A, THE ASSESSEE IS OBVIOUSLY ENTITLED FO R CLAIMING CORRESPONDING DEDUCTIONS PROVIDED IN LAW A ND THE DEDUCTION CLAIMED IN RETURN FILED UNDER SECTION 153A CANNOT BE DENIED ON THE GROUND THAT THE CLAIM WAS N OT 19 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. MADE EARLIER. THE TRIBUNAL ALSO RELIED ON THE DECIS ION OF ITS COORDINATE BENCH IN THE CASE OF DCIT VS. EVERSM ILE CONSTRUCTION CO. P. LTD., (SUPRA) AND HELD THAT THE RETURNS FILED BY THE ASSESSEE UNDER SECTION 153A AR E TO BE TREATED AS RETURNS FILED UNDER SECTION 139(1) BY VI RTUE OF THE LAW STATED IN SECTION 153A(1)(A) AND THE ASSESS EES THEREFORE, ARE ENTITLED FOR DEDUCTION AVAILABLE UND ER SECTION 80IB(1). 7. IT IS THUS THAT THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF EVERSMILE CONSTRUCT ION CO. P. LTD., (SUPRA) AS WELL AS THE CHENNAI BENCH IN TH E CASE OF V.N. DEVODOSS (SUPRA) IS BASED ON THE RELEVANT PROVISIONS OF LAW INCLUDING ESPECIALLY THAT OF SECT ION 153A(1)(A). IN THE CASE OF HYDERABAD CHEMICALS SUPP LIES LTD., (ITA.NO.352/HYD/2005 DATED 21.01.2011) IT WAS HELD THAT WHEN THE DECISION OF THE TRIBUNAL IS BASE D ON THE RELEVANT PROVISIONS OF LAW, THE SAME IS TO BE F OLLOWED OVER THE DECISION OF THE NON-JURISDICTIONAL HIGH CO URT THAT HAS BEEN RENDERED WITHOUT CONSIDERING SUCH STATUTOR Y PROVISIONS THAT ARE DIRECTLY RELEVANT. WE, THEREFOR E, FOLLOW THE DECISION OF THE CHENNAI BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. VN DEVODOSS 157 TTJ 165 (SUPRA) AS WELL AS THE DECISION OF MUMBAI BENCH IN THE CASE OF DCIT VS. EVERSMILE CONSTRUCTION CO. P. LTD., (SUPRA) TO HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION UNDER S ECTION 80IA IN THE RETURNS FILED IN RESPONSE TO THE NOTICE S ISSUED UNDER SECTION 153A FOR THE RELEVANT SIX YEARS I.E., A.YS. 2006-07 TO 2011-12 INCLUDING A.YS. 2009-10 TO 2011- 12 20 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. WHERE THE ASSESSMENTS HAD BEEN ORIGINALLY COMPLETED UNDER SECTION 143(3) PRIOR TO THE DATE OF SEARCH. W E ACCORDINGLY, REVERSE THE DECISION OF THE LD. CIT(A) RENDERED ON THIS ISSUE FOR A.YS. 2006-07 TO 2008-09 AND UPHOLD THE SAME FOR A.YS. 2009-10 TO 2011-12. THE APPEALS OF THE ASSESSEE FOR A.YS. 2006-07 TO 2008-0 9 INVOLVING THIS SOLITARY ISSUE THUS ARE ALLOWED WHER EAS, THE RELEVANT GROUND OF THE REVENUES APPEAL ON THIS ISS UE FOR A.YS. 2009-10 TO 2011-12 ARE DISMISSED. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ALL THE SEVEN YEARS UNDER CONSIDERATION, THE CL AIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IA WAS A LSO EXAMINED BY THE A.O. ON MERIT AND ON SUCH EXAMINATI ON, HE HELD THAT THE ASSESSEE NOT BEING THE OWNER OF TH E INFRASTRUCTURE FACILITY AS REQUIRED BY SUB-CLAUSE ( A) OF CLAUSE (I) OF SUB-SECTION (4) OF SECTION 80IA WAS N OT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA. IN SUPPORT O F THIS CONCLUSION, THE A.O. RELIED ON THE DECISION OF MUMB AI SPECIAL BENCH OF ITAT IN THE CASE OF B.B. PATIL & S ONS 35 SOT 171. THE LD. CIT(A), HOWEVER, HAS NOT AGREED WI TH THIS STAND OF THE A.O. ACCORDING TO HIM, THE OWNERS HIP OF THE INFRASTRUCTURE FACILITY IS NOT THE INTENTION OF THE PROVISION OF SECTION 80IA(4)(I)(A) AND WHAT IS CONT EMPLATED THEREIN IS THE OWNERSHIP OF ENTERPRISE. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEA RING BEFORE US, THIS ISSUE NOW STANDS COVERED BY THE DEC ISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD., 322 ITR 323 WHEREIN IT WAS H ELD 21 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. THAT AFTER SECTION 80IA WAS AMENDED BY THE FINANCE ACT, 2001, THE SECTION APPLIES TO AN ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING, OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFI LLS CERTAIN CONDITIONS AND ONE OF THOSE CONDITIONS ARE THAT THE OWNERSHIP OF THE ENTERPRISE IS BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM. FOLLOWING T HIS DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F ABG HEAVY INDUSTRIES LTD., (SUPRA), IT WAS HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SU SHI HITECH (ITA.NO.269 & 1165/HYD/2009 AND ITA.NO.1171/HYD/2010 DATED 16.03.2012) THAT BY READING OF SUB-CLAUSE (A) OF SUB-CLAUSE (I) OF SUB- SECTION (4) OF SECTION 80IA, IT IS CLEAR THAT THE ENTERPRIS E CARRYING ON DEVELOPMENT OF INFRASTRUCTURE FACILITY SHOULD BE OWNED BY THE COMPANY AND NOT THAT THE INFRASTRUCTURE FACI LITY SHOULD BE OWNED BY A COMPANY. IT WAS HELD THAT THE PROVISIONS ARE MADE APPLICABLE TO THE PERSON TO WHO M SUCH ENTERPRISE BELONGS TO, AS EXPLAINED IN SUB-CLA USE (A) AND THE WORD OWNERSHIP USED THEREIN IS ATTRIBUTAB LE ONLY TO THE ENTERPRISE CARRYING ON THE BUSINESS WHI CH WOULD MEAN THAT ONLY COMPANIES ARE ELIGIBLE FOR DED UCTION UNDER SECTION 80IA(4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL, HUF, FIRM ETC. THIS ISSUE THUS IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE INTER ALIA, BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ABG HEA VY INDUSTRIES LTD., (SUPRA), WHICH HAS BEEN FOLLOWED B Y THE COORDINATE BENCH OF THIS TRIBUNAL IN VARIOUS CASES AND 22 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE IMPU GNED ORDER OF THE LD. CIT(A) HOLDING THAT THE ASSESSEE I S ENTITLED FOR DEDUCTION UNDER SECTION 80IA ON MERIT IN ALL THE SEVEN YEARS UNDER CONSIDERATION. IT IS PERTINEN T TO NOTE HERE THAT ALTHOUGH THIS ASPECT OF THE MATTER R ELATING TO THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IA IS DECIDED BY THE LD. CIT(A) VIDE HIS IMPUGNED ORDERS IN FAVOUR OF THE ASSESSEE IN ALL THE SEVEN YEARS UNDER CONSIDERATION, THE DEPARTMENT HAS NOT DISPUTED THE SAME FOR A.YS. 2006-07, 2007-08 AND 2008-09 AND IT IS DISPUTED ONLY IN A.YS. 2009-10 TO 2012-13. WE, THER EFORE, DISMISS THE GROUNDS RAISED BY THE REVENUE ON THIS I SSUE IN ITS APPEALS FOR THE SAID FOUR YEARS. 9. IN GROUND NO.3 OF ITS APPEALS FOR A.YS. 2009-10 TO 2012-13, THE REVENUE HAS CHALLENGED THE ACTION O F THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE A.O . TO THE TOTAL INCOME OF THE ASSESSEE BY REJECTING ITS CLAIM FOR EXEMPTION ON ACCOUNT OF AGRICULTURAL INCOME. 9.1. IN ITS RETURN OF INCOME FILED FOR A.YS. 2009- 10 TO 2012-13, THE LEASE RENT RECEIVED FROM THE AGRICU LTURAL LAND OWNED BY IT WAS DECLARED BY THE ASSESSEE AS AGRICULTURAL INCOME AND THE SAME WAS CLAIMED TO BE EXEMPT FROM TAX. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE COPIES OF RELEVANT DEED EVIDENCING PURCHASE OF AGRICULTURAL LAND AS WELL AS DECLARATIO N OF THE CONCERNED FARMERS WHO HAD TAKEN THE SAID LAND ON LE ASE WERE FILED BY THE ASSESSEE. FROM THE PERUSAL OF THE SAID 23 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. DOCUMENTS AS WELL AS OTHER MATERIAL AVAILABLE ON RE CORD, THE A.O. RECORDED THE FOLLOWING FINDINGS/OBSERVATIO NS. I) THE ASSESSEE COULD NOT PRODUCE ANY LEASE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE FARMERS. II) THE ASSESSEE COULD NOT PRODUCE PATTADAR PASS BOOK TO SUPPORT ITS CLAIM. III) IT IS FOUND FROM THE PROSPECTUS OF THE ASSESSEE'S COMPANY FILED WITH SEBI IN THE YEAR 2007, ISSUED IN CONNECTION WITH PUBLIC ISSUE THAT IN CONTAINS THE FOLLOWING CLAUSE. '36. RISK PERTAINING TO NOT OBTAINING MUTATION OF THE TITLE DEEDS - OUR COMPANY HAS ACQUIRED VARIOUS FREEHOLD LANDS WITHOUT ANY COMMITMENT TO DEPLOY THEM FOR IMMEDIATE BUSINESS REQUIREMENTS OR OPERATIONS. FURTHER, IN RESPECT OF SOME OF THESE FREE HOLD LANDS, WE ARE YET TO OBTAIN THE MUTATION OF THE TITLE DEEDS. THOUGH WE HAVE MOVED APPLICATION WITH THE RELEVANT LAND REVENUE AUTHORITIES FOR MUTATION OF THE SAID FREE HOLD LANDS IN THE NAME OF OUR COMPANY, WE ARE YET TO RECEIVE ANY COMMUNICATION FROM THE SAID AUTHORITIES. THOUGH WE HAVE ENTERED INTO A REGISTERED SALE DEEDS WITH THE RESPECTIVE VENDORS OF THE LAND, PENDING THE MUTATION OF TITLE DEEDS THE NAME OF OUR COMPANY WILL NOT BE REFLECTED IN THE RECORD OF RIGHTS MAINTAINED WITH THE RELEVANT SUB- REGISTRAR. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSEE COMPANY'S NAME DOES NOT APPEAR AS 'AGRICULTURIST' I N THE REVENUE RECORDS AND AS SUCH IT HAS NO PATTAADAR PASS BOOK IN ITS NAME TO INDICATE THAT THE LAND USE IN THE HANDS OF THE COMPANY IS FOR AGRICULTURE PURPOSE . THEREFORE, THE ASSESSE'S CONTENTION THAT THE LANDS 24 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. WERE ACQUIRED FOR THE PURPOSE OF AGRICULTURE HAS NO MERIT. IV) FROM THE MEMORANDUM OF ASSOCIATION OF THE COMPANY, IT IS FOUND THAT AGRICULTURAL OPERATION IS NOT ONE OF THE OBJECTIVES OF THE ASSESSEE COMPANY. 9.2. ON THE BASIS OF THE ABOVE FINDINGS, THE A.O. HELD THAT THE CLAIM OF THE ASSESSEE FOR AGRICULTURA L INCOME COULD NOT BE ACCEPTED AND THE LEASE RENT RECEIVED B Y IT FOR ALL THE RELEVANT FOUR YEARS UNDER CONSIDERATION WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXP LAINED CASH CREDITS. THE ADDITIONS MADE BY THE A.O. BY DEN YING ITS CLAIM FOR EXEMPTION ON ACCOUNT OF AGRICULTURAL INCOME IN ALL THE FOUR RELEVANT YEARS WERE CHALLENGED BY T HE ASSESSEE BEFORE THE LD. CIT(A) AND THE FOLLOWING SUBMISSIONS WERE MADE BY IT IN SUPPORT OF THE SAID CLAIM BEFORE THE LD. CIT(A). A) MERELY BECAUSE THE PATTADAR PASS BOOK WAS NOT THERE, THE AO HELD THAT AGRICULTURAL INCOME IS NOT ACCEPTABLE. THE AO IGNORED THE STATED FACTS OF OWNERSHIP OF LAND AS TESTIFIED BY THE SALE DEED COPIES AND PRODUCTION OF DECLARATION FROM THE FARMERS WHO OBTAINED THE LAND ON LEASE FOR AGRICULTURAL PURPOSE AND GAVE LEASE RENT. A PATTADAR PASS BOOK ONLY FACILITATES TAKING OF LOAN FROM A BANK AND IS NEVER A DOCUMENT TO ESTABLISH WHETHER THE APPELLANT HAS AGRICULTURAL LANDS OR NOT. COPY OF STATEMENT OF OBJECTS AND REASONS ACT NO.1 OF 1999 AP RIGHTS AND PATTADAR PASS BOOK ACTS, 1971 SECTION 6A EXTRACT WAS FILED. B) A WRITTEN LEASE AGREEMENT WITH THE FARMERS IS NOT REQUIRED AND AN ORAL AGREEMENT OR UNDERSTANDING IS SUFFICIENT ESPECIALLY WHERE IT IS AN ISSUE 25 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. BETWEEN THE TENANT FARMERS AND THE LAND OWNERS. SECONDLY, KEEPING THE LOW QUANTUM RENT WHICH IS 2,00,000/- AND THE NATURE OF PAYMENT BEING AGRICULTURAL INCOME, THE COMMON PRACTICE ADOPTED IS GIVING LANDS ON ORAL AGREEMENTS. ONE HAS TO TAKE INTO COGNIZANCE OF ORAL AGREEMENT AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF BRIJ MOHAN AND OTHERS VS SMT. SUBRA BEGUM & OTHERS 1990 SCR(3)413,1990 SSC (4) 147. C) EVEN A TENANT OF AGRICULTURAL LAND WHO IS NOT AN OWNER AND WHO DOES NOT HAVE A PATTADAR PASS BOOK CAN ALSO DERIVE AGRICULTURAL INCOME BY WAY OF AGRICULTURAL OPERATION. OWNERSHIP OF LAND IS NOT NECESSARY. THE APPELLANT CITED IN SUPPORT, THE DECISION OF HON'BLE ITAT PUNE BENCH IN THE CASE OF ITO VS GAJANAN AGRO FARMS 142 ITD 571. D) THE A.O. CITED CLAUSE NO.36 OF THE PROSPECTUS OF THE ASSESSEE SUBMITTED TO SEBI IN 2007. THIS CLAUSE MENTIONED THE RISK PERTAINING TO NOT OBTAINING THE MUTATION OF TITLE DEED BY THE COMPANY EVEN THOUGH AN APPLICATION WAS MADE TO THE RELEVANT REVENUE AUTHORITIES FOR MUTATION OF SAID LAND IN THE NAME OF THE COMPANY. A DISCLOSURE TO SEBI REGARDING PENDING TRANSFER OF OWNERSHIP OF AGRICULTURAL LANDS IN THE REVENUE RECORDS DOES NOT MEAN THAT THERE ARE NO AGRICULTURAL LANDS OR THERE IS NO LEASING OF SUCH LANDS DERIVING AGRICULTURAL INCOME. 9.3. THE LD. CIT(A) FOUND MERIT IN THE SUBMISSIONS MADE BY THE ASSESSEE AND ACCEPTED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF AGRICULTURAL INCOME IN ALL T HE RELEVANT FOUR YEARS FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER : 10.0. AS REGARDS THE DENIAL OF AGRICULTURAL INCOME, THE SUBMISSIONS MADE BY THE APPELLANT WERE SUMMARIZED SUPRA. THERE IS 26 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. CONSIDERABLE MERIT IN THE SUBMISSIONS MADE. MERELY BECAUSE THE PATTADAR BOOKS ARE YET TO BE ISSUED TO THE APPELLANT, THE OWNERSHIP OF THE LAND AS TESTIFIED BY THE TITLE DEEDS AND THE GIVING OF LANDS FOR LEASE AS TESTIFIED BY THE DECLARATION OF THE FARMERS CANNOT BE DENIED. I ALSO FIND IT SOMEWHAT INCONGRUENT TO HOLD THAT AN APPELLANT DECLARES 82.37 CRORES AS TOTAL INCOME BUT DISGUISES RS.2,00,000/- INCOME AS AGRICULTURAL INCOME TO AVOID TAX PAYMENT ON THAT PORTION. OTHER THAN QUESTIONING THE OWNERSHIP IN ABSENCE OF PATTADAR PASSBOOK, I DO NOT FIND ANY EVIDENCE EITHER IN SEIZED MATERIAL OR ELSEWHERE TO DOUBT THE CLAIM OF AGRICULTURAL INCOME. THE ADDITION MADE BY TREATING THE AGRICULTURAL INCOME AS CASH CREDIT IS THEREFORE DELETED AND THE CLAIM OF AGRICULTURAL INCOME IS UPHELD. 9.4. THE LD. CIT(A) ACCORDINGLY DELETED THE ADDITIONS MADE BY THE A.O. IN ALL THE FOUR RELEVANT YEARS ON ACCOUNT OF AGRICULTURAL INCOME SHOWN BY THE ASSE SSEE BY TREATING THE SAME AS UNEXPLAINED CASH CREDIT. AGGRIEVED BY THE SAME, THE REVENUE HAS RAISED THIS ISSUE IN GROUND NO.3 IN ITS APPEAL FOR A.YS. 2009-10 TO 2 012-13. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE CLAIM OF THE ASSESSEE FOR EXEMPTI ON ON ACCOUNT OF AGRICULTURAL INCOME WAS ACCEPTED BY THE LD. CIT(A) AFTER HAVING FOUND THAT THE OWNERSHIP OF AGRICULTURAL LAND BY THE ASSESSEE WAS DULY EVIDENCE D BY THE SALE DEED. HE ALSO FOUND THAT THE CLAIM OF THE ASSESSEE OF HAVING GIVEN THE SAID LAND TO THE FARMERS ON LEA SE WAS DULY SUPPORTED BY THE DECLARATION FILED BY THE SAID FARMERS. ON THE BASIS OF THESE FINDINGS RECORDED BY HIM IN 27 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. THE LIGHT OF DOCUMENTARY EVIDENCE AVAILABLE ON RECO RD, THE LD. CIT(A) HELD THAT THE PATTADAR PASSBOOK RELIED U PON BY THE A.O. TO DENY THE CLAIM OF THE ASSESSEE OF OWNER SHIP OF AGRICULTURAL LAND WAS IRRELEVANT AS THE PURPOSE OF THE SAME WAS ONLY TO FACILITATE TAKING A LOAN FROM BANK AND IT WAS NEVER A DOCUMENT TO ESTABLISH THE OWNERSHIP OF AGRICULTURAL LAND. HE ALSO NOTED THAT IT WAS COMMON PRACTICE ADOPTED IN GIVING AGRICULTURAL LANDS ON OR AL AGREEMENTS AND THE CLAIM OF THE ASSESSEE OF HAVING GIVEN ITS AGRICULTURAL LAND TO FARMERS WHICH WAS DULY SUP PORTED BY THE DECLARATIONS FILED BY THE CONCERNED FARMERS COULD NOT BE DENIED MERELY FOR WANT OF WRITTEN AGREEMENT AS DONE BY THE A.O. HAVING REGARD TO ALL THESE FINDING OF FACTS RECORDED BY THE LD. CIT(A) BASED ON THE RELEVANT DOCUMENTARY EVIDENCE, WHICH HAVE NOT BEEN CONTROVER TED OR REBUTTED BY THE LEARNED D.R. AT THE TIME OF HEAR ING BEFORE US, AS WELL AS OTHER FINDINGS GIVEN BY HIM I N THE IMPUGNED ORDER, WE FIND NO JUSTIFIABLE REASON TO IN TERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(A) ACCEPTING THE CLAIM OF THE ASSESSEE FOR EXEMPTION ON ACCOUNT OF AGRICULTURAL INCOME IN ALL THE FOUR RELEVANT YEARS. ACCORDINGLY, GROUND NO.3 OF THE REVENUES APPEAL FO R A.YS. 2008-09 TO 2012-13 IS DISMISSED. 11. THE NEXT ISSUE RAISED BY THE REVENUE IN GROUND NO.4 OF ITS APPEAL FOR A.YS. 2011-12 AND 201 2-13 RELATES TO THE DELETION BY THE LD. CIT(A) OF THE AD DITIONS MADE BY THE A.O. ON ACCOUNT OF ALLEGED INFLATION OF SUB- CONTRACT EXPENSES. 28 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. 11.1. IN ITS RETURNS OF INCOME FOR A.YS. 2011-12 A ND 2012-13, SUBSTANTIAL SUB-CONTRACT EXPENSES WERE CLA IMED BY THE ASSESSEE. ON VERIFICATION OF THE SAID EXPENS ES, IT WAS FOUND BY THE A.O. THAT ONE OF THE CONTRACTORS N AMELY M/S. GENERAL TRADING CORPORATION (IN SHORT GTC) T O WHOM SUB-CONTRACT PAYMENT OF RS.25.76 CRORES WAS MA DE BY THE ASSESSEE FOR A.Y. 2011-12 WAS A DELHI BASED PARTY WHILE THE AREA OF OPERATION WAS AT NIRMAL, ANDHRA PRADESH. THE A.O. ALSO FOUND MANY DISCREPANCIES IN THE CASE OF SAID SUB-CONTRACTOR. FOR INSTANCE, THE SAID SUB- CONTRACTOR WAS FOUND TO HAVE NOT MAINTAINED PROPER BOOKS OF ACCOUNT AS WELL AS SUPPORTING DOCUMENTS IN THE FORM OF PURCHASE BILLS AND VOUCHERS. HE WAS ALSO FO UND TO BE NOT IN POSSESSION OF ANY MACHINERY REQUIRED FOR EXECUTION OF THE WORK. THESE DISCREPANCIES AS WELL AS OTHER DISCREPANCIES NOTICED BY HIM WERE LISTED BY T HE A.O. IN THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE CAL LING FOR ITS EXPLANATION. A DETAILED EXPLANATION IN THIS REG ARD WAS FURNISHED BY THE ASSESSEE WHICH WAS SUMMARIZED BY T HE A.O. IN HIS ASSESSMENT ORDER. HE HOWEVER, DID NOT F IND THE SAME TO BE ACCEPTABLE AND ON THE BASIS OF ADVERSE FINDINGS RECORDED BY HIM IN RELATION TO THE CASE OF THE SUB-CONTRACTOR M/S. GTC, THE A.O. CAME TO THE CONCLUSION THAT THERE WAS NO EVIDENCE TO ESTABLISH THAT THE WORK WAS CARRIED OUT BY THE SAID SUB-CONTRACTOR AS CLAIMED BY THE ASSESSEE. HE HOWEVER, AGREED THAT SU CH WORK AS PER THE SCOPE OF WORK AND CONTRACT GIVEN TO THE ASSESSEE BY NHAI WAS ACTUALLY EXECUTED. BY APPLYING THE THEORY OF PREPONDERANCE OF PROBABILITY, THE A.O. IN FERRED 29 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. THAT M/S. GTC WAS USED BY THE ASSESSEE AS CONDUIT F OR INFLATING THE EXPENDITURE UNDER THE HEAD SUB-CONTR ACT EXPENSES. HE THEREFORE, PROCEEDED TO MAKE AN ESTIM ATION OF ACTUAL EXPENDITURE WHICH MIGHT HAVE BEEN INCURRE D BY THE ASSESSEE ON EXECUTION OF THE SUB-CONTRACT PURPO RTEDLY GIVEN TO GTC. IN THIS REGARD, HE FIRST ESTIMATED TH E EXPENDITURE INCURRED BY THE GTC ON THE WORKS GIVEN BY THE ASSESSEE BY TAKING THE PERCENTAGE OF RECEIPTS F ROM THE ASSESSEE TO THE TOTAL GROSS RECEIPTS AT 89.81% AND BY APPLYING THE SAID PERCENTAGE TO THE OUTSTANDING LIA BILITY OF RS.9.9 CRORES SHOWN BY THE ASSESSEE AS PAYABLE TO G TC, HE ESTIMATED THE AMOUNT OF INFLATED EXPENDITURE AT RS.8.89 CRORES. FROM THE SAID AMOUNT, HE REDUCED A SUM OF RS.3.04 CRORES BEING 89.81% OF THE PROFIT OF RS. 3.39 CRORES OFFERED BY THE GTC AND ARRIVED AT THE AMOUNT OF INFLATED SUB-CONTRACT EXPENDITURE AT RS.5.85 CRORES . FINALLY, THE SAID AMOUNT WAS ROUNDED-UP BY HIM AT R S. 6 CRORES AND THE SUB-CONTRACT EXPENSES CALIMED BY THE ASSESSEE WERE DISALLOWED BY HIM TO THAT EXTENT IN A .Y. 2011-12. 11.2. ON THE SIMILAR LINE AS ADOPTED IN A.Y. 2011 - 12, THE A.O. VERIFIED THE SUB-CONTRACT EXPENSES CLA IMED BY THE ASSESSEE IN A.Y. 2012-13 AND HELD FOR THE SIMIL AR REASONS AS GIVEN IN A.Y. 2011-12 THAT ONE SUB-CONTR ACTOR NAMELY M/S. AHA PROJECTS P. LTD., TO WHOM SUB-CONTR ACT PAYMENT OF RS.8.1 CRORES WAS MADE BY THE ASSESSEE, WAS USED AS CONDUIT TO INFLATE SUB-CONTRACT EXPENDITURE . HE HOWEVER, ADOPTED A DIFFERENT METHOD TO QUANTIFY THE 30 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. ALLEGED INFLATED SUB-CONTRACT EXPENDITURE FOR A.Y. 2012- 13. IN THIS REGARD, HE ADOPTED THE RATES GIVEN IN N HAI DATA BOOK 2009 AND APPLYING THE SAME TO THE WORK OF EXCAVATION OF SOIL AND EMBANKMENT CONSTRUCTION STAT ED TO BE DONE BY THE CONCERNED SUB-CONTRACTOR, HE ARRIVED AT THE ESTIMATED VALUE OF WORK OF THE SAID WORK AT RS.5,03,47,000 AS AGAINST SUB-CONTRACT PAYMENT OF RS.8.01 CRORES CLAIMED TO BE MADE BY THE ASSESSEE T O M/S. AHA PROJECTS P. LTD. THE DIFFERENCE AS ROUNDED -OFF BY HIM AT RS.3 CRORES WAS TAKEN BY THE A.O. AS THE EXPENDITURE INFLATED BY THE ASSESSEE ON ACCOUNT OF SUB- CONTRACT EXPENSES. 11.3. THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF SUB-CONTRACT EXPENSES ALLEGEDLY INFLATED BY THE ASSESSEE IN BOTH THE RELEVANT YEARS I.E., A.YS. 201 1-12 AND 2012-13 WAS CHALLENGED BY THE ASSESSEE IN THE APPEA LS FILED BEFORE THE LD. CIT(A). DURING THE COURSE OF A PPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE FOLLOWING SUBMISSIONS WERE MADE BY THE ASSESSEE WHILE CHALLEN GING THE DISALLOWANCE MADE BY THE A.O. ON THIS ISSUE IN A.Y. 2011-12. A) THE ADDITION IS BASED ON ASSUMPTIONS, PRESUMPTIONS AND SURMISES. EVEN THE VERY COMPUTATION IS BASED ON SUCH ASSUMPTIONS. B) THE TOTAL PROJECT COST WAS 503 CRORES AND DURING THE EXECUTION OF THE WORK, PART OF THE WORKS RELATING TO BUS SHELTERS, SERVICE ROADS, JUNCTIONS, CRS WALLS, WATER HARVESTING PITS, PLANTATION OF TREES IN THE LANE DIVIDING MEDIAN AND IN THE 31 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. AVENUES WERE GIVEN TO THE SUB CONTRACTOR M/S GTC. THESE WORKS WERE GIVEN FOR TIMELY COMPLETION OF THE ANCILLARY WORK ALONG WITH THE MAIN ROAD BECAUSE NHAI VIEWS COMPLETION OF ENTIRE PROJECT ONLY WHEN EVERYTHING INCLUDING THESE ANCILLARY WORKS CITED SUPRA ARE ALSO COMPLETED. THEREFORE, IT IS QUITE COMMON THAT IN ANY ROAD CONTRACT OF NHAI SUCH WORKS ARE SUB CONTRACTED SO THAT THEY ARE TAKEN UP SIMULTANEOUSLY. THE TOTAL SUB CONTRACT WORKS GIVEN TO M/S GTC WERE FOR RS.25,76,57,655/-. C) THE BILLS RAISED BY THE GTC WERE DULY VERIFIED AND SIGNED BY THE SITE ENGINEERS, QUANTITY SURVEYORS, PROJECT MANAGER AND THE PROPRIETOR OF GTC. D) A SEPARATE DUE DILIGENCE INSPECTION IS ALSO DONE BY NHAI BY AN INDEPENDENT THIRD PARTY CONSULTANT AND THE COPY OF CERTIFICATE OF SUCH INDEPENDENT CONSULTATION OF NHAI CONFIRMING THE COMPLETION OF PROJECT PHYSICALLY ON GROUND, WAS SUBMITTED. EVEN THE A.O. ACCEPTED THAT THE WORK WAS INDEED COMPLETD. E) ALL THE PAYMENTS TO M/S GTC WERE ACCOUNT PAYEE CHEQUES. TDS CERTIFICATES WERE ISSUED TO THE GTC. GTC HAD IN FACT OFFERED A PROFIT OF 3.39 CRORES TO TAX IN ITS RETURN OF INCOME WHICH IS 11.84 % OF ITS TURNOVER OF 25.68 CRORES. F) THE SAME ASSESSING OFFICER IN FACT COMPLETED THE ASSESSMENT IN THE CASE OF GTC AS WELL UNDER 143(3) R.W.S 147 AND IN FACT MADE AN ADDITION OF RS.7.83 CRORES AS PART OF TURNOVER FROM KNRCL NOT REFLECTED BY M/S GTC DURING THE RELEVANT YEAR AND PROCEEDED TO CONSIDER THE TOTAL CONTRACT RECEIPTS O F RS 25.76 CRORES FROM M/S KNRCL, THE APPELLANT AS M/S GTCS RECEIPTS. COPY OF THE ASST. ORDER DATED 25.03.2015 WAS SUBMITTED AS PART OF THE SECOND PAPER BOOK. THIS ASSERTION AND ACTION OF THE AO IN THE ASSESSMENT ORDER OF THE GTC ACTUALLY GOES IN FAVOUR OF THE APPELLANT. 32 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. G) SWORN STATEMENT WAS RECORDED FROM THE PROPRIETOR OF GTC AND IT WAS CONFIRMED THAT GTC HAS EXECUTED THE WORK ON ITS OWN. H) PHOTOGRAPHS WERE TAKEN SHOWING THE WORKS EXECUTED BY GTC AT THE TIME OF THE VISIT OF THE AO TO THE PROJECT SITE TO INSPECT WHETHER OR NOT SUCH WORKS WAS COMPLETED ON GROUND. I) THE APPELLANT HAD GIVEN AS MANY AS TEN DOCUMENTS INCLUDING THE PHOTOGRAPHS OF THE WORKS EXECUTED AND REFERRED SUPRA TO THE AO WHICH WERE ALSO ADMITTED IN PARA VII & VIII ON PAGES 12 AND 13 OF THE ASST. ORDER. J) CONTEMPORARY CERTIFICATE DATED 05.08.2010 OBTAINED FROM THE SARPANCH OF THAT AREA FOR SOME OTHER PURPOSE WAS ALSO SUBMITTED TO THE A.O. WHICH CLEARLY PROVED THAT M/S GTC HAD EXECUTED THE WORK. CONTENT OF THE CERTIFICATE WAS REPRODUCED IN THE SECOND PAPER BOOK FILED IN COURSE OF APPELLATE PROCEEDINGS. THE LETTER INDICATED NAMES OF FIVE SUB-CONTRACTORS WHO ARE INVOLVED IN EXECUTION OF WORKS, AMONG THEM GTC IS ONE OF THE SUB CONTRACTOR. K) THE A.O. OPINED THAT INFLATION OF EXPENDITURE CANNOT BE RULED OUT AND PROCEEDED TO MAKE AN ESTIMATE OF THE EXPENDITURE INCURRED ON THE WORK. IF AT ALL THE AO HAD ANY SUCH ISSUE, THIS SHOULD HAVE BEEN TAKEN UP IN THE ASSESSMENT OF THE SUB CONTRACTOR M/S GTC AND NOT IN THE ASSESSMENT OF THE APPELLANT. EXPENDITURE INCURRED BY THE ASSESSEE ON SUB CONTRACT, FALLS UNDER THE SCOPE OF SECTION 37 AND THERE ARE NO DISCRETIONARY POWER TO DISALLOW EXPENDITURE ON ASSUMPTIONS, PRESUMPTIONS, SURMISES AND PROBABILITIES AS MENTIONED BY THE AO. THE APPELLANT REFERRED TO THE FOLLOWING CASE LAWS (I) DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS VS. CIT (288 ITR 1) 33 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. (II) CIT VS. CHANDAR CHEMOUSE P. LTD., (2008 ITR 98) (RAJASTHAN). (III) JAYA S. SHETTY VS. ACIT (69 ITD 336) (MUM.) (ITAT). L) ADDITION OF RS.6 CRORES IS AN ARBITRARY FIGURE WHIC H IS BASICALLY 89.81% OF LIABILITIES OF 9.91 CRORES APPEARING IN THE GTC BALANCE SHEET FOR AY 2011- 12.THIS IS TOTALLY UNWARRANTED AS DISALLOWANCE ON THE BASIS OF OUTSTANDING LIABILITIES OF SUB- CONTRACTOR IS NOT AT ALL TENABLE. M) IF THE A.O. IS NOT SATISFIED ABOUT THE ACCOUNTS OF SUB CONTRACTORS, DISALLOWANCE OF EXPENDITURE ON INCREASE IN PROFITS ON ESTIMATION BASIS MAY BE MADE IN THE HANDS OF SUB CONTACTOR BUT NOT IN THE HANDS OF THE ASSESSEE/APPELLANT. THE APPELLANT CITED THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS CONSULTING ENGINEERING GROUP LTD., (365 ITR 284) (2014), WHICH IS SQUARELY ON THIS ISSUE. 11.4. ON THE SIMILAR LINE AS ABOVE, SUBMISSIONS WE RE ALSO MADE BY THE ASSESSEE BEFORE THE LD. CIT(A) WHI LE CHALLENGING THE DISALLOWANCE MADE BY THE A.O. ON AC COUNT OF ALLEGED INFLATED SUB-CONTRACT EXPENSES FOR A.Y. 2012-13. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSES SEE ON THIS ISSUE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) RECORDED HIS FINDINGS/OBSERVATIONS O N THIS ISSUE IN HIS IMPUGNED ORDER FOR A.Y. 2011-12 AS UND ER : (A) THE AO FOUND THAT ACTUALLY WORKS WERE COMPLETED AND ALL THE PAYMENTS WERE BY WAY OF CHEQUES AND THE SAME WERE ALSO OFFERED TO TAX BY THE SUB CONTRACTOR. IN FACT, IF ONE EXCLUDES THE 'SUPPRESSE D' TURNOVER OF RS.7.83 CRORES MENTIONED IN THE ASST. ORDER OF THE SUB-CONTRACTOR M/S. GTC BY THE SAME ASSESSING OFFICER, THE ACTUAL PERCENTAGE OF PROFIT OFFERED TO TAX IN THE TAX RETURN FILED COMES TO 19% 34 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. (3.41 CRORES ON A TURNOVER OF 17.93 CRORES) AND IS STILL 13.23 % AFTER CONSIDERING THE TURN OVER AS 25.76 CRORES (17.93 CRORES PLUS 7.83 CRORES) (B) THE DISALLOWANCE WAS QUANTIFIED ON THE BASIS OF OUTSTANDING LIABILITY OF THE SUB-CONTRACTOR IN THE BALANCE SHEET OF THE SUB-CONTRACTOR AS ON 31.03.2011. FIRSTLY, IT IS ASSUMED THAT 89% OF THIS OUTSTANDING LIABILITY RELATES TO THE WORKS GIVEN BY THE APPELLANT. THEN THE SECOND PRESUMPTION IS THAT THIS 89% OF LIABILITIES IN THE BOOKS OF THE SUB CONTRACTOR ARE 'INFLATED' AND ARE 'INCOME' OF THE MAIN CONTRACTOR. NOW, LIABILITIES IN THE BOOKS ARE LINKED TO EITHER CAPITAL OR REVENUE EXPENDITURE AND REVENUE EXPENDITURE IS DEBITED TO P & L ACCT. THE EXPENDITURE WAS ACCEPTED WITHOUT REJECTING BOOKS BUT THE CONSEQUENT LIABILITIES, WITHOUT ANY REFERENCE TO THE ACTUAL CREDITOR IN WHOSE NAMES SUCH LIABILITIES EXIST, ARE PROPOSED TO BE REJECTED AND CONSIDERED AS INCOME OF THE MAIN CONTRACTOR. (C) THERE IS ALSO CONSIDERABLE MERIT IN THE ARGUMENT OF THE APPELLANT THAT IF THE AO HAS COME ACROSS ANY DISCREPANCIES IN THE ACCOUNTS OF SUBCONTRACTOR, ANY ADDITION OR DISALLOWANCE SHOULD HAVE BEEN MADE IN THE HANDS OF THE SUB-CONTRACTOR AND NOT IN THE HANDS OF THE MAIN CONTRACTOR M/S KNRCL AND THE RELIANCE PLACED IN THIS CONTEXT ON THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS CONSULTING ENGINEERING GROUP LTD (365 ITR 284) (2014). (D) AS FAR AS THE MAIN CONTRACTOR, THE APPELLANT M/S KNRCL IS CONCERNED, IT HAD A SUB CONTRACT AGREEMENT, IT HAD MADE PAYMENTS BY WAY OF CHEQUES, IT HAD DEDUCTED TDS AND THE WORKS WERE ALSO ACTUALLY FOUND TO HAVE BEEN EXECUTED AND CERTIFIED BY INDEPENDENT THIRD PARTY INSPECTION OF NHAI AND THE PRESENCE OF THE SUB CONTRACTOR WAS ALSO CERTIFIED BY THE CONTEMPORARY CERTIFICATE OF VILLAGE SARPANCH IN 2010 DURING THE RELEVANT 35 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. PREVIOUS YEAR ITSELF. THERE IS ALSO NO EVIDENCE OF ANY FLOWING BACK OF MONEY TO THE MAIN CONTRACTOR M/S KNRCL. 11.5. IN HIS IMPUGNED ORDER FOR A.Y. 2012-13, SIMILAR FINDINGS/OBSERVATIONS AS RECORDED IN A.Y. 2 011-12 WERE REITERATED BY THE LD. CIT(A) EXCEPT THE FINDIN GS ON THE ASPECT OF QUANTIFICATION MADE BY THE A.O. OF TH E ALLEGED INFLATED SUB-CONTRACT EXPENSES IN CLAUSE (B ) AND THE FOLLOWING FINDINGS WERE RECORDED BY HIM ON THIS ASPECT FOR A.Y. 2012-13 AS THE BASIS ADOPTED BY THE A.O. F OR SUCH QUANTIFICATION. (B) THE DISALLOWANCE WAS QUANTIFIED ON THE BASIS OF ESTIMATION OF WHAT COULD HAVE BEEN 'CORRECT EXPENDITURE' ON THE WORKS EXECUTED BASED ON A GUIDELINE BOOK OF NHAI FOR 2009. APART FROM THE DOUBTS REGARDING THE APPLICABILITY OF 2009 RATE IN 2011, HOWEVER, MUCH WE ENHANCE AND ADJUST TO THE RATES, THE FUNDAMENTAL PROBLEM IN THE ADDITION MADE IS THE ASSUMPTION MADE. THE AO, GOING BY THE NHAI RATE BOOK, PERHAPS IS DRAWING FIRST A CONCLUSION THAT THE MAIN CONTRACTOR SHOULD HAVE PAID ONLY SAY 5 CRORES. THEN, BECAUSE, THE MAIN CONTRACTOR HAD PAID 8 CRORES, THE AO THEN CONCLUDED THAT THERE IS INFLATION OF 3 CRORES. IN DOING SO, THE AO IS IGNORING THE SUB COR-TRAER WORK AGREEMENT, THE PAYMENT MADE BY THE MAIN CONTRACTOR BY WAY OF CHEQUES, THE RECEIPT OF SUCH PAYMENTS BY THE SUB CONTRACTOR, THE EXPENDITURE INCURRED BY THE SUB CONTRACTOR (DEBIT SIDE OF P & L ACCT OF SUB CONTRACTOR WAS ACCEPTED IN THE DETAILED SCRUTINY ASSESSMENT MADE IN ITS CASE) AND THE ABSENCE OF ANY EVIDENCE INDICATING FLOWING BACK OF CASH ON ACCOUNT OF SUCH 'INFLATION' TO THE MAIN CONTRACTOR. IN THIS MANNER, THE AO CAN ESTIMATE AND OVERTURN EVERY EXPENDITURE DEBITED BY COMPARING WITH THE RATE BOOK AND ESTIMATING 36 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. 'WHAT SHOULD BE CORRECT EXPENDITURE ' AND DEEM EVERYTHING ABOVE SUCH ' RATES' AS 'INFLATION' OF EXPENDITURE. THUS, NOT ONLY THE QUANTIFICATION OF WHAT SHOULD BE 'CORRECT EXPENDITURE' IS QUESTIONABLE, THE INFERENCE DRAWN BEING THAT OF INFLATION BY MAIN CONTRACTOR IS EQUALLY QUESTIONABLE. 11.6. ON THE BASIS OF THE FINDINGS AND OBSERVATION S RECORDED AS ABOVE, THE LD. CIT(A) HELD THAT THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF ALLEGED INFLATED SUB-CONTRACT EXPENSES WAS NOT JUSTIFIED AN D THE SAME WAS DELETED BY HIM IN BOTH THE RELEVANT YEARS I.E., A.YS. 2011-12 AND 2012-13. AGGRIEVED BY THE SAME, T HE REVENUE HAS RAISED THIS ISSUE IN GROUND NO.4 OF ITS APPEAL FOR A.YS. 2011-12 AND 2012-13. 12. AT THE TIME OF HEARING BEFORE US, THE LEARNED D.R. STRONGLY RELIED ON THE ORDER OF THE A.O. IN SU PPORT OF REVENUES CASE ON THIS ISSUE AND SUBMITTED THAT VAR IOUS ADVERSE FINDINGS RECORDED BY THE A.O. PERTAINING TO THE CASE OF THE CONCERNED CONTRACTORS, WHICH HAVE BEEN OVERLOOKED BY THE LD. CIT(A), MAY BE CONSIDERED WHI LE DECIDING THIS ISSUE. 13. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND, STRONGLY SUPPORTED THE IMPUGNED ORDERS OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND SUBMITTED THAT THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD. CIT(A), WHICH HAVE BEEN REL IED UPON BY HIM TO DELETE THE ADDITIONS MADE BY THE A.O . ON THIS ISSUE, MAY BE CONSIDERED WHILE DECIDING THE IS SUE. 37 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. 14. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE WORK ASSIGNED BY THE ASSESSEE TO THE CONCERNED TWO CONTRACTORS IN BOTH THE RELEVANT YEAR S WAS FOUND TO BE ACTUALLY COMPLETED ON THE BASIS OF DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE AND THIS POSITION WAS ACCEPTED EVEN BY THE A.O. BY ALLOWING PARTLY THE EXPENSES CLAIMED TO BE INCURRED BY THE ASSESSEE ON EXECUTION OF THE SAID WORK ON SUB-CONTRACT BASIS. T HE A.O. HOWEVER, DID NOT ACCEPT THE CLAIM OF THE ASSES SEE THAT THE SAID TWO CONTRACTORS HAVE DONE THE SAID WO RK AND BY PRESUMING THAT THE SAID WORK MIGHT HAVE BEEN DON E BY SOME OTHER SUB-CONTRACTORS, HE INFERRED THAT THE CONCERNED TWO CONTRACTORS WERE USED BY THE ASSESSEE AS CONDUIT TO INFLATE THE SUB-CONTRACT EXPENSES. FOR T AKING THIS STAND, THE A.O. MAINLY RELIED ON THE VARIOUS D EFECTS NOTICED BY HIM IN THE MAINTENANCE OF BOOKS OF ACCOU NT AND OTHER RECORD BY THE CONCERNED CONTRACTORS. IN T HE DETAILED SUBMISSIONS FILED BEFORE THE A.O., ATTEMPT WAS MADE BY THE ASSESSEE TO EXPLAIN THE DEFECTS POINTED OUT BY THE A.O. IN THE CASE OF SUB-CONTRACTORS. IT WAS ALSO CLARIFIED BY THE ASSESSEE THAT IT WAS NOT POSSIBLE FOR IT TO EXPLAIN OTHER DEFECTS AND THE EXPLANATION OF THE CONCERNED SUB-CONTRACTORS COULD BE CALLED FOR IN TH IS REGARD. THE A.O. HOWEVER, BRUSHED ASIDE THIS EXPLAN ATION OF THE ASSESSEE AND PROCEEDED TO DRAW AN ADVERSE INFERENCE AGAINST THE ASSESSEE BY ALLEGING THE INFL ATION OF EXPENDITURE RELYING ON THE DEFECTS OR DEFICIENCIES IN THE BOOKS OF ACCOUNT AND OTHER RECORD MAINTAINED BY THE 38 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. CONCERNED TWO SUB-CONTRACTORS, WHICH ARE THIRD PART IES NOT RELATED TO THE ASSESSEE. IT IS PERTINENT TO NOT E HERE THAT NO SUCH ADVERSE INFERENCE HOWEVER WAS DRAWN BY THE A.O. IN THE CASE OF THE CONCERNED TWO SUB-CONTRACTO RS AND IN THE ASSESSMENTS COMPLETED UNDER SECTION 143(3) I N THEIR CASES, THE AMOUNT CLAIMED TO BE PAID BY THE ASSESSEE ON ACCOUNT OF SUB-CONTRACT WORK WAS ACCEPT ED BY THE A.O. IT IS, THUS, CLEAR THAT A CONTRARY STAN D IS TAKEN BY THE A.O. ON THIS ISSUE AND WHILE ACCEPTING THE C ONTRACT RECEIPTS IN THE HANDS OF THE CONCERNED TWO SUB- CONTRACTORS IN WHOSE CASES THE DEFECTS AND DEFICIEN CIES WERE FOUND BY HIM, THE A.O. DID NOT ACCEPT THE PAYM ENT OF THE SAME AMOUNT MADE BY THE ASSESSEE IN ITS CASE . AS RIGHTLY HELD BY THE LD. CIT(A) IN HIS IMPUGNED ORDE R, NEITHER THIS BASIS ADOPTED BY THE A.O. TO ALLEGE TH E INFLATION OF SUB-CONTRACT EXPENSES BY THE ASSESSEE NOR THE QUANTIFICATION OF SUCH INFLATED EXPENDITURE DONE BY HIM IS JUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CAS E. AS FURTHER HELD BY THE LD. CIT(A), THE ASSESSEE HAD DISCHARGED HIS ONUS TO SUPPORT AND SUBSTANTIATE ITS CLAIM OF SUB-CONTRACT EXPENSES BY ESTABLISHING ON EVIDENC E THAT THE RELEVANT WORK ASSIGNED TO THE SAID SUB-CONTRACT ORS WAS ACTUALLY EXECUTED, PAYMENTS WERE MADE FOR THE S UB- CONTRACT TO THE CONCERNED TWO SUB-CONTRACTORS BY CH EQUE AND TAX WAS ALSO DULY DEDUCTED WHILE MAKING SUCH PAYMENTS. MOREOVER, THERE WAS NO EVIDENCE BROUGHT O N RECORD BY THE A.O. TO SHOW THAT THE AMOUNT OF SUB- CONTRACT EXPENSES ALLEGEDLY INFLATED BY THE ASSESSE E HAD COME BACK TO IT FROM THE SUB-CONTRACTORS. FURTHERMO RE, AS 39 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE ASSE SSEE AT THE TIME OF HEARING BEFORE US, BOTH THE CONCERNED S UB- CONTRACTORS ARE NOT RELATED TO THE ASSESSEE AND ONC E IT IS ESTABLISHED THAT THE CONCERNED SUB-CONTRACT WORK WA S ACTUALLY DONE OR EXECUTED AND THIS FACT WAS ACCEPTE D EVEN BY THE A.O. BY ALLOWING PARTLY THE SUB-CONTRACT EXP ENSES, NO DISALLOWANCE ON ACCOUNT OF SUB-CONTRACT EXPENSES CAN BE MADE ON THE GROUND THAT THE EXPENSES SO INCURRED BY THE ASSESSEE ARE EXCESSIVE OR UNREASONABLE. AS SUCH , CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND OURSELVES IN AGREEMENT WITH THE LD. CIT(A) THAT THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF AL LEGED INFLATED SUB-CONTRACT EXPENSES BY THE ASSESSEE IN T HE RELEVANT TWO YEARS I.E., A.YS. 2011-12 AND 2012-13 WAS NOT SUSTAINABLE EITHER IN LAW OR ON THE FACTS OF TH E CASE AND UPHOLDING HIS IMPUGNED ORDERS ON THIS ISSUE, WE DISMISS GROUND NO.4 OF THE REVENUES APPEAL FOR A.Y S. 2011-12 AND 2012-13. 15. IN THE RESULT, APPEALS OF THE ASSESSEE FOR A.Y S. 2006-07, 2007-08, 2008-09 ARE ALLOWED WHEREAS APPEA LS OF THE REVENUE FOR A.YS. 2009-10, 2010-11, 2011-12 & 2012-13 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.10.2015. SD/- SD/- (SMT. P. MADHAVI DEVI) (P.M. JAGTAP) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 16 TH OCTOBER, 2015 VBP/- 40 ITA.NO.946/H/2015 M/S. KNR CONSTRUCTIONS LTD., HYDERABAD. COPY TO : 1. M/S. KNR CONSTRUCTIONS LTD., PLOT NO.113 & 114, PHASE-I, KNR HOUSE, KAVURI HILLS, HYDERABAD. 2. DCIT, CENTRAL CIRCLE - 3, HYDERABAD. 3. CIT(A) - 12, ROOM NO.3A, AAYAKAR BHAVAN, ANNEXE BUILDING, BASHEERBAGH, HYDERABAD 500 004. 4. PR. CIT - (CENTRAL), HYDERABAD 5. D.R. ITAT A BENCH, HYDERABAD. 5. GUARD FILE