M/s National Oil Well Maintenance Company, Jodhpur V. DCIT,Circle ( International Taxation), Jaipur

ITITA 11/JPR/2022

AI Insights

The case involves appeals by M/s National Oil Well Maintenance Company against the orders of the Deputy Commissioner of Income Tax (International Taxation), Jaipur, for the assessment years 2018-19 and 2019-20. The primary issues in the appeals were the additions made to the assessee's income on account of differences in turnover reported in the audited accounts and Form 26AS, and the rejection of the books of accounts under section 145(3) of the Income Tax Act, 1961. The Tribunal examined the submissions, evidence, and the orders of the lower authorities, and found that the assessee had maintained proper books of accounts and that the differences in turnover were explainable. The Tribunal also noted that the assessee had complied with the procedural requirements and had produced the necessary documents during the assessment proceedings.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 132129 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 04-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-10-2022
• Assessment Year: 2018-2019
• Appeal Filed On: 03-07-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Capital asset converted into stock in trade; Depreciation; Double taxation relief; Opportunity of being heard; Deemed to accrue or arise in india; Question of law; Initiation of penalty proceedings; TDS; Set aside; FORM 26AS
• Section: 145; 271(1)(c); 144; 139; 143(3); 142(1); 143(1); 195; 44BB; 143(2); 44AB; 145(3)

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’B’ JAIPUR Mk0 ,l- lhrky{eh]U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@IT(IT) A Nos. 11 & 12/JP/2022 fu/kZkj.k o"kZ@AssessmentYears :2018-19 & 2019-20 M/s National Oil Well Maintenance Company, 19A Karni Krupa, Hanwant Vihar Jodhpur cuke Vs. DCIT (International Taxation) Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCN 2122 J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assesseeby : Sh. Mahesh Gehlot (Adv.) jktLo dh vksj ls@Revenue by: Sh. Sanjay Dhariwal (CIT) lquokbZ dh rkjh[k@Date of Hearing : 06/10/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 05/12/2022 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, A.M. These are the two appeals filed by the assessee aggrieved from the order of the assessment passed u/s. 143(3) r.w.s. 144C(13) [ Here in after referred as ld. AO ] for the assessment year 2018-19 & 2019-20 dated 26.05.2022 which in turn passed after the directions given by the Dispute Resolution Panel [ in short “DRP’] passed under Section 144C(5) of the Income tax Act, 1961 (in short 'the Act') dated 01.04.2022. 2 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 2. Since the issues involved in these appeals are identical on facts and grounds raised are almost same. Therefore, both these appeals were heard together with the agreement of both the parties and disposed off by this consolidated order. 3. In IT(IT) A. 11/JP/2022 for assessment year 2018-19, the assessee has assailed the appeal on the following grounds; “With reference to the assessment order dated 26.05.2022, as passed by Ld. Deputy Commissioner of Income Tax (DCIT), Circle (International Taxation) for the A.Y. 2018-19 the Assessee-appellant would most humbly like to file the following Grounds of Appeal for your kind perusal and consideration: 1. Under the facts and circumstances of the case and in Law, Ld. DCIT (International Taxation), Jaipur has, on the basis of assumptions and presumptions, without appreciating the facts and merits of the case, erred in an addition of Rs 4,76,24,652/-as difference in turnover form 26AS & audit report ,whereas in order he had not applied it and wrongly determining deemed income of the assessee u/s 44BB(1) of Income Tax Act, 1961 for the A.Y. 2018-19. 2. Under the facts and circumstances of the case and in Law, Ld. DCIT (International Taxation), Jaipur has, on the basis of assumptions and presumptions, without appreciating the facts and merits of the case, rejected the books of accounts under section 145(3) of Income Tax Act, 1961 (the Act) without providing specific reason(s) or without considering section 44BB(3) of the Act whereas the books of accounts are correct and complete and maintained following proper accounting method and standard. 3. Under the facts and circumstances of the case and in Law, Ld. DCIT (International Taxation), Jaipur has, on the basis of assumptions and presumptions, without appreciating the facts and merits of the case, erred in making the addition of Rs 1,48,34,753/-,treating it wrongly as deemed income of the assessee u/s 44BB(1) of Income Tax Act, 1961 for the A.Y. 2018-19. 4. That the Appellant reserves the right to add, amend, alter, delete or modify or withdraw any or all of the above grounds of appeal before or at the time of hearing.” 3 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 4. The fact as culled out from the records is that the assessee company filed return of income for Assessment Year 2018-19 on 30.10.2018 declaring total income at loss of Rs. 14,75,11,694/-. The return of income was processed u/s 143(1) of the I.T. Act, 1961 and thereafter the case was selected for complete scrutiny under CASS by issuing notice dated 22.09.2019 u/s 143(2) of the Act. 5. A draft assessment order was passed in this case on 28.09.2021, the assessee filed objection before the DRP, who issued direction on 07/04/2022 bearing DIN no. ITBA/DRP/S/91/2022-23/1042623490(1), u/s 144C(5) of the Act. The final assessment order incorporating the directions issued by the DRP is passed by the ld. AO dated 26.05.2022 and the same is under dispute in this appeal. 6. The assessee is a non-resident company engaged in the business of providing services or facilities in connection with or supplying plant and machinery on hire used or to be used in prospecting for, or extraction or production of mineral oil. The assessee company is a foreign company, originally incorporated under the laws of Qatar. It started its operation in India w.e.f. A. Y. 2011-12 and since then assessee is a branch of foreign 4 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur company whose management and control of the company is outside India in Qatar but is having permanent establishment in India. The assessee company has entered into agreement / contract with the companies as tabulated here in below : S. No. Name of the Contractee Company Contract No. & date Nature of contract 1 Cairn India Limited 4600007298 dated 06-01-2017 4600007299 dated 06-01-2017 Provision of coil tubing services Provision of supply of chemicals for coil tubing units 2 Gujarat State Petroleum Corporation Ltd. (GSPC) No. GSPC- NOWMCO/Onshore/Cementing Services on Call out basis/ 17-18/AS-706/359/C-419 dated 29-01-2018. Cementing services on Call out basis 3 Oil India Limited 6205388 Hiring of Cementing Services for exploratory drilling 7. It is an admitted fact that the assessee has provided details of the agreement / contract with these companies and the ld. AO based on these contracts observed that the contract is a comprehensive and composite contract for these services though the consideration of each item/material are different for billing purpose and broken into components such as rental charges for the equipment, Chemical sale and Floating equipment, spare parts etc. 5 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur Findings of lower authority and related facts for an addition made for difference of turnover reported in books with that of form no. 26AS 8. From the records the ld. AO found that there was difference in Turnover / Receipts in Audit Report vis a vis the Form 26AS. The ld. AO observed that the receipt as per 26 AS is recorded at Rs. 15,04,44,665/- whereas turnover as per audit report is Rs. 10,07,22,887/-. Thus, he found that there is difference of Rs. 4,97,21,778/- as tabulated here in below: Sr. No. Amount as per assessee Amount as per 26AS Difference in (Rs.) GSPC 29,27,397 1,09,89,021 80,61,624 Vadanta Limited 9,77,95,490 11,68,42,959 1,90,47,469 Oil India Limited - 2,26,12,685 2,26,12,685 Total 1007,22,887 15,04,44,665 4,97,21,778 9. The ld. AO show caused the assessee as to why the difference should not be added as income. Assessee explained the difference in the assessment proceeding and contended that the difference is on account of following reasons: Annexure-22 Client Name Amount As per Books Amount as per 26AS Difference Remarks GSPC Ltd. 29,27,397 1,09,89,021 -80,61,624 As per Annexure- 221 Oil India Ltd. - 2,26,12,685 -2,26,12,685 As per Annexure- 222 Vedanta Ltd. 9,77,95,490 11,68,42,959 -1,90,47,469 As per Annexure- 223 6 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur Total Revenue as per Books 10,07,22,887 15,04,44,665 4,97,21,778 Total Revenue as per Audit 10,07,22,887 Details of Difference Due to GST Not shown in ITR 1,08,39,076 Due to Oil India Payment 2,26,12,685 Due to GSPC Invoices not accounted in books in 17-18 75,26,523 Due to Cairn Invoices Accrual and Actual Difference 87,43,494 Difference Total 4,97,21,778 10. Assessee submitted that the vendor parties of the assessee company have shown the gross payment made to the assessee company in Form 26AS i.e. inclusive of GST amount applicable, whereas the assessee has accounted in its books of account on net of GST. Thus, there exist a difference of turnover. The second reason is that invoices were accounted for by Vedanta Ltd. & GSPC in F. Y. 2017-18 i.e. the year under assessment, whereas, the assessee company has accounted the said invoice in next year i.e. F. Y. 2018-19 as these invoices were not approved till the financial year end, but approved later on due to technical & procedural compliance. The ld. AO noted that the contention regarding difference on account of GST accounted net, but the same was not 7 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur accepted as the assessee, not furnished complete invoice related to these differences. The ld. AO noted that the assessee has submitted four invoices of GST and for these invoices difference Rs. 20,97,126/- was considered by ld. AO. As regards the contention of the assessee that some invoices accounted by the assessee in the subsequent year on account of completion of technical & procedural compliance, same was not accepted by the ld. AO because the books of the assessee are prepared on mercantile system of accounting so bills are required to be entered in the year under consideration. Finally, ld. AO has given the benefit to the extent of Rs. 20,97,126/- only for which bills were placed on record as contended by ld. AO. As regards the difference of Rs. 2,26,12,685/- it is submitted by the assessee that invoices were accounted for by the assessee company in the F. Y. 2016-17 i.e. prior to the year under consideration. The assessee submitted the copy of the ledger account and the invoices but as the assessee has not furnished the confirmation from Oil India Ltd., for these facts, the contention of the assessee was not believed by the ld. AO. In the light of these fact the ld. AO has added a sum of Rs. 4,76,24,652/- [ Rs. 4,97,21,778/- less 20,97,126/-]. 8 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 11. The assessee has taken up this issue before the DRP, DRP has also confirmed the findings of the ld. AO. The relevant finding of the DRP on this issue is extracted here in below: 4.2 Ground number 2: Under the facts and circumstances of the case and in Law, the Ld. A.O. has, on the basis of assumptions and presumptions, without appreciation the facts and merits of the case, erred in rejection the contention of the assessee and making the addition of Rs. 4,76,24,652/- to the total receipts of the assessee company on account of difference in receipts as per Profit & Loss Account and Audit Report and as per Form 26AS whereas the complete reason of difference along with the Reconciliation Sheet, relevant invoices and other details and documentary evidences was already submitted to the complete satisfaction of the Ld AO. during the assessment proceedings. DRP Directions: 4.2.1 In Ground number 2 the assessee has objected to the addition of Rs. 4,76,24,652/- to the total receipts of the assessee company on account of difference in receipts as per Profit & Loss Account and Audit Report and as per Form 26AS. The AO has noted that there is a difference in audit report vis-à-vis Form 26AS in the receipts and turnover in respect of the three contractee companies as under: Sr.No Amount as per assessee Amount as per 26AS Difference in (Rs) GSPC 29,27,397 1,09,89,021 80,61,624 Vedanta Limited 9,77,95,490 11,68,42,959 1,90,47,469 Oil India Limited - 2,26,12,685 2,26,12,685 Total 1007,22,887 15,04,44,665 4,97,21,778 4.2.2 The AO has discussed the discrepancy in pages 11 to 15 of the draft assessment order. After verifying the chart produced by the assessee to reconcile the difference, the AO accepted the discrepancy of Rs. 20,97,126/- in respect of Vedanta Ltd whereas the contentions of the assesse as regards the receipts from Oil India Limited and GSPC were rejected by the AO. The assessee has furnished the detailed submissions explaining the discrepancy between the audit report and Form 26A5 in paras 7 to 11 of its submission dated 04.02.2022 In this connection the assessee has submitted that, vide submissions dated 15.04.2021, 28.04.2021, 30.04.2021, 28.06.2021, 21.09.2021, 23.09.2021 it comprehensively explained with supporting documents the impugned discrepancies. In this regard the assessee further submitted, inter alia, as under 9 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur A. "As regards balance difference of a. 75,26,533, it is submitted that it is due to the invoices which were accounted for by GSPC Ld. In the relevant FY 2017-18 whereas these were these invoices were approved later due to certain technical and procedural compliances. B. As regards discrepancy in receipts to the tune of Rs. 2,26,12,685/- from the Vendor company Oil India Ltd. It is submitted that the relevant invoices were accounted for by Oil India Ltd. in the relevant FY 2017-18 on payment basis whereas these were accounted for by the Assessee Company on accrual basis in the preceding FY 2016-17 itself as and when the said invoices were raised Le, on 01.09.2016. C. As far as discrepancy in receipts of Rs. 80,61,624/- from the Vendor-company Gujarat State Petroleum Corporation Ltd. (CSPC) is concerned it is submitted that out of the above Ra. 5,35,091/-is attributed to GST issue. D. As regards discrepancy in receipts to the tune of Rs. 1,90,47,469/- from the Vendor company Vedanta Ltd. (Cairn India Ltd.), it is submitted that out of the above, Rs. 1.08,39,076 is attributed to GST issue. The issue is very simple that the Vendor company has shown the receipts inclusive of GST while the assessee has shown it net of GST, maintaining separate ledger a/c for Output GST on its turnover (Receipts). 4.2.3 The DRP has carefully considered the submissions of the assessee as well as the draft assessment order. The arguments and justification explaining the discrepancy is the same as that taken by the assessee during the assessment proceedings. The AO dealt with the issue of discrepancy in the case of each of the contractee companies in pages 9 to 15 of the draft assessment order. 4.2.3.1 On the issue of discrepancy in the case of Vedanta Ltd, the AOhas observed that invoices regarding GST of only Rs. 20,97,126/- was verifiable for which credit was duly given to the assessee. On the issue that the invoices were accounted for by Vedanta Ltd in FY 2017-18 whereas the assessee company accounted to it in FY 2018-19, the AO has observed that the contention is not acceptable because the books of accounts are maintained on mercantile system of accountings and so the bills are required to be entered in the books as soon as they become due. 4.2.3.2 In the case of Gujarat State petroleum Ltd the AO after examining the contention of the assessee as concluded that the contention of the assessee is not acceptable because accounting of assesser company is based on Mercantile system, therefore, the assessee is required to book receipts in AY 2018-19 only. Thus, the contention of the assessee is hereby rejected and the difference of Rs 80,61,6241- in receipts is hereby added to the total receipts of the assessee in connection with Gujarat State Petroleum Corporation Ltd. (GSPC) 4.2.3.3 In the case of Oil India Ltd, the AO after examining the contention of the assessee observed that invoice was accounted for by the assessee company on accrual basis in period FY 2016-17 itself as per invoice date i.e. 01.09.2016 whereas it was accounted for by Oil India Ltd. on payment basis in FY 2017-18 under consideration The AO further observed that "the assessee company has submitted the copy of invoice and ledger account, however the confirmation from 10 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur Oil India Ltd was not submitted though enough time was given to the assessee. The assessee was requested to submit confirmation, however till date confirmation not received. Thus, the contention of the assessee is hereby rejected and difference of 2,26,12,685/-in receipts is hereby added to the total receipts of the assure company in connection south Oil India Limited.” 4.2.3.4 The AO has carefully analyzed the issue at hand after giving sufficient opportunity to the assessee. The observations and conclusions arrived at by the AO in disallowing the unexplained differential amount of receipts between the P&L account and Form 26AS is well founded and the DRP finds no infirmity in these regard to interfere with the conclusion of the AO. Hence, the objections raised in Ground Number 2 is rejected. 12. As the assessee not finding favour, has taken ground no. 1 before us for an addition amount of Rs. 4,76,24,652/- [ Rs. 4,97,21,778/- less 20,97,126/-] added by the AO on account of difference of turnover reported in Form No. 26AS and audited accounts. Findings of lower authority and related facts relating to rejection of books of account by invoking provision of section 145(3) 13. As the assessee filed ITR for A. Y. 2018-19 by declaring a total loss of Rs. 14,75,11,694/-, for the verification of such a huge loss the assessee company was requested to furnish reasons for claiming such a huge loss. The assessee has filed a detailed explanation vide letter dated 28.01.2021. The ld. AO noted that many details were not furnished due to which the losses claimed in ITR remain unverified. The details of discount given, 11 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur complete invoice and complete books of accounts, bills and vouchers were not furnished by the assessee company. In order to have a look on the company’s financial position, the financial parameters of the company tabulated by the AO, and the gross profit and net profit for last three years were compared with the current year’s results. On perusal of the financial it is noted that the net profit is (-146.45%), in A. Y. 2018-19 while the same was 24.77 % in the A. Y. 2017-18 which shows that there is downfall of 171 % in net profit as compared to last year. The ld. AO further noted that the turnover of the assessee company has declined by 55 % as compared to A. Y. 2017-18 however, most of the indirect expenses have shown a growth of 100-200 % and in some expense the growth is even more. The ld. AO then noted the difference in each of the expenses and the change in the % compared to last year and the said comparison was stated in the order. Based on that comparison the ld. AO noted the rise in the expenses is abnormally high. Keeping in view, abnormally high increase in the expenses, the assessee was requested to furnish complete books of accounts including inter alia bills for all the expenses claimed, vouchers, ledger account etc., vide his letter dated 22.09.2021 and 25.09.2021. The ld. AO noted that on these two-occasion assessee did not furnish books of accounts. The ld. AO further noted that assessee has not furnished all the 12 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur invoices of his customer but same was submitted in part. As the required information was not received in the form of books of accounts, bills and vouchers even though the same were called for, the assessee was show caused as to why the books of account should not be rejected u/s. 145(3) of the Act vide letter dated 27.09.2021 and requested to furnish the reply on 28.09.2021. The ld. AO noted that assessee has not submitted its reply in the stipulated time and thus the provision of section 145(3) was invoked observing that the sufficient opportunities were provided to the assessee to provide complete books of accounts, however, the assessee company did not furnish the books of accounts, all the ledger accounts, bills of expenses, vouchers and invoices to support the claim of expenses. In the absence of these, the expenses and loss claimed remain unverified and unjustifiable. Thus, as the books of accounts rejected u/s.145(3) and the services rendered by the assessee is covered under the provisions of section 44BB of the Act. The ld. AO observed that the assessee filling the ITR u/s. 44BB since, 2011. 14. The ld. AO noted the provision of section 44BB(3), the assessee can claim lower profits and gains than the profits and gains specified in section 44BB(1) of the Act, if he keeps and maintains such books of 13 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur account and other documents as required under section 44AA(2). However, despite repeated opportunities, the assessee failed to produce the complete books of accounts along with the ledger accounts, bills and vouchers etc., The claim of expenses as shown in the financial statement of the assessee not being verifiable and justifiable the benefit of section 44BB(3) of the Act denied to the assessee and the assessment was completed keeping in view the provisions of section 44BB(1) of the Act. To drive home to this contention the ld. AO has relied various judicial decisions and finally estimated income as per provision of section 44BB. 15. Aggrieved from the said action, assessee has taken up this issue before DRP, DRP confirmed the findings of the ld. AO. The relevant finding of the DRP on this issue is extracted here in below: 4.3 Ground 3: Under the facts and circumstances of the case and in Law, the LA. AO has, on the bass assumptions and presumptions, without appreciating the facts and merits of the case, erred in rejection th books of accounts of the assessee company u/s 145(3) of the Income Tax Act, 1961 and wrongly applying Section 44BB(1) of the said Act and wrongly denying the benefit of Section 44BB(3) of the Act whereas all the books of accounts, bills, vouchers etc. were offered for verification to the Ld. A.O DRP Directions: 4.3.1 Ground 3 relates to the rejection of the books of account of the assessee by the AO u/s 1450) of the Income Tax Act. Consequently the AO invoked section 44BB(1) of the Act to assess the deemed profit and gain of the business chargeable to tax @10% of gross receipts. Accordingly the profits deemed u/s 44BB(1) was determined as Rs. 1,48,34,753/-. In this regard a showcase notice dated 27.09.2021 was issued by the AO requiring to the assessee to explain as under 14 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur "On perusal of the Profit and Loss Account and Audit Report of the assessee company the following issues emerged: 1. On perusal of financials of the assessee company it is found that the Net Profit is 146% in AY 2018-19, while the same was 24.77% in AY 2017-18, which shows that there is downfall of 171% in net profit% as compared to last year. 2. The turnover of the assessee company has declined by 55% as compared to AY 2017-18. however, most of the indirect expenses have shown a growth of 100- 200% and in some expenses the growth is even more. You were given two opportunities to furnish your complete books of account, however you have not furnished the ledger accounts, bills of expenses, vouchers, and invoices to support your claim of expenses. Further, from time to time you were requested to furnish invoices, however till date complete invoices have not been submitted by you. In view of the above facts, you are showcaused as to why the books of accounts of the assessee company should not be rejected u/s 145(3) of the Income Tax Act." 4.3.2 The AO has observed that the assessee company did not furnish any reply to the showcause notice and accordingly section 145(3) of the Act was invoked. In this regard the AO proceeded to observe and conclude as under: "During the course of assessment proceedings, the assessee himself submitted that the assessee is filing its ITR u/s 44BB of IT Act since 2011 Under the provisions of section 44BB(3), the assessee can claim lower profits and gains than the profits and gains specified in section 44BB(1) of the Act, if he keeps and maintains such books of account and other documents as required under section 44AA(2). However, despite repeated opportunities, the assessee has failed to produce the complete Books of accounts alongwith the ledger accounts, bills and vouchers etc. The claim of expenses as shown in the financial statements of the assessee not being verifiable and justifiable, the benefit of section 44BB(3) of the Act cannot be allowed to the assessee. In view of the above facts, the assessment proceedings are being completed keeping in view the provisions of section 44BB(1) of the IT Act" 4.3.3 During DRP proceedings the assessee has filed detailed submission dated 04.02.2022 in this regard. The assessee has submitted that all the queries as raised by the AO vide notices u/s 142(1) dated 13.12.2019, 07.02.2020, 15.01.2021, 18.01.2021, 04.03.2021, 12.04.2021, 23.04.2021, 22.09.2021, 24.09.2021, 26.09.2021 were effectively met with to the satisfaction of AO. The assessee has further also submitted that it filed its reply with specific supporting documentary evidences which are in essence, part of books of accounts being regularly maintained by the assessee. As per assessee the AO issued letter dated 25.09.2021 insisting on production of books of accounts at a very short notice and but these voluminous books of accounts could not be uploaded in online portal 15 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur which admits only few MB files. The assessee has further submitted that it was granted only 1 day time to respond to the showcause notice dated 27.09.2021 and the order was passed on 28.09.2021. In para 18 of its submission dated 04.02.2022 the assessee has submitted that the AO did correspondences with the assessee through notice u/s 142(1) dated 04.03.2021, 12.03.2021, 23.04.2021 but she never contradicted or sought clarification on the assessee's submission regarding the books of account maintained by the assessee. The assessee has also submitted that its counsel appeared physically before the AO and shown these books and explained the reason for loss. 4.3.4 The DRP has considered the detailed submissions of the assessee as well as the draft assessment order dated 28.09.2021. The crucial issue involved is rejection of the books of accounts of the assessee by the AO u/s 145(3) of the Act and applying section 44BB(1) of the Act to determine the taxable income. The AO rejected the books of accounts stating that the assessee did not furnish the book of account, ledger account, bills of expenses, vouchers, invoices etc. despite being granted sufficient opportunity in this regard. However, the assessee has submitted that all notices u/s 142(1) issued on various dated by the AO where complied with. The assessee has also claims that sufficient time to respond to the showcause notice dated 25.09.2021 and 27.09.2021 was not granted to the assessee and therefore, the rejection of the books of account u/s 145(3) of the Act and invoking u/s 44BB(1) of the Act is uncalled for. Section 145(3) of the Act provides that where the AO is not satisfied about the correctness or completeness of the account of the assessee, or where the method of accounting income has not been computed in accordance with the standards notified under sub-section (2), the AO may make an assessment in the manner provided in section144 Thus the AO is required to record satisfaction for rejection of books of accounts after forming opinion based on the facts of the case. In the instant case the AO has observed that despite sufficient opportunity to the assessee, the assessee failed to produce the books of accounts and therefore the expenses and loss claimed remained un- verified and un-justifiable. On the other hand the assessee has claimed that it responded to all queries raised by the AO vide notices u/s 142(1) of the Act by its replies dated 18.01.2021, 28.01.2021, 10.03.2021, 15.03.2021, 15.04.2021, 28.04.2021, 30.04.2021, 28.06.2021, 21.09.2021, 23.09.2021. The assessee has also submitted that adequate opportunity was not granted to it to respond to the showcause notice dated 25.09.2021 & 27.09.2021 In essence the assessee has contended that the grounds of rejection of books of accounts are not reasonable. The AO is directed to examine the factual contention of the assessee and pass a speaking order justifying invocation of section 145(3) of the Act, taking into account the factual submissions made by the assessee during DRP proceedings. Ground number 3 is accordingly disposed of. 16 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 16. On rejection of books of accounts and invoking of provision of section 145(3), the DRP has directed the AO to examine the factual aspect of the submission of the assessee and ld. AO was directed to pass a speaking order justifying the invocation of section 145(3) of the Act taking into consideration the factual submissions made by the assessee in the DRP proceedings. The ld. AO noted the reply of the assessee made in the proceeding before DRP and factual contents of the case have been perused and considered. The ld. AO noted that the questions raised during the assessment and the reply of the assessee have been summarized below after taking into account the factual submission made by the assessee. Sr. No. Notice u/s and date of issue Particulars of the query raised/issued Reply of the assessee Remarks Date of compliance (as per notice) Actual date of compliance made by the assessee 1 142(1), 13.12.2019 1. Explanation regarding TDS deduction on expenses. 16.12.2019 15.03.2021 Submitted explanation vide reply dt. 15.03.2021 i.e. after a deliberate delay of 15 months. 2 142(1), 07.12.2020 Recalled information as requisite vide notice u/s 142(1) dt. 13.12.2019 14.12.2020 15.03.2021 Submitted explanation vide reply dt. 15.03.2021 i.e. after a deliberate delay of 3 months 3 142(1), 04.03.2021 i. Details of depreciation 08.03.2021 10.03.2021 The assessee deliberately 17 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur ii. evidence for purchase of assets. filed reply (partly) after due date of submission. 4 142(1) 12.04.2021 i. Copy of contract, bills, vouchers etc. 15.04.2021 28.04.2021 The assessee deliberately filed reply (partly) after due date of submission 5 142(1), 22.09.2021 1. Reconcile the turnover. 2. Copy of invoices raised to Indian customers. 3. Furnish books of accounts, bills and vouchers of expenses claimed. 24.09.2021 23.09.2021 Partly reply. In point No. 4, assessee submitted that complete books of a/c s, bills expenses claimed, vouchers and legders shall be produced in the next hearing. However did not submit the books of accounts, bills and vouchers of expenses. “1. As can be seen above in the factual matrix, the assessee has deliberately delayed the submission of the basic factual information and the details/bills and vouchers relevant to the production of books of accounts. The intention of the assessee is clearly highlighted above that no investigation time is allowed to the assessing officer. 2. The first detailed notice u/s 142(1) was issued on 13.12.2019 and notices were issued regular interval providing ample of opportunities to the assessee. 3. The assessee in its submissions claimed that books of accounts are ready for verification and can be produced as and when required. However, even after the issuance of notices for furnishing the Books of accounts and the issue of the final show cause notice, the assessee did not produce the books of accounts. 4. As discussed in the draft assessment order, many of the expenses increased from 100% to 300% and some expenses even rose by 900%. Keeping in view the abnormally high increase in the expenses of the assessee, the assessee was requested to furnish the complete Books of accounts inter alia, bills for all the expenses claimed, vouchers, ledger accounts, etc., which the assessee has failed in producing. 18 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 5. The assessee could not produce satisfactory justification regarding the 171% fall in net profit in A.Y 2018-19 as compared to A.Y 2017-18 despite providing ample opportunities. 6. The assessee could not produce satisfactory justification regarding the decline in turnover by 55% as compared to A.Y 2017-18 and regarding the rise in expenses from 100%-200% and even more, despite providing ample opportunities.” Taking into consideration the factual contents ld. AO justified invocation of provision of section 145(3) and for that he relied judicial decision as mentioned in the order the relevant conclusion recorded by the ld. AO is reiterated here in below :- “In this case the assessee was asked to furnish books of accounts vide notice u/s 142(1) dated 13.12.2019, 07.12.2020, 15.01.2021, 18.01.2021, 04.03.2021, 12.04.2021, 23.04.2021 (show cause). 22.09.2021, 26.09.2021, 27.09.2021 (show cause), but the same has not been provided by the assessee till date which clearly shows the malafide intentions of the assessee to hide the requisite information so that the assessment proceedings can be delayed and tax evasion can be curtailed. The assessee vide submissions dated 18.01.2021, 28.01.2021, 10.03.2021, 15.03.2021, 15.04.2021, 28.04.2021, 30.04.2021, 21.09.2021, 23.09.2021 submitted response for various queries raised and claimed that the books of accounts would be furnished within some time but did not furnish books of accounts despite asking for it many times vide various notices mentioned above. As per the point no. 4 of assessee's recent submission dated 23.09.2021 - "regarding submission of complete books of accounts, bills of expenses claimed, vouchers and ledgers, the same shall be produced for your physical verification purpose in the next hearing before your good self" This also strengthens the thought that the assessee deliberately chose not to furnish the books of accounts so that discrepancies in maintaining the books of accounts, if any, remain unearthed and the actual amount of tax evasion cannot be ascertained. Thus the contention of the assessee that reasonable opportunities were not provided is hereby rejected. 19 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur Hence, on basis of the above discussion, the invocation of section 145(3) of the Income Tax Act, 1961 in this case is purely fit and justified.” 17. As the assessee did not find any favour, taken up the issue of rejection of books of account and invoking the provision of section 44BB in ground no. 2 & 3 in this appeal. Submission of the assessee 18. The ld. AR of the assessee submitted a combined written submission for all the ground no. 1 to 3 which is extracted in below; The Appellant above-named most respectfully begs to submit as under:- That vide assessment order, Ld A.O. goodself sought to assess the total income of the assessee-company by, inter alia, wrongly rejecting u/s 145(3) of Income Tax Act, 1961 the books of accounts on ignoring our well-reasoned submissions on the matter. 2. That vide your draft assessment order dated 29.09.2021 and final Assessment order, Ld AO assess the total income of the assessee-company at Rs. 2,99,17,942/- by wrongly rejecting u/s 145(3) of Income Tax Act, 1961 the books of accounts on ignoring our well-reasoned submissions on the matter. 3. That, on being aggrieved, the assessee preferred to file objections before Hon’ble Dispute Resolution Panel (DRP) on 11.10.2021. 4. That on being satisfied with our submissions, Hon’ble DRP acceded to our request and remand the case to your file with the direction “...to examine the factual contention of the assessee and pass a speaking order justifying invocation of section 145(3) of the Act, taking into account the factual submissions made by the assessee during DRP proceedings..” 20 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 5. That letters dated 08.02.2022, 15.02.2022 and 21.02.2022, pertaining to assessment year 2018-19 were submitted before Ld AO Annexure – 5 to 9.1,9.2,12 and Hon’ble DRP, These are being enclosed herewith for your kind ready perusal vide Annexure –9.1,9.2,10,11,12,13,&14 respectively. 6. That in course of Assessment hearing proceedings before Ld AO all details, as asked vide notices under the law were submitted vide our written submissions dated 23.08.2021, 10.09.2021, 24.09.2021 and 25.09.2021 which all must be in your record and are self-explanatory. 7. That all the submissions, as mentioned above were extracted from the books of accounts, regularly maintained by the assessee. The relevant part of the books of accounts were duly submitted before Ld AO in course of hearing proceedings and examined by your goodself also. 8. That as per the direction of DRP , we are submitting to Ld AO herewith entire cash book, ledgers, bills & vouchers and stock register since your goodself must be aware that in on-line filing, only 15 MB is allowed and hence, the assessee was not allowed to upload the entire books of accounts. 9. At the cost of repetition, it is submitted that the following books of accounts are being regularly maintained by the assessee : (a) Cash Book (b) Bank Book (c) Purchases and Sales Book (d) Receipts and Payment Vouchers (e) Ledger (f) Journal (g) Stock Register And all of them were duly produced before Ld AO as and when so desired and in every format, so prescribed by LAW. 9.1 Without prejudice to the above, it is submitted that Section 145(3) stipulates as below : “..Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144...” 21 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur On careful perusal of section 145(3) of Income Tax Act, 1961, it would be clear that this section does not deal with the situation whereby books of accounts were actually or purportedly not produced. It deals with the situation after production of books of accounts by the assessee and subsequent examination by the A.O. Non-production of books of accounts, if any, can be covered under non- compliance or otherwise of Section 142(1) of Income Tax Act, 1961. 9.2 Besides, Ld AO never contradicted the assessee’s submissions in response to your specific queries, meaning thereby you were not unsatisfied with the correctness or completeness of the accounts of the assessee. Further, the assessee was regularly following the mercantile system of accounts which were also not doubted upon. Besides, it is submitted that the books of accounts were duly audited u/s 44BB(3) of the Income tax Act, 1961. 9.3 It will not be out of place here to mention that all the payments made on account of various expenditure were duly subjected to TDS which cannot be done in absence of proper maintenance of books of accounts. All records pertaining to TDS were duly produced in course of hearing proceedings. 9.4 Similarly, the assessee is a regular GST payee. All pertaining GST returns were produced in course of hearing proceedings. 9.5 Heavy loss was incurred during this year owing to huge expenses claimed due to the following reasons: (a) During the relevant F.Y. 2018-19 under consideration, the Assessee Company did not have any new Cementing Contract with it as GSPC and Oil India Ltd. Tenders were at finalization stage. So, the Assessee Company did not relive their crew and equipments used for Cementing Project during this period, incurring cost of payroll, accommodation, rentals, and depreciation without generating revenue from Cementing Contract. (b) The assessee was awarded Coil Tubing Contract from Cairn India Limited (then after amalgamated into Vedanta Ltd.). In January, 2017 which was a very big challenge for assessee. The change in the management and due to circumstances available at site the lot of fresh exercises and initial set up to start the well site was having huge expenses. The contracts of such types are running for 4 to 5 years. As on date also the assessee is providing similar type of services but Vedanta Ltd. with a same contract as entered in 2017 and the copy of contract is already annexed with earlier Written Submission – I. Setup and startup a new well location site, the expenses of the base camp hiring of technical staff which is required for to prepare the base camp and all other allowed activities to perform the job as the geographical position of Barmer is not favoring. The proper working condition for plant and machinery and technical staff. They execution of work of standard type and required a depth and thorough approach for Coil Tubing Contract. In initial 22 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur starting lots of engineering, technician were hired to get ready this well location and also the assessee has to bear the huge payroll, cost of technical, engineering staff without final outcome. They were paid monthly salaries according to the market prevailing rates. Whereas the contract signed by the assessee and the principal company Vedanta clearly discloses that the payments are on the basis of call out basis as it is clearly submitted in the earlier submission. The entire expenses were disclosed and for the purpose of expenses to generate revenue. Here all the expenses debited in the profit and loss accounts are on matching concept to earn revenue. The respective payroll salary and other payments are disclosed by the respective parties in their income tax return as the nature of expenses were revenue and also were required for the contract. The contract was having high international standard, norms and regulations to perform the Coil Tubing services which is having from the entire tender document and contract document. It is also pertinent to mention here that the staff was hired in January, 2017 and the operation partly started in August,2017 due to technical errors and geographical position the full fledge started in January, 2018. (c) Implementation of GST and GST rate were not specified in contract: In the contract, page no 90 of the tender clearly provides taxes. In this, no GST provision has been made for maintaining goodwill and abide by the terms and conditions of the contract. The assessee had to perform this contract and also as per the Contract Act if the contract was not complied with, huge compensation was supposed to be paid by the assessee. To avoid the compensation, the assessee had performed the contract. (d) Taxes : The prices and rates set out in this Schedule III (Rates and Prices) are: 1. Inclusive of all Indian direct taxes (including without limitation personnel taxes and corporate taxes/withholding taxes) now or hereafter levied or imposed on the Contractor and 2. inclusive of all non Indian taxes (whether direct or indirect) now or hereafter levied or imposed on the Contractor; and 3. inclusive of the Indian taxes at the prevailing rates/amounts. 9.6 Thus, under these circumstances, invoking section 145(3) of Income Tax Act, 1961 to reject books of accounts was grossly unwarranted and uncalled for. 9.7 That no submission by the assessee on the basis of the impugned books of accounts were controverter by Ld AO which, in other way, means that they have been accepted as true and correct. 23 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 10. That still if you have any doubt in your mind as regards any point on the subject, we shall be pleased to dispel it with necessary documentary evidence(s). 11. To set the matter right and straight, let us revisit the whole gamut of issues from the filing of Income Tax Return through issuance of scrutiny notice u/s 143(2) of Income Tax Act, 1961 (The Act) till today. Accordingly, the statement of affairs are furnished below chronologically before Ld AO : 2.1) 29.10.2019 : Income Tax Return (ITR) for the A.Y. 2019-20 filed electronically vide acknowledgement No. 229174151291019, disclosing total income at NIL. 2.2) 31.03.2021 : Notice u/s 143(2) issued, following selection of the case for scrutiny. 2.3) 06.08.2021 : Notice u/s 142(1) issued, asking for furnishing, inter alia, the followings : (1) Copies of all contracts and agreements operative during the year in respect of the assessee’s activities in India. Copy of agreement/Contracts entered into with Indian customers/clients or any other party in India from whom any payment is received during the year or has accrued or arisen during the year. [Provided vide Annexure – 6 to 15, attached with our written submission dated 23.08.2021] (2) Details of invoices raised to the Indian customers and details of Income or any type of payment received from India or which has accrued or arisen in India. [Provided vide Annexure – 21, attached with our written submission dated 10.09.2021] (3) Copy of all orders u/s 197/195(2)/195(3) of the Income-tax Act relevant to the A.Y., in question, if any. [Provided vide Annexure – 17, attached with our written submission dated 23.08.2021] (4) Explain the method of accounting employed in your case. [The method of accounting employed is mercantile accounting system and accounting policies prevailing in the trade as specified in section 145 of the Income Tax Act.] (5) A brief summary of the expenses incurred during the year. [Provided vide Annexure – 3 & 5, attached with our written submission dated 23.08.2021] 24 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur (6) To confirm whether books of accounts are maintained for the Indian operation as required u/s 44AA of the Act. If yes, to confirm whether they have been audited as required u/s 44AB of the Act. [The assessee have been filing its ITR u/s 44BB in the earlier years since 2011. It maintains regular books of accounts and all documents required u/s 44AA of the Income Tax Act, 1961, e.g., Cash Book, Bank Book, Purchases and Sales Book, Receipts and Payment Vouchers, Ledger, Journal, Stock Register] (7) Details of various payments made, in respect of which TDS was to be made. [The assessee company has been regularly filing its TDS Returns, as evidenced from Annexure-22.1 to 22.4(TDS u/s 192) & Annexure-23.1 to 23.4(TDS u/s 194), attached with our written submission dated 10.09.2021] (8) Justification for refund claim. [Due to higher deduction of TDS u/s 195 r.w.s 197 of the Act @ 10% of gross receipts whereas if assessee happens to fall u/s 44BB(1) and (2), then also tax rate is @ 4.223% of total gross receipts. As the section 44BB clearly provides that 10% of gross turnover is to be taken as deemed profit and tax is payable thereon @40% along with surcharge and education cess, as applicable] (9) Details and justification for the huge loss claimed during the year under consideration. [The details and justification for huge loss claimed during the year under consideration have been explained threadbare in para 25, 25.1 to 25.6 of our written submission dated 23.08.2021] 2.4) 23.08.2021 : Written submission made, giving reply to all the querries dated 06.08.2021, duly supported by evidentiary documents, extracted from books of accounts, regularly maintained by the assessee. 2.5) 10.09.2021 : Supplementary written submission made in continuation to earlier written submission dated 23.08.2021, giving reply to all the querries dated 06.08.2021, duly supported by evidentiary documents, extracted from books of accounts, regularly maintained by the assessee. 2.6) 22.09.2021 : Notice u/s 142(1) issued, asking for furnishing, inter alia, the followings : (1) Details of salary paid during the year along with name and address of the person to whom salary was paid exceeding Rs 5 lakh and function and job performed by each of them during the period. [Provided vide Annexure – 22.1 to 22.4, attached with our written submission during Assessment proceedings dated 10.09.2021] 25 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur (2) Copy of all the invoices raised to Indian customers. [Provided cumulatively vide Annexure – 24, attached with our witten submission dated 24.09.2021 submission during Assessment proceedings] 2.7) 24.09.2021 : Written submission made, giving reply to all the querries dated 22.09.2021, duly supported by evidentiary documents, extracted from books of accounts, regularly maintained by the assessee. 2.8) 26.09.2021 : It has come to be known on perusal of the draft assessment order dated 29.09.2021 that a notice u/s 142(1) was issued on 26.09.2021 electronically asking for certain details which were nothing new and already submitted vide our earlier written submissions, seeking compliance by 27.09.2021 on or before 11.00 AM. The querries raised vide this letter dated 26.09.2021 is repetitive ones and already answered to vide our earlier written submissions. In fact, this letter was issued just to meet the formality of demonstrating that adequate opportunity of being heard was offered to the assessee, before arbitrarily rejecting the books of accounts, purportedly u/s 145(3) of the Act. From this, it is clear that the AO was not serious in providing reasonable opportunity to the assessee to present its defence. In fact, she was more keen to create a false record – as if adequate opportunity of being heard was provided to the assessee – in order to pave way for illegal rejection of books of accounts. Without prejudice to the above, although the replies to the above-mentioned querries were duly given vide our earlier written submissions, still the assessee took up the job of preparing replies to the querries but the draft assessment order was passed, in unnecessary hurry, on 29.09.2021, thus robbing the assessee off the opportunity of being reasonably heard. It may be kindly noted that the on-line e-filing faceless assessment process allows only 15 MB file to be uploaded. Hence, the cash book and ledger which are books of accounts could not be uploaded. Here, it is important to note that the examination of books of accounts was indeed done by the AO and only then the afore-mentioned supplementary querries could be made. The then AO passed the draft assessment order dated 28.09.2021 arbitrarily without using her discretion in a fair and pragmatic way. The draft assessment order is quibble as per the facts and circumstances of the case. The books of accounts are ready for examination. 2.9) 29.09.2021 : Draft assessment order was passed with assessed income of Rs. 2,99,17,942/- on rejecting books of accounts, as apprehended earlier. 2.10) 11.10.2021 : Objections were filed before Dispute Resolution Panel (DRP) in Form 35A against the additions, proposed by the AO. 2.11) 07.04.2021 : Received copy of direction of Hon’ble DRP u/s 144C(5) of the Act whereby Hon’ble DRP directed the AO to re-examine the issue of rejection of books of accounts u/s 145(3) of the Act, keeping in view the submissions dated 11.10.2021 of the assessee before the Hon’ble DRP. 26 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 2.12) 23.04.2022 : Written submission submitted to the AO in keeping with the directions, contained in the order dated 07.04.2022 of Hon’ble DRP. The assessee, once again, offered to produce the entire books of accounts at the convenience of the AO. 2.13) 05.05.2022 : Letter issued, asking for furnishing the followings : Submissions made before DRP and the documents furnished along with. In this connection, it is submitted that vide our written submission dated 23.04.2022, submission dated 11.10.2021, as made before Hon’ble DRP were duly made available to the AO electronically along with all allied annexures and documents. 2.14) 10.05.2022 : As desired by Ld. AO, submission dated 11.10.2021 as made before Hon’ble DRP are, once again, submitted hereby as Annexure – A(along with Index) . Also, entire books of accounts are, once again, produced before Ld. AO. 12. A certificate from the CA with regard to reconciliation of Audited books of accounts with Form No. 26 is submitted during assessment proceedings .Bills and vouchers, being part of books of accounts, aresubmitted during assessment proceedings. Still if you have any doubt in your mind as regards any point on the subject, we shall be pleased to dispel it with necessary documentary evidence(s). Our Prayer 1) The Impugned DRAFT and Final Assessment order by the assessment authorities is bad in Law and bad in facts. Therefore, the Orders needs to be set aside. 2) We respectfully submit before YOU that revenues of Assessee are assessable and taxable under section 44BB(3) admitted fact that the all information sought was on record. 3) We respectfully submit before YOU that the facts and merits of the case withdraw the initiation of penalty proceedings u/s 271(1)(c) of the Act. 4) Any other appropriate order/s which may be deemed just and proper in the facts and circumstances of the case may kindly be passed. That the Assessee reserves the right to add, amend, alter, delete or modify or withdraw any or all of the above written submissions before or at the time of hearing.” *** Summary of case To The Hon’ble President , Hon’ble Vice President and Other Hon’ble companion Members of Income Tax Appellant Judicature for Rajasthan, at Jaipur 27 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur MAY IT PLEASE YOUR LORDSHIPS, The Appellant above-named most respectfully begs to submit as under:- 1. That vide assessment order, Ld A.O goodself sought to assess the total income of the assessee-company by, inter alia, wrongly rejecting u/s 145(3) of Income Tax Act, 1961 the books of accounts on ignoring our well-reasoned submissions on the matter. 2. To set the matter right and straight, let us revisit the whole gamut of issues from the filing of Income Tax Return through issuance of scrutiny notice u/s 143(2) of Income Tax Act, 1961 (The Act) till today. Accordingly, the statement of affairs are furnished below chronologically : 2.1) 29.10.2019 : Income Tax Return (ITR) for the A.Y. 2019-20 filed electronically vide acknowledgement No. 229174151291019, disclosing total income at NIL. 2.2) 31.03.2021 : Notice u/s 143(2) issued, following selection of the case for scrutiny. 2.3) 06.08.2021 : Notice u/s 142(1) issued, asking for furnishing, inter alia, the followings : (1) Copies of all contracts and agreements operative during the year in respect of the assessee’s activities in India. Copy of agreement/Contracts entered into with Indian customers/clients or any other party in India from whom any payment is received during the year or has accrued or arisen during the year. [Provided vide Annexure – 6 to 15, attached with our written submission dated 23.08.2021] (2) Details of invoices raised to the Indian customers and details of Income or any type of payment received from India or which has accrued or arisen in India. [Provided vide Annexure – 21, attached with our written submission dated 10.09.2021] (3) Copy of all orders u/s 197/195(2)/195(3) of the Income-tax Act relevant to the A.Y., in question, if any. [Provided vide Annexure – 17, attached with our written submission dated 23.08.2021] (4) Explain the method of accounting employed in your case. 28 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur [The method of accounting employed is mercantile accounting system and accounting policies prevailing in the trade as specified in section 145 of the Income Tax Act.] (5) A brief summary of the expenses incurred during the year. [Provided vide Annexure – 3 & 5, attached with our written submission dated 23.08.2021] (6) To confirm whether books of accounts are maintained for the Indian operation as required u/s 44AA of the Act. If yes, to confirm whether they have been audited as required u/s 44AB of the Act. [The assessee have been filing its ITR u/s 44BB in the earlier years since 2011. It maintains regular books of accounts and all documents required u/s 44AA of the Income Tax Act, 1961, e.g., Cash Book, Bank Book, Purchases and Sales Book, Receipts and Payment Vouchers, Ledger, Journal, Stock Register] (7) Details of various payments made, in respect of which TDS was to be made. [The assessee company has been regularly filing its TDS Returns, as evidenced from Annexure-22.1 to 22.4(TDS u/s 192) & Annexure-23.1 to 23.4(TDS u/s 194), attached with our written submission dated 10.09.2021] (8) Justification for refund claim. [Due to higher deduction of TDS u/s 195 r.w.s 197 of the Act @ 10% of gross receipts whereas if assessee happens to fall u/s 44BB(1) and (2), then also tax rate is @ 4.223% of total gross receipts. As the section 44BB clearly provides that 10% of gross turnover is to be taken as deemed profit and tax is payable thereon @40% along with surcharge and education cess, as applicable] (9) Details and justification for the huge loss claimed during the year under consideration. [The details and justification for huge loss claimed during the year under consideration have been explained threadbare in para 25, 25.1 to 25.6 of our written submission dated 23.08.2021] 2.4) 23.08.2021 : Written submission made, giving reply to all the querries dated 06.08.2021, duly supported by evidentiary documents, extracted from books of accounts, regularly maintained by the assessee. 2.5) 10.09.2021 : Supplementary written submission made in continuation to earlier written submission dated 23.08.2021, giving reply to all the querries dated 06.08.2021, duly supported by evidentiary documents, extracted from books of accounts, regularly maintained by the assessee. 29 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 2.6) 22.09.2021 : Notice u/s 142(1) issued, asking for furnishing, inter alia, the followings : (1) Details of salary paid during the year along with name and address of the person to whom salary was paid exceeding Rs 5 lakh and function and job performed by each of them during the period. [Provided vide Annexure – 22.1 to 22.4, attached with our written submission dated 10.09.2021] (2) Copy of all the invoices raised to Indian customers. [Provided cumulatively vide Annexure – 24, attached with our written submission dated 24.09.2021] 2.7) 24.09.2021 : Written submission made, giving reply to all the querries dated 22.09.2021, duly supported by evidentiary documents, extracted from books of accounts, regularly maintained by the assessee. 2.8) 26.09.2021 : It has come to be known on perusal of the draft assessment order dated 29.09.2021 that a notice u/s 142(1) was issued on 26.09.2021 electronically asking for certain details which were nothing new and already submitted vide our earlier written submissions, seeking compliance by 27.09.2021 on or before 11.00 AM. The querries raised vide this letter dated 26.09.2021 is repetitive ones and already answered to vide our earlier written submissions. In fact, this letter was issued just to meet the formality of demonstrating that adequate opportunity of being heard was offered to the assessee, before arbitrarily rejecting the books of accounts, purportedly u/s 145(3) of the Act. From this, it is clear that the AO was not serious in providing reasonable opportunity to the assessee to present its defence. In fact, she was more keen to create a false record – as if adequate opportunity of being heard was provided to the assessee – in order to pave way for illegal rejection of books of accounts. Without prejudice to the above, although the replies to the above-mentioned querries were duly given vide our earlier written submissions, still the assessee took up the job of preparing replies to the querries but the draft assessment order was passed, in unnecessary hurry, on 29.09.2021, thus robbing the assessee off the opportunity of being reasonably heard. It may be kindly noted that the on-line e-filing faceless assessment process allows only 15 MB file to be uploaded. Hence, the cash book and ledger which are books of accounts could not be uploaded. Here, it is important to note that the examination of books of accounts was indeed done by the AO and only then the afore-mentioned supplementary querries could be made. The then AO passed the draft assessment order dated 28.09.2021 arbitrarily without using her discretion in a fair and pragmatic way. 30 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur The draft assessment order is quibble as per the facts and circumstances of the case. The books of accounts are ready for examination. 2.9) 29.09.2021 : Draft assessment order was passed with assessed income of Rs. 2,99,17,942/- on rejecting books of accounts, as apprehended earlier. 2.10) 11.10.2021 : Objections were filed before Dispute Resolution Panel (DRP) in Form 35A against the additions, proposed by the AO. 2.11) 07.04.2021 : Received copy of direction of Hon’ble DRP u/s 144C(5) of the Act whereby Hon’ble DRP directed the AO to re-examine the issue of rejection of books of accounts u/s 145(3) of the Act, keeping in view the submissions dated 11.10.2021 of the assessee before the Hon’ble DRP. 2.12) 23.04.2022 : Written submission submitted to the AO in keeping with the directions, contained in the order dated 07.04.2022 of Hon’ble DRP. The assessee, once again, offered to produce the entire books of accounts at the convenience of the AO. 2.13) 05.05.2022 : Letter issued, asking for furnishing the followings : Submissions made before DRP and the documents furnished along with. In this connection, it is submitted that vide our written submission dated 23.04.2022, submission dated 11.10.2021, as made before Hon’ble DRP were duly made available to the AO electronically along with all allied annexures and documents. 2.14) 10.05.2022 : As desired by Ld. AO, submission dated 11.10.2021 as made before Hon’ble DRP are, once again, submitted hereby as Annexure – A(along with Index). Also, entire books of accounts are, once again, produced before Ld. AO. 3. A certificate from the CA with regard to reconciliation of Audited books of accounts with Form No. 26 , Bills and vouchers, being part of books of accounts, are is already submitted to Ld AO and DRP 4. Still if you have any doubt in your mind as regards any point on the subject, we shall be pleased to dispel it with necessary documentary evidence(s). 5. Here it is humbly submitted that the Issues are identical for 31.3.2018 and 31.3.2019 so kindly consider the reply for 31.3.2018 as part of this submission and we would like to avoid the repetition . That the Assessee reserves the right to add, amend, alter, delete or modify or withdraw any or all of the above written submissions before or at the time of hearing. 31 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 19. The ld. AR of the assessee also filed a separate compilation of case laws relied upon and the list of the case law relied upon is as under : S. No. Particulars Page No. 1 Action Electricals v. Deputy Commissioner of Income-tax [2003] 132 Taxman 640 (Delhi) 1-6 2 Commissioner of Income-tax v. British Paints India Ltd. [1991] 54 Taxman 499 (SC) 7-21 3 Commissioner of Income-tax v. Surjit Singh Mahesh Kumar [1994] 210 TTR 83 (ALL.) 22-25 4 Sutlej Cotton Mills Ltd. v. Commissioner of Income-tax [1979] 116 ITR 1 (SC) 26-43 5 Bilahari Investments (P.) Ltd. v. Commissioner of Income-tax [2007] 164 Taxman 443 (Madras) 44-60 6 Sriram & Co. v. Assistant Commissioner of Income-tax, Circle- 2. Bikaner [2009] 176 Taxman 426 (Rajasthan) 61-63 7 Shree Ganpati Embroidery (P.) Ltd. v. Commissioner of Income-tax-II, Amritsar* [2009] 178 Taxman 176 (Punjab & Haryana) 64-67 8 Mani & Co. v. Commissioner of Income-tax [2002] 123 Taxman 508 (Kerala) 68-73 20. In addition to the above written submission the ld. AR of the assessee appearing on behalf of the assessee submitted that the contentions raised by the Revenue are not correct. The assessee has complied all the notices correctly and filed the reply the dealy if any was on account of Covid-19 period and the same was extended by the apex court. The assessment is completed u/s 143(3) of the Act and not under section 144 of the act. The books of account regularly audited and have been accepted in past for that the ld. AR appearing on behalf of the assessee placed on record and copy 32 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur of the assessment order for A.Y. 2016-17, 2017-18 & 2020-21. The ld. AR appearing on behalf of the assessee on reading provision of section 195 submitted that the assessee being non-resident every income paid is subject to deduction of tax source at the rate as applicable to the non- resident and is accordingly reflected in Form 26AS. Thus, the reporting is made twice, once the payment is made and 2 nd when the provision is made by the payee. The assessee being foreign company has to avail the beneficial provision of section 90 or provision of DTAA. The ld. AR of the assessee drawn our attention to the provision of section 44BB(1) / 44BB(3) submitted that the assessee has exercised applicability of provision of section 44BB(3) and has regularly maintained the books of accounts gets it audited and filed the compliance and the same has been accepted in past and for that he has filed the copy of the assessment orders. Accordingly, their books of accounts and audit report placed on record have been accepted in past and in the subsequent year also. The assessee is dealing with all the public sectors undertakings owned by Government of India and all these PSUs have their internal policies to sanction the bills and to complete the formalities so as to confirm the invoice raised by the assessee company. The ld. AR explained that the assessee has complied all the notices starting from 22 nd September, 2019 and the assessee has 33 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur submitted all the details and thus there is no justification of rejection of books of account and even the order is passed under section 143(3) and not under section 144. The assessee has submitted all the bills and vouchers for all expenses running into 1300 pages. All the ledger books, bills and vouchers were uploaded. There is no discussion by the Assessing Officer in his order even though the same were submitted time and again. All the contract details and its related aspects were also submitted in the assessment proceedings and entire bank statement were submitted. The nature of services or business of the assessee is such that the assessee is working in a very remote desert area. This area is directly under supervision of military persons each and every employee and vender who make supply to the assessee is also subject to scrutiny with the Military Officers as the assessee is working in sensitive desert area near to the border. The judgment relied upon by the ld. DR are not applicable to the fact of the case and in law as the entire receipt of the assessee company is subject to TDS and the assessee is following regularly method of accounting for booking the income which is not disputed in past also and the assessment were also completed u/s. 143(3) in past and one subsequent year also. The difference as derived by the Assessing Officer from, form No. 26AS and audit report, the same is duly explained at the time of assessment proceedings and each 34 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur and every item of Revenue as appearing in form 26AS and books of account have been reconciled and explained with a proof that the same is duly accounted if not in the year it may ahead or year after. One of the reason behind the difference in the books of account on account of the goods and services tax being recorded net in the audited accounts, the bills are prepared in accordance with the contract in the respective years which has to be approved in accordance with the contract terms. It is not a case of Revenue that the assessee has not at all booked any bills as reflected in form 26AS in fact either it is reflected in the earlier years or if not, current year it is reflected in the subsequent year. So, there is no case of the Revenue that the assessee has not offered the income arising on account of these PSUs at all. Since the assessee is a non- resident company controlled by professional management and the dealings were duly supported by the contracts and expenses incurred by the assessee are higher in the initial year may be in the nature of loss and the same is account of depreciation of the machinery deployed. The ld. AR of the assessee submitted that it is rightly pointed out by the Revenue that diesel expenses were higher this year, this is on account of fact that the assessee deputed more machineries which are running in remote desert area. This has resulted the consumption of diesel on higher side which has 35 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur not been appreciated by the Revenue. As the machinery were imported it has resulted the increase in custom and clearing expenses. This fact further proves the version of the assessee that they have imported machinery placed on the site, and on account of this fact the related expenditure cannot be avoided. The assessee has deployed these imported machineries for the work which resulted the increase in clearing and customs expenses, tailor [ for transport of imported machine] expenses, catering expenses, employment and the salaries and wages have also substantially shown increasing trend on account of the employment of more manpower on the job. The increase in electricity and MIS expenses is on account of all this factor which the ld. AO has not rightly persuaded and appreciated. Every receipt of the assessee is subject to TDS and every payment made by the assessee is also after payment of withholding of tax. All these information / details of expenses and its related payment details were shared in the assessment proceedings completely against which there is no single adverse observation. Therefore, there cannot be an allegation that the assessee has not maintained books of account. The books of account were accepted by the Revenue on the same state of facts in the scrutiny assessment and orders have been passed u/s 143(3) of the Act for assessment year 2016-17, 2017-18 and 2020-21. The assessee has 36 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur submitted details of all the payments along with reconciliation of TDS made these itself proves that the payments are not entered in the books without support of the bills and vouchers. All these details of expense were uploaded by the assessee vide their various written submissions made online and the proof of online submission of the same were also attached in the paper book filed. The assessee replied to all the queries that has been raised by the Assessing Officer and produced entire books of account on 12.05.2022 but the assessing officer has not recorded this fact in the order even though the same was filed in the faceless proceeding earlier. The assessee has submitted PDF file of various ledger, cash book, bank book and the same were submitted in the assessment proceedings along with bills and vouchers which has not been appreciated by the AO and repeatedly taken a plea that the assessee has submitted the part details, when the part details is available why not full, what will be benefit of the assessee giving the part details when the same is duly recorded in the books of account. The ld. AR of the assessee relied on Page No. 4, 95, 96 and 97 wherein they have submitted all the bills contacts tender documents, conditions of work the contract of all the 3 PSUs i.e Vedanta, GSPC and Oil India Ltd were given. The work of the assessee company was subject to various quality check and inspection to be done by all these PSUs on the 37 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur site. There is no relative payment to any Directors in India by the assessee company so as to claim higher expenses in the books. All income is supported by written contract and same is paid by PSUs, and all expenses are supported by bills and vouchers, all the details of invoices and expenses ledger wise were submitted so as to substantiate the claim. It is evident that the assessee in its initial face has to suffered a loss not only in the year under consideration but even in the Corona period remained in business to survive in operation and performed their services. All the income and expenditure booked are supported by matching concept and looking to the nature of services rendered by the assessee company there cannot be a comparison of gross profit of one year to another year as the nature of contracts in each year different in scope and performance. The assessee has also complied other indirect tax law wherein the books of accounts and turnover reflected by the assessee have been accepted and assessment under the direct tax were completed for the A.Ys 2016-17, 2017-18 and 2020-21 under section 143(3) of the Act. In this assessment the books of account maintained are accepted. The ld. AR of the assessee submitted from the Pages Nos. 459 and 449 from the paper book that similar notices were issued in A.Y 2016-17 and the assessment has been completed by accepting the books of account of the assessee. The turnover 38 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur and the profit declared by the assessee have been accepted in last 8 years and there is no claim of the revenue that the assessee has not disclosed any income but the claim of the Revenue is that the assessee has in some years offered the income in advance and in some years in the subsequent years. Therefore, there is no case of the revenue that the assessee has not shown income, but it has been offered in accordance with the contract terms and the same is regularly followed. The ld. AO has not appreciated the fact that the assessee is dealing with the public sector undertakings such as Vedanta, GSPC and Oil India Ltd, and looking to that fact there cannot be an issue of non-recording of any invoice, all the invoices raised were duly reconciled and submitted that the same is duly accounted in accordance with the regular method of accounting followed. Analysis of the various expenditure made is purely arbitrarily without considering the detailed reasoning made by the assessee in the written submission placed on record. Therefore, there cannot be any reason for rejection of accounts but the ld. AO repeatedly reiterated that the part details submitted. There is no discussion in the assessment orders for all these important aspects and details submitted by the assessee. Therefore, the rejection of books of accounts are not proper and not in accordance with law. The assessee has maintained consistently the books of accounts which were accepted in past 39 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur the contention of the Assessing Officer that the assessee has not produced and books of account and bills and vouchers without verifying online submission made by the assessee which is supported by online acknowledgement. Therefore, the contention of the Revenue is without any basis and the same is based on surmises and conjectures. Not only that the ld. AR of the assessee submitted that the assessment proceedings were in faceless system, many of the aspect he has accepted the details were submitted in online mechanism in soft copy along with and bills and vouchers even though the Assessing Officer is contending that the assessee has not produced the books of account and ledger in the hearing is not in consonance with the faceless assessment proceedings. Therefore, rejection of books of account by the Assessing Officer is incorrect and not in accordance with law and policy of the CBDT. As regards the custom clearing and Trailor expenses, diesel, canteen, electricity and many more accounts where there is increase in expenditure for which the ld. AO has not appreciated that substantial machinery has been imported and the expenses is consequential in nature. The assessee is in receipt of various contracts and in accordance with that contract expenses incurred. All the expenditure which are not in the comparison with the last year and thus, the reasons of deviation explained and it evident from the explanation placed 40 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur on record. The assessee is dealing with most sensitive area under the supervision of military their staff, labourers and supplier of the goods are subject to due diligence of this Military Officers. The area where the assessee operates is not owned or rented but this area belongs to the Government of India. The Government has authorized these PSUs to explore area, exploration in this desert area thereby contract was awarded to the assessee company. Since the assessee is working in remote thar desert area, the expenditure is incurred in accordance with the site area and is incurred in connection with the contract executed. These PSUs considering all these peculiar facts of the case, various expenditure incurred by the assessee including canteen expenditure, diesel and electricity expenditure, custom and clearing expenses rent of tailor cannot be doubted. The ld. AO has not appreciated the nature of work executed by the company in this type of contract wherein the initial expenditure is much more as compared by the Revenue as the assessee has to depute machinery, infrastructural and their cost of running, maintenance, depreciations are higher. The ld. AO has not appreciated the fact that loss in the books of accounts is merely on account of depreciation on account of various machinery reported and deployed by the assessee in the operations which are stabilized and peculiar state of facts, circumstances and nature of 41 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur services rendered. Therefore, in the light of this fact, the books of account which are audited and regularly maintained be accepted. As there is no case of revenue in finding in specific defect in maintenance of this book. Merely, the assessee produced all these books in soft copy in faceless assessment proceedings and the ld. AO is taking a plea that the same is produced in part. The assessee has expressed that how this book can be presented in person when the proceedings are going on in faceless mechanism. Even the proceedings under DRP also in faceless manner. As regards the contention of the AO that the assessee has not complied the notices in time he has not appreciated the fact the assessment were going on in Corana period, the e-mail received by the Assessing Officer went into junk e-mail on account of technical glitches some delay happened to comply notices which were unintentional. The ld. AO has not appreciated the fact that the assessee being a foreign company has to take certain directions from their Headquarters and that too in pandemic and these has in one or two cases delayed the submissions which may be taken into right prospective and considering the past track record and past history of the assessment of the company, the same may be considered accordingly. 42 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 21. The ld. DR is also heard; he has filed the written submission and the same is reiterated here in below: “We are unable to persuade ourselves to agree with learned counsel for the assessee. Section 145(2) of the Act empowers the Assessing Officer to make a best judgment assessment when he is not satisfied about the correctness or completeness of the accounts of the assessee. It is not only the right but the duty of the Assessing Officer to consider whether or not the books disclose the true state of accounts and the correct income can be deduced therefrom. It is incorrect to say that the officer is bound to accept the system of accounting regularly employed by the assessee, the correctness of which had not been questioned in the past. There is no estoppel in these matters, and the officer is not bound by the method followed in the earlier years. Section 145 confers sufficient power upon the officer - nay, it imposes a duty upon him to make such computation in such manner as he determines for deducing the correct profits and gains. Section 144 of the Income-tax Act, 1961 Best judgment assessment Assessment year 1985-86 Whether in every case of best judgment, element of guess work cannot be eliminated and so long as best judgment has nexus with material on record and discretion in that behalf has not been exercised arbitrarily or capriciously, it is not open to scrutiny in reference proceedings to give rise to a question of law or to a mixed question of law and fact - Held, yes - Whether, therefore, where Tribunal while affirming rate of net profit applied by Commissioner (Appeals) had taken into account past and subsequent events in assessee's own case as well as prevailing trading conditions at relevant time and average rate of profit disclosed by similar traders in area order of Tribunal did not give rise to any question of law Held, yes It is now well settled that the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. The assessee may, by making entries which are not in conformity with the proper accountancy principles, conceal profit or show loss and the entries made by him cannot, therefore, be regarded as conclusive one way or the other. A conjoint reading of the above provisions of law makes it clear that all income received or deemed to be received or accruing or arising during the previous year shall form part of the total income of the assessee and such income shall be computed in accordance with the accounting system which the assessee is regularly following. 43 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur Section 145 of the Income-tax Act, 1961 – Method of accounting- Rejection of accounts – Assessment year 2003-04- whether once there is valid basis for rejecting accounts; assessment is not capricious or vindictive; and estimate is rational, some amount of guesswork has to be allowed and such estimate of income cannot be interfered with, merely because a different view can be taken – Held, yes. The Assessing Officer had examined the books of account maintained and produced before him by the assessee and found that the accounts suffered from certain defects. The major defect was that the books of original entry were not produced. The expenses were also not properly vouched. Thus, the assessee had not maintained proper books of account. Other contention of the assessee was that it suffered loss during the relevant years. The assessee had been showing negligible amounts of profit in the earlier years which were not acceptable to the department and the matter was taken before the Settlement Commission. It was not disputed by the assessee that the Settlement Commission adopted the profits rate of more than 10 per cent. The reasoning of the Commissioner (Appeals) could not be accepted inasmuch as he had omitted to take into account certain relevant aspects before coming to that conclusion. If there was delay on the part of the Government in handing over to the assessee, the site for construction or in providing materials, the assessee would certainly be in a position to ask for higher amounts. It was for the assessee-contractor to adduce necessary materials to show that it was not entitled for rate increase corresponding to cost escalation consequent on the delay in completing the work. But it did not discharge that burden. There was no error in the view taken by the Tribunal that the order passed by the Commission (Appeals) was liable to be reversed. Therefore, the Tribunal was justified in upholding the estimate of the profits, rejecting the accounts maintained by the assessee for his business.” 22. In addition to the written submission, ld. DR argued that though the assessee company is a foreign company having permanent establishment in India has to follow the laws of India. It is an evident fact from the record that the assessee has made compliance belatedly and it is also evident that the assessee is not meeting the deadline on given at the time of assessment proceedings. The assessee company has to follow mercantile 44 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur system of accounting while recording the sales even though assessee being foreign company. If this system is not followed regularly then the correct tax liability cannot be calculated and right to receive the correct tax at correct time will affect the revenue. As regards the arguments of the ld. AR of the assessee, that in case of some company, the income is offered in the previous year and in some cases, it is offered in the subsequent year this zigzag accounting of invoice in the books of account in offering the income is not proper and that is why the ld. Assessing Officer has made an addition of Rs. 4,76,24,652/- as difference in turnover in form 26AS and audit report for A.Y 2018-19 and Rs. 2,48,79,285/- for A.Y 2019-20. The ld. DR further submitted that in case of Vedanta and GSPC majority work, is done by the assessee company and billed even though the regular accounting of receipt is not done by the assessee. Thus, the company has no consistent mercantile system of accounting and that is why the reasoned addition made by the Assessing Officer is required to be confirmed. The ld. DR relied on the judgment submitted by him vide his submission dated 06.10.2022 at page 58 para 32 in the case of Bilahari Investments (P.) Ltd. vs. CIT reported in [2007] 164 Taxman 443 (Madras) relied upon para is reiterated here in below:- 45 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur “32. A conjoint reading of the above provisions of law makes it clear that all income received or deemed to be received or accruing or arising during the previous year shall form part of the total income of the assessee and such income shall be computed in accordance with the accounting system which the assessee is regularly following. Here, on the facts of the case, the authorities have found that the assessees are following the mercantile system of accounting. The mercantile system of accounting means, as discussed in Shiva Prasad Gupta v. CIT AIR 1929 All. 819, the amounts that have become recoverable are shown as the income actually received and the liabilities incurred are shown as amounts actually disbursed in any particular year. Therefore, when the assessees are following the mercantile system of accounting, in which entries are posted in the books of account on the date of the transaction, that is, on the date on which rights accrue or liabilities are incurred irrespective of the date of payment, they have to account for their income or loss as per the mercantile system of accounting and not otherwise. Therefore, as rightly found by the Commissioner of Income-tax (Appeals), the income derived during a particular previous year by way of chit dividend has to be reckoned and assessed as income of that year following the principles of mercantile/accrual system of accounting, particularly when the assessees are companies following the mercantile system of accounting.” 23. Relying on the above judgment the ld. DR, further submitted that due income, is to be accounted and relevant tax is to be paid at a particular point of time. As regards, the contention of difference of Rs. 1,08,39,076/- in respect of difference on account of GST amount, the contention of the assessee is duly considered by the Assessing Officer in part as the assessee has given only part bills even though various opportunities were granted. As regards, the difference on account of the amount accounted and appearing in form 26AS and in the audited accounts the assessee submitted that invoice prepared were subjected to approval for F.Y 2016-17 46 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur as compared invoice dated 01.09.2016. As regards the contention of invoices accounted for Oil India Ltd., on payment basis in F.Y 2017-18 being the year under consideration, the assessee has submitted the copy of invoice and ledger account. However, the confirmation from Oil India Ltd was not submitted by the assessee, even though, time was given to the assessee. The assessee has not furnished any confirmation in this regard. Therefore, the addition to the extent of Rs. 2,26,12,685/- correctly made. So, far as the rejection of books of accounts, the ld. DR submitted that the AO has given sufficient time to the assessee as it is evident from the assessment order that there were 11 dates of hearing given, even though the assessee could not give the desired details to the Assessing Officer. Therefore, the Assessing Officer left with no other alternative but to reject books of accounts. The ld. AO has given a detailed chart at Page 29 of the assessment order wherein he has listed the notices issued and the details called for and ultimately on non-compliance of that notices lead to rejection of books of accounts. Based on these observation ld. DR supported the rejection of books of accounts and submitted that the assessee is time and again taking technical plea, the assessee is not a big corporate like Tata, Birla or Reliance so as not been able to produce the books of account so the plea of the assessee that the same is in the software and it cannot be 47 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur presented is not correct plea. The ld. DR further submitted that the assessee has claimed substantial amount of expenses as compared to the earlier years. Some of the expenses incurred which are much in higher amount as compared to last year and the same is reiterated here in below: “The turnover of the assessee company has declined by 55% as compared to AY 2017- 18, however, most of the indirect expenses have shown a growth of 100-200% and in some expenses the growth is even more. The details of the expenses as per P/L Account claimed by the assessee are as under:- 31.03.2018 31.03.2017 % change Material, Supplies & Maintenance “Diesel for operation Expenses 16055099 3509161 357.5196 Operation Expesnses Mizoram 0 5080 -100 Operational Rental Rental for Trailor 11711429 680000 1622.269 Transportation & Mobilization Custom & Clearance Expenses 5776802.32 1013907 469.7566 Office and Camp Catering Expenses 5785297 145345 3880.389 Electricity Charges 3234950.44 589320 448.9293 Other Expenses MIS Payment 2385609.83 216113 1003.872” 48 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 24. On all these expenses, the AO has given a detailed finding and the same is also reiterated herein below:- “The above table shows that there is huge increase in expenses in AY 2018-19 as compared to AY 2017-18. Many of the expenses increased from 100% to 300 % and some expenses even rose by 900 %. The rise in the expenses is abnormally high. Keeping in view, the abnormally high increase in the expenses of the assessee, the assessee was requested to furnish the Complete Books of Accounts including inter alia, bills for all the expenses claimed, vouchers, ledger accounts, etc. vide this office letter dated 22-09-2021 and 25-09-2021. However, even after availing two opportunities the assessee did not furnish Books of accounts. In addition to this, from time to time the assessee was requested to furnish all the invoices raised to Indian customers. However, the assessee furnished some invoices in piecemeal manner, though all invoices were not produced. Thus, the assessee was provided several opportunities to produce Books of accounts, so that expenses could be verified. However, required information was not received. Therefore, the assessee was show caused as to why the Books of Accounts of the assessee company should not be rejected u/s 145(3) of the Income Tax Act 1961.” 25. The Assessing Officer has called for the books of accounts; the assessee submitted the extract of the books of account and in that case the assessee cannot decide that the extract from the books of account will suffice or not? The AO has given a detailed finding as to why and how the books of account is required to be rejected u/s 145(3) of the Act. All these actions of the assessee compelled the AO to reject the books of accounts and on rejection the profit estimated as per provision of section 44BB of the 49 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur Act. The provision of section 44AB of the Act, specifies that the assessee has to maintain the books of account and the same is required to be audited but in this case even though, the books of accounts are audited, assessee has not submitted the bills and vouchers. The assessee has not produced the books of account along with the bills and vouchers. The ld. DR relied on a chart so as to demonstrate increase in expenses substantially and that has led to a need for verification of books of accounts. The ld. DR submitted that the assessee has claimed heavy refund and that was the reason for selection of case under CASS. The ld. AO has pointed out the error on both the aspect as the income is under reported and the expenses are much higher in comparison given in the assessment order. Based on this observation ld. DR supported the addition on account of difference in turnover reported in books and recorded in accounts and action of rejection of book result by the ld. AO. Even the DRP also confirmed the view of the Assessing Officer in the draft assessment order and dismissed the contentions of the assessee for the addition arising on account of difference in turnover. As regards, the rejection of books, the DRP has directed the Assessing Officer to pass a speaking order justifying invocation of section 145(3) of the Act as the assessee has taken a plea before DRP that they have not given the proper opportunity of being heard, 50 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur before rejection of books of accounts. Therefore, based on the detailed finding, in the final order, the Assessing Officer justified the rejection of the books of accounts of the assessee and to support his contention the ld. DR relied on the judgment of Hon’ble Delhi High Court in case of Action Electricals v. DCIT [2003] reported at 132 taxman 640 (Delhi), the relied upon portion is reiterated here in below :- “8. We are unable to persuade ourselves to agree with learned counsel for the assessee. Section 145(2) of the Act empowers the Assessing Officer to make a best judgment assessment when he is not satisfied about the correctness or completeness of the accounts of the assessee. It is not possible to categorise various types of defects which may render rejection of books of account of an assessee on the ground that the accounts are not complete or correct. Each case has to be considered on its own peculiar facts, having regard to the nature of business. Though it is true that the absence of stock register, in a given situation, may not per se lead to an inference that the accounts are incomplete or false the absence of such a register, coupled with other factor, like fall in profits, etc., may lead to an inference that the accounts are not correct. As noticed above, in the instant case, non- maintenance of stock register, coupled with the fact that unaccounted sales were detected during the course of search, in our opinion, is a relevant factor to sustain the view of the Assessing Officer. We do not find any legal infirmity in the view taken by the Tribunal that the disclosures/surrender of Rs. 5 lakhs by the assessee at the time of search, as its unaccounted sales, constitutes sufficient material for the Assessing Officer to base his satisfaction that the books of account of the assessee are not correct and complete. Insofar as the estimation of the sales/gross profit rate is concerned, it being a best judgment assessment, based on past years results cannot be said to be arbitrary.” 51 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 26. The ld. DR also relied on the judgment of Hon’ble Supreme Court in case of CIT vs. British Paints India Ltd [1991] 54 Taxman 499 (SC) submitted that the relevant part of relied upon judgment are as under:- “It is not only the right but the duty of the Assessing Officer to consider whether or not the books disclose the true state of accounts and the correct income can be deduced therefrom. It is incorrect to say that the officer is bound to accept the system of accounting regularly employed by the assessee, the correctness of which had not been questioned in the past. There is no estoppel in these matters, and the officer is not bound by the method followed in the earlier years. It was, therefore, not only the right but the duty of the Assessing Officer to act in exercise of his statutory power, as he had done in the instant case, for determining what, in his opinion, was the correct taxable income. The Tribunal’s order, affirming that of the Assessing Officer, was based on findings of fact made on cogent evidence and in accordance with correct principles. The High Court was clearly wrong in interfering with those findings. Accordingly, the judgment of the High Court was to be set aside.” 27. The ld. DR further relied on the following judgments :- • Hon’ble Supreme Court in case of Sutlej Cotton Mills Ltd. vs. CIT [1979] 116 ITR 1 (SC) “It is now well settled that the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. The assessee may, by making entries which are not in conformity with the proper accountancy principles, conceal profit or show loss and the entries made by him cannot, therefore, be regarded as conclusive one way or the other.” • Shree Ganpati Embroidery (P.) Ltd. vs. CIT-II, Amritsar [2009] 178 Taxman 176 (Punjab & Haryana) [10-11-2008] (HC) 52 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur “Section 145 of the Income-tax Act, 1961- Method of accounting – Rejection of accounts- Assessment year 2003-04 – whether once there is valid basis for rejecting accounts; assessment is not capricious or vindictive; and estimate is rational, some amount of guesswork has to be allowed and such estimate of income cannot be intereferred with, merely because a different view can be taken- Held, yes.” • Mani & Co. vs. CIT [2002] 123 Taxman 508 (Kerala) (HC) “The Assessing Officer had examined the books of account maintained and produced before him by the assessee and found that the accounts suffered from certain defects. The major defect was that the books of original entry were not produced. The expenses were also not properly vouched. Thus, the assessee had not maintained proper books of account. Other contention of the assessee was that it suffered loss during the relevant years. The assessee had been showing negligible amounts of profit in the earlier years which were not acceptable to the department and the matter was taken before the Settlement Commission. It was not disputed by the assessee that the Settlement Commission adopted the profits rate of more than 10 per cent. The reasoning of the Commissioner (Appeals) could not be accepted inasmuch as he had omitted to take into account certain relevant aspects before coming to that conclusion. If there was delay on the part of the Government in handling over to the assessee, the site for construction or in providing materials, the assessee would certainly be in a position to ask for higher amounts. It was for the assessee-contractor to adduce necessary materials to show that it was not entitled for rate increase corresponding to cost escalation consequent on the delay in completing the work. But it did not discharge that burden. There was not error in the view taken by the Tribunal that the order passed by the Commissioner (Appeals) was liable to be reversed. Therefore, the Tribunal, the Tribunal was justified in upholding the estimate of the profits, rejecting the accounts maintained by the assessee for his business.” 28. We have considered the rival contention and perused the orders of the lower authorities, material available on record, arguments advanced by both the parties and also gone through the judicial decision relied upon by 53 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur both the parties to drive home to their respective contentions. Now the mute question or apple of discord is that based on the facts and circumstances of the case whether the books of account were produced before the assessing officer or not. As the issues that the rival parties were contending is travelling on the fact that the ld. AO is contending that the assessee has submitted the details in part - part and not complete books of account. Whereas the assessee is time and again reiterating that as the assessment proceeding were taking place in the online module and there is an issue of file size to be uploaded / submitted. Even though it is in part but the full details in the form of cash book, bank book ledger accounts and bank statement maintained by the assessee were submitted in the assessment proceeding. Not only that the assessee has produced the books in personal hearing as contended by the ld. AR of the assessee placing on record the relevant proof. The bench noted from the written submission of the assessee on page 244 para 11 to 15 of the paper book where in the ld. AR of the assessee contended as under : “11. It is pertinent here to mention that even though Ld. A.O. did correspondences with the assessee after this through notices u/s 142(1) of Income Tax Act, 1961 dated 04.03.2021, 12.04.2021 and 23.04.2021, she never contradicted or sought clarification on this submission of the assessee. Analysis of the assessment proceedings the submissions was in detailed explaining the entire reasons of loss and Books of accounts where produced Dt.10/03/2021. All the ledger account were given in Annexure giving the bills and vouchers which 54 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur has not been considered by the ld. AO. The Ld. Counsel appeared physically before the Id. AO and shown these books and explained the reason of loss and the nature of work with reasons. 12. Besides, vide so many above-mentioned notices u/s 142(1) of Income Tax Act, 1961, Ld. A.O. queried on so many points which all were effectively and comprehensively given replies to along with supporting documentary evidences Ann. 15,16,17,18,20,21,22,23,24,25,26,27,28,29,30,35 & 36 (these annexures are part of assessment proceedings and paper books filed) which were nothing but part and parcel of the impugned books of accounts. The ld. DR did not controvert these factual aspects and not even the ld. AO when the bench directed to submit the contention of the assessee. Thus, it will be incorrect to say that the assessee did not produce any books of accounts and that Ld. A.O. did not get opportunity to examine such vital parts of the books of accounts. Incidentally, Ld. A.O. herself conceded that that the assessee did comply with all the notices u/s 142(1) of Income Tax Act, 1961 other than those issued on 25.09.2021 and 26.09.2021 under dubious circumstances, as discussed in para 11 above. 13. It won't be out of place here to refer to Section 145(3) of income Tax Act, 1961 which reads as under: "..Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee or income has not been computed in accordance with the standards notified under sub- section (2), the Assessing Officer may make an assessment in the manner provided in section 144..." On careful perusal of section 145(3) of Income Tax Act, 1961, it would be clear that this section does not deal with the situation whereby books of accounts were actually or purportedly not produced. It deals with the situation after production of books of accounts by the assessee and subsequent examination by the A.O. Non-production of books of accounts, if any, can be covered under non- compliance or otherwise of Section 142(1) of Income Tax Act, 1961. Incidentally, Ld. A.O. issued no notice u/s 142(1) of Income Tax Act, 1961 on 25.09.2021 (as falsely claimed) requiring the assessee to produce books of accounts. In fact, a simple letter was issued by Ld. A.O. on 25.09.2021 asking for production of Books of Accounts. Thus, Ld. A.O. is not authorized, under these circumstances, to invoke section 145(3) of Income Tax Act, 1961 to reject books of accounts 55 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur which, according to her, were never produced before herself and which she did not examine at all. 14 Without prejudice to what has been submitted in para above, it is humbly submitted that if the submissions of the assessee and Ld. A.O.'s response thereto are analyzed, it would be seen that Ld. A.O. nowhere contradicted the assessee's submissions in response to her specific queries, meaning thereby she was not unsatisfied with the correctness or completeness of the accounts of the assessee. Further, the assessee was regularly following the mercantile system of accounts which were also not doubted upon. Besides, it is submitted that the books of accounts were duly audited u/s 44BB(3) of the Income tax Act, 1961. As regards submission of books of accounts, it was categorically submitted that the same would be produced in the next date of hearing which was reasonably presumed to be 7 to 10 days thereafter, But, Ld. A.O., in unnecessary hurry, issued a letter on 25.09.2021 surreptitiously so much so that it did not come into knowledge of the assessee promptly, enabling it to try to produce the books of accounts. Thus, the assessee was denied reasonable opportunity to present its case. Hence, rejection of books of accounts under such circumstances was highly unwarranted and uncalled for. 15 The contradictory approach of Ld. A.O. is also conspicuous in as much as while the purported receipts by the assessee as per Form 26AS was reported to be Rs. 15,04,44,665/-, she took Rs. 14,83,47,539/- as receipts by the assessee while computing assessed income, thereby giving benefit to the tune of Rs. 20,97,126/- which is attributed to reconciliation, undertaken by her goodself on examination of books of accounts, as produced duly by the assessee in course of assessment proceedings. It bears out the fact with full emphasis that books of accounts were indeed produced by the assessee in course of assessment proceedings and that Ld. A.O. had duly examined them and found no infirmities in absence of any adverse comments in that regard. In the light of the above submissions, it is most humbly requested that the decision of Ld. A.O. to reject books of accounts by wrongly invoking section 145(3) of Income Tax Act, 1961 be nullified and the consequent addition of Rs. 1,48,34,753/- be deleted.” 56 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 29. The ld. AR of the assessee submitted that he has attended the office of the assessing officer personally on 10.03.2021, 19.04.2022 & 12.05.2022 and the letter which was submitted also has the reference of producing the books of account on record. For the reason not known why there is no reference of this submission in the final assessment order. All these instances established that the books of account even though in part – part but were produced before the assessing officer. Based on the above evidence for which there is no controvert finding by the ld. DR in his submission but only the contention that the full books of account were not submitted by the assessee. Based on these evidences the bench directed the ld. DR to have the correct fact on record as the ld. AR stated that he has submitted the tally back vide his letter dated 19.04.2022 & 12.05.2022. The said submission was in addition to the PDF files uploaded earlier in part. On 15.11.2022 the ld. DR submitted the reply of the ld. AO dated 14.11.2022 which is extracted here in below : “No. DCIT/Int.Tax/JPR/2022-23/496 Date: 14.11.2022 To, The Commissioner of Income-tax (DR)-II, ITAT, Jaipur. Sub.: Report in the case of M/s National Oil Well Maintenance Company (PAN- AADCN2122J) A.Y. 2018-19 AND 2019-20-reg-. Sir, 57 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur Kindly take reference to your letter no. CIT (DR)/ITAT/JPR/2022-23/391 dated 19.10.2022. In connection to the above it is stated that no reply was submitted by M/s National Oil Well Maintenance Company containing tally backup which includes cash book, ledger, journal, bank book details relevant to A.Y. 2018-19. Report is submitted as above.” 30. In response the ld. AR filed re-joinder stating that the reply of the ld. AO is incomplete. Assessee had given all ledger in the written submission for assessment year 2018-19 on 04.05.2021 and for assessment year 2019-2020 dated 29.04.2021 in Annexure A-17. In support he has also enclosed the proof of submitting these paper online. He has also submitted that the order for assessment year 2020-21 is completed where in the books of account has been accepted wherein the same method of accounting is adopted and there is not controverting facts placed on record. The bench noted that against the contention of the ld. AR when the bench categorically submitted spell out that whether the books in part and specifically claimed by the ld. AR of the assessee of having been produced on 10.03.2021, 19.04.2022 & 12.05.2022 were produced or not. But the answer of the assessing officer is cryptic, not specific and his denial is against the evidence which was in the form of online acknowledgment and the physical inward copy of letter dated 12.05.2022 placed on record where in clear reference is appearing that the books were produced. When all 58 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur these evidence apparently clear that even though the assessee was facing the difficulty in online submission they have submitted the details in part in the online module and the same were also expressly produced on 10.03.2021, 19.04.2022 and 12.05.2022 [ receipted letter placed on record in the paper book page 498 ]. All this evidence aptly clear that the books were made available on record by the assessee before finally ld. AO passed the order on 26.05.2022. All these actions of the nonresident assessee make it clear that they were comply the law and in fact the assessment order were passed in past and subsequent year wherein no such allegation proved. The evidence placed on record proves that the assessee submissive in complying the law and therefore, the allegation of the ld. DR is without against the evidence placed before us. The ld. AO not appreciated that the assessment was online module even the DRP proceeding were also conducted online. The ld. AR of the assessee submitted that almost 1300 PDF page records were produced even though in part the ld. AO is of the view that the assessee has not produced the books. As regards the missing of dead line the time period of was affected on account of corona and the physical movement was restricted by governments and even the time line for submission were also extended PAN India. The company is having is head quarter out of India the 59 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur submission has delayed for which the apex court has also extended the various dead line. Therefore, the ld. DR based on the few delayed compliance cannot take a plea that the assessee is non-compliant. The bench also noted that the assessment is completed u/s. 143(3) and not 144. We have also noted the reasoning given by the ld. AO while rejecting the books of account is against the evidences on record. As regards the contention of the ld. AO that there is increase in expenses the assessee has submitted clearly the reasoning supported by ledger account along with supporting bills and vouchers, instead of verifying those records and analyzing the same he has merely repeated the same line that the books of accounts were produced in part and not in full. Ld. AO not appreciated that the assessment is under faceless regime. Looking to the specific query assessee produced the physical books before and after the completion of the assessment as per direction of the DRP finally on 12.05.2022 [ copy of the letter acknowledge is placed on record]. We have also persuaded the orders of the assessing officer for assessment year 2016-17, 2017-18 & 2020-21 where in the books of account of the assessee is accepted, when these book results are already accepted for previous and subsequent years we see no reasons to reject the same for the year under consideration when the assessee has filed all most all the details in the assessment 60 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur proceedings in the pdf format in part as there are constraint in submission online. 31. We have noted the contention the ld. AR that on one hand the ld. AO reiterate that the assessee has not produced books of account and on the other hand invoke the provision of section 145(3). Both this stand are contrary and not in accordance with the law. The provision of section 145(3) deals with the situation when after production of books of account by the assessee and subsequent examination by the AO, non production of books of account is covered under section 142(1) and not under section 145(3). This provision also suggests that the ld. AO is taking action against the provision of law and facts placed on record. To understand this aspect provision of section 145(3) and 142(1) is extracted here in below Inquiry before assessment. 142. (1) For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a return under section 115WD or section 139 or in whose case the time allowed under sub-section (1) of section 139 for furnishing the return has expired a notice requiring him, on a date to be therein specified,— (i) where such person has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner 60 and setting forth such other particulars as may be prescribed, or* : Provided that where any notice has been served under this sub-section for the purposes of this clause after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 to a person who has not 61 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, any such notice issued to him shall be deemed to have been served in accordance with the provisions of this sub-section: 61 [Provided further that a notice under this sub-section for the purposes of this clause may also be served by the prescribed 62 income-tax authority,†] (ii) to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require, or (iii) 63 to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Assessing Officer may require : Method of accounting. 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub- section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144. 32. On conjoined reading of the provision we are of the considered view that the provision of section 145(3) can only be invoked after examining the books of account and if the same is not produced then the provision of section 142(1) can be exercised. As ld. AO repeated contended that the assessee has not produced the books of account and that case the application of provision of section 145(3) is bad in law and if he considered 62 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur the books of accounts were produced then without pointing out any defect how the same can be rejected contending that the books of account were not produced. The relevant extract of the conclusion recorded by the ld. AO is reproduced here in below: The assessee vide submissions dated 18.01.2021, 28.01.2021, 10.03.2021, 15.03.2021, 15.04.2021, 28.04.2021, 30.04.2021, 21.09.2021, 23.09.2021 submitted response for various queries raised and claimed that the books of accounts would be furnished within some time but did not furnish books of accounts despite asking for it many times vide various notices mentioned above. As per the point no. 4 of assessee's recent submission dated 23.09.2021 - "regarding submission of complete books of accounts, bills of expenses claimed, vouchers and ledgers, the same shall be produced for your physical verification purpose in the next hearing before your good self" This also strengthens the thought that the assessee deliberately chose not to furnish the books of accounts so that discrepancies in maintaining the books of accounts, if any, remain unearthed and the actual amount of tax evasion cannot be ascertained. Thus the contention of the assessee that reasonable opportunities were not provided is hereby rejected. Hence, on basis of the above discussion, the invocation of section 145(3) of the Income Tax Act, 1961 in this case is purely fit and justified.” 33. On careful consideration of the finding recorded by the ld. AO we are of the considered view that the when in the opinion of the ld. AO books of accounts were not produced how it can lead to rejection of books without pointing out any defects in the books of account. Thus, finding of the ld. AO is contradictory of the fact and invoking of the provision of the act by the ld. 63 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur AO. The ld. DR as well as ld. AO did not bring any contrary finding or evidence so as to counter the argument supported by a detailed paper book filed by the assessee contending that the books were produced and the ld. AO has not pointed out any defect even the part – part books placed on there is no question of the same being rejected by invoking the provision of section 145(3) of the Act. The bench has also noted that based on the similar consistent method of accounting adopted by the assessee the book results were accepted in the proceeding u/s. 143(3) of the act for the assessment year 2017-17, 2017-18 & 2020-21 i.e. preceding and succeeding year under consideration. Thus, based on these set of facts and circumstances we are of the considered view that the rejection of books of account by the assessing officer is illegal and against the set of facts placed on record and we direct the AO to accept the book results as not a single defect is brought to us which suggest the rejection of regular books of account which are audited by an independent Chartered Accountant. Since, we hold that incorrect invocation of provision of section 145(3) and rejection of books is not correct consequently the estimation of income as per provision of section 44BB(1) is also vacated. Therefore, we allow the ground no. 2 & 3 of the assessee. 64 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 34. Apropos ground no. 1 raised by the assessee we have considered the rival contention and perused the orders of the lower authorities, material available on record, arguments advanced by both the parties. The issue in this ground is mainly circulating on account of the alleged difference of turnover / receipt as reflected in the audited accounts and in the form no. 26AS. The difference noted in the assessment by the ld. AO is tabulated here in below ; Sr. No. Amount as per assessee Amount as per 26AS Difference in (Rs.) GSPC 29,27,397 1,09,89,021 80,61,624 Vadanta Limited 9,77,95,490 11,68,42,959 1,90,47,469 Oil India Limited - 2,26,12,685 2,26,12,685 Total 1007,22,887 15,04,44,665 4,97,21,778 35. During the assessment proceeding the ld. AR of the assessee submitted that the reasons behind for the difference in the case of GSPC is on account of the fact that the GSPC have shown the gross payment [including GST] made to the assessee in form no. 26AS whereas the assessee has accounted the turnover net of GST and other difference is on account of the fact that GSPC has accounted the receipt in the year under consideration whereas the assessee has accounted the same in the next year i.e F. Y. 2018-19 when in fact it gets approval. As regards the difference in respect of the Oil India Limited assessee submitted that 65 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur invoice was accounted for by the assessee in F. Y. 2016-17 whereas the company Oil India Limited accounted it in F. Y. 2017-18. The ld. AO rejected the explanation of the assessee merely on ground that the assessee has not produced any confirmation from Oil India Limited for the contentions raised. In the case of Vedanta Limited the difference was on two reason one is that the vendor parties have shown the gross payment [ including GST ] made to the assessee in form no. 26AS whereas the assessee has accounted the turnover net of GST. The second reason is that invoices were accounted for by Vedanta Limited in the F. Y. 2017-18 whereas these were accounted by the assessee in F. Y. 2018-19 on account of the reasons that the same were approved in F. Y. 2018-19. The ld. AO in case of Oil India Limited contended that as the assessee has not produced the confirmation the same was not believed and in the case of Vedanta and GSPC the assessee has not produced the invoices the explanation was not considered full and as the assessee has submitted bills for Rs. 20,97,126/- of Vedanta Limited same were considered for the GST difference. Thus, finally balance amount of Rs. 4,76,24,652/- was added. Before, us the ld. AR of the assessee submitted that the assessee has furnished bills and reconciliation which is also forms part of the assessment order. But for the reasons best known the ld. AO has contended the 66 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur assessee has not produced all the bills related to the issue. On this issue ld. AR of the assessee drawn our attention to the following submission made by the assessee on 15.04.2021 [ APB page 338-344] and 26.04.2021 [ APB page 360-373]. On careful consideration of the submission of the assessee we are of the considered view the assessee has filed reconciliation, ledger account of the vendor concern and attached relevant copies of the invoices concerned then merely stating that the same is not filed on the best reasons known to the assessing officer cannot be a base to disbelieve the explanation of the assessee merely on the ground that the confirmation of Oil India is not placed on record and bills are not placed on record in full for the alleged difference on account of GST accounted net in the books. The bench also noted that considering the peculiar nature of the contract the company in one case already booked the bill in advance earlier to the year under consideration and in other case the same is duly accounted in the subsequent year. This primary fact not being controverted by the ld. DR there is not base to disbelieve the regular method of accounting followed by the assessee. Not only that there is not a case of the revenue that the assessee has not accounted the invoices but in fact the ld. AO has accepted the same is either accounted in earlier period or in the subsequent period if not in the year under consideration. So, the difference 67 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur of these invoices is also accepted the ld. AO that the same is accounted. The assessee has furnished a Chartered Accountant certificate vide point no. 3 of reply dated 10.05.2022 reconciling the alleged difference in turnover and form no. 26AS and the same is also not disputed by the ld. AO passing the assessment order. The assessee has furnished all bills and vouchers vide annexure C point no. 4 of the reply dated 10.05.2022. 36. We have considered the rival contention and perused the orders of the lower authorities, material available on record, arguments advanced by both the parties and also gone through the judicial decision relied upon by both the parties to drive home to their respective contentions. It is not disputed that by adopting the system of accounting followed by the assessee the receipt / revenue is regularly accounted by the assessee and the assessment of the assessee were completed in A. Y. 2016-17, 2017-18 and 2020-21 there is no adjustment on account of this difference of turnover as per 26AS. Even though the issue was raised and the explanation of the assessee were accepted in those years. The difference observed by the ld. AO is also reconciled and the fact the same is on account of GST and recording of the invoices in earlier year or subsequent year. The said fact is not disputed by the revenue. Moreover, it is not a case of revenue that the 68 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur assessee has not accounted any of the particular invoice. The explanation offered by the assessee is duly supported by the reconciliation statement with the invoices, GST returns and party ledger accounts placed on record. The same is accepted in the assessment order for other years. In the case of Oil India, the ld. AO has rejected the explanation of the assessee merely on the ground that the assessee has not placed on record the confirmation of the Oil India and he is not disputing the recording of the invoices. So, be that it may on this issue we are of the considered view that the explanation of the assessee is fully supported by the evidence and the income is duly offered based on the regular method of accounting followed. In fact, the difference arising on account of the GST is already accepted by the AO partly on the bill that he considered is submitted in part and for balance claim was rejected merely on the ground that the invoice is not found by the ld. AO even though the same was submitted on the online portal. Considering the overall facts of the case once the difference is already explained partly on account of GST there is no reason not to accept full. Therefore, we are of the considered view that the contention of the ld. AO on this issue is not correct and addition made is thus vacated on this GST difference issue. As regards the difference on account of accounting of the invoices in the earlier year or in the subsequent year since the same is 69 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur regularly followed by the assessee and expressly reconciled by the assessee with sufficient evidence adduced before the authorities below as it appears from materials available before us that the same is considered in the year when the bills are due the same cannot be added merely the vendor has accounted the same in the year under consideration. We have also noted that the audited books of accounts and reconciliation and the various entities contract amount offered for tax over a period of time. The difference between the contract value of each party matches over a period of time irrespective of the year offered by the assessee and therefore, grievance of the Revenue that the assessee has not offered correct income is fully explained by the assessee. Based on the consistent method of accounting adopted by the assessee the book results were accepted in the proceeding u/s. 143(3) of the act for the assessment year 2017-17, 2017-18 & 2020-21 i.e. preceding and succeeding year under consideration and in that year also there is no such addition made by the revenue. Moreover, the ld. AO has not disturbed the income of the other year while considering the income in this year thus, the addition made by the ld. AO on this aspect is not sustainable and based on this observation we vacate that addition also. In terms of these observation the ground no. 1 raised by the assessee is allowed. 70 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur 37. Ground no. 4 is in general and therefore it does not require our adjudication. 38. In the result the appeal of the assessee in ITA NO. 11/JP/2022 for A. Y. 2018-19 is allowed. 39. As we have heard both the parties and persuaded the materials available on record and the bench also noticed that the issues raised by the assessee in ITA NO. 12/JPR/2022 is equally similar on set of facts and grounds with that of the case in ITA No. 11/JP/2022. Therefore, it is not imperative to repeat the facts and various grounds raised by the assessee. Hence, the bench feels that the decision taken by us in ITA No. 11/JPR/2022 for the Assessment Year 2018-19 shall apply mutatis mutandis in the ITA No. 12/JPR/2022 for assessment year 2019-2020. In the results the appeal of the assessee in ITA No 12/JPR/2022 stands allowed. In terms of these observations the appeal of the assessee in ITA NO. 11/JP/2022 & ITA NO. 12/JP/2022 stands allowed. 71 IT(IT)A Nos. 11 & 12/JP/2022 M/s National Oil Well Maintenance Company, Jodhpur vs. DCIT, Circle(IT), Jaipur Order pronounced in the open court on 05/12/2022. Sd/- Sd/- ¼Mk0 ,l- lhrky{eh ½ ¼jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;dlnL;@Judicial Member ys[kklnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 05/12/2022 *Ganesh Kumar vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- M/s National Oil Well Maintenance Company, Jodhpur 2. izR;FkhZ@ The Respondent- DCIT, Circle (International Taxation), Jaipur 3. vk;djvk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZQkbZy@ Guard File (IT(IT)A Nos. 11 & 12/JP/2022) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst.