ITO, WARD-10(2), KOLKATA, KOLKATA V. MULTIPLE CONCRETE PVT LTD, KOLKATA

ITA 1227/KOL/2024

AI Insights

The case involves an appeal by the Revenue against the order of the CIT (A) which partly allowed the appeal of Multiple Concrete Pvt. Ltd., a company engaged in construction and development. The Revenue challenged the deletion of an addition of ₹9,16,63,588/- made by the AO, alleging suppression of sales by the assessee. The CIT (A) found that the AO had misunderstood the accounts of the assessee, leading to an incorrect conclusion about suppressed sales. The Tribunal agreed with the CIT (A)'s reasoning and dismissed the Revenue's appeal, noting that the CIT (A) had thoroughly addressed each aspect of the issue in a reasoned manner.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25035 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHENDU DATTA
• Assessee Lawyers: S. K. TULSIYAN; PUJA SOMANI; ARS
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.1227/KOL/2024 (Assessment Year: 2012-13) ITO, Ward 10(2) Aaykar Bhavan, 3rd Floor, P-7, Chowringhee Square, Kolkata-700069 West Bengal Vs. Multiple Concrete Pvt. Ltd. 13, Dum Dum road, Motijheel, Kolkata-700074, West Bengal (Appellant) (Respondent) PAN No. AABCM7885R Assessee by : Shri S.K. tulsiyan& Ms. Puja Somani, ARs Revenue by : Shri Subhendu Datta, DR Date of hearing: 10.02.2025 Date of pronouncement : 24.02.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 10.01.2024 for the AY 2012-13. 02. The only issue raised by the Revenue is against the deletion of addition of ₹9,16,63,588/- by CIT (A) as made by the ld. AO on account of suppression of sale by the assessee . 03. The facts in brief are that the assessee filed the return of income on 11.04.2013, declaring total income at ₹1,15,920/-. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) and statutory notices along with questionnaire were Page | 2 ITA No.1227/KOL/2024 Multiple Concrete Pvt. Ltd.; 2012-13 duly issued and served upon the assessee. The assessee addended the proceeding from time to time and also filed the necessary details/ information called for by the ld. Assessing Officer. The assessee is engaged in the business of contractor ship and was following mercantile system of accounting. The ld. AO during the course of assessment proceedings, noted that during the impugned financial year the assessee has executed certain contractual works for his clients and certain discrepancies were noted in the said documents which have been extracted by the ld. AO at page no.2 of the assessment order. Thereafter the ld. AO in a very cryptic manner came to the conclusion that the assessee has suppressed the sales to the tune of ₹9,16,63,588/- and consequently added the same to the income of the assessee besides making other addition in respect of expenses relating to exempt income u/s 14A of the Act. 04. In the appellate proceedings, the ld. CIT (A) partly allowed the appeal by sustaining the addition to the extent of 41,41,728/- and deleting the addition of ₹8,75,21,860/- by observing and holding as under:- “6.2 Ground no. 2, 3 & 4: These pertain to the plea that the AO was not correct in making additions of Rs. 9,16,63,588/- on account of suppressed sales. 6.2.1 During the appeal proceedings, the appellant submitted that it is mainly engaged in the business of construction and development of properties. It was stated that Schedule 19 of audited accounts contains the details of Cost of Construction in Progress which was debited to the Profit and Loss A/c. It was submitted that the same was expense for the appellant-company for the preceding year ending 31/03/2011 and current year ending 31/03/2012 and not Opening WIP and Closing WIP as alleged by the AO. The appellant stated that the AO misunderstood the accounts of the appellant. For example, it was explained, that the cost of construction in progress relating to construction works of Onkar Society for Engineering and Technological Research and Development for the immediately preceding year ending 31/03/2011 was Rs.1,35,45,400/- and for the current year ending 31/03/2012 since no cost was incurred in relation to construction works of the said party, the cost as on 31/03/2023 was reported at Rs.0. It was stated that the AO mistook the cost of construction in progress for the year ending 31/03/2011 as Opening WIP and the cost of construction Page | 3 ITA No.1227/KOL/2024 Multiple Concrete Pvt. Ltd.; 2012-13 in progress for the year ending 31/03/2012 as Closing WIP and treated the difference of Rs.1,35,45,400/- in the opening and closing balance as out of books sales which is illogical. It was explained that similar was the case for Camellia Educare Services (P) Ltd and HCL Nonadanga wherein the difference of the opening WIP and closing WIP was treated as out of books sales by the AO due to misunderstanding of accounts of the appellant. w.r.t. Kalyan Educational Society, it was submitted that the AO on perusal, of Note 17 -Revenue from Operations, of the Audited Accounts noted that the appellant hadreported income from the party of Rs.2,99,50,000/- for the year, treated the same as Sales during the year and computed out of book sales at Rs.5,14,74,463/- being difference of Closing WIP and sum total of Opening WIP and Sales. In this regard, appellant submitted that the said income of Rs. 2,99,50,000/- related to income from construction activity and not income on account of sales. It was stated that the appellant is engaged in the business of construction and development of properties and earns income from construction activities and the appellant does not sell properties. It was explained that the same is evident from Note 17-Revenue from Operations, of the Audited Accounts, wherein the Sales were reported at Rs.0 for the current year and also the preceding year and the entire Revenue from Operations relates to 'Income on Construction Activities'. It was stated that the appellant had not suppressed any sales. It was explained that Schedule 19 contains the details of Cost of Construction in Progress for the current year and the immediately preceding year which was debited in the Profit and Loss A/c and is not in the nature of Opening WIP and Closing WIP. 6.2.2 Regarding the submissions of the appellant, it is noted that the appellant is not into sales of property as a normal builder does but it is engaged in the business of only the construction of the properties and receives the revenue on this account. The appellant is akin to a contractor who constructs buildings/properties on behalf of the person asking it to construct the properties. Thus, the appellant debits the expenses on construction in the P/L account project-wise under the head ‘cost of construction in progress’. This expenditure reflects the cost incurred, during the year, on a given project. Comparison of sales and cost of construction figures for FY 2011-12 & 2010-11 (as mentioned in P/L account of AY 2012-13) reflect that the appellant has offered sales, during FY 2011-12 & 2010-11, on all properties for which it has debited the ‘cost of construction in progress’ except the two properties as described below: (a)For HCL Nonadanga, in FY 2011-12, the cost of construction debited to the P/L account was Rs. 41,41,728/- while sales of Rs. Nil was offered on this property during this year. (b)Similarly, for Onkar Society for Engineering & Technological Research & Development, though nil cost & nil revenue were offered in FY 2011-12 but in Page | 4 ITA No.1227/KOL/2024 Multiple Concrete Pvt. Ltd.; 2012-13 FY 2010- 11, cost was debited at Rs. 1,35,45,400/- while no sales were offered.” Vide this office notice dated 31/10/2023, the appellant was asked to explain such discrepancies in its accounts. The appellant was also asked as to why the addition of Rs. 41,41,728/- on account of HCL Nonadanga be not upheld on this account. Theappellant was also asked to produce part-wise cost of construction in progress debited in P/L account with corresponding revenue offered from each party in FY 2010- 11 & 2011-12 along with necessary documentary evidences, ledger accounts and full financial statements of FY 2010-11 & 2011-12 with all annexures and notes to accounts. The appellant, vide submissions filed on 10/11/2023, requested for adjournment but did not file any details. Another notice dated 20/12/2013 was issued to the appellant to file the details as requisite by notice dated 31/10/2023. The appellant asked for adjournment vide its request dated 29/12/2023 which was accepted and vide hearing notice dated 08/01/204, it was asked to file submissions by 11/01/204. In response, appellant filed submissions dated 09/01/2024 wherein earlier submissions 21/12/2022 were reiterated and it was requested that the same may be deemed to be appellant’s submissions. In view of the above, it is apparent that the appellant has not offered any sales on HCL Nonadanga property in FY 2011-12 though it had debited this cost at Rs. 41,41,728/- to the P/L account for FY 2011-12 on this account. Thus, the expenses to the extent of Rs. 41,41,728/- had been claimed in excess and the addition made by the AO to this extent was justified. On issues of Kalyan Educational Society, it is seen that the appellant has offered income of Rs. 2,99,50,000/- while cost debited to P/L account was Rs. 2,85,27,700/- on this property.Thus, gross profit of 4.75% has been offered on this property. For Camelia Educare Services Pvt Ltd, neither the revenue nor the cost has been shown in P/L account in FY 2011-12. Even in FY 2010-11, appellant offered income of Rs. 1,14,00,100/- while cost debited to P/L account was Rs. 1,12,29,000/- on this property. Thus, gross profit of 1.5% had been offered on this property in FY 2010-11. In any case, since no cost had been debited and no sales had been offered in FY 2011- 12, the addition of Rs. 1,12,29,000/- made by the AO on account of this property is hereby deleted. For Onkar Society for Engineering & Technological Research & Development also, neither the revenue nor the cost has been shown in P/L account in FY 2011-12. However, in FY 2010-11, appellant had offered income of Rs. nil while cost debited to P/L account was Rs. 1,35,45,400/- on this property. Thus, no profit had been offered on this property in FY 2010-11. In any case, as the issue of cost debited for this property pertained to FY 2010-11, the addition of Rs. 1,35,45,400/- made by the AO on account of this property is hereby deleted in this AY 2012-13. To sum up, addition made by the AO for this AY 2012-13 is upheld to the extent ofRs. 41,41,728/- being cost debited to P/L account but no matching sales offered. Balance addition made of by the AO, of Rs. 8,75,21,860/-, is hereby deleted. Page | 5 ITA No.1227/KOL/2024 Multiple Concrete Pvt. Ltd.; 2012-13 Ground no. 2 to 4 of appeal are partly allowed. 05. The ld. Counsel for the assessee pointed out that the assessee has preferred an appeal against the order passed by the ld. CIT (A) sustaining the addition of ₹4141,728/- and the Revenue challenged the deletion of addition to the extent of ₹8,75,21,860/-. The ld. AR submitted that the assessee’s appeal has already been heard and disposed off by the co-ordinate Bench in ITA No. 341/KOL/2024 vide order dated 30.08.2024, wherein after taking into consideration the finding given by the ld. CIT (A), the remaining addition sustained by the first appellate authority of ₹41,41,728/- was also deleted. However, the appeal filed by the Revenue on 28.05.2024 was not clubbed with the same and left out from being decided with the assessee’s appeal. The ld. Counsel for the assessee therefore submitted that the issue is squarely covered in favour of the assessee as the order of the ld. CIT (A) has been evaluated by the Tribunal in assessee’s appeal. However, the ld. AR vehemently submitted that assessee has not made any sales/receipts out of book sales as alleged by the ld. Assessing Officer. The ld. AR while referring to Schedule 19 submitted that the said schedule-19 contained the cost of construction in progress which was debited to the profit and loss account and the same is expense for the assessee for the preceding year ending on 31.03.2011 and current year ending on 31.03.2012 and not opening WIP and closing WIP as alleged by the ld. Assessing Officer. The ld. AR submitted that the ld. AO has completely misunderstood the books of accounts maintained by the assessee and came to the conclusion that the assessee has made sales out of the book of accounts. The ld. AR stated that the assessee has not engaged in selling of properties. The ld. AR thereafter referring to note no.17, which is qua ‘Revenue from Operations’, wherein the sales is reported at ₹ nil for the current Page | 6 ITA No.1227/KOL/2024 Multiple Concrete Pvt. Ltd.; 2012-13 financial year as well as for the preceding financial year and the entire revenue from the operation related to the income from construction activities. The ld. AR while supporting the order of ld. CIT (A) to be reasoned and speaking one, submitted that the ld. CIT (A) has passed a very reasoned and speaking order dealing which each and every aspect of the issue. The ld. AR therefore prayed that the appellate order may kindly be upheld by dismissing the appeal of the Revenue. 06. After hearing the rival contentions and perusing the materials available on record, we find that in this case the ld. AO has passed a very cryptic order and making addition by comparing the opening and closing WIP and then recording a conclusion in two lines that assessee has suppressed sales recorded outside the books of account. We have perused the appellate order in which the ld. CIT (A) has dealt with the receipts from each party for which the assessee executed contracts during the impugned financial year. Therefore, we do not find any infirmity in the order of ld. CIT (A) and same is upheld by dismissing the appeal of the Revenue. Moreover, the appellate order has already been affirmed by the Tribunal while deciding the assessee’s appeal. Consequently, the appeal of the Revenue is dismissed. 07. In the result, the appeal of the Revenueis dismissed. Order pronounced in the open court on 24.02.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 24.02.2025 Sudip Sarkar, Sr.PS Page | 7 ITA No.1227/KOL/2024 Multiple Concrete Pvt. Ltd.; 2012-13 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "