The Dy. Commr. Of Income Tax, Cen.Cir.-2, RAJKOT-GUJARAT V. Backbone Construction Pvt. Ltd., RAJKOT-GUJARAT

MA 14/RJT/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 5019 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 8 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 14-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK RINDANI
• Keywords: Wrong claim
• Section: 260A; 40(a)(ia); 254(2); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member The Deputy Commissioner of Income Tax, CC-2, Rajkot (Appellant) Vs M/s Backbone Construction Pvt. Ltd. Ekta House, 2, Jalaram University Road, Rajkot PAN No: AACCB1167C (Respondent) Appellant by : Shri Deepak Rindani, A.R. Respondent by : Shri Nihar Ranjan Samal, Sr. D.R. Date of hearing : 02-03-2022 Date of pronouncement : 10-03-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:- The present Miscellaneous Application filed by the Revenue relates to the order passed by the ITAT in the appeal filed by the Revenue in the case of the assessee for Assessment Year 2009-10 in ITA No. 708/Ahd/2014 . The rectification sought by the Revenue relates to a purported mistake in the order of an issue remaining unadjudicated, the issue being deletion of addition made in respect of bogus claim of expenditure of Rs. 35,45,89,920/- . The contents of the Miscellaneous Application reveal that against the order of the ITAT for the impugned year, the revenue had approached the Hon’ble High Court on this issue of a ground remaining unadjudciated ,which the Hon’ble High Court had directed the Revenue to approach M.A No. 14/Rjt/2016 (in ITA No. 708/Rjt/2014) Assessment Year 2009-10 M..A No. 14/Rjt/2016 A.Y. 2009-10 Page No DCIT vs. M/s Backbone Construction Pvt. Ltd. 2 the ITAT for rectification and hence the present Miscellaneous Application before us. The contents of the application are as under: In this case, the Department had filed appeal before the Hon'ble Income-tax Appellate Tribunal, Rajkot against the order of the CIT(A)-IV, Ahmedabad for A.Y. 2009-10. The Hon'ble ITAT, Rajkot Bench, Rajkot vide order dated 29-05-2015 in ITA No.708/RJT/2014 did not adjudicate on the merit the issue of addition of Rs.35,45,89,920/- made in respect of bogus claim of expenditure raised by the Revenue. An appeal u/s 260A of the I.T. Act was filed against the order of the Hon'ble ITAT before the Hon'ble High Court. The Hon'ble High Court vide order in Tax Appeal No. 914 of 015 has decided the appeal wherein the Hon'ble High Court has observed as under: "Learned Counsel for the Revenue submitted that the question of deletion of Rs.35.45 crores (round off) was not decided by the Tribunal on the premise that the same does not arise out of the judgement of the CIT(Appeals). He submitted that such observation is clearly erroneous. It would be open for the Revenue to approach the Tribunal for rectification since the Tribunal has not decided the issue on merits. We did not go into it at this stage. Disposed of accordingly." The Pr.CIT, Rajkot-1, Rajkot vide letter dated 06-06-2016 has authorized to file M.A. before the Hon’ble ITAT. 2. At the outset itself, Ld. Counsel for the assessee pointed out that there was no such mistake in the order of the ITAT which had in fact the adjudicated the issue. He stated that the issue commonly arose in appeals relating to A.Y 2008-09 and 2009-10 and the ITAT ,in its consolidated order for both the years, had adjudicated the issue in A.Y 2008-09 applying thereafter its decision to A.Y 2009-10 ,the impugned year before us. In this regard, he drew our attention to the consolidated order of ITAT in ITA Nos. 707 to 710/Rjt/2014 for A.Y 2008-09 and in ITA No. 920 & 921/Rjt/2015 for A.Y 2009-10 ,dated 29/05/2015 ,and taking us to the portion dealing with the cross appeals for A.Y 2009-10, pointed out there from page 6 of M..A No. 14/Rjt/2016 A.Y. 2009-10 Page No DCIT vs. M/s Backbone Construction Pvt. Ltd. 3 the order, that the ITAT had taken up for adjudication the ground raised by the Revenue regarding the deletion of disallowance of bogus claim of expenditure of Rs.35,45,89,920/-alongwith assessees ground of estimation of net profits @ 16% as under: 19. In the assessee’s appeal, the ground no.2 reads as under: 2. The ld.CIT(A) has erred in estimating net profit at 16% of the contract receipt and making addition of difference amount of Rs.6,59,28,523/- (i.e. NP @ 16% Rs.119242720 less NP shown by the appellant Rs.53314197) is unjustified, unwarranted and bad in law. In the Revenue’s appeal for the same assessment year, the ground taken in the appeal reads as under: “1. On the facts and circumstances of the case the ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.35,45,89,920/- and restricting the profit @ 16% of gross profit on account of bogus claim of expenditure. 3. He thereafter drew our attention to para 20 to 22 of the order adjudicating the above grounds as under: 20. After hearing rival submissions, we find that the facts and issues involved in the above grounds of appeal are exactly the same, as was involved in the ground no.1 of the appeal of the assessee and the ground no.1 of the appeal of the Revenue in the Asstt.Year 2008-09, except for change in figures. 21. During the year under consideration also the assessee was engaged in the contract work of widening and deepening of Mithi River. Quantity of work done was measured and certified by the Engineer-in- charge appointed by the Mumbai Metropolitan Region Development Authority. During this year, the assessee’s turnover from such contract was Rs.74,52,67,004/- and the assessee disclosed income at Rs.5,04,42,677/- in the return of income which worked out to 7.15% of the turnover. As the facts and issues involved are similar, we following the decision in the case of the assessee in the Asstt.Year 2008-09, direct the AO to estimate the net profit of the assessee of the year at the rate of 8% of the turnover from contract work. M..A No. 14/Rjt/2016 A.Y. 2009-10 Page No DCIT vs. M/s Backbone Construction Pvt. Ltd. 4 22. Thus, after estimation of net profit from contract work, the question of allowance or disallowance of specific expenditure does not arise. Consequently, the ground of appeal of the assessee is partly allowed and the ground of the Revenue is dismissed. 4. The Ld. D.R. though did not controvert the fact that the issue had been adjudicated by the ITAT following its decision in A.Y 2008-09, however contended that the ITAT had deleted the addition without even discussing the merits of the genuineness of the claim particularly when the AO had found the claim to be fictitious/bogus. Ld.DR has stressed that since the Hon,ble High Court has duly considered the submission of the Revenue and has ordered that since the question of deletion of bogus expenditure was not decided by the Tribunal on merits, It would be open to the Revenue to appeal to the Tribunal for rectification, the present Miscellaneous application needs to be allowed and the issue of deletion of bogus expenditure be adjudicated on merits. Submissions to this effect were filed before us in writing dated 04-10-2021 and 02-03-2022. 6. We have heard both the parties. We find no merit in the present Miscellaneous Application of the Revenue. Clearly the mistake pointed out in the application in the order of the ITAT in Revenues appeal for A.Y 2009-10 is non adjudication of an issue relating to deletion of claim of bogus expenditure by the Ld.CIT(A). But the same has been shown to us as having been adjudicated following the decision for the preceding year i.e A.Y 2008-09 and which fact stands admitted by the Ld. DR before us in writing. 7. The Revenue now appears to have changed gears before us pleading that the error pertains to the issue having not been adjudicated on merits of the genuineness of the claim. M..A No. 14/Rjt/2016 A.Y. 2009-10 Page No DCIT vs. M/s Backbone Construction Pvt. Ltd. 5 7.1 The Revenue has not pointed out how the adjudication of the issue by the Tribunal following its decision of A.Y 2008-09 ,finding it to be identical ,was in error and needed to be adjudicated on the merits of the genuineness of the claim. It is not the case of the Revenue before us that the issue in the impugned year is not identical to that in A.Y 2008-09 . Nor is it the case of the Revenue that even in A.Y 2008-09 the ITAT was in error in adjudicating the identical issue and that an application has been filed by the Revenue in the said year also seeking adjudication on merits. We fail to understand then what mistake had crept in the order of the ITAT. And why the issue needed to be adjudicated on the merits of genuineness of the claim in the impugned year. 7.2 Even otherwise we find on going through the consolidated order of the ITAT in the case of the assessee that both in A.Y 2009-10 ,to which the present MA relates and A.Y 2008-09 both the assessee and the revenue had filed cross appeals wherein the assessee had challenged the estimation of net profit by the Ld. CIT(A) on contract receipts @ 16% of the same ,while the Revenue in turn had challenged the restriction of profits @ 16% in both the years and the deletion of bogus claim of expenditure of transport expenses and expenses paid to M/s Jayshree Builders and addition on account of disallowance u/s 40(a)(ia) of the Act in A.Y 2008-09 ,while in A.Y 2009-10 deletion of bogus expenditure Rs. 35,45,89,920/-. The ITAT dealt with the grounds for A.Y 2008-09 at length in para 7-12 of the order directing estimation of net profits @8% of turnover and further holding that since profit estimation had been resorted to no question of any further disallowance of expenses was warranted. This decision was applied to A.Y 2009-10 also finding the issue to be identical .Para 21 of the order reveals that the ITAT had taken note of the fact that while the assessee had disclosed net profits to the tune of 7.15% of its turnover the A.O. had been directed by the ITAT to compute the same @ 8% as adjudicated by the ITAT in the case of the assessee itself for assessment year 2008-09 wherein it had noted identical issue had arisen. The ITAT further held that after estimation of net M..A No. 14/Rjt/2016 A.Y. 2009-10 Page No DCIT vs. M/s Backbone Construction Pvt. Ltd. 6 profit the question of any allowance or disallowance of any specific expenditure did not arise. 8. Clearly the ITAT has adjudicated the issue of deletion of expenses in A.Y 2009-10 on merits and has followed its decision for A.Y 2008-09 finding the issue to be identical. The Revenue has not pointed out any infirmity in the above order of the ITAT for A.Y 2008-09 and for that matter A.Y 2009-10. We fail to understand therefore why the issue needed to be adjudicated on merits of the genuineness of the claim, when there was no infirmity pointed out by the Revenue in the order of the ITAT for A.Y 2008-09 wherein identical bogus expenses addition was deleted without dealing with the merits of the claim. 9. The plea of the Revenue before us tantamounts to the issue having been decided erroneously on merits ,for which the remedy is to file an appeal to the higher authorities and not an application before us u/s 254(2) of the Act which permits only rectification of apparent errors and not beyond that. The Hon’ble apex court has categorically held so in the case of Commissioner of Income Tax (IT-4),Mumbai vs M/s Reliance Telecom Ltd in Civil appeal No.7110 of 2021 vide order dated 03-12- 2021 as under: “As observed hereinabove, the powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court,’ 9.1 There is therefore,we hold, no mistake in the order of the ITAT for A.Y 2009-10 as pointed out by the Revenue in its application before us. M..A No. 14/Rjt/2016 A.Y. 2009-10 Page No DCIT vs. M/s Backbone Construction Pvt. Ltd. 7 10. In view of the above, we do not find any merit in the present Miscellaneous Application of the Revenue and the same is therefore dismissed. Order pronounced in the open court on 10 -03-2022 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (ANNAPURNA GUPTA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad : Dated 10/03/2022 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, राजकोट