NATIONAL CONTRACTING COMPANY LIMITED,CHENNAI V. DEPUTY COMMISSIONER OF INCOME TAX, CHENNAI

CO 80/CHNY/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax, International Taxation, Circle-2(1), Chennai (Revenue) versus National Contracting Company Ltd. (Respondent) concerning the assessment year 2014-15. The primary issue was the rejection of the assessee's books of account by the Assessing Officer under Section 145 of the Income Tax Act, 1961, due to alleged discrepancies in project progress and other deficiencies, leading to an estimated profit calculation at 8% of turnover. The assessee appealed against this decision, and the CIT(A) found the books accurate and compliant with accounting standards, thus directing a re-computation of profits as per the books. The Revenue's appeal to the Tribunal contested the CIT(A)'s decision, which was ultimately upheld by the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107257 (ITAT-CHENNAI)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R. ANITHA
• Keywords: Business income; Rejection of books of accounts; TDS; Non compliance
• Section: 143(3); 145

Judgement Text

"आयकर अपीलीय अिधकरण, ‘सी’ \u0011ा यपीठ, चे\u0016ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0019ी जॉज\u001c जॉज\u001c क े, उपा \u001e\u001f एवं \u0019ी जगदीश, लेखा सद' क े सम\u001f BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.909/Chny/2024 िनधा \u001cरण वष\u001c /Assessment Year: 2014-15 The Dy. Commissioner of Income Tax, International Taxation, Circle-2(1), Chennai. Vs. National contracting Company Ltd., No.36, 3rd Floor, GRR Business Centre, Vaidyaraman Street, T. Nagar, Chennai – 600 017. [PAN: AADCN 1320N] (अपीलाथ\u0007/Appellant) (\b\tयथ\u0007/Respondent) C.O No.80/Chny/2024 (Arising in ITA No.909/Chny/2024) िनधा \u001cरण वष\u001c /Assessment Year: 2014-15 National contracting Company Ltd., No.36, 3rd Floor, GRR Business Centre, Vaidyaraman Street, T. Nagar, Chennai – 600 017. [PAN: AADCN 1320N] Vs. The Dy. Commissioner of Income Tax, International Taxation, Circle-2(1), Chennai. (अपीलाथ\u0007/Appellant) (\b\tयथ\u0007/Respondent) अपीला थL की ओर से/ Assessee/Cross Objector by : Shri G. Baskar, Advocate NOथL की ओर से /Revenue by : Ms. R. Anitha, Addl. JCIT सुनवा ई की ता रीख/Date of Hearing : 16.12.2024 घोषणा की ता रीख /Date of Pronouncement : 12.03.2025 ITA No.909/Chny/2024 & C.O No.80/Chny/2024 :- 2 -: आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the Revenue and Cross Objection by the assessee for Assessment Year (AY) 2014-15 arises out of the order of Learned Commissioner of Income Tax (Appeals)-16, Chennai [hereinafter “CIT(A)”] dated 31.01.2024 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 (hereinafter “the Act”) on 05.05.2017. 2. There is a delay of 11 days in filing C.O No.80/Chny/2024 by the assessee. The assessee has filed condonation petition/affidavit stating the reasons for delay in filing the appeal. We have considered the petition/affidavit of delay in filing the C.O and satisfied that there was sufficient cause for not filing the appeal within the prescribed time limit. Hence, the delay is hereby condoned. 3. The grounds of appeal raised by the Revenue are as under: “Whether on the facts and circumstances of the case, the Id. CIT(A) was justified in directing the AO to accept the provisions made for expenses when the Ld. CIT(A) itself has noted that ICDS III does not provide for the recognition of any expected loss as per the assessee, which validate the AO's stand. Admittedly the assessee has nowhere substantiated as to how the provisions are meeting the criteria as per AS-29 issued by the ICAI, which states as to when a Provision should be recognised.” ITA No.909/Chny/2024 & C.O No.80/Chny/2024 :- 3 -: 3.1 The additional ground raised by the Revenue is as under: “Without prejudice to the above, even if the provision for expenses are held to be allowed, the break-up, nature and the applicability of TDS or otherwise on the said expenses were not made available to the Assessing Officer.” 4. The assessee has filed its return of income by admitting loss of Rs. 24,73,96,132/-.The assessee-company is a Non-Resident company and established a project office in India on 01.09.2009. The assessee is engaged in the contract works and has executed three projects namely TW01, TW02 & TW04, and computed income as per percentage completion methods. The A.O during the course of assessment proceeding found discrepancy in the project progress and other deficiencies, and therefore rejected the books of account u/s. 145 of the Act and estimated the profit @ 8% of the turnover. Aggrieved, the assessee filed an appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A) after calling for remand report, concluded that assessee’s accounts were accurate, with no non compliance with the Accounting Standards prescribed by the ICAI and held that there was no valid case for the A.O to invoke the provisions of Section 145 of the Act. Aggrieved the order of Ld. CIT(A), now the Revenue is in appeal before us. ITA No.909/Chny/2024 & C.O No.80/Chny/2024 :- 4 -: 5. The Ld. Departmental Representative (DR), has argued that the A.O has clearly pointed out that discrepancy in the books of accounts and accounting of profit for the purpose of computation of income and therefore, rightly rejected and estimated profit @8% of the gross turnover. 6. The Ld. Authorized Representative (A.R) of the assessee, on the other hand, submitted the Ld. CIT(A) has rightly allowed the provision for expenses claimed by the assessee and upheld the computation of income returned as per books of account after considering the facts of the case and provision of law. The Ld. AR supported the order of Ld. CIT(A). 7. We have heard the rival submissions, and perused the materials available on record. The A.O has rejected the books of accounts and estimated the profit @ 8% of the turnover of Rs 58,70,37,383/-. The A.O has rejected the books of accounts citing the discrepancy in the project progress for computation of income as percentage completion method , provisions made for expenses, claim of forex loss , and the allocation of employees’ salaries between NCC India and the assessee books. The Ld. CIT(A) has called for remand report under ITA No.909/Chny/2024 & C.O No.80/Chny/2024 :- 5 -: Rule 46A of the Income Tax Rules, 1962 and after examining the accounts has held as under: “4.5.10. After a meticulous examination of the facts, submissions, and the remand report submitted by the Assessing Officer (AO), it has been conclusively established that the appellant's accounts were found to be accurate, with no noncompliance with the Accounting Standards (AS) prescribed by the Institute of Chartered Accountants of India (ICAI). Discrepancies pointed out by the AO were subjected to thorough verification and reconciliation during the remand report proceedings. 4.5.11 Further, it is crucial to acknowledge that the discrepancies, duly verified and explained by the appellant, were accepted by the Assessing Officer during the remand report proceedings. Building on legal precedents, it underscores the significance of respecting the taxpayer's chosen method of accounting, especially when consistently followed without evidence of inherent defects in the system. The appellant contends that the rejection of books of account lacks legal merit and should be reconsidered in light of these fundamental principles. Consequently, there was no valid case before the Assessing Officer for invoking the provisions of Section 145 of the Income Tax Act. Hence, the rejection of the books of account by the Assessing Officer was disapproved. Additionally, the estimation of business income at 8% of turnover was deemed inappropriate in light of the facts and accounting standards, which were substantiated by various case laws. Therefore, the Assessing Officer is directed to re-compute the business profits by allowing the losses provided by the assessee in its books.” We find that assessee has given reasons for claiming provisions as work done but bill not received and anticipated cost based on POCM . Ld CIT(A) has found the assessee’s account accurate after examining facts and remand report . The Ld CIT(A) has also examined the factor sheet and held that estimation of profit @8% is ITA No.909/Chny/2024 & C.O No.80/Chny/2024 :- 6 -: inappropriate. We find no infirmity in the order of Ld. CIT(A) and therefore, grounds of appeal filed by the Revenue is hereby dismissed. C.O No.80/Chny/2024: 8. So far as the Cross Objection filed by the assessee is concerned, the CO was filed in support of the appellate order passed by the Ld. CIT(A). Since, the main appeal of the Revenue has already been decided, the cross objection filed by the assessee becomes infructuous and is dismissed accordingly 9. In the result, the appeal filed by the Revenue is dismissed and the C.O filed by the assessee is also dismissed. Order pronounced on 12th March, 2025. Sd/- Sd/- (जॉज\u001c जॉज\u001c क े) (George George K) उपा \u001e\u001f / Vice President (जगदीश) (Jagadish) लेखा लेखा लेखा लेखा सद\u0011य सद\u0011य सद\u0011य सद\u0011य /Accountant Member चे\u0013नई/Chennai, \u0016दनांक/Dated: 12th March, 2025. EDN/- आदेश क\u0019 \bितिल\u001cप अ\u001dे\u001cषत/Copy to: 1. अपीलाथ\u0007/Appellant 2. \b\tथ\u0007/Respondent 3. आयकर आयु\u000f/CIT, Chennai 4. िवभागीय \bितिनिध/DR 5. गाड\u0018 फाईल/GF "