UNITY SMC JOINT VENTURE.,MUMBAI V. DCIT-22(1), MUMBAI

ITA 225/MUM/2024

AI Insights

The case involves Unity SMC Joint Venture, which is a joint venture entity formed between M/s Unity Infra Project Ltd. and M/s SMC Infrastructure Ltd., engaged in executing civil contracts. For the assessment year 2014-15, the assessee filed a return declaring a total income of Rs. 36,73,130, which was selected for scrutiny. During scrutiny, it was noted that a sub-contract payment of Rs. 10,62,34,619 was made to M/s Unity Infra Project Ltd. without deducting tax at source, leading to a disallowance under section 40(a)(ia) of the Income Tax Act. The assessee's appeal against this disallowance was initially rejected by the CIT(A), who did not admit additional evidence that the tax on the sub-contract amount had been paid by the payee. The Tribunal found that the CIT(A) had erred in not admitting the additional evidence and remanded the case for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 32085 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Other Referred Cases: CIT v. Manish Build Well (P.) Ltd. [2011] 204 Taxman 106 (Delhi)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHISH HELIWAL
• Assessee Lawyers: APURVA GANDHI
• Keywords: Business income; Additional evidence; Principle of natural justice
• Section: 143(3); 142(1); 43; 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 225/MUM/2024 Assessment Year: 2014-15 Unity SMC Joint Venture, 1252, Pushpanjali Apartment, Old Prabhadevi Road, Mumbai-400025. Vs. Dy. CIT-22(1), Piramal Chambers, Mumbai-400013. PAN NO. AABFU 9813 C Appellant Respondent Assessee by : Mr. Apurva Gandhi Revenue by : Mr. Ashish Heliwal, CIT-DR Date of Hearing : 01/01/2025 Date of pronouncement : 21/02/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 05.01.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2014-15, raising following grounds: Ground No. 1: On the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming order passed by Ld. AO which is against 'Principle of Natural Justice'. Ground No. 2: On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the decision of Ld. AO which has resulted in disallowance of construction expenses paid of Rs. 10,62,34,619 made u/s 40(a) (ia) of the Act the appellant. The appellant prays that such disallowance of such expenditure of Rs. 10,62,34,619 made u/s 40(a)(ia) of the Act may kindly be deleted as no such expenditure is disallowable as per the provisions of the Ground No. 3: On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the decision of Ld. AO wherein it has made disallowance of Rs. 10,62,34,619 and added back to the income of the Act only on the ba requirement ignoring Infraprojects Limited regarding inclusion of contract charges in the total income and payment of tax due on total income. Ground No. 4: On the facts and circumstances erred in upholding the business income determined erroneously by Ld. AO in its assessment order, amounting to Rs. 1,04,06,646 while the actual business income as per ITR filed of A.Y. 2014 to Rs. 32,58,079 on may kindly be rectified. Ground No. 5: On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the income from other sources determined erroneously by Ld. AO in its assessme 6,01,718 while the actual income from other sources as per ITR filed of A.Y. 2014- that this arithmetical error may kindly be rectified. Ground No. 6: Unity SMC Joint Venture ITA No. 225/MUM/2024 On the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming order passed by Ld. AO which is against Natural Justice'. Ground No. 2: On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the decision of Ld. AO which has resulted in disallowance of construction expenses paid of Rs. 10,62,34,619 made u/s 40(a) (ia) of the Act and added back in the total income of the appellant. The appellant prays that such disallowance of such expenditure of Rs. 10,62,34,619 made u/s 40(a)(ia) of the Act may kindly be deleted as no such expenditure is disallowable as per the provisions of the Income Tax Act ('1961'). Ground No. 3: On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the decision of Ld. AO wherein it has made disallowance of Rs. 10,62,34,619 and added back to the income of the Act only on the basis of nonfulfillment of procedural ignoring the submission made by M/s Unity Infraprojects Limited regarding inclusion of contract charges in the total income and payment of tax due on total income. Ground No. 4: On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the business income determined erroneously by Ld. AO in its assessment order, amounting to Rs. 1,04,06,646 while the actual business income as per ITR filed of A.Y. 2014 to Rs. 32,58,079 only. The appellant prays that this arithmetical error may kindly be rectified. Ground No. 5: On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the income from other sources determined erroneously by Ld. AO in its assessment order, amounting to Rs. 6,01,718 while the actual income from other sources as per ITR filed -15 amounts to Rs. 4,15,048 only. The appellant prays that this arithmetical error may kindly be rectified. Ground No. 6: Unity SMC Joint Venture 2 ITA No. 225/MUM/2024 On the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming order passed by Ld. AO which is against On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the decision of Ld. AO which has resulted in disallowance of construction expenses paid of Rs. 10,62,34,619 and added back in the total income of the appellant. The appellant prays that such disallowance of such expenditure of Rs. 10,62,34,619 made u/s 40(a)(ia) of the Act may kindly be deleted as no such expenditure is disallowable as per the On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the decision of Ld. AO wherein it has made disallowance of Rs. 10,62,34,619 and added back to the income of sis of nonfulfillment of procedural the submission made by M/s Unity Infraprojects Limited regarding inclusion of contract charges in the of the case and in law, Ld. CIT (A) erred in upholding the business income determined erroneously by Ld. AO in its assessment order, amounting to Rs. 1,04,06,646 while the actual business income as per ITR filed of A.Y. 2014-15 amounts ly. The appellant prays that this arithmetical error On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the income from other sources determined nt order, amounting to Rs. 6,01,718 while the actual income from other sources as per ITR filed 15 amounts to Rs. 4,15,048 only. The appellant prays On the facts and circumsta erred in confirming the demand erroneously raised by the Ld. AO without perusing the facts and submission made by the appellant during the course of first appellate proceedings. The appellant prays that such erroneou as per the factual evidence of the case. Ground No. 7: On the facts and circumstances of the case and in law, Ld. CIT(A) erred in upholding the decision of Ld. AO which has made disallowance of expenditure w case. Ground No. 8: In consequence of the above ground, Ld. CIT(A) erred in upholding the action of Ld. AO which is initiating penalty proceedings u/s 271(1)(c) of the 2. Briefly stated, the facts of the present assessee is a joint venture entity formed between M/s Unity Infra Project Ltd. and M/s SMC Infrastructure Ltd. During the relevant assessment year, the assessee was engaged in the business of executing civil contracts. The assessee filed declaring a total income of Rs. 36,73,130/ subsequently selected for scrutiny assessment. Statutory notices were duly issued and complied with. During the course of scrutiny proceedings, the Assessing Officer noted that the awarded a sub-contract amounting to Rs. 10,62,34,619/ its joint venture partners, M/s Unity Infra Project Ltd. However, no tax was deducted at source on the said sub Consequently, the Assessing Officer invoked the section 40(a)(ia) of the Act Unity SMC Joint Venture ITA No. 225/MUM/2024 On the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the demand erroneously raised by the Ld. AO without perusing the facts and submission made by the appellant during the course of first appellate proceedings. The appellant prays that such erroneous demand raised may kindly be altered or deleted as per the factual evidence of the case. Ground No. 7: On the facts and circumstances of the case and in law, Ld. CIT(A) erred in upholding the decision of Ld. AO which has made disallowance of expenditure without appreciating the facts of the Ground No. 8: In consequence of the above ground, Ld. CIT(A) erred in upholding the action of Ld. AO which is initiating penalty proceedings u/s the Act. Briefly stated, the facts of the present case are that the assessee is a joint venture entity formed between M/s Unity Infra Project Ltd. and M/s SMC Infrastructure Ltd. During the relevant assessment year, the assessee was engaged in the business of executing civil contracts. The assessee filed its return of income declaring a total income of Rs. 36,73,130/ subsequently selected for scrutiny assessment. Statutory notices were duly issued and complied with. During the course of scrutiny proceedings, the Assessing Officer noted that the contract amounting to Rs. 10,62,34,619/ its joint venture partners, M/s Unity Infra Project Ltd. However, no tax was deducted at source on the said sub-contract payment. Consequently, the Assessing Officer invoked the section 40(a)(ia) of the Act , disallowing the said amount of Rs. Unity SMC Joint Venture 3 ITA No. 225/MUM/2024 nces of the case and in law, Ld. CIT(A) erred in confirming the demand erroneously raised by the Ld. AO without perusing the facts and submission made by the appellant during the course of first appellate proceedings. The appellant prays s demand raised may kindly be altered or deleted On the facts and circumstances of the case and in law, Ld. CIT(A) erred in upholding the decision of Ld. AO which has made ithout appreciating the facts of the In consequence of the above ground, Ld. CIT(A) erred in upholding the action of Ld. AO which is initiating penalty proceedings u/s case are that the assessee is a joint venture entity formed between M/s Unity Infra Project Ltd. and M/s SMC Infrastructure Ltd. During the relevant assessment year, the assessee was engaged in the business of its return of income declaring a total income of Rs. 36,73,130/-, which was subsequently selected for scrutiny assessment. Statutory notices were duly issued and complied with. During the course of scrutiny proceedings, the Assessing Officer noted that the assessee had contract amounting to Rs. 10,62,34,619/- to one of its joint venture partners, M/s Unity Infra Project Ltd. However, no contract payment. Consequently, the Assessing Officer invoked the provisions of , disallowing the said amount of Rs. 10.62 crores and completed the assessment under section 143(3) of the Act vide order dated 30.11.2016. 2.1 Aggrieved by the said disallowance, the assessee preferred an appeal before the Ld. CIT(A) the assessee filed an application under Rule 46A of the Income Rules, 1962 (hereinafter referred to as ‘the Rules’), see admission of additional evidence to substantiate that the payee, M/s Unity Infra Project Ltd., had already discharged its tax liability on the said sub-contract amount. In support of this claim, the assessee furnished a certificate in Form No. 26AS, a under the proviso to section 40(a)(ia) of the Act, and requested its admission as additional evidence. The assessee further explained the reasons for its inability to furnish the said evidence before the Assessing Officer during the assessment CIT(A), upon receipt of the additional evidence, called for objections from the Assessing Officer. The Assessing Officer, in the remand report, objected to the admission of the said additional evidence. After considering the objec to admit the additional evidence, relying upon the judgment of the Hon’ble Delhi High Court in 204 Taxman 106 (Delhi), among other judicial precedents cited in the impugned order. 2.2 Thus, the present appeal raises the crucial issue of whether the learned CIT(A) was justified in rejecting the additional evidence filed Unity SMC Joint Venture ITA No. 225/MUM/2024 10.62 crores and completed the assessment under section 143(3) of the Act vide order dated 30.11.2016. Aggrieved by the said disallowance, the assessee preferred an Ld. CIT(A). In the course of appellate proceedings, the assessee filed an application under Rule 46A of the Income Rules, 1962 (hereinafter referred to as ‘the Rules’), see admission of additional evidence to substantiate that the payee, M/s Unity Infra Project Ltd., had already discharged its tax liability contract amount. In support of this claim, the assessee furnished a certificate in Form No. 26AS, a under the proviso to section 40(a)(ia) of the Act, and requested its admission as additional evidence. The assessee further explained the reasons for its inability to furnish the said evidence before the Assessing Officer during the assessment proceedings. The learned CIT(A), upon receipt of the additional evidence, called for objections from the Assessing Officer. The Assessing Officer, in the remand report, objected to the admission of the said additional evidence. After considering the objections raised, the learned CIT(A) declined to admit the additional evidence, relying upon the judgment of the Hon’ble Delhi High Court in CIT v. Manish Build Well (P.) Ltd. 204 Taxman 106 (Delhi), among other judicial precedents cited in 2.2 Thus, the present appeal raises the crucial issue of whether the learned CIT(A) was justified in rejecting the additional evidence filed Unity SMC Joint Venture 4 ITA No. 225/MUM/2024 10.62 crores and completed the assessment under section 143(3) of Aggrieved by the said disallowance, the assessee preferred an . In the course of appellate proceedings, the assessee filed an application under Rule 46A of the Income-tax Rules, 1962 (hereinafter referred to as ‘the Rules’), seeking admission of additional evidence to substantiate that the payee, M/s Unity Infra Project Ltd., had already discharged its tax liability contract amount. In support of this claim, the assessee furnished a certificate in Form No. 26AS, as prescribed under the proviso to section 40(a)(ia) of the Act, and requested its admission as additional evidence. The assessee further explained the reasons for its inability to furnish the said evidence before the proceedings. The learned CIT(A), upon receipt of the additional evidence, called for objections from the Assessing Officer. The Assessing Officer, in the remand report, objected to the admission of the said additional evidence. tions raised, the learned CIT(A) declined to admit the additional evidence, relying upon the judgment of the CIT v. Manish Build Well (P.) Ltd. [2011] 204 Taxman 106 (Delhi), among other judicial precedents cited in 2.2 Thus, the present appeal raises the crucial issue of whether the learned CIT(A) was justified in rejecting the additional evidence filed by the assessee under Rule 46A of the Rules and whether the disallowance under section 40(a)(ia) of the Act facts and circumstances of the case. 3. Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 35 comprising the copy of the Form No. 26AS issued by the Chartered Accountant. 4. We have heard the relevant materials on record is eligibility of additional evidence for admission in terms of Rule 46A of the Rules. The Ld. CIT(A) has declined additional evidence observing as under: “8.3 During the course of appellate proceedings, I have carefully considered the assessment order, submissions of the appellant, Remand report, Rejoinder to remand report submitted by the appellant and the grounds of appeal. Th appellant with regard to additional evidence is not tenable since, the AO issued notice u/s 142(1) on 17.10.2016 and subsequent mails sent on 01.11.2016 & 12.11.2016 required to explain as to why the said sub-contract charges of Rs disallowed u/s 40(a)(ia) of the Act. The order passed u/s 143(3) on 30.11.2016 by which AO has given ample of time i.e. 43 days (from 18.10.2016 to 29.11.2016) which is more than sufficient time to submit required details. The Chartered Accountant had to examine several documents, books of accounts, records etc of the party in order to satisfy himself about the matter and only then he could issue Form 26A is not sufficient cause to admit additi that does not constitute sufficient cause as required under Rule 46A of the Income Tax Rules, 1962. In my opinion, there is no case for the appellant to state that the appellant was prevented by sufficie cause from producing the said evidence during assessment proceedings. The assessee was given many opportunities which are documented in the assessment order and are also verifiable from the record. Unity SMC Joint Venture ITA No. 225/MUM/2024 by the assessee under Rule 46A of the Rules and whether the disallowance under section 40(a)(ia) of the Act was warranted in the facts and circumstances of the case. Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 35 comprising the copy of the Form No. 26AS issued by the Chartered Accountant. rival submissions of the parties and perused the relevant materials on record. The limited question in the matter is eligibility of additional evidence for admission in terms of Rule 46A of the Rules. The Ld. CIT(A) has declined evidence observing as under: 8.3 During the course of appellate proceedings, I have carefully considered the assessment order, submissions of the appellant, Remand report, Rejoinder to remand report submitted by the appellant and the grounds of appeal. The reply submitted by the appellant with regard to additional evidence is not tenable since, the AO issued notice u/s 142(1) on 17.10.2016 and subsequent mails sent on 01.11.2016 & 12.11.2016 required to explain as to why the contract charges of Rs. 10.62 crores should not be disallowed u/s 40(a)(ia) of the Act. The order passed u/s 143(3) on 30.11.2016 by which AO has given ample of time i.e. 43 days (from 18.10.2016 to 29.11.2016) which is more than sufficient time to submit required details. The reason given by appellant that the Chartered Accountant had to examine several documents, books of accounts, records etc of the party in order to satisfy himself about the matter and only then he could issue Form 26A is not sufficient cause to admit additional evidence as the same is not tenable. In my view that does not constitute sufficient cause as required under Rule 46A of the Income Tax Rules, 1962. In my opinion, there is no case for the appellant to state that the appellant was prevented by sufficie cause from producing the said evidence during assessment proceedings. The assessee was given many opportunities which are documented in the assessment order and are also verifiable record.” Unity SMC Joint Venture 5 ITA No. 225/MUM/2024 by the assessee under Rule 46A of the Rules and whether the was warranted in the Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 35 comprising the copy of the Form No. 26AS rival submissions of the parties and perused . The limited question in the matter is eligibility of additional evidence for admission in terms of Rule 46A of the Rules. The Ld. CIT(A) has declined to admit the 8.3 During the course of appellate proceedings, I have carefully considered the assessment order, submissions of the appellant, Remand report, Rejoinder to remand report submitted by the e reply submitted by the appellant with regard to additional evidence is not tenable since, the AO issued notice u/s 142(1) on 17.10.2016 and subsequent mails sent on 01.11.2016 & 12.11.2016 required to explain as to why the . 10.62 crores should not be disallowed u/s 40(a)(ia) of the Act. The order passed u/s 143(3) on 30.11.2016 by which AO has given ample of time i.e. 43 days (from 18.10.2016 to 29.11.2016) which is more than sufficient time to reason given by appellant that the Chartered Accountant had to examine several documents, books of accounts, records etc of the party in order to satisfy himself about the matter and only then he could issue Form 26A is not sufficient cause onal evidence as the same is not tenable. In my view that does not constitute sufficient cause as required under Rule 46A of the Income Tax Rules, 1962. In my opinion, there is no case for the appellant to state that the appellant was prevented by sufficient cause from producing the said evidence during assessment proceedings. The assessee was given many opportunities which are documented in the assessment order and are also verifiable 4.1 Having carefully examined the matter, we find that CIT(A) declined to admit the additional evidence on the ground that a period of 43 days was sufficient for the assessee to procure and submit the requisite certificate from the Chartered Accountant. However, in our considered view, the require a certificate is contingent upon the facts and circumstances of each case, and no rigid or inflexible timeframe can be universally prescribed. The possibility that the assessee may have required additional time to secure the necessar disregarded. The assessee has placed on record a copy of Form No. 26A, which is available at pages 2 to 5 of the Paper Book. The said certificate, issued by a duly qualified Chartered Accountant, unequivocally supports the content satisfied all conditions prescribed under the proviso to section 40(a)(ia) of the Act. It is a well technicalities should not be allowed to defeat the cause of substantive justice. In the present such evidence merely on a hyper grave prejudice to the assessee and frustrate the very purpose of the statutory provision. the interest of substan aside the impugned order of the learned CIT(A) and remand the matter back to him for reconsideration. The learned CIT(A) is directed to admit the additional evidence and adjudicate the issue afresh, strictly in accordance with law, after affording a reasonable Unity SMC Joint Venture ITA No. 225/MUM/2024 Having carefully examined the matter, we find that CIT(A) declined to admit the additional evidence on the ground that a period of 43 days was sufficient for the assessee to procure and submit the requisite certificate from the Chartered Accountant. However, in our considered view, the requirement of obtaining such a certificate is contingent upon the facts and circumstances of each case, and no rigid or inflexible timeframe can be universally prescribed. The possibility that the assessee may have required additional time to secure the necessary certification cannot be The assessee has placed on record a copy of Form No. 26A, which is available at pages 2 to 5 of the Paper Book. The said certificate, issued by a duly qualified Chartered Accountant, unequivocally supports the contention that the assessee has satisfied all conditions prescribed under the proviso to section 40(a)(ia) of the Act. It is a well-settled principle that procedural technicalities should not be allowed to defeat the cause of substantive justice. In the present case, the denial of admission of such evidence merely on a hyper-technical ground would result in grave prejudice to the assessee and frustrate the very purpose of the statutory provision. In light of the foregoing discussion and in the interest of substantial justice, we deem it appropriate to set aside the impugned order of the learned CIT(A) and remand the matter back to him for reconsideration. The learned CIT(A) is directed to admit the additional evidence and adjudicate the issue ccordance with law, after affording a reasonable Unity SMC Joint Venture 6 ITA No. 225/MUM/2024 Having carefully examined the matter, we find that the learned CIT(A) declined to admit the additional evidence on the ground that a period of 43 days was sufficient for the assessee to procure and submit the requisite certificate from the Chartered Accountant. ment of obtaining such a certificate is contingent upon the facts and circumstances of each case, and no rigid or inflexible timeframe can be universally prescribed. The possibility that the assessee may have required y certification cannot be The assessee has placed on record a copy of Form No. 26A, which is available at pages 2 to 5 of the Paper Book. The said certificate, issued by a duly qualified Chartered Accountant, ion that the assessee has satisfied all conditions prescribed under the proviso to section settled principle that procedural technicalities should not be allowed to defeat the cause of case, the denial of admission of technical ground would result in grave prejudice to the assessee and frustrate the very purpose of In light of the foregoing discussion and in tial justice, we deem it appropriate to set aside the impugned order of the learned CIT(A) and remand the matter back to him for reconsideration. The learned CIT(A) is directed to admit the additional evidence and adjudicate the issue ccordance with law, after affording a reasonable opportunity of hearing to both the Assessing Officer and the assessee. We order accordingly. assessee are accordingly allowed for statistical purposes. 5. In the result, the app statistical purposes. Order pronounced in the open Court on Sd/ (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 21/02/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Unity SMC Joint Venture ITA No. 225/MUM/2024 opportunity of hearing to both the Assessing Officer and the We order accordingly. The grounds of appeal of the assessee are accordingly allowed for statistical purposes. In the result, the appeal of the assessee is allowed for nounced in the open Court on 21/02/2025. Sd/- Sd/ (RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Unity SMC Joint Venture 7 ITA No. 225/MUM/2024 opportunity of hearing to both the Assessing Officer and the The grounds of appeal of the assessee are accordingly allowed for statistical purposes. eal of the assessee is allowed for /02/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai "