SWATI DHIRAJ SATRA,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX -27(3), MUMBAI

1 ITA 3016Mum/2023 Swati Dhiraj Satra IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI

BEFORE SHRI.NARENDER KUMAR CHOUDHRY (JUDICIAL MEMBER) AND SHRI GAGAN GOYAL (ACCOUNTANT MEMBER)

I.T.A. No.3016/Mum/2023 (Assessment year : 2017-18) Swati Dhiraj Satra Vs ACIT-27(3), IT OFFICE- VASI C/3, Delite Palace, RAILWAY STATION BUILDING, NAVI M.G. Road, Ghatkopar-West, MUMBAI-400 703 Mumbai PAN : AAPPS6126A APPELLANT RESPONDENT

Present for the Assessee Shri Dr. K Shivaram, Ld. Sr.Adv. & Shashi Bekal, Ld. Adv. Present for the Department Shri. Mahesh Parwani - Ld. Sr.DR

Date of hearing 21/12/2023 Date of pronouncement 21 /12/2023

O R D E R Per N.K. Choudhry (JM): This appeal has been preferred by the Assessee, against the order dated 14/08/2023 impugned herein passed by the National Faceless Appeal Centre, Delhi / Ld. Commissioner of Income-tax (Appeals) (in short, ‟Ld. Commissioner‟) under section 250 of the Income-tax Act, 1961 (in short, „the Act‟) for the A.Y. 2017-18. 2. In the instant case, Assessee has declared loss of Rs. 25,50,440/- by filling its return of income on dated 08/01/2018, which was processed under section 143(1) of the Act. The case was selected for limited scrutiny with the reason of examining service receipts / fees earned by the Assessee. Accordingly notice under sections 143(2) dated 10/08/2018 was served on the Assessee. Subsequent to that, a notice under section 142(1) along with a questionnaire was also issued and served on the Assessee. Further to that, a show cause

2 ITA 3016Mum/2023 Swati Dhiraj Satra notice dated 08/12/2019 was issued and served on the Assessee. In response to the said notices, the Assessee uploaded the relevant details and documentary evidence. 3. In the assessment proceedings, the Assessing Officer noticed that the Assessee had receipt of Rs.1,00,00,000/- from M/s Trent Limited on which TDS was deducted under section 194C of the Income Tax Act, 1961 which indicated that the Assessee had undertaken a contract from M/s Trent Limited and had not offered the contract income of Rs.1,00,00,000/- for taxation. The Assessee was accordingly show caused vide notice under section 142(1) at question No.6, to match the amount of receipts pertaining to TDS deductions under section 194C of the Income Tax Act, 1961, as shown in „form 26AS‟ and in the Income-tax return filed for the year under consideration. In reply, the Assessee vide letter dated 28/06/2019 has furnished a reconciliation statement whereby the following note was also appended:- “As Trent Limited has given us Rs.1,00,00,000/- (Rs.1 Cr.) refundable advance for completion of road project and they have deducted rs.1,00,000/- (Rs.1 lakh) TDS u/s 194C which the assessee had taken into consideration while arriving at tax liability. Except this one transaction there is no mismatch as shown in Form 26AS.” 4. Noticing that the above reply of the Assessee was not supported with any documentary evidences, the Assessing Officer issued another notice dated 13/08/2019 under section 142(1) of the Act, whereby the Assessee was specifically asked to furnish all the details and documentary evidences. In reply, the Assessee vide letter dated 24/08/2018 has submitted as under:- “Service Receipts Fees:

During the year under review assessee has received refundable advance against completion or road project from M/s Trent Limited, vide letter dated 22.12.2016. Photocopy of letter received from M/s Trent Limited (A Tata Enterprise) is attached herewith. Assessee has not received any service receipt / fees during the year AY 2017-18.” Letter received from M/s Trent Limited reads as follows:- ………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………

3 ITA 3016Mum/2023 Swati Dhiraj Satra ………………………………………………………………………………………………………………… …………………………………………………………………………………………………….. 5. The AO though considered the reply of the Assessee, however not get impressed and finally worked out the profits of the Assessee from the construction works at Rs.3,52,00,000/- on the basis of POCM mandated u/s 43C of the Act and added the same in the income of the Assessee by holding as under .

7.1 “From the details in the case of the assessee, the MOA / contract for the said project was executed on 29.05.2015 and as per submissions of the assessee the project was completed on 27.06.2017. Hence, the total period of project works out to be 25 months, out of which 22 months have already been elapsed as on 31.03.2017. The assessee had not furnished the year-wise break- up of work completed and costs incurred by it. Out of total contract amount reimbursement of expense was up to Rs.2,00,00,0007- and same being in the nature of reimbursement of expense, is excluded from income computation of the assessee. Accordingly, the total remaining contract amount of Rs.4,00,00,000/- being facilitation fees, is bifurcated on the based on the time taken by the assessee for construction of such project. Considering these facts, a sum of Rs.3,52,00,000/-[ i.e.(Rs.4,00,00,000/25 months) x 22 months ] is worked out. This is based on the proportionate period elapsed since the start of the project to the end of AY 2017-18 as compared to total time span of the project, and accordingly the same as revenue has to be recognized by the assessee from the said project for the year under consideration.

7.2 As against this revenue (facilitation fees) no details of any expense have been fed byThe assessee. Without prejudice to the fact that this contract has a separate mention of reimbursement of all expenses incurred during the said project, and hence there is little scope for booking expenses against facilitation fees, still this office vide show cause letter dated 08.12.2019, has specifically asked to produce any objection/details with respect to the taxing this portion of facilitation fees. At the cost of repetition, the relevant portion is reproduced as under- "With respect to the construction contract regarding road widening work allotted to you by Trent Limited, on the perusal of the documents submitted by you, it is revealed that you have completed whole of the work as on 27-06-2017. In relation to the said project, in addition to the 50% of the expenses incurred for the project, you were also entitled to receive fees to the tune of Rs. 40000000. The MoA/contract for the said project was executed on 29.05.2015 and as per your submissions to Trent, you have completed the project on 27.06.2017. Hence the total span of project comes out to be 25 months, out of which 22 months have already been passed as on 31.03.2017. You have not specified year wise breakup of work completed. `In this regard this office is providing you an opportunity to explain and show cause as to why the amount to the tune of Rs. 35200000 (being 22/25 of the total amount) should not be considered as your income accrued till 31.03.2017, and should not be considered as your income for AY2017-1'8."

4 ITA 3016Mum/2023 Swati Dhiraj Satra

7.3 In reply to the same, the assessee vide her letter dated 14.12.2019 had furnished certain explanations, but she had not submitted that she had incurred any expenses allowable against "Facilitation Fees". 7.4 Considering the facts and circumstances of the case, the aforesaid sum of Rs.3,52,00,000/- being the revenue from the aforesaid project for the year under consideration is accordingly added to the total income of the assessee."

5.1 The Assessing Officer, after analyzing the Memorandum of Understanding dated 09/05/2015 entered into by the Assessee and M/s Trent Limited, concluded that while recognizing revenue from the project Assessee is following mercantile accounting method, however, while recognizing interest income with respect to the same contract, she is following cash based accounting. It is even surprising because both of these transactions are with respect to the same party i.e. M/s Trent Limited and same contract. In view of this and also considering the nature of income, the Assessing Officer held the same to be liable to be taxable on accrual basis only. Accordingly, the proportionate interest income of Rs.19,41,421/- as proposed and worked out in the office show cause letter, was added to the income of the Assessee.

“We are also ready for video conferencing, if feasible.”

7.1 Thereafter, the Assessee, by filing certain documents / paper book on 12/07/2023 before the Ld. Commissioner, in response to the hearing notice dated 25/08/2021 received on 02/09/2021, specifically requested for Video Conferencing by submitting as under:-

“Dear Sir, In response to the above-said Notice, I would like to clarify that the Written Submission and Pape Book regarding the same has already been submitted in response to the Noytice under section 250 received dated 25/08/2021 DIN:ITBA/NFAC/F/APL-1/2021-22/103508521(4(1) on 02/09/2021. The same acknowledgement is attached herewith or your reference (Acknowledgement No.411574551010921). Also, I have

5 ITA 3016Mum/2023 Swati Dhiraj Satra attached all the required Annexure and Clarifications you need in the said response above. Am also attaching the Paper Book and Written Submission again for your ready reference. If you do not concede with the submissions, we earnestly request a Video Conferencing in the matter. Thanks and Regards” (emphasis ours)

7.2 The Ld. DR on the contrary supported the impugned order by submitting that the impugned order does not suffers from any perversity, impropriatory or illegality .

7.3 We have considered the rival submissions of the parties. It is a undisputed fact that Assessee specifically asked for video conferencing and has also raised the specific Ground no 1, which pertains to violation of the principles of natural justice, for not being granting the opportunity of being heard through video conferencing. The video conferencing has been made mandatory vide Faceless Appeal Scheme, 2021, in case, the Assessee asked specially for the same. This right given is a very valuable one, namely, a right of getting a reasonable opportunity of being heard and is a facet of one of the well known principles of natural justice, namely, audi-alteram-partem and therefore the Court has to consider and examine the scope, content and the gist of the right given to the person concerned, therefore considering the peculiar facts and circumstances of the case, as no prejudice shall be caused to the Revenue department in case of granting the opportunity to the Assessee to present the case through video conferencing, but the rights of Assessee shall certainly gets prejudiced in case of denial of the same, hence we are inclined set aside the impugned order and to remand the instant case to the file of the Ld. Commissioner for decision afresh. Suffice to say, by granting reasonable opportunity of being heard through video conferencing as well, as requested by the Assessee. Consequently the impugned order is set aside and the case is remanded accordingly. The Assessee is also directed to cooperate with the appellate proceedings and to file the relevant documents which would be essential and to be needed by the Ld. Commissioner for proper adjudication of the case.

6 ITA 3016Mum/2023 Swati Dhiraj Satra 8. In the result, appeal filed by the Assessee stands allowed for statistical purpose.

Order pronounced in the open court on 21/12/2023.

Sd/- sd/- (GAGAN GOYAL) (NARENDER KUMAR CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Pavanan प्रतितिति अग्रेतििCopy of the Order forwarded to : 1. अिीिार्थी/The Appellant , 2. प्रतिवादी/ The Respondent. 3. आयकर आयुक्त CIT 4. तवभागीय प्रतितिति, आय.अिी.अति., मुबंई/DR, ITAT, Mumbai 6. गार्ड फाइि/Guard file. BY ORDER, //True Copy// Asstt. Registrar, ITAT, Mumbai