THE DCIT, CIRCLE-2(1)(2),, AHMEDABAD vs. JSIW INFRASTRUCTURE PVT.LTD.,, AHMEDABAD

The assessee has raised following grounds of appeal:-

The fact in brief is that the return of income declaring income of Rs. 16,57,57,400/- was filed on 30th Sep, 2011. The return was processed u/s. 143(1) of the Income Tax Act. Subsequently, the assessment was reopened by issuing of notice u/s. 148 of the Act on 30th March, 2016 on the basis of information received from DDIT(Investigation) that assessee was sub- contractor of M/s. Naftogaz India Pvt. Ltd. who had booked false entries in its books of account to the amount of Rs. 44,99,99,998/- . During the course of assessment, the Assessing Officer has stated that search action was carried in the case of M/s. Naftogaz India Pvt. Ltd. and it was gathered from the information that assessee company had done the sub-contract for M/s. Naftogaz India Ltd. for amount of Rs. 49,99,99,999/-. The Assessing Officer has stated that the assessee has not recorded the sub-contract work performed to the amount of Rs.49,99,999/- in its books of account. Therefore, the Assessing Officer has rejected the books of account of the assessee and increase the income of the assessee by 8% on total amount of Rs. 44,99,99,999/- shown as sub-contract carried out by the assessee for Naftogaz India Pvt. Ltd. In this way, the Assessing Officer has made addition of Rs. 3,60,00,000/- to the total income of the assessee.

Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision of the ld. CIT(A) is as under:- “2.3 I have carefully considered the facts of the case, assessment order and submission of the appellant. The AO has made the addition of Rs.3,60,00,000/- being profit @ 8% of Rs.44,99,99,999/- on the ground that appellant has not recorded the contract of Rs.44,99,99,999/- from M/s. Nefto Go?, IndiaPvt. Ltd. in the books of account. The appellant has submitted that it has received contract of Rs.25,10,71,424/- from M/s, MeftoGaz India Pvt. Ltd. and Rs.20,44,00,000/- from M/s. AMR Construction and same are duly recorded in the books of account. The appellant has further submitted that contract of Rs.20,44,00,000/- from M/s. AMR Construction limited was out of contract of Rs.44,84,69,9027- sub contracted by M/s. NeftoGaz India Pvt. Ltd. Therefore, AO's finding that contract received from M/s. NeftoGaz India Pvt. Ltd. was not recorded in the books of account is not correct. 2.4. The AO in his reason for recording at Para 3 has noted that during the course of search proceedings and the statement recorded it was noticed that M/s. NeftoGaz India Pvt. Ltd. had given sub contract worth Rs,44,84,69,902/- to M/s. AMR Construction Limited and M/s. AMR Construction Limited correspondingly has given a sub contract to appellant company for an amount of Rs.22,40,81,633/- for the following sites:- i) Site Excavation Work between Km: 329.000 to KM 387.100 (58,100 KM) of Reach - V of the six laning of Panipat - Jalandhar ii) Site Excavation work between KM : 237.161 to Km. 267.000 (30.439 KM) of Reach - V of the six laning of Panipat- Jalandhar section of NH - 1 project, iii) Site Excavation work between KM : 237.161 to Km. 267.000 Total 61.400 Km of Reach - V of the six laning of Panipat - Jalandhar section of NH - 1 project. (iv) Construction of road work for Kondhwar Ph-1, Part - It, Pune. (v) Construction of Road work for Mira Road Ph-1, Part - II, Mira Road, Thane. The appellant company has further sub contracted the above project to M/s. Patel Engineering Limited for Rs.12,34,00,000/- for contracts of above projects mentioned at Pont Mo. i, ii & iii and to M/s. Coastal Projects Limited for Rs.7,67,00,000/- for projects mentioned at Point No. iv& v. The AO has further recorded that M/s. NeftoGaz India Pvt. Ltd. has given sub contract worth Rs.24,59,69,387/- to the appellant company for the following projects:- i) Construction of Pump House in HNSS (Handri Neeva Sujala Sravanthi) Phase - II, Madkasira (13) in the stale of AO for Rs. l 1.42 crores. ii) GLIS (GermanischerLlyocl Industrial Services India Pvt. Lid.) Phase - Ill, Package - I. earth Work, Excavation etc. (Rs.3.81 crores). iii) Dismantling of concrete and clearing debris from Mumbai International Airport (MIAL) Project site Rs.8.30 crores) 12 iv) Bangalore Water Supply and Sewerage Board : Fabrication and laying of clear water tank main from Gubala to HBR on east Bangalore (Rs. l .55 crores). The assessee, M/s. JSIW Infrastructure Pvt. Ltd. on receipt of the contract correspondingly sub contracted the above projects to the following parties:- A. M/s. PSK Infrastructures and Projects Ltd. for Rs.19,33,67,345/- B. Coastal Projects Limited both Hyderabad for Rs.5,25,51,020/- The AO despite of the above facts has noted that appellant has not recorded the contract of Rs.44,99,99,999/- in the books of account and added 8% of the above receipt as income. 2.5. Appellant on the other hand has submitted copy of P & L Account showing the contract from M/s. NeftoGaz India Pvt. Ltd. and M/s. AMR Construction. The contract has been sub contracted on back to back basis and accounted for in the books of account. The appellant has submitted detail of work and accounted for in the books of account as under:- xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 2.8 The appellant has shown receipt of Rs.45,51,53,057/- and debited expenditure of Rs.44,59,31,228/- showing profit of Rs.92,21,829/- from id contract. The appellant company has shown contract receipt of s.l80.9 crore and profit of Rs.19.39 crores in the P & L Account. The alleged contract receipt and payments are duly reflected in the books of account, therefore, rejection of books of account and estimation of profit from M/s. NeftoGaz India Pvt. Ltd. @ 8% was uncalled for and unjustified. 2.9. In view of the above facts of the case, addition made by the AO is deleted and the related grounds of appeal are allowed.”

We have heard the rival contentions and perused the material on record. Assessment u/s. 143(3) r.w.s. 147 of the Act was finalized in the case of the assessee on 29th Sep, 2016. The Assessing Officer pointed out that assessee had not recorded in its books of accounts sub-contract work carried out to the amount of Rs. 44,99,99,999/- for M/s. Naftogaz India Pvt. The Assessing Officer has rejected the books of account of the assessee and increased its income by 8% of total sub-contract amount of Rs.44,99,99,998/- executed for the contractor M/s. Naftogaz India Ltd. On perusal of material on record, it is observed that findings of the Assessing Officer are not supported with any relevant material/evidences to substantiate that the said transactions were not recorded in the books of accounts. In this regard on the other hand during the course of appellate proceedings, the ld. CIT(A) has categorically explained in his finding that assessee has recorded all the transactions in its books of account and shown the complete contract receipt and contract expenditure duly reflected in the books of account which demonstrate that the Assessing Officer has failed to substantiate the reason for rejecting the books of accounts and estimating the income of the assessee. The Assessing Officer has not pointed out any defect in the books of accounts and failed to point out how the contract receipt and contract expenditure were not recorded in the books of account. The Assessing Officer has not controverted any part of profit and loss account or other record of the assessee in support of his contention that assessee has not shown the amount of sub-contract receipt in its books of account. However, ld. CIT(A) has specifically elaborated at para 2.5 of his order demonstrating that in the profit and loss account the assessee has clearly shown the receipt and expenditure of sub-contract carried out for Page No 5 Deputy CIT vs. JSIW Infrastructure Pvt. Ltd. M/s. Naftogaz India Pvt. Ltd. The assumption/observation of the Assessing Officer has categorically been disproved by the ld. CIT(A) in his finding at para 2.5 by reproduction of the extract of book of accounts showing that sub-contract transactions were recorded in the books of accounts. In the light of the above facts and findings of ld. CIT(A), we do not find any error in the decision of ld. CIT(A), therefore, the appeal of the Revenue is dismissed.

In the result, the appeal of the Revenue is dismissed.