SUJALA INFRASTRUCTURE PRIVATE LIMITED,HYDERABAD vs. ACIT, CIRCLE -1, KURNOOL

Succinctly stated, the assessee company, which is engaged in the business of executing civil contract works, had e-filed its return of income for AY 2016-17 on 19/01/2017, declaring an income of Rs.43,04,040/-. Subsequently, the assessee company's case was 3 Sujala Infrastructure Private Limited vs. ACIT selected for scrutiny under section 143(2) of the Act. During the assessment proceedings, the AO, vide notices dated 23/10/2018 and 28/11/2018 under section 142(1) of the Act, called upon the assessee company to submit certain details. However, as the assessee company failed to furnish the requisite details, the AO proceeded to frame the assessment in the manner contemplated under section 144 of the Act.

The AO observed that a perusal of Form-26AS and the Profit & Loss account of the assessee company revealed certain discrepancies, as under:

Aggrieved, the assessee company carried the matter in appeal before the CIT(A). Ostensibly, as the assessee company, despite having been put to notice about the fixation of the appeal on six occasions, had failed to participate in the proceedings, the CIT(A) proceeded with the appeal on an ex parte basis and, finding no infirmity in the view taken by the AO, upheld the additions made by him and dismissed the appeal.

Aggrieved, the assessee company has carried the matter in appeal before us.

We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below, and considered the material available on record.

Shri T Chaitanya Kumar, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee company, at the threshold of hearing of the appeal, submitted that both the authorities below had grossly erred in law and facts of the case by arbitrarily determining the income of the assessee company @ 12.5% of its gross receipts of Rs.14,00,95,930/-. Elaborating on his contention, the Ld. AR submitted that the books of accounts of the assessee company for the subject year were duly audited under section 44AB of the Act, Pages 2- 10 of APB. Apart from that, it was submitted that both the contract receipts and the interest income were duly accounted for in the audited books of accounts of the assessee company. Carrying his contention

Per contra, Dr. Sachin Kumar, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”), relied upon the orders of the authorities below. It was submitted by him that as the assessee company had not only failed to reconcile the discrepancy pertaining to the contract receipts and interest income as disclosed in its Profit & Loss

We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the material available on record. Admittedly, it is a matter of record that the assessee company, in the course of the assessment proceedings, failed to comply with the notices issued by the AO under section 142(1) of the Act, dated 23/10/2018 and 28/11/2018. Also, we find that the assessee company failed to reconcile the discrepancy between the contract receipts and the interest income as disclosed in its Profit & Loss account, and that reflected in its Form- 26AS. Further, it transpires from the record that the assessee company failed to produce documentary evidence, viz., vouchers, to support the expenses incurred for its civil contract work. Also, we find that it is a matter of fact borne from the record, despite the fact that the CIT(A) had afforded six opportunities to the assessee company to participate in the proceedings before him, but on neither of the occasions did the assessee company participate in the said proceedings.

Although, we principally concur with the view taken by the AO that as the assessee company had failed to produce documentary evidence, viz., bills/vouchers etc., supporting its claim for deduction of expenses incurred towards civil contract works, as well as had failed to reconcile the discrepancy between the contract receipts and interest income in its Profit & Loss account as against that reflected in Form-26AS, the AO was justified in rejecting the books of accounts under section 145(3) of the Act and estimating the income of the assessee company. At the same time, we find substance in the Ld. AR’s claim that the estimation of the income of the assessee company @ 12.5% of its contract receipts of Rs. 14 crores (approx.) is not only high pitched and exorbitant, but also does not inspire any confidence in the backdrop of the fact that even under the presumptive scheme of taxation, contemplated under section 44AD of the Act, the income on the contract receipts up to Rs. 60 lakhs is determined @ 6% (where the amounts are received through cheques).

At the same time, we cannot remain oblivious of the fact that not only the assessee company had failed to furnish the requisite details in the course of the assessment proceedings, but had also adopted a lackadaisical approach and, despite having been afforded six opportunities, had failed to participate in the proceedings before the CIT(A). Although, in all fairness we deem it apposite in order to bring the real income of the assessee company to tax, set aside the matter to the 8 Sujala Infrastructure Private Limited vs. ACIT file of the AO with a direction to re-adjudicate the same afresh, but considering the lackadaisical approach adopted by the assessee company before both the lower authorities, we deprecate the said conduct of the assessee company and impose a cost of Rs. 20,000/-, which it is directed to deposit with the “Prime Minister National Relief Fund” within a period of 30 days from the date of receipt of this order, and produce a copy of the receipt before the Assessing Officer.

We thus, in terms of our aforesaid deliberations, set aside the matter to the file of the AO with a direction to re-adjudicate the matter and pass a fresh order of assessment. Needless to say, the AO shall, in the course of the set aside proceedings, afford a reasonable opportunity of being heard to the assessee company.

In the result, the appeal filed by the assessee company is allowed for statistical purposes in terms of our aforesaid observations.

The Principal Commissioner of Income Tax, Kurnool.

"वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad.

The Commissioner of Income Tax 6. गाड"फ़ाईल / Guard file