RAVI INFRA-JAI BUILDCON,UDAIPUR vs. DCIT C-2, UDAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA Nos. 1054 & 1055/Jodh/2025 (Assessment Year – 2018-19) Ravi Infra-Jai Buildcon (JV) DCIT C-2 95, Hiran Mangri, Sector 11 Udaipur Udaipur - 313802 PAN No. AACAR 7059 P Assessee by Shri Mushtaq Ahmad Mir, CA (Physical) Revenue by Shri O.P. Meena, CIT-DR (Virtual) Date of Hearing 25.03.2026. Date of Pronouncement 29.04.2026. ORDER DR. MITHA LAL MEENA, A.M.: These appeals are filed by assessee against the separate order of National Faceless Appeal Centre, Delhi [hereinafter referred to as NFAC/CIT(A)] even dated 23.10.2025 with respect to Assessment Year 2018-19.

ITA No. 1054/Jodh/2025

 The Ld. CIT(A) has erred in law and facts by confirming addition made by the Ld. AO on account of royalty payments. The said addition therefore deserves to be deleted.  The Ld. CIT(A) has erred in upholding addition of 10% of Expenses made by the Ld. AO. The addition made is adhoc in nature, therefore is bad in law and therefore liable to be quashed.  The assessee reserves the right to add, alter, modify or change any grounds of appeal.

2 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19 ITA No. 1055/Jodh/2025

 The Ld. CIT(A) has erred in law and facts by confirming penalty imposed u/s 270A of the Income Tax Act, 1961. The said addition therefore deserves to be quashed.  The assessee reserves the right to add, alter, modify or change any grounds of appeal. 3. Briefly the facts of the case are that the appellant assessee is a joint venture company of M/s Ravi Infra Build Project Pvt. Ltd. and Jai Buildcon Pvt. Ltd. constituted for undertaking construction for the development in construction of infrastructure project. The appellant company had filed his return of income for the year under consideration on 01.10.2018 u/s 139(1) and revised return of income u/s 139(5) of the Act on 18.03.2019. The same was processed by CPC u/s 143(1) and the case has been selected for scrutiny under CASS for proceedings.

3 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19 on the amount of work executed by the sub-contractors during the period under consideration as per Form 20Q furnished by the assessee on 17.03.2021 before the Assessing Officer. Accordingly, the Assessing Officer has made an addition of Rs. 2,65,81,867/- on account of non-deduction of TDS to the return of income of the assessee.

“The AO has denied the royalty expense claimed by the appellant for want of proof. However, during the appeal proceeding it has submitted the following in support of its claim of royalty expenses and stated it is deducted from its running bills itself. The appellant has not submitted the terms of contract with the PWD, therefore whether the deduction shown as royalty is pertaining to what whether allowable or not is not clear. AO is directed to verify the terms of agreement between the appellant and the PWD to ascertain the true nature of such royalty deduction made in certain bills alone. If the same is not allowable as per the terms of agreement the same becomes inadmissible. More importantly the AO is directed to check whether the appellant offered the income only after deduction of such royalty expenses ie the net of deductions received from the PWD. If it has offered only net of deductions as income then the claim of royalty expense once again separately is not admissible and the same shall not be allowed. If the claim of royalty is not allowable as per the terms of agreement with the PWD then the AO need to reconcile the receipts of payments from PWD as per the terms of contract for the relevant AY and the bring the correct amount of receipt on accrual basis to tax. Moreover it is also brought on record that the copy of certificates submitted by the appellant from the PWD does not carry seal, it is not in proper letter head thus lacks authenticity, so the same seems to be not reliable evidence. Accordingly, this ground of appeal is partly allowed. The appellant has stated that AO due to misunderstanding and for the want of TDS return has not allowed the sub contract expense in full and has disallowed 10% of such impugned expense. During the appeal proceeding the appellant submitted copy of the JV agreement and copy of the TDS return which are placed below:”

4 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19

5 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19

6 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19

7 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19 “On careful perusal of the details it is noted that it is only an unregistered agreement and the terms of agreement are very general. The appellant has not furnished material evidence for actual execution of work through the Subcontract by M/s Jai buildcon Pvt. Ltd except for copy of agreement and the TDS return. More over as per the terms of the agreement the sub contractor is 100% liable though it is only a sub contractor how such terms of agreement can be entered into especially without the consent of the contractee especially when it is PWD a government Department. Thus the JV agreement seems to be not a genuine one. Therefore, the same is not acceptable. Accordingly, the grounds of appeal 2 and 3 are dismissed.” 5. The Ld. AR for the assessee has submitted that the CIT(A) was not justified in confirming the addition made by AO on account of royalty payment amounting to Rs. 71,00,493/- and 10% of disallowance of expenses on adhoc basis by Ld. AO, and confirmed by the Ld. CIT(A). The AR submitted that the Ld. AO did not consider the submissions of the appellant in passing the assessment order u/s 143(3) of the Income Tax Act and the AO and the CIT(A) did not appreciate the facts of the case. The Ld. AR contended that during the appellate proceedings that details was submitted in support of its claim of royalty expenses and that of the TDS deducted from its running bills itself. However, the appellant has not submitted the terms of contract with the PWD, therefore, whether the deduction shown as royalty expenses is whether the net deductions from the PWD is not clear, from the agreement, although in support of his arguments, the Ld. AR has filed a proof note as under:

“Further bifurcation of royalty expenses paid bill wise reproducing the copy of RA Bills duly evidencing deduction of royalty from the invoices as Annexure-1.

8 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19

S. No. Particulars Bill Amount Amount (in Rs.) 1. 5th Running Bill 5,33,95,713 20,25,650.00 2. 6th Running Bill 3,00,17,114 7,00,500.00 3. 7th Running Bill 1,64,17,125 2,97,868.00 4. 8th Running Bill 1,89,60,848 78,857.00 5. 9th Running Bill 2,12,10,559 7,62,800.00 6. 10th Running Bill 4.97.02.760 13,75,409.00 7. 13th Running Bill 4,12,14,807 2,95,100.00 8. 14th Running Bill 2,12,52,403 1,88,900.00

Total 57,25,084.00

In spite of providing hand written bills with seal and stamp of the department and bearing signature of the official, evidencing the above figures, the Ld. A.O has arbitrarily directed to reconcile the figures with the JV agreement but has not applied his made that the royalty is deducted from gross bills and paid net to the appellant. The Ld. CIT(A) has reproduced the copies of hand written documents with seal and stamp wherein it is clearly stated that the royalty has been deducted from bills along with other Government dues like Cess and taxes in the order but still hypothetically confirmed the addition which is quite unjustified and therefore bad in law.

The Ld. AO grossly erred in law and facts of the case by disallowing sub-contract expense of Rs. 2,65,81,867 by solely misunderstanding that TDS was not deducted and ignoring the fact and made adhoc addition of 10% of the amount paid as subcontract amount.

9 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19 During the year M/s Jai Buildcon Pvt. Ltd (sub-contractor) had raised a bill of Rs 26,58,18,673 in respect of the work executed and the amount was paid to the subcontractor. The Ld. Assessing officer alleged that the appellant has not deducted TDS on the said amount of sub-contract expense in spite of RAVI INFRA- JAI BUILDCON (JV) AY 2018-19 furnishing TDS Return in the Form 26Q. It will not be out of place to mention here that despite the appellant furnished copy of Form 26Q vide their submission dated 17/03/2021, Ld. AO has completely ignored the same and passed the order without taking recognition of the furnished form 26Q. Appellant would also like to invite attention of honors to the 26AS of the sub-contractor to prove its assertion. The appellant has submitted copies of 26AS from Traces and details of all TDS returns filed which is reproduced in the order of Ld. CIT(A) but still made adhoc addition of 10% of total sub contract payment which is an adhoc addition without any basis. The addition therefore is arbitrary and liable to be deleted.

In the Light of my written submissions and grounds of appeal raised, appeal filed by the appellant may be allowed in the interest of justice.”

10 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19 the PWD to ascertain the true nature of such royalty deduction made, in certain bills alone. He pleaded that the impugned order may be sustained.

11 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19 allowed. However, the appellant assessee has a good arguable case on the facts and, therefore, we consider it deem appropriate to restore the issues of claim of royalty expenses back to the file of the AO with the direction to examine the issues afresh, after considering the submissions filed by the assesse on record and may be filed during the course of fresh proceedings.

As regards to 2nd issue non-deduction of TDS, the Ld. CIT(A) has observed 9. on perusal of the joint venture agreement furnished by the assesse that it was only an unregistered agreement and the terms of agreement are very general, and that the appellant had not furnished material evidence for actual execution of work through the subcontract executed by M/s Jai Buildcon Pvt. Ltd. except the copy of the agreement and the TDS return. The Ld. CIT(A) has further mentioned that as per the terms of the agreement, the sub-contractor is liable to execute 100% of the work and that how such terms of agreement can be entered into especially without the consent of the contractee especially when it is awarded by PWD, a Government Department. The Ld. CIT(A) has thus doubted the genuineness of the joint venture agreement copy furnished by the assessee. The Ld. AR could not furnish any rebuttal on the issues of the genuineness of joint venture agreement and awarding of the sub-contract for 100% execution by the Sub-contractor as it was awarded by PWD, a Government Department. We, therefore, consider this issue on the matter of

12 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19 non-deduction of TDS to be restored back to the AO to examine afresh with reference to the joint venture agreement and execution of the work by the sub-contractor and allow the claim of the assesse as per the terms and conditions of the joint venture agreement vis-à-vis the tender awarded by the PWD Department.

13 ITA Nos. 1054 & 1055/Jodh/2025 Asst. Year: 2018-19 u/s 270A of the Income Tax Act in ITA No. 1055/Jodh/2025 may also be examined by the AO in fresh assessment proceedings, if required.

Order pronounced in the open court on 29/04/2026.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 29/04/2026. Nimisha Sr. PS True Copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File

BY ORDER,