NIKSHEP INFRA PROJECTS,BANGALORE vs. INCOME TAX OFFICER, WARD-2(1)(3), BANGALORE

The ld. D.R. strongly opposed the admission of additional evidence at this stage.

We have heard the rival submissions and perused the materials available on record. On admission of additional evidence, we find good and sufficient reason in not producing/submitting these additional evidences on earlier occasions before the lower authorities. We also noted that the ld. CIT(A)/NFAC dismissed the appeal for non prosecution by the assessee. In our Opinion all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of the adjudication of above evidences produced before us. Accordingly, we admit these additional evidences for adjudication. Further, the Hon’ble High Court of Orissa in the case of Siksha “O” Anusandhan v. Commissioner of Income-tax reported in (2011) 336 ITR 112 (Ori-HC) has held as under- “23. Law is well-settled that once the materials are available on record, the appellate court should have disposed of the case on the merits taking those materials into consideration and there is no need to direct remand.

The Apex Court in Indian Bank v. K.S. Govindan Nair [2004] 13 SCC 697, held that once the materials are available on record, it was for the High Court to have decided the matter on the basis of that materials after appreciation of evidence, and there was no need for directing remand.

The Apex Court in Gowrammanni v. V.V. Patil (D) [2009] (II) OLR SC 465, held that the appellate court should have itself disposed of the case on the merits taking into consideration the evidence adduced before the trial court as on the question of identity of disputed land the parties have adduced evidence, the court commissioner was appointed and submitted a report, and he was examined as a witness and duly cross-examined and thereupon the suit was disposed of by the trial court.”

Now the brief facts of the case are that the assessee is a Partnership firm & engaged in the business of Civil Contracts, mainly of the Government Departments and Government undertakings. The assessee firm filed its return of income for the assessment year 2023-24 u/s 139(1) of the Act on 28/10/2023 declaring total income of Rs. 7,44,40,600/-. Thereafter, the case of the assessee firm was selected under CASS for the reason being business purchase made by the assessee and no TDS deducted u/s 194Q and Non-compliance to Income Computation & disclosure Standards. Accordingly, the notice u/s 143(2) of the Act and notices u/s 142(1) of the Act along with Show cause notice were issued. The assessee in response to above notices submitted the written submission along with computation of income, ledger, details of other payable, details of purchases, copy of ITR, details of sales, contract certificates, Form 26AS, details of secured loans etc. The assessee vide its reply dated 07/01/2025 submitted the reconciliation of Form 26AS, contract receipts, royalty deducted, details of sales etc. Further, the assessee vide its reply dated 05/02/2025 submitted the detailed sheet of purchases along with ledger confirmation, name and PAN of the parties. Lastly, vide reply dated 04/03/2025, the assessee submitted details of sales ledger, details of unsecured loans, invoices of purchases of motor vehicles, loan taken etc. The assessee had also made an submission on 17/03/2025 in response to show cause notice & explained the case on the VC also.

The ld. CIT(A)/NFAC dismissed the appeal of the assessee by observing as below:

During the course of appellate proceedings, no reply has been filed by the appellant. I have perused the order of the Assessing Officer and considered the facts of the case. The Assessing Officer has passed a speaking order with detailed discussion on the issues involved therein. The appellant has not pursued the appeal despite being granted several opportunities through notices u/s 250 of the I.T. Act. No details, documents or submissions have been provided by the appellant substantiating its grounds of appeal. Moreover, mere facts mentioned in Form No. 35 cannot be considered in the absence of any supporting documentary evidence and submissions.

The ld. D.R. on the other hand vehemently relied on the order of the authorities below and submitted that the assessee could not submit the full details/evidences before the AO to substantiate its claim. Further, the assessee did not appear and avail the opportunity before the ld. CIT(A)/NFAC, which shows that the assessee is very callous in its approach before both the authorities and accordingly prayed that the appeal may be dismissed.

We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that the assessee firm is engaged in civil contracts mainly of the government departments and government undertakings. During the year under consideration, out of the total contract receipts of Rs.90,14,42,334.40, works for Rs.38,46,99,507.73 were sub-contracted by the assessee to the various sub-contractors. The AO had made an addition of Rs.15,03,62,905/- towards the outstanding amount payable to sub-contractors as unexplained cash credit u/s 68 of the Act. It is submitted before us that there were 55 sub-contractors based on the nature of contracts, time available for completion, etc. Out of the total sub-contracted work of Rs. Rs.38,46,99,507.73, sub-contract works of Rs.33,07,81,785/- was to the sub-contractors having registration under GST Act and these sub-contractors have also filed GST returns in which the sub-contract amount were declared by them. The balance sub-contract work were given to the sub-contractors for value less than Rs.20 lakhs each. The details of sub-contractors i.e. name, PAN , GSTN No., amount shown in GSTR2B filed by them, opening balance, debit and credit entries during the year, closing balance and TDS made were produced before the AO. We take a note of the fact that the total outstanding amount payable to sub-contractor as on 31.3.2023 was Rs.17,01,36,763/- out of which the AO treated Rs.15,03,62,905/- [2,10,81,600 + 1,67,40,900 + 11,25,40,405 ] as unexplained credit u/s 68 of the Act. We also take a note of the fact that total sub-contract outstanding payable was Rs.17,01,36,763/- for the work done by them is not an expenditure incurred by the assessee but the outstanding amount payable to the sub- contractors as on 31/03/2023 declared under the head “Other Payables” under the Current Liabilities. We are surprised to note that the AO proposed in the show cause notice dated 08/03/2025 to make addition under head unexplained expenditure u/s 69C of the Act amounting to Rs. 17,01,36,763/- being the amount payable to sub-contractors, however, in the Assessment order, the AO made addition u/s 68 of the Act as unexplained cash credits. We found that the AO right from the outset was mystified & make contradictory observations while passing the assessment order. The AO on one hand issued notices u/s 133(6) of the Act to the parties shown as “other Payables” & on the other hand observed that in order to verify the genuineness of the payment made to these sub-contractors aggregating to Rs.17,01,36,763/-, the notice u/s 133(6) was issued. We could not understand when the assessee itself is declaring the outstanding amount payables to the sub- contractors, then how the AO will verify the genuineness of payments of these outstanding amount which were not paid. Therefore, we are of the considered opinion that the AO himself was confused whether to disallow the expenditure of sub-contract expenses or to is disallow the amount payable at the yearend shown as liability by the assessee. The assessee maintains books of accounts on day to day basis. Further, the books of accounts of the assessee was also audited u/s 44AB of the Act by a CA. Neither the auditor nor the AO found any fault in the books of accounts of the assessee. The books of accounts were also not rejected by the AO u/s 145(3) of the Act. The AO had neither disputed the amount of sub-contract expenses debited to profit & loss account by the assessee nor find it bogus. The AO had also not disputed the gross receipts as made as well as the total purchases as declared by the assessee in the P&L account. Before us, the assessee by way of additional evidences had also produced the details of the work sub contracted along with sub-contract agreements, confirmation of accounts, Copies of the invoices raised by the sub contractors, details of payment to sub contractors & the amount outstanding which were perused. The assessee also submitted the details of payment of these outstanding amount of sub-contractors during the subsequent years along with the reconciliation statement by bifurcating the Opening balances, Actual work conducted, Payment received, Amount of TDS along with the closing amount payables. We are of the firm opinion that when the AO had accepted the expenditure of Rs.38,46,99,507.73 towards the sub-contract expenses debited to P&L account, then there is no question of disallowing the payables of the same.

Now with regard to addition of difference in gross receipts on which TDS credit was claimed and the gross receipts as declared in profit & loss account amounting to Rs.5,38,40,149/-, the assessee by way of paper book submitted the detailed reconciliation of total receipts as per 26AS & total Gross receipts as per P & L A/c. Further, the assessee has also submitted the reconciliation for difference between Gross Contract Receipts as per P & L a/c and receipts on which tax deducted at source.( Placed at PB-1). On going through the same we take note of the fact that the total receipts as per 26AS is Rs.90,68,92,756.11/- whereas the gross contract receipts offered in the profit & loss account is Rs.90,14,42,334.40/-. However, it is noticed that as per the TDS schedule of the return of income, the total gross receipts were Rs.95,52,83,482.75/-. & accordingly there is a difference of Rs. 5,38,41,148.32. During the course of assessment proceedings, the assessee submitted the reconciliation of the figures and also submitted that difference was not on account of any omission of taxable receipt and hence cannot be added as income of the assessee. The assessee further submitted that the main reason for the difference was due to inclusion/exclusion of GST by the parties who have issued TDS certificate but either not filed or not correctly filed the TDS returns. The assessee had declared the Gross contract receipts correctly in the profit & loss account and claimed the TDS credit also correctly in TDS schedule of the Return. Before us, the assessee by submitting the reconciliation statement has explained the reason of difference in gross receipts as declared in the profit & loss account and the gross receipt as declared in TDS schedule and we find that the difference was mainly due to the inclusion/exclusion of GST amount shown by the Government department/undertaking while deducting the TDS. We also take note of the fact that there were few wrong declaration of the turnover as well as under reporting of the turnover which were duly reconciled by the assessee and there is no suppression of income as alleged by the AO and accordingly we direct the AO to delete this addition of Rs. 5,38,41,149/-. Thus, this ground of appeal of the assessee is also allowed.

In the result, appeal filed by the assessee is allowed.