VENSA INFRASTRUCTURE LIMITED,HYDERABAD vs. ACIT., CENTRAL CIRCLE-2(4), HYDERABAD

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee challenged the additions made by the AO towards estimation of income at 1% on the gross contract receipts, on the ground that the assessee is an entry provider without carrying out any actual contract. The assessee further contended that it received subcontract work from M/s Megha Engineering and Infrastructure Ltd and the same has been subcontracted to various entities on back to back basis, for which the assessee has furnished sub-contract agreement, ledger agreements, RA Bills and bank account extract etc. The Ld.CIT(A), after considering the relevant submissions of the assessee and also taking note of remand report of the AO, observed that, in view of clear findings of the AO that the assessee is a intermediary, involved in providing accommodation entries for commission, the AO has rightly estimated 1% income on gross receipts of Rs.62,48,00,000/- . The Ld.CIT(A) further observed that since the assessee has already offered 0.224% profit on turnover, including gross contract receipt from the main contractor, the AO is directed to give credit for income already declared on this turnover.

Aggrieved by the order of the Ld.CIT(A), the assessee is now in appeal before the Tribunal.

The learned counsel for the assessee, Shri C.Maheshwar Reddy, CA, submitted that the Ld.CIT(A) erred in sustaining the additions made by the AO towards estimation of 1% income on gross receipts, without appreciating the fact that the AO made additions on the contract receipts which has been already disclosed in the books of accounts for the relevant assessment year. Learned counsel for the assessee referring to various evidences submitted that the assessee is a sub-contractor for M/s Megha Engineering and Infrastructure Ltd. The assessee has received sub-contract works on back-to-back basis and the same has been sub contracted to various entities for execution of work. The assessee has filed various evidences including sub contract agreements, payment details, RA bills submitted by the contractors to prove the genuineness of payment. The AO without considering relevant details, simply on the basis of appraisal report claims that there is incriminating material for making addition, even though there is no reference of any incriminating material in the assessment order. The Ld.CIT(A) without considering relevant facts, simply upheld the estimation of income, even though there is no valid reason for rejection of books of accounts maintained by the assessee. Therefore, submitted that the additions made by the AO should be deleted.

The learned CIT-DR, Ms.U.Mini Chandran, supporting the order of the Ld.CIT(A) submitted that the AO referred to appraisal report and incriminating material found during the course of search to support additions towards estimation of income on gross contract receipts. The AO has recorded categorical finding that the assessee is intermediary involved in providing accommodation entries, without there being any actual work. The Ld.CIT(A) after considering the relevant facts has rightly sustained the estimation of income and further allowed credit for profit already declared for said turnover. Therefore, she submitted that the additions made by the AO should be upheld.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The AO made addition of 1% commission on gross contract receipt of Rs.62,48,00,000/- received from M/s Megha Engineering and Infrastructure Ltd. The AO made addition on the ground that there is enough evidence in the appraisal report and incriminating material to prove that the assessee is an intermediary, involved in providing accommodation entries, without there being any actual work. Although the AO refers to appraisal report and so called incriminating material, but there is no reference of any incriminating material found during the course of search, which suggests that the assessee is an intermediary involved in providing accommodation entries for the main contractor. On the other hand, the assessee has filed all possible evidences including sub-contract agreements, payment details, RA bills submitted by the contractors and proved that it has executed civil contract works for Kaleswaram project. The assessee had also filed relevant bank account statement, TDS and GST filings in support of its contentions. From the details filed by the assessee, it is undisputedly clear that the assessee has accounted the contract receipts from M/s Megha Engineering and also paid relevant taxes on profit derived from the said works contract. Further, the evidences filed by the assessee clearly shows that the assessee has subcontracted the work to various contractors and the same has been executed by sub-contractors, which is evident from RA bills submitted by the parties. Therefore, we are of the considered view that, once the assessee has filed relevant evidences to prove the genuineness of transactions, the AO ought not to have made additions towards estimation of profit or income or commission on gross contract receipts, without there being any evidences to suggest that the assessee is an entry provider for main contractors. The Ld.CIT(A), without considering the relevant facts, simply sustained the additions made by the AO.

Coming back to another aspect of the issue. Admittedly, the search in the case of M/s Prathima Infrastructure Pvt. Ltd. has been conducted on 06.02.2020. The AO issued notice u/s 153C on 05.11.2021. For the purpose of section 153C, the date of search as referred to u/s 153A shall be construed as the date on which the AO hand over the relevant material to the AO, who is having jurisdiction over such other person. In the present case, although there is no reference of satisfaction note recorded by the AO and handing over of books of accounts, but going by the date of notice issued u/s 153C i.e., on 05.11.2021, the date of search for the purpose of section 153A shall be construed as 05.11.2021. If we consider the date of search as 05.11.2021, then the assessment for the A.Y.2019-20 is unabated/concluded as on 05.11.2021, because the time limit for issue of notice u/s 143(2) for the A.Y.2019-20 would expire on 30.09.2020. Once the assessment is unabated/concluded as on date of search, then no additions can be made in the absence of incriminating material found during the course of search. Since the AO made additions towards estimation of profit on gross contract receipts, which is already accounted in the regular books of accounts maintained by the assessee, in our considered view, the additions made by the AO towards estimation of 1% commission on gross receipts cannot be sustained on this count also.

In view of this matter and considering the facts and circumstances of the case, we are of the considered view that the additions made by the AO towards estimation of 1% commission on gross contract receipts cannot be sustained. The Ld.CIT(A), without appreciating the relevant facts, simply sustained the additions made by the AO. Thus, we set aside the order of the Ld.CIT(A) and direct the AO to delete the addition of Rs.62,48,000/- made towards estimation of 1% commission on gross contract receipts.

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