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Facts
The Revenue filed appeals against the orders of the CIT(A) concerning assessment years 2021-2022 and 2022-2023. The appeals involved differences in reported receipts and gross profit calculations, with the assessee having presented different stands during assessment proceedings.
Held
The Tribunal found merit in the Revenue's arguments, noting the assessee's inconsistent stands. For AY 2021-2022, the matter was remitted back to the Assessing Officer for de novo decision. For AY 2022-2023, the CIT(A)'s order was found to be cryptic, and the matter was remanded back to the Assessing Officer for re-examination of gross profit with specific directions.
Key Issues
Whether the CIT(A) was justified in deleting additions related to differences in receipts and gross profit without proper substantiation and whether the assessee's inconsistent stands warranted a remand.
Sections Cited
143(3), 142(1), 144B, 201(1A), 44A, 44AB, 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “A” BENCH : HYDERABAD
Before: SHRI LALIET KUMAR & SHRI G. MANJUNATHA
ORDER PER LALIET KUMAR, J.M. The above appeals are filed by the Revenue against the respective orders both dated 29.07.2024 of the learned CIT(A)-National Faceless Appeal Centre [in short “the NFAC”], Delhi, passed u/sec.143(3) of the Income Tax Act, 1961 [in short “the Act”], relating to assessment years
2 ITA.Nos.969 & 970/Hyd/2024 2021-2022 and 2022-2023. Since common issues are involved in both these appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity. First, we take-up appeal ITA.No.969/Hyd./2024 as the “lead” appeal and both the parties are agreed to that the decision taken in this appeal be applicable in appeal ITA.No.970/Hyd./ 2024.
ITA.No.969/Hyd./2024 – A.Y. 2021-2022 :
Facts of the case, in brief, are that the assessee company is engaged in building commercial, residential complex, housing roads, railways, airports and also into construction and maintenance of roads, rails, bridges, tunnels, ports, harbour, runways etc., and operates as a Civil contractor. During the assessment year under consideration, it filed it's return of income on 28.02.2022 declaring total income at Rs.(-)21,82,31,073/-. The case of the assessee company has been selected for scrutiny under CASS. Accordingly, the Assessing Officer-CPC issued
3 ITA.Nos.969 & 970/Hyd/2024 statutory notices u/sec.143(2) and u/sec.142(1). The Authorised Representative of the Assessee filed his reply from time to time. However, the Assessing Officer has not satisfied with the explanation offered by the assessee and determined the income of the assessee company at Rs.(-) 8,50,57,850/- as against the returned income of Rs.(-) 21,82,31,073/-. While assessing the income of the assessee company, the Assessing Officer made addition of Rs.13,00,11,072/- on account of difference in receipts as per 26AS and ITR; disallowed interest expenditure u/sec.201(1A) at Rs.21,42,151/- and disallowed donation expenses of Rs.10,20,000/- vide order dated 22.12.2023 passed u/sec.143(3) r.w.s.144B of the Act.
3. Aggrieved by the additions made by the Assessing Officer, the assessee carried the matter in appeal before the learned CIT(A) and the learned CIT(A)-NFAC deleted the addition of Rs.13,00,11,072/- on account of difference in receipts as per 26AS and ITR by observing that during the year under consideration, the contract was not completed and the bill was not raised. Therefore, the assessee shown
4 ITA.Nos.969 & 970/Hyd/2024 this mobilization advance of Rs.13,00,11,072/- as liability in the balance-sheet. The learned CIT(A) after examining the audited balance-sheet of the assessee company as on 31.03.2021 and since the same is found in order, the learned CIT(A) deleted the addition of Rs.13,00,11,072/- made by the Assessing Officer on account of difference in receipts as per 26AS and ITR.
Aggrieved by the order of the learned CIT(A), the Revenue carried the matter in appeal before the Tribunal and has raised the following grounds :
1. “The order of the CIT(A) is erroneous in law as well as facts of the case.
2. Whether on the facts and circumstance of the case and in law, the CIT(A) was justified in deleting the addition of Rs.13,00,11,072/-whether the difference is receipts shown in ITR & as per 26AS could not be categorically substantiated through the claim made before the CIT(A). 3. Whether on the facts and circumstance of the case and in law, the CIT(A) was justified in deleting
5 ITA.Nos.969 & 970/Hyd/2024 addition based on claim made by the assessee stating that the income was shown in the subsequent years without verification and examination of the evidences. 4. Any other ground that may be urged at the time of hearing.”
5. During the course of hearing, the Learned DR invited the attention of the Bench that the Assessing Officer has made the impugned addition of Rs.13,00,11,072/- on account of difference in gross receipts shown by the assessee in ITR and as per 26AS. He submitted that assessee has received mobilization advance and other advances of Rs.122,97,25,215/- and Rs.193,52,471/- respectively from M/s. IJM Infrastructure Limited and deducted TDS only on mobilization advance. However, the assessee failed to explain why TDS was not deducted for the remaining advances. Similarly, the assessee has shown receipts of Rs.235.01crore in ITR whereas as per 26AS it is Rs.259.63Cr and the difference of Rs.24.62cr and with respect to confirmation of mobilization advance was only at 6 ITA.Nos.969 & 970/Hyd/2024 Rs.13.24cr. and for this difference also there is no satisfactory explanation offered by the assessee. The assessee during the course of assessment proceedings has changed it’s stand that initially the assessee had received amount towards mobilization advance and thereafter, he stated that it is the mobilization and other advances. The assessee has also taken another stand that the said advance amount is towards work to be carried-out and advance for other materials. Therefore, the Assessing Officer, not convincing the different stands taken by the assessee-company, made the impugned addition of Rs.13,00,11,072/- in the hands of the assessee-company. However, in appeal, the learned CIT(A) deleted the addition basing on the audited balance-sheet as on 31.03.2021 without verifying the bills/vouchers, TDS for the differential amounts in question. He submitted that even the learned CIT(A) had not call for any remand report while deleting the impugned addition of Rs.13,00,11,072/- and, therefore, the order of the learned CIT(A) is not in accordance with law and the order of Assessing Officer should be confirmed or in 7 ITA.Nos.969 & 970/Hyd/2024 the alternative the matter in issue be sent back to the file of learned CIT(A) for de novo verification of bills/vouchers, TDS sums deducted for the differential sums pointed by the Assessing Officer.
6. The Learned Counsel for the Assessee, on the other hand, strongly relied on the order of the learned CIT(A). He submitted that the matter in issue is already on record from the assessment stage. The learned CIT(A) after examining the audited balance-sheet of the assessee company and as the same was found to be in order, then only learned CIT(A) deleted the addition of Rs.13,00,11,072/- made by the Assessing Officer. He accordingly submitted that the order of the learned CIT(A) is in accordance with law and it should be upheld. He submitted that it is not an instance of deleting the addition without verifying the documents placed on record before the learned CIT(A). The learned CIT(A) after calling the objections from the assessee and after considering the documents placed on record, deleted the impugned addition of Rs.13,00,11,072/- made by the Assessing Officer in the 8 ITA.Nos.969 & 970/Hyd/2024 hands of the assessee. He, accordingly, submitted that it is not a fit case to remand back the matter in issue back to the file of learned jurisdictional CIT(A) and pleaded that the order of the learned CIT(A) be confirmed.
We have heard the rival submissions of both the parties and perused the material available on record. We find that there is a force the arguments advanced by the Revenue. It is an admitted fact that the assessee has taken different stands before the Assessing Officer during the course of assessment proceedings as rightly pointed by the Learned DR hereinabove. The assessee has failed to properly explain the impugned amount as mobilization advance or other advance, or for the work to be carried-out or for other materials. Before the learned CIT(A), the assessee has furnished the details for the purpose of reconciliation of the above contradictions which were not confronted to the Assessing Officer by the learned CIT(A). We, therefore, remit the matter in issue back to the file of learned jurisdictional Assessing Officer with a direction to re-decide the issue de novo, after affording reasonable opportunity of being heard
9 ITA.Nos.969 & 970/Hyd/2024 to the assessee. Needless to say, it is the risk and responsibility of the assessee to plead and prove it’s case in consequential proceedings. If the assessee did not respond to the notice(s) issued by the learned jurisdictional Assessing Officer or taking adjournments under any pretext or failed to furnish requisite documents as called for, the learned Assessing Officer is at liberty to decide the matter in issue as per fact and law. Accordingly, the grounds raised by the Revenue are allowed for statistical purposes.
8. In the result, ITA.No.969/Hyd./2024 of the Revenue is allowed for statistical purposes.
ITA.No.970/Hyd./2024 – A.Y. 2022-2023 :
Facts of the case, in brief, are that in the instant appeal, the assessee has filed it’s return of income on 15.10.2022 declaring business loss of Rs.18,64,69,292/- and claimed refund of Rs.5,38,43,088/-. The case of the assessee-company was selected for scrutiny under CASS. The Assessing Officer issued various statutory notices u/sec.143(2), 142(1), show cause notice and also heard the 10 ITA.Nos.969 & 970/Hyd/2024 assessee through video conferencing on 20.03.2024. After considering the submissions of the assessee, the Assessing Officer determined the total income of the assessee at Rs.9,99,09,440/- by estimating the gross profit of the assessee company @ 10% of it’s total turnover in absence of properly explaining the differential amount with relevant documentary evidence furnished by the assessee vide order dated 25.03.2024 passed u/sec.143(3) r.w.s.144B of the Act.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the learned CIT(A) and the learned CIT(A) deleted the addition on the ground that the Assessing Officer erroneously rejected the trading results without considering the fact that the books of accounts of the assessee company were duly audited u/sec.44A of the Act. The learned CIT(A) accordingly directed the Assessing Officer to delete the addition of Rs.8,65,59,856/-.
11 ITA.Nos.969 & 970/Hyd/2024
Aggrieved by the Order of the learned CIT(A), the Revenue carried the matter in appeal before the Tribunal and has raised the following grounds :
1. “The order of the CIT(A) is erroneous in law as well as facts of the case.
2. Whether on the facts and circumstance of the case and in law, the CIT(A) erred in deleting the addition of Rs.8,65,59,856/-on account of estimated business income.
Whether on the facts and circumstance of the case and in law, the CIT(A) erred in holding that assessee company with all the notices issued by the AO and made satisfactory submissions/ explanations even after the AO clearly pointed out in the assessment order that the assessee could not substantiate his arguments with complete documentary evidences.
4. Whether on the facts and circumstance of the case and in law, the CIT(A) erred in not appreciating the fact that assessee failed to submit specific information to the specific defects in the books of accounts as pointed by the AO and hence left with only option to reject the books of accounts of the assessee company.
Whether on the facts and circumstance of the case and in law, the CIT(A) erred in not appreciating the fact that the Assessing Officer has a discretionary power to reject books of accounts u/s. 145(3), when the entries in respect of certain transactions are incorrect and show an abnormally low rate of profit.
Any other ground that may be urged at the time of hearing.”
12 ITA.Nos.969 & 970/Hyd/2024
During the course of hearing, Learned DR vehemently relied on the order of the Assessing Officer. He submitted that the assessee has noted GP ratio for the preceding assessment year @ 13.68% and for the present assessment year the GP ratio was drastically fell down which contention of the assessee is far from truth and further there were mismatch in inventions of the assessee company. The learned CIT(A) without calling remand report and not giving an opportunity to the Assessing Officer, based on the submissions of the assessee deleted the impugned addition of Rs.8,65,59,856/- basing on the audited books of accounts of the assessee company u/sec.44AB of the Act and, therefore, he pleaded that the matter in issue may be sent back to the file of learned jurisdictional CIT(A) in the interest of substantial justice.
The Learned Counsel for the Assessee, on the other hand, strongly relied on the order of the learned CIT(A). He submitted that the assessee had incurred idle charges during Covid period and coupled with this there
13 ITA.Nos.969 & 970/Hyd/2024 was increase in prices subsequent to the Covid and, therefore, his GP was marginally fell down compared to the previous year. The learned CIT(A) after considering these submissions of the assessee and also the books of accounts audited u/sec.44AB of the Act and found to be in order, the learned CIT(A) rightly deleted the addition of Rs.8,65,59,856/-. He, accordingly, pleaded that the order of the learned CIT(A) be upheld in the interest of substantial justice and submitted that it is not a fit case to remit the matter back to the file of jurisdictional CIT(A) as the matter in issue has been thread-bear examined by the learned CIT(A).
We have heard the rival submissions of both the parties and perused the material on record. Admittedly, in the instant appeal, the Assessing Officer estimated the gross profit of the assessee company @ 10% and made addition of Rs.8,65,59,856/- on account of difference in gross profit for the impugned A.Y. 2022-2023. The Assessing Officer further noted that GP ratio for the preceding assessment year 2021- 2022 was @ 13.68% and for the present assessment year
14 ITA.Nos.969 & 970/Hyd/2024 2022-2023 the GP ratio was drastically fell down to 0.70%. The reason of the assessee company for such fall in the GP ratio was due to Covid pandemic outbreak and on account of idle charges and increase in the prices subsequent to Covid period. While making the impugned addition of Rs.8,65,59,856/- the Assessing Officer disbelieved the contentions of the assessee-company and noted that the assessee was failed to substantiate it’s claim of mismatch in inventories with supporting documentary evidence. We find that the learned CIT(A) has passed a cryptic, non-speaking order and has accepted the contention of the assessee without giving any cogent reasons. We, therefore, remand the matter in issue back to the file of jurisdictional Assessing Officer with a direction that the assessee- company shall furnish documentary evidence to prove it’s case of difference in GP ratio. With the above directions, we remit the matter in issue back to the file of learned jurisdictional Assessing Officer to examine the gross profit of the assessee company. Needless to say, it is the risk and responsibility of the assessee to plead and prove it’s case in 15 ITA.Nos.969 & 970/Hyd/2024 consequential proceedings. If the assessee did not respond to the notice(s) issued by the learned jurisdictional Assessing Officer or taking adjournments under any pretext or failed to furnish requisite documents as called for, the learned jurisdictional Assessing Officer is at liberty to decide the matter in issue as per fact and law. Accordingly, the grounds raised by the Revenue are allowed for statistical purposes.
In the result, ITA.No.970/Hyd./2024 of the Revenue is allowed for statistical purposes.
9. To sum-up, ITA.Nos.969 & 970/Hyd./2024 of the Revenue are allowed for statistical purposes. A copy of this common order be placed in the respective case files.
Order pronounced in the open Court on 13.02.2025.