VISHAL INFRASTRUCTURE LIMITED,SECUNDERABAD vs. DCIT., CIRCLE-8(1), HYDERABAD

1. Rs.23,77,97,210. The appellant did not receive any Intimation u/s 143(1). The Ld. AO is not justified in summarily confirming the addition u/s 143(1) and not seeking information on the adjustment by providing an opportunity to the Appellant to make submissions on the same in the course of assessment proceedings.

The Ld. AO has erred in making the addition of Rs.14,35,945 being Interest paid on GST Remittance as expenses not eligible under section 37(1) of the Income Tax Act. The Ld. AO has erroneously treated the same interest as a penalty and disallowed the same.

The Ld.' AO has erred in not considering the total loss of Rs. 55,01,931 on account of Arbitration. The Ld.' AO has not appreciated the fact that the Appellant has incurred an additional loss of Rs. 28,35,000, on account of the dispute with Airport Authority of India, despite the Delhi High Court's Order.

The brief facts of the case are that, the assessee is a company engaged in construction activities. The assessee has filed its Return of Income (“ROI”) on 23.01.2021 declaring total income of Rs.23,77,97,210/-. Subsequently, the case of the assessee was selected for complete scrutiny and the assessment was completed by the Learned Assessing Officer (“Ld. AO”) u/s.143(3) r.w.s. 144B of the Income Tax Act, 1961 (“the Act”) on 25.09.2022 making addition of Rs.14,35,945/- on account of interest expenditure, Rs.26,05,058/- on account of miscellaneous expenditure and Rs.28,35,000/- on account of arbitration award loss. Accordingly, the Ld. AO completed the assessment at total income of Rs.24,50,36,339/-.

Aggrieved by the order of Ld. CIT(A), the assessee is in appeal before us. The Learned Authorised Representative (“Ld. AR”) submitted that the assessee is in appeal before the ITAT on as many as five grounds. He submitted that the ground no.5 is general in nature and do not require any separate adjudication.

With regard to ground no.1, the Ld. AR submitted that, the assessee had disallowed an amount of Rs.3,63,126 u/s.43B of the Act on account of unpaid bonus of Rs.2,71,411/- and unpaid professional tax of Rs.91,715/- in their computation of income while filing its ROI. To demonstrate the same, the Ld. AR brought our attention to page no.1 of paper book containing the computation of income. However, the Ld. AO again added the same amount while completing his order u/s.143(3) of the Act, which resulted in double taxation of income by Rs.3,63,126/- in the hands of the assessee. Therefore, the Ld. AR prayed before the bench to delete the addition.

Per contra, the Learned Department Representative (“Ld. DR”) submitted that, the objection of the Ld. AR required to be verified on the part of the Ld. AO and he prayed before the bench to remit the issue to the file of the Ld. AO for verification.

We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through the assessment order of Ld. AO and page no.1 of paper book containing the computation of income. After verifying these documents, we found that, the assessee had suo moto added Rs.3,63,126/- in their computation of income and the Ld. AO has also taken income as per section 143(1) of the Act at Rs.23,81,60,336/- as against the returned income of Rs.23,77,97,210/- for the purpose of computation of the total assessed income. As submitted by the Ld. AR, the income of Rs.23,81,60,336/- u/s.143(1) of the Act has been arrived after inclusion of Rs.3,63,126/- to the returned income of Rs.23,77,97,210/-. On the basis of this factual matrix, it is apparent that double addition has been made in the hands of the assessee to the extent of Rs.3,63,126/-. The same is required to be confirmed by making verification on the part of the Ld. AO. Therefore, we make a direction to Ld. AO to verify the same from the records of the assessee and if the same has the effect of double addition, then delete the same. Accordingly, the ground no.1 of the assessee is allowed for statistical purposes.

With regard to ground no.2, which is related to disallowance of interest expenditure of Rs.14,35,945/-, the Ld. AR submitted that, this amount consists of interest of Rs.33,195/- on delay TDS and Rs.14,02,750/- on account of interest for delay in filing of GST return. The Ld. AR further submitted that, they are not pressing the addition of Rs.33,195/- on account of interest on TDS. With regard to payment of Rs.14,02,750/- on account of interest on GST, the Ld. AR submitted that, the same are compensatory in nature and not in the nature of penalty. To substantiate their claim, the Ld. AR brought our attention to page nos.75 to 86 of the paper book containing the copy of GST notices and GST challan, showing that the payments are in the nature of interest and not in the nature of penalty.

Per contra, the Ld. DR relied on the decision of revenue authority. He further submitted that, the assessee had accepted the said additions before the Ld. AO. Therefore, the objection raised by the assessee for the first time before the ITAT should not be entertained.

We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through the page nos.75 to 86 of the paper book containing the copy of GST notices and GST challan, showing that the payments are in the nature of interest and not in the nature of penalty and found that, interest has been charged on the assessee for delay in filing of GST return. It is evident that, the interest paid under the GST Act is levied to compensate the government for the delay in realization of its dues. Such interest cannot be treated as penal in nature as it does not involve any punitive action against the assessee. As far as the objection of the Ld. DR that the assessee had agreed for the additions before the Ld. AO, hence the objection raised by the assessee for the first time at appellate stage should not be entertained, we are of the opinion that, if the assessee is eligible for any claim as per the Act, but due to any reason, the assessee had agreed for the addition before the Ld. AO, it does not mean that the assessee will be deprived of the claim. Therefore, we reject this objection of the Ld. DR. Hence, in our considered opinion, the interest paid on account of delay in filing of GST return is compensatory in nature and qualify for deduction under the Act. Therefore, we delete the addition of Rs.14,02,750/-. Accordingly, ground no.2 of the assessee is allowed.

The ground no.3 of the assessee is with regard to disallowance of Rs.26,05,058/- made by the Ld. AO on account of miscellaneous expenditure. The observation of the Ld. AO in this regard are placed at page no.9 of his order which is to the following effect :

Per contra, the Ld. DR relied on the order of revenue authority and submitted that the details submitted by the assessee (page nos.87 to 93 of the paper book) are self-made and no corresponding bills / vouchers have been produced to substantiate that there is no duplication of the claim of the expenditure. Further, he submitted that, it is evident from the details submitted by the assessee that pooja expenses have been claimed under two different heads of expenditure i.e. (i) under “pooja expenses” of Rs.97,338/- and another is under “site weekly pooja expenses” of Rs.4,59,335/-. Therefore, the genuineness of the claim of expenses under miscellaneous expenses is required to be verified from the corresponding bills / vouchers, hence, this issue is required to be set aside for verification by the Ld. AO.

We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We are in agreement with the submission of the Ld. AR that, if separate set of books are maintained for different sites, each set of books may have similar head of expenditure. But after consolidation, there should not be two heads of expenses having similar head of expenditure. However, in the case of the assessee, two heads of expenses have been found having the similar head i.e. pooja expenses and site weekly pooja expenses. In our considered opinion, it is required to be verified, whether the same expenditure has been claimed under both heads or not. Further, the details of expenses (page nos.87 to 93 of paper book) furnished by the assessee is also required to be verified from the relevant bills / vouchers. Therefore, we set aside the issue to the file of Ld. AO with a direction to verify the expenditure claimed under miscellaneous expenditure with corresponding bills / vouchers and allow the claim as per law. Accordingly, the ground no.3 of the assessee is allowed for statistical purposes.

The ground no.4 of the assessee is related to the disallowance of arbitration loss of Rs.28,35,000/-. The facts with regard to this issue is that, the assessee was allowed arbitration award of Rs.3,91,14,607/-, which the assessee had offered as income in A.Y. 2012-13. However, during the year under consideration, the assessee actually received the arbitration award lesser by Rs.55,01,931/- and claimed the same as expenditure during the year under consideration under the head “arbitration loss”. Out of the said loss of Rs.55,01,931/-, the Ld. AO disallowed the amount of Rs.28,35,000/- as per his observation at page no.9 of his order, which is to the following effect :

Per contra, the Ld. DR submitted that, it is not reliable that, even after the direction of Hon'ble Delhi High Court, the assessee has received lesser amount, then what had been decided by Hon'ble Delhi High Court. Hence, the same is liable to be dismissed. In their alternate submission, the Ld. DR submitted that, even if the claim for arbitration loss is held to be allowable to the assessee, it is to be verified, whether on the earlier occasion i.e. in A.Y. 2012-13, whether the same has been offered as income or not ? Hence, the Ld. DR prayed before the bench to remand the issue to the file of Ld. AO for verification.

We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. There is no dispute about the principle that, if any amount has already been offered as income and subsequently some part of the same income could not be realised, then for the unrealized part of loss, the assessee is eligible for deduction in the year of actual write off. In the present case, as submitted by the assessee, the assessee has offered for taxation the whole amount of arbitration award of Rs.3,91,14,607/- in A.Y. 2012-13. Subsequently, the assessee could not realize Rs.55,01,931/- on account of arbitration award. Therefore, the assessee has claimed Rs.55,01,931/- as expenditure under the head arbitration loss during the year under consideration. Therefore, we are of the considered opinion that, if the assessee had already offered Rs.3,91,14,607/- on account of arbitration award in A.Y. 2012-13 and has incurred a loss of Rs.55,01,931/- out of such award, then the said amount should be available as expenditure to the assessee. However, whether the assessee has actually offered the arbitration award of Rs.3,91,14,607/- for taxation in A.Y. 2012-13 or not, is a matter of verification from the record of the assessee. Therefore, we remand back the issue to the file of Ld. AO with a direction to verify whether the arbitration award of Rs.3,91,14,607/- has been offered for