ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(2), HYDERABAD vs. IL & FS ENGINEERING & CONSTRUCTIONS CO. LIMITED , HYDERABAD

ITA 129/HYD/2020Status: DisposedITAT Hyderabad11 February 2026AY 2008-0951 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal addressed the issue of material purchases amounting to Rs. 15,29,99,757/-. The assessee claimed these purchases related to FY 2007-08 but accounted for them as prior period expenses in FY 2008-09. While purchase bills from M/s PSL Ltd. for January, February, and March 2008 were submitted, the AO disallowed the purchases for lack of supporting evidence like delivery challans and proof of supply at the site. The Tribunal noted that the assessee itself accounted for these purchases in FY 2008-09, and payments were made via letter of credit in April 2008 onwards. The Tribunal found that the supply of materials was effected in FY 2008-09, not FY 2007-08, and in the absence of other evidence like delivery challans or stock register entries for FY 2007-08, the claim of expenditure in the revised return could not be accepted. Therefore, the AO rightly disallowed the purchases, and the CIT(A) rightly sustained the additions. The Tribunal upheld the CIT(A)'s finding on this issue. The judgment does not explicitly detail findings on all grounds raised by the Revenue and Assessee, but the operative part indicates a partial allowance for the assessee and dismissal for the Revenue.

What were the facts?

The appeals by the Revenue and the assessee, IL & FS Engineering and Construction Company Limited (formerly Maytas Infra Limited), concern Assessment Year 2008-09. The assessee filed multiple revised returns, with the final one declaring a total income of Rs. 90,36,99,564/-. The Assessing Officer (AO) initiated scrutiny, referred the case for a special audit due to the Satyam Computer Services Ltd. scandal, and subsequently made additions totaling Rs. 1,40,51,60,729/-. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who partly allowed the appeal, granting relief on certain disallowances under sections 40A(3), 194C, 40(a)(ia), and unverifiable labour charges, but confirmed additions for subcontract expenditure and material purchases. Both the Revenue and the assessee are aggrieved by the CIT(A)'s order.

What were the issues?

1. Whether the deletion of addition towards interest on mobilization advances by the CIT(A) is correct, and if Section 194A is applicable as the interest was recovered by the contractee from running bills (Assessee's contention: not recorded; Revenue's contention: Section 194A is applicable as the assessee paid the amount and interest was recovered by the contractee, and non-offering to income results in loss to revenue). 2. Whether the deletion of addition towards non-deduction of TDS on transport charges of raw materials by the CIT(A) is correct (Assessee's contention: not recorded; Revenue's contention: suppliers acted as agents for transport, collected freight charges, and showed them separately in invoices, which the assessee paid). 3. Whether the disallowances made by the AO under Section 40A(3), 40(a)(ia), 194C, 69C, and for material purchases, as sustained or partly sustained by the CIT(A), are valid (Assessee's contention: entire expenditure is deductible under Section 37, and CIT(A) erred in partly sustaining additions or directing verification instead of deletion; Revenue's contention: not recorded for all points, but generally supports the AO's additions). 4. Whether the disallowance of material purchases amounting to Rs. 15,29,99,757/- made by the AO and sustained by the CIT(A) is justified (Assessee's contention: purchase bills relate to FY 2007-08, accounted for as prior period expenses in FY 2008-09, and should be deleted; Revenue's contention: no evidence other than purchase bills was filed to prove purchases for FY 2007-08, and the assessee itself accounted for them in FY 2008-09, indicating they were made in that year).

Which sections of the Income-tax Act were involved?

Section 194A,Section 40A(3),Section 40(a)(ia),Section 194C,Section 69C,Section 37,Section 36(1)(iii),Section 139(5),Section 142(2A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad “B” Bench, Hyderabad

For Appellant: Dr. Narendra Kumar Naik

PER MANJUNATHA G., A.M :

The captioned appeals filed by the R

The order continues below.

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