HINDUSTAN EPC CO. LTD,NEW DELHI vs. DCIT, CENTRAL CIRCLE-20, NEW DELHI
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI SUDHIR KUMARHindustan EPC Company Ltd, 239, Okhla Industrial Estate, Phase-III, New Delhi Vs. DCIT, Central Circle-20, Delhi (Appellant)
PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.1665/Del/2022 for AY 2017-18, arises out of the order of the Commissioner of Income Tax (Appeals)-27, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 27/10427/2019-20 dated 31.05.2022 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.12.2019 by the Assessing Officer, DCIT, Central Circle- 18, Delhi (hereinafter referred to as ‘ld. AO’). 2. Ground No. 1 raised by the assessee is general in nature and does not require any specific adjudication. 3. Ground Nos. 2 to 4 raised by the assessee are challenging the addition made u/s 41(1) of the Act in the sum of Rs. 66,44,030/-. Hindustan EPC Company Ltd 4. We have heard the rival submissions and perused the material available on record. The assessee is a company engaged in providing engineering, procurement and construction (EPC) services and undertakes EPC/ other contract for setting up and maintenance power/ infrastructure/ construction projects. The return of income for AY 2017-18 was filed by the assessee company 07.11.2017 declaring loss of Rs. 2,81,30,797/-. During the course of scrutiny assessment proceedings, the ld AO sought to examine the sundry creditors reflected in the balance sheet of the assessee. The ld AO resorted to apply the provisions of Section 41(1) of the Act on the ground that sundry creditors liability to the tune of Rs. 66,44,030/- cease to exist. This conclusion was drawn by the ld AO after issuance of notice u/s 133(6) of the Act to those four parties wherein, the balance reflected by them varied with the balance shown by the assessee. The details of the same are under:- S.No.
Name of party/creditors
Amount shown by Assessee
Amount as per party
Difference
1. M/s Vidhur Contracts &
Rs Projects Pvt. Ltd.
Rs.
10,56,448.40/-
NIL
10,56,448.40
M/s Siemens Ltd Rs.65,84,337/-
Rs.
16,48,923.22/
Rs.49,35,413.78/-
M/s Futech Projects (India) Pvt. Ltd. Rs. 91,51,602.65 Rs. 85,03,940.93 Rs. 6,47,661.72 4. M/s. Siemar Infrastructure Ltd Rs. 4,10,92,732/- Rs. 3,99,13,624/- Rs. 11,79,108/- (Rs. 4,506/) 5. The ld AO showcaused the assessee as to why the difference be not treated as cessation of liability and brought to tax in terms of Section 41(1) of the Act during the course of assessment proceedings. In response to the show cause notice the assessee explained as under:- “M/s Siemens Ltd. That no transaction has been made with the company M/s Siemens Ltd, during the period under consideration the balance is related to the earlier years and the same was assessed by the then Assessing Officer. Hindustan EPC Company Ltd M/s Futech Projects (India) Pvt. Ltd- we would like to inform you that during the financial year under consideration the assessee company had booked the invoices received from M/s Futech Projects (India) Private Limited for only an amount of Rs. 1,73,476/- from the total outstanding as on 31.03.2017 of Rs. 91,51,602.65/-and the balance was outstanding as on 31.03.2016, which was already assessed by the then assessing officer.
M/s Vidhur Contracts & Projects Pvt. Ltd- That the balance of Rs
10,56,448.40/- of M/s Vidur Contracts & Projects Private Limited is correctly shown by us. We are summarising the transaction with the said party for your kind reference
Particulars
Amounts (in Rs.)
Basic Value of Bill (Copy of bill enclosed)
Add: Service Tax on above
Total Invoice Value
Less: TDS
Net Payable
Less: Amount Paid @ 20% advance
Less: Subsequent Payment
Net Payable after payment
Less: TDS recovered on provision reversed of Rs 3,06,731
Net Payable as on 31.03.2017
2,915,000
288,235
3,203,235
46,640
3,156,595
(583,000)
(1,511,012)
1,062,584
(6,135)
1,056,449
From the table it is evident that the company had received invoice of Rs
32,03,235/- and after adjustment of payment made the net amount payable to the said party is Rs 10,56,449/-.
M/s Siemar Infrastructure Ltd.-, we would like to state that the balance outstanding as on 31.03.2017 is Rs 4,10,92,732/- and out of which Rs
4,04,67,713/- had been paid and balance outstanding till date is Rs
6,25,019/-. However, the balance as on 31.03.2017 of the party (as depicted from your show cause notice) is Rs 3,99,13,624/-. It looks that out of the balance outstanding of Rs 3.99Cr, the party had accepted payment of Rs 4.04 Cr and hence party had taken extra payment of Rs
5,54,089/-. “
The ld AO completely ignored the aforesaid contention and proceeded to complete the assessment by making an addition u/s 41(1) of Hindustan EPC Company Ltd the Act in the sum of Rs. 66,44,030/- which stood upheld by the ld CIT(A). The assessee has filed confirmation from all those parties and prayed for reconsideration of the same by the lower authorities. Further, it was pleaded that there is no mistake committed by the assessee with regard to those balances and the ld AR prayed for re-verification of the same by the ld AO. 7. Per contra, the ld DR vehemently relied on the orders of the lower authorities as the addition was made after obtaining the information u/s 133(6) of the Act from the concerned sundry creditors. 8. We find that the assessee had explained the difference in closing balance in respect of the 4 parties by submitting as under:- “Party-wise submissions are as under:
(i)
Vidhur Contracts Projects Pvt. Ltd.: In response to notice dated
18.12.2019 (page 54-55 of PB), seeking details / reasons for difference of Rs.10,56,448.40/- payable to Vidhur Contracts Projects Pvt. Ltd., the Appellant by replay dated 23.12.2019 (page 56-66 of PB) placing on record the invoice, ledger accounts and bank statement submitted that during FY 2013-14, the party was engaged to install and commission 5.5 MW Power Project. Against full and final bill of Rs.32,03,235/- [Rs.29,15,000 + Rs.2,88,235 (taxes)), amount of Rs.5,83,000/- being 20% of Rs.29,15,000/- was paid as advance (page 58-59).
Subsequently, a sum of Rs.11,97,894/- & Rs.3,13,118/- was paid on 7.4.2014 &
21.10.2014 (page 60). Since, the party could complete only 3.06 MW of the project, therefore, balance of Rs.10,56,448/-was put on hold and has been outstanding in the books of the Appellant.
(ii) Siemens Ltd: In response to notice dated 19.12.2019 (page 67-68 of PB), seeking details / reasons for difference of Rs.49,35,413/- payable to Siemens
Ltd., the Appellant by replay dated 23.12.2019 (page 69-70 of PB), placing on record the ledger account of the party submitted that the balance outstanding has been correctly shown. Form the ledger account of Siemens Ltd. for the period 1.4.2012 to 4.10.2014, it is evident that the Appellant is having running account with Siemens Ltd. Opening balance of Rs.2,08,64,148/- after ent of Rs.1,33,82,970/- and bills of Rs.22,05,454/- resulted in closing balance of payment Rs.65,84,337/-(page 71A-71B of PB), which represented retention money and the same was outstanding in the books as at 31.03.2017. Hence, the balance of Rs.65,84,337/- was correctly shown.
(iii) Futech Projects (India) Pvt. Ltd.: In response to notice dated 19.12.2019
(page 67-68 of PB), seeking details / reasons for difference of Rs.6,47,661/-
Hindustan EPC Company Ltd payable to Futech Projects (India) Pvt. Ltd., the Appellant by replay dated
23.12.2019 (page 69-70 of PB), submitted that the party was engaged to supply fuel oil system for 1200 MW Thermal Power Plant. From the sample invoices
(page 80-103), it is evident that the transactions between the Appellant and Futech Projects (India) Pvt. Ltd were going on even during the relevant previous year. On 15.02.2020, a settlement agreement was entered into between the parties and thereby, it was agreed that the Appellant would pay Rs.70,00,000/- towards full and final settlement (page 107-111 r/w emails of October, 2020:
104-106 of PB).
(iv) Simar Infrastructure Ltd.: In response to notice dated 23.12.2019 (page
113-114 of PB), seeking details / reasons for difference of Rs.11,79,108/- payable to Simar Infrastructure Ltd, the Appellant by replay dated 26.12.2019
(page 115-116 of PB), submitted that from the ledger accounts and bank statement it is evident that Appellant out of total outstanding of Rs.4,10,92,732/- has already paid an amount of Rs.4,04,67,713/- to Simar Infrastructure Ltd.
Hence, if according to Simar Infrastructure Ltd. an amount of Rs.3,99,13,624/- is pending, then the balance amount should be refunded to the Appellant (page
117-123 of PB).
Name of party/
creditors
Difference (amount as per Appellant - as per the party)
Remarks
Vidhur Contracts
Projects Pvt. Ltd.
10,56,448
(10,56,448 - 0)
Against 5.5MW of project,
3.06 MW was constructed.
Therefore,
Rs.
10,56,448/- was put on hold. Since later on, project was sold to MAC, therefore, the account of the Appellant was shown as Nil.
Siemens Ltd
49,35,413
(65,84,337 - 16,48,923)
Appellant was having running account with the party.
Rs.65,84,337/- represented retention amount.
Was represented retention amount.
Futech
Projects
(India) Pvt. Ltd.
6,47,661
(91,51,602 - 85,03,940)
Pursuant to settlement, appellant paid
Rs.
1)
Rs.70,00,000 in Oct, 2020
Simar
Infrastructure Ltd.
11,79,108
(4,10,92,732 -
3,99,13,624
Rs.4,04,67,713 has been paid against =) Rs.3,99,13,624 due as per the party.
Difference of Rs.5,54,089/- is not negative
The ld AR also placed decision of the Kolkata Tribunal in the case of Tum Nath Shaw Vs. ACIT reported in 175 ITD 45 wherein, similar issue Hindustan EPC Company Ltd was addressed. Considering the totality of the facts and circumstances of the case, we deem it fit and appropriate in the interest of justice and fairplay to restore this issue to the file of the ld AO for de novo adjudication in the light of the aforesaid submission and in the light of decision of the Kolkata Tribunal referred supra, in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. Accordingly, the ground Nos. 2 to 4 raised by the assessee are allowed for statistical purposes. 10. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 11/02/2025. - - (SUDHIR KUMAR) ACCOUNTANT MEMBER
Dated:11/02/2025
A K Keot