ACIT 21(1), MUMBAI vs. INTERNATIONAL METRO CIVIL CONTRACTORS, MUMBAI

Briefly stated facts are that the assessee is an unincorporated joint venture, which was awarded a contract for project of design and construction of Delhi Metro Rail Corporation Limited. The assessee is a limited purpose joint venture credit solely for the purpose of executing the contract with DMRC. The assessee filed original return of income declaring nil income and claimed the refund. The assessee did not recognize any revenue for the reason that it recognizes revenue on sale of construction activity on completion at the rate of 5.5% of the contract value. The assessee claimed that the amount of invoices during the year and related expenses were transferred to work in progress. This return ,3936,3937/Mum/ 16 was processed and refund was paid. Subsequently, a rectification order under section 154 of the Act was passed dated 06-04-2004 denying the claim of the TDS. CIT(A) annulled the rectification order. Thereafter the assessee’s case was reopened under section 147 read with section 148 of the Act. The assessee filed return of income on 30-04-2004 declaring the losses of ₹ 41,94,85,340/- for AY 2003-04. The AO framed assessment under section 143(3) read with section 147 of the Act rejecting the claim of assessee regarding loss. The AO estimated the net profit from the project at the rate of 5.5.% of the cost of project incurred during the FY relevant to this AY at ₹ 9,73,24,330/- and also made certain other disallowances on account of computer expenses, the disallowance under section 40A(3) of the Act, Transfer Pricing Adjustment and addition of Interest income. Thereby total addition was made at ₹ 14,90,02,800/-. Aggrieved, assessee preferred the appeal before CIT(A) and CIT(A) allowed the claim of the assessee. The AO reworked loss in consequent to CIT(A)’s order at ₹ 41,81,30,921/-. Even the department appeal was dismissed by the tribunal vide order dated 25- 08-2009. The AO again under section 154 of the Act while rectifying the mistake reworked the claim of loss of ₹ 41,94,85,340/- by observing that this loss was worked out while giving effect to the order of CIT(A). The AO rectified the order by giving effect to ITAT’s order dated 30-12-2011 and income of the assessee was recomputed at ₹ 23,74,937/- withdrawing the benefit of carry forward of losses which was granted in subsequent years by the AO. The CIT(A) allowed the claim of the assessee by observing in Para 6.4 and 6.5 and 6.6 as under: - “6.4 In the instant case, as stated in the preceding paragraphs, the appellant filed its return of income u/s 148 declaring a loss of Rs. 41,94,85,340/- only response to notice u/s 148 of the I.T. Act issued by the AO. Therefore, the returned loss of Rs. 41,94,85,340/- cannot be discarded only on the ,3936,3937/Mum/ 16 ground that it is in response to notice u/s 148 and the assessee has raised new claim in the form of loss. In fact, in the assessment order dated 30th March, 2006. the AO had taken full cognizance of loss of Rs. 41.94 crore. Even in the orders giving effect to Ld. CIT(A) order dated 21.07.2006 and that of Hon'ble ITAT order dated 30.12.2011 losses are determined at Rs. 41,8136,921/- and Rs. 41,71,10,403/- respectively. Therefore, there is no logic in the stand taken by the AO in the impugned order that the loss claimed in the return filed in response to 148 cannot be allowed as the return of income was not filed within the due date, as prescribed under the provisions of sec. 139(1).

At the outset, the learned Counsel for the assessee filed tribunal’s order in assessee’s own case for AY 2002-03 in order dated 07-04-2017 whereby the Tribunal has dismissed the Revenue’s appeal by observing that once the Tribunal has settled the issue upholding the decision of CIT(A), there nothing remains for rectification under section 154 of the Act for the Assessing Officer. The learned Counsel referred to Para 4 and 5 of the Tribunal’s order which reads as under: - “4. Aggrieved by the said order, the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A) allowed substantial relief to the assessee. While giving effect to the Ld. CIT(A)’s order, the AO ,3936,3937/Mum/ 16 reworked the loss allowable to the assessee at Rs.41,81,36,921/- vide his order dated 21.07.06. The department preferred appeal against the said order before the Tribunal. This Tribunal vide order dated 25.08.09 upheld the decision of the Ld. CIT(A). However, on the limited issue of allowability of software and hardware expenses, the Tribunal directed the AO to reexamine the assessee’s claim while giving effect to the ITAT’s order. The AO vide order dated 30.12.11 reworked the loss to Rs.41,71,10,403/-. Now vide impugned order passed under section 154 of the Act, the AO has asserted that the claim of loss of Rs.41,94,85,340/- was incorrectly worked out while giving effect to Ld. CIT(A)’s order dated 21.07.06. On this plea the AO has rectified the order giving effect to Tribunal’s order dated 30.12.11 and has withdrawn the benefit of carried forward losses to the assessee. The AO has concluded that the return of income filed by the assessee, in response to the notice under section 148 of the Act, was invalid and hence losses should not be allowed. The Ld. CIT(A) has allowed the appeal against the said order of the AO holding that there was no justification in the rectification order passed by the AO under section 154 of the Act as it cannot be said that there was any mistake apparent on record in the said order. He accordingly directed the AO to delete the disallowance so made by the AO in proceedings under section 154 of the Act.

We find from the above factual position and the fact that the Tribunal has already taken a view in AY 2002-03 in wherein exactly identical facts are there, what is left in the present appeals before us. Accordingly, we confirm the order of CIT(A) who has clearly observed that there is no mistake apparent from record in giving appeal effect to the order of the ITAT. Respectfully following the same, we confirm the order of CIT(A) and dismiss these three appeals of Revenue.

In the Result, all the three appeals of Revenue are dismissed.