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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Before: Shri S. S. Godara, JM & Shri M. Balaganesh, AM]
Per Shri M. Balaganesh, AM
This appeal by revenue is arising out of order of CIT(A)-5, Kolkata vide appeal No. 84/CIT(A)-5/Wd-13(2)/16-17 dated 31.03.2017. Assessment was framed by ITO, Wd-13(2), Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2013-14 vide his order dated 30.03.2016.
The only issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the addition of Rs 47,36,821/- made u/s 69 of the Act for understatement of contractual receipts , in the facts and circumstances of the case.
The brief facts of this issue are that the assessee company is engaged in civil construction and had filed its return of income for the Asst Year 2013-14 on 28.9.2013 declaring total income of Rs 83,780/-. During the year under consideration, the assessee company had executed works in terms of tender agreement vide work order dated 25.7.2010 entered into with M/s Murti Housing & Finance Pvt Ltd . The ld AO observed from the audited accounts of the assessee that it had declared income under the head ‘revenue from operation’ amounting to Rs 1,02,62,460/- comprising of the following:-
2 M/s. Krishnav Construction Pvt. Ltd. AY 2013-14 Job Work (i) For services Rs 17,33,118 (ii) For Sale of Materials Rs 73,11,984 ------------------ Rs 90,45,102 Sale of Earth and Soil Rs 12,17,358 ----------------------- Rs 1,02,62,460 ----------------------- 3.1. The ld AO observed that the tax deducted by M/s Murti Housing & Finance Pvt Ltd was Rs 1,29,399/- u/s 194C of the Act and as per Form 26AS, the total contractual receipts of assessee was Rs 64,69,939/-. The ld AO observed that the assessee disclosed only income of Rs 17,33,118/- as contractual receipt besides receipt on account of sale of building materials for Rs 73,11,984/-. The ld AO observed that the argument of the assessee that TDS was made from the sale of building materials together with the receipt of service charges was not accepted as there was no justification to deduct TDS on the purchase money of trading materials. Accordingly, the difference of contractual amount of RS 47,36,821/- ( 64,69,939 – 17,33,118) was treated as undisclosed investment u/s 69 of the Act and added to total income.
The ld CITA observed that the ld AO had solely relied on the TDS certificate issued by Murti Housing & Finance Pvt Ltd showing TDS of Rs 1,29,399/- and contractual amount of Rs 64,69,939/-. The ld AO had treated the contractual amount as one having no material component whereas the assessee had claimed that Rs 44,16,544/- was material component in the bill raised against the said contractee. One more bill has been listed in the table on page 2 of the assessment order. The ld AO had not given any finding as to why he had treated the whole contractual amount as having no material component inspite of the assessee’s said claim before him. The question here to be decided is whether the ld AO’s finding treating the whole contract amount as one for service is correct or not. The ld CITA observed that the identical question arose in the Asst Year 2012-13 in assessee’s own case and since the same contract was executed in the current year for the same contractee, and that there is no other contract having been executed by the assessee, he followed the view taken by him in the Asst Year 2012-13 and granted relief to the assessee. Aggrieved, the revenue is in appeal before us.
We have heard the rival submissions. We find that the issue under dispute is squarely covered by the order of this tribunal in assessee’s own case for the Asst Year 2012-13 in dated 4.5.2018 wherein it was held as under:- “Aggrieved the revenue is in appeal before us on the following ground:
1. Whether on the basis of facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs. 2,22,68,725/- made u/s 69 of the I.T. Act, 1961 for understatement of contractual receipt without appreciating the fact finding of the AO.
5. We have heard the rival submission and perused the material available on record including the paper book filed by the assessee comprising of pages 1 to 99 we find from the pages 57 to 87 of the paper book containing the entire agreement dated 25.07.2010 including the work order issued by M/s Murti Housing & Finance Pvt. Ltd. specifying scope of services and terms and conditions to be complied thereon. From the said agreement we find under clause (2) enclosed in page 58 of the paper book as under: “2.0. RATES/PRICE, TAXES AND COST 2.1. The rates quoted of Rs. 1200/- per sq. ft. shall be for the finished work and shall be inclusive of all materials and labour, equipment, shuttering and centring, scaffoldings and consumables etc. but exclusive of cement and steel. Any volume of work exceeding the scheduled quantity as per the drawings issued to contractor at the time of tender is to be treated as extra item. The above quoted rated are inclusive of ESI, PF, freight, Excise Duty & royalty etc. but exclusive of taxes like service tax, VAT etc which will be paid extra to the Contractor ,WCT & TDS will be deducted as per the provisions of the respective act and laws of the land. No claim on this account other than what had mentioned in this Work Order will be entertained due to any reason whatsoever. Quoted rates shall also include any or all wastages etc. as applicable and the rates quoted are firm till the completion of work including the extended period. No claim shall however be entertained in case of increase basic rates of materials and labour etc. In other words NO ESCALATION of prices/rates is acceptable during the execution or work. Your quote of Rs. 1200/- per sq. ft. as mentioned above shall not include the following: All HVAC works Loose Furniture Wardrobes The contractor shall at their own expense, arrange for insurance policies such as workmen compensation policy and contractor’s all risk policy effective from the date of commencement of work until final completion of work, which will be certified by Architect/PMC appointed by us. Also rate quoted shall include the costs of supplying photographs showing the work-in-progress from various angles as decided by the Architect. Two sets of photographs to be supplied by the contractor i.e. one set to the Architect and one set to us. The photographs should contain the date of photograph taken printed on it.” From the above, it is very clear that the assessee is mandated to supply materials and labours, equipment, scaffolding and consumable exclusive cement and steel. Hence it is factually incorrect on the part of the ld. DR to state that there is no stipulation in the agreement dated 25.07.2010 warranting the assessee to supply any materials for which consideration in the sum of Rs. 2,18,16,646/- was received and Rs. 51,686/- towards sale of trading goods were received from M/s Murti Housing & Finance Pvt. Ltd.. The ld. AO had not given any finding to the effect that the entire sum paid to the assessee by M/s Murti Housing & Finance Pvt. Ltd. were only in respect of contractual payments, except placing reliance on the figures reflected in form no. 26AS subjecting the entire payments to deduction of tax at source. Factually we find that the assessee had received 3.37 crores towards contractual receipts and Rs. 2.18 crores towards sale of materials from M/s Murti Housing & Finance Pvt. Ltd. and both are duly paid under the head ‘revenue for operation’. We also find from page 51 of the paper book containing the details of various materials that were supplied by the assessee to M/s Murti Housing & Finance Pvt. Ltd. for the smooth execution of the project containing the details of opening stock, purchases, materials consumed and closing stock thereon. The assessee had also furnished the entire details of M/s Murti Housing & Finance Pvt. Ltd. to justify its claim that there is no understatement of any receipt from M/s Murti Housing & Finance Pvt. Ltd., the details of which are enclosed in page 43 of the paper book. For the sake of convenience the said details are reproduced hereunder:
In view of these facts which are starring on us, we have no hesitation to uphold the finding of Ld. CIT(A) in this regard. Accordingly, ground no. 1 raised by the revenue is dismissed.”
Aggrieved the revenue is in appeal before us on the following ground: 2. Whether on the basis of facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs. 27,43,417/- made u/s 69 of the Income Tax Act, 1961 for undisclosed investment in the absence of evidence of purchase ignoring the observations of the AO.
We have heard the rival submissions and perused the material available on record. We find that the entire details of purchases of various materials together with the bills were duly submitted before the ld. AO. We also find that the assessee had filed a detailed stock summery of various materials comprising of opening stock, purchases, cost of materials consumption and closing stock thereon as under:
It was also specifically brought to the notice of the ld. AO that purchases of other items i.e. other than (sand, stone chips and bricks) to the tune of Rs. 42,09,707/- is duly included in the total cost of materials consumed in the total sum of Rs. 2,47,94,550/- This fact is also evident from the aforesaid stock summery. We find that ultimately the assessee has shown in the closing stock of Rs. 65,90,629/- based on the proper details that were submitted before the ld. AO and which are supported by proper evidences. The ld. AO made arithmetical conclusion and arrived at the closing stock of material figures at Rs. 38,47,212/- only in respect of certain items and compared the same as total closing stock figure of Rs. 65,90,629/- and made an addition of Rs. 27,43,417/- as undisclosed investment. This, in our considered opinion, is absolutely no warranty in view of the complete details of various materials used by the assessee in the execution of the contract as could be evident from the aforesaid stock summery. Hence we hold that there is not case that has been made out by the revenue before us for sustaining the addition towards undisclosed investment u/s 69 of the Act in the sum of Rs. 27,43,417/-. In these facts and circumstances, we do not find any justifiable reason to interfere in the order of Ld. CIT(A) and accordingly, ground no. 2 raised by the revenue is dismissed.
Ground no. 3 raised by the revenue is general in nature and does not require any specific adjudication.
In the result, the appeal of the revenue is dismissed.”
5.1. We find that the ld CITA had followed the order passed for the Asst Year 2012-13 in assessee’s own case, which was upheld by this tribunal in its order dated 4.5.2018 supra. The ld DR was not able to furnish any evidence contrary to the facts on record.
6 M/s. Krishnav Construction Pvt. Ltd. AY 2013-14 Hence we do not find any infirmity in the order passed by the ld CITA. Accordingly, the grounds raised by the revenue are dismissed.