M/S. AYODHYA GORAKHPUR SMS TOLLS PVT. LTD,NAGPUR vs. PRINCIPAL COMMISSIONER OF INCOME TAX-1, NAGPUR

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ITA 167/NAG/2021Status: DisposedITAT Nagpur04 October 2023AY 2016-17Bench: SHRI INTURI RAMA RAO (Accountant Member), SHRI PARTHA SARATHI CHAUDHURY (Judicial Member)5 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the PCIT's order, finding that the Assessing Officer had not properly verified the provision for overlay expenses and its impact on book profit computation under Section 115JB. The assessment order was deemed erroneous and prejudicial to the revenue.

What were the facts?

The assessee made a provision for overlay expenses of Rs. 8,41,49,000 in the relevant year, increasing the total provision to Rs. 17,91,49,000. The PCIT noted that the assessee had actually incurred Rs. 45.04 crores in a subsequent year, implying no expenses were incurred in the relevant years.

What were the issues?

Whether the PCIT was justified in revising the assessment order under Section 263 due to the AO's failure to examine the provision for overlay expenses and its effect on book profit calculation.

Which sections of the Income-tax Act were involved?

Section 263,Section 115JB,Section 143(3),Section 80IA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, NAGPUR BENCH :: NAGPUR

For Respondent: Shri Kailash G. Kanojiya, CIT DR
Hearing: 26/09/2023Pronounced: 04/10/2023

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH :: NAGPUR BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER & SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER (Through virtual hearing) (A.Y. 2016-17) M/s. Ayodhya Gorakhpur vs Pr.CIT-1, Nagpur. SMS Tolls P. Ltd., 20, IT Park, STPI, Parsodi, Gayatri Nagar, Nagpur. PAN : AALCA 3448 C Appellant Respondent Assessee by : Mukesh Agrawal, CA Revenue by : Shri Kailash G. Kanojiya, CIT DR Date of hearing : 26/09/2023 Date of pronouncement : 04/10/2023 O R D E R Per PARTHA SARATHI CHAUDHURY, JM:

This appeal preferred by the assessee emanates from the order of Principal Commissioner of Income Tax-1, Nagpur (for short, PCIT’), dated 23.02.2021 for A.Y. 2016-17 as per the grounds of appeal on record.

2. As per the record, this appeal is barred by limitation by 227 days. Ld.AR for the assessee submitted that though the order u/sec. 263 was passed, but not physically served the assessee due to Covid-19 pandamic and relied on the judgment of the Hon'ble Supreme Court in suo motu cognizance passed in WP (C) No.03/2020, dated 10/01/2022 submitted that the Hon'ble Supreme Court has M/s. Ayodhya Gorakhpur SMS Tolls P. Ltd. extended the period of limitation in all proceedings before the Courts/ Tribunals w.e.f.15.03.2020 till 02.10.2021, therefore the present appeal is not time barred. By considering the submissions of the ld.AR and as per the directives issued by the Hon'ble Supreme Court, this appeal is heard on merits.

3.

That, on perusal of the grounds of appeal filed by the assessee, the solitary grievance that arises is with regard to revisionary jurisdiction assumed by the ld. PCIT and passing the order u/sec. 263 of the Act.

4.

The relevant facts are that the assessee is engaged in the business of operating and maintaining toll plaza. In the show-cause notice issued u/sec. 263, it was mentioned that as per record, the case of the assessee had been selected for complete scrutiny. It was also observed that as per profit & loss account (note 17) amount shown Rs.8,41,49,000/- was provided towards overlay expenses. Therefore, the provision was made for Rs. 8,41,49,000/- during the year towards overlay expenses, however, at the end of the year, the total provision had increased to Rs. 17,91,49,000/- as no amount was utilized. Therefore, the Assessing Officer (AO) while finalizing the scrutiny assessment should have looked into/examined the nature of this provision made in the profit & loss account before completing the assessment and since it was not done, the assessment order should have to be held as erroneous as well as prejudicial to the interest of 2

M/s. Ayodhya Gorakhpur SMS Tolls P. Ltd. the Revenue. In reply to the show-cause notice, the assessee had filed detailed written submission which forms part of the impugned order and is not repeated herein for the sake of brevity. That, after considering the submissions of the assessee as well as the assessment order, it was held by the ld.PCIT that the assessee had to incur overlaying cost of Rs.75.69 crores and accordingly provision was made for A.Y. 2015-16 at Rs. 9.50 crores and for A.Y. 2016-17 at Rs. 8,41,49,000/- towards overlay expenses, but in fact, the assessee had actually incurred an amount of Rs. 45.04 crores as expenses in F.Y. 2016-17 relevant to A.Y. 2017-18 towards overlay expenses of roads. This demonstrated that assessee had not incurred any expenses on overlay of road during the relevant A.Y. 2016-17 and A.Y. 2015-16 also. The facts on record precisely demonstrates that the AO has not verified and examined any details of such overlay expenses claimed under the head ‘overlay expenditure’. Further, it was also observed that the assessee had entered into an agreement with National Highways Authority of India (NHAI) which consists of 140 pages, whereas the assessee had only uploaded 07 pages out of 140 pages of agreement with NHAI and the AO has not looked into this issue at all. Another argument raised before the PCIT by the assessee was that even if overlay expenses were not allowed, but the toll business was eligible for deduction u/sec. 80IA of the Act. To this contention, it was held by the PCIT that irrespective of deduction u/sec. 80IA, the assessee had to consider the provision made against overlay expenses 3

M/s. Ayodhya Gorakhpur SMS Tolls P. Ltd. for computing the book profit u/sec. 115JB of the Act. But, the assessee had failed to consider this provision while computing the book profit u/sec. 115JB of the Act. This crucial aspect of the assessment has been left unverified by the AO. The assessment order passed u/sec. 143(3) was, therefore, held to be erroneous insofar as to be prejudicial to the interest of the Revenue.

5.

Ld.AR could not refute through any evidences the findings of the ld.PCIT. The ld.AR also could not demonstrate whether the AO has actually verified and examined the issue of overlay expenses during assessment proceedings and to what extent it was incurred during the year under consideration. The assessee had actually incurred Rs.45.04 crores as expenses in A.Y. 2017-18 towards overlay expenses of roads. The assessee has not incurred any expenditure on overlay of road during A.Y. 2016-17 and A.Y. 2015-16. We do not find any infirmity with the findings of the ld.PCIT, which is upheld. The grounds of appeal stands dismissed.

6.

In the result, appeal of the assessee is dismissed.

Order pronounced in open Court on 04th October, 2023.

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