×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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30-08-2019, ASR Engg. & Projects, Section 153A, 139(1), Tribunal Hyderabad
All these appeals filed by the assessees and revenue are having common issues, therefore, these appeals were clubbed and heard together. For the sake of convenience, a consolidated order is passed. 1132 to 1136/Hyd/2017 for AYs 2008-09 to 2011-12 and 222 to 226/Hyd/2019
2. The above appeals are cross appeals by both Assessee and Revenue and are filed against common order dated 30-03-2017, passed by the PCIT (A) - 11, Hyderabad. These appeals are being disposed by a common and consolidated order for the sake of convenience, because of common issues and identical submissions.
2.1 The assessee company, not being one in which public are substantially interested, is in the business of execution of contracts relating to infrastructure projects. Search and seizure operations u/s. 132 of the I.T. Act were conducted in the case of the assessee on 30/11/2011. Particulars of income originally returned, income returned in response to notice u/s.153A dated 05/12/2012 (for A.Yrs. 2006-07, to 2011-12), and income assessed, are tabulated as under:
2.2 The AO observed from the respective assessment orders that the returns filed in response to notice u/s.153A by the assessee did not incorporate an admission of income that was made earlier during the course of Search proceedings Details are as under:
2.3 It is also seen from the assessment orders that in AYrs. 2009-10 to 2012-13 deduction u/s.80IA was not claimed in the returns of income originally filed u/s. 139(1). The claim for deduction was introduced for the first time by the revised returns filed in response to Notice u/s.153A. The details are as under:
2.4 The two common aspects of the above assessments are firstly, disallowance of expenditure claimed as payments to sub-contractors in A.Yrs. 2007-08 to 2011-12, and secondly, rejection of claim of deduction u/s.80IA for A.Yrs. 2009-10 to 2012-13. The facts noticed in the assessment, briefly, are as under.
3. The assessee in the course of its business operations of executing various civil contracts, recorded expenditure claimed to be on account of payments made to subcontractors. The Assessing Officer, relying on the findings of the Search, identified significant improbabilities in the expenditure claimed by way of execution of contract works allotted to M/s. Spectrum Infrastructures Ltd (represented by Sri A. Chandrakanth Reddy), M/s. Sushi Udyog Construction Company (Prop. Sri S. ]anardhan Reddy) and M/s. J.K. Enterprises (represented by Sri S. Janardhan Reddy). Similar features were noticed in payments made to M/s. Gee Constructions, M/s. Surya Erectors, M/s. Prasad Reddy & Co, M/s Siri Engg. & Enterprises, Sri B. Narasimha Reddy, Sri M. Krishna Reddy and Sri T. Srinivas. The Assessing Officer noted that RTGS payments made by the assesseecompany to these parties was immediately withdrawn - in cash, by employees of the assessee company (and not the payee), at the instance of the Managing Director or CFO of the assessee company.
3.1 The assessee objected to the Assessing Officer's proposal for the disallowance by stating that the expenses included payments for subcontracted work actually executed by downstream parties as well as payments for material really purchased. In so far as execution of work is concerned, it was stated that a part of the work was executed by the assessee while the other part of it was entrusted to the sub-contractors, with whom agreements were entered into. The bills raised upon execution of the work were verified and paid for by the principal, which shows that work was actually executed. The contractors acknowledged the receipt by admitting it in their returns of income and claimed the TDS that was duly deducted. Regarding the withdrawal of cash, it is claimed that employees of the assessee company merely facilitated the withdrawal of cash by the subcontractor. It was also claimed that the profit margin disclosed by the assessee was equal to, or more than the industry average, which