Income Tax Appellate Tribunal - Delhi
Ito, New Delhi vs M/S. Mrg Promoters P. Ltd., New Delhi on 13 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'E' : NEW DELHI)
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.1959/Del./2014
(ASSESSMENT YEAR : 2009-10)
ITO, Ward 6 (1), vs. M/s. MRG Promoters P. Ltd.,
New Delhi. 2332, 1st Floor, Peeli Building,
Arya Samaj Road, Karol Bagh,
New Delhi - 110 088.
(PAN : AAECM1051G)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : None
REVENUE BY : Ms. Shefali Swroop, CIT DR
Date of Hearing : 09.04.2018
Date of Order : 13.04.2018
ORDER
PER KULDIP SINGH, JUDICIAL MEMBER :
The appellant, Income Tax Officer, Ward 6 (1), New Delhi (hereinafter referred to as 'the Revenue') by filing the present appeal, sought to set aside the impugned order dated 16.01.2014 passed by Ld. CIT (Appeals)-IX, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :-
"1. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.11,06,69,987/-, made by the A.O u/s 40(a)(ia) for non-deduction of TDS u/s 194C, without 2 ITA No.1959/Del./2014 appreciating the fact that deduction of TDS on payments/advances made U/S 194C ?
2. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the addition of Rs.3,28,90,154/-, made by the A.O by rejecting the books of account and estimating the profit @ 25% of the total value of cost by adopting the percentage completion method of accounting, entirely on the submission of the assessee and ignoring the detailed findings given by the A.O ?
3. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in holding that the A.O that the addition of Rs.3,28,90,154/-, made by the A.O by rejecting the books of account and estimating the profit @ 25% of the total value of cost by adopting the percentage completion method of accounting, was based on assumption without adequate adverse material into possession completely ignoring the detailed discussion made by the A.O on the above issue in the assessment order?
4. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in not adjudicating on the issue of non-confirmation of 29 creditors, out of 46 creditors, in response to the notices u/s 133(6) issued by the A.O. as the addition of Rs.5,79,88,516/- was not made u/s 68 by the A.O as he had already made the addition of Rs. 3,28,90,154/- ?
5. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law.
6. That the grounds of appeal are without prejudice to each other."
2. Briefly stated the facts necessary for adjudication of the controversy at hand are : assessee company is into the business of real estate as subsidiary of AMR Infrastructure Ltd. (for short 3 ITA No.1959/Del./2014 'AMR') and has entered into an agreement with its majority shareholder AMR Infrastructure Ltd. (99% holding company) for construction of a mall at Kundli. During the year under assessment, parent company received an amount of Rs.7,26,53,392.70 on account of advance against the expenses of Rs.11,06,69,987/-. In P&L account, assessee company declared nil income and claimed expenditure to the tune of Rs.81,137.20 which is shown as net loss in P&L account. AO by treating assessee and AMR as two separate entities proceeded to conclude that the assessee company was required to deduct the Tax at Source (TDS). AO, declining the contention raised by the assessee company that all the payments are made by AMR and the assessee company is only booking the expenses of AMR, TDS is also made by AMR, disallowed the amount of Rs.11,06,69,987/- under section 40(a)(ia) of the Income-tax Act, 1961 (for short 'the Act') and made addition thereof to the income of the assessee company. AO further made addition of Rs.3,28,90,154/- by rejecting the books of account and estimating the profit @ 25% of the total value of the cost by adopting the percentage completion method of accounting. AO noticed from the details submitted by the AMR showing the list of creditors, their addresses and amount taken during the year and in order to verify their creditworthiness issued notices u/s 4 ITA No.1959/Del./2014 133(6) of the Act. Out of the 46 notices issued, only 17 replied with their confirmations but no separate addition on this account has been made by the assessee company as the addition made by making disallowance u/s 40(a)(ia) and estimating the gross profit will cover the disallowance/addition on this issue.
3. Assessee carried the matter by way of an appeal before the ld. CIT (A) who has deleted the addition of Rs.11,06,69,987/- u/s 40(a)(ia) and addition of Rs.3,28,90,154/- on account of GP rate by partly allowing the appeal. Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal.
4. Assessee has not preferred to put in appearance despite issuance of the notice on earlier occasions and consequently, we proceeded to decide the present appeal with the assistance of the ld. DR as well as on the basis of documents available on the file.
5. We have heard the ld. Departmental Representative for the revenue to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
GROUND NO.1
6. Undisputedly, tax on the amount in question has been deducted at source by AMR and paid to the Government. When 5 ITA No.1959/Del./2014 AMR, a 99% holding company of the assessee company, was to act on behalf of the assessee company, purchased the raw material, carried out all administrative work, make all necessary payments on its behalf and also accepted booking amount, AMR made the payment to various persons after deducting the necessary TDS on behalf of the assessee company, section 194C is not attracted and provisions contained u/s 40(a)(ia) of the Act are not applicable. When ld. CIT (A) has duly examined the bank accounts of AMR showing advances received from clients and payment for expenses and has also perused the ledger account of the payee in books of AMR where TDS has been shown as deducted on the payment and deposited in the Punjab National Bank, Kundli, the assessee company cannot be penalized u/s 40(a)(ia) of the Act as the entire arrangement for making payment of TDS is in accordance with the agreement entered into between the assessee company and AMR (99% holding company). So, in these circumstances, we find no illegality or perversity in the deletion made by ld. CIT (A). Consequently, ground no.1 is determined against the Revenue. GROUNDS NO.2 & 3
7. AO made addition of Rs.3,28,90,154/- by rejecting the books of account by estimating the profit @ 25% of the total value of the 6 ITA No.1959/Del./2014 cost of adopting percentage completion method of accounting, which the ld. CIT (A) has deleted. AO has taken into account GP rate of DLF @ 20% and stated that in case 20% of GP is applied, the profit rate will be 25% of the cost.
8. Perusal of the assessment order goes to show that AO applied Percentage Completion Method (POCM) on work-in- progress of Rs.13.15 crores declared by the assessee company and treated the increase in work-in-progress during the year as project completed and proceeded to assume that 25% of the total value of work-in-progress during the year is recognized as profit of the year. AO arrived at this percentage by applying indirect method. Secondly, AO applied 20% of the GP declared by DLF and then proceeded to take work-in-progress of Rs.13.15 crores as against 25% of the same i.e. Rs.3,28,90,154/- as gross profit.
9. However, the AO has not taken into account the facts inter alia that the assessee company cannot be compared with DLF because of its huge turnover and brand value; that since there is no sale proceeds or income in the hands of the assessee company the entire expenditure is capitalized; that no profit & loss account prepared as the expenditure is wholly capitalized and as per schedule of expenses given in the assessment order, the construction expenses is shown at Rs.6,88,15,115/-. So, the AO 7 ITA No.1959/Del./2014 has applied POCM on cost on an assumed percentage of completion or on extra polation basis which is not permissible as per accounting procedure. So, in these circumstances, we are of the considered view that ld. CIT (A) by examining all these facts have rightly deleted the addition which needs no interference. Consequently, grounds no.2 & 3 are determined against the Revenue.
GROUND NO.4
10. This ground raised by the Revenue is totally misconceived as no specific addition has been made by the AO to be challenged under this ground who has rather recorded his finding on this issue as under :-
"As seen from the above chart, out of the 46 notices issued only 17 replied with their confirmation. The total amounts confirmed by such replies being Rs.1,46,64,876/-. The balance amount of Rs.5,79,88,516/- claimed to have been received during the year stand unconfirmed independently. This is one more reason for rejecting the books of accounts of the assessee company. No addition being made under different heads will cover the disallowance/additions on this issue as well."
11. Ld. CIT(A) has rightly dealt with this issue by treating this ground as infructuous as the AO has not made any addition on this ground which is otherwise covered under expenses and GP head. So, ground no.4 is determined against the Revenue. 8 ITA No.1959/Del./2014 GROUNDS NO.5 & 6
12. Grounds No.5 & 6 are general in nature, hence do not require any adjudication.
13. Resultantly, the appeal of the Revenue is hereby dismissed. Order pronounced in open court on this 13th day of April, 2018.
Sd/- sd/-
(R.K. PANDA) (KULDIP SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 13th day of April, 2018
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-IX, New Delhi.
5.CIT(ITAT), New Delhi. AR, ITAT
NEW DELHI.