DCIT vs Solutrean Building Technology Pvt.Ltd.

PER MANISH AGARWAL, AM :

The present appeal is filed by Revenue against the order dated 02.02.2024 by Ld. Commissioner of Income Tax (A)-3, New Delhi [“Ld.CIT(A)”] in Appeal No. NFAC/2017-18/10041722 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 31.03.2021 passed u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act pertaining to Assessment Year 2018-19.

Brief facts of the case are that the assessee company is a private Limited company and the case of the assessee was selected for Complete Scrutiny assessment under the E-assessment Scheme, 2019 on the following issues:

Accordingly, notice u/s 143(2) was issued followed by notices 142(1) of the Act which were duly replied. After considering the submissions filed by the assessee company, AO assessed the income of the assessee at INR 7,33,07,986/- vide assessment order dated 31.03.2021 passed u/s 143(3) r.w.s. 143(3A) r.w.s. 143(3B) of the Act.

Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 02.02.2024, partly allowed the appeal of the assessee.

Aggrieved by the order of Ld.CIT(A), Revenue is in appeal before the Tribunal by taking following grounds of appeal:-

In support of Ground of appeal No.1 raised by the Revenue, ld. Sr. DR for the Revenue submits that AO has made disallowance by observing that assessee has not deducted tax at source on various payments of expenses claimed in the Profit & Loss Account which are in the nature of contractual payments and attract the liability of TDS. Ld. SR DR further submits that AO in the assessment order has produced a table at para 7.1 of the order which running into few pages according to which the assessee has made payments to various service providers which are contractual in nature totaling to INR 8,79,35,656/- on which TDS was not deducted and accordingly, 30% of the same are disallowed. Ld. Sr. DR submits that ld. CIT(A) deleted the disallowance by relying upon the submissions filed by assessee wherein assessee has submitted that either TDS was deducted or there was no requirement of deduction of tax. Ld. SR DR thus submits that these facts require verification on the part of the AO which was not provided by ld.CIT(A) who has accepted the submissions of the assessee without obtaining comments from the AO and, therefore, he requested that the issue may be sent back to the file of AO for necessary verification.

On the other hand, ld.AR for the assessee submits that during the course of assessment proceedings, assessee filed reply on various occasions stating that TDS as per law was deducted on the payments made and claimed as expenditure wherever applicable. As pe ld. AR, there was no failure on the part of the assessee in making compliance of TDS provisions. He thus, submits that the assessee after receiving the assessment order, has filed a chart before Ld.CIT(A) alongwith the copy of the ledger accounts of the respective parties in support of the claim that TDS was deducted and ld. CIT(A) after verification of the said details, deleted the disallowance which orders deserves to be uphold. Ld. AR submits that ld. CIT(A) under the Co-terminus power granted as per Act has verified the details and thus deleted addition therefore, he prayed for confirmation of the order of ld. CIT(A).

Heard the contentions of both the parties at length and perused the material available on record. The AO has tabulated the parties to whom total payment of INR 8,79,35,656/- was made and alleged that no TDS was deducted on such payments. It appears that AO has not verified the details filed by the assessee in respect to such payments nor confronted the assessee about the facts of non-deduction of tax on payment of these parties. Had there been queries raised by the AO, the necessary reply alongwith evidences could be tendered. It is further observed that assessee has filed TDS returns which were available before the AO wherein payments made to all the parties alleged by the AO and the certificate issued to these parties are duly verifiable. Further in the Tax Audit Report, the Auditor has not made any adverse remarks with respect to the payments made nor it is observed by the Auditors that no TDS was deducted on such payments.

From the perusal of the order of Ld.CIT(A) at page 8 to 12 where party-wise explanation is given by the assessee in the table reproduced. It is observed that assessee has deducted the tax at source wherever applicable and thus, we find no error in the order of Ld.CIT(A) in deleting the same who after making proper verification of the details filed by the assessee has deleted the disallowance. Accordingly, Ground of appeal No.1 raised by the Revenue is dismissed.

Ground of appeal No.2 raised by the Revenue is with respect to the addition of INR 2,72,82,952/- regarding non-reporting of the income.

Before us, Ld. Sr. DR for the Revenue submits that as per Form 26AS, the gross receipts were of INR 54,22,91,501/- as against which assessee has declared gross receipts of INR 45,84,77,858/- and thus, there is a difference of around INR 10 Crores which was not declared by the assessee though was appearing in 26AS statement. Further the AO made the detailed discussion of the receipts and after considering the fact that the assessee has computed its income of POCM method for the construction activities however, has not filed necessary details therefore, invoked the provisions of section 145(3) of the Act. Thereafter the AO has estimated the profits @ 10% on construction activity on the gross receipts of INR 10,24,20,519/-taken as per 26AS statement being the amount deducted on the Sale Deeds executed during the year and further applied 8% profit rate on the contractual receipts of INR 43,98,70,982/- as appearing in 26AS statement. Ld. Sr. DR submits that AO in para 7.3 of its order has pointed out the defect in the books of accounts of the assessee and further submits that after considering the same, AO invoked the provision of section 145(3) of the Act therefore, the action of the AO deserves to be upheld. Ld. SR. DR further submits that ld. CIT(A) has failed to appreciate these facts and deleted the addition by relying upon the submissions made by the assessee without controverting the observation of the AO. He thus, requested for the confirmation of the addition so deleted by Ld.CIT(A).

On the other hand, Ld.AR for the assessee placed reliance on the order of ld. CIT(A) and submits that ld. CIT(A) appreciated the fact of factual error in the order of AO where he has picked up certain incorrect figures of income and further wrongly considered the payments made on which Tax was collected by the recipient (TCS) as income of the assessee, solely based on 26AS statement. Ld.AR further submits that after reducing the errors and omissions as stated above, actual receipts of the assessee were of INR 43.29 crores as per 26AS statements as against which assessee disclosed gross receipt of INR 43.66 crores and therefore, had declared higher receipts. It is further submitted by Ld.AR for the assessee that assessee was engaged in constructing the residential project namely, ‘Cladium’ where construction was started in the year 2013-24 and completed in the year 2022-23 and income from said project was disclosed by following POCM prescribed as per Accounting Standard-7. The assessee disclosed profits from the said project on regular basis which is tabulated at page 15 of the appellate order and thus, submits that Ld.CIT(A) has rightly deleted the additions which order deserves to be uphold.

Heard the contentions of both the parties at length and perused the material available on record. The main allegation of the AO is that there were certain entries in 26AS statement, according to which the gross receipts of the assessee is much higher than the gross receipts declared by the assessee in its final accounts. Therefore, he invoked the provisions of section 145(3) of the Act and estimated the income of the assessee.

Before Ld.CIT(A), assessee has filed the necessary explanation and reconciliation of receipts appearing 26AS statements and as per final accounts which were verified by ld. CIT(A) and while deleting the additions has made following observations in para 16 to 35 of the appellate order :-

Before us, Revenue has failed to controvert the findings of Ld.CIT(A) where he himself has verified the errors and omission made by AO while taking the amounts of receipts as per 26AS statement by wrongly considering the payments made and TCS done as the receipts of the assessee.

Besides this, AO has taken the amount of Sale Deed registered during the year as the receipts of the assessee by ignoring the fact that assessee has followed POCM method for computing the income from Real estate business where income has regularly been offered for tax as method regularly applied where receipts were offered for tax as per the area of constructed vis-a-vis advances received from the customers. It is further observed that as per the said method, assessee had declared the income on regular basis which was accepted by the Revenue, thus, again making addition by treating the amount received on the registration of the Sale Deed would be double addition of an income.

In the light of the above discussion, we find no error in the order of Ld.CIT(A) which is hereby, upheld. Accordingly, Ground of appeal No.2 raised by the Revenue is dismissed.

In the result, the appeal of the Revenue is dismissed.