Ito, Ward-13(2), Kolkata, ... vs M/S. Krishnav Construction P ...

on 15 June, 2018

Income Tax Appellate Tribunal - Kolkata

Ito, Ward-13(2), Kolkata, ... vs M/S. Krishnav Construction P ... on 15 June, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH: KOLKATA
[Before Shri S. S. Godara, JM & Shri M. Balaganesh, AM]

I.T.A. No. 1369/Kol/2017

Assessment Year: 2013-14

Income-tax Officer, Wd-13(2), Kolkata Vs. Krishnav Construction Pvt. Ltd.

(PAN:AADCK5368D)
Appellant Respondent

Date of Hearing 11.06.2018

Date of Pronouncement 15.06.2018
For the Appellant Shri A. Bhattacharjee, Addl. CIT
For the Respondent Shri A. Bose, Advocate

ORDER

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.

2. 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.

3. 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:-

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

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 Ito, Ward-13(2), Kolkata, ... vs M/S. Krishnav Construction P ... on 15 June, 2018

-----------------------

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.

4. 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 M/s. Krishnav Construction Pvt. Ltd. AY
2013-14 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.

5. 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 ITA No. 1942/Kol/2016
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:

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 Ito, Ward-13(2), Kolkata, ... vs M/S. Krishnav Construction P ... on 15 June, 2018

"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 M/s. Krishnav Construction Pvt. Ltd. AY 2013-14 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:

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 Ito, Ward-13(2), Kolkata, ... vs M/S. Krishnav Construction P ... on 15 June, 2018

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.

9. 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:

M/s. Krishnav Construction Pvt. Ltd. AY 2013-14 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.

10. Ground no. 3 raised by the revenue is general in nature and does not require any specific
adjudication.

11. 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.

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.

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 Ito, Ward-13(2), Kolkata, ... vs M/S. Krishnav Construction P ... on 15 June, 2018

6. In the result, the appeal of the revenue is dismissed.

Order is pronounced in the open court on 15.06.2018

Sd/- Sd/-
(S. S. Godara) (M. Balaganesh)
Judicial Member Accountant Member

Dated :15th June, 2018

Jd.(Sr.P.S.)

Copy of the order forwarded to:

1. APPELLANT - ITO, Ward-13(2), Kolkata

2 Respondent -M/s. Krishnav Construction Pvt. Ltd., P-15, Indian

Exchange Place Extn., 9th floor, Kolkata-700 073.
3. The CIT(A)-5, Kolkata (e-mailed)
4. CIT , Kolkata
5. DR, Kolkata Benches, Kolkata (e-mailed)
/True Copy, By order,

Asstt. Registrar.

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