Patel L & T Consortium, Mumbai vs Assessee

BEFORE HON'BLE S/SHRI H.L. KARWA, PRESIDENT AND B.R.BASKARAN (AM) सव ी एच.एल. कावा, अ य एवं बी.आर.बा करन, लेखा सद य आयकर अपील सं./I.T.A. No.634/Mum/2012 ( नधारण वष / Assessment Year :2007-08)

Patel L & T Consortium, बनाम/ Commissioner of Income Tax - L and T House, Vs. 12, N M Marg, Mumbai. Ballard Estate, Mumbai-400001. (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIRNo. :AAAAP5965E

अपीलाथ ओर से / Appellant by : Shri Firoze B Andhyarujina यथ क ओर से/Respondent by Shri Parminder Kaur

सन ु वाई क तार ख / Date of Hearing :29.12.2014 घोषणा क तार ख /Date of Pronouncement : 16 .01.2015

आदे श / O R D E R

Per B.R.BASKARAN, Accountant Member:

The assessee has filed this appeal challenging the validity of revision order dated 05-12-2011 passed by Ld CIT-12, Mumbai u/s 263 of the Act for the assessment year 2007-08.

2. The facts relating to the case are that the assessment for the above said year was completed on 16.12.2009 u/s 143(3) of the Act accepting the returned income of Rs.1.00 lakhs. The Ld CIT, on examination of the record, took the view that the assessment order is erroneous and prejudicial to the interests of the revenue, since the assessing officer did not consider the financial statements properly and they show that the assessee had earned a net profit of Rs.46,57,144/- during the year under 634/M/2012 2

consideration on execution of contract. Accordingly he set aside the assessment order with the directions to the AO to examine the issue in detail. The assessee is aggrieved by the order of Ld CIT.

3. The assessee is an unincorporated Joint Venture between M/s Patel Engineering Ltd and M/s Larsen & Toubro Ltd formed for the execution of a contract awarded by National Hydro Electric Power Corporation (NHPC) for construction of Parvati Hydro Electric Project -III, Lot 1, Sainj in district Kullu (Himachal Pradesh). The contract amount was Rs.439.08 crores and the project is required to be completed within 56 months from the date of contract. According to Ld CIT, during the year under consideration, the assessee incurred project cost of Rs.47.59 crores and raised a bill of Rs.48.06 crores and the difference between the two, i.e., Rs.46.57 lakhs was the profit earned by the assessee during the year under consideration. However, it was seen by him that the assessee had declared an income of Rs.1.00 lakh only and the same was also accepted by the AO. Accordingly, the Ld CIT came to the conclusion that the assessment order is erroneous and prejudicial to the interests of the revenue.

4. The ld A.R invited our attention to the Balance sheet furnished in the Paper book at page 16 and submitted that the amount of Rs.46,57,144/- actually represents the amount payable to a Customer, i.e., the customers who had raised bills against the assessee. The said Liability is shown as under in the Balance Sheet:-

LIABILITIES:-

Due to Customer 48,05,99,359 Less:- Work in Progress - At cost 47,59,42,215 ------------------- 46,57,144 ==========

The Ld A.R submitted that the Ld CIT has wrongly presumed that the above said liability payable to the sub-contractors (customer) represents 634/M/2012 3

profit of the assessee. He then invited our attention to the Profit and Loss account furnished at page 17 of the paper and submitted that the assessee had incurred contract expenses to the tune of Rs.46.08 crores during the year under consideration. The assessee had also incurred other administrative expense to the tune of Rs.1.51 crores. The aggregate amount of both the expenses have been taken as Closing work in progress and hence no profit was arrived at in the Profit and Loss account.

5. The Ld A.R submitted that the contract expenses of Rs.46.08 crores represents only about 10% of the total contract amount. Accordingly he submitted that the Contract has not reached a reasonable level warranting estimation of income. Despite this fact that the assessee has declared income of Rs.1.00 lakh and the same has been accepted by the AO. Accordingly, the Ld A.R submitted that the Ld CIT has entertained an erroneous view about the facts prevailing in the instant case and hence the impugned order is liable to be set aside.

6. On the contrary, the Ld D.R placed reliance on the order passed by Ld CIT and submitted that the financial statements show that the assessee has earned an income of Rs.46.57 lakhs.

7. We have heard the rival contentions and perused the record. We notice that the Ld CIT has considered the Balance sheet of the assessee and has come to the conclusion that the assessee has raised a bill of Rs.48.05 crores and has incurred the work in progress expenditure of Rs.47.59 crores. Where as, the assessee has demonstrated before us that the amount of Rs.48.05 crores is the bill amounts raised by its Customers against the assessee. The assessee has deducted the value of Work-in- Progress from the above said amount, instead of showing the same in the Assets side of the Balance Sheet. If the assessee had shown the Work in Progress amount in the asset side of the Balance Sheet, then the matter 634/M/2012 4

would have been more clear. Thus, we notice that there is a conceptual misunderstanding on the part of Ld CIT about the facts prevailing in this case. When the Ld CIT proceeds on erroneous line on misunderstood facts and accordingly passes the revision order, in our view, the same cannot be sustained.

8. In view of the above, we set aside the impugned revision order passed by Ld CIT.

9. In the result, the appeal filed by the assessee is allowed.

The above order was pronounced in the open court on 16th Jan,2015.

घोषणा खुले यायालय म दनांकः16th Jan 2015 को क गई ।

sd sd

(एच.एल. कावा/ H.L. KARWA) (बी.आर. बा करन,/ B.R. BASKARAN) अ य / PRESIDENT लेखा सद य/Accountant Member मब ुं ई Mumbai: 16th Jan, 2015.

व. न.स./ SRL , Sr. PS

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)- concerned

4. आयकर आयु त / CIT concerned

5. वभागीय त न ध, आयकर अपील य अ धकरण, मब ुं ई / DR, ITAT, Mumbai concerned

6. गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER, true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई /ITAT, Mumbai