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TMI Blog2016 (7) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... uiry in the facts and circumstances of the case and the word `erroneous' in s. 263 includes the failure to make such an enquiry. We are therefore of the view that exercise of jurisdiction u/s 263 of the Act in respect of provision for future losses on construction contract was fully justified. Payments being in the nature of accommodation entry - Held that:- CIT was justified in invoking the jurisdiction u/s 263 of the Act even in respect of the payments made to M/s. Sintex Infra Projects Ltd.n the given facts and circumstances we do not find any ground to interfere in the order of CIT. As rightly contended by the CIT DR before us, the assessee is at liberty to put forth all contentions with regard to the allowability of the provision for future losses on construction contract and also as to how the payments made to M/s. Sintex Infra projects Ltd is not in the nature of accommodation entries and are genuine. The AO will look into the submissions of the assessee and after taking into consideration the evidence and materials before him, he is free to come to the conclusion as to whether the claim made by the assessee has to be accepted or not, uninfluenced by the fact that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate orders should not be passed u/s.263 of the Act. 4. The Assessee by reply dated 29.10.2015 explained that with regard to anticipated loss on construction contracts which were claimed and allowed as deduction in the assessment proceedings, that queries in respect of future losses with reference to Accounting standard followed by the Auditor and verification of the same done by the A.O. during assessment proceeding in the light of several judicial pronouncements on the issues. With regard to the allegation of accommodation entries of bogus expenditure it was explained that the assessee made payments subject to TDS through banking channel to M/ s. Sintex Infra Projects Ltd. for the services rendered by them as subcontractor. The Assessee submitted that the details and background of the said company and other documents evidencing their financial worth are in public domain and the same were also filed before the CIT. It was thus submitted CIT that the A.O. while completing the assessment had adopted one of the courses permissible in law and, therefore, the provisions of sec. 263 of the Act are not attracted. It was, therefore, requested to drop proceeding initiated u/s.263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be conclusively established that M/s. Sintex Infra Projects Ltd. had rendered the services in lieu of the payment received by it. In a collusive transaction, it always happens that the payments are made through banking charmels and TDS is deducted in confirmation with the relevant provisions so as to render a cover of genuineness to otherwise not a genuine transaction in reality. The real nature of the transaction can only be ascertained if the A.O. makes enquiries in this regard. However, from the assessment order, I find that no such enquiry to ascertain the genuineness of the transaction, more specifically whether M/ s. Sintex Infra Projects Ltd. had rendered any service to the assessee in lieu of the payment made by the assessee was conducted by the A.O. The A.O. had also not examined the bank statements to look into the movement of the fund out of the payment made by the assessee. As these enquiries which were required to be made before accepting the claim of the assessee were not make, the assessment order is erroneous in so far as prejudicial to the interest of revenue as deduction of the sum of ₹ 5.42 crores was allowed without making any enquiry. 7. The CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accounts of India (ICAI), provision for foreseeable loss in the case of assessee engaged in construction business and following percentage construction method is allowable as deduction. In particular our attention was drawn to column 17(k) of the Tax Audit Report wherein the basis on which provision for future losses were claimed as deduction has been clearly set out by the Assessee as follows :- Rs.14,83,51,419/- being provision for future losses on construction contracts in terms of Accounting Staneard-7 notified by the Companies Accounting Standard Rules, 2006 (as emended). The Company has relied on the decision of the Mumbai Income Tax Appellate Tribunal (ITAT) (AIT-2009-285-ITAT) in the case of Jacob Eng. India Pvt. Ltd. and accordingly it has considered foreseeable loss, in respect of an incomplete contract computed in accordance with AS-7, as an allowable expense. It was submitted that in the light of the material available on record, the AO accepted the claim of the assessee. It was submitted by him that the fact that the AO did not make any enquiries in this regard before allowing the claim of the assessee would not be material as on the basis of the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. The ld. DR placed reliance on the order of CIT and submitted that on both the issues the AO did not make any enquiries and therefore the CIT was fully justified in passing the impugned order. It was submitted by him that the assessee could always explain the merits of the claim with regard to allowing the provision for future losses and also payments to M/s. Sintex Infra Projects Ltd and therefore the assessee cannot have any grievances. Reliance was placed by him on the decision of the Hon ble Delhi High Court in the case of Gee Vee.Enterprises 99 ITR 375 (Del). 12. We have given a very careful consideration to the rival submissions. It is clear from the material on record that the AO while completing the assessment u/s 143(3) of the Act did not make any enquiries whatsoever with regard to the provision for future losses on construction contract of ₹ 14,83,51,419/- claimed by the assessee. The submission of the ld. Counsel for the assessee was that since the basis on which this loss was claimed was set out in the tax Audit Report in col. 17(k) and since this material was available before the AO, the AO is deemed to have applied his mind to the claim of the assessee fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings, and which is part of the record before CIT when the jurisdiction u/s.263 of the Act is being invoked by the CIT. We are supported in the above conclusions by the decision of the Hon ble Supreme Court in CIT vs. Shree Manjunathesware Packing Products Camphor Works 231 ITR 53 (SC) wherein the Hon ble Supreme Court after examining the legislative amendment to s. 263 including the amendment made with retrospective effect for amplifying the scope of the term record , did not accept the narrow interpretation of the word record which had appealed to the Calcutta High Court in the case of Ganga Properties vs. ITO 118 ITR 447 (Cal) and the apex Court held as under : . . . . The revisional power conferred on the CIT under s. 263 is of wide amplitude. It enables the CIT to call for and examine the record of any proceeding under the Act. It empowers the CIT to make or cause to be made such enquiry as he deems necessary in order to find out if any order passed by the AO is erroneous insofar as it is prejudicial to the interests of the Revenue. After examining the record and after making or causing to be made an enquiry, if he considers the order to be erroneous, then he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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