Case Number: ITA 2835/DEL/2022
Appellant: DCIT, Central Circle-II, Noida
Respondent: Shiv Shakti Construction, Greater Noida
Assessment Year: 2016-17
Case Filed On: 2022-12-02
Order Type: Final Tribunal Order
Date of Order: 2023-07-27
Pronounced On: 2023-07-27
The case involves the assessment year 2016-17, where the DCIT, Central Circle-II, Noida (the appellant) filed an appeal against Shiv Shakti Construction, Greater Noida (the respondent). The primary issues in contention were the disallowance under Section 14A of the Income Tax Act, violation of Section 40A(3), and unverified employee expenses.
The Income Tax Appellate Tribunal, Delhi Bench “G” heard the appeals together for multiple assessment years including 2015-16, 2016-17, 2017-18, 2018-19, 2019-20, and 2020-21.
Appellant’s Arguments: The appellant argued that the assessee (Shiv Shakti Construction) failed to prove the genuineness of purchases and corresponding sundry creditors, and made cash payments in violation of Section 40A(3). Additionally, discrepancies in employee expenses were highlighted.
Respondent’s Defense: The respondent contended that the purchases were genuine and necessary for the government contract works. They argued that the cash payments were made due to the nature of the business, which involved working in remote areas without banking facilities.
The Tribunal noted several key observations:
Conclusion: The Tribunal upheld the rejection of the books of account but moderated the disallowance by estimating the net profit at 10% of the turnover, excluding certain incomes not related to the contract business.
Final Judgment: The appeal of the assessee was partly allowed, and the Revenue’s appeal was dismissed.
Appeal by Revenue (AY 2016-17): The Tribunal dismissed the appeal filed by the Revenue, supporting the CIT(A)’s (Commissioner of Income Tax Appeals) decision to provide partial relief to the assessee.
Appeal by Assessee (AY 2016-17): The Tribunal allowed the appeal in part, directing the AO to consider interest income from fixed deposits and discounts as part of the business receipts for estimation purposes.
The detailed order and observations by the Tribunal reflect a balanced approach considering the peculiarities of the business and the evidence presented. The estimated net profit at 10% of the contract receipts aims to provide a fair assessment while recognizing the operational realities faced by the assessee.
DCIT vs. Shiv Shakti Construction, Assessment Year 2016-17: Disallowance Under Section 14A
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