ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. Heard learned Senior Standing Counsel Ms.Maithili D. Mehta for the appellant-Revenue.

2. By this Appeal under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’), the appellant-Revenue has proposed the following substantial question of law, arising out of the order dated 31st October, 2023 passed by the Income Tax Appellate Tribunal, Ahmedabad ‘B’ Bench (for short ‘the Tribunal’) in ITA No.2798/Ahd/2014 & C.O.No.319/Ahd/2014 for Assessment Year 2011-12:

“(i) Whether on the facts and circumstances of the case, learned Tribunal has erred in law and on facts confirming the decision of Ld. CIT(A) to delete the additions made by the A.O. of Rs.6,48,02,554/- on account expenses of projects for which no income is offered?”

3. The brief facts of the case are as under:

3.1. The assessee is a Company engaged in building infrastructure projects namely roads. The assessee-Company received grants from the Government for carrying out infrastructure road projects.

3.2. The assessee filed the Return of Income for the Assessment Year 2011-12 declaring total income of Rs.2,54,79,210/- and the case of the assessee was selected for scrutiny under CASS and Assessment Order under Section 143(3) of the Act was passed on 21st January, 2014 determining total income at Rs.78,41,21,174/- after making additions on account of unutilised grant treated as income amounting to Rs.56,22,59,000/-, unrecorded receipt of Rs.1,08,22,957/- and expenses of project, for which no income was offered, amounting to Rs.6,48,02,554/- and interest on deposits with GSFS of Rs.12,07,57,449/-.

3.3. Being aggrieved, the assessee preferred an Appeal before the CIT (Appeals), who vide order dated 14th July, 2014, allowed the Appeal of the assessee deleting the additions made by the Assessing Officer.

3.4. Being aggrieved by the order of the CIT (Appeals), an Appeal was preferred before the Tribunal by the Revenue being ITA No.2798 of 2014 and assessee also preferred Cross-Objection being C.O.No.319 of 2014. The Tribunal, following its earlier decision for Assessment Year 2010- 11, upheld the order passed by the CIT (Appeals) deleting the addition made on account of unspent grant of Rs.56,22,59,000/-. The Tribunal also dismissed the Appeal filed by the Revenue and upheld the order of the CIT (Appeals) for deletion of the addition of unrecorded receipts amounting to Rs.1,08,22,957/-, in absence of any infirmity in the order of the CIT (Appeals) brought to the attention of the Tribunal by the Departmental representative.

3.5. So far as ground No.3 of the Revenue for deletion of the addition on expenses claimed for which no income was offered amounting to Rs.6,48,02,554/-, is concerned, the Tribunal followed the decision in case of the assessee rendered in ITA No.136/Ahd/2014 for Assessment Year 2010-11, as the disallowance made by the Assessing Officer was identical with that of the earlier year, which reads as under:

“...21. We have heard both the parties and have carefully gone through the authorities below. The issue before us relates to the allowance of claim of expenses with respect to certain projects against which no income was allegedly booked by the assessee. The amount concerned being Rs. 2,10,53,596- And the project wise details are reproduced above.

22. Firstly, we are in agreement with the ld.counsel of the assessee that for the allowance of claim of expenditure, the only requirement to be fulfilled as per the law is that it should have been incurred wholly and exclusively for the purpose of