DCIT, V. M/s Jharkhand Hill Area Lift irrigation Corpon.,

ITA 116/RAN/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85444 (ITAT-RANCHI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2014
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 14-03-2014
• Court: TRIBUNAL
• Department Lawyers: CHOUDHARY ORAM JCITLD

Judgement Text

1 ITA NO.116/RAN/14 M/S. JHARKHAND HILL AREA LIFT IRRIGATION LTD INCOME TAX APPELLATE TRIBUNAL, CIRCUIT BENCH, RANCHI BEFORE HON'BLE SHRI H.L. KARWA, PRESIDENT , AND HON'BLE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. 116 /RAN/ 14 A.Y . 2008 - 09 D.C.I.T CIR - 1, RANCHI VS. JHARKHAND HILL AREA LIFT IRRIGATION CORPRN LTD PAN : AABCJ4211A ( APPELLANT ) ( RESPONDENT ) FOR THE DEPARTMENT : SHRI CHOUDHARY ORAM, JCIT /LD.DR FOR THE A SSESSEE : NONE DATE OF HEARING : 02 - 12 - 2014 DATE OF PRONOUNCEMENT: 02 - 12 - 2014 O R D E R SHRI B.R. BASKARAN, ACCOUNTANT MEMBER : THE APPEAL FILED BY THE REVENUE IS AR E DIRECTED AGAINST THE ORDER DATED 23 - 12 - 2013 PASSED BY LD CIT(A), RANCHI AND THEY RELATE TO THE ASSESSMENT YEAR 2007 - 08. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DELETING THE ADDITION OF RS.671.99 LAKHS, BEING THE INCREMENTAL VALUE OF WORK IN PROGRESS, ASSESSED BY THE ASSESSING OFFICER. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE AND HENCE WE PROCEED TO DISPOSE OF THIS APPEAL EX - PARTE, WITHOUT THE PRESENCE OF THE ASSESSEE. 2 ITA NO.116/RAN/14 M/S. JHARKHAND HILL AREA LIFT IRRIGATION LTD 4. WE HEARD LD D.R AND PERUSED THE RECORD. THE ASSESSE E IS A STATE GOVERNMENT UNDERTAKING AND IS ENGAGED IN THE BUSINESS OF CONSTRUCTION, MAINTENANCE OF IRRIGATION INFRASTRUCTURE IN JHARKHAND. THE AO NOTICED THAT THE ASSESSEE HAS SHOWN THE VALUE OF WORK IN PROGRESS (WIP) AS AN ASSET IN THE BALANCE SHEET, I.E ., THE OPENING AND CLOSING VALUE OF WIP WERE NOT DEBITED/CREDITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE SUBMITTED THAT IT WAS CARRYING ON THE WORKS FOR STATE GOVERNMENT. ACCORDINGLY, IT WAS SHOWING THE ADVANCE RECEIVED FROM THE GOVERNMENT AS LIABI LITY AND THE WIP AS ASSET. ONCE THE PROJECT IS COMPLETED, THE WIP ACCOUNT IS CLOSED BY TRANSFERRING THE SAME TO THE ADVANCE RECEIVED FROM GOVERNMENT ACCOUNT AND ACCORDINGLY THE ACCOUNT IS SETTLED. THE AO WAS NOT CONVINCED WITH THE SAID EXPLANATIONS A ND ACCORDINGLY ASSESSED THE DIFFERENCE BETWEEN THE CLOSING VALUE OF WIP AND OPENING VALUE OF WIP AMOUNTING TO RS.671.99 LAKHS AS THE INCOME OF THE ASSESSEE. 5. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) NOTICED THAT THE ASSESSEE HAS BEEN RECEIVING CO MMISSION TO THE EXTENT OF 10% ON THE VALUE OF WORK DONE. IN THIS REGARD, THE ASSESSEE FURNISHED A COPY OF MINUTES OF BOARD MEETING DATED 13.03.2003 IN ORDER TO SHOW THAT THE ASSESSEE EARNS ONLY AGENCY COMMISSION FOR THE SERVICES RENDERED TO THE STATE GOVE RNMENT WITH REGARD TO THE CONSTRUCTION OF LIFT IRRIGATION SCHEMES. THE ASSESSEE SUBMITTED THAT IT WAS NOT CARRYING ON ANY INDEPENDENT CONTRACT WORK, BUT ONLY EXECUTING THE ORDERS OF THE GOVERNMENT ON GETTING COMMISSION OF 10%. IT WAS FURTHER SUBMITTED T HAT THE ASSESSEE HAS BEEN FOLLOWING THE ACCOUNTING PRACTICE OF SHOWING WIP AS AN ITEM OF ASSET AND THE ADVANCE RECEIVED FROM GOVERNMENT AS AN ITEM OF LIABILITY TILL THE COMPLETION OF THE PROJECT. ON COMPLETION OF THE PROJECT, BOTH THE ITEMS SHALL BE SET O FF. IT WAS ALSO SUBMITTED THAT THE SAID ACCOUNTING PRACTICE IS IN ACCORDANCE WITH THE AS - 9 ISSUED BY THE ICAI AND ALSO ACCEPTED BY THE STATUTORY AUDITORS AND C &AG AUDITORS OF CENTRAL GOVERNMENT. ACCORDINGLY, THE LD CIT(A) HELD THAT THE AO WAS NOT CORREC T IN 3 ITA NO.116/RAN/14 M/S. JHARKHAND HILL AREA LIFT IRRIGATION LTD PRESUMING THAT THE ASSESSEE HAS BEEN CARRYING ON INDEPENDENT CONSTRUCTION WORK. ACCORDINGLY HE DELETED THE IMPUGNED ADDITION. 6. ON PERUSAL OF RECORD AND THE ORDER PASSED BY LD CIT(A), WE NOTICE THAT THE FIRST APPELLATE AUTHORITY HAS CONSIDERED A LL RELEVANT MATERIALS AND ACCORDINGLY REACHED THE CONCLUSION THAT THE ASSESSEE HAS BEEN UNDERTAKING WORKS ON BEHALF OF THE GOVERNMENT OF JHARKHAND AND WAS GETTING A COMMISSION INCOME OF 10% ON THE VALUE OF WORK. FURTHER THE LD CIT(A) HAS ALSO GIVEN A FIND ING THAT THE WIP AMOUNT IS ADJUSTED AGAINST THE ADVANCE AMOUNT AFTER THE COMPLETION OF THE PROJECT. SINCE THE ASSESSEE HAS BEEN FOLLOWING THE ABOVE SAID ACCOUNTING PRACTICE CONSISTENTLY AND SINCE NOTHING WAS BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE HAS BEEN MAKING PROFITS OUT OF THE CONSTRUCTION WORKS OVER AND ABOVE THE COMMISSION INCOME OF 10%, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.677.91 LAKHS MADE BY THE AO. ACCORDINGLY, WE UPHOLD HIS ORDER ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 02 - 12 - 2014 SD/ - SD/ - [ H.L. KARWA ] [ B.R. BASKARAN ] PRESIDENT ACCOUNTANT MEMBER DT. 02 - 12 - 2014 PLACE : RANCHI PP, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT : 2 THE RESPONDENT: 3..THE CIT, 4.THE CIT(A), 5.DR, ITAT CIRCUIT BENCH, RANCHI 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT. REGISTRAR 4 ITA NO.116/RAN/14 M/S. JHARKHAND HILL AREA LIFT IRRIGATION LTD 1. DATE OF DICTATION .......... ORDER DR AFTED BY THE MEMBER CONCERN ON 02.12 - 14 ........... IN HIS LAPTOP ............ 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ........................OTHER MEMBER ..... 02 - 12 - 2014........................ 3. DATE ON WHICH THE APPROVED DR AFT COMES TO THE SR. P.S./P.S. ..................... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT................................ 02 - 12 - 14 2014................................................... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S ................ 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK ....................................... 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ......................................... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................................................................................................. 9. DATE OF DESPATCH OF THE ORDER ................................................... ...........