Sri.P.M.Alavi, Malappuram V. The ACIT, Tirur

ITA 131/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81399 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 30-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 25-03-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Keywords: Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S. GANESAN, JM & CHANDRA POOJARI, AM ITA NO.131/COCH/2014 (ASST YEAR : 2006-07 ) SHRI P.M.ALAVI, P.W.D. CONTRACTOR, MELMURI, MALAPPURAM. THE ASSISTANT CONTROLLER OF INCOME-TAX, CIRCLE-2(2), TIRUR. ( APPELLANT) VS (RESPONDENT) PAN NO. ACJPA 3935D ASSESSEE BY SHRI SHAJI POULOSE, CA REVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 3OTH OCT 2014 DATE OF PRONOUNCEMENT 21 ST NOV 2014 ORDER PER CHANDRA POOJARI, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 09/01/2014 PASSED BY CIT(A), KOZHIKODE FOR TH E ASSESSMENT YEAR 2006-07. 2. THE ONLY SOLITARY ISSUE RAISED BY THE ASSESSEE I S WITH REGARD TO THE ADDITION OF RS.89,04,792/- DUE TO THE DIFFERENCE BE TWEEN THE OPENING WORK-IN-PROGRESS AND THE CLOSING WORK-IN-PROGRESS. I.T.A. NO.131/COCH/2014 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CIVIL CONTRACTOR. THE RETURN OF INCOME FOR THIS YEAR WAS FILED ON 15-03-2007 DECLARING A TOTAL INCOME OF RS.29,64,395/- AND IT W AS PROCESSED UNDER SECTION 143(1) AND SELECTED FOR SCRUTINY. IN THE C OURSE OF ASSESSMENT, IT WAS NOTICED BY THE AO THAT THE OPENING WIP RETURNED IN THE RETURN OF INCOME FOR THIS YEAR OF RS.4,44,65,795/- WAS MORE T HAN THE CLOSING WIP SHOWN OF RS.3,55,61,003/- AS PER THE STATEMENT OF A SSETS AND LIABILITIES FILED AS ON 31-03-2005 DURING THE COURSE OF SCRUTIN Y ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06. SINCE THE ASSESSEE COULD NOT FURNISH ANY SATISFACTORY EXPLANATION WITH SUPPORTING EVIDENCE F OR THE VARIATION/DIFFERENCE IN RESPECT OF OPENING WIP AS ON 01-04-2005, THE DIFFERENCE OF RS.89,04,792/- (4,44,65,495/- -3,55,6 1,033/-) WAS ADDED BACK TO THE INCOME RETURNED. 3. ON APPEAL, THE CIT(A) OBSERVED THAT IN THE PREVI OUS ASSESSMENT YEAR, 1.E., 2005-06, WIP HAS BEEN ADOPTED ON THE BA SIS OF STATEMENT OF ASSETS AND LIABILITIES FURNISHED BY THE ASSESSEE HI MSELF. THEREFORE, ACCORDING TO THE CIT(A), CONTRADICTING THE STATEMEN TS FILED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS IN A.Y. 2005-06 NOW CAN ONLY BE CONSTRUED AS AN ATTEMPT TO GET UNDUE RE LIEF IN THE A.Y. 2006-07. IN VIEW OF THIS, THE CIT(A) REFUSED TO AC CEPT THE NEW BALANCE SHEET AND OTHER EVIDENCES FILED BY THE ASSESSEE AND SUSTAINED THE I.T.A. NO.131/COCH/2014 3 ADDITION OF RS.89,04,792/-. AGAINST THIS, THE ASSE SSEE IS IN APPEAL BEFORE US. 4. THE LD. AR SUBMITTED THAT UPTO THE ASSESSMENT YE AR 2005-06 THE RETURNS WERE FILED AND ASSESSMENTS WERE COMPLETED O N ESTIMATE BASIS. THE LD. AR SUBMITTED THAT DURING THE COURSE OF ASSE SSMENT FOR A.Y. 2005-06, A STATEMENT OF NET WEALTH WAS FILED ON 11- 09-2006 WHEREIN WORK IN PROGRESS AS ON 31-03-2005 WAS SHOWN AS RS. 3,55,61,003/- AND THE SAID WEALTH STATEMENT WAS AN UNTALLIED DOCUMENT WHEREIN FIGURES WERE WRITTEN IN RANDOM AND PRIMARY PURPOSE WAS TO A SCERTAIN LIABILITY TOWARDS WEALTH TAX. ACCORDING TO THE LD. AR, WORK- IN-PROGRESS IS NOT AN ITEM LIABLE FOR WEALTH TAX. THE LD. AR SUBMITTED T HAT THE ASSESSMENT FOR A.Y. 2005-06 WAS COMPLETED ON 25-10-2006 AND THE NE T PROFIT ESTIMATED AT 8% OF GROSS RECEIPTS WAS ENHANCED TO 1 0%. ACCORDING TO THE LD. AR THERE WAS NO TRADING ACCOUNT DRAWN AND T HE WIP OF RS.3,55,61,033/- WAS NOT ENTERED IN THE COMPUTATION OF PROFIT FOR THE YEAR ENDED 31-03-2005. 4.1 THE LD. AR SUBMITTED THAT RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 FILED ON 15-02-2007, THE OPENING WIP W AS SHOWN AS RS.4,44,65,795/- WHICH WAS BASED ON VALID DOCUMENTS AND DETAILED COMPUTATION FILED BY THE ASSESSEE. I.T.A. NO.131/COCH/2014 4 4.2 THE LD. AR SUBMITTED THAT THE DIFFERENCE IN OPE NING WIP OF YEAR ENDED 31-03-2005 OF RS.89,04,792/- (RS.4,44,65,795/ - - RS.3,55,61,003/-) WAS BROUGHT INTO ASSESSMENT AS IT WAS STATED THAT T HE WORK-IN-PROGRESS RETURNED IN THE RETURN OF INCOME WAS MORE THAN THE CLOSING WORK-IN- PROGRESS AS PER THE ASSET AND LIABILITY STATEMENT F ILED ON 31-03-2005. IT WAS SUBMITTED THAT THE ASS HAS NOT OBTAINED ANY ADV ANTAGE FOR A.Y. 2005-06 OR A.Y. 2006-07 BY SHOWING WIP OF RS.3,55,6 1,003/- IN THE WEALTH STATEMENT. THE LD. AR RELIED ON THE JUDGMENT OF SU PREME COURT IN THE CASE OF CHAMRUP SAMPTRAM VS. CIT (24 ITR 481) WHERE IN IT WAS HELD THAT THE TRUE PURPOSE OF CREDITING VALUE OF UNSOLD STOC K IS TO BALANCE THE COST OF GOODS ENTERED ON THE OTHER SIDE OF THE ACCO UNT AT THE TIME OF THEIR PURCHASES, SO THAT CANCELLING OUT OF THE ENTR IES RELATING TO THE SAME STOCK FROM BOTH SIDES OF THE ACCOUNT WOULD LEA VE ONLY THE TRANSACTIONS ON WHICH THERE HAVE BEEN ACTUAL SALES IN THE COURSE OF THE YEAR SHOWING THE PROFIT OR LOSS ACTUALLY REALIZ ED IN THE COURSE OF THE YEAR TRADING. THUS, THE LD. AR SUBMITTED THAT AS NO TRADING ACCOUNT HAS BEEN PREPARED FOR A.Y. 2005-06, NO ADJUSTMENT A S VISUALIZED ABOVE HAS TAKEN PLACE, AND THERE WAS NO CANCELLING OF ENT RIES SO AS TO LIMIT THE OPENING WIP AS ON 01-04-2005 TO RS.3,55,61,003/ -. ACCORDING TO THE LD. AR, THE SUPPORTING EVIDENCE FILED BEFORE THE AS SESSING OFFICER IN THE REMAND PROCEEDING AND THE CIT(A) PROVE THAT THE WIP OF I.T.A. NO.131/COCH/2014 5 RS.4,44,67,795/- WAS NOT EXAMINED OR DEALT WITH AND WAS SUMMARILY REJECTED BY THE LEARNED AUTHORITIES. THEREFORE, T HE LD. AR SUBMITTED THAT THE ADDITION OF RS.89,04,792/- BEING DIFFERENC E IN OPENING WIP AND CLOSING WIP OF LAST YEAR OF RS.89,04,792/- WAS AGAI NST LAW AND PRAYED THAT THE SAME MAY BE DELETED. 4.3 IT WAS FURTHER SUBMITTED THAT THE CIT(A) IN ORD ER DATED 09-01-2014 AFFIRMED THE ABOVE VIEW AS UNDER: AS REGARDS THE FIRST ISSUE OF WIP IS CONCERNED, IT IS SEEN THAT IN THE PREVIOUS ASSESSMENT YEAR, I.E. 2005-06, WIP HAS BEE N ADOPTED ON THE BASIS OF STATEMENT OF ASSETS AND LIABILITIES FU RNISHED BY THE ASSESSEE HIMSELF. THEREFORE, CONTRADICTING THE STA TEMENTS FILED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEED INGS IN A.Y. 2005-06 NOW CAN ONLY BE CONSTRUED AS AN ATTEMPT TO GET UNDUE RELIEF IN THE A.Y. 2006-07. IN VIEW OF THIS, THE N EW BALANCE SHEET AND OTHER EVIDENCES FILED BY THE ASSESSEE BEFORE ME CANNOT BE ACCEPTED AND HE ADDITION OF RS.89,04,792/- IS SUSTA INED. THUS, THE LD. AR SUBMITTED THAT THE OPENING WIP AS ON 01-04-2005 OF RS.4,44,65,795/- WAS FULLY VERIFIABLE AND THERE WAS COMPLETE DETAILS/EVIDENCE. ACCORDING TO THE LD. AR, THE ASSE SSING OFFICER IN THE COURSE OF REMAND PROCEEDINGS AND CIT(A) IN THE COUR SE OF APPELLATE PROCEEDINGS REFUSED TO VERIFY THE SAME. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE LOWER AUTHORITIES. I.T.A. NO.131/COCH/2014 6 6. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . FOR THE ASSESSMENT YEAR ENDING 31/03/2005 IN WEALTH TAX RET URN, THE ASSESSEE DECLARED PENDING BILL AND ON GOING WORK IN HIS STAT EMENT OF ASSETS AND LIABILITIES AS ON 31-03-2005 AT RS. 3,55,61,003/-. THIS IS ALSO SUPPORTED BY THE CASH FLOW STATEMENT FILED BY THE ASSESSEE FOR T HE YEAR ENDING ON 31-03-2005. ON THIS BASIS, THE WEALTH TAX ASSESSME NT OF THE ASSESSEE HAS BEEN COMPLETED U/S. 16(3) OF THE WEALTH TAX ACT , 1957, VIDE ORDER DATED 08-11-2006. HOWEVER, AS PER BALANCE SHEET AT TACHED TO THE INCOME TAX RETURN FOR ASSESSMENT YEAR 2006-07, THE CORRESPONDING OPENING STOCK OF WORK-IN-PROGRESS, I.E., (PENDING B ILL AND ON GOING WORK) WAS SHOWN AT RS.4,44,65,795/- WHICH RESULTED IN REDUCTION OF THE PROFIT OF THE ASSESSEE BY RS.89,04,792/-. ON THIS REASON, THE ADDITION WAS MADE BY THE ASSESSING OFFICER FOR THIS ASSESSME NT YEAR 2006-07. ADMITTEDLY, THERE WAS DIFFERENCE BETWEEN CLOSING ST OCK OF WORK IN PROGRESS SHOWN IN THE WEALTH TAX RETURN AS COMPARED TO BALANCE SHEET AS ON 31-03-2006 ATTACHED WITH THE INCOME TAX RETU RN FOR THE ASSESSMENT YEAR 2006-07. IN OUR OPINION, IT IS PRO PER TO RECONCILE THESE FIGURES AND ACCORDINGLY, WE REMIT THIS ISSUE BACK T O THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO RECONCILE THE FIGURES OF CLOSING STOCK SHOWN IN THE WEALTH TAX RE TURN AS ON 31-03-2005 AND THE OPENING STOCK IN BALANCE SHEET ATTACHED WIT H THE INCOME TAX I.T.A. NO.131/COCH/2014 7 RETURN FOR THE ASSESSMENT YEAR 2006-07. (YEAR ENDED 31-03-2006). IF THE ASSESSEE IS ABLE TO PINPOINT THE EXACT REASONS FOR THIS DIFFERENCE BETWEEN THE FIGURES OF CLOSING STOCK SHOWN IN WEALT H TAX RETURN AND INCOME TAX RETURN, THE ASSESSING OFFICER SHOULD CON SIDER THE SAME. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21ST D AY OF NOV 2014. SD/- SD/- (N.R.S. GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 21ST NOV 2014 GJ COPY TO: 1. SHRI P.M.ALAVI, P.W.D. CONTRACTOR, MELMURI, MAL APPURAM. 2. THE ASSISTANT CONTROLLER OF INCOME-TAX, CIRCLE-2(2) , TIRUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOZHI KODE. 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T., COCHIN BENCH. 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN 1 DATE OF DICTATION 10 TH NOV 2014 2 DT ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 11 TH NOV 2014 3 DT ON WHICH THE APPROVED DRAFT COMES TO THE SR P S/PS 4 DT ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER I.T.A. NO.131/COCH/2014 8 5 DICTATION PAID PLACED IN THE ORIGINAL FILE (NO.OF PAGES) 6 DT OF PRONOUNCEMENT 7 DT ON WHICH THE FILE GOES TO THE BENCH CLERK 8 DT ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DT ON WHICH THE FILE GOES TO AR 10 DT OF DISPATCH OF THE ORDER