Deputy Commissioner of Income-tax, V. B.G. Shirke Construction Technology Private Ltd.,

ITA 1330/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7178 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-10-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revised return
• Section: 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE , , . , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / I TA NO. 1330/PUN /2015 / ASSESSMENT YEAR : 2011 - 12 THE DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 1(1), PUNE. ....... / APPELLANT / V/S. B.G SH IR KE CONSTRUCTION TECHNOLOGY PRIVATE LIMITED. 72 - 76, MUNDHWA INDUSTRIAL ESTATE, PUNE - 411 036 PAN :AAACB7293D / RESPONDENT APPELLANT BY : SHRI RAJEEV KUMAR, CIT R ESPONDENT BY : SHRI NIKHIL PATHAK / DATE OF HEARING : 20.11.2017 / DATE OF PRONOUNCEMENT : 24 .11.2017 / ORDER PER SUSHMA CHOWLA , JM THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1, PUNE DATED 2 7 .07.2015 RELATING TO ASSESSMENT YEAR 2011 - 12 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2 ITA NO. 1330/PUN/2015 A.Y.2011 - 12 2. THE REVENUE HAS RAISED FOLLOWING GRO UNDS OF APPEAL: - 1) THE LD. CIT(A) ERRED IN DECIDING THAT RETENTION MONEY HAS TO BE TAXED IN THE YEAR OF RECEIPT AND NOT ON ACCRUAL BASIS EVEN THOUGH ASSESSEE IS FOLLOWING MERCANTILE SYSTEM AND ASSESSEE HAS DEBITED ALL EXPENDITURE RELATED TO SUCH CONTRACT RECEIPT INCLUDING RETENTION MONEY. 2) THE LD. CIT(A) ERRED IN CONFIRMING THE VIEW OF ASSESSEE THAT RETENTION MONEY HAS TO BE EXCLUDED IN COMPUTATION OF INCOME, ALTHOUGH THE SAME HAS BEEN SHOWN AS RECEIPT DURING THE YEAR AND CREDITED IN PROFIT AND LOSS ACCOUNT. 3) THE LD. CIT(A) ERRED IN CONFIRMING THE VIEW OF ASSESSEE THAT RETENTION MONEY HAS TO BE EXCLUDED IN COMPUTATION OF INCOME IN VIEW OF DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF ASSOCIATED CABLES ( P.) LTD V. DY. CIT (2006) REPORTED IN 286 ITR 596 ( BOM.) ALTHOUGH THE FACTS OF PRESENT CASE IS DISTINGUISHED. 4) FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(A) MAY BE VACATED AND THAT OF ASSESSING OFFICER BE RESTORED. 5) THE APPELLANT CRAVES TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE ITAT PUNE BENCH, PUNE. 3. THE LD.A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE. 4. THE LD.D.R, ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. BRIEFLY STATED IN THE FACTS OF THE CASE, THE ASSESSEE W AS ENGAGED IN THE BUSINESS OF CONSTRUCTION CONTRACTORS, CIVIL AND STRUCTURAL ENGINEERS, FABRICATORS AND MANUFACTURERS OF POST - HARVEST EQUIPMENT, EXPLORATION AND DEVELOPMENT OF OIL AND GAS PRODUCING ACTIVITIES. THE ASSESSEE HAD FURNISHED RETURN OF INCOME DE CLARING TOTAL INCOME AT RS.120,52,24,410/ - AND REVISED RETURN ON 31.03.2013 DISCLOSING TOTAL INCOME AT RS.124,31,35,374/ - . THE ASSESSEE HAD CLAIMED EXCLUSION OF RETENTION OF RS. 8,98,94,183/ - . THE EXPLANATION OF THE ASSESSEE IN THIS REGARD WAS THAT IT HAD 3 ITA NO. 1330/PUN/2015 A.Y.2011 - 12 CREDITED AND OFFERED THE ENTIRE CONTRACT RECEIPTS INCLUDING THE RETENTION MONEY IN ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2011. IT WAS SUBMITTED BEFORE THE ASSESSING OF FICER THAT THE RETENTION MONEY WA S CHARGEABLE TO TAX ONLY IN THE YEA R IN WHICH IT WAS RECEIVED AND THE INCREMENTAL RETENTION MONEY OF RS.9,70,85,990/ - [ RS.47 ,61,75,847/ - BEING RETENTION MONEY RECEIVABLE AS AT 31.03.2011 LESS RS.37,90,89,857/ - BEING RETENTION MONEY RECEIVABLE AS AT 31.03.2010] SHOULD BE EXCLUDED WHILE COMP UTING THE TOTAL INCOME. THE ASSESSEE CLAIMED THAT THE TAXABILITY OF THE SAID AMOUNT WAS TO BE CONSIDERED IN THE YEAR IN WHICH THE SAME BECOMES UNCONDITIONALLY DUE TO THE ASSESSEE FROM THE CONTRACTEE. THE ASSESSING OFFICER OBSERVED THAT THE APPELLANT COMPAN Y HAS REFLECTED THE ENTIRE CONTRACT RECEIPTS INCLUDING THE RETENTION MONEY IN ITS PROFIT AND LOSS ACCOUNT AND HAS OFFERED THE ENTIRE CONTRACT RECEIPTS INCLUDING THE RETENTION MONEY TO TAX IN ITS ORIGINAL RETURN OF INCOME. THE ASSESSING OFFICER POINTED OUT THAT THE CLAIM OF EXCLUSION OF RETENTION MONEY WAS NOT MADE IN THE ORIGINAL RETURN OF INCOME NOR HAS THE APPELLANT FILED ANY REVISED RETURN MAKING ORIGINAL RETURN OF INCOME NOR HAS THE APPELLANT FILED ANY REVISED RETURN MAKING THE CLAIM. THE ASSESSING OFFICER ALSO OBSERVED THAT THE APPELLANT HAS MADE SIMILAR CLAIM FOR DEDUCTION OF RET ENTION MONEY IN PRECEDING ASSESSMENT YEARS BUT THE CLAIM WAS REJECTED BY HIS PREDECESSORS. BY CITING THESE REASONS, THE CLAIM RELATING TO DEDUCTION OF RETENTION MONEY WHILE COMPUTING TOTAL INCOME OF THE APPELLANT, WAS REJECTED BY THE ASSESSING OFFICER. HOW EVER, AS THE RETENTION MONEY CLAIM WAS NOT MADE IN THE RETURN OF INCOME, NO SEPARATE ADDITION WAS MADE TO THE TOTAL INCOME IN THE ASSESSMENT ORDER. 6. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT ITS BUSINESS WAS TO EXECUTE CONSTRUCTION CONTRACTS. IN SOME OF THE CONTRACTS, THERE WAS A CLAUSE IN THE CONTRACT WHICH ENABLED THE CUSTOMER TO RETAIN BETWEEN 5 TO 10% OF CONTRACT VALUE TILL THE COMPLETION OF DEFECT LIABILITY PER IOD CONTAINED IN THE CONTRACT WHICH WAS GENERALLY BETWEEN 12 TO 24 MONTHS AFTER EXECUTION OF THE WORK. IT WAS STATED THAT INADVERTENTLY IN THE ORIGINAL RETURN OF INCOME FILED; THIS ACCOUNT WAS 4 ITA NO. 1330/PUN/2015 A.Y.2011 - 12 NOT EXCLUDED WHILE COMPUTING THE TOTAL INCOME. IT IS SUBMITTED THAT THE RETENTION MONEY IN THE VARIOUS CONTRACTS IS NOT TAXABLE IN VIEW OF THE VARIOUS DECISIONS. ACCORDINGLY TO THE ASSESSEE, THE RETENTION MONEY WITHHELD/DEDUCTED BY THE ASSESSEE COMPANYS CUSTOMERS ACCRUES AS INCOME TO THE ASSESSEE ONLY ON EXPIRY OF DE FECT LIABILITY PERIOD PRESCRIBED IN THE CONSTRUCTION CONTRACTS AND HENCE DEDUCTION OF RS.8,98,94,183/ - TOWARDS INCREMENTAL RETENTION MONEY INADVERTENTLY OFFERED TO TAX BY THE ASSESSEE COMPANY OUGHT TO BE GRANTED. 7. BEFORE CIT(A), FURTHER, THE ASSESSEE R ELIED ON THE ORDER OF PUNE BENCH OF THE TRIBUNAL IN ITA NOS.727 TO 730/PN/2012 DATED 31.10.2013 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2003 - 04, 2006 - 07, 2007 - 08 AND 2008 - 09 STATING THAT THE ISSUE RELATING TO THE EXCLUSION OF RETENTION MONEY IS DEC IDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THE CIT(A) RELYING ON HIS PREDECESSOR ORDER IN ASSESSMENT YEAR 2010 - 11 WHO IN TURN HAD RELIED ON THE RATIO LAID DOWN IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2003 - 04,2006 - 07,2007 - 08 AND 2008 - 09 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 8. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) BEFORE THE TRIBUNAL. 9. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL (SUPRA) IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2003 - 04, 2006 - 07, 2007 - 08 AND 2008 - 09 DATED 31.10.2013. FURTHER, THE TRIBUNAL IN ITA NO. 1146/PN/2014 AND ITA NO. 1175/P N/2014 RELATING TO ASSESSMENT YEAR 2010 - 11 VIDE ORDER DATED 15.01.2016 HAD TAKEN UP THE GROUND OF APPEAL RAISED BY REVENUE ON THIS GROUND AND HAD ALLOWED THE CLAIM OF ASSESSEE IN ENTIRETY. THE TRIBUNAL PLACED RELIANCE ON THE RATIO LAID DOWN IN ITA NO.1055/ PN/2012 AND CO. NO. 34/PN/2013 RELATING TO ASSESSMENT YEAR 2009 - 10 ORDER DATED 30.14.2015 AND ALLOWED THE CLAIM OF ASSESSEE. WE FIND THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN 5 ITA NO. 1330/PUN/2015 A.Y.2011 - 12 EARLIER YEARS. THE RELEVANT FINDINGS OF THE ORDER OF TRIBUNAL ARE REPRODUCED AT P ARA S 6 TO 8 OF THE APPELLATE ORDER. THE SAME IS BEING REFERRED AND IS NOT BEING REPRODUCED FOR THE SAKE OF BREVITY. 10. THE NEXT STAND OF THE REVENUE IS THAT ASSESSEE HA D NOT CLAIMED THE SAID DEDUCTION IN THE RETURN OF INCOME AND HENCE, THE CIT(A) SHOULD NOT HAVE REDUCED THE INCOME RETURNED BY ASSESSEE. SIMILAR ISSUE WAS RAISED BY REVENUE IN ASSESSMENT YEAR 2010 - 11 (SUPRA) AND THE TRIBUNAL IN ASSESSMENT YEAR 2010 - 11 VIDE ORDER DATED 15.01.2016 HELD AS UNDER : 8. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE, ON THE OTHER HAND, CONTENDED THAT THE ASSESSEE HAD NOT CLAIMED THE IMPUGNED DEDUCTION IN THE RETURN OF INCOME AND THEREFORE THE INCOME OF THE ASSESSEE AS ASSES SED OUGHT NOT TO BE REDUCED BY THE CIT(A) LOWER TO THE INCOME RETURNED IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS PVT. LTD., (1992) 198 ITR 297 (SC). HE ALSO RELIED ON THE ORDER OF THE ASSESSING OFFICER. IN REJOINDER, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE AFORESAID DECISION IN SUN ENGINEERING WORKS PVT. LTD. (SUPRA) IS APPLICABLE ONLY IN RESPECT OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT AND NOT IN RESPECT OF REGULAR ASSESSMENT. THE HON'BLE SUPREME COURT IN THE AFORESAID DECISION HELD THAT THE REOPENING IS CARRIED OUT FOR THE BENEFIT OF REVENUE ONLY. THE INCOME FOR THE PURPOSES OF THE RE - ASSESSMENT CANNOT BE REDUCED BEYOND INCOME ORIGINALLY ASSESSED. THEREFO RE, THE SCOPE OF THE AFORESAID DECISION IS LIMITED TO RE - ASSESSMENT PROCEEDINGS ALONE. 9. WE FIND THAT THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN ITA NOS.727 TO 730/PN/2012 (SUPRA) IN ASSESSEE OWN CASE, THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS NEG ATED THE CONTENTION OF THE REVENUE THAT CLAIM FOR DEDUCTION CAN BE MADE ONLY BY WAY OF REVISED RETURN AFTER CONSIDERING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT, (2006) 284 ITR 323 (SC) . WE ALSO FIND THAT RATIO O F DECISION IN SUN ENGINEERING WORKS PVT. LTD. (SUPRA) RELIED UPON BY THE REVENUE IS NOT APPLICABLE IN THE FACTS OF THE CASE. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEARS, WE RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE WORKING OF QUANTUM OF RETENTION MONEY TO BE ALLOWED DURING THIS YEAR IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEARS. 6 ITA NO. 1330/PUN/2015 A.Y.2011 - 12 11. IN VIEW THEREOF, THERE IS NO MERIT IN THE SECOND PLEA RAISED BY REVENUE IN APPEAL AND THE SAME IS DISMISSED. THUS, THE GROUNDS OF APPEAL RAISED BY REVENUE ARE THUS, DISMISSED. 1 2 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRO NOUNCED ON THIS 24TH DAY OF NOVEMBER , 201 7 . SD/ - SD/ - ( D. KARUNAKARA RAO ) ( SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 24 TH NOVEMBER , 2017 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A) - 1, PUNE. 4. THE CIT - 1, PUNE. 5 . , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. // TRUE COPY // / BY ORDER . / PRIVATE SECRETARY , / ITAT, PUNE .