ITO, Ward-1, Jharsuguda V. Umesh Kumar Poddar, Jharsuguda

ITA 138/CTK/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5410 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 19-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: P R MOHANTY
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 138/CTK/2016 ASSESSMENT YEAR : 2011 - 2012 ITO, WARD - 1, JHARSUGUDA. VS. SRI UMESH KUMAR PODDAR, NEAR UNION BANK, MAIN ROAD, JHARSUGUDA. PAN/GIR NO. ACUPP 0482 F (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.R.MOHANTY, AR REV ENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 23 /08/ 2017 DATE OF PRONOUNCEMENT : 28 /08/ 2017 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - CUTTACK DATED 29.1.2016 FOR THE ASSESSMENT YEAR 2011 - 12. 2. IN GROUND NO.1 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) ERRED IN DELETING ADDITION OF RS.65.71 LAKHS ON ACCOUNT OF BID EXPENSES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE IN HIS P/L ACCOUNT HAS CLAIMED/DEBITED TOLL PLAZA BID MONEY OF RS.1,99,71,600/ - AND IN THE BALANCE SHEET HAD SHOWN ADVANCE BID MONEY OF RS.65,71,538/ - . THE ASSESSING OFFICER COLLECTED INFORMATION FROM ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD. AND FOUN D THAT M/S. ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD. CONFIRMED THAT THEY HAVE 2 ITA NO. 138/CTK/2016 ASSESSMENT YEAR : 2011 - 2012 RECEIVED TOLL PLAZA BID MONEY OF RS.1.34.00.062/ - . THE ASSESSING OFFICER FURTHER FOUND THAT I N THE LEDGER COPY OF M/S. ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD., THERE HAS BEEN NO ADJUSTMENTS OR CREDIT GIVEN FOR THE CLAIM OF RS.65,71,538/ - . THEREFORE, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN THE DISCREPANCY. THE ASSESSEE IN REPLY SUBMITTED THAT HE HAS RECEIVED THE CONTRACT PERIOD OF 365 D AYS STARTING FROM 15.08.2009 TO 14.08.2010 FOR A TOTAL BID VALUE OF RS.5,36,250/ - . OUT OF SUCH PERIOD THE C ONTRACT PERIOD RELEVANT TO FINANCIAL YEAR 2010 - 11 WAS 136 DAYS. THE ASSESSEE THEN CALCULATED THE PROPORTIONATE SHAR E; OF BID VALUE RELEVANT TO FINANC IAL YEAR 2010 - 11 FOR 136 DAYS AT RS.1,99,71,600/ - AND DEBIT ED THE SAME TO HIS P/L ACCOUNT A S PER THE AGREEMENT WITH M/S . ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD., THE ASSESSEE HAS TO PAY BID MONEY IN DIFFERENT AMOUNTS IN SCHEDULED PERIODS. THE ASSESS EE ADHERED TO THE AGREEMENT OF PAYMENT SCHEDULE AND AS PER THE SCHEDULE THE AMOUNT PAID TO M/S. ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD. WAS RS.1,34,00,062/ - . THE ASSESSEE FOLLOWING PAYMENT ON DAILY BASIS ACCOUNTED FOR RS.65,71,538/ - AS ADVANCE CARRIE D FORWARD TO THE NEXT YEAR. IN THE PREVIOUS F INANCIAL YEAR 2009 - 10, THE ASSESSEE HAS WORKED FOR 229 DAYS, THE PROPORTIONATE SHARE OF BID VALUE BEING RS.3,36,28,650/ - WHICH THE ASSESSEE CLAIMED IN HIS P/L ACCOUNT. BUT AS PER THE SCHEDULE OF PAYMENT AGREED W ITH M/S. ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD., HE HAS PAID RS.4,02,00,188/ - IN INSTALMENTS. THUS THE ASSESSEE HAS SHOWN THE DIFFERENCE AMOUNT OF RS.65,71,538/ - IN HIS BALANCE SHEET AS ADVANCE WHICH H E ADJUSTED IN THE 3 ITA NO. 138/CTK/2016 ASSESSMENT YEAR : 2011 - 2012 IMPUGNED FINANCIAL YEAR. THE A SSESSING OFFICER OPINED THAT THE CLAIM OF ADVANCE BID MONEY OF RS.65,71,650/ - WAS FOR THE ASSESSMENT YEA R 2010 - 11 AND CLAIMING THE SAME DURING THE ASSESSMENT YEAR 2011 - 12 IS NOT GENUINE. THE ASSESSING OFFICER FURTHER GAVE A FINDING THAT THE CLAIM OF ADVA NCE BI D MONEY OF RS.65,71,650/ - PAID DURING F.Y. 2009 - 10 CANNOT BE CLAIMED IN THE F.Y. 2010 - 11. SINCE THE ASSESSEE HAS PAID BID MONEY OF RS.1,34,00,062/ - DURING THE IMPUGNED YEAR, THE ASSESSEE CANNOT CLAIM RS.1,99,71,600/ - IN THE PROFIT AND LOSS ACCOUNT. IN VIEW OF ABOVE, THE ASSESSING OFFICER TREATED RS.65,71,538/ - AS EXCESS CLAIM OF BID MONEY BY THE ASSESSEE AND DISALLOWED THE SAME. 4. ON APPEAL, THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE DELETED THE ADDITION OBSERVING AS UNDER: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER MADE BY THE AO AND THE DETAILS SUBMITTED BY THE APPELLANT. THE APPELLANT HAS CONSISTENTLY SUBMITTED THAT HE FOLLOWS THE MERCANTILE METHOD OF ACCOUNTING CONSISTENTLY. OUT OF THE TOTAL CONTRACT VALUE OF RS.S,36,250/ - FROM THE PERIOD 15.08.2009 TO 14.08.2010 STARTING FROM THE F.Y. 2009 - 10 AND ENDING IN F.Y.2010 - 11, THE APPELLANT HAS DEBITED THE TOTAL PAYMENTS DAILY WISE AND CLAIMED THE SAME IN HIS P/L ACCOUNT. THE APPELLANT WAS BOUND BY AGREEMENT TO PAY M/ S. ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD. AMOUNT AS PER THEIR SCHEDULE. THUS, THE APPELLANT HAS, CLAIMED THE TOTAL BID AMOUNT PROPORTIONATE TO THE DAYS OF BID AS EXPENSES IN HIS P/L ACCOUNT. FOR THE F.Y. 2009 - 10, THE APPELLANT HAS DEBITED EXPENSES O F RS.3,36,28,650/ - FOR I2JJ9.DAYS OF WORK PROPORTIONATELY WHEREAS ACTUAL PAYMENT MADE TO M/S. ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD., WAS RS.4,02,00,188/ - AS PER M/S. ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD., SCHEDULE. THE APPELLANT ACC OUNTED FOR THE ADVANCE PAYMENT OF RS.65,71,538/ - IN HIS BALANCE SHEET FOR THE F.Y. 2009 - 10. FOR THE IMPUGNED F.Y. 2010 - 11, THE APPELLANT CALCULATED THE PROPORTIONATE TOLL GATE EXPENSES OF RS. 1,99,71,600/ - AND ACCOUNTED FOR THE SAME IN HIS P/L ACCOUNT, WHE REAS PAYMENTS MADE BY HIM TO M/S. ODISHA B RIDGE & CONSTRUCTION CORPORATION LTD., ACCORDING TO THEIR SCHEDULE WAS RS. 1,34,00,062/ - . IT IS EVIDENT FROM THE ACCOUNTING OF BOTH THE YEARS 2009 - 10 AND 2010 - 11 THAT THE APPELLANT HAS FOLLOWED THE SAME PATTERN OF ACCOUNTING. THE APPELLANT HAS ALSO SUBMITTED THAT IN THE EARLIER YEARS FOR SUCH WORK HE HAS FOLLOWED THE SIMILAR MANNER OF ACCOUNTING REGARDING THE BID AMOUNT PAID. SINCE THE TOTAL BID AMOUNT TO BE PAID AND THE TOTAL 4 ITA NO. 138/CTK/2016 ASSESSMENT YEAR : 2011 - 2012 NUMBER OF DAYS WERE FIXED, HE HAS ACCO UNTED FOR THE EXPENSES PROPORTIONATE TO THE DAYS IN THE F.Y.. THE AGREEMENT WITH M/S. ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD., HAS STRETCHED FROM 15.08.2009 TO 14.08.2010 AND SCHEDULE OF PAYMENT WAS DETERMINED BY M/S. ODISHA BRIDGE &'CONSTRUCTION COR PORATION LTD., WHICH IS INDEPENDENT OF THE ACCOUNTING PROCESS OF THE APPELLANT FOR BOTH THE F.YRS.. IF THE CONTENTION OF THE AO SHALL BE ACCEPTED FOR THE IMPUGNED FINANCIAL YEAR, THEN THE APPELLANT HAS TO BE GIVEN CREDIT OF THE AMOUNT OF RS.65,71,538/ - IN THE ASSESSMENT YEAR 2010 - 11. SINCE THE APPELLANT WAS CONSISTENTLY FOLLOWING THIS METHOD ACCOUNTING, HIS PROCESS NEED NOT BE QUESTIONED AS THE AMOUNTS PAID HAS BEEN ACCOUNTED FOR IN TOTAL. CONSIDERING THE ABOVE, THE AO IS DIRECTED TO DELETE THE ADDITION. 5. BEFORE US, LD D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS LD A.R. OF THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN TH E INSTANT CASE, THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE MERCANTILE ME THOD OF ACCOUNTING . OUT OF THE TOTAL CONTRACT VALUE OF RS.5 ,36,250/ - FROM THE PERIOD 15.08.2009 TO 14.08.2010 STARTING FROM THE F.Y. 2009 - 10 AND ENDI NG IN F.Y.2010 - 11, THE ASSESSEE HAS DEBITED THE TOTAL PAYMENTS DAILY WISE AND CLAIMED THE SAME I N HIS P/L ACCOUNT. THE ASSESSEE WAS BOUND BY AGREEMENT TO PAY M/S. ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD. AMOUNT AS PER THE IR SCHEDULE. THUS, THE ASSESSEE HAS, CLAIMED THE TOTA L BID AMOUNT PROPORTIONATE TO THE DAYS OF BID AS EXPENSES IN HIS P/L ACCOUNT. IN PURSUANCE OF THE AGREEMENT, F OR THE F.Y. 2009 - 10, THE ASSESSEE HAS DEBITED EXPENSES OF RS.3,36,28,650/ - FOR 229 .DAYS OF WORK PROPORTIONATELY WHEREAS ACTUAL PAYMENT MADE TO M/ S. ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD., WAS RS.4,02,00,188/ - AS PER M/S. 5 ITA NO. 138/CTK/2016 ASSESSMENT YEAR : 2011 - 2012 ODISHA BRIDGE & CONSTRUCTION CORPORATION LTD., SCHEDULE. THE ASSESSEE ACCOUNTED FOR THE ADVANCE PAYMENT OF RS.65,71,538/ - IN HIS BALANCE SHEET FOR THE F.Y. 2009 - 10. FOR THE IMPUGNED F.Y. 2010 - 11, AND CALCULATED THE PROPORTIONATE TOLL GATE EXPENSES OF RS. 1,99,71,600/ - AND ACCOUNTED FOR THE SAME IN HIS P/L ACCOUNT, WHEREAS PAYMENTS MADE BY HIM TO M/S. ODISHA B RIDGE & CONSTRUCTION CORPORATION LTD., ACCORDING TO THEIR S CHEDULE WAS RS. 1,34,00,062/ - . WE FIND THAT THE ABOVE FINDINGS OF THE CIT(A) HAS NOT BEEN CONTROVERTED BY LD D.R. BY PLACING ANY POSITIVE MATERIAL ON RECORD, EXCEPTING RELYING ON THE ORDER OF THE ASSESSING OFFICER. THEREFORE, WE FIND NO INFIRMITY IN THE O RDER OF THE CIT (A), WHICH IS HEREBY CONFIRMED AND GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. GROUND NO.2 OF APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN REDUCING THE ADDITION OF RS.9,38,126/ - ON ACCOUNT OF INTEREST ON UNSECURED LOAN. 8. T HE FACTS IN BRIEF ARE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS PAID INTEREST ON UNSECURED LOAN FOR THE WHOLE YEAR IN THE FINANCIAL YEAR 2011 - 12, WHEREAS THE ONGOING BUSINESS INCOME WAS CARRIED ON UPTO 14.8.2010. THE ASSESSING OFFICER FURTHER NOTED THAT AS PER THE PRINCIPLE OF ALLOWABILITY OF INTEREST ON BORROWED CAPITAL U/S.36 OF THE ACT, THE INTEREST SHALL BE ALLOWED TO THE EXTENT OF PERIOD OF UTILISATION IN THE BUSINESS FOR THE PURPOSE OF BUSINESS. IN VIEW OF ABOVE, THE ASSESSING OFFICER A LLOWED INTEREST ON UNSECURED LOAN UPTO 31.8.210 AND DISALLOWED BALANCE PART OF THE FINANCIAL YEAR AMOUNTING TO RS.9,38,126/ - . 6 ITA NO. 138/CTK/2016 ASSESSMENT YEAR : 2011 - 2012 9. BEFORE THE CIT(A), THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS STATING THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS NO T IN SPIRIT OF SECTION 36 OF THE ACT: I) CIT VS. MALAYALAM PLANTATION LTD., 53 ITR 140(SC) II) MADHAV PRASAD JATIA VS CIT, 118 ITR 200 (SC) III) REGAL THEATRE VS CIT, 225ITRA 205 (DEL) IV) CIT VS. INDIAN BANK LTD., 56 ITR 77 (SC) V) CIT VS. MADAN LAL JAIN, 136 ITR 409(DEL) VI) CHHAIL BEHARI LAL VS CIT, 39 ITR 696 (ALL) VII) CALICO DYEING & PRINTING WORKS VS CIT,59ITR 221 (BOM) 10 . THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: I HAVE PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPE LLANT. IT IS A FACT THAT THE ON GOING WORK OF THE APPELLANT TERMINATED ON 14.08.2011. BUT THE APPELLANT BEING IN THE BUSINESS OF EXECUTION OF CONTRACT HAS TRIED PARTICIPATING IN THE BID PROCESS AND DEPOSITED EM D FOR THE PROCESS. THE APPELLANT HAS SHOWN THE EMD PAYMENT OF RS.53,60,025/ - AS ADVANCE IN HIS BALANCE SHEET FOR THE FINANCIAL YEAR 2010 - 11. THE CONTENTION OF THE APPELLANT THAT HE WAS VERY MUCH IN THE BUSINESS FOR THE WHOLE YEAR AND EXPLORING THE BUSINESS AVENUES BY PARTICIPATING IN THE BID PROCESS AND ALSO DEPOSITED HEAVY AMOUNT OF EMD FOR THE SAME. THEREFORE, IT CAN NOT BE CONCLUDED THAT THE ASSESSEE WAS NOT IN BUSINESS FOR THE WHOLE YEAR. IT MAY BE THAT FOR THE BALANCE PART OF THE YEAR, THE APPELLANT HA S NOT EARNED ANY INCOME FROM HIS ACTIVITY. FROM THE SUBMISSIONS OF THE APPELLANT, IT IS EVIDENT THAT TO MAKE OFFER IN THE BUSINESS ALSO HE HAS TO UTILIZE HEAVY AMOUNT OF MONEY. I HAD GONE THROUGH THE JUDICIAL PRONOU NCEMENTS AND LEGAL PROVISIONS SUBMITTED BY THE APPELLANT AND I AM OF THE VIEW THAT THE INTEREST ON BORROWED CAPITAL CANNOT BE DISALLOWED. THE AO IS THEREFORE DIRECTED TO DELETE THE ADDITION. 11. BEFORE US, LD D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE HAS GIVEN INTEREST FOR THE WHOLE YEAR TO THE LOAN CREDITORS AND DEBITED THE SAME IN THE PROFIT AND LOSS ACCOUNT. HE 7 ITA NO. 138/CTK/2016 ASSESSMENT YEAR : 2011 - 2012 REFERRED TO SECTION 36 OF THE ACT AND STATED THAT INTERE ST SHALL BE ALLOWED TO THE EXTENT OF PERIOD OF UTILISATION IN THE BUSINESS. HE SUBMITTED THAT AS PER THE BOOK, THE ASSESSEE HAS GIVEN AGGREGATE INTEREST TO LOAN CREDITORS AT RS.15,66,490/ - FOR THE WHOLE YEAR BUT IN VIEW OF THE PRINCIPLE OF ALLOWABILITY, T HE INTEREST ONLY TO THE EXTENT OF RS.6,28,364/ - ON UNSECURED LOAN SHALL BE ALLOWABLE FOR THE FIVE MONTHS. HENCE, HE SUBMITTED THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER BE CONFIRMED. 12. LD A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF THE ASSESSING OF FICER. 13. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE ORDERS OF LOWER AUTHORITIES, WE FIND THAT THE ASSESSEE BEFORE THE LOWER AUTHORITIES HAS BEEN CLAIMING THAT HE WAS IN THE BUSINESS FOR THE WHOLE YEAR AND EXPLORING THE NEW BUSINESS AVENUES BY P ARTICIPATING IN THE BID PROCESS AND DEPOSITED HEAVY MONTH OF EMD FOR THE SAME. BEFORE US, LD D.R. COULD NOT CONTROVERT THIS FINDINGS OF THE CIT(A) THAT THE ASSESSEE WAS NOT IN THE BUSIN ESS OF THE WHOLE YEAR BY BRINGING ANY MATERIAL ON RECORD. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS SHOWN EMD OF RS.53,60,025/ - AS ADVANCE IN HIS BALANCE SHEET FOR THE IMPUGNED YEAR. HENCE, WE UPHOLD THE FINDINGS OF THE CIT(A) AND REJECT THE GROUND OF APPEAL OF THE REVENUE. 14. IN THE RESULT, APPEAL FILED BY THE REVE NUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 /08/2017. SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 28 /08/2017 8 ITA NO. 138/CTK/2016 ASSESSMENT YEAR : 2011 - 2012 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : ITO, WARD - 1, JHARSUGUDA 2. THE RESPONDENT. SRI UMESH KUMAR PODDAR, NEAR UNION BANK, MAIN ROAD, JHARSUGUDA 3. THE CIT(A) - CUTTACK 4. PR.CIT - CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//