THE DY CIT C-4, THANE V. M/S. RELIABLE ASSOCIATES, Mumbai

ITA 1613/MUM/2005

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49011 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 29-03-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 01-03-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIPUL B JOSHISAMEER G DAL AL

Judgement Text

1 ITA NO.1613/MUM/2005 (ASST YEAR2001-02) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI E E E E BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI P M JAGTAP, AM & P M JAGTAP, AM & P M JAGTAP, AM & P M JAGTAP, AM & SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO.1613/MUM/2005 1613/MUM/2005 1613/MUM/2005 1613/MUM/2005 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR2001 2001 2001 2001- -- -02 0202 02) )) ) THE DY COMMR OF INCOME TAX CIRCLE 4 THANE VS M/S RELIABLE ASSOCIATES SHOP NO.4 BLDG NO.B/18 SECTOR NO. 7 SHANTI NAGAR MIRS RAD(E) DIST THANE ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAAFR3155M AAAFR3155M AAAFR3155M AAAFR3155M A SSESSEE BY SHRI VIPUL B JOSHI/SAMEER G DALAL REVENUE BY SHRI M D SONGATE/DR PER PER PER PER VIJAY VIJAY VIJAY VIJAY PAL RAO, JM PAL RAO, JM PAL RAO, JM PAL RAO, JM: :: : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 16.2.2004 OF THE CIT(A)-II, MUMBAI PERTAINING TO A Y 2001-02. 2 THE REVENUE HAS RAISED VARIOUS GROUND IN ITS APPE AL; HOWEVER, THE ONLY ISSUE ARISES FOR OUR CONSIDERATION AND ADJUDICATION IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS. 27,78,442/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF SUPPRESSED RECEIPT FROM M/S GORAI GOLDEN SANDS COOP HSG SOCIETY 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND FOLLOWING THE ME THOD OF MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSEE HAS SHOWN RECEIPT OF AN A MOUNT OF RS. 59,83,810/- FROM M/S GORAI GOLDEN SANDS COOP HSG SOCIETY. THE ASSESSING OFFICER HAS NOTICED THAT AS PER THE RUNNING BILL NO. RB 13 DATE D 26.3.2001, THE ASSESSEE RAISED A CUMULATIVE BILL OF RS. 1,97,62,252/- ON M/ S GORAI GOLDEN SANDS COOP HSG SOCIETY WHEREAS THE ASSESSEE HAS NOT SHOWN GORAI G OLDEN SANDS CO-OP HSG SOCIETY AS ITS DEBTOR IN THE BALANCE SHEET, WHICH M EANS THAT THE ASSESSEE HAS RECEIVED THE ENTIRE AMOUNT. THE ASSESSING OFFICER OBSERVED THAT SINCE THE 2 ITA NO.1613/MUM/2005 (ASST YEAR2001-02) ASSESSEE HAS ALREADY RECEIVED A SUM OF RS. 1,10,00 ,000/- IN THE AY 1999-00 AND 2001-02, THEREFORE, THE DIFFERENCE OF RS. 87,62,252 /- (RS. 1,97,62,252 RS 1,10,00,000) SHOULD HAVE BEEN SHOWN AS RECEIPT BY T HE ASSESSEE INSTEAD OF RS. 59,83,810/-. ACCORDINGLY, THE ASSESSING OFFICER AS KED THE ASSESSEE TO EXPLAIN THE DISCREPANCY AND SHOW CAUSE AS TO WHY THE DIFFER ENCE OF RS. 27,78,442/- (RS. 87,62,252/- (-) RS 59,83,810/ ) SHOULD NOT BE ADDED TO ITS TOTAL INCOME AS THE ENTIRE EXPENSES AS CLAIMED BY THE ASSESSEE HAS ALRE ADY BEEN ALLOWED. THE ASSESSEE FILED ITS REPLY VIDE LETTER DATED 9.12.200 4 IN RESPONSE TO THE AOS QUERY. THE ASSESSING OFFICER HELD THAT THE REPLY OF THE AS SESSEE IS VERY VAGUE AND IT HAS NOT CLARIFIED THE DISCREPANCY FOUND; ACCORDINGLY, H E ADDED THE DIFFERENCE OF RS. 27,78,442/- TO THE TOTAL INCOME OF THE ASSESSEE BEI NG SUPPRESSED RECEIPT. 2.2 ON APPEAL, THE ASSESSEE FILED ADDITIONAL EVIDEN CE BEFORE THE CIT(A), UPON WHICH, THE CIT(A) ISSUED REMAND ORDER. THE ASSESSIN G OFFICER SUBMITTED HIS REMAND REPORT. AFTER CONSIDERING THE REMAND REPORT, THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCO UNT. 2.3 THE CIT(A) WAS OF THE OPINION THAT THE SOCIETY HAS ALSO CONFIRMED THE WORK DONE AND THE PAYMENT MADE AS ACCOUNTED FOR BY THE ASSESSEE FIRM AND IF THE CONTENTION OF THE ASSESSING OFFICER IS ACCEPTED TO BE CORRECT CONSEQUENTIAL NET PROFIT RESULT SHALL BE ABNORMALLY HIGHER AND UNBELI EVABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 3 THE LD DR HAS POINTED OUT THAT THERE IS A DISCRE PANCY IN THE ACCOUNTS OF THE ASSESSEE AND REFERRED TO THE LETTER DATED 11 TH AUG 2004 OF NATIONAL GRILL WORKS PLACED AT PAGE 74 OF THE PAPER BOOK. THE LD DR HAS SUBMITTED THAT AS PER THE SAID LETTER, THE GRILLS AND SHUTTERS WERE SUPPL IED BY THE SUPPLIER TO THE ASSESSEE VIDE BILL DATED 1.5.2001 WHEREAS THE ASSES SING OFFICER, IN THE REMAND 3 ITA NO.1613/MUM/2005 (ASST YEAR2001-02) REPORT AS REPRODUCED BY THE CIT(A) AT PAGES 24 & 2 5 OF THE IMPUGNED ORDER HAS SPECIFICALLY POINTED OUT THAT THE ASSESSEE PRODUCED THE BILL OF NATIONAL GRILL WORKS OF THE SAME AMOUNT, WHICH BEARS THE DATE AS 1.5.2000 AND 1.7.2000 WHEREAS IN THE REMAND PROCEEDINGS, THE ASSESSEE HA S PRODUCED THE BILLS WHICH BEARS THE DATE AS 1.5.2001 AND 1.7.2001. HE FURTHE R POINTED OUT THAT THE ASSESSEE DURING THE REMAND PROCEEDINGS ALSO FILED A CONFIRMATION COPY OF THE BILL RAISED BY ONE DANI SANITATION BEARING THE D ATE AS 1.2.2001 WHEREAS THE SAME DESCRIPTION OF WORK DONE AND FOR THE SAME AMO UNT, THE ASSESSEE PRODUCED THE BILL DURING THE ASSESSMENT PROCEEDINGS, WHICH BEARS THE DATE AS 1.10.2000. THESE ARE FEW EXAMPLES WHICH SHOW THAT THE ASSESSEE HAS SUBMITTED WRONG AND MISLEADING CONFIRMATION FROM THE SUPPLYING PARTIES. THE LD DR FURTHER POINTED OUT FROM THE REMAND REPORT AS REPRODUCED BY THE CIT (A) IN THE IMPUGNED ORDER THAT THE ASSESSEE, IN THE WRITTEN SUBMISSION STAT ED THAT M/S LAXMI ELECTRIC & HARDWARE HAS RAISED A BILL DATED 28.3.2001 FOR RS. 12,484/- AND THE SAID AMOUNT IS NEITHER APPEARING AS A CREDITOR OF THE ASSESSEE IN THE BALANCE SHEET NOR THE PAYMENT OF THE SAID AMOUNT HAS BEEN NOTICED IN THE BANK ACCOUNT OF THE ASSESSEE. THUS, THE LD DR SUBMITTED THAT THE ASSES SEE HAS MISLED THE FACTS AND SUBMITTED WRONG AND INCORRECT EVIDENCES TO GIVE A C OLOUR OF GENUINITY TO ITS WRONG AND INCORRECT AFFAIRS. HE HAS RELIED ON THE ORDER OF THE ASSESSING OFFICER AND REMAND REPORT 3.1 THE LD DR FURTHER SUBMITTED THAT THE DISCREPANC Y IN THE AMOUNT SHOWN AS RECEIPT AND BILL RAISED WERE NOT RECONCILED BY THE ASSESSEE DESPITE POINTING OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDI NGS AND FURTHER DURING THE REMAND PROCEEDINGS. 4 ITA NO.1613/MUM/2005 (ASST YEAR2001-02) 3.2 THE LD AR OF THE ASSESSEE, ON THE OTHER HAND WH ILE SUPPORTING THE ORDER OF THE LD CIT(A) HAS SUBMITTED THAT THE INCOME DOES N OT ACCRUED AT THE STAGE OF RAISING THE BILL BUT AT THE TIME WHEN THE SAME IS C ERTIFIED BY THE CLIENT. IT WAS FURTHER SUBMITTED THAT AS PER THE TERMS OF THE AGRE EMENT AND THE ARRANGEMENT, THE PAYMENTS TO THE ASSESSEE WERE RELEASED STAGE WI SE, DEPENDING UPON THE PROGRESS OF THE PROJECT. IN OTHER WORDS, THE RIGHT TO RECEIVE THE PAYMENTS WAS DEPENDENT UPON THE PROGRESS OF THE WORK EXECUTED BY THE ASSESSEE AND, MORE IMPORTANTLY, AS CERTIFIED AND APPROVED BY THE ARCHI TECT APPOINTED BY THE SOCIETY SPECIFICALLY FOR THIS PURPOSE. IT WAS ONLY UPON AND TO THE EXTENT THE ARCHITECT APPROVING THE BILLS RAISED BY THE ASSESSEE FROM TIM E TO TIME THAT THE SOCIETY USED TO RELEASE PAYMENTS TO THAT EXTENT AFTER DEDUC TING TAX AT SOURCE. IN OTHER WORDS, NO RIGHT ACCRUED ON SIMPLY RAISING THE BILL. 3.3 IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS FOLLOWING THE CONSISTENT METHOD OF ACCOUNTING THE INCOME ARISING FROM THIS C ONTRACT BY ACCOUNTING AND OFFERING THE INCOME IN EACH YEAR TO THE EXTENT THE WORK SO APPROVED AND THE PAYMENT, ACCORDINGLY, SANCTIONED. THIS METHOD WAS F OLLOWED NOT ONLY IN THE EARLIER YEARS BUT ALSO IN THE SUBSEQUENT YEARS. THI S METHOD HAS BEEN ACCEPTED BY THE DEPARTMENT AND AT NO TIMES ANY ADDITION /DIS ALLOWANCE IS MADE IN THIS REGARD. 3.4 IT WAS FURTHER SUBMITTED THAT IN FACT, WHAT WA S APPROVED BY THE ARCHITECT WAS THE FINAL BILL RAISED BY THE ASSESSEE DATED 24. 6.2001, WHICH WAS APPROVED B Y THE ARCHITECT ON 24.9.2001, AND ON THAT BASIS ONL Y THE PAYMENT WAS RELEASED THEREAFTER. THE ASSESSEE, ACCORDINGLY, OFFERED THE INCOME IN THE NEXT YEAR THAT IS ASSESSMENT YEAR 2002-03 ON THE BASIS OF ITS CONSIST ENT ACCOUNTING METHOD. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE FOLLO WING DECISIONS: 5 ITA NO.1613/MUM/2005 (ASST YEAR2001-02) I) ED SASOONS CO LTD VS CIT 26 ITR 27 (SC) II) CIT VS SHRI GOVERDHAN 69 ITR 675(SC) III) CIT VS A GAJAPATHY NAIDU 53 ITR 114 (SC) IV) CIT VS ASHOKBHAI CHIMANBHAI 56 ITR 42 (SC) V) SETH PUSHALAL MANSINGHKA P LTD VS CIT 66 ITR 159 (SC) VI) CIT VS GOVIND PARAAD 171 ITR 471(ALL) IT WAS FURTHER SUBMITTED THAT THE INCOME ACCRUES ONLY WHEN THE ASSESSEE ACQUIRES THE RIGHT TO RECEIVE THAT INCOME. IT WAS SUBMITTED THAT MERELY RAISING THE BILL BY THE ASSESSEE DOES NOT GIVE ANY RIGHT TO THE ASSESSEE TO RECEIVE THE INCOME BUT IT IS SUBJECTED TO THE CERTIFICATE OF TH E ARCHITECT OF THE SOCIETY. 4 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER RAISED A SPECIFIC QUESTION THAT THE ASSESSEE HAS RAISED RUNNING BILL NO. 13 ON 23.3.200 1 OF RS. 1,97,62,252/- ON M/S GORAI GOLDEN SANDS COOP HSG SOCIETY LTD AND THE ENT IRE EXPENSES CLAIMED BY THE ASSESSEE HAS ALREADY BEEN ALLOWED. THE ASSESSEE EXPLAINED TO THE QUERY THAT THE ASSESSEE RECOGNISES THE REVENUE ONLY WHEN IT IS CERTIFIED BY THE SOCIETY AND THE PAYMENT IS MADE. IN SUCH A SITUATION, IF IT IS ACCEPTED THAT THE ASSESSEE IS CONSISTENTLY FOLLOWING A PARTICULAR METHOD OF AC COUNTING OF RECOGNIZING THE REVENUE BUT ONCE THE ASSESSEE HAS BOOKED THE ENTIR E EXPENSES THEN THE WORK WHICH HAS BEEN COMPLETED BY THE ASSESSEE BY THE END OF THE PREVIOUS YEAR BUT NOT CERTIFIED BY THE SOCIETY SHOULD HAVE BEEN SHOWN EITHER AS WORK-IN-PROGRESS OR CLOSING STOCK. IT IS CLEAR FROM THE DETAILS, WHI CH ARE TABULATED BY THE LD CIT(A) AT PAGE 23 OF THE IMPUGNED THAT 99% OF THE WORK W AS COMPLETED WHEN THE RUNNING BILL NO.13 WAS RAISED ON 26.3.2001. THERE IS NO DISPUTE TO THE DIFFERENCE AMOUNT OF RS. 27,78,442/- BEING THE AMOUNT OF RECEI PT SHOWN BY THE ASSESSEE AND WORK EXECUTED AS PER RUNNING BILL NO.13. THEREF ORE, THE COST OF THE WORK EXECUTED UPTO THE DATE OF THE RUNNING BILL RAISED BUT WAS NOT CERTIFIED BY THE SOCIETY TO THE TUNE OF RS. 27,78,442/- OUGHT TO HA VE BEEN SHOWN EITHER WORK-IN- 6 ITA NO.1613/MUM/2005 (ASST YEAR2001-02) PROGRESS OR CLOSING STOCK TO MATCH THE EXPENSES BOO KED BY THE ASSESSEE TOWARDS EXECUTION OF THE SAID WORK. WE FURTHER NOTE THAT TH E ASSESSEE HAS SHOWN ONLY RS. 25,000 AS CLOSING STOCK AS ON 31.3.2001 IN THE P&L ACCOUNT AND BALANCE SHEET PLACED AT PAGES 3 & 4 OF THE PAPER BOOK. FUR THER, THE ASSESSMENT IS A SEPARATE ACCOUNTING UNIT AND THE INCOME HAS TO BE C OMPUTED SO AS TO GIVE TRUE AND CORRECT RESULT OF ACCOUNTING PERIOD OF 12 MONTH S RELEVANT TO THE ASSESSMENT. THERE IS NO JUSTIFICATION OF NOT OFFERING THE INCOM E DULY ACCRUED IN A PARTICULAR YEAR ON THE GROUND THAT THE SAME HAS BEEN OFFERED I N THE SUBSEQUENT YEAR. IN THE CASE IN HAND, THE METHOD ADOPTED BY THE ASSESSE E RESULTED SUPPRESSION OF INCOME DUE TO CLAIM OF THE ENTIRE EXPENSES BUT NOT SHOWING THE CORRESPONDING WORK-IN-PROGRESS OR CLOSING STOCK. THEREFORE, WE SE T ASIDE THE ORDERS OF LOWER AUTHORITIES AND REMAND THE MATTER TO THE FILE OF TH E ASSESSING OFFICER TO RE- COMPUTE THE INCOME IN ACCORDANCE WITH THE ABOVE OBS ERVATION. WE HOLD AND DIRECT ACCORDINGLY. 5 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 27 TH , DAY OF MAY 2011. SD/- SD/- ( (( ( P M JAGTAP P M JAGTAP P M JAGTAP P M JAGTAP ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:27 TH , MAY 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI