I.T.O., Ward-3(2), Gwalior V. M/s Century Construction, Gwalior

ITA 168/AGR/2011

• Counselvise Citation: 16820314 RSA 2011
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 13-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MAURYA
• Assessee Lawyers: NAVIN GARGH
• Keywords: Assessment record
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 168/AGRA/2011 ASSTT. YEAR : 2005-06 INCOME-TAX OFFICER, VS. M/S. CENTURY CONSTRUCTIO N, WARD 3(2), GWALIOR. 144, MAYUR NAGAR, THATIPUR, GWALIOR. (PAN : AACFC 0885 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.L. MAURYA, SR. D.R. RESPONDENT BY : SHRI NAVIN GARGH, ADVOCATE. DATE OF HEARING : 23.08.2012 DATE OF PRONOUNCEMENT OF ORDER : 31.08.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), GWALIOR DATED 21.02.2011 FOR THE ASSESSMENT YEAR 20 05-06. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF AUTHORITIES BELOW AND CONSIDERED THE MA TERIAL ON RECORD. 3. ON GROUND NO. 1, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.10,23,516/- ON ACCOUNT OF PAYMENT RECEIVED IN FI NANCIAL YEAR 2005-06 IN RESPECT OF THE WORK COMPLETED IN F.Y. 2004-05. THE AO MADE ABOVE ADDITION IN RESPECT OF ITA NO. 168/AGRA/2011 2 WORK CARRIED OUT DURING THE ASSESSMENT YEAR UNDER C ONSIDERATION, BUT THE PAYMENTS FOR WHICH HAVE BEEN RECEIVED DURING THE NEXT YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS OBTAINED INFORMA TION FROM EXECUTIVE ENGINEER, DIVISION NO. 1 & 2, GWALIOR OF M.P. HOUSI NG BOARD IN RESPECT OF WORK DONE BY THE ASSESSEE AND PAYMENT RECEIVED THEREFROM . AS PER THE ASSESSMENT ORDER, THE AO HAS MENTIONED THAT IN RESPECT OF AMOUNT OF R S.4,94,975/- AND OF RS.9,46,041/-, THE WORK HAS BEEN CARRIED OUT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, BUT NOT SHOWN BY THE ASSESSEE EITHER IN ITS TURNOVER OR IN THE WORK IN PROGRESS. ACCORDINGLY, AO HAS MADE ADDITION OF RS.1 0,23,516/- (RS.494975 + RS.9,46,041 = 1441016 MINUS WORK IN PROGRESS SHOWN AT RS.4,17,500/-) TO THE ASSESSEES DECLARED INCOME. IN APPEAL BEFORE THE LD . CIT(A), THE ASSESSEE SUBMITTED THAT THE METHOD OF VALUATION OF CLOSING STOCK, AS M ENTIONED IN THE AUDIT REPORT, IS AT COST OR MARKET PRICE, WHICHEVER IS LOWER. ACCORDING LY, IT HAD VALUED THE WORK COMPLETED BUT NOT CERTIFIED BY THE HOUSING DIVISION AS NIL. SINCE THE WORK FOR RS.4,94,975/- AND RS.9,46,041/- WAS IN DISPUTE, HEN CE, NO PAYMENT WAS RECEIVED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND ACCORDINGLY, VALUATION OF THIS WORK WAS TAKEN AS NIL AT THE CLOSING DATE OF THE YE AR, SINCE IT COULD NOT MAKE SALE OF THIS CONSTRUCTION IN THE OPEN MARKET WHICH MEANS MA RKET PRICE WAS NIL. WHILE RELYING ON CERTAIN CASE LAWS REGARDING VALUATION OF CLOSING STOCK, THE ASSESSEE PRAYED FOR DELETION OF SAID ADDITION. THE LD. CIT(A ), CONSIDERING THE EXPLANATION OF ITA NO. 168/AGRA/2011 3 THE ASSESSEE, DELETED THE ADDITION. HIS FINDINGS IN PARA 2.2 TO 2.4 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER : APPELLANTS SUBMISSIONS ALONGWITH ASSESSMENT ORDE R HAVE BEEN CONSIDERED CAREFULLY. ASSESSMENT RECORDS HAVE ALSO BEEN PERUSED. AS PER ITS RETURN FILED ON 31.10.2005, THE APPELLANT HAS DECLARED INCOME FROM CONSTRUCTION WORK AT RS.1,37,8 7,678/- ALONG WITH CLOSING WORK IN PROGRESS AT RS.4,17,500/-. MOR E THAN 90% OF THE WORK HAS BEEN CARRIED OUT FOR M.P. HOUSING DIVISION . AS PER COPY OF AGREEMENT NO. 23/04-05 MADE BETWEEN THE APPELLANT A ND M.P. HOUSING BOARD, IT IS STIPULATED THAT BEFORE ISSUE O F THE WORK ORDER DY. H.C./E.E. WILL ENSURE THAT THE HOUSES SO CONSTRUCTE D ARE SOLD QUICKLY ACCORDING TO BOARDS NORMS. AS PER THE INFORMATION OBTAINED BY THE AO, MEASUREMENT OF THESE TWO WORKS HAS BEEN CARRIED OUT ON 18.10.2004 AND 20.01.2005 FOR RS.4,94,975/- AND RS. 9,46,041/- RESPECTIVELY. THE PAYMENT FOR THESE WORKS HAS BEEN RECEIVED BY THE APPELLANT ON 5.8.2005 & 2.6.2005. I.E., DURING SUBS EQUENT FINANCIAL YEAR. HOWEVER, AS PER LETTER DTD. 29.10.07 FROM DIV ISION I, GWALIOR, IT IS SPECIFICALLY MENTIONED THAT NIL AMOUNT IS OUT STANDING TO THE APPELLANT AS ON 31.3.2005. SIMILARLY, VIDE LETTER D TD. 31.10.2007 FROM DIVISION NO. II, THE FACT OF NIL OUTSTANDING PAYMEN T IS AGAIN STATED BEFORE THE AO. THUS, THERE IS NO DENYING THE FACT T HAT THE APPELLANT HAS NOT RECEIVED ANY PAYMENT IN RESPECT OF THESE WO RKS AND SINCE THE M.P. HOUSING BOARD HAS ITSELF VALUED THIS WORK AS N IL FOR THE PURPOSE OF MAKING PAYMENT AS ON 31.03.2005, THE APPELLANT I S ALSO FOUND JUSTIFIED IN VALUING THE SAME AS NIL IN ITS BOOKS O F ACCOUNTS. IT IS A WELL RECOGNIZED PRINCIPLE OF COMMERCIAL ACCOUNTING TO EN TER THE VALUE OF THE STOCK-IN-TRADE AT THE BEGINNING AND AT THE END OF THE ACCOUNTING YEAR AT COST OR MARKET PRICE, WHICHEVER IS LOWER. T HE WORD MARKET PRICE IS NOWHERE DEFINED IN THE INCOME TAX ACT. IN COMMON PARLANCE, IT MEANS THE PRICE WHICH A PROPERTY WOULD FETCH IN THE OPEN MARKET. IN THE INSTANT CASE, THE APPELLANT HAD TO SELL THE HOU SES SO CONSTRUCTED AS PER NORMS FIXED BY THE HOUSING BOARD, MEANING THERE BY THERE IS NO DEMAND FOR ITS GOODS IN OPEN MARKET. SINCE THE HOUS ING BOARD ITSELF HAS TAKEN THE VALUE OF THIS WORK AS NIL, THE APPELL ANT IS FULLY JUSTIFIED IN SHOWING THE SAME AS NIL TOO. 2.3. IT IS FURTHER SEEN FROM THE PERUSAL OF RECORD S THAT THE APPELLANT HAS SHOWN THE VALUATION OF ITS OPENING WO RK IN PROGRESS AT RS.4,17,500/- AS ON 1.4.2005 AS PER ITS P & L ACCOU NT FOR ASSTT. YEAR ITA NO. 168/AGRA/2011 4 2006-07. IN FACT, ASSESSMENT FOR A.Y. 06-07 HAS ALS O BEEN COMPLETED U/S. 143(3) BY ACCEPTING TRADING RESULTS OF THE APP ELLANT AS SHOWN IN ITS RETURN. THUS, THE REVALUATION OF CLOSING WORK I N PROGRESS AT A HIGHER RATE DURING THE YEAR UNDER CONSIDERATION IS NOT FOUND JUSTIFIABLE WHEN THE SAME HAS BEEN DULY SHOWN DURIN G NEXT FINANCIAL YEAR AND ACCEPTED AS SUCH BY THE AO. 2.4. IN VIEW OF FACTS ABOVE AND APPELLANTS SUBMIS SIONS, ADDITION OF RS.10,23,516/- IS, HEREBY DELETED. 4. THE LD. DR MERELY RELIED UPON THE ORDER OF THE A O. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISS IONS MADE BEFORE THE LD. CIT(A) AND REFERRED TO PB-5 & 6 TO SHOW THAT MEASUREMENT O F THE WORK WAS TAKEN IN THE ASSESSMENT YEAR UNDER APPEAL, BUT BECAUSE OF THE DI SPUTE, PAYMENTS WERE MADE IN SUBSEQUENT ASSESSMENT YEAR AND AS SUCH, SUCH PAYMEN TS WERE SHOWN AS INCOME IN THE NEXT ASSESSMENT YEAR 2006-07, WHICH HAVE BEEN A CCEPTED BY THE AO IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2006-07 U/ S. 143(3). THEREFORE, IT WOULD AMOUNT TO DOUBLE TAXATION OF THE SAME INCOME. WHILE REFERRING TO THE STATEMENT OF THE DATES OF MEASUREMENTS AND PAYMENTS, WHICH IS AL SO REPRODUCED IN THE ASSESSMENT ORDER, THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT SUBSTANTIAL PAYMENTS HAVE BEEN MADE ON THE DATE OF MEASUREMENT OR NEARBY DATE OF MEASUREMENT, BUT IN RESPECT OF TWO PAYMENTS OF RS.4 ,94,975/- AND RS.9,46,041/-, THE PAYMENTS HAVE BEEN MADE TO THE ASSESSEE AFTER A GAP OF ABOUT 8 MONTHS AND 5 MONTHS RESPECTIVELY. HE HAS, THEREFORE, SUBMITTED T HAT THE LD. CIT(A) ON PROPER APPRECIATION OF FACTS RIGHTLY DELETED THE ADDITION. ITA NO. 168/AGRA/2011 5 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL ON THIS ISSUE. THE LD. CIT(A) H AS PROPERLY APPRECIATED THE FACTS OF THE CASE WHICH IS SUPPORTED BY THE AGREEME NT ENTERED INTO BETWEEN THE ASSESSEE AND M.P. HOUSING BOARD. IT WAS STIPULATED THAT HOUSES HAVE TO BE SOLD QUICKLY ACCORDING TO THE BOARDS NORMS AND WITH REG ARD TO TWO PAYMENTS IN QUESTION, DESPITE MEASUREMENT WERE TAKEN IN ASSESSM ENT YEAR UNDER APPEAL, BUT THE PAYMENTS WERE NOT MADE IMMEDIATELY TO THE ASSESSEE. THUS, THERE APPEARS SOME DISPUTE BETWEEN THE ASSESSEE AND THE CONTRACTING PA RTY AND AS SUCH, IT COULD NOT BE DEEMED TO ACCRUE OR RECEIVED BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER APPEAL. THE CLOSING STOCK OF THE ASSESSMENT YEAR UNDER APPE AL REMAINS OPENING STOCK IN THE NEXT ASSESSMENT YEAR 2006-07, IN WHICH THE AO HIMSE LF ACCEPTED THE CLAIM OF ASSESSEE IN ORDER U/S. 143(3) AND AS SUCH, WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION. FURTHER , WHEN BOTH THE AMOUNTS IN QUESTION HAVE BEEN ADDED AS INCOME IN SUBSEQUENT AS SESSMENT YEAR AFTER RECEIPT OF PAYMENTS IN DISPUTE, IT WOULD AMOUNT TO DOUBLE TAXA TION IN ASSESSMENT YEAR UNDER APPEAL. THE LD. DR HAS NOT POINTED OUT ANY INFIRMIT Y IN THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION. WE, THEREFORE, DO NOT FIN D ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELETING THE AD DITION. GROUND NO. 1 OF APPEAL OF THE REVENUE IS, ACCORDINGLY, DISMISSED. ITA NO. 168/AGRA/2011 6 6. ON GROUND NO.2, THE REVENUE CHALLENGED THE DELET ION OF ADDITION OF RS.48,000/- ON ACCOUNT OF DISALLOWANCE OF SALARY PA ID TO THE PARTNERS. THE AO DISALLOWED PAYMENT OF SALARY OF RS.24,000/- MADE TO TWO LADY PARTNERS AND MADE ADDITION OF RS.48,000/- ON THE GROUND THAT THESE PA RTNERS HAVE NOT BEEN PRODUCED FOR EXAMINATION. IT WAS SUBMITTED BEFORE THE LD. CI T(A) THAT CONSIDERING THE EDUCATION OF THE LADY PARTNERS AND THEY LOOKED AFTE R THE ADMINISTRATIVE WORK OF THE FIRM, THE PAYMENT OF SALARY WAS REASONABLE. THE LD. CIT(A) FOUND THAT DESPITE LADY PARTNERS WERE NOT PRODUCED BEFORE THE AO, THE AO DI D NOT MAKE ANY EFFORTS TO ENSURE THEIR ATTENDANCE BEFORE HIM AND FURTHER COMP LETE DETAILS WERE PRODUCED BEFORE HIM TO SHOW THAT THE PAYMENTS HAVE BEEN MADE TO THE LADY PARTNERS. IT WAS ALSO FOUND THAT SAME AMOUNT OF SALARY WAS PAID TO S MT. MANJU AGARWAL AND SMT. VINITA KASHYAP IN THE SUBSEQUENT ASSESSMENT YEAR AN D THE SAME HAS BEEN ACCEPTED BY THE AO VIDE ORDER U/S. 143(3). THE LD. CIT(A), T HEREFORE, FOUND THAT IN THE ABSENCE OF ANY ADVERSE MATERIAL, THE ADDITION IS UN JUSTIFIED AND THE SAME WAS, ACCORDINGLY, DELETED. 7. THE LD. DR RELIED UPON THE ORDER OF THE AO. ON T HE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND ALSO RELIED UPON THE ORDER OF ITAT, AHMEDABAD BENCH B IN THE CASE OF CHHAJED STEEL CORPORATION VS. ACIT, 69 TTJ (AHD.) 232, IN W HICH IT WAS HELD THAT THE AO HAS NO POWER TO GO INTO THE QUESTION OF REASONABLEN ESS OF REMUNERATION PAID TO THE ITA NO. 168/AGRA/2011 7 PARTNERS. HE CAN ONLY EXAMINE WHETHER THE REMUNERAT ION IS NOT EXCEEDING THE PRESCRIBED LIMIT AS PER SECTION 40(B) OF THE ACT. 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. SIMILAR SALARY WAS PAID TO BOTH T HE PARTNERS IN SUBSEQUENT ASSESSMENT YEAR, WHICH HAS BEEN ACCEPTED BY THE AO IN PROCEEDINGS U/S. 143(3) OF THE IT ACT (PB-31). SINCE THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED BY THE AO HIMSELF ON THE SIMILAR FACTS, WE DO NOT FIND ANY JU STIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THIS GROUND O F APPEAL OF REVENUE IS DISMISSED. NO OTHER POINT IS ARGUED OR PRESSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY