The ITO, Ward-6(4), Ahmedabad V. M/s. Precision Products, Ahmedabad

ITA 2031/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9284 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 24-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: S K SADHWANI
• Keywords: TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD BEFORE SHRI H.L.KARWA AND SHRI A.N.PAHUJA ITA NO.2031/AHD/2009 (ASSESSMENT YEAR:2004 - 2005) ITO WARD 6(4) M/S. PRECISION PRODUCTS AHMEDABAD VS. PLOT NO.2009, PHASE-IV, GIDC, VATVA, AHMEDABAD. (APPELLANT) (RESPONDENT) C.O.NO.169/AHD/2009 (ASSESSMENT YEAR 2004-2005) M/S. PRECISION PRODUCTS VS. ITO WARD 6(4) PLOT NO.2009, PHASE-IV, AHMEDABAD GIDC, VATVA, AHMEDABAD (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI M.C.PANDIT SR.D.R. RESPONDENT BY : SHRI S.K, SADHWANI, ORDER PER KARWA, JM: THE APPEAL FILED BY THE REVENUE AND THE C.O. BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-X I, AHMEDABAD DATED 17.04.2009 RELATING TO ASSESSMENT YEAR 2004-2 005. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHMEDA BAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF RS.13,27,000/- ON ACCOUNT OF UNACCOUNTED RECEIPTS. 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING/DEALING IN MACHINERY AND MACHINERY PARTS. THE ASSESSING OFFICER MADE AN ADDITION OF RS.13,27,000/- ON ACCOUNT OF UNACCOUNTED RECEIPTS. ACCORDING TO THE ASSESSING OFFICER, DURING THE ASSESSMENT YEAR U NDER CONSIDERATION, THE ASSESSEE HAS RECEIVED RECEIPT OF RS.27.98 LACS FROM PUNE MUNICIPAL CORPORATION. HOWEVER, AS PER TH E TDS CERTIFICATE, THE TOTAL RECEIPTS RECEIVED BY THE ASS EESSEE FROM THE ABOVE CONCERNED CAME TO RS.41.25 LACS. THUS, THERE WAS DISCREPANCY BETWEEN THE FIGURES ACCOUNTED IN THE BO OKS OF ACCOUNT AND ACTUAL RECEIVED BY THE ASSESSEE. THEREF ORE, AFTER DISCUSSIONING THE ISSUE AT LENGTH, IN THE ASSESSMEN T ORDER, THE ASSESSING OFFICER HAS MADE ADDITION OF RS.13,27,000 /- TO THE INCOME DECLARED BY THE ASSESSEE BEING THE DIFFERENC E OF RECEIPTS RECEIVED AND ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. 4. AGGRIEVED BY THE ORDER OF A.O., THE ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A), THE ASSEESSEE TOOK THE FOLLOW ING LINE OF ARGUMENTS. (I) THAT THE FIRM HAS RECEIVED THE ADVANCE PAYMENT /CREDIT FOR TOTAL AMOUNT OF RS.41.24 LACS FROM THE PUNE MUNICIPAL CORPORATION TOWARDS THE SALE AND ADVANCE PAYMENT AGAINST THE ORDER FOR SUPPLY OF EQUIPMENTS. (II) DURING THE RELEVANT YEARS, THE FIRM MADE SALES OF RS.27.98 LACS AND BALANCE OF RS.13.27 LACS IS THE ADVANCE AMOUNT, LYING AGAINST THE EQUIPMENT SOLD AN D SUPPLIED IN SUBSEQUENT YEARS AND DULY REFLECTED IN 3 ACCOUNTS, LEDGER ACCOUNTS REFLECTING VARIOUS PAYMEN TS ARE FILED, WHICH ARE VERIFIED DURING ASSESSMENT PROCEEDINGS VIDE SUBMISSION DATED 11.02.2008. COPY ENCLOSED. (III) IT IS ALSO IMPORTANT TO NOTE THAT ABOVE DETAI LS WERE ALSO FILED EARLIER BEFORE THE PREDECESSOR AO VIDE OUR SUBMISSION DATED 5.07.2005, SUPPORTED BY ACCOUNTS O F PUNE MUNICIPAL CORPORATION REFLECTING ALL THE CREDI TS IN ACCOUNTS AS PER TDS CERTIFICATE, IN RESPONSE TO THE N ITO NO.WD.6(4)/05-06 DATED 28.06.2005. AFTER VERIFICATION OF ALL THE CREDITS IN ACCOUNTS ASSESSI NG OFFICER ISSUED THE REFUND. (IV) THE APPELLANT FIRM FOLLOWS THE MERCANTILE SYST EM OF ACCOUNTING UNDER WHICH THE EFFECT OF TRANSACTION AN D EVENTS ARE RECOGNIZED ON ACCRUAL BASIS I.E. WHEN TH EY OCCUR AND NOT WHEN THE CASH IS PAID OR RECEIVED. I N OTHER WORDS, REVENUE AND COST ARE RECOGNIZED WHEN THEY ARE EARNED OR INCURRED AND NOT AS MONEY IS RECEIVED OR PAID. THEREFORE, THE SALE IS RECOGNIZED WHEN PROPERLY IN GOODS IS TRANSFERRED TO THE BUYER AND NOT WHEN THE ADVANCE IS RECEIVED. NO WHERE IN THE L AW IT IS STATED THAT INCOME TAX IS LEVIED ON ADVANCE RECEIVED AGAINST THE SUPPLY OF GOODS WITHOUT AFFECT ING THE SALE. (V) IF ACCOUNTING PRINCIPLE ADOPTED BY AO IS APPLI ED IN THE APPELLANT CASE I.E. IF ADVANCES RECEIVED ARE TO BE ADDED AS INCOME THEN VICE VERSA, ADVANCES MADE ARE TO BE DEDUCTED FROM THE INCOME. THE APPELLANT FIRM HAS 4 ALREADY RECOGNIZED THE SALES AGAINST THE BALANCE OF ADVANCE OF RS.13.27 LACS IN SUBSEQUENT YEAR. (VI) THE APPELLANT SUBMITS THAT THE ADDITION IS UNJ USTIFIED AND AGAINST THE FUNDAMENTAL PRINCIPLE OF ACCOUNTING AND RESULT INTO THE DOUBLE TAXATION OF THE SAME. (VII) IN SUPPORT OF ITS CLAIM, THE ASSEESSEE HAS RE LIED UPON THE FOLLOWING DECISIONS: (I) CIT VS. SHAH CONSTRUCTION CO. LTD. (1999) 237 ITR 814 (BOM.) (II) LAKSHMINARAYANA FILMS VS. CIT (2000) 244 ITR 344 (MAD.) 6. THE CIT(A) HAS CONSIDERED THE ABOVE SUBMISSIONS OF THE ASSESSEE AND HELD AS UNDER: 3.2.1. IT MAY BE SEEN THAT WHERE A CONTRACTOR RECE IVES ADVANCES, THIS CANNOT BE TREATED AS A CONTRACT RECE IPTS TILL IT IS ADJUSTED TOWARDS DUES. THE RELIANCE IS P LACED ON THE CASE OF CIT VS. SHAH CONSTRUCTION CO. LTD. (1999) 237 ITR 814 (BOM.). THE RELIANCE IS ALSO PLA CED ON THE CASE OF LAKSHMINARAYANA FILMS VS. CIT (2000) 244 ITR 344 (MAD.), WHEREIN IT IS HELD BY THE MADRA S HIGH COURT THAT THE ADVANCE CANNOT HAVE THE CHARACT ER OF INCOME TILL SUCH OBLIGATION IS DISCHARGED. IT IS SEEN THAT IN THE INSTANT CASE, THE APPELLANT FIRM HAS RE CEIVED ADVANCE FROM THE PUNE MUNICIPAL CORPORATION AMOUNTING TO RS.41.24 LACS, OUT OF WHICH DURING THE RELEVANT ASSESSMENT YEAR, THE FIRM HAS MADE SALES T O THE TUNE OF RS.27.98 LACS AND BALANCE OF RS.13.27 I S 5 TREATED AS ADVANCE WHICH IS LYING AGAINST THE EQUIPMENT SOLD AND SUPPLIES SHOWN IN THE SUBSEQUENT ASSESSMENT YEAR. HOWEVER, THE ASSESSING OFFICER IS AT LIBERTY TO VERIFY WHETHER THE SAID ADVANCE IS ADJUS TED AGAINST THE SALES OF NEXT ASSESSMENT YEAR. SUBJECT TO THE ABOVE VERIFICATION THIS GROUND OF APPEAL IS ALL OWED. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AT LENGTH AND HAVE ALSO PERUSED THE MATERIALS AVAILABL E ON RECORD. IT IS ONE OF THE CONTENTIONS OF THE ASSESSEE THAT THE FIRM HAS ALREADY RECOGNIZED THE SALE AGAINST THE BALANCE OF ADVANCE OF RS.13.27 LACS IN THE SUBSEQUENT YEAR. THE LEARNED CIT(A) HAS CORRECTLY OBSERVED THAT THE ADVANCE CANNOT HAVE THE CHARACTER OF INCOME TILL SUCH OBLIGATION IS DISCHARGED. THERE IS NO MATERIAL ON RECORD TO CONTROVERT THIS FACT THAT THE ASSESSEE HAS RECEIVED ADVANCE FROM THE PUNE MUNICIPAL CORPORATION AMOUNTING TO RS.41.2 1 LACS, OUT OF WHICH DURING THE RELEVANT ASSESSMENT YEAR, THE ASSE SSEE HAS MADE SALES TO THE TUNE OF RS.27.98 LACS AND BALANCE OF RS.13.27 LACS WAS TREATED AS ADVANCE WHICH IS LYING AGAIN TH E EQUIPMENT SOLD AND SUPPLIED SHOWN IN THE SUBSEQUENT ASSESSMEN T YEAR. THE LEARNED CIT(A) HAS DIRECTED THE ASSESSING OFFICER T O VERIFY WHETHER THE SAID ADVANCE WAS ADJUSTED AGAINST THE S ALES OF NEXT ASSESSMENT YEAR. THE ASSESSEE HAS FILED A COPY OF O RDER DATED 8.06.2009 GIVING APPEAL EFFECT PASSED BY AO AFTER V ERIFICATION OF DETAILS FILED BY ASSESSEE.(PAGE 35 OF PAPER BOOK). THE ASSESSING OFFICER IN HIS ORDER DATED 8.06.2009, AFTER VERIFIC ATION FROM DETAILS FILED BY THE ASSESSEE FOUND THE CLAIM OF THE ASSESS EE AS CORRECT. EVEN IN VIEW OF THE ORDER OF AO DATED 8.06.2009, TH E REVENUE SHOULD NOT HAVE ANY GRIEVANCE AGAINST THE ORDER OF CIT(A). THUS, 6 CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF T HE PRESENT CASE, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, WE UP HOLD THE ORDER OF THE CIT (A) AND DISMISS THE GROUND RAISED BY THE REVENUE. 8. AT THE TIME OF HEARING OF THE APPEAL, SHRI S.K.S ADHWANI LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THE GROUNDS RAISED IN THE CROSS OBJECTION. ACCORDINGLY, WE DISMISS THE C.O. A S NOT PRESSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE C.O. BY THE ASSESSEE ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28.08 .2009 SD/- SD/- (A.N.PAHUJA) (H.L.KARWA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED 28.08.2009 PARAS* COPY TO: 1) THE ASSESSEE, 2) THE ASSESSING OFFICER, 3) THE CIT (A) CONCERNED, 4) THE CIT, CONCERNED, 5) THE DR, ITAT, AHMEDABAD, 6) GUARD FILE. BY ORDER ASSISTANT REGISTRAR/DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.