M/s. Srishti Constructions, Jalandhar V. The Addl.Commissioner of Income-tax, Jalandhar

ITA 234/ASR/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68113 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Keywords: Rule of consistency
• Section: 234B; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.234(ASR)/2011 ASSESSMENT YEAR:2008-09 PAN :AAOFS6916P M/S. SRISHTI CONSTRUCTIONS VS. ADDL. COMMR. OF INCO ME TAX, JALANDHAR. RANGE-III, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. SANDEEP VIJH, CA RESPONDENT BY:SH.AMRIK CHAND, DR DATE OF HEARING: 25/07/2013 DATE OF PRONOUNCEMENT:06/08/2013 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED 17.02.2011 FOR THE ASSESSMENT YEAR 2008-09. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE NOTICE U/S 143(1) AND 143(2) IS BAD I N LA AND VOID AB- INITO. 2. THAT THE LD. CIT(A) HAS FAILED TO CONSIDER THE GROUND NO.2, 3 & 4 OF THE APPEAL. ITA NO.234(ASR)/2011 2 ADDITION OF RS.45,43,465/- ( AS RECTIFIED TO RS.9,0 1,763/- ) ON ACCOUNT OF NO CLOSING STOCK/CLOSING WORK IN PROGR ESS. 3. THAT THE LD. CIT(A) HAS WRONGLY REJECTED THE CO NTENTION OF APPELLANT THAT ITS REGULAR AND CONSISTENT METHOD OF ACCOUNTING SHOULD BE ACCEPTED AND SHOULD NOT BE DISTURBED. 4. THAT THE LD. CIT(A) HAS WRONGLY RELIED UPON ITS OWN APPELLATE ORDER FOR A.Y. 2007-08 WHEREAS THE SAME IS MATTER O F APPEAL BEFORE THE HONBLE TRIBUNAL VIDE ITA NO.74(ASR)/201 1. THE FACTS OF THE CASE ARE SIMILAR IN BOTH THE YEARS I.E . A.Y. 2007-08 & A.Y. 2008-09. ADDITION OF RS.3,11,375/- ( AS RECTIFIED TO RS.1,49 ,476/-) ON INTEREST FREE LOANS. 5. THAT THE LD. CIT(A) HAS WRONGLY RELIED UPON ITS OWN APPELLATE ORDER FOR A.Y. 2007-08 WHEREAS THE SAME IS MATTER O F APPEAL BEFORE THIS TRIBUNAL VIDE ITA NO.74(ASR)/2011. THE FACTS OF THE CASE ARE SIMILAR IN BOTH THE YEARS I.E. A.Y. 2007-0 8 & A.Y. 2008-09. 6. THAT THE LD. CIT(A) HAS WRONGLY REJECTED THE CONTEN TION OF THE ASSESSEE THAT ONE OF THE PERSON I.E. MR. KRISHAN MU RARI HAD ADVANCED INTEREST FREE LOAN TO THE FIRM TO THE TUNE OF RS.20,00 LACS IN THE EARLIER YEAR AND IT IS DISCRIMINATORY T O DISALLOW INTEREST ON AMOUNT ADVANCED TO HIM. INTEREST LEVIED U/S 234A, 234B AND 234C 7. THE LD. CIT(A) ERRED IN CONFIRMING THE LEVY OF INTE REST U/S 234A, 234B & 234C OF THE ACT. PRAYER TO AMEND GROUNDS OF APPEAL & RELIEF. 8. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER OR DELET E ANY OF THE ABOVE GROUNDS OF APPEAL. 9. ANY OTHER RELIEF AS HONBLE MEMBERS MAY DEEM FIT AN D THE DESIRABLE MAY KINDLY BE ALLOWED. 2. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE, MR. SANDEEP VIJH, CA DID NOT PRESS GROUNDS NO. 1, 4 & 5 AND THE SAME ARE DIS MISSED AS NOT PRESSED. ITA NO.234(ASR)/2011 3 3. AS REGARDS GROUNDS NO. 2 & 3 , THE BRIEF FACTS A RE THAT THE ASSESSEE WAS FOUND TO HAVE DECLARED CLOSING STOCK OF RS.95,0 1,778/- PERTAINING TO ONLY TWO SITES BUT IN RESPECT OF ALL THE OTHER ON G OING SITES/PROJECTS, NO CLOSING STOCK/CLOSING WIP WAS SHOWN IN THE PROFIT & LOSS ACCOUNT. THE AO ASKED THE ASSESSEE TO SUBMIT QUANTITATIVE DETAILS O F OPENING AND CLOSING STOCK AND MONTHWISE DETAILS OF PURCHASE AND SALE O F DIFFERENT ITEMS IN QUANTITY AND VALUE. THOUGH SOME INFORMATION WAS FUR NISHED RELATING TO THE VALUE, BUT THE QUANTITATIVE DETAILS WERE NOT FURNIS HED INITIALLY. WHEN THE INFORMATION WAS SUBMITTED SUBSEQUENTLY TO THE AO, I T WAS FOUND THAT ALL THE PURCHASES MADE IN A PARTICULARS MONTH WERE SHOWN TO HAVE BEEN CONSUMED IN THAT VERY MONTH ITSELF. CLOSING STOCK OF RS.95,0 1,778/- WAS FOUND TO PERTAINS TO ONLY TWO SITES. AS PER THE STOCK OF FIN ISHED WORK OR OF WORK IN PROGRESS (WIP). THE AO ASKED THE ASSESSEE TO JUSTI FY NOT HAVING WORK IN PROGRESS AT ALL AT ANY SITE, ESPECIALLY SINCE ALL T HE PROJECTS WERE ON GOING. THE ASSESSEE REPLIED THAT THE CLOSING STOCK OF RS. 95,01,778/- RELATED TO MES, FEROZEPAUR CANTT PROJECT AND AIRPORT AUTHORITY OF INDIA, UDIAPUR. IT WAS INFORMED THAT WORK AT BOTH THESE SITES DID NOT START TILL THE END OF THE YEAR. IN RESPECT OF WORK IN PROGRESS AT OTHER SITES , IT WAS SUBMITTED THAT AS PER THE REGULAR METHOD OF ACCOUNTING EMPLOYED BY TH E FIRM, ALL THE WORK DONE WAS ACCOUNTED AT THE CLOSE OF THE YEAR I.E. 31 ST MARCH. IT WAS POINTED ITA NO.234(ASR)/2011 4 OUT THAT IN THE MONTH OF MARCH, 2008 ITSELF, THE TU RNOVER WAS RS.6.04 CRORE OUT OF THE TOTAL TURNOVER OF RS.26.82 CRORE, WHICH INDICATED THE HEAVY BILLING IN THE MONTH OF MARCH, AGAINST ALL THE PURCHASES AN D EXPENSES IT WAS ALSO POINTED OUT THAT AGAINST THE RECEIPT OF RS.261.73 L AC IN THE LAST WEEK OF THE YEAR, THE PURCHASES WERE ONLY RS.34.19 LAC WHICH IN DICATED THAT MOST OF THE PURCHASES WERE ACCOUNTED FRO AT THE YEAR END. THE A O WAS NOT SATISFIED WITH THE SUBMISSION SINCE NO DOCUMENTARY EVIDENCE IN SU PPORT OF THE SAME WAS FILED. THE AO ASKED THE ASSESSEE TO FURNISH COPIES OF BILLS RAISED AND PAYMENTS RECEIVED IN THE MONTH OF MARCH AND ALSO TH E QUANTITATIVE DETAILS OF ALL MATERIAL PURCHASED IN THE MONTH OF MARCH AS WEL L AS THE SITES WHERE THEY WERE CONSUMED. THE ASSESSEE SUBMITTED SOME INFORMAT ION, BUT THE COPIES OF THE BILLS RAISED IN THE MONTH OF MARCH FOR WHICH PA YMENTS WERE RECEIVED WERE NOT FURNISHED. THE AO ALSO NOTED THAT THE ASSE SSEE HAD ONLY FURNISHED THE PAYMENT VOUCHERS/MEASUREMENT BOOK IN RESPECT OF SOME OF THE CONTRACTEE DEPARTMENTS. THE MEASUREMENT BILL OF AIR PORT AUTHORITY OF INDIA WERE NOT FILED THOUGH PAYMENT VOUCHERS WERE FURNISH ED, BUT THE PAYMENT VOUCHERS DID NOT SHOW THE DATES ON WHICH THE BILLS WERE RAISED. THE MEASUREMENT BOOK OF JALANDHAR IMPROVEMENT TRUST ALS O SHOWED THAT A BILL PASSED ON 27.03.2008, WITHOUT SUBSTANTIATING THE AS SESSEES CONTENTION THAT ALL WORK DONE UPTO 31.03.2008, HAD BEEN ACCOUNTED FOR DURING THE YEAR ITA NO.234(ASR)/2011 5 ITSELF. NO OTHER EVIDENCE WAS FURNISHED. AS PER THE AO, THE TURNOVER OF RS.6.04 CRORE FOR MARCH WAS RECEIVED DURING THIS MO NTH BUT COULD NOT BE THE TURNOVER OR WORK DONE DURING THE MONTH OF MARCH, 20 08 ONLY. SHE WAS ALSO OF THE OPINION THAT THIS DID NOT PROVE THAT ALL THE WORK DONE IN MARCH, 2008 HAD BEEN ACCOUNTED IN THESE PAYMENTS SINCE IT WOULD TAKE AT LEAST 5-6 DAYS FOR THE BILLS TO BE PROCESSED. SHE ALSO DID NOT ACC EPT THE ASSESSEES CONTENTION THAT THE RUNNING BILLS FOR DIFFERENT DEP ARTMENTS ACCOUNTED FOR ALL THE MATERIAL AT SITE UPTO 31.03.2008. SHE HELD THA T THE MATERIAL OF RS.34.19 LAC PURCHASED IN THE LAST WEEK OF MARCH EXCLUDING T HE CLOSING STOCK OF RS.95,01,778/- HAD NOT BEEN ACCOUNTED FOR EITHER AS CLOSING STOCK OR AS CLOSING WIP. THE AO RELIED ON THE DECISION IN THE C ASE OF GEO TECH CONSTRUCTION CO. VS. DCIT & ANR. 203 CTR 493 (KER) IN WHICH IT WAS HELD THAT THE INCOME OF THE ASSESSEE CONTRACTOR COULD NO T BE DEDUCTED FROM THE ACCOUNTS UNLESS THE WIP WAS TAKEN INTO CONSIDERATIO N AND THE O WAS JUSTIFIED IN ESTIMATING THE CLOSING WIP WAS TAKEN INTO CONSIDERATION AND THE AO WAS JUSTIFIED IN ESTIMATING THE CLOSING WIP AND ADDED THE AMOUNT OF CLOSING WIP TO THE TOTAL INCOME OF THE ASSESSEE. TH E AO ALSO HELD THAT THE REGULAR METHOD OF ACCOUNTING OF CLOSING STOCK COULD BE DISTURBED BY THE AO, RELYING ON THE JUDGMENT OF THE HONBLE APEX COURT I N THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. 188 ITR 144 (SC). THE AO, THEREFORE, ADDED THE ITA NO.234(ASR)/2011 6 SUM OF RS.34.19 LAC TO THE CLOSING STOCK AND TO THE INCOME OF THE ASSESSEE. THE AO ALSO ADDED 1/6 TH OF THE WAGES OF THE MOTH OF MARCH TO THE TOTAL INCOME ON THE GROUND THAT THESE SHOULD HAVE BEEN IN CLUDED IN THE CLOSING WIP AT RS.8,90,870/-. THE AO FURTHER ADDED A SUM O F RS.2,09,462/- BEING 1/6 TH EXPENDITURE ON ACCOUNT OF FOC TO THE CLOSING WIP AND OF 1/6 TH OF THE FUEL EXPENDITURE OF THE MONTH OF MARCH, 2008 AMOUNT ING TO RS.24,133/- TO THE CLOSING WIP. A TOTAL ADDITION OF RS.45,43,465/- WAS MADE BY THE A.O. 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE, CONFIRMED THE ACTION OF THE ASSESSING OFFICER, VIDE ORDER DATED 17.02.2011. 5. THE LD. COUNSEL FOR THE ASSESSEE, MR. SANDEEP VI JH, CA, AT THE OUTSET POINTED OUT THAT THOUGH AOS ACTION HAS BEEN CONFIR MED BY THE LD. CIT(A) VIDE ORDER DATED 17.02.2011 BUT IN THE MEANTIME, TH E ORDER PASSED BY THE AO DATED 22.11.2010 WAS RECTIFIED U/S 154 VIDE ORDE R DATED 10.02.2011 WHERE THE ADDITION WAS LIMITED TO RS.9,01,763/- ON ACCOUNT OF NO CLOSING STOCK/CLOSING WORK IN PROGRESS AND THEREFORE, THE A DDITION IS REDUCED TO RS.9,01,763/- INSTEAD OF RS.45,43,465/- AS POINTED OUT IN GROUND NO.3. HE FURTHER ARGUED THAT ON IDENTICAL FACTS, IN THE CASE OF THE SAME ASSESSEE, THE MATTER HAS BEEN DECIDED BY THE ITAT, AMRITSAR BENCH VIDE ORDER DATED 27.12.2012 FOR THE ASSESSMENT YEAR 2007-08 WHERE TH E APPEAL OF THE ASSESSEE HA BEEN ALLOWED, A COPY OF THE ORDER IS AVAILABLE A T PB 25 TO 34. ITA NO.234(ASR)/2011 7 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. GROUNDS NO. 2 & 3 IN THE PRESENT APPEAL ARE IDENT ICAL TO GROUNDS NO. 1 TO 4 IN THE CASE OF THE PRESENT ASSESSEE FOR THE ASSESSM ENT YEAR 2007-08, WHICH HAS BEEN DECIDED BY US IN ITA NO.74(ASR)/2011 VIDE ORDER DATED 27.12.2012 PLACED AT PB 25 TO 34. ON IDENTICAL GROUNDS, IN THE CASE OF THE PRESENT ASSESSEE FOR THE ASSESSMENT YEAR 2007-08, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. IN THE ABSENCE OF ANY CHANG E IN THE FACTS BROUGHT ON RECORD BY THE REVENUE, BEING THE PRESENT CASE ON ID ENTICAL FACTS AS IN THE PRECEDING YEAR, WE ARE BOUND TO FOLLOW OUR EARLIER ORDER. THE SAID ORDER FOR THE ASSESSMENT YEAR 2007-08 IN ITA NO.74(ASR)/2011 DATED 27.12.2012, FOR THE SAKE OF CONVENIENCE IS REPRODUCED AS UNDER: 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASS ESSEE HAS BEEN FOLLOWING THE SAME METHOD OF ACCOUNTING CONSISTENT LY FOR MANY YEARS AS POINTED OUT AT PB-12. THIS FACT HAS NOT BEEN RE BUTTED BY THE REVENUE. THEREFORE, IT IS UNDISPUTED FACT THAT WHE N METHOD OF ACCOUNTING HAS BEEN FOLLOWED CONSISTENTLY AND IN T HE ABSENCE OF ANY JUSTIFICATION BY THE LOWER AUTHORITIES IN THEIR OR DERS, A DIFFERENT METHODOLOGY CANNOT BE ADOPTED DEPARTING FROM THE P AST PRACTICE AS A MATTER OF PRINCIPLE OF CONSISTENCY. THEREFORE, THE AO AS WELL AS THE LD. CIT(A) ARE NOT JUSTIFIED IN ADOPTING DIFFERENT MET HODOLOGY AS IN THE PRESENT CASE. THE RELIANCE WAS PLACED ON THE DECIS IONS OF VARIOUS COURTS OF LAW UPON BY THE LD.AR FOR THE ASSESSEE, SH. SANDEEP VIJH MENTIONED HEREINABOVE. ITA NO.234(ASR)/2011 8 8.1. MOREOVER, IF AT ALL, THE METHOD OF ACCOUNTING IS CHANGED BY THE AO THEN FOR INCLUDING THE CLOSING STOCK IN THE INC OME, THE AO IS REQUIRED TO GIVE DEDUCTION FOR THE OPENING STOCK W HICH IS ACCEPTED METHOD OF ACCOUNTING. THIS HAS NOT BEEN DONE BY TH E AO. THEREFORE, HE IS NOT JUSTIFIED IN MAKING ANY ADDITION ON ACCO UNT OF CLOSING STOCK. 8.2. NOTHING HAS BEEN BROUGHT BY THE AO OR NOTHING HAS BEEN DEMONSTRATED BY THE AO THAT THE METHOD ADOPTED BY THE ASSESSEE IS DIFFERENT AS REQUIRED BY THE REVENUE AND HOW THE P ROFIT HAS BEEN UNDER ESTIMATED HAS NOT BEEN WORKED OUT PROPERLY. THE AO HAS RELIED UPON THE MEASUREMENT BOOK OF JALANDHAR IMPROVEMENT TRUS T AND THE SAME HAS BEEN APPLIED ON THE OTHER CONTRACTEES WHICH IN FACT IS NOT TRUE. IT HAS BEEN ARGUED AND ALSO IS ON RECORD THAT THE ASS ESSEE HAD RECEIVED PAYMENT UPTO 30 TH MARCH. THEREFORE, ON NO ACCOUNT, THE PURCHASE OF MATERIAL BETWEEN 25 TH MARCH 2007 TO 31 ST MARCH, 2007 CAN BE RS.22,27,607/-. THEREFORE, NO ADDITION IN THE PRES ENT CASE CAN BE MADE ON SURMISES AND CONJECTURES. 8.3. AS REGARDS THE ARGUMENTS OF THE LD. DR, WHO R ELIED UPON THE DECISION OF GEO TECH CONSTRUCTION CORPORATION VS. DY. CIT (2006) 203 CTR 493 (KERALA), WHICH WAS RELIED UPON BY BOT H THE AUTHORITIES BELOW AS WELL CANNOT HELP THE REVENUE SINCE THE FA CTS IN THAT CASE ARE DISTINGUISHABLE FOR THE REASONS, THE AO HAD ADDED THE DIFFERENCE IN THE OPENING STOCK AND CLOSING STOCK OF THE WORK IN PROGRESS TO THE INCOME OF THE ASSESSEE. IN THE PRESENT CASE, NO OP ENING STOCK AND CLOSING STOCK AND WORK IN PROGRESS IS THERE AND T HE AO IN FACT HAS NOT TAKEN THE OPENING STOCK. THE RELIANCE PLACED BY TH E LD. DR IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. 188 ITR 44 (S C) IS ALSO NOT APPLICABLE SINCE THE FACTS IN THAT CASE ARE QUITE DISTINGUISHABLE FOR THE REASONS THAT THE ASSESSEE VALUED THE GOODS IN PROC ESS. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, T HE AO IS NOT JUSTIFIED IN MAKING ANY ADDITION. THEREFORE, THE ORDER OF TH E LD. CIT(A) IS DIRECTED TO REVERSED AND ALL THE GROUNDS OF THE AS SESSEE I.E. 1 TO 4 ARE ALLOWED. THUS, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. 7.1. IN SUCH FACTS AND CIRCUMSTANCES OF THE CASE A ND FOLLOWING OUR EARLIER ORDER DATED 27.12.2012 IN ITA NO.74(ASR)/2011 FOR T HE ASSESSMENT YEAR ITA NO.234(ASR)/2011 9 2007-08, WE ALLOW GROUNDS NO. 2 & 3 OF THE ASSESSEE . ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.234(ASR)/2011 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6TH AUGUST, 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 6TH AUGUST, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: 2. THE 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.