DCIT-I, Lucknow V. M/S Arohi construction P Ltd., Lucknow

ITA 276/LKW/2011

• Counselvise Citation: 27623714 RSA 2011
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K R RASTOGI
• Keywords: Opportunity of being heard; Corroborative evidences; Non compliance
• Section: 143(3); 145; 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A : LUCKNOW BEFORE SHRI H. L. KARWA, VICE PRESIDENT AND SHRI N. K. SAINI, ACCOUNTANT MEMBER I.T.A. NO.276/LKW/11 ASSESSMENT YEAR:2004-2005 DY. C.I.T., VS. M/S AROHI CONSTRUCTIONS PVT. LTD. RANGE-I, AROHI PLAZA, PATRAKARPURAM CROSSING LUCKNOW. VIKAS KHAND, GOMTI NAGAR, LUCKNOW. PAN:AACCA0271A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAVEEN KUMAR, CIT, D.R. RESPONDENT BY : SHRI K. R. RASTOGI, C. A. DATE OF HEARING :16/08/2011 DATE OF PRONOUNCEMENT : 26/08/2011 ORDER PER N. K. SAINI: THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST THE ORDER DATED 08/02/2011 OF CIT(A)-I, LUCKNOW RELEVANT TO ASSESSMENT YEAR 2004-2005. IN THIS APPEAL THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) WAS NOT CORRECT IN ACCEPTING THE BOOKS OF ACCOUNTS IGNORING THE FACTS THAT IN SPITE OF SEVERAL OPPORTUNITIES GIVEN BY THE A.O. TO THE ASSESSEE TO PRODUCE THE DETAILS/- DOCUMENTS AND BOOKS OF ACCOUNTS IN SUPPORT OF HIS CASE, THE ASSESSEE FAILED TO DO SO. 2 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT (A) FAILED TO APPRECIATE THAT WHEN THE TRUE ELEMENT OF PROFIT EMBEDDED IN THE SALES, WIP AND FINISHED GOODS WAS NOT DEDUCTIBLE FROM THE BOOKS OF ACCOUNT MAINTAINED ON PROJECT COMPLETION METHOD, THE REJECTION OF BOOKS AND APPLICATION OF PROFIT RATE ON EACH OF THE SAID HEADS WAS ONLY WAY IN WHICH SUCH PROFIT COULD BE TAXED. 3. APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY ONE OR MORE OF THE GROUNDS OF APPEAL AS STATED ABOVE AS AND WHEN NEED OF DOING SO ARISES WITH THE PREVIOUS PERMISSION OF THE HON'BLE BENCH. 2. THE FACTS RELATED TO THIS ISSUE, IN BRIEF, ARE THAT INITIALLY THE ASSESSMENT IN THIS CASE WAS COMPLETED ON 30/12/2006 AT A TOTAL INCOME OF ` 4,99,12,964/-. THE SAID ASSESSMENT ORDER WAS CANCELLED BY THE LEARNED CIT-I, LUCKNOW VIDE ORDER PASSED U/S 263 OF THE I.T. ACT, 1961 (IN SHORT, THE ACT). PURSUANT TO THE SAID ORDER OF THE LEARNED CIT-I, LUCKNOW THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON 30/03/2007 DETERMINING THE TOTAL INCOME AT ` 4,60,98,580/- 3. THE ASSESSEE AGAINST THE SAID ORDER PREFERRED AN APPEAL TO THE LEARNED CIT(A)-I, LUCKNOW WHO VIDE ORDER DATED 28/03/2008 PARTLY ALLOWED THE APPEAL IN AS MUCH AS A LOWER RATE FOR ESTIMATE OF PROFIT WAS APPLIED. BOTH THE PARTIES CONTESTED THE SAID ORDER DATED 28/03/2008 PASSED BY THE LEARNED CIT(A)-I, LUCKNOW BEFORE THE I.T.A.T. IN I.T.A. NO.490/LUC/08 (APPEAL BY THE ASSESSEE) AND I.T.A. NO.417/LUC/08 (APPEAL BY THE 3 DEPARTMENT) WHEREIN VIDE COMBINED ORDER DATED 23/08/2008 ASSESSMENT WAS SET ASIDE AND THE ISSUE WAS SENT BACK TO THE ASSESSING OFFICER TO BE DECIDED DE NOVO BY MAKING THE FOLLOWING OBSERVATIONS: FURTHERMORE, IN THE INSTANT CASE, THE ASSESSING OFFICER HAS NOT POINTED OUT ANY MATERIAL AND SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS AND ALSO HAVE NOT GIVEN ANY REASON FOR APPLYING THE NET PROFIT RATE OF 20% ON THE SALES AND 25% ON THE WORK IN PROGRESS AND CLOSING STOCK. THE ASSESSING OFFICER HAD ALSO NOT CONSIDERED THIS VITAL FACTS AND CIRCUMSTANCES THAT THE ASSESSEE IS NOT A CONTRACTOR. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS DEEM IT PROPER TO SET ASIDE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO BE DECIDED DE NOVO IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 3.1 PURSUANT TO THE ORDER OF THE I.T.A.T., THE ASSESSING OFFICER FRAMED THE ASSESSMENT VIDE ASSESSMENT ORDER DATED 17/12/2009 AT AN INCOME OF ` 4,60,98,580/- I.E. THE SAME INCOME WHICH WAS EARLIER ASSESSED VIDE ORDER DATED 30/03/2007. WHILE DOING SO THE ASSESSING OFFICER MADE THE FOLLOWING OBSERVATIONS: THE ASSESSEE WAS REQUIRED TO PRODUCE BOOKS OF ACCOUNT ALONG WITH ORIGINAL BILLS/VOUCHERS. PART COMPLIANCE HAS BEEN MADE BY THE ASSESSEE AND SOME COPIES OF CASH PAYMENT VOUCHERS HAVE BEEN PRODUCED. IN THESE VOUCHERS FOLLOWING DISCREPANCIES HAVE BEEN NOTICED: S.NO. PAYMENT VOUCHER NO. DISCREPANCY ------- --------------------------- ---------------- 1. 246 PAYMENT AGAINST CHEQUE 2. 283 NO RECEIVING 4 3. 257 NO RECEIVING 4. 255 NO RECEIVING 5. 260 NO RECEIVING 6. 261 NO RECEIVING 7. 267 NO RECEIVING 8. 272 NO RECEIVING 9. 285 NO RECEIVING 10. 244 NO RECEIVING 11. 243 NO RECEIVING 12. 265 NO RECEIVING 13. 291 NO RECEIVING 14. 292 NO RECEIVING 15. 253 NO RECEIVING 16. 252 NO RECEIVING 17. 251 NO RECEIVING 18. 294 NO RECEIVING 19. 296 NO RECEIVING FURTHER, SEVERAL OPPORTUNITIES AS PER ORDER SHEET ENTRIES HAVE BEEN GIVEN TO PRODUCE RELEVANT DETAILS/DOCUMENTS AND BOOKS OF A/CS ETC IN SUPPORT OF HIS CASE, BUT THE ASSESSEE HAS FAILED TO DO SO. IN THESE CIRCUMSTANCES I HAVE NO OPTION BUT TO RELY ON THE ORDER PASSED BY THE THEN ASSESSING OFFICER. AFTER CONSIDERING ALL THE FACTS AVAILABLE ON THE RECORD, INCOME IS ASSESSED AT ` 4,60,98,580/-. ISSUE NOTICE OF DEMAND AND CHALLAN. CHARGE INTEREST AS APPLICABLE. ISSUE PENALTY NOTICE U/S 271(1)(C) READ WITH SECTION 274 FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. 3.2 BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO LEARNED CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER HAD NOT CORRECTLY PLACED FACTS OF THE ASSESSEE WHICH ARE ON RECORD. IT WAS FURTHER STATED THAT THE ASSESSEE FURNISHED AUDITED STATEMENT ALONG WITH AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT WHICH REVEALED THAT THE PROJECT WISE SALES, WORK IN PROGRESS, 5 CLOSING STOCK, NET PROFIT/LOSS, CONSTRUCTION EXPENSES INCURRED DURING THE YEAR AND OTHER DIRECT EXPENSES WERE SUBMITTED. IT WAS CONTENDED THAT THE ASSESSING OFFICER COMPUTED INCOME OF THE ASSESSEE ON THE BASIS OF THE PERCENTAGE COMPLETION METHOD BY REJECTING ASSESSEES METHOD OF PROJECT COMPLETION METHOD. IT WAS POINTED OUT THAT THERE WAS NO CHANGE IN THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AS WELL AS IN THE SUBSEQUENT YEARS AND THAT THE DEPARTMENT HAD ACCEPTED THE PROJECT COMPLETION METHOD AS FOLLOWED BY THE ASSESSEE WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT IN THE SUCCEEDING YEARS. AS REGARDS TO THE PROCEEDINGS IN SET ASIDE ASSESSMENT WHICH RESULTED IN THE ORDER DATED 17/12/2009, IT WAS STATED THAT THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS AND SUPPORTING EVIDENCE BUT THE ASSESSING OFFICER DID NOT APPRECIATE THE SAME. IT WAS ALSO POINTED OUT THAT THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNT ALONG WITH ORIGINAL BILLS AND VOUCHERS ON 26/11/2009, 27/11/209 AND AGAIN ON 30/11/2009. IT WAS POINTED OUT THAT THE ASSESSING OFFICER WRONGLY MENTIONED THAT NONE APPEARED ON 03/12/2009 INSPITE OF THE FACTS THAT THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE HIM AND NO OTHER QUERY WAS RAISED. AS REGARDS TO THE DEFICIENCY TERMED AS NO RECEIVING IN THE VOUCHERS, THE ASSESSEE SUBMITTED AS UNDER: 6 (I) REGARDING VOUCHER NO. 246 - THIS IS THE PAYMENT VOUCHER AND PAYMENT MADE TO M/S RAJA BRICK FIELD FOR HIS DUES REGARDING SUPPLY OF BRICKS. (II) REGARDING VOUCHER NO. 283 - THIS IS THE CASH PAYMENT OF WAGES FOR ` 11450/- FOR THE PERIOD 11.06.2003 TO 20.06.2003. THE WAGES IS PAID THROUGH MASTER ROLL. (III) REGARDING VOUCHER NO. 257 - THE CASH AMOUNT PAID TO MR. JAI SINGH FOR HIS DUES FOR SHUTTERING WORK. (IV) REGARDING VOUCHER NO. 255- ` 50000/- CASH DEPOSITED WITH BANK OF RAJASTHAN, CURRENT ACCOUNT NO. 1001184 ON 13.06.2003. (V) REGARDING VOUCHER NO. 260 - AMOUNT PAID TO M/S NARAIN FURNITURE FOR THEIR OUTSTANDING DUES AS PER DETAILS OF WORK SEPARATELY ATTACHED. (VI) REGARDING VOUCHER NO. 261 - PAID TO M/S RAJ KUMAR AGENCIES, FOR THEIR DUES FOR SUPPLY OF STONE GRITS AS PER DETAILS SEPARATELY ATTACHED. (VII) REGARDING VOUCHER NO. 267- ` 3500/- PAID TO MR. V. K. GUPTA AGAINST VEHICLE FOR PETROL. (VIII) REGARDING VOUCHER NO. 272- ` 1000/- PAID FOR TUBES AS PER THEIR BILLS TO M/S NIKE TUBES. (IX) REGARDING VOUCHER NO. 285 ` 3000/- PAID TO MR. HARSH CHATURVEDI ON ACCOUNT OF SELLING EXPENSES. (X) REGARDING VOUCHER NO. 244 ` 37800/- PAID FOR CEMENT TO M/S ALFA TRADERS. (XI) REGARDING VOUCHER NO. 245 ` 11000/- PAID AS SALARY OF MAY 2003 TO SMT. RICHA GUPTA. (XII) REGARDING VOUCHER NO. 265 PAID FOR PURCHASE OF STEEL TO M/S GARG STEEL. DETAILS ARE SEPARATELY ATTACHED. (XIII) REGARDING VOUCHER NO. 291 ` 4100/- PAID TO MR. RAM CHANDER BUILDER ON ACCOUNT. (XIV) REGARDING VOUCHER NO. 292 ` 6477/- CASH AMOUNT PAID FOR CONVEYANCE. (XV) REGARDING VOUCHER NO. 253 PAID TO M/S RAM KUMAR AGENCIES, AGAINST THEIR DUES FOR SUPPLY OF STONE GRITS. AS PER BILLS SEPARATELY ATTACHED. (XVI) REGARDING VOUCHER NO. 252 - PAID TO M/S SASHI TRADERS AGAINST THEIR DUES FOR SUPPLY OF MORANG. AS PER BILLS SEPARATELY ATTACHED. 7 (XVII) REGARDING VOUCHER NO. 251 ` 10400/- PAID FOR COMPUTER PARTS AS PER BILL NO. 672 DATED 12.06.2003 OF M/S COMPUTER SUPPORT SERVICE. (XVIII) REGARDING VOUCHER NO. 294 FOR ` 830000/- CASH DEPOSITED WITH BANK OF RAJASTHAN ON 30.06.2003. (XIX) REGARDING VOUCHER NO. 296 PAID TO M/S MAHINDRA ENTERPRISES FOR SUPPLY OF BRICKS. (XX) FROM PERUSAL OF THE ABOVE DETAILS, IT IS APPARENT THAT THE PAYMENTS WERE MADE TOWARDS EXPENSES AND FUNDS DEPOSITED IN BANK BUT THIS CANNOT BE TREATED AS DEFECT IN BOOKS OF ACCOUNTS.' IT WAS CONTENDED THAT THE PROJECT COMPLETION METHOD FOLLOWED BY THE ASSESSEE HAS BEEN HELD AS RECOGNIZED METHOD OF ACCOUNTING BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT-II VS. KISHORE BANDHU (P) LTD. REPORTED IN [2008] (11) MTC 22. THE RELIANCE WAS ALSO PLACED ON THE DECISION OF THE I.T.A.T. A BENCH, LUCKNOW IN THE CASE OF M/S HARI OM BUILDERS, LUCKNOW. 3.3 THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 17/12/2009 SIMPLY ADOPTED THE TOTAL INCOME ASSESSED IN THE EARLIER ORDER DATED 30/03/2007. THE LEARNED CIT(A) REPRODUCED THE RELEVANT PORTION OF THE ASSESSMENT ORDER DATED 30/03/2007 IN PARA 4.1 OF THE IMPUGNED ORDER. FOR THE COST OF REPETITION, THE SAME IS NOT REPRODUCED HEREIN. THE LEARNED CIT(A) HAD ALSO REPRODUCED THE DECISION OF THE I.T.A.T. A BENCH, LUCKNOW IN THE CASE OF M/S HARI OM BUILDERS, LUCKNOW 8 IN PARA 4.3 OF THE IMPUGNED ORDER. THE SAME IS ALSO NOT REPRODUCED HEREIN FOR THE COST OF REPETITION. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSING OFFICER ALTHOUGH HAD POINTED OUT A DEFICIENCY, TERMED AS 'NON RECEIVING' IN THE VOUCHERS BUT HE HAD NOT SUBSTANTIATED THAT THIS CONSTITUTED SUCH A DEFECT IN THE ACCOUNTS AS WOULD WARRANT THEIR REJECTION AND WOULD NECESSITATE THE SUBSTITUTION OF 'PROJECT COMPLETION METHOD OF ACCOUNTING' (AS FOLLOWED BY THE ASSESSEE) BY A 'PERCENTAGE COMPLETION METHOD' AS APPLIED IN THE ASSESSMENT ORDER DATED 30/03/2007 AND INCOME ESTIMATED ON THAT BASIS WHICH HAD BEEN REITERATED IN THE ORDER DATED 17/12/2009 PASSED U/S 143(3)/254 OF THE ACT. THE LEARNED CIT(A) CATEGORICALLY STATED THAT THE ASSESSING OFFICER HAD NOT EXAMINED AND DEALT WITH THE POINTS/ISSUES FORMULATED BY THE ITAT IN PARA 13 OF THE ORDER DATED 23/07/2008. THUS, THE SPECIFIC DEFECTS IN THE ACCOUNTS HAD NOT BEEN BROUGHT OUT AND ANALYSED AND THE BASIS FOR ESTIMATE OF PROFIT HAD NOT BEEN SPELT OUT. ACCORDING TO THE LEARNED CIT(A), THE ASSESSING OFFICER HAD NOT GIVEN ANY FINDING AS TO HOW THE BOOKS OF ACCOUNTS WERE DEFECTIVE AND LIABLE FOR REJECTION SO AS TO WARRANT A REJECTION OF METHOD OF ACCOUNTING OF THE ASSESSEE AND AN ESTIMATE OF PROFITS THEREAFTER. THE LEARNED CIT(A) WAS OF THE VIEW THAT THE BOOK RESULTS HAD BEEN REJECTED BY THE ASSESSING OFFICER WITHOUT PROPERLY INVOKING THE PROVISIONS OF SECTION 145 RESULTING IN 9 REJECTION OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE DESPITE THE FACT THAT THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE HAD BEEN REGULARLY AND CONSISTENTLY FOLLOWED AND NO SUBSTANTIAL DEFECT IN THE BOOKS OF ACCOUNTS HAD BEEN POINTED OUT BY THE ASSESSING OFFICER. THE LEARNED CIT(A) POINTED OUT THAT THE ASSESSING OFFICER, IN THE ORDERS PASSED UNDER SECTION 143(3) OF THE ACT IN THE ASSESSMENT YEAR 2006-07 AND 2007-08, HAD ACCEPTED THE PROJECT COMPLETION METHOD AS FOLLOWED BY THE ASSESSEE. HE ACCORDINGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ESTIMATE OF PROFIT. NOW THE DEPARTMENT IS IN APPEAL. 4. THE LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT THE ASSESSING OFFICER POINTED OUT SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT AND THE INCOME ESTIMATED ON THE BASIS OF PERCENTAGE COMPLETION METHOD BY THE ASSESSING OFFICER WAS JUSTIFIED. 5. IN HIS RIVAL SUBMISSIONS, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSING OFFICER WRONGLY MENTIONED IN THE ASSESSMENT ORDER THAT THERE WAS NON COMPLIANCE BY THE ASSESSEE. IT WAS SUBMITTED THAT ALL THE INFORMATION AND THE DOCUMENTS, WHICH WERE ASKED BY THE ASSESSING OFFICER, WERE FURNISHED BY THE ASSESSEE BUT NO COGNIZANCE WAS 10 GIVEN TO THEM AND THE ASSESSMENT, WHICH WAS EARLIER FRAMED VIDE ORDER DATED 30/03/2007, WAS REPEATED IN THE SET ASIDE ASSESSMENT VIDE ORDER DATED 17/12/2009. IT WAS STATED THAT THE ISSUE IS SQUARELY COVERED BY THE FOLLOWING DECISIONS OF THE I.T.A.T.: (I) ORDER OF I.T.A.T. LUCKNOW B BENCH, LUCKNOW IN THE CASE OF APALA CONSTRUCTION & DEVELOPERS PVT. LTD. VS. ACIT, RANGE- IV, LUCKNOW IN I.T.A. NO.536/LUC/08 DATED 23/09/2008. (II) ORDER OF I.T.A.T. LUCKNOW B BENCH, LUCKNOW IN THE CASE OF NUR BUILDERS, LUCKNOW VS. I.T.O., RANGE-II(2), LUCKNOW IN I.T.A. NO.33/LUC/10 DATED 24/02/2010. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON THE RECORD. IN THE PRESENT CASE THE ASSESSEE HAD SHOWN INCOME BY FOLLOWING THE PROJECT COMPLETION METHOD. THE SAME METHOD HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE SUCCEEDING YEARS ALSO WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT IN THE ASSESSMENT YEARS 2006-07 AND 2007-08. HOWEVER, IN THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER ADOPTED THE PERCENTAGE COMPLETION METHOD AND ESTIMATED THE INCOME OF THE ASSESSEE. IT IS NOTICED THAT THE PRESENT ISSUE IS SQUARELY COVERED BY THE EARLIER ORDER DATED 24/02/2010 OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF NUR BUILDERS, LUCKNOW VS. I.T.O., RANGE-II(2), LUCKNOW IN I.T.A. NO.33/LUC/10 FOR THE ASSESSMENT YEAR 2005-2006, ORDER DATED 24/02/2010, WHEREIN THE EARLIER ORDER DATED 29/04/2009 IN THE CASE OF INCOME TAX OFFICER, WARD-1(1), LUCKNOW VS. HARI OM BUILDERS IN 11 I.T.A. NO.814/LUC/08 RELATING TO ASSESSMENT YEAR 2005-2006 HAS BEEN FOLLOWED AND THE RELEVANT FINDINGS GIVEN IN PARA 9 AND 10 OF THE AFORESAID REFERRED TO ORDER DATED 24/02/2010 IN THE CASE OF NUR BUILDERS, LUCKNOW VS. I.T.O., RANGE-II(2), LUCKNOW IN I.T.A. NO.33/LUC/10 FOR THE ASSESSMENT YEAR 2005-2006 READ AS UNDER: 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISIONS RELIED UPON BY SHRI K.R.RASTOGI, LD COUNSEL OF THE ASSESSEE REFERRED TO ABOVE. IT IS SETTLED POSITION OF LAW THAT WHEN FACTS AND CIRCUMSTANCES OF CASES RELIED UPON BY THE PARTY AND THE FACTS OF THE CASE-IN-HAND ARE SIMILAR, THE TRIBUNAL SHOULD FOLLOW THE DECISION OF CO- ORDINATE BENCHES. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE CASES RELIED BY SHRI K.R. RASTOGI, LD. COUNSEL OF THE ASSESSEE. IN THAT VIEW OF THE MATTER, WE HAVE NO HESITATION IN FOLLOWING THE DECISIONS OF THE I.T.A.T.,A-BENCH, LUCKNOW BENCH REFERRED TO ABOVE. IN THE CASE OF SHRI HARI OM BUILDERS, LUCKNOW, THE TRIBUNAL DECIDED THE ISSUE AS PER ITS FINDINGS/OBSERVATIONS IN PARAS 5 AND 6, WHICH ARE IN THE FOLLOWING TERMS : 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF SECTION 145 OF THE ACT AS WELL AS THE ACCOUNTING STANDARD AS-I, AS-7 AND AS-9. HAVING CONSIDERED THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW IN THIS RESPECT, WE, FIRST OF ALL, ARE OF THE OPINION THAT IT WILL BE USEFUL FOR DECIDING THE ISSUE IN HAND FIRST TO CONSIDER THE PROVISIONS OF SECTION 145 OF THE ACT WHICH ARE IN THE FOLLOWING TERMS: [ METHOD OF ACCOUNTING. 12 145. (1) INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURCES SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. (2) THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICIAL GAZETTE FROM TIME TO TIME ACCOUNTING STANDARDS TO BE FOLLOWED BY ANY CLASS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME. (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB-SECTION (2), HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144 .] 5.1 AFTER CONSIDERING THE AFORESAID PROVISIONS, WE ARE OF THE OPINION THAT (I) AFTER AMENDMENT OF SECTION 145 WITH EFFECT FROM 1.4.1989, THE ASSESSEES INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURCES HAS TO BE COMPUTED IN ACCORDANCE WITH ANY OF THE TWO SYSTEMS OF ACCOUNTING I.E CASH SYSTEM OR MERCANTILE SYSTEM REGULARLY EMPLOYED BY THE ASSESSEE, (II) THE AFORESAID METHOD OF COMPUTATION OF INCOME IS HOWEVER, SUBJECT TO THE ASSESSEES OBLIGATION TO FOLLOW THE ACCOUNTING STANDARDS, IF ANY, NOTIFIED BY THE GOVERNMENT IN THE OFFICIAL GAZETTE FROM TIME TO TIME; MEANING THEREBY THAT EVEN IF THE ASSESSEE IS FOLLOWING ONE OF THE ACCOUNTING SYSTEMS MENTIONED IN SUB-SECTION (1) OF SECTION 145 REGULARLY THEN ALSO HE HAS TO PREPARE THE ACCOUNTS AS PER ACCOUNTING STANDARDS NOTIFIED BY THE GOVERNMENT. IF THE GOVERNMENT HAS NOT SPECIFIED ANY 13 ACCOUNTING STANDARD FOR A PARTICULAR TRADE OR FOR A PARTICULAR CLASS OF BUSINESS, THEN ONE CAN MAINTAIN THE BOOKS OF ACCOUNT EITHER ON CASH SYSTEM OR MERCANTILE SYSTEM BUT REGULARLY. IT IS FURTHER NOTICED THAT IF THE ASSESSING OFFICER, IN SPITE OF ASSESSEE HAVING COMPLIED WITH THE REQUIREMENTS OF SUB-SECTION (1) AND SUB-SECTION (2) OF SECTION 145, IS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS, HE CAN REJECT THE ASSESSEES ACCOUNTS AND PROCEED TO MAKE ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT. THE ASSESSING OFFICER CAN ALSO PROCEED TO MAKE ASSESSMENT U/S 144 OF THE ACT IF THE ASSESSEE HAS CONTRAVENED THE REQUIREMENT OF SUB-SECTION (1) OR SUB-SECTION (2) OF SECTION 145. 5.2 SO FAR AS THE PRESENT CASE IS CONCERNED, IT IS REVEALED FROM PARAGRAPH 4 OF THE ASSESSMENT ORDER THAT THE ONLY REASON FOR APPLYING ACCOUNTING STANDARD AS-7 AND IGNORING THE ASSESSEES BOOK RESULTS WAS THAT THE PROJECT COMPLETION METHOD THAT HE HAS APPLIED RESULTS IN DEFERMENT OF TAX LIABILITY AND IS CONTRARY TO THE SETTLED PRINCIPLE OF TAXATION I.E. TAX IS TO BE CHARGED AT THE FIRST POINT. AS WE HAVE ALREADY NOTICED IN PARAGRAPH 5.1 ABOVE ANALYZING THE PROVISION OF SECTION 145 OF THE ACT THAT THE AO CAN REJECT THE BOOKS OF ACCOUNT AND PROCEED TO MAKE ASSESSMENT UNDER SECTION 144 OF THE ACT ONLY IF HE IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF ACCOUNTS OF THE ASSESSEE OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUNTING STANDARD AS NOTIFIED IN SUB-SECTION (2) HAD NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, CONSEQUENTLY WE ARE OF THE OPINION THAT THE AO HAS NO POWER EITHER TO REJECT THE BOOKS OF ACCOUNT OR TO PROCEED TO MAKE AN ASSESSMENT AS PROVIDED IN SECTION 144 ON ANY OTHER GROUND EXCEPT AS PROVIDED IN SUB-SECTION (3) OF SECTION 145 OF THE ACT. COMING TO THE PRESENT CASE, WE HAVE NOT FOUND EVEN A WHISPER IN ANY PART OF THE ASSESSMENT ORDER 14 WHICH MAY SHOW THAT THE AO WAS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF ACCOUNTS OR THERE HAS BEEN VIOLATION OF THE REQUIREMENT OF PROVISIONS OF SUB- SECTION (1)OR SUB-SECTION (2) OF SECTION 145 OF THE ACT. IT IS BECAUSE, AS WAS ADMITTED BY THE LD. D.R. ALSO, BY THE TIME THE ASSESSEE FURNISHED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06, THE CENTRAL GOVERNMENT HAD NOT NOTIFIED, AS REQUIRED UNDER SUBSECTION (2) OF SECTION 145 ANY OF THE ACCOUNTING STANDARDS NAMED AS AS-7 OR AS-9, MEANING THEREBY THAT THERE WAS NO VIOLATION ON THE PART OF THE ASSESSEE AS ENUMERATED IN SUB-SECTION (2)OF SECTION 145 OF THE ACT. FROM THE FACTS OF THE ASSESSEES CASE, THEREFORE, IT IS EVIDENT THAT THE ASSESSEE HAS NOT VIOLATED EITHER THE PROVISIONS OF SUB-SECTION (1) OR SUB- SECTION (2)OF SECTION 145 OF THE ACT AND THEREFORE, IT WAS ONLY SUB-SECTION (3) WHICH COULD, AT BEST, HELP THE REVENUE. BUT HERE AGAIN, THERE IS NO FINDING OF THE AO THAT THE ASSESSEES ACCOUNTS WERE EITHER INCORRECT OR INCOMPLETE. THE ONLY PRESUMPTION OR GROUND TAKEN BY THE AO FOR INVOKING ACCOUNTING STANDARD AS-7, AS WE HAVE ALREADY POINTED OUT ABOVE, IN PARAGRAPH 4 OF THE ASSESSMENT ORDER IS THAT THE PROJECT COMPLETION METHOD ADOPTED BY THE ASSESSEE RESULTS IN DEFERMENT OF TAX LIABILITY AND IS CONTRARY TO SETTLED PRINCIPLES OF LAW I.E. TAX IS TO BE CHARGED AT THE FIRST POINT. IN OUR OPINION, BOTH THESE GROUNDS RELIED UPON BY THE AO WERE IRRELEVANT SO FAR AS THE PROVISIONS OF SECTION 145 WERE CONCERNED. NEITHER THE DEFERMENT OF TAX LIABILITY NOR THE PRINCIPLE THAT THE TAX IS TO BE CHARGED AT THE FIRST POINT COULD BE A BASIS FOR INVOKING THE PROVISIONS OF SUB-SECTION (3) OF SECTION 145 OF THE ACT, BECAUSE PROVISIONS OF SECTION 145(3) DO NOT SPEAK SO. CONSEQUENTLY, WE ARE OF THE OPINION THAT THE ASSESSEE, WHO ADMITTEDLY WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING REGULARLY AND WAS MAINTAINING THE ACCOUNTS BY FOLLOWING PROJECT COMPLETION METHOD, WHICH AS PER THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. 15 KISHORE BANDHU (P.) LTD., 2008 (11) MTC 22 WAS A RECOGNIZED METHOD OF ACCOUNTING, HAD NOT CONTRAVENED ANY OF THE PROVISIONS OF SECTION 145 OF THE ACT. 5.3 COMING TO THE ORDER OF THE LD.CIT(A), IT IS OBSERVED THAT THE LD. CIT(A) HAS DECIDED THE ISSUE IN THE ASSESSEES FAVOUR BY OBSERVING AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER, SUBMISSIONS MADE BY THE APPELLANT AND THE CASE LAWS CITED BY THE AO AND THE APPELLANT. IN THE CASE OF CIT -II V KISHORE (P) LTD. REPORTED IN 2008 (11) MTC 22, HON'BLE ALLAHABAD HIGH COURT HELD THAT PROJECT COMPLETION METHOD FOLLOWED BY THE APPELLANT IS A RECOGNIZED METHOD OF ACCOUNTING AND ALSO ACCEPTED BY THE DEPARTMENT IN THE PAST AND NO DEFECT IN ACCOUNTS WAS POINTED OUT, THE BOOK RESULTS CAN NOT BE REJECTED. THE HEAD NOTE OF THIS JUDGEMENT IS GIVEN BELOW: INCOME-TAX ACT, 196I-SECTION 145-ASSESSEE MAINTAINING HIS ACCOUNTS ON PROJECT COMPLETION METHOD-METHOD A RECOGNIZED METHOD-NO DEFECTS IN ACCOUNTS-BOOKS RESULTS COULD NOT BE REJECTED' RESPECTFULLY FOLLOWING THIS JUDGEMENT OF HON'BLE ALLAHABAD HIGH COURT AND OTHER JUDGEMENTS CITED BY THE APPELLANT, IT IS OBSERVED THAT BOOK RESULTS WERE WRONGLY REJECTED BY THE AO WITHOUT INVOKING THE PROVISIONS OF SECTION 145 AND WITHOUT REJECTING THE BOOKS OF A/C OF THE APPELLANT WHEN THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT HAS BEEN REGULARLY AND CONSISTENTLY FOLLOWING AND NO DEFECT IN THE ACCOUNTS WAS POINTED OUT BY THE AO. THE BASIS, ON WHICH BOOK RESULTS HAVE BEEN REJECTED BY THE AO AS GIVEN IN PARA 5 OF THE ASSESSMENT ORDER, CONTAINS INACCURACIES AS POINTED OUT BY THE 16 APPELLANT. THE CASE LAWS RELIED UPON BY THE AO DO NOT APPLY TO THE APPELLANT'S CASE. 5.1 THE JUDGEMENT OF HON'BLE ALLAHBAD HIGH COURT IN THE CASE OF CIT- II VS. KISHORE BANDHU (P) LTD. REPORTED IN 2008 (11) MTC 22, THE HEAD NOTE OF WHICH HAS BEEN REPRODUCED ABOVE AND OTHER CASE LAWS CITED BY THE APPELLANT, THE PROJECT COMPLETION METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT IS A RECOGNIZED METHOD OF ACCOUNTING AND THE BOOK RESULTS OF THE APPELLANT CAN NOT BE REJECTED ON THE BASIS THAT THE APPELLANT HAS ADOPTED THIS METHOD OF ACCOUNTING AND NOT ANY OTHER METHOD OF ACCOUNTING. ON THE BASIS OF THE REASONS GIVEN ABOVE, THE ADDITION MADE BY THE AO IS DELETED. (RELIEF OF RS.- 1,18,63,346/-) 6. IN VIEW OF THE AFORESAID DISCUSSION, FACTS AND CIRCUMSTANCES OF THE CASE AND VARIOUS DECISIONS RELIED UPON BY THE ASSESSEE BEFORE THE LD.CIT(A) AS WELL AS BEFORE US AND REFERRED TO IN THE ORDER OF THE LD.CIT(A) ALSO, WE ARE OF THE OPINION THAT THE CENTRAL GOVERNMENT HAVING NOT NOTIFIED THE ACCOUNTING SYSTEMS AS-7 OR AS-9, AS IS MANDATORY UNDER SUB-SECTION (2) OF SECTION 145, THE ASSESSEE WAS JUSTIFIED IN FOLLOWING PROJECT COMPLETION METHOD. CONSEQUENTLY DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS POINT, WHICH IS CONFIRMED. 10. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS WELL AS PRECEDENTS, WE ARE OF THE OPINION THAT THERE IS NO MERIT IN THE SUBMISSIONS MADE ON BEHALF OF THE REVENUE. ON THE OTHER HAND, THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE CASES DECIDED BY THE I.T.A.T.,A-BENCH, LUCKNOW (SUPRA). WE, THEREFORE, FOLLOWING THE AFORESAID DECISIONS OF THE TRIBUNAL IN THE CASE OF SHRI HARI OM BUILDERS, 17 LUCKNOW AND M/S. DASHMESH CONSTRUCTIONS P. LTD., LUCKNOW (SUPRA), ALLOW THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL. 6.1 SINCE THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE AFORESAID REFERRED TO CASE OF M/S NUR BUILDERS, LUCKNOW VS. I.T.O., RANGE-II(2), LUCKNOW IN I.T.A. NO.33/LUC/10 FOR THE ASSESSMENT YEAR 2005-2006, SO RESPECTFULLY FOLLOWING THE SAID ORDER DATED 24/02/2010, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LEARNED CIT(A). ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 7. IN THE RESULT, THE APPEAL IS DISMISSED. (THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26/08/2011) SD/. SD/. ( H. L. KARWA ) (N. K. SAINI) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 26/08/2011 *SINGH 16/2508 COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR