DCIT, Circle-5(1), Hyderabad V. SVR Constructions, Hyderabad

ITA 324/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66193 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 04-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Opportunity of being heard; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 324/HYD/2011 ASSESSMENT YEAR: 2007-08 THE DY. COMMISSIONER OF INCOME-TAX, APPEL LANT CIRCLE 5(1), HYDERABAD VS. M/S SVR CONSTRUCTIONS, RESPONDENT 5-9-12/1, SAMRAT COMPLEX, SAIFABAD, HYDERABAD. (PAN AAQFS3181C) APPELLANT BY : SHRI V. SRINIVAS RESPONDENT BY : P. MURALI MOHAN RAO DATE OF HEARING : 11/07/2012 DATE OF PRONOUNCEMENT : 31/08/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A)-V, HYDERABAD DT. 23/12/2010 FOR THE ASSES SMENT YEAR 2007-08. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FIRM IS ENGAGED IN THE BUSINESS OF CONSTRUCTION WORK. DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE FIRM FILED ITS RE TURN OF INCOME ON 30/11/2007 DECLARING TOTAL INCOME OF RS. 69,15,5 30/-, WHICH WAS PROCESSED U/S 143(3) OF THE ACT, DETERMINING TH E TOTAL INCOME OF THE ASSESSEE FIRM AT RS. 2,77,53,940/- BY TREATING THE ADVANCE OF RS. 2,08,38,412/- AS INCOME. THE REASONS FOR MAKING ITA NO. 324/HYD/11 SVR CONSTRUCTIONS 2 THE SAID DISALLOWANCE ON ACCOUNT OF ADVANCE RECEIVE D BY THE ASSESSEE NOTED BY THE AO WERE THAT DURING THE FY RE LEVANT TO AY 2007-08, THE ASSESSEE HAD RECEIVED THE FOLLOWING CO NTRACT RECEIPTS FOR WHICH THE WORK WAS DONE BY THE ASSESSE E DIRECTLY: I) FROM IVRCL INFRASTRUCTURES AND PROJECTS LTD. RS. 26,84,87,450/- II) FROM SC CORPORATION RS. 83,79,376/- TOTAL RS. 27,68,66,826/- THE AO FURTHER NOTED THAT THE ABOVE RECEIPTS WERE SUPPORTED BY TDS CERTIFICATES IN FORM NO. 16A. AGAINST THE AB OVE RECEIPTS, THE ASSESSEE HAD DISCLOSED ONLY RS. 25,60,28,414/-. ON BEING ASKED BY THE AO TO THE ASSESSEE TO EXPLAIN THE DIFF ERENCE OF RS. 2,08,38,412/-, THE ASSESSEE HAD STATED THAT THE DIF FERENCE AMOUNT WAS RECEIVED FROM IVRCL AS ADVANCE AND SHOWN IN CURRENT LIABILITIES IN THE BALANCE SHEET AND ARGUED THAT THE AMOUNT IS NOT TAXABLE DURING THE YEAR VIDE ITS LETT ER DATED 29/12/2009. THE AO WAS OF THE VIEW THAT THE ASSESSE ES CONTENTION COULD NOT BE ACCEPTED SINCE THE ADVANCE IS ALSO A RECEIPT AND THE ASSESSEE IS SUPPOSED TO DISCLOSE AS PART OF ITS TOTAL RECEIPTS AND PAY TAXES ON THAT AMOUNT. THE AO DID NOT ACCEPT THE ASSESSEES EXPLANATION THAT IT IS AN ADV ANCE AND IT IS NOT TAXABLE. THE AO OBSERVED THAT IF THE ASSESSEE H AD RECEIVED THE AMOUNT AS DEPOSIT FROM ITS SUBCONTRACTORS, WHIC H NEEDS TO BE REFUNDED IN FUTURE OR ADJUSTED IN FUTURE BILLS, THE ASSESSEES EXPLANATION FOR SHOWING IT AS LIABILITY IN BALANCE SHEET COULD HAVE BEEN ACCOMMODATED. THE AO FURTHER OBSERVED THAT SIN CE IT IS NOT A DEPOSIT AND IT IS AN ADVANCE FOR RENDERING WORK, THE DIFFERENCE OF AMOUNT OF RS. 2,08,38,412/- IS TO BE TAXED DURIN G THE YEAR. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). ITA NO. 324/HYD/11 SVR CONSTRUCTIONS 3 4. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED ADDITI ONAL EVIDENCE IN THE FORM OF COPIES OF INCOME TAX RETURN S FOR THE AYS 2009-10, 2008-09, 2007-08, 2006-07, SUB-CONTRACT AG REEMENTS BETWEEN IVRCL AND THE ASSESSEE AND THE ORDERS OF DI STRICT COLLECTORS AND AP STATE HOUSING CORPORATION REGARDI NG GIVING OF VARIOUS CONTRACTS. THE CIT(A) SENT THE ADDITIONAL EVIDENCE AND THE WRITTEN SUBMISSIONS OF THE ASSESSEE TO THE AO F OR HIS COMMENTS WHICH WAS RECEIVED ON 26/10/2010. THE ASS ESSEE ALSO FILED COUNTER COMMENTS ON THE SAME. THE IMPORTANT PORTIONS OF THE ARGUMENT OF THE ASSESSEE EXTRACTED BY THE CIT(A ) IN HIS ORDER AT PAGES 3 & 4 ARE REPRODUCED BELOW:- I IT IS SUBMITTED THAT THE ASSESSEE FIRM HAD RENDERED WORKS AS SUBCONTRACTOR OF IVRCL INFRASTRUCTURE PRO JECTS PVT LTD AND THE AMOUNT OF 2.08 CRORES WAS ADJUSTED AGAINST SUBSEQUENT BILLS RENDERED BY THE FIRM AFTE R RENDITION WORK AND THE FACT HAT THE ABOVE MENTIONE D AMOUNT REPRESENTED ADVANCE WAS DISCLOSED BY THE FI RM IN THE BALANCE SHEET AND ALSO IN THE NOTES FORMING PA RT OF THE ACCOUNTS. THE ADVANCE STATED ABOVE WAS ADJUSTE D IN THE SUBSEQUENT YEARS, WHEN THE BILLS WERE RENDERED ON RENDITION OF WORKS. IT IS SUBMITTED THAT FIRM MAINTAINS BOOKS OF ACCOU NT ON MERCANTILE SYSTEM AND FACT IS EVIDENCE FROM THE RE CORDS. THE ASSESSING AUTHORITY WITHOUT CONSIDERING ANY OF THE ARGUMENTS AND EVIDENCES FILED ON RECORD, THE ENTIR E ADVANCE OF RS. 2.08 CRORES WAS ASSESSED AS INCOME AND TAX WAS LEVIED. THE ASSESSEE HAS REFLECTED THE AMOUNT OF RS. 4,94, 13,189/- TOWARDS THE SALES REVENUE FOR THE FINANCIAL YEAR 2 008-09 RELEVANT TO THE ASSESSMENT YEAR 2009-10 AND THE RE TURN OF INCOME OF RS. 4,94,13,189/- INCLUDES THE ADVANCE AMOUNT OF RS. 2,08,38,412/-WHICH WAS RECEIVED BY THE ASSE SSEE DURING THE PREVIOUS YEAR 2006-07. WE SUBMIT THAT T HE WORK HAS NOT BEEN COMPLETED AND WAS UNDER PROGRESS ACCO UNT ONLY AND HENCE THE SAME COULD NOT BE OFFERED TO TA X DURING THE YEAR. II. THE ASSESSEE HAS SUBMITTED A PAPER BOOK CONTAIN ING THE SERIAL PAGE NO. 1 TO 60 WHEREIN THE BALANCE SH EET AND PROFIT AND LOSS ACCOUNT FOR ASSTT. YEARS 2007-08, 2 008-09 AND 2009-10 HAVE BEEN ENCLOSED WHEREIN THE SALES H AVE BEEN SHOWN FOR THE RESPECTIVE FINANCIAL YEARS AS FO LLOWS: ITA NO. 324/HYD/11 SVR CONSTRUCTIONS 4 1) 2006-07 - RS. 13,38,93,380/- 2) 2007-08 - RS. 34,72,800/- 3) 2008-09 - RS. 4,94,13,189/- WHEREAS FOR THE ABOVE YEARS ADVANCES HAVE BEEN RED UCED AS FOLLOWS: 1) 2006-07 - RS. 2,08,38,412/- 2) 2007-08 - RS. 2,34,28,226/- 3) 2008-09 - RS. 67,53,730/- WHILE FURNISHING REPLY TO THE REMAND REPORT, THE A SSESSEE HAS SUBMITTED THE FOLLOWING FACTS WHICH MAY PLEASE BE CONSIDERED IN FAVOUR OF THE ASSESSEE. III. WE WOULD LIKE TO SUBMIT THAT, THE ASSESSEE FI RM HAD RENDERED WORKS AS SUBCONTRACTOR OF IVRCL INFRASTRU CTURE PROJECTS PVT LTD. THE AMOUNT OF RS.2.08 CRORES WAS ADJUSTED AGAINST SUBSEQUENT BILLS RENDERED BY THE FIRM AFTE R RENDITION WORK. THIS FACT THAT THE ABOVE MENTIONED AMOUNT REPRESENTED ADVANCE HAS BEEN DISCLOSED BY THE FIRM IN THE BALANCE SHEET AND ALSO IN THE NOTES FORMING PART O F THE ACCOUNTS. THE ADVANCE STATED ABOVE WAS ADJUSTED IN THE SUBSEQUENT YEARS, WHEN THE BILLS WERE RENDERED ON RENDITION OF WORKS. IV. WE SUBMIT THAT THE ASSESSEE FIRM MAINTAINS BOOK S OF ACCOUNT ON MERCANTILE SYSTEM AND THE FACT IS EVIDE NT FROM THE RECORDS. THE AO, WITHOUT CONSIDERING THE EVIDE NCES FILED ON RECORD, ASSESSED THE ENTIRE ADVANCE OF RS. 2.08 CRORES AS INCOME AND LEVIED TAX ON THE SAME WHICH IS NOT COR RECT. THE ASSESSEE HAS REFLECTED THE AMOUNT OF RS. 4,94, 13,189/- TOWARDS THE SALES REVENUE IN THE AY 2009-10 AND TH E RETURN OF INCOME HAS ALSO BEEN FILED BY THE ASSESSEE. THI S AMOUNT INCLUDES THE ADVANCE AMOUNT OF RS. 2,08,38,412/- W HICH WAS RECEIVED BY THE ASSESSEE DURING THE PREVIOUS YEAR 2006-07. WE SUBMIT THAT THE WORK HAS NOT BEEN COMPLETED AND WAS UNDER PROGRESS ACCOUNT ONLY AND HENCE THE SAME COU LD NOT BE OFFERED TO TAX DURING THE YEAR. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AS WELL AS REMAND REPORT OBTAINED FROM THE AO, THE CIT(A) HELD THAT ASSESSEE HAD RECEIVED ADVANCES FOR MOBILIZATION FRO M IVRCL. THESE HAVE BEEN PROPERLY ACCOUNTED FOR IN THE BALA NCE SHEET AS ADVANCES RECEIVED AND HAVE BEEN TAKEN TO THE PROFI T & LOSS ACCOUNT IN THE CORRESPONDING YEARS. THE CIT(A) FUR THER HELD THAT ITA NO. 324/HYD/11 SVR CONSTRUCTIONS 5 THE AO HAS NOT FOUND THAT THE REVENUE PERTAINING T O THE CURRENT YEAR WAS WRONGLY TAKEN TO THE NEXT YEAR AND THE AO HAS MERELY SAID THAT AN ADVANCE IS ALSO RECEIPT AND SH OULD BE SHOWN AS INCOME. THE CIT(A) HELD THAT ADVANCES RECEIVED DIRECTLY GO TO THE BALANCE SHEET AND ARE NOT REGARDED AS INCOME A ND THE AO HAS NOT ESTABLISHED THAT THE ADVANCES RECEIVED ACT UALLY PERTAIN TO SALES OF THE CURRENT YEAR. THE CIT(A) POINTED OU T THAT IN FACT, THE AO ADMITTED THAT THE AMOUNT IN QUESTION IS AN A DVANCE. THE CIT(A) HELD THAT THE AMOUNT IN QUESTION IS AN ADVAN CE AND HAS BEEN TAKEN TO THE PROFIT & LOSS ACCOUNT AS RECEIPT IN THE NEXT YEAR AND THERE IS NO JUSTIFICATION IN TAXING IT IN THE CURRENT YEAR ALSO. ACCORDINGLY, THE ADDITION ON ACCOUNT WAS DELE TED BY THE CIT(A). 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US RA ISING THE FOLLOWING GROUNDS OF APPEAL:- 1.THE LEARNED CIT(A) ERRED IN FACTS AND IN LAW IN I GNORING THE PROFIT & LOSS ACCOUNT (VIDE ANNEXE 1) WHICH EVIDENCE THAT WHILE THERE WAS OPENING WORK-IN-PROGRESS OF R S. 32,25,000/- AS ON 01/04/2006, THERE WAS NO CLOSING WORK- IN-PROGRESS AS ON 31/03/2007 WHICH FACT LEADS TO T HE INFERENCE THAT COMMENSURATE WORKS WERE EXECUTED BY THE ASSESSEE TO ENTIRE EXTENT OF RECEIPTS DURING FINAN CIAL YEAR UNDER CONSIDERATION AND HENCE THE AMOUNT OF RS. 2,08,38,412/- COULD NOT BE AN ADVANCE. 2. THE LEARNED CIT(A) ERRED IN FACTS AND IN LAW IN IGNORING THE TDS CERTIFICATE (VIDE ANNEX-2) ISSUED BY IVRCL INFRASTRUCTURE & PROJECTS LTD. GOING BY THE FIGURE S STATED IN IT, IT DOES NOT CONTAIN ANY FIGURE OF ADVANCE AMOU NT. 3.THE LEARNED CIT(A) ERRED IN FACTS AND IN LAW IN IGNORING THE FACT THAT THE ASSESSEE HAD CLAIMED THE BENEFIT OF THE ENTIRE TDS AMOUNT OF RS. 30,12,428/-. IT WAS INCUM BENT UPON TO ASSESSEE TO OFFER ENTIRE CORRESPONDING REC EIPTS OF RS. 26,84,87,450/- TO TAX AS HELD BY HONBLE ITAT, A BENCH IN THE CASE OF BSC-RBM-PATI JOINT VENTURE VS . CIT(ASSTS), SR-3 IN ITA NO. 513/HYD/2011 DATED 22/12/2002. ITA NO. 324/HYD/11 SVR CONSTRUCTIONS 6 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW. THE ASSESSEE RECEIVED AN AMOUNT OF RS. 27,68,66,826/- TOWARDS CONTRACT RECEIPTS WHEREAS HE HAD DISCLOSED ONLY RS. 25,60,28414/-. THE AO WAS OF THE VIEW THAT SINCE THE SAID AMOUNT IS NOT A DEPOSIT AND IT IS AN ADVANCE FOR RENDERING WORK, THE DIFFERENCE AMOUNT OF RS. 2,08,3 8,412/- IS TO BE TAXED DURING THE YEAR AND, ACCORDINGLY, THE SAME WAS BROUGHT TO TAX. THE CIT(A) DELETED THE ADDITION MADE BY THE AO BY HOLDING THAT THE AMOUNT IN QUESTION IS AN ADVANCE A ND HAS BEEN TAKEN TO THE PROFIT & LOSS ACCOUNT AS RECEIPT IN TH E NEXT YEAR AND, THEREFORE, THERE IS NO JUSTIFICATION IN TAXING IT I N THE CURRENT YEAR ALSO. IN THIS CASE, NEITHER THE CIT(A) NOR THE AO E XAMINED AS TO HOW THIS AMOUNT WAS SHOWN IN THE BOOKS OF M/S IVRCL . THE ASSESSEE ALSO COULD NOT EXPLAIN HOW THE IMPUGNED AM OUNT WAS SUBJECT TO TDS. IN VIEW OF OUR OPINION, THIS ISSUE REQUIRES EXAMINATION FROM THE SIDE OF THE AO AND, ACCORDINGL Y, WE REMIT THIS ISSUE BACK TO THE FILE OF THE AO FOR VERIFICAT ION/EXAMINATION AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 31/08/ 2012. KV ITA NO. 324/HYD/11 SVR CONSTRUCTIONS 7 COPY TO:- 1) THE DCIT, CIRCLE 5(1), 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2) M/S SVR CONSTRUCTIONS, 5-9-12/1, SAMRAT COMPLEX, SAIFABAD, HYDERABAD. 3) THE CIT (A)-V, HYDERABAD 4) THE CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D.