ACIT, UDAIPUR V. M/s. Khurana Construction, UDAIPUR

ITA 36/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78185 (ITAT-JODHPUR)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-04-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 36/JODH/2014 (A.Y. 2010-11) THE A.C.I.T VS. M/S KHURANA CONSTRUCTION C O. CIRLCE - 1 38-B, SHAKTI NAGAR UDAIPUR UDAIPUR PAN NO. AABFK 6710 G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEVENDRA MEHTA SHRI NEERAJ BHANDARI DEPARTMENT BY : SHRI N.A. JOSHI, DR. DATE OF HEARING : 24.04.2014 DATE OF PRONOUNCEMENT : 13.05.2014 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL HAS BEEN FILED BY THE REVENUE FOR A.Y 2010-11 AGAINST THE ORDER OF THE CIT(A), UDAIPUR, D ATED 28.10.2013. 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF CIVIL-CONSTRUCTION. F OR A.Y. 2010-11 IT FILED ITS RETURN OF INCOME (ROI) ON 11.10.2010 DECL ARING TOTAL INCOME OF RS. 1,22,04,240/-. ASSESSMENT WAS MADE U/ S 143(3) OF INCOME-TAX ACT, 1961 ['THE ACT', FOR SHORT] ON 18.2 .2013 AT A TOTAL INCOME OF RS. 1,96,64,435/-. IN COMING TO THE ABOV E TAXABLE INCOME, THE A.O. HAS ADDED A SUM OF RS. 1,04,92,784 /- ON ACCOUNT OF RETENTION MONEY AND SECURITY DEPOSITS. FURTHER ADDITION OF RS. 1,17,653/- HAS BEEN MADE ON ACCOUNT OF INTEREST ON TDS. IN THIS CASE, WE ARE CONCERNED WITH THE FIRST ADDITION MADE ON ACCOUNT OF RETENTION MONEY AND SECURITY DEPOSITS. ON VERIFICA TION OF THE RECORDS, IT WAS NOTICED BY THE A.O. THAT THE ASSESS EE FIRM HAS SHOWN GROSS CONTRACT RECEIPTS OF RS. 21,15,08,258/- AND H AS NOT DECLARED RETENTION MONEY AND SECURITY DEPOSITS OF TRANSPORT SUBSIDY 1,04,92,784/-. ON BEING ASKED TO EXPLAIN THE ANOMA LY, IT WAS SUBMITTED VIDE LETTER DATED 8.2.2013 THAT THE ASSES SEE IS A CIVIL CONTRACTOR AND ON THE BASIS OF ACCOUNTING POLICY FO LLOWED BY IT, SINCE ITS INCEPTION, THE RETENTION MONEY IS OFFERED FOR TAX AS AND WHEN IT IS RECEIVED OR AS AND WHEN RIGHT TO RECEIV E THE SAID AMOUNT IS OBTAINED. BECAUSE OF THE TERMS AND CONDI TIONS OF THE 3 CONTRACTS, THE AMOUNTS DO NOT ACCRUE TO THE ASSESSE E TILL THE TIME THE DEFECT LIABILITY PERIOD IS OVER OR ANY OTHER CO NDITION AS SPECIFIED IN THE CONTRACT IS COMPLETE. IT WAS EXPLAINED THAT THE ACCOUNTING SYSTEM ADOPTED BY THE ASSESSEE IS IN ACCORDANCE WIT H THE GENERALLY FOLLOWED ACCOUNTING PRACTICES. IN THIS REGARD, REL IANCE WAS PLACED ON VARIOUS DECISIONS WHICH ARE MENTIONED IN THE ASS ESSMENT ORDER FROM PAGES 2 TO 5. HOWEVER, THE A.O. WAS NOT AGREE ABLE AND AFTER MAKING LENGTHY DISCUSSION AT PAGES 5 TO 9 OF HIS OR DER, HAS ADDED THE ENTIRE RETENTION MONEY AND SECURITY DEPOSITS TO TALING RS. 1,04,92,784/- TO ASSESSEES TOTAL INCOME OF THE YEA R. FOR ARRIVING AT THE ABOVE CONCLUSION, THE A.O. HAS MENTIONED THA T THE ASSESSEE HAS NOT SHOWN THE AMOUNT OF RETENTION MONEY AND SEC URITY DEPOSITS IN ITS BALANCE SHEET AND HAS BEEN KEPT IN A SEPARAT E REGISTER. THE A.O. HAS ALSO OBSERVED THAT MERCANTILE SYSTEM OF AC COUNTING DOES NOT JUSTIFY THE TREATMENT GIVEN BY THE ASSESSEE TO RETENTION MONEY AND SECURITY DEPOSITS WHICH IN A SENSE AMOUNT FOLLO WING A HIGH BREED SYSTEM OF ACCOUNT. HE HAS EMPHATICALLY OBSER VED THAT ONCE CONTRACT WORK IS OVER AND THE ENTIRE AMOUNT BECOMES DUE TO THE FIRM, THE AMOUNT RETAINED BY THE CONTRACT AWARDER IS REFUNDABLE TO THE ASSESSEE. IN SUPPORT OF THIS CONCLUSION, HE HA S ALSO MENTIONED 4 THAT THE ASSESSEE-FIRM HAS NOT PRODUCED ANY DOCUMEN TARY EVIDENCE TO SUPPORT THE VERSION THAT THE RETENTION MONEY HAS NOT BECOME RECEIVABLE TO IT. HE HAS MENTIONED THAT THE ASSESS EE FIRM HAS NOT EVEN PRODUCED A COPY OF THE CONTRACTS TO PROVE THAT THE AMOUNT OF RETENTION MONEY HAS NOT BECOME RECEIVABLE. BEING AGGRIEVED FROM THE ABOVE FINDING OF THE A.O, THE ASSESSEE PREFERRE D APPEAL AND THE LD. CIT(A) HAS DELETED THIS ENTIRE AMOUNT BY FOLLOW ING THE TRIBUNAL ORDER RENDERED IN ASSESSEES OWN CASE IN ITA NO. 25 /JU/2013 ORDER DATED 7.3.2013. HE HAS OBSERVED THAT THE FACTS IN A.Y. 2009-10 AND 2010-11 REMAIN SAME AND THERE BEING NO DIFFERENCE I N FACTS, THE JURISDICTIONAL APPELLATE TRIBUNALS ORDER FOR THE I MMEDIATELY PAST YEAR HAS A BINDING FORCE AND THEREFORE, BY RESPECTF ULLY FOLLOWING THE SAME, HE HAS HELD THAT THE AMOUNT OF RETENTION MONE Y AND SECURITY DEPOSITS HAVE TO BE DELETED. NOW THE REVENUE IS AG GRIEVED AND HAS FILED THIS APPEAL BY RAISING THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF T HE CASE, THE ID. CIT(A) HAS ERRED IN 1. DELETING THE ADDITION OF RS. 1,04,92,784/- MADE BY AO BY RELYING UPON THE ITAT ORDER DATED 07.03.2013 IN ITA NO. 25/JU/2013 FOR THE A.Y. 2009-10 IGNORING TH E 5 FACT THAT ONCE THE HON'BLE ITAT IN A.Y. 2009-10 HAS HELD THAT THE AMOUNT RETAINED BY WAY OF RETENTION MONE Y/ SECURITY DEPOSIT HAS ACCRUED DURING THE YEAR, WHOLE AMOUNT NEED TO BE ADDED INSTEAD OF ONLY REDUCED AMOUNT BY APPLYING THE GP RATE BECAUSE IT IS NOT CA SE OF THE ASSESSEE THAT SOME SEPARATE EXPENDITURE HAS BEE N INCURRED (WHICH IS NOT CLAIMED IN THE BOOKS) IN REL ATION TO THE RETENTION MONEY AND THEREBY THE FINAL FINDIN G OF THE HON'BLE ITAT IN A.Y. 2009-10 IS NOT ACCEPTABLE. 2. WITHOUT PREJUDICE TO ABOVE WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE ID. CIT(A) IS JUSTIFIED IN DELETING THE ENTIRE ADDITION BY RELYING UPON HON'BLE ITAT ORDER IN A.Y. 2009-10 DES PITE THE FACT THAT THE HON'BLE ITAT IN A.Y. 2009-10 HAS ITSELF HELD RETENTION MONEY BEING ACCRUED DURING THE YEAR AND GP RATE TO BE APPLIED ON RETENTION MONEY AND THEREB Y THEE FINAL FINDING OF DELETION OF ENTIRE ADDITION I NSTEAD OF SUSTAINING PART ADDITION IN A.Y. 2009-10, IS CONTRADICTORY TO THE FACTS AND FINDING GIVEN IN EAR LIER PARA OF THE ORDER OF A.Y. 2009-10 OF ITAT. 3. WITHOUT PREJUDICE TO THE ABOVE, THE DECISION OF HON'BLE ITAT IN ITA NO. 25/JU/2013 DATED 07.03.2013 RELIED UPON BY THE ID. CIT (A), HAS BEEN CHALLENGE D BEFORE THE HON'BLE HIGH COURT. 6 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. BOTH THE PA RTIES HAVE REITERATED THE SAME ARGUMENTS WHICH WERE TAKEN BEFO RE THE LD. CIT(A). THE LD. A.R. HAS PRODUCED COPY OF THE APPE LLATE TRIBUNAL ORDER DATED 7.3.2013 PASSED FOR A.Y. 2009-10. WE H AVE CAREFULLY TREADED THROUGH THE TRIBUNAL ORDER AND HAVE FOUND T HAT WHILE DECIDING THE ISSUE OF RETENTION MONEY AND SECURITY DEPOSITS, THE TRIBUNAL HAS TAKEN THE FOLLOWING DECISION WHICH IS AVAILABLE IN PARA 8 OF THE TRIBUNAL ORDER 7.3.2013. WE REPRODUCE THE SAME FOR READY REFERENCE AS BELOW: 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE CONSIDERED OPINION THAT UNDER IDENTICAL FACTS A ND THE CIRCUMSTANCES OF THE CASE WE HAVE RECENTLY TAKE N A VIEW WHILE DECIDING THE CASE OF AMRIT LAL KHATRI & ORS. IN ITA NO. 19/JU/2013 & OR. ORDER DATED 25.02.2013. THE FACTS OF THIS CASE, IN PRINCIPLE, ARE EXACTLY I DENTICAL TO THE FACTS OF THE CASE IN AMRIT LAL KHATRI [SUPRA ]. IN THAT CASE WE HAVE HELD AS UNDER :- WE HAVE CIRCUMSPECTED THE RECORD AVAILABLE BEFORE U S. WE HAVE ALSO GONE THROUGH THE ENTIRE PRECEDENTS REL IED BEFORE US AND WE HAVE GONE THROUGH THE RELEVANT 7 PROVISIONS OF THE ACT. IN SO FAR AS THE FACTS OF T HE CASE ARE CONCERNED, THERE IS NOT MUCH DISPUTE BETWEEN TH E PARTIES. THE ASSESSEE IS A CIVIL CONTRACTOR WHO OB TAINED CONTRACT FROM THE GOVERNMENT DEPARTMENT. CONTRACTS ENTERED INTO BETWEEN THE CIVIL CONTRACTOR AND GOVERNMENT DEPARTMENTS ARE STANDARD AGREEMENTS. A COPY OF ONE OF THE AGREEMENTS IS FOUND ENCLOSED IN THE RECORDS. THE RELEVANT TERMS OF THE CONTRACT WITH REFERENCE TO PERFORMANCE GUARANTEE IS CONTAINED IN CLAUSE 43.4, WHICH READS AS UNDER: 43.4 THE PERFORMANCE SECURITY EQUAL TO THE FIVE PERCENT OF THE CONTRACT PRICE AND ADDITIONAL PERFORMANCE SECURITY FOR ROUTINE MAINTENANCE AS DETAILED IN CLAUSE 51 OF THE CONDITIONS OF CONTRACT IS REPAID TO THE CONTRACTOR WHEN THE PERIOD OF FIVE YE ARS FIXED FOR ROUTINE MAINTENANCE IS OVER AND THE ENGIN EER HAS CERTIFIED THAT THE CONTRACTOR HAS SATISFACTORIL Y CARRIED OUT THE ROUTING MAINTENANCE OF THE WORKS. IF THE ROUTINE MAINTENANCE PART OF THE CONTRACT IS NOT CARRIED OUT BY THE CONTRACTOR AS PER THIS CONTRACT, THE EMPLOYER WILL BE FREE TO CARRY OUT ROUTINE MAINTENA NCE WORK AND THE AMOUNT REQUIRED FOR THIS WORK WILL BE RECOVERED FROM THE AMOUNT OF PERFORMANCE SECURITY 8 AVAILABLE WITH THE EMPLOYER AND/OR FROM ANY AMOUNTS OF THE CONTRACTOR WHATEVER IS DUE. 9. THERE IS NO DISPUTE BETWEEN THE PARTIES REGARDIN G THIS FACT AS WELL. ACCORDING TO THE DEPARTMENT, TH IS IS A RETENTION MONEY AND NOT PERFORMANCE SECURITY AS H AS BEEN PLEADED. BUT AS PER THIS AGREEMENT, IT IS EVI DENT THAT THIS IS A PERFORMANCE SECURITY. IT IS IMMAT ERIAL AS TO WHAT NOMENCLATURES IS GIVEN TO THIS AMOUNT SO DEDUCTED WHICH IS TO BE PAID TO THE ASSESSEE CONTIN GENT ON CERTAIN CONDITIONS AND IS TO BE CONSIDERED WITH REFERENCE TO THE TERMS OF AGREEMENT BETWEEN THE PARTIES. THE NATURE OF THIS AMOUNT WILL NOT CHANGE WHETHER WE CALL IT A RETENTION-MONEY OR PERFORMA NCE SECURITY OR WITH ANY OTHER NAME. THIS IS A PERFOR MANCE SECURITY AS PER THE AGREEMENT. IT MAY BE CALLED AS A SECURITY DEPOSIT ALSO. BUT ADMITTEDLY, THIS AMOUNT IS A PART OF TOTAL GROSS RECEIPTS FROM THE CONTRACTEE. THE HON'BLE MADRAS HIGH COURT IN SIMILAR CIRCUMSTANCES, IN THE ABOVE MENTIONED DECISIONS HAVE HELD THAT SINCE THIS RECEIPT CANNOT BE SAID TO HAVE BEEN EITHER ACCRUED OR ARISEN TO THE ASSESSEE, THIS CANNOT BE CONSIDERED A S RECEIPT OF THAT PARTICULAR YEAR TO THE EXTENT THE A MOUNT RETAINED ARE SUBJECT TO FULFILLMENT OF SOME CONDITI ONS LIKE A CERTIFICATE FOR INSPECTION OF SATISFACTORY COMPLETION ETC. AND TILL SUCH TIME THIS AMOUNT HAS NOT 9 ACCRUED TO THE ASSESSEE AND HENCE IS NOT INCLUDIBLE IN ASSESSEES INCOME. VARIOUS CLAUSES OF THE CONTRACT TOWARDS WHICH THE LD. A.R. HAS INVITED OUR ATTENTIO N TO SUBSTANTIATE HIS SUBMISSION THAT THE MONEY RETAINED BY THE CONTRACTEE AS PER TERMS OF THE AGREEMENT BE IT CALLED A RETENTION MONEY OR PERFORMANCE SECURITY IT CANNOT BE INCLUDED IN THE TOTAL INCOME OF THIS YEAR . IN THOSE CASES THE ASSESSEE HAD RAISED THE ENTIRE BILL S WHICH HAVE BEEN PASSED AND THE ENTIRE AMOUNT HAD ACCRUED TO THE ASSESSEE. AFTER CAREFULLY TREADING THROUGH DECISIONS WE HAVE FOUND THAT ALL THESE DECI SIONS ON WHICH THE LD. A.R. HAS RELIED ARE DISTINGUISHABL E ON FACTS. IN THOSE CASES, THE REVENUE HAD BEEN RECOGN IZED IN ASSESSEES BOOKS OF ACCOUNT AND TAX HAD BEEN DEDUCTED ON THE FULL AMOUNT WITHOUT DEDUCTION OF RETENTION MONEY. IN THOSE CASES, THE ASSESSEE HAD FURNISHED BANK GUARANTEE AS A MEASURE OF PERFORMANC E. LIKEWISE, THE CASE ON WHICH THE LD. D.R. HAS RELIED I.E. THE CASE OF AMAR SHIV CONSTRUCTIONS [SUPRA] THE ENT IRE CONTRACT RECEIPT HAD BEEN REALIZED BY THE ASSESSEE ON FURNISHING OF BANK GUARANTEE. IN THAT FACTUAL MATR IX, IT HAS BEEN HELD THAT IT CANNOT BE NOW SAID THAT THE AMOUNT HAS NOT ACCRUED TO THE ASSESSEE IN THE RELEV ANT A.YS IN WHICH BILLS WERE RAISED. THUS, THIS DECISIO N IS ALSO NOT APPLICABLE TO THE FACTS. LIKEWISE, AS WE H AVE ALREADY DISCUSSED THE DECISIONS ON WHICH THE LD. A. R. 10 HAS RELIED ALSO SEEM TO BE DISTINGUISHABLE ON FACTS IN AS MUCH AS IN THOSE CASES, THE ASSESSEES HAD COMPLETE RECORDS OF THIS RETENTION MONEY FOR THE PERFORMANCE SECURITY AND IN SOME OF THE CASES THE ASSESSEE HAD EVEN GOT THE ENTIRE AMOUNT AGAINST BANK GUARANTEE. IN T HE GIVEN CASES, THE ASSESSEE COULD NOT SATISFY THE DEPARTMENT AS TO WHAT HAPPENED OF THE PERFORMANCE SECURITY IN WHICH ALREADY FIVE YEARS HAVE EXPIRED. IN A.Y. 2009-10 THE ASSESSEE HAS DISCLOSED THE ENTIRE RECEIPTS AS ITS CONTRACTUAL-RECEIPTS EVEN WHEN FI VE PERCENT WAS RETAINED AND PAID TAX BY APPLYING PER G ROSS PROFIT RATE APPLICABLE IN THAT YEAR. THE DECISION OF TRIBUNAL FOR A.Y. 2005-06 PERTAINING TO APPEAL ARIS ING U/S 263 OF THE ACT CANNOT BE TREATED AS A PRECEDENT ON THE ISSUE. THE PARAMETERS TO UPHOLD OR SET ASIDE PROCEEDINGS TAKEN U/S 263 ARE ENTIRELY DIFFERENT. THEREFORE, IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE AMOUNT RETAINED BY THE GOVERNMENT DEPARTMENT WHICH IS SUBJECT TO SATISFACTORY PERFORMANCE AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT CAN BE INCLUDED IN THE TOTAL GROSS RECEIP TS AND HAVE TO BE TREATED AS ACCRUED TO THE ASSESSEE DURING THE YEAR. HOWEVER, SINCE BOOKS HAVE BEEN REJECTED, THE ASSESSEE HAS NOT OBJECTED TO THE SAME , GROSS PROFIT HAS TO BE ARRIVED AT ON THIS AMOUNT BY 11 APPLYING SAME FIGURE GROSS PROFIT RATE WHICH HAS BE EN DISCLOSED BY THE ASSESSEE AND HAS BEEN ACCEPTED BY THE DEPARTMENT. IN CASE THIS AMOUNT IS RETAINED IN ANY SUBSEQUENT YEAR TO THAT EXTENT, THE ASSESSEE CAN CL AIM DEDUCTION AS PER THE LAW. 10. TO UNDERSTAND THIS TANGLE, LET US TAKE A HYPOT HETICAL EXAMPLE. SUPPOSE, THE CONTRACTOR-ASSESSEE, AS CONT RACTOR, HAS RAISED BILLS OF RS. 100/-, IN A GIVEN YEAR. OUT OF THIS RS. 100/-, THE DEPARTMENT-CONTRACTEE HAD RETAINED RS. 5 /- AS PERFORMANCE GUARANTEE OR SECURITY DEPOSIT. THE ASS ESSEE WANTS TO PAY TAX ON RS. 95% AFTER APPLYING GROSS PR OFIT RATE TO ARRIVE AT ITS ACTUAL INCOME. THE REVENUE WANTS TO TAX 95% BY APPLYING GROSS PROFIT RATE BUT WANTS TO ADDITION RS . 5/- AS IT IS IN ASSESSEES TOTAL INCOME OF THE YEAR. THE ACTION OF THE REVENUE IS TOTALLY UNCALLED FOR AND CANNOT BE APPRO VED UNDER THE PROVISIONS OF THE ACT BEING UNJUSTIFIABLE. THE ASSESSEE WANTS TO FORGET ABOUT THIS AMOUNT OF RS. 5% RETAINE D BY DEPARTMENT AND HAS PAID TAX BY APPLYING GROSS PROFI T RATE ON THE REMAINING 95%. IN THIS WAY, BOTH THE REVENUE A S WELL AS THE ASSESSEE HAVE NOT DONE A CORRECT THING IN OUR C ONSIDERED OPINION AS THE LAW DOES NOT PERMIT THEM TO DO SO. IN CASE RS. 5/- IS TREATED A ACCRUED TO THE ASSESSEE DURING THE YEAR BECAUSE THE ASSESSEE HAS RAISED BILLS FOR THE ENTIR E RS. 100/- AND THE GOVERNMENT CONTRACTEE HAS DEDUCTED TDS ON T HE ENTIRE AMOUNT INCLUDING RS. 5/- ALSO AND THE TDS CR EDIT CAN BE GIVEN IN THE YEAR IN WHICH TDS IS DEDUCTED. IT WOULD BE 12 SAFER AND CORRECT AS PER LAW TO TAX RS. 100/- BY TR EATING IT AS ENTIRE RECEIPT OF THE YEAR ALTHOUGH RS. 5/- ARE SUB JECT TO FULFILLMENT OF CERTAIN CONDITIONS WHICH HE MAY NOT RECEIVE AT ALL OR MAY RECEIVE THE ENTIRE AMOUNT OR PART THEREO F IN TERMS OF THE CONTRACT SUBSEQUENTLY. SINCE THE ASSESSEE H AS NOT BEEN MAINTAINING ANY RECORD IN THIS REGARD AND THE CONTR ACTEE ALSO COULD NOT HELP THE REVENUE IN THIS REGARD, THEREFOR E, IN OUR CONSIDERED OPINION, IT WOULD BE A JUST AND CORRECT ACTION, AS PER THE PROVISIONS OF LAW, TO TAX THE ENTIRE RS. 10 0/- BY TREATING IT AS TOTAL GROSS RECEIPT OF THE YEAR AND IF BOOKS ARE REJECTED AND THE A.O. APPLIES A PARTICULAR FIGURE O F GROSS PROFIT RATE AND THE SAME IS NOT DISPUTED BY THE ASS ESSEE, THE ACTUAL INCOME ON THE CONTRACT RECEIPT OF RS. 100/- CAN BE ARRIVED AT BY APPLYING THAT FROM THE FIGURE OF GROS S PROFIT RATE TO THE ENTIRE AMOUNT OF RS. 100/-. NOW THE QU ESTION ARISES AS TO WHAT WILL HAPPEN IN CASE THAT RS. 5/- IS ENTANGLED IN TERMS OF THE CONTRACT AND IS RECEIVED SUBSEQUENT LY OR IS RECEIVED AT ALL IN THE SUBSEQUENT YEARS OR THAT SOM E PART OF IT IS RECEIVED AFTER THE SATISFACTION OF THE DEPARTMEN T IN VIEW OF THE TERMS OF THE AGREEMENT. WE MAY FURTHER MENTI ON THAT AS PER THIS AGREEMENT, IF THE GOVERNMENT CONTRACTEE HAS TO INCUR SUMS MORE THAN THE SUM OF RS. 5/- RETAINED BY IT, THEY MAY CLAIM FROM THE ASSESSEE AND RECOVER THE SAME AS PER LAW. IN THAT EVENTUALITY, AGAIN SOME AMOUNT OF THE RECEIPT OUT OF THE CONTRACT RECEIPTS MAY HAVE TO BE REDUCED IF MORE THAN RS. 5/- IS TAKEN AWAY BY THE DEPARTMENT. THUS , IN THIS 13 WAY, IT BECOMES AN ANOMALOUS SITUATION. THEREFORE, THE BEST COURSE IS TO TREAT THE ENTIRE RS. 100/- AS CONTRACT RECEIPT, PARTICULARLY, WHEN THE ASSESSEE HAS BEEN FOLLOWING 'MERCANTILE SYSTEM OF ACCOUNTING AND APPLIED GROSS PROFIT RATE TO ARRIVE AT TAXABLE INCOME. WITH THE FOREGOING DI SCUSSION, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND ORD ER THAT THE A.O. SHALL TREAT THE ENTIRE CONTRACT RECEIPTS OF TH E YEAR AND APPLY GROSS PROFIT RATE OF THE YEAR DISCLOSED OR AG REED TO ARRIVE AT TAXABLE INCOME. THE A.O. CANNOT TAX RETE NTION MONEY BY ADDING IT IN TOTO BY TREATING IT AS NET IN COME. THIS IS A WRONG PROCEDURE AND CANNOT BE APPROVED OF AS I T IS UNKNOWN TO ANY LEGAL PROCEDURE UNDER THE ACT. ACCO RDINGLY, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED.' ACCORDINGLY, BY FOLLOWING THE ABOVE VIEW, IN ORDER TO KEEP CONSISTENCY AND BY RESPECTFULLY FOLLOWING THE ABOVE ORDER, WE ALLOWED GROUND NO. 3 AND 4, IN SAME OF THE ASSESSME NT ORDER TO DELETE THE ENTIRE IMPUGNED ADDITIONS. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE ENTIRE RETENTION MONEY AND SECURITY DEPOSITS CANNOT BE ADD ED IN ASSESSEES HANDS. ONLY GROSS PROFIT RATE HAS TO BE APPLIED AND TO THAT EXTENT THE ADDITION HAS TO BE SUSTAINED. THE R EMAINING AMOUNT HAS TO BE DELETED. IN OUR CONSIDERED OPINION, THE LD. CIT(A) HAS WRONGLY APPLIED THE TRIBUNAL ORDER TO THAT EXTENT. 14 4. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 13 TH MAY, 2014. SD/- SD/- (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 TH MAY, 2014 VL/- COPY TO: THE APPELLANT THE RESPONDENT THE CIT BY ORDER THE CIT(A) THE DR ASSISTANT REGISTRAR ITAT, JODHPUR