Asst. Director of Income-tax (Intl.Txn)-I, Hyderabad V. M/s Kayson Constructions Company, Hyderabad

ITA 393/HYD/2013

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1559 (ITAT-HYDERABAD)
• Duration Of Justice: 7 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 04-02-2021
• Assessment Year: 2003-2004
• Appeal Filed On: 26-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Section: 143(3); 147; 12

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD (THROUGH VIRTUAL HEARING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 393/HYD/2013 ASSESSMENT YEAR: 2003 - 04 THE ASST. DIRECTOR OF INCOME TAX , INT. TXN - 1, HYDERABAD. VS. M/S. KAYSON CONSTRUCTIONS COMPANY, HYDERABAD. PAN: AABCK 7 046 E (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI A.V. RAGHURAM REVENUE BY: SHRI ROHIT MUJUMDAR, DR DATE OF HEARING: 04/02/2021 DATE OF PRONOUNCEMENT: 15 /02/2021 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT (A) - V, HYDERABAD IN APPEAL NO. 0 024/AD(IT) - I/CIT(A) - V/2011 - 12, DATED 18/12/20 12 PASSED U/S. 143(3) R.W.S 147 AND U/S. 250(6) OF THE ACT FOR THE AY: 2003 - 04. 2. THE REVENUE HAS RAISED FIVE ELABORATE GROUNDS IN ITS APPEAL HOWEVER, THE LD. DR POINTED THAT THE ENTIRE ISSUE IS WITH RESPECT TO THE DELETION OF RS. 29,32,90,734/ - BY THE LD. CIT (A) WITH RESPECT TO THE ADDITION MADE ON ACCOUNT OF WORK - IN - PROGRESS BY THE LD. AO. 3. THE LD. DR FILED THE FOLLOWING WRITTEN SUBMISSI ONS BEFORE US: - 2 THE FACTS OF THE CASE CAN BE BETTER APPRECIATED FROM THE FINDINGS OF THE SUBSEQUENT ASSESSMENT YEAR I.E. AY 2004 - 05. IN THIS YEAR, THE AO NOTICED THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD AND THE PROGRESSIVE RECEIPTS ARE RS.84,67,13,021/ - . DURING THE COURSE OF THE ASSESSMENT THE ASSESSEE SUBMITTED THAT IT HAD SHOWN RS.74,89,67,167/ - , IN EARLIER YEARS. THE AO HOWEVER DID NOT AGREE WITH THE CONTENTION O F THE ASSESSEE AND ESTIMATED THE PROFIT ON THE PROGRESSIVE CONTRACT RECEIPTS OF RS.84,67,13,021/ - AS SALES FOR THIS YEAR @8%. ON APPEAL CIT(A) - III, HYDERABAD CONFIRMED THE ESTIMATION OF THE NET PROFIT @ 8%, BUT ALLOWED RELIEF IN RESPECT OF WIP OF RS.74,89, 67,167/ - AS THE SAME WAS ALREADY RECOGNISED IN THE EARLIER YEARS AND THE BALANCE SALE OF RS.9,77,45,854/ - WAS ACCEPTED AS SALES FOR A.Y. 2004 - 05. NO APPEAL WAS PREFERRED AGAINST THIS ORDER EITHER BY THE ASSESSEE OR THE REVENUE. BASED ON THE FINDINGS OF T HE CIT(A) - III, HYDERABAD FOR A.Y.2004 - 05 THE ASSESSMENT FOR A.Y.2003 - 04 WAS REOPENED U/S.147 OF THE IT ACT, TO BRING TO TAX THE SALES REVENUE OF RS.74,89,67,167 / - . SINCE IN THIS YEAR I.E A.Y.2003 - 04 THE ASSESSEE HAS ALREADY OFFERED THE SUM OF RS.45,56,76, 433/ - AS SALES THE AO TAXED THE BALANCE AMOUNT OF RS.29,32,90,734/ - @ 8% AMOUNTING TO RS.2,34,64,259/ - . FURTHER A REFERENCE MAY ALSO BE MADE TO THE ASSESSMENT FOR AY 2002 - 03 PASSED U/S 143(3) ON 23.05.2005. IT CAN BE SEEN FROM THE SAID ORDER THAT THE AO ASSESSED THE INCOME AT RS.NIL, WHICH CLEARLY ESTABLISHES THAT NO WIP WAS BROUGHT TO TAX IN AY 2002 - 03. THUS AS PER THE ACCEPTED FINDINGS OF CIT(A) - III, HYDERABAD, FOR AY 2004 - 05, THE PROGRESSIVE WIP OF RS.74,89,67,167 / - IS REQUIRED TO BE BROUGHT TO TAX IN THE EARLIER YEAR AND ALSO FROM THE ASSESSMENT ORDER OF AY 2002 - 03 IT IS EVIDENT THAT NO PART OF THE SUM OF RS.74,89,67,167 / - WAS BROUGHT TO TAX, THEREFORE IT FOLLOWS THAT THE SUM OF RS.74,89,67,167/ - HAS TO BE BROUGHT TO TAX IN AY 2003 - 04. THE APPELLAN T HAS ALREADY OFFERED THE WIP OF RS.45,56,76,433/ - AS SALES, THE AO HAS RIGHTLY BROUGHT THE BALANCE OF RS.29,32,90,734/ - TAX IN AY 2003 - 04. 4. THE LD. AR SUBMITTED BEFORE US THAT THOUGH THE ASSESSEE HAD INAPPROPRIATELY DEBITED OPENING WORK - IN - PROGRESS OF RS. 29,32,90,734/ - IN ITS P & L ACCOUNT AND CORRESPONDINGLY CREDITED SALES ACCOUNT HOWEVER, WHILE COMPUTING THE TAXABLE INCOME IN THE COMPUTATION STATEMENT THE ASSESSEE HAD ADDED THE SAME TO ITS INCOME. IT WAS 3 T HEREFORE SUBMITTED THAT , ADDITION ON THIS CO UNT ONCE AGAIN IS ERRONEOUS. IT WAS FURTHER SUBMITTED THAT THIS DISCREPANCY HAD OCCURRED BECAUSE THE WORK - IN - PROGRESS WAS ALTERED BY THE LD. AO AT THE TIME OF ASSESSMENT AND THEREFORE IT DID NOT MATCH WITH THE STATEMENT OF ACCOUNTS DRAWN BY THE ASSESSEE. HENCE, IT WAS PLEADED THAT SINCE THE ASSESSEE ITSELF HAD MADE ADDITION IN ITS COMPUTATION STATEMENT FOR THE ENTIRE AMOUNT OF RS. 29,32,90,734/ - , THE LD. CIT (A) HAD RIGHTLY GRANT RELIEF TO THE ASSESSEE. IT WAS THEREFORE REQUESTED THAT THE APPEAL OF THE R EVENUE MAY BE DISMISSED. THE LD. DR ON THE OTHER RELIED ON THE ORDER OF THE LD. AO. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. ON PERUSING THE P & L ACCOUNT OF THE ASSESSEE FOR THE PREVIOUS YEAR 2002 - 03 RELEVANT TO THE AY 2003 - 04, IT IS APPARENT THAT THE ASSESSEE HAS ERRONEOUSLY DEBITED OPENING WIP BY RS. 29,32,90,734/ - AND CREDITED THE SAME TO SALES ACCOUNT. ACCORDINGLY, THE ACTUAL SALE OF RS. 45,56,76,433/ - HAS BEEN DISCLOSED IN THE BALANCE SHEET AS RS. 74,89,67 ,167/ - (RS. 45,56,76,433 + RS. 29,32,90,734). IT IS PERTINENT TO MENTION THAT ONLY THE CLOSING STOCK OF THE EARLIER ASSESSMENT YEAR CAN BE BROUGHT FORWARD INTO THE BOOKS OF THE ASSESSEE AS OPENING WORK - IN - PROGRESS FOR THE RELEVANT ASSESSMENT YEAR . IN THE CASE OF THE ASSESSEE , THE CLOSING STOCK OF THE ASSESSEE FOR THE EARLIER YEAR IS DISCLOSED AS NIL. FURTHER, THE ASSESSEE HAS RECEIVED THE ENTIRE SALE CONSIDERATION OF RS. 74,89,67,167/ - D URING THE RELEVANT ASSESSMENT 4 YEAR , AS OBSERVED BY THE LD. CI T (A) IN PARA 5 OF HIS ORDER. IT IS OBVIOUS THAT IF THE CLOSING STOCK OF THE EARLIER YEAR WAS DETERMINED AS RS. 29,32,90,734/ - IT WOULD HAVE RESULTED IN INCREASE OF PROFIT TO THE ASSESSEE FOR THE EARLIER YEAR WHICH THE ASSESSEE HAS FAILED TO DO SO. FROM THESE ABOVE FACTS, IT IS APPARENT THAT THERE ARE SEVERAL DISCREPANCIES IN THE ACCOUNTING ENTRIES PASSED BY THE ASSESSEE. HOWEVER, IF THE EFFECT OF THE ERRONEOUS ENTRY PASSED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY DEBITING R S. 29,32,90,734/ - TO WIP ACCOUNT AND CORRESPONDINGLY CREDITING SALES ACCOUNT OF RS. 29,32,90,734/ - HAS BEEN REVERSED BY THE ASSESSEE WHILE COMPUTING THE INCOME IN THE COMPUTATION STATEMENT BY MAKING ADDITION OF RS. 29,32,90,734/ - , THEN W E ARE OF THE VIEW T HAT FURTHER ADDITION ON THE SAME ISSUE IS ERRONEOUS AS ARGUED BY THE LD. AR. THE LD. AR HAS ALSO S TATED THAT THE ACTUAL WIP ADOPTED BY THE ASSESSEE HAS BEEN ALTERED BY THE LD. AO WHILE PASSING THE ASSESSMENT ORDER IN THE PRECEDING AND SUCCEEDING ASSESSMEN T YEARS HENCE , THE SAME DID NOT TALLY WITH THE STATEMENT OF ACCOUNTS DISCLOSED BY THE ASSESSEE WHICH LED TO THIS DISCREPANCY, IS REQUIRED TO BE VERIFIED. THEREFORE, IN THE INTEREST OF JUSTICE, THE ENTIRE MATTER IS REMITTED BACK TO THE FILE OF LD. AO FOR DE - NOVO CONSIDERATION AND TO PASS APPROPRIATE ORDER AS PER OUR OBSERVATION S MADE HEREIN ABOVE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. 5 PRONOUNCED IN THE OPEN COURT ON THE 15 TH FEBRUARY , 2021. S D/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 15 TH FEBRUARY , 2021. OKK COPY TO: - 1. M/S. KAYSON CONSTRUCTIONS COMPANY C/O. K. VASANTH KUMAR & A.V. RAGHURAM, ADVOCATES & TAX CONSULTANTS, FLAT NO. 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2. ASSISTANT DIRECTOR OF INCOME TAX - (IT) - I, R.NO.632, 6 TH FLOOR, C - BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 3. THE CIT(A) - V, HYDERABAD. 4. THE ADIT (INTERNATIONAL TAXATION) - 1, HYDERABAD. 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. 6. GUARD FILE.