ITO 8(3)(2), MUMBAI V. SIDDHARTH TANKS AND VESELS P.LTD, MUMBAI

ITA 4995/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0701 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: AJAY SINGH LD
• Section: 143(3)

Judgement Text

ITA NO.4995/M/2014 SIDDHARTH TANKS & VESSELS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO. 4995/MUM/2014 ( ASSESSMENT YEAR: 2010-11) INCOME TAX OFFICER 8(3)(2) ROOM NO. 201, AAYKAR BHAVAN M.K.ROAD MUMBAI 400 020 VS. SIDD H ARTH TA NKS AND VESSELS PRIVATE LIMITED 2 ND FLOOR AJANTA HOTEL COMPLEX 8, JUHU TARA ROAD SANTACRUZ(WEST) MUMBAI-400 049 PAN/GIR NO. AAECS-6170-L ( APPELLANT ) : ( !' RESPONDENT ) A SSESSEE BY : AJAY SINGH, LD. AR RE VENUE BY : NAVEEN GUPTA, LD. DR # $ DATE OF HEARING : 04/05/2017 %&' $ / DATE OF PRONOUNCEMENT : 12/05/2017 ITA NO.4995/M/2014 SIDDHARTH TANKS & VESSELS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 2 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT Y EAR [AY] 2010- 11 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-18 [CIT(A)], MUMBAI DATED 21/05/2014 QUA DELETION OF CERTAIN ADVANCES OF RS.50.00 LACS RECEIVED BY THE ASSESSEE FROM AN ENTI TY NAMELY GAMMON INDIA LIMITED PARTICULARLY WHEN THE ASSESSEE DEBITED EXPENSES OF RS.30,16,721/- AGAINST THE SAME. 2. FACTS LEADING TO THE DISPUTE ARE THAT THE ASSESS EE, BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING / SUPPLY OF EQUIPMENT TO SUGAR INDUSTRIES , WAS ASSESSED U/S 143(3) AT RS.99,96,900/- AFTER CERTAIN ADDITIONS / DISALLOWAN CES VIDE ASSESSING OFFICER [AO] ORDER DATED 25/03/2013 AS AGAINST NIL RETURN FILED BY THE ASSESSEE ON 28/09/2010. DURING ASSESSMENT PROCEEDIN GS, IT WAS NOTICED THAT THE ASSESSEE RECEIVED CERTAIN ADVANCES OF RS.50.00 LACS & RS.91,83,673/- ON 12/01/2010 & 31/03/2010 RESPECTIV ELY FROM AN ENTITY NAMELY GAMMON INDIA LIMITED AGAINST WHICH TDS WAS DEDUCTED BY THE PAYER U/S 194C, HOWEVER, THE SAME WAS NOT OFFERED T O TAX. THE ASSESSEE EXPLAINED THAT THE SAID ADVANCES WERE RECE IVED BY THE ASSESSEE PURSUANT TO AN AGREEMENT WITH THE PAYER FO R CERTAIN CONSTRUCTION PROJECT AT PRAVARANAGAR AND SINCE THE SAME WERE MERE ADVANCES IN NATURE, THE INCOME THEREON DID NOT ACCR UE TO THE ASSESSEE DURING IMPUGNED AY AND THEREFORE, NOT OFFERED TO TA X BY THE ASSESSEE. HOWEVER, THE AO NOTED THAT THE ASSESSEE DEBITED EXP ENSES OF RS.30.16 ITA NO.4995/M/2014 SIDDHARTH TANKS & VESSELS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 3 LACS AS SITE EXPENSES FOR THIS PROJECT BUT DID NOT OFFERED / CREDITED TH E RECEIPTS IN PROFIT & LOSS ACCOUNT AND REFLECTED THE SAME AS MERE ADVANCES AND THEREFORE, THE SAME CALLED FOR AN ADDI TION TO THE EXTENT OF RS.50.00 LACS, BEING AMOUNT RECEIVED BY THE ASSESSE E DURING THE IMPUGNED AY ON 12/01/2010. FINALLY, AO TREATED THE ADVANCE OF RS.50 LACS RECEIVED BY THE ASSESSEE AS RECEIPT OF REVENUE IN NATURE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 3. THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEF ORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 21/05/2014 WHERE THE ASSE SSEE CONTENDED THAT THE PROJECT WORK AGAINST THIS ADVANCE WAS COMP LETED IN FINANCIAL YEAR 2013-14 AND THE INVOICES WERE RAISED DURING TH AT YEAR AND THEREFORE, FOLLOWING MERCANTILE SYSTEM OF ACCOUNTIN G, OFFERED TO TAX IN THAT YEAR AND HENCE ADDITION OF MERE ADVANCE AMOUNT IN THE IMPUGNED AY WAS NOT JUSTIFIED AND WOULD LEAD TO DOUBLE TAXAT ION. THE LD. CIT(A) AFTER CONSIDERING THE VARIOUS SUBMISSIONS MADE BY T HE ASSESSEE AND FACTUAL MATRIX OF THE CASE CAME TO THE CONCLUSION T HAT A MERE ADVANCE DO NOT GIVE RISE TO ACCRUAL OF INCOME PARTICULARLY WHEN THE ASSESSEE OFFERED THE INCOME IN VARIOUS AYS AS PER THE INVOIC ES RAISED BY THE ASSESSEE AGAINST THE PROJECT. FURTHER, THE ASSESSEE FOLLOWING CONSISTENT METHOD OF ACCOUNTING OFFERED THE INCOME WHENEVER TH E SAME ACCRUED TO THE ASSESSEE AND MERE DEDUCTION OF TDS AGAINST ADVA NCE PAYMENT PER- SE DID NOT MAKE THEM LIABLE TO TAX IN THE IMPUGNED AY. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE CONTENDED TH AT SINCE THE ASSESSEE AVAILED THE BENEFIT OF TDS IN THE IMPUGNED AY, HE WAS LIABLE TO OFFER THE ADVANCES AS INCOME IN THE IMPUGNED AY PARTICULARLY WHEN IT ITA NO.4995/M/2014 SIDDHARTH TANKS & VESSELS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 4 DEBITED EXPENDITURE OF RS.30.16 LACS AGAINST THE PR OJECT IN THE PROFIT & LOSS ACCOUNT AS IT VIOLATED THE MATCHING PRINCIPLE OF ACCOUNTING. 5. PER CONTRA, THE LD. AR EXPLAINED THAT THE ASSESSEE GOT A SUB- CONTRACT FOR CERTAIN CONSTRUCTION WORK AT PRAVARANAGAR FROM THE MAIN CONTRACTOR NAMELY GAMMON INDIA LTD. AND RECEIVED CERTAIN ADVANCES AGAINST THE SAME IN IMPUGNED AY. HOWEVER, THE PROJE CT GOT DELAYED FOR WANT OF APPROVALS AND COULD BE STARTED ONLY IN DECE MBER, 2013. THE LD. AO ERRED IN NOTING THAT THE ASSESSEE DEBITED EXPENS ES OF RS.30.16 LACS AGAINST THE SAME WHEREAS THOSE EXPENSES WERE NOT RE LATED WITH THIS PROJECT. MERELY BECAUSE TDS WAS DEDUCTED ON THE IMP UGNED PAYMENT, THE SAME PER-SE DO NOT MAKE THE SAID ADVANCES TAXABLE IN THE HANDS OF THE ASSESSEE AS THE INCOME THEREUPON NEVER GOT ACCR UED DURING IMPUGNED AY. THE ASSESSEE COMPLETED THE PROJECT IN VARIOUS STAGES / PHASES AND RAISED INVOICES AS PER THE AGREEMENT AND OFFERED THE INCOME AS PER THE INVOICES RAISED BY THE ASSESSEE I N VARIOUS AYS. THE WORK AGAINST THIS PARTICULAR ADVANCE WAS COMPLETED IN FY 2013-14 WHEN THE ASSESSEE RAISED A BILL OF RS.52.91 LACS AND OFF ERED THE SAME TO TAX IN THAT YEAR. THE ASSESSEE FOLLOWED CONSISTENT METH OD OF ACCOUNTING AND FOLLOWING THE SAME RECOGNIZED THE REVENUE AS PER TH E ACCOUNTING PRINCIPLES AND THEREFORE, THE ADDITIONS WERE UNWARR ANTED AND THE SAME AMOUNTS TO DOUBLE TAXATION. THE DETAILS OF SITE EXP ENSES, DETAILS OF YEAR WISE INVOICES RAISED AGAINST PRAVARANAGAR PROJECT ALONG WITH COPIES OF THE INVOICES, FINANCIAL STATEMENTS FOR AY 2014-15, COPIES OF AGREEMENT, LEDGER EXTRACT, VAT RETURNS ETC. HAVE BEEN PLACED I N THE PAPER-BOOK IN SUPPORT OF VARIOUS CONTENTIONS. ITA NO.4995/M/2014 SIDDHARTH TANKS & VESSELS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 5 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED RELE VANT MATERIAL ON RECORD. THE SHORT DISPUTE BEFORE US IS WHETHER THE ASSESSEE WAS LIABLE TO OFFER THE ADVANCES TO TAX MERELY BECAUSE TDS WAS DEDUCTED THEREUPON PARTICULARLY WHEN THE ASSESSEE, FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, RECOGNIZED THE REVENUE FROM THE PROJ ECT IN AY 2014-15 WHEN THE INVOICES WERE RAISED. THERE IS NO DISPUTE THAT THE ASSESSEE RECEIVED TWO ADVANCES OF RS.50.00 LACS & RS.91.83 L ACS DURING IMPUGNED AY, AGAINST WHICH TDS WAS DEDUCTED. HOWEVE R, THE LD. AO TREATED BOTH THE ADVANCES DIFFERENTLY AND ADDED ONL Y RS.50.00 LAKHS TO THE INCOME OF THE ASSESSEE, WHICH, IN OUR OPINION, WAS NOT CORRECT APPROACH. WE FURTHER FIND THAT THE ASSESSEE HAS REC OGNIZED THE REVENUE IN THE BOOKS OF ACCOUNTS, BY FOLLOWING CONSISTENT M ETHOD OF ACCOUNTING AND OFFERED THE SAME TO TAX WHENEVER THE INVOICES W ERE RAISED BY HIM AND THE SAME IS NOT IN DISPUTE. AT THIS JUNCTURE, I T WOULD BE PRUDENT TO REPRODUCE THE FINDINGS OF LD. CIT(A) MADE IN THE IM PUGNED ORDER: FROM THE PERUSAL OF THE SUBMISSIONS AND FACTS OF T HE CASE, IT IS CLEAR THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.50,00,000/- ON 12 .01.2010 AND RS.91,83,673/- ON 31.03.2010 FROM M/S GAMMON INDIA LTD. ON WHICH T DS U/S 194I WAS DEDUCTED. THE ASSESSEE HAS TREATED THIS AMOUNT AS ADVANCE AND NOT SHOWN AS INCOME IN THE YEAR UNDER CONSIDERATION, BUT THE A.O. HAS HELD THA T SINCE THE TDS HAS BEEN DEDUCTED AND THE AMOUNT OF RS.50,00,000/- WAS RECEI VED ON 12.01.2010, IT WAS A REVENUE RECEIPT AND ADDED BACK TO THE TAXABLE INCOM E. HOWEVER, THE AMOUNT OF RS.91,83,673/- WHICH WAS RECEIVED ON 31.03.2010 AND TDS WAS ALSO DEDUCTED ON THIS AMOUNT WAS ACCEPTED BY THE A.O. NOW, THE QUEST ION ARISES WHETHER THE ADVANCE RECEIVED BY THE ASSESSEE ON WHICH TDS WAS D EDUCTED HAS TO BE TREATED AS INCOME OF THE APPELLANT FOR THE YEAR UNDER CONSI DERATION OR IT WILL HAVE TO BE TREATED AS INCOME WHEN THE BILLS HAVE BEEN RAISED A GAINST THIS AMOUNT. FROM THE PERUSAL OF THE SUBMISSIONS AND THE COPY OF THE INVO ICES AND THE FINANCIAL STATEMENTS FOR THE YEAR F.Y.2008-09 TO 2013-14, IT IS NOTICED THAT THE ASSESSEE COMPANY IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING REGULARLY AND THERE IS NO CHANGE IN THE ACCOUNTING METHOD IN THE YEAR UNDER CONSIDERATION. THE COMPANY IS SHOWING INCOME ON ACCRUAL BASIS IRRESPECTIVE OF RECEIPT OF PAYMENT AS PER ACCOUNTING PRINCIPLE. THE AMOUNT OF RS.50,00,000/- WAS RECEIVE D ON 12.01.2010 WAS TREATED BY THE APPELLANT AS ADVANCE RECEIVED AGAINST WHICH THE BILLS WERE RAISED AMOUNTING TO ITA NO.4995/M/2014 SIDDHARTH TANKS & VESSELS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 6 RS.52.91 LAKHS. IN THE F.Y.2013-14 THIS AMOUNT HAS BEEN ADJUSTED AGAINST THE INVOICES RAISED AS PER THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT ON PROVISIONAL BASIS SUBMITTED FOR F.Y.2013-14. THUS, THREE IS NO DISPUTE THAT THE ASSESSEE HAS NOT DECLARED THE AMOUNT OF RS.50,00,000/- AS RECEIP T FROM M/S GAMMON INDIA LTD. THE DISPUTE IS ONLY WHETHER IT IS TO BE TAXED IN TH E YEAR UNDER CONSIDERATION OR IN F.Y.2013-14. AS PER THE DOCUMENTARY EVIDENCES SUBMI TTED, IT IS CLEAR THAT THE BILLS HAVE BEEN RAISED AGAINST THE CONTRACT WORK ON COMPL ETION METHOD IN THE F.Y.2013- 14 AND THIS AMOUNT OF RS.50,00,000/- HAS BEEN ADJUS TED AGAINST THESE BILLS. ALTHOUGH TDS WAS DEDUCTED IN THE YEAR UNDER CONSIDE RATION, BUT IT WAS AN ADVANCE RECEIPT AGAINST WHICH THE BILLS WERE RAISED IN F.Y. 2013-14, THEREFORE, IT CANNOT BE TREATED AS INCOME OF THE ASSESSEE FOR A.Y.2010-11. MOREOVER, THE ASSESSEE COMPANY HAS RECEIVED RS.91,83,673/- ON 31.03.2010 & RS.50,00,000/- ON 12.01.2010 AS ADVANCE FROM M/S GAMMON INDIA LTD. AN D TDS WAS DEDUCTED ON BOTH AMOUNTS, HOWEVER, THE A.O. HAS ACCEPTED RS.91, 83,673/- AS ADVANCE BUT ADDED BACK RS.50,00,000/- AS INCOME, WHICH IS CONTR ADICTORY STAND OF THE A.O. SINCE BOTH THE AMOUNTS ARE ADVANCE MONEY AGAINST TH E CONTRACT WORK, THEREFORE, IT CANNOT BE SAID THAT ONE AMOUNT IS ADVANCE AND THE O THER IS AN INCOME. IT IS ALSO NOT A CASE THAT THE A.O. HAS POINTED OUT ANY DISCREPANC Y IN THE BOOKS OF ACCOUNTS OR CHANGE IN METHOD OF ACCOUNTING. THE ASSESSEE IS FOL LOWING THE SAME METHOD OF ACCOUNTING EVERY YEAR, THE INCOME ACCRUED HAS BEEN TAKEN AS PER ACCOUNTING PRINCIPLE. THE SYSTEM IS FOLLOWED REGULARLY AND CON SISTENTLY BY THE COMPANY WHICH IS CLEAR FROM THE STATEMENT OF WORK DONE AND INVOICES RAISED FROM THE YEAR F.Y.2008- 09 TO 2013-14. IN VIEW OF THESE FACTS & CIRCUMSTANC ES, IT IS HELD THAT THE ASSESSEE HAS RECEIVED ADVANCE OF RS.50,00,000/- FROM M/S GAM MON INDIA LTD. AGAINST WHICH BILLS WERE RAISED IN THE F.Y.2013-14 AND DULY REFLE CTED IN THE RECEIPTS FOR F.Y. 2013- 14, THEREFORE, ONLY ON THE BASIS OF TDS DEDUCTED, I T CANNOT BE TREATED AS INCOME OF THE COMPANY WHICH IS ADDED BACK BY THE A.O. IN TOTA LITY OF THE FACTS AND CIRCUMSTANCES, IT IS HELD THAT THE AMOUNT OF RS.50, 00,000/- RECEIVED BY THE ASSESSEE COMPANY AND SHOWN IN THE BOOKS OF ACCOUNT AS ADVANCES FROM M/S GAMMON INDIA LTD., CANNOT BE TREATED AS INCOME OF T HE ASSESSEE, THE A.O. IS DIRECTED TO DELETE THE ADDITION. THE A.O. IS ALSO D IRECTED TO ALLOW THE CREDIT OF TDS DEDUCTED ON RS.50,00,000/- IN THE A.Y.2014-15 WHEN THE ASSESSEE HAS DECLARED THE INCOME. GROUND OF APPEAL IS ALLOWED. A PERUSAL OF THE ABOVE FINDINGS REVEALS THAT THE LD . CIT(A) CLINCHED THE ISSUE IN THE RIGHT PERSPECTIVE AND WE SEE NO REASON TO DEVIATE FROM THE SAME, THIS BEING THE CORRECT LEGAL APPROACH. IN PRI NCIPLE, WE CONCUR WITH THE SAME AND UPHOLD THE FINDING OF LD. CIT(A) SUBJE CT TO CERTAIN VERIFICATION AS ENUMERATED IN SUCCEEDING PARAGRAPH. 7. WE FIND THAT THE LD. AO PROCEEDED IN THE MATTER ON THE ASSUMPTION THAT SINCE ASSESSEE CLAIMED EXPENSES AGAINST THE SA ID PROJECT AND ITA NO.4995/M/2014 SIDDHARTH TANKS & VESSELS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 7 THEREFORE, WAS OBLIGED TO OFFER THE SAID ADVANCES T O TAX. THE REVENUE HAS RAISED A SPECIFIC GROUND IN THE APPEAL THAT LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE DEBITED EXP ENSES OF RS.30.16 LACS DURING IMPUGNED AY WITHOUT OFFERING CORRESPOND ING RECEIPTS TO TAX. THIS FACT HAS BEEN CONTROVERTED BY THE LD. AR BY CO NTENDING THAT THE SAME WAS FACTUALLY INCORRECT AS WHATEVER EXPENSES W ERE INCURRED BY THE ASSESSEE TOWARDS THIS PROJECT WERE SHOWN AS CLOSING STOCK / WORK-IN- PROGRESS IN THE IMPUGNED AY AND THE EXPENSE OF RS.30.16 LAC S DEBITED IN THE PROFIT & LOSS ACCOUNT WERE INCURRED IN RELAT ION TO OTHER PROJECTS, WHICH MAY BE VERIFIED BY THE LOWER AUTHORITIES. THE REFORE, FOR THE LIMITED PURPOSE OF VERIFICATION OF THIS FACT, WE DEEM IT FI T TO RESTORE THE MATTER BACK TO THE FILE OF LD. AO. THE ASSESSEE IS DIRECTE D TO SUBSTANTIATE THIS FACT WITH NECESSARY EVIDENCES FAILING WHICH THE AO SHALL BE AT LIBERTY TO DECIDE THE SAME AS PER LAW ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE LD. AO IS ALSO DIRECTED TO RE-COMPUTE BOOK PROF ITS U/S 115JB, CARRY FORWARD / SET OFF OF LOSSES IN THE LIGHT OF THE FIN AL OUTCOME. 8. RESULTANTLY, THE REVENUES APPEAL STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MAY, 2017. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER (# MUMBAI; DATED : 12.05.2017 SR.PS:- THIRUMALESH ITA NO.4995/M/2014 SIDDHARTH TANKS & VESSELS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 8 COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) / THE CIT(A) 4. ) / CIT CONCERNED 5. *+ !$, , ' (# / DR, ITAT, MUMBAI 6. +-. /# GUARD FILE ! / BY ORDER, ' !# $ (DY./ASSTT. REGISTRAR) (# / ITAT, MUMBAI