JCIT 25(2), MUMBAI V. MIRA CONSTRUCITON, MUMBAI

ITA 5663/MUM/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2103 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SATISH MANKOSKAR
• Keywords: Question of law
• Section: 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , ,, , !'# , ,, , $ BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SAKTIJIT DEY,JUDICIAL MEMBER /.ITA NO.5663/MUM/2012, % & /ASSESSMENT YEAR-2009-10 JCIT-25(2) C-11, PRATYAKSHAKAR BHAVAN R.NO.108, BANDRA KURLA COMPLEX, BANDRA(E) MUMBAI-400 051. VS M/S. MIRA CONSTRUCTION C-52, GANJAWALA APART MENT BUILDING,NO.2, 2 ND FLOOR, S.V.P. ROAD,BORIVALI(W),MUMBAI-92. PAN: AAPFM 7608 H ( / APPELLANT) ( / RESPONDENT) %'# /ASSESSEE BY : SHRI SASHI TULSIYAN / REVENUE BY : DR. SATISH MANKOSKAR / DATE OF HEARING : 01.10. 2015 / DATE OF PRONOUNCEMENT : 07 -10-2015 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) )*# ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.29-6-2012 OF CIT(A)-35, MU MBAI, THE ASSESSING OFFICER(AO), HAS RAISED FOLLOWING GROUNDS OF APPEAL : I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF THE RETENTION MONEY OF RS.1,02,25,7 31/- TO THE TURNOVER, WITHOUT CONSIDERING THE FACT THAT THE TDS WAS DEDUCTED ON THE GROSS AMOUNT AND SAME HAS BEEN CLAIMED AS CREDIT BY THE ASSESSEE IN RELEVANT ASSESSMENT YEAR. THE LD.C IT(A) ALSO FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTIN G, AND AS SUCH THE RETENTION MONEY IN CONSIDERATION HAD ACCRUED DURING THE PERIOD UNDER QUESTION AND THE FACT THAT IN THE PRESENT CASE THE CONTRACTUAL WORK WAS NOT PENDING COMPLETI ON, BUT COMPLETED. II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION ON THE GROUND OF INFORMATION IN FORM 2 6AS OF RS.1,15,050/- WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAD FAILED TO ADVANCE ANY E VIDENCE IN THIS REGARD DURING THE ASSESSMENT PROCEEDINGS. III) ON THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE ON THE GROUND OF LABOUR CHARGES WITHOUT APPRECIATING THE FACT THAT PAYMENTS HAD BEEN MADE BY CASH AND NOT ALL THE VOU CHERS WERE PRODUCED FOR VERIFICATION, AND THE FACT THAT THE ADDITION WAS MADE ON REASONABLE BASIS AS THE EXPENSES WERE ON A HIGHER SIDE. ASSESSEE FIRM, ENGAGED IN THE BUSINESS OF CIVIL CON STRUCTION, FILED RETURN OF INCOME ON 30.9.09 DECLARING INCOME OF RS.83.78 LACS. THE AO COMPLETED THE ASSESSMENT ON 28.12.2011 U/S. 143(3) OF THE ACT DETERMINING THE INCOME OF THE ASS ESSE AT RS.1,90,51,230/-. 2. THE FIRST GROUND OF APPEAL PERTAINS TO RETENTION MO NEY AMOUNTING TO RS.1.02 CRORES.DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT ON COM PLETED CONTRACTS THE ASSESSEE WOULD BE SUBMITTING FINAL BILL, THAT BOMBAY MUNICIPAL CORPOR ATION (BMC) WOULD WITHHOLD A CERTAIN AMOUNT UNDER THE HEAD RETENTION MONEY, THAT THE ASS ESSEE CLAIMED THAT THE SAID AMOUNT NEVER ACCRUED IN TERMS OF THE CONTRACT AND METHOD OF ACCO UNTING FOLLOWED BY IT. HOWEVER, THE AO DID NOT AGREE WITH THE PROPOSITION AND HELD THAT TH E CONTRACTS WERE ALREADY OVER, THAT FINAL BILLS WERE SUBMITTED BY THE ASSESSEE AFTER THE WORK WAS OVER, THAT THE TAX WAS DEDUCTED ON THE BASIS OF FULL AMOUNT, THAT IT WAS FOLLOWING MERCANT ILE SYSTEM OF ACCOUNTING, THE RETENTION 5663/12 MIRA CONSTRUCTION A.Y.09-10 2 MONEY WAS ASSESSABLE IN THE YEAR UNDER APPEAL. HE R EFERRED TO VARIOUS CASES AND FINALLY MADE AN ADDITION OF RS.1.02 CRORES TREATING IT AS A PART OF THE TURNOVER. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, TH E ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM, IT WAS ARGUED THAT UNDER THE TERMS OF CONTRACT IT HAD TO SUBMIT THE BILLS DEPENDING ON THE STAGE OF C OMPLETION, THAT THE FINAL BILL WAS SUBMITTED ON COMPLETION OF THE CONTRACT, THAT BMC WOULD NOT R ELEASE FULL AMOUNT, THAT IT WOULD APPOINT INSPECTION TEAM TO INSPECT THE WORK DONE BY THE ASS ESSEE, THAT THE RETENTION MONEY WAS RECEIVED ONLY AFTER CERTIFICATE WAS ISSUED BY THE T EAM OF BMC, THAT RETENTION MONEY WAS DEDUCTED BY BMC AS PER THE AGREEMENT ENTERED INTO B Y THE ASSESSEE, THAT RETENTION MONEY IS REFUNDED DURING THE PERIOD OF 3-7 YEARS OF COMPLETI ON OF THE WORK, THAT IT DID NOT ACCRUE OR BECAME DUE TO IT AS SOON AS THE FINAL BILL WAS SUBM ITTED, THAT GETTING THE RETENTION MONEY WAS CONTINGENT AND UNCERTAIN.THE ASSESSEE RELIED UPON T HE CASE OF SIMPLEX CONCRETE PILES (INDIA) P. LTD. (179 ITR 8) AND IGNIFLUID BOILERS INDIA LTD . (283 ITR 295) AND ASSOCIATED CABLES PVT. LTD. (286 ITR 596).AFTER CONSIDERING THE SUBMI SSION OF THE ASSESSEE AND THE ASSESSMENT ORDER, THE FAA HELD THAT THE ASSESSEE WAS EXECUTING CONTRACTS WHICH PROVIDED FOR WITHHOLDING OF RETENTION MONEY FOR A PERIOD OF 3-7 YEARS ON COMPLETION OF THE WORK, THAT THE AMOUNT BECAME PAYABLE WHEN THE EXECUTED CONTRACT WA S FOUND TO BE OF A STIPULATED QUALITY AND STANDARD, THAT THE RETENTION MONEY DID NOT BECO ME DUE AT ALL IN THE YEAR IN WHICH IT WAS RETAINED, THAT IT WAS CONTINGENT ON SATISFACTORY PE RFORMANCE FOR A CERTAIN PERIOD, THAT THE AMOUNT OF RETENTION MONEY WOULD BECOME DUE AND PAYA BLE ONLY AFTER THE LOCAL AUTHORITY AWARDING THE CONTRACT WAS SATISFIED ABOUT THE PERFO RMANCE OF THE EXECUTED CONTRACT FOR A SPECIFIED PERIOD.FOLLOWING THE DECISION OF THE HIGH COURT, THE FAA DELETED THE ADDITION. 4. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE (DR) REF ERRED TO THE ORDER OF THE AO.THE AUTHORISED REPRESENTATIVE (AR) RELIED UPON THE CASE S OF ASSOCIATED CABLES PVT. LTD.(SUPRA), IGNIFLUID BOILERS INDIA LTD.(SUPRA) AND SIMPLEX CON CRETE PILES (INDIA) P. LTD.(SUPRA). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.WE FIND THAT IN CASE OF ASSOCIATED CABLES LTD.(SUPRA), THE HON'BLE JURISDICTIONAL HIGH COURT HAS DEALT THE ISSUE AS UNDER: THE QUESTION OF LAW SOUGHT TO BE RAISED IN THIS AP PEAL IS AS TO WHETHER THE RETENTION MONEY COULD BE CONSIDERED TO BE THE INCOME OF THE ASSESSE E IN THE YEAR IN WHICH THE AMOUNT WAS RETAINED. THE INCOME-TAX APPELLATE TRIBUNAL HAS REF ERRED TO A JUDGMENT OF THE TRIBUNAL IN ASSOCIATED CABLES P. LTD. V. DEPUTY CIT [1994] 20 6 ITR (AT) 48 (BOM). MR. SATHE APPEARING FOR THE RESPONDENT HAS, HOWEVER, DRAWN OUR ATTENT ION TO TWO JUDGMENTS, VIZ., OF THE CALCUTTA HIGH COURT AND THE MADRAS HIGH COURT. THE CALCUTTA HIGH COURT JUDGMENT IS REPORTED IN CIT V. SIMPLEX CONCRETE PILES (INDIA) P. LTD. (1989) 17 9 ITR 8. A DIVISION BENCH OF THE CALCUTTA HIGH COURT IN THAT MATTER HAS HELD THAT THE PAYMENT OF RETENTION MONEY IN THE CASE OF CONTRACT IS DEFERRED AND IS CONTINGENT ON SATISFACTORY COMPL ETION OF CONTRACT WORK. THE RIGHT TO RECEIVE THE RETENTION MONEY IS ACCRUED ONLY AFTER THE OBLIG ATIONS UNDER THE CONTRACT ARE FULFILLED AND, THEREFORE, IT WOULD NOT AMOUNT TO AN INCOME OF THE ASSESSEE IN THE YEAR IN WHICH THE AMOUNT IS RETAINED. THE OTHER JUDGMENT RELIED UPON IS IN THE CASE OF CIT V, LGNIFLUID BOILERS (I) LTD. REPORTED IN [2006] 283 ITR 295 (MAD). IN THAT JUDGM ENT ALSO, A DIVISION BENCH OF THE MADRAS HIGH COURT HAS HELD THAT THE AMOUNT RETAINED DOES NOT ACCRUE TO THE ASSESSEE AND, THEREFORE, THE ASSESSEE WOULD NOT BE LIABLE. IN VIEW OF WHAT IS STATED ABOVE, THERE IS NO REASO N TO ENTERTAIN THE APPEAL, THE APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE WE DECIDED THE FIR ST GROUND OF APPEAL AGAINST THE AO. 5663/12 MIRA CONSTRUCTION A.Y.09-10 3 6. NEXT GROUND OF APPEAL IS ABOUT ADDITION OF RS.1.15 LAKHS ON THE BASIS OF INFORMATION SHOWN IN FORM 26 AS.BEFORE THE AO,THE ASSESSEE EXPLAIN ED THAT THE FIRM CAME IN TO EXISTENCE W.E.F.01.07.2008 AND THE AMOUNT DID NOT RELATE TO T HE JOBS PERFORMED BY IT,THAT AMOUNT RELATED WITH IT WAS NOT TO BE ASSESSED IN ITS HANDS. THE A O REJECTED THE CLAIM MADE BY THE ASSESSEE. 6.1. IN THE APPELLATE PROCEEDINGS BEFORE THE FAA,THE AS SESSEE STATED THAT THE FIRM COULD NOT BE ASSESSED FOR TURNOVER THAT TOOK PLACE PRIOR TO I TS COMING IN TO EXISTENCE,THAT EARLIER BUSINESS WAS DONE IN PROPRIETARY STATUS,THAT THE IN COME WAS DULY DISCLOSED IN THE HANDS OF PROPRIETARY CONCERN,THAT THERE WAS ANOTHER JOINT VE NTURE(JV) WHICH HAD DONE SOME BUSINESS AND TURNOVER WAS RELATED TO THAT JV.AFTER CONSIDERI NG THE SUBMISSION,THE FAA HELD THAT FROM THE SHEET OF 26A IT WAS EVIDENT THE FIRST CREDIT OF RS.18,027/- RELATED TO 02.06.2008,THAT ON THAT DATE THE ASSESSEE -FIRM HAD NOT COME IN TO EX ISTENCE,THAT AMOUNT COULD NOT BE CONSIDERED IN ITS HANDS,THAT THE SECOND CREDIT WAS OF 26.03.20 09 AND IT PERTAINED TO JV,THAT AMOUNT WAS OFFERED FOR TAXATION BY THAT ASSESSEE ,THAT THE E XPLANATION OF THE ASSESSEE WAS CONVINCING. HE DELETED THE ADDITION MADE BY THE AO. 6.3. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR) AND T HE AUTHORISED REPRESENTATIVE (AR)SUPPORTED THE ORDER OF THE AO AND THE FAA RESPE CTIVELY.AFTER CONSIDERING THE RIVAL SUBMISSIONS,WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY INFIRMITY.AFTER GOING THROUGH THE ENTRIES OF SHEET 26A HE HAS GIVEN CATEGORICAL FINDINGS OF FACT.THEREFORE,ENDORSING HIS VIEWS WE DECIDE GROUND NO.2 AGAINST THE AO. 7. LAST GROUND OF APPEAL IS ABOUT DELETION OF ADDITION ON ACCOUNT OF LABOUR CHARGES.THE AO FOUND THAT THE ASSESSEE HAD MADE PAYMENTS TO LAB OURS THROUGH MUKADAMS.IN THE APPELLATE PROCEEDINGS,IT WAS ARGUED THAT ASSESSEE WAS A CI VIL CONTRACTOR,THAT THE VERY NATURE OF THE BUSINESS WAS SUCH THAT IT HAD TO SPEND MONEY IN CAS H. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,THE FAA REDUCED THE DISALLOWANCE TO 20% OF THE TOTAL EXPENDITURE. 7.1. BEFORE US,THE DR RELIED UPON THE ORDER OF THE AO.TH E AR CONTENDED THAT THE AO HAD MADE DISALLOWANCE ON AD HOC BASIS,THAT WHEREVER IT WAS NECESSARY IT HAD DEDUCTED TDS,THAT EXPENSES WERE RELATED TO THE DAY TO DAY BUSINESS OF THE ASSESSEE.WE HAVE HEARD THE RIVAL SUBMISSION.WE FIND THAT THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE, THAT HE HAD MADE ONLY AD HOC ADDITION,THAT THE ASSESSEE HAD FILED REQUISITE DETAILS BEFORE THE AO, THAT THE FAA HAD UPHELD THE ADDITION UPTO 20% OF TH E DISALLOWANCE MADE BY THE AO, THAT THE AO HAD NOT GIVEN ANY REASON FOR MAKING THE DISALLOW ANCE.THEREFORE,CONSIDERING THE ENTIRETY OF THE FACTS, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT REQUIRE ANY INTERFERENCE FROM US. CONFIRMING HIS ORDER WE DECIDE GROUND NO. 3 AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH OCTOBER,2015. 7. '# ,2015 SD/- SD/- ( !'# / SAKTIJIT DEY) ( ( / RAJENDRA) ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 07. 1 0. 2015 . . . .. . JV.SR.PS. +# ,&# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 5663/12 MIRA CONSTRUCTION A.Y.09-10 4 3. THE CONCERNED CIT(A)/ !$+ , , 4. THE CONCERNED CIT / !$+ , 5. DR A BENCH, ITAT, MUMBAI / . , , . . . 6. GUARD FILE/ %1 //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.