ACIIT, NAVSARI V. NARAN LALA PRIVATE LIMITED, NAVSARI

ITA 581/SRT/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2467 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-02-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 19-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SITA RAM MEENA
• Assessee Lawyers: MEHUL K. PATEL
• Keywords: Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 581/SRT/2019 (AY 2011-12) (Hearing in Virtual Court) Assistant Commissioner of Income-tax, Navsari, Room No.302, Aaykar Bhavan, Nr. Charpool Police Chowki, Lunsikui, Navsari-396445 Vs M/s Naran Lala Pvt. Ltd. Nr. Bank of India Mota Bazar, Nr. Railway Goods Yard, Navsari-396445 PAN : AAACN 7719 C Appellant /Revenue Respondent /assessee Assessee by Shri Mehul K Patel, A.R Revenue by Shri Sita Ram Meena – Sr-DR Date of hearing 23.02.2022 Date of pronouncement 23.02.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income tax (Appeals) hereinafter called “ld CIT(A)”-Valsad dated 11.10.2019 for assessment year (AY) 2011-12, which in turn the assessment order under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 08.10.2013. The Revenue has raised the following grounds of appeal:- “i) On the facts in the circumstances of the case whether , the ld. CIT(A) has erred by deleting the addition of Rs.1,85,24,060/- on account of retention money even though the matter has not been verified whether or not the retention money has been offered in subsequent years. ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 2 ii) It is, therefore, prayed that the order of the CIT(A), be set-aside and that the order of Assessing Officer be restored.” 2. Brief facts of the case are that assessee is a company and engaged in the manufacture of industrial plant and alcohol based chemical plants and equipments including “Ethyl Acetate Plant’. The assessee filed its return of income for assessment year (AY) 2011-12 on 28.09.2011 declaring total income at Rs.2.02 crores. The case of assessee was selected of scrutiny and assessment was completed under section 143(3) of the Act. The Assessing Officer during assessment, on examination of books of account found that assessee-company has reduced an amount of Rs.1.85 crores from its sale being an amount of ‘retention money’ retained by the customers out of the contract amount. The assessee was show caused vide order-sheet dated 10.09.2013 as to why the said amount should not be added to the total income of assessee. The assessee filed its reply dated 17.09.2013. The contents of which extracted by Assessing Officer in para-5.1 of his order. In the reply, assessee stated that the assessee-company engaged in business of manufacture of industrial plant & machinery in particular distillery and alcohol based chemical ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 3 plants and equipments including ‘Ethyl Acetate plant’. These plants are sold to manufacturers of alcohol and other chemicals to manufacture of such plants take a long time. The assessee-company gets turn-key contracts under which the assessee has to manufacture the plant on the basis of customer’s requirements, install the same at the premises of the customer and gets commission for the same. In the guarantee period, the assessee has to ensure that that the plant so manufactured and installed worked properly and customers retain 10% or thereabout as “retention money” out of contract amount. The assessee released the retention money after specified guarantee period, which ranges from 3 to 12 months after the commissioning the plant. If the defects are found in the working of the plant, the assessee used to attend and rectified the defects for which no separate charges can be made for the defects. The assessee explained that normal terms for the payments in such contracts are that price payable according to the terms of payment 10% at the time of signing the agreement against submission of indemnity bond/advance bank guarantee. 15% after meeting submission ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 4 certain basic and details engineering documents or submission of P.O copies of certain major purchases or long delivery items. 65% against dispatches on provision-rate basis and 10% within 30 days after commissioning and or performance test against bank guarantee for like amount towards performance guarantee to be effective for twelve months from the date of commissioning. The experience of the company was that the balance of the full amount which was specified in the agreement with the customer i.e. retention money was normally not received because he customer raised some issues about the performance of the machinery and tried to settle the payment of the last instalment by reducing the amount payable. In some cases, the amount not received or delayed by 12 months or more. The assessee prepared the bill for the entire amount of the price as per agreement with sales tax, excise duty on the entire amount because the duty and taxes were payable on the entire sum when the plant was installed. However, the customer made payment in instalments and the balance of 10% which was the retention money was not paid until the performance of the machinery ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 5 after commissioning the same was up to satisfaction of the customer. The assessee stated that the customer reduced the agreement money or did not pay the retention money for one reason or the other. It was submitted that the retention money which was due for payment after the plant was commissioned and worked for a certain period cannot be considered as income of the assessee as the amount did not accrue or become due at that time. In support of the explanation, assessee also relied upon case law of Hon'ble Calcutta High Court in the case of CIT vs. Simplex Concrete Piles (India) Pvt. Ltd. reported in 70 ITD 109 (Cal) and various decisions. The assessee further explained that during the year, the assessee executed a contract on which Rs.1.85 crores is the retention money retained by customers in majority of bills for 12 months and that above amount has been shown as income in the subsequent year. The assessee explained that when retention money was received it was shown in AYs 2012-13 and 2013-14 i.e. Rs.1.38 crores and Rs.46.32 lakhs respectively. The copy of receipt of retention money was also furnished. ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 6 3. The contention of assessee was not accepted by Assessing Officer by taking view on verification of books of account, Assessing Officer noted that full retention money had been received by assessee in subsequent year and deduction is made by the parties from the retention money. The expenditure relatable to the contract already completed is debited by assessee in the year in which the expenditure incurred that no liabilities accrue on account of retention money. Accordingly, the amount of said retention money was added back to the total income of assessee. Before, assessing officer the assessee requested that in case the amount of Rs.1.85 crores is taxed in the year than they may be allowed retention money for subsequent assessment year as amended the income was shown by assessee in subsequent year also. The submission of assessee was not accepted by Assessing Officer without giving any reason. 4. On appeal before Ld. CIT(A), the assessee filed detailed written submission. In the submission, the assessee stated that similar disallowance / addition was made by Assessing Officer, though on appeal before appellate commissioner such addition ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 7 was upheld in AYs 2002-03, 2005-06, 2008-09 & 2010-11 respectively. However, on further appeal before Tribunal, the issue was restored back to the file of Assessing Officer for AY 2002-03 in ITA No.1977/AHD/2011 dated 27.03.2015, for AY 2005-06 in ITANo.2600/AHD/2011 dated 12.06.2015, for AY 2008-09 in ITA No.1774/AHD/2011 dated 10.04.2015 and for AY 2010-11 in ITA No.2044/AHD/2011 dated 20.06.2016. The Tribunal in its order directed the assessing officer to decide the issue in the light of decision of Hon’ble Supreme Court in Rotrock Control India Ltd Vs CIT (314 ITR 62 SC), Punjab & Haryana High Court in CIT Vs Subrat Datta Chaudhary (197 Taxman 71). The Assessing Officer in his order giving effect passed under section 143(3) read with section 254 dated 19.12.2016, accepted the contention of assessee and no addition on account of retention money was added in all the years. 5. The Ld. CIT(A) after considering the submission of assessee and referring other various judicial decisions held that in the setting aside assessment orders under section 143(3) r.w.s. 254 of the Act in assessee’s own cases for assessment years ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 8 2002-03, 2005-06, 2008-09 & 2010-11 in ITA’s No. 1977, 2600,1774 & 2044/Ahd/2011 respectively and no addition is made relating to retention money. Thus, Ld. CIT(A) find that there is no justification to sustain the addition pertaining to the year under consideration. Aggrieved by the order of Ld. CIT(A), the Revenue has filed present appeal before this Tribunal. 6. We have heard the submissions of Ld. Senior Departmental Representative (Sr. DR) for the Revenue and Ld. Authorized Representative (AR) for the assessee. The Ld. Sr.DR for the Revenue submits that during the assessment, the Assessing Officer find that the full amount of retention money was received by assessee in subsequent assessment year of Rs.1.38 crores in AY 2012-13 and Rs.46.32 lakhs in AY 2013- 14 respectively. Further, the expenditure relatable to the contract was completed debited to the profit and loss account for the year under reference. On the basis of attributable whereas the assessee received retention money of Rs.1.85 crores on sale on the ground that retention money was retained by customer on contract. The Ld. Sr.DR submits that ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 9 Ld. CIT(A) in the impugned order allowed the appeal of assessee on his observation that addition on account of retention money was not made by Assessing Officer in setting aside theism order passed under section 143(3) r.w.s. 254 of the Act in assessee’s own cases for AYs 2002-03, 2005-06, 2008-09 & 2010-11 respectively. Accordingly, Ld. CIT(A) took his view that there is no justification in sustaining the addition of retention money for the year under consideration and deleted the said addition of retention money. The Ld. Sr.DR submits that as a matter of consistently the issue should have been restored to the file of Assessing Officer and that the Ld. CIT(A) has not followed the principle of consistency rather he himself allowed relief to the assessee. 7. On the other hand, Ld. AR of the assessee submits that ground of appeal, in fact the ground of appeal raised by the revenue is covered by the decision of Tribunal in assessee’s own cases for earlier years, wherein the Tribunal restored the similar issue back to the file of Assessing Officer and the Assessing Officer in his order giving effect in all four assessment years and has not made any addition on account ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 10 of similar retention money in AYs 2002-03, 2005-06, 2008-09 & 2010-11 respectively. The Ld. AR for the assessee submits that copy of the decisions of Tribunal and the order giving effect passed by Assessing Officer in all years is already on record. 8. We have considered the rival submissions of both the parties and have gone through the orders of authorities below. We have also deliberated the order of Tribunal in AYs 2002-03, 2005-06, 2008-09 & 2010-11. The detail of the order of Tribunal and the order giving effect by Assessing Officer are as under:- A.Y ITA No. Date of order AO's order u/s143(3) r.w.s 254 2002-03 1977/Ahd/2011 27.03.2015 19.12.2016 2005-06 2600/Ahd/2011 12.06.2015 19.12.2016 2008-09 1774/Ahd/2011 10.04.2015 19.12.2016 2010-11 2044/Ahd/2011 20.06.2016 31.10.2017 9. On perusal of the order giving effect passed by Assessing Officer, we find that on similar issues in all four earlier years (supra), the Assessing Officer himself accepted the contention of assessee on the issue of retention money and no addition ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 11 was made. We find that Ld. CIT(A) while granting relief to the assessee specifically mentioned that Assessing Officer himself has not addition any addition on account of retention money in order giving effect in all cases vide his order dated 19.11.2016. 10. We find that despite accepting the contention of the assessee in all earlier in his own order on 19.12.2016, filed present appeal on similar issue on 20.12.2019. Before us Ld. Sr.DR for the Revenue vehemently argued and insisted that principle of consistency should have been followed by ld CIT(A) and now the issue be restored to the file of assessing officer. We are unable to persuade ourselves on the submission of Ld. Sr.DR for the revenue, as the Assessing Officer himself deleted the similar addition by accepting the contention of assessee on the retention money and again filed the appeal on the same issue. Therefore, we do not find any infirmity in the order passed by Ld. CIT(A). Accordingly, we affirm the same. We order accordingly. 11. In the result, the appeal of the Revenue is dismissed. ITA No.581/SRT/2019 (A.Y.11-12) M/s Naran Lala Pvt. Ltd. 12 Order pronounced on 23/02/2022 in the open court and by placing the result on the Notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 23/02/2022 Dkp. Out Sourcing P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)-Valsad 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Assistant Registrar, ITAT, Surat True copy/