ACIT, Bijapur V. Shri. Ajit N. Kulkarni, Bijapur

ITA 614/BANG/2010

• Counselvise Citation: 61421114 RSA 2010
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-01-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 03-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEERA SRIVASTAV
• Assessee Lawyers: ASHOK KULKARNI
• Keywords: Depreciation; Revised return; Reassessment proceedings
• Section: 44AD; 143(3); 148; 263

Judgement Text

PAGE 1 ITA NO.614/BANG/2010 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A. NO.614/BANG/2010 (ASSESSMENT YEAR : 2003-04) THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, BIJAPUR. . APPELLANT. VS. SHRI AJIT N. KULKARNI, PROP. SHREE COMPUTER, GODBOLE MALA, BIJAPUR. .. RESPONDENT. PAN ACVPK0754G APPELLANT BY : SMT. MEERA SRIVASTAV. RESPONDENT BY : SHRI ASHOK KULKARNI. DATE OF HEARING : 03.01.2012. DATE OF PRONOUNCEMENT : O R D E R PER N.K. SAINI, A.M. : THIS IS AN APPEAL BY THE DEPARTMENT AND IS DIRECT ED AGAINST THE ORDER DATED 19.2.2010 OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), BELGAUM. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THE AP PEAL : 1. THE ORDER OF CIT(A) IS OPPOSED TO LAW AND FA CTS OF THE CASE. 2. THE CIT(A) ERRED IN RESTRICTING AD DITION OF RS.7,71,042 MADE ON ACCOUNT OF DISCREPANCY IN CONTRACT BILLS ACCOUNTED TO RS.26,652. PAGE 2 ITA NO.614/BANG/2010 2.1 THE CIT(A) FAILED TO NOTE THAT, OUT OF TOTAL C ONTRACT RECEIPTS AS PER TDS CERTIFICATE ISSUED BY C.E.O., BANGALORE AMOUNTING T O RS.2,22,62,917 ASSESSEE DID NOT OFFER A SUM OF RS.20,70,041 WHICH WAS CLAIM ED BY ASSESSEE AS OFFERED TO TAX ON ACCRUAL BASIS DURING EARLIER ASSESSMENT Y EAR 2002-03, THOUGH ONLY RS.13 LAKHS WAS OFFERED TO TAX IN RESPECT OF ABOVE PARTY. 2.2 THE CIT(A) FAILED TO NOTE THAT, AS PER ASSESS EES LETTER DT.17.8.2004 FILED DURING APPELLATE PROCEEDINGS FOR ASSESSMENT YEAR 20 02-03, THE AMOUNT OF RS.18 LAKHS OFFERED TO TAX ON ACCRUAL BASIS IN ASSE SSMENT YEAR 2002-03 AND SHOWN AS RECEIVABLE IN BALANCE SHEET FOR YEAR ENDIN G 31.3.2002 AND THE SAME CONSISTS OF RS.13 LAKHS RECEIVABLE FROM CEO, BANGAL ORE AND BALANCE OF RS.5 LAKHS RELATES TO AMOUNT RECEIVABLE FROM CEO, BANGAL ORE. 2.3 THE CIT(A) ERRED IN HOLDING THAT, ENTIRE AMOUN T OF RS.20,71,041 NOT DECLARED BY ASSESSEE DURING CURRENT YEAR HAS BEEN O FFERED TO TAX IN EARLIER ASSESSMENT YEAR THOUGH, AS PER ASSESSEES OWN LETTE R ONLY RS.13 LAKHS WAS OFFERED TO TAX IN EARLIER ASSESSMENT YEAR AND THUS, ERRED IN DELETING BALANCE AMOUNT CORRECTLY BROUGHT TO TAX BY A.O. 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, THE ORDER OF CIT(A) ON THE ABOVE ISSUE MAY BE SET A SIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. FROM THE ABOVE GROUNDS IT IS GATHERED THAT THE G RIEVANCE OF THE DEPARTMENT RELATES TO THE RELIEF ALLOWED TO THE ASSESSEE OUT O F THE ADDITIONS OF RS.7,71,042 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISCREPANCY IN CONTRACT BILLS. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSI NESS OF COMPUTER RELATED SERVICE AND FILED RETURN OF INCOME ON 1.12.2003 DECLARING AN IN COME OF RS.25,01,030 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX AC T, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) ON 25.3.2004. SUBSEQUENTLY, THE ASSESSM ENT WAS REOPENED BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT ON THE POINT OF TAXING THE EXCESS DEPRECIATION OF RS.10,93,781 CLAIMED BY THE ASSESSEE. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE REQUESTED TO TREAT RETURN OF INCOME FILED ON 1.12.2 003 AS FILED IN RESPONSE TO THE NOTICES PAGE 3 ITA NO.614/BANG/2010 UNDER SECTION 148 DATED 1.4.2004. FINALLY THE ASSE SSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 ON 28.3.2006 BY ARRIVING AT ASSES SED INCOME OF RS.30,68,577. THE ASSESSMENT WAS REOPENED UNDER SECTION 263 BY THE CI T VIDE ORDER DATED 24.3.2008. THE CIT FOUND THAT THE ASSESSMENT ORDER PASSED BY THE A SSESSING OFFICER WAS ERRONEOUS ON SEVERAL POINTS, ONE OF WHICH WAS DISCREPANCIES IN C ONTRACT RECEIPTS. IN OBEDIENCE TO CITS ORDER, THE ASSESSING OFFICER HAS REOPENED THE ASSES SMENT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE TDS CERTIFICATE IN FORM NO.16A ISSUED BY THE CHIEF ELECTORAL OFFICER, BANGALORE ME NTIONED GROSS RECEIPTS OF RS.2,22,62,917, BUT THE PROFIT AND LOSS ACCOUNT REV EALED THAT THE ASSESSEE HAS ADOPTED GROSS RECEIPTS OF RS.2,08,97,210. THE ASSESSING OF FICER HAS ASKED THE ASSESSEE TO RECONCILE THE ABOVE FIGURE. IN RESPONSE TO THAT, T HE ASSESSEE FILED WRITTEN SUBMISSION DATED 26.12.2008 WHICH READS AS UNDER : DIFFERENCE OF RS.7,71,042 IN BILLS RECEIVABLE AMOUN T AS SHOWN IN BALANCE SHEET OF F.Y.2001-02 (A.Y. 2002-03) AND AS ADOPTED AS OPENING BALANCE OF F.Y. 2002-03 (A.Y. 2003-04) : IN REFERENCE TO ABOVE CITED SUBJECT, I BEG TO STATE AS FOLLOWS. BEFORE PROVIDING EACH POIN T-WISE EXPLANATION IN REFERENCE TO ORDER U/S.263, I EARNESTLY BRING BEFOR E YOUR HONOR CERTAIN FACTS WHICH LED FOR MISTAKES AND CONFUSION IN ACCOUNTS. A) TILL A.Y. 2002-03, I WAS FILING R.I. UNDER SECTI ON 44AD DECLARING THE INCOME @ 8% OF RECEIPTS AND THE SAME WAS EVEN ACCEPTED BY THE DEPARTMENT. SINCE, INCOME WAS OFFERED UNDER SECTION 44AD, BOOKS OF ACC OUNT WERE NOT MAINTAINED FOR ALL THE EARLIER YEARS. B) HOWEVER FOR THE FIRST TIME, FOR A.Y. 2003-04, MY TOTAL TURNOVER EXCEEDED RS.40 LAKHS AND AS SUCH, I WAS REQUIRED TO WRITE TH E BOOKS OF ACCOUNT, FOR WHICH OPENING BALANCES WERE REQUIRED TO BE ADOPTED. C) SINCE AS EXPLAINED ABOVE, BOOKS WERE NOT WRITTEN FOR EARLIER YEARS, THE OPENING BALANCES OF ALL RELEVANT ACCOUNTS WERE TAKEN ON THE BASIS OF INFORMATION THEN PAGE 4 ITA NO.614/BANG/2010 AVAILABLE WITH ME WHICH WAS ASCERTAINED ON APPROXIM ATION BASIS RATHER THAN AN INTENSIVE CALCULATION. THIS WAS DONE TO SEE THAT, I AM IN A POSITION TO COMPLETE ACCOUNTS WITHIN TIME AND SO ALSO GET ACCOUNTS AUDIT ED WITHIN THE STIPULATED TIME AS PER I.T. ACT, 1961. AT THIS JUNCTURE, I ALSO CALCU LATED VALUE OF AMOUNTS RECEIVABLE FROM VARIOUS CLIENTS FOR WORKS DONE IN EARLIER YEAR S AND SAME WAS ADOPTED AT RS.30,54,974.00 AS OPENING BALANCE. SO ALSO, IN CAS E OF COMPUTERS WDV AS ON 31.3.2002, VALUES OF ALL COMPUTERS IN EARLIER YEARS WAS ASCERTAINED ON THE BASIS OF INFORMATION THEN AVAILABLE AND DEPRECIATION FOR RES PECTIVE EARLIER YEARS WAS DEDUCTED THERE FROM. IN CASE OF OTHER ACCOUNTS ALS O, INCLUDING AMOUNTS RECEIVED FROM MY FATHER IN ALL EARLIER YEARS FROM HIS ANCEST RAL AND JOINT FAMILY AGRICULTURAL LANDS HAS BEEN SHOWN AS UNSECURED LOAN FROM MY HUF, SINCE IT WAS MY SHARE BELONGING TO MY JOINT FAMILY. D) IN THE MEAN TIME ASSESSMENTS FOR A.Y. 2002-03 & 2003-04 WERE REOPENED UNDER SECTION 148 AND THEN THE ASSESSING OFFICER CO NTENDED THAT SECTION 44AD IS NOT APPLICABLE TO ME AND SO ANY INCOME TO B E DECLARED SHOULD BE ON THE BASIS OF BOOKS OF ACCOUNT. E) IN RESPONSE TO NOTICE UNDER SECTION 148 FOR A.Y . 2003-04, I FILED A LETTER DATED 5.5.2004, REQUESTING TO TREAT ORIGINAL R.I. F ILED FOR A.Y. 2003-04 AS R.I. IN RESPONSE TO NOTICE UNDER SECTION 148 AND ALSO SP ECIFICALLY MENTIONED AT PARA (2) OF SAID LETTER THAT, I AM COMPILING THE ACCOUNT S FOR A.Y. 2002-03 AND INCASE, THERE ARE ANY CHANGES FOR SAID A.Y. 2002-03 , THE R.I. FOR A.Y. 2003-04, SHALL BE SUBJECT TO SUCH CHANGES. F) AS SUCH FOR A.Y. 2002-03, I COMPILED BOOKS OF A CCOUNT ON THE BASIS OF BANK ENTRIES, SINCE MORE THAN 90% OF TRANSACTIONS WERE T HROUGH BANK, AND OTHER AVAILABLE RECORDS AND FILED REVISED R.I. FOR A.Y. 2 002-03. WHILE COMPILING THE ACCOUNTS FOR A.Y. 2002-03, I MYSELF FOUND THAT, THE RE WAS MISTAKE IN CALCULATING THE OPENING BALANCE OF COMPUTERS, WHICH I MYSELF BROUGHT TO THE NOTICE OF A.O. BY FILING REVISED R.I. FOR A.Y. 2002 -03. IN THE SAME WAY THERE WAS A SMALL DIFFERENCE IN AMOUNT SHOWN IN BILLS REC EIVABLE. EARLIER WHILE ASCERTAINING AMOUNT OF BILLS RECEIVABLE, I HAD NOT DONE BIFURCATION AMONGST AMOUNT RECEIVABLE FROM CEO, BANGALORE AGAINST WORK IN PROGRESS, EMD DEPOSITS RECEIVABLE AND BILLS RECEIVABLE FROM CEO AGAINST BI LLS ACTUALLY ISSUED AS AT 31.3.2002 I COULD BIFURCATE THESE RESPECTIVE AMOUNT S FOR A.Y. 2002-03 (F.Y. 2001-02) I WOULD BIFURCATE THESE RESPECTIVE AMOUNTS AND SO INSTEAD OF SHOWING ALL THESE BALANCES COMBINED, I BIFURCATED THEM AS B ILLS RECEIVABLE RS.18,00,000, CEO, BANGALORE RS.7,14,321, EMD DEPOSIT RS.5,14,000 TOTALING TO RS.30,28,321 WHEREAS OPENING BALANCE TAKEN BY ME FOR A.Y. 2003-0 4 WAS RS.30,54,974 LEAVING A BALANCE OF RS. 26,653.00. AS REGARDS RS.1 8,00,000 SHOWN IN THIS PAGE 5 ITA NO.614/BANG/2010 BALANCE SHEET, THIS REPRESENTS VALUE OF WORK IN PRO GRESS OF CEO, BANGALORE FOR WHICH STILL BILLS WERE NOT RAISED AS BILLS CAN BE R AISED ONLY IF THE WORK IS FULLY COMPLETED AND DELIVERED TO CEO, BANGALORE. 4. THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE C ONTENTION OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE EXPLAINED THAT THE DIFF ERENCE OF RS.20,71,042 PERTAINED TO THE ASSESSMENT YEAR 2002-03 FOR WHICH THE PAYMENTS WERE MADE IN THIS YEAR. HE, FURTHER POINTED OUT THAT AS PER THE LETTER DATED 17 .08.2004 FILED BEFORE THE THEN ASSESSING OFFICER DURING THE COURSE OF SCRUTINY PRO CEEDINGS, THE BILLS RECEIVABLE AS ON 31.3.2002 FROM CEO, BANGALORE WAS RS.13 LAKHS. HE, THEREFORE, ACCEPTED THE EXPLANATION OF THE ASSESSEE FOR RS.13 LAKHS AND REST OF THE REC EIPTS OF RS.7,71,042 RECEIVED FROM THE CEO, BANGALORE WAS BROUGHT TO TAX. 5. THE ASSESSEE CARRIED THE MATTER IN AP PEAL TO THE LEARNED CIT(A) AND FURNISHED LEDGER ACCOUNT, CONTRACT RECEIPTS ALONG WITH TDS CE RTIFICATE AND TRIED TO RECONCILE THE DIFFERENCE OF RS.7,71,042 ARRIVED BY THE ASSESSING OFFICER. THE RELEVANT SUBMISSIONS OF THE ASSESSEE AS MENTIONED IN PARA 4 (III) OF THE IM PUGNED ORDER OF THE LEARNED CIT(A) ARE REPRODUCED VERBATIM AS UNDER : III) DIFFERENCE OF RS.7,71,042.00 IN BILL RECEIVA BLE AMOUNT AS SHOWN IN BALANCE SHEET OF FY 2001-02 (ASSESSMENT YEAR 2002-03) AND A S ADOPTED AS OPENING BALANCE FOR FY 2002-03 (ASSESSMENT YEAR 2003-04) : 1. IN REFERENCE TO ABOVE CITED SUBJECT, I BEG TO STATE AS FOLLOWS. I FILED A LETTER WITH AO DATED 24-12-2008 THROUGH WHICH I BROUGHT TO HIS NOTICE THE FOLLOWING POINTS. B) I EARNESTLY BRING BEFORE YOUR HONOUR CERTAIN FAC TS WHICH LED FOR MISTAKES AND CONFUSION IN ACCOUNTS. PAGE 6 ITA NO.614/BANG/2010 C) TILL A . Y . 2002-2003 , I WAS FILING R . I . ULS 44AD DECLAR I NG THE INCOME @ 8% OF RECEIPTS AND THE SAME WAS EVEN ACCEPTED BY TH E DEPARTMENT . S I NCE , I NCOME WAS OFFERED ULS 44AD , BOOKS OF ACCOUNT WERE NOT MAINTAINED FOR ALL THE EARLIER YEARS . D) HOWEVER , FOR THE FIRST TIME , FOR A . Y . 2003-2004 , MY TOTAL TU R NOVER EXCEEDED RS . 40 . 00 LACS AND AS SUCH , I WAS REQU I RED TO W RITE THE BOOKS OF ACCOUNT , FOR WHICH OPENING BALANCES WERE REQUIRED TO BE ADOPTED . E) S I NCE AS E X PLA I NED ABOVE , BOOKS WERE NOT WR I T TEN F O R EA RLI E R YEARS , TH E OPEN I NG BALANCES OF ALL RELEVANT AC C OUNTS W ERE TAKEN ON THE BAS I S OF INFORMATION THEN AVAILABLE WITH ME WHICH WAS ASCERT AINED ON APPROMIXATION BASIS RATHER THAN AN INTENSIVE CALCULA T ION . THIS WAS DONE TO SEE THAT , I AM IN A POSITION TO COMPLETE ACCOUNTS WI THIN TIME AND SO ALSO GET ACCOUNTS AUDITED WITHIN THE STIPULATED T I ME AS PER I T ACT , 1961. AT THIS JUNCTURE I ALSO CALCULATED VALUE OF AMOUNTS RECEIVABLE FROM VARIOUS CLIENTS FOR WORKS DONE IN E ARLIER YEARS & SAME WAS ADOPTED AT RS . 30 , 54 , 974-00 AS OPENING BALANCE . SO ALSO , IN CASE OF COMPUTERS W DV AS ON 31-03-2002 , VALUES OF ALL COMPUTERS IN EARLIER YEARS WAS ASCERTAINED ON THE BASIS OF INFORMATION THEN AV AILABLE AND DEPRECIATION FOR RESPECTIVE EARLIER YEARS WAS DEDUCTED THERE FRO M. I N CASE OF OTHER ACCOUNTS ALSO , INCLUDING AMOUNTS RECEIVED FROM MY FATHER IN ALL EA RLIER YEARS FROM HIS ANCESTRAL AND JOINT FAMILY AGRICULTURAL LA NDS HAS BEEN SHOWN AS UNSECURED LOAN FROM MY HUF, SINCE IT WAS MY SHARE B ELONGING TO MY JOINT FAMILY. F) IN THE MEAN TIME ASSESSMENTS FOR A . Y . 2002-2003 & 2003-2004 WERE REOPENED U L S 148 AND THEN THE A . 0 . CONTENDED THAT SECTION 44AD I S NOT APPL I CABLE TO ME AND SO ANY INCOME TO BE DECLARED SHOULD BE ON THE BASIS OF BOOKS OF ACCOUNT . G) IN RESPONSE TO NOTICE U L S 148 FOR A . Y . 2003-2004 , I FILED A LETTER DATED 05 - 05-2004 , REQUESTING TO TREAT ORIGINAL R . I . FILED FOR A Y 2003-2004 AS R . I . IN RESPONSE TO NOTICE U L S 148 AND ALSO SPECIFICALLY MENT I ONED AT PARA ( 2 ) OF SAID LETTER THAT , I AM COMPILING THE ACCOUNTS FOR A . Y . 2 002 - 2003 AND IN CASE , THERE ARE ANY CHANGES FOR SAID A . Y . 2002-2003 , THE R . I . FOR A . Y . 2003-2004 , SHALL BE SUBJECT TO SUCH CHANGES . H) A S S UCH FOR A . Y . 2002 - 2003 I COMPILED BOOKS OF ACCOUNT ON THE BASIS OF BANK E NTRI E S , S I NCE MORE THAN 90% OF TRANSACTIONS WERE THROUGH BANK , AND OTHER AVAILABLE RECORDS AND FILED REVISED R . I . FOR A . Y . 2002-2003 . WHILE COMPILING THE ACCOUNTS FOR A . Y . 2002 - 2003 , I MYSELF PAGE 7 ITA NO.614/BANG/2010 FOUND THAT , THERE WAS MISTAKE IN CALCULATING THE OPENING BALANC E OF COMPUTERS , WHICH I MYSELF BROUGHT TO THE NOTICE OF A . 0. BY FILING REVISED R . I . FOR A . Y. 2002-2003. IN THE SAME WAY THERE WAS A SMALL DIFFERENCE IN AMOUNT SHOWN IN BILLS RECEIVABLE . EARLIER WHILE ASCERTAINING AMOUNT OF BILLS RECEIVABLE , I HAD NOT DONE BIFURCATION AMONGST AMOUNT RECEIVABLE FROM CEO BANGALORE AGAINS T WORK IN PROGRESS , EMD DEPOSITS RECEIVABLE AND BILLS RECEIVABLE FROM C EO AGAINST BILLS ACTUALLY ISSUED AS AT 31-03-2002 . HOWEVER , WHILE PREPARING THE ACCOUNTS FOR A . Y. 2002-2003 (FY 2001-2002) I COULD BIFURCATE THESE RESPECTIVE AMOUNTS AND SO INSTEAD O F SHOWING ALL THESE BALANCES COMBINED , I BIFURCATED THEM AS BILLS RECEIVABLE RS . 18 , 00 , 000-00 , CEO , BANGALORE RS. 7 , 14 , 321-00 AND EMD DEPOSIT RS . 5 , 14 , 000-00 TOTALING TO RS . 30 , 28 , 321-00 WHEREAS OPENING BALANCE TAKEN BY ME FOR A . Y . 2003-2004 WAS RS . 30 , 54 , 974-00 LEAVING A BALANCE OF RS. 26,653-00 . AS REGARDS RS. 18 , 00 , 000-00 SHOWN IN THIS BALANCE SHEET , THIS REPRESENTS VALUE OF WORK IN PROGRESS OF CEO BANGALORE FOR WHICH STILL BILLS WERE NOT RAISED AS BILLS CAN BE RAISED ONLY IF THE WORK IS FULLY COMPLETED AND DELIVERED T O CEO BANGALORE . I) FURTHER , I HAD FILED MY LETTER DATED 18-06-2004 GIVING BIFURCATION AND RECONCILIATION FOR TDS CERTIFICATE ISSUED BY CEO BA NGALORE FOR RS. 2 , 22 , 62 , 917-00 . HOWEVER , THIS LETTER I HAD PREPARED ON THE BASIS OF ORIGINAL INFORMATION I HAD WITHOUT BOOKS OF ACCOUNT S FOR A Y 2002-2003 & BEFORE COMPILING THE ACCOUNTS FOR A Y 2002-2003 A S SAID ABOVE . THUS NOW IT DOES NOT HOLD GOOD SINCE I HAVE REVISED MY ACCOUNTS FOR A Y 2002-2003 . J) NOW , IN RESPECT TO THESE CHANGES I ONCE AGAIN GIVE BELOW THE RECONCILIATION STATEMENT OF ALL THESE FIGURES . FOR THIS I HAVE ENCLOSED LEDGER ACCOUNT OF CONTRACT RECEIPTS IN ANNEXURE-I & BILLS RECEIVABLE IN ANNEXURE-II AND XEROX COPY OF TDS CERTIFICATE ISSUED BY CEO BANGALORE ALONG WITH DETAILS OF BILLS IN ANNEXURE-I II . SO ALSO , I ENCLOSE COPY OF BALANCE SHEET AS AT 31-03-2002 ALREADY FILE D WITH YOU ALONG WITH R I FOR A Y 2002-2003 IN ANNEXURE-IV K) IN ANNEXURE - I & ANNEXURE-II , I HAVE RED MARKED ALL THOSE BILLS ALONG WITH NUMBERS IN RED INK TALLYING IN ANNEXURE-III NU MBERS , WHICH ARE RECEIVED FROM CEO , BANGALORE AND ALL THESE AMOUNTS EXACTLY TALLY WITH AMOUNTS & DETAILS IN ANNEXURE-II/ GIVEN BY CEO, BANGALORE , THE TOTAL BEING RS. 2,22,62,917-00 (A). THE FIGURES FOR RECEI PT OF EARLIER YEAR BALANCE RECEIVABLE SHOWN AS CEO BANGALORE RS. 7,14, 321-00 (B), UNDER CURRENT ASSETS UNDER APPLICATION OF FUNDS (ASSETS) HAVE BEE N ROUNDED BY RED INK. AMOUNTS OF EMD DEPOSITS RECEIVED DURING THE YEAR AR E UNDERLINED IN GREEN INK PAGE 8 ITA NO.614/BANG/2010 WHICH TOTALS TO RS.5,14,000 (C) CONSISTING OF TWO E NTRIES WHICH HAS BEEN DISCLOSED IN BALANCE SHEET AS AT 31.3.2002 AS EMD DEPOSITS UNDER CURRENT ASSETS UNDER APPLICATION OF FUNDS (ASSETS). FURTHE R RS.18,00,000 (D) IS SHOWN AS BILLS RECEIVABLE UNDER CURRENT ASSETS UNDER APPL ICATION OF FUNDS (ASSETS). FURTHER THERE ARE STILL UNMARKED FIGURES IN ANNEXURE-I AND ANNEXURE-II WHICH REPRESENT OTHER RECEIPTS RECEIVED DURING YEAR (WHICH ARE INCLUDED IN CONTRACT RECEIPTS RECEIVED RS.2,08,97,2 10 IN P & L ACCOUNT FILED ALONG WITH R.I. OF AY 2003-04) WHICH TOTALS TO RS.4 ,60,946 (E) NOW BASED ON THIS THE RECONCILIATION WOULD BE AS FOLLOWS. THERE IS DIFFERENCE OF RS.26,653.00, WHICH EXACTLY TALLY WITH DIFFERENCE S HOWN IN PARA (F) ABOVE WHICH PROVES CORRECTNESS OF THE RECONCILIATION STATEMENT. I HEREWITH VOLUNTARILY OFFER THE SAID DIFFERENCE OF RS.26,653.00 FOR TAXAT ION. PARTICULRS AMOUNTS TOTAL OF RECEIPT SIDE OF ANNEXURE-I 2 , 09 , 75 , 583 TOTAL OF RECEIPT SIDE OF ANNEXURE - II EXCLUDING 29 , 76 , 601 TRANSFER AMOUNT OF RS. 78,3731- TOTAL ( INCLUDING PREVIOUS Y EA R RECEIPTS TA X ED CONSISTING OF CEO BANGLORE AND BILLS RECEIVABLE 2,39,52,184 ALSO EMD DEPOSITS ALL SHOWN IN BALANCE SHEET OF 2002-2003 ) RS. LESS : INCOMES ALREADY TAXED DURING EARLIER YEAR EMD DEPOS I T WHICH IS OWN MONEY AND NOT INCOME INCLUDED IN ABOVE TOTALS . CEO BANGLORE (B) AS PER ABOVE PARA 7 , 14 , 321 BILLS RECEIVABLE (D) AS PER ABOVE PARA 18 , 00 , 000 EMD DEPOSITS (C) AS PER ABOVE PARA 5 , 14 , 000 30,28,321 ACTUAL NETT CONTRACT RECEIPTS RECEIVED 2,09,23,86 3 NETT CONTRACT RECEIPTS SHOWN IN P & L ACCOUNT 2,08,97,210 WITH R I OF AY 2003-2004 DIFFERENCE AMOUNT NOW TAXABLE 26,653.00 3. HO W EVE R, AO DID NO T A C CEPT TH I S R ECONCILIATION NOR TRIED TO VERIFY ITS CORRECTNESS BY CA L LING EV I DENCES , BUT REJECTED THE CLAIM ON A FLIMSY GROUND THAT THE E X PLANATION IS NOT ACCEPTABLE . 4. IT WAS NECESSARY ON THE PART OF AO TO GIVE PROPER REASONS FOR NOT ACCEPTING T HE REASONS AND DETAILS GIVEN BY ME . FURTHER , FOR A . Y . 2002 - 2003 , THESE CHANGED FIGURES I TSELF HAVE BEEN FILED BASED ON WHICH THE AO HAS COMPLETED ASSESSMENT W HICH MEANS THESE FIGURES ARE ACCEPTED BY HIM . IN SUCH SITUATION , HOW CLOSING BALANCES OF EARLIER YEARS ARE DENIED FO R SUBSEQUENT YEAR AS OPENING BALANCES? PAGE 9 ITA NO.614/BANG/2010 5. IN VIEW OF ABOVE FACTS AND LEGAL POSIT I ON , WE REQUEST YOUR HONOR TO KINDLY DELETE THE ADD I TION OF RS . 7 , 71 , 0 4 2-00 TO THE E X TENT OF RS . 7 , 44 , 389-00 SINCE I HAVE ALREADY ACCEPTED BEFORE AO FOR ADD I T I ON OF DIFFERENCE OF RS . 26, 653-00. 6. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE OBSERVED THAT DURING THE COURSE OF REASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD NOTICED DISCREPANCIES IN THE DISCLOSURE OF CONTRACT RECEIPT S DURING THE YEAR AND CONSEQUENTLY DIFFERENCE OF RS.7,71,042 HAD BEEN TAXED. THE LEAR NED CIT(A) POINTED OUT THAT FACTS LEADING TO THE DIFFERENCE WAS THAT THE ASSESSEE HAD ACCOUNTED FOR NET CONTRACT RECEIPTS OF RS.2,08,97,210 IN THE PROFIT AND LOSS ACCOUNT WH EREAS, AS PER THE TDS CERTIFICATE ISSUED BY THE CHIEF ELECTORAL OFFICER (CEO), BANGAL ORE, THE GROSS RECEIPTS HAD BEEN SHOWN AT RS.2,22,62,917. HE FURTHER OBSERVED THAT THE TU RNOVER OF THE ASSESSEE UPTO THE ASSESSMENT YEAR 2002-03 WAS LESS THAN RS.40 LAKHS I N EACH OF THOSE YEARS. HOWEVER, THE ASSESSEE HAD OBTAINED CONTRACTS FROM CEO, BANGALORE RELATING TO PREPARATION OF VOTERS IDENTITY CARDS AND THE CONTRACT RECEIPTS FROM THIS WORK WAS DECLARED IN THE RETURNS FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04. HE ALSO OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD EXPLAINED T HAT MORE THAN 90% OF THE RECEIPTS HAVE BEEN RECEIVED BY CHEQUES AND CREDITED TO HIS B ANK ACCOUNT AND THE REASON FOR NON- MAINTENANCE OF BOOKS OF ACCOUNTS FOR THE YEARS UPTO THE ASSESSMENT YEAR 2002-03 WAS THAT THE TURNOVERS WERE LESS THAN RS.40 LAKHS IN EA CH YEAR. HOWEVER, THE CONTENTION OF ASSESSEE FOR NON-MAINTENANCE OF BOOKS OF ACCOUNT WA S REJECTED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ASSESSEE HAD REQUESTED THE ASSESSI NG OFFICER THAT HE HAD STARTED WRITING THE BOOKS OF ACCOUNT FOR THE ASSESSMENT YEA R 2002-03 AND IF THERE WERE ANY PAGE 10 ITA NO.614/BANG/2010 CHANGES IN THE ASSESSMENT YEAR 2002-03, THE RETURN FOR THE ASSESSMENT YEAR 2003-04 WOULD BE SUBJECT TO SUCH CHANGES. THE LEARNED CIT( A) POINTED OUT THAT THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS FOR THE ASSESSMENT YEAR 2003-04 HAD EXPLAINED THAT THE DISCREPANCIES IN CONTRACT RECEIP TS WERE DUE TO RECEIPT OF THE FOLLOWING AMOUNTS DURING THE YEAR : I) RECEIPT FROM CEO, BANGALORE. RS.7,14,321 II) BILL RECEIVABLE OF PRECEDING YEAR RS.18,00,000 III) EMD DEPOSIT RECEIVED RS.5,14,000 THE LEARNED CIT(A) OBSERVED THAT THE EXPLANATION OF THE ASSESSEE REGARDING THE ABOVE DISCREPANCIES WERE THAT THE RECEIPT OF RS.7,14,321 WAS PERTAINING TO BILLS OF EARLIER YEAR FROMCEO, BANGALORE WHICH HAD ALREADY BEEN OFFERED F OR TAXATION IN THE ASSESSMENT YEAR 2002-03 AND THE UNPAID AMOUNT WAS DULY REFLECTED UN DER THE HEAD CURRENT ASSET IN THE BALANCE SHEET AS ON 31.3.2002. AS REGARDS THE RECE IPT OF RS. 18 LAKHS, IT WAS CLAIMED THAT THE SAME WAS OFFERED FOR TAXATION IN THE ASSESSMENT YEAR 2002-03 AND SINCE THE AMOUNT WAS NOT RECEIVED DURING THAT YEAR, THE SAME HAS BEE N SHOWN UNDER THE HEAD CURRENT ASSETS IN THE BALANCE SHEET AS ON 31.3.2002. AS R EGARDS TO THE EMD DEPOSITS OF RS.5,14,000, THE ASSESSEE CLAIMED THAT THIS WAS NOT A TRADING RECEIPT AND WAS PAID EARLIER WHICH HAD BEEN RECEIVED DURING THE YEAR, IT WAS CLA RIFIED THAT THE ACTUAL CONTRACT RECEIPTS CRYSTALLIZED AT RS.2,09,23,863 WHEREAS THE ASSESSEE HAS DECLARED CONTRACT RECEIPTS OF RS.2,08,97,210 IN THE RETURN FOR THE ASSESSMENT YEA R 2003-04. THE LEARNED CIT(A) WAS OF THE VIEW THAT THE ONLY DIFFERENCE OF RS.26,653 S HOULD HAVE BEEN TAXED IN THE RETURNED PAGE 11 ITA NO.614/BANG/2010 INCOME. THE LEARNED CIT(A) OBSERVED THAT THE ASSES SEE AFTER WRITING PROPER BOOKS OF ACCOUNTS FOR THE ASSESSMENT YEAR 2002-03 HAD FURNIS HED A REVISED RETURN OF INCOME FOR THE SAID ASSESSMENT YEAR AND HAD ALSO REDRAWN OPENI NG BALANCES IN RESPECT OF CERTAIN ACCOUNTS IN THE ASSESSMENT YEAR 2003-04 ON THE BASI S OF ENTRIES IN THE BOOKS OF ACCOUNTS FOR THE ASSESSMENT YEAR 2002-03 WHICH WERE AS UNDER : PARTICULARS AMOUNTS RS. TOTAL OF RECEIPT SIDE OF ANNEXURE I 2,09,75,583 TOTAL OF RECEIPT SIDE OF ANNEXURE - II EXCLUDING TRANSFER AMOUNT OF RS.78,373. 29,76,601 TOTAL (INCLUDING PREVIOUS YEAR RECEIPTS TAXED CONS ISTING OF CEO BANGALORE AND BILLS RECEIVABLE AND ALSO EMD DEPOSITS ALL SHOWN IN BALANCE SHEET OF AY 2002-03) RS. 2,39,52,184 LESS : INCOMES ALREADY TAXED DURING EARLIER YEAR AN D EMD DEPOSIT WHICH IS OWN MONEY AND NOT INCOME INCLUDED IN ABOVE TOTALS. CEO BANGALORE (B) AS PER ABOVE PAR 7,14,321 BILLS RECEIVABLE (D) AS PER ABOVE PARA 18,00,000 EMD DEPOSITS (C) AS PER ABOVE PARA. 5,14,000 30,28,321 ACTUAL NETT CONTRACT RECEIPTS RECEIVED 2,09,23,863 NET CONTRACT RECEIPTS SHOWN IN P & L ACCOUNT FILED WITHRI OF AY 2003-04 2,08,97,210 DIFFERENCE AMOUNT NOW TAXABLE. 26,653.00 THE LEARNED CIT(A) CATEGORICALLY STATED IN THE PARA 9.4 OF THE IMPUGNED ORDER THAT THE ASSESSING OFFICER HAD ACCEPTED THE RETURN FOR THE A SSESSMENT YEAR 2002-03 ON THE BASIS PAGE 12 ITA NO.614/BANG/2010 OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET PREPAR ED BY THE ASSESSEE. HAVING ACCEPTED THE REVISED RETURN FOR THE ASSESSMENT YEAR 2002-03 AND THE CORRECT AMOUNTS RECEIVABLE AS SHOWN IN THE BALANCE SHEET AS ON 31.3.2002, THE ASSESSING OFFICER WAS SUPPOSED TO ACCEPT THE CLOSING BALANCES AS ON 31.3.2002 AS THE OPENING BALANCES AS ON 1.4.2002. THE LEARNED CIT(A) OBSERVED THAT THE LETTER DATED 17.8. 2004 FILED DURING ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2002-03 WAS STA TED TO BE PRIOR TO WRITING OF THE BOOKS OF ACCOUNT FOR THE ASSESSMENT YEAR 2002-03, H OWEVER, AFTER WRITING PROPER BOOKS OF ACCOUNT, THE BILLS RECEIVABLE WORKED OUT TO RS.1 8 LAKHS WHICH WAS BY MISTAKE SUBMITTED TO THE ASSESSING OFFICER AS RS.13 LAKHS VIDE LETTER DATED 17.8.2004. THE LEARNED CIT(A) FURTHER OBSERVED THAT THE ASSESSEES CONTENTION WAS FURTHER CORROBORATED BY THE FACT THAT IN THE PROFIT AND LOSS ACCOUNT FOR THE PERIOD 1.4.2001 TO 31.3.2002, THE ASSESSEE HAD ALREADY DECLARED THE CEO BILLS OF RS.7,31,137 AND B ILLS RECEIVABLE OF RS.18 LAKHS FOR TAXATION. SINCE THE AMOUNTS WERE NOT RECEIVED BY 3 1.3.2002, THE SAME WERE SHOWN AS OUTSTANDING UNDER THE HEAD CURRENT ASSETS IN THE BALANCE SHEET AS ON 31.3.2002. THE LEARNED CIT(A) FOUND THAT THE CONTENTION OF THE ASS ESSEE WAS CORRECT AND CAME TO THE CONCLUSION THAT DIFFERENCE IN CONTRACT RECEIPTS FOR THE ASSESSMENT YEAR 2003-04 WORKED OUT TO RS.26,653, THE ADDITION WAS DIRECTED TO BE R ESTRICTED TO THE SAID AMOUNT AND THE REMAINING DIFFERENCE WAS DIRECTED TO BE DELETED. N OW THE DEPARTMENT IS IN APPEAL BEFORE US. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHILE THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS PAGE 13 ITA NO.614/BANG/2010 MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMI TTED THAT THE LEARNED CIT(A) AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD FOUND THE RECONCILIATION STATEMENT OF THE ASSESSEE IN ORDER AND THEREAFTER RESTRICTED THE ADD ITION ON ACCOUNT OF DIFFERENCE OF CONTRACT BILL TO THE EXTENT OF RS.26,653 ONLY. AC CORDINGLY, IT WAS SUBMITTED THAT NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER PA SSED BY THE LEARNED CIT(A). 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE INSTAN T CASE, IT APPEARS THAT THE ASSESSEE FOR THE YEAR PRIOR TO THE ASSESSMENT YEAR 2002-03 WAS H AVING TURNOVER OF LESS THAN RS.40 LAKHS IN EACH YEAR, FOR THE REASON THAT PROPER BOOK S OF ACCOUNTS WERE NOT MAINTAINED AND THE INCOME WAS DECLARED UNDER SECTION 44AD OF THE I NCOME TAX ACT, 1961 @ 8% OF THE RECEIPTS. HOWEVER, THE ASSESSING OFFICER REOPENED THE ASSESSMENT FOR THE ASSESSMENT YEAR 2002-03 AND 2003-04 BY ISSUING NOTICE UNDER SE CTION 148 AND ALSO REJECTED THE ASSESSEES CONTENTION FOR NON-MAINTENANCE OF BOOKS OF ACCOUNTS FOR THE ASSESSMENT YEAR 2002-03. THEREAFTER, THE ASSESSEE COMPLETED THE BO OKS OF ACCOUNTS FOR THE ASSESSMENT YEAR 2002-03 AND FOUND CERTAIN DISCREPANCIES WHICH WERE CORRECTED, THEREAFTER THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 I. E. THE ASSESSMENT YEAR UNDER CONSIDERATION WAS REVISED WHICH WAS ALSO ACCEPTED B Y THE ASSESSING OFFICER. IN THE SAID REVISED RETURN, THE ASSESSEE HAD TAKEN INTO CONSIDE RATION THE DIFFERENCE OF RS.7,71,042 POINTED OUT BY THE ASSESSING OFFICER AND ALSO RECON CILED THE ACCOUNT RELATING TO THE RECEIPTS FROM CEO, BANGALORE. AFTER THE RECONCILIA TION, THE ONLY DIFFERENCE OF RS.26,653 REMAINED. IN THE PRESENT CASE, THE LEARNED CIT(A) CHECKED THE RECONCILIATION STATEMENT PAGE 14 ITA NO.614/BANG/2010 PREPARED BY THE ASSESSEE AND WAS FULLY SATISFIED WI TH THE EXPLANATION OF THE ASSESSEE. NOTHING CONTRARY TO THE FINDINGS OF THE LEARNED CIT (A) IS BROUGHT ON RECORD. WE, THEREFORE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LEARNED CIT(A) ON THIS ISSUE. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS APPEAL BY THE DEPARTMENT. 9. IN THE RESULT THE APPEAL IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 18.01.201 2.) SD/- SD/- (P. MADHAVI DEVI) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED: 18.01.2012. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - A BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, BANGALORE .