The ACIT, 2(1), Ujjain V. SHRI DEVI PRASAD, Shajapur

ITA 631/IND/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5653 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: SHRI; S N AGRAWAL
• Section: 194C; 145

Judgement Text

DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., ..!', #$ # !% BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. NO. 631/IND/2014 ASSESSMENT YEAR: 2010-11 ACIT 2(1) UJJAIN :: APPELLANT VS DEVI PRASAD SHUJALPUR ./ PAN: AJTPP1499A :: RESPONDENT CO NO.83/IND/2014 ARISING OUT OF ITA NO. 631/IND/2014 DEVI PRASAD SHUJALPUR :: OBJECTOR VS ACIT 2(1) UJJAIN :: RESPONDENT REVENUE BY SHRI MOHD. JAVED ASSESSEE BY SHRI SN AGRAWAL & SHRI PANKAJ MOGRA ! ' #$ DATE OF HEARING 19.10.2016 %&'( #$ DATE OF PRONOUNCEMENT 7.11.2016 DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 2 * O R D E R PER SHRI D.T. GARASIA, JM THE REVENUE HAS FILED BY THE APPEAL WHEREAS THE ASSESSEE HAS FILED THE CROSS OBJECTION AGAINST THE ORDE R OF THE LEARNED CIT(A),UJJAIN, DATED 15.7.2014. 2. SO FAR AS THE APPEAL OF THE REVENUE IS CONCERNED, TH E SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE ROAD CONSTRUCTION WORK. THE ASSESSEE UNDERTAKES TH E WORK OF PWD, MPRRDA AND WESTERN RAILWAY. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL IN COME AT RS.1723240/- BUT THE ASSESSING OFFICER HAS MADE TH E ADDITION OF RS.14523174/- ON ACCOUNT OF WORK IN PROGR ESS AND RS.536215/- ON ACCOUNT OF NON-DEDUCTION OF TDS. T HE ASSESSING OFFICER WHILE PASSINGTHE ASSESSMENT ORDER AD DED AN AMOUNT OF RS.14523174/- ON ACCOUNT OF FOLLOWING WOR K CONTRACTSS :- DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 3 S.NO. CONTRACT NO. CONTRACT AMOUNT MARGIN NET AMOUNT (RS.) 1 176/2008-09 6766970 111655 6655315 2 262/2007-08 2803256 46254 2757002 3 233/2006-07 5196601 85744 5110857 14766827 243653 14523174 THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS WORK WAS COMPLETED PRIOR TO 31.3.2010 BY THE ASSESSEE WHILE T HE ASSESSEE HAS NOT DISCLOSED THE BOOKS OF ACCOUNTS. TH E AMOUNT WAS NOT INCORPORATED IN THE FIGURE OF CONTRACT RECEIPT. THE ASSESSEE IS ENGAGED IN THE GOVERNMENT CONTRACT OR ROAD DEVELOPMENT AND SUPPLY OF GITTI MATERI AL. ON THE CONTRACT RECEIPT OF RS.10.42 LACS, THE ASSESSEE HAS SHOWN MATERIAL PURCHASED OF RS.469 CRORES AND LABOUR CHARGES OFRS.479 CRORES. DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE ASSESSING OFFICER HAS RECORDED THE STATEMENT OF BABULAL VERMA AND DEVIPRASAD ON OATH AND FROM THE STATEMENT RECORDED IT WAS ESTABLISHED BY THE DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 4 ASSESSING OFFICER THAT THE ASSESSEE HAS COMPLETED SOME OF THE CONTRACT WORK IN F.Y. 2009-10 AND THE ASSESSEE MUS T HAVE DEBITED ALL THE EXPENSES RELATING TO IT. HOWEVER, THE ASSESSEE HAS NOT REFLECTED THE WORK IN PROGRESS AS ON 31 ST MARCH, 2010, THEREFORE, THE ASSESSEE OUGHT TO HAVE SHO WN THE CONTRACT RECEIPT OF RS.59660/- AND CORRESPONDING CLOSING WORK IN PROGRESS. SIMILARLY, THE ASSESSEE HAS ALSO DEBITED ALL THE EXPENSES RELATING TO WORK EXECUTED I N THE F.Y. 2009-10 IN THE BOOKS OFF.Y. 2009-10 BUT THE CORRESPONDING RECEIPTS/WORK IN PROGRESS IN CASE OF T WO CONTRACT WORKS OF PWD, SHAJAPUR AND ONE CONTRACT OF PW D, SEHORE, WERE NOT FOUND REFLECTED IN THE BOOKS OF ACC OUNTS ON 31.3.2010, THEREFORE, SHOW CAUSE NOTICE WAS GIVEN AND THE ASSESSEE CONTENDED THAT THE ASSESSEE IS ENGAGED IN GOVERNMENT CONTRACT ROAD DEVELOPMENT FOR THE LAST SO MANY YEARS. THE GOVERNMENT WORK AND REALISATION DEPENDS UPON VARIOUS FACTORS. TILL THE DATE ON WHICH INSPECTIO N HAS DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 5 BEEN DONE AND THE BILL HAS BEEN PASSED AND REALISED, THE AMOUNT OF CONTRACT RECEIPT IS NOT ASCERTAINED. SINCE TH E ASSESSEE FROM THE BEGINNING OF LAST SO MANY YEAR, FOLL OWING THE SAME SYSTEM OF ACCOUNTING, THE SAME HAS BEEN ACCEPTED. THE ASSESSEE WHILE PREPARING THE BOOKS OF ACCOUNTS, BOOK THE EXPENSES AS INCURRED BY HIM WHICH ARE PAID OR NOT. SINCE THE AMOUNT OF EXPENSES AS INCURRED BY THE ASSESSEE WAS CERTAIN, HOWEVER, THE INCOME IS CONCERNED, THE AMOUNT OF CONTRACT RECEIPT IS DUE AS AND WHEN THE SAME WAS ACTUALLY REALISED BY THE ASSESSEE OR TDS WAS DEDUCTED BY THE RESPECTIVE DEPARTMENT. HENCE , MERELY ON THE BASIS OF WORK DONE UNDER THE YEAR UNDER CONSIDERATION THOUGH NOT REALISED BY THE ASSESSEE CANNO T BE CONSIDERED AS INCOME OF THE ASSESSEE IN THE YEAR M ERELY ON THE BASIS OF SYSTEM OF ACCOUNTING EVEN WHEN THE SAM E SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE SINCE L AST SO MANY YEARS. HOWEVER, THE ASSESSEE WAS NOT CONVINCED AND DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 6 THE ASSESSEE HAS RECEIVED RS. 6666097/-, RS.28,356/- FROM PWD, SHAJAPUR AND RS.5196601/- FROM PWD, SEHORE IN THE F.Y. 2010-11. THE WORK WAS COMPLETED IN THE F.Y. 2009-10, THEREFORE, THE ASSESSEE FAILED TO SHOW THE W ORK IN PROGRESS, THEREFORE, IT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE MATTER WAS CARRIED IN APPEAL AND THE LEARNED CIT(A) ALLOWED THE APPEAL BY OBSERVING AS UNDER :- I HAD HEARD THE APPELLANT AND CONSIDERED HIS SUBMISSIONS. I HAD ALSO PERUSED THE ORDER OF THE A. O. AND OTHER DOCUMENTS PLACED ON RECORD. THE ASSESSEE S LEARNED COUNSEL CONTENDED THAT THE ACTION OF THE A. O. HAS RESULTED IN THE DOUBLE TAXATION OF THE SAME INC OME SINCE THE CLOSING WORK IN PROGRESS WAS MORE THAN TH E OPENING WORK IN PROGRESS. I FIND SUBSTANTIAL FORCE IN THIS SUBMISSION OF THE ASSESSEE. OPENING STOCKI WAS AT A LOWER FIGURE IN COMPARISON TO CLOSING STOCK.THE DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 7 ASSESSING OFFICER HAS CHARGED TAX ON THE HIGHER AMOUNT OF CLOSING WORK IN PROGRESS. THEREFORE, AGAI N CHARGING OF TAX ON THE DIFFERENCE BETWEEN THE OPENI NG WORK IN PROGRESS AND CLOSING WORK IN PROGRESS WILL RENDER DOUBLE TAXATION ON THE SAME AMOUNT WHICH IS N OF PERMISSIBLE IN LAW. IN VIEW OF THE ABOVE, I HOLD THAT ONCE THE CLOSING WORK IN PROGRESS HAS BEEN TAKEN AS OPENING WORK IN PROGRESS IN THE IMMEDIATELY SUBSEQUENT FINANCIAL YEAR AND TAX HAS BEEN CHARGED ON THAT CLOSING BALANCE, CHARGING OF TAX ON THE DIFFER ENBTIAL AMOUNT BETWEEN THE TWO WILL TANTAMOUNT TO DOUBLE TAXATION, ONCE ON THE ENTIRE AMOUNT OF CLOSING FIGU RE AND OTHER ON THE DIFFERENCE BETWEEN THE OPENING AND CLOSING BALANCE OF WORK IN PROGRESS. THEREFORE, ADD ITION MADE BY THE A.O. AT RS.1,45,23,174/- IS DELETED. TH E APPEAL ON THIS GROUND IS ALLOWED. DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 8 4. THE LEARNED DR SUBMITTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND AS PER TH E MERCANTILE SYSTEM OF ACCOUNTING, ANY RECEIPT OR PAYMEN T IS TAKEN INTO CONSIDERATION ON ACCRUAL BASIS ONLY. IN THE CASE OF THE ASSESSEE FROM THE INQUIRY FROM PWD, SHAJAPUR AND PWD, SEHORE, IT WAS FOUND THAT THE ASSESSEE ACCEPTED TH E VARIOUS CONTRACTS FOR VARIOUS WORKS. THE ASSESSEE HAS RECEIVED PAYMENT OF RS.1,47,66,827/- FOR THE WORKS EXECUTED IN THE FINANCIAL YEAR 2009-10 AND CORRESPONDI NG EXPENSES WERE DEBITED IN THE BOOKS OF ACCOUNTS IN TH E F.Y. 2009-10. WHATEVER EXPENDITURE WAS INCURRED FOR THE CONTRACT WORK WAS PAID AND ENTERED IN THE BOOKS OF ACCOUNTS FROM THE PERIOD BETWEEN 1.4.2009 TO 31.3.20 10, THEREFORE, IT IS PROVED THAT THE WORK HAS BEEN EXECUT ED IN PARTICULAR FINANCIAL YEAR AND EXPENSES CORRESPONDING TO I T HAS BEEN DEBITED IN PARTICULAR FINANCIAL YEAR, THEREFORE, THE CORRESPONDING WORK IN PROGRESS SHOULD HAVE BEEN REFL ECTED DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 9 IN THE BOOKS OF ACCOUNTS, THEREFORE, THE ASSESSEE HAS NOT SHOWN THE INCOME IN A PARTICULAR YEAR, THEREFORE, THIS IS A LOSS TO THE REVENUE. THE ASSESSEE HAS EXECUTED THE CONTRACT AND HOW MUCH BILL IS TO BE PREPARED IS IN THE KNOWLEDGE OF THE CONTRACTOR, THEREFORE, THE ASSESSEE HAS TRIED TO DIFFER THE TAXES BY WAY OF AVOIDING THE ACTU AL AMOUNT OF TAX THAT ANY PARTICULAR ASSESSEE IS LIABLE TO PA Y AS THE VALUE OF RUPEE DEPRECIATES YEAR AFTER YEAR. HE FU RTHER SUBMITTED THAT IN ONE OF THE YEARS IF THE ASSESSEE I S FOLLOWING A PARTICULAR METHOD, IT DOES NOT MEAN THAT THE ASSESSEE SHOULD NOT HAVE CHANGED THE METHOD OF ACCOUNTING BECAUSE AFTER INSERTION OF SECTION 145, THE ASSESSEE SHOULD CHANGE THE METHOD OF ACCOUNTING IN THE YEAR UNDER CONSIDERATION BUT THE TRIBUNAL SHOULD UPHOL D THE ACTION OF THE ASSESSING OFFICER. THE LEARNED DR R ELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE OF CIT VS. BRITISH PAINTS INDIA LTD.; 188 ITR 44, MEL MOUND DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 10 CORPORATION VS. CIT; 202 ITR 789 AND CIT VS. CORPORATI ON BANK LTD.; 174 ITR 616. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE GOVERNMENT CONTRACT OF ROAD DEVELOPMENT AND SUPPLY OF GITTI MATERIAL. IN THE GOVERNMENT WORK, REALISATION DEPENDS UPON VARIOUS FACTORS TILL THE DATE ON WHICH TH E INSPECTION WAS DONE AND BILL WAS APPROVED BY THE GOVERNMENT AUTHORITIES. TILL THE COMPLETION OF THE P ROCESS, THE AMOUNT OF CONTRACT RECEIPT IS NOT ASCERTAINED, THER EFORE, THE ASSESSEE FROM THE BEGINNING AND LAST SO MANY YEARS FOLLOWING SYSTEM OF ACCOUNTING AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE PAST. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CARRIED OUT THE WORKS CONTRACT AND BOOKED THE EXPENSES , BUT THE ASSESSEE SHOWED THE INCOME WHEN THE BILL IS RECEIVED BY THE ASSESSEE AND WHEN THE GOVERNMENT DEDU CT DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 11 TDS ON CONTRACT RECEIPT, THE RECEIPT IS ACCOUNTED, TH EREFORE, IN THIS YEAR IT IS A FACT THAT THE ASSESSEE HAS CARRIED O UT THE FIRM IN THE FINANCIAL YEAR 2009-10 BUT THE ASSESSEE HAS SHOWN THIS AMOUNT IN THE YEAR 2010-11. THE WORK WAS COMPLETED PRIOR TO 31.3.2010. THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT IN THE MERCANTILE SYSTEM OF ACCOUNTING, MERE RAISING THE BILL IS NOT IMPORTANT. IT S RIGHT TO RECEIVE IS IMPORTANT. IT IS THE REAL INCOME AND NOT HYPOTHETICAL INCOME WHICH IS SUBJECT TO TAX. IN THE CONTRACT WORK, THE PAYMENT IS AGAINST THE BILL RAISED IS ASCERTAI NED AND WHEN IT IS VERIFIED AND FINALLY APPROVED BY THE GOVERNMENT THEREFORE THE UNREALISED AMOUNT CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE FO LLOWS MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSEE REQUIRED THE ACCOUNTS FOR INCOME ONLY WHEN IT ACCRUES OR RECEIVES. THE ACCRUAL TAKES PLACE WHEN THE GOVERNMENT ACCEPTS THE BILL . THE RECEIPTS ARE CREDITED WHEN THE SAME ARE ACTUALLY DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 12 RECEIVED BY THE ASSESSEE BY PASSING THE BILL ON WHICH THE TDS U/S 194C OF THE ACT IS DEDUCTED BY THE GOVERNME NT. HE RELIED UPON THE DECISION OF THE HON'BLE CALCUTTA B ENCH IN THE CASE OF USHA RAJAN SARKAR; 109 TTJ 673 AND DECISION OF PATNA HIGH COURT IN IT VS. CHANCHAN BROTHE RS (CONTRACTORS) PVT. LTD.; 161 ITR 418. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SI DES. WE FIND THAT THE ASSESSEE IS CARRYING OUT THE GOVERNME NT CONTRACT AND THE ASSESSEE IS FOLLOWING MERCANTILE SYSTE M OF ACCOUNTING. THE ASSESSEE PREFERRED REIMBURSEMENT OF EXPENSES RELATING TO CONTRACT WORK BEYOND THE CONTRACT AGREEMENT AND THE ASSESSEE WAS NOT SHOWING THE INCOME I N THE YEAR UNDER WHICH THE CONTRACT WORK HAS BEEN DONE AN D THE ASSESSEE WAS SHOWING THE INCOME WHEN HE REALISED T HE AMOUNT FROM THE DEPARTMENT AND THE ASSESSEE WAS FOLLOWING THE SAME METHOD OF ACCOUNTING FOR THE LAST S O MANY YEARS AND IT WAS ACCEPTED BY THE DEPARTMENT. DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 13 HON'BLE PATNA HIGH COURT HAS HELD THAT THE UNTIL THE VERIFICATION OF THE CONTRACT WORK, THE ASSESSEE HAD NO RIGHT TO CLAIM THE AMOUNT. WE FIND THAT THE LEARNED DR HAS RELIED UPON THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF MOOLCHAND VS. CIT (SUPRA) WHEREIN IT HELD THAT UNDER SECTION 145 OF THE ACT THE ASSESSEE CAN ADOPT A METHOD OF VALUATION WHICH IS FOLLOWED REGULARLY. IT IS AN ACCEPTED PRINCIPLE OF ACCOUNTING THAT THE VALUE OF STOC K CAN BE DETERMINED AT COST AND MARKET PRICE WHICHEVER IS L OWER AND THE HON'BLE HIGH COURT HAS HELD THAT ONCE THE METH OD OF ACCOUNTING IS ACCEPTED BY THE DEPARTMENT, THE TRIBU NAL HAS NO POWER TO CHANGE OR DETERMINE THE VALUE OF OPENI NG STOCK. WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE T HE HYDRABAD TRIBUNAL IN THE CASE OF VISHAL INFRASTRUCTURE LTD. VS. ACIT; 104 ITD 537. THEREFORE, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 14 7. SO FAR AS THE CROSS OBJECTION OF THE ASSESSEE, WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWED THE AMOUNT O F INTEREST PAID TO M/S SUNDRAM FINANCE LIMITED FOR NON- DEDUCTION OF TAX. THE LEARNED CIT(A) HAS CONFIRMED T HE SAME. 8. DURING THE COURSE OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INTEREST PAYMENT MADE TO M/S SUNDRAM FINANCE LIMITED HAS ALREADY BEEN ACCOUNTED IN THE RETURN OF INCOME THEREFORE THE MATTER MAY BE RESTOR4ED TO THE ASSESSING OFFICER AS PER THE DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ANSAL LAN D MARK TOWNSHIP (P) LTD.; ITA 160/2015. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SI DES. WE FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE AFORESAID DECISION, THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO DECIDE THE SAME IN THE SPIRIT OF THE DECISION OF THE HON'BLE SU PREME DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 15 COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD. (SUPRA). 10. IN THE RESULT, THE APPEAL OF THE REVENUE FAILS AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 7 NOVEMBER, 2016. SD SD ( ..!') (..) #$ (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER J UDICIAL MEMBER )'* / DATED : 7 NOVEM BER, 2016. DN/ DEVIPRASAD ITA NO.631/IND/2014 & CO 83/IND/2014 16