ITO 10(1)(2), MUMBAI V. BETTER BUILDERS & INFRASTRUCTURE P. LTD, MUMBAI

ITA 6788/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8450 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G PARTHASARATHI NAIK

Judgement Text

ITA NO.6788 OF 2010 BETTER BUILDERS & INFRASTRUCTUR ES PVT LTD MUMBAI PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.6788/MUM/2010 (ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER 10(1)(2) AAYAKAR BHAVAN, MK ROAD, MUMBAI 400020 VS. BETTER BUILDERS & INFRASTRUCTURE PVT. LTD, ST. ANTHONY ESTATE, KALINA, SANTACRUZ (E) MUMBAI 400098 PAN: AACCB 6226 A (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI G. PARTHASARATHI NAIK, DR ASSESSEE BY: SHRI SATISH R. MODY DATE OF HEARING: 24/09/2012 DATE OF PRONOUNCEMENT: 23/10/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS A REVENUE APPEAL AGAINST THE ORDER OF THE CIT (A)-21 MUMBAI, DATED 28.07.2010 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT (A) ERRED IN DELETING T HE ADDITION OF ` .1,10,49,765/- WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAS UNDISCLOSED THE REVENUE OF 9.57% IN RESPECT OF VALUE OF THE CONTRACT. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNE D CIT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF AO BE RESTORED. 2. BRIEFLY STATED ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACTORS AND HAD UNDERTAKEN A CONTRACT FOR PROJE CT AT PARIJATA TOWERS, ANDHERI (E), MUMBAI. ASSESSEE SUBCONTRACTED THE SAID WORK. ON EXAMINATION OF THE ACCOUNTS, AO NOTED THAT THE SUB CONTRACTOR BILLED ASSESSEE FOR A WORK TO AN EXTENT OF 26.57%, WHEREAS ASSESSEE BILLED THE LAND OWNER FOR 17% AND ACCORDINGLY THE BALANCE OF 9.57% WAS NOT BILLED. IT WAS EXPLAINED B Y ASSESSEE THAT EVEN THOUGH THE SUB CONTRACTOR HAS BILLED THE WORK TO AN EXTENT OF ITA NO.6788 OF 2010 BETTER BUILDERS & INFRASTRUCTUR ES PVT LTD MUMBAI PAGE 2 OF 4 26.57%, ASSESSEE CAN ONLY RECEIVE THE AMOUNT FROM T HE LAND OWNER AFTER APPROVAL FROM THEIR ARCHITECT AND FURTHER THI S PROCEDURE OF ACCEPTING THE RECEIPTS AFTER APPROVAL BY OWNERS AR CHITECT HAS BEEN FOLLOWED REGULARLY AND IN FACT ASSESSEE HAD SHOWN T HE BALANCE COMPLETED WORK IN WORK PROGRESS AS PER THE ACCOUNTI NG STANDARD AND THEREFORE, THERE IS NO SHORT COMPUTATION OF INC OME. HOWEVER, AO CONSIDERED THAT ASSESSEE HAD SHOWN ` .1,07,00,268/- AS WORK IN PROGRESS AND AFTER ARRIVING AT THE VALUE OF CONTRA CT AND THE AMOUNT COMPLETED BY THE SUB CONTRACTOR AND REDUCING THE BI LLS BOOKED EARLIER, ARRIVED AT THE TOTAL RECEIPTS FOR THE YEAR AT ` .2,23,46,096/- AND AS ASSESSEE RECOGNIZED ONLY ` .1,04,75,783/-, HE BROUGHT TO TAX THE BALANCE AMOUNT OF ` .1,10,49,765/-. 3. BEFORE THE CIT (A) ASSESSEE SUBMITTED THAT ASSESSEE IS CONSISTENTLY FOLLOWING THE REVENUE RECOGNIZING METH OD ONLY AFTER THE LAND OWNERS ARCHITECT CERTIFIES THE WORK AND ACCOR DINGLY THE AMOUNT WAS OFFERED IN LATER YEAR. IT WAS FURTHER SU BMITTED THAT THE WORK COMPLETED BY THE SUB CONTRACTOR WAS SHOWN AS W ORK IN PROGRESS AND AO WAS NOT CORRECT IN BRINGING TO TAX THE ENTIRE AMOUNT OF SO CALLED RECEIPTS WITHOUT ALLOWING THE C ORRESPONDING EXPENDITURE AT ` .93,85,949/- WHICH WAS CARRIED FORWARD TO WIP AND ALSO ON ACCOUNTING PRINCIPLES. 4. AFTER CONSIDERING ASSESSEES OBJECTIONS, THE CIT (A ) DELETED THE SAID ADDITION HOLDING AS UNDER: 3.3 . I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. THE APPELLANT WAS A CONTRACTOR FOR PROJECT AT PARIJAT TOWERS, ANDHERI (E), MUMBAI HOWEVER, THE APPELLANT BY ITSELF DID NOT CARRY OUT ANY CONSTRUCT ION WORK AND HAD SUB CONTRACTED THE WORK. THE SAID SUB-CONTRACTOR WAS RAISING BILLS (OF CONSTRUCTION W ORK DONE) TO THE APPELLANT. CONSEQUENTLY, THE APPELLANT WAS RAISING BILLS ON THE PARTY FOR THE SAID CONSTRUCTION WORK. AS PER CONTRACT AGREEMENT WITH THE PARTY, THE PARTY'S ARCHITECT WAS CERTIFYING THE APPELLANT'S BILLS AND PERCENTAGE OF WORK COMPLETED. THE APPELLANT COULD HAVE RECEIVED THE REVENUE/ AMOUNT FROM THE CLIENT ONLY ON THE BASIS OF WORK CERTIFIED BY CLIENT'S ARCHITECT. THEREFORE, THE APPELLANT WAS ACCOUNTING THE CONTRACT REVENUE IN TH E BOOKS OF ACCOUNTS ON THE BASIS OF WORK CERTIFIED BY ITA NO.6788 OF 2010 BETTER BUILDERS & INFRASTRUCTUR ES PVT LTD MUMBAI PAGE 3 OF 4 THE PARTY'S ARCHITECT. IN THE YEAR UNDER CONSIDERATION, THE APPELLANT'S SUB CONTRACTOR HAD BILLED IT FOR 26.57% WORK DONE, AGAINST WHICH THE APPELLANT HAD ACCOUNTED WORK DONE AT 17% ONLY IN THE BOOKS OF ACCOUNTS. HOWEVER, THIS ACCOUNTING WORK DONE AT17% WAS ON THE BASIS OF WORK CERTIFIED BY CLIENT'S ARCHITECT. THE BALANCE OF 9.57% OF THE WORK DONE HAD BEEN CARRIED FORWARD AS WORK-IN PROGRESS BY THE APPELLANT. THE QUESTION FOR CONSIDERATION IS THAT THE APPELLANTS SHOULD HAVE ACCOUNTED FOR CONTRACT REVENUE AT 26.57%OF THE CONTRACT VALUE AS PER BILL RAISED BY IT'S SUB- CONTRACTOR OR THE APPELLANT WAS CORRECT IN ACCOUNTI NG CONTRACT REVENUE AT 17% OF THE CONTRACT AS CERTIFIE D BY THE LAND OWNERS ARCHITECT. IN MY CONSIDERED VIEW, THE APPELLANT WAS JUSTIFIED IN ACCOUNTING THE REVENUE ON THE BASIS OF WORK CERTIFIED BY THE CLIEN T'S ARCHITECT. AS PER AGREEMENT WITH THE CLIENT (LAND OWNER) THE PAYMENT OF EACH BILL WAS TO BE RECEIVED BY THE APPELLANT IN PROPORTION TO THE SALE OF FLAT AND IN PROPORTION TO THE WORK COMPLETED AND CER TIFIED BY THE ARCHITECT OF THE CLIENT. THIS PRACTICE (OF RAIS ING BILL ON THE CLIENT ON THE BASIS OF WORK CERTIFIED BY CLIENT'S ARCHITECT) WAS BEING FOLLOWED CONSISTENTLY BY THE APPELLANT IN THE EARLIER YEARS, IN THE YEAR UNDER CONSIDERATION AS WELL AS IN THE SUBSEQUENT YEARS. THE APPELLANT WAS ALSO JUSTIFIED IN FOLLOWING SUCH PRACTICE FOR THE REASONS THAT UNLESS THE BILLS WERE CERTIFIED THE APPELLANT COULD NOT HAVE RECEIVED ANY AMOUNT/INCOME FROM THE CLIENT. MOREOVER, THE DIFFERENCE OF 9.75% WAS CARRIED FORWARD BY THE APPELLANT AS WIP AND WAS OFFERED AS RECEIPT IN THE SUBSEQUENT YEAR AS PER PRACTICE CONSISTENTLY FOLLOWED. THOUGH THE A.O. CONSIDERED THE INCOME ON THE BASIS OF WORK DONE AT 26.57(% BUT AT THE SAME TIME THE A.O. DID NOT CONSIDER THE FACT THAT THE EXPENDITURE PERTAINING TO DIFFERENCE OF 9.57% WAS CARRIED FORWARD BY THE APPELLANT IN THE WIP. SUCH DIFFERENCE OF 9.57% WAS APPELLANT'S EXPENDITURE WHICH THE A.O. DID NOT CONSIDER. EVEN IF THE A.OS STAND IS CONSIDERED AS CORRECT IN THAT CASE ALSO TH E A.O. WAS REQUIRED TO ALLOW THE EXPENDITURE INCURRED AT RS. 93,85,949/- EQUIVALENT TO 9.57% WORK CARRIED FORWARD IN WIP. HOWEVER, IN MY CONSIDERED VIEW, AS PER PRACTICE CONSISTENTLY FOLLOWED BY THE APPELLANT THE A.O. SHOULD HAVE CONSIDERED THE RECEIPTS ON THE BASIS OF WORK COMPLETED AT 17% ONLY WHICH WAS AS PER WORK CERTIFIED BY THE CLIENT'S ARCHITECT. IN THE FACTS AND CIRCUMSTANCES THE ADDITION MADE BY A.O. IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. ITA NO.6788 OF 2010 BETTER BUILDERS & INFRASTRUCTUR ES PVT LTD MUMBAI PAGE 4 OF 4 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DISTURB THE CIT (A) FINDIN GS. AO HAS NOT MADE OUT ANY CASE WHY AN AMOUNT OF ` .1,10,49,765/- SHOULD BE BROUGHT TO TAX AS THE AMOUNT WAS SHOWN AS WORK-IN-P ROGRESS AND HAS NOT YET BEEN BILLED TO THE LAND OWNER. CONSISTE NCY IN FOLLOWING ACCOUNTING PRINCIPLES ALSO DOES NOT ALLOW THE SAID AMOUNT TO BE TREATED AS INCOME OF THE YEAR AND IN FACT THE SAME AMOUNT WAS OFFERED IN LATER YEAR WHEN THE AMOUNT WAS BILLED. F URTHER AO ALSO WAS NOT CORRECT IN BRINGING THE ENTIRE AMOUNT AS IN COME IGNORING THE CORRESPONDING EXPENDITURE OF ` .93,85,949/-. THIS ONLY SHOWS THAT AO HAS NOT APPLIED HIS MIND, HAS NOT GIVEN PRO PER REASONS WHY HE IS DISTURBING ASSESSEES ACCOUNTING PRINCIPLES A ND WHY THE SAID AMOUNT IS THE INCOME OF ASSESSEE WHEN IN FACT IT IS ONLY A CONTRACT AMOUNT WHICH WAS NOT YET BILLED PENDING THE CERTIFI CATION BY THE ARCHITECT. FOR THESE REASONS, WE REJECT THE GROUNDS OF THE REVENUE AND CONFIRM THE ORDER OF THE CIT (A). 6. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 23R OCTOBER, 2012. SD/- SD/- ( B.R. MITTAL ) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 23 RD OCTOBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI