ITO, Jind V. Shri. Sanjay Kumar, Jind

ITA 86/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77145 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 17-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJEEV GOEL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.86 /CHD/2014 ASSESSMENT YEAR : 2009-10 THE INCOME OFFICER, VS. SHRI SANJAY KUMAR, CON TRACTOR, WARD 2, KATHANIA MOHALLA JIND. JIND. PAN: ABZPS2792P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH GUPTA, DR RESPONDENT BY : SHRI SANJEEV GOEL DATE OF HEARING : 21.05.2014 DATE OF PRONOUNCEMENT : 19.06.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX(APPEALS), ROHTAK DATED 0 7.11.2013 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 8,69,851/- MAD E BY THE AO BY APPLYING MERCANTILE METHOD OF ACCOUNTING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,45,000/- MA DE BY THE AO BY APPLYING MERCANTILE METHOD OF ACCOUNTING. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE CORRECT POSITION OF LAW THAT A S PER SECTION 145(1) OF THE INCOME-TAX ACT, 1961, METHOD OF ACCOUNTING CAN BE ONLY ONE I.E. EITHER MERCANTILE OR CASH. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN 2 ACCEPTING 'MIXED METHOD' OF ACCOUNTANCY WHICH IS IN CONTRAVENTION OF PROVISIONS OF SECTION 145(1) OF THE INCOME-TAX ACT, 1961. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. C1T(A) HAS ERRED IN NOT APPRECIATING THE FACT OF THE CASE THAT THE ASSE SSEE IS AVAILING BENEFIT OF MERCANTILE METHOD IN RESPECT OF EXPENSES. THEREFORE , IN RESPECT OF RECEIPT / REVENUE ALSO, MERCANTILE METHOD WOULD BE APPLICABLE . 6. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 3. THE ISSUE IN GROUND NO.1 RAISED BY THE REVENUE I S AGAINST THE DELETION OF ADDITION OF RS.8,69,851/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS A CIVIL CONTRACTOR AND WAS FOLLOWING MERCANTILE SYSTEM OF A CCOUNTING. DURING THE YEAR UNDER CONSIDERATION GROSS RECEIPTS OF THE ASSESSEE WERE RS.2.86 CRORES ON WHICH THE ASSESSEE DECLARED NET PROFIT OF RS.5,43,066/-. FROM THE PERUSAL OF THE RECORDS THE ASSESSING OFFICER NO TED THAT THE ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING IN RESPECT OF RECEIPTS AND MERCANTILE SYSTEM OF ACCOUNTING TO CLAIM DEDUCTION ON THE AMOUNTS PAYABLE BY HIM. THE INFORMATION WAS SOUGHT FROM TH E DEPUTY G.M., HARYANA STATE ROADS & BRIDGES DEVELOPMENT CORPORAT ION LTD., JIND AND IT WAS REPORTED BY LETTER DATED 12.4.2011 THAT THE TOTAL WORK DONE BY THE ASSESSEE WAS OF RS.1.76 CRORES. OUT OF THIS AMOUN T OF TOTAL WORK DONE, PAYMENT OF RS.1.66 CRORES WAS MADE DURING THE FINAN CIAL YEAR 2007-08, PAYMENT FOR THE WORK FOR RS.86,851/- WAS MADE DURIN G THE FINANCIAL YEAR 2008-09 AND BALANCE PAYMENT OF RS.8,69,851/- WAS MA DE DURING THE FINANCIAL YEAR 2009-10. THE ASSESSING OFFICER NOT ED THAT THOUGH THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING BUT DID NOT INCLUDE THE PAYMENT OF RS.86,851/- AND RS.8,69,449/ -. THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO WHY THE SAID SUM S HOULD NOT BE INCLUDED IN THE GROSS PAYMENTS AND CHARGED TO TAX. IN REPLY IT WAS SUBMITTED BY THE ASSESSEE THAT SUM OF RS.8,69,851/- WAS INCLUDED IN WORK-IN-PROGRESS AND RS.86,851/- WAS RECEIVED DURIN G THE FINANCIAL YEAR 3 2008-09 WHICH AGAIN WAS INCLUDED IN THE WORK-IN-PRO GRESS. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD ONLY INCLUDED THE MATERIAL AT SITE PURCHASED IN THE MONTH OF MARCH IN THE WORK -IN-PROGRESS, WHEREAS THE WORK WAS COMPLETED IN FEBRUARY, 2009. SINCE T HE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, SUM OF R S.9,56,300/- WAS ADDED AS INCOME OF THE ASSESSEE BY THE ASSESSING OF FICER. 5. THE CIT (APPEALS) VIDE PARA 2.3 NOTED THE FACTS AND VIDE PARA 3 SUMMARIZED THE SUBMISSION OF THE ASSESSEE AS TO THE ASSESSEE HAVING FOLLOWED THE SYSTEM OF ACCOUNTING. THE CONTENTION OF THE ASSESSEE BEFORE THE CIT (APPEALS) WAS THAT SUM OF RS.8,69,44 9/- WAS RECEIVED IN ASSESSMENT YEAR 2011-12 AND HAD BEEN DISCLOSED IN T HE SAID RETURN OF INCOME AND BALANCE SUM OF RS.86,851/- HAD BEEN DEDU CTED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2009-10 AND HE NCE SAID AMOUNT WAS NOT PRESSED. THE CIT (APPEALS) DELETED THE ADDITI ON IN VIEW OF THE ASSESSEE HAVING REPORTED THE SAID SUM IN ASSESSMENT YEAR 2011-12. 6. THE LEARNED D.R. FOR THE REVENUE PLACING RELIANC E ON THE ORDER OF THE ASSESSING OFFICER POINTED OUT THAT THE ASSESSEE HAD NOT INCLUDED THE SAID AMOUNT AS WORK-IN-PROGRESS, AS THE ASSESSEE WA S FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE SAME WAS IN CLUDED AS INCOME OF THE ASSESSEE IN THE PRESENT YEAR. 7. THE LEARNED A.R. FOR THE ASSESSEE PLACING RELIAN CE ON THE ORDER OF THE CIT (APPEALS) STATED THAT THE SAID AMOUNT HAD A LREADY BEEN INCLUDED IN THE HANDS OF THE ASSESSEE IN ASSESSMENT YEAR 201 1-12 AND THE ADDITION IN THE PRESENT YEAR WOULD RESULT IN DOUBLE TAXATION . 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ADMITTEDLY THE ASSESSEE WAS FOLLOWING MERCANTILE SY STEM OF ACCOUNTING AND CONSEQUENTLY BOTH THE RECEIPTS AND EXPENDITURE ARE TO BE BOOKED IN 4 LINE WITH THE SAID SYSTEM OF ACCOUNTING I.E. BOTH T HE RECEIPTS AND EXPENDITURE ARE TO BE RECOGNIZED AT FIRST JUNCTURE. IN VIEW OF THE AMENDED PROVISIONS OF SECTION 145(3) OF THE ACT THE RE IS NO MERIT IN THE PLEA OF THE ASSESSEE THAT IT WAS FOLLOWING MERCANTI LE SYSTEM OF ACCOUNTING I.E. THE RECEIPTS WERE BEING RECOGNIZED ON CASH BASIS AND THE EXPENDITURE WAS BEING BOOKED ON MERCANTILE BASIS. ANOTHER PLEA RAISED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS TH AT THE SAID AMOUNT WHICH IS NOT RECEIVED BY THE ASSESSEE DURING THE YE AR UNDER CONSIDERATION WAS SHOWN AS WORK-IN-PROGRESS, WAS FO UND TO BE NOT CORRECT BY THE ASSESSING OFFICER. 9. IN THE ABOVE SAID FACTS AND CIRCUMSTANCES THE IS SUE ARISING BEFORE US IS IN RELATION TO THE ASSESSABILITY OF SUM OF RS .8,69,851/- IN THE HANDS OF THE ASSESSEE. THE TOTAL RECEIPTS ARISING TO TH E ASSESSEE IN THE YEAR UNDER CONSIDERATION WERE RS.1.76 CRORES AND THE ASS ESSEE HAD ONLY ACCOUNTED FOR RS.1.66 CRORES DURING THE YEAR UNDER CONSIDERATION. THE SUM OF RS.86,851/- WAS ACCOUNTED FOR IN THE FINANCI AL YEAR 2008-09 AND THE BALANCE SUM OF RS.8,69,449/- WAS ACCOUNTED FOR IN ASSESSMENT YEAR 2010-11. THE SAID SUMS OF RS.86,851/- AND RS.8,69 ,449/- WERE INCLUDED BY THE ASSESSING OFFICER IN THE INCOME OF THE ASSES SEE FOR THE YEAR UNDER CONSIDERATION. ADMITTEDLY, THE ASSESSEE HAD RECEIV ED REBATE OF RS.86,851/- IN THE PRECEDING YEAR AND HENCE THE GRO UND OF APPEAL RELATING TO THE SAME WAS NOT PRESSED BEFORE THE CIT (APPEALS). THE BALANCE SUM OF RS.8,69,449/- WAS SUBJECTED TO TDS A ND TDS CORRESPONDING TO THE SAME WAS DEDUCTED BY THE PRINC IPAL IN THE FINANCIAL YEAR 2010-11. CONSEQUENT THERETO, THE ASSESSEE HA D INCLUDED THE SAID CONTRACT RECEIPTS OF RS.8,69,449/- IN ASSESSMENT YE AR 2011-12. THE ASSESSEE HAD FURNISHED ON RECORD COPY OF FORM NO.2 6AS RECORDING PAYMENT OF RS.8,69,449/- AT PAGES 12 AND 13 OF THE PAPER BOOK 5 ALONGWITH FORM NO.16 ISSUED AT PAGE 11 OF THE PAPER BOOK. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT (APPEALS) IN DELETING THE ADDITION OF RS.8,69,449/- IN THE HANDS OF THE ASSESSEE AS THE A SSESSEE HAD ACCOUNTED FOR THE SAID PAYMENT IN ASSESSMENT YEAR 2011-12 AND EVEN THE PRINCIPAL HAD DEDUCTED THE TAX AT SOURCE OUT OF THE SAID PAYM ENT IN ASSESSMENT YEAR 2011-12. IN VIEW THEREOF, THE GROUND OF APPE AL NO.1 RAISED BY THE REVENUE IS DISMISSED. 10. THE ISSUE IN GROUND NO.2 RAISED BY THE REVENUE IS IN RELATION TO DELETION OF ADDITION OF RS.1,45,000/-. THE GROUND NOS.3 TO 5 RAISED BY THE REVENUE ARE AGAINST THE METHOD OF ACCOUNTING FO LLOWED BY THE ASSESSEE. WE HAVE ALREADY COMMENTED UPON THE METHO D OF ACCOUNTING BEING FOLLOWED BY THE ASSESSEE IN THE PARAS HEREINA BOVE. 11. NOW COMING TO THE ISSUE OF ADDITION OF RS.1,45, 000/- MADE BY THE ASSESSING OFFICER, ON ENQUIRIES IT WAS INFORMED TO THE ASSESSING OFFICER BY THE EXECUTIVE ENGINEERING, KURUKSHETRA UNIVERSIT Y, KURUKSHETRA VIDE LETTER DATED 7.6.2011 THAT THE WORK HAD BEEN COMPLE TED AND ONLY FINAL BILL WAS PENDING. VIDE LETTER DATED 4.7.2011 THE E XECUTIVE ENGINEER, KURUKSHETRA UNIVERSITY INTIMATED THAT SOME QUANTITY OF STEEL WAS STOLEN DURING THE EXECUTION OF WORK AT SITE AND AS THE CAS E EFFECTING THE RECOVERY WAS TO BE DECIDED, THE FINAL AMOUNT WOULD BE INTIMATED. THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFICER W AS THAT THE FINAL BILL OF RS.1,45,000/- WAS STILL PENDING AND THE SAID AMO UNT WAS INCLUDED IN THE WORK-IN-PROGRESS OF RS.12,34,560/-. REJECTING THE EXPLANATION OF THE ASSESSEE AND AS THE ASSESSEE WAS FOLLOWING MERC ANTILE SYSTEM OF ACCOUNTING, SUM OF RS.1,45,000/- WAS ADDED AS INCOM E OF THE ASSESSEE. THE CIT (APPEALS) DELETED THE ADDITION OF RS.1,45,0 00/- AS THE SAID PAYMENT WAS NOT RELEASED BY THE EXECUTIVE ENGINEER. 6 12. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WHERE THE PRINCIPAL HAD INTIMATED TO THE ASSESSING OFFICER THAT THE SAI D AMOUNT WAS WITHHELD BECAUSE OF THEFT OF STEEL AND WAS NOT RELEASED TO T HE ASSESSEE TILL DATE. THUS THERE IS NO MERIT IN THE ORDER OF THE ASSESSIN G OFFICER IN ADDING THE SAID SUM OF RS.1,45,000/- IN THE HANDS OF THE ASSES SEE. THE AMOUNT IS EXCLUDED AND CANNOT BE ATTRIBUTED TO THE ASSESSEE. UPHOLDING THE ORDER OF THE CIT (APPEALS) WE DISMISS THE GROUND OF APPEA L NOS.2, 4 AND 5 RAISED BY THE REVENUE. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF JUNE, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19 TH JUNE, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH