M/s Phalke Constructions, Satara V. Asstt.Commr.of Income Tax, Satara

ITA 912/PUN/2010

• Counselvise Citation: 91224514 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA
• Assessee Lawyers: S N DOSHI
• Keywords: Additional evidence
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 912/PN/2010 (ASSESSMENT YEAR: 2006-07) PHALKE CONSTRUCTIONS, .. APPELLANT SWAMI VIVKANAND NAGAR, KALYANI COLONY, KARAD, SATARA PAN AAGFP4093G VS. ASSTT.COMMISSIONER OF INCOME-TAX, .. RESPONDENT CIR., SATARA APPELLANT BY : SHRI S N DOSHI RESPONDENT BY : SHRI S K AMBASTHA DATE OF HEARING : 10.01.2012 DATE OF PRONOUNCEMENT : 20.01.2012 ORDER PER G.S. PANNU, A.M .: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, PUNE DATED 14 .12.2009 WHICH, IN TURN, HAS ARISEN FROM ORDER DATED 30.12.2008 PASSED BY THE ASSESSING OFFICER, UNDER SECTION 144 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. THE FIRST GROUND RELATES TO AN ADDITION OF RS 10,51 ,300/- WHICH HAS BEEN MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDER V ALUATION OF CLOSING WORK-IN-PROGRESS. BRIEFLY PUT THE RELEVANT FACTS ARE TH AT THE ASSESSEE IS A FIRM ENGAGED IN CIVIL CONTRACTING BUSINESS. THE RETURN OF INCO ME FILED FOR THE ASSESSMENT YEAR 2006-07 WAS ACCOMPANIED BY A COMPUTATION OF TOTAL INCOME, BALANCE SHEET AND TRADING PROFIT & LOSS ACCOUNT, WHEREI N A TOTAL LOSS OF RS 61,88,990/- WAS DECLARED. IN THE TRADING PROFIT & LOSS ACCOUNT SO FILED, THE ASSESSEE HAD DECLARED OPENING WORK-IN-PROGRESS AT RS 1,05,00 ,000/- AND THE CLOSING WORK-IN-PROGRESS AT RS 96,25,500/-. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, ASSESSEE WAS REQUIRED TO FURNISH THE CONTRACT ACCOUNT. IN THE ACCOUNT SO FURNISHED, CLOSING WORK-IN-PROGRESS WAS DEPICTED AT RS 1,06,76,800/- WHICH WAS IN VARIATION WITH THE CLOSING W ORK-IN-PROGRESS DECLARED IN THE PROFIT & LOSS ACCOUNT ANNEXED WITH THE R ETURN OF INCOME BY A SUM OF RS 10,51,300/-. ON THE BASIS OF THE AFORESAID DISCR EPANCY, THE ASSESSING OFFICER REJECTED THE BOOK RESULTS BY INVOKING SECTIO N 145(3) OF THE ACT AND HELD THAT THE UNDER-STATEMENT IN THE VALUE OF CLOSING WORK-IN-PROGRESS IN THE RETURN OF INCOME HAD RESULTED IN CLAIMING OF A N EXCESS LOSS OF RS 10,51,300/-, WHICH WAS DISALLOWED. 3. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), THE ASSESSEE CONTENDED THAT THE PARTICULARS OF CLOSING WORK-IN-PROGRESS IN THE CONTRACT ACCOUNT AS FILED DURING THE ASSESSMENT PROCEEDINGS WAS INCOR RECT AND NOT AS PER THE ACCOUNT BOOKS. IT WAS EXPLAINED THAT THE CLOSING WORK-IN-PROGRESS AS SHOWN IN THE PROFIT & LOSS ACCOUNT ANNEXED WITH THE RETU RN OF INCOME WAS CORRECT AND WAS SUPPORTED BY THE ACCOUNT BOOKS AND, THEREF ORE, THE DISALLOWANCE WAS NOT JUSTIFIED. THE COMMISSIONER OF INCOM E-TAX (APPEAL) HAS SUSTAINED THE ADDITION BY OBSERVING THAT THE EXPLANATI ON FURNISHED WAS VAGUE AND UNSUBSTANTIATED. 4. BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE HAS POINTE D OUT THAT THE CLOSING WORK-IN-PROGRESS CONTAINED IN THE CONTRACT ACCOUNT FILED DURING THE ASSESSMENT PROCEEDINGS WAS WITHOUT ANY BASIS AND WAS NOT SUPPO RTED BY THE ACCOUNT BOOKS MAINTAINED AND IT SHOULD BE IGNORED. IT IS POINTED OUT THAT THE ASSESSEE IS IN THE BUSINESS OF CARRYING OUT CIVIL CONSTRUCTION W ORK FOR LIFT IRRIGATION DEPARTMENT, GOVERNMENT OF MAHARASHTRA AND THE WORK WHICH IS COMPLETED BUT NOT CERTIFIED AT THE CLOSE OF THE YEAR IS CLASSIFIED AS WORK-IN- PROGRESS AND THE SAME IS ALSO CERTIFIED BY THE OFFICIALS OF THE CONCERNED DEPARTMENT. IN THIS CONNECTION, IT IS POINTED OUT THAT FOR VARIOUS ASSESSMENT YEARS IN THE PAST AS WELL AS ALSO IN THE SUBSEQUENT ASSESSMEN T YEARS THE CLOSING WORK-IN-PROGRESS DEPICTED IN THE PROFIT & LOSS ACCOUN T TALLIED WITH THE CERTIFICATES ISSUED BY THE IRRIGATION DEPARTMENT, RATNAG IRI, MAHARASHTRA, AND IN THIS REGARD, REFERENCE WAS MADE TO PAGE 5 OF THE PAPE R BOOK, WHEREIN THE RELEVANT DETAILS ARE GIVEN. IT WAS POINTED OUT THAT E VEN THE CLOSING WORK-IN- PROGRESS IN THE INSTANT ASSESSMENT YEAR I.E. AS ON 31.3.20 06 HAS BEEN CERTIFIED BY THE IRRIGATION DEPARTMENT, RATNAGIRI AT RS 96,25,500/-, WHICH CORRESPONDS TO THE CLOSING WORK-IN-PROGRESS SHOWN IN THE PR OFIT & LOSS ACCOUNT ANNEXED WITH THE RETURN OF INCOME. IN THIS MANN ER, THE BOOK RESULTS DECLARED IN THE RETURN OF INCOME IS SOUGHT TO BE JUSTIFI ED. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE HAS POINTED OUT THAT THERE IS NO EXPLANATION FURNISHED BY THE ASSESSEE FOR FURNISHING THE CONTRACT ACCOUN T DURING THE ASSESSMENT PROCEEDINGS WHICH CONTAINED THE CLOSING WORK-IN-PRO GRESS AT RS 1,06,76,800/- AND, THEREFORE, THE PRESENT PLEA RAISED BY THE ASSESSEE IS NOT JUSTIFIED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THIS CASE, THE BOOK RESULTS HAVE BEEN REJECTED BY THE ASSESSING OFFICER ON A SINGULAR POINT REGARDING THE VARIATION IN THE VALUE OF CLOSING WORK-I N-PROGRESS. IN THE TRADING, PROFIT & LOSS ACCOUNT ANNEXED WITH THE RETURN OF INCOME FILED, THE CLOSING WORK-IN-PROGRESS WAS REFLECTED AT RS 96,25,500/- WHEREAS IN THE COURSE OF ASSESSMENT PROCEEDINGS, A CONTRACT ACCOUNT WAS FILED WHICH CONTA INED THE VALUE AT RS 1,06,76,800/- THEREBY DEPICTING A DIFFER ENCE OF RS 10,51,300/- WHICH IS THE SUBJECT-MATTER OF DISPUTE. IN THIS CONTEXT, THE PLEA OF THE ASSESSEE IS THAT THE VALUE OF CLOSING WORK-IN-PROGRESS SHOWN IN TH E RETURN OF INCOME IS CORRECT AND IS ALSO SUPPORTED BY THE ACCOUNT BOOKS AS ALSO A CERTIFICATE DATED 14.2.2011 ISSUED BY IRRIGATION DEPARTMENT, RATNAGIRI (MAHARASHTRA). IT IS FURTHER EXPLAINED THAT THE CLOSING WORK-IN-PROGRESS REFL ECTED IN THE CONTRACT ACCOUNT WAS A MISTAKE AND BE IGNORED. WE FIND THAT THE CL OSING WORK-IN- PROGRESS IS NOW SOUGHT TO BE JUSTIFIED ON THE BASIS OF A CERTIFICATE ISSUED BY THE IRRIGATION DEPARTMENT, RATNAGIRI. THE ASSESSEE IS UNDE RTAKING CIVIL CONTRACTING WORK FOR SUCH DEPARTMENT. OSTENSIBLY, THE CERTIFICATE SO ISSU ED BY THE IRRIGATION DEPARTMENT, RATNAGIRI, STATES THE VALUE OF WORK DONE F OR WHICH BILLS HAVE NOT BEEN ISSUED AS ON 31.3.2006 AT RS 96,25,500/-. THIS PIECE OF EVIDENCE WAS NOT BEFORE THE LOWER AUTHORITIES AS WAS FAIRLY ADMITTED BY THE LEARNED COUNSEL AT THE TIME OF HEARING. UNDER THESE CIRCUMSTANCES, WE T HEREFORE FIND IT APPROPRIATE THAT THE MATTER REQUIRES TO BE VERIFIED AT THE LEVEL OF THE ASSESSING OFFICER. THE ASSESSEE SHALL EXPLAIN BEFORE THE ASSESSING OF FICER THE REASONS FOR DEPICTING A DIFFERENT FIGURE OF CLOSING WORK-IN-PRO GRESS IN THE CONTRACT ACCOUNT FILED DURING THE ASSESSMENT PROCEEDINGS AND THE ASSE SSING OFFICER SHALL CONSIDER THE FRESH EVIDENCE NOW BROUGHT ON RECORD BY THE ASSESSEE AND THEREAFTER PASS AN ORDER AFRESH IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION THAT IN CARRYING OUT THIS EXERCISE, THE ASSESSING OFFICER SH ALL ALLOW THE ASSESSEE APPROPRIATE OPPORTUNITY TO SUPPORTITS CLAIM MADE IN THE RETURN OF INCOME. AS A RESULT, THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (APPEALS) IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DECIDE TH E ISSUE AFRESH AS DIRECTED ABOVE. THIS GROUND OF APPEAL IS ALLOWED, AS AB OVE. 7. THE LAST GROUND RELATES TO THE DISALLOWANCE OF RENT AND RATES OF RS 3,98,000/-. IN THIS CONNECTION, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD CLAIMED A SUM OF RS 19,25,055/- IN THE PROFIT & LOSS ACCO UNT FILED ALONGWITH THE RETURN OF INCOME UNDER THE HEAD RENT, CHARGES AND TAXES ETC. IN THE CONTRACT ACCOUNT FILED DURING THE ASSESSMENT PROCEEDINGS ONL Y A SUM OF RS 15,27,055/- WAS DEBITED ON ACCOUNT OF RENT, RATES AND T AXES, ETC. AND THEREFORE, THE BALANCE OF RS 3,98,000/- WAS DISALLOWED AS THE ASSESSEE FAILED TO SUBSTANTIATE THE SAID EXPENDITURE. BEFORE THE COMMI SSIONER OF INCOME-TAX (APPEALS), THE ASSESSEE FURNISHED THE RELEVANT DETAILS W HICH ARE INCORPORATED AT PARA 4.2 OF THE ORDER AND IT WAS EXPLAINED THAT T HE EXPENSES WERE ON ACCOUNT OF DUMPER RENT PAID, ROOM RENT PAID, COMPRESSO R RENT PAID, ETC. ALL THIS MATERIAL WAS NOT ENTERTAINED BY THE COMMISSIONER O F INCOME-TAX (APPEALS) ON THE GROUND THAT THE SAME WAS ADDITIONAL EVIDENCE NOT FURNISHED DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE HAS NOT E XPLAINED THE REASONS FOR NOT FURNISHING THE SAME BEFORE THE ASSESSING OFFICER. HENCE, THE ADDITION WAS SUSTAINED, AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 8. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE EVIDENCE BEFORE THE COMMISSIONER OF INCOME-TAX (APPEAL S) JUSTIFIED THE IMPUGNED EXPENDITURE AND NO DISALLOWANCE WAS NECESSARY. I T WAS ALSO POINTED OUT THAT THERE WAS NO OCCASION TO SUBMIT THE DE TAILS BEFORE THE ASSESSING OFFICER AS THE ASSESSEE COULD NOT FORESEE THAT THE DISALLOWANCE WOULD BE MADE FOR SUCH REASON. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OUR VIEW , THERE IS NO PRIMA FACIE MATERIAL TO REJECT THE EVIDENCE SOUGHT TO B E RELIED UPON BY THE ASSESSEE IN SUPPORT OF THE IMPUGNED EXPENDITURE. WE, THE REFORE, SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND DIRECT THE ASSESSING OFFICER TO VERIFY THE EXPENSES IN QUESTION AND THEREAF TER ALLOW THE SAME IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION THAT IN CARRYING OUT THIS EXERCISE, THE ASSESSING OFFICER SHALL ALLOW ASSESSEE APPROPRIATE OPPORT UNITY TO FILE THE MATERIAL AND EVIDENCE IN SUPPORT OF HIS CLAIM. WE ORD ER ACCORDINGLY. THIS GROUND OF APPEAL IS ALLOWED, AS ABOVE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 20 TH DAY OF JANUARY, 2012. SD/- SD/- (I C SUDHIR) (G.S . PANNU) JUDICIAL MEMBER ACCOUNTANT MEMB ER PUNE, DATED 20 TH JANUARY, 2012 B COPY TO:- 1) PHALKE CONSTRUCTIONS, KARAD 2) ACIT CIR. SATARA 3) THE CIT (A)-III PUNE 4 THE CIT-III PUNE 5) DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE TRUE COPY BY ORDER SR. PS, ITAT PUNE