M/s. Indiinfrabuild Constructions Private Limited, Bangalore V. Income Tax Officer, Ward 3(1)(4), Bangalore

MA 139/BANG/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6229 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-12-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 15-11-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice; TDS; Set aside
• Section: 143(3); 254(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “B”, BANGALORE Before Shri B.R.Baskaran, AM & Smt.Beena Pillai, JM MA No.139/Bang/2021 : Asst.Year 2016-2017 (Arising out of ITA No.329/Bang/2020) M/s.Indi Infra Build Constructions (P) Limited 29, 1, 4 th Floor, Sabari Paradise, No.9, Belathur Main Road Kadugodi Plantation Bangalore Rural Bangalore – 560 067. PAN : AACCI6843A. v. The Income Tax Officer Ward 3(1)(4) Bangalore. (Applicant) (Respondent) Applicant by : Sri.Anil Kumar, CA Respondent by : Sri.Srinath Sadanala, JCIT-DR Date of Hearing : 17.12.2021 Date of Pronouncement : 17.12.2021 O R D E R Per B.R.Baskaran, AM: The assessee has filed this miscellaneous application submitting that there are mistakes apparent from record in the order dated 15.06.2021 passed by the Tribunal in the appeal filed by the assessee mentioned in the caption. 2. The miscellaneous petition filed by the assessee reads as under:- “By this petition the petitioner urges the Honourable Bench to rectify the following mistakes apparent from the record in paragraphs 13 to 19 of its order dated ] 5.06.2021. 1. This Honourable Court, with reference to the reconciliation submitted by the AR reproduced in paragraph 5 of the order, and without seeking clarification from the AR as to how increase in contract work in progress could be considered as income, has concluded, for the reasons stated MA No.139/Bang/2021 M/s.Indi Infra Build Constructions (P) Ltd. 2 in paragraph 13 and 14 of the Order, that increase in Work in Progress cannot be considered an item of income offered to tax by the appellant. Had this issue been raised during the course of the hearing, the AR of the appellant would have clarified that the appellant is a sub contractor and not a trader or manufacturer, and that a subcontractor is required to follow percentage of completion method while declaring revenue as mandated by Accounting Standard-7 "Construction Contracts" as also ICDS III, that the said policy is being followed by the appellant as disclosed in Accounting Policy-6 "Revenue Recognition" (enclosed in page 17 of the Paper Book) and that the "Work in Progress" disclosed by the petitioner/ appellant has all the attributes of "Unbilled Revenue" in the Accounting Standard-7. Hence, it is submitted that this issue was decided by the Honourable Court without any clarification sought from the AR of the appellant during the hearing and requires to be properly adjudicated before the Honourable Bench in the interests of justice and fairplay. 2. The conclusion that Work in Progress cannot be considered as income is also contrary to the order of the Honourable Mumbai Tribunal in Toyo Engg India Ltd [2006] 5 SOT 616 (Mum) which squarely applies to the facts of the appellant petitioner's case. If the Honourable Tribunal is of the opinion that work in progress does not include income in the case of a contractor, then the case has to be referred to a Special Bench. 3. This Honourable Court has erred in referring to AO for verification whether the amount shown in 26AS as paid/credited has been offered to tax as income/ sales/ turnover to determine the credit to be given for the TDS, when the proceedings under Section 143(3) was only a limited scrutiny and to examine only the following issues: i) Whether sales, turnover/receipts have been correctly offered for tax. ii) Whether contract receipts/fees have been correctly offered for tax; and did not extend to verification of the correctness of the credit for TDS. Accordingly, the petitioner prays that paragraphs 13 to 19 of the order dated 15-6-2021 be modified, and holding that the work in progress declared in the account is income offered to tax, and considering the same the appellant has properly offered the sales, turnover, gross receipts, contract receipts / fees to tax and that the issues for which the case was MA No.139/Bang/2021 M/s.Indi Infra Build Constructions (P) Ltd. 3 selected for limited scrutiny have been demonstrated to have been complied with and the appeal be allowed.” 3. We heard the parties and perused the record. The assessee is a civil contractor and the issue contested before the Tribunal pertained to the addition of Rs.1.12 crores made by the AO. This addition represents the different between the gross receipts declared in the books of account (Rs.1,65,99,621/-) and the gross receipt shown in the TDS certificates (Rs.2,78,72,229/-). The Tribunal noticed that the TDS certificates have been received from five parties. Out of the five parties, the assessee had reconciled the difference in the gross receipts in respect of only one party, viz., Iconic Constructions. In respect of remaining parties, the assessee had reconciled the gross receipts in a summary manner. Accordingly, the Tribunal restored this issue to the file of AO with the following observations:- “15. In effect, the assessee has not reconciled the difference between the contractual payments shown in TDS certificates and the turnover shown in the Profit and Loss account except in the case of M/s Iconica Constructions. Even in the reconciliation statement furnished in a summary manner, a sum of Rs.55,41,742/- remain un-reconciled. We notice that the reconciliation statement furnished in a summary manner has also not been examined by the tax authorities. As noticed earlier, the difference has arisen mainly on account of timing difference in recognizing the contractual receipts as income. In any case, since these payments have been received through banking channels, it should be possible for the assessee to reconcile the receipts as was done in the case of M/s Iconica Constructions. Accordingly, in the interest of natural justice, we are of the view that the assessee may be provided with one more opportunity to reconcile the contractual payments shown in the TDS certificate furnished by a party with the entries made in the books of account. Accordingly, we direct the assessee to prepare reconciliation statement for each of the remaining four parties, viz., M/s Prestige Estates Projects Ltd, M/s Safalaakar Buildtech, M/s Skylark Arcadia Pvt Ltd and M/s Skylark Mansions Pvt Ltd. The reconciliation statement furnished for each of the above said four parties would show how the payments received have been accounted for by the assessee, which will help the assessing officer to take proper view of the matter.”. MA No.139/Bang/2021 M/s.Indi Infra Build Constructions (P) Ltd. 4 4. With regard to the credit to be given for TDS deducted, the Tribunal referred to the provisions of sec.199(3) read with Rule 37BA of IT Rules, which was relied upon by Ld DR, but left the matter to the wisdom of AO in the set aside proceedings, since the assessee relied on certain case laws in order to claim full TDS credit irrespective of quantum of income offered. 5. In the present miscellaneous petition, the assessee has pointed out the Tribunal did not consider Accounting Standard 7 and also ICDS III, which are relevant for recognising income for construction contracts, i.e., the income should be recognised under percentage completion method. It is also pointed out that the view of the Tribunal that the amount shown under “work in progress” cannot be considered as income is contrary to the decision rendered by Mumbai bench of Tribunal in the case of Toyo Engg India Ltd (2006)(5 SOT 616). It is also submitted that the Tribunal should not have remitted the issue of allowing TDS credit to the file of the AO as the same is against the scope of limited scrutiny. 6. We notice that the decision rendered by the Mumbai bench of Tribunal in the case of Toyo Engineering India Ltd (supra) related to the granting of TDS in respect of construction companies, where income is offered either on completion contract method or under percentage completion method. Hence it will not be possible to reconcile the TDS credit with the corresponding income offered. Accordingly, there is difficulty in application of section 199 in respect of construction companies and the Mumbai bench of Tribunal has understood the difficulty and accordingly directed to allow full TDS credit. In the instant case, we notice that the Tribunal, after noting the provision of sec.199 and also the decision relied upon by Ld A.R, has restored the issue to the file of AO without giving any specific direction, i.e, the matter of granting TDS credit was left open. MA No.139/Bang/2021 M/s.Indi Infra Build Constructions (P) Ltd. 5 7. With regard to the different in gross receipts declared by the assessee and that shown in the TDS certificates, which was assessed as income of the assessee, the Tribunal has directed the assessee to explain the difference by furnishing reconciliation statement before the AO. The Tribunal has not rendered any specific decision on this difference also. We also notice that the decision rendered in the case of Toyo Engineering India Ltd (supra) did not deal with the quantum of income offered. Hence the contention that the Tribunal should have referred the issue to Special bench is totally misconceived. 8. With regard to the claim of the assessee that the amount included in “work in progress” also should be considered as income offered, the Tribunal did not agree with the said contention and accordingly explained its view with an illustration. However, finally the Tribunal has only directed the assessee to reconcile the difference and did not render any specific direction. 9. Since the granting of TDS credit was linked to income offered as per provisions of sec. 199 of the Act, the Tribunal has dealt with the same. In fact, the assessee had raised following ground in respect of TDS credit:- “10. In the alternative, the credit for TDS may be restricted as per a formula for which appropriate directions may be given by the Honourable Court.” Hence the contention raised in the petition that the Tribunal should not have given direction with regard to the correctness of amount of TDS credit is also against the facts of the present case. 10. In any case, it can be noticed that the Tribunal has decided the issues by taking a view and both the issues have been restored to the file of AO. Hence conscious view taken by the Tribunal would not fall under the category of mistake apparent from record. Accordingly, the alleged mistakes pointed out in the petition would not fall under the category of mistakes apparent from record u/s 254(2) of the Act. Accordingly, we MA No.139/Bang/2021 M/s.Indi Infra Build Constructions (P) Ltd. 6 do not find any merit in the petition filed by the assessee. At the time of hearing, the Ld A.R sought permission of the bench to furnish copies of Accounting Standard 7 and ICDS III in support of his contentions. We have declined to grant permission as the same would result in re- appreciation of entire issue, which is not permitted u/s 254(2) of the Act. 11. In the result, the miscellaneous petition filed by the assessee is dismissed. Order pronounced on this 17 th day of December, 2021. Sd/- (Beena Pillai) Sd/- (B.R.Baskaran) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore; Dated : 17 th December, 2021. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-3, Bangalore. 4. The Pr.CIT-3, Bangalore. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore