TaxTMI 
TaxTMI 
2012 (5) TMI 215
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....ntractor engaged in government contracts for building/constructing/laying down roads, bridges, etc. 3.1 The first issue is with regard to the disallowance of the cost incurred in respect of the amount retained, termed 'retention money', from the bills for the work performed as raised by the assessee, toward any defect liability in the work, and which is to be released only later, i.e., on satisfaction of the performance guaranteed. During the course of the assessment proceedings, it was found that the assessee had, in deviation with its past practice, not credited the same to the profit and loss account for the period, and thereby returned its income for the year/s excluding the retention amount. The Assessing Officer (A.O.), accordingly, proceeded to examine the assessee's case for the non-inclusion of the same. The assessee is admittedly following mercantile system of accounting. The bills are raised only on the basis of the certified work at the contracted rates. As such, it's stating of following receipt basis for the retention money was considered unacceptable by him. Section 145 of the Act clearly mandates either cash or mercantile method, i.e., a total and not partial adh....
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....g excluded the retention money, he denied credit on account of the corresponding tax deducted thereon, which would, in terms of section 199, become exigible only in the year in which the said amount is brought to tax. 3.2 In appeal, the ld. CIT(A) concerned himself with the issue of whether income to the extent of the amount retained for clearance of the defect liability claims, could be said to have accrued. In light of the decisions in the case of Janatha Contract Co. v. CIT [1976] 105 ITR 627 (Ker.) and CIT v. East Coast Construction & Ind. Ltd. [2006] 283 ITR 297/[2007] 160 Taxman 399 (Mad.), he was of the view that the same is to be considered as the income of the year in which the amount/s is actually received by the contractor. Furthermore, the assessee had already included and been assessed for the retained amount on receipt basis for the following years, having been received in large measure thereat, even as about 35% (for AY 2003-04) of the retained amount was yet to be received. He, therefore, held that the retention amount could be brought to tax only in the year of receipt and hence the addition/s made by the AO toward the same was directed to be cancelled. Aggrieve....
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....e have heard the parties, and perused the material on record. We shall begin with by enlisting the respective cases of the opposing sides, as discerned. 5.1 The Revenue's case is that the defect liability, against which the amount is withheld, is only a contingent liability at the relevant time, i.e., which might arise in the eventuality of detection of any defect in the work later, and not a liability in praesanti and, as such, is not admissible as a deduction under the Act where mercantile method of accounting is being followed. Further, even if considered as excludable on the ground of the income having not accrued, the corresponding cost could not be allowed on matching principles; the cost being only in relation to the income which stands not accrued yet, so that the same would have to be carried over in the balance-sheet as a current asset, and not allowed in the computation of income for the relevant year/s. 5.2 The assessee's case, on the other hand, is that income to the extent of the retained money has not accrued, and which accrues only on the release of the funds on satisfaction of the terms of the contract, and toward which it cites case law. Further, the impugne....
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.... whether a legal liability in its respect has in fact arisen, i.e., the same, though relevant, is not decisive of the matter. As such, while it was, and is, open to the Revenue to rely on the consistent basis adopted in the past for assessing contractual income, i.e., up to AY 2001-02, it would have to prove its case on facts where the assessee contests, contending non-accrual. In fact, we observe that the Revenue had itself assessed the income for AY 2003-04, the first of the three consecutive years in appeal, as disclosed by the assessee, i.e., by following the receipt basis for RM, and the present assessment only follows the revision of the assessment u/s 263 of the Act. It is equally incumbent on the assessee to show that its consistently followed method of accounting was not consistent with the facts, or that the facts for the relevant years are distinguishable. The primacy of the books of account, it may be appreciated, is only on the basis that they represent the true state of affairs, so that where it is not so, the reliance thereon would to that extent be misplaced [refer: Pullangade Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC)]. That is, the assesse....
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.... respect of Rs. 96/-, i.e., Rs. 91/20 immediately (or even after lapse of a defined time) and Rs. 4/80 (RM) on no defect liability claim arising. While there is no uncertainty with regard to the former, the same, even if to be received after a specified time period - the credit period - the right to receive the same stands accrued. The RM, however, is subject to receipt only on satisfaction of the relevant terms of the Agreement and, thus, its accrual would have to await the satisfaction of the same. If, and to the extent, the same involves a time period, the right cannot be said to have arisen till after the completion of the said time period. As sought to be emphasized by the ld. AR during hearing, the contractor may be called upon to remove a defect, or in the event of his inability to do so, the contractee may cause the same at his end, recovering the cost from the RM. As such, there is no basis to hold that the amount of RM had accrued to the contractor on the passing of the bill. In our view, the proposition is sync with the judicially well-settled principle of accrual, and is unexceptional. 5.6 At the same time, it would be equally incorrect to say, as the assessee does, ....
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.... completion of DLP; (b) certificate by the Engineer that all the defects notified by him during DLP have been certified. It was submitted by the Id. AR that it is the latter time period which leads to the uncertainty, inasmuch as no definite time period is specified for obtaining the said certificate. How it could be, when no time period is, as it appears, specified for the removal of the notified defect/s? Also, the same would extend only to 50% of RM, while the assessee has accounted for the whole of RM as income only on its receipt. Secondly, true, the recognition as income of the balance 50% could in practical situations extend indefinitely, but then it would have to be shown that the defects stand notified during the DLP in its respect. This is as the same would otherwise automatically accrue on the expiry of the DLP. We are, nevertheless, not issuing any final findings in the matter as, firstly, the specimen contract cannot be strictly considered as a part of the record and, secondly, the question of accrual is essentially a matter of factual determination, the onus to exhibit which, though - in each case; its method of accounting being admittedly mercantile....
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.... 5.8 We may also refer, before concluding the matter, to some case law relied upon by the parties. In this regard, firstly, the matter in issue, i.e., the accrual of the income represented by retention money toward defect liability claims is a matter of fact, to be decided on the basis of all the relevant materials. The decision by the hon'ble jurisdictional high court in the case of Janatha Construction Co. (supra), even as pointed out by the Id. DR, is a clear authority in this regard, and that the nature of the retention money is paramount. As such, there could be no standard prescription in this regard, and the case laws by the high courts cited being on the questions of law posed before them, are largely irrelevant. The tribunal in the case of Emerson Network Power India (P.) Ltd. v. Asstt. CIT [2009] 27 SOT 593 (Mum.) on an examination of facts of the case found that the retention money could not be excluded from the purview of the income assessable for the year. All the case law relied upon by the assessee in the instant case stood also relied upon by the assessee-appellant in that case, which were found distinguishable. Our examination in the instant case leads to the findi....
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...., given the clear prescription of Explanation (c) to section 263 (1), the same definitely precluded the first appellate authority from exercising his appellate power in relation to the said issue for the said year, having the subject matter of revision by a coordinate authority. His order for the year in relation to the said issue is, therefore, without jurisdiction; the revision order being not annulled or reversed by a higher appellate authority, so that it held good. Thirdly, we may also deal with the assessee's claim of the RM as having been brought to assessment for the subsequent years of receipt, so that including the same for the current year/s would amount to double taxation. That there can be no double taxation is unexceptional. However, the pertinent question is: In which year the same is to be taxed? It is only the year to which it relates in terms of its regular method of accounting that the assessee's business income is to be subject to the charge of tax. This statement of law is equally unexceptional, apart from being borne out by the reading of the relevant sections (sections 4 & 5 r/w sections 28 and 145). Reference in this context may also be made to the decisi....
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..... CIT(A) has directed relief to the assessee by confirming the difference between Annexures B-1 and B-2 (to the assessment order) and the figures per the return and the accompanying documents. The Revenue contends that no such claim was raised before the Assessing Officer and, in any case, there is contravention of rule 46A(3), with the assessee adverting to pgs. 71, 73 & 84 of its PB. 7.3 The third adjustment (vide Ground # 2.2.3 at Rs. 2,87,8345/-) is toward retention money on two projects stated to be included in Annexure B-1 (Bills Receivable). With reference to pgs. 81, 82 and 85 of its PB, it was claimed that the same could only be assessed on receipt basis, on which basis it was allowed relief by the ld. CIT(A). The Revenue's grievance qua this adjustment is the same as with respect to the retention money (refer its Gd. 2.1). 7.4 The fourth adjustment (Rs. 7,27,3,166/-) is for the difference in the profit which the Assessing Officer has deducted in computing the cost of WIP & BR, i.e., at 4%. The assessee claimed that it is the gross profit, and not the net profit, which is to be allowed, claiming the former to be at 15% (with reference to pgs. 92 & 102 of its PB), and....
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....not there has been an omission by the Assessing Officer to consider the same would be required to be confirmed by him, particularly in view of the fact that the reconciliation statement has not been prepared and vetted by the authorities below. Further, it would also have to be seen if the recoveries pertain to, in whole or in part, to the preceding years, in which case the credit would be eligible only for that year(s). Reference to the Assessing Officer and the need for the preparation of the reconciliation statement, linking, year-wise, the book and the assessed figures, cannot be over-emphasized. 8.3 The third difference is in respect of retention money. The matter would, in view of our decision in its respect, have to travel back to the AO, who shall also verify the figures, being not apparent from the Annexure B1. Reference in this regard, is drawn to para 5 of this order, particularly sub-paras 5.3 to 5.7. Further on, as the entire retention money for the year stands apparently brought to tax separately, it would need to be seen as to how this amount stood excluded, i.e., the matter requires validation on facts. Also, the assessee has not spelled out the year/s in which t....
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....ld require first stating all the inventories at sale value, estimating the expenditure to be incurred for the completion of the projects under progress (WIP). This would enable arriving at the most proximate value of profit, as also, consequently, its rate, which may then be applied to the WIP, to yield the same rate of gross profit. With these observations we remit this matter back to the file of the AO for the necessary verification and application along the lines explained. 8.5 The AO while computing the addition in respect of the understatement qua WIP & BR for the year as per Annexures B1 & B2 allowed deduction for the same to the extent it stands already brought to tax for the immediately preceding year, i.e. a.y. 2002-03, at Rs. 330.56 lakhs. The ld. CIT(A) has revised the same to Rs. 271.25 lacs, i.e., the amount as finally assessed on appeal by the first appellate authority, and for which the assessee adverts to his order dated 12-4-2008 (PB pgs. 93 - 100). The Revenue objects thereto, citing violation of r. 46A(3). We are unable to understand the said objection; the ld. CIT(A) only incorporating the revised figure for that year. Even if the same is disputed, the same w....
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....nd, accordingly, returned by it. Reference to him for his verification and comments was thus even otherwise only compelling in the facts and circumstances of the case, i.e., besides required to meet the principles of natural justice and the statutory mandate of law. We direct likewise, acceding to the Revenue's objection. 11.3 So however, before parting with the matter, we have two observations on the merits of the case, and thus, deemed relevant to state, for consideration and application in determination of the assessee's case. Firstly, the need for consistency is paramount. The assessee is, except in respect of retention money, admittedly following mercantile method of accounting. As such, the same would, irrespective of the time of receipt (of business debts), bring to credit only the incomes/debts/assets arising during the year for which the accounts are being made. All that the Hon'ble Settlement Commission ('HSC' for short) has allowed the assessee is to capitalize its unaccounted assets as on 31.3.2001 (refer para 17 of its order dated 4.3.2008/PB pgs. 1-50). Without doubt, the same, on being realized, would not lead to any taxing event, unless of course there has been a....
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....65,583/-, the same represents retention money in respect of contract receipt qua Parambikulam Division-Pollachi qua which Rs. 136.10 lakhs stood credited to the P&L account. A sum of credit Rs. 127.12 lakhs stands assessed as retention money in respect of this project for the block period as per the order of the Hon'ble Settlement Commission. The amount realized therefrom during the year is at Rs. 116.66 lakhs, and which stands credited to the P&L account. In other words, the same represents realization of retention money already subject to tax for the block period and, thus, could not be subject to tax again. The ld. CIT(A) allowed the assessee relief on that basis. 13. Before us, like contentions stood raised, with the Revenue charging non-adherence to Rule 46A. The assessee, in appeal, states of no such violation as the relevant claim stood made before the AO. 14. We have heard the parties, and perused the material on record. We are inclined to be in agreement with the Revenue. The order of the HSC came to be passed only subsequently (4.3.2008), and there is no reference thereto in the assessment order. As such, the assessee's contention that the claim stood raised before ....
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....essment order). 17. Before the ld. CIT(A), the assessee submitted a reconciliation statement, detailing the omissions by the AO, and who allowed it relief on that basis. We shall detail the adjustments directed by him, as follows: (a) The first adjustment upheld by the ld. CIT(A) is for Rs. 18,70,449/-. The assessee claimed the same on the basis of being retention money, of which Rs. 1,99,543/- stands received in the following year (A.Y. 2005-06), while the balance remains to be received. (b) The second adjustment is for Rs. 1,06,84,398/- on the basis that the assessment as made is inclusive of the value of the work-in-progress and bills receivable to this extent, duly credited to the profit and loss account, so that it is a case of double addition. (c) The third adjustment is for Rs. 65,15,396/-. The assessee accepts that these amounts remained to be disclosed by it. So however, the same were in existence as on 31.3.2003 as well, so that the same should be included also in the opening balance of WIP/BR, in which case, the net result would be nil. Further, the same stands received and offered to tax as income for AY 2005-06 for which reference is made ....
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....ontested being ascribed to omissions by him, would enable resolution. Further on, the order by the HSC (passed on 12/3/2008) and the appellate order for AY 2002-03 (being dated 12/4/2008) having been passed subsequent to the assessment orders for both AYs 2003-04 and 2004-05, this aspect of the matter would arise only later, so reference to the AO for validation and confirmation was otherwise incumbent, particularly where the ld. CIT(A) has himself not undertaken any such exercise. In fact, the Revenue's specific ground # 2.3 (for AY 2003-04) only seeks to highlight this aspect of the matter. This is also, in effect, the essence of rule 46A. 18.2 Coming to the merits of the various deductions, our findings and decision qua similar issues arising in Gds. 2.2, 2.3 & 2.4 for AY 2003-04 per paras 8, 11 and 14 of this order would be equally applicable for this ground as well; the facts and circumstances; the respective cases of the parties and the arguments advanced before us, being identical. So however, we find that the Revenue does not contest the second and the fourth adjustment listed hereinabove, so that no interference qua the same at our end is called for. We are aware that t....
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.... law; the relevant matters arising in the adjudication of the issues before it, and toward which reference may be drawn to the case law cited at para 5.9 of this order. We decide accordingly. 19. Ground # 4 relates to the assessment of agriculture income, returned by the assessee for the year at Rs. 40.53 lakhs. While the AO has assessed the same at nil, the ld. CIT(A) has estimated the same at Rs. 15 lakhs on the basis of like estimate for the immediately preceding year. The AO had in fact assessed the same for the said year at Rs. 5 lakhs, and which stands confirmed by the ld. CIT(A) at Rs. 10 lakhs, revising his earlier estimate at Rs. 15 lakhs, and in line with the assessment for the assessment years 2001-02 and 2002-03. The assessee has, as in the past, accepted the estimate by the first appellate authority, and pleads the same for the current year in its defence, while the Revenue is in appeal. 20.1 The basis for the AO to deviate from the past history of accepted agriculture income by the assessee is the complete absence of any substantiation of its case in its respect for the current year. The assessee-firm owns no agriculture land. It could not produce any lease agre....
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....ase in any manner, leave alone with credible and cogent evidence/s, it has also not advanced any to meet the adverse material gathered and relied upon by the AO disproving its case. There has been no rebuttal by the assessee at any stage. In fact, as it turns out, there has been no evidence of any agricultural activity after the initial years, being 1993 to 1995-96, and the assessee's claim for agricultural income stood accepted year after year only on that basis; there being no independent examination of the assessee's claim thereafter. An actual conduct of any activity would yield a variety of evidences, while here we find none, and for years together. Under the circumstances, relying only on past estimate/s would be both factually and legally untenable, and amount to committing a folly. Before us also, as aforestated, the assessee, apart from reiterating its case of like estimations in the past, furnished no materials in support of its case, which is thus de hors any evidence and based on bald assertions. Under the circumstances, we have no hesitation in confirming the Revenue's stand, setting aside the impugned order on the said ground. We decide accordingly. 21. In the resu....
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....o that extent, so that the possibility of a double addition does exist, and the assessee's claim warrants examination of facts. Once again, a correction that a reference to the assessing authority, calling for his report, would have enabled, which we understand the issue at hand essentially as. The ld. CIT(A) has neither conducted the said verification nor consequently issued any findings qua the contrary claims, which continue to obtain. The matter is, therefore, restored back to the file of the AO for examining the assessee's claims in the matter, issuing appropriate findings on the points of differences, clearly stating how the amounts were accounted for and when released, if at all, including on the status of the corresponding TDS credit. He shall also examine the second limb of the Revenue's argument that the assessee would avail credit through enhanced value of bills receivable for the next year on merits, issuing corrective directions if found meritorious, and which would arise only as a result of absence of proper accounting. We decide accordingly. 24. The second ground ( # 2.2) is regarding retention money, which stands already decided by us vide para 5 of this order on....
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....ds the first adjustment of the profit component, the same is a subject matter of our adjudication vide para 8.4 of this order, which would be applicable for this year as well. As regards the second deduction of Rs. 6,509,735/-, the same represents the amount of addition of Rs. 2,79,135,96 for A.Y. 2004-05 that survived the first appeal, vide para 2 (pg. 12) of the appellate order dated 14.12.2008, which is the subject matter of the present appeal for that year (per Ground No. 3). The premise of the deduction, i.e., ignoring the quantification aspect, is only that there is double deduction to that extent, i.e., as being included in the assessment for both the years. The AO, while computing the addition vide para 11 (pg. 6) of his order, has given no such relief, as he does in respect of retention money (vide para 9, pg. 5) thereof. Neither is there any discussion by him in the matter, so that this issue was not raised by the assessee before him, i.e., of the same leading to a double assessment for both the current year and the immediately preceding year. Now, it is one thing that the deduction is confirmed in principle, and the first appellate authority allows the assessee relief qu....
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....lty accounting, included in the BR statement twice, adverting to pgs. 56, 73 & 73E of its paperbook. It stood allowed relief by the ld. CIT(A), finding its claim as correct, vide para 7 (pg. 10) of his order. 31. We have heard the parties, and perused the material on record. We are again at a loss to understand as to why did not, if that be so, the assessee move a rectification petition u/s. 154 before the AO, time for which we observe is still available, even as it may have, exercising abundant caution, impugned the same by way of an appeal as well. This is particularly so as the 'addition' is ascribed by the assessee to its own mistake, again bearing out the absence of, and the consequent need for, a reconciliation statement. It is not a question of tallying the figures alone, but giving an opportunity for verification, which may require examination of the books of account and other accompanying documents and statements. Further, on merits, the statement of its case only implies that there has been no matching with the TDS certificates by the assessee, or even by the Revenue, which, if so, would have at once highlighted the mistake. Also relevant in the matter would be the adj....
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....s income from other sources, though subject to capitalization benefit. Toward the same, the AO shall confirm if, firstly, the assessee has not already introduced cash in its accounts against the surplus 'asset' of Rs. 89.13 lakhs available with it as on 31/3/2001. This is as if so, the capitalization in its respect stands already availed by it, and no further adjustment is permissible. Secondly, he shall also confirm if after the adjustments already allowed, some 'balance' is available, which could be allowed to be set off. Toward this we find that the assessee has already moved a rectification application before the AO (at PB pg. 83/AY 2004-05), exhibiting the availability of cash. We decide accordingly. 34. In the result, the Revenue's appeal for A.Y. 2005-06 (in ITA 861/Coch/2008) is partly allowed and partly allowed for statistical purposes. ITA 832/Coch/2008 (for AY 2003-04) 35. The only issue arising per the instant appeal relates to the estimation of the Assessee's agricultural income, which stood estimated by the Assessing Officer (AO) at Rs. 5 lakhs, as against the returned amount of Rs. 24,98,737/- by the assessee vide its return of income for the year file....
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....e for that year, i.e., Rs. 41.36 lakhs. The ld. DR, in rejoinder, would submit that the search on the assessee was on 21.6.2001. As such, in the case of A.Y. 2002-03, the block period covered a part of the relevant previous year, whereas for the year under consideration, the entire income being sought to be adjusted against the pre-existing cash balance, admittedly arose only during the current year, i.e., after 21.6.2001. As such, the said order is not applicable on merits in the facts of the case. 37. We have heard the parties, and perused the material on record. 37.1 As would be apparent, the issue arising before us has two limbs. The first pertains to the estimation of the assessee's agricultural income and, consequently, the assessment of the balance as income from other sources, and secondly, of the adjustment of this balance against the available cash balance as at the end of the block period on the basis of the undisclosed income for the said period. Adverting to the first issue, we find force in the Revenue's case. There is no reference in the impugned order to either the terms of the remand report received from the AO or the findings thereby. In fact, it is not even....
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.... 20(All.) (at pgs. 192, 195-196); Basudeo Prasad Aggarwalla v. ITO [1989] 180 ITR 388/[1990] 48 Taxman 260 (Cal.) (at pgs. 388, 391). The plea regarding the said adjustment stands raised by the assessee only subsequently on the strength of the order dated 4/3/2008 by the Hon'ble Settlement Commission. Though not relevant, i.e., in view of the limited scope of the remand by the tribunal, it is not even clear if the said plea stood advanced before the AO in the remand proceedings. In fact, the assessee being not in appeal before the tribunal, which proceedings led to the remand, it could not even otherwise assume the same before it in the first instance, and therefore, in the second round, which are derived proceedings. That is, neither the scope of the original appellate proceedings nor of remand, admit of such a plea by the assessee. The same (plea), it may be noted, impacts the assessment substantively inasmuch as the non-agricultural (taxable) income for the year, assessed as from other sources, gets neutralised to that extent. The afore-referred order by the Settlement Commission for the block period ending 21/6/2001 does not contain any direction qua and, thus, does not have....
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.... the result, all the appeals are dismissed. Reference Under Section 255(4) of Income-tax.Act.1961 As there is a difference of opinion between the Members who heard the above appeals, the following questions are referred to the Hon'ble President, Income-tax Appellate Tribunal:- (1) Whether any retention money accrued to the assessee in the relevant years under appeal? (2) Whether the bills receivables which was already decided in ITA No.831/Coch/2008 for the assessment year 2002-03 vide Tribunal's order dated 31-5-2011 will have a binding effect? (3) Whether the Tribunal has power to decide the issue in respect of the assessment years which were not before the Tribunal? Reference under section 255(4) of the Income-tax Act 1961 In Re: Chandragiri Construction Co., Kasaragod (in ITA Nos. 832, 857, 681 & 861/Coch/2008 for Asstt. Yrs. 2003-04 to 2005-06) I have carefully perused the separate order by my ld. brother in the afore-referred appeals, as also the questions on the points of difference as framed by him for reference to the hon'ble President. However, in my humble view, the said questions do not truly represent the controversy or the dif....
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....ication of the issue of accrual of retention money on merits, as proposed by the Tribunal in the assessee's case for AY 2003-04 to AY 2005-06, is consistent with the facts and materials brought on record and the law in the matter, or not? (b) Whether the same is inconsistent with the findings by the Tribunal in the assessee's own case for AY 2002-03 per ITA No. 831/Coch/2008 dated 31/5/2011. 2 (a) Whether the issue qua the adjustment of the values of the work-in-progress and bills receivable for the several projects, as agitated by the Revenue, and particularly in view of its case before the Tribunal and the grounds raised by it, can be said to be squarely covered by the order by the Tribunal in the assessee's case for AY 2002-03 in ITA No. 831/Coch/2008? (b) Whether, in any case, the said order, particularly considering that it came into existence much after the hearing of the instant appeals, would, prior to it being so applied, be required to be put to notice, and the parties heard in the matter? 3(a) Whether the Tribunal can issue consequential direction/s for the subsequent year/s to prevent the taxation of the same income twice/again? (b) Whether, in view of it....
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....b) Whether, in any case, the said order, particularly considering that it came into existence much after the hearing of the instant appeals, would, prior to it being so applied, be required to be put to notice, and the parties heard in the matter? 3(a) Whether the Tribunal can issue consequential direction/s for the subsequent year/s to prevent the taxation of the same income twice/again? (b) Whether in view of its premises being only to avoid double taxation, would it matter if the subsequent years may also include years which are not under appeal before the Tribunal? 4(a) Whether the grounds/issues not referred to or dealt with by the dissenting order would amount to a tacit agreement with the order thereon per the proposed order? (b) Whether, therefore, the result of the appeal/s as declared by the dissent order would be required to be modified in consistency with the decisions rendered thereby, including in respect to such grounds/issues? " 4. Since the Hon'ble President has authorized the Third Member to frame a proper point of difference to bring out the real controversy, after going through the questions framed by both the ld. Members, I am reframing the follo....
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....k Page 69) 2005-06 37,14,247.00 (Paper Book Page 69) 2006-07 41,336.00 (Paper Book Page 69) Amount not yet released 77,71,728.00(Paper Book Page 70) Total 2,17,86,896.00 Grounds of appeal 2.4: Retention as per the Block Assessment Rs. 1,16,65,583/-: As per para. 9 Page 8 & 9 of the appellate order Contract Receipt in respect of Parambikulam Division - Pollachi Rs.l,36,10,364/-is included in the Contract receipt as per the profit and Loss Account (Paper Book Page No. 104). In respect of this work Rs. 1,27,11,627/-(Rs. 4,57,312+1,22,54,315) (Paper Book Page No.53 Item No.2 & 3) is assessed as retention amount by the Hon'ble Settlement Commission. Out of this Rs. 1,16,65,583/- is released during this assessment year. The amount released and credited to profit and loss account should be reduced from the total income since the corresponding retention amount is treated as income in the Block Assessment. The provisions of Rule 46A is not applicable since all the evidences are at the disposal of the Assessing Officer relating to the reduction given by the CIT(A). The Assessing Officer has not conceded to the assessee'....
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....year: 2005-06) Grounds of appeal 2.2 and 2.2.1 - Rs. 3,36,30,186: This Issue covered In Page 5 para. 9 of the Assessment Order and page 4, Para 4 of the order of the CIT(A). The Total Retention amount is Rs. 4,25,24,938/- but an addition is made to the amount of Rs.3,66,30,186/- as detailed In Page 4 Para 4 of the order of the CIT(A). The above amount of Rs. 4,25,24,938/- Is consisting of the following Items. (i) Retention amount Included In the Profit and Loss Account Rs.2,48,38,802 (ii) Retention Amount of NH Mangalore, which Is included as income in the profit and loss account in the amount of Rs.6,23,819/- - Madras-Kolar-Bangalore, NH Bangalore Rs. 2,00,000/- (iii) Retention Amount of Periyathali Sea Wall, which is included as Income In the profit and loss account Rs. 18,02,962/- (iv) Retention amount carried forward in the Balance Sheet which is not received during the year Rs. 1,56,83,174/- Total Rs.4,25,24,938/- (i) Rs.2,48,38,802/- is the current year retention amount released and taken in the Profit and Loss Account (Paper Book Page No. 58-60B) (ii)&nb....
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....ss omitted as per Annexure B2 92,18,256 Note: Annexures Bl & B2 are the Annexures to the assessment order 5,21,44,529 Less 4% profit margin 20,85,781 Balance 5,00,58,747 Less: BR & WP added in 2002-03 3,30,56,296 1,70,02,451 As against the above the CIT(A) in Page 7 para. 7 computed as under: BR & WIP as per Annexure B 1 & B2 .... Rs. 5,21,44,529 Less: Amount as per Return of Income .... Rs. 1,08,550 Recoveries .... Rs. 7,02,162 Retention Amount .... Rs.28.778,345 Rs. 36,89,057 Rs. 4,84,55,172 Less: Gross profit @ 15.01 % Rs. 72,73,166 Rs. 4,11,82,306 Less: BR&WIP added in AY 2002-03 Rs. 2,71,25,551 Balance Rs. 1,40,56,755 The difference amount of Rs. .29,45,696/- is in appeal before the Hon'ble Bench. The reasons for the differences are as under; a. In respect of the work PWD Roads, Kalpetta, Wayanad Rs. 1,08....
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.... of Rs. 29,45,696/- is granted by the CIT(A). Rs. 10,850/-reduction given by the Assessing Officer (Paper Book Page 74) is to be reduced from Rs. 29,45,696/- and the net relief by the CIT(A) should be Rs.29,34,846/- (Rs. 29,45,696/-Rs.10,850) Grounds of appeals in respect of point No. 2.2.1; 2.2.2; 2.2.3; 2.2.4 and 2.2.5 are covered in the above submission under point No.5 above. Bills Receivable & Work in Progress Rs. l,34,33,923/-: The Assessing Officer in Para 13 Page 7 & 8 of the assessment order rejected the assessee's claim that the addition to the Work-in-Progress and Bills Receivable which are already considered in the Block Assessment, which are received during the year and included in the contract receipt of the year in the Profit and Loss Account filed along with the return of income (Paper Book Page : 101-102) should not be added again which will cause a double assessment. The CIT(A) in para. 8 Page 8 the details of the addition to the Work-in-Progress and Bills Receivable as per the Block Assessment Rs. 8,04,83,460 is given. Out of this Rs. 2,61,93,756 is received credited in profit and loss account for the Asst. Year 2002-03, the balance carried forward for t....
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....ceivable in the Balance Sheet as on 31.03.2004. (Paper Book Page 62 & 63). Copy of the Profit and Loss Account is enclosed in Paper Book Page N0.66A. The CIT(A) allowed this as per page 9 Para 19(2)(b) of the appellate order against which the revenue has not come in appeal before the Hon'ble Bench. c. Grounds of Appeals 3.2 - Rs.65.15.396/- The details are given in Page 64 of the Paper Book. The above Work-in-Progress and Bills Receivables are not included in as Work-in-Progress and Bills Receivable as per the Assessment Order. These items are included as on 31.03.2004 for the first time and hence there will be an enhancement in the closing balance without the corresponding opening balance in the balance sheet even though the amounts are receivable as on 31.03.2003 also. This amount was in dispute and hence not included as on 31.03.2003 but when the amount is received the amount is offered as income for the A Y :2005-06 and hence the assessment for the A Y.2004-05 is not correct. The details of Bills received for the A Y:2005-06 are given in page 66B & 66C of the paper Book. d. Rs. 23,37,985/- In respect of Karapuzha Irrigation Project, Kalpetta is ....
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....net profit after depreciation, interest and other administrative expenses. The Profit and Loss Account after adjustment of opening work-in-progress/bills receivable after order of the CIT(A) and Closing work-in-progress and bills receivable as per assessment order of this assessment year (paper Books Page No.67) clearly shows the Gross Profit is 24.05 %. in respect of the A Y: 1995-96 the Gross Profit is determined at 13.79%. The Assessment Order AY: 1995-96 (Paper Book Page No.61-66) In page 63 of the Paper Book and page 3 of the Assessment Order the Gross profit calculation for the A Y: 1995-96 is disclosed. The gross profit is to be arrived at after reducing the cost of material, labour and other direct expenses and when the depreciation, interest partners salary and other administrative expenses are reduced the result is net profit which is not to be considered for the purpose of arriving at the Gross Profit of the Contract Gross Profit @ 24.05% (Grounds of Appeal 2.3.1) This item is covered in Grounds of Appeal No.2.3 above. Grounds of Appeal 2.4 - Rs.2.50.60.960/- This issue covers in page 9 Para 6 of the order of the CIT(A). The above amount is consisting of t....
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....No fresh documents or evidences are produced before the CIT(A) which were not produced before the Assessing Officer. In this context the revenues objection of violation of Rule 46( A) (3) is not justified. The order of the Hon'ble Settlement Commission is a document known to the Assessing Officer who is a party to the proceedings and the consequent effect of his decision allowed by the CIT(A) is not violating Rule 46 (A) (3). Similar is the case about the retention amount bills receivable and all the other items decided by the CIT(A). The same question regarding violation of Rule -46 (A) (3) by the revenue is decided as unsustainable by the Hon'ble Bench in ITA -831 & 805/lCoch dated 31.05.2011 and 29.01.2010 A Y-2002-03. 4(iv) Question No.4: It is well-settled law that the Hon'ble Appellate Tribunal is empowered to decide only on the matters contained in the grounds of appeals relating to the particular A Y under appeal. The Hon'ble bench can admit additional grounds on application but additional evidence cannot be entertained without affidavit. The decision of the Hon'ble Tribunal on questions of facts is having any effect on the assessment of either earlier years or sub....
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.... for the A Y -2002- 03 in ITA 581/Coch/2008 and hence the decision of the Hon 'ble bench is binding. 4. In respect of the block assessment up to 31.03.2001 ,A Y -2001-02 the value of work in progress and bills receivable are enhanced as decided by the Hon'ble Settlement Commission. This enhancement is having a cascading effect to the subsequent assessment years. Whatever the amount of bills realized during the assessment year 2003-04 to 2005-06 out of the above enhancement should not be taxed again as income since those amounts are already are subject to taxation at 60% u/s.113 of the Act. The Assessing Officer is a party to the proceedings and order of the Hon'ble Settlement Commission and hence the order of the Hon'ble Settlement Commission should not be considered as a new document under Rule 46A(3). This is the decision of the Hon'ble bench of the A Y -2002-03 in ITA 831/Coch/2008 dated 31.05.2011. As a result this decision is binding on the Hon'ble bench for the A Y's-2003-04t 2004-05 and 2005-06. 5. ITA 832/Coch /2008 - A.Y -2003-04 : The Hon'ble Settlement Commission in Its order in the block assessments has permitted capitalization of cash bala....
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....terated the contents of the Hon'ble Accountant Member's order. Since the same is on record, I do not want to waste the space and time in reproducing the same here. 6. I have heard the rival submissions and considered the facts and materials on record including the paper book and the case-laws cited before the Tribunal. There are only two issues referred to me viz., - (i) the time and accrual of the retention of money and (ii) whether the Tribunal's order for assessment year 2002-03 in respect of retention money, bills receivable and work-in-progress is binding on the Bench for this assessment year? 7. That apart, the legal issue whether the decision of the Tribunal in earlier assessment year in the assessee's own case is to be followed and whether the Tribunal has power to decide the issues in respect of assessment years which are not before the Tribunal are also there. 8. I would like to take up the legal issue first viz., whether the Tribunal's order for assessment year 2002-03 in assessee's own case is having any binding effect on the current assessment year and whether the learned Accountant Member's order is inconsistent with the said order for assessment year 2002-03....
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....s Tribunal in assessee's own case, facts and circumstances being same, is binding on the Bench (which also decided the case of the assessee for earlier assessment year) for all these assessment years under consideration? The Tribunal is to follow the decision of another Bench where facts are the same. This is a treaty law. The only other alternative is to refer the matter to the larger bench if the Members of this Bench are not willing to follow the earlier order. In this case, there is no dispute that the facts and circumstances are the same as appearing in the assessment year 2002-03 except change in figures and it is also true that the very same Members decided the issues for assessment year 2002-03 in favour of the assessee. In such circumstances, the only course left to the Bench was to follow the earlier decision in order to gain confidence of public in the judicial system. In case the learned Accountant Member wanted to deviate from the earlier order, the only course left was to refer the matter to the larger bench with the concurrence of the learned Judicial Member which, in this case had not happened. Hence, I am of the view that the learned Accountant Member should hav....