TaxTMI 
TaxTMI 
2019 (4) TMI 1102
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....e Act"] Act. The facts in this regard are that the assessee, who is an individual and who carries the business of electrical contractor under the name and style of M/s. Vijaya Enterprises, filed a return of income for the AY 2008-09 declaring a total income of 59,27,400. In the computation of total income, the assessee has deducted from the profit as per profit & loss account a sum of Rs. 66,65,994 which was retention money retained by the contractors for work done by the assessee and to be released to the assessee only after certain conditions are fulfilled. The assessee was following mercantile system of accounting. The return filed by the assessee was taken up for scrutiny assessment and order of assessment dated 13.12.2010 was passed by....
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..... But however, the AO shall ensure that the receipt has been offered on completion of contract. Further grounds taken by the assessee do not survive for adjudication." 5. Subsequently, the AO issued a notice u/s. 147 of the Act dated 31.03.2015 for the reason that there was escapement of income in as much as the retention money has not been offered to tax by the assessee in the return of income. In the said order, the AO came to the following conclusion:- "5. The assessee is following the Mercantile System of Accounting. In the books of account. the assessee had declared the gross receipts and has claimed deduction from the net profit. In the Mercantile system of accounting, with regard to the retention money, one basic situation may a....
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....- "Legal Issues :- The Assessee has raised several grounds on the issue of validity of re-assessment proceedings. I do not find myself in agreement with the same. The basic legal requirements of recording of reasons and communication of the same to the appellant have been met, as is evident from the records. The Assessee has duly complied with the notices and participated in the proceedings. The objections raised by the appellant have been duly addressed by the AO. The questions of limitation and escapement of income are contingent on the core-reasons on basis of which a reassessment proceeding is initiated. It is amply clear in the present case that, the Assessee's excess claim of deduction of retention money from the Net-profit,....
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....nt is accordingly liable to be annulled. 8. The ld. DR, however, submitted that the assessee has not included in the gross contract receipts the retention money and therefore by claiming retention money as deduction, there was a double deduction claimed by the assessee and to this extent, there was a failure of the part of assessee to fully and truly disclose all material facts and therefore, initiation of reassessment proceedings is valid. 9. The learned counsel for the Assessee brought to our notice a chart showing party-wise break-up of retention money that was not offered to tax but included in the total turnover declared by the Assessee. The same is given as Annexure-2 to this order. The Assessee has also given a breakup of the sales....