TaxTMI 
TaxTMI 
2021 (6) TMI 509
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....ade on an aggregate amount of contractual payments of Rs. 2,78,72,229/-. Thus there was a difference of Rs. 1,12,72,068/- between the contractual amount shown in the TDS certificates and that shown in the Profit and Loss account. Hence the A.O. asked the assessee to explain the difference between the turnovers. The assessee submitted that it has received an advance amount of Rs. 74,32,104/- and the same was not included in the turnover. According to the AO, the assessee did not furnish any documentary evidence in support of this claim. 3. Since the assessee has claimed credit for entire TDS amount of Rs. 5,57,448/-, the AO took the view that the assessee should have disclosed gross receipts of Rs. 2,78,72,229/- shown in the TDS certificates as its turnover. Accordingly, he assessed the difference of Rs. 1,12,72,608/- as income of the assessee. The Ld. CIT(A) also concurred with the view taken by the A.O. and hence, the assessee has filed this appeal before us. 4. The Ld. A.R. has filed his written submissions and also advanced his arguments. He submitted that the assessee, being a civil contractor, would raise invoices on its clients in several stages of construction, as per the....
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....the appellant has offered revenue/income from contracts as under: Note 13 Work Contract & Supplies 71,69,238 VAT collected 10,39,541 Works Contract Services 73,60,951 Service Tax Collected 10,29,891 1,65,99,621 Note 15 Increase in Contract Work in progress ____________ (Note 15) 1,00,02,270 Amount offered as income 2,66,01,891 Note 4(b) Increase in Advance received from customers (Note 4b) 74,32,104 Closing balance 17,01,238 Less: Opening Balance 57,30,866 Total of "Amount Credited/ Paid" reflected in financial Statements. 3,23,32,757 It appears the A.O. is not conversant with Financial Statements of a Contractor and due to "E-Proceedings" was restricted from being enlightened by the A.R. of the appellant on the nature of operations and book keeping of a contractor, particularly the 'concept of cash and mercantile system of accounting'. As the A.O. has not rejected the accounts under section 145, present action is not as per law. The Ld reiterated the submissions made in the written submissions. 6. The Ld D.R, on the contrary, submitted that the assessee has claimed entire amount of TDS sho....
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....its clients. The assessee would be preparing running bills upon completion of agreed stage of construction. According to the accounting practice followed by the assessee, the invoice so raised and approved by the client, is recognized as contract receipts in the books of account. Hence there bound to be mismatch between the amount of contractual payments made by the client and the contract receipts accounted for by the assessee in the Profit and Loss account. 10. The assessee has claimed TDS amount of Rs. 5,57,448/- during the year under consideration. The details of the same along with corresponding "contractual payments" have been tabulate as under by the AO:- Sl. No. Name of the deductor TDS deducted TDS claimed in the current year Gross receipts (in Rs.) 1 Iconica Constructions 36,868 36,868 18,43,382 2 Prestige Estates Projects Ltd. 2,60,220 2,60,220 1,30,10,944 3 Safalaakar Buildtech 2,25,047 2,25,047 1,12,52,281 4 Skylark ArcadiaPvt. Ltd. 21,795 21,795 10,89,728 5 Skylark Mansions Pvt. Ltd. 13,518 13,518 6,75,894 Total 5,57,448 5,57,448 2,78,72,229 11. We notice that the assessee has received the aggregat....
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....sessee. We are unable to agree with the said submission. The amount of "work in progress" cannot be considered as an item of income offered by the assessee. We explain the same. The amount of "Closing stock"/work in progress" is credited to the Profit and Loss account under "revenue cost matching principle", i.e., in order to arrive at the correct profit, one is entitled to deduct only corresponding cost. In the normal practice, the purchases made during the year would be booked in the Purchases account and the entire amount shall be transferred to the Profit and Loss account. This kind of practice necessitates crediting of profit and loss account with Closing stock. We will explain this practice with a simple illustration. 14. For example, if a person has purchased 10,000 units at a cost of Rs. 50/- per unit, then the purchases account will show a balance of Rs. 5,00,000/- and the same shall be transferred to the Profit and loss account. If that person has sold only 7000 units, then he is not entitled to claim deduction of entire amount of Rs. 5,00,000/-. Under revenue cost matching principle, he shall be entitled to deduct only cost relating to 7000 units, viz, Rs. 3,50,000/- ....