TaxTMI 
TaxTMI 
2021 (2) TMI 1229
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....appreciating the fact that there is no typographical error and closing stock figure of Rs. 58,72,11,589/- is taken from the written submission dated 18.11.2014 of assessee showing detail of closing stock at page 250 to 273 of submission. 2. The CIT(A), Lucknow has erred in ia\v and on facts in deleting the addition of Rs. 13,99,33.507/- on account of prior period without appreciating the fact that the assessee has not produced documentary evidence before A.O. that income corresponding to expenditure of Rs. 13,99,33,507/- has already been recognized as income in contract account of earlier years. 2A The CIT(A), Lucknow has erred in law and on facts in deleting the addition of Rs. 13,99,33,507/- on account of prior period without appreciating the fact that the assessee was unable to prove before the assessing officer that the expenses crystallized during the year under consideration and thus are not allowable as assessee is following mercantile system of accounts. 3. The CIT(A), Lucknow has erred in law and on facts in deleting the addition of Rs. 1,12,00,000/- on account of provision for gratuity without appreciating the fact that the assessee has made provisions of gratuit....
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....prayed that following the Tribunal's orders in the case of assessee itself, the appeal of the assessee may be allowed. The ld. DR fairly agreed that the issue under appeal is covered in favour of the assessee. 3. The ld. DR arguing the appeal in ITA No. 316/Lkw/2017 submitted that the ld. CIT(A) has wrongly allowed relief to the assessee on various issues and placed her reliance on the order of Assessing Officer. The ld. AR, on the other hand, submitted that the Ground Nos. 2 and 2A, Ground No.4, Ground No.6, Ground No.7 and Ground No.9 are already covered in favour of the assessee by orders of ITAT for AYs. 2010-11 and 2011-12 and in this respect filed a chart showing page numbers and para number of ITAT order wherein similar issues were already decided by the ITAT in favour of the assessee. 4. As regards Ground Nos. 1, 3, 5 and 8, the ld. AR submitted that detailed submissions were made before the ld. CIT(A) and ld. CIT(A) after going through the submissions of the assessee has allowed relief to the assessee as the Assessing Officer had wrongly made the additions. Explaining the facts of Ground No.1 the ld. AR submitted that there was a typographical mistake in the totaling of ....
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....cess provision of Rs. 36,52,81,82/- in operating expenses in Schedule-11. The assesses was show caused to furnish proof of depositing Labour cess of Rs. 36,52,81,828/- in Govt. account vide questionnaire dated 21.10.2014 and 16.01.2015. The assesses reply dated 18.11.2014 is as under:- "In this regard it is submitted as under:- (i) That concept of the Labour cess was for the first time introduced in the financial Year 2009-10 by the Labour Department of the Government of U.P. vide notification dated 20.112009. (ii) That in light of this notification, the corporation vide its Circular dated 19.02.2010 informed all the unit Heads/General Managers to make provision for Labour Cess @ 1% of the cost of construction of the concerned work sanctioned by the Government and are in progress. Thus, the Labour Cess so charged on the work done by the corporation art' direct expenses in nature which are debited to the Contract Account for the purposes of charging centage on the work so done by the corporation. As the corporation undertakes the works of Government departments only, the labour cess so charged on the work is recoverable from the concerned Government Department. (i....
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....oration. Thus, the contract account is, basically, accounting of work done where the gross profit worked out is the centage allowed towards the overheads and profits of the assessee Corporation. In the contract account, all direct costs, as are to be borne by the clients of the Corporation, are debited and the value of the work done is credited by adding 15% towards centage charges. As such, in case any disallowance is to be made in the cost debited to the contract account, a corresponding deduction is also required to be made in the cost debited to the work done, as this is a case of contra entries only. This accounting procedure of the assessee Corporation stands accepted by the Department in assessment year 1990-91, as taken note of by the Tribunal in the assessee's case for assessment year 1991-92, in its order dated 30/11/2006, passed in ITA No.714/LKW/2002. For assessment year 2000-01, the Tribunal, vide its order dated 18/12/2018, passed in ITA No.382/LKW/2004, also took note that all the expenditures incurred by the assessee Corporation on material consumed is recovered from its clients along with 15% profit thereon and that so, even if there is inflation in the expenses in....
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....n for Government. It receives orders for projects on behalf of the Government and executes the same. The inventory of stock is maintained at all units separately and is physically verified by an officer of the rank of a Gazetted officer. The closing stock as per profit and loss account for the year under consideration is Rs. 58,17,00,211/-. During the course of assessment proceedings the appellant filed inventor,' of closing stock which by typographical mistake was shown at Rs. 58,72,11,589/-. The AO instead of verifying the correct position with reference to opening stock, purchases and utilization in construction activities chose the easier way of rejecting the books of accounts under section 145(3) of the Act and making the addition for the difference. I find that the position has been explained by the appellant both during the assessment proceedings as well as appellate proceedings that the figure of Rs. 58,72,11,589/- is a typographical error and correct value of closing stock as per books of accounts and verified inventory is Rs. 58,17,00,211/-. The Law does not proceed from taking advantage of a genuine bonafide mistake of the appellant. The books of accounts of the appe....
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.... therefore the expenses are allowable in the assessment year under consideration. Notwithstanding, the claim of the appellant that any addition made will result in reduction of work in progress is justified as the income corresponding to the said expenses of Rs. 23,54,235/- has already been accounted for in the contract account of earlier years. In this connection a reference may be made to the decision of Hon'ble ITAT, Lucknow in case of the appellant for the assessment year 1991-92 in ITA No 714/LUC/02 dated 30/11/2006, which has been followed in case of the appellant for the assessment year 2000-2001 in ITA No 382/LUC/04 dated 18/12/2008. While deciding a similar disallowance of prior period expenses the Hon'ble Court held that if any disallowance was to be made in the cost debited to the Contract account then corresponding reduction is required to be made in the work done also, this being a case of contra entries only. The decision of the Hon'ble Tribunal is discussed at length in paragraph 5(6) above. Relying on the decision supra and finding that the income corresponding to the expenditure of Rs. 23,54,235/- has already been recognized in contract account of ea....
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.... for gratuity written back and added to the computation of income the years is as under - Assessment Year Provision for Gratuity added in Computation chart in Rs. Provision for Gratuity written back as no longer required in Rs. 2000-2001 1,09,15,481/- - 2001-2002 75,25,5267- - 2002-2003 38,56,755/- - 2003-2004 71,14,765/- - 2004-2005 43,43,921/- - 2005-2006 S3,16,192/- - 2006-2007 3,69,742/- - 2007-2008 18,38,1751/- - 2008-2009 2,90,67,063/- - 2009-2010 5,22,62,229/- - 2010-2011 2,65,73,248/- - 2011-2012 11,46,32,701/- 2012-2013 4,78,12,614/- TOTAL 16,87,26,673/- 16,24,45,315/- 8(5) In view of above I find that as against a provision of gratuity of Rs. 16.24.45.315/-upto assessment year 2012-2013 the appellant has already added back an amount of Rs. 16,87,26,673/- in the computation of income, The amount added back is more than the amount claimed as provision for gratuity. The addition made by the AO for Rs. 1,12,00,000/- is therefore not sustainable and is deleted giving relief to the appellant." 17. The above findings are exhaustive enough wherein the ld. CIT(A) has examined the assessment rec....
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.... find that the interest accrued on deposits has been credited to the respective client account. The interest earned by the appellant on unutilized funds is therefore credited to the respective accounts and is income of the concerned client and not the appellant. The GO dated 11.04.1976 referred above supports the contention of the appellant. The addition of Rs. 39,46,18,444/- made by the A.O on account of interest accrued on deposits is deleted giving relief to the appellant." 41. Having considered the rival submissions and perusal of record, we find that the amount of Rs. 39,46,18,444/- shown in the balance sheet as interest accrued on deposits was the running balance of the accrued interest on the funds of the clients of the assessee. The assessee maintains its books of account on mercantile basis and it makes provision of interest on accrual basis. The assessee also credits such interest to the respective clients' accounts as per Government Order dated 11/4/1076 (supra). The ld. CIT(A) has rightly observed that the interest earned by the assessee on unutilized fund is credited to the respective accounts and are the income of the concerned clients and not of the assessee. We d....
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....n of addition on account of interest on unlisted machinery, we find that in schedule-12 to the profit & loss account, placed at page 28, the assessee, under the head 'other receipts', has declared as income of Rs. 19,34,458/- and the total of all other receipts including the interest on unlisted machinery has been declared as income in the contract account, which is placed at page 21 of the paper book. Therefore, learned CIT(A) has rightly allowed relief to the assessee. In view of the above, ground No. 3 of the Revenue is dismissed." 22. We find that during the year under consideration, the ld. CIT(A) has made a finding of fact that interest of Rs. 25,33,327/- on unlisted machinery is in the nature of notional interest being charged by assessee on the machinery used in the construction work undertaken by it and the notional interest chart on unlisted machinery being used in the work. The ld. CIT(A) further made a finding of fact that such amount has been debited in the contract account and therefore, the assessee had earned centage on this amount as specified by the Government and the centage so earned was taken in the P&L account. The findings of ld. CIT(A) contained in....
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....utation chart in computing net taxable income. The assessee had claimed that it never claimed the gratuity expenses and added back the same in computing of income and therefore, the addition was not justified. The Assessing Officer had wrongly made the addition, which the ld. CIT(A) has deleted by appreciating the facts correctly. The ld. CIT(A) has already dealt this issue in Para 8(4)(5) and has rightly deleted the addition. Finding no infirmity in the findings, Ground No.7 is also dismissed. 25. Now coming to Ground No.8, we find that the Assessing Officer made the additions on account of interest accrued on investment and other income which was shown in the balance sheet under the head current assets. Paper book Pg.49 under the head other current assets declares interest accrued on investment at Rs. 299543067 and other income accrued but not received at Rs. 54497865. When the assessee passed this entry and declared the income as receivable naturally credit would have been given to the income which would have gone to the P&L account. The system of accounting adopted by assessee is that the income is arrived at by first adding interest received during the year less opening balan....