TaxTMI 
TaxTMI 
2024 (7) TMI 777
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....Rs. 17,63,289/- made by enhancing the value of raw materials and goods sold ignoring the fact that no details were provided by the assessee during the course of assessment proceedings." 3. Brief facts are that the Assessee which is engaged in the business of Civil Contractors for interior and Civil Works, dealings in paintings and manufacturing of furniture filed its return of income on 30.09.2011 declaring income of Rs. 75,82,415/-. The assessment was completed u/s 143(3) of the Act on 10.03.2014 determining the income of the assessee at Rs. 9,28,37,760/- in the course of assessment proceedings the Assessing Officer (for short the "AO") noticed that assessee has shown working progress at various sites amounting to Rs. 18,89,55,400/- and has not raised any bills on the parties and not booked sales even in completion of 90% of work. The assessee was required to show cause as to why as per the agreement with the parties the billing should not be done for 75% of Work-in-Progress (WIP) and booked as sales by estimating GP at 18.54%. The assessee submitted that the consolidated gross profit comprising of gross profits of contract business and art gallery business is 18.54% gross profi....
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....sessee has deliberately not billed the work done. In his wisdom, the Assessing Office treated 75% of the value of work-in-progress as sale and made an addition of Rs. 2,62,74,248/- by applying GP rate of 18.54% on so designated sales. 4.4 I have also noted that during the assessment stage, the appellant had challenged the assertion of the Assessing Officer that as per the agreements the billing is to be done at the completion of 50% of work. In the assessment order the Assessing Officer has not recorded source of this information and has not controverted the challenge made by the Assessee in this respect. During the appellate proceedings also I am unable to corroborate the assertion of the Assessing Officer from the agreements made available to me. 4.5 During the appellate stage, the appellant has submitted the details of sales billed during the F.Y. 2010- 11 and F.Y. 2011-12 in respect of parties whose work-in- progress remained unbilled on 31.03.11. The details are as under:- VADEHRA BUILDERS PRIVATE LIMITED D-40, Defense Colony, New Delhi SUMMARY OF WIP AS ON 31.03.2011 AND SALES IN NEXT YEAR S. No. Party Name Project Work in Progress FY 2010-11 FY 2011-12 &....
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....no work was done for these parties during the period from April 2010 to March 2011 and thereafter. 4.6.2 From the ledger of M/s Assotech Realty Pvt. Ltd., I have noted that from 01.04.06 till 31.03.09 the appellant has raised the bills and received payments during different years as under: - F.Y. Work Done Amount Received Closing Balance 2006-07 2,38,38,122/- 1,42,89,563/- 95,48,558/- 2007-08 10,97,80,008/- 1,14,69,871/- 78,58,695/- 2008-09 4,76,98,122/- 4,92,03,423/- 63,53,394/- 4.6.2.1 It is noted that in A.Y. 2010-11, the amount retained earlier by the client amounting to Rs. 83,93,563/- was debited to the account of M/s Assotech Realty Pvt. Ltd. Consequently the opening "balance in respect of the party stood at Rs. 1,46,46,967/- during A.Y. 2011-12. 4.6.2.2 On the basis of above observations, the contention of the appellant that the work done for M/s Assotech Realty Pvt. Ltd. could not be billed due to a dispute with them appears to be in order. Against the work done and billed amounting to Rs. 18.13 crore during the earlier years, the appellant had received payment of Rs. 16.62 crore. The balance work done amounted to loss incurred by the appellant. Fur....
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....ogress and the remaining 63% was billed and included in the appellant's turnover. From the accounts, it is noted that during the subsequent year i.e. AY 2012-13 the appellant had billed work done amounting to Rs. 12.68 crores in respect of these parties. The work-in-progress of these parties reduced to Rs. 5.77 crore as on 31.03.12 as against Rs. 13.27 crore as on 31.03.11. It, therefore, is clear that part of the work-in- progress as on 31.03.11 was billed in the subsequent year." 8. On carefully going through the findings of the Ld.CIT(Appeals), we do not find any valid reason to interfere with the observation of the Ld.CIT(A). We observe that the Ld.CIT(A) after his detailed analysis came to the conclusion that no part of work in progress can be treated as sales and estimate the GP on such sales, thus, we sustain the order of the Ld.CIT(A). Ground no.1 of grounds of appeal of Revenue is dismissed. 9. Coming to ground no.2 of grounds of appeal, we noticed that the AO made addition of Rs. 5,54,44,938/- towards Sales Tax and Service Tax. This addition was made by the AO for the reason that the assessee did not file requisite details/reconciliation of Sales Tax with sales and pur....
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.... tax including the service tax on the entire sales made cannot be adopted for working out the calculation The value of closing stock can be enhanced only by the amount of sales tax pertaining to the closing stock on a pro-rata-basis. 5.3.6 The closing stock of the appellant stands at Rs. 1,66,80,664/-. The sales tax on purchases was only Rs. 65,41,478/-. Material consumed during the year amounts to Rs. 16,57,76,188/-. Sales tax on the material consumed come to 3.94%. The value of closing stock therefore is required to be enhanced by 3.94%. The amount of addition thus works out to Rs. 6,56,280/-. 5.3.7 Accordingly, the addition of Rs. 5,54,45,938/- is restricted to Rs. 17,63,289/- (Rs.6,56,218/- on account of enhancement on value of closing stock by 3.94% and Rs. 11,07,071/- on account of additional sales tax pertaining to earlier years disallowed by the Assessing Officer)." 10. On careful consideration of the Ld.CIT(A) findings, we see no infirmity in the observations of the Ld.CIT(A). The Revenue could not rebut the findings. Ground no.2 of grounds of appeal of Revenue is dismissed. 11. Coming to appeal of the assessee the following grounds have been raised: 1. "On the ....
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....een, called for and examined by me. My findings in this regard Recorded in subsequent paragraphs. 5.3.3 I have noted that vide letter dated 17.12.13 the appellant had submitted the details before the Assessing Officer. The A.O. has recorded in the order sheet as under:- "Shri Y.S Bhartnagar, CA attended and filed details vide letter dated 17.12.13 produced labour expenses bills & bills for closing rotation to file balance details. On 27.12.13 at 11:00 A.M." 5.3.4 I have considered the reasoning of the Assessing Officer and the submissions of the appellant. I appreciate the observations and consequent notice given by the Assessing Officer asking the appellant to show cause why the sales tax pertaining to earlier years should not be disallowed and appellant's closing stocks should not be enhanced by the amount debited in profit & loss accounts. 5.3.5 I, however, do not agree with the numerical working of the Assessing Officer in as much as the total sales tax including the service tax on the entire sales made cannot be adopted for working out the calculation. The value of closing stock can be enhanced only by the amount of sales tax pertaining to the closing stock on a pr....