TaxTMI 
TaxTMI 
2024 (9) TMI 1514
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....f the evidences on record. 3. The decision of the Ld. CIT (Appeals) deleting the addition of Rs. 2,12,95,900/- is perverse on facts in as much as the same has been reached on an incorrect conclusion that the assessment had to be completed based on documentary evidences on record ignoring the clear statements given by the contractees during assessment proceedings before the assessing officer. 4. The decision of the Ld. CIT (Appeals) deleting the addition of Rs. 2,12,95,900, is bad in law in as much as it is evident from various sub-paras of para 6.6 of the appellate order that the learnt CIT (Appeals) chose to delete the addition, despite being not satisfied with the enquiries conducted by the Assessing Officer during remand proceedings, ignoring the trite law that being a fact finding authority the Ld. CIT (Appeals) ought to have got the required enquiries made to her full satisfaction. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has erred in deleting the addition of Rs. 2,12,95,900 for the reason that the Assessing Officer did not reject the books of accounts under s. 145(3) of the I.T. Act, 1961. 6. Th....
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....Mohadi, Tadegaon and Vizora. The amounts paid by these Samiti total amounting to Rs. 2,12,95,900/- (Samiti Waghora Rs. 28,58,000/-, Samiti Mohadi Rs. 80,53,000/-, Samiti Tadegaon Rs. 22,20,000/- and Samiti Wizora Rs. 81,64,900/-)were shown as creditors as the work is not yet complete. In this regard statements of the Secretaries/President of these Samiti were recorded u/s 131 of the Income Tax Act, 1961. The assessee himself and his counsel were present during the recording of these statements. All the Secretaries/President, without any exception, said that the money was released only after completion of the work and payments for the works which were not yet completed have been withheld. They stated categorically that the assessee was NOT given any advance against the work orders issued to him. The assessee or his counsel who were present has not raised any objection to these contentions recorded in the statement. The assessee was asked, vide order sheet entry dated 14-11-2017, as to why the contract amount received from these Samiti and shown as advances or Sundry Creditors should not be added to your total income. The case was fixed for hearing on 21-11-2017. On 21-11-2017 neithe....
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.... 4. The learned CIT(A) allowed the claim of the assessee while directing the Assessing Officer to delete the addition of Rs. 2,12,95,900. The observations made by the learned CIT(A), vide Para-6.6 to 6.8 of its order, which are relevant to note, are quoted herein below:- "6.6 I have carefully considered the facts of the case and submissions made by the appellant. I find considerable force in submissions of the appellant. The AO has made the addition merely on the basis of the statement recorded of Secretaries/President of the Samiti. The AO did not corroborate the statement with the facts emanating from documentary evidences placed on record by the appellant. The AO has believed the statement of Samiti members as gospel of truth and rejected all the documentary evidences including the audited financial statements without giving any cogent reasoning. The appellant has submitted that, the statements of samiti members were self-contradictory & also contrary to the evidences on record and hence were not reliable. The appellant has provided a tabular chart highlighting the various contradictions in the statement's vis-s-vis undisputed facts & documentary evidences available....
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....amiti members. In fact, the Inspector has very vaguely mentioned that "the letter" was shown to the various mentbers without mentioning as to which letter he was referring to. 6.6.8 The Inspector did not take any acknowledgement of refusal of the parties over the alleged documents shown to them. Further, the party Shri. Baliram Sampatrac Darade and Shri. Karbhari Zagre did not refuse or deny the contents of alleged additional evidence which is evident from the report. The said parties have informat the AO that, they will furnish the details in due course. 6.6.9 The Inspector has not recorded statement of the parties and has merely mentioned that they refused to certify the correctness of the unspecified letter. Further the entire exercise was carried out at the back of the assessee and without providing the assessee an opportunity of cross examination of the aforesaid parties in response to summons issued during remand proceedings. 6.7 I find merit in appellant's submission that, he was following mercantile system of accounting, revenue was recognized only when particular stage of contract work was completed and the corresponding contract receipt has ....
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....its income in the year under consideration. The various Hon'ble Courts including Supreme Court of India have time and again observed that the Department should not litigate on issues which are tax neutral insofar as the question is whether a particular income is to be taxed in either of the two years. In fact, the AO has acknowledged this principle in the remand report in respect of Ground of Appeal No. 3 having similar facts. Reliance placed by appellant on following judicial precedent support his contention * CIT v. Excel Industries Ltd (358 ITR 295) (SC) wherein the Hon'ble Court has observed as under: "32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax, There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax, We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academ....
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.... of the opinion that, the AO erred in making addition in respect of advances received from the Samiti towards work to be done of Rs. 2,12,95,900/-, as unaccounted receipts. Accordingly, the AO is directed to delete the addition of Rs. 2,12,95,900/-. Therefore, Ground of Appeal No.2 is allowed." The Revenue being aggrieved by the order so passed by the learned CIT(A), filed appeal before the Tribunal. 5. Before us, the learned Departmental Representative vehemently argued that the order passed by the learned CIT(A) be and the addition be confirmed. 6. The learned Counsel for the assessee furnished a detailed Paper Book containing the documents, which formed part of the record before the learned CIT(A) and the Assessing Officer as well and the same are listed below:- "i) Summary chart showing Samiti wise (i.e project wise) details of tender issued, advances received in current & subsequent years, work done stagewise shown in P&L account in current & subsequent years as per work done statement, date of completion of project as per completion certificate along with documentary evidences: (a) Waghora (b) Tadegaon (c) Vizora (d) Mohad....
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....water tank to the households. After successfully bidding, the work was allotted to the Assessee. The work of laying pipelines had to be completed in specified stages (i.e 1,2,3) within the specified time which was mentioned on the work orders issued. The Assessee had received advances from the Samiti from time to time for the completion of the work. The Samiti had received the funds/advances from the Government Department and released the same to the Assessee on the same day or as soon as possible. The copy of bank statements of the Samiti is enclosed at Pages 33 to 36 of Factual Paper Book. Thus, the role of Samiti was limited to release of the funds to the Assessee as and when the same were received by the Samiti from the Government Department. After receiving the advances from the Samiti, it took considerable time to start the work of laying pipelines from water tank to the households due to various reasons such as (i) objections from the farmers over whose land the pipelines have to be laid (ii) sometimes crops are standing on the land and hence pipelines could not be laid until the crops have been harvested (iii) various permissions to be taken from the concerned local authori....
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.... 2.3 The Assessee submits that, the learned AO has made the impugned addition merely on the basis of the statement recorded of Secretaries/President of the Samiti. The learned AO did not corroborate the statement with the facts emanating from documentary evidences. The statements were recorded under pressure. The Assessee had approached the concerned Secretaries/President of the Samiti and asked them to give a clarification over their incorrect statement recorded before the learned AO. Therefore, the Assessee submits that, the statements recorded by the learned AO is unreliable in light of aforesaid circumstances and being contrary to the facts and documents such as work order, bank statement, work completion certificate etc. Thus, the Assessee submits before your Honour that, statements are not credible and should not be relied upon while deciding the present issue. 3. Documentary evidences filed by the assessee in support of his contentions 3.1 The Assessee has filed a summary chart showing the Samiti wise (i.e project wise) details of tender issued, advances received in current & subsequent years, work done stagewise shown in P&L account in current & s....
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....and net profit (NP) for current year as well as in the past and subsequent years. The Assessee has enclosed working chart showing the GP/NP rate for the various years including the year under consideration at Page 91 of Factual Paper Book. On perusal of the details, your Honour will appreciate that the Assessee has been showing consistent profits over the years which are commensurate to the profits earned in construction line of businesses. If the action of the learned AO is accepted, then the gross profit for the year under consideration would be 41.2% which is abnormal and unrealistic to earn in the line of construction business. 6. Books of accounts not rejected by learned AO 6.1 The Assessee submits that only real income can be subjected to tax and not any hypothetical income. The Assessee maintains regular books of account. The books of account are duly audited by a chartered accountant. The learned AO has not found any defect in the books of account. The learned AO has not doubted the correctness of books of accounts. Therefore, the profits as per profit and loss account cannot be simply brushed aside without rejecting the books of the Assessee. 6.2....
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....mphasis Supplied) * CIT-2 v. Millennium Estates (P) Ltd (93 taxmann.com 41) (Bombay HC), wherein it has been observed as under (Refer Pages 176 to 181 of Legal Paper Book): ''10. It must also be borne in mind that the aforesaid amount which is being sought to be brought to tax in the subject Assessment Year 2007-08 has been offered to tax as income by the Respondent in the next Assessment Year. It is not the case of the Revenue that there are circumstances to indicate that by bringing the said transactions to tax in the next Assessment Year instead of this, there is likely to be a loss to the Revenue. In fact the impugned order of the Tribunal has relied upon the decision of this Court in CIT v. Nagri Mills Co. Ltd. [1958] 33 ITR 681 and in that context reproduced the decision of Delhi High Court in CIT v. Vishnu Industrial Gases (P.) Ltd. [IT Reference No. 229 (Delhi) of 1988, dated 6-5-2008] as under:-'' (Emphasis Supplied) 7.2 The Assessee places reliance on the decision of Hon'ble Gujarat HC wherein, the Hon'ble Court had deleted the similar addition made in respect of ''mobilization advance'' treated as revenue....
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....unal have committed any error. In paras 8.4 and 9, the revenue observed and held as under:'' 9. The Assessing Officer has relied on the statement of certain Members of the Samiti who have given contradictory statements which can be seen from the various evidences filed by the assessee. The learned CIT(A) has verified the statement of Samiti Members vis-a-vis documentary evidences and highlighted the discrepancies, vide Annexure enclosed with the first appellate order. On a perusal of the statements of the Members of the Samiti, it is evident that they did not have full knowledge on the progress of work and that the Sub Divisional Engineer, Rural Water Supply, was looking after the matter. Various work completion certificates clearly denotes that the work was completed subsequently and the income was also offered for taxation in subsequent years. We find force in arguments of the learned Counsel for the assessee that; (a) Books of Account were not rejected by the Assessing Officer; (b) Reasonable Gross Profit / Net Profit ratio have not been offered to tax for part and subsequent years; and (c) Accounting Policy has been consistently followed by....