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Income Tax Appellate Tribunal, JAIPUR BENCHE-‘A’ JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 869/JP/2017
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE-‘A’ JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 869/JP/2017 fu/kZkj.k o"kZ@Assessment Year :2012-13 cuke The ACIT, Shri Balaji Builders, Vs. Circle-2, 1/43, RHB Colony, Alwar Bhiwadi, Distt. Alwar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABHFS5311G vihykFkhZ@Appellant izR;FkhZ@Respondent izR;k{ksi.k@C.O. No. 05/JP/2018 (Arising out of vk;dj vihy la-@ITA No. 869/JP/2017) fu/kZkj.k o"kZ@Assessment Year 2012-13 cuke Shri Balaji Builders, The ACIT, Vs. 1/43, RHB Colony, Bhiwadi, Circle-2, Distt. Alwar Alwar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABHFS5311G izR;k{ksid@Objector izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by : Shri J. C. Kulhari (JCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) lquokbZ dh rkjh[k@ Date of Hearing : 26/11/2019 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 25/02/2019 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the Revenue against the order of ld. CIT(A), Alwar dated 13.09.2017 and the cross objection filed by the assessee.
In the Revenue has taken the following grounds of appeal:- & CO No. 05/JP/2018 The ACIT, Alwar Vs. M/s Shri Balaji Builders, Alwar “On the facts and circumstances of the case and in law ld. CIT(A) has erred in restricting the addition of Rs. 2,49,73,290/- to Rs. 51,91,097/- only made by the AO on account of undisclosed receipts without appreciation the material facts of the case.”
In Cross objection No. 5/JP/18, the assessee has taken following ground of appeal:
1. The ld. CIT(A) has erred on facts and in law in confirming the addition of Rs. 51,91,097/- on account of difference in receipts shown in Form No. 26AS and receipts shown in books of accounts by not accepting the contention of assessee that difference is on account of double TDS deducted by M/s Mahindra Ugine System Ltd.”
Briefly stated the facts of the case are that assessee is engaged in the business of civil construction. The original assessment was completed on 31.03.2014 at income of Rs.3,52,86,880/-. Thereafter, the ld CIT passed an order u/s 263 on 14.03.2016 for the reason that there is variation of the receipt from job work and interest shown in the P&L A/c vis-à-vis that appearing in Form No.26AS and the order passed by AO was set aside with a direction to properly examine this issue.
In the set-aside proceedings, the assessee filed a reconciliation statement between the receipt from job work as shown in the P&L A/c at Rs.63,53,86,890/- and that reflected in Form 26AS at Rs.68,66,53,910/-. The variation of Rs.5,12,67,020/- was explained on account of the following reasons:-
(a) Amount of service tax included in the receipt as per Form 26AS- Rs.2,16,70,623/- (b) Debit note issued by Greenply Industries- Rs. 41,45,291/- 2 & CO No. 05/JP/2018 The ACIT, Alwar Vs. M/s Shri Balaji Builders, Alwar (c) Mobilization advance from parties on which TDS deducted- - Reckitt Benchkiser India Ltd.- Rs.55,00,000/- - Alpha India Ltd.- Rs.21,61,458/- - Emami India Ltd.- Rs.75,13,431/- -Spirotech Heat Exchangers Pvt. Ltd.- Rs.25,83,590/- Rs.1,77,58,479/- (d) Double deduction - Shriram Piston & Rings Ltd.- Rs.25,00,000/- - Mahindra Ugine System Ltd.- Rs.51,91,097/- Rs. 76,91,097/- (e) Miscellaneous Difference- Rs. 1,530/- Total Rs.5,12,67,020/-
The AO accepted the difference on account of service tax at Rs.2,16,70,623/-, mobilization advance of Alpha India Ltd. at Rs.21,24,106/- and double deduction made by Shriram Piston & Rings Ltd. at Rs.25,00,000/-, aggregating to Rs.2,62,94,729/-. However, for the remaining amount of Rs.2,49,72,291/- (5,12,67,020-2,62,94,729), he observed that assessee has given different version in reply dt. 29.06.2016 and 14.12.2016 and therefore, the explanation of assessee given vide letter dt. 14.12.2016 is not authentic and reliable. Accordingly, he made addition of Rs.2,49,73,290/- (correct amount should be Rs.2,49,72,291/-).
Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A). The ld. CIT(A) after considering the evidences on record accepted the explanation of assessee with reference to deduction on account of mobilization advance received from Reckitt Benchkiser India Ltd. (Rs.55 lacs), Emami India Ltd. (Rs.75,13,431/-), Spirotech Heat Exchangers Pvt. Ltd. (Rs.25,83,590/-), aggregating to Rs.1,55,97,021/- and on account of debit note of Rs.41,45,291/- issued by Greenply Industries, thus, allowing the relief of Rs.1,97,42,312/-. However, he sustained the addition of Rs.51,91,097/- on account of double deduction by Mahindra Ugine System Ltd. for the reason that no supporting 3 & CO No. 05/JP/2018 The ACIT, Alwar Vs. M/s Shri Balaji Builders, Alwar evidence has been filed. Against the said findings of the ld CIT(A), both the parties are in appeal before us.
The ld DR vehemently argued the matter and relied on the findings of the Assessing officer and taken us through the findings of the AO which we have noted above and are not repeated for sake of brevity.
Per contra, the ld. AR submitted that it is not necessary that receipt as per Form 26AS should always match with the receipt declared in the P&L A/c. There may be various reasons for such differences. The assessee has explained the reasons for such differences initially vide letter dt. 29.06.2016 but on further verification, assessee found that the reason for such difference given vide letter dt. 29.06.2016 is not correct and therefore, vide letter dt. 14.12.2016, he furnished the correct reasons for such difference supported by documentary evidences. The AO accepted the explanation only in respect of those difference where the reasons given vide letter dt. 29.06.2016 and 14.12.2016 are same. He did not accept the explanation for the remaining difference submitted vide letter dt. 14.12.2016 by stating that the explanation given by this letter is not authentic and reliable. There is no basis with the AO to come to this conclusion.
The ld AR further drawn our reference to the explanation given for the individual differences which was not accepted by the AO but later on accepted by Ld. CIT(A) as under:-
Debit Note by Greenply Industries- Rs.41,45,291/- During the year, assessee has not carried out any work for Greenply Industries Ltd. In fact the assessee has done job work for Greenply Industries Ltd. in FY 4 & CO No. 05/JP/2018 The ACIT, Alwar Vs. M/s Shri Balaji Builders, Alwar 2010-11 and an amount of Rs.98,00,222/- was due from this company to the assessee on 01.04.2011. Against this amount part payment was made by Greenply Industries Ltd. during the year and a debit note of Rs.41,45,291/- was raised by them for deficiency in work which is credited to their account by debiting to the job work account. This is evident from the debit note raised by Greenply Industries Ltd. and copy of ledger account placed at PB 22 & 23. The debit note was accounted for in the books of accounts by debiting the job work account and therefore, the total receipt from job work has reduced by this amount vis-à-vis the receipt reflected in Form 26AS. Thus, the reason for variation to this extent is fully explained and rightly accepted by the Ld. CIT(A).
Mobilization advance from Reckitt Benchkiser India Ltd.- Rs.55 lacs This company has awarded a contract to the assessee on 06.01.2012 for an amount of Rs.5,82,72,946/- (PB 24-27). As per condition no.14, it was to provide a mobilization advance of 10%. Accordingly, assessee received an advance of Rs.55 lacs from this company vide cheque dt. 27.02.2012 after furnishing bank guarantee dt. 08.02.2012 of the similar amount. All these facts are verifiable from the copy of the account of the company in the books of the assessee, copy of bank guarantee and the cheque payment voucher of the company (PB 33). Thus, on mobilization advance, tax is deducted at source but the same is not the income of the assessee for the year. Hence, the addition made by AO on this account is rightly deleted by Ld. CIT(A).
Mobilization advance from Emami India Ltd.- Rs.75,13,431/- This company awarded the work on 01.07.2011 for Rs.4,94,61,885/-. As per condition no.5 it is to provide mobilization advance of 10% of the contract value on furnishing the bank guarantee which is to be recovered from 3rd RA 5 & CO No. 05/JP/2018 The ACIT, Alwar Vs. M/s Shri Balaji Builders, Alwar onwards @ 12% of the gross amount of RA bills. Accordingly, assessee received an amount of Rs.48,47,264/- on 26.07.2011 after deducting TDS of Rs.98,924/- on the gross amount of Rs.49,46,188/- after furnishing the bank guarantee (PB 29-43). Thus, on mobilization advance, tax is deducted at source but the same is not the income of the assessee for the year. Hence, the addition made by AO on this account is rightly deleted by Ld. CIT(A).
Mobilization advance from Spirotech Heat Exchangers Pvt. Ltd.- Rs.25,83,590/- This company awarded work on 01.08.2011 for Rs.9,24,67,805/-. As per para 2 of the work order it is to provide Rs.51 lacs as mobilization advance net of TDS (gross amount Rs.52,04,082, less TDS Rs.1,04,082= Rs.51 lacs) upon furnishing the bank guarantee. The advance was to be recovered from the running bills on pro rata basis. During the year running bill of Rs.4,89,45,611/- was raised whereas as per Form 26AS amount received is Rs.5,15,29,200/-. This comprises of advance of Rs.52,04,082/- and Rs.4,63,25,118/- against the running bill of Rs.4,89,45,611/-. Thus, mobilization advance is recovered to the extent of Rs.26,20,493/- (4,89,45,611- 4,63,25,118). Thus, at the year end mobilization advance remained outstanding at Rs.25,83,589/- (52,04,082- ,26,20,493) on which tax is deducted at source but the same was not the income of assessee for the year. This is also evident from Form 26AS according to which amount paid/ credited is Rs.5,15,29,200/- whereas the bill raised and credited to the job work is Rs.4,89,45,611/- resulting into difference of Rs.25,83,589/-. Hence, the addition made by AO on this account is rightly deleted by Ld. CIT(A).
In view of above, it was submitted that the ld. CIT(A) has rightly deleted the addition made by the AO to the extent of Rs.1,97,82,193/-. & CO No. 05/JP/2018 The ACIT, Alwar Vs. M/s Shri Balaji Builders, Alwar 11. Regarding addition of Rs.51,91,097/- confirmed by both the lower authorities and in respect of which the assessee has filed its cross-objection, it was submitted by the ld AR that the same is on account of double deduction of TDS made by Mahindra Ugine System Ltd. From this company, assessee received Rs.2,46,46,798/- against RA bills raised for Rs.2,27,69,795/-. As against this Form No.26AS shows that the company has paid/ credited Rs.3,08,24,834/- to the assessee. The difference has arisen because assessee received payment of Rs.45,30,816/- (35,18,644+10,12,172) in the month of June, 2011 against 9th to 11th RA bill. At the time of payment the company deducted TDS of Rs.93,059/- and on account of material supply at Rs.29,080/- on the gross amount of Rs.46,52,955/-. Thereafter at the time of passing the bills for Rs.85,91,645/- (16,94,477+9,00,917+12,40,788+47,55,463), tax was again deducted at source without adjusting the earlier payment of Rs.46,52,995/-. Now the company has given a certificate to this effect. The assessee has also got verified the receipt from this company from the bank statement in which no discrepancy is pointed out by the Ld. CIT(A). However, the Ld. CIT(A) has not accepted the contention only for the reason that no supporting evidence has been filed but now in view of the certificate given by the company, the addition of Rs.51,91,097/- made on this account be directed to be deleted.
We have heard the rival contentions and perused the material available on record. Regarding mobilization advance received from Reckitt Benchkiser India Ltd., Emami India Ltd., Spirotech Heat Exchangers Pvt. Ltd. aggregating to Rs.1,55,97,021/-, the contention of the assessee is that though the amount has been received during the year, the same is not in the nature of income for the year. It has been submitted that the said advance is adjusted from the subsequent running bills raised by the assessee and based on the running bills, the revenues have been accounted for in the financial statements and 7 & CO No. 05/JP/2018 The ACIT, Alwar Vs. M/s Shri Balaji Builders, Alwar correspondingly offered to tax in the subsequent financial years. In our view, where the assessee is following a consistent accounting policy whereby the revenues have been accounted for based on percentage of work completed and such mobilsation advance has been offered to tax as part of the contract revenues over the period of contract, there is no basis to disturb the same merely because in Form 26AS, the mobilization advance has been reflected and TDS has been done thereon. Receipt of advance per se for execution of a contract cannot be characterized and brought to tax as income in the hands of the assessee. Unless and until the assessee fulfills the corresponding work obligations and a debt become due in favour of the assessee, it cannot be stated that income has accrued to the assessee. Further, mere reflection in Form 26AS is not determinative of the real character and/or taxability of a particular transaction. What has to be examined is the nature of the contract receipts on perusal of contract documentation and how the same has been accounted for in the financial statements. In light of above discussions, we deem it appropriate to set-aside the matter to the file of Assessing officer to examine the method of accounting regularly followed by the assessee in respect of recognition of contract revenues and where it is so found that the assessee is following a consistent accounting policy whereby the revenues have been accounted for based on percentage of work completed and such mobilsation advance has been offered to tax as part of the contract revenues over the period of contract, the impunged additions is directed to be deleted.
Regarding debit note raised by Greenply Industries for Rs 41,45291, the contention of the assessee is that it relates to work done in financial year 2010- 11 and certain deficiency was raised by the customer and a debit note was raised which is accounted for in the books of accounts by debiting the job work account. In our view, where the assessee has accounted for job work invoices in the financial year 2010-11 and offered the same to tax, in that case, where 8 & CO No. 05/JP/2018 The ACIT, Alwar Vs. M/s Shri Balaji Builders, Alwar the assessee has received the debit notes in respect of said job work invoices on account of certain deficiency, the accounting so done by the assessee should be accepted. In the result, we set-aside the matter to the file of the AO to examine the above aspect and where the same is found to be in order, the explanation so furnished by the assessee should be accepted and the addition is directed to be deleted.
Regarding addition of Rs 51,91,097, the contention of the assessee is that the same is on account of double deduction of TDS and a certificate is obtained by the assessee from the deductor company which supports the same. The matter is set-aside to the file of the AO to examine the aforesaid contention and certificate so furnished by the assessee and where the same is found to be in order, allow the necessary relief to the assessee.
In the result, appeal of the Revenue and cross-objection of the assessee are allowed for statistical purposes.
Pronounced in the Open Court on 25/02/2019.
Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 25/02/2019 *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- The ACIT, Circle-2, Alwar 2. izR;FkhZ@ The Respondent- M/s Shri Balaji Builders, Alwar 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 869/JP/2017 & CO No. 05/JP/2018} 9 & CO No. 05/JP/2018 The ACIT, Alwar Vs. M/s Shri Balaji Builders, Alwar