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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition made by the AO. The AO had treated a difference between payments received and sales accounted for by the assessee as income for AY 2016-17, arising from a search and survey operation related to interior designing contracts.
Held
The Tribunal upheld the CIT(A)'s order, finding no infirmity. It noted that the assessee had properly accounted for the amounts received, with certain amounts treated as advance for incomplete projects and later adjusted after resolution of corporate insolvency.
Key Issues
Whether the difference between payments received and sales accounted for by the assessee in AY 2016-17 constitutes taxable income for that year, or if it was correctly treated as advance and accounted for later.
Sections Cited
132, 133A, 143(3), 153C
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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal filed by the Revenue for Assessment Year (AY) 2016-17 arises out of the order of Learned Commissioner of Income Tax (Appeal), Chennai-19 [hereinafter “CIT(A)”] dated 30.10.2024 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Income-tax Act, 1961 (hereinafter “the Act”) dated 29.12.2017.
The assessee is engaged in the business of undertaking contracts of interior designing and labour. A search under section 132 of the Act was conducted in the case of Vasan Healthcare Private limited and assessee’s premises was also covered under survey u/s 133A of the Act. It was stated during the survey that the assessee has received a payment of Rs. 105.95 Crores for the financial year 2011- 12 to 2014-15 from M/s. Vasan Healthcare Private limited, but has raised bill of only Rs. 84.88 Crores and therefore, the assessee has not offered income of Rs. 21,10,01,150/- . The assessing officer on the basis of above information has initiated proceedings u/s. 153C of the Act. The AO in the assessment order has noted that the assessee has received payment of Rs.105,98,45,175/- from M/s. Vasan Healthcare Pvt. Ltd. during assessment year 2011 12 to 2016-17 out of which it had accounted sales of only Rs.84,47,88,417/- and therefore, the assessee has not raised the bills for a sum of Rs. 21,50,56,758/-. The year wise details of payment received and sales accounted for as per AO are as under:
A.Y Payments Received Sales Accounted 2011-12 1,56,32,317 1,60,60,000/- 2012-13 13,65,81,096/- 13,87,00,000/- 2013-14 30,62,62,263/- 28,79,45,152/- 2014-15 31,01,72,877/- 24,77,60,000/- 2015-16 28,54,56,822/- 14,78,23,265/- 2016-17 57,39,800/-, 56,00,000/- Total 105,98,45,175 84,47,88,417
The assessee before the A.O has stated that M/s. Vasan Healthcare Pvt. Ltd. has initially released payment, but afterward no payments were released in respect of 12 branches for which bill of Rs.17,70,87,163/- was to be raised but not raised as work has stopped. The Ld. A.R has submitted that the work of 12 sites were remained uncompleted during the year and sales bills were not raised and the excess amount has been shown as advance in the books of accounts. The Ld. AR has further submitted that the assessee has returned back the payment of Rs.7,25,00,000/- to M/s. Vasan Medical Centre Private Limited on 10.11.2014 against the advance received from M/s. Vasan Healthcare Private limited. However, the A.O did not accept the assessee’s explanation on the ground that the assessee’s relation with M/s. Vasan Healthcare Private limited had reached to a breaking point during assessment year 2015-16 itself therefore, the assessee should have accounted the entire receipts up to A.Y 2016-17 during the year and should not indefinitely postpone the account of income for the receipt which is already been received. As regard to returned back of Rs.7,25,00,000/-, the A.O has held that it has been shown as loan in assessee’s books and therefore, sale receipt from Vasan Healthcare Private limited cannot be reduced as the loan transaction is totally independent and is with different entity. The AO accordingly made addition of Rs.21,50,56,758/-. On appeal, the Ld.
CIT(A) after considering the assessee’s submission found that the assessee has received only an amount of Rs.103,17,18,545/- from M/s. Vasan Healthcare Private Limited as against Rs. 105.98 Crores considered by the AO. The Ld. CIT(A) after examining the books of accounts and after considering the TDS detected of Rs.14,87,573/- and amount returned by the Director of Vasan Healthcare Private Limited of Rs. 72,75,000/- has held that assessee has received only net amount of Rs. 102,59,31,118/-. The Ld. CIT(A) has noted that the assessee has recorded Rs. 84,88,43,955/- as sale during the relevant period on the completed project and the remaining balance of Rs.17,70,87,164/- was treated as advance, which represents fund received from Vasan Healthcare Private Limited for projects that were either incomplete or for which services have not been rendered. The Ld. CIT(A) has observed that the above amount has been shown as advance in the balance sheet as on 31st March, 2016. The Ld. CIT(A) has also noted that the assessee has also filed its claim before Hon’ble NCLT against the M/s. Vasan Healthcare Private Limited filed for Corporate Insolvency Resolution Process and the assessee has offered Rs. 10,45,87,163/- in Financial Year 2022-23 after the resolution process was finalized. It was also noted that the amount of Rs.7,25,00,000/-, which was the loan given to M/s. Vasan Healthcare Private Limited has been accepted by Hon’ble NCLT and has been accordingly adjusted to arrive at Rs. 10,45,87,163/-. The Ld. CIT(A) has also examined the ledger extract of M/s. Vasan Healthcare Private limited in assessee’s books of account for financial year 2022-23 in support of its contention. The Ld. CIT(A), based on the above evidences has held that the assessee has properly accounted for outstanding advance received from M/s. Vasan Healthcare Private Limited and the amount of advance received of Rs. 17,70,87,163/- was accounted in financial year 2022-23 after advancing of the commercial transaction of Rs.7,25,00,000/- provided to M/s. Vasan Medical Centre Private Limited. The Ld. CIT(A), therefore held that the assessee has recognized amount of Rs. 17.70 Crores in the financials as income for financial year 2022-23 therefore, there is no need to treat this amount during Financial Year 2015-16 relevant to assessment year 2016-17 and deleted the addition. Aggrieved, the revenue is in appeal against the above disallowances.
The Ld. Departmental Representative (DR) relying on the order of the A.O has submitted that the Ld. CIT(A) was not justified to delete the addition on the ground that part of the income has been shown in financial year 2022-23 when the same was taxable in A.Y 2016-17 when the work stopped. The Ld DR also argued that Rs. 7.25 Crore, which was loan to M/s. Vasan Medical Centre Private limited can not be adjusted against the receipt of assessee as they are two different entities.
On the other hand, The Ld. Authorized Representative (A.R) of the assessee has supported the order of Ld. CIT(A). The Ld. AR has submitted that the assessee has received only Rs. 103,17,18,545/- as against Rs. 105,98,45,175/- considered in assessment order. Further, the Ld.AR has argued that this figure has no basis. It was further submitted that there was dispute in respect of 12 projects and stop work notice was given in the month of April and May, 2014 to M/s.
Vasan Healthcare Private Limited and excess amount received was accounted for as advance in the books of accountant. The Ld. AR also submitted that proof of the claim by operational creditor put up to IRP in the matter of resolution petition filed before Hon’ble NCLT in the case of M/s. Vasan healthcare Private limited. The Ld. AR has submitted that the assessee has accounted for the income of Rs.10,45,87,163/- in assessment year 2023-24 after the order of Hon’ble NCLT pronounced on 3rd February, 2023 after accounting for on the basis of NCLT order. Therefore, the Ld. AR has request to dismiss the appeal of the Revenue.
We have heard the rival submissions, and perused the materials available on record. The AO has made addition of Rs. 21,50,56,758/- as unaccounted sales on the ground that the assessee has received the payment of Rs.105,98,45,175/- from M/s. Vasan Healthcare Private Limited during assessment year 2011-12 to 2016-17, but it has accounted sales of only Rs.84,47,88,417/-. The A.O has also noted that the assessee has a dispute with M/s. Vasan Healthcare Private Limited during assessment year 2015-16 and has stopped the work and has not received any substantial payment during assessment year 2016-17 resulting into end of the contract between the two parties. The A.O has concluded that the AO should have accounted the entire sum received up to assessment year 2016-17 during the year. The Ld. CIT(A) after considering the detailed submission and the accounts has concluded that the assessee has received net payment of only Rs.102,59,31,118/- and has recorded sales of Rs. 84,88,43,955/- from assessment year 2011-12 to 2016-17. Further, as there was a dispute in respect of 12 sites, the assessee has stopped the work and the assessee could not bill the above amount in the absence of any confirmation about a completion change or modification in the work on site and has accounted the balance of Rs. 17,70,87,164/- as advance in the balance sheet. The Ld. CIT(A) has also observed that there was corporate insolvency resolution process started against M/s. Vasan Healthcare Private Limited and the assessee has also made the claim reporting the advance of Rs. 17,70,87,164/- and payment of Rs. 7,25,00,000/- given to M/s. Vasan Medical Center Private Limited .and after the resolution plan has been approved , assessee has offered the balance amount of Rs. 10,45,87,163/- in financial year 2022-23.
The Ld. CIT(A) has concluded that there is no need to treat the advance amount as the income and deleted the addition. We do not find any merit in the Revenue’s arguments to tax Rs.21,50,56,758/- in assessment year 2016-17 when the assessee has received only Rs.57,39,800/- during the assessment year 2016-17 and has accounted sales of Rs. 65 Lakhs in the books of accounts. The Ld. CIT(A) has considered entire facts and has deleted the addition as the entire amount received has been accounted in the books of account.
We, therefore find no infirmity in the order of Ld. CIT(A) and dismiss the appeal of the Revenue.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on 29th day of August, 2025 at Chennai.