ADARSH KAUL,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX 31(1), MUMBAI
What did the Tribunal hold?
The Tribunal deleted the addition on revalued closing work-in-progress, following its own prior decision. The issue of turnover difference was remitted back to the AO for verification of reconciliation.
What were the facts?
The assessee's appeals concerned additions made by the AO and confirmed by the CIT(A) on account of revaluing closing work-in-progress and estimating profit rate. Another issue involved an addition for alleged differences in turnover as per AIR data.
What were the issues?
Whether the AO was justified in making an ad-hoc addition to closing work-in-progress by estimating profit. Whether a difference in turnover between books and AIR data requires further verification.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
आयकर अपीलीय अधिकरण “A” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य एविं श्री एम बालगणेश, लेखा दस्य के मक्ष । BEFORE SRI MAHAVIR SINGH, JM AND SRI M BALAGANESH, AM आयकर अपील सुं./ (यिर्ाारण वर्ा / Assessment Year 2013-14) आयकर अपील सुं./ (यिर्ाारण वर्ा / Assessment Year 2011-12) Adarsh Kaul The Asst. Commissioner of C/o VAV Airconditioning Income Tax, pratyaksha Unit No.2, IT Park, Techniplex- Kar Bhavan, Bandra Kurla बनाम/ II, Junction of Veer Savarkar Complex, Mumbai-400 051 Vs. Flyover, S.V. Road, Goregaon Mumbai-400 062 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./PAN No. AHRPK7595A अपीलार्थी की ओर े / Appellant by : Shri M.N. Nandgaonkar, AR प्रत्यर्थी की ओर े / Respondent by : Shri S. Michael Jerald, DR ुिवाई की तारीख / Date of hearing: 12.12.2019 घोर्णा की तारीख / Date of pronouncement : 12.12.2019 आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
These appeals by assessee are arising out of common of the Commissioner of Income Tax (Appeals)]-42, Mumbai [in short CIT(A)], in Appeal Nos. CIT(A)-42/IT-285/14-15, CIT(A)- 42/IT-69/16-17 even dated 30.05.2018. The Assessments were framed by the Asst. Commissioner of Income Tax, Central Circle- 31(1), Mumbai (in short ACIT/ AO) for the A.Ys. 2013-14 & 2011-12 2 | P a g e & 4481/Mum/2018 Adarsh Kaul vide order dated 21.03.2016 & 27.03.2014 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The first common issue in these appeals of assessee is against the order of CIT(A) confirming the action of the AO in making addition on account of revaluing closing work-in- progress and estimating the profit rate at the rate of 2%. For this, assessee has raised the following grounds No. 1 in AYs 2011-12 and 2013-14: - “for AY 2013-14
1. On the facts and in the circumstances of the case & in law the learned Assessing Officer has erred in increasing and the CIT(A) has erred in confirming the increase in the value of closing WIP (closing stock) by Rs. 6,33,857/- on account of estimated additional profit of 2% on the value of closing WIP as declared by the appellant. for AY 2011-12
1. On the facts and in the circumstances of the case and in law the learned Assessing Officer has erred in increasing and the CIT(A) has erred in confirming the increase in the value of closing WIP (closing stock) by ₹18,89,246/- on account of estimated 3 | P a g e ITA No.4480 & 4481/Mum/2018 Adarsh Kaul additional profit on the value of closing WIP as declared by the appellant.”
At the outset, the learned Counsel for the assessee filed copy of Tribunals order in assessee’s own case for AY 2009-10, wherein Tribunal in & 2811/Mum/2013 for AY 2009-10 vide order dated 24.05.2019 has considered the identical issue as this being a recurring issue Tribunal deleted the addition made by AO on estimating closing work-in-progress by observing in Para 8 as under: - “8. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the AO has not recorded any adverse finding in regard to correctness and completeness of the books of account of the assessee even though the assessee has filed complete details in respect of closing work in progress. During the course of assessment proceedings even job wise breakup of closing work in progress was submitted by the assessee. The assessee also before the AO and even before CIT(A) and even now before us contended that the assessee is following the method of valuing his closing stock i.e. work in progress consistently from year to year basis by ascertaining and accumulating the direct cost and other identifiable 4 | P a g e ITA No.4480 & 4481/Mum/2018 Adarsh Kaul expenses and adding the same to realizable profit as on 31st March of every year having due regard to the progress of the relevant job. The assessee has filed the detailed working relating to opening work in progress and subsequent bills raised in respect of opening WIP or closing WIP during the appellant proceedings before CIT(A). We noted that despite assessee’s details filed before AO, the AO could not pointed out any mistake in the books of accounts or any discrepancy and no books of accounts were ever rejected by the AO while applying the profit rate to the work in progress. Even otherwise, we noted that the assessee is following the method of accounting consistently and it is followed consistently year after year by ascertaining and accumulating the direct cost such as material cost, labour and other identifiable expenses directly relating to a particular ongoing job as on the last day of the accounting year. We also noted that the work in progress followed at cost + net profit so as to bring the contract revenue for the period lying with the requirement of accounting standard AS 7 as prescribed by ICAI and 5 | P a g e ITA No.4480 & 4481/Mum/2018 Adarsh Kaul adopted by assessee as per section 145 of the Act. In such circumstances, we are of the view that the AO and CIT(A) has wrongly made adhoc addition, which we delete. This issue of assessee’s appeal is allowed in term of the above.;”
When this was confronted to the learned Sr. Departmental Representative, he could not point out any factual difference in facts. As the issue is squarely covered by Tribunal’s decision in assessee’s own case in earlier year, we direct the AO to delete the addition and accordingly, this issue is allowed in favour of assessee in both the years.
One more issue in assessee’s appeal in for AY 2011-12 is as regards to the order of CIT(A) confirming the action of the AO in making addition of alleged difference in the total turnover declared and as per information available in AIR Data base. For this, assessee has raised the following ground No.2: -
2. On the facts and in the circumstances of the case and in law the learned Assessing Officer has erred in adding and the CIT(A) has erred in confirming the addition of ₹1,54,244/- on account of alleged difference in the turnover of the appellant and the information as per AIR.”
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