ADARSH KAUL,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX 31(1), MUMBAI

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

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: -