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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI D.T. GARASIA & SHRI RAJESH KUMAR
The captioned appeal by the Revenue and cross objection by the assessee are directed against the order of Commissioner of Income Tax (appeal) -28, Mumbai (hereinafter called as CIT(A)) dated 01.03.2016
2 M/s. Indian Prestress Corporation CO No.314/Mum/2017 pertaining to the Assessment Year 2011-12, which in turn has arisen from the order dated 11.03.2014 passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
The Revenue has raised the following grounds in its appeal :-
“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing to delete the addition of Rs.50,40,756/- u/s 41(1) of the Income Tax Act, 1961, without appreciating the fact that the projects were completed in earlier years.
2. On the facts and circumstances of the case and in law, the Learned CIT(A) has erred in directing to delete the addition of Rs.1,50,907/- in respect of expenses claimed against rental income on the basis of new evidence submitted before the Ld. CIT(A), without providing the Assessing Officer an opportunity for verification.
3. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the A.O be restored.”
In ground no. 1, the issue raised is against the deletion of addition of Rs.50,40,756/- by CIT(A) as made by the Assessing Officer u/s 41(1) of the Act without appreciating the fact that the assigned projects to the assessee were completed in the earlier years. The facts of the case are that during the assessment proceedings, the Assessing Officer observed that the assessee has shown advances received as liability in its Balance-sheet to the tune of Rs.54,47,958/- from two parties, namely, Kolak Aquaduct Project – Rs. 27,30,078/- and Ratlam Project (M.P) – Rs.27,17,880/- aggregating to Rs.54,47,958/-. The Assessing Officer, in order to verify the genuineness of the advances, issued notices u/s 133(6) of the Act dated 21.10.2013 and 3 M/s. Indian Prestress Corporation CO No.314/Mum/2017 11.11.2013 calling for various information from these parties. Both these parties were Government Departments and the Dy. Chief Engineer vide letter dated 06.01.2014 has categorically denied the said outstanding amount in the name of the assessee. The assessee replied to the Assessing Officer that work was executed in the name of the above two parties long back and the advance of Rs.54,47,958/- received from the said parties was shown on the ‘Liabilities’ side whereas the expenditure of Rs.50,40,756/- incurred on executing such works was shown in work-in-progress in the ‘Assets’ side. The assessee submitted before the Assessing Officer that since the work was still not complete, therefore, the amount was not offered to tax. However, the Assessing Officer not finding the reply of the assessee convincing and satisfactory, added Rs.54,47,958/- as unexplained advance to the income of the assessee.
In the appellate proceedings, the First Appellate Authority partly allowed the appeal of the assessee by restricting the addition to Rs.4,07,202/-, which represented the difference between the total advances received and cost of work done on the ground that only the profit element could be brought to tax and not the entire advance received. The Revenue being aggrieved by the order of CIT(A), preferred an appeal before us.
We have heard the rival submissions and perused the material on record. The undisputed facts are that the assessee executed the works of Railway Department for two projects – Kolak Aquaduct Project & Ratlam Project (M.P) in respect of which assessee received advances of Rs.27,30,078/- and Rs.27,17,880/- respectively. The assessee executed the projects and the expenditure incurred on the execution was shown in the 4 M/s. Indian Prestress Corporation CO No.314/Mum/2017 work-in-progress aggregating to Rs.50,40,756/-. The AO added the entire advance received of Rs. 54,47,958/- whereas the CIT(A) partly allowed the appeal of the assessee by deleting the addition to the tune of RS. 50,40,756 which represented the expenses incurred by the assessee on the execution of said projects. We are in agreement with the observations of the Assessing Officer that the income of the assessee should be brought to tax, but we differ on the point of bringing the entire advance receipt to tax instead of the net profit on the said advances, which the CIT(A) has rightly calculated and allowed. We find no reason to differ with the conclusion drawn by the CIT(A) and, therefore, are inclined to affirm the order of the CIT(A) on this issue. The ground raised by the revenue is dismissed.
The issue raised in ground no. 2 is with respect to deletion of addition of Rs.1,50,907/- by CIT(A), as disallowed by the Assessing Officer, in respect of expenses claimed against rental income. The facts in brief are that the assessee has shown income from factory rent to the tune of Rs.66,540/- against which assessee has claimed expenses of electricity – Rs.54,476/-, rates and taxes – Rs.98,004/-, depreciation – Rs.233/- and bank commission – Rs.194/- aggregating to Rs.1,50,907/-. The assessee has also claimed rental expenses at Rs.1,80,000/- for which assessee did not file any details before the AO. Thus, the total expenditure incurred by the assessee worked out to Rs.3,30,907/-. Since the assessee could not produce any evidence of these expenses, the Assessing Officer disallowed the entire amount of expenditure of Rs.3,30,907/- and added the same to the income of the assessee. In the appellate proceedings, the CIT(A) sustained the addition to the extent of Rs.1,80,000/-, which represented the rental expenditure incurred by the assessee, while allowing relief to the tune of Rs.1,50,907/-
5 M/s. Indian Prestress Corporation CO No.314/Mum/2017 comprising of office rent – Rs.98,004/-, electricity charges – Rs.52,476/-, bank charges – Rs.194/- and depreciation – Rs.233/- after calling for the records of the assessee. The CIT(A) allowed the relief to the assessee after verifying the bank statements, electricity bills, office rent receipt, etc. Aggrieved by the order of the CIT(A), the Revenue has challenged the deletion before us.
We have heard the rival submissions and perused the material on record. We find the order of the CIT(A) allowing relief of Rs.1,50,907/- is based upon the verification of bills, vouchers, bank statement, which was called for by the CIT(A) and produced by the assessee. Therefore, there is no reason to interfere with the order of the CIT(A) and accordingly, we affirm the same.
As we have already decided the issues against the Revenue, the various issues raised by the assessee in its cross objection becomes infructuous and is accordingly dismissed.
In the result, both the appeal filed by the Revenue as well as the Cross objection of the assessee stands dismissed.
Order pronounced in the open court on 16th January, 2018.