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Income Tax Appellate Tribunal, KOLKATA BENCH “D”, KOLKATA
Before: SH. WASEEM AHMED & SH. S.S.VISWANETHRA RAVI
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER
This appeal filed by the Revenue against the order dated 28.10.2016 passed by CIT(A)-14, Kolkata for AY 2008-09.
The appellant Revenue raised only ground reads as under:-
1. “That on the facts and circumstances of the case the Ld.CIT(A) erred in deleting the differential amount i.e. Rs.1,44,19,780/- [Rs.4,26,77,382/- minus Rs.2,82,57,602/-] which was added by the A.O. on account of undisclosed contractual receipts as evident from the details of TDS.”
Brief facts of the case are that the assessee is a company and is a developer and engaged in the business of civil construction. The assessee filed its return of income declaring a total income of Rs.70,78,191/- and refund of Rs.3,62,730/- was raised by an order dated 19.11.2010 passed u/s 143(3) of the Income Tax Act (in short “Act”).
The CIT(A) u/s 263 proceedings found that the assessee received contractual payments from various parties to the extent of Rs.4,26,77,382/-. Further he found that the assessee offered only Rs.2,82,57,602/- for taxation and claimed full tax credit of Rs.4,81,941/-. The CIT held the order of AO passed u/s 143(3) of the Act dated 19.11.2010 is erroneous and pre-judicial to the interests of the Revenue by observing that the AO failed to take notice of differential income of Rs.1,4419,780/- (Rs.4,26,77,382/- minus Rs.2,82,57,602/-) in the assessment proceedings and the assessee did not disclose its true income in the return of income.
In giving effect proceedings, AR of the assessee submitted that the assessee received fresh amounts of Rs.4,13,44,753/- during the year under consideration against amount paid/credited altogether in TDS Certificate of Rs.4,26,77,282/-.
Balance amount of Rs.13,32,629/- is due from the customs. Out of the said balance of Rs.90,000/- was received during the FY 2006-07 & Rs.12,57,328/- during FY 2008-09. Further, it was stated the said advance was charged in Revenue’s account in subsequent years. AO found the submissions of the assessee not acceptable and added an amount of Rs.1,44,19,780/- to the total income of the assessee vide his order dated 31.03.2014 passed u/s 143(3)/263 of the Act.
In the first appellate proceedings on an examination of record, CIT(A) directed the AO to allow credit to the assessee only in respect of TDS certificates that relate to actual income of the assessee during the year under consideration and not in deletion to the entire amount received by him which is in the nature of advances. The relevant portion of CIT(A) is reproduced hereunder below:-
“I have examined the material on record, the submissions of the appellant, the assessment order and the remand report. The admitted facts are that the appellant, during the course of his business was in receipt of certain funds from several parties against contractual' work that the appellant undertook for these parties. The nature of works itself was such that it would take several years for each contract to be completed. It is also an undisputed fact that that the appellant raised bills from time to time against quantum of works completed and that it was these amounts that were shown by the appellant as business contractual receipts that constituted the turnover of the appellant as shown by him in his audited books. It is also a fact that the P/L account of the appellant was prepared with reference to these last mentioned receipts and profit for that year calculated after taking into account the expenses relatable to that particular contract for that year. I have also perused the agreements with the various contracting parties. There are three parts, Part I, II and II that span the entire contractual obligations for appellant. Part I relates to fencing etc.; Part II relates to Land cleaning and levelling through six stages, to construction of surface tank; and finally, Part Ill, which goes from, installation of diesel. engine through a further 5 stages to Maintenance of farm. In these agreements, in para 7, speaks about the payment schedules. For Part I of the works, para 7 says that there would be payment in advance for fencing work which would be made in sections of 1 km each. For works listed in Part Il, the same paragraph says that there would be payment of advance, amounting to 60% at the time of work order, then another 30% at the time of completion of 75% of work and 10% after completion of entre work. The payment schedule for advance in relation to Part II of the work obligations of the appellant have also been mentioned. It is clear from the above that .the appellant was to receive the major chunk of contractual amounts in advance and the remaining also at a fairly early stage of completion of the works. The amounts have also been shown appropriately by the appellant in his books of account which are audited. The AO's case is not that there was any deficiency in the books of account or in the bills or vouchers raised by the appellant or in respect of any other expenses related to the individual projects. It is not the case of the AO that any of the expenses so claimed by the appellant pertained to any other year than that in which they were shown as having been claimed as per books. The AO has not suggested that the entire work had been completed in one "single - the impugned- year. Since the AO has not contested any of the scheme of business receipts and, payments shown by the appellant in his books of account, it was up to him - the AO - to show that, given that everything else was exactly as the appellant had claimed it, the calculation of receipts as per individual bills raised by the appellant during that year for the works completed during that year, was, however, erroneous. The only reason that the AO seems to have for the impugned addition is that the appellant had claimed credit for the entire TDS. He has quoted Rule 37BA read with section 199 of the Act and cited several judicial pronouncements in his favor. I quite agree with the AO on this count. It is settled law that credit for TDS deducted and deposited with the Government can be given only in respect of income that is relatable to the year in which such claim has been made. The appellant's contention that this amendment is not applicable in his case is erroneous on several counts. The first is that the assessment order was passed on 13.3.2014 - by which time the said amendment had already come into effect - such an amendment being applicable to all pending proceedings. The second is that such an amendment is merely clarificatory in nature - clarifying and placing on the statute a fact that had already been underlined by several judicial authorities. Therefore, being clarificatory, it was retrospectively applicable. But then the fact that the appellant has made an erroneous claim does not alter the nature of a receipt. The only that can and should be done is that the additional claim on account of TDS that pertains to receipts from business that are against bills raised for that year should not be allowed. To say that just on account of the facts that the appellant has claimed a wrong amount of TDS, that is, on the entire amount of receipts rather than upon only those receipts that pertained to the impugned year, therefore the entire amount of receipts should be treated as receipts to be used for calculating. the profit for the year in question, would be tantamount to wagging the dog by its tail. All other evidence and facts and circumstances show that the entire amount was actually advances received by the appellant from contracting parties and bills were adjusted against these advances as and when some amount of work was completed. The said amounts of bills were accordingly offered for taxation in the relevant AY. All this has not been controverted by the AO, either in the assessment order or during remand proceedings. The only defect that remains is therefore that the appellant has claimed TDS credit for the entire amount of payment when in reality he, admittedly, has claimed that the income that accrued to him was over more than one financial year. This is, as discussed above, not as per law. Therefore, the AO is directed to allow credit to the appellant only in respect of TDS certificates that relate to the actual income of the appellant during the year and not in relation to the entire amount received by him, which is in the nature of advances and not income. As far as the addition by the AO is concerned, it is clear from the aforesaid discussion that the entire amount received by the appellant was not his income for any particular year. The income arose only at the time that works were completed and corresponding bills raised by the appellant. These bills were progressively adjusted against the advance as is evident from the books of the appellant. The amount in the bills raised by the appellant during the impugned fear is, therefore, to be treated as the amount from which contractual income of the appellant for the impugned year is to be calculated, and not the entire amount. This income, of course, has to be calculated as per the accounting system of the appellant after debiting the expenses etc. The addition with respect to this is accordingly deleted with directions to the AO to calculate the income of the appellant in the manner given above and after examining the material on record, while giving effect to this appeal.”
Before us, the Ld. DR submits that CIT(A) has no power to remand the matter to the file of the AO for verification and referred to page No.8 of the CIT(A).
The DR relied upon the order of the AO.
The ld. AR submits that all the advances are reflected in Schedule (G) of Annual Report for the year under consideration and the said advances received by the assessee during the year under consideration but, however, no work was done and the same carried out over to next year. The Ld. AR referred to balance sheet as on 31.03.2008 which is placed in Paper Book and argued that the assessee has shown the said advances as current liability. The Ld. AR further referred to Schedule (G) in Paper Book and submitted that the assessee received advances from several parties detailed thereonand all were shown as current liabilities under the head “Advance payment from customers”. Further submitted that the Board empowered to make Rules for the purpose of giving credit to a person in respect of assessment year for which such credit may be given and placed reliance on Rule 37BA(3) of Income Tax Rules, 1962 and Ld. AR argued that CIT(A) by following the provisions of law directed the AO to give tax credit only to the actual income of the assessee during the year under consideration and referred to page No.8 of CIT(A) and supported the order of the CIT(A).
Heard rival submissions and perused the material available on record. It is noticed that the assessee contended that it received fresh advances during the year under consideration and the same has been shown as current liabilities in the balance sheet as on 31.03.2008. It is also clear from the record that the said advances received for execution of work and the same was not executed and the said advances were carried over to next year. The CIT(A) examined the record as it is clear from his order in page No.7. The sub-section (3) of 199 of the Act empowers the Board to make Rules that may be necessary for the purpose of giving credit of persons other than those referred to sub-section 1 & 2 of the section 199 of the Act. Accordingly, the Rule 37BA(3)(i) was framed to give credit for tax deducted at source and paid to the Central Government shall be given for the AY for which such income is accessible. We find from the impugned order that CIT(A) found satisfied that the advances have been shown as current liabilities which were carried over to next year, if that is the case, he rightly directed the AO to allow tax credit to the actual income of the assessee during the year under consideration.
Further, regarding the submissions of Ld.DR, we find that the CIT(A) directed the AO to give effect to the first appellate order, but did not make any direction to the AO to conduct further inquiries. Therefore, we find no force in the arguments of Ld. DR that the CIT(A) has no power to remand the issue to the file of AO.
Therefore, the submissions of Ld.DR are rejected. Therefore, we find no infirmity in the order of CIT(A). Accordingly, we confirm the order of the CIT(A) and sole ground raised by the Revenue is dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 18.07.2018.