SUSANTA BISWAS,KOLKATA vs. ITO, WARD-50(4), KOLKATA, KOLKATA

In this appeal though the assessee has raised as many as five grounds amongst of which the only effective issue is that whether the CIT-A justified in confirming the addition of Rs.3,70,244/- treating the same as undisclosed current asset on account of outstanding balance receivable being not reflected the same in the balance sheet as on 31-03-06 in the facts and circumstances of the case.

The assessee is an individual and engaged in the business of contract work. The assessee filed his return of income on 20-09-2006 declaring total income at Rs.2,04,640/-. Under scrutiny, notices u/s. 143(2) and 142(1) of the Act were issued. In response to which, the ld.AR of assessee appeared and advanced his submission in support of the return of income.

As matter stood thus, the case of the assessee was transferred to ITO, Ward 50(4), Kolkata from Durgapur. The AO exercising jurisdiction under transfer as said above re-fixed the hearing in compliance with the order of the Tribunal, Kolkata and in response to which through his ld.AR, the Assessee filed books of account, bills and vouchers before the AO in support of his contention. The AO issued summon/notice issued u/s. 133(6) of the Act to M/s. Simplex Infrastructure Ltd for cross verification of the transaction in pursuance to the said order of the Tribunal. On perusal of the relevant details of payments the AO found that the assessee maintains his account on the basis of mercantile system and an amount of Rs.3,70,244/- as an outstanding which was added to the income of the assessee and the said amount was not shown in the balance sheet being outstanding receivable in the form of its current asset and though it was included in the gross receipts to the profit & loss account. The assessee took a plea that he maintains his accounts on the basis of actual payment and credit as per TDS certificates. But, however, according to AO, the assessee should have accounted the said amount in the balance sheet as per the mercantile system of accounting and for not recording the same, the AO added the said amount of Rs.3,70,244/- to the total income of assessee.

The assessee challenged the same before the CIT-A. Before him the assessee filed the bills raised for the work and the details of TDS for the year under consideration and contended that the assessee raised the bills worth

Further, the Assessee submitted that the retention money is not shown as "Receivable" that in mercantile system of accounts and it will be shown when the right to receive the income accrued to the assessee. The Assessee relied on the decisions of Hon’ble Supreme Court in the case of Laxmipat Singhania v. CIT reported in [1969] 71 ITR 291 (SC) and ITO v. Bachu Lal Kapoor [1966] 60 ITR 74 (SC) for the proposition that the same income cannot be taxed twice.

Further, the Assessee relied on the decision of Hon’ble Supreme Court in the case of UCO Bank of vs. CIT reported in 240 ITR 355 for the that real income theory cannot be ignored by holding that the Balance Sheet to be maintained in a particular form.

For the proposition that taxability has to be decided in accordance with the provisions of law and not on the basis of the entries which the assessee may choose to make in his accounts and placed on reliance in the case of CIT v. Mogul Line Ltd reported in [1962] 46 ITR 590 (Bom).

The Assessee submitted that accounting practice is not relevant while computing income under the income tax law and that principle of accountancy cannot override the provisions of Tax Statutes and placed reliance on the interpretation rendered by the Hon’ble Supreme Court in the Susanta Biswas. case of Tuticorn Alkali Chemicals & Fertilizers Ltd vs CIT reported in 227 ITR 172 (SC) that the question has to be decided according to the principles of law and not in accordance with accountancy practice and urged to delete the addition of Rs. 3,70,240/- as made by the Assessing Officer.

The CIT-A found the assessee filed some documents as directed by the Tribunal during the appellate stage and sought remand report from the Assessing Officer vide this office letter No. CIT(A)-XXXII/Kol/Remand Report/12-13/178 dated 25.06.2012. The A.O sent remand report vide letter No. ITO-50(4)/Remand Report/Kol/2012-2013/152 dated 29.06.2012 which was sent through JCIT, Range-50, Kolkata vide letter No. JCIT/R-50/Remand Report/2012-13/97 dated 05.07.2012 (through proper channel) which is reproduced below: In the instant case the Assessment Order u/s. 254/143(3) was passed on 21/12/11 at an assessed income of Rs. 5,96,870/-. An addition was made amounting to Rs.3,70,240/- on account of outstanding balance receivable from simplex Infrastructures Ltd. For contract work which was not reflected in the respective B/sheet. The amount was included in the gross receipts of the assessee as per Mercantile System of Accounting. According to the submission of the assessee and the confirmation received from the party u/s. 133(6) of the Act, 1961 it was stated as retention money/security deposit. As the assessee was maintaining Mercantile System of accounting as per the Tax Audit Report for the year under assessment it ought to be reflected in the relevant B/sheet as per I.T Act, 1961. Hence Rs.3,70,240/- was treated as undisclosed current asset and addition to the Total Income was made accordingly.

The CIT-A rejected the submissions of the Assessee in respect of the argument that the said amount was offered already and any addition thereon on the same amount is double Taxation and the CIT-A found the assessee concealed the income by not showing the amount as receivable in the Balance Sheet in the assets side and the relevant portion of which is reproduced herein below: After perusal of the assessment order, remand report and submission of the appellant and its rejoinder. These are facts that the amount outstanding in the name of the Simplex Infrastructures Limited is not reflected in the balance sheet. The argument of the appellant that this amount is offered already and this is double Taxation. This is not correct because this matter is not double taxation. The appellant concealed the income by not showing the receivable balance in the Balance Sheet in the assets side. Assets side of the balance sheet shown lesser to the tune of Rs.3,70,240/- due to not showing the outstanding balance of Simplex Infrastructures Ltd. The effect of this is that the liability side of the balance sheet showing lesser amount to the said amount. The effect of this is that the appellant concealed the profit to the tune of Rs.3,70,240/- not showing in the liability side. So the question of double taxation is not there. In this case the appellant relied upon various case laws but the facts are different from this case. In one case the appellant relied that the principle of accounting cannot override the provision of tax statute. This is not in this case. In this case the appellant concealed the income of Rs.3,70,240/- by not showing the balance of Rs. 3,70,240/- of Simplex Infrastructures in assets side. Considering the above finding I am of the view that the action of the AO treating Rs.3,70,244/- as undisclosed income is as per law. Hence, I confirm the addition made by the Assessing Officer of Rs.3,70,240/-. Therefore, these grounds are disallowed.

The Ld.AR reiterated the submissions as made before the CIT-A and AO and urged to delete the addition by taking into consideration the same. The Ld.DR relied on the orders of proceedings below.

Heard rival submissions and perused the material on record. The case of the Assessee is that the amount was included in the total income and offered to tax and the same income can not be taxed again by adding the same to the total income and if so, it is a taxation twice on the same amount. We find that the AO acknowledged the said amount was included in the gross receipts in remand report as well as in assessment proceedings as conducted and passed order u/s. 254/143(3) of the Act. We find that the impugned amount of Rs.3,70,244/- remained as unpaid as on 31-03-2006 as the Simplex Infrastructures Limited to whom the Assessee rendered services retained the same as retention money for realization of liquidated damages, if any, for the work executed by the Assessee and according to Assessee, the realization of the amount was uncertain and that was the reason, he did not show the amount as receivable in the Balance Sheet. It is pertinent to note that the Simplex Infrastructures Limited deducted tax on the total amount as required to be paid to the Assessee and a letter of confirmation was filed before the AO as issued by the Simplex Infrastructures Ltd, deductor, along with the evidences of payments mentioning the cheque no’s and dates of payments of impugned of Rs.3,70,244/- and thereby, we agree with the submissions of the Ld.AR that the tax was offered on the total value of contract work and we find force in the arguments of the Assessee in respect of the decisions of Hon’ble Supreme Court and High Court as discussed above in para’s 6 to 9, therefore, as held by the Hon’ble Supreme Court the income once taxed can not be taxed again, we hold that the impugned addition was part of gross receipt and as shown income in the profit and loss account, thus, it can not become an addition again bringing the same for taxation for not following the principles of accountancy.