ACIT, CIRCLE - 1,, GORAKHPUR vs. ASHUTOSH KUMAR DUBEY,, VARANASI

SHRI VIJAY PAL RAO, JUDICIAL MEMBER: This appeal by the Revenue is directed against the order dated 22.01.2019 of CIT(A) for the assessment year 2015-16. The Revenue has raised the following grounds:- “

1. That the order of Ld. CIT(A) is perverse and bad in law.

2. That the Ld. CIT(A) has erred in deleting the addition of Rs. 1,75,42,731/- without appreciating that the nature of such receivable as to whether it is capital receipt or revenue receipt.

3. That the Ld. CIT(A) has erred in law in accepting remand report which is not enquiry based as mandated in section 250(4) of the I.T. Act, 1961.

4. The appellant craves right to add alter or amend any ground which may be taken at the time of hearing.”

2. None has appeared on behalf of the respondent assessee despite the notice of hearing was issued through RPAD as well Email at the Email ID given in Form No.

35. Accordingly, we propose to hear and dispose of this appeal ex parte.

3. The learned DR has submitted that during the course of the scrutiny assessment, the Assessing Officer noted that the assessee has shown work in progress in the balance-sheet at Rs. 1,75,42,731/- which is not shown in the profit and loss account of the assessee. The Assessing Officer verified the profit and loss account and balance-sheet for the assessment years 2014-15 and 2013-14 and found that no such work in progress is shown by the assessee in the balance-sheet of the preceding assessment year. Thus, the Assessing Officer found that the work in progress shown first time in the balance-sheet for the year under consideration should have been shown in the profit and loss account also. Accordingly, the Assessing Officer made the addition of the said amount of Rs. 1,75,42,731/- to the total income of the assessee. The learned DR has further pointed out that the CIT(A) has deleted the addition on the ground that it was a mistake in the Audit Report which has shown this amount under the head work in progress whereas it was payment receivable. He has thus contended that without verifying the correct and relevant record, the addition deleted by the CIT(A) is not justified.

4. We have considered the contention of the learned DR and carefully perused the order of the Assessing Officer as well as CIT(A). At the outset, we note that the Assessing Officer has made the addition of Rs. 1,75,42,731/- as under:- ”However, on going through P&L account submitted by the assessee alongwith audit report downloaded from system, it is seen that the closing stock in P&L account has been shown at Rs. 3,01,269/- and in balance-sheet the inventory has been shown at Rs. 3,01,269/-. Apart from inventories in balance-sheet work in progress has been shown at Rs. 1,75,42,731/-. This figure of work in progress has not been shown in the P&L account of the assessee. To verify this profit and loss account and balance-sheet of A.Y. 2014-15 and 2013-14 has been verified. It is seen that the assessee has not shown work in progress in balance sheet of A.Y. 2013-14 and 2014-15. Therefore, the work in progress shown for the first time in the balance-sheet for A.Y. 2015-16 should have been shown in the P&L account also. In this way the profit of the assessee was suppressed by this amount. In view of these facts addition of Rs. 1,75,42,731/- is made to the income of the assessee. The assessee has not furnish accurate particulars of income therefore penalty u/s 271(1)(c) issued separately. (Addition of Rs. 1,75,42,731/-)”

5. The assessee challenged the addition before the CIT(A) and contended that the Assessing Officer made the addition without appreciating the fact that it was only a typographical mistake which has been duly rectified by the Auditor and also established from the record that in the preceding year this amount was shown as receivable and it was actually received in the subsequent year. The assessee also contended before the CIT(A) that the Assessing Officer made this addition without even giving any show cause notice. We find that the Assessing Officer though issued a notice u/s 142(1) with questionnaire and in compliance to that the authorized representative appeared and attended the proceedings before the Assessing Officer and also filed the written replies. The Assessing Officer has stated in the assessment order that the details have been verified and case has been discussed with him. Thereafter, the Assessing Officer has made this addition for which apparently no show cause notice was issued. To remove this deficiency, the CIT(A) has called a remand report from the Assessing Officer and then decided this issue in para 5 as under:- “5. During the course of assessment proceeding the AO noted that the appellant had shown work in progress of Rs. 17542731/- in balance sheet for the year under consideration. This figure of work in progress was not shown in P&L account of the appellant. Accordingly, the AO held that the appellant has suppressed his profit by this amount and added the same to the income of the appellant. During the course of appellate proceeding it was submitted that the amount of Rs. 17542731/- shown in the balance sheet was actually payment receivable which was in advertently printed as work in progress. It was further submitted that the then counsel of the appellant also failed to understand the issue and took the wrong plea before the AO. A summary of payments receivable was also submitted in support of the contention. The contention of the appellant was sent to the AO for his comments. The AO has submitted his report vide letter dated 12/09/2018, relevant portion of which are under- "The assessee has also submitted corrected balance sheet duly signed by the same auditor showing payment receivable of Rs. 175,42,731/-. The assessee also submitted that in return of income for A.Y. 2015-16, WIP is shown at Rs. Nil and payment receivable is clubbed under "other current assets". The assessee's submission that payment receivable of A.Y. 2015-16 has been 3

received in AY 2016-17 appears to be correct in view of OBC bank account statement wherein two payments of Rs. 80,60,738/- and Rs. 1,04,42,256/- are credited on 26.06.2015 and 07.08.2015 respectively. Total of above amount comes to Rs. 1,85,02,994/- inclusive of security deposit of Rs. 5,10,000/- and security deposit of Rs. 4,50,263/- which were also released in A.Y. 2016-17. On the basis of documentary evidences, the plea taken by the assessee of payment receivable of Rs. 175,42,731/- seems to be reasonable and may be considered.” A copy of remand report was provided to the appellant for his comments which were duly considered and placed on record. The appellant has submitted a corrected balance sheet duly signed by the same auditor in which the amount of Rs. 17542731/- is shown as payments receivable. The contention of the appellant has been examined and found to be correct by the AO. In view of the above I find that the addition made by the AO is not based on the correct facts accordingly the same is directed to be deleted.”