The ITO, Ward-4(2),, Baroda v. M/s. Protech Controls Pvt. Ltd.,, Baroda

ITA 4123/AHD/2007 | 1999-2000
Pronouncement Date: 31-05-2010 | Result: Dismissed

Appeal Details

RSA Number 412320514 RSA 2007
Assessee PAN AABCP2642R
Bench Ahmedabad
Appeal Number ITA 4123/AHD/2007
Duration Of Justice 2 year(s) 6 month(s) 16 day(s)
Appellant The ITO, Ward-4(2),, Baroda
Respondent M/s. Protech Controls Pvt. Ltd.,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 31-05-2010
Date Of Final Hearing 12-05-2010
Next Hearing Date 12-05-2010
Assessment Year 1999-2000
Appeal Filed On 14-11-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL SHRAWAT JUDICIAL MEMBER AND SHRI D.C. AGRAWAL ACCOUNTANT MEMBER DATE OF HEARING : 12/05/2010 DRAFTED ON: 12/0 5/2010 APPEAL(S) BY SL. NO(S). ITA NO(S) ASSESSMENT YEAR(S) APPELLANT RESPONDENT 1. 4123/AHD/2007 1999-2000 ITO WARD-4(2) BARODA M/S.PROTECH CONTROLS PVT.LTD. GOKUL 23-C VISHWAS COLONY ALKAPURI BARODA PAN :AABCP 2642 R 2. 4124/AHD/2007 2002-2003 REVENUE ASSESSEE 3. 4125/AHD/2007 2003-2004 REVENUE ASSESSEE 4. 4401/AHD/2007 1999-2000 ASSESSEE REVENUE ASSESSEE BY : SHRI J.P.SHAH REVENUE BY: SHRI M.C. PANDIT SR. D.R. O R D E R PER SHRI MUKUL SHRAWAT JUDICIAL MEMBER : AS FAR AS THE ASSESSMENT YEAR 1999-2000 IS CONCER NED BOTH REVENUE AS WELL AS ASSESSEE ARE IN APPEAL AGAINST T HE ORDER OF THE LEARNED CIT(APPEALS)-III BARODA DATED 31/08/2007. FOR REST OF THE ASSESSMENT YEARS; I.E. ASSESSMENT YEARS 2002-03 & 2 003-04 ONLY THE REVENUE IS IN APPEAL. IT WAS FOUND CONVENIENT TO C ONSOLIDATE ALL THESE FOUR APPEALS AND TO DECIDE BY THIS COMMON ORDER. W E HAVE PROCEEDED ACCORDINGLY. ITA NOS.4123. 4124. 4125(BY REVENUE) & 4401/AHD/2007(BY ASSESSEE) ITO VS. M/S.PROTECH CONTROLS P.LTD. ASST.YEARS 1999-2000 2002-03 & 2003-04 - 2 - 2. REVENUE HAS RAISED THE IDENTICAL ISSUE IN ALL TH E THREE YEARS; REPRODUCED BELOW FROM THE FILE OF ASSESSMENT YEAR 1 999-2000:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE RECEIPTS OF RS .15 86 804/- WERE ADVANCES TO THE ASSESSEE CONTRACTOR AND ALSO T HE PROJECT COMPLETION METHOD ADOPTED BY THE ASSESSEE WAS CORRE CT METHOD OF ACCOUNTING OVERLOOKING THE UNDERLYING FACT THAT TH E ASSESSEE WAS POSTPONING THE TAX LIABILITY BY ACCOUNTING FOR THOS E RECEIPTS AT THE COMPLETION STAGE. 2.1. ORDER FOR ASSESSMENT YEAR 2002-03 IS THE LEAD ORDER OF LEARNED CIT(APPEALS) WHICH SHALL BE REFERRED TO AND REST OF THE APPEALS SHALL BE DECIDED ACCORDINGLY. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ORDER WERE THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF INSTRUMENTATION ERECTION CONTRACTORS & CONSULTANTS. 3.1. IT WAS NOTICED FROM THE STATEMENT OF COMPUTAT ION OF INCOME THAT THE APPELLANT HAD CLAIMED THE AMOUNT OF TDS HOWEVER N OT OFFERED THE CORRESPONDING INCOME DURING THE RELEVANT FINANCIAL YEAR. THE ASSESSING OFFICER HAS MENTIONED THE AMOUNT OF TDS DEDUCTED BY CERTAIN PARTIES AS WELL AS THE TOTAL AMOUNT ON WHICH THE TAX WAS DEDUC TED. ON THAT BASIS A SHOW-CAUSE NOTICE WAS ISSUED TO EXPLAIN AS TO WHY T HOSE PAYMENTS WHICH WERE ALLEGED TO HAVE BEEN RECEIVED HAVE NOT BEEN A DDED IN THE TOTAL INCOME FOR THE RESPECTIVE YEARS. IN COMPLIANCE TH EREOF IT WAS EXPLAINED THAT THE INCOME WAS OFFERED ON THE BASIS OF THE CO MPLETION OF THE WORK. ITA NOS.4123. 4124. 4125(BY REVENUE) & 4401/AHD/2007(BY ASSESSEE) ITO VS. M/S.PROTECH CONTROLS P.LTD. ASST.YEARS 1999-2000 2002-03 & 2003-04 - 3 - HOWEVER AS PER ASSESSING OFFICER SINCE THOSE TDS CERTIFICATES HAVE INDICATED THAT THE AMOUNT WAS RECEIVED BY THE ASSES SEE AND THEREON THE TAX WAS DEDUCTED AT SOURCE THEREFORE THE INCOME W AS TAXABLE FOR THOSE RELEVANT FINANCIAL YEARS. AS PER ASSESSING OFFICE R IT WAS NOT CLEAR IN WHICH YEAR THE INCOME WAS OFFERED BY THE ASSESSEE. WITH THE RESULT THE IMPUGNED AMOUNTS WHICH WERE SUBJECTED TO TDS WERE R ESPECTIVELY ASSESSED IN THE ASSESSMENT YEARS IN QUESTION. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 4. AFTER CONSIDERING THE SUBMISSIONS THE LEARNED C IT(APPEALS) HAS NOTED THAT AS PER THE AUDITED ACCOUNTS THERE WAS A NOTE REGARDING REVENUE RECOGNITION THROUGH WHICH IT WAS DISCLOSED THAT THE ASSESSEE HAD OFFERED PROFIT ON THE BASIS OF THE COMPLETED CONTRACT M ETHOD. THE LEARNED CIT(APPEALS) HAS ALSO DISCUSSED ACCOUNTING STANDARD 7 (AS-7) AS PRESCRIBED BY THE INSTITUTE OF CHARTERED ACCOUNTANT S OF INDIA AND VIDE PARAGRAPH NO.4.4 GRANTED RELIEF BY MAKING THE FOLLO WING OBSERVATIONS:- 4.4. THE ACCOUNTING STANDARD 7 (AS-7) PRESCRIBED B Y THE INSTITUTED OF CHARTERED ACCOUNTANTS OF INDIA IN RES PECT OF CONSTRUCTION CONTRACT LAYS DOWN TWO BASES FOR RECOG NIZING REVENUE ON CONSTRUCTION CONTRACTS. THE FIRST IS PERCENTA GE OF COMPLETION METHOD AND THE SECOND IS COMPLETED CONTRACT METHO D. THE ASSESSEE FOLLOWS THE SECOND METHOD. IT HAS BEEN F OLLOWED CONSISTENTLY YEAR AFTER YEAR SINCE THE INCEPTION OF THE COMPANY. THUS THERE IS NO INFIRMITY OR DEFECT IN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. HOWEVER THERE IS MERI T IN THE A.OS CONTENTION ALSO. THE ASSESSEE HAS CLAIMED CREDIT F OR TAX DEDUCTED AT SOURCE BUT THE CORRESPONDING RECEIPTS HAVE NOT BEEN SUBJECTED TO TAX. THE CREDIT FOR TAX DEDUCTED IS TO BE CLAIM ED U/S.199. SECTION 199 CLEARLY STATES THAT ANY DEDUCTION OF TA X MADE IN ITA NOS.4123. 4124. 4125(BY REVENUE) & 4401/AHD/2007(BY ASSESSEE) ITO VS. M/S.PROTECH CONTROLS P.LTD. ASST.YEARS 1999-2000 2002-03 & 2003-04 - 4 - ACCORDANCE WITH THE PROVISION OF CHAPTER XVII OF TH E ACT AND PAID TO THE CENTRAL GOVERNMENT SHALL BE TREATED AS PAYME NT OF TAX ON BEHALF OF THE PERSON FROM WHOSE INCOME THE DEDUCTIO N WAS MADE AND CREDIT SHALL BE GIVEN TO HIM FOR THE AMOUNT SO DEDUCTED IN THE ASSESSMENT YEAR IN WHICH SUCH INCOME IS ASSESSABLE. THUS THE LAW CLEARLY PROVIDES THAT THE CREDIT FOR TDS CAN BE CLAIMED ONLY IN THAT ASSESSMENT YEAR IN WHICH THE CORRESPONDING INC OME IS EXIGIBLE TO TAX. IN THE INSTANT CASE THE ASSESSEE HAS CLAIMED THE TDS CREDIT BUT NOT OFFERED THE CORRESPONDING INCOME FOR TAX. AS PER THE GENERALLY ACCEPTED ACCOUNTING PRACTICE FOLL OWED BY THE ASSESSEE I.E. COMPLETED CONTRACT METHOD PRESCRIB ED UNDER THE ACCOUNTING STANDARD 7 (AS-7) OF THE INSTITUTE OF CH ARTERED ACCOUNTANTS OF INDIA THE RECEIPTS RELATING TOT THE CONTRACT ARE TO BE TAXED ONLY ON COMPLETION OF THE CONTRACT. HENCE THE CREDIT FOR TAX DEDUCTED FROM SUCH RECEIPTS WILL ALSO BE ALLOWE D IN THAT YEAR. ACCORDINGLY IT IS HELD THAT THE INCOME OF THE ASSE SSEE IN RESPECT OF THE RECEIPTS FROM WHICH THE TDS WAS DEDUCTED IS TO BE ASSESSED IN THE SUBSEQUENT YEAR I.E. WHEN THE CONTRACT IS COMP LETED. AT THE SAME TIME IT IS HELD THAT THE AO HAS RIGHTLY NOT A LLOWED THE CREDIT FOR TDS IN THE CURRENT YEAR. THE A.O. IS DIRECTED TO ALLOW THE CREDIT FOR TAX DEDUCTED AT SOURCE IN THE RESPECTIVE YEARS IN WHICH THE CORRESPONDING INCOME IS OFFERED FOR TAXATION. 4.1. AS IS EVIDENT FROM THE ABOVE PARAGRAPH THE LE ARNED CIT(APPEALS) HAS NOT ONLY DISCUSSED THE METHOD OF ACCOUNTANCY CO NSISTENCY FOLLOWED BY THE ASSESSEE BUT HE HAS ALSO DISCUSSED THE PROV ISIONS OF SECTION 199 OF THE I.T. ACT 1961 AND THEREUPON DIRECTED THE ASS ESSING OFFICER TO ALLOW THE CREDIT OF THE TDS IN THE YEAR IN WHICH THE INCO ME IS OFFERED BY THE ASSESSEE. BEING AGGRIEVED OF THE SAID DIRECTION NOW THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH AND ALSO CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ON CE IT IS NOT IN DISPUTE ITA NOS.4123. 4124. 4125(BY REVENUE) & 4401/AHD/2007(BY ASSESSEE) ITO VS. M/S.PROTECH CONTROLS P.LTD. ASST.YEARS 1999-2000 2002-03 & 2003-04 - 5 - THAT THE ASSESSEE HAS CONSISTENTLY FOLLOWED COMPLETED CONTRACT METHOD AND THAT METHOD HAS BEEN ADOPTED SINCE THE INCEPTIO N OF THE COMPANY THEREFORE WE FIND NO JUDICIAL BASIS ON THE PART OF THE ASSESSING OFFICER TO REJECT THAT METHOD WITHOUT ASSIGNING ANY REASON AND IN AN INTERVENING ASSESSMENT YEAR ADOPTED AN ANOTHER METHOD OF ACCOUN TING. THOUGH UNDISPUTEDLY THE ASSESSEE HAS NOT DISCLOSED THE COR RESPONDING RECEIPTS ON WHICH THE TDS WAS DEDUCTED; AS CERTIFIED BY THE TAX DEDUCTOR BUT THE CORRECT APPROACH WOULD HAVE BEEN TO RECOGNIZE THE R EVENUE AS PRESCRIBED IN ACCOUNTING STANDARD 7 (AS-7) AND TA X THE INCOME ACCORDINGLY. FURTHER HE IS ALSO EXPECTED TO GIVE THE CREDIT OF TAX SO DEDUCTED BY APPLYING THE PROVISIONS OF SECTION 199 OF THE I.T. ACT 1961. THE VIEW TAKEN BY THE LEARNED CIT(APPEALS) APPEARS TO BE A LEGAL VIEW CONSIDERING THE RELEVANT PROVISIONS OF THE I.T. ACT 1961 AS WELL AS THE GUIDELINES ISSUED BY THE INSTITUTE OF CHARTERED ACC OUNTANTS OF INDIA I.E. AS-7. WHILE DECIDING SO WE ARE ALSO FORTIFIED BY A DECISION OF THE RESPECTED CO-ORDINATE BENCH PUNE IN THE CASE OF B. K. PATE ENTERPRISES VS. DY.CIT REPORTED AS 28 DTR 451. RESULTANTLY G ROUNDS OF THE REVENUE ARE DISMISSED. 6. IN THE LIGHT OF THE ABOVE DISCUSSION SINCE T HE REVENUE HAS RAISED THE IDENTICAL ISSUE IN ALL THE ABOVE THREE APPEALS HEN CE HEREBY THEY ARE DISMISSED. 7. ASSESSEES APPEAL (ITA NO.4401/AHD/2007) IS IN RESPECT OF AN ADDITION ON ACCOUNT OF GROSS PROFIT OF RS.11 77 765 /-. REST OF THE GROUNDS ARE GENERAL IN NATURE NEED NO INDEPENDENT ADJUDICATION. WHILE ITA NOS.4123. 4124. 4125(BY REVENUE) & 4401/AHD/2007(BY ASSESSEE) ITO VS. M/S.PROTECH CONTROLS P.LTD. ASST.YEARS 1999-2000 2002-03 & 2003-04 - 6 - COMPLETING THE ASSESSMENT FOR ASSESSMENT YEAR 1999- 2000 IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE GROSS PR OFIT FOR THE YEAR UNDER CONSIDERATION WAS DISCLOSED AT THE RATE OF 17.45% AS AGAINST GROSS PROFIT AT THE RATE OF 30.10% FOR ASSESSMENT YEAR 1998-99. ACCORDING TO ASSESSING OFFICER THERE WAS A STEEP FALL OF GROSS PROFIT TO THE EXTENT OF 12.65% AS COMPARED TO THE PAST YEAR. IT HAS ALSO B EEN MENTIONED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS FAILED TO F URNISH THE EXPLANATION OR COMMENTS IN RESPECT OF THE SAID FALL IN GROSS PR OFIT RATE FOR THE YEAR UNDER CONSIDERATION. ON ACCOUNT OF SAID DEFECT AND NON-COOPERATION OF THE ASSESSEE HE HAD ADOPTED THE GROSS PROFIT RATE AT 12.65% ON THE TOTAL SALES OF RS.93 10 399/-. ACCORDINGLY THE PROFIT WAS WORKED OUT AND AN ADDITION OF RS.11 77 765/- WAS MADE WHICH WAS CHALL ENGED. 8. THE LEARNED CIT(APPEALS) HAS DISCUSSED THE FACTS OF THE CASE AND THEREAFTER AFFIRMED THE ACTION OF THE ASSESSING OF FICER VIDE PARAGRAPH NO.9.3; FOR READY REFERENCE REPRODUCED BELOW:- 9.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LEA RNED AO AND THE FACTS OF THE CASE. WHILE IT IS QUITE POSSIBLE THAT THE TERMS OF THE CONTRACT MAY HAVE CHANGED TO THE DETRIMENT OF T HE ASSESSEE SINCE THE COST OF PROVIDING MATERIALS WAS TO BE BOR NE BY THE ASSESSEE INSTEAD OF THE CUSTOMER AT THE SAME TIME THE ONUS OF ESTABLISHING THAT THIS WAS INCIDENTAL TO THE BUSINE SS LIES SQUARELY ON THE ASSESSEE HIMSELF. THIS COULD BE EASILY SUB STANTIATED BY COMPARISON OF THE CONTRACT FOR THE EARLIER PERIOD W ITH THE CONTRACT FOR THE CURRENT PERIOD. HOWEVER THE APPELLANT HA S EXPRESSED HIS ITA NOS.4123. 4124. 4125(BY REVENUE) & 4401/AHD/2007(BY ASSESSEE) ITO VS. M/S.PROTECH CONTROLS P.LTD. ASST.YEARS 1999-2000 2002-03 & 2003-04 - 7 - INABILITY TO FURNISH COPIES OF CONTRACT FOR COMPARI SON PURPOSES. HENCE IN THESE CIRCUMSTANCES IT IS HELD THAT THE EXPLANATION OFFERED BY THE ASSESSEE HAS NOT BEEN SUBSTANTIATED ON THE BASIS OF EVIDENCE. IT IS THEREFORE HELD THAT THE A.O. WA S NOT UNJUSTIFIED IN MAKING THE ADDITION AMOUNTING TO RS.11 77 765/-. T HE ADDITION IS CONFIRMED AND THIS GROUND OF APPEAL THUS FAILS. 9. ON HEARING THE RIVAL SUBMISSIONS WE FIND NO F ALLACY IN THE VERDICT OF LEARNED CIT(APPEALS). THERE COULD BE A POSSIBILITY THAT FOR THE YEAR UNDER CONSIDERATION THE TERMS OF THE CONTRACT MIGHT HAVE BEEN CHANGED BUT THE FUNDAMENTAL QUESTION IS THAT WHETHER THIS A SSESSEE HAS EVER PRODUCED THOSE CONTRACTS EITHER BEFORE THE ASSESSIN G OFFICER OR BEFORE THE LEARNED CIT(APPEALS) FURTHER EVEN BEFORE US. ONC E THE SAID COGENT EVIDENCE WAS NOT MADE AVAILABLE TO ANY OF THE AUTHO RITIES THEREFORE SUCH A STATEMENT WAS NOTHING BUT A BALD EXPLANATION DEVO ID OF ANY SUBSTANCE. THE LEARNED CIT(APPEALS) HAS CORRECTLY OBSERVED THA T THE ONUS OF ESTABLISHING THE TERMS OF THE CONTRACT IF AT ALL CHANGED FOR THE YEAR UNDER CONSIDERATION WAS SQUARELY UPON THE ASSESSEE . RATHER HE HAS OBSERVED THAT THE APPELLANT HAD EXPRESSED HIS INABI LITY TO FURNISH THE COPIES OF THOSE CONTRACTS. UNDER THOSE CIRCUMSTANC ES HE HAS EXPRESSED HIS HELPLESSNESS TO GRANT ANY RELIEF AND AFFIRMED T HE ADDITION SO MADE BY THE ASSESSING OFFICER. WE FIND NO REASON TO DISTUR B THE SAID DECISION OF LEARNED CIT(APPEALS) SPECIALLY WHEN THE ASSESSEE HA S MISERABLY FAILED TO SUBSTANTIATE THE IMPUGNED CLAIM. THIS GROUND OF THE ASSESSEE IS THEREFORE DISMISSED. ITA NOS.4123. 4124. 4125(BY REVENUE) & 4401/AHD/2007(BY ASSESSEE) ITO VS. M/S.PROTECH CONTROLS P.LTD. ASST.YEARS 1999-2000 2002-03 & 2003-04 - 8 - 10. IN THE RESULT ALL THE THREE APPEALS OF THE REV ENUE AS WELL AS THE APPEAL OF THE ASSESSEE ARE HEREBY DISMISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 31 ST MAY 2010. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31 / 05 /2010 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-III BARODA 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD+++