U.P.Projects Corporation Limited.,, ... vs Assessee

Appellant by Shri Rakesh Garg, Advocate Respondent by Shri O. P. Meena, CIT, D. R. Date of hearing 17/11/2014 Date of pronouncement 16/01/2015

ORDER

PER A. K. GARODIA, A.M.

This is an assessee's appeal directed against the order passed by learned CIT(A)-II, Lucknow dated 26/09/2012 for the assessment year 2009-2010.

"1.1 Because the learned 1st appellate authority ought to have adjudicated our ground no. 1.1 that the learned Assessing Officer ought not to have disallowed prior period expenses of Rs.9,11,259/- as the liability in respect of such expenses arose/ crystallized during the relevant previous year.

1.2 Because the learned 1st appellate authority ought to have excluded the prior period income as the Assessing Officer had no warrant to assessee the prior period income in the current assessment year and in any case as it stood offered in the computation of the assessee.

2 1.3 Because, in any case, the assessee had in a fair manner offered the net prior period income of Rs.33,342/- for taxation and the Assessing Officer had no warrant to make an addition of Rs.18,22,518/- which after rectification of double addition mistake vide order dated 01-03-12 served on 15-10-12 stands at Rs.9,44,601/-; During appellate proceedings the assessee had agreed to drop the issue pertaining to double taxation only on rectification of mistake by the learned A.O."

2. It was submitted by Learned A.R. of the assessee that if prior period expenses are to be disallowed in the present year then prior period incomes should also be excluded in the present year. He further submitted that in fact, the prior period income at Rs.9,44,601/- is higher to prior period expenses of Rs.9,11,259 and there is net prior period income of Rs.33,342/- , which was included by the assessee in the computation of income and hence, no addition is justified on this account.

3. Learned D.R. of the Revenue supported the orders of the authorities below.

4. We have considered the rival submissions. In our considered opinion, the addition made by the Assessing Officer is not justified because prior period income reported by the assessee at Rs.9,44,601/- is more than prior period expenses of Rs.9,11,259/-. The Assessing Officer has wrongly made addition of Rs.18,52,518/- by adding both the amount of prior period income and expenditure and excluding net prior period income of Rs.33,342/- offered to tax by the assessee. Even if the entire amount of prior period expenses of Rs.9,11,259/- is excluded then also the addition can be made of only Rs.9,11,259/- being difference between prior period income of Rs.9,44,601/- and Rs.33,342/-. Therefore, the total addition made by the Assessing Officer is not justified at the face of it. Moreover, since the prior period income is more than prior period expenses and the 3

net prior period income has been offered to tax, no addition is justified. We, therefore, decide this issue in favour of the assessee. Ground No. 1 is allowed.

5. Ground No. 2 is as under:

"2.1 Because the learned 1st appellate authority erred in confirming the action of the Assessing Officer of not treating temporary sheds of Rs.4,26,112/- as eligible for 100% depreciation.

2.2 Because the learned 1st appellate authority had no warrant to confirm the action of Assessing Officer to allow depreciation @7.5% only on temporary sheds (in fact, depreciation @ 7.5% is nowhere prescribed in New Appendix 1 of rates of depreciation in Income Tax Rules 1962) and making addition of Rs.3,94,154/-.

2.3 Because the learned first appellate authority had no warrant to treat the cost of construction as deferred revenue expenditure and to estimate the life of project and life of temporary constructions at approximately 13 years.

2.4 Because the denial of 100% depreciation by the learned 1st appellate authority by upholding the finding of the assessing officer that the material used in temporary sheds was available to the assessee for use after the requirement of temporary sheds was over, is erroneous.

2.5 Because on identical facts in earlier years, the depreciation on temporary sheds was allowed @100% and the learned lower authorities erred in denying it without any fresh facts or fresh material on record."

6. It was submitted by Learned A.R. of the assessee that the details of expenses are available on page 46 and the supporting bills are available on pages 47 to 54 of the paper book. Regarding the judgment of Hon'ble Guwahati High Court cited by Assessing Officer in the assessment order 4

having been rendered in the case of CIT vs. Sibson Construction & Co. 221 ITR 468, it was submitted by Learned A.R. of the assessee that this judgment is not applicable in the facts of the present case.

7. Learned D.R. of the Revenue supported the orders of the authorities below.

8. We have considered the rival submissions. We find that it is noted by the Assessing Officer in the assessment order that no details of construction of temporary structure were filed by the assessee and on this basis, he disallowed the claim of the assessee. Now we find that in the paper book, the details are available on page No. 46 of the paper book and along with this, photocopy of relevant bills are also available on pages 48 to 54 of the paper book. As per the details available on page No. 46 of the paper book, out of total expenses of Rs.4,16,228/-, the amount of Rs.3,85,150/- is on the basis of six bills and the remaining amount of Rs.31,078/- is on the basis of various small bills, each of less than Rs.3,000/-. Hence, we feel it proper to examine these six bills, which constitute the majority of the expenses of Rs.3,85,150/-.

9. The first item is of Rs.1,52,100/-, being cost of boundary wall and leveling charges. As per the detail, the boundary wall is of barbed wire and it includes the expenditure of Rs.31,150/- on account of leveling of new store compound. In our considered opinion, such an expenditure is purely temporary in nature.

10. The second item is of Rs.25,000/- on account of fixing of shed. As per the bill, labour charges is paid on account of fixing of nut bolt for a shed using old materials. In our considered opinion, this is also temporary in nature.

5 11. The third item is dismantling of old shed of Rs.46,000/-. This item, in our considered opinion is allowable in full as Revenue expenditure.

12. The 4th item is expenses of Rs.1,05,300/- on account of earth filling. In our considered opinion, this expenditure is also allowable as Revenue expenditure in full.

13. The next item is of Rs.50,000/- incurred on account of cost of shifting of old store. In our considered opinion, this expenditure is also allowable as Revenue expenditure.

14. The last item is of Rs.9,750/- on account of labour charges for doing misc. work. In our considered opinion, as per above discussion, the entire expenses incurred by the assessee is allowable in full in the present year and hence, we delete these disallowances. Ground No. 2 is allowed.

15. Ground No. 3 is as under:

"3.1 Because the learned 1st appellate authority erred in upholding addition of Rs.111,28,64,313/- made by the Assessing Officer.

3.2 Because the addition of Rs.111,28,64,313/- made on the plea that centage receivable on work in progress @12.5% is not reflected in the books of account is erroneous as the work in progress is inclusive of centage wherever applicable.

3.3 Because the learned 1st appellate authority had no warrant to confirm the finding of learned Assessing Officer that no evidence was produced to establish that centage has been charged on the work in progress.

3.4 Because in any case and without prejudice to above the learned assessing officer had no warrant to calculate 6

disallowance @12.5% on the closing work-in-progress without reducing it by opening work-in-progress.

3.5 Because the learned Assessing Officer erred in rejecting the books of account of the assessee.

3.6 Because the addition has been made on conjectures and surmises, e.g., the comment of the assessing officer on the last page of the assessment order "this argument is strengthened by the fact that while advancing /issuing funds for project by the Govt. organizations in the work order almost invariably add a clause that monthly progress report on work done and expenditure have to be furnished. On the basis of such reports profit/centage can be estimated month-wise what to talk of annuals. Failure of the assessee to account for such profit is therefore clearly deliberate, in order to suppress its income" and is therefore liable to be deleted."

16. It was submitted by Learned A.R. of the assessee that the relevant circular dated 27/02/97 is available on pages 73 & 74 of the paper book as per which, centage is allowable @12.5%. He also submitted that in the earlier years also, the assessee was following same method of accounting and it was accepted by the Revenue. He also submitted that in fact, in assessment year 2005-06, the addition was made by the Assessing Officer and confirmed by CIT(A) but when the assessee carried the matter in appeal before the Tribunal, the Tribunal allowed relief to the assessee as per the Tribunal order dated 29/01/2010 in I.T.A. No.646/Lkw/06, copy of which is available on pages 93 to 100 of the paper book. He also placed reliance on the following judicial pronouncements in support of this contention that as per Rule of consistency, if matter is decided in favour of the assessee in earlier years, the same cannot be challenged in the subsequent year.

(i) CIT vs. Excel Industries Ltd. [2013] 358 ITR 295 (SC) 7

(ii) CIT vs. Bhanji Lavji [1971] 79 ITR 582 (SC)

(iii) Radhasoami Satsang vs. CIT [1992] 193 ITR 321 (SC)

(iv) Parashuram Pottery Works Co. Ltd. vs. Income Tax Officer [1977] 106 ITR 1 (SC)

17. Learned D.R. of the Revenue supported the orders of the authorities below.

18. We have considered the rival submissions. First we examine the Tribunal order in assessee's own case for assessment year 2005-06. In this order, the Tribunal has simply followed another Tribunal order rendered in the case of Hariom Builders in I.T.A. No.814/Lkw/08 dated 29/04/2009. The relevant portion of this Tribunal order has been reproduced by the Tribunal in the Tribunal order of the assessee for assessment year 2005-06. As per that Tribunal order, we find that in that case, the issue in dispute was that the assessee was following project completion method and the allegation of the Assessing Officer was that it amounts to deferment of tax liability and on this basis, he invoked the provisions of section 145(3) of the Act. This was noted by the Tribunal that this aspect is fully covered in favour of the assessee by the judgment of Hon'ble Allahabad High Court rendered in the case of CIT-II vs. Kishore Bandhu (P) Ltd. reported in 2008 (11) MTC 22 wherein it was held that project completion method is recognized method of accounting and therefore, there is no contravention of any of the provisions of the Act. The Tribunal has not given or narrated the facts of the assessee in assessment year 2005-06 and the Tribunal has simply followed this Tribunal order in the case of Hariom Builders. Hence, we compare the facts of the present year with the facts in the case of Hariom Builders. When we do so, we find that in the present case, it is noted by the Assessing Officer on page No. 3 of the assessment order that it was submitted by the assessee before him that the assessee is following percentage completion method of accounting and therefore, it is clear that 8

the assessee is not following project completion method of accounting. Moreover, it is not the case of the Assessing Officer that following percentage completion method of accounting is not permitted or it amounts to deferment of income and consequently deferment of tax. Rather the case of the Assessing Officer is that when the assessee is following percentage completion method of accounting, he should have accounted for centage receivable on WIP also. The Assessing Officer has noted that the assessee has shown WIP of Rs.890.29 crores and no evidence has been produced before him to establish that centage has been charged thereon. The case of the Assessing Officer is that the assessee is following percentage completion method of account but the same was not followed in true sense because the assessee has not accounted for centage in respect of WIP. Therefore, in our considered opinion, the Tribunal decision in the case of Hariom Builders (supra), cannot be made applicable in the present case. So far the Tribunal decision in assessee's own case for assessment year 2005-06 is concerned, in the absence of facts and disputes of that year, we cannot compare the facts of this year with the facts of that year and therefore, it cannot be said that the present issue is covered by this Tribunal order.

19. Regarding the reliance of the Learned A.R. of the assessee on various judicial pronouncements in support of this contention that as per the principle of consistency, no contrary view should be taken in the present year, we would like to observe that this contention is perfectly all right if it is shown that two views are possible and one possible view was taken in earlier year but now the second possible view is being thrust upon. In our considered opinion, that is not permissible as per these judgments but if it is found that the view taken in earlier year is not a possible view then it cannot be said that in the name of consistency, the mistake should be 9

allowed to be perpetuated. In our considered opinion, when the assessee is following percentage completion method of accounting, centage should be considered as income in respect of WIP also and since this is not shown to have been done by the assessee and therefore, it cannot be said that it is a possible view and hence, even if in earlier year, there was a mistake, such mistake cannot be allowed to be perpetuated on the basis of consistency. Hence, these judgments are also not rendering any help to the assessee in the present case. It was one more contention raised that there is opening WIP also and therefore, entire amount of WIP cannot be considered for accounting for centage in the present year. In this regard, we would like to observe that unless it is established by the assessee that closing WIP includes opening WIP also, no exclusion can be made of opening WIP from closing WIP because there is completion of work also in the present year and if opening WIP has been completed in the present year and income is accounted for on such completion of project and closing WIP is for the present year only then no such exclusion of opening WIP from closing WIP is called for. In the absence of any such details having been provided by the assessee to establish that some portion of closing WIP is including opening WIP also, the assessee cannot get any benefit on this account also. Hence, on this issue, we do not find any reason to interfere in the order of CIT(A) in the light of above discussion. This ground of the assessee is rejected.

20. Ground No. 4 is as under:

"4. Because the learned 1st appellate authority ought to have directed the Assessing Officer to allow full claim of credit of TDS of Rs.547,37,968/- in respect of which the details where applicable were filed in the return of income or actual original certificates were filed where such certificates were received after filing of the return."

10 21. This ground was not pressed by Learned A.R. of the assessee and hence, this ground is rejected as not pressed.

22. Ground No. 5 is as under:

"5. Because no interest u/ss. 234A, 234B and 234C of the Income Tax Act, 1961 was liable to be charged."

23. It was agreed by both the sides that this issue is consequential and hence, no adjudication is called for. Accordingly, this ground is also rejected.

24. In the result, the appeal of the assessee stands partly allowed.

(Order was pronounced in the open court on the date mentioned on the caption page)

Sd/. Sd/.

(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member

Dated:16/01/2015 *C.L.Singh

Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar