M/s Kerala State Electronics Development Corporation Ltd, Trivandrum v. ITO, Trivandrum

ITA 515/COCH/2010 | 2007-2008
Pronouncement Date: 25-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 51521914 RSA 2010
Assessee PAN AAJFA1875G
Bench Cochin
Appeal Number ITA 515/COCH/2010
Duration Of Justice 1 year(s) 2 month(s) 11 day(s)
Appellant M/s Kerala State Electronics Development Corporation Ltd, Trivandrum
Respondent ITO, Trivandrum
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 25-11-2011
Date Of Final Hearing 22-09-2011
Next Hearing Date 22-09-2011
Assessment Year 2007-2008
Appeal Filed On 13-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NOS.515 & 516/COCH/2008 ASST. YEARS:1999-2000 & 2000-01 M/S. A.K.BUILDERS BY-PASS ROAD VADAKARA. PA NO.AAJFA 1875G VS. THE INCOME - TAX OFFICER WARD-2(2) CALICUT. (APPELLANT) ( RESPONDENT ) APPELLANT BY SHRI S. NARAYANAN RESPONDENT BY MS. VIJAYAPRABHA JR.DR O R D E R PER N.VIJAYAKUMARAN J.M: THESE TWO APPEALS ARE BY THE ASSESSEE VIZ. M/S. A.K.BUILDERS BYE PASS ROAD VADAKARA. THEY RELAT E TO THE ASSESSMENT YEARS 1999-2000 AND 2000-01. BOTH THE A PPEALS ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. CIT(APPEALS) DATED 14-01-2008. 2. ORIGINALLY THESE APPEALS WERE DISMISSED FOR WAN T OF PROSECUTION BY THE TRIBUNAL VIDE ITS ORDER DATED 05 -12-2008. HOWEVER THE ASSESSEE MOVED A MISCELLANEOUS PETITIO N STATING THE REASONS AS TO WHY IT COULD NOT REPRESEN T BEFORE THE TRIBUNAL AND THE TRIBUNAL ACCEPTED THE MISCELLA NEOUS ITA NOS.515 & 516 /COCH/2008 2 PETITION AND RE-CALLED ITS ORDER DATED 05-12-2008 T HROUGH ITS ORDER DATED 28-08-2009 IN M.P.NO.40/COCH/2009. 3. THE FIRST COMMON ISSUE IS IN RESPECT OF THE STA TUS OF THE ASSESSEE I.E. TREATING THE ASSESSEE AS AOP. ACCORDING TO THE LD. COUNSEL THE REJECTION OF THE STATUS FI RM BY THE LD. CIT(APPEALS) IS WRONG. WE HAVE HEARD THE LD . COUNSEL FOR THE ASSESSEE WITH RELEVANCE TO THE FACTS AND CIRCUMSTANCES OF BOTH THE APPEALS BEFORE US. TH E FACTS BEING THE SAME WE HAVE TAKEN THE APPEAL FOR THE ASSESSMENT YEAR 1999-2000 FOR THE PURPOSE OF DISCUS SION. 4. THE ASSESSEE WAS ENGAGED IN THE CONTRACT WORKS O F VARIOUS BUILDINGS. THE NET LOSS WAS DECLARED IN T HE RETURN. ACCORDING TO THE ASSESSING OFFICER ASSESSEE HAS NO T FILED A VALID RETURN WITHIN THE TIME ALLOWED U/S.139 OF THE ACT. HOWEVER THE RETURN OF INCOME FILED BY THE ASSESSEE ON 29- 03-2001 AS A PROVISIONAL RETURN WAS TREATED INVAL ID AS IT DID NOT CONTAIN THE STATEMENT SHOWING THE BASIS OF COMPUTATION OF INCOME REQUIRED IN NO ACCOUNT CASES AND THE ASSESSEE DID NOT CURE THE DEFECT POINTED OUT BY THE ASSESSING OFFICER VIDE HIS LETTER/S.139(9) DATED 13 -2-2002. ASSESSEE FILED ANOTHER RETURN OF INCOME ON 19-7-200 1 ITA NOS.515 & 516 /COCH/2008 3 TERMING IT AS A REVISED RETURN. THIS WAS ALSO TREA TED AS INVALID RETURN BY THE ASSESSING OFFICER FOR THE RE ASON THAT IT WAS FILED BEYOND THE TIME ALLOWED U/S.139(4) AND AL SO THAT NO REVISED RETURN COULD BE FILED WHEN THERE IS NO V ALID ORIGINAL RETURN FILED WITHIN THE TIME ALLOWED U/S.1 39(1) OF THE ACT. THEREFORE THE ASSESSING OFFICER VIDE HI S LETTER DATED 11-10-2004 INFORMED THE ASSESSEE THAT THE STA TUS OF THE FIRM CLAIMED BY IT COULD NOT BE ALLOWED IN VIEW OF THE PROVISIONS OF SECTION 184(5) OF THE I.T.ACT. IN R EPLY THE ASSESSEE CONTENDED THAT IT DID FILE THE RETURN OF I NCOME PROVISIONALLY FOR THE YEAR UNDER APPEAL FOR THE REA SON THAT IT HAD TO GET DETAILS FROM VARIOUS DEPARTMENTS FOR COM PLETED AUDITING U/S.44AB. THEREFORE IT WAS STATED THAT THE PROVISIONS OF SECTION 184(5) SHOULD NOT BE APPLIED SINCE THE ASSESSMENT IS BEING COMPLETED ON THE BASIS OF RETUR N OF INCOME FILED IN RESPONSE TO A NOTICE U/S.148. AFT ER CONSIDERING THE ARGUMENTS THE LD. ASSESSING OFFICE R WAS OF THE VIEW THAT THE DECISION OF THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF MUBARAK TRADING CO. VS. CIT 222 CTR 194 (KER.) IS DIRECTLY ON THE ISSUE. THEREFORE THE ASSESSING OFFICER ADOPTED THE STATUS OF THE ASSESSE E COMPANY AS AOP BY REJECTING THE CLAIM OF THE ASSESS EE. THE LD. FIRST APPELLATE AUTHORITY UPHELD THE VIEW O F THE ITA NOS.515 & 516 /COCH/2008 4 ASSESSING OFFICER. HENCE THE ASSESSEE IS IN SECO ND APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PRECEDE NCE RELIED UPON. WE AGREE WITH THE VIEW OF THE INCOME-TAX AU THORITIES THAT THE DECISION RENDERED BY THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF MUBARAK TRADING CO. VS. CIT 222 CTR 194 (KER.) IS DIRECTLY ON THE ISSUE AND THEREFORE WE SEE NO REASON TO INTERFERE WITH THEIR FINDINGS. A CCORDINGLY THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 6. THE SECOND GROUND RELATES TO THE ISSUE OF METHOD OF ACCOUNTING. THE ARGUMENT OF THE LD. COUNSEL FOR T HE ASSESSEE IS THAT THE LD. CIT(APPEALS) IS WRONG IN A FFIRMING THE ORDER OF THE ASSESSING OFFICER REJECTING THE ME THOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. 7. WE HAVE HEARD BOTH SIDES. THE ASSESSING OFFICE R FOUND THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE DOES NOT REVEAL THE CORRECT INCOME DERIVED BY IT DURING THE RELEVANT PREVIOUS YEAR AND ASSESSEE WAS INFORMED THROUGH LETTER DATED 11-10-2004 THAT BY THE METHOD OF ITA NOS.515 & 516 /COCH/2008 5 ACCOUNTING FOLLOWED BY IT ONLY A APPORTION OF THE PROFIT EARNED DURING THE RELEVANT PREVIOUS YEAR IS OFFERED FOR TAXATION AND THE BALANCE IS DIRECTLY TRANSFERRED TO THE RESERVE ACCOUNT IN THE BALANCE-SHEET. SO BY THIS ME THOD OF ACCOUNTING A PORTION OF THE INCOME EARNED ISS POSTP ONED OR DEFERRED TO A FUTURE YEAR AND THEREFORE IT WAS PRO POSED TO REJECT THE BOOK RESULT AND TO ESTIMATE THE INCOME F ROM BUSINESS BY INVOKING THE PROVISIONS OF SECTION 145 AT 10% OF THE TOTAL CONTRACT RECEIPTS AS REDUCED BY THE COST OF MATERIALS. HOWEVER THE CONTENTION OF THE ASSESSE E THROUGHOUT THE PROCEEDINGS WAS THAT THE EARLIER ASS ESSMENT FOR THE ASSESSMENT YEAR 1997-98 WAS DONE UNDER SCRU TINY AND THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESS EE WAS ACCEPTED. THEREFORE CONSISTENTLY IT HAS TO BE FO LLOWED. THE ASSESSING OFFICER REJECTED THE CONTENTION OF TH E ASSESSEE. THE LD. CIT(APPEALS) AGREED WITH THE VIE W OF THE ASSESSING OFFICER. 8. BEFORE US THE LD. D.R. WOULD SUBMIT THAT THE MET HOD OF ACCOUNTING IS NOT IN ACCORDANCE WITH LAW AND ACCOUN TING ARE IRRATICAL. THE ASSESSEE IS NEITHER HAVING THE PER CENTAGE COMPLETION METHOD NOR PROJECT COMPLETION METHOD. THE ASSESSEE HAS TO STRICTLY FOLLOW THE PERCENTAGE COMP LETION ITA NOS.515 & 516 /COCH/2008 6 METHOD. UNDER THE ABOVE CIRCUMSTANCES THE ASSESS ING OFFICER IS JUSTIFIED IN ESTIMATING THE SAME AT 10% AS REDUCED BY THE COST OF MATERIALS. 9. IN REPLY THE LD. COUNSEL RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. REALEST BUILDERS & SERVICES LTD. (2008) 307 ITR 202 (SC) AND URGED THAT THE INCOME-TAX AUTHORITIES WERE NOT JUSTIFIED TO DISTURB THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. 10. ON A CAREFUL CONSIDERATION OF THE RIVAL SUBMISS IONS WE ARE OF THE VIEW THAT THE POWER TO INVOKE SECTION 14 5 HAS BEEN AMPLY SPELL OUT IN THE ASSESSMENT ORDER. IT IS THE POWER OF THE ASSESSING OFFICER TO ARRIVE AT THE COR RECT TAXABLE INCOME. WHENEVER THE INCOME CANNOT BE DED UCED FROM THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSES SEE IT IS OPEN TO THE ASSESSING OFFICER TO REJECT THE BOOK RESULT AND PROCEED TO ESTIMATE THE INCOME FROM BUSINESS BY INV OKING THE PROVISIONS OF SECTION 145. THIS HAS BEEN RIGHTL Y EXERCISED AND DISCHARGED BY THE ASSESSING OFFICER A ND WE HAVE TO APPRECIATE. THE LD. CIT(APPEALS) HAS AFFI RMED THE SAME. THEREFORE WE SEE NO JUSTIFICATION TO INTERF ERE WITH ITA NOS.515 & 516 /COCH/2008 7 THE ORDER OF THE LD. CIT(APPEALS). ACCORDINGLY ON THIS ISSUE ALSO ASSESSEE FAILS. 11. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM DATED THE 27 TH JULY 2011. PM. COPY FORWARDED TO: 1. M/S. A.K.BUILDERS C/O.P.P.ABDULLAKUTTY MG. PAR TNER PVS APARTMENTS T1/D BLOCK GOVINDAPURAM P.O. CALICUT.16. 2. THE INCOME-TAX OFFICER WARD-2(2) CALICUT. 3. CIT(A)-I CALICUT. 4. CIT CALICUT. 5. D.R.