ACIT, Circle-5, Pune v. Shri T.J. Naik,, Pune

ITA 847/PUN/2013 | 2009-2010
Pronouncement Date: 24-04-2014 | Result: Dismissed

Appeal Details

RSA Number 84724514 RSA 2013
Assessee PAN ABMPN1377L
Bench Pune
Appeal Number ITA 847/PUN/2013
Duration Of Justice 1 year(s) 11 day(s)
Appellant ACIT, Circle-5, Pune
Respondent Shri T.J. Naik,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 24-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 24-04-2014
Assessment Year 2009-2010
Appeal Filed On 12-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER. ITA.NO.847/PN/2013 (ASSESSMENT YEAR 2009-10) ACIT CIRCLE-5 PUNE .. APPELLANT VS. SHRI T.J. NAIK PROPRIETOR OF T.J. NAIK & COMPANY NEAR FOREST COLONY SHALIMAR CHOWK DAUND PUNE 413 801 .. RESPONDENT PAN NO.ABMPN1377L ASSESSEE BY : SHRI SATHEESH MANMOHAN REVENUE BY : MRS. M.S. VERMA DATE OF HEARING : 16-04-2014 DATE OF PRONOUNCEMENT : 24-04-2014 ORDER PER R.K. PANDA AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 17-12-2012 OF THE CIT(A)-III PUNE RELATING TO ASSE SSMENT YEAR 2009-10. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF EXCAVATION EARTH MOVING ETC. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE FILED ITS RETURN OF INCOME ON 29-09-20 09 DECLARING TOTAL INCOME OF RS.1 93 89 007/-. DURING THE COURSE OF ASSESSME NT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS BE EN FOLLOWING CASH SYSTEM OF ACCOUNTING IN RESPECT OF ITS BUSINESS OF CIVIL A ND EARTH MOVING CONTRACT FOR VARIOUS COMPANIES AND OTHER CONCERNS. A SURVEY U/S.133A OF THE I.T. ACT WAS CARRIED OUT IN THE CASE OF THE ASSESSEE ON 28-0 1-2003 DURING WHICH IT WAS FOUND THAT THE ASSESSEE WAS FOLLOWING THE CASH SYSTEM OF ACCOUNTING WITHOUT SHOWING ANY WORK IN PROGRESS WHEREBY THOUG H ALL EXPENSES WERE 2 BEING CLAIMED CORRESPONDING INCOME WAS NOT BEING S HOWN. THE ASSESSEE IS REPORTED TO HAVE AGREED IN THE STATEMENT RECORDED D URING THE SURVEY OPERATION THAT HE WOULD BE SWITCHING OVER TO THE ME RCANTILE SYSTEM OF ACCOUNTING TO HAVE A FAIR PICTURE OF HIS BUSINESS A FFAIRS AND ALSO UNDERTAKEN TO DECLARE ADDITIONAL PROFITS WORKED OUT AS A RESUL T OF SUCH CHANGE OF METHOD OF ACCOUNTING. HOWEVER THE ASSESSEE WAS FOUND TO HAVE BACKTRACKED FROM THE SAID UNDERTAKING AND CONTINUED TO FOLLOW THE CA SH SYSTEM OF ACCOUNTING AGAIN FOR THE SUBSEQUENT YEARS INCLUDING THE ASSESS MENT UNDER CONSIDERATION WITHOUT ACCOUNTING FOR THE WIP. 3. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPL AIN AS TO WHY THE EFFECT OF OPENING AND CLOSING WIP SHOULD NOT BE GIV EN IN HIS CASE TO HAVE A FAIR PICTURE OF THE PROFIT POSITION. HOWEVER THE MOVE WAS STRONGLY OPPOSED BY THE ASSESSEE BY REITERATING THAT THE ASSESSEE HA S BEEN CONSISTENTLY FOLLOWING THE CASH SYSTEM OF ACCOUNTING AND BEING A SERVICE PROVIDER THE ASSESSEE DID NOT HAVE EITHER OPENING OR CLOSING STO CKS. HOWEVER THE AO WAS NOT SATISFIED WITH THIS EXPLANATION. ACCORDING TO HIM EVEN THOUGH THE PRINCIPLE OF 'MATCHING INCOME HAS A LIMITED ROLE TO PLAY IN THE CASH SYSTEM OF ACCOUNTING THE WIP ACQUIRED OUT OF THE EXPENSES CLAIMED BY THE ASSESSEE OUGHT TO HAVE FORMED PART OF THE PROFIT & LOSS ACCO UNT AND THEREFORE ADJUSTMENT IN P & L ACCOUNT ON ACCOUNT OF WIP NEEDE D TO BE MADE. FOR THIS PROPOSITION THE AO RELIED ON THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. (188 ITR 44) WHEREIN THE APEX COURT OPINED THAT WHERE THE ACCOUNTING SYSTEM FOLLO WED BY THE ASSESSEE DOES NOT GIVE THE CORRECT PICTURE OF PROFITS THE A SSESSING OFFICER CAN REJECT THE ACCOUNTING SYSTEM AND DETERMINE THE CORRECT TAX ABLE INCOME. THE ASSESSING OFFICER WAS OF THE FIRM OPINION THAT GIVE N THE FACT OF RISING 3 TURNOVER AND THE CONSEQUENT RISING RECEIVABLES AND MOST OF THE EXPENSES HAVING BEEN CLAIMED THE P & L A/C THE CORRESPONDI NG RECEIVABLES / WIP SHOULD BE INCLUDED IN THE PROFIT ELEMENT ELSE IT WO ULD GIVE A DISTORTED PICTURE OF PROFITS. 4. THE CONTENTION OF THE ASSESSEE THAT THE ISSUE HA S BEEN FAVOURABLY DECIDED BY THE CIT (APPEALS) AND ALSO UPHELD BY THE ITAT DID NOT HAVE MUCH EFFECT ON THE ASSESSING OFFICER ON THE GROUND THAT THE DECISION OF THE ITAT IS BEING CHALLENGED BEFORE THE HIGH COURT. ACC ORDINGLY THE CASH SYSTEM OF ACCOUNTING BEING FOLLOWED BY THE ASSESSEE WAS HELD TO BE UNACCEPTABLE BY THE ASSESSING OFFICER WHO PROCEEDED TO RE-WORKOUT THE PROFIT BY INCLUDING THE IMPACT OF WIP. THE METHOD D EPLOYED BY THE ASSESSING OFFICER TO ARRIVE AT THE CORRESPONDING WI P WAS TO FIRST WORK OUT THE OPENING AND CLOSING RECEIVABLES ON THE BASIS OF THE TDS CERTIFICATES ATTACHED ALONG WITH THE RETURNS FOR A.Y. 2008-09 & 2009-10 I.E. PRECEDING YEAR AND THE ASSESSMENT YEAR UNDER CONSIDERATION AN D THEN REDUCING THE GROSS PROFITS OF THE RESPECTIVE YEARS FROM THE TDS RECEIVABLE FOR THE SAID YEARS TO ARRIVE AT THE WIP AS UNDER: OPENING RECEIVABLE AS ON 01/04/2008 (ON THE BASIS OF TDS CERTIFICATES) : RS.3 23 47 76 1/- LESS: GROSS PROFIT (@ 39.89%) : RS.1 29 03 612/- OPENING WIP AS ON 01/04/2008 : RS.1 94 44 149/- RECEIVABLES AS ON 31/03/2009 : RS.4 89 98 773/- (BASED ON TDS CERTIFICATES RECONCILIATION) LESS: GROSS PROFIT ON ABOVE @ 38.55%) : RS.1 88 89 027/- CLOSING WIP AS ON 31/03/2009 : RS.3 01 09 746/- 5. HAVING WORKED OUT THE OPENING AND CLOSING WIPS F OR THE YEAR UNDER CONSIDERATION THE ASSESSING OFFICER ADDED THE DIFF ERENTIAL AMOUNT BETWEEN 4 THE OPENING AND CLOSING WIPS AMOUNTING TO RS.1 06 6 5 597/- I.E. (RS.3 01 09 746 -1 94 44 149) TO THE PROFIT DISCLOS ED BY THE ASSESSEE HOLDING THE SAME TO BE THE CORRESPONDING WIP FOR TH E YEAR UNDER CONSIDERATION 6. IN APPEAL THE LD.CIT(A) FOLLOWING THE DECISION O F HIS PREDECESSOR FOR A.Y. 2003-04 WHICH HAS BEEN FOLLOWED IN A.YRS. 2006 -07 2007-08 AND 2008-09 DELETED THE ADDITION MADE BY THE AO. WHILE DOING SO HE FURTHER OBSERVED THAT THE VIEW TAKEN BY THE CIT(A) ON THIS ISSUE HAS BEEN UPHELD BY THE TRIBUNAL IN ASSESSEES OWN CASE WHILE DECIDING THE APPEALS FILED BY THE DEPARTMENT AGAINST THE ORDERS OF THE CIT(A). THERE FORE FOLLOWING THE VIEW TAKEN BY HIS PREDECESSORS IN ASSESSEES OWN CASE FO R THE PRECEDING ASSESSMENT YEARS WHICH HAS BEEN UPHELD BY THE TRIBU NAL THE CIT(A) HELD THAT THE ADDITION MADE BY THE ASSESSING OFFICER AMO UNTING TO RS.1 06 05 597/- IS NOT SUSTAINABLE. HE ACCORDINGL Y DELETED THE SAME. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELETING ADDITION OF RS. 1 06 65 597/- ON ACCOUNT OF CLOSING WORK IN PR OGRESS IGNORING THE FACT THAT THE ASSESSING OFFICER WAS NOT SATISFIED ABOUT THE COR RECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE WITHOUT TAKIN G INTO CONSIDERATION THE VALUE OF CLOSING WORK IN PROGRESS. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN IGNORING THE FACT THAT THE VALUE OF WORK IN PROGRESS WAS DETERMINED BY THE ASSESSEE HIMSELF AND WAS DULY AUTHENTICATED BY THE CA ON THE BASIS OF H IS BOOKS OF ACCOUNT AND DOCUMENTS WHILE COMPUTING THE TOTAL INCOME. 4. FOR THESE AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF THE HEARING THE ORDER OF THE COMMISSIONER OF INCOME -TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IDEN TICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YR S. 2000-01 TO 2004-05. WE FIND THE TRIBUNAL VIDE ITA NOS. 1697/PN/2005 28 0/PN/2007 278/PN/2007 279/PN/2007 AND 1160/PN/2007 ORDER DAT ED 31-05-2011 FOR A.YRS. 2000-01 TO 2004-05 RESPECTIVELY HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DISMISSED THE APPEAL FILED BY THE REVENUE BY OBSERVING AS UNDER : 9. AFTER CONSIDERING THE ORDERS OF THE AUTHORITIES BE LOW AS WELL AS RIVAL SUBMISSIONS THE MOOT QUESTION WHICH ARISES IS AS TO WHETHE R THE REVENUES APPROACH OF TREATING RECEIVABLES AS WIP AND TAXING TH E DIFFERENCE BETWEEN CLOSING BALANCE AND OPENING BALANCE OF RECEIVABLES IS IN ORDER HAVING REGARD TO THE FACT THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS CASH BASIS. IN OUR CONSIDERED OPINION THE COMMISSIONER OF I NCOME-TAX (APPEALS) MADE NO MISTAKE IN HOLDING THAT SUCH AN ADDITION IS NO T TENABLE SINCE THE ASSESSEE WAS COMPUTING ITS INCOME IN ACCORDANCE WITH CASH SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY IT. IN THIS CONNECT ION REFERENCE MAY BE MADE TO THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF INCOME-TAX APPELLATE TRIBUNAL V JANANMANDAL LTD. 14 3 ITR 228 (ALL.) WHEREIN AN ADDITION ON ACCOUNT OF DIFFERENCE BETWEE N THE OUTSTANDING AT THE BEGINNING OF THE ASSESSMENT YEAR AND AT THE CLOSE OF TH E YEAR WAS MADE. THE SAID ADDITION WAS DELETED BY THE TRIBUNAL NOTICING TH AT THE ASSESSEE FOLLOWED THE CASH SYSTEM OF ACCOUNTING WHICH WAS AFFIRMED BY TH E HONBLE HIGH COURT BY NOTING THE FINDINGS OF THE TRIBUNAL THAT NO ITEMS OF BILLS RECEIVABLES OR SUNDRY DEBTORS WERE TO BE FOUND IN THE BALANCE SHEETS F ILED BY THE ASSESSEE ALONGWITH ITS RETURNS OF INCOME FOR VARIOUS ASSESSMENT YEA RS. NOTABLY THE ADDITION MADE BY THE REVENUE WAS FOUND UNTENABLE HAV ING REGARD TO THE CASH SYSTEM OF ACCOUNTING BEING FOLLOWED BY THE ASSESSEE T HEREIN IN ORDER TO COMPUTE THE INCOME. TO THE SIMILAR EFFECT ARE THE JU DGMENTS OF THE HONBLE SUPREME COURT IN THE CASES OF CIT V A KRISHNASWAMI MUDA LIAR & ORS 53 ITR 122 (SC) MORVI INDUSTRIES LTD V CIT (CEN.) CALCUTTA 82 ITR 835 (SC) AND CIT V BARJATYA FAMILY CHARITABLE TRUST 163 ITR 269 (RAJ. ) AND 137 CTR 133 (RAJ). MOREOVER WE ALSO FIND THAT THE ASSESSMENTS FOR ASSESSMENT YE ARS 1997-98 AND 1998-99 HAVE BEEN COMPLETED AFTER SCRUTINY WHER EIN THE QUESTION OF ACCOUNTING OF WIP WAS NOT RAISED AT ALL. THUS IN PRI NCIPLE WE FIND NO ERROR IN THE APPROACH OF THE COMMISSIONER OF INCOME-TAX (AP PEALS) IN DELETING THE IMPUGNED ADDITION. 10. IN SO FAR AS THE ASSESSMENT YEAR 2003-04 IS CONCERNED THERE WAS A SURVEY ACTION IN THE COURSE OF WHICH THE ASSESSEE AGREED TO OFFER INCOME ON ACCOUNT OF WIP FOR ASSESSMENT YEAR 2003-04. IN THIS CON NECTION ASSESSEE CLAIMS THAT IT HAD ALSO OFFERED AN AMOUNT OF RS 80 LAK HS ON THIS ACCOUNT IN THE RETURN OF INCOME FILED. THE FACTUAL ASPECTS OF THE STA TEMENT MADE BY THE ASSESSEE DURING SURVEY AND THE RETURN OF INCOME FILED TH EREOF AND THE ASSESSMENT FINALIZED BY THE ASSESSING OFFICER FOR ASSESSMENT YE AR 2003-04 WOULD BE DISCUSSED SEPARATELY IN THE SUBSEQUENT PARAGRAPH S. 6 11. IN THE ASSESSMENT YEAR 2003-04 THE LEARNED DEPARTM ENTAL REPRESENTATIVE HAS RAISED AN ADDITIONAL GROUND OF APPE AL WHICH WAS HITHERTO NOT RAISED IN THE MEMO OF APPEAL. BY WAY OF ADDITIONAL GROUND IT IS CHALLENGED THAT THE COMMISSIONER OF INCOME-TAX (APPEA LS) ERRED IN TREATING THE REVISED RETURN FILED BY THE ASSESSEE AS A VALID RETUR N UNDER SECTION 139(5) OF THE ACT. THE CONTENTION RAISED IS THAT THE COMMISSI ONER OF INCOME-TAX (APPEALS) HAS CONSIDERED THE RETURN AS VALID MERELY BEC AUSE THE SAME WAS FILED WITHIN THE PERIOD PRESCRIBED UNDER SECTION 139( 1) OF THE ACT WHEREAS AS PER THE SAID SECTION A RETURN CAN BE REVISED ONLY O N DISCOVERY OF AN OMISSION OR A WRONG STATEMENT IN THE RETURN ORIGINALLY FILED. IT IS CONTENDED THAT IN THE INSTANT CASE THERE IS NO OMISSION OR WRONG ST ATEMENT MADE BY THE ASSESSEE IN THE ORIGINAL RETURN. THE LD DEPARTMENTAL RE PRESENTATIVE ALSO RELIED UPON THE JUDGMENT OF THE HONBLE GAUHATI HIG H COURT IN THE CASE OF SUNANDA RAM DEKA V CIT 210 ITR 988 TO CONTEND THA T ONLY A BONA FIDE MISTAKE OR OMISSION IS CONTEMPLATED AS A REQUIREMENT FO R REVISING A RETURN UNDER SECTION 139(5) OF THE ACT. IT HAS ALSO BEEN CONT ENDED THAT SECTION 139(5) OF THE ACT DOES NOT CONTEMPLATE A REVISION OF RETURN MEANT TO REWORK THE INCOME ON THE BASIS OF A DIFFERENT METHOD OF ACCO UNTING. IN THIS CONNECTION RELIANCE WAS PLACED ON THE JUDGMENT OF T HE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF DEEPNARAYAN NAGU & CO V. CIT 157 ITR 37 (MP). 12. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE R ESPONDENT-ASSESSEE HAS NOT OBJECTED TO THE ACTION OF THE REVENUE IN RAI SING THE SAID ADDITIONAL GROUND OF APPEAL. HOWEVER ON MERITS IT IS CONTENDED THAT THE REVISED RETURN FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 FULFI LLS THE PARAMETERS OF SECTION 139(5) OF THE ACT. IT HAS ALSO BEEN CONTEN DED THAT THE REVISED RETURN WAS FILED ON BONA FIDE CONSIDERATIONS AND THE ASSESSMENT FINALIZED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2001-02 ON 31 .3.2004 ITSELF PROVES THE BONA FIDES OF THE ASSESSEE FOR REVISING ITS RETU RN FOR THE ASSESSMENT YEAR 2003-04. IT HAS BEEN POINTED OUT THAT IN THE ASSESSMENT MADE FOR ASSESSMENT YEAR 2001-02 ON 31.3.2004 THE ADDIT ION WAS MADE ON ACCOUNT OF WORK-IN-PROGRESS AND THIS CLEARLY SHOWED THA T ASSESSEE WAS ENTITLED TO A SUITABLE CREDIT AS AN OPENING BALANCE I N THE SUBSEQUENT ASSESSMENT YEARS AND THEREFORE THE RETURN FOR THE ASSESSME NT YEAR 2003-04 FILED ORIGINALLY WITHOUT INCORPORATING SUCH CREDIT I N THE OPENING BALANCE CONTAINED AN OMISSION OR MISTAKE WITHIN THE MEANING OF SECTION 139(5) OF THE ACT AND THEREFORE THE REVISED RETURN FILED ON 25.8.2004 FOR THE ASSESSMENT YEAR 2003-04 FULFILLS THE PARAMETERS OF SECTION 139(5) OF THE ACT. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY. SECTION 139(5) OF THE ACT PROVIDES THAT ANY PERSON HAVING FURNISHED A R ETURN UNDER SECTION 139(1) OR IN RESPONSE TO A NOTICE UNDER SECTION 142(1) DISCOVERS ANY OMISSION OR ANY WRONG STATEMENT THEREIN HE MAY FURNISH A REVISED RETURN AT ANY TIME BEFORE THE EXPIRY OF THE PERIOD PRESCRIBED THEREIN. IN THE PRESENT CASE THERE IS NO CONTROVERSY THAT THE REVISED RETURN F ILED BY THE ASSESSEE ON 25.8.2004 IS WITHIN THE PERIOD PRESCRIBED. HOWEVER T HE ONLY CONTROVERSY IS AS TO WHETHER THERE WAS ANY OMISSION OR A WRONG STATE MENT IN THE ORIGINAL RETURN SO AS TO ENTITLE THE ASSESSEE TO FILE A R EVISED RETURN IN TERMS OF SECTION 139(5) OF THE ACT. FROM THE PHRASEOLOGY OF SEC TION 139(5) IT IS CLEAR THAT FOR A RETURN TO BE VALID UNDER SECTION 139(5) O F THE ACT IT IS NECESSARY THAT OMISSION OR THE WRONG STATEMENT IN THE ORIGINAL R ETURN MUST BE DUE TO A BONA FIDE INADVERTENCE OR MISTAKE ON THE PART OF THE ASSESSEE AS OPINED BY THE HONBLE GAUHATI HIGH COURT IN THE CASE OF SUNAN DA RAM DEKA (SUPRA). 14. IN THIS CASE A SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CARRIED OUT ON 28.1.2003 WHEREIN AS PER THE ASSESSING OFFICER THERE WAS A DECLARATION OF RS 80 LAKHS AS UNACCOUNTED ADDITIONAL I NCOME FOR THE ASSESSMENT YEAR 2003-04 IN THE STATEMENT RECORDED UNDER SECTION 131 OF THE 7 ACT. THE ASSESSEE FILED A RETURN OF INCOME FOR THE ASSESSME NT YEAR 2003-04 ON 29.11.2003 DECLARING TOTAL INCOME OF RS 1 41 44 010/- INCLUSIVE OF RS 80 LAKHS DECLARED AS ADDITIONAL UNACCOUNTED INCOME ON A CCOUNT OF WIP. SUBSEQUENTLY THE RETURN WAS REVISED ON 31.3.2004 DECL ARING TOTAL INCOME OF RS 1 01 27 100/- WHICH WAS FURTHER REVISED ON 28.8.200 4 TO AN INCOME OF RS 64 44 010/-. AS PER THE ASSESSING OFFICER IN THE REVISED AND RE-REVISED RETURN THE ADDITIONAL UNACCOUNTED INCOME HAS BEEN W ITHDRAWN WITHOUT ASSIGNING ANY REASONS AND THEREFORE THE SAME WAS NOT AC CEPTED. THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSING OFFICER WAS INCORRECT I N OBSERVING THAT THERE WAS A DECLARATION OF RS 80 LAKHS AS UNACCOUNTED A DDITIONAL INCOME IN THE STATEMENT RECORDED UNDER SECTION 131 OF THE ACT A T THE TIME OF SURVEY. IT WAS POINTED OUT THAT SUBSEQUENT TO THE DATE OF SURVEY A LETTER WAS FILED ON 30.1.2003 CLARIFYING THAT THE ASSESSEE WOULD CONSULT HI S LAWYERS AND CHARTERED ACCOUNTANTS AND THEN ONLY WOULD TAKE A FIN AL DECISION ABOUT SHIFTING FROM CASH SYSTEM OF ACCOUNTING TO MERCANTILE SY STEM OF ACCOUNTING. IT WAS EXPLAINED THAT THE AMOUNT OF RS 80 LAKHS WAS OFF ERED FOR THE FIRST TIME IN THE RETURN OF INCOME FILED ON 29.11.2003 AS CLOSIN G WIP AS ON 31.3.2003 WHICH WAS WITHDRAWN BY FILING REVISED AS WELL AS RE-REV ISED RETURN AS THE DEPARTMENT HAD REOPENED THE ASSESSMENT OF THE ASSESSEE FOR THE EARLIER YEARS DESPITE THE FACT THAT IT WAS AGREED THAT UPON OF FERING RS 80 LAKHS AS WIP AS ON 31.3.2003 WITHOUT CLAIMING THE BENEFIT OF OPENING WIP AS ON 1.4.2002 ASSESSMENT OF THE EARLIER YEARS WOULD NOT BE R EOPENED. EVEN BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT AT THE TIME OF FILING OF THE REVISED RETURN THE ASSESSMENT OF EARLIER YEARS WA S MADE WHEREIN ADDITIONS WERE MADE ON ACCOUNT OF WIP AND THEREFORE UNDER THESE CIRCUMSTANCES FOR THE ASSESSMENT YEAR 2003-04 THE ASSESSEE W AS ENTITLED TO CREDIT FOR THE OPENING RECEIVABLES WHICH WERE ASSESSED I N THE PRECEDING YEAR. IT WAS ALSO EXPLAINED THAT ON SUCH ACTION OF THE REVEN UE FOR THE EARLIER ASSESSMENT YEARS THE RETURN OF INCOME ORIGINALLY FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 WAS RENDERED WRONG WITHIN THE MEANING OF SECTION 139(5) OF THE ACT. 15. IN ORDER TO APPRECIATE THE FACTUAL CONTOURS OF T HIS ASPECT WE MAY REFER TO THE FOLLOWING CONCLUSIONS OF THE COMMISSIONER OF IN COME-TAX (APPEALS) CONTAINED IN PARA 3.15 AND 3.16 WHICH READ AS UNDER: - 3.15 I HAVE GONE THROUGH THE FACTS OF THE CASE FRO M THE ASSESSMENT ORDER WRITTEN SUBMISSIONS OF THE APPELLANT THE STATEMENT OF SHRI TUKARAM J. NAIK THE APPELLANT RECORDED U/S 131 OF THE INCOME TAX ACT 1 961 AT THE TIME OF SURVEY AS ALSO THE REMAND REPORT OF THE AO. IT IS SEEN THA T THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS 1 41 44 010/- WAS FILE D ON 29.11.2003 WHICH WAS REQUIRED TO BE FILED ON 31.10.2003 OF THE RELEVANT ASSESSMENT YEAR. WHEN POINTED OUT IT WAS STATED THAT VIDE F. NO. 220/3/2 003 ITA-II DATED 16.10.2003 REPORTED AT 264 ITR (ST) 10 THE CBDT HAD EXTENDED THE DATE FOR FILING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 FO R ONE MONTH AND THEREFORE ORIGINAL RETURN OF INCOME WAS FILED WITHIN TIME AND THUS THE APPELLANT WAS IN HIS RIGHTS TO REVISE OR RE-REVISE THE RETURN WITHIN ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR I.E. TILL 31.3.2005. IT I S UNDISPUTED THAT THE REVISED AND RE-REVISED RETURNS WERE FILED ON 31.3.2004 AND 28.9 .2004 RESPECTIVELY. THE AO HAS HARPED UPON THE FACT THAT NO REASONS WHATSOEVE R HAVE BEEN GIVEN WHILE FILING THE REVISED OR RE-REVISED RETURNS AND THAT I N THE STATEMENT RECORDED U/S 131 IN RESPONSE TO QUESTION NOS 20 TO 23 THE APPE LLANT HAD DECLARED ADDITIONAL UNACCOUNTED INCOME OF RS 80 LACS ON ACCOUNT OF WIP. THIS STATEMENT OF THE AO DOES NOT APPEAR TO BE CORRECT IN SO FAR AS THE AO H AS HERSELF REPRODUCED THE QUESTION NOS 20 TO 23 AND 27 AND ANSWERS OF THE APP ELLANT THERETO ON PAGE 6 OF THE ASSESSMENT ORDER WHEREIN THERE IS NO MENTION O F DECLARATION OF THE AMOUNT OF RS 80 LACS BY THE APPELLANT AT THE TIME OF SURVE Y. THERE IS NO DECLARATION OF THE AMOUNT OF RS 80 LACS IN RESPONSE TO THE QUESTIO N NO 21 ALSO WHICH PERTAINS 8 TO THE RETURNS FILED FOR THE EARLIER ASSESSMENT YEA RS 2001-02 2001-02 & 2002- 03 WHEREIN THE CONTRACT RECEIPTS WERE NOT TALLYING WITH THE TDS CERTIFICATES PLACED ON RECORD. IT IS SEEN THAT THE AMOUNT OF RS 80 LACS HAD NEVER BEEN DECLARED BY THE APPELLANT DURING THE COURSE OF SURV EY BUT WAS INCLUDED IN THE ORIGINAL RETURN OF INCOME FILED ON 29.11.2003 FOR T HE ASSESSMENT YEAR UNDER APPEAL FOR THE WORKING OF WIP AS EXTRACTED VIDE PAR A 3.3 ABOVE. THE APPELLANT HAD ALSO WRITTEN A LETTER TO THE AO THAT CASH SYSTE M OF ACCOUNTING WAS THE CORRECT METHOD OF ACCOUNTING BEING FOLLOWED BUT HE WILL CHANGE THE METHOD OF ACCOUNTING TO MERCANTILE SYSTEM AFTER CONSULTATION WITH HIS ADVOCATE. THE APPELLANT HAS GIVEN REASONS AS TO WHY HE REVISED AN D RE-REVISED THE RETURN. IT WAS STATED TO BE ON ACCOUNT OF ORAL DISCUSSION/AGRE EMENT MADE WITH THE THEN CIT & ADDL. CIT THAT THE METHOD OF ACCOUNTING WOUL D BE CHANGED FROM CASH SYSTEM TO MERCANTILE SYSTEM AND ADDITIONAL AMOUNT O F RS 80 LACS WOULD BE DECLARED IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 WITHOUT CLAIMING CREDIT FOR ANY OPENING WIP. HOWEVER IT WA S IN SCRUTINY AND THE AO COMPUTED THE OPENING AND CLOSING WIPS AND WAS IN TH E PROCESS OF MAKING ADDITIONS OF THE DIFFERENCE AND THE CASES FOR THE A SSESSMENT YEARS 2000-01 AND 2001-02 WERE BEING REOPENED BY ISSUANCE OF NOTICE U /S 148 THE APPELLANT FOUND HIMSELF UNDULY HARASSED AND HE WAS UNDER NO O BLIGATION TO STICK TO THE AGREEMENT AND DECLARE THE CLOSING WIP AS ON 31.3.2 003 AND INCREASE THE INCOME BY RS 80 LACS THE APPELLANT REVISED AND RE- REVISED THE RETURN WHICH AS ALREADY STATED ABOVE WERE FILED WITHIN TIME ALLOWE D UNDER SECTION 139(5) OF THE ACT. NO DISCRIMINATING DOCUMENTS HAD BEEN FOUND FROM APPELLANT. NO SELF INCRIMINATING DECLARATION WAS MADE DURING SURVEY. A RETURN WAS FILE DECLARING AN AMOUNT OF RS 80 LACS WHICH WAS REVISED AND RE-RE VISED WITHIN TIME ON RETRACTION OF AGREEMENT BY THE DEPARTMENT. IT IS TR ITE LAW THAT ONCE A VALID REVISED RETURN IS FILED U/S 139(5) OF THE ACT IT O BLITERATES THE ORIGINAL RETURN AND THE REVISED RETURN IS THE ONLY RETURN WHICH COU LD BE CONSIDERED. REFERENCE IN THIS CONNECTION IS MADE TO THE FOLLOWING DECISIO NS:- (I) SHRI VALLABH GLASS WORKS LTD V ITO 212 ITR 433 (GUJ .) (II) DHAMPUR SUGAR MILLS LTD. V CIT 90 ITR 236 (ALL) (III) BECO ENGG. CO. LTD. V CIT 148 ITR 478 (P&H) (IV) CIT V MANGALORE CHEMICALS & FERTILIZERS LTD. 191 IT R 156 (KAR.) (V) CHIEF CIT V MACHINE TOOL CORPN. OF INDIA LTD 201 IT R 101 (KAR.) 3.16 FURTHER IT IS NOTICED THAT THE APPELLANT WAS UNDISPUTEDLY FOLLOWING CASH SYSTEM OF ACCOUNTING FOR THE EARLIER YEARS SINCE 19 91 AND IT WAS ONLY DURING THE COURSE OF SURVEY THAT HE HAD AGREED TO SHIFT THE SY STEM OF ACCOUNTING TO MERCANTILE. ON THE VERY NEXT DAY HE HAD FILED A LET TER RETRACTING THE STATEMENT OF SHIFTING THE CASH SYSTEM OF ACCOUNTING TO MERCAN TILE SYSTEM OF ACCOUNTING STATING THAT HE WOULD HAVE TO CONSULT HIS COUNSELS. THE INCLUSION OF RS 80 LACS IN THE RETURN OF INCOME ON THE BASIS OF SHOWING WIP AS ON 31.3.2003 WITHOUT CLAIMING OPENING WIP DOES NOT IPSO FACTO SHOW THAT THE APPELLANT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. IT IS SE EN THAT THE TAX AUDITORS HAD MERELY STATED THE FACTS AS PER CLAUSES 11(A) & 11(C ) OF THE AUDIT REPORT WHICH WAS PRODUCED DURING THE COURSE OF APPELLATE PROCEED INGS. THE METHOD OF ACCOUNTING EMPLOYED IN THE PREVIOUS YEAR WAS STATED TO BE CASH SYSTEM WHILE AGAINST THE COLUMN WHETHER THERE WAS ANY CHANGE IN THE METHOD OF ACCOUNTING EMPLOYED AS COMPARED TO THE METHOD EMPLOYED IN THE IMMEDIATELY PRECEDING PREVIOUS YEAR IT WAS STATED THAT THERE WAS NO SU CH CHANGE. IT WAS CLARIFIED THAT THE APPELLANT HAD SHOWN THE VALUE OF WIP AT TH E END OF THE ACCOUNTING PERIOD FOR THE FIRST TIME WHILE CALCULATING THE TAXA BLE INCOME. THE METHOD OF VALUATION OF CLOSING STOCK EMPLOYED IN THE PREVIOUS YEAR WAS STATED TO BE THE VALUE OF THE WIP TAKEN AT COST BUT IT WAS FURTHER R EITERATED THAT THE APPELLANT WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. IT IS SEEN THAT NOWHERE HAD THE AUDITORS GIVEN A CERTIFICATE THAT THE APPELLANT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AS CLAIMED BY THE AO. 9 16. IN VIEW OF THE AFORESAID DISCUSSION IT IS QUITE CLE AR THAT THE CIRCUMSTANCES PREVAILING WITH THE ASSESSEE TO REVISE AND R E-VISE ITS RETURNS OF INCOME ARE WELL-FOUNDED. IT IS QUITE CLEAR THAT ORIG INALLY THE INCOME OF RS 80 LAKHS WAS DECLARED IN THE COMPUTATION OF INCOME AS IS EVIDENT FROM A COPY PLACED AT PAGE 109 OF THE PAPER BOOK. IT IS ALSO CLE AR THAT THE INCOME FROM BUSINESS OTHER THAN RS 80 LAKHS ON ACCOUNT OF WIP HAS BE EN DECLARED AS PER REGULAR METHOD OF ACCOUNTING FOLLOWED I.E. CASH SYSTE M OF ACCOUNTING. NOTABLY ADDITIONAL INCOME OF RS 80 LAKHS HAS BEEN OFF ERED IN THE COMPUTATION OF INCOME AND HAS NOT AFFECTED THE REGUL AR ACCOUNTING SYSTEM FOLLOWED. THEREFORE THE PLEA OF THE LEARNED DEPART MENTAL REPRESENTATIVE THAT THE RETURN HAS BEEN REVISED TO CHANGE THE METHO D OF ACCOUNTING IN OUR VIEW IS UNTENABLE. FACTUALLY ADDITIONAL INCOME OF RS 80 LAKHS WHICH WAS HITHERTO DECLARED IN THE REVISED RETURN CANNOT BE SAI D TO BE A CHANGE MADE IN THE ACCOUNTING SYSTEM BECAUSE AT THE ORIGINAL STAGE TH ERE WAS NO ADJUSTMENT MADE IN THE BOOKS OF ACCOUNT WHICH CONTINUED TO BE M AINTAINED ON CASH BASS WHILE THE SAID AMOUNT WAS DECLARED AS ADDITIONAL INCOM E BY WAY OF COMPUTATION OF INCOME. UNDER THESE CIRCUMSTANCES THE RELIANCE PLACED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE JUDGM ENT OF THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF DEEPNARAYAN NAGU & CO (SUPRA) TO ARGUE THE UNTENABILITY OF THE REVISED RETURN IS MISPL ACED. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE AS PER THE HONB LE MADHYA PRADESH HIGH COURT A REVISED RETURN CANNOT BE FILED IN ORDE R TO ADJUST OR REVISE THE METHOD OF ACCOUNTING. ON ACTS IN THIS CASE WE DO NOT FIND THAT THA RETURN HAS BEEN REVISED TO EFFECTUATE ANY CHANGE IN THE METHOD OF ACCOUNTING. MOREOVER AS EXPLAINED BY THE LEARNED COUNSEL THE DE CLARATION OF RS 80 LAKHS ON ACCOUNT OF ONLY CLOSING WIP IN THE ASSESSMENT YEAR 20 03-04 IS UNDENIABLY INCONSISTENT WITH THE NORMS OF ACCOUNTING SINCE IT DOE S NOT TAKE INTO CONSIDERATION THE ADJUSTMENT IN THE OPENING WIP AND THEREFORE THIS ITSELF CONSTITUTES A WRONG WITHIN THE MEANING OF SECTION 13 9(5) OF THE ACT. APART THEREFROM THE CIRCUMSTANCES EXPLAINED BY THE COMMISSI ONER OF INCOME-TAX (APPEALS) IN TERMS OF WHICH THE REVISED RETURN WAS NECE SSITATED HAVE NOT BEEN CONTROVERTED BEFORE US. CONSIDERING ALL THESE FAC TORS IN OUR VIEW THE COMMISSIONER OF INCOME-TAX (APPEALS) MADE NO MISTAKE IN HOLDING THAT THE REVISED AND RE-REVISED RETURNS FALL WITHIN THE PARAMET ERS OF SECTION 139(5) OF THE ACT. THUS THE ACTION OF THE ASSESSING OFFICER IN MAK ING THE ADDITION MERELY BECAUSE THE AMOUNT WAS OFFERED IN THE ORIGINAL RETURN OF INCOME WAS FILED ON 29.11.2003 CANNOT BE UPHELD SINCE IT WAS IN CUMBENT ON THE REVENUE TO HAVE CONSIDERED THE REVISED AND RE-REVISED RETURNS A ND THE REASONS PREVAILING FOR THE SAME AND ONLY AFTER EVALUATING TH E SAME THE ISSUE WAS REQUIRED TO BE EXAMINED. IN OUR VIEW THE COMMISSIONE R OF INCOME-TAX (APPEALS) HAS CORRECTLY APPRECIATED THE CONTROVERSY AN D UNDER THESE CIRCUMSTANCES WE HEREBY AFFIRM HIS ORDER. 17. SINCE FOR THE ASSESSMENT YEAR OTHER THAN 2003-04 WE HAVE ALREADY OPINED IN PARA 9 THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS CORRECTLY DELETED THE ADDITION IN THE ASSESSMENT YEAR 2003-04 FOLLOWING SIMILAR REASONINGS WE HEREBY AFFIRM THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). 18. IN THE RESULT THE APPEALS OF THE REVENUE FOR THE CAPTIONED ASSESSMENT YEARS ARE DISMISSED. 10 8.1 FOLLOWING THE ORDER OF THE TRIBUNAL FOR A.YRS. 2000-01 TO 2004-05 THE TRIBUNAL VIDE ITA NO.1445/PN/2009 FOR A.Y. 2006-07 ORDER DATED 07-07- 2011 HAS DISMISSED THE APPEAL FILED BY THE REVENUE. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A. YRS. 2007-08 AND 2008- 09 VIDE ITA NO.1034/PN/2011 AND ITA NO.785/PN/2012 ORDER DATED 28-08- 2012 AND 18-07-2013 RESPECTIVELY. 8.2 SINCE THE LD.CIT(A) HAS FOLLOWED THE ORDERS OF HIS PREDECESSORS IN ASSESSEES OWN CASE FOR DIFFERENT ASSESSMENT YEARS WHICH HAVE BEEN UPHELD BY THE TRIBUNAL AND THE APPEAL FILED BY THE REVENUE FOR A.Y. 2007-08 AND 2008-09 HAVE BEEN DISMISSED BY THE TRIBUNAL ON IDEN TICAL FACTS THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). N OTHING CONTRARY WAS BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE TRIB UNAL IN ASSESSEES OWN CASE FOR THE PRECEDING YEARS. MERELY BECAUSE THE DEPART MENT HAS FILED AN APPEAL AGAINST THE ORDER OF THE TRIBUNAL THE SAME CANNOT BE A GROUND TO TAKE A CONTRARY VIEW THAN THE VIEW TAKEN BY THE TRIBUNAL. IN THIS VIEW OF THE MATTER WE UPHOLD THE ORDER OF THE LD.CIT(A) ON THI S ISSUE AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 24-04-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE DATED 24 TH APRIL 2014 11 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-III PUNE 4. THE CIT-III PUNE 5. THE DR A BENCH PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TR IBUNAL PUNE 12