2011 (1) TMI 1203 - HC - Income Tax

Addition - Estimation of work in progress - when there is no evidence on record to indicate that any work was actually carried out for the remaining period of the relevant previous year after the period in respect of which the last bill had been raised, the addition made by the Assessing Officer is based purely on assumption that some work must have been carried out during the said period. The Tribunal was, therefore, justified in upholding the deletion of the addition. Besides, the conclusion arrived at by the Tribunal is based upon findings of fact recorded by it after appreciating the evidence on record. In the circumstances, in the absence of any infirmity being pointed out in the findings of fact recorded by the Tribunal, the impugned order being based solely on findings of fact does not give rise to any question of law so as to call for intervention by this Court.

Summary

Issues:
Challenge to order under section 260A of the Income Tax Act, 1961 regarding deletion of addition made by Assessing Officer on account of estimation of work in progress.

Analysis:
1. The appellant-revenue challenged the order made by the Income Tax Appellate Tribunal (the Tribunal) regarding the addition of Rs. 12,45,121/- made by the Assessing Officer on account of estimation of work in progress for the assessment year 2003-04. The appellant contended that the work in progress for the last few days in March 2003 was not shown, and the Assessing Officer calculated the amount based on bills raised in subsequent years. The appellant argued that the expenses for unmeasured work were not accounted for in the profit and loss account beyond the billing date, and hence, the addition was unjustifiable.

2. The Commissioner [Appeals] found that the Assessing Officer did not provide evidence to contradict the claim of the assessee that expenses for unmeasured work were not charged to the profit and loss account beyond the billing date. Therefore, the Commissioner [Appeals] concluded that the addition of closing stock was not justified, leading to the dismissal of the revenue's appeal before the Tribunal.

3. The Tribunal noted that the Assessing Officer assumed that work must have been uniformly carried out between the last bill of the relevant year and the first bill of the subsequent year. However, the Tribunal found that there was no material to support this assumption, as the revenue failed to provide evidence to counter the findings of the Commissioner [Appeals]. The Tribunal upheld the deletion of the addition, stating that the Assessing Officer's calculation was based on assumption without concrete evidence.

4. The Tribunal's decision was based on the factual finding that there was no evidence to indicate work was carried out after the last bill in the relevant previous year. As the revenue did not present any material to challenge this finding, the Tribunal concluded that the addition made by the Assessing Officer was purely speculative. The Tribunal's decision was upheld, emphasizing that it was based on factual findings and did not give rise to any legal questions warranting intervention by the Court.

5. The Court dismissed the appeal, stating that no substantial question of law arose from the Tribunal's order. The decision highlighted that the Tribunal's findings were based on factual evidence, and as there was no infirmity in these findings, there was no legal basis for intervention.