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2012 (5) TMI 304 - AT - Income TaxMethod of accounting - Assessing Officer observed in his order that that the assessee has not shown work-in-progress with profit and loss Account for the relevant previous year ended with 31.03.2004 - Held that - The choice of the method of accounting lies with the assessee - the accounting policy consistently followed by the assessee wherein all the income and expenses were wholly accounted for and offered as such in the profit and loss account as and when it was received or incurred, there arises no work-in-progress with relation to expenses incurred on the on-going projects as the whole is offered as income/expenses - Matter remanded back. Regarding addition u/s 69 - bogus purchase - transactions were in remote areas where proper banking facilities and trading channels were not present. - assessee has transferred the amounts from his accounts with UCO Bank,Barakka Branch to the account of Mr. S. Das with the same Branch - The black wire purchase details/quantity were also mentioned. It clearly establishes that this money from the assessee s account went to Mr. S. Das who acted as an agent for the assessee in procuring black wire from the local market which has been sufficiently explained to the satisfaction of the authorities. - Decided in favor of assessee. Regarding retention money - Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (1996 - TMI - 5626 - SUPREME Court - Income Tax) which permits the Tribunal to admit the additional ground as it does not require any investigation of facts and it can be adjudicated upon - Appeal is allowed by way of remand to AO
Issues Involved:
1. Addition of Rs. 5,55,034/- under section 69 of the Act. 2. Addition of Rs. 13,85,600/- under section 69 of the Act. 3. Taxability of retention money amounting to Rs. 9,33,399/-. Detailed Analysis: Issue 1: Addition of Rs. 5,55,034/- under section 69 of the Act The Assessing Officer (AO) added Rs. 10,66,594/- to the assessee's income, considering it as an understatement of profits due to unaccounted work-in-progress. The assessee contended that the amounts in question were already included in the gross receipts and declared in the profit and loss account. The assessee followed a consistent accounting practice where all income and expenses were accounted for when received or incurred, leaving no work-in-progress. The CIT(A) confirmed the addition, but the Tribunal found that the AO did not establish that the assessee's method of accounting distorted profits. The Tribunal directed the AO to verify the assessee's claims and allow the same if found correct, emphasizing the need to afford the assessee an opportunity to present evidence. Issue 2: Addition of Rs. 13,85,600/- under section 69 of the Act The AO added Rs. 13,85,600/- to the assessee's income, suspecting it to be a bogus purchase. The assessee explained that due to the remote location of the project, payments were made through a local resident, Mr. S. Das, who acted as an agent. Mr. S. Das initially denied any financial transactions with the assessee but later, under cross-examination, admitted to facilitating the purchases. The Tribunal found that the transactions were genuine and necessary for the project. The Tribunal noted that the payments were made from the assessee's bank account to Mr. S. Das, who then paid the supplier. The Tribunal set aside the addition, concluding that the purchases were legitimate and essential for the project. Issue 3: Taxability of retention money amounting to Rs. 9,33,399/- The assessee raised an additional ground regarding the taxability of retention money, which was not previously claimed before the authorities. The Tribunal admitted this ground, referencing the Supreme Court's decision in National Thermal Power Co. Ltd. vs. CIT, which allows the Tribunal to consider new grounds if the facts are available on record. The Tribunal directed the AO to verify whether the corresponding TDS was already credited and to decide the issue in accordance with the law, ensuring the assessee is given an opportunity to present evidence. Conclusion: The Tribunal partly allowed the appeal, directing the AO to verify the claims regarding the work-in-progress and retention money, and to delete the addition related to the alleged bogus purchase of Rs. 13,85,600/-.
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