2014 (1) TMI 484 - AT - Income Tax

Write-off of work-in-progress Held that - Those projects which were discontinued or cancelled by the customer and work-in-progress recognised against the same was not invoiced ultimately, resulted in write off - The assessee has submitted the details of the customers who had placed orders but the order was discontinued - Neither any correspondence nor any evidence was produced by the assessee with regard to discontinuance or cancellation of the order to substantiate the claim The issue was restored for fresh decision.

Summary

Issues:
Challenge to disallowance of write off of work-in-progress amounting to Rs. 15,29,600.

Analysis:
The appeal was against the CIT(A)'s order for the assessment year 2005-06. The assessee challenged the disallowance of write off of work-in-progress amounting to Rs. 15,29,600. The assessee, engaged in software business, filed its return showing a loss. During reassessment, the Assessing Officer noted the write off and sought clarification. The assessee explained that work-in-progress was recognized for unbilled work on milestone projects, and the write off was for closed projects due to customer discontinuation. The Assessing Officer rejected the claim citing lack of evidence. The CIT(A) upheld the disallowance, stating work-in-progress cannot be written off without evidence. The assessee appealed.

Before the ITAT, the assessee reiterated its stance, emphasizing the billing milestone policy and inability to realize amounts due to customer order cancellations. The Departmental Representative argued for evidence to verify the claim. The ITAT noted the lack of evidence but allowed the appeal, remitting the matter to the Assessing Officer for fresh assessment based on any additional evidence the assessee may provide.

In conclusion, the ITAT allowed the appeal for statistical purposes, granting the assessee an opportunity to present evidence to support the write off claim before the Assessing Officer for reassessment.