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TMI Blog2008 (6) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had admitted that the practice of undertaking works contract was started only during the end of February, 1998 and hence the question of consistently following the system "for all the years" does not arise at all. The learned Commissioner of Income-tax (Appeals) ought to have gone through Annexure 1 of the assessment order where the Assessing Officer has worked out in detail the work-in-progress and profit branch-wise." 3. The brief facts pertaining to this issue as found from the assessment order are that the assessee is a firm engaged in various business activities, viz., trading in automobile spare parts, petrol pump, trading in spare parts of mill equipments, transport division, data processing centre, etc. The Assessing Officer noticed that during the previous year 1997-98 relevant to the assessment year 1998-99 Popular Automobiles had undertaken Auto Engines job works on behalf of various customers. In turn it has entrusted these jobs to one of its sister concern, KER. Materials required for these jobs are supplied by Popular Automobiles to KER by raising invoices. These invoices when raised were accounted by debit to works contract and credited to sales account. Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l before the Tribunal with this issue. 4. At the time of hearing the learned departmental representative reiterated the contents of the assessment order (para 12 of the assessment order) as his submissions. He also submitted that the theory of consistency in maintaining the accounts is not correct as this is the first year of such transactions and there was no system at all. The learned departmental representative also filed a copy of the letter dated 29-1-2001 addressed to the Assessing Officer for the proposition for the fact that the practice of undertaking works contract was started only during the end of February 1998. 5. Per contra the learned representative of the assessee placed on record two small compilations consisting of the following :- Sl. No. Description Page Nos. 1. Copy of invoices evidencing the purchase in June 1997. 1-12 2. Comparative trading account for years ended 31-3-1997 and 31-3- 1998 and trading profit and loss account for the year ended 31-3-1998 13-15 Sl. No. Description Page Nos. 1. Argument Note 1-2 2. Copy of Annexure-II to the assessment order and its English translation 3-4 3. Copy of Tribunal's order in assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention of the learned representative of the assessee that cost of the materials supplied by the assessee for the work had already been taken to sales account, as observed in the assessment order. As regards the reorganization of the work-in-progress in respect of labour charges it is seen that the same system has been followed by the assessee in the subsequent years, which has not been disturbed by the department. Thus, there is force in the contention of the learned representative of the assessee that the system has been consistently followed by the assessee, which has been accepted by the revenue. Also there is force in the contention that the income of this portion has already been recognized in the Profit and Loss Account. Considering the totality of the facts and circumstances in the light of the above observation, we are inclined to dismiss this ground of appeal of the revenue, by upholding the order of the first appellate authority. 7. Now let us turn to the next issue regarding the deletion of addition of Rs. 1,46,880 representing closing stock value of one bus purchased from KSRTC, which is covered by ground No. 3, which reads as under :- "The learned Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax charged in the bill is the rate applicable as per Sales Tax Rules and at that time and that both the chassis were sued, one to Delhi Branch and other to PVS Ltd. The first appellate authority after considering the submissions of the assessee found that the assessee has originally debited the plant and machinery account when these vehicles were purchased from KSRTC in June, 1997 and on 31-12-1997 this was transferred to purchase account by a transfer entry. This date is thus mistaken as the date of purchase. Therefore, the finding of the Assessing Officer that the sale bills were before the date of purchase is wrong. He also noted that the balance value of the bus was dismantled amounting to Rs. 1,57,000 which included in the closing stock of Trichur. Therefore, the CIT (Appeals) deleted the addition of Rs. 1,46,880. Now the revenue is aggrieved and in appeal before the Tribunal with this issue. 9. At the time of hearing the learned departmental representative reiterated the contents of the assessment order (paras 13 and 14) as his submissions. He also referred to Annexure-II to the assessment order being a letter from Accounts Department of the assessee wherein it is stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve and Annexure-II to the assessment order. We find force in the contention of the learned representative of the assessee. There is no dispute that on 31-12-1997 the amount debited to the Plant and Machinery Account has been transferred to purchases account by journal entry. Hence, there is force in the contention of the learned representative of the assessee that the auditor has mis-took this date as date of purchase instead of June 1997. From page Nos. 1 to 12 of the compilation which are copies of the invoices raised by the assessee we find that the payments were made by pay order dated 5-7-1997 to KSRTC towards the purchase of two buses from Edappal Regional Workshop which has been account for in the books of the assessee on 7-7-1997. The assessee has also filed a copy of the memo issued by KSRTC for sale of these vehicles to the assessee. We also find from page 5 of the Compilation-I being transfer advice No. 445 dated 14-7-1997 wherein it is stated that one KSRTC bus purchased now transferred with details of spare parts therein. Also page No. 6 of the compilation-I dated 29-8-1997 being transfer advice shows another vehicle purchased and transferred to Trichur. From pages 9 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other cases it is being done. There were erasures in four way bills dated 6th, 14th, 21st and 24th March, 1998. Therefore, the assessing authority suspected that there was under statement of stock and accordingly the assessee was asked to clarify the same through his letter dated 2-1-2000. The assessee filed a detailed reply on 29-1-2001 disputing the averments made in the Assessing Officer's letter. In the aforesaid letter though the assessee admitted that the storekeeper did not record the receipt of the goods by acknowledging the goods received on the waybill and that there were erasures corrections and over-writings in the sales tax form, which was, accompanied the stock transfer advice and that the difference in the value of STA journal relating to Trivandrum Branch and that of general ledger whose print-out taken on 4-12-1998 and as per this print out taken on 4-12-1998, the assessee submitted that on the basis of these grounds it cannot be concluded that there is under statement of stocks. The assessee relied on the print-out taken on 4-12-1998 and as per this print-out, the stock transfer to Trivandrum Branch match with that of general ledger. Thus the assessee explained th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are transferred inter-branch-wise and head office to branch and branch to head office also and transfers are recorded at cost. According to the CIT (Appeals) when the transfers are recorded in head office and branches independently, there was actually no effect in the consolidated Profit and Loss Account since inwards and outwards entries gets nullified. According to him, Assessing Officer has only pointed out a difference between the subsidiary ledger and general ledger, which was not a conclusive finding of suppression in stock. The transfers inward and outwards in the Profit and Loss Accounts have tallied establishing the correctness of the method of accounting for stock transfers. Therefore, the CIT (Appeals) deleted the addition made by the Assessing Officer. Now the revenue is aggrieved and in appeal before the Tribunal with this issue. 14. The learned departmental representative reiterated the contents of the assessment order (already extracted elsewhere of this order) as his submissions. On the contrary the learned representative of the assessee submitted that the assessee having its head office at Ernakulam were having 21 branches. There used to be transfers of stock from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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