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TMI Blog2019 (3) TMI 1556X X X X Extracts X X X X X X X X Extracts X X X X ..... e of estimation. Accrual of income - after defect liability period or contract completion date - HELD THAT:- we do not think that there was any accrual on the completion of contract. The specific terms of the agreement provided that the amounts due to the awardee would be retained after completion for a specific period to ensure that if defects arise in the work executed, the same is rectified with the retained amounts which would also be the responsibility of the awardee to rectify as per the specific terms. The amounts are not set apart by the assessee for an apprehended defect. By the specific terms of the contract itself, the awarder is entitled to retain the said amounts so as to rectify any defects arising in the period in which as per the terms of the contract the amount is retained. There can be no accrual found on the completion of contract, since the assessee's right to such amount would depend on there being no defects arising in the subsequent period during which the awarder is enabled retention of such amounts. The accrual if at all happens, occurs only on completion of the retention period. We hence answer the first question of law against the Revenue and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) - HELD THAT:- If the Settlement Commission's order is sustained, then the consequence flowing from that order for the subsequent years has to be accepted by the Department. In such circumstance, no penalty can be imposed on the assessee for reason of there being no addition possible. Hence, the orders of penalty are to be set aside. We set aside the orders issued by the lower authorities, answering the question of law in favour of the assessee and against the Revenue. However, we make a reservation, different from that made in the quantum appeals, that if at all the Settlement Commission's order is declared void, then necessarily the penalty imposed under Section 271(1)(c) have to be reconsidered by the AO, on the basis of the additions sustained. However, the issue of retention amount being taxed in the year of completion of contract has been held in favour of the assessee by us, independent of the order of the Settlement Commission, which portion would have to be, even then reduced. - ITA Nos. 192, 134, 139, 243 & 202/2012, 8 & 231/2013, 132 & 88 /2014, 61, 62, 63 And ITA No. 70/2015 - - - Dated:- 13-3-2019 - MR K. VINOD CHANDRAN AND MR V. G. ARUN, JJ. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in before the Tribunal and by the common order, a decision was rendered by one of the members (the Accountant Member). The Judicial Member, however, dissented from the same and followed the findings of the Tribunal in an earlier appeal of the Department as against the very same assessee for the AY 2002-03 in I.T.A.No.831/Cochin/2008. The Third Member agreed with the judicial member and found that the order of the Settlement Commission created certain consequences with respect to the subsequent years also, which has to be adhered to in making assessments for the subsequent years. 4. It is submitted by the learned Standing Counsel for the Government of India (Taxes) that the Revenue has filed an application to declare the order of the Settlement Commission void, before the Commission itself, on grounds of fraud and misrepresentation and the same is still pending. 5. In the above circumstances, it can only be said that the issue would be regulated by the finding of the Settlement Commission. If the Settlement Commission's order is sustained, we find no reason to defer from the order of the Tribunal which confirmed the First Appellate Authority's order. However, if the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst issue (i), we notice that the Tribunal members deferred, but, however, the same was not decided on the basis of the decision of the Settlement Commission. The Tribunal, by majority, followed its own order in the case of the assessee for the AY 2002-03 in ITA No.831/Cochin/2008. 8. The Accountant Member who was one of the members deciding the question in the AY 2002-03, however, deferred, which practice, we deprecate, since if at all there was a difference of opinion from the earlier order, it was appropriate that it be referred to a Larger Bench. In any event, the Third Member to whom the issue was referred, concurred with the Judicial Member, who followed the earlier verdict of the Tribunal itself. Earlier order of the Tribunal, though challenged before this Court, was withdrawn on the basis of litigation policy. Hence, the question is left open. 9. We see from the records and also a specimen contract produced before the Tribunal that there is a defect liability period which is reckoned from the completion date for which period the awarder retains certain amounts for the purpose of ensuring that there arises no defect in the work executed by the awardee. In the earlier o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first question of law against the Revenue and in favour of the assessee. 11. As to the work-in-progress and the bills receivable, the Accountant Member had remanded most of the issues for consideration before the AO. The Judicial Member and the Third Member, however, deferred since there were certain consequences arising from the order of the Settlement Commission. Even de hors the Settlement Commission's order, we find that the order of the Accountant Member was only on the various adjustments made. There arises no question of law and the issues revolve around facts. The consequence arising from the order of the Settlement Commission as recognised by the Judicial Member and the Third Member, necessarily has to be accepted by the Department in making assessments for the subsequent years, subject, however, to the Settlement Commission's order being sustained. As of now, we would not express anything on that, since the issue is pending before the Settlement Commission itself and is not agitated before us. We, however, answer the question of law framed by us in favour of the assessee and against the Revenue. If at all the order of the Settlement Commission is set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the allowance of loss made by the Tribunal. We reject the above appeals also with the reservation as above. I.T.A.No.88 of 2014 14. For the AY 2008-2009 there is one other issue raised, of modification made on the disallowance of expenditure. The AO disallowed 5% of the expenditure. While the CIT (Appeals), following the order of the Tribunal for the earlier assessment year in the case of the assessee itself, confined the disallowance to 1%. The Tribunal confirmed the same. We do not find any reason to interfere with that since it gives rise to no question of law. I.T.A.Nos.61, 62, 63 70 of 2015 15. These are all appeals filed by the assessee against the order of the Tribunal, affirming the penalty imposed under Section 271(1)(c) of the Act. The imposition of penalty relates to AY's 2002-03 to 2005-06. We notice that penalty has been imposed under Section 271(1)(c) on the additions made by the AO; both on retention of amounts as also work in progress and bills receivables. The appeals before the Tribunal had been concluded, rejecting the claim of the Revenue and accepting that of the assessee as to the consequential effect of the order of the Settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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