TMI Blog2011 (11) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... -11-2011 - Akil Kureshi, Sonia Gokani, JJ. Tushar P. Hemani and Vaibhavi K. Parikh for the Appellant M.R. Bhatt, Sr. Adv. with Mauna M. Bhatt for the Respondent JUDGEMENT Akil Kureshi:- 1. Rule. Mrs. Mauna Bhatt, waives service of rule on behalf of the respondents. 2. The petitioner has challenged the notice dated 30.3.2011 annexed at Annexure-A to the petition in following factual background:- 2.1 The petitioner is a Private Limited Company and is engaged in the business of construction and execution of works on contract basis. The contracts that the petitioner enters into with various parties carry a defect liability clause usually for a period of one year of the completion of the work. It is the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he has reason to believe that income chargeable to tax has escaped assessment for the assessment year 2006-07. He, therefore, called upon the assessee to file return of income within 30 days from the receipt of notice. 4. At the request of the petitioner the Assessing Officer supplied the reasons he had recorded for reopening the assessment. Such reasons read as under:- "The reasons recorded for re-opening assessment u/s 147 for AY 2006-07 is as under:- "The assessee company had filed return on 17/11/2006 showing total income at Rs.28,73,365/-. The assessment u/s.143(3) was finalized on 21/11/2008,determining total income at Rs.36,12,630/-. It is seen that, Scrutiny of records revealed that as per schedule-B (Significa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at source and the income and the receipts shown in the accounts of the assessee pertaining to such TDS. The assessee had pointed out that the mismatch was on account of the retention money which the assessee had offered for tax only upon completion of the liability period. Counsel further pointed out that the Assessing Officer also raised queries with respect to drop in GP ratio. In this context also the assessee had highlighted that the gross profit should be seen from the point of view of the retention money and any other method would give a distorted picture. It was only thereafter that the Assessing Officer made certain additions but did not interfere with this method of accounting adopted by the petitioner. In short, the contention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns raised by the counsel for the petitioner namely whether on facts of case, the Assessing Officer can be stated to have formed any opinion on the taxability of the retention money and whether merely because the assessee has challenged the Assessing Officer's order before the Commissioner on some other grounds, reopening of assessment would not be permissible on principle of merger; since in the facts of the present case, these issues need not be deliberated upon. This is so because in our opinion the entire issue on merits has been decided in favour of the assessee right upto the High Court level. 12. We have briefly noted the central controversy on the basis of which the Assessing Officer seeks to reopen the assessment. The assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led reconciliation provided by the assessee, it was revealed that the sum of Rs.11.96 lakhs represented the retention money withheld by the clients, though the work was done. The Assessing Officer enquired with the assessee that why such retention money should not be treated as the assessee's income. The assessee contended that the retention money as per the terms of the contract was contingent upon completion of the work and the same was not due and payable to the assessee. The Assessing Officer did not accept assessee's claim holding that since the assessee was following mercantile system of accounting the accrual of income was independent of its receipt. In appeal before the Commissioner, the assessee contended that this uniform pattern ..... X X X X Extracts X X X X X X X X Extracts X X X X
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