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2015 (8) TMI 555 - AT - Income TaxMethod of accounting - recognition of income - determination of value of WIP - accounting for construction contracts (AS7) of the Institute of Chartered Accountant of India - CIT(A) directing to take WIP for A.Y. 2001-02 at ₹ 3 Crs and not ₹ 4.94 for Ghatprabha Project as adopted by the AO - carrying forward of losses as per the revised return Held that:- The bill raised by the assessee has been accepted by the department and for whatever reason an amount of ₹ 2.88 crores was not paid during F.Y. 2001-02 but the fact remains that there is no such dispute as claimed by the assessee. No documentary evidence/correspondence has been filed by the assessee during assessment proceedings or appeal proceedings or even before us to substantiate the contention that some dispute was going on between the assessee and department. It is also to be noted that the assessee has not incurred any further expenditure in subsequent years for receipt of the above amount. We do not find merit in the submission of the assessee that since he has offered the income in the A.Y. 2004-05 and since there is no loss to the revenue the order of the CIT(A) should be upheld. Here, in the instant case the question is not relating to loss to the Revenue. It relates to the taxability of the income in a particular year. In the instant case the assessee follows mercantile system of accounting, has debited all the expenditure to the profit and loss account during the impugned assessment year, has valued the WIP at a particular figure, got its accounts audited and filed the return of income belatedly. Having done so the question that arises is whether the assessee be allowed to value the WIP at a reduced figure merely on receipt basis. The answer in our opinion in the facts of the present case is negative, i.e. in favour of the Revenue and against the assessee. So far as the various decisions relied on by the Ld. Counsel for the assessee are concerned we find the same are not applicable to the facts of the present case. In the instant case the assessee initially raised the bill on the Government department which has not been disputed by the department. The assessee has categorically submitted before the CIT(A) that the departmental engineer endorsed on the bill that the measurements were checked on 31-03-2001. Even the assessee in the profit and loss account has also accounted for such WIP. Further, from the copy of the letter addressed by the Executive Engineer to the Addl.CIT there appears to be no dispute so far as the bill is concerned. Only there was a delay in release of the payment. Therefore, the decision of Hon’ble Patna High Court in Chanchani Brothers (Contractors) Pvt. Limited [1986 (2) TMI 26 - PATNA High Court ] is not applicable to the facts of the present case. Since the assessee is following mercantile system of accounting and since the assessee himself has shown in the belated original return of income the figure of WIP as per the bills raised by it on the Government department and since the assessee has not incurred any further expenditure on such amount received in subsequent year, therefore, the order of the CIT(A) reducing the WIP from ₹ 4.94 crores to ₹ 3 crores for A.Y. 2001-02 in our opinion cannot be accepted. Merely because assessee has offered the same to tax in A.Y. 2004-05 cannot be a ground to reduce the correct WIP from ₹ 4.94 crores to ₹ 3 crores. We accordingly set aside the order of the CIT(A) and the grounds raised by the revenue are allowed. - Decided in favour of revenue.
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