TMI Blog2012 (5) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. It is clear that the Tribunal has no power to decide the issue in respect of assessment years which are not before it. - IT Appeal Nos. 681, 832, 857 & 861 (Coch.) of 2008 - - - Dated:- 24-2-2012 - N. Barathvaja Sankar, N. Vijayakumaran and N.R.S. Ganesan, Sanjay Arora and B.R. Baskaran, JJ. T.J. Vinsent and Smt. Vijayaprabha for the Appellant. C.B.M. Warrier for the Respondent. ORDER Saniay Arora, Accountant Member These are a set of four Appeals by the Revenue arising out of separate Orders by the Commissioner of Income-tax (Appeals)-I, Kochi ('CIT(A)' for short) dated 18.4.2008, 21.5.2008, 14.2.2008 and 22.5.2008 for three consecutive assessment years (A.Ys.) 2003-04 to 2005-06. The appeals raising common issues were heard together, and are being disposed of by a common, consolidated order. 2. We shall deal with the issues in the appeal, and in seriatim , though for the purpose of the reference to the figures shall, where required to, and to the extent possible, advert to those for AY 2003-04, i.e. , the first year under reference. The assessee is a Civil Contractor engaged in government contracts for building/constructing/laying down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putting aside of money, which may become an expenditure on the happening of an event, i.e. , detection of a defect/s in the present case, that the claim could be allowed as a business outgoing. Toward this, references were made, including by reproduction therefrom, to the decisions in the case of CIT v. Rotork Controls India Ltd. [2007] 293 ITR 311 (Mad.) and CIT v. Dynavision Ltd. [2004] 265 ITR 289/[2003] 128 Taxman 406 (Mad.). The assessee's argument that the retained amount represents neither an income nor an asset is not correct and leads to an understatement of both. However, in view of the various decisions by the high courts wherein it was held that retention amount accrues only in the year of receipt, he, allowing the exclusion thereof, deducted the cost thereof, which he determined by deducting the estimated profit therefrom, i.e. , as returned, which he found at 4% of the gross receipt. This was on the basis that if the amount is to be accounted for on receipt basis, the corresponding cost could only be allowed in the year in which the amount is subject to tax, following the matching principle. Further, having excluded the retention money, he denied credit on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra ), even as stated by the AO, the Hon'ble high court had only remitted the matter back to the tribunal to consider the same with reference to the practice followed by the department and other relevant facts and circumstances. 4.2 The ld. AR, on the other hand, submitted that the liability claims stand settled and the assessee has received most of the retained amount in the subsequent years for which it stands brought to tax. The Revenue could not be allowed to blow hot and cold at the same time, seeking to tax the same on retention and again on receipt basis, i.e. , as and when realised. Secondly, it needs to be borne in mind that the AO has disallowed the cost toward retention amount and not the retention amount itself. The premises of the same is only that the income in the retention money had not accrued to the assessee, so that the corresponding claim toward its cost also could not be allowed for the year, and would stand to be so allowed only when the income accrues, i.e. , on receipt, and brought to tax. There is, as such, a clear contradiction between the AO's action and the contentions being now raised on behalf of the Revenue. 5. We have heard the parties, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccrual, which is always a matter of fact. It is trite law that it is the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter [ CIT v. C. Parakh Co. (India) Ltd. [1956] 29 ITR 661 (SC)]. The issue is essentially one of timing, i.e. , the correct year in which the income represented by retention money can be said to have accrued, and the past assessments would not bar the assessment of the impugned income for the right year; the principle of res judicata being not applicable to the proceedings under the Act. Reference in this context be made to the decision in the case of CIT v. British Paints India Ltd. [1991] 188 ITR 44/54 Taxman 499 (SC), and which is also the purview of sections 4 5 r/w sections 28 and 145 of the Income-tax Act, 1961 ('the Act' hereinafter). Similar, would be position with reference to the deduction of tax at source (TDS) on RM, which, as contended by the ld. AR, is being deducted in one State (Kerala) and not in another (Tamil Nadu). We say so as the obligation toward TDS would arise on a credit in the account, while what would be relevant, for ascertaining the matter of accrual, is whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case law in the matter is legion (see Note 2). The only difference would be that in this case, instead of the assessee-contractor reasonably estimating the liability arising on account of such defects, based on past, actual data (over a reasonable period of time) in its respect, the construction contract itself provides for the 'retention' of a part of the billed amount toward the same, to be released later, i.e. , on a satisfactory performance report. Clearly, there is no scope for contending that such amount stands accrued on either the raising or even the passing of the bill, which processes are again only as envisaged under the contract; the legal right to receive the amount having not arisen. This is also the import, and the sum and substance, of the decision by the Hon'ble jurisdictional high court in the case of Janatha Contract Co. ( supra ). We may illustrate this by way of an example; a bill for Rs. 100/- (say) is raised, which is passed for (say) Rs. 96/-. 5% thereof (say), is withheld as RM, and the balance released. There is no question of Rs. 4/- deducted (assuming a valid deduction under the contract) as having inured to the assessee; the right to receive having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, and which period could not be indefinite, and ought to be necessarily defined, even as the ld. counsel contended before us (of course, without reference to any material on record) that there is no time lag between the two processes, i.e. , the satisfaction of the relevant terms of the contract and the release of RM, i.e ., an apparent inconsistency, if not a contradiction. Accordingly, he was required to demonstrate the same, and toward which he adduced a copy of a contract as a sample (placed on file). We find, on its perusal, it to define the term 'defect liability period' (DLP), which is to be reckoned from the 'completion date'. The retention is to be in a definite proportion, duly specified. Further, 50% of the RM is to be withheld till the completion of the contract and the balance 50% till the DLP is over and the Engineer has certified that the defects as notified by him to the contractor during the DLP have been since corrected. As such, it is clear from this Agreement, which we consider as a specimen contract, that 50% of the RM would accrue immediately on the completion of the works - the completion date, while the balance 50% would await the latter of the two point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing authority and the first appellate authority, as arrived at, shall stand vacated. We decide accordingly. We are aware, while doing so, that the Revenue has not brought the RM to tax as income, but only its cost, which has been treated at 96% thereof, i.e. , by deducting the net profit rate (on turnover) as disclosed. However, as observed earlier, the findings by both the said authorities are de hors any materials, despite the fact that the issue at large is essentially factual; the assessee failing to bring any such in support of its case, on record, making only bald assertions, which we regard as most surprising, particularly considering the decision by the Hon'ble court in the case of Janatha Contract Company ( supra ), on which it relies. The province of the tribunal is to decide the matter in issue before it in accordance with the law; reference in this regard may be made, inter alia, to the decisions in the case of Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC); Kapurchand Shrimal v. CIT [1981] 131 ITR 451/7 Taxman 6 (SC); CIT v. Assam Travels Shipping Service [1993] 199 ITR 1/67 Taxman 269 (SC); and Bhavana Chemicals Ltd. v. CIT [1998] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge of the corresponding income to tax (section 199). That is, irrespective of the TDS having been deducted in an earlier period, the credit in its respect would correspond in time with the assessment of the relevant income. It would be advisable if the reconciliation statement, which ought to be preferably prepared, carries a separate column in respect of TDS, so that the amount of TDS for which credit is given as well as not so, for the reason that the corresponding income stands not accrued and, thus, not brought to tax, gets exhibited and clarified for each year. That is, a match between the two is established, as is the warrant of law. Secondly, we are only aware that the assessment for AY 2003-04 in challenge before us is only consequent to the revision order u/s. 263. The same directs the AO to disallow the cost of RM. Again, we find on facts that the revision order contains clear findings as to the accrual of RM, though finally directs for disallowance of cost thereof. We, therefore, for the same reasons as stated in the preceding sub-para, delineating the issue arising in appeal, find the said direction by the ld. CIT per his revision order as not operating to preclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the adjustments to the value of the work-in-progress (WIP) and Bills Receivable (BR) as assessed (Gd. 2.2). The assessee pointed out certain discrepancies in the AO's working thereof to the ld. CIT(A) in appeal, who finding the same as in order, directed accordingly. 7. Before us, the assessee has submitted a reconciliation statement listing out the said adjustments. Each of the differences, which are five in number, have been separately objected to by the Revenue per its Grounds 2.2.1 to 2.2.5. We shall take up each of them. 7.1 The first adjustment is in respect of project work PWD Roads, Kalpetta, Wayanad. The assessee's contention that the same stood already returned per its return of income, so that its inclusion again amounts to a double addition, found acceptance with the ld. CIT(A) on finding it to be in order. The Revenue's grievance is that the said project stood already listed at Annexure B1, albeit at Rs. 10,850/-, so that there has been an error in allowing the assessee deduction by the ld. CIT(A) to that extent. The assessee has accepted the Revenue's contention, adverting to pgs. 72 and 78 of it Paper Book (PB). 7.2 The second adjustment is on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential, requiring no fresh decision, but only confirmation of facts and figures, which could also be pressed through a rectification application u/s. 154. At the minimum, a report from the Assessing Officer on these aspects would have avoided unnecessary litigation thereon before us. Coming to the computation, the first adjustment (Gd. 2.2.1) relates to omission by the Assessing Officer, which the Revenue does not dispute, so that a reference to the AO would have resolved the matter (again validating our foregoing observation). The excess relief allowed to it is admitted by the assessee. However, it only shows that it had not prepared a reconciliation statement in respect of the difference between the value of WIP and BR as returned and as assessed, and also that the ld. CIT(A) did not verify the said difference/s. So however, no dispute obtains in view of the admission of their respective mistakes by the Revenue and the assessee, and the correct amount to be reduced is Rs. 97,700/- instead of Rs. 10,8550/-. That the amount deducted by the Assessing Officer was only Rs. 1,08,50/- has also been cross-verified by us. We decide accordingly. 8.2 As regards the second adjustment tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the other expenses, being indirect expenses, the Revenue has not even pressed the same before us, so that it evidently has no case thereon. So however, the assessee's consistently followed and applied method of stock valuation, on which there is no finding by the ld. CIT(A), shall be required to be considered. This is as depreciation, to the extent it relates to assets deployed directly in the construction activity, could well form part of the valuation of inventories, as prescribed by AS 2, though, however, the purview of the AO would only be to apply the cost for the year adopting the valuation method being followed in the past. Also, it may be clarified that the assessee's P L Account shall have to be recast incorporating the adjustments as directed by us in this order, including as to retention money, keeping the matching principle in mind at all times. This is particularly so as the assessee has claimed inclusion of certain items in the P L A/c on receipt basis alone, so that by its own admission the corresponding cost stands claimed in the preceding year of its incurring. Furthermore, as the cost is to be determined by deducting the profit component, which is itself a deriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der). 10. Before us, the Revenue disputes the deletion on the ground of violation of rule 46A(3), while the assessee reiterates its case as the same being a case of double assessment. 11. We have heard the parties, and perused the material on record. 11.1 Clearly, therefore, the assessee's case is on merits of the assessment, while the Revenue's case is one of denial of proper opportunity, as further mandated by the prescribed procedure, which precludes the first appellate authority to take into account any evidence produced by the assessee before him without first admitting it for sufficient reasons, to be recorded in writing and, secondly, only on affording an opportunity to the assessing authority to meet the same, i.e. , its examination as well as production of evidence in rebuttal. 11.2 The ld. CIT(A) has clearly failed on the second aspect the sufficiency of cause, i.e. , double addition, particularly in view of the order of the Settlement Commission, which stood passed only subsequently, being apparent. The assessee does not deny the same, warranting similar observations by us, i.e. , as in respect of Ground No. 2.2 (refer para 8.1). This is in fact more s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s profit does not admittedly reflect the correct picture. Two: Admittedly, the capitalized amount as on 31.3.2001, since realized, includes that on account of WIP as well, which would be at 17.647 % (G.P. rate on sales being at 15%) lower than the sale/billed value. As such, even if, and to whatever extent, there is a double assessment on account of realization of income/asset for an earlier period, value to this extent (or corresponding to the actual gross profit earned) would not be included therein and, thus, warrant being brought to tax for the year of receipt/credit. Equally relevant would be the aspect of TDS, to which we observe no reference either in the assessee's submissions or the order of the ld. CIT(A). Put succinctly, not denying and granting that no double assessment is permissible, and income for an earlier period, duly assessed, cannot be brought to tax again, which we understand to be the assessee's case, the matter, as evident, shall require factual, if not legal finding(s) as well. The same, we may also add, brings forth once again the absence of transparency, which proper accounting automatically brings about. We decide accordingly. Ground 2.4/AY 2003-04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order under reference nor is the subject matter of adjudication per the impugned appellate order. The same, in fact, is the subject matter of a separate appeal by the Revenue (ITA 832/Coch/2008), also heard along with, though for the reason that the does not have any issue with the present set of appeals stands decided per a separate order. The Revenue's ground is, thus, not maintainable. We decide accordingly. 15. The Revenue's appeal for AY 2003-04 (in ITA 857/Coch/2008) is, in result, partly allowed and partly allowed for statistical purposes. AY 2004-05 16. Ground No. 3; ground 2 ( 2.1) having been decided vide para 5 of this order, is in relation to the omissions by the Assessing Officer in working out the valuation of the work-in-progress and bills receivable omitted to be returned by the assessee. The Assessing Officer detailed the same as per Annexure 'B' at Rs. 438.32 lakhs, deducting therefrom the following: ( a ) the bills relating to the block assessment period (Rs. 1 15.37 lakhs); ( b ) the work given on sub-contract (Rs. 18.54 lakhs); ( c ) the profit margin reckoned @ 4% (?12.18 lakhs); ( d ) cost of the bills received at a lower amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be highly illustrative in the matter. The AO has, in working the said omission by the assessee in disclosing the value of its BR, deducted the amount thereof as stands already assessed for the block period. The same, as per the order for AY 2002-03 (PB pgs. 93 to 100 / AY 2003-04) is at Rs. 261.94 lakhs, while the AO allows a relief for only Rs. 115.37 lakhs, to which the assessee has not objected. Clearly, therefore, it is either a case of the two amounts representing different sums or the assessee having secured an excess relief. As regards the two relating to different sums, which could well be, the same would require a factual finding to that effect, while it may well be not so. This is particularly so as the deduction granted by the AO has been on the basis that the bills relate to work completed during the block period for which the assessment was pending before the HSC, while the basis of the relief allowed for AY 2002-03 is that bills to that extent relating to the block period stand received during the year and, accordingly, credited to the P L account for the year, i.e. , the basis is not the same, which may lead to an unintended relief, even though both the orders inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute, which is stated as the reason for non-returning the same. Incidentally, no such claim has made before the Assessing Officer, and neither has the ld. CIT(A) issued any finding/s in its respect nor has there been any material to exhibit the same. In fact, how is it that if the amount/s were in dispute, they stand realized without any deductions? When was the TDS thereon deducted?; the same would also be a relevant factor as it could only follow the credit of the corresponding amount in accounts of the customer, so that the amount to that extent is admittedly not in dispute, and it being equally undeniable that the assessee stands to be allowed credit in respect of TDS. The Assessing Officer, while causing the necessary verification, shall also look into these aspects of the matter, deemed relevant. 18.4 In view of the foregoing, we restore the matters relating to the first, third and fifth adjustments afore-referred, to the file of the AO for his verification and a decision on merits in accordance with law and the facts found, per a speaking order, addressing the issues raised, including in relation to the credit of Rs. 115.37 lakhs for BR for the block period, and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e did not pay nor stood assessed to agricultural income-tax. The search operations (on 21-6-2001) also did not reveal any evidence as regards any agricultural operations being carried on by the assessee. He further drew support from the fact that the statutory auditors had also reported absence of any basis for reporting the agricultural income in accounts; the same being based only on the basis of the statements by the partners. Also, the farmers of the region had suffered heavy losses in agricultural operations, committing suicides, while the assessee, essentially a civil contractor firm, continued to prosper in agriculture, reporting huge profits therefrom year after year. 20.2 As would be apparent from the foregoing, the ld. CIT(A) did not meet any of the factual findings by the AO; only stating his estimate, de hors any factual basis except for the similar estimations having been made in the preceding years. The principle of res judicata is not applicable to the proceedings under the Act, and each year is an independent unit of assessment. The AO has made a detailed case as to why under the facts and circumstances of the case, no claim for agriculture income could be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 109.59 lakhs, citing violation of rule 46A(3). Besides, if these amounts are excluded, the assessee would get a double benefit through the opening balance for the next year under the head WIP and BR. 23. We have heard the parties, and perused the material on record. The assessee has sought to clarify with reference to the material on record (PB pgs. 53, 56, 56A 56B) that the amounts stood already accounted for. As such, the same merited deletion and, further, there has been no contravention of Rule 46A(3) by the ld. CIT(A). We find the statement of both the parties as contradictory and inconsistent with the facts on record. Clearly, a reconciliation, as well as a reference to the AO in the matter by the ld. CIT(A), would have avoided the problem that has arisen and found its way before us. If the amounts stood already included, there was no question of the same surfacing on a comparison of the book figures with the TDS certificates, and the concomitant explanation by the assessee, citing non-approval for technical reasons as the cause of non-accounting, so that there has been a change of stand before the first appellate authority. Again, the very fact that a third sum (R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing authority for verification and the issue of relevant findings, including qua the corresponding TDS claims, which do not appear to have been matched, as in that case the question of current year's retentions (which is otherwise not clear, given the assessee's stand of accounting for the same on receipt basis), would not arise. We decide accordingly. 26. The third issue (Ground No. 2.3) relates to the relief for Rs. 244.12 lakhs allowed by the ld. CIT(A) by valuing the WIP and BR at Rs. 61,304,654/- as against Rs. 8,571,6674 by the AO, vide para 5 (pgs. 7 to 9) of his order. The basis of the relief is that while the AO deducted the profit from the gross value of Rs. 892.88 lakhs at the rate of 4% thereof (Rs. 35.72 lakhs), the same stands allowed by the ld. CIT(A) at the rate of 24.05% (at Rs. 35.72 lakhs), the same stands allowed by the ld. CIT(A) at the rate of 24.05% (at Rs. 14.74 lakhs). He has further allowed a relief of Rs. 65.10 lakhs on account of the additions sustained in its respect vide the appellate order for A.Y. 2004-05. 27. We have heard the parties, and perused the material on record. Clearly, there is no dispute with regard to the computation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect to this order. We decide accordingly, remitting the matter back to the file of the AO for the purpose. 28. The fourth issue (per Ground No. 2.4) in appeal concerns two amounts, i.e. , Rs. 1,01,59,920/- and Rs. 14,901,040/- qua WIP and BR, which were claimed by the assessee, with reference to pgs 68 and 69 of its paperbook, as having been already included in the P L account for the year, being receivable, in fact, as on 31.3.2001 and, thus, included in the undisclosed income for the block period (PB pg. 72). Accordingly, it stood allowed relief by the ld. CIT(A) for Rs. 250.61 lakhs on that basis vide para 6 (pgs. 9 10) of his order. The Revenue is aggrieved for violation of Rule 46A(3). 29. We have heard the parties and perused the material on record. There could be decidedly no double addition, and for which a factual finding by the AO is a must (refer: Tin Box Co. v. CIT [2001] 249 ITR 216/116 Taxman 491 (SC)). Further, the issue on merits is covered by our decision in respect of the Revenue's Ground 2.3 for A.Y. 2003-04 as well, so that our observation and findings per para 11 of his order would be applicable for this year as well. We decide accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The ld. CIT(A) shall first render a finding on the jurisdiction aspect after hearing the parties. Subject to a positive finding in the matter, he shall, decide the issue on merits, after obtaining a remand report in the matter from the AO, requiring the assessee to furnish all the materials relied upon by it before him in the matter. We decide accordingly. 32. The last and sixth ground (No. 2.6) is with respect to agricultural income, the entire of which, returned at Rs. 22,31,760/-, stands assessed as income from other sources. The ld. CIT(A) has estimated the same at Rs. 10 lakhs vide para 8 (pgs. 10 11) of his order, further allowing the assessee relief of adjustment of the balance Rs. 12,31,760/- against the capitalized amount available with it in terms of the order dated 4.3.2008 by the HSC. 33. We have heard the parties, and perused the material on record. This issue stands adjudicated by us vide para 20 of this order in relation to the Revenue's appeal for A.Y. 2004-05 (Ground Nos. 4, 4.1). The same would apply for the current year as well. As regards the capitalization benefit, the same has been accepted by the tribunal vide its order dated 29.1.2010 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion (Chennai Bench) vide its order dated 4.3.2008. In other words, the income to that extent (Rs. 14.99 lakhs), assessed by him as from non-agricultural sources, was directed for set off against the cash balance available with the assessee as on 31.3.2001 on the basis of its accepted undisclosed income for the block period, and not assessed as income from other sources. In the result, the entire income of Rs. 14.99 lakhs assessed by the AO as from other sources stood cancelled. 36.1 Before us, the ld. DR would submit that the impugned order requires to be set aside as it stands passed contravening the provisions of rule 46A(3), i.e. , by not allowing an opportunity to the AO to examine the additional evidence/s admitted by the ld. first appellate authority CIT(A). Secondly, he has, in allowing relief of capitalisation to the assessee for its non-agricultural income of Rs. 14.99 lakhs, travelled outside the scope of the directions by the tribunal. 36.2 The ld. AR, on the other hand, would submit that, as would be apparent from the perusal thereof, the impugned order stands passed after due consideration of the remand report by the AO. Secondly, as regards the capitalizat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural income and, consequently, the estimation of the balance Rs. 14,98,737/- as income from non-agricultural sources. 37.2 As regards the second aspect of adjustment, without going into the merits of the case, we find that the ld. CIT(A) has without doubt travelled outside the scope of the directions by the tribunal in the first round vide para 4 (pg. 2) of its order, accepting the Revenue's claim that there had been a contravention of rule 46A of the Rules by the first appellate authority. The only issue before the first appellate authority in the first round and, consequently, in second round, was the estimation of the assessee's agricultural income. This was directed by the tribunal to be done after allowing opportunity to the AO, which stood not extended earlier, to examine the additional evidence/s being relied upon by the assessee and considering the objections, if any, per his remand report, and after hearing the assessee in the matter. The Revenue authorities in the second round, and even the tribunal itself, were bound by such directions. The matter is well settled, and for which one may refer to the decisions by the jurisdictional high court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2002-03, in the assessee's own case, set aside the order of Id. CIT(Appeals) on merits deciding the issue in favour of the assessee and against the Department. The same will hold good for these years under consideration also, i.e. for the assessment years 2003-04 to 2005-06. Therefore, the findings of my Id. Brother which is not in consistent with the findings rendered by the same Bench in the assessee's own case for the assessment year 2002-03 in ITA No.831/Coch/2008 dated 31-05-2011. 3. Coming to the one more issue that duly considered by my Id. Brother in page 12, para.5.9, last 5 lines, which, in my view will amount to a direction to the Assessing Officer to consider the issue while giving effect to the order. In the proposed order, my ld. Brother has directed for corresponding revision of the assessment of the relevant years of receipt and particularly when no appeals for those years are before us. Hence also I differ. 4. Further, the order of the Settlement Commission was very much available to the Assessing Officer, who was also a party to the Settlement Commission proceedings. Hence, based on the decision of the Tribunal in assessee's own case in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee itself has adduced paper-books and reconciliations. Each of the several grounds raised stand dealt with independently, accepting or not accepting, as the case may be, the Revenue's case, including qua grant of opportunity, i.e., on merits. There is, in my view, no inconsistency between the order as proposed by me and that by the Tribunal in the assessee's own case for AY 2002-03 on both these issues, as stated at para 2 of the separate order by my ld. brother. (C) With regard to the third issue/question, as referred by my ld. brother, there is no reference to any particular year in the said direction, so that it would not be correct to say that the same is only for years not under appeal. Further, to my mind, the moot question would be whether such a direction is warranted in the facts and circumstances of the case, i.e., is required to decide the issue before the Tribunal comprehensively, per the dictate of law and justice; the amplitude of the power vested with it being wide. (D) The order by my ld. brother does not deal with the issue of agricultural income, which is the subject-matter of one ground each for AY 2004-05 (Gd. # 4) and AY 2005-06 (Gd. # 2.6), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Id. Members are as under: Ld. judicial Member: "( i ) Whether any retention money accrued to the assessee in the relevant years under appeal? ( ii ) Whether the bills receivables which was already decided in ITA No.831/Coch/2008 for the assessment year 2002-03 vide Tribunal's order dated 31-5-2011 will have a binding effect? ( iii ) Whether the Tribunal has power to decide the issue in respect of the assessment years which were not before the Tribunal?" 3. The learned Accountant Member, not being able to agree with the question referred by the Id. Judicial Member, has proposed the following questions: "1( a ) Whether the adjudication of the issue of accrual of retention money on merits, as proposed by the Tribunal in the assessee s case for A Y 2003-04 to AY 2005-06 is consistent with the facts and materials brought on record and the law in the matter, or ( b ) Whether the same is inconsistent with the findings by the Tribunal in the assessee's own case for AY 2002-03 per ITA No.831/Coch/2008 dated 31/5/2011. 2( a ) Whether the issue qua the adjustment of the values of the work-in-progress and bills receivable for the several projects, as agitated by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his issue is covered in Para 11 Page 6 of the Assessment Order. The retention amount of Rs.2,09,15,420 is assessed as income which is cancelled by the CIT(A)as per page 2,3 4 para. 5 of the appellate order. The retention amount is assessable only in the year of receipt of the amount after clearing the defect liability claims. This principle is accepted in the following decisions. (Paper Book Page No. 113). a. Janatha Contract Company v. CIT [] (105 ITR 627) (Kerala), b CIT v. P C Constructions (P.) Ltd [] (318ITR 113) (Madras), c CIT v. Ignifluid Boilers (I ) Ltd [] (283 ITR 295) (Madras), d CIT v. Simplex Concreter Piles (India) P Ltd [] (179 ITR 8) (Calcutta) and e. CIT v. Chanchani Brothers (Contractors) (P.) Ltd [] (161 ITR 418) (Patna) : As per the assessment order (Page 6 para. 11) an amount of Rs. 2,17,86,896/- (Paper Book Page No.67-68) is retained by various departments and the Assessing Officer reduced 4% of Rs. 8,71,475/- towards profit margin and assessed Rs.2,09,15,420. Out of Rs .2,17,86,896/- the following amounts received in the subsequent years and assessed to income and Rs .77,71,728/- is not yet realized since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook Page No.82) a. janatha Contract Company v. CIT [] (105 ITR 627)(Kerala), b. CIT v P C Constructions (P ) Ltd [] (318 ITR 113) (Madras), c. CIT v. Ignifluid Boilers I Ltd. [] (283 ITR 295)(Madras), d. CIT v. Simplex Concreter Piles (India) (P.) Ltd [] (179 ITR 8) (Calcutta) and e. CIT v. Chanchani Brothers (Contractors) (P.) Ltd [] (161 ITR 418) (Patna) As per the assessment order Page 4 para. 2 an amount of Rs. 2,00,84,119/- (Paper Book Page No. 55) is retained by various departments and the Assessing Officer reduced 4% of Rs. 8,03,365/- towards profit margin and assessed Rs. 1,92,80,754/-. Out of Rs. 2,00,84,119/- the following amounts received In the subsequent years and assessed to Income and Rs. 80,91,584/- is not yet realized since the retention amount is not released after defect liability claims. Asst. Year Amount Released 2004-05 3,67,621.00 (Paper Book Page 56) 2005-06 43,06,266.00 (Paper Book Page 56) 2006-07 10,04,673.00 (Paper Book Page 56) 2008-09 42,68,310.00 (Paper Book Page 56) 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following decisions. (Paper Book Page No. 83) ( a ) Janatha Contract Company v. CIT [] (105 ITR 627( (Kerala), ( b ) CIT v P C Constructions P Ltd [] (318 ITR 113) (Madras), ( c ) CIT v. Ignifluid Boilers I Ltd [] (283 ITR 295( (Madras), ( d ) CIT v. Simplex Concreter Piles (India) (P ) Ltd [] (179 ITR 8) (Calcutta), and ( e ) CIT v. Chanchani Brothers (Contractors) P Ltd [] (161 ITR 418) (Patna). Grounds of Appeal 2.2.1: This item is covered in Grounds of Appeals No.2.2 above. Capital City, Trivandrum R D. This issue is covered in page 10 Para 7 of the order of the CIT(A). The above retention amount received during this year is included in the Bill Received as per Profit and Loss Account filed (Paper Book Page No. 73) This amount is taken for a second time by a journal entry crediting bills received account and debiting retention account (Paper Book Page No. 73 E). 4( ii ). Bills Receivable (Question No.2) ITA No.857/Coch/2008: (Assessment year: 2003-04): This issue is covered in page 8 para. 11 of the assessment order. The CIT(A) order page 7, para. 7 Bills Receivable Work-in-Progress as per Annexure B1 B2 is Rs. 5,21,44,529/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... Rs. 6.73.435.00 (Paper book Page No. 73 84) 7,02,162.00 c. Retention amount in respect of the following works are included in the annexure B1: KRP Kalpetta, Wayanad .... Rs. 22,94,501 (paper book page no. 81 82 BSP Padinjarathara ... Rs 5,83,844 (paper book page no.85) Rs 28,78,345 The retention amount of Rs.28, 78,345 is assessed as income which is cancelled by the CIT(A) as per page 6 para. 7(c) of the appellate order. The retention amount is assessable only in the year of receipt of the amount after clearing the defect liability period. The principle is accepted in the decisions listed under para. 4 above. d. Gross profit adopted as per the assessment order is at 4% whereas the gross profit is 15.01 % (Paper Book Page No.92). This is allowed by the CIT(A) in the earlier assessment years. e. The Bills Receivable and Work-in-Progress added in the assessment Year 2002-03 is taken by the Assessing Officer at Rs. 3,30,56,296 whereas as per the appeal order of the CIT(A) for the Asst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara. 3 of the assessment order. Cross Amount of Addition to BR/WIP ...Rs. 2,90,76,663.00 Rs. Less: Relief allowed by CIT(A) 2,90,76,663 .. As per page 9 para. 19(2)(a) 18,70,449 .. As per page 9 para. 19(2)(b) 1,06,84,398 .. As per page 9 para. 19(2)(c) 65,15,396 .. As per page 9 para. 19(2)(d) 23,37,985 2,14,08,228 76,68,435 Less: Gross Profit @ 15,11% 11,58,700 65,09,735 a. Grounds of Appeals 3.1 : Rs. 18.70,449/- : Rs. 18,70.449/- is consisting of Rs.1,99,543/- received during the A Y:2005-06 which is offered as income for that year. (Paper Book Page No. 61). Name of work Amount Rs KRP Forming Kolliyil Branch Canal of RBC 30-1965M 2,658 KRP Constn. Of Retaining wall- RBC - 6070-6200m 1,34,656 62.229 KRP Constm. Of Ahmunda - RBC - 420-720m Total 1,99,543 The details of Bills Recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order the Gross profit calculation for the A Y: 1995-96 is disclosed. The Gross Profit is to be arrived at after reducing the cost of material, labour and other direct expenses and when the depreciation, interest, partners salary and other administrative expenses are reduced the result is net profit which is not to be considered for the purpose of arriving at the Gross Profit of the Contract. ITA 861/Coch/08 (A Y: 2005-06): Bills Receivable Work-in-Progress Rs.8.57.16,674/- fGrounds of appeal 2.3. 2.3.1, 2.4 1 This issue is covered in page 6 para. 11 of the assessment order and Page 7 para. 5 of the order of the CIT(A). At page 8 para. 5(b) of the CIT(A) 's order, the addition on account of Bills Receivable Work in Progress is recomputed at Rs. 6,13,04,654/- as under as against Rs. 8,57,16,674/-. The net addition as per Page 6 para. 11 of the assessment order- Addition to BR/WIP as per Annexure B B 1 .... Rs. 8,92,88,202/- Less: Relief Allowed by CIT(A) ( a ) Gross Profit @ 24.05 % .... Rs. 2,14,73,813 ( b ) Amount enhanced as per appellate order A Y: 2004-05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2). Hence the addition of this amount is not correct. ITA No.832/Coch/2008 - (A Y: 2003 -04) The issue in this appeal is agricultural income and adjustment income assessed under other sources against the cash balance permitted for capitalization by the Hon'ble Settlement Commission up to the A Y -2002- 03. The very same question is decided by the same members in ITA No. 805/Coch/2008 by order dated 29.01.2010 for the AY-2002-03. But this issue is decided by the Hon'ble Accountant Member in Page -32 to 35 Para- 35 to 37 which is not in agreement with the earlier decision in ITA No.805/Coch/2008 dated 29.01.2010. The Hon'ble judicial Member has not subscribed to the above decision of the Accountant Member and in the absence of any question by the Hon'ble Members and any joint decision the appeal may be posted for fresh hearing. In the absence of any questions framed by the Hon'ble Members I may submit that the above is only the way open to proceed. 4(iii) Quest/on No.3 The decision of the Hon'ble Accountant Member is inconsistent with the finding of the Tribunal in the Appellant's own case in ITA 831/Coch/ dated 31.05.2011 A Y - 2002-03. The issues in the appeals for the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertained at cost. This amount is computed after reducing the gross profit percentage from the value of bills receivables and the value of work-in-progress as arrived at contract rates. But the Assessing Officer reduced only the net profit percentage instead of gross profit percentage. The net profit percentage arrived at by the assessing officer after considering all the expenditure of administration, office expenses, bank interest and depreciation. This method is held as incorrect and decided in the assessment year - 2002-03 in ITA 831/Coch/2008 dated 31.05.2011 by the co-ordinate bench. Since issues involved in respect of the Asst.Years-2002-03, 2003-04 , 2004-05 and 2005-06 are identical. The decision of the Hon 'ble Bench for the Asst. Year-2002-03 is having a binding effect. 3. There are certain omissions and duplications in the computation of work-in-progress and bills receivable and these mistakes are corrected by the CIT(A) on the basis of explanations supported by documents. Those documents relied upon by the CIT(A) are documents which were available to the Assessing officer during the assessment proceedings but omitted to be considered. The CIT(A) made corrections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... italization is applied by the appellant earlier and the capitalization now claimed will be a claim for second time with duplicate effect. The decision of the same bench for the Asst Year -2002-03 in ITA 805/Coch/2008 dated 29.01.2010 is binding in respect of the Assessment years 2002-03, 2003-04 and 2005-06. 6. The Hon'ble Accountant Member made the order but this order is neither agreed nor descended by the Hon'ble judicial Member. No questions are referred jointly by the members. Hence the order in ITA 832/Coch/2008 by the Hon'ble Accountant Member is not complete and hence it is my prayer that the appeal is to be heard afresh and decision to be taken by the Hon'ble bench. The decision of the Hon 'ble Accountant member is inconsistent with his own finding taken in ITA 831/Coch/2008 dated 31.05.2011. I may submit that the Hon'ble Bench is not empowered to decide the issues which are not included in the grounds of appeal relating to the assessment year under appeal. The Hon'ble bench is not empowered to pass an order relating to any other assessment year or relating to any other issues before the Hon'ble bench included in the grounds of appeal. The consequential effect of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the submissions of the assessee and the revenue and after following the decision of the jurisdictional High Court in the case of Janatha Contract Co . ( supra ) and decisions of the Madras High Court in the case of East Coast Constructions Ind. ( supra ), CIT v. Ignifluid boilers (I) Ltd. [2006] 283 ITR 295 (Mad.) and CIT v. P C Constructions (P) Ltd. [2009] 318 ITR 113 (Mad.) held that the assessee had no right to receive the money by virtue of the contract between parties and the assessee also had no right to enforce the payment and therefore the Department could not include the amount (retention money) in the assessment year when actually this amount had not been paid to the assessee. It also held that the retention money in the contract is assessable only in the year of receipt, that too after clearance of the defect liability. Thus, the decision of the CIT(A) was upheld. In respect of bills receivable and work-in-progress also, the Bench has decided the issue in favour of the assessee by upholding the order of the CIT(A). Thus, on these two issues, the very same Cochin Bench with the same constitution of the Members in the case of the same assessee, while deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... left over question 'D' is dealt with by me in the following paragraph. The question is whether the Tribunal has power to decide the issues in respect of assessment year which are not before it? In this regard, it is well-settled proposition that the Tribunal has no jurisdiction to give any finding for the earlier or subsequent year while dealing with the particular assessment year. Under the Income-tax Act, each assessment year is a separate unit and the decision of the AO given in a particular year cannot operate as res judicata in the matter of assessment of subsequent years. Similarly the jurisdiction of the Tribunal in the hierarchy created by the same Act is no higher than that of the AO and hence it also should confine to the year of assessment. It is clear that the Tribunal has no power to decide the issue in respect of assessment years which are not before it. In this connection, I am fortified by the decision of the Apex Court in the case of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) and the decision of the Madras High Court in the case of CIT v. T.P.S.H.Selva Saroja [2000] 244 ITR 671/[2003] 131 Taxman 1. Hence, I have to concur with the learned Judi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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