TMI Blog2021 (6) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in summary manner, the assessee has claimed that there is increase in work-in-progress amount to the tune of ₹ 2,66,01,891/- and it is further stated that the above said WIP has been offered as income by the assessee. We are unable to agree with the said submission. The amount of work in progress cannot be considered as an item of income offered by the assessee. We explain the same. The amount of Closing stock /work in progress is credited to the Profit and Loss account under revenue cost matching principle , i.e., in order to arrive at the correct profit, one is entitled to deduct only corresponding cost. In the normal practice, the purchases made during the year would be booked in the Purchases account and the entire amount shall be transferred to the Profit and Loss account. We are of the view that the issues contested before us require fresh examination. Accordingly, we set aside the order passed by Ld CIT(A) and restore all the issues to the file of the assessing officer for examining them in the light of discussions made supra. As directed earlier, the assessee shall furnish reconciliation statements for each of the parties in the similar fashio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken by the A.O. and hence, the assessee has filed this appeal before us. 4. The Ld. A.R. has filed his written submissions and also advanced his arguments. He submitted that the assessee, being a civil contractor, would raise invoices on its clients in several stages of construction, as per the agreement entered with its clients. Even though the assessee would be continuously executing the work, the invoice will be raised after completion of particular stage of construction and when the running bill is approved by the client. Accordingly, the assessee would recognize contract receipts only to the extent of invoices raised by it. However, since the assessee would continue to execute the work, the unbilled expenses would be shown as work in progress, as per AS-7. In the mean time, the assessee would also be receiving advance payments from the clients and the same would be adjusted against the invoice raised. He submitted that the clients would be deducting TDS whenever the payments were made to the assessee. However, the assessee would account for the contract receipts only upon raising of invoices. Accordingly, he submitted that there will be mismatch between the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Increase in Advance received from customers (Note 4b) 74,32,104 Closing balance 17,01,238 Less: Opening Balance 57,30,866 Total of Amount Credited/ Paid reflected in financial Statements. 3,23,32,757 It appears the A.O. is not conversant with Financial Statements of a Contractor and due to E-Proceedings was restricted from being enlightened by the A.R. of the appellant on the nature of operations and book keeping of a contractor, particularly the concept of cash and mercantile system of accounting . As the A.O. has not rejected the accounts under section 145, present action is not as per law. The Ld reiterated the submissions made in the written submissions. 6. The Ld D.R, on the contrary, submitted that the assessee has claimed entire amount of TDS shown in the certificates. However, the assessee has not offered the entire amount of contract receipts shown in the TDS certificates. She submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting practice followed by the assessee, the invoice so raised and approved by the client, is recognized as contract receipts in the books of account. Hence there bound to be mismatch between the amount of contractual payments made by the client and the contract receipts accounted for by the assessee in the Profit and Loss account. 10. The assessee has claimed TDS amount of ₹ 5,57,448/- during the year under consideration. The details of the same along with corresponding contractual payments have been tabulate as under by the AO:- Sl. No. Name of the deductor TDS deducted TDS claimed in the current year Gross receipts (in Rs.) 1 Iconica Constructions 36,868 36,868 18,43,382 2 Prestige Estates Projects Ltd. 2,60,220 2,60,220 1,30,10,944 3 Safalaakar Buildtech 2,25,047 2,25,047 1,12,52,281 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner was ₹ 2,23,30,487/-. In any case, in our view, the reconciliation made in summary manner will not give correct result. It is the duty of the assessee to reconcile the payments received from each of the parties, i.e., the assessee should furnish reconciliation statement for each of the parties. In fact, the assessee itself has reconciled the payments received from M/s Iconica Constructions in a proper manner. In our view, the assessee should reconcile the payments received from other four parties also in the similar fashion. 13. In the reconciliation statement furnished by the assessee in summary manner, the assessee has claimed that there is increase in work-in-progress amount to the tune of ₹ 2,66,01,891/- and it is further stated that the above said WIP has been offered as income by the assessee. We are unable to agree with the said submission. The amount of work in progress cannot be considered as an item of income offered by the assessee. We explain the same. The amount of Closing stock /work in progress is credited to the Profit and Loss account under revenue cost matching principle , i.e., in order to arrive at the correct profit, one is entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of M/s Iconica Constructions. Accordingly, in the interest of natural justice, we are of the view that the assessee may be provided with one more opportunity to reconcile the contractual payments shown in the TDS certificate furnished by a party with the entries made in the books of account. Accordingly, we direct the assessee to prepare reconciliation statement for each of the remaining four parties, viz., M/s Prestige Estates Projects Ltd, M/s Safalaakar Buildtech, M/s Skylark Arcadia Pvt Ltd and M/s Skylark Mansions Pvt Ltd. The reconciliation statement furnished for each of the above said four parties would show how the payments received have been accounted for by the assessee, which will help the assessing officer to take proper view of the matter. 16. The Ld D.R submitted that the assessee shall be entitled to TDS credit of proportionate amount only, i.e., the amount proportionate to contractual receipts recognized as income. For example, the TDS amount deducted by M/s Iconica Constructions was ₹ 36,868/- against the payment of ₹ 18,43,382/-. We have noticed earlier that the assessee has offered a sum of ₹ 11,13,237/- only as its income and the balan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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