TMI Blog2022 (4) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... Understatement of closing WIP shown by the assessee in respect of Andhra Project - As assessee has contended that the said amount received during the year under consideration represented the liability of the assessee and there being nothing to show that the same represented income of the assessee for the year under consideration from Andhra Project, the learned CIT was not justified in treating the same as an income of the assessee for the year under consideration. We are inclined to accept this contention of the learned Counsel for the assessee. Moreover, this amount treated by the learned CIT as an income of the assessee for the year under consideration from Andhra Project has already been included by the assessee in the amount declared as his income from Andhra Project in the immediately succeeding year, i.e. AY 2010-11, and the addition of the same again in the year under consideration has clearly resulted in double addition which is not justified. After treating the amount as an income of the assessee for the year under consideration for Andhra Project, the balancing figure was treated by the learned CIT as a closing WIP in respect of Andhra Project as on 31.03.2009. Having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of learned Commissioner of Income-Tax, Ahmedabad-IV, Ahmedabad ( CIT in short) dated 21.02.2014 passed under Section 263 of the Income-tax Act, 1961 ( the Act in short). 2. The assessee, in the present case, is an individual who is engaged in the business of excavation contract work of canal and irrigation project. The return of income for the year under consideration was filed by him on 29.09.2008 declaring a loss of ₹ 14,75,989/-. In the assessment completed under Section 143(3) of the Act vide an order dated 24.12.2010, the total loss of the assessee was determined by the Assessing Officer at ₹ 12,58,729/- after making disallowance on account of certain expenses aggregating to ₹ 2,17,260/-. The records of the said assessment came to be examined by the learned CIT and, on such examination, he was of the view that the assessment order passed by the Assessing Officer under Section 143(3) of the Act suffered from the following errors which were prejudicial to the interest of the Revenue:- (i) On perusal of the assessment record, it is noticed that as per the profit loss account balance sheet for the previous year relevant to assessment year filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,89,345/- as per the I.T. Rules and the same has been allowed by the AO without verification of the fact as to whether the said assets including plant and machinery have been used by you for the purpose of your business since prima facie no work has been carried out by you during the year under consideration as is evident from the fact that you have shown receipt of ₹ 2,92,19,509/- as against the opening W.I.P. of ₹ 3,72,00,700/- as on 1st April, 2008. Hence, the Assessing Officer has allowed your claim for the depreciation without verifying the factual position regarding allowability of your claim of depreciation. 3. The learned CIT accordingly issued a notice under Section 263 of the Act to the assessee on 10.10.2013 pointing out the above errors and seeking explanation of the assessee as to why the assessment order passed by the Assessing Officer under Section 143(3) of the Act should not be revised by treating the same as erroneous and prejudicial to the interest of the Revenue. In reply, it was submitted by the assessee in respect of first error allegedly pointed out by the learned CIT that the assessee, in his individual capacity, was also engaged in the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, the learned CIT noted that an amount of ₹ 74,99,454/- was actually received by the assessee during the year under consideration from two parties namely M/s. Ketan Construction Limited and AMR Construction Limited against the Andhra Project and the same was shown by the assessee as its liability as on 31.03.2009 instead of offering the same to tax as an income of the year under consideration. He noted that the said amount, however, was offered by the assessee only in AY 2010-11 wherein the total amount of ₹ 1,22,97,379/- was offered to tax by claiming that the same was actually received against Andhra Project. The learned CIT also noted that as against the opening WIP of ₹ 3,72,00,700/- shown in respect of Andhra Project and further purchase of ₹ 19,30,911/- made during the year under consideration, the assessee had declared the income of ₹ 2,00,44,922/- only in the year under consideration and the remaining amount of closing WIP was not at all shown by the assessee which ought to have done as per the Mercantile System of Accounting followed by him. He held that the assessee thus had clearly underreported his income from Andhra project by ₹ 74 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 1,15,87,235/- which has not been shown on credit side of Trading and P L Account. (ii) The Assessing Officer will also verify the genuineness of assessee's claim of purchase of ₹ 19,30,911/incurred for the purpose of its business of contract. (iii) The Assessing Officer will disallow the depreciation of ₹ 17,44,750/- in respect of plant and machinery pertaining to Andhra Project and depreciation of ₹ 98,85,362/- in respect of plant and machinery pertaining to earth work. (iv) The Assessing Officer will call for and verify transaction wise details of assessee's transactions for purchase and sale of equity shares as well as the transactions in future and options category of equity shares for the year under consideration and compute income/allowable loss from the business of purchase and sale of equity shares and its futures and options, if any. (v) The Assessing Officer will compute the taxable income of the assessee for the year under consideration, after giving effect to the directions in para 7(i) to 7(iii) above. Aggrieved by the order of the learned CIT passed under Section 263 of the Act, the assessee has preferred this appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt only to the extent of ₹ 2,00,44,922/- claiming the balance as loss. In this regard, the contention raised on behalf of the assessee before the leaned CIT as well as before the Tribunal is that there was a disturbance in the area of Andhra Pradesh due to naxalite activity and therefore, the work of the said project was completely stopped leaving the assets at the site with no hope to carry on and continue the same. It is contended that, keeping in view this position, the assessee did not show any closing WIP in respect of Andhra Project as on 31.03.2009. It is observed that there is, however, no documentary evidence brought on record on behalf of the assessee to support and substantiate this contention. Moreover, by assessee's own admission, a sum of ₹ 1,22,97,379/- was actually received by him against the work already completed in respect of Andhra Project in the immediately succeeding year, i.e. AY 2010-11, and the same was duly offered to tax in that year. It is thus clear that there was a substantial closing work-in-progress as on 31.03.2009 in respect of work already completed by the assessee against Andhra Project which the assessee had failed to disclose. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently be increased to that extent. Once this amount is treated as closing WIP of Andhra Project as on 31.03.2009 and added to the total income of the assessee for the year under consideration, it follows that the same would be taken as opening WIP in respect of Andhra Project for the immediate succeeding year, i.e. AY 2010-11. 10. As regards the third error pointed out by the learned CIT in the order of the Assessing Officer passed under Section 143(3) of the Act in allowing wrongly the claim of the assessee for depreciation of ₹ 17,44,750/- and ₹ 98,85,362/- in respect of the block of asset of plant and machinery pertaining to Andhra Project and Earth-work project, the learned Counsel for the assessee has contended that Earth-work project was continued even in the year under consideration and the receipts generated from the same amounting to ₹ 90,84,584/- were duly declared by the assessee in the return of income filed for the year under consideration. It is observed that even the learned CIT in his impugned order has not disputed this position. He however held that only maintenance work was carried out by the assessee on canal and there was also some lab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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