Principal Commissioner Of Income Tax-4, Kolkata v. M/S. Mackintosh Burn Ltd

OD-29 ITAT/181/2018 IA NO: GA/2/2018(Old No.GA/1354/2018)IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE PRINCIPAL COMMISSIONER OF INCOME TAX-4, KOLKATAVERSUSM/S. MACKINTOSH BURN LTD. BEFORE : THE HON’BLE JUSTICE T.S. SIVAGNANAMAnd THE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 30[th] November, 2021 Appearance :- … For AppellantMr. Ananda Sen,Mr. Arnab Chakraborty,Ms. Pragya Bhowmick, Advs.… For Respondent The Court : This appeal by the assessee filed under Section260A of the Income Tax Act, 1961 (the Act, for brevity) is directedagainst the order dated 7[th] June, 2017 passed by the Income TaxAppellate Tribunal, “C” Bench, Kolkata in ITA No.1489/Kol/2014 forassessment year 2010-11. The appellant has raised the followingquestions of law for consideration :- “(i) Whether on the facts and circumstances of the case theLearned Tribunal was justified in law in deleting the addition of retention money without having any evidence in hand to warrantsuch decision? (ii)Whether on the facts and circumstances of the case, theLearned Tribunal was justified in law in accepting the propositionof the assessee that such retention money reserved as securitydeposit by the principal contractor was duly offered to tax in theyear of billing i.e. in the year income against job booked? (iii)Whether on the facts and circumstances of the case, theLearned Tribunal was justified in law in accepting the propositionof the assessee that such retention money reserved as securitydeposit by the Principal Contractor was duly offered to tax in theyear of billing i.e. in the year income against job i.e. in the year ofIncome against job was booked only on the basis of samplejournal entry?” We have heard Mr. P.K. Bhowmick, learned Standing Counselappearing for the appellant revenue and Mr. Ananda Sen, learnedCounsel appearing for the respondent assessee. The respondent assessee is the Government of West BengalEnterprise engaged in construction and development of infrastructurefacilities and matters connected therewith. In the businessundertaken by the assessee, the practice is that the parties on whosebehalf the assessee is undertaking the construction activities mayretain certain sum of money as security deposit which will be releasedon satisfactory completion of the project and/or fulfilment of certainpre-fixed terms and conditions as mutually agreed between the parties. The assessee has been following the mandatory accountingstandard/AS-VII and booked the gross value of progressive runningaccount bills as income in the year in which the bills were raised oncustomers irrespective of whether payments were received from themor not. The gross value of the running account bills was explained toinclude amount retained by the customers as securitydeposit/retention money on such bills. The assessee contended thatthe retention money though retained by customers, were credited bythe assessee to its profit and loss account as income in the year inwhich the bills were raised. Hence, as and when the securitydeposit/retention money was refunded by the customer to theassessee, the same was not considered as income by the assessee.This was not accepted by the Assessing Officer and his view wasupheld by the Commissioner of Income Tax (Appeals). The Tribunalon appeal by the assessee tested the contention advanced by theassessee and took note of the explanation offered by the assessee inrespect of the books of accounts and held as follows :- “5.1 It was submitted that the security deduction by clients account isclubbed under `Loans & Advances’ and the same is disclosed in theasset side of the balance sheet. Subsequently, when security deposit isrefunded by the customers, the following entry is passed in the books:- Bank Account DrTo Security Deduction by Clients AccoutnCr (Entry passed at the time of refund of security deposit by customers) “5.1 It was submitted that the security deduction by clients account isclubbed under `Loans & Advances’ and the same is disclosed in theasset side of the balance sheet. Subsequently, when security deposit isrefunded by the customers, the following entry is passed in the books:- Bank Account DrTo Security Deduction by Clients AccoutnCr (Entry passed at the time of refund of security deposit by customers) 6.We find from the aforesaid entries passed, there is absolutely nocase made out by the revenue for making an addition towards theretention money in the sum of Rs. 3,25,03,665/- on the ground ofunder-reporting of sales. We find that the sales are always reflectedonly at the gross value and a portion of it (which is retained asretention money) is reflected in Loans & Advances and the same isknocked off as and when the same is received from customer.Hence it does not in any way affect the sales account warrantingany addition. In fact the gross sales were duly offered to tax inearlier years which included the retention money component also.The ld. AR also stated that no such addition was made by the ld AOeither in the earlier years or in the subsequent years. Hence wehave no hesitation in holding that the revenue had grossly erred inmaking this addition towards retention money in the sum of Rs.3,25,03,665/- in the facts and circumstances of the case.Accordingly, the grounds raised by the assessee are allowed.” On a perusal of the above finding, we are of the clear view that theTribunal has taken note of the fact situation and confirmed that thesales are always reflected only at the gross value and a portion of itwhich is retained as retention money is reflected in loans andadvances and the same is knocked off as and when the same isreceived from the customer. Therefore, the Tribunal on facts wassatisfied that it does not in any way affect the sales accountwarranting any addition. Furthermore, the Tribunal noted that thegross sales were duly offered to tax in the earlier years which included the retention money and no addition was made by the AssessingOfficer for the earlier year or in the subsequent year and theassessment year under consideration (A.Y. 2010-11) appears to beonly year during which the Assessing Officer took a different view.Thus, we find that there are no questions of law arising forconsideration in this appeal, much less substantial questions of law.Consequently, the appeal fails and is dismissed. The finding given by the Tribunal if needs to be upset, it wouldamount to a case of double taxation. With the dismissal of the appeal, the connected application is alsodismissed. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.) SN/S. DasAR(CR)