The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the amount declared as an advance in the year under consideration and offered to tax in the subsequent year cannot be again added to the income of the assessee as it will result in double taxation.
The assessee is engaged in the business of a contractor for building development with labour and materials. For the year under consideration, the assessee did not file its return of income. Subsequently, pursuant to the notice issued under Section 142(1) of the Income Tax Act, 1961, the assessee filed its return of income declaring a total income of Rs. 91,73,403.
During the reassessment proceedings, it was observed that during the year under consideration, contractual payments were received by the assessee amounting to 12,05,88,663 from M/s Sigrun Realities Ltd. It was further observed that as per the profit and loss account, the assessee has recognized income of contractual payments amounting to Rs. 9,85,88,663 only.
In light of the provisions of Section 199 of the Income Tax Act, the Assessing Officer disallowed proportionate tax deducted at source (TDS) credit of Rs. 4,98,520, since credit for TDS shall be allowable only in the year in which the income is assessable. The Assessing Officer further held that the assessee is free to claim the said credit in the year in which the corresponding income has been offered to tax. He assessed the total income of the assessee at Rs. 96,56,230.
The Commissioner of Income Tax (CIT) vide order passed under Section 263 of the Income Tax Act set aside the assessment order on the basis that the entire payment of Rs. 12,05,88,663 was towards the contract cost and work carried out by the assessee and the entire TDS deducted was claimed by the assessee. The CIT held that the assessee has in its return of income not shown income of Rs. 2,26,08,779 (Rs. 12,05,88,663 – Rs. 9,79,79,884) for the relevant assessment year.
The Two-member bench comprising of Prashant Maharishi (Accountant member) and Sandeep Singh Karhail (Judicial member) held that the CIT(A) had correctly directed the Assessing Officer to delete the addition of Rs. 2,20,68,779, which was declared as advance by the assessee in the year under consideration and offered to tax in the subsequent year on the basis of project completion.
Therefore, the bench didn’t find any infirmity in the directions of the CIT(A) to restrict the credit of TDS only with respect to the income of Rs. 9,79,79,884 for the assessment year 2008-09 and the balance excess claim for TDS be allowed in the subsequent years in which the income has been offered to tax as per the consistent accounting practice followed by the assessee. Accordingly, the order passed by the CIT(A) was upheld and the appeal of the Revenue was dismissed.
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