T.M. Francis, Proprietor vs Commissioner of Income Tax

C.N. Ramachandran Nair, J.—Heard Sri. K.R. Sudhakaran Pillai, counsel appearing for the appellant and Standing Counsel appearing for the respondent-assessee. The appellant-assessee is a contractor who was engaged in construction of ice plants. During the accounting year relevant for the assessment year 1992-93, the Assessing Officer made an addition of Rs. 15,42,425 towards bill amount and a further sum of Rs. 4 lakhs raised on M/s. Cochin Frozen Food Export (P.) Ltd., omitted to be included by the assessee in the return filed. Similarly a further sum of Rs. 4 lakhs was added towards bill raised on M/s. Horisona Food Exports. While the Assessing Officer justified addition by holding that assessee was following mercantile system of accounting and the entire amounts billed are includible in the income, the assessee took the stand that it was following cash system of accounting and therefore, only received amounts form part of income. In fact the first appeal filed by the assessee was allowed by the appellate authority holding that assessee was following cash system of accounting. The Tribunal, however, accepted the department''s contention and reversed the first appellate authority''s order holding that assessee is maintaining mercantile system of accounting and therefore, bills raised are accountable. So far as the addition of Rs. 15,42,425 is concerned, the case of the assessee is that even though the amounts were billed during the accounting year, there was dispute between the assessee and the contractee which led to settlement wherein assessee received only Rs. 9,35,000 which was accounted by the assessee. Standing Counsel on the other hand submitted that the original contract amount was Rs. 38 lakhs and amount added represents bills raised subsequent to the settlement. We are surprised to note that the assessee has not come forward with the full facts even when the appeal was filed before this Court in 2004. If the assessee has a case that the bill amounts were later accounted after receipt and tax paid, the assessee could have stated that amount got assessed in later years. On the other hand if bills were not received, assessee would have written off and claimed benefit in subsequent year. Neither of these facts are available on record. However, we feel an opportunity can be granted to the assessee to prove before the officer the subsequent developments and if it is found that same amount is assessed in the next year, the officer will grant relief in this year to avoid duplication of assessment of same amount. The assessee also has not produced any evidence from the contractee to prove the terms of settlement and payments to prove his case before any of the authorities. In any case in the interest of justice, we grant an opportunity to the assessee to produce any such evidence also before the Assessing Officer who, if required, can cross-check with the assessment records of the contractee and can grant relief to avoid double assessment of the same amount, if any made.

So far as the addition of Rs. 4 lakhs is concerned, we are not able to accept the argument of the department that this is assesseable on mercantile basis because entire contract amount of Rs. 12 lakhs were stated to be billed by the assessee under two invoices dated 12-11-1990 and 29-ll-1990 which falls within the accounting year relevant for the assessment year 1991-92. However, Standing Counsel submitted that assessee is accounting on contract-completion basis and contract with Horison Food Exports appears to have been completed only during the accounting year relevant for the assessment year 1992-93. Since we are remanding the case for verification in respect of the contract with the other party, we direct the officer to verify whether the full contract amount billed for the work executed for Horison Food Exports got assessed in the earlier year 1991-92. Here again, we direct the officer to verify the assessment records of the earlier year and if required, of the subsequent year also and make correction to avoid duplication. We make it clear that the Assessing Officer need to re-investigate the matter only if the assessee produces proof of assessment of the same amount for any earlier or subsequent year. The appeal is disposed of directing the Assessing Officer to make modification to the extent required in terms of the above direction. The Tribunal''s order will stand modified to the above extent.