Advance received by contractor in excess of bill raised by him couldn’t be taxed on receipt basis

HIGH COURT OF GUJARAT

Rudraksh Builders v. Assistant Commissioner of Income-tax*

Section 5, read with sections 143(1)(a) and 194C, of the Income-tax Act, 1961 – Income – Accrual of (Advances) – Assessment year 1996-97 – Assessee had carried out certain work on behalf of one ‘R’ as sub-contractor and towards same, it had received various amounts from time to time during relevant year – Assessee had received Rs. 16.30 lakhs from ‘R’, who had deducted 2 per cent TDS from said amount – It was found that assessee carried out work and received payment towards same throughout year – However, it raised bill at end of year and on account of that, payment amount was more than bill amount – Whether since actual work carried out by assessee during relevant year was to extent of bill raised, assessee was justified in not showing income to extent of excess amount received from ‘R’ – Held, yes – Whether, therefore, Assessing officer was not justified in taking difference as prima facie adjustment under section 143(1)(a) – Held, yes [Para 11] [In favour of assessee]