KOREGAON PROPERTIES P.LTD, MUMBAI V. DCIT CIR 6(2), MUMBAI

CO 114/MUM/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9727 (ITAT-MUMBAI)
• Duration Of Justice: 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S SENT H IL KUMARAN
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & VIVEK VARMA , J M ITA NO. 2016 / M UM/20 1 3 ( ASSESSMENT YEAR : 20 0 8 - 09 ) DCIT, CIR - 6(2), MUMBAI VS. M/S KOREGAON P ROPERTIES PVT. LTD., G RIKRUPA, KAZI SAYED STREET, MUMBAI - 400 003 PAN/GIR NO. : A A A CK 9386 L ( APPELLANT ) .. ( RESPONDENT ) AND . 114 / MUM/20 1 4 (ARISING OUT OF ITA NO. 2016 /MUM/201 3 ) ( ASSESSMENT YEAR :2008 - 0 9 ) M/S KOREGAON PROPERTIES PVT. LTD., GRIKRUPA, KAZI SAYED STREET, MUMBAI - 400 003 VS. DCIT, CIR - 6(2), MUMBAI PAN/GIR NO. : A AACK 9386 L ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : MR. S.SENTHIL KUMARAN /ASSESSEE BY : MR. VIJAY MEHTA DATE OF HEARING : 12 TH JUNE , 201 4 DATE OF PRONOUNCEMENT : 20 TH JUNE , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THE REVENUE HAS FILED APPEAL, WHEREAS THE ASSESSEE HAS FILED CROSS OBJECTIONS, AGAINST THE ORDER OF CIT(A) DATED 24 - 12 - 2012, FOR THE ITA NO. 2016 /1 3 & CO NO. 114/14 2 ASSESSMENT YEAR 200 8 - 09 , IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN BUSINESS OF REAL ESTATE DEVELOPMENT. DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING INCOME OF RS. 2,89,63,123/ - . THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT ORDER DATED 31 - 12 - 2010 HAS BEEN PASSED U/S. 143(3) OF THE ACT ASSESSING TH E TOTAL INCOME AT RS. 4,86,52,093/ - . THE ENHANCEMENT TO THE INCOME IS ON ACCOUNT OF TREATING THE ADVANCES RECEIVED FROM FOLLOWING FOUR PARTIES AS ALLEGED SUPPRESSED SALES AMOUNTING TO RS. 1,96,88,970/ - : - SL.NO. NAME OF THE PARTY AMOUNT (RUPEES) 1 SEVEN SEA S ENTERPRISES 1,11,00,000 2 MORYA INDUSTRIES 24,00,000 3 SARASWATI 45,00,000 4 RAMESH SHAH 16,88,969 3 . THE ASSESSEE HAS CARRIED DEVELOPMENT AND CONSTRUCTION OF RESIDENTIAL BUILDING KNOWN AS MIT RIVIERA AT BOAT CLUB ROAD, PUNE - 411 001 . THE PROJECT C OMMENCED IN THE YEAR 1994 , AND DUE TO VARIOUS CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE THE PROJECT TOOK A LONG PERIOD FOR ITS COMPLETION. THE SAID PROJECT COMPRISES RESIDENTIAL BUILDING COMPRISING OF 33 FLAT. AS THE PROJECT WAS COMPLETED DURING THE Y EAR UNDER CONSIDERATION, THE ASSESSEE HAS OFFERED FOR TAXATION ITS ITA NO. 2016 /1 3 & CO NO. 114/14 3 PROFIT IN THE F.Y. 2007 - 08 RELEVANT TO THE A.Y.2008 - 09 UNDER CONSIDERATION . THE ASSESSEE IN THE COURSE OF ITS CONSTRUCTION OF THE SAID PROJECT RECEIVED ADVANCES FROM THE VARIOUS PROSPECTI VE BUYERS AMOUNTING TO RS. 15,61,32,677/ - AS ON 31 - 3 - 2007. OF THE TOTAL 33 FLATS THE ASSESSEE WERE ABLE TO SALE 31 FLATS AS ON 31 - 3 - 2008. OF THE TOTAL ADVANCES RECEIVED AMOUNTING TO RS. 15,61,32,677/ - THE SALE PROCEEDS , INCLUDING CHARGES FOR AMENITIES AND MA INTENANCE DEPOSITS, IN RESPECT OF THE SAID 31 FLATS AMOUNTING TO RS. 13,64,43,708/ - WAS CREDITED TO PROFIT AND LOSS ACCOUNT AND OFFERED FO R TAXATION. THE 2 UNSOLD FLATS BEARING FLAT NOS. 111 - A AND 111 - B WERE VALUED AT COST OF RS. 79,18,795/ - WERE SHOWN AS ST OCK IN TRADE AND WAS CREDITED TO PROFIT AND LOSS ACCOUNT. PARTICULARS AMOUNT (RUPEES) SALES PROCEEDS OF 31 FLATS 13,64,43,708 LESS:COST OF CONSTRUCTION 11,53,62,422 NET PROFIT 2,10,81,286 ADD: CLOSING STOCK OF 2 FLATS 79,18,795 TOTAL PROFIT OFFERED F ROM THE PROJECT 2,90,00,081 THE BALANCE ADVANCE RECEIVED AMOUNTING TO RS. 1,96,88,969/ - (15,61,32,677 13,64,43,708) TO WHOM NO UNITS WERE SOLD WERE REPAID DURING THE FINANCIAL YEAR 2007 - 08. THE UNPAID AMOUNT AS ON 31 - 3 - 2008 AMOUNTING TO RS. 35,80,000/ - WAS CARRIED FORWARD AS AMOUNT PAYABLE. FURTHER OF THE AMOUNT PAYABLE AMOUNTING TO RS. 35,80,000/ - SUM OF RS. 11,80,000/ - WAS REPAID TO SARASWATI DURING THE FINANCIAL YEAR 2008 - 09 RELEVANT TO ASSESSMENT YEAR 2009 - 10. THE BALA NCE AMOUNT OF ITA NO. 2016 /1 3 & CO NO. 114/14 4 RS. 24,00,000/ - PAYAB LE TO M/S MORYA INDUSTRIES IS CARRIED FORWARD AS ON 31 - 3 - 2009. THE YEAR WISE DETAILS ARE TABULATED HEREIN BELOW : NAME OF THE PARTY BALANCE AS ON 31 - 3 - 2008 REPAID DURING FY 2008 - 09 BALANCE AS ON 31 - 3 - 2009 SEVEN SEAS ENTERPRISES NIL - NIL MORYA INDUSTRIES 24,00,000 - 24,00,000 SARASWATI 11,80,000 11,80,000 NIL TOTAL 35,80,000 11,80,000 24,00,000 BEING NOT SATISFIED WITH THE ASSESSEES EXPLANATION, THE AO ADDED ALL THE FOUR ADVANCES IN ASSESSEES INCOME TREATING THE SAME AS SUPPRESSED PROFIT ON SALES O F FLATS . BY THE IMPUGNED ORDER, THE CIT(A) DELETED ADDITIONS IN RESPECT OF ALL THE FOUR PARTIES. AGAINST THE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US IN RESPECT OF ADVANCES TAKEN AND REPAID TO TWO PARTIES NAMELY, SAR A SWATI AND RAMESH SHA H , WHICH WERE DELETED BY THE CIT(A) . THE ASSESSEE HAS ALSO FILED CROSS OBJECTION ALLEGING THAT ADVANCE RECEIVED FROM SARASWATI AND RAMESH SHAH ARE NOT TAXABLE AS SUPPRESSED PROFIT ON SALE OF FLAT. IT WAS ALSO ALLEGED THAT AMOUNT OF ADVANCE WAS NOT RECEIVED IN A.Y.2008 - 09, THEREFORE, THE SAME WAS NOT TAXABLE AS UNEXPLAINED ADVANCE IN A.Y. 2008 - 09. 4 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE IS A BUILDER. IT HAS UND ERTAKEN CONSTRUCTION OF A RESIDENTIAL PROJECT OF 33 FLATS IN THE YEAR 1994. THE PROJECT WAS COMPLETED DURING ITA NO. 2016 /1 3 & CO NO. 114/14 5 THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 208 - 09. TILL 31 - 3 - 2008, ASSESSEE HAS SOLD 32 FLATS AND 2 FLATS ARE SHOWN AS STOCK - IN - TRADE. 5 . DURI NG THE COURSE OF ASSESSMENT, THE AO FOUND THAT THE ASSESSEE WAS IN RECEIPT OF TOTAL ADVANCE OF RS. 15,61,32,677/ - AS ADVANCE FOR SALE OF FLATS, WHEREAS IN THE PROFIT AND LOSS ACCOUNT, RECEIPT OF SALE OF FLATS HAS BEEN SHOWN AS RS. 1 3 ,64, 43, 708/ - ONLY. ACCO RDINGLY, DIFFERENCE OF THESE TWO AMOUNTS WERE ADDED BY THE AO UNDER THE HEAD ADDITION ON ACCOUNT OF SUPPRESSED PROFIT ON SALE. THE CONTENTION OF THE ASSESSEE WAS THAT AMOUNT WAS RECEIVED AS ADVANCE AGAINST SALE OF FLATS AND SINCE NO SALE WAS EFFECTED TO TH ESE FOUR PARTIES, SAME WAS REPAID BY ASSESSEE BY ACCOUNT PAYEE CHEQUE. HOWEVER, THE AO DID NOT AGREE WITH THE ASSESSEES CONTENTION AND ADDED THE DIFFERENCE BEING ADVANCE SO RECEIVED AS SUPPRESSED PROFIT ON SALE OF FLATS. BY THE IMPUGNED ORDER, CIT(A) DELE TED THE ADDITION AFTER RECORDING A FINDING THAT ADVANCE SO RECEIVED WAS REPAID BY ASSESSEE BY ACCOUNT PAYEE CHEQUE. THESE F INDINGS HAVE BEEN RECORDED BY THE CIT(A) AT PARA 6.4, 6.5 & 6.6 OF HIS APPELLATE ORDER . 6 . FOR THE RECORD, WE ALSO FOUND THAT D URING THE COURSE OF APPELLATE PROCEEDINGS, WHATEVER INFORMATION WAS FURNISHED BY THE ASSESSEE WERE SENT BY CIT(A) TO THE AO FOR HIS REMAND REPORT AND AFTER CONSIDERING THE REMAND REPORT AS WELL AS COUNTER REPLY OF THE ASSESSEE, THE CIT(A) OBSERVED THAT ASSESSEE VIDE ITS LETTER DATED 19 - ITA NO. 2016 /1 3 & CO NO. 114/14 6 11 - 2012 GIVEN FULL PARTICULARS TO THE AO. HE FURTHER OBSERVED THAT ASSESSEE HAD ALSO FILED BANK DETAILS OF THE CITY BANK ACCOUNT BEARING NO. 0846599118 AND THAT OF BANK OF BARODA ACCOUNT BEARING NO. 0398020000046, WHICH IS EVIDENCIN G RE PAYMENT TO THESE PARTIES BY ACCOUNT PAYEE CHEQUE. THE CIT(A) ALSO OBSERVED THAT REPAYMENT MADE TO THESE PARTIES WERE ALSO REFLECTED IN LEDGER ACCOUNT OF THE ASSESSEE COMPANY. THE CIT(A) FOUND THAT ASSESSEE HAS PRODUCED ALL DOCUMENTS TO ESTABLISH ITS CA SE REGARDING RECEIPT AND REPAYMENT OF ADVANCES. IN VIEW OF THE FINDING RECORDED BY THE CIT(A) WITH REGARD TO THE FACT THAT AMOUNT WAS RECEIVED FROM THESE TWO PARTIES AS ADVANCE AGAINST SALE OF FLAT AND SINCE NO SALES WERE EFFECTED TO THESE PARTIES, ADVANCE S SO RECEIVED WERE RETURNED BACK BY ACCOUNT PAYEE CHEQUE TO THESE PARTIES , THERE IS NO JUSTIFICATION FOR MAKING ANY ADDITION BY TREATING THE SAME AS SUPPRESSED PROFIT ON SALE OF FLATS. FROM THE RECORD WE ALSO FOUND THAT OUT OF 33 FLATS THE ASSESSEE HAD DU LY RECORDED AND ACCOUNTED FOR ADVANCE RECEIVED IN RESPECT OF 31 FLATS SOLD DURING THE YEAR, AS INCOME THE YEAR UNDER CONSIDERATION AND THE TWO FLATS, WHICH WERE NOT SOLD WERE TAKEN INTO CLOSING STOCK. AFTER CONSIDERING THE DOCUMENT SUBMITTED BY THE ASSESSE E AND THE REMAND REPORT, THE CIT(A) HAS CATEGORICALLY RECORDED A FINDING TO THE EFFECT THAT ADVANCE RECEIVED FROM THESE TWO CUSTOMERS WERE REPAID BY ACCOUNT PAYEE CHEQUE . THE FINDINGS SO RECORDED BY CIT(A) ARE FURTHER SUPPORTED BY DOCUMENTARY EVIDENCE FILE D BEFORE THE LOWER AUTHORITIES ITA NO. 2016 /1 3 & CO NO. 114/14 7 IN THE FORM OF COPY OF AUDITED LEDGE ACCOUNT OF THESE PARTIES COMMENCING FROM THE YEAR OF RECEIPT OF ADVANCE TILL THE YEAR OF REPAYMENT. WITH REGARD TO THE GROUND TAKEN BY THE REVENUE UNDER RULE 46A, WE FOUND THAT AFTER CALL ING REMAND REPORT FROM THE AO, THE CIT(A) HAS RECORDED CATEGORICAL FINDING WITH REGARD TO THE RECEIPT OF ADVANCE AND REPAYMENT OF THE SAME TO THESE TWO PARTIES. ACCORDINGLY, THE GROUND TAKEN BY THE REVENUE UNDER RULE 46A HAS NO LEGS TO STAND. T HE DETAILED FINDING RECORDED BY CIT(A) AT PARA 6 OF HIS APPELLATE ORDER HAS NOT BEEN CONTROVERTED BY DEPARTMENT BY BRINING ANY POSITIVE MATERIAL ON RECORD , A CCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A) FOR DELETING THE ADDITION MADE W ITH RESPECT TO THE AMOUNT RETURNED TO THESE TWO PARTIES. 7 . IN CROSS OBJECTION, THE ASSESSEE IS AGGRIEVED FOR TREATING SUCH ADVANCE BY THE AO AS SUPPRESSED PROFIT ON SALE OF FLATS IN THE ASSESSMENT YEAR 2008 - 09. AS THERE WAS NO SALE OF FLAT TO THESE TWO PARTIES NAMELY RAMESH SHAH AND SARASWATI , AND THE ADVANCES SO RECEIVED WERE ALSO REFUNDED TO THE SE PARTIES, WE DO NOT FIND ANY JUSTIFICATION IN THE ORDER OF AO FOR BRINING SUCH ADVANCES AS SUPPRESSED PROFIT ON SALE OF FLATS. 8 . IN THE CROSS OBJECTION, TH E ASSESSEE IS ALSO AGGRIEVED FOR ADDITION OF THE AMOUNT OF ADVANCE ON THE PLEA THAT THESE ADVANCES WERE NOT RECEIVED DURING THE RELEVANT ASSESSMENT YEAR UNDER ITA NO. 2016 /1 3 & CO NO. 114/14 8 CONSIDERATION I.E. 2008 - 09. AS PER LEARNED AR, THE ADVANCES WERE RECEIVED IN EARLIER YEAR, THEREF ORE, THERE IS NO JUSTIFICATION FOR ADDING THE SAME AS SUPPRESSED PROFIT ON SALE OF FLATS DURING THE YEAR UNDER CONSIDERATION I.E. A.Y.2008 - 09. SO FAR AS GROUND NO. 2 OF THE CROSS OBJECTION IS CONCERNED, THE SAME HAS BECOME INFRUCTUOUS IN VIEW OF THE UPHOLDI NG OF CIT(A)S ACTION FOR DELETING THE ADDITION MADE ON ACCOUNT OF ADVANCE RETURNED BACK TO THESE TWO PARTIES. 9 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED, WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED IN PART IN TERMS AS INDICATE D HEREIN ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH JUNE, 201 4 . 20 TH JUNE ,2014 SD/ - SD/ - ( ) ( VIVEK VARMA ) ( ) ( R.C.SHA RMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED /06 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2 . / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//