M/s. Anshul Siddhi Promoters & Builders, Pune V. Deputy Commissioner of Income-tax, Central Circle -2 (4), Pune

CO 28/PUN/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3134 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-07-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 13-06-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Search and seizure; Retraction
• Section: 132; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / IT(SS)A No.90/PUN/2019 िनधाᭅरण वषᭅ / Assessment Year : 2016-17 The Deputy Commissioner of Income-tax, Central Circle 2(4), Pune .......अपीलाथᱮ / Appellant बनाम / V/s. M/s. Anshul Siddhi Promoters & Builders, Unit-501, 5 th Floor, Karan Tej Bonita, CTS No.1187/16, Ghole Road, Shivajinagar, Pune – 411005 PAN: AAZFS8803L ......ᮧ᭜यथᱮ / Respondent CO No.28/PUN/2022 िनधाᭅरण वषᭅ / Assessment Year : 2016-17 M/s. Anshul Siddhi Promoters & Builders, Unit-501, 5 th Floor, Karan Tej Bonita, CTS No.1187/16, Ghole Road, Shivajinagar, Pune – 411005 PAN: AAZFS8803L .......Cross Objector बनाम / V/s. The Deputy Commissioner of Income-tax, Central Circle 2(4), Pune ......ᮧ᭜यथᱮ / Respondent 2 IT(SS)A Nos.90 & 91/PUN/2019 CO Nos.28 & 29/PUN/2022 आयकर अपील सं. / IT(SS)A No.91/PUN/2019 िनधाᭅरण वषᭅ / Assessment Year : 2016-17 The Deputy Commissioner of Income-tax, Central Circle 2(4), Pune .......अपीलाथᱮ / Appellant बनाम / V/s. M/s. Anshul Bhosale Reality, Unit-501, 5 th Floor, Karan Tej Bonita, CTS No.1187/16, Ghole Road, Shivajinagar, Pune – 411005 PAN: AATFA3195M ......ᮧ᭜यथᱮ / Respondent CO No.29/PUN/2022 िनधाᭅरण वषᭅ / Assessment Year : 2016-17 M/s. Anshul Bhosale Reality, Unit-501, 5 th Floor, Karan Tej Bonita, CTS No.1187/16, Ghole Road, Shivajinagar, Pune – 411005 PAN: AATFA3195M .......Cross Objector बनाम / V/s. The Deputy Commissioner of Income-tax, Central Circle 2(4), Pune ......ᮧ᭜यथᱮ / Respondent Assessee by : Shri S.N. Puranik Revenue by : Shri Abhinay S. Kumbhar, CIT सुनवाई कᳱ तारीख / Date of Hearing : 19-07-2022 घोषणा कᳱ तारीख / Date of Pronouncement : 23-08-2022 3 IT(SS)A Nos.90 & 91/PUN/2019 CO Nos.28 & 29/PUN/2022 आदेश / ORDER PER INTURI RAMA RAO, AM: These are two appeals filed by the Revenue relating to different assessees directed against separate orders of the Ld. Commissioner of Income Tax (Appeals)-12, Pune, both dated 29.03.2019 for the assessment year 2016-17. The assessees filed their respective COs. 2. Since the identical facts and issues are involved in all both the appeals, we proceed to dispose of them vide this common order. 3. For the sake of clarity and convenience, the facts relevant for the appeal in IT(SS)A No.90/PUN/2019 in the case of M/s. Anshul Siddhi Promoters & Builders are stated herein. 4. The Revenue in IT(SS)A No.90/PUN/2019 has raised the following grounds of appeal: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 5,98,49,207/- made by the AO on account of change in method of revenue recognition from project completion method to percentage completion method. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the method of revenue recognition applied(Project completion method) by the AO without appreciating the fact that the major portion of the project has been completed and already sold/booked but revenue has not been recognized by the assessee. 5. Briefly, the facts of the case are as under: 4 IT(SS)A Nos.90 & 91/PUN/2019 CO Nos.28 & 29/PUN/2022 The respondent-assessee is a partnership firm duly constituted under the Partnership Act. It is engaged in the business of promoters and builders. The return of income for the assessment year 2016-17 was filed on 30.11.2016 declaring total income of Rs.10,01,08,330/-. Subsequently, search and seizure operations u/s 132 of the Act were conducted in the premises of the assessee company on 28.03.2016. During the course of search and seizure operations, a statement was recorded of one Mr. Deepak Jagtap, who is the partner of assessee firm on 30.03.2016, wherein it is stated that he had admitted income of Rs.15,98,69,802/- as undisclosed income for the assessment year 2016-17. This undisclosed income is on account of recognition of income on percentage completion method as against project completion method followed by the assessee firm. During the course of search and seizure operations, it is found that housing projects have been completed, but no revenue was recognized. This information was confronted with the partner of firm, Shri Deepak Jagtap, who is stated to have admitted income of Rs.15,98,69,802/- under percentage of completion method. Based on this statement, the AO made addition of Rs.5,98,49,207/- being the difference between the amount disclosed in the statement given u/s 132(4) of Rs.15,98,69,802/- and the amount of Rs.10,01,08,330/- declared by the assessee in the return of income as per project completion method. 6. Being aggrieved by the above addition, an appeal was filed before the CIT(A), who vide impugned order deleted the addition by holding that the addition on account of change in the method of accounting income from 5 IT(SS)A Nos.90 & 91/PUN/2019 CO Nos.28 & 29/PUN/2022 project completion method to percentage completion method is not warranted as the assessee firm followed one of the recognized methods of accounting, placing reliance on the following decisions :- (i) CIT vs. Aditya Builders, 378 ITR 93 (Bom.-HC). (ii) Krish Infrastructure P. Ltd. vs. ACIT, 35 taxmann.com 38 (Jaipur-ITAT). (iii) Investment Ltd. vs. CIT, 77 ITR 533 (SC). (iv) Excel Industries Ltd., 358 ITR 295 (SC). (v) Hill View Infrastructure Pvt. Ltd., 384 ITR 451 (P&H-HC). (vi) Bilahari Investment P. Ltd. vs. CIT, 215 CTR 201 (SC). (vii) DCIT vs. Associated Petroleum Corporation, 7 taxmann.com 42 (ITAT-Ahmedabad). (viii) Mr. K. N. Ramchandra Naidu vs. CIT (ITA No.47/PNJ/2013). 7. Being aggrieved by the order of CIT(A), Revenue is in appeal before us in the present appeal challenging the correctness of the decision of CIT(A). The ld. CIT-DR submits that the CIT(A) ought not to have deleted the addition made by the AO on account of change in method of revenue recognition from project completion to percentage completion method without appreciating the fact that the entire housing projects have been completed and already sold and booked. He further submits that the addition made by the AO is based on the statement given u/s 132(4) mere retraction of statement subsequently does not invalidate the statement given u/s 132(4). 6 IT(SS)A Nos.90 & 91/PUN/2019 CO Nos.28 & 29/PUN/2022 8. On the other hand, the ld. AR submits that the assessee firm has been regularly following the project completion method for the purpose of recognizing the income from execution of housing projects. It is not case of the AO that the assessee has not been following regularly this method nor the AO rejected the book results. He submits that the contention of AO that if the project completion method is accepted, it would be deferment of tax indefinitely is not correct as it is tax neutral. He further submits that revenue recognition under project completion method is accepted by the Hon’ble jurisdictional High Court in the case of CIT vs. Aditya Builders (2015) 378 ITR 75 (Bom) and placed reliance on the ratios laid down in the cases of Pr.CIT vs. Nathpa Jhakri Joint Venture, 299 ITR 1 (Bom), CIT vs. Manish Build Well (P.) Ltd. (2011) 245 CTR 397 (Del) and CIT vs. Varun Developers, 440 ITR 354 (Kar). Finally, he submits that in the preceding assessment year i.e. 2015-16, the AO has accepted project completion method followed by the assessee and there is no reason as to why the same cannot be followed to deviate from the earlier years. 9. We have heard the rival contentions and perused material on record. The issue in the present appeal relates to whether or not the AO was justified in changing the method of recognizing income which has been regularly followed by the assessee. The assessee is a real estate builder. The assessee had been submitting that it has been following regularly, project completion method for the purpose of recognition of income, earned from housing projects. During the course of search and seizure operations, it is found that majority of the projects had been completed but 7 IT(SS)A Nos.90 & 91/PUN/2019 CO Nos.28 & 29/PUN/2022 no income was offered to tax. When the partner of the assessee firm was confronted with this information, he gave a statement admitting the additional income of Rs.15,98,69,802/- on account of change in method of accounting i.e. from project completion method to percentage completion method. However, this statement was retracted subsequently. 10. It would be suffice to say that there is no evidentiary value for the statement given u/s 132(4) for the reason that the addition on account of change of method of accounting is a purely legal one and moreover, having found that the assessee has been regularly following the project completion method, which is also a recognized method, it is not open to the Department to reject such method because according to the AO, the percentage completion method was preferable to project completion method. Once the assessee chosen a particular method of accounting and accepted by the Department in earlier years, the same should not lightly to be substituted, unless the Department is able to show that the same distorts the profits for a particular year. The choice of method of accounting is always left to the assessee as held by the Hon’ble Apex Court in the case of United Commercial Bank Vs CIT, 240 ITR 355 (SC). Thus, the CIT(A) had rightly applied the correct position of law to the facts of the present case and rightly held that it is not open to the AO to disturb the method of accounting and make addition. 11. However, the AO had no occasion to examine the correctness of amount of taxable profits offered under project completion method nor the 8 IT(SS)A Nos.90 & 91/PUN/2019 CO Nos.28 & 29/PUN/2022 CIT(A) had examined the issue of correct taxable income under project completion method. Therefore, we remit the matter back to the file of AO with a direction to assess the correct income derived from the execution of housing project under project completion method, in accordance with law after affording reasonable opportunity of hearing to the assessee. 12. In view of our above decision restoring the issue back to the file of AO, the Cross Objection filed by the assessee becomes infructuous. 13. As mentioned earlier, the facts and issues involved in IT(SS)A No.91/PUN/2019 and CO No.29/PUN/2022 are identical, therefore, our decision in IT(SS)A No.90/PUN/2019 & CO No.28/PUN/2022 shall apply mutatis mutandis to IT(SS)A No.91/PUN/2019 and CO No.29/PUN/2022. Accordingly, the grounds of appeal raised by the Revenue in IT(SS)A Nos.90 & 91/PUN/2019 are allowed for statistical purposes. 14. Resultantly, the appeals of Revenue are allowed for statistical purposes and COs of assessee are disposed of in above terms. Order pronounced in the open court on 23 rd August, 2022. Sd/- Sd/- S.S.VISWANETHRA RAVI INTURI RAMA RAO JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 23 rd August, 2022 GCVSR/Sujeet 9 IT(SS)A Nos.90 & 91/PUN/2019 CO Nos.28 & 29/PUN/2022 आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order is forwarded to : 1. अपीलाथᱮ / The Appellant; 2. ᮧ᭜यथᱮ / The Respondent; 3. आयकर आयुᲦ(अपील) / The CIT(A)-12, Pune; 4. The Pr.CIT-Central, Pune; 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, पुणे “A” / DR ‘A’, ITAT, Pune; 6. गाडᭅ फाईल / Guard file. आदेशानुसार / BY ORDER, //स᭜यािपत ᮧित// True Copy// वᳯर᳧ िनजी सिचव / Sr. Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune