M/s. Malibu Estates Pvt. Ltd, New Delhi V. DCIT, New Delhi

CO 381/DEL/2009

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7182 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 09-04-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 30-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RA J TANDON
• Assessee Lawyers: SSH ANIL KUMAR CHOPRA; KVK GARG
• Keywords: Rectification of order; Additional evidence
• Section: 145; 144; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI B.C. MEENA ITA NO. 4085/DEL/2009 ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF IT, VS. MALIBU ESTATES PVT. LTD., CIRCLE-1(1), 38-DDA COMMERCIAL COMPLEX NEW DELHI. KAILASH COLONY, N.DELHI (PAN: NOT MENTIONED ) (APPELLANT) (RESPONDENT) CROSS OBJ. NO. 381/DEL/2009 ( IN ITA NO. 4085/DEL/2009 ) ASSESSMENT YEAR: 2006-07 MALIBU ESTATES PVT. LTD., VS. DEPUTY COMMISSIONER OF IT, 38-DDA COMMERCIAL COMPLEX CIRCLE 1(1), KAILASH COLONY, N.DELHI NEW DELHI. (PAN: NOT MENTIONED ) (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI RAJ T ANDON, CIT(DR) ASSESSEE BY: S/SH. ANIL KUMAR CHOPRA, CA & KVK GARG, ADV. DATE OF HEARING : 09.04.2012 DATE OF PRONOUNCEMENT : 20.04.2012 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED COMMISSIONER DATED 31.07.2009 PASSED FOR ASSESSMENT YEAR 2006-07. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, ASSESSEE -RESPONDENT FILED CROSS OBJECTION BEARING NO. 381/DEL/09. 2 2. IN GROUND NO.1, REVENUE HAS PLEADED THAT THE ORD ER OF LEARNED CIT(APPEALS) IS ERRONEOUS AND CONTRARY TO FACTS AND LAW. IT IS A GENERAL GROUND OF APPEAL, NO ARGUMENTS WERE ADDRESSED ON TH IS GROUND OF APPEAL, HENCE IT IS REJECTED. IN GROUND NOS. 2 AND 2.1, IT HAS BEEN PLEADED BY THE REVENUE THAT THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.8,09,68,000 BY ENTERTAINING ADDITIONAL EVIDENCE IN VIOLATION TO RULE 46A OF THE INCOME-TAX RULES, 1962. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DEVELOPMENT OF TOWNSHIP IN THE NAME AND STYLE OF MALIBU TOWNE AT GURGAON (HARYANA). IT HAS FILED ITS RETUR N OF INCOME ON 16.11.2006 DECLARING TOTAL INCOME AT RS.2,42,41,111 . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) OF THE ACT DATED 11.10.2007 WAS ISSUED AND SERVED U PON THE ASSESSEE. IN RESPONSE TO THE NOTICE OF HEARING, SHRI ANIL KUMAR, CA AND SHRI BK MAHESHWARI, AUTHORIZED REPRESENTATIVE OF THE ASSESS EE COMPANY APPEARED BEFORE THE ASSESSING OFFICER AND SUBMITTED THE DETA ILS FROM TIME TO TIME. ON AN ANALYSIS OF THE RECORD, LEARNED ASSESSING OFFICE R HAS OBSERVED THAT AGAINST THE NAME OF CERTAIN PURCHASERS, ASSESSEE HA S SHOWN ZERO BALANCE TOWARDS RECEIVEABLE. IN THE OPINION OF THE ASSESSIN G OFFICER, ONCE NOTHING 3 WAS TO BE RECOVERED THEN ASSESSEE OUGHT TO HAVE ACC OUNTED FOR THESE RECEIPTS IN THE SALE, THEREFORE, HE ISSUED A SHOW-CAUSE NOTI CE TO THE ASSESSEE ON 21.11.2006 INVITING ITS EXPLANATION AS TO WHY ADVAN CES RECEIVED FROM SOME CUSTOMERS, WHERE THERE IS A ZERO BALANCE LEFT HAVE NOT BEEN ACCOUNTED FOR SALES. HE ALSO DIRECTED THE ASSESSEE TO SUBMIT ITS METHOD OF REVENUE RECOGNITION. IN RESPONSE TO THE QUERY OF THE ASSESS ING OFFICER, ASSESSEE HAS SUBMITTED DETAILED REPLY WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE NOS. 2 & 3 OF THE ASSESSMENT ORDER. IN ORDER TO APPRECIATE THE CONTROVERSY IN MORE APPROPRIATE WAY, IT IS IMPE RATIVE UPON US TO TAKE NOTE OF THIS REPLY WHICH READS AS UNDER:- THE ASSESSEE COMPANY IS FOLLOWING PARTIAL PROJECT COMPLETION METHOD OF ACCOUNTING IN THE FOLLOWING MANNER:- (A) PLOTS/CONDOMINIUM APARTMENTS REVENUE (I) THE REVENUE IN RESPECT OF SALE OF PLOTS/APARTMENTS ARE RECOGNIZED UPON REGISTRATION OF THE SALE DEED OF TH E PLOT IN FAVOUR OF THE CUSTOMER. THE PHYSICAL POSSESSION OF THE PLOTS/APARTMENTS ARE HANDED OVER SIMULTANEOUSLY UPO N REGISTRATION OF THE SALE DEED AND IN THE ABSENCE TH EREOF, POSSESSION IS NOT HANDED OVER. THE SALE DEED IS EXECUTED ONLY UPON RECEIPT OF ALL MONIES DUE AND RECEIVABLE BY THE ASSESSEE COMPANY, WHICH INTER -ALIA INCLUDE THE BASIC SALE PRICE PREFERENTIAL LOCATION CHARGES, EXTERNAL DEVELOPMENT CHARGES, INTEREST ON DELAYED P AYMENTS, 4 CONTINGENCY DEPOSITS, MAINTENANCE DEPOSIT AND REGIS TRATION CHARGES INCLUDING STAMP DUTY. THE REVENUE IN RESPECT OF PERSONAL/VALUE FLOORS IS RECOGNIZED UPON HANDING OVER PHYSICAL POSSESSION OF THE PROPER TY TO THE CUSTOMERS. THE POSSESSION IS HANDED OVER ONLY UPON RECEIPT OF THE AMOUNT DUE AND RECEIVABLE BY THE ASSESSEE COMPA NY EXCEPT STAMP DUTY AND REGISTRATION CHARGES. THAT THE ASSESSEE COMPANY RESORTED TO A CHANGE IN A CCOUNTING POLICY IN ASSESSMENT YEAR 2004-05 IN RESPECT OF PER SONAL/VALUES FLOORS AS THE GOVT. OF HARYANA AMENDED ITS POLICY B Y DECLINING TO REGISTER SALE DEEDS IN RESPECT OF FLOORS CONSTRU CTED ON RESIDENTIAL PLOTS AS THE SAID PLOTS DID NOT CONSTIT UTE GROUP HOUSING PLOTS. DURING THE COURSE OF HEARING YOU HAVE REQUIRED OUR CLIENT TO EXPLAIN AS TO WHY THE PLOTS/APARTMENTS/FLOORS, AGAI NST WHICH TOTAL PAYMENT HAS BEEN RECEIVED FROM THE CUSTOMER, THOUGH NEITHER SALE DEED HAS BEEN REGISTERED NOR POSSESSIO N HAS BEEN HANDED OVER BE NOT TREATED AS A SALE AND THE CONSEQ UENTIAL PROFIT IF ANY BE BROUGHT TO TAX DURING THE YEAR UNDER ASSE SSMENT. IN THIS RESPECT WE WISH TO STATE AS UNDER: (I) THAT, AS EXPLAINED HERE IN ABOVE SALES IS ONLY RECOGNIZED IN THE CASE OF PLOTS UPON REGISTRATION OF THE SALE DEED WHICH IS EXECUTED UPON RECEIPT OF TOTAL DUES. 5 THE TOTAL RECEIPT COMPRISES OF (A) BASIC SALE PRICE (B) PREFERENTIAL LOCATION CHARGES (C) EXTERNAL DEVELOPM ENT CHARGES (D) MAINTENANCE DEPOSIT (E) PROPERTY REGISTRATION C HARGES AND STAMP DUTY. IN RESPECT OF THE STATEMENT FURNISHED TO YOU DISCLO SING NIL BALANCE, THE CUSTOMER WAS STILL LIABLE TO PAY DEMAN D RAISED BY THE COMPANY IN RESPECT OF (A) MAINTENANCE DEPOSITS (B) CONTINGENCY DEPOSIT (C) PROPERTY REGISTRATION CHARG ES AND STAMP DUTY. THUS, IN SUCH CIRCUMSTANCES THE ASSESSEE CONT INUES TO REMAIN THE LEGAL OWNER OF THE PROPERTY AND NO SALE HAS BEEN RECORDED IN ACCORDANCE WITH THE METHOD OF ACCOUNTIN G REGULARLY FOLLOW AND APPROVED BY THE REVENUE DEPARTMENT. IT IS RELEVANT TO STATE THAT NIL BALANCES IN RESPEC T OF VARIOUS CUSTOMERS WERE APPEARING EVEN IN EARLIER YEARS. AND YOUR PREDECESSOR HAVE AFTER DUE EXAMINATION APPROVED THE SAME. THUS RELIANCE IS PLACED ON THE CONCEPT OF CONSISTEN CY AS HELD BY THE VARIOUS COURTS AS UNDER:- (I) THIRANI CHEMICALS LTD. VS. DCIT (2006) 153 TAXMAN 4 5 (DELHI) IF THE FACTS ARE UNCHANGED THE RESULT FOR T HE SUBSEQUENT ASSESSMENT YEAR MUST ALSO REMAIN UNCHANG ED. (II) CIT VS. NEO POLYPACK LTD., 245 ITR 492 (DEL.), 6 HELD, THAT THE DOCTRINE OF RES JUDICATA DOES NOT AP PLY TO INCOME-TAX PROCEEDINGS SINCE EACH ASSESSMENT YEAR I S INDEPENDENT OF THE OTHER BUT WHERE AN ISSUE HAD BEE N DECIDED CONSISTENTLY IN A PARTICULAR MANNER FOR EAR LIER ASSESSMENT YEARS, FOR THE SAKE OF CONSISTENCY THE S AME VIEW SHOULD CONTINUE TO PREVAIL FOR SUBSEQUENT YEAR S UNLESS THERE IS MATERIAL CHANGE IN THE FACT. 4. LEARNED ASSESSING OFFICER HAS OBSERVED THAT PART IAL PROJECT COMPLETION METHOD VALUED BY THE ASSESSEE IS IN TOTA L DISREGARD TO AS-7 WHICH WAS MANDATORY FOR THE ASSESSEE TO FOLLOW. LEA RNED ASSESSING OFFICER MADE REFERENCE TO SOME PART OF AS-7 AND THEREAFTER MADE THE ADDITION BY OBSERVING AS UNDER: ACCORDING TO AS-7, PERCENTAGE COMPLETION METHOD HA S TO BE MANDATORILY FOLLOWED BY ALL DEVELOPERS AND IF THE S AME IS NOT FOLLOWED BY ASSESSEE HIS ACCOUNTS ARE NOT CORRECT A CCURATE AND COMPLETE. ON THE ABOVE BASIS, ASSESSEES PLEA FOR CONSISTENCY AND ACCEPTANCE OF PARTIAL PROJECT COMPLETION METHOD ARE AGAINST BASIC ACCOUNTING STANDARD ITSELF AND PRESENT A DISTORTED PICTURE OF ITS ACCOUNTS. THEREFORE HIS INCOME OR REVENUE FOR THIS A.Y. IS BE ING RECOMPUTED BY INCLUDING PROPERTIES WHICH ARE COMPLETE AND READY F OR POSSESSION AND ALL ADVANCES HAVE BEEN RECEIVED BY THE ASSESSEE COM PANY. FOLLOWING 7 IS THE LIST OF PROPERTIES WHERE ENTIRE ADVANCE HAS BEEN RECEIVED AND NIL BALANCE IS OUTSTANDING. (GIVEN BY ASSESSEE COMPANY ITSELF) (RS. IN LACS) S.NO. PARTICUALARS BALANCE NOS. AMOUNT 1. PLOTS:- GENERAL CATEGORY 14 199.01 NPNL 15 73.73 S. TOTAL 29 272.74 2. APARTMENTS 18 492.61 3. PERSONAL FLOORS 2 32.15 4. VALUE FLOORS 1 12.18 GRAND TOTAL 50 809.68 5. DISSATISFIED WITH THE ACTION OF THE ASSESSING OF FICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED FIRST APPEL LATE AUTHORITY. IT CONTENDED THAT AS-7 IS APPLICABLE ONLY TO CONSTRUCT ION CONTRACTORS AND NOT TO BUILDER OR REAL ESTATE DEVELOPERS. THE ASSESSEE FUR THER SUBMITTED THAT IT IS FOLLOWING SIMILAR METHOD OF ACCOUNTING IN THE PAST ALSO AND ASSESSING OFFICER NEVER DISTURB THIS ACCOUNTING METHOD IN ASS ESSMENT YEARS 2003-04 TO 2005-06. IT WAS ALSO CONTENDED THAT ACCOUNTING STAN DARD NOT PRESCRIBED UNDER THE ACT ARE NOT BINDING FOR TAX ASSESSMENT. T HE ASSESSEE HAS EMPHASIZED THAT IT IS NOT A CONTRACTOR BUT IT IS EN GAGED IN THE BUSINESS OF DEVELOPER AND SALE OF REAL ESTATES. THE SALE OF IMM OVEABLE PROPERTY AND 8 AGREEMENT FOR THE SAME IS AN INDEPENDENT AGREEMENT BETWEEN THE PURCHASE AND THE SELLER AS AN INDEPENDENT PARTY. THE ASSESSE E CONTENDED THAT ITS RIGHTS VIS--VIS THE RIGHTS OF THE PURCHASERS ARE TO BE SE EN IN THE LIGHT OF AGREEMENT. IT ALSO CONTENDED THAT ASSESSING OFFICER DID NOT PR OVIDE DUE OPPORTUNITY OF HEARING AND DID NOT CONFRONT THE ASSESSEE WITH THE RELEVANT MATERIAL, HENCE IT BE GIVEN PERMISSION FOR LEADING ADDITIONAL EVIDENCE . IT OUGHT TO SUBMIT THE DETAILS EXHIBITING THAT THESE SALES WERE MADE IN FU TURE YEARS AND DULY RECOGNIZED BY THE ASSESSEE. LEARNED COMMISSIONER CA LLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER ON THE ADMISSION OF ADDITIONAL EVIDENCE AS WELL AS HIS COMMENTS ON THE MERITS OF SUCH EVIDENCE . ASSESSING OFFICER HAS GIVEN HIS REMAND REPORT DATED 17.6.2009. HE CONTEND ED THAT CONDITIONS ENUMERATED IN CLAUSES A TO D IN SUB-RULE (1) OF RUL E 46A ARE NOT AVAILABLE IN THIS CASE, THEREFORE, THE ADDITIONAL EVIDENCE SH OULD NOT BE ADMITTED. WITHOUT PREJUDICE TO SUCH AN OBJECTION ON MERIT, HE COMMENTED THAT THE ISSUE HAS BEEN DISCUSSED IN THE DETAIL IN THE LIGHT OF ACCOUNTING STANDARD AND, THEREFORE, HE RELIED UPON THE ASSESSMENT ORDER. LEA RNED CIT(APPEALS) HAS GONE THROUGH THE RECORD CAREFULLY AND DELETED THE A DDITION. HE OBSERVED THAT THE OBJECTIVE OF AS-7 IS TO PRESCRIBE THE ACCOUNTIN G TREATMENT OF REVENUE AND COST ASSOCIATED WITH CONSTRUCTION CONTRACT I.E. THE ALLOCATION OF CONTRACT REVENUE AND CONTRACT COST TO THE ACCOUNTING PERIOD IN WHICH CONSTRUCTION IS 9 PERFORMED. ACCORDING TO THE LEARNED CIT(APPEALS), T HE SCOPE OF THIS ACCOUNTING STANDARD IS APPLICABLE TO THE ACCOUNTING FOR CONSTRUCTION CONTRACTS IN THE FINANCIAL STATEMENT OF CONTRACTORS . FOLLOWING THE PRINCIPLES OF CONSISTENCY AND LOOKING INTO THE BALANCE SHEET A S ON 31.3.2004 AND 31.3.2005 ALONG WITH THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE IN THOSE YEARS. LEARNED COMMISSIONER OBSERVED THAT SALES HAV E NOT BEEN MATERIALIZED QUA THESE AMOUNTS AND, THEREFORE, THEY CANNOT BE RE COGNIZED AS A REVENUE IN THIS YEAR. 6. LEARNED DR WHILE IMPUGNING THE ORDER OF LEARNED CIT(APPEALS) SUBMITTED THAT ONCE TOTAL AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE TOWARDS SALE OF A PLOT THEN IT SHOULD BE CONSTRUED THAT SAL E HAS FINALIZED AND ASSESSEE OUGHT TO HAVE RECOGNIZED THE REVENUE. BY NOT REGIST ERING THE CONVEYANCE DEED, ASSESSEE CANNOT DEFFER THE RECOGNITION OF REV ENUE ACCORDING TO ITS SWEET WILL. THIS ASPECT HAS TO BE SEEN WITH THE ANG LE OF HUMAN PROBABILITY. HE FURTHER SUBMITTED THAT ASSESSING OFFICER HAS GRA NTED SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND, THEREFORE, LEARNED FIRST APPELLATE AUTHORITY OUGHT TO HAVE NOT PERMITTED THE ASSESSEE TO ADDUCE ADDITIONAL EVIDENCE. HE ALSO SUBMITTED THAT THE LEARNED FIRST APPELLATE AUT HORITY HAS NOT GRANTED OPPORTUNITY TO THE ASSESSING OFFICER FOR REBUTTING THE ADDITIONAL EVIDENCE 10 SUBMITTED BY THE ASSESSEE. IN SUPPORT OF HIS CONTEN TIONS, HE RELIED UPON THE ORDER OF THE ITAT IN THE CASE OF JYOTSNA SURI VS. D CIT REPORTED IN 61 ITD 139, CIT VS. SHREE KANGROO STEEL PVT. LTD. REPORTED IN 320 ITR 691. HE ALSO RELIED UPON THE JUDGMENT OF HON'BLE DELHI HIGH COUR T IN THE CASE OF DIRECTOR OF INCOME-TAX VS. MODERN CHARITABLE FOUND ATION (2011) TIOL- 363. 7. LEARNED DR FURTHER RELIED UPON THE ORDER OF THE ITAT, BANGALORE IN THE CASE OF PRATIMA BUILDERS VS. ITO (2009) TIOL 95 AND SUBMITTED THAT IN THIS CASE ITAT HAS OBSERVED THAT THERE IS NO JUSTIF ICATION FOR NOT BOOKING CREDIT FOR ANY PROFIT UNTIL THE SALE DEEDS ARE REGI STERED IN FAVOUR OF THE PURCHASERS EVEN THOUGH THE SALES HAVE BEEN MADE AND THE PRICE HAS BEEN RECEIVED. LEARNED DR SUBMITTED THAT REGISTRATION OF SALES DEED CAN BE DELAYED FOR SEVERAL REASONS. HE ALSO RELIED UPON T HE ORDER OF THE ITAT, BANGALORE IN THE CASE OF PRESTIGE ESTATE PROJECT LT D. VS. DCIT REPORTED IN 129 ITD 342 AND ITO VS. SAVOY REAL ESTATES DEVELOPE RS PVT. LTD. (2010) TIOL-300- ITAT, MUMBAI. LEARNED DR TOOK US THROUGH THE LICENSE GRANTED BY THE HARYANA GOVERNMENT FOR DEVELOPMENT OF THE CO LONY. HE POINTED OUT THAT INTERNAL DEVELOPMENT WAS REQUIRED TO BE COMPLE TED WITHIN GIVEN TIME AS 11 PER LICENSING CONDITION AND, THEREFORE, CLAIM OF PR OJECT BEING INCOMPLETE AND POSTPONEMENT OF REVENUE RECOGNITION IS NOT TENABLE. 8. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT ASSESSING OFFICER HAS OBSERVED THAT ASSESSEE WAS RE QUIRED TO MANDATORILY FOLLOW AS-7. HE POINTED OUT THAT SECTION 145 OF THE INCOME-TAX ACT, 1961 PROVIDES THAT INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS IS TO BE COMPUTED IN ACCORDANCE WITH EITH ER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSE SSEE SUBJECT TO PROVISIONS OF SUB-SECTION (2) OF SECTION 145 OF THE ACT. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTANCY. THE REV ENUE HAS ACCEPTED ITS METHOD OF ACCOUNTANCY IN THE PAST AND NEVER RAISED ANY DISPUTE. ALL OF A SUDDEN, THIS YEAR, LEARNED ASSESSING OFFICER HAS OB SERVED THAT ASSESSEE OUGHT TO HAVE RECOGNIZED THE REVENUE IN RESPECT OF PLOTS AND FLOORS FOR WHICH TOTAL ADVANCES HAVE BEEN RECEIVED. HE TOOK US THROU GH THE DETAILS OF SUCH RECEIPTS AVAILABLE ON PAGE NOS. 97 TO 99, 125 TO 12 6 OF THE PAPER BOOK. HE POINTED OUT THAT SUBSTANTIAL AMOUNTS HAVE BEEN RECE IVED BY THE ASSESSEE IN THIS YEAR BUT STILL THE PURCHASERS HAVE NOT FULFILL ED ALL THE CONDITIONS ENUMERATED IN THE AGREEMENT. HE DREW OUR ATTENTION TOWARDS CLAUSE NOS. 21 & 22 OF THE AGREEMENT BETWEEN THE ASSESSEE AND KOHL I HOUSING WHICH IS A 12 SAMPLE AGREEMENT SIMILAR TO THE AGREEMENT ENTERED B Y THE ASSESSEE WITH THE OTHER PURCHASERS. HE SUBMITTED THAT ITAT, MUMBAI IN THE CASE OF M/S. UNIQUE ENTERPRISES VS. ITO HAS CONSIDERED THE APPLI CABILITY OF AS-7 ON A DEVELOPERS AND EXPLAINED THE SCOPE OF AS-7. THE ITA T HAS HELD THAT AS-7 IS NOT APPLICABLE ON REAL ESTATE DEVELOPERS RATHER IT IS RELATABLE TO CONTRACTORS ENGAGED IN CONSTRUCTION. THE LEARNED COUNSEL FOR TH E ASSESSEE FURTHER SUBMITTED THAT THE DEPARTMENT CANNOT CHANGE THE ACC OUNTING METHOD ADOPTED BY THE ASSESSEE UNLESS SOME ILLEGALITIES OR SOME FA CTS WHICH CREATE A HURDLE FOR THE ASSESSING OFFICER IN COMPUTING THE TRUE INC OME OF THE ASSESSEE IS ESTABLISHED. HE RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF TRIVENI ENGG. & IND. LTD. REPORTED IN (2010 ) TIOL 790. HE FURTHER SUBMITTED THAT METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE AND ACCEPTED BY THE DEPARTMENT OVER SEVERAL YEARS, THE DEPARTMEN T CANNOT CHANGE THE METHOD IN SUBSEQUENT YEARS. HE RELIED UPON THE DECI SION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. BILAHARI INVESTMENTS P VT. LTD. REPORTED IN 299 ITR 1. HE ALSO RELIED UPON THE ORDER OF THE ITAT IN THE CASE OF DCIT VS. OTIS ELEVATORS REPORTED IN 284 ITR AT PAGE 170. 9. IN HIS NEXT FOLD OF CONTENTIONS, HE SUBMITTED TH AT THE ASSESSEE CANNOT BE TAXED TWICE ON THE SAME INCOME. ACCORDING TO THE LEARNED COUNSEL FOR THE 13 ASSESSEE, ASSESSEE HAS ALREADY ACCOUNTING SALES CON SIDERATION IN THE FUTURE YEARS WHEN SALES HAVE BEEN ACTUALLY EFFECTED. HE PL ACED ON RECORD COPIES OF THE JUDGMENTS RELIED UPON BY HIM. 10. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. SECTION 145 OF THE INCOME-TAX ACT , 1961 CONTEMPLATES THAT INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURCES, SUBJECT TO THE PROVISIONS OF SUB- SECTION (2), BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. S UB-SECTION (2) OF SECTION 145 CONTEMPLATES THAT THE CENTRAL GOVERNMENT MAY NO TIFY IN THE OFFICIAL GAZETTEE FROM TIME TO TIME ACCOUNTING STANDARD TO B E FOLLOWED BY ANY CLASS OF ASSESSEE OR IN RESPECT OF ANY CLASS OF INCOME. S UB-SECTION (3) OF SECTION 145 STATES THAT WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF ASSE SSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION(1) OR ACCOUNTING STANDARD AS NOTIFIED UNDER SUB-SECTION (2) HAVE NOT BEEN REGULA RLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSM ENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT. AT THIS STAGE, WE DEEM IT APPROPRIATE TO NOTE CLAUSES NUMBERS 21 AND 22 OF THE AGREEMENT FOR THE SAKE OF REFERENCE, COPY OF THE AGREEMENT BETWEEN THE ASSESSEE IN KOHLI HOUSING HAS BEEN 14 PLACED ON RECORD OTHERWISE WITH ALL PURCHASERS SIMI LAR AGREEMENTS HAVE BEEN ENTERED INTO BY THE ASSESSEE. THESE CLAUSES READ AS UNDER: UNLESS A CONVEYANCE DEED IS EXECUTED AND REGISTERE D, THE SELLER SHALL CONTINUE TO BE THE OWNER OF THE PLOT AND ALL AMOUNT S PAID BY THE PURCHASER UNDER THIS AGREEMENT SHALL MERELY BE AN A DVANCE PAYMENT FOR PURCHASE OF ALLOTTED PLOT AND SHALL NOT GIVE HI M ANY LIEN OR INTEREST ON THE PLOT UNTIL HE HAS COMPLIED WITH ALL THE TERM S AND CONDITIONS OF THE AGREEMENT AND A SALE DEED OF THE SAID PLOT HAS BEEN EXECUTED AND REGISTERED IN HIS FAVOUR. THE SELLER SHALL EXECUTE THE SALE DEED AND HAVE IT REGISTERED IN FAVOUR OF THE PURCHASER WITHIN A REASONABLE TIME AFTER THE PLOT HAS BEEN FINALLY DEMARCATED AT SITE AND AFTER RECEIPT FROM T HE PURCHASER OF FULL SALE PRICE AND OTHER DUES DETAILED HEREINABOVE AND THE FULL COST OF STAMP PAPER AND REGISTRATION CHARGES ETC. PROVIDED THAT THE SELLER IN ITS SOLE DISCRETION MAY EXECUTE THE SALE DEED AT ANY TI ME PRIOR TO THE RECEIPT OF THE FULL PRICE AND OTHER DUES. IN THAT C ASE EVEN THOUGH THE SALE DEED MAY HAVE BEEN EXECUTED, BUT THE POSSESSIO N WILL BE GIVEN TO THE PURCHASER ONLY WHEN THE PURCHASER MAKES PAYM ENT OF THE BALANCE PRICE AND ALL OTHER DUES AS STIPULATED IN T HIS AGREEMENT. 11. WE HAVE ALREADY EXTRACTED THE FINDINGS OF THE A SSESSING OFFICER FOR INCLUDING THE SALE PROCEEDS OF THE PLOTS/FLOORS IN RESPECT OF WHICH ASSESSEE HAS RECEIVED ADVANCES. HOWEVER, SALE DEEDS HAVE NOT BEEN REGISTERED IN THIS 15 YEAR. NOW, THE CASE OF THE ASSESSING OFFICER IS THA T MERELY ON ACCOUNT OF NON-REGISTRATION OF SALE DEED, IT CANNOT BE CONSTRU ED THAT TRANSACTION HAS NOT BEEN COMPLETED BETWEEN THE PARTIES. THE ASSESSEE CA NNOT DEFER OR POSTPONE THE RECOGNITION OF THE REVENUE IN RESPECT OF THESE PLOTS. 12. ACCORDING TO THE ASSESSEE, RECEIPT OF SALE PROC EEDS IS ONE FACTOR INDICATING THE SALE OF THE PLOTS BUT THE SALE IS TO BE MATERIALIZED AFTER FULFILLMENT OF ALL OTHER CONDITIONS. IN THE REPLY O F THE ASSESSEE, EXTRACTED SUPRA, IT HAS BEEN SPECIFICALLY POINTED OUT BY THE ASSESSEE THAT REVENUE WOULD BE RECOGNIZED UPON HANDING OVER PHYSICAL POSSESSION OF THE PROPERTY TO THE CUSTOMER, COLLECTION OF PREFERENTIAL CHARGES, EXTER NAL DEVELOPMENT CHARGES, INTEREST ON DELAYED PAYMENT, CONTINGENT DEPOSIT, MA INTENANCE DEPOSITS, REGISTRATION CHARGES INCLUDING STAMP DUTY. IN SUCH SITUATION, HOW IT CAN BE SAID THAT MERELY ON RECEIPT OF ADVANCE THE CONTRACT HAS FULLY BEEN SATISFIED BY THE VENDEE QUA THE VENDOR. THE RIGHTS OF THE PART IES ARE TO BE SEEN IN THE LIGHT OF THE AGREEMENT EXECUTED BY THEM. IN THE CLA USES 21 AND 22 SPECIFICALLY PROVIDE THAT UNLESS A CONVEYANCE DEED IS EXECUTED AND REGISTERED, THE SELLER SHALL CONTINUE TO BE THE OWN ER OF THE PLOT. APART FROM THIS FACTUAL ASPECT, WE FIND THAT FROM ASSESSMENT Y EARS 2003-04, 2004-05 AND 2005-06, SIMILAR ACCOUNTING PRINCIPLES ADOPTED BY T HE ASSESSEE HAVE BEEN 16 ACCEPTED BY THE REVENUE. IN THE FINDINGS OF THE ASS ESSING OFFICER, HE NOWHERE ASSIGNED ANY REASON ENABLING HIM TO CHANGE THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE ASSESSEE. S UB-SECTION (3) OF SECTION 145 SUGGEST THAT WHERE ASSESSING OFFICER IS NOT SAT ISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR THE METHOD OF ACCOUNTING IS NOT INCONSEQUENCE WITH THE ACCOUNTING STANDARD NOTIFIED UNDER SUB-SECTION (2) AND THEY ARE NOT REGULARLY FOLLOWED BY THE ASSESSEE. A.O. MAY DETERMINE THE TRUE INCOME AS PER HIS BEST JUDGM ENT. IN THE ASSESSMENT ORDER, NOWHERE ASSESSING OFFICER HAS EXPRESSED HIS DIFFICULTY EITHER ABOUT THE METHOD OR ABOUT THE COMPLETENESS OF THE ACCOUNT S WHICH CAN CREATE AN HINDRANCE IN COMPUTING THE TRUE INCOME. THE ASSESSE E HAS RELIED UPON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF TRIVENI ENGINEERING FOR THE PROPOSITION THAT DEPARTMENT CANNOT CHANGE T HE METHOD OF ACCOUNTING IF THE SAME IS REVENUE NEUTRAL AND IT HAS BEEN FOLL OWED IN EARLIER YEARS. WE ALSO FIND THAT ASSESSEE HAS PLACED RELIANCE FOR THE PRINCIPLES OF CONSISTENCY ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CAS E OF CIT VS. REALEST BUILDERS & SERVICES LTD. REPORTED IN 307 ITR 202, C IT VS. WOOD WORLD GOVERNOR REPORTED IN 312 ITR 254. IN THIS CASE, HON 'BLE SUPREME COURT HAS OBSERVED THAT ACCOUNTING METHOD FOLLOWED BY AN ASSE SSEE CONTINUOUSLY FOR A GIVEN PERIOD OF TIME HAS TO BE PRESUMED TO BE CORRE CT TILL THE ASSESSING 17 OFFICER COMES TO THE CONCLUSION FOR REASONS TO BE G IVEN THAT SYSTEM DOES NOT REFLECT TRUE AND CORRECT PROFIT. LEARNED FIRST APPE LLATE AUTHORITY HAS CONSIDERED ALL THESE ASPECTS IN THE IMPUGNED ORDER AND THEREAFTER DELETED THE ADDITION. 13. AS FAR AS THE SUBMISSIONS OF THE LEARNED DR THA T LEARNED CIT(APPEALS) HAS ENTERTAINED ADDITIONAL EVIDENCE AN D DID NOT PROVIDE OPPORTUNITY OF HEARING TO THE ASSESSING OFFICER IS CONCERNED, WE DO NOT FIND ANY FORCE IN THIS SUBMISSION. WE FIND FROM THE ASSE SSMENT ORDER THAT ASSESSING OFFICER HAD ISSUED A SHOW-CAUSE NOTICE ON 21.11.2008. THE ASSESSEE HAS SUBMITTED A DETAILED REPLY TO THIS NOT ICE. ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER ON 29.12.2008. HE DID N OT CALL FOR ANY FURTHER INFORMATION AND NO SUCH ISSUE IS DISCERNIBLE FROM H IS ORDER. LEARNED FIRST APPELLATE AUTHORITY HAS ADMITTED THE ADDITIONAL EVI DENCE IN ORDER TO UNDERSTAND WHAT TREATMENT HAS BEEN GIVEN TO THESE R ECEIPTS IN THE FUTURE YEARS WHEN ACCORDING TO THE METHOD OF ACCOUNTING FO LLOWED BY THE ASSESSEE, SALES WERE MATERIALIZED. LEARNED COMMISSIONER HAS G IVEN DUE OPPORTUNITY OF HEARING TO THE ASSESSING OFFICER AND CALLED FOR THE REMAND REPORT. THE RELEVANT PART OF THE REMAND REPORT SUBMITTED BY THE A.O. READS AS UNDER: 18 ON THE QUESTION OF COMMENTS ON THE A.O. ON ADDITIO NAL EVIDENCES, IT IS HUMBLY SUBMITTED THAT IN THE FIRST PLACE, IN VIE W OF INADMISSIBILITY OF THESE EVIDENCES, NO COMMENTS CAN BE OFFERED CONS IDERING THE DOCUMENTS PRODUCED AS ADDITIONAL EVIDENCE ARE NON E ST IN VIEW OF RULE 46A HOWEVER, WITHOUT PREJUDICE TO THE ABOVE, IT IS HUMB LY SUBMITTED THAT AN ELABORATE DISCUSSION HAS BEEN MAD E IN THE ASSESSMENT ORDER BY MY LEARNED PREDECESSOR ON THE I SSUES FOR WHICH THE ASSESSEE HAS ATTEMPTED TO SUBMIT THESE ADDITION AL EVIDENCES. A DETAILED DISCUSSION HAS BEEN MADE REFERRING TO ACCO UNTING STANDARD OF ICAI IN THE ASSESSMENT ORDER. THEREFORE, ON MERI T, FULL RELIANCE IS PLACED ON THE ASSESSMENT ORDER PASSED BY LEARNED PR EDECESSOR. 14. A BARE PERUSAL OF THIS REMAND REPORT, WE FIND T HAT THERE IS NO VIOLATION OF RULE 46A AND THE JUDGMENTS RELIED UPON BY THE LE ARNED DR TO THIS EFFECT ARE NOT APPLICABLE ON THE FACTS OF THIS CASE. AS FA R AS THE OTHER JUDGMENTS RELIED UPON BY HIM ARE CONCERNED, THEY ARE QUIRE DI STINGUISHABLE ON FACTS. HE MADE REFERENCE TO THE DECISION OF THE ITAT, BANGALO RE IN THE CASE OF PRATIMA BUILDERS. IN THIS CASE, ASSESSEE HAD NOT MAINTAINED CORRECT AND COMPLETE ACCOUNTS. THE COST OF CONSTRUCTION HAD NOT BEEN MAI NTAINED PROPERLY AND THE ONLY EVIDENCE WHICH WAS SUBMITTED BEFORE THE ASSESS ING OFFICER WAS A CERTIFICATE OF THE ENGINEER. THE CERTIFICATE ALSO S HOWED EXPENDITURE INCURRED IN ROUND SUMS WHICH WAS IMPROBABLE AND CONTRARY TO THE NORMAL STATES OF 19 AFFAIRS. IN SUCH CIRCUMSTANCES, ASSESSING OFFICER H AS REJECTED THE BOOK RESULTS AND WORKED OUT THE REVENUE. FACTS OF THIS C ASE ARE TOTALLY DISTINGUISHABLE TO THE FACTS OF THE ASSESSEES CASE . AS FAR AS THE ORDER OF M/S. SAVOY IS CONCERNED, IT IS A CASE OF A CONTRACTOR WH O WAS FOLLOWING PROJECT COMPLETION METHOD. HE HAS CONSTRUED A BUILDING. HIS PROJECT WAS COMPLETED UP TO 94% BUT STILL HE DID NOT OFFER ANY INCOME. IN THE CASE OF ASSESSEE, IT IS A DEVELOPER AND RECOGNIZED THE SALE OF THE PLOTS ON E XECUTION OF THE CONVEYANCE DEED DULY REGISTERED. TAKING INTO CONSID ERATION ALL THESE ASPECTS, WE DO NOT FIND ANY REASON TO CHANGE THE METHOD OF A CCOUNTING IN THIS YEAR WHICH WAS ACCEPTED IN THE PAST. THE A.O. HAS NOT AS SIGNED ANY REASON FOR THIS CHANGE. THUS, THE GROUND NOS.2 AND 2.1 ARE REJ ECTED. 15. GROUND NOS. 3 & 4 ARE INTERCONNECTED AND THEY R EAD AS UNDER: 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDI TION OF RS.8,99,469 MADE BY THE ASSESSING OFFICER BEING THE SALE PROCEE DS OF 31 PROPERTIES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS.12,09,45,742 MADE BY THE ASSESSING OFFICER BEING THE SALE PROCEEDS OF 24 PROPERTIES NOT ACCOUNTED FOR BY THE ASSESSEE. 20 16. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE HAD ENTERED INTO AN AGREEMENT WITH ITS SISTER CONCERN M/S. KOHLI ONE HO USING & DEVELOPMENT PVT. LTD. BY VIRTUE OF THIS AGREEMENT, ASSESSEE HAD AGREED TO GIVE ALLOTMENT RIGHTS OF 44 PLOTS AND 11 CONDOMINIUMS FOR A CONSID ERATION. THIS AGREEMENT WAS ENTERED INTO IN 2003. THERE IS NO REGISTERED SA LE DEED AND ONLY ALLOTMENT RIGHTS ARE ALLOTTED WHICH ARE TRANSFERABLE. OUT OF SAID 44 PLOTS AND 11 CONDOMINIUMS, BOOKING RIGHTS OF 24 PLOTS WERE SOLD BY M/S. KOHLI ONE HOUSING & DEVELOPMENT AND REST WERE SHOWN IN THE C LOSING STOCK. CONVEYANCE DEEDS IN RESPECT OF 12 PLOTS HAVE BEEN D ONE DURING THIS YEAR AND THE SALE PROCEEDS ARE TAKEN TO THE REVENUE ACCOUNT IN CONSONANCE WITH ACCOUNTING POLICY REGULARLY FOLLOWED BY THE ASSESSE E. M/S. KOHLI ONE HOUSING HAS SHOWN SALE OF 24 PLOTS AT RS.12,09,45,7 42 OUT OF WHICH RS.3,79,23,057 IS SHOWN AS PAYABLE TO THE ASSESSEE. M/S. KOHLI ONE HOUSING HAS SHOWN BALANCE AMOUNT OF RS.830,22,685 AS PROFIT ON SALE OF 24 PLOTS. THE CASE OF THE ASSESSING OFFICER IS THAT THIS ARRA NGEMENT IS SHAM. THE ASSESSEE CANNOT ASSIGNED THE ALLOTMENT RIGHTS TO TH E SISTER CONCERN. IT IS A DEVELOPER, THERE IS NO REASON AS TO WHY IT WILL ASS IGN SUCH RIGHTS TO THE SISTER CONCERN. ASSESSING OFFICER REJECTED ALL THE CONTENT IONS OF THE ASSESSEE. HE OBSERVED THAT TOTAL SALE VALUE OF ALL THE PLOTS AND THE FLATS IS TO BE CONSIDERED AS REVENUE OF THE ASSESSEE. HIS FINDING READS AS UN DER: 21 AS A PART OF THIS AGREEMENT, 44 ALLOTMENT RIGHTS F OR PLOTS AND 11 ALLOTMENT RIGHTS FOR CONDOMINIUMS WERE TRANSFERRED TO M/S. KOHLI ONE HOUSING & DEVELOPMENT PVT. LTD. BY M/S. MALIBU ESTA TE PVT. LTD. BY M/S. MALIBU ESTATE PVT. LTD. HOWEVER, OUT OF THIS 24 PLOTS HAVE BEEN SOLD EARLIE R, AND 20 PLOTS AND 11 CONDOMINIUMS HAVE BEEN SHOWN IN CLOSING STOCK BY M/S. KOHLI ONE HOUSING & DEVELOPMENT PVT. LTD. IT IS NOW CONTE NDED, THE SALE CONSIDERATION OF THESE THAT IT APPEARING IN CLOSING STOCK OF M/S. KOHLI ONE HOUSING & DEV. PVT. LTD. HAS TO BE TREATED AS S ALE-IN-HANDS OF M/S. MALIBU ESTATE PVT. LTD. AS ALLOTMENT RIGHTS HA VE BEEN TRANSFERRED DURING THE YEAR AND ON THE BASIS OF MERCANTILE SYST EM OF ACCOUNTING. THEREFORE, VALUE OF 20 PLOTS AND 11 CONDOMINIUMS AT RS.8,99,39,469 IS TAKEN AS SALE IN THE HANDS OF M/S. MALIBU ESTATE PVT. LTD. (ADDITION OF RS.8,99,39,469/-) IN ADDITION, M/S. KOHLI ONE HOUSING & DEVELOPMENT P VT. LTD. HAS PURCHASED 44 ALLOTMENTS RIGHTS DURING THE A.Y. 2006 -07 OUT OF WHICH 24 PLOTS HAVE BEEN SOLD AT A CONSIDERATION OF WHICH HAS TO BE ACCOUNTED FOR IN THE HANDS OF M/S. MALIBU ESTATE PV T. LTD. THESE AMOUNTS TO RS.12,09,45,742 WHICH IS ALSO ADDED TO A SSESSEES TAXABLE INCOME ON SIMILAR GROUNDS. (ADDITION OF RS.12,09,45,742/-) 17. ON APPEAL, LEARNED FIRST APPELLATE AUTHORITY HA S ACCEPTED THE CONTENTION OF THE ASSESSEE AND DELETED THE ADDITION . 22 18. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE CASE OF THE ASSESSEE IS THAT IT HAS ASSIGNED BOOKING RIGHTS OF THESE 44 PLOTS AND 11 CONDOMINIUMS TO THE SISTER CONCERN IN 2003. THE SISTER CONCERN WOULD SELL THESE PLOTS TO THIRD PERSON. THE REVENUE WOULD BE RECOGNIZED AT THAT POINT OF TIME. AFTER DEBITING THE AMOUNT PAYABLE TO THE ASSESSEE FOR ASSIGNMENT OF THOSE BOOKING RIGHTS, TH E SISTER CONCERN WOULD RETAIN THE PROFIT. IN OTHER WORDS, ACCORDING TO THE ASSESSEE, IT IS A BUSINESS TRANSACTION. IT HAS SOLD THE PLOT TO THE SISTER CON CERN. AS AND WHEN SALE DEED WILL BE EXECUTED IT WOULD RECOGNIZE THE REVENUE. TH E SALE DEEDS INSTEAD OF EXECUTING IN THE NAME OF SISTER CONCERN, IT IS EXEC UTED IN THE NAME OF THIRD PERSON TO WHOM SISTER CONCERN WOULD ASSIGN ITS RIGH TS. IN A WAY, SISTER CONCERN, EFFECTIVELY SOLD THE PLOTS BY ASSIGNING IT PURCHASE RIGHTS. THE REVENUE HAS DULY BEEN RECOGNIZED AS AND WHEN SALE D EED IS REGISTERED. 19. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMST ANCES, WE DO NOT FIND ANY FORCE IN THE CONTENTIONS OF THE ASSESSING OFFIC ER THAT IT IS A SHAM TRANSACTION. IT CAN BE EXPLAINED WITH A SIMPLE EXAM PLE, NAMELY, ASSESSEE HAS LAUNCHED A SCHEME FOR DEVELOPMENT OF PLOTS AND FLAT S, A BOOKS A PLOT WITH THE ASSESSEE. AFTER 2-3 YEARS WHEN THE PLOT WAS DEV ELOPED, A WANTS TO SELL THE PLOT TO B. HE APPROACHED THE ASSESSEE WITH TH E PURCHASER AND MADE A 23 PRAYER THAT HE IS SURRENDERING ALL HIS PURCHASE RIG HTS IN FAVOUR OF B. KINDLY EXECUTE THE SALE DEED. ASSESSEE WOULD CHARGE THE AM OUNT AGREED WITH THE A AT THE TIME OF BOOKING. IF A IS GETTING SOMET HING MORE FROM B THEN THE AMOUNT PAID OR PAYABLE BY HIM TO THE ASSESSEE I N LIEU OF ASSIGNMENT OF HIS ALLOTMENT RIGHTS THEN HOW THAT CAN BE AN INCOME OF THE ASSESSEE. LEARNED ASSESSING OFFICER MISERABLY FAILED TO APPRECIATE TH IS ASPECT, AND OBSERVED THAT IT IS A BOGUS AND SHAM TRANSACTION. HE HAS NOT ASSIGNED ANY REASON FOR SUCH CONCLUSION. LEARNED DR ALSO POINTED OUT THAT I T IS A COLOURABLE DEVICE. ACCORDING TO HIM, IT SHOULD BE APPRECIATED IN THE L IGHT OF HUMAN PROBABILITY AND HE REFERRED THREE DECISIONS, NAMELY, SUMITI DAY AL VS. CIT 214 ITR 801, KILLICK NIXON LTD. VS. DCIT (2012) TIOL 190 (H. C. GUPTA ), XYZ INDIA (2012) 20 TAXMAN.COM.89. 20. WE HAVE DULY CONSIDERED THESE DECISIONS BUT THE Y ARE QUITE DISTINGUISHABLE ON FACTS. ASSESSING OFFICER HAS NOT BROUGHT ANY FACTS ON THE RECORD WHICH SUGGESTS ANY COLLUSION, ANY ATTEMPT TO EVADE TAX, HE SIMPLY OBSERVED THAT BOOKING OF PLOT/FLAT BY THE SISTER CO NCERN IS NOT ACCEPTABLE. TO OUR MIND, THAT CANNOT BE A BASIS TO DOUBT THE TRANS ACTION. WE COULD UNDERSTAND THE CASE OF ASSESSING OFFICER, IF HE HAD FIND OUT THAT BOOKING RIGHTS WERE NOT GIVEN ON ARMS LENGTH TO THE SISTER CONCERN. THE LEARNED 24 ASSESSING OFFICER HAS NOT REFERRED ANY MATERIAL IN THE ASSESSMENT ORDER. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY ME RIT IN THESE TWO GROUNDS OF APPEAL. THEY ARE REJECTED. 21. IN THE CROSS-OBJECTION, IT IS PLEADED BY THE AS SESSEE THAT LEARNED CIT(APPEALS) HAS ERRED IN REJECTING ASSESSEES CLAI M FOR DELETION OF ADDITION RELATING TO EXPENDITURE PENDING ADJUSTMENT AMOUNTIN G TO RS.705,66,000. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMOUNT OF RS.705,66,000 WAS A DEBIT BALANCE UNDER THE HEAD DEVELOPMENT EXP ENSES PENDING ADJUSTMENT IN THE BALANCE SHEET. ASSESSING OFFICER HAS DISALLOWED THIS AMOUNT AND ADDED BACK TO TAXABLE INCOME. THE ASSESS EE CONTENDED BEFORE THE LEARNED CIT(APPEALS) THAT IT HAS NOT CLAIMED TH E DEDUCTION OF THIS AMOUNT AS EXPENSES IN THIS YEAR, THEREFORE, IT CANN OT BE ADDED BACK. DURING THE PENDENCY OF THIS APPEAL, LEARNED ASSESSING OFFI CER HAS PASSED A RECTIFICATION ORDER UNDER SEC. 154 OF THE ACT. HE E XCLUDED THE AMOUNT FROM THE COMPUTATION BUT HE MADE THE FOLLOWING OBSERVATI ONS: SO INSTEAD BEING DEBITED TO THE INCOME OF THIS YEA R AS HAS BEEN DONE IN THE ASSESSMENT ORDER, THESE DEVELOPMENT CHARGES ARE NOT ALLOWED TO BE WRITTEN OFF IN LATER YEARS AS THEY HAVE BEEN CAP ITALIZED ON ACCOUNT OF REASONS MENTIONED IN THE ASSESSMENT ORDER. 25 22. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT LEARNED CIT(APPEALS) HAS REJECTED THE GROUNDS OF APPEAL RAI SED BY THE ASSESSEE ON THE GROUND THAT ASSESSING OFFICER HERSELF HAS DELET ED THE ADDITION IN AN ORDER PASSED UNDER SECTION 154 OF THE INCOME-TAX ACT, 196 1. HE CONTENDED THAT THE ASSESSING OFFICER HAS MADE IRRELEVANT OBSERVATIONS AND LEARNED CIT(APPEALS) OUGHT TO HAVE DECIDED THE GROUND OF AS SESSEE ON MERIT. WE CONFRONTED THE LEARNED COUNSEL FOR THE ASSESSEE THA T HE SHOULD HAVE CHALLENGED THE ORDER PASSED UNDER SEC. 154 OF THE A CT IN A SEPARATE APPEAL. HE REPLIED THAT THERE ARE TWO COURSES AVAILABLE WIT H THE ASSESSEE AGAINST THE ASSESSMENT ORDER. THE ONE COURSE TO CHALLENGE THE O RDER OF THE ASSESSING OFFICER IN AN APPEAL BEFORE THE LEARNED CIT(APPEALS ) AND IN THE OTHER COURSE TO FILE A MISCELLANEOUS APPLICATION UNDER SE C. 154 OF THE ACT. WHEN ASSESSEE HAS CHALLENGED THE ASSESSMENT ORDER IN AN APPEAL BY ADOPTING THE FIRST COURSE THEN LEARNED CIT(APPEALS) WITHOUT GETT ING INFLUENCED FROM THE OUTCOME OF SECTION 154 OUGHT TO HAVE DECIDED ITS GR OUND OF APPEAL ON MERIT. IN THAT SITUATION, THE PROCEEDINGS OF SEC 154 WOULD BECOME REDUNDANT. ON THE OTHER HAND, LEARNED DR RELIED UPON THE ASSESSME NT ORDER. 23. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. WHEN EXPENSES ARE NOT CLAIMED BY THE ASSESSEE IN THE YEAR 26 THEY CANNOT BE ADDED, IT WOULD AMOUNT DOUBLE ADDITI ON. THEREFORE, WE ALLOW THE SOLITARY GROUND RAISED IN THE CROSS OBJECTION A ND DELETE THE ADDITION OF RS.7,05,66,000 FROM THE COMPUTATION OF INCOME BECAU SE ITS DEDUCTION WAS NOT CLAIMED BY THE ASSESSEE. 24. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED WHEREAS THE CROSS- OBJECTION OF THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 20.04.20 12 SD/- SD/- ( B.C. MEENA ) ( RAJ PAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20/04/2012 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 27