DCIT, Circle-1, Nellore, Nellore V. Platinum Projects, Nellore, Nellore

CO 74/HYD/2015

• Counselvise Citation: [2016] 119 COUNSELVISE.COM (IT) 3237 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 02-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Keywords: Business income; Additional evidence; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.667/HYD/2015 : ASSESSMENT YEARS 2010-1 1 DY. COMMISSIONER OF INCOME - TAX CIRCLE 1, NELLORE V/S M/S. PLATINUM PROJECTS, NELLORE (PAN AAKFP 0667 N) (APPELLANT) (RESPONDENT) CO NO.74/HYD/2015 (IN ITA NO.667/HYD/2015) : ASSESSMENT YEARS 20 10-11 M/S. PLATINUM PROJECTS, NELLORE (PAN AAKFP 0667 N) V/S DY. COMMISSIONER OF INCOME - TAX CIRCLE 1, NELLORE (CROSS OBJECTOR) (APPELLANT-IN-APPEAL) DEPARTMENT BY : SHRI B.KURMI NAIDU, DR ASSESSEE BY : SHRI K.PANDURANGAIAH DATE OF HEARING 2.5.2016 DATE OF PRONOUNCEMENT 2.5.2016 O R D E R PER D.MANMOHAN, VICE PRESIDENT : THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) TIRUPATI AND THEY PERTAIN TO ASSESSMENT YEAR 2010-11. 2. FOLLOWING GROUNDS ARE URGED BY THE REVENUE- ITA NO.667/HYD/2015 & CO THEREIN M/S. PLATINUM PROJECTS, NELLORE 2 1. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BOTH O N FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT NOT TO HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS AS THE ASSESSEE HAS SUBMITTED DIFFERENT FIGURES OF REALIZABLE AND REALIZED AMOUNTS ON SALE OF FLATS BEFORE THE LD. COMMISSIONER OF INCOME-TAX(APPEALS) AND THE ASSESSING OFFICER. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) SHOULD HAVE CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER UNDER RULE 46A. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT TO HAVE APPRECIATED THE ASSESSING OFFICERS STAND THAT THE ASSESSEE IS FOLLOWING THE MERCAN TILE SYSTEM OF ACCOUNTING. 3. IN THE CROSS OBJECTIONS FILED ON BEHALF OF THE ASSESSEE, THE GROUNDS URGED BY THE REVENUE ARE CHALLENGED ON THE GROUND THAT THERE IS NO BASIS FOR THE REVENUE FOR STATING THAT THE ORDER OF THE CIT(A) IS WITHOUT ANY WEIGHT OF EVIDENCE; IN FACT N O INSTANCES HAVE BEEN FURNISHED FOR RAISING SUCH GROUND. SIMILARLY , IT WAS CONTENDED THAT THE APPELLANT-ASSESSING OFFICER ERRED IN STATI NG THAT THE ASSESSEE, DURING THE COURSE OF APPEAL, SUBMITTED DIFFERENT F IGURES OF REALISABLE AND REALISED AMOUNTS ON SALE OF FLATS; ON THE CONTR ARY NO SUCH INSTANCES HAVE BEEN FURNISHED AND IN FACT NO ADDITI ONAL EVIDENCE WAS FILED BEFORE THE CIT(A) AND HENCE, THERE IS NO OCCA SION FOR THE COMMISSIONER TO INVOKE RULE 46A, WHEREAS THE APPELL ANT/ASSESSING OFFICER HAS WRONGLY RAISED A GROUND THAT THE CIT(A ) SHOULD HAVE CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER UNDER RULE 46A. TO HIGH- LIGHT THAT THE GROUNDS URGED BY THE ASSESSING OFFIC ER BEFORE THE TRIBUNAL ARE WITHOUT ANY APPLICATION OF MIND THE ASSESSEE, IN ITS CROSS OBJECTIONS, RAISED THE FOLLOWING GROUNDS- ITA NO.667/HYD/2015 & CO THEREIN M/S. PLATINUM PROJECTS, NELLORE 3 1 2. THE CONTENTION OF THE ASSESSING OFFICER/APPELLAN T THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN ALLOWI NG THE APPEAL IS WITHOUT ANY WEIGHT OF EVIDENCE AND PROBABILITIES OF THE CASE. NO INSTANCES HAVE BEEN FURNISHED. 3. THE CONTENTION OF THE A.O. THAT THE ASSESSEE/RES PONDENT DURING THE COURSE OF APPEAL SUBMITTED DIFFERENT FI GURES OF REALIZABLE AND REALIZED AMOUNTS ON SALE OF FLATS BE FORE THE COMMISSIONER OF INCOME-TAX(APPEALS) IS NOT SUPPORTE D BY ANY EVIDENCE. NO INSTANCES HAVE BEEN FURNISHED. 4. THE ASSESSEE/RESPONDENT SUBMITS THAT NO ADDITIONAL EVIDENCE HAS BEEN FILED BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS) AS ALLEGED BY THE AO/APPELLANT. HENCE THE PROVISIONS OF RULE 46A HAVE NO APPLICATIO N TO THE FACTS OF THE PRESENT APPEAL. 5. IT IS TRUE THAT THE ASSESSEE/RESPODNENT HAS FOLL OWED THE MERCANTILE SYSTEM OF ACCOUNTS AS IS CUSTOMARY I N THIS LINE OF TRADE. ALSO FOLLOWED THE MERCANTILE SYSTEM OF ACCOUNTING IN THE PREVIOUS YEAR AS WELL AS IN THE SUCCEEDING YEARS. 6. THE ASSESSEE/RESPONDENT SUBMITS THAT THE PREDECE SSOR AO HAS MISCONSTRUED THE BUILDERS AGREEMENTS AS DIRECT SALE OF FLATS/APARTMENTS AND THEREBY ALLEGED SUPPRESSION OF SALES AND INITIATED ACTION UNDER SEC.148 READ WITH SEC.14 7. THE SUCCESSOR A O WITHOUT APPRECIATING THE DETAILED SUBMISSIONS MADE HAS FOLLOWED THE FOOT-STEPS OF THE THEN ASSESSING OFFICER WHO INITIATED ACTION UNDER SEC.14 8 AND MADE ADDITION TOWARDS SUPPRESSION. 7. AS PER THE BUILDERS AGREEMENT DULY REGISTERED IT IS CLEAR THAT: THE GROSS COLLECTIONS RECEIVABLES FROM THE FLAT PURCHASERS HAVE TO PAY PERIODICALLY AT DIFFERENT ST AGES OF CONSTRUCTION OF APARTMENT IN THE FOLLOWING MANNER:- ITA NO.667/HYD/2015 & CO THEREIN M/S. PLATINUM PROJECTS, NELLORE 4 (A) ADVANCE AMOUNT RECEIVED AT THE TIME OF REGISTRATION OF THE BUILDERS AGREEMENT (B) AT THE STAGE OF FOUNDATION AND BASEMENT 35% (C) AFTER COMPLETION OF ROOF SLAB 35% OF THE AMOUNT MENTIONED IN THE REGD. BUILDERS AGREEMENT (D) AFTER COMPLETION OF BRICK WORK AND DOORS AND FITTINGS 20% (E) AFTER COMPLETION OF FLAT BALANCE AMOUNT BEING 10% . IN SUM AND SUBSTANCE, THE CROSS-OBJECTION IS FILED TO SUPPORT THE ORDER PASSED BY THE LEARNED COMMISSIONER(APPEALS). 4. FACTS IN SHORT ARE THAT THE ASSESSEE-FIRM IS A BUILDER AND PROPERTY DEVELOPER. FOR THE YEAR UNDER CONSIDERATI ON, ASSESSEE FILED E-RETURN ADMITTING TOTAL INCOME OF RS.30 LAKHS. THO UGH THE RETURN WAS PROCESSED UNDER S.143(1) OF THE ACT, IT WAS LATER O N REOPENED BY ISSUE OF NOTICE UNDER S.147 OF THE ACT, AS THE ASSE SSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE-FIRM SOLD APARTMENTS IN VARIOUS PROJECTS AND THE TOTAL SALES EFFECTED DURING THE YEAR WORKE D OUT TO RS.6,40,40,000 WHEREAS THE ASSESSEE ADMITTED GROSS SALES OF RS.5,32,89,646 ONLY, WHICH WORKS OUT TO SHORT ADMIS SION OF SALES/ GROSS RECEIPTS TO THE TUNE OF RS.1,07,50,354. THOUG H THE ASSESSEE FILED DETAILED EXPLANATION TO SUBMIT THAT THE ASSUM PTIONS OF THE ASSESSING OFFICER ARE NOT CORRECT, THE ASSESSING OF FICER PROCEEDED ON THE PREMISE THAT THERE IS SHORT ADMISSION OF SALES/ GROSS RECEIPTS AND ACCORDINGLY ADDED A SUM OF RS.1,07,50,354 TO THE IN COME ADMITTED. 5. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THAT THE ASSESSING OFFICER COMMITTED A MISTAKE IN TOTALLING THE SALE VALUE OF THE BUILDERS AGREEMENTS PERTAINING TO ASSESSMENT YEAR 2 010-11 WITH THAT OF TURNOVERS PERTAINING TO 2009-10, WHICH WORKED OU T TO RS.37,76,000. ITA NO.667/HYD/2015 & CO THEREIN M/S. PLATINUM PROJECTS, NELLORE 5 IN FACT, THIS MISTAKE WAS COMMITTED BY THE PREDECES SOR ASSESSING OFFICER AND FOLLOWED BY THE SUCCEEDING ASSESSING OF FICER. IT WAS ALSO CONTENDED THAT THE BUILDERS AGREEMENT IS NOTHING BU T THE CONSTRUCTION AGREEMENT DULY REGISTERED BY THE ASSESSEE-FIRM IN F AVOUR OF THE PURCHASER OF THE APARTMENT AT THE INITIAL STAGE OF CONSTRUCTION WITH THE CONDITION THAT THE APARTMENT BUYER HAS TO PAY THE S ALE CONSIDERATION IN REGULAR INSTALMENTS AT DIFFERENT STAGES OF CONSTRUC TION. THE ASSESSEE HAS ALSO FURNISHED YEAR-WISE COLLECTIONS MADE AND H IGHLIGHTED THAT ALL THESE DETAILS WERE AVAILABLE BEFORE THE ASSESSING O FFICER AND THE AGREEMENT OF SALE IS NOT A CONTRACT OF SALE OF APAR TMENT/FLAT AND ENTIRE SALE CONSIDERATION IS NOT RECEIVED AT THE TIME OF R EGISTRATION OF THE AGREEMENT, BUT NOMINAL AMOUNT OF RS.10,000 WAS RE CEIVED AS ADVANCE AT THE TIME OF REGISTRATION OF THE BUILDERS AGREEMENT. IT WAS ALSO EMPHASISED THAT ALL THE FACTS WERE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER, BUT THE ASSESSING OFFICER HAD NO T CALLED FOR ANY DETAILS AND WITHOUT PERUSAL OF THE MATERIAL FURNISH ED, AND THE BOOKS OF ACCOUNT FURNISHED, HE HAS PROCEEDED TO MAKE THE IMPUGNED ADDITION ON ASSUMPTION. 6. THE CIT(A) VERIFIED THE FACTS AS STATED ON BEH ALF OF THE ASSESSEE AND ALSO NOTICED THAT DURING THE COURSE O F ASSESSMENT PROCEEDINGS THE ASSESSEE CATEGORICALLY SUBMITTED TH AT THE SALE RECEIPTS ARE ACCOUNTED FOR AS PER THE DOCUMENT SALES, ON CO MPLETION OF PROJECT METHOD, AS PER THE STAGES OF COMPLETION AND PAYME NT SCHEDULE STIPULATED AND FINAL REGISTRATION WAS DONE ON RECEI PT OF LAST INSTALMENT AND THE PROCEEDS ARE ACCOUNTED. HE ALSO NOTICED TH AT THESE EXPLANATIONS WERE BRUSHED ASIDE BY THE ASSESSING OF FICER MERELY ON THE GROUND THAT SOME DETAILS ARE NOT SUBSTANTIATED BY MATERIAL EVIDENCE. HE THEREFORE, CONCLUDED THAT THE ADDITIO N MADE BY THE ASSESSING OFFICER HAS NO LEGS TO STAND. IN THIS RE GARD, HE OBSERVED IN PARA 5.4 OF THE IMPUGNED ORDER AS UNDER- ITA NO.667/HYD/2015 & CO THEREIN M/S. PLATINUM PROJECTS, NELLORE 6 5.4 THUS AS COULD BE MADE OUT FROM THE ABOVE INFORMATIO N THAT HAS BEEN BROUGHT ON RECORD BY THE APPELLANT TH ERE ARE VARIATIONS IN THE AMOUNTS REALISED (RS.4,47,99,595/ -) VIS- -VIS THE GROSS RECEIPTS SHOWN IN THE P&L A/C. WHIC H IS TO THE TUNE OF RS.5,32,89,646/- ;AND THE REALISABLE AM OUNTS OF RS.6,42,98,000/- AS WORKED OUT ABOVE, VIS-A-VIS THE REALIZABLE AMOUNT OF RS.6,02,64,000/- AS POINTED OU T BY THE ASSESSEE. IT REVEALS THAT THE REALISABLE AMOUN TS ARE MORE THAN WHAT HAS BEEN INDICATED IN THE ASST. ORDE R AND AMOUNTS REALISED WHICH IS RS.4,47,99,595/- (3,98,33,995+49,65,600) IS LESS THAN THE AMOUNTS SH OWN IN THE RETURN OF INCOME (RS.5,32,89,646). THUS, BAS ED ON THE FACTS OF THE CASE, IT MAY BE REASONABLE TO HOLD THAT THE ADDITION OF RS.1,07,50,354/- MADE ON PRESUMPTION BA SIS, DOES NOT HAVE LEGS TO STAND, WHERE THE ASSESSEE IS FOLLOWING THE METHOD OF PERCENTAGE OF COMPLETION OF ACCOUNTS. HOWEVER, THE AO MAY GIVE EFFECT TO THE OR DER AS PER THE ABOVE OBSERVATIONS AND SUBJECT TO THE SAID OBSERVATION, THIS GROUND RELATED TO THE ADDITION IS TREATED AS ALLOWED. 7. DESPITE A CATEGORICAL FINDING BY THE COMMISSION ER OF INCOME-TAX(APPEALS), THE ADMINISTRATIVE COMMISSIONE R APPEARS TO HAVE MECHANICALLY AUTHORISED THE ASSESSING OFFICER TO PREFER AN APPEAL. POWER TO FILE AN APPEAL IS VESTED UPON THE COMMISSIONER UNDER THE ACT; THE INTENTION OF THE LEGISLATURE WAS TO SE E TO IT THAT APPEALS ARE NOT FILED MECHANICALLY BY LEAVING IT TO THE ASS ESSING OFFICER, WHO IS LOWER IN RANK, AND A COMMISSIONER OF INCOME-TAX(ADM N) WOULD CAREFULLY EXAMINE THE RECORD AND EVALUATE AS TO TH E GENUINE NEED TO FILE A SECOND APPEAL AGAINST THE ORDER PASSED BY TH E CIT(A), WHO IS OF EQUAL RANK TO THAT OF COMMISSIONER-ADMINISTRATION. HOWEVER, WE NOTICE THAT THIS PURPOSE IS NOT ACHIEVED, GOING BY THE RECENT TREND OF AUTHORISATIONS GIVEN BY THE COMMISSIONERS OF INCOME -TAX UNDER S.253(2) OF THE ACT. THEY ARE VERY GENERAL IN NATU RE WHERE NO REASON WAS MENTIONED AS TO WHY IT IS FELT NECESSARY TO GIV E A DIRECTION TO THE ASSESSING OFFICER TO PREFER AN APPEAL; IN FACT NO S PECIFIC GROUND WAS MENTIONED IN THE AUTHORISATION, WHICH IS NOTHING BU T TRANSFERRING THEIR ITA NO.667/HYD/2015 & CO THEREIN M/S. PLATINUM PROJECTS, NELLORE 7 RIGHT TO THE ASSESSING OFFICER, AND GIVING UNBRIDLE D POWER TO THE ASSESSING OFFICER TO PREFER AN APPEAL BASED ON HIS OWN UNDERSTANDING OF THE ORDER PASSED BY THE CIT(A)- WHICH IS APPAREN T IN THIS CASE, BECAUSE THE ASSESSING OFFICER RAISED A GROUND THAT THE CIT(A) SHOULD HAVE CALLED FOR REMAND REPORT FROM THE ASSESSING OF FICER UNDER RULE 46A, WHICH IN TURN REFERS TO THE ADMISSION OF ADDI TIONAL EVIDENCE BY THE CIT(A), WHEREAS WHEN THE LEARNED DEPARTMENTAL R EPRESENTATIVE CALLED FOR THE ASSESSMENT RECORD, BASED ON THE DI RECTION OF THE BENCH, IT IS NOTICED THAT ALL THE MATERIAL WAS ALREADY AVA ILABLE WITH THE ASSESSING OFFICER AND HENCE THIS GROUND DOES NOT AR ISE OUT OF CIT(A)S ORDER. IN OTHER WORDS, THERE IS NO ADDITIONAL EVID ENCE FILED BEFORE THE CIT(A), WHEREAS THE ASSESSING OFFICER NOT ONLY PASS ED A CAUSAL ORDER, WHICH WAS STRONGLY HIGHLIGHTED BY THE CIT(A) WHO D EPRECATED THE SAME AND EMPHASISED HIS OBSERVATIONS IN THIS BEHALF BY PUTTING THE SAME IN BOLD LETTERS AND STATED THAT THE ADDITION W AS MADE BY THE ASSESSING OFFICER ON PRESUMPTION BASIS. BUT THE AD MINISTRATIVE COMMISSIONER HAS ALLOWED THE ASSESSING OFFICER TO F ILE A SECOND APPEAL, WITHOUT MENTIONING THE NATURE OF GROUNDS T O BE RAISED AND THE REASONS WHY HE WAS OF THE VIEW THAT AN APPEAL DESE RVES TO BE FILED AGAINST THE ORDER OF THE CIT(A), WHICH IMPLIEDLY EM BOLDENED THE ASSESSING OFFICER TO FILE AN APPEAL ON A NON-ISSUE, I.E. ADMISSION OF ADDITIONAL EVIDENCE. THIS WAS PRECISELY WHAT WAS CO NTESTED BY THE ASSESSEE IN ITS CROSS OBJECTION BY HIGHLIGHTING THA T THE ASSESSING OFFICER HAD REPEATEDLY CHALLENGED THE ORDER OF THE CIT(A) ON THE GROUND THAT IT WAS PASSED WITHOUT ANY WEIGHT OF EVI DENCE, BUT NO INSTANCE WAS FURNISHED AND RULE 46A HAS NO APPLICAT ION TO THE FACTS OF THE PRESENT CASE. IT IS UNFORTUNATE THAT THE INTEN TION OF THE LEGISLATURE WAS NOT FULFILLED BY THE ADMINISTRATIVE COMMISSIONE R BY MECHANICAL EXERCISE OF GIVING APPROVAL WITHOUT SATISFYING HIMS ELF AND ALSO SPECIFYING THE GROUNDS ON WHICH HE FEELS THAT AN AP PEAL DESERVES TO BE FILED IN THIS CASE. WHEN THE SAME WAS PUT TO THE L EARNED ITA NO.667/HYD/2015 & CO THEREIN M/S. PLATINUM PROJECTS, NELLORE 8 DEPARTMENTAL REPRESENTATIVE, HE HAS FAIRLY CONCEDED THAT THE EVIDENCE FILED BEFORE THE CIT(A) WAS ALSO AVAILABLE BEFORE T HE ASSESSING OFFICER AND THESE FACTS WERE NOT TAKEN INTO CONSIDERATION B Y THE ASSESSING OFFICER. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, WE DISMISS THE APPEAL FILED BY THE REVENUE AS WITHOUT ANY BASI S AND CONSEQUENTLY, TREAT THE CROSS OBJECTIONS OF THE ASS ESSEE AS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE PECULIAR CIRCUMSTANCES OF THE CASE, WE W ISH TO ADVISE THE COMMISSIONERS OF INCOME-TAX(ADMINISTRATI ON) IN GENERAL TO VERIFY THE FACTS PROPERLY, WHILE EXERCISING THEIR S TATUTORY RIGHT, BEFORE GIVING AUTHORISATION UNDER S.253(2) OF THE ACT. ON THE CONTRARY, WHEN AN ASSESSING OFFICER CHALLENGES THE ORDERS PASSED B Y THE CIT(A) EVEN THOUGH GLARING DEFICIENCIES IN THE ASSESSMENT ORDE R ARE HIGHLIGHTED BY THE CIT(A) SUPERVISORY AUTHORITY SUCH AS COMMISSION ER(ADMN) SHOULD ADMONISH ASSESSING OFFICER FOR SEEKING PERMISSION T O FILE SUCH FRIVOLOUS APPEALS, IN OTHER WORDS, THE SUPERIOR A UTHORITIES SHOULD TAKE APPROPRIATE ACTION AGAINST THE ASSESSING OFFICERS B ECAUSE SUCH APPEALS CREATE UNNECESSARY LITIGATION, TROUBLING THE GENUIN E TAX-PAYER FOR NO FAULT OF THE ASSESSEE. WE WISH AND HOPE THAT THE TA X ADMINISTRATION WOULD NOT HENCEFORTH ALLOW FILING OF SUCH APPEALS B Y THE ASSESSING OFFICERS TO COVER UP THEIR OWN DEFICIENCIES IN THE ASSESSMENT ORDERS, PASSED IN A CASUAL MANNER. 9. AS PRONOUNCED IN THE COURT, APPEAL OF THE REVEN UE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (B.RAMAKOTAIAH) (D.MANMOHAN) ACCOUNTANT MEMBER. VICE PRESIDENT DT/- 2 ND MAY, 2015 ITA NO.667/HYD/2015 & CO THEREIN M/S. PLATINUM PROJECTS, NELLORE 9 COPY FORWARDED TO: 1. M/S. PLATINUM PROJECTS, D.NO.27/1/198 - 3, SVR THE NEST, BALAJI NAGAR, NELLORE 2. DY. COMMISSIONER OF INCOME - TAX CIRCLE 1, NELLORE 3. 4. COMMISSIONER OF INCOME-TAX(APPEALS) , TIRUPATI COMMISSIONER OF INCOME-TAX, TIRUPATI 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.