DCIT, CENTRAL CIRCLE, DEHRADUN V. GOLDEN MANOR, DEHRADUN

ITA 104/DDN/2019

AI Insights

The case involves two appeals by the Revenue against the order of the CIT(A) which pertained to the assessment years 2015-16 and 2016-17. The appeals were based on the additions made by the Assessing Officer (AO) following a search and seizure operation at the premises of Golden Manor Group, where discrepancies in income declarations were noted. The AO had made substantial additions to the assessee's declared income, which were later deleted by the CIT(A). The Revenue challenged this deletion, arguing that the CIT(A) did not adhere to the mandatory provisions of AS-7. The Tribunal examined the methods used by both the AO and the assessee in calculating the profits and found that the assessee's method was correct and in compliance with AS-7.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298798 (ITAT-DEHRADUN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.K CHATERJEE; THROUGH VC
• Assessee Lawyers: S. K. MATTA; CHARTERED ACCOUNTANT
• Keywords: Search and seizure
• Section: 44AB

Judgement Text

"आयकर अपीलीय अिधकरण देहराद ून पीठ “डीबी”, देहराद ून ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं ŵी अवधेश क ुमार िमŵा, लेखाकार सद˟ क े समƗ IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH “DB”, DEHRADUN (THROUGH VIRTUAL HEARING) BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER आअसं.103 &104/देहराद ून/2019(िन.व. 2015-16 & 2016-17) ITA Nos.103 & 104/DDN/2019 (A.Ys.2015-16 & 2016-17) Deputy Commissioner of Income Tax, Central Circle, Dehradun ...... अपीलाथᱮ/Appellant बनाम Vs. Golden Manor, 229, Indira Nagar, Dehradun, Uttarakhand 248001 PAN: AAMFG-2590-D ..... ᮧितवादी/Respondent अपीलाथŎ Ȫारा/ Appellant by : Shri S.K Chaterjee, CIT-DR(Through VC) ŮितवादीȪारा/Respondent by : Shri S.K. Matta, Chartered Accountant सुनवाई कᳱ ितिथ/ Date of hearing : 10/02/2025 घोषणा कᳱ ितिथ/ Date of pronouncement : : 21/02/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: These two appeals by the Revenue are directed against the order of Commissioner of Income Tax (Appeals)-IV, Kanpur (hereinafter referred to as 'the CIT(A)') dated 16.05.2019, common for assessment years 2015-16 & 2016-17. 2. Since, identical issues have been raised by the Revenue in both these appeals and the facts germane to the issues in appeal are identical, these appeals are taken up together for adjudication and decided by this common order. 2 ITA Nos.103 & 104/DDN/2019 (A.Y.2015-16 & 2016-17) 3. Shri S.K. Chaterjee, representing the Department narrating facts of the case submitted that a search and seizure operation was carried out at the business premises of Golden Manor Group on 22.07.2015. The assessee is a partnership firm and is engaged in Real Estate Business. During the course of search and seizure operation one of the partners Shri A N Ahuja in his statement recorded u/s. 132(4) of the Income Tax Act, Income Tax Act,1961(hereinafter referred to as ‘the Act’) made a disclosure of Rs.5 crores for AY 2015-16 and Rs.9 crores for AY 2016-17. However, in return of income the assessee did not offer surrendered income. The assessee in return of income declared total taxable of Rs.2,68,97,657/- from the business of Real Estate for AY 2015-16 and Rs.2,92,02,474/- for AY 2016-17. The assessee being in the business of Real Estate Development was required to adopt Percentage Completion Method as per Accounting Standard-7 (AS-7). The Assessing Officer (AO) computed the gross profit as per norms laid down in AS-7 and made addition of Rs.4,96,15,372/-in AY2015-16 and Rs.5,58,06,768/- in AY 2016-17. The CIT(A) has erred in deleting the additions made by the AO. The CIT(A) has not followed mandatory provision of AS-7. The assessee had furnished written submissions before the CITA(A). The CIT(A) has sought remand report from the AO. The AO submitted his report vide letter dated 18.04.2019. The CIT(A) without properly appreciating observations of the AO in remand report decided appeal of the assessee deleting addition made in the assessment orders. The ld. DR thus prayed for reversing findings of the CIT(A) and upholding addition made in assessment orders for respective impugned assessment years. 3 ITA Nos.103 & 104/DDN/2019 (A.Y.2015-16 & 2016-17) 4. Shri S.K. Matta, appearing on behalf of the assessee submitted that Financial Year 2014-15 relevant to assessment year 2015-16 is the first year of booking profits by the assessee. During assessment proceedings, the assessee furnished all the relevant documents and financial statement before the AO. The assessee is following Percentage Completion Method as per AS-7. In assessment proceedings, the AO could not point any defect in the working of the assessee or books of the assessee which were duly audited as per provision of section 44AB of the Act. In so far as, surrender of Rs.5 crores/Rs.9 crores in impugned assessment years, by Shri A N Ahuja Managing Partner, the statement was retracted next day. The AO has not made any addition on the basis of surrender of income. The ld. Counsel for the assessee submitted that the AO instead of taking actual cost and actual revenue has adopted projected figures which were filed before the bank. The AO conveniently ignored actual figures which were submitted during the course of assessment proceedings as well as on the basis of which the return of income was filed. The ld. Counsel vehemently defended impugned order and prayed for upholding the same. 5. Both sides heard, orders of the authorities below examined. In so far as the nature of business activities carried out by the assessee, it is not in dispute. The assessee recoginzied revenue on the basis of Percentage Completion Method. The assessment year 2015-16 is the second year of operations and the first year of booking profits. The profits computed by the assessee for impugned assessment years per Percentage Completion Method and in line with AS-7, is tabulated herein under:- 4 ITA Nos.103 & 104/DDN/2019 (A.Y.2015-16 & 2016-17) PARTICULARS ASSESSMENT YEARS 2014-15 2015-16 2016-17 OPENING WORK IN PROGRESS (WIP) NIL 68405365 166362875 COST INCURRED DURING RELEVANT A.Y. 68405365 219370654 145259079 TOTAL COST INCURRED UPTILL NOW [A] 68405365 287776019 433035097 ESTIMATED PROJECT COST[B] 450645000 581130894 607096958 DEGREE OF COMPLETION (%) [C] i.e [A/B] 15.18% 49.52% 71.33% (Refer Note 1) ESTIMATED PROJECT REVENUE [D] - 299513995 433573883 (Based on Sale Agreement Executed) TOTAL PROJECT REVENUE [C*D] i.e [E] - 148310800 316396018 (Refer Note 1) PROJECT REVENUE FOR RELEVANT A.Y. - 148310800 168085218 CLOSING WORK IN PROGRESS 68405365 166362875 172739211 PROJECT COST TO BE CHARGED [F] - 121413143 138882743 (Opening WIP +Cost Incurred -Closing WIP) PROFIT FOR RELEVANT A. Y. NIL 26897657 29202475 [E-F] i.e [G] 6. We find that the AO is also of the view that the assessee has recognized profits in accordance with AS-7. However, the AO while computing profits instead of taking actual revenue and cost has relied on projections that were furnished to the bank by the assessee. When actuals are available, resorting to addition based on projections is unwarranted. The CIT(A) has reserved findings of the Assessing 5 ITA Nos.103 & 104/DDN/2019 (A.Y.2015-16 & 2016-17) Officer by observing that the computation of assessee’s profits of business should be on the basis of actual revenue recognized and actual cost incurred. We find no infirmity in the order of CIT(A). 7. The impugned order is upheld and both appeals of the Revenue are dismissed. Order pronounced in the open court on Friday the 21st day of February, 2025. Sd/- Sd/- (AVDHESH KUMAR MISHRA) (VIKAS AWASTHY) लेखाकार सद᭭य/ACCOUNTANT MEMBER ᭠याियक सद᭭य/JUDICIAL MEMBER िदʟी / Delhi, ᳰदनांक/Dated 21/02/2025 NV/- ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT/CIT(A) 4. िवभागीय ᮧितिनिध, आय.अपी.अिध.,देहराद ून /DR, ITAT,Dehradun 5. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Dehradun "