ACIT Circle -58(1), Delhi V. Dwarika Balaji, Delhi

ITA 107/DEL/2021

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) - XXXV, Delhi, which had reversed the disallowance of an amount of Rs. 45,65,51,338/- on account of provision for development expenses. The assessee, an Association of Persons engaged in real estate development, had booked this amount as a provision for development expenses related to an integrated township project. The Assessing Officer disallowed this provision, leading to the assessee's appeal before the CIT(A), which was subsequently reversed. The Revenue challenged this reversal, leading to the current appeal before the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121732 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 10-09-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 10-02-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 6; 201; 43; 72; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H” DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & Ms. ASTHA CHANDRA, JUDICIAL MEMBER I.T.A. No.107/DEL/2021 Assessment Year 2016-17 ACIT, Circle-58(1) Delhi. Vs. Dwarika Balaji, 2 nd Park End, Delhi-110092 TAN/PAN: AABAD2075J (Appellant) (Respondent) Appellant by: Shri S.B. Gupta, CA Shri Morh Mukut P. Yadav, Adv. Respondent by: Shri Amit Katoch, Sr.DR Date of hearing: 11 09 2023 Date of pronouncement: 25 09 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he ca p t i o n e d a p p e al ha s be e n fi l e d b y t h e R e v en ue a g ai ns t t he or d e r o f t h e Co m m i s si o n e r o f I nc o m e T a x ( A pp e a ls )-X X X V , D el h i [ ‘ C IT (A ) ’ i n sh o rt ] da t e d 2 0 . 02 . 2 0 2 0 a ri si ng fr o m t he a ss es s m e n t or d e r d a te d 17. 1 2. 2 0 1 8 pa sse d b y t h e A s se s s i ng O ffi c e r (A O ) un d er S e c t i o n 1 43 ( 3) o f t h e I n c o m e T a x A c t , 196 1 (t h e A c t ) c on c e rn i n g A Y 201 6- 1 7. 2. A s pe r t h e g r o un ds o f ap pe a l , t h e Re v e nu e ha s c ha l le n g e d t he re v e r sa l o f d i s a l l o w a nc e o f a mo u nt a t R s. 45, 6 5, 51 , 338 /- on a c c o u nt o f p r o v i s i o n f or d e v el o p m e n t e xp en se s . 3. B ri e f l y st a t e d, t h e as s es se e i s a n A ss o ci a t i o n of P e rs on ( A O P) e ng a g e d i n t he b u si n es s o f de ve l op m e nt o f r e a l e st at e a n d w a s de v e l op i n g a n i nt e g ra t e d t ow n sh i p o f 42 30 5 3 s q. m t rs at Ja n s ha d I.T.A. No.107/Del/2021 2 Ro a d , M uz a ff a r N a g a r , U t t ar P ra de s h a t t he r e l e v a n t t i m e . T he a ss es se e fi l e d r e t u r n o f i nc o m e for A sse s s me n t Y e a r 2 0 16 - 17 i n qu e st i o n d ec l a ri ng i n c o me at R s. 2 , 18, 3 1, 91 0/ -. T he re t ur n fi l e d b y t he a ss es s e e w a s s ub j ec t e d t o sc r ut in y a s se ss m e n t. In t h e co urs e o f sc r ut i n y as se ss m e n t , th e A ss es si ng O ff ic e r i nt e r a l i a o bs e rv e d t h a t t he a ss e s se e h a s b o o ke d a n a m o u n t o f R s. 4 5, 6 5, 51 , 3 38 /- a s p ro vi si o n fo r de ve l o p m e n t e x pe ns e s. O n i n q u i r y, t h e a ss es see s ub mi t t e d t h a t suc h p r o vi si on i s ma d e fo r a l l th e e st i m a t e d c ost to c o mp le t e t h e pr o j e c t a nd t he e xp e ns e s c l a i m e d a s p ro v i s i o n ha vi ng be en a c t u al l y i nc ur r e d in F . Y . 20 1 5- 1 6 r e l e va nt t o A sse s s m e n t Y e ar 20 1 6- 17 i n qu e st i o n b ut i s l i ke l y t o be i nc ur r e d i n t he e n s ui ng y ea r s. T h e A sse s si n g O ff i c e r o b se r v e d th at s u c h pr o vi si on g oe s ag a i n s t t he ru d i me n t a ry p r i n c i pl es o f a c c o u n ti ng a n d a r e n o t a ll o w a b le e xp e n d i t u r e u nd e r S e ct i o n 37 o f t h e A c t . Th e A s se s si ng O ffi c e r a cc or di ng l y d i s a l lo w ed t h e p ro v i si o n f or de ve l o p m e nt e x p en se s a n d a dd e d t he sa me t o t he re t u rn e d i n c o m e. 4. A g gri e v e d, t he a ss e ss e e p r e f e r re d a p pe a l b e f or e th e CI T( A ). Be fo r e t h e C I T ( A ), t h e a ss e s se e i nt e r al i a re fe r r e d t o a gr i ev an ce pe t it i o n r e l a t e d t o hi gh pi t c h e d sc r u t i ny a s se ss me nt d a t e d 30 . 0 4. 2 0 1 9 pl a ce d be for e t he P r. C I T . Th e g r ie va nc e c o m mi t t ee c on st i t ut ed f or r e d re s sa l o f g r i e v a n c e s a gr e e d to the c l a i m o f t h e a ss es se e t ha t su c h p r o v i s i o ns f or e xpe ns e s i n tu rn r e su l t ed i n c or r e sp on d i ng i n c r e as e i n t h e c l o s i n g in v e n t or y o f u n so l d pl ot s an d t hu s t h e p r o fi ts d ed uc t e d i s co rr e c t a n d i s un a f fe cte d by t h e pr o vi si on s t ow a rd s de ve l o p me n t e x p e nse s. T he a ss e s se e poi nt e d o ut be fo r e t he C I T ( A ) t h a t a s p e r t he fi n d i ng s an d r ec om m e n da t io ns o f t he c o m mi t t e e , t h e i nc o m e a ss es se d i s i n h i g h p it c he d a n d ad d i t io ns ma de o n a c co un t o f p r o v i s io n a r e u n w a rr a n t e d . Th e CI T (A ) i n t u r n re l ie d up o n t h e o bs e r v a t i o n s o f t he G r ie v a n c e R ed res sa l Co m mi t t ee a nd r e v e rse d t he a dd it i o n s on ac c ou nt o f p r o vi si o n fo r re dr e ss al I.T.A. No.107/Del/2021 3 pu r po se s. T he r el e va nt o pe ra t i v e p ar a gr a p h o f th e or de r o f t he CI T ( A ) i s r e pr o d u c e d h e r e u n d er : “ 6 . It h as be e n ar gu e d t h at f a c t s r e l e v an t t o t h e pr ov i s i o n f o r d e v e l op m e n t e x pe n s e s m ad e b y t h e as s e s s e e i n i t s bo ok s a nd d ul y e x p l a in e d t o t he A O a r e t h a t t he as s e s s e e s u b m i t t e d t h e S i t e P l a n to M u z af f a r n a g ar D e v e l op m e n t A ut h or i t y ( M D A ) f o r a pp r o v al f o r de v e l op m e n t o f a n in t e gr at e d t o w n s h i p i n 4 23 0 5 3 s qua r e m e t r e s of la n d a t J a ns h a d R o ad , M u z a f f ar na ga r , U t t a r P r a de s h . Th e M D A ap pr ov e d th e s i t e p l a n o n 1 9/ 1 0/ 2 01 1 an d r e n e w e d t he a pp r o v al o n 09 / 09 / 20 1 6, c o py o f ap p r ov e d s i t e m a p f u r n i s h e d t o t h e A O . T he s i t e m ap s p e c i f ie d a n d pa r t i c ul a r i z e d , i nc l u di n g int e r a l ia , a r e as of to w n e a r m a r k e d as gr e e n a r e a, w a t e r c ol l e c t i on p on ds , r o ad s , s t r e e t s , s c h o ol s , h o s p i t al s , c o m m un i t y c e nt r e s , c l ub ho us e , po s t of f i c e , r ai l w ay r e s e r v a t io n c o u n t e r , A T M , t e m p l e s , r e s i de n ti a l a n d c om m e r c i al b l o c k s h av i n g d is t in c t p l o t o r f l at o r sho p o r o f fi c e nu m b e r s . It h a s b e e n c on t e nd e d t ha t i t i m pl i e s t ha t t h e i nt e g r a t e d to w ns h i p pr oj e c t u n d e r t ak e n b y th e a s s e s s e e o n t he t o t al a r e a of 42 30 5 3 s q ua r e m e t r e s o f l a nd r e qu i r e d n ot o nl y de v el o pm e n t of r e s i d e n t i al a n d c o m m e r c i a l bl o c k s i n s uc h t ow n bu t al s o c on s t r u c t i o n an d d e v e lo p m e n t o f v ar i o u s i nt e r n a l a nd e x t e r n al ba s i c p u bl i c u t i l it i e s , a m e ni t i e s an d f a c i l i t i e s b y w ay of l ay i n g do w n d r a i na ge a n d s e w e r a g e , l ay i n g e l e c t r i c l i n e s , c a b l e s a n d po l e s , c o ns t r u c t i o n of bo u nd a r y w al l a r o un d t h e t own a nd g at e at th e e n tr y t h e r e o f , c o n s t r u c t i o n of r o a d s a n d s t r e e ts , c o n s t r u c t i o n o f c om m un i t y h a l l s , c l u b s , s c h o o l s a n d h os pi t a l s , de v el o p m e n t of gr e e n ar e a in c om pl i a nc e w i t h t h e m an d a t o r y c o n di t ion of pr o v i d i n g f or s uf f i c i e nt g r e e n ar e a i n t h e t o w n , bea u ti f i c a t i o n of to w n b y w ay o f d e v e l op i ng p a r k s an d h o r t i c ul t ur e , et c . Th us , i t be c o m e s m a n if e s t t h at t h e d e v e l op m e n t o f t ow ns hi p do e s no t ge t c om p l e t e d s i m p ly b y a c qu i r i n g l a n d, b u t de v e l o p m e n t o f t he ab ov e m e nt i on e d b a s i c a m e n i t i e s a nd f a c i li t i e s ar e int e g r a l pa r t an d c o m p on e n t th e r e t o . 7. It ha s be e n a r g u e d t h a t t h e s i t e p l a n ap pr ov e d by t h e M D A e nt i t l e d t he as s e s s e e t o s e l l 1 87 2 3 2 s q ua r e m e t r e s ou t o f t h e t o t al to w ns h i p a r e a of 42 3 05 3 s q u ar e m e t r e s . T he r e m a i n ing a r e a o f t he to w n c o m p r i s e d of 7 50 1 2 s q ua r e m e t r e s of l an d r e m a ini n g t o be pu r c h a s e d by t he a s s e s s e e a s on 31 / 0 3 / 20 1 6 a nd 16 080 9 s q ua r e m e t r e s o f l a n d e a r m a r k e d b y t he M D A f or c o ns t r uc t i on a n d de v e l op m e n t o f t he a b ov e m e n t i on e d v a r i o us pu b l ic uti l i t i e s , b as i c am e n i t i e s a nd f a c i l i t i e s . It im pl i e s t h a t t he t ot a l s a l e a b l e ar e a ap pr ov e d by t h e M D A , e n t i t li n g t h e as s e s s e e t o s e l l t h e s a m e t o bu y e r s , w a s 1 8 7 2 32 s qu a r e m e t r e s . f t h a s be e n s u b m it t e d t h a t t he ap pe l l a nt h ad s o l d 1 6 69 . 97 s q ua r e m e t r e s of p l ot i n F Y 2 01 4 - 1 5 r e l e v a n t t o t h e A Y 20 1 5 - 1 6 , r e s u l ti n g i n to s al e a bl e ar e a i n t he ha nd s o f t h e as s e s s e e o f 1 8 5 5 6 2 . 03 s q u a r e m e t r e s a s o n t h e f i r s t da y o f t h e r e l e v a n t f i n an d a l y e ar 2 01 5 - 1 6 r e l e v an t t o t he I.T.A. No.107/Del/2021 4 as s e s s m e n t y e ar 2 0 1 6 -1 7 . I t ha s b e e n b r o ug ht o n r e co r d t ha t ou t of th i s s a le a b le ar e a o f 1 8 55 62 . 0 3 s qu a r e m e t r e s , t h e a p p e l la n t s o l d 22 56 3 . 4 9 s qu a r e m e t r e s o f p l ot du r i n g F Y 20 1 5 - 1 6 r el e v a nt t o t he r e l e v a n t . A Y r e s u lt i n g i n t o 1 6 2 99 8 . 5 4 s qu ar e m e t r e s i n v e nt o r y of un s o l d s a l e ab l e p l ot s i n t he ha n d s o f t h e ap p e l l a n t a s at 31 / 03 / 20 1 6. 8. It ha s b e e n br o u gh t t o t h e n o t i c e t h at t he t o t a l c os t of t he to w ns h i p p r oj e c t a p p r o v e d b y t he M D A a s p e r D R w a s R s . 62 . 7 6 c r or e s . S uc h c o s t i n c l ud e d c o s t o f l a n d e s t i m at e d at R s . 10 . 2 4 c r or e s . T h e r e f or e , e x c l u di n g l a n d c o s t , c o s t o f t he c o ns t r uc t i o n a n d de v e l op m e n t of v a r i ou s p u b l ic u t i l i t i e s , b as i c a m e ni ti e s a n d fa c i l i t i e s , ap p r o v e d b y t he M D A a s p e r D PR , c om e s to R s . 52 . 5 2 c r or e s (R s . 6 2 . 76 c r o r e s m i n u s R s . 1 0 . 2 4 c r o r e s ) . He r e , i t i s e qu al l y i m p or t a nt t o n ot e t ha t th e as s e s s e e ha d i n cur r e d t ot a l c o s t to w ar d s c o n s t r u c ti o n an d d e v e l op m e n t of v a r i o u s p u bl i c u t i l i t i e s , ba s i c a m e n it i e s an d f ac i l i t i e s , e x c l ud i ng c o s t o f la nd , o f R s . 6 . 1 2 c r or e s u pt o 3 1/ 0 3/ 2 01 6 . Th us , t he a s s e s s e e w as ob v iou s l y d ut y bo un d u nd e r c o n tr ac t u al ob l i g a t i o n t o w a r d s i t s b u y er s of pl o t s o r fl a t s o r s h o p s o r o f f i c e s i n t h e t ow n t o i nc u r f u r the r c os t o f R s . 46 . 4 0 c r or e s t o w a r d s c o n s t r u c t i o n an d d e v e l o p m e nt of pu bl i c ut i l i t i e s , b as i c a m e n i t ie s an d f ac i l i t i e s i n t he t ow n s h i p p r o j e c t i n w h i c h t h e as s e s s e e h ad p ar t l y s o l d pl o t s t o b u y e r s . 9. O n t h e b a s i s o f t h e ab o v e , t h e a p pe l l a nt c o nt e n ts t ha t t he c o s t of th e i n te r na l an d e x t e r n a l de v e l op m e n t o f v a r i o us p ubl i c u ti l i t i e s , ba s i c am e n i t i e s a n d f ac i l t i e s , de t e r m i n e d b y t h e M DA a s pe r D P R , e x c l u di n g l a n d c os t, w as R s . 5 2 . 5 2 c r or e s . Thi s c o st w a s e s t i m a t e d in t he y e a r 2 0 1 1 w he n D P R w a s i ni t i a l ly a pp r o v e d. Ho w e v e r , s i nc e m o r e t h an f ou r y e a r s h a d e x pi r e d a n d m u c h w at e r ha d f l o w n s i nc e th e n , a n d t a k i n g i nt o c o ns i d e r a t i on t h e i nf l a t io n ary t r e nd s pr e v a l e nt i n t h e c o u nt r y , a n d w i t h a v ie w t o a r r i v e a t t he m o s t r e c e nt s c i e n t i f i c e s t i m a t e s , t h e a s s e s s e e e ng a ge d an A r c hi t e c t M / s G i an P . M a t h u r & A s s oc i a t e s P v t. L t d. , C -5 5 , E a s t of K a i l a s h , N e w D e l hi - 11 0 06 5 a t th e e nd of M ar c h, 2 01 6 t o gi v e e s t im a t e o f t he c os t of t h e p e nd i ng c o ns t r uc t i o n a n d d e v e l op m e n t w or k s as o n 31 / 03 / 20 1 6 of v a r i o us p u b l ic ut i l i t i e s , b a s ic am e nit i e s a n d fa c i l i t i e s . T he s a i d a r c hi t e c t e s t i m a te d t he f ur t her c o s t t o be in c u r r e d b y t he as s e s s e e a t R s . 45 , 6 5, 5 1 , 33 8 c r or e s. A s t he as s e s s e e ha d a l r e a d y i nc u r r e d c o s t o f R s . 6 , 12 , 1 9, 31 2 , i t m e an s th a t t h e t o t a l e s t i m a t e d c o s t o f t h e c o n s t r u c t i on an d de v e l op m e n t o f v ar i o u s p u bl i c ut i l i t i e s , b a s i c a m e n i t i e s a n d f ac i li t i e s , i nc l u di n g th e c o s t e s t i m a t e d b y t he s a i d ar c h i t e c t, c o m e t o Rs . 5 1, 7 7 , 7 0 , 6 50 . A c c o r d i n g l y , i n o r d e r t o c om pl y w i t h t h e m a t c h i n g co nc e p t o f ac c o un t i n g , b e s i d e s h a v in g p as s e d t h e e n tr y f o r c o st of de v e l op m e n t a c t u a l l y i n c ur r e d u pt o 3 1 / 0 3 /2 0 1 6 o f R s. 6 . 1 2 c r o r e s , th e a s s e s s e e a ls o pa s s e d a c c o u nt i n g e n t r y i n i t s b ook s t o p r o v i de fo r c os t of th e c o ns t r uc t i o n an d de v e l o pm e nt o f v a ri ou s pu bl i c I.T.A. No.107/Del/2021 5 ut i l i t i e s , b a s i c a m e n i ti e s a nd f a c i l i ti e s t o b e i n cur r e d of R s . 45 . 6 5 c r or e s f or t h e s i m p l e r e as o n t h a t t h e a s s e s s e e h ad ob l i ga t i on i n pr a e s e n t i t o i nc u r c o s t s f or th e c on s t r u c t i on an d de v e l op m e n t of v ar i o u s i n t e r n a l a n d e x t e r n al pu bl i c u t i l i t ie s , b a si c am e ni t i e s a n d fa c i l i t i e s i n th e s a i d t ow ns hi p pr oj e c t m o r e s o s i nc e t h e a s s e s s e e ha d al r e a d y s o l d s o m e of th e p l ot s of t h e t o w n s h i p pr o j e c t i n t he w e a r u n d e r c o n s i d e r a t io n by w a y of r e g i s t e r e d c on v ey a n c e de e d s . 10 . Th e n e t r e s u l t , ar gu e s t h e ap p e ll a nt , af t e r c o ns i de r i n g t he de v e l op m e n t e x p e ns e s a c t u a ll y i n c u r r e d u pt o 3 1/ 0 3/ 20 1 6 o f R s . 6 , 12 , 1 9 , 3 1 2, p r o v i s i on f o r p e n d i ng d e v e lo p m e n t e x p e ns e s o f R s . 45 , 6 5 , 5 1, 3 3 8 an d c o s t i nc u r r e d i n th e pu r c h as e o f la n d u p t o 31 . 0 3 . 2 01 6 o f R s . 1 0 , 78 , 9 5 , U 7 7 , i s t h a t t h e t ot a l co s t o f t o w n s h i p pr o j e c t c o m e s t o R s . 62 , 5 6, 6 5 , 7 2 7. A s s t a t e d h e r e i na b ov e , t h e t o t al s at a b le a r e a of t h e p l o t s i n t h e h a nd s o f t h e a s s e ss e e a s o n 01 / 04 / 20 1 5, e l i g i b l e f or s al e a s pe r s i t e pl a n an d D R a pp r o v e d by th e MD A , w as 1 , 8 5 , 5 62 s q u a r e m e t r e s . Th us , c o s t o f s al e a bl e ar e a of th e p r o j e c t c om e s t o R s . 3 37 1. 7 3 p e r s q u ar e m e t re (6 2 5 6 6 5 72 7 /1 8 55 6 2 ) . 11 . Th e a p pe l l a n t c on t e n d s t ha t s i m u l t an e o u s w i t h the m a k i n g of pr o v i s i o n f or d e v e l o pm e nt e x p e n s e s , t h e a s s e s s e e s uo m o t o l oa d e d s uc h p r ov i s i o n f o r e x p e ns e u po n t he i n v e n t or y of u ns o l d p l o t s i n i t s ha nd s un d e r t h e h e ad i n g “C l o s i n g S t o c k ” r e p r e s e n ti ng w or k -i n - pr o g r e s s , d u ly c r e d i t e d t o t he p r o f it a nd l os s a c c ou nt . T h e r e s u l t of s uc h l oa di n g w a s t h a t t h e a m o u n t o f t h e p r o v is i on fo r d e v e l o pm e nt e x p e n s e s r e l a ta b l e t o t he p l ot s s o l d du r i ng t he y e ar w a s c h ar ge d t o pr o f i t e ar n e d d u r i n g t he y e a r . Th e r e m a in i n g a m ou n t o f s u c h pr o v i s i o n, be i n g r e l at a bl e w i t h t he i n v e nt o r y o f u ns ol d p l ot s , w a s ad de d t o t h e v a l ue o f w o r k -i n -p r o g r e s s , t h e r e by n e ut r a l i z i n g t he de b i t a n d c r e d i t s i de o f p r of i t & l os s ac c o un t w i t h t he s a m e am o u nt , r e s ul t i ng i n t o no i m p ac t o f s uc h pr o v i s i o n u p o n t h e ne t pr o f i t e ar ne d f or th e y e ar . 12 . O n t h e b as i s o f f or e g o in g t h e a p pe l l a n t ar gu e s t h a t t h e c o s t of s al e a b le a r e a of t h e p r o j e c t af t e r t a k in g i nt o c o n si de r at i o n pr o v i s i o n f or d e v e l o pm e nt e x p e n s e c o m e s to R s . 3 37 1. 7 3 p e r s qu a r e m e t r e . In t hi s r e g a r d, t h e as s e s s e e e x pl a i ned t o t he A O t h at it v a l u e d i t s w or k -i n -p r o gr e s s a t th e r a t e of R s . 3, 3 71 . 7 3 p e r s qu a r e m e t r e a n d d u l y c r e d i t e d t h e s a m e t o t h e P r o fit a n d L o s s A c c o u nt u n d e r t h e he a d " C l o s i ng S t o c k " , t he r e b y d uly o f fe r i ng s u c h s t oc k to t a x . I t i s t h us e s t a b l i s h e d t h a t t he v a l u e o f c l o s i n g s t oc k w a s al s o s i m ul t a ne o us l y i nc r e a s e d b y t h e a m o u n t o f t h e e s t i m a t e d pr o v i s i o n f or t he c os t o f d e v e l o p m e nt as w a s r e l a t ab le t o s u c h c lo s i n g s t oc k . I n o t h e r w o r d s , t he as s e s s e e d e bi t e d t he p r o v i s i on , fo r c os t of de v e l o pm e n t o f R s . 4 5 . 6 5 c r o r e s t o i t s P r o fi t an d L o s s A c c o u nt a n d a t t he s am e t i m e c r e d i te d t h e c or r e s p o ndi n g a m o u nt r e l at a bl e t o i t s c l o s i ng s t oc k t o t h e P r of i t & L o s s A c c o u nt , r e s u l ti n g in t o no i m p ac t u p o n t h e n e t p r o f i t or ta xa bl e i n c o m e . I.T.A. No.107/Del/2021 6 13 . T he A O h ow e v e r , di s a l l ow e d t h e i s P r o ns o t or D e v el o pm e nt E x p e n di t u r e a m o un t i ng to R s . 4 5 , 65 , 5 1 , 3 38 / - a nd a t -t h e s am e t i m e ac c e p te d t h e c l o s i ng s t oc k E x p e n s e s , b e e n v al u e d c on s i d e r i n g t h i s ar g u e of p r o v is i on f o r " D e v e l op m e n t s E x p e n s e s . 14 . B e in g ag g r ie v e d w i t h t h e ad d it i o n m a d e by t he As s e s s i n g O f f i c e r t h e ap p e l l a nt h ad al s o f i l e d a g r i e v an c e pet i t i on be f o r e t he H i gh P i t c he d Sc r u t i ny A s s e s s m e n t C o m m it t e e , w hi c h fo u nd t he as s e s s m e n t o r de r a s h i g h p i tc h e d in n at u r e . Th e C o mm i tt e e ob s e r v e d a s u n de r - ‘w hi l e t he A O ha s t ak e n l e g al l y c o r r e c t v i e w on di sa l l ow i n g " P r o v i s io n f o r D e v e l o pm e nt Ex p e n s e s " b u t h e f a i l e d t o a p p r e c i at e th e f ac t t ha t t h e m a j o r c h un k o f th i s a m o u n t i s a l so t h e r e i n c r e di t s i de i n c l os i n g s t oc k o f 5 4 . 9 5 c r a nd t he r e f o r e t he s am e a m o u n t g ot ad de d t w i c e b o t h w h il e di s a l l ow i n g " P r o v i s io n f o r De v e l o pm e n t E x p e n s e s " a s w e l l a s i n c l o s i n g s t o c k . T h i s h as r e su lt e d i n a r r i v i n g at i nc o m e o f R s . 4 7 . 9 3 c r in t he A s s e s s m e n t O r d e r da t e d 17 . 1 2 . 2 01 8 on t h e s al e o f l a n d o f R s . 1 0. 1 4 c r . w hic h i s n o t ju s t po s s i b l e . A r i s i ng f r o m th e f a c t t ha t d i s al l o w a n c e of a n a m ou nt of 4 5 . 65 c r w a s m a d e fr om t h e e x p e n s e s id e o nl y w i th o ut r e d u c i ng t he c or r e s po n di n g a m o u n t f r o m t h e c l o s i n g a m o un t f r om th e c l o s i n g s t oc k w hi c h r e s u lt e d i nt o do ub l e ad di t i o n o f t h e s am e a m ou nt . Th i s ha s r e s u l t e d i n to ar r i v i ng at i n c o m e o f R s . 4 7 . 8 3 cr o n t he s a l e s of la n d/ p l ot s o f R s . 1 0 . 14 c r . w hi c h i s n ot p os s i bl e .' 15 . I h a v e c ar e f u l l y c o ns i d e r e d t h e a s s e s s m e nt o r d er , s u b m i s s i on s an d ar g u m e nt s m a de b y t he a p pe l l a nt a nd t h e f ac t s an d c ir c um s t a n c e s o f t h e c a s e . I a m of t he s am e v i e w a s h as b e e n e x p r e s s e d b y t h e H i g h P i t c he d Sc r ut i n y A s s e s s m e n t Co m m it t e e di s c u s s e d a bo v e . T h e r e f or e , I ho l d t h a t t he A O i s not ju s t i f i e d in m a k i n g di s a l l ow a nc e o f an a m o un t o f R s . 4 5 , 6 5, 5 1 , 3 38/ - o n ac c o un t o f p r o v i s i on f o r " D e v e lo p m e n t E x pe n s e s f r om t h e e x p e n s e s i de , o n ly w i t h o ut r e d u c i n g t h e c or r e s p on di n g a m o un t f r o m t he c lo s i n g s t oc k w hi c h r e s u l t e d i n t o d ou b le a d di t i o n of t he s a m e am o u nt w h i c h i s no t p e r m i s s i bl e u n de r l a w . Th e r e f o re , t h e g r ou n d r ai s e by t h e a p pe l l a n t i s a l l ow e d . ” 5. A g gri e v e d by t he r e l i e f g r a nt ed b y t h e CI T ( A ), the R e v e n ue i s i n a p pe a l b e f o r e t h e T ri bu n a l. 6. T he l d. D R fo r t h e Re ve nu e r e li e d u p on t he a c t i on o f t h e A sse s si n g O ff i c e r. 7. T he l d . c o un sel fo r t h e a sse ss e e , o n t h e o th e r han d, s u p p o rt e d I.T.A. No.107/Del/2021 7 t he o r d e r o f t he C I T (A ) a n d su b m i t t e d t h a t a s p e r pa r a g r a p h 5 . 3 o f t he f i nd i n g s o f t he G r i e v a nc e Re dr e ss al Co m m i t t e e dat e d 30 . 0 4. 2 0 1 9 , t he A s s es si ng O f fi c er h i m se l f a c c e p t e d t ha t h e fa i le d t o no t i c e t h a t t he ‘ p ro v i si o n s fo r D e ve l o p m e n t Ex pe n ses ’ w e r e c or r e sp on d i ng l y g i ve n e ffe c t w hi l e de t e r m i n i n g t h e c lo si n g s to c k o f i nv e n t o r y a nd t h e c l o si n g i n ve nt o ry w a s su i t a b ly i nc r ea se d. Co n s e q ue n t l y t h e e f fe ct o f pr o v i si o n m a de on a c co unt o f D ev e l o p m e n t E x p e n se s h as b ee n o ffs e t a n d t h u s s u c h p r o vi s i o n h a s a ne u t r a l i zi ng e ff e c t on t h e re su l t a n t i n c o m e de ri ve d fr o m re al e st a te bu s in es s du ri ng t h e ye a r. T he l d . c o un sel fur t h e r su b m it t e d t h a t t h e a cc ou nt s h a v e b e e n d ra w n h a v i n g r eg ar d t o t h e A c c ount in g S t an d a r d- 2 a nd A c co u nt i n g S t a nd a rd 2 9 i ss ue d b y t h e A c c ou nt in g Bo d y IC A I . T h e l d. co un se l f ur th er su b m i tt e d t ha t the re s ul t o f s uc h l oa di ng o f P r o j ec t D e ve l o p m e n t E x p e ns e s up o n t he i nve n t o ry o f un s ol d p l o t s u n d e r t he he a d ‘ c l osi ng st o c k ’, t he P ro j e c t D e v e l o p me n t Ex pe n se s r e l a t a b l e to pl o t s so l d d u r i n g t he y e a r w as c h a rg e d t o t he pr o fi t e ar n e d du ri n g th e y ea r w h i le t he p r o vi si on co rre s po nd i n g t o un s ol d pl ot s fo r m s p a r t o f t he c l os i n g in v e n t o r y. Th us, t h e p ro v i si o n ma de c o rr e s po n d i n g t o u n so l d p l o ts i s n o t c ha rg e d to t he P & L a cc ou nt b ut fo r m s p a r t o f t h e c l o s in g i nv e n t o ry. T he l d . c o u ns e l t h u s su b mi t t e d th a t i n th e l i g h t o f t h e o bse rv at i o ns o f t h e G r i ev an c e Re dr e ss a l C o m m i t t e e fo r h i g h pi t c h e d a ss e s s me n t s a nd h a v i n g r e g a r d t o t h e a c c o u n t i n g p ol i cy ad op t e d by t h e a s se ss ee , th e ta xa bl e in c o me i s n o t un de r r e p o rt e d in a n y ma n ne r. T h e l d . c ou ns e l t h us ur g e d t h a t no i n fe re nc e i s c a l l e d fo r w i t h t h e or de r o f th e C IT (A ) . 8. W e h a v e c a re ful l y c o ns i d e r e d t h e r i v al s ub mi ss i ons , p er u se d t he a s se s s me n t o r d e r a s w e l l a s t h e fi r s t a pp e l l a t e o rd e r a nd a l s o ma t e r i a l r e f er r e d t o a nd re li e d u p on i n th e c ou rs e o f he ar i ng. 9. O n p er us a l , w e ob s er v e th at t he CI T (A ) ha s c o nc ur r e d w it h t h e I.T.A. No.107/Del/2021 8 pl e a o f t h e a ss es s e e t h a t p r o vi si on f o r d e v el o p me nt e x p e ns e s, not c ry st a l li z e d d u r i n g t he y e a r b u t pr o vi d e d fo r i n t he P & L a c co un t , ha s no i mp a c t o n t he r e su lt a n t p r o f it f o r t he re a s on t ha t s uc h p r o v i s io n ha s al s o r es u l t e d i n i nc r e a s e i n t h e v al ue o f t h e cl o sin g s t o c k re p r e se n ti ng u n so l d p l o t s a s w or k i n p r og re s s. Th e CI T( A ) h a s re fe rr e d t o th e v ie w e xp r e ss ed b y t h e G ri ev an c e Re dr e ss al Co m m i t t e e on h ig h pi t c h e d a s se ss m e n ts a n d r e v e r s ed t h e di s a l l o w a n c e . 10 . W e do n ot s e e a n y e r ro r i n t h e a c t i o n o f t h e C IT ( A ) o n fi r st pr i n c i p l e s. H o w e v e r o n fu r t h e r pe ru s al , w e o bs e r v e on fa ct s t h at w hi l e t h e p r ov i si o n fo r de ve l o p m en t pur po s e s w e re ma de fo r a n a m ou nt o f R s. 4 5, 6 5 , 51, 3 38 / - , t he c l o si n g st oc k ha s b e e n l oa d ed w i t h suc h p ro j e c t ex pe n se s pr op o rt i o na t e t o t h e un s o l d st o c k o nl y. A s a re s ul t o f su ch a c c ou n t i n g, t h e p ro v i s io n fo r de ve l op me nt e x pe ns e s a tt ri b u t a b l e t o t h e so l d i n ve nt o r y h as be en a c t ua l ly c ha r ge d d ur in g t he F i na nc i al Y e a r 20 15- 16 re l e va n t t o A sse s s me n t Yea r 20 16- 17 i n qu e st i o n . T h e p r op ri e ty a n d c o r re c t n e ss o f e x p e n s e s at t r i bu ta b l e t o i nv e n t o r y so l d d ur i ng t h e y e a r h a s n o t b e e n ve ri f ied on f a c t s by t h e a ut ho r i t i e s b el o w . T he C IT (A ) ha s gra n te d re l i e f o n t h e w ho le a m ou nt b y ba si ng t hi s fi nd in g so l e l y o n t h e o b se rv at i o n s o f t he h ig h pi t ch ed s c r u t in y a s se s s m en t c o m mi t t e e w i t h o ut no t ici n g t he f ac t t h e pr o vi si on f o r d e v e l op me nt ex pe n se s r e l at a b l e t o pl ot so l d du ri n g t he ye a r w a s a c t ua l l y c ha r g e d t o t h e pr o fi t e a r n e d du r in g t h e ye a r w h a t a sp e c t h a s r e ma i ne d un e x a m i n e d a nd un scr ut i n i ze d a ny t h e r e v e n ue a ut ho r i t i e s. 11 . T h u s, t h e o r d e r o f t he CI T (A ) i s s e t a si de t o the e xt e nt o f pr o j e c t d e v e l op m e nt e x pe ns e s c ha rg e d t o t h e P & L a c co un t i n re l at i o n t o t he i n v e n t o r y / p l o t s s ol d du r i n g th e ye a r a nd r es t o r e d ba c k t o t h e fi l e o f t he A ss e s si ng O f fi c e r . T h e A s sess i ng O ff ic e r I.T.A. No.107/Del/2021 9 sha l l b e en t i t l e d t o v er i f y a n d sc ru t i ni z e t h e n a t ure o f e xp e n se s i nc ur r e d a n d c h a r g e d t o t he P & L a c c o u nt i n re l at i o n t o p l o t s s ol d du r i n g t he y e a r . I t sh a l l be o pe n t o th e a s se sse e to ad du c e e v i d e n c e s a nd e xp l a na t io ns a s ma y be c o n si d e r e d n e c e s sa ry t o j u st i fy t he pr o pr ie t y o f t h e e x p e n se s d e bi t e d t o t he P & L a c c o u nt o u t o f s uc h pr o vi si on s a n d r e la t a b l e t o re ve n u e i n c o m e fro m i n ve n t o r y so ld . T h e A sse s si n g O ff ic e r s ha l l p a ss t h e or d e r a fr e s h i n acc o r da nc e w i t h la w a ft er gi vi ng pr o p e r op po r t uni t y t o t he a s ses se e i n t hi s r e ga rd . T he or d e r o f t h e C IT (A ) i s m od i f ie d a c c or d in g l y. 12 . I n t h e re s ul t , th e a p p e a l o f th e R e v e n u e i s al low e d i n p a r t. Order pronounced in the open Court on 25/09/2023 Sd/- Sd/- [ASTHA CHANDRA] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /09/2023 Prabhat