A.G HOMES, MUMBAI V. ITO 19(3)(1), MUMBAI

ITA 1092/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1951 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 18-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 142(1); 133(6); 147; 131; 148; 144

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 1092 /MUM/2014 ( / ASSESSMENT YEAR : 2005-06) M/S A.G. HOMES, 151, ACCOST, PALI ROAD, BANDRA (W), MUMBAI -400050. / V. THE ITO 19(3)(1), R NO. 307, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400012. ./ PAN : AAAFA 8566 F ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI SATISH MODY REVENUE BY : SHRI A. RAMACHANDRAN / DATE OF HEARING : 27-09-2016 / DATE OF PRONOUNCEMENT : 08-11-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE-FIRM, BEING ITA NO. 1092/MUM/2014, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 1ST N OVEMBER, 2013 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 30, M UMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2005- 06, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDER DATED 21 ST DECEMBER, 2009 PASSED BY THE LEARNED ASSESSING OFF ICER (HEREINAFTER CALLED THE AO) U/S 144 R.W.S. 147 OF THE INCOME-TAX ACT,1961 (HEREINAFTER CALLED THE ACT). ITA 1092/MUM/2014 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- GROUND NO. 1: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (,CIT (A)') HA S ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICE R ('AO') OF ISSUANCE OF NOTICE U/S 148 OF INCOME TAX ACT, 1961 ('IT ACT' ) AND COMPLETION OF ASSESSMENT U/S. 147 OF IT ACT, AS VALID. GROUND NO. 2: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO IN ESTIMATION OF INCOME FROM BUILDING PROJECT @ 10% OF NOTIONAL RE VENUE, IGNORING THE FACT THAT THE CONSTRUCTION OF BUILDING WAS INCOMPLETE AND EVEN TRANSACTION OF SALE WAS NOT COMPLETED. GROUND NO. 3: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNE D AO OF CONSIDERING NOTIONAL REVENUE OF TOTAL AREA OF FLATS PROPOSED TO BE CONSTRUCTED AND SOLD, IGNORING THE FACT THAT THE BUILDING WAS A RE-DEVE LOPMENT PROJECT GROUND NO.4: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO IN NOT ALLOWING THE DEDUCTION OF REMUNERATION PAID TO PARTNERS BY MAKIN G A BEST JUDGMENT ASSESSMENT U/S. 144 OF THE ACT AND INVOKING THE PROVISIONS OF SECTION 184(5) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT IT WAS OBSE RVED BY THE AO FROM THE AIR INFORMATION RECEIVED IN THE CASE OF THE PARTNER OF THE ASSESSEE FIRM I.E. MR. ABDUL KHALIQ BHATTI IN HIS SCRUTINY ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2005-06 THAT HE HAD SHOWN TO HAVE P URCHASED/SOLD ITA 1092/MUM/2014 3 IMMOVABLE PROPERTIES AMOUNTING TO RS. 80.50 LACS, R S. 80 LACS AND RS. 1,39,00,000/-, WHEREBY IT WAS STATED BY MR. ABDUL K HALIL BHATTI THAT THE FLATS HAVE BEEN SOLD BY THE ASSESSEE FIRM AND HE SIGNED THE AGREEMENTS IN THE CAPACITY OF A PARTNER OF THE ASSESSEE FIRM. NOTICE DATED 09.05.2008 U/S 148 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE AND IN REPLY THE ASSESSEE SUBMITTED THAT THE RETURN OF INCOME FILED ON 19 TH OCTOBER, 2005 MAY BE TREATED AS RETURN OF INCOME IN RESPONSE TO NOTICE U /S 148 OF THE ACT. IT IS PERTINENT TO MENTION HERE THAT IN-SPITE OF SEVERAL OPPORTUNITIES PROVIDED TO THE ASSESSEE BY ISSUANCE OF NOTICES U/S 142(1) OF T HE ACT AND ALSO SUMMONS ISSUED U/S 131 OF THE ACT , THE SAME REMAIN UN-COMP LIED BY THE ASSESSEE. LATER ON 07.09.2008 , THE ASSESSEE ATTENDED BUT FIL ED FEW DETAILS AND THEREAFTER DID NOT FILED THE REMAINING DETAILS DESP ITE OPPORTUNITIES BEING GRANTED BY THE AO FROM TIME TO TIME. THE AO OBSERVE D THAT THERE WAS NO ALTERNATIVE BEFORE HIM DUE TO NON CO-OPERATION OF T HE ASSESSEE BUT TO FINALIZE THE ASSESSMENT EX-PARTE U/S 144 OF THE ACT BASED UP ON THE MATERIAL AVAILABLE ON RECORD. THE A.O. OBSERVED THAT THE ASSESSEE DERIVED INCOME FROM BUSINESS OF RS 48,915/- , BEING PROFIT DERIVED FROM CONSTRUCTION A CTIVITY CARRIED OUT AT BANDRA(W.), MUMBAI. IT WAS OBSERVED THAT MOST OF T HE DETAILS AS CALLED FOR WERE NOT FURNISHED BY THE ASSESSEE AND EVEN THE ASS ESSEE FAILED TO FILE THE DETAILS OF ADVANCES RECEIVED TOWARDS FLAT THEREBY P REVENTING VERIFICATION OF THE GENUINENESS OF THE ASSESSEE BY THE REVENUE. IN ORD ER TO VERIFY THE BUSINESS ACTIVITY OF THE ASSESSEE, NOTICES U/S 133(6) OF THE ACT WAS ISSUED TO THE EXECUTIVE ENGINEER, BUILDING PROPOSAL(W.S.), H WA RD OF MUNICIPAL CORPORATION OF GREATER MUMBAI AND IN REPLY IT WAS I NFORMED BY EXECUTIVE ENGINEER, BUILDING PROPOSAL(W.S.), H WARD OF MUNI CIPAL CORPORATION OF GREATER MUMBAI TO THE AO THAT THE ASSESSEE FIRM HAS COMPLETED THE CONSTRUCTION AND ALSO HAS CONSTRUCTED ADDITIONAL IL LEGAL FLOORS. THE ASSESSEE HAS SHOWN IN ITS RETURN OF INCOME THE CLOSING WIP A T RS. 5,42,38,000/-. THE ITA 1092/MUM/2014 4 A.O. OBSERVED THAT AS PER THE PLAN APPROVED BY THE MUNICIPAL AUTHORITIES, THE ASSESSEE WAS PERMITTED TO CONSTRUCT 8670 SQ. FT. WH EREIN THE BUILDING APPROVED WAS GROUND + 6 FLOORS. . WHEREAS IT WAS OB SERVED BY THE AO FROM THE COPIES OF INDEX-II ISSUED BY THE REGISTRATION A UTHORITIES FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF MR. ABDUL KHALI Q BHATTI THAT THE ASSESSEE HAS CONSTRUCTED GROUND FLOOR PLUS 18 FLOOR S ON THE SAID PLOT RESULTING IN CONSTRUCTION OF ADDITIONAL 12 ILLEGAL FLOORS ON THE SAID PLOT , WHEREIN THE CONSTRUCTED AREA WAS TAKEN AT 17,340 SQ . FT BY THE AO OF ILLEGAL CONSTRUCTION. THUS, THE BUSINESS INCOME OF THE ASSE SSEE FIRM AS ARRIVED AT BY THE A.O. ON THE BASIS OF INFORMATION IS AS FOLLOWS: -` AREA RATE VALUE REMARKS AREA SOLD AS PER REGISTERED DOCUMENTS 5,340 SQ. FT. - 2,99,50,000 AS PER COPIES OF INDEX- II AVAILABLE IN THE FILE OF SHRI ABDUL KHALIQ BHATTI AREA OTHER THAN THE ABOVE AS PER APPROVED PLAN 2,898 SQ. FT. 7,234 2,09,64,132 TOTAL AREA 8,670 SOLD AREA 5,340 ILLEGAL AREA AS DISCUSSED ABOVE 17,340 SQ. FT. 7,234 12,54,37,560 AS PER CLAUSE 3)(C) ABOVE. TOTAL 17,63,51,692/- THUS, THE A.O. OBSERVED THAT THE PROFIT DERIVED BY THE ASSESSEE ON THE TOTAL VALUE OF THE PROJECT TAKEN AT 10% OF RS.17,63,51,6 92/- I.E. AT RS. 1,76,35,169/- AND AFTER DEDUCTING THE INCOME DECLAR ED BY THE ASSESSEE ON THIS PROJECT TILL 31-03-2005 OF RS. 41,76,627/-, TH E BALANCE AMOUNT OF RS. 1,34,58,542/- WAS BROUGHT TO TAX BY THE A.O. VIDE A SSESSMENT ORDER DATED 21.12.2009 PASSED BY THE AO U/S. 144 R.W.S. 147 OF THE ACT. FURTHER, DUE TO NON CO-OPERATION OF THE ASSESSEE DURING THE ASSESSM ENT PROCEEDINGS AS SET- OUT ABOVE, THE AO INVOKED PROVISIONS OF SECTION 184 (5) AND 185 OF THE ACT WHEREIN THE ASSESSEE-FIRM WAS TREATED AS AOP FOR ALL TAX PURPOSES. ITA 1092/MUM/2014 5 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 21.12.20 09 PASSED BY THE A.O. U/S. 144 R.W.S. 147 OF THE ACT , THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). 5. THE LD. CIT(A) REMANDED THE MATTER TO THE FILE O F THE A.O. IN VIEW OF THE EX-PARTE ORDER PASSED BY THE A.O. U/S 144 OF THE AC T WHEREBY DIRECTING THE A.O. TO CONDUCT NECESSARY ENQUIRIES TO ASCERTAIN WH ETHER THE PROJECT OF THE ASSESSEE HAS BEEN COMPLETED OR IS STILL GOING ON AS CLAIMED BY THE ASSESSEE. THE ASSESSEE SUBMITTED IN THE REMAND PROCEEDINGS BE FORE THE AO THAT THE ASSESSEE IS ENGAGED IN THE ACTIVITY OF CONSTRUCTION OF RESIDENTIAL BUILDINGS AND THE ASSESSEE FOLLOWS PERCENTAGE COMPLETION METHOD O F ACCOUNTING. THE ASSESSEE STARTED CONSTRUCTION OF THE BUILDING IN YE AR 1992 AND HAS NOT COMPLETED THE CONSTRUCTION TILL MARCH, 2011. IT WA S SUBMITTED BY THE ASSESSEE IN REMAND PROCEEDINGS THAT THE ASSESSMENT FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 WERE COMPLETED 143(3) OF THE ACT AND FOR THE ASSESSMENT YEAR 2004-05, THE CLOSING WIP AS AT 31 ST MARCH, 2004 WAS ASSESSED AT RS. 5,09,80,000/- WHICH DOES NOT INCLUD E LAND COST AND COST OF TDR. IT WAS SUBMITTED THAT THE ASSESSEE IS YET TO COMPLETE CERTAIN WORK LIKE CONSTRUCTION OF PARKING BUILDING, WATER CONNECTION, PERMANENT ELECTRICITY CONNECTION, ASPHALTING OF THE COMPOUND, TDR REGULAR IZATION ETC. . THE ASSESSEE SUBMITTED THAT THE OCCUPATION/ COMPLETION CERTIFICATE WHICH ARE LEGAL DOCUMENTS PROVING THE COMPLETION OF THE BUILD ING HAVE NOT YET BEEN RECEIVED BY THE ASSESSEE TILL DATE. THE COMPLIANCE S AND THE CONDITIONS OF IOD ARE YET TO BE COMPLIED WITH. THE ASSESSEE SUBMITTED THAT IN VIEW OF ABOVE SUBMISSIONS , THE CONSTRUCTION OF THE BUILDING IS I NCOMPLETE AS THE ABOVE ITEMS OF EXPENDITURE COST MORE THAN RS. 4-5 CRORES. ITA 1092/MUM/2014 6 HOWEVER, THE A.O. OBSERVED THAT EXCEPT MERE SUBMISS IONS , THE ASSESSEE HAS NOT FILED ANY SUPPORTING DETAILS/DOCUMENTS TO SUBST ANTIATE ITS CLAIM OF NON- COMPLETION OF THE PROJECT DURING THE YEAR UNDER CON SIDERATION, HENCE, ASSESSEE WAS AGAIN ASKED TO PRODUCE SUPPORTING DOCU MENTS, HOWEVER, NO EVIDENCE HAS BEEN FILED BY THE ASSESSEE DURING THE REMAND PROCEEDINGS BEFORE THE AO ALSO . THE AO, THEREFORE, STATED IN REMAND REPORT SUBMITTED TO THE LEARNED CIT(A) THAT THE NECESSARY ADDITIONS MADE IN THE ASSESSMENT ORDER ARE CORRECT AND NEED TO BE CONFIRMED. COPY OF THE A.O.S REPORT WAS ALSO FURNISHED TO THE ASSESSEE AND THE ASSESSEE IN REPLY SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE ACTIVITY OF CONSTRUCTION OF RESIDENT IAL BUILDINGS AND THE ASSESSEE IS FOLLOWING PERCENTAGE COMPLETION METHOD . IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAS SHOWN PROFIT AND WIP AS FOLLOWS IN THE EARLIER YEARS: YEAR W.I.P. NET PROFIT 1996 19,88,057 1,78,925 1997 1,41,61,943 8,49,539 1998 1,11,70,000 7,55,871 1999 60,82,000 5,03,240 2000 36,54,000 3,01,498 2001 38,35,000 3,42,012 2002 28,41,000 2,19,435 2003 38,63,000 3,13,838 2004 33,85,000 2,74,357 CLOSING WIP AS PER PROFIT & LOSS A/C 5,09,80,000 37,38,713 THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS STARTE D CONSTRUCTION OF THE BUILDING IN YEAR 1992 AND HAS NOT COMPLETED THE CON STRUCTION TILL DECEMBER, ITA 1092/MUM/2014 7 2009 AND EVEN BY JANUARY, 2013. IT WAS SUBMITTED T HAT THE ASSESSMENT FOR ASSESSMENT YEARS 2003-04 AND 2004-05 WERE COMPLETED U/S 143(3) OF THE ACT AND FOR ASSESSMENT YEAR 2004-05, THE CLOSING WIP AS AT 31-03-2004 WAS ASSESSED AT RS. 5,09,80,000/- WHICH DOES NOT INCLUD ED LAND COST AND COST OF TDR. THE ASSESSEE IS YET TO COMPLETE CERTAIN WORK LIKE CONSTRUCTION OF PARKING BUILDING, WATER CONNECTION, PERMANENT ELECT RICITY CONNECTION AND TDR REGULARIZATION ETC. . THE LEGAL DOCUMENTS LIKE OCCUPATION CERTIFICATE , BUILDING COMPLETION CERTIFICATE INDICATING COMPLETI ON OF THE BUILDING HAVE NOT BEEN RECEIVED. IT WAS SUBMITTED THAT DURING THE AS SESSMENT PROCEEDINGS, THE A.O. CALLED FOR INFORMATION FROM THE EXECUTIVE ENGI NEER, BUILDING PROPOSAL(W.S.), H WARD OF MUNICIPAL CORPORATION O F GREATER MUMBAI AS TO WHETHER THE CONSTRUCTION OF THE BUILDING IS COMPLET ED OR NOT , WHEREIN THE A.O. HAS MISQUOTED THE FILE NO. AS 9753 INSTEAD OF CORRECT FILE NO 9755. IT WAS SUBMITTED THAT THE ASSESSEE WAS CONSTRUCTING 18 FLOORS BUILDING ON PLOT NO. 9755 AT BANDRA HILL ROAD, BANDRA(W), MUMBAI, WH EREAS THE A.O. BY MISTAKE CALLED FOR THE INFORMATION OF THE ADJACENT PLOT NO. 9753 AT BANDRA HILL ROAD, BANDRA(W), MUMBAI ON WHICH A 6 FLOORS BUILDIN G WAS CONSTRUCTED BY SOMEONE ELSE AND THE A.O. HAD PASSED AN BEST JUDGME NT ASSESSMENT ESTIMATING THE SALES REVENUE AND PERCENTAGE OF PROF IT BASED ON INFORMATION RECEIVED WITH RESPECT TO WRONG PLOT NO 9753 AND HEN CE, THE BASIS ON WHICH THE ASSESSMENT ORDER WAS PASSED WAS INCORRECT. IT WAS SUBMITTED THAT THE REVENUE HAS ACCEPTED ALL THROUGH PERCENTAGE COMPLET ION METHOD FOLLOWED BY THE ASSESSEE AND ASSESSED THE ASSESSEE FIRM ACCORDI NGLY. IT WAS SUBMITTED THAT THE INFORMATION RECEIVED BY THE AO FROM EXECUT IVE ENGINEER, BUILDING PROPOSAL(W.S.), H WARD OF MUNICIPAL CORPORATION O F GREATER MUMBAI WAS NOT PROVIDED TO THE ASSESSEE BEFORE FRAMING BEST JU DGMENT ASSESSMENT BY THE AO. NO OPPORTUNITY WAS GRANTED TO THE ASSESSEE TO R EBUT THE SAME. IT WAS SUBMITTED BY THE ASSESSEE THAT THE AO INSISTED THAT THE ASSESSEE SUBMIT A PROOF THAT THE CONSTRUCTION WAS NOT COMPLETED WHILE IT WAS SUBMITTED THAT THE BMC DID NOT CERTIFY THAT THE CONSTRUCTION OF THE BU ILDING IS NOT COMPLETED. ITA 1092/MUM/2014 8 THE A.O. WAS REQUESTED TO SHOW THE COMPLETION CERTI FICATE AVAILABLE WITH HIM BUT THE AO REFUSED TO SHOW THE SAME. THE ASSESSEE ACCORDINGLY FILED APPLICATION UNDER RTI FOR SUCH INFORMATION WHICH WA S ALSO DENIED TO THE ASSESSEE. THE ASSESSEE FILED AN APPEAL UNDER RTI AC T WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE AND THE INFORMATION WAS RECE IVED BY THE ASSESSEE. IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD ENTERE D INTO SALE AGREEMENT FOR THREE FLATS DURING THE ASSESSMENT YEAR 2005-06 BUT WHILE REGISTERING THE AGREEMENT WITH THE SUB-REGISTRAR THE PARTNER OF THE FIRM WRONGLY SUBMITTED HIS PAN NO. TO THE REGISTERING AUTHORITY INSTEAD OF GIVING PAN NO. OF THE ASSESSEE FIRM. THE SUB-REGISTRAR HAD FORWARDED THE INFORMATION OF SALE OF THREE FLATS BY THE PARTNER TO THE CONCERNED AO OF T HE PARTNER WHO ALSO HAPPENED TO BE THE AO OF THE ASSESSEE AND ON THIS B ASIS, THE CASE WAS SELECTED FOR SCRUTINY. DURING ASSESSMENT PROCEEDIN GS, THE A.O. CALLED FOR INFORMATION FROM THE BMC AS TO IF THE CONSTRUCTION OF THE BUILDING WAS COMPLETED OR NOT AND IN REPLY THE BMC CLEARLY STATE D THAT THE CONSTRUCTION OF THE BUILDING WAS NOT COMPLETED BUT STILL THE A.O. P ASSED THE BEST JUDGMENT ASSESSMENT ORDER BY ASSUMING THAT THE CONSTRUCTION OF THE BUILDING WAS COMPLETED AND ESTIMATING THE SALES REVENUE AND PERC ENTAGE OF PROFIT THEREON, HENCE, THE BASE OF THE ASSESSMENT IS INCORRECT AS T HE BUILDING IS NOT YET COMPETED. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) TH AT THE REOPENING OF THE ASSESSMENT WAS NOT IN ACCORDANCE WITH THE PROVISION S OF THE LAW AS THE A.O. COULD NOT HAVE REASONS TO BELIEVE THAT THE INCOME O F THE ASSESSEE FIRM HAS ESCAPED ASSESSMENT BECAUSE THE INFORMATION RECEIVED BY THE AO AS PER AIR IS ABOUT SALE OR PURCHASE OF IMMOVABLE PROPERTY ABOVE CERTAIN FINANCIAL LIMITS AND AS PER ADMINISTRATIVE INSTRUCTIONS ONLY. ITA 1092/MUM/2014 9 THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSE E ON THE GROUND OF RE- OPENING U/S 147/148 OF THE ACT AS THE RETURN OF IN COME FILED ON 19 TH OCTOBER, 2005 WAS PROCESSED U/S 143(1) OF THE ACT. THE A.O. HAS REOPENED THE ASSESSMENT U/S 147/148 OF THE ACT ON THE BASIS OF SUBMISSION OF ONE OF THE PARTNERS OF THE ASSESSEE FIRM DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE PARTNERS CASE FOR THE ASSESSMENT YEAR 2005-06. WITH RESPECT TO THE DENIAL OF OPPORTUNITY TO CROSS VERIFY THE CORRECTNESS OF THE STATEMENT MADE BY THE EXECUTIVE ENGINEER, BUILDING PROPOSAL(W.S.), H WARD OF MUNICIPAL CORPORATION OF GREATER MUMBAI, THE MAT TER WAS REMANDED TO THE A.O. FOR REMAND REPORT, WHEREBY THE ASSESSEE DID NO T ATTENDED. THE ASSESSEE HAS MADE SUBMISSIONS BEFORE THE AO VIDE LETTER DATE D 05-04-2011 THAT THE ASSESSMENT IN THE CASE OF THE ASSESSEE FOR ASSESSME NT YEAR 2003-04 AND 2004-05 WERE COMPLETED U/S 143(3) OF THE ACT AND WI P AS ON 31-03-2004 HAS BEEN ASSESSED AT RS. 5,09,80,000/- WHICH DOES NOT I NCLUDE LAND COST AND COST OF TDR , ASSESSEE IS FOLLOWING PERCENTAGE COMPLETIO N METHOD OF ACCOUNTING AND SINCE THE PROJECT HAS NOT BEEN COMPLETED TILL M ARCH 2011. THE LEARNED CIT(A) CONSIDERED THE SUBMISSION OF THE ASSESSEE W HICH WERE REJECTED BY THE LEARNED CIT(A) AS SUFFICIENT OPPORTUNITY WAS PROVID ED TO THE ASSESSEE. ON MERITS, THE LEARNED CIT(A) OBSERVED THAT THE ASS ESSEE HAS NOT FURNISHED ANY SUPPORTING DETAILS WITH DOCUMENTS TO SHOW THAT THE BUILDING PROJECT WAS INCOMPLETE. IT WAS OBSERVED THAT THE ASSESSEE HIMS ELF SUBMITTED DURING REMAND PROCEEDINGS THAT SOME WORK REMAINED TO BE CO MPLETED WAS ANCILLARY IN NATURE LIKE MINOR WORK RELATING TO PARKING SPACE , PERMANENT WATER CONNECTION, PERMANENT ELECTRICITY CONNECTION , TDR REGULARIZATION ETC. WHICH CLEARLY SHOWS THAT ELECTRICITY CONNECTION AND WATER CONNECTION HAD ALREADY BEEN TAKEN AND IT HAD TO BE REGULARIZED BY WAY OF M AKING AN APPLICATION FOR PERMANENT CONNECTION. WITH RESPECT TO THE CONSTRUCT ION OF PARKING SPACE, IT WAS OBSERVED BY LEARNED CIT(A) THAT THE ASSESSEE HA S NOT FURNISHED ANY ITA 1092/MUM/2014 10 EVIDENCE TO SHOW WHAT PART OF CONSTRUCTION OF PARKI NG SPACE HAD NOT BEEN COMPLETED. REGARDING OCCUPATION CERTIFICATE(OC) AN D BUILDING COMPLETION CERTIFICATE(BCC) , IT WAS OBSERVED BY THE LEARNED C IT(A) THAT THE A.O. HAS DISCUSSED IN HIS ORDER THAT THE ASSESSEE HAS CONSTR UCTED 17340 SQ. FT. AREA ILLEGALLY, HENCE, OC AND BCC HAD REMAINED PENDING. IT WAS OBSERVED BY THE LEARNED CIT(A) THAT IT IS A KNOWN FACT THAT THE RES IDENTIAL FLATS ARE SOLD IN MUMBAI WITHOUT OBTAINING OC AND BCC AND IN ABSENCE OF THESE CERTIFICATES ALSO, THE PURCHASERS HAVE TAKEN POSSESSION OF THE F LATS AND STARTED RESIDING THERE. THE LD. CIT(A) UPHELD THE ASSESSMENT ORDER AND CONFIRMED THE ADDITION OF RS. 1,34,58,542/-, VIDE APPELLATE ORDERS DATED 0 1-11-2013 . 6. AGGRIEVED BY THE APPELLATE ORDER DATED 01-11-201 3 PASSED BY THE LD. CIT(A), THE ASSESSEE FILED SECOND APPEAL BEFORE T HE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE WHOLE PREMISE ON WHICH ASSESSMENT WAS FOUNDED WAS WRONG , WHEREIN THE A.O. HAS MISQUOTED THE FILE NO. 9753 INSTEAD OF CORRECT FILE NO. 9755 WHILE CALLING INFORMATION FROM EXECUTIVE ENGINEER, BUILDING PROPO SAL(W.S.), H WARD OF MUNICIPAL CORPORATION OF GREATER MUMBAI . IT WAS S UBMITTED THAT THE ASSESSEE WAS CONSTRUCTING 18 FLOORS BUILDING ON PLO T NO. 9755 AT BANDRA HILL ROAD, BANDRA(W), MUMBAI WHEREAS THE A.O. BY MISTAKE CALLED INFORMATION FROM EXECUTIVE ENGINEER, BUILDING PROPOSAL(W.S.), H WARD OF MUNICIPAL CORPORATION OF GREATER MUMBAI OF THE ADJACENT PLOT NO. 9753 AT BANDRA HILL ROAD, BANDRA(W), MUMBAI ON WHICH A 6 FLOORS BUILDI NG WAS CONSTRUCTED BY SOMEONE ELSE AND THE A.O. HAD PASSED AN ASSESSMENT ESTIMATING THE SALES REVENUE AND PERCENTAGE OF PROFIT BASED ON INFORMATI ON RECEIVED WITH RESPECT TO WRONG PLOT NO. 9753 INSTEAD OF CORRECT PLOT NO 9 755, HENCE, THE BASIS ON WHICH THE BEST JUDGMENT ASSESSMENT WAS PASSED WAS I NCORRECT. THE LD. COUNSEL INVITED OUR ATTENTION TO PAGE NO. 1 PLACED AT PAPER BOOK FILED WITH THE TRIBUNAL WHEREBY THE A.O. WRONGLY QUOTED FILE NO. AS 9753 INSTEAD OF CORRECT ITA 1092/MUM/2014 11 FILE NO. 9755 WHILE CALLING INFORMATION FROM EXECUT IVE ENGINEER, BUILDING PROPOSAL(W.S.), H WARD OF MUNICIPAL CORPORATION O F GREATER MUMBAI VIDE LETTER DATED 22-09-2009. OUR ATTENTION WAS ALSO D RAWN TO PAGE NO. 2 /PAPER BOOK WHEREBY SUMMONS DATED 19-11-2009 U/S 131 OF TH E ACT WERE ISSUED TO BMC BY THE A.O. WHEREIN REFERENCE WAS MADE TO LETTE R DATED 22-09-2009 CALLING FOR INFORMATION WITH RESPECT TO INCORRECT P LOT NO. 9753 INSTEAD OF CORRECT PLOT NO. 9755. SIMILARLY ATTENTION WAS ALSO DRAWN TO PAGE NO. 3 & 4 / PAPER BOOK WHEREIN THE BMC HAS INFORMED VIDE LETTER DATED 23-11-2009 THAT BUILDING WAS COMPLETED IN ALL RESPECT AND WAS GRANT ED BCC AND OTHER CERTIFICATES FOR PLOT NO. 9753 INSTEAD OF CORRECT P LOT NO. 9755. FURTHER, OUR ATTENTION WAS ALSO INVITED TO PAGE NO. 6 TO 8/PAPER BOOK WHEREBY THE AO HAS FORWARDED THE INFORMATION UNDER RTI ACT PERTAINING TO PLOT NO. 9753 AT BANDRA HILL ROAD, BANDRA(W), MUMBAI INSTEAD OF CORR ECT PLOT NO 9755 AT BANDRA HILL ROAD, BANDRA(W), MUMBAI WHERE THE ASSES SEE WAS CONSTRUCTING THE BUILDING . THE A.O. HAS BROUGHT TO TAX , INCOM E BY ESTIMATING SALES AND PROFITS ON THIS WRONG PLOT I.E. PLOT NO. 9753 AT BA NDRA HILL ROAD, BANDRA(W), MUMBAI INSTEAD OF CORRECT PLOT NO 9755 AT BANDRA HI LL ROAD, BANDRA(W), MUMBAI , WHERE BY SOME OTHER PERSON WAS CONSTRUCTIN G THE BUILDING. COPIES WERE NOT PROVIDED BY THE A.O. , FOR WHICH ASSESSEE FILED AN APPLICATION UNDER RTI AND THE INFORMATION WAS OBTAINED VIDE APPEAL FI LED UNDER RTI ACT. THE LD. COUNSEL SUBMITTED THAT ASSESSMENTS WERE FRAMED U/S 144 R.W.S. 147 OF THE ACT AND ASSESSEE IS NOT CHALLENGING THE REOPENING U /S 147 OF THE ACT BEFORE THE TRIBUNAL AS THE ORIGINALLY RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE ACT AND NO SCRUTINY ASSESSMENTS WERE FRAMED U/S 143(3) OF THE ACT AND THE ASSESSMENTS ARE RE-OPENED WITHIN FOUR YEARS FRO M THE END OF THE ASSESSMENT YEAR. THE LD. COUNSEL SUBMITTED THAT EN D OF JUSTICE WILL BE MET, IF THE MATTER IS SET ASIDE AND RESTORED TO THE FILE OF THE A,O WITH A DIRECTION TO DE-NOVO FRAME ASSESSMENT U/S 143(3) OF THE ACT READ WITH SECTION 147 OF THE ACT AFTER MAKING PROPER ENQUIRY IN THE MATTER ON ME RITS, SO THAT UN-NECESSARY PREJUDICE IS NOT CAUSED TO THE ASSESSEE. ITA 1092/MUM/2014 12 8. THE LD. D.R. HOWEVER SUPPORTED THE ORDERS OF THE LD. CIT(A) BUT SUBMITTED THAT THE MATTER MAY BE SET ASIDE TO THE F ILE OF THE A.O. FOR CONDUCTING PROPER ENQUIRY IN THIS MATTER.IT IS THE SAY OF LEARNED DR THAT SPECIFIC DIRECTIONS MAY BE GIVEN TO THE ASSESSEE TO CO-OPERATE WITH THE AUTHORITIES BELOW WHILE FRAMING DE-NOVO ASSESSMENT ON MERITS. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASS ESSEE IS IN BUSINESS OF CONSTRUCTION OF RESIDENTIAL BUILDING . THE ASSESSEE IS STATED TO BE CONSTRUCTING AN 18 FLOORS BUILDING AT PLOT NO. 9755 AT BANDRA HI LL ROAD, BANDRA(W), MUMBAI. THE ASSESSEE IS FOLLOWING PERCENTAGE COMPLE TION METHOD OF ACCOUNTING SINCE EARLIER YEARS WHICH IS ACCEPTED BY REVENUE. THE ASSESSEES ASSESSMENTS FOR THE PRECEDING ASSESSMENT YEAR 2003- 04 AND 2004-05 WERE STATED BY THE ASSESSEE TO BE COMPLETED U/S 143(3) O F THE ACT WHEREIN THE ASESSESEE DECLARED WIP OF RS. 5,09,80,000 WHICH WAS ACCEPTED BY REVENUE. THE ASSESSEE IS STATED TO BE CONSTRUCTING A 18 FLOO RS BUILDING AT PLOT NO. 9755 AT BANDRA HILL ROAD, BANDRA(W), MUMBAI WHICH IS STA TED TO BE NOT COMPLETED BY THE ASSESSEE TILL THE YEAR END. THE A.O. CALLED FOR THE INFORMATION DURING THE ASSESSMENT PROCEEDINGS FROM EXECUTIVE ENGINEER, BUILDING PROPOSAL(W.S.), H WARD OF MUNICIPAL CORPORATION O F GREATER MUMBAI W.R.T. PLOT NO 9753 INSTEAD OF CORRECT PLOT NO 9755 . THE BMC HAS GIVEN INFORMATION WITH RESPECT TO WRONG PLOT I.E. PLOT NO. 9753 AT BA NDRA HILL ROAD, BANDRA(W), MUMBAI INSTEAD OF CORRECT PLOT NO. 9755 AT BANDRA H ILL ROAD, BANDRA(W), MUMBAI WHEREIN THE ASSESSEE IS ACTUALLY CONSTRUCTIN G THE BUILDING. IN PLOT NO.9753, SOME OTHER PERSON IS STATED TO BE CONSTRUC TING THE BUILDING COMPRISING OF GF + 6 FLOORS , WHILE THE ASSESSEE IS BUILDING AN EIGHTEEN STOREYED BUILDING. THE AO CAME TO THE CONCLUSION BA SED ON WRONG REPORT W.R.T. WRONG PLOT NO 9753 FROM THE EXECUTIVE ENGINE ER, BUILDING PROPOSAL(W.S.), H WARD OF MUNICIPAL CORPORATION O F GREATER MUMBAI THAT THE ITA 1092/MUM/2014 13 ASSESSEE HAS DONE ILLEGAL CONSTRUCTION AS THE PLAN APPROVED WERE FOR GF +6 FLOOR, WHILE INFACT THE ASSESSEE WAS CONSTRUCTING 1 8 FLOOR BUILDING. THE AO ESTIMATED TURNOVER AND PROFITABILITY BASED ON THE I NFORMATION RECEIVED WITH RESPECT TO PLOT NO 9753 AT BANDRA HILL ROAD, BANDRA (W), MUMBAI INSTEAD OF CORRECT PLOT NO 9755 AT BANDRA HILL ROAD, BANDRA(W) , MUMBAI. BASED ON THE SAME WRONG PREMISES , THE AO ALSO CAME TO THE CONCL USION THAT THE BUILDING WAS COMPLETED AND THE ENTIRE PROFIT ON CONSTRUCTION OF BUILDING INCLUDING ALLEGED ILLEGAL FLOORS CONSTRUCTED BY THE ASSESSEE ARE TAXABLE AFTER REDUCING THE PROFIT VOLUNTARILY DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FILED WITH REVENUE. IN OUR CONSIDERED VIEW BASED ON OUR DETAILED DISCUSSIONS AS SET-OUT ABOVE , END OF JUSTICE WILL BE MET IN THIS APPEAL IF THIS MATTER IS SET ASIDE AND RESTORED TO THE FILE OF THE A.O. FOR DE N OVO DETERMINATION OF THE ISSUE ON MERITS AFTER CONSIDERING THE CORRECT AND PROPER INFORMATION WITH RESPECT TO PLOT NO 9755 AT BANDRA HILL ROAD, BANDRA(W), MUMBAI WHICH IN-FACT IS BEING CONSTRUCTED BY THE ASSESSEE . THE AO SHALL BE FREE TO MAKE SUCH ENQUIRES, VERIFICATIONS, EXAMINATIONS ETC AS HE MAY DEEM FIT BEFORE FRAMING DE-NOVO ASSESSMENT ON MERITS. NEEDLESS TO SAY, THE ASSESSEE MAY BE GRANTED PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD BY THE AO BEFORE RE-DETERMINATION OF THE MATTER ON MERITS. THE ASSESSEE SHALL BE ALLOWE D TO SUBMIT RELEVANT EVIDENCES AND EXPLANATION BEFORE THE AO IN ITS DEFE NSE. THE AO SHALL ALSO FURNISH AND CONFRONT ASSESSEE WITH ANY EVIDENCE/MAT ERIAL COLLECTED AT THE ASSESSEES BACK FOR NECESSARY REBUTTAL BEFORE USING SUCH EVIDENCE /MATERIAL TO FRAME DE-NOVO ASSESSMENT, IF THE SAME IS LIKELY TO CAUSE PREJUDICE TO THE ASSESSEE IN THE DE-NOVO ASSESSMENT FRAMED AGAINST T HE ASSESSEE ON MERIT. THE ASSESSEE IS DIRECTED TO CO-OPERATE WITH AUTHORI TIES BELOW IN THE SET ASIDE PROCEEDINGS FOR FRAMING DE-NOVO ASSESSMENT AGAINST THE ASSESSEE. WE ORDER ACCORDINGLY. ITA 1092/MUM/2014 14 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 1092/MUM/2014 FOR THE ASSESSMENT YEAR 2005-06 IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH NOVEMBER, 2016. # $% &' 8-11-2016 ( ) SD/- SD/- (MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 08-11-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS \ !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI