M/s. Jayabheri Properties Pvt.Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1114/CHNY/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7707 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 18-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-05-2012
• Court: TRIBUNAL
• Department Lawyers: MSVM PRASAD
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Additional depreciation
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1114/MDS/2012 / ASSESSMENT YEAR : 2007-08 M/S JAYABHERI PROPERTIES PVT. LTD NO.28/21, DE MONTE COLONY ALWARPET, CHENNAI 600018 VS. THE ASSTT. COMM ISSIONER OF INCOME-TAX COMPANY CIRCLE II(3) CHENNAI [PAN AAACM 5296 R ] ( %& / APPELLANT) ( '(%& /RESPONDENT) ./ I.T.A.NO.122/MDS/2015 / ASSESSMENT YEAR : 2007-08 THE DY. COMMISSIONE R OF INCOME-TAX CORPORATE CIRCLE 2(2) CHENNAI VS. M/S JAYABHERI PROPERTIES PVT. LTD TEMPLE STEPS, GROUND FLOOR, 4 TH BLOCK 184-187, ANNA SALAI, LITTLE MOUNT CHENNAI 600 008 ( %& / APPELLANT) ( '(%& /RESPONDENT) ASSESSEE BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE DEPARTMENT BY : SHRI MSVM PRASAD, CIT / DATE OF HEARING : 18 - 02 - 2016 / DATE OF PRONOUNCEMENT : 18 - 03 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THESE APPEALS OF THE ASSESSEE AND THE REVENUE PE RTAIN TO ASSESSMENT YEAR 2007-08. ASSESSEES APPEAL I.T.A. NO.1114/MDS/ ITA NO.1114/12 & 122/15 :- 2 -: 2012 IS DIRECTED AGAINST THE ORDER PASSED BY THE AD MINISTRATIVE COMMISSIONER, CHENNAI, DATED 23.3.2012 U/S 263 OF T HE INCOME-TAX ACT, 1961. REVENUES APPEAL I.T.A.NO.122/MDS/2015 IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)- II, CHENNAI, DATED 3.6.2014, CONSEQUENT TO THE ORDER PASSED BY THE ASS ESSING OFFICER. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS, WE HEARD THEM TOGETHER AND DISPOSING OF THE SAME BY T HIS COMMON ORDER. 2. LET US FIRST TAKE UP ASSESSEES APPEAL AGAINST THE ORDER OF THE ADMINISTRATIVE COMMISSIONER PASSED U/S 263 OF THE ACT. 3. SHRI R.VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS FOLLOWING PERCENTA GE COMPLETION METHOD. IN RESPECT OF THE PROJECT KNOWN AS JEYABH ERI ORANGE(RESIDENTIAL APARTMENT), THE NET PROFIT ADMI TTED BY THE ASSESSEE WAS ` 3,40,11,279/-. HOWEVER, THE CIT FOUND THAT THE PR OFIT AS PER THE PROJECT COMPLETION METHOD COMES TO NEARL Y ` 5,10,36,411/-. ACCORDING TO THE LD. COUNSEL, SINCE THE PROFIT ON P ROJECT COMPLETION METHOD IS LESS THAN 30%, IT MAY NOT BE NECESSARY TO RECOGNIZE ANY REVENUE IN THIS PROJECT. THE ASSESSING OFFICER, AFTER CONSIDERING THE RELEVANT MATERIAL, ACCEPTED THE INCOME DECLARED BY THE ASSESSEE. ITA NO.1114/12 & 122/15 :- 3 -: THEREFORE, THE CIT IS NOT JUSTIFIED IN REVISING THE ORDER OF THE ASSESSING OFFICER. 4. WE HEARD SHRI MSVM PRASAD, LD. DEPARTMENTAL REPRESE NTATIVE ALSO. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS FOLLOWIN G PERCENTAGE COMPLETION METHOD. THE CIT FOUND THAT THE ASSESSEE HAS ADMIT TED NET PROFIT OF ` 3,40,11,279/-. ON PERUSAL OF THE ASSESSMENT ORDER, IT APPEARS THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING ABOUT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND THE PROFIT RATIO DECL ARED BY THE ASSESSEE. THE ASSESSING OFFICER HAS SIMPLY ACCEPTED THE RETURN FI LED BY THE ASSESSEE WITHOUT ANY ENQUIRY. THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT THE FAILURE OF THE ASSESSING OFFICER TO CONDUCT A PROPER ENQUIRY IS AN ERROR WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. MOREOVER, THE ASSE SSMENT PROCEEDING BEING A JUDICIAL PROCEEDING U/S 136 OF THE INCOME-TAX ACT, THE ORDER OF ASSESSMENT SHALL CONTAIN REASONS FOR THE CONCLUSION. THIS VIE W OF THE TRIBUNAL IS FORTIFIED BY THE JUDGMENT OF THE APEX COURT IN S.N.MUKHERJEE VS UNION OF INDIA, AIR 1990 SC 1984 AND THE JUDGMENT OF THE PUNJAB & HARYA NA HIGH COURT IN CIT VS SUNIL KUMAR GOEL [2005] 274 ITR 53. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT ORDER OF ASSESSMENT IS NON-SPEAKING AN D IT DOES NOT HAVE ANY REASONS, THEREFORE, THE CIT HAS RIGHTLY EXERCISED H IS JURISDICTION U/S 263 OF THE ACT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REAS ON TO INTERFERE WITH THE ORDER OF THE CIT. ACCORDINGLY, THE SAME IS CONFIRMED. ITA NO.1114/12 & 122/15 :- 4 -: 5. NOW COMING TO THE REVENUES APPEAL I.T.A.NO. 122/MDS/2015, THE FIRST ISSUE IS WITH REGARD TO EST IMATION OF COST OF THE FLATS. 6. SHRI MSVM PRASAD, LD. DR SUBMITTED THAT THE ASSESS EE CLAIMED BEFORE THE LOWER AUTHORITIES THAT FLATS WER E SOLD RANGING FROM ` 3000/- TO ` 3500/- PER SQ FT. THE ASSESSEE HAS ALSO CLAIMED THAT CERTAIN EXTRA SPECIAL FACILITIES WERE PROVIDED TO T HE PURCHASERS OF THE FLATS, THEREFORE, IT HAS TO BE REDUCED FROM THE CO ST OF THE FLAT. THE CIT(A), WITHOUT CONSIDERING THE ACTUAL COST OF THE FLATS, ESTIMATED THE AVERAGE SALE PRICE AT ` 3250/- PER SQ FT. WHEN THE ASSESSEE HAS SOLD MORE THAN 83% OF THE FLATS, THE CIT(A), WITHOUT ANY MATERIAL ON RECORD OBSERVED THAT THE ASSESSEE HAS NOT SOLD NOT EVEN 5 0% OF THE FLATS DURING THE YEAR UNDER CONSIDERATION. THEREFORE, AC CORDING TO THE LD. DR, THE ACTUAL SALE PRICE HAS TO BE CONSIDERED FOR ARRIVING AT THE GROSS RECEIPTS OF THE ASSESSEE. 7. WE HEARD SHRI R.VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSEE ALSO. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS SOLD FLATS RANGING FROM ` 3,000/- TO ` 3500/- PER SQ FT. THE ASSESSING OFFICER, HOWEVER, FOUND THE MINIMUM SALE PRICE OF THE FLATS AT ` 3500/- PER SQ FT. OUT OF THE 123 FLATS SOLD BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, 18 FLATS WERE SOLD AT ` 3000/- PER SQ FT. SOME OF THE FLATS WERE IN FACT SOLD AT ` 3300/- PER SQ FT ALSO. THE ITA NO.1114/12 & 122/15 :- 5 -: ASSESSEE HAS PROVIDED SOME EXTRA FACILITIES TO SOME OF THE FLAT PURCHASERS. THE COST FOR THE EXTRA FACILITIES HAS TO BE REDUCED FROM THE SALE PRICE OF THE FLAT. THE CIT(A), AFTER CONS IDERING THE EXTRA FACILITIES PROVIDED TO SOME OF THE FLAT PURCHASERS, HAS TAKEN THE AVERAGE SALE PRICE OF THE FLATS AT ` 3250/- PER SQ FT. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(A) HAS RIGHTL Y ADOPTED THE VALUE OF THE FLAT AT ` 3250/- PER SQ FT. THE LD. COUNSEL HAS FURTHER SUB MITTED THAT HE MAY NOT HAVE ANY OBJECTION TO FIND OUT THE ACTUAL SALE PRICE ALSO. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ISSUE ARISES FOR CONSIDERATION IS DETERMINATION OF THE SALE PRICE OF THE FLATS. THE ASSESSEE CLAIMS THAT OUT OF 123 FLATS, 18 FLATS WER E SOLD AT ` 3000/- PER SQ FT. THE REMAINING FLATS WERE SOLD AT ` 3500/- PER SQ FT. THE ASSESSEE HAS ALSO PROVIDED CERTAIN EXTRA FACILITIES TO SOME OF THE FLAT PURCHASERS, THEREFORE, IT HAS TO BE REDUCED FROM TH E COST OF THE FLATS. ACCORDINGLY, THE CIT(A) ESTIMATED THE VALUE AT ` 3250/- PER SQ FT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHE N THE ASSESSEE IS MAINTAINING BOOKS OF ACCOUNT, THE ACTUAL SALE PRICE OF THE FLAT HAS TO BE TAKEN INTO CONSIDERATION. THE ESTIMATION OF SALE P RICE WOULD COME ONLY IN CASE THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT. SINCE ITA NO.1114/12 & 122/15 :- 6 -: THE TRANSACTION IN LAND HAS TO BE REGISTERED BEFORE THE SUB-REGISTRAR AND THE ASSESSEE ALSO NEEDS TO PAY SALES TAX IN RE SPECT OF THE WORKS CONTRACT FOR CARRYING OUT THE CONSTRUCTION OF THE F LATS, FINDING OUT THE ACTUAL PRICE ON THE BASIS OF THE BOOKS OF ACCOUNT A ND FURTHER MATERIAL AVAILABLE ON RECORD MAY NOT BE A DIFFICULT TASK. T HEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSE SSING OFFICER HAS TO ASCERTAIN THE ACTUAL SALE PRICE OF THE FLATS AFTER CONSIDERING ALL THE MATERIALS THAT MAY BE PRODUCED BY THE ASSESSEE INC LUDING THE BOOKS OF ACCOUNT. ACCORDINGLY, THE ORDERS OF THE LOWER A UTHORITIES ARE SET ASIDE AND THE ISSUE OF DETERMINATION OF ACTUAL SALE PRICE OF THE FLATS IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH IN THE LI GHT OF THE MATERIAL THAT MAY BE FILED BY THE ASSESSEE AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY TO THE ASSESSEE. 9. THE REVENUE HAS TAKEN ONE MORE GROUND WITH REGARD TO ADDITIONAL DEPRECIATION. 10. SHRI MSVM PRASAD, THE LD. DR SUBMITTED THAT THE AS SESSEE CLAIMED ADDITIONAL DEPRECIATION AT ` 26,59,481/- IN RESPECT OF THE MACHINERY PURCHASED. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF MANUFACTURE OR PR ODUCTION OF AN ARTICLE OR THING. ADMITTEDLY, THE ASSESSEE IS ENG AGED IN THE ITA NO.1114/12 & 122/15 :- 7 -: CONSTRUCTION OF FLATS. THE CONSTRUCTION OF FLATS C ANNOT BE CONSTRUED AS A MANUFACTURING ACTIVITY. ACCORDING TO THE LD. DR, THE MACHINERY PURCHASED FOR MAKING READY MIX CONCRETE IS ONLY F OR CARRYING OUT THE CONSTRUCTION ACTIVITY, THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR ANY ADDITIONAL DEPRECIATION. THEREFORE, ACCORDING TO T HE LD. DR, THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE CLAIM OF ADDITIONAL DEPRECIATION U/S 36(1)(IIA) OF THE ACT. 11. ON THE CONTRARY, SHRI R.VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS MANUFACTUR ING READY MIX WHICH IS A DISTINCT AND DIFFERENT PRODUCT BY USING CEMENT CHIPS AND SAND MIXED IN A SPECIFIC PROPORTION. ACCORDING TO THE LD. COUNSEL, THERE ARE CERTAIN COMPANIES WHICH ARE ENGAGED IN SU PPLY OF READY MIX FOR CONSTRUCTION ACTIVITY ALSO. THE READY MIX IS LIABLE FOR EXCISE DUTY ALSO, THEREFORE, THE ACTIVITY OF MAKING READY MIX CONCRETE IS A MANUFACTURING ACTIVITY. ACCORDING TO THE LD. COUNS EL, THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADM ITTEDLY, THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION. CONST RUCTION OF THE BUILDING OR BRIDGE CANNOT BE CONSTRUED AS A MANUFAC TURING ACTIVITY. NOW THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATI ON ON THE ITA NO.1114/12 & 122/15 :- 8 -: MACHINERY PURCHASED FOR MAKING READY MIX. THE QU ESTION ARISES FOR CONSIDERATION IS WHETHER MAKING READY MIX CONCRETE AMOUNTS TO MANUFACTURING OR NOT? THE ASSESSING OFFICER HAS NO T DISCUSSED ANYTHING ABOUT THE MANUFACTURING ACTIVITY SAID TO B E CARRIED ON BY THE ASSESSEE. THE ASSESSING OFFICER HAS SIMPLY OBSERVE D THAT THE ASSESSEE IS NOT IN THE BUSINESS OF MANUFACTURE OR P RODUCTION OF ANY ARTICLE OR THING. THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT THE ASSESSING OFFICER HAS TO EXAMINE WHETHER MAKING OF READY MIX CONCRETE WOULD AMOUNT TO MANUFACTURE OF AN ARTICLE OR THING. SINCE SUCH AN EXERCISE WAS NOT DONE BY THE ASSESSING OFFI CER, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFF ICER HAS TO EXAMINE THE ACTIVITY OF THE ASSESSEE WHETHER THERE WAS A NY MANUFACTURING ACTIVITY OR NOT. ACCORDINGLY, THE ORDERS OF THE LO WER AUTHORITIES ARE SET ASIDE AND THE CLAIM OF ADDITIONAL DEPRECIATION IS R EMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER SHALL RE-EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE MATERIAL THAT MAY BE FILED BY THE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 14. TO SUMMARIZE, THE APPEAL OF THE ASSESSEE IS DISM ISSED AND THAT OF THE REVENUE IS ALLOWED FOR STATISTICAL PUR POSES. ITA NO.1114/12 & 122/15 :- 9 -: ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 18 TH MARCH, 2016 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF