ACIT, Chandigarh V. M/s Chandigarh Housing Board, Chandigarh

ITA 120/CHANDI/2010

• Counselvise Citation: 12021514 RSA 2010
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 29-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY SHARMA
• Keywords: Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 120/CHD/2010 ASSESSMENT YEAR: 2006-07 ACIT, CIRCLE-1(1), V CHANDIGARH HOUSING BOARD, CHANDIGARH. 8, JAN MARG, SECTOR 9, CHANDIGARH. PAN: AAALC-0132H (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI AJAY SHARMA ASSESSEE BY: SHRI HARRY RIKHY DATE OF HEARING : 29.09.2011 DATE OF PRONOUNCEMENT : 30.09.2011 ORDER PER MEHAR SINGH, AM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 11.11.2009 PASSED BY THE CIT(A) U/S 143(3) OF THE I NCOME-TAX ACT,1961 ( IN SHORT THE ACT) FOR THE ASSESSMENT Y EAR 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITI ONS OF RS.9,99,529/- MADE BY THE AO AND NOT UPHOLDING THE ORDER OF THE AO ON THE ISSUE OF RECASTING THE TRADING ACCOUNT OF THE ASSESSEE BY INCLUDING THE VALUE OF WORK IN PROGRESS IN THE VALUE OF CLOSING STOCK AND MADE THE ADDITIONS OF RS.9,99,529/- IN TH E GROSS PROFIT OF THE ASSESSEE. 2.1 THE FACTS OF THE CASE, IN BRIEF ARE THAT THE APPELLANT, CHANDIGARH HOUSING BOARD IS A L OCAL AUTHORITY CONSTITUTED AND ESTABLISHED UNDER HARYANA HOUSING 2 BOARD ACT, 1971 AS EXTENDED TO UNION TERRITORY OF C HANDIGARH BY THE GOVT. OF INDIA FOR THE PURPOSE OF DEALING WI TH AND MEETING THE NEEDS OF HOUSING ACCOMMODATION. IT BUI LDS AND SELLS HOUSING UNITS FOR GENERAL PUBLIC, DIFFERENT S ECTIONS OF THE SOCIETY ETC. AND ALSO TAKES UP CONSTRUCTION WORK AS PER THE DIRECTIONS OF CHANDIGARH ADMINISTRATION. IT ALSO I MPLEMENTS THE INFRASTRUCTURE DEVELOPMENT IN THE UNION TERRITO RY OF CHANDIGARH AS PER SCHEMES OF THE GOVERNMENT AND ALS O UNDERTAKES THE WORK OF DEVELOPMENT WORK OF PARKS, R E-CARPETING THE ROADS, SLUM REHABILITATION SCHEMES ETC. IT IS ALSO DOING DEVELOPMENT WORKS ON BEHALF OF THE CHANDIGARH ADMIN ISTRATION. THE AO MADE AN ADDITION OF RS.9,99,529/- AFTER INCL UDING THE VALUE OF WORK-IN PROGRESS IN THE TRADING ACCOUNT, W HILE PLACING VALUE ON THE CLOSING STOCK. 3. THE LD. CIT(A) DELETED THE IMPUGNED ADDITIONS AN D THE FINDINGS OF THE LD. CIT(A), AS CONTAINED IN PARA 9 OF THE APPELLATE ORDER ARE REPRODUCED HEREUNDER ; I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS CLE AR THAT WIP HAS NOT MADE PART OF P & L ACCOUNT. IT IS SHOWN AS AN ASSET IN THE BALANCE SHEET. THE EXPENDITURE IS D EBITED TO WIP TILL THE COMPLETION OF THE SCHEME. ONLY THE COMPLETED SCHEMES ARE REFLECTED UNDER STOCK OF HOUS ES & BOOTHS. IT IS ONLY AFTER COMPLETION & HANDING OVER THAT TOTAL COST OF HOUSES UNDER A SCHEME IS CHARGED TO P & L ACCOUNT ON EXPENDITURE SIDE AND SALE IS BOOKED ON T HE INCOME SIDE OF PROFIT & LOSS ACCOUNT. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE DEPARTMENT PLACED RELIANCE ON THE ASSESSMENT ORDER AND ON THE 3 DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT V BRITISH PAINTS INDIA LTD. REPORTED IN 188 ITR 44 (S .C). 5. LD. 'AR' ON THE OTHER HAND, CONTENDED UNINTERRU PTEDLY AND UNIFORMERLY, A SYSTEM OF VALUATION OF THE CLOSI NG STOCK IS BEING FOLLOWED BY THE ASSESSEE. IT HAS BEEN ACCEPTE D, IN PAST BY THE REVENUE. HE PLACED RELIANCE ON THE DECISION OF TRIBUNAL IN THE CASE OF NANDI HOUSING (P) LTD. V DY.CIT (2003) 80 TTJ 750 (BANG) AND ABODE CONSTRUCTION LTD. V ITO , ITAT MUM BAI J BENCH (2005) 95 TTJ (MUM) 35 AND PLACED RELIANCE ON THE THIRD MEMBER BENCH DECISION IN THE CASE OF DCIT V DHARTI ESTATE (2011) 51 DTR (MUM)(TRIB) 28. 6. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE DECISIONS RELIED UPON BY THE CONTE NDING PARTIES. THE ISSUE IN QUESTION HAS BEEN SQUARELY CO VERED BY THE DECISION OF THE THIRD MEMBER BENCH IN THE CASE OF A CIT V DHARTI ESTATE (SUPRA) WHEREIN THE DECISION OF THE B RITISH PAINTS INDIA LTD. (SUPRA) HAS BEEN DULY CONSIDERED AND DIS TINGUISHED. IT WOULD BE APPROPRIATE TO REPRODUCE THE DECISION O F THE THIRD MEMBER BENCH OF MUMBAI TRIBUNAL FOR THE PURPOSE OF PROPER APPRECIATION : THE ASSESSEE HAS FOLLOWED PERCENTAGE COMPLETION METHOD CONSISTENTLY SINCE INCEPTION AND HAS BEEN DECLARING INCOME/LOSS FROM YEAR TO YEAR AND THE SAM E WAS ACCEPTED IN EARLIER YEARS. DESPITE THE AOS ST AND FOR THE ASSESSMENT YEAR 1998-99 AND 1999-2000, WITH REGARD TO CORRECTNESS OF THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, IN THE YEAR 2000-01 WHEN THE ASSESSEE DECLARED PROFIT OF MORE THAN RS.5 CRORES T HE AO APPEARS TO HAVE ACCEPTED THE SAME METHOD TO 4 ACCEPT THE INCOME DECLARED THEREIN WHICH IN ITSELF IS AN INDICATION THAT THE METHOD OF ACCOUNTING FOLLOWED B Y THE ASSESSEE IS AN APPROVED METHOD OF ACCOUNTING. T HE AO HAS NOT REJECTED THE BOOK RESULTS BY POINTING OU T ANY DEFECT IN THE BOOKS MAINTAINED BY THE ASSESSEE. CATEGORICAL FINDING OF THE CIT(A) TO HIGHLIGHT THAT ASSESSEE HAS NOT DEVIATED FROM GUIDELINES ISSUED BY THE ICA (UNDER AS-7) WAS NOT CHALLENGED BEFORE THE TRIBUNAL BY DEPARTMENTAL REPRESENTATIVE BY PRODUCIN G ANY EVIDENCE THEREOF. THE CIT(A) HAS DISCUSSED THE ISSUE ELABORATELY AND MET EACH POINT OF DISPUTE RAI SED BY THE AO TO HIGHLIGHT THAT THERE IS NO MERIT IN TH E CONCLUSION REACHED BY THE AO. IN FACT, THE JM HAS EXTRACTED THE OPERATIVE PORTION OF THE ORDER OF THE CIT(A) WHEREIN THE CONCLUSIONS DRAWN BY HIM WHILE HOLDING THAT ASSESSEE HAS ADOPTED CORRECT METHOD OF ACCOUNT ING AND THE SAME WAS FOLLOWED CONSISTENTLY. IN ADDITION TO THAT, THE JM HAD HIGHLIGHTED THAT THE PROJECT WAS ULTIMATELY COMPLETED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2000-01 WHEREIN THE ASSESSEE DECLARED INCOME OF RS.5 CRORES PLUS AND THE SAME HA S BEEN ACCEPTED BY THE DEPARTMENT WHICH HAS ATTAINED FINALITY IN THE ABSENCE OF ANY PROCEEDINGS INITIATE D UNDER S.263 OR OTHERWISE. NEITHER THE AM CONTROVERT ED THE FINDINGS OF THE CIT(A) OR THE JM NOR THE DEPARTMENTAL REPRESENTATIVE SOUGHT TO CONVERT THE FINDINGS OF THE CIT(A) AND THE JM. THE ORDER PASSED BY THE CIT(A) DESERVES TO BE UPHELD-CIT V BRITISH PAIN TS INDIA LTD. (1991) 91 CTR (S.C) 108 (1991) 188 ITR 4 4 (S.C) DISTINGUISHED. 7. A PERUSAL OF PARA 13 OF THE IMPUGNED DECISION SH OWS THAT IT DISCUSSES THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF BRITISH PAINTS INDIA LTD., AND DECIDED THE SIMILAR ISSUE AS INVOLVED IN THE PRESENT APPEAL IN FAVOUR OF THE ASSESSEE. IT WOULD ALSO BE RELEVANT TO REPRODUCE THE ANALYSIS AN D FINDINGS OF 5 THE FACTUAL MATRIX OF THE CASE RELIED UPON BY THE ASSESSEE AS CONTAINED IN PARA 13 OF THE IMPUGNED THIRD MEMBER D ECISION : 13. I HAVE HERD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT THE A SSESSEE HAS FOLLOWED PERCENTAGE COMPLETION METHOD CONSISTEN TLY SINCE INCEPTION AND HAS BEEN DECLARING INCOME/LOSS FROM YEAR TO YEAR AND THE SAME WAS ACCEPTED IN EARLIER Y EARS. DESPITE THE AOS STAND FOR THE ASSESSMENT YEAR 1998 -99 AND 1999-2000, WITH REGARD TO CORRECTNESS OF THE ME THOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, IN THE YEAR 2000-01 WHEN THE ASSESSEE DECLARED PROFIT OF MORE T HAN RS.5 CRORES THE AO APPEARS TO HAVE ACCEPTED THE SAM E METHOD TO ACCEPT THE INCOME DECLARED THEREIN WHICH IN ITSELF IS AN INDICATION THAT THE METHOD OF ACCOUNTI NG FOLLOWED BY THE ASSESSEE IS AN APPROVED METHOD OF ACCOUNTING. THE DECISION OF THE APEX COURT IN THE C ASE OF BRITISH PAINTS (SUPRA) COMES INTO PLAY ONLY IN A CA SE WHERE A PLEA OF THE ASSESSEE IS ACCEPTED IN CONTRAVENTION OF LAW OR AN INCORRECT METHOD OF ACCO UNTING FOLLOWED BY THE ASSESSEE WAS ACCEPTED FROM YEAR TO YEAR. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL, APPE ARING ON BEHALF OF THE ASSESSEE. IN THE CASE OF BRITISH P AINTS (SUPRA) OVERHEADS WHICH OUGHT TO HAVE BEEN TAKEN IN TO ACCOUNT TO ARRIVE AT THE CORRECT COST OF RAW MATERI ALS WAS NOT TAKEN INTO CONSIDERATION BY THE ASSESSEE BUT A T THE SAME TIME PLEADED THAT THE METHOD HAS BEEN CONSISTE NTLY FOLLOWED AND HENCE THE SAME DESERVES TO BE ACCEPTED . SINCE THE SAID METHOD IN THE OPINION OF THE APEX CO URT DO NOT REFLECT THE TRUE AND CORRECT PROFITS AND WAS NO T A WELL RECOGNIZED METHOD OF ACCOUNTING, THE HON'BLE COURT OBSERVED THAT RULE OF CONSISTENCY OR RES JUDICATA D O NOT COME INTO PLAY WHEN THE METHOD FOLLOWED BY THE ASSESSEE IS CONTRARY TO LAW. HOWEVER IN THE INSTANT CASE THERE IS NO SUCH FINDING EITHER BY THE AO OR BY TH E LD. CIT(A). AO HAS NOT REJECTED THE BOOK RESULTS BY POI NTING OUT ANY DEFECT IN THE BOOKS MAINTAINED BY THE ASSES SEE. 6 CATEGORICAL FINDING OF THE LD. CIT(A) TO HIGHLIGHT THAT ASSESSEE HAS NOT DEVIATED FROM GUIDELINES ISSUED BY THE ICAI (UNDER AS-7) WAS NOT CHALLENGED BEFORE THE TRI BUNAL BY LD. DR BY PRODUCING ANY EVIDENCE THEREOF. LD. CI T(A) HAS DISCUSSED THE ISSUE ELABORATELY AND MET EACH PO INT OF DISPUTE RAISED BY THE AO TO HIGHLIGHT THAT THERE IS NO MERIT IN THE CONCLUSION REACHED BY THE AO. IN FACT, LD. JM HAS EXTRACTED THE OPERATIVE PORTION OF THE ORDER OF THE LD. CIT(A) FROM PARAS 7 TO 20 WHEREIN LD. CIT(A) NOT ON LY ANALYZED EACH ISSUE RAISED BY THE AO BUT ALSO SUPPO RTED THE CONCLUSIONS DRAWN BY HIM WHILE HOLDING THAT ASSESSEE HAS ADOPTED CORRECT METHOD OF ACCOUNTING A ND THE SAME WAS FOLLOWED CONSISTENTLY. IN ADDITION TO THAT, LD. JM HAD HIGHLIGHTED THAT THE PROJECT WAS ULTIMAT ELY COMPLETED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2000-01 WHEREIN THE ASSESSEE DECLAR ED INCOME OF RS.5 CRORES PLUS AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT WHICH HAS ATTAINED FINAL ITY. IN THE ABSENCE OF ANY PROCEEDINGS INITIATED UNDER S .263 OR OTHERWISE. NEITHER THE LD. AM CONTROVERTED THE F INDINGS OF THE CIT(A) OR THE LD. JM NOR THE LD. DEPARTMENTA L REPRESENTATIVE SOUGHT TO CONTROVERT THE FINDINGS OF THE LD. CIT(A) AND LD. JM. 14. IT IS ALSO NOT OUT OF PLACE TO MENTION THAT WIT H REGARD TO DELETION OF ADDITION OF RS.2,70,230 (VIDE GROUND NO.2 IN ASSESSMENT YEAR 1998-99) THOUGH THE LD. JM HAS GIVEN COGENT REASONS WHILE COMING TO THE CONCLUSION THAT THE ORDER PASSED BY THE LD. CIT(A) IS IN ACCORDANCE WITH THE LAW. THE LD. AM HAS NOT TOUCHED UPON THE SAID ISSUE. 15. HAVING REGARD TO THE CIRCUMSTANCES, I AGREE WIT H THE VIEW TAKEN BY THE LD. JM ON BOTH THE ISSUES. IN MY CONSIDERED OPINION, ORDER PASSED BY THE LD. CIT(A) DESERVES TO BE UPHELD AND THUS I AGREE WITH THE VIE W TAKEN BY THE LD JM. 7 8. RESPECTFULLY FOLLOWING THE DECISION OF THE THIRD MEMBER DECISION OF THE MUMBAI BENCH AS REPRODUCED ABOVE, W HEREIN THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF BRITISH PAINTS P.LTD. HAS BEEN DULY CONSIDERED AND DISTINGU ISHED, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CI T(A) AND THE SAME ARE UPHELD. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER,2011. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 30 TH SEPT.,2011 POONAM COPY TO: 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH ASSISTANT REGISTRAR, ITAT, CHANDIGARH