Appeal details
Counselvise Citation
[2016] 121 COUNSELVISE.COM (IT) 4409 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-11-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
16-11-2016
Assessment Year
2005-2006
Appeal Filed On
10-02-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 136/HYD/2016 ASSESSMENT YEAR: 2005-06 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 14(1), HYDERABAD. VS. ZULFI RAVDJEE, HYDERABAD PAN AEAPA 2227H (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.J. RAO ASSESSEE BY : SHRI C.P. RAMASWAMI DATE OF HEARING 16-11-2016 DATE OF PRONOUNCEMENT 30-11-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-9, HYDERABAD, DATED 23/11/2015 FOR AY 2005-0 6. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED HIS RETURN OF INCOME FOR THE ASST. YEAR 2005-06 ON 1.11 .2005, DECLARING TOTAL LOSS OF RS. 1,58,37,666/- THE RETURN OF INCOM E WAS PROCESSED U/S. 143(1) OF INCOME-TAX ACT ON 3-2-06. THE CASE W AS TAKEN UP FOR SCRUTINY BY ISSUE OF NOTICE U/S. 143(2). 2.1 FOR THE YEAR UNDER CONSIDERATION, ASSESSEE WHO IS THE PROPRIETOR OF M/S. A.Z. DEVELOPERS, WHICH IS ALSO E NGAGED IN CONSTRUCTION ACTIVITY HAS SHOWN RECEIPT OF FLAT ADV ANCES TO THE TUNE OF RS. 4,81,89,403/- BUT NO INCOME HAS BEEN ADMITTED O N ACCOUNT OF THE SAME. WHEN THIS WAS PUT TO THE ASSESSEE, HE SUBMITT ED THAT THE SYSTEM OF ACCOUNTING BEING FOLLOWING ARE THE PROJEC T COMPLETION METHOD OF ACCOUNTING I.E. PROFIT IS ARRIVED ONLY AF TER THE POSSESSION OF 2 ITA NOS. 136/H/16 ZULFI RAVDJEE, HYD. THE APARTMENTS ARE HANDED OVER TO THE RESPECTIVE PU RCHASERS. SINCE, THIS METHOD OF ACCOUNTING HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE PAST, HE IS FOLLOWING THE SAME SYSTEM OF ACCOUN TING EVEN NOW. 3. THE AO OBSERVED THAT THE ASSESSEE'S CONTENTION THAT THE METHOD OF ACCOUNTING I.E. PROJECT COMPLETION METHOD FOLLOWED BY HIM HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE PAST IS NOT TRUE AS FROM ASST. YEARS 2001-02 ONWARDS, THE ASSESSEE WAS FOLL OWING THE PROJECT COMPLETION METHOD, THE BOOKS-OF- ACCOUNT HAVE BEEN REJECTED BY THE AO AND PROFIT ESTIMATED @ 15% ON ADVANCES RECEIVED BY THE ASSESSEE TOWARDS FLATS BOOKED. THE CONTENTION OF TH E DEPARTMENT IS THAT AS EACH ASSESSMENT YEAR IS A SELF CONTAINED UN IT THE INCOME EARNED DURING THE RELEVANT PREVIOUS YEAR IS TAXABLE DURING THAT YEAR ONLY. THE AO PLACING RELIANCE ON THE RATIO LAID DOW N BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. BRITISH PAINTS (INDIA) LIMITED, 188 ITR 44, CHAMPION CONSTRUCTION CO. VS. 1ST ITO ( ITAT BOMBAY 'B' BENCH - 104 TAXMAN 222), HELD THAT THE ADVANCES RE CEIVED TOWARDS BOOKING OR SALE OF FLATS HAS BEEN TAKEN INTO CONSID ERATION AND THE NET PROFIT FROM ASSESSEE'S CONSTRUCTION ACTIVITY HAS BE EN TAKEN AT 15% FOR BLOCK PERIOD AND FROM AY 2001-02 ONWARDS. HENCE, IN VIEW OF THE ABOVE, THE AO REJECTED THE BOOKS-OF-ACCOUNT OF THE ASSESSEE ON THE GROUND THAT THE BOOKS OF ACCOUNT DID NOT REFLECT TH E TRUE PROFIT, AND ESTIMATED THE NET PROFIT @ 15% ON THE ADVANCES REC EIVED BY M/S. A.Z. DEVELOPERS. THE ADVANCES RECEIVED DURING THE Y EAR WAS RS. 4,81,89,403/- AND 15% ON THE SAME WORKED OUT TO RS. 72,28,410/-, WHICH WAS TREATED AS INCOME OF THE ASSESSEE. 4. AGGRIEVED WITH THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND CONTENDED THAT THE ASS ESSING OFFICER HAD NOT SHOWN ANY REASON EITHER LEGALLY OR FACTUALL Y TO REJECT THE BOOKS OF ACCOUNT OF THE APPELLANT. CONSEQUENTLY, TH E METHOD ADOPTED BY THE ASSESSING OFFICER IN ESTIMATING THE PROFITS HAS NO FACTUAL OR LEGAL BASIS AND THEREFORE THE ADDITIONS MADE BY THE ASSESSING OFFICER 3 ITA NOS. 136/H/16 ZULFI RAVDJEE, HYD. ARE NOT CALLED FOR. HE FURTHER CONTENDED THAT THE A SSESSING OFFICER DID NOT RESORT IN ANY COMPULSORY AUDIT IN TERMS OF SEC 142(2A) WITH A VIEW TO FINDING SPECIFIC DEFECTS IN THE ACCOUNTS RE GULARLY MAINTAINED BY THE ASSESSEE. FURTHER THE AO OVERLOOKED THE FACT THAT THE ASSESSEE HAD APPROPRIATED ADVANCES RECEIVED AS SALE S IN THE SUBSEQUENT YEARS AND OFFERED AS INCOME IN THE SUBSE QUENT YEARS. CONSEQUENTLY THESE AMOUNTS HAVE BEEN TAXED TWICE AS INCOME IN DIFFERENT ASSESSMENT YEARS. THUS, IT IS CLEAR THAT THE ESTIMATED INCOME OF RS. 72,28,410/- AS NET PROFIT FROM CONSTR UCTION ACTIVITY @ 15% OF RS. 4,81,89,4031- IS ABSOLUTELY WITHOUT ANY BASIS AND IT IS PRAYED THAT THE SAME BE DELETED. 4.1 THE AR OF THE ASSESSEE SUBMITTED THAT THE ITAT HAD ACCEPTED THE PROJECT COMPLETION METHOD OF ACCOUNTING OF THE ASSESSEE FOR THE EARLIER AYS FOR AY 2001-02 AND 2002-03 VIDE ORDER D ATED 24/09/2009 IN ITA NOS. 736 & 749/HYD/2006. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND FOLLOWING THE ORDER OF THE ITAT IN ASSESSEES OWN CASE (SUPRA ), THE CIT(A) DIRECTED THE AO TO ADOPT THE PROJECT COMPLETION MET HOD AND RECOMPUTE THE INCOME. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUND OF APPEAL: A) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE CIT(A) IS CORRECT IN DIRECTING THE AO TO COMPUTE T HE INCOME BY ADOPTING PROJECT COMPLETION METHOD WHEN THE AO HAS ESTIMATED THE RECEIPTS AT 15% OF ADVANCES RECEIVED BY THE AS SESSEE. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. BEFORE US THE LD. AR OF THE ASSESSEE FIL ED A COPY OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT ( ITTA NOS. 405 AND 406 OF 2015, DATED 01/06/2016.), WHICH WAS DELIVERE D AGAINST THE APPEAL FILED BY THE REVENUE ON THE DECISION OF THE ITAT IN ASSESSEES 4 ITA NOS. 136/H/16 ZULFI RAVDJEE, HYD. OWN CASE, WHEREIN THE HONBLE COURT DISMISSED THE A PPEAL OF THE REVENUE BY OBSERVING AS FOLLOWS: THE METHOD OF ACCOUNTING TO BE FOLLOWED IS PRIMAR ILY FOR THE ASSESSEE TO DETERMINE AND, SAVE JUSTIFIABLE REASONS , THE ASSESSING AUTHORITY WOULD ORDINARILY ACCEPT THE MET HOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE ASSESSEE. T HE ASSESSMENT ORDER DOES NOT DISCLOSE ANY REASONS, MUC H LESS JUSTIFIABLE REASONS, FOR THE ASSESSING OFFICER TO R EJECT THE PETITIONER'S CLAIM FOR FOLLOWING THE PROJECT COMPLE TION METHOD. CONSEQUENTLY COMPUTATION OF THE INCOME OF THE ASSES SEE, EVEN IF IT WERE TO BE ESTIMATED AT 15% IN THE ABSENCE OF PR OPER BOOKS OF ACCOUNTS BEING MAINTAINED CAN ONLY BE ON THE AMOUNT S RECEIVED BY THE ASSESSEE AS PER THE PROJECT COMPLETION METHO D, AND NOT THE PERCENTAGE COMPLETION METHOD. WE FIND NO LEGAL INFIRMITY IN THE ORDER OF THE ITAT, MUCH LESS ANY SUBSTANTIAL QU ESTION OF LAW, NECESSITATING INTERFERENCE IN THESE APPEALS. AS THE CIT(A) DIRECTED THE AO TO ADOPT THE PROJECT COMPLETION METHOD AND RECOMPUTE THE INCOME FOLLOWING THE DECISION OF THE ITAT, WHICH WAS UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND ACCORD INGLY UPHOLDING THE SAME, WE DISMISS THE APPEAL OF THE REVENUE. ` 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 30 TH NOVEMBER, 2016 KV COPY TO:- 1) THE ACIT, CIRCLE 14(1), 6 TH FLOOR, C BLOCK, ROOM NO. 635, IT TOWERS, AC GUARDS, HYDERABAD. 2) SRI ZULFI RAVDJEE, 8-2-494/50, ROAD NO. 7, BANJA RA HILLS, ,HYD. 3) CIT(A) - 9, HYDERABAD. 4 PR. CIT 6,, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE 5 ITA NOS. 136/H/16 ZULFI RAVDJEE, HYD. S.NO. DESCRIPTION DATE INTLS DS1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEF ORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEF ORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROV ED BY SECOND MEMBER JM/AM 5 APPROV ED DRAF T COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT F OR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH F ILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER .
