ITO, Ward - 50(4), Kolkata, Kolkata V. The Economic Structures, Kolkata

ITA 1421/KOL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3054 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 07-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-07-2010
• Court: TRIBUNAL
• Department Lawyers: K N JANA
• Assessee Lawyers: S M SURANA
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE . . . . . . . . , ! /AND ' #!' , ) [BEFORE SHRI N. S. SAINI, AM & SHRI MAHAVIR SINGH, JM] !$ !$ !$ !$ / I.T.A NO. 1421/KOL/2010 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEAR: 200 6- 0 7 INCOME-TAX OFFICER, WD-50(4), KOLKATA. VS. THE EC ONOMIC STRUCTURES (PAN: AADFT3765G) ()* /APPELLANT ) (+,)*/ RESPONDENT ) & C.O. NO.108/KOL/2010 IN !$ !$ !$ !$ / I.T.A NO. 1421/KOL/2010 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEAR: 200 6- 0 7 THE ECONOMIC STRUCTURES VS. INCOME-TAX OFFICER, WD-50(4), KOLKATA. ()* /APPELLANT ) (+,)*/ RESPONDENT ) DATE OF HEARING: 22.04.2013 DATE OF PRONOUNCEMENT: 26.04.2013 FOR THE REVENUE: SHRI K. N. JANA, JCIT FOR THE ASSESSEE: SHRI S. M. SURANA, ADVOCATE - / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XXXII, KOLKATA IN APPEAL NO. 170/CIT(A)-XXXII/08-09/50(4)/KOL DATED 18.02.2010. ASSESSMENT WAS FRAMED BY ITO, WARD- 50(4), KOLKATA U/S. 143(3) R.W.S. 145(3) OF THE INC OME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORD ER DATED 26.12.2008. 2. THE TWO INTER-CONNECTED ISSUES, RAISED IN THIS APPEAL BY REVENUE, ARE AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION OF ADVANCES RECEIVE D FROM TWO PURCHASERS AMOUNTING TO RS.9,05,000/- AND DELETION OF ADDITION OF EXPENDITU RE MADE BY AO FOR BUILDING D BLOCK. FOR THIS, REVENUE HAS RAISED FOLLOWING TWO GROUNDS: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD. CIT(A-XXXII, KOLKATA WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.9,05,000/- AS THE ASSESSEE RECEIVED ADVANCE FROM 2 ITA NO.1421/K/2010 & CO 108/K/2010 THE ECONOMIC STRUCTURES AY: 2006-07 TWO PURCHASERS AMOUNTING TO RS.9,05,000/- (4,05,000 + 5,00,000), BUT THERE WAS NO REFLECTION OF THESE PURCHASE I.E. RS.9,05,000/- IN VALUATION OF WORK-IN-PROGRESS AND NO REVENUE HAD BEEN RECOGNIZED BY THE ASSESSEE. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD. CIT(A)-XXXII, KOLKATA WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.12,73, 607/-, AS THE FACT OF THE CASE WAS THAT THE ASSESSEE HAD FOUR BLOCKS OF BUILDING A, B, C & D IN FINANCIAL YEAR 2005-06. NO INCOME OUT OF BUILDING D HAD BEEN RECOGNIZED AND WORK-IN-PROGRESS CREDITED IN P&L ACCOUNT DID NOT INCLUDE A PENNY OUT OF BLOCK D, S O IT SHOULD NOT DEBITED ANY EXPENSE OUT OF THIS BUILDING. THIS EXPENSE SHOULD BE ALLOW ED NEXT YEAR AS WHEN THE REVENUE FROM BLOCK D WAS OFFERED TAXATION UNDER I. T. ACT. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE C ONSTRUCTION OF RESIDENTIAL FLATS IN JOINT VENTURE WITH LAND OWNERS. IN THE PRESENT PROJECT, ASSESSEE CONSTRUCTED FOUR BLOCKS OF BUILDING ON THE PLOT OF LAND. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, AO NOTICED THAT FIVE PURCHASERS OUT OF 28 PURCHASERS WERE NOT ON THE LIS T OF SALES FOR VALUATION OF WORK-IN-PROGRESS. THE AO NOTED THE FIVE PURCHASERS AND FINALLY AFTER CATEGORICAL REPLY FROM ASSESSEE NOTED THAT THE ADVANCES RECEIVED FROM SUSHANTA KR. MALLICK OF RS.4,05,000/- AND DILIP KR. SEN OF RS. 5 LAKHS ARE NOT SUBSTANTIATED WITH ANY EVIDENCE AS TO HOW THE VALUE OF ADVANCES RECEIVED ARE INCLUDED IN THE PREVIOUS YEARS WORK-IN-PROGRESS. HENCE, HE MADE ADDITION. SIMILARLY, THE AO ALSO NOTED THAT THE ASSESSEE HAS CONSTRUCTED FOUR D IFFERENT BLOCKS I.E. BLOCKS A, B, C & D AND ACCORDING TO ASSESSEE, BLOCKS A & B ARE COMPLETED L ONG BACK, BLOCK C IS INCOMPLETE WITH 75% COMPLETION AND BLOCK D IS NOT AT ALL STARTED YET. THE ASSESSEE HAS VALUED WORK-IN-PROGRESS OF THE BLOCKS AS UNDER: BLOCK A RS. 4,19,880/- BLOCK B RS. 4,56,000/- BLOCK C RS.63,58,420/- OWNERS SHARES RS.10,40,700 BLOCK D NIL ____________ TOTAL WORK-IN-PROGRESS RS.82,75,000/- THE A.O. NOTED THAT IT IS NOT CLEAR THAT HOW THE AS SESSEE HAS OFFERED REVENUE ONLY FOR A, B, C BUT FOR D BLOCK, HOW HE HAS ATTRIBUTED EXPENSES AND NO REVENUE IS OFFERED FOR THE SAME. THEREFORE, HE BIFURCATED THE EXPENSES INCURRED FOR BLOCK D ATTRIBUTED 15% OF TOTAL EXPENSES I.E. 84,90,713/- AND THEREBY DISALLOWED AT RS.12,73,607/ - BY PURELY ESTIMATING. AGGRIEVED ON BOTH THE COUNTS, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) , WHO ON BOTH THE COUNTS DELETED THE ADDITION. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFO RE US. 3 ITA NO.1421/K/2010 & CO 108/K/2010 THE ECONOMIC STRUCTURES AY: 2006-07 4. WE FIND THAT FIRST OF ALL THE ASSESSEE HAS RECEI VED ONLY ADVANCES FROM SUSHANTA KR. MALLICK AND DILIP KR. SEN, WHICH ARE AS UNDER: THE DETAILS OF ADVANCE RECEIVED FROM SRI SUSANTA K R. MULLICK ARE HEREIN BELOW: F.Y. DATE AMOUNT CHQ. NO. DEPOSITED INTO BANK 2000-01 2001-02 2005-06 12.06.2001 18.08.2001 10.09.2001 24.01.2006 TOTAL 72,500/- 2,11,000/- 32,500/- 84,000/- 5,000/- 4,05,000/- 528158 860822 505404 754845 B.O.B THE DETAILS OF ADVANCE RECEIVED FROM SRI DILIP KUMA R SEN ARE HEREINBELOW: F.Y. DATE AMOUNT CHQ. NO. DEPOSITED INTO BANK 2005-06 22.08.2005 26.08.2005 TOTAL : 4,00,000/- 1,00,000/- 5,00,000/- CASH 376976 B.O.B WE FIND THAT IN THE CASE OF SHRI SUSHANTA KR. MULL ICK, ONLY ADVANCE OF RS.5,000/- IS RECEIVED DURING THE RELEVANT ASSESSMENT YEAR AND RS.4 LACS I S RECEIVED DURING DIFFERENT PERIOD AS NOTED ABOVE. IT IS ALSO A FACT THAT THE ASSESSEE HAS REC ORDED THESE ADVANCES IN ITS BOOKS OF ACCOUNT AND DISCLOSED IN ITS ACCOUNTS FILED ALONG WITH RETURN O F INCOME. THE ASSESSEE HAS ENCLOSED COMPLETE ACCOUNTS IN ASSESSEES PAPER BOOK PAGES 1 TO 33. T HIS IS MERELY AN ADVANCE FROM THESE TWO CUSTOMERS LIKE ADVANCE RECEIVED FROM OTHER CUSTOMER S FOR BOOKING OF FLAT. THE ASSESSEE IS ACCOUNTING FOR WORK-IN-PROGRESS ONLY WHERE THE ASSE SSEE HAS SPENT ON ACCOUNT OF WORK-IN- PROGRESS OR FOR CLOSING STOCK. AN ADVANCE CANNOT B E INCOME BECAUSE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD AND IN PROJECT COMPLETION METHOD INCOME IS DECLARED AS AND WHEN PROJECT IS COMPLETE AND ASSESSEE MADE SALES OF FLAT S. IN SUCH CIRCUMSTANCES, ADVANCES RECEIVED FROM THESE TWO PERSONS CANNOT BE THE INCOME OF ASSE SSEE TILL ALLOTMENT OF FLAT IN A COMPLETE PROJECT. 5. SIMILARLY, AS REGARDS TO THE WORK-IN-PROGRESS IN RESPECT TO BLOCK D, THE AO HAS ESTIMATED 15% OF COST OF CONSTRUCTION EXPENDITURE ON BLOCK D AND ACCORDING TO AO, THEY SHOULD NOT HAVE BEEN CLAIMED BY THE ASSESSEE IN ITS ACCOUNT FOR THE REASON THAT NO REVENUE/INCOME IS DISCLOSED FROM THIS BLOCK D. WE FIND THAT THE ASSESSEE HAS ALREADY DISCLOSED GROSS RECEIPT UNDER PROJECT COMPLETION METHOD AND T HIS PRACTICE IS FOLLOWING CONSISTENTLY FROM 4 ITA NO.1421/K/2010 & CO 108/K/2010 THE ECONOMIC STRUCTURES AY: 2006-07 AY 2001-02 AND TILL THIS AY I.E. 2006-07. THE RELE VANT DETAILS OF INCOME DISCLOSED ARE AS UNDER: ASSTT. YEAR GROSS RECEIPT NET PROFIT 2001-02 24,45,883/- 2,71,255/- 2002-03 35,15,125/- 3,65,762/- 2003-04 38,86,120/- 4,05,236/- 2004-05 37,35,850/- 4,05,399/- 2005-06 35,20,000/- 3,94,125/- 2006-07 82,75,000/- 7,83,135/- TOTAL : 2,56,87,158/- 26,25, 312/- 10.2% THE ACCOUNTS SHOWS THAT THE ASSESSEE IS FOLLOWING P ROJECT COMPLETION METHOD AND DISCLOSING PROFIT MORE THAN 10% OR ABOUT 10%, EVEN IN ASSESSME NT COMPLETED U/S. 143(3) OF THE ACT FOR AY 2002-03, WHEREIN THIS SYSTEM OF ASSESSEE IS ACCE PTED BY REVENUE. WE FIND THAT NO DISALLOWANCE CAN BE MADE QUA THE EXPENSES OF BLOCK D AND PARTICULARLY WHEN THE AO COULD NOT FIND BIFURCATION. WE ARE NOT AWARE AND THERE IS NO BASIS IN THE ASSESSMENT ORDER FOR MAKING SUCH ESTIMATE FOR DISALLOWANCE OF THESE EXPENSES. IN OUR VIEW, THERE CANNOT BE ANY DISALLOWANCE BY ESTIMATING, IN CASE, WHERE THE ASSE SSEE IS FOLLOWING PROJECT COMPLETION METHOD. IN SUCH CIRCUMSTANCES, THESE TWO INTER-CON NECTED ISSUE OF REVENUES APPEAL ARE DISMISSED. APPEAL OF REVENUE IS DISMISSED. 6. COMING TO THE CROSS OBJECTION OF ASSESSEE. THE ONLY ISSUE IN THIS CROSS OBJECTION OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE MADE U/S. 40(A))(IA) OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUN D NO. 2: FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE AD DITION OF RS.13,16,900/- WHEN THE PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLICABLE AND EVEN OTHERWISE THE ADDITION WAS NOT JUSTIFIED. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO NOTED THAT THE ASSESSEE HAS MAD E PAYMENT RELATING TO LABOUR EXPENSES TO THE FOLLOWING PERSONS: I) LABANYA ELECTIC RS.1,60,000/- II) PADMASON HALDER RS. 71,900/- III) KHELOPROSAD SHAW RS.10,85,000/- THESE PAYMENTS, ACCORDING TO ASSESSEE, IS WITHOUT D EDUCTION OF TDS U/S. 194C(2) AND AS THE ASSESSEE FAILED TO DEDUCT TDS, THESE EXPENSES WERE DISALLOWED BY THE AO BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. THE AO HAS NOT DISCLOSED ANYTHING AS TO WHY HE HAS 5 ITA NO.1421/K/2010 & CO 108/K/2010 THE ECONOMIC STRUCTURES AY: 2006-07 DISALLOWED, WHETHER THIS IS A LABOUR PAYMENT OR PAY MENT FOR MATERIAL. FURTHER, THE CONTENTION OF THE ASSESSEES COUNSEL NOW BEFORE US IS THAT THI S SHOULD BE DECIDED ON THE BASIS WHETHER THE PAYEE HAS INCLUDED THE LABOUR CHARGES RECEIVED BY T HEM IN THEIR RETURN OF INCOME OR NOT, THIS ALSO NEEDS VERIFICATION. EVEN THE CIT(A) HAS NOT A DJUDICATED THE ISSUE BY A SPEAKING ORDER. IN SUCH CIRCUMSTANCES, WE SET ASIDE THIS ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED AN D CROSS OBJECTION OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. ORDER PRONOUNCED IN THE OPEN COURT ON 26.04.2013 SD/- SD/- . . . . . . . . , ' ' ' ' #!' #!' #!' #!' , (N. S. SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( . . . .) )) ) DATED : 26TH APRIL, 2013 /0 #12 #3 JD.(SR.P.S.) 6 ITA NO.1421/K/2010 & CO 108/K/2010 THE ECONOMIC STRUCTURES AY: 2006-07 - 4 +##5 65&7- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT ITO, WARD-50(4), KOLKATA . 2 +,)* / RESPONDENT THE ECONOMIC STRUCTURES, 66, DUM DUM ROAD, KOLKATA-700 074. 3 . #- ( )/ THE CIT(A), KOLKATA 4. 5. #- / CIT KOLKATA 5 <#= +# / DR, KOLKATA BENCHES, KOLKATA ,5 +#/ TRUE COPY, ->/ BY ORDER, ' !2 /ASSTT. REGISTRAR .