JET SPEED DEVELOPERS P. LTD, MUMBAI V. ITO 5(2)(2), MUMBAI

ITA 1425/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7616 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 20-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 22-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHASARTHI NAIK
• Keywords: Reassessment proceedings
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I BENCH BEFORE SHRI G.E.VEERABHADRAPPA, PRESIDENT AND SHRI VIVEK VARMA, JM ITA NO.1425/MUM/2010 : ASSESSMENT YEAR: 2004-05 M/S JET SPEED DEVELOPMENT PVT. LTD. C% M/S. P.V. MEHTA & CO., CHARTERED ACCOUNTANTS, 314, LOTUS HOUSE, 33-A, NEW MARINE LINES, MUMBAI 400020 PAN NO. AABCJ0059L VS. THE INCOME TAX OFFICERS 50(2)(2) AAYKAR BHAVAN, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : MR VIMAL PUNMIYA RESPONDENT BY : MR PARTHASARTHI NAIK DATE OF HEARING : 20.03.2012 DATE OF PRONOUNCEMENT : 28 .03.2012 ORDER PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSESS EE COMPANY AGAINST THE ORDER OF CIT(A) 9, MUMBAI , DATED 29/12/2009 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY FILED ITS RETURN OF INCOME DECLARING NIL INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. THE AO, THEREAF TER, ISSUED NOTICE UNDER SECTION 148 TO INITIATE REASSESSMENT PROCEEDINGS. NOTICES FOR ATTENDANCE WERE ISSUED, WHICH WENT UNCOMPLIED WITH AND THE AO PASSED THE ORDER OF ASSESSMENT UNDER SECTION 144. ITA NO.1425/MUM/2010 ASSESSMENT YEAR: 2004-05 2 3. AS PER THE FACTS MENTIONED IN TH E ASSESSMENT ORDER, THE COMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTIO N ACTIVITY. ACCORDING TO THE AO, THE ASSESSEE COMPANY RECEIVED RS. 4,26,86,677 AS ADVANCE DURING THE YEAR. HE, THEREFORE, REJECTED THE ASSESSEES METHOD OF PROJECT COMPLETION METHOD FOR MAINTAINING THE ACCOUNTS AND APPLIED 8% TO ASCERTAIN THE TAXABLE INCOME AND ADDED BACK RS. 34,14,934 AS INCOME FOR THE YEAR. 4. THE ASSESSEE CARRIED THE GRIEVAN CE BEFORE THE CIT(A), WHO ACCEPTED THE TOTAL ADVANCE RECEIVED UPTO THE END OF THE CURRENT YEAR AT RS. 3,81,35,000 AND NOT 4,26,86,677, AS CLARIFIED BY THE ASSESSEE TO BE THE CORRECT FIGURE OF ADVANCE RECEIVED, BUT WENT ON TO APPL Y 8% PROFIT ON THE ADVANCES, THEREBY REDUCING THE QUANTUM OF ADDITION MADE BY THE AO. 5. THE ASSESSEE, BEING NOT SATIS FIED, IS NOW BEFORE THE ITAT. 6. BEFORE US, THE AR OF THE ASSESSEE, REITERATED THE FACTS WHICH WERE SUBMITTED IN THE BEFORE THE CIT(A) AND WHICH HAVE BEEN INCORPORATED IN THE ORDER OF THE CIT(A), I.E. THE PROJECTS STATED BY THE ASSESSEE COMPANY ARE AT A STANDSTILL AS MANY OF ITS INITIAL / CURRE NT OCCUPANTS HAD FILES SUITS EITHER AGAINST THE MANAGEMENT OR AGAINST TH E ASSESSEE. THE AR OF THE ASSESSEE COMPANY BROUGHT TO OUR NOTICE THAT TH E ADVANCES RECEIVED BY THE ASSESSEE WERE WAY BACK IN 1997 98, WHEN TH E ASSESSEE COMPANY GOT ITSELF INVOLVED IN THE EXTENSION OF THE PR OJECTS, AS MENTIONED IN TH E ORDERS OF THE REVENUE AUTHORITIES. IT IS EVIDENT FROM THE ORDER OF THE CIT(A) THAT THE ADVANCES OF RS. 3,81,35,000 (NOT RS. 4, 26,86,677) WERE RECEIVED IN SOME EARLIER YEAR, ITA NO.1425/MUM/2010 ASSESSMENT YEAR: 2004-05 3 BECAUSE NOWHERE DOES THE CIT(A) HOLDS OR CLARIFIES THAT THE ADVANCES RECEIVED BY THE ASSESSEE COMPANY WERE DURING THE CURRENT YEAR. 7. THE AR POINTED OUT THAT IMMEDIAT ELY PRECEDING YEAR ALSO WAS TAKEN UP FOR SCRUTINY BY THE DEPARTMENT AND WHILE PASSING THE ORDER U/S 143(3), THE AO HAD ACCEPTED THE PROJECT COMPLETION METHOD. 8. THE AR, FURTHER SUBMITTED THAT IF AT ALL THE DEPARTMENT WANTS TO DEVIATE FROM THE EXISTING METHOD AND COMPUTE THE INCOME ON PERCENTAGE COMPLETION METHOD THEN IN THAT CASE TH E AO MUST TAKE 8% OF RS. 15,000, WHICH HAS BEEN ACTUALLY RECEIVED BY THE ASSESSEE COMPANY DURING THE YEAR. 9. WE HAVE HEARD BOTH THE SIDES A ND WE HOLD THAT INCOME HAS TO BE DETERMINED ON CONTINUITY AND BY KEEPI NG TRACK OF THE BOOKS MAINTAINED AND METHOD REGULARLY FOLLOWED BY THE ASSESS EE AND ALSO KEEPING IN MIND AS TO HOW THE DEPARTMENT BEEN TREATING THE METHOD, DECLARED BY THE ASSESSEE. WE FIND THAT IN THE IMMEDIATE PRECEDING YEAR THE AO HAS NOT DISTURBED THE METHOD OF ACCOUNTING / VALUATION ADOPTED BY THE ASSESSEE. IN THE LIGHT OF THIS, THE JUSTICE SHALL ONLY PREVAIL IF THE MATTE R IS SENT BACK TO THE FILE OF THE AO WITH THE DIRECTION THAT THE INCOME FOR THE CURRENT YEAR BE DETERMINED KEEPING IN VIEW THE HISTORY OF ASSESSMENT PR OCEEDINGS AND THE METHOD ADOPTED BY THE ASSESSEE. IF THE ASSESSEE HAS BEEN FOLLOWING PROJECT COMPLETION METHOD, THE SAME METHOD BE FOLLOWED FOR FRA MING THE ASSESSMENT FOR THE CURRENT YEAR AS WELL AND INCOME BE DETERMINED ACCORDINGLY. ITA NO.1425/MUM/2010 ASSESSMENT YEAR: 2004-05 4 10. THE ORDERS OF THE REVENUE AUTHORITIE S ARE THEREFORE, SET ASIDE, WITH THE DIRECTIONS TO THE AO AS PER PRECEDING PA RA, I.E. ASSESSMENT TO BE FRAMED DE NOVO AND AFTER AFFORDING PROPER AND REAS ONABLE OPPORTUNITY TO THE ASSESSEE. 11. THE APPEAL OF THE ASSESSEE IS, T HUS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH, 2012 SD/- (G.E.VEERABHADRAPPA) PRESIDENT SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATED : 28 TH MARCH, 2012 RASIKA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS), IX, MUMBAI 4. COMMISSIONER OF IN COME TAX CONCERNED 5. DEPARTMENTAL REPRESENTATIVE, BENCH I MUMBAI 6. GUARD FILE //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI