DAS PATEL LAND DEVELOPERS P. LTD, MUMBAI V. ITO 8(1)(3), MUMBAI

ITA 1503/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8978 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 25-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: SHIR K K LALKAKA
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1503/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. DAS PATEL LAND DEVELOPERS P. LTD. INCOME TAX O FFICER - 8(1)(3) F/9, SARDAR PATEL SOCIETY AAYAKAR BHAVAN, M.K. ROAD NEHRU ROAD, VILE PARLE (E) VS. MUMBAI 400020 MUMBAI 400 093 PAN - AAACD 5993 M APPELLANT RESPONDENT APPELLANT BY: SHIR K.K. LALKAKA RESPONDENT BY: SHRI JITENDRA YADAV O R D E R PER B. RAMAKOTAIAH, A.M. 2. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XVI, MUMBAI DATED 01.12.2009. ASSESSEE HAS RAISED SIX GR OUND ON THE ISSUE OF ESTIMATION OF INCOME. 3. ASSESSEE IS IN THE BUSINESS OF BUILDERS AND DEVELOP ERS AND FILED RETURN OF INCOME DECLARING INCOME AT ` 1,36,358/-. ASSESSEE, IN RESPONSE TO VARIOUS NOTICES ISSUED, FILED DETAILS VIDE LETTERS DATED 15 .06.2008 AND 25.08.2008, WHICH WAS ACKNOWLEDGED BY THE A.O. IN THE ASSESSMEN T ORDER. HOWEVER, ON 07.11.2008 THE ASSESSEE WAS ASKED TO FURNISH COMPLE TE DETAILS OF THE PROJECT LIKE TOTAL AREA TO BE CONSTRUCTED, NUMBER OF FLATS, AREA CONSTRUCTED SO FAR, AREA SOLD SO FAR, PLAN FURNISHED TO MUNICIPAL AUTHO RITIES, ARCHITECT CERTIFICATE FOR WORK-IN-PROGRESS, DETAILS OF ADVANCE RECEIVED L IKE NAME AND ADDRESS ALONG WITH COPY OF ALLOTMENT LETTER, DETAILS OF SUN DRY CREDITORS, ETC. FOR THESE DETAILS THE CASE WAS ADJOURNED TO 18.11.2008. SINCE NONE APPEARED ON THE APPOINTED DATE THE A.O. COMPLETED THE ASSESSMENT VI DE ORDER DATED 26.12.2008. IN COMPLETING THE ORDER EXPARTE UNDER S ECTION 144 THE A.O. TOOK THE ENTIRE STOCK ON 31.03.2006 AND SALE VALUE AT ` 2000/- PER SQ.FT. AND WORKED OUT THE TOTAL SALE AT ` 2.67 CRORES AND ESTIMATED THE PROFIT AT 12% OF THE SALES THEREBY DETERMINING THE BUSINESS PROFIT AT ` 31,58,400/-. ASSESSEE ITA NO. 1503/MUM/2010 M/S. DAS PATEL LAND DEVELOPERS P. LTD. 2 CARRIED THE MATTER TO THE CIT(A) WITH THE SUBMISSIO N THAT ASSESSEE HAS BEEN FILING RETURN IN EARLIER YEARS AND OFFERING THE SAL ES IN EVERY YEAR AND EVENTHOUGH THE ASSESSEE HAS FURNISHED SUBSTANTIAL D ETAILS THE A.O. TOOK THE PRICE AT ` 2,000/- PER SQ.FT. AS AGAINST ` 565 TO 581 PER SQ.FT. AS PER AGREEMENT ENTERED INTO AND FURTHER THAT THE BOOKS O F ACCOUNT ARE AUDITED AND THE CLOSING STOCK WAS ALSO AVAILABLE AT ` 1.02 CRORES AND ASSESSING OFFICERS ACTION IN TREATING THE ENTIRE FLOOR SPACE AVAILABLE AS SALE IN THE YEAR WAS NOT CORRECT. THE ASSESSEE ALSO RELIED ON VARIOU S CASE LAWS ON ESTIMATION OF INCOME AND PROFITS THEREON. THE CIT(A), AFTER CO NSIDERING THE SUBMISSIONS, HOWEVER, WAS OF THE VIEW THAT THE PRIC E TAKEN AT ` 2,000/- WAS WRONG AND HE ADOPTED THE SALES RATE AT ` 596/- AND ON THE ENTIRE SPACE AVAILABLE DETERMINED THE SALE PRICE ` 78,43,360/- AS AGAINST ` 2.63 CORES ADOPTED BY THE A.O. AND DETERMINED THE INCOME AT 12 % OF THE SAME WHEREBY REDUCING THE ESTIMATION TO ` 9,41,203/- AS AGAINST ` 31,58,400/-. 4. THE LEARNED COUNSEL REFERRING TO THE ORDERS OF THE A.O. AND THE CIT(A) AND THE PAPER BOOK FILED IN THIS REGARD SUBMITTED T HAT THE ASSESSEE IS FOLLOWING THE PROJECT COMPLETION METHOD AND THE PRO JECT WAS COMPLETED THREE YEARS EARLIER TO THE IMPUGNED ASSESSMENT YEAR AND I N THE IMMEDIATELY PRECEDING ASSESSMENT YEAR THE ASSESSMENT WAS DONE U NDER SECTION 143(3) WHEREIN ASSESSEES INCOMES WERE ACCEPTED AS SUCH. T HE LEARNED COUNSEL ALSO REFERRED TO THE BALANCE SHEET AVAILABLE FOR EARLIER AND P & L ACCOUNT WHEREIN THE SALE OF FLATS IN THAT YEAR WAS AT ` 9,98,500/- AND THE WORK-IN- PROGRESS WERE SHOWN AT ` 94,91,760/-. IN THIS YEAR THE ASSESSEES CLOSING WORK-IN-PROGRESS WAS AT ` 1,02,08,030/-. THE LEARNED COUNSEL ALSO PLACED ON RECORD THE ACCOUNT COPIES OF THE LATER YEAR IN WHIC H ASSESSEE HAS ADMITTED THE SALE OF FLATS. IT WAS HIS SUBMISSION THAT THE A .O. ASKED THE DETAILS AND TREATED THE ENTIRE FLOOR SPACE AVAILABLE WITH THE A SSESSEE AS SOLD DURING THE YEAR WHEREAS THE FACTS INDICATE OTHERWISE AND ONLY 4 APARTMENTS WERE SOLD DURING THE YEAR, RECEIPTS OF WHICH WERE ACCOUNTED I N THE P & L ACCOUNT. IT WAS FURTHER HIS SUBMISSION THAT THE A.O. SHOULD NOT RESORT TO ESTIMATION OF INCOME ARBITRARILY. IN THE PREVIOUS YEAR ASSESSEES INCOME RETURNED WERE ACCEPTED IN THE SCRUTINY ASSESSMENT AND IN THE LATE R YEARS ASSESSEE HAS OFFERED SALES FROM THE SAID PROJECT. HE REFERRED TO THE VARIOUS DETAILS FILED IN ITA NO. 1503/MUM/2010 M/S. DAS PATEL LAND DEVELOPERS P. LTD. 3 THE PAPER BOOK WITH REFERENCE TO THE SALE OF APARTM ENTS SUBSEQUENTLY. IT WAS HIS SUBMISSION THAT THE A.O. AND THE CIT(A) HAVE ES TIMATED THE INCOME ON THE WORK-IN-PROGRESS ALSO AS SOLD AND WRONGLY ADOP TED THE G.P. ADDITION WITHOUT REJECTING THE BOOKS OF ACCOUNT JUST BECAUSE ASSESSEE DID NOT FURNISH CERTAIN DETAILS EVENTHOUGH MANY OF THE DETAILS RELE VANT FOR THE ASSESSMENT YEAR WERE FURNISHED EARLIER. ON ENQUIRY WHETHER THE ASSESSEE HAS FURNISHED THE DETAILS AS ASKED FOR EVEN BEFORE THE CIT(A), TH E LEARNED COUNSEL FAIRLY ADMITTED THAT THE DETAILS ASKED FOR HAS NOT BEEN PL ACED ON RECORD. 5. THE LEARNED D.R., HOWEVER, SUBMITTED THAT THE ASSES SEE HAS NOT COMPLIED WITH THE NOTICES ISSUED AND ACCORDINGLY TH E A.O. HAS NO OPTION BUT TO ESTIMATE THE INCOME. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. EVENTHOUGH THE ASSESSEE COMPLI ED WITH MANY OF THE NOTICES, THERE WAS NON-COMPLIANCE WITH THE LAST OF THE NOTICE. HOWEVER, BEFORE INVOKING THE PROVISIONS OF SECTION 144 THE A.O. HAS NOT FOLLOWED THE STATUTORY PROCEDURE OR AT LEAST ISSUED SHOW CAUSE NOTICE INFO RMING THE ASSESSEE THAT HE WOULD ESTIMATE THE PROFIT AS BEST JUDGEMENT ASSESSM ENT. AS NOTICED FROM THE ORDER ITSELF, THE A.O. ASKED FOR VARIOUS OTHER DETA ILS ON 07.11.2008 AND POSTED THE CASE ON 18.11.2008 GIVING 11 DAYS TIME TO THE A SSESSEE. HOWEVER, AFTER THAT NO NOTICE WAS ISSUED TILL 26 TH DECEMBER 2008, I.E. THE DATE OF THE ORDER. THERE IS NOTHING ON RECORD TO SHOW THE CIRCUMSTANCE S IN WHICH THE A.O. COULD RESORT TO SECTION 144. EVEN OTHERWISE WHILE DOING A SSESSMENT UNDER SECTION 144 THE LAW PRESCRIBES THAT IT SHOULD BE BASED ON B EST JUDGEMENT BUT SHOULD NOT BE BASED ON EXTRANEOUS FACTORS OR HIGH PITCHED AS WAS DONE IN THIS CASE BY THE A.O. AS SEEN FROM THE P & L ACCOUNT THE ASSE SSEE HAS SHOWN THE SALE VALUE OF ` 9,21,000/- BY WAY OF SALE OF FOUR APARTMENTS AND HA S CARRIED OVER THE CLOSING WIP AT ` 1.02 CRORES. THE OPENING WORK-IN-PROGRESS CARRIED O VER FROM EARLIER YEAR WAS TO THE TUNE OF ` 94.91 CRORES. ALL THESE FACTS ARE AVAILABLE ON RECORD. WE ARE UNABLE TO UNDERSTAND HOW THE A.O. CAN TAKE THE TOTAL STOCK ON 31.03.2006 AND DETERMINE THE SAME AS SOLD AT ` 2,000/- PER SQ.FT. AND ARRIVE AT THE BUSINESS PROFIT AT 12%, JUST BECAUSE THE ASSESSEE COULD NOT SUBSTANTIATE/FURNISH DETAILS AS CALLED FOR, WHICH H AS NO BEARING WITH THE BOOKS OF ACCOUNT MAINTAINED. WHAT THE AO ASKED WERE THE DETAILS OF PROJECT ITA NO. 1503/MUM/2010 M/S. DAS PATEL LAND DEVELOPERS P. LTD. 4 FROM THE INCEPTION AND PERMISSION FROM MUNICIPAL AU THORITIES, DETAILS OF WORK, WHICH MAY BE RELEVANT IN EXAMINING ASSESSEES PROJECT WORK BUT HAS NO RELEVANCE FOR EXAMINING THE VERACITY OF THE BOOKS O F ACCOUNT. STILL THE A.O. VIDE PARA 4.3 HAS REJECTED THE BOOKS OF ACCOUNT ON THIS PRECISE REASON THAT THE ASSESSEE HAS NOT FURNISHED NECESSARY DETAILS. W E ARE NOT IN A POSITION TO APPRECIATE THE ACTION OF THE A.O. IN REJECTING THE BOOKS OF ACCOUNT AND TAKING THE SALE PRICE OF THE ENTIRE STOCK AVAILABLE EVENTH OUGH THE ASSESSEES BOOKS OF ACCOUNT INDICATES THAT THERE WAS UNSOLD STOCK AT TH E END OF THE YEAR. 7. IT IS EVEN SURPRISING THAT THE LEARNED CIT(A) HAS O NLY REDUCED THE PRICE ON WHICH THE STOCK WAS TAKEN AS SOLD WITHOUT EXAMIN ING THE CONTENTIONS RAISED BY THE ASSESSEE THAT MOST OF THE STOCK WAS A VAILABLE AS OPENING STOCK AND CLOSING STOCK AFTER SALE OF FOUR FLATS, THE DET AILS OF WHICH WERE AVAILABLE IN PARA 4.1 OF THE ASSESSMENT ORDER ITSELF, THEREB Y CONFIRMING THE ADDITION MADE BY THE A.O. AS THE ORDERS OF THE A.O. AND THE CIT(A) ARE NOT BASED ON FACTS AND COULD NOT BE SUPPORTED EVEN ON THE LEGAL PRINCIPLES THE ORDERS ARE SET ASIDE. SINCE THE ASSESSEE HAS NOT FURNISHED CER TAIN DETAILS REQUIRED FOR VERIFICATION BEFORE THE A.O. AND AS THE ORDER FOR A .Y. 2005-06 AND STATEMENTS OF ACCOUNT OF EARLIER/LATER YEARS ARE NO T PLACED ON RECORD BEFORE THIS FORUM TO EXAMINE ABOUT THE VERACITY OF SCRUTIN Y ASSESSMENT DONE IN EARLIER YEAR AND PROJECT COMPLETION, WE ARE OF THE OPINION THAT THE ISSUE SHOULD BE RE-EXAMINED BY THE A.O. AFRESH BY GIVING DUE OPPORTUNITY TO THE ASSESSEE. THEREFORE, THE ASSESSMENT IS RESTORED BAC K TO THE FILE OF THE A.O. TO COMPLETE IT ACCORDING TO THE PROVISIONS OF LAW AFTE R EXAMINING THE FACTS AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. THE A .O. SHOULD ALSO KEEP IN MIND THE ORDERS OF THE EARLIER YEARS AND LATER YEAR S BEFORE COMPLETING THE ASSESSMENT. GROUNDS ARE TREATED AS ALLOWED. 8. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 11 TH JANUARY 2011 ITA NO. 1503/MUM/2010 M/S. DAS PATEL LAND DEVELOPERS P. LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XVI, MUMBAI 4. THE CIT VIII, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.