Dy.CIT, Central Circle-2, Hyderabad V. M/s Omega Shelters Privsate Limited, Hyderabad

ITA 154/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69746 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV DAVE
• Assessee Lawyers: K GNANAPRAKASH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.154/HYD/2013 ASSESSMENT YEAR 2009-10. DY. CIT, CENT. CIR.-2, -V- M /S.OMEGA SHELTERS PVT. LTD., HYDERABAD. HYDERABAD. PAN: AAACO8221A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJIV DAVE RESPONDENT BY : SRI K. GNANA PRAKASH DATE OF HEARING : 19-8-2013 DATE OF PRONOUNCEMENT: 19-8-2 013 ORDER PER SAKTIJIT DEY, J.M: THIS APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGA INST THE ORDER DATED 29-11-2012 OF CIT (A)-I, HYDERABAD PASSED IN ITA NO.0256/CC-2,HYD/CIT(A)-I/11-12 PERTAINING TO ASSES SMENT YEAR 2009-10. 2. THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS BEFORE US:- 1. THE ORDER OF THE CIT (A) IS ERRONEOUS BOTH ON FACTS AND ON LAW. 2. THE CIT (A) IS NOT JUSTIFIED IN DELETING THE ADD ITION WHICH HAS BEEN MADE BY FOLLOWING THE ACCOUNTING ITA NO.154 OF 2013 OMEGA SHELTORS, HYDERABAD. 2 STANDARDS PRESCRIBED BY ICAI REGARDING RECOGNITION OF REVENUE. 3. THE ORDER OF THE CIT (A) IS ERRONEOUS AS THE ASSESSEE COMPANY IS ALLOWED TO POSTPONE THE TAX LIABILITY BY RECOGNISING ITS OWN METHOD THOUGH FOLLOWED CONSISTENTLY. 4. THE CIT (A) ERRED IN STATING THAT THE SEARCH ASSESSMENT HAS TO BE RESTRICTED ONLY TO THE SEIZED MATERIAL WHICH IS AGAINST THE AP HIGH COURTS DECISION IN THE CASE OF AHURA HOLDINGS PVT. LTD. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE A PRIVATE LIMIT ED COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND CONSTRUCTION. FOR THE IMPUGNED ASSESSMENT YEAR, TH E ASSESSEE FILED ITS RETURN OF INCOME ON 30-9-2009 DECLARING LOSS OF 1,09,31,190/-. DURING SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER NOTICED THAT THE ASSESSEE HAD NOT RECOGNISED ANY IN COME IN RESPECT OF ANY OF ITS PROJECTS FOR THE ASSESSMENT YEAR UNDE R DISPUTE. WHEN THE ASSESSING OFFICER RAISED QUERY IN THIS RESPECT, THE ASSESSEE SUBMITTED THAT REVENUE IS RECOGNISED WHEN ALL SIGNI FICANT RISKS AND REWARDS OF OWNERSHIP OF RESIDENTIAL PROPERTIES AR E TRANSFERRED, IT IS PROBABLE THAT ECONOMIC BENEFITS ASSOCIATED WITH THE TRANSACTION WILL FLOW TO THE ENTERPRISE AND THE AMOUNT OF REVENUE CA N BE MEASURED RELIABLY. IT WAS SUBMITTED THAT IN CASE THE COMPANY IS OBLIGED TO PERFORM ANY SUBSTANTIAL ACT AFTER TRANSFER OF ALL S IGNIFICANT RISKS AND REWARDS OF OWNERSHIP, REVENUE FROM SALE OF RESIDENT IAL PROPERTIES IS ITA NO.154 OF 2013 OMEGA SHELTORS, HYDERABAD. 3 RECOGNISED ON PROPORTIONATE BASIS BY APPLYING THE P ERCENTAGE OF COMPLETION METHOD. THE PERCENTAGE OF COMPLETION IS DETERMINED WITH REFERENCE TO THE COSTS INCURRED TO DATE TO THE TOTAL ESTIMATED COSTS; PROVIDED THE COMPANY HAS ACHIEVED 30% PROJEC TED COST AND SOLD 30% OF TOTAL NUMBER OF UNITS AND ALL ANTICIPAT ED FUTURE LOSSES ARE FULLY PROVIDED FOR. IT WAS SUBMITTED THAT THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE AFORESAID ACCOUNTING POL ICY OF REVENUE RECOGNITION. IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE IT HAS NOT ACHIEVED THRESHOLD LIMIT AS PER ITS ACCOUNTING POLI CY OF ACHIEVING 30% OF THE PROJECTED COST, NO REVENUE WAS RECOGNISE D DURING THE YEAR. THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT IN THE IMMEDIATELY PRECEDING ASSESSMEN T YEARS 2007-08 AND 2008-09, THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT BY ADOPTING DIFFERENT ACCOUNTING POLICIES OTHER THAN W HAT WAS FOLLOWED BY THE COMPANY WERE NOT APPROVED BY THE CIT (A) WHO ACCEPTED THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND W HEN THE DEPARTMENT WENT IN APPEAL BEFORE THE INCOME-TAX AP PELLATE TRIBUNAL AGAINST THE ORDER OF CIT (A), THE INCOME -TAX APPELLATE TRIBUNAL ALSO UPHELD THE ORDER OF THE CIT (A) BY OB SERVING THAT THE ACCOUNTING POLICY CONSISTENTLY FOLLOWED BY THE ASSE SSEE IS TO BE ACCEPTED. 4. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT TH E CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE DEPARTMENT HA S PREFERRED AN APPEAL AGAINST THE ORDER OF THE INCOME-TAX APPELLAT E TRIBUNAL FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 BEFORE THE HONBLE A.P. HIGH COURT. THE ASSESSING OFFICER THEREFORE PROCEE DED TO FRAME THE ASSESSMENT BY REPRODUCING THE FINDING MADE BY THE A SSESSING OFFICER IN THE ASSESSMENT ORDERS PASSED FOR ASSESSM ENT YEARS 2007- 08 AND 2008-09 AND COMPLETED THE ASSESSMENT ACCORDI NGLY BY ITA NO.154 OF 2013 OMEGA SHELTORS, HYDERABAD. 4 DETERMINING INCOME FOR THE IMPUGNED ASSESSMENT YEAR AT RS.7,87,86,926/-. BEING AGGRIEVED OF THE AFORESAI D ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A). 5. THE CIT (A) HAVING FOUND THAT THE ASSESSMENT OR DER PASSED FOR THE ASSESSMENT YEAR 2007-08 AND 2008-09 ON IDEN TICAL MANNER WAS STRUCK DOWN BY THE CIT (A) AND THE DEPARTMENTS APPEAL TO THE INCOME-TAX APPELLATE TRIBUNAL AGAINST THE ORDER OF CIT (A) WAS ALSO DISMISSED, ALLOWED THE APPEAL OF THE ASSESSEE BY HO LDING AS UNDER:- ON A CONSIDERATION OF FACTS OF THE PRESENT ASSESSME NT YEAR 2009- 10, IT IS SEEN THAT EVEN IN THIS YEAR THE ADDITION IS NOT BASED ON ANY SEIZED MATERIAL BUT ONLY ON THE OPINION OF THE ASS ESSING OFFICER THAT THE ACCOUNTING METHOD FOLLOWED BY THE APPELLAN T IS NOT CORRECT. HOWEVER, IT IS SEEN THAT EVEN IN THIS YEA R THE ASSESSING OFFICER DEMONSTRATED AS TO HOW THE SAID METHOD HAS RESULTED IN UNDER-ESTIMATION OF PROFITS FOR THE YEAR. ON THE O THER HAND, IT CANNOT BE DISPUTED THAT THE APPELLANT HAS BEEN CONS ISTENTLY FOLLOWING SUCH METHOD FOR PAST SEVERAL YEARS AND TH E ACCOUNTING METHOD SO FOLLOWED HAS BEEN HELD AS NOT BEING UNREA SONABLE BY THE HONBLE JURISDICTIONAL INCOME-TAX APPELLATE TRIBUNA L. RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE INCOME-TAX APPELLAT E TRIBUNAL AND THE PRINCIPLE LAID DOWN IN THE DECISIONS LIKE RADHA SOAMI SATSANGT VS. CIT (193 ITR 321), CIT VS. NEO POLY PACK PVT. LTD (245 ITR 492), IT IS TO BE HELD THAT THE ADDITIONS MADE BY T HE ASSESSING OFFICER BY SIMPLY REJECTING THE METHOD OF ACCOUNTIN G SO FOLLOWED CANNOT BE SUSTAINED. DELETING THE ADDITION OF RS.8 ,97,26,116/- MADE ON ACCOUNT OF ESTIMATION OF PROFIT BY THE ASSE SSING OFFICER, THEREFORE, THE GROUNDS RAISED IN THIS APPEAL ARE DE CIDED IN FAVOUR OF THE APPELLANT. 6 . THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSES SEE AT THE OUTSET SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF INCOME-TAX APPELLATE TRIBUNAL IN ASSESSEES OWN CASE IN ITA ITA NO.154 OF 2013 OMEGA SHELTORS, HYDERABAD. 5 NOS. 798 AND 799/HYD/2010 DATED 18-2-2011 FOR ASSES SMENT YEARS 2007-08 AND 2008-09. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO AGR EES TO SUCH CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIAL ON RECORD. FROM THE ASSESSMENT ORDER, IT IS VERY MUCH CLEAR THAT IDENTICAL ISSUE AROSE IN CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2007-08 AND 2008-09. IT IS VE RY MUCH CLEAR FROM THE OBSERVATION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT HE ACCEPTS THE FACT THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL, HOWEVER, HE HAS DE CIDED NOT TO FOLLOW THE ORDER OF THE TRIBUNAL AS THE DEPARTMENT HAS PREFERRED AN APPEAL BEFORE THE HIGH COURT OF ANDHRA PRADESH. IN OUR VIEW, SUCH ATTITUDE ON THE PART OF THE ASSESSING OFFICER CANNO T BE APPRECIATED. UNLESS THE ORDER OF THE TRIBUNAL IS SET ASIDE OR RE VERSED BY A HIGHER COURT, THE ASSESSING OFFICER IS BOUND TO FOLLOW IT. MERELY BECAUSE AN APPEAL IS FILED BEFORE THE HIGH COURT BY THE DEPART MENT, IT CANNOT BE A GROUND FOR NOT FOLLOWING THE ORDER OF THE TRIBUNA L WHICH IS BINDING ON THE ASSESSING OFFICER WHEN THE ISSUE IN DISPUTE IS IDENTICAL. BE THAT AS IT MAY, ON PERUSAL OF THE ORDER PASSED BY T HE CO-ORDINATE BENCH IN CASE OF DCIT VS. M/S OMEGA SHELTERS PVT. L TD. (ITA NOS. 798 AND 799/HYD/2010 DATED 18-2-2011 PERTAINING TO ASSESSMENT YEARS 2007-08 AND 2008-09, IT IS TO BE SEEN THAT WH ILE CONSIDERING IDENTICAL ISSUE OF ACCOUNTING POLICY OF REVENUE REC OGNITION BEING CONSISTENTLY FOLLOWED BY THE ASSESSEE, THE CO-ORDIN ATE BENCH HELD AS UNDER:- WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PA RTIES AND PERUSED ITA NO.154 OF 2013 OMEGA SHELTORS, HYDERABAD. 6 THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. THE ASSESSING OFFICER IN HIS REPORT TO THE CIT (A) CLEARLY MENTIONED THAT THE ASSESSMENT WAS NOT BASED ON THE SEIZED MATERIAL BUT, IT IS BASED ON ONLY ON WRONG ACCOUNTING STANDARDS FOLLOWED BY THE ASSESSEE COMPANY IN RECOGNIZING THE REVENUE AND HENCE, THE O NLY ISSUE IS TO BE ADJUDICATED UPON IN THIS APPEAL IS WHETHER THE ASSE SSING OFFICER IS RIGHT IN REJECTING THE ACCOUNTING METHOD REGULARLY EMPLOY ED BY THE ASSESSEE AND SUBSTITUTING THE SAME WITH ACCOUNTING METHOD AS PER AS-7 AND COMPUTATION OF PROFIT BASED ON THE SAME. THE ASSESS EE CONTENDS THAT THE METHOD OF ACCOUNTING FOR RECOGNITION OF REVENUE IS REGULARLY EMPLOYED BY THE ASSESSEE AND OTHER GROUP COMPANIES AND TO THIS EFFECT THE ASSESSEE HAD FILED COPIES OF THE STATEME NT OF ACCOUNTS OF SOME OF THE GROUP COMPANIES WHERE ASSESSMENTS WERE COMPLETED UNDER SECTION 143(3) OF THE ACT BY THE ASSESSING OF FICERS. THE CATEGORICAL FINDING OF THE CIT (A) IS THAT THE ASSE SSING OFFICER SIMPLY BY REJECTING THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS NOT PROPER SINCE ASSESSMENTS HAVE BEEN COMPLETED IN OTH ER GROUP CASES BASED ON THE SAME ACCOUNTING METHOD. WE FIND FORCE IN THE FINDING OF THE CIT (A) FOR THE REASON THAT SINCE THE ASSESSING OFFICER REJECTED THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE BUT H E ACCEPTED THE SAME METHOD OF ACCOUNTING FOLLOWED BY GROUP COMPANI ES OF THE ASSESSEE, WHICH IS CONTRARY AS PER LAW. THE ASSESSI NG OFFICER HAS NOT GIVEN A CLEAR FINDING MANDATED UNDER SECTION 145(3) OF THE ACT AND YET RE-COMPUTED THE PROFIT FROM THE PROJECTS DONE BY TH E ASSESSEE COMPANY. THE ADDITIONS MADE BY THE ASSESSING OFFICE R ARE NOT SUPPORTED BY ANY FACTS AND FIGURES WHICH CAN DEMONS TRATE THAT THE IMPUGNED METHOD OF ACCOUNTING POLICY ADOPTED BY THE ASSESSEE COMPANY RESULTED IN UNDER ESTIMATION OF PROFIT. ALT HOUGH THE ASSESSING OFFICER DISCUSSED IN DETAIL ABOUT THE ACCOUNTING AS PECTS IN HIS ORDER, HOWEVER NO CONCLUSION HAS BEEN REACHED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS TAKEN ESTIMATED REVENUE FROM THE PROJECTS WITHOUT CONSIDERING THE FACT THAT WHETHER THE UNITS ARE SOL D OR NOT. IN OTHER WORDS, PROFIT IS BEING ESTIMATED ON UNSOLD STOCK ALSO. WE FIND THAT PRE-REVISED AS-7 ISSUED BY THE ICAI IN THE YEAR 1983 SPECIFICAL LY INCLUDED COMPANIES UNDERTAKING CONSTRUCTION ACTIVITIES ON THEIR OWN, B UILDERS AND DEVELOPERS. AS PER REVISED AS-7 IN THE YEAR 2002, SUCH SPECIFIC INCLUSION WAS MISSING. HENCE, IN OUR CONSIDERED OPINION, AS-7 DOES NOT APP LY TO THE BUILDERS AND REAL ESTATE DEVELOPERS. THE METHOD FOLLOWED BY THE ASSESSEE COMPANY CANNOT BE CALLED AS AN UNREASONABLE METHOD AND ANY CHANGE IN THE METHOD WOULD ONLY BE TAX NEUTRAL. THEREFORE, WE FIN D NO INFIRMITY IN THE ORDER OF THE CIT (A) AS THE SAME HAS BEEN PASSED BY THE CIT (A) AFTER ANALYZING AND EXAMINING THE ISSUE ELABORATELY. ACCO RDINGLY WE CONFIRM THE ORDER OF THE CIT (A) AND DISMISS THE GROUNDS RAISED FOR BOTH THE YEARS BY THE REVENUE IN THIS REGARD . ITA NO.154 OF 2013 OMEGA SHELTORS, HYDERABAD. 7 9. WE FIND THAT THE FACTS INVOLVED IN THE PRESENT APPEAL ARE ALSO IDENTICAL TO THE FACTS CONSIDERED BY THE CO-ORDINAT E BENCH IN THE AFORESAID APPEALS OF THE SAME ASSESSEE. THE LEARNE D DEPARTMENTAL REPRESENTATIVE HAS NOT BROUGHT TO OUR NOTICE ANY OT HER DISTINGUISHING FEATURE TO TAKE A DIFFERENT VIEW IN THIS MATTER. THEREFORE RESPECTFULLY FOLLOWING THE AFORESAID DECI SION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF THE SAME ASSES SEE FOR THE PRECEDING ASSESSMENT YEARS, WE UPHOLD THE ORDER OF THE CIT (A) AND DISMISS THE GROUND RAISED BY THE DEPARTMENT. 10. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 19 -8-2013. SD/- ( CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 19 TH AUGUST, 2013 COPY TO:- 1) DCIT, CENTRAL CIR-2, 7 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2) M/S OMEGA SHELTERS PVT. LTD., INRHYTHM BUILDING, 1 ST FLOOR, PLOT NO.1023, GURUKUL SOCIETY, KHANAMET VILLAGE, NE W MERIDIAN SCHOOL, MADHAPUR, HYDERABAD. 3) CIT(A) I,, HYDERABAD. 4) CIT CONCERNED, HYDERABAD. 5.THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERA BAD. JMR*