DCIT CIRCLE12(1)(1), MUMBAI V. M/S ABODE BUILDERS & DEVELOPERS PVT. LIMITED, MUMBAI

ITA 1679/MUM/2019

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9972 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 20-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALD
• Assessee Lawyers: VIJAY MEHTA SUHANI VASAVADA
• Keywords: Set aside
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI RAJESH KUMAR (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 1679/MUM/2019 ASSESSMENT Y EAR: 2010 - 11 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(1)(1), ROOM NO. 223, 2 ND FLOOR, AAYA KAR BHAVAN, CHURCHGATE, MUMBAI - 400020 VS. M/S ABODE BUILDERS & DEVELOPERS PVT. LIMITED, 114A, VEENA BEEN SHOPPING CENTRE, GURU NANAK ROAD, BANDRA (W), MUMBAI - 400050 PAN: AADCA2191C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI MICHAEL JERALD (D R) ASSESSEE BY : SHRI VIJAY MEHTA /SUHANI VASAVADA ( A R S ) DATE OF HEARING: 25/09 /2020 DATE OF PRONOUNCEMENT: 03 / 12 /2020 O R D E R PER RAM LAL NEGI, JM THE REVENUE HAS FILED THE PRESENT APP EAL AGAINST THE ORDER DATED 28.12.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 20 (FOR SHORT THE CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT(A) HAS PARTLY ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY CARRYING ON THE BUSINESS AS BUILDERS AND DEVELOPERS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON DECLA RING TOTAL LOSS AT RS. 79,068/ - THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT. T HE CASE WAS SELECTED FOR SCRUTINY AND THE AO PASSED ASSESSMENT ORDER U/S 143 (3) OF THE ACT DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 5,14,93,220/ - . THE AO MADE ADDITION OF RS. 2 ITA NO. 1679 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 5,12,64,274/ - ON ACCOUNT OF PROFIT FROM PROJECT , COMPUTED ON THE BASIS OF PERCENTAGE COMPLETION METHOD REJECTING THE PROJECT COMPLETION METHOD FOLLOWED BY THE ASSESSEE , ADDITION OF RS. 72,782/ - UNDER THE HEAD INCOME FROM OTHER SOURCES AND ADDITION OF RS. 1,56,192/ - UNDER THE HEAD INCOME FROM MAINTENANCE AND OTHER CHARGES . THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE . AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE DEPARTMENT IS IN APPEAL BEFORE THIS TRIBUNAL. 3 . THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS : - I) . WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE AO DID NOT HAVE JURISDICTION TO MAKE ADJUSTMENT TO WIP WITHOUT APPRECIATING THE FACT THAT DURING THE YEAR THERE WAS NO ADJUSTMENT TO THE WIP AND ONLY THE ADJUSTED WIP OF EARLIER YEARS HAS BEEN CONS IDERED FOR DETERMINING THE PROFITS FROM THE BUSINESS FOR THE YEAR. II). WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DIRECTING TO EXCLUDE THE PROFITS CONSIDERED IN EARLIER YEARS ON THE BASIS OF PERCENTAGE C OMPLETION METHOD IGNORING THE FACT THAT THE PERCENTAGE COMPLETION METHOD FOR RECOGNITION OF THE PROFITS HAVE NOT BEEN ACCEPTED BY THE ASSESSE AND THE MATTER IS PENDING BEFORE THE ITAT FOR ADJUDICATION. 4. T HE REVENUE HAS CHALLENGED THE ACTION OF THE LD . CIT (A) , IN HOLDING THAT THE AO HAD NO JURISDICTION TO MAKE ADJUSTMENT TO WORK IN PROGRESS (WIP) WITHOUT APPRECIATING THE FACT THAT DURING THE YEAR UNDER CONSIDERATION THERE WAS NO ADJUSTMENT TO WIP THE ONLY ADJUSTED THE WIP OF EARLIER YEARS HAS BEEN CON SIDERED FOR DETERMINING THE PROFITS OF THE BUSINESS FOR THE YEAR. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED BEFORE US THAT DURING THE FINANCIAL YEAR 2000 - 01 THE ASSESSEE COMPANY HAD INCREAS ED ITS WIP BY RS. 1,63,36,933/ - ON ACCOUNT OF CLAIM IN TERM S OF CONSENT DECREE AND DURING THE FY 2003 - 04 WIP WAS INCREASED BY RS. 60,68,627/ - ON ACCOUNT OF INTEREST TO BANKS AS PER ORDER OF THE DEBT RECOVERY TRIBUNAL (DRT). THE AO REDUCED THE SAID 3 ITA NO. 1679 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 AMOUNTS HOLDING THAT THESE EXPENSES CANNOT BE INCLUDED IN WIP AS T HE SAME DO NOT INCREASE THE VALUE OF WIP. THE LD. DR FURTHER SUBMITTED THAT SINCE THE AFORE SAID DECREE AND INTEREST RATE ARE PENAL IN NATURE AND HAVE BEEN CHARGED FROM THE ASSESSEE COMPANY FOR FAILURE TO COMPLETE ITS COMMITMENTS , THE AO HAD RIGHTLY DISALLO WED THE SAME. HENCE, THE LD. CIT(A) HAS WRONGLY HELD THAT THE AO HAD NO JURISDICTION TO DISALLOW THOSE ADDITION TO WIP IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 5. ON THE OTHER HAND , THE LD. COUNSEL FOR THE ASSESSEE SUPPORTING THE ORDER PASSED BY THE LD. CIT (A) SUBMITTED THAT SINCE THE ADDITION OF RS. 1,63,36,993/ - WAS MADE IN THE FY 2000 - 01 AND THE ADDITION OF RS. 60,68,627/ - WAS MADE IN THE FY 2003 - 04, THE LD. CIT (A) HAS RIGHTLY SET ASIDE THE FINDINGS OF THE AO. THE LD. COUNSEL FURTHER POINTED OUT THAT THE ITAT MUMBAI HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSEES CASE FOR THE ASSESSMENT YEAR 2012 - 13. SINCE THE FINDINGS OF THE LD. CIT(A) ARE IN ACCORDANCE WITH THE FINDINGS OF THE JURISDICTIONAL TRIBUNAL, THERE IS NO INFIRMI TY IN THE ORDER OF THE LD. CIT (A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE COMMON ORDER DATED 06.06.2019 PASSED BY THE COORDINATE BENCH IN REVENUES APPEAL S ITA NO. 1274/MUM/2012 FOR AY 20 0 8 - 09 AND ITA NO. 2327/MUM/2018 FOR AY 2012 - 13 . THE LD. CIT (A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER: - 7.4.1 I HAVE CONSIDERED THE ORDER OF THE AO AND SUBMISSIONS MADE BY THE APPELLANT. I FIND FROM PARA 7.3 OF THE ASSESSME NT ORDER THAT THE ADDITIONS TO WIP WHICH HARE THE SUBJECT MATTER OF THIS APPEAL DO NOT RELATE TO THE RELEVANT PREVIOUS YEAR. THE AO HAS HIMSELF OBSERVED IN THE ORDER THAT THE ADDITION OF RS. 1,63,36,993/ - WAS MADE IN THE F.Y. 2000 - 01 AND THE ADDITION OF RS . 60,68,627/ - WAS MADE IN THE F.Y. 2003 - 04. THEREFORE, IN MY VIEW, THE AO DID NOT HAVE JURISDICTION TO DISALLOW THOSE ADDITIONS TO THE WIP IN THE ASSESSMENT ORDER FOR AY 2010 - 11. I ACCORDINGLY, I ALLOW GROUND OF APPEAL NO. 5 & 6. 4 ITA NO. 1679 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 7. AS POINTED OUT BY THE LD. COUNSEL ASSESSEE HAD MADE PROVISION DURING THE FINANCIAL YEAR (FY) 2000 - 01 IN RESPECT OF CLAIM MADE BY UCO BANK AS PER THE CONSENT TERMS FILED BEFORE THE DRT. THE ASSESSEE SOLD THE PREMISES TO THE BANK AND CLAIM OF RS. 1,63,36,993/ - WAS ADJUSTED AGAINS T THE SALE PROCEEDS RECEIVABLE FROM UCO BANK. SIMILARLY, IN THE FY 2003 - 04 , THE ASSESSEE PAID INTEREST AMOUNTING TO RS. 60,68,627/ - TO CANARA BANK AS PER THE ORDER OF THE DRT. THE ASSESSEE ADDED THE SAID AMOUNT TO WIP. THE AO REDUCED WIP TO THE EXTENT OF THE SAID AMOUNT . HOWEVER, THE LD. CIT (A) HAS SET ASIDE THE FINDINGS OF THE AO HOLDING THAT SINCE THE ADDITION OF RS. 1,63,36,993/ - WAS MADE IN THE FY 2000 - 01 AND ADDITION OF RS. 60,68,627/ - WAS MADE IN THE FY 2003 - 04, THE AO HAD NO JURISDICTION TO DISALLO W THE ADDITIONS TO WIP IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 8. FURTHER, A S POINTED OUT BY THE LD. COUNSEL, THE ISSUE RAISED BY THE REVENUE HAS BEEN DECIDED BY THE A BENCH OF THE MUMBAI TRIBUNAL IN REVENUES APPEAL ITA NO. 2327/MUM/2018 FOR THE AY 2012 - 13 IN ASSESSEES CASE. IN THE ASSESSMENT YEAR 2012 - 13 THE AO MADE THE SIMILAR DISALLOWANCE. HOWEVER, IN THE FIRST APPEAL, THE LD.CIT (A) ALLOWED THE ASSESSEES APPEAL AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE REVENUE CHALLENGED THE ORDER P ASSED BY THE LD. CIT (A) BEFORE THE ITAT. THE ITAT UPHELD THE FINDINGS OF THE LD. CIT (A) HOLDING AS UNDER: - 6. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF BUILDERS AND DEVELOPERS. THE ASSESSEE IS FOLLOWING THE METHOD OF AC COUNTING I.E. COMPLETING CONTRACT METHOD FOR DECLARING PROFIT FROM ITS CONSTRUCTION PROJECT (KNOWN AS ARCADE INTERNATIONAL) SITUATED AT JAIPUR. THE PROJECT WAS STARTED IN 1987 AND CLAIMED TO BE INCOMPLETE TILL THE DATE OF ASSESSMENT. THE FACTS ARE THAT THE ASSESSEE COMPANY IS FOLLOWING THE PROJECT COMPLETION METHOD AND THE SAME HAS BEEN REJECTED IN THE PRECEDING YEAR AND PERCENTAGE METHOD HAS BEEN APPLIED FOR COMPUTING THE PROFIT OF THE ASSESSEE COMPANY. THE AO ALSO NOTED THAT FOR THE YEAR UNDER CONSIDERATI ON, ACTIVITIES REMAINS THE SAME AS THEY WERE IN EARLIER YEARS AND THERE IS NO PROGRESS IN THE CONSTRUCTION ACTIVITY OF THE ASSESSEE. THE AO NOTED THAT TO ARRIVE AT A CORRECT WORK IN PROGRESS OF THE ABOVE STATED PROJECT, IT IS 5 ITA NO. 1679 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 NECESSARY TO EXAMINE THE WORK IN PROGRESS OF THE PRECEDING YEARS. HE NOTED THAT THE REVISED WORK IN PROGRESS WAS COMPUTED FOR THE ASSESSMENT YEARS 2008 - 09 AND 2010 - 11 AND FOLLOWING THE SAME METHOD, THE WORK - IN - PROGRESS OF THE YEAR UNDER CONSIDERATION IS COMPUTED ACCORDINGLY. THE AO NOT ED THAT DURING THE FY 2000 - 01 RELEVANT TO AY 2001 - 02, THE ASSESSEES COMPANY HAS INCREASED ITS WORK IN PROGRESS BY AN AMOUNT OF 1,63,36,933/ - ON ACCOUNT OF CLAIM IN TERMS OF CONSENT DECREE. IN FY 2003 - 04 RELEVANT TO AY 2004 - 05, THE ASSESSEE COMPANY HAS INCREASED ITS WORK IN PROGRESS BY A SUM OF 60,68,627/ - ON ACCOUNT OF INTEREST TO BANKS AS PER THE ORDER OF DRT. IT IS ALSO NOTE D BY THE AO THAT CANARA BANK AND UCO BANK HAS BOOKED PREMISES AGGREGATING TO 35,360 SQ. FEET OF YEAR IN THE ASSESSEES PROJECT AND DUE TO DELAY IN THE PROJECT AND OTHER LEGAL ISSUES THEY HAVE DEMANDED REFUND OF ADVANCE GIVEN BY THEM ALONG WITH INTEREST. HE NCE, THE ASSESSEE HAS WRONGLY INCLUDED THE AFORESAID EXPENSES IN WORK IN PROGRESS. THE AO THEREFORE, NOTED THAT THE AFORESAID EXPENSES CANNOT BE INCLUDED IN THE WORK IN PROGRESS AS THE AMOUNT DOES NOT IN ANY WAY INCREASE THE VALUE OF WORK IN PROGRESS. THER EBY, HE REDUCED THE SUM FROM WORK IN PROGRESS OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED THE APPEAL BEFORE CIT(A). THE CIT(A) CONSIDERED THE ISSUE AND ALLOWED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING IN PARA 6.4 AS UNDER: - 6.4.1 I HAVE CONSIDERE D THE ORDER OF THE AO AND SUBMISSIONS MADE BY THE APPELLANT. I FIND FROM PARA 6.3 OF THE ASSESSMENT ORDER THAT THE ADDITION IS TO WIP WHICH WERE DISALLOWED BY THE AO DOES NOT RELATE TO THE RELEVANT PREVIOUS YEAR. THE AO HAS HIMSELF OBSERVED IN THE ORDER TH AT THE ADDITION OF 1,63,36,993/ - WAS MADE IN THE FY 2000 - 01 AND THE ADDITION OF 60,68,627/ - WAS MADE IN THE FY 2003 - 04. THEREFORE, IN MY VIEW, THE AO DID NOT HAVE JURISDICTION TO DISALLOW THESE ADDITION TO THE WIP IN THE ASSESSMENT ORDER FOR AY 2012 - 1 3. ACCORDINGLY, I ALLOW THIS GROUND OF APPEAL. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE TRIBUNAL. 7. NOW, BEFORE US, LEARNED SR. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ASSESSMENT ORDER BUT COULD NOT CONTROVERT THE FINDINGS OF THE CIT(A). ON THE OT HER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THIS ADDITION TO THE WORK IN 6 ITA NO. 1679 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 PROGRESS TO AYS 2001 - 02 AND 2004 - 05 AND NOT TO THE RELEVANT AY UNDER CONSIDERATION I.E. AY 2012 - 13. IN ANY CASE, IF AT ALL THE ADDITION OF THIS SUM IS TO BE MADE, THE S AME CAN BE MADE IN THOSE ASSESSMENT YEAR I.E. AYS 2001 - 02 AND 2004 - 05. WE ARE IN AGREEMENT WITH THE LEARNED COUNSEL FOR THE ASSESSEE AND ARE OF THE VIEW THAT THIS ISSUE DOES NOT PERTAIN TO THIS YEAR. THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE AND HENCE, THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 9. SINCE THE COORDINATE BENCH HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN REVENUES APPEALS ITA NO. 2327/MUM/2018 (SUPRA) AND THE FINDINGS OF THE LD. CIT (A) ARE IN ACCORDANCE WITH DECISION OF THE COORDINATE BENCH, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A). HENCE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH, WE UPHOLD THE FINDINGS OF THE LD. CIT (A) AND DISMISS THE APPEAL OF THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2010 - 2011 IS DISMISSED . ORDER PRONOUNCED ON 3 RD DECEMBER, 2020 UNDER RULE 34 (4) OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963. SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 03 / 12 /2020 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . 7 ITA NO. 1679 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI