M/s. Soni Somani Infrastructure, Solapur V. Deputy Commissioner of Income-tax, Circle - 1, Solapur

ITA 1750/PUN/2018

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The case involves M/s. Soni Somani Infrastructure, a partnership firm engaged in the business of construction, which appealed against the order of the Commissioner of Income Tax (Appeals)-7, Pune. The appeal was directed against the disallowance of provisions for expenses amounting to Rs. 97,13,526 made by the Assessing Officer during the assessment year 2015-16. The expenses were related to provisions made for common amenities and buildings 'A' and 'B'. The Assessing Officer disallowed these provisions on the grounds that they were not based on a scientific basis and were contingent in nature. The CIT(A) upheld this decision, leading to the present appeal before the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137512 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-01-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 14-11-2018
• Other Referred Cases: Rotork Controls India (P.) Ltd. vs. CIT, 314 ITR 62 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.1750/PUN/2018 िनधाᭅरण वषᭅ / Assessment Year : 2015-16 M/s. Soni Somani Infrastructure, 560/31, Vinayak Nagar, South Sadar Bazar, Soni Bungalow, Solapur- 413003. PAN : ABVFS4209B Vs. DCIT, Circle-1, Solapur. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM : This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)-7, Pune [the ‘CIT(A)’] dated 20.08.2018 for the assessment year 2015-16. 2. Briefly, the facts of the case are that the appellant is a partnership firm formed under the Partnership Act. It is engaged in the business of builders. The Return of Income for the assessment year 2015-16 was filed on 29.10.2015 declaring total income of Rs.56,81,370/-. Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Circle-1, Assessee by : Shri Vishnu Bhutada Revenue by : Shri M. G. Jasnani Date of hearing : 23.01.2023 Date of pronouncement : 23.01.2023 ITA No.1750/PUN/2018 2 Solapur (‘the Assessing Officer’) vide order dated 30.12.2017 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.1,53,94,897/-. While doing so, the Assessing Officer disallowed the provision for expenses of Rs.42,11,245/- made provision towards expenses to be incurred on providing common emanates and Rs.55,02,281/- to be incurred towards provision of expenses of building ‘A’ and ‘B’. The Assessing Officer was of the opinion that the provisions were not made on scientific basis and contingent nature and cannot be allowed as deduction. 3. Being aggrieved by the above disallowance, an appeal was filed before the ld. CIT(A) contending inter alia that when the case was selected for limited scrutiny, the Assessing Officer cannot travel beyond the issues for which the case was selected for scrutiny assessment. Without prejudice to the above, it is contended that the provision of expenses should be allowed as deduction, as the provision of expenses was made based on the certificate issued by the Architect. However, the ld. CIT(A) dismissed the appeal by giving the finding that the appellant had failed to demonstrate that the expenses for which the provision was created were actually incurred in the subsequent period. The ld. CIT(A) even dismissed the preliminary grounds of appeal that the addition made was vitiated for the reason that the Assessing Officer had exceeded the ITA No.1750/PUN/2018 3 guidelines for limited scrutiny assessment by holding that the verification of income come within the ambit of every item of expenses. 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. The ld. AR contends that the provision of expenditure should be allowed as deduction, as it is based on the Architect certificate as well as the assessee was following the percentage of completion method. He also placed reliance on the decision of the Hon’ble Supreme Court in the case of Rotork Controls India (P.) Ltd. vs. CIT, 314 ITR 62 (SC). 6. On the other hand, ld. Sr. DR placing reliance on the decision of the ld. CIT(A) prayed that the order of the ld. CIT(A) is based on the proper appreciation of facts of the case as well as on law and does not warrant for any interference. 7. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the allowability of provision for expenditure, in case where an assessee who is a builder following the percentage of completion method for the purpose of recognition of income for the purpose of tax. When an assessee following the percentage of completion method, it means that the revenue expenses of the contracts are recognized, as the ITA No.1750/PUN/2018 4 percentage of work completed during the period. The method recognise revenue expenses in proportionate to the completion of the contracted project, which means the question of providing for expenses to be incurred in future does not arise. It is neither the case of the appellant that the corresponding entire income has been offered to tax. The ratio of the decisions of the Hon’ble Supreme Court in the case of Rotork Controls India (P.) Ltd. (supra) and Bharat Earth Movers Ltd. laid down by the ld. AR have no application to the facts of the present case. The CIT(A) had rightly held that when the case was taken up for scrutiny under “Limited Scrutiny” for the purpose of verification of low income, verification of expenses also falls within its sweep. Thus, we are of the considered opinion that the provision for expenses as claimed by the assessee was rightly disallowed by the Assessing Officer. Accordingly, the order of the ld. CIT(A) is based on proper appreciation of facts of the case and just and proper and does not warrant any inference by this Tribunal. 8. In the result, the appeal filed by the assessee stands dismissed. Order pronounced on this 23 rd day of January, 2023. Sd/- Sd/- (S. S. GODARA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 23 rd January, 2023. Sujeet ITA No.1750/PUN/2018 5 आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-7, Pune. 4. The Pr. CIT-6, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.