ELENJI KAMALIL V. THOMAS, NAVI MUMBAI V. JT.C.I.T. 22(3), MUMBAI

ITA 199/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3440 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 20-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Rule of consistency; Accommodation entries
• Section: 143(3); 133(6); 131; 145

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 199 /MUM/2013 ( / ASSESSMENT YEAR : 2009-10) ELENJI KAMALIL V. THOMAS, 212, VARDHAMAN CHAMBERS, SECTOR 17, VASHI, NAVI MUMBAI 400 703. / V. JCIT 22(2), NAVI MUMBAI. ./ PAN : AACPE 7339 L ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI PRAKASH PANDIT REVENUE BY : SHRI SUNIL KUMAR AGARWAL / DATE OF HEARING : 24-2-2016 / DATE OF PRONOUNCEMENT : 18-05-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE , BEING ITA NO. 199/MUM/2013, IS DIRECTED AGAINST THE ORDER DATED 9-11-2012 PASSED B Y LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 33, MUMBAI (HEREINAFTER CA LLED THE CIT(A) ), FOR THE ASSESSMENT YEAR 2009-10, THE APPELLATE PROCEEDINGS BEFORE THE CIT(A) ARISING FROM THE ASSESSMENT ORDER DATED 28-12-2011 PASSED B Y THE LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT,1961(HEREINAFTER CALLED THE ACT). ITA 199/MUM/2013 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- (1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACT OF THE A. O. OF REJECTING APPELLANT'S CLAIM OF RS. 48,22,390/- BEING THE CAPITA L COST OF IMPROVEMENT AS CONTEMPLATED BY SECTION 43(6)(C)(I)(A ) OF THE INCOME TAX ACT 1961. (2) REASONS GIVEN BY THE CIT(A) FOR CONFIRMING THE ACT OF THE A. O. OF REJECTING APPELLANT'S CLAIM OF RS. 48,22,390/- BEIN G THE CAPITAL COST OF IMPROVEMENT AS CONTEMPLATED BY SECTION 43(6)(C)(I)(A ) OF THE INCOME TAX ACT 1961, ARE WRONG INSUFFICIENT AND CONTRARY TO THE F ACTS AND EVIDENCE ON RECORD. (3) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE A. O. OF RS. 77,99,056/- BY WAY OF ALTERATION AND ADDITION TO WORK IN PROGRESS OVER THAT DETERMINED BY THE APPELLANT. (4) REASONS GIVEN BY THE LEARNED CIT(A) FOR CONFIRM ING THE ADDITION MADE BY THE A. O. OF RS. 77,99,056/- BY WAY OF ALTE RATION AND ADDITION TO WORK IN PROGRESS OVER THAT DETERMINED BY THE APPEL LANT, ARE WRONG INSUFFICIENT AND CONTRARY TO THE FACTS AND EVIDENCE ON RECORD. (5) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACT OF THE A.O. OF M AKING ADDITION OF RS. 77,99,056/- TO THE PROFIT DISCLOSED BY THE APPELLANT WITH OUT POINTING OUT DEFECTS IN THE BOOKS OF ACCOUNTS. 6) REASONS GIVEN BY THE LEARNED CIT (A) FOR CONFIRMI NG THE ACT OF THE A. O. OF MAKING ADDITION OF RS. 77,99,056/- TO THE PR OFIT DISCLOSED BY THE APPELLANT WITHOUT POINTING OUT DEFECTS IN THE BOOKS OF ACCOUNTS, ARE WRONG, INSUFFICIENT AND CONTRARY TO THE FACTS AND EVIDENCE ON RECORD. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PROPRIETOR OF M/S VICKY ELECTRICAL CORPORATION AND M/S E.V. HOMES. M /S VICKY ELECTRICAL CORPORATION IS ENGAGED IN THE BUSINESS OF CONTRACTO R AND M/S E.V. HOMES IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. ITA 199/MUM/2013 3 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) READ WITH SECTION 143(2) OF THE ACT, FROM THE PERUSAL OF THE AUDIT RE PORT, FORM NO. 3CD , FILED WITH THE RETURN OF INCOME, IT WAS OBSERVED BY THE L EARNED A.O. THAT ASSESSEE HAS SOLD FACTORY PREMISES AT NERUL FOR A CONSIDERAT ION OF RS. 1.16 CRORES. THE ABOVE FACTORY PREMISES WAS DEPRECIABLE ASSET AND T HE SHORT TERM CAPITAL GAIN OF RS. 33,14,640/- WAS REPORTED ON THE SALE OF SUCH DEPRECIABLE ASSET. THE ASSESSEE DID NOT OFFER TAXATION ON THE GROUND THAT THE ASSESSEE HAS ACQUIRED THREE SHOPS FOR RS. 53 LACS, SO THE BLOCK OF ASSET DID NOT CEASED DURING THE RELEVANT FINANCIAL YEAR 2008-09. THE CONTROVERSY/D ISPUTE IN THIS APPEAL IS WITH RESPECT TO THE ADDITION OF RS. 48,22,390/- TO THE FACTORY BUILDING CLAIMED BY THE ASSESSEE BEFORE THE SALE OF THE FACTORY BUIL DING AS CAPITAL COST OF IMPROVEMENT BEING INCURRED BEFORE THE SALE OF THIS FACTORY PREMISES. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF ADDITI ON MADE IN FACTORY BUILDING, APPROVAL TAKEN FROM LOCAL AUTHORITIES TO CARRY OUT ALTERATION IN THE FACTORY BUILDING AND NECESSITY OF INVESTMENT WHEN THE ASSES SEE HAS ALREADY TAKEN ADVANCE FOR SALE OF THIS FACTORY BUILDING. THE ASSESSEE SUBMITTED IN REPLY THAT DEED OF ASSIGN MENT IS REGISTERED ON 4 TH NOVEMBER, 2008 , BUT THE TRANSACTION STARTED ON 15 TH OCTOBER, 2007 , WHEREIN THE PARTIES AGREED FOR THE SAID TRANSFER AND FIRST PAYMENT WAS RECEIVED BY THE ASSESSEE. DURING THE COURSE OF MUTUAL UNDERSTANDIN G AND AGREEMENT , SINCE THE ASSESSEE BEING INVOLVED IN CONSTRUCTION ACTIVIT IES WAS ASKED BY THE BUYER TO MAKE THE WORKSHOP BUILDING USABLE AS PER THE BUY ERS REQUIREMENTS. SINCE THE WORKSHOP BUILDING WHICH WAS BUILT IN THE YEAR 2 001 WAS USED AS FACTORY BY THE ASSESSEE PRIOR TO YEAR 2003-04 AND SINCE 200 4-05, IT WAS NOT IN GOOD CONDITION AND WAS RENTED OUT AND USED AS A GODOWN. THUS, IN ORDER TO MAKE THE PROPERTY SALEABLE AND TO FINALIZE THE DEAL, THE ASSESSEE AGREED FOR THE REPAIRS AND ALTERATIONS AS PER THE REQUIREMENT OF T HE BUYER. WITH RESPECT TO THE QUERY OF THE A.O. REGARDING THE APPROVAL AND PL AN FROM LOCAL AUTHORITY, IT WAS SUBMITTED THAT SINCE THE WORK CARRIED OUT IS IN THE NATURE OF ITA 199/MUM/2013 4 STRENGTHENING, ALTERATIONS AND REPAIRS OF EXISTING STRUCTURE , NO APPROVAL FROM THE LOCAL AUTHORITIES WAS REQUIRED. THE ASSESSEE S UBMITTED THAT THE ASSESSEE HIMSELF IS ENGAGED IN THE CONSTRUCTION ACTIVITIES A ND HE HAS THE TECHNICAL EXPERTISE AND RESOURCES TO CARRY OUT THE WORK. THE ASSESSEE HAS SPENT RS. 48,22,390/- TOWARDS THE ABOVE WORK AND NECESSARY CO PIES OF THE BILLS WITH RESPECT TO THE WORK DONE HAVE ALSO BEEN SUBMITTED B EFORE THE A.O. THE A.O. REJECTED THE CONTENTIONS OF THE ASSESSEE O N THE GROUNDS THAT THE ASSESSEE HAS NOT OBTAINED ANY APPROVAL FROM THE LOC AL AUTHORITY FOR CARRYING OUT THE ALTERATION AND STRENGTHENING OF EXISTING ST RUCTURE AND SUCH A HUGE AMOUNT WILL NOT BE REQUIRED TO CARRY OUT THE SAID W ORK. THE CONSTRUCTED AREA IS ONLY 250 SQ. METER AND COMPARED TO THE CONSTRUCT ION EXPENSES OF RS. 48,22,390/-, IT COULD NOT BE POSSIBLE TO DO SUCH HU GE WORK WITHOUT OBTAINING THE APPROVAL FROM LOCAL AUTHORITY. SECONDLY, NO WR ITTEN AGREEMENT BETWEEN THE ASSESSEE AND BUYER HAS BEEN FURNISHED TO PROVE THAT THE CONSTRUCTION WORK OF RS. 48,22,390/- WAS TO BE DONE PRIOR TO SAL E OF THE FACTORY BUILDING, HENCE, IT IS UNLIKELY THAT ASSESSEE HAS INVESTED SU CH A HUGE AMOUNT FOR REPAIR BEFORE SALE OF THE BUILDING. THE MOU DATED 17 TH AUGUST, 2007 WAS ENTERED INTO BETWEEN THE ASSESSEE AND THE BUYER WHEREIN IT WAS AGREED TO TRANSFER THE FACTORY BUILDING AT A CONSIDERATION OF RS. 1.16 CRO RES , BUT THERE IS NO MENTION OF EXPENSE OF RS. 48,22,390/- TOWARDS REPAIRS OF TH E BUILDING TO BE INCURRED BY THE ASSESSEE WAS FOUND. THE A.O. FOUND THAT THE COST OF THE BUILDING WAS RS. 23,96,777/- WHEREAS THE REPAIR COST IS RS. 48,2 2,390/- WHICH IS DISPROPORTIONALLY VERY HIGH. IN THE MOU , IT WAS S TATED THAT REPAIR AND MAINTENANCE TO BE UNDERTAKEN TO MAKE IT USABLE. TH E A.O. ALSO HELD THAT SINCE THE FACTORY BUILDING WAS RENTED OUT AND 30% D EDUCTION WAS CLAIMED FOR REPAIR AND MAINTENANCE FROM THE ASSESSMENT YEAR 200 4-05 ONWARDS, THE EXPENSES TOWARDS REPAIR AND MAINTENANCE DEEMED TO H AVE BEEN ALLOWED AND IT IS UNLIKELY THAT 41.6% OF THE SALE CONSIDERATION OF THE LAND AND BUILDING WILL BE INVESTED FOR MAKING THE FACTORY BUILDING USABLE BEFORE THE SALE OF THE ITA 199/MUM/2013 5 BUILDING, THAT TOO WITHOUT ANY WRITTEN AGREEMENT. THE ASSESSEE IN THIS REGARD SUBMITTED THAT THE PLOT WAS GIVEN ON RENT PRIOR TO ITS SALE , THE AO OBSERVED THAT THEN HOW THE CONSTRUCTION WORK HAS BEEN CARRIE D OUT IN THE SAID PLOT. THE A.O. OBSERVED THAT NO PRUDENT PERSON WILL SELL A PLOT OF SIZE OF 511 SQ. METER AFTER MAKING A INVESTMENT OF RS. 48.22 LAKHS FOR CONSIDERATION OF RS. 1.16 CRORES WHEN THE PRICE OF LAND ARE SKYROCKETIN G. THE A.O. REFERRED TO THE VARIOUS EXPENSES INCURRED BY THE ASSESSEE TOWARDS M ATERIAL AND LABOUR CHARGES FROM DIFFERENT PARTIES AND OBSERVED THAT TH ERE WAS OUTSTANDING PAYABLE MONEY TO MANY PARTIES AND THE AMOUNT CLAIME D IS NOT MATCHING WITH THE BILLS. THE PARTIES LIKE BHUMI ENTERPRISES AND P AYAL ENTERPRISES FROM WHERE THE STEEL HAS BEEN PURCHASED REMAIN UNPAID FO R MORE THAN ONE YEAR AND THESE SUPPLIERS ARE NOT REGULAR SUPPLIERS OF ST EEL AND IT IS UNLIKELY THAT SUCH SUPPLIERS WILL GIVE CREDIT FOR MORE THAN ONE Y EAR. TO VERIFY THE GENUINENESS OF THE SUPPLIERS, INSPECTOR FROM THE DE PARTMENT WAS DEPUTED TO SERVE NOTICE U/S 133(6) OF THE ACT AND IT WAS REPOR TED BY THE INSPECTOR THAT NEITHER M/S PAYAL ENTERPRISES NOR M/S BHUMI ENTERPR ISES HAVE EVER EXISTED IN THE GIVEN ADDRESS AS STATED IN THE INVOICE. THE ASSESSEE WAS CONFRONTED WITH THE FINDINGS OF THE INSPECTOR. THE ASSESSEE S UBMITTED THAT THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND THE COP Y OF THE BANK STATEMENTS WERE FURNISHED. THE SUBMISSION MADE BY THE ASSESSEE WAS NOT ACCEPTABLE TO THE A.O. AS VARIOUS ACCOMMODATION ENT RY PROVIDERS ARE GIVING BOGUS BILLS AND RECEIVE THE PAYMENT BY CHEQUES AND RETURN THE MONEY BACK TO THE ASSESSEE. THUS , IT WAS HELD BY THE AO THAT PURCHASES OF STEEL FROM M/S PAYAL ENTERPRISES AND M/S BHUMI ENTERPRISES ARE BOG US AND ARE NOT GENUINE PURCHASES. THE A.O. OBSERVED THAT THE AMOUNT OF PU RCHASES FROM VARIOUS PARTIES IS NOT MATCHING WITH THE BILL AMOUNT AND TH E ASSESSEE BEING ENGAGED IN THE BUILDING ACTIVITIES AND ELECTRICAL CONTRACTO R, MANAGED TO GET THE BILLS FOR SHOWING INVESTMENT IN CONSTRUCTION. THE AO FURTHER OBSERVED THAT THE CEMENT PURCHASED FROM THAKKAR POPATLALJI VELJI SHOW N OF RS. 2,85,000/- BUT THE BILL AMOUNT SUBMITTED WAS RS. 61,251/-. SIMILA RLY, THERE WERE OTHER ITA 199/MUM/2013 6 DISCREPANCIES WHICH WERE NOTED BY THE A.O.IN THE AM OUNTS OF THE BILLS CLAIMED AND THE AMOUNT AS PER THE BILLS SUBMITTED , AS THE INVOICES OF LESSER AMOUNT IN AGGREGATE WERE SUBMITTED VIS--VIS THE CL AIM OF RS.48,22,390/- OF HAVING BEEN SPENT ON THE REPAIRS TO THE FACTORY BUI LDING . THUS, THE A.O. HELD THAT THE EXPENSES ARE FOUND TO BE NOT GENUINE AND A CCORDINGLY THE CLAIM OF ADDITIONS TO THE FIXED ASSETS OF RS. 48,22,390/- W AS DENIED TO THE ASSESSEE, VIDE ASSESSMENT ORDERS DATED 28.12.2011 PASSED BY T HE AO U/S. 143(3) OF THE ACT. 4.AGGRIEVED BY THE ASSESSMENT ORDERS DATED 28.12.20 11 PASSED BY THE A.O. U/S. 143(3) OF THE ACT, THE ASSESSEE FILED FIRST APPEAL BEFORE THE LEARNED CIT(A). 5. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTE D THAT THE A.O. HAS MADE THE ADDITIONS TO THE INCOME OF THE ASSESSEE IN THE ASSESSMENT ORDER BASED UPON SURMISES AND CONJECTURES ON SUSPICION AN D NOT SUPPORTED BY ANY EVIDENCE. THE A.O. HAS WRONGLY PRESUMED THAT MAJOR REPAIR REQUIRES APPROVAL FROM LOCAL AUTHORITIES. IT WAS SUBMITTED T HAT THE ASSESSEE NOT ONLY REPAIRED EXTENSIVELY STRUCTURE OF 255 SQ. MTR BUT H E ALSO CARRIED OUT REPAIR TO THE COMPOUND WALL AND LEVELING OF THE SAID PLOT. TH E ASSESSEE SUBMITTED THAT THE MOU DATED 17 TH AUGUST, 2007 IS SIGNED BY BOTH THE PARTIES AND THE A.O. WAS WRONG IN HIS FINDING THAT THERE WAS NO AGREEMEN T BETWEEN THE ASSESSEE AND THE BUYER. AS PER CLAUSE 2 OF THE SAID MOU, IT IS STATED THAT THE ASSESSEE WILL MAKE THE SAID FACTORY BUILDING IN A FIT AND PR OPER USABLE CONDITION TO SUIT THE BUYERS REQUIREMENT AND HENCE REPAIRS AND MODIF ICATIONS TO THE STRUCTURE AND THE FLOORING ETC. TO SUIT BUYERS REQUIREMENT WA S A PRECONDITION FOR THE SALE. THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RIGHTLY SPENT THE AMOUNT ON REPAIRING OF THE BUILDING AND RIGHTLY CLAIMED TH E DEDUCTION AS PER SECTION 43(6)(C)(I)(A) OF THE ACT. WITH RESPECT TO THE CON TENTIONS OF THE A.O. THAT THE PLOT WAS GIVEN ON RENT, THEN HOW THE CONSTRUCTION W ORK WAS CARRIED OUT IN THE ITA 199/MUM/2013 7 PLOT AND NO PRUDENT BUSINESSMAN WILL SELL A PLOT OF SIZE 511.50 SQ. MTR. AFTER MAKING INVESTMENT OF RS. 48.22 LAKHS FOR A CONSIDER ATION OF RS. 1.16 CRORES, THE ASSESSEE SUBMITTED THAT IT IS MERELY A REPETITI ON OF REASON NO. 1 & 2 STATED ABOVE AND THE ASSESSEE HAS DULY REPLIED IN T HE PRECEDING PARAS. THE ASSESSEE SUBMITTED THAT THE AO WAS GIVEN DETAIL BIF URCATION OF THE COST OF IMPROVEMENT INCLUDING THE PERSONS WHO HAS SUPPLIED MATERIAL AND LABOUR TO THE ASSESSEE. THE AO ISSUED NOTICES U/S 133(6) OF T HE ACT TO THE PARTIES AND IN RESPONSE TO THE NOTICES U/S 133(6) OF THE ACT, A LL THE PARTIES EXCEPT ONE HAVE CONFIRMED THAT THEY WERE SUPPLYING BUILDING MA TERIAL TO THE ASSESSEE AND ALSO CONFIRMED THAT TDS WAS DULY DEDUCTED ON AM OUNT PAID TO THEM FROM TIME TO TIME. THE ASSESSEE SUBMITTED THAT THE A.O. WAS WRONG IN CONCLUDING THAT ALL THE BILLS ARE ACCOMMODATION BILLS. THE SUP PLIERS WERE REGULARLY SUPPLYING BUILDING MATERIAL TO THE ASSESSEE AND THE REFORE OUTSTANDING AS ON 31-03-2009 HAS NOTHING TO DO WITH THE GOODS SUPPLIE D BY THEM. IT WAS CONTENDED BY THE ASSESSEE THAT BECAUSE OF THE SAID EXPENDITURE , THE ASSESSEE WAS ABLE TO REALIZE A CONSIDERATION MORE THAN THE M ARKET VALUE OF THE SAID FACTORY BUILDING AND THE EXPENDITURE WAS INCURRED W HOLLY AND EXCLUSIVELY IN CONNECTION WITH THE COST OF IMPROVEMENT WHICH WAS A PRECONDITION LAID DOWN BY THE BUYER. THE ASSESSEE SUBMITTED THAT BECAUSE O F THE SAID EXPENDITURE, THE ASSESSEE WAS ABLE TO REALIZE THE SUM OF RS.49,4 0,027/- FOR THE FACTORY BUILDING AS AGAINST THE COST OF THE SAID FACTORY AT RS.25,69,500/- AS ON 31-03- 2002. THE ASSESSEE HAS SUBMITTED THE COPIES OF BA LANCE SHEET WHICH SHOWS THAT THE LAND AND FACTORY BUILDING IN THE BLOCK OF THEIR SHARE FROM THE YEAR 2001 ONWARDS , THE COPY OF DEED OF ASSIGNMENT ENTER ED BETWEEN THE ASSESSEE AND THE BUYER AND A COPY OF MOU DATED 03-09-2007 VI DE CLAUSE NO. 2 STIPULATES THAT TO MAKE THE BUILDING FIT AND IN PRO PER USABLE CONDITION , THE BUYER REQUIRED REPAIRING AND MODIFICATION BEFORE HA NDING OVER THE POSSESSION. THE LEARNED CIT(A) AFTER GOING THROUGH THE SAME, RE JECTED THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE MOU DATED 3 RD SEPTEMBER, 2007 IS ENTERED ON ITA 199/MUM/2013 8 ONE HUNDRED RUPEE STAMP PAPER AND DOES NOT TALK ABO UT ANY SCHEDULE OF PAYMENT AND ONLY SAYS THAT THE ENTIRE BALANCE PAYME NT WILL BE MADE WITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF SIGNING OF T HE MOU. THE LEARNED CIT(A) NOTED THAT DEED OF ASSIGNMENT DATED 20-01-2009 REFE RS TO AN AGREEMENT TO LEASE DATED 21 ST JANUARY, 1999, LEASE DEED DATED 14 TH MAY, 2008 BETWEEN CIDCO AND THE ASSESSEE, HOWEVER DEED OF ASSIGNMENT DATED 20-01-2009 DOES NOT MENTION ANYTHING ABOUT THE MOU DATED 3 RD SEPTEMBER, 2007 AND DOES NOT TALK THAT ADVANCE OF RS. 3 LACS WAS RECEIVED BY THE ASSESSEE IN ACCORDANCE WITH THE MOU. RATHER, THE DEED OF ASSIGNMENT SHOWS THE DETAILS OF PARTICULARS OF PAYMENT OF THAT AMOUNT HAVING BEEN R ECEIVED ON 15 TH OCTOBER, 2007 ALONG WITH OTHER PAYMENTS RECEIVED FROM 15 TH DECEMBER, 2007 TO 1ST JANUARY, 2009 , FROM TIME TO TIME , AGGREGATING TO RS. 1.16 CRORES. THE LEARNED CIT(A) REFERS TO CLAUSE 9 OF THE DEED OF AS SIGNMENT DATED 20-01-2009 WHICH READS AS UNDER:- THE CIDCO HAS GRANTED ITS PERMISSION FOR TRANSFERR ING THE DEMISE PREMISES IN FAVOUR OF THE ASSIGNEES VIDE ITS LETTER BEARING REFERENCE NUMBER CIDCO/EMS/EO/2008/6529 31/10/2008. THUS , IT WAS OBSERVED BY THE LEARNED CIT(A) THAT T HE ASSESSEE GOT THE PERMISSION FROM THE AUTHORITIES TO ASSIGNMENT OF IT S LEASE RIGHTS ONLY BY THE LETTER DATED 31 ST OCTOBER, 2008 FROM CIDCO AND HENCE MOU DATED 3 RD SEPTEMBER, 2007 IS NOT RELIABLE AS FIRSTLY IT WAS E NTERED INTO EVEN PRIOR TO THE DATE OF PERMISSION GRANTED TO THE ASSESSEE BY THE C IDCO AND THEN ALSO FOR THE REASON THAT SAME DOES NOT FIND ANY MENTION IN T HE DEED OF ASSIGNMENT DATED 20 TH JANUARY, 2009 , THOUGH THE OTHER RELEVANT AGREEMEN T TO LEASE DATED 21 ST JANUARY, 1999 AND 14 TH MAY, 2008 DID FIND MENTION IN THE DEED OF ASSIGNMENT DATED 20-01-2009. HENCE, THE LEARNED C IT(A) HELD THAT THE MOU DATED 3 RD SEPTEMBER, 2007 IS NOT A GENUINE DOCUMENT TO SUPPO RT THE ASSESSEE CLAIM THAT THE EXPENSES FOR REPAIRING WORK WERE IN CURRED. IT WAS ALSO OBSERVED BY THE CIT(A) THAT THERE WAS A MISMATCH I N THE AMOUNT SHOWN BY ITA 199/MUM/2013 9 THE ASSESSEE THAT MATERIAL AND LABOUR EXPENSES CLAI MED BY THE ASSESSEE AT RS. 48,22,390/- AS AGAINST THE BILL AMOUNT AS RAISE D BY THESE 15 PARTIES COMES TO TOTAL RS. 36,83,451/-. WITH RESPECT TO TH E GENUINENESS OF THE SUPPLIERS, INCOME TAX INSPECTOR WAS DEPUTED BY SERV ING NOTICE U/S 133(6) OF THE ACT AND AFTER VERIFYING, IT WAS REPORTED THAT T HE PARTIES M/S PAYAL ENTERPRISES AND M/S BHUMI ENTERPRISES NEVER EXISTED AT THE GIVEN ADDRESSES AND SOME OTHER PERSONS WERE STAYING FOR MANY YEARS. WHEN IT WAS CONFRONTED TO THE ASSESSEE, IT WAS STATED BY THE ASSESSEE THAT THE PAYMENTS WERE MADE THROUGH THE BANKING CHANNEL AND COPY OF BANK STATEM ENTS WERE FURNISHED BEFORE THE A.O. . THE CIT(A) , THUS, CONCLUDED THAT CONSTRUCTION EXPENSES ARE NOT GENUINE. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS NOT DISPUTED THE FINDING OF THE A.O. MADE BY PHYSICAL AND ON THE SPOT ENQUIRIES CONDUCTED IN THE CASE . THE DISCREPANCIES FOUND BY THE AO WER E NOT EXPLAINED BY THE ASSESSEE RATHER THE ASSESSEE ACCEPTED THAT ALL THE PARTIES ARE SUPPLYING MATERIAL TO THE ASSESSEE AND THE ASSESSEE IS ALSO T HE PROPRIETOR OF E.V. HOMES WHICH IS IN BUILDING BUSINESS AND IT IS POSSIBLE TH AT THESE BUILDING MATERIAL COULD BE FOR BUILDING BUSINESS OF THE ASSESSEE CARR IED ON BY E. V. HOMES. IN VIEW OF THE ABOVE OBSERVATIONS, THE LEARNED CIT(A) HELD THAT THE COST OF IMPROVEMENT OF AN AMOUNT OF RS. 48,22,390/- CLAIME D BY THE ASSESSEE CANNOT BE TAKEN AS ADDITION TO THE FACTORY BUILDING AND THE CLAIM OF THE ASSESSEE WAS REJECTED, VIDE APPELLATE ORDERS DATE 0 9.11.2012 6. AGGRIEVED BY THE APPELLATE ORDERS DATED 09.11.20 12 PASSED BY THE LEARNED CIT(A), THE ASSESSEE FILED SECOND APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE DISPUTE UNDER THIS APPEAL IS WITH REGARD TO THE COST OF IMPROVEME NT OF RS. 48,22,390/- SPENT BY THE ASSESSEE FOR MAJOR STRUCTURAL REPAIR AND MOD IFICATION WORK IN THE FACTORY BUILDING ALONG WITH REPAIR TO THE COMPOUND WALL AND LEVELING OF PLOT, WHICH FACTORY BUILDING WAS PROPOSED TO BE SOLD ALON G WITH LAND FOR RS. 1.16 ITA 199/MUM/2013 10 CRORES. THE LD. COUNSEL DREW OUR ATTENTION TO THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS DULY SUBMITTED ALL THE INVOICES AND DETAILS WITH RESPECT TO THE CONSTRUCTION WORK CARRI ED OUT BY THE ASSESSEE IN THE FACTORY BUILDING. EVEN THE TAX WAS DEDUCTED AT SOURCE ON THE AMOUNTS PAID TO THE PARTIES WHO UNDERTOOK THE WORK WHEREVER APPLICABLE AS PER PROVISIONS OF CHAPTER XVII-B OF THE ACT. IT WAS AG REED BY THE ASSESSEE WITH THE BUYER THAT THE ASSESSEE WILL CARRY OUT THE REPA IR WORK TO MAKE THE PROPERTY USABLE AND HENCE THE EXPENSES WAS INCURRED OF WHICH THE DETAILS ARE PLACED IN THE PAPER BOOK FILED WITH THE TRIBUNAL. HE ALSO DREW OUR ATTENTION TO CLAUSES OF THE MOU ENTERED INTO BETWEEN THE ASSE SSEE AND THE BUYER DATED 3 RD SEPTEMBER, 2007 WHICH IS PLACED ON RECORD VIDE PAP ER BOOK PAGE NO. 85- 86 AND SUBMITTED THAT AS PER CLAUSE -2, THE ASSESSE E WAS REQUIRED TO UNDERTAKE THE REPAIR WORK IN THE BUILDING STRUCTURE BEFORE HANDING OVER THE POSSESSION. THE LD COUNSEL DREW OUR ATTENTION TO TH E INVOICES FOR SUPPLY OF MATERIAL AND LABOUR CHARGES FOR CONSTRUCTION OF FAC TORY BUILDING BEING PLACED IN PAPER BOOK PAGE 92-111. THE LD. COUNSEL SUBMITTE D THAT THE ADDITION HAS BEEN MADE BY THE LEARNED A.O. BASED ON SURMISES AND CONJECTURES ON SUSPICION WHILE ALL THE COGENT MATERIAL HAS BEEN BR OUGHT ON RECORD TO SUBSTANTIATE THAT MAJOR STRUCTURAL REPAIRS AND MODI FICATION WORK WAS CARRIED OUT BY THE ASSESSEE AT THE FACTORY BUILDING . HE A LSO DREW OUR ATTENTION TO THE CERTIFICATE OF ARCHITECT DATED 10 TH SEPTEMBER, 2007 DESCRIBING THE WORK TO BE CARRIED ON FOR THE PURPOSES OF REPAIRING TO AVOID C OLLAPSING OF THE BUILDING WHICH IS PLACED AT PAPER BOOK PAGE 89. IT WAS SUBMI TTED THAT THE LEARNED CIT(A) ERRED IN REFERRING TO THE MOU DATED 3 RD SEPTEMBER, 2007 BEING NOT INCORPORATED IN THE DEED OF ASSIGNMENT DATED 20 TH JANUARY, 2009 , THOUGH THE OTHER RELEVANT AGREEMENT TO LEASE DATED 21 ST JANUARY, 1999 AND 14 TH MAY, 2008 DID FIND MENTION IN THE DEED OF ASSIGNMENT DAT ED 20-01-2009. THE LD. COUNSEL SUBMITTED THAT THE PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUES TO ALL THE SUPPLIERS OF THE MATERIAL AND LA BOUR , AND WHERE-EVER APPLICABLE UNDER CHAPTER XVII-B OF THE ACT, EVEN TA XES WERE DEDUCTED AT ITA 199/MUM/2013 11 SOURCE AND DEPOSITED WITH GOVERNMENT TREASURY .HE D REW OUR ATTENTION TO PAGE 166 OF PAPER BOOK TO CONTEND THAT TAX OF RS.31 ,765/- WAS DEDUCTED AT SOURCE ON LABOUR CHARGES OF RS.15,42,000/- PAID FOR STRUCTURAL REPAIR AND MODIFICATION WORK CARRIED ON BY THE ASSESSEE IN THE FACTORY BUILDING. FURTHER, THE LD. COUNSEL RELIED UPON THE SUBMISSION MADE BEF ORE THE AUTHORITIES BELOW WHICH ARE NOT REPEATED FOR THE SAKE OF BREVITY. 8. THE LD. D.R. SUBMITTED THAT THE FACTORY AREA WAS ONLY AROUND 255 SQ. METERS AND THE EXPENSES HAS BEEN INCURRED FOR RS. 4 8,22,390/- ON REPAIRS WHICH IS DISPROPORTIONATELY EXCESSIVE. THE BUILDIN G WAS GIVEN ON RENT SINCE ASSESSMENT YEAR 2004-05 AND IT IS NOT POSSIBLE TO C ARRY OUT EXTENSIVE REPAIRS ON THE RENTED PREMISES. THE PURCHASES ARE BOGUS FR OM WHOM THE MATERIAL WAS SUPPLIED. THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. IN REJOINDER THE LD COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE SAID FACTORY BUILDING WAS NOT ON RENT WHEN THE MAJOR AND EXTENSI VE STRUCTURAL REPAIR AND MODIFICATION WORK WAS UNDERTAKEN BY THE ASSESSEE. I T WAS ALSO SUBMITTED THAT THERE WAS NO PERMISSIONS REQUIRED FROM CIDCO FOR CA RRYING OUT THESE EXTENSIVE STRUCTURAL REPAIRS AND MODIFICATION WORK AS IT IS NOT A CASE OF CONSTRUCTION OF NEW FACTORY BUILDING, CONSEQUENTLY NO PERMISSION FROM CIDCO WAS TAKEN BY THE ASSESSEE. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND AL SO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASS ESSEE WAS THE OWNER OF THE LAND AND FACTORY BUILDING AT 32-A, SECTOR-1, SHIRWA NE, NERUL, NAVI MUMBAI- 400 706 WITH THE LEASEHOLD RIGHTS IN PLOT OF SIZE OF 511.50 SQUARE METERS , WHILE THE CONSTRUCTED AREA OF THE FACTORY BUILDING WAS 255 SQ. METERS. THE ASSESSEE HAS STATED TO HAVE ENTERED INTO AN MOU DAT ED 3 RD SEPTEMBER, 2007(STAMP PAPER PURCHASE DATE 17-08-2007 AS THE SA ME IS REFERRED BY THIS DATE IN THE ORDERS OF THE AUTHORITIES BELOW) FOR TH E SALE OF THE SAID LAND AND ITA 199/MUM/2013 12 FACTORY BUILDING AT NERUL FOR A TOTAL CONSIDERATION OF RS. 1.16 CRORES. THE SAID MOU DATED 03-09-2007 (STAMP PAPER PURCHASE DATED 17 -08-2007) IS PLACED BY THE ASSESSEE AT PAGE 85-86 OF PAPER BOOK FILED W ITH THE TRIBUNAL. AS PER CLAUSE 2 OF THE MOU DATED 03-09-2007, THE ASSESSEE WAS REQUIRED TO MAKE THE SAID BUILDING IN A FIT AND PROPER USABLE CONDIT IONS AS THE BUILDING STRUCTURE REQUIRED REPAIRS AND MODIFICATION TO SUIT THE REQUIREMENT OF THE BUYER. THE ARCHITECT CERTIFICATE DATED 10-09-2007 I S ALSO PLACED BY THE ASSESSEE IN THE PAPER BOOK PAGE 89 FILED WITH THE T RIBUNAL, WHICH DETAILED IN THIS ARCHITECT CERTIFICATE DATED 10-09-2007 THE EXT ENSIVE REPAIR AND MODIFICATION WORK REQUIRED IN THE FACTORY BUILDING TO AVOID THE BUILDING FROM COLLAPSING. THE ARCHITECT HAS ALSO CERTIFIED THAT T HE BEAMS AND COLUMNS HAVE DEVELOPED CRACKS AND WATER IS SEEPING INTO THE INTE RIORS OF THE BUILDING. THE ARCHITECT HAS ALSO CERTIFIED THAT THE REINFORCEMENT S ARE DAMAGED SEVERELY. THIS ARCHITECT CERTIFICATE DATED 10-09-2007 AND THE MOU DATED 03-09-2007 ARE CERTIFIED BY THE ASSESSEE IN THE PAPER BOOK CERTIFI CATE THAT THESE DOCUMENTS WERE DULY PLACED BEFORE THE LEARNED AO AND THE LEAR NED CIT(A) DURING THE COURSE OF RELEVANT PROCEEDINGS BEFORE THESE AUTHORI TIES. THE ASSESSEE HAS INCURRED THESE EXPENSES FOR THE EXTENSIVE STRUCTURA L REPAIRS AND MODIFICATIONS IN THE FACTORY BUILDING APART FROM REPAIRS TO THE C OMPOUND WALL AND LEVELING OF PLOT, FOR WHICH THE ASSESSEE SUBMITTED THE DETAI LS/DOCUMENTS INCLUDING INVOICES REGARDING THE MATERIAL COST AND LABOUR CHA RGES ETC. INCURRED FOR THESE EXTENSIVE STRUCTURAL REPAIRS AND MODIFICATIONS TOWA RDS THE FACTORY BUILDING APART FROM REPAIRS TO THE COMPOUND WALL AND LEVELIN G OF PLOT, IN TERMS OF THE MOU DATED 03-09-2007. THE PAYMENTS FOR THIS WORK C ARRIED ON BY THE ASSESSEE, HAVE BEEN STATED TO BE MADE THROUGH BANKI NG CHANNEL BY ACCOUNT PAYEE CHEQUES AND EVEN THE TAXES WERE ALSO STATED TO BE DEDUCTED AT SOURCE ON THESE PAYMENTS AS COVERED BY PROVISIONS OF CHAPT ER XVII-B OF THE ACT. WE HAVE OBSERVED THAT THE AUTHORITIES BELOW HAVE MADE THE ADDITION MERELY ON THE BASIS OF SURMISES AND CONJECTURES ON SUSPICION BY TERMING THE INVOICES OF MATERIAL AND LABOUR SUBMITTED BY THE ASSESSEE AS BO GUS AND ACCOMMODATION ITA 199/MUM/2013 13 ENTRIES. NO COGENT INCRIMINATING MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AUTHORITIES BELOW TO PROVE THAT ASSESSEE HAS MADE B OGUS PURCHASES EXCEPT INSPECTOR REPORT WHICH IS NOT SUFFICIENT TO FASTEN THE LIABILITY TO TAX ON THE ASSESSEE. THE INSPECTOR REPORT HAS MERELY SUBMITTED THAT TWO OF THE VENDORS FROM WHOM STEEL WAS BOUGHT BY THE ASSESSEE NAMELY P AYAL ENTERPRSIES AND BHUMI ENTERPRISES WERE FOUND NOT EXISTING AT THE AD DRESSES GIVEN IN THEIR INVOICES. THE INSPECTOR REPORT IS PLACED AT PAGE 11 2 OF PAPER BOOK. WE HAVE SEEN FROM THE INVOICES PLACED IN THE PAPER BOOK THA T BOTH THESE VENDORS NAMELY PAYAL ENTERPRSIES AND BHUMI ENTERPRISES ARE REGISTERED WITH VAT AUTHORITIES AND THEY HAVE ALSO CHARGED MAHARASHTRA VAT ON THE INVOICES ISSUED TO THE ASSESSEE . REVENUE HAS MADE NO FURTHE R ENQUIRIES WITH THE VAT DEPARTMENT OR WITH THE BANKERS OF THESE TWO VENDORS AS THE PAYMENT WERE ALL MADE THROUGH ACCOUNT PAYEE CHEQUES . NO FURTHER ENQ UIRY WAS CONDUCTED BY THE REVENUE TO BRING ON RECORD COGENT INCRIMINATIN G MATERIAL TO DISPROVE AND DEMOLISH THE CONTENTIONS OF THE ASSESSEE. THE ASSES SEE IN ALL DEALT WITH FIFTEEN PARTIES AS PER DETAILS VIDE PAGE 90 OF PAPER BOOK F ILED BY THE ASSESSEE WITH THE TRIBUNAL. ONLY ENQUIRIES WERE MADE THROUGH INSPECTO R WITH RESPECT TO FOUR PARTIES OUT OF THESE FIFTEEN PARTIES , OF WHICH TWO WERE FOUND NON-EXISTENT AT THE GIVEN ADDRESSES. THE ENQUIRIES WITH RESPECT TO THE REST OF THE ELEVEN SUPPLIERS WERE NOT EVEN MADE BY ISSUING NOTICES U/S 133(6) OF THE ACT. THESE MATERIAL AND LABOUR SUPPLIERS, FIFTEEN IN NUMBER WE RE NOT SUMMONED U/S 131 OF THE ACT, NOR THEIR STATEMENT WERE RECORDED. THE INFORMATION WAS NOT CALLED BY THE REVENUE FROM THE BUYER OF THE LAND AND FACTO RY BUILDING BY ISSUING SUMMONS/NOTICES U/S 131/133(6) OF THE ACT TO VERIFY THE AUTHENTICITY OF THE CLAIM OF THE ASSESSEEE HAVING UNDERTAKEN EXTENSIVE STRUCTURAL REPAIRS AND MODIFICATION WORK TO THE FACTORY BUILDING PRIOR TO ITS SALE, NOR THE STATEMENT OF THE BUYER OF THE AFORE-STATED PROPERTY WAS RECORDED . NO TECHNICAL EXPERT SUCH AS DVO WAS APPOINTED BY THE REVENUE TO ENQUIRE ABOU T THE EXTENSIVE STRUCTURAL REPAIRS AND MODIFICATION CLAIMED TO BE CARRIED ON BY THE ASSESSEE TO DISPROVE AND DEMOLISH THE CONTENTIONS OF THE ASS ESSEE . NO ENQUIRY WAS ITA 199/MUM/2013 14 EVEN MADE WITH THE OFFICE OF THE MUNICIPAL AUTHORIT IES TO ASCERTAIN THE STATUS OF CONSTRUCTION AND STRUCTURAL REPAIRS AND MODIFICA TION OF THE FACTORY BUILDING , IF ANY CARRIED ON BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR TO DISPROVE THE CONTENTIONS OF THE ASSESSEE. THE CASE OF THE REVENUE IS BASED ON THE NON-EXISTENCE OF TWO PARTIES AT THE GIVEN ADDRE SSES VIDE INSPECTOR REPORT, WHICH IS NOT SUFFICIENT ENOUGH TO COME TO THE CONCL USION THAT THE ENTIRE THEORY OF EXTENSIVE STRUCTURAL REPAIR AND MODIFICAT ION OF THE FACTORY BUILDING AS BROUGHT OUT BY THE ASSESSEE IS A FARCE , IN-FACT THE RELIANCE BY THE REVENUE ON THE INSPECTOR REPORT WITHOUT CONDUCTING FURTHER PROBE TO CONCLUSIVELY DISPROVE AND DEMOLISH THE CONTENTIONS OF THE ASSESS EE, HAS LED THE REVENUE CONCLUSIONS FALL INTO THE REALM OF CONJECTURES AND SURMISES ON SUSPICION WHICH IS NOT PERMISSIBLE. SUSPICION HOWSOEVER STRON G CANNOT TAKE THE PLACE OF THE PROOF IS A SETTLED PROPOSITION OF LAW. THUS, IN NUT-SHELL, NO PROPER AND ADEQUATE ENQUIRY HAS BEEN CONDUCTED BY THE REVENUE TO REBUT , DISPROVE AND DEMOLISH THE CONTENTIONS OF THE ASSESSEE AS NO COGE NT INCRIMINATING MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE AGAINST T HE ASSESSEE. THE GROUND WHICH HAS BEEN TAKEN BY THE LD. CIT(A) TO REJECT TH E CONTENTION OF THE ASSESSEE SUCH AS MOU DATED 3 RD SEPTEMBER, 2007 IS ENTERED ON ONE HUNDRED RUPEE STAMP PAPER AND IT DOES NOT TALK ABOUT ANY SCHEDULE OF PAYMENT AND ONLY SAYS THAT THE ENTIRE BALANCE PAYMENT WILL BE MADE W ITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF SIGNING OF THE MOU ARE IRR ELEVANT DE-HORS FASTENING OF THE LIABILITY TO TAX ON THE ASSESSEE . SIMILARLY TO CONTEND THAT THE SAID MOU DID NOT FIND MENTION IN THE DEED OF ASSIGNMENT DATE D 20-01-2009 AND IS MERELY AN AFTER-THOUGHT IS BASED ON SURMISES AND CO NJECTURES ON SUSPICION , WHILE THE MOU DID TALK OF PAYMENT OF RS. 3 LACS VID E CHEQUE DATED 15-10- 2007 WHICH FIND MENTION IN THE DEED OF ASSIGNMENT D ATED 20-01-2009 . TO CONTEND THAT THE MOU DATED 03-09-2007 HAS PRECEDED THE PERMISSIONS RECEIVED BY THE ASSESSEE FROM CIDCO ON 31/10/2008 I S AGAIN OF NO-USE TO THE REVENUE AS IT IS VERY PROBABLE THAT THE TAX-PAY ER WILL FIRST ENTER INTO A BINDING AGREEMENT WITH A SERIOUS BUYER OF THE PROPE RTY WHO HAS ALSO ITA 199/MUM/2013 15 ADVANCED SOME AMOUNT OF MONEY AND THEN APPROACH THE CIDCO FOR SEEKING PERMISSION TO SELL THE PROPERTY. NO COGENT INCRIMIN ATING MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AUTHORITIES BELOW TO DEMOL ISH THE MOU DATED 03-09- 2007 AS AN AFTER-THOUGHT BUT RATHER THE SAME IS BAS ED ON CONJECTURES AND SURMISES BASED ON SUSPICION WHICH IS NOT PERMISSIBL E UNDER THE ACT. THE CIT(A) AGAIN ENTER INTO REALM OF CONJECTURES AND S URMISES BASED ON SUSPICION BY CONTENDING THAT THE MATERIAL AND LABOUR CHARGES MUST HAVE BEEN USED IN BUILDING BUSINESS OF THE OTHER PROPRIETARY CONCERN OF THE ASSESSEE NAMELY E. V. HOMES , WHILE THE INVOICES SPEAK VOLUMINOUSLY OF THE NAME OF THE CONCERN OF THE ASSESSEE M/S VICKY ELECTRICAL CORPORATION AS THE VENDEE IN THE SAID INVOICES , WHICH CONCERN OF THE ASSESSEE NAMELY, M/ S VICKY ELECTRICAL CORPORATION OWNED THE LAND AND FACTORY BUILDING AND THESE INVOICES ALSO REFLECTED THE ADDRESS OF THE 32-A, SECTOR-1, SHIRWA NE, NERUL OF THE SAID LAND AND FACTORY BUILDING FOR DISPATCH OF MATERIAL AND R ENDERING OF LABOUR SERVICES. THE PAYMENTS FOR THESE INVOICES ARE STATED TO BE MA DE BY ACCOUNT PAYEE CHEQUES AND TAX WAS ALSO DEDUCTED AT SOURCE ON THES E INVOICES WHERE-EVER APPLICABLE AS PER PROVISIONS OF CHAPTER XVII-B OF T HE ACT. THESE COGENT MATERIAL BROUGHT ON RECORD BY THE ASSESSEE BACKED W ITH THE CHAIN OF EVENTS STARTING FROM SIGNING OF MOU DATED 03-09-2007 AND E NDING WITH DEED OF ASSIGNMENT DATED 20-01-2009 , WHICH COMPRISED AGREE MENT TO SELL LAND AND FACTORY BUILDING FOR RS.1.16 CRORES VIDE MOU DATED 03-09-2007 WITH CONDITIONS AGREED BY THE ASSESSEE TO MAKE THE FACTO RY BUILDING FIT AND USABLE AS THE BUILDING REQUIRED EXTENSIVE STRUCTURAL REPAI RING AND MODIFICATION TO SUIT THE BUYERS REQUIREMENT, ARCHITECT CERTIFICATE DATED 10-09-2007 POINTING OUT DEFICIENCIES IN THE FACTORY BUILDING STRUCTURE TO AVOID THE COLLAPSING OF BUILDING, INVOICES FOR MATERIAL AND LABOUR EXPENSE S INCURRED BY THE ASSESSEE TOWARDS EXTENSIVE REPAIRS AND MODIFICATION TO THE F ACTORY BUILDING DURING THE PERIOD APRIL NOVEMBER 2008 , PAYMENTS OF THESE IN VOICES BY ACCOUNT PAYEE CHEQUES, DEDUCTION OF TAX AT SOURCE ON THESE PAYME NTS WHERE-EVER APPLICABLE UNDER CHAPTER XVII-B OF THE ACT, PERMISSION VIDE AP PROVAL DATED 31-10-2008 ITA 199/MUM/2013 16 FROM THE CIDCO TO SELL THE SAID LAND AND BUILDING, RECEIPT OF PAYMENT FROM THE SAME BUYER STARTING FROM 15-10-2007 AND ENDING ON 01-01-2009 IN ALL AGGREGATING TO RS.1.16 CRORES AS AGREED IN THE MOU DATED 03-09-2007 AND FINALLY EXECUTION OF DEED OF ASSIGNMENT IN FAVOUR O F THE SAME BUYER VIDE DEED DATED 20-01-2009, WHICH COMPLETES FULL CHAIN OF EVE NT OF THE TRANSACTION FOR SALE OF LAND AND FACTORY BUILDING FOR WHICH NECESSA RY STRUCTURAL REPAIRS AND MODIFICATIONS WERE DONE BY THE ASSESSEE AS CONTENDE D, ON THE TOUCH STONE OF PREPONDERANCE OF PROBABILITIES WHICH CANNOT BE SIMP LY BRUSHED ASIDE OR DEMOLISHED BY THE REVENUE BASED ON CONJECTURES AND SURMISES ON SUSPICION , EXCEPT THROUGH COGENT INCRIMINATING MATERIAL WHIC H REVENUE HAS FAILED TO BRING ON RECORD IN THE INSTANT CASE. IN OUR CONSIDE RED VIEW, THE ASSESSEE HAS DULY DISCHARGED HIS BURDEN CAST UNDER THE ACT AND N OW IT WAS FOR THE REVENUE TO HAVE BROUGHT ON RECORD COGENT INCRIMINAT ING MATERIAL AND EVIDENCES TO REBUT AND DEMOLISH THE CONTENTIONS OF THE ASSESSEE CONCLUSIVELY ON THE TOUCHSTONE OF PREPONDERANCE OF PROBABILITIES WHICH THE REVENUE COULD NOT DO EXCEPT BY BRINGING ON RECORD INSPECTOR REPO RT THAT TWO OF THE PARTIES ARE NOT EXISTING ON THE ADDRESSES GIVEN ON THE INVO ICES WHICH IS NOT SUFFICIENT ENOUGH TO FASTEN THE LIABILITY ON THE ASSESSEE AS I T DOES NOT PROVE THAT THESE PURCHASES WERE BOGUS AND ARE ACCOMMODATION ENTRIES AS SET OUT ABOVE BY REVENUE . EVEN FOR THE SAKE OF ARGUMENT IT IS ASSUM ED THAT THE ASSESSEE HAS NOT OBTAINED THE APPROVAL FROM CIDCO FOR DOING THIS MAJOR AND EXTENSIVE STRUCTURAL REPAIR AND MODIFICATION WORK TO THE FACT ORY BUILDING, THIS TECHNICAL BREACH WILL NOT IN ITSELF DISENTITLE THE ASSESSEE FROM CLAIMING THE SAME UNDER THE ACT AS COST OF IMPROVEMENT AND MORE-SO IT IS A CASE OF MAJOR AND EXTENSIVE STRUCTURAL REPAIR AND MODIFICATION TO THE EXISTING FACTORY BUILDING AND NOT A CASE OF CONSTRUCTION OF ALTOGETHER NEW FA CTORY BUILDING. HENCE, IN OUR CONSIDERED VIEW, THE ADDITIONS OF RS. 48,22,390 /- BY DISALLOWING THE SAME AS COST OF IMPROVEMENT TO THE FACTORY BUILDING CANN OT BE SUSTAINED AND WE ORDER DELETION OF THE ADDITION MADE BY THE A.O. AND AS SUSTAINED BY THE CIT(A). HOWEVER, FROM THE PERUSAL OF THE INVOICES SUBMITTED BY THE ASSESSEE ITA 199/MUM/2013 17 IN THE PAPER BOOK FILED WITH THE TRIBUNAL WHICH ARE PLACED AT PAPER BOOK PAGE 92-111, WE HAVE OBSERVED THAT THE SAME TOTALED TO R S 38,18,517/-( EXCLUDING ONE INVOICE WHICH IS PLACED TWICE AT PAGE 100 AND10 1 BEING RITESH TRANSPORT OF RS.92,192/- BEARING NUMBER 385 DATED 31/05/2008) ) AGAINST THE EXPENSES OF RS.48,22,390/- CLAIMED BY THE ASSESSEE, TO THAT EXTENT , WE ARE DIRECTING THE AO TO UNDERTAKE LIMITED VERIFICATION BEFORE ALLOWING THE CLAIM OF THE ASSESSEE AFTER SATISFYING THAT COMPLETE INVOICE S OF RS.48,22,390/-BACKED WITH ACCOUNT PAYEE CHEQUE PAYMENTS AS CLAIMED BY TH E ASSESSEE ARE ON RECORD WITH THE REVENUE DULY RECONCILED TO PROTECT THE INTEREST OF REVENUE. WE DIRECT ACCORDINGLY. 11. WITH RESPECT TO THE SECOND ISSUE, ON PERUSAL OF THE DETAILS FILED BY THE ASSESSEE, THE A.O. OBSERVED THAT THE PROJECT CARMEL AT KAMOTHE IS COMPLETED DURING THE PREVIOUS YEAR 2008-09 RELEVANT TO THE AS SESSMENT YEAR 2009-10. THE OCCUPANCY CERTIFICATE OF THE SAID PROJECT ISSUE D BY THE CIDCO WAS OBTAINED ON 30 TH MARCH, 2009. THE ASSESSEE HAS ALREADY TAKEN BOOKI NG ADVANCE FROM THE BUYERS AND AGREEMENT TO SALE WAS A LSO EXECUTED STILL NO SALE BOOKED FOR MANY BUYERS BY THE ASSESSEE . THE ASSES SEE HAS BOOKED SALE OF RS. 1,98,47,560/- IN THE PROJECT CARMEL AND ADVANCE AGAINST THE BOOKING OF RS. 2,55,68,200/- WAS SHOWN IN THE BALANCE SHEET AS AT 31-03-2009. THE DETAILS OF BOOKING ADVANCE HAVE BEEN GIVEN IN THE A SSESSMENT ORDER PAGE NO. 12. WITH RESPECT TO THE REASONS OF NOT BOOKING SAL ES WHEN THE PROJECT IS COMPLETED AND THE ENTIRE SALE CONSIDERATION RECEIVE D BY THE ASSESSEE, THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RECEIVED T HE OCCUPATION CERTIFICATE FROM CIDCO OF THE PROJECT CARAMEL ON 30-03-2009 AND THE BUILDING IS COMPLETED BUT FOR CERTAIN PRACTICAL PURPOSES, THE B UILDING CONSTRUCTION NEED NOT BE 100% COMPLETE AT THE TIME OF THE RECEIPT OF THE OCCUPATION CERTIFICATE. THE ASSESSEE SUBMITTED THAT THERE COULD BE CERTAIN ITEMS WHICH WOULD BE INCOMPLETE AND UNFINISHED AT THE TIME OF RECEIPT OF COMPLETION CERTIFICATE , THE BUILDER MAY NOT BE IN A POSITION TO GIVE THE POSSES SION TO ALL THE BUYERS. THE ITA 199/MUM/2013 18 ASSESSEE SUBMITTED THAT HE FOLLOWS A METHOD OF OFFE RING PROFITS ON ESTIMATION BASIS FOR ONGOING PROJECTS BASED ON PERCENTAGE COMP LETED TILL THE END OF THE FINANCIAL YEAR WHICH HAS BEEN FOLLOWED CONSISTENTLY . IN CASE OF COMPLETED PROJECTS, THE SALES IS OFFERED AS AND WHEN FULL CON SIDERATION IS RECEIVED AND THE POSSESSION IS HANDED OVER TO THE BUYERS . DURIN G THE FINANCIAL YEAR 2008- 09, IN THE CASE OF THE PROJECT CARMEL ,THE ASSESSEE OFFERED SALES OF THOSE FLATS FROM WHOM THE ASSESSEE HAS RECEIVED THE CONSIDERATI ON, THE FINISHING OF THE FLAT WAS COMPLETE IN ALL RESPECT AND THE POSSESSION WAS HANDED OVER TO THE BUYERS. IN THE CASE OF BALANCE UNITS, THE BOOKING AMOUNT WAS RECEIVED IN THE FINANCIAL YEAR 2008-09 BUT THE FINISHING WORK WAS NOT COMPLETE BY THE END OF THE YEAR ON 31-03-2009 AND THE POSSESSION WAS NOT G IVEN, THE SALES IS BOOKED IN THE SUBSEQUENT FINANCIAL YEAR I.E. 2009-10. THE ASSESSEE SUBMITTED THE SALES ACCOUNT BEFORE THE A.O. . THE ASSESSEE SUBMIT TED THAT THE ASSESSEE IS FOLLOWING PERCENTAGE COMPLETION METHOD FOR OFFERING PROFITS ON THE SAID PROJECT DURING THE CONSTRUCTION STAGE . IN IMMEDIATELY SUCC EEDING YEAR, THE BALANCE UNITS WERE SOLD AND BEEN OFFERED FOR TAXATION, WHIC H INDICATED THAT THE BOOKING OF SALES IS REVENUE NEUTRAL IN NATURE AND N O ATTEMPT IS MADE BY THE ASSESSEE TO AVOID OR PROLONG THE TAX LIABILITY. W ITHOUT PREJUDICE , IT WAS SUBMITTED THAT IF THE AO INTENDS TO BOOK THE SALES OF UNITS FOR WHICH THE ASSESSEE RECEIVED THE BOOKING ADVANCES, IN THE FINA NCIAL YEAR 2008-09 ITSELF, THE BENEFIT SHOULD BE ALLOWED FOR THE LEGITIMATE EX PENSES INCURRED AND CLAIMED BY THE ASSESSEE ON THE UNITS IN THE FINANCI AL YEAR 2009-10, AGAINST THE PROFITS ON THE SALE OF SAID UNITS FOR WHICH TH E WORKING OF SUCH PROPORTIONATE COST INCURRED IN THE SUBSEQUENT YEAR WAS SUBMITTED TO THE A.O. BY THE ASSESSEE. THE A.O. REJECTED THE CONTENTIONS OF THE ASSESSEE B Y HOLDING THAT THE OCCUPANCY CERTIFICATE WAS OBTAINED BY THE ASSESSEE OF THE PROJECT CARMEL ON 30 TH MARCH, 2009 AND THEN HOW THE POSSESSION HAS BEEN G IVEN TO THE BUYERS WHOSE SALE HAS BEEN BOOKED AND HOW HE BOOKED SALE F OR SOME OF THE BUYERS ITA 199/MUM/2013 19 AND NOT BOOKED SALE FOR SOME OF THE BUYERS IS NOT C LEAR. THE AO OBSERVED THAT THE PROJECT IS COMPLETE AND PRICE ALMOST EQUAL TO THE SALE CONSIDERATION HAS BEEN RECEIVED AND SINCE THE ASSESSEE IS FOLLOWI NG PERCENTAGE COMPLETION METHOD, THE PROFIT ARE TO BE BROUGHT TO TAX AS THE PROJECT IS COMPLETED BEFORE THE END OF THE PREVIOUS YEAR RELEVANT TO THE ASSESS MENT YEAR AND THE CHARGEABILITY TO TAX CANNOT BE POSTPONED TO WHEN TH E FULL CONSIDERATION IS RECEIVED AND POSSESSION IS HANDED OVER AS NOW THERE IS NO RISK OF LOSS IN FUTURE FOR THE ASSESSEE. THE A.O. HELD THAT AS PER THE GUIDANCE NOTE ON RECOGNITION OF REVENUE BY THE REAL ESTATE DEVELOPER S ISSUED BY ICAI, THE REVENUE SHOULD BE RECOGNIZED WHEN (I) THE SELLER HA S TRANSFERRED TO THE BUYER ALL SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP AND THE SELLER RETAINS NO EFFECTIVE CONTROL OF THE REAL ESTATE TO A DEGREE US UALLY ASSOCIATED WITH THE OWNERSHIP (II) NO SIGNIFICANT UNCERTAINTY EXISTS RE GARDING THE AMOUNT OF THE CONSIDERATION THAT WILL BE DERIVED FROM THE REAL ES TATE AND IT IS NOT UNREASONABLE TO EXPECT ULTIMATE COLLECTION. THE AO HELD THAT , IN THE INSTANT CASE, THE ASSESSEE HAS RECEIVED ALMOST THE ENTIRE C ONSIDERATION AND THE BUYER HAS THE LEGAL RIGHT TO SELL OR TRANSFERS HIS INTERE ST IN THE PROPERTY AND NO SIGNIFICANT UNCERTAINTY REMAINS IN REALIZING THE SA LE CONSIDERATION FOR REVENUE RECOGNITION, HENCE, ALL THE CONDITIONS FOR REVENUE RECOGNITION ARE SATISFIED AND THE PROFITS SHOULD BE TAXED IN THIS YEAR ONLY AND B Y NOT BOOKING SALES THE ASSESSEE IS DEFERRING HIS TAX LIABILITY. AS PER TH E AO , THE POSSESSION GIVEN TO THE CUSTOMERS IS NOT THE CRITERIA FOR RECOGNIZING I NCOME BY THE BUILDER FOLLOWING PERCENTAGE COMPLETION METHOD. THE AO HELD THAT THE CONTENTION OF THE ASSESSEE THAT THE COST INCURRED IN THE SUBSEQUE NT YEAR IN THE CASE OF CARMEL PROJECT SHOULD BE ALLOWED IN THIS FINANCIAL YEAR IS NOT ACCEPTABLE ACCORDING TO THE MERCANTILE SYSTEM OF ACCOUNTING. THE COST WILL BE ALLOWED IN THE FINANCIAL YEAR IN WHICH IT IS INCURRED. THUS, THE A.O. MADE THE ADDITION OF RS. 77,99,056/- TOWARDS PROFITS WITH RESPECT TO THE FLATS FOR WHICH SALE WAS NOT BOOKED EXCEPT FLAT NO 7 WHERE THE SALE CONSIDER ATION RECEIVED WAS LESS ITA 199/MUM/2013 20 THAN 80% AND ADDED THE SAME TO THE INCOME OF THE AS SESSEE, VIDE ASSESSMENT ORDERS DATED 28.12.2011 PASSED U/S 143(3) OF THE AC T. 12.AGGRIEVED BY THE ASSESSMENT ORDERS DATED 28.12.2 011 PASSED BY THE A.O. U/S. 143(3) OF THE ACT, THE ASSESSEE FILED FIRST AP PEAL BEFORE THE LD. CIT(A). 13. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF DEVELOPERS AND CONTRACTORS AT NAVI MUMB AI UNDER THE NAME AND STYLE OF E.V.HOMES. THE ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE FOR ASCERTAINING PROFITS IS BASED ON THE PERCENTAGE COM PLETION METHOD. THE ASSESSEE SUBMITTED THAT HE IS KEEPING SEPARATE RECO RDS FOR EACH PROJECT. THE REVENUE HAS ACCEPTED IN THE PAST THE SAID PERCENTAG E COMPLETION METHOD FOLLOWED BY THE ASSESSEE WHILE FRAMING ASSESSMENTS U/S 143(3) OF THE ACT . THE REVENUE HAS IN THE INSTANT ASSESSMENT YEAR ACCE PTED THE BOOK RESULTS IN RESPECT OF OTHER PROJECTS EXCEPT THE PROJECT KNOWN AS CARMEL PROJECT WHICH THE ASSESSEE WAS CONSTRUCTING ON THE PLOT OF LAND B EARING NO 12 , SECTOR-6, KAMOTHE , RAIGAD DISTRICT , MAHARASHTRA. THE PLOT W AS PURCHASED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2006-07 AND CONSTRU CTION ON THE SAID PLOT STARTED IN THE ASSESSMENT YEAR 2007-08 ,WHICH WAS C OMPLETED IN THE ASSESSMENT YEAR 2010-11. THE CIDCO HAS GIVEN OCCUP ATION CERTIFICATE WITH RESPECT TO PROJECT CARMEL ON 30-03-2009 TO THE AS SESSEE, THOUGH THE CONSTRUCTION OF THE REMAINING FLATS CONTINUED AND B UILDING WAS COMPLETED IN THE ASSESSMENT YEAR 2010-11. THE ASSESSEE SUBMITTED THAT BUILDING OCCUPATION CERTIFICATE IS A MERE FORMALITY IN ORDER TO GET THE WATER CONNECTION, ELECTRIC CONNECTION, DRAINAGE CONNECTION ETC.. THE ASSESSEE SUBMITTED THAT DETAILED COST OF THE MATERIAL AND CONSTRUCTION EXPE NSES WERE DULY GIVEN TO SHOW THAT THE CONSTRUCTION OF THE BUILDING CONTINUE D TILL THE ASSESSMENT YEAR 2010-11. THE ASSESSEE SUBMITTED THE DETAILS OF PROF IT SHOWN IN THE RETURN OF INCOME FILED WITH THE REVENUE SINCE INCEPTION OF TH E PROJECT CARMEL TILL THE ASSESSMENT YEAR 2011-12, WHICH IS REPRODUCED HEREUN DER: ITA 199/MUM/2013 21 A.Y. CLOSING WIP SALE BOOK PROFIT 2007-08 46,94,166.00 -- -- 2008-09 1,33,28,780.00 -- 11,35,720.00 2009-10 2,59,86,410.00 1,98,47,560.00 57,78,545.00 2010-11 -- 4,27,34,291.00 1,35,68,710.00 2011-12 -- -- -- THE ASSESSEE SUBMITTED THAT THE ASSESSEE CONSTRUCTE D 27 FLATS IN PROJECT CARMEL AND THE ASSESSEE IS FOLLOWING PERCENTAGE COM PLETION METHOD AND THE PROFIT IS DULY DISCLOSED TO THE REVENUE FROM YEAR T O YEAR. THE ASSESSEE ALSO SUBMITTED THAT WITH RESPECT TO FLAT NO 101,203,501 AND 601 WERE ON THE VERGE OF CANCELLATION AND WERE IN-FACT CANCELLED. WITH RE SPECT TO FLAT NO 501 AND 601, THE ADVANCES WERE RECEIVED AND THE AO WANTED T O TREAT THE SAME AS SALES. THE OCCUPATION CERTIFICATE WAS THOUGH RECEIV ED ON 30/03/2009 , THE WATER , ELECTRICITY, DRAINAGE CONNECTIONS ETC WERE OBTAINED BY THE ASSESSEE ONLY AFTER 31/03/2009. THE TOTAL CONSIDERATION REAL IZED FOR 27 FLATS WAS RS.6.95 CRORES, OF WHICH ONLY RS. 2.03 CRORES WAS R EALIZED DURING THE RELEVANT PREVIOUS YEAR AND THE BALANCE CONSIDERATION WERE RE CEIVED AS UNDER:- FINANCIAL YEAR 2006-07 RS.32.82 LACS FINANCIAL YEAR 2007-08 RS.221.60 LACS FINANCIAL YEAR 2009-10 RS. 204.45 LACS FINANCIAL YEAR 2010-11 RS.32.62 LACS THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS RIGHTLY FOLLOWING THE PERCENTAGE COMPLETION METHOD AND THE SAME IS REQUIRED TO BE AC CEPTED. BUT THE AO RELYING ON THE JUDGMENT OF CHAMPION CONSTRUCTION (1 983) 5 ITD 495(BOM. TRIB.) HELD THAT IF THE PROJECT IS COMPLETE, THEN T HERE IS NO REASON FOR NOT RECOGNIZING THE ADVANCES RECEIVED AS SALE AND ACCOR DINGLY THE AO ADDED SUM ITA 199/MUM/2013 22 OF RS. 77,99,076/- AS AN INCOME IN THE CURRENT YEAR AND REDUCED THE WIP BY RS.1,75,29,144/-. THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS RECOGN IZING THE REVENUE AS PER AS-9 THAT IS PERCENTAGE COMPLETION METHOD OF RECOGN IZING THE REVENUE, COST AND PROFITS FROM THE TRANSACTION ACTIVITIES OF REAL ESTATE. THE REVENUE IS RECOGNIZED BY APPLYING PERCENTAGE COMPLETION METHOD ON THE BASIS OF METHODOLOGY EXPLAINED IN AS-7. THE COMPLETION OF T HE REVENUE RECOGNITION PROCESS IS IDENTIFIED AFTER TAKING INTO CONSIDERATI ON THE FOLLOWING CONDITIONS: (A) THE SELLER HAS TRANSFERRED TO THE BUYER ALL THE SIG NIFICANT RISK AND REWARDS OF OWNERSHIP AND THE SELLER RETAINS NO EFFE CTIVE CONTROL OF THE REAL ESTATE TO A DEGREE USUALLY ASSOCIATED WITH THE OWNERSHIP. (B) THE SELLER HAS EFFECTIVELY HANDED OVER POSSESSION O F THE REAL ESTATE UNIT TO THE BUYER FORMING THE PART OF THE TRANSACTI ON (C) NO SIGNIFICANT UNCERTAINTY EXIST REGARDING THE AMO UNT OF CONSIDERATION THAT WILL BE DERIVED FROM REAL ESTATE SALE, AND (D) IT IS NOT UNREASONABLE TO EXPECT ULTIMATE COLLECTIO N OF REVENUE FROM THE BUYER. THE SAID METHOD ALSO RECOGNIZES FOLLOWING INDICATOR OF SUCH TRANSACTIONS AND ACTIVITIES:- (I) THE REVENUE IS RECOGNIZED BASED ON THE STAGE OF COM PLETION REACHED (II) THE COST INCURRED IN REACHING THE STAGE OF COMPLETI ON IS MATCHED OR COMPARED WITH THE REVENUE. (III) REPORTING OF THE RESULT WHICH CAN BE ATTRIBUTED TO THE PROPORTION OF THE WORK COMPLETED. (IV) BASED ON THE PRINCIPLE OF PRUDENCE THE REVENUE IS RECOGNIZED ON REALIZATION ITA 199/MUM/2013 23 (V) THE STAGE OF COMPLETION IS MEASURED IN AN APPROPRIA TE MANNER. NO WEIGHTAGE IS GIVEN TO A SINGLE FACTOR, I NSTEAD OF ALL THE RELEVANT FACTORS ARE CONSIDERED. (VI) WHILE RECOGNIZING THE PROFIT UNDER THIS METHOD AND APPROPRIATE ALLOWANCE FOR FUTURE UNFORESEEABLE FACT ORS WHICH MAY AFFECT THE ULTIMATE QUANTUM OF PROFIT IS GENERALLY MADE. THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS FOLLOWI NG THE SAID ACCOUNTING STANDARD AS-9 AND IS DISCLOSING THE PROFITS ON PERC ENTAGE COMPLETION METHOD IN THE PAST AS WELL AS IN THE FUTURE. THE ASSESSEE SUBMITTED THAT HE HAS ALREADY BOOKED PROFIT OF RS. 11,35,720/- FROM PROJE CT CARMEL DURING THE ASSESSMENT YEAR 2008-09 WHEN THERE WERE NO SALES A ND THE REMAINING PROFIT IS BOOKED IN ASSESSMENT YEARS 2009-10 AND 2010-11 A ND IT WAS NOT NECESSARY FOR THE A.O. TO MAKE CHANGES IN THE PROFI T DISCLOSED BY THE ASSESSEE AND MAKE THE ADDITION OF RS. 77,99,076/- AS WAS DON E VIDE ASSESSMENT ORDERS DATED 28.12.2011 PASSED U/S 143(3) OF THE AC T. IT WAS SUBMITTED THAT AS PER SECTION 145 OF THE ACT INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION HAS TO BE COMPUTED IN ACCORD ANCE WITH THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE AND I T CAN ONLY BE DISTURBED WHERE THE METHOD OF ACCOUNTING FOLLOWED IS SUCH THA T IN THE OPINION OF A.O. THE INCOME CANNOT BE PROPERLY DEDUCED THERE FROM, T HE A.O. CAN COMPUTE THE INCOME IN SUCH A MANNER AS HE MAY DETERMINE. THE AS SESSEE IS FOLLOWING AS- 9 FROM THE FIRST YEAR OF HIS BUSINESS. THIS METHOD HAS BEEN CONSISTENTLY FOLLOWED AND NOW THE SAID METHOD CANNOT BE REJECTED WITHOUT POINTING OUT THAT THE SAID METHOD IS NOT GIVING TRUE INCOME OF T HE ASSESSEE. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE SUBMITTED THAT THE A.O. HAS MADE ADDITION BY TREATING THE ADVANCES RECEIVED AS SALES ON THE GROUND THAT THE BUILDER HAS RECEIVED THE OCCUPATION CERTIFICATE ON 30-03-2009 I.E. DURING THE YEAR UNDER APPEAL, BUT AS PER THE ASSESSEE, THE PER CENTAGE COMPLETION AS CONTEMPLATED BY AS-9 AND AS-7, NO WEIGHTAGE SHOULD BE GIVEN TO A SINGLE ITA 199/MUM/2013 24 FACTOR SUCH AS RECEIPT OF OCCUPATION CERTIFICATE FO R COMPUTING PROFIT BUT ONE HAS TO CONSIDER ALL THE RELEVANT FACTORS. THE ASSE SSEE SUBMITTED THAT HE HAS DISCLOSED PROFIT OF THIS PROJECT CARMEL FROM YEAR T O YEAR AND THE ASSESSEE DISCLOSED SALES OF REMAINING FLAT IN THE ASSESSMENT YEAR 2010-11 ON FIVE COUNTS SUCH AS (I) AS OUT OF THE TOTAL CONSIDERATIO N 1/3RD OF THE CONSIDERATION WAS RECEIVED AFTER 31ST OF MARCH 2009, (II) THERE W ERE CANCELLATION OF BOOKING FOR FOUR FLATS WHICH INCLUDE TWO FLATS WHICH THE A. O. HAS CONSIDERED AS SALES (III) POSSESSION TO EACH FLAT HOLDER WAS GIVEN IN T HE ASSESSMENT YEAR 2010-11 AND THE ASSESSMENT YEAR 2011-12, (IV) THE ASSESSEE BOOKED ALL THE REMAINING SALES IN THE ASSESSMENT YEAR 2010-11 THOUGH SALE CO NSIDERATION OF THE TWO FLATS WHICH WERE CANCELLED WAS RECEIVED IN THE ASSE SSMENT YEAR 2011-12, (V) THE ASSESSEE SPENT FURTHER AMOUNT OF RS. 31,79,171. 00 DURING THE ACCOUNTING YEAR ENDED 31ST MARCH 2010 I.E. THE ASSESSMENT YEAR . 2010-11. THUS, THE ASSESSEE SUBMITTED THAT ASSESSEE IS FOLLOWING APPRO VED METHOD OF ACCOUNTING WHICH REFLECTS TRUE AND CORRECT PROFIT, THEREFORE, AS A RULE OF CONSISTENCY THE SAME METHOD MAY BE ACCEPTED. THE BOOK RESULTS HAVE NOT BEEN REJECTED BY THE A.O.. THUS THE ASSESSEE PRAYED THAT THE ADDITI ON OF RS. 77,99,056 IS REQUIRED TO BE DELETED. IN SUPPORT, THE ASSESSEE R ELIED UPON THE DECISION OF ITAT , MUMBAI BENCH IN THE CASE OF AWADHESH BUILDER S V. ITO, (2010) 37 SOT 122(MUM.) AND ITAT , AHMADABAD BENCHES IN ACIT V. N ATIONAL BUILDERS, (2012) 137 ITD 277(AHD. TRIB.). THE ASSESSEE ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. REALEST BUILDERS & SERVICES LTD.(2008)307 ITR 202(SC) , WHEREIN THE HONBLE SUP REME COURT HELD THAT IN THE ABSENCE OF ANY SPECIFIC FINDING TO DEMONSTRATE THAT THERE IS AN UNDERESTIMATION OF INCOME, THE PRESUMPTION WOULD BE THAT THE ENTIRE EXERCISE IS A REVENUE NATURAL. THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. ADVANCE CO NSTRUCTION CO. PVT. LTD.,(2005)275 ITR 30(GUJ.) WHEREBY HONBLE GUJARAT HIGH COURT HELD THAT POSITION OF THE LAW IS FURTHER SETTLED THAT REGULAR METHOD ADOPTED BY THE TAX- PAYER CANNOT BE REJECTED MERELY BECAUSE IT GIVES BE NEFIT TO THE ASSESSEE IN ITA 199/MUM/2013 25 CERTAIN YEARS. THE ASSESSEE ALSO RELIED UPON THE DE CISION OF ITAT, MUMBAI BENCHES IN THE CASE OF ACIT V. DHARTI ESTATE, (2011 )129 ITD 1(MUM)(TM). THE LD. CIT(A) REJECTED THE CONTENTION OF THE ASSES SEE WHEREBY HE HELD THAT THE ASSESSEE HAS GIVEN A LIST OF BUYERS FROM WHERE IT IS CLEAR THAT THE AGREEMENT HAS ALSO BEEN REGISTERED OF SALES MADE TO THOSE BUYERS BY THE ASSESSEE , AGAINST WHICH THE ASSESSEE HAS RECEIVED SUBSTANTIAL PORTION OF THE CONSIDERATION ALSO. IN EACH CASE THE ADVANCE RECEIV ED IS HIGHER THAN THE PURCHASE PRICE ITSELF. OCCUPANCY CERTIFICATE HAS A LSO BEEN OBTAINED BEFORE THE END OF THE PREVIOUS YEAR ON 30-03-2009. NOW TH ERE IS NO SIGNIFICANT RISK OR UNCERTAINITY ON THE ASSESSEE ABOUT THE REALIZATI ON OF THE INCOME AND THE BUYER HAS ALSO GOT LEGAL RIGHT TO SELL OR TRANSFER THE SAID PROPERTIES, HENCE, THE A.O. HAS RIGHTLY TAXED THE SAID INCOME. THE LD CIT (A) OBSERVED THAT ON THE ONE HAND THE ASSESSEE HAS STATED THAT THEY ARE FOLL OWING PERCENTAGE COMPLETION METHOD OF ACCOUNTING AS PER AS-7 WHICH I S AN APPROVED METHOD AND ON THE OTHER HAND THE ASSESSEE IS STATING THAT THEY ARE FOLLOWING AS-9 METHOD, WHICH IS ALSO AN APPROVED METHOD FOR BUILDE RS. THE OCCUPATION CERTIFICATE WAS OBTAINED BY THE ASSESSEE ON 30-03-2 009. THE OCCUPATION CERTIFICATE WAS GIVEN ON THE BASIS OF ASSESSEES AR CHITECT CERTIFICATE WHEREIN IT WAS CERTIFIED THAT WORK IS COMPLETED AND BUILDING I S READY FOR POSSESSION. THE BUILDING WAS INSPECTED BY THE LOCAL AUTHORITIES. T HE ASSESSEE IS GIVING CONTRADICTORY STATEMENT THAT THE OCCUPATION CERTIFI CATE IS MERELY A FORMALITY FOR GETTING WATER CONNECTION, ELECTRICAL CONNECTION ETC.. THE ASSESSEE IS FOLLOWING PERCENTAGE COMPLETION METHOD WHICH IS AN APPROVED METHOD BUT THE ASSESSEE HAVING RECEIVED THE OCCUPATION CERTIFICATE ON 30-03-2009 AND THEN ALSO THE ASSESSEE IS CONTENDING THAT THE PROJECT IS NOT COMPLETE AND THE ASSESSEE IS CONTRADICTING HIMSELF. THE METHODOLOGY ADOPTED BY THE ASSESSEE IS TO RECOGNIZE THE REVENUE AS AND WHEN HE WANTS TO AN D AS AND WHEN HE CHOOSES TO DO SO IS NOT SUPPORTED BY AS-7 OR AS-9 M ETHOD OF ACCOUNTING . IT IS ALSO NOT SUPPORTED BY A MERCANTILE METHOD OF ACCOUN TING. WITH RESPECT TO THE ITA 199/MUM/2013 26 TWO FLATS CANCELLED INCLUDED IN THE SALE RECEIPT BY THE AO, THE CIT(A) HELD THAT WHEN THE FLATS WERE SOLD BY THE ASSESSEE , AGREEMEN TS WERE REGISTERED AND THE AMOUNT WERE REALIZED , IT AMOUNTS TO SALE BY THE AS SESSEE AND WHEN LATER ON FLATS WERE CANCELLED , THE CANCELLED FLATS WILL COM E BACK TO THE STOCK AND FURTHER SALE WILL BE CONSIDERED IN THE YEAR IN WHIC H THEY ARE RESOLD AND HENCE THE CIT(A) AGREED WITH THE CONTENTIONS OF THE AO IN RECOGNIZING SALE OF THE FLATS WHICH WERE SUBSEQUENTLY CANCELLED BY THE BUYE RS. WITH RESPECT TO THE CONTENTION OF THE ASSESSEE THAT IN CASE SAME IS AC COUNTED AS REVENUE IN THE ASSESSMENT YEAR 2009-10, THEN THE EXPENSES INCURRE D IN SUBSEQUENT YEARS SHOULD BE ALLOWED, THE LD. CIT(A) REJECTED THE CONT ENTION OF THE ASSESSEE AS THE PROJECTS HAVE BEEN COMPLETED AND ALL THE FLATS ARE SOLD ,REVENUE RECOGNIZED, THERE IS NOTHING LEFT TO ALLOW AS EXPENSES PERTAINI NG TO THE SAME PROJECT IN THE SUBSEQUENT YEAR. , VIDE ORDERS DATED 09-11-2012. 14. AGGRIEVED BY THE ORDERS DATED 09-11-2012 OF THE LD. CIT(A), THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 15. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASESSEE IS FOLLOWING PERCENTAGE COMPLETION METHOD BY FOLLOWING ACCOUNTIN G STANDARD 7 AND 9 PRESCRIBED BY THE ICAI. IT IS SUBMITTED THAT THE A .O. HAS MADE ADDITION OF RS. 77,99,056/- BUT THE CORRESPONDING BENEFIT HAS NOT B EEN GIVEN IN THE WIP. THE SAME IS ADDED AGAIN IN THE SUBSEQUENT YEAR I.E . ASSESSMENT YEAR 2010- 11 INCOME WHICH HAS LED TO DOUBLE TAXATION OF THE S AME INCOME WHICH IS NOT PERMISSIBLE . HE DREW OUR ATTENTION TO THE ASSESS MENT ORDER U/S 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2010-11 WHEREBY THE ACCOUNTING METHOD ADOPTED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE RE VENUE AND NO ADDITION HAS BEEN MADE ON THIS COUNT. THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE BOOKING OF SALES IS REVENUE NEUTRAL WHEREBY NO LOSS OR PREJUDICE HAS OCCURRED TO THE REVENUE AS THERE IS NO TAX LOSS TO THE REVENUE AS THE TAXES HAVE BEEN PAID IN THE IMMEDIATELY SUCCEEDING ASSESS MENT YEAR AND THERE IS ITA 199/MUM/2013 27 NO INTENTION TO AVOID OR POSTPONE THE TAX LIABILITY . THE ASSESSEE SUBMITTED THAT HE CONSTRUCTED 27 FLATS IN THIS PROJECT CARMEL AND THE ENTIRE PROFIT EARNED FROM THIS PROJECT WITH RESPECT TO ALL 27 FLA TS SO CONSTRUCTED HAS BEEN OFFERED FOR TAXATION IN THE ASSESSMENT YEAR 2008-09 , 2009-10 AND 2010-11 BY FOLLOWING PERCENTAGE COMPLETION METHOD BASIS OF ACC OUNTING WHICH IS IN COMPLIANCE WITH ACCOUNTING STANDARDS AS-7 AND AS-9. HE DREW OUR ATTENTION TO PAGE 57 AND 164 OF PAPER BOOK WHICH IS AUDITED PROFIT AND LOSS ACCOUNT OF E. V. HOMES(PROPRIETARY CONCERN OF THE ASSESSEE) FO R THE FINANCIAL YEAR 2008- 09 TO CONTEND THAT RS.57,78,545/- HAS BEEN OFFERED TO TAX BY THE ASSESSEE AS GROSS PROFIT FROM THIS PROJECT CARMEL FOR THE PREVI OUS YEAR ENDED 31-03-2009 CORRESPONDING TO THE ASSESSMENT YEAR 2009-10. SIMIL ARLY , HE DREW OUR ATTENTION TO PAGE 20 OF PAPER BOOK WHICH IS AUDITED PROFIT AND LOSS ACCOUNT OF E. V. HOMES (PROPRIETARY CONCERN OF THE ASSESSEE ) FOR THE FINANCIAL YEAR 2007-08 TO CONTEND THAT RS.11,35,720/- HAS BEEN OFF ERED TO TAX BY THE ASSESSEE AS GROSS PROFIT FROM THIS PROJECT CARMEL F OR THE PREVIOUS YEAR ENDED 31-03-2008 CORRESPONDING TO THE ASSESSMENT YEAR 200 8-09. SIMILARLY , HE DREW OUR ATTENTION TO PAGE 165 OF THE PAPER BOOK WH ICH IS PROFIT AND LOSS ACCOUNT OF E. V. HOMES (PROPRIETARY CONCERN OF THE ASSESSEE) FOR THE FINANCIAL YEAR 2009-10 TO CONTEND THAT RS.1,35,68,710/- HAS B EEN OFFERED TO TAX BY THE ASSESSEE AS GROSS PROFIT FROM THIS PROJECT CARMEL F OR THE PREVIOUS YEAR ENDED 31-03-2010 CORRESPONDING TO THE ASSESSMENT YEAR 201 0-11. THE LD. COUNSEL SUBMITTED THAT THE ASSESSMENT FOR THE ASSESSMENT YE AR 2010-11 HAS ALSO BEEN FRAMED U/S 143(3) OF THE ACT WHEREBY REVENUE A CCEPTED THE METHOD OF ACCOUNTING BEING PERCENTAGE COMPLETION METHOD ADOPT ED BY THE ASSESSEE AND THE ASSESSMENT ORDER IS PLACED AT PAPER BOOK,PAGE 8 2-84 . THE LD. COUNSEL RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF CIT V. REALEST BUILDERS AND SERVICES LTD. [2008] 307 ITR 2 02 (SC) ,WHEREIN THE HONBLE SUPREME COURT HELD THAT IN THE ABSENCE OF A NY SPECIFIC FINDING TO DEMONSTRATE THAT THERE IS AN UNDERESTIMATION OF INC OME, THE PRESUMPTION WOULD BE THAT THE ENTIRE EXERCISE IS A REVENUE NEUT RAL. THE LD. COUNSEL FOR THE ITA 199/MUM/2013 28 ASSESSEE SUBMITTED THAT IF THE ENTIRE INCOME FROM T HIS PROJECT CARMEL IS TO BE TREATED AS INCOME OF THIS YEAR AND BROUGHT TO TAX, THE BENEFIT OF COST WHICH IS INCURRED SUBSEQUENTLY IN THE SUCCEEDING YEAR WITH R ESPECT TO THIS PROJECT CARMEL SHOULD BE ALLOWED WHILE COMPUTING THE INCOME OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. IT IS SUBMITTED THAT INC OME IS TAXED TWICE WITH THIS ADDITIONS SO MADE BY THE AO AND SUSTAINED BY T HE CIT(A), ONCE IN THE IMPUGNED ASSESSMENT YEAR AND AGAIN IN THE SUCCEEDIN G ASSESSMENT YEAR 2010-11 WHICH IS NOT PERMISSIBLE UNDER THE ACT , AS THE ASSESSEE OF HIS OWN VOLITION HAS OFFERED FOR TAX THE ENTIRE INCOME IN T HREE ASSESSMENT YEARS I.E. 2008-09,2009-10 AND 2010-11 BASED ON PERCENTAGE COM PLETION METHOD WITH RESPECT TO ALL 27 FLATS SO CONSTRUCTED AND WITH THE ADDITIONS OF RS.77,99,076/- AS MADE BY THE AO AND CONFIRMED BY THE CIT(A) TO TH E INCOME OF THE ASSESSEE IN THE INSTANT ASSESSMENT YEAR AS THE PROFIT FROM P ROJECT CARMEL HAS LED TO THE DOUBLE TAXATION OF THE SAME INCOME WHICH IS NOT PERMISSIBLE UNDER THE ACT. 16. THE LD. D.R. SUBMITTED THAT THE ASSESSEE IS FOL LOWING PERCENTAGE COMPLETION METHOD OF ACCOUNTING AND THE PROJECT IS COMPLETE BY THE END OF THE RELEVANT PREVIOUS YEAR CORRESPONDING TO THE ASS ESSMENT YEAR 2009-10 UNDER APPEAL AS THE OCCUPATION CERTIFICATE OF THE P ROJECT CARMEL WAS RECEIVED FROM THE CIDCO BY THE ASSESSEE ON 30-03-2009, ALMOS T ENTIRE CONSIDERATION HAS BEEN RECEIVED FROM THE BUYERS AND THERE IS NO R ISK AND UNCERTAINITY WITH THE ASSESSEE ABOUT REALIZATION OF THE REMAINING PRO CEEDS, THE BUYERS HAVE GOT RIGHT TO SELL AND TRANSFER THEIR INTEREST IN THE FL ATS AND HENCE REVENUE SHOULD BE RECOGNIZED IN THIS ASSESSMENT YEAR AS WAS DONE B Y THE AO AND SUSTAINED BY THE CIT(A). HE FURTHER RELIED UPON THE ORDERS O F AUTHORITIES BELOW. 17. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND AL SO PERUSED THE MATERIAL ON RECORD INCLUDING CASE LAWS RELIED UPON . WE HAV E OBSERVED THAT THE ASSESSEE HAS CONSTRUCTED 27 FLATS IN THE PROJECT KN OWN AS PROJECT CARMEL ITA 199/MUM/2013 29 WHICH THE ASSESSEE WAS CONSTRUCTING ON THE PLOT OF LAND BEARING NO 12 , SECTOR-6, KAMOTHE , RAIGAD DISTRICT , MAHARASHTRA. THE PLOT WAS PURCHASED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2006-07 AND CONSTRUCTION ON THE SAID PLOT STARTED IN THE ASSESSMENT YEAR 2007-08 AND STA TED TO BE COMPLETED IN THE FINANCIAL YEAR 2009-10. THE ASSESSEE IS FOLLOWING P ERCENTAGE COMPLETION METHOD OF ACCOUNTING FOR ACCOUNTING REVENUE AS STIP ULATED VIDE ACCOUNTING STANDARDS AS -7 AND AS-9 PRESCRIBED BY ICAI. THE AS SESSEEE HAS STATED TO HAVE DISCLOSED THE PROFIT FROM THIS PROJECT CARMEL WITH RESPECT TO ALL 27 FLATS SO CONSTRUCTED OVER THE THREE YEARS I.E. FINANCIAL YEAR 2007-08, 2008-09 AND 2009-10 BY FOLLOWING PERCENTAGE COMPLETION METHOD O F ACCOUNTING. THE ENTIRE PROFIT WITH RESPECT TO ALL 27 FLATS SO CONST RUCTED IS STATED BY THE ASSESSEE TO HAVE BEEN DULY OFFERED FOR TAXATION WIT H RESPECT TO PROJECT CARMEL AND DUE TAXES BEING PAID TO THE REVENUE BY FOLLOWIN G PERCENTAGE COMPLETION METHOD OF ACCOUNTING . THE ASSESSEE HAS RECEIVED TH E OCCUPATION CERTIFICATE ON 30-03-2009 FROM CIDCO WHICH IS PLACED AT PAPER B OOK PAGE 118-119. THE ASSESSEE HAS DEFERRED THE SALE TO THE ASSESSMEN T YEAR 2010-11 WITH RESPECT TO 13 FLATS ON THE GROUND THAT CONSTRUCTION AND FINISHING WORK WAS NOT COMPLETED TILL 31 ST MARCH, 2009 WITH RESPECT TO THESE 13 FLATS AND THE POSSESSION WAS ALSO GIVEN WITH RESPECT TO THESE 13 FLATS IN THE FINANCIAL YEAR 2009-10 AND 2010-111, ALTHOUGH ALMOST ENTIRE SALES CONSIDERATION HAS BEEN RECEIVED TILL 31-03-2009 WITH RESPECT TO THESE FLAT S BARRING ONE FLAT WHERE VERY LITTLE AMOUNT VIS--VIS TOTAL CONSIDERATION HAS BEE N RECEIVED . THE ASSESSEE HAS STATED TO HAVE INCURRED EXPENSES OF RS.31,79,1 71/- IN THE FINANCIAL YEAR 2009-10 TOWARDS THESE 13 FLATS AS THESE FLATS WERE NOT FINISHED BY THE END OF THE RELEVANT PREVIOUS YEAR I.E. 2008-09 AND DETAILS FURNISHED TO THE REVENUE DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HA S SUBMITTED THAT MERELY BY RECEIVING OCCUPATION CERTIFICATE ON 30/03/2009 , DOES NOT BY ITSELF MEAN THAT THE PROJECT IS COMPLETE AS THERE ARE SEVERAL O THER WORK WHICH ARE DONE POST RECEIPT OF THIS OCCUPANCY CERTIFICATE DATED 30 -03-2009, SUCH AS APPLYING FOR ELECTRICAL CONNECTION, WATER CONNECTION, DRAINA GE CONNECTION ETC AND ALSO ITA 199/MUM/2013 30 FINISHING WORK IS TO BE DONE IN THESE FLATS TO COMP LETE CONSTRUCTION OF THESE FLATS, AS ALSO THERE ARE OTHER RELEVANT FACTORS TO BE KEPT IN MIND TO BOOK REVENUE AS PER PERCENTAGE COMPLETION METHOD APART F ROM THE OCCUPANCY CERTIFICATE. THUS, THE ASSESSEE HAD SUBMITTED THAT HE ACTED BONAFIDELY AND VOLUNTARILY OFFERED TO TAX THE ENTIRE INCOME OF T HE PROJECT CARMEL WITH RESPECT TO ALL 27 FLATS SO CONSTRUCTED SPREAD IN TH REE FINANCIAL YEARS NAMELY 2007-08, 2008-09 AND 2009-10 AND PAID DUE TAXES TO THE REVENUE IN THESE THREE YEAR OF HIS OWN VOLITION BY FOLLOWING PERCENT AGE COMPLETION METHOD AS THE PROJECT IS COMPLETED IN THE FINANCIAL YEAR 200 9-10 AND NOT IN THE FINANCIAL YEAR 2008-09 AS CONTENDED BY THE REVENUE WHEN THE OCCUPATION CERTIFICATE WAS RECEIVED. THE POSSESSION WITH RESPE CT TO THOSE FLATS WHICH WERE NOT COMPLETED BY THE END OF THE PREVIOUS YEAR ENDED 31-03-2009 WERE GIVEN IN THE FINANCIAL YEAR 2009-10 AND 2010-11, WHILE T HE PROJECT WAS COMPLETED IN FINANCIAL YEAR 2009-10. THE ASSESSEE HAS PLACED POSSESSION LETTERS BEARING DATES OF 2009-10 AND 2010-11 IN THE PAPER BOOK PAGE 120-140 . THE ASSESSEE STATED TO HAVE ACTED WITH A BONA-FIDE BELIEF THAT T HE INCOME HAS TO BE OFFERED TO TAX BASED ON PERCENTAGE COMPLETION METHOD BASED ON THE STAGES OF COMPLETION OF THE PROJECT AND THE RECEIPT OF THE OC CUPANCY CERTIFICATE IS ONE OF THE RELEVANT FACTORS TO BE TAKEN INTO ACCOUNT FOR D ETERMINING THE COMPLETION OF THE PROJECT BUT IT IS NOT THE ONLY OR THE SOLE RELE VANT AND CONCLUSIVE FACTOR FOR DETERMINING THE COMPLETION OF THE PROJECT FOR BOOKI NG REVENUE UNDER THE PERCENTAGE COMPLETION METHOD. IT IS STATED THAT THE RE WERE OTHER WORKS SUCH AS FINISHING WORK WHICH WERE REQUIRED TO COMPLETE T HE PROJECT WHICH WAS DONE IN THE FINANCIAL YEAR 2009-10 AND THE ASSESSEE HAS STATED TO HAVE INCURRED RS.31,79,171/- IN THE SUCCEEDING FINANCIAL YEAR 200 8-09 TO COMPLETE THIS PROJECT CARMEL , WHILE THE REVENUE IS CONSIDERING T HE RECEIPT OF OCCUPANCY CERTIFICATE ON 30-03-2009 AS CONCLUSIVE TO BOOK THE ENTIRE PROFIT TO TAX BACKED WITH THE PLEA THAT ALMOST ENTIRE CONSIDERATION IS R ECEIVED BY THE ASSESSEE FROM THE FLAT BUYERS. THE SAME METHOD OF ACCOUNTING BEING PERCENTAGE COMPLETION METHOD AS FOLLOWED BY THE ASSESSEE IS ST ATED TO BE CONSISTENTLY ITA 199/MUM/2013 31 FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE REVENU E IN THE PAST AS WELL IN THE SUCCEEDING ASSESSMENT YEARS AND EVEN THE ASSESS MENTS WERE FRAMED U/S. 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2010-11 A CCEPTING THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, WHICH HAS NOT BEEN DISTURBED BY THE REVENUE IN ASSESSMENT YEAR 2010-11.THE SAID ASSESSM ENT ORDER DATED 01/03/2013 PASSED BY THE AO U/S 143(3) OF THE ACT I S PLACED IN PAPER BOOK PAGE 82-84. WE HAVE OBSERVED THAT THE REVENUE HAS N OT REJECTED THE BOOKS OF ACCOUNTS . THUS, KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF SUBSTANTIAL JUSTICE, WE ARE SETTING ASIDE THIS MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO VERIFY THE CONTENTIONS OF THE ASSESSEE THAT THE ENTIRE PROFIT FROM THIS PROJECT CARMEL WIT H RESPECT TO ALL 27 FLATS SO CONSTRUCTED IS DULY OFFERED FOR TAXATION BY THE ASS ESSEE ALBEIT IN THE ASSESSMENT YEAR 2008-09,2009-10 AND 2010-11. IN CA SE THE CONTENTION OF THE ASSESSEE IS FOUND TO BE CORRECT THAT THE ENTIRE PROFIT OF THIS PROJECT CARMEL WITH RESPECT TO ALL 27 FLATS SO CONSTRUCTED IS DULY OFFERED FOR TAXATION IN THESE THREE YEARS AND THE ENTIRE DUE TAXES THEREON ARE PA ID TO THE REVENUE, THEN THE ADDITION SO MADE OF RS.77,99,076/- BY THE REVEN UE IN THE IMPUGNED ASSESSMENT YEAR BY THE AO AND AS CONFIRMED BY THE C IT(A) WILL STAND DELETED AS IN OUR CONSIDERED VIEW, THEN NO PREJUDICE IS SAI D TO BE CAUSED TO THE REVENUE AS REVENUE IMPACT IS TAX NEUTRAL AND THE RE VENUE WOULD HAVE GOT ALL ITS DUE TAXES ON THIS PROJECT CARMEL ALBEIT IN THRE E ASSESSMENT YEAR I.E. 2008- 09,2009-10 AND 2010-11. OUR VIEW IS CONSISTENT WITH THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. REALEST BUILDER S AND SERVICES LIMITED(SUPRA). WE ORDER ACCORDINGLY. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA N0. 199/MUM/2013 FOR THE ASSESSMENT YEAR 2009-10 IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ITA 199/MUM/2013 32 ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY , 2016. # $% &' 18-05-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 18-05-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI