DCIT 15(3), MUMBAI V. OMKAR ENTERPRISE, MUMBAI

ITA 2109/MUM/2009

• Counselvise Citation: 210919914 RSA 2009
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 06-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M SUBRAMANIAN
• Assessee Lawyers: SU RENDRA KUMAR
• Keywords: Opportunity of being heard; Competent authority
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI PRAMOD KUM AR (A.M.) ITA NO. 2109/MUM /2009 ASSESSMENT YEAR 2005-06 DY. COMMISSIONER OF INCOME - TAX, 15(3), MATRU MANDIR, IST FLOOR, TARDEO ROAD, MUMBAI 400 007. VS. M/S OMKAR ENTERPRISE, 19 LAXMI CHHAYA, L.T. ROAD, BABHAI NAKA, BORIVALI (W), MUMBAI- 400 092. PAN : AAAFO-9762-F (APPELLANT) (RESPONDENT) ITA NO. 416/MUM /2010 ASSESSMENT YEAR 2006-07 M/S OMKAR ENTERPRISE, 19 LAXMI CHHAYA, L.T. ROAD, BABHAI NAKA, BORIVALI (W), MUMBAI- 400 092. PAN : AAAFO-9762-F VS. DY. COMMISSIONER OF INCOME - TAX, 15(3), MATRU MANDIR, IST FLOOR, TARDEO ROAD, MUMBAI 400 007. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M. SUBRAMANIAN RESPONDENT BY : SHRI SURENDRA KUMAR O R D E R PER BENCH. THE APPEAL FOR THE A.Y. 2005-06 PREFERRED BY THE R EVENUE IS DIRECTED AGAINST THE ORDER DATED 11.2.2009 PASSED B Y THE LD. CIT(A) AND THE APPEAL FOR THE A.Y. 2006-07 PREFERRED BY THE AS SESSEE IS DIRECTED AGAINST THE ORDER DATED 30.10.2009 PASSED BY THE LD . CIT(A). SINCE FACTS ARE IDENTICAL AND ISSUE INVOLVED IS COMMON, BOTH TH ESE APPEALS WERE ITA 2109/M/09 & 416/M/2010 M/S OMKAR ENTERPRISE 2 HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE EXTRACTED FROM ITA NO. 2109/M/2009 FOR THE A.Y. 2005-06 ARE THAT THE ASSES SEE FIRM IS ENGAGED IN THE BUSINESS AS BUILDER AND DEVELOPER. IT FILED RETURN DECLARING TOTAL INCOME AT ` 84,750/-.DURING THE COURSE OF ASSESSMENT, THE A.O. OBSERVED THAT ON VERIFICATION OF P&L ACCOUNT FOR THE YEAR UN DER CONSIDERATION, THE ASSESSEE FIRM HAS SHOWN WORK-IN-PROGRESS OF ` 439096717/- AND IN THE BALANCE SHEET AMOUNT RECEIVED FOR BOOKING OF FLATS ` 34963855/-. THE ASSESSEE WAS ASKED AS TO WHY HE HAS ADOPTED THE PRO JECT COMPLETION METHOD INSTEAD OF FULL PERCENTAGE COMPLETION METHOD . IN RESPONSE, IT WAS INTER ALIA EXPLAINED BY THE ASSESSEE THAT THE COMME NCEMENT CERTIFICATE WAS ISSUED BY THE LOCAL COMPETENT AUTHORITY ON 20.2 .2004 AND OCCUPATION CERTIFICATE WAS ISSUED ONLY ON 26.8.2005 , HENCE, UPTO THE ACCOUNTING PERIOD 2004-05 PROJECT WAS UNDER CONSTRU CTION AND HENCE WORK-IN-PROGRESS WAS RIGHTLY SHOWN. HOWEVER, THE A .O. DID NOT ACCEPT THE ASSESSEES PLEA AND OBSERVED THAT THE ASSESSEE COMPLETED 75% OF TOTAL WORK AND RECEIVED 90% OF TOTAL CONSIDERATION, THEREFORE, HE ESTIMATED THE PROFIT FOR THE YEAR UNDER CONSIDERATI ON ON THE BASIS OF PERCENTAGE COMPLETION METHOD AT ` 4850790/- AS UNDER ( PAGE 4 OF ASSESSMENT ORDER ) :- TOTAL SALE VALUE OF THE PROJECT (REFER TO TRADING A/C 2006-07) : ` 11,64,16,412/- 45% OF SALE PROCEEDS FOR M/S OMKAR ENTERPRISES ` 5,23,84,855/- PROFIT DECLARED : ` 90,37,344/- % THEREOF : 17.25% 45% OF SALE PROCEED FOR M/S OMKAR ENTERPRISES: ` 2,80,08,695/- ( ` 6,22,37,644/-) ITA 2109/M/09 & 416/M/2010 M/S OMKAR ENTERPRISE 3 17% OF PROFIT : ` 48,50,790/- AND ACCORDINGLY COMPLETED THE ASSESSMENT AT AN INCO ME OF ` 48,50,790/- VIDE ORDER DATED 14.11.2007 PASSED U/S 143(3) OF TH E INCOME TAX ACT, 1961 (THE ACT). ON APPEAL, THE LD. CIT(A) OBSERVED THAT THE FINDING OF THE A.O. IS BASED ON CONJECTURE AS NO EVIDENCE HAS BEEN BROUGHT ON RECORD AS TO HOW PROFIT OF THE RELEVANT YEAR HAS BEEN DEFE RRED, THE A.O. HAS NOT POINTED OUT THE INCONSISTENCY OF METHOD OF ACCOUNTI NG, THE A.O. HAS NOT CATEGORICALLY MENTIONED AS TO WHAT ARE THE BASIC DE FECTS OF BOOKS OF ACCOUNT WHICH ARE SUBSTANTIAL IN NATURE GIVE RISE T O THE PRESUMPTION THAT ACTUAL PROFIT HAS NOT BEEN DISCLOSED, THERE IS NO PROPRIETARY ON THE PART OF THE A.O. TO TAX THE SAME AMOUNT IN SUBSEQUE NT YEAR WITHOUT REDUCING THE PRE-TAKEN PROFIT AND HELD THAT THERE I S NO MERIT IN SUCH ESTIMATION OF INCOME AND ACCORDINGLY DELETED THE ES TIMATION OF PROFIT OF ` 48,50,790/- AND ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE DELETION OF ADDITION MADE BY THE A.O. IN VIEW OF THE DECISION IN CIT VS. BRITISH PAINT (INDIA) LTD. 188 ITR 44 (SC) AND ACIT VS. CHAMPION CONSTRUC TION CO. 5 ITD 495 (MUM). 4. AT THE TIME OF HEARING, BOTH PARTIES HAVE AGREED THAT IN THIS CASE THE LD. CIT(A) WHILE ACCEPTING THE ASSESSEES PLEA THAT THE PROFIT FOR A.Y. 2005-06 IS TO BE ASSESSED ON PROJECT COMPLETION MET HOD INSTEAD OF PERCENTAGE COMPLETION METHOD HAS GIVEN A CONTRARY F INDING IN THE APPEAL FOR THE SUBSEQUENT A.Y. 2006-07 THAT ACTUAL WORK OF PROJECT WAS COMPLETED BEFORE THE F.Y. 2005-06 RELEVANT TO A.Y. 2006-07. THEREFORE, IN THE IN THE INTEREST OF JUSTICE, THE MATTER MAY B E SET ASIDE TO THE FILE OF THE LD. CIT(A) TO DECIDE THE ISSUE AFRESH. ITA 2109/M/09 & 416/M/2010 M/S OMKAR ENTERPRISE 4 5. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE LD. CIT(A) WHILE DECIDING THE APPEAL FOR THE A.Y. 2005-06 HAS ACCEPTED THE METHOD OF ACCOUNTING I.E. PROJECT COMPLETION METHOD FOLLOW ED BY THE ASSESSEE ON THE GROUND THAT THE A.O. HAS NEITHER POINTED OUT AN Y INCONSISTENCY IN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE N OR HAS POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT. HOWEVER, THE L D. CIT(A) WHILE DECIDING THE APPEAL FOR A.Y. 2006-07 HAS GIVEN A CO NTRARY FINDING AS UNDER (PAGE 9 OF CIT(A)S ORDER):- .......FURTHER, IT IS RELEVANT TO MENTION THAT ENTI RE PROJECT WAS COMPLETED IN F.Y. 2004-05 A.Y., 2005-06, HENCE, THERE WAS NO REASON WHATSOEVER TO CLAIM SUCH EXPENDITURE IN THIS YEAR WHEN FINAL SALE OF FLAT WAS ACCOUNTED FOR DISCLOSURE OF PROFIT. OBVIOUSLY SUCH ATTEMPT HA S BEEN MADE BY THE APPELLANT TO INFLATE THE EXPENDITURE. IN THE ABSENCE OF ANY SUPPORTING MATERIAL I.E. STAT EMENT OF FINANCIAL ACCOUNTS FOR A.Y. 2005-06 PLACED ON RECORD BY THE A SSESSEE AND KEEPING IN VIEW THAT THE FINDING OF THE FACT RECORDED BY TH E LD. CIT(A) ARE CONTRARY AS MENTIONED HEREINABOVE, WE ARE OF THE VIEW THAT I N THE INTEREST OF JUSTICE, THE MATTER SHOULD GO BACK TO THE FILE OF T HE LD. CIT(A) AND ACCORDINGLY WE SET ASIDE THE ORDERS PASSED BY THE L D. CIT(A) FOR A.YRS. 2005-06 AND 2006-07 AND RESTORE THE MATTER TO THE F ILE OF THE LD. CIT(A) WHO SHALL DECIDE THE SAME AFRESH IN THE LIGHT OF TH E OUR OBSERVATIONS HEREINABOVE AND ACCORDING TO LAW AFTER PROVIDING RE ASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 416/MUM/2010, A.Y. 2006-07 (ASSESSEES APPE AL) 6. GROUND NO. 1 IS AGAINST THE SUSTENANCE OF DISALL OWANCE OF ` 39,59,458/- OUT OF MATERIAL AND LABOUR COST. ITA 2109/M/09 & 416/M/2010 M/S OMKAR ENTERPRISE 5 7. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE AG REED THAT THE FACTS OF THE ABOVE GROUND ARE SIMILAR TO THE FACTS FOR A. Y. 2005-06, THEREFORE, THE PLEA TAKEN BY THEM MAY BE CONSIDERED WHILE DECI DING THE APPEAL FOR THE YEAR UNDER CONSIDERATION. 8. AFTER HEARING THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE PARTIES, WE, KEEPI NG IN VIEW OUR FINDING RECORDED IN REVENUES APPEAL FOR A.Y. 2005-06 IN PA RA NO. 5 OF THIS ORDER, SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND RE STORE THE ISSUE TO HIS FILE WHO SHALL DECIDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS GIVEN HEREINABOVE AND ACCORDING TO LAW AFTER PROVID ING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GRO UND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED FOR STATISTICA L PURPOSES. 9. GROUND NO. 2 IS AGAINST THE SUSTENANCE OF DISALL OWANCE OF LEGAL AND PROFESSIONAL FEES OF ` 105000/- AND SALARY OF ` 135000/-. 10. IT WAS DISALLOWED BY THE A.O. AS THE ASSESSEE H AS NOT FURNISHED ANY DETAILS OR EVIDENCE. ON APPEAL, THE LD. CIT(A) WHILE OBSERVING THAT THERE WAS A FAILURE ON THE PART OF THE APPELLANT TO PRODUCE NECESSARY EVIDENCE BEFORE THE A.O., CONFIRMED THE DISALLOWANC E MADE BY THE A.O. 11. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LD. CIT(A) SUBMITS THAT HE HAS NO OBJECTION IF THE ISSUE IS SE T ASIDE TO THE FILE OF THE LD. CIT(A) WHICH WAS NOT OBJECTED TO BY THE LD. D.R . ITA 2109/M/09 & 416/M/2010 M/S OMKAR ENTERPRISE 6 12. AFTER HEARING THE SUBMISSIONS OF THE RIVAL PART IES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT BEFORE TH E LD. CIT(A) IT WAS CONTENDED BY THE ASSESSEE THAT THE ASSESSEE HAS FIL ED DETAILS OF PAYMENT TOWARDS LEGAL AND PROFESSIONAL FEES OF ` 105000/- AND SALARY OF ` 135000/- AND PROPER TDS HAS ALSO BEEN MADE. HOWEVE R, THE LD. CIT(A) WHILE OBSERVING THAT THERE WAS A FAILURE ON THE PAR T OF THE APPELLANT TO PRODUCE NECESSARY EVIDENCE BEFORE THE A.O., CONFIRM ED THE DISALLOWANCE MADE BY THE A.O. SINCE THE LD. CIT(A) WITHOUT CONSI DERING THE ASSESSEES SUBMISSION THAT THE RELEVANT DETAILS WERE DULY FILE D BEFORE THE A.O. HAS REJECTED THE CLAIM OF THE ASSESSEE, THEREFORE, WE A RE OF THE VIEW THAT IN THE INTEREST OF JUSTICE, THE MATTER SHOULD GO BACK TO THE FILE OF THE LD. CIT(A) AND ACCORDINGLY WE SET ASIDE THE ORDER PASSE D BY THE LD. CIT(A) ON THIS ACCOUNT ALSO AND RESTORE THE MATTER TO HIS FIL E TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE OUR OBSERVATIONS HEREINA BOVE AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND TAKEN BY THE ASSESSEE IS, THER EFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSE. 13. IN THE RESULT, REVENUES APPEAL FOR A.Y. 2005-0 6 AND ASSESSEES APPEAL FOR A.Y. 2006-07 STANDS PARTLY ALLOWED FOR S TATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.2011. SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER SD/- (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 29.04.2011. RK ITA 2109/M/09 & 416/M/2010 M/S OMKAR ENTERPRISE 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- CONCERNED , MUMBAI 4. COMMISSIONER OF INCOME TAX, CONCERNED, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA 2109/M/09 & 416/M/2010 M/S OMKAR ENTERPRISE 8 DRAFT DICTATED ON 19 . 4 .11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 20.4.11 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS