M/s. Rajesh Buildcon & Infrastructure Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 22/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97944 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 01-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VED PRAKASH MISHRA
• Assessee Lawyers: SUNIL ARORA; RUCHIKA JAIN CAS
• Keywords: Depreciation; Additional evidence; Reasonable cause

Judgement Text

1 ITA NO. 22 /DEL/2013 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT ME MBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO.-22/DEL/ 2013 (ASSESSMENT YEAR-2008- 09) RAJESH BUILDCON & INFRASTRUCTURE PVT. LTD., 2/33, ANSARI ROAD, DARYA GANJ, NEW DELHI. AAEFP8228P VS ITO, WARD 39(3), NEW DELHI. APPELLANT BY SHRI SUNIL ARORA & MS. RUCHIKA JAIN, CAS RESPONDENT BY SH. VED PRAKASH MISHRA, SR. DR ORDER PER BEENA PILLAI, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)S-XVII, NEW DELHI VIDE HIS ORDER DATED 22/10/2012 FOR A.Y. 2008-09 ON THE FOLLOWING GROUND S: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS GROSSLY ERRED IN LAW IN UPHOLDING THE RE JECTION OF BOOKS OF ACCOUNTS MADE BY THE LD. ASSESSING OFFI CER DISREGARDING THE METHOD OF ACCOUNTING REGULARLY EMP LOYED BY THE APPELLANT COMPANY. DATE OF HEARING 01.12.2015 DATE OF PRONOUNCEMENT 2 ITA NO. 22 /DEL/2013 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN LAW IN HOLDING THAT THE APPELLANT IS A CONTRACTOR AND NOT A BUILDER OR DEVE LOPER. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN DIRECTING THE LD. ASSES SING OFFICER TO COMPUTE INCOME IN RESPECT OF HARIDWAR PR OJECT BASED ON THE PERCENTAGE OF COMPLETION METHOD WHEN T HE VARIOUS CONDITIONS PRESCRIBED FOR RECOGNITION OF RE VENUE UNDER AS-7 ON CONSTRUCTION CONTACTS AND AS-9 ON REVENUE RECOGNITION READ WITH GUIDANCE NOTE ON RECOGNITION OF REVENUE BY THE REAL ESTATE DEVELOPER S ARE NOT SATISFIED IN THE CASE OF THE APPELLANT. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. ASSESSING AUTHORITY HAS GROSSLY ERRED IN TREATING T HE INTEREST, DEPRECIATION AND PRELIMINARY AND PREOPERA TIVE EXPENSES, AND GENERAL MANAGEMENT AND ADMINISTRATION EXPENSES OF RS. 16,77,299/- AS WORK-IN-PROGRESS INS TEAD OF REVENUE EXPENSE CLAIMED BY THE ASSESSEE AND LD. CIT(A) HAS GROSSLY ERRED IN HOLDING THE SAID EXPENSES ARE NOT GENERAL IN NATURE RATHER RELATABLE TO THE SPECIFIC PROJECTS ALLOWABLE FOR DEDUCTION AT THE TIME OF COMPUTATION OF INCOME THROUGH PERCENTAGE COMPLETION METHOD. 5. THE APPELLANT CRAVES TO ADD, WITHDRAW, AND REVISE A NY OR ALL THE ABOVE GROUND OF APPEAL, EITHER BEFORE OR DU RING THE COURSE OF HEARING IN THE INTEREST OF JUSTICE. 2. BRIEF FACTS OF THE CASE AS RECORDED BY THE LD. A SSESSING OFFICER ARE AS UNDER: THE ASSESSEE IS INVOLVED IN THE BUSINESS OF DEVELOP MENT OF REAL ESTATE, RESIDENTIAL TOWNSHIP PROJECT AT HARIDWAR & JAIPUR. THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 28/02/20 09 DECLARING A TOTAL INCOME OF RS. 4,20,970/-. THE CASE WAS SELEC TED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE I.T. ACT DATED 29/09/2 009 WAS ISSUED. DURING THE ASSESSMENT PROCEEDINGS, THE LD. ASSESSIN G OFFICER OBSERVED THAT, ASSESSEE HAD INCURRED CERTAIN COSTS OF LAND AND THE 3 ITA NO. 22 /DEL/2013 AMOUNT INCURRED ON DEVELOPMENT WERE TREATED AS INVE NTORY/WORK IN PROGRESS, TILL THE TIME THE SAME CAN BE SOLD/TRANSF ERRED. THE ASSESSEE HAD ALSO INCLUDED THE BOOKING MONEY RECEIV ED IN PHASED MANNER UNDER CURRENT LIABILITIES, TILL THE CRITERIA FOR RECOGNITION OF THE INCOME PURSUANT TO THE TRANSFER OF THE PROPERTY IS MET. 3. THE LD. ASSESSING OFFICER TREATED THE ENTIRE BOO KING MONEY RECEIVED BY THE ASSESSEE DURING THE RELEVANT FINANC IAL YEAR AS WELL AS DURING THE PRECEDING FINANCIAL YEAR BEING 2006-0 7 AS ITS INCOME, AND COMPUTED TAXABLE INCOME, BY REDUCING THERE FROM , THE TOTAL COST INCURRED TILL 31/03/2008, IN RESPECT OF LAND A ND DEVELOPMENT WORK, TO ARRIVE AT THE INCOME OF THE ASSESSEE FOR T HE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION. THE LD. ASSES SING OFFICER ALSO CAPITALIZED THE EXPENSES AMOUNTING TO RS. 16,7 7,299/- AS WORK IN PROGRESS. THE LD. ASSESSING OFFICER COMPLETED T HE ASSESSMENT AT AN INCOME OF RS. 3.06.42,224/-. 4. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFI CER THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT (A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND HE HAD DIRECTED THE LD. ASSESSING OFFICER TO COMPUTE THE EXACT PERCENTAGE OF PROJECT COMPLETION ACHIEVED BY THE ASSESSEE BY THE END OF THE YEAR AND , ACCORDINGLY THE INCOME FROM HARIDWAR PROJECT WAS TO BE COMPUTED. I N RESPECT OF THE JAIPUR PROJECT THE LD. CIT(A) HAD STATED THAT A S THE SAID PROJECT WAS IN THE INITIAL STAGE, AND THE ASCERTAINABLE PER CENTAGE HAS NOT BEEN COMPLETED, THEREFORE, PERCENTAGE COMPLETION ME THOD COULD NOT BE APPLIED FOR THE RELEVANT YEAR. 4 ITA NO. 22 /DEL/2013 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. THE ISSUE THAT ARISES FOR CONSID ERATION BEFORE US PERTAINS TO RECOGNITION OF REVENUE IN RESPECT OF A PROJECT UNDERTAKEN BY THE ASSESSEE AT HARIDWAR. 6. THE LD. AR TODAY HAS FILED A PETITION FOR ADMISS ION OF ADDITIONAL EVIDENCE UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963, WHEREIN CERTAIN ADDITIONAL DOCUMENTARY EVIDEN CES HAVE BEEN ENCLOSED. THE APPLICATION UNDER RULE 29 AS FILED B Y THE ASSESSEE READS AS FOLLOWS: PETITION FOR ADMISSION OF ADDITIONAL EVIDENCE UND ER RULE 29 OF THE INCOME-TAX (APPELLATE TRIBUNAL) RULES, 1963 THIS IS WITH REFERENCE TO THE LAST HEARING DATED 12 .08.2015, WHEREIN THE APPELLANT WAS DIRECTED BY THE HON. BENC H OF ITAT TO FILE A DETAILED PETITION SUBSTANTIATING THE REASON AS TO WHY THE ADDITIONAL EVIDENCES WERE NOT FILED BEFORE THE LOWE R AUTHORITIES, I.E., THE LD. ASSESSING OFFICER AND LD. CIT(A) AND WHAT IS THE RELEVANCE OF THE SAID ADDITIONAL EVIDENCES TO THE P RESENT APPEAL. IN THIS REGARDS, IT IS HEREBY SUBMITTED AS UNDER: 1. THE APPELLANT HAS VIDE PETITION DATED 26.11.2014, F ILED IN TERMS OF RULE 29 OF INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963, SUBMITTED CERTAIN ADDITIONAL DOCUMENTARY EVID ENCES. 2. THE ADDITIONAL EVIDENCES WERE BASICALLY IN THE FORM OF CERTAIN FIRS LODGED AGAINST THE APPELLANT COMPANY/D IRECTORS OF THE APPELLANT COMPANY, LEGAL NOTICES RECEIVED FO R REFUNDING THE BOOKING MONEY PAID BY THE VARIOUS APP LICANTS OF HARIDWAR PROJECT, CASES FILED BEFORE VARIOUS CON SUMER COURTS/FORUMS BY THE APPLICANTS AGAINST THE APPELLA NT COMPANY. THE SAME WERE ENCLOSED ON PAGE NO. 1 TO 1 6 OF THE PAPER BOOK FILED UNDER RULE 29 OF INCOME TAX (A PPELLATE TRIBUNAL) RULES, 1963. 3. AS REGARDS THE REASON FOR NON-SUBMISSION OF THE AFO RESAID DOCUMENTS AT THE ASSESSMENT STAGE, IT IS HEREBY SUB MITTED THAT THE AFORESAID DISPUTE DOCUMENTS PERTAIN TO THE PERIOD AFTER THE DATE OF DECIDING OF APPEAL BY THE HON. FI RST APPELLATE AUTHORITY, THUS THE SAME WERE NOT EARLIER AVAILABLE WITH THE APPELLANT COMPANY AND, THEREFORE, THE APPE LLANT WAS PREVENTED BY REASONABLE CAUSE FROM FURNISHING T HE SAME BEFORE LOWER AUTHORITIES. 5 ITA NO. 22 /DEL/2013 4. AS REGARDS THE RELEVANCE OF THE AFORESAID DOCUMENTS TO THE PRESENT APPEAL MATTER, IT IS HEREBY SUBMITTED AS UN DER: 4.1 THE MAIN ISSUE INVOLVED IN THE PRESENT APPEAL IS TH AT THE LD. CIT(A) HAS VIDE HER ORDER DATED 17.10.2012 DIRECTED THE LD. ASSESSING OFFICER TO COMPUTE THE E XACT PERCENTAGE OF PROJECT COMPLETION ACHIEVED BY THE APPELLANT BY THE END OF THE YEAR AND ACCORDINGLY COMPUTE THE INCOME FROM THE HARIDWAR PROJECT. IN T HIS REGARDS, THE DETAILED SUBMISSIONS HAVE BEEN COVERED IN THE APPEAL PAPER BOOK DATED 26.11.2014 FILED BY THE ASSESSEE. 4.2 THE PLEA OF THE APPELLANT IS THAT THE AFORESAID DIR ECTION OF THE LD. CIT(A) IS NOT MAINTAINABLE AS THE PERCEN TAGE COMPLETION METHOD PRESCRIBED UNDER AS-7 CANNOT BE APPLIED IN THE CASE OF APPELLANT AS THE OUTCOME OF THE HARIDWAR PROJECT CANNOT BE RELIABLY ESTIMATED. THI S IS ON ACCOUNT OF VARIOUS DISPUTED GOING ON AGAINST THE APPELLANT COMPANY AND RELATED TO HARIDWAR PROJECT. THE APPELLANT HAS IN THE MAIN APPEAL PAPER BOOK DAT ED 26.11.2014 ALREADY FILED THE COPIES OF OTHER DOCUME NTS IN SUPPORT OF THE FACT OF DISPUTES BEING GOING ON A GAINST THE APPELLANT COMPANY, DIRECTORS OF THE APPELLANT COMPANY. 4.3 THE PERUSAL OF THE ADDITIONAL DOCUMENTARY EVIDENCES WOULD REVEAL THAT THE POSITION OF THE HARIDWAR PROJ ECT EVEN AS ON PRESENT DATE IS HIGHLY CONTENTIOUS. EVE N AS ON PRESENT DATE LARGE NUMBERS OF FRESH DISPUTE CASE S ARE BEING FILED AGAINST THE COMPANY. IN THE LIGHT OF THE AFORESAID SUBMISSIONS AND DOCUMENTARY EVIDENCES IN SUPPORT OF DISPUTES, IT IS HEREBY SUBMITTED THAT EV EN AS ON PRESENT DATE THE OUTCOME OF THE PROJECT CANNOT B E RELIABLY ESTIMATED. MORE THAN 7.5 YEARS HAVE ELAPS ED FROM THE INCEPTION OF THE PROJECT AND THERE IS NOT MUCH PROGRESS IN THE DEVELOPMENT AS ON DATE. THEREFORE, THE PERCENTAGE COMPLETION METHOD AS PRESCRIBED UNDER AS - 7 CANNOT BE APPLIED AS THE OUTCOME OF THE PROJECT I S STILL IS DARK AND IT IS REALLY DOUBTFUL AS TO WHETHER THE HARIDWAR PROJECT WOULD EVER BE ABLE TO SEE THE LIGH T OF THE DAY. 5. THUS, KEEPING THE AFORESAID IN VIEW, THE APPLICANT HEREBY PRAYS THAT IN EXERCISE OF THE POWERS CONFERRED UNDE R RULE 29 OF INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963, THE ADDITIONAL DOCUMENTS COMPILED IN THE ADDITIONAL PAP ER BOOK DATED 26.11.2014 MAY KINDLY BE ADMITTED AND CONSIDE RED BY THIS HON. COURT FOR THE JUDICIAL DISPOSAL OF THE PRESENT APPEAL OF THE APPELLANT. 6 ITA NO. 22 /DEL/2013 6. THE KIND ATTENTION OF THIS HON. COURT IS INVITED TO THE DECISION OF THE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT VS. TEXT HUNDRED INDIA PVT. LTD., 239 CTR 263. IN THAT CASE, THEIR LORDSHIPS HAVE HELD THAT RULE 29, ENABL ES THE TRIBUNAL TO ADMIT ANY ADDITIONAL EVIDENCE WHICH WOU LD BE NECESSARY TO DO SUBSTANTIAL JUSTICE IN THE MATTER. THEIR LORDSHIPS FURTHER OBSERVED THAT THE VARIOUS PROCEDU RES, INCLUDING THAT RELATING TO FILING OF ADDITIONAL EVI DENCE, IS HANDMADE FOR JUSTICE AND JUSTICE SHOULD NOT BE ALLO WED TO BE CHOKED ONLY BECAUSE OF SOME INADVERTENT ERROR OR OM ISSION ON THE PART OF ONE OF THE PARTIES TO LEAD EVIDENCE. THE RELEVANT OBSERVATIONS OF THE COURT ARE REPRODUCED HEREUNDER: 13. THE AFORESAID CASE LAW CLEARLY LAYS DOWN A NE AT PRINCIPLE OF LAW THAT DISCRETION LIES WITH THE TRIB UNAL TO ADMIT ADDITIONAL EVIDENCE IN THE INTEREST OF JUSTIC E ONCE THE TRIBUNAL AFFIRMS THE OPINION THAT DOING SO WOUL D BE NECESSARY FOR PROPER ADJUDICATION OF THE MATTER. T HIS CAN BE DONE EVEN WHEN APPLICATION IS FILED BY ONE O F THE PARTIES TO THE APPEAL AND IT NEED NOT TO BE A S UO MOTTO ACTION OF THE TRIBUNAL. THE AFORESAID RULE IS MADE ENABLING THE TRIBUNAL TO ADMIT THE ADDITIONAL EVIDENCE IN ITS DISCRETION IF THE TRIBUNAL HOLDS THE VIEW THAT SUCH ADDITIONAL EVIDENCE WOULD BE NECESSARY TO DO SUBSTANTIAL JUSTICE IN THE MATTER . IT IS WELL SETTLED THAT THE PROCEDURE IS HANDMADE OF JUSTICE AND JUSTICE SHOULD NOT BE ALLOWED TO BE CHOKED ONLY BECAUSE OF SOME INADVERTENT ERROR OR OMISSION ON THE PART OF ONE OF THE PARTIES TO LEAD EVIDENCE AT THE APPROPRIATE STAGE. ONCE IT IS FOUND THAT THE PARTY INTENDING TO LEAD EVIDEN CE BEFORE THE TRIBUNAL FOR THE FIRST TIME WAS PREVENTE D BY SUFFICIENT CAUSE TO LEAD SUCH AN EVIDENCE AND THAT THIS EVIDENCE WOULD HAVE MATERIAL BEARING ON THE ISSUE WHICH NEEDS TO BE DECIDED BY THE TRIBUNAL AND ENDS OF JUSTICE DEMAND ADMISSION OF SUCH AN EVIDENCE, THE TRIBUNAL CAN PASS AN ORDER TO THAT EFFECT. (EMPHA SIS SUPPLIED) 7. IN VIEW OF THE AFORESAID, IT IS SUBMITTED THAT ADDI TIONAL EVIDENCE PLACED BY THE APPLICANT MAY KINDLY BE ADMI TTED AND TAKEN INTO ACCOUNT BY YOUR HONOURS FOR DISPOSI NG THE APPEAL AS THE SAME ARE NECESSARY TO DO SUBSTANTIAL JUSTICE IN THE MATTER. 7 ITA NO. 22 /DEL/2013 7. ON BARE PERUSAL OF THESE ADDITIONAL DOCUMENTS, W E NOTE THAT THESE ARE CERTAIN FIRS LODGED AGAINST THE ASSESSEE/ DIRECTORS OF THE ASSESSEE, LEGAL NOTICES RECEIVED, CASES FILED BEFOR E VARIOUS FORUMS/COURTS AGAINST THE ASSESSEE. IT IS ALSO OBS ERVED THAT THE SAME RELATES TO THE PERIOD AFTER THE DATE OF ORDER BY THE LD. CIT(A). THUS, THESE DOCUMENTS COULD NOT BE MADE AVAILABLE B Y THE ASSESSEE BEFORE THE AUTHORITIES BELOW. 8. IN ORDER TO MEET THE ENDS OF JUSTICE, WE SET ASI DE THE ISSUE TO THE FILES OF THE LD. ASSESSING OFFICER FOR CONSIDER ATION OF THESE DOCUMENTS AND TO DECIDE THE MATTER AFRESH. 9. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE ST ANDS STATISTICALLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 02/12/ 2015 SD/- SD/- (N.K. SAINI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 02/12/2015 *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 8 ITA NO. 22 /DEL/2013 DATE 1. DRAFT DICTATED ON 01.12.15 2. DRAFT PLACED BEFORE AUTHOR 02.12.15 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 02.12.15 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 02.12.15 5. APPROVED DRAFT COMES TO THE SR.PS/PS 03.12.15 6. KEPT FOR PRONOUNCEMENT ON 02.12.15 7. FILE SENT TO THE BENCH CLERK 03.12.15 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.