The DCIT, Circle-9, Ahmedabad V. M/s. B.R. Developers, Ahmedabad

ITA 2234/AHD/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9085 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 05-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 133A; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2234/AHD/2012 & C.O. NO.226/AHD/12 (ASSESSMENT YEAR: 2009-10) D.C.I.T. CIRCLE-9, AHMEDABAD M/S. B.R. DEVELOPERS 3-4, 2 ND FLOOR, MARUTI ARCADE, NR. SHIVRANJINI CROSS ROAD, 132 FT. RING ROAD, SATELLITE, AHMEDABADS V/S V/S M/S. B.R. DEVELOPERS 3-4, 2 ND FLOOR, MARUTI ARCADE, NR. SHIVRANJINI CROSS ROAD, 132 FT. RING ROAD, SATELLITE, AHMEDABAD D.C.I.T. CIRCLE-9, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAHFB9222A APPELLANT BY : SHRI JAMES KURIAN, SR. D.R . RESPONDENT BY : SHRI DHIREN SHAH, A.R. ( )/ ORDER DATE OF HEARING : 22 -02-201 7 DATE OF PRONOUNCEMENT : 27 -02-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: ITA NO. 2234/AH D/12 & C.O. 236/AHD/12 . A.Y. 2009-10 2 1. ITA NO. 2234 & C.O. NO.226/AHD/2012 ARE APPEALS OF THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE PREFERRED AGAINST T HE VERY SAME ORDER OF THE LD. CIT(A)-XV, AHMEDABAD DATED 04.07.2012 PERTA INING TO A.Y. 2009-10. 2. THE SUBSTANTIVE GRIEVANCE OF THE REVENUE READS AS U NDER:- 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,00,5 7,310/- MADE U/S.69 OF THE ACT. 2. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE AMOUNT DISCLOSED B Y THE ASSESSEE WAS BUSINESS RECEIPT ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT. 3. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AH MEDABAD HAS ERRED IN LAW AND ON FACTS BY NOT ADJUDICATING UPON ASSESSEE'S EL IGIBILITY FOR DEDUCTION U/S.80IB(10)OF THE ACT. 3. AND THE CROSS OBJECTION OF THE ASSESSEE IS IN SUPPO RT OF THE FINDINGS OF THE LD. CIT(A). 4. THE ASSESSEE IS A DEVELOPER. THE RETURN WAS FILED ON 27.09.2009 DECLARING TOTAL INCOME OF NIL. THE RETURN WAS SELECTED FOR SC RUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVE D UPON THE ASSESSEE. 5. IN THIS CASE, A SURVEY OPERATION WAS CONDUCTED AT T HE BUSINESS PREMISES OF THE ASSESSEE U/S. 133A OF THE ACT. DURING THE COURS E OF THE SURVEY PROCEEDINGS, SOME INCRIMINATING DOCUMENTS WERE FOUN D AND IMPOUNDED. OUT OF THEM, THERE WAS ONE NOTE BOOK CONTAINING PAG ES 1 TO 11 IN THAT NOTE BOOK, DETAILS OF RECEIPT OF FLAT BOOKING AMOUNT WAS NOTED FOR THE MONTH OF ITA NO. 2234/AH D/12 & C.O. 236/AHD/12 . A.Y. 2009-10 3 APRIL TO AUGUST. THE ENTRIES FOUND TO BE NOTED IN T HAT IMPOUNDED BOOK CAN BE SUMMARIZED AS UNDER:- PAGE NO. DATE AMOUNT IN RS. CHEQUE CASH 1. 2/04/08 5/4/08 /04/08 2/4/08 2,50,000 1,00,001 1,11,000 23,18,980 2. 2/5/08 7/5/08 23/5/08 18/5/08 20/5/08 /5/08 2,00,000 24,50,000 3,40,000 7,12,000 20,55,209 17,06,740 3. 1/6/08 /6/08 8,00,000 18,26,350 4. / 7/08 /7/08 3,00,000 9,26.300 5. 1/8/08 8/8/08 9/8/08 18,35,400 1,45,000 12,23,800 6. 5/9/08 5/9/08 3/9/08 3/9/08 5,00,000 1,00,000 10,00,000 10,00,000 7. 9/10/08 /10/08 5,00,000 15,00,000 8 1/11/08 19/11/2008 10,25,866 6,00,000 9 1/12/08 31/12/2008 5,00,000 23,82,000 10 9/1/08* 4,87,800 11 /2/08* 5,00,000 1,56,83,207 1,00,57,799 ITA NO. 2234/AH D/12 & C.O. 236/AHD/12 . A.Y. 2009-10 4 6. ONE OF THE PARTNER OF THE ASSESSEE FIRM SHRI BALVAN TRAI R. AGRAWAL HAS VOLUNTARY ADMITTED THAT THE CASH RECEIPTS OF RS. 1, 00,57,309/- FOUND TO BE NOTED IN THE IMPOUNDED NOTE BOOK WAS ON ACCOUNT OF SALE OF BUNGALOWS AT VRAJ DHAM SCHEME AND ALSO STATED THAT THE SAID CA SH RECEIPTS IS NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT AND SHOWN A S MEMBERS COLLECTION IN THE BALANCE SHEET. IT WAS EXPLAINED THAT THE SAID C ASH RECEIPTS WILL BE RECOGNIZED AS REVENUE ON COMPLETION OF THE PROJECT. 7. THE A.O. IS EXAMINED THE CASH RECEIPTS FOUND TO BE NOTED IN THE IMPOUNDED NOTE BOOK IN THE LIGHT OF SECTION 68 OF THE ACT AND THEREAFTER IN THE VERY SAME ASSESSMENT ORDER CHANGED HIS STANDS AND INVOKE D THE PROVISIONS OF SECTION 69 OF THE ACT. 8. THE A.O. DISBELIEVED THE CONTENTION OF THE ASSESSEE THAT THE SAID CASH ENTRIES FOUND IN THE IMPOUNDED NOTE BOOK BELONG TO THE PROJECT VRAJ DHAM. THE A.O. TREATED RS. 1,00,57,309/- AS DEEMED INCOME U/S. 69 OF THE ACT AND TAXED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. 9. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND VEHEMENTLY STATED THAT THE A.O. IS NOT JUSTIFIED IN TREATING UNACCOUN TED SALE RECEIPT FOUND DURING THE COURSE OF SURVEY PROCEEDING AS NON-BUSIN ESS RECEIPT AND TREATING THE SAME AS INCOME FROM OTHER SOURCES U/S. 69 OF THE ACT. ITA NO. 2234/AH D/12 & C.O. 236/AHD/12 . A.Y. 2009-10 5 10. IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE DISCUSSION BY THE A.O. IN RESPECT OF ALLOWABILITY OF CLAIM U/S. 80IB(10) O F THE ACT IS MISPLACED AS THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/S. 80I B(10) OF THE ACT. 11. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) WAS CONVINCED THAT THE ONLY ACTIVITY OF THE ASSESSEE IS TO DEVELOP AND CONSTRUCT VRAJ DHAM WHICH WAS ELIGIBLE FOR DEDUCT ION U/S. 80IB(10) OF THE ACT. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE IS F OLLOWING PROJECT COMPLETION METHOD AND SINCE THE PROJECT IS NOT COMP LETED, THEREFORE IT IS PREMATURE TO PUT COMMENT ON MERIT ON THE ISSUE OF A LLOWABILITY OR OTHERWISE OF CLAIM OF DEDUCTION U/S. 80IB(10) OF TH E ACT. 12. COMING TO THE CASH RECEIPTS OF RS. 1,00,57,299/- FO UND TO BE NOTED IN THE IMPOUNDED NOTE BOOK, THE LD. CIT(A) WAS CONVINCED T HAT SUCH CASH RECEIPT IS FROM MEMBERS CONTRIBUTION RECEIVED FROM THE BOO KING OF FLATS AT VRAJ DHAM SCHEME. THEREFORE, THE SAME HAS TO BE TREATED AS BUSINESS INCOME OF THE ASSESSEE, EVEN IF IT IS FOUND TO BE UNACCOUN TED ON THE DATE OF SURVEY. THE LD. CIT(A) DIRECTED THE A.O. TO DELETE THE ADDI TION OF RS. 1,00,57,309/- MADE U/S. 69 OF THE ACT. 13. RIVAL SUBMISSIONS HAVE BEEN HEARD AT LENGTH. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE CAREFULLY PERUSED THE ORDERS O F THE AUTHORITIES BELOW AND HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RE LEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD IN THE FORM OF PAPER BO OK IN THE LIGHT OF RULE 18(6) OF THE APPELLATE TRIBUNAL RULES. ITA NO. 2234/AH D/12 & C.O. 236/AHD/12 . A.Y. 2009-10 6 14. AT THIS STAGE, IT WOULD BE PERTINENT TO SEE THE NOT ES FORMING PART OF STATEMENT OF TOTAL INCOME FOR A.Y. 2009-10 FILED WI TH THE RETURN OF INCOME AND THE SAME READS AS UNDER:- 4. THE SURVEY PROCEEDINGS U/S.133A OF THE I.T. AC T, 1961 WAS CARRIED OUT BY THE INCOME-TAX DEPARTMENT ON 10/2/2009. DURI NG THE COURSE OF SURVEY PROCEEDINGS PARTNER OF THE FIRM HAS VOLUNTARILY AND SUO-MOTO DISCLOSED AN AMOUNT OF RS. 1,00,57,299/- AS CASH RECEIPT FROM TH E MEMBERS OF THE SCHEME 'VRAJ DHAM' FOR WHICH NO DETAILS WERE MAINTAINED AND WAS NOT RECORDED IN THE BOOKS OF ACCOUNT AND IT WAS INFORMED THAT SAID CASH RECEIPT WILL BE SHOWN IN THE INCOME-TAX RETURN FOR A.Y.2009-10. THE FIRM HAS, ON THE BASIS OF SAID STATEMENT, DEPOSITED THE C-ASH RECEIPT IN THE BANK ACCOUNT OF THE FIRM AND RECORDED THE ENTRIES IN THE BOOKS OF ACCOUNTS. THE SAID CASH RECEIPT IS FROM THE MEMBERS OF THE SCHEME 'VRAJ DHAM' ELIGIBLE FOR DEDUCTION U/S.8 0IB(10) OF THE ACT. DURING THE YEAR UNDER CONSIDERATION B.U, PERMISSION OF PAR T RESIDENTIAL UNITS HAVE BEEN RECEIVED. THE FIRM HAS FOLLOWED COM PLETED CONTRACT METHOD FOR RECOGNITION OF REVENUE, HENCE SAID CASH RECEIPT IS NOT CREDITED TO THE PROFIT & LOSS ACCOUNT AND SHOWN AS MEMBERS COLLECTIONS IN THE B ALANCE SHEET. THE SAID CASH RECEIPT WILL BE RECOGNIZED AS REVENUE ON COMPLETION OF THE PROJECT AND ON THE RECOGNITION OF REVENUE FROM THE HOUSING PROJECT 'VR AJ DHAM' ON RECEIPT OF B.U. PERMISSION OF THE ENTIRE HOUSING PROJECT. THE SAI D CASH RECEIPT IS THE REVENUE FROM THE HOUSING PROJECT ELIGIBLE FOR DEDUCTION U/S .80IB(10) OF THE ACT. 5. THE ASSESSEE HAS NOT SHOWN THE CASH RECEIPT OF RS. 1,00,57,299/- IN THE STATEMENT OF TOTAL INCOME AS THE PROJECT IS NOT COM PLETED AND REVENUE IS NOT RECOGNIZED. IF THE ASSESSING OFFICER CONSIDERED THE SAME AS BUSINESS RECEIPT THE SAME IS REQUIRED TO BE GIVEN AS DEDUCTION U/S.80IB( 10) OF THE INCOME TAX ACT, 1961 AS THE SAID CASH RECEIPTS IS FORM THE 'VRAJ DHA M' SCHEME ELIGIBLE FOR DEDUCTION 80IB(10) OF THE INCOME TAX ACT,1961 . ITA NO. 2234/AH D/12 & C.O. 236/AHD/12 . A.Y. 2009-10 7 15. THE CASH RECEIPTS FOUND TO BE NOTED IN THE IMPOUNDE D NOTE BOOK HAS BEEN REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE UNDE R SCHEDULE F AND THE SAME READS AS UNDER:- SCHEDULE- F MEMBERS COLLECTION PARTICULARS AMOUNT (RS.) A) MEMBER'S COLLECTION FOR LA 31. ASHISH PANDIT & SHILPA PARIKH 11 JASHVANT RAI . M . PATEL 9, KIRJT VAITHA 10. LATHIKA NIRAJ JAIN/ NIRAJ A. JAIN 52. MITUL SHAH 19. NARAYAN V. PILLAI & SHUSHAMA V. PILLAI 59. PRABHATBHAI H. DESAI 2. RITA KAMALIA 58. SHANTOSH PAREEKH 25. VINAY SONI 1 ,068,000 100,000 624,000 411,000 25,000 732,000 75,000 101,000 508,000 51,000 664,000 TOTAL ( A ) 4,359,000 B) MEMBER'S COLLECTION FOR CONSTRUCTION 19. NARAYAN V. PILLAI 25. VD. VINAY SONI 2. RITA KAMALIA 31. ASHISH PANDIT 32. JAY PRAKASH ROHITKUMAR 1 ,468,000 337,000 1,292,000 .578,000 827,000 TOTAL (A) 4,502,000 C) MEMBER'S COLLECTION (OTHER) (REFER NOTE NO. C(II) OF SCHEDULE - S) 10,057,299 TOTAL A + B+ C 18,918,299 ITA NO. 2234/AH D/12 & C.O. 236/AHD/12 . A.Y. 2009-10 8 16. IN FORM NO. 10CCB OF THE AUDIT REPORT FOR THE YEAR UNDER CONSIDERATION, THE RELEVANT OBSERVATIONS OF THE AUDITORS READ AS U NDER:- 9. INITIAL ASSESSMENT YEAR FROM WHEN: THE ASSESSEE IS DEVELOPING HOUSING PROJECT KNOWN AS DEDUCTION IS BEING CLAIMED. 'VRAJ DHAM'. THE SAID HOUSING PROJECT IS ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE INCOME-TAX ACT, 1961. WHEREIN INTERALIA ONE OF THE CONDITION FOR ELIGIBILITY OF HOUSING PROJECT IS THAT IT SHOULD BE COMPLETED WITHIN 4 YEARS AND THE B.U. PERMISSION/COMPLETION CERTIFICATE OF LOCAL AUTHORIT Y SHOULD BE OBTAINED. ACCORDINGLY, THE APPROPRIATE METHOD OF ACCOUNTING FOR DETERMINATION OF PROFIT ELIGIBLE FOR EXEMPTION U/S.80IB(10) IS THE PROJEC T COMPLETION METHOD WHICH THE FIRM HAS FOLL OWED. DURING THE YEAR 9 UNITS HAVE BEEN SOLD BY EXECUTI NG CONVEYANCE DEED, HOWEVER BU PERMISSION/ COMPENSATION CERTIFICATE OF ENTIRE HOUSING PROJECT HAS NOT BEEN RECEIVED FROM LOCAL AUTHORITY AND PROJECT IS INCOMPLETE, HENCE NO REVENUE IS RECOGNIZED. THE PRO FIT OF THE HOUSING PROJECT WILL BE RECOGNIZED ON RECEIP T OF THE BU PERMISSION OF ENTIRE HOUSING PROJECT ON COMPLETION OF HOUSING PROJECT. 17. THE FACTS EMANATING FROM THE AFORE-STATED DISCUSSIO N CLEARLY SHOW THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD FOR REVENUE RECOGNITION AND SINCE THE PROJECT VRAJ DHAM WAS AT THE NASCEN T STAGE DURING THE YEAR UNDER CONSIDERATION, THE BOOKING AMOUNTS HAVE BEEN SHOWN IN THE BALANCE SHEET AS UNDER THE HEAD MEMBERS CONTRIBUTION. 18. A PERUSAL OF THE STATEMENT OF SHRI SHRI BALVANTRAI R. AGRAWAL CLEARLY SHOW THAT IN THE STATEMENT THE PARTNER ADMITTED THAT THE TRANSACTIONS ARE RELATED TO BOOKING OF VRAJ DHAM HOUSING SCHEME AN D IN THE SAME STATEMENT, THE PARTNER ALSO ADMITTED THE CASH RECEI PT OF RS. 1,00,57,299/- ITA NO. 2234/AH D/12 & C.O. 236/AHD/12 . A.Y. 2009-10 9 HAS NOT SHOWN ANYWHERE SINCE IT IS CURRENT FINANCIA L YEARS UNACCOUNTED BOOKING RECEIPT, IT WILL BE INCORPORATED IN THE BOO KS OF ACCOUNTS AND DULY REFLECTED IN THE FINANCIAL STATEMENTS. 19. IN OUR CONSIDERED OPINION, ONCE THE PARTNER HAS AD MITTED THE CASH RECEIPT OF RS. 1,00,57,299/- AS BOOKING AMOUNT FOR VRAJ DH AM HOUSING SCHEME, THE SAME DOES NOT LEAVE ANY DOUBT THAT THE IMPUGNED AMOUNT IS BUSINESS RECEIPT OF THE ASSESSEE. SINCE THE ASSESSEE IS FOLL OWING PROJECT COMPLETION METHOD OF ACCOUNTING, THEREFORE, TO TAX THE SAME DU RING THE YEAR UNDER CONSIDERATION IS PREMATURE AND NOT WARRANTED. 20. THE UNDISPUTED FACT IS THAT THE ONLY SOURCE OF INCO ME OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS FROM DEVELO PING THE PROJECT VRAJ DHAM HOUSING SCHEME, THEREFORE, ANY RECEIPT HAS TO BE TREATED AS BUSINESS RECEIPT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THEREFORE, IN OUR UNDERSTANDING OF THE FACTS, THE R ECEIPT OF RS. 1,00,57,799/- HAS BEEN ERRONEOUSLY TAXED U/S. 69 OF THE ACT UNDER THE HEAD INCOME FROM OTHER SOURCES. THE FIRST APPELLATE AU THORITY HAS RIGHTLY DIRECTED THE A.O. TO DELETE THE IMPUGNED ADDITION W HICH CALLS FOR NO INTERFERENCE. 21. BEFORE CLOSING, THE ELIGIBILITY OF DEDUCTION U/S. 8 0IB(10) OF THE ACT SHALL BE CONSIDERED BY THE A.O. AS AND WHEN SUCH RECEIPT BY THE ASSESSEE ON COMPLETION OF THE SAID PROJECT AS PER THE PROVISION S OF THE LAW. ITA NO. 2234/AH D/12 & C.O. 236/AHD/12 . A.Y. 2009-10 10 22. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. CROSS OBJECTION OF THE ASSESSEE BECOMES INFRUCTUOUS. ORDER PRONOUNCED IN OPEN COURT ON 27 - 02- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOU NTANT MEMBER AHMEDABAD: DATED 27 /02/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD