HOME BUILDERS, NAVI MUMBAI V. JCIT RG 22(3), MUMBAI

ITA 2240/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8367 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 31-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ADAGIRI
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & DR.S.T.M.PAVALA N , J M ITA NO. 2240 / MUM/20 13 ( ASSESSMENT YEAR : 200 9 - 10 ) M/S HOME BUILDERS, SEA HOME, PLOT NO.3, SECTOR - 36, PALM BEACH ROAD, KARAVE, NERUL, NAVI MUMBAI - 400 706 VS. JCIT, RANGE - 22(3), MUMBAI PAN/GI R NO. : A ACFH 1767 K ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 2 52 1 /MUM/20 13 ( ASSESSMENT YEAR :200 9 - 10 ) ACIT, RANGE - 22(3), MUMBAI VS. M/S HOME BUILDERS, SEA HOME, PLOT NO.3, SECTOR - 36, PALM BEACH ROA D, KARAVE, NERUL, NAVI MUMBAI - 400 706 PAN/GIR NO. : A ACFH 1767 K ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : MR. PRAKASH PANDIT /ASSESSEE BY : MR. B. YADAGIRI DATE OF HEARING : 31 ST JULY , 201 4 DATE OF PRONOUNCEMENT : 22 ND AUGUST , 2014 O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A), DATED 29 - 1 - 2013 FOR THE ASSESSMENT YEAR 2009 - 10 , IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE I.T. ACT. ITA NO S . 2240 & 2521 /1 3 2 2 . FACTS IN BRIEF ARE THAT ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON BUSINESS OF DEVELOPMENT OF THE BUILDING AND OTHER CONSTRUCTION ACTIVITIES. THE SAID FIRM HAS STARTED ITS CONSTRUCTION ACTIVITIES SINCE ITS INCORPORATION IN THE YEAR 1998. THE ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE FIRM FOR ASCERTAINING PROFITS IS PERCENTAGE COMPLETION METHOD. THE ACCOUNTING STANDARD AS - 7 PRESCRIBES TWO METHODS OF ACCOUNTING WHICH CONTRACTORS COMMONLY FOLLOW, VIZ (A) PERCENTAGE OF COMPLETION METHOD AND (B) COMPLETED CONTRACT METHOD. THE ASSESSEE IS FOL L OW I NG PERCENTAGE COMPLETION METHOD CONSISTENTLY SINCE INCEPTION. IN THE SAID METHOD REVENUE IS RECOGNIZED AS CONTR ACT ACTIVITY PROGRESS AND BASED ON STAGE OF COMPLETION WHICH MATCHES WITH THE REVENUE RESULTING IN REPORTING OF THE RESULTS WH I CH CAN BE ATTRIBUTED TO THE PROPORTION OF WORK COMPLETED. THE REVENUE IS RECOGNIZED AS ACTIVITIES PROGRESSES EVEN THOUGH IN CERTA IN CIRCUMSTANCES, IT MAY NOT BE REALIZED. KEEPING THE ABOVE METHOD IN MIND THE ASSESSEE STARTED ITS BUSINESS ACTIVITY OF DEVELOPING VARIOUS PLOTS IN NAVI MUMBAI. AFTER DEVELOPING THE SAME, THE ASSESSEE SALES FLATS ON OWNERSHIP BASIS TO THE PROSPECTIVE PURC HASERS. SINCE THE YEAR OF INCEPTION THE ASSESSEE IS CONSISTENTLY FOLLOWING PERCENTAGE COMPLETION METHOD. 2.1 DURING THE YEAR UNDER APPEAL THE ASSESSEE WAS CONSTRUCTING THREE PROJECTS I.E. SEA HOMES, SHANTI PARK, RUPAREL GARDEN ON PLOTS OF LAND SITUATED I N AND AROUND NAVI MUMBAI. AS REGARDS SEA HOMES PROJ ECT IS CONCERNED, THE ASSESSEE STARTED CONSTRUCTION ACTIVITIES IN A.Y.2006 - 07 AS PER THE PLANS SANCTIONED ON 20 TH SEPTEMBER 2008 THE ASSESSEE RECEIVED OCCUPATION CERTIFICATE HOWE VER, THE ASSESSEE DID NOT D ISCLOSE PROFIT IN ITA NO S . 2240 & 2521 /1 3 3 RESPECT OF ALL THE FLATS SITUATED IN TH IS BUILDING. THE CONTENTION OF ASSESSEE BEFORE THE AO WAS THAT THERE WAS STRUCTURAL PROBLEM IN RESPECT OF THE FLATS ON 10TH AND 11TH FLOORS AND THE FLOORING AND THE TILING OF THE FLATS ON THE 10TH & 11 TH FLOORS WAS DEFECTIVE. THEREFORE THE CONSTRUCTION OF THE REMAINING FLATS CONTINUED AND BUILDING IN ALL RESPECTS WAS COMPLETED ONLY IN AY 2011 - 2012. IT WAS FURTHER SUBMITTED THAT BUILDING OCCUPATION CERTIFICATE IS A MERE FORMALITY IN ORDER TO G ET WATER CONNECTION, ELECTRIC CONNECTION, DRAINAGE CONNECTION ETC. T HE ASSESSEE HAS GIVEN DETAILED COST OF THE MATERIAL AND CONSTRUCTION EXPENSES TO SHOW THAT THE CONSTRUCTION ACTIVITIES CONTINUED DURING A.Y. 2010 - 11. IT WAS FURTHER SUBMITTED THAT T HE ASSESSEE HAS DISCLOSED THE PROFIT ON PERCENTAGE COMPLETION METHOD WHICH THE ASSESSEE WAS CONSISTENTLY FOLLOWING IN EARLIER YEARS IN RESPECT OF OTHER PROJECTS. DURING THE YEAR ASSESSEE HAD BOOKED THE PROFIT AT RS. 1,94,40,253/ - AND SHOWN ADVANCE OF RS. 6,40,70,151/ - . THE ASSESSEE HAS DISCLOSED THE SAID AMOUNT OF RS. 6, 40 , 70 , 151 / - AS ADVANCE RECEIVED IN HIS BOOKS OF ACCOUNTS. THE ASSESSEE HAS DISCLOSED THE PROFIT IN RESPECT OF SAID PROJECT AS PER THE PROFIT & LOSS ACCOUNT AS UNDER : - A.Y. CLOSING WIP BOOK PROFIT 2007 - 08 8,6 9,17,599 75,66,619 2008 - 09 16,76,75,867 1,05,33,687 2009 - 10 2,21,12,778 1,94,40,253 2010 - 11 4,39,57,585 33,67,280 2011 - 12 ---- LOSS(23,12,086/ - ) 2.2 DURING THE ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO GIVE THE DETAILS OF THE ADVANCES WHICH THE ASSESSEE HAD RECEIVED AND THE AO ALSO ASKED AS TO WHY THE SAID ADVANCES SHOULD NOT BE TREATED AS SALES AND PROFIT BE RECOMPUTED AFTER REDUCING THE CLOSING STOCK ITA NO S . 2240 & 2521 /1 3 4 ACCORDINGLY. THE ASSESSEE ALSO EXPLAINED TO THE AO THE POSITION OF EACH AND EVERY ADVANCE AS ON 31/03/2009 . IT WAS ALSO SUBMITTED THAT IN RESPECT OF ALL SUCH ADVANCES THERE WAS UNCERTAINTY AND SIGNIFICANT RISK OF SPENDING FURTHER AMOUNT AND THEREFORE THE APPELLANT HAD SHOWN THE SAID AMOUNTS AS ADVANCES RECEIVED. 2.3 THE AO REJECTED A SSESSEE S CONTENTION AND TREATED AGREEMENT VALUE PLUS EXTRA AMENTITIES OF RS.6,3 5,00 , 000 / - AS SALES AND HE DEDUCTED COST OF RS.4,46,90,298/ - . ACCORDINGLY, AN ADDITION OF RS. 1,88,09,702/ - WAS MADE IN THE INCOME OF ASSESSEE . WHILE ARRIVING THE SAID PROFIT THE AO HAS NOT TAKEN INTO CONSIDERATION CORRESPONDING COST WHICH WAS INCURRED AND DISCLOSED IN SUBSEQUENT ASSESSMENT YEAR. THE AO ACCORDINGLY REDUCED CLOSING STOCK BY RS . 4 ,46,90,298/ - . 2. 4 AS FAR AS SHANTI PARK PROJECT IS CONCERNED, THE AO OBSERVED THAT THOUGH THE BUILDING WAS COMPLETED, THE ASSESSEE HAS NOT BOOKED THE PROFIT IN RESPECT OF TWO SHOPS BEING SHOP NOS.10 AND 11. AS REGARDS SHOP PURCHASED BY RAMESHCHANDRA BENAKE, BEING SHOP NO.10, IS CONCERNED, IT WAS EXPLAINED THAT THERE WAS A DISPUTE BETWEEN HIM COMIN G FORWARD TO TAKE THE POSSESSION OF THE SHOP AND REGISTER THE AGREEMENT, SUBSEQUENTLY, WHEN THE DISPUTE BETWEEN THE SAID BROTHERS GOT RESOLVED, THE SAID SHOP NO.10 WAS TRANSFERRED IN THE NAMES OF BOTH THE BROTHERS JOINTLY ON 29 TH JULY 2011. ACCORDINGLY PRO FIT IN RESPECT OF THE SAID SHOP WAS BOOKED IN AY.2011 - 2012. AS REGARDS SHOP NO.11 IS CONCERNED, THOUGH THE ASSESSEE HAD RECEIVED THE ENTIRE CONSIDERATION, THE PURCHASER OF THE SAID SHOP VIZ. MR. ROHIDAS KADAM WAS NOT COMING FORWARD TO TAKE THE POSSESSION O F THE SAID SHOP TILL THIS DATE. IT WAS EXPLAINED THAT AFTER THE ITA NO S . 2240 & 2521 /1 3 5 DEATH OF SAID ROHIDAS KADAM, DISPUTE WAS GOING ON AMONGST THE LEGAL HEIRS OF THE SAID ROHIDAS KADAM. HENCE THE ASSESSEE HAS RIGHTLY DISCLOSED SAID AMOUNT RECEIVED FROM ROHIDAS KADAM AS AN ADVA NCE RECEIVED. THE AO. DISBELIEVED THE ASSESSEES CONTENTION AND TREATED THE ENTIRE ADVANCE AS SALE AND MADE AN ADDITION OF RS.5,81,912/ - AS A PROFIT OF THE YEAR UNDER APPEAL. 2. 5 AS FAR AS RUPAREL GARDEN PROJECT IS CONCERNED THE A SSESSEE HAS RECEIVED ADV ANCE OF RS.72,75, 000 / - FOR SALE OF A FLAT IN THE SAID PROJECT. THE SAID ADVANCE WAS ALMOST EQUAL TO THE SALE CONSIDERATION IN RESPECT OF THE SAID FLAT AND WAS RECEIVED IN LAST FORTNIGHT OF MARCH 2009 AND SALE AGREEMENT WAS REGISTERED IN FIRST WEEK OF APRIL . IT WAS EXPLAINED TO THE AO. THAT THERE WAS A DISPUTE ABOUT THE TITLE OF THE SAID PROPERTY AND THE APPELLANT WAS FULLY AWARE THAT THE ASSESSEE WILL HAVE TO SHELL OUT EXTRA MONEY TO SETTLE THE SAID DISPUTE BETWEEN THE ORIGINAL LANDLORD AND THE ASSESSEE . TH EREFORE, KEEPING IN MIND THE SAID EVENTUALITY THE ASSESSEE HAS SHOWN AMOUNT RECEIVED OF RS. 72,75,000/ - FROM SUJATA HADGE AS AN ADVANCE RECEIVED. THE AO REJECTED ASSESSEE S CLAIMED AND TREATED THE ADVANCE RECEIVED OF RS. 72,75,000/ - AS A SALE AND MADE AN ADD ITION OF RS. 48,48,942/ - . THE AO ALSO REDUCED THE CLOSING STOCK BY RS. 24,26,058/ - . IT WAS EXPLAINED THAT THE PROFIT ARISING FROM THE SALE O F SAID FLAT WAS DULY DISCLOSED IN AY 2010 - 11 AND THE APPELLANT HAS PAID ADDITIONAL COMPENSATION TO THE SAID ORIGINAL OWNER TO THE EXTENT OF RS. 1,00,00,000/ - DURING AY 2011 - 12. ITA NO S . 2240 & 2521 /1 3 6 2. 6 HOWEVER, THE AO DID NOT ACCEPT ASSESSEES CONTENTION REGARDING ADVANCES AND ON THE BASIS OF COMPLETION CERTIFICATE BEING ISSUED TO THE ASSESSEE, AO TREATED ENTIRE ADVANCES AS SALES AND MADE A DDITION ON ACCOUNT OF PROFIT EARNED ON THESE PROJECTS. 3 . BY THE IMPUGNED ORDER, THE CIT(A) DELETED ENTIRE ADDITION EXCEPT THE ADDITION TO THE EXTENT OF RS .47,22,146/ - ON ACCOUNT OF SEA HOME PROJECT . THE CIT(A) ALSO DELETED ADDITION OF RS. 5,81,912/ - MADE BY AO ON ACCOUNT OF ADVANCE RECEIVED ON SALE OF SHOPS. DISALLOWANCE MADE ON ACCOUNT OF INTEREST ON HUNDI LOAN AND BANK OD TO THE EXTENT OF RS. 50,95,700/ - WAS ALSO DELETED BY THE CIT(A) . HOWEVER, THE CIT(A) SUSTAINED ADDITION OF RS. 48,48,942/ - MADE ON ACCO UNT OF SALE OF FLAT IN RUPAREL GARDEN PROJECT. AGAINST THE ABOVE ORDER OF CIT(A), BOTH THE ASSESSEE AND REVENUE ARE IN APPEALS BEFORE US WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN : - I) GROUNDS TAKEN BY ASSESSEE IN ITS APPEAL I.E ITA NO. 2240/MUM/2013 ARE AS UNDER : 1 . IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A), WITHOUT POINTING OUT DEFECTS IN THE BOOKS OF ACCOUNTS, ERRED IN CONFIRMING THE ADDITI ON MADE BY THE A. O. OF RS. 47,2 2,146/ - OUT OF THE TOTAL ADDITION OF RS. 1,88,09,702 /- TO THE PROFIT DISCLOSED BY THE APPELLANT IN SEA HOME PROJECT BY TREATING THE ADVANCES RECEIVED AS SALES WHEN THE METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT IS PROPER AND IS CONSISTENTLY FOLLOWED AND ACCEPTED BY THE A. O. IN PAST AND IN FUTURE. 2 . R EASONS GIVEN BY THE LEARNED CIT (A), WITHOUT POINTING OUT DEFECTS IN THE BOOKS OF ACCOUNTS, FOR CONFIRMING THE ADDITION MADE BY THE A. O. OF RS. 47,22,146/ - OUT OF THE TOTAL ADDITION OF RS. 1,88,09,702/ - , TO THE PROFIT DISCLOSED BY THE APPELLANT IN SEA HOM E PROJECT BY TREATING THE ADVANCES RECEIVED AS SALES WHEN THE METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT IS PROPER AND IS CONSISTENTLY FOLLOWED AND ACCEPTED BY THE A.O IN PAST AND IN FUTURE, ARE WRONG, INSUFFICIENT AND CONTRARY TO THE FACTS AND EVIDENCE ON RECORD. 3 . IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A), WITHOUT POINTING OUT DEFECTS IN THE BOOKS OF ITA NO S . 2240 & 2521 /1 3 7 ACCOUNTS, ERRED IN CONFIRMING THE ADDITION MADE BY THE A. O. OF RS. 48,48 ,942 / - TO THE PROFIT DISCLOSED BY THE APPELLAN T IN RUPAREL GARDEN PROJECT BY TREATING THE ADVANCES RECEIVED AS SALES WHEN THE METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT IS PROPER AND IS CONSISTENTLY FOLLOWED AND ACCEPTED BY THE A.O IN PAST AND IN FUTURE. 4 . REASONS GIVEN BY THE LEARNED CIT(A), WI THOUT POINTING OUT DEFECTS IN THE BOOKS OF ACCOUNTS, FOR CONFIRMING THE ADDITION MADE BY THE A. O. RS. 48,48,942/ - TO THE PROFIT DISCLOSED BY THE APPELLANT IN RUPAREL GARDEN PROJECT BY TREATING THE ADVANCES RECEIVED AS SALES WHEN THE METHOD OF ACCOUNTING A DOPTED BY THE APPELLANT IS PROPER AND IS CONSISTENTLY FOLLOWED AND ACCEPTED BY THE A. O. IN PAST AND IN FUTURE, ARE WRONG, INSUFFICIENT AND CONTRARY TO THE FACTS AND EVIDENCE ON RECORD. II ) GROUNDS TAKEN BY REVENUE IN ITS APPEAL I.E ITA NO. 2521 /MUM/2013 ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING RELIEF OF RS. 1,40,87,556/ - FOR CANCELLATION OF BOOKING IN THE YEAR UNDER CONSIDERATION, AS THE CANCELLATION IN BOOKING OF FLATS HAPPENED IN T HE SUBSEQUENT YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING RELIEF OF RS. 5,81,912/ - EVEN THOUGH FULL SALE CONSIDERATION WAS RECEIVED BY THE ASSESSEE BUT NOT TAKEN AS SALES BY THE ASSESSEE. 3. ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING RELIEF OF RS. 50,95,700/ - ON INTEREST EXPENSES ON HUNDI LOAN AND BANK OD AS THESE EXPENSES WERE NOT ATTRIBUTABLE TO ANY PROJECT OF THE ASSESSEE. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4 . BEFORE US, IT WAS CONTENDED BY THE LEARNED AR SHRI PRAKASH PANDIT THAT DU RING THE YEAR UNDER APPEAL THE ASSESSEE WAS CONSTRUCTING THREE PROJE CTS VIZ. SEA H ES, SHANTI PARK, RUPAREL GARDEN ON PLOTS OF LAND SITUATED IN AND AROUND NAVI MUMBAI. THE ASSESSEE FOR ALL THE ABOVE MENTIONED PROJECTS WAS KEEPING SEPARATE ACCOUNTS. THE ASSESSEE HAS DISCLOSED THE PROFITS EARNED FROM EACH OF SUCH PROJECTS ON PERCENTAGE COMPLETION METHOD. IN THE PAST THE SAID PERCENTAGE COMPLETION METHOD IN ITA NO S . 2240 & 2521 /1 3 8 RESPECT OF ALL THE PROJECTS WAS ACCEPTED BY THE A. O. WHILE PASSING ORDER UNDER SECTION 143(3) OF THE ACT. DURING THE YEAR UNDER APPEAL THE ASSESSEE HAD BOOKED THE PROFIT A T RS. 1,94,40,253/ - IN RESPECT OF SEA HOMES PROJECT. THE SALES OF THE ENTIRE SEA HOMES PROJECT ARE RS. 26,86,61,130/ - OUT OF WHICH FOR THE PURPOSE OF PERCENTAGE COMPLETION METHOD THE ASSESSEE HAD BOOKED SALES OF RS. 14,69,86,750/ - THUS THE SALES BOOKED FOR THE PURPOSE OF PERCENTAGE COMPLETION METHOD ARE 55% OF THE ENTIRE SALES. THE ASSESSEE'S BOOKS ALSO SHOW THAT THERE ARE ADVANCES RECEIVED OF RS. 6,40,70,151/ - . THE ASSESSEE HAS DISCLOSED THE PROFIT IN RESPECT OF THE SAID PROJECT AS PER THE PROFIT & LOSS AC COUNT AS UNDER: - A.Y. CLOSING WIP BOOK PROFIT 2007 - 08 8,69,17,599 75,66,619 2008 - 09 16,76,75,867 1,05,33,687 2009 - 10 2,21,12,778 1,94,40,253 2010 - 11 4,39,57,585 33,67,280 2011 - 12 ---- LOSS(23,12,086/ - ) 4.1 FURTHER CONTENTION OF THE LEARNED AR WAS THAT THE CONSTRUCTION OF THE ASSESSEE'S SEA HOMES PROJECT CONTINUED AND THE BUILDING IN ALL RESPECT OF THE SAID SEA HOMES PROJECT WAS COMPLETED ONLY IN THE A. Y. 2011 - 2012. THE OCCUPATION CERTIFICATE IN RESPECT OF THE SAID BUILDING WAS ISSUED ON 20 TH S EPTEMBER 2008, HOWEVER, THE BUILDING OCCUPATION CERTIFICATE IS A MERE FORMALITY IN ORDER TO GET WATER CONNECTION, ELECTRIC CONNECTION, DRAINAGE CONNECTION ETC. IN FACT THE ASSESSEE HAS GIVEN DETAILED COST OF THE MATERIAL AND CONSTRUCTION EXPENSES TO SHOW T HAT THE ASSESSEE CONTINUED ITS CONSTRUCTION ACTIVITIES DURING A. Y. 2010 - 11. THE ASSESSEE HAS DULY DISCLOSED THE PROFIT ON PERCENTAGE COMPLETION METHOD ITA NO S . 2240 & 2521 /1 3 9 WHICH THE ASSESSEE WAS CONSISTENTLY FOLLOWING IN EARLIER YEARS IN RESPECT OF OTHER PROJECTS. THE SAID ME THOD IS IN CONFORMITY WITH AS 9 ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANT. 4.2 IN THE BACKGROUND OF ABOVE FACTS, DURING THE ASSESSMENT PROCEEDINGS THE A. O. ASKED THE ASSESSEE TO GIVE. THE DETAILS OF THE ADVANCES WHICH ARE REFLECTED IN THE BALANCE SHEE T OF THE ASSESSEE AND THE A. O. ALSO ASKED AS TO WHY THE SAID ADVANCES SHOULD NOT BE TREATED AS SALES AND PROFIT BE RECOMPUTED AFTER REDUCING THE CLOSING STOCK ACCORDINGLY. THE ASSESSEE VIDE HIS LETTER REPLIED TO THE A. O. THAT THE ASSESSEE IS CONSISTENTLY FOLLOWING PERCENTAGE COMPLETION METHOD AND THE PROFIT IS OFFERED YEAR TO YEAR AS PER THE SAID METHOD AND THERE IS NO DEVIATION FROM THE SAID METHOD. THE ASSESSEE ALSO EXPLAINED TO THE A. O. THE POSITION OF EACH AND EVERY ADVANCES AS ON 31/03/2009 AS UNDER : I) MR. & MRS. ANIL GANGANI: - THE SAID PERSONS HAVE GIVEN BOOKING ADVANCE FOR BOO KING A FLAT BEING FLAT NO. 1001 ON THE 10 TH FLOOR. THOUGH THE PAYMENT WAS RECEIVED, BECAUSE OF THE DEFECTIVE FLOORING POINTED OUT BY THE PURCHASER, THE FLOORING WAS REDONE TW ICE AND THE POSSESSION WAS GIVEN ONLY ON 3/11/2009, AND ACCORDINGLY THE SALE WAS BOOKED AFTER COMPLETING HIS FLAT IN A.Y.2010 - 11 (II) MR. BHARAT JAVERI : - THE SAID BHARAT LAVER HAD BOOKED TWO FLATS BEING FLAT NOS.1201 & 1202 ON 12 TH FLOOR WHICH WERE IN I NCOMPLETE STAGE AS ON 31/03/2009 AND FURTHER AMOUNT WAS ALSO RECEIVABLE FROM THE SAID BHARAT LAVER. THE POSSESSION OF THE SAID FLATS WERE GIVEN ON 11/6/2010 AFTER COMPLETING THE INCOMPLETE CONSTRUCTION AND DEFECTS POINTED BY THE SAID MR.JAVERI. THE PROFIT IN RESPECT OF THE SAID FLATS IS DULY BOOKED IN THE AY.2010 - 2011. (PAGENO.11 TO 14) (III) MR. MILIND RUPAREL : - HE BEING ONE OF THE PARTNERS HAD BOOKED THE FLAT AND PAID ADVANCE. HOWEVER, BY AGREEMENT DATED 10 TH JUNE 2009, HE CANCELLED THE AGREEMENT AD SU RRENDERED THE SAID FLAT TO THE FIRM AND ACCORDINGLY THE SAID FLAT WAS SOLD BY THE APPELLANT IN THE SUBSEQUENT YEAR AND THE PROFIT ARISING THEREOF IS DULY DISCLOSED IN AY.2011 - 12 (PAGE NO. 15 TO 18) ITA NO S . 2240 & 2521 /1 3 10 (IV) PINKY THAKKAR : - PINKY THAKKAR HAD PURCHASED FLATS B EING FLAT NOS.1501 AND 1502 FOR A TOTAL CONSIDERATION OF RS.2,30,OO,OOO/ - AND PAYMENT OF RS.1,95,00,150/ - WAS RECEIVED FROM HER. SHE HAD OBTAINED A LOAN FROM BANK TO PURCHASE THE SAID FLATS. HOWEVER SHE FELT THAT SHE HAS BEEN OVERCHARGED BY THE APPELLANT B Y SELLING THE SAID FLATS TO HER AT HIGHER PRICE THAN THE MARKET PRICE. THEREFORE SHE ENTERED INTO THE CORRESPONDENCES WITH THE APPELLANT REQUESTING THE APPELLANT TO REFUND THE ENTIRE AMOUNT PAID BY HER BY WAY OF ADVANCE. THE APPELLANT WAS IN THE PROCESS OF CANCELING THE SAID AGREEMENT AND ULTIMATELY THE SAID AGREEMENT WAS CANCELLED ON 18TH JUNE 2010. THEREFORE THE APPELLANT WAS RIGHT IN SHOWING THE SAID AMOUNT AS AN ADVANCE RECEIVED. AS PER THE ACCOUNTING STANDARD 4 ONE HAS TO TAKE INTO CONSIDERATION ALL TH E FACTS AND EVENTS HAPPENED BEFORE THE ACCOUNTS ARE FINALIZED . (PAGE NO. 19 TO 22). (V) MR. & MRS.AMIT MARFATIA : - THEY HAD BOOKED TWO FLATS IN 2007, BEING FLAT NOS.1801 & 1802. AS THE SAID FLATS WERE NOT IN A LIVABLE CONDITION, THEY REFUSED TO TAKE POSSES SION OF THE SAID FLATS BY ENTERING INTO CORRESPONDENCES WITH THE APPELLANT. ACCORDINGLY THE SAID FLATS WERE DULY COMPLETED AND POSSESSION WAS GIVEN ON 20 TH OCTOBER 2010 AND THE PROFIT WAS BOOKED ACCORDING IN AY.2010 - 2011. (PAGE NO. 23 TO 26) THUS IN RESPEC T OF ALL SUCH ADVANCES THERE WAS UNCERTAINTY AND SIGNIFICANT RISK OF SPENDING FURTHER AMOUNT AND THEREFORE THE APPELLANT HAD SHOWN THE SAID AMOUNTS AS ADVANCES RECEIVED. 5 . ON THE OTHER HAND, IT WAS CONTENDED BY THE LEARNED DR MR. B. YADAGIRI THAT ASSES SEE HAD NOT ONLY RECEIVED THE ENTIRE PAYMENT OF FLATS SOLD, BUT ALSO GOT THE FLATS REGISTERED IN THE NAME OF BUYER . UNDER THESE CIRCUMSTANCES, THE AO HAS CORRECTLY ADDED THE AMOUNT OF ADVANCE RECEIVED FROM FLAT OWNERS AS SALES. OUR ATTENTION WAS ALSO INVIT ED TO THE PARA 3.3 & 3.4 OF CIT(A)S ORDER, WHEREIN HE AGREED WITH THE FINDINGS OF THE AO TO THE EFFECT THAT ASSESSEE WAS IN RECEIPT OF ENTIRE AMOUNT OF SALES PROCEEDS AND NOTHING WAS TO BE DONE FROM THE SIDE OF THE ASSESSEE WHICH DETRACT HIM TO BOOK THE S ALE DURING THE YEAR UNDER CONSIDERATION. AS PER LEARNED DR WITHOUT GIVING ANY COGENT REASON IN THE LAST THREE LINES IN PARA 3.4, THE CIT(A) HAS DELETED THE ADDITION MADE BY AO TREATING THE AMOUNT RECEIVED AGAINST FLATS AS SALES. ITA NO S . 2240 & 2521 /1 3 11 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED AT BAR BY LEARNED AR AND DR IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD, WE FOUND THAT ASSESSEE FIRM IS ENG AGED IN THE BUSINESS OF DEVELOPMENT OF BUILDING AND OTHER CONSTRUCTION ACTIVITIES. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE COMPLETED VARIOUS PROJECTS, PROFIT OF WHICH WAS ALLEGED TO BE DISCLOSED AS PER ACCOUNTING STANDARD AS7, IN TERMS OF WHICH PROFI T WAS DISCLOSED BY FOLLOWING PERCENTAGE COMPLETION METHOD OF ACCOUNT. IN RESPECT OF SEA HOMES PROJECT, ASSESSEE HAS BOOKED PROFIT OF RS.1,94,40,253/ - AND RECEIVED ADVANCE OF RS.6,40,70,151/ - . THE ASSESSEE HAS SHOWN AN AMOUNT OF RS.6,40,70,151/ - AS ADVANCE IN HIS BOOKS OF ACCOUNT, HOWEVER, THE AO TREATED THE ADVANCE AS SALES ON THE PLEA THAT THE PROJECT WAS ALREADY COMPLETED AND ASSESSEE HAS ALSO RECEIVED AMOUNT WHICH EITHER EQUAL OR NEAR TO THE AGREEMENT VALUE. THE AO ALSO OBSERVED THAT ALL THESE AGREEMENTS DULY BEEN REGISTERED IN THE YEAR 2007 AND THE ASSESSEE HAS ALSO GOT COMPLETION CERTIFICATE IN RESPECT ON THIS PROJECT. ACCORDINGLY, AFTER ADJUSTING THE WORK IN PROGRESS SHOWN IN THE CLOSING STOCK IN RESPECT OF THESE ADVANCES, THE AO BROUGHT TO TAX THE PRO FIT EARNED ON THIS PROJECTS AMOUNTING TO RS.1,88,09,782/ - . THE CIT(A) DELETED THE ENTIRE ADDITION EXCEPT ADDITION OF RS.47,22,146/ - AFTER HAVING THE FOLLOWING OBSERVATIONS : - 3.3. I HAVE GONE THROUGH ARCHITECT'S CERTIFICATE SAYING THE WORK IS INCOMPLETE AS ON 31.3.2009. THIS LETTER DOES NOT SAY ON WHAT BASIS THEN COMPLETION CERTIFICATE WAS GIVEN TO CORPORATION FOR OBTAINING OC FOR THIS VERY PROJECT. THE OCCUPATION CERTIFICATE REFERS TO APPELLANTS ARCHITECT COMPLETION CE RTIFICATE TO CORPORATION TO OBTAIN OCCUPATION CERTIFICATE. THE APPELLANT SAYS THAT OCCUPATION CERTIFICATE IS ONLY A FORMALITY WHICH IS FOUND TOTALLY WRONG BEING CONTRADICTORY TO THE ITA NO S . 2240 & 2521 /1 3 12 FACTS IN THE CASE. THEN I HAVE ALSO GONE THROUGH THESE 2 LETTERS GIVEN BY RESPECTIVE BUYERS. IN NO WAY THESE PARTIES HAVE CONTRADICTED THAT THEY WERE UNCERTAIN OF GETTING THE FLAT OR AT ANY POINT OF TIME HAVE DEMANDED THEIR MONEY BACK. ALL THESE LETTERS UNIFORMLY SAY THAT THEY HAVE NOT GOT THE POSSESSION AS ON 31.3.2009 AS THERE WERE SOME WORK RELATED TO AMENITIES WAS YET TO BE DONE. INCIDENTALLY IT IS ALSO BROUGHT ON RECORD THAT APPELLANT IS CHARGING SEPARATELY FOR EXTRA AMENITIES WHICH IS OVER AND ABOV E SALE CONSIDERATION. THUS, IN NO WAY APPELLANT HAS BEEN ABLE TO CONTRADICT THE CONCLUSION MADE BY THE AO THAT WHEN THE AGREEMENTS WERE REGISTERED FOR THESE FLATS, AMOUNT WERE RECEIVED AND THERE WAS NO UNCERTAINTY OF RECEIVING THE VE RY NOMINAL AMOUNT IF LEFT TO BE RECEIVED FROM THESE PARTIES, HE WAS OBLIGATED TO BOOK THE SALES INSTEAD OF SHOWING FLATS AT COST IN CLOSING STOCK. IN VIEW OF THIS, I AM ADVANCES AND SHOWING FLATS AT COST IN CLOSING STOCK. IN VIEW OF THIS I AM UNABLE TO AGREE WITH THE APPELLANT THAT HE HAS NOT BOOKED THE SALES ONLY BECAUSE POSITION WAS GIVEN LATER THAN 31.3.2009. ACCORDINGLY, I AM OF THE OPINION THAT APPELLANT WAS OBLIGATED TO BOOK THE SALE PRICE AS PER THE REGISTERED AGREE MENT IN CASE OF THESE THREE PARTIES I.E. AN AMOUNT OF RS.71,85,000/ - IN CASE OF MR AND MRS. ANIL GA G VANI; THEN RS.45,00,000/ - AND RS.57,30,000/ - IN CASE OF MR. BHARAT ZAVERI AND IN CASE OF MR. AND MRS. AMIT AND ANKIT MARFATIA RS.79,52,500/ - PLUS RS.79,52,5 00/ - , IN ALL TOTALING TO RS.1,74,15,000/ - 3.4. THEN AS REGARDS OTHER TWO PARTIES NAMED MR MILIND M RUPAREL AND MS PINKY NANDKISHORE THAKKAR, THE APPELLANT HAS FILED DEED OF CANCELLATION DATED 10TH OF JUNE 2009 AND 18TH OF JUNE 2010, IN THEIR CASES RESPECT IVELY. I HAVE GONE THROUGH THE SAME AND IT IS NOTED THAT THE FIRST ONE WAS ENTERED WITH MR MILIND M RUPAREL AND SAYS THAT VIDE AGREEMENT FOR SALE DATED 23RD OF JUNE 2008 WHICH WAS REGISTERED ON 24TH OF JUNE 2008 HE MADE PURCHASE OF FLAT BEARING NUMBER A - 13 02 FOR A PRICE OF RS. 65,00,000 / IS CANCELLED AND ACCORDINGLY, THE FIRST PARTY I.E. THE APPELLANT WILL PAY THE CONSIDERATION MONEY OF RS.51,00,000/. ALONG WITH THIS DEED OF CANCELLATION A RECEIPT FOR RS.51,00,000/ ON ONE RUPEE REVENUE STAMP; IS ALSO ANNEX ED AND HENCE IS AVAILABLE ON PAGE 4 OF THIS DEED ITSELF. AS PER THAT THE AMOUNT OF RS. 51,00,000/ - IS CLAIMED AS RECEIVED IN CASH. HOWEVER IT IS NOTED TO BE CONTRADICTORY TO THE WORDING OF DEED OF CANCELLATION WHERE IN ON PAGE 2, IT IS STATED THAT THE BUIL DER WILL PAY THE CONSIDERATION MONEY OF RS. 51,00,000/. THEN AS FAR AS DEED OF CANCELLATION ENTERED WITH THE SECOND PARTY MS PINKY NANDKISHORE THAKKAR IS CONCERNED, IT IS NOTED THAT HERE ALSO, IT SAYS THAT APPELLANT WILL PAY THE CONSIDERATION MONEY OF RS .1,95,00,150/ - WHEREAS RECEIPT OF RS.1,95, 00,150 IN CASH AGAIN ON ONE RUPEE REVENUE STAMP IS ANNEXED WITH THIS DEED ITSELF ON PAGE 4 OF THE SAME. IN VIEW OF THIS FINDING THAT FIRSTLY THESE BOTH THE DEEDS OF CANCELLATION NOT UNREGISTERED AND SECONDLY THE S UBSTANCE AS NARRATED IN THE DEED OF CANCELLATION IS CONTRADICTORY TO THE RECEIPT OF MONEY WHICH IS INCIDENTALLY, ALL IN CASH AND IS SUPPORTED BY ONLY ONE REVENUE STAMP AND WHICH IS ALSO PART OF THE DEED ITSELF. FOR THIS APPELLANT WAS ASKED TO FURNISH LEDG ER ACCOUNT OF BOTH THESE PARTIES AND IT IS NOTED FROM THE SAME THAT MONEY WAS ACTUALLY PAID ITA NO S . 2240 & 2521 /1 3 13 BACK BY APPELLANT TO MILIND RUPARE FROM 26 - 5 - 2009 TO 5.10.2011. THEN IN CASE OF MS PINKY NANDKISHORE THAKKAR MONEY WAS PAID BACK BY APPELLANT TO HER ONLY FROM 22.1. 2011 TO 30.3.2011. IN VIEW OF THIS I AM CONVINCED THAT BOTH THESE DEEDS OF CANCELLATION BEING CONTRADICTORY TO THEMSELVES ARE NOT RELIABLE AND THUS BEING NOT ADMISSIBLE HAVE TO BE REJECTED AND HENCE ARE REJECTED HERE WITH. HOWEVER HAVING FOUND THAT THEIR M ONEY WERE ACTUALLY PAID BACK LATER, THE AMOUNT SHOWN AS ADVANCES IN THESE TWO NAMES CANNOT BE FOUND FAULT WITH. THE APPELLANT NOW HAD TAKEN PLEA THAT THOUGH THEY HAVE RECEIVED THE AGREEMENT VALUE PLUS EXTRA AMENITIES OF RS. 6,35,00,000/ - , CORRESPONDING C OST TO THESE SALE WAS INCURRED IN SUBSEQUENT ASSESSMENT YEAR. I FIND THIS PLEA UNACCEPTABLE AS THE AMOUNTS HAVE BEEN RECEIVED AS PER SCHEDULE OF PAYMENT AND 100% AT TIME OF POSSESSION IN ALL THESE CASE AS IS EVIDENT FROM REGISTERED AGREEMENTS ENTERED IN AL L THESE CASES. THUS IF 100% AMOUNT WERE ALREADY RECEIVED BY THE APPELLANT IT MEANS THE EFFECTIVE POSSESSION WAS ALREADY GIVEN TO BUYER HAVING PAID 100% AMOUNT, WHICH IS EVIDENT FROM OCCUPATION CERTIFICATE. THE APPELLANT SAYS THAT OCCUPATION CERTIFICATE IS ONLY A FORMALITY WHICH IS FOUND CONTRADICTORY TO THE FACTS IN THE CASE. THUS I AM CONVINCED THAT A. O. HAS RIGHTLY OBSERVED AND CONCLUDED THAT REVENUE SHOULD HAVE B E EN RECOGNIZED IN THIS A.Y. WHEN APPELLANT WAS FOLLOWING PERCENTAGE COMPLETION METHOD AND PROJECT IS COMPLETE ON THE BASIS OF THE METHODOLOGY EXPLAINED IN AS9 ALSO BECAUSE THE COMPLETION OF REVENUE RECOGNITION AS PER ALL THESE CONDITIONS; THE SELLER HAS TRANSFERRED TO THE BUYER ALL THE SIGNIFICANT RISK AND REWARDS OF OWNERSHIP AND THE SELLER R ETAINS NO EFFECTIVE CONTROL OF THE REAL ESTATE TO A DEGREE USUALLY ASSOCIATED WITH THE OWNERSHIP AND THEN THE SELLER HAS EFFECTIVELY HANDED OVER POSSESSION OF THE REAL ESTATE UNIT TO THE BUYER FORMING THE PART OF THE TRANSACTION AND THEN NO SIGNIFICANT UNC ERTAINTY EXIST REGARDING THE AMOUNT OF CONSIDERATION THAT WILL BE DERIVED FROM REAL ESTATE SALE AND THEN; ULTIMATE COLLECTION OF REVENUE HAS ALREADY BEEN DONE FROM THE BUYER WERE ALL PRESENT IN THE APPELLANT'S CASE. ACCORDINGLY, I AM CONVINCED THAT THE APP ELLANT WRONGLY HAS NOT REFLECTED AT SALES IN CASE OF FORMER 3 PARTIES ONLY THE AMOUNT OF REVENUE WHICH SHOULD HAVE BEEN RECORDED AS SALES AS PER THE AGREEMENT VALUE RS. 3,33,20,000/ AGAINST REFLECTED IN THE COST OF UNSOLD FLATS AT RS. 2,85,97,854/ WHICH IS INCLUDED IN CLOSING STOCK AT RS. 4,46,90,298/ OF SEA HOMES. THE ADDITION FOR THE DIFFERENCE OF RS.47,22,146/ - IN RESPECT OF THESE THREE FLATS WHICH WERE SOLD BY REGISTERED AGREEMENT, AND AMOUNT AS PER AGREEMENT ITSELF, OCCUPATION CERTIFICATE RECEIVED FOR THE PROJECT, THE ASSESSEE WAS HAVING NO RISK OR UNCERTAINTY WHATSOEVER FOR THE REVENUE TO BE BOOKED AS SALES IN THE CONCERNED PERIOD RELEVANT TO ASSESSMENT YEAR 2009 - 10 IS UPHELD AGAINST THE ADDITION OF RS.1,88,09,702/ - . THE GROUND NO. 1 &2 ARE PARTLY AL LOWED. ITA NO S . 2240 & 2521 /1 3 14 7 . IT IS CLEAR FROM THE DETAILED OBSERVATION MADE BY THE CIT(A) IN PARA 3.3 TO 3.4 THAT HE WAS CONVINCED WITH THE FINDING OF THE AO TO THE EFFECT THAT THE ASSESSEE HAS TRANSFERRED TO BUYER AND THE SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP AND THE SELLER RETAINS NO EFFECTIVE CONTROL OF THE FLATS SOLD BY HIM AND THAT ASSESSEE HAD ALSO EFFECTIVELY HANDED OVER THE POSSESSION OF THE FLATS TO BUYER. ACCORDINGLY, CIT(A) FOUND THAT THERE WAS NO SIGNIFICANT UNCERTAINTY EXIST REGARDING THE AMOUNT OF CON SIDERATION RECEIVED FROM REAL ESTATE SALE AND THEN ULTIMATE COLLECTION OF NOMINAL PRICE OF FLATS WHICH WERE DUE ALSO COLLECTED IN SUBSEQUENT YEAR. HOWEVER, WITHOUT GIVING ANY COGENT REASON OR FINDING THE CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF RS.47,22,146/ - . THE OBSERVATION MADE BY CIT(A) IN THE LAST PART OF PARA 3.4 IS INCONSISTENT WITH THE OBSERVATION MADE IN PARA 3.3 AND 3.4 ACCORDING TO WHICH ASSESSEE WAS IN RECEIPT OF AMOUNT OF SALE CONSIDERATION AND THE SALES HAVE ALREADY BEEN EFFECTED. I N CASE OF MILIND RUPAREL & PINKI THAPPER, IT WAS FOUND THAT MONEY WAS RETURNED IN SUBSEQUENT YEAR. NO JUSTIFIABLE REASONS HAS BEEN GIVEN BY CIT(A) FOR DELETING THE ADDITION OF RS. 1 , 40 , 87 , 556 (RS.1,88,09,702 - 47,22,146). HOWEVER, THE CONTENTION OF LEARNED A R WAS THAT EVEN THOUGH ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD BUT PART OF THE PROFIT OF THIS PROJECT HAVE ALREADY BEEN OFFERED IN THE AY 2007 - 08 TO 2011 - 12. DURING THE COURSE OF HEARING, LEARNED AR HAD ALSO DRAWN OUR ATTENTION TO THE AMOUNT OF CL OSING STOCK AND PROFIT BOOKED IN VARIOUS YEARS PERTAINING TO THIS PROJECT. AS PER OUR CONSIDERED VIEW PROFIT SHOULD BE BROUGHT TO TAX IN THE YEAR TO WHICH IT PERTAINS. WHEN ASSESSEE WAS IN RECEIPT OF ENTIRE AMOUNT OF SALE CONSIDERATION, MERELY DUE TO REASO N THAT SOME EXTRA ITA NO S . 2240 & 2521 /1 3 15 AMENITIES WERE REQUIRED BY CUSTOMER AND FOR WHICH AMOUNT WAS RECEIVED IN SUBSEQUENT YEAR AFTER COMPLETION OF THOSE AMENITIES CANNOT BE MADE THE REASON TO DEFER ENTIRE SALE TO SUBSEQUENT YEAR. THE PROFIT WHICH THE ASSESSEE HAS ALLEGED TO B E ALREADY OFFERED APPEARS TO BE PERTAINING TO THE OTHER FLATS WHICH HAVE BEEN COMPLETED AND PROFIT OF WHICH HAS BEEN SHOWN ON THE BASIS OF COMPLETION CONTRACT METHOD OF ACCOUNTING. AT THE VERY SAME TIME, ASSESSEE SHOULD NOT BE ASKED TO PAY TAX ON THE PROFI T WHICH ASSESSEE HAS DECLARED IN THE SUBSEQUENT YEARS IN RESPECT OF SALES OF FLATS WHICH WERE TAKEN BY AO DURING THE YEAR UNDER CONSIDERATION. WE ALSO FOUND THAT AO HAS NOT PROPERLY APPRECIATED THE REASONS ADVANCED BY ASSESSEE IN RESPECT OF SOME OF THE BUY ERS WHOSE ADVANCE MONEY WAS RETURNED BACK TO THEM IN SUBSEQUENT YEAR DUE TO DISPUTE OR SOME OTHER COGENT REASON. 8 . IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF BOTH THE LOWER AUTHORITIES ON THIS ISSUE OF ADDITION ON ACCOUNT OF SEA HOME PROJ ECT, AND MATTER IS RESTORED BACK TO THE FILE OF THE AO FOR DECIDING AFRESH THE PROFIT DERIVED BY THIS PROJECT DURING THE YEAR UNDER CONSIDERATION IN TERMS OF OUR ABOVE DISCUSSION. WE DIRECT ACCORDINGLY. 9 . IN RESPECT OF ADDITION OF RS. 5,81,912/ - , ON ACCOU NT OF SALE OF SHOPS IN SHANTI PARK PROJECT, THE CIT(A) OBSERVED THAT SALE AGREEMENT WAS NOT REGISTERED DURING THE YEAR BECAUSE OF SOME ONGOING DISPUTES BETWEEN THE TWO PARTNERS, WHO HAD BOOKED THESE SHOPS. IT WAS ALSO FOUND THAT AGREEMENT WAS REGISTERED ON LY IN JULY, 2011 AND SALES WERE BOOKED IN AY 2010 - 11. ITA NO S . 2240 & 2521 /1 3 16 ACCORDINGLY, ADDITION WAS DELETED BY CIT(A) AFTER HAVING FOLLOWING OBSERVATIONS : - 4.2 I HAVE DULY CONSIDERED THE FACTS BROUGHT ON RECORD BY THE AO AS WELL AS SUBMISSION MADE BY THE APPELLANT. IN CASE OF ADDITION MADE OF RS. 5,81,912/ - MADE FOR THE FLAT IN SANTI PARK PROJECT, THE APPELLANT HAS BROUGHT THIS FACT ON RECORD THAT THE AGREEMENT WAS NOT REGISTERED BECAUSE OF SOME ONGOING DISPUTE BETWEEN THE TWO BROTHERS WHO HAVE BOOKED THESE SHOPS. AS PER THE APPELLANT, THE AGREEMENT WAS REGISTERED ONLY IN JULY, 2011 AND ACCORDINGLY THE SALES WERE BOOKED IN ASSESSMENT YEAR 2011 - 2000. AFTER GOING THROUGH THIS FACT I AM IN AGREEMENT WITH THE APPELLANT THAT AS THE AGREEMENT WAS NOT REGISTERED, EVEN THOUGH THE WHO LE AMOUNT WAS RECEIVED FROM THE PROS P ECTIVE BUYERS, THE APPELLANT WAS NOT CERTAIN OF THE TRANSACTION AND HENCE HAS NOT BOOKED THE SALES IN ASSESSMENT YEAR 2009 - 10, BUT REFLECTED THE SAME AS ADVANCES. IN VIEW OF THIS ADDITION MADE OF RS. 5,81,912/ - IS DELETE D HEREWI TH . THE GROUND NUMBER 3 & 4 ARE TREATED ALLOWED. 10 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ADDITION OF RS. 5,81,912/ - WAS MADE FOR THE SALE OF SHOPS IN SHANTI PARK PROJECT. IT WAS FOUND THAT AGREEMENT IN RESPECT OF THESE SHOPS WERE R EGISTERED ONLY IN JULY, 2011 DUE TO SOME ONGOING DISPUTES BETWEEN TWO BROTHERS, WHO HAVE BOOKED THESE SHOPS. THE CIT(A) HAS CATEGORICALLY RECORDED A FINDING TO THE EFFECT THAT SINCE SALE DEED WAS REGISTERED ONLY IN JULY, 2011, THE ASSESSEE HAS OFFERED AND BOOKED THE SALE IN THE ASSESSMENT YEAR 2011 - 2012 AND NOT IN THE ASSESSMENT YEAR 2009 - 10 UNDER CONSIDERATION. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE BY THE AO BY TREATING THE ADVANCES AS SALE DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE ORDER OF CIT(A) IS UPHELD. 11 . DURING THE COURSE OF ASSESSMENT, ON PERUSAL OF P&L ACCOUNT, THE AO FOUND THAT ASSESSEE HAS DEBITED INTEREST EXPENDITURE OF RS. 25.01 LAKHS IN RESPECT OF CC/OD ACCOUN T AND RS. 25.93 LAKHS TOWARDS INTEREST ITA NO S . 2240 & 2521 /1 3 17 ON HUNDI LOAN. BY OBSERVING THAT INTEREST EXPENDITURES WERE NOT ATTRIBUTABLE TO ANY OF THE PROJECTS OF THE ASSESSEE, THE AO DISALLOWED ASSESSEES CLAIM OF INTEREST. BY THE IMPUGNED ORDER, CIT(A) DELETED DISALLOWANCE AF TER HAVING THE FOLLOWING OBSERVATIONS : - 7.2. I HAVE DULY CONSIDERED THE DISCUSSION MADE BY THE AO AND ALSO THE SUBMISSIONS MADE BY THE APPELLANT. THE AO HAS DISALLOWED THE AMOUNT DEBITED IN THE PROFIT AND LOSS ACCOUNT, AS HE IS OF THE OPINION THAT HAVIN G DEBITED INTEREST EXPENSES IN VARIOUS PROJECTS LIKE SEA HOMES, RUPAL GARDEN, JASAI AND ULVE THE INTEREST EXPENSES ON HUNDI LOAN AND OD CANNOT BE TAKEN AS PERTAINING TO ANY OF THESE PROJECTS, AND FOR THIS REASON THEY CANNOT BE DEBITED AGAINST THE INCOME FR OM THESE PROJECTS. ON THE OTHER HAND APPELLANT HAS SUBMITTED THAT THESE ALL LOANS AS WELL AS OD, ARE FOR THE PURPOSE OF BUSINESS ONLY, WHICH IS CONSTRUCTION AS BUILDER AND HENCE BEING THEIR BUSINESS EXPENSES, SHOULD HAVE BEEN ALLOWED. IN VIEW OF THIS THE APPELLANT WAS ASKED TO FURNISH DETAILS OF SUCH LOANS I.E. IN THE YEAR THEY WERE TAKEN AND USED FOR THE PROJECT CONCERNED. THE APPELLANT HAS FURNISHED A CHART IN RESPECT OF ALL THEIR PROJECTS WITH DETAILS OF INTEREST ON LOAN AMOUNT TAKEN FROM VARIOUS BANKS WHICH ARE ICICI BANK, SATARA, HDFC, INDIA BULLS, KO TAK MAHINDRA, BARCLAYS BANK, M AHANAGAR BANK' SATARA SAHKARI, CHOLA MANDALAM, MONEY LINE AS WELL AS PRIVATE PARTIES NAMED J.P.VED AND N.B.KESARIA. I HAVE GONE THROUGH THE SAME AND NOTED THAT INTEREST AMOUN T ARE DEBITED FROM THE FINANCIAL YEAR 2005 - 06 TO THE YEAR 2008 - 09 IN THE PROJECT, RUPAL GA RD EN AND SHAN TI HOME WHEREAS IN THE OTHER TWO PROJECTS WHICH ARE JASAI AND ULVE THE INTEREST AMOUNT ARE DEBITED FROM FINANCIAL YEAR 2007 - 08, WHEN THEY CAME INTO B EING. IT IS ALSO NOTED THAT DURING THE FINANCIAL YEAR 2007 - 08 THAT INTEREST ON HUNDI LOAN, OD AND CC ARE SHOWN AT RS. 78,85, 444/ FOR SHANTI HOMES AND RS. 6,25,879/ FOR RUPAREL GARDEN. AS THE LOAN ON OD / CC AND ON HUNDI LOANS ARE ALLOCATED IN THIS CHART TOWARDS THE PROJECT SHANTI HOMES AND ARE SHOWN AS PERTAINING TO THE YEAR 2007 - 08, WHICH ARE PART OF DIRECT EXPENSES AND HENCE INCLUDED IN WORK IN PROGRESS OF THE CONCERNED ASSESSMENT YEAR, THE INTEREST ON THE LOANS TAKEN FOR THE PROJECT HAS TO BE ALLOWED . THE AO HAS STATED THAT INTEREST PERTAINING TO THIS PROJECT HAS ALREADY BEEN DEBITED AND HENCE, THE INTEREST NOW BEING DEBITED AGAINST THE SAME IS NOT ALLOWABLE. TO MY UNDERSTANDING, EVEN IF APPELLANT HAS NOT DEBITED INTEREST AS DIRECT EXPENSES FOR THE PROJECT AND THE OTHERS THIS INTEREST HAS NOT GONE INTO WORK IN PROGRESS ON WHICH APPELLANT HAS BEEN DECLARING PROFIT ON PERCENT IS COMPLETION BASIS FROM YEAR TO YEAR, BY NOT DEBITING THESE INTEREST EXPENSES WHICH ARE AD MITTEDLY PERTAINING TO THE PROJ ECT AN D THERE IS NO CONTRARY FINDING THAT THESE LOANS HAVE GONE FOR SOME PERSONAL AND/ OR NON - BUSINESS PURPOSES, THE APPELLANT HAS NOT DERIVED ANY BENEFIT IN THE PRECEDING ASSESSMENT YEARS. FURTHER, FOR THE REASON ITA NO S . 2240 & 2521 /1 3 18 THAT THE PROJECT IS STILL ON THESE INTEREST EXPE NSES DEBITED HAVE TO BE ALLOWED FOR ASSERTING PROFIT FROM THE SAID PROJECT AND HENCE THEY ARE ALLOWED. THE GROUND NUMBER 11 AND 12 ARE ALLOWED. 11.1 IN TERMS OF FINDING RECORDED BY THE CIT(A), THE FUNDS WERE BORROWED FOR THE PURPOSE OF ASSESSEES BUSINES S OF CONSTRUCTION ACTIVITY AND NO MATERIAL WAS BROUGHT ON RECORD TO THE EFFECT THAT THE BORROWED FUNDS WERE USED FOR ANY PERSONAL PURPOSE OTHER THAN BUSINESS PURPOSE. SINCE THERE WAS NO DIVERSION OF INTEREST BEARING FUNDS FOR NON BUSINE SS PURPOSES , WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS.50,95,700/ - . 1 2 . WITH REGARD TO THE ADDITION OF RS. 48,48,942/ - MADE BY THE AO IN RESPECT OF RUPAREL GARDEN, WE FOUND THAT THE PROJECT HAS BEEN COMPLETED IN 24.8.2006. THE BOOKING ADVANCE RECEIVED FROM CUSTOMERS AND COST OF CONSTRUCTION WAS AS FOLLOWS : SL. NO NAME & FLAT NO. COST AS ON 31.3.2009 (IN RS.) SALE CONSIDERATION (IN RS.) AMOUNT RECEIVED AS ON 31.3.2009 (IN RS.) 1. MRS. SUJATA HADGE 24,26,058 7 2,75,000 72,75,000 TOTAL (IN RS.) 24,26,058 72,75,000 72,75,000 FROM ABOVE TABLE, IT IS CLEAR THAT THE SALE CONSIDERATION AND AMOUNT RECEIVED AS ON 31.3.2009 IS EQUAL TO RS. 72,75,000/ - . ACCORDINGLY, THE AO TAXED THE SALE DURING THE YEAR. 1 3 . THE CIT(A ) HAS CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS : - 5 . 2. I HAVE CONSIDERED THE FACTS BROUGHT ON RECORD BY THE AO AS WELL AS SUBMISSION MADE BY THE APPELLANT. THE AO HAS STATED THAT THE SAID CONSIDERATION WAS ALREADY RECEIVED AND HENCE SAME SHOULD HAVE BEEN BOOKED AS SUCH. ON THE OTHER HAND APPELLANT HAS STATED THAT THE TOTAL AMOUNT WAS RECEIVED IN THE LAST FORTNIGHT OF MARCH 2009 AND HENCE SALE AGREEMENT WAS REGISTERED IN THE FIRST WEEK OF APRIL . IT ITA NO S . 2240 & 2521 /1 3 19 HAS HAPPENED BECAUSE OF THE REASON TH AT THERE WAS A DISPUTE ABOUT THE TITLE OF THE PROPERTY WITH THE LANDLORD AND SO THE AMOUNT RECEIVED FROM PROSPECTIVE BUYER WAS SHOWN AS ADVANCES RECEIVED. AS PER THE APPELLANT THEY HAD TO PAY ADDITIONAL COMPENSATION TO THE LANDLORD DURING THE ASSESSMENT YE AR 2011 - 12, AND THIS WAS THE REASON THAT THEY WERE NOT CERTAIN OF THE TRANSACTION, IN VIEW OF THE ONGOING DISPUTE. I HAVE DULY CONSIDERED THE SUBMISSION. IT IS A FACT THAT THERE WAS A DISPUTE GOING ON DUE TO WHICH APPELLANT WAS RESTRAINED TO HANDOVER POS SESSION .HOWEVER IT IS NOTED THAT IT WAS MATTER OF DISPUTE FOR A.Y. 2006 - 07 AND NOT NOW. IN VIEW OF THIS THE APPELLANT WAS ASKED HOW MANY FLATS WERE THERE IN RUPAREL GARDEN PROJECT AND THEN IF THIS WAS THE REASON FOR NOT BOOKING THE SALES WHETHER FOR OTHER FLATS ALSO IT IS THE SAME. THEY WERE ALSO ASKED IN WHICH YEAR THE LAND COST IS DEBITED IN P& L ACCOUNT, IF THEIR METHODOLOGY HAS TO BE ACCEPTED, AS IT IS NOTED THAT ISSUE OF LAND COST WAS DISPUTED IN A.Y. 2006 - 7 BY THE APPELLANT AND WAS DECIDED BY HON'BLE ITAT , MUMBAI IN ITA NO.1754 /MUM/2010 ALSO FOR THAT YEAR WITH DIRECTION TO A.O. AS NO REPLY HAS BEEN RECEIVED DISPUTING THIS FACT, IT CANNOT BE PRESUMED THAT LAND DISPUTE WAS NOT SETTLED TILL A.Y. 2009 - 10 AND DUE TO THAT APPELLANT DID NOT BOOK SALES. IN THE GIVEN SET OF ADMITTED FACTS THAT THE PROJECT RUPA R EL GARDEN WAS COMPLETED, WAY BACK ON 24TH OF AUGUST 2006 , I AM OF THE OPINION THAT APPELLANT WAS OBLIGATED TO BOOK THE SALES IN THE PROFIT AND LOSS ACCOUNT IN ASSESSMENT YEAR 2009 - 10. IN VIEW OF THIS A DDITION MADE OF RS.48,48,942 /BY THE A.O. FOR THE DIFFERENCE IN COST PRICE AND SALE PRICE OF THE ONLY FLAT REMAINED TO BE SHOWN AS SALES IS UPHELD. THE GROUND NUMBER 5 AND 6 ARE DISMISSED. 13.1 IT IS CLEAR FROM THE FINDINGS RECORDED BY THE AO AND CIT(A) THAT THE ASSESSEE WAS IN RESPECT OF ENTIRE AMOUNT OF SALE CONSIDERATION BEFORE 31.3.2009. ACCORDINGLY, THERE WAS NO REASON TO SHOW THE FLAT SOLD TO MRS SUJATA HADGE IN CLOSING STOCK. NOTHING WAS BROUGHT ON RECORD TO DISLODGE THE FINDING RECORDED BY LOWER A UTHORITIES AS REPRODUCED ABOVE . ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LOWER AUTHORITIES FOR MAKING ADDITION OF RS. 48,48,942/ - WITH RESPECT TO THE AMOUNT OF DIFFERENCE IN SALE CONSIDERATION AND THE COST SHOWN AS ON 31.3.2009. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE IS DISMISSED. 1 4 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE ALLOWED IN PA RT , IN TERMS INDICATED HEREINABOVE. ITA NO S . 2240 & 2521 /1 3 20 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22/08/ 201 4 . 22/08/ 2014 SD/ - SD/ - ( ) ( DR.S. T.M.PAVALAN ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED 22/08 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FIL E. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI