The Assistant Commissioner of Income Tax (Exemptions) Circle-1 , Mangaluru V. M/s Hyderabad Karnataka Education Society , Kalburgi

ITA 2275/BANG/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3316 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 30-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SRINIVASAN
• Assessee Lawyers: GANESH R GHALE TO D EPT
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, A BENCH : BANGALORE BEFORE SHRI B.R BASKARAN , ACCOUNTANT MEMBER ITA NO.2725/BANG/2018 ASSESSMENT YEAR : 2013-14 M/S R.K DEVELOPERS, D.NO.4-6-577/31, MAHENDRA ARCADE, KARANGALPADY, MANGALURU-575 003. PAN AAIFR 5130 J VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), MANGALURU. APPELL ANT RESPONDENT APPELLANT BY : SHRI V SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI GANESH R GHALE, ADVOCATE STANDING COUNSEL TO D EPT. DATE OF HEARING : 06.11.2019 DATE OF PRONOUNCEMENT : 11.11.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 1/8/2018 PASSED BY LD CIT(A)-10, BENGALURU AN D IT RELATES TO THE ASST. YEAR 2013-14. 2. THE ASSESSEEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.22.71 LAKHS MADE BY T HE AO. 3. THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE S TATED IN BRIEF: ITA NO.2725 /BANG/2018 PAGE 2 OF 6 4. THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGE D IN THE REAL ESTATE BUSINESS. DURING THE COURSE OF ASST. PROCEE DINGS, THE AO NOTICED THAT THE ASSESSEE HAD INITIALLY ENTERED INT O A JOINT DEVELOPMENT AGREEMENT ON 31/8/2015 WITH A COMPANY N AMED M/S CPC (I) LTD., FOR DEVELOPMENT OF A LAND BELONGING T O THE ABOVE SAID COMPANY. SUBSEQUENTLY THE SAID LAND WAS ACQUIRED B Y ONE OF THE PARTNERS ON 14/10/2005. ACCORDINGLY THE JOINT DEVEL OPMENT AGREEMENT WAS ABANDONED AND THE PARTNERSHIP FIRM HA S STARTED DEVELOPING THE LAND. THE LD A.R SUBMITTED THAT THE SAID LAND WAS TREATED AS PROPERTY OF THE PARTNERSHIP FIRM. THE A O NOTICED THAT THE ASSESSEE HAS SOLD UNDIVIDED SHARES OF LAND TO THE P ROSPECTIVE BUYERS OF FLATS. THE AMOUNTS RECEIVED FROM THE PRO SPECTIVE BUYERS WERE SHOWN AS ADVANCE IN THE BOOKS OF ACCOUNT. T HE AO NOTICED THAT THE ADVANCE SO RECEIVED FROM PROSPECTIVE BUYER S STOOD AT RS.8.82 CRORES AS ON 31/3/2012 AND AT RS.9.13 CRORE S AS ON 31/3/2013. THUS THERE WAS A INCREASE OF RS.30,83,6 25/- DURING THE YEAR UNDER CONSIDERATION. THE AO TOOK THE VIEW THAT THE ABOVE SAID DIFFERENCE OF RS.30.83 LAKHS SHOULD BE ASSESSE D TO TAX. THE AO, BY MAKING HIS OWN CALCULATIONS, WORKED OUT PRO PORTIONATE COST OF LAND RELATING TO THE ABOVE SAID AMOUNT AS RS.8,1 1,884/-. ACCORDINGLY HE ALLOWED DEDUCTION OF RS.8.11 LAKHS T OWARDS COST OF LAND AGAINST THE RECEIPT OF RS.30.83 LAKHS AND ACCO RDINGLY COMPUTED NET INCOME FROM SALE OF UNDIVIDED INTEREST IN LAND AT RS.22,71,741/- AND ASSESSED THE SAME. THE LD CIT(A ) ALSO CONFIRMED THE ADDITION AND HENCE THE ASSESSEE HAS F ILED THIS APPEAL BEFORE THE TRIBUNAL. ITA NO.2725 /BANG/2018 PAGE 3 OF 6 5. THE LD AR SUBMITTED THAT THE ASSESSEE HAS BECOME OWNER OF THE LAND AND WAS DEVELOPING THE LAND ON ITS OWN. T HE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD AND ACCORDINGLY OFFERED THE INCOME FROM THE PROJECT IN THE SUCCEEDING ASST. YEA R AFTER COMPLETION OF THE PROJECT. HE SUBMITTED THAT THE A O DID NOT ESTIMATE ANY INCOME IN THE PRECEDING YEARS. ACCORDI NGLY HE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN ASSESSIN G PROFIT FROM SALE OF UNDIVIDED LAND IGNORING THE METHOD FOLLOWED BY T HE ASSESSEE FOR OFFERING THE INCOME AND ALSO IGNORING PAST ASSESSME NTS. 6. ON THE CONTRARY, THE LD DR SUBMITTED THAT THE AS SESSEE HAS NOT OFFERED ANY INCOME SINCE THE INITIATION OF THE PROJECT AND HENCE THE AO HAS ESTIMATED PROPORTIONATE INCOME DURING TH E YEAR. 7. I HEARD THE RIVAL CONTENTIONS AND PERUSED THE RE CORD. I NOTICED THAT THE AO HAS CONSIDERED NET INCREASE IN THE ACCOUNT (ADVANCE FOR PLOT) AND TREATED THE SAME AS SALE CON SIDERATION RECEIVED BY THE ASSESSEE TOWARDS THE SALE OF LAND D URING THE YEAR UNDER CONSIDERATION. IT IS NOT CLEAR FROM THE ASST . ORDER AS TO WHETHER THE AMOUNT OF RS.30.83 LAKHS REFERRED ABOVE REPRESENTS ONLY THE ADVANCE RECEIVED TOWARDS SALE OF PROPORTIO NATE SHARE OF LAND. THE POSSIBILITY IS THAT THE SAME MAY ALSO IN CLUDE PAYMENT MADE TOWARDS FLAT ALSO. I NOTICED THAT THE AO HAS NOT EXAMINED THIS FACT WHILE COMPLETING THE ASSESSMENT. 8. BE THERE AS IT MAY, IT IS THE SUBMISSION THAT LD AR THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD FOR OFFERING THE INCOME. HE FURTHER SUBMITTED THAT THE PROJECT WAS COMPLETED IN THE ITA NO.2725 /BANG/2018 PAGE 4 OF 6 SUCCEEDING YEAR AND INCOME HAS BEEN OFFERED IN THE SUCCEEDING YEAR. WHEN THE ASSESSEE IS FOLLOWING PROJECT COMPL ETION METHOD AND IT HAS NOT BEEN DISTURBED IN THE PAST, IN MY VI EW, IT MAY NOT BE PROPER ON THE PART OF AO TO ASSESS INCOME DURING TH E YEAR UNDER CONSIDERATION ALONE UNDER PROPORTIONATE COMPLETION METHOD. IT IS THE SUBMISSION OF LD AR SUCH TYPE OF PROPORTIONATE ASST. OF INCOME HAS NOT BEEN DONE IN THE EARLIER YEARS. UNDER THES E SET OF FACTS, I AM OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN EST IMATING INCOME DURING THE YEAR UNDER CONSIDERATION ALONE. HOWEVER, THE SUBMISSION MADE BY THE LD AR, IN MY VIEW, REQUIRES VERIFICATION AT THE END OF AO. ACCORDINGLY I SET ASIDE THE ORDER P ASSED BY LD CIT(A) AND RESTORE THE IMPUGNED ISSUE TO THE FILE OF THE A O WITH THE DIRECTION TO VERIFY THE SUBMISSIONS MADE BY THE ASS ESSEE. IF THE ASSESSEE HAS OFFERED INCOME UNDER PROJECT COMPLETIO N METHOD IN THE SUCCEEDING YEAR, THEN THERE IS NO NECESSITY TO MAKE THE ADDITION DURING THE YEAR UNDER CONSIDERATION. I ORDER ACCOR DINGLY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH NOVEMBER, 2019. SD/- (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, THE 11 TH NOVEMBER, 2019. /VMS/ ITA NO.2725 /BANG/2018 PAGE 5 OF 6 COPY TO: 1. APPELLANT (S) / CROSS OBJECTOR(S) 2. RESPONDENT(S) 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE ITA NO.2725 /BANG/2018 PAGE 6 OF 6 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED