M/s Bengal Peerless Housing Development Company Ltd, Kolkata V. DCIT, Circle-7(1), Kolkata, Kolkata

ITA 2414/KOL/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8463 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 06-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: S K TULSIYAN; S DECA
• Section: 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI A.T. VARKEY, JM & DR. A.L.SAINI, AM ./ ITA NO.2414/KOL/2017 ( / ASSESSMENT YEAR : 2012-13 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. 6/1A, MOIRA STREET, MONGAL DEEP, GROUND FLOOR, KOLKATA-700017 VS. DCIT, CIRCLE-7(1), KOLKATA AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069 ./ ./PAN/GIR NO. : AABCB 3038 P ( /ASSESSEE ) .. ( / RESPONDENT ) ./ ITA NO.2549/KOL/2017 ( / ASSESSMENT YEAR : 2012-13 DCIT, CIRCLE-7(1), KOLKATA AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069 VS. M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. 6/1A, MOIRA STREET, MONGAL DEEP, GROUND FLOOR, KOLKATA-700017 ./ ./PAN/GIR NO. : AABCB 3038 P ( /ASSESSEE ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI S.K. TULSIYAN, ADV.& SHRI S. DE,(CA) /REVENUE BY :ROBIN CHOUDHURY, ADDL. CIT SR. DR / DATE OF HEARING : 11/12/2018 !'# /DATE OF PRONOUNCEMENT : 31/12/2018 ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 2 / O R D E R PER DR.ARJUN LAL SAINI, AM: THE CAPTIONED CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE, PERTAINING TO ASSESSMENT YEAR 2012-13, ARE DIRECTED AGAINST AN ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-16, KOLKATA (I N SHORT THE LD. CIT(A)] IN APPEAL NO.612/CIT(A)-16/CIR-7(1)/2014-15, DATED 24. 10.2017, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASS ESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) DATE D 27.02.2015. 2. THE APPEAL FILED BY THE REVENUE IN I.T.A. NO. 25 49/KOL/2017, FOR ASSESSMENT YEAR 2012-13, IS BARRED BY LIMITATION BY 2 DAYS. TH E REVENUE HAS MOVED A PETITION REQUESTING THE BENCH TO CONDONE THE DELAY. WE HAVE HEARD BOTH THE PARTIES ON THIS PRELIMINARY ISSUE, AND HAVING REGAR D TO THE REASONS GIVEN IN THE PETITION, WE CONDONE THE DELAY AND ADMIT THE APPEAL OF REVENUE FOR HEARING. 3. SINCE, THE ISSUE INVOLVED IN THESE TWO CROSS APP EALS ARE COMMON AND IDENTICAL THEREFORE, THESE APPEALS HAVE BEEN HEARD TOGETHER A ND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. FOR THE SAKE OF CONVENIENC E, THE GROUNDS AS WELL AS FACTS NARRATED IN I.T.A. NO. 2414/KOL/2017, FOR ASSESSMEN T YEAR 2012-13, HAVE BEEN TAKEN INTO CONSIDERATION FOR DECIDING THE ABOVE APP EALS EN MASSE. 4. WE NOTE THAT THE ASSESSEE IN HIS APPEAL RAISED A MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING, THE SOLITARY GRIEVANCE OF T HE ASSESSEE HAS BEEN CONFINED TO THE ISSUE THAT OUT OF TOTAL DISALLOWANCE OF RS.4,79 ,18,880/- MADE BY THE ASSESSING OFFICER, THE LD. CIT(A) ERRED IN CONFIRMING THE DIS ALLOWANCE OF RS. 94,51,860/- AND RS. 2,15,30,312/-,( BEING ESTIMATED EXPENDITURE STILL REQUIRED TO BE INCURRED). ON THE OTHER HAND, THE SOLITARY GRIEVANCE OF THE RE VENUE IN ITS APPEAL IN I.T.A. NO. 2549/KOL/2017, IS THAT THE LD. CIT(A) HAS WRONG LY ALLOWED THE PROVISIONS FOR ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 3 EXPENSES AMOUNTING TO RS. 1,69,36,708/-, OUT OF TOT AL DISALLOWANCE OF RS. 4,79,18,880/-. WE NOTE THAT SOLITARY GRIEVANCE OF THE ASSESSEE AND REVENUE ARE COMMON AND INTERLINKED WITH EACH OTHER, AS MENTIONED ABOVE, CH ALLENGING TOTAL DISALLOWANCE OF RS.4,79,18,880/- MADE BY THE ASSESSING OFFICER, AND ON APPEAL, DELETED BY THE LD CIT(A) PARTLY, WHICH ARE DEALT TOGETHER AS UNDER . 5. THE FACTS OF THE CASE WHICH CAN BE STATED QUITE SHORTLY ARE AS FOLLOWS: THE ASSESSEE COMPANY IS ENGAGED IN THE REAL ESTATE BUSI NESS.DURING THE ASSESSMENT YEAR 2012-13,IT HAD DISCLOSED ITS TOTAL INCOME FROM A PROJECT KNOWN AS ANAHITA PROJECT INVOLVING CONSTRUCTION OF A LARGE NUMBER O F RESIDENTIAL FLATS IN A MULTI STORIED BUILDING. THE TOTAL WORK-IN-PROGRESS OF THE PROJECT ANAHITA AS ON 01.04.2011 WAS RS. 36,19,47,176/- TO WHICH FURTHER DIRECT EXPENSES AND INDIRECT EXPENSES WERE DEBITED TAKING THE TOTAL COST OF THE CONSTRUCTION AT RS. 77,20,91,223/-. OUT OF TOTAL 356 FLATS CONSTRUCTED IN THIS PROJECT UPTO 31.03.2012, 314 FLATS WERE SOLD DURING THE FINANCIAL YEAR 2011- 12 AND THERE WAS A CLOSING STOCK OF 42 READY BUILT FLATS AS ON 31.03.2012. DUR ING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE COMPANY HAS CLAIMED THE FOLLOWING AMOUNTS AS PROVISION FOR LIABILITIES UNDER THE HEAD OF EXPENDITURE MENTIONED BELOW: SL. NO. HEAD OF EXPENDITURE AMOUNT OF EXPENDITURE INCLUDED REMARKS MENTIONED BY THE ASSESSEE COMPANY 1. SUPERSTRUCTURE LIFT SUNDRY PARTIES 37,58,000 PRO VISIONAL LIABILITY PROVIDED ON COMPLETION OF PROJECT. TDS DEDUCTED SUBSEQUENTLY ON SETTLEMENT OF BILLS. 2 SUPERSTRUCTURE DO 3,18,85,066 DO 3 SANITARY AND WATER SUPPLY DO 2,18,203 DO 4 DO DO 74,59,486 DO 5 ELECTRIFICATION DO 15,27,397 DO 6 DO DO 30,70,728 DO TOTAL 4,79,18,880 ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 4 DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF THE PROVISIONS AND THE EXPENSES CLAIMED WHICH AR E MENTIONED IN THE ABOVE NOTED TABLE. IN RESPONSE, THE ASSESSEE SUBMITTED TH AT SINCE THE PROJECT WAS COMPLETED, THE ASSESSEE COMPANY HAD BOOKED ALL THE EXPENDITURE IRRESPECTIVE OF THE FACT WHETHER THE BILLS WERE RECEIVED ON OR BEFO RE 31.03.2012 OR NOT. THE ASSESSE COMPANY WAS REQUESTED TO FURNISH THE BILLS IN RESPECT OF ALL THE PROVISIONS FOR EXPENSES DEBITED TO THE DIRECT EXPENSES. IN RE SPONSE, THE ASSESSEE SUBMITTED A DETAILED LIST OF PROVISIONAL DIRECT EXPENSES DURING ASSESSMENT YEAR 2012-13, IN WHICH THE FOLLOWING FACTS WERE NOTED BY THE ASSESSI NG OFFICER: I) THAT ALL THE BILLS OF EXPENDITURE NAMELY SUPERSTRUC TURE, SUPERSTRUCTURE LIFT, SANITARY AND WATER SUPPLY, ELECTRIFICATION ET C, WERE RECEIVED AFTER 31/03/2012, MAJORITY OF WHICH ARE DATED IN THE MONT HS BETWEEN JULY, 2012 AND MARCH. 2013 AND SOME ARE EVEN DATED BETWE EN APRIL, 2013 AND NOVEMBER, 2013. II) THAT THE DATE OF TRANSACTIONS ON RECEIPT OF BILLS F ROM VARIOUS PARTIES UNDER THE ABOVE HEADS OF EXPENDITURE FALL IN THE MO NTHS AS MENTIONED IN SL. NO. (I) ABOVE. THE PAYMENTS ON FINAL SETTLE MENT OF BILLS HAVE BEEN MADE TO THE PARTIES DURING THE AY 2013-14 AND ALSO IN AY2014- 15, NOT RELEVANT TO THE IMPUGNED ASSESSMENT YEAR 20 12-13. III) THAT THE TDS WAS DEDUCTED ON SUCH BILLS AT THE TIME OF CREDITS/ PAYMENTS ON THE DATES OF TRANSACTIONS AND THEREFORE MUCH BEYOND THE END OF THE AY 2012-13. IT WAS SUBMITTED BY THE ASSESSEE THAT ALL EXPENSES RELATED TO PROJECT ANAHITA WERE BOOKED AND WERE PROVIDED DURING THE AY 2012-13 ITSELF, AS ALL EXPENSES HAVE TO BE BOOKED, AS THE PROJECT WAS COMPLETED. HO WEVER,THE FOLLOWING INFORMATION WERE NOTICED BY THE AO, FROM THE ACCOUN TING STATEMENTS OF THE ASSESSEE: I) THE TOTAL WIP OF THE PROJECT ANAHITA AS ON 01/04/ 2011 WAS RS. 36,19,47,176/- TO WHICH FURTHER DIRECT EXPENSES AND INDIRECT EXPENSES WERE DEBITED TAKING THE TOTAL COST OF THE CONSTRUCT ION OF THE FLATS AT RS. ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 5 77,20,91,223/-. THE WIP OF THEPROJECT, AS ON 31/03 /2012 IS DECLARED AT RS. NIL. II) HOWEVER, AS AGAINST TOTAL CONSTRUCTED FLATS AT 356 ON 31/03/2012, IN RESPECT OF ANAHITA PROJECT, THE NUMBER OF FLATS A CTUALLY SOLD DURING THE AY 2012-13,WAS 314 NOS; AND THEREFORE CLOSING S TOCK OF READY BUILT FLATS WAS 42 (356-314) AS ON 31/03/2012. 6. THE AO NOTED THAT SUPERSTRUCTURE, SUPERSTRUCTURE LIFT, SANITARY AND WATER SUPPLY AND ELECTRIFICATION JOBS, HAVE NOT BEEN COMPLETED T ILL 31.03.2012, THEREFORE, THE EXPENSES RELATING TO THESE UNCOMPLETED JOBS SHOULD NOT BE INCLUDED FOR THE A.Y. 2012-13. BUT THE ASSESSEE HAS INCLUDED THESE PROVIS IONAL EXPENSES, IN THE DIRECT AND INDIRECT EXPENSES FOR AY 2012-13 DESPITE THE FA CT THAT SUCH EXPENDITURE DO NOT PERTAIN TO AY 2012-13. THE AO FURTHER NOTED THA T THE EXPENSES FOR WHICH BILLS HAD NOT BEEN RECEIVED BY THE ASSESSEE TILL 31 .03.2012,AND THE CONTRACTORS HAD NOT COMPLETED THEIR JOB TILL 31.03.2012, SHOULD NOT BE INCLUDED FOR THE ASSESSMENT YEAR 2012-13, AS THESE EXPENSES PERTAIN TO NEXT ASS ESSMENT YEARS.THEREFORE, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS NOT SU BMITTED PROPER EXPLANATION REGARDING THE PROJECT COMPLETION DATE AS ON 31.03.2 012 AND SUBMITTED THE EXPENDITURE BILLS WHICH PERTAIN TO THE NEXT ASSESSM ENT YEARS,THEREFORE THE ASSESSING OFFICER MADE ADDITION OF RS. 4,79,18,880/ -. 7. AGGRIEVED BY THE ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS PARTLY ALLOWED THE ASSESSEESCLAIM. THE LD. CIT(A) NOTED THAT OUT OF T OTAL EXPENDITURE OF RS. 4,79,18,880/-,THE SUM OF RS. 1,69,36,708/- PERTAINS TO PURCHASE OF BUILDING MATERIAL AND THEREFORE DID NOT REQUIRE DEDUCTION OF TDS AND HENCE HE DELETED THE ADDITION TO THE EXTENT OF RS. 1,69,36,708/-. FOR BA LANCE ADDITION SUSTAINED BY THE LD CIT(A) TO THE TUNE OF RS.94,51,860/- AND RS.2,15 ,30,312/- ( OUT OF TOTAL ADDITION OF RS. 4,79,18,880), THE ASSESSEE IS IN AP PEAL BEFORE US, AND THE REVENUE IS IN APPEAL BEFORE US AGAINST THE AMOUNT OF RS. 1, 69,36,708/- DELETED BY LD CIT(A). ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 6 8. SHRI S.K. TULSIYAN, THE LD. COUNSEL FOR THE ASSE SSEE, BEGINS BY POINTING OUT THAT THE ASSESSEE HAS MADE A PROVISION FOR THE EXPE NSES TO BE INCURRED / ALREADY INCURRED TO THE TUNE OF RS. 4,79,18,880/-. OUT OF THE SAID TOTAL EXPENDITURE A SUM OF RS.1,69,36,708/- BELONGS TO RAW MATERIAL PURCHAS ED BY THE ASSESSEE, THEREFORE NO TDS IS REQUIRED TO BE DEDUCTED, AS IT RELATES TO RAW MATERIAL PURCHASED BY THE ASSESSEE. THEREFORE, ON APPEAL BY THE ASSESSEE, THE LD CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.1,69,36,708/-. ON THE BALANCE A MOUNT OF RS.94,51,860/- THE ASSESSEE HAS DEDUCTED TDS BEFORE 31.09.2012, I.E. B EFORE FILING THE RETURN OF INCOME, FOR ASSESSMENT YEAR 2012-13, THEREFORE THE DISALLOWANCE ON ACCOUNT OF TDS U/S 40A(IA) DOES NOT ARISE. ON THE REMAINING SU M OF RS. 2,15,30,312/-( RS. 4,79,18,880-RS.1,69,36,708-RS.94,51,860), SINCE THE ASSESSEE IS FOLLOWING CONTRACT COMPLETED METHOD, WHICH IS KNOWN AS PROJEC T COMPLETION METHOD OF ACCOUNTING, IN THIS METHOD OF ACCOUNTING OF CONSTRU CTION CONTRACTS THE ASSESSEE PREPARED THE FINANCIAL STATEMENT ON SUBSTANTIAL COM PLETION OF THE PROJECT. THE ASSESSEES SUBSTANTIAL ACTIVITIES WERE COMPLETED BE FORE 31/03/2012, THEREFORE THE ASSESSEE MADE PROFIT & LOSS ACCOUNT AND BALANCE SHE ET AND OTHER FINANCIAL STATEMENTS AND HAS SHOWN ENTIRE INCOME OF THE PROJE CT. SINCE THE ASSESSEE HAS SHOWN THE ENTIRE INCOME OF THE PROJECT THEREFORE IT WAS NECESSARY TO MAKE THE PROVISION FOR THE EXPENSES (MINOR WORK/MISCELLANEOU S WORK) TO BE INCURRED FOR COMPLETION OF PROJECT. THEREFORE, THE ASSESSEE MADE A PROVISION ON ESTIMATED BASIS TO THE TUNE OF RS. 2,15,30,312/- WHERE THE PA YEE IS NOT KNOWN AND IT IS JUST KIND OF A PROVISION ON ESTIMATE BASIS AND THEREFORE TDS OBLIGATION DOES NOT ARISE. SHRI S.K. TULSIYAN ALSO POINTED OUT THAT THE ASSESS ING OFFICER HAS NOT DISPUTED THE METHOD OF ACCOUNTING I.E. PROJECT COMPLETION ME THOD. MOREOVER, THE ASSESSING OFFICER HAS ALSO NOT DISPUTED THE FACT TH AT THE ASSESSEE WAS MAINTAINING ITS BOOKS OF ACCOUNT ON PROJECT COMPLET ION METHOD. APART FROM THIS, THE REAL REASON FOR DISALLOWANCE OF THE EXPENDITURE BY THE ASSESSING OFFICER WAS NOT THE FAILURE OF THE ASSESSEE TO PRODUCE ALL THE BILLS AND VOUCHERS AS ALLEGED IN THE DEPARTMENTS GROUNDS OF APPEAL, BUT THE FACT TH AT ALL THE EXPENDITURE WERE NOT INCURRED DURING THE ASSESSMENT YEAR 2012-13 BUT SOM E OF THESE EXPENDITURE SPILLED OVER TO THE ASSESSMENT YEARS 2012-13 AND 20 13-14. THE LD. COUNSEL ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 7 POINTED OUT THAT THE LD. CIT(A) HAD CONDONED THIS D EFECT ON THE GROUND THAT THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD AN D ALLOWED A SUM OF RS. 1,69,36,708/-. THE LD. COUNSEL, SHRI S.K. TULSIYAN ALSO POINTED OUT THAT IN ASSESSEES CASE ALMOST THE ENTIRE PROJECT WAS COMPL ETED BY THE END OF 31.03.2012 AND ONLYA CERTAIN ADDITIONAL WORKS AS REQUIRED TO B E DONE WAS PENDING. OUT OF TOTAL FLATS BUILT BY THE ASSESSEE, THE 88% OF THE F LATS WERE SOLD AND REMAINING 12% OF THE UNSOLD FLATS WERE CARRIED TO STOCK-IN-TRADE. FURTHER,SINCE THE ASSESSEE HAS DISCLOSED ITS ENTIRE INCOME FROM ANAHITA PROJECT IN THE CURRENT YEAR, ALL THE CORRESPONDING EXPENSES INCURRED OR TO BE INCURRED I N CONNECTION WITH THE SAID PROJECT WERE ALSO TAKEN INTO ACCOUNT, SO AS TO ARRI VE AT THE CORRECT NET PROFIT FROM THIS PROJECT, HENCE THE COUNSEL PRAYED BEFORE THE B ENCH THAT ADDITION DELETED BY THE LD CIT(A) OF RS.1,69,36,708/- SHOULD BE SUSTAIN ED AND ADDITION CONFIRMED BY THE LD CIT(A) OF RS.94,51,860/- AND RS.2,15,30,312 /- SHOULD BE DELETED. 9. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE VE HEMENTLY SUBMITTED BEFORE US THAT, FIRST OF ALL, THE ASSESSEE HAS NOT PRODUCED B EFORE THE ASSESSING OFFICER THE PROJECT COMPLETION CERTIFICATE AND HAS ALSO NOT SUB MITTED THE BILLS AND VOUCHERS AND THE SUFFICIENT PROOF TO SUBSTANTIATE THESE EXPE NDITURES, HENCE THE ADDITION MADE BY THE AO SHOULD BE SUSTAINED. MOREOVER, THE A SSESSEE HAS NOT SUBMITTED THE BILLS AND INVOICES IN RELATION TO THE RAW MATER IAL PURCHASED TO THE TUNE OF RS. 1,69,36,708/-. HE HAS ALSO POINTED OUT THAT THESE E XPENSES WERE BASED ON THE PROVISIONS MADE IN ACCOUNTS, AND THESE ARE NOT ACTU AL EXPENDITURE INCURRED BY THE ASSESSEETHEREFORE THESE SHOULD NOT ALLOWED.THE DR F URTHER POINTED OUT THAT SINCE THE ASSESSEE HAS COMPLETED ITS PROJECT SUBSTANTIALL Y THEREFORE HE SUPPOSED TO DEDUCT TDS ON THE ENTIRE EXPENDITURES WHICH ARE TO BE INCURRED FOR ANCILLARY OR MINOR WORK, WHICH ARE TO BE DONE AFTER COMPLETION O F THE PROJECT. SINCE THE ASSESSEE HAS FAILED TO DEDUCT TDS ON RS.4,79,18,880 /-, THEREFORE THE SAME SHOULD BE DISALLOWED. 10. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RI VAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT RECO GNITION OF CONTRACT REVENUE ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 8 ANDEXPENSES ARE DONE BY THE CONTRACTORS BY FOLLOWIN G EITHER PERCENTAGE OF COMPLETION METHOD OR COMPLETED CONTRACT METHOD. THE COMPLETED CONTRACT METHOD IS ALSO KNOWN AS PROJECT COMPLETION METHOD. IN PERCENTAGE COMPLETION METHOD THE REVENUE AND CONTRACT COSTS ASSOCIATED WI TH THE CONSTRUCTION CONTRACT SHALL BE RECOGNIZED AS REVENUE AND EXPENSES RESPECT IVELY BY REFERENCE TO THE STAGE OF COMPLETION OF THE CONTRACT ACTIVITY AT THE END OF THE ACCOUNTING PERIOD. WHEREAS IN COMPLETED CONTRACT METHOD, WHICH ISALSO KNOWN AS PROJECT COMPLETION METHOD, THE REVENUE AND EXPENSES ARE REC OGNIZED AT THE TIME OF SUBSTANTIAL COMPLETION OF THE PROJECT. THE SUBSTANT IAL COMPLETION OF THE PROJECT MEANS THE PROJECT SHOULD BE COMPLETED BY AND LARGE, EXCEPT TO SOME ANCILLARY AND MINOR/MISCELLANEOUS WORK, WHICH CAN BE COMPLETED IN SUBSEQUENT YEARS.THE ANOTHER FEATURE OF PROJECT COMPLETION METHOD IS THA T, IN THIS METHOD, THE FINANCIAL STATEMENTS, THAT IS, PROFIT AND LOSS ACCOUNT AND BA LANCE SHEET IS PREPARED ONCE IN THE LIFE OF THE PROJECT THEREFORE IT IS NECESSARY T O MAKE THE PROVISION IN THE BOOKS OF ACCOUNTS FOR EXPENSES LIKEANCILLARY AND MINOR/MI SCELLANEOUS WORK, WHICH ARE YET TO BE COMPLETED OR TO BE COMPLETED IN SUBSEQUEN T YEARS. THE ASSESSEE COMPANY, BEFORE US, IS FOLLOWING PROJECT COMPLETION METHOD AND MADE PROVISION FOR EXPENSES ON ACCOUNT OF ANCILLARY AND MINOR/MISC ELLANEOUS WORK, WHICH IS TO BE COMPLETED IN SUBSEQUENT YEARS. WE NOTE THAT THE ASSESSING OFFICER, IN THE ASSESSEE S CASE UNDER CONSIDERATION HAS NOT DISPUTED THE METHOD, WHICH HAS BEEN ADOPTED BY THE ASSESSEE. THE ASSESSEE AS A MATTER OF CONSISTENCY HAS BEEN FOLLOWING THE P ROJECT COMPLETION METHOD. IN PROJECT COMPLETION METHOD, AS WE POINTED OUT EARLIE R THAT THE ASSESSEE PREPARES BALANCE SHEET, PROFIT & LOSS ACCOUNT AND OTHER FINA NCIAL STATEMENT ONCE IN A LIFE OF THE PROJECT I.E. FOR A PARTICULAR PROJECT THE FINAN CIAL STATEMENTS CONSISTING PROFIT & LOSS ACCOUNT AND BALANCE SHEET IS PREPARED ONLY ONC E IN A LIFE OF THE SAID PROJECT. THEREFORE, IF THE ASSESSEE IS OF THE VIEW THAT HIS PROJECT HAS SUBSTANTIALLY COMPLETED AND ONLY SOME MINOR/ ANCILLARY AND MISCEL LANEOUS WORKS ARE PENDING, WHICH IS YET TO BE COMPLETED, IN THAT SITUATION, TH E ASSESSEE PREPARES FINANCIAL STATEMENTS, IN THAT YEAR ITSELF AND WILL SHOW THE E NTIRE EXPENSES AND ENTIRE SALES ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 9 RECEIPTS IN THE PROFIT & LOSS ACCOUNT. SINCE IN PRO JECT COMPLETION METHOD, THE ENTIRE EXPENSES AND ENTIRE SALES SHOULD BE SHOWN, T HEREFORE, IT IS NECESSARY FOR THE ASSESSEE TO MAKE PROVISION FOR ESTIMATED EXPENDITUR ES WHICH ARE TO BE INCURRED IN SUBSEQUENT YEARS ON ACCOUNT OF MINOR/MISCELLANEOUS WORK. IF THE ASSESSEE DOES NOT MAKE PROVISION FOR ESTIMATED EXPENDITURES, LIK E, EXP. ON MINOR/MISCELLANEOUS WORK, THEN IN THAT CASE ASSESSE E WILL NOT ABLE TO SHOW TRUE PROFIT AND LOSS, IN ITS PROFIT AND LOSS ACCOUNT.AS WE POINTED OUT IN OUR EARLIER PARA THAT IN PROJECT COMPLETION METHOD, THE ASSESSEE PRE PARES PROFIT AND LOSS ACCOUNT AND OTHER FINANCIAL STATEMENTS ONCE IN LIFE OF A PR OJECT, THEREFORE, THESE ESTIMATED EXPENDITURES, LIKE, EXP. ON MINOR/MISCELLANEOUS WOR K, CAN NOT BE SHOWN NEXT YEAR. ANOTHER IMPORTANT POINT IS THAT IN PROJECT CO MPLETION METHOD, THE ASSESSEE HAS SHOWN ENTIRE SALES/REVENUE THEREFORE HE IS ENTI TLED TO RECORD THE ENTIRE EXPENSES WHICH HAD INCURRED BY HIM OR TO BE INCURRE D TO EARN THE SAID ENTIRE SALES/REVENUE.THEREFORE, IN ORDER TO DERIVE THE TRU E NET PROFIT IN PROJECT COMPLETION METHOD IT IS NECESSARY TO SHOW THESE EST IMATED EXPENDITURES, LIKE,EXP. ON MINOR/MISCELLANEOUS WORK. HENCE, WE AC CEPT THE TREATMENT MADE BY THE ASSESSEE IN RESPECT OF ESTIMATED EXPENDITURES, LIKE, EXP.ON MINOR/MISCELLANEOUS WORK, IN ITS BOOKS OF ACCOUNTS. 11. NOW THE NEXT QUESTION BEFORE US IS DEDUCTION OF TDS ON THESE ESTIMATED EXPENDITURES, LIKE, EXP. ON MINOR/MISCELLANEOUS WOR K?SINCE THE EXPENDITURE ARE ESTIMATED ONLY AND WORK WILL BE EXECUTED AGAINST TH ESE EXPENSES IN SUBSEQUENT YEARS THEREFORE, THE PAYEE IS NOT KNOWN HENCE IT IS NOT POSSIBLE FOR ASSESSEE TO DEDUCT TDS ON THESE ESTIMATED EXPENDITURE, LIKE, EX P. ON MINOR/MISCELLANEOUS WORK,WHICH IS TO BE COMPLETED IS YEARS TO COME. THE REFORE, THIS IS A KIND OF CONDITION WHICH IS MANDATED BY THE PROJECT COMPLETI ON METHOD THAT THE FINANCIAL STATEMENTS OF A PARTICULAR PROJECT IS TO BE MADE ON CE IN A LIFE OF THE PROJECT, ON COMPLETION OF SUBSTANTIAL ACTIVITYTHEREFORE, THE AS SESSEE DOES NOT HAVE ANY OPTION BUT TO MAKE ESTIMATE FOR EXP. ON MINOR/MISCELLANEO US WORK. WHEN THE EXPENSES ARE ESTIMATED, THE PAYEE IS NOT KNOWN, HENCE, WITHO UT KNOWING THE PAYEE, IT IS NOT POSSIBLE TO DEDUCT TDS. ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 10 12. WE NOTE THAT THE DEPARTMENT IS IN APPEAL AGAINS T THE AMOUNT DELETED BY THE LD. CIT(A) TO THE TUNE OF RS.1,69,36,708/- ON THE GROUN D THAT THE ASSESSEE HAS NOT SUBMITTED BILLS AND VOUCHERS. WE NOTE THAT THE ASSE SSEE HAS FURNISHED ALL THE BILLS AND VOUCHERS RELATING TO SAID EXPENDITURE, THEREFOR E THE STAND OF THE REVENUE THAT BILLS AND VOUCHERS HAVE NOT BEEN SUBMITTED BY THE A SSESSEE IS NOT TENABLE HENCE WE DO NOT ACCEPT THE CONTENTIONS OF THE LD. DR THAT THE ASSESSEE HAS NOT SUBMITTED OR PRODUCED THE BILLS AND VOUCHERS IN RELATION TO T HE EXPENDITURE OF RS. 1,69,36,708.WE ALSO NOTE THAT THE ACCOUNTS OF THE A SSESSEE WERE DULY AUDITED BY THE STATUTORY AUDITOR, THEREFORE, THE ALLEGATION OF THE LD DR, ABOUT NON-AVAILABILITY OF BILLS AND VOUCHERS RELATING TO THE SUM OF RS.1, 69,36,708/- APPEARS TO BE NOT CORRECT AND THEREFORE WE DISMISS THE APPEAL OF THE REVENUE. 13. WE NOTE THAT THE IF A BUSINESS LIABILITY HAS DE FINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WHAT SH OULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SHOULD ALSO BE CAPABLE OF BEIN G ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTUAL QUANTIFICATION MAY NOT BE POSSIBLE. IF THESE REQUIREMENTS ARE SATISFIED THE LIABILITY IS NOT A C ONTINGENT ONE. IN THE ASSESSEES CASE UNDER CONSIDERATION THE LIABILITY TO PAY THE E XPENSES( ESTIMATED EXPENDITURE EXPLAINED ABOVE) IS PRESENT IN THE ASSESSMENT YEAR UNDER CONSIDERATION THOUGH IT SHOULD BEDISCHARGED AT A FUTURE DATE.FOR THAT WE RE LY ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH M OVERS VS. CIT REPORTED IN 245 ITR 428, WHEREIN THE SAME FACTS AND RATIO WAS D ECIDED. 14. AT THE COST OF REPETITION, WE REITERATE THE FAC TS THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD AND IN THIS METHOD THE RE VENUE IS RECOGNIZED WHEN A SUBSTANTIAL PORTION OF THE CONSTRUCTION WORK IS COM PLETED ALTHOUGH SOME UNFINISHED ANCILLARY WORKS MAY REMAIN PENDING. THE TOTAL EXPENDITURE IN RESPECT OF SUCH ANCILLARY UNFINISHED WORK IS ESTIMATED AND A PROVISION IS MADE IN THE BOOKS OF ACCOUNTS. THIS PRINCIPLE IS ADOPTED WHEN T HE ASSESSEE HAS RECOGNIZED THE ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 11 ENTIRE INCOME FROM THE PROJECT AND THE SAME IS CRED ITED IN THE BOOKS OF ACCOUNTS. THEREFORE IN THE ASSESSEES CASE UNDER CONSIDERATIO N, SINCE THE ASSESSEE HAS DISCLOSED ITS ENTIRE PROJECT RECEIPTS OF ITS ANAHI TA PROJECT IN THE ASSESSMENT UNDER CONSIDERATION, THEREFORE,ALL THE EXPENSES INC URRED OR TO BE INCURRED IN CONNECTION WITH THE SAID PROJECT WERE ALSO TAKEN IN TO ACCOUNT SO AS TO ARRIVE AT THE CORRECT NET PROFIT FROM THIS PROJECT. ON THE SAME FACTS, OUR VIEWS ARE FORTIFIED BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE O F CALCUTTA CO. LTD. REPORTED IN 37 ITR (1) WHEREIN IT WAS HELD AS UNDER: THE APPELLANT BOUGHT LANDS AND SOLD THEM IN PLOTS FIT FOR BUILDING PURPOSES UNDERTAKING TO DEVELOP THEM BY LAYING OUT ROADS, PROVIDING A DRAINAGE SYSTEM AND INSTALLING LIGHTS ETC. WHEN THE PLOTS WERE SOLD THE PURCHASER PAID ONLY A PORTION OF THE PURCHASE PRICE AND UNDERTOOK TO PAY THE BALANCE IN INSTALLMENTS. THE APPELLANT IN ITS T URN UNDERTOOK TO CARRY OUT THE DEVELOPMENTS WITHIN SIX MONTHS BUT TIME WAS NOT OF THE ESSENCE OF THE CONTRACT. IN THE RELEVANT ACCOUNTING YEAR THE APPELLANT ACTUA LLY RECEIVED IN CASH ONLY A SUM OF RS. 29,392 TOWARDS SALE PRICE OF LAND S, BUT IN ACCORDANCE WITH THE MERCANTILE SYSTEM OF ACCOUNTS ADOPTED BY I T, IT CREDITED IN ITS ACCOUNTS THE SUM OF RS. 43,692 REPRESENTING THE FUL L SALE PRICE OF LANDS. AT THE SAME TIME IT ALSO DEBITED AN ESTIMATED SUM OF R S. 24,809 AS EXPENDITURE FOR THE DEVELOPMENTS IT HAD UNDERTAKEN TO CARRY OUT, EVEN THOUGH NO PART OF THAT AMOUNT WAS ACTUALLY SPENT. T HE DEPARTMENT DISALLOWED THE EXPENDITURE. HELD, (I) THAT THE UNDERTAKING TO CARRY OUT THE DEV ELOPMENTS WITHIN SIX MONTHS FROM THE DATES OF THE DEEDS OF SALE (WHICH, IN VIEW OF THE FACT THAT TIME WAS NOT OF THE ESSENCE OF THE CONTRACT, MEANT A REASONABLE TIME) WAS UNCONDITIONAL, THE APPELLANT BINDING ITSELF ABSOLUT ELY TO CARRY OUT THE SAME. THAT UNDERTAKING IMPORTED A LIABILITY ON THE APPELLANT WHICH ACCRUED ON THE DATES OF THE DEEDS OF SALE, THOUGH T HAT LIABILITY WAS TO BE DISCHARGED AT A FUTURE DATE. IT WAS THUS AN ACCRUED LIABILITY AND THE ESTIMATED EXPENDITURE WHICH WOULD BE INCURRED IN DI SCHARGING THE SAME COULD BE DEDUCTED FROM THE PROFITS AND GAINS OF THE BUSINESS, AND THE AMOUNT TO BE EXPENDED COULD BE DEBITED IN ACCOUNT M AINTAINED IN THE MERCANTILE SYSTEM OF ACCOUNTING BEFORE IT WAS ACTUA LLY DISBURSED. THE DIFFICULTY IN THE ESTIMATION THEREOF DID NOT CONVER T THE ACCRUED LIABILITY INTO A CONDITIONAL ONE BECAUSE IT WAS ALWAYS OPEN TO THE INCOME-TAX AUTHORITIES CONCERNED TO ARRIVE AT A PROPER ESTIMAT E THEREOF HAVINGREGARD TO ALL THE CIRCUMSTANCES OF THE CASE. (II) THAT THE SUM OF RS. 24,809 REPRESENTED THE EST IMATED AMOUNT WHICH WOULD HAVE TO BE EXPENDED BY THE ASSESSEE IN THE CO URSE OF CARRYING ON ITS ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 12 BUSINESS AND WAS INCIDENTAL TO THE BUSINESS AND, HA VING REGARD TO THE ACCEPTED COMMERCIAL PRACTICE AND TRADING PRINCIPLES , WAS A DEDUCTION WHICH, IF THERE WAS NO SPECIFIC PROVISION FOR IT UN DER SECTION 10(2) OF THE INCOME-TAX ACT, WAS CERTAINLY AN ALLOWABLE DEDUCTIO N, IN ARRIVING AT THE PROFITS AND GAINS OF THE BUSINESS OF THE APPELLANT, UNDER SECTION 10(1) OF THE ACT, THERE BEING NO PROHIBITION AGAINST IT, EXP RESS OR IMPLIED, IN THE ACT. THE EXPRESSION ''PROFITS OR GAINS' IN SECTION 10(1) OF THE INCOME-TAX ACT HAS TO BE UNDERSTOOD IN ITS COMMERCIAL SENSE AND TH ERE CAN BE NO COMPUTATION OF SUCH PROFITS AND GAINS UNTIL THE EXP ENDITURE PURPOSE OF EARNING THE RECEIPTS IS DEDUCTED THEREFROM WHETHER THE EXPENDITURE IS ACTUALLY INCURRED OR THE LIABILITY IN RESPECT THERE OF HAS ACCRUED EVEN THOUGH IT MAY HAVE TO BE DISCHARGED AT SOME FUTURE DATE. 15. WE NOTE THAT THE GRIEVANCE OF THE REVENUE IS TH AT THE ASSESSEE HAS NOT DEDUCTED TDS ON THE SUM OF RS. 94,51,860/- AND RS. 2,15,30,312/-. SO FAR THE SUM OF RS. 94,51,860/- IS CONCERNED, WE NOTE THAT T HE ASSESSEE HAS DEDUCTED TDS AND PAID BEFORE 31.09.2012 I.E. BEFORE THE DUE DATE OF SUBMISSION OF RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13, THEREFORE BY NO ANY STRETCH OF IMAGINATION, THE DISALLOWANCE SHOULD BE ATTRACTED I.E. THE DISAL LOWANCE MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED BASED ON THE FACT THAT THE ASSESSEE MADE THE COMPLIANCE AND PAID TDS ON OR BEFORE SUBMISSIONS OF THE RETURN OF INCOME. 16. SO FAR THE BALANCE AMOUNT OF RS. 2,15,30,312/- IS CONCERNED, AS WE HAVE EXPLAINED IN OUR ABOVE PARA THAT SINCE THE ASSESSEE IS FOLLOWING THE PROJECT COMPLETION METHOD AND IN PROJECT COMPLETION METHOD THE ASSESSEE PREPARES FINANCIAL STATEMENT, PROFIT AND LOSS ACCOUNT AND BA LANCE SHEET ONCE IN LIFE OF PROJECT AND SOME ANCILLARY WORKS WHICH MAY REMAIN P ENDING WILL GET COMPLETED IN SUBSEQUENT YEARS. SINCE THE ASSESSEE MADE PROVIS ION FOR THESE EXPENSES TO COMPUTE THE TRUE NET PROFIT AND THE PAYEE IS NOT KN OWN, THEREFORE, DEDUCTION OF TDS IS NOT POSSIBLE, HENCE THE DISALLOWANCE IS NOT ATTRACTED. FOR THAT WE RELY ON THE JUDGMENT OF THE CO-ORDINATE BENCH OF ITAT DELHI IN THE CASE OF APOLLO TYRES LTD. VS. DCIT REPORTED IN [2017] 54 ITR (TRIB)(S.N ) 1 (ITAT[DEL]) WHEREIN IT WAS HELD AS UNDER: ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 13 A SURVEY WAS CONDUCTED AT THE PREMISES OF THE ASSE SSEE. THEREAFTER, THE SUMMONS WERE ISSUED UNDER SECTION 131 OF THE INCOME TAX ACT, 1961 ASKING FOR DETAILS AND INFORMATION FOR THE FINANCIA L YEARS 2009-10, 2010- 11 AND 2011-12, IN RESPONSE TO WHICH, NECESSARY DET AILS WERE FURNISHED BY THE ASSESSEE. THEREAFTER, THE ASSESSING OFFICER PAS SED AN ORDER RAISING A DEMAND UNDER SECTION 201 AND LEVYING INTEREST UNDER SECTION 201 (1 A) HOLDING THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE IN RESPECT OF THE PROVISION MADE UNDER SEVERAL HEADS OF INCOME AM OUNTING TO RS. 15,07,25,637. THE COMMISSIONER (APPEALS) SUSTAINED THE ADDITION. ON APPEAL: HELD, ALLOWING THE APPEAL, THAT ACCORDING TO THE SC HEME OF TAX DEDUCTION AT SOURCE UNDER CHAPTER XVII-B, CREDIT FOR THE TAX DEDUCTION AT SOURCE IS TO BE GIVEN TO THE DEDUCTEE. THUS THE IDENTIFICATIO N OF THE PERSON FROM WHOSE ACCOUNT INCOME-TAX WAS DEDUCTED AT SOURCE IS A PRE- REQUISITE CONDITION SO AS TO MAKE THE PROVISION FOR CHAPTER X VII-B WORKABLE. TAX DEDUCTED AT SOURCE IS CONSIDERED TO BE TAX PAID ON BEHALF OF THE PERSON FROM WHOSE INCOME THE DEDUCTION WAS MADE AND THEREF ORE CREDIT THEREFORE IS TO BE GIVEN TO SUCH PERSON. SECTION 203(1) LAYS DOWN THAT FOR ALL TAX DEDUCTION AT SOURCE, THE TAX DEDUCTOR HAS TO FURNIS H A CERTIFICATE TO THE PERSON TO WHOSE ACCOUNT SUCH CREDIT IS TO BE GIVEN. THEREFORE, WHEN THE TAX DEDUCTOR CANNOT ASCERTAIN THE PAYEE WHO IS THE BENEFICIARY OF A CREDIT OF TAX DEDUCTION AT SOURCE, THE MECHANISM OF CHAPTE R XVII-B CANNOT BE PUT INTO SERVICE. THE ASSESSING OFFICER WAS TO VERI FY WHETHER THE PAYEE WAS IDENTIFIABLE AND THE AMOUNT PAYABLE TO HIM WAS ASCE RTAINABLE. THEN THE ASSESSEE WOULD BE REQUIRED TO DEDUCT TAX AT SOURCE IN RESPECT OF SUCH PROVISION. HOWEVER, IF PAYEE WAS NOT IDENTIFIABLE, THE PROVISIONS OF CHAPTER XVII-B I.E., TAX DEDUCTION AT SOURCE, COULD NOT BE PRESSED INTO SERVICE AND, THEREFORE, THE ASSESSEE WAS NOT REQUIR ED TO DEDUCT TAX AT SOURCE IN SUCH A CASE. THE ASSESSING OFFICER WAS TO RE ADJUDICATE THE ISSUE AFRESH AFTER EXAMINING THE FACTS. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE MATERIAL ON RECORD, WE ARE UNABLE TO UPHOLD THE STAND OF THE REVENUE, THEREFORE WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 94,51,860/- AND RS.2,15,30,313. WE ALSO UPHOLD THE ORDER OF THE LD. CIT(A) IN RESPE CT OF DELETION OF AMOUNT OF RS.1,69,36,702/-, SINCE THIS AMOUNT PERTAINS TO PUR CHASE OF RAW MATERIALSTHEREFORE NO TDS IS ATTRACTED. HENCE, WE DISMISS THE APPEAL F ILED BY THE REVENUE IN I.T.A. NO. 2549/KOL/2017 IN ASSESSMENT YEAR 2012-13 AND WE ALLOW THE ASSESSEES APPEAL IN 2414/KOL/2017 FOR ASSESSMENT YEAR 2012-13 . ITA NOS.2414&2549/KOL/2017 M/S BENGAL PEERLESS HOUSING DEVT. CO. LTD. A.Y.2012-13 14 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED WHEREAS THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31/ 12/2 018. SD/- (A.T. VARKEY) SD/- (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; DATED 31 / 12/2018 SB , SR.PS. / COPY OF THE ORDER FORWARDED TO : ASSISTANT REGISTRAR I.T.A.T., KOLKATA BENCHES, KOLKATA 1. / THE ASSESSEE- M/S BENGAL PEERLESS HOUSING DEVT. CO. L TD. 2. / THE RESPONDENT.- DCIT, CIRCLE-7(1), KOLKATA 3. ( ) / THE CIT(A), :KOLKATA. 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. / GUARD FILE. //TRUE COPY// BY ORDER