ESKAYS CONSTRUCTIONS PRIVATE LIMITED, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX - CENTRAL CIRCLE 8(4), MUMBAI

ITA 2425/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6054 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 19-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGH
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI PAWAN SINGH,JUDICIAL MEMBER AND SHRI G MANJUNATHA,ACCOUNTANT MEMBER ITA NO. 2425/MUM/2018 (ASSESSMENT YEAR: 2013-14) M/S ESKAYS CONSTRUCTION PVT LTD, 16 TH FLOOR, B WING, MITTAL TOWER, NARIMAN POINT MUMBAI 400 021 PAN: AAACE1223E VS THE ACIT, CENT.CIR. 8(4), ROOM NO.658, AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400 020 APPELLANT RESPONDEDNT APPELLANT BY MS. RUTUJA N PAWAR RESPONDENT BY SHRI AMIT PRATAP SINGH DATE OF HEARING 25-09-2019 DATE OF PRONOUNCEMENT 01-10-2019 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER : THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE OR DER OF CIT(A)-50, MUMBAI DATED 28-02-2018, WHICH IN TURN, ARISES FROM ASSESSMENT ORDER PASSED U/S 143(3) ON 29-01-2016. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEA LS) (C1T (A)) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSISTANT COMMISSI ONER ('AO'), OF NOT REDUCING THE INCOME BY RS. 2,40,47,466/-, WHICH WAS PREPONED AND BROUGHT TO TAX BY AO IN A.Y 2010-11 AND 2011-12 BY DISTURBING PERCENTAGE OF COMPLETION. WHILE DOING SO HE HAS GIVEN FOLLOWING REASON - THE ADDITION MADE BY THE AO IN A.Y 2010-11 & A .Y 2011-12 IS CONTESTED BY THE APPELLANT BEFORE APPELLATE AUTHORITIES, HENCE A DDITION HAS NOT REACHED FINALITY; THAT THERE IS NO PROVISION UNDER THE INCOME-TA X ACT TO MAKE AMENDMENT IN THE RETURN OF INCOME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE ASSESSED INCOME OUGHT TO BE REDUCED BY RS.240,47,466/-. ITA NO. 2425/MUM/2018 ESKAY CONSTRUCTION PVT LTD 2. AT THE OUTSET OF HEARING, THE LD.AR OF THE ASSES SEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED IN THE PRESENT APPEAL IS C OVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2010-11 & 2011-12 IN ITAS NO.3722/MUM/2016, 3466/MUM/2016 & 3465/MUM/2016. THE LD.AR FURTHER SUBMITS THAT THE LD. CIT(A) CONFIRMED THE ACTION OF AO BY TAKING VIEW THAT THE ADDITION M ADE BY AO IN AYS 2010- 11 & 2011-12 HAS NOT ATTAINED FINALITY. IT WAS SUB MITTED APPEALS FOR AYS 2010-11 & 2011-12, HAS BEEN DECIDED VIDE ORDER DATE D 10.07.209, THE LD.AR OF THE ASSESSEE ALSO FURNISHED THE COPY OF ORDER OF TRIBUNAL FOR AYS 2010-11 & 2011-12 DATED 10-07-2019. 3. THE LD. DR FOR THE REVENUE, AFTER GOING THRO UGH THE GROUNDS OF APPEAL AND THE DECISION OF TRIBUNAL FOR AYS 2010-11 & 2011 -12 FAIRLY AGREED THAT THE GROUNDS OF APPEAL RAISED BY REVENUE ARE COVERED . 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE RECORDS. FOR PROPER APPRECIATION OF FACTS, THE FACTS IN BRIEF ARE THAT ASSESSEE IS A BUILDER AND DEVELOPER, FILED ITS RETU RN OF INCOME FOR AY 2012-13 DECLARING TOTAL INCOME AT RS.23,74,33,983/-. THE C ASE WAS SELECTED FOR SCRUTINY. THE ASSESSEE IS FOLLOWING PERCENTAGE COM PLETION METHOD FOR REVENUE RECOGNITION. DURING THE ASSESSMENT PROCEED INGS, THE ASSESSEE FILED REVISED COMPUTATION OF INCOME ON 21-12-2015. AND M ADE THE FOLLOWING CONTENTIONS:- ITA NO. 2425/MUM/2018 ESKAY CONSTRUCTION PVT LTD 'THE ASSESSEE TILL THE AY 2012--13 WAS OFFERING INCOME FROM ITS RESIDENTIAL PROJECT AT THE TARAPORWALA MANSION , CUFF PARADE ON PERCENTAGE COMPLETION METHOD. THE ASSESSEE IN THE A.Y. 2010-11 AND A.Y. 2011-12 H AS ESTIMATED THAT THE SAID PROJECT IS COMPLETED TO THE EXTENT OF 67.28% AND 81.42% RESPECTIVELY AND ACCORDINGLY HAS OFFERED THE INCOME FOR TAX. HOWEVER , IN THE ASSESSMENT THE LEARNED AO HAS MODIFIED THE COMPUTATION OF INCOME E STIMATION AND DETERMINATION THE PERCENTAGE OF COMPLETION AT THE 7 7.16% AND 87.88% RESPECTIVELY. THIS RESULTED INTO ADDITION TO THE TO TAL INCOME, BY RS. 2,39,00,000/- AND RS.1,17,00,000/- FOR THE A.Y. 2010-11 AND A.Y. 2011-12, RESPECTIVELY. THE ASSESSEE HAS COMPLETED THE SAID PROJECT IN THE YEAR UNDER CONSIDERATION AND OFFERED THE FINAL PROFIT OF RS.23,58,32,369/- OFFERED BY THE ASSESSEE .IN THE A.Y. 2013-14. CONSEQUENTLY, THE TOTAL INCOME OF THE ASSESSEE FOR THE A.Y, . 2013-14 NEEDS TO BE REDUCED BY THE AFORESAID SUM OF RS. 3,56,00, 000/- (I.E. RS. 2, 39,00, 000 AND RS.1, 17,00,000/-. THE REVISED COMPUTATION WITHOUT PREJUDICE TO THE PENDING APPEALS FOR THE ABOVE TWO ASSESSMENT YEARS IS ENCLO SED FOR YOUR READY REFERENCE.' 5. THE REVISED CLAIM OF THE ASSESSEE WAS NOT ACCEPT ED BY AO HOLDING THAT THE LAW DID NOT PERMIT HIM TO REDUCE THE RETURNED I NCOME SHOWN BY THE ASSESSEE. THE AO FURTHER NOTED THAT APPEALS FOR AY S 2010-11 AND 2012-13 WERE PENDING BEFORE CIT(A) AGAINST THE ADDITION MAD E IN THOSE ASSESSMENTS THEREBY THE AO ACCEPTED THE RETURNED INCOME FILED O RIGINALLY AND REJECTED THE REVISED COMPUTATION. ON APPEAL BEFORE CIT(A), THE ACTION OF AO WAS UPHELD WITH THE FOLLOWING OBSERVATIONS:- 8.0. 1 HAVE CONSIDERED THE OBSERVATIONS OF THE A.O . IN THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT AND ALSO PERUSED THE M ATERIALS AVAILABLE ON RECORD, ON THIS ISSUE. THE FACTS ARE THAT THE APPELLANT OFFERED INCOME BAS ED ON PERCENTAGE COMPLETION METHOD IN RELATION TO THE RESIDENTIAL PROJECT AT TA RAPORWALA MANSION. THE A.O, HAS DISTURBED THE % APPLIED BY THE APPELLANT AND MA DE ADDITIONS IN A.Y. 2010-11 & A.Y. 2011-12, THUS, INCOME AMOUNTING RS. 3,56,00, 000/- (I.E. RS. 2,39,00,000/- AND RS. 1,17,00,000/- ADDED IN A.Y. 2 010-11 & AY 2011-12 RESPECTIVELY) WAS PROPONED BY THE AO. THE APPELLANT HAS CLAIMED CONSEQUENTIAL ITA NO. 2425/MUM/2018 ESKAY CONSTRUCTION PVT LTD RELIEF IN THE YEAR UNDER CONSIDERATION, AS THE PROJ ECT WAS COMPLETED IN THE CURRENT YEAR. 8.2 FIRSTLY, 1 HAVE NOTED THAT THE ADDITION MADE BY THE A.O. IN A.Y. 2010-11 & A.Y. 2011-12 HAS NOT ATTAINED FINALITY. THE CD (A) HAS VIDE ORDER DATED 26.02.016 & 26.02.2016 GIVEN PARTIAL RELIEF TO THE APPELLANT AND INCOME TO THE EXTENT OF RS. 2,40,47,466/- I.E. RS. 85,18,702/- AN D RS. 1,55,28,764/- FOR 2010-11 & A.Y. 2011-12 RESPECTIVELY HAS BEEN UPHELD. IN THE WRITTEN SUBMISSIONS, THE APPELLANT HAS FAILED TO FURNISH TH E PRESENT STATUS OF THE APPELLATE PROCEEDINGS. FROM THE MATERIAL ON RECORD, IT IS INF ERRED THAT THIS IS NOT THE CASE, WHEREIN THE APPELLANT HAS ACCEPTED THE ADDITIONS MA DE BY THE A.O. 5. FROM THE AFORESAID ORDERS, WE HAVE NOTED THAT IN AYS 2010-11 & 2011- 12 ASSESSEE HAS ESTIMATED THE COMPLETION OF PROJECT TO THE EXTENT OF 67.28% AND 81.48% RESPECTIVELY AND OFFERED THE INCOME TO T AX. HOWEVER, THE AO MODIFIED THE COMPUTATION OF INCOME ON ESTIMATION AN D DETERMINED THE COMPLETION OF PROJECT AT 77.16% AND 87.88%, WHICH U LTIMATELY RESULTED IN ADDITION OF RS.2.39 CRORES AND RS.1.17 CRORES FOR A YS 2010-11 & 2011-12, RESPECTIVELY. THE ASSESSEE CLAIMED THAT THE PROJEC T IS COMPLETED DURING THE YEAR UNDER CONSIDERATION, I.E. IN AY 2013-14 AND AC CORDINGLY CLAIMED THAT INCOME NEEDS TO BE REDUCED TO THE EXTENT OF RS.3.56 CRORES. THE AO DID NOT ACCEPT THE REVISED COMPUTATION ON THE GROUND THAT L AW DID NOT PERMIT HIM TO REDUCE THE RETURNED INCOME. THE LD. CIT(A) DID NOT ALLOW RELIEF TO THE ASSESSEE ON THE GROUND THAT APPEAL FOR AYS 2010-11 & 2011-12 WERE PENDING. 6. WE HAVE NOTED THAT THE CO-ORDINATE BENCH OF TRIB UNAL IN ASSESSEES OWN CASE FOR AYS 2010-11 & 2011-12 VIDE ORDER DATED 10.07.2019 ALLOWED ITA NO. 2425/MUM/2018 ESKAY CONSTRUCTION PVT LTD RELIEF TO THE ASSESSEE ON THE ISSUE OF CLAIM OF PE RCENTAGE COMPLETION BY PASSED THE FOLLOWING ORDER:- 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE SUBJECT MENTIONED PROJE CT WAS STARTED BY THE ASSESSEE IN THE YEAR 2006 AND THE SAID PROJECT WAS COMPLETED SUBSEQUENT TO ASSESSMENT YEARS UNDER CONSIDERATION BEFORE US . THUS THE ASST YEARS 2010- 11 AND 2011-12 ARE THE INTERVENING YEARS WHEN THE P ROJECT WAS UNDER CONSTRUCTION. THE ADOPTION OF PERCENTAGE OF COMPLET ION METHOD FOR RECOGNIZING REVENUE FROM THE REAL ESTATE PROJECT IS NOT IN DISPUTE. THE MANNER IN WHICH SUCH INCOME WAS RECOGNIZED IS IN DI SPUTE BETWEEN THE ASSESSEE AND THE REVENUE. WE FIND THAT THE ASSESSEE HAD DECLARED THE PERCENTAGE OF WORK COMPLETED AT 67.38% IN THE RETUR N. WE FIND THAT THE ID AO HAD ARRIVED AT THE PERCENTAGE OF WORK COMPLETED AT 77.16% BY INCLUDING THE COST OF LAND BOTH IN THE ESTIMATE OF TOTAL PROJECT AND IN THE ESTIMATE OF COST OF WORK COMPLETED AS ON 31.3.2010. THE MANNER OF DETERMINATION OF REVENUE BY THE ID AO AND CONSEQUEN TIAL ADDITION MADE THEREON IN THE SUM OF RS 2.39 CRORES IS REPRODUCED IN TABLE SUPRA. WE FIND THAT THE ID CIT(A) HAD ACCEPTED THE CONTENTION OF T HE ASSESSEE THAT THE COST OF LAND SHOULD BE EXCLUDED AND ACCEPTED THE PERCENT AGE OF WORK COMPLETED TO BE AT 67.38% AS DISCLOSED BY THE ASSESSEE. WE FI ND THAT THE ACQUISITION OF LAND IS THE VERY FIRST STEP FOR THE COMMENCEMENT OF THE PROJECT. THE WORK ON THE PROJECT TAKES PLACE AFTER THE ACQUISITION OF LA ND. GENERALLY, COST OF LAND CONSTITUTES A VERY LARGE PORTION BUT BY THE ACQUISI TION OF LAND ITSELF, THERE IS NO WORK-IN-PROGRESS. AT THE STAGE WHERE LAND ONLY I S ACQUIRED, IT CANNOT BE SAID THAT THE PROJECT HAS COMMENCED BUT IF THE COST OF LAND IS INCLUDED IN THE PERCENTAGE OF THE PROJECT COMPLETION, THEN IT WOULD SHOW THAT THE PROJECT HAS BEEN SUBSTANTIALLY COMPLETED SAY, TO THE EXTENT OF 50-60% AT THE BEGINNING ITSELF. HENCE, FOR WORKING OUT THE STAGE OF COMPLETION OF THE PROJECT LAND VALUE SHOULD NOT BE INCLUDED. HENCE WE HOLD THAT THE ID CIT(A) IS JUSTIFIED IN EXCLUDING THE VALUE OF LAND WHILE WORKING OUT THE ITA NO. 2425/MUM/2018 ESKAY CONSTRUCTION PVT LTD PERCENTAGE OF WORK COMPLETED. MOREOVER, WE FIND THA T THE ID AO HAD CONSIDERED THE SALE AREA WHILE DETERMINING THE PERC ENTAGE OF COMPLETION METHOD AS AGAINST THE COST INCURRED UP TO 31.3.2010 . HENCE WE HOLD THAT THE PERCENTAGE OF WORK COMPLETED UP TO 31.3.2010 SHOULD BE CONSIDERED AT 67.38% AS DETERMINED BY THE ASSESSEE IN THE RETURN OF INCOME. 7.1----------- 7.2----------- 7.3----------- 7.4. ACCORDINGLY, THE GROUND NO. 1 RAISED BY THE RE VENUE FOR ASST YEAR 2010-11 IS DISMISSED AND GROUND NO. 1 RAISED BY THE ASSESSEE FOR ASST YEAR 2010-11 IS ALLOWED. IN VIEW OF OUR DECISION FOR GRO UND NO. L RAISED BY THE ASSESSEE, THE ADJUDICATION OF GROUND NO. 2 IN ASSES SEE'S APPEAL BECOMES ACADEMIC IN NATURE AND DOES NOT REQUIRE ANY ADJUDIC ATION AT THIS STAGE. 8. BOTH THE PARTIES BEFORE US AGREED THAT THE GROUN D NO. 1 IN ASST YEAR 2011-12 IN ASSESSEE'S APPEAL IS SIMILAR TO GROUNDS RAISED BY THE ASSESSEE IN ASST YEAR 2010-11. HENCE THE DECISION RENDERED BY U S FOR ASST YEAR 2010- 11 THEREON WOULD APPLY WITH EQUAL FORCE FOR ASST YE AR 2011-12 ALSO EXCEPT WITH VARIANCE IN FIGURES. THE ID DR CONFIRMED THE F ACT THAT THERE WAS NO APPEAL PREFERRED BY THE REVENUE FOR THE ASST YEAR 2 011-12 BEFORE THIS TRIBUNAL. ACCORDINGLY, THE GROUND NO. L RAISE D BY THE ASSESSEE FOR ASST YEAR 2011-12 IS ALLOWED. IN VIEW OF OUR DECISION FO R GROUND NO. L FOR ASST YEAR 2011-12, THE ADJUDICATION OF GROUNDS 2 AND 3 T HEREON BECOMES ACADEMIC IN NATURE AND DOES NOT REQUIRE ANY ADJUDIC ATION AT THIS STAGE. 7. CONSIDERING THE DECISION OF CO-ORDINATE BENCH FO R AYS 2010-11 & 2011-12, WE FIND THAT THE ASSESSEE IN THE A.Y. 2010 -11 AND A.Y. 2011-12 HAS ESTIMATED THAT THE SAID PROJECT IS COMPLETED TO THE EXTENT OF 67.28% AND 81.42% RESPECTIVELY AND ACCORDINGLY HAS OFFERED THE INCOME FOR TAX AND ADMITTEDLY REMAINING INCOME WAS OFFERED IN THE YEAR UNDER CONSIDERATION (AY 2013-14) IN THE RETURN OF INCOME, WHICH HAS BEE N CORRECTLY ACCEPTED BY ITA NO. 2425/MUM/2018 ESKAY CONSTRUCTION PVT LTD ASSESSING OFFICER BY ACCEPTING THE RETURN INCOME . HENCE, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 01-10-2019. SD/- SD/- (G.MANJUNATHA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 01 OCTOBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI