ASST CIT 16(3), MUMBAI V. KALPAVRUKSHA DEVELOPERS, MUMBAI

ITA 2500/MUM/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7934 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: K GOPAL WITH MS NEHA PARANJAPE
• Keywords: Business income
• Section: 143(3); 131; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH H, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2500/MUM/2014 (ASSESSMENT YEAR- 2010-11) ACIT-16(2), MATRU MANDIR, 2 ND FLOOR, R.NO. 206, TARDEO ROAD, MUMBAI-400007 VS. M/S. KALPAVRUKSHA DEVELOPERS 8221, PAREKH MARKET, MAMA PARMANAND MARG, MUMBAI-400004 PAN: AAGFK2907E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M.C. OMI NINGSHEN (DR) ASSESSEE BY : SHRI K. GOPAL WITH MS. NEHA PARANJAPE (AR) DATE OF HEARING 05.07.2018 DATE OF PRONOUNCEMENT 19.09.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER (APP EALS) DATED 29 TH JANUARY 2014 FOR ASSESSMENT YEAR 2010-11, WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER UNDER SECTION 143(3) DATED 26 TH OF MARCH 2013. THE ASSESSEE HAS RAISED FOLLOWING G ROUND OF APPEAL: (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEAL) WAS JUSTIFIED IN DELE TING THE ADDITION ON ACCOUNT OF TOTAL SALES OF FLATS OF THE ASSESSEE BASED ON THE STATEMENT OF ESTIMATED PROFIT AT THE TIME OF SURVEY ACTION ON 18 JANUARY 2010. (II) WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, LEARNED COMMISSIONER (APPEAL) WAS JUSTIFIED IN DELETING THE ADDITION BY CITING THE CASE OF CIT VERSUS BILAHARI INVESTMENT PRIVATE LTD 299 ITR 1(SC), WHEREIN THE ISSUE WAS OF ADOPTION OF ACCOUNTING MET HOD PROFIT OR ITA NO. 2500/MUM/2014- M/S. KALPAVRUKSHA DEVELOPER S 2 PROFIT SHOWING METHOD AND IN HAWARA INFRASTRUCTURE PRIVATE LTD VERSUS ACIT, MUMBAI WHEREIN THE ISSUE WAS REJECTION OF PROJECT COMPLETION METHOD BY THE ASSESSING OFFICER UNLIKE P RESENT CASE. (III) WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, LEARNED COMMISSIONER APPEAL WAS JUSTIFIED IN DELETING THE A DDITION OF AN ASSESSEE HAS ACCEPTED THAT IT WAS FOLLOWING PERCENT AGE COMPLETION METHOD AND THE AMOUNT OF WORK IN PROGRESS AS PER BA LANCE-SHEET OF THE ASSESSEE HAS TO BE OFFERED FOR TAXATION AS PER PERC ENTAGE COMPLETION METHOD. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF BUILDING CONSTRUCTION AND DEVELOPER, FILED ITS RETU RN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 30 TH SEPTEMBER 2010 DECLARING TOTAL INCOME AT RS. 9,76,03,100/-. THE ASSESSMENT WAS SELECTED F OR SCRUTINY. THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDING OBSERVED THAT IN THE SURVEY PROCEEDING CARRIED OUT AT THE PREMISES OF T HE ASSESSEE ON 18 JANUARY 2010, THE ASSESSEE OFFERED TOTAL INCOME OF RS. 82,08,000/- FROM KEMPS CORNER PROJECT AND RS. 8,27,11,588/- FROM PRA BHADEVI PROJECT FOR TAXATION. ON GOING THROUGH THE BALANCE-SHEET AS ON 31 MARCH 2010, THE ASSESSING OFFICER NOTED THAT THE SALES OF FLAT AT C AMP CORNER WAS RS. 29,04,50,000/- WHICH IMPLIED THAT SALES OF RS. 19,9 2,50,000/- WAS MADE IN BETWEEN 18 JANUARY 2010 TO 31 ST MARCH 2010. THIS WAS IN ADDITION TO THE SALES REPORTED ON THE DATE OF SURVEY, ON WHICH NO CONSEQUENT PROFIT WAS DECLARED. THE ASSESSING OFFICER ISSUED SHOW CAU SE NOTICE TO THE ASSESSEE AS TO WHY THE ESTIMATED PROFIT ON RS. 19, 92,50,000/- SHOULD NOT BE TAKEN AS PER ADDITIONAL INCOME AND TAXED AT ESTI MATED PROFIT @ 9%. THE ASSESSEE FILED ITS REPLY DATED 20.03.2013 AND C ONTENTED THEREIN THAT ITA NO. 2500/MUM/2014- M/S. KALPAVRUKSHA DEVELOPER S 3 THAT THE TOTAL SALES AT CAMP CORNER IS AT RS. 29.04 CRORE INCLUDING THE AMOUNT OF RS. 19.92 CRORE WHICH HAS BEEN PROPOSED T O BE TREATED AS ADDITION INCOME. THE AGGREGATE AMOUNT RECEIVED AG AINST THE ABOVE SALES IS RS. 5.81 CRORE ONLY. THE OUTSTANDING RECEI VABLE AGAINST THE ABOVE CELLS IS RS.23.23 CRORE. THE CONTENTION OF THE ASSE SSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER HOLDING THAT THE ASSESSEE COULD NOT SATISFACTORY EXPLAIN THE ENHANCE INCOME THEREFORE THE ASSESSING OFFICER ESTIMATED 9% PROFIT ON SALES OF RS. 19,92,50,000 /-. ON APPEAL B EFORE LD. COMMISSIONER (APPEALS) THE ENTIRE ADDITION MADE BY ASSESSING OFF ICER ON ESTIMATED BASIS WAS DELETED. THE LD. COMMISSIONER (APPEALS) D ELETED THE ADDITION ON ESTIMATED BASIS HOLDING THAT THE ASSESSEE HAS MA DE SHOWN SUO-MOTO DECLARATION AND READY TO PAY THE TAX ON ESTIMATED I NCOME AND NO FURTHER ADDITION WAS JUSTIFIED. AGGRIEVED BY THE ORDER OF L D. COMMISSIONER (APPEALS) THE REVENUE HAS FILED PRESENT APPEAL BEFO RE US. 3. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE ( DR) FOR THE REVENUE AND LEARNED AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARN ED DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LEARN ED DR FURTHER SUBMITS THAT ASSESSEE HAS CLAIMED PERCENTAGE COMPLETION MET HOD. THE ASSESSING OFFICER MADE THE ADDITION ON THE BASIS OF STATEMENT RECORDED DURING THE SURVEY ACTION AND ADDED 9% OF WORK IN PROGRESS. THE LEARNED ITA NO. 2500/MUM/2014- M/S. KALPAVRUKSHA DEVELOPER S 4 COMMISSIONER (APPEALS) DELETED THE ADDITION WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE OFFERED ESTIMATED PROFIT AT THE TIME OF SURVEY. 4. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSEE SU PPORTED THE ORDER OF LD. COMMISSIONER (APPEALS). THE LEARNED AR OF THE A SSESSEE FURTHER SUBMITS THAT DURING THE ASSESSMENT YEAR ONLY 9% WOR K WAS COMPLETED. IN THE YEAR 2011- 12 ONLY 12.5% WORK WAS COMPLETED. DU RING ASSESSMENT YEAR 2012-13 ONLY 30% WORK WAS COMPLETED AND DURING ASSESSMENT YEAR 2013-14 ONLY 55% WORK WAS COMPLETED. THE LD. COMMIS SIONER (APPEALS) APPRECIATED THE FACTS AND GRANTED RELIEF TO THE ASS ESSEE. THE ASSESSING OFFICER IN ASSESSMENT YEAR 2010- 11 IN THE ASSESSME NT ORDER PASSED UNDER SECTION 143(3) MADE NO ADDITION IN RESPECT OF PROJE CT AT CAMP CORNER. SIMILARLY, THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2012- 13 WAS PASSED UNDER SECTION 143(3), AND NO ADDITION IN RESPECT OF PROJECT AT CAMP CORNER WAS MADE. THE ASSESSING OFFICER FURTHER IN A SSESSMENT YEAR 2013-14 PASSED ASSESSMENT ORDER UNDER SECTION 143(3 ) AND NO ADDITION IN RESPECT OF PROJECT AT CAMP CORNER WAS MADE. THE LEA RNED AR OF THE ASSESSEE PLACED COPIES OF ASSESSMENT ORDERS OF ALL THESE ASSESSMENT YEARS. THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT THE ORDER PASSED BY LD. COMMISSIONER (APPEALS) DOES NOT SUFFER FROM ILL EGALITY OR INFIRMITY AND NEEDS NO INTERFERENCE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS ING OFFICER MADE THE ITA NO. 2500/MUM/2014- M/S. KALPAVRUKSHA DEVELOPER S 5 ADDITION ON HIS OBSERVATION THAT IN THE SURVEY PROC EEDING CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 18 JANUARY 2010, TH E ASSESSEE OFFERED TOTAL INCOME OF RS. 82,08,000/- FOR TAXATION. ON GO ING THROUGH THE BALANCE-SHEET AS ON 31 MARCH 2010, THE ASSESSING OF FICER NOTED THAT THE SALES OF FLAT AT CAMP CORNER WAS RS. 29,04,50,000/- WHICH IMPLIED THAT SALES OF RS. 19,92,50,000/- WAS MADE IN BETWEEN 18 TH JANUARY 2010 TO 31 ST MARCH 2010. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SALES REPORTED ON THE DATE OF SURVEY, ON WHICH NO CONSEQU ENT PROFIT WAS DECLARED. THEREFORE, THE ASSESSING OFFICER ISSUED S HOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE ESTIMATED PROFIT ON RS. 19,92,50,000/- SHOULD NOT BE TAKEN AS PER ADDITIONAL INCOME AND TAXED ACC ORDINGLY AT ESTIMATED PROFIT @ 9%. THE ASSESSEE FILED ITS REPLY DATED 20. 03.2013 AND CONTENTED THEREIN THAT THAT THE TOTAL SALES AT CAMP CORNER IS AT RS. 29.04 CRORE INCLUDING THE AMOUNT OF RS. 19.92 CRORE WHICH HAS BEEN PROPOSED TO BE TREATED AS ADDITION INCOME. THE ASSESSEE FURTHER CONTENDED THAT THE AGGREGATE AMOUNT RECEIVED AGAINST THE ABOVE SALES I S RS. 5.81 CRORE ONLY. THE OUTSTANDING RECEIVABLE AGAINST THE ABOVE SALES IS RS.23.23 CRORE. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER HOLDING THAT THE ASSESSEE COULD NOT SATISFACTORY EX PLAIN THE ENHANCE INCOME, THEREFORE, THE ASSESSING OFFICER ESTIMATED 9% PROFIT ON SALES OF RS. 19,92,50,000/-. DURING THE FIRST APPEAL BEFORE LD. COMMISSIONER (APPEALS) THE ASSESSEE CONTENDED THAT DURING THE SU RVEY ACTION THE ITA NO. 2500/MUM/2014- M/S. KALPAVRUKSHA DEVELOPER S 6 ASSESSEE DECLARED ESTIMATED PROFIT OF RS. 8 2.08 CR ORE FROM CAMPS CORNER PROJECT WHICH IS IN CONFORMITY WITH THE STATEMENT R ECORDED UNDER SECTION 131 OF THE ACT. THE ASSESSEE HAD ESTIMATED THE PROF IT THOUGH IT WAS NOT REQUIRED TO DECLARE ANY PROFIT CONSIDERING THE APPL ICABLE AMOUNT ACCOUNTING STANDARD AND ACCOUNTING POLICIES AND THE STAGE OF COMPLETION OF PROJECT. THE PERCENTAGE OF WORK COMPLETED AS IN THE BALANCE SHEET TILL 31 ST MARCH 2010 WAS APPROXIMATELY 9% ONLY. IT WAS FURTH ER EXPLAINED THAT THE ASSESSING OFFICER HAS TREATED THE SALES AS ADDITIONAL INCOME AND HAS FURTHER PROCEEDED TO ESTIMATED NET PROFIT ON TH E ALLEGED ADDITIONAL INCOME AT A FLAT RATE OF 9% AND PROCEEDED TO MAKE T HE ADDITION OF RS. 1.79 CRORE. THE ASSESSEE ALSO EXPLAINED THAT THE AS SESSEE HAS RECEIVED ONLY RS. 5.81 CRORE AND REMAINING ARE RECEIVABLE IN THE SUBSEQUENT YEARS UPON COMPLETION OF AQUARIUS STAGE OF CONSTRUCTION. THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE CONTEN TION OF THE ASSESSEE CONCLUDED THAT THE CONSTRUCTION OF CAMPS CORNER PRO JECT WAS COMPLETED ONLY 9% AND THAT THE ASSESSEE WAS NOT OBLIGED TO ES TIMATE ANY PROFIT FOR THE YEAR IN RESPECT OF SAID PROJECT. HOWEVER, THE A SSESSEE SUO-MOTO MADE A DECLARATION AND THAT HE WAS READY TO PAY TAX ON E STIMATED INCOME OF RS. 8 2.08 LAKHS BEING 9% OF SALES OF RS. 9.12 CRORE AN D NO FURTHER ADDITION IS JUSTIFIED. WE HAVE NOTED THAT THE LD. COMMISSIONER (APPEALS) ALSO EXAMINED THE WORK IN PROGRESS IN SUBSEQUENT ASSESSM ENT YEAR TILL THE ASSESSMENT YEAR 2013-14 AND CONCLUDED THAT ONLY 55% OF WORK WAS ITA NO. 2500/MUM/2014- M/S. KALPAVRUKSHA DEVELOPER S 7 COMPLETED TILL THE END OF ASSESSMENT YEARS 2013-14. THE LEARNED COMMISSIONER (APPEALS) FURTHER CONCLUDED THAT AS PE R ACCOUNTING STANDARD-7 (AS-7) WHEN OUTCOME OF CONSTRUCTION CONT RACT CANNOT BE ESTIMATED RELIABLY, REVENUE SHOULD BE RECOGNIZED ON LY TO THE EXTENT OF CONTRACT COST INCURRED OF WHICH RECOVERY IS PROBABL E. FURTHER, AS PER ACCOUNTING STANDARD IN TRANSACTION INVOLVING SALES OF GOODS, PERFORMANCE SHOULD BE REGARDED AS BEING ACHIEVED WH EN ALL SIGNIFICANT RISK AND REWARDS OF OWNERSHIP HAS BEEN TRANSFERRED TO THE BUYER AND THE SELLER RETAINS NO EFFECTIVE CONTROL. THE COMMISSION ER (APPEALS) WHILE RELYING UPON THE DECISION OF HONBLE APEX COURT IN CIT VS. BILAHARI PVT. LTD. (SUPRA) WHEREIN IT WAS HELD THAT IN THE PERCEN TAGE COMPLETION METHOD, PERIODIC RECOGNITION OF INCOME IS ATTAIN IN ORDER TO REFLECT CURRENT PERFORMANCE. THE AMOUNT OF REVENUE RECOGNIZED UNDER THIS METHOD IS DETERMINED BY REFERENCE TO THE STAGE OF COMPLETION. THE LD. COMMISSIONER (APPEALS) FURTHER RELIED UPON THE DECI SION OF HONBLE DELHI HIGH COURT IN CIT VS. MANISH BUILDWELL PVT. L TD. IN ITA NO. 928 OF 2011 DATED 15.11.2011, WHEREIN IT WAS HELD THAT AS-7 ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA RECOGNI ZED THE POSITION THAT IN CASE OF CONSTRUCTION CONTRACTS, THE ASSESSEE CAN FO LLOW EITHER PROJECT COMPLETION METHOD OR PERCENTAGE COMPLETION METHOD. WE HAVE NOTED THAT THE ASSESSEE HAS BEEN FOLLOWING PERCENTAGE COMPLETI ON METHOD WHICH HAS NOT BEEN DISPUTED BY ASSESSING OFFICER. THE ASSESSI NG OFFICER MERELY ITA NO. 2500/MUM/2014- M/S. KALPAVRUKSHA DEVELOPER S 8 RELIED UPON THE DISCLOSURE MADE BY ASSESSEE UPTO TH E DATE OF SURVEY. WE HAVE FURTHER NOTED THAT THE ASSESSEE HAS SUO-MOTO M ADE A DECLARATION THAT HE IS READY TO PAY TAX ON ESTIMATED INCOME OF SALE BEING 9%. WE HAVE FURTHER NOTED THAT THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER IN ASSESSMENT YEAR 2011-12, 2012-13 & 2013-14 AND NO A DDITION ON ACCOUNT OF PROFIT FOR CAMP CORNER PROJECT WAS ADDED . CONSIDERING THE FACT THAT NO ESTIMATED ADDITION WAS MADE BY ASSESSI NG OFFICER IN ASSESSMENT ORDER IN ASSESSMENT YEAR 2011-12, 2012-1 3 & 2013-14, NO ESTIMATED ADDITION WAS JUSTIFIED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. HENCE, THE GROUND OF APPEAL RAISED B Y REVENUE IS HAVING NO LEGAL FORCE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DAY SEPTEMBER 2018. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 19/09/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //E COPY/