ASHFORS HOUSING CORPORATION , MUMBAI V. INCOME TAX OFFICER 21(1)(2), MUMBAI

ITA 2535/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4282 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K CHATURVEDI
• Assessee Lawyers: SANJAY R PARIKH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 2535 / MUM . /2018 ( ASSESSMENT YEAR : 20 12 13 ) ASHFORD HOUSING CORPORATION 10, SSHFORD CENTRE SHANKARRAO NARAM PATH OPP. PENINSULA CORPORATE PARK LOWER PAREL, MUMBAI 400 013 PAN AAKFA1087D . APPELLANT V/S INCOME TAX OFFICER WARD 2 1 ( 1 )( 2 ), MUMBAI . RESPONDENT ASSESSEE BY : SHRI SANJAY R. PARIKH REVENUE BY : SHRI V.K. CHATURVEDI DATE OF HEARING 26 . 1 2 .201 8 DATE OF ORDER 13.03.2019 O R D E R A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 4 TH JANUARY 2 0 1 8 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 33 , MUMBAI , FOR THE ASSESSMENT YEAR 20 12 13 . 2 . THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE ADDITION OF ` 19,73,839. 3 . BRIEF FACTS ARE, THE ASSESSEE , A PARTNERSHIP FIRM , IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. FOR THE IMPUGNED ASSESSMENT 2 ASHFORS HOUSING CORPORATION YEAR, THE ASSESSEE FILED ITS RETURN OF INCO ME ON 28 TH NOVEMBER 2013, DECLARING NIL INCOME. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON VERIFYING MATERIAL AVAILABLE ON RECORD NOTICED THAT A HOUSING PROJECT UNDERTAKEN BY THE ASSESSEE WAS COMPLETED DURING THE FINANCIAL YEAR 2008 09 AND OCCUPANCY CERTIFICATE FOR THE SAID HOUSING PROJECT WAS ALSO ISSUED IN FINANCIAL YEAR 2008 09. FURTHER, HE NOTICED THAT ALL THE FLATS IN THE SAID HOUSING PROJECT WERE SOLD OFF BY THE END OF FINANCIAL YEAR 2010 11. HOWEVER, HE FOUND THAT OUT OF THE TO TAL REVENUE FROM PROJECT OF ` 328,97,31,575, THE ASSESSEE HAS RETAINED 0.3% AMOUNTING TO ` 98,69,165, TOWARDS OBLIGATION FOR EXPENSES IN RESPECT OF PROJECT IN FINANCIAL YEAR 2010 11. HE NOTICED THAT OUT OF THE RETENTION MONEY KEPT ASIDE IN FINANCIAL YEAR 2 010 11, THE ASSESSEE HAS OFFERED 80% AMOUNTING TO ` 78,95,355, AS INCOME DURING THE FINANCIAL YEAR 2011 12 CORRESPONDING TO THE IMPUGNED ASSESSMENT YEAR. WHEREAS, HE HAS DEFERRED THE BALANCE 20% AMOUNTING TO ` 19,73,839, FOR SUBSEQUENT YEAR. NOTICING THE A FORESAID, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE AMOUNT OF ` 19,73,839, SHOULD NOT BE TREATED AS INCOME ALONG WITH ` 78,95,335, OFFERED AS INCOME DURING THE IMPUGNED ASSESSMENT YEAR. IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE THAT TH OUGH THE ALL UNITS OF THE HOUSING PROJECTS WERE SOLD BY FINANCIAL YEAR 2010 11 AND PROFIT OF THE HOUSING PROJECT WAS OFFERED TO TAX PROP ORTIONATELY FROM FINANCIAL YEAR 2008 09 TO 2010 11 IN ACCORDANCE WITH GENERALLY ACCEPTED 3 ASHFORS HOUSING CORPORATION PRINCIPLE, HOWEVER, CERTAIN WORK STILL REMAINED TO BE CARRIED OUT UNTIL THE POSSESSION OF THE AFFAIRS OF THE SOCIETY WERE HANDED OVER TO THE MEMBERS OF THE SOCIETY IN THE FINANCIAL YEAR 2011 12. IT WAS SUBMITTED , SINCE THE ENTIRE PROFIT OF THE HOUSING PROJECT WAS OFFERED TO TAX BY FINANCIAL YEAR 2010 11, CERTAIN AMOUNTS WERE RETAINED AS RETENTION MONEY TO MEET THE EXPENSES AND CERTAIN UNFORESEEN LIABILITY OF THE PROJECT THAT MAY COME UP IN FUTURE YEARS. THEREFORE, IT WAS SUBMITTED , OUT OF THE RETENTION MONEY OF ` 98,96,195, THE ASSESSEE HAS OFFERED 80% AS INCOME IN THE IMPUGNED ASSESSMENT YEAR AND THE BALANCE 20% WAS OFFERED AS INCOME IN FINANCIAL YEAR 2012 13. HE SUBMIT TED , EVE N BEYOND FINANCIAL YEAR 2013 14 THE ASSESSEE HAS INCURRED CERTAIN EXPENSES AND LIKELY TO INCUR SOME MORE EXPENDITURE IN FUTURE. THUS, IT WAS SUBMITTED , THE AMOUNT OF ` 19,73,839, SHOULD NOT BE BROUGHT TO TAX IN THE IMPUGNED ASSESSMENT YEAR. HOWEVER , THE ASSESSING OFFICER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. HE OBSERVED , ONCE THE PROJECT WAS COMPLETED AND POSSESSION OF THE AFFAIRS OF THE SOCIETY WAS HANDED OVER TO THE MEMBERS OF THE SOCIETY IN THE FINANCIAL YEAR 2011 12, RESPONSIBIL ITY IS ON THE SOCIETY TO MEET THE FUTURE MAINTENANCE AND CONTINGENT EXPENSES. THEREFORE, THERE IS NO NEED FOR THE ASSESSEE TO DEFER A PART OF INCOME TO THE FINANCIAL YEAR 2012 13. ACCORDINGLY, HE ADDED BACK THE AMOUNT OF ` 19,73,839, TO THE INCOME OF THE A SSESSEE. BEING AGGRIEVED WITH THE AFORESAID 4 ASHFORS HOUSING CORPORATION ADDITION, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 . L EARNED COMMISSIONER (APPEALS) , HOWEVER, SUSTAINED THE ADDITION BY ACCEPTING THE REASONING OF THE ASSESSING OFFICER. 5 . THE LEARNED AUT HORISED REPRESENTATIVE SUBMITTED , THOUGH THE ASSESSEE HAD SOLD ALL THE FLATS IN THE HOUSING PROJECT DURING THE FINANCIAL YEAR 2010 11, HOWEVER, CERTAIN LIABILITIES OF THE ASSESSEE RELATING TO THE HOUSING PROJECT STILL REMAINED WITH THE ASSESSEE. HE SUBMITTED , TO MEET SUCH LIABILITIES/ EXPENDITURE THE ASSESSEE RETAINED A NEGLIGIBLE AMOUNT OUT OF THE PROFIT OF THE HOUSING PROJECT. HE SUBMITTED , AS PER THE MAHARASHTRA OWNERSHIP FLATS (REGULATION OF THE PROMOTION OF C ONSTRUCTION, CESS, MANAGEMENT AND T RANSFER) ACT, 1963, THE BUILDER/DEVELOPER/ PROMOTER IS REQUIRED TO RECTIFY ANY DEFECT WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF HANDING OVER OF POSSESSION. HE SUBMITTED , EVEN AFTER SALE OF ALL THE FLATS OF THE HOUSIN G PROJECT AND HANDING OVER POSSESSION, THE ASSESSEE CONTINUED TO INCUR EXPENDITURE IN RESPECT OF THE SAID HOUSING PROJECT IN ASSESSMENT YEAR 2012 13 AND 2013 14. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE DETAILS OF EXPENDITURE INCURRED IN THE ASSESSMEN T YEAR 2013 14 PLACED AT PAGE 31 OF THE PAPER BOOK. HE SUBMITTED , THE ACTUAL EXPENDITURE INCURRED B Y THE ASSESSEE AFTER SALE OF FLATS AND HANDING OVER OF THE POSSESSION IS MUCH MORE THAN THE RETENTION MONEY. HE SUBMITTED , THE 5 ASHFORS HOUSING CORPORATION EXPENDITURE S CLAIMED BY THE AS SESSEE HAVE BEEN ALLOWED BY THE ASSESSING OFFICER. FURTHER, HE SUBMITTED , THE ASSESSEE HAS OFFERED THE AMOUNT OF ` 19,73,839 , AS INCOME IN THE ASSESSMENT YEAR 2013 14. THEREFORE, ADDITION OF THE SAID AMOUNT IN THE IMPUGNED ASSESSMENT YEAR AMOUNTS TO DOUBLE ADDITION OF THE SAME INCOME. THEREFORE, HE SUBMITTED , THE ADDITION MADE MAY BE DELETED. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELY ING UPON THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER SUBMITTED , ONCE THE PROJECT IS COMPL ETE AND THE ASSESSEE HAS SOLD ALL THE FLATS , THERE IS NO REASON TO DEFER THE PROFIT DERIVED FROM THE HOUSING PROJECT. THUS, HE SUBMITTED, ASSESSEES CLAIM CANNOT BE ACCEPTED. 7 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. INSOFAR AS THE FACTUAL ASPECT OF T HE ISSUE IS CONCERNED, THERE IS NO DISPUTE THAT THE HOUSING PROJECT WAS COMPLETED IN THE FINANCIAL YEAR 2008 09 AND ALL UNITS OF THE HOUSING PROJECT WERE SOLD OUT BY THE END OF FINANCIAL YEAR 2010 11. IT IS ALSO A FACT ON RECORD THAT THE ASSESSEE HAS ALSO OFFERED INCOME FROM THE HOUSING PROJECT PROPORTIONATELY IN THE A.Y. 2009 10, 2010 11 AND 2011 12. HOWEVER, OUT OF THE TOTAL PROFIT OF THE HOUSING PROJECT AMOUNTING TO ` 238,97,31,575, THE ASSESSEE HAS RETAINED 0.3% AMOUNTING TO ` 98, 69,165, TO MEET FUTURE EXPENDITURE. IT IS ALSO EVIDENT , OUT OF THE RETENTION MONEY OF ` 6 ASHFORS HOUSING CORPORATION 98,61,165, THE ASSESSEE HAS OFFERED AN AMOUNT OF ` 78,95,355, AS INCOME IN THE IMPUGNED ASSESSMENT YEAR AND THE BALANCE AMOUNT OF ` 19,73,839, IN ASSESSMENT YEAR 2013 1 4. THEREFORE, IT IS NOT A FACT THAT THE AMOUNT OF ` 19 ,73,839 HAS ESCAPED TAXATION. THERE IS ONLY A TIMING DIFFERENCE . I NSTEAD OF OFFERING THE INCOME IN THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE HAS OFFERED IT TO TAX IN THE ASSESSMENT YEAR 2013 14. THEREFO RE, ADDITION OF THE SAID AMOUNT AGAIN IN THE IMPUGNED ASSESSMENT YEAR AMOUNTS TO DOUBLE ADDITION OF THE SAME INCOME WHICH IS NOT PERMITTED IN LAW. 8 . EVEN OTHERWISE ALSO, IF THE ASSESSING OFFICERS REASONING THAT THE PROFIT FROM THE HOUSING PROJECT SHOULD BE ASSESSED IN THE YEAR WHEN POSSESSION OF ALL THE FLATS WERE HANDED OVER IS ACCEPTED , THEN , THE ENTIRE INCOME FROM THE HOUSING PROJECT SHOULD HAVE BEEN ASSESSED IN ASSESSMENT YEAR 2011 12, WHEREIN ALL THE FLATS WERE SOLD OUT AND THE ASSESSEE OFFERED THE ENT IRE PROFIT OF THE HOUSING PROJECT BARRING THE RETENTION MONEY. THEREFORE, BY ASSESSING THE RETENTION MONEY IN THE IMPUGNED ASSESSMENT YEAR THE ASSESSING OFFICER, TO SOME EXTENT, HAS ACCEPTED DEFERMENT OF INCO ME BY THE ASSESSEE. MOREOVER, A PERUSAL OF SECTION 7 OF THE MAHARASHTRA OWNERSHIP FLATS (REGULATION OF THE PROMOTION OF CONSTRUCTION, CESS, MANAGEMENT AND TRANSFER) ACT, 1963, MAKES IT CLEAR THAT ASSESSEES OBLIGATION IN RECTIFYING THE DEFECT DOES NOT END ON SALE OF ALL THE FLATS, AS UNDER THE SAID PROVISION THE 7 ASHFORS HOUSING CORPORATION ASSESSEE IS REQUIRED TO RECTIFY DEFECTS WITHIN THREE YEARS. IT IS ALSO RELEVANT TO OBSERVE , THE MATERIAL PRODUCED BEFORE ME CLEARLY DEMONSTRATE THAT THE ASSESSEE HAD INCURRED EXPENDITURE TOWARDS REPAIR OF FLATS IN THE HOUSING P ROJECT AND FOR MEETING OTHER CONTINGENCIES EVEN AFTER SALE OF ALL THE FLATS IN THE ASSESSMENT YEAR 2011 12. THEREFORE, ON OVER ALL CONSIDERATION OF FACTS AND MATERIAL ON RECORD, I AM OF THE VIEW THAT THE ADDITION OF ` 19,73,839, DESERVE S TO BE DELETED. ACC ORDINGLY, I DO SO. GROUND RAISED IS ALLOWED. 9 . I N THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.03.2019 SD/ SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 13.03.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI