Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 76246 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 2 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-03-2014
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2009-2010
Appeal Filed On
28-12-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.2569/PN/2012 (ASSESSMENT YEAR : 2009-10) M/S KSHITIJ ASSOCIATES, B-75, ANUGRAHA CO-OP. HSG. SOCIETY, DNYASHEWAR NAGAR, PIMPRI, PUNE 411 018. PAN : AAIFK1377L . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 8, PUNE. . RESPONDENT ASSESSEE BY : MR. SHARAD SHAH DEPARTMENT BY : MR. P. L. PATHADE DATE OF HEARING : 27-01-2014 DATE OF PRONOUNCEMENT : 10-03-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED A GAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DA TED 09.10.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 26.12.2011 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2009-10. 2. IN THIS APPEAL, ALTHOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT THE DISPUTE REVOLVES AROUND AN ADDITION OF RS.2,31,72,934/- MADE BY THE ASSESSING OFFICER, WHICH HAS FURTHER BEEN SU STAINED BY THE CIT(A). 3. IN BRIEF, THE FACTS ARE THAT ASSESSEE IS A PARTN ERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDERS AND PROMOTERS. FOR THE ASSESS MENT YEAR 2009-10, IT FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.96, 28,370/- WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT. THE ASSESSING OFFICER NOTE D THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE WAS ENGAGED IN CONSTR UCTION OF TWO BUILDINGS, NAMELY, KSHITIJ A WING AND KSHITIJ B WING. THE ASSESSING OFFICER FURTHER ITA NO.2569/PN/2012 A.Y. 2009-10 NOTICED THAT ASSESSEE HAD SHOWN SALES OF RS.2,19,96 ,100/- DURING THE YEAR UNDER CONSIDERATION ON ACCOUNT OF 8 FLATS, OUT OF T HE TOTAL NUMBER OF FLATS OF 45. ONLY 7 FLATS WERE SHOWN AS UNSOLD AND 6 FLATS WERE SHOWN SOLD AS CONSIDERATION FOR COST OF LAND, WHEREAS THE CLOSING STOCK WAS SHOWN OF 31 FLATS. THE CLOSING STOCK INCLUDED THE STOCK OF 24 SUCH FLATS FOR WHICH ASSESSEE HAD RECEIVED A SUM RS.4,62,27,757/- FROM THE RESPEC TIVE FLAT-HOLDERS, WHICH WAS SHOWN AS ADVANCES RECEIVED IN THE BALANCE-SHEET AND WAS NOT CREDITED TO THE PROFIT & LOSS ACCOUNT ALTHOUGH THE BALANCE R EMAINING TO THE RECEIVED WAS VERY SMALL. THE ASSESSING OFFICER FURTHER NOTI CED THAT ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD AND IN DOING SO ASSESSEE HAD DEBITED A COST OF RS.50,00,000/- IN THE PROFIT & LOSS ACCOUNT , WHICH REPRESENTED A PROVISION FOR EXPENSES RELATING TO UNFINISHED WORK OF LIFT FITTING, PAINTING OF PREMISES, ETC. WHICH WAS COMPLETED IN THE NEXT YEAR . IT WAS NOTICED THAT FOR THE 8 FLATS SOLD, THE POSSESSION WAS HANDED-OVER TO THE OCCUPANTS, AND THUS IT WAS INFERRED THAT THE PROJECT WAS READY FOR OCCUPAT ION AND COMPLETE. THE PROVISION DEBITED IN THE PROFIT & LOSS ACCOUNT FOR THE LIKELY EXPENSES TO BE INCURRED FOR LIFT FITTING AND PAINTING SHOWED THAT THE ENTIRE EXPENSE ON PROJECT WAS ACCOUNTED FOR DURING THE YEAR UNDER CONSIDERATI ON. THE ASSESSING OFFICER ALSO NOTICED THAT ASSESSEE HAD ENTERED INTO SALE AG REEMENTS WITH ALL THE BUYERS FROM WHOM ADVANCES HAVE BEEN RECEIVED PRIOR TO 31.03.2009. FOR THE SAID REASON THE ASSESSING OFFICER WAS OF THE VIEW T HAT THE ADVANCES RECEIVED BY THE ASSESSEE WERE LIABLE TO BE TREATED AS SALES AND THE BALANCE RECEIVABLE FROM SUCH BUYERS, BEING VERY SMALL AMOUNTS WERE TO BE TAKEN AS SALES RECEIVABLES. NOT ACCOUNTING FOR THE SALES WITH RES PECT TO SUCH ADVANCES WAS CONSIDERED AS A DEFECT IN THE ACCOUNTS MAINTAINED A ND THEREFORE HE INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND REJ ECTED THE BOOK RESULTS FOR THE PURPOSES OF SUBSTITUTING THE CORRECT SALES. THE AS SESSING OFFICER MADE AN ADDITION OF RS.2,31,72,934/- AFTER MAKING NECESSARY CHANGES IN THE FIGURES OF SALES, WORK-IN-PROGRESS AND CLOSING STOCK AFTER REJ ECTING THE BOOK RESULTS U/S ITA NO.2569/PN/2012 A.Y. 2009-10 145(3) OF THE ACT. THE AFORESAID ADDITION HAS ALSO BEEN AFFIRMED BY THE CIT(A), AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THOUGH THE ASSESSEE WAS FOLLOWING THE PROJECT COMPL ETION METHOD FOR MAINTENANCE OF ACCOUNT BUT THE INCOME ON THE SALES WAS BEING RECOGNIZED ONLY ON THE BASIS OF HANDING-OVER POSSESSION OF THE FLATS, WHICH WAS IN THE SUBSEQUENT YEAR. 5. ON THIS ASPECT OF THE MATTER, WE FIND THAT THE L OWER AUTHORITIES HAVE NOT MADE ANY ERROR IN THE REJECTING THE BOOKS OF ACCOUN T BY INVOKING SECTION 145(3) OF THE ACT. IT IS NOT IN DISPUTE THAT THE A SSESSEE IS FOLLOWING THE PROJECT COMPLETION METHOD AND THE SAME IS ALSO EVIDENT FROM THE FACT THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE DEBITED IN THE PR OFIT & LOSS ACCOUNT A PROVISION OF SUM OF RS.50,00,000/- WHICH REPRESENTE D ESTIMATED COST OF COMPLETING THE WORK, WHICH WAS TO BE DONE IN THE NE XT YEAR. THE AFORESAID DEBIT REFLECTS THAT THE PROJECT WAS COMPLETED EXCEP T FOR SOME UNFINISHED WORK FOR WHICH A NECESSARY PROVISION OF RS.50,00,000/- W AS ESTIMATED BY THE ASSESSEE AND DEBITED IN THE PROFIT & LOSS ACCOUNT. ONCE THE ASSESSEE IS MAINTAINING ITS ACCOUNTS ON PROJECT COMPLETION METH OD, THE SALES HAVE ALSO TO BE ACCOUNTED FOR ACCORDINGLY. NOTABLY, IT IS ALSO FACTUALLY NOT IN DISPUTE THAT OUT OF THE TOTAL 45 FLATS IN THE PROJECT ONLY 7 FLA TS ARE UNSOLD, AS NOTED BY THE ASSESSING OFFICER IN PARA 3.2 OF THE ASSESSMENT ORD ER. THEREFORE, IT IS ONLY IN RELATION TO SUCH FLATS THAT THE CLOSING STOCK VALUE HAS BEEN ARRIVED AT BY THE ASSESSING OFFICER, AS AGAINST THE STAND OF THE ASSE SSEE OF SHOWING CLOSING STOCK EVEN OF FLATS WHICH HAVE BEEN CONTRACTED FOR SALE AND ADVANCES RECEIVED FROM THE CUSTOMERS. FACTUALLY, IT IS NOT IN DISPUTE THAT THE INCREMENTAL SALES CONSIDERED BY THE ASSESSING OFFICER CONSISTED OF SUCH FLATS FOR WHOM ASSESSEE HAD ENTERED INTO SALE AGREEMENTS AND RECEI VED ALMOST FULL CONSIDERATION. CONSIDERING THE FACTS AND CIRCUMSTA NCES OF THE CASE, WE HEREBY AFFIRM THE ACTION OF THE CIT(A) IN UPHOLDING THE ADDITION MADE BY THE ITA NO.2569/PN/2012 A.Y. 2009-10 ASSESSING OFFICER. PERTINENTLY, THE CIT(A) HAS ALS O OBSERVED THAT THE METHOD FOLLOWED BY THE ASSESSEE IS NOT IN COMPLIANCE WITH THE ACCOUNTING STANDARD-9 ON REVENUE RECOGNITION ISSUED BY INSTITUTE OF CHART ERED ACCOUNTANTS OF INDIA. CONSIDERING THE AFORESAID, WE HEREBY AFFIRM THE ACT ION OF THE LOWER AUTHORITIES IN REJECTING THE BOOK RESULTS MAINTAINED BY THE ASS ESSEE BY INVOKING SECTION 145(3) OF THE ACT. 6. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE RAISED AN ADDITIONAL PLEA WHICH IS TO THE FOLLOWING EFFECT. ACCORDING TO THE LEARNED COUNSEL, IN CASE ADDITION DURING THE YEAR UNDER APP EAL IS UPHELD, THE SAME SHOULD BE REDUCED WHILE MAKING ASSESSMENT OF THE SU BSEQUENT ASSESSMENT YEAR WHEN SUCH INCOME HAS BEEN DECLARED BY THE ASSE SSEE. THE SAID PLEA OF THE ASSESSEE IS QUITE GERMANE TO THE CONTROVERSY AN D IS JUSTIFIED; SO HOWEVER, THE SAME SHALL BE CONSIDERED BY THE ASSESSING OFFIC ER IN THE RELEVANT ASSESSMENT YEAR WHEN THE ASSESSEE IS CLAIMING TO HA VE DECLARED SUCH INCOME. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH MARCH, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 10 TH MARCH, 2014 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE
