M/s Parkway Holdings Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 27/BANG/2012

• Counselvise Citation: 2721114 RSA 2012
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Application of stay; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO .27/ BANG/20 12 (ASSESSMENT YEAR : 2008-09) M/S. PARKWAY HOLDING S PVT. LTD., (FORMERLY KNOWN AS IDEB PARKWAY HOLDINGS PVT LTD) 102, 1 ST FLOOR, RICHMOND TOWER, NO.12,RICHMOND ROAD, BANGALORE-560 025 PAN AABCI 5173Q VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 11(4), BANGALORE. APPELLANT RESPONDENT. S.P. NO.40/BANG/2012 (IN ITA NO.27/BANG/2012) (BY ASSESSEE) APPELLANT BY : SHRI A. SHANKAR. RESPONDENT BY : SHRI FARHAT HUSSAIN QURESHI. DATE OF HEARING :11.10.2012. DATE OF PRONOUNCEMENT : 31.10.2012. O R D E R PER SHRI JASON P. BOAZ : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE DT.20.10.2011. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE, A COMPANY IN THE BUSINESS OF REAL ESTATE AND DEVELOPMENT, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 ON 30.9.2008 DECLARING A LOSS OF RS.20,47,589. THE 2 ITA NO.27/BANG/2011 & S.P. NO.40/BANG/2012 RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE IN COME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') AND THE CASE WAS SUBSEQUENTLY TAKE N UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED BY AN ORDER UNDER SECTION 143(3) OF THE A CT ON 24.12.2010 BY WHICH THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.3,73,33,958. THI S WAS DUE TO THE FACT THAT THE ASSESSING OFFICER RECAST THE ASSESSEE'S PROFIT OF THE CURREN T YEAR BY TREATING THE REVENUE EARNED FROM THE TIVOLI PROJECT IN THE RELEVANT PERIOD AT DEVELO PMENT COST MARKED UP BY 8% WHICH WORKED OUT RS.13,78,31,045 AS AGAINST RS.9,84,49,498 DECLA RED BY THE ASSESSEE. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESS MENT YEAR 2008-09 DT.24.12.2010, THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT(APPE ALS) WHO DISMISSED THE ASSESSEE'S APPEAL BY ORDER DT.20.10.2011. 3.0 AGGRIEVED WITH THE ORDER OF THE CIT(APPEALS) DT .20.10.2011, THE ASSESSEE IS NOW IN APPEAL BEFORE US. IN THE CONCISE GROUNDS OF APPEAL FILED BY THE ASSESSEE CONTENDS AS UNDER : 1. THE ORDER OF THE AUTHORITIES BELOW IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, FACTS, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED AUTHORITIES BELOW ARE NOT JUSTIFIED IN DETERMINING THE INCOME AT RS.3,73,33,958 AS AGAINST THE RETURNED LOSS OF RS.2 0,47,589 ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED AUTHORITIES BELOW ARE NOT JUSTIFIED IN ESTIMATING THE INCOME @ 8% ON THE AMOUNT OF COST INCURRED BY THE APPELLANT. T HE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE INCOME OF THE APPELLANT, WHO IS A DEVELOPER ACCRUES DIFFERENTLY FROM THAT OF THE CONTRACTOR AND HENCE THE ADDITION IS NOT JUSTIFIED. 4. THE LEARNED AUTHORITIES BELOW ARE NOT JUSTIFIED IN REJECTING THE PERCENTAGE OF COMPLETION METHOD (POCM) FOLLOWED BY THE APPELLANT ESPECIALLY BY THE LEARNED A.O. BY HOLDING THAT NO PRUDENT BUSINESS MAN WILL CARRY ON WITH A PROJECT WHICH IS RESULTING IN A LOSS EVEN AFTER ALMOST 1/3 RD OF COM PLETION, WHICH IS NOT GERMANE TO THE REJECTION OF THE POCM BY THE APPELLANT. THE A. O. HAS NOT POINTED OUT ANY DEFECTS IN THE POCM ADOPTED BY THE APPELLANT AND TH EREFORE THE REJECTION IS BAD IN LAW. 3 ITA NO.27/BANG/2011 & S.P. NO.40/BANG/2012 5. WITHOUT PREJUDICE, THE AUTHORITIES BELOW HAVING SUSTAINED THE ADDITION APPLYING 8% ON THE CONSTRUCTION COST, OUGHT TO HAVE ALLOWED THE ENTIRE ADMINISTRATION, INTEREST AND DEPRECIATION IN FULL AND THE LEARNED A UTHORITIES BELOW INSTEAD OF ALLOWING THE ENTIRE REVENUE EXPENDITURE AS EXPENSE AGAINST SUCH INCOME OF 8%. APART FROM THE ABOVE, THE AUTHORITIES BELOW HAVE AL SO ADDED BACK THE ENTIRE AMOUNT SPENT AS CONSTRUCTION COST AS INCOME AGAIN A ND ARRIVED AT A NOTIONAL PROFIT, WHICH IS NOT IN ACCORDANCE WITH ANY KNOWN ACCOUNTIN G TREATMENT. THE ARRIVING OF PROFIT BY THE ASSESSING OFFICER IS UNSCIENTIFIC, IL LOGICAL AND ILLEGAL AND THEREFORE DESERVES TO BE IGNORED COMPLETELY. 6. THE LEARNED CIT (APPEALS) WHILE DISPOSING THE A PPEAL, HAS ALTOGETHER GIVEN A DIFFERENT FINDING (WHICH IS TOTALLY DIFFERENT AND D IAMETRICALLY OPPOSITE TO THE FINDING OF THE LEARNED ASSESSING OFFICER) THAT IS THE A.O. HAS NOT BROUGHT ON RECORD RECEIPT OF ANY ADVANCE FROM ANY BUYER OF THE APARTMENT OF THE TIVOLI PROJECT UNDER CONSTRUCTION AT A LUCRATIVE LOCALITY. EMPHASIS SUPPLIED BY US HERE). IN THIS REGARD IT IS SUBMITTED THAT THE ASSESSING O FFICER LET ALONE MENTIONING SOMETHING ABOUT THIS, SHE HAS NOT EVEN WHISPERED AB OUT SUCH A SITUATION IN THE ASSESSMENT ORDER AND THE LEARNED CIT (APPEALS) CON VENIENTLY PRESUMES SUCH A SITUATION DOES EXIST AND HAS DISMISSED THE APPEAL W ITHOUT ASSIGNING ANY REASON WHATSOEVER. 7. WITHOUT PREJUDICE, THE DISALLOWANCE IS HIGHLY EX CESSIVE AND DESERVES TO BE REDUCED SUBSTANTIALLY. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE, CHANGE AND DELETE ANY OF THE GROUNDS OF APPEAL. 9. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEALS MAY BE ALLOWED AND JUSTICE RENDERED. 4.1 AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT IN THE RELEVANT PERIOD THE ASSESSEE WAS FOLLOWING THE PERCENTAGE CO MPLETION METHOD OF ACCOUNTING (PCM) FOR REVENUE RECOGNITION AND ACCORDINGLY OFFERED REVENUE FROM A PROJECT ONCE THE PROJECT IS COMPLETED BEYOND 30%. IN THE RELEVANT PERIOD, IT W AS SUBMITTED, THE ASSESSEE HAD THREE ON- GOING PROJECTS, VIZ. TIVOLI AT WHITEFIELD, RIVER SPRING AT HEBBAL AND MYSORE MALL AT HOSUR ROAD, MYSORE. IT WAS SUBMITTED THAT IN VIEW OF THE FACT THAT THE PROJECTS AT MYSORE MALL AND RIVERSPRING WERE COMPLETED ONLY TO THE EXTENT OF 8.43% AND 3.05% RESPECTIVELY IN THE RELEVANT PERIOD, NO REVENUE WAS RECOGNIZED OR INCOM E WAS DECLARED IN RESPECT OF THESE 4 ITA NO.27/BANG/2011 & S.P. NO.40/BANG/2012 PROJECTS AND THERE WAS DISPUTE IN THE MATTER. THE ONLY DISPUTE IN ORDER OF ASSESSMENT WAS WITH RESPECT TO THE TIVOLI PROJECT. IN THIS PROJ ECT WHICH WAS COMPLETED TO THE EXTENT OF 30.41%, THE ASSESSEE HAD OFFERED INCOME TO THE EXTE NT OF RS.9,84,49,498 AND ALSO CHARGED AN AMOUNT OF RS.12,76,21,338 AS DEVELOPMENT COST TO TH E PROFIT AND LOSS ACCOUNT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT DETAILED BRE AKUP OF THE DEVELOPMENT COST INCURRED WERE FILED WITH THE ASSESSING OFFICER AND FINDS MEN TION AT PARA 5 ON PAGE 4 OF THE ORDER OF ASSESSMENT. THE LEARNED COUNSEL FOR THE ASSESSEE T AKING US THROUGH PARAS 5.1 TO 5.3 OF THE ORDER OF ASSESSMENT CONTENDS THAT THE ASSESSING OFF ICER AFTER NOTING THESE DETAILS, WITHOUT POINTING OUT ANY MISTAKE THEREIN OR SEEKING CLARIFI CATION FROM THE ASSESSEE OR ASSIGNING ANY REASON PROCEEDED TO CONCLUDE THAT THE ASSESSEE HAD APPLIED A WRONG INTERPRETATION OF THE PROJECT COMPLETED METHOD WHICH DEFEATED ACCOUNTING POLICY BY PRESENTING A WRONG PICTURE OF BUSINESS PROFITS. THE LEARNED COUNSEL FOR THE ASSE SSEE ARGUED THAT AFTER REACHING THIS BASELESS CONCLUSION, THE ASSESSING OFFICER WENT FUR THER TO MAKE AN UNJUSTIFIABLE AND UNWARRANTED RECASTING OF PROFITS OF THE ASSESSEE IN THE RELEVANT PERIOD BY WORKING IT OUT AT RS.13,79,16,045 ( BEING 8% MARK UP ON DEVELOPMENT C OST OF RS.12,76,21,338) AS AGAINST RS.9,84,49,498 DECLARED BY THE ASSESSEE. THE LEARNE D COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REACHING THE CONCLUSIONS SHE DID WITHOUT FINDING ANY ERROR IN THE ACCOUNTS FURNISHED OR REJECTING THE BO OKS OF ACCOUNTS OR ASSIGNING ANY REASONS FOR THE SAME. IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE LEARNED CIT (APPEALS) TOO HAS NOT EXAMINED THE ISSUE AT ALL AND HAS SUMMARILY DISMISSED THE ASSESSEE'S APPEAL WITHOUT ASSIGNING ANY REASON OR JUSTIFICATIO N FOR CONFIRMING THE ORDER OF ASSESSMENT 5 ITA NO.27/BANG/2011 & S.P. NO.40/BANG/2012 WHEN THE ONUS WAS ON REVENUE TO ESTABLISH THAT THE ASSESSEE HAD IN FACT HAD EARNED REVENUE OF RS.13,78,31,045 FROM THE TIVOLI PROJECT AS AGAINST RS.9,84,49,498 DECLARED BY THE ASSESSEE. IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COUNSEL FOR THE ASSESSEE PRAYED THAT THE ORDERS OF THE AUTHORITIES BELOW OUG HT TO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION AND ADJ UDICATION. 4.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS HE ARD AND ON HIS PART SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE HOWEVER STATED THAT HE HAD NO OBJECTION TO THE SUGGESTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE OR DERS OF THE AUTHORITIES BELOW BE SET ASIDE AND BE REMITTED TO THE FILE OF THE ASSESSING OFFICE R FOR FRESH CONSIDERATION AND ORDERS. 4.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSE D THE MATERIAL ON RECORD. AFTER CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCE S IN WHICH THE ORDER OF ASSESSMENT HAD BEEN PASSED, WE ARE INCLINED TO AGREE WITH THE LEAR NED COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RECASTING TH E PROFITS OF THE ASSESSEE FROM THE TIVOLI PROJECT WITHOUT ESTABLISHING THAT THE ASSESSEE'S AC COUNTS WERE ERRONEOUS OR THAT THE ASSESSEE HAD EARNED PROFITS AS ASSESSED WITHOUT REJECTING T HE BOOKS OF ACCOUNTS AND WITHOUT ASSIGNING ANY REASON WHATSOEVER FOR THE ACTION. WE ALSO FIND THAT THE LEARNED CIT(APPEALS) MERELY LISTED OUT THE SUBMISSIONS OF THE ASSESSEE AT PAGES 3 TO 6 OF HIS ORDER AND WITHOUT ANSWERING ANY OF THE ARGUMENTS AND CONTENTIONS PUT FORTH, HAS IN A SUMMARY MANNER CONFIRMED THE ORDER OF THE ASSESSING OFFICER WITHOUT ASSIGNING ANY REAS ONS FOR HIS ACTION. IN THIS VIEW OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT IN TH E INTEREST OF EQUITY AND JUSTICE, THE ORDERS OF THE AUTHORITIES BELOW REQUIRE TO BE SET ASIDE AN D DO SO. THE MATTER IS ACCORDINGLY RESTORED 6 ITA NO.27/BANG/2011 & S.P. NO.40/BANG/2012 TO THE FILE OF THE ASSESSING OFFICER FOR TAKING UP THE ASSESSMENT AFRESH FOR DE NOVO CONSIDERATION ON ALL ISSUES AND TO PASS SPEAKING OR DERS THEREON AFTER GIVING THE ASSESSEE SUFFICIENT OPPORTUNITY OF BEING HEARD AND TO FILE D ETAILS REQUIRED LEAVING ALL CONTENTIONS OPEN. THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE IN FILI NG DETAILS CALLED FOR SO THAT THE MATTER CAN BE DISPOSED OFF EXPEDITIOUSLY. IT IS ORDERED ACCOR DINGLY. 5. IN THE RESULT, THE ASSESSEE'S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN VIEW OF THE ASSESSEE'S APPEAL IN ITA NO.27/BA NG/2012 BEING DISPOSED OFF, THE ASSESSEE'S PETITION FOR STAY OF DEMAND IN S.P. NO.4 0/BANG/2012 BECOMES INFRUCTUOUS AND IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2012. SD/- SD/- (N.V. VASUDEVAN) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - B BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R SR. PRIVATE SECRETARY, ITAT, BANGALORE