ACIT, CHENNAI V. M/s. Classic Farms & Country Club P. Ltd., CHENNAI

ITA 2907/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4566 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 05-04-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 10-10-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: K RAVI
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , # $ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 2907/MDS/2016 / ASSESSMENT YEAR : 2012-13 ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -1(2), CHENNAI 600 034. VS . M/S. CLASSIC FARMS & COUNTRY CLUB P. LTD., I T HIGHWAY, CLASSIC FARMS ROAD, SHOLINGANALLUR, CHENNAI 600 119. [PAN: AAACC 2612H] ( / APPELLANT) ( /RESPONDENT) & ' / APPELLANT BY : SHRI SUPRIYO PAL, JCIT *+& ' / RESPONDENT BY : SHRI K. RAVI, ADVOCATE ' /DATE OF HEARING : 13.04.2017 ' /DATE OF PRONOUNCEMENT : 03.05.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS) -3, CHENNAI IN ITA NO. 35/CIT( A)-1/2015-16, DATED 14.07.2016 PASSED U/S. 143(3) OF THE INCOME TAX ACT . :-2-: I.T.A. NO.2907/MDS/2016 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2.1 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DEVELOPMENT CHARGES RECEIVED, ASSESSED AS INCOM E, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD RECOGNI ZED LAND CONSIDERATION FOR THE ASSESSMENT YEAR 2012-13, WHEREAS, THE DEVEL OPMENT CHARGES WERE NOT RECOGNIZED AS INCOME FOR THE ASSESSMENT YEAR 20 12-13, AND THE ASSESSEE CANNOT SELECTIVELY ADOPT THE MODE OF INCOM E RECOGNITION AND POSTPONE THE INCOME. 2.2 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN DELETING THE DEVELOPMENT CHARGES RECEIVED, ASSESSED AS INCOME, WITHOUT APPRECIATING THE FACT THAT THE SALE CUM DEVELOPMENT AGREEMENT NEITHER MENTIONS ABOUT THE PERIOD OF COMPLETION NOR REFUND OF THE SAME ON NON- PERFORMANCE, AND HAVING RECOGNIZED THE LAND SALE CO NSIDERATION, THE DEVELOPMENT CHARGES ALSO OUGHT TO HAVE BEEN OFFERED FOR TAXATION, WITHOUT POSTPONING THE INCOME. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS IN THE BUSINESS OF REAL ESTATE AND FILED THE RETURN OF INCOME FOR THE ASSES SMENT YEAR 2012-13 ON 29.09.2012 WITH TOTAL INCOME RS. 4,67,77,160/-. S UBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S. 14 2(1) OF THE ACT WAS ISSUED. IN COMPLIANCE TO NOTICE LD. AR APPEARED FROM TIME T O TIME AND FILED THE DETAILS. THE ASSESSING OFFICER ON THE DISPUTED ISSUE FOUND T HAT THE ASSESSEE COMPANY IS ENGAGED IN THE PURCHASE OF LARGE ACRES OF LAND AND DIVIDING IT INTO PLOTS AND SELLING. THE ASSESSEE COMPANY ENTERED INTO SALE AG REEMENT AND REGISTERED SALE OF PLOTS. ON COMPLETION OF DEVELOPMENT WORKS AND T HEREFORE THE SALE CONSIDERATION IS NOT IMMEDIATELY RECOGNISED AS INCO ME. THEREFORE, RS. :-3-: I.T.A. NO.2907/MDS/2016 85,34,180/- IS LIABLE TO TAX IN THE CURRENT YEAR RE CEIVED AS ADVANCE WAS NOT RECOGNIZED AND NOT THE LD.AO CALLED FOR BREAKUP OF ADVANCES OUTSTANDING WHICH WAS NOT PRODUCED BY THE ASSESSEE COMPANY AND ALSO A DVANCES AGAINST WHICH NO WORK WAS EXECUTED. FURTHER THE LD.AO OBSERVED THAT THE ASSESSEE COMPANY DOES NOT FOLLOW EITHER PERCENTAGE COMPLETION OR COM PLETION PROJECT, THE LD. ASSESSING OFFICER IS OF THE OPINION THAT THE ASSESS EE CANNOT SEPARATELY REPORT INCOME FROM DEVELOPMENT CHARGES AND OFFER FOR TAXAT ION AND MADE ADDITION OF RS.85,34,180/- AS INCOME AND ALONG WITH OTHER ADDI TION PASSED ORDER U/S.143(3) OF THE ACT DATED 10.03.2015. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED A N APPEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. AR ARGUED THE GROUNDS AND SUBMITTED THAT THE ASSESSEE COMPANY HAS INCURRED THE DEVELOPMENT C HARGES AND THE ADVANCE RECEIVED FROM THE PLOT HOLDERS FOR THE DEVELOPMENT HAS BEEN RECOGNISED IN THE NEXT FINANCIAL YEAR AND WAS TAXED IN ASSESSMENT YEA R 2013-14 AND EMPHAZISED ON THE REVENUE RECOGNITION SYSTEM REFERRED AT PAGE 9 PARA 20 OF THE ORDER AND WHEREAS THE ASSESSEE HAS OFFERED DEVELOPMENT CHARGE S RECEIVED IN ADVANCE DURING THE ASSESSMENT YEAR 2012-13 IN THE SUBSEQUEN T ASSESSMENT YEAR 2013- 14, BEING THE YEAR IN WHICH THE ASSESSEE HAS COMPLE TED THE DEVELOPMENT WORKS AND THE ASSESSEE PROVIDED THE BREAKUP OF ADVANCES A LONG WITH THE OTHER INFORMATION AND WITH THESE OBSERVATIONS THE LD.CIT( A) HAS DELETED THE ADDITION AT PARA 22 WHICH READ AS UNDER: :-4-: I.T.A. NO.2907/MDS/2016 22. I HAVE CAREFULLY PERUSED THE FACTS IN ISSUE, O RDER OF THE AA, SUBMISSIONS MADE BY THE APPELLANT AND MATERIAL ON R ECORD. THE ISSUE RAISED BY THE AA IS IN RELATION TO A SUM OF RS.85,3 4,180 RECEIVED BY THE APPELLANT TOWARDS DEVELOPMENT CHARGES WHICH WAS OFF ERED TOWARDS INCOME AND RECOGNIZED AS REVENUE IN THE SUBSEQUENT YEAR. I T IS SO ON ACCOUNT OF THE FACT THAT THE INCOME HAD NOT ACCRUED TO THE APP ELLANT IN VIEW OF THE WORK HAVING NOT COMMENCED DURING THE IMPUGNED FINAN CIAL YEAR. ONCE THE DEVELOPMENT WAS COMPLETED DURING THE IMMEDIATELY NE XT FINANCIAL YEAR THE ADVANCE HAS BEEN RECOGNIZED AS INCOME FOR THE AY. 2 013-14 AS HAS BEEN ALSO EXPLAINED VIDE LETTER DATED 13.2.2015. THIS IS IN CONFORMITY WITH THE METHOD OF ACCOUNTING EMPLOYED BY THE APPELLANT REGU LARLY WHEREIN IT HAS ADOPTED THE ACCRUAL SYSTEM. SALE CONSIDERATION HERE INCLUDES THE AGGREGATE AMOUNT OF SALE PRICE OF LAND AND CONSIDER ATION TOWARDS DEVELOPMENT AS PER THE AGREEMENT ENTERED INTO WITH THE BUYERS. THE SAME IS RECOGNIZED ON THE BASIS OF PERCENTAGE OF CO NSTRUCTION COST AND WORK PERFORMED UPTO THE DATE OF REPORTING. THE EXPE NDITURE TILL SUCH TIME IS ACCUMULATED UNDER THE HEAD WORK-IN-PROGRESS WHIL E THE ADVANCES ARE CARRIED FORWARD UNDER THE HEAD ADVANCES RECEIVED FR OM CUSTOMERS. HAVING REGARD TO THE FACT THAT THE DEVELOPMENT CHARGES REC EIVED IN ADVANCE DURING ASSESSMENT YEAR 2012-13 WAS ACCOUNTED FOR A S INCOME IN THE SUBSEQUENT ASSESSMENT YEAR 2013-14 WHEN THE WORK WA S COMPLETED IS IN ORDER. THE VIEW TAKEN BY THE AO THEREFORE CANNOT BE UPHELD. THIS GROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE HAS FILED AN APPEAL WITH THE TRIBUNAL. BEFORE US, THE LD DR ARGUED THE GROUNDS AND SUBSTANTIATED THAT THE EXPLANATIONS THAT THE CIT(A) HAS ERRED IN DELETING THE DEVELOPMENT CHARGES WITHOUT APPRECIATING THE FACT THAT THE CONSIDERATIO N WAS RECEIVED IN THE FINANCIAL YEAR2011-12 BEING IRRESPECTIVE OF THE FACT THAT THE WORK WAS NOT COMPLETED AND :-5-: I.T.A. NO.2907/MDS/2016 THE ASSESSEE CANNOT DECIDE THE REVENUE RECOGNITION AND THESE FACTS/MATERIAL WERE NOT ON RECORD OR FILED BEFORE THE ASSESSING OF FICER AND PRAYED FOR SET ASIDE OF THE ORDER OF THE CIT(A) AND CONFIRM THE ORDER OF THE AO. CONTRA, THE LD. AR RELIED ON THE ORDERS OF THE CIT(A) AND REVENUE RECO GNITION POLICY ADOPTED AND OPPOSED THE ORDERS OF THE REVENUE. 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE SOLE CRUX OF THE DISPUTED ISSUE BEING THE RECOGNITION OF REVENUE IN RESPECT OF PLOTS. THE ASSESSEE COMPANY IS IN THE BUSINESS OF REAL ESTATE AND PURCHASE OF LAND AND OBTAIN, ADVANCES FR OM THE PLOT HOLDERS AND SALE DEED ARE REGISTERED. THE ASSESSEE IS FOLLOWING THE REVENUE RECOGNITION POLICY WHICH IS DEALT BY THE CIT(A), WHERE THE DEVELOPMENT AMOUNT RECEIVED AND RECOGNIZED AS INCOME IN THE SUBSEQUENT ASSESSMENT Y EAR 2013-14. PRIMA FACIE, ON PERUSAL OF THE ASSESSMENT ORDER, WE COULD NOT FI ND ANY SUBMISSIONS/FINDINGS IN RESPECT OF INCOME RECOGNITION BY THE ASSESSEE IN THE SUBSEQUENT YEARS AND THESE FACTS WERE DISCUSSED IN DETAIL IN APPELLATE P ROCEEDINGS. WE ARE OF THE OPINION THAT THE ASSESSEE COMPANY HAS RECOGNIZED OF INCOME ON SALE OF PLOTS IN ASSESSMENT YEAR 2013-14 WHICH REQUIRES VERIFICATION AND EXAMINATION. WE ALSO FIND THAT THE ASSESSEE HAS SUBMITTED THE VARIOUS DE TAILS IN APPELLATE PROCEEDINGS AND THE LD. CIT(A) HAS NOT CALLED FOR ANY REMAND RE PORT OR COMMENTS FROM THE ASSESSEE AND FURTHER THE ASSESSING OFFICER HAS TO V ERIFY AND EXAMINE THE DEVELOPMENT CHARGES RECOGNISED IN THE ASSESSMENT YE AR 2013-14. ACCORDINGLY, IN THE INTEREST OF JUSTICE, WE REMIT THE ENTIRE DIS PUTED ISSUE TO THE FILE OF AO TO :-6-: I.T.A. NO.2907/MDS/2016 VERIFY THE GENUINENESS AND THE REVENUE RECOGNITION IN ACCOUNTS AND THE ASSESSEE SHOULD BE PROVIDED ADEQUATE OPPORTUNITY OF HEARING AND SUBSTANTIATE THE CLAIM WITH MATERIALS BEFORE PASSING THE ORDER O N MERITS AND THE GROUNDS OF APPEAL OF THE REVENUE ARE ALLOWED FOR STATISTICAL P URPOSE. 7. IN THE RESULT, REVENUE APPEAL IS ALLOWED FOR STA TISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 3 RD DAY OF MAY, 2017 AT CHENNAI. SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER SD/- ( . ) (G. PAVAN KUMAR) /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 3 RD MAY, 2017. JPV ' *#23 43 /COPY TO: 1. &/ APPELLANT 2. *+& /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3 *## /DR 6. 9 /GF