Dum Dum Construction (P) Ltd., Kolkata V. ITO, Wd-12(2), Kolkata, Kolkata

ITA 292/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1849 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 12-12-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 18-02-2014
• Court: TRIBUNAL
• Department Lawyers: A K SINHA
• Assessee Lawyers: I BAN ERJEE
• Section: 44AD; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAI NI, AM ./ ITA NO.292/KOL/2016 ( / ASSESSMENT YEAR :2006-2007) DUM DUM CONSTRUCTION (P) LIMITED, BLOCK-B, 3 RD FLOOR, MADHUBANI APARTMENT, 258 M.C.GARDEN ROAD, KOLKATA-700030 VS. ITO WARD-12(2), KOLKATA P- 7 CHOWRINGHEE SQUARE, AAYAKAR BHAVAN, KOLKATA- 700030 ./ ./PAN/GIR NO. : AABCD 1720 G ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI I. BANERJEE, FCA /REVENUE BY : SHRI A.K.SINHA, JCIT / DATE OF HEARING : 16/03/2017 /DATE OF PRONOUNCEMENT 12/04/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAI NING TO THE ASSESSMENT YEAR 2006-2007, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKA TA, IN APPEAL NO.269/XII/12(2)/08-09, DATED 06.12.2012, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE AO U/S.143 (3) OF THE INCOME TA X ACT 1961, (HEREINAFTER REFERRED TO AS THE ACT), DATED 15.12 .2008. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE IS A BUILDER AND DURING THE PREVIOUS YEAR CORRESPONDING TO THE ASSESSMENT YEAR 2006-07, SHOWN ITS INCOME TO HAVE DERIVED FROM SALE OF FLATS. THE ASSESSEE HAD CLAIMED LIABILITIES OF RS.2,86,82,805/ - AS ON 31.03.2006 ON ACCOUNT OF ADVANCE FROM CUSTOMER. DURING THE ASSESS MENT PROCEEDINGS, ASSESSEE FILED A LIST OF TWENTY PARTIES TO WHOM THE ASSESSEE COMPANY HAD ITA NO.292/KOL/2014 DUM DUM CONSTRUCTION (P) LTD. 2 SHOWN TOTAL LIABILITY OF RS.19,32,000/- AS ON 31.03 .2006. THE AO ISSUED REQUISITION LETTERS U/S 133(6) OF THE ACT TO CROSS VERIFY THE ASSESSEES CONTENTION IN THIS REGARD. THE AO RECEIVED THE REPL Y FROM PARTIES WHICH REVEALED DIFFERENT FACTS. THESE PARTIES WERE REQUES TED TO SUBMIT THEIR DEED OF CONVEYANCE ALONG WITH POSSESSION LETTER OR ELECTRICITY BILLS OR TELEPHONE BILLS. THE AO OBTAINED THE DETAILS FROM S OME PARTIES AND FOUND THAT THE ASSESSEE COMPANY HAD RECEIVED MONEY FROM T HOSE PARTIES, IN PRECEDING PREVIOUS YEARS, THAT IS, IN THE ASSESSMEN T YEARS 2000-01, 2001- 02, 2002-03, 2003-04 & 2005-06. THE ASSESSEE COMPAN Y DID NOT HAVE ANY LIABILITY ON 31.03.2006. THEREFORE, THE AO OBSE RVED THAT ONCE FULL SALE CONSIDERATION IS RECEIVED FROM A PURCHASER IN AN IN STANT FINANCIAL YEAR, IT SHOULD BE REFLECTED AS SALE DURING THAT RELEVANT AS SESSMENT YEAR IN PAST. REGISTRATION IS THE RESPONSIBILITY OF THE BUYER. IF A BUYER DOES NOT GET HIS/HER PROPERTY REGISTERED, SELLER HAS GOT NOTHING TO DO. THE REGISTRATION CHARGE IS BORN BY THE PURCHASER AND NOT BY THE SELL ER. IN THE INSTANT CASE THE ASSESSEE HAS SOLD OUT THOSE PROPERTIES, RECEIVE D ENTIRE SALE CONSIDERATION AND GIVEN POSSESSIONS OF THOSE FLATS MUCH BEFORE THE RELEVANT YEAR ENDING ON 31.03.2006. THEREFORE, THE ASSESSEE FAILED TO PROVE ITS LIABILITY OF RS.19,32,000/- AND, THEREFOR E, THE AO ADDED BACK RS.19,32,000/- TO THE TOTAL INCOME OF THE ASSESSEE. 3. NOT BEING SATISFIED WITH THE ORDER PASSED BY TH E AO, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO HAS CONFIRME D THE ADDITION MADE BY THE AO OBSERVING THE FOLLOWINGS :- ITA NO.292/KOL/2014 DUM DUM CONSTRUCTION (P) LTD. 3 4. I HAVE CONSIDERED THE FINDING OF THE A O. IN HI S ORDER DT. 15-12- 2008 AND WRITTEN SUBMISSION FILED BY THE A.R. DURIN G THE APPELLATE PROCEEDING. THE ASSESSEE HAS FILED A REVISED GROUND S OF APPEAL ON THREE GROUNDS. APPEAL ON REVISED GROUNDS NO. 1 AND 2 ARE AGAINST THE ADDITION OF RS. 1932000/- BY DISALLOWING THE AD VANCES. THE FACT OF THE CASE IS THAT THE ASSESSEE HAD SHOWN RS. 1932 000/- AS ADVANCE FROM CUSTOMERS AS ON 31-03-2006. THE ASSESS EE CLAIMED THAT THESE ADVANCES WERE RECEIVED FROM VARIOUS PART IES AGAINST FLATS AS THE ASSESSEE IS A BUILDER AND ITS MAIN WOR K IS TO CONSTRACT FLATS AND SALE THEM. DURING THE ASSESSMENT PROCEEDI NG IN ORDER TO VERIFY THE CLAIM OF THE ASSESSEE, THE AO ISSUED LET TERS U/S. 133(6) OF THE I.T.ACT, 1961 TO ALL THE ELEVEN PARTIES. ALL TH E ELEVEN PARTIES REPLIED TO THE A.O. AND THEY SUBMITTED THEIR TELEPH ONE BILLS, ELECTRICITY BILLS POSSESSION SLIP THAT PROVED BEYON D DOUBT THAT THE ASSES COMPANY DID NOT HAVE ANY LIABILITY TO ABOVE P ARTIES AS ON 31- 03-2006 AS ALL THE PARTIES HAD ALREADY TAKEN POSSES SION OF THE FLAT FOR WHICH THEY HAD GIVEN ADVANCE TO THE ASSESSEE. T HE AO. CONTENDED THAT AS THE ASSESSEE HAD ALREADY RECEIVED THE FULL SALE CONSIDERATION FROM DIFFERENT PARTIES AND HAD GIVEN FLATS TO THEM THERE WAS NO QUESTION OF OUTSTANDING LIABILITY IN T HE FORM OF ADVANCES FROM SUCH PARTIES. DURING THE APPELLATE PR OCEEDING THE AR. SUBMITTED A WRITTEN SUBMISSION AND VARIOUS DETA ILS REGARDING DIFFERENT PARTIES. IN ORDER TO VERIFY THEM, THE MAT TER WAS REFERRED TO A.O. FOR REMAND REPORT. THE A.O. HAS SUBMITTED HIS REMAND REPORT DT. 25-06-2012 VIDE LETTER NO. ITO WD-12(2)/KOL/REM AND REPORT/2012-13/135 DT. 25-06-2012. THE A.R. WAS GIV EN A COPY OF THE SAME AND THE A.R. HAS FILED A REJOINDER DT. 03- 08-2012. ASSESSMENT ORDER AND REMAND REPORT OF THE AO. AND W RITTEN SUBMISSION AS WELL AS REPLY TO REMAND REPORT FILED BY THE AR HAVE BEEN CONSIDERED DURING THE APPELLATE PROCEEDING. IN THE REMAND REPORT THE A.O. HAS CATEGORICALLY STATED THAT IN RE SPECT OF THE ASSESSEE'S SUBMISSION IT CAN BE STATED THAT, DURING THE COURSE OF ASSESSMENT IT WAS FOUND BY THE A.O., LIABILITY TO T HE TUNE OF RS.79,32,000/- CLAIMED BY THE ASSESSEE AS 'ADVANCE FROM CUSTOMERS' DID NOT EXIST ON 31.03 2006. ON ENQUIRY THE A.O. FOUND THAT ALL THE PARTIES AGAINST WHOM THE ASSESSEE HAD SHOWN THE LIABILITY OF RS. 19,32,000/- HAD ALREADY GOT POSSES SION OF THE PROPERTY AND 'SALE DEED' WAS REGISTERED BEFORE 31-0 3-2006, ON PAYMENT OF ENTIRE SALE CONSIDERATION BY THOSE PARTI ES TO THE ASSESSEE. THE ADDITION MADE BY THE A.O. IS ON THE B ASIS OF HIS FINDING OF NON EXISTENCE OF LIABILITY WHICH HAS NO RELEVANCE WITH THE AMOUNT OF SALE OF FLAT DURING THE YEAR AS WELL AS W ORK-IN-PROGRESS SHOWN BY THE ASSESSEE.' IN HIS REPLY TO THE REMAND REPORT THE A.R. HAS FILE D HIS SUBMISSION IN THREE PARAGRAPHS. IN PARA-1, THE A.R. HAS NOT REFUT ED / CONTRADICTED THE FACT FOUND BY THE A.O. THAT THE LIABILITY OF AD VANCE OF RS. 1932000/- DID NOT EXIST AS ON 31-03-2006 CLAIMED BY THE ASSESSEE IN DETAILS FILED BEFORE THE A.O. DURING THE ASSESSM ENT PROCEEDING. IN PARA-2 AND 3 OF HIS REPLY TO THE REMAND THE A.R. HA S TRIED TO MAKE A POINT THAT AS THE ASSESSEE IS A BUILDER AT MOST IT S INCOME SHOULD BE ITA NO.292/KOL/2014 DUM DUM CONSTRUCTION (P) LTD. 4 ENHANCED / (ACCEPTED AT 8%. HERE THAT THE ISSUE INV OLVED IN THIS CASE IS NOT THE INCOME SHOWN BY THE ASSESSEE OR AN INCOME ESTIMATED BY THE AO. HERE THE ISSUE AS THE REJECTIO N/DISALLOWANCES OF WRONGLY CLAIMED LIABILITY OF ADVANCES TO THE TUN E OF RS. 1932000/- BY THE ASSESSEE AS ON 31-03-2006. I HAVE CONSIDERED THE ENTIRE FACTS AND I FIND THAT THE FINDING OF THE A.O. OF NO N-EXISTENCE OF LIABILITY OF RS. 1932000/- AS ON 31-03-2006 HAS BEE N PROVED BEYOND DOUBT. THEREFORE, ASSESSEE'S APPEAL ON REVIS ED GROUNDS OF REVISED APPEAL NO. 1 AND 2 ARE DISMISSED. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND HAS TAKEN THE FOLLOWIN G GROUNDS OF APPEAL :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE APPEAL ORDER, PASSED BY THE LD. CIT(A), UPHOLDING T HE ADDITION AND THEREFORE DISMISSING THE APPEAL, IS LIABLE TO B E CANCELLED, REVERSED AND RENDERED UNSUSTAINABLE, CONSIDERING TH E SERVICE OF THE IMPUGNED APPELLATE ORDER AFTER AN UNREASONAB LE PERIOD OF MORE THAN ONE YEAR FOLLOWING ITS PURPORTED DATE OF 6 TH DECEMBER, 2012, EVIDENCING GROSS ANOMALY AS TO THE DATE OF ORDER ITSELF. 2. WITHOUT PREJUDICE TO THE GROUND NO.1, ON THE FA CTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS. 1932000/ -, ON ACCOUNT OF 'ADVANCE FOR FLAT BOOKING', MERELY ON THE BASIS OF REMAND REPORT SUBMITTED BY THE LD. RESPONDENT, AFTER NOT A PPRECIATING ITS CHARACTER AS ADVANCE CUM LIABILITY ONLY, PENDIN G THE COMPLETION OF THE CORRESPONDING CONSTRUCTION OF FLA TS AS WELL AS GRANT OF POSSESSION IN FUTURE. 3. WITHOUT PREJUDICE TO THE GROUND NO. 1, ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS GROSSLY ERRED, WHILE UPHOLDING THE ADDITION OF RS.1932000/- , ON ACCOUNT OF 'ADVANCE FOR FLAT BOOKING', IN ARRIVING AT THE C ONCLUSION OF EXISTENCE OF NO LIABILITY ON ACCOUNT OF AFORESAID A DVANCE, SOLELY ON AN ARBITRARY, CURSORY AND SUPERFICIAL ASSERTION OF THE LD. RESPONDENT AND SOME SUBJECTIVE VIEW, IGNORING ITS D ULY EVIDENCED AND EXPLAINED CHARACTER AS LIABILITY ONLY , PENDING EVENT OF SALE. 4. WITHOUT PREJUDICE TO THE GROUND NO. 1, ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS GROSSLY ERRED, WHILE UPHOLDING THE ADDITION OF RS. 1932000/ -, ON ACCOUNT OF 'ADVANCE FOR FLAT BOOKING', WITHOUT EVER APPRECIATING THE DUE ADHERENCE TO THE CONSISTENT PRACTICE OF REC OGNIZING SALE OF FLATS ON THE GRANT OF POSSESSION, BY WAY OF APPROPRIATION FROM ADVANCE ACCOUNT AS ACCOMPANIED B Y THE RECIPROCAL ADJUSTMENT FROM WORK IN PROGRESS ACCOUNT , TO ARRIVE AT GROSS PROFIT, ACCEPTED IN PRIOR ASSESSMENTS. ITA NO.292/KOL/2014 DUM DUM CONSTRUCTION (P) LTD. 5 5. WITHOUT PREJUDICE TO THE GROUND NO. I, ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS GROSSLY ERRED, WHILE UPHOLDING THE ADDITION OF RS.1932000/- , ON ACCOUNT OF 'ADVANCE FOR FLAT BOOKING', AFTER OMITTING TO AP PRECIATE ITS DUE INCLUSION AS SALE PERTAINING TO SUBSEQUENT YEARS, O N EVENTUAL HANDING OVER OF POSSESSION. 6. EVEN OTHERWISE, WITHOUT PREJUDICE TO GROUND NO. I AND 2 TO 5, THE LD. CIT ( A) INSTEAD OF UPHOLDING THE DISALLOWA NCE OF RS.1932000/-, REPRESENTING THE ADVANCE ACCEPTED DUR ING THE YEAR, AS INCOME FROM CONCLUDED SALE, OUGHT TO HAVE DETERMINED THE ONLY THE PROFIT ELEMENT COMPRISED THEREIN, BY A LLOWING THE SETTING OFF THEREFROM THE APPROPRIATE AND CORRESPON DING PART OF RECIPROCAL AMOUNT OF WIP. 7. WITHOUT PREJUDICE TO THE AFORESAID GROUNDS, ON A FAIR AND REASONABLE PERUSAL OF EVIDENCE, THE LD. CIT(A) OUGH T TO HAVE DIRECTED THE ADOPTION OF USUAL AND REASONABLE NET P ROFIT, PRESCRIBED U/S 44AD OR ATTAINABLE UNDER COMPARABLE CASES , IN RELATION TO THE ABOVE ADVANCE AMOUNT PERTAINING TO CONSTRUCTION/DEVELOPMENT OF PROPERTY ACTIVITIES. 8. THE APPELLANT CRAVES LEAVE TO SUPPLEMENT, GO FO R ADDITIONAL GROUNDS, MODIFY OR WITHDRAW ANYONE OR MORE OF THE F OREGOING GROUNDS EITHER BEFORE OR DURING THE APPEAL HEARING. 5. ALTHOUGH IN THIS APPEAL, THE ASSESSEE HAS RAISED A MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING THE S OLITARY GRIEVANCE OF THE ASSESSEE HAS BEEN CONFINED TO THE ISSUE OF A DDITION OF RS.19,32,000/- ON ACCOUNT OF ADVANCE FOR FLAT BOOKI NG. GROUND NO.2 IS NOT PRESSED BY THE ASSESSEE. 5.1 LD. AR FOR THE ASSESSEE HAS SUBMITTED BEFORE US AND ADMITTED THAT RS.19,32,000/- IS AN UNDISCLOSED INCOME SHOWN IN TH E LIABILITY SIDE OF THE BALANCE SHEET OF THE ASSESSEE AS PAYABLE TO THE OUT SIDERS. IN FACT, THE AMOUNT OF RS.1932000/- IS NOT PAYABLE TO ANYBODY. T HEREFORE, LD. AR FOR THE ASSESSEE HAS SUBMITTED ON BEHALF OF THE ASSESSE E THAT THE ASSESSEE ITA NO.292/KOL/2014 DUM DUM CONSTRUCTION (P) LTD. 6 IS READY OF OFFER THIS INCOME @8.3%, BEING THE NET PROFIT EARNED BY THE ASSESSEE DURING THE YEAR. THE NET PROFIT RATIO OF T HE ASSESSEE, (AS PER AR), UNDER CONSIDERATION DURING THE YEAR COMES @8.3 % AND THE ASSESSEE IS READY TO OFFER THE INCOME @8.3% ON THE IMPUGNED ADDITION OF RS.1932000/-. THE LD. AR FOR THE ASSESSEE FURTHER A RGUED THAT RS.1932000/- RELATES TO ASSESSEES BUSINESS AND ITS LIABILITY IS NOT PAYABLE, THEREFORE, THE ASSESSEE IS READY TO OFFER THIS LIABILITY AS AN INCOME @8.3%. IN ADDITION TO THIS, LD. AR FOR THE A SSESSEE ALSO SUBMITTED THAT ASSESSEE IS A SMALL TRADER AND FALLS IN THE SC HEME OF SECTION 44AD WHERE THE ASSESSEE CAN OFFER 8% OF HIS GROSS RECEIP TS FOR TAXATION PURPOSE. THE ASSESSEE`S TURNOVER AS ON 31.03.2006 I S AT RS. 31,68,000/- WHICH IS BELOW TAX AUDIT LIMIT U/S 44AB OF THE ACT, THEREFORE THE ASSESSEE IS A SMALL BUSINESSMAN AND MAY FALL UNDER SECTION 4 4AD. 5.2. LD. DR FOR THE REVENUE HAS ALSO PRIMARILY RELI ED ON THE FINDINGS OF THE AO WHICH WE HAVE ALREADY NOTED IN OUR EARLIER P ARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 5.3. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORDS, WE ARE OF THE VIEW THAT THE AMOUNT OF R S.1932000/- SHOWN BY THE ASSESSEE AS A BOGUS LIABILITY SHOULD BE TREATED AS RECEIPTS OF THE ASSESSEE. SINCE THE ASSESSEE IS A SMALL TRADER AND FALLS IN THE SCHEME OF SECTION 44AD OF THE INCOME TAX ACT WHERE THE ASSESS EE MAY OFFER 8% OF HIS GROSS RECEIPTS FOR TAXATION PURPOSES. IN THE CA SE UNDER CONSIDERATION THE NET PROFIT RATIO OF THE ASSESSEE IS 8.3%, THERE FORE, IT IS APPROPRIATE TO ESTIMATE THE INCOME @8.3% OF RS.19,32,000/-. THEREF ORE, WE DIRECT THE ITA NO.292/KOL/2014 DUM DUM CONSTRUCTION (P) LTD. 7 AO TO TAX THE BOGUS LIABILITY OF RS. 19,32,000/- A T THE RATE OF 8.3%. THAT IS THE AO SHOULD ESTIMATE THE INCOME @ 8.3% ON RS. 19, 32,000/-. 5.4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE, IS ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12/04 /2017. SD/ - (S.S.VISWANETHRA RAVI) S D/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; $% DATED 12/04/2017 & ()* /PRAKASH MISHRA ,SR.PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) % & , / ITAT, KOLKATA 1. / THE APPELLANT- DUM DUM CONSTRUCTION (P) LTD. 2. / THE RESPONDENT.-ITO WARD-12(2), KOLKATA 3. 4 ( ) / THE CIT(A), KOLKATA. 4. 4 / CIT 5. 56 7 8 , 8 , / DR, ITAT, KOLKATA 6. 7 9 / GUARD FILE. 5 //TRUE COPY//