JASWANT H BHATIA, MUMBAI V. ITO CIR 19(3)(2), MUMBAI

ITA 2989/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6580 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: J
• Next Hearing Date: 07-04-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2011
• Court: TRIBUNAL
• Department Lawyers: MOURYA PRATAP
• Assessee Lawyers: KIRIT N MEHTA
• Keywords: Unexplained cash credit
• Section: 68; 145; 10

Judgement Text

J IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI SANJAY GARG, JM ./I.T.A. NO.2989/M/2011 ( / ASSESSMENT YEAR: 2006 - 2007 ) MR. JASWANT H. BHATIA, 61 - A, MITTAL TOWERS, NARIMAN POINT, MUMBAI 400 005. / VS. ITO - CIRCLE 19(3)(2), PIRAMAL CHAMBERS, R.NO.305, 3 RD FLOOR, MUMBAI 400 012. ./ PAN : AACPB 0225 E ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI KIRIT N MEHTA / RESPONDENT BY : SHRI MOURYA PRATAP, DR / DATE OF HEARING : 08.04.2014 / D ATE OF PRONOUNCEMENT : 07.05 .2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 15.4.2011 IS AGAINST THE ORDER OF THE CIT (A) - 30, MUMBAI DATED 12.1.2011 FOR THE ASSESSMENT YEAR 2006 - 2007. 2. IN THIS APPEAL, ASSESSEE RAISED THE GROUNDS RELATING TO INVOK ING OF THE PROVISIONS OF SECTION 145(3) OF THE ACT AND CONSEQUENT ESTIMATE OF THE PROFITS. FURTHER, AO ALSO DISALLOWED INTEREST EXPENSES AMOUNTING TO RS. 52.61 LAKHS. DURING THE PROCEEDINGS BEFORE US, ASSESSEE FILED ADDITIONAL GROUNDS WHICH READ AS UNDER : 1.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS. 25,00,000/ - AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. 1.2. THE CIT (A) FAILED TO UNDERSTAND THE FACTS THAT THE APPELLANT HAS INADVERTENTLY PASSED A WRONG ENTRY IN HIS BOOKS OF ACCOUNT BY RS. 25,00,000/ - WHICH NEEDS RECTIFICATION IN BOOKS OF ACCOUNT OF THE APPELLANT AND IT DOES NOT WARRANT ANY ADDITION U/S 68 OF THE ACT. 3. AT THE OUTSET, NARRATING THE BRIEF FA CTS OF THE PRESENT CASE, SHRI KIRIT N MEHTA, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE IS A BUILDER AND DEVELOPER AND STARTED A COUPLE OF PROJECTS NAMELY CITY GEM AND CITY DREAMS. IN THE ASSESSMENT, AO INVOKED THE PROVISIONS OF SECTION 14 5 (3) OF THE ACT HOLDING THAT THE 2 CITY GEM PROJECTED WAS COMPLETED AND THE PROFITS WERE OFFERED IN THE YEAR AY 2005 - 2006. REGARDING THE PROFITS RELATING TO THE OTHER PROJECT CITY DREAMS, ASSESSEE OFFERED THE INCOME IN THE YEAR 2006 - 2007. AO IS OF THE OPIN ION THAT THE SAID OFFER OF RECOGNITION OF INCOME IS NOT PROPER AND REJECTED THE ASSESSEES PROJECT COMPLETION METHOD INSTEAD THRUST ON THE ASSESSEE PERCENTAGE COMPLETION METHOD AND PARA 3.9 OF THE ASSESSMENT ORDER IS RELEVANT IN THIS REGARD. SUBSEQUEN TLY, AO ANALYZED THE LOW PROFITS OFFERED BY THE ASESSEE AND DISCUSSED VARIOUS CASE LAWS IN SUPPORT OF THE REJECTION OF THE METHOD OF ACCOUNTING AS WELL AS IN SUPPORT OF THE ESTIMATED PROFITS. AO DETERMINED THE INCOME OF THE ASSESSEE FROM THE CONSTRUCTION ACTIVITY AT RS. 95 LAKHS ON PROTECTIVE BASIS AGAINST THE RETURNED INCOME OF RS. 34,401/ - . PARA S 9 & 10 OF THE ASSESSMENT ORDER ARE RELEVANT IN THIS REGARD. THERE ARE OTHER ADDITIONS ALSO WHICH FORM PART OF THE SAID INCOME OF RS. 95 LAKHS. MATTER TRAVEL LED TO THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE MADE VARIOUS SUBMISSIONS AND SUCCEEDED PARTLY. SO FAR AS THE INVOKING THE PROVISIONS OF SECTION 145(3) AND CONSEQUENT BEST JUDGMENT ASSESSMENT A S WELL AS THE ADDITION U/S 68 IS CONCERNED, ASSESSEE COULD NOT SUCCEED. ACCORDINGLY, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE GROUNDS MENTIONED ABOVE. 5. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL BROUGHT OUR ATTENTION TO THE REASONS GIVEN BY THE AO FOR INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND MENTIONED THAT THEY ARE NOT SUSTAINABLE CONSIDERING THE VARIOUS CASE LAWS OF THE COORDINATE BENCH OF ITAT, BOMBAY, WHEN THE PROFITS ARE PROPERLY DETERMINED, THE ASSESSING OFFICER CANNO T THRUST ON THE ASSESSEE A METHOD OF ACCOUNTING I.E., IN THIS CASE PERCENTAGE COMPLETION METHOD, WHEN ASSESSEE IS FOLLOWING CONSISTENTLY PROJECT COMPLETION METHOD. BRINGING OUR ATTENTION TO COPIES OF THE ASSESSMENT ORDERS FOR THE EARLIER ASSESSMENT YE AR S 2002 - 2003 TO 2005 - 2006 (PLACED AT PAGE 8 TO 24 OF THE PAPER BOOK), LD COUNSEL MENTIONED THAT NO ADDITION WAS MADE BY THE AO IN THE REASSESSMENT / ASSESSMENT QUANTIFYING THE ASSESSEES INCOME BASED ON THE PERCENTAGE COMPLETION METHOD WHICH WAS THRUST ON THE ASSESSEE VIDE PARA 9 AND 10 OF THE ASSESSMENT ORDER. FURTHER, BRINGING OUR ATTENTION TO PARA 9, LD COUNSEL MENTIONED THAT THE ADDITION OF RS. 95 LAKHS WAS ADDED TO THE INCOME OF THE ASSESSEE ON PROTECTIVE BASIS. BRINGING OUR ATTENTION TO THE COP IES OF THE 3 ASSESSMENT ORDERS, LD COUNSEL MENTIONED THAT NO ADDITION WAS MADE ON SUBSTANTIVE BASIS AND IN ANY OF THE ASSESSEES OR ASSESSMENT YEARS FROM AY 2002 - 2003 TO 2005 - 2006. AS PER THE ASSESSEE, WHEN NO INCOME HAS ESCAPED ASSESSMENT, THERE IS NO NECESSITY FOR THE AO TO DISTURB THE METHOD OF ACCOUNTING FOLLOWED BY HIM OVER THE YEARS. 6. PER CONTRA, LD DR MENTIONED THAT IT IS NO T POSSIBLE THAT THE SUBSTANTIVE ASSESSMENT IS NOT DONE CONSIDERING THE CLEAR CUT FINDING OF THE AO GIVEN IN PARA 10 OF THE ASSESSMENT ORDER DATED 30.12.2008 FOR THE AY 2006 - 2007. ON THIS LEGAL ISSUE, BOTH THE PARTIES ARE OF THE OPINION THAT THE MATTER MAY BE REMANDED TO THE FILES OF THE AO FOR DECIDING THE ISSUE AFRESH CONSIDERING THE FINDINGS OF THE AO IN THE EARLIER ASSESSMENT YEARS ON THE NECESSITY OF MAKING SUBSTANTIVE ADDITIONS. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE A UTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT THERE IS NO CLARITY ON FACTS RELATING TO THE DETAILS OF THE ADDITIONS MADE IN THE SUBSTANTIVE ASSESSMENT EITHER OF THE ASSESSEE OR OF OTH ERS, IF ANY. HOWEVER, IT IS AN UNDISPUTED FACT THAT THE IMPUGNED ASSESSMENT IS A PROTECTIVE ASSESSMENT. IN THE REMAND PROCEEDINGS, AO SHALL EXAMINE ALL THE ABOVE CONTENTIONS OF THE ASSESSEE AND EXAMINE AFRESH THE APPLICABILITY OF THE PROVISIONS OF SECTIO N 145(3) AND CONSEQUENT BEST JUDGMENT ASSESSMENT, IF ANY. SO FAR AS THE ADDITIONAL GROUNDS ARE CONCERNED, WE FIND IT NECESSARY THE SAME SHOULD BE REMANDED TO THE FILES OF THE AO AND ADJUDICATE THEM AFRESH AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. ACCORDINGLY, ALL THE ISSUES RAISED IN THE GROUNDS AS WELL AS THE ADDITIONAL GROUNDS ARE REMANDED. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT O N 07.05 .2014 . S D / - S D / - (SANJAY GARG) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 07.05 .2014 . . ./ OKK , SR. PS 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI