AAVAAS REALTORS, MUMBAI V. PR CIT 19, MUMBAI

ITA 3054/MUM/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3344 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 01-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 21-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K P KAPADIA
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3054/M/2015 ASSESSMENT YEAR: 2010-11 M/S. AAVAAS REALTORS, 711, ARUN CHAMBERS, TARDEO ROAD, MUMBAI 400 034 PAN: AANFA9849A VS. PR. COMMISSIONER OF INCOME TAX-19, ROOM NO.228, 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI 400 007 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI K.P. KAPADIA, A.R. REVENUE BY : SHRI RAHUL RAMAN, D.R. DATE OF HEARING : 16.03.2016 DATE OF PRONOUNCEMENT : 16.03.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 16.03.2015 OF THE PRINCIPAL COMMISSIONER OF I NCOME TAX [HEREINAFTER REFERRED TO AS THE PR.CIT] RELEVANT TO ASSESSMENT Y EAR 2010-11 PASSED UNDER SECTION 263 OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A BUILDER AND DEVELOPER. THE ASSESSEE STARTED ITS MAIDEN PROJECT AT VIRAR. THE ASSESSEE FOLLOWED THE PROJECT COMPLETION METHOD UP TO FINANC IAL YEAR 2008-09 RELEVANT TO A.Y. 2009-10 AND ENTIRE COST OF PROJECT WAS CARRIED FORWARD. IN THE FINANCIAL YEAR 2009-10 RELEVANT TO A.Y. 2010 -11, THE BUILDING WAS PARTLY COMPLETED AND 28 FLATS OUT OF 32 FLATS WERE SOLD DURING THE SAID YEAR. THE PROJECT WAS, HOWEVER, COMPLETED IN FINAN CIAL YEAR 2010-11 RELEVANT TO A.Y. 2011-12 AND THE REMAINING FOUR FLA TS WERE SOLD DURING ITA NO.3054/M/2015 M/S. AAVAAS REALTORS 2 THE SAID A.Y. 2011-12. THE ASSESSEE OFFERED THE 10 0% SALE PRICE OF THE 28 FLATS SOLD AS REVENUE DURING THE A.Y. 2010-11. HOWEVER, THE PROJECT WAS NOT COMPLETED DURING THE A.Y. 2010-11 AND CERTA IN EXPENDITURE WAS ESTIMATED BY THE ASSESSEE WHICH WAS REQUIRED TO BE INCURRED TO COMPLETE THE CONSTRUCTION AND PROVIDE THE AMENITIES, WHICH W AS ESTIMATED AT RS.29,89,414/- AND A PROVISION FOR THE SAME WAS MAD E IN THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER (HEREINAFTER REFER RED TO AS THE AO), AFTER CONSIDERING THE ABOVE DETAILS, ALLOWED THE SAID PRO VISION. THE LD. PR. CIT, HOWEVER AFTER EXAMINING THE RECORDS OF THE ASS ESSEE, OBSERVED THAT THE AO HAD NOT MADE ANY ENQUIRY ABOUT THE ESTIMATED EXPENDITURE AND THAT THE SAID LIABILITY OF THE ASSESSEE HAD NEITHER ACCRUED NOR ASCERTAINED DURING THE YEAR. HE, THEREFORE, HELD THAT THE ACTI ON OF THE AO IN ALLOWING THE ASSESSEES CLAIM OF DEDUCTION OF RS.29,89,414/- WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE ACC ORDINGLY SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO MAKE A FRES H ASSESSMENT. AGGRIEVED BY THE ORDER OF THE LD. PR. CIT, THE ASSE SSEE HAS COME IN APPEAL BEFORE US. 3. THE LD. A.R. OF THE ASSESSEE, BEFORE US, HAS SUB MITTED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD DEMONS TRATED THE WORKING OF THE EXPENDITURE AND IT WAS ALSO BROUGHT TO THE N OTICE OF THE LD. PR. CIT THAT DURING THE FINANCIAL YEAR 2010-11 RELEVANT TO A.Y. 2011-12, THE ASSESSEE HAD ACTUALLY INCURRED THE TOTAL EXPENDITUR E OF RS.77,52,228/- WHICH WAS MUCH MORE THAN THE PROVISION MADE OF RS.2 9,89,414/-. THE DETAILS HAVE BEEN EXAMINED BY THE AO AND AFTER EXAM INING THE SAID DETAILS, THE AO HAD ALLOWED THE PROVISION MADE FOR AN ESTIMATED EXPENDITURE FOR A.Y. 2010-11. HE HAS FURTHER SUBMI TTED THAT THE PROVISION MADE WAS NOT IN RELATION TO ANY CONTINGEN T NATURE OF EXPENSES ITA NO.3054/M/2015 M/S. AAVAAS REALTORS 3 RATHER IT WAS CLEAR AND ASCERTAINED LIABILITY IN RE SPECT OF THE WORK TO BE CARRIED OUT AND THE INCURRING OF THE EXPENDITURE WA S ALSO ASCERTAINED. HE, IN THIS RESPECT, HAS RELIED UPON THE DECISION OF TH E HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. TRIVENI ENGINEERING & INDUSTRIES LTD. ITA NO.346 OF 2009 VIDE ORDER DATED 29.11.10 AND FURTHE R OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CALCUTTA CO. LTD. VS. CIT (1959) 37 ITR 1 (SC) WHEREIN HONBLE SUPREME COURT HAS HELD THAT IN A CASE WHERE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LAND AND PROPERTY DEVELOPMENT AND IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, EXPENDITURE ACTUALLY INCURRED BUT NOT DURING THE RE LEVANT YEAR IS STILL ALLOWABLE, IF SUCH EXPENDITURE HAS BEEN INCIDENTAL TO THE CARRYING ON OF THE BUSINESS. 4. ON THE OTHER HAND, THE LD. D.R. HAS RELIED UPON THE FINDING OF THE LD. PR. CIT. 5. AFTER CONSIDERING THE RELEVANT SUBMISSIONS, WE F IND THAT IN THIS CASE THE ASSESSEE HAD SOLD 28 FLATS DURING THE YEAR AND HAD OFFERED THE 100% INCOME FOR TAXATION. HOWEVER, THE PROJECT WAS COMP LETED DURING THE SUBSEQUENT YEAR. THE ASSESSEE HAD MADE PROVISION O F A REASONABLE EXPENDITURE WHICH WAS LIKELY TO BE INCURRED BY THE ASSESSEE TOWARDS CERTAIN WORK OF FURNISHING AND PROVIDING OF AMENITI ES ETC. THE LIABILITY OF THE ASSESSEE THEN WAS CRYSTALLIZED AND ASCERTAINED. EVEN THE ASSESSEE HAD DEMONSTRATED BEFORE THE AO THAT IN FACT THE ASSESSE E HAD INCURRED MUCH MORE AMOUNT THAN THAT, PROVISION FOR WHICH WAS MADE BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. WE, THEREFORE, DO NO T FIND JUSTIFICATION ON THE PART OF THE LD. PR. CIT IN INVOKING PROVISIONS OF SECTION 263 OF THE ACT AND THEREBY SETTING ASIDE THE ASSESSMENT ORDER. ITA NO.3054/M/2015 M/S. AAVAAS REALTORS 4 6. THE ORDER OF THE LD. PR. CIT PASSED UNDER SECTIO N 263 IS THEREFORE QUASHED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.03.2016. SD/- SD/- (RAJESH KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 05.03.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.