M/S. SREE SANKESWARA FOUNDATIONS AND INVESTMENTS, CHENNAI V. ACIT, NCC-6(1), CHENNAI

ITA 3288/CHNY/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3264 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2016-2017
• Appeal Filed On: 29-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. ANITHA
• Keywords: TDS; FORM 26AS
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.3288/CHNY/2019 ! ' / ASSESSMENT YEAR : 2016-2017. M/S. SREE SANKESWARA FOUNDATIONS AND INVESTMENTS, NO.115, RAJENDRA COMPLEX, NSC BOSE ROAD, SOWCARPET, CHENNAI 600 079. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 6(1) CHENNAI. [PAN ABTFS 7616L] ( / APPELLANT) ( /RESPONDENT) # $ % / APPELLANT BY : SHRI. T. VASUDEVAN, ADV &' # $ % /RESPONDENT BY : MS. R. ANITHA, IRS, JCIT. ( ) $ * /DATE OF HEARING : 27-02-2020 +,'! $ * /DATE OF PRONOUNCEMENT : 09-03-2020 / O R D E R PER INTURI RAMA RAO , ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-5, CHENNAI (CIT(A) FOR SHORT) DATED 01.10.2019 FOR THE ASSES SMENT YEAR (AY) 2016-2017. ITA NO.3288/2019 :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPE ALS) DISMISSING THE APPEAL IS CONTRARY TO LAW, ERRONEOUS AND UNSUSTAINABLE ON THE FACTS OF THE CASE. 2. THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF R S.88,11,291 ADDED BOCK BY THE ASSESSING OFFICER IN THE ASSESSME NT. 3. THE CIT(A) ERRED IN ADDING THE DIFFERENCE IN THE AMOUNT OF B 11,31,13,700/- BEING TDS EFFECTED BY M/S. DUGAR HOU SING LTD AND THE ACTUAL RECEIPTS OF B 10,43,02,409/- CONSIDERED BY ASSESSEE IN THE RETURN AS UNDER-STATEMENT OF RECEIPTS. 4. THE CIT(A) FAILED TO APPRECIATE THAT AS PER THE JDA WITH M/S. DUGAR HOUSING LTD, THE ASSESSEE HAD RECOGNIZED INCO ME AS PER PERCENTAGE OF COMPLETION BASIS AND OFFERED THE SAME FOR TAXATION AND HENCE CONFIRMING THE ADDITION ON ME STATED PRETEXT THAT THE APPELLANT BEING A LAND OWNER AND DID NOT UNDERTAKE ANY CONSTR UCTION CONTRACT WAS UNJUSTIFIED ON THE FACTS OF THE CASE. 5. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT AS PER THE JV, THE ASSESSEE AND DUGAR HOUSING HAVE EQUAL ONUS IN THE D EVELOPMENT OF PROPERTY AND HENCE RIGHTLY OFFERED ITS SHARE OF INC OME FROM SALE OF FLATS FOR THE CURRENT YEAR ON PROJECT COMPLETION BA SIS AND THEREFORE THE ADDITION IS UNSUSTAINABLE ON THE FACTS OF THE C ASE. 6. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT THE INCOME OFFERED ON PERCENTAGE COMPLETION BASIS ACCORDS WITH THE GUIDAN CE NOTE ON REAL ESTATE ACCOUNTING ISSUED BY ICAI AND ALSO THE APPLICATION OF AS-7, AND HENCE WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION. 7. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT THE DIFFERENCE BETWEEN FORM 26AS AND THE DECLARED RECEIPTS BY ASSESSEE CAN NOT BE CONSIDERED FOR ADDITION TO THE RETURNED INCOME AS S UPPRESSION OF RECEIPTS. 8. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT THE ENTIRE CONTRACT RECEIPTS HAD BEEN OFFERED BY ASSESSEE OVER THE PERI OD OF CONTRACT AND THERE IS NO SHORTFALL BETWEEN THE INCOME REFLECTED IN 26AS AND THAT OFFERED BY ASSESSEE BEFORE THE COMPLETION OF THE PR OJECT AND HENCE THE ARBITRARY ADDITION MADE IS TO BE DELETED. 9. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT THE TDS CREDIT TAKEN BY ASSESSEE IS IN LINE WITH THE ACTUAL INCOME SHOWN IN THE FINANCIALS AND THE BALANCE OF CREDIT HAD BEEN CARRIED FORWARD TO THE LATER YEARS ITA NO.3288/2019 :- 3 -: WHEN THE INCOME HAS BEEN OFFERED AND HENCE THE ADDI TION IS UNCALLED TO, AND CANNOT BE SUSTAINED 10. THE CIT(A) FAILED TO APPRECIATE THAT THE ASSESS EE HAVING PROVIDED THE ENTIRE BASIS OF WORKING OUT THE INCOM E ON PROJECT COMPLETION BASIS, WAS NOT JUSTIFIED IN MERELY CONF IRMING THE ADDITION MADE BY OFFICER WITHOUT POINTING OUT ANY DEFICIENCY IN THE WORKING OF THE INCOME BY ASSESSEE. 11 THE CIT(A) IN ANY VIEW OF THE MATTER, OUGHT TO H AVE CONSIDERED THE CONTENTIONS OF ASSESSEE IN THE PROPER PERSPECTI VE AND DELETED THE ADDITION MADE TO THE RETURNED INCOME OF ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. SREE SANKESWARA FOUNDATIO NS AND INVESTMENTS IS A PARTNERSHIP FIRM CONSTITUTED UN DER THE PARTNERSHIP ACT. IT IS ENGAGED IN THE BUSINESS OF REAL EST ATE. THE RETURN OF INCOME FOR THE AY 2016-17 WAS FILED ON 17.10.2016 D ISCLOSING TOTAL INCOME OF RS.1,32,31,560/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED UNDER LIMITED SCRUTINY AS SESSMENT GUIDELINE AND THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 6( 1), CHENNAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 24.12.20 18 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) AT TOTAL INCOME OF B2,20,42,850/-. WHILE DOING SO, THE AO MADE AD DITION OF B88,11,291/- BEING THE DIFFERENCE IN AMOUNT SHOWN IN THE PROFIT AND LOSS ACCOUNT AND OF B10,43,02,409/- AND AMOUNT SHOW N IN FORM 26AS B11,31,13,700/-. IT WAS SUBMITTED BEFORE THE ASSES SING OFFICER THAT ITA NO.3288/2019 :- 4 -: ASSESSEE HAD ENTERED INTO JOINT DEVELOPMENT AGREEM ENT WITH M/S. DUGAR HOUSING LIMITED. THE INCOME OF THE SAID PROJ ECT WAS OFFERED TO TAX FOLLOWING PERCENTAGE OF COMPLETION METHOD. HO WEVER, THE ASSESSING OFFICER TURN DOWNED THE SUBMISSION POINTI NG OUT THAT ASSESSEE IS ONLY LAND OWNER. THE FORM 26AS CLEARLY SHOWS SALE OF IMMOVABLE PROPERTY, ACCORDINGLY TAX WAS DEDUCTED U /S.194A OF THE INCOME TAX ACT,1961 (IN SHORT THE ACT) B11,31, 13,700/-. 4. B EING AGGRIEVED BY THE ABOVE ADDITIONS, THE ASSESSE E PREFERRED AN APPEAL BEFORE LD. CIT(A), WHO VIDE IMP UGNED ORDER CONFIRMED THE ACTION OF THE ASSESSING OFFICER (AO). 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), TH E APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. IT I S SUBMITTED THAT ASSESSEE HAD ENTERED INTO JOINT DEVELOPMENT AGREEME NT WITH M/S. DUGAR HOUSING LIMITED ON 16.03.2012. IN TERMS OF J OINT DEVELOPMENT AGREEMENT, ASSESSEE HAD CONTRIBUTED LAND TOWARDS HIS SHARE. IT IS SUBMITTED THAT JOINT DEVELOPMENT AGREEMENT IS ENT ERED BETWEEN ASSESSEE, LAND DEVELOPER AND THE LAND OWNERS. SHA RE OF THE LAND WAS NOT TRANSFERRED TO THE DEVELOPER. THE SALE PROCEED S OF THE BUILT UP AREA WERE SHARED BETWEEN DEVELOPER AND THE LAND OWN ER IN THE AGREED RATIO. THUS, IT IS SUBMITTED THAT NO ADDITION CAN BE MADE, WHEN ASSESSEE HAS BEEN FOLLOWING PERCENTAGE OF COMPLETI ON METHOD. ITA NO.3288/2019 :- 5 -: 6. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE OPPOSED THE ABOVE SUBMISSION AND SUBMITTED THAT ASS ESSEE IS ONLY LAND OWNER AND HE NEVER CARRIED ON ANY BUSINESS ACT IVITY WITH THE LAND DEVELOPER AND THEREFORE THE QUESTION OF FOLLOWING P ERCENTAGE OF COMPLETION METHOD DOES NOT ARISE. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. ADMITTEDLY, JOINT DEVELOPMENT AGREEMENT WAS ENTERED TO DEVELOP PROPERTY SITUATED AT AYANAMBAKKAM VILLAGE, RAJANKUPPAM HAMLET, AMBATTUR TALUK, THIRUVALLUR DIST. IT IS THE CASE OF THE ASSESSEE THAT AGREEMENT WAS ENTERED WITH AN INTENTION OF DE VELOPING ABOVE PROPERTY JOINTLY AS BUSINESS VENTURE AND THE INCOM E FROM THE SAID ACTIVITY WAS OFFERED TO TAX BY FOLLOWING PERCENTAGE OF COMPLETION METHOD. HOWEVER, THE ASSESSING OFFICER WAS OF THE V IEW THAT ASSESSEE CANNOT ADOPT PERCENTAGE OF COMPLETION METHOD AS IT IS NOT IN THE BUSINESS OF DEVELOPING THE PROPERTY BUT ONLY WAS THE LAND OWNER OF THE PROPERTY. THEREFORE, THE DIFFERENCE AMOUNT CO NTAINED IN FORM 26AS AND SHOWN IN PROFIT AND LOSS ACCOUNT WAS BROUG HT TO TAX. THIS IS AN ISSUE WHICH REQUIRES TO BE DECIDED HAVING REGARD TO TERMS OF JOINT DEVELOPMENT AGREEMENT AND THE INTENTION OF THE PAR TIES TO THE AGREEMENT. THUS, THE INTENTION OF THE PARTIES CAN BE GAUGED FROM THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS. ENTRIES IN THE BOOKS OF ACCOUNTS CLEARLY GOES TO SHOW THAT ASSESSEE IS ONLY PARTNER IN THE ITA NO.3288/2019 :- 6 -: DEVELOPMENT OF SCHEDULED PROPERTY OF THE AGREEMENT. IN ANY EVENT, NO ADDITION CAN BE MADE BASED ON MERE DIFFERENCE BETWE EN FORM 26AS AND THE AMOUNT SHOWN IN THE PROFIT AND LOSS ACCOU NT AND IN THE ABSENCE OF ANY RECONCILIATION AND CORROBORATIVE EV IDENCE. IN ANY EVENT, IT IS NOT THE CASE OF THE REVENUE THAT THERE IS LEAKAGE OF REVENUE DURING THE PERIOD OF JOINT DEVELOPMENT, IT IS CASE OF TAX NEUTRAL. THEREFORE, WE ARE OF THE CONSIDERED OPINIO N THAT NO ADDITION IS WARRANTED AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.3288/CHNY/2019 FOR ASSESSMENT YEAR 2016-2017 STA NDS ALLOWED. ORDER PRONOUNCED ON 9TH DAY OF MARCH, 2020, AT C HENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER -) / CHENNAI . / DATED:9TH MARCH, 2020. KV /0 $0& *12032'* / COPY TO: 0 1 . # / APPELLANT 3. 0 ( 4*056 / CIT(A) 5. 278 0& * 9 / DR 2. &' # / RESPONDENT 4. 0 ( 4* / CIT 6. 8:0;) / GF