ITO 15(1)(3), MUMBAI V. PODDAR ASHISH DEVELOPERS, MUMBAI

ITA 3408/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75900 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Assessee Lawyers: J D MISTRY; B N RAO
• Section: 80IB; 145

Judgement Text

, , ,, , INCOME TAX APPELLATE TRIBUNAL MUMBAI - C BENCH MUMBAI , , / ! ! ! ! , BEFORE S/SH. VIJAY PAL RAO, JUDICIAL MEMB ER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 3408/M/2010, ' ' ' ' # # # # / ASSESSMENT YEAR 2007-08 ITO 15(1)(3) MATRU MANDIR, R. NO.108 MUMBAI-400007 VS. PODDAR ASHISH DEVELOPERS, 115 5-C, COURT CHAMBERS, 35, NEW MARINE LINES, MUMBAI- 400020 PAN: AAAAP4750D ( $% / ASSESSEE) ( &'$% / RESPONDENT) /. ITA NO. 3559/M/2011, ' ' ' ' # # # # / ASSESSMENT YEAR 2008-09 ITO 15(1)(3) MATRU MANDIR, R. NO.108 MUMBAI-400007 VS. PODDAR ASHISH DEVELOPERS, 115 5-C, COURT CHAMBERS, 35, NEW MARINE LINES, MUMBAI- 400020 PAN: AAAAP4750D ( $% / ASSESSEE) ( &'$% / RESPONDENT) $% ( / APPELLANT BY : SHRI A.C.TEJPAL &'$% ) ( / RESPONDENT BY : SHRI J.D.MISTRY & B.N.RAO ' ' ' ' ) )) ) *+ *+ *+ *+ / DATE OF HEARING : 08-01-2014 ,-# ) *+ / DATE OF PRONOUNCEMENT : 12- 03 - 2014 ' ' ' ' , 1961 ) )) ) 254 )1( *.* *.* *.* *.* / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M: CHALLENGING THE ORDERS OF THE CIT(A)-26,MUMBAI,ASSE SSING OFFICER(AO)HAS FILED FOLLOWING GROUNDS OF APPEAL FOR ASSESSMENT YEARS 2007-08 AND 2008-09 : ITA NO. 3408/M/2010-AY-2007-08 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LEARNED CIT (A) HAS ERRED IN LAW AS WELL AS ON THE FACTS IN DELETING THE ADDITION OF RS . 17,68,97,860/- BASED ON FINDING THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD IGNORING THE FA CT THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND SUBSTANTIAL PART OF THE PR OJECT HAS BEEN COMPLETED AND SOLD AGAINST RECEIPT OF ADVANCES ON WHICH THE ACCRUAL OF INCOME CAN NOT BE DENIED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND LAW, THE LEARNED CIT (A) HAS ERRED IN LAW AS WELL AS ON THE FACTS IGNORING THE FACT THAT EACH AS SESSMENT YEAR IS AN INDEPENDENT ASSESSMENT UNIT AS ENVISAGED BY SUPREME COURT IN THE CASE OF CIT V/S B RITISH INDIAN PAINT 188 ITR 441 AND THE ACCRUED INCOME CAN NOT WAIT FOR TAXATION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND LAW, THE LEARNED CIT (A) HAS ERRED IN LAW AS WELL AS ON THE FACTS BY GIVING ADVERSE FINDING AGAI NST THE A.O.S FINDING ON THE POINTS OF ALLOWABILIT Y OF SECTION 80 IB(10) WITHOUT APPRECIATING THE FULL FACTS AFTER IT HAS GIVEN THE FINDING THAT NO INCOME HAS ACCRUED FOR ASSESSMENT YEAR 2007-08 BASED ON TH E PROJECT COMPLETION METHOD & IT WAS 2 ITA NOS. 3408 MUM 2010 & 3559/MUM/2011 PODDAR ASHIS H DEVELOPERS CONSEQUENTIAL. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. ITA NO. 3559/M/2011-AY-2008-09 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND LAW, THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS ON THE FACTS IN DELETING THE ADDITION OF RS . 14.72 CRORES BASED ON FINDING THAT THE ASSESSEE I S FOLLOWING PROJECT COMPLETION METHOD IGNORING THE FA CT THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND SUBSTANTIAL PART OF THE PR OJECT HAS BEEN COMPLETED AND SOLD AGAINST RECEIPT OF ADVANCES ON WHICH THE ACCRUAL OF INCOME CAN NOT BE DENIED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND LAW, THE LEARNED CIT (A) HAS ERRED IN LAW AS WELL AS ON THE FACTS IGNORING THE FACT THAT EACH AS SESSMENT YEAR IS AN INDEPENDENT ASSESSMENT UNIT AS ENVISAGED BY SUPREME COURT IN THE CASE OF CIT V/S B RITISH INDIAN PAINT 188 ITR 441 AND THE ACCRUED INCOME CAN NOT WAIT FOR TAXATION 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF BUIL DERS & PROPERTY DEVELOPERS.DETAILS OF DATES OF FILING OF RETURNS, INCOMES RETURNED,DATES OF ASSESS MENT,ASSESSED INCOMES,DATES OF ORDERS OF THE CIT (A)CAN BE SUMMARISED AS UNDER : AY. DT.OF FILING OF RETURN RETURNED INCOME (RS.) DATE OF ASSESSMENT ASSESSED INCOME DT. OF ORDERS OF CIT(A) 2007-08 14.11.2007 NIL 18.12.2009 17,68,97,860/- 10.03.2010 2008-09 30.09.2008 (-)33,708/- 14.12.2010 14,72,68, 810/- 22.02.2011 ITA NO. 3408/M/2010-AY-2007-08 2. FIRST GROUND OF APPEAL IS ABOUT DELETING THE ADDITI ON OF RS. 17,68,97,860/-.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT ASSESSEE-AOP C ONSISTED OF THREE MEMBERS NAMELY,M/S. ASHISH ESTATES AND PROPERTIES PRIVATE LIMITED(AEPPL ),M/S.ESVEE PODDAR FAMILY TRUST (EPFT) - A DISCRETIONARY TRUST AND M/S. BEDROCK LIMITED,(BL),T HAT IT WAS FORMED BY AN AGREEMENT KNOWN AS JOINT VENTURE AGREEMENT EXECUTED ON 29.06.2004,THAT THE AGREEMENT WAS REGISTERED ON 08.09.2004,THAT BLWAS THE OWNER OF THE PROPERTY BEI NG A PLOT OF LAND BEARING PLOT NO. B/2,CTS NO,1A/158 AT VILLAGE PAHADI,ADMEASURING ABOUT 11082 .90 SQ. MTS AND IT HAD GRANTED DEVELOP - MENT RIGHTS TO THE ASSESSEE IN RESPECT OF A PART OF IT(6557 SQ.MTS.), THAT A SUM OF RS.2.5 CRORES WAS PAID TO BL BY THE AOP,THAT THE AOP WAS KNOWN AS PODDAR & ASHISH DEVELOPERS (PAD) AND THE PROJECT DEVELOPED BY IT WAS KNOWN GARDEN ESTAT ES(GE),THAT A SUPPLEMENTARY AGREEMENT WAS ENTERED IN TO BY THE AOP ON 16.09.2005 BY THE ABOVE THREE PARTIES,THAT BY THE SUPPLEMENTARY AGREEMENT DEALT WITH REVISED ALLOCATION OF THE AREA S IN THE PROJECT AMONG THE MEMBERS OF THE AOP. BEFORE THE AO,ASSESSEE CLAIMED THAT AREA OF PROPERT Y FOR DEVELOPMENT WAS MORE THAN AN ACRE, THAT THE TOTAL AREA OF CONSTRUCTION INVOLVED FSI OF 1596 51 SQ. FT. INCLUDING TDR TO BE UPLOADED ON THE PROPERTY,THAT THE PROJECT WAS APPROVED BY ISSUE OF COMMENCEMENT CERTIFICATE ON 16.12. 2004 BY THE MUNICIPAL CORPORATION OF GREATER MUMBAI,THAT TH E SANCTIONED PLAN ENVISAGED A WING WITH 96 FLATS IN 24 STOREYS OF THE BUILDING AND B WING WITH 95 FLATS IN 24 STOREYS,THAT THE PROJECT WAS COMPLETED AND THE OCCUPATION CERTIFICATES WERE OBTA INED IN RESPECT OF A WING ON 08.12.2008 AND 3 ITA NOS. 3408 MUM 2010 & 3559/MUM/2011 PODDAR ASHIS H DEVELOPERS IN RESPECT OF B WING OCCUPATION CERTIFICATE UPTO TH E 20TH FLOOR WAS ISSUED ON 21. 03.2009,THAT FOR THE BALANCE PROJECT THE CERTIFICATE WAS ISSUED ON 3 0.03.2009,THAT EPT WAS ENTITLED TO 45% SHARE IN THE TOTAL PROJECT WHICH WORKED OUT TO 90% OF THE SH ARE OF THE PREMISES IN THE B WING OF GE,THAT THE AREA BELONGING TO EPT IN B WING WAS DEMARCATED AND WAS ALLOTTED AS SUCH,THAT EPT BORE THE COST OF DEVELOPMENT RIGHTS,BEING RS.2.50 CRORES,WAS TO BE PAID TO BL AND THE COST OF TDR WAS TO BE UPLOADED ON THE PROPERTY FOR DEVELOPMENT,THAT AE PPL WAS TO BEAR THE COSTS INITIALLY AND SAME WAS TO BE ADJUSTED AGAINST THE SALE PROCEEDS OF THE PREMISES BELONGING TO THE TRUST OR REIMBURSED BY THE TRUST TO THE COMPANY,THAT BL WAS ENTITLED T O 5% SHARE IN THE TOTAL PROJECT WHICH HAD BEEN WORKED OUT TO 10% OF THE PREMISES IN THE B WING OF THE PROJECT,THAT AEPPL WAS ENTITLED TO WHOLE OF A WING OF THE GE,THAT AEPPL INCURRED TOTAL EXPEN SES INVOLVED IN DEVELOPMENT OF THE PROJECT EXCEPT FOR THE COSTS BORNE BY TRUST AS ABOVE STATED ,THAT THE PROJECT COMMENCED WITH COMMENCE - MENT CERTIFICATE ISSUED ON 16. 12.2004 AND SAME WAS COMPLETED BY END MARCH,2009 IN TERMS OF THE OCCUPATION CERTIFICATES ISSUED BY THE AUTHORIT IES. AO WAS OF THE OPINION THAT PROJECT HAD SUBSTANTIALL Y COMPLETE BUT ASSESSEE HAD HAS SHOWN NIL INCOME. ACCORDING TO THE AO IN F.Y. RELEVANT TO A.Y . 2005-06 BEING STARTING YEAR OF THE PROJECT, ASSESSEE HAD SHOWN WORK-IN-PROGRESS OF RS.52,00,000 /- WHEREAS, IN F.Y. 2005-06 THERE WAS WORK-IN-PROGRESS OF RS.14.84 CRORES BUT ASSESSEE HA D AGAIN SHOWN NIL INCOME,THAT IN THE F.Y. 2006-07 RELEVANT TO A.Y. 2007-08 SUBSTANTIAL PART O F THE PROJECT APPEAR WAS COMPLETE WITH SUBSTANTIAL ADVANCES RECEIVED FROM THE CUSTOMERS AG AINST THE BOOKING OF FLATS. ACCORDING TO THE AO DURING THAT YEAR ASSESSEE HAD COMPLETED SUBSTANT IAL PART OF THE PROJECT AND HAS SHOWN WORK- IN-PROGRESS OF RS.25.S9CRORES AND HAD RECEIVED ADVA NCE OF RS. 14.68 CRORES,THAT OUT OF THE TOTAL 192 FLATS IT HAD BOOKED ONLY 53 FLATS UPTO F.Y.2007 -08.ACCORDING TO THE AO INCOME HAD TO BE ESTIMATED ON SUBSTANTIAL COMPLETION METHOD BASIS AN D NOT AS PER ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE. DURING THE COURSE OF VERIFICATION OF RECORD,AO FOUN D THAT THE ASSESSEE WAS HAVING PROJECT WORTH OF RS.100 CRORES AND SUBSEQUENTLY IN F.Y, 2008-09 R ELEVANT TO A.Y. 2009-10, HAD EFFECTED SALE OF RS.99.92 CRORES WITH A CLOSING VALUE OF STOCK OF RS .22.37 CRORES.HE HELD THAT THE GESTATION PERIOD OF 5 YEARS OF COMPLETION OF PROJECT WAS IMPORTANT TO CON SIDER THE ISSUE,THAT THE ASSESSEE COULD NOT BE ALLOWED TO KEEP WAITING TO ACCRUE THE PROFIT ONLY BY VIRTUE OF HAVING MAINT AINED MERCANTILE METHOD OF ACCOUNTING WHICH WAS NOT PERMISSIBLE AS P ER THE SUPREME COURTS DECISION IN THE CASE OF BRITISH PAINT (I) LTD.(188 ITR 44),THAT INCOME H AD DEEMED TO HAVE ACCRUED EVERY YEAR AFTER THE COMMENCEMENT OF THE PROJECT,THAT IN THAT YEAR THERE WAS A SUBSTANTIAL COMPLETION OF THE PROJECT,THAT INCOME HAD TO BE ESTIMATED IN THAT YEA R ITSELF.AO PLACED RELIANCE UPON THE CASES OF N.M. ASSOCIATES(256 ITR141,SHRI SUKHDEODAS JALAN(26 ITR 617),RAM CHANDRA SINGH RAMNIK LAL (42ITR780) AND JANATHA CONTRACT CO.(105 ITR 627 ). 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).BEFORE HIM IT WAS CONTENDED THAT THE ASSESSEE HAD FOLLOWED PROPER,DEF ECTLESS AND MOST RECOGNIZED METHOD OF ACCOUNTING I.E.PROJECT COMPLETION METHOD(PCM)DULY A PPROVED BY ICAI,THAT THE AO HAD NOT POINTED OUT ANY DEFECTS IN BOOKS OF ACCOUNT AND HAD MERELY CHANGED THE OPINION FOR ESTIMATING THE PROFIT ON NOTIONAL BASIS IGNORING THE DECISION OF PRECEDING AO.S,THAT WHILE DEALING WITH THE ISSUE,AO HAD IGNORED THE BASIC FACTS OF THE CASE,TH AT THE ASSESSEE TOOK UP A RESIDENTIAL PROJECT WHICH GOT OMPLETED IN THE YEAR RELEVANT TO THE ASSE SSMENT YEAR 2009-10,THAT THE ASSESSEE FOLLOWED THE PCM OF ACCOUNTING FOR DETERMINING THE PROFITS F ROM THE PROJECT IN THE PREVIOUS ASSESSMENT YEARS,THAT THE SAID METHOD WAS ACCEPTED BY THE AO I N THE ASSESSMENT YEARS 2005-06 AND 2006-07 AND THE ASSESSMENT ORDERS HAD BEEN PASSED ACCORDING LY,THAT PCM WAS ONE OF THE RECOGNISED METHODS,THAT THE DEPARTMENT ALSO HAD ACCEPTED THE M ETHOD,THAT THE ASSESSEE HAD THE PREROGATIVE OF ADOPTING ANY APPROVED METHOD OF ACCOUNTING TO WO RK OUT ITS PROFITS AND UNLESS THE AO DISPUTED THE METHOD ADOPTED BY THE ASSESSEE OR THE ACCOUNTIN G WAS SO DEFECTIVE THAT TRUE PROFITS COULD NOT BE DEDUCED FOR ASSESSMENT,THAT THE AO HAD NO AUTHOR ITY TO CHANGE THE METHOD ADOPTED BY THE ASSESSEE,THAT THE ORDER OF THE AO WAS BESET WITH OT HER MISTAKES AS WELL,THAT THE AO WAS NOT CORRECT IN TAKING THE CUMULATIVE WIP AS AT 31.3.200 7 AND ESTIMATING INCOME FOR ASSESSMENT,THAT 4 ITA NOS. 3408 MUM 2010 & 3559/MUM/2011 PODDAR ASHIS H DEVELOPERS THE AO,WHILE ESTIMATING PROFITS ON WIP METHOD ALSO, HAD NOT FOLLOWED HER OWN CONCEPT THAT EACH ASSESSMENT YEAR WAS INDEPENDENT UNIT FOR ASSESSMENT ,THAT FOLLOWING HER OWN CONCEPT,SHE COULD CONSIDER THE WIP FOR THE YEAR OF RS.10,74,68,492 ON LY AND NOTHING BEYOND, THAT THE AO ERRED IN TAKING THE RATIO OF PROFITS ON COMPLETION OF THE PR OJECT TO APPLY TO THE WIP, THAT THE SALE PRICE IN THE SUBJECT PREVIOUS YEAR WAS LESSER THAN THE PRICE IN THE LATER YEARS WHEN THE PROJECT WAS NEARING COMPLETION AND THEREFORE, THE PROFIT RATIO APPLIED WAS ON HIGHER SIDE. 4. BEFORE HIM A CASH FLOW STATEMENT FOR ALL THE YEARS, IN WHICH THE PROJECT WAS DEVELOPED,WAS FILED AND IT WAS SUBMITTED THAT THE CASH INFLOW ON ACCOUN T OF ADVANCES AGAINST SALES WERE ALWAYS LESS THAN THE INVESTMENT AND SUCH INFLOW HAD INCREASED O NLY WHILE THE PROJECT WAS NEARING COMPLETION I.E.IN THE YEAR RELEVANT TO THE ASSESSMENT YEARS 20 08-09 AND 2009-10,THAT NO REAL PROFITS ACCRUED IN THE YEARS EARLIER TO THE YEAR OF COMPLETION AND THE REFORE, THE PROFITS SHOULD BE ASSESSED TO TAX ONLY IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2009-10 WHEN THE PROJECT WAS COMPLETED.IT WAS FURTHER ARGUED THAT THE AO WAS INCORRECT IN INFERRING THAT THE ASSESSEE HAD COMPLETED SUBSTANTIAL PORTION OF THE PROJECT IN THE SUBJECT YEAR IN APPEAL AND TH EREFORE,THE PROFIT SHOULD BE ASSESSED IN THAT YEAR,THAT 40% OF THE WORKS COULD BE SAID TO HAVE CO MPLETED AS ON 31.03.2007,THAT IT HAD FILED AN ARCHITECTS CERTIFICATE DURING THE COURSE OF ASSESS MENT TO THAT EFFECT,THAT THE INFRASTRUCTURE AMENITIES,LOGISTICS INCLUDING THE PARKING SPACE,COM POUND,BEING COMMON TO ALL THE PURCHASERS WHICH WERE CREATED OR COMPLETED AFTER THE BUILDINGS WERE BUILT OR SIMULTANEOUSLY TO THAT,THAT THE TRUE SURPLUS AND PROFITS COULD NOT BE WORKED OUT UN LESS ALL ASPECTS OF THE WORKS INVOLVED IN THE PROJECT WERE COMPLETE,THAT THE AO WAS NOT CORRECT I N INFERRING THAT IN SUCH CIRCUMSTANCES,THE ASSESSEE MIGHT KEEP A SMALL PORTION NOT SOLD OR NOT COMPLETED TO POSTPONE ASSESSMENTS FOR PAYMENT OF TAXES,THAT IT WAS NOT THE CASE WITH THE ASSESSEE WHEN THE PROJECT COULD BE SAID TO HAVE BEEN COMPLETE ONLY TO THE EXTENT OF 40%,THAT THE PR OJECT WAS NOT A CONTRACT BUT A UNIFIED WORK OF DEVELOPMENT,THAT PROJECT WAS COMPLETED IN ABOUT 3 Y EARS AND WAS NOT A LONG DRAWN PROJECT. AS TO A QUERY BY THE FAA AS TO WHETHER THE TWO BUIL DINGS CALLED A WING AND B WING DID NOT CONSTITUTE TWO DIFFERENT PROJECTS,IT WAS SUBMITTED THAT THE PLOT OF LAND BEING ONE, THE ACCESS, INFRASTRUCTURE AND VARIOUS BENEFITS AND LOGISTICS B EING COMMON, A BUILDING WITH TWO WINGS A AND B WERE CONSTRUCTED ON THE SAME PLOT AND THE SAME HA D BEEN SANCTIONED AS ONE PROJECT BY THE AUTHORITIES AND FURTHER DEVELOPED AS ONE SUCH PROJE CT,THAT THE TWO BUILDINGS WERE TAKEN UP SIMULTANEOUSLY AND HAD BEEN COMPLETED IN THE SAME A SSESSMENT YEAR 2009-10.ASSESSEE FILED THE SANCTIONED PLAN APPROVED BY THE MCGM WITH THE OCCUP ATION CERTIFICATES ISSUED AND SUBMITTED THAT THERE WAS NO DISPUTE ON THIS ACCOUNT EVEN AS P ER THE AO. 5. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF TH E CASE,HE HELD THAT THE AO HAD CHANGED THE METHOD OF ACCOUNTING ON A VERY SUPERFICIAL GROUND THAT ASSESSEE HAS STARTED PROJECT IN FY.2004- 05AND IN FY. 2004-05 AND F.Y 2006-07,NO INCOME WAS OFFERED UNDER THE DISGUISE OF MERCANTILE SYSTEM OF ACCOUNTING,THAT IT WAS NOT THE CASE OF ME RCANTILE SYSTEM OF ACCOUNTING BUT IT WAS ALSO NOOSE OF METHOD OF ACCOUNTING PROFITS ON PROJECT CO MPLETION BASIS DULY RECOGNISED BY ACAI AND THE COURTS AND TRIBUNALS,THAT THE AO HAD ACCEPTED T HE RETURNS OF INCOME FOR AY.S 2005-06, 2006-07AND HAD PASSED ORDERS ACCEPTING THE TOTAL IN COME AS SHOWN BY THE ASSESSEE,THAT THE PROJECT WAS COMPLETED AT THE END OF THE FINANCIAL YEAR ENDE D 31.3.2009 RELEVANT TO THE AY. 2009 -10,THAT IT WAS NOT THE CASE OF THE AO THAT THE PROJECT COMP LETION METHOD FOLLOWED BY THE ASSESSEE WAS NOT RECOGNISED ONE,THAT IT WAS ALSO NOT HER CASE THAT T HERE WERE DEFECTS IN ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE THAT DESERVED REJECTION OF ACCOUNTS OR THE METHOD FOLLOWED BY THE ASSESSEE,THAT THERE WAS NO JUSTIFICATION FOR ADOPTING A DIFFERENT METHOD,THAT IT WAS NOT HER CASE THAT TRUE PROFITS COULD NOT BE DEDUCED FROM THE PCM FOLLOWED BY THE A SSESSEE,THAT HER ONLY CONTENTION WAS THAT IF THE ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE WAS APPROVED IT HAD THE - EFFECT OF POSTPONEMENT OF INCOME TO THE SUBSEQUENT YEARS FOR ASSESSMENT AN D THE REVENUE WAS AFFECTED AND THEREFORE THE PROFITS SHOULD BE WORKED OUT EACH YEAR ON THE ALTER NATE METHOD AVAILABLE THAT IS, ESTIMATION ON WIP METHOD,THAT ONCE THE ASSESSEE FOLLOWED AN APPROVED SYSTEM OF ACCOUNTS ACCEPTED GENERALLY BY THE ACCOUNTING FRATERNITY AND THE DEPARTMENT IN RESPECT OF THE NATURE OF ACTIVITY CARRIED ON BY 5 ITA NOS. 3408 MUM 2010 & 3559/MUM/2011 PODDAR ASHIS H DEVELOPERS THE ASSESSEE THE AO WAS NOT BE JUSTIFIED IN REJECTI NG SUCH METHOD FOLLOWED UNLESS HE COULD SHOW THAT THE METHOD FOLLOWED ITSELF WAS DEFECTIVE,THAT THE AO HAD NOT HELD SO,THAT BY THE METHOD FOLLOWED,ALTHOUGH AN ACCEPTED METHOD,HAD THE RESULT OF OF INCOME TO BE ASSESSED AND TAXES TO BE COLLECTED TO THE SUBSEQUENT YEARS COULD NOT BE A GR OUND TO REJECT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND ESTIMATE INCOME ON AN ALTERNATE METHOD OF ACCOUNTS,THAT NONE OF THE CASES RELIED UPON BY THE AO SUPPORTED HER CONTENTIO N. REFERRING TO THE CASES OF PRATJKSHA ENTERPRISES,DEC IDED BY THE MUMBAI BENCH D IN SEPTEMBER, 2007,V S DEMPO & CO PVT LTD,DECIDED BY BOMBAY HIGH COURT AND RAJESH BUILDERS(3SOT 917) THAT IN THE CASE UNDER APPEAL ASSESSEE HAD TAKEN UP DEVELOPMENT OF THE PROJECT ON A PART OF SINGLE PLOT,THAT THE ASSESSEE WAS A JOINT VENTURE AOP CARR YING OUT THE PROJECT WITH SPECIFIED SHARES DEFINED TO THE ACCOUNT OF THE THREE MEMBERS CONSTIT UTING THE AOP AS MENTIONED IN THE DEVELOPM - ENT AGREEMENT,THAT THE ASSESSEE FOLLOWED PCM AND HA D WORKED OUT PROFITS FROM THE PROJECT FOR THE AY.2009-10,THAT THE RETURN OF INCOME HAD BEEN FILED ALTHOUGH THE AS SESSEE HAD ARGUED THAT THE PROJECT WAS EXEMPT FROM TAX U/S.80IB(10) OF THE ACT ,THAT THE AOS HAD ACCEPTED THE PCM OF ACCOUNTING FOR THE PREVIOUS TWO AYS. I.E.2005-06 AN D 2006-07,THAT THE CUMULATIVE WIP AS AT 31.3.2007 RELEVANT TO THE ASST YEAR IN APPEAL WORKE D OUT TO 37 % OF THE TOTAL WIP AT THE COMPLETION OF THE PROJECT,THAT AS PER THE ARCHITECT S CERTIFICATE,DATED 14.11.2009,THE WORK WAS CERTIFIED TO BE COMPLETE ONLY ABOUT 40% AS AT 31.3. 2007,THAT THAT UNLESS THE PROJECT WAS COMPLETE IN ALL RESPECTS,ALLOCATION OF PREMISES TO THE SHARE OF THE MEMBERS WAS NOT POSSIBLE AND NO PROFITS PER SE MEMBERS COULD BE WORKED OUT,THAT THE PROFITS FROM THE PROJECT IN THE CASE OF THE ASSESSEE SHOULD BE ASSESSED ONLY ON PCM FOLLOWED BY IT AND N OT OTHERWISE. AS REGARDS THE CONTENTION OF THE AO THAT THE PROJEC T WAS SUBSTANTIALLY COMPLETE IN THE AY.2007- 08,FAA HELD THAT THE ARCHITECTS CERTIFICATE,DATED 14.11.2009,FILED IN RESPONSE TO DIRECTIONS OF THE AO,PROVED THAT STAND TAKEN BY THE AO WAS NOT FACTUA LLY CORRECT,THAT EVEN AT THE TIME OF SURVEY CONDUCTED IN MARCH,2008 THE ASSESSEE HAD COMPLETED 70% OF THE PROJECT,THAT AT THAT POINT OF TIME SLAB WORK WAS COMPLETE BUT CONSTRUCTION OF PODIUM A ND AMENITY WERE PENDING, THAT INTERIOR FURNISHING OF FLATS WERE IN PROGRESS,THAT COMMON SP ACE WORK AND INSTALLATION OF LIFTS WERE IN PROGRESS,THAT THE AO DID NOT CONSIDER THE STATEMENT S MADE AT THE TIME OF SURVEY NOR DID HE TOOK COGNISANCE OF THE ARCHITECTS CERTIFICATE,THAT AO W AS NOT JUSTIFIED IN HOLDING THAT SUBSTANTIAL WORK WAS WERE COMPLETE IN THE AY.2007-08 AND THEREFORE P ROFITS HAD BECOME TAXABLE IN THAT YEAR.FINALLY,HE HELD THAT THE PROJECT HAD BEEN COMP LETED IN THE ASSESSMENT YEAR 2009-10 UPON THE MCGM ISSUING THE OCCUPATION CERTIFICATES-THE LAST O F WHICH WAS ISSUED ON 30.03.2009.AS A RESULT,HE DIRECTED THE AO TO DELETE ADDITION OF RS. 17,68,97,360/- 6. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE AO.AUTHORISED REPR- SENTATIVE(AR) SUBMITTED THAT THE ASSESSEE WAS FOLLO WING PCM REGULARLY,THAT IN THE EARLIER AS WELL AS IN SUBSEQUENT YEARS AO HAD ACCEPTED THE SAID MET HOD OF ACCOUNTING,THAT ASSESSEE HAD OFFERED THE INCOME ARISING OUT OF THE PROJECT WHILE FILING RETURN FOR AY.2009-10,THAT IN THE YEAR UNDER APPEAL PROJECT WAS NOT COMPLETED,THAT THERE WAS NO JUSTIFICATION FOR MAKING ADDITION. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE HAVE ALSO CAREFULLY CONSIDERED THE GUIDANCE NOTES ISSUED BY ICAI AS WEL L AS ACCOUNTING STANDARDS AS-7&9 IN THE LIGHT OF PROVISION OF SECTION 145 OF ACT.PRINCIPLES APPLICABLE WITH REGARD TO THE METHOD OF ACCOUNTING CAN BE SUMMARISED AS UNDER: I. SECTION 145 OF THE ACT,DEALS WITH THE METHOD OF ACC OUNTING.IT IS FOR THE ASSESSEE TO ADOPT ANY RECOGNISED METHOD OF ACCOUNTING FOR HIS BUSINESS.IN COME SHALL BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE.IN OTHER WORDS,IT IS OPEN TO THE ASSESSEE TO OPT FOR SUCH METHOD OF ACCOUNTING AS HE DEEMS REASONABLE AND APPROPRIATE.THE PROVISO TO SUB-SECTION(1) EMPOWERS THE AO TO COMPUT E THE INCOME ON SUCH BASIS AND IN SUCH MANNER AS HE DETERMINES IF THE ACCOUNTS ARE CORRECT AND COMPLETE BUT THE METHOD ADOPTED IS SUCH THAT, IN HIS OPINION, THE INCOME CANNOT PROPERLY BE DEDUCED THEREFROM. THE JURISDICTION CAN BE 6 ITA NOS. 3408 MUM 2010 & 3559/MUM/2011 PODDAR ASHIS H DEVELOPERS INVOKED WHERE HE IS OF THE OPINION THAT THE INCOME CANNOT PROPERLY BE DEDUCED THEREFROM. HE CANNOT EXERCISE THE JURISDICTION MERELY ON THE GROU ND THAT THE METHOD ADOPTED, WHICH IS OTHERWISE REGULAR OR FAIR,IS DETRIMENTAL TO THE REVENUE OR AD VANTAGEOUS TO THE ASSESSEE.(200 ITR 496-DOOM DOOMA INDIA LTD.-GAU.) II. EVERY ASSESSEE IS ENTITLED TO ARRANGE ITS AFFAIRS A ND FOLLOW THE METHOD OF ACCOUNTING, WHICH THE DEPARTMENT HAS EARLIER ACCEPTED.IT IS ONLY IN THOSE CASES WHERE THE DEPARTMENT RECORDS A FINDING THAT THE METHOD ADOPTED BY THE ASSESSEE RESULTS IN DISTORTION OF PROFITS THAT THE DEPARTMENT CAN INSIST ON SUBSTITUTION OF THE EXISTING METHOD.(BILA HARI INVESTMENT P. LTD.-299ITR1-SC) III. THE AOS POWER TO CHOOSE THE BASIS AND MANNER OF CO MPUTATION OF INCOME IS NOT AN ARBITRARY POWER TO ASSESS THE INCOME, BUT HE MUST EXERCISE HI S DISCRETION AND JUDGMENT JUDICIALLY. IV. THE ACCOUNTS WHICH ARE REGULARLY MAINTAINED IN THE COURSE OF BUSINESS AND ARE DULY AUDITED, FREE FROM ANY QUALIFICATION BY THE AUDITORS, SHOULD NORMALLY BE TAKEN AS CORRECT UNLESS THERE ARE ADEQUATE REASONS TO INDICATE THAT THEY ARE INCORREC T OR UNRELIABLE. THE ONUS IS UPON THE AO TO SHOW THAT EITHER THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE INCORRECT OR INCOMPLETE OR THAT THE METHOD OF ACCOUNTING ADOPTED BY HIM WAS SU CH THAT TRUE PROFITS OF THE ASSESSEE CANNOT BE DEDUCED THEREFROM.(325ITR13,PARADISE HOLIDAYS-DEL.) V. IF A PARTICULAR ACCOUNTING SYSTEM HAS BEEN FOLLOWED AND ACCEPTED AND THERE IS NO ACCEPTABLE REASON TO DIFFER WITH IT,THE DOCTRINE OF CONSISTENC Y WOULD COME INTO PLAY.(339ITR382-JAGATJIT INDUSTRIES LTD.,DEL.) IN THE MATTER BEFORE US,ASSESSEE WAS FOLLOWING A PA RTICULAR METHOD OF ACCOUNTING REGULARLY IN THE EARLIER AS WELL AS SUBSEQUENT ASSESSMENT YEARS.AS T HE ASSESSEE IS A BUILDER AND DEVELOPER AND IN SUCH A CASE PCM IS AN ACCEPTED METHOD OF ACCOUNTING .AS-7 IS APPLICABLE ONLY IN CASE OF CONTRACTORS, ENGAGED IN THE CIVIL CONSTRUCTION BUSI NESS,IT DOES NOT APPLY TO BUILDER & DEVELOPER.IT IS ESTABLISHED PRINCIPLE OF TAXATION THAT PCM AND P ERCENTAGE COMPLETION METHOD ARE RECOGNISED METHODS TO ASSESS CORRECT INCOME OF AN ASSESSEE UND ER THE ACT.HOWEVER,THE CHOICE OF METHOD OF ACCOUNTING,LIES WITH THE ASSESSEE.WE ARE OF THE CON SIDERED VIEW THAT THE ASSESSEE CAN FOLLOW ANY METHODS,ONLY CONDITION IS THAT THE SAME METHOD HAS TO BE FOLLOWED CONSISTENTLY.IT IS NOT OPEN TO THE AO TO CHANGE THE METHOD OF ACCOUNTING ONLY BECA USE HE FINDS ANOTHER METHOD OF ACCOUNTING BETTER THAN THE ONE ADOPTED REGULARLY BY THE ASSESS EE. WE FIND THAT THE AO WAS NOT ABLE TO DEMONSTRATE THA T THE METHOD OF ACCOUNTING PROVIDED UNDER SUB SECTION (1) OR ACCOUNTING STANDARD NOTIFIED UND ER SUBSECTION (2) OF SECTION 145 OF THE ACT WERE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE.AS SESEE-AOP IS NOT A PURE CONTRACTOR DOING JOB WORK FOR OTHERS.THE HONBLE APEX COURT HAS IN THE C ASE OF BILAHARI PVT. LTD. (SUPRA),HELD THAT THAT RECOGNITION/DENTIFICATION OF INCOME UNDER THE ACT W AS ATTAINABLE BY SEVERAL METHODS OF ACCOUNT - ING.IN OUR OPINION,THE SAME RESULT COULD BE ATTAINE D BY FOLLOWING ANY ONE OF THE TWO ACCOUNTING METHODSI.E.THE COMPLETION CONTRACT METHOD AND PCM.U NDER THE COMPLETED CONTRACT METHOD,THE REVENUE IS NOT RECOGNISED UNTIL THE CONTRACT IS COM PLETED. UNDER THE SAID METHOD,COSTS ARE ACCUMULATED DURING THE COURSE OF THE CONTRACT AND T HE PROFIT AND LOSS IS ESTABLISHED IN THE LAST ACCOUNTING PERIOD AND TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT.THE SAID METHOD DETERMINES RESULTS ONLY WHEN THE CONTRACT IS COMPLETED.ON THE OTHER HAND THE PCM TRIES TO ATTAIN PERIODIC RECOGNITION OF INCOME IN ORDER TO REFLECT CURRENT P ERFORMANCE.THE AMOUNT OF REVENUE RECOGNISED UNDER THIS METHOD AS DETERMINED BY REFERENCE TO THE STAGE OF COMPLETION BY TAKING INTO CONSIDERATION THE PROPORTION THAT COSTS INCURRED TO DATE BEARS TO THE ESTIMATED TOTAL COSTS OF CONTRACT.THE HONBLE DELHI HIGH COURT WHILE DEALING WITH THE SIMILAR SITUATION IN THE CASE OF MANISH BUILDWELL PVT. LTD. IN ITA NO.928/2011 DATED 15.11,2011 HELD THAT AFTER THE JUDGMENT OF SUPREME COURT IN BILAHARI INVESTMENT PVT. LTD.,(SUP RA)IT CANNOT BE SAID THAT THE PCM FOLLOWED BY THE ASSESSEE WOULD RESULT IN DEFERMENT OF THE PAYME NT OF TAXES WHICH ARE TO BE ASSESSED ANNUALLY 7 ITA NOS. 3408 MUM 2010 & 3559/MUM/2011 PODDAR ASHIS H DEVELOPERS UNDER THE ACT.ACCOUNTING STANDARD AS-7 ISSUED BY TH E INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ALSO RECOGNIZE THE POSITION THAT IN THE CASE OF CONSTRUCTION CONTRACTS, THE ASSESSEE CAN FOLLOW EITHER THE PCM OR THE PERCENTAGE COMPLETION METHOD. WE FIND THAT THE ASSESSEE HAD CONSTRUCTED THE COMPL ETE BUILDING OVER A PERIOD OF TIME AND RECEIVED THE PURCHASE CONSIDERATION FROM TIME TO TI ME FROM THE PURCHASERS AND HANDED OVER THE POSSESSION OF THE BUILDING WHEN THE BUILDING WAS FU LLY COMPLETED AND OCCUPANCY CERTIFICATE WAS RECEIVED.IT WAS ONLY AT THAT TIME THAT THE PROVERBI AL RISKS AND REWARDS WERE TRANSFERRED TO THE PURCHASER.THEREFORE,IN OUR OPINION PCM FOLLOWED BY THE ASSESSEE-AOP WAS IN ORDER AND THE ACTION OF THE FAA TO REJECT THE STAND TAKEN BY THE AO WAS JUSTIFIED.ONLY OBJECTION OF THE AO,AS STATED BY THE FAA WAS THAT THE ASSESSEE HAS DEFERRE D THE TAXES TO SUBSEQUENT YEARS.BUT,AS HELD THE HONBLE GAUHATI HIGH COURT IT CANNOT BE BASIS FOR R EJECTING THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE.THEREFORE,CONFIRMING THE O RDER OF THE FAA WE DECIDE GROUND NO.1 AGAINST THE AO. 8. SECOND GROUND OF APPEAL IS AGAINST DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S 801B(L0) OF THE ACT.WHILE THE PROJECT OF DEVELOPMENT OF GE WAS GOIN G ON,AN ACTION U/S.133A OF THE ACT WAS CONDUCTED IN THE REGISTERED OFFICE AS WELL AS SITE OFFICE ON 11.3.2008TO VERIFY THE GENUINENESS OF THE CLAIM U/S 80IB(10).STATEMENT OF MR VAID, REPRES ENTING ONE OF THE MEMBERS OF THE AOP WAS RECORDED IN RELATION TO THE ACTIVITIES OF THE JOINT VENTURE.AO FOUND THAT THE ASSESSEE HAD CONSTRUCTED 3 TYPES OF RESIDENTIAL FLATS IN THE TWO WINGS OF THE BUILDING KNOWN AS GE,THAT THERE WERE 24 ONE BHK FLATS, 97 TWO BHK FLATS AND 70 THREE BHK FLATS IN A LL TOTALING TO 191 FLATS IN THE PROJECT,THAT THERE WERE 96 FLATS IN THE A WING AND 95 FLATS IN THE B WING OF THE PROJECT,THAT ACCORDING TO THE SANCTIONED PLANS ONE BHK FLAT MEASURED 631 SQ. FT. BUILT UP AREA, TWO BHK FLAT MEASURED 750 SQ. FT. BUILT UP AREA AND THE THREE BH K FLAT MEASURED 986 SQ. FT. BUILT UP AREA.AO OBSERVED THAT THE PROJECT VIOLATED THE AREA LIMITA TIONS PRESCRIBED UNDER THE PROVISIONS OF SECTION 80IB(10) OF THE ACT ON THREE COUNTS.AO CONCLUDED TH AT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION UNDER THE SAID PROVISIONS.OTHER COMPLIANCES BEING A DMITTED FOR THE PURPOSES OF SECTION 80 IB(10) CLAIM,THERE WAS A DISPUTE ON THE ISSUE OF BUILT UP AREA OF THE FLATS BETWEEN THE DEPARTMENT AND THE ASSESSEE.AO OBSERVED THAT AS REGARDS 24 ONE BHK UNITS BUILT,THE ASSESSEE HAD LEFT PROVISIONS FOR DOVETAILING TWO UNITS IN THE LOWER AND UPPER FLOORS INTO ONE UNIT AS A DUPLEX; THAT SUCH TWO FLATS SHOULD BE CONSIDERED AS ONE FLAT FOR ALL PURPOSES,T HAT THE AGGREGATE AREA OF THE SAME WAS MORE THAN1000 SQ. FT.AO HELD THAT IT VIOLATED THE CONDIT IONS PRESCRIBED BY THE PROVISIONS THAT THE BUILT UP AREA OF A FIAT SHOULD NOT EXCEED 1000 SQ. FT AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF SECTION 80IB(10) CLAIMED.AS REGARDS 3 BH K UNITS,AO HELD THAT FLOWER BED, DRY BALCONY,WINDOW PROJECTIONS SHOULD BE TAKEN AS PART OF THE BUILT UP AREA OF THE FLAT,THAT SUCH TOTAL AREA BEING IN EXCESS OF THE PRESCRIBED LIMIT OF 100 0 SQ.FT. THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF SECTION 80IB(10) CLAIMED,THAT FLAT NO.13 03 AND 1304 OF B-WING WERE SOLD TO RELATED PARTIES AND NO WALL WAS BUILT IN BETWEEN THE TWO FL ATS,THAT THE COMBINED AREA OF THOSE TWO FLATS WAS 1736 SQ. FT.,THAT BOTH FLATS PUT TOGETHER SHOUL D BE TAKEN AS ONE FLAT FOR THE PURPOSE OF SECTION 80IB(10),THAT ASSESSEE WAS NOT ENTITLED TO THE BENE FIT OF SECTION 80IB(10). 9. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER HE HELD THAT AT THE RELEVA NT TIME THE ASSESSEE SOLD THE FLATS, THERE WAS NO BAR FOR THE ASSESSEE TO SELL MORE THAN ONE FLAT TO A SINGLE PERSON OR MEMBERS OF THE SAME FAMILY, THAT THE ASSESSEE HAD SOLD MORE THAN ONE FLAT AS SU CH TO THE SAME PERSON OR TO MEMBERS OF THE SAME FAMILY,THAT SUCH SALES WERE NOT OF ALL FLATS B UT ONLY FEW FLATS WERE OF SUCH TYPE,THAT BARRING FEW INSTANCES OF COMBINING OF FLATS, ALL OTHER FLAT S ARE INDEPENDENT UNITS HAVING BUILT-UP AREA OF LESS THAN 1000 SQ. FT.,THAT WHILE APPRECIATING THE BACKGROUND OF THE CASE AO ALSO ADMITTED THAT THE SANCTIONED PLANS DID NOT ENVISAGE DUPLEX FLATS,THAT EACH ONE BHK FLAT HAD BEEN SOLD AS SUCH ONE BHK FLAT,THAT EACH AGREEMENT HDS BEEN REGISTERED SE PARATELY,THAT MERELY BECAUSE THE PURCHASERS HAVD COMBINED MORE THAN ONE FLAT INTO ONE OR INTEND ED TO BE SO EVEN IF THEY WERE NOT COMBINED AT THE TIME OF TAKING OCCUPATION OR THE ASSESSEE MADE SUCH PROVISION AT THE-INSTANCE OF THE 8 ITA NOS. 3408 MUM 2010 & 3559/MUM/2011 PODDAR ASHIS H DEVELOPERS PURCHASERS,IT COULD NOT BE SAID IN THE CONTEXT THAT THE ASSESSEE VIOLATED THE NORMS UNDER THE PROVISIONS OF SECTION 80IB(10),THAT THE DEDUCTION C LAIMED UNDER SECTION 801B(10) COULD NOT BE DENIED ON THE GROUNDS TAKEN BY THE AO. ANALYSING THE PROVISIONS OF THE ACT AND THE DEVELOP MENT CONTROL REGULATIONS (DCR), HE HELD THAT THE AREAS OF A UNIT AT THE FLOOR LEVEL USED IN THE ACT AND THE EXCEPTION OF AREAS WITH THE LEVEL DIFFERENCE OF 0.3MTS UNDER THE DCR HAD A GREATER SI GNIFICANCE,THAT SAME HAD NOT BEEN USED IN THE RELEVANT PROVISIONS WITHOUT ANY MEANING OR REASON,T HAT THE AREAS STIPULATED UNDER THE DRC WERE TO BE WITH THE LEVEL DIFFERENCE TO THE FLOOR LEVEL ARE CHAJJAS, FLOWER BEDS, DRY BALCONY ETC. WHICH WERE TO BE PROVIDED FOR PROPER VENTILATION,LIGHT AN D PROTECTION FROM WEATHER TO THE ACTUAL USEABLE AREA OF THE FLAT,THAT SAME WERE NOT ON THE SAME FLO OR LEVEL AS THE USEABLE FLAT AREA FOR THE OCCUPANT AND THEREFORE UNDER THE DEFINITION OF BUILT UP AREA THOSE AREAS WERE NOT INCLUDABLE,THAT INNER BUILT- UP AREA AND PROJECTION AND BALCONIES - AND THICKNES S OF WALL WAS TO BE INCLUDED AS PER ACT,THAT THE CERTIFICATE ISSUED BY THE ARCHITECT, GAVE TYPIC AL FLOOR PLAN, FLOOR WISE VARIOUS ACCOMMODATION IN EACH FLAT AND CARPET AREA THEREOF, BUILT UP AREA OF ALL THE FLATS IN EACH FLOOR WHICH TALLIED WITH THE AGGREGATE AREA OF THE FLATS SHOWN IN THE AGREEMENTS OF SALE,THAT ASSESSEE HAD TAKEN THE AGGREGATE OF THE BALCONY AREA AS THE BUILT UP AREA OF THE FLA T,WHICH PRIMA FACIE APPEARED TO BE CORRECT, CONSIDERED UNDER THE DEFINITION OF THE BUILT UP ARE A UNDER THE ACT AND DCR PROVISIONS. HE HELD THAT THE AO WOULD BE AT LIBERTY TO MAKE SU CH FURTHER INQUIRIES AS MIGHT BE NECESSARY TO CONSIDER THE FULL FACTS OF THE CASE WITH REFERENCE TO THE CLAIM OF THE ASSESSEE,SO THAT THERE COULD NO T BE ANY SORT OF AMBIGUITY OF ACTUAL FACTS REGARDING BUILT-UP AREA OF SUCH COMBINED FLATS.HE ALSO THAT THE RATIO OF DECISION IN THE CASES OF ARUN EXCELLO FOUNDATIONS (P) LTD(108 TTJ 7-CHENNAI), BRIGADE ENTERPRISES PVT. LTD.(119 TTJ 869-BANGALORE ),BRHAMA ASSOCIATES(122 TTJ 433-PUNE) HARSHAD P. DOSHI(109 TTJ335-MUM) AIR DEVELOPERS (31 9 ITR (AT) 167 NAGPUR) RELIED UPON BY THE ASSESSEE WERE NOT RELEVANT AS SAME WERE NOT CON CERNED WITH THE WORKING OF BUILT-UP AREA. 10. BEFORE US,DR SUPPORTED THE ORDER OF THE FAA.AR SUBM ITTED THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION U/S.80IB OF THE ACT,THAT THE SIZE O F THE FLATS WAS AS PER THE PROVISIONS OF THE ACT. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WHILE DECIDING THE GROUND NO.1 AGAINST THE AO,WE HAVE HELD THAT PCM FO LLOWED BY THE ASSESSEE WAS THE RIGHT METHOD OF ACCOUNTING FOR DETERMINING THE TAXABLE IN COME OF THE ASSESSEE,THAT PROJECT WAS COMPLETED IN AY.2009-10.IN OUR OPINION,THE ISSUE OF ELIGIBILITY OF 80IB DEDUCTION HAS BEEN LEFT OPEN BY THE FAA WHEN HE HELD THAT THE AO WOULD BE A T LIBERTY TO MAKE NECESSARY INQUIRIES.IN THESE CIRCUMSTANCES,IN OUR OPINION,NO PREJUDICE HAS BEEN CAUSED TO THE INTEREST OF THE REVENUE. THEREFORE,CONFIRMING THE ORDER OF THE FAA,WE DECIDE GROUND NO.2 AGAINST THE AO. ITA NO. 3559/M/2011-AY.2008-09: 12. EFFECTIVE GROUND OF APPEAL FOR THE YEAR UNDER APPEA L IS AOUT DELETING THE ADDITION OF RS.14.72 CRORES.WE FIND THAT THE FACTS OF THE CASE ARE IDENT ICAL TO THE FACTS AND CIRCUMSTANCES OF EARLIER AY.-THE ONLY DIFFERENCE IS OF AMOUNT INVOLVED.WE HA VE ALREADY HELD THAT FAA WAS JUSTIFIED IN HOLDING THAT PCM,FOLLOWED BY THE ASSESSEE-AOP,WAS T HE CORRECT METHOD OF ACCOUNTING FOR DETERMINING TAX-LIABILITY OF ASSESSEE.AS THE ISSUE HAS ALREADY BEEN DECIDED AGAINST THE AO BY US, WHILE ADJUDICATING THE APPEAL FOR THE LAST AY.,SO,F OLLOWING THE SAME WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE FOR THIS YEAR ALSO. AS A RESULT,APPEALS FILED BY THE AO FOR BOTH THE AYS. STAND DISMISSED. 1*2 '3* + 4 -'5 '.#7. 8 ) . 9 :* ) * ;< . ORDER PRONOUNCED IN THE OPEN COURT ON 1 2 TH MARCH,2014. / ) ,-# 9 =' 12 >, 2014 - ) . ? 9 ITA NOS. 3408 MUM 2010 & 3559/MUM/2011 PODDAR ASHIS H DEVELOPERS SD/- SD/- ( / VIJAY PAL RAO ) ( ! / RAJENDRA ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, =' /DATE: 12.03.2014 SK+ / / / / ) )) ) &* &* &* &* @ #* @ #* @ #* @ #* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT (A) / A B , 4. THE CONCERNED CIT / A B 5. DR C BENCH, ITAT, MUMBAI / C. &*' , . . . 6. GUARD FILE/ . 1 '* '* '* '* &* &*&* &* //TRUE COPY// /' / BY ORDER, D / ; DY./ASST. REGISTRAR , /ITAT, MUMBAI