ITO 12(1)(1), MUMBAI V. AJIT DEVELOPERS P. LTD, MUMBAI

ITA 3561/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9720 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 23-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: V C SHAH
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3561/M/2016 ASSESSMENT YEAR: 2011-12 ITO 12(1)(1), ROOM NO.226, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 20 VS. M/S. AJIT DEVELOPERS PVT. LTD., GROUND FLOOR, GOKUL APARTMENTS, SHIMPOLI ROAD, HARIDAS NAGAR, BORIVALI (W), MUMBAI 400 092 PAN: AAACA3462F (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI V.C. SHAH, A.R. REVENUE BY : SHRI RAM TIWARI, D.R. DATE OF HEARING : 19.03.2018 DATE OF PRONOUNCEMENT : 22.03.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 22.02.2016 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE RAISED BY THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE AO OF RS.51,95,530/- IN RESPECT OF SALE OF STOCK. ITA NO.3561/M/2016 M/S. AJIT DEVELOPERS PVT. LTD. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED THE RETURN OF INCOME ON 30.03.2013 WHICH WAS PROCESSED U NDER SECTION 143(1) OF THE ACT. THE CASE WAS SELECTED FO R SCRUTINY AND NOTICE UNDER SECTION 143(2) & 142(1) WERE DULY ISSUED AND SERVED ON THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVED FROM THE FINAL ACCOUNT FOR THE YEAR ENDED 31.03.11 THAT ASSESSEE HAS OFFERED INCOME ON ACCOUNT OF SALE OF PROPERTY AT RS.1.25 CRORES AND TH E CLOSING STOCK WAS SHOWN AT RS.3,44,39,625/-. THE AO FURTHER N OTICED THAT ASSESSEE HAS FURTHER RECEIVED ADVANCES TO THE TUNE OF RS.1.03 CRORES WHICH IS SHOWN UNDER THE HEAD LIABIL ITIES. THE ASSESSEE ALSO OBSERVED THAT THE PROJECT OF THE ASSE SSEE SIDDHIVINAYAK ARCADE WAS COMPLETE DURING THE RELEVA NT PREVIOUS YEAR AND ACCORDINGLY AO ASKED THE ASSESSEE VIDE ORDER SHEET NOTING DATED 11.11.2013 TO EXPLAIN AS TO WHY THE INCOME FROM SIDDHIVINAYAK ARCADE WAS NOT OFFERED TO TAX AS PER PROJECT COMPLETION METHOD BY APPLYING ACCOUNTIN G STANDARD -9 WHICH WAS REPLIED BY THE ASSESSEE BY SU BMITTING THAT ADVANCE OF RS.1.03 CRORE IS RECEIVED FROM AJIT/RAMABEN/HITESH HAKANI TOWARDS PREMISES BEING O FFICE ON 3 RD FLOOR IN SIDDHIVINAYAK ARCADE PROJECT. THE ASSESSE E COULD NOT BE GIVEN POSSESSION AS THEY DID NOT HAVE OCCUPA TION CERTIFICATE. THE ASSESSEE ALSO SUBMITTED THAT THE P OSSESSION WAS GIVEN IN F.Y. 2011-12 AND AMOUNT RECEIVED IS ADJ USTED AGAINST SALE PRICE RECEIVABLE AND OFFERED TO TAX AC CORDINGLY. AS REGARDS RS.3,20,000/- THE ASSESSEE SUBMITTED THAT THE SAME WAS RECEIVED FROM FAMILY MEMBERS OF BHOJWANI F AMILY MANY YEARS AGO FOR RESIDENTIAL PREMISES TO BE GIVEN TO THEM. ITA NO.3561/M/2016 M/S. AJIT DEVELOPERS PVT. LTD. 3 HOWEVER, THE SAID PROPERTY COULD NOT BE CONSTRUCTED AS THERE WAS DELAY IN SETTLING WITH THE OCCUPANTS OF THE SL UM PROPERTY AND THEREFORE, THE ADVANCE CONTINUED IN THE BALANCE SHEET. THE AO WAS NOT CONVINCED WITH THE REPLY OF THE ASSE SSEE AND ACCORDINGLY BY APPLYING PERCENTAGE COMPLETION METHO D HE MADE AN ADDITION OF RS.51,95,530/- BEING PROFIT ON SALE OF PROPERTY AT 3 RD FLOOR, A WING ADMEASURING 1266 SQ. FT. ACCORDING TO THE AO THE ASSESSEE HAS DEFERRED THE TAX LIABILITY QUA THE SAID PROJECT ON THE GROUND THAT POSSESSION IS NOT GIVEN AND CHANGED THE METHOD OF ACCOUNTING FROM P ROJECT COMPLETION TO PERCENTAGE COMPLETION METHOD AND THUS MADE THE ABOVE ADDITION. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE AS HAS BEEN INCORPORATED IN PARA 4.4 OF THE APPELLATE ORDER BY OBSERVING AND HOLDING AS UNDER: I HAVE PERUSED THE ASSESSMENT ORDER AND SUBMISSION S MADE IN THIS REGARD. IT IS NOTED THAT ASSESSEE IS A BUILDER AND HAD CARRIED OUT A SRA PROJECT WHICH WAS SANCTIONED IN 2004 AND THE CONSTR UCTION COMMENCED IN OCTOBER 2007. THE ASSESSEE HAS BEEN CO NSISTENTLY FOLLOWING PROJECT COMPLETION METHOD WHICH WAS ACCEP TED BY THE DEPARTMENT IN OTHER YEARS AND NO ADDITION WAS MADE ON THIS ISSUE. DURING THE YEAR UNDER CONSIDERATION THE A.O. HAS APPLIED P ERCENTAGE COMPLETION METHOD AND MADE ADDITION OF RS.51,95,530 /- TO THE INCOME OF THE ASSESSEE. THE A/R OF THE APPELLANT HAS VEHEM ENTLY OPPOSED THE ADDITION AND HAS SUBMITTED THAT A.O. HAS CHANGED TH E METHOD OF ACCOUNTING WITHOUT MUCH BASIS AND MADE ADDITION WHI CH MAY BE DELETED. IN THIS REGARD IT IS NOTED THAT PROJECT COMPLETION METHOD IS AN ACCEPTED METHOD OF ACCOUNTING FOR BUILDERS. THE ASSESSEE IS REGULARLY FOLLOWING THIS METHOD OF ACCOUNTING WHICH HAS BEEN ACCEPTED BY THE A.O. IN OTHER YEARS. IT IS AN ESTABLISHED LEGAL PROPOSITION THAT AN ASSESSEE CAN FOLLOW ANY RECOGNIZED METHOD OF ACCOUNTING AND THE CONDITI ON IS THAT THE SAME METHOD HAS TO BE FOLLOWED CONSISTENTLY. SINCE THE A SSESSEE IN INSTANT CASE IS REGULARLY FOLLOWING PROJECT COMPLETION METHOD AN D HAS OFFERED INCOME IN THE YEAR OF COMPLETION OF PROJECT THEREFORE THER E IS NO REASON FOR THE A.O. TO REJECT THE METHOD OF ACCOUNTING REGULARLY F OLLOWED BY THE ITA NO.3561/M/2016 M/S. AJIT DEVELOPERS PVT. LTD. 4 ASSESSEE. THIS VIEW IS SUPPORTED BY THE ORDER DT. 0 5.08.2011 OF THE HON'BLE ITAT, MUMBAI IN THE CASE OF HAWARE CONSTRUC TIONS PVT. LTD. VS. ITO, ITA NO.5601/MUM/2009 WHEREIN THE HON'BLE TRIBU NAL HAD DELETED THE ADDITION MADE ON IDENTICAL ISSUE. IN VIEW OF TH IS DISCUSSION THE ADDITION MADE BY THE LD.A.O. OF RS.51,95,530/- BY A DOPTING PERCENTAGE COMPLETION METHOD AS AGAINST PROJECT COMPLETION MET HOD OF THE ASSESSEE CANNOT BE SUSTAINED IN APPEAL AND IS DIRECTED TO BE DELETED. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED. 5. HAVING HEARD THE RIVAL SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE WAS FOLLOWING A PROJECT COMPLETION METHOD FOR THE P URPOSE OF RETURNING THE INCOME AND WAS PAYING TAXES ACCORDING LY. HOWEVER, DURING THE YEAR UNDER CONSIDERATION THE AO AFTER EXAMINING THE BALANCE SHEET OF THE AO NOTED THAT AS SESSEE HAS RECEIVED ADVANCES TO THE TUNE OF RS.1,03,20,000/ - AS WERE APPEARING IN THE LIABILITY SIDE ON WHICH THE A SSESSEE HAS NOT PAID ANY TAXES. ACCORDING TO THE ASSESSEE, THE P OSSESSION OF THE PROPERTY COULD NOT BE GIVEN AS THE OCCUPATIO N CERTIFICATE WAS NOT AVAILABLE WITH THE ASSESSEE. THE ASSESSEE ALSO SUBMITTED THAT THE PROJECT COMPLETION METHOD WAS BE ING ACCEPTED BY THE REVENUE OVER THE YEARS AND PERTINEN T TO MENTION THAT THE ASSESSEE HAS ALREADY OFFERED THE T AX FOR SALE IN SUBSEQUENT YEAR I.E. A.Y. 2012-13 RELATING TO THE P ROPERTY ON THE 3 RD FLOOR QUA WHICH THE SAID ADVANCE OF RS.1 CRORE WAS RECEIVED AND NECESSARY ADJUSTMENTS TOWARDS THE SAI D ADVANCE OF RS. 1 CRORE WAS MADE. THUS THE INCOME ON SAID PROPERTY WAS OFFERED TO TAX BY THE ASSESSEE SUO MOT O. WE FIND FROM THE SUBMISSIONS OF THE ASSESSEE THAT IN C ASE THE ADDITION IS SUSTAINED IN THE CURRENT YEAR, THE SAME WILL RESULT IN DOUBLE TAXATION OF THE SAME INCOME FIRST BY WAY OF CONFIRMATION OF ADDITION MADE IN THE PRESENT YEAR A ND SECOND ITA NO.3561/M/2016 M/S. AJIT DEVELOPERS PVT. LTD. 5 AS THE ASSESSEE SUO MOTO SHOWED THE INCOME AS PER T HE METHOD OF ACCOUNTING BEING CONSISTENTLY FOLLOWED. UNDER THE PRESENT FACTS AND CIRCUMSTANCES, WE ARE NOT IN AGR EEMENT WITH THE CONTENTION OF THE LD. D.R. THAT THE ASSESSEE HAS RESORTED TO DEFERMENT OF TAX OR NOT OFFERING THE IN COME TO TAX QUA WHICH THE PROPERTY IS COMPLETE. IN OUR VIEW, THE ORDER PASSED BY THE LD. CIT(A) IS CORRECT AND DOES NOT RE QUIRE ANY INFERENCE FROM OUR SIDE. ACCORDINGLY, WE DISMISS THE APPEAL OF THE REVENUE BY UPHOLDING THE ORDER OF LD. CIT(A). ORDER PRONOUNCED IN THE OPEN COURT ON 22.03.2018. SD/- SD/- (PAWAN SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.03.2018. * 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.