GHALOT CONSTRUCTION, NAVI MUMBAI V. PR CIT 28, NAVI MUMBAI

ITA 3576/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9396 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 16-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT PATANKAR
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 142(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, A.M. AND SHRI SAKTIJIT DEY, JM ./ I.T.A. NO. 3576/MUM/2017 ( [ [ / ASSESSMENT YEAR: 2014-15) GAHLOT CONSTRUCTION G-SQUARE BUSINESS PARK, PLOT NO. 25/26, SECTOR-30, VASHI, NAVI MUMBAI, MUMBAI-400 703 / VS. PR. CIT-28, 3 RD FLOOR, 6 TH TOWER, VASHI RAILWAYS STATION COMPLEX, VASHI, NAVI MUMBAI-400 703 ./ ./PAN/GIR NO. AAOFM 5698 J ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VIMAL PUNMIYA, SHRI BHARATKUMAR DARSHAN B. GANDHI / RESPONDENT BY : SHRI ABHIJIT PATANKAR / DATE OF HEARING : 24.08.2017 / DATE OF PRONOUNCEMENT : 05.10.2017 / O R D E R PER SHAMIM YAHYA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER PASSED U/S. 263 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) BY THE COMMISSIONER OF INCOME TAX-28, MUMBAI (CIT FOR SHORT) DATED 30.03.2017 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2014-15. THE GROUND OF APPEAL READ AS UNDER: 1. THE LD. CIT ERRED IN PASSING THE ORDER UNDER SECTION 263 OF THE ACT, INSPITE OF THE FACT THAT THE ASSESSMENT ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2 ITA NO. 3576/MUM/2017 (A.Y. 2014-15) GAHLOT CONSTRUCTION VS. PR. CIT 2. THE LD. CIT ERRED IN IGNORING ALL THE RELEVANT FACTS AND LEGAL PRECEDENTS CITED BY THE APPELLANT IN SUPPORT OF ITS CLAIM THAT IN THE FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE OF THE APPELLANT, NO ACTION UNDER SECTION 263, WAS CALLED FOR BECAUSE THE TWO VIEW ARE POSSIBLE AND THE LD. AO HAD ADOPTED THE VIEW IN FAVOUR OF ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND LAW, THE LD. CIT ERRED IN PASSING ORDER U/S 263 STATING THAT ASSESSEE HAS CLAIMED FURTHER PURCHASE OF RS.1,12,83,447/- AND INDIRECT EXPENSES OF RS.52,32,402/- CONSEQUENT TO COMPLETION OF THE PROJECT IN A.Y. 2013-14. 4. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND LAW, THE LD. CIT ERRED IN PASSING ORDER U/S 263 STATING THAT THE ASSESSEE HAS UNSOLD UNITS IN HIS POSSESSION AND THE INCOME FROM HOUSE PROPERTY WAS LIABLE TO BE ASSESSED, BUT THE ASSESSEE DID NOT RECEIVE ANY INCOME FROM UNSOLD UNITS AND SO INCOME FROM HOUSE PROPERTY WAS NOT LIABLE TO BE ASSESSED. 5. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND LAW, THE LD. CIT ERRED IN PASSING ORDER U/S 263 STATING THAT SERVICE TAX PROVISION NOT LOOKED BY A.O. WHEREAS ASSESSEE DID NOT CLAIMED ANY SERVICE TAX IN PROFIT & LOSS ACCOUNT. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT ERRED IN PASSING ORDER U/S. 263 STATING THAT VAT PROVISION IS NOT LOOKED BY AO WHEREAS ASSESSEE DID NOT RECEIVED ANY AMOUNT OF VAT FROM CUSTOMER. 7. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND LAW, THE LD. CIT ERRED IN PASSING ORDER U/S 263 STATING THAT TDS PROVISION U/S 194IA IS NOT LOOKED BY AO WHEREAS THIS PROVISION WAS NOT APPLICABLE IN RESPECTIVE YEARS AND IT IS APPLICABLE ON BUYER OF PROPERTY NOT TO SELLER. 2. IN THIS CASE, THE LD. CIT NOTED THAT THERE IS SALE OF FLATS AS ADMITTED BY THE ASSESSEE DURING A.Y. 2014-15. THAT THE SAME IS EVIDENT FROM FORM NO. 26AS PERTAINING TO THIS YEAR. THAT THE ASSESSMENT HAS BEEN COMPLETED AT NIL INCOME AND THE ISSUE OF PROJECT INCOME HAS NOT BEEN LOOKED INTO/EXAMINED BY THE A.O. DURING THE ASSESSMENT PROCEEDINGS. THAT THE SERVICE TAX PROVISIONS ON PROPERTY TRANSACTIONS BECAME EFFECTIVE W.E.F. 01.06.2010. THAT THIS ISSUE HAS NOT BEEN LOOKED INTO AND EXAMINED BY THE A.O. DURING THE COURSE OF ASSESSMENT IN THE YEAR IN QUESTION. THAT IF THIS DATA WERE PROCURED AND EXAMINED, THE APPLICABILITY OF AS-9 WOULD HAVE BEEN REALIZED AND THE ASSESSMENT COULD HAVE BEEN DONE ACCORDINGLY SO AS TO RECOGNIZE INCOME IN THE RELEVANT ASSESSMENT YEAR. THAT ALSO VAT PAYABLE/COLLECTIBLE ON SALE OF PROPERTY DURING THE YEAR AND ITS IMPLICATION ON THE DETERMINATION AND RECOGNITION OF 3 ITA NO. 3576/MUM/2017 (A.Y. 2014-15) GAHLOT CONSTRUCTION VS. PR. CIT INCOME HAS NOT VERIFIED BY THE A.O. DURING THE ASSESSMENT PROCEEDINGS AND THE SAME COULD HAVE ALSO LED TO THE ADOPTION OF AS-9 FOR RECOGNITION OF INCOME. 3. UPON SHOW CAUSE AND CONSIDERING THE ASSESSEES RESPONSE, THE LD. CIT HELD AS UNDER: HERE IT MAY ALSO BE POINTED OUT THAT FROM THE RECORDS THAT IT IS SEEN THAT SERVICE TAX PROVISIONS ON PROPERTY TRANSACTIONS BECAME EFFECTIVE W.E.F. 01.06.2013. THE ITS STATEMENT OF THE ASSESSEE SHOWS PAYMENT OF SERVICE TAX IN A.Y. 2013-14 AND 2014-15 AND TDS U/S. 194-IA IN A.Y. 2014-15 AS ALSO SALE OF PROPERTY TRANSACTIONS IN A.Y. 2013-14 AND 2014-15 (AIR INFORMATION). THESE ISSUES OF NOT APPEAR TO HAVE BEEN LOOKED INTO AND EXAMINED DURING THE COURSE OF ASSESSMENT IN THE YEARS IN QUESTION DESPITE THE COMPLETION OF PROJECT AT 100% IN A.Y. 2013-14. ALSO VAT IS PAYABLE/COLLECTIBLE ON SALE OF PROPERTY DURING THE PERIOD IN QUESTION HAS NOT BEEN SEEN. THE DETAILS OF VAT PAYMENT BY THE ASSESSEE HAVE NOT BEEN CALLED FOR DURING THE ASSESSMENT PROCEEDINGS. THE SUBMISSION OF THE ASSESSEE IN THIS REGARD IN FACT CONCEDE THAT FOR REASONS MENTIONED IN THE SUBMISSIONS, THE A.O. HAS NOT EXAMINED THE IMPLICATIONS OF THESE LEVIES IN SO FAR AS RECOGNITION OF INCOME AS REQUIRED BY AS-9. IF THIS DATA WERE PROCURED AND EXAMINED, THE APPLICABILITY OF AS-9 WOULD HAVE BEEN REALIZED AND THE ASSESSMENT COULD HAVE BEEN DONE ACCORDINGLY SO AS TO RECOGNIZE INCOMES IN THE RELEVANT ASSESSMENT YEARS. IN FACT IN A SUBMISSION MADE BY THE ASSESSEE DURING A.Y. 2012-13 WHEREIN DETAILS OF BOOKING ADVANCE AND DEPOSITS ARE MENTIONED, IT IS SEEN THAT THE ASSESSEE HAS REGISTERED ITS FIRST SALE DOCUMENT ON 24.12.2008 AND THERE HAVE BEEN REGULAR SALES DOCUMENTS THEREAFTER. THE ASSESSEE HAS CONTENDED THAT THE ISSUE REGARDING SERVICE TAX, MVAT AND TS U/S. 194-IA ON SALE OF PROPERTY AND THE CONSEQUENT IMPLICATIONS WERE CONSIDERED BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IN SUPPORT OF HIS CONTENTIONS STATED THAT THE ASSESSEE HAD MADE SUBMISSIONS ON EACH OF THESE ASPECTS. THIS CONTENTION IS NOT ACCEPTABLE BECAUSE NOTHING FROM THE RECORDS INDICATES THAT THESE ISSUES HAVE BEEN EXAMINED OR CONSIDERED DURING THE ASSESSMENT PROCEEDINGS. THE A.O., AS IS APPARENT FROM RECORD, DOES NOT APPEAR TO HAVE APPLIED HIS MIND ON THESE ISSUES AND CONSIDERED THE IMPLICATIONS OF THE SAME ON THE INCOME OFFERED IN THE RETURN OF INCOME/COMPUTATION OF INCOME FILED BY THE ASSESSEE. 4.1 DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING FOR A.Y. 2014-15, THE DETAILS OF SALE OF FLATS HAS BEEN SUBMITTED BY THE ASSESSEE IN ORDER TO CLARIFY THE MATTER PERTAINING TO DISCREPANCY BETWEEN SALES OF FLATS AS ADMITTED BY THE ASSESSEE DURING THE A.Y. 2013-14 AND 2014-15. 4 ITA NO. 3576/MUM/2017 (A.Y. 2014-15) GAHLOT CONSTRUCTION VS. PR. CIT 5. THE ASSESSEE HAS COMPLETED 100% OF THE PROJECT AS ADMITTED BY IT DURING THE F.Y. 2012-13 PERTAINING TO A.Y. 2013-14. IN THE PRESENT CONDITION AND AS THE PROJECT HAS ALREADY BEEN COMPLETED, THE ASSESSEE HAS SHOWN EXPENSES OF RS.1,12,83,447/- AS PURCHASE AND INDIRECT EXPENSES OF RS.52,32,402/- AGAINST THE OPENING STOCK AND THE SALES REPORTED FROM THE CLOSING STOCK OF RS.6,05,22,400/- AND SHOWN LOSS OF RS.1,77,44,206/-. SINCE THE ENTIRE PROJECT IS COMPLETED, FURTHER PURCHASE OF RS.1,12,83,447/- AND THE INDIRECT EXPENSES CLAIMED AT RS.52,32,402/- CONSEQUENT TO COMPLETION OF PROJECT DOES NOT APPEAR TO BE JUSTIFIED. THE AO IS DIRECTED TO VERIFY THE SAME IN DETAIL IN SO FAR THEIR ALLOWABILITY IS CONCERNED. 6. IN VIEW OF THE FOREGOING FACTS, IT IS ABUNDANTLY CLEAR THAT NOT ONLY IS THE COMPLETED ASSESSMENT FOR A.Y. 2014-15 ERRONEOUS BUT IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ASSESSEE HAS HIMSELF ADMITTED 100% COMPLETION OF THE PROJECT AND CONSIDERING THE SAME AND IN CONSONANCE WITH THE ACCOUNTING STANDARD 9 THAT WOULD APPLY TO THE PROJECT WHICH THE A.O. HAS FAILED TO CONSIDER, THE ASSESSMENT IS HELD TO BE ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ASSESSEE HAD UNSOLD UNITS IN HIS POSSESSION, AND THE INCOME FROM HOUSE PROPERTY WAS LIABLE TO BE ASSESSED AS IS JUDICIALLY SETTLED NOW AND WHICH WAS LIABLE TO BE ASSESSED BUT WHICH HAS NOT BEEN DONE. THUS, ON THIS ISSUE ALSO THE ASSESSMENT ORDER IS HELD TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 7. THEREFORE, IT IS HELD THAT THE ORDER DATED 16.11.2016 U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE WITHIN THE MEANING OF CLAUSES (A) AND (B) OF EXPLANATION 2 BELOW SUB-SECTION (1) OF SEC. 263 OF THE INCOME-TAX ACT, 1961 AND, AS THE ASSESSING OFFICER FAILED TO CONDUCT INQUIRES. THE ASSESSMENT ORDER IS SET ASIDE TO THE ASSESSING OFFICER WITH THE DIRECTION TO PASS A FRESH ASSESSMENT ORDER IN ACCORDANCE WITH LAW AND CONSIDERING ALL THE ISSUES RAISED IN THIS ORDER AND AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ORDER SHALL BE PASSED UNDER THE SUPERVISION AND GUIDANCE OF THE ADDL./JTD. CIT- 28(1), MUMBAI. 4. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSMENT ORDER IN THIS CASE IS VERY LACONIC. WE MAY GAINFULLY REFER TO THE ASSESSMENT ORDER AS UNDER: 5 ITA NO. 3576/MUM/2017 (A.Y. 2014-15) GAHLOT CONSTRUCTION VS. PR. CIT 2. SUBSEQUENTLY NOTICES U/S. 142(1) WERE ISSUED CALLING FOR INFORMATION ON THE POINTS AND/OR MATTERS SPECIFIED THEREIN. IN RESPONSE TO THE AFORESAID NOTICES, SHRI HITESH SHAH, AR OF THE ASSESSEE ATTENDED FROM TIME TO TIME, FILED THE DETAILS AS CALLED FOR AND DISCUSSED THE CASE. 3. THE ASSESSEE A FIRM EARNING INCOME BY WAY OF BUSINESS INCOME FROM BUILDERS. 4. AFTER PERUSAL OF DETAILS AVAILABLE ON RECORD AND DISCUSSION WITH THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, THE TOTAL INCOME OF ASSESSEE AS PER RETURN IS ACCEPTED. 5. SUBJECT TO THE ABOVE REMARKS, THE TOTAL INCOME OF THE ASSESSEE FOR A.Y. 2014-15 IS COMPUTED AS UNDER: RS./- INCOME AS PER 143(1): NIL TOTAL INCOME NIL ROUNDED OFF TO NIL 6. ASSESSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 AT RS.NIL/-. THE NECESSARY DETAILS/DOCUMENTS ARE PERUSED AND KEPT ON RECORD. CREDIT FOR PREPAID TAXES HAS BEEN GIVEN AFTER DUE VERIFICATION. INTEREST APPLICABLE AS PER LAW IS CHARGED AND DEMAND NOTICE AND CHALLAN IS ISSUED ACCORDINGLY. 6. WE NOTE THAT THE LD. CIT HAS NOTED THAT THE ASSESSEE HAS COMPLETED 100% OF THE PROJECT IN THE PREVIOUS ASSESSMENT YEAR. HENCE, THE LD. CIT HAS RAISED OBJECTION THAT WHEN THE PROJECT WAS COMPLETED IN THE PREVIOUS YEAR, THE ASSESSEE HAS SHOWN IN THE PRESENT YEAR THE EXPENSES OF RS.1,12,83,447/- FOR PURCHASE AND INDIRECT EXPENSES OF RS.52,32,402/-, AGAINST THE OPENING STOCK AND THE SALES REPORTED FROM THE CLOSING STOCK OF RS.6,05,22,400/- AND FINALLY THE ASSESSEE HAS SHOWN LOSS OF RS.1,77,44,206/-. HENCE, THE LD. CIT HAS OBSERVED THAT SINCE THE ENTIRE PROJECT IS COMPLETED, FURTHER PURCHASE OF RS.1,12,83,447/- AND THE INDIRECT EXPENSES CAME AT RS.52,32,402/- CONSEQUENT TO THE COMPLETION OF THE PROJECT DOES NOT APPEAR TO BE JUSTIFIED. HENCE, THE A.O. WAS DIRECTED TO VERIFY THE SAME IN DETAIL. INSOFAR AS THE DIRECTION FOR EXAMINATION IS CONCERNED, WE FIND THAT THE ABOVE OBSERVATION OF THE LD. CIT IS COGENT AND JUSTIFIED. THE ORDER OF THE A.O. IS COMPLETELY SILENT. ONCE THE PROJECT WAS COMPLETED IN THE 6 ITA NO. 3576/MUM/2017 (A.Y. 2014-15) GAHLOT CONSTRUCTION VS. PR. CIT PREVIOUS ASSESSMENT YEAR, THE INCURRING OF FURTHER EXPENDITURE OF SUCH HUGE AMOUNTS FOR PURCHASE AND INDIRECT EXPENSES DO NEED PROPER EXAMINATION. THE LD. COUNSEL OF THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY MATERIAL SHOWING THAT THESE ASPECTS WERE EXAMINED BY THE A.O. HENCE, THERE IS LACK OF PROPER APPLICATION OF MIND BY THE ASSESSING OFFICER ON IMPORTANT ISSUE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT TO DIRECT THE A.O. TO EXAMINE THE SAME. 7. AS REGARDS THE FURTHER DIRECTION OF THE LD. CIT CONTAINED IN PARAGRAPHS 6, THAT THE TREATMENT OF UNSOLD STOCK AS INCOME FROM HOUSE PROPERTY ALSO NEEDS TO BE EXAMINED. THIS ASPECT HAS ALSO BEEN NOT EXAMINED BY THE A.O. NON EXAMINATION OF THIS ASPECT LEADS TO AN ERRONEOUS ORDER INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, THIS ASPECT ALSO NEEDS TO BE EXAMINED AND RELOOKED BY THE A.O. 8. THE OTHER ASPECT MENTIONED BY THE LD. CIT IS THE APPLICABILITY OF TDS PROVISION AND MVAT PROVISIONS AND SERVICE TAX. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THESE ARE NOT APPLICABLE. WE FIND THAT WHEN THE A.O. HAS NOT EXAMINED THESE ASPECTS, AND AS PER THE LD. COUNSEL OF THE ASSESSEES SUBMISSION THEY ARE NOT APPLICABLE, NO PREJUDICE WILL BE CAUSED TO THE ASSESSEE IF THEY ARE EXAMINED. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT FOR EXAMINING THESE ISSUES. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT TO THE EXTENT MENTIONED HEREINABOVE. THE A.O. SHALL EXAMINE ON THE ABOVE ASPECTS UPHELD BY US AND PASS THE ORDER ACCORDINGLY. 9. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.10.2017 SD/- SD/- (SAKTIJIT DEY) (SHAMIM YAHYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 05.10.2017 . ../ ROSHANI , SR. PS 7 ITA NO. 3576/MUM/2017 (A.Y. 2014-15) GAHLOT CONSTRUCTION VS. PR. CIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI