The ACIT, Circle-3(1), Visakhapatnam V. M/s Krishnarjuna Constructions P Ltd, Visakhapatnam

ITA 362/VIZ/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2869 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2001-2002
• Appeal Filed On: 01-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Assessee Lawyers: C SUBRAMANYAM
• Keywords: Revision of order; Reassessment proceedings; Set aside
• Section: 143(3); 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SRI B.R. BASKARAN, ACCOUNTANT MEMBER I.T.A. NO.362/VIZAG/2007 ASSESSMENT YEAR : 2001-02 ACIT, CIRCLE-3(1), VISAKHAPATNAM VS. KRISHNARJUNA CONSTRUCTIONS (P) LTD., VISAKHAPATNAM (APPELLANT) (RESPONDENT) . PAN NO: AABCK 2478 E APPELLANT BY : SHRI R.K. SINGH, DR RESPONDENT BY : SHRI C. SUBRAMANYAM, CA O R D E R PER B..R. BASKARAN, ACCOUNTANT MEMBER : 1. THE APPEAL OF THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 28.5.2007 PASSED BY LD CIT(A) AND IT RELATES TO THE ASSESSMEN T YEAR 2001-02. 2. THE REJECTION OF BOOKS AND CONSEQUENT ESTIMA TION OF INCOME, NOT HAVING BEEN UPHELD BY LD CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 3. THE LD CIT, BY EXERCISING HIS POWERS U/S 263 OF THE ACT, SET ASIDE THE ASSESSMENT ORDER PASSED ON 30.4.2003 U/S 143(3) OF THE ACT AND DIRECTED THE AO TO EXAMINE VARIOUS ASPECTS, WHICH INTER ALIA, INCL UDED THE EXAMINATION OF COMPUTATION OF INCOME FROM CONSTRUCTION OF FLATS ON THE BASIS OF PERCENTAGE COMPLETION METHOD. IT MAY BE NOTED THAT THE ASSESS EE HAD OFFERED INCOME FROM CONSTRUCTION OF FLATS UNDER PROJECT COMPLETION METH OD. BESIDES THE ASSESSEE WAS EXECUTING OTHER CIVIL CONTRACT WORKS ALSO. 2 3.1 IN PURSUANCE TO THE ORDER OF LD CIT, THE AO INITIATED REASSESSMENT PROCEEDINGS. AFTER HEARING THE ASSESSEE, THE AO CO MPLETED THE ASSESSMENT BY REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE I NCOME FROM THE CIVIL CONTRACT WORKS AT 5% OF THE CONTRACT RECEIPTS. WITH REGARD TO THE CONSTRUCTION OF FLATS ALSO, THE AO ESTIMATED INCOME BY ADOPTING PERCENTAGE COM PLETION METHOD. THE ASSESSMENT WAS COMPLETED EVEN PRIOR TO THE DISPOSAL OF APPEAL PREFERRED BY THE ASSESSEE BEFORE ITAT, VISAKHAPATNAM CHALLENGING THE ORDER OF LD CIT PASSED U/S 263 OF THE ACT. THE ASSESSEE FILED APPEAL BEFO RE LD CIT(A) CHALLENGING THE ORDER OF THE AO PASSED U/S 143(3) R.W.S. 263. IN T HE APPELLATE PROCEEDINGS BEFORE LD CIT(A), THE ATTENTION OF THE FIRST APPELL ATE AUTHORITY WAS DRAWN TO THE ORDER OF ITAT REFERRED ABOVE. ACCORDINGLY LD CIT(A ) HELD THAT THAT ESTIMATION OF INCOME BY ADOPTING PERCENTAGE COMPLETION METHOD W AS NOT JUSTIFIED. THE RELEVANT OBSERVATIONS OF LD CIT(A) ARE EXTRACTED BE LOW:- FOLLOWING THE DIRECTIONS ISSUED U/S 263 OF THE ACT , THE ASSESSING OFFICER ESTIMATED THE INCOME FROM THE CONSTRUCTION OF FLATS BY USING THE PERCENTAGE COMPLETION METHOD. AS AGAINST THIS, THE APPELLANTS CONTENTION WAS THAT THE SAID INCOME IS BEING ACCOUNTED FOR ON THE PROJECT COMPLETION METHOD. IN THIS CONTEXT, THE HONBLE ITAT, VISAKHAPATNAM WHILE DISPOSING OFF THE APPEAL FILED AGAINST THE ORDER PASSED U/S 263 HAVE OBSERVE D THAT PROJECT COMPLETION METHOD AS ADOPTED BY THE APPELLANT IS AL SO RECOGNIZED METHOD AND THE COMMISSIONER IS NOT JUSTI FIED IN SETTING ASIDE THE MATTER TO THE ASSESSING OFFICER F OR RECONSIDERATION. THIS IMPLIES THAT THE METHOD ADOP TED BY THE APPELLANT HAS BEEN ACCEPTED BY THE HONBLE ITAT. H ENCE, IT IS CONCLUDED THAT THE ASSESSING OFFICER IS NOT JUSTIFI ED IN ESTIMATING THE INCOME FROM THE BUSINESS OF FLAT CONSTRUCTION A T RS.3,86,449/- BY USING THE PERCENTAGE COMPLETION METHOD. THE SAM E IS HEREBY DELETED AND THIS GROUND OF APPEAL IS ALLOWED . 4. THE REVENUE IS ASSAILING THE SAID DECISION O F LD CIT(A) IN THE PRESENT APPEAL. AS POINTED OUT BY LD AR, THE LD CIT(A) HAS MERELY FOLLOWED THE DECISION RENDERED BY THIS TRIBUNAL. HENCE WE DO NOT FIND AN Y INFIRMITY IN THE DECISION OF LD CIT(A) AND ACCORDINGLY UPHOLD HIS ORDER. 3 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 11-12-2009 SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 11-12-2009 A COPY OF THIS ORDER IS FORWARDED TO : 01 THE ACIT, CIRCLE-3(1), VISAKHAPATNAM 02 M/S. KRISHNARJUNA CONSTRUCTIONS PVT. LTD., 50-49 -39/B, TPT COLONY, VISAKHAPATAM 03 THE CIT (A), VISAKHAPATNAM 04 THE CIT, VISAKHAPATNAM 05 THE DR, ITAT, VISAKHAPAATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT, VISAKHAPATNAM BENCH