ITO 25(3)(4), MUMBAI V. SHREE SIDDHIVINAYAK DEVELOPERS, MUMBAI

ITA 3693/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92967 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 13-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N V NADKARNI
• Keywords: Opportunity of being heard
• Section: 69C

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ./ I.T.A. NO.3693/ MUM/2011 ( / ASSESSMENT YEAR : 2008-2009 INCOME TAX OFFICER 25(3)(4), R. NO. 307, C-10, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI 400 051. / VS. SHREE SIDHIVINAYAK DEVELOPERS, 2/D, SATLUJ APARTMENT, SAHAKAR GRAM COMPLEX, KANDIVALI (EAST), MUMBAI 400 101. ./ PAN : AACAS5244H ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI N.V. NADKARNI R E SPONDENT BY : SHRI SHASHI TULSIYAN / DATE OF HEARING : 15-04-2015 / DATE OF PRONOUNCEMENT : 12-06-2015 [ !' / O R D E R PER B.R. BASKARAN, A.M. THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE O RDER DATED 22-02-2011 PASSED BY THE LD. CIT(A) 35, MUMBAI IN RESPECT OF THE FOLLOWING ISSUES FOR A.Y. 2008-09:- (A) DELETION OF INCOME ESTIMATED BY THE A.O. FOR THE PR OJECT NAMED POONAM GARDEN. (B) DELETION OF ADDITION MADE U/S 69C OF THE INCOME TAX ACT, 1961. 2. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . THE ASSESSEE FIRM IS A BUILDER AND DEVELOPER AND IS ASSESSED IN THE STAT US OF AOP. DURING THE YEAR ITA 3693/M/11 2 UNDER CONSIDERATION, THE ASSESSEE WAS DEVELOPING A RESIDENTIAL PROJECT BY NAME POONAM GARDEN WHICH INVOLVED CONSTRUCTION OF BUILDING NO. 6 TO 11 COMPRISING OF 182 FLATS AND 8 SHOPS IN BHAYANDER, D IST. THANE. THE ASSESSEE DID NOT DISCLOSE ANY INCOME OUT OF THESE PROJECTS O N THE PLEA THAT IT WAS FOLLOWING PROJECT COMPLETION METHOD FOR OFFERING THE INCOME UNDER THE INCOME TAX ACT. THE A.O., HOWEVER, NOTICED THAT TH E ASSESSEE HAS RECEIVED MAJOR PORTION OF ADVANCES AND ALSO COMPLETED MAJOR PORTION OF THE CONSTRUCTION ACTIVITY BY 31-3-2008, MORE PARTICULAR LY THE A.O. NOTICED THAT THE WORK RELATING TO FIXING OF TILES AND MARBLES, P AINTING, PLUMBING WERE UNDER THE VERGE OF COMPLETION DURING THE YEAR UNDER CONSIDERATION. THE A.O. FURTHER NOTICED THAT THE ASSESSEE HAS REALIZED FULL SALES CONSIDERATION IN RESPECT OF 33 UNITS AND MORE THAN 90% OF THE SALES VALUE IN RESPECT OF 59 UNITS OUT OF TOTAL UNITS OF 190. THE A.O. TOOK A VI EW THAT ASSESSEE HAS PASSED ON ALL THE RISKS AND REWARDS IN RESPECT OF THE ABOV E SAID 92 UNITS (59 + 33). ACCORDINGLY THE AO TOOK THE VIEW THAT THE ASSESSEE SHOULD HAVE OFFERED THE INCOME PERTAINING TO THE ABOVE SAID 92 UNITS DURING THE YEAR UNDER CONSIDERATION. THE A.O. NOTED THAT THE ASSESSEE HAS DECLARED PROFIT IN A.Y. 2010-11 @ 52.12% OF GROSS TURNOVER OF THE ABOVE SAI D PROJECT. BY APPLYING THE SAME RATE IN RESPECT OF 92 UNITS REFERRED ABOVE , THE A.O. ESTIMATED THE PROFIT AT RS. 6.48 CRORES AND ASSESSED THE SAME AS INCOME OF THE ASSESSEE. 3. THE A.O. FURTHER NOTICED THAT THE ASSESSEE HAS NOT DEBITED VARIOUS EXPENDITURE OR HAS DEBITED MINIMUM EXPENDITURE UNDE R VARIOUS HEADS LISTED OUT IN THE ASSESSMENT ORDER. ACCORDINGLY, THE A.O. TOOK THE VIEW THAT THE ASSESSEE MUST HAVE INCURRED EXPENDITURE UNDER THE V ARIOUS HEADS WITHOUT RECORDING THE SAME IN THE BOOKS OF ACCOUNT. ACCORD INGLY, THE A.O. ESTIMATED THE EXPENDITURE THAT MIGHT HAVE BEEN INCURRED BY TH E ASSESSEE AT 10% OF THE TOTAL WORK CARRIED OUT AND THE SAME WORKED OUT TO R S. 55 LACS. THE A.O. ASSESSED THE SAME U/S 69C OF THE ACT. ITA 3693/M/11 3 4. THE LD. CIT(A), HOWEVER, GRANTED RELIEF TO THE A SSESSEE IN RESPECT OF BOTH THE ADDITIONS REFERRED ABOVE. AGGRIEVED, THE REVEN UE HAS FILED THIS APPEAL BEFORE US. 5. THE FIRST ISSUE RELATES TO ESTIMATION OF INCOME IN RESPECT OF 92 UNITS REFERRED ABOVE FROM WHICH THE ASSESSEE HAS ALREADY RECEIVED ALMOST ENTIRE CONSIDERATION. THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSEE HAS BEEN FOLLOWING PROJECT COMPLETION METHOD AND HENCE THE INCOME ARISING OUT OF THESE UNITS HAS BEEN OFFERED IN A.Y. 2010-11 . WE HAVE NOTICED THAT THE A.O. HAS ESTIMATED THE INCOME IN RESPECT OF 92 UNIT S BY OBSERVING THAT THE ASSESSEE HAS PASSED THE RISK AND REWARDS ATTACHED T O THE 92 UNITS, SINCE THE ASSESSEE HAD ALREADY RECEIVED ALMOST THE ENTIRE CON SIDERATION FROM THEM. IN OUR VIEW, THERE IS NOTHING WRONG IN ASSESSING THE I NCOME PERTAINING TO THE UNITS THAT HAVE ALREADY BEEN SOLD BY THE ASSESSEE, EVEN IF THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD. THIS IS SO BEC AUSE, ONCE THE ASSESSEE HAS SOLD THE FLATS, THEN THE PROFIT FROM SUCH SALE STANDS REALIZED AND IT MAY NOT BE PROPER TO POSTPONE THE TAX LIABILITY THEREON . HOWEVER, WE HAVE EARLIER NOTICED THAT THE AO HAS ENTERTAINED THE VIEW THAT T HE ASSESSEE HAS TRANSFERRED THE RISK AND REWARD ATTACHED TO THE 92 UNITS AND WE NOTICE THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SU BSTANTIATE THIS VIEW. HENCE, IT IS NOT CLEAR AS TO WHETHER 92 UNITS HAVE ACTUALLY BEEN SOLD AWAY OR WHETHER THE RISKS AND REWARDS ATTACHED TO THESE FLA TS HAS ACTUALLY BEEN TRANSFERRED DURING THE YEAR UNDER CONSIDERATION. FU RTHER, THE RATE OF GROSS PROFIT OF 52% ADOPTED BY THE A.O. NEEDS TO BE VALID ATED IN CASE IT IS FOUND THAT THE RISKS AND REWARDS ATTACHED TO THE 92 FLATS HAVE BEEN TRANSFERRED DURING THE YEAR UNDER CONSIDERATION. UNDER THE SETS OF FAC TS, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF A.O. ACCORDINGLY WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND DIR ECT THE A.O. TO CONSIDER THE SAME AFRESH AND TAKE APPROPRIATE DECISION IN ACCORD ANCE WITH LAW, AFTER OFFERING NECESSARY OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. ITA 3693/M/11 4 6. THE NEXT ISSUE RELATES TO ADDITION OF RS. 55 LAC S U/S 69C OF THE ACT. ADMITTEDLY, THE A.O. HAS ESTIMATED THE EXPENDITURE OF RS. 55 LACS ON PRESUMPTIONS WITHOUT BRINGING ANY MATERIAL ON RECOR D. HENCE THE LD. CIT(A) HAS DELETED THIS ADDITION BY MAKING THE FOLLOWING O BSERVATION:- AT THE TIME OF HEARING, THE REPRESENTATIVE SUBMITT ED THAT THE APPELLANT DEBITED RS.46,32,453J - IN THE P&L ACCOUNT DURING T HIS YEAR AS PER THE DETAILS GIVEN BELOW:- A) BROKERAGE OF RS.34,38,900/-: THE APPELLANT DID N OT DO ANY ADVERTISING. IT WAS LEFT TO THE BROKERS TO MAKE THE INTENDING PURCHASERS AWARE ABOUT THE PROJECT AND PERSUADE THE M TO PURCHASE THE FLATS/ SHOPS. B) HIRE CHARGES OF RS.58,448/-, C) OCTROI CHARGES OF RS.L,23,551/-, D) OFFICE EXPENSES OF RS.9,350/-, E) POSTAGE AND COURIER CHARGES OF RS.7,646/-, F) PRINTING AND STATIONERY CHARGES OF RS.28, 179 /- G) RENT FOR MACHINERY OF RS.3,00,000/-, H) SALARY & WAGES OF RS.2,05,489/-, HE SUBMITTED THAT THE A.O. REMARKED THAT THERE WAS NO EXPENDITURE ON HIRE OF MACHINERY WHEREAS IN FACT THE APPELLANT DEB ITED RS.3 LAKH TOWARDS RENT: FOR MACHINERY AS SEEN FROM THE P&L AC COUNT. HE FURTHER SUBMITTED THAT THE A.O. REMARKED THAT MBMC CHARGES WERE NOT INCURRED BY THE APPELLANT WHEREAS IN FACT A SUM OF RS.18,50,000/- WAS CLAIMED AS DEVELOPMENT EXPENSES IN A.Y. 2010. HE FU RTHER SUBMITTED THAT THE ADMINISTRATIVE OFFICE OF THE APPELLANT IS LOCATED AT HARSH PLAZA, ABOVE RELIANCE FRESH, 1 ST FLOOR, MIRA ROAD(EAST), DIST. THANE-40 1107 AND THE SAME PREMISES ARE USED FOR OFFICE PURPOSES BY HALF A DOZEN OTHER UNITS OF THE GROUP AND IN THE CIRCUMSTANCES T HERE ARE CERTAIN EXPENSES WHICH ARE INCURRED JOINTLY AND THE CONCERN ED STAFF DEBITS IT TO ONE OF THE UNITS. EVEN IF ONE WERE TO MAKE PROPORTI ONATE ALLOCATION OF SUCH EXPENSES UNDER THE HEAD CONVEYANCE, TELEPHONE EXPENSES ETC. FALLING TO THE SHARE OF THE APPELLANT, THE ALLOCATE D AMOUNT FALLING TO THE SHARE OF THE APPELLANT WOULD NOT BE MORE THAN A FEW THOUSANDS OF RUPEES. IT IS THEREFORE OBVIOUS THAT THE DISALLOWAN CES RESULTED ON ACCOUNT OF LACK OF APPRECIATION OF FACTS AND THE DI SALLOWANCE REQUIRES TO BE DELETED. ITA 3693/M/11 5 7. A PERUSAL OF THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE SHOWS THAT THE LD. CIT(A) ADJUDICATED THIS ISSUE BY DULY CONSI DERING THE RELEVANT PROVISIONS OF LAW AND THE FACTS AVAILABLE IN THE IN STANT CASE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) ON TH IS ISSUE AND ACCORDINGLY CONFIRM THE SAME. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE, 2015. !' # $% &! ' 12-06-2015 ( ) SD/- SD/- (JOGINDER SINGH (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 12-06-2015 [ .<../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. = () / THE CIT (A) 35, MUMBAI 4. = / CIT -25,MUMBAI 5. @A( <