The Income Tax Offie-4, BHILAI(CG) V. M/s Landmark Developers, BHILAI(CG)

ITA 37/BIL/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0531 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 15-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHITAL SHASHWAT VERMA
• Keywords: Depreciation

Judgement Text

, RAIPUR IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BEFORE S/SHRI G.D.AGARWAL( VP) & MUKUL KR. SHRAWAT (JM) . . , , ./ I.T.A. NO. 37/BLPR/2012 ( / ASSESSMENT YEAR : 2008 - 09 ) THE INCOME TAX OFFICER - 4, AAYAKAR BHAVAN, NEW CIVIC CENTRE, BHILAI / VS. LANDMARK DEVELOPERS, SHOP NO.2, STREET - 27, SMRITI NAGAR, BHILAI ./ ./ PAN/GIR NO. : AACFL 3868 R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SMT. SHITAL SHASHWAT VERMA / RESPONDENT BY : NONE / DATE OF HEARING :0 7 - 10 - 2015 / DATE OF PRONOUNCEMENT : 09 - 10 - 2015 / O R D E R PER MUKUL K SRAWAT, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF THE LD CIT(A) - BILASPUR DATED 2.12.2011. THE REVENUE HAS RAISED THE FOLLOWING GROUND: WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN ESTIMATING THE NET INCOME FROM DEVELOPMENT OF HOUSING COLONY @ 5% OF THE TURNOVER OF RS.1,68,65,501/ - AND AFTER PROVIDING CERTAIN ALLOWANCES , RECOMPUTED THE ASSESSEES TOTAL INCOME AT RS.7,37,859/ - WHICH IN TERMS OF PERCENTAGE WORKS OUT TO 4.37%. 2 I.T.A. NO. 37/BLPR/2012 ASSESSMENT YEAR : 2008 - 09 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT DATED 28.12.2010 WERE THAT THE ASSESSEE FIRM IS RUNNING BUSINESS AS BUILDER AND DEVELOPER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD ASKED THE ASSESSEE TO PRODUCE BILLS OF THE PURCHASES OF BUILDING MATERIALS PURCHASED FROM VARIOUS PARTIES. THE AO HAD PLACED DETAILS OF BUI LDING MATERIALS PURCHASED FROM VARIOUS PARTIES IN THE ASSESSMENT ORDER. ACCORDING TO THE AO, THE ASSESSEE HAD FAILED TO PRODUCE THE PURCHASE BILLS, HENCE, OUT OF TOTAL EXPENSES CLAIMED OF RS.22,10,366/ - , HE HAS DISALLOWED 40% OF THE SAME AMOUNTING TO RS.8 ,84,146/ - WHICH WAS TAXED IN THE HANDS OF THE ASSESSEE. 3. THERE WERE CERTAIN OTHER EXPENSES SUCH AS ELECTRICITY EXPENSES, LEGAL EXPENSES, COMMISSION EXPENSES, BORE WELL EXPENSES, ETC. THE ALLEGATION OF THE AO WAS THAT THE ASSESSEE HAD FAILED TO PRODUCE T HE BILLS/VOUCHERS. THE AO HAD ACCEPTED THE PAYMENTS MADE BY CHEQUES, HOWEVER, DISALLOWED 25% OF THE PAYMENTS WHICH WERE MADE IN CASH. RESULTANTLY, AN ADDITION OF RS.1,78,782/ - WAS MADE. IN THE SAME MANNER, CERTAIN OTHER EXPENSES HAVE ALSO BEEN DISALLOWE D. FINALLY, AN ADDITION OF RS.18,89,098/ - WAS MADE, WHICH WAS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD A.R. HAD MADE AN ALTERNATIVE CONTENTION THAT IF THE ADDITION CHALLENGED AS PER GROUND OF APPEAL WAS NOT ACCEPTABLE, THEN THE ASSESSEES NET INCOME MAY BE ESTIMATED AT 4% OF THE GROSS TURNOVER DUE TO NON - AVAILABILITY OF BILLS AND VOUCHERS. THE 3 I.T.A. NO. 37/BLPR/2012 ASSESSMENT YEAR : 2008 - 09 EXPLANATION OF THE ASSESSEE WAS THAT AN OLD ACCOUNTANT WAS ENGAGED WHO HAD MISPLACED THOSE EVIDENCES, HENCE, THE ASSESSEE FIRM WAS NOT IN A POSITION TO PRODUCE ALL THOSE EVIDENCES FOR VERIFICATION. AFTER CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE, THE LD CIT(A) HAS GRANTED PART RELIEF AND COMPUTED THE TAXABLE INCOME OF THE ASSESSEE IN T HE FOLLOWING MANNER: THE APPELLANT FIRM BEING ENGAGED IN CONSTRUCTION AND DEVELOPMENT OF HOUSING COLONY. ACCOUNTING STANDARD - 9 IS APPLICABLE FOR REVENUE RECOGNITION. THE TOTAL WORK BILLS ON SALE OF HOUSING COLONY HAS BEEN DISCLOSED AT RS.1,58,25,001/ - B ESIDES CLOSING STOCK AT RS.10,40,500/ - PROFIT ON SALE OF LAND, DEVELOPMENT CHARGES HAS BEEN DISCLOSED AT RS.2,63,200/ - AND RS.66,000/ - RESPECTIVELY. THE MATERIAL PURCHASES EXPENSES AND WAGES ARE RS.1,05,19,460/ - AND RS.33,82,006/ - . THERE IS FURTHER DEBI T OF BUILDING DEVELOPMENT CHARGES, BORE WELL EXPENSES UNDER THE HEAD ADMINISTRATIVE EXPENSES. THE DETAILS OF THE COMPLETED HOUSING PROJECT/COLONY, CONSIDERATION DERIVED FROM SUCH SALE AND RECONCILIATION WITH WORK BILLS DISCLOSED IN THE P&L ACCOUNT HAS NOT BEEN FURNISHED BY THE APPELLANT FIRM IN ANY PROCEEDING UNDER THE ACT. THE APPELLANT FIRM DEVELOPED LAND AND SOLD TO THE CUSTOMERS AFTER PROPER PLOTTING. NO DETAIL OF THE LAND OWNED, DEVELOPED AND SOLD ALONGWITH SALES CONSIDERATION RECEIVED WOULD BE FURNI SHED. EVEN THE DETAILS OF HOW THE INCOME FROM SALE OF LAND DERIVED AND DISCLOSED AT RS.2,63,200/ - ARE NOT AVAILABLE. SO IS THE CASE WITH THE DEVELOPMENT CHARGES DISCLOSED AS OTHER INCOME AT RS.66,000/ - . COPIES OF THE PURCHASE ORDERS, GOODS INWARD REGIST ER, SUPPLIERS BILLS AND CHALANS, STOCK REGISTERS AND INWARD/OUTWARD MEMOS ARE NOT MAINTAINED. WAGE REGISTER IS NOT MAINTAINED. DAY TO DAY RECORDS RELATING TO LABOUR PAYMENTS AND WORK DONE BY THE LABOUR CONTRACTORS ARE NOT MAINTAINED. RECORDS RELATING T O SPECIFICATION OF AMENITIES LIKE FLOORING, TILES, GRANITE, FINISH, ELECTRICAL FITTINGS, SANITARY FITTINGS, WINDOWS FRAMES/DOORS ETC ARE NOT MAINTAINED. THE WORK IN PROGRESS HAS BEEN DISCLOSED AS CLOSING STOCK AT RS.10,40,500/ - . THERE IS NO PROJECT - WISE INFORMATION ON WORK IN PROGRESS. THE BASIS OF VALUATION OF WORK IN PROGRESS IS NOT AMENABLE TO VERIFICATION. THE DETAILS OF WORK BILL ARE NOT AMENABLE TO VERIFICATION UNLESS DETAILS OF PROJECT COMPLETED AND SOLD ARE MADE AVAILABLE. EVEN THE BILLS AND VOU CHERS FOR HUGE EXPENSES BOOKED TO THE PROFIT AND LOSS ARE NOT AVAILABLE FOR VERIFICATION. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT THE PROFIT DISCLOSED IN THE RETURN OF INCOME IS NOT AMENABLE TO 4 I.T.A. NO. 37/BLPR/2012 ASSESSMENT YEAR : 2008 - 09 VERIFICATION NOT MERELY BECAUSE OF NON AVAILABILITY OF BILLS AND VOUCHERS TO SUPPORT THE EXPENSES BOOKED IN THE P&L ACCOUNT BUT BECAUSE OF NON AVAILABILITY OF PRIMARY INFORMATION AND DOCUMENTS AS DISCUSSED ABOVE. THE LD AR MADE AN ALTERNATIVE CONTENTION TO APPLY 4% OF THE WORKS BILL AS NET PRO FIT. THE ALTERNATIVE CONTENTION IS ALSO NOT APPLICABLE ON OTHER INCOME WHEN THE APPELLANT FIRM HAS DISCLOSED ONLY THE PROFIT ON SALE OF LAND AND DEVELOPMENT CHARGES. THE TURNOVER ON SALE OF LAND AND DEVELOPMENT CHARGES IS NOT KNOWN. THE OTHER INCOME INCL UDING INTEREST INCOME TOTALING TO RS.3,49,320/ - IS REQUIRED TO BE CONSIDERED SEPARATELY FOR PURPOSE OF COMPUTING THE INCOME FROM WORK BILLS ON SALE OF HOUSING COLONY. THE PERCENTAGE OF PROFIT PROPOSED BY THE LD A.R. IS LOW LOOKING TO THE FACT THAT THERE A RE PLETHORA OF COMPARABLE CASES AVAILABLE IN THE SAME LOCALITY WHERE THE BUILDERS HAVE DISCLOSED NET PROFIT AT MORE THAN 5% OF GROSS RECEIPTS. FOR EXAMPLE, CHAUHAN HOUSING PVT LTD., BHILAI HAS DISCLOSED NET PROFIT AT 5.67% OF THE TURNOVER OF RS.17.32 CROR ES IN THE A.Y 2007 - 08. HOWEVER, CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, NET INCOME FROM DEVELOPMENT OF HOUSING COLONY IS ARRIVED AT RS.8,43,275/ - I.E. 5% OF TURNOVER OF RS.1,68,65,501/ - . AFTER ALLOWING PROPORTIONATE ADMINISTRATIVE EX PENSES AND DEPRECIATION, THE OTHER INCOME OUT OF PROFIT ON SALE OF LAND AND DEVELOPMENT CHARGES COMES TO RS.53,642/ - . THE APPELLANT FIRM HAS INTEREST INCOME OF RS.20,120/ - . ACCORDINGLY, THE INCOME OF THE APPELLANT FIRM IS RECOMPUTED AT RS.7,37,859/ - AFTE R CONSIDERING THE REMUNERATION AND INTEREST TO THE PARTNERS. 5. ON THE DATE OF HEARING, NO ONE WAS PRESENT FROM THE SIDE OF THE RESPONDENT ASSESSEE. CONSIDERING THE TRIFLE NATURE OF THE DISPUTE, WE HAVE DECIDED TO PROCEED EXPARTE QUA ASSESSEE AFTER HEAR ING THE LD D.R., WHO HAS PLACED RELIANCE ON THE ORDER OF THE AO. 6. WE HAVE PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THEREUPON NOTED THAT THE ASSESSEE FIRM IS IN THE CONSTRUCTION BUSINESS DERIVING INCOME AS A BUILDER AND DEVELOPER. FOR CONSTRU CTION, THE ASSESSEE HAS SHOWN PURCHASE OF BUILDING CONSTRUCTION MATERIALS WHICH WERE LISTED PARTY - WISE BY THE AO IN THE ASSESSMENT ORDER. HOWEVER, THE ASSESSEE HAD FAILED TO PRODUCE PURCHASE BILLS, 5 I.T.A. NO. 37/BLPR/2012 ASSESSMENT YEAR : 2008 - 09 ETC. IN THE LIKE MANNER, CERTAIN OTHER EXPENSES HAVE BEE N CLAIMED BUT COULD NOT BE SUBSTANTIATED BY THE ASSESSEE AT THE ASSESSMENT STAGE. THE AO HAS PARTLY ALLOWED THE ASSESSEES CLAIM UNDER DIFFERENT HEADS. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE LD CIT(A) HAS CONSIDERED THE OVE RALL PICTURE OF THE CONSTRUCTION BUSINESS AND TAKEN INTO ACCOUNT CERTAIN PERCENTAGE OF PROFITS, WHICH WERE PREVALENT IN THIS TYPE OF BUSINESS. THE LD CIT(A) HAS ALSO MENTIONED COMPARABLE INSTANCES OF THAT AREA, W HEREIN, CERTAIN TAXPAYERS WHO WERE IN CO NSTRUCTION BUSINESS HAD DISCLOSED NET PROFIT @ 5.67% OF THE TURNOVER. PLACING RELIANCE ON THE SAID TAXPAYERS INSTANCES, THE LD CIT (A) HAD APPLIED THE PERCENTAGE OF PROFIT AT 5% OF THE TURNOVER OF THE ASSESSEE. THE LD CIT(A) HAS ALSO WORKED OUT CERTAIN PROPORTION OF ADMINISTRATIVE EXPENSES, DEPRECIATION, ETC AND FINALLY DIRECTED THE AO TO RE - COMPUTE THE TAXABLE INCOME OF THE ASSESSEE AT RS.7,37,859/ - , AFTER CONSIDERING THE REMUNERATION AND INTEREST PAID TO THE PARTNERS. NOW, THE REVENUE AS PER GROUND IS AGITATING THAT AS PER CALCULATION GIVEN BY THE LD CIT(A), THE PERCENTAGE OF PROFIT HAD GONE DOWN TO 4.37% OF THE TURNOVER OF THE ASSESSEE. THE LD CIT(A) HAS GIVEN FINDINGS THAT IN SUCH TYPE OF BUSINESS, THE NET PROFIT PERCENTAGE WAS 5% OF THE TURNOVER. ACCORDING TO US, AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ESPECIALLY WHEN THE AO HAD MADE DISALLOWANCE OF VARIOUS EXPENSES ON ESTIMATED PERCENTAGE BASIS AND THE LD CIT(A) HAS ALSO PROCEEDED TO APPLY AN OVERALL PERCENTAGE O F PROFIT ON THE TURNOVER, THEREFORE, IT IS JUSTIFIABLE AS WELL AS REASONABLE TO ADOPT SUCH RATE OF PROFIT AS FOUND IN COMPARABLE INSTANCES OF THAT AREA. WE HAVE NOTED THAT ALTHOUGH THE LD CIT(A) HAS RECORDED HIS FINDINGS THAT 6 I.T.A. NO. 37/BLPR/2012 ASSESSMENT YEAR : 2008 - 09 NET PR OFIT WAS DISCLOSED AT A BOUT 5 % BUT FINALLY AS PER REVENUE DEPARTMENT, THE NET PROFIT HAD GONE DOWN TO 4.37%. THEREFORE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HEREBY DIRECT TO COMPUTE THE NET PROFIT @ 5% OF THE TOTAL TURNOVER WHICH SHALL BE THE NET TAXABLE INCOME OF THE ASSESSEE ON WHICH INCOME TAX AS PER LAW CAN BE COMPUTED. BECAUSE OF THIS DIRECTION REST OF THE EXEMPTION /DEDUCTION SHALL MERGE WITH THE NET PERCENTAGE OF PROFIT AS FIXED BY US. RESULTANTLY, GROUND RAISED BY THE REVENUE MAY BE TREATED AS PARTLY ALLOWED. 7. IN THE RESULT, APPEAL FI LED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 /10/2015 . SD/ - SD/ - ( . . , ) ( , ) G.D.AGARWAL, VICE PRESIDENT MUKUL KR SHRAWAT,JUDICIAL MEMBER RAIPUR, DATED 09 / 10/2015 . . ./ PARIDA , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT : THE INCOME TAX OFFICER - 4,AAYAKAR BHAVAN, NEW CIVIC CENTRE, BHILAI 2. / THE RESPONDENT: LANDMARK DEVELOPERS, SHOP NO.2, STREET - 27, SMRITI NAGAR, BHILAI 3. ( ) / THE CIT(A) - BILASPUR 4. / CIT , RAIPUR 5. , , / DR, ITAT, RAIPUR 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SR. PS, ITAT, CAMP: RAIPUR