The ITO, Ward-1(1), RAJKOT-GUJARAT V. M/s. Geet Gunjan Builders, RAJKOT-GUJARAT

ITA 384/RJT/2012

• Counselvise Citation: 38424914 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MA THEWS D R RE
• Assessee Lawyers: MEHUL RANPURA CA H
• Keywords: Reopening of assessment; Difference of opinion; Assessment record; Revised return; Change of opinion
• Section: 143(3); 80IB; 148

Judgement Text

H , IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . . . OR 1 . . 1 1 BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM ITA NO. 3 84/RJT/2012 7R R / ASSESSMENT YEAR 200 6 - 07. THE INCOME - TAX OFFICER, WARD - 1 ( 1 ), RAJKOT. ( D / APPELLANT) GEET GUNJAN BUILDERS, C /O . MANSUKHBHAI M. PATEL, HARE KRUSHNA, 4 NARMADA PARK, RAJKOT. PAN : A AFFG6280R D / RESPONDENT O / REVENUE BY SHRI K. C. MA THEWS, D R. 7RE / ASSESSEE BY SHRI MEHUL RANPURA , CA. H / DATE OF HEARING 0 7 - 06 - 2013 H / DATE OF PRONOUNCEMENT 01 - 0 8 - 2013 / ORDER . . . , OR 1 / T. K. SHARMA, J. M. : THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 26 - 03 - 2012 OF CIT (A) - I, RAJKOT FOR THE ASSESSMENT YEAR 200 6 - 07. 2. BRIEFLY STATED, T HE FACTS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUS INESS OF CONSTRUCTION AND DEVELOPMENT OF HOUSING PROJECTS. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME ON 17 - 10 - 2006 DECLARING TOTAL INCOME AT RS.6,720/ - . AFTER CLAIMING THE DEDUCTION OF RS.1,82,56,946/ - U/S.80IB(10) OF THE I. T. ACT, 1961. SUBSEQUENTLY, ON 28 - 03 - 2008 THE ASSESSEE FIRM FILED A REVISED RETURN DECLARING TOTAL INCOME AT RS.6,720/ - AFTER CLAIMING DEDUCTION OF RS.1,93,06,458/ - U/S. 80IB(10) OF THE I. T. ACT, 1961 ALONGWITH AUDIT REPORT IN FORM NO.10CCB. AO FRAMED THE ASSESSMENT U/S.143(3) OF THE I.T. ACT, 1961ON 12 - 12 - 2008 ASSESSING THE TOTAL INCOME AT RS.49,02,720/ - . AGAINST THIS ORDER, ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A) AND LD. CIT (A) VIDE ORDER DATED 22 - 10 - 2009 ALLOWED THE APPEAL OF THE ASSESSEE. AGA INST THIS ORDER, AN APPEAL WAS FILED BY THE DEPARTMENT AND THE TRIBUNAL VIDE ORDER DATED 19 - 09 - 2010 IN ITA NO.1176/RJT/09 UPHOLD THE DECISION OF LD. CIT (A), RAJKOT. ITA 3 84 - 201 2 2 3. SUBSEQUENTLY, AO ISSUED NOTICE U/S.148 ON 22 - 03 - 2011 AND THEREAFTER FRAMED THE ASSESSME NT U/S.143(3) R.W.S. 147 OF THE I. T. ACT, 1961 ON 26 - 12 - 2011. IN THIS ASSESSMENT ORDER, AO MADE THE ADDITION OF RS.23,29,134/ - BEING PROFIT M ARGIN @ 20% OF ADVANCE RECEIVED FROM CUSTOMERS AMOUNTING TO RS.1,20,78,745/ - . THE REASONING GIVEN BY AO FOR MAKI NG THIS AD DITION ARE CONTAINED IN PARA - 3.2 AND 3.3 OF THE ASSESSMENT ORDER. ON APPEAL, IN THE IMPUGNED ORDER, LD. CIT (A) FOR THE REASONS GIVEN IN PARA - 3.1 HELD THAT REOPENING U/S.148 IS NULL AND VOID . THE MAIN REASONS GIVEN FOR HOLDING THE ASSESSMENT AS NULL AND VOID ARE THAT THE FACTS OF THE ENTIRE CASE WERE ON RECORD BEFORE THE AO AND NO NEW SET OF FACTS EMERGED OR WERE GATHERED OR INVESTIGATED UPON BY THE AO WHICH NECESSITATED REOPENING OF PROCEEDINGS. THE LD. CIT (A) RELIED ON THE JUDGMENT OF HONBL E SUPREME COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. 256 ITR 1 (SC) AND HELD THAT REOPENING U/S.148 IS NULL AND VOID. 4. AFTER DECLARING REOPENING OF ASSESSMENT U/S.147 AS NULL AND VOID, HELD THAT THE ENTIRE ADDITION OF RS.23,29,134/ - MADE BY A O BY CHANGING METHOD OF ACCOUNTING IS NOT SUSTAINABLE. FURTHER THIS INCOME IS EXEMPT U/S.80IB OF THE IT ACT AGGRIEVED WITH THE ORDER OF LD. CIT (A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING G ROUNDS: - 1 ) THE LEARNED CIT (A) - I, RAJKOT HA S ERRED IN LAW AND ON FACTS IN DIRECTING TO TREAT THE REOPENED ASSESSMENT PROCEEDINGS AS NULL AND VOID. 2 ) THE LEARNED CIT (A) - I, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.23,29,134/ - MADE ON A/C OF W.I.P. 5. AT THE TIME OF HEARING BEFO RE US, ON BEHALF OF REVENUE, SHRI K.C. MATHEWS, DR, APPEARED AND POINTED OUT THAT AO ISSUED NOTICE U/S.148 OF THE I.T. ACT ON 22 - 03 - 2011 AFTER RECORDING THE FOLLOWING REASONS: - ON SCRUTINY OF ASSESSMENT RECORDS AND OTHER DETAILS FILED BY THE ASSESSEE DURI NG THE SCRUTINY ASSESSMENT, IT HAS REVEALED THAT THE ASSESSEE HAS INCLUDED 28,09,262/ - AS PROFIT MARGIN @ 25% IN ITS B/S AS WORK IN PROGRESS. BUT THE SAME HAS NOT BEEN OFFERED FOR THE INCOME TAX. FURTHER SCRUTINY REVEALED THAT THE ACCRUED INCOME IS RELATED TO 28 TENEMENTS HAVING TOTAL AREAS OF 27,500 SQ. ML, WHICH ALSO INCLUDED THE 2 TENEMENTS IN GUNJAN VATIKA HAVING TOTAL AREA OF 2400 SQ. MT. AND 2 ITA 3 84 - 201 2 3 TENEMENTS IN GUNJAN RESIDENCY HAVING AREA OF 2300 SQ. MT. THESE TWO PROJECTS HAVE BEEN EXEMPTED U/S 80IB (10) . THEREFORE, THE WORK IN PROGRESS IN RESPECT OF REMAINING 24 TENEMENTS OF AREA 22,800 SQ. MTS. ARE NOT COVERED UNDER SECTION 80IB(10). FURTHER THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.1,20,78,745/ - AS ADVANCE FROM CUSTOMER ALSO. AS PER THE CASE LAW OF P ARAM ANAND BUILDER (P) LTD VS ITO (ITAT MUM) 59 ITD 29 THE ASSESSEE HAS TO OFFER HIS INCOME ON THE BASIS OF PERCENTAGE OF COMPLETION METHOD AS PER THE PROVISIONS OF AS 7: CONSTRUCTION CONTRACTS. THE PROFIT HAS TO BE RECOGNIZED @ 25% OF TOTAL RECEIPT. AS SUCH THE ACCRUED INCOME IN RESPECT OF SUCH TENEMENTS SHOULD BE OFFERED IN INCOME - TAX. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT AN AMOUNT OF 23,29,134/ - CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. AC T, 1961. 6. THE ASSESSEE OBJECTED TO THE REOPENING AND HIS OBJECTIONS WERE REJECTED BY THE AO VIDE LETTER DATED 12 - 12 - 2006, THEREFORE, AO RIGHTLY RE - OPENED THE ASSESSMENT. AS AGAINST THIS, SHRI MEHUL RANPURA, CA APPEARED ON BEHALF OF THE ASSESSEE POINT ED OUT THAT NO NEW SET OF FACTS EMERGED OR GATHERED OR INVESTIGATED BY THE AO WHICH PROMPTED THE AO TO REOPEN THE ASSESSMENT. WHILE FRAMING THE ASSESSMENT U/S.143(3) OF THE I.T. ACT, AO VERIFIED THE ALLOWABILITY OF DEDUCTION U/S.80IB(10). ALL THESE DETAIL S WERE FURNISHED WHICH WERE EXAMINED BY AO AND IT IS ONLY AFTER SATISFYING HIMSELF, HE ALLOWED THE DEDUCTION U/S.80IB(10). THE LD. COUNSEL OF THE ASSESSEE FURTHER RELIED ON THE DECISION OF CIT VS. KELVINATOR OF INDIA LTD. (SUPRA) WHEREIN IT WAS HELD THAT C HANGE OF OPINION, REOPENING U/S.148 IS NOT PERMISSIBLE. 7. AFTER HEARING BOTH THE SIDES IN RESPECT OF GROUND NO.1, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT ORIGINAL ASSESSMENT WAS FRAMED U/S.143(3) ON 26 - 12 - 2011 WHEREIN AO ALLOWED THE DEDUCTION CLAIMED U/S.80IB (10). IN THE IMPUGNED ORDER, THE LD. CIT (A) HELD THAT PROCEEDINGS U/S.147 OF THE I.T. ACT ARE NULL AND VOID. THE REASONINGS GIVEN BY LD. CIT (A) IN THIS REGARD ARE CONTAINED IN PARA - 3.,1 WHICH R EADS AS UNDER: - 3.1 I HAVE CAREFULLY PERUSED THE WRITTEN SUBMISSION OF THE LD. AR OF THE APPELLANT AND THE MATTER WAS ALSO DISCUSSED WITH HIM DURING THE COURSE OF HEARING. ON PERUSAL OF THE REASONS RECORDED BY THE AO WHILE INITIATING THE REOPENING PROCEE DINGS, IT IS NOTICED THAT, THE PROCEEDINGS WERE REOPENED DUE TO IMPROPER CLAIM OF DEDUCTION U/S 80IB(10) IN RESPECT OF PROJECT ITA 3 84 - 201 2 4 GUNJAN VATIKA. THE AO VIDE NOTICE U/S 148 OF THE ACT DATED 22.03.2011 REOPENED THE ASSESSMENT BY RECORDING FOLLOWING REASONS: ON SCRUTINY OF ASSESSMENT RECORDS AND OTHER DETAILS FILED BY THE ASSESSEE DURING THE SCRUTINY ASSESSMENT, IT HAS REVEALED THAT THE ASSESSEE HAS INCLUDED 28,09,262/ - AS PROFIT MARGIN @ 25% IN ITS B/S AS WORK IN PROGRESS. BUT THE SAME HAS NOT BEEN OFFERED F OR THE INCOME TAX. FURTHER SCRUTINY REVEALED THAT THE ACCRUED INCOME IS RELATED TO 28 TENEMENTS HAVING TOTAL AREAS OF 27,500 SQ. ML, WHICH ALSO INCLUDED THE 2 TENEMENTS IN GUNJAN VATIKA HAVING TOTAL AREA OF 2400 SQ. MT. AND 2 TENEMENTS IN GUNJAN RESIDENCY HAVING AREA OF 2300 SQ. MT. THESE TWO PROJECTS HAVE BEEN EXEMPTED U/S 80IB(10). THEREFORE, THE WORK IN PROGRESS IN RESPECT OF REMAINING 24 TENEMENTS OF AREA 22,800 SQ. MTS. ARE NOT COVERED UNDER SECTION 80IB(10). FURTHER THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.1,20,78,745/ - AS ADVANCE FROM CUSTOMER ALSO. AS PER THE CASE LAW OF PARAM ANAND BUILDER (P) LTD VS ITO (ITAT MUM) 59 ITD 29 THE ASSESSEE HAS TO OFFER HIS INCOME ON THE BASIS OF PERCENTAGE OF COMPLETION METHOD AS PER THE PROVISIONS OF AS 7: CONST RUCTION CONTRACTS. THE PROFIT HAS TO BE RECOGNIZED @ 25% OF TOTAL RECEIPT. AS SUCH THE ACCRUED INCOME IN RESPECT OF SUCH TENEMENTS SHOULD BE OFFERED IN INCOME - TAX. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT AN AMOUNT OF 23,29,134/ - CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. THUS, THE APPELLANT HAD WRONGLY CLAIMED DEDUCTION, WHICH WAS ALLOWED TO IT, IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE I T ACT ON 12.12.2008. HENCE, THE ENTIRE F ACTS OF THE CASE WERE ON RECORD BEFORE THE AO, AND NO NEW SET OF FACTS EMERGED OR WERE GATHERED OR INVESTIGATED UPON BY THE AO, WHICH NECESSITATED REOPENING OF PROCEEDINGS. EVEN DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS, THE AO WHILE VERIFYING TH E ALLOWABILITY OF CLAIM OF DEDUCTION U/S 80IB(10) WOULD HAVE CALLED FOR ALL THE DETAILS FROM THE APPELLANT. AFTER SATISFYING HIM WITH THE DETAILS SO PRODUCED BEFORE HIM, HE WAS CONVINCED THAT THE CLAIM OF DEDUCTION HAS BEEN RIGHTLY MADE. SUCH CLAIM WAS ALL OWED. IT IS NOT A CASE WHERE THE APPELLANT HAD FURNISHED INCORRECT INFORMATION LEADING TO THE CLAIM OF DEDUCTION, WHICH RESULTED IN ESCAPEMENT OF INCOME. HENCE, THE PRESENT ACTION OF THE AO TO REOPEN THE PROCEEDINGS, TANTAMOUNT TO A MODIFICATION ARISING FR OM MERE CHANGE OF OPINION AND HENCE, THE JUDGMENT OF THE HON. SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA, AS PRODUCED IN THE WRITTEN SUBMISSION (SUPRA) IS HELD TO BE SQUARELY APPLICABLE TO THE CASE OF APPELLANT. IN VIEW OF ABOVE FACTS & LEGAL POSITION AS DISCUSSED ABOVE IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN REOPENING THE ASSESSMENT AND THEREFORE, THE REOPENING PROCEEDINGS U/S 147 OF THE I T ACT ARE HELD AS NULL AND VOID. THIS GROUND OF APPEAL STANDS ALLOWED. 8. FROM THE AFORESAID PARA , IT CAN BE SEEN THAT LD. CIT (A) HAS RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. WHICH WE ARE OF THE VIEW IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE AS ORIGINAL ASSESSMENT WAS FRAMED U/S. 143(3) WHEREIN, AO ALLOWED THE DEDUCTION U/S.80IB (10) OF THE I.T. ACT, 1961. WE THEREFORE INCLINED TO UPHELD THE VIEW TAKEN BY THE LD. CIT (A) IN THIS REGARD. THE GROUND NO.1 IS REJECTED. ITA 3 84 - 201 2 5 9. EVEN ON MERIT, IN THE IMPUGNED ORDER THE LD. CIT (A) HELD THAT ASSESSEE IS ENTITLED TO DEDUCTION U/S.80IB(10) AND FOR THIS REASON ALSO, HE DELETED ADDITION OF RS.23,29,134/ - MADE BY AO. THE REASONING IN THIS REGARD IS CONTAINED IN PARA - 4.2 TO 4.7 OF THE IMPUGNED ORDER. ON MERIT, BEFORE US LD. DR MERELY RELIED ON THE REASONS RECORDED BY THE AO FOR ISSUING NOTICE U/S.148 OF THE I.T. ACT, 1961. AS AGAINST THIS, COUNSEL OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT (A). 10. WE HAVE CAREFULLY GONE THROUGH THE DECISION OF THE LD. CIT (A) CONTAINED IN PARA - 4.2 T O 4.7 OF THE IMPUGNED ORDER. IT IS PERTINENT TO NOTE THAT IN THE ASSESSMENT FRAMED U/S.143 (3) R.W.S. 147 ON 26 - 12 - 2011, THE ASSESSING OFFICER HAS NOT CONSIDERED THAT ASSESSEE IS ENTITLED TO DEDUCTION U/S.80IB(10) OF THE I.T. ACT, 1961. THE LD. CIT (A) HAS HELD THAT ADDITION OF RS.23,29,134/ - MADE BY CHANGING METHOD OF ACCOUNTING IS NOT SUSTAINABLE BECAUSE THIS ADDITION MADE IS ALSO EXEMPTED U/S.80IB (10) OF THE I.T. ACT, 1961. WE ARE OF THE VIEW THAT VIEW TAKEN BY LD. CIT (A) IS FAIR AND REASONABLE. WE THEREFORE DECLINED TO INTERFERE. THE GROUND NO.2 IS REJECTED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 12. THIS ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/_ ( . . PO D. K. SR IVASTAVA ) ( H . . R / T. K. SHARMA) / ACCOUNTANT MEMBER 7 O / JUDICIAL MEMBER / ORDER DATE 01 - 0 8 - 2013. /RAJKOT NVA/ - PRJ / COPY OF ORDER FORW ARDED TO: - 1 . D / APPELLANT - THE INCOME - TAX OFFICER, WARD - 1 (1), RAJKOT. . 2 . D / RESPONDENT - GEET GUNJAN BUILDERS, C /O . MANSUKHBHAI M. PATEL, HARE KRUSHNA, 4 NARMADA PARK, RAJKOT. 3 . M / CONCERNED CIT (A) - I , RAJKOT. 4 . M - / CIT (A) - II, RAJKOT. 5 . 77 , H , / DR, ITAT, RAJKOT 6 . R / GUARD FILE. / BY ORDER TRUE COPY. PRIVATE SECRETARY, I TAT, RAJKOT