ACIT, Cir.-3, Pune V. Shri Sanjay Vasant Chaphalkar, Pune

ITA 389/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56584 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO. 389/PN/2010 : A.Y. 2006-07 ASSTT. CIT CIR. 3, PUNE APPELLANT VS. SHRI SANJAY V. CHAPHALKAR JANARDHAN DESHPANDE BUNGALOW 76/14 SHANTI SHEELA SOCIETY LAW COLLEGE ROAD, ERANDAWANE PUNE-411 004 PAN ABPPC 2158 P RESPONDENT APPELLANT BY: SHRI S.K. AMBASTHA RESPONDENT BY: SHRI M.R. BHAGWAT DATE OF HEARING: 22-11-2011 DATE OF PRONOUNCEMENT : ___ 11-2011 ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-II PUNE DATED 29-12-2009 FOR A.Y. 2 006-07 ON THE POINT OF DELETION OF ADDITION OF RS. 28,87,6 80/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ESTIMAT ED PROFIT IN THE OWNERSHIP FLAT SCHEME UNDERTAKEN BY T HE ASSESSEE. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BU SINESS OF CONSTRUCTION ACTIVITIES SUCH AS RESIDENTIAL SCHE MES. THE ACTIVITIES OF CONSTRUCTION OF RESIDENTIAL HOUSES AT RAMBAUG COLONY, PUNE, CONTINUED IN THE YEAR UNDER CONSIDERA TION. THE ONLY GROUND RAISED BY THE REVENUE IN THIS APPEA L 2 ITA NO. 389/PN/2010 SANJAY CHAPHALKAR A.Y. 2006-07 RELATES TO THE ISSUE OF ESTIMATION OF PROFIT DISREG ARDING THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE A SSESSEE AND IN RESPECT OF ADVANCES RECEIVED BY THE ASSESSEE FOR BOOKING OF FLATS/HOUSE IN RAMBAUG COLONY PROJECT. IT WAS CONTENDED THAT THE ASSESSING OFFICER HAS NOT APPREC IATED THE FURTHER WORK DONE IN THE RAMBAUG COLONY PROJECT IN THE NEXT ACCOUNTING YEAR AND CAME TO THE CONCLUSION THA T THE PROJECT WAS COMPLETED IN ACCOUNTING YEAR 2005-06 IT SELF. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD OF REVENUE RECO GNITION BUT THE AUDIT REPORT IN FORM NO. 3CB AND 3CD DID NO T MENTION THE METHOD. IN THIS VIEW OF THE MATTER, TH E ASSESSING OFFICER HAS INFERRED THAT THE REVENUE FRO M PROJECT RAMBAUG COLONY WAS TO BE RECOGNIZED IN A.Y. 2006-07 AND THEREFORE THE GP RATE SHOWN BY THE ASSESSEE FOR OTH ER SALES AT 16.15% WAS APPLIED ON THE ADVANCES RECEIVED OF R S 1,80,48,000/- AS ON 31-3-2006 AND A NET ADDITION OF RS. 28,87,680/- WAS MADE ON ESTIMATED BASIS. 3. ON APPEAL, THE CIT(A) DELETED THE IMPUGNED ADDIT ION MADE ON ACCOUNT OF ESTIMATED PROFIT IN THE OWNERSH IP FLAT SCHEME UNDERTAKEN BY THE ASSESSEE. THE SAME HAS BEE N OPPOSED BY THE REVENUE BEFORE US. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE PROFIT AND LOS S ACCOUNT, BALANCE SHEET FOR A.Y. 2003-04 TO 2007-08 REVEALED THAT THE ASSESSEE HAS BEEN FOLLOWING PROJE CT COMPLETION METHOD OF ACCOUNTING WHICH IS A RECOGNIZ ED METHOD OF ACCOUNTING AND SINCE IT HAS BEEN CONSISTE NTLY FOLLOWED BY THE ASSESSEE FROM YEAR TO YEAR THE PROF ITS OF THE ASSESSEE ARE TO BE WORKED OUT ON THE BASIS OF THIS REGULAR METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE. THE 3 ITA NO. 389/PN/2010 SANJAY CHAPHALKAR A.Y. 2006-07 ASSESSING OFFICER HAS FAILED TO POINT OUT FROM THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE THAT THE TRUE P ROFIT CANNOT BE WORKED OUT FROM THIS METHOD OF REVENUE RECOGNITION. THE ASSESSING OFFICER HAS ALSO NOT P OINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS WHICH INDI CATE THAT THE CORRECT INCOME OF THE ASSESSEE WAS NOT DETERMINABLE. THE ASSESSEE EXPLAINED THAT SOME EX PENSES WERE INCURRED IN THE NEXT YEAR AND SALES AND INCOME HAVE BEEN BOOKED ONLY AFTER COMPLETION CERTIFICATE WAS R ECEIVED FROM PMC ON 29-8-2006. FROM THE BALANCE SHEETS OF DIFFERENT YEARS REVEALED THAT THE SAME SYSTEM HAS B EEN FOLLOWED BY THE ASSESSEE FROM YEAR TO YEAR. THE AS SESSING OFFICER SHOULD HAVE POINTED OUT IN PARTICULAR THE I TEMS OF EXPENDITURE OR METHOD OF BOOKING OF SALES ETC., OR THERE WAS DEFERMENT OF PROFIT FROM ONE YEAR TO THE OTHER YEAR BEFORE REJECTING THE METHOD OF ACCOUNTING WHICH WAS BEING CONSISTENTLY FOLLOWED BY THE ASSESSEE IN EARLIER YE ARS. IN THE CIRCUMSTANCES THEREFORE, THE CIT(A) WAS JUSTIFI ED IN HOLDING THAT THE PROJECT COMPLETION METHOD FOLLOWED BY THE ASSESSEE CANNOT BE DISTURBED AND THAT THE ADDITION OF GP RATE ON THE ADVANCES OF BOOKING OF FLATS WAS RIGHTL Y HELD TO BE NOT JUSTIFIED. WE THEREFORE, DO NOT FIND ANY INF IRMITY IN THE ORDER OF THE CIT(A) AND ACCORDINGLY, THE SAME I S CONFIRMED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN ON 29 TH NOVEMBER 2011. SD/- SD/- (G.S. PANNU RAO) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER PUNE DATED THE 29 TH NOVEMBER 2011. ANKAM 4 ITA NO. 389/PN/2010 SANJAY CHAPHALKAR A.Y. 2006-07 COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT II PUNE 4. CIT(A)-II PUNE 5. THE D.R, ITAT PUNE BENCH, PUNE 6. GUARD FILE BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, PUNE.