LAXMANBHAI CONSTRUCTION (INDIA) P.LTD, MUMBAI V. DCIT CIR 3(2), MUMBAI

ITA 4092/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0329 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 13-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 01-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI RAM CHANDRAN
• Assessee Lawyers: V C SHAH
• Section: 143(3); 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ITA NO. 4092/MUM/2015 ( / ASSESSMENT YEAR: 2 0 10 - 11 ) M/S LAX MANBHAI CONSTRUCTION ( I) PVT LTD., 97,BAJAJ BHAVAN, NARIMAN POINT, MUMBQI - 400021 / VS. DY. COMMISSIONER OF INCOME TAX - CIRCLE (3) (2) , AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ( / APPELLANT) : ( / RESPONDENT ) ./ PAN : AAAC L0711E ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : SHRI V C SHAH / REVENUE BY : SHRI K RAVI RAMCHANDRAN / DATE OF HEARING : 13 .6. .2017 / DATE OF PRONOUNCEMENT : 16. 8 . 201 7 / O R D E R PER RAJESH KUMAR, A. M: THE CAPTIONED IS APPEAL BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 20 10 - 11 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 8 , MUMBAI , DATED 2 6 . 06 .20 15 WHICH IN TURN HAS ARISE N FROM AN ORDER PASSED 2 ITA NO. 4092 /MUM/2015 BY THE ASSESSING OFFICER DATED 1.3. 2013 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT) WHEREIN THE ASSESSEE CHALLENGED THE CONFIRMATION OF ADDITION OF RS.27,51,654/ - BY CIT(A) IGNORING THE FACT THAT THE INCOME HAS BEEN OFFERED IN THE EARLIER YEARS ON THE BASIS OF PERCENTAGE COMPLETION METHOD. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 7.10.2010 DECLARING TOTAL INCOME OF RS.71,18,924 / - WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. T HEREAFTER THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE UNDER SECTION 143(2) AND 142(1) AND WERE DULY SERVED UPON THE ASSESSEE. THE ASSESSEE IS A CIVIL CONTRACTOR AND WAS ALSO DOING THE BUSINESS OF PROPERTY DE VELOPER. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS SOLD FLATS AT A PRICES WHICH IS BELOW MARKET RATE AND AT A V AR YING RATES AS WA S APPARENT FROM THE FACTS THAT THE FLAT NO.502 WAS SOLD AT RS.4371/ - PER SQ.FT. WHEREAS FLAT NO.702 WAS SOLD AT 3989/ - PER SQ.FT WHICH WA S LOWER THAN THE CONSTRUCTION COST AND ACCORDINGLY, THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE AND WORKED OUT PRO FIT BY APPLYING 8% ON THE SALES RS.36,02,640/ - AND ADDED A SUM OF RS.27,51,654/ - WHI CH WAS CALCULATED BY DEDUCTING RS.8,50,986/ - , THE AMOUNT OF PROFIT DECLARED BY THE ASSESSEE BEING 8% ON 3 ITA NO. 4092 /MUM/2015 C O ST FROM RS.36,02,640/ - AS CALCULATED BY THE AO BY ALLOWING DEDUCTION OF PROFIT ALREADY SHOWN BY THE ASSESSEE RS.8,50,986/ - DURING THE YEAR BY FRAMING ASSESSMENT UNDER SECTION 143(3) VIDE ORDER DATED 1.3.2013 . THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE THAT THE PROFIT IS BEING DECLARED AT THE RATE OF 8% OF THE COST OF CONSTRUCTION ACCORDING TO PERCENTAGE COMPLETION METHOD AND PROFIT ON T HE S O ME OF FLATS WAS BEING OFFERED OVER THE YEARS ON THE BASIS OF CONSTRUCTION COST. THE MATTER CARRIED BEFORE THE LD.CIT(A). 3 . BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE SUBMITTED THAT THE AO HAS FAILED TO CONSIDER THE FACTUAL POSITION THAT THE PROFIT IN RESPECT OF PROJECT UNDER CONSIDERATION STANDS DECLARED IN THE EARLIER YEARS ON THE BASIS OF COST OF CONSTRUCTION AND ASSESSED ACCORDINGLY. THEREFORE UPHOLDING THE ORDER OF THE AO WOULD AMOUNT TO DOUBLE TAXATION FIRST BY SHOWING PROFIT ON THE BASIS OF W ORK COMPLETION METHOD IN EACH YEAR AS PER CO S T OF CONSTRUCTION BY THE ASSESSEE AND SECONDLY BY APPLYING THE PERCENTAGE ON THE SALES WITHOUT MAKING ANY ALLOWANCE AND DEDUCTION IN RESPECT OF PROFIT ALREADY DECLARED IN THE EARLIER YEARS. THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER : 4 ITA NO. 4092 /MUM/2015 5. THE APPELLANT.. IN VIEW OF THE ABOVE, THERE IS NO MERIT IN CONTENTION OF THE AR THAT THE AO SHOULD NOT HAVE IGNORED THE PROFIT OFFERED TAX IN PREVIOUS YEAR ENDED 31 .3.2008/ - OF RS.44,45,586/ - AND PREVIOUS Y EAR ENDED 31.3.2009 OF RS.10,41,000/ - THE APPELLANT COMPANY HAS SOLD 6 FLATS DURING THE YEAR UNDER CONSIDERATION FOR A SUM OF RS.4,50,33,000/ - A THE APPELLANT ITSELF HAS CONSIDERED 8% PROFIT FROM THE PROJEC T AND HAS AS IT FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING, THE AO HAS RIGHTLY APPLIED SAME PERCENTAGE OF 8% TO ARRIVE, ITS PROFIT ON SALE CONSIDERATION OF RS.4,50,33,000/ - . HOWEVER, THERE IS A COMPUTATION MISTAKE MADE BY THE AO . THE CORRECT FIGURE WILL BE RS.27,51,654 / - (RS.36,02,640/ - MINUS RS.8,50,986 / - ). THE AO IS DIRECTED TO MAKE ADDITION OF RS.27,51,654 / - IN PLACE OF RS.35,17,544/MADE BY HI M. 4. AGGRIEVED BY THE ORDER OF FAA, THE ASSESSEE IS IN APPEAL BEFORE US . THE LD AR OF THE ASSESSEE SUBMITT ED THAT WHILE APPLYING THE PERCENTAGE, THE AO DID NOT ALLOW THE DEDUCTION OF PROFIT DECLARED ON THE BASIS OF WORK - IN - PROGRESS METHOD D ECLARED IN THE EARLIER YEARS AND THEREFORE BY UPHOLDING THE ORDER OF THE AO , THE LD.CIT(A) H AS TOTALLY ERRED ON FACT S AND ON LAW AS IT HAS RESULTED IN DOUBLE TAXATION OF INCOME WHICH IS AGAINST THE SCHEME OF THE ACT . THE LD. AR PRAYED BEFORE THE BENCH THAT THE ADDITION AS MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) BE DELETED AS IT AMOUNT ED TO DOUBLE TAXATION. 5 . THE LD. DR REITERATED THE FACTS AS SUBMITTED BEFORE THE LOWER AUTHORITIES AND RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 5 ITA NO. 4092 /MUM/2015 6 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELLOW . WE FIND THAT THE CONTENTION OF THE ASSESSEE THAT THE PROFIT HAS BEEN RETURNED IN THE EARLI E R YEARS ON THE BASIS OF WORK - IN - PROGRESS METHOD (PERCENTAGE COMPLETION METHOD) BY APPLYING 8 % ON THE COST OF CONSTRUCTION HAS RESULTED IN TO DOUBLE TAXATION IS CORRECT . THER EFORE, WE ARE OF THE VIEW THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR VERIFICATION OF FACTS TO DETERMINE WHETHER THE ASSESSEE HAS DECLARED ANY PROFIT IN THE EARLIER YEA R S AND IF SO ASSESS THE INCOME AFTER ALLOW ING REDUCTION/ ALLOWAN CE OF THE SAME AFTER AFFORDING THE FAIR AND REASONABLE OPPORTUNITY OF BEING HEARING AND ASSESS THE INCOME ACCORDINGLY AS PER FACTS OF THE CASE SO THAT THERE IS NO DOUBLE TAXATION . 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH AUG , 2017. SD SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 16. 8 .2017 SRL,SR.PS 6 ITA NO. 4092 /MUM/2015 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR ) , / ITAT, MUMBAI