ACIT, New Delhi V. M/s. DLF South Point, New Delhi

ITA 4244/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5240 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 12-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI R.S. SYAL, HONBLE VICE PRESID ENT & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-4244/DEL/2013 ( ASSESSMENT YEAR: 2008-09) ACIT CIRCLE 31(1), 14 TH FLOOR, E-2 BLOCK, CIVIC CENTRE, MINTO ROAD, NEW DELHI. VS DLF SOUTH POINT 9 TH FLOOR, DLF CENTRE SANSAD MARG, NEW DELHI. AABFU1094K ASSESSEE BY SH. R.S. SINGHVI, CA REVENUE BY SH. ANSHU PRAKASH, SR. DR ORDER PER SHRI K.N. CHARY, J.M. THIS IS AN APPEAL BY THE REVENUE CHALLENGING THE O RDER DATED 30.04.2013 IN APPEAL NO. 55/CIT(A)XVII/DEL/2011-12 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XVII, NEW DELHI (FOR SHORT HEREINAFTER CALLED LD. CIT(A)). 2. BRIEFLY STATED FACTS RELEVANT FOR THE DISPOSAL O F THIS MATTER ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM WHICH COMPR ISES OF FOUR PARTNERS OF THE DLF GROUP WHO ARE ENGAGED IN THE BU SINESS OF REAL DATE OF HEARING 09.08.2017 DATE OF PRONOUNCEMENT 11.08.2017 2 ITA NO. 4244/DEL/2013 ESTATE. THE ASSESSEE FIRM CAME INTO EXISTENCE ON 1 2.04.2004. FOR THE AY 2008-09 THE ASSESSEE FILED THEIR RETURN OF I NCOME ON 06.10.2008 DISCLOSING A GROSS RECEIPT/INCOME OF RS. 11.40 CRORES AND HAS CLAIMED EXPENSES OF RS. 14.30 CRORES RESULT ING IN A NET LOSS OF RS. 2.90 CRORES. AO, ON A PERUSAL OF ITR-V FOUND THAT AS PER COMPUTATION OF INCOME A TOTAL INCOME WAS DECLAR ED AT LOSS OF RS. 3,13,16,917/-. FURTHER, AO FOUND THAT THE ASSE SSEE HAD PAID AN ADVANCE TAX OF RS. 2.58 CRORES IN SEPTEMBER AND DECEMBER, 2007, AND CLAIMED REFUND OF THE SAME. IN THE CIRCU MSTANCES, AO CONCLUDED THAT THE ASSESSEE HAD NOT COMPUTED THE CO RRECT AMOUNT OF INCOME FOR THE FOLLOWING REASONS: I. ASSESSEE HAS UNDERTAKEN COMMERCIAL PROJECT IN THE NAME OF M/S DLF SOUTH POINT WHICH IS PART OF THE PRESTIGIOUS DL F GROUP AND THE CHANCES OF ANY LOSSES ARE RULED OUT. II. THE ASSESSEE HAS UNDERTAKEN THE COMPLETION OF PROJE CT BY 98.35% BY THE END OF THE YEAR. III. AS PER THE WORKING GIVEN AGAINST ESTIMATED SALE VAL UE OF RS. 121.16 CRORES, THE TOTAL COST IS RS. 81.19 CRORES W HICH SHOWS A GROSS MARGIN OF MORE 33%. IV. AS PER THE BALANCE SHEET AND PROFIT AND LOSS ACCOUN T, THE ASSESSEE IS NOT HAVING ANY FINANCIAL CRUNCH AS HE H AS ALSO DISCLOSED INCOME FROM MUTUAL FUNDS AND DIVIDENDS. V. THE ASSESSEE IS HAVING HIGHLY PROFESSIONAL AND WELL VERSED EMPLOYEES WHO ARE LEGALLY AND TECHNICALLY QUALIFIED AND HENCE THE CHANCE OF ANY LOSS OR ANY REASON FOR DEPOSIT OF ADVANCE TAX TILL DECEMBER QUARTER CANNOT BE SATISFACTORILY UNDERSTOO D. AS PER THE ADVANCE TAX PAID, THE ASSESSEE WOULD HAVE ESTIMATED ITS INCOME OF RS. 10 CRORES. VI. THE SUDDEN FALL IN THIS ESTIMATED INCOME OF RS. 10 CRORES TO A LOSS OF RS. 3 CRORES IS BEYOND IMAGINATION. 3 ITA NO. 4244/DEL/2013 VII. THE REASONS FOR THE DECREASE IN PROFIT AND THE HUGE LOSS DECLARED BY THE ASSESSEE HAS NOT BEEN EXPLAINED SATISFACTORI LY. RATHER, THE ASSESSEE HAS TRIED HIS LEVEL BEST TO DIVERT ATTENTI ON OF THIS OFFICE BY FILING A FRESH CHART AS MENTIONED ABOVE IN WHICH TH E FIGURE OF LOSSES CLAIMED IN THE FOURTH QUARTER ARE COMPLETELY MISSING. CONSEQUENTLY, AO COMPUTED THE TOTAL TAXABLE INCOME OF THE ASSESSEE AT RS. 3,86,30,653/-. CHALLENGING THE SAM E ASSESSEE CARRIED THE MATTER IN APPEAL AND THE LD. CIT (A) VI DE IMPUGNED ORDER CONSIDERED THE CONTENTIONS OF THE ASSESSEE AN D DELETED THE ADDITIONS MADE BY THE AO AND HELD THAT THERE IS A D IP IN THE PROFITS OF THE ASSESSEE DURING THE LAST QUARTER OF AY 2008-09 ATTRIBUTABLE TO THE REVERSAL OF THE ACCOUNTING ENTR IES DUE TO THE CANCELLATION THAT TOOK PLACE ON 20.02.2008 OF AN AG REEMENT DATED 30.06.2007 OF SALE OF 74,216 SQ.FT OF PROPERTY FOR A CONSIDERATION OF RS. 34,73,30,880/- AND REFUND OF AMOUNT TO THE PROS PECTIVE PURCHASER. ON THIS PREMISES LD. CIT (A) ALLOWED TH E APPEAL AND DELETED THE ADDITIONS MADE BY THE AO. CHALLENGING THE SAME THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GRO UNDS: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT (A) HAS ERRED IN DELETING THE ESTIMATION OF INCOME OF RS. 3,23,01 ,869/- I.E. 30% OF THE SALES OF RS. 10,76,72,869/- INSTEAD OF 33% GROS S MARGIN DECLARED BY THE ASSESSEE DESPITE THE FACT THAT THE ASSESSEE HAS FAILED TO FURNISH ANY SATISFACTORY EXPLANATION FOR DECLARING HUGE LOSS ESPECIALLY IN THE FOURTH QUARTER OF THE YEAR. 2. THE LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE A DDITION AMOUNTING TO RS. 70,66,880/- WHEN ALL DEDUCTIONS DEEMED TO HAVE BEEN TAKEN WHILE MAKING THE ESTIMATE OF THE INCOME. 4 ITA NO. 4244/DEL/2013 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF TH E HEARING OF THE APPEAL. 3. IT IS THE ARGUMENT OF THE LD. DR THAT THE APPELL ANT WAS CONSISTENTLY MAKING PROFIT AT 33% IN THE EARLIER YE ARS, AND MADE PROFIT AS WELL IN THE SUCCEEDING YEAR AS SUCH AO WA S JUSTIFIED IN DISBELIEVING THE VERSION OF THE ASSESSEE THAT THERE HAPPENED TO BE A LOSS IN THE AY 08-09 AND IN VIEW OF THE FACT THAT THE ASSESSEE FAILED TO EXPLAIN THE TRANSACTIONS AND ACCOUNTS, TH E AO IS JUSTIFIED IN ESTIMATING THE PROFIT OF THE ASSESSEE AT 30% TO REACH THE CORRECT ASSESSABLE INCOME. ACCORDING TO THE LD. DR THERE A RE NO CIRCUMSTANCES EXISTING IN THIS CASE FOR THE CIT (A) TO INTERFERE WITH THE ORDER OF THE AO AND SINCE THE ORDER OF THE LD. CIT (A) IS ARBITRARY AND WITHOUT ANY BASIS, THE ORDER OF THE A O HAS TO BE RESTORED. 4. PER CONTRA, IT IS THE ARGUMENT OF THE LD.AR THAT THE AO DID NOT PROPERLY UNDERSTAND THE ACCOUNTING POLICY OF TH E ASSESSEE AND WITHOUT DISPUTING THE PROJECT OF COMPLETION METHOD (POCM) ADOPTED BY THE ASSESSEE AND WITHOUT REJECTING THE B OOKS OF ACCOUNTS, IT IS NOT OPEN FOR THE AO TO ESTIMATE THE PROFIT OF THE ASSESSEE FOR THE CURRENT ASSESSMENT YEAR ALONE IN U TTER DISREGARD 5 ITA NO. 4244/DEL/2013 TO THE FACT THAT FOR THE EARLIER YEARS THE ASSESSEE HAD SHOWN THE CUMULATIVE MARGIN OF 33% AND FOR THE CURRENT YEAR A LSO 31% OF THE CUMULATIVE PROFIT. ACCORDING TO THE LD. AR, THERE IS A FAILURE ON THE PART OF THE AO IN UNDERSTANDING THE REASONS FOR THE DIP IN THE PROFIT OF THE ASSESSEE WHICH ARE MAINLY DUE TO THE REASON OF REVERSAL ENTRIES IN RESPECT OF THE CANCEL THE SAME TRANSACTION. IT IS SUBMITTED THAT DESPITE THIS REVERSAL ENTRIES STILL THE ASSESSEE HAD SHOWN A HEALTHY CUMULATIVE PROFIT MARGIN AT 31%. 5. WE HAVE CAREFULLY GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. ABSOLUTELY THERE IS NO DISPUTE THAT THE ASSESSEE HAS BEEN FOLLOWING THE PROJECT OF COMPLETION METHOD (POCM) AND THE AO NEVER RAISED ANY OBJECTION FOR THE SAME. UNDISPUTED FACTS SHOW THAT AS ON31.12.2007 T HE ASSESSEE HAD SHOWN THE BUDGETED SALE VALUE AT RS. 12,116 LAC S, ACTUAL SALE VALUE AS 11,563.82 LACS, BUDGETED COST RS. 8155.45 LACS. ACTUAL COST INCURRED AS ON 31.12.2007 WAS 95.41% IN RELATI ON TO THE TOTAL BUDGETED COST OF RS. 8155.45. HOWEVER, THERE WAS C ANCELLATION OF SALE REDUCING THE FIGURE OF ACTUAL SALE VALUE. EVEN DURING THE REMAND PROCEEDINGS, AS COULD BE FOUND FROM THE ORDE R OF THE 6 ITA NO. 4244/DEL/2013 LD.CIT (A), THERE IS NO DISPUTE RAISED BY THE AO TO THE FACT THAT THE AGREEMENT OF THE SALE DATED 30.06.2007 FOR RS. 34,7 3,30,880/- IN RESPECT OF THE 74216 SQ. FT OF PROPERTY WAS CANCELL ED ON 22.02.2008. AFTER THIS CANCELLATION OF SALE THE AC TUAL SALES VALUE HAD COME DOWN TO RS. 8074.69 LACS FROM RS. 11,563.8 2 LACS AND CONSEQUENTLY THE PERCENTAGE OF 95.41% IN RELATION T O FIGURE OF 11,563.82 HAD GONE UP TO 98.35% AFTER THE VALUE OF SALES WAS REDUCED FROM 11,563.82 TO 8074.69 BECAUSE OF THE CA NCELLATION OF THE SALE AGREEMENT. DUE TO THIS ESCALATION IN THE PERCENTAGE OF THE ACTUAL COST TO THE BUDGETED COST FROM 31.12.2007 TO 31.03.2008, THE CUMULATIVE PROFIT WAS REVISED FROM RS. 27.50 CR ORES SHOWN IN THE AY 2007-08 TO 24.67 CRORES IN THE LAST QUARTER OF THE AY 2008- 09 WHICH IS CORRESPONDING TO THE CUMULATIVE PROFIT AT 31%. 6. THIS ASPECT OF THE ACCOUNTING UNDER POCM METHOD WAS PLACED BEFORE THE AO BY THE LD. CIT (A) WHILE CALLI NG FOR THE REMAND REPORT BUT UNFORTUNATELY THE REMAND REPORT O F THE AO DOES NOT THROUGH ANY LIGHT ON THIS PARTICULAR ACCOUNTING METHOD ADOPTED BY THE ASSESSEE. IT IS PERTINENT TO NOTE T HAT THE ASSESSEE HAS BEEN FOLLOWING THE POCM METHOD OF ACCOUNTING FO R THE EARLIER 7 ITA NO. 4244/DEL/2013 YEAR ALSO WHEN THEY HAVE DECLARED THE PROFITS OF 10 .67 CRORES IN THE AY 2006-07 AND 16.83 CRORES IN THE AY 2007-08. EVEN SUBSEQUENT TO THE ASSESSMENT YEAR UNDER CONSIDERATI ON, THE ASSESSEE HAD DECLARED A PROFIT OF RS. 9.05 LACS FOR THE AY 2009-10. REVENUE ACCEPTED THIS METHOD OF ACCOUNTING BY THE A SSESSEE AND WITHOUT REJECTING THE BOOKS OF ACCOUNTS AND WITHOUT POINTING ANY FALLACY IN THE FIGURES FURNISHED BY THE ASSESSEE, W E ARE OF THE CONSIDERED OPINION THAT THE AO WAS NOT JUSTIFIED IN RESORTING TO ESTIMATE PROFITS AT 30% OF SALE FOR THE AY 2008-09 ALONE. WE ARE IN AGREEMENT WITH THE FINDINGS OF THE LD. CIT (A) I N PARAGRAPH NO. 4.2 OF HIS ORDER IN RESPECT OF ALL THE SEVEN REASON S ENUMERATED BY THE AO FOR NOT ACCEPTING THE COMPUTATION OF INCOME FURNISHED BY THE ASSESSEE AND ENUMERATED AT PARAGRAPH NO. 4.6 OF THE ASSESSMENT ORDER. FURTHER WE ARE IN AGREEMENT WITH THE CONTENTION OF THE AR THAT THE CUMULATIVE PROFIT AT RS. 24.67 CRORES SHOWN BY THE ASSESSEE AS ON 31.03.2008 SHOWS A CUMU LATIVE PROFIT OF 31% WHICH IS HEALTHY AS OPENED BY THE LD. CIT (A). FOR THESE REASONS WE ARE SATISFIED WITH THE REASONING G IVEN BY THE ASSESSEE FOR THE DIP IN THE CUMULATIVE PROFITS TO R S. 24.67 CRORES AS ON 31.03.2008 INSTEAD OF RS. 27.50 CRORES SHOWN IN THE AY 8 ITA NO. 4244/DEL/2013 2007-08 IN RESPECT OF THE CUMULATIVE SALES OF RS. 7 9.42 CRORES, IS ATTRIBUTABLE TO THE CANCELLATION OF SALE IN RESPECT OF 74,216 SQ. FT AND CONSEQUENT REVERSAL OF ACCOUNTING ENTRIES. SUC H A REVISION OF CUMULATIVE PROFITS WAS OCCASIONED BY THE COMPELLING REASON OF CANCELLATION OF SALE WHICH IS NOT AT ALL CONTROVERT ED BY THE AO, AND WE ARE INCLINED TO ACCEPT THE SAME. 7. FOR THE REASONS SET FORTH IN THE PRECEDING PARAG RAPHS, WE UPHOLD THE FINDINGS OF THE LD. CIT (A) AND DO NOT F IND ANY REASONS TO INTERFERE WITH THE SAME. CONSEQUENTLY, GROUNDS OF APPEAL ARE DISMISSED. 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.08.2017 SD/- SD/- (R.S. SYAL) (K. NARSIM HA CHARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 11.08.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 9 ITA NO. 4244/DEL/2013 DRAFT DICTATED ON 09.08.2017 DRAFT PLACED BEFORE AUTHOR 10.08.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 11.8.17 APPROVED DRAFT COMES TO THE SR.PS/PS 11.8.17 KEPT FOR PRONOUNCEMENT ON 11.8.17 FILE SENT TO THE BENCH CLERK 11.8.17 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.