The ITO, Ward-5(2), RAJKOT-GUJARAT V. M/s. Gunjan Developers, RAJKOT-GUJARAT

ITA 425/RJT/2012

• Counselvise Citation: 42524914 RSA 2012
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-04-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 02-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: J C RANPURA
• Keywords: Wrong claim; Revised return
• Section: 143(3); 80IB; 145; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH BEFORE: SHRI D.K. TYAGI , JUDICIAL MEMBER AND SHR I A. MOHAN ALANKAMONY , ACCOUNTANT MEMBER INCOME TAX OFFICER, WARD 5 (2 ), RAJKOT (APPELLANT) VS M/S GUNJAN DEVELOPERS, C/O SANDEEP ENTERPRISE, 41 PTC PLOT, LOHANAGAR, RAJKOT (RESPONDENT) REVENUE BY : SRI AVINASH KUMAR , D . R. ASSESSEE BY: SRI J.C. RANPURA , A.R. DATE OF HEARING : 25 - 04 - 2013 DATE OF PRONOUNCEMENT : 06 - 0 6 - 2013 / ORDER P ER : D.K. TYAGI , JUDICIAL MEMBER : - THIS IS THE REVENUE S APPEAL AG AINST THE ORDER OF LD. CIT(A) - IV RAJKOT DATED 25 - 05 - 2 012 . 2. THE ONLY EFFECTIVE GROUND TAKEN BY REVENUE READS AS UNDER : - 1 THE LD. CIT(A) - IV RAJKOT ERRED IN LAW AND ON FACT IN DIRECTING THE AO TO ASSESSEE THE TOTAL INCO ME OF THE ASSESSEE AT NIL, AS AGAINST I T A NO . 425 / RJT /20 12 A SSESSMENT YEAR 2006 - 07 I.T.A NO. 425/RJT/2012 A.Y. 2006 - 07 PAGE NO ITO VS. M/S GUNJAN DEVELOPERS 2 DETERMINED BY THE A.O. AT RS. 9,18,720/ - BY DISALLOWING THE ASSESSEES CLAIM U/S 80IB(10) OF THE I.T. ACT. 2. THE ASSESSING OFFICER WHILE DISALLOWING THE CLAIM OF DEDUCTION OF ASSESSEE U/S 80IB(10) OF THE ACT HAS OBSERVED AS UNDER: - 4. ON VERIFICATION OF THE CASE RECORDS, IT IS FOUND THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB(10) OF THE I.T ACT, 1961 OF RS, 9,18,720 / - . ON PERUSAL OF RETURN OF INCOME AND AUDIT REPORT, IT IS NOTICED THAT DURING THE YEAR, THER E WERE NO OPENING STOCK AND SALES. SINCE THERE IS NO SALES, THE QUESTION DOSE NOT ARISE OF PROFIT AND THERE FOR THE DEDUCTION CLAIMED IS NOT ADMISSIBLE AS PROVISIONS SECTION 80IB(10) OF THE I.T ACT. IN VIEW OF THE ABOVE A SHOW CAUSE NOTICE WAS ISSUED VIDE NOTICE NO. IT0/5(2) /ASST./285/08 - 09 DATED 12/12/2008. THE OPERATIVE PART OF NOTICE IS REPRODUCED HERE UNDER : 7. ON VERIFICATION OF THE RETURN OF INCOME, IT IS SEEN THAT YOU HAVE CLAIMED DEDUCTION U/S.80IB(10) OF THE ACT AT RS.9,18,720 / - . AS PER PROVISIONS OF SECTION 8 01 B(10 ) DEDUCTION OF HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR FROM SPECIFIED HOUSING PROJECT IS ALLOWABLE SUBJECT TO FULFILLMENT OF CONDITIONS STIPULATED IN THE SAID SUB SECTION. 3. GROSS PROFIT S O F RS. 13,87,683/ - ARRIVED AT BY YOU BY INCREASING THE COST OF WORK IN PROGRESS OF RS: 1,1 5,57,657/ - BY 12% DOES NOT REPRESENT THE PROFIT EARNED DURING THE YEAR FROM A CTIVITIES SPECIFIED IN SECTION 80B(10) OF THE I T ACT, 1961. IT IS ALSO WORT HWHILE TO NOTE THAT WORK IN PROGRESS INCLUDES COST OF LAND OF RS.54,57,473/ - & C HARGES PAID TO RMC AGGREGATING TO RS.12,33,944 / - WHICH ARE RELATED LO ENTIRE PROJECT AND NOT TO C ONSTRUCTION CARRIED OUT DURING T HE YEAR. 4. AS PE R PROVISION OF SECTION 80IB(10) , PROFIT DERIVED FROM ACTIVITY OF DEVELOPING & BUILDING HOUSING PROJECT DURING THE RELEVANT PREVIOUS YEAR F ROM THE PROJECT IS EXEMPT FROM T AX. DURING THE YEAR THERE IS NO INCOME ACCRUED TO AND RECEIVED BY THE FIRM. AS S UCH THERE IS NO PROFIT DERIVE D B Y YOU FROM ACTIVITY OF DEVELOPING AND BUI LDING HOUSING PROJECT. HOWEVER JUST TO T AKE BENEFI T OF EXEMPTION FROM PAYMENT OF T AX YOU HAVE ESTIMATED PROFIT @12% OF WORK IN PROGRESS WHICH IS NOT IN ACCORDANCE WITH THE PROVISIO NS OF SECTION 80IB(10) OF I.T. ACT. I.T.A NO. 425/RJT/2012 A.Y. 2006 - 07 PAGE NO ITO VS. M/S GUNJAN DEVELOPERS 3 5. FURTH ER AS DISCUSSED ABOVE INCOME O F RS. 13,87,683/ - CREDITED BY Y OU IN THE B OOKS OF ACCOUNTS IS NOT INCOME DERIVED FROM ACTIVITY OF DEVELOPING AND BUILDING HOUSING PROJECT. AS SUC H YOU ARE NOT ENTITL ED TO CLAIM DEDUCTION U/S.80I B( 1 0) OF THE ACT ON ESTIMATED INCOME CREDIT IN PROFIT AND LOSS ACCOUNT. 6. WITHOUT PREJUDICE TO THE ABOVE, IT IS NOTICED THAT YOU HAVE CONSTRUCTED PROJECT ON VARIOUS PLOTS OF LAND EACH ADMEASURING TOTAL LAND AREA OF 3797.74 SQ. MTRS PURCHASED VIDE REGISTERED DOC UMENTS N O. 3278 DATED 21.04.2005 & 5348.33 SQ. MT RS PURCHASED VIDE REGISTERED DOCUMENTS NO. 367 3 DATED 07.05.2005. TOTAL AR EA OF VARIOUS PLOTS IS WORKED OU T TO 9146.07 SQ. MTR S. 7. AS PER PROVISIONS OF CLAUSE (B) OF SUB SECTION 10 OF SECTION 80IB, IN ORDER TO BE ELIGIBLE TO CLAIM DEDUCTION U/S.80IB(10 ) ' THE PROJECT I S ON THE SIZE OF A PLOT OF LAND, WHICH HAS A MINIMUM AREA OF ONE ACRE. THUS IN ORDER TO BE ELIGIBL E TO CLAIM DEDUCTION V/S 80IB(10 ) THE PROJECT SHOULD BE ON A SINGLE PLOT OF LAND WHICH SHOULD HAVE A MINIMUM AREA OF ONE ACRE. YOU HAVE CONSTRUCTE D PROJECT ON TWO PLOTS OF LAND AREA OF EACH PLOT IS BELOW ONE ACRE, WHICH IS NOT IN ACCORDANCE WI TH THE PROVISIONS OF SECTION 80IB(10)(B )OF THE I . T. ACT. 8. IN VIEW OF THE ABOVE, YOU ARE HEREBY REQUESTED TO SHOW CA SE AS TO WHY DEDUCTION 80IB(10) OF RS. 9,18, 720/ - SHOU LD NOT BE DISALLOWED AND TAX ED 5. IN RESPONSE TO THE SAID NOTICE THE ASSESSES HAS SUBMITTED HIS REPLY VIDE L ETTER DATED 20.12.2008 ALONG WITH REVISED LIMITED REVIEW REPORT OF THE CA WITH REVISED PROFIT & LOSS ACCOUNT AND BALANCE SHEET ADMITTING AS WRONG CLAIM OF DEDUCTION U/S 80IB(10) OF RS. 9,18,720/ - . IN VIEW OF THE ABOVE, IT CLEARS THAT THE ASSESSEE HAS ADMIT TED THE DEPARTMENTAL VIEW FOR DISALLOWING DEDUCTION OF RS. 9,18 ; 720/ - CLAIMED UNDER SECTION 80IB(10 ) IN ITS RETURN OF INCOME. CONSIDERING THE FACTS OF THE CASE, THE DEDUCTION OF RS, 9,18,720/ - IS DISALL OWED. PENALTY U/S 271(L)(C) R.W.S. 274 OF THE I. T.ACT, 1961 I S INITIATED FOR CONCEALMENT OF I NCOME AND FURNISHING INACCURATE PARTICULARS . I.T.A NO. 425/RJT/2012 A.Y. 2006 - 07 PAGE NO ITO VS. M/S GUNJAN DEVELOPERS 4 3. LD. CIT(A) AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE HAS ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: - 4. I HAVE GONE THROUGH THE AS SESSMENT ORDER AND SUBMISSIONS OF APPELLANT. I FIND THAT APPELLANT HAD WORKED OUT THE PROFIT OF THE HOUSING PROJECT UNDERTAKEN BY IT IN THE MANNER ANY WORKS CONTRACTOR OF ANY CONSTRUCTION PROJECT WOULD WORK OUT BY ESTIMATING 12% OF T HE WORK IN PROGRESS AS THE GROSS PROFIT. IN FACT IF THE APPELLANT WERE A WORKS CONTRACTOR OF ANY HOUSE CONSTRUCTION PROJECT, THE DEDUCTION U/S 80IB (10 ) WOULD NOT BE AVAILABLE TO THE APPELLANT AS PER EXPLANATION TO SECTION 80IB (10) . HOWEVER, ASSESSING OFFICER HAS CLARIF IED IN THE ASSESSMENT ORDER THAT THE APPELLANT HAS PURCHASED PLOTS VIDE REGISTERED DOCUMENT DATED 2 1.04.2005 AND 07.05.2005 AND THE COST OF LAND OF RS.54,57,473/ - IN PART OF THE WORK IN PROGRESS OF HOUSING PROJECT . MOREOVER APPELLANT HAS PAID CHARGES AGGREGATING TO RS.12,33,944/ - TO RMC WHICH ARE R ELATED TO PAYMENT MADE BY THE O WNER AND DEVELOPER RATHER THAN A WORKS CONTRACTOR F OR THE CONSTRUCTION WOR K CARRIED OUT DURING THE YEAR. I THEREFORE FIND THAT ASSESSING OFFICER HIMSELF HAS CLARIFIED IN THE ASSESSMENT ORD ER THAT THE APPELLANT IS NOT A WORK S CONTRACTOR THOUGH THE METHOD OF ACCOUN TING OF PROFIT BY APPELLANT WAS MORE AKIN TO THE METHOD FOLLOWED BY A CONTRACTOR RATHER THAN THE OWNER AND DEVELOPER OF A HOUSING PROJECT. IT IS F OR THIS REASON THAT T HE ASSESSING O F FICER OBJECTED TO THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT. IF THE APPELLANT FOLLOWS THE METHOD OF AC COUNTING GENERALLY RECOMMENDED F OR AN OWNER AND DEVELOPER OF HOUSING PROJECT, THE PROFIT WOULD GENERALLY ACCRUE AT THE TIME OF SALE OF HOUSES ON COMPLETION OF SUCH HOUSING PROJECT. HOWEVER, THERE IS NO EXPRESS ACCO UNTING STANDARD U/S 145 OF THE I T ACT THAT THE APPELLANT WHO IS CARRYING OUT HOUSING CONSTRUCTION PROJECT AS OWNER OR DEVELOPER MAY NOT FOLLOW THE ACCOUNTING METHOD OF ESTIMATED PERCENT AGE OF WORK IN PROGRESS FOR GROSS PROFIT. IN SUCH ESTIMATED PERCENTAGE OF WORK, IN PROGRESS METHOD O F ACCOUNTING THE GROSS PROFIT, T HE PARTS OF ENTIRE PROFIT OF PROJECT ARE RETURNED CONTINUOUSLY DURING THE CONSTRUCTION P ERIOD AND ONLY T HE BALANCE PROFIT IS RETURNED ON COMPLETION OF PROJECT. HOWEVER, IN PROJECT COMPLETION METHOD THE PROFIT OF PROJECT IS RETURNED WHEN SALE IS REALIZED AFTER THE COMPLETION OF PROJECT. THE APPELLANT MAY MAKE THE DETERMINATION OF PART OF PROFIT OF PROJECT DURING THE CONSTRUCTION PERIOD ITSELF IF THE APPELLANT I S REASONABLY CERTAIN OF THE COST INCURRED AND SALE TO BE REALIZED. IN ANY CASE, SUCH METHOD OF I.T.A NO. 425/RJT/2012 A.Y. 2006 - 07 PAGE NO ITO VS. M/S GUNJAN DEVELOPERS 5 ACCOUNTING IS MORE FAVOURABLE TO THE DEPARTMENT AND MAY ALSO BE AN ACCEPTABLE METHOD OF ACCO UNTING U/S 145 OF THE I.T. ACT BECAU SE APPELLANT IS REGULARLY FOLLOWING THIS METHOD OF ACCOUNTING. IN PRESENT CASE, APPELLANT ESTIMATED A GROSS PROFIT OF 12% ON THE WORK IN PROGRESS AS ON 31.3.2006 FOR RETURNING PART OF THE PROFIT IT WOULD REALIZE ON COMPLETION OF THE PROJECT. IN PRESENT CAS E THE PROFIT ON HOUSING PROJECT IS OTHERWISE ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE I. T. ACT, WHETHER RETURNED IN PARTS IN DIFFERENT ASSESSMENT YEARS ON PERCENTAGE OF WORK IN PROGRESS BASIS OR RETURNED ON SALE AFTER COMPLETION OF HOUSING PROJECT. IN AS SESSMENT YEAR 2007 - 08 AND ASSESSMENT YEAR 2008 - 09, ASSESSING OFFICER HAS ALLOWED THE DEDUCTION U/ S 801B(10) OF THE I .T. ACT TO APPELLANT IN THE ASSESSMENT ORDER U/S 143(3) FOR THE S AME HOUSING PROJECT AS CLAIMED IN THE ORIGINAL RETURN FILED BY THE APPELLAN T WITHOUT REFERRING TO T HE REVISED RETURN FILED LATER BY THE ASSESSING OFFICER. IN THE ORIGINAL RETURNS OF INCOME FILED BY APPELLANT FO R ASSESSMENT YEAR 2007 - 08 AND 2008 - 0 9, THE METHOD OF ACCOUNTING IS THE SAME WHERE CERTAIN PERCENTAGE OF WORK IN PROGRESS AT THE END OF THE YEAR IS ESTIMATED AS GROSS PROFIT. IT FURTHER CLARIFIES THAT APPELLANT HAS SATISFIED ALL C ONDITIONS TO CLAIM DEDUCTION U/S 80IB (10) BECAUSE ASSESSING OFFICER HAS ALLOWED THE DEDUCTION IN ASSESSMENT YEAR 20 07 - 08 AND 2008 - 09. THEREFORE I FIND THAT APPELLANT HAS CORRECTLY DETERMINED THE PROFIT OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL AT RS. 9, 1 8,720/ - AS PER THE METHOD OF ACCOUNTING REGULARLY FOLLOW ED BY APPELLANT U/S 145 OF THE I. T. ACT AND APPELLANT HAS ACCORDINGLY CORREC TLY CLAIMED DEDUCTION U/S 80IB(10) OF THE I .T. ACT. THE CLAIM OF APPELLANT TO ALLOW CHANGE OF METHOD OF ACCOUNTING IS UNNECESSARY BECAUSE THE ASSESSING OFFICER HAS ALLOWED THE SAME METHOD OF ACCOUNTING GROSS PROFIT ON PERCENTAGE OF WORK I N PROGRESS BASIS IN AS SESSMENT YEAR 2007 - 08' AND 2008 - 09 ALSO' AND THEREFORE THE SAME METHOD O F ACCOUNTING HAS BEEN FOLLOWED B Y THE APPELLA NT REGULARLY U/S 145 OF THE I T ACT. THE CLAIM OF APPELLANT TO ALLOW CARRY FORWARD OF LOSS ON ACC OUNT OF CHANGE OF ME THOD OF ACCOUNTING THEREFORE NOT ENTERTAINED. I THEREFORE DIRECT THE ASSESSING OFFICER TO ASSESS THE TOTAL INCOME OF APPELLANT AT NIL AFTER ALLOWING DEDUCTION U/S 80IB (10 ) WITHOUT ALLOWING CARRY FORWARD OF ANY LOSS AS THERE IS NO LOSS. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT IN ASSESSMENT YEAR 2007 - 08 AND I.T.A NO. 425/RJT/2012 A.Y. 2006 - 07 PAGE NO ITO VS. M/S GUNJAN DEVELOPERS 6 ASSESSMENT 2008 - 09 ASSESSING OFFICER HAS ALLOWED THE DEDUCTION U/S 80IB(10) OF THE ACT TO ASSESSEE BY PASSING AN ORDE R U/S 143(3) OF THE ACT FOR THE SAME HOUSING PROJECT AS CLAIMED IN THE ORIGINAL RETURN FILED BY THE ASSESSEE WITHOUT REFERRING TO REVISED RETURN FILED LATER ON BY HIM. IN THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08 AND ASSESSMENT YEAR 2008 - 09 THE METHOD OF ACCOUNTING WAS SAME WHERE CERTAIN PERCENTAGE OF WORK IN PROGRESS AT THE END OF THE YEAR WAS ESTIMATED AS GROSS PROFIT . T HIS SHOWS THAT ASSESSEE HAS SATISFIED ALL CONDITIONS TO CLAIM DEDUCTION U/S 80IB(10) OF THE A CT . O N THESE FACTS LD. CIT(A) HAS RIGHTLY HELD THAT ASSESSEE HAS CORRECTLY DETERMINED THE PROFIT AT RS. 9,18,270/ - DURI NG THE YEAR UNDER APPEAL AS PER THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY HIM U/S 145 OF THE ACT AND ACCORDINGLY HAS CORRECTLY CLA IMED DEDUCTION U/S 80IB(10) , THEREFORE WE FEEL NO NEED TO INTERFERE WITH THE ORDER PASSED BY HIM AND THE SAME IS HEREBY UPHELD. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. SD/ - SD/ - (A.MOHAN ALANKAMONY ) (D.K.TYAGI ) ACCOUNTANT MEM BER JUDICIAL MEMBER AHMEDABAD: DATED /05 /2013 A K ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONED HEREINABOVE AT CAPTION PAGE SD/ - SD/ - (D.K. SRIVASTAVA) (T.K.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER I.T.A NO. 425/RJT/2012 A.Y. 2006 - 07 PAGE NO ITO VS. M/S GUNJAN DEVELOPERS 7 O / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT THE I.T.O., WARD - 5(2), RAJKOT 2 . / RESPONDENT M/S. GUNJAN DEVELOPERS, C/O. SANDEEP ENTERPRISE, 41 PTC PLOT, LOHANAGAR, RAJKOT 3 . / CONCERNED CIT III, RAJKOT 4 . - / CIT (A) IV, RAJKOT 5 . , , / DR, ITAT, RAJKOT 6 . [ / GUARD FIL E //TRUE COPY// BY ORDER/ , SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL RAJKOT