M/s. Apna Sapna, Bangalore V. Assistant Commissioner of Income-Tax, Bangalore

ITA 454/BANG/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4167 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K N DHANDAPANI
• Assessee Lawyers: NITISH RANJAN
• Keywords: Opportunity of being heard; Additional evidence; Assessment record
• Section: 263; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 45 4/BANG/2017 ASSESSMENT YEAR : 20 07 - 08 M/S. APNA SAPNA, NO. 83, 5 TH FLOOR, FARAH TOWERS, M G ROAD, BANGALORE 560 001. PAN: AAIFA7051P VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4 (3) (1) (ERSTWHILE CIRCLE 10 (1)), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI NITISH RANJAN, CA RESPONDENT BY : SHRI K. N. DHANDAPANI, JCIT (DR) DATE OF HEARING : 1 3 .0 2 .2019 DATE OF PRONOUNCEMENT : 15 .0 2 .2019 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT(A)-4, BANGALORE DATED 28.11.2016 FOR ASSESS MENT YEAR 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME - TA X (APPEALS) IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE . 2. THE ORDER IS PASSED IN HASTE, WITHOUT PROVIDING SUFFICIENT AND REASONABLE OPPORTUNITY OF BEING HEARD. 3. THE ORDER IS PASSED AGAINST THE PRINCIPLE OF NAT URAL JUSTICE AND THUS LIABLE TO BE QUASHED. 4. THE LD. AO ERRED IN COMPUTING THE INCOME OF THE APPELLANT AT RS. 4,15,26,408/- AS AGAINST THE RETURNED INCOME OF RS. 82,15,770/-. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE LD. AO. 5. THE LD. CIT(A) ERRED BY NOT CONSIDERING THE PLEA THAT THE IMPUGNED RE-COMPUTATION OF INCOME, BASED ON WHICH THE ASSESS MENT WAS COMPLETED, WAS NOT FURNISHED BY THE APPELLANT. ITA NO. 454/BANG/2017 PAGE 2 OF 9 6. THE LD. CIT(A) ERRED IN DISMISSING THE APPEAL OF THE APPELLANT WITHOUT ADJUDICATING THE MERITS OF THE CASE. 7. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT IM PUGNED ASSESSMENT ORDER WAS NOT IN ACCORDANCE WITH THE DIR ECTIONS UNDER SEC. 263 OF THE ACT. 8. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E DIRECTION UNDER SEC. 263 OF THE ACT WAS TO RE-DO THE ASSESSMENT WHE REAS THE LD. AO MERELY RELIED ON THE RE-COMPUTATION STATEMENT ALLEG EDLY FILED BY THE APPELLANT. 9. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THE IMPUGNED ASSESSMENT ORDER WAS A NONSPEAKING ORDER WITHOUT HA VING ANY REASON FOR NOT CONSIDERING COST OF CLUB HOUSE WHILE ARRIVI NG AT THE ASSESSED INCOME. 10. THE LD. CIT(A) AND THE LD. AO ERRED BY NOT APPR ECIATING THE FACT THAT THE APPELLANT NEVER MADE ANY REAL/ACTUAL INCOM E FROM THE IMPUGNED PROJECT. 11. THE LD. AO WHILE REDOING THE ASSESSMENT UNDER S EC. 143(3) R.W.S. 263 OF THE ACT OUGHT TO HAVE TAKEN COGNIZANCE OF TH E PREVAILING FACTS OF THE CASE 12. THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF LD. AO WHEREIN THE INCOME OF THE APPELLANT IS COMPUTED IN ACCORDAN CE WITH PERCENTAGE COMPLETION METHOD PRESCRIBED UNDER THE A CCOUNTING STANDARD - 7 ISSUED BY THE ICAI. 13. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE APPELLANT IS A REAL ESTATE DEVELOPER AND. THEREFORE, ACCOUNTING ST ANDARD -7 IS NOT APPLICABLE IN ITS CASE. 14. THE LD. CIT(A) ERRED IN CONFIRMING THE INTEREST CHARGED BY THE LD. AO UNDER SEC. 234B, 234C AND 234D OF THE ACT. THE APPELLANT SEEKS YOUR LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS URGED AT THE TIME OF HEARING. 3. AT THE VERY OUTSET, THE LD. AR OF ASSESSEE SUBMI TTED THE COPY OF WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE LD. CIT(A) ON 20.06.2016. OUR ATTENTION WAS DRAWN TO PARA NOS. 14 TO 18 OF THE WR ITTEN SUBMISSIONS. IT WAS POINTED OUT THAT THIS WAS THE CLAIM OF THE ASSESSEE BEFORE CIT(A) THAT THE ASSESSEE HAS NOT EARNED ANY REAL INCOME AND THEREFO RE, ADOPTING THE PERCENTAGE COMPLETION METHOD IS NOT JUSTIFIED. HE SUBMITTED THAT THESE WRITTEN SUBMISSIONS FILED BEFORE CIT (A) ON 20.06.2 016 AND THE IMPUGNED ITA NO. 454/BANG/2017 PAGE 3 OF 9 ORDER HAS BEEN PASSED BY THE LD. CIT (A) ON 28.11.2 016 AFTER OBTAINING REMAND REPORT FROM THE AO DATED 19.10.2016. BUT NE ITHER IN THE REMAND REPORT OF THE AO NOR IN THE IMPUGNED ORDER OF CIT(A ), THESE ASPECTS RAISED BY ASSESSEE BEFORE CIT(A) WERE DEALT WITH. HE SUBM ITTED THAT UNDER THESE FACTS, THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO/CIT(A) FOR FRESH DECISION BY WAY OF A SPEAKING AND REASONED ORDER IN RESPECT OF THESE ASPECTS RAISED BY THE ASSESSEE BEFORE CIT(A) IN THE WRITTEN SUBMISSIONS. THE LD. DR OF REVENUE SUPPORTED THE ORDER OF CIT(A) . IN REPLY TO A SPECIFIC QUERY OF THE BENCH, HE ALSO AGREED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF CIT(A) FOR FRESH DECISION. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE REPRODUCE PARAS 14 TO 18 OF THE WRITTEN SUBMISSIONS FILED BY THE AS SESSEE BEFORE CIT(A) ON 20.06.2016. THE SAME ARE AS UNDER. VALIDITY OF PERCENTAGE COMPLETION METHOD 14. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, IT IS PERTINENT TO NOTE THAT THE ENTIRE PROJECT WAS MARRED BY ONE LITIGATIO N AFTER ANOTHER AND THE ADVANCES THAT WERE COLLECTED FROM THE BUYERS WE RE EVENTUALLY RETURNED WITHOUT THE APPELLANT EVEN BEING ABLE TO R ECOVER THE COST OF DEVELOPMENT INCURRED. THE FACTUAL POSITION IS ELUCI DATED HEREUNDER: A. SY. NO. 10, SONNENAYAKAPURA AND SY. NO. 0-28, AD UR THE HON'BLE HIGH COURT OF KARNATAKA ORDERED THE APP ELLANT TO RESTRAIN FROM INTERFERING WITH THE PLANTIFF'S PE ACEFUL POSSESSION OF THE PROPERTY. COPY OF JUDGEMENT IS ENCLOSED IN ANNE XURE 7. ALSO, THE GOVT. OF KARNATAKA VIDE NOTIFICATION NO. BM RDA/PRO J/IRR- STRR/2005-06 DATED 29.11.2006 PROPOSED TO ACQUIRE 3 .5 ACRES OF LAND UNDER SY. NO. 46 FOR THE DEVELOPMENT OF THE SA TELLITE TOWN RING ROAD WHICH RESULTED IN THE APPELLANT LOSING SIGNIFI CANT PORTION OF THE LAND. COPY OF THE NOTIFICATION ALONG WITH RELEVANT EXTRACTS OF THE ANNEXURES IS ENCLOSED AS ANNEXURE 8. B. SY. NO. 46, THIMMASANDRA THE APPELLANT ACQUIRED THE LAND VIDE SALE DEEDS REG ISTERED AS DOCUMENT NO. 28861/04-05 AND 28864/04-05 ON 22.03.2 005. AS PER THE TITLE DEED, THE AFOREMENTIONED LAND WAS ACQUIRE D IN SY. NO. 46 OF THIMMASANDRA. AFTER OBTAINING CONVERSION OF LAND AN D CARRYING OUT OF LAND DEVELOPMENTAL ACTIVITY TO ALMOST 80%, THE APPE LLANT ON COMPLIANT RAISED BY THE OWNER, REALIZED THAT DEVELO PMENT WAS CARRIED OUT ON A WRONG PLOT. THE APPELLANT INADVERTENTLY IN STEAD OF CARRYING OUT THE DEVELOPMENT WORK IN SY. NO. 46 CARRIED OUT THE DEVELOPMENT ON LAND IN SURVEY NO. 48 FOR WHICH EVEN APPROVALS W AS GRANTED BY AUTHORITIES. NEVERTHELESS, THE APPELLANT FILED A LE TTER WITH THE TAHSILDAR, ANEKAL SEEKING AN EXCHANGE IN THE OWNERS HIP OF LAND, ITA NO. 454/BANG/2017 PAGE 4 OF 9 TRANSLATED COPY OF WHICH HAS BEEN ENCLOSED IN ANNEX URE 9. DESPITE VARIOUS SURVEYS BY THE DISTRICT ADMINISTRATION, THE RE HAS BEEN NO HEADWAY IN THIS MATTER. TO ADD TO THE MISERY OF THE APPELLANT, THE SATELLITE TOWN RING ROAD WAS PROPOSED TO BE LAID TH ROUGH THE LAND IN SY NO. 46. COPY OF THE PROPOSAL HAS BEEN ENCLOSED I N ANNEXURE 8 OF THIS SUBMISSION. 15. AS A RESULT OF THE AFOREMENTIONED LITIGATIONS, INADVERTENCE OF THE APPELLANT, UNFAVORABLE JUDGMENTS AND UNAVOIDABLE GO VERNMENT POLICIES, THE DEVELOPMENT WORK WAS STALLED AND SO M UCH SO THAT THE DISPUTED PARTIES DEMOLISHED SOME OF THE CONSTRUCTED STRUCTURES. 16. OWING TO THE DELAY IN PROJECT, SOME OF THE BUYE RS FILED PLAINTS BEFORE THE CONSUMER COURT AS A RESULT OF WHICH THE APPELLANT RETURNED THE ADVANCES COLLECTED FROM PROSPECTIVE BU YERS, IN EXTREME CASES ALONG WITH INTEREST. 17. IN VIEW OF THE ABOVE, THE LD. AO WAS NOT JUSTIF IED IN ADOPTING PRESCRIBED UNDER AS-7 AS THE METHOD OF REVENUE RECO GNITION FOR THE FOLLOWING REASONS: 17.1 THE PRE-REVISED ACCOUNTING STANDARD - 7 ISSUED BY ICAI IN THE YEAR 1983 APPLIED BOTH TO PERSONS CARRYING ON CONST RUCTION WORK ON CONTRACT FOR OTHERS AS WELL AS BUILDERS AND DEVELOP ERS WHO CARRY ON CONSTRUCTION WORK FOR THEMSELVES. HOWEVER, PARAGRAP H 1 OF ACCOUNTING STANDARD 7 (REVISED) GIVING ITS SCOPE MENTION THAT THE STANDARD SHOULD BE APPLIED ONLY FOR ACCOUNTING FOR CONSTRUCTION CONTRACTS IN THE FINANCIAL STATEMENT OF CONTRACTORS . 17.2 IN RESPONSE TO A QUERY ON APPLICABILITY OF REV ISED AS 7 TO A REAL ESTATE DEVELOPER BEFORE THE EXPERT ADVISORY COMMITT EE (EAC) FORMED BY THE ICAI, THE EAC OBSERVED THAT THE PRE REVISED AS 7 SPECIFICALLY MENTIONS ABOUT ITS APPLICABILITY TO ENTERPRISES UND ERTAKING CONSTRUCTION ACTIVITIES ON THEIR OWN WHICH WOULD IN CLUDE REAL ESTATE DEVELOPER. HOWEVER, THE REVISED AS 7 IS APPLICABLE ONLY TO CONTRACTORS. THE HON'BLE BANGALORE TRIBUNAL IN THE CASE OF PRESTIGE ESTATE PROJECTS (P) LTD. V. DCIT [2010] 33 DTR 514 (BANG.) ALSO EXAMINED THE OPINION GIVEN BY THE EAC ON THE APPLIC ABILITY OF AS 7 AND HELD THAT THE REVISED AS 7 DOES NOT APPLY TO BU ILDERS AND REAL ESTATE DEVELOPERS. 17.3 IN THE INSTANT CASE, THE APPELLANT IS A REAL E STATE DEVELOPER AND NOT A CONTRACTOR. CONSEQUENTLY, THE GENERAL PRINCIP LES OF REVENUE RECOGNITION AS PER AS 9 WOULD BECOME APPLICABLE. TH E APPELLANT RECOGNIZED REVENUE VOLUNTARILY ADOPTING THE PERCENT AGE COMPLETION METHOD SINCE THE GOING CONCERN ASSUMPTION WAS VALID AS ON THE DATE OF FILING THE TAX RETURNS. HOWEVER, THE LD. AO WAS NOT JUSTIFIED IN ADOPTING THE PERCENTAGE COMPLETION METHOD, AS THE G OING CONCERN ASSUMPTION WAS NO LONGER VALID AS ON THE DATE OF FR AMING THE ASSESSMENT. ITA NO. 454/BANG/2017 PAGE 5 OF 9 17.4 THE LD. AO WHILE RE-DOING THE ASSESSMENT U/S. 143(3) R.W.S. 263 OUGHT TO HAVE TAKEN COGNIZANCE OF THE PREVAILING FA CTS AS STATED ABOVE. IT WAS WELL WITHIN HIS JURISDICTION TO VERIFY THE A BOVE FACTS BY MAKING A VISIT TO THE PROJECT SITE AND THEN, ACCORDINGLY PRO CEED WITH THE ASSESSMENT PROCEEDINGS. INSTEAD, HE COMPLETED THE A SSESSMENT IN HASTE BY ADOPTING THE INCOME COMPUTED IN A REVISED STATEMENT THAT HE HAS INCORRECTLY STATED TO HAVE BEEN FURNISHED BY TH E APPELLANT. 17.5 IN OTHER WORDS, THE PROFIT OFFERED TO TAX BY T HE APPELLANT OR THE ADDITIONAL PROFIT BROUGHT TO TAX BY THE LD. AO IS O NLY IN THE NATURE OF NOTIONAL PROFIT SINCE THE APPELLANT NEVER MADE ANY REAL/ACTUAL PROFIT FROM THE PROJECT. 17.6 THE ADVANCES RECEIVED BY THE APPELLANT CONSTIT UTE DEFERRED REVENUE OR UNEARNED REVENUE. ONLY INCOME RECEIVED O R DEEMED TO BE RECEIVED OR INCOME THAT ACCRUES OR ARISES OR DEEMED TO ACCRUE OR ARISE ARE INCLUDED IN TOTAL INCOME UNDER SECTION 5 OF THE INCOME-TAX ACT, 1961. DEFERRED REVENUE OR UNEARNED REVENUE FAL LS OUTSIDE THE SCOPE OF TOTAL INCOME UNDER SECTION 5 OF THE ACT AN D IS, THEREFORE, NOT CHARGEABLE UNDER SECTION 4 OF THE ACT. UNDER THE IN DIAN LAW, THE TAXATION OF INCOME IS SCHEDULER IN CHARACTER. THIS IMPLIES THAT TAX IS IMPOSED ON ONLY THOSE HEADS OF INCOME WHICH ARE SPE CIFICALLY COVERED UNDER THE INCOME TAX ACT. CONSEQUENTLY, NOTIONAL IN COME IS NOT TAXABLE UNLESS SPECIFICALLY PROVIDED FOR IN THE ACT . VARIOUS COURTS, OVER THE YEARS, HAVE UNIFORMLY SUPPORTED THE INSTAN CE THAT THE TAXATION OF NOTIONAL INCOME IS IMPERMISSIBLE. AS HIGHLIGHTED BY THE HON'BLE SUPREME COURT IN THE CASE OF POONA ELECTRICITY SUPP LY CO. LTD. VS CIT (1965) 3 SCR 818, THIS REASONING POSTULATES THAT 'I NCOME TAX IS TAX ON REAL INCOME, I.E. THE PROFITS ARRIVED AT ON COMMERC IAL PRINCIPLES SUBJECT TO THE PROVISIONS OF THE INCOME-TAX ACT.' S UBSEQUENTLY, THE HON'BLE ORISSA HIGH COURT IN CIT VS. PRAFULLA KUMAR MALIK AIR 1969 ORI 187 EMPHASIZED THAT INCOME TAX IS IMPOSED ONLY ON 'PROFITS HE ACTUALLY RECEIVES AND NOT ON THE PROFITS HE MIGHT H AVE, BUT HAS NOT RECEIVED'. 17.7 THIS REAL ACCRUAL OF INCOME TEST WAS FURTHER E LABORATED BY THE HON'BLE SUPREME COURT IN GODHRA ELECTRICITY CO. LTD . VS. CIT (1997) 4 SCC 530. IN THIS CASE, A GOVERNMENT CIRCULAR ENTI TLED THE APPELLANT TO RECOVER CONSUMPTION CHARGES FROM ITS CUSTOMERS A T ENHANCED RATES. AS THIS ORDER WAS THE SUBJECT MATTER OF PROTRACTED LITIGATION, THE APPELLANT WAS UNABLE TO RECOVER THE ENHANCED CHARGE S. CONSEQUENTLY, IT CHALLENGED THE INCLUSION OF SUCH AMOUNT WITHIN I TS ASSESSABLE INCOME ON THE GROUND THAT NO REAL INCOME HAD ACCRUE D. REITERATING ITS EARLIER DECISION IN MORVI INDUSTRIES LTD. VS. CIT ( 1972) 4 SCC 451 AND CIT VS. BIRLA GWALIOR (1974) 3 SCC 196, THE COU RT HELD THAT TAX CANNOT BE IMPOSED ON HYPOTHETICAL ACCRUAL OF INCOME . IT WAS OBSERVED THAT THE QUESTION OF REAL ACCRUAL OF INCOME MUST BE CONSIDERED BY TAKING THE PROBABILITY OF REALIZATION IN REALISTIC MANNER. APPLYING THE ABOVE PRINCIPLES, COURTS HAVE CONSISTENTLY REFRAINE D FROM ALLOWING ITA NO. 454/BANG/2017 PAGE 6 OF 9 TAXATION OF NOTIONAL PROFITS THAT IS NOT EXPRESSLY ALLOWED IN THE ACT. 18. ACCORDINGLY, ADOPTION OF PERCENTAGE COMPLETION METHOD IS NOT ONLY CONTRARY TO THE FACTS OF THE INSTANT CASE PREV ALENT AS ON THE DATE OF ASSESSMENT BUT ALSO TO THE GENERAL PRINCIPLES OF TAXATION AND PROVISIONS OF THE INCOME-TAX ACT. 5. NOW WE REPRODUCE PARA 6 OF THE ORDER OF CIT(A) I N WHICH THE CIT(A) HAS REPRODUCED THE RELEVANT PORTION OF AOS REMAND REPO RT DATED 19.10.2016. 6. REMAND PROCEEDINGS : THE AO SUBMITTED HIS REMAND-REPORT VIDE LETTER DATE D 19/10/2016. THE AO HAS CONTESTED THE ASSESSEE'S SUBMISSIONS AND HAS SUPPORTED THE IMPUGNED ORDER U/S. 143(3) R.W.S. 263 OF THE I. T. ACT. THE RELEVANT PORTION OF THE AO'S REMAND-REPORT DATE D 19/10/2016 IS EXTRACTED AS UNDER: '3. THE BRIEF FACTS OF THE CASE ARE:- THE ASSESSEE FILED RETURN OF INCOME ON13.11.2007 DECLARING INCOME OF RS. 82,15,770/- AN D SUBSEQUENTLY, A/R HAS FILED A REVISED COMPUTATION OF INCOME DECLA RING INCOME OF RS. 4,11,61,379/-. THE REASONS FOR FILING A REVISED COM PUTATION OF INCOME IS THAT THE A/R HAS REMOVED PART OF THE EXPENDITURE OF CLUB HOUSE FOR THE ABOVE MENTIONED ASSESSMENT YEAR, PROPORTIONATE TO THE PROJECT COMPLETION CARRIED OUT TILL THE END OF THE FINANCIA L YEAR 2006-07. 4. THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AN D ASSESSMENT RECORD HAVE BEEN EXAMINED AND FOLLOWING HAS BEEN OB SERVED AFTER GIVING THE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE IT IS SEEN FROM THE ASSESSMENT RECORD THAT THE ASSE SSEE HAS HIMSELF FILED THE REVISED COMPUTATION OF INCOME AFTER REMOV ING PART OF THE EXPENDITURE OF CLUB , HOUSE AND ASSESSMENT ORDER WA S PASSED BASED ON THAT COMPUTATION. NOWHERE FROM THE RECORD AVAILABL E, IT IS FOUND THAT ASSESSEE OBJECTED TO THE REVISED COMPUTATION OF INC OME BEING CONSIDERED FOR CONCLUDING THE ASSESSMENT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 5. THE CLAIM OF THE ASSESSEE CANNOT BE ALLOWED FOR THE REASONS STATED ABOVE. IN VIEW OF THE ABOVE FACTS, IT IS REQUESTED THE ADDITION MAY KINDLY BE SUSTAINED ' 6.1 THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO FURNIS H HIS REJOINDER/COMMENTS IF ANY ON THE REMAND-REPORT VIDE THIS OFFICE LETTER DATED 26/10/2016. THE ASSESSEE HAS FILED HIS REPLY VIDE LETTER DATED 09.11.2016, WHICH HAS BEEN PERUSED. THE ASSESSEE TH EREIN HAS MORE OR LESS REITERATED ITS SUBMISSIONS, RELEVANT PORTIO N OF THE SAME IS REPRODUCED AS UNDER :- '.................... HOWEVER, THE LD. COMMISSIONER OF INCOME TAX, BANGALORE-IV WAS OF THE OPINION THAT THE ASSESSMENT COMPLETED WAS ITA NO. 454/BANG/2017 PAGE 7 OF 9 ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE LD. CIT SUBSEQUENTLY PASSED AN ORDER UNDER SEC. 263 OF ACT DATED 30-MARCH- 2012, CANCELLING THE ORDER PASSED UNDER SEC 14393) OF THE ACT DATED 04-DEC-2009. ASSESSMENT WAS THEREFORE COMPLETED BY THE LD.AO UNDER SEC. 143(3) R.W.S. 263 OF THE ACT DATED 26-MA RCH-2013, DETERMINING THE INCOME OF THE APPELLANT AT RS. 4,15 ,26,408/-. AN APPEAL WAS PREFERRED BY THE APPELLANT IN THIS CONNE CTION AGAINST THE ORDER OF THE LD.AO BEFORE YOUR LD. AUTHORITY WHEREI N RELEVANT DOCUMENTS AND SUBMISSIONS WERE MADE DURING THE COUR SE OF PROCEEDINGS. A REMAND REPORT WAS THEREAFTER CALLED FOR FROM THE LD. AO, WHICH WAS ISSUED ON 19-OCT-2016. YOUR LD. AUTHO RITY VIDE LETTER DATED 26-OCT-2016 HAS CALLED FOR A REJOINDER. IN TH IS REGARD, WE WISH TO SUBMIT AS UNDER : THE LD. CIT IN HIS ORDER UNDER SEC.263 OF THE ACT H AD SPECIFICALLY DIRECTED THE LD. AO TO EXAMINE IF THE CLUBHOUSE WAS TRANSFERRED TO THE BUYERS OF THE PLOTS. HOWEVER, THE LD.AO HAS MERELY ADOPTED A STATEMENT PURPORTEDLY FILED BY THE APPELLANT AND CO MPLETED THE ASSESSMENT UNDER SEC. 143(3) R.W.S. 263 OF THE ACT DETERMINING THE INCOME OF THE APPELLANT AT RS. 4,15,26,408/-. WHILE NO OPPORTUNITY WAS ACCORDED TO THE APPELLANT TO FILE EVIDENCES AT THE TIME OF ASSESSMENT TO ESTABLISH THAT THE OWNERSHIP OF THE C LUBHOUSE WAS TRANSFERRED TO THE BUYERS, AT THE TIME OF ISSUING O F THE REMAND REPORT, THE LD. AO HAS COMPLETELY IGNORED THE SUBMISSIONS M ADE BEFORE YOUR LD. AUTHORITY. ONCE AGAIN, THE LD. AO HAS ERRED IN RELYING ON A STATEMENT RE-COMPUTING THE PROFITS THAT HE CLAIMS T O HAVE BEEN FILED BY THE APPELLANT. EVEN ASSUMING THAT THE STATEMENT WAS FILED BY THE APPELLANT, WHICH IN ITSELF DOES NOT ESTABLISH THAT THE APPELLANT AGREES TO THE RE-COMPUTED PROFITS AND DOES NOT HAVE ANY OB JECTION TO IT. ON THE OTHER HAND, THE LD. AO WAS DUTY BOUND TO MAKE E NQUIRIES REGARDING THE TRANSFER OF OWNERSHIP OF THE CLUBHOUS E AND COMPUTE THE PROFITS IN ACCORDANCE WITH THE LAW, WHICH HE HAS FA ILED TO DO. 6. WE ALSO REPRODUCE THE RELEVANT PARAS FROM PAGE N OS. 11 AND 12 OF THE ORDER OF CIT(A) WHICH ARE AS UNDER. IT HAS BEEN EXPLAINED IN THE PRECEDING PARAS THAT W ITH REGARD TO THE APPELLANT'S ADDITIONAL SUBMISSIONS / EVIDENCES FILE D BY THE APPELLANT WITH RESPECT TO PROJECT LOSSES DUE TO NON-COMPLETIO N, WERE FORWARDED TO THE AO FOR A REMAND REPORT AFTER DUE EXAMINATION . THE AO WAS ALSO DIRECTED TO VERIFY AND REPORT UPON, THE ASSESS EE'S CONTENTION, AGAINST THE AUTHENTICITY OF THE RE-COMPUTATION, AS ALLEGED BEFORE THE UNDER SIGNED. THE AO IN HIS REMAND REPORT DATED 19. 10.2016 (AS REPRODUCED AT PARA-6 ABOVE), HAS HOWEVER AFFIRMED T HE AO'S FINDINGS IN THE IMPUGNED ORDER. IT HAS BEEN REITERATED BY TH E AO, IN THE REMAND REPORT AS UNDER : 'IT IS SEEN FROM THE ASSESSMENT RECORD THAT THE ASS ESSEE HAS HIMSELF FILED THE REVISED COMPUTATION OF INCOME AFTER REMOV ING PART OF THE EXPENDITURE OF CLUB HOUSE AND ASSESSMENT ORDER WAS PASSED BASED ON THAT COMPUTATION. NOWHERE FROM THE RECORD AVAILABLE , IT IS FOUND THAT ITA NO. 454/BANG/2017 PAGE 8 OF 9 ASSESSEE OBJECTED TO THE REVISED COMPUTATION OF INC OME BEING CONSIDERED FOR CONCLUDING THE ASSESSMENT DURING THE COURSE OF ASSESSMENT PROCEEDINGS.' IN BACKGROUND OF THE ABOVE DETAILED DISCUSSION AND FACTS & CIRCUMSTANCES OF THE CASE, IT IS QUITE CLEAR THAT I N THE IMPUGNED ORDER U/S.143(3) R.W.S 263, THE AO DETERMINED THE ASSESSA BLE INCOME AT RS. 4,15,26,408/- ONLY ON BASIS OF THE RE-COMPUTATION B Y THE APPELLANT HIMSELF. NO INTERFERENCE IS THEREFORE CALLED FOR IN THIS RESPECT. WITH REGARD TO THE ASSESSEE'S CONTENTIONS ON THE PROJECT LOSSES SUFFERED DURING THE SUBSEQUENT PERIOD, NOTHING PREVENTED THE ASSESSEE FROM CLAIMING JUSTIFIABLE LOSES IF ANY, AS PER LAW, IN T HE ENSUING / RELEVANT ASSESSMENT PERIODS. IN BACKGROUND OF THE ABOVE DETAILED DISCUSSION & FA CTS AND CIRCUMSTANCES OF THE CASE THE ASSESSEES GROUNDS OF APPEAL CANNOT BE SUSTAINED. THE AOS ACTION IS THEREFORE UPHELD. 7. FROM THE ABOVE PARAS REPRODUCED FROM THE ORDER O F CIT(A) BEING PARA NO. 6 AND SOME PARAS FROM PAGE NOS. 11 AND 12 OF THE ORDE R OF CIT(A), IT IS SEEN THAT ALTHOUGH LD. CIT(A) HAS OBTAINED REMAND REPORT FROM THE AO IN RESPECT OF VARIOUS SUBMISSIONS MADE BY THE ASSESSEE BEFORE CIT(A) IN WHICH ASSESSEE HAS STATED THAT THE ASSESSEE HAS INCURRED LOSSES DUE TO NON- COMPLETION OF THE PROJECT AND THEREFORE, THERE IS N O REAL INCOME AND RELIANCE HAS BEEN PLACED BY LD. AR OF ASSESSEE ON VARIOUS JU DICIAL PRONOUNCEMENTS SUCH AS JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF GODHRA ELECTRICITY CO. LTD. VS. CIT AS REPORTED IN (1997) 4 SCC 530, MORVI INDUSTRIES LTD. VS. CIT AS REPORTED IN (1972) 4 SCC 451 AND IN THE CASE OF CIT VS. BIRLA GWALIOR AS REPORTED IN (1974) 3 SCC 1 96. BUT THERE IS NO REFERENCE TO THESE SUBMISSIONS AND CLAIM OF THE ASS ESSEE IN THE REMAND REPORT OF THE AO OR IN THE ORDER OF CIT(A). UNDER THESE FACTS, WE FEEL IT PROPER TO RESTORE BACK THE MATTER TO THE FILE OF CI T(A) FOR FRESH DECISION BY WAY OF A SPEAKING AND REASONED ORDER IN RESPECT OF THESE CLAIMS OF THE ASSESSEE MADE BY THE ASSESSEE BEFORE CIT(A). IF RE QUIRED, CIT(A) CAN OBTAIN FRESH REMAND REPORT FROM THE AO AND IF LD. C IT(A) ASK THE AO FOR FRESH REMAND REPORT, THEN AO SHOULD FURNISH THE FRE SH REMAND REPORT WHICH SHOULD BE A SPEAKING REPORT IN RESPECT OF ALL THESE SUBMISSIONS OF THE ASSESSEE. IN VIEW OF THIS DECISION, NO ADJUDICATIO N ON MERIT IS CALLED FOR AT THE PRESENT STAGE. ITA NO. 454/BANG/2017 PAGE 9 OF 9 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE ME NTIONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (ARUN KUMAR GARODI A) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 15 TH FEBRUARY, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGAL ORE.