The ITO, Ward-7(3), Ahmedabad V. M/s. Tirupati Enterprises, Ahmedabad

ITA 464/AHD/2012

• Counselvise Citation: 46420514 RSA 2012
• Duration Of Justice: 3 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Avoidance of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .. , ( .) , ! BEFORE SHRI BEFORE SHRI G.D. AGARWAL,VICE PRESIDEN T (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.464/AHD/2012 ( / ASSESSMENT YEAR : 2007-08) THE ITO WARD-7(3) AHMEDABAD / VS. M/S.TIRUPATI ENTERPRISES B/4, JALVIHAR FLATS B/H.AJANTA COMM.CENTRE ASHRAM ROAD AHMEDABAD % & ./ ./ PAN/GIR NO. : AALFM 9809 J ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %(+ / APPELLANT BY : SHRI DINESH SINGH, SR.DR )*%(,+ / RESPONDENT BY : MS.URVASHI SHODHAN, AR - ., /& / DATE OF HEARING 02/06/2015 0123 , /& / DATE OF PRONOUNCEMENT 05/06/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDAB AD (CIT(A) IN SHORT) DATED 05/12/2011 PERTAINING TO ASSESSMEN T YEAR (AY) 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- ITA NO.464/AHD/ 2012 ITO VS. M/S. TIRUPATI ENTERPRISES ASST.YEAR 2007-08 - 2 - 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.18,00,324/- BEING THE INCOME WORKED OUT BY AP PLYING THE PERCENTAGE COMPLETION METHOD. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.C OMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASS ESSING OFFICER BE RESTORED. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 30/12/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION OF RS.18,00,324/- BEING UNDISCLOSED PROFIT OF PARAS STATUS PROJECT. THE ASSESSEE FEELING AGGRIEVED BY THE ORD ER OF THE AO, PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERI NG THE SUBMISSIONS OF THE ASSESSEE, ALLOWED THE APPEAL. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW THE REVENUE IS IN APPEAL BEFORE US. 3. GROUND NOS.2 & 3 ARE GENERAL IN NATURE WHICH REQ UIRE NO INDEPENDENT ADJUDICATION. 4. GROUND NO.1 IS AGAINST DELETION OF ADDITION OF R S.18,00,324/- BEING THE INCOME WORKED-OUT BY APPLYING THE PERCENT AGE COMPLETION ITA NO.464/AHD/ 2012 ITO VS. M/S. TIRUPATI ENTERPRISES ASST.YEAR 2007-08 - 3 - METHOD. THE LD.SR.DR SHRI DINESH SINGH SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. HE SUBMITTED THAT THE ASSESSEE HAD UNDER TAKEN CONSTRUCTION AND DEVELOPMENT OF TWO PROJECTS; NAMELY, CAMPUS CORNER- II AND PARAS STATUS. IN RESPECT OF CAMPUS CORNER-II, THE ASSESS EE DECLARED GROSS PROFIT YEAR-TO-YEAR WISE @ 20%. HOWEVER, IN THE CASE OF PARAS STATUS, THE ASSESSEE HAS FAILED TO DO SO. HE SUBMITTED THA T THE SUBSTANTIAL AMOUNT HAS BEEN RECEIVED FROM THE PROSPECTIVE BUYERS. T HE PROJECT IS COMPLETED AND THE ASSESSEE OUGHT TO HAVE DECLARED T HE PROFIT ON THE BASIS OF PROJECT COMPLETION METHOD. 4.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE M S.URVASHI SHODHAN STRONGLY SUPPORTED THE ORDER OF THE LD.CIT(A) AND S UBMITTED THAT THE ASSESSEE HAS DISCLOSED THE PROFIT AS PER THE ACCOUN TING STANDARD. SHE SUBMITTED THAT THERE IS NO ILLEGALITY IN THE ORDER OF THE LD.CIT(A). SHE FURTHER SUBMITTED THAT IT IS NOT CORRECT THAT THE A SSESSEE HAS RECEIVED ENTIRE THE MONEY, HANDED OVER THE POSSESSION OF THE PROJEC T AND THE BUYERS HAVE OCCUPIED THE PROPERTIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO MADE THE ADDITION ON THE BASIS THAT THE ASSESSEE HAS RECEIVED SUBSTANTIAL SALES CONSIDERATION AND DESPIT E THE SAME, NO INCOME ITA NO.464/AHD/ 2012 ITO VS. M/S. TIRUPATI ENTERPRISES ASST.YEAR 2007-08 - 4 - HAS BEEN OFFERED FOR TAXATION. THE AO WAS OF THE V IEW THAT THE ASSESSEE IS SELLER OF GOODS AND AS SUCH THE ASSESSEE OUGHT T O HAVE FOLLOWED ACCOUNTING STANDARD (AS-7) AND RECOGNIZE THE REVENU E WHEN THE SELLER HAS TRANSFERRED THE SIGNIFICANT RISK AND REWARD IN THE PROPERTY TO THE PERSON FOR A CONSIDERATION. HOWEVER, THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER:- 2.3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE APPELLANT W AS DEVELOPING TWO CONSTRUCTION PROJECTS DURING THE YEAR. FOR ONE PROJ ECT NAMELY CAMPUS CORNER- II, THE APPELLANT WAS SHOWING 20% GROSS PRO FIT EVERY YEAR ON THE RECEIPTS AS IT WAS BEING DEVELOPED BY HIM FOR S OME CO-OPERATIVE SOCIETY. HOWEVER, IN RESPECT OF THE OTHER PROJECT N AMELY PARAS STATUS, THE APPELLANT DID NOT SHOW ANY INCOME BUT CONSIDERE D ALL THE WORK DONE DURING THE YEAR AS WORK IN PROGRESS. THE A. O. DID NOT ACCEPT THE METHOD OF ACCOUNTING AND HELD THAT THE APPELLANT SH OULD HAVE FOLLOWED ACCOUNTING STANDARD 7. THE APPELLANT HAS SUBMITTED THAT THE PROJECT WAS NEW IN THAT YEAR AND THE CONSTRUCTION WAS INCOM PLETE. THE APPELLANT HAS RECEIVED ADVANCE BOOKING AND DID NOT TRANSFER THE POSSESSION OF THE UNITS TO THE CUSTOMERS. IT HAS BE EN SUBMITTED BY THE APPELLANT THAT THE APPELLANT WAS FOLLOWING AS - 9 I SSUED BY ICAI FOR REVENUE RECOGNITION. THE REVENUE AS PER THIS METHOD SHALL BE RECOGNIZED AT THE TIME WHEN THE SELLER TRANSFERS TH E PROPERTY IN GOODS TO THE BUYER FOR A CONSIDERATION OR ALL SIGNIFICANT RI SK AND REWARD OF OWNERSHIP ARE TRANSFERRED TO THE BUYER AND SELLER R ETAINS NO EFFECTIVE CONTROL OF GOODS. SINCE THE CONSTRUCTION WAS INCOMP LETE, THE PROPERTY WAS NOT READY FOR SALE. THE APPELLANT DID NOT TRANS FER THE PROPERTY AS ONLY INITIAL INSTALLMENTS WERE PAID AND FINAL PAYME NT WAS PENDING. IT WAS FURTHER POINTED OUT BY THE APPELLANT THAT IN SU BSEQUENT YEARS, THE APPELLANT HAS RECOGNIZED SALES OF RS.5.25 CRORES IN F. Y. 2008-09, ITA NO.464/AHD/ 2012 ITO VS. M/S. TIRUPATI ENTERPRISES ASST.YEAR 2007-08 - 5 - RS.3.21 CRORES IN F. Y. 2009-10 AND RS.75.5 LACS IN F. Y. 2010-11 AND HAS OFFERED TOTAL PROFIT OF RS.1.82 CRORES FOR TAX ON ACCOUNT OF THIS SCHEME. THEREFORE, THERE WAS NO AVOIDANCE OF TAX AT ALL. I AM INCLINED TO AGREE WITH THE SUBMISSION GIVEN BY THE APPELLANT. IN THIS TYPE OF CASES, THE REVENUE HAS T O BE RECOGNIZED ONLY AT THE TIME WHEN SUBSTANTIAL RISK AND REWARD ARE TRANS FERRED TO THE BUYER BY THE SELLER. THE SCHEME WHICH WAS UNDER CONSTRUCT ION WAS NOT READY FOR POSSESSION. THE BUYERS DID NOT PAY FULL INSTALL MENT. IT WAS ONLY THE ADVANCE BOOKING AMOUNT THAT WAS PAID BY THE BUYERS. THE A. O. HAS WITHOUT ANY BASIS TAKEN THE RATE OF 8% ON THE WORK IN PROGRESS SHOWN BY THE APPELLANT. THE APPELLANT HAS RIGHTLY FOLLOWE D THE METHOD OF ACCOUNTING AS PRESCRIBED IN AS - 9 OF THE ICA1. IT IS ALSO NOTED THAT IT HAS OFFERED SUBSTANTIAL PROFIT IN THE NEXT YEARS ON ACCOUNT OF THIS SCHEME. IN VIEW OF THESE FACTS, THE ADDITION MADE B Y THE A. O. IS DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS, THEREFORE, ALLOWED. 5.1. THE LD.CIT(A) HAS GIVEN A FINDING ON FACT THAT THE SCHEME WAS UNDER CONSTRUCTION AND WAS NOT READY FOR POSSESSION . THE BUYER DID NOT PAY FULL INSTALLMENTS, IT WAS THE ONLY ADVANCE BOOK ING AMOUNT THAT WAS PAID BY THE BUYERS. THIS FINDING ON FACT IS NOT RE BUTTED BY PLACING ANY CONTRARY MATERIAL ON RECORD. THE REVENUE HAS NOT P LACED ANY MATERIAL ON RECORD SUGGESTING THAT THE SUBSTANTIAL AMOUNT HAS B EEN PAID TO THE ASSESSEE, PROJECT HAS BEEN COMPLETED AND AFTER COMP LETION THE POSSESSION IS ALSO HANDED OVER TO THE BUYERS. MOREOVER, IT IS NOT DEMONSTRATED AS TO HOW AS-9 OF THE ICAI IS NOT APPLICABLE IN THE PRESE NT CASE. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE LD.CIT(A), ITA NO.464/AHD/ 2012 ITO VS. M/S. TIRUPATI ENTERPRISES ASST.YEAR 2007-08 - 6 - SAME IS HEREBY UPHELD. THUS, GROUND NO.1 OF REVENU ES APPEAL IS REJECTED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 5 TH DAY OF JUNE, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( .) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 5/ 06 /2015 6/..- , .-../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-XIV, AHMEDABAD 5. ; <)-89 , /893 , 7 / DR, ITAT, AHMEDABAD 6. < => . / GUARD FILE. / BY ORDER, * ;) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 02.06.15 (DICTATION-PAD 8 + PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..3.6.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.5.6.2015 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 5.6.2015 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER