M/s. Ranade Dighe & Associates, Pune V. ITO, Ward 3(1), Pune

ITA 466/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56411 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 1999-2000
• Appeal Filed On: 26-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Business income
• Section: 143(3); 133A; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTAN T MEMBER ITA NO. 466/PN/2010 (ASSESSMENT YEAR: 1999-2000) M/S RANADE DIGHE AND ASSOCIATES FLAT NO.33, YASH APARTMENTS, OPP.SHASTRINAGAR POLICE STATION, NEAR VANAZ FACTORY, PAUD ROAD, PUNE .. APPELLANT PAN AAJFR7811L VS. INCOME TAX OFFICER, WARD 3(1) PUNE .. RESPONDENT APPELLANT BY: SHRI M.R.BHAGWAT, AR RESPONDENT BY: ANN KAPTHUAMA, DR ORDER PER D.KARUNAKARA RAO, A.M .: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) II, PUNE D ATED 29-01- 2010 FOR THE ASSESSMENT YEAR 1999-2000. 2. FOLLOWING ARE THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL. 1. ON THE FACTS OF THE CASE THE LD.CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS.7,50,000/- ON ACCOUNT OF ALLEGED ON-MONEY RECEIVED BY THE ASSESSEE FIRM 2. THE LD.CIT(A) ERRED IN OVERLOOKING THE SYSTEM OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE ASSESSEE FIRM VIZ., T HE PROJECT COMPLETION METHOD AND THE FACT THAT EVEN ON-MONEY IS TAXABLE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE ASSESSEE. 3. CIT(A) ERRED IN SUSTAINING THE ADDITION EVEN THO UGH THERE WAS NO ACCRUAL OF INCOME IN THE PREVIOUS YEAR RELEV ANT TO ASSESSMENT YEAR 1999-2000. 4. THE LD.CIT(A) ERRED IN SUSTAINING THE ADDITION O F RS.7,50,000/- AS BUSINESS INCOME OF ASSESSMENT YEAR 1999- 2000 EVEN THOUGH THE SAID INCOME HAD ALREADY BEEN T AXED IN ASSESSMENT YEAR 2003-04 U/S 143(3). 5. THE ADDITION OF RS.7,50,000/- BE DELETED AND THE INCOME OF THE ASSESSEE FIRM BE REDUCED TO THAT EXTENT. ITA NO 466/PN/10 (ASSESSMENT YEAR: 1999-2000) M/S RAN ADE DIGHE AND ASSOCIATES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON CONSTRUCTION BUSINESS. THERE WAS A SURVEY ACTION U/S 133A ON 30 TH MARCH, 1998. MR.N.S.RANADE PARTNER OF THE ASSESSEE FIRM AGREED TO DISCLOSE ADD ITIONAL INCOME OF RS.7,50,000/- FOR THE AY 1999-2000. THE PROJECTS COULD NOT BE COMPLETED IN ACCOUNTING YEAR 1998-99 RELEVANT TO AS SESSMENT YEAR 1999-2000 BUT IN FACT THE PROJECT WAS COMPLETED IN ACCOUNTIN G YEAR 2002-03 RELEVANT TO ASSESSMENT YEAR 2003-04. THE ASSESSEE FIRM ACCORDINGLY OFFERED THIS INCOME OF RS.7,50,000 /- IN ITS RETURN FOR ASSESSMENT YEAR 2003-04 AND THE SAID OFFER WAS ACCE PTED BY THE AO IN THE ASSESSMENT MADE U/S 143(3) OF THE ACT. WHILE IT WAS THE DECISION OF THE AO FOR THE AY 2003-04 W R T TO SUM OF RS 7.5 LAKHS, THE AO HAD OBJECTION FOR THE AY 1999-2000. ON FACTS RELATING TO AY 1999-00, THE ASSESSEES ORIGINAL ASSESSMENT WAS FRA MED U/S 144 WHICH WAS SET ASIDE BY THE HONBLE APPELLATE TRIBUN AL AND A FRESH ASSESSMENT WAS DIRECTED AFTER CONSIDERING THE ASSES SMENT ORDER FOR ASSESSMENT YEAR 2003-04. AO MADE AN ADDITION OF RS .7,50,000/- AGAIN EVEN THOUGH THE SAID INCOME WAS ALREADY TAXED FOR ASSESSMENT YEAR 2003-04 AS DISCUSSED ABOVE. THIS A CTION OF THE ASSESSING OFFICER IS NOW CHALLENGED IN APPEAL BEFOR E THE TRIBUNAL. 4. DURING THE PROCEEDINGS BEFORE US, THE LEARNED CO UNSEL FOR THE ASSESSEE FILED A COPY OF THE ORDER IN THE CASE OF D .J.HANSWANI VIDE ITA NOS. 894/PN/97, 453/PN/98 AND C.O.NO.17/PN/99 O F THE PUNE BENCH, DT.29-6-2005 FOR THE PROPOSITION THAT THE UN ACCOUNTED RECEIPT, IF ANY, FOUND DURING THE INVESTIGATION BY THE REVENUE NEED NOT BE TAXED ON CASH BASIS, THEY HAVE TO BE ASSESSE D ON PAR WITH THE OTHER RECEIPTS OF THE BUSINESS. PARAGRAPH 3.1 WAS RELEVANT AND THE SAME WAS READ OUT BEFORE US. IN THE LIGHT OF T HE ABOVE LEGAL POSITION, THE LEARNED COUNSEL FOR THE ASSESSEE MENT IONED THAT THE CIT(A) ERRED IN NOT FOLLOWING THE SAID ORDER OF THE TRIBUNAL, PUNE BENCH WHILE DECIDING THE ISSUE RAISED BEFORE THE TR IBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED TO P ARAGRAPH 3.8 OF THE CIT(A)S ORDER IN THIS REGARD. OTHERWISE, THE FACTS ARE THAT THE IMPUGNED INCOME OF RS 7.5 LACS WHICH WAS ADMITTED U /S 133A OF THE ACT WAS TAXED IN THE ASSESSMENT YEAR 2003-04, WHICH IS YEAR OF PROJECT COMPLETION. THE SAME AMOUNT CANNOT BE AGAI N TAXED ON CASH BASIS IN THE ASSESSMENT YEAR 1999-2000. WE FI ND MERIT IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE. FOR THE SAKE OF ITA NO 466/PN/10 (ASSESSMENT YEAR: 1999-2000) M/S RAN ADE DIGHE AND ASSOCIATES. COMPLETENESS OF THIS ORDER, WE REPRODUCE PARAGRAPH 3.1 OF THE ORDER DT. 29-6-2005 FOR READY REFERENCE. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVA L SUBMISSIONS. ON PERUSAL OF THE FACTS OF THIS YEAR, WE FIND THAT THE ASSESSEE HAS BEEN ACCOUNTING FOR PROFITS ON LE BASIS AND NOT ON PROJECT COMPLETED BASIS AS MENTIONED IN THE STATEMENT OF FACTS FILED BY THE REVENUE. THIS IS QUITE CLEAR THAT FROM SUMMARY OF PROJECTS FILED BY THE LEARNED COUNSEL, W HICH GIVES THE DETAILS OF SALE. IT MAY BE MENTIONED HERE THAT THE SALES STARTED FROM THE PREVIOUS YEAR RELEVANT TO AY 1994- 95, THOUGH THE PROJECT WAS INITIATED IN THE PREVIOUS YEA RELEV ANT TO AY 1993-94. THE LEARNED DR HAD SOUGHT TO ARGUE THAT T HE CHARACTER OF CASH RECEIPTS IS DIFFERENT FROM THE CO NSIDERATION MENTIONED IN THE DOCUMENTS FOR THE REASON THAT NO E XTRA WORK WAS TO BE DONE IN RESPECT OF CASH RECEIPTS. IT WAS ALSO HIS CASE THAT BUT FOR THE SURVEY THESE RECEIPTS WOULD N OT HAVE COME TO THE NOTICE OF THE DEPARTMENT AND WOULD HAVE ESCAPED ASSESSMENT. THEREFORE, THESE RECEIPTS SHOULD BE TA XED ON CASH BASIS. WE ARE UNABLE TO AGREE WITH THIS ARGUM ENT. IT MAY HAPPEN THAT A TRADER RECEIVES SALE CONSIDERATIO N CASH BY CHEQUE OR PAYMENT THROUGH CREDIT CARD. IT MAY ALSO HAPPEN THAT THE ASSESSEE MAY HAVE INTENTION TO HIDE THE WH OLE OR PART OF CASH ALES AND SUCH INTENTION MAY DETECTED IN THE COURSE OF SEARCH OR SURVEY. NONETHELESS, A CASH RECEIPT DOES NOT PARTAKE A DIFFERENT CHARACTER FROM OTHER RECEIPT ME RELY BECAUSE IT WAS RECEIVED IN CASH AND POSSIBLY BECAUS E THERE AS SOME INTENTION TO EVADE ITS DISCLOSURE TO THE DEPAR TMENT. WE ARE OF THE VIEW THAT THE CHARACTER OF RECEIPT IS TO BE FOUND OUT FROM THE NATURE OF TRANSACTION . IN THE INSTANT CASE, THE ASSESSEE RECEIVED CERTAIN AMOUNTS BY WAY OF CHE QUES AND RECEIVED CERTAIN OTHER AMOUNTS BY WAY OF CASH, WHIC H WERE DETECTED IN THE COURSE OF SURVEY. BOTH THESE RECEI PTS WERE IN PURSUANCE OF AGREEMENTS FOR SALE OF FLAT/SHOP. THE ASSESSEE HAS BEEN RECOGNIZING INCOME ON SALE BASIS. THEREFORE, BOTH THE CASH RECEIPT AND THE CHEQUE RECEIPT REMAIN AS DEPOSIT TILL THERE HAS BEEN TRANSFER OF FLAT/SHOP B Y HANDING OVER POSSESSION TO THE BUYER, AS CONTEMPLATED IN SECTION 2(47). THEREFORE, WE ARE OF THE VIEW THAT CASH RECEIPT CANNOT BE BROUGHT TO TAX ON CASH BASIS. LOOKING TO THE ORDER OF FIRST APPELLATE AUTHORITY, ARGUMENT MADE IN THE COURSE OF HEARING BEFORE US AND THE SUMMARY OF PROJ ECTS, WE ARE OF THE VIEW THAT THE LD.CIT(A) WAS RIGHT IN HOL DING EXTRA CONSIDERATION TO BE INTEGRAL PART OF SALE PROCEEDS AND RECOGNIZED AS INCOME WHEN SALE TOOK PLACE BY WAY OF TRANSFER U/S 2(47) OF THE IT ACT. IN THIS VIEW OF THE MATTE R, WE AGREE WITH THE FINDINGS OF THE LD.CIT(A) IN ALL RESPECTS. 5. THERE IS NO DISPUTE ON THE FACT OF OFFERING OF T HE SUM OF RS 7.5 LAKHS IN THE AY 2003-04 AND TAXING OF THE SAME IN T HAT YEAR, THE YEAR OF COMPLETION OF THE PROJECT. THE DISPUTE RELA TE IF THE SAID RECEIPT SHOULD HAVE BEEN OFFERED TO TAX IN THE AY 1 999-00 ON CASH BASIS, WHEN THE RECEIPT IS UNDISPUTEDLY LINKED TO T HE PROJECT. IN OUR OPINION, THIS ISSUE IS SETTLED VIDE THE DISCUSSION EXTRACTED ABOVE. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT T HE ORDER OF THE CIT(A) HAS TO BE REVERSED ON THIS ISSUE. FACTUALLY, THE SAID DECISION ITA NO 466/PN/10 (ASSESSMENT YEAR: 1999-2000) M/S RAN ADE DIGHE AND ASSOCIATES. OF THE TRIBUNAL WAS FILED BEFORE THE CIT(A) IN THE FIRST APPELLATE PROCEEDINGS. ACCORDINGLY, THE GROUNDS RAISED BY TH E ASSESSEE ARE ALLOWED . 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 26-8-2011. SD/- SD/- (I.C.SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 26-8-2011 COPY TO:- 1) ASSESSEE 2) ITO, WARD 3(1), PUNE 3) THE CIT (A) II, PUNE 4) THE CIT CONCERNED 5) THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T.A.T., PUNE. ITA NO 466/PN/10 (ASSESSMENT YEAR: 1999-2000) M/S RAN ADE DIGHE AND ASSOCIATES. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., PUNE