BHUMIRAJ CONSTRUCITONS, NAVI MUMBAI V. JCIT 15(1), MUMBAI

ITA 5195/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84474 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 16-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SU JIT BANGAR
• Assessee Lawyers: PRADIP N KAPASI
• Keywords: Rejection of books of accounts; Business income; Business expenditure; Commercial expediency
• Section: 143(3); 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI AMIT SHUKLA , J M ITA NO. 5195 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 9 - 10 ) M/S BHUMIRAJ CONSTRUCTIONS, D/5 - 6, BIG SPLASH, SECTOR - 17, VASHI, NAVI MUMBAI - 400 703 VS. JCIT - 15(1), MUMBAI - 400 008 PAN/GIR NO. : A A FFB 3546 H ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 3380 / MUM/20 12 ( ASSESSMENT YEAR : 200 8 - 09 ) M/S BHUMIRAJ CONSTRUCTIONS, D/5 - 6, BIG SPLASH, SECTOR - 17, VASHI, NAVI MUMBAI - 400 703 VS. JCIT - 15(1), MUMBAI - 400 008 PAN/GIR NO. : A AFFB 3546 H ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI PRADIP N. KAPASI /REVENUE BY : SHRI SUJIT BANGAR DATE OF HEARING : 8 TH SEPT. 201 4 DATE OF PRONOUNCEMENT : 11 TH DEC , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : TH ESE ARE THE APPEALS FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) FOR ASSESSMENT YEARS 2008 - 09 & 2009 - 10 , IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE I.T. ACT . 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE ISSUE IN BOTH THE YEARS UNDER CONSIDERATION ARE SAME, THEREFORE, BOTH THE ITA NO. 5195 & 3380 /1 2 2 APPEALS WERE HEARD TOGETHER AND ARE NOW DISPOSED OF BY THIS CONSOLIDATED ORDER. 3 . FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT SINCE INCEPTION. DURING THE ASSESSMENT YEAR 2009 - 10, THE ASSESSEE HAS UNDERTAKEN FIVE PROJECTS. THE AO HAS REJECTED T HE BOOKS OF ACCOUNTS BY INVOKING PROVISIONS OF SECTION 145(3) AND ESTIMATED BUSINESS INCOME OF THE ASSESSEE ON THE BASIS OF ACTUAL SALE OF FLATS. THE AO OBSERVED THAT ASSESSEE HAS OFFERED PROFIT IN RESPECT OF ITS THREE PROJECTS VIZ. WOODS, MEADOWS AND HERM ITAGE, BUT NO PROFIT IS OFFERED IN RESPECT OF TWO PROJECTS VIZ. IRAISAA AND COSTARICA. IT WAS FURTHER OBSERVED BY THE AO THAT THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD AND NO PROFIT IS DECLARED ON THE BASIS OF PERCENTAGE COMPLETION METHOD. THE A O ALSO OBSERVED THAT THE ASSESSEE DID NOT DECLARE ANY PROFIT IN RESPECT OF WORK - IN - PROGRESS DURING THE YEAR. THE TOTAL WORK - IN - PROGRESS DURING THE YEAR IN RESPECT OF ALL THE FIVE PROJECTS IS RS. 32,84,47,955/ - . IN THE OPINION OF THE AO , ACCOUNTING SYSTEM FO LLOWED BY THE ASSESSEE BY NOT OFFERING TAXABLE PROFIT ON THE BASIS/OF PERCENTAGE COMPLETION METHOD IS NOT IN ACCORDANCE WITH THE I. T A CT AND AS PER THE ME THODS PRESCRIBED BY THE CHARTERED ACCOUNTANT'S INSTITUTE FOR DEVELOPERS. ON THE OTHER HAND, AT THE TIM E OF ASSESSMENT THE ASSESSEE SUBMITTED THAT IT HAS CORRECTLY DECLARED PROFIT FROM VARIOUS PROJECTS. IT WAS F URTHER SUBMITTED THAT THE ASSESSEE IS FOLLOWING THE SAME METHOD OF ACCOUNTING CONSISTENTLY DURING THE LAST SEVERAL YEARS, BUT THE AO DID NOT AGREE WITH THE CONTENTIONS OF THE APPELLANT AND IT 'WAS HELD BY HIM THAT WITH EFFECT FROM 1.4.2003 AS PER REVISED AS - 7, THE PROJECT COMPLETION METHOD HAS BEEN DONE AWAY AND THE ITA NO. 5195 & 3380 /1 2 3 ONLY METHOD FOR RECOGNIZING THE REVENUE IS PERCENTAGE COMPLETION METHOD. ACCORDINGLY, THE AO HAS ESTIMATED THE PROFIT @ 10% OF WORK DONE DURING THE YEAR AS AGAINST THE PROFIT DECLARED BY THE ASSESSEE. 4 . BY THE IMPUGNED ORDER, CIT(A) DELETED THE ADDITIO N MADE IN RESPECT OF THREE PROJECTS, NAMELY, WOODS, MEADOWS AND HERMITAGE BY OBSERVING T HAT THESE PROJECTS HAVE ALREADY BEEN COMPLETED I N THE IMMEDIATELY PRECEDING YEAR I.E. 2007 - 08. HOWEVER, IN RESPECT OF THE REMAINING TWO PROJECTS, NAMELY, COSTARICA AND IRAISAA, THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE AO. RELEVANT OBSERVATION OF T HE CIT(A) IN THIS REGARD WAS AS UNDER : - 3.2 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE AO AS WELL AS THE SUBMISSIONS OF THE APPELLANT. AFTER CONSIDERING THE RIVAL SUBMISSIONS, IT IS NOTED THAT DURING THE .YEAR, THE APPELLANT HAS DISCLOSED PROFIT/LOS S ON IT'S FIVE RUNNING 'PROJECTS, OUT OF THESE PROJECTS, THREE PROJECTS HAVE ALREADY BEEN COMPLETED IN THE IMMEDIATELY PRECEDING YEAR I.E. 2007 - 08, THESE PROJECTS ARE WOODS, MEADOWS AND HERMITAGE. THE REMAINING TWO PROJECTS ARE NEW PROJECTS AND THESE ARE C OSTA RICA AND IRAISAA, WH EREAS COSTA RICA IS STILL IN INITIAL PHASE, WHERE ONLY 1% SALEABLE AREA IS SOLD AND IN PROJECT 'IRAISAA' MORE THAN 43% AREA HAS BEEN SOLD UPTO THE YEAR UNDER CONSIDERATION. UNDER THESE CIRCUMSTANCES, IN MY CONSIDERED OPINION, IT WOUL D NOT BE APPROPRIAT E TO APPLY THE CHANGED METHOD ADOPTED BY THE AO IN THE CASES OF OLD PROJECTS, WHICH HAVE ALREADY BEEN COMPLETED AND THE METHOD CONSISTENTLY FOLLOWED BY THE APPELLANT WAS ACCEPTED IN EARLIER YEARS. THESE PROJECTS ARE ALMOST SOLD OUT AND P ROFIT ON THEM HAVE ALREADY BEEN DISCLOSED BY THE ASSESSEE IN EARLIER YEARS. THEREFORE, TO THAT EXTENT, I AGREE WITH THE CONTENTION OF THE APPELLANT THAT IF 10% PROFIT IS AGAIN CHARGED ON THE REMAINING WORK IN PROGRESS COMPLETED DURING THE YEAR RELATING TO SUCH PROJECTS, IT WILL TANTAMOUNT TO DOUBLE ADDITION BECAUSE IN THAT CASE, PROFIT WILL BE TAXED ONCE AT THE TIME. OF SALE AS HAS ALREADY BEEN DECLARED IN EARLIER YEARS AND NOW ONCE AGAIN ON THE BASIS OF NEW METHOD ADOPTED BY THE AO. THEREFORE, THE AO IS DI RECTED 'TO DELETE THE ADDITION MADE IN RESPECT OF WIP OF THE THREE COMPL ETE PROJECTS I.E WOODS, MEADOWS AND HERMITAGE. HOWEVER, I DO' NOT AGREE WITH THE CONTENTION OF THE APPELLANT THAT IN THE NEW PROJECTS I.E. COSTAR ICA AND IRAISAA ALSO, THE CONSISTENTLY FOLLOWED METHOD OF ACCOUNTING OF THE ASSESSEE SHOULD BE ALLOWED. THE PRINCIPLE OF CONSISTE N CY DOES NOT EXTEND TO THE NEW PROJECT. IN THIS 'REGARD, I D O AGREE WITH THE FIN DING OF THE AO THAT AS PER THE REVISED ACCOUNTING STANDARD AS - 7 , THE PROFIT IS REQUIRE D TO BE RECOGNIZED ON THE BASIS OF WORK - IN - PROGRESS AS IT IS A MORE SCIENTIFIC MANNER, WHICH GIVES A CORRECT PICTURE OF THE PROFIT AS ITA NO. 5195 & 3380 /1 2 4 COMPARED TO THE METHOD ADOPTED BY THE ASSESSEE ON THE BASIS OF PERCENTAGE OF AREA SOLD. THIS FACT GETS FURTHER STRENGTHENE D FROM THE ASSESSEE'S OWN STATISTICS, WHEREIN BY THE METHOD ADOPTED BY THE ASSESSEE PROFIT OF PROJECT IRAISAA IS WORKED OUT AT 3.74%, WHEREAS IN COSTARICA IT IS 24.48%, WHEREAS WORK - IN - PROGRESS DURING THE YEAR IN BOTH THE PROJECTS ARE ALMOST SIMILAR I.E. IN THE RANGE OF 12 CRORES EACH. THE APPELLANT HAS NOT. BEEN ABLE TO SUBMIT ANY SATISFACTORY EXPLANATION REGARDING SUCH HUGE VARIATION IN 'THE PROFITS OF THESE TWO PROJECTS, WHICH ARE OF ALMOST SAME MAGNITUDE. UNDER THESE CIRCUMSTANCES, TAKING A HOLISTIC VI EW OF THE MATTER, I AM CONVINCED THAT THE METHOD ADOPTED BY THE AO BY APPLYING A UNIFORM 10% NET PROFIT ON WIP IS MORE REASONABLE, HENCE THE ADDITION MADE BY THE AO IN RESPECT OF THE TWO NEW PROJECTS I.E. COSTARICA AND IRAISAA, IS SUSTAINED. THESE GROUNDS OF APPEAL ARE ACCORDINGLY, PARTLY ALLOWED. 5 . IN RESPECT OF ADDITION DELETED BY CIT(A), THE REVENUE IS NOT IN APPEAL BEFORE US, HOWEVER, A GAINST THE ABOVE ORDER OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. LEARNED AR REITERATED THE CONTENTION S TAKEN BEFORE CIT(A), WHICH ARE AS UNDER : - THE AO'S OBSERVATIONS THAT THE ASSESSEE IS RECOGNIZING THE REVENUE BY FOLLOWING THE PROJECT COMPLETION METHOD IS NOT CORRECT AT ALL. THE CORRECT METHOD, WHICH HAS CONSISTENTLY BEEN ADOPTED BY THE ASSESSEE IS ON T HE BASIS OF PERCENTAGE COMPLETION METHOD. IT WAS FURTHER POINTED OUT THAT THE ANOTHER OBSERVATION OF THE AO THAT NO PROFIT IS DISCLOSED ON PROJECT 'IRAISAA' AND 'COSTARICA' IS ALSO INCORRECT, BECAUSE THE ASSESSEE HAS DISCLOSED PROFITS OF RS.3,60,509/ - FOR PROJECT 'IRAISAA' AND RS.4,74,060/ - FOR PROJECT 'COSTARICA'. IT WAS FURTHER SUBMITTED THAT AS AGAINST THE ESTIMATED ADDITION MADE BY THE AO ON THE BASIS OF 10% PROFIT ON WORK - IN - PROGRESS, THE ASSESSEE HAS ADOPTED A DIFFERENT PERCENTAGE COMPLETION METHOD ON THE BASIS OF SALES MADE DURING THE YEAR AND NOT ON THE BASIS OF WORK IN PROGRESS DURING THE YEAR. IT WAS FURTHER SUBMITTED THAT THE PERCENTAGE OF PROFIT DECLARED IN 'COSTARICA', WHERE ONLY LESS THAN 1 % AREA IS SOLD, IS WORKED OUT AT 25.48% WHEREAS IN 'TH E CASE OF 'IRAISAA', WHERE 43.22% AREA HAS BEEN SOLD ON, PROFIT IS DECLARED AT 3.74%. IT WAS VEHEMENTLY ARGUED BY THE LD. AR OF THE ASSESSEE THAT THE METHOD ADOPTED BY THE ASSESSEE FOR WORKING OUT THE PROFIT ON THE BASIS OF SALES, MADE DURING THE YEAR IS A LSO A CORRECT AND SCIENTIFIC METHOD OF WORKING OUT THE PROFITS BY PERCENTAGE COMPLETION METHOD. THEREFORE ON THE BASIS OF THESE GROUNDS, IT WAS REQUESTED THAT THE METHOD CONSISTENTLY FOLLOWED BY THE APPELLANT SHOULD NOT BE DISTURBED AND THE DISCLOSED PROFI T SHOULD BE ASSESSED AS SUCH. ITA NO. 5195 & 3380 /1 2 5 7 . ON THE OTHER HAND, LEARNED DR RELIED ON THE FINDINGS RECORDED BY AO AND CIT(A). 8 . WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT OUT OF F IVE PROJECTS THE CIT(A) HAS DELETED THE ADDITION MADE IN RESPECT OF THREE PROJECTS WHICH WERE FOUND TO BE COMPLETED IN EARLIER YEARS. HOWEVER, IN RESPECT OF PROJECT IRAISAA AND COSTARICA , THE AO MADE AN ADDITION BY TAKING 10% PROFIT ON WORK - IN - PROGRESS IN RESPECT OF THESE PROJECTS AND THE SAME HAS BEEN CONFIRMED BY THE CIT(A) AND ASSESSEE IS IN FURTHER APPEAL BEFORE US. 9 . FROM THE RECORD, WE FOUND THAT ASSESSEE IN RESPECT OF THE PROJECT COSTARICA, HAD ON ITS OWN RECOGNIZED THE PROFIT ON PERCENTAGE OF COMPL ETION METHOD OF ACCOUNTING AS IN THE PAST. WE ALSO FOUND THAT THE AO HAS ALSO TREATED ADMINISTRATIVE EXPENSES AS PART OF THE COST OF WORK DONE WHICH IS ABSOLUTELY WRONG. IT APPEARS THAT ASSESSEE HAS RECOGNIZED REVENUE BY APPLYING PERCENTAGE OF COMPLETION METHOD PRESCRIBED BY THE ICAI VIDE THE GUIDANCE NOTE ON RECOGNITION OF REVENUE BY REAL ESTATE DEVELOPERS READ WITH THE ACCOUNTING STANDARD 9 AND 7 OF THE ICAI. IT IS ALSO CLEAR FROM THE RECORD THAT THE AO HAS ESTIMATED PROFIT WITHOUT REJECTING METHOD OF AC COUNTING AND THE BOOKS OF ACCOUNTS MAINTAINED BY ASSESSEE. THE AO HAS ALSO NOT INVOKED PROVISIONS OF SECTION 145 FOR REJECTION OF BOOKS OF ACCOUNTS. IN CASE OF IR AISAA, WE FOUND THAT DURING THE YEAR 43.22% AREA HAS BEEN SOLD ON, PROFIT WAS DECLARED AT 3.74 %. THE ASSESSEE HAS DULY DECLARED PROFIT ON THE BASIS OF SALES MADE DURING THE YEAR. IN VIEW OF THE FACT THAT ASSESSEE WAS FOLLOWING PERCENTAGE COMPLETION METHOD OF ACCOUNTING FOR RECOGNIZING ITS PROFIT OF THE PROJECTS ITA NO. 5195 & 3380 /1 2 6 UNDER CONSTRUCTION AND SALE OF FLAT S FOR THE COMPLETED, THERE IS NO MERIT IN THE OBSERVATION OF THE AO THAT ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD. WE ALSO FOUND THAT PERCENTAGE COMPLETION METHOD FOLLOWED BY ASSESSEE IN EARLIER YEAR WAS ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS . WE FOUND THAT FOR THE ASSESSMENT YEAR 2004 - 05 TO 2007 - 08, THE ACCOUNTS WERE FINALIZED BY FOLLOWING PERCENTAGE COMPLETION METHOD OF ACCOUNT, TOTAL PROFIT THEREON WAS ACCEPTED BY THE AO UNDER SCRUTINY ASSESSMENT FRAMED U/S.143(3). THE PROJECT IRAISAA WAS UND ERTAKEN ON A PLOT 1, SECTOR 19, SANPADA IN NAVI MUMBAI IN THE YEAR 2005. THE SAID HOUSING PROJECT WAS COMMENCED ON 19 TH MAY,2005 A S CERTIFIED IN THE COMMENCEMENT CERTIFICATE ISSUED BY THE NAVI MUMBAI MUNICIPAL CORPORATION AND COMPLETED ON 20 TH SEPTEMBER, 2 008 AS NOTED IN THE OCCUPANCY CERTIFICATE ISSUED BY THE NAVI MUMBAI MUNICIPAL CORPORATION. PROFITS FOR THE ASSESSMENT YEAR 2008 - 09 WAS DETERMINED AT RS. 3,60,509/ - ON PERCENTAGE COMPLETION METHOD OF RS. 12,14,16,969/ - 10 . IN RESPECT OF COSTARICA PROJECT, IT WAS UNDERTAKEN ON A PLOT 1 AND 2, SECTOR - 18, SANPADA IN NAVI MUMBAI IN THE YEAR 2007. THE SAID COMMERCIAL PROJECT IS STILL IN PROGRESS. PROFITS FOR THE YEAR IS DETERMINED AT RS. 4,74,060/ - ON PERCENTAGE COMPLETION METHOD OF RS. 12,75,62,614/ - . THE OBJECTION OF THE AO WAS THAT NO PROFIT HAS BEEN DECLARED BY THE ASSESSEE IN RESPECT OF ITS IRAISAA AND COSTARICA PROJECTS, BUT THE SAME IS FACTUALLY INCORRECT. F ROM THE RECORD, WE FOUND THAT ASSESSEE HAS OFFERED RS. 3,60,509/ - AS PROFIT FOR IRAISAA PROJECT AND RS.4, 74,060/ - FOR COSTARICA PROJECT. THE SAID PROFITS WERE SCIENTIFICALLY COMPUTED AND THE DETAILS THEREOF WERE ANNEXED WITH THE RETURN OF INCOME. FURTHERMORE, THE ASSESSEE CONSISTENTLY FOLLOWED THE METHOD OF ACCOUNT FOR COMPUTING ITA NO. 5195 & 3380 /1 2 7 PROFITS OF THESE PROJECTS UNDE R PROGRESS AS IN THE PAST YEARS IN WHOSE ASSESSMENTS, THIS METHOD OF ACCOUNTING HAS BEEN ACCEPTED UNDER ORDERS PASSED U/S.143(3). AFTER VERIFYING ALL THE ACCOUNTS FOR THE YEARS UNDER CONSIDERATION, WE FOUND THAT ASSESSEE WAS FOLLOWING PERCENTAGE COMPLETION METHOD FOR IRAISAA AND COSTARICA PROJECTS AND HAS OFFERED FOR TAXATION HE AMOUNT OF RS.3,60,509/ - AND RS.474,060/ - RESPECTIVELY FOR THE SAID PROJECTS, THE WORK OF WHICH IS UNDER PROGRESS. IN VIEW OF THESE FACTS ALLEGATION OF AO TO THE EFFECT THAT THE ASSE SSEE DID NOT DECLARE ANY PROFIT WITH REGARD TO WORK - IN - PROGRESS AND THE COMPLETED PROJECT, IS ALSO HAVING NO BASIS. WE FOUND THAT ASSESSEE HAS RECOGNIZED PROFIT FOR THESE TWO PROJECTS, WHICH WAS UNDER PROGRESS. THE DETAILS ARE AS UNDER : - PROJECT PROFIT OF THE YEAR METHOD OF ACCOUNTING WOODS 21,84,818 ACTUAL SALES BASIS MEADOWS (9,16,107) ACTUAL SALES BASIS HERMITAGE 1,77,78,443 ACTUAL SALES BASIS IRAISAA 3,60,509 PERCENTAGE COMPLETION COSTARICA 4,74,060 PERCENTAGE COMPLETION 1 1 . IN VIEW OF ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF LOWER AUTHORITIES FOR MAKING ADDITION BY ESTIMATING 10% PROFIT ON WORK - IN - PROGRESS FOR BOTH THE YEARS . THE AO IS DIRECTED TO REFRAME ASSESSMENT KEEPING IN VIEW OUR ABOVE OBSERVATION . NEEDLESS TO SAY THE ASSESSEE SHOULD BE GIVEN FULL OP PORTUNITY BEFORE FINALIZING THE ASSESSMENT. 1 2 . IN THE ASSESSMENT YEAR 2008 - 09, THE AO HAS ALSO DISALLOWED BUSINESS EXPENDITURE OF RS. 65,68,500/ - . FROM THE RECORD, WE FOUND THAT ASSESSEE HAD PAID AN AMOUNT OF RS. 65,68,500/ - DURING THE YEAR TO CERTAIN PERSO NS, TO WHOM THE ASSESSEE HAD AGREED TO SELL THE PREMISES UNDER CONSTRUCTION IN THE PRECEDING FINANCIAL YEARS. THE SAID AMOUNT WAS ITA NO. 5195 & 3380 /1 2 8 DEBITED TO THE PROFIT & LOSS ACCOUNT AND WAS CLAIMED AS BUSINESS EXPENDITURE U/S.37 OR AS A BUSINESS LOSS U/S.28 OF THE ACT. THE REASONS FOR DISALLOWANCE HAS BEEN RECORDED BY THE AO AT PARA 9 & 9.7 OF HIS ORDER. THE AO HELD THAT SUCH EXPENDITURE WAS CAPITAL IN NATURE. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO. 1 3 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF BUILDINGS COMPRISING OF SEVERAL UNITS TO BE USED FOR THE PURPOSES OF RESIDENCE AND/OR OFFICE. IN THE PRECEDING YEARS, THE ASSESSEE HAD AGREED TO SELL CERTAIN PREMISES IN THE BUILDINGS UNDER CONSTRUCTION TO VARIOUS PERSONS ON THE TERMS AND CONDITIONS AND FOR CONSIDERATION MUTUALLY AGREED UPON WITH SUCH PERSONS. T HE AFORESAID SALES WERE DULY REFLECTED IN THE BOOKS OF ACCOUNTS OF THE RESPECTIVE YEAR/YEARS OF SALES AND THE PROFIT THEREON WAS DULY RECOGNIZED IN THE BOOKS AND WAS OFFERED FOR TAXATION IN SPITE OF THE FACT THAT THE WORK WAS IN PROGRESS AND THE POSSESSION OF THE FLATS WAS NOT GIVEN. SINCE THE ASSESSEE WAS UNABLE TO COMPLY WITH SOME OF THE CONDITIONS OF SALE AND THE PURC HASERS OF THE SAID FLATS WERE NOT SATISFIED WITH THE PROGRESS OF THE WORK AND HAD EXPRESSED THEIR DESIRE TO OPT OUT OF THE DEALS ON PAYMENT OF COMPENSATION FOR NON - PERFORMANCE. ACCORDINGLY, ASSESSEE SETTLED THE DISPUTE, TOOK OVER THE RIGHTS OF THE SAID PE RSONS IN THE SAID FLATS ON SURRENDER OF ALL THEIR RIGHTS, TITLE AND INTEREST IN THE SAID FLATS IN FAVOUR OF THE ASSESSEE ON REFUND OF CONSIDERATION RECEIVED TILL DATE AND ON PAYMENT OF COMPENSATION TO THE SAID PERSONS DURING THE YEAR UNDER CONSIDERATION . ITA NO. 5195 & 3380 /1 2 9 1 4 . IT IS CLEAR FROM THE RECORD THAT PAYMENTS SO MADE WAS TOWARDS COMPENSATION TO THE CUSTOMERS, WHO HAVE BOOKED THEIR FLATS AND THE SAME WAS PAID FOR THE REASON OF COMMERCIAL EXPEDIENCY. IT IS PERTINENT TO MENTION THAT ASSESSEE HAS NOT CLAIMED EXPENDITURE IN RESPECT OF REFUND OF SALE CONSIDERATION OF RS. 1,43,97,500/ - , HOWEVER, ONLY AMOUNT OF COMPENSATION TERMED AS BUY - BACK EXPENSES AGGREGATING TO RS. 65,68,500/ - WHICH HAS BEEN CLAIMED AS DEDUCTION WHICH AMOUNT AS HAS BEEN INFORMED IN THE COURSE OF REGULAR B USINESS. THUS, THERE IS NO REASON TO DIS ALLOW SUCH EXPENSES AS REVENUE EXPENSES . ACCORDINGLY, WE DIRECT THE AO TO ALLOW EXPENSES OF RS. 65,68,500/ - AS REVENUE EXPENSES. 15. IN THE RESULT, BOTH APPEAL S OF THE ASSESSEE ARE ALLOWED IN PART, IN TERMS INDICATE D HEREINABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 / 12 / 201 4 . / 12 / 2014 SD/ - SD/ - ( ) ( AMIT SHUKLA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER M UMBAI ; DATED 11 / 12 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//