M/s Tanna Const Development Pvt Ltd, Mumbai V. ITO WD - 9(3)(3), Mumbai

ITA 5736/MUM/2003

• Counselvise Citation: 573619914 RSA 2003
• Duration Of Justice: 8 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-11-2011
• Assessment Year: misc
• Appeal Filed On: 21-08-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: SANJUKTA CHOW DHURY; PRAMOD KUMAR PARIDA
• Section: 234B

Judgement Text

1 ITA NO: 5736/MUM/2003 M/S. TANNA CONSTRUCTION DEV. PVT. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE SHRI RAJENDRA SING (A.M.) ITA NO. : 5736/MUM/2003 ASSESSMENT YEAR : 1999-2000 M/S. TANNA CONSTRUCTION DEV PVT. LTD. 107/108, SUPER SHOPPING COMPLEX, BAJAJ CROSS ROAD, KANDIVLI(W), MUMBAI-400 002 VS. THE INCOME TAX OFFICER WARD 9(3)(3), AAYKAR BHAVAN, CHURCHGATE, MUMBAI-400 002. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. SANJUKTA CHOWDHURY & SHRI PRAMOD KUMAR PARIDA RESPONDENT BY : SHRI P.C. MAURYA DATE OF HEARING : 28.11.2011 DATE OF PRONOUNCEMENT : 28.11.2011 ORDER PER RAJENDRA SINGH (AM) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17.06.2003 OF THE LD. CIT(A)-IX FOR THE ASSESSMENT YEAR 1999-2000. THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING THE METHOD OF COMPUTATION OF INCOME FROM THE BUILDING PROJECT AND LEVY OF INTEREST U/S.234A, 234B AND 234C. 2 ITA NO: 5736/MUM/2003 M/S. TANNA CONSTRUCTION DEV. PVT. LTD. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WHO WAS CONSTRUCTING DHAVAL APARTMENTS, BORIVALI HAD DECLARED NIL INCOME FOR TH E ASSESSMENT YEAR 1999-2000. THE ASSESSEE EXPLAINED THAT IT WAS FOLLO WING THE PROJECT COMPLETION METHOD OF DECLARING INCOME AND SINCE THE PROJECT WAS NOT COMPLETED DURING THE YEAR, NO INCOME HAD BEEN DECLA RED. THE ASSESSEE HAD BEEN SHOWING THE CONSTRUCTION WORK DONE UNDER WORK- IN-PROGRESS (WIP) AND ADVANCES RECEIVED AGAINST SALES WERE BEING SHOW N AS CURRENT LIABILITY IN THE BALANCE SHEET. 2.1 THE AO, HOWEVER, NOTED THAT THE CLOSING WIP IN THE ASSESSMENT YEAR 1999-2000 WAS `. 2.19 CRORES, WHEREAS THE SAME WAS `. 2.45 CRORES IN THE ASSESSMENT YEAR 2001-02. THERE WAS NO MAJOR ADDITIO N TO WIP AFTER ASSESSMENT YEAR 1999-2000, AND THE EXPENDITURE SHOW N SUBSEQUENTLY WAS ON ACCOUNT OF VACATION OF TENANTS AND ACQUISITION O F TENANCY RIGHTS. IT WAS ALSO OBSERVED BY HIM THAT THOUGH THE PROJECT COMPLE TION METHOD WAS AN ACCEPTED METHOD, THE ASSESSEE COULD NOT BE ALLOWED TO POSTPONE THE PAYMENT OF TAX WHEN SUBSTANTIAL CONSTRUCTION WAS CO MPLETED. HE PLACED RELIANCE ON THE DECISIONS OF THE TRIBUNAL IN THE CA SE OF M/S. CHAMPION CONSTRUCTION CO. VS. CIT (5 ITD 495) AND OTHER DECI SIONS OF THE TRIBUNAL. HE, THEREFORE, REJECTED THE METHOD OF ACCOUNTING FO LLOWED BY THE ASSESSEE AND ESTIMATED THE INCOME AT 15% ADVANCES RECEIVED A GAINST SALES AND ASSESSED THE SAME AS TOTAL INCOME. 3. IN APPEAL, CIT(A) NOTED THAT IN ASSESSMENT YEAR 2000-01 SIMILAR ISSUE HAD ARISEN REGARDING COMPUTATION OF INCOME FR OM THE SAME PROJECT AND THE CIT(A) HAD CONFIRMED THE ORDER OF AO IN ASS ESSING THE INCOME ON THE BASIS OF ADVANCE RECEIVED. CIT(A) HAD HOWEVER, REDUCED THE ESTIMATION OF INCOME AT 10% OF WIP. CIT(A), THEREFORE, FOLLOWI NG THE DECISION TAKEN IN ASSESSMENT YEAR 2000-01 CONFIRMED THE ASSESSMENT OF INCOME ON THE BASIS 3 ITA NO: 5736/MUM/2003 M/S. TANNA CONSTRUCTION DEV. PVT. LTD. OF WIP, BUT DIRECTED THE AO TO ESTIMATE THE INCOME AT 10% OF WIP. AGGRIEVED BY THE SAID DECISION THE ASSESSEE IS IN A PPEAL BEFORE THE TRIBUNAL. 4. BEFORE ME THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE PROJECT HAD STARTED IN THE YEAR 1994 AND THE SAME WAS COMPLETED IN THE ASSESSMENT YEAR 2002-03 IN WHICH YEAR THE ASSESSEE HAD DECLARE D THE INCOME FROM THE PROJECT. IT WAS ALSO SUBMITTED THAT THE DEPARTMENT HAD ACCEPTED THE PROJECT COMPLETION METHOD IN RESPECT OF THE SAME PROJECT IN THE EARLIER YEARS. IT WAS ALSO POINTED OUT THAT IN THE ASSESSMENT YEAR 20 02-03 THE AO IN THE SCRUTINY ASSESSMENT HAD ACCEPTED THE METHOD FOLLOWE D BY THE ASSESSEE WHICH WAS LATER CANCELED BY THE LD. CIT(A) U/S.263 OF THE I.T. ACT. HOWEVER, ON FURTHER APPEAL, THE TRIBUNAL HAD SET ASIDE THE O RDER OF THE CIT AND THUS THE INCOME DECLARED BY THE ASSESSEE REMAINED ACCEPT ED. SIMILARLY, IN ASSESSMENT YEAR 2000-01 IN ITA NO.5761/MUM/2003, TH E TRIBUNAL HAD DIRECTED THE AO TO ACCEPT THE PROJECT COMPLETION ME THOD BEING FOLLOWED BY THE ASSESSEEE, IN VIEW OF THE DECISION OF THE TRIBU NAL IN THE EARLIER YEAR. IT WAS THUS ARGUED THAT THE CASE OF THE ASSESSEE WAS C OVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLI ER YEARS. THE LD. DR FAIRLY CONCEDED THAT THE ISSUE WAS COVERED. 5. I HAVE PERUSED THE RECORDS AND CONSIDERED THE MA TTER CAREFULLY. THE DISPUTE IS REGARDING METHOD OF COMPUTATION OF INCOM E FROM THE BUILDING PROJECT, DHAVAL APARTMENTS. THE PROJECT HAD BEEN ST ARTED IN THE YEAR 1994 AND AS PER THE ASSESSEE, THE SAME WAS COMPLETED IN THE ASSESSMENT YEAR 2002-03 IN WHICH YEAR THE ASSESSEE DECLARED INCOME FROM PROJECT ON THE BASIS OF PROJECT COMPLETION METHOD. IN THE ASSESSME NT YEAR 2002-03, THE AO IN THE ASSESSMENT ORDER U/S.143(3) HAD ACCEPTED THE INCOME DECLARED BY THE ASSESSEE. SUBSEQUENTLY, CIT HAD SET ASIDE TH E ASSESSMENT ORDER U/S.263 BUT ON FURTHER APPEAL THE TRIBUNAL IN THE O RDER DATED 24.04.2009 IN ITA NO.2856/MUM/2007 NOTED THAT IN THE ASSESSMEN T YEAR 1994-95 4 ITA NO: 5736/MUM/2003 M/S. TANNA CONSTRUCTION DEV. PVT. LTD. AND 2000-01 THE TRIBUNAL HAD ACCEPTED ON MERIT THE PROJECT COMPLETION METHOD. FURTHER, FOR THE ASSESSMENT YEARS 1996-97 T O 1998-99 THE CIT(A) HAD ALSO ACCEPTED THE PROJECT COMPLETION METHOD. TH E TRIBUNAL, THEREFORE, SAW NO MERIT IN THE ORDER OF CIT U/S.263 WHICH WAS SET ASIDE. I ALSO NOTE THAT THE TRIBUNAL IN THE ORDER DATED 14.03.2007 FOR THE ASSESSMENT YEAR 2000-01 IN ITA NO.5761/MUM/2003 HAD ACCEPTED THE PR OJECT COMPLETION METHOD BEING FOLLOWED BY THE ASSESSEE. THEREFORE, I N MY VIEW THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE TRIB UNAL IN THE ASSESSMENT YEARS 2000-01 AND 2002-03 (SUPRA). ACCORDINGLY, TH E ADDITION MADE BY THE AO CANNOT BE SUSTAINED. THE ORDER OF THE CIT(A) IS, THEREFORE, SET ASIDE AND THE CLAIM OF THE ASSESEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON TO DAY I.E. 28 TH NOVEMBER, 2011. S D / - ( RAJENDRA SINGH ) ACCOUNTANT MEMBER MUMBAI, DT: 28/11/2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, SMC - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI