THE ITO RG 8(3)-1, MUMBAI V. M/S. SAVOY REAL ESTATE DEVELOPERS PVT. LTD, MUMBAI

ITA 576/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1891 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 30-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 24-01-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: L K AGRAWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH, MUMBAI BEFORE SHRI D.K. AGRAWAL, (JUDICIAL MEMBER), AND SHRI PRAMOD KUMAR, (ACCOUNTANT MEMBER) I.T.A NO.576/MUM./2008 ASSESSMENT YEAR : 2003-04 DATE OF HEARING 30.3.2010 INCOME TAX OFFICER, RANGE 8(3) 1, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 .. APPELLANT VS M/S. SAVOY REAL ESTATE DEVELOPERS P. LTD. 304 B WING, CLARIDGE, LOKHANDWALA COMPLEX, ANDHERI (W), MUMBAI 400 102 PAN AABSC3492A RESPONDENT APPELLANT BY : SHRI L.K. AGRAWAL RESPONDENT BY : NONE O R D E R PER PRAMOD KUMAR A.M. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CH ALLENGED CORRECTNESS OF ORDER DATED 30 TH NOVEMBER 2007, PASSED BY THE LEARNED COMMISSIONER (APPEALS) XXIX, MUMBAI, ON THE FOLLOWING GROUNDS:- ITA NO.576/MUM./2008 M/S. SAVOY REAL ESTATE DEVELOPERS P. LTD. [2] (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE A.O. TO WORKO UT THE PROFIT ON THE ADDITIONAL AMOUNT OF RS.77,25,300/- RECEIVED DURING THE YEAR ONLY AS AGAINST ENTIRE ADVANCES WITHOUT APPRECIATING THE FA CTS BROUGHT OUT BY THE A.O. ON THE RECORD BY INVOKING PROVISIONS OF SE C. 145A THAT NO INCOME IS ASSESSED IN THE EARLIER YEARS ON THE ADVA NCES OR WORK COMPLETED. 2. NONE APPEARED FOR THE ASSESSEE BUT WE HAVE HEARD TH E LEARNED DEPARTMENTAL REPRESENTATIVE, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE APPLICABLE LEGAL POSITION. 3. THE ASSESSEE IS A BUILDER AND HAS, IN THE RELEVANT PREVIOUS YEARS, CONSTRUCTED A BUILDING BY THE NAME OF REGENCY MANOR AT PLOT NO.TC 2/2444, PATTAM PALACE, THIRUVANANTHAPURAM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE DID NOT OFFER ANY INCOME FROM THE SAID PROJECT EVEN THOUGH 94% OF THE TOTAL COMPLETION LEVEL WAS ATTAINED IN THIS YEAR. HE THUS PROCEEDED TO BRING TO TAX, ON ESTIMATE BASIS @ 12% OF THE RECEIPTS AS INCOME FROM THE PROJECT. IN DOING SO, THE ASSESSING OFFICER CLAIMED TO HAVE FOLLOWED BY TRIBUNALS DEC ISION IN THE CASE OF CHAMPION CONSTRUCTION CO. VS ITO, 5 ITD 495. AGGRIEVED, ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT COMPLETE SUCCESS. WH ILE THE LEARNED CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER IN PRINCIPLE, HE HE LD THAT ONLY 12% OF RECEIPTS DURING THE YEAR AND NOT ENTIRE RECEIPT OF THE PROJECT, ARE TO BE TAKEN INTO ACCOUNT. THE LEARNED CIT(A) OBSERVED AS FOLLOWS:- I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISS ION MADE BY THE APPELLANT AND ORDER OF THE A.O. IN PRINCIPLE, I AGR EE WITH THE A.O. THAT PERCENTAGE COMPLETION IS PROPER METHOD FOR ASSESSIN G THE APPELLANTS CASE. THIS IS MORE SO BECAUSE FOR THE PURPOSE OF SALES TA X ALSO THE APPELLANT IS DOING THE SAME. HOWEVER, THE COMPUTATION MADE BY TH E A.O. IS NOT PROPER. WHILE HE HAS ADOPTED PERCENTAGE COMPLETION METHOD B UT IN FACT HE HAS WORKED OUT PROFIT AS PER PROJECT COMPLETION METHOD BY CONSIDERING RECEIPTS OF EARLIER YEARS FOR WORKING OUT THE PROFIT. FOR PE RCENTAGE COMPLETION METHOD THE PERCENTAGE OF WORK COMPLETED DURING THE YEAR HAS TO BE CONSIDERED AS THE PROFIT HAS TO BE WORKED OUT PERCE NTAGE COMPLETED. IN THE ITA NO.576/MUM./2008 M/S. SAVOY REAL ESTATE DEVELOPERS P. LTD. [3] ABSENCE OF ANY INFORMATION REGARDING EXACT PERCENTA GE OF WORK COMPLETED, THE ADDITIONAL AMOUNT RECEIVED FROM CUSTOMER DURING THE YEAR CAN PROVIDE BASIS FOR WORKING OUT THE PROFIT DURING THE YEAR. I T IS SEEN FROM THE BALANCE SHEET THAT ADVANCES FROM CUSTOMERS AS ON 31.03.2002 , WAS RS.2,02,24,970/- AND AS ON 31.03.2003, IT WAS RS.2,79,50,270/-. THER EFORE, THE ADDITIONAL AMOUNT RECEIVED DURING THE YEAR WAS [RS.2,79,50,270 (-) RS.2,02,24,970] RS.77,25,300/-. PROFIT CAN BE WORKED OUT ON THIS AM OUNT AND NOT ON TOTAL OUTSTANDING DURING THE YEAR AS SHOWN IN THE BALANCE SHEET. THE A.O. IS DIRECTED ACCORDINGLY TO WORK OUT THE PROFIT @ RS.12 % ON RECEIPT OF RS.77,25,300/-. THE APPEAL IS PARTLY ALLOWED. 4. AGGRIEVED BY THE ABOVE DIRECTIONS OF THE LEARNED CI T(A), THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 5. THE SHORT ISSUE THAT WE HAVE TO THUS DECIDE IS WHET HER 12% OF ENTIRE PROJECT RECEIPTS ARE TO BE BROUGHT TO TAX OR ONLY SUCH RECE IPTS, AS PERTAINED TO THE RELEVANT ASSESSMENT YEAR ARE TO BE TAKEN INTO ACCOUNT. THE Q UESTION OF TAXABILITY ARISES ONLY IN THE YEAR IN WHICH PROJECT IS COMPLETED OR IS SUB STANTIALLY COMPLETED. THEREFORE, THE TAXABILITY CANNOT BE CONFINED TO THE RECEIPTS O F THAT YEAR ALONE AS THERE MAY OR MAY NOT BE REVENUE RECEIPTS IN THAT YEAR. THE PROFI TS ARE TO BE ASCERTAINED IN RESPECT OF THE WORK THAT IS COMPLETED AND TO THE EXTENT IT IS COMPLETED, IN THE YEAR OF SUCH COMPLETION PROVIDED THE THRESHOLD OF SUBSTANTIAL COMPLETION IS ACHIEVED. IN THIS VIEW OF THE MATTER, IN OUR CONSIDERED VIEW, RE VENUES TO BE TAKEN INTO ACCOUNT ARE REVENUES PERTAINING TO SUCH WORK AND IT IS IMMA TERIAL WHETHER OR NOT THE SAID REVENUES ARE ACTUALLY RECEIVED IN THAT YEAR. WE, TH EREFORE, SEE NO MERITS IN RELIEF GRANTED BY THE LEARNED CIT(A). THE ORDER OF THE LEA RNED CIT(A) IS VACATED AND THAT OF THE ASSESSING OFFICER RESTORED. ITA NO.576/MUM./2008 M/S. SAVOY REAL ESTATE DEVELOPERS P. LTD. [4] 6. IN THE RESULT, REVENUES APPEAL IS ALLOWED. PRONOUN CED IN THE OPEN COURT TODAY ON 30 TH DAY OF APRIL 2010. SD/- (D.K. AGRAWAL) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI; 30 TH DAY OF APRIL 2010 COPIES OF THE ORDER FORWARDED TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT, MUMBAI (4) CIT(A), MUMBAI (5) DR, J BENCH (6) GUARD FILE TRUE COPY BY ORDER, ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PRADEEP J. CHOWDHURY MUMBAI BENCHES SR. PRIVATE SECRETARY ITA NO.576/MUM./2008 M/S. SAVOY REAL ESTATE DEVELOPERS P. LTD. [5] DATE INITIAL 1. DRAFT DICTATED ON 22.4.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 22.4.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 23.4.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 23.4.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 23.4.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 30.4.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 30.4.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER