DCIT , CC-1(2), MUMBAI V. M/S. SUNNY VISTA REALTORS PVT.LTD., MUMBAI

ITA 610/MUM/2023

AI Insights

The case involves two appeals by the Revenue against the orders of the Ld. Commissioner of Income-tax (Appeals) -47, Mumbai, concerning the assessment year 2011-12. The appeals were related to the disallowance of business expenditures which the Assessing Officer treated as capital work in progress. The main contention was whether the administrative, marketing, and selling expenses should be capitalized as work in progress since the assessee was engaged in a single construction project. The tribunal examined the decisions of the Ld. CIT(A) which had deleted the additions made by the Assessing Officer, relying on previous ITAT decisions and the percentage completion method of accounting followed by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123582 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: G
• Next Hearing Date: 08-05-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 28-02-2023
• Other Referred Cases: Ms. Hiranandani Palace Gardens Pvt. Ltd. Vs ACIT, CIT Vs. Continental Warehousing Corporation, All Cargo Global Logistics Vs. DCIT, CIT Vs. Anil Kumar Bhatia
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Additional evidence
• Section: 143(3); 153A; 260A; 274; 143(2); 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI KULDIP SINGH (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA Nos. 610 & 611/MUM/2023 Assessment Year: 2011-12 Dy. CIT CC-1(2), 906, 9 th floor, Pratishtha Bhavan, Old CGO Building (Annexe), M.K. Road, Mumbai-400020. Vs. M/s Sunny Vista Realtors Pvt. Ltd., 511, Dalamal Towers, 211, Nariman Point, Mumbai-400021. PAN No. AAKCS 1269 E Appellant Respondent Assessee by : None Revenue by : Dr. Koshor Dule, CIT-DR Date of Hearing : 09/05/2023 Date of pronouncement : 25/05/2023 ORDER PER OM PRAKASH KANT, AM These two appeals by the Revenue are directed against two separate orders, both dated 02.12.2022, passed by the Ld. Commissioner of Income-tax (Appeals) -47, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2011-12, first one, in relation to assessment completed u/s 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 24.03.2014 and another, in relation to assessment completed u/s 153C of the Act dated 28.03.2016. 2. Facts and circumstances and the additions appeals being connected, and disposed off by way 3. First, we take up the appeal of the Revenue in ITA No. 611 for assessment year 2011 of the Act dated 24.03.2014. The grounds of appeal as under: 1. "On the facts and in law, the Ld. CIT(A) has erred in deleting the disallowance made by the A0 of the business expenditure of Rs. 28,24,28,829/ administrative expenses, marketing and selling expenses and finance expens same as capital work in progress, without considering the fact that assessee company had only one contract and therefore, entire expenses were liable to be capitalized as work in progress. 2. On the facts and in the circumstances of the ca in law, the Id. CIT(A) has erred in not appreciating that the assessee follows percentage completion method of accounting and is not carrying on any other business activity except construction of the residential project on hand, the entire business expenses claimed of Rs.28,24,28,829/ correctly disallowed by the A. O. capitalizing it, and treating it as work constructed by the assessee. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) respect of capitalization of expenses on the decision of the ITAT in case of sister concern of the assessee, Ms. Hiranandani Palace Gardens Pvt. Ltd. Vs ACIT (A.Y. 2009 03/12/2015) without cons Department had not accepted the decision of the ITAT in the case and the appeal before the Hon ble ITA No Facts and circumstances and the additions challengedin these connected, both these appeals were heard together and disposed off by way of this order for convenience. take up the appeal of the Revenue in ITA No. 611 for assessment year 2011-12, which is in relation to order of the Act dated 24.03.2014. The grounds of appeal "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance made by the A0 of the business expenditure of Rs. 28,24,28,829/- comprising of administrative expenses, marketing and selling expenses and finance expenses and treating the same as capital work in progress, without considering the fact that assessee company had only one contract and therefore, entire expenses were liable to be capitalized as work in progress. On the facts and in the circumstances of the ca in law, the Id. CIT(A) has erred in not appreciating that the assessee follows percentage completion method of accounting and is not carrying on any other business activity except construction of the residential project on hand, the entire business expenses claimed of Rs.28,24,28,829/ correctly disallowed by the A. O. capitalizing it, and treating it as work-in-progress of the project being constructed by the assessee. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in placing reliance in respect of capitalization of expenses on the decision of the ITAT in case of sister concern of the assessee, Ms. Hiranandani Palace Gardens Pvt. Ltd. Vs ACIT (A.Y. 2009-10, ITA No.4579/M/2013 dated 03/12/2015) without considering that the Department had not accepted the decision of the ITAT in the case and the appeal before the Hon ble M/s Sunny Vista Realtors 2 ITA Nos. No. 610 & 611/M/2023 challengedin these both these appeals were heard together of this order for convenience. take up the appeal of the Revenue in ITA No. 611 for order u/s 143(3) of the Act dated 24.03.2014. The grounds of appeal are reproduced and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance made by the A0 of the business comprising of administrative expenses, marketing and selling es and treating the same as capital work in progress, without considering the fact that assessee company had only one contract and therefore, entire expenses were On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that the assessee follows percentage completion method of accounting and is not carrying on any other business activity except construction of the residential project on hand, the entire business expenses claimed of Rs.28,24,28,829/- were correctly disallowed by the A. O. capitalizing it, and progress of the project being On the facts and in the circumstances of the case and has erred in placing reliance in respect of capitalization of expenses on the decision of the ITAT in case of sister concern of the assessee, Ms. Hiranandani Palace Gardens Pvt. Ltd. Vs ACIT 10, ITA No.4579/M/2013 dated idering that the Department had not accepted the decision of the ITAT in the case and the appeal before the Hon ble Bombay High Court (Appeal us. 260A filed on 14/09/2016, vide Appeal No. ITXA/212/2017 for A. Y. 2009 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that no adverse findings has been given by the AO in the Remand Report called for with respect to the additional evidences filed by the assessee and has deleted th by the AO without considering the fact that in the remand report submitted to the CIT(A) on 28.07.2021, the A0 has categorically mentioned that the documents in support of its claim submitted by the assessee as addi dealt by the A0 during the assessment proceedings and a speaking order had been passed by the erstwhile AO after due consideration of these evidences." 4. At the outset, we may like to mention that despite notifying neither anyone attended on behalf of the assessee nor any adjournment was filed. We was not interesting in prosecuting the appeal heard exparte qua the assessee after hearing the argument Ld. Departmental Representative (DR). 5. Briefly stated, facts of the case are that the assessee filed return of income for the year under consideration on 30.09.2011 declaring current year losses at Rs.29,12,14,681/ further revised its return of income on 05.10.2012 declaring current year losses at Rs.27,42,19,208/ assessee was selected for scrutiny and statutory notices under the Act were issued and complied with. The assessee company incorporated on 08.05.2006 with the objective of real estate ITA No Bombay High Court (Appeal us. 260A filed on 14/09/2016, vide Appeal No. ITXA/212/2017 for A. Y. 2009-10) is pending for adjudication. e facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that no adverse findings has been given by the AO in the Remand Report called for with respect to the additional evidences filed by the assessee and has deleted the other additions and disallowances made by the AO without considering the fact that in the remand report submitted to the CIT(A) on 28.07.2021, the A0 has categorically mentioned that the documents in support of its claim submitted by the assessee as additional evidences had already been dealt by the A0 during the assessment proceedings and a speaking order had been passed by the erstwhile AO after due consideration of these evidences." At the outset, we may like to mention that despite notifying r anyone attended on behalf of the assessee nor any adjournment was filed. We were of the opinion that the assessee not interesting in prosecuting the appeal and hence same was qua the assessee after hearing the argument Ld. Departmental Representative (DR). Briefly stated, facts of the case are that the assessee filed return of income for the year under consideration on 30.09.2011 declaring current year losses at Rs.29,12,14,681/- its return of income on 05.10.2012 declaring current at Rs.27,42,19,208/-. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Act were issued and complied with. The assessee company rated on 08.05.2006 with the objective of real estate M/s Sunny Vista Realtors 3 ITA Nos. No. 610 & 611/M/2023 Bombay High Court (Appeal us. 260A filed on 14/09/2016, vide Appeal No. ITXA/212/2017 for A. e facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that no adverse findings has been given by the AO in the Remand Report called for with respect to the additional evidences filed by the assessee and has e other additions and disallowances made by the AO without considering the fact that in the remand report submitted to the CIT(A) on 28.07.2021, the A0 has categorically mentioned that the documents in support of its claim submitted by the tional evidences had already been dealt by the A0 during the assessment proceedings and a speaking order had been passed by the erstwhile AO after due consideration of these At the outset, we may like to mention that despite notifying r anyone attended on behalf of the assessee nor any of the opinion that the assessee and hence same was qua the assessee after hearing the arguments of the Briefly stated, facts of the case are that the assessee filed return of income for the year under consideration on 30.09.2011 -. The assessee its return of income on 05.10.2012 declaring current . The return of income filed by the assessee was selected for scrutiny and statutory notices under the Act were issued and complied with. The assessee company was rated on 08.05.2006 with the objective of real estate development of special economic zone. The assessee was engaged in Construction and Development activity. The assessee followed percentage completion method projects of construction and development of real sinceinception of company. The assessee entered sale of the SEZ units sale of the units, despite claimed to have followed percentage completion method considering submission of the assessee disallowed the claim of administrative and other expenses holding the same as part of the work in progress. The Assessing Officer also disallowed certain purchases and expens Assessing Officer made addition of Rs.28,24,829/ capitalized and Rs.37,15,319/ verifiable. On further appeal, the Ld. CIT(A) deleted both the additions. Regarding the Fi the decision of the Tribunal in the case of the assessee in the preceding year as well as decision in the case of sister concern deleted the addition of administrative and other expenses. Regarding the second report on the additional evidences filed by the assessee. However, the Ld. Assessing Officer merely objected admissibility of the additional evidence and did not give specific comment on the allowability of such expenses. The Ld. CIT(A) observing that no ITA No development of special economic zone. The assessee was engaged in Construction and Development activity. The assessee followed percentage completion method for recognizing profit from the nstruction and development of real sinceinception of company. The assessee enteredinto agreements units, however no revenue was recognized from the , despite claimed to have followed percentage completion method of accounting. The Assessing Officer after considering submission of the assessee disallowed the claim of administrative and other expenses holding the same as part of the work in progress. The Assessing Officer also disallowed certain purchases and expenses as non-verifiable. In this manner Assessing Officer made addition of Rs.28,24,829/- capitalized and Rs.37,15,319/- for purchases/expenses non verifiable. On further appeal, the Ld. CIT(A) deleted both the additions. Regarding the First addition, the Ld. CIT(A) has relied on the decision of the Tribunal in the case of the assessee in the preceding year as well as decision in the case of sister concern deleted the addition of administrative and other expenses. Regarding the second addition, the Ld. CIT(A) called for the remand report on the additional evidences filed by the assessee. However, the Ld. Assessing Officer merely objected admissibility of the additional evidence and did not give specific comment on the uch expenses. The Ld. CIT(A) observing that no M/s Sunny Vista Realtors 4 ITA Nos. No. 610 & 611/M/2023 development of special economic zone. The assessee was engaged in Construction and Development activity. The assessee followed for recognizing profit from the nstruction and development of real estate into agreements for however no revenue was recognized from the , despite claimed to have followed percentage The Assessing Officer after considering submission of the assessee disallowed the claim of administrative and other expenses holding the same as part of the work in progress. The Assessing Officer also disallowed certain n this manner, the for expenditure for purchases/expenses non- verifiable. On further appeal, the Ld. CIT(A) deleted both the rst addition, the Ld. CIT(A) has relied on the decision of the Tribunal in the case of the assessee in the preceding year as well as decision in the case of sister concerns and deleted the addition of administrative and other expenses. addition, the Ld. CIT(A) called for the remand report on the additional evidences filed by the assessee. However, the Ld. Assessing Officer merely objected admissibility of the additional evidence and did not give specific comment on the uch expenses. The Ld. CIT(A) observing that no adverse comments were given by the Assessing deleted the addition. 6. Aggrieved, the Revenue is in appeal before the Tribunal by way of raising grounds as reproduced above. 7. We have heard submission of the Ld. DR and perused the relevant material on record. As far as ground No regarding capitalization concerned, we find that the Assessing Officer has capitalize same as no revenue from the project has been the entire project being Officer entire expenses including direct expenses on the project along with administrative marketing and other expense should be capitalized as work in progress. But the Ld. CIT(A) has referred to the decision of the Tribunal in t 4580/M/2013 for assessment year 2009 the Tribunal noted that assessee was following percentage completion method of accounting regularly in the assessment year 2010-11. The Assessing Officer accep identical nature of the expenses in the assessment passed u/s 143(3) of the Act. The Tribunal (supra) after considering the fact the case agreed with the contention of the Ld. Counsel for the assessee that employee’s the employees for looking after construction and therefore it was part of the administrative ITA No were given by the Assessing Officer, deleted the addition. Aggrieved, the Revenue is in appeal before the Tribunal by way of raising grounds as reproduced above. heard submission of the Ld. DR and perused the relevant material on record. As far as ground Nos. 1 capitalization of administrative and other expenses is e find that the Assessing Officer has capitalize o revenue from the project has been recognized, despite the entire project being single project. According to the Assessing Officer entire expenses including direct expenses on the project along with administrative marketing and other expense should be capitalized as work in progress. But the Ld. CIT(A) has referred to the decision of the Tribunal in the case of the assessee in ITA No. 4580/M/2013 for assessment year 2009-10. In the said decision the Tribunal noted that assessee was following percentage completion method of accounting regularly in the assessment year 11. The Assessing Officer accepted the deductibility identical nature of the expenses in the assessment passed u/s 143(3) of the Act. The Tribunal (supra) after considering the fact agreed with the contention of the Ld. Counsel for the employee’s expenses referred were the salary paid to for looking after the administrative office construction and therefore it was part of the administrative M/s Sunny Vista Realtors 5 ITA Nos. No. 610 & 611/M/2023 Officer, therefore, he Aggrieved, the Revenue is in appeal before the Tribunal by way heard submission of the Ld. DR and perused the . 1 to 3 of appeals other expenses is e find that the Assessing Officer has capitalized the recognized, despite ccording to the Assessing Officer entire expenses including direct expenses on the project along with administrative marketing and other expense should be capitalized as work in progress. But the Ld. CIT(A) has referred to he case of the assessee in ITA No. 10. In the said decision the Tribunal noted that assessee was following percentage completion method of accounting regularly in the assessment year deductibility of the identical nature of the expenses in the assessment passed u/s 143(3) of the Act. The Tribunal (supra) after considering the facts of agreed with the contention of the Ld. Counsel for the the salary paid to the administrative office of project construction and therefore it was part of the administrative expenses. Therefore, administration, were to be charged to t excluded from the cost of the inventory Thus, the Tribunal held that only direct expenses could be charged to work in progress and the expenses in the nature of administrative, marke to the profit and loss account and to be account of computing profit and gains from business and profession as per the relevant provisions of the Act. However, we note that year under construction, assessee commenced the project and started construction activity in the year under construction and the project being development. But actually , since 2006 and therefore, ascertained whether substantial construction has been carried out on the project and if revenue from the project and accordingly allocate the expenses thereafter to work out the profit completion method, in the facts and circumstances, we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) for deciding afresh after taking into consideration substantial work is carried out on the project be recognized and administrative and marketing expenses has to be deducted thereafter from the profit from the project co ITA No Therefore, administration, salary and marketing expenses to be charged to the profit and loss account and to be the cost of the inventory or closing work in progress. the Tribunal held that only direct expenses could be charged to work in progress and the expenses in the nature of marketing and selling expenses were to be debited to the profit and loss account and to be accounted of computing profit and gains from business and profession as per the relevant provisions of the Act. However, we note that onstruction, the Ld. CIT(A) has presumed that the assessee commenced the project and started construction activity in the year under construction and the project being actually , the assessee commenced its activity 6 and therefore, in the circumstances, whether substantial construction has been carried out and if so, the assessee is required to recognized revenue from the project and accordingly allocate the expenses er to work out the profit, following the percentage which the assessee has not shown. Therefore, in the facts and circumstances, we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) for deciding afresh after taking into consideration, the percentage of work completed substantial work is carried out on the project, then be recognized and administrative and marketing expenses has to be deducted thereafter from the profit from the project co M/s Sunny Vista Realtors 6 ITA Nos. No. 610 & 611/M/2023 marketing expenses he profit and loss account and to be closing work in progress. the Tribunal held that only direct expenses could be charged to work in progress and the expenses in the nature of salary, ting and selling expenses were to be debited for the purpose of computing profit and gains from business and profession as per the relevant provisions of the Act. However, we note that for the the Ld. CIT(A) has presumed that the assessee commenced the project and started construction activity in the year under construction and the project being in the initial he assessee commenced its activity in the circumstances, it need to be whether substantial construction has been carried out the assessee is required to recognized revenue from the project and accordingly allocate the expenses following the percentage which the assessee has not shown. Therefore, in the facts and circumstances, we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) for deciding afresh after completed and if then revenue has to be recognized and administrative and marketing expenses has to be deducted thereafter from the profit from the project computed as per the percentage completion method. The ground Revenue are accordingly allowed 8. As far as ground expense, the Ld. CIT(A) deleted “19. Considering the fact that no adverse finding has been given by the A.O. in the remand report with respect to the additional evidences filed and submission of the assessee, there is no occasion for impugned additions as resorted to by the A.O. Hence, it is held that purchases of Rs. 88,28,374/ and expenses of Rs. 4,87,97,603/ reducing the same from WIP are unjustified. Further, purchases of Rs. 28,04,194/ 37,15,395/- purchases of Rs. 11,71,916/ 44,60,080/- deserved to be deleted. Thus, grounds of appeal no. 4, 5 & 6 are Allowed. 9. We have heard submission of ld DR and perused the material on record. The Ld CIT(A) has deleted the addition for the reason that no comments were given by the AO on additional evidences. our opinion, if the Assessing Officer has not given any comment on the additional evidence CIT(A) after admitting the evidence should have comments on the merit of the expenses which the Ld. CIT(A) has not followed. Further, in Court dated 11/03/2015 and Marketing p ltd have carried out inquiries on those additional has not done. In the to restore this issue also back to the file of the Ld. CIT(A) for adjudication afresh after following due procedure of law. ITA No per the percentage completion method. The grounds are accordingly allowed for statistical purposes. As far as grounds related to issue of non-verifiable the Ld. CIT(A) deleted the addition observing 19. Considering the fact that no adverse finding has been given by the A.O. in the remand report with respect to the additional evidences filed and submission of the assessee, there is no occasion for impugned additions as resorted to by . Hence, it is held that purchases of Rs. 88,28,374/ and expenses of Rs. 4,87,97,603/- as unexplained bogus and reducing the same from WIP are unjustified. Further, purchases of Rs. 28,04,194/- and expenses of Rs. as unexplained, are uncalled f purchases of Rs. 11,71,916/- and expenses of Rs. as unexplained being excess in difference, deserved to be deleted. Thus, grounds of appeal no. 4, 5 & 6 are Allowed.” We have heard submission of ld DR and perused the material record. The Ld CIT(A) has deleted the addition for the reason that no comments were given by the AO on additional evidences. our opinion, if the Assessing Officer has not given any comment on the additional evidences while objecting admissibility, then CIT(A) after admitting the evidence should have again comments on the merit of the expenses which the Ld. CIT(A) has . Further, in view of decision of the Hon’ble Delhi High dated 11/03/2015 in the case of Jansampark and Marketing p ltd in ITA 525/2014,the Ld. CIT(A) himself should have carried out inquiries on those additional evidence, which has not done. In the facts and circumstances, we feel it appropriate issue also back to the file of the Ld. CIT(A) for afresh after following due procedure of law. M/s Sunny Vista Realtors 7 ITA Nos. No. 610 & 611/M/2023 of appeal of the for statistical purposes. verifiable purchase the addition observing as under: 19. Considering the fact that no adverse finding has been given by the A.O. in the remand report with respect to the additional evidences filed and submission of the assessee, there is no occasion for impugned additions as resorted to by . Hence, it is held that purchases of Rs. 88,28,374/- as unexplained bogus and reducing the same from WIP are unjustified. Further, and expenses of Rs. as unexplained, are uncalled for. Finally and expenses of Rs. as unexplained being excess in difference, deserved to be deleted. Thus, grounds of appeal no. 4, 5 & 6 We have heard submission of ld DR and perused the material record. The Ld CIT(A) has deleted the addition for the reason that no comments were given by the AO on additional evidences. In our opinion, if the Assessing Officer has not given any comment on admissibility, then the Ld. again called for comments on the merit of the expenses which the Ld. CIT(A) has Hon’ble Delhi High ampark Advertising the Ld. CIT(A) himself should evidence, which he circumstances, we feel it appropriate issue also back to the file of the Ld. CIT(A) for afresh after following due procedure of law. 10. Now, we take up the appeal of the Revenue in ITA No. 610 for assessment year 2011 of the Act by the Assessing Officer raised by the Revenue are reproduced as under: 1. "In the facts and in the circumstances of the case and in law, the Ld. CIT(4) has erred in not appreciating the fact that there is nothing in the language of the which would indicate that the assessment is restricted to incriminating material or the basis of the assessment would be that which is discovered during the search or during the process contemplated by Section 132A of the Income Tax Act, 1961 a support from the judgement of the Hon'ble Delhi High Court in the case of CIT Vs. Anil Kumar Bhatia, 352 ITR 493 (Del) and the judgement of the Karnataka High Court in the case of Canara Housing Development Company Vs. DCIT, 27 2. In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in placing reliance on various judicial pronouncements including in the Warehousing cases of CIT Vs. Continental Warehousing Corporation, All Cargo Glob without appreciating that these judgements have not been accepted by the Department and in fact, SLP filed by the Department against Bombay High Court's order in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd Apex Court [vide order dated 12.10.2015 in Special Leave to Appeal (C) CC 18506/20157 and is pending for adjudication. 3. In the facts and in the circumstances of the case and in law, the Id. CIT(4) has erred in not appreci assessee follows percentage completion method of accounting and is not carrying on any other business activity except construction of the residential project on hand, and therefore the depreciation and amortization expenses of Rs.52,96,960/ by the 10 by capitalizing it. ITA No we take up the appeal of the Revenue in ITA No. 610 for assessment year 2011-12 arising from the order passed u/s 153C Assessing Officer dated 28.03.2016. The grounds raised by the Revenue are reproduced as under: "In the facts and in the circumstances of the case and in law, the Ld. CIT(4) has erred in not appreciating the fact that there is nothing in the language of the which would indicate that the assessment is restricted to incriminating material or the basis of the assessment would be that which is discovered during the search or during the process contemplated by Section 132A of the Income Tax Act, 1961 and that this view finds full support from the judgement of the Hon'ble Delhi High Court in the case of CIT Vs. Anil Kumar Bhatia, 352 ITR 493 (Del) and the judgement of the Karnataka High Court in the case of Canara Housing Development Company Vs. DCIT, 274 CTR 122 (Kar). In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in placing reliance on various judicial pronouncements including in the Warehousing cases of CIT Vs. Continental Warehousing Corporation, All Cargo Global Logistics Vs. DCIT, etc., without appreciating that these judgements have not been accepted by the Department and in fact, SLP filed by the Department against Bombay High Court's order in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd., has been admitted by the Hon'ble Apex Court [vide order dated 12.10.2015 in Special Leave to Appeal (C) CC 18506/20157 and is pending for adjudication. In the facts and in the circumstances of the case and in law, the Id. CIT(4) has erred in not appreciating that the assessee follows percentage completion method of accounting and is not carrying on any other business activity except construction of the residential project on hand, and therefore the depreciation and amortization expenses of Rs.52,96,960/- were correctly disallowed by the 10 by capitalizing it. M/s Sunny Vista Realtors 8 ITA Nos. No. 610 & 611/M/2023 we take up the appeal of the Revenue in ITA No. 610 for 12 arising from the order passed u/s 153C 28.03.2016. The grounds "In the facts and in the circumstances of the case and in law, the Ld. CIT(4) has erred in not appreciating the fact that there is nothing in the language of the provisions which would indicate that the assessment is restricted to incriminating material or the basis of the assessment would be that which is discovered during the search or during the process contemplated by Section 132A of the nd that this view finds full support from the judgement of the Hon'ble Delhi High Court in the case of CIT Vs. Anil Kumar Bhatia, 352 ITR 493 (Del) and the judgement of the Karnataka High Court in the case of Canara Housing Development In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in placing reliance on various judicial pronouncements including in the Warehousing cases of CIT Vs. Continental Warehousing al Logistics Vs. DCIT, etc., without appreciating that these judgements have not been accepted by the Department and in fact, SLP filed by the Department against Bombay High Court's order in the case of Continental Warehousing Corporation ., has been admitted by the Hon'ble Apex Court [vide order dated 12.10.2015 in Special Leave to Appeal (C) CC 18506/20157 and is pending In the facts and in the circumstances of the case and in ating that the assessee follows percentage completion method of accounting and is not carrying on any other business activity except construction of the residential project on hand, and therefore the depreciation and amortization were correctly disallowed 4. In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that assessee company had only one contract and therefore, entire expenses were liable to be as work in progress. 5. In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that purchases and expenses which remained unexplained/unverifiable/bogus were rightly reduced by the A to the total income of the assessee company. 6. In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that the interest income of Rs.72,55,7471 earned on surplus funds of the assessee, which did not have direct and proximate relationship with the business activity of the assessee, would fall under the head 'Income from other Sources' as has held by the jurisdictional High Court in the case of Swami Spice Mills Pvt 11. We find that the Assessing Officer has mainly made additions which were made by him in the original assessment proceedings u/s 143(3) of the Act. The Ld. CIT(A) has deleted the addition on the ground that there was no incriminatin made and the assessment being in the category of the completed/non-abated assessment no assessment could have been made otherwise made incriminating material. The relevant finding of the Ld. CIT(A) is reproduced as under: “7.3 I have carefully considered the facts of the case, submissions of the Appellant, the observations of the AO contained in the assessment order, various judgements and other materials on record on this issue. In this Ground, the appellant has contended that the assessment order passed us 153C r.w.s 143(3) of the Act for the impugned assessment year is bad in law as the additions made in the assessment ITA No In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that assessee company had only one contract and therefore, entire expenses were liable to be therefore, capitalized as work in progress. In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that purchases and expenses which remained unexplained/unverifiable/bogus were rightly reduced by the A0 from Capital work-in-progress and/or added to the total income of the assessee company. In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that the interest income of Rs.72,55,7471 earned on surplus funds of the assessee, which did not have direct and proximate relationship with the business activity of the assessee, would fall under the head 'Income from other Sources' as has held by the jurisdictional High Court in the case of Swami Spice Mills Pvt. Ltd. (332 ITR 288). We find that the Assessing Officer has mainly made additions which were made by him in the original assessment proceedings u/s 143(3) of the Act. The Ld. CIT(A) has deleted the addition on the ground that there was no incriminating material qua the addition made and the assessment being in the category of the abated assessment no assessment could have been made otherwise made incriminating material. The relevant finding of the Ld. CIT(A) is reproduced as under: 7.3 I have carefully considered the facts of the case, submissions of the Appellant, the observations of the AO contained in the assessment order, various judgements and other materials on record on this issue. In this Ground, the appellant has contended hat the assessment order passed us 153C r.w.s 143(3) of the Act for the impugned assessment year is bad in law as the additions made in the assessment M/s Sunny Vista Realtors 9 ITA Nos. No. 610 & 611/M/2023 In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that assessee company had only one contract and therefore, therefore, capitalized In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that purchases and expenses which remained unexplained/unverifiable/bogus were rightly reduced progress and/or added to the total income of the assessee company. In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that the interest income of Rs.72,55,7471 earned on surplus funds of the assessee, which did not have direct and proximate relationship with the business activity of the assessee, would fall under the head 'Income from other Sources' as has held by the jurisdictional High Court in . Ltd. (332 ITR 288). We find that the Assessing Officer has mainly made additions which were made by him in the original assessment proceedings u/s 143(3) of the Act. The Ld. CIT(A) has deleted the addition on the g material qua the addition made and the assessment being in the category of the abated assessment no assessment could have been made otherwise made incriminating material. The relevant finding 7.3 I have carefully considered the facts of the case, submissions of the Appellant, the observations of the AO contained in the assessment order, various judgements and other materials on record on this issue. In this Ground, the appellant has contended hat the assessment order passed us 153C r.w.s 143(3) of the Act for the impugned assessment year is bad in law as the additions made in the assessment order are not based on or connected with any incriminating documents found or seized during the search pr appellant. 7.4 It has been observed from the assessment order that the AO has not highlighted any incriminating material found and or seized during the search action, which can be relatable to the appellant, based on which the impugned additions are made. The appellant, on the other hand, has emphatically stated that the impugned additions are not based on any material found/seized during the course of search action at the premises of the appellant. The appellant has also relied on a no. of judicial decisions on this issue. 7.5 On perusal of the impugned assessment order, it is evident that the A0 has not referred to any seized material found during the course of search to make the impugned additions. The due date for notice u/s 143(2) had already expired on the date of search or the date of issue of notice u/s 143(2) in the current proceeding, which was issued on 24.08.2015. Since, the proceedings for A.Y. 2011 abated, the contention of the appellan was empowered to make additions based on the incriminating material found and seized during the course of search operation, appears to Conte be true, as held in a no. of judicial decisions including the decision of jurisdictional High Court. 7.6 Before proceeding further, it is necessary to apprise with the legal principles settled by Hon'ble Jurisdictional High Court and other courts on this issue. The Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation [374 I 645], has held that when the assessment has attained finality, then the AO while passing the independent assessment order us 153C of the Act can't disturb the assessment / reassessment order which has attained finality, unless the materials gathered in the Act establish that the reliefs granted under the ITA No order are not based on or connected with any incriminating documents found or seized during the search proceedings, which can be relatable to the appellant. 7.4 It has been observed from the assessment order that the AO has not highlighted any incriminating material found and or seized during the search action, which can be relatable to the appellant, based n which the impugned additions are made. The appellant, on the other hand, has emphatically stated that the impugned additions are not based on any material found/seized during the course of search action at the premises of the appellant. The appellant also relied on a no. of judicial decisions on this 7.5 On perusal of the impugned assessment order, it is evident that the A0 has not referred to any seized material found during the course of search to make the impugned additions. The due date for notice u/s 143(2) had already expired on the date of search or the date of issue of notice u/s 143(2) in the current proceeding, which was issued on 24.08.2015. Since, the proceedings for A.Y. 2011-12 had not abated, the contention of the appellant that the AO was empowered to make additions based on the incriminating material found and seized during the course of search operation, appears to Conte be true, as held in a no. of judicial decisions including the decision of jurisdictional High Court. 7.6 Before proceeding further, it is necessary to apprise with the legal principles settled by Hon'ble Jurisdictional High Court and other courts on this issue. The Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation [374 I 645], has held that when the assessment has attained finality, then the AO while passing the independent assessment order us 153C of the Act can't disturb the assessment / reassessment order which has attained finality, unless the materials gathered in the course of the proceedings us 132 of the Act establish that the reliefs granted under the M/s Sunny Vista Realtors 10 ITA Nos. No. 610 & 611/M/2023 order are not based on or connected with any incriminating documents found or seized during the oceedings, which can be relatable to the 7.4 It has been observed from the assessment order that the AO has not highlighted any incriminating material found and or seized during the search action, which can be relatable to the appellant, based n which the impugned additions are made. The appellant, on the other hand, has emphatically stated that the impugned additions are not based on any material found/seized during the course of search action at the premises of the appellant. The appellant also relied on a no. of judicial decisions on this 7.5 On perusal of the impugned assessment order, it is evident that the A0 has not referred to any seized material found during the course of search to make the impugned additions. The due date for issuing notice u/s 143(2) had already expired on the date of search or the date of issue of notice u/s 143(2) in the current proceeding, which was issued on 24.08.2015. 12 had not t that the AO was empowered to make additions based on the incriminating material found and seized during the course of search operation, appears to Conte be true, as held in a no. of judicial decisions including the 7.6 Before proceeding further, it is necessary to apprise with the legal principles settled by Hon'ble Jurisdictional High Court and other courts on this issue. The Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation [374 ITR 645], has held that when the assessment has attained finality, then the AO while passing the independent assessment order us 153C of the Act can't disturb the assessment / reassessment order which has attained finality, unless the materials the course of the proceedings us 132 of the Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of search operation. 12. We have heard submission of the Ld. DR and perused the relevant material on record. It is undisputed that no assessment was pending as on the date of the search year is concerned and therefore, the assessment is in the category of the non-abated assessment. Hence made without the aid of the incriminating material as held by Hon’ble Bombay High Court in the case of Continental Warehousing Corporation 374 ITR 645 (Bombay). assessment order,there is no reference to material qua the additions made and therefore, no addition could have been sustained. We do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly same. However, we may like to mention that as far as computation of the total income for the purpose of assessment u/s 153A is concerned, the Assessing Officer should income and thereafter he should have us/ 143(3) of the order, order of appellate authority. Thereafter, he could have further added any additions based on the incriminating material. The Assessing Officer is accordingly income under order passed u/s 153A of the Act. The ground Revenue are accordingly dismissed. ITA No finalized assessment/reassessment were contrary to the facts unearthed during the course of search operation.” We have heard submission of the Ld. DR and perused the relevant material on record. It is undisputed that no assessment as on the date of the search as far as the assessment and therefore, the assessment is in the category assessment. Hence, no addition could have been made without the aid of the incriminating material as held by Hon’ble Bombay High Court in the case of Continental Warehousing Corporation 374 ITR 645 (Bombay). there is no reference to any incriminating material qua the additions made and therefore, no addition could have been sustained. We do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly, we may like to mention that as far as computation of the total income for the purpose of assessment u/s 153A is the Assessing Officer should begin with the returned income and thereafter he should have added the order, which have been sustained by the authority. Thereafter, he could have further any additions based on the incriminating material. The Assessing Officer is accordingly required to compute the final der passed u/s 153A of the Act. The ground Revenue are accordingly dismissed. M/s Sunny Vista Realtors 11 ITA Nos. No. 610 & 611/M/2023 finalized assessment/reassessment were contrary to the facts unearthed during the course of search We have heard submission of the Ld. DR and perused the relevant material on record. It is undisputed that no assessment as far as the assessment and therefore, the assessment is in the category , no addition could have been made without the aid of the incriminating material as held by the Hon’ble Bombay High Court in the case of Continental Warehousing Corporation 374 ITR 645 (Bombay). Since in the any incriminating material qua the additions made and therefore, no addition could have been sustained. We do not find any error in the order of the , we uphold the we may like to mention that as far as computation of the total income for the purpose of assessment u/s 153A is with the returned added the additions made which have been sustained by the latest authority. Thereafter, he could have further any additions based on the incriminating material. The compute the final total der passed u/s 153A of the Act. The grounds of the 13. In the result, the appeal in ITA NO. 611 is allowed for statistical purposes whereas appeal in ITA No. 610 is dismissed. Order pronounced in the open Court on Sd/ (KULDIP SINGH JUDICIAL MEMBER Mumbai; Dated: 25/05/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA No In the result, the appeal in ITA NO. 611 is allowed for statistical purposes whereas appeal in ITA No. 610 is dismissed. nounced in the open Court on 25/0 Sd/- Sd/ KULDIP SINGH) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai M/s Sunny Vista Realtors 12 ITA Nos. No. 610 & 611/M/2023 In the result, the appeal in ITA NO. 611 is allowed for statistical purposes whereas appeal in ITA No. 610 is dismissed. /05/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai