INCOME TAX OFFICER , Jaipur V. M/S RANKA COLONIZERS PVT. LTD., Jaipur

ITA 642/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1830 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 04-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P P MEENA
• Section: 143(3); 37(1); 37; 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKWY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 642/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2011-12 ITO, WARD-1(2), JAIPUR CUKE VS. M/S RANKA COLONIZERS PVT. LTD., 939-940, RANKA MANSION, SBBJ STREET, CHAURA RASTA, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACR8260L VIHYKFKHZ@ A PPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 232/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2012-13 ITO, WARD-1(2), JAIPUR CUKE VS. M/S RANKA COLONIZERS PVT. LTD., 939-940, RANKA MANSION, SBBJ STREET, CHAURA RASTA, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACR8260L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI P.P MEENA FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VIJAY GOYAL LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 31/10/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 05/12/2017 VKNS'K@ ORDER ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 2 PER: VIKRAM SINGH YADAV, A.M. THESE ARE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) JAIPUR DATED 26.05.2017 FOR AY 2012-12 AND D ATED 09.01.2017 FOR AY 2012-13 RESPECTIVELY. THE RESPECTIVE GROUND S OF APPEAL ARE AS UNDER: ITA. NO. 642/JP/2017 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 62,67,610/- MADE BY THE AO BY DISALLOWING THE UNASCERTAINED LIA BILITY TOWARDS THE PROVISION MADE FOR DEVELOPMENT EXPENSES. ITA. NO. 232/JP/2017 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 55,88,655/- MADE ON ACCOUNT OF DISALLOWANCE OF PROVISIONS FOR D EVELOPMENT EXPENSES WITHOUT GOING THROUGH THE PROVISIONS OF SE CTION 37(1) OF THE I.T ACT, 1961. 2. AT THE OUTSET, LD. AR SUBMITTED THAT MATTER PERT AINING TO AY 2011- 12 MAY BE TAKEN AS LEAD CASE SINCE THE ISSUES INVOL VED IS COMMON AND THE MATTER IN THIS CASE HAS BEEN EXAMINED AT LENGTH BY THE LD. CIT(A) PURSUANT TO THE DIRECTION OF THE HONBLE TRIBUNAL I N THE FIRST ROUND OF APPELLATE PROCEEDINGS. WITH THE CONSENT OF THE BOT H PARTIES, THE MATTER PERTAINING TO AY 2011-12 HAS BEEN TAKEN AS LEAD CAS E FOR THE PURPOSES OF PRESENT DISCUSSIONS. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF REAL EST ATE. THE SUBJECT ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 3 MATTER OF DISPUTE IN THE PRESENT PROCEEDINGS IS THA T THE ASSESSEE DEBITED TO ITS P&L ACCOUNT UNDER THE HEAD DEVELOPM ENT EXPENSES A SUM OF RS. 62,67,210/-. THE ASSESSING OFFICER REQUI RED THE ASSESSEE TO EXPLAIN THE SAME. THE RECORD SHOWS THAT THE ASSESSE E AS PER REPLY DATED 11/12/2013, WHICH HAS BEEN EXTRACTED BY THE A SSESSING OFFICER IN HIS ORDER, HAD OFFERED THE FOLLOWING JUSTIFICATION: THE DEVELOPMENT EXPENSES OF RS. 6267210/- DEBITED IN P&L ACCOUNT CONSIST THE PROVISION FOR DEVELOPMENT MADE ON ARE SOLD DURING THE YEAR @ RS. 500/- PER SQ. YARDS IN THE SC HEME OF ASSESSEE NAMING 'SACHIVALAYA ENCLAVE'. THE ACTUAL D EVELOPMENT EXPENSES INCURRED DURING THE YEAR ARE BEING DEBITED IN THE A/C NAMING 'PROVISION FOR DEVELOPMENT EXPENSES'. THE CO PY OF SUCH LEDGER A/C CONSISTING THE DETAIL OF NATURE OF EXPEN SES INCURRED DURING THE YEAR IS ENCLOSED HEREWITH. AS REGARDING JUSTIFICATION OF PROVISIONS FOR DEVELOPMENT EXPENSES WE SUBMIT THAT AS PER THE NORMS OF JDA FOR PRIVATE TOWNSHIP, THE DEVELOPER HA S TO INCUR SEVERAL EXPENSES ON THE DEVELOPMENT OF THE SCHEME S UCH AS EXPENSES ON INTERNAL ROADS, ELECTRIFICATION, WATER SUPPLY AND DEVELOPMENT OF PUBLIC PARKS AND FACILITIES ETC. THE COST OF THESE EXPENSES IS INCLUDED IN THE SALE PRICE OF THE PLOT AND SEPARATE CHARGES AGAINST THE DEVELOPMENT EXPENSES TO BE INCU RRED BY THE DEVELOPER IS NOT BEING CHARGED IN ADDITION TO THE S ALE PRICE OF THE PLOT TAKEN BY THE DEVELOPER. THE DEVELOPMENT WORK H AS TO BE CARRIED OUT AS PER THE SPECIFICATION OF THE JDA. TH E SALES OF THE ASSESSEE REPRESENTS TO TWO THINGS, FIRST COST OF LA ND AND SECOND COST OF DEVELOPMENT EXPENSES. SINCE THE COST OF THE DEVELOPMENT EXPENSES IS TO BE INCURRED IN THE NEXT YEARS, THERE FORE, THE SALES TO THE EXTENT OF THE COST OF DEVELOPMENT EXPENSES I S CARRIED FORWARDED FOR NEXT YEARS UNDER THE NOMENCLATURE 'PR OVISION AGAINST THE DEVELOPMENT EXPENSES. IT IS RELEVANT TO MENTION HERE THAT THE DEVELOPMENT EXPENSES ARE ESTIMATED ONLY IN RESPECT OF THE PLOTS SOLD DURING THE YEAR, NOT ON WHOLE LAND A ND SUCH AMOUNT IS CARRIED FORWARDED. THUS, THE SALE PROCEED RECEIVED BY THE ASSESSEE AGAINST THE PLOTS IS SUBJECT TO THE LI ABILITY OF DEVELOPMENT WORK TO BE DONE BY THE ASSESSEE. THE LI ABILITY TO INCUR THE DEVELOPMENT EXPENSES HAS ARISEN IN THE YE AR OF THE SALE OF THE PLOT. THE SAID LIABILITY OUGHT TO HAVE BEEN DEDUCTED FROM ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 4 THE AMOUNT OF INCOME ACCRUED IN ORDER TO ARRIVE THE TRUE AND FAIR PROFITS OF A BUSINESS OR PROFESSION, THEREFORE THE ESTIMATION OF FURTHER COST OF DEVELOPMENT NOMENCLATURE IN BOOKS O F ACCOUNT AS ' PROVISION AGAINST DEVELOPMENT EXPENSES' ARE ALLOW ABLE EXPENSES U/S 37 OF THE INCOME TAX ACT READ WITH SEC TION 28 OF INCOME TAX ACT. THE DEVELOPMENT WORK HAS TO BE CARR IED OUT AS PER THE SPECIFICATION OF THE JDA. 3.1 HOWEVER, THE AO NOT CONVINCED WITH THE EXPLANAT IONS OFFERED REJECTED THE SAME AND HELD THAT SINCE NO EXPENDITUR E WAS ACTUALLY INCURRED AND THE AMOUNT WAS ONLY IN THE FORM OF A P ROVISION, HE ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO HAS ALLOW ED THE SAME IN FAVOUR OF THE ASSESSEE. ON APPEAL BY THE REVENUE, THE COORDINATE BENCH VIDE ITS ORDER DATED 24.03.2017 HAS SET ASIDE THE MATTER TO THE FILE OF THE LD CIT(A) WITH THE FOLLOWING DIRECTIONS WHICH ARE REPRODUCED AS UNDER:- 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. ON A CONSIDERATIO N OF THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE FI ND THAT, THOUGH, PRIMA FACIE, THE ASSESSEE APPEARS TO HAVE A N ARGUABLE CASE AS CANVASSED BEFORE US. HOWEVER, ARGUMENTS HAV E TO BE SUPPORTED ON FACTS AND THIS IS AN AREA, WHICH IS RE QUIRED TO BE CONSIDERED. SINCE THE EVIDENCE AND SUPPORTING FACTS HAVE NOT BEEN TAKEN INTO CONSIDERATION BY THE LD. CIT(A), WE DEEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER. WE ARE OF THE VIEW THAT SINCE FACTS WERE BROUGHT TO THE NOTICE OF THE LD. CIT(A) IT WAS INCUMBENT UPON HIM TO FIRST ADDRESS THE FACTS A ND THEN ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 5 PROCEED TO CONSIDER THE LAW APPLICABLE THEREON. IT IS SEEN THAT THE DECISION MAKING PROCESS OF THE LD. CIT(A) IS FLAWED AND OPEN TO THE CHALLENGE OF BEING PERVERSE AS HE HAS STRAIGHTW AY PROCEEDED TO DECIDE THE ISSUE ON THE BASIS OF LEGAL PRECEDENC E WITHOUT FIRST CARING TO MARSHAL THE FACTS. LEGAL PRECEDENT IS AVA ILABLE BOTH FOR AND AGAINST A GENERAL PROPOSITION OF LAW AND IT IS ONLY WHEN THE FACTS ARE FIRST ADDRESSED AND THE MATERIAL FACTS AR E CULLED OUT THAT THE CONCLUSION CAN BE SUPPORTED BY LEGAL PRECEDENT. CONSIDERING THE FACT THAT IT IS A RECURRING ISSUE FOR THE ASSES SEE AND THE TAX AUTHORITIES, WE DEEM IT APPROPRIATE TO SET ASIDE TH E IMPUGNED ORDER AND RESTORE THE ISSUE BACK TO THE FILE OF THE LD. CIT(A) WITH A DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW BY FIRST MARSHALLING THE FACTS OF THE INSTANT CASE AND THEREAFTER CONSIDER THE PRECEDENT AVAILABLE ON THOSE SET OF FA CTS. ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE WITH T HE AFORESAID DIRECTION. NEEDLESS TO SAY THAT A REASONABLE OPPORT UNITY OF BEING HEARD SHALL BE AFFORDED TO THE ASSESSEE BY THE LD. CIT(A). SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 5. THE LD. AR SUBMITTED THAT PURSUANT TO THE DIRECT ION OF THE HONBLE ITAT, THE MATTER HAS SINCE BEEN EXAMINED AT LENGTH BY THE LD. CIT(A) WHEREIN THE RELEVANT FACTS HAVE BEEN BROUGHT ON REC ORD AND PROPERLY ANALYIZED AND TAKING INTO CONSIDERATION THE DECISIO N OF HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT VS. SHREE SALAS AR OVERSEAS PVT. LTD. IN ITA NO. 147/2014 DATED 29.04.2016 AND THE D ECISION OF VARIOUS BENCHES OF THE JAIPUR TRIBUNAL, THE LD. CIT(A) HAS RIGHTLY ALLOWED THE ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 6 PROVISION FOR DEVELOPMENT EXPENSES AMOUNTING TO RS. 62,67,210/-. HE FURTHER RELIED ON THE WRITTEN SUBMISSIONS FILED BEF ORE US. 6. NOW, THE REVENUE IS AGAIN IN APPEAL BEFORE US. THE FINDINGS OF THE LD CIT(A) WHICH ARE UNDER CHALLENGE ARE REPRODU CED AS UNDER:- 3.1.2 I HAVE DULY CONSIDERED ASSESSEES SUBMISSIO N AND CAREFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALSO TAKEN A NOTE OF FACTUAL MATRIX OF THE CASE AS WELL AS APPLICABLE CASE LAWS RELIED UPON. IT IS SUBMITTED THAT DURING THE YEAR UNDER APPEAL, THE ASSESSEE IS A REAL ESTATE DEVELOPER, NATURE OF ITS BUSINESS IS TO DEVE LOP COLONY. THE ASSESSEE PURCHASES THE AGRICULTURE LAND AND THEREAF TER IT APPLIES TO JDA FOR CONVERSION OF LAND FOR RESIDENTIAL AND COMMERCI AL PURPOSE AS PER THE PROVISION OF RAJASTHAN LAND REVENUE ACT AND JAIPUR DEVELOPMENT AUTHORITY. THE ASSESSEE DIVIDES THE LAND IN PLOTS O F VARIOUS SIZES AND CARRIES DEVELOPMENT ACTIVITIES LIKE CONSTRUCTION OF ROAD, LYING OF WATER SUPPLY LINES, ELECTRICITY FACILITY WIRING, SEWERAGE , CONSTRUCTION OF OVERHEAD TANKS ETC. AS PER THE NORMS AND REGULATION S OF JDA FOR PRIVATE TOWNSHIP, THE DEVELOPER HAS TO INCUR SEVERAL EXPENS ES ON THE DEVELOPMENT OF THE SCHEME SUCH AS EXPENSES ON INTER NAL ROADS, ELECTRIFICATION, WATER SUPPLY AND DEVELOPMENT OF PU BLIC PARKS AND FACILITIES ETC. EXTERNAL DEVELOPMENT WORKS LIKE SEC TOR ROADS, ETC ARE CARRIED OUT BY JDA. FURTHER, THE DEVELOPER HAS ALSO OPTION TO CARRY OUT INTERNAL DEVELOPMENT OF THE COLONY THROUGH THE JDA BY PAYING EXTRA COST TO JDA OR THE DEVELOPER ITSELF MAY CARRIED OUT THE DEVELOPMENT WORK IN HIS COLONY. HOWEVER, THE JDA HAS PRESCRIBED MINIMUM STANDARDS OF WORK AND QUALITY AND THE DEVELOPER HAS TO CARRY OUT THE ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 7 WORK AS PER THE MINIMUM STANDARDS LAID DOWN BY THE JDA. IN ORDER TO SECURE THE CARRY OUT OF THE DEVELOPMENT WORK AS PER THE STANDARDS AND SPECIFICATION LAID DOWN BY IT, JDA KEEPS 12.5% PLOT S AS PLEDGED SECURITY AND THESE PLOTS CAN BE RELEASED ONLY AFTER COMPLETI ON OF DEVELOPMENT WORK. IN CASE THE DEVELOPER DOES NOT CARRY OUT THE DEVELOPMENT WORK, THE JDA SALES THESE PLOTS IN OPEN MARKET AND OUT OF THE SALE PROCEEDS OF THESE PLEDGED PLOTS, THE DEVELOPMENT WORK IS CAR RIED OUT BY JDA. THE COST OF THESE EXPENSES IS INCLUDED IN THE SALE PRICE OF PLOT AND AS PER NORMS OF JDA, SEPARATE CHARGES AGAINST THE DEVE LOPMENT EXPENSES CANNOT BE CHARGED FROM THE BUYERS OF THE PLOT IN AD DITION TO THE SALE PRICE OF THE PLOT. THE ASSESSEE HAS DEVELOPED ONLY ONE COLONY NAMES AS SACHIVALAYA ENCLAVE WHICH WAS LAUNCHED IN AY 2007 -08. THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING WHEREIN THE REVENUE IS BOOKED ON ACCRUAL BASIS IRRESPECTIVE TO REALIZATION AND EX PENSES ARE BOOKED ON ACCRUAL BASIS. THE ASSESSEE STARTED THE SALES WITHO UT COMPLETING THE DEVELOPMENT WORK AND THE DEVELOPMENT WORK IS TO BE CARRIED OUT IN DIFFERENT PHASES IN COMING YEARS. THEREFORE, THE SA LES EFFECTED BY THE ASSESSEE ARE SUBJECT TO LIABILITY OF DEVELOPMENT EX PENSES WHICH IS TO BE INCURRED IN FUTURE. THE BASIC PRINCIPLE OF THE ACCO UNTING IS MATCHING I.E. MATCHING OF EXPENSES WITH REVENUE. THEREFORE, THE A SSESSEE MAKES THE PROVISION FOR DEVELOPMENT EXPENSES TO BE INCURRED I N FUTURE IN RESPECT OF THE PLOTS SOLD BY IT DURING THE YEAR. THE ASSESS EE MAKES THE PROVISION FOR DEVELOPMENT EXPENSES @ RS. 500/- PER SQ. YARD ON THE PLOTS SOLD BY IT DURING THE YEAR. WHEN THE DEVELOPM ENT EXPENSES ARE INCURRED, THE SAME IS DEBITED IN THE ACCOUNT PROVI SION FOR DEVELOPMENT EXPENSES. DURING THIS YEAR THE ASSESSEE SOLD PLOTS OF 12534.42 SQ YARD ON WHICH IT MADE PROVISION FOR DEVELOPMENT EXPENSES @ 500/- PER SQ ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 8 YARD, WHICH COMES TO RS. 62,67,210/-. DURING THIS Y EAR, THE ASSESSEE INCURRED ACTUAL EXPENSES OF RS. 19,60,751/- ON DEVE LOPMENT WORK WHICH WERE DEBITED TO PROVISION FOR DEVELOPMENT EXP ENSES. (REFERENCE:PB PG 37-38). THE SALES VIS A VIS PROVIS ION FOR DEVELOPMENT EXPENSES IN THE PREVIOUS YEARS IS AS UNDER:- AY SALES IN (SY) PROVISION MADE DURING THE YEAR EXPENSES INCURRED DURING THE YEAR STATUS OF ASSESSMENT ASSES SMENT ORDER AT PB PG NO. 2007 - 08 29121.03 1,45,60,515 0.00 JUSTIFICATION FOR PROVISION SUBMITTED BEFORE AO (PB PG 78-85) AND AO ALLOWED IT IN SCRUTINY ASSESSMENT U/S 143(3) 86 - 88 2008 - 09 50839.75 2,54,19,875 27,73,271 JUSTIFICATION FOR PROVISION SUBMITTED BEFORE AO (PB PG 89-95) AND AO ALLOWED IT IN SCRUTINY ASSESSMENT U/S 143(3) 96 - 97 2009 - 10 8440.71 42,20, 355 36,06,375 AO ALLOWED IT IN SCRUTINY ASSESSMENT U/S 143(3) 98 - 99 2010 - 11 54026.74 2,70,13,370 84,84,375 NO SECURITY THE SCRUTINY ASSESSMENTS FOR AY 2007-08 TO AY 2009- 10 WERE COMPLETED U/S 143(3) OF THE ACT AND THE AO IN THESE YEARS HAS ALLOWED THE PROVISIONS FOR DEVELOPMENT EXPENSES. ALTHOUGH A LL THE FACTS AND CIRCUMSTANCES OF THE CURRENT YEAR WERE SIMILAR TO P REVIOUS YEARS BUT THE AO TOOK A DIVERGENT VIEW AND DISALLOWED THE PROVISI ON FOR DEVELOPMENT ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 9 EXPENSES OF RS. 62,67,210/-. FURTHER, THE ACTUAL EX PENSES INCURRED BY THE ASSESSEE AMOUNTING TO RS. 19,60,751/- WHICH WAS DEBITED TO PROVISION FOR DEVELOPMENT EXPENSES, WERE ALSO NOT ALLOWED BY AO. HOWEVER, AO STRAIGHTWAY DISALLOWED THE PROVISION FO R DEVELOPMENT EXPENSES BY HOLDING THAT PROVISION ARE NOT ALLOWABL E U/S 37 R.W.S 28 OF THE ACT AND HELD THAT SUCH EXPENSES WHICH HAVE BEEN INCURRED ARE ONLY ALLOWABLE U/S 37 & 28 OF THE ACT. IT IS ALSO A FACT THAT THE AO HAS ALSO NOT MADE ANY INQUIRY WITH REGARD TO NATURE OF PROVI SION WHETHER IT IS AGAINST THE CONTINGENT LIABILITY OR AGAINST ASCERTA INED LIABILITY. NO INQUIRY WAS MADE FOR THE BASIS OF PROVISION OR REASONABLENE SS OF THE PROVISION. FURTHER, THE AO HAS ALSO NOT CONSIDERED THE PAST HI STORY OF THE ASSESSEE AND ALSO NOT TAKEN A NOTE OF THE CASE LAWS RELIED U PON. THEREFORE, CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES OF TH E CASE, UNDER POWER VESTED U/S 250(4) OF THE ACT, ASSESSEE HAS BEEN ASK ED TO PROVIDE FOLLOWING: (I) FURNISH THE DETAILS REGARDING THE NATURE AND BASIS OF PROVISION, (II) HOW THE ASSESSEE IS ABIDE BY JDA CIRCULARS AND (III) PAST HISTORY OF THE CASE. THE LD AR EXPLAINED THAT THE ASSESSEES SCHEME IS A PPROVED BY JDA. THE APPROVAL PROCESS WAS UNDER PROGRESS SINCE 20/07 /2006 AND SCHEME WAS FINALLY APPROVED BY JDA ON 14.09.12. THE COPY OF CORRESPONDENCE WITH JDA/AND OTHER GOVERNMENT AGENCI ES WERE FILED AT PB PG 100 TO 135. THE SCHEME MAP WAS FILED. THE ASS ESSEE FILED A COPY OF JDA CIRCULAR NO. D-1694 DATED 01/12/2005, WHICH CLEARLY DEMONSTRATES THAT THE DEVELOPER HAS TO CARRY OUT IN TERNAL DEVELOPMENT OF THE SCHEME AND THIS INTERNAL DEVELOPMENT CAN EIT HER BE CARRIED OUT ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 10 THROUGH JDA OR BY THE DEVELOPER HIMSELF. IN CASE TH E DEVELOPMENT WORK HAS TO BE CARRIED OUT BY THE DEVELOPER ITSELF, IT H AS TO KEEP 12.5% OF PLOTS WITH JDA AS SECURITY AND THESE PLOTS CAN BE R ELEASED ONLY AFTER THE COMPLETION OF THE WORK. THE DEVELOPMENT WORK IS TO BE CARRIED OUT UNDER THE SUPERVISION AND CONTROL OF JDA AND IT SHO ULD BE IN ACCORDANCE WITH THE STANDARDS PRESCRIBED BY JDA. THE ASSESSEE FILED COPY OF JDA CIRCULAR TO SUPPORT ITS CONTENTIONS. I HAVE ALSO PE RUSED THE APPROVED MAP OF THE SCHEME WHEREIN CLEAR CUT MARKING IS MADE IN PARA 5 OF NOTES THAT 12.5% PLOTS TOTAL AREA OF 37181.61 ARE P LEDGED WITH JDA WHICH WILL BE RELEASED AFTER COMPLETION OF DEVELOPM ENT WORK. THE PRIVATE COLONIZERS ARE BOUND BY THE CIRCULARS, DIRE CTION AND ORDERS OF JDA, IF IT WANTS TO DEVELOP PRIVATE TOWNSHIP IN JAI PUR AND IT CANNOT WRIGGLE OUT FROM ITS OBLIGATIONS FIXED BY JDA. HONBLE RAJASTHAN HIGH COURT HAS CONSIDERED THE NAT URE OF FUTURE LIABILITY AGAINST DEVELOPMENT COST IN ITS RECENT DE CISION IN THE CASE OF CIT VS SHREE SALASAR OVERSEAS PVT LTD. THE NATURE OF THE BUSINESS OF THE ASSESSEE IS SIMIL AR TO THE BUSINESS OF M/S SHREE SALASAR OVERSEAS PVT LTD. THEREFORE, IN V IEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND MOST RESPEC TFULLY FOLLOWING THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF M/S SHREE SALASAR OVERSEAS PRIVATE LTD. I AM OF CONSIDERATE V IEW THAT THE LIABILITY OF ASSESSEE TO CARRY OUT THE INTERNAL DEVELOPMENT W ORK IN THE COLONY IS NOT A CONTINGENT LIABILITY BUT ASCERTAINED LIABILIT Y WHICH ACCRUED ON THE DATE OF SALE OF THE PLOT. ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 11 NOW THE QUESTION ARISES ON THE ISSUE OF REASONABLEN ESS AND BASIS OF THE PROVISION. THE AO HAS EXAMINED THE BOOKS OF ACCOUNT . HE HAS NOT MADE ANY FINDING THAT THE ASSESSEE HAS MADE PROVISI ON FOR EXCESSIVE AMOUNT. IT IS ALSO SEEN THAT THE ASSESSEE MADE THE PROVISION FOR DEVELOPMENT EXPENSES @ RS. 500/- PER SQ YARD ON THE AREA SOLD BY IT DURING THE YEAR. THE PROVISION FOR THE DEVELOPMENT EXPENSES WERE MADE AT THE SAME RATE WHICH WAS APPLIED BY THE ASSE SSEE IN PREVIOUS YEAR AND ACCEPTED BY A O . FURTHER THE ASSESSEE HA S ALSO SUBMITTED THE ESTIMATION OF DEVELOPMENT COST AS MADE B Y A RCHITECT. THE TOTAL ESTIMATION OF DEVELOPMENT COST AS MADE BY ARCHITECT IS OF RS. 15,55,73,066/- AND TOTAL SALEABLE AREA IS 310052.60 SQ YARD. THIS GIVES THE DEVELOPMENT COST OF RS. 501.76 PER SQ YARD AGAI NST WHICH THE ASSESSEE MADE THE PROVISION OF RS. 500/- PER SQ YAR D. THE ASSESSEE HAS FURTHER SUBMITTED THAT AS PER THE CIRCULAR OF J DA IN RESPECT OF THE GUIDANCE FOR DEVELOPMENT WORK AND ESTIMATE AMOUNT O F EXPENSES ON EACH ACTIVITY OF DEVELOPMENT WHEREIN THE EXPENSES O N THE EACH ACTIVITY WERE ESTIMATED BY JDA @ RS. 250/- PER SQ MTR. THIS ESTIMATION IS FOR THE YEAR 2005. THE ASSESSEE HAS ALSO SUBMITTED THAT THERE IS SUBSTANTIAL PRICE ESCALATION FROM 2005. FURTHER, TH E ASSESSEE HAS COMMITTED FOR MORE INFRASTRUCTURAL FACILITIES LIKE CLUB HOUSE, HOSPITALS, SCHOOLS ETC. PROPOSED TO BE PROVIDED BY THE ASSESSE E. THE ASSESSEE SUBMITTED THE COPY OF BROACHER OF THE SCHEME. IN SU PPORT OF ITS CONTENTION, ASSESSEE HAS ALSO JUSTIFIED THE REASONA BLENESS OF ESTIMATION OF DEVELOPMENT EXPENSES BY SUBMITTING THE COPY OF N OTE SHEET TAKEN FROM THE FILE OF JDA IN RESPECT OF JDAS OWN SCHEME AT VILLAGE PRITHVISINGHPURA WHEREIN THE JDA ESTIMATED THE COST OF DEVELOPMENT EXPENSES ABOUT RS. 1700/- PER SQ. MTS. AS ON 14.02. 2014. ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 12 HONBLE ITAT JAIPUR BENCH IN THE CASE OF DCIT VS. M /S SHREE RAM KRIPA BUILDCON PVT LTD ITA NO 1076/JP/2011 ORDER DATED 13-01-2012 HAS MADE THE FINDING ON EXCESSIVE PROVISION IF ANY MADE AS UNDER:- '2.15 FOLLOWING THAT ORDER, WE HOLD THAT THE ID CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION. IT IS USEFUL TO NOTE THAT TH E ASSESSEE HAS USED THE PERCENTAGE COMPLETION METHOD. WHEN THE ASSESSEE FOL LOWS THE PERCENTAGE COMPLETION METHOD THEN AT THE COMPLETION OF THE PROJECT, THE ASSESSEE HAS TO MAKE UP THE ACCOUNT. AT THAT RE LEVANT TIME, THE ASSESSEE CAN OFFER SURPLUSES FROM THE PROVISIONS OR MAY CLAIM THE DEFICIT IN CASE THE ACTUAL EXPENDITURE IS MORE THAN THE PRO VISION. HENCE THE REVENUE IS NOT WITHOUT ANY REMEDY IN CASE THE PROVI SION IS EXCESSIVE.' IN THE CASE OF THE ASSESSEE, THE ESTIMATION IS SUPP ORTED BY EXPERTS OPINION ALSO. EVEN OTHERWISE ALSO IF EXCESS PROVISI ON IS FOUND AFTER COMPLETION OF THE PROJECT, THE LEGISLATION HAS REME DY TO TAX EXCESSIVE PROVISION BY APPLYING THE PROVISIONS OF SECTION 41( 1) OF INCOME-TAX ACT 1961. THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIR CUMSTANCES, THE PROVISION FOR DEVELOPMENT EXPENSES WHICH WAS MADE B Y ASSESSEE @ RS. 500/- PER SQ YARD ON THE AREA SOLD BY IT CANNOT BE DISALLOWED ON THIS GROUND. HOWEVER, IN THIS REGARD, AO HAS HELD THAT THE PROVI SION CANNOT BE ALLOWED UNDER SECTION 37 & 28 OF THE ACT. IN THIS R EGARD, I WOULD LIKE TO DRAW STRENGTH FROM THE FINDINGS OF HONBLE APEX COU RT IN THE CASE OF ROTORK CONTROLS INDIA (P) LTD VS CIT (2009) 314 ITR 62 (SC) WHEREIN IT HAS LAID DOWN THE PRINCIPLE THAT ANY PROVISION MADE FOR THE OBLIGATION OF EXPENSES TO BE INCURRED IN FUTURE AGAINST THE CURRE NT YEARS SALE IS ALLOWABLE EXPENSES. ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 13 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF ROTARK CONTROLS INDIA (P) LTD VS CIT (SUPRA) AND DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHREE S ALASAR OVERSEAS PVT LTD. (SUPRA), I AM OF THE CONSIDERATE VIEW THAT THE AO HAS NOT JUSTIFIED IN DISALLOWING THE PROVISION FOR DEVELOPMENT EXPENS ES. ACCORDINGLY, AO IS DIRECTED TO DELETE THE ADDITION OF RS. 62,67,210 /-. ASSESSEES APPEAL STANDS ALLOWED IN GR NO. 1 & 2. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE UNDER DISPUTE RELAT ES TO DEDUCTIBILITY OF PROVISION FOR DEVELOPMENT EXPENSES AMOUNTING TO RS 62,67,210 DEBITED BY THE ASSESSEE IN ITS PROFIT/LOSS ACCOUNT AND CLAI MED AS AN ALLOWABLE EXPENSE IN ITS RETURN OF INCOME. DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAS REPORTED SALE OF PLOTS MEASURING 1 2534.42 SQ. YARD AMOUNTING TO RS 3,09,04,182 IN A SCHEME BEING DEVEL OPED UNDER THE NAME AND STYLE OF SACHIVALAYA ENCLAVE. THE SAID SCHEME HAS BEEN APPROVED BY JDA ON 14.9.2012 AND THE APPROVED SCHEM E MAP HAS BEEN PLACED ON RECORD WHICH HAS BEEN VERIFIED BY THE LD CIT(A). THE LD CIT(A) HAS RETURNED A FINDING THAT AS PER JDA CIRC ULAR NO D-1694 DATED 1/12/2005, INTERNAL DEVELOPMENT WORK HAS TO BE UNDE RTAKEN BY THE ASSESSEE AND IN PURSUANCE OF THE SAME, IN THE INSTA NT CASE, 12.5% PLOT AREA OF MEASURING AN AREA OF 37181.61 SQ. YARD IS P LEDGED WITH JDA AS SECURITY WHICH WILL BE RELEASED AFTER COMPLETION OF DEVELOPMENT WORK BY THE ASSESSEE. FROM A REGULATORY STANDPOINT, AS PER THE APPROVED SCHEME BY JDA, THE ASSESSEE WILL THEREFORE BE REQUI RED TO CARRY OUT THE ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 14 INTERNAL DEVELOPMENT WORK IN TERMS OF ROADS, ELECTR ICITY, WATER SUPPLY, PLANTATION, STREET LIGHTS, SEWERAGE FACILITY, PARKS DEVELOPMENT, PARKING FACILITY, DRAINAGE AND WATER HARVESTING SYSTEMS. FU RTHER, WE FIND THAT THE ASSESSEE HAS ALSO GIVEN AN UNDERTAKING TO JDA A S PART OF ITS CHANGE IN LAND USE APPLICATION (90-B(3)) DATED 24 .08.09 THAT INTERNAL DEVELOPMENT WORK WILL BE CARRIED OUT AS PER NORMS O F JDA AND IN FUTURE, JDA AND OTHER GOVT. AGENCIES WILL NOT BE REQUESTED FOR ANY FUNDS AND NO DEMAND SHALL BE MADE FOR CARRYING OUT THE INTERN AL DEVELOPMENT IN TERMS OF ROAD, WATER, ELECTRICITY, SEWERAGE, FACILI TY, ETC. THE ABOVE FACTS THUS CLEARLY DEMONSTRATE THAT FROM A REGULATO RY STANDPOINT, THE ASSESSEE IS REQUIRED TO CARRY OUT THE INTERNAL DEVE LOPMENT WORK IN RESPECT OF SCHEME BEING DEVELOPED UNDER THE NAME AN D STYLE SACHIVALAYA ENCLAVE. 8. NOW, LETS EXAMINE THE MATTER FROM A CONTRACTUAL STANDPOINT VIS- -VIS THE PERSONS TO WHOM THE PLOTS OF LAND HAVE BE EN SOLD BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATIO N. THE LD AR HAS CONTENDED THAT THE ASSESSEE HAS AGREED TO SELL DEVE LOPED PLOTS OF LANDS TO THE END-CUSTOMERS AND COST OF THE DEVELOPMENT EX PENDITURE IS INCLUDED IN THE SALE PRICE OF THE PLOTS OF LAND AND NO SEPARATE CHARGES HAVE BEEN COLLECTED OR GOING TO BE COLLECTED IN FUT URE IN RESPECT OF SUCH DEVELOPMENT EXPENDITURE. IT WAS ACCORDINGLY SUBMIT TED THAT THE ASSESSEE HAD A CONTRACTUAL OBLIGATION WITH THE CUST OMER TO CARRY OUT THE DEVELOPMENT WORK. IN SUPPORT OF THE SAID CONTENTIO N, IT WAS FURTHER SUBMITTED THAT THE SALES OF THE ASSESSEE CONSISTS T HE SALES OF PLOTS IN PRIVATE KHATEDAR SCHEME FOR WHICH NO SALES AGREEMEN T IS EXECUTED. IN THE PRIVATE KHATEDAR SCHEME, THE BUYER OF PLOT APPL Y FOR PURCHASE OF ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 15 PLOT IN SCHEME BY WAY OF APPLICATION FORM WHEREIN I T IS SPECIFIED THAT THE ASSESSEE COMPANY SHALL DEVELOP ROADS LAY ELECTR ICITY POLES, WATER PIPE LINES ETC. AND UPON ALLOTMENT OF PLOT TO SUCH BUYER, THE ASSESSEE ISSUES THE ALLOTMENT LETTER SPECIFYING THE PLOT NUM BER, AREA AND SITE PLAN TO THE BUYERS AND GIVES THE PROVISIONAL POSSES SION OF THE PLOT. THEREAFTER, ON ISSUE OF PATTA BY JDA COUPLED WITH P OSSESSION OF THE PLOTS LAND, THE OWNERSHIP OF THE PLOT IS TRANSFERR ED TO THE BUYER. IT WAS SUBMITTED THAT THE PRIVATE KHATEDAR SCHEME IS GOVER NED AS PER RULES AND REGULATIONS OF RAJASTHAN LAND REVENUE ACT AND T HE JDA, AND AS PER JDA CIRCULAR, THE DEVELOPMENT EXPENSES CANNOT BE CH ARGED FROM CUSTOMERS IN ADDITION TO THE COST OF THE PLOT. IT W AS SUBMITTED THAT AFTER TAKING INTO CONSIDERATION THE ASSESSEES SUBMISSION S THAT THE CONSIDERATION TOWARDS THE SALE OF PLOTS OF LAND INC LUDES THE COST OF DEVELOPMENT EXPENDITURE HAS BEEN ACCEPTED BY THE RE VENUE AND THE SAME IS NOT IN DISPUTE. WE FIND THAT THE SIMILAR C ONTENTIONS HAVE BEEN RAISED BY THE ASSESSEE BEFORE THE LD CIT(A) AND THE LD CIT(A) HAS RETURNED A FINDING ACCEPTING THE ABOVE-SAID CONTENT IONS REGARDING ASSESSEES CONTRACTUAL OBLIGATION TO INCUR THE DEVE LOPMENT EXPENDITURE AND NO SEPARATE CHARGE BEING RECOVERED FROM THE END -CUSTOMERS TOWARDS SUCH DEVELOPMENT EXPENDITURE AND THE SAID F INDINGS REMAIN UNCONTROVERTED BEFORE US. WE ACCORDINGLY SEE NO RE ASON TO INTERFERE WITH THE SAID FINDINGS OF THE LD CIT(A). 9. NOW, LETS EXAMINE THE MATTER FROM AN ACCOUNTING STANDPOINT. AS WE HAVE NOTED ABOVE, DURING THE YEAR UNDER CONSIDER ATION, THE ASSESSEE HAS REPORTED SALE OF PLOTS MEASURING 12534 .42 SQ. YARD AMOUNTING TO RS 3,09,04,182. IT HAS BEEN CONTENDED BEFORE US THAT THE ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 16 PROVISION OF RS 62,67,210 TOWARDS THE DEVELOPMENT E XPENDITURE IS IN RELATION TO SAID SALE OF PLOTS WHICH HAVE BEEN ACTU ALLY EXECUTED DURING THE YEAR, DULY REFLECTED IN THE FINANCIAL STATEMENT S AND OFFERED TO TAX IN THE RETURN OF INCOME. IT WAS CONTENDED THAT UNDER THE WELL ACCEPTED ACCOUNTING PRINCIPLE OF MATCHING CONCEPT, WHERE THE SALES HAVE BEEN DULY OFFERED TO TAX, CORRESPONDING EXPENSES HAVE TO BE CLAIMED IN ORDER TO REFLECT THE TRUE PROFIT/LOSS SITUATION. IT WAS FURTHER CONTENDED THAT THE ASSESSEE FOLLOWS THE MERCANTILE SYSTEM OF ACCOU NTING WHEREIN ALL KNOWN AND ASCERTAINED LIABILITY, EVEN IF THE SAME H AVE TO BE INCURRED IN FUTURE, HAVE TO BE DULY ACCOUNTED FOR. WE DONOT SE E ANY INFIRMITY IN THE SAID CONTENTIONS RAISED BY THE LD AR AND WE HAV E NO HESITATION BUT TO ACCEPT THE SAME. 10. NOW, COMING TO THE CONTENTION OF THE REVENUE TH AT WHAT HAS BEEN CLAIMED BY THE ASSESSEE IS A MERE PROVISION TO WARDS DEVELOPMENT EXPENDITURE AND NOT AN ACTUAL EXPENDITURE WHICH HAS BEEN INCURRED BY THE ASSESSEE DURING THE YEAR AND THE SAME IS THUS N OT ALLOWABLE UNDER THE PROVISIONS OF THE ACT. IN THE INSTANT CASE, TH E ASSESSEE HAS EXECUTED SALE OF PLOTS OF LAND AND CONSIDERATION FO R SUCH SALE OF PLOTS, AS WE HAVE NOTED ABOVE, IS INCLUSIVE OF CHARGES TOW ARDS THE DEVELOPMENT EXPENDITURE WHICH IN EFFECT, CREATES AN OBLIGATION ON THE ASSESSEE TO CARRY OUT THE NECESSARY DEVELOPMENT ACT IVITIES. THE ASSESSEE HAS THUS INCURRED A LIABILITY AT THE STAGE OF EXECUTION OF SALE OF PLOTS AND THE LIABILITY SO INCURRED IS THUS AN ASCE RTAINED LIABILITY. WHERE AMOUNT IS NOT ACTUALLY EXPENDED DURING THE YEAR UND ER CONSIDERATION TOWARDS SUCH AN ASCERTAINED LIABILITY, THE ONLY QUE STION THAT ARISES IS REGARDING THE BASIS OF QUANTIFICATION AND THE REASO NABILITY OF SUCH ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 17 PROVISION AND WHERE THE SAME CAN BE DEMONSTRATED WI TH APPROPRIATE DOCUMENTATION, A CLAIM TOWARDS SUCH AN ASCERTAINED LIABILITY WILL THEREFORE BE ALLOWABLE FOR TAX PURPOSES. IT IS NOTE D THAT THE ASSESSEE HAS PREPARED AN ESTIMATE OF DEVELOPMENT EXPENSES FR OM AN ARCHITECT AND DETAILED WORKING HAS BEEN SUBMITTED AS PART OF THE PAPERBOOK PAGES 137-154. IT IS NOTED THAT THE DEVELOPMENT WOR K HAS TO BE CARRIED OUT BY THE ASSESSEE AS PER THE SPECIFICATIONS OF TH E JDA AND THE SAME HAVE BEEN CONSIDERED WHILE WORKING OUT THE ABOVE ES TIMATION WHICH HAS BEEN WORKED OUT AT RS. 15,55,73,066/- AND GIVEN THE TOTAL SALEABLE AREA OF 310052.60 SQ. YARDS, IT GIVES THE DEVELOPME NT COST OF RS. 501.76 PER SQ. YARD AGAINST WHICH THE ASSESSEE HAS MADE A PROVISION OF RS. 500/- PER SQ YARD. IT WAS ALSO CONTENDED THAT T HE SAID ESTIMATE OF DEVELOPMENT EXPENDITURE IS ALSO COMPARABLE TO DEVEL OPMENT EXPENDITURE ESTIMATED BY JDAS OWN SCHEME AT VILLAG E PRITHVISINGHPURA WHEREIN THE JDA ESTIMATED THE COST OF DEVELOPMENT E XPENSES AT ABOUT RS. 1700/- PER SQ. MTS. AS ON 14.02.2014. NOTHING HAS BEEN BROUGHT ON RECORD WHICH DISPUTE THE SPECIFICATION OF DEVELO PMENT ACTIVITIES WHICH HAS TO BE CARRIED OUT BY THE ASSESSEE AND ALS O IN TERMS OF QUANTIFICATION THEREOF. WE ACCORDINGLY CONFIRM THE BASIS AND REASONABILITY OF SUCH PROVISION TOWARDS THE DEVELOP MENT EXPENDITURE AND A CLAIM TOWARDS SUCH AN ASCERTAINED LIABILITY I S THEREFORE CLEARLY ALLOWABLE FOR TAX PURPOSES UNDER THE PROVISIONS OF SECTION 37 OF THE ACT. 11. FURTHER, WE NOTE THAT THE ASSESSEE HAS BEEN CON SISTENT IN ITS ACCOUNTING POLICY WHEREBY IT CREATES PROVISION TOWA RDS THE DEVELOPMENT EXPENDITURE AND THERE IS NO DEVIATION FROM THE PAST YEARS. FURTHER, WE NOTE THAT THE ASSESSEE HAS BEEN INCURRING ACTUAL EX PENDITURE OUT OF ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 18 SUCH PROVISION ACCOUNT AND IT IS NOT A CASE THAT WH ERE THE PROVISION HAS BEEN BUILT OVER A PERIOD OF TIME WITHOUT ANY ACTUAL EXPENDITURE. THE AO HAS ALLOWED THE PROVISION FOR DEVELOPMENT EXPENS ES IN A.Y 2007-08, A.Y 2008-09 AND A.Y 2009-10 WHILE COMPLETING THE AS SESSMENT U/S 143(3) OF THE ACT AND WE DONT SEE ANY JUSTIFIABLE BASIS TO DISTURB THE SAME FOR THE IMPUNGED ASSESSMENT YEAR. 12. OUR VIEW IS ALSO FORTIFIED BY THE DECISION OF T HE HONBLE RAJASTHAN HIGH COURT IN CASE OF SALASAR OVERSEAS PVT LTD (SUP RA) WHEREIN IT WAS HELD AS UNDER: 8. ADMITTEDLY, THE ASSESSEE IS FOLLOWING THE MERCA NTILE SYSTEM OF ACCOUNTING AND IT IS RECOGNISING THE SAME ON ACCRUA L BASIS AS AND WHEN THE POSSESSION OF THE PLOT IS PASSED/ GIVEN. THE SA LE OF PLOT IS SUBJECT TO LIABILITY OF DEVELOPMENT WORK TO BE CARRIED OUT IN THE COLONY IN FUTURE. THIS LIABILITY ACCRUES AS SOON AS SALE OF A PLOT IS MADE. THE ASSESSEE ADMITTEDLY MADE A PROVISION FOR DEVELOPMENT OF LAND FOR THE PLOTS SOLD DURING THE YEARS UNDER REFERENCE AND ACTUAL EXPENSE S ON DEVELOPMENT WORK INCURRED IN THE COLONY ACCOUNTED FOR BY REVERS ING THE PROVISION MADE IN RESPECT OF THE PLOTS SOLD BY IT. 9. THE APPELLATE AUTHORITIES IN THE INSTANT CASE HA VE TAKEN INTO CONSIDERATION THE DIRECTIVES OF THE JDA TO DEVELOP THE COLONIES BY THE VARIOUS WORKS WHICH WE HAVE ALREADY REFERRED TO HER EINBEFORE AND NATURALLY A PROSPECTIVE BUYER OF A PLOT GETS ATTRAC TED THE MOMENT A DEVELOPER/BUILDER SPECIFIES THAT THE LAND IN QUESTI ON WOULD BE PROVIDED WITH BASIC INFRASTRUCTURE, SUCH AS INTERNAL ROADS, WATER LINES, SEWER LINE, ELECTRIFICATION, BOUNDARY WALLS ETC. SO THAT ONCE A PLOT HOLDER, WANTS TO CONSTRUCT A HOUSE, THEN FOR THESE THINGS ONE NEED N OT LOOK TO OTHER ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 19 AGENCIES. ONCE A SALE PRICE HAS BEEN RECEIVED AND A CCOUNTED FOR, THE EXPENSES WHICH ARE OBLIGATORY AND IN THE NATURE OF COMMITTED LEGAL LIABILITY, ORDINARILY HAS TO BE ACCOUNTED FOR. THE DEVELOPMENT EXPENSES AS FOUND BY THE APPELLATE AUTHORITIES, IN OUR VIEW AS WELL ARE ASCERTAINED COMMITTED LEGAL LIABILITY. 13. IN LIGHT OF ABOVE DISCUSSIONS, WE AFFIRM THE OR DER OF THE LD CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. ITA NO.232/JP/2017 14. IN APPEAL FILED BY THE REVENUE FOR AY 2012-13 , BOTH THE PARTIES SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE C ASE ARE IDENTICAL TO THE FACTS AND CIRCUMSTANCES IN ITA NO. 642/JP/2017, OUR FINDINGS AND DIRECTIONS CONTAINED IN ITA NO. 642/JP/2017 SHALL A CCORDINGLY APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/12/2017 SD/- SD/- FOT; IKWY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 05/12/2017. * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: ITA NO. 642 & 232/JP/2017 ITO, JAIPUR VS. M/S RANKA COLONIZERS PVT. LTD., JAI PUR 20 1. VIHYKFKHZ@ THE APPELLANT- ITO, WARD-1(2), JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S RANKA COLONIZERS PVT. LTD., JAI PUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 642 & 232/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR