ITO - 26(2)(5), MUMBAI V. RAKESH SHRINATH DUBEY, MUMBAI

ITA 6529/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1882 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA SR AR
• Keywords: Business income; Additional evidence
• Section: 143(3); 56(2); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6529/MUM/2016 ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER - 26(2)(5), MUMBAI VS. SHRI RAKESH SRINATH DUBEY, B-406, RAJDEEP CO-OP. HSG. SOC, LBS MARG, KURLA (WEST), MUMBAI [PAN : AERPD 6608 J] ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI CHAITANYA ANJARIA, SR. AR - CIT RESPONDENT BY : SHRI RISHAB SH AH , DATE OF HEARING : 13 - 11 - 201 8 DATE OF PRONOUNCEMENT : - 16 - 11 - 201 8 O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-38 , MUMBAI, IN APPEAL NO. CIT(A)-38/ITO.21(3)(4)/IT.101/2013-14 , DATED 29-07-2016. THE ASSESSMENT WAS FRAMED BY THE ITO, WARD 21(3)(4), BKC, MUMBAI U/S. 143(3) OF THE INCOME TAX ACT, 1961 [HEREIN AFTER REFERRED TO AS ACT] FOR THE AY. 201 0-11 VIDE HIS ORDER DATED 22-03-2013. ITA NO.6529/MUM/2016 SHRI RAKESH SRINATH DUBEY 2 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A), DELETING THE ADDITION MADE BY THE AO IN RESPECT TO DIFFERENCE BETWEEN AIR DETAILS AND THE TRANSACTI ONS DISCLOSED IN THE INCOME TAX RETURNS. FOR THIS, REVENUE HAS RA ISED THE FOLLOWING FIVE GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF 1,38,55,010/- MADE BY THE AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) FAILED TO CONSIDER THE FACT THAT THE ASSE SSEE IN HIS STATEMENT RECORDED U/S. 131 OF THE ACT ON 11.03.2013 DURING A SSESSMENT PROCEEDINGS ADMITTED THAT 11 RESIDENTIAL FLATS WERE SOLD DURING THE YEAR UNDER CONSIDERATION FOR A TOTAL CONSIDERATION OF 2,77,10,020/- IN THE PROJECT HARMONY, HOWEVER, NO INCOME FROM SALE OF FLATS WERE OFFERED BY THE ASSESSEE IN HIS RETURN OF INCOME FILED FOR THE AY. 2010-11. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE B Y THE AO WITHOUT CONSIDERING THE FACT THAT THE FLATS WERE SOLD DURIN G THE AY 2010-11 BY WAY OF REGISTERED SALE DEEDS WHICH IMPLIES THAT THE ASSESSEE HAS COMPLETED THE PROJECT AND AS SUCH, AS PER THE PROJE CT COMPLETION METHOD ALSO THE INCOME PERTAINING TO THE ABOVE SALE DEEDS EXECUTED AND CONSIDERATION RECEIVED WAS REQUIRED TO BE BROUGHT T O TAX IN THE YEAR AY. 2010-11 ITSELF. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN IGNORING THE FACT THAT THE ASSES SEE HAS CLAIMED MAJOR EXPENSES TOWARD THE PROJECT COST IN AY. 2010-11 OF 2,04,20,122/- WHEREAS IN AY. 2011-12 THE ASSESSEE HAS INCURRED ON LY 28,25,813/- TOWARDS PROJECT COST OUT OF WHICH CONSTRUCTION EXPE NSES IS 18,69,645/- ONLY WHICH ESTABLISHES THE FACT THAT TH E CONSTRUCTION HAD REACHED COMPLETION STAGE IN AY. 2010-11. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) FURTHER ERRED IN IGNORING THE FACT THE OF THE TOTAL ADVANCES RECEIVED BY THE ASSESSEE ALONGWITH THE CO-OWNER DUR ING THE AY. 2010- 11 IS 3,23,10,020/- OUT OF WHICH SALES TO THE EXTENT OF 2,77,10,020/- HAVE BEEN REGISTERED BY REGISTERED AGREEMENTS FOR S ALE IN THE FY. 2009- ITA NO.6529/MUM/2016 SHRI RAKESH SRINATH DUBEY 3 10 RELEVANT TO THE AY. 2010-11, WHICH AMPLY JUSTIFI ES THE FACT THAT MORE THAN 80% OF THE PROJECT WAS COMPLETED IN FY. 2009-1 0 RELEVANT TO AY. 2010-11 AND SALE CONSIDERATION HAS BEEN RECEIVED AN D SALE AGREEMENTS HAVE BEEN REGISTERED IN THIS YEAR ITSELF, THUS PROP ORTIONATE PROFIT SHOULD HAVE BEEN OFFERED TO TAX IN VIEW OF THE DECISION OF TRIBUNAL IN THE CASE OF CHAMPION CONSTRUCTION CO. VS. FIRST ITO 1983 (5 ITD 495) (MUM) WHEREIN IT WAS HELD THAT WHEN 80% OF WORK IS COMPLE TED, PROPORTIONATE PROFIT MUST BE CHARGED TO TAX. 6. THE APPELLANT PRAYS THAT THE ORDER OF LD.CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED. 7. THE APPELLANT CRAVES LEAVE TO AMEND OR TO ALTER ANY GROUND OR ADD ANEW GROUND, WHICH MAY BE NECESSARY. 3. BRIEF FACTS ARE THAT THE ASSESSEE IS AN INDIVIDU AL ENGAGED IN THE BUSINESS OF BUILDING AND DEVELOPING PROPERTIES AND LEGAL CONSULTANCY. THE ASSESSEE ALONG WITH ONE SHRI PRITH VIJEET RAJARAM CHAVAN ENTERED INTO A MUTUAL UNDERSTANDING (MOU) FOR JOINTLY BUYING, DEVELOPING AND SELLING PROPERTY WHI CH WAS CARRIED OUT DURING THE YEAR. DURING THE PREVIOUS YEAR 2009 -10 RELEVANT TO THE AY 2010-11, THE ASSESSEE HAS RECEIVED ADVANC ES FROM CUSTOMERS AMOUNTING TO 2,77,10,020/- AGAINST THE SALE OF FLAT IN LIEU OF THIS JOINT VENTURE WITH SHRI PRITHVIJEET RAJARAM CHAVAN. THE AO TREATED THIS 50% OF THE ADVANCES RECEIVED BY THE ASSESSEE AMOUNTING TO 1,38,55,010/- AS INCOME FROM OTHER SOURCES BY INVOKING THE PROVISIONS OF SECTION 56(2) (VI) OF THE ACT AND ADDED TO THE RETURNED INCOME OF THE ASSESSEE. FURTHER, THE ITA NO.6529/MUM/2016 SHRI RAKESH SRINATH DUBEY 4 AO ALSO TREATED THESE ADVANCES RECEIVED FROM BUYERS OF THE FLATS AS BUSINESS RECEIPT BY INVOKING THE DEEMED PROVISIO NS OF SECTION 28(IV) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. THE ASSESSEE FILED ADDITIONAL EVIDENCES BEFORE C IT(A) AND HE REFEREED THE ADDITIONAL EVIDENCES TO THE AO AND THE AO SUBMITTED REMAND REPORT ON THE FOLLOWING ADDITIONAL EVIDENCES: I. COPIES OF THE RELEVANT EXTRACTS OF THE REGISTERED AGREEMENTS FOR SALE; II. COPIES OF THE RETURN OF INCOME AND ANNUAL ACCOUNTS OF SHRI PRITHVIJEET RAJARAM CHAVAN FOR THE AY. 2011 - 12; III. COPY OF THE RETURN OF INCOME FILED BY THE APPELLANT FOR THE AY. 2011-12 ALONG WITH THE COPY OF THE AUDITED ANNUAL ACCOUNTS; IV. COPY OF THE PART OCCUPATION CERTIFICATE; V. COPIES OF THE LEDGER ACCOUNTS OF THE PARTIES AS APPEARING IN THE BOOKS OF THE ASSESSEE FOR THE AY. 2009-10 AND FY. 2010-11; ITA NO.6529/MUM/2016 SHRI RAKESH SRINATH DUBEY 5 4.1. THE CIT(A) AFTER CONSIDERING THE REMAND REPORT AND ADDITIONAL EVIDENCES, NOTED THAT THE ADDITION MADE BY THE AO U/S. 56(2)(VII) OF THE ACT AND ALSO ALTERNATIVELY U /S. 28(2)(IV) OF THE ACT, THESE BEING ADVANCES ARE NOT BUSINESS INCO ME OR INCOME FROM OTHER SOURCES. HE ALSO NOTICED THAT THESE ARE MERELY ADVANCES AND ASSESSEE HAS DISCLOSED THE INCOME ON P ROJECT COMPLETION BASIS IN AY 2011-12 OUT OF THE TOTAL REC EIPTS OF THIS HARMONY PROJECT. ACCORDING TO CIT(A), ASSESSEE H AS OFFERED THE INCOME OF 57,14,251/- IN AY. 2011-12. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS ARE THAT T HE CONSTRUCTION OF HARMONY PROJECT WHICH IS A JOINT VENTURE OF THE ASSESSEE AND SHRI PRITHVIJEET RAJARAM CHAVAN WAS CO MMENCED ON 06-10-2006 AND FINALLY COMPLETED ON 19-06-2012. THIS COMPLETION WAS DONE ON THE DATE OF POSSESSION OF TH ESE TWO FLATS, AND COMPLETION WAS GIVEN BY MUNICIPAL CORPORATION O F GREATER MUMBAI (MCGM). WE FIND THAT THE MAIN THRUST OF THE AO FOR MAKING ADDITION WAS THAT THE ASSESSEE HIMSELF OFFER ED THIS INCOME OF 1,38,55,010/- WHICH IS 50% OF THE TOTAL RECEIPTS ITA NO.6529/MUM/2016 SHRI RAKESH SRINATH DUBEY 6 DURING THE FY. 2009-10 RELEVANT TO THE AY. 2010-11 BUT ASSESSEE CONTESTED THAT WHEN THE ASSESSEE IS FOLLOWING THE P ROJECT COMPLETION METHOD OF ACCOUNTING, HOW THIS INCOME AS SESSEE CAN OFFER FOR TAXATION. THE ASSESSEE BEFORE US ALSO CON TENDED THAT THE JOINT CO-OWNER SHRI PRITHVIJEET RAJARAM CHAVAN HAS NOT OFFERED ANY INCOME IN HIS RETURN OF INCOME AND THE SAME WAS ACCEPTED AS IT IS. WE HAVE GONE THROUGH THE FACTS IN ENTIRE TY INCLUDING THE ASSESSEES PAPER BOOK CONSISTING OF 1 TO 104 PAGES AND NOTICED THAT THE OCCUPATION CERTIFICATE IS DATED 13-04-2010 I.E., FALLING IN AY 2011-12. EVEN, WE HAVE GONE THROUGH THE BALANCE SHEET AND PROFIT AND LOSS A/C OF THE ASSESSEE FOR THE AY. 201 1-12, WHICH ARE ENCLOSED IN ASSESSEES PAPER BOOK FROM PAGES 34 TO 52 AND NOTICED THAT THE ASSESSEE HAS DISCLOSED PROFIT OF HARMONY PROJECT AT 57,14,251/- IN THE YEAR OF COMPLETION OF PROJECT. THE ASSESSEE HAS ENCLOSED THE STATEMENT OF TOTAL INCOME AT PAGES 34, 35 AND 36 OF THE ASSESSEES PAPER BOOK. WE FIND THA T THE ASSESSEE IS PROMOTER OF THE BUILDING HARMONY ALON G WITH THE OTHER CO-OWNER SHRI PRITHVIJEET RAJARAM CHAVAN AND BOTH AS CO- OWNER HAS CARRIED OUT THIS CONSTRUCTION ACTIVITY. W E FIND FROM RECORDS THAT THE ASSESSEE AS WELL AS SHRI PRITHVIJE ET RAJARAM CHAVAN HAS OFFERED THE INCOME FROM THIS PROJECT AT 57,14,251/- ITA NO.6529/MUM/2016 SHRI RAKESH SRINATH DUBEY 7 IN EACH CASE IN RESPECTIVE RETURNS OF INCOME FOR AY . 2011-12. WE ARE OF THE VIEW THAT THE AO HAS NOT APPRECIATED THE AIR INFORMATION WHICH IS MERELY CARRIED OUT THE DETAILS OF RECEIPTS FROM THE BUYERS. THE PROPERTY WAS SOLD IN NEXT YEA R WHEN THE PROJECT GOT COMPLETED AND BOTH THE JOINT CO-OWNER H AS DISCLOSED THEIR RESPECTIVE INCOME IN THEIR RETURNS OF INCOME EARNED FROM THIS PROJECT. WE HAVE VERIFIED THIS FACT AS NOTED BY THE CIT(A) ALSO THAT THE INCOME FROM THIS PROJECT HAS ALREADY BEEN DISCLOSED BY ASSESSEE AS WELL AS SHRI PRITHVIJEET R AJARAM CHAVAN IN THEIR RESPECTIVE RETURNS OF INCOME. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION. HENC E, WE CONFIRM THE ORDER OF THE CIT(A) AND THE APPEAL OF REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DAY OF NOVEMBER, 2018 SD/- SD/- (RAJESH KUMAR) (MAHAV IR SINGH) ACCOUNTANT MEMBER JUDICI AL MEMBER MUMBAI; DATED: 16 TH NOVEMBER, 2018 TNMM ITA NO.6529/MUM/2016 SHRI RAKESH SRINATH DUBEY 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A),MUMBAI 4. THE CIT 5. DR, D BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI