PEARL COSCHEM PVT LTD., MUMBAI V. DY CIT 3 (2)(2), MUMBAI

ITA 6611/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2920 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 22-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Opportunity of being heard; Cost of acquisition; Capital Gains
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI MAHAVIR SINGH (VICE PRESIDENT) AND SHRI S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) ITA NO. 6611/MUM/2019 ASSESSMENT YEAR: 2013-14 PEARL COSCHEM PRIVATE LIMITED, 83, 8 TH FLOOR, JOLLY MAKER CHAMBERS II, NARIMAN POINT, MUMBAI-400021. VS. DEPUTY COMMISSIONER OF INCOME TAX 3(2)(2), ROOM NO. 608, 6 TH FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI-400020. PAN NO. AAACP 3117 G APPELLANT RESPONDENT ASSESSEE BY : MR. VIJAY MEHTA, AR REVENUE BY : MS. SHREEKALA PARDESHI, DR DATE OF HEARING : 25/03/2021 DATE OF PRONOUNCEMENT : 02/06/2021 ORDER PER S. RIFAUR RAHMAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2013-14. THE APPEAL IS DIRECTED AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-9, MUMBAI [IN SHORT CIT(A)] AND ARI SES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (T HE ACT). 2. THE BRIEF FACTS OF THE CASE ARE, ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 ON 30.09.2013 DECLARING TOT AL INCOME AT RS.88,44,342/ THE CASE WAS SELECTED FOR SCRUTINY A ND STATUTORY NOTICES UNDER SECTION 143 (2) AND 142 (1) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). IN PEARL COSCHEME PVT. LTD. ITA NO. 6611/M/2019 2 RESPONSE, A.R. OF THE ASSESSEE ATTENDED AND FILED A RELEVANT INFORMATION AS CALLED FOR. 3. THE AO OBSERVED THAT ASSESSEE HAD ENTERED INTO A MOU WITH M/S SAMBHAV INFRASTRUCTURE PRIVATE LIMITED (SIPL) IN OR DER TO INVEST IN THE ONGOING PROJECTS UNDER TAKEN BY SIPL. THE ASSESSEE INVESTED AN AMOUNT OF RS.31,046,400/ DURING THIS ASSESSMENT YEAR. AS PER THE MOU, AO OBSERVED THAT THE ASSESSEE WAS PROMISED TO RECEIVE 18 INSTAL MENT OF RS.20,79,000/ AS PER BELOW SCHEDULE FROM SIPL: DATE OF INSTALLMENT AMOUNT OF INSTALLMENT (RS.) 21 ST NOVEMBER, 2012 20,79,000/- 21 ST DECEMBER, 2012 20,79,000/- 21 ST JANUARY, 2013 20,79,000/- 21 ST FEBRUARY, 2013 20,79,000/- 21 ST MARCH, 2013 20,79,000/- 21 ST APRIL, 2013 20,79,000/- 21 ST MAY, 2013 20,79,000/- 21 ST JUNE, 2013 20,79,000/- 21 ST JULY, 2013 20,79,000/- 21 ST AUGUST, 2013 20,79,000/- 21 ST SEPTEMBER, 2013 20,79,000/- 21 ST OCTOBER, 2013 20,79,000/- 21 ST NOVEMBER, 2013 20,79,000/- 21 ST DECEMBER, 2013 20,79,000/- 21 ST JANUARY, 2014 20,79,000/- 21 ST FEBRUARY, 2014 20,79,000/- PEARL COSCHEME PVT. LTD. ITA NO. 6611/M/2019 3 21 ST MARCH, 2014 20,79,000/- 21 ST APRIL, 2014 20,79,000/- FURTHER, AO OBSERVED FROM THE MOU THAT SIPL SHALL G IVE 18 PDCS AND THE SAID PDCS SHALL BE DEPOSITED ON THE DUE DATES WITHO UT REFERENCE TO SIPL. BASED ON THE ABOVE OBSERVATIONS, THE ASSESSEE WAS ASKED T O SHOW CAUSE AS TO WHY THE PROFIT ELEMENT IN THE ABOVE SAID PROJECT SHOULD NOT BE TAXED, IN RESPONSE ASSESSEE FILED A LETTER DATED 11.2.2016, FOR THE SA KE OF BREVITY IT IS REPRODUCED BELOW: PLEASE NOTE THAT OUR CLIENT MADE INVESTMENTS BY AC QUIRING 74 RESIDENTIAL FLATS AND HAS MADE THE PAYMENT OF RS.3,10,46,400/- TO THE DEV ELOPER. IT WAS THE OBLIGATION OF THE DEVELOPER TO HELP AND ASSIST OUR CLIENT AND ALS O SELL THE RESIDENTIAL FLATS IN WHICH INVESTMENTS WERE MADE. THE TOTAL SATE CONSIDERATION WHICH WOULD HAVE BEEN RECEIVED ON TRANSFER OF THE 74 RESIDENT/AT FLATS WI LL BE THE SALE CONSIDERATION AND AFTER REDUCING THE COST OF ACQUISITION THE RESULTANT GAIN WOULD BE CHARGEABLE TO TAX TO CAPITAL GAINS. AS EXPLAINED AND AS PROVED BEFORE YO U, NOT A SINGLE RESIDENTIAL FLAT IS SOLD IN AY 2013-14 AND NO INCOME HAS ACCRUED TO OUR CLIENT. YOU WILL APPRECIATE THAT SECTION 45 OF INCOME TAX ACT, 1961 WILL ONLY APPLY WHEN THERE IS TRANSFER OF CAPITAL ASSET DURING THE FINANCIAL YEAR. IN THE ABSENCE OF ANY TRANSFER NO CAPITAL GAIN CAN BE COMPUTED IN THE HANDS OF THE ASSESSES. OUR OBJECTIO N TO YOUR PROPOSED ADDITION IS THAT NO INCOME HAS ACCRUED OR RECEIVED BY OUR CLIEN T DURING THE A.Y 2013-14 AND HENCE NO INCOME CAN BE BROUGHT TO TAX. AS REGARDS THE PROPOSITION THAT NO INCOME HAS ACCRU ED TO OUR CLIENT, WE STATE THAT SECTION 5 OF INCOME TAX ACT, 1961 IS THE CHARGING S ECTION. AS PER SECTION 5, THE TOTAL INCOME OF ANY PREVIOUS YEAR OF A PERSON, WHO IS RES IDENT, INCLUDES AIL INCOME FROM WHICHEVER SOURCE, WHICH ACCRUES OR ARISES OR IS DEE MED TO ACCRUE OR ARISE IN INDIA DURING SUCH YEAR. THE INCOME WILL ACCRUE TO THE COM PANY ONLY WHEN THE COMPANY HAS ACQUIRED RIGHT TO RECEIVE SUCH INCOME. THE HON'BLE SUPREME COURT IN THE CASE OF E.D. PEARL COSCHEME PVT. LTD. ITA NO. 6611/M/2019 4 SASOON & CO. LTD. VS CIT REPORTED IN 261 ITR PG. 2 7, HAS HELD THAT A DEBT MUST HAVE COME INTO EXISTENCE WHEN THE ASSESSEE HAS ACQUIRED A RIGHT TO RECEIVE THE PAYMENT. UNLESS THERE IS AN EXISTENCE OF A DEBT OR RIGHT TO RECEIVE THE PAYMENT, THE INCOME CANNOT BE DEEMED TO HAVE ACCRUED. THE SIMILAR VIEW ALSO HAS BEEN EXPRESSED BY HON'BLE SUPREME COURT IN THE CASE OF ASHOLBHAI CHIM ANBHAI REPORTED IN 56 ITR PG. 42. THE BASIC TENETS OF THE INCOME AS DEFINED U/S 2 (24) OF INCOME TAX ACT, 1961 R.W.S. 5, MUST EXIST IN ORDER TO TREAT A PARTICULARS AMOUN T AS INCOME AND MORE SO INCOME CHARGEABLE TO TAX. ALL THESE IMPORTANT AND BASIC FE ATURES OF DETERMINING THE INCOME IN THE PRESENT TRANSACTION. AO REJECTED THE SUBMISSIONS OF THE ASSESSEE MERELY RELYING ON THE CHEQUE COLLECTION CLAUSE OF THE MOU THAT THE PDCS SHALL BE DEPOSITED ON DUE DATES WITHOUT REFERENCE TO SIPL. ACCORDINGLY, THE AO MADE THE ADDITION THE DIFFERENCE BETWEEN TOTAL REALIZATION OF ALL THE POST DATED CHE QUES TO THE EXTENT OF RS.3,74,22,000/- MINUS INVESTMENT OF RS.31,046,400/ - AS INCOME FROM INVESTMENT MADE. 4. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS) 9, MUMBAI AN D MADE A DETAILED SUBMISSION. AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE, LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE WITH THE FOLLO WING OBSERVATION: 4.2.5 FROM THE EXAMINATION OF THE MOU, FOLLOWING C RUCIAL FACTS REGARDING THE TRANSACTIONS UNDER CONSIDERATION EMERGE: I. THE SELL PROCEEDS FROM 14 FLATS WERE QUANTIFIED BY BOTH THE PARTIES BY MUTUALLY AGREEING TO THE TERMS OF MOU. THE TOTAL AMOUNT OF S ALE PROCEEDS TO BE PAID BY M/S SAMBHAV INFRASTRUCTURE PVT. LTD. TO THE APPELLA NT IN 18 INSTALMENTS WAS RS.3,74,22,000/-. PEARL COSCHEME PVT. LTD. ITA NO. 6611/M/2019 5 II. M/S SAMBHAV INFRASTRUCTURE PVT. LTD. GAVE A COMMIT MENT OF SELLING ALL THE FLATS WHICH WERE ALLOTTED TO THE APPELLANT VIDE VARIOUS A LLOTMENT LETTERS DATED 11- 09-2012 WITHIN 2 MONTHS FROM 10-09-2012 ONWARDS. III. M/S. SAMBHAV INFRASTRUCTURE PVT. LTD. GAVE A COMMIT MENT TO THE APPELLANT TO RETURN SALE PROCEEDS TOTALLING TO RS.3,74,22,000/- WITHIN A PERIOD OF 18 MONTHS STARTING FROM 21-11-2012 TO 21-04-2014. IV. M/S, SAMBHAV INFRASTRUCTURE PVT. LTD. WAS REQUIRED TO GIVE 18 POSTDATED CHEQUES EQUIVALENT TO THE INSTALMENT AMOUNTS TO THE APPELLANT. V. THE APPELLANT WAS FREE TO DEPOSIT THE 18 POST DATED CHEQUES ON DUE DATES WITHOUT REFERENCE TO M/S. SAMBHAV INFRASTRUCTURE PV T. LTD. 4.2.6 FROM THE ABOVE CRUCIAL FACTS, IT IS EVIDEN T THAT THE MOU CREATED A RIGHT IN FAVOUR OF THE APPELLANT TO RECEIVE RS.3,74,22,000/- FROM M /S. SAMBHAV INFRASTRUCTURE PVT LTD. WITHIN A SPECIFIC PERIOD OF TIME. THE RIGHT TO RECEIVE SALE PROCEEDS AMOUNTING TO RS.3,74,22,000/- WAS ALSO REINFORCED BY ISSUE OF 18 POST DATED CHEQUES OF EQUAL AMOUNTS. 4.2.7 AS RIGHTLY STATED BY THE APPELLANT THE PROP OSITION REGARDING THE ACCRUAL OR ARISING OF INCOME IS PROVIDED IN SECTION 5 OF THE A CT WHICH IS THE CHARGING SECTION. IN ORDER THAT INCOME, PROFITS OR GAINS MAY ACCRUE TO A PERSON, IT IS NECESSARY THAT HE MUST HAVE ACQUIRED A RIGHT TO RECEIVE SALE OR RIGHT TO T HE INCOME, PROFITS OR GAINS HAS BECOME VESTED IN HIM AS DECIDED BY THE SUPREME COUR T IN THE DECISION OF CIT VS. SHRI GOVARDHAN LTD. 69 ITR 675. THE HON'BLE SUPREME COUR T IN THE CASE OF MORVI INDUSTRIES LTD. VS. CIT 82 ITR 835 DECIDED THAT THE POSTPONEMENT OF PAYMENT DOES NOT AFFECT THE ACCRUAL OF THE INCOME. THE FACT THAT THE AMOUNT OF THE INCOME IS NOT SUBSEQUENTLY RECEIVED BY THE ASSESSEE WOULD NOT ALS O DETRACT FROM OR EFFACE THE ACCRUAL OF THE INCOME, ALTHOUGH NON RECEIPT MAY IN APPROPRIATE CASES BE A GROUND FOR PLAYING DEDUCTION. 4.2.8 THE APPELLANT FOLLOWS MERCANTILE METHOD OF ACCOUNTING AS EVIDENT FROM THE RECORD. THE RIGHT TO RECEIVE RS.3,74,22,000/- HAD C LEARLY AROSE FROM THE MOU AND ON PEARL COSCHEME PVT. LTD. ITA NO. 6611/M/2019 6 ACCOUNT OF FULFILMENT OF ALL THE RESPONSIBILITY BY THE APPELLANT AS MENTIONED IN THE MOU. THE APPELLANT HAS ALSO NOT SUBMITTED ANY ARGUM ENTS OR EVIDENCE TO PROVE THAT MOU WAS LEGALLY NOT ENFORCEABLE. IN SUCH SITUATION, THE APPELLANT SHOULD HAVE SHOWN THE RECEIPT OF SALE PROCEEDS OF RS.3,74,22,000/- AR ISING FROM INVESTMENT IN THE PROJECT STAVAN PARISHRAY ON ACCRUAL BASIS. HOWEVER, THE APP ELLANT PREFERRED TO REPRESENT THE TRANSACTION IN CONVENIENTLY DIFFERENT MANNER, WHICH WAS NOT IN CONSONANCE WITH THE PRINCIPLES OF ACCOUNTING AND ALSO THE PROVISIONS OF THE ACT. THOUGH THE APPELLANT MISREPRESENTED THE TRANSACTIONS WHILE ACCOUNTING, T HAT WOULD NOT CHANGE THE NATURE OF THE TRANSACTION AND ALSO THE FACT OF ACCRUAL OF THE INCOME TO THE APPELLANT FROM SUCH TRANSACTION. 4.2.9 THE APPELLANT HAS ARGUED THAT THE FLATS WERE NOT SOLD WITHIN TWO MONTHS AS PER THE PLAN AND EVEN AFTER THAT DUE TO ADVERSE MARKET CONDITION. THE APPELLANT HAS ALSO ARGUED THAT THE INCOME WILL ACCRUE ONLY AFTER THE F LATS ARE SOLD BY THE PROJECT DEVELOPER. THE ARGUMENTS MADE BY THE APPELLANT ARE NOT TENABLE BECAUSE, AS PER THE MOU, THE DEVELOPER, M/S. SAMBHAV INFRASTRUCTURE PVT . LTD. WAS COMMITTED TO RETURN THE SALE PROCEEDINGS AMOUNTING TO RS.3,74,22,000/- WITHOUT ANY CONDITION. THE PAYMENT OF AMOUNT OF RS.3,74,22,000/- BY M/S. SAMBH AV INFRASTRUCTURE PVT. LTD WAS NOT CONTINGENT ON THE EVENT OF SALE OF FLATS. THE A PPELLANT WAS FREE TO DEPOSIT THE POST DATED CHEQUES AS IT'S WILL WITHOUT ANY REFERENCE TO M/S. SAMBHAV PVT LTD. 4.2.10 HAD THE RIGHT TO RECEIVE THE AMOUNT OF RS.3, 74,22,000/-AROSE BY VIRTUE OF THE MOU, HANDING OVER OF THE POST DATED CHEQUES AND THE FULFILMENT OF ALL THE CONDITIONS MENTIONED IN THE MOU BY THE APPELLANT? ANSWER TO TH IS QUESTION IS KEY TO DECIDE THE ISSUE UNDER CONSIDERATION. THE FACT THAT M/S. SAMBH AV INFRASTRUCTURE PVT. LTD. HANDED OVER 18 POST DATED CHEQUES TOTALLING TO RS.3,74,22, 000/- TO THE APPELLANT IS CRUCIAL TO DETERMINE THE ANSWER. IT IS ALSO PERTINENT TO NOTE THAT THE APPELLANT WAS HAVING UNCONDITIONAL POWERS TO DEPOSIT THESE CHEQUES. THIS MEANS THAT THE APPELLANT WAS FREE TO DEPOSIT THESE CHEQUES AND REALIZE THE AMOUN T OF RS.3,74,22,000/- EVEN IN A SITUATION IN WHICH M/S. SAMBHAV INFRASTRUCTURE PVT. LTD. WAS NOT ABLE TO SALE THE FLATS. THE MOU IS SILENT ABOUT THE SITUATION IN WHICH M/S. SAMBHAV INFRASTRUCTURE PVT. LTD. PEARL COSCHEME PVT. LTD. ITA NO. 6611/M/2019 7 IS NOT ABLE TO SALE THE FLATS. IT SPEAKS ABOUT THE COMMITMENT GIVEN BY M/S. SAMBHAV INFRASTRUCTURE PVT. LTD. TO HANDOVER THE SALE PROCE EDS. HOWEVER, WHAT IS MATERIAL HERE IS THE HANDING OVER OF POST DATED CHEQUES WITH FREE DOM FOR THE APPELLANT TO DEPOSIT THE SAME WITHOUT ANY CONDITIONS AS SUCH. THUS, THE FACT THAT M/S. SAMBHAV INFRASTRUCTURE PVT. LTD. HANDED OVER POST DATED CHE QUES TOTALLING TO RS.3,74,22,000/- ALONG WITH THE FACT THAT THE MOU GAVE UNEQUIVOCAL A ND UNCONDITIONAL POWER TO THE APPELLANT TO DEPOSIT THE CHEQUES WHICH WERE IN THE FORM OF RETURN FOR THE INVESTMENT MADE BY THE APPELLANT, ESTABLISH THAT THE RIGHT TO RECEIVE AMOUNT OF RS.3,74,22,000/- WAS CREATED IN FAVOUR OF THE APPELLANT ON 11.09.201 2 4.2.11 THEREFORE, IN VIEW OF THE OVERALL READING OF THE MOU BETWEEN THE APPELLANT AND M/S SAMBHAV INFRASTRUCTURE PVT. LTD. AND THE FACTS ARID CIRCUMSTANCES, IT IS VERY CLEAR THAT THE INCOME OF RS.63,75,600/- HAD ACCRUED AND A ROSE TO THE APPELLANT BY VIRTUE OF THE CLAUSES MENTIONED IN THE LEGALLY BINDING MOU AN D THE FEET THAT THE POST DATED CHEQUES WERE GIVEN WITH A FREEDOM TO DEPOSIT WITHOU T ANY REFERENCE. THEREFORE, THE ADDITION OF RS.63,75,600/- MADE BY THE AO IN THIS R EGARD IS CONFIRMED. THESE GROUNDS OF APPEAL ARE DISMISSED. 5. AGGRIEVED WITH THE ABOVE ORDER ASSESSEE IN APPE AL BEFORE US RAISING FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OR THE CASE THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS)-58 (CIT-A) ERRED IN CONFIRMING THE ADDITION MADE BY LEARNED ASSESSING OFFICER (AQ) OF INR. 63,75,600/- AND TR EATING THE SAME AS BUSINESS INCOME. THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY LEARNED CIT-A IS ERRONEOUS AND CONTRARY TO THE FACT S OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED CIT-A HAS ERRED IN IGNORING THE FACT THAT, NO INCOME HAS ACCRUED OR RECEIVED TO THE APPELLANT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION TO THE EXTENT O F INR. 63,75,600/- AS COMPUTED BY THE LEARNED A.O. AND CONFIRMED BY THE L EARNED CIT-A. ON THE FACTS AND CIRCUMSTANCE OF THE CASE THE LEARNED CIT-A HAS ERRED REJECTING THE CLAIM OF PEARL COSCHEME PVT. LTD. ITA NO. 6611/M/2019 8 THE APPELLANT. THE APPELLANT PRAYS THAT NO INCOME H AS ACCRUED OR IS RECEIVED BY THE APPELLANT TO THE EXTENT OF INR. 63,75,600/-. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARNE D CIT-A HAS ERRED IN CONCLUDING THAT SUM OF INR. 63,75,600/- IS CHARGEABLE TO TAX. THE CONCLUSION REACHED BY LEARNED CIT-A IS ERRONEOUS AND CONTRARY TO THE PROV ISIONS OF THE LAW. 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARNE D CIT-A HAS ERRED IN CONCLUDING THAT INCOME HAS ACCRUED TO THE APPELLANT AMOUNTING TO INR. 63,75,600/-. THE CONCLUSION REACHED BY LEARNED CIT-A IS ERRONEOUS. 5. THE LEARNED CIT-A HAS ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234B AT INR. 14,80,487/-. THE APPELLANT DENIES THE LIABILITY OF PAYMENT OF INTEREST U/S 234B. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APPELL ANT SUBMIT THAT LEVY OF INTEREST U/ 234B AT INR. 14,80,487/- IS NOT JUSTIFIED AND BE DELETED. 6. BEFORE US LD. AR BROUGHT TO OUR NOTICE FINDINGS OF ASSESSING OFFICER AND THE RESPECTIVE MOU ENTERED BY THE ASSESSEE. FURTHER HE BROUGHT TO OUR NOTICE PAGE 47 OF THE PAPER BOOK WHICH IS DETAILS OF ADVAN CE RECEIVED FROM SIPL IN FINANCIAL YEAR 201213, 201314 AND 201415 TO THE EXTENT OF RS.24,948,000/ AND IT WAS SUBMITTED THAT ALL THESE AMOUNTS WERE DI SCLOSED IN THE BALANCE SHEET AS AN LIABILITIES AND IT IS ALSO SUBMITTED THAT THE PROJECT ON WHICH ASSESSEE HAS MADE THE INVESTMENT IS STILL UNDER CONSTRUCTION AND THE FLATS WERE NOT SOLD NOR ASSESSEE HAD TRANSFERRED THE RIGHT OVER THE PROPERT Y. THE LD AR SUBMITTED THAT THE ASSESSING OFFICER WRONGLY MADE THE ADDITION DUR ING THIS YEAR THE WHOLE PROFIT WHICH ASSESSEE WOULD HAVE MADE THE PROFIT ON COMPLETION OF THE PROJECT. THEREFORE, HE PRAYED THAT THIS ISSUE MAY BE REMITTE D BACK TO AO FOR PROPER VERIFICATION AND APPRECIATE THE FACTS ON RECORD. 7. ON THE OTHER HAND, LD. DR OBJECTED TO THE ABOVE PROPOSITION AND SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. PEARL COSCHEME PVT. LTD. ITA NO. 6611/M/2019 9 8. CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD. WE NOTICE THAT ASSESSEE HAD ENTERED INTO A MOU WITH SIPL TO INVEST IN THE PROJECT TO BE EXECUTED BY SIPL. IT WAS AGREED BETWEEN THEM THAT S IPL WILL COMPLETE THE PROJECT AND HELP THE ASSESSEE TO MARKET AND SELL TH E FLATS. ACCORDINGLY, SIPL ISSUED 18 POST DATED CHEQUES TO THE ASSESSEE AND IN MOU IT WAS AGREED THAT THE ABOVE SAID POSTDATED CHEQUES WILL BE DEPOSITED BY T HE ASSESSEE WITHOUT REFERENCE TO SIPL. WE NOTICE FROM THE SUBMISSION OF THE ASSESSEE THAT ASSESSEE HAD RECEIVED THE PROMISED AMOUNT FROM SIPL IN THIS ASSESSMENT YEAR BUT CONSIDERED THE SAME AS ADVANCE SINCE THE PROJECT WA S NOT COMPLETED NOR SOLD ANY FLATS THIS YEAR. FURTHER, IT WAS SUBMITTED BEFO RE US THAT EVEN IN OTHER ASSESSMENT YEARS ALSO ASSESSEE HAS RECEIVED CERTAIN PAYMENTS AS PER THE MOU BUT NOT RECEIVED THE WHOLE PAYMENT ON THE PROMISED DATE. EVEN THE PROJECT WAS NOT COMPLETED. WE NOTICED THAT AO HAS PROCEEDED TO MAKE ADDITION OF WHOLE EXPECTED PROFIT IN THIS AY BASED ON THE PROMISED PA YMENT SCHEDULE SINCE ASSESSEE IS A COMPANY AND EXPECTED TO FOLLOW THE ME RCANTILE SYSTEM OF ACCOUNTING. THE SAME VIEW WAS EXPRESSED BY THE LD. CIT(A) IN HIS ORDER. IN OUR CONSIDERED VIEW, FROM THE RECORDS SUBMITTED BEFORE US, IT CLEARLY INDICATE THAT THE PROJECT WAS NOT COMPLETED IN THIS ASSESSMENT YE AR AND PROMISED PAYMENTS AGAINST THIS PROJECT IS PART OF THE TOTAL AGREED SA LES PROCEEDS WHEN THE PROJECT IS COMPLETED. WE DO NOT AGREE WITH THE AO IN BRINGI NG THE WHOLE PROFIT OF THE PROJECT IN THE FIRST YEAR OF EXECUTION OF THE MOU. SINCE, THE CLAIM OF THE ASSESSEE WAS NOT VERIFIED BY THE LD. CIT(A) AND IT NEEDS PRO PER VERIFICATION. WE DEEM IT FIT TO REMIT THIS ISSUE BACK TO THE FILE OF AO TO R EDO THE ASSESSMENT DE NOVO AND DIRECT HIM TO VERIFY THE STATUS OF THE PROJECT AND CAN BE TAXED ONLY TO THE EXTENT OF INCOME WHICH ACCRUES TO THE ASSESSEE DURING THIS ASSESSMENT YEAR AND DIRECT PEARL COSCHEME PVT. LTD. ITA NO. 6611/M/2019 10 AO TO GIVE PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STAT ISTICAL PURPOSE. 9. IN THE NET RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 02/06/2021. SD/- SD/- (MAHAVIR SINGH) (S. RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI; DATED: 02/06/2021 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSISTANT REGISTRAR) ITAT, MUMBAI