DCIT CENTRAL CIRCLE-1 , VADODARA V. DARSHNAM LIFE SPACES PVT LTD, VADODARA

ITA 663/AHD/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6237 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-06-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 27-08-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: COORDINATE BENCH OF THIS TRIBUNAL
• Keywords: Rule of consistency; Tax effect; Set aside
• Section: 68; 145; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद यायपीठ ‘C’ अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD ] ] BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.663/Ahd/2023 Assessment Year : 2015-16 Deputy Commissioner of Income Tax, Central Circle-1, Vadodara Vs Darshnam Life Spaces Pvt. Ltd., 3 rd Floor, Platinum Complex, Opp. Ganga Jamuna Hospital, Subhanpura, Vadodara-390023 [PAN No.:AADCD2030M] अपीलाथ / (Appellant) यथ / (Respondent) Appellant by : None Respondent by : Shri Kamlesh Makwana, CIT DR सुनवाई क तार ख/Date of Hearing: 12.06.2024 घोषणा क तार ख /Date of Pronouncement: 28.06.2024 आदेश/O R D E R PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: This appeal is filed by the Revenue as against the appellate order dated 14.06.2023 passed by Commissioner of Income Tax (Appeals) – 12, Ahmedabad arising out of the assessment order passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the “the Act”) relating to the Assessment Year 2015-16. 2. The grounds of appeal raised by the Revenue are as follows:- “1. On the facts and in the circumstance of the case and in law, the Ld. CIT(A) here erred in deleting the addition of Rs. 11,09,70,932/- made by the AO on account of profit calculated on percentage completion method @ 15% of the total money received during the year of consideration of Rs. 73,98,06,214/-, the construction agreements ITA No.663/Ahd/2023 A.Y. 2015-16 2 were made during the year and the addition made by following the decision of the Ld. CIT(Appeals), in the assessee’s own case for the A.Y. 2012-13. 2. In addition to the ground No.1 on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.11,09,70,932/- made by the AO on account of profit calculated on percentage completion method @ 15% of the total money received during the year under consideration of Rs. 73,98,06,214/- without appreciating the fact that the assessee has purposely shifted the revenue earned during the year in the subsequent years only to evade the taxes as the assessee company has received the payment are not advances but payment from its customers, as per the work executed by the assessee company and hence it should be included in the year of receipts. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,44,00,000/- made by the AO u/s 68 of the Act towards unexplained unsecured loan following the order of the ITAT in the case of M/s Blackberry Ventures Pvt. Ltd. (BVPL) in which protective addition was made without considering the fact that the substantiate addition was made in the case of the assessee and Shri Anish Kumar Joshi who was one of the directors of BVPL at the time of search wherein he had stated that the assessee company is a paper company and he does not know anything about the activities/business of company registered address of the company. 4. In addition to the ground no. 2 above, on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 1,44,00,000/- made by the AO u/s 68 of the ITA Act towards unexplained unsecured loan observing that the allegation of genuineness of the transactions and credit worthiness of BVPL is not proven despite the facts the BVPL has failed to explain genuineness of the transactions and credit worthiness of the so called investors especially when the returned income of all such investors are less than Rs. 5000/-. 5. The appellant craves to add, amend, alter, substitute, modify the above ground of appeal, raise any new ground of appeal, if necessary, either before or during the course of the hearing of the appeal on the basis of submissions to be made on the facts and in the circumstances of the case and in law, the Ld. CIT(A)-12, Ahmedabad ought to have upheld the order of the Assessing Officer. 6. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that the AO may be restored to the above extent.” ITA No.663/Ahd/2023 A.Y. 2015-16 3 3. None appeared on behalf of the assessee, Ld. CIT-DR Shri Kamlesh Makwana appearing for the Revenue submitted that issues involved in the appeals are covered against the Revenue relating to Ground Nos. 1 and 2 in assessee’s own case for earlier Assessment Year 2012-13 in ITA No. 1590 & 1662/Ahd/2016 vide order dated 30.04.2019 passed by this Tribunal. Similarly Ground Nos. 3 and 4 is covered against the Revenue by Coordinate Bench of this Tribunal in IT(SS)A Nos. 84, 85 and 161/Ahd/2021 in the case of ACIT vs. Blackberry Ventures Pvt. Ltd. vide order dated 26.04.2023. 4. The brief facts of the case is the assessee is a Private Limited Company engaged in the business of Real Estate Development and Building of Housing Projects. During the Assessment Year 2015-16 the assessee broadly engaged in three different projects: (i) Darshanam Central Park (ii) Darshanam Antica and (iii) Darshanam 99 4.1 The Assessing Officer noticed that the assessee using different method of accounting for these projects. In the case of Darshanam Antica and Darshanam 99 assessee is following percentage completion method for recognition of Revenue. However, with respect to Darshanam Central Park the method of accounting used is based on project completion method and Revenue is recognized on sale of units per annum. Following the order passed in the Assessment Year 2012-13, the Assessing Officer made addition by converting the project completion method to percentage completion method. However, that assessment order was challenged before this Tribunal by the Revenue and vide its common order in ITA No. 1590/Ahd/2016 dated 30.04.2019 the Coordinate Bench of this Tribunal held as follows:- ITA No.663/Ahd/2023 A.Y. 2015-16 4 “7.2 Regarding the working done by the AO to determine the income, we note that it suffers from certain infirmities. It is beyond doubt that the assessee was using percentage completion method for its all projects except central park project where the assessee was following project completion method. Thus the AO to apply the percentage completion method should have taken only the amount of advances of Rs. 12,78,91,771/- pertaining to the central park project for working out the profit as per the percentage completion method. But the AO has wrongly taken the entire advances including the projects where the assessee was following percentage completion method. Therefore at the threshold the working made by the AO to determine the profit in respect of central park project following the percentage completion method is erroneous. 7.3 We also note that the Guidance Note issued by the ICAI is only recommendatory in nature and not mandatory. Thus the assessee is not under the obligation to follow such method of accounting mandatorily. 7.4 The other point for the consideration arises that there is no bar under the statute to use a different method of accounting for its different projects. The requirement of the provisions of section 145 of the Act is that the assessee should have followed the method of accounting regularly and it should be capable of reflecting true and fair profit of the company. As such the AO has not pointed out any defect in the method of accounting used by the assessee regularly. 7.5 We find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of CIT v/s Umang Hiralal Thakkar reported in 42 taxmann.com 194 wherein it was held as under: “It is required to be noted that the assessee is consistently following accounting system of project completion method. It is not disputed that the accounting system on project completion method is recognized and even approved by the CBDT. Merely because, another firm/concern, in which, the assessee might be concerned as a partner and/or proprietor is following another accounting system, i.e., on percentage completion method, it cannot be said that the assessee could not have followed the accounting system of project completion method. It is reported that the decision of the Appellate Tribunal in the case of Vraj Developers (supra) has attained the finality as the said decision is not challenged by the department before Higher Forum. In view of the above and more particularly, when it has been found that the assessee is consistently following accounting system of percentage completion method, which is permissible and accepted by ICAI and CBDT with respect to construction work, it cannot be said that the learned Appellate Tribunal has committed any error and / or illegality, which call for the ITA No.663/Ahd/2023 A.Y. 2015-16 5 interference of this Court. We see no reason to see to interfere with the impugned judgment and order passed by the learned Tribunal. We are in complete agreement with the view taken by the learned ITAT as well as learned CIT(A) deleting the addition of Rs.1,66,70,811/- which was made by the Assessing Officer on rejecting the accounting system on percentage completion method followed by assessee. No question of law much less any substantial question of law arise in the present appeal. Hence, present appeal deserves to be dismissed and is accordingly dismissed. 7.6 It is also important to note that the Revenue in the subsequent A.Y. 2013-14 and 2014-15 has accepted the method of accounting in respect of central park project for project completion method in the assessment framed under section 143(3) of the Act. Therefore we are of the view that the principle of consistency needs to be applied in the given facts and circumstances in view of the judgment of Hon’ble Supreme Court in the case of Radhasoami Satsang v/s Commissioner of Income-tax reported in [1992] 60 Taxman 248 (SC). 7.7 We also find the support and guidance from the judgment of the Hon’ble Apex court in the case of CIT Vs. Bilhari Investment Pvt. Ltd. reported in 299 ITR 1 wherein it was held as under: “19. In the judgment of the Bombay High Court in Taparia Tools Ltd.'s case (supra) it has been held that in every case of substitution of one method by another method, the burden is on the Department to prove that the method in vogue is not correct and it distorts the profits of a particular year. Under the mercantile system of accounting based on the concept of accrual, the method of accounting followed by the assessees is relevant. In the present case, there is no finding recorded by the Assessing Officer that the completed contract method distorts the profits of a particular year. Moreover, as held in various judgments, the Chit Scheme is one integrated scheme spread over a period of time, sometimes exceeding 12 months. We have examined computation of tax effect in these cases and we find that the entire exercise is revenue neutral, particularly when the scheme is read as one integrated scheme spread over a period of time.” There was no defect pointed out by the AO in the method of accounting regularly employed by the assessee in determining the profit. 7.8 We further note that the assessee has offered the income using the project completion method in the A.Y. 2016-17 to 2018-19 in respect of the advances shown by the assessee in the year under consideration. The relevant details have already been elaborated in ITA No.663/Ahd/2023 A.Y. 2015-16 6 the preceding paragraph. Thus the further addition to the total income of the assessee in the year under consideration will lead to double addition of the same income. 7.9 Similarly, we also disagree with the methodology adopted by the Ld.CIT (A) in determining the profit in respect of those units where the assessee entered the agreement for sale after applying the net profit rate disclosed by the assessee in the year under consideration. It is because the assessee was using project completion method in respect of central park project and no defect was pointed out by the Ld. CIT (A) in respect of the method used by the assessee. Moreover, the assessee following the project completion method has already offered the income in respect of central park project in the subsequent assessment year as discussed above. Therefore the addition in any manner in the year under consideration will lead to double addition of the same income. Accordingly, we reverse the order of the Ld CIT (A) to the extent of the addition confirmed by the ld. CIT-A for Rs. 56,39,740.00. Accordingly, the ground of appeal of the Revenue is dismissed, and the ground of appeal of the assessee is allowed. In the result, the appeal of the Revenue is dismissed.” 5. In fact, Ld. CIT(A) also has followed the Coordinate Bench decision of the Tribunal in assessee’s own case. Ld. D.R. could not place on record whether any further appeal filed by the Revenue before the Higher Forum. Respectfully following the Coordinate Bench decision, the Grounds 1 and 2 raised by the Revenue are devoid of merit and liable to be dismissed. 6. Regarding Ground Nos. 3 and 4 addition of Rs. 1,44,00,000/- made under Section 68 of the Act, in respect of the loan received from Blackberry Ventures Pvt. Ltd. The Assessing Officer held that such loan is unexplained and treated as cash credit in the hands of the assessee. The assessee primarily submitted that the aforesaid loan is also repaid and furnished evidence in support of the credit worthiness of the lender. However, the Assessing Officer made addition in the hands of the assessee. ITA No.663/Ahd/2023 A.Y. 2015-16 7 7. Ld. D.R. brought to our attention to the Coordinate Bench decision in the case of Blackberry Ventures Pvt. Ltd. in IT(SS)A Nos. 84, 85 and 161/Ahd/2021 vide order dated 26.04.2023 wherein it is held as follows: “20.3 Coming to the facts of the case to hand, the AO based on the statement one Shri Pankaj Aggarwal held that the assessee company is a paper company. There was no nexus whatsoever established between assessee company and Pankaj Aggarwal neither his statement provided to the assessee for rebuttal, nor the cross examination was provided. Likewise, the AO also held the companies in which the assessee company made investment and the companies to whom assessee company sold its investment as paper company without assigning any cogent reason or material facts/evidence. The AO in his finding discussed the trail of fund in case of one company namely M/s Bignull Goods Pvt Ltd (BGPL) to whom assessee company sold its investment for Rs. 1.4 crore in the A.Y. 2015-16. The AO found that just before making payment to the assessee company the bank of BGPL was credited for same amount from different persons in whose bank account cash was deposited. Accordingly, the AO presumed the cash deposits in the bank account of the person who transferred fund to BGPL are unaccounted cash of Cube-Group of companies without establishing nexus between those person and cube-group. The AO further presumed the entire sale proceeds on investment which received from more than 30 different companies as unaccounted money of cube group. It is settled position of law that the no income can be assessed based on presumption, surmise, and conjecture whatsoever strong it is. In the case on hand, the entire basis of AO treating the sale proceeds as unaccounted money of cube group are based on presumption and surmises. 20.4 Further, the AO lost the sight to the fact that the assessee company was having fund in the form of share capital and premium which was invested in the shares of different companies and finally the investment was sold, and the amount was lent to the cube group as loan. Thus, the origin of funds in dispute starts when the assessee company issued shares in the A.Y. 2011-12. Therefore, any action or doubt can only be raised at origin i.e. in A.Y. 2011-12. However, we note that the AO has made the addition of the credit of share capital along with premium in the A.Y. 2011-12 which has been deleted by us on technical ground vide paragraph no. 10.4 of this order. In our considered opinion, the same amount cannot be added again in the year under consideration in the hands of the assessee company. In view of the above and considering the facts and circumstances on record, we do not find any reason to interfere in the finding of the learned CIT(A). Hence, the grounds of appeal of the Revenue for both ITA No.663/Ahd/2023 A.Y. 2015-16 8 the assessment years viz 2014-15 and 2015-16 are hereby dismissed. 21. In the result, both the appeals of the Revenue are hereby dismissed.” 8. Since the additions made in the hands of the lender of the company was deleted by the Tribunal and reject the ground BVPL as an accommodation entry provider. Therefore, the addition made by the Assessing Officer in the hands of the assessee is liable to be deleted. Thus, the Ground Nos. 3 and 4 raised by the Revenue is devoid of merit and liable to be dismissed. 9. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Court on 28.06.2024 at Ahmedabad. Sd/- Sd/- (ANNAPURNA GUPTA) ACCOUNTANT MEMBER (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (True Copy) Ahmedabad, dated 28/06/2024 Tanmay, Sr. P.S. TRUE COPY