DCIT 10(1), MUMBAI V. SHIVSHAHI PUNARVASAN PRAKAL LTD, MUMBAI

ITA 6836/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0371 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2003-2004
• Appeal Filed On: 10-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILESH B SHETHIA
• Assessee Lawyers: MANJUNATHA SWAMY
• Keywords: Question of law
• Section: 115JB; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH , MUMBAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO. 6836 / MUM/ 201 4 ( / ASSESSMENT YEAR: 2003 - 04 ) THE DCIT - 10(1), 453, AAYAKAR BHAVAN, 4 TH FLOOR, M.K. MARG, MUMBAI - 400020 VS. M/S SHIVSHAHI PUNARVASAN PRAKALP LTD., 5 TH FLOOR, GRIHA NIRMAN BHAVAN, BANDRA (EAST), MUMBAI - 51 ./ ./ PAN/GIR NO. : AAACS 1590 C ( / APPELLANT ) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI. MANJUNATHA SW AMY ( CIT DR) / REVENUE BY : SHRI SHAILESH B. SHETHIA / DATE OF HEARING : 15 / 0 3 /201 7 / DATE OF PRONOUNCEMENT : 09 /06 /2017 / O R D E R PER RAM LAL NEGI, JM THE PRESENT APPEAL HA S BEE N FILED BY THE REVENUE AGAINST ORDER DATED 05/08/2014 PASSED BY THE LD. CIT (APPEALS) - 21 , MUMBAI PERTAINING TO THE ASSESSMENT YEAR 20 03 - 04 , WHEREBY THE LD. CIT (A) HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ORDER PASSED U/S 154 OF THE INCOME TAX ACT, 1961(FOR SHORT THE ACT) . 2. BRIEF FACTS OF THE CASE CARE THAT THE ASSESSEE ENGAGED IN WORK OF SLUM REDEVELOPMENT AS PER THE SCHEME APPROVED BY SLUM REDEVELOPMENT AUTHORITY (SRA) HAD CLAIMED AS LOSS OF RS. 88,71,908/ - BY THE ASSESSEE IN THE ASSESSM ENT YEAR 2003 - 04 BY VALUING ITS INVENTORY AT NET REALIZABLE VALUE. HOWEVER, THE AO 2 ITA NO 6836 /MUM/201 4 ASSESSMENT YEAR: 20 03 - 04 REJECTED THE CLAIM AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE EXERCISING THE POWERS U/S 154 OF THE ACT. 3. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BY FILING FIRS T APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER HEARING THE ASSESSEE ALLOWED THE APPEAL AND SET ASIDE THE ORDER PASSED U/S 154 OF THE ACT. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER. 4 . THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER ON THE FOLLOWING E F FECTIVE GROUND : - . 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE VALUE OF WORK IN PROGRESS IS IN NATURE OF CONTINGENT LIABILITY & HENCE THE CANNOT BE REDUC ED FROM THE NET PROFIT TO ARRIVE AT THE BOOK PROFIT U/S 115JB OF THE ACT. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY ALLOWED THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE VALUE IN WORK IN PROGRESS IS IN THE NATURE OF CONTINGENT LIABILITY THEREFORE THE SAME CANNOT BE REDUCED FROM THE NET PROFIT TO ARRIVE AT THE BOOK PROFIT U/S 115 JB OF THE ACT. THE LD. DR FURTHER SUBMITTED THAT SINCE THE IMPUGNED ORDER IS ERRONEOUS THE SAME IS LIABLE TO BE SET ASIDE. 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE FINDINGS OF THE LD. CIT(A) SUBMITTED THAT THE LD. CIT(A) HAS RIGHTLY SET ASIDE THE ORDER PASSED BY THE AO U/S 154 OF THE ACT AS THE AO HAS PASSED THE SAID ORDER AGAINST TH E LAW LAID DOWN BY THE HONBLE SUPREM COURT IN SANTOSH HAZARI VS. PURSHOTTAM TIWARI 3 SCC 179 THEREFORE, THE APPEAL DESERVES DISMISSAL. 3 ITA NO 6836 /MUM/201 4 ASSESSMENT YEAR: 20 03 - 04 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIAL ON RECORD INCLUDING THE ORDERS PASSED BY THE AUTHO RITIES BELOW. THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE HOLDING AS UNDER: I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT IS A DEVELOPER OF SLUMS AND IT VALUES ITS INVENTORY ON LOWER COST OF NET REALIZABLE VALUE. IN T HE YEAR UNDER CONSIDERATION APPELLANT HAD ALLOWED ITS VALUE OF WORK IN PROGRESS OF RS. 88,71,919/ - . THE A.O. IN THE INITIAL ASSESSMENT ORDER HAD NOT ADDED THIS AMOUNT IN THE COMPUTATION OF BOOK PROFIT U/S. 115JB, LATER ISSUE NOTICE U/S 154. THE APPELLANT H AD OBJECTED FOR RECTIFICATION, RECTIFICATION WAS NOT CARRIED OUT. ON THE SAME ISSUE APPELLANT HAD FILED APPEAL IN CIT (A) & ITAT. THE A.O. AGAIN ISSUED NOTICE U/S 154. AFTER THE APPELLATE ORDERS WAS RECEIVED THIS AMOUNT WAS ADDED U/S. 154 STATING THAT THIS LIABILITY IS CONTINGENT IN NATURE. HENCE, APPELLANT IS NOT ELIGIBLE FOR THIS LIABILITY AS IT IS CONTINGENT IN NATURE AND HAD ADDED LOSS OF PROJECT CLAIMED BY THE APPELLANT BY REDUCING THE VALUE OF WORK IN PROGRESS FOR RS. 88,71,919/ - . THE APPELLANT HAD FI LED APPEAL WITH HONBLE ITAT AND THEN HIGH COURT. THE HONBLE HIGH COURT HAS ADMITTED APPELLANTS APPEAL. ONCE THE HIGH COURT HAD ADMITTED THE APPEAL IN VIEW OF SUPREME COURT IN THE CASE OF SANTOSH HAZARI VS. PUROSHOTTAM TIWARI 3 SCC 179 (FULL BENCH) S.C. WHEREIN IT IS HELD THAT TO BE SUSTAINED A QUESTION OF LAW MUST BE DEBATABLE AND RELIANCE WAS ALSO PLACED ON OBSERVATION OF HONBLE SUPREME COURT IN THE CASE OF HERE VINOD VS. SHESHAMAL, AIR 2006 S.C. 2234, WHEREIN IT IS HELD THAT SUBSTANTIAL QUESTION OF LAW INVOLVES A DEBATABLE LEGAL ISSUE. AS APPELLANTS APPEAL IS IN HIGH COURT IT IS ADMITTED ON THE QUESTION OF LAW, HENCE, ISSUE HAS BECOME AUTOMATICALLY DEBATABLE. HENCE, A.OS ADDITION TO THE BOOK PROFIT U/S 115JB IS NOT CALLED FOR AS THE ISSUE IS DEBAT ABLE IN NATURE. THE A.OS ADDITION IS DELETED. THESE GROUNDS OF APPEAL ARE ALLOWED. 8. WE NOTICE THAT THE AO REVISED THE INCOME OF THE ASSESSEE VIDE ORDER DATED 26.2.2007 PASSED U/S 154 OF THE ACT AFTER ALLOWING SET OFF OF BROUGHT 4 ITA NO 6836 /MUM/201 4 ASSESSMENT YEAR: 20 03 - 04 FORWARD LOSSES. SUBSE QUENTLY, ON 10.7.2008 THE TOTAL LOSS WAS REVISED FROM RS. 14,70,94,681/ - TO RS 88,22,94,631/ - VIDE ORDER DATED 10.7.2008 PASSED U/S 154 OF THE ACT. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE ITAT. AFTER RECEIVING THE APPELLATE ORDER, WHICH A GAINST THE ASSESSEE, THE AO ADDED THE SAID AMOUNT HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM THE LOSS BEING CONTINGENT LIABILITY. THE ASSESSEE CHALLENGED THE ORDER PASSED BY THE ITAT IN THE HONBLE HIGH COURT . SINCE, THE HONBLE HIGH COURT ADMITTED THE APPEAL OF THE ASSESSEE. HENCE, THE LD. CIT (A) HAS RIGHTLY ALLOWED OF THE APPEAL OF THE ASSESSEE BY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF SANTOSH HAZARI VS. PURUSHOTTAM TIWARI 3 SCC 179 AND HERO VINOD VS. SHESHAMAL AIR 2006 SC 2234 . SINCE, THE FINDING OF THE LD. CIT (A) IS BASED ON THE SETTLED PRINCIPLES OF LAW, WE DO NOT FIND ANY INFIRMITY THEREIN. CONSEQUENTLY , WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISSED THE APPEAL FILED BY THE REVENUE. IN THE RESU LT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2003 - 2004 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH JUNE , 2017. SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 09 / 06 / 2017 ALINDRA, PS 5 ITA NO 6836 /MUM/201 4 ASSESSMENT YEAR: 20 03 - 04 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / TH E RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY O RDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI