The DCIT, Circle-9, Ahmedabad V. M/s. Harekrishna Developers, Ahmedabad

ITA 685/AHD/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6014 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-02-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 18-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Competent authority
• Section: 143(3); 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 685/AHD/2016 WITH C.O.NO.118/AHD/2019 / ASSTT. YEAR: 2011-2012 D.C.I.T., CIRCLE-3(3), AHMEDABAD. VS. M/S HAREKRISHNA DEVELOPERS, F.P. 291, SAHJANAND COMPLEX, 132 FT. RING ROAD, MEMNAGAR, AHMEDABAD. PAN: AACFH9579H (APPLICANT) (RESPONDENT) REVENUE BY : SHRI JAMES KURIAN, D.R ASSESSEE BY : SHRI BHAVESH SHAH WITH SHRI DHIREN SHAH, A.RS /DATE OF HEARING : 25/03/2021 /DATE OF PRONOUNCEMENT: 09/04/2021 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL IS FILED BY THE REVENUE AND THE CO IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 13, AHMEDABAD, DATED 06/01/2016 (IN SHORT LD. CIT(A)) ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (HERE-IN- AFTER REFERRED TO AS 'THE ACT').THE ASSESSEE HAS FILED THE CROSS OBJECTION IN THE ITA NO.685/AHD/2016 A.Y. 2011-2012 2 REVENUES APPEALS BEARING ITA NO. 685/AHD/2016 FOR THE ASSESSMENT YEAR 2011- 2012. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,91,25,000/- MADE ON ACCOUNT OF DISALLOWANCE OF CONSTRUCTION LOSS. 2. THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE HAS CLAIMED THE LOSS ON ESTIMATION BASIS AND THEREFORE NOT ALLOWABLE U/S.37 OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.COMMISSIONER OF INCOME TAX(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(A) MAY BE SET-ASIDE AND THAT THE ASSESSING OFFICER BE RESTORED. 3. THE SOLITARY ISSUE RAISED BY THE REVENUE IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR 1,91,25,000/- ON ACCOUNT OF CONSTRUCTION LOSS CLAIMED BY THE ASSESSEE. 4.1 THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF REAL ESTATE, CONSTRUCTION, SUPERVISION AND DEVELOPMENT OF CONSTRUCTION WORK, SALE OF REAL ESTATE PROPERTIES AND LAND. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS DEBITED CONSTRUCTION LOSS WITH RESPECT TO THE 5 BUNGALOWS CONSTRUCTED BY IT. IT WAS CONTENDED BY THE ASSESSEE THAT THE APPROVAL FOR THE BUNGALOWS CONSTRUCTED BY IT WAS NOT GRANTED BY AUDA. AS SUCH THE AUDA HAS ISSUED A NOTICE UPON THE ASSESSEE FOR THE DEMOLITION OF THE BUNGALOWS CONSTRUCTED BY IT. ACCORDINGLY, THE ASSESSEE DEBITED A LOSS OF 1,91,25,000/- ON ACCOUNT OF CONSTRUCTION COST WHICH WAS ALSO INCLUDING PROPORTIONATE COST OF THE LAND IN ITS PROFIT AND LOSS ACCOUNT. 4.2 HOWEVER, THE AO FOUND THAT THE BUNGALOWS WERE NOT DEMOLISHED BY THE AUDA. SUBSEQUENTLY, RATHER, THE BUNGALOWS CONSTRUCTED BY THE ASSESSEE WERE REGULARIZED BY THE CONCERNED AUTHORITY IN THE MONTH OF SEPTEMBER AND OCTOBER 2013. ITA NO.685/AHD/2016 A.Y. 2011-2012 3 4.3 THE AO ALSO FOUND THAT THERE CANNOT BE ANY LOSS ON ACCOUNT OF LAND AND THEREFORE THE LOSS RELATING TO THE LAND AMOUNTING TO 86,70,948/- WHICH WAS INCLUDED IN THE CONSTRUCTION LOSS CANNOT BE ALLOWED AS DEDUCTION. 4.4 THE AO ALSO REJECTED THE CONTENTION OF THE ASSESSEE I.E. THE LOSS CLAIMED IN THE YEAR UNDER CONSIDERATION WAS OFFERED TO TAX IN THE SUBSEQUENT YEAR WHEN BUNGALOWS CONSTRUCTED BY THE ASSESSEE GOT REGULARIZED BY THE COMPETENT AUTHORITY, ON THE REASONING THAT THE LOSS WAS CLAIMED IN THE YEAR UNDER CONSIDERATION WHICH IS NOT PERMISSIBLE UNDER THE PROVISIONS OF THE ACT. IN VIEW OF THE ABOVE THE AO DISALLOWED THE CONSTRUCTION LOSS CLAIMED BY THE ASSESSEE FOR 1,91,25,000/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 2.2. I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS THE DETAILS COMPILED IN THE PAPER BOOK. FROM VERIFICATION OF THE DETAILS, IT IS SEEN THAT AUDA HAD GIVEN THE DEVELOPMENT PERMISSION OF THE RESIDENTIAL PLOTS SCHEME 'SAHAJANAND PALACE'SUBJECT TO CONDITION THAT THE CONSTRUCTION CARRIED OUT FOR 5 BUNGALOWS TO BE REMOVED. THERE WAS A PROHIBITION FOR CONSTRUCTION ON THE SITE AND THERE WAS A STAY BY AUDA, HENCE THERE WAS AN ORDER TO DEMOLISH FIVE BUNGALOWS. DURING THE A.Y. 2011-12, THE DOCUMENTS FOR THREE BUNGALOWS I.E. BUNGALOW NO. 28, 29 & 31 WERE EXECUTED. HOWEVER, AS THERE WAS A STAY BY AUDA AND AUDA HAD TO DEMOLISH 5 BUNGALOWS, THE PURCHASERS OF THE SAID THREE BUNGALOWS WERE DEMANDING THEIR PAYMENTS AS REFUND AND THE AMOUNT RECEIVED FROM THE PURCHASERS OF THREE BUNGALOWS HAS BEEN SHOWN AS CURRENT LIABILITY IN THE BALANCE SHEET OF THE APPELLANT FIRM. THE APPELLANT FIRM HAS WRITTEN OFF THE LOSS OF 5 BUNGALOWS TO THE PROFIT & LOSS ACCOUNT UNDER THE HEAD 'CONSTRUCTION LOSS' ON THE BASIS OF ACCOUNTING STANDARD ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND AS PER THE ACCOUNTING STANDARD -1 DISCLOSURE OF ACCOUNTING POLICIES, WHEREIN, THE FUNDAMENTAL ACCOUNTING PRINCIPLE IS 'PRUDENCE'. AS PER 'PRUDENCE', IN VIEW OF UNCERTAINTY ATTACHED TO THE FUTURE EVENTS, PROFITS ARE NOT ANTICIPATED, BUT RECOGNIZED ONLY WHEN REALIZED. HOWEVER, LOSS IS B.U PERMISSION FOR THE FIVE BUNGALOWS HAS BEEN SUBMITTED BY THE APPELLANT. IN SUBSEQUENT YEARS, THE ENTIRE RECEIPTS OF FIVE BUNGALOWS HAVE BEEN SHOWN AS INCOME WITHOUT CLAIMING ANY EXPENDITURE AGAINST THE SAME. WHEN AMC HAS APPROVED THE CONSTRUCTION AND REGULARIZED THE IRREGULARITY, IF ANY, BY ISSUING THE B.U. PERMISSION AND VACATED THE STAY, IT CANNOT BE SAID THAT THE EXPENDITURE IS BEING PROHIBITED UNDER THE LAW AND IS ALLOWABLE UNDER SECTION 37(1) OF THE ACT. IF THE LOSS IS NOT ALLOWED, IT WOULD BE TANTAMOUNT TO DOUBLE ADDITIONS AS THE ENTIRE RECEIPTS IN SUBSEQUENT YEARS HAVE BEEN SHOWN AS INCOME AND TAX HAS BEEN PAID THEREON AND AS THE APPELLANT HAS BOOKED THE LOSS ON THE BASIS OF ACCOUNTING PRINCIPLES ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, HENCE ITA NO.685/AHD/2016 A.Y. 2011-2012 4 THE CONSTRUCTION LOSS INCURRED BY THE APPELLANT FOR AN AMOUNT OF RS. 1,91,25,000/- IS ALLOWED. HENCE, APPEAL ON THIS GROUND IS ALLOWED. 6. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE REVENUE IS IN APPEAL BEFORE US. 7. THE LEARNED DR BEFORE US VEHEMENTLY SUPPORTED THE ORDER OF THE AO. ON THE CONTRARY, THE LEARNED AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 423 AND CONTENDED THAT THE CONSTRUCTION LOSS CLAIMED IN THE YEAR UNDER CONSIDERATION WAS OFFERED TO TAX IN THE SUBSEQUENT ASSESSMENT YEARS. THE LEARNED AR IN SUPPORT OF HIS CONTENTION DREW OUR ATTENTION ON PAGES 375 TO 379 OF THE PAPER BOOK WHERE DETAILS OF THE INCOME OFFERED TO TAX WAS PLACED. THE LEARNED AR FURTHER SUBMITTED THAT THERE WAS THE SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2014-15 WHEREIN THE IMPUGNED INCOME WAS ACCEPTED BY THE REVENUE. ACCORDINGLY THE LEARNED AR CONTENDED THAT IF ANY ADDITION IS CONFIRMED IN THE YEAR UNDER CONSIDERATION, THEN IT WOULD LEAD TO THE DOUBLE ADDITION WHICH IS NOT WARRANTED UNDER THE PROVISIONS OF THE ACT. THE LEARNED AR VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT (A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, THE CONSTRUCTION LOSS CLAIMED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WAS OFFERED TO TAX IN THE SUBSEQUENT ASSESSMENT YEARS. THIS FINDING OF THE LEARNED CIT (A) HAS NOT BEEN CONTROVERTED BY THE LEARNED DR AT THE TIME OF HEARING. THUS IT CAN BE INFERRED THAT, IF THE AMOUNT OF LOSS CLAIMED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION IS DISALLOWED THEN SUCH DISALLOWANCE/ADDITION WILL LEAD TO THE DOUBLE ADDITION WHICH IS NOT DESIRABLE UNDER THE PROVISIONS OF LAW. THIS FACT WAS ALSO BROUGHT TO THE NOTICE TO THE AO BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS BUT THE SAME WAS REJECTED BY THE AO BY OBSERVING AS UNDER: 4.8 ALSO ASSESSEE HAS SUBMITTED THAT IF LOSS IS DISALLOWED THEN IT WILL BE DOUBLE ADDITION AS INCOME HAS BEEN SUBSEQUENTLY RECOGNIZED. THE CONTENTION OF THE ASSESSEE IS NOT CORRECT AS IT HAS CLAIMED A DEDUCTION IN THE CURRENT ASSESSMENT YEAR AND WHICH CAN BE ALLOWED ONLY IT IS PERMISSIBLE UNDER THE PROVISION THE ACT. ITA NO.685/AHD/2016 A.Y. 2011-2012 5 8.1 ASSUMING, THE CONTENTION/FINDING OF THE AO IS CORRECT THAT IMPUGNED LOSS IS NOT ALLOWABLE FOR DEDUCTION IN THE YEAR UNDER CONSIDERATION, THEN IT IS INCUMBENT UPON THE AO TO REDUCE THE AMOUNT OF INCOME WHICH WAS OFFERED TO TAX BY THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEAR. IF IT IS NOT DONE SO, THEN THE ASSESSEE WILL SUFFER TO TAX 2 TIMES WITH RESPECT TO THE SAME AMOUNT IN 2 DIFFERENT ASSESSMENT YEARS WHICH IS NOT DESIRABLE UNDER THE PROVISIONS OF LAW. ACCORDINGLY IN THE ABSENCE OF ANY ADVERSE FINDING BY THE AO FOR THE ADJUSTMENT OF THE CONSTRUCTION LOSS CLAIMED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WITH THE INCOME OFFERED IN THE SUBSEQUENT YEAR, WE ARE NOT CONVINCED WITH THE ORDER OF THE AO. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (A). HENCE, WE UPHOLD THE SAME. THUS THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8.2 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. NOW COMING TO THE CROSS OBJECTION FILED BY THE ASSESSEE 9. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN IT CROSS OBJECTION: ALL THE GROUNDS IN THIS CROSS OBJECTIONS ARE MUTUALLY EXCLUSIVE AND WITHOUT PREJUDICE TO EACH OTHER:- 1. THE LD. CIT (A) AFTER CAREFULLY CONSIDERING THE FACTS OF THE CASE AND SUBMISSION OF THE RESPONDENT HAS RIGHTLY ALLOWED THE CONSTRUCTION LOSS OF RS. 1,91,25,000/-. 2. THE LD. CIT(A) HAS ALLOWED THE CONSTRUCTION LOSS AFTER CONSIDERING THE ACCOUNTING STANDARD ISSUE BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND CONSIDERING THE FACT THAT IN SUBSEQUENT ASSESSMENT YEAR, THE ENTIRE RECEIPTS OF 5 BUNGALOWS HAS BEEN SHOWN BY THE RESPONDENT AS INCOME WITHOUT CLAIMING ANY EXPENDITURE AGAINST IT. 3. YOUR RESPONDENT CRAVES RIGHT TO ADD, AMEND, ALTER, MODIFY, SUBSTITUTE, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF CROSS OBJECTION. 10. AT THE OUTSET WE NOTE THAT THE GROUNDS RAISED BY THE ASSESSEE IN CROSS OBJECTION ARE SUPPORTING THE ORDER OF THE LEARNED CIT (A). THEREFORE WE DO NOT FIND ITA NO.685/AHD/2016 A.Y. 2011-2012 6 ANY REASON TO ADJUDICATE THE SAME HERE. ACCORDINGLY WE DISMISS THE CROSS OBJECTION FILED BY THE AO BEING INFRUCTUOUS. 11. IN THE COMBINED RESULTS, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALSO DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE COURT ON 09/04/2021 AT AHMEDABAD. SD/- SD/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (TRUE COPY ) AHMEDABAD; DATED 09/04/2021 MANISH