ITO 12(1)(3), MUMBAI V. BELLOR HOMES AND REALTORS P.LTD, MUMBAI

ITA 6886/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4851 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 24-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH J SETH
• Assessee Lawyers: BHARTI SINGH
• Section: 142(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI , . , , BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER, ITA NO.6886/MUM/2016 ASSESSMENT YEAR: 2012-13 ITO - 12(1)(3), ROOM NO.145A, 1 ST FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 / VS. M/S BELLOR HOMES AND REALTORS PVT. LTD. SHOP NO.1 & 2, SATYADEEP CHS LTD. CHIKUWADI, BORIVALI (W), MUMBAI-400020 ( / REVENUE) ( !'# /ASSESSEE) P.A. NO.AACCB5747Q $ %# / DATE OF HEARING : 04/02/2019 %# / DATE OF ORDER: 13/02/2019 / O R D E R PER G. MANJUNATHA (ACCOUNTANT MEMBER) THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF THE LD. CIT(APPEAL)-20, MUMBAI, 03/08/2016 AND I T !' / REVENUE BY MS. BHARTI SINGH !'# !' / ASSESSEE BY SHRI MANISH J. SETH 2 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. PERTAINS TO AY 2014-15. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ON FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED I DELETING THE ADDITION MADE BY THE AS SESSING OFFICER WITHOUT APPRECIATING THE FACT THAT THE ASSE SSEE HAS COMPLETED SUBSTANTIAL WORK AND RECEIVED SUBSTANTIAL ADVANCES AND SHOULD HAVE RECOGNIZED REVENUE IN VIEW OF DECISION OF HONBLE BOMBAY ITAT IN THE CASE OF CHAM PION CONSTRUCTION COMPANY (5ITD 495). ON FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) FAILED TO APPRECIATE THAT OVER 62%, 72% 83% AND 90% OF THE ESTIMATED PROJECT COST HAD BEEN INCURRED BY THE ASSESSEE IN A.YS. 2011-12, 2012-13, 2013-14, & 2014 -15 RESPECTIVELY AND IT HAD ALSO RECEIVED COMMENSURATE ADVANCES, YET NO PROFIT HAD BEEN DECLARED ON THE PR OJECT TILL A.Y. 2014-15. 2. THE BRIEF, FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT, FILED ITS RETURN OF INCOME FOR AY 2012 -13 ON 29/02/2012, DECLARING TOTAL INCOME AT RS.NIL. THE C ASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 1 43(2) AND 142(1) OF THE ACT, WERE ISSUED. IN RESPONSE TO THE NOTICES, THE LD. AUTHORISED REPRESENTATIVE (IN SHORT AR) OF TH E ASSESSEE HAS FILED VARIOUS DETAILS AS CALLED FOR INCLUDING T AX AUDIT REPORT ALONG WITH PROFIT & LOSS ACCOUNT AND BALANCE SHEET. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. ASSES SING OFFICER NOTICED THAT THE ASSESSEE IS DEVELOPING A P ROJECT CALLED 3 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. NEO CORPORATE PLAZA, BUT NOT RECOGNIZING ANY REVENU E FROM THE PROJECT, THEREFORE, CALLED UPON THE ASSESSEE TO FIL E ITS OBJECTION AS TO WHY THE REVENUE FROM THE PROJECT SHALL NOT BE DETERMINED FOLLOWING PERCENTAGE COMPLETION METHOD. IN RESPONSE , THE ASSESSEE SUBMITTED THAT IT IS FOLLOWING PROJECT COM PLETION METHOD FOR RECOGNISING REVENUE IN RESPECT OF NEO CO RPORATE PLAZA AND THE SAID PROJECT WAS NOT COMPLETED DURING THE YEAR UNDER CONSIDERATION, THEREFORE, THE QUESTION OF REC OGNISING OF REVENUE DOES NOT ARISE. THE LD. AO, AFTER CONSIDERI NG THE SUBMISSIONS OF THE ASSESSEE AND ALSO TAKEN INTO ACC OUNT THE FACT THAT THE PROJECT HAS BEEN COMPLETED ALMOST 80% , THEREFORE, DETERMINED REVENUE FROM THE PROJECT ON P ERCENTAGE COMPLETION METHOD ON THE BASIS OF TOTAL ADVANCES RE CEIVED FROM THE CUSTOMERS BY APPLYING 10% PROFIT ON TOTAL ADVANCES RECEIVED. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED THE APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY. 4. BEFORE THE LD. CIT(A), THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS, WHICH IS REPRODUCED IN PARA 4.2, PAGE-5 TO 9 OF THE ORDER OF THE LD. CIT(A). TH E LD. CIT(A), 4 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND ALSO BY FOLLOWING THE DECISIONS OF THE ITAT, MUMBAI BENCH I N THE CASE OF HAWARE CONSTRUCTIONS PVT. LTD. VS ITO IN ITA NO.5601/MUM/2009 HELD THAT THE ASSESSEE IS CONSISTE NTLY FOLLOWING PROJECT COMPLETION METHOD FOR RECOGNISING THE REVENUE, THEREFORE, THERE IS NO REASON TO APPLY PE RCENTAGE COMPLETION METHOD TO DETERMINE THE REVENUE. THE REL EVANT OBSERVATION IS AS UNDER:- 4.3. I HAVE PERUSED THE ASSESSMENT ORDER AND SUBM ISSIONS MADE IN THIS REGARD. IT IS NOTED THAT ASSESSEE IS A BUIL DER. THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING PROJECT COMPLETION METHOD WHICH WAS ACCEPTED BY THE DEPARTMENT IN OTHER YEARS AND N O ADDITION WAS MADE ON THIS ISSUE. DURING THE YEAR UNDER CONSI DERATION, THE A.O. HAS APPLIED PERCENTAGE COMPLETION METHOD AND M ADE ADDITION OF RS.1,19,60,459/- TO THE TOTAL INCOME OF THE ASSE SSEE BY APPLYING PERCENTAGE COMPLETION METHOD AND ESTIMATING INCOME @ 10% OF THE ADVANCES RECEIVED OF RS.11,96,03,459/- AS PER T HE BOOKS OF THE ASSESSEE, TO THE INCOME OF THE ASSESSEE. THE A/R OF THE APPELLANT HAS VEHEMENTLY OPPOSED THE ADDITION AND HAS SUBMITT ED THAT THE ASSESSEE IS REGULARLY FOLLOWING THIS METHOD OF ACCO UNTING WHICH HAS BEEN ACCEPTED BY THE A.O. IN THE EARLIER ASSESS MENT YEAR. IT IS ALSO SUBMITTED THAT THE A.O. HAS CHANGED THE METHOD OF ACCOUNTING WITHOUT MUCH BASIS AND MADE ADDITION WHICH MAY BE D ELETED. REFERRING TO A NUMBER OF DECISIONS, THE AR HAS SUBM ITTED THAT THE REVENUE AUTHORITIES ARE NOT JUSTIFIED IN REJECT ING THE PROJECT COMPLETION METHOD FOLLOWED BY THE ASSESSEE BY ADOPT ING THE PERCENTAGE COMPLETION METHOD. IN THIS REGARD IT IS NOTED THAT PROJECT COMPLETION METHOD IS AN ACCEPTED METHOD OF ACCOUNTING FOR BUILDERS. THE ASSESSEE IS REGULARLY FOLLOWING T HIS METHOD OF ACCOUNTING WHICH HAS BEEN ACCEPTED BY THE A.O. I N OTHER YEARS. IT IS AN ESTABLISHED LEGAL PROPOSITION THAT AN ASSE SSEE CAN FOLLOW ANY RECOGNIZED METHOD OF ACCOUNTING AND THE CONDITI ON IS THAT THE SAME METHOD HAS TO BE FOLLOWED CONSISTENTLY. SINCE THE ASSESSEE IN THE INSTANT CASE WAS REGULARLY FOLLOWIN G THE PROJECT COMPLETION METHOD THEREFORE, THERE IS NO SOUND REAS ON AS TO WHY THE SAME SHOULD BE REJECTED AND PERCENTAGE COMPLETI ON METHOD BE FOLLOWED. IT IS NOTED THAT MUMBAI TRIBUNAL IN THE C ASE OF AWADESH BUILDERS V. ITO REPORTED IN 37 SOT 122 (MUMBAI) HAS HELD THAT PROJECT COMPLETION METHOD ADOPTED BY THE ASSES SEE BUILDER AND REAL ESTATE DEVELOPER IS JUSTIFIED INSTEAD OF T HE PERCENTAGE 5 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. COMPLETION METHOD AS COMPUTED BY THE DEPARTMENT. WH ILE GIVING THIS FINDING, THE HON. TRIBUNAL RELIED ON THE DECIS ION OF THE HON. SUPREME COURT IN THE CASE OF CIT V. BILAHARI INVEST MENT (P) LTD. REPORTED IN 299 ITR 1 (SC) AND DECISION OF THE HON. SUPREME COURT IN THE CASE OF CIT V. REALEST BUILDER S & SERVICES LTD REPORTED IN 307 ITR 202. THE HON. TRIB UNAL ALSO CONSIDERED AS-7 AND AS-9 ISSUED BY ICAI. SINCE THE ASSESSEE IN INSTANT CASE IS REGULARLY FOLLOWING PROJECT COMPLET ION METHOD THEREFORE THERE IS NO REASON FOR THE A.O. TO REJECT THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE ORDER DT. 05.08.2011 OF THE HON'BL E ITAT, MUMBAI IN THE CASE OF HAWARE CONSTRUCTIONS PVT. LTD . VS. ITO, ITA NO.5601/MUM/2OO9 WHEREIN THE HON'BLE TRIBUNAL H AD DELETED THE ADDITION MADE ON IDENTICAL ISSUE. IN VIEW OF TH IS DISCUSSION THE ADDITION MADE BY THE LD. A.O. OF 1,19,60,459/- BY A DOPTING PERCENTAGE COMPLETION METHOD AS AGAINST PROJECT COM PLETION METHOD OF THE ASSESSEE CANNOT BE SUSTAINED IN APPEA L AND IS DIRECTED TO BE DELETED. ACCORDINGLY THESE GROUNDS O F APPEAL ARE ALLOWED. 5. THE LD. AR OF THE ASSESSEE, AT THE TIME OF HEAR ING, SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE IN ITS OWN CASE BY THE DECISION OF THE MUM BAI BENCH OF THE TRIBUNAL IN ITA NO.4445/MUM/2016 FOR THE AY 2011- 12, WHERE THE CO-ORDINATE BENCH HELD THAT WHEN PROJ ECT WAS NOT COMPLETED AND ALSO THE ASSESSEE IS FOLLOWING PR OJECT COMPLETION METHOD FOR RECOGNITION OF THE REVENUE, T HE ACTION OF THE AO IN ESTIMATING THE INCOME FROM THE PROJECT BY FOLLOWING PERCENTAGE COMPLETION METHOD CANNOT BE AP PROVED. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT WHEN T HE PROJECT WAS COMPLETED ALMOST 72% FOR THE YEAR UNDER CONSIDERATION, THE AO WAS VERY MUCH WITHIN ITS RIGH TS TO ESTIMATE THE PROFIT FROM THE PROJECT BY FOLLOWING T HE PERCENTAGE 6 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. COMPLETION METHOD WHEN THE ASSESSEE IS FOLLOWING ME RCANTILE SYSTEM OF ACCOUNTING. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE O RDER OF THE AUTHORITY BELOW. WE FIND THAT THE MUMBAI H BENC H OF THE ITAT IN ASSESSEES OWN CASE FOR AY 2011-12 HAS CONS IDERED IDENTICAL ISSUE, IN THE LIGHT OF METHOD OF ACCOUNT ING FOLLOWED BY THE ASSESSEE TO RECOGNISE THE REVENUE FROM ITS P ROJECT AND HELD THAT WHEN ASSESSEE IS FOLLOWING PROJECT COMPLE TION METHOD FOR RECOGNITION OF THE REVENUE AND SUCH PROJ ECT WAS NOT COMPLETED FOR THE YEAR UNDER CONSIDERATION, THE RE IS NO REASON FOR THE AO TO ESTIMATE THE REVENUE FROM THE PROJECT. THE RELEVANT OBSERVATION OF THE TRIBUNAL IS AS UNDE R:- 7. HAVING HEARD BOTH THE SIDES AND CONSIDERED THE RELEVANT MATERIAL PLACED BEFORE US, WE FIND THAT THE ASSESSEE WAS FOL LOWING THE PROJECT COMPLETION METHOD CONSISTENTLY WHICH HAS BEEN ACCEP TED BY THE REVENUE. HOWEVER, THE AO ESTIMATED THE REVENUE ON T HE PROJECT CALLED NEO CORPORATE PLAZZA A COMMERCIAL PROJECT ON PERCEN TAGE COMPLETION METHOD BY REASONING THAT THE ASSESSEE HAS ALREADY I NCURRED SUBSTANTIAL EXPENDITURE TO THE TUNE OF RS.30,77,35, 824/- AGAINST THE ESTIMATED PROJECT COST OF RS.49,15,61,282/- AND HAS RECEIVED ADVANCES OF RS.31,15,62,438/- AGAINST THE ESTIMATED PROJECT OF REVENUE OF RS.54,12,51,702/-. IN OUR OPINION, WHEN THE ASSESSE E IS FOLLOWING PROJECT COMPLETION METHOD, THE AO CANNOT AT ITS DIS CRETION CHANGE THE SAID METHOD OF PERCENTAGE COMPLETION METHOD AS THE LAW DOES NOT PERMIT THE SAME. IN VIEW OF THE SAID FACTS NONETHEL ESS THE ASSESSEE HAS RECEIVED SUBSTANTIAL ADVANCES FROM THE CUSTOMER S TO THE TUNE OF 57.56% OF THE TOTAL ESTIMATED PROJECT REVENUE, THE ACTION OF THE AO CANNOT BE APPROVED. THUS, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF LD. CIT(A) AND ACCORDINGLY WE DISMISS THE GROUND NO .1 & 2 RAISED BY THE REVENUE BY UPHOLDING THE ORDER OF LD. CIT(A). 7 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. 7. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL WE A RE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN THE FINDI NGS RECORDED BY THE LD. FIRST APPELLATE AUTHORITY IN DELETING TH E ADDITION MADE BY THE AO TOWARDS ESTIMATION OF REVENUE FROM T HE PROJECT. HENCE, WE ARE INCLINED TO UPHOLD THE ORDE R OF THE LD. CIT(A) AND DISMISSED THE APPEAL FILED BY THE REVENU E. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/02/2019. SD/- SD/- ( SANDEEP GOSAIN ) (G. MANJUNATHA) # '$ /JUDICIAL MEMBER %'$ / ACCOUNTANT MEMBER $ MUMBAI; & DATED : 13/02/2019 F{X~{T? P.S / /. .. &#'()*)+' / COPY OF THE ORDER FORWARDED TO : 1. ' () / THE APPELLANT (RESPECTIVE ASSESSEE) 2. *+() / THE RESPONDENT. 3. ,, $ -# ( ' ) / THE CIT, MUMBAI. 4. ,, $ -# / CIT(A)- , MUMBAI, 5. /0 *#1 , ,''1 2 , $ / DR, ITAT, MUMBAI 6. 3!4 / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI