WELL BUILD REALTORS P. LTD, MUMBAI V. DCIT CIR 9, MUMBAI

ITA 6926/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8815 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 12-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER. I.T.A. NO. 6926/MUM/2011. ASSESS MENT YEAR :2009-10. M/S WELL BUILD REALTORS P. LTD., DY. COMMISSIONER OF ACME GHAR, 19 K.D. ROAD, VS. INCOME-TAX, BEHIND RASRAJ RESTAURANT, CENTRAL CIRCLE-9, VILE PARLE (WEST), MUMBAI. MUMBAI 400 056. PAN AAACW6644H APPELLANT RESPONDENT. APPELLANT BY : SHRI VIJAY MEHTA. RESPONDENT BY : SHR I NAVEEN GUPTA. DATE OF HEARING : 12-09-2012. DATE OF PRONOUNCEMENT : 26-09-2012. O R D E R PER P.M. JAGTAP, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LEARNED CIT(APPEALS)-37, MUMBAI DATED 20-07-2011 AND THE SO LITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE ADDITION OF RS.3,50,000/- M ADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF DISALLOWANCE OF PROVISION MADE BY THE ASSESSEE FOR EXPENSES TO BE INCURRED ON INCOMPLETED CONSTRUCTION WORK. 2 ITA NO.6926/MUM/2011 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. IT FOLLOWS PRO JECT COMPLETION METHOD OF ACCOUNTING. IN THE YEAR UNDER CONSIDERATION, IT HAD COMPLETED ONE PROJECT, NAMELY, ACME PLAZA-II AND THE PROFIT OF THE SAID PROJECT WA S OFFERED TO TAX IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION WH EREIN TOTAL INCOME OF RS.2,88,680/- WAS DECLARED. IN THE PROFIT & LOSS AC COUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS.3,50,000/- WAS DEBITED BY THE A SSESSEE ON ACCOUNT OF PROVISION FOR EXPENSES TO BE INCURRED ON INCOMPLETE CONSTRUCT ION WORK. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT SOME CONSTRUCTION WORK OF ACME PLAZA-II PROJECT WAS ST ILL INCOMPLETE AS ON 31 ST MARCH, 2009 AND PROVISION FOR THE EXPENSES TO BE IN CURRED FOR THE SAID WORK AMOUNTING TO RS.3,50,000/- WAS MADE. ACCORDING TO T HE AO, ANY PROVISION MADE FOR EXPENSES, HOWEVER, WAS NOT ALLOWABLE AS DEDUCTI ON AND ACCORDINGLY THE PROVISION OF RS.3,50,000/- MADE BY THE ASSESSEE WAS DISALLOWED BY HIM. ON APPEAL, THE LEARNED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE OBSERVING THAT THE ASSESSEE COULD NOT ESTABLISH THAT THE EXPENSES OF RS.3,50,000/- PROVIDED FOR WERE ACTUALLY INCURRED DURING THE YEAR UNDER CONSID ERATION. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE ASSESSEE HAS PREFE RRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IN OUR OPINION, WHEN THE ASSESS EE IS FOLLOWING PROJECT COMPLETION METHOD AND PROFIT OF THE PROJECT, NAMELY , ACME PLAZA-II COMPLETED IN THE YEAR UNDER CONSIDERATION WAS OFFER ED TO TAX IN THAT YEAR, PROVISION FOR EXPENSES, IF ANY, PERTAINING TO THE SAID PROJEC T WHICH ARE LIKELY TO BE INCURRED SUBSEQUENTLY, HAS TO BE TAKEN INTO CONSIDERATION AN D SUCH PROVISION IS AN ALLOWABLE 3 ITA NO.6926/MUM/2011 DEDUCTION TO DETERMINE THE TRUE AND CORRECT PROFIT DERIVED FROM THE COMPLETED PROJECT. IT APPEARS THAT NEITHER THE AO NOR THE LEA RNED CIT(APPEALS) HAS APPRECIATED THIS POSITION IN THE RIGHT PERSPECTIVE WHILE DISALLOWING THE DEDUCTION OF RS.3,50,000/- CLAIMED BY THE ASSESSEE ON ACCOUNT OF PROVISION MADE FOR EXPENSES TO BE INCURRED ON INCOMPLETED CONSTRUCTION WORK OF COMPLETED PROJECT. THE QUESTION ONLY IS THAT WHETHER THERE IS ANY SOUND BA SIS ON WHICH SUCH PROVISION HAS BEEN MADE BY THE ASSESSEE. IN THIS REGARD, THE LEAR NED COUNSEL FOR THE ASSESSEE HAS DEMONSTRATED BEFORE US ON THE BASIS OF RELEVANT LE DGER ACCOUNT EXTRACT THAT THE EXPENDITURE OF RS.3,50,000/- HAS ACTUALLY BEEN INCU RRED BY THE ASSESSEE SUBSEQUENTLY FOR COMPLETION OF PENDING CONSTRUCTION WORK OF ACME PLAZA-II PROJECT WHICH, IN OUR OPINION, IS SUFFICIENT TO EST ABLISH THAT THE PROVISION OF RS.3,50,000/- MADE BY THE ASSESSEE WAS A REALISTIC ONE AND IT WAS MADE ON A SOUND AND CONVINCING BASIS. WE, THEREFORE, HOLD THAT THE DISALLOWANCE OF RS.3,50,000/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APP EALS) IS NOT SUSTAINABLE AND DELETING THE SAME, WE ALLOW THIS APPEAL OF THE ASSE SSEE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 26 TH DAY OF SEPT., 2012. SD/- (VIVEK VARMA) JUDICIAL MEMBER SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED : 26 TH SEPT., 2012 4 ITA NO.6926/MUM/2011 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI