DCIT, Jaipur V. SHRI RAM CHANDRA AGARWAL, Jaipur

ITA 707/JPR/2012

• Counselvise Citation: 70723114 RSA 2012
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 01-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 707/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 THE D.C.I.T. CIRCLE-6, JAIPUR. CUKE VS. SHRI RAM CHANDRA AGARWAL TRIVENI PROPERTIES, 21-A, TRIVENI CHAMBERS, VISHVESHWARIYA NAGAR, GOPALPURA BYE PASS, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: ABRPA 9062 C VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI AJAY MALIK (ADDL.CIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI VIJAY GOYAL (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 27/11/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 13/02/2015 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 31/5/2012 PASSED BY THE LEARNED CIT (A)-II, JAIPUR FOR A.Y. 2009-10. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN:- 1) ALLOWING THE UNASCERTAINED DEVELOPMENT EXPENSES O F RS. 12,40,483/- DESPITE THE FACT THAT DEVELOPMENT ITA 707/JP/2012_ DCIT VS. SHRI RAM CHANDRA AGARWAL 2 WORK WAS TO BE DONE AT DIFFERENT SITES AND DEVELOPMENT EXPENDITURE INCURRED DURING THE YEAR CANNOT BE CO-RELATED WITH RESPECTIVE SITES. 2) THE BASIS OF PROVISION WAS A LETTER OF JAIPUR DEVELOPMENT AUTHORITY STIPULATING RATE FOR DIFFEREN T KIND OF DEVELOPMENT WORK BUT IT CANNOT BE STANDARDIZED FOR ALL KIND OF LAND, THUS ESTIMATION ONLY ON THIS BASIS IS NOT AN ASCERTAINED AMOUNT OF LIABI LITY. 3) LIABILITY FOR DEVELOPMENT WORK HAS NOT BEEN WORKED OUT IN A SCIENTIFIC MANNER AS HELD BY THE APEX COUR T IN THE CASE OF ROTORK INDIA LTD. 314 ITR 62 (SC) 2. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPER AN D SUBSEQUENT SALE OF PLOTS IN THE NAME AND STYLE OF M/S TRIVENI PROPER TIES. THE ASSESSEE HAD SHOWN NET PROFIT OF RS. 43,67,211/- ON TOTAL SAL ES OF RS. 6,79,37,725/-. ON VERIFICATION OF P&L ACCOUNT, IT WA S FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD DEBITED EXP ENSES ON ACCOUNT OF DEVELOPMENT EXPENSES TO THE TUNE OF RS. 84,26,808/- INCLUDING THE PROVISIONS MADE FOR DEVELOPMENT OF RS. 12,40,483/-. THESE PROVISIONS WERE NOT MADE BY THE ASSESSEE IN EARLIER YEAR. THE AS SESSING OFFICER HELD THAT THESE PROVISIONS FOR DEVELOPMENT WERE NOT BEING ACTUALLY INCURRED BUT SIMPLY PROVISIONS WERE MADE AND WERE SHO WN AS OUTSTANDING CURRENT LIABILITY IN THE BALANCE SHEET. THE ASSESSEE HAD CLAIMED THAT THESE PROVISIONS HAVE BEEN MADE @ RS. 1 45/- PER SQUARE YARD IN RESPECT OF THE SALE CARRIED OUT DURING THE YEAR. THE EXPENSES ITA 707/JP/2012_ DCIT VS. SHRI RAM CHANDRA AGARWAL 3 CLAIMED TO HAVE BEEN INCURRED DURING THIS YEAR, WERE NOT POSSIBLE TO BE ASCERTAINED IN THE SENSE THAT AS AGAINST WHICH SCHEM E THESE EXPENSES HAD BEEN INCURRED. THE ASSESSEE WAS NOT HAVING ANY S ITE WISE DETAIL IN RESPECT OF THE EXPENSES INCURRED AND ON WHAT BASIS T HE PROVISIONS FOR THESE EXPENSES PERTAINING TO PRECEDING AND CURRENT A.Y. HAVE BEEN SET OFF AGAINST THESE EXPENSES ACTUALLY CLAIMED TO HAVE BEEN INCURRED. THE PERIOD TO WHICH THESE EXPENSES RELATED AND THE PURPO SE THEREOF, WAS ALSO NOT ASCERTAINABLE. THE ASSESSEE WAS ASKED TO FUR NISH THE BASIS AND JUSTIFICATION OF THESE PROVISIONS BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH WAS ALSO REP LIED BY THE ASSESSEE AND ARGUED THAT THE PROVISIONS @ 145 PER SQ . YARD WAS MADE AS PER RATE GIVEN FOR VARIOUS DEVELOPMENT WORKS BY T HE JAIPUR DEVELOPMENT AUTHORITY (IN SHORT THE JDA). THE ASSESS EE ALSO FURNISHED THE COPY OF ORDER ISSUED BY THE JDA BEFORE THE ASSE SSING OFFICER. THE ASSESSEE REPLY WAS CONSIDERED BY THE ASSESSING OFFIC ER AND HELD THAT THE PROVISIONS MADE BY THE ASSESSEE ON THE BASIS OF PERCENTAGE ALLOCATED BY THE JDA FOR DIFFERENT KIND OF DEVELOPM ENT WORKS, LIABLE TO BE CARRIED OUT BY HIM. THE JDA HAD ALLOTTED THE AMOU NT OF EXPENDITURE IN TERMS OF PERCENTAGE ON AD HOC BASIS WHILE THE AC TUAL EXPENDITURE MIGHT BE LESS OR MORE THAN THE PERCENTAGE FIXED BY THE JDA DEPENDING ITA 707/JP/2012_ DCIT VS. SHRI RAM CHANDRA AGARWAL 4 UPON THE KINDS OF LAND AND LOCATION THEREOF. MOST O F THE SCHEMES ARE DEVELOPED ON AGRICULTURAL LAND. IT IS FURTHER OBSER VED THAT IN MOST OF THE CASES, TERRAIN IS NOT SO UNEVEN THAT THE ASSESSEE H AD TO INCUR SUCH A HUGE EXPENDITURE. SIMULTANEOUSLY, IN SOME CASES, IT MAY BE MORE THAN THE AD HOC RATE GIVEN/FIXED BY THE JDA. ROADS CONST RUCTED BY THE ASSESSEE IN THE SCHEME DEVELOPED BY HIM ARE THIN LA YERED GRIT ROAD. THEY ARE NOT OF GOOD QUALITY AS MENTIONED IN THE JDA LETTER. DEVELOPMENT WORKS DONE BY THE ASSESSEE THROUGH CONTR ACTOR AND INTERMEDIARY PERSON WAS CREATED BUT THE BASIS OF PAY MENT FOR WORK DOWN CANNOT BE CO-RELATED WITH THE ACTUAL DEVELOPMENT WORK DONE. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD NOT TR ULY ESTIMATED THE EXPENSES ON SCIENTIFIC MANNER. THUS, THE LIABILITY O F THE ASSESSEE FOR ANY PAST WORK CANNOT BE PRECISELY DETERMINED. HE CONCLUD ED THAT THE PROVISIONS MADE BY THE ASSESSEE WERE CONTINGENT IN N ATURE AND LIABILITY HAD NOT BEEN CRYSTALLIZED. HE FURTHER RELIED ON THE DECISIONS IN THE CASES OF RAJASTHAN STATE MINES AND MINERALS LTD. VS. CIT (RAJ) 208 ITR 1010 AND TN SMALL INDUSTRIES DEVELOPMENT CORPORATION VS. CIT (MAD) 242 ITR 122. ACCORDINGLY, HE MADE ADDITION OF RS. 12,40, 483/- IN THE INCOME OF THE ASSESSEE. ITA 707/JP/2012_ DCIT VS. SHRI RAM CHANDRA AGARWAL 5 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL BY OBSERVING THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE UNDERSIGNED FOR A.Y. 2 008-09 IN APPEAL NO. 509/10-11 DATED 08/09/2011 AND ORDER OF HONBLE ITAT IN ITA NO. 1078/JP/2011 DATED 13/01/2012. THE FINDINGS OF THE HONBLE ITAT HAS BEEN REPRODUCED ON PAGE NO. 2 TO 4 AND HELD THAT TH ERE IS NO MATERIAL CHANGE IN THE FACTS AND CIRCUMSTANCES IN THE YEAR U NDER CONSIDERATION. THEREFORE, THE DECISION OF HONBLE ITAT IS BINDING ON THE FIRST APPELLATE AUTHORITY. THUS, HE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNE D D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND AR GUED THAT THERE WAS NO SCIENTIFIC METHOD TO CALCULATE THE LIABILITY FOR DEVELOPMENT WORK AS PER THE LETTER OF JDA AND PRAYED TO CONFIRM THE ORD ER OF THE ASSESSING OFFICER. 5. AT THE OUTSET, THE LEARNED AR FOR THE ASSESSEE R EITERATED THE FACTS, WHICH WERE RAISED BEFORE THE LEARNED CIT(A) TH AT IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE HONBLE ITAT IN A.Y. 2008 -09, WHICH HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. HE FURTHER ARGUED THAT EVEN DEPARTMENT IN A.Y. 2006-07 TO 2008-09 AND 2010-11 T O 2011-12 HAS ITA 707/JP/2012_ DCIT VS. SHRI RAM CHANDRA AGARWAL 6 BEEN ACCEPTED & IN A.Y. 2011-12, THE ADDITIONS WERE MADE UNDER THIS HEAD, WHICH HAS BEEN DELETED BY THE LEARNED CIT(A). I T IS FURTHER ARGUED THAT THE ACTION OF THE ASSESSING OFFICER CLE ARLY VIOLATES THE PROVISIONS OF CONSISTENCY AND RULE OF MATCHING. HE FURTHER ARGUED THAT THE PROVISIONS HAS BEEN MADE ON THE BASIS OF ORDER OF THE JDA IN RESPECT OF DEVELOPMENT WORK AND BREAKUP OF EXPENSES OF EACH ACTIVITY OF DEVELOPMENT WERE CALCULATED BY THE JDA, WHICH WAS F IXED ON TECHNICAL ANALYSIS OF THE JDA. THESE EXPENSES WERE ES TIMATED BY THE JDA ON THE BASIS OF PLOT AREA. THE DEVELOPER HAD OPT ION EITHER TO CARRY OUT DEVELOPMENT ACTIVITIES HIMSELF OR GET THE DEVEL OPMENT WORK OF HIS SCHEMES THROUGH JDA BY PAYING RS. 250 PER SQ.MT.. S INCE THE JDA IS A GOVERNMENT BODY AND RATES FIXED BY IT CANNOT BE ARB ITRARY BUT CERTAINLY BASED ON ITS TECHNICAL ANALYSIS OVER THE COST IN RE SPECT OF EACH ITEM. THE ASSESSEE IS NOT INCURRING EXPENSES FOR DRAINAGE, SEWERAGE AND OTHER PUBLIC FACILITIES. THE COST DEVELOPMENT OF THE SE FACILITIES HAS BEEN WORKED OUT @ 175 PER SQ.MT. WHEREAS THE ASSESSEE MADE THE PROVISIONS FOR THIS DEVELOPMENT @ 145 PER SQ. YARD. THE LIABILITY TOWARDS DEVELOPMENT EXPENSES TO BE INCURRED IN FUTUR E ON THE PLOT SOLD DID NOT EXTINGUISH MERELY THE ASSESSEE HAD INCURRED SMALL PART OF EXPENSES IN NEXT FEW YEARS. THE ASSESSEES BOOKS OF ACCOUNT HAS NOT ITA 707/JP/2012_ DCIT VS. SHRI RAM CHANDRA AGARWAL 7 BEEN REJECTED BY THE ASSESSING OFFICER. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LEARNED CIT(A). HE ALSO RELIED ON T HE VARIOUS CASE LAWS IN HIS ARGUMENT, WHICH IS SUMMARIZED AS UNDER:- (I) CALCUTTA CO LTD. VS. COMMISSIONER OF INCOME TAX (1959) 37 ITR 1 S.C. (II) GREATER ASHOKA LAND AND DEVELOPMENT CO. (P) L TD. VS. ACIT (2001) 79 ITD 595 (DEL.) (III) ROTORK CONTROLS INDIA (P) LTD. VS. CIT (2009) 314 ITR 62 (SC). (IV) BHARAT EARTH MOVERS VS. CIT (2000) 245 ITR 428 (SC) (V) UDAIPUR MINERAL DEVELOPMENT SYNDICATE (P) LTD. VS. DY.CIT (2003) 181 CTR (RAJ) 251. (VI) CIT VS. DEVELOPMENT TRUST (P) LTD. (1991) 99 CT R (ALL) 247. (VII) WELDING RODS MFG.CO. VS. CIT (1997) 137 CTR (G UJ) 569. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IS IDENTI CAL WITH A.Y. 2008-09 OF ASSESSEES OWN CASE IN ITA NO. 1076/JP/2011 & ITA NO. 1078/JP/2011 WHEREIN THE COORDINATE BENCH HAD DECID ED THIS ISSUE BY OBSERVING AS UNDER:- 2.15 FOLLOWING THAT ORDER, WE HOLD THAT THE LD. CIT(A ) WAS JUSTIFIED IN DELETING THE ADDITION. IT IS USEFUL TO NOTE THAT THE ASSESSEE HAS USED THE PERCENTAGE ITA 707/JP/2012_ DCIT VS. SHRI RAM CHANDRA AGARWAL 8 COMPLETION METHOD. WHEN AN ASSESSEE FOLLOWS THE PERCENTAGE COMPLETION METHOD THEN AT THE COMPLETION OF THE PROJECT, THE ASSESSEE HAS TO MAKE UP THE ACCOUNTS. AT THAT RELEVANT TIME, THE ASSESSE E CAN OFFER SURPLUSES FROM THE PROVISIONS OR MAY CLAI M THE DEFICIT IN CASE THE ACTUAL EXPENDITURE IS MORE THAN THE PROVISIONS. HENCE, THE REVENUE IS NOT WITHOUT ANY REMEDY IN CASE THE PROVISION IS EXCESSIVE. BY RESPECTFULLY FOLLOWING THE DECISION OF THE COORDI NATE BENCH ON IDENTICAL ISSUE IN A.Y. 2008-09, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, WE UPHELD THE ORD ER OF THE LEARNED CIT(A). 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 13/02/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 13 TH FEBRUARY, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: ITA 707/JP/2012_ DCIT VS. SHRI RAM CHANDRA AGARWAL 9 1. VIHYKFKHZ @ THE APPELLANT- THE D.C.I.T., CIRCLE-6, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- SHRI RAM CHANDRA AGARWAL, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 707/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR