The DCIT, Circle-3(1)(1), Ahmedabad V. M/s. Navaratna Organisers & Developers Pvt. Ltd., Ahmedabad

ITA 780/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2712 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 29-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHR I MAHAVIR PRASAD , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 3(1)(1), AHMEDABAD (APPELLANT) VS M/S. NAVRATNA ORGANISERS & DEVELOPERS PVT. LTD. 2 ND FLOOR, KAYCREST, OPP . GUJARAT GAS CO. LTD. NR. PARIMAL CROSSING, C.G. ROAD, AHMEDABAD PAN: AAACN5181E (RESPO NDENT) REVENUE BY : MS. APARNA AGRAWAL , CIT - D . R. SHRI S.K. DEV, SR. D.R. ASSESSEE BY: SHRI TUSHAR P. HEMANI, A.R. DATE OF HEARING : 13 - 02 - 2 019 DATE OF PRONOUNCEMENT : 21 - 02 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO REVENUE S APPEAL FOR A.Y. 2010 - 11 TO 2011 - 12 , ARI SE FROM ORDER OF THE CIT(A) - 7, AHMEDABAD DATED 31 - 01 - 2 017 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE AC T . I T A NO S . 780 & 781 / A HD/20 17 A SS ESSMENT YEAR 2010 - 11 & 2011 - 12 I.T.A NO S . 780 & 781 /AHD/20 17 A.Y. 2010 - 11 & 2011 - 12 PAGE NO D CIT VS. M/S. NAVARATNA ORGANISERS & DEVELOPERS PVT. LTD. 2 2. AS THE F ACTS AND ISSUE INVOLVED IN THE TWO APPEALS OF THE REVENUE ARE COMMON THEREFORE THE SAME ARE ADJUDICATED BY THIS COMMON ORDER BY TAKING THE FACTS OF ITA NO. 780/AHD/2017 FOR THE SAKE OF CONVENIENCE. 3. THE FACT IN BRIEF IS THAT ASSESSEE HAS FILED RETURN OF INCOME DECLARING INCOME OF RS. 23413987/ - ON 30 TH SEP, 2010. SUBSEQUENTLY , THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 1 ST SEP, 2011. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING OF VARIOU S PROJECTS AS DEVELOPER FOR WHICH IT WAS EARNING DEVELOPMENT FEES. THE ASSESSMENT U/S. 143(3) OF THE CASE IN THE CASE OF ASSESSEE WAS FINALIZED ON 21 ST MA RCH, 2013 AT RS. 83691740/ - . F URTHER FACT S OF THE CASE ARE DISCUSSED WHILE ADJUDICATING GROUND OF AP PEAL FILED BY THE REVENUE. GROUND N O. 1 (DELETING THE ADDITION OF RS. 236867 6 8/ - MADE ON ACCOUNT O F 8% WORK IN PROGRESS. 4. DURING THE COURSE OF A SSESSMENT PROCEEDINGS BY ADOPTI NG PERCENTAGE COMPLETION METHOD, THE ASSESSING OFFICER HAS OBSERVED THAT BY ADOPIGN THE PERCENTAGE COMPLETION METHOD, THE ASSESSEE WAS NOT OFFERING THE CORRECT AMOUN T OF PROFIT TO TAX EVEN THOUGH I T WAS INVOLVED IN ALL STAGES OF ACTI VITI ES OF THE PROJECT STARTING FROM ACQUISITION OF LAND, CONSTRUCTION OF THE PROJECT AND INCURR ING EXPENSES F R OM THE PROJECT AS CAN BE SEEN FRO M T HE BALANCE SHEET OF THE COMPANY AS WELL AS FINALLY HANDING OVER OF THE CONSTRUCTED DEVELOPMENT PROPERT Y TO THE UNIT HOLDER. FOLLOWING THE EARLIER ASSESSMENT YEAR S , THE ASSESSING OFFICER H AS CONCLUDED THA T BY NOT ADOPTING PERCENTAGE COMPLETION METHOD THE ASSESESSE WAS NOT OFFERING THE CORREC T AMOUNT OF PRO FIT TO TAX EVEN THOUGH IT WAS INVOLVED IN ALL STAG ES OF ACTIVITIES. I.T.A NO S . 780 & 781 /AHD/20 17 A.Y. 2010 - 11 & 2011 - 12 PAGE NO D CIT VS. M/S. NAVARATNA ORGANISERS & DEVELOPERS PVT. LTD. 3 THEREFORE, AFTER RELYING UPON THE ASSESSMENT ORDER OF EARLIER YEARS , THE ASSESSING OFFICER HAS COMPUTED THE INCOME OF THE ASSESSEE AT 8% OF WORKING IN PROGRESS I.E. TO THE AMOUNT OF RS. 2 , 36 , 86 , 768/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. 6. DURING THE COURSE OF A PPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED THAT T H E IDENTICAL ISSUE ON IDENTICAL FACT IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008 - 09 AND 2009 - 10 HAVE BEEN DECIDED BY THE CO - ORDIN ATE BENCH OF THE ITAT AHMEDABAD VIDE ITA NOS. 2634/AHD/2011 AND 1875/AHD/2013 IN FAVOUR OF THE ASSESSEE. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THESE UNDISPUTED FAC TS. WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE REC ORD AND ORDER OF THE AFORESAID MENTIONED ORDER OF THE CO - ORDINATE BENCHES AND CONSIDER THE IMPUGNED ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE . RELEVANT PART OF THE CO - ORDINATE BENCH OF THE ITAT IS REPRODUCED AS UNDER: - 10. AS FAR ESTIMATION O F PROFIT AT 8% OF THE WIP IN BOTH THESE YEARS IS CONCERNED, WE HAVE GONE THROUGH THE RECORD WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES. IN THE ASSTT.YEAR 2008 - 09, WIP OF RS.45,98,27,752/ - WAS NOTICED BY THE AO. HE ESTIMATED 8% PROFIT ON SUCH WIP AND MA DE ADDITION OF RS.3,67,86,220/ - . ON SIMILARLY ANALOGY, HE NOTICED WIP OF RS.54,36,30,173/ - IN THE ASSTT.YEAR 2009 - 10 AND ESTIMATED PROFIT AT RS.4.34 CRORES. THESE ADDITIONS HAVE BEEN DELETED BY THE LD.CIT(A). SIMILAR ADDITION WAS MADE IN THE CASE OF THE AS SESSMENT IN THE ASSTT.YEAR 1997 - 98 WHICH WAS DELETED BY THE LD.CIT(A). DISPUTE TRAVELLED UPO THE TRIBUNAL VIDE ITA NO. 1114/AHD/2005 AND THE TRIBUNAL HAS UPHELD THE DELETION. COPY OF THE TRIBUNAL'S ORDER HAS BEEN PLACED ON RECORD. 11. ON DUE CONSIDERATION OF ALL THE MATERIALS, WE ARE OF THE VIEW THAT THE ASSESSEE WAS WORKING AS A DEVELOPER. IT WAS NOT OWNER OF WORK - IN - PROGRESS. MOREOVER, ON COMPLETION OF PROJECT, IT USED TO OFFER RECEIPT RECEIVED IN THE SHAPE OF DEVELOPMENT FEES AND SUCH RECEIPTS HAVE BEEN RECOGNIZED ON COMPLETION OF PROJECT. CONSISTENTLY, THIS HAS BEEN SHOWN BY THE ASSESSEE. THE AO HAS MADE AN ADDITION ON HYPOTHETICAL BASIS BY TREATING THE WIP BELONGED TO THE ASSESSEE. IT HAS BEEN CONTENDED BEFORE US THAT THE AO HAS INVOKED ACCOUNTING STAN DARD - 7 WHICH OTHERWISE APPLICABLE ON I.T.A NO S . 780 & 781 /AHD/20 17 A.Y. 2010 - 11 & 2011 - 12 PAGE NO D CIT VS. M/S. NAVARATNA ORGANISERS & DEVELOPERS PVT. LTD. 4 CONTRACTOR. THE ASSESSEE IS A DEVELOPER, AND AS - 7 IS NOT APPLICABLE. AFTER GOING THROUGH THE FINDING OF THE LD.CIT(A) AND RELYING UPON THE ORDER OF THE ITAT IN THE ASSESSEE'S OWN CASE FOR THE ASSTT.YEAR 1997 - 98, WE ARE OF THE VIEW THAT 8% PROFIT ON ALLEGED WIP CANNOT BE ESTIMATED IN THE CASE OF THE ASSESSEE. HENCE, THE LD.CIT(A) HAS RIGHTLY DELETED THIS ADDITION IN BOTH THE YEARS. NO OTHER GROUND HAS BEEN AGITATED BY THE REVENUE IN THE ASSTT.YEAR 2008 - 09. HENCE, ITS APPE AL IS REJECTED. RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH ON SIMILAR ISSUE AND SIMILAR FACT AS CITED ABOVE , WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE AND THE SAME IS DISMISSED . GROUND NO. 2 ( ADDITION OF RS. 3 , 65 , 90 , 983/ - ON ACCOUNT OF NET OF OVER COLLECTION AS BUSINESS INCOME) 7. DURING THE COURSE OF ASSESSMENT, THE AS SESSING OFFICER HAS NOTICED FROM ASSESSMENT ORDER FOR ASSESSMENT YEAR 2009 - 10 THAT THE ASSESSEE HAD NOT DISCLOSED THE BASIS OF VARIOUS FIGURES APPE ARING UNDER THE HEAD NET OF COLLECTION OVER EXPENSES RELATIN G TO KALHAR BANGALOW PROJECT . HE HAS FURTHER STATED THAT ON THE BASIS OF SEIZED DOCUMENT, THE ASSESSING OFFICER HAD OBSERVED IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2007 - 08 THAT THE SAID PROJ ECT WAS NEAR COMPLETION IN FINANCIAL YEAR 2005 - 06. IN VIEW OF THIS, HE WAS OF THE VIEW THAT GENUINENESS OF THE FIGURES UNDER THE HEAD NET OF COLLECTION OVER EXPENS E S WAS NOT VERIFIABLE. FROM THE DETAILS FILED BY THE ASSESSEE , THE ASSESSING OFFICER HAS ST AT ED THAT ASSESSEE HAD RECEIVED COLLECTION OF RS. 59 , 69 , 567/ - AND HAD INCURRED PROJECT COST OF ONLY RS. 2 , 31 , 04 , 644/ - IN RELATION TO THE KALHAR BUNGALOW P ROJECT, THEREFORE, THE EXCESS COLLECTION IN THE HAND OF THE ASSES S EE IN RELATION OF THIS PROJECT STOOD AT RS. 3 , 65 , 90 , 983/ - I.T.A NO S . 780 & 781 /AHD/20 17 A.Y. 2010 - 11 & 2011 - 12 PAGE NO D CIT VS. M/S. NAVARATNA ORGANISERS & DEVELOPERS PVT. LTD. 5 8. AGGRIEVED ASSESSEE HAS FILED APPEAL B E FORE THE LD. CIT(A). THE LD. CIT(A) HAS DELETED THE AFORESAID ADDITION. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS CONTENDED THAT SIMILAR ADDITION ON IDENTICAL ISSUE HAS BEEN ADJUDICATED BY THE DECISION OF CO - ORDINATE BENCH FOR ASSESSMENT YEAR 2008 - 09 AND 2009 - 10 VIDE 2634/A HD/2011 1075/AHD/2013 IN FAVOUR OF THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THIS UNDISPUTED FACT . WITH THE ASSISTA NCE OF LD. LD. REPRESENTATIVES WE HAVE GONE THROUGH THE AFORESAID DECISION OF THE CO - ORDINATE BENCH OF THE ITAT AND CONSIDER THAT THE SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISION OF THE CO - ORDINATE BENCH . RELEVANT P ART OF THE DECISION O F CO - ORDINATE BENCH OF THE ITAT IS REPRODUCED AS UNDER: - 9. WITH THE ASSISTANCE OF L D. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE ASSESSMENT ORDER WOULD INDICATE THAT THE ID.AO HAS TREATED THE ASSESSE E AS OWNER OF KALHAR PROJECT WHEREAS THE CASE OF THE ASSESSEE IS THAT IT IS A DEVELOPER. IT USED TO DEVELOP HOUSING PROJECT ON BEHALF OF THE COOPERATIVE SOCIETIES AND CHARGES DEVELOPMENT FEES FOR CARRYING OUT SUCH DEVELOPMENT WORK. ACCORDING TO THE ASSESSE E, COOPERATIVE SOCIETIES PROVIDE MATERIAL FOR CARRYING OUT DEVELOPMENT ACTIVITY. THE ASSESSEE USED TO COLLECT BOOKING AMOUNT ON BEHALF OF THE SOCIETY AND ITS DEVELOPMENT WORK IS BEING SHOWN UNDER THE HEAD WORK - IN - PROGRESS ON ASSET SIDE OF THE BALANCE SHEET . SIMILARLY, COLLECTIONS TAKEN FROM THE MEMBERS ARE BEING SHOWN AS LIABILITY IN THE BALANCE SHEET. THUS, STAND OF THE ASSESSEE BEFORE THE AO WAS THAT BEING A DEVELOPER, ITS RIGHTS WERE LIMITED TO RECEIVE DEVELOPMENT FEES ON COMPLETION OF PROJECT. THE SOCIE TY IS OWNER AND HAS RIGHT, TITLE AND INTEREST ON WORK - IN - PROGRESS. THIS STAND OF THE ASSESSEE HAS BEEN ACCEPTED BY THE ID.CIT(A) IN BOTH THE ASSESSMENT YEARS. CONTRARY TO THIS STAND, NOTHING HAS BEEN BROUGHT TO OUR NOTICE. THE ASSESSEE HAS DEMONSTRATED THA T IT WAS WORKING ONLY AS A DEVELOPER AND ALLEGED COLLECTION OVER EXPENDITURE CANNOT BE TREATED AS ITS BUSINESS INCOME, RATHER, IT WAS A LIABILITY IN THE BALANCE SHEET. THEREFORE, WE ARE OF THE VIEW THAT THE ID.CIT(A) HAS RIGHTLY DELETED THIS ADDITION AND, NO INTERFERENCE IS CALLED FOR. SIMILARLY, IN A.Y.2009 - 10 AND ADDITION OF RS.4,84,35,702/ - WAS MADE ON ACCOUNT OF EXCESS OF COLLECTION OVER EXPENSES. IT WAS DELETED BY CIT(A). WE DO NOT FIND ANY ERROR IN THE ORDER OF LD. CIT(A) . THUS, THIS GROUND IS REJECT ED IN BOTH YEARS. RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE ITAT ON SIMILAR ISSUE AND SIMILAR FACT IN THE CASE OF THE ASSESSEE AS SU P R A WE I.T.A NO S . 780 & 781 /AHD/20 17 A.Y. 2010 - 11 & 2011 - 12 PAGE NO D CIT VS. M/S. NAVARATNA ORGANISERS & DEVELOPERS PVT. LTD. 6 DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT(A), THEREFORE , THIS GROUND OF APPEA L OF THE REVENUE IS ALSO DISMISSED. 9. IN THE RE SULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 2 1 - 02 - 201 9 SD/ - SD/ - ( MAHAVIR PRASAD ) ( AMARJIT SINGH ) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD : DATED 21 /02 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,