SEA SAGAR CONSTRUCTION CO., MUMBAI V. ITO WD 14(2)(2), MUMBAI

ITA 789/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6269 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 15-11-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 05-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV DUTT

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI V.DURGA RAO, JM ITA NO.789/MUM/2009 : ASST.YEAR 2000-2001 M/S.SEA SAGAR CONSTRUCTION CO. 428, KALBADEVI ROAD ABHAY HOUSE, 2 ND FLOOR MUMBAI 400 002. PA NO.AACFS2838L. VS. THE INCOME TAX OFFICER WARD 14(2)(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI SANJEEV DUTT (CIT-DR) O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 02.01.2009 IN RELATION TO THE ASSESSMENT YEAR 2000-2001. 2. THE ONLY ISSUE RAISED IS AGAINST THE DIRECTION O F THE LEARNED CIT(A) FOR UPHOLDING THE ASSESSMENT OF INCOME AT RS.3,87,90,04 0. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN DECLARI NG INCOME AT RS.NIL. THEREAFTER NOTICE U/S.148 WAS ISSUED ON THE GROUND THAT THE AS SESSEE HAD SHOWN WORK IN PROGRESS AT RS.23,32,66,919 IN THE BOOKS OF ACCOUNT WITHOUT OFFERING ANY INCOME FOR TAXATION. IN RESPONSE TO NOTICE U/S.148, THE AS SESSEE FILED LETTER REQUESTING THE A.O. TO TREAT THE ORIGINAL RETURN FILED AS THE ONE IN RESPONSE TO NOTICE U/S.148. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS A CONT RACTOR FOLLOWING CASH SYSTEM OF ACCOUNTING. THE ASSESSEE FIRM HAVING TWO PARTNERS V IZ. M/S.MAYURESH BUILDERS AND M/S.SATLAJ PROPERTIES ENTERED INTO AN AGREEMENT WIT H TWO HOUSING SOCIETIES VIZ. M/S.SEA BREEZE CO-OPERATIVE HOUSING SOCIETY AND M/S .SAGAR DARSHAN CO-OP. HOUSING SOCIETY, WHICH WERE FORMED IN THE YEAR 199 3 FOR DEVELOPMENT OF PLOT OF LAND ALLOTTED TO THESE TWO HOUSING SOCIETIES. CONST RUCTION WORK WAS STARTED BY ONE ITA NO.789/MUM/2009 M/S.SEA SAGAR CONSTRUCTION CO. 2 OF THE PARTNERS OF THE ASSESSEE-FIRM, M/S.MAYURESH BUILDERS AND THE SAME WAS LEFT INCOMPLETE. WHEN THE ASSESSEE-FIRM CAME INTO EXISTE NCE, IT TOOK OVER THE CONTRACT FROM M/S.MAYURESH BUILDERS. FOR THE ASSESSMENT YEAR S 1998-99 AND 1999-2000 RETURNS WERE FILED DECLARING NIL INCOME. THE A.O. N OTED THAT IN THE CURRENT YEAR, THE WORK OF THE ASSESSEE WAS ALMOST COMPLETE BUT NO INCOME WAS OFFERED BY SHOWING WORK IN PROGRESS AT RS.23.32 CRORES. APPLY ING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN M/S.CHAMPION CONSTR UCTION CO. 5 ITD 495, THE ASSESSING OFFICER APPLIED THE RATE OF 15% AS PROFIT ON THE WORK IN PROGRESS WHICH RESULTED IN TO AN ADDITION OF RS.3,47,90,038. NO RE LIEF WAS ALLOWED IN THE EX PARTE ORDER PASSED BY THE LEARNED CIT(A) AS VARIOUS NOTIC ES SENT TO THE ASSESSEE REMAINED UNREPLIED. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE CASE OF THE ASSESSING OFFICER IS THAT T HE ASSESSEE COMPLETED THE CONTRACT SUBSTANTIALLY IN THE YEAR IN QUESTION AND HENCE INCOME SHOULD HAVE BEEN OFFERED. IT IS NOTED THAT THE ASSESSING OFFICER TOO K INTO CONSIDERATION THE FACT THAT THE ASSESSEE DID NOT OFFER ANY INCOME IN ASSESSMENT YEARS 1998-99 AND 1999-2000. THE CONTRACT WAS TAKEN BY M/S.MAYURESH BUILDERS, TH E PARTNER IN THE ASSESSEE-FIRM AND IN ASSESSMENT YEAR 1997-98, THE ASSESSING OFFIC ER MADE SIMILAR ADDITION BY APPLYING 15% PROFIT RATE WHICH WAS FINALLY DELETED BY THE TRIBUNAL VIDE ITS ORDER DATED 18.01.2005 IN ITA NO.648/MUM/2001. COPY OF TH E SAID ORDER IS AVAILABLE ON RECORD. IN ASSESSMENT YEAR 1999-2000 WHEN THE ASSES SEE-FIRM FILED RETURN, THE A.O. AGAIN MADE ADDITION BY ESTIMATING PROFIT AT THE RAT E OF 15% ON THE SALE PROCEEDS WHICH ADDITION CAME TO BE DELETED BY THE TRIBUNAL V IDE ITS ORDER DATED 13.02.2009 IN ITA NO.4787/MUM/2007. SIMILARLY FOR ASSESSMENT Y EAR 1998-99 SUCH ADDITION MADE WAS DELETED. THE LEARNED A.R. HAS PLACED ON RE CORD A COPY OF THE ASSESSMENT ORDER PASSED U/S.143(3) FOR ASSESSMENT YEAR 2001-20 02 IN WHICH RETURN WAS FILED DECLARING NIL INCOME AND THE SAME WAS ASSESSED AS S UCH, MEANING THEREBY THAT THE WORK IN PROGRESS WAS ALLOWED TO CONTINUE WITHOUT CO NSIDERING IT TO BE COMPLETION ITA NO.789/MUM/2009 M/S.SEA SAGAR CONSTRUCTION CO. 3 OF PROJECT. FOR ASSESSMENT YEAR 2003-2004, THE ASS ESSEE FURNISHED RETURN DECLARING INCOME OF RS.51,96,112. IT IS THE CASE OF THE ASSES SEE THAT IN THIS YEAR THE CONTRACT GOT COMPLETED AND FOLLOWING PROJECT COMPLETION METH OD THE ASSESSEE OFFERED INCOME FOR TAXATION IN SUCH YEAR. COPY OF PROFIT AN D LOSS ACCOUNT AND BALANCE SHEET FOR ASSESSMENT YEAR 2003-2004 HAS BEEN PLACED ON RE CORD FROM WHERE IT CAN BE SEEN THAT INCOME HAS BEEN SHOWN TO THE CREDIT SIDE OF THE PROFIT AND LOSS ACCOUNT FROM THE CONTRACT AND THERE IS NO WORK IN PROGRESS IN THE BALANCE SHEET FOR THE SAID YEAR. IT, THEREFORE, TRANSPIRES THAT FOLLOWING THE PROJECT COMPLETION METHOD THE ASSESSEE OFFERED INCOME IN RESPECT OF THESE PROJECT S IN ASSESSMENT YEAR 2003-2004 WHICH HAS BEEN ACCEPTED BY THE REVENUE. ONCE THE IN COME IS TAXED IN ASSESSMENT YEAR 2003-2004 ON THE COMPLETION OF THE PROJECT, TH ERE CANNOT BE ANY QUESTION OF TAXING THE SAME AMOUNT IN THE EARLIER YEARS BY APPL YING A PARTICULAR PERCENTAGE ON THE AMOUNT OF WORK IN PROGRESS SHOWN IN THE BALANCE SHEET. 4. HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE BROUGHT TO OUR NOTICE THAT THE TRIBUNAL IN ASSESSMENT YEAR 1997-98 RECORDED A CATEGORICAL FINDING THAT THE TOTAL WORK DONE UP TO ASSESSMENT YEAR 1997-98 WAS R S.36.78 CRORES AND THE TOTAL WORK IN PROGRESS UP TO ASSESSMENT YEAR 2000-2001 WA S ABOUT RS.63.67 CRORES. IT WAS CONTENDED THAT THE ASSESSING OFFICER IN ASSESSM ENT YEAR 2001-2002 HAS NOTED THAT THE TOTAL WORK IN PROGRESS WAS ONLY RS.19.59 C RORES. IT WAS, THEREFORE, CONTENDED THAT THERE WAS A POSSIBILITY OF THE CONTR ACTS GETTING COMPLETED IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND IN THE NEXT YEAR SOME NEW PROJECTS BEING TAKEN UP BY THE ASSESSEE. IN THE LIGHT OF THESE FAC TS IT WAS CONTENDED THAT THE FACTUAL MATRIX REQUIRES CONSIDERATION AT THE ASSESSING OFFI CERS END. WE ARE AGREEABLE WITH THE VIEW POINT CANVASSED BY THE LEARNED DEPARTMENTA L REPRESENTATIVE ON THE GROUND THAT IF IN THE ASSESSMENT YEAR 1997-98 WORK IN PROGRESS IS MORE THAN RS.60 CRORE AS TAKEN NOTE OF BY THE TRIBUNAL AND THE ASSE SSEE-FIRM TOOK OVER THE PROJECT AS SUCH FROM M/S.MAYURESH BUILDERS, THE WORK IN PROGRE SS IN THE INSTANT YEAR SHOULD HAVE BEEN MORE THAN THAT. HOWEVER IT IS NOTED THAT THE ASSESSEE HAD SHOWN WORK IN ITA NO.789/MUM/2009 M/S.SEA SAGAR CONSTRUCTION CO. 4 PROGRESS IN THIS YEAR AT RS.23.32 CRORES. FURTHER IN ASSESSMENT YEAR 2001-2002 THE WORK IN PROGRESS HAS BEEN SHOWN AT RS.19.59 CRORE. IN VIEW OF THESE FACTS IT APPEARS THAT THERE IS SOME CONFUSION REGARDING THE FIGURE OF WORK IN PROGRESS VIS-- VIS THE PROJECT UNDERTAKEN, WHICH NEEDS TO BE SET R IGHT. IN SUCH A SITUATION WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF A.O. FOR DECIDING AS TO WHETHER THE TWO PROJECTS REFERRED TO IN THE ASSE SSMENT ORDER FOR THE YEAR UNDER CONSIDERATION WERE PART OF THE WORK COMPLETED IN AS SESSMENT YEAR 2003-2004 ON WHICH INCOME WAS OFFERED FOR TAXATION. IF THE WORK IN PROGRESS FOR THE CURRENT YEAR AT RS.23.32 CRORES WAS CARRIED OVER TO SUBSEQUENT Y EARS AND THE PROJECTS WERE COMPLETE IN THE ASSESSMENT YEAR 2003-2004 THEN NO A DDITION SHOULD BE MADE IN ASSESSMENT YEAR 2000-2001 AS THE INCOME HAS BEEN OF FERED FOR TAXATION IN THIS YEAR. IN THE OTHERWISE SITUATION THE ASSESSING OFFICER IS FREE TO DECIDE AS PER LAW. 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THIS 24 TH DAY OF NOVEMBER, 2010. SD/- SD/- ( V.DURGA RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI : 24 TH NOVEMBER, 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XIV, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.