Shree Gurudev Enterprise , Silvassa V. Commissioner of Income Tax, Vapi Circle, Vapi, Vapi

ITA 790/SRT/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2725 (ITAT-SURAT)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-04-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 16-11-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 68; 143(3); 22

Judgement Text

आयकर अपीलीय अिधकरण, सुरत Ɋायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANDA PRUSETH, ACCOUNTANT MEMBER आ.अ.सं./ITA No.790/SRT/2023 (AY 2017-18) (Hearing in Physical Court) Shree Gurudev Enterprise House No.120 1 st Floor, Samarpan, Opp. Ratan Petrol Pump, Village Dadra Silvassa-396230, Dadra and Nagar Haveli (UT) [PAN No. ABSFS 2058 P] Vs Assistant Commissioner of Income Tax Officer, Vapi Circle, Vapi अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by None राजˢ की ओर से /Revenue by Shri Vinod Kumar, Sr-DR सुनवाई की तारीख/Date of hearing 18.04.2024 उद्घोषणा की तारीख/Date of pronouncement 29.04.2024 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi [ for short to as “NFAC)/Ld. CIT(A)”] dated 12.09.2023 for the assessment year 2017-18, which in turn arises out of assessment order passed by Assessing Officer under section 143(3) of Income Tax Act, 1961 (‘the Act’) on 19.12.2019. The assessee has raised the following grounds of appeal: “1. On appreciation of the facts and in the circumstances of the case and law, the Learned Assessing Officer has erred in making an addition of Rs.15,97,655/- on account of change in method of revenue recognition. The Action of the Learned Assessing Officer is contrary to the facts and circumstances of the facts and law and deserves to be deleted. 2. On appreciation of the facts and circumstances of the case and law the Learned Assessing Officer has erred in making an addition of Rs.15,97,655/- on account of change in method of revenue recognition. ITA No.790/SRT/2023 (A.Y 17-18) Shree Gurudev Enterprise 2 The action of the Learned Assessing Officer is contrary to the facts and circumstances of the case and law and deserves to be deleted.” 2. Brief facts are that assessee is a partnership firm engaged in construction of residential building. The assessee filed its return of income for assessment year 2017-18 under consideration on 31.03.2018 declaring income of Rs.24,87,080/-. The case was selected for scrutiny. During assessment, on perusal of Tax Audit Report, the Assessing Officer found that assessee has shown turnover of Rs.3.37 crores and after claiming various expenses declared in gross profit of Rs.83,06,112/-(24.62%) and net profit of Rs.54,06,421/- (16.03%). The assessee was asked to furnish details of progress of the projects, advances received from the customers and the sale deed executed against various units. The assessee was also asked to furnish the method of accounting for the purpose of revenue recognition for its construction activities. In response to said show cause notice, the assessee filed its reply and submitted that they have recognised revenue on the basis of sale deed executed during the year. The assessee also furnished working as per Accounting Standard (AS-7 and AS-9). On perusal of such details, the Assessing Officer noted that assessee submitted that towers A, B & C of those projects completed and there is a closing stock of unsold flats. Tower-E was under construction and construction of bungalows were under progress. On further perusal of the details the Assessing Officer was of the view that there was a difference between cost of construction and agreement value of unsold flats which are at Rs.41,04,276/- for Towers A, B & C and 100% cost of construction incurred and debiting expenses in the profit and loss account. The revenue recognition from the projects should have been recognised by the ITA No.790/SRT/2023 (A.Y 17-18) Shree Gurudev Enterprise 3 assessee. So far as cost of construction of Tower-E incurred till the end of financial year was at Rs.5.67 crores, which is 51% of total estimated construction cost of units. The Assessing Officer was of the view that advance taken against booking of units for agreement executed should have been recognized by the assessee on the basis of working as per AS-7 and AS-9, the Assessing Officer was of the view that there was a difference between cost of construction and agreement value of unsold flats of Rs.73,05,893/-. The Assessing Officer was of the view that revenue from the projects of Tower-E should also have been recognized and booked by the assessee. The Assessing Officer on the basis of submission and working details and from record of assessment year 2015-16 worked out difference of unsold flats, the value of Rs.73,05,893/-, out of which Rs.23,87,066/- were already considered and added in earlier assessment year i.e., 2015-16. The assessee also considered Rs.33,21,172/- for sale executed in assessment year 2017-18 (current assessment year) on the basis of which, Assessing Officer was of the view that Rs.15,97,655/- (73,05,893 – 23,87,066 – 33,21,172/-) is difference between cost of construction and agreement value of unsold flats. The Assessing Officer added such amount earned to the income of the assessee under section 68 of the Act and taxed same under section 115BBE of the Act. 3. Aggrieved by the addition made by Assessing Officer in the assessment order, the assessee filed appeal before Ld.CIT(A). The case of assessee is migrated before NFAC/Ld.CIT(A). Before NFAC/Ld.CIT(A) the assessee filed statement of fact. In the statement of fact, the assessee contended that they are maintaining complete books of account on generally accepted Accounting ITA No.790/SRT/2023 (A.Y 17-18) Shree Gurudev Enterprise 4 Principle and recognizing revenue by following AS-9, which is applicable for revenue recognition after final execution of sale deed. The assessee recognized its revenue since beginning as per AS-9. The assessee also stated that they are free to adopt method of accounting and guidelines of real estate transaction. The Assessing Officer has not considered the contention of assessee and made addition of Rs.15,97,655/- by adopting Percentage Completion Method as per guidance no real estate transaction. The NFAC/Ld.CIT(A) dismissed the appeal of assessee by taking view that various notices were issued to the assessee as recorded in para-4 of the order of NFAC/Ld.CIT(A) and that no response was made by assessee. The NFAC/Ld.CIT(A) dismissed the appeal of assessee in limine by holding that there is no material before him to deviate from the order of Assessing Officer. Further aggrieved the assessee has filed present appeal before the Tribunal. 4. Notice of hearing was sent to the assessee through registered e-mail to the assessee provided in Form-36 (Appeal Form before Tribunal) on more than three occasions, the assessee was also served notice through registered post with Acknowledgment Due sent on 08.03.2024 for hearing fixed on 18.04.2024. Despite service of notice of hearing of appeal on more than three occasions as well as by way of registered post with RPAD for 18.04.2024, none appeared on behalf of assessee nor filed any adjournment application. In such circumstances, we are left with no option but to hear the submissions of the ld departmental representative and to consider material available on record. 5. Perusal of record shows that impugned order was passed by NFAC/Ld.CIT(A) on 12.09.2023, however, the present appeal was filed on 17.11.2023. Thus, ITA No.790/SRT/2023 (A.Y 17-18) Shree Gurudev Enterprise 5 there is delay of six days in filing appeal before Tribunal. The assessee has filed application for condonation of delay. In the application, the assessee contended that Ld.CIT(A) disposed of appeal on 12.09.2023 and time limit for filing appeal before Tribunal was upto 11.11.2023, though assessee filed appeal on 16.11.2023. The assessee further contended that office of assessee was closed on account of Diwali festival and was again open on 16.11.2023 and then appeal was filed on 16.11.2023 itself. 6. We have heard the submissions of the Ld. Senior Departmental Representative (Ld. Sr-DR) for the Revenue and perused record carefully. The Ld. Sr-DR for the Revenue submits that assessee has not filed any details or made submission before Ld.CIT(A) despite allowing more than sufficient opportunities. Even this appeal before Tribunal is filed belatedly and no plausible explanation is given by assessee in its application for condonation of delay. The reason stated in the application is vague hence the assessee does not deserve any leniency for condoning such delay. The addition made in the assessment order may be confirmed. In alternative and without prejudice submission, Ld. Sr-DR for the Revenue submits that in case this Bench is convinced that assessee has reasonably explained the cause of delay in filing the appeal before Tribunal, the matter may be restored back to the file of Ld.CIT(A) to adjudicate the issue on merit. 7. We have considered the contention of Ld. Sr-DR for the Revenue and once again perused entire record of appeal carefully. We find that this appeal was heard ex-parte, when the assessee despite the service of notice neither appeared nor sought adjournment. However, the assessee filed its written ITA No.790/SRT/2023 (A.Y 17-18) Shree Gurudev Enterprise 6 submission running into 22 pages, on 22.04.2024, without providing copy thereof to the office of ld Sr DR for revenue, nor sought any permission of the bench to place such written submissions of record. Perusal of such submissions shows that it was prepared by expert Counsel, which is not a healthy practice, still we have considered such submission. We find that Assessing Officer made addition on the basis of observation, which we have already recorded in para- 2 of this order and NFAC/Ld.CIT(A) dismissed the appeal of assessee in limine for the want of submission. We find that there is delay of six days in filing appeal before Tribunal. The assessee in its application has taken a plea that office of assessee was closed due to Diwali festival of second week of November, 2023. We find that assessee has not explained the delay in a proper manner and there is no assertion that delay was not intentional nor deliberate, however, keeping in view the principle of natural justice and the fact that delay is not inordinate and substantial right of assessee are involved in the present appeal. The Assessing Officer not only made addition on substituting method of revenue recognition and taxed the same under section 155BBE”. We find that prima facia the assessee has merit in its case. Therefore, delay of six days in filing of appeal is condoned. Further considering the fact that NFAC/Ld.CIT(A) has dismissed the appeal of assessee for want of submission. We find that appeal before NFAC/Ld.CIT(A) was posted in January, 2020 and appeal of assessee was taken up in February, 2021 by issuing various notices. We further find that for the date fixed on 04.08.2023 the assessee sought adjournment and appeal was fixed on 21.08.2023 and thereafter on 31.08.2023 on recording fact that no response was made by assessee and the ITA No.790/SRT/2023 (A.Y 17-18) Shree Gurudev Enterprise 7 appeal of assessee was dismissed in limine. The order of NFAC/Ld.CIT(A) is not as per mandate of Section 250(6) of the Act, even statement of facts filed with Form-25 was not considered or discussed by NFAC/Ld.CIT(A). It is not case of complete non-compliance rather it seems that assessee was interested in pursuing its case as adjournment was sought by way of application dated 29.07.2023. In our view, the assessee deserves one more opportunity at the stage of First Appellate Authority, therefore grounds of appeal raised by assessee are restored back to the file of Ld.CIT(A) to adjudicate the issue / grounds of appeal on merit. Needless to direct that before passing the order afresh, the NFAC/Ld.CIT(A) shall grant reasonable opportunity of being heard to the assessee. The assessee is also given liberty to file copy of their written submissions, which has been filed before this bench and relevant evidence to substantiate its case. The ld CIT(A) is directed to consider all such evidences, if so filed by the assessee. The assessee is also further directed to be more vigilant and to make compliance in time as and when called for by NFAC/Ld.CIT(A). In the result, the grounds of appeal raised by the assessee are allowed for statistical purpose. 8. In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 29/04/2024. Sd/- Sd/- (BIJAYANDA PRUSETH) (PAWAN SINGH) [लेखा सद˟/ACCOUNTANT MEMBER] [Ɋाियक सद˟ JUDICIAL MEMBER] Surat, Dated: 29/04/2024 Dkp. Out Sourcing Sr.P.S ITA No.790/SRT/2023 (A.Y 17-18) Shree Gurudev Enterprise 8 Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Sr. Private Secretary /Private Secretary /Assistant Registrar, ITAT, Surat