Dy.CIT, Circle-3(3), Hyderabad V. M/s Universal Realtors Private Limited, Hyderabad

ITA 838/HYD/2014

• Counselvise Citation: 83822514 RSA 2014
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: VIJAY DAVE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 837 & 838/HYD/2014 ASSESSMENT YEARS : 2009-10 & 2010-11 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(3),HYDERABAD. M/S UNIVERSAL REALTORS PVT. LTD., HYDERABAD PAN AAACU 7615C (APPELLANT) (RESPONDENT) REVENUE BY SHRI D. SUDHAKAR RAO ASSESSEE BY SHRI VIJAY DAVE DATE OF HEARING 18-08-2014 DATE OF PRONOUNCEMENT 19-09-2014 O R D E R PER SAKTIJIT DEY, J.M.: THESE APPEALS BY THE DEPARTMENT ARE AGAINST A COMM ON ORDER DATED 14/02/2014 OF THE CIT(A)-IV, HYDERABAD PERTAI NING TO AY 2009- 10 AND 2010-11. 837/HYD/2014 FOR AY 2009-10 2. DEPARTMENT HAS RAISED 8 GROUNDS. GROUND NOS. 1 & 8 BEING GENERAL IN NATURE ARE NOT REQUIRED TO BE ADJUDICATE D. AT THE OUTSET, LEARNED AR MENTIONED THAT GROUND NOS. 2, 3 & 4 ARE NOT RELEVANT FOR THE IMPUGNED ASSESSMENT YEAR AS THEY DO NOT ARISE E ITHER FROM THE ASSESSMENT ORDER OR FROM THE CIT(A)S ORDER. LEARN ED DR ALSO ACCEPTED THIS FACT. ON PERUSAL OF ASSESSMENT ORDER AND CIT(A)S ORDER, IT IS NOTICED THAT ISSUE RAISED IN THESE GRO UNDS ARE NEITHER SUBJECT MATTER OF ADDITION IN THE ASSESSMENT ORDER NOR WERE SUBJECT 2 ITA NOS. 837 & 838/HYD/2014 M/S UNIVERSAL REALTORS PVT. LTD. MATTER OF APPEAL BEFORE THE CIT(A). AS THE ISSUE R AISED IN THE AFORESAID GROUNDS ARE NOT RELEVANT FOR THE PURPOSE OF THIS APPEAL, THESE GROUNDS ARE DISMISSED AS INFRUCTUOUS. 3. IN GROUND NO. 5, THE ISSUE RAISED IS WITH REGARD TO ADDITION MADE ON ESTIMATION BASIS BY AO ON CONSTRUCTION OF H OUSING PROJECTS. 4. BRIEFLY, THE FACTS RELATING TO THE AFORESAID ISS UE ARE, ASSESSEE A COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE D EVELOPMENT AND CONSTRUCTION. FOR THE AY UNDER DISPUTE, ASSESSEE FI LED HIS RETURN OF INCOME ON 30/09/2009 DECLARING TOTAL INCOME OF RS. 17,65,49,710. DURING ASSESSMENT PROCEEDING, AO AFTER EXAMINING TH E BOOKS OF ACCOUNT AND OTHER INFORMATION AVAILABLE WITH HIM NO TICED THAT DURING THE RELEVANT AY ASSESSEE HAS RECOGNIZED REVENUE FRO M THREE OF ITS PROJECTS VIZ., BIT-I, BIT-II AND BIT-IV. ON QUERY R AISED BY AO, ASSESSEE EXPLAINED THAT IT RECOGNIZES REVENUE AS PER THE PER CENTAGE COMPLETION METHOD AS PRESCRIBED IN ITS ACCOUNTING P OLICY. FOR THE YEAR UNDER CONSIDERATION ALSO, REVENUE IS RECOGNIZED IN ACCORDANCE WITH CONSISTENT ACCOUNTING SYSTEM FOLLOWED BY ASSESSEE A ND ACCEPTED BY DEPARTMENT IN THE PRECEDING AY. IT WAS SUBMITTED BY ASSESSEE THAT AS PER THE SAID ACCOUNTING POLICY, REVENUE IS RECOGNIZ ED ON ACHIEVING 30% THRESHOLD LIMIT OF INCURRING COST OF A PARTICUL AR PROJECT VIS--VIS TOTAL PROJECT COST. IN SUPPORT OF SUCH CLAIM, ASSE SSEE ALSO FURNISHED DETAILS OF REVENUE RECOGNIZED AND COST CHARGED AS W ELL AS PROFIT ACCOUNTED FOR IN DIFFERENT PROJECTS. AO, HOWEVER, C OMMENTED THAT ASSESSEES POLICY OF RECOGNIZING REVENUE ON ACHIEVI NG 30% OF THE PROJECT COST IS NOT ACCEPTABLE. SINCE AO WAS OF THE VIEW THAT PROFIT SHOULD BE RECOGNISED AS PER THE PERCENTAGE OF COST ACTUALLY INCURRED, HE PROCEEDED TO ESTIMATE THE PROFIT FOR BIT-III PRO JECT BY ESTIMATING AT RS. 1,39,33,222, WHICH WAS ADDED TO INCOME OF ASSES SEE. BEING AGGRIEVED OF THE ADDITION MADE, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 3 ITA NOS. 837 & 838/HYD/2014 M/S UNIVERSAL REALTORS PVT. LTD. 5. IN COURSE OF HEARING BEFORE THE CIT(A), ASSESSEE SUBMITTED THAT IN IDENTICAL NATURE OF DISPUTE FOR THE PRECEDING AY 2008-09, ITAT IN ORDER PASSED IN ITA NOS. 342-343/HYD/12 DATED 20/01 /2014 HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. FOLLOWING THE DECISION OF ITAT, CIT(A) DELETED THE ADDITION. 6. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF THE RE VENUE AUTHORITIES. THOUGH, THE LEARNED DR AGREED WITH THE FACT THAT IS SUE IS COVERED BY THE ORDER OF ITAT FOR THE PRECEDING ASSESSMENT YEAR , BUT, HE NEVERTHELESS SUBMITTED THAT AO WAS CORRECT IN ESTIM ATING THE PROFIT. LEARNED AR ON THE OTHER HAND SUBMITTED, AS THE ISSU E IS SQUARELY COVERED BY THE DECISION OF COORDINATE BENCH FOR PRE CEDING AY, CIT(A) WAS CORRECT IN DELETING THE ADDITION MADE. 7. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIES , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). IT IS A FACT ON RECORD THAT IDENTICAL ESTIMATION OF PROFIT RELATING TO BIT-III HOUSING PROJECT IN THE PRECEDING AY 2008-09 CAME UP FOR CONSIDERATION BEFO RE THE ITAT IN ITA NOS. 342-343/HYD/12 DATED 20/01/2014. ITAT AFTE R CONSIDERING THE SUBMISSIONS OF THE PARTIES HELD AS UNDER: 36. COMING TO SUSTAINING OF ADDITION BY THE CIT(A) , IN OUR OPINION, THOUGH HE ACCEPTED THE METHOD OF ACCOUNTING FOLLOWE D BY THE ASSESSEE, HE FOUND FLAWS IN THE COMPUTATION AND HE HAS MADE T HE REVISED COMPUTATION. IN OUR OPINION, HE CANNOT SUBSTITUTE O NE MORE COMPUTATION IN PLACE OF ASSESSEE'S COMPUTATION AS WELL AS AO'S COMPUTATION. THE ASSESSEE HAS RECOGNISED THE INCOME IN ACCORDANCE WI TH THE TRUE TERMS OF THE AGREEMENT AND IF THERE IS ANY INCONSISTENCY IN RECOGNISING THE INCOME THEN ONLY REVENUE AUTHORITIES CAN DISTURB TH E SAME. THERE IS NO WHISPER IN THE CIT(A)'S ORDER THAT THE ASSESSEE HAS NOT RECOGNISED THE INCOME IN ACCORDANCE WITH THE SUPPLEMENTARY AGREEME NTS. ONCE THE ASSESSEE RECOGNISED THE INCOME IN ACCORDANCE WITH T HE SUPPLEMENTARY AGREEMENTS, THE CIT(A) CANNOT SUBSTITUTE HIS ASSESS MENT TO SAY THAT THE ASSESSEE HAS POSTPONED THE TAX LIABILITY. THE CIT(A ) OBSERVED THAT THERE IS NO BASIC DEVIATION IN THE METHOD FOLLOWED BY THE ASSESSEE REGARDING RECOGNISING OF INCOME. HOWEVER, HE OBSERVED IN THE SAME BREATH THAT THERE IS BASIC FLAW IN THE METHOD FOLLOWED BY THE A SSESSEE TO HAVE 4 ITA NOS. 837 & 838/HYD/2014 M/S UNIVERSAL REALTORS PVT. LTD. THRESHOLD LIMIT OF 30% AS THE SAID THRESHOLD LIMIT CAN BE DIFFERED BY VARIOUS MEANS. WHEN THERE IS NO DEVIATION IN RECOGN ISING THE INCOME BY THE ASSESSEE, THE CIT(A) CANNOT RECOMPUTE THE PROFI T OF THE ASSESSEE BY OBSERVING THAT THERE IS BASIC FLAW IN THE METHOD FO LLOWED BY THE ASSESSEE TO HAVE THRESHOLD LIMIT OF 30% AS THE SAID THRESHOL D LIMIT CAN BE DIFFERED BY VARIOUS MEANS, WHICH IS UNWARRANTED. ACCORDINGLY , THE FINDINGS OF THE CIT(A) ARE VACATED AND THE GROUNDS RAISED BY THE AS SESSEE ARE ALLOWED. AS THE CIT(A) HAS DELETED THE ADDITION BY FOLLOWING THE AFORESAID ORDER OF ITAT, ORDER OF CIT(A) HAS TO BE UPHELD. TH US, GROUND NO. 5 IS DISMISSED. 8. THE NEXT ISSUE AS RAISED IN GROUND NOS. 6 & 7 RE LATE TO DISALLOWANCE OF AN AMOUNT OF RS. 25,66,160 U/S 40(A )(IA) OF THE ACT. 9. BRIEFLY, THE FACTS ARE, DURING THE ASSESSMENT PR OCEEDING, AO NOTICING THAT ASSESSEE HAS NOT REMITTED THE TDS AMO UNT WITHIN THE DUE DATE DISALLOWED AN AMOUNT OF RS. 25,66,160 ON T OTAL PAYMENTS MAD OF RS. 9,69,04,762 TO DIFFERENT ENTITIES. 10. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS SU BMITTED BY ASSESSEE THAT TDS AMOUNT WAS REMITTED TO GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U /S 139(1) FOR THE AY UNDER CONSIDERATION. IT WAS, THUS, SUBMITTED THAT I N VIEW OF FIRST PROVISO TO SECTION 40(A)(IA) OF THE ACT, WHICH IS R ETROSPECTIVE IN OPERATION, THERE CANNOT BE ANY DEFAULT IF TDS IS RE MITTED WITHIN THE DUE DATE OF FILING OF RETURN. IN THIS CONTEXT, ASSE SSEE RELIED ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN CASE OF M/S VIRGIN CREATIONS (ITA NO. 302 OF 2011, DATED 23/11/2011. T HE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND GOING T HROUGH THE DECISIONS CITED BEFORE HIM HELD THAT AS THE TDS AMO UNT WAS REMITTED TO THE GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF RE TURN U/S 139(1), THERE CANNOT BE ANY DISALLOWANCE U/S 40(A)(IA) OF T HE ACT. 5 ITA NOS. 837 & 838/HYD/2014 M/S UNIVERSAL REALTORS PVT. LTD. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES, PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE MATERIAL S ON RECORD AS WELL AS THE JUDICIAL PRECEDENTS ON THIS ISSUE. THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE HAS REMITTED THE TDS AMOUNT BEFO RE THE DUE DATE OF RETURN FOR THE IMPUGNED ASSESSMENT YEAR AS PROVI DED U/S 139(1) OF THE ACT. THE HONBLE CALCUTTA HIGH COURT IN CASE O F M/S VIRGIN CREATIONS (SUPRA) INTERPRETING THE PROVISIONS OF SE CTION 40(A)(IA) HAS HELD THAT IF TDS AMOUNT IS REMITTED TO THE GOVT. AC COUNT PRIOR TO THE DUE DATE OF RETURN, U/S 139(1), THERE WILL BE NO D ISALLOWANCE U/S 40(A)(IA) AS FIRST PROVISO TO SECTION 40(A)(IA) BRO UGHT TO THE STATUTE BY FINANCE ACT, 2010 WILL APPLY RETROSPECTIVELY. THIS DECISION OF THE CALCUTTA HIGH COURT HAS BEEN FOLLOWED BY THE HONBL E JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. PEC ELECTRICALS PVT. LTD. VIDE ITTA NO. 263/2013 DATED 12/07/2013. FOLLOWING THE RATIO LAID DOWN BY THE HONBLE HIGH COURTS, COORDINATE BENCHES OF THIS TRI BUNAL HAVE ALSO HELD THAT FIRST PROVISO TO SECTION 40(A)(IA) BEING RETROSPECTIVE IN OPERATION, IF THE TDS AMOUNT IS REMITTED PRIOR TO T HE DUE DATE OF RETURN U/S 139(1), NO DISALLOWANCE IS TO BE MADE U/ S 40(A)(IA) OF THE ACT. FOLLOWING THE VIEW EXPRESSED BY THE HONBLE H IGH COURTS AS WELL AS COORDINATE BENCHES OF ITAT, WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE BY DISMISSING GROUND RAISED BY REVENUE AUTHOR ITIES. ITA NO. 838/HYD/2014 FOR AY 2010-11 12. IN THIS APPEAL DEPARTMENT HAS RAISED SIX GROUND S. GROUND NOS. 1 & 6 BEING GENERAL IN NATURE ARE NOT REQUIRED TO B E ADJUDICATED. AT THE OUTSET, LEARNED AR MENTIONED THAT GROUND NOS. 2 , 3 & 4 ARE NOT RELEVANT FOR THE IMPUGNED ASSESSMENT YEAR AS THEY D O NOT ARISE EITHER FROM THE ASSESSMENT ORDER OR FROM THE CIT(A)S ORDE R. LEARNED DR ALSO ACCEPTED THIS FACT. ON PERUSAL OF ASSESSMENT ORDER AND CIT(A)S ORDER, IT IS NOTICED THAT ISSUE RAISED IN THESE GRO UNDS NEITHER SUBJECT MATTER OF ADDITION IN THE ASSESSMENT ORDER NOR WERE SUBJECT MATTER OF 6 ITA NOS. 837 & 838/HYD/2014 M/S UNIVERSAL REALTORS PVT. LTD. APPEAL BEFORE THE CIT(A) AS THE ISSUE RAISED IN THE AFORESAID GROUNDS ARE NOT RELEVANT FOR THE PURPOSE OF THIS APPEAL, TH ESE GROUNDS ARE DISMISSED. 13. IN GROUND NO. 5, THE ISSUE RAISED IS WITH REGAR D TO ADDITION MADE ON ESTIMATION BASIS BY AO ON THE CONSTRUCTION OF HOUSING PROJECTS. 14. AS THIS GROUND IS MATERIALLY IDENTICAL TO THE G ROUND NO. 7 IN ITA NO. 837/HYD/14 FOR AY 2009-10(SUPRA), FOLLOWING OU R DECISION VIDE PARA 5 OF THIS ORDER, THIS GROUND IS ALSO DISMISSE D. 15. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19/09/2014. SD/- SD/- (P.M. JAGTAP) (SAKT IJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 19 TH SEPTEMBER, 2014 KV COPY TO:- 1) DCIT, CIRCLE 3(3), 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2) M/S UNIVERSAL REALTORS PVT. LTD., INRHYTHM BUIL DING, 1 ST FLOOR, PLOT NO. 1023, GURUKUL SOCIETY, KHANMET VILLAG E, NEAR MERIDIAN SCHOOL, MADHAPUR, HYDERABAD 3) CIT(A)-IV, HYDERABAD. 4) CIT-III, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.