Centre Point Estates Pvt. Ltd., Kolkata V. ITO, Ward 12(3), Kolkata, Kolkata

ITA 860/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5358 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 27-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOWDHURY A DDL
• Assessee Lawyers: M D SHAH
• Section: 40A(3); 143(3); 133(6); 147; 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI A T VARKEY, JM, & SHRI M.BAL AGANESH, AM] I.T.A NO. 860/KOL/201 7 ASSESSMENT YEAR : 2010-1 1 CENTRE POINT ESTATES PVT. LTD. -VS- ITO, WARD-12(3), KOLKATA. [PAN: AABCC 0785 C ] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI M.D.SHAH, AR FOR THE RESPONDENT : SHRI ROBIN CHOWDHURY, AD DL. CIT SR. DR DATE OF HEARING : 11.10.2018 DATE OF PRONOUNCEMENT : 16.10.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-15, KOLKATA [IN SHORT THE LD CI T(A)] IN APPEAL NO. 390/CIT(A)- 15/15-16/12(3)/R&T/KOL DATED 14.03.2017 AGAINST TH E ORDER PASSED BY THE ITO, WARD- 12(3), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 144 READ WITH SECTION 145(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 11 .03.2013 FOR THE ASSESSMENT YEAR 2010-11 2 ITA NO.860/KOL/2017 CENTRE POINT ESTATES PVT. LTD. A.YR. 2010-11 2 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE ADDITION OF RS. 48,51,20 0/- ON ACCOUNT OF CONSTRUCTION COST, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE COMPANY IS A REAL ESTATE DEVELOPER. IT FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2010 -11 ON 19.11.2010 SHOWING NIL INCOME AFTER ADJUSTING OF BROUGHT FORWARD LOSS OF R S. 2,84,891/-. THE LD. AO OBSERVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD . AR OF THE ASSESSEE FURNISHED FEW DETAILS IN RESPECT OF IT RETURN WHICH WERE TEST CHE CKED AND PLACED ON RECORD. BOOKS OF ACCOUNTS, BILLS AND VOUCHERS WERE NOT PRODUCED BEFO RE THE LD. AO DESPITE SEVERAL OPPORTUNITIES. THE LD. AO OBSERVED THE A COPY OF A NNUAL INFORMATION REPORT (AIR) DOWNLOADED FROM DATABASE WERE SERVED ON THE ASSESSE E AND CLARIFICATION WAS SOUGHT WITH REGARD TO SALE OF IMMOVABLE PROPERTIES ON 19.0 5.2009 WHICH REMAINED UN- COMPLIED. THE LD. AO ALSO POINTED OUT THE VARIOUS D ISCREPANCIES IN THE BOOKS AND TAX AUDIT REPORT U/S 44AB OF THE ACT TO THE LD. AR OF T HE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. AO OBSERVED THAT AS PER THE DETAILS FILED BY THE ASSESSEE, THE PROJECT EXPENSES WAS RS. 2,89,34,69 7/- (RS. 46,78,716/- FOR ASSESSMENT YEAR 2010-11 + RS. 2,42,55,981/- FOR ASSESSMENT YEA RS 2008-09 AND EARLIER). BUT AS PER BALANCE SHEET (SCHEDULE -6 UNDER THE HEAD LOANS AN D ADVANCES), PROJECT EXPENSES AS ON 31.03.2009 WAS RS. 2,56,90,235/-. THE REASONS AN D DIFFERENCE OF OPENING BALANCE OF RS. 32,44,462/- (RS. 2,89,34,697/- - RS. 2,56,90,23 5/-) WAS NOT EXPLAINED. THE ASSESSEE FAILED TO FURNISH A CLARIFICATION IN THIS REGARD. B ECAUSE OF DISCREPANCIES IN OPENING BALANCE, NECESSARY ACTION AS PER LAW IS REQUIRED TO BE TAKEN FOR ASSESSMENT YEAR 2009- 10. THE LD. AO ALSO OBSERVED THAT NOTICE U/S 133(6) ISSUED TO MD. KHALID AND G.S. TRANSPORT PVT. LTD. COULD NOT BE SERVED BY THE POST AL AUTHORITIES. HE ALSO OBSERVED THAT THERE WERE CERTAIN PAYMENTS WHICH WERE PAID IN VIOL ATION OF SECTION 40A(3) OF THE ACT. SINCE THE ASSESSEE WAS DIRECTED TO PRODUCE THE BOOK S OF ACCOUNTS, BANK STATEMENT, BILLS AND VOUCHERS WHICH REMAINED UN-COMPLIED, THE LD. AO HELD THAT COMPLETENESS AND 3 ITA NO.860/KOL/2017 CENTRE POINT ESTATES PVT. LTD. A.YR. 2010-11 3 CORRECTNESS OF ACCOUNTS OF THE ASSESSEE ARE NOT SAT ISFACTORY AND ACCORDINGLY THE BOOK RESULTS WERE REJECTED U/S 145(3) OF THE ACT AND INC OME WAS SOUGHT TO BE ESTIMATED U/S 144 OF THE ACT. FOR THIS PURPOSE, THE LD. AO OBSERV ED THAT SINCE THE ASSESSEE IS DEALING PROJECT COMPLETION METHOD IN RESPECT OF REAL ESTATE PROJECTS, THE INCOME IS TO BE DETERMINED DURING THIS YEAR AND ACCORDINGLY, SINCE NO DETAILS OF TOTAL PROJECT EXPENSES OF RS. 3,11,50,132/- WAS FURNISHED BY THE ASSESSEE AND FOR TOTAL OTHER EXPENSES OF RS. 7,04,948/-, HE RESORTED TO DISALLOW 20% OF THE SAME IN THE ASSESSMENT AND ALLOWED THE REMAINING EXPENDITURE OF RS. 2,54,84,064/- AS DEDUC TION IN THE ASSESSMENT AND COMPUTED THE PROFITS ACCORDINGLY. 4. BEFORE THE LD. CIT(A), THE ASSESSEE FURNISHED AL L THE DETAILS THAT WERE CALLED FOR BY THE LD. AO AS WELL AS BY THE LD. CIT(A). THESE DETA ILS WERE SOUGHT TO BE VERIFIED BY THE LD. AO AND ACCORDINGLY, A REMAND REPORT WAS SOUGHT BY THE LD. CIT(A) FROM THE LD. AO. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASS ESSEE ALSO PLACED ON RECORD THE REASSESSMENT ORDER FRAMED FOR THE ASSESSMENT YEAR 2 009-10 U/S 147 / 143(3) OF THE ACT DATED 05.03.2014, WHEREIN THE REOPENING WAS MADE IN ORDER TO VERIFY THE CLOSING WORK- IN-PROGRESS AS ON 31.03.2009. THE ASSESSEE ALSO BRO UGHT TO THE NOTICE OF THE LD. CIT(A) THAT THIS FACT IS ALSO MENTIONED BY THE LD. AO IN P AGE 3 PARA VI OF THE ASSESSMENT ORDER FRAMED FOR THE YEAR UNDER APPEAL. IN THE SAID REASS ESSMENT ORDER COMPLETED ON 05.03.2014 FOR ASSESSMENT YEAR 2009-10, THE LD. AO WAS SATISFIED WITH THE COMPLETE DETAILS OF EXPENDITURE INCURRED TOWARDS WORK-IN-PRO GRESS UPTO 31.3.2009 AND NO ADDITION WAS MADE IN THE SAID REASSESSMENT. THIS FA CT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) BY THE ASSESSEE. THE ASSESSEE ACCORDINGL Y PLEADED THAT ONLY THE EXPENDITURE INCURRED DURING THE YEAR TOWARDS WORK-IN-PROGRESS I.E. CONSTRUCTION COST FOR ASSESSMENT YEAR 2010-11 REQUIRES TO BE EXAMINED BY THE LD. AO FOR WHICH NECESSARY DETAILS WITH EVIDENCES WERE PRODUCED BY THE ASSESSEE BEFORE THE LD. AO IN THE REMAND PROCEEDINGS. THE LD. AO IN THE REMAND REPORT DATED 31.01.2017 ST ATED AS UNDER: 4 ITA NO.860/KOL/2017 CENTRE POINT ESTATES PVT. LTD. A.YR. 2010-11 4 2. DISALLOWANCE OF 20% OF EXPENSE OF PROJECT COST: THE LD. AO DISALLOWED RS. 62,30,026/- BEING 20% OF THE PROJECT COST ON ESTIMA TE. IN THE REMAND SUBMISSION THE ASSESSEE COMPANY HAS SUBMITTED THAT THE COST OF PRO JECT EXPENSES WERE RS. 3,11,50,132/- . ON EXAMINATION OF THE AUDITED ACCOUNTS AND THE AS SESSMENT ORDER DATED 05.03.2014 PASSED U/S 147 / 143(3) OF THE IT ACT IN THE CASE O F THE ASSESSEE FOR ASSESSMENT YEAR 2009-10 THE CLOSING WIP FOR THE PROJECT AS ON 31.03 .2009 WAS FOUND AND ACCEPTED AT RS. 2,89,34,435/- THUS THE TOTAL PROJECT COST BECAM E RS. 3,11,50,132/-. THE DETAILS OF THE EXPENDITURE WERE PRODUCED DURING THE COURSE OF HEAR ING IN RELATION WITH THE REMAND REPORT. 5. THE LD. CIT(A) HOWEVER PROCEEDED TO ACCEPT THE T OTAL CLAIM OF WORK-IN-PROGRESS INCURRED BY THE ASSESSEE FOR ASSESSMENT YEARS 2009- 10 AND 2010-11 AS CORRECT AND GENUINE. HE HOWEVER, DID NOT ACCEPT THE AMOUNT INCU RRED UP TO ASSESSMENT YEAR 2008- 09 IN THE SUM OF RS. 2,42,55,981/- AND HE UPHELD TH E ADDITION MADE BY THE LD. AO AT 20% THEREON IN RESPECT OF CONSTRUCTION COSTS INCURR ED UPTO ASSESSMENT YEAR 2008-09 ALONE AND CONFIRMED THE ADDITION OF RS 48,51,200/- THEREON. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T THE DETAILS OF TOTAL CONSTRUCTION COSTS FOR THE PROJECTS INCURRED BY THE ASSESSEE ARE AS UNDER: UP TO ASSESSMENT YEAR 2008-09 RS. 2,42,55,981/- FOR ASSESSMENT YEAR 2009-10 RS. 22,15,435/- FOR ASSESSMENT YEAR 2010-11 RS. 46,78,716/- TOTAL RS.3,11,50,132/- IT IS NOT IN DISPUTE THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD IN RESPECT OF ITS REAL ESTATE ACTIVITIES. THERE IS NO DISPUTE WIT H REGARD TO INCURRENCE OF CONSTRUCTION COST FOR ASSESSMENT YEARS 2009-10 AND 2010-11 AS TH E SAME HAS BEEN ACCEPTED AS GENUINE BY THE LD. CIT(A) IN HIS APPELLATE ORDER AG AINST WHICH THE REVENUE IS NOT IN APPEAL BEFORE US. THE ONLY DISPUTE THAT ARISES IS W ITH REGARD TO EXPENDITURE OF THE CONSTRUCTION COST BY THE ASSESSEE UP TO 31.03.2008 IN THE SUM OF RS. 2,42,55,981/-. IN THIS REGARD, WE FIND THAT THE ASSESSMENT FOR ASSESS MENT YEAR 2009-10 WAS REOPENED BY 5 ITA NO.860/KOL/2017 CENTRE POINT ESTATES PVT. LTD. A.YR. 2010-11 5 THE LD. AO ONLY TO VERIFY THE TOTAL CONSTRUCTION CO ST INCURRED BY THE ASSESSEE UP TO 31.03.2009. IN THE SAID REASSESSMENT COMPLETED U/S 147 / 143(3) DATED 05.03.2014 FOR ASSESSMENT YEAR 2009-10, THE LD. AO HAD ACCEPTED TH E ENTIRE CONSTRUCTION COST UP TO 31.03. 2009 AS CORRECT AND GENUINE. WE FIND THAT TH E TOTAL CONSTRUCTION COST INCURRED UP TO 31.03.2009 OBVIOUSLY INCLUDES THE CONSTRUCTION C OST INCURRED UP TO 31.03.2008 ALSO. HENCE THERE IS ABSOLUTELY NO REASON TO DOUBT THE CO NSTRUCTION COST INCURRED UP TO 31.03.2008 IN THE SUM OF RS. 2,42,55,981/- WARRANTI NG ANY ADDITION ON AN ESTIMATED BASIS ON 20% THEREON BY THE LD CITA. HENCE WE HOLD THAT THE LD. CIT(A) GROSSLY ERRED IN CONFIRMING THE ADDITION BY TAKING INTO ACCOUNT O NLY THE FIGURES UP TO ASSESSMENT YEAR 2008-09 WHEN THE SAME HAS ALREADY BEEN ACCEPTED AS GENUINE BY THE LD. AO WHICH FACT IS ALSO CONFIRMED IN THE REMAND REPORT. THE LD. AR ALSO SUBMITTED THAT NO REVISION PROCEEDINGS U/S 263 HAVE BEEN INITIATED BY THE LD. CIT IN RESPECT OF REASSESSMENT COMPLETED FOR ASSESSMENT YEAR 2009-10 ON 05.03.2014 AND THAT THE TIME LIMIT FOR THE SAME HAD ALREADY EXPIRED. HENCE THE REASSESSMENT FR AMED ON 05.03.2014 FOR THE ASSESSMENT YEAR 2009-10 WHEREIN THE TOTAL CONSTRUCT ION COST INCURRED UP TO 31.03.2009 HAS ALREADY BEEN EXAMINED AND FOUND TO BE GENUINE A ND HAD REACHED FINALITY. IN THESE FACTS AND CIRCUMSTANCES, WE HOLD THAT THERE IS ABSO LUTELY NO CASE MADE OUT BY THE REVENUE FOR UPHOLDING THE ADDITION OF RS. 48,51,200 /- IN THE YEAR UNDER APPEAL. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALL OWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 16.10.20 18 SD/- SD/- [A T VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16.10.2018 SB, SR. PS 6 ITA NO.860/KOL/2017 CENTRE POINT ESTATES PVT. LTD. A.YR. 2010-11 6 COPY OF THE ORDER FORWARDED TO: 1. CENTRE POINT ESTATES PVT. LTD. , C/O, D.J.SHAH & CO., KALYAN BHAWAN, 2, ELGIN ROAD, KOLKATA-700020. 2. ITO, WARD-12(3), KOLKATA, AAYAKAR BHAWAN, P-7, C HOWRINGHEE SQUARE, KOLKATA- 700069. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES