Dy. CIT, Circle-9, Pune V. M/s. Dhanashree Construction, Pune

ITA 865/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6731 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: K SRINIVASAN
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 143(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.865/PN/2013 (ASSESSMENT YEAR : 2009-10) DY. COMMISSIONER OF INCOME TAX, CIRCLE- 9, PUNE. . APPELLANT VS. M/S DHANASHREE CONSTRUCTION, 19/1/16, TATHWADE ROAD, DANGE CHOWK, THERGAON, PUNE- 411 033. PAN : AAEFD4519R . RESPONDENT DEPARTMENT BY : MR. S. P. WALIMBE ASSESSEE BY : MR. K. SRINIVASAN DATE OF HEARING : 05-06-2014 DATE OF PRONOUNCEMENT : 23-06-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DA TED 30.01.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 01.12.2011 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2009-10. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/S 80IB(10), IN RESPECT OF THE ADDITION MADE BY THE A.O. FOR UNDISC LOSED STOCK OF TWO FLATS FOUND AND VALUED AT RS.10,50,192/- WHICH WAS ASSESSABLE U/S 69, AND HENCE COMPUTABLE UNDER THE HEAD ' OTHER SOU RCES '. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE CHHATTISGARH HIGH COURT IN ITS DECISION IN THE CASE OF DHANUSH GENERAL STORES VS. CIT REPORTED IN 339 ITR 651, WHI LE ALLOWING DEDUCTION U/S 80IB(10) ON UNDISCLOSED STOCK OF TWO FLATS OF R S. 10,50,192/-. ITA NO.865/PN/2013 A.Y. : 2009-10 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO ALLOW THE CLAIM OF THE ASSESSEE MADE TO REDUCE THE GROSS SALE AMOUNT OF TH IS YEAR BY RS.17,60,400/- RELATING TO EXCESS SALE SHOWN ON RES ALE EFFECTED IN A.Y. 2008-09 BUT NOT CONSIDERED IN THAT YEAR, WHEN ASSES SEE IS REGULARLY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND RECOG NIZES REVENUE AND EXPENSES ON ACCRUAL BASIS AND UNDER THE I.T. LA W INCOME/LOSS OF EACH YEAR IS TO BE COMPUTED SEPARATELY. 3. THE RESPONDENT-ASSESSEE IS A PARTNERSHIP FIRM EN GAGED IN THE BUSINESS OF CONSTRUCTION OF HOUSING AND COMMERCIAL PROJECTS AND FOR THE YEAR UNDER CONSIDERATION, IT FILED A RETURN OF INCOME DECLARIN G TOTAL INCOME OF RS.1,46,02,550/- WHICH WAS SUBJECT TO A SCRUTINY AS SESSMENT U/S 143(3) OF THE ACT WHEREBY THE TOTAL INCOME WAS DETERMINED AT RS.1 ,90,47,790/- AFTER MAKING CERTAIN DISALLOWANCES/ADDITIONS ON ACCOUNT OF DEDUC TION U/S 80IB(10) OF THE ACT, UNDERSTATEMENT OF CLOSING STOCK, ETC.. ASSESS EE ASSAILED THE ADDITIONS IN APPEAL BEFORE THE CIT(A), WHO HAS DELETED THE SAME. AGGRIEVED WITH THE DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US ON THE AFORESTATED GROUNDS OF APPEAL. 4. IN SO FAR AS THE GROUNDS OF APPEAL NO.1 & 2 ARE CONCERNED, THEY RELATE TO THE ACTION OF THE CIT(A) IN ALLOWING ASSESSEES CLAIM FOR DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF A SUM OF RS.10,52 ,192/-, WHICH REPRESENTED ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT U NDERSTATEMENT OF CLOSING STOCK. IN THIS REGARD, THE RELEVANT FACTS ARE THAT THE ASSESSEE HAD UNDERTAKEN DEVELOPMENT OF A HOUSING PROJECT, NAMELY, SONIGRA P ARK AT DANGE CHOWK, CHINCHWAD, PUNE. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD SHOWN THE CLOSING STOCK IN THE SAID PROJECT AT NIL BUT ON VER IFICATION IT WAS FOUND THAT TWO RESIDENTIAL FLATS IN THE SAID PROJECT HAD REMAINED UNSOLD AT THE END OF THE YEAR UNDER CONSIDERATION, WHICH WERE SOLD DURING THE SUB SEQUENT YEAR. AS PER THE ASSESSING OFFICER, THE VALUE OF THE AFORESAID TWO F LATS WAS LIABLE TO BE CONSIDERED AS CLOSING STOCK, WHICH WAS NOT SO DIS CLOSED. AS A RESULT, THE ASSESSING OFFICER TREATED THE COST ELEMENT OF TWO F LATS TO BE RS.10,52,192/-, ITA NO.865/PN/2013 A.Y. : 2009-10 WHICH WAS ADDED TO THE TOTAL INCOME AS UNDERSTATED PROFIT ON ACCOUNT OF NON- REPORTING OF CLOSING STOCK. THE ASSESSING OFFICER ALSO HELD THAT ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF SECTION 80IB(10) OF THE ACT IN RELATION TO THE SAID ASSESSED INCOME, IT WAS NOT CLAIMED IN THE RET URN OF INCOME. 5. THE CIT(A) HAS UPHELD THE ADDITION BUT ALLOWED T HE PLEA FOR DEDUCTION U/S 80IB(10) OF THE ACT WITH RESPECT TO THE AFORESA ID INCOME, AS ACCORDING TO HIM, THE AFORESAID SUM REPRESENTED PROFITS PERTAINI NG TO THE HOUSING PROJECT WHICH WAS OTHERWISE ELIGIBLE FOR THE BENEFITS OF SE CTION 80IB(10) OF THE ACT. 6. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT THE IMPUGNED SUM WAS ASSESSABLE AS DEEMED INCOME U/S 69 OF THE ACT UNDER THE HEAD OTHER SOURCES AND RELIED UPON THE JUDGEM ENT OF THE HONBLE CHHATTISGARH HIGH COURT IN THE CASE OF DHANUSH GENE RAL STORES VS. CIT, 339 ITR 651 IN THIS REGARD; AND, THEREFORE SUCH INCOME WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. 7. ON THE OTHER HAND, THE LEARNED COUNSEL APPEARING FOR THE RESPONDENT- ASSESSEE HAS DEFENDED THE ACTION OF THE CIT(A) ON T HIS ASPECT AND POINTED OUT THAT THE ADDITION HAS BEEN MADE BY THE ASSESSIN G OFFICER AS UNDERSTATEMENT OF PROFITS OF THE PROJECT AND SECT ION 69 OF THE ACT HAS NOT BEEN INVOKED IN RELATION TO THE IMPUGNED ADDITION; AND, THEREFORE THE PLEA OF THE LEARNED DEPARTMENTAL REPRESENTATIVE IS NOT BORN E OUT OF RECORDS. 8. ON THIS ASPECT, WE FIND THAT THE ASSESSING OFFIC ER CONSIDERED THE NON- REPORTING OF TWO FLATS IN THE CLOSING STOCK AS AN U NDERSTATEMENT OF CLOSING STOCK, WHOSE VALUE WAS DETERMINED AT RS.10,52,192/- . AS PER THE ASSESSING OFFICER, THIS NON-REPORTING HAD RESULTED IN UNDERSTATEMENT OF PROFIT DURING THE YEAR AND THEREFORE, HE ADDED THE SAME TO THE INCOME OF THE ASSESSEE. HAVING REGARD TO THE AFORESAID FACTUAL POSITION, WE FIND THAT THE PRESENT PLEA OF ITA NO.865/PN/2013 A.Y. : 2009-10 THE REVENUE TO INVOKE SECTION 69 OF THE ACT TO JUST IFY THE IMPUGNED ADDITION, AS QUITE IRRELEVANT AND EXTRANEOUS TO THE STAND OF THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS. BE THAT AS IT MAY, THE ASS ESSING OFFICER CONSCIOUSLY MADE THE ADDITION TREATING THE IMPUGNED SUM AS UNDE RSTATED PROFITS OF THE HOUSING PROJECT IN QUESTION. FURTHER, HE DENIED TH E BENEFITS OF SECTION 80IB(10) OF THE ACT ON SUCH INCOME MERELY FOR THE R EASON THAT IT WAS NOT CLAIMED IN THE RETURN OF INCOME. HOWEVER, FACTUALL Y, IT IS QUITE CLEAR THAT THE IMPUGNED ADDITION MERELY GOES TO ENHANCE THE BUSINE SS INCOME OF THE HOUSING PROJECT AND IN THIS CONTEXT, THE RATIO OF T HE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASES OF CIT VS. SHETH DEV ELOPERS (P) LTD., (2012) 254 CTR 127 (BOM) AND CIT VS. GEM PLUS JEWELLERY IN DIA LTD., (2010) 330 ITR 175 (BOM) CLEARLY ENTITLES THE ASSESSEE FOR SEC TION 80IB(10) BENEFITS ON SUCH INCOME ALSO. THE FACT THAT THE SAID CLAIM WAS NOT MADE IN THE RETURN OF INCOME HAS NO BEARING ON THE ISSUE IN QUESTION BECA USE THE SAID INCOME WAS OBVIOUSLY NOT DECLARED IN THE RETURN OF INCOME BUT HAS RESULTED ON ACCOUNT AN ADDITION MADE BY THE ASSESSING OFFICER DURING THE A SSESSMENT PROCEEDINGS. THEREFORE, ONCE THE ASSESSING OFFICER HAS MADE THE SAID ADDITION, TREATING IT AS AN INCOME RELATING TO THE HOUSING PROJECT IN QUE STION, THE SAME HAS TO BE REGARDED AS MERE ENHANCEMENT THE BUSINESS INCOME DE RIVED FROM THE ELIGIBLE HOUSING PROJECT; AND, IT SHALL BE ENTITLED FOR SECT ION 80IB(10) BENEFITS. THE CIT(A), IN OUR VIEW, MADE NO MISTAKE IN ALLOWING TH E BENEFITS OF SECTION 80IB(10) OF THE ACT IN RELATION TO THE IMPUGNED INC OME. THUS, ON THIS ASPECT, REVENUE HAS TO FAIL. 9. AT THE TIME OF HEARING, THE LEARNED COUNSEL ALSO MADE A SUPPLEMENTARY ARGUMENT WHICH IS TO THE EFFECT THAT THE ADDITION O F RS.10,50,192/- MADE ON ACCOUNT OF NON-REPORTING OF TWO FLATS IN CLOSING ST OCK, WAS ITSELF NOT MAINTAINABLE. IN THIS CONTEXT, THE LEARNED COUNSEL SUBMITTED THAT THE TWO FLATS IN THE PROJECT IN QUESTION, NAMELY, B/601 AND B/602 WERE INDEED ALREADY SOLD BEFORE THE LAST DATE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR ITA NO.865/PN/2013 A.Y. : 2009-10 UNDER CONSIDERATION; AND, IT WAS ONLY IN THE SUBSEQ UENT PERIOD THAT THE SALE WAS CANCELLED. THEREFORE, THERE WAS NO REASON TO C ONSIDER THEIR VALUE AS A PART OF CLOSING STOCK ON 31.03.2009. WE FIND THAT THE AFORESAID PLEA OF THE ASSESSEE IS A FRESH PLEA, WHICH WAS NOT RAISED BEFO RE EITHER OF THE LOWER AUTHORITIES. BE THAT AS IT MAY, WE REFRAIN FROM AD JUDICATING ON THE SAME AS IT IS RENDERED ACADEMIC, BECAUSE ASSESSEE HAS ALREADY BEE N ALLOWED THE BENEFIT OF SECTION 80IB(10) OF THE ACT ON SUCH INCOME AND T HERE IS NO RESULTANT TAX LIABILITY ON THIS SCORE. 10. IN CONCLUSION, WE AFFIRM THE ORDER OF THE CIT(A ) ON THIS ASPECT AND THE REVENUE FAILS IN ITS GROUNDS OF APPEAL NO.1 & 2. 11. THE LAST GROUND IN THIS APPEAL IS WITH RESPECT TO THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING THE NET SALES OF T HE HOUSING PROJECT DURING THE YEAR AT RS.50,23,971/- AS AGAINST RS.73,70,958/- CO NSIDERED BY THE ASSESSEE THEREBY RESULTING IN PARTIAL DISALLOWANCE OF DEDUCT ION U/S 80IB(10) OF THE ACT TO THE EXTENT OF RS.20,18,050/-. IN THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE GROSS SALES CONSID ERATION OF THE FLATS SOLD DURING THE YEAR WAS CONSIDERED BY THE ASSESSEE AT R S.88,02,421/- AND IT WAS REDUCED BY RS.17,60,400/- TO ARRIVE AT NET SALES AN D SUCH DEDUCTION WAS ON ACCOUNT OF CANCELLATION OF THE SALE OF FLAT NOS. G- 101 & 102, WHICH WERE EARLIER SOLD TO ONE JAISI ROHIT HARIPRASAD. THE AFORESAID TWO FLATS WERE RESOLD ON 01.11.2007 FOR A TOTAL CONSIDERATION OF RS.37,78,45 0/-. AS PER THE ASSESSING OFFICER, THE ASSESSEE OUGHT TO HAVE REDUCED THE SUM OF RS.37,78,450/- FROM THE GROSS SALE CONSIDERATION TO ARRIVE THE NET SAL ES AND THEREFORE HE DISALLOWED DEDUCTION U/S 80IB(10) OF THE ACT AMOUNT ING TO RS.20,18,050/- (I.E. RS.37,78,450/- MINUS RS.17,60,400/-). THE CIT(A) HAS SET-ASIDE THE ACT ION OF THE ASSESSING OFFICER ON THE GROUND THAT THERE WAS NO JUSTIFICATION FOR DISALLOWING RS.20,18,050/-, AS THE NET EFFECT OF TH E SALE CANCELLATION WAS DULY CONSIDERED BY THE ASSESSEE BY REDUCING THE GROSS SA LES BY THE SUM OF ITA NO.865/PN/2013 A.Y. : 2009-10 RS.17,60,400/-. AGAINST SUCH DECISION OF THE CIT(A ), REVENUE IS IN APPEAL BEFORE US. 12. AT THE TIME OF HEARING, THE LEARNED DEPARTMENTA L REPRESENTATIVE HAS MERELY RELIED UPON THE REASONING TAKEN BY THE ASSES SING OFFICER, WHICH WE HAVE ADVERTED TO IN EARLIER PARAS AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 13. AFTER CONSIDERING THE STAND OF THE LEARNED DEPA RTMENTAL REPRESENTATIVE, WE FIND NO REASONS TO INTERFERE WIT H THE CONCLUSION DRAWN BY THE CIT(A), WHICH IS QUITE APT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE CIT(A) HAS MADE THE FOLLOWING CONCLU SION :- 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AS WELL AS REPLY OF THE APPELLANT. IN THIS CASE, IT IS SEEN TH AT ORIGINALLY RS.17,60,400/- WAS SHOWN AS SALE CONSIDERATION ON 14.01.2006 I.E. FOR A.Y. 2007-08 AND DEDUCTION U/S. 80IB(10) OF INCOME-TAX ACT WAS CLAIM ED. AFTER CANCELLATION, THE TWO FLATS WERE SOLD ON 01.11.2007 FOR THE TOTAL CONSIDERATION OF RS.37,78,450/- WHICH PERTAINS TO A.Y. 2008-09. THE APPELLANT SHOULD HAVE REVISED THE CLAIM OF 80IB(10) EITHER FOR A.Y. 2007- 08 OR A.Y. 2008-09. HOWEVER, INSTEAD OF DOING THAT, THE APPELLANT REDUC ED THE SALE CONSIDERATION IN A.Y. 2009-10 BY DEBIT ENTRY DATED 01.04.2008 FOR THE AMOUNT OF RS.17,16,400/-. THIS DELAY IN DEBIT ENTRY IS WITHOUT ANY BASIS. HOWEVER, SINCE THE ASSESSING OFFICER HAD NOT TAKEN ANY REMEDIAL MEASURES EITHER IN A.YS. 2007-08 OR 2008-09, IT IS CLEAR THAT HE HAS ACCEPTED THE DEBIT ENTRY OF RS.17,60,400/- DATED 01 .04.2008. THIS BEING SO, THERE IS NO CASE FOR DISALLOWING RS.20,18,050/- IN A.Y. 2009-10 AS THE NET EFFECT OF CANCELLATION HAS BEEN CONSIDERED BY T HE APPELLANT VIDE DEBIT ENTRY DATED 01.04.2008 AMOUNTING TO RS.17,60,400/-. THEREFORE, THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING DEDUCTION U /S. 80IB(10) AMOUNTING TO RS.20,18,050/- IS NOT JUSTIFIED AND HE IS DIRECT ED TO DELETE THE ADDITION. ACCORDINGLY, GROUND NO.1 IS ALLOWED. 14. FROM THE AFORESAID, IT IS QUITE EVIDENT THAT TH E NET EFFECT OF THE CANCELLATION OF SALE AND ITS RE-SALE THEREOF HAS BE EN CONSIDERED BY THE ASSESSEE WHILE COMPUTING ELIGIBLE DEDUCTION U/S 80I B(10) OF THE ACT. ONCE THE NET EFFECT OF THE CANCELLATION OF SALE AND SUBSEQUE NT RE-SALE HAS BEEN CONSIDERED, IT IS ONLY ON THE RESULTANT NET INCOME THAT THE CLAIM OF SECTION 80IB(10) OF THE ACT HAS BEEN WORKED OUT. THE DISCU SSION MADE BY THE CIT(A), ITA NO.865/PN/2013 A.Y. : 2009-10 CLEARLY LEADS TO THE AFORESAID CONCLUSION AND THE S AME HAS NOT BEEN FACTUALLY NEGATED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BEFORE US IN ANY MANNER. THEREFORE, THE ACTION OF THE CIT(A) IS HER EBY AFFIRMED AND THE REVENUE FAILS ON THIS GROUND ALSO. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JUNE, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 23 RD JUNE, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE