The DCIT, Central Circle-1, Baroda V. M/s. Narayan Land & Estate cO., Bharuch

ITSSA 177/AHD/2010

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8336 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 19-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SHANKAR
• Keywords: Opportunity of being heard; Audit objection; Competent authority
• Section: 143(3); 234B; 80IB; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI ANIL CHATURVE DI, AM) IT(SS)A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2005-06, 2006-07 AND 2007-08 THE D. C. I. T., CENT. CIR-1, 16 TH FLOOR AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA VS M/S. NARAYAN LAND & ESTATE CO., NARAYAN CHAMBER, STATION ROAD, BHARUCH, P. A. NO. AABFN 2500 K (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI T. SHANKAR, SR. DR RESPONDENT BY SHRI MUKUND BAKSHI, AR DATE OF HEARING: 07-08-2012 DATE OF PRONOUNCEMENT: 21-09-2012 O R D E R PER BENCH: ALL THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE SEPARATE ORDERS OF THE LEARNED CIT(A)-I V, BARODA ALL DATED 25 TH NOVEMBER, 2009 FOR THE ABOVE ASSESSMENT YEARS. THE SE APPEALS OF THE REVENUE ARE RELATING TO ONE ASSESSEE . THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS CONSOLIDATED ORDER. 2. THE FOLLOWING COMMON GROUNDS OF APPEAL (EXCEPT T HE FIGURES) TAKEN BY THE REVENUE IN IT (SS) A NO.178, 179/AHD/2 010 AND IN ITA NO.567/AHD/2010 FOR AY 2005-06, 2006-07 AND 2007-08 AND WE ARE DISPOSING OFF THESE APPEALS BY TAKING THE FACTS AND GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR 2005-06 WHICH ARE AS UNDER: IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 2 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION MADE BY A. O. OF RS.98,41,252/- ON ACCOUNT OF DISALLOWAN CE OF DEDUCTION U/S. 80 IB (10) OF THE ACT. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. C. I. T. (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. 3. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS.98,41,252/- U/S 80 IB (10) OF T HE I. T. ACT. THE AO HAS DISCUSSED THIS ISSUE IN PARA 4 TO 9 OF HIS ORDE R AND FINAL FINDING HAS BEEN GIVEN BY HIM IN PARA 8 AND 9 OF THE ASSESS MENT ORDER WHICH READS AS UNDER: 08. TO CONCLUDE, THE DEDUCTION U/S 80 IB (10) R. W . S. 80IB (1) AND RULE 18 BBB IS ADMISSIBLE ONLY TO SUCH ASSESSEE AS ARE DERIVING PROFITS FROM AN UNDERTAKING OF BUILDIN G AND HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITIES AND FOR SUCH APPROVAL, THE ASSESSEE MUST LEGALLY OWN THE LA ND WHICH IS AN INALIENABLE CONSTITUENT OF ANY HOUSING PROJECT. THE PERSON DOING ONLY THE WORK OF DEVELOPING AND CONSTRUCTING THE BUILDING STRUCTURE ON THE AUTHORIT Y OF THE APPROVAL GRANTED TO THE LAND OWNER CAN NOT BE SAID TO BE IN THE BUSINESS OF AN UNDERTAKING DEVELOPING AND BU ILDING HOUSING PROJECTS, NOT ONLY ON ACCOUNT OF NOT BEING THE OWNER OF THE LAND, A NECESSARY CONSTITUENT OF THE H OUSING PROJECT, BUT ALSO ON ACCOUNT OF NOT HAVING BEEN GRA NTED APPROVAL TO EXECUTE THE PROJECTS IN HIS OWN RIGHT, BECAUSE IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 3 THAT INVOLVES OBLIGATIONS THAT CAN BE DISCHARGE ONL Y BY THE PERSON TO WHOM THE APPROVAL IS GRANTED. 09. SINCE THE ASSESSEE IS NOT THE OWNER OF LAND AND THE APPROVAL OF LOCAL AUTHORITY IS NOT IN THE NAME OF T HE ASSESSEE BUT IN THE NAME OF THE LAND OWNERS, THE CONDITIONS LAID DOWN IN SECTION 80IB (10) R. W. S. 80IB(1), ARE NOT FULFILLED. IN VIEW OF THE DISCUSSION MADE I N THE ABOVE PRECEDING PARAS, DEDUCTION U/S 80IB (10) CLAI MED OF RS.9841252/- CAN NOT BE ALLOWED TO THE ASSESSEE AND THE SAME IS, THEREFORE, REJECTED. PENALTY PROCEEDINGS U/S 271 (1) (C) ARE INITIATED ON THIS POINT FOR FUR NISHING INACCURATE PARTICULARS. 4. BEFORE THE LEARNED CIT(A), FOLLOWING WRITTEN SUB MISSIONS WERE FILED ON BEHALF OF THE ASSESSEE: 4.1 THE LEARNED COUNSEL THROUGH HIS DETAILED WRITT EN SUBMISSION HAS SUBMITTED ON THIS ISSUE AS UNDER: SECOND AND THIRD GROUND IN THE APPEAL FOR A. Y. 200 5-06 TO A. Y. 2007-08 ARE PERTAINING TO DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S. 80 IB (10) OF THE ACT IN RE SPECT OF RESIDENTIAL PROJECTS NARAYAN GARDEN AT BARODA AND SURYANARAYAN AT BHARUCH DEVELOPED BY THE APPELLANT FIRM IN DENIAL OF DEDUCTION OF AN AMOUNTS SPECIFIED IN T HE ABOVE TABLE. THE LD. A. O. HAS DISALLOWED THE CLAIM OF THE APPEL LANT HOLDING THAT SUCH CLAIM IS ALLOWABLE ONLY TO AN ASS ESSEE WHO DERIVES PROFITS FROM AN UNDERTAKING OF BUILDING AND HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY, A ND FOR SUCH APPROVAL, THE ASSESSEE MUST LEGALLY OWN THE LA ND WHICH IS AN INALIENABLE CONSTITUENT OF ANY HOUSING PROJECT SUBJECT TO FULFILLMENT OF OTHER CONDITIONS PRESCRIB ED U/S. 80IB (10). IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 4 YOUR APPELLANT IS NOT BURDENING YOUR HONOUR BY THE SUBMISSIONS WITH RESPECT TO THE FULFILLMENT OF THE OTHER CONDITIONS PRESCRIBED IN SEC. 80 IB (10) NOR THE SUBMISSIONS AND CONTENTION IN SUPPORT OF THE LAW TH AT THE OWNERSHIP BY REGISTRATION IN THE NAME OF THE ASSESS EE CLAIMING DEDUCTION U/S. 80IB (10) IS NOT ESSENTIAL IN VIEW OF THE SETTLED PROPOSITION LAID DOWN IN THE CASE OF RADHE DEVELOPERS IN ITA NO.2482/AHD/2006. THE APPELLANT IS ALSO AWARE OF THE LATER DECISION O F THE JURISDICTIONAL TRIBUNAL IN I. T. A. NO.1503/AHD/200 8 FOR A. Y. 2005-06 IN THE CASE OF M/S. SHAKTI CORPORATION (UNREPORTED) WHEREIN THE HONBLE TRIBUNAL RECONFIRM ED THE LAW AND POSITION LAID DOWN IN RADHE DEVELOPERS WITH A RIDER THAT THE SAME CANNOT BE UNIVERSALLY APPLIED WITHOUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTE RED BY THE DEVELOPERS WITH THE LANDOWNER. THE HONBLE TRIBUNAL IN PARA 16 OF THE ORDER HAS HELD AS UNDER: (THE RELEVANT FINDING OF THE DECISION OF M/S. SHAKT I CORPORATION WILL BE REPRODUCED IN THE SUBSEQUENT PARAS OF FINDING, THEREFORE, TO AVOID REPETITION IT IS NOT REPRODUCED FOR SAKE OF BREVITY). CONSIDERING THE ABOVE DECISIONS OF THE HONBLE TRI BUNAL, YOUR APPELLANT SEEKS TO ESTABLISH BY REFERRING TO T HE VARIOUS TERMS OF THE DEVELOPMENT AGREEMENT AND THE ATTENDANT FACTS TO SHOW THAT THE APPELLANT IN FACT EXERCISES THE DOMINION OF OWNERSHIP OVER THE LAND AND SUBSEQU ENT CONTROL OVER THE PROJECT. ALL RISKS AND REWARD INVO LVED WITH THE PROJECT VEST WITH THE DEVELOPER AND THE LANDOWNER IS ONLY ENTITLED TO A FIXED REMUNERATION. THE APPELLANT HAS DEVELOPED THE VARIOUS PROJECTS IN THE YEARS UNDER CONSIDERATION PARTICULARS OF WHICH WAS SUBMITTED TO THE LD. A. O. VIDE ITS LETTERS DATED N IL PLACED AT PAGE NO. 29 TO 69 OF THE PAPER BOOK WHEREIN THE APPELLANT HAS SUBMITTED THE RELEVANT DOCUMENTS JUST IFYING THE CLAIM AND ALSO THE COPY OF THE DEVELOPMENT IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 5 AGREEMENTS BY WHICH THE APPELLANT HAS PURCHASED THE PROPERTY FROM THE LANDOWNERS. THE APPELLANT HAS ENTERED INTO FOUR DEVELOPMENT AGREEMENTS: (A) THE FIRST AGREEMENT, THE COPY OF WHICH IS PLACE D AT PAGE NO.102 TO 110 IS WITH SHRI RTILAL BHIKHABHAI P ATEL AND OTHERS ON 13.6.2003 FOR PIECE OF LAND AT GOTRI R. S. NO.272, 273, 267/2. THE AGREEMENT IS TITLED SALE CUM DEVELOPMENT AGREEMENT ON WHICH THE HOUSING PROJECT IN RESPECT OF WHICH DEDUCTION U/S. 80 IB (10) IS CLAIMED IS DISCU SSED AS UNDER: (THE BRIEF DISCUSSION ON THE CLAUSES OF THE AGREEME NT IS NOT REPRODUCED FOR BREVITY) (B)) THE SECOND AGREEMENT, THE COPY OF WHICH IS PLA CED AT PAGE NO.111 TO 118 IS WITH SHRI CHANDUBHAI BHIKHABHAI PATEL AND OTHERS ON 20.09.2003 FOR PIECE OF LAND AT GOTRI R. S. NO.267/1/3. THE AGREEMENT IS TITLED DEVELOPMENT AGREEMENT ON WHICH THE HOUSING PROJECT IN RESPECT OF WHICH DEDUC TION U/S. 80IB (10) IS CLAIMED IS DISCUSSED AS UNDER (C) THE THIRD AGREEMENT, THE COPY OF WHICH IS PLACE D AT PAGE NO.119 TO 129 IS WITH SHRI RAMANBHAI CHHOTABHA I PATEL AND OTHERS ON 11.08.2003 FOR PIECE OF LAND AT GOTRI R. S. NO.275. THE AGREEMENT IS TITLED SALE CUM DEVELOPMENT AGREEMENT ON WHICH THE HOUSING PROJECT IN RESPECT OF WHICH DEDUCTION U/S. 80IB (10) IS CLAIMED IS DISCUS SED AS UNDER: IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 6 (THE BRIEF DISCUSSION ON THE CLAUSES OF THE AGREEMENT IS NOT REPRODUCED FOR BREVITY) (D) THE FOURTH AGREEMENT, THE COPY OF WHICH IS PLAC ED AT PAGE NO.130 TO 135 IS WITH SHRI JAYANTIBHAI D. P ANCHAL (PARTNER OF THE FIRM) AND SMT. PURNIMABEN JAYANTIBH AI PANCHAL ON 27.05.2005 FOR PIECE OF LAND AT VILLAGE BHOLAV, BHARUCH R. S. NO.50/PAIKI AND 51/PAIKI (THE BRIEF DISCUSSION ON THE CLAUSES OF THE AGREEMENT IS NOT REPRODUCED FOR BREVITY) ON THE BASIS OF ABOVE AGREEMENT, THE APPELLANT HAS INCURRED AND PAID ALL THE DEVELOPMENT CHARGES TO LO CAL AUTHORITY AS WELL AS CHARGED PAID TO BMC AND GEB FO R OBTAINING DRAINAGE CONNECTION AND ELECTRICITY CONNE CTION ETC. HAVE BEEN ACCOUNTED FOR AND DEBITED TO PROFIT AND LOSS ACCOUNT UNDER THE VARIOUS HEADS OF DEVELOPMENT EXPENSES. THE APPELLANT HAS ALSO INCURRED ALL THE EXPENSES IN RESPECT OF CONSTRUCTION / DEVELOPMENT EXPENSE BY APPOINTING THE ARCHITECTS, CONTRACTORS, PURCHASE OF MATERIAL ETC. FOR THE YEAR UNDER CONSIDERATION AS D EBITED IN THE PROFIT & LOSS ACCOUNT UNDER THE VARIOUS HEAD S OF ACCOUNTS MAINTAINED BY THE APPELLANT. THE APPELLANT HAS PAID TO THE LANDOWNERS THE CONSIDERATION FOR PURCHASE OF THE LAND AS PER THE A GREED TERMS. FROM THE PERUSAL OF THE TERMS OF THE AGREEMENT AND ALSO THE CONDUCT OF THE APPELLANT AND THE LANDOWNERS, IT IS EVIDENT THAT UPON EXECUTION OF THE AGREEMENT THAT T HE EXPENSES IN RELATION TO THE HOUSING PROJECT ARE INC URRED BY THE APPELLANT AND THAT THE LANDOWNERS BY HANDLING O VER THE POSSESSION AND AGREEING TO ACCEPT THE CONSIDERA TION HAVE HANDED OVER BY TRANSFER THE LAND UNDER CONSIDERATION TO THE DEVELOPER EVEN IN TERMS OF THE IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 7 TRANSFER OF PROPERTY ACT. (SEC. 53A) AND ALSO IN TE RMS OF SEC. 2 (47) OF THE I. T. ACT. THE DEVELOPER IS AUTHORIZED TO FURTHER TRANSFER THE LAND ALONG WITH CONSTRUCTION IN FAVOUR OF ANY OTHER PERS ON AND THAT LANDOWNERS HAVE NO CONTROL OR RIGHT OVER THE DEVELOPER ON HANDLING OVER THE POSSESSION. THUS THE RISK AND REWARD AS ALSO THE RIGHT OF OWNER ARE VESTED IN THE DEVELOPER AND IT IS THUS STATED THAT THE APPELLANT HAS ESTABLISHED TO HAVE COMPLIED WITH THE REQUIREMENTS AS LAID DOWN BY THE HONBLE TRIBUNAL IN THE CASE OF SH AKTI CORPORATION REFERRED ABOVE. IN VIEW OF THE ABOVE SUBMISSION, THE LD. A. O. MAY PLEASE BE DIRECTED TO ALLOW THE CLAIM OF DEDUCTION U/S. 80 IB AS MADE IN RESPECT OF THE PROJECT DEVELOPED ON THESE P LOTS OF LAND, THE PARTICULARS OF WHICH IS SUBMITTED TO THE LD. A. O. AS MENTIONED ABOVE AND THE COPIES OF THE COMPLETE PARTICULARS IS PLACED AT PAGE NOS. 29 TO 135 OF THE PAPER BOOK. 5. AFTER TAKING INTO CONSIDERATION THE ASSESSEES S UBMISSION, THE LEARNED CIT(A) HAS DELETED THE DISALLOWANCE MADE B Y THE AO BY OBSERVING AS UNDER IN PARA 4.2 TO 4.5 OF HIS ORDER: 5.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE LD. COUNSEL AS WELL AS THE FINDING OF THE ASSESSING OFF ICER RECORDED IN THE ASSESSMENT ORDER ON THIS ISSUE. I H AVE CONSIDERED THE REMAND REPORT DATED 03.11.2009 AND A LSO CONSIDERED COUNTER COMMENTS OF THE LD. COUNSEL. I H AVE ALSO CONSIDERED THE MAIN CLAUSES OF ALL THE FOUR DEVELOP MENT AGREEMENTS, VARIOUS APPROVALS GRANTED BY VADODARA M UNICIPAL CORPORATION AND GRAM PANCHAYAT, BHOLAV FOR THE RELE VANT PROJECTS AND THE COMPLETION CERTIFICATES ISSUED BY THE VADODARA MUNICIPAL CORPORATION, GRAM PANCHAYAT, BHOLAV IN TH IS RESPECT. THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS HAD FURNISHED ALL THE DETAILS RELATING TO ALL THE FIVE PROJECTS SUCH AS IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 8 NARAYAN GARDENS, SURYA NARAYAN, NARAYAN AVENUE, NAR AYAN DARSHAN AND ALAKNANDA GALAXY AND SPECIFICALLY CLARI FIED THAT THE APPELLANT IS FULFILLING ALL THE CONDITIONS PRES CRIBED U/S 80 IB (10) OF THE ACT. IT WAS SUBMITTED TO THE ASSESSING OFFICER THAT THE DOMINION OVER THE OWNERSHIP OF LAND IS PASSED O N TO THE ASSESSEE FIRM WITH ALL THE RISK AND LIABILITIES AND ALL THE PROFITS OR LOSS IN RELATION TO THE LAND IS VESTED I N THE ASSESSEE AND THEREFORE, IN TERMS OF THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF M/S. RADHE DEVELOPERS IN ITA NO.2482/AHD/2006 FOR 2003-04 {NOW REPORT4ED AT 113 TTJ (AHD) 300}, IT IS SUFFICIENTL Y ESTABLISHED THAT IN THE CASE OF THE APPELLANT ON AC QUIRING DOMINION OVER THE PROPERTY, THE ASSESSEE HAS DEVELO PED AND CONSTRUCTED HOUSING PROJECTS AT ITS OWN COST AN D RISKS AND THEREFORE, THE ASSESSEE IS DEEMED TO BE THE OWN ER OF THE PROPERTY ON WHICH THE PROJECT IS DONE. EVEN AFTER THE ABOVE QUOTED SUBMISSION OF THE APPELLANT INCLUDING THE DECISION OF THE JURISDICTIONAL TRIBUNAL, THE ASSESS ING OFFICER HAD DISALLOWED THE DEDUCTION U/S 80 IB (10) OF THE ACT ONLY ON THE GROUND THAT THE ASSESSEE IS NOT THE OWNER OF LA ND AND THE APPROVAL OF LOCAL AUTHORITY IS NOT IN THE NAME OF T HE ASSESSEE BUT IN THE NAME OF THE LAND OWNERS AND THUS THE CON DITIONS LAID DOWN IN SECTION 80IB (10) R. W. S. 80IB (1) ARE NOT FULFILLED. HOWEVER THIS ISSUE HAD ALREADY BEEN DECIDED BY THE HONBLE AHMEDABAD TRIBUNAL IN THE CASE OF M/S. RADHE DEVELO PERS & ORS VS. I.T.O. & ORS 113 TTJ (AHD) 300. THOUGH, T HE ASSESSING OFFICER WAS WELL AWARE OF THE DECISION OF HONBLE AHMEDABAD TRIBUNAL IN THE CASE OF M/S. RADHE DEVEL OPERS & ORS. VS. I. T. O. & ORS. 113 TTJ (AHD) 300, HE HAS DISALLOWED THE CLAIM OF THE APPELLANT U/S 80 IB (10) OF THE AC T BY IGNORING THIS DECISION OF THE JURISDICTIONAL TRIBUNAL. THE A HMEDABAD TRIBUNAL IS CONSISTENTLY FOLLOWING THE AFORESAID DE CISION OF M/S. RADHE DEVELOPERS (SUPRA). MY PREDECESSOR IN VARIOUS CASES OF THE JURISDICTION OF THE SAME ASSESSING OFFICER HAD ALLOWED THE DEDUCTION U/S 80 IB (10) OF THE ACT BY RELYING ON T HIS DECISION. I HAVE ALSO REQUESTED THE ASSESSING OFFICER VIDE LET TER DATED 05.10.2009 TO STATE AS TO HOW THE CASE OF THE ASSES SEE IS NOT COVERED BY T4HE DECISIONS OF THE AHMEDABAD TRIBUNAL IN THE CASES OF M/S. RADHE DEVELOPERS AND M/S. SHAKTI CORP ORATION IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 9 IN ITA NO.1503/AHD/2008. HOWEVER, AS USUAL HE HAS T OTALLY IGNORED THIS PARTICULAR POINT ON WHICH A SPECIFIC R EPORT WAS CALLED FOR WHILE SENDING HIS REPORT DATED 03.11.200 9. THE DEDUCTION UNDER ANY PROVISIONS OF THE ACT INCLUDING THE PROVISIONS OF SEC. 80 IB (10) O THE ACT4 CANNOT BE DISALLOWED ONLY BY IGNORING THE DECISION OF THE JURISDICTIONAL TRIBUNAL BUT CAN ONLY BE DISALLOWED IF, THE CONDITIONS LAID DOWN THEREIN ARE NOT FULFILLED. THE REASONS GIVEN BY THE ASSESSING O FFICER FOR DENYING THE DEDUCTION U/S 80 IB OF THE ACT TO THE A PPELLANT IN HIS ORDER HAD ALREADY BEEN ADJUDICATED BY THE HONBLE A HMEDABAD TRIBUNAL IN THE CASE OF M/S. RADHE DEVELOPERS & OR S. VS. ITO & ORS.(SUPRA). THE RELEVANT FINDING OF THE AFORESAI D DECISION OF M/S. RADHE DEVELOPERS & ORS. VS. I.T.O. & ORS. (SPR A) IS REPRODUCED HERE UNDER FOR THE SAKE OF CONVENIENCE: A BARE READING OF THIS PROVISIONS OF S. 80IB (10), AS THEY STOOD IN THE YEARS UNDER CONSIDERATION, THE REQUIRE MENTS FOR CLAIMING DEDUCTION FOR HOUSING PROJECTS ARE THA T (I) THERE MUST BE AN UNDERTAKING DEVELOPING AND BUILDIN G HOUSING PROJECT; (II) SUCH HOUSING PROJECT IS APPRO VED BY THE LOCAL AUTHORITY; (III) THE DEVELOPMENT AND CONS TRUCTION OF HOUSING PROJECT HAS COMMENCED ON OR AFTER 1 ST DAY OF OCTOBER, 1998; (IV) THE HOUSING PROJECT IS ON A SIZ E OF A PLOT OF LAND WHICH HAS MINIMUM AREA OF ONE ACRE; AN D (V) THE RESIDENTIAL UNIT DEVELOPED AND BUILT HAS A BUIL T UP AREA OF 1000 SQ. FT. IF IT IS SITUATED IN DELHI AND MUMB AI OR WITHIN 25 KM. OF MUNICIPAL LIMIT OF THESE CITIES AN D 1500 SQ. FT. AT ANY OTHER PLACES. THERE IS NO OTHER COND ITION, WHICH IS TO BE COMPLIED WITH BY AN ASSESSEE FOR CLA IMING THE DEDUCTION ON PROFITS OF THE HOUSING PROJECT. TH E CONTENTION OF THE REVENUE AUTHORITIES THAT TO CLAIM DEDUCTION U/S.80IB(10), THERE IS A CONDITION PRECED ENT THAT THE ASSESSEE MUST BE OWNER OF THE LAND ON WHICH HOU SING PROJECT IS CONSTRUCTED HAS NO FORCE. WE DO NOT FIND ANY SUCH CONDITION AS APPEARING IN THE PROVISIONS OF TH E SECTION EXTRACTED ABOVE. A PLAIN READING OF SUB-SEC TION (10) OF SEC.80IB REVEALS AND MAKES IT EVIDENT THAT THERE MUST BE AN UNDERTAKING DEVELOPING AND BUILDING A HOUSING PROJECT AS APPROVED BY A LOCAL AUTHORITY. I T DOES IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 10 NOT HAVE ANY FURTHER CONDITION THAT SUCH DEVELOPMEN T AND BUILDING OF THE HOUSING PROJECT SHOULD ALSO BE ON A LAND OWNED BY AN ASSESSEE UNDERTAKING. IT MIGHT BE TRUE THAT THE LAND BELONGS TO THE PERSONS WHO HAS ENTERED INT O AN AGREEMENT WITH THE ASSESSEE TO DEVELOP AND BUILD HOUSING PROJECT BUT ON A PERUSAL OF THE AGREEMENT A S NARRATED ABOVE, IT IS EVIDENT THAT THE DEVELOPMENT AND BUILDING WORK HAS BEEN CARRIED OUT BY THE ASSESSEE IN PURSUANCE OF A TRIPARTITE AGREEMENT AND IT IS NOT B Y THE LAND OWNERS. THEREFORE, THE MERE FACT THAT THE LAND -OWNER AND THE UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT, ARE TWO DIFFERENT ENTITIES WOULD NOT MAKE ANY DIFFERENCE. THE DEDUCTION WOULD BE ELIGIBLE TO THE PERSON WHO IS DEVELOPING AND BUILDING HOUSING PROJECT AND NOT TO THE MERE OWNER THEREOF. HAVING ENTERED INTO AGREEM ENTS WITH LANDOWNERS FOR DEVELOPMENT AND BUILDING THE HOUSING PROJECT, WAS OBVIOUSLY A CONTRACTOR BUT IT DOES NOT DEROGATE THE ASSESSEE FOR BEING A DEVELOPER, AS WEL L. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. THE ASSESSEE IS A DEVELOPER, AND NOT A CONTRACTOR AS HELD BY THE LOWER AUTHORITIES. THE DEVELOPER IS NOT WORKING ON REMUNERATION FOR THE LANDOWNERS, BUT DEVELOPER IS WORKING FOR HIMSELF IN ORDER TO EXPLOIT THE POTENTIAL OF ITS BUSINESS IN HIS OWN INTEREST AND, THEREFORE, OPTED FOR ALL BUSINESS RISKS ASSOCI ATED WITH THE BUSINESS OF DEVELOPMENT OF REAL ESTATE INCLUDIN G DEVELOPING AND BUILDING OF HOUSING PROJECTS. 4.3 THE ABOVE PRINCIPLE LAID DOWN IN THE CASE OF RA DHE DEVELOPERS (SUPRA) WAS ALSO ENDORSED BY THE HONBLE AHMEDABAD TRIBUNAL IN THE UNREPORTED CASE OF ITO & ORS. VS. SHAKTI CORPORATION & ORS. VIDE ORDER DATED 07.11.20 08 IN ITA NO.1503/A/2008. THE RELEVANT FINDING OF THE AFORESA ID DECISION OF SHAKTI CORPORATION (SUPRA) IS REPRODUCED HERE UN DER FOR THE SAKE OF CONVENIENCE: THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPERS (SUPRA) AND ACCORDINGLY WE ARE OF THE IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 11 VIEW THAT THE ASSESSEE HAS ACQUIRED THE DOMINANT OVER THE LAND AND HAS DEVELOPED THE HOUSING PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THAT, IN OUR OPINION, THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WILL NOT APPLY IN A CASE WHERE THE ASSESSEE HAS ENTERED INTO THE AGREEMENT FOR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED INTO IN THAT CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED THEREIN WILL VEST WITH THE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRICTED ONLY FOR THE FIXED REMUNERATION FOR WHICH HE WOULD BE RENDERING THE SERVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) HAS NOT DEALT WITH SUCH SITUATION. THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY WITHOUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVELOPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SINCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGREEMENT AND CRUX OF THE AGREEMENT IS THAT THE ASSESSEE HAS PURCHASED THE LAND AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN, THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DEDUCTION U/S 80IB(10). THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GULATI (CIVIL APPEAL NO.3302 OF 2005) WILL NOT ASSIST THE REVENUE, AS THE AGREEMENT IS NOT SHARING OF THE CONSTRUCTED AREA. 4.4 I HAVE CAREFULLY GONE THROUGH THE RELEVANT CLAU SES OF ALL THE FOUR DEVELOPMENT AGREEMENTS AND OTHER DOCUMENTS FILED BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE ME. ON CONSIDERATION OF THE RELEVANT DOCUMENTS, I CAME TO THE IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 12 CONCLUSION THAT THE APPELLANT HAD ACQUIRED THE DOMI NANCE OVER THE LAND AND THE LAND IS UNDER THE POSSESSION OF TH E APPELLANT FIRM. THE APPELLANT FIRM WAS THE DE-FACTO LAND OWNE R FOR ALL PRACTICAL PURPOSES AND HAD DEVELOPED THE HOUSING PR OJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. THE APPELLANT FIRM WAS NOT MERELY A CONTRA CTOR OF THE LAND OWNER FOR FIXED REMUNERATION. THE LAND OWNERS WERE ELIGIBLE TO GET ONLY PRICE OF LAND FIXED BY THE DEV ELOPMENT AGREEMENTS AND NOT TO GET ANY SHARE IN THE DEVELOPM ENT PROFITS OF THE PROJECT. THE APPELLANT HAD FULFILLED ALL THE CONDITIONS LAID DOWN IN SEC. 80 IB(10) OF THE ACT. 4.5 IN VIEW OF THE ABOVE DISCUSSION IN PARA - 4.2 T O PARA 4-4 AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE AHMEDABAD TRIBUNAL IN THE CASE OF THE APPELLANT FOR THE A. Y. 2003-04 AS AFORESAID (RADHE DEVELOPERS & ORS) AND A LSO THE SUBSEQUENT DECISION IN THE CASE OF SHAKTI CORPORATI ON (SUPRA), I AM OF THE OPINION THAT THE APPELLANT FIRM FULFILLED THE CONDITIONS LAID DOWN IN SEC. 80IB(10) OF THE ACT AND WAS ENTIT LED TO THE DEDUCTION U/S 80IB(10) OF THE ACT. THE ASSESSING OF FICER WAS THUS NOT JUSTIFIED IN DENYING THE DEDUCTION U/S 80 IB (10) OF THE ACT TO THE APPELLANT FIRM. HIS FINDING SO RECORDED IS THUS CANCELLED AND DEDUCTION U/S 80 IB (10) OF THE ACT I S ALLOWED TO THE APPELLANT FIRM. THE ADDITION MADE FOR RS.98,41, 252/- IS HEREBY DELETED. THE SECOND AND THIRD GROUNDS OF APP EAL ARE ACCORDINGLY ALLOWED. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSE E FOR DEDUCTION U/S 80 IB (10) OF THE ACT ONLY ON THE BASIS THAT TH E ASSESSEE FIRM WAS NOT THE OWNER OF THE LAND WHICH WAS DEVELOPED BY IT AND THE NECESSARY APPROVAL WAS NOT IN ITS NAME AS THE SAME WAS OBTAINED BY THE LAND OWNERS. THE LEARNED CIT(A) AFTER GOING THR OUGH THE COPIES OF THE MEMORANDUM OF ARRANGEMENT, DEVELOPMENT AGREEMEN T, APPROVAL OF THE COMPETENT AUTHORITY FOR THE PROJECT/PLAN AND OTHER RELATED IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 13 DOCUMENTS HAS GIVEN HIS FINDING THAT THE ASSESSEE F IRM WAS NOT A CONTRACTOR BUT A DEVELOPER IN ITS TRUE SENSE AND, T HEREFORE, WAS ELIGIBLE TO SHARE NOT ONLY THE PROFITS OF THE FIRM BUT TO BEAR THE LOSSES ALSO. AS A DEVELOPER, THE ASSESSEE FIRM EXERCISED S UFFICIENT DOMINANCE OVER THE PROJECT AND THEY WERE NOT TO GET ANY FIXED REMUNERATION ON THE BASIS OF ANY ARRANGEMENT. THE L AND OWNERS WERE TO GET ONLY THE PRICE OF THEIR LAND AND NOT TO GET ANY SHARE IN THE PROFIT OF THE DEVELOPMENT PROJECT. HE ALSO FOUND TH AT AS PER THE MEMORANDUM OF ARRANGEMENT, THE ASSESSEE FIRM WAS TO GET NOT ONLY THE PROFITS OF THE DEVELOPMENT PROJECT BUT WAS ALSO RESPONSIBLE WITH THE RISK ASSOCIATED WITH THE DEVELOPMENT PROJE CT. THEREFORE, THE LEARNED CIT(A) RELYING ON THE DECISION OF THE ITAT AHMEDABAD BENCH IN THE CASE OF M/S. RADHE DEVELOPERS & ORS. WHICH HAS BEEN UPHELD BY THE HONBLE GUJARAT HIGH COURT REPORTED IN 341 I TR 403 (GUJ) AND ALSO THE SUBSEQUENT DECISION IN THE CASE OF SHAKTI CORPORATION (SUPRA) WAS OF THE VIEW THAT THE ASSESSEE HAD FULFI LLED ALL THE CONDITIONS AS LAID DOWN U/S 80 IB (10) OF THE ACT A ND, THEREFORE, THE ASSESSEE WAS ENTITLED TO THE DEDUCTION UNDER THAT S ECTION. 6.1 FURTHER, ON IDENTICAL FACTS, IN ONE OF THE GROU P CASES OF THE ASSESSEE IN IT (SS) A NO. 172, 173, 174, 175,176 AN D ITA NO.566/AHD/2010 FOR ASSESSMENT YEARS 2002-03, 2003- 04, 2004-05, 2005-06, 2006-07 AND 2007-08, WE HAVE UPHELD THE OR DERS OF THE LEARNED CIT(A) AND DECIDED THE ISSUE OF DEDUCTION U /S 80 IB (10) OF THE ACT IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, I N THE PRESENT CASES UNDER CONSIDERATION, WE UPHOLD THE ORDERS OF THE LE ARNED CIT(A). IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 14 7. IN THE RESULT, ALL THE APPEALS OF THE REVENUE FO R ASSESSMENT YEAR 2005-06, 2006-07 AND 2007-08 ARE DISMISSED. IT (SS)A NO. 177/AHD/2010 (REVENUES APPEAL FOR AY 2003-04) 8. THE REVENUE HAS FILED THIS APPEAL AGAINST THE OR DER OF THE LEARNED CIT(A) DATED 25 TH NOVEMBER, 2009 IN APPEAL NO. CIT(A)-430- B/CC-1/08-09 FOR ASSESSMENT YEAR 2003-04 ON THE FOL LOWING GROUNDS: I) THE LD. CIT(A) HAS ERRED IN LAW AND FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION MADE BY THE A. O. OF RS.10,85,336/- ON ACCOUNT OF 10% WO RK IN PROGRESS. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. III) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED TO THE ABOVE EXTENT. 9. THE AO HAS DISCUSSED THIS ISSUE IN PARA 5 OF THE ASSESSMENT ORDER WHICH READS AS UNDER: 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT A REVENUE AUDIT OBJECTION WAS RAISED B Y THE REVENUE AUDIT PARTY IN EARLIER ASSESSMENT ORDER WHI CH PASSED U/S 143 (3). THE GIST OF AUDIT OBJECTION RAISED IS REPRODUCED HEREUNDER- IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 15 THE ASSESSEE CLAIMED DEDUCTION U/S. 80 IB IN RESPEC T OF 3 PROJECTS. THE ASSESSEE FIRM FILED RETURN OF INCOME ON 03/11/2003 DECLARING INCOME AT RS.19,85,160/- AFTER CLAIMING DEDUCTION U/S. 80 IB OF RS.1,57,09,648/-. THE ASSESSMENT WAS FINALIZED AFTER SCRUTINY U/S. 143(3) OF THE ACT. THE ASSESSEE FIRM IS A BUILDER AND DEVELOPER ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. BESIDES, THE ASSESSEE HAD INCOME FROM OTHER CONSTRUCTION WORK AND MISC. INCOME IN THE CASE OF O NE PROJECT VIZ. KESHAV NARAYAN, THE ASSESSEE HAS NOT DISCLOSED INCOME, BUT HAS SHOWN WORK IN PROGRESS OF AMOUNTING TO RS.1,08,53,359/- AT THE END OF THE YEA R. THE HON. SUPREME COURT IN THE CASE OF MILLAN & CO. VS. CIT (1998 33 ITR) AND IN THE CASE OF CIT VS. A. KRISHNASWAMI (1984 53 ITR 122 SC) HAS HELD THAT IN THE CASE OF A PROJECT UNDER PROGRESS AND NO SALE OR INC OME REALIZED, THE INCOME TO BE COMPUTED AT 10% OF THE V ALUE OF WORK IN PROGRESS, IN THE LIGHT OF THE ABOVE DECI SION OF THE APEX COURT, THE TAXABLE INCOME THAT SHOULD HAVE BEEN CONSIDERED WORKS OUT TO RS.10,85,336/-. OMISSI ON TO CONSIDER THE INCOME AS STATED ABOVE RESULTED INT O UNDER ASSESSMENT OF INCOME OF RS.10,85,336/- WITH S HORT LEVY OF TAX OF RS.5,47,437/- INCLUDING INTEREST LEV IABLE U/S. 234B OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME AND A SHOW C AUSE WAS GIVEN VIDE ORDER SHEET ENTRY 08/12/2008, IN RES PONSE THERETO THE ASSESSEE FAILED TO SUBMIT ANY CONVINCIN G REPLY. HENCE, SAME IS ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE. THE ADDITION ON THIS COUNT COMES TO RS.10 ,85,336/-. PENAL PROCEEDINGS U/S. 271 (1) ( C ) ARE INITIATED. (ADDITION RS.10,85,336/-) 10. BEFORE THE LEARNED CIT(A) RELIANCE WAS PLACED B Y THE ASSESSEE ON THE FOLLOWING WRITTEN SUBMISSIONS: IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 16 4.1 THE LEARNED COUNSEL HAS SUBMITTED AS UNDER ON THIS ISSUE: THE AUDIT PARTY HAS RAISED OBJECTION IN RESPECT OF THE INCOME INCLUDED IN THE WORK-IN-PROGRESS OF KESHAV NARAYAN RESIDENCY PROJECT AS SHOWN IN THE BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION. IN THIS REGARD, IT IS SUBMITTED TO YOUR HONOUR THAT NO PROPER OPPORTUNITY OF BEING HEARD WAS GIVEN TO THE APPELLANT IN RESPECT OF THE ADDITION TO BE MADE BY THE LD. A. O. THE APPELLANT IS DEVELOPING A SCHEME KNOWN AS KESHA V NARAYAN RESIDENCY AT SURAT IN WHICH FLATS ARE BUILT AND SOLD TO THE PROSPECTIVE CUSTOMERS. AS PER THE REGULAR METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT WHICH IS MERCANTILE BASIS, THE APPELLANT IN THE CONDUCT OF ITS BUSINESS RECEIVES PROGRESSIVE AMOUNT S FROM THE CUSTOMERS WHILE THE DEVELOPMENTAL WORK IS CARRIED OUT. THE CONSTRUCTION WORK WAS CARRIED OUT BY THE APPELLANT AGAINST WHICH THE ADVANCES RE PROGRESSIVE LY RECEIVED FROM CUSTOMERS. SALES ARE EFFECTED ON EXEC UTION OF THE SALE DEEDS TO VARIOUS CUSTOMERS AND RECOGNIZ ING THE WELL ACCEPTED PRINCIPLES OF ACCOUNTING ON MERCA NTILE AND ACCRUAL BASIS THE SALES REALIZATION/ACCRUAL OF INCOME IS CONSIDERED AT THE TIME OF THE SALE IN RESPECT OF FLATS WHERE CONVEYANCE DEEDS ARE EXECUTED IS RECOGNIZED A S REVENUE AND MATCHING REVENUE EXPENSES IN RELATION T O SUCH SALE IS PROVIDED FOR AS EXPENSES BASED ON THE COST INCURRED/ TO BE INCURRED. TILL SUCH TIME, THE AMOUN TS RECEIVED ARE TREATED AS ADVANCE. IT IS SUBMITTED TO YOUR HONOUR THAT THE APPELLANT I S CONSTRUCTING RESIDENTIAL FLATS AND THE INCOME AS RECOGNIZED BY THE APPELLANT AS PER THE REGULAR ACCO UNTING METHOD EMPLOYED IN RESPECT OF THE TRANSACTIONS OF S ALES IS PRAYED NOT TO BE DISTRIBUTED. IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 17 AS PER THE OBJECTION RAISED BY THE AUDIT REPLY, IT IS GATHERED THAT T HEY HAVE A VIEW THAT PROJECT COMPLE TION METHOD IS NO MORE IN USE AND THAT THE ADVANCES RECE IVED FROM THE CUSTOMERS WOULD BE REQUIRED TO BE TAXED IN THIS YEAR. IT IS RESPECTFULLY SUBMITTED TO YOUR HONOUR T HAT THERE IS NO SUCH RESTRICTION. AS PER THE REGULARLY ADOPTE D METHOD OF ACCOUNTING, THE APPELLANT IS ACCOUNTING O N COMPLETED CONTRACT METHOD WHEREIN THE REVENUE IN RESPECT OF SALE OF FLAT IS RECOGNIZED ON EXECUTION OF THE SALE DEED OF A PARTICULAR FLAT. SINCE THE APPELLANT IS NOT A CONTRACTOR BUT BUILDER AND DEVELOPER OF THE LAND ON ITS OWN, THE ACCOUNTANT ST ANDARD 7 (REVISED) AS ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA IS NOT APPLICABLE TO IT. SUCH METHOD OF ACCOUNTING IS RECOGNIZED BY LARGE NUMBER OF AUTH ORITIES LISTED BELOW: ITAT, AHMEDABAD BENCH C ORDER DATED 10.12.2004 (I TA NO.2235/AHD/99, 3950/AHD/99 AND 3951/AHD/99 FOR A. Y. 1996-97, 1997-98 & 1998-99 IN THE CASE OF MIRAJ CONSTRUCTION P. LTD. VS. ACIT. ITAT, AHMEDABAD BENCH C ORDER DATED 10.12.2003 (I TA NO.1554 TO 1559/AHD/00 FOR A. Y. 1989-90 TO 1994095 ) IN THE CASE OF MAHAVIR ESTATE (P) LTD. VS. ACIT. IT IS FURTHER SUBMITTED TO YOUR HONOUR THAT THOUGH THE LD. A. O. HAS NOT ACCEPTED THE METHOD OF ACCOUNTING FOR THE YEAR UNDER CONSIDERATION, HE HIMSELF HAS ACCEPTED T HE SAME FOR THE OTHER YEARS IN WHICH THOUGH THE SAME METHOD OF ACCOUNTING WAS EMPLOYED NO DISALLOWANCE H AS BEEN MADE BY HIM. THE FIGURES OF THE WORK IN PROGRESS FOR THE SAME PR OJECT SHOWN IN THE OTHER YEARS IS AS UNDER: IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 18 ASSESSMENT YEAR PARTICULARS 2005-06 2006-07 2007-08 TOWER A 10,09,721 0 0 TOWER B 28,00,051 3,61,995 3,16,995 THUS, IN ONE YEAR THE LD. A. O. IS NOT ACCEPTING TH E METHOD OF ACCOUNTING JUST BECAUSE THE AUDIT OBJECTI ON AND FOR THE OTHER YEARS HE HAS ACCEPTED THE METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT. CONSIDERING THE ABOVE SUBMISSIONS AND THE DECISION RELIED UPON BY THE APPELLANT, IT IS PRAYED YOUR HON OUR TO KINDLY DELETE THE ADDITIONS MADE BY THE A. O. WITHOUT PREJUDICE TO THE ABOVE, IT IS FURTHER SUBMI TTED THAT THE LD. A. O. OUGHT TO HAVE REDUCED THE INCOME FOR THE YEAR FOLLOWING THE YEAR IN WHICH THE INCOME HAS BEE N OFFERED FOR TAXATION BY THE APPELLANT ON THE BASIS OF SALES BOOKED IN THE SUBSEQUENT YEARS. THE LD. A. O. HAS N OT GIVEN EFFECT IN THE INCOME FOR THE SUBSEQUENT YEARS . THEREFORE, YOUR HONOUR IS PRAYED TO DIRECT THE LD. A. O. TO REDUCE THE INCOME OF THE SUBSEQUENT YEAR TO THE EXT ENT INCOME INCLUDED IN THE YEAR UNDER CONSIDERATION. 11. AFTER TAKING INTO CONSIDERATION THESE SUBMISSIO NS OF THE ASSESSEE, THE LEARNED CIT(A) DELETED THE ADDITION B Y OBSERVING IN PARA 4.2 OF HIS ORDER AS UNDER: 4.2 IN HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE LD. COUNSEL AND THE FACTS OF THE CASE. I HAVE ALSO CONS IDERED THE REPORT DATED 03.11.2009 (RECEIVED ON 12.11.2009) AN D THE REJOINDER OF THE LD. COUNSEL. IT IS NOTICED FROM TH E RECORD THAT THE ASSESSEE HAS FILED THE RETURN ON 03.03.2008 AND IN THE SHOW CAUSE NOTICE DATED 29.07.2008, 04.08.2008 AND 05.09.2009, THE ISSUE REGARDING TAXING THE WORK IN PROGRESS WAS NOT MENTIONED. THE ASSESSING OFFICER IN HIS REP ORT DATED IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 19 03.11.2009 HAS HIMSELF ADMITTED THAT THE OPPORTUNIT Y TO THE ASSESSEE WAS GIVEN VIDE ORDER SHEET ENTRY DATED 08. 12.2008. HOWEVER, HE HAS NOT MENTIONED HOW MUCH TIME WAS GIV EN TO THE ASSESSEE FOR FILING REPLY. IN ABSENCE OF SUCH D ETAILS, IT CANNOT BE SAID WHETHER THE OPPORTUNITY WAS SUFFICIE NT OR NOT. HOWEVER, THE ASSESSING OFFICER HAS IGNORED THE SUBM ISSION OF THE LD. COUNSEL AND NO REPORT WAS SENT ON THE ISSUE S RAISED IN HIS SUBMISSION. IT IS AN ADMITTED FACT THAT NO MATE RIAL RELEVANT TO THE YEAR UNDER CONSIDERATION WAS AVAILABLE WITH THE ASSESSING OFFICER FOR THE ISSUE OF ADDITION IN THE YEAR UNDER CONSIDERATION. AS PER OWN VERSION OF THE ASSESSING OFFICER, THE AU DIT OBJECTION WAS RELATING TO EARLIER YEAR. IT IS NOT COMING OUT FROM THE ORDER AS TO WHAT HAPPENED IN EARLIER YEAR WHEN THE AUDIT OBJECTION WAS RAISED. AS PER THE SUBMISSION OF THE LEARNED CO UNSEL, NO ADDITION IN EARLIER YEAR WAS MADE. IF IT IS CORRECT THEN THE ASSESSING OFFICER WAS NOT HAVING ANY CASE FOR ADDIT ION. EVEN OTHERWISE ALSO, NO ADDITION CAN BE MADE ON THE BASI S OF AUDIT OBJECTION RAISED IN EARLIER YEARS. I HAVE SEEN THAT NO SUCH ADDITION WAS MADE IN THE SUBSEQUENT YEARS UP TO A. Y. 2007- 08. THEN WHAT PROMPTED THE ASSESSING OFFICER TO MAK E ADDITION ONLY IN ONE YEAR, IS OUT OF IMAGINATION. NO REASONS HAVE BEEN GIVEN FOR THE ADDITION EXCEPT QUOTING THE AUDIT OBJ ECTION OF EARLIER YEAR. HE HAS NOT DEDUCTED THIS YEARS WORK IN PROGRESS FROM THE WORK IN PROGRESS OF THE NEXT YEAR BECAUSE ONCE THE WORK IN PROGRESS IS TAXED IN THIS YEAR, IT CANNOT BE THE PART OF WORK IN PROGRESS OF THE NEXT YEAR OTHERWISE THE SAM E WORK IN PROGRESS WILL BE SUBJECT TO TAXED TWICE. THE ASSESS ING OFFICER ON THE ONE HAND ACCEPTING THE ACCOUNTS OF THE ASSES SEE AS CORRECT AS PROVISIONS OF SEC. 145 WERE NOT RESORTED TO AND ON THE OTHER HAND TAXING THE WORK IN PROGRESS BY APPLY ING A FIXED PERCENTAGE WITHOUT ASSIGNING ANY REASON. THE HONBL E AHMEDABAD TRIBUNAL IN THE CASE OF MAHAVIR ESTATE (P ) LTD. VS. ACIT VIDE ORDER DATED 10.12.2003 IN ITA NOS. 1554 T O 1559/AHD/00 HAS HELD THAT METHOD OF ACCOUNTING ADOP TED BY TAX PAYER CONSISTENTLY AND REGULARLY CANNOT BE DISC ARDED BY THE DEPARTMENT IN VIEW THAT HE SHOULD HAVE ADOPTED A DI FFERENT METHOD OF ACCOUNTING THAN ADOPTED BY TAX PAYER CONS ISTENTLY AND REGULARLY AND THAT ASSESSING OFFICER IS NOT ENT ITLED TO DISTURB MODE OF COMPUTATION OF INCOME IN CASE SYSTE M ADOPTED IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 20 BY ASSESSEE DISCLOSES TRUE AND PROPER INCOME. THIS VIEW WAS FURTHER FOLLOWED BY THE AHMEDABAD TRIBUNAL (BENCH C) IN THE CASE OF MIRAJ CONSTRUCTION P. LTD. VS. ACIT VIDE OR DER DATED 10.12.2004 IN ITA NOS. 2235/AHD/99, 3950/AHD/99. TH E ASSESSING OFFICER NO WHERE GIVEN A FINDING THAT THE CORRECT INCOME CANNOT BE DEDUCED BY THE SYSTEM ADOPTED BY A SSESSEE OR THAT SYSTEM ADOPTED BY THE ASSESSEE DOES NOT DIS CLOSES TRUE AND PROPER INCOME. CONSIDERING THE FACTS OF THE CAS E AND FOLLOWING THE FINDING OF THE AHMEDABAD TRIBUNAL IN SIMILAR CASES, IT IS HELD THAT THE ASSESSING OFFICER WAS NO T JUSTIFIED IN TAXING THE WORK IN PROGRESS ONLY IN ONE SELECTED YE AR. THE ADDITION WAS MADE WITHOUT ANY REASONING AND WITHOUT REJECTING THE BOOK RESULT. THE ADDITION SO MADE FOR RS.10,85, 336/- IS THUS DELETED. SECOND GROUND OF APPEAL IS ACCORDINGLY ALL OWED. 12. SINCE, THE LEARNED CIT(A) HAS GIVEN RELIEF TO T HE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF ITAT AHMEDABAD BENCH C IN THE CASE OF MAHAVIR ESTATE (P) LTD. VS ACIT DATED 10.1 2.2003 IN ITA NOS. 1554 TO 1559/AHD/00 AND IN THE CASE OF MIRAJ C ONSTRUCTION P. LTD. VS ACIT ORDER DATED 10.12.2004 IN ITA NOS. 223 5/AHD/99, 3950/AHD/99 AND THE REVENUE HAS NOT CITED ANY CONTR ARY DECISION, WE FEEL NO NEED TO INTERFERE WITH THE ORDER OF THE LEA RNED CIT(A) AND THE SAME IS HEREBY UPHELD AND THE APPEAL OF THE REVENUE IS DISMISSED. 13. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21-09-2012 SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (D. K. TYAGI) JUDICIAL MEMBER LAK LAK LAK LAKSHMIKANT DEKA/ SHMIKANT DEKA/ SHMIKANT DEKA/ SHMIKANT DEKA/ IT (SS) A NO. 177, 178, 179 AND ITA NO.567/AHD/2010 A. Y.: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08 DCIT, CENT. CIR-1, BARODA VS M/S. NARAYAN LAND & ES TATE CO. 21 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: DIRECT DICTATION ON 18-09-201 2 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 20-09-12 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: