The ACIT, Central Circle-1(2), Ahmedabad V. M/s. Pratigna Properties (P) Ltd., Ahmedabad

ITSSA 569/AHD/2010

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9258 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: VIJAY RANJAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT M EMBER ACIT, CENTRAL CIRCLE 1(2) ROOM NO. 305, 3 RD FLOOR, AAYKAR BHAVAN ASHRAM ROAD, AHMEDABAD (APPELLANT) VS M/S PRATIGNA PROPERTIES (P) LTD. IST FLOOR, NRAQV COMPLEX, OPP. NAVRANG HIGH SCHOOL, NAVRANGPURA, AHMEDABAD (RESPONDENT) C.O. NOS. 238-240/AHD/20 10 (IN IT(SS)A NOS. 567-569/AHD/2010) M/S PRATIGNA PROPERTIES (P) LTD. IST FLOOR, NRAQV COMPLEX, OPP. NAVRANG HIGH SCHOOL, NAVRANGPURA, AHMEDABAD (CROSS OBJECTOR) VS ACIT, CENTRAL CIRCLE 1(2) ROOM NO. 305, 3 RD FLOOR, AAYKAR BHAVAN ASHRAM ROAD, AHMEDABAD (RESPONDENT) REVENUE BY: SRI T. SANKAR, SR.D.R. ASSESSEE BY: SRI VIJAY RANJAN, A.R. DATE OF HEARING : 20-06-2013 DATE OF PRONOUNCEMENT : 20-06-20 13 IT(SS)A NOS. 567-569/AHD/2010 ASSESSMENT YEAR 2005-06 TO 2007-08 I.T.(SS)A NOS. 567-569 /AHD/2010 & CO NOS. 238-240 /AHD/2010 PAGE NO ASST. YEAR. 2005-06 TO 2007-08 ACIT VS. PRATIGNA PROPERTIES PVT. LTD. 2 / ORDER PER BENCH:- THESE ARE THE REVENUES APPEALS AND COS BY THE ASS ESSEE AGAINST THE COMMON ORDER OF LD. CIT(A)-I DATED 29-014-2010. 2. SINCE THESE APPEALS BELONG TO THE SAME ASSESSEE AND WERE HEARD TOGETHER, ARE BEING DISPOSED OF BY THIS CONSOLIDATI ON ORDER. 3. THE GROUNDS TAKEN BY THE REVENUE IN ALL THESE AP PEALS READ AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 7,68,000/-(A.Y.-2005-06), 8,56,000/ -(A.Y.-2006-07)& 4,48,968/-(2007-08) MADE ON ACCRUAL BASIS BY THE AS SESSING OFFICER AFTER REJECTING THE PROJECT COMPLETION METHOD ADOP TED BY THE ASSESSED AS AGAINST THE PERCENTAGE COMPLETION METHO D PRESCRIBED BY THE ICAI UNDER ACCOUNTING STANDARD 7. 4. DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVE D THAT ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD IN RESPECT OF P ROPERTY BEING CONSTRUCTED BY IT. IT WAS OBSERVED BY THE AO THAT THE REVISED ACCOUNTING STANDARD-7 ISSUED BY THE INDIAN INSTITUTE OF CHARTE RED ACCOUNTANTS OF INDIA REQUIRED ASSESSEE TO ADOPT PERCENTAGE COMPLETION ME THOD AND PROJECT COMPLETION METHOD PRESCRIBED EARLIER WAS SCRAPED. THE AO RELYING ON THE DECISION OF TIRATHRAM AHUJA PVT. LIMITED VS. CIT 10 3 ITR 15 HELD THAT INCOME ACCRUED IN EACH YEAR AND ASSESSEE WAS REQUIR ED TO OFFER SUCH INCOME ON YEAR TO YEAR BASIS CONSIDERING THE SAME THE ASSE SSING OFFICER ESTIMATED 8 % OF NET WORKING PROGRESS BEING DIFFERENCE BETWEEN CLOSING WORKING PROGRESS AND OPENING WORK IN PROGRESS AS INCOME OF THE ASSESSEE AND MADE I.T.(SS)A NOS. 567-569 /AHD/2010 & CO NOS. 238-240 /AHD/2010 PAGE NO ASST. YEAR. 2005-06 TO 2007-08 ACIT VS. PRATIGNA PROPERTIES PVT. LTD. 3 THE ADDITION OF RS. 7,68,000/- IN A.Y. 2005-06, RS. 8,56,000/- IN A.Y. 2006- 07 AND RS. 4,48,968/- IN A.Y. 2007-08. 5. BEFORE LD. CIT(A), SUBMISSION OF THE ASSESSEE WA S THAT ASSESSING OFFICERS RELIANCE ON REVISED AMOUNTING STARNDARD-7 ISSUED BY THE ICAI AND ADOPTING PERCENTAGE COMPLETION METHOD WAS NOT JUSTI FIABLE IN CASE OF IT AS AS-7 APPLIES IN CONSTRUCTION CONTRACT AND NOT IN TH E CASE OF BUILDERS. IT WAS FURTHER SUBMITTED THAT IN CONSTRUCTION CONTRACT CON TRACTOR CARRIED OUT THE CONSTRUCTION WORK ON BEHALF OF THE OTHER PERSONS WH EREAS BUILDERS BUILD THEIR OWN IMMOVABLE PROPERTY FOR SALE HENCE THERE WAS DIF FERENCE BETWEEN THE TWO CATEGORIES AND REVISED AS-7 CANNOT BE APPLIED IN CASE OF THE ASSESSEE. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT REVIS ED ACCOUNTING STANDARD-9 ISSUED BY ICAI APPLIES, WHEREIN IT HAS BEEN CLEARLY STATED THAT REVENUE HAS TO BE RECOGNIZED WITH THE CONCEPT OF ACCRUAL OF INCOME AND INCOME ACCRUES IN RESPECT OF SALE ONLY WHEN SIGNIFICANT RISK, REWARDS OR OBLIGATION AND OWNERSHIP ARE TRANSFERRED AND AS UP TO THE A.Y. 200 7-08 ASSESSEE HAD NOT EXECUTED ANY SINGLE SALE DEED, INCOME CANNOT BE REC OGNIZED BY ADOPTING PERCENTAGE COMPLETION METHOD. RELIANCE WAS PLACED ON THE DECISION OF BANGLORE ITAT IN THE CASE OF NANDI HOUSING (P) LTD VS. DCIT 2 SOT 395. IN RESPECT OF DECISION OF TIRATHRAM AHUJA PVT. LIM ITED VS. CIT RELIED BY THE AO ASSESSEES SUBMISSION WAS THAT THE SAME CANNOT B E APPLIED IN CASE OF ASSESSEE BECAUSE IN THAT CASE ASSESSEE WAS ENGAGED IN CONTRACT WORK WHEREAS IN THE PRESENT CASE ASSESSEE IS A BUILDER. IT WAS FURTHER STATED THAT IN THE CASE BEFORE THE DELHI HIGH COURT ASSESSEE HAS INCURRED E XPENDITURE OF RS. 13.43 LACS AGAINST WHICH IT HAS RECEIVED 11.11 LACS AND W ORK WAS ABANDONED DUE TO WAR BETWEEN INDIA AND PAKISTAN AND FURTHER IN THE S AME CASE ASSESSEE WAS I.T.(SS)A NOS. 567-569 /AHD/2010 & CO NOS. 238-240 /AHD/2010 PAGE NO ASST. YEAR. 2005-06 TO 2007-08 ACIT VS. PRATIGNA PROPERTIES PVT. LTD. 4 UNABLE TO DETERMINE THE VALUE OF WORK IN PROGRESS A ND INCOME RECEIVED BY THE ASSESSEE WAS NOT REPAYABLE. HENCE, THE COURT O BSERVED THAT INCOME IS REQUIRED TO BE TAXED EVEN THOUGH CONTRACT WAS NOT C OMPLETED WHEREAS IN THE PRESENT CASE OF THE ASSESSEE THE VALUE OF WORK IN P ROGRESS IS CLEARLY DETERMINABLE HENCE SAID CASE CANNOT BE APPLIED TO T HE CASE OF ASSESSEE- COMPANY. BEFORE LD. CIT(A) ASSESSEE ALSO TOOK AN ALTERNATIVE GROUND STATING THAT IN A.Y. 2008-09 AND 2009-10 ASSESSEE E XECUTED SALE DEED AND ON THE BASIS OF SAME IN A.Y. 2008-09 THE ASSESSEE HAS SHOWN SALES OF RS. 6,70,57,825/- AND RETURN OF INCOME SHOWING TOTAL I NCOME OF RS. 94,54,150/- FOR A.Y. 2008-09 AND RS. 5,65,010/- FOR A.Y. 2009-1 0 WAS FILED BY THE ASSESSEE AND NECESSARY TAXES HAVE ALREADY BEEN PAID . HENCE ASSESSING OFFICERS STAND IN ESTIMATING PROFIT FOR A.Y. 2005- 06 TO 2007-08 WOULD AMOUNT TO DOUBLE TAXATION IN THE HANDS OF THE ASSES SEE. AFTER TAKING INTO CONSIDERATION THE ABOVE SUBMISSION OF THE ASSESSEE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER:-. 5. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AND SUBMISSIONS MADE ON BEHALF OF APPELLANT. IT IS A FACT THAT APPE LLANT IS A BUILDER ENGAGED IN CONSTRUCTION AND SALE OF IMMOVEABLE PROP ERTY AND NOT CARRYING OUT CONSTRUCTION CONTRACT ON BEHALF OF OTH ERS AND HENCE, REVISED AS-7 ISSUED BY ICAI AS WELL AS DECISION OF TIRATHRAM AHUJA FVT. LIMITED 186 ITR 428 RELIED UPON BY THE ASSESSI NG OFFICER WERE NOT APPLICABLE TO THE FACTS OF THE APPELLANT COMPAN Y. THE ADDITION MADE BY ASSESSING OFFICER WHILE PLACING RELEVANCE O N SUCH CASES CANNOT BE UPHELD. I ALSO FIND FORCE IN THE ARGUMEN T OF LEARNED COUNSEL OF APPELLANT THAT APPELLANT HAS SHOWN THE I NCOME IN THE YEAR IN WHICH SALE DEEDS HAVE BEEN EXECUTED AND IN A.Y. 2008-09 AND 2009-10 APPELLANT COMPANY HAS OFFERED INCOME FROM T HE PROJECT AND PAID NECESSARY TAXES DUE ON SUCH INCOME. HENCE, THE RE IS NO JUSTIFICATION IN MAKING ADDITION OF ESTIMATED PROFI T WITHOUT GIVING ANY CONTRARY OBSERVATION TO THE FACT THAT METHOD ADOPTE D BY APPELLANT HAS RESUMED INTO UNDER-ASSESSMENT OF REAL INCOME. ON AP PREHENSION AND FACTS OF THE PRESENT CASES AND IN THE LIGHT OF VARI OUS JUDICIAL RULINGS I.T.(SS)A NOS. 567-569 /AHD/2010 & CO NOS. 238-240 /AHD/2010 PAGE NO ASST. YEAR. 2005-06 TO 2007-08 ACIT VS. PRATIGNA PROPERTIES PVT. LTD. 5 RELIED UPON BY THE ASSESSEE, I HOLD THAT ADDITION M ADE IN THE ALL THE ASSESSMENT YEARS BY WAY OF ESTIMATED PROFIT ON WORK IN PROGRESS WERE UNWARRANTED AND ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE SUCH ADDITIONS. THE RELATED GROUNDS OF APPE ALS ARE THUS ALLOWED. 6. AGGRIEVED BY THIS ORDER OF LD. CIT(A) THE REVENU E IS IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING LD. D.R. RELIED ON THE OR DER OF A.O. WHILE LD. COUNSEL OF THE ASSESSEE RELIED ON THE DECISION OF L D. CIT(A). 8. AFTER HEARING BOTH THE PARTIES AND PERUSING TH E RECORD, WE FIND THAT THE FACT THAT ASSESSEE-COMPANY IS A BUILDER ENGAGED IN CONSTRUCTION AND SALE OF IMMOVABLE PROPERTY AND NOT CARRYING OUT CONSTRUC TION CONTRACT ON BEHALF OF OTHERS HAS NOT BEEN DISPUTED BY THE REVENUE. THE REFORE THE LD. CIT(A) HAS RIGHTLY HELD THAT REVISED ACCOUNTING STANDARD A S-7 ISSUED BY ICAI IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEE-COMPANY AND THE DECISION OF TIRATHRAM AHUJA PVT LTD RELIED BY THE AO FOR MAKING THE ADDITION IN ASSESSEES HANDS IS ALSO NOT APPLICABLE. WE FURTHE R FIND THAT LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE AS HE FOUND THAT ASSES SEE HAS SHOWN THE INCOME IN THE YEARS IN WHICH SALES DEEDS WERE EXECUTED BY HIM I.E. IN A.Y. 2008-09 AND 2009-10 BY HOLDING THAT ADDITIONS MADE IN THE Y EARS UNDER APPEAL BY WAY OF AN ESTIMATED PROFIT ON WORK IN PROGRESS WERE THEREFORE UNWARRANTED. WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) BEC AUSE IN CASE THE ADDITIONS MADE BY A.O. IN THESE YEARS IS CONFIRMED, IT WILL AMOUNT TO DOUBLE TAXATION IN THE HANDS OF ASSESSEE-COMPANY, THEREFOR E THE ORDER PASSED BY LD. CIT(A) IS HEREBY UPHELD. I.T.(SS)A NOS. 567-569 /AHD/2010 & CO NOS. 238-240 /AHD/2010 PAGE NO ASST. YEAR. 2005-06 TO 2007-08 ACIT VS. PRATIGNA PROPERTIES PVT. LTD. 6 9. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE ARE DISMISSED. NOW WE TAKE UP C.O. NOS. 238-240/AHD/2010 10. AT THE TIME OF HEARING LEARNED COUNSEL OF THE A SSESSEE DID NOT PRESS THE COS FILED BY THE ASSESSEE THEREFORE THESE COS ARE DISMISSED AS NOT PRESSED. 11. IN THE RESULT, THE APPEALS FILED BY THE REVENUE AND THE COS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (T.R. MEENA) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 20/06/2013 AK / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '#