ncome Tax Officer 25(3)(4), R. No. 307, C-10, Pratyaksha Kar Bhavan, Vs. Shree Sidhivinayak Developers, 2/D, Satluj Apartment, Sahakar Gram Complex, Kandivali (East), Mumbai 400 101.
June, 15th 2015
IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND
SHRI B.R. BASKARAN, ACCOUNTANT MEMBER
./I.T.A. No.3693/ Mum/2011
( / Assessment Year : 2008-2009
Income Tax Officer / Shree Sidhivinayak
R. No. 307, 2/D, Satluj Apartment,
C-10, Pratyaksha Kar Sahakar Gram Complex,
Bhavan, Kandivali (East),
Bandra Kurla Complex, Mumbai 400 101.
Mumbai 400 051.
. / PAN : AACAS5244H
( /Appellant) .. ( / Respondent)
Appellant by Shri N.V. Nadkarni
Respondent by : Shri Shashi Tulsiyan
/ Date of Hearing : 15-04-2015
/Date of Pronouncement : 12-06-2015
/ O R D E R
PER B.R. BASKARAN, A.M.
The Revenue has filed this appeal challenging the order dated
22-02-2011 passed by the ld. CIT(A) 35, Mumbai in respect of the following
issues for A.Y. 2008-09:-
(a) Deletion of income estimated by the A.O. for the project named
(b) Deletion of addition made u/s 69C of the Income Tax Act, 1961.
2. We have heard the parties and perused the record. The assessee firm is
a builder and developer and is assessed in the status of AOP. During the year
2 ITA 3693/M/11
under consideration, the assessee was developing a residential project by
name "Poonam Garden" which involved construction of building No. 6 to 11
comprising of 182 flats and 8 shops in Bhayander, Dist. Thane. The assessee
did not disclose any income out of these projects on the plea that it was
following `project completion method' for offering the income under the
Income Tax Act. The A.O., however, noticed that the assessee has received
major portion of advances and also completed major portion of the
construction activity by 31-3-2008, more particularly the A.O. noticed that
the work relating to fixing of tiles and marbles, painting, plumbing were
under the verge of completion during the year under consideration. The A.O.
further noticed that the assessee has realized full sales consideration in
respect of 33 units and more than 90% of the sales value in respect of 59
units out of total units of 190. The A.O. took a view that assessee has passed
on all the risks and rewards in respect of the above said 92 units (59 + 33).
Accordingly the AO took the view that the assessee should have offered the
income pertaining to the above said 92 units during the year under
consideration. The A.O. noted that the assessee has declared profit in A.Y.
2010-11 @ 52.12% of gross turnover of the above said project. By applying
the same rate in respect of 92 units referred above, the A.O. estimated the
profit at Rs. 6.48 crores and assessed the same as income of the assessee.
3. The A.O. further noticed that the assessee has not debited various
expenditure or has debited minimum expenditure under various heads listed
out in the assessment order. Accordingly, the A.O. took the view that the
assessee must have incurred expenditure under the various heads without
recording the same in the books of account. Accordingly, the A.O. estimated
the expenditure that might have been incurred by the assessee at 10% of the
total work carried out and the same worked out to Rs. 55 lacs. The A.O.
assessed the same u/s 69C of the Act.
3 ITA 3693/M/11
4. The ld. CIT(A), however, granted relief to the assessee in respect of both
the additions referred above. Aggrieved, the Revenue has filed this appeal
5. The first issue relates to estimation of income in respect of 92 units
referred above from which the assessee has already received almost entire
consideration. The ld. Counsel for the assessee submitted that the assessee
has been following `project completion method' and hence the income arising
out of these units has been offered in A.Y. 2010-11. We have noticed that the
A.O. has estimated the income in respect of 92 units by observing that the
assessee has passed the risk and rewards attached to the 92 units, since the
assessee had already received almost the entire consideration from them. In
our view, there is nothing wrong in assessing the income pertaining to the
units that have already been sold by the assessee, even if the assessee is
following project completion method. This is so because, once the assessee
has sold the flats, then the profit from such sale stands realized and it may
not be proper to postpone the tax liability thereon. However, we have earlier
noticed that the AO has entertained the view that the assessee has
transferred the risk and reward attached to the 92 units and we notice that
the AO has not brought any material on record to substantiate this view.
Hence, it is not clear as to whether 92 units have actually been sold away or
whether the risks and rewards attached to these flats has actually been
transferred during the year under consideration. Further, the rate of gross
profit of 52% adopted by the A.O. needs to be validated in case it is found that
the risks and rewards attached to the 92 flats have been transferred during
the year under consideration. Under the sets of facts, we are of the view that
this issue requires fresh examination at the end of A.O. Accordingly we set
aside the order of ld. CIT(A) on this issue and direct the A.O. to consider the
same afresh and take appropriate decision in accordance with law, after
offering necessary opportunity of being heard to the assessee.
4 ITA 3693/M/11
6. The next issue relates to addition of Rs. 55 lacs u/s 69C of the Act.
Admittedly, the A.O. has estimated the expenditure of Rs. 55 lacs on
presumptions without bringing any material on record. Hence the ld. CIT(A)
has deleted this addition by making the following observation:-
"At the time of hearing, the representative submitted that the appellant
debited Rs.46,32,453j - in the P&L account during this year as per the
details given below:-
a) Brokerage of Rs.34,38,900/-: The appellant did not do any
advertising. It was left to the brokers to make the intending
purchasers aware about the project and persuade them to
purchase the flats/ shops.
b) Hire charges of Rs.58,448/-,
c) Octroi charges of Rs.l,23,551/-,
d) Office expenses of Rs.9,350/-,
e) Postage and Courier charges of Rs.7,646/-,
f) Printing and Stationery charges of Rs.28, 179/-
g) Rent for machinery of Rs.3,00,000/-,
h) Salary & Wages of Rs.2,05,489/-,
He submitted that the A.O. remarked that there was no expenditure on
hire of machinery whereas in fact the appellant debited Rs.3 lakh
towards rent: for machinery as seen from the P&L account. He further
submitted that the A.O. remarked that MBMC charges were not
incurred by the appellant whereas in fact a sum of Rs.18,50,000/- was
claimed as development expenses in A.Y. 2010. He further submitted
that the administrative office of the appellant is located at Harsh Plaza,
above Reliance Fresh, 1 st floor, Mira Road(East), Dist. Thane-40 1107
and the same premises are used for office purposes by half a dozen
other units of the group and in the circumstances there are certain
expenses which are incurred jointly and the concerned staff debits it to
one of the units. Even if one were to make proportionate allocation of
such expenses under the head Conveyance, Telephone Expenses etc.
falling to the share of the appellant, the allocated amount falling to the
share of the appellant would not be more than a few thousands of
rupees. It is therefore obvious that the disallowances resulted on
account of lack of appreciation of facts and the disallowance requires to
5 ITA 3693/M/11
7. A perusal of the order passed by the ld. CIT(A) on this issue shows that
the ld. CIT(A) adjudicated this issue by duly considering the relevant
provisions of law and the facts available in the instant case. Hence, we do not
find any infirmity in the order of ld. CIT(A) on this issue and accordingly
confirm the same.
8. In the result, the appeal filed by the Revenue is treated as partly
allowed for statistical purpose.
Order pronounced in the open court on 12th June, 2015.
(JOGINDER SINGH (B.R. BASKARAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
. ../ RK , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT (A) 35, Mumbai
4. / CIT -25,Mumbai
5. , , / DR, ITAT, Mumbai F Bench
6. / Guard file.
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai