ACIT, Nashik v. Shri Prakash Nivruti Burhade,, Nashik

ITA 1129/PUN/2010 | 2007-2008
Pronouncement Date: 15-07-2013 | Result: Dismissed

Appeal Details

RSA Number 112924514 RSA 2010
Assessee PAN AARPB2087R
Bench Pune
Appeal Number ITA 1129/PUN/2010
Duration Of Justice 2 year(s) 11 month(s) 2 day(s)
Appellant ACIT, Nashik
Respondent Shri Prakash Nivruti Burhade,, Nashik
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 15-07-2013
Date Of Final Hearing 04-07-2013
Next Hearing Date 04-07-2013
Assessment Year 2007-2008
Appeal Filed On 12-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K.PANDA ACCOUNTANT MEMBER ITA NO. 1129/PN/2010 & 1566/PN/2011 (ASSESSMENT YEAR: 2007-08 & 2008-09) ASSTT. CIT CIR. 1 NASIK APPELLANT VS. SHRI PRAKASH N. BURHODE C-11/12 FIRST FLOOR CITY PLAZA NEAR KALIKA MANDIR OLD MUMBAI AGRA ROAD NASIK PAN AARPB 2087 R .. RESPONDENT APPELLANT BY: SHRI KOTH ARI RESPONDENT BY: SHRI NIKH IL PATHAK DATE OF HEARING : 05-07-2013 DATE OF ORDER : 15.07.2013 ORDER PER SHAILENDRA KUMAR YADAV JM: BOTH THESE APPEALS PERTAIN TO THE SAME ASSESSEE. SO THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO. 1129/PN/2010 FOR A.Y. 2007-08 THE RE VENUE HAS RAISED THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE D. CIT(A)-I NASIK WAS JUSTIFIED IN DELETI NG THE ADDITION OF RS. 74 94 954/- OUT OF DISALLOWANCE MADE BY THE AT RS. 1 34 50 940/- U/S 37(1)(VII) OF THE ACT; 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-I NASIK WAS JUSTIFIED IN DELET ING THE ADDITION OF RS. 74 94 954/- IGNORING THE FACT THAT THE ASSESSEE HAS NOT GIVEN ANY PLAUSIBLE EXPLANATION NOR HAS THE CIT(A) GIVEN ANY FINDINGS ON THE ISSUE U/S 37(1)(VII) OF T HE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. THE ASSESSEE HAS FILED RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION ON 30-10-2007 DECLARING INCOME OF RS. 7 28 265/-. THE ASSESSING OFFICER HAS ASSESSED THE INCOME OF THE ASSESSEE U/S 143(3) OF THE ACT AT RS. 1 56 00 388/- BY MAKING AN ADDITION ON A CCOUNT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT OF RS. 78 514/ DISALLOWANCE U/S 40(A)(IA) OF THE ACT AT RS. 13 42 669/ AND DISALLOWANCE OF PLOT ADVANCES DEBITED IN THE P & L A/C AT RS. 1 34 50 940/- U/S 37(1) OF THE ACT. THE ONLY ISSUE BEFORE US IS REGARDING DELETION OF ADDITION OF RS. 74 94 954/- O UT OF DISALLOWANCE MADE BY THE ASSESSING OFFICER AT RS 1 34 50 940/- U/S 37(1)(VII) OF THE ACT. THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAD CLAIMED EXPENSES OF RS. 1 90 41 728/- ON ACCOUN T OF CONSTRUCTION AND PLOT ACCOUNT WHICH INCLUDED ADVANC ES PAID FOR PURCHASE OF PLOTS AS UNDER:- SR.NO. DESCRIPTION AMOUNT RS. 1. PLOT AT S.NO. 3 MAKHMALABAD 40 00 000/ - 2 PLOT AT S.NO. 40 K. WADA 66 00 000/ - 3. PLOT A T S.NO . 693 GANGAPUR ROAD 28 00 940/ - 4. PLOT AT S.NO . 889 50 000/ - TOTAL 1 34 50 940/ - 4. THE ASSESSEE CONTENDED THAT SINCE BEGINNING THE PAYMENTS FOR PURCHASE OF PLOTS HAVE BEEN DEBITED TO THE P & L A/ C AND THE AMOUNT APPEARING AS ADVANCES RECEIVED AGAINST PROPO SED SALE OF PLOTS APPEARING IN THE BALANCE SHEET ON LIABILITY S IDE SHOULD BE TREATED AS INCOME AS THE SAME METHOD IS BEING REGUL ARLY FOLLOWED. HOWEVER THE ASSESSING OFFICER OBSERVED THAT THE AS SESSEE IS NOT ALLOWED TO FOLLOW THE MIXED SYSTEM OF ACCOUNTING W. E.F. A.Y. 1997- 98 IN VIEW OF AMENDMENT TO SEC. 145 OF THE ACT BY T HE FINANCE ACT 1995. HE OBSERVED THAT THE EXPENSES ON ACCOUNT OF P URCHASES LABOUR CHARGES ETC. WERE CLAIMED BY THE ASSESSEE BY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND ACCORDINGLY SHO WN CREDITORS FOR EXPENSES IN THE BALANCE SHEET TO THE EXTENT OF RS. 27 14 602/- AND THE AUDITOR HAVE ALSO STATED IN THE AUDIT REPOR T THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD SH OWN ADVANCES AGAINST PLOTS AMOUNTING TO RS. 47 60 000/- MAINLY I N RESPECT OF PLOT BOOKING ON THE LIABILITY SIDE IN THE BALANCE S HEET AND HAS ALSO SHOWN PLOT BOOKING ADVANCE PAID RS. 10 00 000/- AGA INST PLOT AT TILAKWADI IN THE BALANCE SHEET ON ASSET ASIDE. HE ALSO OBSERVED THAT THE ASSESSEE HAS RECOGNISED REVENUE IN RESPECT OF SALE OF FLATS WHEN THE TRANSACTION HAS COMPLETED AND NOT WHEN IT HAS RECEIVED ADVANCES. THE ASSESSING OFFICER THEREFORE REJECTE D THE CONTENTION OF THE ASSESSEE THAT PLOT ADVANCES PAID AND DEBITED IN THE P & L A/C SHOULD BE ALLOWED AS EXPENDITURE AND PLOT ADVANCES APPEARING IN THE BALANCE SHEET SHOULD BE TREATED AS INCOME OF TH E ASSESSEE. THE ALTERNATE PLEA OF THE ASSESSEE IS REGARDING ALLOWAB ILITY OF BAD DEBIT. THE ASSESSING OFFICER REJECTED THE SAME. 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE FIRS T APPELLATE AUTHORITY WHEREIN VARIOUS CONTENTIONS HAVE BEEN RA ISED AND THE CIT(A) HAVING CONSIDERED THE SAME HAS HELD AS UNDER :- 5.2.3 DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT HAS RAISED THIRD CONTENTION THAT AS THE P LOT ADVANCES DEBITED TO THE PROFIT AND LOSS ACCOUNT IS NOT ALLOW ABLE EXPENDITURE THE FLAT BOOKING AND ADVANCE PAYMENTS FOR FLATS CREDITED TO THE PROFIT AND LOSS ACCOUNT SHOULD NOT BE CONSIDERED AS INCOME OF THE APPELLANT FOLLOWING THE SAME ACCOUNTING PRINCIPLE. THE CONTENTION RAISED VIDE L ETTER DATED 25-5-2010 ALONG WITH COPIES OF RECEIPTS ISSUED FOR BOOKING ADVANCE PAYMENT AGAINST FLATS WERE ALSO FILED BY T HE APPELLANT WITH THE A.O. DURING THE COURSE OF APPELLANT PROCE EDINGS THE AO ATTENDED AND HAS ALSO ACCEPTED THE ABOVE CONTENT ION OF THE APPELLANT. THE CONTENTION OF THE APPELLANT THAT IF THE PLOT ADVANCES PAID RS. 1 34 50 940/- ARE TO BE DISALLOWE D AS THE REVENUE IN RESPECT OF THE SAME IS TO BE RECOGNISED IN THE YEAR OF ACTUAL SALE/POSSESSION OF THE PLOTS THEN THE AD VANCES RECEIVED IN RESPECT OF FLATS RS. 74 94 984/- CREDIT ED IN THE PROFIT AND LOSS ACCOUNT ARE ALSO TO BE TAXED IN THE YEAR OF ACTUAL SALE POSSESSION OF THE FLATS IS FOUND TO BE CORRECT AND HENCE ACCEPTED. THE APPELLANT HAS CORRECTLY CLAIME D THAT THE SAID FLATS IN RESPECT OF WHICH ADVANCES OF RS. 74 9 4 984/- WERE RECEIVED ARE ACTUALLY TRANSFERRED TO THE CUSTOMERS IN THE F.Y. 2007-08 RELEVANT TO A.Y. 2008-09 AND HENCE THE AMO UNT IS TO BE TAXED IN A.Y. 2008-0. THE A.O IS THEREFORE DIRE CTED TO DELETE THE ADDITION TO THE EXTENT OF RS. 74 94 984/ - IN THE A.Y. 2007-08 AND ASSESS THE SAID AMOUNT AS INCOME IN A.Y . 2008- 09. THE APPELLANT HAS ALSO CLAIMED THAT AS THE AMO UNT OF RS. 74 94 984- IS TO BE ASSESSED AS INCOME OF A.Y. 2008 -09 ON THE GROUND THAT THE INCOME IS TO BE RECOGNISED IN THE Y EAR OF ACTUAL SALE/POSSESSION THE PLOT ADVANCES RECEIVED RS. 25 40 000/- AND CREDITED TO THE PROFIT AND LOSS ACC OUNT OF THE A.Y. 2008-09 ARE TO BE REDUCED FROM INCOME ALSO APP EARS T BE REASONABLE AND CORRECT. THE A.O SHALL ACCORDINGLY CONSIDER THE CONTENT RAISED BY THE APPELLANT WHILE ASSESSING THE INCOME FOR THE A.Y. 2008-09. THE THIRD CONTENTION OF THE APPELLANT IS ALLOWED AS ABOVE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF TH E REVENUE. THE LEARNED DR SUBMITTED THAT THE CIT(A) WAS NOT JU STIFIED IN DELETING THE ADDITION OF RS. 74 94 954/- OUT OF DI SALLOWANCE MADE BY THE ASSESSING OFFICER AT RS. 1 34 50 940/- U/S 3 7(1)(VII) OF THE ACT. ON THE OTHER HAND THE LEARNED COUNSEL FOR TH E ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 6. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD WE FIND THAT THE ASSESSING OFFICER HAS HELD THAT THE PLOT ADVANCES DEBITED TO THE P & L A/C IS NOT AN ALLOWAB LE EXPENDITURE. THE FLAT BOOKING AND ADVANCE PAYMENTS FOR FLAT BOOK ING CREDITED TO P & L A/C SHOULD NOT BE CONSIDERED AS INCOME OF THE ASSESSEE. THE CONTENTION OF THE ASSESSEE HAS BEEN THAT IF THE PLO T ADVANCES PAID OF RS. 1 34 50 940/- ARE TO BE DISALLOWED AS REVENUE I N RESPECT OF THE SAME IS TO BE RECOGNISED IN THE YEAR OF ACTUAL SALE /POSSESSION OF THE PLOTS THEN THE ADVANCES RECEIVED IN RESPECT OF FLA TS RS. 74 94 984/- CREDITED IN THE P & L A/C ARE ALSO TO BE TAXED IN T HE YEAR OF ACTUAL SALE/POSSESSION OF THE FLATS. THE CIT(A) ACCEPTED THE ABOVE CONTENTION OF THE ASSESSEE AND OBSERVED THAT THE FL ATS IN RESPECT OF WHICH ADVANCE OF RS 74 94 984/- WAS RECEIVED WERE A CTUALLY TRANSFERRED TO THE CUSTOMERS IN THE F.Y. 2007-08 RE LEVANT TO A.Y. 2008-09 AND HENCE THE AMOUNT IS TO BE TAXED IN A.Y. 2008-09. ACCORDINGLY THE ASSESSING OFFICER WAS DIRECTED TO DELETE THE ADDITION TO THE EXTENT OF RS. 74 94 984/- AND ASSES S THE SAID AMOUNT AS INCOME IN A.Y. 2008-09. THE ASSESSEE HAS CLAIMED THAT AS THE AMOUNT OF RS. 74 94 984/- IS TO BE ASSESSED AS INCOME OF A.Y. 2008-09 ON THE GROUND THAT THE INCOME IS TO BE RECOGNISED IN THE YEAR OF ACTUAL SALE POSSESSION THE PLOT ADVANCE S RECEIVED OF RS. 25 40 000/- AND CREDITED TO THE P & L ACCOUNT OF TH E A.Y. 2008-09 WERE TO BE REDUCED FROM INCOME WAS ALSO FOUND REASO NABLE BY THE CIT(A). ACCORDINGLY THE ASSESSING OFFICER WAS DIR ECTED TO CONSIDER THE CONTENTION RAISED BY THE ASSESSEE WHILE ASSESSI NG THE INCOME OF A.Y. 2008-09. THIS REASONED FINDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE BECAUSE THE ASSESSEE HAS RIGHTLY CLAIMED THAT PLOTS IN RESPECT OF WHICH ADVANCE OF RS. 74 94 983/- WERE ACTUALLY TRANSFERRED TO THE CUSTOMERS IN A.Y. 2008- 09 HENCE THE AMOUNT IS TO BE TAXED IN THE SAID YEAR. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. 8. IN ITA NO. 1566/PN/2011 FOR A.Y. 2008-09 THE RE VENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) NASIK ERRED IN DELETING THE ADDITION AT RS. 25 40 000/- ON ACCOUNT OF ADVANCE TOWARDS PROPOSED SALE OF PLOT S FROM THE PROFIT FOR A.Y. 2008-09. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) NASIK ERRED IN DELETING THE ADDITION AT RS. 25 40 000/- HAS DIRECTED AO TO REDUCE FROM THE PROFIT FOR A.Y. 2008-09. 3. THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O DY. CIT CIR. 1 NASIK FOR ADDITION U/S 143(3) OF THE ACT 9. THE ASSESSING OFFICER HAS DISALLOWED RS. 25 40 000/- ON ACCOUNT OF ADVANCE AGAINST THE PLOTS WHILE ASSESSIN G THE INCOME OF THE ASSESSEE. IN APPEAL THE CIT(A) HELD AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE THE ASSESSMENT ORDER AND THE RIVAL SUBMISSIONS. THE AP PELLANT HAS FILED RETURNS OF INCOME FOR A.Y. 2007-08 AND 20 08-09 WHEREIN HE HAS CLAIMED ADVANCES FOR PROPOSED PURCHA SE OF PLOTS AS EXPENDITURE AND HAS CLAIMED ADVANCES RECEI VED FOR PROPOSED SALE OF FLATS/PLOTS AS INCOME. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2007-08 THE AO HAS ASKED THE APPELLANT AS TO HOW THE ADVANCES FOR PROPOSED P URCHASE OF PLOTS HAVE BEEN CLAIMED AS EXPENDITURE. THE APPELL ANT HAS NOTICED THE APPARENT MISTAKE AND HAS FILED REVISED COMPUTATION OF INCOME FOR A.Y. 2007-08 AND 2008-09 WHEREIN THE ADVANCES PAID FOR PAYMENT OF PLOTS ARE NOT CLAI MED AS EXPENDITURE AND ADVANCES RECEIVED FOR PROPOSED SALE OF FLATS/PLOTS ARE NOT CLAIMED AS INCOME. THE APPELLAN T STATED THAT THE SAID ADVANCE PAYMENT FOR PLOTS AND THE REC EIPT FROM PROPOSED SALE SHALL BE CONSIDERED IN THE YEAR OF AC TUAL SALE OF THE SAID ASSETS. IT IS SETTLED PRINCIPLE OF ACCOUNT ING THAT AN ADVANCE PAYMENTS CANNOT BE TREATED AS EXPENDITURE A ND ADVANCE RECEIPTS CANNOT BE TREATED AS INCOME. THE R EVENUE AND EXPENDITURE IS TO BE RECOGNISED IN THE YEAR OF ACTUAL SALE OF PLOTS/FLATS. IN VIEW OF THE ABOVE FACTS I AM OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIED IN TREATING THE ADVANCE RECEIVED FOR PROPOSED SALE OF FLATS AS INCOME. THE AO IS DIRECTED TO REDUCE THE INCOME ASSESSED BY RS. 25 40 000/-. THIS GROUND OF APPEAL IS ALLOWED. ACCORDINGLY THE CIT(A) GRANTED RELIEF TO THE ASSES SEE. THE SAME HAS BEEN OPPOSED BY THE REVENUE. THE LEARNED DR STATED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION O F RS. 25 40 000/- ON ACCOUNT OF ADVANCE TOWARDS PROPOSED SALE OF PLOT S FROM THE PROFIT FOR AY. 2008-09. ACCORDING TO THE LEARNED D R THE CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 25 40 000/- WHEREBY THE ASSESSING OFFICER WAS DIRECTED TO REDUCE THE SAID A MOUNT FROM THE PROFIT FOR A.Y. 2008-09. THE LEARNED COUNSEL FOR T HE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 10. WE FIND THAT THE ASSESSEE HAS FILED RETURNS OF INCOME FOR A.Y. 2007-08 AND 2008-09 WHEREIN HE HAS CLAIMED ADVANCES FOR PROPOSED PURCHASE OF PLOTS AS EXPENDITURE AND HAS C LAIMED ADVANCES RECEIVED FOR PROPOSED SALE OF FLATS/PLOTS AS INCOME. THE ASSESSEE NOTICED AN APPARENT MISTAKE AND HAS FILED REVISED COMPUTATIONS OF INCOME FOR AY. 2007-08 AND 2008-09 WHEREIN ADVANCES PAID FOR PAYMENT OF PLOTS WERE NOT CLAIMED AS EXPENDITURE AND ADVANCES RECEIVED FOR PROPOSED SALE OF FLATS/P LOTS WERE NOT CLAIMED AS INCOME. THE ASSESSEE STATED THAT THE SA ID ADVANCE PAYMENT FOR PLOTS AND RECEIPTS FROM PROPOSED SALE S HALL BE CONSIDERED IN THE YEAR OF ACTUAL SALE OF THE SAID A SSETS. THE ADVANCE PAYMENT CANNOT BE TREATED AS EXPENDITURE AND ADVANC E RECEIPT COULD NOT BE TREATED AS INCOME. THE REVENUE AND T HE EXPENDITURE IS TO BE RECOGNIZED IN THE YEAR OF ACTUAL SALE OF P LOTS/FLATS. IN VIEW OF THE ABOVE FACTS THE ASSESSING OFFICER WAS RIGHT LY DIRECTED TO REDUCE THE INCOME ASSESSED BY RS. 25 40 000/-. THI S REASONED FINDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OU R SIDE. WE UPHOLD THE SAME. 11. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 15 TH JULY 2013 SD/- SD/- (R.K.PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 15 TH JULY 2013 ANKAM COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A)-I NASIK 4) THE CIT- I NASIK 5) THE DR B BENCH I.T.A.T. PUNE. 6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY I.T.A.T. PUNE