The ACIT, Circle-3,, Baroda v. Sumatinath Developers Pvt.Ltd.,, Borsad

ITA 2310/AHD/2009 | 1999-2000
Pronouncement Date: 15-07-2011 | Result: Dismissed

Appeal Details

RSA Number 231020514 RSA 2009
Assessee PAN AAAFI4576R
Bench Ahmedabad
Appeal Number ITA 2310/AHD/2009
Duration Of Justice 1 year(s) 11 month(s) 16 day(s)
Appellant The ACIT, Circle-3,, Baroda
Respondent Sumatinath Developers Pvt.Ltd.,, Borsad
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 15-07-2011
Date Of Final Hearing 30-06-2011
Next Hearing Date 30-06-2011
Assessment Year 1999-2000
Appeal Filed On 29-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI D K TYAGI JM & SHRI A N PAHUJA AM ITA NOS.2310 2311 & 2312/AHD/2009 (ASSESSMENT YEARS:-1999-2000 2000-01 & 2001-02) ASST. COMMISSIONER OF INCOME-TAX CIRCLE-3 BARODA V/S SUMATINATH DEVELOPERS P. LTD. 13 PUSHPAKUNJ SOCIETY VASAD CROSSING BORSAD DISTRICT:ANAND PAN: AAAFI 4576 R [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI M R CHAUDHARY DR ASSESSEE BY:- SHRI B D KARIA AR O R D E R A N PAHUJA: THESE THREE APPEALS BY THE REVENUE AGAINST A COMMON ORDER DATED 13-05-2009 OF THE LD. CIT(APPEAL S)-I BARODA FOR THE ASSESSMENT YEARS 1999-2000 2000-01 & 2001 -02 RAISE THE FOLLOWING IDENTICAL GROUNDS: 1(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON P ROPORTIONATE BASIS ON ACCOUNT OF TREATING THE AMOUNT RECEIVED TOWARDS P LOT BOOKING AS INCOME ASSESSED ON CASH BASIS. 1(B) THE LD. CIT(A) FAILED TO APPRECIATE THAT THE PL OTS WERE TRANSFERRED AND POSSESSION OF THE PLOTS WERE GIVEN TO THE CUSTOMERS AFT ER ALLOTMENT. 2. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR TO A LTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS MAY B E SET-ASIDE AND THAT OF THE AO BE RESTORED. 2 ADVERTING FIRST TO GROUND NOS.1(A) & (B) IN THESE APPEALS FACTS IN BRIEF AS PER RELEVANT ORDERS FOR THE AY 1999-2000 ARE THAT RETURN DECLARING LOSS OF RS.9 53 650/- FILED ON 23- 12-1999 BY THE 2 ITA NOS.2310 TO 2312/AHD/09 ASSESSEE ENGAGED IN THE BUSINESS OF DEVELOPMENT OF LAND AND ITS SALE WAS PROCESSED U/S 143(1) OF THE INCOME-TAX AC T 1961 [HEREINAFTER REFERRED TO AS THE ACT].DURING THE C OURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2000-01 THE ASSE SSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE RECE IVED AN AMOUNT OF RS. 39 60 000/- DURING THE PERIOD RELEVANT TO THE A Y 1999-2000 ON SALE OF 165 PLOTS @RS.24000/- PER PLOT AND DID NOT REFLECT ANY INCOME. ACCORDINGLY ASSESSMENT WAS REOPENED U/S 14 7 OF THE ACT WITH THE SERVICE OF A NOTICE U/S 148 OF THE ACT ON 4.2.2004.IN RESPONSE THE ASSESSEE SUBMITTED THAT RETURN FILED ON 23.12.1999 MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF REASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD TAKEN LAND SITUATE NEAR BORSAD FROM SHRI SHANKARBHAI PATEL A DIRECTOR OF THE COMPANY FOR D EVELOPMENT AND SALE. IN TERMS OF THE AGREEMENT WITH SHRI SHANKARBH AI PATEL THE ASSESSEE WAS ENTITLED TO CARRY OUT DEVELOPMENT ACTI VITIES ON THE LAND AT ITS OWN COST. 165 PLOTS WERE CARVED OUT OF THE SAID LAND AND THE TOTAL CONSIDERATION TO BE RECEIVED FROM MEMBERS WAS DIVIDED INTO 30 MONTHLY INSTALLMENTS @ RS.2 000/- P.M. COMM ENCING FROM APRIL 1998. CONSEQUENTLY IN THE PERIOD RELEVANT TO A. Y. 1999-2000 TOTAL AMOUNT OF RS.35 86 000/- WAS COLLECTED FROM CUSTOMERS WHILE IN THE PERIOD RELEVANT TO THE AYS. 2000-01 & 2001- 02 AMOUNT SO COLLECTED WAS RS.39 60 000/- & RS.19 80 000/- RESP ECTIVELY. SINCE THE BUYERS HAD PAID SUBSTANTIAL PORTION OF THE SALE PRICE I.E. ABOUT 90% OF THE TOTAL PRICE WHILE PLOTS HAD BEEN ALLOTT ED TO ALL THE CUSTOMERS AND THEY HAD TAKEN POSSESSION OF THEIR PL OTS THE AO CONCLUDED THAT PROFIT OF THE ASSESSEE WAS TO BE DE TERMINED ON PROPORTIONATE BASIS WITH RESPECT TO THE SALE PROCEE DS REALIZED DURING THE YEAR. ACCORDINGLY THE FOLLOWING AMOUNTS WERE A DDED IN EACH OF THE THREE ASSESSMENT YEARS ON THE BASIS OF THE AMOU NTS COLLECTED FROM CUSTOMERS DURING EACH YEAR: 3 ITA NOS.2310 TO 2312/AHD/09 PARTICULARS AY 1999-2000 RS. AY 2000-2001 RS. AY 2001-2002 RS. AMOUNT COLLECTED FROM CUSTOMERS DURING THE YEAR 35 86 000 39 60 000 19 80 000 ADDITION MADE ON PROPORTIONATE BASIS 10 31 896 10 51 500 10 54 612 3. ON APPEAL IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THEY HAD NOT EXECUTED SALE DEEDS IN RESPECT OF ANY OF TH E PLOTS DURING THE YEARS UNDER CONSIDERATION AND THE AMOUNTS RECEIVED FROM MEMBERS WERE REFLECTED AS BOOKING DEPOSITS WHILE SALES WAS SHOWN IN SUBSEQUENT YEARS AS AND WHEN THE SALE DEEDS WERE EX ECUTED. THE ID. AR FURTHER CONTENDED THAT AS PER PROVISIONS OF SEC. 53A OF THE TRANSFER OF PROPERTY ACT 1882 THE PROPERLY HAD NO T BEEN TRANSFERRED TO BUYERS AS NEITHER POSSESSION WAS HAN DED OVER TO ANY BUYER NOR THE SALE DEEDS WERE EXECUTED WITH THEM DU RING THE ASSESSMENT YEARS UNDER CONSIDERATION. THEREFORE PE R ACCOUNTING STANDARD 9 ON 'REVENUE RECOGNITION' REVENUE CAN ON LY BE RECOGNIZED WHEN THE PROPERTY IN THE GOODS ALONG WIT H SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP HAVE BEEN TRANSFERRE D TO THE BUYER AND THE SELLER RETAINS NO EFFECTIVE CONTROL OVER TH E GOODS SO TRANSFERRED. SINCE NO RISKS AND REWARDS OF OWNERSHI P HAD BEEN TRANSFERRED TO THE BUYERS AND THE POSSESSION OF THE PLOTS WERE NOT HANDED OVER TO THEM NOR SALE DEEDS WERE EXECUTED WI TH ANY BUYER AND NOR EVEN POSSESSION WAS HANDED OVER NO PART OF THE RECEIPTS COULD BE TREATED AS INCOME IN THESE YEARS. IT WAS FURTHER POINTED OUT THAT THE MEMBERS HAD MERELY GIVEN AN ADVANCE AN D HAD THE RIGHT TO CANCEL THE PLOT BOOKED AND CLAIM THE REFUND. THE ASSESSEE COULD ALSO CANCEL THE BOOKING AND REFUND THE PAYMENT IN C ASE OF DEFAULT IN THE PAYMENT OF INSTALLMENTS. IN SUBSEQUENT YEARS A S AND WHEN THE POSSESSION WAS HANDED OVER AND SALE DEEDS WERE EXEC UTED WITH THE 4 ITA NOS.2310 TO 2312/AHD/09 MEMBERS THE ASSESSEE HAD OFFERED THE RECEIPTS AS I NCOME AND PAID TAX ON THE SAME. IF THE SAME WERE TO BE CONSIDERED AS INCOME OF THESE THREE YEARS ALSO IT WOULD AMOUNT TO DOUBLE T AXATION OF THE SAME AMOUNTS WHICH WAS CLEARLY NOT PERMITTED UNDER THE LAW. IN THIS CONNECTION THE ASSESSEE SUBMITTED THE FOLLOWI NG DETAILS: ASSESSMENT YEAR FINANCIAL YEAR NO OF SALE DEEDS EXECUTED TAXABLE RECEIPTS AS PER AO RS. TAXABLE RECEIPTS AS PER ASSESSEE RS. 1999-2000 1998-1999 0 10 31 896 0 2000-2001 1999-2000 0 10 51 500 0 2001-2002 2000-2001 0 10 54 612 0 2002-2003 2001-2002 15 0 3 47 580 2003-2004 2002-2003 13 0 1 73 265 2004-2005 2003-2004 0 0 0 2005-2006 2004-2005 2 0 6 800 2006-2007 2005-2006 10 0 49 700 2007-2008 2006-2007 4 0 42 600 2008-2009 2007-2008 4 0 45 100 2009-2010 2008-2009 2 0 1 350 2010-2011 2009-2010 115 0 24 71 613 TOTAL 165 31 38 008 31 38 008 3.1 IT WAS FURTHER CONTENDED THAT THE AO HAD A SSESSED THE SALES ON THE BASIS OF COLLECTION FROM MEMBERS ON CA SH BASIS AND ALLOWED EXPENSES ON MERCANTILE BASIS AND THEREBY VI OLATED PROVISIONS OF SECTION 145 OF THE ACT BY FOLLOWING ' HYBRID' SYSTEM OF 5 ITA NOS.2310 TO 2312/AHD/09 ACCOUNTING. INTER ALIA THE ASSESSEE RELIED ON THE JUDGMENT IN THE CASE OF CIT VS. MOTILAL C PATEL & CO. 71 CTR 98(GU J). 4. IN THE LIGHT OF AFORESAID SUBMISSIONS THE LD. CIT(A) CONCLUDED AS UNDER: 3.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE ID. AR AND THE FACTS OF THE CASE. I FIND THAT THE FACTS AND ISSUE FOR DETERMINATION IN THE THREE ASSESSMENT YEARS 1999-2000 2000-01 AND 2 001-02 ARE IDENTICAL. THE METHODOLOGY ADOPTED BY THE AO IN DET ERMINING THE PROFITS FOR EACH OF THE THREE YEARS TO ASSESS THE I NCOME BASED ON THE ACTUAL RECEIPTS IS NOT SUPPORTED BY ACCOUNTING PRINCIPLES. THE POSSESSION OF PLOTS WAS NOT HANDED OVER TO ANY BUYE R NOR ANY SALE DEEDS WERE EXECUTED DURING THESE THREE ASSESSMENT Y EARS. THE ASSESSEE COMPANY HAS OFFERED THE INCOME FOR TAXATIO N IN THE SUBSEQUENT YEARS BASED ON THE SALE DEEDS EXECUTED A ND POSSESSION GIVEN AT THE TIME OF EXECUTION OF THE SALE DEEDS. T HE QUESTION AS TO WHETHER ANY AND EVERY RECEIPT CONSTITUTED INCOME WA S CONSIDERED BY THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF C1 T V. PUNJAB TRACTORS CO-OPERATIVE MULTIPURPOSE SOCIETY LTD. 23 4 1TR 105. THE COURT HELD THAT THE MERE RECEIPT OF AN AMOUNT DOES NOT ALWAYS MEAN THAT INCOME HAS ALREADY ACCRUED UNLESS THERE IS A RIGHT TO SUCH RECEIPT WITHOUT ANY CORRESPONDING OBLIGATION TO RET URN THE MONEY. THE COURT OBSERVED THAT 'DEPOSITS OR ADVANCES RECEIVED BY THE ASSESSEE BECOME TRADING RECEIPTS WHEN THE ASSESSES BECOMES E NTITLED TO APPROPRIATE THE SAME TO ITS INCOME AT THE TIME OF R ENDERING THE SERVICE. 3.5 IN THE INSTANT CASE THE ASSESSEE DID NOT BECOM E LEGALLY ENTITLED TO APPROPRIATE THE RECEIPTS TILL THE TIME OF HANDIN G OVER THE POSSESSION OF THE PLOTS AND SIGNING THE SALE DEEDS IN FACT THE ASSESSEE HAS APPROPRIATED THE RECEIPTS TO ITS INCOM E AFTER SIGNING THE DEEDS AND HANDING OVER THE POSSESSION. HENCE T HE ACTION OF THE APPELLANT WAS IN CONFORMITY WITH (HE LAW AS WELL AS IN ACCORDANCE WITH THE PRESCRIBED ACCOUNTING STANDARD OR THE ICAI RELATING TO RECOGNITION OF INCOME. ACCORDINGLY THE ADDITIONS O F RS.10 31 896/- RS.10 51 500/- & RS.10 54 612/- FOR THE THREE YEARS ARE HELD TO BE UNJUSTIFIED AND ARE ACCORDINGLY DELETED. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE SUPPORTE D THE FINDINGS OF THE LD. CIT(A). 6 ITA NOS.2310 TO 2312/AHD/09 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY THE ASSESSEE IS CONSISTENTL Y FOLLOWING THE METHOD OF ACCOUNTING OF INCOME WHEN THE POSSESSION OF PLOTS IS HANDED OVER TO ANY BUYER AND SALE DEEDS ARE EXECUTE D. IN CIT VS. BHURANGYA COAL OMPANY 34 ITR 802(SC) HONBLE APEX C OURT HELD THAT THE TITLE TO IMMOVABLE PROPERTY PASSES TO THE TRANSFEREE ONLY WHEN THE SALE DEED IS EXECUTED AND REGISTERED. IN THE CASE OF ARUNDHATI BALKRISHNA [1982] 138 ITR 245 (GUJ) HONBLE GUJRAT HIGH COURT HELD THAT THAT TH E TRANSFER OF CAPITAL ASSET BECOMES EFFECTIVE UNDER SECTION 45 OF THE INCOME-TAX ACT FROM THE DATE ON WHICH THE DOCUMENT WAS EXECUTED IN CASE ITS REGISTRATION WAS SU BSEQUENTLY ADMITTED BEFORE THE REGISTRAR. THIS VIEW WAS REITERATED IN COMMISSIONER OF INCOME TAX. VS MORMASJI MANCHARJI VAID 250 ITR 542(GUJ ). AS HELD IN DECISION IN PUNJAB TRACTORS CO-OPERATIVE MULTIPURPOSE SOCIETY LTD.(SUP RA)FOLLOWED BY THE LD. CIT(A) DEPOSITS OR ADVANCES RECEIVED BY THE ASS ESSEE BECAME TRADING RECEIPTS ONLY WHEN THE ASSESSEE BECAME ENTITLED TO APPROP RIATE THE SAME TO ITS INCOME AT THE TIME OF RENDERING THE SERVICE. IN THE IN STANT CASE THE LD. CIT(A) CONCLUDED THAT THE ASSESSEE DID NOT BECOME LEGALLY EN TITLED TO APPROPRIATE THE RECEIPTS TILL THE TIME OF HANDING O VER THE POSSESSION OF THE PLOTS AND SIGNING THE SALE DEEDS IN FACT T HE ASSESSEE APPROPRIATED THE RECEIPTS TO ITS INCOME AFTER SIGNI NG THE DEEDS AND HANDING OVER THE POSSESSION. THE LD. DR DID NOT PLA CE ANY MATERIAL BEFORE US IN ORDER TO CONTROVERT THESE FINDINGS OF THE LD. CIT(A) NOR BROUGHT TO OUR NOTICE ANY CONTRARY DECISION SO AS T O ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER. IN THE ABSENCE OF ANY BASIS WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). CONSEQUENTLY GROUND NOS.1 (A)& (B) IN THE APPEAL A RE DISMISSED.. 7. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE U S IN TERMS OF RESIDUARY GROUND NO.2 IN THESE APPEALS ACCORDINGLY THIS GROUND IS DISMISSED. 7 ITA NOS.2310 TO 2312/AHD/09 8. IN THE RESULT THESE THREE APPEALS ARE DISMISSE D. ORDER PRONOUNCED IN THE COURT TODAY ON 15 -07-2011 SD/- SD/- ( D K TYAGI ) JUDICIAL MEMBER ( A N PAHUJA ) ACCOUNTANT MEMBER DATED : 15 -07-2011 COPY OF THE ORDER FORWARDED TO: 1. SUMATINATH DEVELOPERS P. LTD. 13 PUSHPAKUNJ SO CIETY VASAD CROSSING BORSAD DISTRICT:ANAND 2. ASST. COMMISSIONER OF INCOME-TAX CIRCLE-3 BARO DA 3. CIT CONCERNED 4. CIT(A)-I BARODA 5. DR ITAT AHMEDABAD BENCH-A AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD