ITO 24(2)(4), MUMBAI v. TRIMURTY CONSTRUCTIONS, MUMBAI

ITA 6516/MUM/2011 | 2002-2003
Pronouncement Date: 10-07-2013 | Result: Dismissed

Appeal Details

RSA Number 651619914 RSA 2011
Assessee PAN AAAFT1349M
Bench Mumbai
Appeal Number ITA 6516/MUM/2011
Duration Of Justice 1 year(s) 9 month(s) 13 day(s)
Appellant ITO 24(2)(4), MUMBAI
Respondent TRIMURTY CONSTRUCTIONS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-07-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 10-07-2013
Date Of Final Hearing 10-07-2013
Next Hearing Date 10-07-2013
Assessment Year 2002-2003
Appeal Filed On 27-09-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . . !' # $ BEFORE SHRI I.P. BANSAL JM AND SHRI N.K. BILLA IYA AM . / ITA NO.6516/MUM/2011 % % % % / ASSESSMENT YEAR 2002-03 INCOME TAX OFFICER 24(2)(4) RN 605 6 TH FLOOR C/13 PRATAYASHKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (EAST) MUMBAI -51 / VS. M/S. TRIMURTY CONSTRUCTIONS 41 LAXMINARAYAN SHOPPING CENTRE PODDAR ROAD MALAD (WEST) MUMBAI - 64. & # ./ '( ./ PAN/GIR NO. : AAAFT 1349M ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &) / APPELLANT BY: SHRI RAJENDRA KUMAR *+&) - / RESPONDENT BY : SHRI AJAY I. THAKORE - .# / DATE OF HEARING : 10/07/2013 /0% - .# / DATE OF PRONOUNCEMENT : 10/07/2013 1 / O R D E R PER I.P.BANSAL J.M: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST ORDER PASSED BY LD. CIT(A)-34 MUMBAI DATED 18/7/2011 FOR ASSESS MENT YEAR 2002-03. GROUND OF APPEAL READ AS UNDER: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT(A) ERRED IN HOLDING THAT THE TAPOVAN PROJECT OF ASSESSEE IS NOT COMPLETED AND DECISION OF ITAT MUMBAI IN M/S PRERNA PREMISES PVT LTD 7 SOT 288 IS NOT APPLICABLE IGNORING THE FACTS THAT ITAT MUMBAI IN ASSESEES OWN CASE FO R THIS YEAR HAS DIRECTED THE ITO TO DECIDE THE ISSUE FOLLOWING THE ABOVE DECISION. C IT (A) ALSO IGNORED THE FACT THAT PROJECT OF ASSESSEE IS COMPLETED 80.69% 9MORE THAN 80%) IN THIS YEAR. HENCE PROFIT IS TO BE TAXED IN THIS YEAR. . / ITA NO.6516/MUM/2011 % % % % / ASSESSMENT YEAR 2002-03 2 II. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR TO SUBMIT ADDITIONAL NEW GROUND WHICH MAY BE NECESSARY 2. THE IMPUGNED ASSESSMENT HAS BEEN FRAMED BY THE AO VIDE ORDER DATED 6/10/2010 PASSED UNDER SECTION 143(3) READ WITH S ECTION 254 OF THE INCOME TAX ACT 1961(THE ACT). EARLIER VIDE ORDER DATED 12/03/2 009 IN ITA NO.177/MUM/2007 THE MATTER WAS SET ASIDE WITH THE FOLLOWING OBSERVATIONS: WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RECOR D OF THE CASE. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING VARIOUS AM ENITIES IN THE FIATS CONSTRUCTED BY M/S. DEORA KEDIA DEVELOPMENT CO. PVT. LTD. THE A MENITIES CONCLUDED PUTTING OF TILES DOORS WINDOWS GRILLS BATH WITH MANY COMMO N FACILITIES LIKE COMPOUND WALLS INTERNAL ROADS WATER DRAINS GARDEN ETC. THE ASSE SSEE HAD FILED ITS RETURN F INCOME FOR THE YEAR UNDER CONSIDERATION AT NIL INCOME. THE Y DEPARTMENT INITIALLY HAD OBJECTED TO THE PROJECT COMPLETION METHOD ADOPTED B Y THE ASSESSEE AND CALLED FOR EXPLANATION FROM THE ASSESSEE. THE ASSESSEE HAD ALR EADY EXPLAINED BEFORE THE ASSESSING OFFICER THE REASON FOR NOT PROVIDING THE AMENITIES. HOWEVER THE EXPLANATION WAS NOT ACCEPTABLE TO THE ASSESSING OFF ICER WHO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS ALREADY COMPLETED ALMOST ALL THE WORKS IN THE PROJECT EXCEPT FEW WORKS. ACCORDINGLY THE ASSESSING OFFICER PRES UMED THAT THE PROJECT IS COMPLETED IN F.Y.2001-02 RELEVANT TO A.Y.2002-03. THE ASSESSING OFFICER HAS ASSESSED THE INCOME OF THE ASSESSEE AT RS.26 58 334 /-. HOWEVER THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSING OFFICER WITHOUT MAK ING ANY ENQUIRY CAME TO THE WRONG CONCLUSION THAT THE PROJECT WAS COMPLETED. TH E ISSUE FOR CONSIDERATION BEFORE US IS WHETHER THE PROJECT UNDERTAKEN BY THE ASSESSE E I.E. TAPOVAN WAS COMPLETE OR NOT? ACCORDINGLY TO THE ASSESSING OFFICER THE P ROJECT WAS COMPLETED. AFTER CAREFUL CONSIDERATION THE ASSESSMENT ORDER WE NOTICE THAT THE ASSESSING OFFICER WITHOUT MAKING PROPER VERIFICATION CAME TO THE CONCLUSION T HAT THE ASSESSEE HAS COMPLETED THE PROJECT ALTHOUGH THERE ARE SOME WORKS YET TO BE COMPLETED. IN THIS CONNECTION THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF PRERNA PREMISES PUT. LTD. 7 SOT 288 WHEREIN IT WAS OBSERVED AS UNDER: WE ARE THEREFORE OF THE VIEW THAT THERE SHOULD B E SOME GUIDELINES IN THIS REGARD WHICH MAY GOVERN THE ASSESSEE AS AND WHEN P ROFITS IN THE PROJECT COMPLETION METHOD ARE TO BE DECLARED. THE PERIOD OF COMPLETION OF THE PROJECT CANNOT BE STRETCHED AT THE WHIMS OF THE ASSESSEE TO DEFRAUD THE REVENUE. WE ARE ALSO CONSCIOUS OF THE FACT THAT THE ASSESSEES OBJECT IS NOT ONLY TO CONSTRUCT A BUILDING BUT ALSO TO SELL THE CONSTRUCT ED PORTION AND EARN PROFIT. BUT THE TIME OF COMPLETION OF THE PROJECT CANNOT BE STRETCHED TO THAT EXTENT TILL THE ASSESSEE FINALLY CONSTRUCT THE BUILDING AND ACQ UIRE THE COMPLETION OR THE OCCUPANCY CERTIFICATE. AS AND WHEN THE ENTIRE BUILD ING IS COMPLETED / CONSTRUCTED AND 80% OF ITS CONSTRUCTED PORTION IS S OLD AND OCCUPIED BY THE PURCHASER THE PROJECT IS DEEMED TO HAVE BEEN COMPL ETED IRRESPECTIVE OF THE FACT THAT MINOR CONSTRUCTION WORK IN THE BUILDING I S GOING ON. IT MAKES NO DIFFERENCE WHETHER THE BUILDER HAS OBTAINED THE OCC UPANCY CERTIFICATE OR NOT. ONCE MORE THAN 80% OF THE CONSTRUCTED AREA SOLD / O CCUPIED BY THE BUILDER . / ITA NO.6516/MUM/2011 % % % % / ASSESSMENT YEAR 2002-03 3 THE PROJECT IS DEEMED TO HAVE BEEN COMPLETED. THE R EMAINING CONSTRUCTED PORTION WOULD TAKE CARE OF THE CONTINGENT LIABILITI ES WHICH MAY OCCUR IN FUTURE IN THE PRESENT CASE THE ASSESSEE IS A CONTRACTOR A ND NOT A BUILDER. HOWEVER THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SIMILAR TO THE CASE OF PRERNA PREMISES PVT. LTD. (SUPRA). WE THEREFORE SET ASID E THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF T HE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH THE OBJE CTS IN THE CASE OF PRERNA PREMISES PVT. LTD. (SUPRA). 2.1 REFERRING TO THE DECISION OF PRERNA PREMISES PV T. LTD.(SUPRA) AO OBSERVED THAT IN A CASE WHERE 80% OF THE PROJECT IS COMPLETE D THEN ACCORDING TO PROJECT COMPLETION METHOD PROJECT IS DEEMED TO BE COMPLETE D. THEREFORE AO IN PARA 7.4 OF THE ORDER COME TO THE CONCLUSION THAT THE WORK C OMPLETED BY THE ASSESSEE WAS 80.69% THEREFORE THE PROJECT BY THE ASSESSEE IS D EEMED TO BE COMPLETED AND PROFIT WAS ASSESSABLE DURING THE YEAR UNDER CONSIDE RATION. HE COMPUTED THE PROFIT ACCORDINGLY AND ASSESSED THE NET INCOME OF RS.26 58 331/-. JUST THE AO HAS REPEATED THE EARLIER ADDITION. IT WILL BE REL EVANT TO REPRODUCE RELEVANT PORTION OF PARA 7.4 OF ASSESSMENT ORDER IN WHICH AO HAS CON CLUDED THAT THE PROJECT WAS COMPLETED TO THE TUNE OF 80.69%. 7.4 FURTHER ON EXAMINATION OF DETAILS IT IS SEEN T HAT THE WIP OF THE ASSESSEE AS ON 31-03-2002 IS RS.2 29 75 178/- AND WIP AS ON 31-03- 2009 IS RS.2 84 70 230/-. IF THE PERCENTAGE OF COMPLETION OF WORK AS ON 31-03-20 02 HAS BEEN WORKED OUT IT COMES TO RS.80.69%. THEREFORE AS PER CHAIMPION CO NSTRUCTION CO. VS. ITO (198) 5 ITD 495 (BORN) THE ASSESSEES PROJECT HAS BEEN DEE MED PROJECT COMPLETION YEAR. WHEN THIS FACT WAS SPECIALLY ASKED TO EXPLAIN THE A SSESSEE FAILED TO FILE ANY PROPER EXPLANATION. FURTHER THE ASSESSEE HAS NOT BROU GHT ON RECORD ANY EVIDENCES INDICATING THAT THE PROJECT HAS NOT BEEN COMPLETED AS ON 3 1-03-2002. FURTHER ON ANALYSIS OF SUBSEQUENT YEAR DETAILS I.E. THE PROFI T AND LOSS ACCOUNT FOR THE YEARS 31-03-2003 31-03-2004 31-03-2005 ETC. THE FOLLO WING FACTS EMERGES: O IN THE F.Y.2002-03 RELEVANT TO A.Y.2003-04 THE AS SESSEE HAS SHOWN OPENING WIP OF RS.2 29 75 175/- AND CLOSING WIP OF RS.2 37 92 8 44/-. THE MAJOR EXPENDITURE DEBITED FOR INCREASING THE WIP FOR THE YEAR IS ON ACCOUNT OF SALARY & BONUS MOBILE EXPENDITURE MOTOR CAR ELECTRICITY CITY DEPRECIAT ION COMPENSATION AND INTEREST ETC. THESE EXPENDITURES ARE NOT DIRECTLY LIKED WITH THE NATURE OF CONTRACTS CARRIED OUT BY THE ASSESSEE. NO MAJOR EXPENDITURE DIRECTLY RELATIN G TO EXECUTING OF PROVIDING FACILITIES FOR THE FLATS IS EVIDENT FROM THE ACCOUN TS OF THE ASSESSEE EXCEPT NOMINAL EXPENDITURE OF RS.13 462/- FOR WOOD HARDWARE RS.36 5/- GARDEN EXPENSES OF RS. 1 000/-. O SIMILARLY IN THE F.Y.2003-04 RELEVANT TO A.Y.200 4-05 THE ASSESSEE HAS CLAIMED MAJORITY OF EXPENSES ON ACCOUNT OF ABOVE MENTIONED HEADS EXCEPT EXPENDITURE ON . / ITA NO.6516/MUM/2011 % % % % / ASSESSMENT YEAR 2002-03 4 ACCOUNT OF COLOUR OF RS.1 99 211/- GATE OF RS.30 0 00/- WATCHMAN CHOWKEY RS.21 000/- BESIDES THE WIP FOR THE YEAR INCREASED FROM 2 37 92 844/- TO RS.2 46 54 895/- O ALSO IN THE F.Y.2004-05 RELEVANT TO A.Y.2005-06 T HE ASSESSEE HAS INCREASED ITS WIP FROM RS.2 46 54 895/- TO RS.2 52 91 059/- BY CL AIMING SIMILAR EXPENSES INCLUDING THE HARDWARE OF RS.8 342/- FURNITURE & F IXTURE OF RS.2 047/-. 7.5 FROM THE ABOVE IT CAN BE SAID THAT AFTER 31-03- 2002 THE ASSESSEE HAS NOT CARRIED OUT ANY MAJOR WORK WHICH IS EVIDENT FROM T HE NATURE OF EXPENDITURE BOOKED IN ITS ACCOUNT. BY SIMPLY CARRYING OUT A NOMINAL WO RK THE ASSESSEE ON ONE SIDE POSTPONING THE TAX LIABILITY AND ON THE OTHER SIDE CLAIMING HUGE EXPENDITURE ON ACCOUNT OF MOBILE PHONES MOTOR CAR DEPRECIATION. IN VIEW OF THE ABOVE IT IS CRYSTAL CLEAR THAT THE ASSESSEE HAS COMPLETED ITS MAJORITY OF THE WORK IN THE YEAR 31-03-200 2 AND HENCE THE A.Y.2002-03 IS CONSIDERED AS DEEMED YEAR OF COMPLETION CONSIDERING THE AFORESAID JUDICIAL PRONOUNCEMENTS. ACCORDINGLY THE PROFIT OF THE PROJECT IS WORKED OUT AS UNDER: ADVANCES RECEIVED RS. 2 56 33 509 LESS: WIP (WHICH INCLUDES PROFITS DECLARED IN EARLI ER YEARS) RS. 2 29 75 178 PROFIT FROM THE PROJECT RS. 26 58 331 ==== ========= 2.2 LD. CIT(A) HAS HELD THAT THE PROJECT OF THE ASS ESSEE AS ON 31/3/2002 WAS NOT COMPLETED UPTO 80% IT WAS LESS THAN 80% THER EFORE ACCORDING TO THE DECISION OF TRIBUNAL IN THE CASE OF PRERNA PREMISES PVT. LTD.(SUPRA) THE PROFIT COULD NOT BE ASSESSED IN THE YEAR UNDER CONSIDERATI ON. IT IS AGAINST SUCH FINDING RECORDED BY LD. CIT(A) THE DEPARTMENT HAS FILED AF OREMENTIONED GROUNDS OF APPEAL. 3. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. LD. DR RELIED UPON THE ORDER PASSED BY AO AND AS AGAINST THAT LD. A.R RELIED UPON THE ORDER PASSED B Y LD. CIT(A). IN THE PRESENT APPEAL IT IS THE CASE OF THE REVENUE THAT PROJECT D URING THE YEAR WAS COMPLETED AT 80.69% THEREFORE IT IS MORE THAN 80% AND ACCORDIN G TO THE TRIBUNAL IN THE CASE OF PRERNA PREMISES PVT. LTD. (SUPRA) THE PROJECT S HOULD HAVE BEEN DEEMED TO HAVE BEEN COMPLETED ON WHICH PROFIT WAS ASSESSABLE DURIN G THE YEAR UNDER CONSIDERATION. WE HAVE CAREFULLY EXAMINED SUCH CON TENTION OF THE REVENUE. RELEVANT PORTION OF THE ASSESSMENT ORDER HAS BEEN R EPRODUCED ABOVE. THE . / ITA NO.6516/MUM/2011 % % % % / ASSESSMENT YEAR 2002-03 5 COMPLETION UPTO 80.69% IS NOT AS ON 31/3/2002 BUT I T IS UPTO 31/3/2009. UPTO 31/3/2002 THE WORK-IN-PROGRESS IS ONLY A SUM OF RS. 2 29 75 178/-. THE WORK-IN- PROGRESS ON COMPLETION OF PROJECT AS ON 31/3/2010 WAS RS.2 92 19 240/- OF WHICH WORK-IN-PROGRESS UPTO 31/3/2002 AMOUNTING TO RS.2 29 75 175/- COMES TO 78.63%. THEREFORE WE SEE NO INFIRMITY IN THE F INDING RECORDED BY LD. CIT(A) THAT WORK-IN-PROGRESS AS ON 31/03/2002 WAS LESS THA N 80% THEREFORE PROFIT COULD NOT BE ASSESSED DURING THE YEAR UNDER CONSIDE RATION. THERE BEING NO SUCH INFIRMITY IN THE ORDER OF LD. CIT(A) WE DECLINE TO INTERFERE AND THE REVENUES APPEAL IS DISMISSED. 4. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/07/20 13 1 - /0% # 3 45 10/07/2013 0 - 6 7 SD/- SD/- ( !' / N.K.BILLAIYA ) ( . . / I.P. BANSAL ) # / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 4 DATED 10/07/2013 1 1 1 1 - -- - *.89 *.89 *.89 *.89 :9%. :9%. :9%. :9%. / COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. 9<6 *. / DR ITAT MUMBAI 6. 6= > / GUARD FILE. 1 1 1 1 / BY ORDER +9. *. //TRUE COPY// ? ?? ? / @ @ @ @ ' ' ' ' (DY./ASSTT. REGISTRAR) / ITAT MUMBAI . . ./ VM SR. PS