M/S. SHEETAL CLASSIC HOME MAKERS PVT. LTD, MUMBAI v. THE DY CIT CEN CIR-33,

ITA 6715/MUM/2007 | 2004-2005
Pronouncement Date: 30-04-2010 | Result: Allowed

Appeal Details

RSA Number 671519914 RSA 2007
Assessee PAN AAFCS7665B
Bench Mumbai
Appeal Number ITA 6715/MUM/2007
Duration Of Justice 2 year(s) 5 month(s) 23 day(s)
Appellant M/S. SHEETAL CLASSIC HOME MAKERS PVT. LTD, MUMBAI
Respondent THE DY CIT CEN CIR-33,
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 30-04-2010
Date Of Final Hearing 26-04-2010
Next Hearing Date 26-04-2010
Assessment Year 2004-2005
Appeal Filed On 06-11-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH MUMBAI BEFORE SHRI N.V. VASUDEVAN (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) I.T.A NO.6715/MUM./2007 ASSESSMENT YEAR : 2004-05 DATE OF HEARING 26.4.2010 SHEETAL CLASSIC HOME MAKERS P. LTD. A/16 ROOP KAMAL OPP. ANAND ASHRAM B.V. ROAD KANDIVALI (W) MUMBAI 400 067 AAFCS7665B .. APPELLANT VS DY. COMMISSIONER OF INCOME TAX C.C. 33 MUMBAI RESPONDENT APPELLANT BY : SHRI DHARMESH SHAH RESPONDENT BY : SHRI L.K. AGRAWAL O R D E R PER PRAMOD KUMAR A.M. BY WAY OF THIS APPEAL THE ASSESSEE APPELLANT HAS CH ALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 29 TH AUGUST 2007 FOR THE ASSESSMENT YEAR 2004-05 ON T HE FOLLOWING GROUNDS:- ITA NO.6715/MUM./2007 SHEETAL CLASSIC HOME MAKERS P. LTD. [2] 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DETERMINING THE PROFIT AT RS.1 88 4 79/- DURING THE YEAR UNDER CONSIDERATION. 2. THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF REAL ESTATE. THE AS SESSEE CLAIMS TO BE FOLLOWING PROJECT COMPLETION METHOD FOR COMPUTING ITS PROFITS FROM D EVELOPMENT OF REAL ESTATE. IN THE ABSENCE OF ASSESSEES COMPLIANCE TO THE ASSESSING O FFICERS REQUISITIONS FROM TIME TO TIME THE ASSESSING OFFICER PROCEEDED TO REJECT THE SAID METHOD AND ESTIMATE THE INCOME @ 10% OF ADVANCES RECEIVED BY THE ASSESSEE. ACCORDINGLY INCOME WAS ASSESSED AT RS.5 60 676/-. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE LEARNED CIT(A) WHILE THE LEARNED CIT(A) DID NOT FIND ANYTHING WRONG WITH THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE HE ALSO HELD THAT THE PROJECT WAS COMPLET ED IN THE PRECEDING YEAR. HE THEREFORE PROCEEDED TO BRING TO TAX DIFFERENCE BETWEEN PROPOR TIONATE VALUE OF W.I.P. AT THE BEGINNING OF THE YEAR AND SALE PRICE AS ASSESSEES INCOME. W HILE DOING SO THE LEARNED CIT(A) OBSERVED AS FOLLOWS:- 2.6 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. IN THIS CASE IT IS FOUND THAT THE APPELLANT STARTED DEVELOPMENT PROJEC T ON A PIECE OF LAND AT MIRA ROAD DIST. THANE CONSISTING OF A WING B WING AND C WING. THE APPELLANT NEVER PURCHASED B WING. IT HAS AGREED TO PURCHASE ONLY A AND C WINGS OF THE PROJECT. DUE TO NON-AVAILABILITY OF FUNDS THE APPELLANT COULD NOT CARRY ANY CONSTRUCTION ON THE C WING AND DEVELOPMENT RIGHT OF THIS LAND WAS SOLD BY THE APPELLANT ON 17.4.2002. THIS LEFT A PORTION OF THE LAND WITH THE APPELLANT HAVING FSI OF 23207 SQ.FT. WHICH COST TO THE APPELLANT RS. 26 84 000/- (NET). ON THIS PORTION OF LAND THE APPELLANT CARRIED OUT THE CONS TRUCTION AND SPENT RS.48 94 705/- UPTO 31.3.2003. THE APPELLANT WAS CO NSTRUCTING A BUILDING CONSISTING OF GROUND FLOOR HAVING COMMERCIAL ESTABL ISHMENTS AND SEVEN FLOORS CONSISTING OF RESIDENTIAL UNIT. ON 5.3.2002 THE AP PELLANT SOLD THE ONGOING PROJECT ON AS IS WHERE IS BASIS TO M/S. SAI RAJ CON STRUCTIONS AND AS PER DEVELOPMENT AGREEMENT THE APPELLANT WAS TO RETAIN GROUND FLOOR PLUS FIRST FLOOR OF THE BUILDING AND ALSO RECEIVED A SUM OF RS .21 LAKHS FOR THE BALANCE FSI. ALL OTHER CONSTRUCTION EXPENSES INCLUDING CONSTRUCT ION EXPENSES RELATING TO GROUND FLOOR AND FIRST FLOOR OF THE BUILDING ARE TO BE MET BY M/S SAI RAJ CONSTRUCTION. THUS THE CONSTRUCTION ACTIVITY OF TH E APPELLANT CAME TO AN END ON 5.3.2002 AND THEREFORE CANNOT BE SAID THAT THE AP PELLANT IS STILL CARRYING OUT ANY CONSTRUCTION DURING THE YEAR UNDER CONSIDERATIO N. THE ASSESSING OFFICER COULD NOT TAKE NOTE OF THESE FACTS AS THE APPELLANT HAS NOT FILED ANY INFORMATION BEFORE THE ASSESSING OFFICER. SINCE THE PROJECT OF THE APPELLANT CAME TO AN END IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2002-03 THERE I S NO QUESTION OF COMPUTING ITA NO.6715/MUM./2007 SHEETAL CLASSIC HOME MAKERS P. LTD. [3] INCOME OF THE APPELLANT BY FOLLOWING THE PROJECT CO MPLETION METHOD IN THE CURRENT YEAR. AFTER THIS YEAR WORK IN PROGRESS SHOW N BY APPELLANT WHICH IS NOT SOLD IS TO BE TREATED AS CLOSING STOCK ONLY. 2.7 HOWEVER IT IS SEEN THAT THE APPELLANT IS INDUL GING IN SALE OF CLOSING STOCK BEING RESIDENTIAL AND COMMERCIAL UNITS ON GROUND FL OOR AND FIRST FLOOR OF THE BUILDING WHICH IT HAS RETAINED AS PER DEVELOPMENT A GREEMENT IT HAS ENTERED INTO WITH M/S. SAI RAJ CONSTRUCTION. AS PER DETAILS FURNISHED BY APPELLANT IN THE APPELLATE PROCEEDINGS ON 27.8.2007 THE APPELLANT H AS SOLD AND TRANSFERRED PROPERTY TO DIFFERENT PERSONS IN THE A.Y. 2003-04 A.Y. 2004-05 AND A.Y. 2008- 09. AS PER DETAILS FURNISHED BY THE APPELLANT THE COST OF THE PROJECT IS RS.54 78 705/- WHEREAS THE ACTUAL SALES REALIZED BY APPELLANT TILL DATE ARE RS.74 78 705/-. THEREFORE THE APPELLANT HAS EARNED PROFIT ON THE SALE OF CLOSING STOCK. AS PER DETAILS FURNISHED BY THE APPELLANT T HE TAXABLE INCOME OF THE APPELLANT FOR THE CURRENT YEAR IS REQUIRED TO BE CO MPUTED AS UNDER:- SALE CONSIDERATION FOR 1821 SQ.FT. RS.15 00 000/- LESS: COST OF CONSTRUCTION @ 720.22 WORKED OUT AS ABOVE FOR 1821 SQ.FT. RS.13 11 521/- BALANCE PROFIT RS.1 88 479/- 2.8 THEREFORE INCOME OF RS.1 88 479/- HAS ACCRUED TO THE APPELLANT DURING HE YEAR UNDER CONSIDERATION. ADDITION TO THIS EXTEN T MADE BY THE ASSESSING OFFICER IS UPHELD AND THE BALANCE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. THIS GROUND IS PARTLY ALLOWED. 3. THE ASSESSEE IS NOT SATISFIED BY THE RELIEF SO GIVE N BY THE LEARNED CIT(A) AND IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MA TERIAL ON RECORD AND DULY CONSIDERED THE APPLICABLE LEGAL POSITION AS ALSO TH E FACTUAL MATRIX OF THE CASE. 5. LEARNED COUNSEL FOR THE ASSESSEE COULD NOT BRING AN Y MATERIAL ON RECORD TO CONTROVERT THE FINDING OF THE LEARNED CIT(A) THAT C ONSTRUCTION ACTIVITY OF THE ASSESSEE CAME TO AN END ON 5.3.2002 AND THEREFORE IT COULD NOT B E SAID THAT THE ASSESSEE WAS CARRYING OUT ANY CONSTRUCTION ACTIVITY DURING THE RELEVANT PREVI OUS YEAR. THERE IS NO REASON THUS TO ITA NO.6715/MUM./2007 SHEETAL CLASSIC HOME MAKERS P. LTD. [4] DISTURB THESE FINDINGS OF THE LEARNED CIT(A). LEARN ED COUNSELS CONTENTION IS THAT THE EXPENSES INCURRED DURING THE YEAR SHOULD ALSO BE TA KEN INTO ACCOUNT FOR COMPUTING PROPORTIONATE VALUE OF WORK IN PROGRESS. TO THAT EX TENT WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO RECOMPUTED THE PROFITS BY MODIFYING THE PROPORTIONATE VALUE OF WORK IN PROGRESS. LD. COUNSEL HAS ALSO SUB MITTED THAT IT WILL AMOUNT TO DOUBLE TAXATION OF INCOME SINCE THE ASSESSEE HAS ALREADY R ETURNED ENTIRE INCOME FROM PROJECT IN A LATER ASSESSMENT YEAR. HE THUS SEEKS A DIRECTION TO THE EFFECT THAT THE AMOUNT TAXED AS INCOME OF THIS ASSESSMENT YEAR SHOULD BE EXCLUDED F ROM THE INCOME FINALLY TAXED IN THE LATER YEAR. WE HAVE NO MATERIAL BEFORE US TO SUPPOR T THE FACTUAL ASPECTS EMBEDDED IN LD. COUNSELS STATEMENT ABOUT TAXABILITY IN THE LATER Y EAR. THAT APART WE DO NOT THINK IT IS OPEN TO US TO GIVE DIRECTIONS ABOUT AN ASSESSMENT YEAR O THER THAN THE ASSESSMENT BEFORE US AND REMEDY WOULD PROBABLY BE ELSEWHERE. WE MAY IN THIS REGARD REFER TO THE FOLLOWING OBSERVATIONS MADE BY A CO-ORDINATE BENCH SPEAKING THROUGH ONE OF US (I.E. THE ACCOUNTANT MEMBER) IN THE CASE OF MARKETWELL HOSE INDUSTRIES P . LTD. VS JCIT 95 ITD 271. 9. THE ASSESSEE AS AN ALTERNATE PLEA CONTENDS TH AT IN CASE WE COME TO THE CONCLUSION THAT THE DEDUCTION IS ALLOWABLE I N THE YEAR IN WHICH THE PLOT IS ACTUALLY SUB-DIVIDED AND TRANSFERRED TO THE WORKERS WE SHOULD GIVE DIRECTIONS TO THE AO TO ALLOW THE SAME IN THE YEAR IN WHICH THE PLOT IS ACTUALLY SUB-DIVIDED AND TRANSFERRED TO THE WORKERS. 10. AT THE OUTSET WE MAKE IT CLEAR THAT THIS TRIBU NAL DOES NOT HAVE ANY POWERS TO SPECIFICALLY GIVE ANY DIRECTIONS FOR THE YEAR WHICH IS NOT IN APPEAL BEFORE US. THE ONLY ISSUE BEFORE US IS WH ETHER THE IMPUGNED DISALLOWANCE WAS RIGHTLY MADE BY THE AO IN THIS YEA R OR NOT AND THEREFORE IT IS NOT OPEN TO US TO GIVE SPECIFIC DI RECTION TO AO TO ALLOW THAT DEDUCTION FOR THE NEXT YEAR. THAT IS NOT A GRO UND OF APPEAL BEFORE US. WE MAY IN THIS REGARD REFER TO THE FOLLOWING OBSERVATIONS OF HON BLE GAUHATI HIGH COURT IN THE CASE OF JEYPORE TIMBE R & VENEER MILLS (P) LTD. VS. CIT (1982) 137 ITR 415 (GAU) : 'THE PROVIS ION OF S. 254 OF THE ACT IS AN ENABLING AS WELL AS DISABLING PROVISION. A PASSING GLANCE CREATES AN IMPRESSION THAT THE TRIBUNAL HAS BEEN EN DOWED WITH PLENARY POWER UNDER S. 254 OF THE ACT TO PASS ANY ORDER AS IT THINKS FIT. HOWEVER IT IS NOT SO AS IT WILL APPEAR IN THE EXPRESSION SUCH ORDERS THEREON AS IT THINKS FIT IN S. 254. THE WORD THEREON IN T HE EXPRESSION IS A SERIOUS CONSTRICTION ON THE EXERCISE OF POWER BY THE TRIBUN AL. IT CAN DECIDE ONLY THE POINTS OR GROUNDS RAISED BEFORE IT WHEREAS THE IT AUTHORITIES CAN TRAVEL BEYOND THE GROUNDS AND CONSIDER THE ENTIRE A SSESSMENT.' IN THIS ITA NO.6715/MUM./2007 SHEETAL CLASSIC HOME MAKERS P. LTD. [5] VIEW OF THE MATTER AS FAR AS THE QUESTION OF GIVIN G DIRECTIONS FOR THE NEXT YEAR IS CONCERNED WE ARE NOT INCLINED TO ACCE PT THE PLEA OF THE ASSESSEE. 11. THE REMEDY HOWEVER LIES ELSEWHERE. 12. SEC. 153(3) OF THE IT ACT 1961 PROVIDES THAT T HE PROVISIONS OF SS. 153(1) AND (2) (I.E. THE PROVISION LAYING DOWN TH E TIME-LIMIT WITHIN WHICH ASSESSMENTS REASSESSMENTS OR RECOMPUTATIONS CAN BE DONE) SHALL NOT APPLY TO INTER ALIA THE CLASSES OF ASSESSMENT S REASSESSMENTS AND RECOMPUTATIONS WHICH MAY BE COMPLETED AT ANY TIME W HERE THE ASSESSMENT REASSESSMENT OR RECOMPUTATION IS MADE O N THE ASSESSEE OR ANY PERSON IN CONSEQUENCE OF OR TO GIVE EFFECT TO A NY FINDING OR DIRECTION CONTAINED IN AN ORDER UNDER SS. 250 254 260 262 263 OR 264 OR IN AN ORDER OF ANY COURT IN A PROCEEDING OTHERWISE THAN B Y WAY OF APPEAL OR REFERENCE UNDER THIS ACT. THEREFORE TO THE EXTENT AN ASSESSMENT REASSESSMENT OR RECOMPUTATION IS DONE TO GIVE EFFEC T TO THE FINDING OR DIRECTION CONTAINED IN INTER ALIA THE TRIBUNAL ORDER THE SAME CAN BE PASSED AT ANY TIME. IT IS ALSO SETTLED IN LAW THAT WHEN A STATUTORY AUTHORITY HAS THE POWERS TO DO SOMETHING THEN IT H AS A CORRESPONDING DUTY TO EXERCISE SUCH POWERS WHENEVER CIRCUMSTANCES WARRANTING EXERCISE OF SUCH POWERS EXIST. NO DOUBT AS HELD BY THE HON BLE SUPREME COURT IN THE CASE OF RAJINDER NATH VS. CIT (1979) 1 2 CTR (SC) 201 : (1979) 120 ITR 14 (SC) A FINDING GIVEN IN AN APPEA L REVISION OR REFERENCE ARISING OUT OF AN ASSESSMENT MUST BE A FI NDING NECESSARY FOR THE DISPOSAL OF THE PARTICULAR CASE THAT IS TO SAY IN RESPECT OF THE PARTICULAR ASSESSEE AND IN RELATION TO THE PARTICUL AR ASSESSMENT YEAR. TO BE A NECESSARY FINDING IT MUST BE DIRECTLY INVOLVE D IN THE DISPOSAL OF THE CASE. THE CASE BEFORE US CLEARLY FULFILS THIS TEST BECAUSE THE ONLY REASON THAT THE DISALLOWANCE HAS BEEN CONFIRMED THIS YEAR IS THAT IT IS ALLOWABLE IN THE YEAR IN WHICH PLOTS ARE FINALLY TRANSFERRED TO THE WORKERSWHICH ADMITTEDLY IS NOT THE YEAR BEFORE US AND FOR THAT REASON ALLOWABILITY IN THAT YEAR WAS THE SOLE AND PROXIMATE REASON FOR DIS ALLOWABILITY IN THE CURRENT YEAR. THEREFORE ON THE FACTS OF THE PRESEN T CASE WHERE THE TRIBUNAL HAS GIVEN A FINDING THAT THE DEDUCTION ON ACCOUNT OF EXPENDITURE ACQUIRED ON PLOT FOR USE BY WORKERS IS TO BE ALLOWED IN THE YEAR(S) IN WHICH THE PLOTS ARE FINALLY TRANSFERRED TO THE WORKERS THE AO HAS THE POWER AND THEREFORE THE INHERENT CORRESP ONDING DUTY UNDER S. 153(3) OF THE ACT TO RECOMPUTE THE INCOME OF THAT S UBSEQUENT YEAR TO GIVE EFFECT TO TRIBUNALS FINDING. IT IS OPEN TO TH E ASSESSEE TO APPROACH THE AO FOR THAT PURPOSE OR WE MAY FURTHER ADD AT T HE COST OF STATING THE OBVIOUS TO APPROACH THE CIT ALONG WITH THE REQUIS ITE PETITION FOR CONDONATION OF DELAY FOR REVISION UNDER S. 264 OF THE ACT. 13. FOR THE REASONS SET OUT ABOVE WE UPHOLD THE DI SALLOWANCE IN PRINCIPLE SO FAR AS THE YEAR IN APPEAL BEFORE US IS CONCERNED AND DECLINE TO INTERFERE IN THE MATTER. THE ISSUE RAISED IN THE APPEAL IS WHETHER THE EXPENDITURE IN QUESTION IS DEDUCTIBLE IN THE YEAR B EFORE US OR NOT; WE ITA NO.6715/MUM./2007 SHEETAL CLASSIC HOME MAKERS P. LTD. [6] HOLD IT IS NOT DEDUCTIBLE IN THE YEAR BEFORE US. WH ATEVER BE THE REASONING AND FINDING IN COMING TO THIS CONCLUSION THAT CANNOT BROADEN THE SCOPE OF OUR ADJUDICATION SO AS TO GIVE AN EXPR ESS DIRECTION FOR ITS ALLOWABILITY IN SOME OTHER YEAR. THE ASSESSEE SHALL HOWEVER BE AT LIBERTY TO APPROACH THE AO OR THE CIT AS HE MAY BE ADVISED TO DO IN ACCORDANCE WITH THE ABOVE OBSERVATIONS. 3. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MAT TER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH. WE THEREFORE UPHOLD ASSESSEES GRIEVANCE TO THE LIMITED EXTENT OF TAKING INTO ACCOUNT EXPENSES INCURRED DURING THE YE AR FOR COMPUTING PROPORTIONATE VALUE OF W.I.P. AND TO THAT EXTENT MODIFY THE PROFIT BROUGHT TO TAX. 4. IN THE RESULT APPEAL IS PARTLY ALLOWED IN THE TERM S INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF APRIL 2010. SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI; 30 TH DAY OF APRIL 2010 COPIES OF THE ORDER FORWARDED TO : 9 (1) THE APPELLANT (2) THE RESPONDENT (3) CIT MUMBAI (4) CIT(A) MUMBAI (5) DR J BENCH (6) GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PRADEEP J. CHOWDHURY MUMBAI BENCHES SR. PRIVATE SECRETARY ITA NO.6715/MUM./2007 SHEETAL CLASSIC HOME MAKERS P. LTD. [7] DATE INITIAL 1. DRAFT DICTATED ON SR.PS 2. DRAFT PLACED BEFORE AUTHOR SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. DATE OF PRONOUNCEMENT SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER