ACIT 25(3), MUMBAI v. BHOOMI ENTERPRISES, MUMBAI

ITA 885/MUM/2010 | 2006-2007
Pronouncement Date: 28-01-2011 | Result: Dismissed

Appeal Details

RSA Number 88519914 RSA 2010
Assessee PAN MARCH2006A
Bench Mumbai
Appeal Number ITA 885/MUM/2010
Duration Of Justice 11 month(s) 23 day(s)
Appellant ACIT 25(3), MUMBAI
Respondent BHOOMI ENTERPRISES, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-01-2011
Date Of Final Hearing 17-01-2011
Next Hearing Date 17-01-2011
Assessment Year 2006-2007
Appeal Filed On 04-02-2010
Judgment Text
I.T.A NO.885/MUM/2010 M/S. BHOOMI ENTERPRISES 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI. [ CORAM: D.MANMOHAN V.P. AND PRAMOD KUMAR AM ] I.T.A NO.885/MUM/2010 ASSESSMENT YEAR: 2006-07 ACIT-25 (3) . APPELLANT C-11 R.NO.308 PRATYAKSH KAR BHAVAN BANDRA-KURLA COMPLEX BANDRA (EAST) MUMBAI-51. VS M/S. BHOOMI ENTERPRISES RESPONDENT 123/124 SONA SHOPPING CENTRE TRIKAMDAS ROAD KANDIVLI(WEST) MUMBAI-67. PA NO.AAAFF B 6143 C APPEARANCES: HARI GOVIND SINGH FOR THE APPELLANT ASHOK PATIL FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSING OFFICER H AS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 13.11.2009 IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2006-07 ON THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO WITHOUT APPRECIATING THE FACT THAT THE PROJECT WAS ALREADY COMPLETED AND THE POSSESSION WAS BEING HANDED OVER IN THIS YEAR ITSEL F AND CONSEQUENTLY THE ASSESSEE WAS REQUIRED TO RECOGNIZE SALE AND DEC LARE PROFIT. I.T.A NO.885/MUM/2010 M/S. BHOOMI ENTERPRISES 2 2. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE WAS ENGAGED IN THE CONSTRUCTION ACTIVITIES IN PROJECT CALLED DEEP NIK ETAN AT MALAD(W) MUMBAI. THE RETURN OF INCOME SHOWING TOTAL INCOME AT ` .19 44 606 WAS FILED BY THE ASSESSEE ON 30.10.2006. THE CLAIM OF THE ASSESSEE THAT THE PRO JECT IS NOT COMPLETED AND ACCORDINGLY ENTIRE PROFITS FROM THE PROJECT WERE N OT OFFERED TO TAX. HOWEVER DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICE D THAT THE PROJECT WAS SUBSTANTIALLY COMPLETED AND THAT OCCUPATION CERTIFI CATE OF THE PROJECT WAS ISSUED BY THE GOVERNMENT ON 18.2.2006 I.E. DURING THE RELEVAN T FINANCIAL YEAR AND THEREFORE THE ASSESSEE WAS NOT JUSTIFIED IN NOT OFFERING TO T AX THE ENTIRE PROFITS ON THE PROJECT. ASSESSEES EXPLANATION WAS THAT SMALL WORK LIKE TO UCH OF PAINTING LIGHTING APPROACH ROAD WAS PENDING AND THE SAME WAS COMPLETED IN THE SUBSEQUENT FINANCIAL YEAR. THE AO REJECTED THIS EXPLANATION AND HELD THAT SINC E CONSTRUCTION ACTIVITY HAS BEEN SUBSTANTIALLY COMPLETED AND POSSESSION HAS ALREADY BEEN STARTED THE PROJECT HAS TO BE TREATED AS COMPLETED AND THE ENTIRE PROFITS THER EON HAS TO BE OFFERED TO TAX. AGGRIEVED BY THE STAND SO TAKEN BY THE AO THE ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). 3. IT WAS SUBMITTED BEFORE THE CIT (A) THAT THE ASS ESSEE HAD STARTED THE PROJECT IN THE EARLIER YEARS AND OFFERED PROFIT ON PERCENTA GE COMPLETION METHOD EVERY YEAR SINCE CONSTRUCTION ACTIVITY WAS STARTED AND THAT EN TIRE BALANCE PROFITS FROM THE PROJECT WERE OFFERED TO TAX IN THE SUBSEQUENT ASSES SMENT YEARS. ONE OF THE CONTENTIONS OF THE ASSESSEE WAS THAT EVEN THOUGH TH E OCCUPATION CERTIFICATE WAS DATED 18.2.2006 THE SAME WAS RECEIVED BY THE ASSES SEE IN THE END OF MARCH 2006 AND SUBSEQUENT COMPLETION OF WORK WAS COMPLETED ONL Y IN THE NEXT YEAR AND THEREFORE THE AO ERRED IN TAKING THE DATE OF COMPL ETION OF PROJECT AS 18.2.2006. THE ASSESSEE ALSO FILED DETAILS OF EXPENSES THAT HAD IN CURRED IN THE SUBSEQUENT YEARS. IT WAS IN THIS BACKDROP THAT THE CIT (A) UPHOLDS THE C ONTENTION OF THE ASSESSEE BY OBSERVING AS FOLLOWS:- I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENT ATIVE AND THE STAND TAKEN BY THE AO. THE APPELLANT TOOK UP THE CONSTRU CTION OF THE PROJECT OF DEEP NIKETAN AT MALAD (WEST) FROM FINANCIAL YE AR 2003-04 AND THE APPELLANT HAS BEEN ADMITTING PROFIT EVERY YEAR ON E STIMATE BASIS ON THE I.T.A NO.885/MUM/2010 M/S. BHOOMI ENTERPRISES 3 INCREASE IN THE WORK IN PROGRESS BASED ON PERCENTAG E COMPLETION METHOD. EVEN FOR THE RELEVANT ASSESSMENT YEAR THE APPELLANT HAS ADMITTED NET PROFIT OF ` .19 44 607 EVEN THOUGH THE ADDITION TO WORK IN PROGRESS WAS LESS THAN ` . ONE CRORE. THUS THE APPELLANT HAD ADMITTED MORE THAN 20% NET PROFIT ON THE ADDITION TO WORK IN PROGRESS DURING THIS YEAR. THE AO RELIED ON THE COMPLETION CERTIFI CATE DATED 18.2.2006 TO HOLD THAT THE PROJECT WAS COMPLETED AND ASSESSED THE ENTIRE POFIT FROM THE PROJECT IN THIS YEAR BASED ON THE RETURN FILED BY THE APPELLANT IN THE NEXT YEAR. AS CONTENDED BY THE REPRESENTATI VE THE COMPLETION CERTIFICATE EVEN THOUGH ISSUED ON 18.2.2006 WAS RE CEIVED BY THE APPELLANT AT THE END OF MARCH 2006 WHICH IS NOT D ISPUTED BY THE AO IN THE IMPUGNED ORDER. FURTHER SOME FINAL WORK WAS P ENDING AND THE SAME WAS CARRIED OUT IN THE NEXT YEAR AND THE APPEL LANT HAS PURCHASED MATERIALS EVEN UPTO MAY 2006 AND THE LAST PAYMENT T O THE CONTRACT M/S. KRISHNA ENTERPRISES WAS MADE ON 8.8.2006. FUR THER THE APPELLANT HAS SOLD 3 FLATS AND 3 SHOPS IN THE SUBSEQUENT YEAR AND ADMITTED ` .54 24 968 AS SALE PROCEEDS. IF THE APPELLANT HAD NOT ADMITTED ANY PROFIT IN THIS YEAR OR EARLIER YEARS ON PERCENTAGE COMPLETION METHOD THE AO COULD HAVE TAKEN THE STAND THAT THE APPELLAN T WAS DEFERRING THE PAYMENT OF TAX BY SHOWING THE SAME AS WORK IN PROGR ESS. BUT WHEN THE AO COULD HAVE TAKEN THE STAND THAT THE APPELLA NT WAS DEFERRING THE PAYMENT OF TAX BY SHOWING THE SAME AS WORK IN PROGR ESS. BUT WHEN THE APPELLANT HAD ALREADY ADMITTED THE PROFIT ON PE RCENTAGE COMPLETION METHOD AND THE SAME HAS BEEN ACCEPTED IN THE EARLIE R YEARS THERE IS NO REASON TO TAX THE ENTIRE PROFIT OF THE PROJECT I N THIS YEAR ESPECIALLY WHEN THE APPELLANT ADMITTED MORE THAN 20% OF PROFIT . AS THE APPELLANT HAD ALREADY ADMITTED PROFITS IN THE EARLI ER YEARS ON THE BASIS OF PERCENTAGE COMPLETION METHOD THE DECISION OF TH E HONBLE MUMBAI TRIBUNAL IN THE CASE OF CHAMPION CONSTRUCTION 5 I TD 495 IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. FURTH ER IT IS SEEN FROM THE DETAILS OF EXPENDITURE INCURRED IN THE NEXT YEAR TH AT THE APPELLANT PAID ELECTRICITY CHARGES AND WATER CHARGES UPTO FEBRUARY 2007 AND SECURITY CHARGES UPTO OCTOBER 2006 WHICH SHOWS THAT THE POS SESSION WAS ACTUALLY HANDED OVER IN THE NEXT YEAR WHEN THE PROJ ECT IS COMPLETED. I THEREFORE ACCEPT THE PLEA OF THE REPRESENTATIVE TH AT ONLY IN THE NEXT YEAR THE PROJECT IS COMPLETED AND THE APPELLANT HAS ALREADY OFFERED THE REMAINING PROFIT IN THE NEXT YEAR AND THEREFORE D IRECT THE AO TO ACCEPT THE INCOME ADMITTED BY THE APPELLANT AT ` .19 44 607 IN THIS YEAR. 4. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APP EAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. I.T.A NO.885/MUM/2010 M/S. BHOOMI ENTERPRISES 4 6. WE HAVE NOTED THAT IT IS AN ADMITTED POSITION TH AT THE PROJECT WORK WAS SUBSTANTIALLY COMPLETED IN THE RELEVANT PREVIOUS YE AR AND THAT THE OCCUPATION CERTIFICATE WAS ALSO ISSUED BY THE GOVERNMENT ON 18 .2.2006. AS FOR THE WORK IT APPEARS THAT SOME SMALL WORKS WERE CARRIED IN THE S UBSEQUENT PERIOD AFTER OBTAINING OCCUPATION CERTIFICATE BUT THAT DOES NOT OBLITERATE THE FACT THAT PROJECT WAS SUBSTANTIALLY COMPLETED IN THE RELEVANT PREVIOUS YE AR ITSELF. WHEN THE PROJECT IS SUBSTANTIALLY COMPLETED THERE CANNOT BE ANY GOOD R EASON NOT TO OFFER THE INCOME FROM THE PROJECT TO TAX. THE MERE FAT THAT THE ASS ESSEE HAS OFFERED THE REMAINING PROFIT TO TAX IN THE SUBSEQUENT ASSESSMENT YEAR CAN NOT BE A GOOD GROUND FOR REJECTING THE TAXABILITY OF SUCH PROFITS IN THE YEA R IN WHICH THE PROJECT IN FACT HAS BEEN COMPLETED. IN VIEW OF THESE DISCUSSIONS AND BEARIN G IN MIND THE ENTIRETY FACT OF THE CASE WE ARE UNABLE TO APPROVE THE CONCLUSIONS ARRI VED AT BY THE CIT(A) AND REVERSE THE SAME AND UPHOLD THE STAND OF THE AO. 7. IN THE RESULT APPEAL OF THE REVENUE STANDS ALLO WED. PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY 2011 SD/- (D.MANMOHAN ) (VICE PRESIDENT) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 28 TH JANUARY 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-35 MUMBAI 4. COMMISSIONER OF INCOME TAX 25 MUMBAI. 5. DEPARTMENTAL REPRESENTATIVE BENCH B MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI I.T.A NO.885/MUM/2010 M/S. BHOOMI ENTERPRISES 5 I.T.A NO.885/MUM/2010 M/S. BHOOMI ENTERPRISES 6