DEPUTY COMMISSIONER OF INCOME TAX -5(1), INDORE vs. M/S SUNDERDEEP CONSTRUCTIONS PVT. LTD. , INDORE

PER MANISH BORAD, A.M

The above captioned appeals filed at the instance of the Revenue pertaining to Assessment Year 2010-11 & 2013-14 are

directed against the orders of Ld. Commissioner of Income

Tax(Appeals)-II (in short ‘Ld. CIT], Bhopal dated 27.07.2018 which

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 is arising out of the order u/s 143(3)/147 of the Income Tax Act

1961(In short the ‘Act’) dated 29.12.2016 and 29.03.2016 framed

by ACIT-5(1) Indore.

ITA No.784/Ind/2018 A.Y 2010-11

1.The Ld. CIT(A) has erred in deleting the disallowance made by AO on account of Development expenses of Rs.2,93,76,568/-, even though the assessee has already charged this amount from the customers to whom property was transferred during F.Y 2009-10. 2.Whether on the facts and in the circumstances of the case the Ld. CIT (A) was justified in holding that the AO has made addition by disallowing development expenses of Rs.2,93,76,558/- on presumption basis whereas the fact is that the claim made by the assessee for development expenses has been disallowed as the assessee has received this expenditure from the customers therefore the Ld. CIT(A) has grossly erred in holding that the addition was made presuming that the assessee has received the same in cash. 3.The appellant craves leave to add to or deduct from or otherwise amend the above ground of appeal. ITA No.786/Ind/2018 A.Y 2013-14

1.The Ld. CIT(A) has erred in deleting the disallowance made by AO on account of Development expenses of Rs.7,14,97,410/-, while the development expenses have not yet been incurred in respect of all the plots of the entire ‘Infocity’ projects and the amount.

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 2. The Ld. CIT (A) has erred in deleting the disallowance made by AO on account of development charge of Rs.7,14,97,410/-, while it was contingent in nature. 3.The appellant craves leave to add to or deduct from or otherwise amend the above ground of appeal.

assessee with referring to Rule 27 of the Income Tax (Appellate

Tribunal) Rules, 1963 submitted that the finding of Ld. CIT(A) with

regard to the issue of development expenses of Rs.3,70,650/- to be

taxed in Assessment Year 2010-11 is not justified since the

assessee had already offered this amount of Rs.3,70,650/- to tax in

Assessment Year 2015-16.

commonly raised for both the years is with regard to allowability of

development expenses of Rs.2,93,76,568/- and Rs.7,14,97,410/-

for Assessment Years 2010-11 and 2013-14 respectively. Since the

assessment for Assessment Year 2013-14 was framed earlier on

29.12.2016 and on the basis of the observations of the Ld. A.O for

Assessment Year 2013-14 disallowing the claim of development

expenses similar action was also taken for Assessment Year 2010-

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 11 which was reassessed on 29.12.2016. We therefore proceed to

adjudicate this common issue raised by the revenue on the basis of

facts for Assessment Year 2013-14 to which both the parties have

agreed.

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 2012-13 and out of the balance area of 19,59,785 Sq. Feet (26,34,265 - 6,74,480 Sq. Feet), the assessee has sold an area of 4,20,573 Sq. Feet in ‘Infocity Project’ during the year under consideration. The assessee has incurred development expenses for ‘Infocity Project’ and has claimed these expenses on actual basis during A.Y.2009-10 to AY.2012-13. However, w.e.f. A.Y.2013-14, the assessee Company decided to change accounting policy and estimated the expenses on development to be incurred in this project at Rs.33,31,66,000/- (apart from the development expenses which are already incurred by the assessee till A.Y.2012-13). These expenses are estimated on the basis of the report given by Architect & Engineer namely M/s Mathur and Associates (copy enclosed). Since the balance unsold area as on 01.04.2012 was 19,59,785 Sq. Feet and the estimated development expenses as per the Architect was Rs. 33,31,66,000/-, the assessee has worked out average development expenses at the rate of Rs.170/- per Sq. Feet (Rs. 33,31,66,000 divided by 19,59,785 Sq. Feet). During year under consideration i.e. A.Y.2013-14 the assessee has 5

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 actually incurred development expenses at Rs.l,94,74,600/- but has amortized development expenses at Rs.7,14,97,410/- on estimation basis as discussed above. Similarly, in subsequent Assessment Years also, the assessee has followed this system. During the year under consideration, the assessee has sold out 4,20,573 Sq. Feet of land and thus applying the rate of Rs. 170/- per sq. ft. Accordingly, the assessee has estimated development expenses at Rs.7,14,97,410/- (420573 Sq. Feet x Rs.170/-).

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 "2. During the year under consideration, the Company has shown Sales at Rs.12,60,97,OOO/- and the Net Profit before Tax is shown at Rs.51,07,895/- as per statement of P&L A/c. This Net Profit is arrived at after taking into consideration the various expenses actually incurred and also the expenses towards development of the project namely ‘Infocity’ to be incurred in subsequent years. It is seen that the basic cost of plot per sq. feet worked out at Rs.98/- per Sq. feet is loaded with the development expenses estimating the same at the rate of Rs.170/- per sq. feet for the project namely 'Infocity'. However, it is seen that prior to Assessment Year 2013-14, that is upto A. Y.2012-13, the Company has taken into consideration only those development expenses which were actually incurred during the respective Previous Years. But, the Company has changed the system of Accounting w.e.f. A. Y.2013-14 by way of loading the estimated cost of development expenses at the rate of 170/- per sq. feet to the actual cost of the land. In this regard, you are requested to state that under which accounting standard, this system of accounting being followed by the Company w.e.f. A. Y.2013-14 is governed and give justification for changing the system of accounting,"

the assessee filed following written submissions:-

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Tax Act, many of the customers who have only booked the plot by paying small amount of advance, but not turning out for registry of the plot, assessee company has rigorously followed them to get their plot registered and pay the difference amount.

On such follow up many of the customers (Plot area sold was 4,20,573 Sq. Fts during A.Y. 2013-14, which is about 16% saleable area of 26,34,265 sq. Fts) have got registered their plot in the last quarter of the F.Y. 2012-13. The plots which were sold by the assessee company, were developed plots but however, development work was pending and expenditure needs to be incurred by the assessee company against the sales revenue so booked. Assessee company has no option but to book corresponding expenditure towards the development of the land to match the revenue booked and therefore it has got the report of the qualified valuer, who has estimated the cost of Rs.170 per sq.ft of remaining area to be developed. Therefore to claim the expenditure on prudent basis on matching concept, this expenses have been booked to follow mercantile system of accounting also, as the revenue, as explained above, was booked for the sale of fully developed plot but however the corresponding, direct expenses have not been incurred and since looking to the complicated nature of the accounting, the amount of development expenses have got been estimated by a qualified valuer and claimed as expenses.

claim of development expenses @ Rs.170/- per sq. Ft was based on

the report of the Architect namely M/s. Mathur & Associates. 8

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Further Ld. A.O recorded the statements of some of the persons

who purchased the plots of land from the assessee in Info City.

These persons stated that they have paid development charges.

Further enquiry was made with regard to 22 purchasers of plot who

also stated to have paid development charges through cheque.

When the Ld. A.O asked further that the assessee would have

received similar type of development charges from other

purchasers/plot holders, to which the assessee denied that these

were special charges taken from these 22 persons and no other

charges were taken from any other parties. It was also stated that

the excess amount received on account of claim of development

expenses have been offered to tax in the Income Tax Return filed for

Assessment Year 2015-16 and therefore the claim of development

expenditure should be allowed. However Ld. A.O was not satisfied

with these submissions and he was of the view that apart from

these 22 plot holders, the remaining persons might have paid cash

to the assessee towards development charges and there is neither

income or expenses under the head development charges since

whatever development expenses have been incurred the same have

been received by the assessee on matching principle. Ld. A.O 9

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 therefore disallowed the claim of estimated development expenses of

Rs.7,14,97,410/- and also did not allowed the claim of actual

development expenses incurred for Assessment Year 2010-11 at

Rs.1,94,74,600/- , observing as follows:-

On consideration of the above facts and circumstances, it emerges that:-

a) The assessee has carried out development work on the plots of 'Infocity' Projects which it has debited on actual basis up to A.Y.20 12-13. However, during the AY. Under consideration, the development expenses have been worked out on an estimated basis at the rate of Rs.170/- per Sq. Feet and claimed at Rs.7,14,97,410/- accordingly. As the said expenditure is on projection basis i.e. contingent in nature and has not been actually, incurred during the year, the same is not allowable as an deduction in terms of the provisions of section 37(1) of the Act and hence disallowable.

b) In para 14 above, it has been established that the assessee has been charging development charges at the rate of Rs.170/- per Sq. Feet as also recorded by the assessee in its books of accounts in respect of the buyers who have paid the amounts by cheques. However, in respect of the buyers who have paid the amounts in cash, the assessee has not recorded corresponding development charges receivable at the rate of Rs.170/- per Sq. Feet even though the assessee has claimed excess deduction on account of development expenses. When confronted with such apparent inconstancy and incongruity 10

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 between the buyers paying entire purchase consideration by cheque and other buyers, the assessee took the plea of difference in consideration due to different location of plots as discussed in para 16 above. However, the plea of the assessee is inconsistent and contrary to its own accounting of development expenses incurred/incurable at the rate of Rs.170/- per Sq. Feet and development charges received at the rate of Rs.170/- per Sq. Feet from 22 buyers of plots. This being the admitted position as per assessee's books of accounts, it can be concluded that :-

a) Development expenses have not yet been incurred in respect of all the plots of the entire 'Infocity' Projects and the amount of Rs.7,14,97,410/- claimed is contingent in nature. b) Actual development expenses when actually incurred would have to be considered for deduction in the relevant A.Ys. subject to fulfilment of the provisions of Section 37(1) of the Act.

c) Development charges whether received or not would accrue to the assessee at the rate of Rs.170/- per Sq. Feet at par with 22 buyers of the plots as detailed in para 13 and 14 above and thus, the development charges would not be a charge on the assessee's profit as the same would be commensurately recoverable from the buyers of the plots. Also, the assessee has itself shown the entries of the development charges received from 22 buyers by cheques by passing general entries in assessment year 201S-16 for which the assessee has already filed its return of income. (copy of P&L A/c for A.Y.2015-16 is Marked as Annexure "A" )

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 9. On the basis of observation for Assessment Year 2013-14

similar action was taken for Assessment Year 2010-11 also.

Though the assessee has not claimed the development expenses on

estimated basis and has claimed actual expenses incurred at

Rs.2,97,47,218/- but the Ld. A.O applying the same analogy denied

the claim and added it back to the income of the assessee.

the disallowance of development expenses at Rs.7,14,97,410/- and

succeeded as the claim of the assessee was allowed by Ld. CIT(A)

giving detailed finding of fact, placing reliance on settled judicial

pronouncements and also observing that there is no iota of evidence

of any cash sum received by the assessee towards development

charges other than those received by cheque from the parties

mentioned by the Ld. A.O in the impugned order, secondly the

genuineness of actual expenses incurred by the assessee is not in

doubt and excess development charges received from some

customers has been offered to tax in the Assessment Year 2015-16.

supporting the order of Ld. A.O. Reference was also made to the 12

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 paper book filed on 27.11.2020 which included the comments of Ld.

A.O. Ld. Departmental Representative further submitted that the

claim of the assessee of having received development charges from

22 persons are with regard to special location is totally

misconceived since the Director incharge of the project have refused

to have charged extra money for locational advantages. Further he

submitted that it is totally unacceptable that the assessee had

taken development charges only from 22 plot holders and has not

taken any such development charges from the remaining plot

holders. He submitted that since Assessment Year 2009-10, 413

plots have been sold and the assessee might have received the

development charges in cash from the remaining plot holders.

Further as per the direction given by this Tribunal during the

course of hearing to file written submission (if any needed) within

one week of the conclusion of the hearing, Ld. Departmental

Representative has filed following written submissions:-

F.No. – CIT (Audit)/BPL/2020-21/ Dated: 05.03.2021 To, The Hon’ble Members, ITAT, Indore Bench, Indore. 13

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018

Respected Sirs,

Sub:-Written submission in the case of M/s Sunderdeep Constructions Pvt. Ltd., Indore, in ITA No. 786/Ind./2018 for A.Y. 2013-14. Kindly refer the subject as above. In continuation of my arguments in the appeal proceedings of above mentioned case, on 16.02.2021, as desired, the written submission is being filed in support of the grounds of department for kind consideration of Hon’ble Bench. Brief Background

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 01.04.2012 was estimated at Rs.33,31,66,000/- by the said Architect. The balance unsold area as on 01.04.2012 was 19,59,785 Sq. Ft. as shown by the appellant and the estimated development expenses as per the Architect was Rs.33,31,66,000/-. The appellant has worked out average development expense at the rate of Rs.170/- per Sq. Ft. (Rs.33,31,66,000 ÷19,59,785 Sq. Ft.) and applied this rate for working out and claiming this expenditure in various assessment years from A.Y. 2013-14. 3. The details of area sold out, development expenses incurred and development expenses incurable on the basis of estimation at the rate of Rs.170/- per Sq. Ft. and also the actual expenses development expenses incurred out of the estimation made by the appellant are summarized by AO in the assessment order as under:-

Particulars Financial year Grand

Total

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Total 2,634,265 2,634,265 2,634,265 2,634,265 2,634,265 2,634,265 2,634,265 2,634,265

saleable area

Area sold 141,474 311,131 134,125 87,750 4,20,573 8,600 12,006 11,15,659

Percentage of 5.37% 11.81% 5.09% 3.33% 15.97% 0.33% 0.46% 42.35%

total saleable

area sold

Total 11,587,720 29,747,218 9,116,040 2,416,100 _ _ _ 52,867,078

development

expenses

actually

incurred and

claimed

Estimated _ _ _ _ 71,497,410 1,462,000 2,041,020 75,000,430

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Development Expenses claimed

Actual 11,587,720 29,747,218 9,116,040 2,416,100 19,474,600 13,626,544 10,117,084 96,085,306 expenses incurred

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 recorded the statement of Shri N.M. Mathur of M/s Mathur and Associates. He is none else but the one who was supervising the project right from the beginning. In other words, they were the contractors for execution of work. In his statement, Mr. N. M. Mathur has failed to give any basis for estimation of development expenses to the extent of Rs.33.31crores @ Rs.170/- per Sq. ft. even though till F.Y. 2011-12, the same was being shown @ Rs.78.38 per Sq. ft. as detailed above.

The order of CIT (A):-

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 2. The Ld.CIT (A) has erred in deleting the disallowance made by AO on account of Development charge of Rs.7,14,97,410/-, while it was contingent in nature.

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 the F.Y. 2012-13 i.e. assessment year 2013-14 which is under consideration?

The basis adopted by AO to reach to above conclusion.

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 20. Similarly, in case of other three parties, as per the statements, price of plot as per registered sale deed did not include the component of development charges.

Name of party Amount as Amount Component of per deed actually paid development charges (in lakhs) (in lakhs) (in lakhs) Anil Malik 6.30 13 3.57 Ram Purkar Tiwari 7.20 13 4.08 Shailesh 6.75 13.50 5.11

While registering the documents, the assessee has shown only the part of sale amount as per registered sale agreement. At the stage of assessment proceedings, the appellant came out with the list of 22 parties (customers) in regard with whom, the element of development expenditure was not accounted for in the sale consideration during the relevant assessment year. The list is duly reproduced at page no. 18 of the assessment order.

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 (b) The plots belonged to the same project without having added advantages over each other. (c) The sale deeds have been found registered on the cost of plot only excluding development charges in regards of plots to the parties other than these 22 parties. (d) In regard with some of these 22 parties, in their statement, they have clearly stated that development charges were separately charged and not included in cost of plot. In cases of parties other than 22 parties, the plots have been registered only on cost of plots. (e) In the interest of natural justice, during the course of assessment proceedings, the statement of Shri Ramesh Jain, Director of appellant company was recorded and it was specifically asked as why the development charges in regard with only 22 parties were separately recorded for. It was stated by the Director that these were not on account of development charges but extra charges were due to location advantage like “Corner Plot” etc. The AO has prepared and reproduced a chart showing locations of the plots of 22 parties at page No. 18 of assessment order. It can be seen that except in case of 03 parties, all others were non- corner plots and with no other advantages. Moreover, the statement of Director was entirely contrary to the copies of accounts of various parties and statements given by many purchasers. (f) AO vide letter dated 13/01/2016 had required assessee to explain as why the revenue in regard of 22 persons was not recognized in the year of registration of deed. But the assessee has maintained the noble silence on the issue as can be seen in the detailed discussion at page no. 17 of the assessment order. (g) During the course of assessment, Shri Ramesh Jain, Director had also cross-examined Shri Nirmal Chand Tiwari and Shri Ram Purkar Tiwari who has re-confirmed the facts that development charges were paid separately and not accounted for in the sale consideration of plot.

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 25. The A.O. after taking into account the findings of inquiries, documents submitted by the assessee and detailed discussion, proceeded to conclude that the actual expenditure on account of development of land was not chargeable to the profits as the same have been recovered directly from the customers not forming part of sale consideration on which the sale deeds were registered. The relevant part of finding of AO is reproduced as under:- (c) Development charges whether received or not would accrue to the assessee at the rate of Rs.170/- per Sq. Feet at par with 22 buyers of the plots as detailed in para 13 and 14 above and thus, the development charges would not be a charges on the assessee’s profit as the same would be commensurately recoverable from the buyers of the plots. Also, the assessee has itself shown the entries of the development charge received from 22 buyers by cheques by passing general entries in assessment year 2015-16 for which the assessee has already filed its return of income. (Copy of P &L A/c for A.Y. 2015-16 is marks as Annexure “A”).

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 April, 1973 (Equivalent citations: 1973 AIR 2266, 1973 SCR (3) 1005, where the turnover for entire year was estimated on the basis of sales figures for only 19 days. This decision holds the ground even today as no other decision contrary to this has been given by Hon’ble Supreme Court till now. The relevant part of decision is as under:- “The question before us is whether there is a reasonable nexus between the basis adopted by the assessing authority and the estimate of escaped turnover made. We have no doubt that there is such a nexus.

On behalf of the assessee, reliance was placed on the decision of this Court in Commissioner of Income-tax., West Bengal v. Padamchand Ramgopal(1). Therein, while investigating into the case of the assessee, the Income-tax Officer found two insignificant mistakes in the assessees accounts relating to the assessment year 1953-54. No mistakes were found in the accounts relating to the assessment years 1954-55 to 1957-58. Merely because there were some insignificant mistakes in the accounts maintained by the assessee for the assessment year 1953-54, the Income- tax Officerrejected the accounts of the assessee for all the concerned assessment years and added to the income returned half the amount of gross receipts shown by the assessee under the head "interest" for each of the years as escaped income. The Tribunal upheld the addition 'but the High Court came to the conclusion that the additions made by the Income-tax Officer were quite arbitrary. This Court agreed with that view. We do not think that the said decision lends any support to the assessee's contention.

(1) 60 I.T.R.239 (1) 76 I.T.R.719.

For the reasons mentioned above, We are unable to agree with .the High Court that the Sales.-tax Officer. had arbitrarily assessed the assessee.

It was next contended that in are assessment under,s. 19(1) of the Act, Sale-tax Officer was- not competent to- make. 'best. judgment assessment' as no such power was conferred on him under the said section. This contentions had been rejected by the; High Court and the assessee had not appealed against that part of the judgment. Be that as it may, even though s. 19 does not in specific terms confer on the assessing authority power to make 'best-judgment assessment' that section specifically says that the .assessment made under that section is a reassessment. Section 18 deals with assessment of tax. Section 18 (4) says "If a registered dealer-

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 X X a) x x x x (b) x x x x (c) x x x x

(d) has not maintained any account or has not regularly employed any method of accounting, or if the. method employed is such that in the opinion of the Commissioner assessment cannot properly be made on the basis thereof; the Commissioner shall in the prescribed manner assess the dealer to the best of his judgment."

What is true of the assessment must also be true of reassessment because reassessment is nothing but a fresh assessment. When reassessment is made under s. 19, the former assessment is completely reopened and in its place fresh assessment is made. While reassessing a dealer, the assessing authority does not merely assess him on the escaped turnover but it assesses him on his total estimated turnover. While making reassessment under s. 19, if the assessing authority has. no power to make best judgment assessment, all that the assessee need do to escape reassessment is to refuse to file a return or refuse to produce his account-books. If the contention taken on behalf of the assessee, is correct, the assessee can escape his liability to be reassessed by adopting an obstructive attitude. It is difficult to conceive that such could be the position in law.

Before making reassessment, the assessing authority has to, under rule 33(1) framed under the Act call upon the assessee to produce his books of account and other documents which the assessing authority may require and any evidence which the dealer may wish to produce in support of his objection. When such a notice is issued to the dealer, he may appear before the assessing authority on the date fixed in the notice and prefer his objections and produce such evidence as he may think necessary. Sub- rule (2) of rule 33 provides that if the assessee appears in response to the notice under s. 3 3 (1)., the assessing authority may make reassessment, if necessary, only after, considering the objections raised by the dealer and after, examining such evidence as may be produced by,, him,. It is important to, note that in the notice which the assessing authority is required to issued to the dealer in form 16, the extent of the escaped turnover as estimated, by the assessing authority has to be specified.

The procedure laid down in rule 33 could not have been a mere empty formality. If the assessee's contention is right in order to 24

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 escape reassessment all that the assessee need do is to ignore the notice issued under rule 33(1) and refuse to co-operate with the assessing authority in the reassessment proceedings. We are unable to accept that is the true position in law. In our opinion the decision of the Andra Pradesh High Court in State of Andhra Pradesh v. Bavuri V. Narasimhan, (1) relied on by the assessee was not correctly decided. For the reasons mentioned above, we allow these appeals, vacate the answers given by the High Court to Questions Nos. 1 and 3 and answer those questions in favour of the Department i.e. that the estimate of taxable turnover under the 'State Act and the 'Central Act' made by the assessing authority for the period from November 1, 1959 to October 20, 1960 on the basis of Rs. 31,171.28 as the escaped turnover for a period of 19 days was legal and justified and consequently the penalty of Rs. 2,000/imposed on the assessee was in accordance with law. The assessee shall pay the costs of the Department both in this Court and in the High Court.”

The findings of CIT (A)

Para 3.6:-

The CIT (A) has stated that development charges @ Rs.170/- were considered only in case of 07 customers whereas in case of 15 customers, it was ranging between Rs. 7/- to Rs.165/- only. This was a new fact brought to the notice of CIT (A) which needed the comments from AO as such the matter should have been remanded.

Para 3.8:-

The CIT (A) says that the AO has not recorded the statement or called the information from other customers as such made this as one of the basis for deleting the addition. The CIT (A) has got co-terminus powers with the AO. The CIT (A) could have invoked section 251 (4) of IT Act in order to get the further verification done by the AO.

Para 3.9:-

The CIT (A) states that “learned AO had disallowed a sum of Rs. 7.14 crores being the amount actually incurred and charged to P & L account”. The conclusion of CIT (A) is factually incorrect. The AO has no where stated that an amount of Rs. 7.14 crores was actually incurred. 25

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Right from the beginning, the AO has been insisting that the provision (contingent) on account of development expenses have been claimed by assessee and the same was not allowable. Therefore, the CIT (A) has deleted the addition on mistaken understating of AO’s conclusion.

Para 3.10:-

The entire issue was discussed and decided on the factual matrix as per the record, statements and outside inquires. The question of rejection of books did not arise before the CIT (A). Moreover the same was not raised by the appellant in specific grounds or in written submissions. Further the CIT (A) has stated that the addition on account of disallowance of development expenditure by AO was for it’s being contingent in nature. But the CIT (A) has failed to adjudicate and decide whether the AO was correct in his conclusion.

Para 3.13:-

The CIT (A), has stated that none of the customers has admitted of having paid any amount over and above what was recorded in the books of account. He has not considered and appreciated the detailed discussion by the AO in the assessment order that the appellant had received the cost of development separately from the customers and the same has not been considered in sale consideration as shown in the P & L accounts of A.Y. 2009-10, 2010-11 and 2012-13 and 2013-14. These amounts have been disclosed only in the F.Y. 2014-15 for which no explanation could be filed during the assessment proceedings. The entire discussion by the AO and above submission prove it beyond doubt that the assessee has disclosed the component of development charges only on account of those parties who had paid the same by cheques.

Further the CIT (A) has failed to take note of detailed discussions and copies of statements and confirmation by the parties which are duly pasted in the assessment order at page No. 11 to 33 of the assessment order.

Para 3.17:-

The finding of CIT (A), that the AO has not brought on record any evidence is far from reality as can be seen from the detailed discussion running in to 35 pages . Nothing had prevented the CIT (A) to reach the truth by invoking section 251 (4) of IT Act.

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Para 3.18:-

Regarding allowing of cross examination of Shri N.M. Mathur, the architect, there is nothing on record to prove that the assessee had sought cross-examination. Further, not giving cross- examination is not sufficient ground for allowing the appeal of assessee as held in following cases of Hon’ble Apex Court.

M/s Pebble Investment Supreme 2017 2017-TIOL-238-SC-IT and Finance ltd., Vs ITO Court ITO Vs M. Piral Choodi Supreme 2010 [2012] 20 taxman.com 733 Court (SC)/[2011]334 ITR 262 (SC)/[2011] 245 CTR 233 (SC) Roger Enterprises (P.) Supreme 2016 [2016] 72 taxmann.com 167 Ltd., Vs. CIT Court (SC) Further, CIT (A) could have directed the AO to allow the cross- examination of architect in remand proceedings. Therefore, the order of CIT (A) is not in accordance with the provisions of IT Act, 1961.

Para 3.19:-

There is no mistake by AO in relying on the report of M/s Mathur and associates about the cost of club house as the firm was associated with the project since beginning.

Para 3.21:-

The CIT (A) while deleting the addition has relied on the decision of Hon’ble Supreme Court. The facts of decision of Hon’ble Supreme Court in the case of Rotark Control India Pvt. Ltd., vs CIT (314 ITR 62) is totally distinguishable from the facts of present case. In that case, the issue before Hon’ble Apex Court was estimation of warranty expenses which was considered as integral part of sale price. “The provision for warranty was recognized as the assessee had present obligation as a result of past events” whereas in the present case, the assessee had been comfortably debiting the expenses on actual basis from A.Y. 2008-09 to A.Y. 2012-13. The average cost on account of development charges @ Rs.78. 38/- per Sq.ft. was being reflected . But suddenly, during the relevant assessment year, the appellant has estimated the cost of development @ Rs.170/- per Sq. ft. for remaining part of the project and started claiming the expenses on proportionate basis. Moreover, the Architect, M/s Mathur and associates have themselves stated that the estimates were contingent to the quality of work 27

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 specified in the report ( refer statement of Shri N.M. Mathur). Therefore, in the present case, the liability was not determinable with certainty.

In view of the facts brought out above and detailed discussion based on various documents, inquires, statement of various purchasers and judicial decisions, we request Hon’ble Bench, ITAT, Indore to set aside the order of CIT (A) and restore the order of Assessing Officer.

Sd/-

(Lal Chand) Commissioner of Income Tax (Audit) Bhopal (Assigned charge- CIT (DR))

the order of Ld. CIT(A) and also relied on the following

submissions:-

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018

The total plots in the ‘Info City’ project are 1142. The year wise break-up of sale of plots from F.Y. 2008-09 to F. Y. 2014-15 (AY 2009-10 to 2015-16) is as under:- A.Y. No. of plots of ‘Info-City’ project sold 2009-10 56 2010-11 120 2011-12 54 2012-13 33 2013-14 168 2014-15 4 2015-16 6

Sr. Name of Plot Area Excess PB Amount Amount Rate of PB No. the party No. of amount [AY transferr transferre developm [AY plot received in 201 ed to d to ent 201 (sq.ft addition to 3- MPEB developm charges 3- .) the sale 14] deposit ent per sq.ft 14] considerat account charges ion in AY (Rs.) account 2013-14 (Rs.) (Rs.) (A) (B) (C) (D) (E) (F) (G) (H) = (E-G) (I) =(G/D) (J) 1 Meeta 421 8200 40,40,000 44, 2,87,000 13,94,000 170 228 Rajesh 420 77- Panwar 463 78 2 Seema and 1725 1,82,500 45 60,375 1,22,125 70.80 228 Piyush Zalaya 1000 3 Rajeev 1725 9,97,500 44 60,375 2,93,250 170 228 Kumar 991 126 29

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Nikhar 4 Anu Kumar 1725 7,65,000 43 60,375 2,93,250 170 228 Gargav 957 5 Rampukar 2400 5,80,000 44 84,000 4,08,000 170 228 Tiwari 122 6 Satyanaray 4260 4,22,000 45 1,49,100 2,72,900 64.06 228 an Dhruv 464 7 Anita 2100 4,20,000 43 73,500 3,46,500 165 228 Suresh 172 Sharma 882 8 Nirmal 1725 6,82,500 187- 60,375 2,93,250 170 228 Rajendra 188 Tiwari 986 9 Anil Malik 2100 4,00,000 200 73,500 3,26,500 155.48 228 391 10 Amit 2100 2,45,000 43 73,500 1,71,500 81.67 228 Shantilal 216 345 Total 39,21,275

Out of the above mentioned excess amount as mentioned in column E, after transferring to the MPEB deposit account (column G) the balance amount was then transferred to development charges (column H). These development charges vary from the range of Rs. 64 per sq. ft. to Rs. 170 per sq. ft. and are not exactly Rs. 170 per sq. ft. (column I).

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 in the year under consideration, it shall amount to taxing the same twice in two different years, viz. AY 2015-16 wherein the assessee itself has offered it to tax and AY 2013-14 wherein it is done by the Ld. Authority. [AO Para 14 Page 17 Table and CIT(A) Para 3.4 Page 14-15]

Para 14 of the assessment order states this fact of reporting of Rs. 61,21,220 in respect of development charges recovered from 22 buyers in AY 2015-16 which has been tabulated at page 17. This amount of Rs. 61,21,220 is included in the Note 14 to the Statement of Profit and Loss for AY 2015-16 forming part of the impugned assessment order as Annexure ‘A’. 10. It is a settled law that once an amount has been subjected to tax in a given assessment year, it cannot be taxed again in another assessment year. This principle emerged from the decision of Hon’ble Supreme Court in the case of Excel Industries Ltd. 358 ITR 295 (SC) [2013].

It was held – “Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers.

Para 8 – “It was conceded that even in the present case, the rate of tax remained the same in both the assessment years i.e. 2005-06 and 2007- 08. Following the above judgment of the Hon’ble Supreme Court, it must be held that the dispute raised by the revenue is essentially academic. The 31

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 issue may have some tax effect in that if the department is correct and the amount ought to have been brought to tax two years earlier, there would be loss of interest for two years on the amount of ` 31,10,000/-. The department has not raised the claim in that regard. We do not wish to express any opinion as to the right of the department to claim interest.

Where assessee succeeded before Commissioner (Appeals) in ultimate analysis and was, thus, not an aggrieved party, in Revenue’s appeal, Tribunal committed a mistake by not permitting assessee (respondent before it) to support final order of Commissioner (Appeals) by assailing findings of Commissioner (Appeals) on issues that had been decided against him. 14. Combined reading of Explanation 2(a) to Section 153, section 153(6)(i) and section 150(1) also fortifies the contention of the assessee to have the direction of the Hon’ble Bench to re-compute the total income of AY 2015-16 and / or AY 2013-14, as the case may be, so as to bring to charge the amount of Rs. 39,21,275/- only once.

The combined reading of these sections provides that the appellate authority may direct for re-computation of total income to give effect to a finding in an order passed by it under an appeal.

a) Section 43CA was introduced w.e.f. 01.04.2014 in the Income-tax Act, 1961 because of which buyers who had booked their plots by making 32

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 part payments and their registry pending were persuaded to get the registry done under the erstwhile law which was to their advantage. Owing to follow up with the buyers, significant portion of land was sold in the impugned year i.e. 4,20,573 sq. ft. which is 16% of the total saleable area of 26,34,265 sq. ft.

b) Village ‘Arandiya’ where the ‘Info-city’ project under consideration was under construction was brought under Indore Municipal Corporation (IMC) vide notification of the State Government. Prior to coverage under the IMC, it fell under ‘village panchayat’. Owing to coverage under the municipal area of IMC, the development norms would change to that of CPWD and equal to Indore Development Authority (IDA), requiring extra charges by MPEB, extra property tax, shelter tax, expenses on Narmada water supply line, RCC roads instead of metal roads, street lights, etc.

Change in accounting policy is duly disclosed in the audited financial statements by way of a note at Note 9. [PB 30]

Accordingly, an estimate was drawn on the development expenses to be incurred for the ‘Info-city’ project by engaging the expert Architect and Engineers – Mathur & Associates. A detailed report with scientific analysis on the estimation of development expenses was obtained based on which development expenses were provided for in the books of account from AY 2013-14 and onwards. [PB 49 – 60]

These expenses were provided on the basis of area of land sold for which revenue was 33ecognized in the P&L of the year. [AO Para 8 Page 3 Table]

Following the prudent basis of matching concept of accounting, assessee provided for development expenses of Rs. 7,14,97,410 on the basis of technical report of Mathur & Associates, Architect & Engineers in the impugned year.

Further, assessee being a ‘developer’, Accounting Standard AS – 7 on Construction Contracts does not apply. This standard is applicable in case of contractors. 33

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018

“……….when after scientific estimation of maintenance and repairs, the assessee made a provision by debiting the profit and loss account and crediting the provision account then the accounting policy of the assessee cannot be held as faulty as undisputedly the assessee did not debit any amount to the profit and loss account on account of actual maintenance and repair expenses rather the assessee reversed the excess amount of provision than the actual expenditure was credited to profit and loss account and offered as income after the end of 5th year. – Therefore the CIT(A) was quite correct and justified in following decision in Rotork Control India Pvt Ltd [2009] 314 ITR 62 (SC) and ITAT is unable to see any valid reason to interfere with the conclusion drawn by CIT(A).” [emphasis supplied] [refer PB 62 & 67] 21. Ld. CIT(A) has rightly held that development expenses of Rs. 7,14,97,410 charged to profit and loss account on prudent basis of matching concept by applying scientific method is an allowable expenditure. [CIT(A) Para 3.21 Page 19]

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 14. We have heard rival contentions and perused the records

placed before us and carefully gone through the written

submissions filed by both the parties. Revenue has raised the

common issue for Assessment Year 2010-11 and 2013-14

challenging the finding of Ld. CIT(A) deleting the disallowance of

development expenses made by Ld. A.O at Rs. 2,93,76,568/-and

Rs. 7,14,97,410/- for Assessment Years 2010-11 and 2013-14

respectively. Since the assessment order for Assessment Year

2013-14 was finalized earlier than the assessment order for

Assessment Year 2010-11 adjudication of the sole issue raised by

the revenue is on the basis of facts for Assessment Year 2013-14.

We observe that the assessee is involved in the business of

development of land and developing colony undertook two projects

namely Info-City and Royal Premium Park. The issue under appeal

for the two assessment years is with regard to the plots sold under

the project ‘Info-City’. There are total 1142 plots in the Info-City

and the assessee has sold 56,120, 54,33, 168, 4 & 6 during

Assessment Year 2009-10 to 2015-16. There is no dispute with

regard to number of plots sold. From Assessment Year 2009-10

onwards till Assessment Year 2012-13 assessee was claiming actual 35

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 development expenses incurred during the year. For Assessment

Year 2010-11 Rs. 2,97,47,218/- was claimed.

was incurring development expenses regularly but it opted to

change the accounting policy and claimed the development

expenses in the Profit & Loss account on estimated basis calculated

@Rs.170/- per sq. feet if for the area sold during the year and the

development expenses were booked in the books. Average rate of

development expenses @Rs.170/- per sq.feet was arrived on the

basis of the report prepared by an expert Architect & Engineer M/s

Mathur & Associates as per which the development expenses

remaining to be incurred from 1.4.2012 onwards was

Rs.33,31,66,000/- and this amount was divided by the unsold area

as on 1.4.2012 which was 1959785 sq.feet. During the assessment

proceedings this claim of estimated development expenses as

against the actual development expenses prompted the Ld. A.O to

investigate the issue during which it was revealed that assessee had

received development charges from 22 purchasers of plots. The

relevant ledger account of the purchasers were called for. The

assessee has also not disputed this fact that it had received 36

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 development charges from these purchasers of plots through

account payee cheque.

the development charges from the purchasers of plot Ld. A.O came

to a conclusion that other than the purchaser of plot who have

paid development charges by cheque duly reflected in the regular

books of accounts, the assessee might have received development

charges in CASH from the remaining purchaser of plots which

assessee has not revealed in the books. Based on this self

developed theory Ld. A.O concluded that assessee should not be

allowed the claim of development expenses since the assessee is

receiving the development charges against the expenses so incurred

and therefore development expenses are incurred on matching

principle resulting in no profit no loss. It is interesting to note that

the Ld. A.O without referring to any material evidence indicating

that the assessee have received development charges in cash from

purchaser of other plots, not doubting the genuineness of the actual

development charges incurred by the assessee and also not

rebutting the fact that excess development charges so claimed by

the assessee during Assessment Year 2009-10 to 2014-15 has been 37

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 offered to tax in the Income Tax Return filed for Assessment Year

2015-16 decided to disallow the claim of assessee of development

charges on following three counts:-

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 17. From perusal of the above observation by Ld. A.O we find that

firstly he mentions that development expenses has not yet been

incurred in respect of all the plots and then he further observes that

actual development expenses actually incurred would have to be

considered for deduction but he fails to give the benefit of actual

expenses incurred by the assessee during the year and thirdly he

applies a complete different approach with regard to the

development charges whether received or not but would accrue to

the assessee @ Rs.170/- per sq.feet at par with 22 buyers of plots.

Looking to the above observation of Ld. A.O we are of the view that

his approach is neither here nor there. Ld. A.O is not sure what

actually he want to assert upon.

CIT(A) he after examining the facts in detail and also discussing the

settled judicial precedents decided in favour of the assessee

allowing the claim of development expenses claimed on estimated

basis of development expenses at Rs.7,14,97,410/- for Assessment

Year 2013-14 and partly allowing the claim of development

expenses at Rs. 2,93,76,568/- for Assessment Year 2010-11. 39

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Relevant finding of Ld. CIT(A) for Assessment Year 2013-14 which is

squarely applicable for Assessment Year 2010-11 also is reproduced

below:-

Ground No. 2 to 5

3.0 These grounds of appeal are with respect to disallowing Rs.7,14,97,410/- considering the expenses debited, on estimate to match the corresponding revenue. I have gone through the assessment order and the submission made by the appellant before me and noted that:-

3.1 The appellant company is engaged in the business of the development of the colony. The appellant company purchases land and sells after developing and plotting them in smaller sizes. The appellant company had under taken two projects namely 'Infocity' and 'Royal Premium Park' ..

3.2 The Learned AO while assessing the income for A.Y. 2013- 14 had noted that the appellant till assessment year 2012-13 had charged the actual expenditure incurred on development of land to its profit and loss account irrespective of the area sold in that particular year, however, from AY 2013-14, the appellant company had changed its accounting: policy based on the report of a qualified Engineer obtained by the appellant and debited an amount of Rs. 7,14,97,410/- @ Rs. 170/- per sq. feet of Rs. 4,20,573 sq. feet being the total area sold during the year, instead of actual expenses incurred of Rs. 1,94,74,600/- in F.Y. 2012-13 to match the revenue.

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 3.4 During such proceedings, the learned AO had also noted that in case of 22 customers, the appellant had received the amount in excess of the amount stated in the sale deed, towards MPEB, club house, development expenses etc. The sale deeds of these 22 customers were executed in the FY 2008-09, 2009-10,2011-12 and 2012-13 (No sale 'deed related to FY 2010-11). And the amount of Rs. 1,25,94,195/- so received from these 22 customers were transferred to various heads including development charges of Rs. 61,21,200/- as income in AY 2015-16 and balance was kept. as liability towards MPEB, club house membership & colony maintenance charges. A chart given by appellant, is forming the part of submission made by appellant, which is reproduced as below: S.N Name of the Plot Area Amount Development MPEB @ Club Mainten Financal O Plot Holder No. charges received Rs.35/- House ance Year of book and offered for tax Registry ed in F.Y 2014-15 1 CHETNA 888 2100 247,595 174,095 73,500 0 0 2008-09 W/0 R.K. MISHRA 2 SANJAY 145 2800 148600 50,600 98,000 0 0 2008-09 BADJATIYA 3 VINAY 837 2100 357,000 283,500 73,500 0 0 2008-09 KUMAR TIWARI 4 GOVIND & 135 2700 111,300 16,800 94,500 0 0 2009-10 VIDYAVATI 5 KAVITA 175 3200 121,600 9,600 112,000 0 0 2009-10 MUNDRA 6 LALITA W/O 381 2025 425,000 344,250 70,875 9875 0 2009-10 SURESH KABRA 7 DEVI 120 2400 972,000 408,000 84,000 55,000 36,000 2011-12 KISHAN SHARMA 8 DR. 124 5400 700,000 511,000 189,000 0 0 2011-12 SHAILESH AND J.N. 125 PRASAD 9 PRAJUN 485 3700 175,000 45,500 129,500 0 0 2011-12 S/O RAJENDRA SONI 10 PUSHPA 215 2800 433,600 335,600 98,000 0 0 2011-12 WASDEV GABA 11 SATISH S/O 339 2100 84,000 10,500 73,500 0 0 2011-12 MOHANLAL, LAHOTI 12 SEEMA 340 2100 84,000 10,500 73,500 0 0 2011-12 W/O SATISH LAHOTI 13 MEETA W/O 421, 8,200 4,040,000 1,394,000 287,000 16,5000 108,000 2012-13 RAJESH 420, PANWAR 463 14 SEEMA AND 1000 1725 182,500 122,125 60,375 0 0 2012-13 PIYUSH ZALAYA 15 RAJEEV 991 1725 997,500 293,250 60,375 55000 36,000 2012-13 KUMAR NIKHAR 16 ANU KUMAR 957 1725 765,000 293,250 60,375 55000 36,000 2012-13 GARGAV 41

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 17 RAMPUKAR 122 2400 580,000 408,000 84,000 55000 33,000 2012-13 TIWARI 18 SATANARAY 464 4260 422,000 272,900 149,000 0 0 2012-13 AN DHRUV 19 ANITA W/O 882 2100 420,000 346,500 73,500 0 0 2012-13 SURESH SHARMA 20 NIRMAL S/0 986 1725 682,500 293,250 60,375 55000 36,000 2012-13 RAJENDRA TIWARI 21 ANIL MALIK 391 2100 400,000 326,500 73,500 0 0 2012-13 22 AMIT 345 2100 245,000 171,500 73,500 0 0 2012-13 SHANTILAL TOTAL 12,594,195 6,121,220 2,151,975 449,875 285,000

3.5 The learned AO during the proceedings for AY 2013-14 had called 4 customers of the appellant company and had recorded their statements, These persons were Shri Nirmal Charid Tiwari, Shri Rampukar Tiwari, Shri Anil Malik and Shri Jagdish Narayan Prasad (Father of customer Dr. Shailender Kumar). In addition to this, 2 customers namely Anu Kumar Gargav and Vinay Kumar Tiwari had submitted their replies, in response to information called by learned AO. Shri Nirmal Kumar Tiwari & Shri Rampukar Tiwari were also allowed by the AO for limited cross examination.

3.6 It was also brought to my knowledge that out of the cases of 22 customers, only in cases of 7 customers the income towards development charges was considered @ Rs. 170/- per sq. ft., while in the remaining 15 customers such income had ranged from Rs. 3/- per sq. ft. to Rs. 165 per sq. ft.

3.7 Out of 6 customers from whom statements were recorded and/or information was called, only for 3 customers, income was booked @ Rs.170/ - per sq. ft.

3.8 The learned AO had not recorded or called information from any other customer, from whom he has presumed the appellant to have received cash in addition to what was recorded in books @ Rs. 170/- per sq. ft.

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 3.9 On the basis of these statements ,the learned AO had come to the conclusion that the appellant had received an amount of Rs. 170 per sq. ft. over and above what had been recorded in the books of account from each and every customer and therefore, from the expenditure incurred towards development, the learned AO had disallowed a sum of Rs. I7,14,97,410/- being the amount actually incurred and charged to Profit & loss account by holding that Development Charges whether received or not would accrue to the appellant at the rate of Rs. 170 per sq. feet and also presumed that the same was received from each and every customer over and above what was recorded and offered by the appellant company.

3.10 On the other hand of the appellant had submitted that the appellant had a valid reason for change in accounting policy in AY 2013-14 which has already been reproduced above. Further the learned AO has not rejected the books of accounts of the appellant. The only finding of the learned AO, for disallowing the claim of the appellant was that this expenditure is contingent in nature.

3.11 The learned AO has also disallowed this u/s 37(1) that the expenses been charged on projected basis.

3.12 The appellant had pointed out that on the one hand the learned AO has mentioned that the expenditure debited should be on actual basis and the expenditure actually incurred should be allowed u/s 37(1) but has not allowed the actual expenditure incurred by appellant.

3.13 The appellant had further submitted during appellant proceedings that out of 4 customers whose statements were 43

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 recorded and heavily relied on by the learned AO, only 2 were allowed to be cross examined and that too for the limited purpose of confirming the answer to one question asked by learned AO. He also pointed out that none of the customers had admitted to have paid any amount over and above what had been recorded in the books of accounts by the appellant either by way of cheque or cash.

3.14 The learned AO on his own belief had come to the conclusion that the appellant had. received development charge in cash, although he has not brought on record any positive and cogent evidence that any additional money had flown in the hands of the appellant. Statement recorded of customer did not contain any acceptance on their part that any cash in addition to what had been recorded in the books of accounts had been paid by them.

3.15 It had further been noted by AO that the amount of Rs. 61,21,200/had been offered by appellant himself in AY 2015- 16 as development charges, which had been received in excess in respective years and not offered as income even on accrual/receipt basis. The financial year wise breakup of the same is under:

S. Name of the plot Financial Plot Plot T/f to Rate per No. holder Year of No. area Development Sq.ft Registry booked in Sq. charges recovered as ft recovered in development 2014-15 charge 1 CHETNA W/O 2008-09 888 2100 174,095 82.90 R.K. MISHRA 2 SANJAY 2008-09 145 2800 50,600 18.07 BADJATIYA 3 VINAY KUMAR 2008-09 837 2100 283,500 135.00 TIWARI TOTAL 2008-09 7000 508195 44

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 4 GOVIND 2009-10 135 2700 16,800 6.22 &VIDYAVATI BAGHORE 5 KAVITA 2009-10 175 3200 9,600 3.00 MUNDRA 6 LALITA W/O 2009-10 381 2025 344,250 170.00 SURESH KABRA TOTAL 2009-10 7925 370650 7 DEVI KISHAN 2011-12 120 2400 408,000 170.00 SHARMA 8 DR. SHAILESH 2011-12 124 & 5400 511,000 94.63 J.N. PRASAD 125 9 PRAJUN S/O 2011-12 485 3700 45,500 12.30 RAJENNDRA SONI 10 PUSHPA 2011-12 215 2800 335,600 119.86 WASDEV GABA 11 SATISH S/O 2011-12 339 2100 10,500 5.00 MOHANLAL LAHOTI 12 SEEMA W/O 2011-12 340 2100 10,500 5.00 SATISH LAHOTI TOTAL 2011-12 18500 1,321,100 13 MEETA W/O 2012-13 421, 8200 1,394,000 170.00 RAJESH 420, PANWAR 463 14 SEEMA AND 2012-13 1000 1725 122,125 70.80 PIYUSH ZALAYA 15 RAJJEV KUMAR 2012-13 991 1725 293,250 170.00 NIKHAR 16 ANU KUMAR 2012-13 957 1725 293,250 170.00 GARGAV 17 RAMPUKAR 2012-13 122 2400 408,000 170.00 TIWARI 18 SATYANARAYAN 2012-13 464 4260 272,900 64.06 DHRUV 19 ANITA W/O 2012-13 882 2100 346,500 165.00 SURESH SHARMA 20 NIRMAL S/O 2012-13 986 1725 293,250 170.00 RAJENDRA TIWARI 21 ANIL MALIK 2012-13 391 2100 326,500 155.48 22 AMIT 2012-13 345 2100 171,500 81.67 SHANTILAL TOTAL 2012-13 28060 3921275

16 It would be pertinent here to examine the decision of the Hon'ble Supreme Court of India in the case of CALCUTIA CO. LTD. vs. COMMISSIONER OF INCOME TAX.

"CALCUTTA CO. LTD. vs. COMMISSIONER OF INCOME TAX

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 SUPREME COURT OF INDIA (1959) 37 ITR 0001

Business expenditure-Conditions for allowing deduction of expenses-Assessee engaged in the Business of land and property development-Assessee following mercantile system of accounting-Expenditure actually incurred but not during the relevant year is still allowable if such expenditure was incidental to the carrying on of the business.

Facts

The assessee deals in land and property and carries on land developing business and, in the course of business, it buys land, develops it so as to make it fit for building purposes and sells it at a profit in plots. Whenever a plot is sold, the purchase 1" pays about 25 of the purchase price in cash and undertakes to pay the balance with interest at a certain rate in ten annual instalments which he secures by creating a charge on the land purchased. The assessee undertakes to carry out the developments including laying out roads, provision of drainage system etc., within a reasonable time. The assessee, following the mercantile system of accounting, during the relevant assessment year entered in the credit side of its books of accounts, the whole of the sum representing the full sale price of the lands sold during the accounting year, though only a part of it was actually received in cash from the purchaser and the balance represented the unpaid balance retained by the purchasers the payment of which was secured by creating charge on the said lands as also the interest received or receivable in the year of account under the deeds of charge. The assessee estimated certain sum as expenditure for the 46

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 developments to be carried out in respect of the plots which had been sold during the year and debited the same in the books of account on the ground that the liability for the said sum had actually arisen, the assessee being bound to provide the facilities it had undertaken to do, even through no part of that amount represented any expenditure actually made during that year.

The sum of Rs. 24,809 represented the estimated amount which would have to be expended by the appellant in the course of carrying on its business and was incidental to the same and, having regard to the accepted commercial practice and trading principles, was a deduction which, if there was no specific provision for it under s. 10(2) of the Act, was certainly allowable deduction, in an1.ving at the profits and gains of the business of the appellant under s. 10(1) of the Act, there being no prohibition against it, express or implied, in the Act. Having accepted the receipts of Rs. 43,692-11-9 in their totality even though a sum of Rs. 29,392-11-9 only was actually received by the appellant in cash, thus making the appellant liable for income tax on a sum of Rs. 14,300 which had not been received by it during the accounting year, it was hardly open to the Revenue to urge that the sum of Rs. 24,809 should not have been allowed as a permissible deduction before arriving at the profits or gains of the appellant which were liable to tax. Consistently enough with this attitude, the Revenue ought to have expressed its willingness to treat only a sum of Rs. 29,392-11-9 as the actual receipt of the appellant during the accounting year and made up the computation of the profits 47

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 and gains of the appellant's business on that basis. The Revenue, however, did nothing of the sort and insisted upon having its pound of flesh, asking to delete the whole of the item of Rs. 24,809 from the debit side of the account which it was certainly not entitled to do.-Calcutta Co. Ltd. vs. CIT (1953) 24 ITR 454 (Cal) : TC16R.204 overruled."

3.17 The learned AO has not brought on record, any evidence against the appellant, to prove that the actual expenditure incurred is not actual expenditure, except for his own presumption that the appellant would have received development charges in cash. Further, no evidence brought on record by the learned AO to prove that the plot sold was not developed plot.

3.18 From the assessment order it is found that the learned AO had recorded the statement of Shri M. M. Mathur Engineer, who had issued the report for development expenditure required to be incurred @ Rs. 170/- sq. ft. on the remaining project. It is also a fact on record that he was never allowed to be cross examined by the appellant company.

3.19 His report was relied upon by the learned AO to come to the conclusion that the cost estimated includes the cost of club house and the learned AO has completely relied on his report to come to the conclusion that the appellant had received development charges @Rs 170 per sq. ft from each and every customer.

3.20 No evidence was brought on record by the learned AO to prove that the appellant had received any amount in cash over and above what was recorded in books of account. 48

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 The sole basis for making addition was the book entry passed in AY 2015-16 for offering income under development charges in case of 22 customers and based on that entry, statement of customers were recorded. Therefore, the entry passed in AY 2015-16 could not be considered for disallowing expenditure.

3.21 Respectfully following the decision of Hon 'ble Supreme Court in case of Rotark Controls India P. Ltd. vs, CIT (314, ITR 62), and the decision of the jurisdictional Bench of ITAT, Indore, which has followed the decision of Hon'ble Supreme Court in case of Rotork Controls India Pvt. Ltd. and other decision relied on by the appellant, I hold that the expenses charged to profit and loss account on prudent basis though on estimate is allowable expenditure. The relevant portion of the orders is reproduced here:

"Held, reversing the decision of the High Court, that the value actuators, manufactured by the assessee, were sophisticated goods and statistical data indicated that every year some of these were found defective, that value actuator being a sophisticated item no customer was prepared to buy a valve actuator without a warranty. Therefore, the warranty became an integral part of the sale price; in other words, the warranty stood attached to the sale price of the product. In this case the warranty provisions had to oe recognized because the assessee had a present obligation as a result of past events resulting an outflow of resources and a reliable estimate could be made of the amount of the obligation. Therefore, the assessee had incurred a liability during the assessment year which was entitled to deduction under section 37 of the Income Tax Act 1961.

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 The present value of contingent liability, like the warranty expenses, if properly ascertained and discounted on accrual basis can be an item of deduction under section 37. The principle of estimation of the contingent liability is not the normal rule. It would be depend on the nature of the business, the nature of sales, the nature of the product manufactured and sold and the scientific method of accounting adopted by the assessee. It would also depend upon the historical trend and upon the number of articles produced.

A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will= be required to settle the obligation, and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized.

The principle is that if the historical trend indicates that a large number of sophisticated goods were being manufactured in the past and the facts S110W that defects existed in some of the items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under section 37. »

ITAT INDORE In Case of BALAJI NEEMUCH INFRASTRUCTURE

"Business Expenditure - U/s 37 of the Income-Tax Act, 1961 -AO made addition in respect of provision for repair and maintenance-CIT(A) deleted the additions-HELD· The assessee is under obligation to maintain road for 3/5 years after completion of 50

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 construction work. Further, when after scientific estimation of maintenance and repairs, the assessee made a provision by debiting the profit and loss account and crediting the provision account then the accounting policy of the assessee cannot be held as faulty as undisputedly the assessee did not debit any amount to the profit and loss account on account of actual maintenance and repair expenses rather the assessee reversed the excess amount of provision than the actual expenditure was credited to profit and loss account and offered as income after the end of 5th year - Therefore, the CIT(A) was quite correct and justified in following decision in Rotork Controls India Put. Ltd. (2009) 13 ITJ 589 (SC): (2011) 3 STD 535 and ITAT is unable to see any valid reason to interfere with the conclusion drawn by CIT(A). [Refer Para 48 & 49)

development expenses claimed by the assessee without providing on

record any cogent material to show that the assessee has received

cash over and above the amount recorded in the books of accounts.

None of the buyers of the plots in their statement recorded by the

Ld. A.O has stated about the payment of cash to the assessee. The

fact of the matter is that whatever the buyers have confirmed in

their statement recorded before Ld. A.O all those payments are duly

recorded in the respective ledger account. It is also not in dispute

that the excess development charges recovered at Rs.61,21,220/-

are offered to tax in Assessment Year 2015-16 which includes sum 51

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 of Rs. 39,21,275/- pertaining to the Assessment Year 2013-14 and

the details of the same are mentioned below:-

Year wise Rate per Sq. Ft Plot S. AY Plot No. Development received as Name of The Plot Holder Area In No. of Registry Booked charges Offered Development Sq. Ft in AY 2015-16 Charges

1 CHETNA W/O R.K. MISHRA 2009-10 888 2100 1,74,095 82.90 2 SANJAY BADJATIYA 2009-10 145 2800 50,600 18.07 3 VINAY KUMAR TIWARI 2009-10 837 2100 2,83,500 135.00 TOTAL 2009-10 7000 5,08,195 4 GOVIND & VIDYAVATI BAGHORE 2010-11 135 2700 16,800 6.22 5 KAVITA MUNDRA 2010-11 175 3200 9,600 3.00 6 LALITA W/O SURESH KABRA 2010-11 381 2025 3,44,250 170.00 TOTAL 2010-11 7925 3,70,650 7 DEVI KISHAN SHARMA 2012-13 120 2400 4,08,000 170.00 8 DR. SHAILESH J.N. PRASAD 2012-13 124 and 125 5400 5,11,000 94.63 9 PRAJUN S/O RAJENDRA SONI 2012-13 485 3700 45,500 12.30 10 PUSHPA WASDEV GABA 2012-13 215 2800 3,35,600 119.86 11 SATISH S/O MOHANLAL LAHOTI 2012-13 339 2100 10,500 5.00 12 SEEMA W/O SATISH LAHOTI 2012-13 340 2100 10,500 5.00 TOTAL 2012-13 18500 13,21,100 13 MEETA W/O RAJESH PANWAR 2013-14 421, 420, 463 8200 13,94,000 170.00 14 SEEMA AND PIYUSH ZALAYA 2013-14 1000 1725 1,22,125 70.80 15 RAJEEV KUMAR NIKHAR 2013-14 991 1725 2,93,250 170.00 16 ANU KUMAR GARGAV 2013-14 957 1725 2,93,250 170.00 17 RAMPUKAR TIWARI 2013-14 122 2400 4,08,000 170.00 18 SATYANARAYAN DHRUV 2013-14 464 4260 2,72,900 64.06 19 ANITA W/O SURESH SHARMA 2013-14 882 2100 3,46,500 165.00 20 NIRMAL S/O RAJENDRA TIWARI 2013-14 986 1725 2,93,250 170.00 21 ANIL MALIK 2013-14 391 2100 3,26,500 155.48 22 AMIT SHANTILAL 2013-14 345 2100 1,71,500 81.67 TOTAL 2013-14 28060 39,21,275 GRAND TOTAL 61,21,220

about the genuineness of the actual development charges incurred

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 by the assessee nor has he pointed out any mistake in the books of

accounts maintained by the assessee except about the claim of

development charges. The assessee has been consistently claiming

the actual development charges from Assessment Year 2009-10 till

Assessment Year 2012-13. Though actual expenses are incurred

subsequently also but expenses are booked in the Profit and Loss

account based on a scientific method i.e. report of technical expert.

The rate of Rs.170/- per sq. ft applied by the assessee as

development charges for the areas so sold during the year is based

on the report of an expert Architect & Engineer M/s. Mathur

Associates. Even Ld. A.O has also endorsed the correctness of the

Architect & Engineer report. The action of the assessee for

changing the accounting policy for the year and booking the

expenses calculated at scientific basis is not found to be wrong in

view of settled judicial pronouncements. This Tribunal in the case

of Balaji Neemuch Infrastructure Pvt Ltd (supra) has held that :-

“……….when after scientific estimation of maintenance and repairs, the assessee made a provision by debiting the profit and loss account and crediting the provision account then the accounting policy of the assessee cannot be held as faulty as undisputedly the assessee did not debit any amount to the profit and loss account on account of actual maintenance and repair expenses rather the assessee reversed the excess amount of provision than the actual expenditure was credited to profit and loss account and offered as income after the end of 5th year. – Therefore 53

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 the CIT(A) was quite correct and justified in following decision in Rotork Control India Pvt Ltd [2009] 314 ITR 62 (SC) and ITAT is unable to see any valid reason to interfere with the conclusion drawn by CIT(A).” [emphasis supplied]. 21. We further observe that in the instant case Ld. A.O has

proceeded on guess work since without placing any material

evidence on record to show that assessee had ever received

development charges in cash, on his on motion which in our view is

merely based on surmises and conjectures deemed that assessee

would have received development charges in cash and further

deemed that the development charges would not be a charge on the

assesse’s as the same would be recoverable from the buyers of the

plot. Further we find that the Ld. A.O failed to appreciate the fact

that the assessee is in to the business of development of plots and

then selling the plots. The assessee purchase piece of land, makes

a plan for its development with all amenities required for

establishing the colony which includes land leveling, roads, internal

roads, parks, common areas and other incidental expenses relating

to development of land till it is handed over to the plot holders and

then subsequently for making a particular colony fit for

constructing residential houses. In all this process development

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 charges ought to be incurred. They were incurred and were

consistently charged to Profit & Loss Account. The change of

accounting policy effected from Assessment Year 2013-14 was

based on the accounting standard AS-5 issued by Institute of

Chartered Accountants of India which permits the change and

which was done so to make appropriate presentation of financial

statements of the enterprise. The same was taken up since the

highest number of plots were sold by the assessee during

Assessment Year 2013-14 which were 168 in number. Almost 16%

of saleable area was sold during the year. Change in accounting

policy is duly disclosed in the audited financials by way of note.

Actual development charges incurring during the year are also

reported in the balance sheet.

some of the purchasers of plot and were excess in nature in

comparison to the amount charged to other plot purchasers the

excess amount of Rs. 61,21,220/- have already been offered to tax

in Assessment Year 2015-16 and the chart showing year wise

amount of income offered during Assessment Year 2015-16 has

already been mentioned by us in the preceding paras. 55

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 23. Now in the given situation where the genuineness of actual

development expenses incurred by the assessee has never been in

doubt at any stage by the revenue authorities nor the Departmental

Representative could controvert this fact then the next thing to be

considered is that whether the assessee over charged the Profit &

Loss Account by claiming the higher amount of estimated

development expenses.

shows the year wise detail of actual development expenses incurred

and the estimated development expenses charged to Profit & Loss

Account. As discussed before, from Assessment Year 2009-10 to

Assessment Year 2012-13 assessee was charging actual

development charge incurred during the year to the Profit & Loss

Account. Only from Assessment Year 2013-14 after making

changes in the accounting policy adopted by the assessee

estimated development charges were booked to the Profit & Loss

Account. Following chart will provide more clarity:-

Assessment Year Grand Particulars Unit 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 Total Total salable area Sq. ft. 26,34,265 26,34,265 26,34,265 26,34,265 26,34,265 26,34,265 26,34,265 26,34,265

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Area Sold Sq. ft. 1,41,474 3,11,131 1,34,125 87,750 4,20,573 8,600 12,006 11,15,659 Percentage of total salable area sold Perct. 5.37% 11.81% 5.09% 3.33% 15.97% 0.33% 0.46% 42.35% Total Development expenses Rs. 1,15,87,720 2,97,47,218 91,16,040 24,16,100 - - - 5,28,67,078

Estimated Develpoment Expenses Rs. - - - - 7,14,97,410 14,62,000 20,41,020 7,50,00,430

ACTUAL EXPENCES INCURRED Rs. 1,15,87,720 2,97,47,218 91,16,040 24,16,100 1,94,74,600 1,36,26,544 1,01,17,084 9,60,85,306

Assessment Year 2015-16 the actual development charges incurred

by the assessee from Assessment Year 2009-10 to Assessment Year

2015-16 is Rs. 9,60,85,306/-. Development charges booked on

estimated basis from Assessment Year 2013-14 to Assessment Year

2015-16 are Rs. 7,50,00,430/-. For Assessment Year 2014-15 and

Assessment Year 2015-16 the estimated development expenses

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 charged to Profit & Loss account are only Rs. 14,62,000/- and Rs.

20,31,020/- as against the actual expenditure of Rs. 1,36,26,544/-

and Rs. 1,01,17,084/- respectively which shows that the assessee

has duly adhered to the changed accounting policies implemented

from Assessment Year 2013-14. For Assessment Year 2013-14

there was certain spike in the claim of development expenses but

the revenue for the year were also at a higher side since around

420573 sq. ft area of land was sold during the year as against

87750 sq. ft area sold in the immediately preceding Year. Ld. A.O

also failed to appreciate that the assessee had shown a positive

income at the end of the year and paid taxes there on. We have

also examined the audited balance sheet and Profit & Loss Account

and treatment of development charges incurred during the year.

The excess amount charged in the preceding years has been offered

to tax in Assessment Year 2015-16 and it would not be justified to

tax an income already offered to tax in the correct year as there is

no loss to the revenue department.

tax in a given assessment year, it cannot be taxed again in another

assessment year. This principle emerged from the decision of 58

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Hon’ble Supreme Court in the case of Excel Industries Ltd. 358 ITR

295 (SC) [2013].

It was held – “Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers.

followed by Hon’ble P&H High Court in the case of Vee Gee

Industrial Enterprises in ITA 187 of 2014, order dated 28.07.2015

and held in -

Para 8 – “It was conceded that even in the present case, the rate of tax remained the same in both the assessment years i.e. 2005-06 and 2007- 08. Following the above judgment of the Hon’ble Supreme Court, it must be held that the dispute raised by the revenue is essentially academic. The issue may have some tax effect in that if the department is correct and the amount ought to have been brought to tax two years earlier, there would be loss of interest for two years on the amount of ` 31,10,000/-. The department has not raised the claim in that regard. We do not wish to express any opinion as to the right of the department to claim interest.

Jurisdictional Indore ITAT Bench in the case of Balaji Neemuch

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Infrastructure Pvt Ltd in ITA 918 to 920/Ind/ 2016, order pronounced

on 27.09.2017. It was held in Para 48 & 49 as –

“……….when after scientific estimation of maintenance and repairs, the assessee made a provision by debiting the profit and loss account and crediting the provision account then the accounting policy of the assessee cannot be held as faulty as undisputedly the assessee did not debit any amount to the profit and loss account on account of actual maintenance and repair expenses rather the assessee reversed the excess amount of provision than the actual expenditure was credited to profit and loss account and offered as income after the end of 5th year. – Therefore the CIT(A) was quite correct and justified in following decision in Rotork Control India Pvt Ltd [2009] 314 ITR 62 (SC) and ITAT is unable to see any valid reason to interfere with the conclusion drawn by CIT(A).” [emphasis supplied] [refer PB 62 & 67]

judgments referred herein above we are of the considered view that

Ld. CIT(A) was justified in allowing the claim of estimated

development expenses booked by the assessee in the Profit & Loss

Account at Rs. 7,14,97,410/- on matching concept by adopting

scientific method allowable u/s 37(1) of the Act and thus the theory

adopted by the Ld. A.O of the assessee having received the

development charges in cash is just in air and has no legs to stand

for since there is no evidence to prove it and it is merely on

surmises and conjectures. The fact remains that the assessee had

been consistently incurring development expenses and the

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 genuineness of the same has not been doubted by the revenue

authorities at any stage. We accordingly find no reason to interfere

in the finding of Ld. CIT(A) and the same is confirmed. We

accordingly order so and dismiss all the grounds of appeal raised by

the revenue for Assessment Year 2013-14.

2013-14 and we thus taking a consistent view confirm the finding of Ld. CIT(A) and dismiss the revenue’s grounds raised for Assessment Year 2010-11 and allow the assessee’s claim of actual development charges

u/s 37(1) of the Act at Rs.2,93,76,568/- claimed for Assessment Year 2010-11. 31. The last issue is with regard to the application made by Ld.

Counsel for the assessee under Rule 27 of Income-Tax (Appellate

Tribunal) Rules, 1963 which provides that “the respondent, though

he may not have appealed, may support the order appealed against

on any of the grounds decided against him”. The Hon'ble’ble Delhi

High Court in the case of Sanjay Sawhney (2020) 116 taxmann.com

701 (Delhi) dated 01.05.2020 dealing with the issue of application

of Rule 27, held that “where assessee succeeded before

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 Commissioner (Appeals) in ultimate analysis and was, thus, not an

aggrieved party, in Revenue’s appeal, Tribunal committed a mistake

by not permitting assessee (respondent before it) to support final

order of Commissioner (Appeals) by assailing findings of

Commissioner (Appeals) on issues that had been decided against

him.”. In the instant case for Assessment Year 2010-11 the assessee

claimed actual development expenses at Rs.2,97,47,218/-. Ld. A.O

disallowed this claim. In the first appeal before Ld. CIT(A) allowed

the claim of Rs.2,93,76,558/- and for remaining amount of

Rs.3,70,650/- Ld. CIT(A) observed as under:-

3.19 However, I agree with the view taken by the AO that the income should be offered in the year in which it is received. Since the income towards the sale of plot based on execution of respective sale deeds was offered in ASSESSMENT YEAR 2010-11 in case of 3 customers, the excess amount paid by these customers should be considered as income in ASSESSMENT YEAR 2010-11 of Rs.3,70,650/-. 32. Before us the Ld. Counsel for the assessee submitted that the

amount of development charges from 3 buyers at Rs.3,70,650/- has

already been offered in the Return of income filed for Assessment

Year 2015-16 which is an undisputed fact. The direction of Ld.

CIT(A) taxing sum of Rs.3,70,650/- for Assessment Year 2010-11

would amount to taxing the income again. 62

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 33. On the other hand Ld. Departmental Representative supported

the finding of Ld. CIT(A).

placed before us. In view of Rule 27 of Income-tax (Appellate

Tribunal) Rules, 1963 and also in view of the judgment of Hon'ble

Delhi High Court in the case of Sanjay Sawhney (supra) we accept

the application of the assessee.

received by the assessee at Rs. 3,70,650/- Ld. CIT(A) has held that

this sum is to be taxed in Assessment Year 2010-11. Ld. Counsel

for the assessee submitted that this amount has already been

offered to tax in the return of income filed for Assessment Year

2015-16.

tax in a given assessment year, it cannot be taxed again in another

assessment year. This principle emerged from the judgment of

Hon’ble Supreme Court in the case of Excel Industries Ltd. 358 ITR

295 (SC) [2013].

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 It was held – “Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers.

Rs.3,70,650/- relating to Assessment Year 2010-11 is offered to tax

for Assessment Year 2015-16 and is duly reported in the audited

Profit & Loss Account and its relevant schedule, we are of the view

that the finding of Ld. CIT(A) of taxing the impugned amount in

Assessment Year 2010-11 deserves to be set aside. In the result this

issue raised by the assessee through application under Rule 27 of

Income-Tax (Appellate Tribunal) Rules, 1963 is decided in favour of

the assessee.

& 786/Ind/2018 for Assessment Year 2010-11 and 2013-14 stands

dismissed and assessee’s application under Rule 27 of Income Tax

Sunderdeep Construction Pvt. Ltd ITA No.784 & 786/Ind/2018 (Appellate Tribunal) Rules,1963 for Assessment Year 2010-11 is

allowed as per terms indicated above.

The order pronounced in the open Court on 09.03.2021.

Sd/- Sd/-

( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER

�दनांक /Dated : 09 March, 2021 /Dev

Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore