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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”: HYDERABAD
Before: SHRI SATBEER SINGH GODARA & SHRI LAXMI PRASAD SAHU
O R D E R PER L.P. SAHU, A.M.: Both these appeals filed by the assessee are directed against CIT(A) - 4, Hyderabad’s separate orders dated 18/01/2018 for AYs 2008-09 & 2010-11 involving proceedings u/s 143(3) of the Income- Tax Act, 1961; in short “the Act” .
:- 2 -: & 617/Hyd/2018 Lanco Hills Technology Park Pvt. Ltd., Hyd.
The assessee has raised 22 grounds of appeal and another three grounds of appeal from 23 to 25 in additional grounds of appeal in AY 2008-09. The sum and substance of which are against the action of the lower authorities in rejecting the revised return of income and accepting the original return of income. Since the grounds raised in AY 2010-11 are similar, the decision taken in AY 2008-09 shall mutatis-mutandis apply to AY 2010-11.
Briefly, the facts of the case are that the assessee company which is the business of real estate and property development, originally filed its return of income on 29-09- 2008 for the A.Y. 2008-09 declaring taxable income of Rs. 33,68;45,110/-. Later, the assessee company filed revised return of income on 28-08-2010 declaring total loss of Rs. 1,76,26,195/-. The original return of income was processed u/s 143(1) of the IT Act. The Assessing Officer observed that in the original return of income filed on 29-09-2008, the assessee admitted the turnover of the property development at Rs. 128,82,98,000/- and offered taxable income at Rs. 33,68,45,110/ offering profit at 29% on original turnover. Subsequently, the assessee revised return of income on 28-08-2010 by disclosed revised turnover of the property development at Rs., 82,31,37,621/- and in the revised Profit and loss account loss of Rs, 3,78,33,053/- is reflected and in the revised return of income flied on 28-08-2010, Rs. 1,76,26,195/- is :- 3 -: & 617/Hyd/2018 Lanco Hills Technology Park Pvt. Ltd., Hyd.
declared as current year's loss. The case was selected for scrutiny and accordingly the Assessing Officer issued statutory notices. In response to the notices, the AR of the appellant' appeared and filed the information.
3.1 After going through the information, the Assessing Officer completed the assessment by adopting the income returned filed on29-09-2008 by accepting the income returned by observing that the assessee has filed the original return of income as per the results and audited books of account and again the assessee has filed revised return by deviating from the audited book results and moreover, reducing sales cannot be claimed as omission/wrong statement.
When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the order of the AO by observing that the AO has very well considered the revised return and decided that as per the results and audited books of account, the original return has been filed and the assessee has filed the revised return by deviating from the audited book results without any supporting evidences.
Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT.
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Before us, the ld. AR of the assessee submitted that the CIT(A) was wrong in dismissing the appeal of the assessee on the ground that the assessee failed to submit any further supporting evidences. He further submitted that the CIT(A) ought to have considered the fresh computation/information on assessee’s claims on revision of income/loss, even though the revised return was furnished beyond the due date. He relied on various case laws in support of assessee’s which are filed in paper book, which are as under:
1. 1. Maruti Securities Ltd., 468/Hyd/2009, (ITAT, Hyd.) 2. H.M. Kashiparekh & co. Ltd., 379 ITR 706 (Bom. HC) 3. Hind Construction Ltd., 83 ITR 211 (SC) 4. Sanjeev Woolen Mills, 149 Taxmann 431 5. Lok Housing & Constructions Ltd., .58 taxmann.com 179 (Bom HC).
6. Lok Housing & Constructions Ltd., 27 taxmann.com 15 (Mumbai ITAT) 7. SPR Infrastructure India Ltd. 1173 & 74/H/2014 (ITAT, Hyd.) 8. Lok Housing & Constructions Ltd.,70 taxmann.com 2 9. Shoorji Vallabhadas & Co., 46 ITR 144 (SC)
The ld. DR, on other hand relied on the orders of the revenue authorities and submitted that the assessee has filed the revised return of income beyond the due date, which is deviated from the audited book results. He, therefore, submitted that the order of the CIT(A) may be upheld.
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We have considered the rival submissions and perused the material on record. The undisputed facts of the case are that the assessee has filed its return of income on 29/09/2008 declaring taxable income of Rs. 33,68,45,110/- and the revised return of income was filed on 28/08/2010 declaring total loss of Rs. 1,75,26,195/-, which is beyond the due date. The AO did not consider the revised return of income and assessed u/s 143(3) of the Act on the basis of the original return of income on the ground that the assessee has filed the revised return of income by deviating from the audited book results. He further observed at para No. 3.6 that reducing sales cannot be claimed as omission/wrong statement. In the revised return, the assessee computed profit on the basis of price revision and cancellation. Similar issue came up for consideration before the coordinate bench of this Tribunal in assessee’s own case for AY 2011-12 in vide order dated 07/09/2021, wherein the coordinate bench has observed as under: “10. This leaves us with the assessee's 9th to 11th substantive grounds seeking to delete the disallowance of Rs.18,76,42,239 towards cancellation and price revision. The CIT(A)’s detailed discussion affirming the impugned disallowance reads as under :
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There is hardly any dispute that the learned lower authorities; and more particularly the Assessing Officer, quote Accounting Standard AS-7 as applicable only in case of contractor rather than builder as well. It is clear that there is no issue about the genuineness of the assessee’s price revision or cancellation claim; as the case may be. The clinching fact that appears to have formed the basis of the assessee’s impugned claim(supra)) is a “lis” in the Andhra Pradesh State Wakf Tribunal at Hyderabad instituted by the “Darga
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Hazarat Hussain Shahwali” against 17 defendants/respondents wherein this taxpayers had been impleaded at Sl.No.5. The above stated plaintiff has sought for injunction relief against this assessee as well as all other respondents thereby claiming that the land in issue is “wakf property only.” And that these defendants never enjoyed any title thereupon so as to derive real estate development activity.
It is evident from a perusal of the instant case file that the learned Wakf Tribunal had passed a “status quo” order dt.14.02.2011 relevant to the impugned assessment year only . And that the said proceedings are stated to have been pending all along (pages 70 to 86 in the paper book). Learned counsel has quoted Accounting Standard AS-9 issued by the Institute of Chartered Accountants of India regarding the issue of revenue recognition. His vehement contention in light of the foregoing Account Standard AS-9 is that the above stated “Waqf” proceedings compelled this assessee to reduce/revive the real estate project prices in issue. We find no force in the instant argument and made it clear that AS-9 is applicable in the prescribed activities of sale of goods, rendering of services and “the use by others of enterprise yielding interest, royalty and dividend” only. We thus adopt stricter interpretation and reject the assessee's instant argument. The fact however remains that it can be sufficiently presumed by virtue of learned Waqf Tribunal’s foregoing ‘status quo’ order qua that the assessee's project lands (supra) that the latter had no option but to opt for downward revision / cancellation only in order to avoid exodus of its customers. We wish to emphasise that the Revenue is fair enough in not having disputed the assessee's claim in principle. Or that the same contained any “on money” element, as well. Faced with this situation, we find that hon'ble apex court’s much a celebrated decision i.e. Chainrup Sampathram Vs. CIT (1953) 24 ITR 481 (SC) hold that anticipated business losses
:- 9 -: & 617/Hyd/2018 Lanco Hills Technology Park Pvt. Ltd., Hyd. could be booked at the first reasonable probability as under : “ While anticipated loss is thus taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account as no prudent holder would care to show increased profit before its actual realization legislative enactment.” Their lordship hold in very much unambiguous terms that principles of conservatism and considerations of prudence in accounting treatment require that no anticipated profits are to be treated as income before realization, an anticipated loss ought to be deducted at the first sign of probability. We thus reject the learned CIT-DR’s argument supporting the lower authorities’ impugned stand in principle. We further conclude that since there is no clarity either in the assessment order or in the lower appellate discussion as to whether the foregoing wakf litigation involves the assessee’s project land(s) or not, this reconciliation aspect deserves to be restored back to the Assessing Officer for his necessary factual verification. Ordered accordingly. Needful shall be done within three effective opportunities of hearing before the Assessing Officer. This assessee's 9 to 11 substantive grounds are allowed therefore.”
8.1 On considering the totality of the facts of the case and the case law relied on by the assessee as well as to meet the ends of justice, we remit the issue back to the file of the AO with a direction to make de-novo assessment by considering the concept of real income theory, which could be filed by the assessee before him and in accordance with law by considering the above decision of the coordinate bench of this Tribunal in assessee’s own cited supra. The :- 10 -: & 617/Hyd/2018 Lanco Hills Technology Park Pvt. Ltd., Hyd. assessee is directed to substantiate the revised return of income with supporting evidences before the AO. Accordingly, the grounds raised by the assessee are treated as allowed for statistical purposes.
As the facts and grounds in AY 2010-11 are materially identical to that of for AY 2008-09, following the decision therein, we remit this appeal also to the file of AO with identical directions.
In the result, both the appeals under consideration are allowed for statistical purposes. A copy of this common order be placed in the respective case files.
Pronounced in the open court on September, 2021.