ITO, WARD-1(1), BURDWAN, BURDWAN vs. BURDWAN DEVELOPMENT AUTHORITY, BURDWAN

The assessee in the present case is a Development Authority constituted under section 11 of the West Bengal Town and Country Assessment Year: 2006-2007 Burdwan Development Authority (Planning and Development) Act, 1979 to provide facilities for planned development of rural and urban area under Burdwan Municipality of West Bengal. As noticed by the Assessing Officer from the audited statements of accounts for the financial year 2005-06 relevant to assessment year 2006-07, the assessee had generated substantial amount of surplus. Since no return of income for the assessment year 2006-07 was filed by the assessee under section 139 of the Income Tax Act, 1961, a notice under section 148 was issued by the Assessing Officer to the assessee on 06.07.2011. In response to the said notice, the return of income for the year under consideration was filed by the assessee on 27.07.2011 declaring its total income at ‘NIL’.

As noticed by the Assessing Officer during the course of the assessment proceedings, the assessee during the year under consideration as well as during the subsequent years i.e. A.Y. 2007-08 to 2010-11 was engaged in the business of sale of development rights of land and/or other properties under Public-Private Partnership Mode for various development projects viz. Medical Hub, Software /IT Park, Logistic Hub Tourism/Hospitality Project, Residential Township/Complexes, Commercial Complexes etc. As further noted by the Assessing Officer, land for such projects was acquired and handed over to the assessee by the Land Acquisition Collector of Burdwan and the same in turn was transferred by the assessee to the Private Partners for execution of various projects. The compensation payable to land owners was paid by the assessee through Land Acquisition Collector, Burdwan out of the premium received from the lessee partners and the surplus was retained by the assessee as reflected in its balance-sheet. From the details of such amounts reflected in the balance-sheet of the assessee, it was noticed by the Assessing Officer that the assessee had received a total consideration/premium from the lessee partners aggregating to Rs.9.07,31,221/- in respect of Poddar Projects while the amount paid to Land Acquisition Collector of Burdwan in respect of the Assessment Year: 2006-2007 Burdwan Development Authority said project was only Rs.4,16,79,053/- retaining the balance amount of Rs.4,90,52,168/-. Similarly the assessee had received total consideration/premium of Rs.52,63,350/- from Dheeraj Promoters, which was entirely retained by the assessee. Since the assessee could not offer any satisfactory explanation in respect of these surplus amounts retained by it amounting to Rs.4,90,52,168/- and Rs.52,63,350/-, the Assessing Officer treated the same as income of the assessee for the year under consideration from the sale of development rights and additions to that extent were made by him to the total income of the assessee in the assessment completed under consideration 143(3)/147 of the Act vide an order dated 26.03.2013.

Against the order passed by the Assessing Officer under section 143(3)/147 of the Act, an appeal was preferred by the assessee before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), relevant details were furnished by the assessee to show that the total consideration received by it from the lessee partners in respect of Poddar Projects was only to the extent of Rs.5,16,09,181/-, while the remaining amounts of Rs.7,82,954/-, Rs.2,33,39,086/- and Rs.1,50,00,000/- were not received during the year under consideration. These details furnished by the assessee were forwarded by the ld. CIT(Appeals) to the Assessing Officer for the latter comments. In the remand report submitted to the ld. CIT(Appeals), the Assessing Officer accepted the fact that the sums of Rs. 7,82,954/- and Rs.2,33,39,086/- were actually received by the assessee on 05.02.2008 and 05.05.2011 respectively and not in the year under consideration. As regards the sum of Rs.1,50,00,000/-, the Assessing Officer stated in his remand report that the same had become due to the assessee on 08.02.2006 when the relevant agreement was signed. The Assessing Officer, however, could not bring any evidence on record to dispute the claim of the assessee of having not received the said amount during the year under consideration and keeping in view the same as well as the other comments made by the Assessment Year: 2006-2007 Burdwan Development Authority Assessing Officer in the remand report, the ld. CIT(Appeals) deleted the addition of Rs.4,90,52,168/- made by the Assessing Officer by holding that the same was not chargeable to tax in the hands of the assessee for the year under consideration.

As regards the addition of Rs.52,63,350/- made by the Assessing Officer on account of the amount received from M/s. Dheeraj Promoters, the ld. CIT(Appeals) found from the relevant Clauses of the Agreement entered into by the assessee with M/s. Dheeraj Promoters that the said amount to the extent of Rs.50,00,000/- was received by the assessee on account of security deposit, which was liable to be adjusted against the final payment on execution of the project or the expiry of the period of 42 months, whichever is earlier. The ld. CIT(Appeals) accordingly held that the said amount of Rs.50,00,000/- was liable to be considered for assessment in A.Y. 2008-09 and not in the year under consideration i.e. A.Y. 2006-07. He accordingly deleted the addition of Rs.50,00,000/- out of the total addition of Rs.52,63,350/- made by the Assessing Officer on this issue.

Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal on the following grounds:- (1) On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting income of the assessee from sale of development rights to the tune of Rs.4,90,52,168/- being not actually received in the relevant previous year.

(2) On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs.4,90,52,168/-, whereas he himself has observed that Rs.1,50,00,000/- had become due for receipt on 08.03.2006.

We have heard the arguments of both the sides and also perused the relevant material available on record. As regards the common issue raised in Grounds No. 1, 2 & 3 relating to the deletion by the ld. CIT(Appals) of the addition of Rs.4,90,52,168/- made by the Assessing Officer on account of income of the assessee from Poddar Projects, it is observed that the said addition was made by the Assessing Officer on the basis that out of the total consideration of Rs.9,07,31,221/- received by the assessee from the lessee partners, a sum of Rs.4,16,79,053/- only was paid by the assessee to the Land Acquisition Collector of Burdwan and the balance amount of Rs.4,90,52,168/- retained by the assessee represented its income from Poddar Projects. During the course of appellate proceedings, the assessee, however, furnished the relevant details to show that the said amount was actually not received during the year under consideration and since the Assessing Officer could not rebut or controvert this assertion made by the assessee, the ld. CIT(Appeals) deleted the addition of Rs.4,90,52,168/- made by the Assessing Officer by holding that the said amount not received by the assessee during the year under consideration could not brought to tax in the hands of the assessee in the year under consideration.

At the time of hearing before us, the ld. D.R. has not brought anything on record to dispute the finding/ observation arrived at by the ld. CIT(Appeals) while giving relief to the assessee on this issue that the amount in question was not received by the assessee during the year under consideration but the same was actually received in the subsequent years. He, however, has contended by referring to Ground No. 4 raised by the Revenue in this appeal that the amount in question, even though was Assessment Year: 2006-2007 Burdwan Development Authority not received by the assessee in the year under consideration, had become due and accrued to the assessee in the year under consideration and the same, therefore, was rightly assessed by the Assessing Officer in the hands of the assessee following the mercantile system of accounting. In this regard, it is noted that this was not the basis of which the amount in question was added by the Assessing Officer to the total income of the assessee for the year under consideration, inasmuch as, there is no finding/observation recorded by the Assessing Officer in the assessment order to show as to how the amount in question had accrued as an income to the assessee in the year under consideration and how it was chargeable to tax in the hands of the assessee in the year under consideration by the mercantile system of accounting followed by the assessee. As a matter of fact, the said amount was assessed by the Assessing Officer in the year under consideration mainly on the basis that the same was actually received by the assessee during the year under consideration and the same representing surplus over the amount paid to the Land Acquisition Officer of Burdwan being retained by the assessee represented the income for the year under consideration. The said basis, as already noted by us, however, turned out to be wrong. Moreover as explained by the ld. Counsel for the assessee, Project Completion Method was being followed by the assessee and the relevant project viz. Poddar Projects having been completed in the previous year relevant to assessment year 2009-10, the entire income from the said project was actually accrued to the assessee in A.Y. 2009-10 and the same was accordingly recognized and offered to tax in that year as is evident from the assessment order dated 20.12.2016 passed by the Assessing Officer under section 143(3)/147 of the Act. We, therefore, find no merit in Grounds No. 1, 2 & 4 raised by the Revenue in this appeal and dismiss the same.

As regards the issue involved in Ground No. 3 relating to the deletion by the ld. CIT(Appeals) of the addition of Rs.50,00,000/- made Assessment Year: 2006-2007 Burdwan Development Authority by the Assessing Officer on account of amount received from Dheeraj Promoters, it is observed that the said amount actually received by the assessee on 11.04.2004 represented security deposit received by the assessee as found by the ld. CIT(Appeals) from the relevant Clauses of the Agreement entered into by the assessee with M/s. Dheeraj Promoters. As further found by the ld. CIT(Appeals) from the said agreement, the said amount of security deposit was liable to be adjusted against the final amount on the execution of the project or the expiry of the period of 42 months, whichever is earlier. He accordingly held that the said amount of Rs.50,00,000/- could be considered for assessment in A.Y. 2008-09 and not in A.Y. 2006-07, i.e. the year under consideration. At the time of hearing before us, the ld. Counsel for the assessee has placed on record a copy of the assessment order dated 20.12.2016 passed by the Assessing officer under section 143(3)/147 of the Act for A.Y. 2009-10 to show that the amount of Rs.50,00,000/- in question has already been taxed in the hands of the assessee for A.Y. 2009-10 when the relevant project was completed and the amount in question actually accrued to the assessee as income on the basis of Project Completion Method followed by it. Keeping in view all these facts and circumstances of the case, which have remained undisputed by the ld. D.R., we find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the addition of Rs.50,00,000/- made by the Assessing Officer and upholding the same, we dismiss Ground No. 3 of the Revenue’s appeal.