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Facts
For AY 2013-14, the assessee challenged a search assessment order making an addition of Rs. 1.16 Cr based on a diary entry, disputing jurisdiction, validity of approval, and claiming it was gross revenue. For AY 2017-18, the revenue appealed against the CIT(A)'s deletion of an addition of Rs. 3.71 Cr, which the AO had made by applying the percentage completion method, despite the assessee's consistent use of the completed contract method as a real estate developer.
Held
For AY 2013-14, the Tribunal partly allowed the assessee's appeal, reducing the addition to Rs. 10 Lacs from Rs. 1.35 Cr, deeming it a reasonable estimate of profit from undisclosed gross revenue, while dismissing grounds on jurisdiction and approval. For AY 2017-18, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s deletion of the addition, recognizing the assessee's consistent completed contract method and noting the revenue-neutral aspect.
Key Issues
Whether the search assessment order for AY 2013-14 was valid regarding jurisdiction, approval, and quantum of addition from undisclosed income; and for AY 2017-18, whether the percentage completion method or completed contract method should apply for a real estate developer's income and if it leads to double taxation.
Sections Cited
250, 143(3), 254, 153B(1)(b), 132, 153A, 153D, 144, 139(1), 139(4), 139(5), 139(8A), 142(1), 142(2A), 143(2), 143, 28(iv), 145, 53A, 2(22)(e)
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Income Tax Appellate Tribunal, JAIPUR BENCH “B”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
PER GAGAN GOYAL, A.M: These appeals by assessee and revenue are directed against the order of CIT(A), Udaipur-2dated 31.01.2024 for A.Y. 2013-14 and 2017-18 respectively passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The assessee has raised the following grounds of appeal: -
1. 1The ld. CIT(A) as well as ld. AO erred in law as well as on the facts of the case in passing the impugned order u/s. 143(3)/254 r.w.s 153B(1)(b) dt. 29.12.2019 consequent to a search action carried out u/s. 132 in the case of Nainani Group Kota dt. 19.12.2012, completely devoid of jurisdiction in as much as the initial order dt. 29.03.2015 completed u/s. 143(3) r/w 153B (1) (b) itself was devoid of jurisdiction for the simple reason that considering the date of the search, the AO could have legally issued notices u/s. 153A for six assessment years immediately preceding their relevant assessment year being A.Y. 2007-08 to 2012-13 but not, in any case, for the search year i.e. A.Y. 2013-14. The impugned assessment orders thus, having been passed absolutely without jurisdiction is void-ab-initio being a nullity in absence of specific sanction of law. The Id. AO having acted contrary to the provisions of law, the impugned order deserves to be quashed and set aside.
The impugned order passed u/s. 143(3)/254 r.w.s 153B (1) (b)dt. 29.12.2019 is bad in law and is in complete nullity for want of valid approval obtained prior to passing order mandated by S. 153D of the Act. The approval granted is mechanical without application of mind and is no valid approval as contemplated by law. Thus, the impugned assessment order deserves to be quashed and set aside.
3. Rs. 1,16,10,000/- The Id. CIT(A) has erred in law as well as in facts in confirming the additions made by the AO of Rs. 1,16,10,000/- which being completely contrary to the provisions of law and facts may kindly be deleted in full.
4. the appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.”
In addition to the above the assessee has raised an additional ground vide application dated: 16.01.2025 as under:
“The impugned assessment order dated: 29.12.2019 is a nullity being non-est and must be considered as never passed in as much as no DIN number has been generated as per the prescribed procedure, which is in violation of the binding instructions of CBDT and hence, the impugned assessment order may kindly be held as non-est and may kindly be quashed.”
ITA No. 390/JP/2024 (A. Y. 2017-18)
The revenue has raised the following grounds of appeal: -
1 (1) Whether on the facts and circumstances of the case, the learned CIT(A), NFAC, Delhi was justified in deleting the addition of Rs. 3,71,74,468/-, by applying percentage completion method without considering the fact that completion method is a recognized method of accounting and assessee followed the same method on regular basis?
2)Whether on the facts and circumstances of the case, the learned CIT(A), NFAC, Delhi was justified in deleting the addition made by the AO, who, while applying the Percentage Completion Method, categorically explained in the assessment order that- (a) Construction of more than 92% of the project had been completed, (b) Substantial part had been sold and sale amount had been realized with only registration amount pending; and (c) As per sale agreements significant risks and rewards of ownership were transferred as per para (34) and (35) of the agreements which were re-produced in the Assessment Order?
2 (ii) Whether on the facts and circumstances of the case, the learned CIT(A), NFAC, Delhi was justified in deleting the addition made by the AO, who, while applying the Percentage Completion Method, categorically explained in the assessment order that- (a) Construction of more than 92% of the project had been completed, (b) Substantial part had been sold and sale amount had been realized with only registration amount pending; and (c) As per sale agreements significant risks and rewards of ownership were transferred as per para (34) and (35) of the agreements which were re-produced in the Assessment Order?”
2. First we are dealing with the appeal of the assessee for the A.Y. 2013-14 vide ITA No. 156/JPR/2024. The brief facts of the case are that this is the second round of litigation in this case before us. Earlier the matter was restored back to the file of the AO by the coordinate bench vide and C.O. No. 02/JPR/2017. Dated: 18.01.2019. In the original appeal the assessee approached the coordinate bench against the order of the Ld. CIT (A) against sustaining the addition of Rs. 10,80,000/- Whereas the Revenue approached the coordinate bench against the order of the Ld. CIT (A) against sustaining the addition of Rs. 10,80,000/- against the assessed addition of Rs. 1,16,10,000/-.
In compliance to the directions of the coordinate bench (supra), the case of the assessee was assessed again u/s. 143(3) r.w.s. 254 of the Act vide order dated: 29.12.2019 at a figure of Rs. 3, 90, 18,460/-. The assessee being aggrieved with the same preferred an appeal before the Ld. CIT (A), Udaipur-2, who in turn confirmed the order of the AO and dismissed the appeal of the assessee. The assessee being further aggrieved preferred the present appeal before us. We have gone through the orders of the AO, Ld. CIT (A) and order of the coordinate bench in the first round of appeal. It is observed that the figure of Rs. 1.35 Cr. Is in focus and unchallenged by both the parties. The only question for our consideration is, whether the whole amount is to be added back or G.P. rate is to be applied over the same. This amount of Rs. 1.35 Cr. Emanated out of a noting of the diary seized during the search and the statement of the Director Shri Dwarkadas Nainani. It is pertinent to mention that the coordinate bench took cognizance of the fact that the issue needs to be examined again to satisfy the main appeal of the Revenue as well as C.O. filed by the assessee.
We have gone through the order of the Ld. CIT(A), wherein the assessee’s main argument was that the amount found in diary and surrendered by the director was a gross receipt and consequential expenses has to be allowed. Now the short point for our consideration is, neither the Revenue is able to substantiate the figure of revenue as noted in diary nor supported by the Director’s statement with corroborative statement nor the Assessee is able to come forward with the evidences of expenditure incurred in connection with the earning of revenue of Rs. 1.35 Cr. In this case we further referred the findings of the AO and observed that although not mentioned categorically about section 144 of the Act, but in substance the assessment was carried out like that only as the assessee had not come forward with the evidences of the expenses incurred and claimed. In view of this, we deem it fit to rely on the provisions of section 144 of the Act as under:
“Best judgment assessment. 144. (1) If any person— (a) fails to make the return required under sub-section (1) of section 139and has not made a return or a revised return under sub-section (4) or sub-section (5) or an updated return under sub-section (8A)] of that section, or (b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142or fails to comply with a direction issued under sub-section (2A) of that section], or (c) having made a return, fails to comply with all the terms of a notice issued under sub- section (2) of section 143, the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment: Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment: Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section. (2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.
To appreciate the provisions mentioned (supra) in its right perspective and spirit, we deem it fit to discuss and rely on judicial pronouncement of Hon’ble Apex Court as under:
[1978] 115 ITR 524 (SC) Brij Bhushan Lal Parduman Kumar, vs. CIT The authority making a best judgment assessment must make an honest and fair estimate of the income of the assessee and though arbitrariness cannot be avoided in such estimate the same must not be capricious but should have a reasonable nexus to the available material and the circumstances of the case. From the tender documents that were made available to the contractor and the terms and conditions of the "Lump Sum Contracts", two or three aspects emerged very clearly. In the first place, the contractor became aware that certain specified stores/materials would be supplied to him by the department at fixed rates for being used in the works to be undertaken by him for which he had not to pay from his pocket and it was on that footing that he submitted his tender quoting a particular figure for the entire work; secondly, such stores/material so supplied by the M.E.S. department had to be used, fixed or incorporated by the contractor in the works undertaken by him and the surplus, if any, that would remain after the completion of the work was to be returned to the department; thirdly, since for accounting purposes the initial supply was debited to the contractor at the specified fixed rates, credit for the balance of the stores/materials so returned was also given at the same rates, some adjustment being made in respect of the wear and tear of such stores/material but in regard to the stores/material out of such supply as was actually used, fixed or incorporated into the works, no accounting was done vis-a-vis the contract payment that is made to the contractor. In other words, in substance and in reality, such stores/material always remained the property of the department and the contractor had merely the custody of it and he fixed or incorporated the same into the works. It seemed clear that in such circumstances and having regard to the terms and conditions on which such supply of stores/materials was made there was not even a theoretical possibility of any element of profit being involved in the turnover represented by the cost of such stores/material. It was conceivable that when the contractor himself purchased materials in the open market and supplies the same to the department by using, fixing or incorporating the same in the works, as in the case of materials other than those specified in Schedule "B", some profit element would be embedded in the turnover represented by the cost of such material but when stores/material was supplied by the Government department at fixed rates for being used, fixed or incorporated in the work on terms indicated above, there would be no element of profit involved in the turnover represented by the cost of such material. It is true that, ordinarily, when a works contract is put through or completed by a contractor the income or profits derived by the contractor from such contract is determined on the value of the contract as a whole and cannot be determined by considering several items that go to form such value of the contract but in our view where certain stores/material is supplied at fixed rates by the department to the contractor solely for being used or fixed or incorporated in the works undertaken on terms and conditions mentioned above, the real total value of the entire contract would be the value minus the cost of such stores/material so supplied. Therefore, since no element of profit was involved in the turnover represented by the cost of stores/material supplied by the M.E.S. to the assessee-firm, the income or profits derived by the assessee firm from such contracts would have to be determined on the basis of the value of the contracts represented by the cash payments received by the assessee-firms from the M.E.S. department exclusive of the cost of the material/stores received for being used, fixed or incorporated in the works undertaken by them.
In view of above, no doubt in case of non-cooperation from the side of the assessee, the AO is empowered to carry out the assessment best to his judgment. But, the principle of taxing the real income still has paramount importance and can’t be brush aside. Nowhere it is demonstrated by the Revenue that whatever may be the disclosure made by the assessee is actually the net undisclosed income and not the gross receipts and the assessee is not able to demonstrate the amount of undisclosed expenditure incurred. In view of this and relying on the judicial pronouncement in the case of Brij Bhushan Lal Parduman Kumar, vs. CIT (supra), we are of the considered view that the whole amount can’t be added back to the income of the assessee as undisclosed income. A reasonable estimate of income has to be done in the case under consideration.
On perusal of the order of the Assessing Officer, it is noticed that no exercise has been made by the Assessing Officer as to hold that the surrender of Rs. 1.35 crores made by the assessee was not proper. No explanation was offered by the assessee before the AO, but the same was made before the Ld. CIT (A), which was also considered by the Ld. CIT (A) and in the first round of the litigation same was partly accepted also, who too was partly satisfied with the explanation and sustained addition of Rs. 10.80 Lacs by giving relief to the tune of Rs. 1.16 crores. It was the claim of the assessee that the surrender made in the assessment year under consideration was a gross revenue figure and not the net undisclosed income and thus there is a scope for allowing expenditure incurred to earn the undisclosed gross revenue. Therefore, in our considered opinion a lump sum addition of Rs. 10 Lacs can be applied to cover all the possibilities of revenue leakage as well as to satisfy the claim of the assessee about the expenditure incurred. Once it is settled that the amount surrendered is a gross undisclosed income, there can’t be a full amount addition and only the element of profit can be added into the same.
In view of the above addition to the extent of Rs. 10 Lacs out of Rs. 1.35 Cr. is sustained in addition to the income already disclosed voluntarily by the assessee. In these terms Ground No. 3 raised by the assessee is partly allowed.
Additional ground not pressed before us in view of divergent views from various Hon’ble High Courts. Hence the same is left undecided and open for the assessee to be raised at appropriate forum and time, if desired so. Hence the same is also rejected for statistical purposes.
As far as Ground No. 1 and 2 are concerned, as it is observed (supra) that it’s a second round of appeal and all the earlier orders, i.e. order of the AO passed u/s. 143(3) r.w.s. 153B of the Act and the earlier order of the Ld. CIT (A) passed u/s. 250 of the Act have already been merged with the order of coordinate bench. Hence, no comments on the same are required as the earlier orders are no more in existence for all the legal purposes. As far as the latest assessment order passed u/s. 143(3) r.w.s. 254 of the Act is concerned, the same was passed in compliance to the directions issued by the coordinate bench. Hence in the light of this fact, the ground raised
by the assessee for current assessment is not found to be legally tenable, hence rejected. In the result, Ground Nos. 1 and 2 are dismissed.
11. In the result, the appeal of the assessee is partly allowed.
ITA No. 390/JP/2024 (A. Y. 2017-18)
This appeal has been filed at the instance of the revenue. Assessee is a Company and engaged in the business of real estate as a developer. Return of income declaring total income at Rs. 8, 65, 86,610/- was e-filed on 31.10.2017 by the assessee company for the A.Y 2017-18. Assessee company has filed its revised return of income on 02.06.2018 declaring total income of Rs. 8,65,87,030/- . The case was selected for scrutiny through Computer assisted selection of cases (CASS) programmed on parameters decided by CBDT. During the assessment proceedings it was categorically asked by the AO that by the assessee is not following percentage completion method. In response to this the assessee submitted that companies consistently following the completed contract method there was a discussion w.r.t. ICDS also as provided in section 145 of the Act. Ultimately, the case of the assessee was assessed after making addition under the head business amounting to Rs. 3,71,74,468/-. The assessee being aggrieved with this order of the AO preferred an appeal before the Ld. CIT (A), who in turned allowed the appeal of the assessee and deleted the additions made by the AO. Now the revenue being aggrieved with the same preferred the present appeal before us.
We have gone through the order of AO, order of the Ld. CIT (A) and submissions of assessee to counter the grounds of appeal
taken by the revenue. It is observed that the assessee is a builder and developer and not construction contractor. In view of this fact, the accounting standard 7 as prescribed by the institute of Chartered Accountant of India (ICAI) is not applicable to the assessee (as the same is mandatory to be followed by the construction contractor). The facts of case are being governed by the accounting standard
9. It is further observed that the method of accounting adopted by the assessee is being followed consistently since in section and the same has been accepted by the revenue in past. In view of this on the one hand AS-7 is not applicable in the case of the assessee on the other hand as per AS-9 the assessee is consistently following the method and calculating its profits on project completion method this fact is not under challenged either by the revenue or by the assessee.
It is also being to our notice that the assessee had already offered to tax the income earned from the Project Completion Method in subsequent A.Y 2016- 17 and A.Y 2017-18. We have perused the specimen agreement between the assessee and buyers vide PB 57 -64 (relevant clauses 27,28,29,32 and 36)
"27. It is also decided by the parties to this agreement that under no circumstances the possession of the said flat/unit and/or any portion of the said flat/ unit shall be given by the seller to the purchaser unless all payment required to be made under this agreement as upto the date by the purchaser to the seller have been made in full. It is also decided by the parties that purchaser will not be entitled to claim possession whatsoever in the said building until and unless he/she/they make full and final payment under this agreement.
That at the time of possession / execution of the necessary Sale Deed /Conveyance Deed for the said flat/unit, the purchaser has to sign a possession letter along with a letter of fitness in favour of the seller. The said possession letter will be treated as the acceptance of the purchaser about the calculations and drawings of the flat/unit handed over to the purchaser. Any complaint in future will not be entertained by the seller toward / about the change in flat/ unit area, drawing, specification and quality.
That upon the delivery of possession of the said flat / unit the purchaser shall be entitled to use and possess the said flat/ unit exclusively as the owner. It is also decided by and between the parties to this agreement that even after the delivery of possession and/or the execution and registration of the necessary Sale Deed/Conveyance Deed the purchaser shall not in any manner object the Seller from completion/further construction of the building or any part thereof as per the approved plans.
That it is also unequivocally and irrevocably agreed by the purchaser that the purchaser shall neither have any right, title and interest nor shall acquire any right title and interest under this agreement in the land or any portion of the building except that he will acquire such right as are specified in the agreement that too only after making full and final payment of consideration money, costs, charges, expenses, and amount specified in this agreement.
The purchaser shall have the liberty to transfer, assign, mortgage, lease or let out its interest in the said unit / flat by giving 21days prior notice in writing to the seller subject to the overall condition that the purchaser, transferee, assignee, mortgagee, lessee or tenant of the purchaser shall be bound and liable to observe, perform and to carry out all the terms, conditions and obligations on the part of the purchaser to be observed and performed under this agreement. PROVIDED that such right can be exercised only after the purchaser pays to the seller as a condition precedent all amount that may become due and payable hereunder and all common expenses, construction costs and other charges until the date of such transfer, assignment, mortgage AND PROVIDED FURTHER that such rights can be exercised only with the prior written consent of the seller and such consent will not be withheld in respect of respectable person."
In view of the above it is transpired that the transactions of the immovable property transfer are governed by the special provisions of the Transfer of Property Act, 1882 (“TPA” for short) where under, every transfer of an immovable property requires compulsory registration under the provisions of the Registration Act, 1917 and the transfer is considered completed only when the entire consideration is received by the seller from the buyer and thereafter possession is handed over to him. Even the cases of part performance u/s. 53A of TPA, 1882 cannot be considered to be a complete transfer in the context of the present case. Further no title can be validly transferred to the buyer by merely entering into a Sale Agreement in as much as the Sale Agreement cannot confer any legal title of ownership to the proposed buyer. The buyer may make the payment and comply with the conditions of the Agreement or may not. There is no prohibition upon a buyer to complete the transaction. By Clause No. 5 (PB 59) he has been given an option to get the booking cancelled and get his deposited amount back. The said Clause reads as under:-
“Notwithstanding anything contained in para No. 4 in the event of non-payment of consequent installments the seller shall be entitled to cancel the agreement and the purchaser shall be left with no right under this agreement. The seller shall thereafter be free to deal with the apartment in any matter whatever at its sole discretion. The deposited amount paid by the purchaser shall be refunded without any interest.
AS-9 requires transfer of both risk and rewards of ownership. There apart, by not completing the performance on the part of buyer by way of making the entire payment to the appellant, the seller can also cancel the booking, which is a right reserved in the favour of the seller appellant vide Clause No. 5. On the contrary, the different clauses of Sale Agreement clearly provided that the transaction of the sale and the consequent transfer of the property shall be treated as complete only when the entire payment is received by the seller and possession is handed over to the buyer. Kindly refer Clause No. 27, 28, 29, 32 and 36 (PB 59-60). As a matter of fact, in some of the cases, the buyers have even got their bookings cancelled please see the details of cancelation (PB 23-24).
Pertinently, the so called binding Agreement does not provide for forfeiture of money and therefore the amounts have been refunded in full because of the right of the buyer to get the booking cancelled and also keeping in mind the commercial ground realities. In view of these peculiar facts & circumstances therefore, it will not be logical and justifiable to recognize the revenue by a prudent businessmen until the transaction come to a conclusion by receiving of the entire payment.
We further relied on the following judicial pronouncements relevant to the matter under consideration as under:
CIT vs. Excel Industries Ltd. (2013) 358 ITR 0295 (SC)/219 TAXMAN 0379 (SC) - Held “Income—Benefit under Advance licenses and duty entitlement pass book—Year in which Taxable—In its return, assessee claimed deduction of advance license benefit receivable and duty entitlement pass book benefit receivable—These benefits related to entitlement to import duty free raw material under relevant import and export policy by way of reduction from raw material consumption—AO stated that taxability of benefits was covered u/s 28(iv) which provides that value of any benefit or perquisite, whether convertible into money or not, arising from a business or a profession is income—According to AO, along with an obligation of export commitment, assessee gets benefit of importing raw material duty free—CIT(A) followed conclusion of ITAT in A.Ys. 1999-2000 and 2000-01 and held that advance benefits ought not to be taxed in this year—ITAT upheld view of CIT(A)—Held, applying three tests laid in various decisions, namely, whether income accrued to assessee is real or hypothetical; whether there is a corresponding liability of other party to pass on benefits of duty free import to assessee even without any imports having been made; and probability or improbability of realisation of benefits by assessee considered from a realistic and practical point of view, it was quite clear that in fact no real income but only hypothetical income had accrued to assessee and Section 28(iv) would be inapplicable—Secondly, consistent view had been taken in favour of assessee, starting with A.Y. 1992-93, that benefits under advance licenses or under duty entitlement pass book do not represent real income of assessee—Thus, there was no reason to take a different view unless there are very convincing reasons, none of which had been pointed out by revenue— Thirdly, there was no dispute that in subsequent FY, assessee did make imports and did derive benefits under advance license and duty entitlement pass book and paid tax thereon— Therefore, it was not as if revenue has been deprived of any tax—Rate of tax remained same— There was, thus, no need for revenue to continue with this litigation”
Manjusha Estates (P.) Ltd. v. ITO* [2017] 88 taxmann.com 699 (Gujarat) (DC 5-8): Section 145 of the Income-tax Act, 1961 - Method of accounting - System of accounting - Assessment year 2001-02 - Tribunal was not right in law in rejecting Project Completion Method which was followed consistently by assessee and instead applying work-in-progress method and taxing 80 per cent thereon as net profit [In favour of assessee] held that “even the assessee also substantial work has been completed and receipts were more than the valuation of WIP if the assessee has followed the method which is consistent considering the decision in case of Shivalik Buildwell (P.) Ltd. (supra) and Umang Hiralal Thakkar (supra) and therefore this Court is of the opinion that the view taken by the tribunal and CIT (A) is not correct.”
CIT v. Banjara Developers & Constructions (P.) Ltd.* [2020] 117 taxmann.com 747 (Karnataka) (DC 9-12) court observed that where assessee, engaged in construction of flats, was consistently following completed contract method of accounting and said method had been accepted by revenue authorities in past, there was no justification on part of Assessing Officer to change same and to determine income of assessee on estimate basis in assessment year in question. Held “9. The submission made on behalf of the revenue that the directions issued by a bench of this court vide order dated 23-9-2010 in I.T.A.No.36/2006 appears to be attractive at the first blush but on careful scrutiny of the order it is evident that the tribunal has referred to the decision of this court in the case of Skytop Builders (P.) Ltd. (supra), as well as the decision of the supreme court in Bilahari Investments (P.) Ltd. supra and has held that the assessee was following completed contract method which was accepted by the department in the past as well and therefore, there is no justification for the assessing officer to change the same. For the aforementioned reasons the submission made on behalf of the revenue cannot be accepted. Similarly, the contention that the controversy involved in this case is covered by decision of this court dated 9-9-2014 rendered in I.T.A.No.835-837/2008 is concerned, suffice it to say that substantial questions of law involved in the aforesaid appeals were entirely different. By reading the order of the tribunal as a whole, it is evident that the tribunal has taken note of the effect of Section 145 of the Act. Therefore, the aforesaid submission made on behalf of the revenue also does not deserve acceptance.”
It is further observed that the AO has not brought any special reason as to why he is taking a departure from the past settled history between the assessee and the Department in as much as all along in the past, the assessee declared the results (Net Profit) by consistently following the Project Completion Method only and the policy as stated above and accordingly the ROI was filled. The Department not only accepted but also assessed the income declared without any variation right from AY 2007-08 to 2014-15.
Amount of Assessing Assessment Nature of Asstt Year addition Remarks officer completed u/s addition (in Rs.) ACIT Central u/s 143(3) Return Income 2014-15 Nil Nil Circle Kota dt.23.12.2016 Accepted Difference of Substantial ACIT Central u/s 143(3) undisclosed relief allowed 2013-14 Circle-3 r.w.s. 153B income 1,16,10,000/- by CIT(A) Jaipur dt.19.03.2015 declared during Jaipur of Rs. search 10530000 ACIT Central u/s 143(3) Return income 2012-13 Circle-3 r.w.s. 153A Nil Nil accepted Jaipur dt.19.03.2015 Deemed Addition Dividend u/s 2,85,334/- ACIT Central u/s 143(3) deleted by 2011-12 Circle-3 r.w.s. 153A 2(22)(e) CIT(A) Jaipur Jaipur dt.19.03.2015 Intt. Paid on 92,593/- Income Tax Deemed Addition dividend u/s 2,66,149/- deleted by 2(22)(e) CIT(A) Jaipur ACIT Central u/s 143(3) Donation 17,100/- 2010-11 Circle-3 r.w.s. 153A Non Deduction 23,750/- Jaipur dt.19.03.2015 of TDS Addition Excess interest 6,66,129/- deleted by paid on loan CIT(A) Jaipur Deemed dividend u/s 2,37,340/- ACIT Central u/s 143(3) Addition 2(22)(e) 2009-10 Circle-3 r.w.s. 153A deleted by Late fees paid Jaipur dt.19.03.2015 CIT(A) Jaipur to development 35,407/- authority Deemed dividend u/s 1,95,385/- ACIT Central u/s 143(3) Addition 2(22)(e) 2008-09 Circle-3 r.w.s. 153A deleted by Jaipur dt.19.03.2015 CIT(A) Jaipur Misc. Exp w/o 29,666/- Deemed dividend u/s 2,08,366/- ACIT Central u/s 143(3) Addition 2(22)(e) 2007-08 Circle-3 w.r.s. 153A deleted by Misc. Exp Jaipur dt.19.03.2015 CIT(A) Jaipur 29,667/- w/o It is further submitted that in some of the years, when additions were made, the same were deleted by the Ld. CIT (A), as indicated above.
In A.Y. 2015-16, the AO made impugned addition (at Page 3 of Asst. Order) taking inference from the fact that in A.Y. 2015-16 also similar addition was made and the appeal there against, was pending at the time of passing of the impugned order. However, the ld. CIT(A) has now, deleted the addition on exactly identical facts & circumstances following the application of Project Completion Method by the assessee for A.Y. 2015-16 vide his order dt. 31.01.2024, Appeal No. CIT (A), Udaipur - 2/10315/2017-18 (DC 89-91).
Double taxation not permissible, again, it is not denied that the assessee had already offered to Tax the income earned from the project “Aashirvad Gokul” by following Project Completion Method in subsequent AY 2018-19. Copies of the audited financial annual statement of accounts have been duly submitted before the AO and otherwise also they were available with the AO along with uploaded/filed along with ROI for AY 2018-19 (PB 45-56). The advances received from the customers in the preceding years including current year, were all credited in A/c “Advances from Customers against Project” and were later on adjusted in the sales in A.Y. 2018-19. In support of this contention and for better appreciation, at a glance chart showing the details relating to of the receipt of flat advance bookings and the sales recognition of the flat sold was submitted before the AO (PB 25-32). On one hand, the income declared in A.Y. 2018-19 has been accepted, assessed and the Department received the tax on such income in that year. Whereas, on the other hand the AO after disturbing the declared income this year, taxed the entire advance of Rs. 3, 71, 74,468/- in this year which has clearly resulted into double taxation. The law is well settled that the same income cannot be taxed twice as held in the case of Mahaveer Kumar Jain vs. CIT (2018) 165 DTR 113 (SC).
Before the AO also the assessee submitted that the assessee has offered to Tax the income earned on “Aashirwad Gokul” by following the Project Completion Method in subsequent years i.e. AY 2017-18 of Rs. 18,86,86,000/- (PB 27,31&42) and AY 2018-19 of Rs.14,88,74,000/- (PB 45-50). In support of the same an at a glance chart (PB 25-32) showing the details of year wise receipts of flats booking advance and sales recognition of flats sold and alongwith the same copy i.e of ITR & Balance Sheet of AY 2018-19 and AY 2019-20 were furnished to the AO (PB 33- 56).
In similar circumstances, the Supreme Court in CIT v. Excel Industries Limited 2013 ITR 295 (SC) observed that - “As the dispute was only as to the year of taxability and as the rate of tax remained the same 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” In the decision of the Bombay High Court in CIT vs. Taparia Tools Ltd. 260 ITR 102 (Bom), it has been held that “In every case of substitution of one method by another method, the burden is on the Department to prove that the method in vogue is not correct and it distorts the profits of a particular year. Under the mercantile system of accounting based on the concept of accrual, the method of accounting followed by the assessees is relevant. In the present case, there is no finding recorded by the Assessing Officer that the completed contract method distorts the profits of a particular year. Moreover, as held in various judgments, the Chit Scheme is one integrated scheme spread over a period of time, sometimes exceeding 12 months. We have examined computation of tax effect in these cases and we find that the entire exercise is revenue neutral, particularly when the scheme is read as one integrated scheme spread over a period of time.”
In view of the above, the facts of the matter and the ratio as laid down by the Hon’ble Apex Court in the case CIT v. Excel Industries Limited 2013 ITR 295 (SC) (supra) are similar. The facts discussed (supra) are not under challenge by either of the parties to the disputes and legal position goes in favour of the assessee. Resultantly, Grounds raised by the Revenue are not sustainable, hence dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 18th day of February 2025.