DCIT, CIRCLE -10(1), , KOLKATA vs. M/S. CHARANSHEELA ADVISORY PVT. LTD., , KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA (Before Sri J. Sudhakar Reddy, Hon’ble Accountant Member & Sri Aby T. Varkey, Hon’ble Judicial Member) [VIRTUAL COURT HEARING] Assessment Years: 2014-15 Deputy Commissioner of Income Tax, Circle-10(1), Kolkata……...........….……....………....Appellant Vs. M/s. Charansheela Advisory Pvt. Ltd...........................................................……………….…....Respondent 72/2, Sarat Bose Road Opp. Lansdown Kolkata – 700 025 [PAN : AACCC 4291 J] Appearances by: Shri Vijay Shankar, CIT D/R, appearing on behalf of the Revenue. Shri Akkal Dudhewala, Advocate, appeared on behalf of the assessee. Date of concluding the hearing : July 15th, 2020 Date of pronouncing the order : July 17th, 2020 ORDER Per J. Sudhakar Reddy, AM :-

This appeal filed by the revenue is directed against the order of the Learned Commissioner of Income Tax (Appeals) – 1, Kolkata, (hereinafter the “ld.CIT(A)”), passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 28/06/2018 for the Assessment Year 2014-15.

Assessment Years: 2014-15 M/s. Charansheela Advisory Pvt. Ltd. M/s. Charansheela Advisory Pvt. Ltd b) The sale deed executed on 25/01/2014 of a space situated in the 10 The sale deed executed on 25/01/2014 of a space situated in the 10 The sale deed executed on 25/01/2014 of a space situated in the 10th floor of “Shekhar Central”. He concluded that the top most floor floor of “Shekhar Central”. He concluded that the top most floor floor of “Shekhar Central”. He concluded that the top most floor which is registered on 25/01/2014 to the buyer, indicates that the construction is registered on 25/01/2014 to the buyer, indicates that the construction is registered on 25/01/2014 to the buyer, indicates that the construction is complete. c) The registered sale deed of the assessee handing over TF The registered sale deed of the assessee handing over TF The registered sale deed of the assessee handing over TF-01 on 25/01/2014 to the buyer and the sale deed mentions that occupation 25/01/2014 to the buyer and the sale deed mentions that occupation 25/01/2014 to the buyer and the sale deed mentions that occupation certificate was issued by the Of certificate was issued by the Officer of Nagar Palika, Indore on ficer of Nagar Palika, Indore on 29/06/2013. 2.1. The ld. Counsel for the assessee made submissions that the architect had made The ld. Counsel for the assessee made submissions that the architect had made The ld. Counsel for the assessee made submissions that the architect had made an inadvertent mistake for the year ending 31/03/2013 as well as for the year ending an inadvertent mistake for the year ending 31/03/2013 as well as for the year ending an inadvertent mistake for the year ending 31/03/2013 as well as for the year ending 31/03/2014 by mentioning that the construct 31/03/2014 by mentioning that the construction is complete and this was clarified by ion is complete and this was clarified by the architect himself vide letter addressed to the Assessing Officer and that the method the architect himself vide letter addressed to the Assessing Officer and that the method the architect himself vide letter addressed to the Assessing Officer and that the method of accounting of the assessee being followed consistently year after year mandates of accounting of the assessee being followed consistently year after year mandates of accounting of the assessee being followed consistently year after year mandates recognition of income only on handing over recognition of income only on handing over of the property and that the certificate of the property and that the certificate issued by the local authority on 29/0 issued by the local authority on 29/06/2013 was of part completion of the project. The /2013 was of part completion of the project. The Assessing Officer rejected these explanations and at para 4 of his order held as follows: Assessing Officer rejected these explanations and at para 4 of his order held as follows: Assessing Officer rejected these explanations and at para 4 of his order held as follows:- “4.8 It is seen from the occupationa “4.8 It is seen from the occupational certificate filed by the assessee dated 29.06.2013 that l certificate filed by the assessee dated 29.06.2013 that occupational certificate up to the height of 30 meter was issued on 29.06.2013. It is further occupational certificate up to the height of 30 meter was issued on 29.06.2013. It is further occupational certificate up to the height of 30 meter was issued on 29.06.2013. It is further seen from the occupational certificate filed by the assessee dated 07.04.2015 that seen from the occupational certificate filed by the assessee dated 07.04.2015 that seen from the occupational certificate filed by the assessee dated 07.04.2015 that occupational certificate was issued up to the height of 36 meter. It is not possible to issue ate was issued up to the height of 36 meter. It is not possible to issue ate was issued up to the height of 36 meter. It is not possible to issue occupational certificate before completion of any project. When a project is under occupational certificate before completion of any project. When a project is under occupational certificate before completion of any project. When a project is under construction occupational construction occupational certificate cannot be issued. Completion certificate is a certificate cannot be issued. Completion certificate is a precondition and basic requirements for issuing occupational certificate. When a project is basic requirements for issuing occupational certificate. When a project is basic requirements for issuing occupational certificate. When a project is completed and all the basic requirements such completed and all the basic requirements such electricity connection, drainage connection, electricity connection, drainage connection, water supply, provision for fire fighting etc are taken care as per requirement and law i water supply, provision for fire fighting etc are taken care as per requirement and law i water supply, provision for fire fighting etc are taken care as per requirement and law in this regard then only occupational certificate can be issued. There is no addition of floor this regard then only occupational certificate can be issued. There is no addition of floor this regard then only occupational certificate can be issued. There is no addition of floor area during the year under consideration as appeared in even revised certificates issued area during the year under consideration as appeared in even revised certificates issued area during the year under consideration as appeared in even revised certificates issued for closing stock as on 31 for closing stock as on 31/03/2013 and 31/03/2014 by the architect. Under 03/2014 by the architect. Under the facts and circumstances it is amply clear that the project was completed as on 31/03 circumstances it is amply clear that the project was completed as on 31/03 circumstances it is amply clear that the project was completed as on 31/03/2013 itself and the construction expenses booked by the assessee during the year is bogus. The assessee's the construction expenses booked by the assessee during the year is bogus. The assessee's the construction expenses booked by the assessee during the year is bogus. The assessee's project "Shekhar Central" Indore was competed as on 31 project "Shekhar Central" Indore was competed as on 31/03/2013 hence assessee should 13 hence assessee should recognize revenue by not only taking the sale consideration during the year but also by recognize revenue by not only taking the sale consideration during the year but also by recognize revenue by not only taking the sale consideration during the year but also by taking into account of all advances received for sale of property as on 31 taking into account of all advances received for sale of property as on 31 taking into account of all advances received for sale of property as on 31/03/2014. The assessee has advance of Rs. 8,62,55,621 assessee has advance of Rs. 8,62,55,621/- as on 31/03/2014 for sale of shops and offices. 014 for sale of shops and offices. Therefore Rs. 8,62,55,621/ Therefore Rs. 8,62,55,621/- is being added to the total income of the assessee. is being added to the total income of the assessee. Penalty proceedings u/s. 271(1)(c ) initiated separa Penalty proceedings u/s. 271(1)(c ) initiated separately for concealment of income. tely for concealment of income.”

Assessment Years: 2014-15 M/s. Charansheela Advisory Pvt. Ltd. M/s. Charansheela Advisory Pvt. Ltd 2.2. He further disallowed expenditure of Rs.4,91,40,547/ He further disallowed expenditure of Rs.4,91,40,547/- on the ground that this on the ground that this expenditure was incurred after completion of the project expenditure was incurred after completion of the project i.e. on 31/03/2013 and hence i.e. on 31/03/2013 and hence was bogus expenditure and not allowable. was bogus expenditure and not allowable.

Assessment Years: 2014-15 M/s. Charansheela Advisory Pvt. Ltd. M/s. Charansheela Advisory Pvt. Ltd In this regard, the A/R has submitted that, the appellant maintains its books of In this regard, the A/R has submitted that, the appellant maintains its books of In this regard, the A/R has submitted that, the appellant maintains its books of account by following the mercantile method of accounting, wherein, the revenue is account by following the mercantile method of accounting, wherein, the revenue is account by following the mercantile method of accounting, wherein, the revenue is recognized as and when risk and reward attached with the immovable property is recognized as and when risk and reward attached with the immovable property is recognized as and when risk and reward attached with the immovable property is transferred to the buyer and the buyer and also, when ultimate collection of the consideration of the consideration towards the sale of property becomes certain. Therefore, any amount received by th the sale of property becomes certain. Therefore, any amount received by th the sale of property becomes certain. Therefore, any amount received by the appellant as advances against the booking of the property partake the character ""current liability" advances against the booking of the property partake the character ""current liability" advances against the booking of the property partake the character ""current liability" and the same shall be recognized as revenue only when the risk the same shall be recognized as revenue only when the risk and reward of the property and reward of the property is transferred. In support of this proposition, reliance was placed upon various judicial s transferred. In support of this proposition, reliance was placed upon various judicial s transferred. In support of this proposition, reliance was placed upon various judicial pronouncements viz., the decision of Hon'ble High Court of Gujarat in the case o pronouncements viz., the decision of Hon'ble High Court of Gujarat in the case o pronouncements viz., the decision of Hon'ble High Court of Gujarat in the case of CIT v. Shivalik Buildwell (P.) Ltd. (2014) 220 Taxman 3 (Gujarat) (MAG.), the Hon'ble High Court Shivalik Buildwell (P.) Ltd. (2014) 220 Taxman 3 (Gujarat) (MAG.), the Hon'ble High Court Shivalik Buildwell (P.) Ltd. (2014) 220 Taxman 3 (Gujarat) (MAG.), the Hon'ble High Court of Gujarat in the case 'of CIT v. Ashaland Corporation (1982) 133 ITR 55 (Gujarat). the of Gujarat in the case 'of CIT v. Ashaland Corporation (1982) 133 ITR 55 (Gujarat). the of Gujarat in the case 'of CIT v. Ashaland Corporation (1982) 133 ITR 55 (Gujarat). the Hon'ble High Court, of Gujarat in the case of CIT vs. Motilal C. Pate Hon'ble High Court, of Gujarat in the case of CIT vs. Motilal C. Patel & Co. (1988) 173 ITR l & Co. (1988) 173 ITR 666 (Gujarat) and the Hon'ble Bombay High Court decision dated 30.01.2018 in the case of 666 (Gujarat) and the Hon'ble Bombay High Court decision dated 30.01.2018 in the case of 666 (Gujarat) and the Hon'ble Bombay High Court decision dated 30.01.2018 in the case of CIT vs. Millennium Estates Pvt. Ltd. in of 2015 (2018) 93 taxmann.com 41 CIT vs. Millennium Estates Pvt. Ltd. in ITA No. 853 of 2015 (2018) 93 taxmann.com 41 CIT vs. Millennium Estates Pvt. Ltd. in ITA No. 853 of 2015 (2018) 93 taxmann.com 41 (Bombay)”

6.1. Thereafter at para 11, the ld. CIT(A) held Thereafter at para 11, the ld. CIT(A) held as follows:- “I find that there is substance in the contentions of the appellant. Firstly, th that there is substance in the contentions of the appellant. Firstly, th that there is substance in the contentions of the appellant. Firstly, the assessment of the appellant for the A.Y 2015 the appellant for the A.Y 2015-16 has been completed wherein the A.O has accepted the 16 has been completed wherein the A.O has accepted the income of the appellant and the method of accounting income of the appellant and the method of accounting consistently followed by it. It was consistently followed by it. It was argued that had the department been consistent in its approach, then the income offered argued that had the department been consistent in its approach, then the income offered argued that had the department been consistent in its approach, then the income offered by the appellant for all the subsequent years, should have been nullified as the AO had by the appellant for all the subsequent years, should have been nullified as the AO had by the appellant for all the subsequent years, should have been nullified as the AO had already made addition of the entire advances already made addition of the entire advances received during the year itself. Therefore, on received during the year itself. Therefore, on the one hand, for AY 2014 the one hand, for AY 2014-15, the entire advances received and recorded in the books of 15, the entire advances received and recorded in the books of the appellant as Current liability are treated as income (net income), whereas, in the ent liability are treated as income (net income), whereas, in the ent liability are treated as income (net income), whereas, in the subsequent years, the income accr subsequent years, the income accrued from sales effected are treated as taxable income. It ued from sales effected are treated as taxable income. It is also a fact that, the appellant has offered income upon effecting sales, in all the is also a fact that, the appellant has offered income upon effecting sales, in all the is also a fact that, the appellant has offered income upon effecting sales, in all the subsequent years, as and when the sale deeds were registered. Further, no consequential subsequent years, as and when the sale deeds were registered. Further, no consequential subsequent years, as and when the sale deeds were registered. Further, no consequential deduction or adjustment deduction or adjustment was given ~o the appellant, on the basis of the additions made by the additions made by the AO in the present assessment order. Moreover, the AO has not rejected the book results the AO in the present assessment order. Moreover, the AO has not rejected the book results the AO in the present assessment order. Moreover, the AO has not rejected the book results by pointing out any defects in the books of acc by pointing out any defects in the books of account maintained by the appellant nor given ount maintained by the appellant nor given any specific finding as to why the cific finding as to why the completed contract method is not acceptable and mpleted contract method is not acceptable and advances received are net income f the appellant. It was argued that when the architect advances received are net income f the appellant. It was argued that when the architect advances received are net income f the appellant. It was argued that when the architect has rectified the certificate he reliance exclusively by the A.O on the erroneous data was has rectified the certificate he reliance exclusively by the A.O on the erroneous data was has rectified the certificate he reliance exclusively by the A.O on the erroneous data was arbitrary, as the same was stated to have been inadverten rbitrary, as the same was stated to have been inadvertently submitted by the appellant, tly submitted by the appellant, considering the fact that the corrected certificate along with documentary evidences i.e considering the fact that the corrected certificate along with documentary evidences i.e considering the fact that the corrected certificate along with documentary evidences i.e., subsequent issuance of completion certificate by competent authority were pla subsequent issuance of completion certificate by competent authority were pla subsequent issuance of completion certificate by competent authority were placed on record in support of the appellant's method of accounting. record in support of the appellant's method of accounting. It is also pertinent to the issue in dispute that, the method of accounting, viz., It is also pertinent to the issue in dispute that, the method of accounting, viz., It is also pertinent to the issue in dispute that, the method of accounting, viz., recognizing sales upon execution of sale deed, is an accepted method of accounting, as per recognizing sales upon execution of sale deed, is an accepted method of accounting, as per recognizing sales upon execution of sale deed, is an accepted method of accounting, as per accounting standards of the ICAI as well as in various judicial pronouncements, the dards of the ICAI as well as in various judicial pronouncements, the dards of the ICAI as well as in various judicial pronouncements, the Appellate Tribunals/Courts have accepted this norm and this has now become an accepted Appellate Tribunals/Courts have accepted this norm and this has now become an accepted Appellate Tribunals/Courts have accepted this norm and this has now become an accepted principle for this line of trade. Therefore, the addition merely on the basis of erroneous principle for this line of trade. Therefore, the addition merely on the basis of erroneous principle for this line of trade. Therefore, the addition merely on the basis of erroneous assumptions made by the AO, which does not lead to establishing that the method of ns made by the AO, which does not lead to establishing that the method of ns made by the AO, which does not lead to establishing that the method of accounting followed by the appellant was incorrect. Further, advances per accounting followed by the appellant was incorrect. Further, advances per accounting followed by the appellant was incorrect. Further, advances per-se does not become the taxable income of the appellant. As far as the certificate of th become the taxable income of the appellant. As far as the certificate of th become the taxable income of the appellant. As far as the certificate of the architect and occupation certificate are concerned, it was explained by the A/R as per submissions cate are concerned, it was explained by the A/R as per submissions cate are concerned, it was explained by the A/R as per submissions placed on record that placed on record that the same was issued inadvertently. It was clarified that this was inadvertently. It was clarified that this was corrected wherein the architect has stated that the construction is under progress. corrected wherein the architect has stated that the construction is under progress. corrected wherein the architect has stated that the construction is under progress.

Assessment Years: 2014-15 M/s. Charansheela Advisory Pvt. Ltd. M/s. Charansheela Advisory Pvt. Ltd However, there is no variation of inventory valuation in both the certificates, which leads ver, there is no variation of inventory valuation in both the certificates, which leads ver, there is no variation of inventory valuation in both the certificates, which leads to the inference that there was no mala fide intention behind the clarification issued by the to the inference that there was no mala fide intention behind the clarification issued by the to the inference that there was no mala fide intention behind the clarification issued by the architect or suppression of facts by the appellant relevant to the account architect or suppression of facts by the appellant relevant to the account architect or suppression of facts by the appellant relevant to the accounting of profits for the financial year under consideration.” cial year under consideration.”

6.1.1. We find no infirmity in these findings of the ld. CIT(A). We find no infirmity in these findings of the ld. CIT(A). 6.2. The ld. D/R, relies mainly on the certificate issued by the architect to come to a The ld. D/R, relies mainly on the certificate issued by the architect to come to a The ld. D/R, relies mainly on the certificate issued by the architect to come to a conclusion that the project has been comp conclusion that the project has been completed on 31/03/2013. We find that the . We find that the architect has clarified that there was a architect has clarified that there was an inadvertent mistake in the the certificate and similar mistake had also occurred in the certificate issued by him as on 31/03/2013. He similar mistake had also occurred in the certificate issued by him as on 31/03/2013. He similar mistake had also occurred in the certificate issued by him as on 31/03/2013. He filed rectified certificates. If we cannot re If we cannot rely on these certificates of the architect, we may ly on these certificates of the architect, we may consider other factual evidences to arrive at the conclusion as to whether the consider other factual evidences to arrive at the conclusion as to whether the consider other factual evidences to arrive at the conclusion as to whether the construction of the project was complete. construction of the project was complete. We also find from the financials statements We also find from the financials statements that substantial expenditure has been inc that substantial expenditure has been incurred by the assessee towards construction towards construction cost of the project (which was disallowed by the Assessing Officer) cost of the project (which was disallowed by the Assessing Officer) cost of the project (which was disallowed by the Assessing Officer) during the subsequent assessment years i.e., relevant to the Financial Year 01/04/2014 to subsequent assessment years i.e., relevant to the Financial Year 01/04/2014 to subsequent assessment years i.e., relevant to the Financial Year 01/04/2014 to 31/03/2015 which indicates that the project was not com 31/03/2015 which indicates that the project was not completed as on 31/03/2014. pleted as on 31/03/2014. If construction was completed, then such huge expenditure would not be required to be construction was completed, then such huge expenditure would not be required to be construction was completed, then such huge expenditure would not be required to be incurred. We also find that the local authorities have given occupation certificate only We also find that the local authorities have given occupation certificate only We also find that the local authorities have given occupation certificate only on 07/04/2015. The certificate relied upon by the Assess on 07/04/2015. The certificate relied upon by the Assessing Officer, which was issued ing Officer, which was issued on 29/08/2013, is only a part occupation certificate. on 29/08/2013, is only a part occupation certificate. Thus, as per the local authorities, Thus, as per the local authorities, the project was not complete as on 31/03/2013. the project was not complete as on 31/03/2013. 6.2.1. We find that the assessee recog assessee recognizes the revenues and costs in relation to the zes the revenues and costs in relation to the project following the project completion method/ completed contract method. The sale oject following the project completion method/ completed contract method. The sale oject following the project completion method/ completed contract method. The sale of units/ spaces is recognized upon completion of the said unit, handing over of of units/ spaces is recognized upon completion of the said unit, handing over of of units/ spaces is recognized upon completion of the said unit, handing over of possession and execution of conveyance in favour of the intending buyer. The revenue is possession and execution of conveyance in favour of the intending buyer. The revenue is possession and execution of conveyance in favour of the intending buyer. The revenue is thus recognized as and when the risk and rewards as also the title in the immoveable recognized as and when the risk and rewards as also the title in the immoveable recognized as and when the risk and rewards as also the title in the immoveable property is transferred to the buyer and when there i property is transferred to the buyer and when there is a reasonable certainty of s a reasonable certainty of collection of the consideration. This method of accoun deration. This method of accounting has been consistently ting has been consistently followed by the assessee and has been accepted by the Department in all the pr he assessee and has been accepted by the Department in all the pr he assessee and has been accepted by the Department in all the preceding as well as subsequent years. as well as subsequent years. This is not disputed by the ld. D/R.

Assessment Years: 2014-15 M/s. Charansheela Advisory Pvt. Ltd. M/s. Charansheela Advisory Pvt. Ltd 6.4. We also find that for the subsequent Assessment Year 2015 We also find that for the subsequent Assessment Year 2015-16, the assessee has 16, the assessee has recognized as income all these advances on the ground that the project is substantially recognized as income all these advances on the ground that the project is substantially recognized as income all these advances on the ground that the project is substantially complete during Assessment Year 2015 during Assessment Year 2015-16. The Assessing Officer has accepted this . The Assessing Officer has accepted this advance as income of the assessee for the Assessment Year 2015 as income of the assessee for the Assessment Year 2015-16 16 and assessed the same to tax. Thus, taxing them once again for the Assessment Year 2014 . Thus, taxing them once again for the Assessment Year 2014 . Thus, taxing them once again for the Assessment Year 2014-15, would amount to double taxation of the same amount. amount to double taxation of the same amount. This is a case where the year of taxation This is a case where the year of taxation is in dispute.