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Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Shri A T Varkey, JM, & Shri M.Balaganesh, AM]
Per M.Balaganesh, AM
This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-15, Kolkata [in short the ld CIT(A)] in Appeal No. 390/CIT(A)- 15/15-16/12(3)/R&T/Kol dated 14.03.2017 against the order passed by the ITO, Ward- 12(3), Kolkata [ in short the ld AO] under section 144 read with Section 145(3) of the Income Tax Act, 1961 (in short “the Act”) dated 11.03.2013 for the Assessment Year 2010-11
2 ITA No.860/Kol/2017 Centre Point Estates Pvt. Ltd. A.Yr. 2010-11 2. The only issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in upholding the addition of Rs. 48,51,200/- on account of construction cost, in the facts and circumstances of the case.
The brief facts of this issue is that the assessee company is a real estate developer. It filed its return of income for assessment year 2010-11 on 19.11.2010 showing Nil income after adjusting of brought forward loss of Rs. 2,84,891/-. The ld. AO observed during the course of assessment proceedings, the ld. AR of the assessee furnished few details in respect of IT return which were test checked and placed on record. Books of accounts, bills and vouchers were not produced before the ld. AO despite several opportunities. The ld. AO observed the a copy of Annual Information Report (AIR) downloaded from database were served on the assessee and clarification was sought with regard to sale of immovable properties on 19.05.2009 which remained un- complied. The ld. AO also pointed out the various discrepancies in the books and tax audit report u/s 44AB of the Act to the ld. AR of the assessee during the course of assessment proceedings. The ld. AO observed that as per the details filed by the assessee, the project expenses was Rs. 2,89,34,697/- (Rs. 46,78,716/- for assessment year 2010-11 + Rs. 2,42,55,981/- for assessment years 2008-09 and earlier). But as per Balance sheet (Schedule -6 under the head “loans and Advances”), Project expenses as on 31.03.2009 was Rs. 2,56,90,235/-. The reasons and difference of Opening balance of Rs. 32,44,462/- (Rs. 2,89,34,697/- - Rs. 2,56,90,235/-) was not explained. The assessee failed to furnish a clarification in this regard. Because of discrepancies in Opening balance, necessary action as per law is required to be taken for assessment year 2009- 10. The ld. AO also observed that notice u/s 133(6) issued to Md. Khalid and G.S. Transport Pvt. Ltd. could not be served by the postal authorities. He also observed that there were certain payments which were paid in violation of section 40A(3) of the Act. Since the assessee was directed to produce the books of accounts, bank statement, bills and vouchers which remained un-complied, the ld. AO held that completeness and 2
3 ITA No.860/Kol/2017 Centre Point Estates Pvt. Ltd. A.Yr. 2010-11 correctness of accounts of the assessee are not satisfactory and accordingly the book results were rejected u/s 145(3) of the Act and income was sought to be estimated u/s 144 of the Act. For this purpose, the ld. AO observed that since the assessee is dealing project completion method in respect of real estate projects, the income is to be determined during this year and accordingly, since no details of total project expenses of Rs. 3,11,50,132/- was furnished by the assessee and for total other expenses of Rs. 7,04,948/-, he resorted to disallow 20% of the same in the assessment and allowed the remaining expenditure of Rs. 2,54,84,064/- as deduction in the assessment and computed the profits accordingly.
Before the Ld. CIT(A), the assessee furnished all the details that were called for by the ld. AO as well as by the Ld. CIT(A). These details were sought to be verified by the ld. AO and accordingly, a remand report was sought by the Ld. CIT(A) from the ld. AO. During the course of appellate proceedings, the assessee also placed on record the reassessment order framed for the assessment year 2009-10 u/s 147 / 143(3) of the Act dated 05.03.2014, wherein the reopening was made in order to verify the closing work- in-progress as on 31.03.2009. The assessee also brought to the notice of the Ld. CIT(A) that this fact is also mentioned by the ld. AO in page 3 para VI of the assessment order framed for the year under appeal. In the said reassessment order completed on 05.03.2014 for assessment year 2009-10, the ld. AO was satisfied with the complete details of expenditure incurred towards work-in-progress upto 31.3.2009 and no addition was made in the said reassessment. This fact was brought to the notice of the Ld. CIT(A) by the assessee. The assessee accordingly pleaded that only the expenditure incurred during the year towards work-in-progress i.e. construction cost for assessment year 2010-11 requires to be examined by the ld. AO for which necessary details with evidences were produced by the assessee before the ld. AO in the remand proceedings. The ld. AO in the remand report dated 31.01.2017 stated as under:
4 ITA No.860/Kol/2017 Centre Point Estates Pvt. Ltd. A.Yr. 2010-11 “2. Disallowance of 20% of expense of project cost: The ld. AO disallowed Rs. 62,30,026/- being 20% of the project cost on estimate. In the remand submission the assessee company has submitted that the cost of project expenses were Rs. 3,11,50,132/- . On examination of the audited accounts and the assessment order dated 05.03.2014 passed u/s 147 / 143(3) of the IT Act in the case of the assessee for assessment year 2009-10 the closing WIP for the project as on 31.03.2009 was found and accepted at Rs. 2,89,34,435/- thus the total project cost became Rs. 3,11,50,132/-. The details of the expenditure were produced during the course of hearing in relation with the remand report.”
The Ld. CIT(A) however proceeded to accept the total claim of work-in-progress incurred by the assessee for assessment years 2009-10 and 2010-11 as correct and genuine. He however, did not accept the amount incurred up to assessment year 2008- 09 in the sum of Rs. 2,42,55,981/- and he upheld the addition made by the ld. AO at 20% thereon in respect of construction costs incurred upto assessment year 2008-09 alone and confirmed the addition of Rs 48,51,200/- thereon. Aggrieved the assessee is in appeal before us.
We have heard the rival submissions. We find that the details of total construction costs for the projects incurred by the assessee are as under: Up to assessment year 2008-09 Rs. 2,42,55,981/- For assessment year 2009-10 Rs. 22,15,435/- For assessment year 2010-11 Rs. 46,78,716/- Total Rs.3,11,50,132/-
It is not in dispute that the assessee is following project completion method in respect of its real estate activities. There is no dispute with regard to incurrence of construction cost for assessment years 2009-10 and 2010-11 as the same has been accepted as genuine by the Ld. CIT(A) in his appellate order against which the revenue is not in appeal before us. The only dispute that arises is with regard to expenditure of the construction cost by the assessee up to 31.03.2008 in the sum of Rs. 2,42,55,981/-. In this regard, we find that the assessment for assessment year 2009-10 was reopened by 4
5 ITA No.860/Kol/2017 Centre Point Estates Pvt. Ltd. A.Yr. 2010-11 the ld. AO only to verify the total construction cost incurred by the assessee up to 31.03.2009. In the said reassessment completed u/s 147 / 143(3) dated 05.03.2014 for assessment year 2009-10, the ld. AO had accepted the entire construction cost up to 31.03. 2009 as correct and genuine. We find that the total construction cost incurred up to 31.03.2009 obviously includes the construction cost incurred up to 31.03.2008 also. Hence there is absolutely no reason to doubt the construction cost incurred up to 31.03.2008 in the sum of Rs. 2,42,55,981/- warranting any addition on an estimated basis on 20% thereon by the ld CITA. Hence we hold that the Ld. CIT(A) grossly erred in confirming the addition by taking into account only the figures up to assessment year 2008-09 when the same has already been accepted as genuine by the ld. AO which fact is also confirmed in the remand report. The ld. AR also submitted that no revision proceedings u/s 263 have been initiated by the Ld. CIT in respect of reassessment completed for assessment year 2009-10 on 05.03.2014 and that the time limit for the same had already expired. Hence the reassessment framed on 05.03.2014 for the assessment year 2009-10 wherein the total construction cost incurred up to 31.03.2009 has already been examined and found to be genuine and had reached finality. In these facts and circumstances, we hold that there is absolutely no case made out by the revenue for upholding the addition of Rs. 48,51,200/- in the year under appeal. Accordingly, grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 16.10.2018
Sd/- Sd/- [A T Varkey] [ M.Balaganesh ] Judicial Member Accountant Member
Dated : 16.10.2018 SB, Sr. PS 5
6 ITA No.860/Kol/2017 Centre Point Estates Pvt. Ltd. A.Yr. 2010-11
Copy of the order forwarded to: 1. Centre Point Estates Pvt. Ltd. , C/o, D.J.Shah & Co., Kalyan Bhawan, 2, Elgin Road, Kolkata-700020. 2. ITO, Ward-12(3), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata- 700069. 3. C.I.T(A)- 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.