CENTRE POINT ESTATES PVT. LTD.,KOLKATA vs. ITO, WARD 12(3), KOLKATA, KOLKATA

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

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

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:

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

In the result, the appeal of the assessee is allowed.