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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: SHRI B.R. BASKARAN (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the revenue against order dated 29/01/2016 passed by Ld. Commissioner of Income Tax (Appeals)- 30, Mumbai for the assessment year 2012-2013, whereby the Ld. CIT(A) has partly allowed the appeal filed by the assessee against assessment order passed by the AO u/s143(3) of the Income Tax Act, 1961 (for short ‘the Act’).
Brief facts of the case are that the assessee firm engaged in the business of construction of buildings filed its return of income for the assessment year under consideration declaring ‘Nil’ income. The return was processed u/s 143(3) of the Act and the return was accepted. Subsequently, the case was selected for scrutiny and notices u/s 143(2) and 142(1) were issued. In response thereof, the authorized representative (AR) of the assessee appeared 2 Assessment Year: 2012-2013 and filed the details called for. During the year relevant to the assessment year under consideration, the assessee was engaged in constructing a project which had been started in 2008-09. Since, the assessee has been following the project completion method, no tax was offered in respect of the income pertaining to the said project. Accordingly, the AO asked the assessee to submit justification as to why the profit on the project should not be taxed on percentage completion method and also asked to submit the justification as to why the interest received as credit in P & L account should not be added to the total income. In response thereof the AR submitted that the assessee has been following project completion method for recognizing the revenue wherein cost of land, construction and other expenses incurred every year is added and carried forward as work in progress and advances received from the customers are shown in the liability side in the balance sheet. The income of the project will be offered in the year of completion of the project.
The AO rejecting the explanation of the assessee determined the profit earned by the assessee during the accounting year under assessment at Rs. 1,17,87,927/-and added the said amount to the total income of the assessee and determined the income at Rs. 1,26,51,820/-, holding that post amendment every assessee has to follow either cash or mercantile system of accounting u/s 145 of the Act and that no accounting standards has so far been notified u/s 145(2) of the Act in regard to developers and builders. In appeal, the Ld. CIT(A) partly allowed the appeal filed by the assessee against the assessment order passed by the AO and deleted the addition made by the AO. Aggrieved by the impugned order passed by the Ld. CIT(A) the revenue is in appeal before the Tribunal by raising the following effective ground of appeal:
Whether on the facts and in the circumstances of the case and in law, the Learned CIT (A) was justified in deleting the addition made 3 Assessment Year: 2012-2013 by the Assessing Officer on account of percentage completion method?.
4. Before us, the Ld. Departmental representative relying on the assessment order submitted that since, the assessee has followed the project completion method, to postpone the tax liability, the AO has rightly rejected the explanation given by the assessee and determined the profit earned during the accounting year under consideration in terms of section 145 of the Act as amended w.e.f. 01.04.1997 and added the amount to the income of the assessee. Therefore, the findings of the Ld CIT(A) are liable to be set aside.
On the other hand, the Ld. Counsel for the assessee submitted that the Mumbai Tribunal has decided the identical issue in favour of the assessee in assessee’s own case for the assessment year 2011- 12. Since, the issue raised by the revenue in the present case is covered by the decision of the Tribunal is assessee’s favour there is no merit in the department’s appeal and the same is liable to be dismissed.
We have heard the rival submissions and perused the material on record including the cases relied by the authorities below. The only grievance of the revenue is that the Ld. CIT(A) has wrongly deleted the addition made by the AO on account of profit earned by the assessee during the accounting year under consideration. As pointed out by the Ld. Counsel, the co-ordinate Bench has already decided the said issue in favour of the assessee in assessee’s own case for the assessment year 2011-12 by following the decision of Hon’ble Supreme Court rendered in CIT vs. Bilahari Investment (P) Ltd. 299 ITR 1, Hon’ble Delhi High Court CIT vs. Manish Build Well Private Limited 245 CTR 397(Del.) and decision of co-ordinate Bench in Avadhesh Builder vs. ITO 37 SOT 122 Mum (Trib). The operative part of the order of the Tribunal reads as under:
4 Assessment Year: 2012-2013 “We also find that the assessee has claimed to have duly paid the entire taxes from the profit earned on the said project by following project completion method albeit in subsequent years and it is claimed that no prejudice has been caused to the Revenue. But, however to substantiate this conditions evidences are not placed on record by the assessee before us except provisional profit and loss account for financial year 2013-14. After considering the various case laws cited by the assessee based on peculiar facts of the case, we are of the considered view that consistency has to be followed as the Revenue has accepted the ‘project completion method’ in the past. The entire profit from this project is stated to have been offered for taxation and due taxes are stated to have been paid to the Revenue albeit in assessment year 2014-15. In our considered view in order to render substantial justice and fair play in the instant case keeping in view peculiar facts and circumstances of the case, we are inclined to accept the appellate order of the Ld. CIT (A) subject to verification by the A.O. that the entire profits earned by the assessee from this project ‘Quantum Tower’ in totality has been offered for taxation and due taxes on this project were duly paid to Revenue as contended by the assessee, albeit in the succeeding years by following ‘project completion method’ ,(including, inter-alia, profit earned on sales of Rs. 42.10 crores as well on closing stock of Rs. 29.50 crores) for which the assessee is directed to produce relevant evidence before the AO to substantiate that entire income from this project in totality has suffered tax and no prejudice is cause to the Revenue. In view of our detailed discussion and reasoning as detailed above, the appeal filed by the Revenue is dismissed subject to verification by the A.O. that the entire profits from this project has been offered for taxation by the assessee albeit in succeeding years and due taxes have been paid by the assessee to the Revenue with respect to the project ‘Quantum Tower’, on Rambaug, S.V. Road, Malad (W), Mumbai. The assessee is directed to appear before the AO and produce relevant evidence to substantiate its contentions before the AO. Needless to say that the AO shall grant assessee proper and sufficient opportunity of being heard in accordance with principles of natural justice in accordance with law. We order accordingly.”
5 Assessment Year: 2012-2013
The facts and the issue involved in the present case are identical to the facts and the issue involved in the assessee’s own case for the assessment year 2011-12. The identical issue has already been decided in favour of the assessee in the assessee’s own case for the assessment year 2011-12 vide order dated 19.12.16 and the findings of the Ld. CIT(A) is in accordance with the decision of the co-ordinate Bench. Hence, we respectfully following the findings of the co-ordinate Bench, uphold the findings of the Ld. CIT(A) and dismiss the sole ground of appeal of the revenue.
In the result, appeal filed by the revenue for the assessment year 2012- 2013 is dismissed.