ACIT 32 (1), MUMBAI vs. SHUBHAM DYNAMIC REAL ESTATE DEVELOPERS LLP, MUMBAI

Briefly stated, facts of the case are that Briefly stated, facts of the case are that the assessee is the assessee is engaged in the business of construction and development of real engaged in the business of construction and development of real engaged in the business of construction and development of real estate projects. The assessee commenced construction of residential . The assessee commenced construction of residential . The assessee commenced construction of residential project at Jogeshwari project at Jogeshwari, Mumbai and for declaring profit from the real Mumbai and for declaring profit from the real estate project followed estate project followed ‘project completion method etion method’. The cost of construction incurred incurred was carried forward from year to year as was carried forward from year to year as work in progress (WIP) and (WIP) and sale proceeds received were shown as received were shown as ‘current liability’ but t but the profit from the project was to be was to be declared in the year of the completion of project on receipt of completion of project on receipt of completion of project on receipt of occupation certificate.

2016-17 Rs.3 crores Order u/s 143(3) Order u/s 143(3) 2. 2017-18 Rs.60 lakhs Order u/s 143(3) Order u/s 143(3) 3. 2018-19 Rs.40 lakhs Order u/s 143(3) Order u/s 143(3) 4. 2019-2020 2020 Rs.2,77,00,000/- Order u/s 143(1) Order u/s 143(1) 2.2 In the course of scrutiny proceedings, the assessee explained In the course of scrutiny proceedings, the assessee explained In the course of scrutiny proceedings, the assessee explained that rather than entire addition in the year under consideration entire addition in the year under consideration, the entire addition in the year under consideration assessee declared the assessee declared the additional income in various years for the income in various years for the reason that at the time of making statement, the assessee was reason that at the time of making statement, the assessee w reason that at the time of making statement, the assessee w under the presumption that entire car parking would be sold in under the presumption that entire car parking would be sold under the presumption that entire car parking would be sold current year but same could not be sold same could not be sold. But the Assessing Officer But the Assessing Officer rejected the contention of the assessee and made addition for the rejected the contention of the assessee and made addition for the rejected the contention of the assessee and made addition for the entire amount of Rs.6.77 crores entire amount of Rs.6.77 crores, ignoring the amount of the amount of Rs.3 crores declared by the assessee in the year under consideration. declared by the assessee in the year under consideration. declared by the assessee in the year under consideration.

Before the Ld. CIT(A), the assessee explained Before the Ld. CIT(A), the assessee explained its stand by way its stand by way of journal entries passed passed in books of account and and its effect on profitability and WIP and WIP and explained that there was no no tax impact in both the scenario of amount added to WIP and without adding to both the scenario of amount added to WIP and without adding to both the scenario of amount added to WIP and without adding to WIP. The assessee also submitted certificate by The assessee also submitted certificate by The assessee also submitted certificate by a Chartered Accountant stating that survey declared that survey declared amount was amount was offered to tax by the assessee. Considering the submission of the ass . Considering the submission of the ass . Considering the submission of the assessee, the Ld. CIT(A) deleted the addition observing as under: Ld. CIT(A) deleted the addition observing as under:

1. “7.9 In the present case, while during the course of the survey it 7.9 In the present case, while during the course of the survey it 7.9 In the present case, while during the course of the survey it was envisaged that the said project would get completed by was envisaged that the said project would get completed by was envisaged that the said project would get completed by December 2015 i.e during the assessment year under consideration December 2015 i.e during the assessment year under consideration December 2015 i.e during the assessment year under consideration itself and the entire receipts declared during the course of the itself and the entire receipts declared during the course of the itself and the entire receipts declared during the course of the survey shall be offered during the assessment year under survey shall be offered during the assessment year under survey shall be offered during the assessment year under contention itself, in reality the project got delayed and got completed contention itself, in reality the project got delayed and got completed contention itself, in reality the project got delayed and got completed only in AY 2019 only in AY 2019-20. While as per the Project Completion Method 20. While as per the Project Completion Method, the income from the project ought to have been offered in the year of income from the project ought to have been offered in the year of income from the project ought to have been offered in the year of completion of the project i.e AY 2019 completion of the project i.e AY 2019-20, to honour the Survey 20, to honour the Survey declaration, the declaration amount was offered for taxation in a declaration, the declaration amount was offered for taxation in a declaration, the declaration amount was offered for taxation in a staggered manner in AYs2016 staggered manner in AYs2016-17 to 2019-20for the purpos 20for the purpose of payment of advance tax and advance tax was duly paid payment of advance tax and advance tax was duly paid payment of advance tax and advance tax was duly paid accordingly. The net profit from the project was calculated on the accordingly. The net profit from the project was calculated on the accordingly. The net profit from the project was calculated on the completion of the project in AY 2019 completion of the project in AY 2019-20 after including the survey 20 after including the survey declaration made towards sale of the entire car parking spaces a declaration made towards sale of the entire car parking spaces a declaration made towards sale of the entire car parking spaces and subscription money to be collected from flat owners on handing over subscription money to be collected from flat owners on handing over subscription money to be collected from flat owners on handing over of possession of the flats. The survey declaration amount of Rs. of possession of the flats. The survey declaration amount of Rs. of possession of the flats. The survey declaration amount of Rs. 3,00,00,000/ 3,00,00,000/- was indeed offered to tax in the assessment year was indeed offered to tax in the assessment year under consideration i.e AY 2016 under consideration i.e AY 2016-17 which can be seen from 17 which can be seen from the audited profit and loss account. Similarly, the balance amount of audited profit and loss account. Similarly, the balance amount of audited profit and loss account. Similarly, the balance amount of declaration was offered in AYs2017 declaration was offered in AYs2017-18, AY 2018-19 and 2019 19 and 2019-20 which can also be seen from the respective audited profit and loss which can also be seen from the respective audited profit and loss which can also be seen from the respective audited profit and loss accounts for the respective years.As already pointed out accounts for the respective years.As already pointed out accounts for the respective years.As already pointed out above, the AO has accepted the books of accounts and has not rejected them. AO has accepted the books of accounts and has not rejected them. AO has accepted the books of accounts and has not rejected them. Therefore, the audited book results also need to accepted and Therefore, the audited book results also need to accepted and Therefore, the audited book results also need to accepted and cannot be rejected and no adhoc addition can be allowed to be cannot be rejected and no adhoc addition can be allowed to be cannot be rejected and no adhoc addition can be allowed to be made. 7.10 It is also seen that the AO was in agreement 7.10 It is also seen that the AO was in agreement 7.10 It is also seen that the AO was in agreement with the accounting treatment of survey declaration adopted by the accounting treatment of survey declaration adopted by the accounting treatment of survey declaration adopted by the appellant in. AY 2017 appellant in. AY 2017-18 and AY 2018-19 where the appellant has 19 where the appellant has offered Rs. 60,00,000/ offered Rs. 60,00,000/-and Rs. 40,00,000/- respectively out of the respectively out of the total survey declaration of Rs. 6,77,00.000/ total survey declaration of Rs. 6,77,00.000/-. The same A . The same AO has accepted the declaration so made in AY 2017 accepted the declaration so made in AY 2017-18 vide assessment 18 vide assessment order dated 15.12.2019 passed u/s 143(3) of the Act. Similarly, in order dated 15.12.2019 passed u/s 143(3) of the Act. Similarly, in order dated 15.12.2019 passed u/s 143(3) of the Act. Similarly, in AY 2018-19 also the AO has accepted the declaration made by,the 19 also the AO has accepted the declaration made by,the 19 also the AO has accepted the declaration made by,the assessee vide assessment order dated 10.03.2021 passed u assessee vide assessment order dated 10.03.2021 passed u assessee vide assessment order dated 10.03.2021 passed u/s 143(3) of the Act. Ironically, during the AY under consideration i.e 143(3) of the Act. Ironically, during the AY under consideration i.e 143(3) of the Act. Ironically, during the AY under consideration i.e AY 2016-17 the AO did not accept the declaration amount of Rs. 17 the AO did not accept the declaration amount of Rs. 17 the AO did not accept the declaration amount of Rs. 3,00,00,00/- made by the assessee and instead added the entire made by the assessee and instead added the entire declaration amount of Rs, 6,77,00,000/ declaration amount of Rs, 6,77,00,000/- in AY 2016 in AY 2016-17. This has been done without rejecting the books of accounts of the appellant. been done without rejecting the books of accounts of the appellant. been done without rejecting the books of accounts of the appellant. The AO cannot adopt different stands on the same issue in different The AO cannot adopt different stands on the same issue in different The AO cannot adopt different stands on the same issue in different assessment years and so the action of the AO in AY 2016 assessment years and so the action of the AO in AY 2016 assessment years and so the action of the AO in AY 2016-17 cannot be sustained. The appellant has also illustrated be sustained. The appellant has also illustrated that the accounting that the accounting treatment of offering the declaration amount by debiting the WIP treatment of offering the declaration amount by debiting the WIP treatment of offering the declaration amount by debiting the WIP account and crediting the profit & loss account has no impact on account and crediting the profit & loss account has no impact on account and crediting the profit & loss account has no impact on taxable income calculated at the time of the completion of the project taxable income calculated at the time of the completion of the project taxable income calculated at the time of the completion of the project as alleged by the AO. as alleged by the AO. 7.11 Therefore, keeping in view the above facts and the judicial re, keeping in view the above facts and the judicial re, keeping in view the above facts and the judicial pronouncements, addition of Rs. 6,77,00,000/ pronouncements, addition of Rs. 6,77,00,000/- made by the AO in made by the AO in AY 2016-17 cannot be sustained and is hereby deleted. Ground 17 cannot be sustained and is hereby deleted. Ground 17 cannot be sustained and is hereby deleted. Ground No.1(a) of the appeal is accordingly allowed.” No.1(a) of the appeal is accordingly allowed.”

We have considered rival sub We have considered rival submission of the parties and mission of the parties and perused the relevant material on record. Shri Manish Shah director perused the relevant material on record. Shri Manish Shah director perused the relevant material on record. Shri Manish Shah director of one of the partner of the assessee firm offered undisclosed of one of the partner of the assessee firm offered undisclosed of one of the partner of the assessee firm offered undisclosed income of Rs.6.77 crores for taxation which included Rs.6.26 crores income of Rs.6.77 crores for taxation which included Rs.6.26 crores income of Rs.6.77 crores for taxation which included Rs.6.26 crores from sale of entire car parking from sale of entire car parking spaces and Rs.51 lakhs spaces and Rs.51 lakhs as subscription fees toward use subscription fees toward use of recreation facilities. According to of recreation facilities. According to the assessee it offered offered the entire survey declaration declaration amount in four years, interalia, Rs.3 cr Rs.3 crores in assessment year 2016 ores in assessment year 2016-17; Rs.60 lakhs in assessment year 20 in assessment year 2017-18; Rs.40 lakhs in assessment year Rs.40 lakhs in assessment year 2018-19 and Rs.2,77,00,000/ 19 and Rs.2,77,00,000/- in assessment year 2019 in assessment year 2019-20. But, the Ld. Assessing Officer rejected the contention and ignored the the Ld. Assessing Officer rejected the contention and ignored the the Ld. Assessing Officer rejected the contention and ignored the undisclosed income of Rs.3 crores offered in the year under undisclosed income of Rs.3 crores offered in the year under undisclosed income of Rs.3 crores offered in the year under consideration and made additio tion and made addition for the amount of Rs.6.77 crores for the amount of Rs.6.77 crores to the total income declared by the assessee in the return of to the total income declared by the assessee in the return of to the total income declared by the assessee in the return of income. Thus the issue in dispute in the case is whether the income. Thus the issue in dispute in the case is whether the income. Thus the issue in dispute in the case is whether the assessee has honored the declaration made during the course of assessee has honored the declaration made during the course of assessee has honored the declaration made during the course of survey proceedings. We have verif survey proceedings. We have verified the claim of the assessee the claim of the assessee of undisclosed income from sale of car parking and subscription fee undisclosed income from sale of car parking and subscription fee undisclosed income from sale of car parking and subscription fee offered in assessment year assessment years from 2016-17 to 2019 17 to 2019-20. In assessment years 2017 s 2017-18 and 2018-19 assessment 19 assessments have been completed u/s 143(3) of the Act by the Assess completed u/s 143(3) of the Act by the Assessing Officer and ing Officer and he has duly accepted the declaration made by the assessee. In assessment duly accepted the declaration made by the assessee. In assessment duly accepted the declaration made by the assessee. In assessment year 2019-20 also the declaration of Rs.2,77,00,000/ 20 also the declaration of Rs.2,77,00,000/ 20 also the declaration of Rs.2,77,00,000/- has been accepted by the Revenue under intimation issued u/s 143(1) of the accepted by the Revenue under intimation issued u/s 143(1) of the accepted by the Revenue under intimation issued u/s 143(1) of the Act. The income of Rs.3 crores declar Act. The income of Rs.3 crores declared in the year under ed in the year under consideration has also not been reduced by the Assessing Officer consideration has also not been reduced by the Assessing Officer consideration has also not been reduced by the Assessing Officer and therefore, the entire income of Rs.6.77 crores offered by the and therefore, the entire income of Rs.6.77 crores offered by the and therefore, the entire income of Rs.6.77 crores offered by the assessee stands declared in the return assessee stands declared in the returns of income filed. of income filed. The action of the Assessing Officer is revenue of the Assessing Officer is revenue neutral unless there is neutral unless there is significant change in tax rates favorable to assessee in other years. significant change in tax rates favorable to assessee significant change in tax rates favorable to assessee In view of the above, we do not find any infirmity in the order of the In view of the above, we do not find any infirmity in the order of the In view of the above, we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute and accordingly Ld. CIT(A) on the issue in dispute and accordingly, , we uphold the same. The grounds of appeal raised by the Revenue are accordingly same. The grounds of appeal raised by the Revenue are accordingly same. The grounds of appeal raised by the Revenue are accordingly dismissed.

In the result, the appeal of the Revenue is dismissed. In the result, the appeal of the Revenue is dismissed. In the result, the appeal of the Revenue is dismissed.