M/S. UKN PROPERTIES PRIVATE LIMITED vs. THE DEPUTY COMMISSIONER OF INCOME TAX

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF AUGUST, 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE HEMANT CHANDANGOUDAR ITA NO.119 OF 2017 BETWEEN: M/S. UKN PROPERTIES PRIVATE LIMITED, REP.BY ITS MANAGING DIRECTOR, SRI PADDY MENON, #102, ST.PATRICKS ARCADE, RESIDENCY ROAD, BANGALORE-560 025. ... APPELLANT (BY SRI A SHANKAR SR. COUNSEL A/W SRI BHAIRAV KUTTAIAH, ADVOCATE) AND: THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-12(5), NOW CIRCLE-7(1)(1) 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BANGALORE-560 095. ... RESPONDENT (BY SRI E.I.SANMATHI, ADVOCATE) - - - THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED

2 19.10.2016 PASSED IN ITA NOS.1559 & 1654/BANG/2013, FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 PRAYING TO: (a) TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS STATED ABOVE AND THE ANSWER THE SAME IN FAVOUR OF THE APPELLANT. (b) TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT WHICH IS AGAINST THE APPELLANT IN THE COMMON ORDER PASSED BY THE ITAT, 'C' BENCH, BENGALURU IN ITA NOS. 1559 AND 1654/BANG/2013 DATED 19/10/2016 FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 (ANNEXURE-A) AND ETC., THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT Mr. A.Shankar, learned Senior counsel along with Mr. Bhairav Kuttaiah, learned counsel for the assessee. Mr. E.I.Sanmathi, learned counsel for the revenue. 2. This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee against the order dated 19.10.2016 passed by the Income Tax Appellate Tribunal. The subject matter of the appeal pertains to the Assessment years 2008-09 and 2009-10. The appeal was admitted by a bench of this Court vide order dated 29.11.2017 on the

3 following substantial questions of law: "1. Whether the Tribunal is justified is justified in law in holding that the percentage completion method is applicable to the developer on the facts and circumstances of the case? 2. Whether the Tribunal is justified in law in applying the percentage completion method in respect of units not sold and consequently passed a perverse order on the facts and circumstances of the case?" 3. The facts giving rise to filing of this appeal briefly stated are that the assessee is a private limited company engaged in the business of real estate and development of projects. Assessee filed returns of income for the assessment years 2008-09 and 2009-10 on 30.09.2008 and 30.09.2009, declaring income of Rs.1,32,11,729/- and Rs.1,00,31,316/- respectively. 4. The returns filed by the assessee was selected for scrutiny and notices were issued for the assessment year 2008-09. The Assessing Officer completed the assessment

4 and by order dated 29.11.2010, made certain additions and disallowance of Rs.57,75,178/- on account of a report submitted in Arcot Narian Street Project by applying percentage completion contract method. Similarly for the assessment year 2009-10, the Assessing Officer completed the assessment and vide order dated 16.12.2011 and allowed addition of Rs.1,92,53,422/- on account of report submitted in Arcot Narian Street Project by applying percentage completion contract method. 5. The assessee being aggrieved by the orders of the Assessing Officer filed appeals before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) by order dated 27.08.2013 for the assessment year 2008-09 has partly allowed the appeal. Similarly, the Commissioner of Income Tax (Appeals) by order dated 23.09.2013 for the assessment year 2009-10 has partly allowed the appeal. The appellant being aggrieved by the order of the Commissioner of Income Tax (Appeals) preferred an appeal before the Income Tax Appellate Tribunal, Bangalore and the same came to be dismissed by

5 an order dated 19.10.2016. In the aforesaid factual backdrop this appeal has been filed. 6. The learned senior counsel for the assessee submits that the following issues arise for consideration in this appeal: "a) Whether the percentage contract completion method is applicable to a developer and on facts of the case. b) Without prejudice whether the working adopted by the assessing officer is fair and correct on the facts of the case." 7. It is further submitted that the order passed by the Commissioner of Appeals is to be set aside and the matter may be remitted to the Assessing Officer for adjudication afresh as the same requires adjudication of the facts. It is also submitted that when no answers are given in the miscellaneous petition filed by the assesse before the Tribunal, the Tribunal has to allow the petition filed by the

6 assessee and has to remand the matter to the Assessing Officer. 8. The aforesaid facts has not been disputed by the learned counsel for the revenue. 9. In view of the submission made by the learned counsel for the parties and taking into consideration that issue No.1 involved in this appeal namely whether the completion Contract Method or the percentage Completion Contract Method for computation of income has to be adopted requires fair adjudication on the basis of facts. Therefore, the orders dated 27.08.2013 and 23.09.2013 passed by the Commissioner of Income Tax (Appeals) and so far the order of the Assessing Officer vide orders dated 29.11.2010 and 16.12.2011 so far as it pertains to issue No.1 are hereby quashed and the matter is remanded to the Tribunal for decision afresh in accordance with law. It is needless to state that it will be open for both the parties to raise all contention as made available in law.

7 10. Since the matter is remitted to the Tribunal therefore it is not necessary for this Court to answer the substantial questions of law raised in this appeal Accordingly, the appeal is disposed of. Sd/- JUDGE Sd/- JUDGE HR