Income Tax Appellate Tribunal - Ahmedabad
Tirupati Enterprises, Ahmedabad vs Department Of Income Tax on 5 June, 2015
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'ए', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" A " BENCH, AHMEDABAD
सम ी जी.डी.अ वाल, उपा य (अहम. े ) एवं ी कुल भारत, या यक सद य ।
BEFORE SHRI BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) And
SHRI KUL BHARAT, JUDICIAL MEMBER
आयकर अपील सं./I.T.A. No.464/Ahd/2012
( नधा रण वष / Assessment Year : 2007-08)
The ITO बनाम/ M/s.Tirupati Enterprises
Ward-7(3) Vs. B/4, Jalvihar Flats
Ahmedabad B/h.Ajanta Comm.Centre
Ashram Road
Ahmedabad
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AALFM 9809 J
(अपीलाथ( /Appellant) .. ()*यथ( / Respondent)
अपीलाथ( ओर से / Appellant by : Shri Dinesh Singh, Sr.DR
)*यथ( क, ओर से/Respondent by : Ms.Urvashi Shodhan, AR
ु वाई क, तार/ख /
सन Date of Hearing 02/06/2015
घोषणा क, तार/ख /Date of Pronounce ment 05/06/2015
आदे श / O R D E R
PER SHRI KUL BHARAT, JUDICIAL MEMBER :
This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-XIV, Ahmedabad ('CIT(A)' in short) dated 05/12/2011 pertaining to Assessment Year (AY) 2007-08. The Revenue has raised the following grounds of appeal:-
ITA No.464/Ahd/2012ITO vs. M/s. Tirupati Enterprises Asst.Year - 2007-08 -2-
1. The ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.18,00,324/- being the income worked out by applying the percentage completion method.
2. On the facts and circumstances of the case, the Ld.Commissioner of Income-tax(A) ought to have upheld the order of the Assessing Officer.
3. It is, therefore, prayed that the order of the Ld.Commissioner of income tax (A) may be set-aside and that of the Assessing Officer be restored.
2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 30/12/2009, thereby the Assessing Officer (AO in short) made addition of Rs.18,00,324/- being undisclosed profit of Paras Status Project. The assessee feeling aggrieved by the order of the AO, preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee, allowed the appeal. Aggrieved by the order of the ld.CIT(A), now the Revenue is in appeal before us.
3. Ground Nos.2 & 3 are general in nature which require no independent adjudication.
4. Ground No.1 is against deletion of addition of Rs.18,00,324/- being the income worked-out by applying the percentage completion ITA No.464/Ahd/2012 ITO vs. M/s. Tirupati Enterprises Asst.Year - 2007-08 -3- method. The ld.Sr.DR Shri Dinesh Singh supported the order of the AO and submitted that the ld.CIT(A) was not justified in deleting the addition. He submitted that the assessee had undertaken construction and development of two projects; namely, Campus Corner-II and Paras Status. In respect of Campus Corner-II, the assessee declared Gross Profit year-to-year wise @ 20%. However, in the case of Paras Status, the assessee has failed to do so. He submitted that the substantial amount has been received from the prospective buyers. The project is completed and the assessee ought to have declared the profit on the basis of project completion method.
4.1. On the contrary, ld.counsel for the assessee Ms.Urvashi Shodhan strongly supported the order of the ld.CIT(A) and submitted that the assessee has disclosed the profit as per the accounting standard. She submitted that there is no illegality in the order of the ld.CIT(A). She further submitted that it is not correct that the assessee has received entire the money, handed over the possession of the project and the buyers have occupied the properties.
5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO made the addition on the basis that the assessee has received substantial sales consideration and despite the same, no income ITA No.464/Ahd/2012 ITO vs. M/s. Tirupati Enterprises Asst.Year - 2007-08 -4- has been offered for taxation. The AO was of the view that the assessee is seller of goods and as such the assessee ought to have followed Accounting Standard (AS-7) and recognize the revenue when the seller has transferred the significant risk and reward in the property to the person for a consideration. However, the ld.CIT(A) deleted the addition by observing as under:-
"2.3 Decision:
I have carefully perused the assessment order and the submissions given by the appellant. The appellant was developing two construction projects during the year. For one project namely Campus Corner- II, the appellant was showing 20% gross profit every year on the receipts as it was being developed by him for some co-operative society. However, in respect of the other project namely Paras Status, the appellant did not show any income but considered all the work done during the year as work in progress. The A. O. did not accept the method of accounting and held that the appellant should have followed Accounting Standard 7. The appellant has submitted that the project was new in that year and the construction was incomplete. The appellant has received advance booking and did not transfer the possession of the units to the customers. It has been submitted by the appellant that the appellant was following AS - 9 issued by ICAI for revenue recognition. The revenue as per this method shall be recognized at the time when the seller transfers the property in goods to the buyer for a consideration or all significant risk and reward of ownership are transferred to the buyer and seller retains no effective control of goods. Since the construction was incomplete, the property was not ready for sale. The appellant did not transfer the property as only initial installments were paid and final payment was pending. It was further pointed out by the appellant that in subsequent years, the appellant has recognized sales of Rs.5.25 crores in F. Y. 2008-09, ITA No.464/Ahd/2012 ITO vs. M/s. Tirupati Enterprises Asst.Year - 2007-08 -5- Rs.3.21 crores in F. Y. 2009-10 and Rs.75.5 lacs in F. Y. 2010-11 and has offered total profit of Rs.1.82 crores for tax on account of this scheme. Therefore, there was no avoidance of tax at all.
I am inclined to agree with the submission given by the appellant. In this type of cases, the revenue has to be recognized only at the time when substantial risk and reward are transferred to the buyer by the seller. The scheme which was under construction was not ready for possession. The buyers did not pay full installment. It was only the advance booking amount that was paid by the buyers. The A. O. has without any basis taken the rate of 8% on the work in progress shown by the appellant. The appellant has rightly followed the method of accounting as prescribed in AS - 9 of the ICA1. It is also noted that it has offered substantial profit in the next years on account of this scheme. In view of these facts, the addition made by the A. O. is directed to be deleted. The ground of appeal is, therefore, allowed."
5.1. The ld.CIT(A) has given a finding on fact that the scheme was under construction and was not ready for possession. The buyer did not pay full installments, it was the only advance booking amount that was paid by the buyers. This finding on fact is not rebutted by placing any contrary material on record. The Revenue has not placed any material on record suggesting that the substantial amount has been paid to the assessee, project has been completed and after completion the possession is also handed over to the buyers. Moreover, it is not demonstrated as to how AS-9 of the ICAI is not applicable in the present case. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), ITA No.464/Ahd/2012 ITO vs. M/s. Tirupati Enterprises Asst.Year - 2007-08 -6- same is hereby upheld. Thus, ground No.1 of Revenue's appeal is rejected.
6. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Court on Friday, the 5th day of June, 2015 at Ahmedabad.
Sd/- Sd/-
(जी.डी.अ वाल) (कुल भारत)
उपा य (अहम. े ) या यक सद य
( G.D. AGARWAL ) ( KUL BHARAT )
VICE PRESIDENT (AZ) JUDICIAL MEMBER
Ahmedabad; Dated 5/ 06 /2015
ट/.सी.नायर, व. न.स./T.C. NAIR, Sr. PS
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ( / The Appellant
2. )*यथ( / The Respondent.
3. संब8ं धत आयकर आय:
ु त / Concerned CIT
4. आयकर आय:
ु त(अपील) / The CIT(A)-XIV, Ahmedabad
5. ;वभागीय ) त न8ध, आयकर अपील/य अ8धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड= फाईल / Guard file.
आदे शानुसार/ BY ORDER, स*या;पत ) त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 02.06.15 (dictation-pad 8+ pages attached at the end of this File)
2. Date on which the typed draft is placed before the Dictating Member ..3.6.15
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......5.6.2015
7. Date on which the file goes to the Bench Clerk.....................5.6.2015
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................