Income Tax Appellate Tribunal - Jaipur
Ito, Jaipur vs Unique Affordable Homes Pvt. Ltd.,, ... on 13 January, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 946/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2013-14.
The Income Tax Officer,
Ward 6(2),
Jaipur.
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Vs.
M/s. Unique Affordable Homes Pvt. Ltd., 8th Floor, Miles Stones, Tonk Road, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAACU 9543P
vihykFkhZ@Appellant
izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl. CIT)
fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA)
lquokbZ dh rkjh[k@ Date of Hearing : 06.01.2017.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 13/01/2017.
vkns'k@ ORDER
PER SHRI KUL BHARAT, JM.
The appeal by the revenue is directed against the order of ld. CIT (Appeals)-4, Jaipur dated 19.08.2016 pertaining to assessment year 2013-14. The revenue has raised the following ground of appeal :-
Whether on the facts and in the circumstances of the case and in law, the CIT (Appeals) has erred in deleting the addition of Rs. 1,45,45,106/- u/s 145(3) when the assessee is not maintaining quantitative and qualitative stock register.
Whether on the facts and in the circumstances of the case and in law, the CIT (Appeals) has erred in rejecting application of percentage completion method adopted by the AO when this rejection means acceptance of loss return of the assessee engaged in construction and sale of residential/commercial projects.
The appellant craves its rights to add, amend or alter any of the grounds on or before the hearing.
The only effective ground of appeal is against deletion of addition of Rs. 1,45,45,106/-.
2. Briefly stated the facts giving rise to this appeal are that the case of the assessee was picked up for scrutiny assessment and assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was completed vide order dated 28.03.2016. While framing the assessment, the AO rejected the books of account by invoking the provisions of section 145(3) on the basis that as per Accounting Standard-2 to arrive at the valuation of closing stock the details in respect of both quality as well as quantity of the different items of stock, including details relating to direct expenses and costs are meticulously maintained by the assessee. The AO observed that the assessee, however, has not maintained such detail. The AO after rejecting the books of accounts, proceeded to estimate the Net Profit and made addition of Rs. 1,5,45,106/-. Aggrieved by this, the assessee has preferred an appeal before ld. CIT (A), who after considering the submissions and following the decision of the Coordinate Bench in the assessee's own case pertaining to A.Y. 2008-09 and 2009-10 in ITA No. 587 & 588/JP/2012 and 623/JP/2012 allowed the appeal of the assessee. The revenue against this order has preferred this appeal before this Tribunal.
3. The ld. D/R submitted that the appeals against the orders passed in earlier years have been preferred before the Hon'ble Jurisdictional High Court. He placed reliance on the order of the AO and submitted that the ld. CIT (A) was not justified in deleting the addition.
3.1. On the contrary, ld. Counsel for the assessee submitted that the facts are identical as in the earlier years and the Tribunal in ITA No. 1008/JP/2015 A.Y. 2012-13 has followed the decision rendered in earlier years in assessee's own case and has dismissed the appeal of the revenue. He, therefore, submitted that taking a consistent view, appeal of the revenue is required to be dismissed.
3.2. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. We find that the ld. CIT (A) in para 3.1.2 has decided the issue as under :-
" 3.1.2. I have duly considered assessee's submission and also taken a note of factual matrix of case as emanating from the assessment order passed by the AO. In this case, assessment was completed at a total income of Rs. 1,35,46,195/- against the returned income of (-) Rs. 9,98,911/- wherein addition of Rs. 1,45,45,106/- on account of profit computed by change in method of accounting to percentage completion method. In this case, at the end of FY relevant to AY 2013-14 appellant has completed less than 50% of the project. In the assessment order, AO has observed that during the course of assessment proceeding, the assessee was asked produce/furnish, stock register, basis of valuation of closing stock as well as detail/information including original vouchers for the payment made in respect of direct expenses. However, the assessee could not produce the stock register and argued that closing stock was valued at cost. The assessee stated that stock off company and direct expenses, which form part of stock of project-in- progress. In this regard, the AO held that this proved that the assessee did not maintain its books of accounts as required by law and that its books did not present "True & fair Picture" of its accounts and financial transactions, thereby contravening the provision of Accounting Standard (AS-1) issued by the Institute of Chartered Accountants of India (ICAI) as well. In view of these, assessee was show cause as to why its books of accounts should not be rejected u/s 145(3) of the Act and income be determined as per Percentage Completion Method. Assessee vide its letter dated 26.12.2014 filed its detail explanation which is reproduced by the AO in the assessment order in para 6. AO has discussed this issue in para 7 of the assessment order and held that assessee by following Project Completion Method, has not declared complete at correct profit and at the same time by not following AS-9 and AS-7, which tantamount to not following AS-1 as per sec. 145(2), the books do not represent true and fair picture and therefore rejected the books of accounts and by applying Percentage Completion Method determined profit of the business at Rs. 1,35,46,195/- resulting in addition of Rs. 1,45,45,106/-.
AR of the assessee has contended that the assessee is maintaining its day to day books of accounts along with complete record of material purchased and expenses incurred towards project development. As per the consistent accounting policy followed by the assessee, the revenue is recognized when all significant risk and rewards of ownership are transferred to the buyer and no effective control of the real estate to a degree usually associated with the ownership is retained. Thus the assessee has been consistently following 'Project Completion Method'of Accounting in which sale is recognized only when transaction is complete and possession of the property is handed over to the buyer.
Therefore, AR has also clarified that assessee's case is covered by the decision of Hon'ble ITAT Bench Jaipur in its own case for AYs 2008-2009 & 2009-10 wherein Hon'ble ITAT Bench Jaipur vide ITA No. 587 & 588/JP/2012 and 623/JP/2012 has deleted the entire addition made and held that the computation of income by following the project completion method is the correct method for the recognition of the income of the assessee, which is regularly followed by the assessee.
Further, for AY 2010-11 & 2011-12, ld. CIT (A) for AY 2010-11 & 2011-12 vides ITA No. 597/12-13 dt. 16.12.13 and ITA No. 830/13-14 Dt. 07.05.2014 respectively has reversed the AO's action of rejecting assessee's books of accounts u/ 145(3) of the Act and computation of income on percentage completion method and finally given full relief to the assessee. It is also a fac6t that AO has not brought on record any evidence or case law to controvert the findings of the Hon'ble ITAT in the related case of the group of the appellant on the same facts, I find that the facts of this case I directly covered by aforementioned decision of Hon'ble ITAT Bench Jaipur (supra) and ld. CIT (A), Central, Jaipur. In view of these facts, and circumstances of the case and also respectfully following the decision of Hon'ble ITAT and ld. CIT (A), Central, Jaipur the grounds of appeal no. 1, 1.1 & 1.2 are decided in favour of assessee and addition made of Rs. 1,45,45,106/- by following Percentage Completion Method is hereby deleted."
Further, we find that the Coordinate Bench in ITA No. 1008/JP/2015 pertaining to assessment year 2012-13 dismissed the revenue's appeal by observing as under :-
"2.3 We have heard the rival contentions and perused the materials available on record. It emerges from the record that in the case of the assessee i.e. M/s. Unique Affordable Homes (P) Ltd., relief has been granted by the ld. CIT(A) on the basis of the decision of ITAT Coordinate Bench in assessee's own case (supra) by observing as under:-
''3.1.3 I have duly considered assessee's submission and also taken a note of factual matrix of case as emanating from the assessment order passed by the AO. In this case, assessment was completed at a total income of Rs. 1,08,78,346/- against the returned income of (-) Rs. 10,47,837/- wherein addition of Rs. 1,19,26,183/- on account of profit computed by change in method of accounting to percentage completion method. In this case, at the end of F.Y. relevant to A.Y. 2012-13 appellant has completed les than 50% of the project. In the assessment order, AO has observed that during the course of assessment proceedings, the assessee was asked to produce/ furnish, stock register basis of valuation of closing stock as well as detail/ information including original vouchers for the payment made in respect of direct expenses. However, the assessee could not produce the stock register and argued that closing stock was valued at cost. The assessee stated that stock of company and direct expense, which form part of stock of project-in-progress. In this regard, the AO held that this proved that the assessee did not maintain its books of accounts as required by law and that its books did not present ''true and fair picture'' of its accounts and financial transactions, thereby contravening the provisions of Accounting Standard (AS-1) issued by the Institute of Chartered Accountants of India (ICAI) as well. In view of these assessee show cause as to why its books of account should not be rejected u/s 145(3) of the Act and income be determined as per Percentage Completion Method. Assessee vide its letter dated 26-12-2004 filed its detail explanation which is reproduced by the AO in the assessment order in para 6. AO has discussed this issue in para 7 of the assessment order and held that assessee, by following project completion method, has not declared complete at correct profit and at the same time by not following AS-9 and AS-7, which tantamount to not following AS-1 as per Section 145(2) of the Act, the books do not represent true and fair picture and therefore, rejected the books of account and by applying Percentage Completion Method determined profit of the business at Rs. 1,08,78,346/- resulting in addition of Rs. 1,19,26,183/-.
AR of the assessee has contended that the assessee is maintaining its day to day books of accounts alongwith complete record of material purchased and expenses incurred towards project development. As per the consistent accounting policy followed by the assessee, the Revenue is recognized when all significant risk and towards of ownership are transferred to the buyer and no effective control of the real estate to a degree usually associated with the ownership is retained. Thus the assessee has been consistently following 'Project Completion Method' of Accounting in which sale is recognized only when transaction is complete and possession of the property is handed over to the buyer.
Therefore, AR has also clarified that assessee's case is covered by the decision of Hon'ble ITAT Jaipur Bench in its own case for A.Ys. 2008-09 and 2009-10 wherein Hon'ble ITAT Bench Jaipur vide ITA No. 587 & 588/JP/2012 and 623/JP/2012 has deleted the entire addition made and held that the computation of income by following the project completion method is the correct method for the recognition of income of the assessee, which is regularly followed by the assessee.
Further, for A.Y. 2010-11 & 2011-12 ld. CIT(A) Central Jaipur for A.Y. 2010-11 & 2011-12 vide ITA No. 597/12-13 dated 16-12-13 and ITA No. 830/13-14 dated 7-05-2014 respectively has reversed the AO's action of rejecting books of accounts u/s 145(3) of the Act and computation of income on percentage completion method and finally given full relief to the assessee. It is also a fact that AO has not brought on record any evidence or case law to controvert the findings of the Hon'ble ITAT in the related case of the group of the appellant on the same facts, I find that the facts of this case is directly covered by aforementioned decision of Hon'ble ITAT Bench Jaipur (supra) and ld. CIT(A) , Central, Jaipur. In view of these facts and circumstances of the case and also respectfully following the decision of Hon'ble ITAT and ld. CIT(A), Central, Jaipur the grounds of appeal No.1, 2.0 & 2.1 are decided in favour of the assessee and addition made of Rs. 1,19,26,183/- by following Percentage Completion Method is hereby deleted.'' By respectfully following the decision of Coordinate Bench in assessee's own case (supra), we dismiss the appeal of the Revenue."
The facts are identical. No change into facts and circumstances has been pointed out. The revenue has not pointed out that the orders of earlier years have been stayed by the Hon'ble Jurisdictional High Court. Since no stay against the operation of the order of the Coordinate Bench has been brought to our notice, therefore, taking a consistent view, we do not see any reason to interfere into the order of ld. CIT (A). Same is hereby upheld. The grounds raised in the appeal are dismissed.
4. In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 13/01/2017. Sd/- Sd/- ¼foØe flag ;kno½ ( dqy Hkkjr) (VIKRAM SINGH YADAV) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 13/01/2017. Das/ vkns'k dh izfrfyfi vxzsf"kr@Copy of the order forwarded to: 1. The Appellant- The ITO Ward 6(2), Jaipur. 2. The Respondent- M/s. Unique Affordable Homes Pvt. Ltd., Jaipur. 3. The CIT, 4. The CIT (A) 5. The DR, ITAT, Jaipur 6. Guard File (ITA No. 946/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 8 ITA No. 946/JP/2016 M/s. Unique Affordable Homes Pvt. Ltd.