The Commissioner of Income Tax-15, Mumbai vs Sai Shraddha Construction

These Appeals by the Revenue under Section 260-A of the Income Tax Act(Act) challenges the common order dated 21st November, 2012 passed by the Income Tax Appellate Tribunal. The Assessment Years involved are 2005-2006 and 2006-2007.

Mr. Malhotra, learned counsel for the Revenue states that although five questions have been raised in the Appeal Memo, the issues which really arise for consideration are telescoped in Questions (A) and (B) thereof which read as under:-

"(A):Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in holding that the assessee has not violated the provisions of section 80 IB(10) without taking into consideration the clinching evidence gathered by the survey team which had found that there are many residential units in the building admeasuring more than stipulated limit of 1000 sq.ft. after including the exclusive terrace?

(B):Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in upholding the order of the CIT(A) regarding project completion method?

So far as Question No. (A) is concerned, we find that identical questions had been raised by the Revenue in Income Tax Appeal No. 1628 of 2013 and others (CIT v/s M/s. Raviraj Kothari Punjabi Associates). The question for consideration therein read as under:-

"Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal erred in not appreciating the fact that the flats on the seventh floor had a built-up area of more than 1500 sq. ft. after including the exclusive terrace and, therefore, the assessee was not eligible for deduction u/s. 80IB (10)(c) of the Act ?"

This Court, by an order dated 24th April, 2015 did not entertain the Revenue''s above Appeal of M/s. Raviraj Kothari Punjabi Associates(supra) on the aforesaid question and inter alia observed as under:-

"We find that issues in the present case and five questions proposed as essential questions revolve around eligibility to claim benefit of section 80IB(10). Since the project is admittedly approved prior to 1.4.2005 the assessee is covered in the case of the Commissioner of Income Tax Vs. M/s. Happy Home Enterprises decided in two appeal being ITA No. 201/2012 alongwith ITA No. 308 of 2012. In the case of Happy Home Enterprises this Court in a judgment to which one of us (Shri S.C. Dharmadhikari, J.) was a party, after considering the submissions of revenue on the issue of applicability of the judgment of Brahma Associates has held that the clause (d) of section 80IB(10) is prospective in nature and would not apply to the housing projects commenced prior to 1.4.2005.

We are of the view that Mr. Gupta''s submission apropos assessment year 2005-06 will make no difference since the provisions of section 80IB(14)(a) will not affect the present project having been sanctioned prior to 1.4.2005. In the present case it is seen that the approval of the project was granted on 16th July,2002 well before introduction of the provisions of clause (d) which came into effect from 1.4.2005.

In the circumstances and in the facts of the present appeals these issues are covered by the judgment in M/s. Happy Home Enterprises and M/s. Kanakia Spaces Pvt. Ltd., we do not find that any of the questions proposed give rise to any substantial questions of law. The appeals are accordingly, dismissed. There will be no order as to costs."

In this case, it is an undisputed position that the project has been sanctioned prior to 2005. Thus, the decision of this Court in Raviraj Kothari Punjabi Associates(supra) which has also been followed in Income Tax Appeal No. 237 of 2013 (CIT V/s. M/s. Prime Properties), while dismissing the Revenue''s Appeal on 27th July, 2015 would cover the Question(A) in favour of the assessee. In the above view, Question No. (A) as framed does not give rise to any substantial question of law. Thus, not entertained.

Regarding Question(B):-

(a) The respondent-assessee is a builder and developer. In the subject assessment year, it filed it''s return of income on the basis of having adopted the Project Completion Method of accounting. The respondent-assessee also claimed deduction under Section 80IB(10) of the Act. The Assessing Officer by order dated 9th February, 2009 inter alia did not accept the respondent-assessee''s claim of adopting the project completion method and held that the percentage completion method should be adopted. In these circumstances, the Assessing Officer by an order dated 12th November, 2007 computed the profit at 8% of the work in progress determining the income of Rs. 50.40 lakhs in place of nil return by respondent-assessee.

(b) In appeal, the CIT(A) allowed the appeal of the respondent-assessee and held that stand of Assessing Officer determining profit at 8% on the basis of percentage completion method of accounting cannot be accepted. The CIT(A) held that the method of accounting regularly employed by the respondent-assessee was project completion method and no defect in the books of account maintained by the respondent-assessee has been pointed out. Thus, the order of the Assessing Officer to the extent it determined profit at 8% of percentage completion method was set aside by order dated 17th February, 2009 of the CIT(A).

(c) On further appeal by the revenue, the Tribunal by the impugned order dated 21st November, 2011 upheld the finding of the CIT(A) that no defects have been brought on record by the Assessing Officer to reject a recognized method of accounting adopted by the respondent-assessee viz. project completion method. In these circumstances, the Tribunal dismissed the revenue''s appeal.

We find that project completion method is one of the accepted method of accounting and the same was regularly followed by the respondent-assessee in computing it''s taxable income. It is for the assessee to choose the method of accounting and employ it regularly. It is not the case of the revenue that the project completion method of accounting is not regularly employed by the assessee. As held by the two authorities, the Assessing Officer has without any reason discarded the project completion method and adopted the percentage completion method of accounting. It is pertinent to note that the Assessing Officer has not rejected the books of account of the respondent-assessee so as to complete the assessment on Best Judgment basis under Section 144 of the Act. Therefore, there is no reason to interfere with the concurrent finding of fact arrived at by the CIT(A) and the Tribunal that no defect has been pointed out by the Assessing Officer to discard the project completion method adopted by the respondent-assessee. Accordingly, Question(B) does not give rise to any substantial question of law. Thus, not entertained.

Accordingly, both Appeals are dismissed. No order as to costs.