2021 (9) TMI 651 - AT - Income Tax

Validity of the assessment passed beyond the period of limitation as per the provisions of Section 142(2A) - HELD THAT - There is no dispute on the fact that the Co-ordinate Bench of ITAT, Delhi, vide aforesaid consolidated order 2021 (7) TMI 1243 - ITAT DELHI has already held that the corresponding Assessment Orders are barred by limitation. As a result of the aforesaid consolidated order Supra of Co-ordinate Bench of ITAT, Delhi; as far as the present appeals before us are concurred, the corresponding Assessment Orders of Ld. CIT(A) have no existence at present. Thus, the present appeals before us have no legs to stand; and are not maintainable presently.

Summary

Issues Involved:

1. Eligibility for taxation under Section 44AD for a real estate developer with a turnover of more than 40 lakhs.
2. Reliance on books of accounts and the deletion of additions by CIT(A) despite the assessee's failure to produce relevant documents.
3. The principle of taking advantage of one's own wrong by disputing the best judgment assessment while not producing necessary evidence.
4. The validity of the assessment orders being barred by limitation.

Detailed Analysis:

Issue 1: Eligibility for Taxation Under Section 44AD

The Revenue contended that the CIT(A) erred in deleting the addition after applying the net profit rate of 8% prescribed under Section 44AD. The primary argument was that the assessee, being a real estate developer with a turnover exceeding 40 lakhs, was not eligible for taxation as per the rates prescribed under Section 44AD. This section is generally applicable to small businesses, and the Revenue argued that the CIT(A) failed to appreciate this distinction.

Issue 2: Reliance on Books of Accounts

The Revenue argued that the CIT(A) erred in deleting the addition on the grounds that the Assessing Officer (AO) did not cite any comparable cases with such high profits. The CIT(A) had accepted that due to the non-production of project-wise expenses, revenue recognition Work in Progress (W.I.P.), bills/vouchers, and copies of agreements, the books of the appellant could not be relied upon. Despite this, the CIT(A) deleted the addition, which the Revenue argued was a mistake because the AO was left with no choice but to estimate the profit, which was deemed fair and reasonable given the nature of the business and turnover.

Issue 3: Principle of Taking Advantage of One's Own Wrong

The Revenue further argued that the CIT(A) failed to appreciate that the assessee's action of not producing the relevant details/evidences and then disputing the best judgment assessment by the AO was akin to taking advantage of its own wrong. This principle has been recognized in various judicial forums, and the Revenue contended that the CIT(A) should have upheld the AO's assessment in light of this principle.

Issue 4: Validity of Assessment Orders Being Barred by Limitation

The Tribunal noted that the assessment orders for the years in question were passed on 28.10.2016, based on an estimation of net profit at 15% of the gross turnover. The CIT(A) had directed the AO to estimate the net profit at 8% instead. However, the Tribunal found that the assessment orders were barred by limitation. The Tribunal referred to the provisions of Section 142(2A) of the Income Tax Act, which states that the time period for completing an audit is 90 days plus an extension of 60 days. This period expired on 21.08.2016, but the AO passed the assessment order on 28.10.2016, making it barred by limitation.

The Tribunal also addressed the CIT(A)'s finding that the time period starting with the date of filing of the writ petition and ending on the date of disposal of the writ petition should be excluded under Section 153B read with Explanation-(b). The Tribunal found no merit in this argument, noting that the assessment proceedings had not been stayed by any court order. Therefore, the CIT(A) was wrong in invoking this provision, and the assessment order was quashed for being barred by limitation.

Conclusion:

The Tribunal dismissed the appeals filed by the Revenue, noting that the corresponding assessment orders and the impugned appellate order of the CIT(A) had no existence at present due to being barred by limitation. Consequently, the appeals were not maintainable and were dismissed. The Tribunal's decision was pronounced in open court and subsequently documented in a written order.