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TMI Blog2012 (5) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2009 - - - Dated:- 20-4-2012 - Rajpal Yadav And B. C. Meena, JJ. ORDER Rajpal Yadav, Judicial Member The revenue is in appeal before us against the order of Learned Commissioner dated 31.07.2009 passed for assessment year 2006-07. On receipt of notice in the revenue's appeal, assessee-respondent filed cross objection bearing No. 381/Del/09. 2. In ground No.1, revenue has pleaded that the order of Learned CIT(Appeals) is erroneous and contrary to facts and law. It is a general ground of appeal, no arguments were addressed on this ground of appeal, hence it is rejected. In ground Nos. 2 and 2.1, it has been pleaded by the revenue that the Learned CIT(Appeals) has erred in deleting the addition of ₹ 8,09,68,000 by entertaining additional evidence in violation to Rule 46A of the Income-tax Rules, 1962. 3. The brief facts of the case are that assessee is a company engaged in the business of development of township in the name and style of Malibu Towne at Gurgaon (Haryana). It has filed its return of income on 16.11.2006 declaring total income at ₹ 2,42,41,111. The case of the assessee was selected for scrutiny assessment and a notice under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2004-05 in respect of personal/values floors as the Govt. of Haryana amended its policy by declining to register sale deeds in respect of floors constructed on residential plots as the said plots did not constitute group housing plots. During the course of hearing you have required our client to explain as to why the plots/Apartments/floors, against which total payment has been received from the customer, though neither sale deed has been registered nor possession has been handed over be not treated as a sale and the consequential profit if any be brought to tax during the year under assessment. In this respect we wish to state as under: ( i ) That, as explained here in above sales is only recognized in the case of plots upon registration of the sale deed which is executed upon receipt of total dues. The total receipt comprises of (a) basic sale price (b) preferential location charges (c) external development charges (d) maintenance deposit (e) property registration charges and stamp duty. In respect of the statement furnished to you disclosing NIL balance, the customer was still liable to pay demand raised by the company in respect of (a) maintenance deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. Amount 1. Plots :- General Category 14 199.01 NPNL 15 73.73 S. Total 29 272.74 2. Apartments 18 492.61 3. Personal Floors 2 32.15 4. Value floors 1 12.18 Grand Total 50 809.68 5. Dissatisfied with the action of the Assessing Officer, assessee carried the matter in appeal before the Learned First Appellate Authority. It contended that AS-7 is applicable only to construction contractors and not to builder or real estate developers. The assessee further submitted that it is following similar method of accounting in the past also and Assessing Officer never disturb this accounting method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(Appeals) submitted that once total amount has been received by the assessee towards sale of a plot then it should be construed that sale has finalized and assessee ought to have recognized the revenue. By not registering the conveyance deed, assessee cannot deffer the recognition of revenue according to its sweet will. This aspect has to be seen with the angle of human probability. He further submitted that Assessing Officer has granted sufficient opportunity to the assessee and, therefore, Learned First Appellate Authority ought to have not permitted the assessee to adduce additional evidence. He also submitted that the Learned First Appellate Authority has not granted opportunity to the Assessing Officer for rebutting the additional evidence submitted by the assessee. In support of his contentions, he relied upon the order of the ITAT in the case of Jyotsna Suri v. DCIT reported in 61 ITD 139, CIT v. Shree Kangroo Steel Pvt. Ltd. reported in 320 ITR 691. He also relied upon the judgment of Hon'ble Delhi High Court in the case of Director of Income-tax v. Modern Charitable Foundation [2011] -TIOL-363. 7. Learned DR further relied upon the order of the ITAT, Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f AS-7 on a developers and explained the scope of AS-7. The ITAT has held that AS-7 is not applicable on real estate developers rather it is relatable to contractors engaged in construction. The learned counsel for the assessee further submitted that the department cannot change the accounting method adopted by the assessee unless some illegalities or some facts which create a hurdle for the Assessing Officer in computing the true income of the assessee is established. He relied upon the decision of Hon'ble Delhi High Court in the case of Triveni Engg. Ind. Ltd. reported in (2010) TIOL 790. He further submitted that method of accounting adopted by the assessee and accepted by the department over several years, the department cannot change the method in subsequent years. He relied upon the decision of Hon'ble Supreme Court in the case of CIT v. Bilahari Investments Pvt. Ltd. reported in 299 ITR 1. He also relied upon the order of the ITAT in the case of DCIT v. Otis Elevators reported in 284 ITR AT page 170. 9. In his next fold of contentions, he submitted that the assessee cannot be taxed twice on the same income. According to the learned counsel for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any time prior to the receipt of the full price and other dues. In that case even though the Sale Deed may have been executed, but the possession will be given to the Purchaser only when the Purchaser makes payment of the balance price and all other dues as stipulated in this Agreement. 11. We have already extracted the findings of the Assessing Officer for including the sale proceeds of the plots/floors in respect of which assessee has received advances. However, sale deeds have not been registered in this year. Now, the case of the Assessing Officer is that merely on account of non-registration of sale deed, it cannot be construed that transaction has not been completed between the parties. The assessee cannot defer or postpone the recognition of the revenue in respect of these plots. 12. According to the assessee, receipt of sale proceeds is one factor indicating the sale of the plots but the sale is to be materialized after fulfillment of all other conditions. In the reply of the assessee, extracted supra, it has been specifically pointed out by the assessee that revenue would be recognized upon handing over physical possession of the property to the customer, collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order and thereafter deleted the addition. 13. As far as the submissions of the Learned DR that Learned CIT(Appeals) has entertained additional evidence and did not provide opportunity of hearing to the Assessing Officer is concerned, we do not find any force in this submission. We find from the assessment order that Assessing Officer had issued a show-cause notice on 21.11.2008. The assessee has submitted a detailed reply to this notice. Assessing Officer has passed the assessment order on 29.12.2008. He did not call for any further information and no such issue is discernible from his order. Learned First Appellate Authority has admitted the additional evidence in order to understand what treatment has been given to these receipts in the future years when according to the method of accounting followed by the assessee, sales were materialized. Learned Commissioner has given due opportunity of hearing to the Assessing Officer and called for the remand report. The relevant part of the remand report submitted by the A.O. reads as under: On the question of comments on the A.O. on additional evidences, it is humbly submitted that in the first place, in view of inadmissibili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale proceeds of 31 properties. 4. On the facts and circumstances of the case and in law, the learned CIT(Appeals) erred in deleting the addition of ₹ 12,09,45,742 made by the Assessing Officer being the sale proceeds of 24 properties not accounted for by the assessee . 16. The brief facts of the case are that the assessee had entered into an agreement with its sister concern M/s. Kohli One Housing Development Pvt. Ltd. By virtue of this agreement, assessee had agreed to give allotment rights of 44 plots and 11 condominiums for a consideration. This agreement was entered into in 2003. There is no registered sale deed and only allotment rights are allotted which are transferable. Out of said 44 plots and 11 condominiums, booking rights of 24 plots were sold by M/s. Kohli One Housing Development and rest were shown in the closing stock. Conveyance deeds in respect of 12 plots have been done during this year and the sale proceeds are taken to the revenue account in consonance with accounting policy regularly followed by the assessee. M/s. Kohli One Housing has shown sale of 24 plots at ₹ 12,09,45,742 out of which ₹ 3,79,23,057 is shown as payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oking rights, the sister concern would retain the profit. In other words, according to the assessee, it is a business transaction. It has sold the plot to the sister concern. As and when sale deed will be executed it would recognize the revenue. The sale deeds instead of executing in the name of sister concern, it is executed in the name of third person to whom sister concern would assign its rights. In a way, sister concern, effectively sold the plots by assigning it purchase rights. The revenue has duly been recognized as and when sale deed is registered. 19. On due consideration of the facts and circumstances, we do not find any force in the contentions of the Assessing Officer that it is a sham transaction. It can be explained with a simple example, namely, assessee has launched a scheme for development of plots and flats, A books a plot with the assessee. After 2-3 years when the plot was developed, A wants to sell the plot to B . He approached the assessee with the purchaser and made a prayer that he is surrendering all his purchase rights in favour of B . Kindly execute the sale deed. Assessee would charge the amount agreed with the A at the time of booking. If A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en off in later years as they have been capitalized on account of reasons mentioned in the assessment order . 22. The learned counsel for the assessee submitted that Learned CIT(Appeals) has rejected the grounds of appeal raised by the assessee on the ground that Assessing Officer herself has deleted the addition in an order passed under section 154 of the Income-tax Act, 1961. He contended that the Assessing Officer has made irrelevant observations and Learned CIT(Appeals) ought to have decided the ground of assessee on merit. We confronted the learned counsel for the assessee that he should have challenged the order passed under sec. 154 of the Act in a separate appeal. He replied that there are two courses available with the assessee against the assessment order. The one course to challenge the order of the Assessing Officer in an appeal before the Learned CIT(Appeals) and in the other course to file a Miscellaneous application under sec. 154 of the Act. When assessee has challenged the assessment order in an appeal by adopting the first course then Learned CIT(Appeals) without getting influenced from the outcome of section 154 ought to have decided its ground of appeal on m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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