TMI Blog2022 (12) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... title is validly transferred to the buyer. In our opinion, the assessee has been following project completion method of recognition of revenue and this system of accounting has been followed by from year to year which can be seen from the assessment order in assessment year from 2014-15 passed u/s 143(3) dated 19.5.2015. Thus, it was the submission ld. AR that it is not open to the department to change the method of accounting in the middle of the period of completion of the project even percentage competition method is applicable. He submitted that rule of consistency has to be followed. For this purpose, he relied on various judgements. In our opinion, the additions made under the income from business by computing the income based on percentage completion method will result in double taxation which is impermissible in law. The proposition of the learned Assessing Officer that the income offered in the subsequent years is income of the impugned assessment year will result in double taxation which is impermissible in law. It is a settled position of law that department cannot collect tax twice on the very same income and observation of the AO is absolutely contrary to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious parties. The sale agreement is different from sale deed. In case of sale deed, the right in property transferred from seller to buyer immediately. However, it does not transfer in case of sale agreement. Sale deed is an executed contract. On the other hand, sale agreement is executory contract. In case of sale deed, seller can sue the buyer for breach of the contract. However, in the case of sale agreement, seller can sue the buyer only for damages but not for the price. In case of sale, if the property is destroyed, loss is borne by the buyer himself as he is the owner of the property. In case of agreement to sell, loss falls on the seller even though possession in the hands of buyer. Therefore, the contention that the amounts received from the prospective buyer through agreement to sell should be treated as sale was fallacious. The facts in the instant case, showed that there was no construction work done by assessee itself and it was the developer i.e. M/s. G-Corp Homes Pvt. Ltd. and there was no handing over of the constructed area by present assessee to prospective purchasers. What was received from the prospective buyers was in the nature of advance, therefore, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and there was no valid seized material found during the course of search to frame the assessment. The ld. AO cannot rely only on the sworn statement recorded from Shri M.R. Seetharam to frame the assessment. In our opinion, as discussed in earlier para, sworn statement is not conclusive evidence to frame the assessment or to sustain the addition. The addition shall be based on the evidence found during the course of search action or during the course of assessment. CIT(A) after verifying the detailed submissions, had allowed the appeals filed by the Respondent holding that the sale of flats (received under Development Agreement) are to be taxed in the year of execution of sale deed and not in the year of advances received. In view of this, we confirm the order of the CIT(A) in all these years in deleting the addition made by AO. Since we have confirmed the deletion of additions by ld. CIT(A) made by ld. AO, at this stage, we refrain from commenting on the head of income under which the income to be taxed as there is no accrual of income in these assessment years. Appeals of the revenue are dismissed. Proceedings u/s 153C in the absence of any incriminating material is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common grounds of appeals are as follows:- ITA Nos.542 to 544/Bang/2021 (AYs 2014-15 to 2016-17): Common Grounds:- 1. The order of the CIT(A) is opposed to law and facts of the case. 2. The CIT(A) erred in holding that land in consideration was held as fixed asset in the books of accounts although it was admitted by assessee in his statement u/s 132(4) of I T Act dated 28.08.2016 and reaffirmed in his statement u/s 131 of I T Act dated 19.10.2016 that the said land was held as stock in trade in his books. 3. The CIT(A) erred in holding that the sale of units by land owner in a project developed on JDA basis will attract taxation u/s 45(2) of I T Act only after it is sold by a registered deed. 4. The CIT(A) has erred in not considering the principles of revenue recognition as prescribed in AS9 to determine income. 5. Any other ground that may be urged at the time of appeal. CO Nos.17 to 19/Bang/2021 (AYs 2014-15 to 2016-17): Common grounds:- 1. The learned Commissioner of Income-tax (Appeals) has erred in holding that several legal issues raised by the Cross Objector in the appeal before the learned Commissioner of Income-tax (Appeals) are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent. A Development Agreement ( DA ) was entered into between M/s. G Corp Homes Pvt Ltd (developer), and the Respondent (land owner) on 02.09.2010 for development and construction of residential building in the land. Copy of the Development Agreement is available at Page no. 185 to 223 of the Paper book filed. Thereafter two Supplementary Agreements and a Deed of Rectification were also entered into which are available at page nos. 224 to242 of the Paper Book filed. At the time of entering into DA, amount of Rs. 25 Crores was given to the Respondent as refundable security deposit which was subsequently adjusted proportionally against the advances received. In terms of DA, the revenue earned from sale, lease, license of the area covered under the project was to be shared between the Respondent and developer in the ratio of 37% and 63% respectively. The developer started giving the owners share to the Respondent from FY 2012-13 onwards. These advances were shown as liabilities in the Balance sheet of the Respondent. 4.2 Respondent s share of revenue under this agreement has been offered to tax by the Respondent under the head capital gains. The revenue has been offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the Assessing officer had rightly assessed the advances received as Business income in the year of receipt of advances. 5.1 Ld. D.R. submitted that Shri M.R. Seetharam in his statement stated that the said land is recognized as stock -in-trade in his books. However, as he is regularly receiving the amounts of advances received from M/s. G-Corp Homes Pvt Ltd., the assessee was questioned as to why his part of the advances received shall not be considered as revenue under percentage completion method. In reply, Shri. M R Seetharam accepted this position of the department and agreed to offer the revenue in the respective Assessment Years as per the table below: Assessment Year Amount offered to Tax in (Rs.) 2014-15 27,00,00,000/- 2015-16 50,00,00,000/- 2016-17 25,00,00,000/- TOTAL 102,00,00,000/- 5.2. Again, a sworn statement of Shri. M R Seetharam was recorded u/s 131 of the Act on 19.10.2016. In the statement recorded on 19.10.2016, Shri. Seetharam once again reaffir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee entered into a JDA with M/s G Corp Homes Pvt Ltd. in the capacity of land owner and the revenue sharing model is followed in this JDA instead of sharing of built-up area, which means that the assessee is getting 37% share of the revenue earned on account off development and sale of the constructed area. i. The assessee is in the business of real estate development in addition to the JDA referred above, particularly the nature of business is that of land development, Plotting and selling of plots and offered the income under the head business. ii. Possession of the land was given to the developer, M/s G Corp Homes P Ltd indicating transfer of the land. It is specifically mentioned in the JDA as per point no 6 that the owner executed an irrevocable power of attorney in respect of the property to the developer for development of the property and construction thereon. Another power of attorney was given in favour of the developer giving power to the developer for selling the premises, including selling of the undivided interest in the land. Thus, risk of the assessee is shifted to the developer. By virtue of this, the assessee is receiving the advances from developer at en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have offered the income under Accounting Standard 9, him being the land owner. viii. The other party (Developer) which is developing the land is regularly accounting the revenue generated on the development generated from the land as per the percentage completion method under AS-7. ix. There is transfer of significant risks and rewards by way of agreement to sell and agreement to construct signifying the applicability of AS-9. Registration of the final sale deed by the assessee to customers is only a way of formalizing the contract and its impact on recognition of revenue and corresponding tax liability is extremely limited in scope. x. It is to be noted that the revenue/income should be recognized when there is an actual transfer even though the legal title is not transferred. ICAI guidance note on recognition of revenue for real estate transactions states that the basic principles of AS-09 would apply to Real Estate transactions. The point at which all significant risks and rewards of ownership can be considered as transferred is required to be determined on the basis of the terms and conditions of the agreement for sale. In case of real estate sales, the sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el indicates that the transactions are similar to that of a developer and not that of mere transferring of property to developer. The revenue share received by the assessee cannot be construed as a simple case of transfer of property. In any transfer of property, the transferor and transferee exercise effective control over the transaction. In the present scenario, the assessee has no control over the sale process, i.e. right to choose the transferee and the cancellation of contract. In all the agreements, developer is a party indicating significant sharing of business between the assessee and the developer. In other words, the entire business process of development of- property, sale of the apartments, transfer of assessee's share of revenue to the assessee's account is irreversible by the assessee. The business process is similar to that of a business activity of a developer and the assessee should have recognized revenue as per AS-9, being a land owner. It is also noticed by the Ld. D.R. that from the returns of income filed by the assessee till AY 2015-16, the assessee had shown this land which is under JDA as stock in trade. Subsequently, from AY 2016-17 it has been sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efrom have been offered to tax by the Respondent under the head Capital Gains. The details of capital gains offered by the Respondent as and when the sale deeds got registered as under: Year-wise Capital Gains offered to Tax relating to ICON Project with a Corp Homes Pvt. Ltd, Income from Capital Gains: Asst. Year Sale consideration Cost of Transfer Net Sale consideration indexed cost of acquisition capital gain offered to tax 2017-18 352,599,441 3,084,915 349,514,526 43,621,676 305,892,850 2018-19 218,214,035 1,780,301 216,433,734 24,784,313 191,649,421 2019-20 762,950,740 6,980,579 755,970,161 83,182,154 672,788,007 2020-21 276,366,036 2,821,635 273,544,401 32,467,521 241,076,880 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against sale of flats does not arise at all. 6.3 The Ld. AR of the Respondent further argued that advances received against sale of flats cannot result in transfer of flats and therefore the advances received against sale of flats cannot be held to trigger a taxable event. If this proposition is upheld then there would be as many transfers as advances received for a Flat which is unconceivable in the eyes of law. 6.4 During the year under consideration, no flats were sold in the project. There were only few agreements to sale under which some advances were received and the Respondent received his share of advance. The actual sale vide registered sale deeds happened only from AY 17-18. Under the agreement to sale with the buyers of flat, there was no sale or exchange or relinquishment of any asset. The agreement to sale also did not result in any actual sale of flats. The Supreme Court has in the case of Suraj Lamp Industries (P) Ltd v State of Haryana [2012] 340 ITR 1 (SC) held that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance. The Respondent relied upon various case laws Copies of which are available at pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Thanisandra is treated as stock in trade, the advances received during the impugned assessment years would not be in the nature of income would remain as advances (liabilities) in the hands of the Respondent. The profit on sale of flats will be recognized only in the year of sale when significant risk and rewards are transferred to the buyer. However, the Assessing officer has brought to tax the entire advances received in the respective years in which advances were received. h. In the present case the Respondent is following the Mercantile system of accounting not Cash system of accounting, which are the only two systems of accounting recognized by the Income Tax Act. Under the Mercantile System of Accounting the Respondent is following the completed contract method to determine the year of taxability of income arising out of the same. In the event he owns the land as Stock in Trade, does not by itself confer any right to the AO to recognise income from the said project on percentage completion method. The said method is to be applied to the person who is developing the land not the Respondent as he is landlord simpliciter in the present case. The Land if held as Stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the CIT(A) s order with respect to applicability of section 45(2) of the Act. The provisions of section 45(2) of the Act are applicable in a case of transfer by way of conversion of capital asset into stock in trade. In the instant case there is no such conversion of capital asset into stock in trade. The land at Thanisandra was held as Capital asset only and at no point of time such capital asset was converted into stock in trade. The Respondent in the submissions made before CIT(A) had alternatively contended that even if the land at Thanisandra is considered as stock in trade then also the taxability arises only in the year of sale and not in the year of receipt of advances. 6.11. The Department in ground no. 4 raised a contention that the principles of revenue recognition as prescribed in AS9 should have been adopted. In this regard, the Respondent submits as under: 6.12 Accounting standard 9 not applicable to the facts of the Respondent s case: 6.13 ICDS IV (AS 9) deals with three forms of revenue. They are - (i) sale of goods; (ii) rendering of services; and (iii) use of other person s resources yielding interest, royalties or dividends. 6.14 In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal title in the flats and undivided share of land is transferred only upon registration of the final sale deed. 6.21 In the Respondent s case, the alternate conditions transfer of significant risks and rewards of ownership to the buyer and loss of effective control by seller are also not met. These conditions are deliberated in detail below: 6.22 Risks and rewards of ownership a. Under the agreement to sale, which is a composite agreement, the buyer has bargained for two future performances for an agreed monetary consideration: 1. Purchase on a future date of undivided share in land from the Respondent. 2. Construction of residential apartment by the developer. b. Respondent s transaction with buyer, concerns transfer of undivided share of land from the Respondent to the buyer on a future date. Undivided Share of Land is a part of the plot agreed to be given to the buyer of an apartment complex on which the entire structure is built. This share of land has no defined boundaries. Out of the overall land available, the buyer s share of land agreed to be bought is not identifiable. c. In the case of real estate sales, the events, such as, transfer of legal ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Vendors, only if the Purchaser satisfies the Vendors of the credibility and financial capability of the prospective assignee or transferee and on payment of transfer charges plus service tax or any other taxes as applicable as determined by the Developer from time to time. Clause 1 at page 12: Purchaser has no right to interfere with the progress of construction of the apartment and/or the residential buildings or the Project or any part thereof and the Purchaser is aware that he shall not be permitted to enter upon the said property at the time of construction in the interests of safety. h. From the above extract of agreement, following restrictions on buyer s rewards associated with ownership emerges: i) The buyer s undivided share of land is not identifiable in the overall land held by the Respondent. In fact, the exact quantum of undivided share of land is also not certain and is liable to future variations. ii) The buyer s right to transfer / assign his rights under the contract are highly restricted and requires prior approval of the sellers. The buyer has no independent right to transfer what he has agreed to buy under the agreement to sale. iii) Buyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tervention of the Purchaser/s as per the development Scheme. b. Thus, clearly, under the agreement to sale, neither risks and rewards of ownership nor control over the land have been transferred to the buyer. Therefore, no income has accrued to the Respondent during the year under consideration. The conclusions drawn by the learned assessing officer being contrary to the generally accepted accounting principles is erroneous and have to be ignored. 6.24 Even legally speaking under agreement to sale, no significant risks and rewards get transferred under the agreement to sale. An immoveable property of the value of Rs. 100 and above can be transferred only by through a registered conveyance Deed. The Supreme Court in the case of Suraj Lamp Industries (P) Ltd v State of Haryana [2012] 340 ITR 1 (SC) has held that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance. There are catena of cases to support the above view. Even the law (Transfer of property Act read with Indian Registration Act) is very clear on the issue. Therefore, significant risks and rewards exchange hands only at the moment of final transfer i.e. on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etion of the project. b) Percentage completion method Under this method revenue is recognised in proportion to percentage of overall work completed during the year. 6.28 As per the accounting standard, percentage completion method (also referred to as proportionate completion method) is apt for cases where performance consists of execution of more than one acts. 6.29 Project completion method is recommended in scenarios where a. the performance consists of execution of a single act or b. where there are more than one acts to be executed but the actions yet to be performed are so significant that the performance cannot be deemed to have been completed until execution of those final acts 6.30 In the Respondent s case the only performance obligation pending from the Respondent s end is transfer of legal title of share in land by registration and execution of sale deed. The Respondent s case thus falls under the scenario where only single act is pending for discharge of performance obligations. Therefore, the project completion method of accounting is most appropriate to the facts of the Respondent s case. 6.31 In any case, where there are two or more alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt due by the Respondent and not debt due to the Respondent. Therefore, till project is completed there would be no legal right to appropriate the advance money paid by the prospective customers. e. The project completion method chosen by the Respondent is therefore in accordance with section 5 of the Act. f. The case laws upholding project completion method for assessing income are available at page nos. 1590 to 1687 of the compilation of case laws filed. 6.33 Income recognition of one business cannot be applied to another: a. At para 12(viii), of the impugned order, the learned assessing officer has noted that the developer has accounted and offered revenue to tax under percentage completion method. This however cannot be a basis to compel the Respondent also to adopt percentage completion method. As has been explained earlier the choice of method of accounting is always that of the assessee. As long as the method followed by the assessee is valid and recognised, the department can never force upon the assessee any other method of accounting. b. Even otherwise the Respondent submits that the economic substance of Respondent s transactions and developer s transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered under the project was to be shared between the assessee and developer in the ratio of 63:37. According to the assessee, the developer started giving owner share of the constructed area from financial year 2012-13 (AY 2013-14 onwards) and the developer has been receiving the advance from the prospective customers and transferred landlord s share of advance to assessee s account. The said advance has been shown by assessee as a liability in the balance sheet. The submission of the ld. AR is that the income earned by the assessee on this transaction was offered by assessee as capital gain in subsequent assessment years under head Capital Gain by following completed contract method as assessee not involved in the construction and development activity and the AS-7 not applicable to the assessee as the assessee is not a contractor and the assessee s revenue is to be recognized and governed by AS-9. According to the Ld. D.R., the same to be treated as income from business in all these assessment years and percentage completion to be followed and income recognition to be done as per AS-7. The ld. AO also has not granted any deduction in respect of cost of land and other incidental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in respect of certain other lands bearing Sy. Nos. 45/3, 46/9, 49,2, 55/2, 55/3, 55/4 and 55/5 ('Additional Lands ) which are contiguous to the Subject Property and if the Owner acquires title and khata in relation to the Additional Lands, the Owner shall be obliged to enter into a Supplemental Agreement to this Agreement and grant developments rights in respect of the Additional Lands in favour of the Developer on the same terms and conditions as set cut in this Agreement. It is clarified that no further Refundable Security Deposit will be payable by the Developer to the Owner for the Additional Lands. 9.4 The Owner shall not interfere or create hindrance in the construction or do or permit anyone to do any act, deed, matter or thing which may affect the marketability of the Schedule Property or which may cause obstruction in construction. 9.5 The Owner shall provide, at the request of the Developer, from time to time, all data, documents, information as may be deemed necessary or reasonably required by the Developer and also to communicate to the Developer in writing any information coming to their knowledge which is likely to adversely affect the development of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Property shall be marketed as a G. Corp MSR Project and the name of the Project will be mutually decided by and between the parties 14.3 The Agreement for Sale and/or other writings to be entered into with the prospective purchasers of the premises { Customer Agreements ) shall be prepared by the Developer and for this purpose the Developer may engage legal advisors for drafting the Agreement for Sale and other writing/s to be executed with the prospective purchasers. 14.4 The Owner as represented by their Power of Attorney Holder i.e. the Developer, the Developer and the Customer shall be parties to the Customer Agreements and/or other writings to be executed with the purchasers of the premises in the Schedule Property. 14.5 The Developer shall allow the Owner to inspect all the agreements / deeds that are executed by the Developer upon the request of the Owner BANK ACCOUNT 14.6 The Developer shall be responsible for all the collection of dues from apartment/flat/unit purchasers in its own name. Ali collection of Revenue from the Project shall be deposited in a separate bank account. 14.7 The separate bank account shall be opened in the name of G:C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the Owner to give his comments in relation to the plans and any period during which approvals a'-e not being granted by statutory / municipal authorities, which is beyond the control of the Developer, shall be excluded from the period of g months. However, in case there is a delay in receiving the approvals for reasons beyond the Developer's control, the period shall be extended mutually by the Owner and the Developer. 7.7 As seen from the various clauses as narrated above, the assessee agrees to sell the specified share for percentage of undivided interest in the land to the prospective buyers as nominated by the developer in lieu of developer to construct for the owner certain specified extent of built-up area with the right to use certain common area, facilities and amenities. Development agreement between assessee and developer are contractual and commercial in nature and assessee given right to enter into the property for the purpose of construction to be carried out in the scheduled property and such right of enter is only license giving coming within the purview of section 52 of the Indian Easement Act, 1882. The legal domain, control and physical possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ships observed as follows: Under Section2(47)(v), any transaction involving allowing of possession to be taken or retained in part performance of the contract of the nature referred to in section 53A of the Transfer of Property Act would come within the ambit of Section 2(47)(v). That, in order to attract Section 53A, the following conditions need to be fulfilled. There should be contract for consideration; it should be in writing; it should be signed by the transferor; it should pertain to the transfer of immovable property; the transferee should have taken possession of property; lastly, transferee should be ready and willing to perform the contract. That even arrangements confirming privileges of ownership, without transfer of title, could fall under section 2(47)(v). 7.11 Their Lordships, having made the above observations, took note of the fact that section 2(47)(v) was introduced in the Act w.e.f. A.Y 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of conveyance. It was also noted by their Lordships that, in this scenario, assessee used to enter into agreements for developing properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom enforcing against the, transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than the right specifically provided by the terms of the contract; Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. 7.14 A plain reading of the section 53A of the Transfer of Property Act shows that in order that a contract can be termed to be of the nature referred to in s. 53A of the Transfer of Property Act it is one of the necessary preconditions that transferee should have or is willing to perform his part of the contract. This aspect has been duly taken note of by the Hon ble Bombay High when their Lordships observed as follows: That, in order to attract s. 53A, the following conditions need to be fulfilled. There should be contract for consideration; it should be in writing; it should be signed by the transferor; it should pertain to the transfer of immovable property; the transferee should have taken possession of property; lastly, transferee should be ready and willing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the clause No.5 5.1 of the development agreement dated 2.9.2010 as enumerated therein, which itself states that no possession of property has been given through the impugned development agreement. The development agreement is only for granting license to enter property and start development activity, thus, as a result of this provision of section 2(47)(v) of the Act have no application. This falls within the purview of section 53A of the T.P. Act and such part performance has been defined as Transfer u/s 2(47) of the Act. The A.O. himself aware of the fact that the possession of the property was not given vide development agreement and valid consideration was also not received by the assessee and only permissive possession of the property was given by the assessee to the developer in these assessment years. The A.O. apparently posted on the basis that mere grant of license, coupled with entering of development agreement was enough to invoke deemed transfer u/s 2(47)(v) of the Act. That is clearly an erroneous estimation and an action based on such a fallacious estimation cannot be sustained by law. The provisions of deemed transfer u/s 2(47)(v) of the Act could not have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act takes into account two points of time on which liability to tax is attracted. Namely, the accrual of the income or its receipt but the substance of the matter is the income . If income does not result at all, there cannot be a tax even though any book keeping an entry made about an income, which does not materialize. Where income as, in fact, been received and in subsequently given up in such situation that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said to have resulted at all there is obviously neither accrual nor receipt of income, even though an entry to that effect might in certain circumstances have been made in the books of accounts. Mere book keeping entry cannot be income unless income has actually received. In our opinion, legal consequences of the transaction must be kept in mind and should be taken as an acting factor for arriving at a decision from the point of view of the income tax as well. This is because of the fact that what is sought to be taxed under income tax act is the commercial profit and not the theoretical or notional income unless the statute otherwise provides for imposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the same as each of them are independent assessable entities under the scheme of Act and are entitled to choose the method that is preferred by them. d) It has to be noted that the expert advisory committee of the Institute of Chartered Accountants of India have opined that the provisions of the Accounting Standard - 7 - Construction Contracts are not applicable developers and that the provisions of Accounting Standard - 9 - Revenue Recognition would apply to them e) In our opinion, no possession has been granted to the prospective customers. The purchasers do not have a right to obstruct the development. It is also be noted that if the prospective purchases do not make the payments, the agreement can be terminated. The clauses in the agreements with customers, which clearly states that the parties confirm that the owner shall retain legal possession, domain and control over the property till the same is developed and sold either in whole or in parts to prospective purchasers as provided in the agreement. f) As per clause 2 3 of the development agreement at page no.5 6 of JDA dated 13.03.2005 which clearly states as follows:- Clause 2 PLANS/LICENSES The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been following project completion method of recognition of revenue and this system of accounting has been followed by from year to year which can be seen from the assessment order in assessment year from 2014-15 passed u/s 143(3) dated 19.5.2015. Thus, it was the submission ld. AR that it is not open to the department to change the method of accounting in the middle of the period of completion of the project even percentage competition method is applicable. He submitted that rule of consistency has to be followed. For this purpose, he relied on various judgements. 8. In our opinion, the additions made under the income from business by computing the income based on percentage completion method will result in double taxation which is impermissible in law. 8.1 In view of the above, the proposition of the learned Assessing Officer that the income offered in the subsequent years is income of the impugned assessment year will result in double taxation which is impermissible in law. 8.2 We place reliance on the decision of the Hon'ble Supreme Court in ITO v. Bachu Lal Kapoor (1966) (60 ITR 74) (SC), wherein held that: A HUF is a separate unit of assessment. It is a dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the 1922 Act, any part of the income reeived by its members cannot be assessed over again. While section 3 of the 1922 Act confers an option on the ITO to assess either the association of persons or the members of the association individually, no such option is conferred on him thereunder in the case of a HUF, as its existence excludes the liability of its members in respect of the income of the former received by the latter. It was true that the Act does not envisage taxation of the same income twice over one passage of money in the form of one sort of income . It is equally true that section 14(1) of the 1922 Act expressly debars the imposition of tax on any part of the income of a HUF received by its members. The fact that there is no provision in the Act dealing with a converse position does not affect the question, for the existence of such a converse position is legally impossible under the Act. So long as the HUF exists, the individuals thereof cannot separately be assessed in respect of its income. None the less, if, under some mistake, such income was assessed to tax in the hands of the individual members, which should not have been done, when a proper assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame method of revenue recognition as there is an implied formidable fortified concurrence of the revenue on the method adopted by the assessee. The observation of the AO is further not under the spirit and the scheme of the Act. 8.5 It is needless to add that the department is excepted to assist the assesses in computing taxable income as per the provisions of the Act as enunciated by the CBDT in Circular No. No. 14 (XL-35) of 1955, dated 11.04.1995 and amplified by the decision of the Hon'ble Karnataka High Court in the case of Rajeshwari Cotton Ginning Pressing Industries v. ALIT (2017) 88 taxmann.com 463 (Kar.). Therefore, the officers of the department ought to have atleast guided the assessee in offering income correctly. Failure to even suggest the same during the course of enquiry and therefore, the statement of the CIT(A) that the assessee was not directed to offer income in subsequent years is absolutely not within the spirit and intent of the Act and also unsustainable in law. 8.6 It was noted that Joint Development agreement and the method of revenue recognition of the assessee are details/ information which were already available with the department during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... past by the assessee, which had been accepted by the department in earlier years, therefore, there was no justification, whatsoever to reject this system by invoking the provisions of section 145 of the Act and making estimate of profit by AO. 8.7 At this stage, it is appropriate mention the Third member decision in the case of JCIT Vs. Magnum International Trading Company Ltd. (84 ITD 113) (Third Member) (Del.) wherein held that: Assessee following project completion method, AO not justified in rejecting the method midway and estimated profit more so on when it was not permissible for the assessee or for the revenue to correctly work out the profit by changing the method of accounting in midway and make estimate of the income from ongoing contract for which there is no specific allocation of expenditure. 8.8 In the case of Haware Constructions (P) Ltd. Vs. ITO 30 CCH 425 (Mum. Trib) wherein held that: Assessee builder having regularly employed project completion method which is an accepted method of accounting and the AO having accepted the same in the preceding assessment year, there is no justification to reject the said method to apply the percentage comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, there is no error in the order of the CIT(A) on the issue in dispute. Revenue s appeal dismissed. 8.11 In the case of DCIT Vs. Ankit Chirag Developers Pvt Ltd. 40 CCH 18 (Jodh) (Trib). held that On perusal of clause 10 11 of AS-9 it is noted that in the appellant s case the retractions involving of sale of good, the performance can be regarded as achieved when conditions laid down in clause 11 are fulfilled. In this connection it may be noted that the appellant has not transferred to the buyers the property i.e. flats in as much as significant risk and rewards of ownership have not been transferred. No sale deeds of sale of flats or any legally enforceable documents have been executed by the appellant. Though the AO has mentioned in the assessment order that sale agreements were executed but such findings appear to be factually incorrect in as much as in assessment order or in subsequent remand report there is no reference of any sales agreement. The appellant has also denied to have executed any sale agreement for sale of flat. It may also be noted that the appellant during assessment proceedings, vide written submission dated 8.1.2011 (para 2) also brought to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own that the income in respect of transfer of immovable property can be recognized only when the risks, rewards and ownership of the property is transferred to the buyer. Therefore, the matter requires fresh examination by the Assessing Officer in the light of the above position of law. Therefore, court remand this matter back to the file of the Assessing Officer with a direction that the income in respect of sale of plots can be recognized only in the year in which conveyance deed executed is registered in favour of the buyers and to allow the development expenditure incurred as expenditure or the expenditure likely to be incurred on the plots sold as expenditure. And this direction also goes in line in consonance with the provisions of accounting standard 9 which clearly lays down that matching is required to be done on accrual basis in respect of the income offered to tax and upheld by Hon ble Supreme Court in the case of CIT Vs. Taparia Tools Ltd. 8.13 In the case of Prestige Estate Projects (P) Ltd. Vs. DCIT 129 TTJ 680 (Bang) (Trib) wherein held that: The appellant undertakes construction activity for those persons to whom it intends to sell the super-built area a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is an accepted method of accounting, and the Central Government having not notified AS-7 under s. 145(2), AO could not reject the accounts under s. 145(3) on the ground that the assessee had not followed the percentage completion method. 8.14 In the case of CIT Vs. Banjara Developers Constructions P. Ltd. 425 ITR 673 (Karn.) wherein held that: 7. We have considered the submissions made on both the sides and have perused the record. Section 145 of the Act deals with method of accounting. Section 145(1) provides that income chargeable under the head 'profits and gains of business or profession' or 'income from other sources' shall subject to provisions of sub-section (2) be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. It is noteworthy that section 145 came to be amended w.e.f. 1-4-1987 and has not been given retrospective operation. The supreme court in the case of Bilahari Investments (P.) Ltd. supra has held as under: Every assessee is entitled to arrange its affairs and follows the method of accounting which the department has earlier accepted. It is only in those cases where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 440 ITR 343 (Karn.) wherein held that 10. In the instant case, assessee entered into a Development Agreement with M/s. Karnataka Realtors Private Limited, under which agreement the assessee was to develop the property and after development of the property, the owner and the developer were entitled to a specified percentage of super built area and both were free to sell the super built area allotted to their respective shares before construction of the built up area fallen to the share of the assessee, it (assessee) entered into agreement with the proposed buyer to construct the portion as per their specification. In other words, construction is undertaken by the assessee on behalf of the proposed buyer. However, for the purposes of stamp duty payable on the sale of undivided share of land sold to the buyer, only value of the land is taken and assessee had followed consistently this method of accounting to declare the profit namely, on project completion method as per the provisions of the Companies namely, section 211(3A) the Profit and Loss Account and balance sheet of the company has to comply with the Accounting Standard. As per proviso to section 211(3C), Standards of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in the activity of projects and was not a construction contractor. Thus, the revised AS-7 would be applicable to an enterprise undertaking construction activities on their own account as a venture of commercial nature. Whereas, the assessee undertakes construction activities for those persons to whom it intends to sell super built area along with undivided share of land in a project which it is developing as a developer. 11. There cannot be any dispute to the fact that every assessee being entitled to arrange its affairs and follow the method of accounting, which the Department has earlier accepted. Under similar circumstances as obtained from the facts on hand, Hon'ble Apex Court in the case of CIT v. Bilahari Investment (P) Ltd. [2008] 168 Taxman 95/299 ITR 1 has held: Recognition/identification of income under the 1961 Act is attainable by several methods of accounting. It may be noted that the same result could be attained by any one of the accounting methods. The completed contract method is one such method. Similarly, the percentage of completion method is another such method. Under the completed contract method, the revenue is not recognized until ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat under section 145(1) of the Act, the income chargeable under the head Profits and Gains of Business shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. The general provision is subject to accounting standards that the Central Government may notify. The assessee is a builder and developer and not a construction contractor simplicitor. Accounting Standard 7, titled construction contracts is applicable only in case of contractors and does not apply to the case of developers and builders which is evident from opinion rendered by expert advisory committee of ICAI. It is pertinent to note that the assessee had offered the income for. Assessment Year 2007-08 and no income from the project was offered for the Assessment Year 2007-08 on the basis of project completion method and that either method of accounting finally lead to the same results in terms of profits and therefore, revenue neutral. In view of preceding analysis, the fourth substantial question of law is also answered against the revenue and in favour of the assessee. In the result, the appeal fails and is hereby dismissed. 8.19 In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner as he may determine . Comparing the provisions with the English provisions, it is held, the only departure made by section 13 of 1922 Act from tax legislation in England is that whereas under English legislation the commissioner is not obliged to determine profits of a business venture according to method of accounting adopted by the assessee, under the Indian Income Tax Act, prima-facie, the ITO has for purposes of section 10 12 of 1922 act to compute income, profits and gains in accordance with method of accounting regularly employed. If, therefore, there is a system of accounting regularly employed and by appropriate adjustments from the accounts maintained taxable profits may be properly deduced, the ITO is bound to compute profits in accordance with method of accounting. but where in the opinion of ITO, the profits cannot be properly deduced from eth system of accounting adopted by assessee it is open to him to adopt a more suitable basis for computation of true profits. Their Lordships then also dealt with method of accounting and observed as under- among Indian businessmen as elsewhere, there are current two principle systems of book keeping, there is, firstly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common order, accepting the method of accounting and method of recognition of revenue. Thus the method followed by appellant is a consistent method which has been accepted by AO for two years i.e. AY 2010-11 2011-12 Since the said method has been consistently followed by appellant and even accepted by department, the same cannot be deviated in the present two years without there being any finding as contemplated u/s 145(3) on the basis of satisfaction required by that section viz., (1)about correctness or completeness of the accounts of the assessee or (2) about the fact that the assessee has not regularly employed the method of accounts provided in section 145(1) or (3) that the income has not been computed in accordance with the standards notified u/s 145(2). 33. Now it is an admitted fact based on the financial statement and audited reports for 2010-11 and 2011-12 accepted by the revenue authorities in the assessment proceedings u/s 143(3) read with respect of 153(A) of the Act that the assessee has been consistently following project completion method/completed contract method for the treatment of advances received from proposed buyers through developer JSM DPL. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant is not reporting or under reporting its income. In fact, I find in the subsequent assessment year, i.e. the assessment year 2007-08, the appellant has disclosed substantial income from the projects undertaken in the business proprietary concerns, viz, M/s. Neelkanth Enterprises, M/s. Ghanshyam Enterprises and M/s. Swaminarayan Enterprises. In the subsequent year, i.e. the assessment sear 2007-08 the profit declared from the projects run by these three proprietary concerns ranges from 43 per cent to 46 per cent. The Supreme Court in the case of Sanjeev Woolden Mills v. CIT (supra), has clearly held that to attract the proviso to section 145(1) of the Act, the Assessing Officer should be of the view that the accounts are correct and complete but the method employed is such that the income cannot be property deduced there from. The choice of method of accounting regularly employed by the assessee lies with the assessee but the assessee would be required to show that he assessee's regular method would not be rejected as improper merely because it gives the assessee the benefit in certain years or that as per the Assessing Officer, the other method would have been more prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided the system chosen by the assessee is consistently followed by him and such system is not a defective system. In our considered view, provisions of AS7 cannot override the provisions of section 145 in so far as the computation of business income under the Income Tax Act for the purpose of determining income is concerned. In the instant case, we find that the learned Assessing Officer has brought no material on record to show that the system of accounting adopted by the assessee for the year under appeal was not consistently followed y the assessee or the system adopted was a defective system. In our considered view, even a project completion method is also a recognized system of accounting. Simply the Institute of Chartered Accountants of India has recommended the percentage completion method does not mean that project accounting or the same is a defective system of accounting. The learned Commissioner of Incometax (Appeals) has recorded a finding after pursuing the assessment records of the subsequent years that the assessee has offered for taxation its income in the. subsequent year as per the consistent system of accounting followed by the assessee. The learned Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38. Similarly Hon'ble High Court of Punjab Haryana in the case of Commissioner of Income Tax (Central), Gurgaon V. Principal Officer, Hill View Infrastructure (P) Ltd (2017) 81 taxmann.com 58 (Punjab Haryana) order dated 13.8.2015 confirmed the view taken by the Tribunal deciding in favour of the assessee relating to the issue of the project completion method adopted by the assessee vis-a-vis percentage completion method applied by us, the Assessing Officer observing as follows; The assessee in reply to the query raised by the Assessing Officer had inter alia claimed that it had been consistently following method of booking of the revenue on the completion of the flat when full payment had been made to it by the person concerned and possession was delivered to him. It was pointed out that neither Accounting standard 9 (AS 9) or Accounting Standard 7 (AS 7) issued by the Institute of Chartered Accounts of India has been recognized by the Act and in such circumstances, there was no guidance or strict procedure for adopting a particular accounting standard under the/act and it depends upon facts and circumstances of each case. In other words, the assessee was entitled to adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompletion method is accepted standards of accounting and either of the methods can be applied by the assessee. In the facts of the present case before us, the assessee had chosen to compute its income on the basis of project completion method i.e. recognizing the income on -the completion of the project and not from year to year whereas the case of the revenue was that it should account for the income as it is generated in the hands of the assessee i.e. from year to year on the basis of the work completed being relatable to the revenue generated from year to year. The Hon`ble Supreme Court in CIT Vs. Bilahari Investment (P) Ltd (supra) had held that recognition/identification of income under the 1961 Act is attainable by several methods ,of accounting. It may be noted that the same result could be attained by any one of the accounting methods. Completed contract method is one such method. It was further held that Every assessee is entitled to arrange its affairs and follow the method of accounting which the Department has earlier accepted. It is only on those cases where the department records a finding that the method adopted by the assessee results in distortion of profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tently following one of the recognized methods of accountancy, i.e project completion method, for computation of its income. In the absence of any prohibition or restriction under the Act for doing so, it cannot be held that the approach of the CIT (A) and the Tribunal was erroneous or illegal in any manner so as to call for interference by this Court. No substantial question of law arises. Consequently, finding no merit in these appeals, the same are dismissed. 38. It is well settled that the project completion method is one of the recognized methods of accounting. In CIT v Hyundai Heavy Industries Co. Ltd (2007) 291 ITR 482/161 Taxman 191 (SC) the Supreme Court held as follows:- Lastly, there is a concept in accounts which is called the concept of contract accounts. Under that concept, two methods exist for ascertaining profit for contracts, namely, completed contract method and percentage of completion method . To know the results of his operations, the contractor prepares what is called a contract account which is debited with various costs and which is credited with revenue associated with a particular contract. However, the rules of recognition of cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there was no justification on the part of the assessing officer to adopt the percentage completion method for one year(the year under appeal) on selective basis. This will distort the computation of the true profits and gains of the business. For these reasons, we axe of the view that no substantial question of law arises. We, therefore, decline to admit question Nos. 2 and 3. 41. From perusal of all the judgments it has been consistently held rather a settled law that the action of revenue authorities cannot be held justified if they substitute another method of accounting on the assessee which in the instant case was imposing of percentage completion method on the assessee even when it has been consistently maintaining the regular books of accounts on mercantile basis u/s 145 of the Act adopting project completion method to account for the revenue and the revenue authorities have failed to bring forth any inconsistency in the books of accounts. The Assgessing Officer in the instant case has merely applied the method of percentage completion adopted by the Developer JSM DPL and calculated the income of the assessee completely ignoring the fact that the assessee was merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire exercise of the AO is revenue neutral. The CIT(A) has correctly appreciated the facts and circumstances of the case and has taken note of the revenue recognition in the later year. The assessee has also demonstrated that the revenue recognized from project has been actually assessed and accepted in 143(3) r.w.s. 263 of the Act proceedings. (Para 8) Conclusion: AO cannot challenge the project completion method adopted by the assessee, a developer and constructor of the building project, to the percentage completion method unless all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership. 8.22 The following case laws also support the case of the assessee which are as follows:- CIT V. Realest Builders Services Ltd. 216 CTR (SC) 345 Paras Buildtech India Pvt. Ltd. Vs CIT (2016) 382 ITR 0630 (Delhi) CIT V. Manish Buildwell Pvt. Ltd. (2011) 245 CTR 0397 (Del) CIT vs. Shivalik Buildwell (P.) Ltd. - 40 taxmann.com 219(Gujarat) ITA No. 853 of 2015(Bom) CIT vs. Millennium Estates Private Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.25 Thus, in case of JDA the assessee being landlord share the proceeds arising from the development of immovable property belonging to the land owner share at specified percentage of constructed area and retains the legal ownership, domain and control of the land with him being a land owner and no portion of it will be transferred to the developer or his nominee, as the case may be. There is no allocated area designated as owner share or developer share as the case may be. The revenue shall be recognized by land owner being present assessee only at the point of transfer of risk and rewards of ownership of divided/undivided shares of land to the purchaser of unit i.e. at the point of conveyance or possession, whichever is earlier. 8.26 Income recognition of one business cannot be applied to another: a. At para 12(viii), of the impugned order, the learned assessing officer has noted that the developer has accounted and offered revenue to tax under percentage completion method. This however cannot be a basis to compel the Respondent also to adopt percentage completion method. As has been explained earlier the choice of method of accounting is always that of the assessee. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is whether the addition could be made merely on the basis of admission made by the assessee in the statement recorded u/s 132(4) of the Act? In our opinion, the statement recorded u/s 132(4) of the Act is not conclusive and it is rebuttable. For this proposition, we place reliance on the decision rendered by Hon'ble Supreme Courtin the case of Pullangode Rubber Product Co. Vs. State of Kerala (91 ITR 18) (SC), wherein it was held that the admission may be an important piece of evidence, but the same is not conclusive. It is open to the person who made the admission to show that it was incorrect. We may also refer to the decision rendered by Hon'ble Supreme Court in the case of CIT vs. V. MR.P Firm (1965) 56 ITR 67, wherein it was held that the principle of estoppels will not against the Income tax Act. The relevant observations are extracted below: The contention is that the assessees having opted to accept the scheme, derived benefit there-under, and agreed to have their discharged debts excluded from the assets side in the balance-sheet subject to the condition that subsequent recoveries by them would be taxable income, they are now precluded, on the principle of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. In the case on hand, it was obligatory on the part of the Assessing Officer to apply his mind to the facts disclosed in the return and assess the assessee keeping in mind the law holding the field. 8.30. The Hon'ble Calcutta High court in case of CIT V. Bhaskar Mitter (73 Taxmann 437) has held as under: 8. The controversy raised in the second question is as to whether the annual letting value of the property determined by the Tribunal could be a figure lower than that returned by the assessee. The principles for determining the annual letting value under section 23 are now well-settled and if the value returned is not in accordance with such principles, it is open to the assessee to contend that the value as may be determined upon correct application of the law should form the basis of assessment. The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a figure which is higher than the annual value determined in accordance with the correct legal principles, such higher amount and not the correct amount should be lawfully assessed. An assessee is liable to pay tax only upon such income as can be in law included in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 132(4) as well as 131 of the Act without valid seized material. In our opinion, that should be a valid seized material found during the course of search and the sworn statement of the Directors cannot substitute this seized material found during the course of search, though sworn statement is a piece of evidence to frame the assessment but it is not conclusive evidence to frame the assessment or sustain the addition. 8.32 For the assessment year 2015-16 and 2016-17, these assessments were framed u/s 143(3) r.w.s. 153D of the Act and there was no valid seized material found during the course of search to frame the assessment. The ld. AO cannot rely only on the sworn statement recorded from Shri M.R. Seetharam to frame the assessment. In our opinion, as discussed in earlier para, sworn statement is not conclusive evidence to frame the assessment or to sustain the addition. The addition shall be based on the evidence found during the course of search action or during the course of assessment. 8.33 The learned CIT(A) after verifying the detailed submissions, had allowed the appeals filed by the Respondent holding that the sale of flats (received under Development Agreement) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced at the time of hearing, it is requested that the impugned assessment order passed by the Assessing Officer be held to be bad in law and void ab initio and be quashed. 11. Facts of the case are that a search action u/s 132 of the Act was conducted in the case of M/s. M.S. Ramaiah Developers Builders P Ltd. on 23.08.2016. During search proceedings some documents pertaining to Shri. M R Seetharam, the assessee was found and seized. Since these documents had a bearing on total income of the Shri M R Seetharam, the same were considered for assessment of this. case u/s 153C of I T Act. Subsequently, this case is centralized to this circle by the Pr. CIT, Bangalore-6, Bangalore vide his Notification u/s 127 in F.No. Pr. CIT/B1r- 6/Centralization/20.16-17 dated 02.12.2016. 11.1 Notice u/s. 153C r.w.s. 153A of the Act was issued to the assessee on 30.08.2018 requiring 'him to file the Return of Income within 30 days from the date of receipt of notice. In response to. the notice issued, the assessee submitted a copy of the return filed by him on 18.09.2018 vide acknowledgement number 296341471180918 declaring the total income at Rs.1,85,34,040/- and requested for the withd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is transferring the land owner's share of advances received regularly to Shri. M R Seetharam. This was confronted to the assessee, Shri. M R Seetharam and his sworn statement was recorded u/s 132(4) of I T Act on 28.08.2016 during the course of the search. The relevant part of the statement is reproduced as below: Q.No.13 Please state the various stages in which the JDAs are in presently with respect to completion. Ans. The JDAs with G-Corp Homes Pvt. Ltd., M/s. Kalyam Tech Park Ltd. are under development. The JDA with M/s. Micro Construction is under preliminary clearances and construction has not started till date. With respect to M/s. Roma Builders, construction is in the final stages. Some sale deeds have been already entered into and I am yet to receive the possession of 2 to 3 apartments. Q.No.14 Please explain in detail the aspects of the JDA with G-Corp Homes Pvt. Ltd. Ans. The JDA was entered into in the FY 2010-11 between myself in the individual capacity as a owner and M/s. G-Corp Homes Pvt. Ltd. as a Developer. The period consists of 14 towers out of which 2 towers are almost completed. The M/s. G-Corp Homes Pvt. Ltd. is responsible for the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment Years. 11.7 However, in the return filed in response to notice u/s 153C of I T Act, the assessee did not declare the income as admitted during search proceedings. The assessee was asked to show-cause as to why the revenue received from M/s G Corp Homes P Ltd during the Asst Year 2014-15 should not be treated as his business income. 12. The Ld. A.R. submitted as follows:- ORDER IS BAD IN LAW FOR INCORRECT ASSUMPTION OF JURISDICTION: 12.1 Transfer of Respondent s case from ACIT Circle 6(3)(1) to ACIT Central Circle 1(2) in violation of Sec. 127 is bad in law. 12.2 As has been submitted earlier, the file of the Respondent was with ACIT Circle 6(3)(1) In fact for the year under appeal the Respondent was earlier assessed u/s 143(3) of the Act by ACIT Circle 6(3)(1). 12.3 However, in the Respondent s case a notice u/s 153C dated 30.08.2018 was served on the Respondent by ACIT Central Circle 1(2). On 19-09-2018 the Respondent filed a letter questioning the assumption of jurisdiction u/s 153C on the ground that the Respondent was not made aware of the reasons for transfer/assignment of his record from one officer to another officer on the ground that requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructors Pvt Ltd and M/s Ramaiah Developers and Builders Pvt Ltd. . 12.9 The Respondent submits that there is however no cogent material to demonstrate as to how transfer of Respondent s case could facilitate effective and coordinated investigation . The Respondent s case is not a case where large number of assessees have been subject to action of search u/s. 132. The Respondent s case has not been linked to search action in the case of any other assessee. Throughout all proceedings, there has never even been a whisper of any linkage between the Respondent s case and the search carried out in the case of other assessees. One therefore fails to decipher as to how transfer of Respondent s case to Central Circle could assist in effective and coordinated investigation . 12.10 The jurisdictional high court in the case of Y. Moideen Kunhi Co. Vs. ITO [1993] 71 Taxman 177 (Karnataka)/[1993] 204 ITR 29 (Karnataka)/[1993] 114 CTR 174 (Karnataka) has categorically/ held mere mention of stock - phrases like 'to facilitate coordinated investigation' or variations thereof will not be in compliance with the mandatory requirement of section 127(1) Thus the reason fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been accepted without any variations. In the original assessment proceedings, the fact that the Respondent had entered into a DA and had received advances was very much within the knowledge of the assessing officer. The Respondent s tax treatment of offering receipts under development agreement to tax only in the year of registration was then accepted by the jurisdictional assessing officer. 12.16 In the present search and impugned assessment proceedings no new / hidden fact has come to light. The learned assessing officer has only changed the opinion and has now sought to tax the receipts in the year of receipt as against the year of registration. Thus, the additions in the impugned order are purely based on a change in legal opinion and not on any incriminating material . 12.17 The predominant condition for satisfaction under 153C of the Act is the incriminating nature of evidence found. Though there has been change in the wordings of the section, the intention behind the section is not changed and the presence of document or evidence with incriminating nature is necessary before a notice u/s. 153C is issued. [B] Non-recording of satisfaction u/s 153C invalidates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings u/s. 153C of the Act. ACIT v. Global Estate (2013) 142 ITD 740(Agra)(Trib.) Ingram Micro (India) Exports Pvt. Ltd. v. Dy. DIT (Mum.)(Trib.) ITA Nos.8133, 8137,8138,8136, 8135 8132/Mum/2010 Assessment years: 2002-03 to 2007-08 V. K. Fiscal Services Pvt. Ltd. v. DCIT (Delhi)(Trib.) ITA nos. 5460.5461, 5462,. 5463, 5464 and 5465/Del/2012 AYs 2004-05 to 2009-10 DSL Properties (P.) Ltd. v. Dy. CIT (2013) 60 SOT 88 (URO)(Delhi)(Trib.) ACIT .v. Inlay Marketing Pvt. Ltd(2015) 167 TTJ 273 (Delhi)(Trib.) Pepsi Foods P. Ltd. .v. ACIT (2014) 367 ITR 112 (Delhi)(HC) CIT .v. Gopi Apartment (2014) 365 ITR 411 (All.)(HC) DCIT.v. Akash Arogya Mindir P.Ltd. (2015) 167 TTJ 578/ 114 DTR 61 (Delhi)(Trib.) ACIT v. Surbhi Sen Jindal (2018) 68 ITR 12(SN) (Patna) (Trib.) Avalanche Reality P. Ltd. v. ACIT (2018) 68 ITR 79 (SN) (Indore)(Trib.) CIT v. Sinhgad Technical Education Society (2015) 378 ITR 84/ 278 CTR 144 (Bom.)(HC) CIT v. Mechmen (MP)(HC) AYs 2000-01 to 2006-07 I.T.A. No.44/2011, I.T.A. No.45/2011 DCIT .v. Aakash Arogya Mindir (P) Ltd. (2015) 167 TTJ 578 (Delhi)(Trib.) CIT v. N. S. Software (FIRM) (2018) 403 ITR 259/ 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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