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Om Developers, Versus Asstt. Commissioner of Income Tax, Circle- 3, Pune

2015 (3) TMI 1211 - ITAT PUNE

Computation of income from project - “Om Megasparsh” - assessee is maintaining its accounts on project completion method and it is recognizing income on the basis of handing over of possession of flats to the customers - method of accounting to account for sales on the basis of handing over of possession to the customers - Held that:- The verification exercise carried out by the Assessing Officer revealed that even with respect to the flats in Wings A & C assessee had handed-over possession to t .....

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ds to the next assessment year. In our considered opinion, the case being set-up by the assessee is quite superfluous and is devoid of merit. We find that at no stage it was the case of the assessee that it is recognizing sale of flats on the basis of final handing over of possession. In-fact, there is no material on record to suggest that assessee has differentiated between a temporary possession and final possession so as to recognize income on sale of flats. Therefore, the verification exerci .....

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ith respect to 20 customers as detailed in Annexure – A to the assessment order we deem it fit and proper to restore the matter back to the file of the Assessing Officer to re-quantify the addition liable to be made on the basis of the evidence available with the Assessing Officer which demonstrates that the possession was handed-over by the assessee to the respective buyers in Wings A & C in the previous year relevant to the assessment year under consideration. The Assessing Officer shall compu .....

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in turn, has arisen from an order dated 31.12.2007 passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 (in short the Act ) pertaining to the assessment year 2005-06. 2. In this appeal, assessee has raised the following Grounds of Appeal :- 1. The learned CIT(A) has erred in dismissing the appeal, without appreciating the facts of the case and submissions of the appellant. 2. The learned CIT(A) has erred in confirming the addition of ₹ 1,07,48,442/- made by the A.O. on ac .....

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the Building A & C was received on 04.04.2005, d) Affidavits submitted by the flat purchasers, categorically stated that the possession was taken by them for carrying out furniture activity. 4. As a consequence to the above, the learned CIT(A) erred in law and on facts in confirming the levy of interest U/sec. 234B and 234C of the Income Tax Act, 1961. 5. The appellant craves leave to add or amend, modify or delete any of the grounds of the appeal, if deemed necessary. 3. The appellant befo .....

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be assessed from the project in question was short computed by the assessee by a sum of ₹ 1,07,48,442/-. This aspect of the controversy has also been upheld by the CIT(A) and therefore the assessee is in further appeal before us. 4. The short point involved is the manner in which assessee has computed its income from project - Om Megasparsh . The assessee is maintaining its accounts on project completion method and it is recognizing income on the basis of handing over of possession of flat .....

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and execution of the project was in progress during the year under consideration. So far as the flats in Wing B are concerned, assessee had recognized income on the sale of such flats and it was offered for tax during the year under consideration in terms of the method of accounting followed by it. So far as the flats constructed in Wings A & C were concerned, assessee did not recognize income therefrom. In other words, the income from flats in Wing A & C were accounted for and offered f .....

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. On this basis, the Assessing Officer concluded that income from flats in Wings A & C was also to be recognized during the year under consideration itself and therefore he brought to tax a sum of ₹ 1,07,48,442/- on account of the corresponding profits on such sales. The aforesaid aspect has also been affirmed by the CIT(A). 6. Before us, the Ld. Representative for the assessee vehemently pointed out that the verification exercise carried out by the Assessing Officer has been wrongly u .....

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in Wings A & C were liable to be recognized in the previous year from April, 2005 to March, 2006 corresponding to the next assessment year 2006-07. It was also pointed out that assessee had obtained affidavits from such persons stating that only temporary possession of flats was taken for carrying out furniture work during the year under consideration. 7. On the other hand, the Ld. Departmental Representative appearing for the Revenue contended that the CIT(A) has appropriately dealt with t .....

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f the verification exercise carried out by the Assessing Officer such customers did not say that they had taken possession on a temporary basis in the year 2003 or during the year under consideration. 8. We have carefully considered the rival submissions. The crux of the controversy is the income deduced by the assessee on application of its method of accounting to account for sales on the basis of handing over of possession to the customers. There is no dispute between the assessee and the Reve .....

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nstrate that the possession given to the customers was only a temporary possession whereas the final possession was to be given only after obtaining the completion certificate from the local authority , which happened in the month of April, 2005, which corresponds to the next assessment year. In our considered opinion, the case being set-up by the assessee is quite superfluous and is devoid of merit. We find that at no stage it was the case of the assessee that it is recognizing sale of flats on .....

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rd to the methodology adopted by the assessee consistently over a period of time. Thus, we upheld the action of the Revenue in-principle. 9. At this stage, Ld. Representative for the assessee made an alternate plea to the effect that the Assessing Officer had carried out verification exercise only with respect to 20 customers as detailed in Annexure - A to the assessment order. According to the Ld. Representative, only the transactions with such 20 customers be considered for recognizing sale of .....

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