TMI Blog2007 (9) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds are common grounds in appeal of the assessee and the Department, therefore, they are disposed off together. 2. The Briefly stated facts of the case are described as under : 2.1 The assessee is a partnership firm constituted on 6th May, 1989 with the object of undertaking the activity of property development of residential and commercial buildings. The assessee company followed the project completion method of accounting since beginning. The said method has been accepted by the IT Department year after year. Under the project completion method the profits of the project are offered to tax only on finalization of the whole project. The assessee company entered into an agreement on 6th May, 1989 with Standard Mills Co. Ltd. in respect of Plot Nos. 952 (Part) and 954 (Part) TPS IV situated at Mahim division admeasuring 14,886 sq. mtrs. Orbit Finance (P) Ltd. (Orbit) one of the partners of the assessee firm, had retired from one another partnership firm M/s Solar Developer w.e.f. 1st June, 1992 and on retirement and full settlement and satisfaction of their share Orbit received Plot Nos. 952 (Part) and 954 (Part) of TPS IV admeasuring 7544.74 sq. mtrs (approx.) situated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in respect of the Chaitanya Tower project and started liasioning with the society. The flat owners contributed the amount to the society and monitored the progress of construction. Twinkle also assisted the assessee firm in various legal disputes. Twinkle was admitted as a partner in the assessee firm as per partnership deed dt. 14th April, 2001. The assessee firm thereafter completed the structural work of A and B Wings upto 23rd floor and C Wing upto 17th floor. The Bombay Municipal Corporation issued Part Occupation Certificate dt. 20th Nov., 2001 upto 20th floor only subject to fulfilment of various prerequisites and requirements stipulated therein. 2.3 The Chaitanya Tower project was completed only to the extent of 75 per cent as per the certificate of the architect dt. 16th April, 2002. Subsequently the construction upto 23rd floor in respect of all the wings was completed on 31st Jan., 2003 and Bombay Municipal Corporation issued final occupation certificate on 25th Feb., 2003. In respect of Chaitanya Tower project sum of ₹ 10,71,57,107 was spent after 31st March, 2002. There was a change in the constitution of the assessee from 13th Sept., 2002 and Twinkle took ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lat owners towards the sale of flats do not exclusively belong to the assessee firm and it is not feasible to determine the profits embedded therein and this exercise can be undertaken only on completion of project and which event has taken place post January, 2003 which is relevant for asst. yr. 2003-04. 2.8 The AO thereafter issued a letter dt. 17th March, 2005 wherein he has directed the appellant to calculate the correct profits derived from Chaitanya Tower project. The assessee company vide letter dt. 25th March, 2005, wherever applicable, the factual averment made by the AO in his letter dt. 17th March, 2005 and stated that no profit could be computed in asst. yr. 2002-03. 2.9 The AO rejected the claim of appellant and estimated the net profit from the Chaitanya Tower project at ₹ 19,45,59,276. 2.10 The assessee firm filed the appeal before CIT(A) and disputed the determination of the income on various grounds. The assessee firm relied upon various decisions in support of the claim that income cannot be taxed in asst. yr. 2002-03. The CIT(A) rejected the claim of the assessee firm to the effect that income is not taxable in asst. yr. 2002-03. The CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ya Tower project is taxable in asst. yr. 2003-04 in the hands of Orbit in proceedings under s. 143(3). 2.14 In support of this contention, the learned counsel of the assessee placed reliance on the decision of various Courts wherein it has been held that it is not open for the Department to take one view in case of one assessee and a different view in case of another assessee on the same set of facts and law. (a) Berger Paints India Ltd. vs. CIT (2004) 187 CTR (SC) 193 : (2004) 266 ITR 99 (SC); (b) Union of India vs. Kaumudini Narayan Dalal (2001) 168 CTR (SC) 3 : (2001) 249 ITR 219 (SC); (c) CIT vs. Narendra Doshi (2002) 174 CTR (SC) 411 : (2002) 254 ITR 606 (SC); (d) CIT vs. Shivsagar Estate (2002) 177 CTR (SC) 107 : (2002) 257 ITR 59 (SC). The learned Authorised Representative argued that in respect of a single composite project the Department has accepted the proposition in the case of Orbit that the project is complete in asst. yr. 2003-04 and hence in the case of assessee firm also the Department cannot take a different view and hold that the project is complete in asst. yr. 2002-03. 3. The learned CIT Departmental Repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Feb., 2003. According to the learned CIT Departmental Representative it is commonly known in the building trade that final occupation certificate is a mere formality as the physical occupation of the building is with the part occupation certificate wherein the purchasers of the flats are able to occupy the building. The final occupation certificate is delayed for certain incidential and insignificant matters. Final occupation certificate is not a significant evidence regarding the completion of the project. According to him the final occupancy certificate is only an indication that the incidential work of the project is complete. According to him the only importance of the final completion report allows the builder to obtain a refund of the deposit from BMC. 3.3. The learned CIT Departmental Representative has further argued that the part completion certificate from Bombay Municipality is already obtained by the assessee firm. According to him the project was completed upto 90 per cent. He also emphasized that there is a change in the constitution of the assessee firm in 13th Sept., 2002 and the income of the assessee firm cannot be taxed in the hands of Twinkle who has take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight the correct status of the development arrangement. (c) The commencement certificate is for the entire 23 floors of all the 3 wings which was obtained on 4th May, 2000. The final occupation certificate dt. 25th Feb., 2003 is also in respect of the entire single one project. (d) Huge and colossal expenditure of ₹ 10,71,57,117 has been spent after 31st March, 2002. (e) The assessee firm follows project completion method which is an accepted method under provisions of IT Act, 1961 and the profit has to be determined based on the said method of accounting. The Hon ble Bombay High Court in the case of CIT vs. V.S. Dempo Co. (P) Ltd. (1996) 131 CTR 203 (Bom) has also accepted the project completion which was followed by assessee year after year. (f) He also emphasized on the decision of Malad Shopping Centre (P) Ltd. vs. ITO (1983) 17 TTJ (Bom) 125 wherein it has been held that the completion and occupation certificate and possession of flats given to all flat owners would be the test for completion project. (g) He relied upon decision in case of Asstt. CIT vs. Rajesh Builders (2004) 3 SOT 917 (Mumbai) wherein all authorities have been we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has made speculation and the base is founded on suspicion, surmise and speculation. He drew attention to para 4 on p. 3 of assessment order wherein it is stated that This led to the suspicion towards the intention of the assessee . According to him the AO was shooting in dark. The AO started within assumption that the income of Chaitanya Tower project could be ₹ 65,28,54,369 and ultimately has determined the profit of ₹ 19,46,36,630. He also drew the attention to the letter of 17th March, 2005 issued by the AO wherein he has stated that last opportunity is given to the assessee firm to calculate the correct profit. According to him the entire exercise of the assessment undertaken by her is an eyewash and futile one to justify the prejudicial conclusion that the assessee firm has earned imaginary profits from the Chaitanya Tower project in asst. yr. 2002-03. (l) He also emphasized that the Department has accepted a proposition that a single composite project is complete in asst. yr. 2003-04 in the hands of Orbit which is one of the co-developers and based on legal decisions the Department cannot take a different view in the case of assessee firm holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003-04. 6.2 Under IT Act, 1961 the income of an assessee is chargeable to tax under s. 4. The said income has to be computed based on the method of accounting followed under s. 145. The assessee firm has followed the completed contract method in respect of their single project viz. Chaitanya Tower. Year after year the assessee firm has followed the same method and every year the expenditure incurred on the project is capitalized. The amount received from the flat purchasers is treated as advance. In the balance sheet of the company the said advances are duly reflected and the total expenditure on construction is also treated as work-in-progress. The IT Department has accepted the method of accounting followed by the assessee firm. In this project there were two buildings. Building No. 1 had three wings A, B and C with 23 storeys in each wing. The Building No. 2 was a separate building though originally part of the same project. The said building was under construction and in asst. yr. 1998-99 the said building was sold on as it is where it is basis to Jindals. The profit of the said building was offered for tax on the ground that project vis-a-vis that building is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. yr. 2003-04 and the Department has taxed the said income in asst. yr. 2003-04 while passing the order under s. 143(3). This aspect clearly establishes the fact that the Department has accepted a proposition that Chaitanya Tower project which is a single composite project is complete in asst. yr. 2003-04. As stated above the Chaitanya Tower project is a single composite project and if in respect of the said project if the IT Department has accepted a fact that it is complete in asst. yr. 2003-04 then the IT Department cannot on the same facts take a different view and hold that the said project is complete in asst. yr. 2002-03. Various decisions of Supreme Court have laid down the law very clearly that if the Department has taken one view in case of one assessee then a different view in case of another assessee on the same facts cannot be taken. The facts in both the cases are identical. The income is to be determined in respect of the same project. Based on the two of these decisions we hold that the Department cannot take a different view in case of the assessee firm to the effect that the project is completed in asst. yr. 2002-03 when it has been accepted that the said single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with bank and in view of the compromise terms, M/s Twinkle had sold its Worli project and suffered heavy losses. He also revealed that the heavy losses of Twinkle were used to set off against the profit of M/s Pratiksha Enterprises with a clear intention to evade taxes and thereby the appellant firm had indulged into the method of tax avoidance in the year under reference. 7.1 The learned counsel for the assessee has contended that as on the date of admission of M/s Twinkle on 14th April, 2001, the said company had neither incurred any losses nor it was possessing any carried forward unabsorbed business losses or depreciation. He also stated that in view of tremendous efforts put in by M/s Twinkle the settlement has been arrived between the purchasers of the flats and the work has been restarted again. This fact has been mentioned in the recital of the partnership deed executed on 14th April, 2001. He also stated that as on the date of take over of the Chaitanya Tower project i.e. 13th Sept., 2002, when the construction of the said project was in progress, M/s Twinkle again at this point of time did not possess any accumulated or incur any losses. He submitted that as on 13th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record. It emerges from the record that the assessee firm had started the Chaitanya Tower project in asst. yr. 1992-93. Shri Vallabh Thakkar one of the main partners expired in 1997. Twinkle played major role in registration and settling various disputes, co-ordinated between the flat owners and the society, attended to legal matters. Twinkle was admitted as partner in the firm w.e.f. 14th April, 2001. The recital of the partnership deed revealed the facts leading to the admission of Twinkle as partner. At the time Twinkle was admitted into the partnership firm there was no loss determined or claimed by Twinkle. There was change in constitution on 13th Sept., 2002 after a period of 17 months. Twinkle has settled its all liabilities with bank in the consent term approved by Debt Recovery Tribunal (DRT) on 13th Feb., 2003. The settlement of liability in DRT has taken place 22 months after the admission of Twinkle in the partnership firm. Chaitanya Tower project completed on 25th Feb., 2003. The events of suffering loss by Twinkle could not be envisaged either at the time when Twinkle was admitted as partner as well as at the time when there was change in constitution. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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