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08-03-2019, DBS Realty, Section 263, 144A, 120, Tribunal Mumbai

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2 months 6 days ago #8780 by amit
Section - 263, 144A, 120, 119, 129
Order Date - 08-03-2019
Favouring - Assessee
Court - Tribunal Mumbai
Appellant - DBS Realty
Respondent - PCIT
Justice - Shamim Yahya AM & Amarjit Singh JM
Citation - 319Taxpundit228
Appeal No. - ITA Nos.3034 & 3035/Mum/2018
Asstt. Year - 2012-13& 2013-14



These are appeals filed by the assessee against the order of ld. Commissioner of Income Tax-31, passed under Sec. 263 of the IT Act for assessment year 2012-13 and 2013-14, respectively. Since the issues are common, these appeals were heard together and are being disposed of by this consolidated order.

2. Since facts are similar, we are referring to grounds of appeal and facts of the case from ITA No. 3034/Mum/2018. The grounds raised as under:

“1. The Learned Pr. Commissioner of Income Tax ("Pr. CIT") erred in fact and in law by invoking the provision of Section 263 of the Act without appreciating the fact that the Learned Assessing Officer ("LAO") passed order u/s 143(3) of the Act after making detailed and adequate inquiries/verification/examination with respect to amount received on sale of TDR.

2. The revision order passed u/s 263 by the Learned Pr. CIT is bad in law and deserves to be set aside.

3. The Ld. Pr. CIT erred in alleging that the appellant is engaged in the trading of TDRs without appreciating the fact that the release entitlement and sale of TDR is sine-qua-non for developing, construction, completion, and handover of single, inseparable, indivisible and composite SRA project to the SRA Authority.

4. The Ld. Pr. CIT erred in Facts and in law in concluding that the percentage completion method followed by the appellant for revenue recognition is not applicable to the assessee's business.

5. The Ld. Pr. CIT has grossly erred in directing the LAO to tax the amount received on sale of TDR of Rs. 53,35,24,118/ without appreciating the facts of the case.”

2.1 At the outset there is a delay of 96 days in the appeal filed by the assessee. The Ld. Counsel for the assessee submitted that delay was on account of wrong advice of the consultant in this regard. The acceptance letter for wrong advice by the consultant was duly submitted. Upon hearing both counsel and perusing the records in the substantial interest of justice we are inclined to condone the delay. The delay is according y condoned.

3. In this case the assessee is engaged in the business of development and construction of land and building particularly Slum Rehabilitation Authority (SRA). The assessment order was passed under Sec. 143(3) on 29.03.2015.

4. Subsequently, the CIT observed that the ongoing through the assessment records, it was noted that during the assessment proceedings for A.Y. 2014-15, the firm had submitted the details of TDRs (Transferable Development Rights) received against the SRA Project. As per the submissions, the firm had sold total TDR amounting to Rs.3,04,43,99,698/- out of which TDR of Rs.53,35,24,118/- was sold during the F.Y. 2011-12 relevant to A.Y. 2012-13. However, the firm had not booked the above mentioned sale on TDRs in A.Y. 2012-13. The TDRs received from the development of SRA Project was sold but no development had been made by the firm itself. Therefore, Ld. CIT opined that sale of TDRs should have been disclosed as income on accrual basis. Therefore, he held that as this income was not disclosed, the order passed by the Assessing Officer for A. Y. 2012-13 under section 143(3) of the Act was considered erroneous in so far as it is prejudicial to the interest of the revenue in view of clause (a) to Explanation 2 of sub-section (1) of section 263 of the Act It was therefore proposed to exercise power under section 263 of the Act in respect of the assessment order under section 143(3) of the Act dated 29.03.2015. Accordingly, noticed under Sec. 263(1) was issued to the assessee. The ld. CIT thereafter noted following extracts from the assessee’s submission in this regard as under:

“5….It is incorrect to stale that the firm is not making any development. The realty is that the first the firm invest from its own resources reaches the particular milestone (sic) and files progress report of development with the SEA authority. The proje t development is inspected than the authorities based on which eligible TDRs s issued by the MHADA Thus income of TDRs. receipt of TDRs by assessee is when development of SEA project is achieved.

5.l....b) There is an express agreement between SRA Authority and assessee firm which entitle the assessee to TDRs to recoupe its expenditure on construction on reaching various stages of development of SEA project.

7.l….b) the assessee has been consistently following Percentage completion method for revenue recognition./or its real estate project since its incorporation. It can also be referred from note no 2. 7 Revenue recognition of the audited financial statement for the year which clearly mentions that revenue recognition policy of the company for real estate project is Percentage completion method.

h) Further, the Institute of Chartered Accountant of India (ICAI), came up with guidance note on Revenue Recognition by Real Estate Developer which prescribed Percentage Completion Method for revenue recognition. As per the guidance note, revenue from construction and development of the project will be recognised only after the work has progressed to the extent of 25% of the total construction cost excluding land cost and other parameters are fulfilled. The total project work completed up to March 31, 2012 is 11%. Accordingly,

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