Mahalakshmi Real Estate,, Hyderabad vs Department Of Income Tax

This is a Revenue's appeal against the common order of the Commissioner of Income Tax(Appeals)-IV Hyderabad for the Assessment Year (AY) 2005-06 and 2006-07 on the issue of directions given by the CIT(A), which resulted in reduction of returned income.

2. Briefly stated, assessee is engaged in the business of real estate and has undertaken plotting in venture namely Mahalaxmi Real Estates. Since there are no sales in A.Y.2004-05, assessee did I.T.A. No. 277 /Hyd/13 :- 2 -: Mahalakshmi Real Estate

not declare any income. For A.Y.2005-06, assessee declared total income of Rs.7,21,546/- on a turnover of Rs.4.12 Crores from sale of 325 plots aggregating to 82,324 Sq. Yds. For A.Y.2006-07, consequent to the survey conducted by the Department on 06-01- 2006, assessee admitted total income of Rs.1,01,31,049/- on a turnover of Rs.2.02 Crores from sale of 64 plots aggregating to 18,898 Sq. Yds. The income of A.Y.2006-07 included sum of Rs.1 Crore admitted during the survey as an additional income from sale of plots. Assessing Officer in the scrutiny for A.Y.2005-06 rejected Books of Accounts and estimated the profit at 13.34% of the turnover and assessed the profit at Rs.54,90,958/- in his order dt.28-12- 2007. Assessee preferred an appeal which was not admitted by the CIT(A), then on the directions of the ITAT, the appeal was considered on merits by the CIT(A). In the mean time, assessee's returned income for the A.Y.2006-07 has been accepted by the Assessing Officer as such. Therefore, assessee preferred an appeal with a delay seeking adjustment of the income assessed in A.Y.2005-06 from the income declared in AY.2006-07.

3. The Ld.CIT(A) considered both the appeals and analysed the facts and came to the conclusion that the assessee's admission of profit at Rs.1 Crore in the course of survey was on the entire project. Consequently, on sale of 82,324 Sq. Yds in 2005-06, the Ld.CIT(A) arrived at additional income proportionately at Rs.90,23,192/- and on sale of 8,912 Sq. Yds., up to the date of survey at Rs.9,76,808/-. While confirming the apportionment as above, Ld.CIT(A) directed that the addition made by the Assessing Officer for the A.Y.2005-06 should be deleted. Ld.CIT(A) also directed further estimation of income on the sales subsequently made to the date of survey. Assessee has accepted the order of the CIT(A), whereas Revenue is I.T.A. No. 277 /Hyd/13 :- 3 -: Mahalakshmi Real Estate

aggrieved in A.Y.2006-07 as income returned at Rs.1,01,31,049/- was reduced consequent to the order of CIT(A).

4. We have considered the arguments of the Ld.DR and Ld.Counsel. Even though assessee has not admitted higher income for A.Y.2005-06 at the time of survey, the additional income indeed pertains to sale of plots occurred over a period of time. In order to honour the admission of Rs.1 Crore made to the Assessing Officer in the course of survey, assessee did pay the taxes and then filed return accordingly in A.Y.2006-07. Had the Assessing Officer accepted the returns for A.Y.2005-06 and A.Y.2006-07 as such, assessee would not have been aggrieved, however, Assessing Officer rejected the Books of Accounts and made an addition to the returned income and assessed at Rs.54,90,958/- in A.Y.2005-06. It was assessee's submission that on sale of 82,324 Sq. Yds., most of the profit accrued in A.Y.2005-06. Assessee admitted the same in a later year as per the declaration made. Since the Assessing Officer brought a part of income in A.Y.2005-06, assessee contended that income correspondingly should be reduced from A.Y.2006-07. The Ld.CIT(A) analysed the facts correctly and directed the Assessing Officer to assess on a proportion basis. In fact, the Ld.CIT(A) order resulted in enhancement for A.Y.2005-06, in the sense that as against Rs.7,21,546/- declared as income in the return of income the ultimate determination of income resulted at Rs.90,23,192/- correspondingly the additional income of Rs.1 Crore admitted in A.Y.2006-07 was reduced. We do not find any merit in the Revenue's contentions, objecting to the order of the Ld.CIT(A). In fact even the statement recorded on the basis of which assessee declared income of Rs.1 Crore indicate that for A.Y.2006-07, the total sales works out to Rs.3,91,45,977/- and after deducting work in progress of Rs.3,49,66,234/-, the balance was net receipts. This also indicate I.T.A. No. 277 /Hyd/13 :- 4 -: Mahalakshmi Real Estate

that Assessing Officer is aware that the project was completed over a period of time and the gross receipts are not entirely for A.Y.2006- 07, still he accepted the declaration of Rs.1 Crore in that year and assessee has committed to that by filing the return. Since Assessing Officer brought part of that income to assessment in earlier year i.e., A.Y.2005-06, the CIT(A) is correct in considering the assessee's contentions and apportioning the income according to the sales made during the relevant years. We do not find anything to deviate from the findings of Ld.CIT(A). Accordingly, the grounds raised by the Revenue are dismissed.

5. In the result, Revenue's appeal is dismissed.

Order pronounced in open Court on 16th January, 2015.

Sd/- Sd/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 16th January, 2015.

TNMM

Copy to :

1. The Income Tax Officer, Ward-6(2), 6th Floor, 'C' Block, I.T. Towers, A.C.Guards, Hyderabad

2. Mahalakshmi Real Estate, 7-1-621/10, Flat No.401, Sai Manor Apartments, S.R.Nagar Cross Road, Hyderabad

3. CIT(A)-IV, Hyderabad

4. CIT-III, Hyderabad

5. D.R. ITAT, Hyderabad.