2021 (4) TMI 377 - AT - Income Tax

Tribunal upholds assessee's stance on undeclared income from development rights sale

Income Tax Officer, Ward-1 (1), Burdwan Versus Burdwan Development Authority

The Tribunal dismissed the Revenue's appeal against the deletion of additions made to the total income of the assessee on account of income from the sale ... Accrual of income - Income from sale of development rights in respect of two Projects - Year of assessment - CIT(Appeals) deleted the addition made by the Assessing Officer by holding that the said amount not received by the assessee during the year under consideration could not brought to tax in the hands of the assessee in the year under consideration - HELD THAT:- Income from Poddar Projects D. R. has not brought anything on record to dispute the finding/ observation arrived at by the ld. CIT(Appeals) while giving relief to the assessee on this issue that the amount in question was not received by the assessee during the year under consideration but the same was actually received in the subsequent years. As a matter of fact, the said amount was assessed by the Assessing Officer in the year under consideration mainly on the basis that the same was actually received by the assessee during the year under consideration and the same representing surplus over the amount paid to the Land Acquisition Officer of Burdwan being retained by the assessee represented the income for the year under consideration. The said basis, as already noted by us, however, turned out to be wrong. Moreover as explained by the ld. Counsel for the assessee, Project Completion Method was being followed by the assessee and the relevant project viz. Poddar Projects having been completed in the previous year relevant to assessment year 2009-10, the entire income from the said project was actually accrued to the assessee in A. Y. 2009-10 and the same was accordingly recognized and offered to tax in that year as is evident from the assessment order dated 20.12.2016 passed by the Assessing Officer under section 143(3)/147 of the Act. We, therefore, find no merit in revenue appeal. Amount received from Dheeraj Promoters - assessee has placed on record a copy of the assessment order dated 20.12. 2016 passed by the Assessing officer under section 143(3)/ 147 of the Act for A.Y. 2009- 10 to show that the amount in question has already been taxed in the hands of the assessee for A.Y. 2009- 10 when the relevant project was completed and the amount in question actually accrued to the assessee as income on the basis of Project Completion Method followed by it. Keeping in view all these facts and circumstances of the case, which have remained undisputed by the ld. D. R., we find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the addition - Revenue appeal dismissed. Issues:1. Deletion of income from sale of development rights by the assessee.2. Accrual basis of revenue recognition and taxability of income.3. Addition of amount received from Dheeraj Promoters.Analysis:1. The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) regarding the deletion of additions made by the Assessing Officer to the total income of the assessee on account of income from sale of development rights. The assessee, a Development Authority, generated surplus from projects but did not file a return of income for the relevant assessment year. The Assessing Officer treated surplus amounts retained by the assessee as income from sale of development rights, leading to additions. The Commissioner of Income Tax (Appeals) deleted the additions after the assessee provided evidence that the amounts were not received during the year under consideration, which the Assessing Officer could not refute.2. The Revenue contended that the amounts, though not received in the relevant year, had accrued and should be assessed following the mercantile system of accounting. However, the basis for adding the amounts to the total income was their actual receipt during the year, not accrual. The Project Completion Method was followed by the assessee, and income from the projects accrued in subsequent years. The Tribunal dismissed the Revenue's grounds, noting that the amounts were not received in the relevant year and were correctly recognized in subsequent assessments.3. The addition of an amount received from Dheeraj Promoters was also disputed. The Commissioner of Income Tax (Appeals) found that the amount was a security deposit liable for adjustment against the final payment upon project completion. The Tribunal upheld the Commissioner's decision, noting that the amount had already been taxed in a subsequent assessment year when the project was completed and income accrued to the assessee. The appeal filed by the Revenue was dismissed by the Tribunal based on these findings.