These appeals are by the Revenue against separate orders of ld.CIT(A)- 9 , Ahmedabad of even dated i.e. 2.4.2019 passed for the Asstt.Years 2005-06 and 2013-14.
ITA No.1098 AND 1099/Ahd/2019
IN THE INCOME TAX APPELLATE TRIBUNAL,
“D” BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT
SHRI WASEEM AHMED, ACCOUNTANT MEMBER
ITA No.1098 AND 1099/Ahd/2019
Asstt.Year : 2005-06 AND 2013-14
M/s.Navratna Organizers &
2nd Floor, Kaycrest
Opp: Gujarat Gas Company Ltd.
PAN : AAACN 8151 E
Revenue by : Shri Vidyut Trivedi, Sr.DR
Assessee by : Shri Tushar Hemani, with Shri P.B. Parmar, AR
Date of Hearing : 09/12/2021
Date of Pronouncement : 20/12/2021
O R D E R
These appeals are by the Revenue against separate orders of ld.CIT(A)- 9 , Ahmedabad of even dated i.e. 2.4.2019 passed for the Asstt.Years 2005-06 and 2013-14. Since identical issues are involved in both the appeals, they are disposed of by this consolidated order.
2. We would take a brief fact of the case for adjudication of this common ground. Assessee is a developer and engaged in development of various schemes on the land owned and belonging to different entities. It has filed
return of income declaring total income at Rs.11,28,440/- on 4.5.2007 for the Asstt.year 2005-06 and Rs.3,07,88,041/- on 1.10.2013 for the Asstt.Year 2013-14. Both returns were selected for scrutiny assessment, and consequent notices under section 143(2) were issued and served upon the assessee. During the assessment proceedings, the ld.AO observed that the assessee is not following correct accounting method.
3. We have heard both the sides, and gone through orders of the Revenue authorities. We have also gone through orders of the ITAT in the assessee’s own case cited (supra) for the assessment years 2008-09 and 1997-98. Copies of both the orders are placed on record. We find that Co-ordinate bench of the Tribunal (in which one of us, Vice-President is party) has examined and discussed at length issue of estimation of net profit at the rate of 8% on the alleged work-in-progress, and came to the conclusion that the assessee was a developer, and the WIP did not belong to it. The assessee is consistently following mercantile system of accounting, where receipts in the form of development fees have been recognized on completion of project.
4. We have heard rivals submissions and gone through the record carefully. We find that action of the ld.AO in making disallowance under section 14A read with Rule 8D was not justified in view of the fact that the
assessee has demonstrated that it has sufficient funds for making investment which yielded exempt income. As per the figures demonstrated by the assessee, assessee’s interest free funds far exceeded investment made for earning exempt, against which, there is no material with the Department to establish that borrowed funds were utilized by the assessee for the impugned investment. The ld.CIT(A) in the impugned order noticed that the assessee had sufficient interest free funds in excess of investment made for earning tax free income. After examining the explanation of the assessee and based on decision of the Tribunal in assessee’s own case for the Asstt.Year 2011-12 cited (supra), the ld.CIT(A) deleted the interest portion of the disallowance and the balance amount was sustained.
5. In the result, both appeals of the Revenue are dismissed. Order pronounced in the Court on 20th December, 2021 at Ahmedabad.
Please find attached the enclosed file for the full judgement