The Two member bench of Income Tax Appellate Tribunal ( ITAT ) of Mumbai directed readjudication with respect to parties who advance received against booking of flats.
The Assessee, Cavalcade Properties Pvt. Ltd is engaged in the business of real estate development and related activities who filed its return of income by declaring total loss of Rs.27,71,66,306/. Thereafter the case was selected for scrutiny .
During the year under consideration the assessee recognized proportionate income following percentage of completion method ( POCM ). The assessee following the POCM since assessment year 2012-13.
During the scrutiny proceedings, the Assessing Officer though accepted the POCM m method followed by the assessee However, as far as revenue recognized from the projects is considered, the Assessing Officer considered the advance received from booking of the flats also for the purpose of recognizing revenue whereas the assessee only considered the revenue recognised in cases where the registered sale agreements were entered into with customers/buyers. The Assessing Officer accordingly added additional revenue for unregistered flats amounting to Rs.38,77,965/-
Aggrieved by the order assesee filed appeal before the CIT(A). The CIT(A) has dismissed the appeal of the assessee. Accordingly the Assessee filed another appeal before the tribunal.
During the adjudication the bench observed that the assessee received advance at the time of booking of the flats and thereafter it enter into agreements with the purchaser of the flats/units which are then executed and registered.
Further the only issue in dispute in the instant case is whether at the time of booking of the flats substantial risk and rewards have been transferred to the buyer or not. After analyzing the bench failed to understand how those parties agreed for panay denying advance to the assessee without any certainty of purchase or benefit of escalation in the prices of the flat in case of cancellation. Assessee has not furnished any details of documents signed at the time of provisional documents.
The Assessing Officer has also not made any comment in the assessment order in respect of how the significant risk and reward were transferred to the buyer at the stage of booking.
Therefore the bench comprising Sandeep Singh Karhail ( Judicial Member ) and Om Prakash Kant ( Accountant Member ) restored the matter back to the file of the Assessing Officer for examining parties from whom advance was received against booking.
Madhur Agarwal appeared for assessee and H.M. Bhatt appeared for revenue.
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