ITO, Ward-14(5), Hyd, Hyderabad V. Kalyan Chillara, Hyd, Hyderabad

CO 16/HYD/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5157 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 24-01-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 04-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Reopening of assessment; Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.137/HYD/2016 ASSESSMENT YEAR: 2010 - 11 INCOME TAX OFFICER, WARD - 14(5), 6 TH FLOOR, C - BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD. VS. SRI CHILLARA KALYAN, PLOT NO.332, H.NO.G - 1, SOMNATH RESIDENCY, PHASE - III, KAMALAPURI COLONY, HYDERABAD. PAN: ACSPC 2026 Q (APPELLANT) (RESPONDENT) C.O.NO.16/HYD/2016 (ARISING OUT OF ITA NO.137/HYD/2016 ASSESSMENT YEAR: 2010 - 11 SRI CHILLARA KALYAN, PLOT NO.332, H.NO.G - 1, SOMNATH RESIDENCY, PHASE - III, KAMALAPURI COLONY, HYDERABAD. PAN: ACSPC 2026 Q VS. INCOME TAX OFFICER, WARD - 14(5), 6 TH FLOOR, C - BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD. ( CROSS OBJECTOR ) (APPELLANT IN APPEAL) ITA NO.293/HYD/2018 ASSESSMENT YEAR: 2010 - 11 SRI CHILLARA KALYAN, PLOT NO.332, H.NO.G - 1, SOMNATH RESIDENCY, PHASE - III, KAMALAPURI COLONY, HYDERABAD. PAN: ACSPC 2026 Q VS. INCOME TAX OFFICER, WARD - 14(5), 6 TH FLOOR, C - BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI V. RAGHAVENDRA RAO REVENUE BY: SRI Y.V.S.T. SAI, CIT - DR 2 DATE OF HEARING: 24 . 01 .201 9 DATE OF PRONOUNCEMENT: 31 . 0 1.201 9 ORDER PER SMT. P. MADHAVI DEVI, J.M.: THE ABOVE CAPTIONED APPEAL ITA NO.137/H/2016 IS THE REVENUES APPEALS WHILE THE ASSESSEES CROSS OBJECTION NO.16/H/2016 IS FILED BY THE ASSESSEE AND BOTH ARE AGAINST THE ORDER OF THE CIT(A) - 6, HYDERABAD DATED 13/11/2015. ITA NO.293/H/2018 IS ALSO ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT (A) - 6, HYDERABAD DATED 13.11.2015. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, ENTERED IN TO A DEVELOPMENT AGREEMENT - CUM - GPA WITH M/S. BERGGRUEN PROJECTS PVT LTD ON 24/01/2008 FOR THE DEVELOPMENT OF THE PROPERTY SITUATED AT NANAKRAMGUDA VILLAGE, SERILINGAMPALLY MANDAL, RAN GA REDDY DISTRICT AND CONSEQUENT TO THE SALE , THE ASSESSEE RECEIVED A SUM OF RS. 7 CRS AS REFUNDABLE INTEREST FREE SECURITY DEPOSIT. THE ASSESSEE WAS LIABLE TO REFUND THIS INTEREST FREE SECURITY DEPOSIT TO THE DEVELOPER ON COMPLETION OF THE PROJECT. ACCO RDINGLY, THE ASSESSEE HAS BEEN REPORTING THE SUM OF RS. 7 CRS AS UNSECURED LOAN FROM M/S. BERGGRUEN HOLDINGS SINCE A.Y. 2008 - 09. 3. DURING THE ASSESSMENT PROCEEDINGS FOR THE A.Y. 2008 - 09, THE ASSESSING OFFICER NOTICED THAT THE DEVELOPER HAD NOT COMMENCE D ANY DEVELOPMENT ACTIVITY ON THE PROPOSED SITE AND THEREFORE, THE ASSESSEE HAD ISSUED A LEGAL NOTICED DATED 18/02/2012 TO THE DEVELOPER BRINGING TO THE NOTICE OF THE DEVELOPER , THAT SINCE THE DEVELOPMENT ACTIVITY HAS NOT BEEN CARRIED OUT IN THE SITE AS PE R THE DEVELOPMENT AGREEMENT , AND THE INTEREST FREE SECURITY DEPOSIT AMOUNTING TO RS. 7 CRS STANDS FORFEITED 3 AND THE ASSESSEE IS NOT LIABLE TO REFUND THE SAME. TAKING THE SAME INTO CONSIDERATION, THE A.O HAS TREATED THE SUM OF RS. 7 CRS AS CESSATION TO LIA BILITY AND BROUGHT IT TO TAX. 4 . AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) , WHO DELETED THE DISALLOWANCE BY HOLDING THAT THE AMOUNT REFUNDABLE AS A SECURITY DEPOSIT OF RS. 7 CRS DOES NOT FALL IN THE CATEGORY OF TRADING LIABILITY / EX PENDITURE / LOSS AND THEREFORE, CANNOT BE CONSIDERED AS EXPENDITURE INCURRED BY THE ASSESSEE AND ALLOWED IN THE EARLIER YEARS AND THEREFORE, IT CAN NOT BE BROUGHT TO TAX U/S 41(1) OF THE ACT. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A), REVENUE IS IN APP EAL BEFORE US AND THE ASSESSEE ALSO FILED CROSS OBJECTION CHALLENGING THE VALIDITY OF REOPENING OF THE ASSESSMENTS AND ALSO STATING THAT THE CIT(A) PASSED THE APPELLATE ORDER BEFORE THE AWARD COULD BE PASSED BY THE ARBITRAL TRIBUNAL , WHICH COULD BE PRESENT ED TO THE CIT(A). IT WAS STATED THAT THE ARBITRAL TRIBUNAL DIRECTED THE ASSESSEE TO REFUND THE SUM OF RS. 7 CRS ALONG WITH THE INTEREST @ 9% PER ANNUM AND THEREFORE, THE FORFEITURE NOTICE OF THE ASSESSEE DATED 18/02/2010 TO THE DEVELOPER FAILED. IT IS AL SO SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT SUBSEQUENTLY, THE ASSESSEE CAME TO KNOW THAT THERE WAS NO GROUND BEFORE THE CIT(A) ABOUT THE VALIDITY OF REOPENING OF ASSESSMENT, AND THEREFORE, THE ASSESSEE COULD NOT HAVE FILED THE CROSS OBJECTION S ON SUCH ISSUE . THEREFORE, IN ORDER TO PROTECT ITS INTEREST, H E FILED A CROSS APPEAL IN ITA NO.293/H/2018 ALONG WITH AN APPLICATION FOR CONDONATION OF DELAY OF 727 DAYS. 5 . IN SUPPORT OF THE REVENUES APPEAL, T HE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE A.O , WHILE THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 4 6 . IT HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT AN APPEAL AGAINST THE ARBITRATION AWARD WAS FILED BEFORE THE H ONBLE MADRAS HIGH COURT WHICH CONFIRM ED THE AWARD OF THE ARBITRAL TRIBUNAL ON THE POINT THAT THE ASSESSEE HAS TO REFUND THE SUM OF RS. 7 CRS. TAKING THE SAME INTO CONSIDERATION, IT IS SUBMITTED THAT IT CANNOT NOW BE SAID THAT IT IS THE INCOME OF THE ASSE SSEE FOR THE RELEVANT ASSESSMENT YEAR. 7. TAKING THE SAME INTO CONSIDERATION, WE DECLINE TO INTERFERE WITH THE CONCLUSION OF THE CIT(A) ALSO ON THE GROUND THAT THE ASSESSEE HAS SUBSISTING LIABILITY TO REFUND THE SUM OF RS. 7 CRS. THEREFORE, REVENUES A PPEAL AND THE CROSS OBJECTIONS OF THE ASSESSEE ON THIS ISSUE ARE DISMISSED. 8 . SINCE THE VERY ISSUE ON MERITS IS DECIDED IN FAVOUR OF THE ASSESSEE WE DO NOT SEE ANY REASON TO ADJUDICATE THE GROUND ON VALIDITY OF REOPENING O F THE ASSES SMENT . THEREFORE, TH E CROSS OBJECTIONS AS WELL AS THE CROSS APPEAL WHICH IS FILED WITH A DELAY OF 727 DAYS , ARE NOT ADJUDICATED AT THIS STAGE AS IT W OULD ONLY AMOUNT TO AN ACADEMIC EXERCISE. 9 . IN THE RESULT, REVENUES APPEAL AS WELL AS THE ASSESSEES CROSS OBJECTIONS AND TH E CROSS APPEAL ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2019 . SD/ - SD/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 31 ST JANUARY, 2019 5 OKK COPY TO: - 1) SRI CHILLARA KALYAN, PLOT NO.332, H.NO.G - 1, SOMNATH RESIDENCY, PHASE - III, KAMALAPURI COLONY,HYDERABAD. 2) THE INCOME TAX OFFICER, WARD - 14(5), 6 TH FLOOR, C - BLOCK, R.NO.632, IT TOWERS, A.C. GUARDS, HYDERABAD. 3) THE CIT(A) - 6 , HYDERABAD 4) THE PR. CIT - 6 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE