Kishore Kumar Gokuldas & Associates, CHENNAI V. ACIT, CHENNAI

CO 20/CHNY/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8663 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 16-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN C BHARAT
• Assessee Lawyers: V S JAYAKUMAR
• Section: 143(3); 142(1); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER] I.T.A.NO.58/MDS/2012 ASSESSMENT YEAR : 2007-08 THE ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-I(5) CHENNAI VS M/S KISHORE KUMAR GOKULDAS & ASSOCIATES 12, BANK STREET, KILPAUK CHENNAI 600 010 [PAN AANAL 0846 P ] (APPELLANT) (RESPONDENT) C.O.NO.20/MDS/2012 ASSESSMENT YEAR : 2007-08 M/S KISHORE KUMAR GOKULDAS & ASSOCIATES 12, BANK STREET, KILPAUK CHENNAI 600 010 VS THE ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-I(5) CHENNAI (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI ARUN C. BHARAT, CIT ASSESSEE BY : SHRI V.S.JAYAKUMAR, ADVOCATE DATE OF HEARING : 05-06-2013 DATE OF PRONOUNCEMENT : 25-06-2013 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER THE APPEAL FILED BY THE REVENUE AND T HE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-I, CHENNAI, DATED 13.9.2011, RELEVANT TO ASSESSMENT YE AR 2007-08. I.T.A.NO. 58.12 C.O.20/12 :- 2 -: 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN ASSOCIATION OF PERSONS (AOP). A SEARCH U/S 132 OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] WA S CONDUCTED ON 11.9.2008 IN THE CASE OF SHRI KISHORE KUMAR GOKULDA S AND ITS GROUP CONCERNS. NOTICE U/S 153A OF THE ACT WAS ISSUED T O THE ASSESSEE ON 27.4.2010. IN RESPONSE TO THE NOTICE, THE ASSESSE E FILED LETTER DATED 8.10.2010 STATING THAT THE AOP WAS FORMED IN THE YE AR 2006 BUT IN THE YEARS 2006-07 TO 2009-10 THERE WAS NO COMMERCIAL AC TIVITY EXCEPT THAT THE AOP WAS INCURRING EXPENDITURE ON PURCHASE OF LAND AND CONSTRUCTION OF BUILDING. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING ITS INCOME AS NIL. NOTICES U/S 143(2) AND 142(1) OF THE ACT DATED 15.11.2010 WERE ISSUED TO THE ASSESSEE. DUR ING THE COURSE OF SEARCH PROCEEDINGS, LOOSE SHEETS WERE FOUND IN THE PREMISES OF SHRI ARUJUNDAS GOKULDAS, ONE OF THE MEMBERS OF AOP WHERE IN CERTAIN NOTING REGARDING ON-MONEY PAYMENT FOR PURCHASE OF 44 CENTS LAND AT PALLARIVATOM, OPP. ERNAKULAM MEDICAL CENTRE AND AGR EEMENT FOR SALE ENTERED INTO WITH SHRI GEORGE KUTTY FOR THE PROJECT KG OXFORD SYMPHONY WAS MENTIONED. FROM THE NOTE SO RECOVERE D, IT WAS OBSERVED THAT THE AOP HAD ENTERED INTO A TRANSACTIO N WITH SHRI GEORGE KUTTY, OWNER OF 44 CENTS OF LAND AT PALLARIVOTAM FO R A CONSIDERATION OF 2.6 CRORES. OUT OF THIS TOTAL CONSIDERATION, THE A OP MADE PAYMENT OF ` 1.6 CRORES BY CHEQUE AND THE REMAINING AMOUNT OF ` 1 CRORE WAS TO I.T.A.NO. 58.12 C.O.20/12 :- 3 -: BE MADE IN CASH. FROM THE REMAINING ` 1 CRORE, ` 75 LAKHS WAS PAID BY THE MEMBERS OF AOP AND THE BALANCE ` 25 LAKHS WAS TO BE ADJUSTED AS ADVANCE-CUM-BOOKING AMOUNT OF FOUR FLATS ON TH E 9 TH FLOOR IN THE PROPOSED RESIDENTIAL COMPLEX KG OXFORD SYMPHONY. THE AMOUNT OF ` 75 LAKHS WAS PAID BY THE MEMBERS OF AOP IN THE FOL LOWING RATIO: S.NO NAME OF THE AOP MEMBER ON-MONEY PAID 1. SHRI ARJUNDAS GOKULDAS 12.50 LAKHS 2. RAJIV PUNJABHI, S/O ARJUNDAS GOKULDAS 12.50 LAKH S 3. AMIT P. KINGER, S/O PREMCHAND KHLARAM 12.50 LAKH S 4. ARUN P. KINGER, S/O PRAKASHLAL KHLARAM 12.50 LAK HS 5. HARESH KISHOR, S/O KISHOREKUMAR GOKULDAS 25.00 LAKHS TOTAL CASH PAID 75.00 LAKHS 3. THE PAYMENT OF THE ABOVE AMOUNT OF ` 75 LAKHS WAS DISCLOSED BY THE MEMBERS OF AOP IN THEIR RESPECTIVE RETURNS AND WAS THUS ACCOUNTED FOR. AS FAR AS THE REMAINING AMOUNT OF ` 25 LAKHS WHICH WAS TO BE ADJUSTED TOWARDS SALE PRICE OF THE FLATS, THE ASSESSING OFFICER WAS OF THE VIEW THAT IT HAD ESCAPED ASSESSM ENT. THE ASSESSING OFFICER MADE AN ADDITION OF THE AFORESAID AMOUNT AS UNDISCLOSED INVESTMENT VIDE ORDER DATED 30.12.2010 PASSED U/S 153A R.W. S 143(3) OF THE ACT. I.T.A.NO. 58.12 C.O.20/12 :- 4 -: 4. AGGRIEVED AGAINST THIS ASSESSMENT ORDER, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A ), WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HELD AS UNDER: 16. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE APPELLANT. SIMPLY PUT, THE APPE LLANT PAID ` 75 LAKHS OUT OF ` 1 CRORE TO BE PAID; THIS ` 75 LAKHS WAS ITS UNDISCLOSED INCOME. THE BALANCE ` 25 LAKHS WAS NOT ACTUALLY PAID, BUT INSTEAD THE LANDLORD WAS GIV EN A DISCOUNT FOR THE SALE CONSIDERATION RECEIVABLE FOR 4 FLATS IN THE 9 TH FLOOR SOLD TO HIM. FIRSTLY, THE APPELLANT HAD NOT PAID ` 25 LAKHS. ONLY THE AMOUNT PAID, ` 75 LAKHS WAS UNDISCLOSED. SECONDLY, THIS ` 25 LAKHS WAS ADJUSTED AS A DISCOUNT TO THE LANDLORD WHO ALSO HAD BOOKED 4 FLAT S ON THE 9 TH FLOOR IN THE PROJECT. THEREFORE, EVEN THE MONEY I S NOT RECEIVABLE AT THE POINT OF SALE. EITHER WAY TH ERE IS NO INCOME. THEREFORE, THE APPELLANTS ARGUMENTS HAVE MERIT. IN THE CIRCUMSTANCES, THE ADDITION MADE IS DELETED. 5. NOW, THE REVENUE HAS COME IN APPEAL BEFORE THE T RIBUNAL ASSAILING THE ORDER OF THE CIT(A). THE ASSESSEE HAS ALSO FILED CROSS OBJECTION AGAINST THE ORDER OF THE CIT(A) ON THE GR OUND THAT THE CIT(A) HAS NOT OBSERVED IN HIS ORDER THAT THE ISSUE OF ASSESSABILITY OF THE SUM IN QUESTION AND THE ALLOWANCE OF REBATE TO THE OWNER OF LAND SHOULD BE CONSIDERED ONLY IN THE YEAR OF COMPLETION OF THE PROJECT, AND THAT THE CIT(A) HAS FAILED TO NOTE THAT THE ASSESSI NG OFFICER HAS NOWHERE MENTIONED THAT THE SLIP OF PAPER RELATES TO THE ASSESSEE- AOP. I.T.A.NO. 58.12 C.O.20/12 :- 5 -: 6. SHRI ARUN C. BHARAT, REPRESENTING THE REVENUE, VEHE MENTLY OPPOSED THE ORDER OF THE CIT(A). THE LD. DR SUBMIT TED THAT THE CIT(A) HAS ERRED IN COMING TO THE CONCLUSION THAT T HE AMOUNT OF ` 25 LAKHS IS A DISCOUNT FOR THE SALE CONSIDERATION RECE IVABLE FOR FOUR FLATS ON THE 9 TH FLOOR OF KG OXFORD SYMPHONY. THE LD. DR FURTHER SUBMITTED THAT THE SUM OF ` 25 LAKHS WHICH WAS TO BE PAID IN CASH TO SHRI GEOR GE KUTTY WAS NOT ACTUALLY PAID BUT ADJUSTED AGAINST TH E SALE CONSIDERATION RECEIVABLE FOR THE FLATS SOLD TO HIM, THEREFORE, TH E SALE PRICE OF THE FLATS HAS BEEN REDUCED BY ` 25 LAKHS WHICH WOULD OTHERWISE HAVE BEEN THE INCOME OF THE ASSESSEE. THE LD. DR, SUPPORTING THE ASSESSMENT ORDER, PRAYED FOR SETTING ASIDE THE ORDER OF THE CIT( A). 7. ON THE OTHER HAND, SHRI V.S.JAYAKUMAR, ADVOCATE, REPRESENTING THE ASSESSEE, SUBMITTED THAT NO SEARC H OPERATIONS WERE CONDUCTED IN THE PREMISES OF THE ASSESSEE. IT IS WRONG FINDING OF FACT THAT THE SEARCH WAS CONDUCTED IN THE PREMISES OF TH E ASSESSEE-AOP AND THE NOTE ALLEGED TO HAVE BEEN RECOVERED DURING SEARCH WAS RECOVERED FROM THE PREMISES OF THE ASSESSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS PROJECT COMPLETION METHOD. AS SUCH, THE ASSESSE E WILL DECLARE ITS PROFIT ON THE COMPLETION OF THE PROJECT I.E KG OXF ORD SYMPHONY. THE AMOUNT OF ` 25 LAKHS WILL BE ACCOUNTED FOR ONLY AFTER THE COMP LETION OF I.T.A.NO. 58.12 C.O.20/12 :- 6 -: THE PROJECT. EVEN OTHERWISE, AS OF NOW, THE PROJEC T IS IN DISPUTE AND THE MATTER IS PENDING FOR FINAL ADJUDICATION BEFORE THE HON'BLE KERALA HIGH COURT. TILL THE TIME LITIGATION IS OVER AND T HE MATTER IS LAID TO REST, THE PROJECT CANNOT BE CONSIDERED TO HAVE BEEN COMPL ETED. 8. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF BOTH THE SIDES. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE- AOP HAD ENTERED INTO AN AGREEMENT WITH ONE SHRI GEORGE KUTTY FOR SA LE OF LAND MEASURING 44 CENTS FOR A CONSIDERATION OF ` 2.60 CRORES AT PALLARIVATOM AND ON THE SAID LAND, A RESIDENTIAL COMPLEX IN THE NAME OF KG OXFORD SYMPHONY WAS CONSTRUCTED. IT IS ALSO AN ADMITTE D FACT THAT OUT OF TOTAL SALE CONSIDERATION OF ` 2.60 CRORES, AN AMOUNT OF ` 1.60 CRORES WAS PAID THROUGH CHEQUE TO THE VENDOR(SHRI GEORGE K UTTY). FROM THE REMAINING AMOUNT OF ` 1 CRORE, ` 75 LAKHS WAS PAID IN CASH BY THE MEMBERS OF ASSESSEE-AOP, THE DETAILS OF WHICH ARE GIVEN IN PARA 2 ABOVE. IT IS THE REMAINING AMOUNT OF ` 25 LAKHS WHICH HAS NOT BEEN ACCOUNTED AND HAS ESCAPED ASSESSMENT. THE AMOUNT OF ` 25 LAKHS HAS ALLEGED TO HAVE BEEN ADJUSTED AGAINST SALE CONS IDERATION OF FOUR FLATS ON 9 TH FLOOR OF KG OXFORD SYMPHONY PROJECT. AS PER ASSE SSEE, THIS AMOUNT WILL BE ACCOUNTED ONLY AFTER THE COMP LETION OF THE I.T.A.NO. 58.12 C.O.20/12 :- 7 -: PROJECT, AS THE METHOD OF ACCOUNTING FOLLOWED BY T HE ASSESSEE IS PROJECT COMPLETION METHOD. 9. AS PER ASSESSEES OWN ADMISSION, THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD FOR ACCOUNTING, AS SUCH , THIS AMOUNT IS ASSESSABLE ONLY AFTER THE COMPLETION OF THE PROJECT . THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE HAS NOT BEEN D ISPUTED BY THE REVENUE. WE ARE OF THE CONSIDERED OPINION THAT SINC E THE AMOUNT OF ` 25 LAKHS IS TO BE ADJUSTED AGAINST THE FOUR FLATS O N THE 9 TH FLOOR OF THE BUILDING AND THE SAID FLATS HAVE NOT BEEN COMPLETED , DUE TO ONGOING LITIGATION QUA THE BUILDING, THE SAID AMOUNT CANNOT BE CONSIDERED TO HAVE BEEN ADJUSTED IN THE ASSESSMENT YEAR UNDER REF ERENCE. THE AMOUNT OF ` 25 LAKHS IS LIABLE TO BE ASSESSED TO TAX IN THE YE AR OF COMPLETION OF THE PROJECT. THE LD. COUNSEL FOR THE ASSESSEE HAS MADE STATEMENT AT THE BAR THAT THE AMOUNT OF ` 25 LAKHS WILL BE OFFERED TO TAX BY THE ASSESSEE AFTER THE ALLOTMENT OF FLATS T O THE VENDOR. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALSO DISMISSED AS HAVING BECOME INFRUCTUOUS. 10. HOWEVER, IT IS MADE CLEAR THAT IN CASE THE ASS ESSEE FAILS TO DISCLOSE THE AFORESAID AMOUNT OF ` 25 LAKHS IN THE YEAR OF COMPLETION OF BUILDING AND/OR ALLOTMENT OF FLATS TO THE VENDOR OR TO ANY I.T.A.NO. 58.12 C.O.20/12 :- 8 -: OTHER PERSON AT HIS BEHEST, THE DEPARTMENT IS AT LI BERTY TO INITIATE APPROPRIATE ACTION AGAINST THE ASSESSEE IN ACCORDA NCE WITH LAW. 11. IN THE RESULT, BOTH, THE APPEAL OF THE REVENUE A ND THE CROSS OBJECTION OF THE ASSESSEE, ARE DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 25 TH OF JUNE, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (VIKAS AWASTHY) JUDICIAL MEMBER DATED: 25 TH JUNE, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR