Sri Sun City Developers, Coimbatore V. ITO, Coimbatore

CO 55/CHNY/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9823 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S SRIDHAR
• Assessee Lawyers: GURU BHASHYAM
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . , . . , ! ' [BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMB ER AND SHRI S. S. GODARA, JUDICIAL MEMBER] ./ I.T.A.NO.451/MDS/2013 & C.O.55/MDS/2013 / ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER WARD II(3) COIMBATORE VS. M/S SRI SUN CITY DEVELOPERS 116, 117 VOC LAYOUT WEST SAMBANDAM ROAD R.S.PURAM, COIMBATORE 641 002 [PAN ABIFS 4607 E] ( #$ / APPELLANT) (RESPONDENT/CROSS OBJECTOR) / APPELLANT BY : SHRI GURU BHASHYAM, JCIT /RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE / DATE OF HEARING : 09-09-2014 ! / DATE OF PRONOUNCEMENT : 25-09-2014 % / O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL AND ASSESSEES CROSS OBJECT IONS FOR ASSESSMENT YEAR 2009-10, ARISE FROM ORDER OF THE CO MMISSIONER OF INCOME-TAX(APPEALS)-I COIMBATORE DATED 18.12.2012, RESTRICTING THE DISALLOWANCE OF SITE DEVELOPMENT EXPENDITURE OF ` 40 LAKHS TO ` 17,01,475/- IN PROCEEDINGS U/S 143(3) OF THE INCOM E-TAX ACT, 1961 I.T.A.NO.451/13 & CO 55/13 :- 2 -: ((IN SHORT THE ACT). THE REVENUES GROUNDS SEEK RESTORATION OF THE ENTIRE ADDITION. THE ASSESSEES CROSS OBJECTIONS SUPPORT THE CIT(A)S ORDER. IT ALSO ARGUES FOR DELETING THE REMAINING PORTION OF THE IMPUGNED DISALLOWANCE AS WELL. 2. THE ASSESSEE IS A FIRM ENGAGED IN REAL ESTATE BU SINESS SINCE PRECEDING ASSESSMENT YEAR 2008-09. IT ACQUIR ES CHUNKS OF LAND, EXECUTES LAYOUT PLANS AND SELLS RESIDENTIAL PLOTS. THE ASSESSEE HAD FILED ITS RETURN ON 28.8.2009 ADMITTING INCOME OF ` 7,49,190/-. THEREAFTER, THE DEPARTMENT HAD CONDUCTED A SURVEY ON 28.9.2011 IMPOUNDING VARIOUS SALE AGREEMENTS PERTAINING TO PL OTS SOLD AND REGISTERED SALE DEEDS ETC. 3. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE, INTE R ALIA, NOTICED THE ASSESSEE TO HAVE CLAIMED LAND DEVELOP MENT EXPENSES OUTGO OF ` 64,02,076/- IN ITS PROFIT AND LOSS ACCOUNT. THIS EXPENDITURE COMPRISED OF FUEL EXPENSES FOR JCB, TWO TRACTORS, L AND DEVELOPMENT CHARGES, SITE DEVELOPMENT EXPENSES AND CIVIL WAGES OF ` 5,29,750/-, ` 3,28,142/-, ` 3,20,850/-, ` 23,77,905/-, ` 7,83,753/- AND ` 20,61,676/-, RESPECTIVELY. THE DISPUTE IS ABOUT L AND DEVELOPMENT CHARGES, SITE EXPENSES AND CIVIL WAGES TOTALLING TO ` 52,23,334/- ONLY. THE ASSESSING OFFICER SOUGHT FOR FURTHER DETAILS. IT CAME TO LIGHT THAT SINCE ITS FORMATION, THE ASSESSEE HAD DEVELOPED FI VE RESIDENTIAL I.T.A.NO.451/13 & CO 55/13 :- 3 -: PROJECTS. THIS LIS PERTAINS TO APPLE CASTLE P ROJECT ONLY. THIS PROJECT COMPRISED OF 612 PLOTS ON A CHUNK OF LAND MEASURING 48 ACRES. THE ASSESSEE HAD ACQUIRED 37 ACRES IN ASSESSMENT YEAR 2 007-08 AND REMAINING 11 ACRES IN 2008-09. IT HAD SOLD 228 UN ITS IN ASSESSMENT YEAR 2008-09 AND ALSO RECEIVED ADVANCES OF ` 3 CRORES IN THE RELEVANT THE PREVIOUS YEAR. IN RELEVANT PREVIOUS YEAR, THE ASSESSEES 322 UNITS WERE SOLD. THE ASSESSING OFFICER INFERRED IN LIGH T OF THESE FACTS THAT PLOTS WERE ALREADY IN SALEABLE CONDITION. HE OPIN ED THAT THE EXPENDITURE IN QUESTION WAS ON HIGHER SIDE OVER AN D ABOVE ` 63 LAKHS ALREADY CLAIMED DURING ASSESSMENT YEAR 2008-09. 4. THE ASSESSING OFFICER ALSO TOOK COGNIZANCE OF THE F ACT THAT THE ASSESSEE HAD ONLY FILED SELF-MADE VOUCHERS TO SUPPORT THE IMPUGNED EXPENDITURE OUTGO. ONE SMT. D.BINDHYA (SC RIBER OF VOUCHERS) DEPOSED TO HAVE PREPARED THE SAME AS PE R THE ASSESSEES DIRECTIONS. TWO OTHER RECIPIENTS SMT.RAJASREE BHAS KAR AND SMT. SAROJA TURNED OUT TO BE MARKETING EXECUTIVES. THE LAST RECIPIENT SHRI E. RAJENDRAN(A SURVEYOR) HAD CONDUCTED SURVEY OF T HE ENTIRE PROJECT, PREPARED DRAWINGS, PURCHASED AND LAID SITE STONES ETC. HE CONFIRMED PAYMENTS OF ` 2.5 LAKHS QUA PROJECT APPLE CASTLE. ALSO STATED THAT 10 ACRES OF THE PROJECT SITE WAS IN A LOW LYING AREA. THIS WAS CLAIMED TO HAVE BEEN LEVELLED BY CUTTING SOIL OF THE HIGHER PO RTION OF THE LAND. THE ASSESSING OFFICER OBSERVED THAT THE MAIN COST INCURRED WAS ON I.T.A.NO.451/13 & CO 55/13 :- 4 -: FUEL CHARGES FOR TRANSPORTATION OF SOIL. HE NEGATE D ANY LAYING OF TAR ROADS, BUILDING OF DITCHES AND SHEDS. THE ASSISTAN T ENGINEER(VALUATION) WAS DEPUTED TO SUBMIT SITE REP ORT. HE FILED HIS RESPONSE ON 29.9.2011 SUPPORTING EXPENSES OF ONLY ` 40 LAKHS FOR THE ENTIRE PROJECT. THE ASSESSING OFFICER HELD IN THE ASSESSMENT ORDER DATED 30.12.2011 THAT THE ASSESSEE HAD ALREADY CLA IMED EXPENSES OF ` 63 LAKHS FOR THE VERY PROJECT AND NO FURTHER CLAI M WAS ADMISSIBLE. HOWEVER, HE ALLOWED FUEL CHARGES (SUPRA) WITH A FUR THER SUM OF ` 12 LAKHS QUA LAND MEASURING 11 ACRES ACQUIRED IN THE R ELEVANT PREVIOUS YEAR. THIS RESULTED IN CONSEQUENTIAL DISALLOWANCE/ ADDITION OF ` 40 LAKHS. 5. IN ASSESSEES APPEAL, THE CIT(A) HAS RESTRICTED TH E IMPUGNED DISALLOWANCE OF ` 40 LAKHS TO ` 17,01,475/- BY OBSERVING AS UNDER: 6.2 AS SEEN FROM THE DETAILS FURNISHED BY THE APP ELLANT, THE TOTAL LAND DEVELOPMENT EXPENSES ARE AS FOLLOWS: FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSEE DEVELOPED 6,90,753 SQ. FT. OF LAND AND FOR THE ASSESSMENT YEA R 2009-10, THE LAND DEVELOPED WAS 5,12,048 SQ.FT. THE AR SUBMITTED THAT THE VALUATION OFFICER'S REPORT IS NOT FOR THE ENTIRE APPLE CASTLE PROJECT. THE ASSISTANT VALUATION OFFICER VISITED THE SITE AN D HIS VALUATION ESTIMATE IS ONLY FOR LAND LEVELING OF 10 ACRES DONE IN THE CURRENT YEAR AND FENCING OF ENTIRE AREA. THERE, THE LAND FILLING DONE IN THE PREVIOUS YEAR LE. ASSESSMENT YEAR 2008-09 IS NOT CONSIDERED BY HIM. FURTHER, THE MUD JELLY LAYOUT, ROAD FORMATION, SITE MARKING, STONE LAYING, NAME BOARD LAYING WAS NOT CONSIDERED BY THE VALUER. IT IS ONLY AN ESTIMATED FIGURE. THE AR ALSO SUBMITTED THAT THE VALUATION OFFICER HAS NOT CONSIDERED THE WAGES AND LABOUR CHARGES. I.T.A.NO.451/13 & CO 55/13 :- 5 -: 6.3 THE ACREAGE WAS ALSO TAKEN AS 20 ACRES INST EAD OF ACTUAL 27.6125 ACRES. I HAD PERUSED THE ASSISTANT VALUATIO N OFFICER'S LETTER DATED 29.12.2011. HE MENTIONED IT IS OBSERVED THAT ABOUT 10 ACRES OF LAND WAS AT A LOWER LEVEL COMPARED TO THE ADJACE NT LAND. THIS WAS LEVELLED BY CUTTING OUT SOIL FROM HIGHER LEVEL AND FILLING THE LOWER LEVEL. HE ESTIMATED THE COST FOR CUTTING SITE AREA OF A MA XIMUM OF 20 ACRES AND ESTIMATED THE EXPENSES AT ABOUT RS.40,00,537/- . IT IS A FACT THAT THE ASSESSEE HAS PURCHASED 11.75 ACRES DURING THE Y EAR 2008-09. THE AR SUBMITTED THAT THE PLOT SOLD DURING THE FINA NCIAL YEAR 2007-08 INCLUDED MAJOR PART OF THE DEVELOPED LAND. TAKING INTO CONSIDERATION THE ADVANCES RECEIVED, FURTHER LAND WAS ACQUIRED TO CAT ER TO THE CUSTOMERS . THE VALUAT I ON OFFICER HAS NOT TAKEN INTO CONSIDERATION THE COST OF LABOUR , LAYING OUT OF ROADS , SIGN BOARDS AND NAME BOARDS EXPENDITURE . THE AR ON 14.12 . 2012 FURTHER MADE H I S S UBMISSIONS STATING THAT AVERAGE DEVELOPMENT COST WORKED OUT TO RS.10 . 60 PER SQ . FT . WHICH SHOULD BE ALLOWED . IT WAS FURTHER SUBMITTED THAT THE APPELLANT PURCHASED LAND OF 1 1 . 755 ACRES (5,12,048 SQ . FT.) DURING MAY TO DECEMBER 2008 OUT OF WHICH 9 . 915 ACRES WERE PURCHASED BEFORE IH AUGUST, 2008 AND DEVELOPMENTAL ACTIVITIES AND LAND FILLING, FENCING, ETC., WERE COMMENCED AND ONLY 1.14 ACRES W ERE REGISTERED ON 23.12.2008. AS COMPARED TO PREVIOUS FINANCIAL YE AR, THE CURRENT YEAR COST MUST BE HIKED AS PER INFLATION. IN THE AS SESSMENT YEAR 2008- 09, THE EXPENSES WERE ACCEPTED BY THE ASSESSING OFFICER IN HIS ORDER U/S 143(3) OF THE INCOME TAX A CT, 1961. 6.4 AS SEEN FROM THE ASSESSMENT YEAR 2008-09 REC ORD, THERE WAS NO CLOSING STOCK IN THE APPLE CASTLE PROJECT WHICH PROVES THAT ALL OF THE SITES DEVELOPED WERE SOLD IN THE CONCERNED RELE VANT YEAR IMMEDIATELY. THE LAND PURCHASED DURING THE FINANCIA L YEAR 2008-09 HAS TO BE DEVELOPED BY THE APPELLANT TO MAK E SALE OF THE LAND. AS SEEN FROM THE DETAILS, THE APPELLANT HAS S PENT RS .9.180 PER SQ.FT. DURING THE FINANCIAL YEAR 2007-08. HOWEVER, FOR THE ASSESSMENT YEAR 2009-10, THE APPELLANT HAS SHOWN TH E EXPENDITURE AT RS.12.50 PER SQ.FT. THE REPORT OF THE ASSISTANT VALUATION OFFICER IS NOT VERY CLEAR REGARDING THE DEVELOPMENT MADE DURIN G THE FINANCIAL YEAR 2008-09. THE ASSESSING OFFICER HAS ALSO MADE AN ESTIMATION OF THE EXPENDITURE AND ALLOWED AN AMOUNT OF RS.12 L ACS APART FROM THE FUEL EXPENSES CLAIMED TO THE EXTENT OF RS.12 LA CS. SHE HAS MADE A DISALLOWANCE OF RS.40 LACS. GOING THROUGH THE FAC TS OF THE CASE, THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO THE ORDER OF THE ASSESSING OFFICER, THE LAND DEVELOPMENT EXPENDITURE HAS TO BE CONSIDERED AT THE SAME COST AS DONE IN THE FINANCIA L YEAR 2007-08. APPLYING THE SAME RATIO OF COST PER SQ. FT., THE DI SALLOWANCE IS TO BE RESTRICTED TO RS.17,01,475/-. THE COMMISSION PAYMEN TS AS STATED TO HAVE BEEN WRONGLY INCLUDED IN LAND DEVELOPMENT HAVE TO BE VERIFIED BY THE ASSESSING OFFICER. I.T.A.NO.451/13 & CO 55/13 :- 6 -: IN THIS BACKDROP OF FACTS, THE REVENUE IS IN APPEA L AND THE ASSESSEE HAS PREFERRED CROSS OBJECTIONS. 6. WE HAVE HEARD BOTH PARTIES AND PERUSED THE RELEVANT FINDINGS IN ASSESSMENT AS WELL AS THE LOWER APPELL ATE ORDER. THE PARTIES RAISE A FACTUAL ISSUE AS TO WHETHER ENTIRE EXPENDITURE OF ` 52,23,334/- HAD BEEN INCURRED IN RELEVANT PREVIOUS YEAR FOR THE PROJECT APPLE CASTLE OR NOT. THE CIT(A) IN HIS ORDER HAS VALUED LAND DEVELOPMENT EXPENDITURE AT THE SAME COST ADOPTED IN ASSESSMENT YEAR 2008-09. IT HAS COME ON RECORD THAT THE ASSESSEE HAD ACQUIRED 11 ACRES OF LAND IN PREVIOUS YEAR RELEVANT TO THE IMPU GNED ASSESSMENT YEAR. THE REVENUES STAND RIGHT FROM SCRUTINY ON LY TREATS THE IMPUGNED EXPENDITURE ON HIGHER SIDE AND NOT A FALSE ONE. THUS, THE QUESTION IS MORE ESTIMATION OF EXPENSES. COMING TO THE CIT(A)S FINDINGS ON THE BASIS OF DEVELOPMENT COSTS INCURRED IN THE PRECEDING ASSESSMENT YEAR, THE REVENUE DOES NOT FILE ANY COGE NT EVIDENCE ON RECORD REBUTTING QUANTIFICATION THEREOF. SO, WE DO NOT DEEM IT APPROPRIATE TO DISTURB THE CIT(A)S VIEW FORMED BAS ED ON ASSESSMENT FRAMED IN ASSESSMENT YEAR 2008-09. WE REITERATE TH E TRITE PROPOSITION THAT THE CIT(A)S POWERS ARE CO-TERMINUS WITH THE A SSESSING AUTHORITY. THE FINDINGS UNDER CHALLENGE SUFFICIENTLY EXPLAIN T HE REASONING BEHIND PART ACCEPTANCE OF THE EXPENDITURE IN QUESTION. THE REVENUES I.T.A.NO.451/13 & CO 55/13 :- 7 -: GROUNDS ARE DISMISSED. THE ASSESSEES SUPPORTIVE CROSS OBJECTIONS ARE RENDERED INFRUCTUOUS. 7. NOW, WE COME TO THE ASSESSEES SIMULTANEOUS PLEA T HAT THE LOWER APPELLATE AUTHORITY OUGHT TO HAVE DELETED THE ENTIRE DISALLOWANCE. HEREIN AS WELL, WE DO NOT FIND ANY MATERIAL TO UPSET THE LOWER APPELLATE FINDINGS. WE ARE ALSO OF THE OPINI ON THAT WITH THE PASSAGE OF TIME AND PASSING OF EACH ASSESSMENT YEAR , THERE IS SOME ESCALATION IN THE COST OF EXPENSES. ON THIS ASSUMP TION, WE OBSERVE THAT INTEREST OF JUSTICE WOULD BE MET IN CASE THE D ISALLOWANCE AFFIRMED IN THE LOWER APPELLATE ORDER OF ` 17,01,475/- IS FURTHER RESTRICTED TO ` 14 LAKHS ONLY. THE ASSESSEES ARGUMENT IS PART LY ACCEPTED. 8. THE REVENUES APPEAL IS DISMISSED AND ASSESSEES C ROSS OBJECTIONS ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 25 TH OF SEPTEMBER, 2014, AT CHENNAI. SD/- SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER ( . . ) (S. S. GODARA) ! / JUDICIAL MEMBER '# / CHENNAI $% / DATED: 25 TH SEPTEMBER, 2014 RD %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF