M/s.City Centre Builders & Developers, Trichur V. The ACIT, Trichur

CO 9/COCH/2015

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4255 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-08-2016
• Assessment Year: 1999-2000
• Appeal Filed On: 28-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: K KITTU
• Keywords: Prejudicial to interest; Tax effect; Condonation of delay; Reassessment proceedings

Judgement Text

CO 9/C/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH KOCHI BEFORE S/ SHRI B P JAIN , AM & GEORGE GEORGE K, JM CROSS OBJECTION NO. 09/COCH/2015 ARISING OUT OF ITA NO 72/COCH/2015 (A SST YEAR 1999 - 000 ) CITY CENTRE BUILDERS & DEVELOPERS ROAD WEST THRISSUR 68 0 001 VS THE ASST COMMR F INCOME TAX CIRCLE 2(1), RANGE 2 THRISSUR ( CROSS OBJECTOR ) (RESPONDENT) PAN NO. AAAAC0706G ASSESSEE BY SHRI K KITTU REVENUE BY SHRI A DHANARAJ, SR DR DATE OF HEARING 22 ND AUG 2016 DATE OF PRONOUNCEMENT 23 RD , AUG 2016 O RDER PER GEORGE GEORGE K,JM: THIS CROSS OBJECTION, AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 16.10.2014. THE RELEVANT ASSESSMENT YEAR IS 1999 - 2 000. 2 THIS CROSS OBJECTION WAS ORIGINALLY DISMISSED BY THE TRIBUNAL IN LIM IN E WITHOUT GOING INTO THE MERITS , S INCE THE DEPARTMENTS APPEAL (ITA NO.72/COCH/2015) WAS DISMISSED FOR LOW TAX EFFECT. HOWEVER, THE HONBLE KERALA HIGH IN WP.(C) NO. 7668 OF 2016(JUDGMENT DATED 2.6.2016) DIRECTED THE CO 9/C/2015 2 TRIBUNAL TO DECIDE THE CROSS OBJECTIO N ON MERITS. IT IS IN THIS CONTEXT, THE CROSS OBJECTION WAS HEARD TODAY I.E. 22 ND AUG 2016. 3 AT THE VERY OUTSET, WE NOTICE THAT THERE IS A DELAY IN FILING THE CROSS OBJECTION BY 31 DAYS. A PETITION FOR CONDONATION OF DELAY , ALONG WITH AN AFFIDAVIT OF ONE SHRI K V MOHAMMED ZAKIR (MEMBER OF AOP) HAS BEEN FILED STATING THE REASONS FOR THE DELAY IN FILING THIS CROSS OBJECTION. ON PERUSAL OF THE REASONS STATED IN THE AFFIDAVIT, WE ARE OF THE VIEW THAT THERE IS SUFFICIENT CAUSE FOR THE DELAY IN FILING TH IS CROSS OBJECTION AND IT IS NOT ON ACCOUNT OF WILLFUL LATCHES OR OMISSION ON THE PART OF THE ASSESSEE. THEREFORE, WE CONDONE THE DELAY IN FILING THE CROSS OBJECTION AND PROCEED TO DISPOSE OFF THE SAME ON MERITS. 4 THOUGH SEVERAL GROUNDS ARE RAISED IN T HIS CROSS OBJECTION, ONLY TWO ISSUES WERE ARGUED BY THE LD AR SHRI K KITTU. THE TWO ISSUES ARGUED ARE; I) BUYERS ARE MEMBER OF THE AOP/CLOSE RELATIVES OF THE MEMBERS OF THE AOP AND THE ASSESSEE HAS NOT RECEIVED ANYTHING OVER AND ABOVE RS. 1089 PER SQ.FT. II) THE CIT(A) HAD GONE WRONG IN REJECTING THE CLAIM OF THE ASSESSEE FOR CANCELLATION OF THE LEVY OF INTEREST U/S 220(2) OF THE I T ACT. 5 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS AN AOP CONSISTING OF 15 M EMBERS. IT IS A DEVELOPER AND BUILDER. IT HAD UNDERTAKEN TO BUILD COMMERCIAL/OFFICE COMPLEX BY NAME CITY CENTRE BUILDERS AND DEVELOPERS . RETURN OF INCOME FOR THE RELEVANT ASSESSMENT CO 9/C/2015 3 YEAR WAS FILED ON 29.6.2000 DECLARING A TOTAL INCOME OF RS. 40,95,890/ - . THERE WAS A SURVEY CONDUCTED ON 8.9.1997 IN THE PREMISES OF ONE MR C K SUDHAKARAN WHO HAD PURCHASED A SHOP NO.115 IN THE ASSESSEES COMPLEX . DURING THE SURVEY, AN AGREEMENT DATED 12.5.1997 ENTERED BETWEEN THE ASSESSEE AND SHRI C K SUDHAKARAN WAS FOUND. A S PER THIS AGREEMENT, SALE CONSIDERATION OF THE SHOP NO. 115 WAS RS. 49,91,842/ - ; WHEREAS THE ASSESSEE HAD ACCOUNTED IN THE BOOKS OF ACCOUNT ONLY A SUM OF RS. 8,97,152/ - . THEREFORE, REASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUANCE OF NOTICE U/ 148 OF TH E ACT DATED 11.1.2006 TO ASSESS THE ESCAPEMENT INCOME. ALTHOUGH THE AGREEMENT DATED 25.5.1997 WAS ONLY IN RESPECT OF THE SALE OF ONE SHOP, THE AO WAS OF THE VIEW THAT THE CONCEALMENT OF INCOME IS TO BE CONSIDERED IN RESPECT OF ALL THE SALES EFFECTED BY TH E ASSESSEE , DURING THE YEAR. THE ASSESSMENT WAS COMPLETED ON 29.12.2006 DETERMINING A TOTAL INCOME OF RS. 7,28,80,077/ - . AGGRIEVED BY THIS REASSESSMENT, THE ASSESSEE PREFERRED APPEAL TO THE CIT(A), WHO HAD GRANTED CERTAIN REDUCTION. ON FURTHER APPEAL, T HE TRIBUNAL IN ITS ORDER DATED 15.5.2009 (ITA NO.907/COCH/2007) HAD ALLOWED FURTHER REDUCTION IN THE ADDITIONS ON ACCOUNT OF ON - MONEY PAYMENT . THEREAFTER, THE ASSESSEE APPROACHED THE HONBLE KERALA HIGH COURT AND THE HONBLE HIGH COURT, IN THE JUDGMENT IN ITA NO. 420 OF 200 9 DATED 4.1.2011, REMANDED THE ISSUE BACK TO THE FILE OF THE AO WITH THE DIRECTIONS TO ALLOW PROGRESSIVE REDUCTION IN THE RATE PER SQ.FT IN RESPECT OF HIGHER FLOORS, AS THE SAME WILL NOT FETCH THE SAME PRICE AS THAT OF THE GROUND FLOOR. CO 9/C/2015 4 5.1 SUBSEQUENT TO THE REMAND BY THE HONBLE HIGH COURT OF KERALA, THE ASSESSMENT WAS RE - DONE BY ORDER DATED 28.3.2013 WHEREIN RS. 7250/ - WAS FIXED AS THE RATE PER SQ.FT FOR THE GROUND FLOOR AND FOR THE OTHER FLOORS , T HE REDUCTIONS WERE GIVEN IN THE FOLLOWING TERMS: BASE MENT 95%OF RS 7250/ - FIRST FLOOR 60% OF RS. 7250 2 ND FLOOR 50% OF RS. 7250/ - 3 RD FLOOR 45% OF RS. 7250/ - 4 TH FLOOR 35% OF RS. 7250/ - 5.2 BASED ON THE ABOVE FIXATION OF COST PER FLOOR, THE TOTAL INCOME H AS RECOMPUTED AT RS.2,24,68, 765/ - . 5.3 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSED HAD RAISED A SPECIFIC GROUND (GR. NO.4) WHICH READS AS FOLLOWS: THE FLOOR AREA OF 13815 SQFT IS APPROPRIATED BY THE P ROMOTERS THEMSELVES WHICH IS NOT A SALE TO BE CONSIDERED FOR THE PURPOSE OF ASCERTAINING THE PREMIUM RECEIVED FOR SALE OF THE FLOOR AREA. 5.4 THE CIT(A) REJECTED THE ABOVE GROUND OF THE ASSESSEE BY HOLDING AS UNDER: HAVING GONE THROUGH THE EXPLANATIONS OF THE ASSESSEE, IT IS FOUND THAT CERTAIN MEMBERS OF THE AOP, NAMELY A SALIH YAZIR ZAKIR, K V YUSUF ALI HAVE RETAINED 13815 SQFT TOGETHER OF THE CONSTRUCTED AREA OF THE BUILDING IN THE 4 TH FLOOR. AS SUCH, THE AOP AND ITS MEMBERS ARE SEPARATE ENTITIES AS PER THE STATU E , THE LIABILITY TO PAY TAX FOR THE INCOME EARNED FROM THE APPELLANTS PROJECT LIES WITH CO 9/C/2015 5 THE AOP. ONCE AN AOP HAS COME INTO EXISTENCE THE MEMBERS CONSTITUTING THE AOP CANNOT RETAIN THE PROPERTY AT A PRICE WHICH IS LOWER THAN THE MARKET PRICE. IT I S A CASE WHERE THERE COULD BE CONFLICT OF INTEREST. MOREOVER, THE LD BENCH ITAT COCHIN HAS ALREADY DECIDED THIS ISSUE THAT THE RATE APPLICABLE FOR DECIDING THE ON - MONEY RECEIVED FROM ONE BUYER, I.E. SHRI SUDHAKARAN WOULD BE EXTENDABLE TO ALL OTHER SALES. T HUS, THE CONSTRUCTED AREA HELD BY THE MEMBERS OF THE AOP WOULD NOT ENJOY ANY EXEMPTION, AND THE SAME RATE OF RS. 7250/ - PER SQFT FOR THE GROUND FLOOR WITH THE PROGRESSIVE REDUCTION IN THE VALUE OF THE CONSTRUCTED AREA GOING ABOVE THE GROUND FLOOR HAS BEEN CONSIDERED. THE SAME HAS APPROPRIATELY, BEEN CONSIDERED B THE AO AND HENCE, THE ASSESSEE HAS NOT CASE ON MERITS. 5.5 AGGRIEVED BY THE DISMISSAL OF THIS GROUND BY THE CIT(A), THE ASSESSEE IS IN CROSS OBJECTION BEFORE US. THE LD COUNSEL FOR THE ASSESSEE REI TERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). 5.6 THE LD DR, ON THE OTHER HAND, SUBMITTED THAT THE ISSUE OF PRICE FIXATION OF SPACE SOLD TO THE MEMBERS OF THE AOP WAS NEVER SUBJECT MATTER OF PROCEEDINGS BEFORE THE HONBLE HIGH COURT AND THE TRIBUNAL IN THE FIRST INSTANCE AND THEREFORE, THE ASSESSEE IS PRECLUDED FROM RAISING THE ABOVE ISSUES IN THE 2 ND ROUND OF LITIGATION BEFORE THE TRIBUNAL. 5.7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE FOR OUR CONSIDERATION IS ; I) WHAT IS THE VALUE PER SQ.FT FR THE SPACE PURCHASED/RETAINED BY THE THREE MEMBERS OF THE AOP ? II) WHETHER IT IS RS. 2537.50 PER SQFT (AS ESTIMATED BY THE AO) OR RS. 1089/ - PER SQ.FT (AS CLAIMED BY THE ASSESSEE) ? . CO 9/C/2015 6 AS RIGHTLY POINTED BY THE LD DR, THE HONBLE H IGH COURT DIRECTED THE AO TO GIVE PROGRESSIVE REDUCTION OF RATE FOR HIGHER FLOORS SINCE HIGHER FLOORS WOULD NOT FETCH THE SAME PRICE AS GROUND FLOOR . THE ISSUE OF SPACE PURCHASE/RETAINED BY THE MEMBERS OF THE AOP ; WHETHER IT SHOULD BE TAKEN AT RS . 1089/ - PER SQ.FT , WAS NEVER THE SUBJECT MATTER OF LITIGATION BEFORE THE HONBLE HIGH COURT. IN THIS CASE, THE VALUE/RATE HAS BEEN FIXED UNIFORMLY FOR ALL , AS PER THE DIRECTIONS OF THE HONBLE HIGH COURT. THE VALUE FIXED BY THE AO FOR THE 4 TH FLOOR WAS AT RS. 2537/ - PER SQ.FT. THE ASSESSEE HAD NOT DISPUTED THE VALUE OF R S. 2537/ - PER SQ.FT SOLD TO THE OUTSIDER; WHEREAS THE ASSESSEE CLAIMS THAT THE SALE PRICE TO THE MEMBERS OF THE AOP IS ONLY RS. 1087/ - INSTEAD OF RS. 2537/ - . AS MENTIONED EARLIER , THIS DISPUTE WAS NEVER SUBJECT MATTER OF ADJUDICATION BEFORE THE HONBLE HIGH COURT , WHEN THE MATTER WAS REMANDED TO THE AO. ON THE CONTRARY, THE TRIBUNAL HAD ALREADY DECIDED THE ISSUE THAT THE RATE APPLICABLE FOR COMPUTING ON - MONEY RECEIVED FROM ONE BUY ER, I.E. SHRI SUDHAKARAN WOULD BE EXTENDABLE TO ALL OTHER SALES. THUS, THE CONSTRUCTED AREA PURCHASED/RETAINED BY THE MEMBERS OF THE AOP WOULD NOT ENJOY ANY EXEMPTION, AND THE SAME RATE OF RS. 2537/ - PER SQFT FOR THE 4 TH FLOOR , WHICH HAS BEEN FIXED BY THE AO IS APPROPRIATE RATE AND NO REDUCTION CAN BE GRANTED. IT IS ORDERED ACCORDINGLY . CO 9/C/2015 7 SECOND ISSUE: 6 THE CLAIM OF THE ASSESSEE IS WITH THAT THE INTEREST U/S 220(2) OF THE A CT IS TO BE LEVIED ONLY FROM THE DATE OF SECOND ASSESSMENT ORDER (ORDER GIVIN G EFFECT TO THE HONBLE HIGH COURT JUDGMENT). THE CIT (A) HAD REJECTED THIS PLEA OF THE ASSESSEE, BY OB SERVING AS UNDER : THE ASSESSEES CONTENTIONS ARE NOT TENABLE IN LAW AS THE PROVISIONS U/S 220(2) CLEARLY CORRELATES WITH THE AMOUNT OF TAX. ON WHIC H INTEREST WAS PAYABLE. PROVISO TO SECTION 220(2) MENTIONS THAT WHERE AS A RESULT OF AN ORDER U/S 254, AMOUNT ON WHICH INTEREST WAS PAYABLE UNDER THIS SECTION HAD BEEN REDUCED, THE INTEREST SHALL BE REDUCED ACCORDINGLY. IT MEANS THAT THE ASSESSEE IS LI ABLE TO PAY INTEREST IN RESPECT OF THE QUANTUM OF TAX DETERMINED ORIGINALLY AND SUCH QUANTUM OF TAX WHEN GAINS THE FINALITY BY WAY OF ANY ALTERATION AS A RESULT OF APPEAL ORDERS, IT IS ONLY THE ORIGINAL AMOUNT OF TAX RAISED BY THE AO GETS ALTERED AND, ANY LIABILITY TO PAY INTEREST ARISES FROM THE DATE ON WHICH THE NOTICE U/S 156 WAS ISSUED AT THE TIME. 6.1 AGGRIEVED BY THE ABOVE ORDER OF THE C IT (A), THE ASSESSEE IS IN CROSS OBJECTION BEFORE US. THE LD COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MA DE BEFORE THE CIT(A). THE LD DR PRESENT WAS DULY HEARD. 6.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE LD AR DOES NOT HAVE THE CASE THAT THE ASSESSEE HAD PAID THE DEMAND AS PER THE ORIGINAL DEMAND NOTICE ISSUED U/S 156 OF THE ACT. T HEREFORE, THE JUDGMENTS RELIED ON BY THE ASSESSEE IN THE CASE OF ITO VS AV THOMAS & CO (160 ITR 818) AND IN THE CASE OF VIKRANT TYRES LTD VS ITO 247 ITR(FB) 821(SC) DOES NOT CO 9/C/2015 8 HAVE APPLICATION TO THE FACTS OF THE PRESENT CASE. IN THE INSTANT CASE, THE DEMAND AS PER THE FIRST ASSESSMENT ORDER WAS SUBSTANTIALLY REDUCED WHILE GIVING EFFECT TO THE JUDGMENT OF THE HONBLE HIGH COURT. THE PROVISION OF SECTION 220(2) OF THE ACT IS VERY CLEAR . AS A RESULT OF SECOND ASSESSMENT ORDER, THE TAX LIABILITY WAS REDUCED AND INTEREST U/S 220(2) IS TO BE QUANTIFIED FROM THE DATE OF ORIGINAL ASSESSMENT ORDER WHEN THE DEMAND FOR O RIGINAL ASSESSMENT WAS NOT DISCHARGED BY THE ASSESSEE . IN VIEW OF THE CLEAR PROVISIONS OF SECTION 220 (2) , WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY REJECTED THIS PLEA OF THE ASSESSEE. IT IS ORDERED ACCORDINGLY. 7 IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD , DAY OF AUG 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 23 RD , AUG 2016 RAJ* CO 9/C/2015 9 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN