LOKHANDWALA INFRASTRUCTURE P.LTD, MUMBAI V. ACIT RG 21(1), MUMBAI

ITA 1056/MUM/2015

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9849 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 26-07-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 18-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Reopening of assessment; Tax effect
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 1056/ MUM/20 15 ( ASSESSMENT YEAR : 2005 - 06 ) ITA NO. 4386/ MUM/20 15 ( ASSESSMENT YEAR : 2010 - 11 ) M/S. LOKHANDWALA INFRASTRUCTURE PVT. LTD. , 72, GANDHI NAGAR DAINIK SHIVNER ROAD, WORLI, MUMBAI 400 018 VS. ACIT RG 21(1) / DCIT CC - 8(3) MUMBAI PAN/GIR NO. AABCL4859L APPELLANT ) .. RESPONDENT ) ITA NO. 1333/ MUM/20 15 ( ASSESSMENT YEAR : 2005 - 06 ) ITA NO. 4839/ MUM/20 15 ( ASSESSMENT YEAR : 2010 - 11 ) DCIT RG 8(3) MUMBAI VS. M/S. LOKHANDWALA INFRASTRUCTURE PVT. LTD., 72, GANDHI NAGAR DAINIK SHIVNER ROAD, WORLI, MUMBAI 400 018 PAN/GIR NO. AABCL4859L APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI HARI RAHEJA & SHRI MANI JAIN REVENUE BY SHRI CHAITANYA AN JARIA DATE OF HEARING 06 / 09 /201 8 DATE OF PRONOUNCEMENT 24 / 09 / 201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE CROSS APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) - 33, MUMBAI DATED 23/12/2014 FOR A.Y.2005 - 06 AND 2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. ITA NO. 1056/MUM/2015 AND OTHER APPEALS M/S. LOKHANDWALA INFRASTRUCTURE PVT. LTD., 2 ITA NO . 1333/ MUM/20 15 & ITA NO. 4839/ MUM/20 15 2. AT THE OUTSET, IT WAS POINTED OUT BY LEARNED AR THAT THE TAX EFFECT IN THE REVENUE APPEAL S IS NOT EXCEEDING RS. 20 LA KH S. UNDER THE POWER VESTED BY SEC. 268A(1) OF THE I T. ACT, CBDT HAS RECENTLY ISSUED CIRCULAR NO. 3/2018 DATED 11.07.2018 INSTRUCTING THE AUTHORITIES BELOW THAT DEPARTMENTAL APPEAL S SHOULD NOT BE FILED BEFORE I TAT WHERE THE DEMAND/TAX EFFECT DOES NOT EXCEED RS. 20 LA KH S. THE CIRCULAR SPECIFICALLY MENTIONS THAT THE INSTRUCTIONS ARE APPLICABLE TO ALL PENDING APPEALS ALSO. 3 . SUBJECT TO SOME EXCEPTIONS, IT IS FURTHER DIRECTED BY CBDT THAT ALL THE DEPARTMENTAL APPEALS PENDING BEFORE ITAT WHERE THE DEMAN D/TAX EFFECT IS LESS THAN 20 LAKH S SHOULD BE EITHER WITHDRAWN OR NOT PRESSED BY THE DEPARTMENTAL REPRESENTATIVE. 4 . THE PRESENT APPEAL S ARE NOT COVERED BY ANY EXCEPTIONS MENTIONED IN THE SAID CBDT CIRCULAR. SINCE THE TAX DEMAND IN DISPUTE IN THESE DEPARTMENTAL APPEAL S DO ES NO T EXCEED THE LIMIT OF RS. 20 LAKH S AS SET OUT BY CBDT, SUCH APPEAL S ARE NOT MAINTAINABLE IN VIEW OF FORE GOINGS. ACCORDINGLY THE APPEAL S OF THE DEPARTMENT ARE DISMISSED AS NOT PRESSED/WITHDRAWN AND HENCE INFRUCTUOUS. 5. IN THE RESULT, THE APPEALS FILED BY REVENUE ARE DISMISSED. ITA NO.1056/MUM/2015 & ITA NO.4386/MUM/2015: ITA NO. 1056/MUM/2015 AND OTHER APPEALS M/S. LOKHANDWALA INFRASTRUCTURE PVT. LTD., 3 6. IN THE APPEAL FILED BY THE ASSESSEE FOR THE A.Y.2005 - 06, THE ASSESSEE IS AGGRIEVED FOR REOPENING OF ASSESSMENT AFTER FIVE YEAR IN SO FAR AS ORIGINAL ASSESSMENT YEAR COMPLETED U/S.143(3) A ND NEW NOTICE ISSUED FOR REOPENING, AO HAS NOT POINTED OUT ANY FAULT ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS. FOR THIS PURPOSE RELIANCE WAS PLACED ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF HARIKISHAN SUNDERLAL VIRMANI 88 TAXMANN.COM 548 AND DELHI HIGH COURT IN CASE OF UNITECH L IMITED (W.P.(C) 12324/2015). 7. SO FAR AS MERIT OF THE ADDITION IS CONCERNED, THE ASSESSEE IS AGGRIEVED FOR ADDITION OF RS.12 LAKHS MADE ON THE BASIS OF MATERIALS SEIZED FROM THE PREMISES OF SHRI SATISH MUNDRA WHO HAS PURCHASED FLAT FROM THE ASSESSEE. AS PER THE AO, THE SEIZED MATERIAL INDICATE CASH PAYMENT OF RS.12 LAKHS, HOWEVER, ASSESSEE HAS CLEARLY DENIED THE SAID NOTINGS WHICH ARE NOT IN THE HAND WRITI NG OF THE ASSESSEE. FURTHERMORE , NO ATTEMPT HAS BEEN MADE BY THE AO TO IDENTIFY THE SIGNATURE OR HAND WRITING OF SHRI SATISH MUNDRA TO EXAMINE AS TO WHOM HE HAD PAID THE MONEY NOR ANY CROSS EXAMINATION WAS ALLOWED. AS AN ALTERNATE, IT WAS ALSO ARGUED BY LEARNED AR THAT THE ENTIRE ON MONEY WHICH IS A SALE CONSIDERATION CANNOT BE SUBJECTED TO TAX AND ONLY P ROFIT ELEMENT IN THE SAID SALE CONSIDERATION CAN BE BROUGHT TO TAX. FOR THIS PURPOSE RELIANCE WAS PLACED ON THE DECISION OF CO - ORDINATE BENCH IN THE CASE OF PLATINUM PROPERTIES ITA NO.2600/MUM/2012, WHEREIN 8% OF ON MONEY HAS BEEN SUSTAINED. ITA NO. 1056/MUM/2015 AND OTHER APPEALS M/S. LOKHANDWALA INFRASTRUCTURE PVT. LTD., 4 8. WE HAVE CON SIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT ADDITION WAS MADE ON THE BASIS OF MATERIALS SEIZED AT THE PREMISES OF THIRD PERSON. THE AO HAS NOT MADE ANY ATTEMPT TO IDENTIFY THE SIGNATURE OR HAND WR ITING OF THE PERSON. K EEPING IN VIEW THE FACT THAT ASSESSEE IS ENGAGED IN BUSINESS OF BUILDING CONSTRUCTION , T HE ALLEGED AMOUNT APPEARS TO BE RECEIVED IN RESPECT OF THE FLATS SOLD BY THE ASSESSEE. RESPECTFULLY FOLLOWING THE PROPOSITION LAID DOWN BY THE CO - ORDINATE BENCH, WE DIRECT THE AO TO RESTRICT THE ADDITION TO THE EXTENT OF 8% OF THE ON - MONEY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE FOR THE A.Y.2005 - 06 IS ALLOWED IN PART. 10. IN THE A.Y.2010 - 11, ASSESSEE IS AGGRIEVED FOR DISALLOWANCE OF PURCHASE OF R S.2,28,22,577/ - . F ACTS IN BRIEF ARE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MENTIONED THAT THE CONSTRUCTION COST INCLUDES PURCHASE OF BUILDING MATERIAL SUCH AS STEEL, CEMENT ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS DETAILS IN THIS R EGARD WERE CALLED FOR FROM THE ASSESSEE, WHICH WERE FURNISHED. INFORMATION U/S 133(6) WAS CALLED FOR FROM VARIOUS PURCHASE PARTIES FOR VERIFICATION OF TRANSACTIONS WITH THE ASSSESSEE. HOWEVER, IN 7 CASES THE NOTICES WERE RETURNED UN - SERVED. 11. THE AO QUAN TIFIED THE MATERIAL ALLEGED TO HAVE BEEN CONSUMED IN CONSTRUCTION WORK OF ONGOING PROJECTS AGAINST THE ABOVE MENT IONED 7 PARTIES' AS UNDER: ITA NO. 1056/MUM/2015 AND OTHER APPEALS M/S. LOKHANDWALA INFRASTRUCTURE PVT. LTD., 5 PROJECT CITY PARK PROJECT VICTORIA PROJECT TOTAL NAME OF SUPPLIER PARTY AMOUNT (IN RS.) AMOUNT (IN RS.) AMOUNT (IN RS.) OM ENTERPRISE 52,18,720 52,18,720 TAKSHIL TRADERS 19,93,494 66,64,965 86,58,459 TAKSHIL TRADERS 30,61,687 30,61,687 RIDDHI SIDDHI ENTERPRISES 85,11,723 85,11,723 SAI INTERNATIONA] IMPEX 20,11,208 20,11,208 TA MAS STEEL - 22,50,000 22,50,000 TAMAS STEEL 16,45,310 16,45,310 MAZDA STEEL 63,68,778 63,68,778 NIKHIL ENTERPRISE 58,93,524 58,93,524 TOTAL 2,07,96,832 2,28,22,577 4,36,19,409 12. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE AC TION OF THE AO AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 13. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE THE ASSESSING OFFICER IN PARA NO.3 OF THE IMPUGNED ORDER HAS MADE AD DITION OF RS.2,28,22,577/ - AND REDUCED THE WIP TO THE EXTENT OF RS.2,07,96,832/ - ON ACCOUNT OF UNPROVED PURCHASES. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN BUSINESS OF DEVELOPMENT & CONSTRUCTION OF RESIDENTIAL UNITS. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, INFORMATION U/S. 133(6) WAS CALLED FROM VARIOUS PARTIES FOR VERIFICATION OF TRANSACTIONS. HOWEVER IN 7 CASES THE NOTICES WERE RETURNED UNSERVED. THE ASSESSING OFFICER ONLY ON THE ITA NO. 1056/MUM/2015 AND OTHER APPEALS M/S. LOKHANDWALA INFRASTRUCTURE PVT. LTD., 6 BASIS OF NOT BEING ABLE TO PRODUCE THESE PARTIES HELD THAT THESE PARTIES ARE NON - EXISTENT AND THE TRANSACTION ARE BOGUS . 14. FROM THE RECORD, WE FOUND THAT IN MOST OF THE CASES ASSESSEE PROCURED MATERIALS SUCH AS STEEL, CEMENT AND OTHER BUILDING MATERIALS THROUGH BROKER OF THE SUPPLIERS. IN RESPECT OF THESE PART IES, ASSESSEE HAS SUBMITTED CERTAIN DOCUMENTARY EVIDENCE SUCH AS COPIES OF SAID APPLICATIONS, INVOICES AND PAYMENT DETAILS BEFORE THE AO. ALL THE PAYMENTS FOR PURCHASE WERE MADE BY ACCOUNT PAYEE CHEQUES. SINCE MATERIAL PURCHASED HAVE BEEN ACTUALLY USED BY ASSESSEE IN ITS CONSTRUCTION ACTIVITY, ONLY POSSIBILITY OF ASSESSEE HAVING PURCHASED THE GOODS FROM THE GREY MARKET HAS TO BE CONSIDERED FOR COMPUTING EXTRA INCOME EARNED BY THE ASSESSEE. ON THE BASIS OF FACTS AND FIGURES, WE COMPUTE THE NET IMPACT OF SUCH ALLEGED NON - GENUINE PURCHASES OF REVENUE OF THE ASSESSEE WHICH IS AS UNDER: - PROFIT CALCULATED AS PER PERCENTAGE COMPLETION METHOD IN P & L DISALLOWING THE NON - GENUINE PURCHASES. EXPENSES TOTAL ESTIMATED COST OF CONSTRUCTION 1,30,00,00,000 LESS: NON G ENUINE PURCHASES 2,28,22,577 __ NET ESTIMATED COST 1,27,71,77,423 ACTUAL COST INCURRED UPTO 31.03.2010 46,45,03,998 LESS: NON GENUINE PURCHASES 2 , 28,22,577 NET COST INCURRED 44,16,81,421 PERCENTAGE COMPLETION 34.583% INCOME TOTAL ESTIMATED SALES 1,76,71,71,285 TOTAL SQ. FT 86,400 ITA NO. 1056/MUM/2015 AND OTHER APPEALS M/S. LOKHANDWALA INFRASTRUCTURE PVT. LTD., 7 SOLD SQ. FT. 79,200 % OF SALE 91.667% SALES RECOGNIZED AS PER PERCENTAGE COMPLETION METHOD = 176,71,71,285 / - * 34.583% 61,11,34,139 (D) COST ACCOUNTED AS PER PERCENTAGE COMPLETION METHOD = 44,16,81,421/ - * 91.667% 40,48,74,636 (E) NET REVENUE RECOGNIZED IN P & L (D - E) 20,62,59,503' (F) NET IMPACT ON REVENUE ON ACCOUNT OF NON GENUINE P URCH ASES (C - F) 6,25,506/ - 15. IN VIEW OF THE ABOVE DISCUS SION, WE MODIFY THE ORDER OF THE LOWER AUTHORITIES AND DIRECT THE AO TO RESTRICT THE ADDITION ON ACCOUNT OF ALLEGED NON - GENUINE PURCHASES TO THE EXTENT OF RS.6,25,506/ - . WE DIRECT ACCORDINGLY. 16. EVEN AS PER THE AS - 7, NET EFFECT OF REVENUE ON ACCOUNT OF T HE SAID NON - GENUINE PURCHASES IS RS.6,25,506/ - IN VIEW OF THE FACT THAT GP ALREADY OFFERED BY THE ASSESSEE IN THE CURRENT YEAR WORKS OUT AT 27%. UNDER THESE FACTS AND CIRCUMSTANCES, IT WILL NOT BE JUSTIFIED TO MAKE ADDITION ON ENTIRE AMOUNT OF ALLEGED NON - GENUINE PURCHASES. ACCORDINGLY, AO IS DIRECTED TO RESTRICT THE ADDITION TO THE EXTENT OF RS.6,25,506/ - . 17. IN THE RESULT APPEALS OF THE ASSESSEE ARE ALLOWED IN PART, WHEREAS APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 / 09 /201 8 SD/ - ( AMARJIT SINGH ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 24 / 09 /201 8 KARUNA SR. PS ITA NO. 1056/MUM/2015 AND OTHER APPEALS M/S. LOKHANDWALA INFRASTRUCTURE PVT. LTD., 8 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. T HE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//