The DCIT(OSD)Range-1, Ahmedabad V. Corrtech International Pvt.Ltd., Ahmedabad

ITA 1086/AHD/2012

• Counselvise Citation: 108620514 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 17-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: G C PIPARA A R
• Keywords: Opportunity of being heard; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMADABAD , , , , BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND , SHRI T.R. MEENA, ACCOUNTANT MEMBER .. , ! ' ! ' ! ' ! ' ITA NO. 925 & 1086/AHD/2012 ASSESSMENT YEAR :2007-08 CORRTECH INTERNATIONAL PVT. LTD. 22, DHARA CENTRE, VIJAY CHAR RASTA, NAVRANGPURA, AHMADABAD - 380009 THE DY. COMMISSIONER OF INCOME TAX (OSD), RANGE-1, AHMEDABAD A-WING, 308, 3 RD FLOOR, PRATYAKSH KAR BHAVAN, NR. POLYTECHNIC, AMBAWADI, AHMADABAD-380015 V/S . V/S. THE DY. COMMISSIONER OF INCOME TAX (OSD), RANGE-1, AHMEDABAD A-WING, 308, 3 RD FLOOR, PRATYAKSH KAR BHAVAN, NR. POLYTECHNIC, AMBAWADI, AHMADABAD-380015 CORRTECH INTERNATIONAL PVT. LTD. 22, DHARA CENTRE, VIJAY CHAR RASTA, NAVRANGPURA, AHMADABAD - 380009 PAN NO. AAACC0134G (APPELLANT) .. (RESPONDENT) # $ % BY REVENUE SHRI O. P. BATHEJA, SR.D.R. $ % /BY ASSESSEE SHRI G. C. PIPARA, A.R. &' $ /DATE OF HEARING 24.10.2013 ()* $ /DATE OF PRONOUNCEMENT 20.12.2013 O R D E R ITA NOS. 925 & 1086/AHD/2012 A.Y. 07-08 PAGE 2 PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND R EVENUE IN ITA NOS. 925/AHD/12 & 1086/AHD/12 RESPECTIVELY WHICH HA VE EMANATED FROM THE ORDER OF CIT(A)-6, AHMEDABAD, DATED 13.03.2012 FOR ASSESSMENT YEAR 2007- 2008. BOTH CROSS APPEALS WERE HEARD TOGETHER AND A RE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E. THE EFFECTIVE GROUNDS OF ASSESSEES APPEAL IN ITA NO. 925/AHD/2012 ARE AS UNDER: 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ADDITION OF RS.6,67,849/- OUT OF TOTAL ADDITION OF RS.79,41,759/- MADE BY THE AO ON ACCOUNT OF DISALLO WANCE OF LAND RESTORATION EXPENSES. IN VIEW OF FACTS OF THE CASE, SUBMISSIONS AND EVIDENCES FILED AND AVAILABLE ON RE CORD, THE IMPUGNED ADDITION OF RS.6,67,849/- ALSO REQUIRES TO BE DELETED. 2. THE LEARNED CIT(A) HAS FURTHER ERRED IN NOT APPR ECIATING THE FACT THAT IN RESPECT OF EXPENDITURE TO THE EXTENT O F RS.6,67,849/-, THE CORRESPONDING PROJECTS HAVING BE EN COMPLETED IN EARLIER YEAR, THE INCOME WAS BOOKED IN THE EARLIER YEAR AND ONLY A SMALL AMOUNT OF LAND RESTOR ATION EXPENSES TOWARDS LAND LEVELING HAD BEEN INCURRED DU RING THE YEAR AND HENCE SHOULD HAVE BEEN ALLOWED AS REVENUE EXPENSES, THE SAME HAVING BEEN CRYSTALLIZED DURING THE YEAR AND SINE THE CORRESPONDING INCOME HAVING ALREADY BE EN OFFERED IN EARLIER YEAR. 2. ORIGINALLY IN THIS CASE, THE CO-ORDINATE A BEN CH, ITAT, AHMADABAD IN ITA NO. 3076/AHD/2010 FOR A.Y. 07-08 DECIDED FOLLOW ING GROUND OF APPEAL RAISED BY THE REVENUE: ITA NOS. 925 & 1086/AHD/2012 A.Y. 07-08 PAGE 3 (2) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.79,41,759/- ON ACCOUNT OF TREATMENT OF LAND RESTORATION EXPENSES AS CAPITAL EXPENSES. 2(I). THE CO-ORDINATE A BENCH VIDE ORDER DATED 25 .10.011 HAD DECIDED THIS ISSUE AS UNDER: 12. REGARDING GROUND NO.2, WE FIND THAT AO HAS TRE ATED THE EXPENDITURE INCURRED OF RS.79,41,759/- BY THE ASSES SEE ON LAND RESTORATION AS CAPITAL EXPENSES. WE FIND THAT THE D ISALLOWANCE WAS MADE BY THE AO ON THE BASIS THAT AFTER ISSUE OF SHO W CAUSE NOTICE BY HIM NO REPLY WAS SUBMITTED BY THE ASSESSEE BEFOR E AO AS TO WHY THESE EXPENSES INCURRED BY THE ASSESSEE ON LAND RES TORATION BE NOT TREATED AS CAPITAL EXPENDITURE. THIS SHOWS THAT NO DETAIL WHATSOEVER OR EXPLANATION WAS FURNISHED BEFORE THE AO IN THIS REGARD. WE ALSO FIND THAT ASSESSEE HAS SUBMITTED THE DETAILS BEFORE LD. CIT(A) AND THE ISSUE WAS DECIDED BY SIMPLY ACCEPTING THE ARGUM ENT OF THE LD. AR OF THE ASSESSEE WITHOUT EXAMINING THE DETAILS AN D EVIDENCE AND WITHOUT OBTAINING ANY REMAND REPORT FROM THE AO. WE ALSO FIND THAT THIS WAS AN ARGUMENT BEFORE THE LD. CIT(A) THAT THE EXPENSES ARE INCURRED BY THE ASSESSEE FOR LAND LEVELING WHICH WE RE EXCAVATED IN THE COURSE OF LAYING PIPELINES. WE ALSO FIND THAT T HE PROFIT & LOSS ACCOUNT OF THE ASSESSEE IS APPEARING ON PAGE NO.95 OF THE PAPER BOOK, AS PER WHICH, ASSESSEE HAS SHOWN INCOME FROM OPERATIONS OF RS.635.159 LACS AND HAS SHOWN INCREASE/(DECREASE) I N CLOSING STOCK OF RS.13.047 LACS. THE DETAILS OF INCREASE/(DECREAS E) IN STOCK ARE SHOWN IN SCHEDULE AT PAGE 99 OF THE PAPER BOOK WHER EIN CLOSING STOCK WAS SHOWN AT RS.25.950 LACS WHEREAS OPENING S TOCK WAS SHOWN AT RS.12.902 LACS. NOW THE QUESTION IS AS TO WHETHER THE RECEIPT ON ACCOUNT OF LAYING OF PIPE LINES IN RESPE CT OF WHICH IT IS CLAIMED THAT THE LAND LEVELING EXPENSES WERE INCURR ED HAVE BEEN ITA NOS. 925 & 1086/AHD/2012 A.Y. 07-08 PAGE 4 SHOWN AS INCOME IN THE PRESENT YEAR OR NOT HAS NOT COME OUT FROM THE RECORD. THIS IS VERY IMPORTANT ASPECT BECAUSE I F THE RECEIPTS ON THIS ACCOUNT ARE NOT DECLARED AS INCOME IN THE PRES ENT YEAR THEN EVEN IF IT IS ACCEPTED THAT THESE EXPENSES ARE IN C ONNECTION WITH LAYING OF PIPE LINES, THE SAME HAS TO BE ADDED TO T HE VALUE OF CLOSING STOCK AND IT WILL NOT BE ALLOWABLE AS EXPENDITURE I N THE PRESENT YEAR. THERE IS NO FINDING OF LD. CIT(A) IN HIS ORDER ON T HIS ASPECT. HENCE, WE FIND THAT THE ORDER OF LD. CIT(A) IS NOT SUSTAIN ABLE. CONSIDERING THE FACTS OF THE PRESENT CASE, WE FEEL THAT IN THE INTEREST OF JUSTICE, THIS MATTER SHOULD GO BACK TO THE FILE OF LD. CIT(A ) FOR FRESH ADJUDICATION. WE ORDER ACCORDINGLY. GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. LD. CIT(A) SHOULD DECIDE THIS ISSUE AFRESH IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY TO BOTH SIDES. THUS, THIS ISSUE WAS SET ASIDE TO THE LD. CIT(A). LD. CIT(A) HAD GIVEN REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE AGAIN TO ASSESSEE WHO HAS ALSO FILED REPLY BEFORE HIM. THE ASSESSEES RE PLY WAS FORWARDED TO THE A.O. TO GIVE THE REPORT ON THE ISSUE AND FACTS RAIS ED BY THE APPELLANT BEFORE THE CIT(A). AFTER CONSIDERING THE ASSESSEES REPLY LD. CIT(A) PASSED ORDER AS UNDER: 2.5 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER, APPELLANT'S SUBMISSION AND AO'S REPORT. THIS GROUND WAS SET-ASIDE BY ITAT WITH THE DIRECTIONS THAT EXPENSE IS ALLOWAB LE IF THERE IS CORRESPONDING INCOME DISCLOSED DURING THE YEAR. IF THERE IS NO INCOME DISCLOSED THEN THE EXPENSES SHOULD BE TAKEN TO CLOSING STOCK AND THE SAME WILL BE ALLOWABLE IN THE YEAR IN WHICH INCOME IS SHOWN. THIS DECISION WAS ON THE BASIS OF MATCHING P RINCIPLE. ACCORDINGLY APPELLANT WAS ASKED TO PROVIDE DETAILS OF LAND ITA NOS. 925 & 1086/AHD/2012 A.Y. 07-08 PAGE 5 RESTORATION EXPENSES PROJECT WISE AND INCOME DISCLO SED IN RESPECT OF THE SAID PROJECT. APPELLANT SUBMITTED THE CHART SHO WING 16 PROJECTS ON WHICH LAND RESTORATION EXPENSES WERE INCURRED. O UT OF THESE 16 PROJECTS, APPELLANT DISCLOSED INCOME IN RESPECT OF 9 PROJECTS EITHER DIRECTLY UNDER LAND RESTORATION INCOME OR INCOME FR OM THE PROJECT. DETAILS RECEIVED FROM THE APPELLANT WERE PROVIDED T O THE ASSESSING OFFICER FOR VERIFICATION AND HIS COMMENTS. ASSESSI NG OFFICER VERIFIED THE DETAILS SUBMITTED BY THE APPELLANT AND SUBMIT TED HIS REPORT WHICH IS QUOTED EARLIER. APPELLANT SUBMITTED FURTHE R EXPLANATION AS PER WHICH CERTAIN MISTAKES IN THE CHART WAS POINTED OUT. APPELLANT ALSO ARGUED THAT THE EXPENSES ON CERTAIN PROJECTS W ERE INCURRED AFTER CONCLUSION OF THE PROJECTS, THE RECEIPTS OF W HICH WERE DISCLOSED IN EARLIER YEARS. HOWEVER CONSIDERING THE DECISION OF ITAT AND SPECIFIC DIRECTIONS CONTAINED THEREIN, THE EXPENSES ON ACCOUNT OF LAND RESTORATION RELATED TO PIPELINE PROJECTS AR E TO BE ALLOWED ONLY WHEN THERE IS CORRESPONDING INCOME THIS YEAR. IN THE ABSENCE OF CORRESPONDING INCOME DISCLOSED DURING TH E YEAR, THE EXPENSE CANNOT BE ALLOWED AS REVENUE DURING THE YEA R. BY FOLLOWING THIS DIRECTION, IT IS FOUND THAT APPELLANT DISCLOSE D INCOME IN RESPECT OF 9+1= 10 PROJECTS (INCOME IN RESPECT OF ONE PROJECT WRONGLY NOT INCLUDED IN THE CHART). AS REGARDS OTHER PROJECTS, THERE ARE ONLY EXPENSES BUT NO CORRESPONDING INCOME DISCLOSED DURI NG THE YEAR. ASSESSING OFFICER AFTER VERIFICATION OF PROJECT WIS E EXPENSES FOUND THAT THE EXPENSES IN RESPECT OF 9 PROJECTS TO TAL IS TO RS 70,73,910 AS AGAINST RS 73,73,410 CLAIMED BY THE AP PELLANT. SINCE AS PER THE VERIFICATION CARRIED OUT BY THE AO, EXPE NSES IN RESPECT OF PROJECTS WHERE CORRESPONDING INCOME IS D ISCLOSED IS ONLY RS 70,73,910, THE SAME IS HELD TO BE ALLOWABLE . APART FROM THIS, EXPENSE OF RS 2,00,000 INCURRED ON CP WORK OF JAGOTI- PITHAMPUR HAD CORRESPONDING INCOME WHICH WAS WRONGL Y NOT ITA NOS. 925 & 1086/AHD/2012 A.Y. 07-08 PAGE 6 MENTIONED IN THE CHART. I HAVE VERIFIED THE SAME AN D FOUND THAT THERE IS SUBSTANTIAL INCOME RECEIVED DURING THE YEAR FROM THIS PROJECT AND THEREFORE THIS EXPENSE IS ALSO ALLOWABLE AS PER THE DIRECTIONS OF ITAT. ACCORDINGLY TOTAL EXPENSES ALLOWED IS RS 72,73,910 OUT OF CLAIM OF RS 79,41,759. THE BALANCE EXPENSES RS 6,67,849 IS TREATED AS NOT RELATING TO THE PROJECTS ON WHICH IN COME WAS RECEIVED DURING THE YEAR. ACCORDINGLY THE DISALLOWANCE MADE BY THE AO IS CONFIRMED TO THE EXTENT OF RS.6,67,849/-. 4. NOW THE ASSESSEE IS BEFORE US. LD. A.R. FOR THE APPELLANT FURTHER ARGUED THAT THE REVENUE HAS ALREADY BEEN DISCLOSED BUT SOME LAND RESTORATION EXPENSES WERE PAID AFTER THE COMPLETION OF PROJECT AS PER THE CONTRACT WITH THE FARMERS. HE HAS ALSO FILED THE C OPY OF THE ACCOUNTS OF GAIL, MANDA, PETTA, RAJMUNDRI LEDGER ACCOUNT RELEVANT TO A.Y. 06-07 FOR DEMONSTRATING THE RECEIPTS HAD ALREADY BEEN ACCOUNT ED FOR BY THE APPELLANT. THEREFORE, HE REQUESTED TO ALLOW THE EXPENSES INCUR RED LATER ON AND THE INCOME ALREADY DISCLOSED BY IT. AT THE OUTSET, LD . SR. D.R. RELIED UPON DECISION OF THE CO-ORDINATE A BENCH, ITAT, AHMADABAD AND A RGUED THAT THE ASSESSEE HAD NOT ESTABLISHED THE EXPENSES WITH REFERENCE TO INCOME BOOKED. THEREFORE, THE LD. CIT(A) RIGHTLY PARTIALLY ALLOWED THE APPEAL. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. AS PER CO-ORDINATE ABENCH DIRECTION, THE LD.CIT(A) HAD ADJUDICATED THE ISSUE AFTER OBTAINING REPLY FROM THE APPELLANT AS WELL AS REMAND REPORT FROM A.O. THE APPELLANT WAS NOT ABLE TO CO-RELATE T HE EXPENSES INCURRED WITH INCOME GENERATED. THESE EXPENSES WERE ALSO NOT REFL ECTED IN CLOSING BALANCE ITA NOS. 925 & 1086/AHD/2012 A.Y. 07-08 PAGE 7 IN WORK-IN-PROGRESS. THUS, HE RIGHTLY PARTIALLY CO NFIRMED THE DISALLOWANCES. WE DISMISS THE APPEAL OF THE ASSESSEE. 6. THE REVENUE IS AGAINST CONSIDERING THIS LAND RES TORATION EXPENSES AS CAPITAL EXPENSES. THE GROUND IS REPRODUCED AS UNDE R: 1. LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION TO THE EXTENT OF RS.72,73,910/- OUT OF THE TOTAL ADDIT ION OF RS.79,41,759/- WHICH WAS MADE AFTER TREATING LAND A ND RESTORATION EXPENSES AS CAPITAL EXPENDITURE. 6(I). AS CO-ORDINATE A BENCH HAS ALSO DECIDED AND SET ASIDE THE ISSUE TO THE CIT(A) FOR CONSIDERING THE NATURE OF THE EXPEND ITURE, ACCORDINGLY, THE CIT(A) HAD GIVEN REASONABLE OPPORTUNITY TO THE APPE LLANT IN SECOND ROUND ALONG WITH THE LD. A.O., WHO HAD SUBMITTED WRITTEN REPLY VIDE LETTER DATED 01.03.2013. BUT REMAND REPORT FILED BY THE A.O. IS SILENT ON THIS ISSUE, WHETHER HE AGAIN CONSIDERED THE NATURE OF EXPENDITU RE IN HIS REMAND REPORT OR NOT. THE LD. CIT(A) HAS NOT GIVEN ANY FINDING ON T HIS ISSUE IN THE SECOND ROUND ALSO. IT IS TRUE THAT IN FIRST ROUND, THE AS SESSEE DID NOT FURNISH ANY REPLY TO THE A.O. AND HAD NOT CLARIFIED THE NATURE OF EXP ENSES. IN FIRST ROUND, THE LD. CIT(A) WITHOUT CALLING THE REMAND REPORT FROM THE A .O. ACCEPTED THE SUBMISSION OF APPELLANT. ON THAT BASIS, THE CO-ORD INATE A BENCH HAD SET ASIDE THE ISSUE, WHICH HAS NOT BEEN CONSIDERED BY B OTH THE LOWER AUTHORITIES. HOWEVER, THE LD. CIT(A) IN FIRST ROUND HAD GIVEN FI NDING ON NATURE OF EXPENDITURE AND HAD TREATED THESE EXPENSES AS REVEN UE EXPENDITURE. THE LD. CIT(A) HAS CO-TERMINUS POWER WITH A.O. THE ONLY TE CHNICAL FORMALITY REMAINED TO BE FULFILLED AT THE TIME OF FIRST ROUND BY THE LD. CIT(A), WAS NOT ITA NOS. 925 & 1086/AHD/2012 A.Y. 07-08 PAGE 8 CALLING REMAND REPORT FROM THE A.O. CO-ORDINATE A BENCH ALSO HAD TOUCHED THIS ISSUE IN SETTING ASIDE ORDER AND OBSERVED THAT THESE RECEIPTS ARE REVENUE NATURE. THEREFORE, WE DISMISS THE APPEAL OF THE RE VENUE. 7. IN THE COMBINED RESULT, THE ASSESSEES AND REVEN UES APPEALS ARE DISMISSED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 20.12.2013 SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA + + + + $ $$ $ ,- ,- ,- ,- .-* .-* .-* .-* / COPY OF ORDER FORWARDED TO:- 1. # / REVENUE 2. / ASSESSEE 3. 22 3 / CONCERNED CIT 4. 3- / CIT (A) 5. -78 ,& , , / DR, ITAT, AHMEDABAD 6. 8:; <= / GUARD FILE. BY ORDER/ + , >/ 2# , '