HITESH CONSTRUCTION CO., MUMBAI V. ITO 20(1)(3), MUMBAI

ITA 1133/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3099 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 09-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Assessee Lawyers: MAHENDRA G VASHI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SANJAY ARORA , A M AND SHRI AMARJIT SINGH, JM ./ I.T.A. NO. 1133/MUM/2014 ( / ASSESSMENT YEAR: 2007 - 08 ) HITESH CONS TRUCTION CO. 501, PRIME PLAZA, NEXT TO ASHA PAREKH HOSPITAL, S. V. ROAD, SANTACRUZ (W), MUMBAI - 400 054 / VS. ITO - 20(1)(3), MUMBAI ./ ./ PAN/GIR NO. AACFH 2238 K ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI MAHENDRA G. VASHI / RESPONDENT BY : SHRI M. RAJAN / DATE OF HEARING : 06.06.2016 / DATE OF PRONOUNCEMENT : 22 .0 9 .2016 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 31 , MUMBAI (CIT(A) FOR SHORT) DATED 20.12.2013 , DISMISSING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2007 - 08 VIDE ORDER DATED 30.10.2009. 2. IN THE PRESENT CASE, THE ASSESS MENT WAS FRAMED BY DISALLOWING THE ASSESSEES CLAIM IN RESPECT OF INTEREST EXPENDITURE U/S. 36(1)(III) OF THE ACT AT RS.5,26,737/ - . THE 2 ITA NO. 1133/MUM/2014 (A.Y. 2007 - 08) HITESH CONSTRUCTION CO. VS. ITO ASSESSEE, A FIRM IN THE BUSINESS OF CIVIL CONSTRUCTION, CARRIED THE MATTER IN APPEAL, WHEREAT IT WAS OBSERVED THAT THE ASSESSEE HA D RECEIVED A SUM OF RS.39,86,300/ - FROM ITS SISTER CONCERN, J AYC EE CONSTRUCTION CO MPANY (JCC) , DURING THE RELEVANT YEAR, EVEN AS NO SUCH DEBT APPEAR ED IN THE ASSESSEES AUDITED FINAL ACCOUNTS. ON THE CONTRARY, A SUM OF RS.15,92,860/ - STOOD REFLECTED AS RECEIVABLE FROM JCC AS ON 31.3.2006 IN THE BOOKS OF THE ASSESSEE - FIRM, SO THAT THE ASSESSEES BOOKS OUGHT TO HAVE REFLECTED A N OUTSTANDING OF RS.23,93,440/ - (RS.39,86,300 RS.15,92,860) AS ON 31.3.2007. T HE MATTER WAS ACCORDINGLY RESTORED TO THE FILE OF THE ASSESSING OFFICER ( A.O. ), WHEREAT IT WAS FOUND THAT THE ASSESSEE HAD IN FACT MADE A PAYMENT OF RS.25 LACS TO ONE , BHAGTA NI H EIGHT S CO - OPERATIVE HOUSING SOCIETY (B H CHS) , DURING THE YEAR , FOR AND ON BEHALF OF JCC. ON THE BASIS OF THE EXPLANATION S FURNISHED BY THE ASSESSEE IN THE REMAND AND THE APPELLATE PROCEEDINGS, IT WAS FURTHER FOUND THAT THE ASSESSEE - FIRM HAD CONSTRUCTED A BUILDING (BY THE NAME BHA G TANI HEIGHTS) IN VERSOVA, ANDHERI , AND THAT THE C O - OPERATIVE H OUSING S OCIETY OF THE SAID BUILDING WAS OBSTRUCTING THE CONSTRUCTION OF THE ROAD TO ANOTHER BUILDING ( BY THE NAME SHIV BHA G TANI TOWER S) BEING DEVELOPED BY JCC. ACCORD INGLY, JCC FILED A SUIT IN THE C IVIL C OURT AGAINST THE SAID SOCIETY (DEFENDANT N O. 1), WHICH THE ASSESSEE - APPELLANT AGREED TO JOIN (AS DEFENDANT N O. 2) ON A SETTLEMENT ARRIVED AT BETWEEN THE PARTIES. PER THE CONSENT TERMS, BHCHS AGREED NOT TO CAUSE ANY HIN DRANCE TO THE DEVELOPMENT OF THE PROPERTY (SHIV BHA G TANI TOWERS) AND TO DEMOLISH THE COMPOUND WALL , ALLOWING ERECTION OF A SLIDING GATE. VIDE CLAUSE (F) OF THE SAID AGREEMENT, THE ASSESSEE (DEFENDANT N O.2) WOULD PAY RS.25 LACS TO BHCHS IN FULL AND FINAL SE TTLEMENT AGAINST THE 27 MONTH S ADVANCE MAINTENANCE TAKEN BY THE ASSESSEE AS A BUILDER FROM THE RESIDEN TS OF BHCHS. THE ASSESSEE - APPELLANT HAD THUS SOUGHT TO EXPLAIN THE RECEIPT FROM JCC AS ON ACCOUNT OF THE PAYMENT S TO BE MADE BY IT (ASSESSEE) TO BHCHS, W HILE NO SUCH PAYMENT IS DUE TO THE ASSESSEE FROM JCC AS PER ITS ACCOUNTS. THE PAYMENT DUE TO BHCHS IS AGAINST THE AMOUNT OF MAINTENANCE FOR 27 MONTHS , ALREADY COLLECTED BY THE ASSESSEE IN ADVANCE FROM THE RESIDEN TS OF THE SOCIET Y , WHO DO NOT OWE ANYTHING T O JCC, WHICH IS CLEAR 3 ITA NO. 1133/MUM/2014 (A.Y. 2007 - 08) HITESH CONSTRUCTION CO. VS. ITO FROM THE CONSENT TERMS DRAWN UP. THERE IS, ACCORDINGLY, NO QUESTION OF THE SAID PAYMENT, AS DESCRIBED , BEING MADE ON AND BEHALF OF JCC. IT WAS ALSO NOT CLEAR AS TO WHY WOULD JCC PAY RS.23.93 LACS TO THE ASSESSEE IN EXCESS , OR AS TO WH Y WOULD THE ASSESSEE PAY BHCHS FOR AND ON BEHALF OF JCC (REFER PARA S 5 AND 5.1 OF THE IMPUGNED ORDER). THE SAID RECEIPT OF RS.23,93,440/ - WAS , THUS , NOT SATISFACTORILY EXPLAINED AND, ACCORDINGLY, ADDED AS THE ASSESSEES INCOME FOR THE YEAR. AGGRIEVED , THE ASSESSEE IS SECOND APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. WE FIND THE REVENUE TO HAVE B AS ED ITS CASE WITHOUT CONSIDERING AND DE HORS THE ACCOUNTS OF THE ASSESSEE - FIRM AND THE JCC, WHICH ARE SELF EXPLANATORY. THE LEDGE R ACCOUNT OF THESE TWO ENTITIES, IN THE BOOKS OF EACH OTHER (PB PGS. 16 - 17, 21 - 22) , TOGETHER WITH THE ACCOUNT OF BHCHS IN THE BOOKS OF BOTH (PB PGS. 18 - 19, 20) , FULLY EXPLAIN THE ASSESSEES CASE. THE ASSESSEE HAS RECEIVED A TOTAL OF RS.44.36 LACS FROM JCC DURING THE YEAR. OF THE S A M E , RS.39.99 LACS IS THROUGH BANK TRANSFERS, DULY CREDITED THEREFORE TO THE ACCOUNT OF THE SAID PAYEE - FIRM. THE BALANCE RS.4.37 LACS IS BY WAY OF THREE ADJUSTMENT ENTRIES, EACH QUA A DIFFERENT PART Y , WHICH STAND CORRESPONDINGLY DE BITED (IN THE ASSESSEES ACCOUNTS). THERE IS NO MENTION OR WHISPER ABOUT THESE THREE ADJUSTMENTS IN THE ORDERS OF THE REVENUE AUTHORITIES AND, ACCORDINGLY, NO EXPLANATION BY THE ASSESSEE IN RESPECT THEREOF. THE SAME MUST THEREFORE BE REGARDED AS IN ORDER. THE ENTIRE CREDIT (OF RS.44.36 LACS) STANDS ADJUSTED AGAINST THE OPENING RECEIVABLE OF RS.16.60 LACS AND RECEIVABLE OF RS.27,67 , 657 / - BY THE ASSESSEE FROM BHCHS, AND A REPAYMENT OF RS.8,000/ - (VIDE CHEQUE NO. 517116 DATED 28.9.2006). W HAT , THEN , IS THE DIS PUTE ABOUT ? THE PAYMENT OF RS.25 LACS BY THE ASSESSEE TO BHCHS DURING THE YEAR, TOGETHER WITH THE OPENING RECEIVABLE OF RS.2.68 LACS, STANDS THUS RECOVERED BY THE ASSESSEE - FIRM FROM JCC IN FULL. HOW CAN THEN JCC BE SAID TO HAVE PAID THE ASSESSEE IN EXCESS STATED TO BE AT RS.23.93 LACS, OR OF THE SAID RECEIPT BEING NOT EXPLAINED ? T HE TWO - JCC AND BHCHS, BEING IN DISPUTE , THE 4 ITA NO. 1133/MUM/2014 (A.Y. 2007 - 08) HITESH CONSTRUCTION CO. VS. ITO ENTIRE AMOUNT PAID BY THE ASSESSEE TO (OR RECEIVABLE FROM) BHCHS STANDS, THUS, BORNE BY JCC. IF, ANYTHING, THE ASSESSEE HAS ALSO REC OVERED (THROUGH JCC) RS.2.68 LACS DUE FROM BHCHS AS ON 31.3.2006. WE COULD UNDERSTAND A N ISSUE IF THE ASSESSEE HAD CLAIMED RS.25 LACS PAID TO BHCHS AS AN EXPENDITURE. THAT THE ENTIRE AMOUNT PAID BY IT TO (OR RECEIVABLE FROM) BHCHS (RS.27.68 LACS) STANDS T RANSFERRED TO JCC, WHICH , TOGETHER WITH THE AMOUNT PAID THERETO (BHCHS) OR ON ITS BEHALF (RS.1.83 LACS), I.E., AT A TOTAL OF RS.29.51 LACS, STANDS IN TURN TRANSFERRED BY JCC TO THE ACCOUNT HEAD INFRASTRUCTURE COST , IS SOMETHING WE ARE NOT CONCERNED ABOUT . IT IS IN FACT CLEAR THAT AS PER BHCHS, THE ASSESSEE - FIRM OWED IT 27 MONTH S MAINTENANCE , COLLECTED IN ADVANCE, WHICH IT BARGAINED FOR RECEIPT IN VIEW OF IT ALLOWING ACCESS (RIGHT OF WAY) TO JCC FOR ITS NEW BUILDING. A SETTLEMENT WAS ARRIVED AT UNDER THE AEGIS OF THE COURT . THIS ALSO EXPLAINS THE ASSESSEES JOINING THE SUIT FILED BY JCC (AGAINST BHCHS) AS DEFENDANT AND PAYMENT TO THE LAT T ER BY IT, WHICH THOUGH STANDS FINALLY BORNE BY JCC. THE REVENUES CASE IS WITHOUT MERIT AND SUBSTANCE. WE DECIDE ACCORD INGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 22 , 201 6 SD/ - SD/ - ( AMARJIT SINGH ) (S ANJA Y ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 22 . 0 9 .201 6 . . ./ ROSHANI , SR. PS 5 ITA NO. 1133/MUM/2014 (A.Y. 2007 - 08) HITESH CONSTRUCTION CO. VS. ITO / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI