ACIT, CHENNAI V. Classic Farms (Chennai) Pvt. Ltd., CHENNAI

ITA 1193/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81201 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: K RAVI
• Keywords: Additional evidence

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 1193/MDS/2013 / ASSESSMENT YEAR : 2008-09 ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(3), CHENNAI 600 034 ( !% /APPELLANT) VS M/S.CLASSIC FARMS (CHENNAI) PVT. LTD., NO.131-132, CLASSIC RETREAT, CLASSIC FARMS ROAD, IT HIGH WAY, SHOLINGANALLUR, CHENNAI -600 119 [PAN: AACCC 2612 H] ( &'!% /RESPONDENT) REVENUE BY : SHRI GURU BHASHYAM, JCIT ASSESSEE BY : SHRI K.RAVI, ADVOCATE / DATE OF HEARING : 18-08-2014 / DATE OF PRONOUNCEMENT : 16-10-2014 #( / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE REVENUE ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-IX, CH ENNAI DATED 19-02-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 8-09. I.T.A. NO. 1193/MDS/2013 2 THE ONLY ISSUE RAISED BY THE REVENUE IN APPEAL IS DELETING OF DIS-ALLOWANCE OF ` 40.00 LAKHS CLAIMED BY ASSESSEE AS DEVELOPMENT EXPENSES. 2. THE BRIEF FACTS OF THE CASE ARE, THE ASSESSEE IS A COMPANY ENGAGED IN REAL ESTATE BUSINESS. THE ASSESSEE FILE D ITS RETURN OF INCOME FOR THE AY.2008-09 ON 27-09-2008 DECLARING I TS TOTAL INCOME AS ` 75,55,812/-. A SURVEY OPERATION U/S.133A OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WAS CARRIED OUT IN THE PREMISES OF THE ASSESSEE ON 15-0 3-2007. NOTICE U/S.143(2) WAS ISSUED TO THE ASSESSEE ON 28-08-2009 . DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICE R OBSERVED THAT THE ASSESSEE HAD EARNED ` 3,26,71,460/-. THE ASSESSEE EARNED INTEREST INCOME OF ` 82,72,872/- AND THE REMAINING SUBSTANTIAL INCOME OF ` 33,69,60,305/- IS SHARE OF PROFIT IN A FIRM, EXEMPT FROM TAX U/S.10(2A). THE ASSESSEE CLAIMED ` 2.32 CRORES TOWARDS DIRECT EXPENDITURE. THE SAID AMOUNT INCLUD E ` 40.00 LAKHS PAID BY CHEQUE TO M/S.LANCOR IN RESPECT OF LA ND COMPRISING IN SURVEY NO.494/12B. THE ASSESSING OFFICER HELD T HAT THE EXPENDITURE OF ` 40.00 LAKHS DOES NOT PERTAIN TO THE LAND SOLD DURING THE AY UNDER CONSIDERATION, THEREFORE, IT IS NOT ALLOWABLE. I.T.A. NO. 1193/MDS/2013 3 AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 31-12 -2010, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APP EALS). THE CIT(APPEALS) AFTER EXAMINING THE SUPPORTING DOCUMEN TS FILED BY THE ASSESSEE, DIRECTED THE ASSESSING OFFICER TO DEL ETE THE DIS- ALLOWANCE OF ` 40.00 LAKHS. NOW, THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI GURU BHASHYAM, APPEARING ON BEHALF OF THE R EVENUE SUBMITTED THAT THE CIT(APPEALS) HAS ERRED IN DELETI NG THE DIS-ALLOWANCE ON THE BASIS OF THE DOCUMENTS FURNISH ED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE CIT(APPEALS) . DOCUMENTS ON THE BASIS ON WHICH THE CIT(APPEALS) DELETED THE DIS -ALLOWANCES WERE NEITHER PRODUCED BEFORE THE ASSESSING OFFICER NOR ANY REMAND REPORT WAS SOUGHT BY THE CIT(APPEALS) FROM T HE ASSESSING OFFICER ON THE SAID DOCUMENTS. THUS, THERE WAS VIO LATION OF RULE 46A OF THE INCOME TAX RULES. THE LD.DR FURTHER CON TENDED THAT THE DOCUMENTS PRODUCED BY THE ASSESSEE BEFORE CIT(A PPEALS) AND THE EXPENDITURE CLAIMED BY THE ASSESSEE TOWARDS DEVELOPMENT EXPENSES RELATE TO EARLIER YEARS AND NO T THE AY UNDER CONSIDERATION. THEREFORE, THE SAME IS NOT AL LOWABLE. I.T.A. NO. 1193/MDS/2013 4 4. ON THE OTHER HAND, SHRI K.RAVI, APPEARING ON BEH ALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE IMPUGNED ORDER. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSE SSEE HAD SOLD LAND COMPRISING IN SURVEY NO.494/12B TO M/S.LANCOR G.CORP PROPERTIES LTD., DURING THE PERIOD RELEVANT TO AY.2 006-07. SUBSEQUENTLY, ONE MR. J.RAVICHANDER CLAIMED OWNERSH IP OF THE LAND COMPRISING IN SURVEY NO.494/12B THAT WAS SOLD BY ASSESSEE TO M/S.LANCOR G.CORP PROPERTIES LTD. SINCE, LANCOR GROUP WAS IN ADVANCED STAGE OF CONSTRUCTING APARTMENTS ON THE LA ND, THEY PAID ` 100 LAKHS TO MR.J.RAVICHANDER TO SETTLE THE DISPUTE AND AVOID ANY LITIGATION. M/S.LANCOR GROUP FILED COUNTER CLA IM OF ` 40.00 LAKHS WITH THE ASSESSEE. THE SAID AMOUNT WAS PAID BY THE ASSESSEE DURING THE AY UNDER CONSIDERATION. THE LD .COUNSEL FOR THE ASSESSEE STATED THAT THE AMOUNT WAS PAID IN ORD ER TO AVOID ANY FORCED LITIGATION. THE ASSESSEE IS IN CONTINUE D BUSINESS OF REAL ESTATE DEVELOPMENT AND THE SAID EXPENDITURE WAS INC URRED DURING THE IMPUGNED AY. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE HAS CLAIMED ` 40.00 LAKHS TOWARDS DEVELOPMENT EXPENSES OF THE LAND SOLD DURIN G THE I.T.A. NO. 1193/MDS/2013 5 AY.2006-07. THE ASSESSING OFFICER DIS-ALLOWED THE S AID EXPENDITURE FOR THE REASON THAT ` 40.00 LAKHS RELATES TO THE TRANSACTION WHICH WAS CARRIED OUT IN EARLIER AY AND DOES NOT RELATE TO AY UNDER CONSIDERATION, THEREFORE, THE EXPENDITU RE IS NOT ALLOWABLE IN CURRENT AY. THE CIT(APPEALS) EXAMINED THE FOLLOWING DOCUMENTS FILED BY THE ASSESSEE. I. SALE AGREEMENT RELATING TO LAND COMPRISING IN SU RVEY NO.494; II. PARTNERSHIP DEED BETWEEN M/S.LANCOR G.CORP PROPERTIES LTD. AND THE ASSESSEE; III. LETTER FROM M/S.LANCOR G.CORP PROPERTIES LTD., EVIDENCING PAYMENT OF ` 1.00 CRORES IN RESPECT OF LAND COMPRISED IN SURVEY NO.494; IV. COPY OF MINUTES OF THE MEETING OF M/S.LANCOR G. CORP PROPERTIES LTD; V. COPY OF LETTER BY THE ASSESSEE TO M/S.LANCOR G.C ORP PROPERTIES LTD, IN RESPECT OF PAYMENT OF ` 40.00 LAKHS; AND VI. COPY OF MEMORANDUM OF UNDERSTANDING BETWEEN MR.J.RAVICHANDER AND M/S.LANCOR G.CORP PROPERTIES LTD. I.T.A. NO. 1193/MDS/2013 6 AFTER EXAMINING THE AFOREMENTIONED DOCUMENTS, THE C IT(APPEALS) ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND DIRECT ED THE ASSESSING OFFICER TO DELETE THE DIS-ALLOWANCE. THE MAIN CONTENTION OF THE REVENUE IS THAT THE ASSE SSEE HAD NOT FURNISHED THE DOCUMENTS OR ANY OTHER DETAIL S WITH REGARD TO THE SAID PAYMENT. THE AFORESAID DOCUMENTS WERE PLACED BEFORE THE CIT(APPEALS) FOR THE FIRST TIME AND WERE NOT MA DE AVAILABLE TO THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS NO T GIVEN ANY OPPORTUNITY TO EXAMINE THE DOCUMENTS. THE CIT(APPEA LS) HAS VIOLATED THE PROVISIONS OF RULE 46A IN ACCEPTING TH E CLAIM OF ASSESSEE. 6. FROM THE PERUSAL OF IMPUGNED ORDER, IT IS NOT EV IDENT WHETHER THESE DOCUMENTS WERE AVAILABLE BEFORE THE ASSESSING OFFICER OR THEY WERE FILED AS ADDITIONAL EVIDENCE BEFORE THE C IT(APPEALS). THE LD.COUNSEL FOR THE ASSESSEE HAS ALSO NOT REBUTT ED THE CONTENTIONS OF THE LD.DR THAT THE DOCUMENTS WERE NO T FURNISHED BEFORE THE ASSESSING OFFICER FOR EXAMINATION. THER EFORE, WE ARE OF THE CONSIDERED VIEW THAT BEFORE PLACING RELIANCE ON THE DOCUMENTS FURNISHED BY THE ASSESSEE, THE CIT(APPEALS) SHOULD HAVE GIVEN OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE SAME. RULE 46A(3) SPECIFICALLY STATES THAT THE CIT(APPEALS) SH ALL NOT TAKEN IN I.T.A. NO. 1193/MDS/2013 7 TO ACCOUNT ANY FRESH EVIDENCES UNLESS THE ASSESSING OFFICER HAS BEEN ALLOWED A REASONABLE OPPORTUNITY TO EXAMINE TH E EVIDENCE OR DOCUMENTS PRODUCED BY THE ASSESSEE FOR THE FIRST TI ME BEFORE HIM. IT IS A TRAIT LAW THAT THE POWER OF CIT(APPEALS) AR E CO-TERMINUS WITH THAT OF THE INCOME TAX OFFICER. HOWEVER, BEFORE AC CEPTING ANY EVIDENCE/DOCUMENTS WHICH WERE NOT FURNISHED BY THE ASSESSEE BEFORE ASSESSING OFFICER, THE CIT(APPEALS) SHOULD G IVE AN OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE SAME OR SEEK REMAND REPORT ON THE DOCUMENTS FURNISHED FOR THE FI RST TIME BEFORE THE CIT(APPEALS). IN THE FACTS OF THE PRESENT CASE, WE DEEM IT APPROP RIATE TO REMIT THE FILE BACK TO ASSESSING OFFICER TO EXAMINE THE DOCUMENTS FILED BY THE ASSESSEE BEFORE THE CIT(APPEALS). 7. WITH REGARD TO THE SUBMISSIONS OF LD.DR THAT THE EXPENDITURE RELATES TO SALE TRANSACTION CARRIED OUT IN EARLIER AY, AND IS THUS NOT ALLOWABLE IN CURRENT AY, WE DO NOT FIND ANY MERIT. THE ASSESSEE IS IN CONTINUED BUSINESS OF REAL ESTATE DEVELOPMENT. PAYMENT OF ` 40.00 LAKHS HAS BEEN MADE BY THE ASSESSEE IN ORDER TO SETTLE THE DISPUTE WITH RESPECT TO TITLE OF LAND SOLD BY T HE ASSESSEE. THE PAYMENT OF SAID AMOUNT HAS NOT BEEN DISPUTED BY THE REVENUE. THE SALE TRANSACTION MAY HAVE BEEN CARRIED OUT IN E ARLIER AY, I.T.A. NO. 1193/MDS/2013 8 SINCE THE DISPUTE WITH RESPECT TO TITLE OF LAND ARO SE SUBSEQUENTLY, THE ASSESSEE PAID THE AMOUNT TO SETTLE THE SAME IN LATER AY. THEREFORE, THIS AMOUNT IS ALLOWABLE AS EXPENDITURE IN THE YEAR OF PAYMENT. 8. IN VIEW OF OUR ABOVE FINDINGS, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 16 TH OCTOBER, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) / VICE PRESIDENT ! / JUDICIAL MEMBER '# /CHENNAI, $ /DATED: 16 TH OCTOBER, 2014 TNMM #% & '( )#( /COPY TO: 1. *+ /APPELLANT 2. &,*+ /RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. (01 & 2 /DR 6. 13 4 /GF