HAWARE INFRASTRUCTURE PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER 15(2)(1), MUMBAI

ITA 1208/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1736 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESHWAR YADAV
• Assessee Lawyers: RUTURAJ HARIVIJAY GURJAR; J P BAIRAGRES K MUTSADDI
• Keywords: Business expenditure; Capital receipt; Commercial expediency; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3); 133A; 207

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL H BENCH MUMB AI BEFORE SHRI G.S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 1208/MUM/2018 (ASSESSMENT YEAR 2012-13 ) HAWARE INFRASTRUCTURE PVT. LTD. 413/416, VARDHAMAN MARKET, SECTOR-17, DBC, VASHI, NAVI MUMBAI- 400705. PAN: AABCH3852R VS. ITO- 15(2)(1) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT ITA NO. 1185/MUM/2018 (ASSESSMENT YEAR 2012-13 ) ITO- 15(2)(1) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. HAWARE INFRASTRUCTURE PVT. LTD. 413/416, VARDHAMAN MARKET, SECTOR-17, DBC, VASHI, NAVI MUMBAI- 400705. PAN: AABCH3852R APPELLANT RESPONDE NT APPELLANT BY : SHRI J.P. BAIRAGRE/S.K. MUTSADDI AND MR. RUTURAJ HARIVIJAY GURJAR (AR) RESPONDENT BY : SHRI RAJESHWAR YADAV (CIT-DR) DATE OF HEARING : 16.04.2019 DATE OF PRONOUNCEMEN T : 31.05.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE CROSS APPEAL ARE DIRECTED AGAINST THE ORDER O F LD. COMMISSIONER OF INCOME-TAX (APPEALS)-24, MUMBAI [FOR SHORT THE LD. CIT(A)] DATED 28.12.2017, WHICH IN TURN ARISES FROM THE ASSESSMEN T ORDER PASSED UNDER SECTION 143(3) ON 31.03.2015. THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL: ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 2 1. ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.50.84 CRORES PAID BY THE APPELLANT DURING THE YEAR TO THE REDDY FAMILY IN RESPECT OF DEVELOPMENT OF THE PROJECT - FANTASIA BUSINESS PARK AT PLOT NO.47, SECTOR 30-A, VASHI, NA VI MUMBAI. 2. ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN UPHOLDING THAT THE AMOUNT PAID OF RS.50.84 CRORES B Y THE APPELLANT WAS TOWARDS PURCHASE OF EQUITY SHARES OF THE COMPANY MO HAN ENTERTAINMENT CO. LTD. (MECL) FROM THE REDDY FAMILY AND NOT AS PART O F THE PROJECT COST AS CLAIMED BY THE APPELLANT FOR IMPROVING & BETTERMENT OF ITS DEVELOPMENT RIGHTS OF THE PROJECT FANTASIA BUSINESS PARK AT PLO T NO.47, SECTOR 30-A, VASHI, NAVI MUMBAI. THE CIT(A) HAS FURTHER ERRED IN NOT AC CEPTING THE APPELLANT'S PLEA THAT THE VALUE OF PURCHASE CONSIDERATION PAID IN RESPECT OF THE EQUITY SHARES OF MECL, ACQUIRED FROM THE REDDY FAMILY WAS RS.39,99,000/- ONLY, AND THAT THE AMOUNT OF RS.50.84 CRORES PAID TO THE REDDY FAMILY BY THE APPELLANT WAS FOR IMPROVING & BETTERMENT OF ITS DEV ELOPMENT RIGHTS OF THE PROJECT FANTASIA BUSINESS PARK AT PLOT NO.47, SECTO R 30-A, VASHI, NAVI MUMBAI. THE PAYMENT OF RS.50.84 CRORES BEING PART O F THE PROJECT COST SHOULD HAVE BEEN ALLOWED. 2. THE REVENUE IN ITS CROSS APPEAL HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.114.84 CRORES ON ACCOUNT OF REVENUE RECOGNITION FROM THE FANTASIA BUILDING PROJECT, REL YING ON THE STAY ORDER DATED 13.12.2011 OF THE CITY CIVIL COURT, THANE, GRANTING INJUNCTION, THEREBY HOLDING THAT THE ASSESSEE COULD NOT CARRY OUT ANY OTHER ACT IVITIES OF BUYING OR SELLING OR LEASE OR ANY OTHER RELATED ACTIVITIES OF THE PROJEC T, AND HAD TO MAINTAIN THE STATUS QUO, IGNORING THAT THE ASSESSEE HAD RECEIVED OCCUPANCY CERTIFICATE VIDE LETTER DATED 29.10.2011, AND PROJECT COMPLETION MET HOD IS CONSISTENTLY FOLLOWED BY THE ASSESSEE AND THE REGISTRATION OF AG REEMENTS OF ALL THE UNITS HAD ALSO BEEN ALREADY MADE.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.114.84 CRORES ON ACCOUNT OF REVENUE RECOGNITION FROM THE FANTASIA BUILDING PROJECT, IGN ORING THE DECISION IN THE CASE OF CHAMPION CONSTRUCTION CO. (5 ITD 76) WHEREI N THE HON'BLE TRIBUNAL ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 3 HELD THAT PROPORTIONATE PROFIT MUST BE CHARGED TO T AX, AND THEREFORE THE ASSESSEE HAVING RECEIVED OCCUPANCY CERTIFICATE VIDE LETTER D ATED 29.10.2011, DURING THE FINANCIAL YEAR 2011-12 RELEVANT TO ASSESSMENT YEAR 2012-13, IT IS THE TRIGGER POINT THAT THE PROJECT IS COMPLETE AND THE REVENUE HAS TO BE RECOGNIZED IN ASSESSMENT YEAR 2012-13.' 3. 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ), MUMBAI ON THE ABOVE DIRECTIONS BE SET-ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED.' 4. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y OF THE AFORESAID GROUNDS OR ADD A NEW GROUND OF APPEAL, WHICH MAY BE NECESSARY, AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL.' 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND CONSTRUCTIO N. FOR ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE FILED ITS RETURN O F INCOME ON 28.09.2012 DECLARING LOSS OF RS. 9,83,499/-. THE RETURN OF INC OME WAS SELECTED FOR SCRUTINY. AFTER ISSUING STATUTORY NOTICE AND VARIOU S QUESTIONNAIRE, THE ASSESSMENT WAS COMPLETED ON 31.05.2015 UNDER SECTIO N 143(3) ASSESSING THE TOTAL INCOME OF RS. 114,74,42,730/-. THE ASSESS ING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE DISALLOWANCE OF P AYMENT MADE ON ACCOUNT OF DEVELOPMENT RIGHT OF RS. 50,84,00,000/- AND FURTHER HELD THAT THE PROJECT WAS COMPLETED DURING THE ASSESSMENT YEA R UNDER CONSIDERATION AND COMPUTED THE PROFIT OF PROJECT AT RS. 114,84,26 ,221/-. 4. THE FACTS LEADING TO ADDITIONS ARE THAT DURING ASSE SSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE WAS DEVEL OPING A COMMERCIAL PROJECT FANTASIA BUSINESS PARK, PLOT NO. 47, SECT OR 30A, VASHI, NAVI MUMBAI. AS PER THE APPROVED PLAN, THE TOTAL CONSTRU CTED AREA IS 12652.3 SQ. MTR. THE ASSESSEE CLAIMED THAT IT HAS REGULARLY FOLLOWING THE PROJECT ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 4 COMPLETION METHOD (PCM) FOR REVENUE RECOGNITION. NO INCOME WAS OFFERED FROM THE PROJECT, AS PROJECT WAS NOT COMPLE TED TILL THE END OF MARCH 2012. THE ASSESSEE ACQUIRED DEVELOPMENT RIGHT IN TH E PROJECT FROM MOHAN ENTERTAINMENT COMPANY LTD. (MECL) IN THE YEAR 2003. THE ASSESSING OFFICER ALSO NOTED THAT ASSESSEE HAS PAID AN AMOUNT OF RS. 50.84 CRORE TOWARDS THE DEVELOPMENT RIGHT FOR THE PROJECT IN PR EVIOUS YEAR 2011-12 AND CLAIMED IT AS REVENUE EXPENDITURE. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE CLAIM WITH DOCUMENTARY EVIDENCES. 5. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED ITS R EPLY DATED 09.03.2015. IN THE REPLY, THE ASSESSEE STATED THAT ASSESSEE-COMPAN Y ENTERED INTO DEVELOPMENT AGREEMENT WITH MECL ON 27.03.2009, THEN OWNED BY REDDY FAMILY FOR DEVELOPING OF LAND ADMEASURING 12677.30 SQ. MTR. AT PLOT NO. 47, SECTOR 30A, VASHI, NAVI MUMBAI. AS PER THE AGRE EMENT, THE ASSESSEE HAS TO PAY 3/4 TH OF THE LEASING PREMIUM OF RS. 3.80 CRORE, DEVELOPM ENT 60% OF THE BUILT-UP AREA WITH 1 FSI AND SALE ASSIGN ED, TRANSFER THE DEVELOPED AREA TO THE PROSPECTIVE PURCHASER. ON 40% OF THE LAND RETAINED BY MECL, THE ASSESSEE HAD TO CONSTRUCT A MULTIPLEX THEATRE ON THE CONDITION THAT UP TO 600 PER SQ. MTR. OF PLOT AREA (I) THE COST WOULD BE ENTIRELY BORNE BY THE DEVELOPER/ASSESSEE (II) THE C OST IN EXCESS OF 600 PER SQ. FT. AREA OF BUILT-UP ARE IN EXCESS OF WOULD BE SHARED IN THE RATIO OF 60:40 BY DEVELOPER(ASSESSEE). IN THE INTERVENTION PERIOD, THE REDDY GROUP, WHO OWNED MECL ENTERED INTO SERIES OF AGREEMENT WITH AS SESSEE GROUP ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 5 THROUGH LATE SATISH KASHINATH HAWARE. AS PER THESE AGREEMENTS (SERIES) THE SHARE OF HAWARE GROUP IN DEVELOPMENT PROPERTY I NCURRED SUBSTANTIALLY AND DEVELOPED RIGHTS OF THE SAID PLOT AND CONTROL A ND MANAGEMENT OF MECL WAS AGREED TO BE TRANSFERRED TO HAWARE GROUP. ON 27.09.2003, FOUR DIFFERENT AGREEMENTS WERE EXECUTED BETWEEN MECL AND HAWARE GROUP, FOR FIRST AGREEMENT SHAREHOLDING AGREEMENT IN THE R ATIO OF 80:20 FOR OWNERSHIP OF MECL (HAWARE GROUP 80% AND REDDY GROUP 20%) (III) AGREEMENT FOR TRANSFER OF SHARE BY MANISH NITYA RED DY, HARISH HAWARE IN RESPECT OF SHARE OF MECL, THIRD AGREEMENT FOR TRANS FER OF SHARE OF MANISH MOHAN REDDY AND SATISH HAWARE, FOURTH AGREEMENT FOR TRANSFER OF SHARE OF PRATIK REDDY AND SATISH HAWARE, FIFTH AGREEMENT FOR TRANSFER OF SHARES OF MOHIT REDDY AND MR. SATISH HAWARE. 6. AFTER SOME TIME, MR. MOHAN REDDY, WHO WAS THE MAIN PERSON OF REDDY GROUP ENTERED WHO ENTERED IN ABOVE FIVE AGREEMENTS EXPIRED ON 06.04.2005. MR. SATISH K. HAWARE ALSO DIED AFTER SO ME TIME. AFTER THE DEATH OF MOHAN REDDY THE CLAIM OF HAWARE GROUP WAS TOTALLY DENIED AND DISPUTED BY REDDY GROUP. THE RELATIONS BETWEEN ASSE SSEE GROUP AND REDDY GROUP BECAME SORE, BOTH THE GROUPS MADE CLAIM S AND COUNTER CLAIMS WHICH CULMINATED INTO VARIOUS CIVIL, CRIMINA L AND CORPORATE LITIGATION BETWEEN TWO GROUPS INCLUDING ARREST OF L ADIES IN HAWARE GROUP. THESE LITIGATIONS REMAINED UNDER PROGRESS FOR FEW Y EARS AND THE MATTER ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 6 BECAME MORE COMPLICATED INCLUDING STOPPAGE OF PROJE CT (FANTASIA BUSINESS PARK). 7. HOWEVER, IN THE MEAN TIME, THE ASSESSEE CONTINUED T O DEVELOP THE PLOT OF LAND AND GIVING EFFECT TO THE UNREGISTERED DEVELOPM ENT AGREEMENTS DATED 2709.2003 AND RECEIVED ADVANCES FROM CUSTOMERS FOR SALE OF UNIT IN THE PROJECT, THE YEAR WISE BREAD-UP OF CLOSER BALANCE O F MARCH 2010, 2011 & 2012 AS UNDER: SR.NO. PARTICULARS AS AT 31/03/2010 AS AT 31/03/2011 AS AT 31/03/2012 I SITE WORK IN PROGRESS MULTIPLEX 47/30A, VASHI SITE FANTASIA 20,95,75,331 33,38,71,924 89,74,96,057 II ADVANCES RECEIVED FROM CUSTOMERS FOR SAID PROJECT FANTASIA 19,52,71,949 57,68,81,571 80,90,12,552 8. AS BOTH THE GROUPS WERE CLAIMING CONTROL ON THE MAN AGEMENT OF MECL THROUGH BOARD WHICH WERE DISPUTED BY THE OTHER GROU P I.E. MECL WAS CLAIMED BY REDDY GROUP AND HAWARE GROUP. SUBSEQUENT LY, WITH THE INTERVENTION OF WELL-WISHER AND COMMON FRIENDS, THE ENTIRE DISPUTE AND DIFFERENCE BETWEEN HAWARE GROUP AND REALITY GROUP W ERE RESOLVED AS PER THE AGREEMENT OF SETTLEMENT/ SUBSTITUTED AGREEMENT FOR SETTLEMENT DATED 05.02.2012 WITH ADDENDUM DATED 18.03.2012 AND FURTH ER ADDENDUM DATED 18.05.2012. AS PER THE SUBSTITUTED AGREEMENT FOR SE TTLEMENT DATED 15.02.2012, THE ASSESSEE GROUP AGREED TO PAY A LUMP SUM COMPENSATION OF ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 7 RS. 110 CRORE FOR (I) TRANSFER OF SHARE OF REAL OPT IMIST INDIA LTD. (EARLIER KNOWN AS MECL), (II) SETTLEMENT OF ALL PENDING ISSU ES IN VARIOUS FORUMS, (III) ACQUISITION OF ACQUIRE DEVELOPMENT RIGHT REGA RDING THE PLOT IN ORDER TO BUY PEACE. AS A RESULT OF SETTLEMENT, THE RATIO OF OBLIGATION AND RETENTION OF 60:40 BETWEEN THE ASSESSEE AND MECL WERE CHANGED TO 90:10. UNDER THESE CIRCUMSTANCES, THE TOTAL COMPOSITION OF COST UNDERWENT CHANGED RETROSPECTIVELY AND THEREFORE, THE LOAN OF RS. 60 L AKHS FROM ASSESSEE, WHICH WAS UTILIZED FOR INCURRING THE COST THEN BY M ECL IS NOW TRANSFER IN THE BOOKS OF ASSESSEE. SIMILARLY, AS A RESULT OF 40 % CONTRIBUTION, RS. 9.48 CRORE WERE ATTRIBUTED TO MECL AND ITS BOOKS, THE SA ME HAS TO BE CHANGED IN CONSONANCE WITH 90:10 RATIO AND THEREFORE, BROUG HT INTO COST OF THE ASSESSEE-COMPANY. THE ASSESSEE-COMPANY MADE THE FOL LOWING PAYMENTS TO FAMILY MEMBERS OF REDDY FAMILY MENTIONED AS BELOW: SR.NO. NAME OF PERSON ASSESSMENT YEAR 2012-13 ASSESSMENT YEAR 2013-14 TOTAL I HARISHVARDHAN REDDY 20,90,50,000 - 20,90,50,000 II MUTHU PRATIMA REDDY 11,25,00,000 15,00,00,000 26,25,00,000 III MUTHUROHIT REDDY 17,44,23,414 44,15,26,586 61,5 9,50,000 IV NITYA REDDY 1,25,00,000 - 1,25,00,000 TOTAL 50,84,73,414 59,15,26,586 110,00,00,000 9. THE ABOVE SAID COMPOSITION OF RS. 110 CRORE WAS PAI D TO REDDY GROUP FOR VARIOUS CONSIDERATIONS AND ACQUISITIONS OF SHARES W ERE INCIDENTAL AND NOT MAIN CONSIDERATION. THE SHARE OF REDDY GROUP WERE T RANSFERRED TO HAWARE GROUP IN THE NAME OF ASSESSEE-COMPANY ON 18.05.2012 AT THE FACE VALUE OF ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 8 SHARE I.E. RS. 10/- EACH SHARE. PRIOR TO 18.05.2012 , THE ASSESSEE-COMPANY WAS HOLDING 30000 EQUITY SHARE OF RS. 10/- EACH. TH E DETAILS OF SHARE ACQUIRED ON 18.05.2012 BY ASSESSEE FROM REDDY FAMIL Y ARE AS UNDER: SR.NO. NAME OF PARTY NO. OF EQUITY SHARES DATE OF TRANSFER AMOUNT IN RS. I HARISHVARDHAN REDDY 3,45,000 18/05/2012 34,50,000 II MUTHU PRATIMA REDDY 18,500 18/05/2012 1,85,000 III MUTHUROHIT REDDY 20,400 18/05/2012 2,04,000 IV NITYA REDDY 16,000 18/05/2012 1,60,000 TOTAL 39,99,000 10. THE ADDITIONAL COMPENSATION OF RS. 109,60,01,000/- (RS. 1,10,00,000 RS. 39,99,0000) OVER AND ABOVE FOR THE ACQUISITION ON S HARE, WAS EFFECTIVELY FOR THE PROJECT FANTASIA BUSINESS PARK ONLY AND HEN CE THE SAME ACCOUNTED AS PROJECT COST IN THE FINANCIAL YEAR ENDING ON MAR CH 2012 (RS. 50 CRORE AND BALANCE RS. 59.60 CRORE IN THE FINANCIAL YEAR 2 013). 11. THE ASSESSEE ALSO PROVIDED THE DETAILS OF (I) CIVIL SUIT NO. 758 & 759/2011 FILED BY REDDY GROUP FOR CANCELLATION OF DEVELOPMEN T AGREEMENT PREPARING FOR POSSESSION OF LAND INCLUDING PERMANEN T INJUNCTION FOR DEVELOPMENT AND SALE OF PROPERTY, WHEREIN REDDY GRO UP MADE SUB- REGISTRAR, THANE, ARCHITECTURE, CHARTERED ACCOUNTAN T, NAVI MUMBAI MUNICIPAL CORPORATION, COSMOS BANK LTD. AND REGISTR AR OF COMPANIES AND DIRECTORS OF HAWARE GROUP AND SISTER CONCERN AS A PARTIES TO THE CIVIL SUIT. (II) THE OCCUPANCY CERTIFICATE ISSUED BY NAVI MUMBAI MUNICIPAL CORPORATION WAS STAYED ON 08.12.2011 ON THE APPLICA TION DATED 03.12.2011 ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 9 FILED BY ROHIT REDDY. COPY OF PUBLIC NOTICE ISSUED BY ISSUED BY REDDY GROUP ISSUED DATED 19.03.2012 PUBLISHED IN TIMES OF INDIA WARNING THE PUBLIC AT WHICH SO AS NOT ENTERED INTO TRANSACTION WITH HAWARE INFRASTRUCTURE IN RESPECT OF PLOT NO. 47, SECTOR 30 A, VASHI, NAVI MUMBAI. THE DETAILS OF STATUS QUA ORDER GRANTED FOR CIVIL S UIT NO. 758/2011 BY CIVIL JUDGE (SENIOR DIVISION, THANE). THE DETAILS OF PAYM ENT MADE IN PURSUANCE OF AGREEMENT DATED 15.02.2012 AND DETAILS OF WITHDR AWAL OF DIFFERENT SUITS/LITIGATIONS IN PURSUANCE OF AGREEMENT DATED 1 5.02.2012. THE ASSESSEE ALSO CONTENDED THAT PERUSAL OF VARIOUS DOCUMENTS MA DE IT CLEAR THAT THE COMPLETE PROJECT NAMELY FANTASIA HANDLED IN ALL RES PECT INCLUDING FINANCIAL, CONTRACTUAL, LEGAL AND OTHER TECHNICAL I NPUTS BY ASSESSEE. THEREFORE, THERE WAS NO QUESTION FOR ANY SIGNIFICAN T VALUE REMAINING WITH NEPL AFTER COMPROMISE. THE PURCHASE OF SHARE, PER S AY, WAS AN INCIDENTAL FORMALITIES FOR WHICH A FACE VALUE WAS THE FAIR CON SIDERATION. 12. THE ASSESSING OFFICER FURTHER NOTED THAT DIRECTORAT E OF INCOME-TAX (INVESTIGATION), HYDERABAD CONDUCTED A SURVEY ACTIO N UNDER SECTION 133A IN CASE OF REDDY GROUP TO WHOM THE ASSESSEE HAVE MA DE PAYMENT OF DEVELOPMENT RIGHT. IN CONNECTION WITH THE SAID SURV EY, ENQUIRY WAS MADE FROM THE ASSESSEE. THE REPORT OF INVESTIGATION WAS FORWARDED TO THE ASSESSING OFFICER. IN THE SAID ENQUIRY, IT WAS EMER GES THAT THE SAID PAYMENT IS NOT ADMISSIBLE AS REVENUE EXPENDITURE AN D THAT PAYMENTS WERE MADE FOR ACQUISITION OF SHARE OF MECL. THE ASSESSEE WAS SHOW-CAUSED ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 10 VIDE SHOW-CAUSE DATED 20.03.2015 AS TO WHY THE PAYM ENTS OF RS. 50.84 CRORE REVENUE EXPENDITURE SHOULD NOT BE DISALLOWED. 13. THE ASSESSEE FILED ITS REPLY VIDE REPLY DATED 25.03 .2015. IN THE REPLY, THE ASSESSEE DESPITE IN ADDITION TO CONTENTS OF ITS EAR LIER REPLY DATED 09.03.2015 FURTHER STATED THAT THE ISSUE REGARDING THAT REDDY S HAVE TREATED THE RECEIPT AS CAPITAL RECEIPT OF SHARE, IN FACT INDICATES THAT THE MISTAKE IS AT THE END OF RECIPIENT AND THE SAME CANNOT BE BASED FOR ADVERSE INFERENCE AGAINST THE ASSESSEE. IF AT ALL ANY TAX IS TO BE LEVIED AS REVE NUE TRANSACTION, IT SHOULD HAVE BEEN ON REDDYS WHO HAVE TREATED THE ENTIRE RE CEIPT AS CAPITAL GAIN AND NOT THE ASSESSEE-COMPANY FOR WHO, IT IS THE COS T INCURRED THAT TOO WHICH WAS AGREED UNDER A DURESS AS IT WAS TO ENSURE THAT ALL THE PROJECTS EXPENSES GONE INTO DEVELOPMENT OF PROJECT AND THE R IGHT CREATED THEREIN REMAINED UNDISTURBED AND DULY PROTECTED. THE ASSESS EE SPECIFICALLY STATED THAT THE DISPUTE WAS NEVER OF SHARE OR OWNERSHIP OF THE COMPANY BUT WAS OF DEVELOPMENT RIGHT OF THE PROJECT IN ANY CASE, TH E ASSESSEE-COMPANY HAD ONLY 10% OF THE RIGHT IN THE DEVELOPMENT IN ANY CAS E THE COMPANY HECL HAD ONLY 10% OF THE RIGHT IN THE DEVELOPED PROPERTY THAT TOO WITH FURTHER OBLIGATION OF PAYMENT. THE VALUE OF SHARE OF THE CO MPANY SANS THE LIABILITY AS PER BOOKS WAS INSIGNIFICANT. NO THIRD PARTY COUL D HAVE PAID MORE BEYOND THE FACE VALUE OF SHARES, AS THE SHARE DID N OT HAVE INTRINSIC VALUE SINCE THE DEVELOPMENT RIGHT WAS ALREADY TRANSFERRED . THE CLAIM OF REDDYS GROUP OF CAPITAL GAIN OF SHARE SHOULD HAVE BEEN VER IFIED IN THE BACKGROUNDS ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 11 OF FACTS, PLETHORA OF DOCUMENTS AND VARIOUS CASES F ILED AND SETTLED BY THE PARTIES. THE ASSESSEE PAID CONSIDERATION FOR TRANSF ER OF SHARE OF REAL OPTIMIST INDIA LTD. (SUPRA), SETTLEMENT OF ALL PEND ING ISSUES /DISPUTES IN VARIOUS FORUMS, ACQUISITION OF CLEAR DEVELOPMENT RI GHT REGARDING THE PROJECT IN ORDER TO BUY PEACE. THE ASSESSEE ALSO ST ATED THAT AS STATED IN REPLY DATED 09.03.2015 AS ALSO ASSUMING THAT IT WAS A CAPITAL RECEIPT IN THE HAND OF RECIPIENT I.E. UNDER BOTH THE CIRCUMSTANCES , THE ASSESSEE-COMPANY IS CONCERNED, THE PAYMENT IS NECESSARILY, SOLELY, E XPLICITLY AND ONLY FOR THE PURPOSE OF BETTERMENT OF ITS DEVELOPMENT RIGHT WHIC H WAS WRONGFULLY DENIED BY REDDYS AND UNDER DURESS TO GET RID OF VA RIOUS DISPUTES, AS THE PROHIBITORY ORDER OF THE COURT FOR GETTING OCCUPANC Y CERTIFICATE, THE PAYMENT WAS MADE THEREOF HAS TO BE INEVITABLY NOTHI NG BUT A REVENUE EXPENDITURE. 14. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY ASSE SSING OFFICER. THE ASSESSING OFFICER OBSERVED THAT DIT (INV.), HYDERAB AD CONDUCTED A SURVEY UNDER SECTION 133A IN MUTHU ROHIT REDDY (REDDYS GR OUP), IN THE SAID SURVEY, THE ENQUIRY WAS ALSO MADE FROM ASSESSEE-COM PANY. AFTER DETAILED ENQUIRY AND INVESTIGATION CAME TO THE CONCLUSION TH AT PAYMENT IS NOTHING BUT PAYMENT MADE FOR ACQUISITION OF SHARE OF REAL O PTIMIST (INDIA) LTD. (PRESENTLY MECL). THE ASSESSING OFFICER ALSO REFERR ED THE REPORT OF INVESTIGATION WING IN PARA-5.3 OF HIS ORDER. IN PAR A-6 OF INVESTIGATION REPORT, IT IS MENTIONED THAT THE ASSESSEE-COMPANY H AS WRONGLY DEBITED RS. ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 12 109.60 CRORE TOWARDS THE PROJECT COST FOR ITS PROFI T & LOSS ACCOUNT WHICH IS ACTUALLY IN NATURE OF CAPITAL EXPENDITURE INCURR ED FOR ACQUISITION OF SHARE. THE REDDY GROUP TO WHOM THE PAYMENTS WERE MADE WERE NOT THE OWNER OF THE LAND AND THEY DO NOT HAVE ANY DEVELOPMENT RIGHT , HENCE, THE ASSESSEES EXPLANATION THAT THE PAYMENTS WERE MADE FOR THE PUR POSE OF DEVELOPMENT RIGHT IS NOT TENABLE AND AFTER THOUGH TO CAMOUFLAGE THE CAPITAL EXPENDITURE AS REVENUE EXPENDITURE. ON THE BASIS OF REPORT OF I NVESTIGATION WING AND AFTER CONSIDERING THE SUBMISSION OF ASSESSEE, THE A SSESSING OFFICER TOOK THE VIEW THAT PAYMENT MADE TO REDDY GROUP ARE NOTHI NG BUT PAYMENTS FOR ACQUISITION OF SHARES AND ACCORDINGLY A CLAIM OF EX PENSES (OUT OF RS. 110 CRORE) RS. 50.84 CRORE PAID DURING THE RELEVANT ASS ESSMENT YEAR TOWARDS THE DEVELOPMENT RIGHT WERE DISALLOWED AND REDUCED F ROM WORKING-IN- PROGRESS. 15. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESS EE IS FOLLOWING THE PROJECT COMPLETION METHOD. THE ASSESSEE HAS RECEIVE D OCCUPANCY CERTIFICATE ON 29.10.2011 I.E. DURING THE RELEVANT PREVIOUS YEAR; THE ASSESSEE HAS NOT TAKEN ANY PROFIT DURING THE PREVIO US YEAR. THE ASSESSEE WAS SHOW-CAUSED AS TO WHY THE PROJECT SHOULD NOT BE TREATED AS COMPLETED AND THE PROFIT OF THE PROJECT SHOULD NOT BE BROUGHT TO TAX. THE ASSESSEE FILED ITS REPLY DATED 09.03.2015. IN THE REPLY, THE ASSESSEE STATED THAT THERE WAS LEGAL DISPUTE WITH REGARD TO THE CANCELLATION O F DEVELOPMENT AGREEMENT, PERMANENT INJUNCTION FOR SALE OF PROPERT Y UNDER DEVELOPMENT. ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 13 THE REDDY GROUP WITH WHOM THE ASSESSEE ENTERED INTO DEVELOPMENT AGREEMENT FILED CIVIL SUIT BEFORE CIVIL JUDGE (SR. DIVISION), THANE VIDE SUIT NO. 758 & 759/2011 WHEREIN THE ASSESSEE WAS RE STRAINED FROM CREATING THIRD RIGHT AND TO MAINTAIN STATUS QUA VID E STAY ORDER DATED 13.12.2011. THE SAID ORDER WAS VACATED ONLY ON 14.0 1.2012. NO REVENUE WAS RECOGNIZED IN THE FINANCIAL YEAR ENDING ON 31.0 3.2012. THE REVENUE WAS RECOGNIZED FOR THE FINANCIAL YEAR ENDING ON 31. 03.2013. THE SUBMISSION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSIN G OFFICER. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE RECEI VED OCCUPANCY CERTIFICATE DURING THE RELEVANT PREVIOUS YEAR. ONCE THE PROJECT IS COMPLETED AND OCCUPANCY CERTIFICATE IS OBTAINED. THE ASSESSIN G OFFICER FURTHER CONCLUDED THAT IT IS CLEARLY ESTABLISHED THAT ONCE OCCUPANCY CERTIFICATE IS OBTAINED IN RESPECT OF ANY PROJECT, THE PROJECT MUS T HAVE COMPLETED IN ALL PRACTICAL PURPOSE. AS THE ASSESSEE HAS OBTAINED OCC UPANCY CERTIFICATE, NOTHING IS LEFT TO ESTABLISH THAT PROJECT HAS ALREA DY COMPLETED BEFORE THE DATE OF ISSUANCE OF OCCUPANCY CERTIFICATE BY NAVI M UMBAI MUNICIPAL CORPORATION. THE ASSESSING OFFICER FURTHER CONCLUDE D THAT THE ASSESSEE SIMPLY DELAYED THE REVENUE RECOGNITION ON THE GROUN D THAT THERE WAS DISPUTE AND THAT MATTER WAS SUB-JUDICE BEFORE CIVIL JUDGE, THANE. THE LD. CIT(A) CONCLUDED THAT IN HIS OPINION, EVEN IF, THER E IS DISPUTE, CANNOT AFFECT THE STATUS OF PROJECT COMPLETION. THE ASSESS ING OFFICER WORKED OUT THE PROFIT OF PROJECT IN THE FOLLOWING MANNER: ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 14 AGREEMENT VALUE OF SALE RS. 153,75,22,278 WIP SHOWN IN THE BOOKS RS. 89,74,96,057 LESS: PROFIT DISCUSSED IN PARA-5 RS.50,84,00,000 REWORKED WIP RS. 38,90,96,057 PROFIT OF THE PROJECT RS.114,84,26,221 16. ACCORDINGLY, THE ASSESSING OFFICER WORKED OUT PROFI T OF THE PROJECT AT RS.114,84,26,299/-. AGGRIEVED BY THE ORDER OF ASSES SING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD . CIT(A) DELETED THE ADDITION OF RS. 114.84 CRORE ON ACCOUNT OF REVENUE RECOGNITION OF THE PROJECT NAMELY FANTASIA. HOWEVER, THE TREATMENT/DIS ALLOWANCE OF RS. 50.84 CRORE AS CAPITAL EXPENDITURE WAS CONFIRMED. AGGRIEV ED BY THE ORDER OF LD. CIT(A), BOTH THE PARTIES HAVE FILED THEIR RESPECTIV E APPEAL BEFORE US. THE ASSESSEE HAS CHALLENGED THE VALIDITY OF DISALLOWANC E OF RS. 50.84 CRORE AND THE REVENUE HAS CHALLENGED THE VALIDITY OF DELE TING THE ADDITION OF RS. 114.84 CRORE. 17. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE A LSO DELIBERATED ON VARIOUS CASE LAWS RELIED BY LOWER AUTHORITIES AS WE LL AS BY RESPECTIVE PARTIES. GROUND NO.1 & 2 RELATES TO DISALLOWANCES O F RS. 50.84 CRORE. BOTH THE GROUNDS OF APPEALS ARE INTERCONNECTED; THEREFOR E, WE WILL DISCUSS BOTH THE GROUNDS TOGETHER. THE LEARNED AUTHORISED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITTED THAT ASSESSEE IS REPUTED BUILDER S IN NAVI MUMBAI. THE ASSESSEE FOLLOWED THE PROJECT COMPLETION METHOD OF ACCOUNTING FOR ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 15 RECOGNIZING REVENUE FOR THE YEAR UNDER CONSIDERATIO N. THE ASSESSEE WAS DEVELOPING A PROJECT NAMELY FANTASY A BUSINESS PA RK AT PLOT NO. 47 SECTOR 30-A VASHI, NAVI MUMBAI. THE DEVELOPMENT RIG HTS WERE ACQUIRED BY THE ASSESSEE VIDE AND UNREGISTERED AGREEMENT DAT ED 27 TH SEPTEMBER 2003 FROM MAHON ENTERTAINMENT COMPANY LTD (MECL), W HICH WAS A CLOSELY HELD COMPANY, OWNED BY REDDY FAMILY. THE AG REEMENT FOR DEVELOPMENT RIGHT DATED 27 TH SEPTEMBER 2003 WAS EXECUTED ON A STAMP PAPER OF RS. 20/- ONLY. THOUGH, THE AGREEMENT WAS U NREGISTERED, THE SAME WAS ACTED UPON AND THE ASSESSEE COMPANY STARTED THE DEVELOPMENT ON THE SAID PLOT. DURING THE DEVELOPMENT OF THE PROJECT TH E ASSESSEE COMPANY RECEIVED ADVANCES FROM VARIOUS PROSPECTIVE BUYERS A GAINST SALE OF VARIOUS UNITS IN THE PROJECT. THE BREAKUP OF CLOSING BALANC E AS ON 31 ST MARCH 2010, 31 ST OF MARCH 2011, 31 ST MARCH 2012 AND 31 MARCH 2013 WAS PROVIDED TO THE ASSESSING OFFICER. UNFORTUNATELY, THE FOUNDER P ROMOTER DIRECTORS OF BOTH THE COMPANIES I.E. ASSESSEE AS WELL AS OF MECL EXPIRED. THE REMAINING SHAREHOLDERS AND DIRECTORS OF MECL FINDIN G AN OPPORTUNITY OF UNFAIR ADVANTAGES REFUSED TO ACKNOWLEDGE THE UN-REG ISTERED AGREEMENT, ACTED UPON EARLIER BY BOTH THE PARTIES IN THE REGIM E OF ITS FOUNDER PROMOTERS / SHAREHOLDERS. THIS EPISODE GIVE RISE TO THE SERIOUS DISPUTE, WHICH MULTIPLIED DUE TO THE CLAIMS AND COUNTER CLAI MS AND DRIVES TO MANY AREAS SUCH AS ACCOUNTS, COMPANY LAW MATTERS, CONTRA CTS FILING OF CRIMINAL COMPLAINTS AND CIVIL SUITS. AS A RESULT OF DISPUTE AND A NUMBER ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 16 OF COMPLAINTS WERE FILED AGAINST THE ASSESSEE. THE ASSESSEE COMPANY HAS ALREADY SPENT HUGE AMOUNT ON DEVELOPMENT, THUS, THE ASSESSEE WAS ON A DEFENSIVE STAND DUE TO AN ARM-TWISTING TACTICS OF T HE REDDYS FAMILY. THE ASSESSING OFFICER AS WELL AS LEARNED CIT (A) WAS PR OVIDED THE COPY OF THE DEVELOPMENT AGREEMENT AND THE DETAILS OF VARIOUS LI TIGATIONS LAUNCHED BY THE REDDY FAMILY. 18. THE LEARNED AR SUBMITS THAT IN THE CIVIL SUIT FILED BEFORE CIVIL JUDGE SENIOR DIVISION VIDE SUIT NO. 758 & 559/2011BY REDD Y FAMILY. THE LD. CIVIL JUDGE GRANTED INJUNCTION ORDER ON 14.12.2011, WHEREIN, THE ASSESSEE WAS RESTRAINED FROM CREATING THIRD PARTY RIGHT AND WAS DIRECTED TO MAINTAIN THE STATUS QUO OF THE PROJECT TILL THE DISPOSAL OF THE SUIT. THE ASSESSEE RECEIVED OCCUPANCY CERTIFICATE ON 21 ST OCTOBER 2011 FROM NAVI MUMBAI MUNICIPAL CORPORATION (NMMC) IN RESPECT OF THE BUIL DING AT FANTASY PROJECT. THE ASSISTANT DIRECTOR OF TOWN PLANNING NA VI MUMBAI MUNICIPAL CORPORATION STAYED THE IMPLEMENTATION OF OCCUPANCY CERTIFICATE GRANTED TO THE ASSESSEE ON 08.12.2011 ON THE APPLICATION FILED BY ROHIT REDDY. THUS, THE ASSESSEE WAS RESTRAINED FROM HANDING OVER POSSE SSION OF THE UNIT AND THE IMPLEMENTATION OF OCCUPANCY CERTIFICATE GRANTED WAS STAYED, THE PROJECT OF THE ASSESSEE BECAME A STANDSTILL AND THE ASSESSEE STARTED SUFFERING HUGE LOSSES. DUE TO VARIOUS LITIGATIONS B Y REDDY FAMILY THE ASSESSEE SUFFERED HUGE LOSS OF TIME AND PERSONAL IN JURY AND DEFAMATION. THE LADY DIRECTORS OF THE ASSESSEE COMPANY WAS ARRE STED ON THE FALSE ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 17 COMPLAINT BY REDDY FAMILY. FACED WITH THE ABOVE LI TIGATIONS, WHEN THE PROJECT WAS PRACTICALLY COMPLETED, ESPECIALLY, WHEN THE OCCUPANCY CERTIFICATE WAS ISSUED ON 21 ST OF OCTOBER 2011 ANY ADVERSE ORDER FROM COURTS WOULD HAVE SERIOUS CONSEQUENCES OF THE SCRAP ING OF THE PROJECT, CANCELLATION OF THE SALE AGREEMENTS WITH BUYERS AND REFUND OF THE ADVANCE AGAINST SALE RECEIVED TO THE TUNE OF RS. 81 CRORES WITH COMPENSATION AND THAT WOULD HAVE AFFECTED THE BUSINESS OF ASSESSEE C OMPANY INCLUDING PROJECT AND BAD NAME. THE ASSESSEE AFTER TAKING INT O ACCOUNT ALL THESE RISK FACTORS RELATED CONTINGENCIES IN ORDER TO PROTECT T HE BUSINESS INTEREST, THE ASSESSEE COMPANY WAS FORCED INTO ENTERING INTO CONS ENT TERMS WITH THE REDDY FAMILY COMPRISING OF HARSHVARDHAN REDDY, MUTH U PRATIMA REDDY, MUTHU MOHIT REDDY AND NITYA REDDY (REDDY FAMILY) ON 15 TH FEBRUARY 2012. THE COPY OF CONSENT AGREEMENT DATED 15 TH FEBRUARY 2012 IS ALSO PLACED ON RECORD. IN THE CONSENT AGREEMENT THE ASSE SSEE AGREED TO MAKE THE COMPENSATION OF RS. 110 CRORE, OUT OF WHICH RS. 50. 84 CRORE WAS PAID IN ASSESSMENT YEAR 2012-13 AND BALANCE OF RS. 59.15 CR ORE WAS PAID IN ASSESSMENT YEAR 2013-14. CONSEQUENT UPON AGREEMENT THE REDDY FAMILY AGREED TO WITHDRAW ALL THE SUITS, COMPLAINTS, PETIT IONS AND TO RELEASE THE PROJECT FOR FURTHER COMMERCIAL EXPLOITATION BY THE ASSESSEE COMPANY. 19. THE LEARNED AR FOR THE ASSESSEE FURTHER SUBMITS THA T AS AN INCIDENTAL, COMMERCIAL REQUIREMENT SHARE REDDYS FAMILY OWNED C OMPANY MCPL OF WORTH RS. 40.00 LAKHS WERE ALSO SURRENDERED BY REDD Y FAMILY, THEY HAVING ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 18 ACHIEVED THEIR ULTERIOR MOTIVE OF UPFRONT CASHING THEIR PROUD OF FLESH. OUT OF WHICH RS. 109.60 CRORE TOWARDS ACQUISITION OF DE VELOPMENT RIGHTS REGARDING THE PLOT OF LAND AND SUM OF RS. 39.99 LAK H (399900 SHARE X RS.10/-) WAS PAID FOR A CONSIDERATION OF ACQUISITIO N OF THE BALANCE SHARES FROM REDDY FAMILY. THE SHARES OF COMPANY HAD NO SIG NIFICANT VALUE HAVING AN AGREED TO GIVE CLEAN PROJECT TO THE ASSES SEE COMPANY. HOWEVER, AS A MATTER OF CONVENIENCE THE VALUE OF SHARES WAS ARRIVED AT AN AGGREGATE VALUE OF RS. 39.99 LAKHS. THE VALUATION OF RS. 10/- PER SHARE WAS ADOPTED AS PER RULE 11UA OF INCOME TAX RULES 1962. THE ACQ UISITION OF SHARE OF MECL BY THE ASSESSEE FROM REDDY FAMILY WAS ONLY INC IDENTAL FOR SMOOTH HANDLING AND EXPLOITATION OF THE PROJECT FANTASY WH ICH HAD RECEIVED OCCUPATION CERTIFICATE BUT NOT A SINGLE SALE CONDIT ION CONSIDERATION COULD BE RECEIVED APPROPRIATED DUE TO VARIOUS LEGAL OBSTRUCT IONS. AS PER SUBSTITUTED AGREEMENT DATED 15 TH FEBRUARY 2012 BETWEEN ASSESSEE GROUP AND REDDY GROUP THE ASSESSEE AGREED TO PAY SUM OF RS. 110 CRO RE TO REEDY GROUP A LUMP SUM COMPENSATION, DETAILS OF WHICH WERE PROVID ED TO THE LOWER AUTHORITIES. OUT OF TOTAL PAYMENTS OF RS. 110 CRORE RS. 50.84 CRORE WERE PAID DURING THE ASSESSMENT YEAR UNDER CONSIDERATION , WHICH HAS BEEN CORRECTLY RECORDED BY ASSESSING OFFICER IN ASSESSME NT ORDER. THE LEARNED AR FOR THE ASSESSEE FURTHER CLARIFIED THAT OUT OF T OTAL/ADDITIONAL COMPENSATION OF RS. 110 CRORE, OUT OF WHICH RS. 10 9.60 CRORE WAS PAID ON ACCOUNT OF BETTERMENT OF DEVELOPMENT RIGHT IN TH E PROJECT AND ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 19 REMAINING AMOUNT OF RS. 39.99 LAKHS WERE PAID FOR A CQUISITION OF SHARES. THE RECEIPT OF DEVELOPMENT RIGHTS CANNOT BE CONSIDE RED AS A SALES CONSIDERATION FOR SALE OF SHARE AS IT WAS AN AFTERT HOUGHT STAND OF REDDY FAMILY TO SAVE THE TAX AS REVEALED IN THE REPORT OF ENQUIRY PROCEEDING UNDER SECTION 131. THE ASSESSING OFFICER WRONGLY TREATED THE TOTAL AMOUNT OF RS. 110 CRORE PAID TO REDDY GROUP TOWARDS PURCHASE OF S HARE. AS PER THE STATEMENT OF REDDY FAMILY RECORDED BY DIT (INVESTIG ATION) THAT THEY TREATED THE SAID AMOUNT AS CAPITAL GAIN IN THE HAND S OF FAMILY MEMBERS AND IGNORED THE STATEMENT OF SANJAY HAWARE, DIRECTOR OF ASSESSEE COMPANY RECORDED BY THE SAME INVESTIGATION TEAM /WING. 20. IN THE ABOVE BACKGROUND THE LEARNED AR OF ASSESSEE SUBMITS THAT PERUSAL OF INITIAL DEVELOPMENT AGREEMENT AGREEMENTS DATED 2 7.09.2003, NATURE OF VARIOUS LITIGATIONS AND COMPLAINTS FILED BY THAT RE DDY FAMILY AND SUBSEQUENT AGREEMENT DATED 15 TH FEBRUARY 2012, COPIES OF WHICH IS ALREADY PLACED ON RECORD, IT WILL BE ABUNDANTLY CLEAR THAT COMPLETE PROJECT ON THE AFORESAID PLOT WAS HANDLED IN ALL RESPECT INCLUDING FINANCIAL, CONTRACTUAL, LEGAL AND UNDER OTHER TECHNICAL INPUTS BY ASSESSEE. THEREFORE, THERE WAS NO QUESTION OF ANY SIGNIFICANT VALUE REMAINING WITH TH E MECL AFTER THE COMPROMISE. AS SUCH THE PURCHASE OF SHARE, PER SE W AS AN INCIDENTAL FORMALITY FOR WHICH THE FACE VALUE WAS THE FAIR CON SIDERATION THE ASSESSEE HAS CORRECTLY APPROPRIATED A SUM OF RS. 39.99 LAKHS AS PAID TO THE REDDY FAMILY ON ACCOUNT OF ACQUISITION OF SHARES AND THE BALANCE CONSIDERATION OF ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 20 RS. 109.06 CRORE WAS PAID OUT OF COMMERCIAL EXPEDIE NCY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS, WITHOUT WHICH THE BUSINESS COULD HAVE COME TO A STANDSTILL. IN THE RECEIPT EXECUTED BY THE FAMILY MEMBERS OF REDDYS ARE IN RESPECT OF DEVELOPMENT RIGHTS OF PL OT NO 47 SECTOR 30-A VASHI, NAVI MUMBAI. THE LOWER AUTHORITIES WERE INCO RRECT IN APPRECIATING THE ABOVE FACTS WHILE INTERPRETING THE SETTLEMENT D OCUMENT. 21. THE LEARNED AR FURTHER SUBMITS THAT IF THE APPARENT IS NOT REAL, THEN THE ONUS IS ON THE PERSON WHO ALLEGES TO DO SO. THE LEA RNED COMMISSIONER (APPEALS) MERELY RELYING ON THE PARA 6(D)(III) OF T HE AGREEMENT TO ARRIVE AT A CONCLUSION THAT ENTIRE CONSIDERATION WAS PAID FOR PURCHASE OF SHARE BY IGNORING THE FACTS MENTIONED IN THE COMPLETE AGREEM ENT AND THE FACTS OF THE CASE. THEREFORE, THE CONCLUSION OF LEARNED COMMISSI ONER (APPEALS) IS NOT CORRECT. 22. THE LEARNED AR OF THE ASSESSEE IN HIS WITHOUT PREJU DICE TO HIS EARLIER SUBMISSIONS SUBMITS THAT THE PLOT UNDERNEATH DEVELO PMENT OF FANTASY PROJECT WAS ALLOTTED TO MECL BY CIDCO. AFTER THE AL LOTMENT OF SAID PLOT THE SAID COMPANY WAS NOT ABLE TO EVEN PAY FULL CONS IDERATION TO CIDCO AND TO MAKE CONSTRUCTION ON THE SAID PLOT. THUS, VI DE UNREGISTERED DEVELOPMENT AGREEMENT DATED 27 TH SEPTEMBER 2003 THE SAID MECL ENTERED INTO AGREEMENT WITH ASSESSEE COMPANY TO ASSIGNED DE VELOPMENT RIGHT ON THE PLOT ON THE TERM AGREED AS PER THE AGREEMENT. T HE ASSESSEE COMPANY, THEREAFTER STARTED CONSTRUCTION IN FULL SPEED AND A LSO SOLD THE UNIT TO VARIOUS ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 21 PARTIES FROM TIME TO TIME AND RECEIVED ADVANCES. WH EN THE PROJECT WAS NEAR COMPLETION THE REDDY FAMILY DISPUTED THE UNREG ISTERED AGREEMENT AND FILED VARIOUS COMPLAINT AND SUITS AT VARIOUS PLACES TO OBSTRUCT THE COMPLETION OF THE PROJECT BY GETTING INTO THE ARGUM ENT THAT THE PLOT OF LAND BELONGS TO THEM AND THE DEVELOPMENT AGREEMENT EXECU TED IS NOT VALID. AFTER NEGOTIATION, THE SETTLEMENT WAS ARRIVED AND A CCORDINGLY A SUM OF RS. 110 CRORE IN TOTAL WAS PAID TO VARIOUS MEMBERS OF R EDDY FAMILY WHO WERE HOLDING SHARES IN MECL. THE ASSESSEE TREATED THE SU M OF RS. 109.60 CRORE TOWARDS ACQUISITION OF CLEAR DEVELOPMENT RIGHT OF T HE PLOT AND DEBITED THE SUM TOWARD THE COST OF PURCHASE OF SHARE OF RS. 39 .99 LAKHS FOR PURCHASE OF 399900 SHARES @ RS. 10 PER SHARE OF MECL AND GO T THE TRANSFER OF BALANCE SHARE OF MECL IN THE NAME OF ASSESSEE COMPA NY FOR THE SMOOTH COMPLETION OF PROJECT SO THAT FAMILY MEMBERS OF RED DY FAMILY COULD NOT RAISE ANY FURTHER DISPUTE IN FUTURE. THOUGH, THE FA MILY MEMBERS OF REDDY TO WHOM THE PAYMENTS WERE MADE MENTIONED IN THE REC EIPT THAT AMOUNT RECEIVED BY THEM IS ON ACCOUNT OF TRANSFER OF DEVEL OPMENT RIGHT OF THE PLOT OF LAND IN FAVOUR OF ASSESSEE COMPANY, BUT IN THEIR RETURN OF INCOME THEY HAVE DECLARED THE AMOUNT AS CAPITAL GAIN FOR THE SA LE OF SHARE OF MECL. SINCE, BOTH THE PARTIES ACTED UPON THE AGREEMENTS T HOUGH UNREGISTERED THE SUBSTANTIAL RIGHT IN THE DEVELOPED PROJECT BELONG T O THE ASSESSEE COMPANY, THEREFORE MECL COULD NOT HAVE SUCH LARGE VALUES. TH E COMPLETE ENJOYMENT OF 90% DEVELOPMENT RIGHT WAS OBSTRUCTED B Y REDDY GROUP ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 22 HENCE THE COMPENSATION WAS PAID. MOREOVER, MECL HAD RECEIVED FUND FROM THE APPELLANT COMPANY WHICH WAS CORRECTLY REFL ECTED AS LIABILITIES IN THE BALANCE SHEET OF MECL AS DUE TO THE ASSESSEE CO MPANY AND HENCE NO STRETCH OF IMAGINATION THE CONSIDERATION COULD HAVE BEEN RELATED TO SHARE WHICH WAS A MINISCULE PORTION OF THE TOTAL PACKAGE. 23. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE SUPREME COURT IN SHAHAZADA NAND & SONS (108 ITR 358 SC) HELD THAT IF THE PAYME NT IS MADE THROUGH COMMERCIAL EXPEDIENCY, THE SAME WOULD BE ALLOWED AS BUSINESS EXPENDITURE, FURTHER IN MALAYALAM PLANTATION (43 IT R 114 SC) IT WAS HELD BY HONBLE SUPREME COURT THAT THE EXPRESSION WHOLLY AND EXCLUSIVELY LAID OUT OR EXPENDED FOR THE PURPOSE OF BUSINESS NEED NO T NECESSARILY BE CONSTRUED FOR THE PURPOSES OF EARNING PROFITS. FOR THE PURPOSE OF BUSINESS IS WIDER THAN THE SCOPE OF EXPRESSION FOR THE PURPO SES OF EARNING PROFITS. ITS RANGE IS SO WIDE, IT MAY TAKE IN NOT ONLY THE DAY T O DAY RUNNING OF A BUSINESS AND FOR PROTECTION OF ITS ASSETS AND PROPE RTY FROM EXPROPRIATION COERCIVE PROCESS OR ASSERTION OF HOSTILE TITLE. FUR THER, IN MEENAKSHI MILLS LTD. (63 ITR 207 SC) THE HONBLE SUPREME COURT HELD THAT THE EXPRESSION FOR THE PURPOSES OF BUSINESS IS WIDER THAN THE PURP OSE OF EARNING INCOME. THE FORMER WOULD INCLUDE WITHIN ITS SCOPE EXPENDITU RE INCURRED ON THE GROUNDS OF COMMERCIAL EXPEDIENCY. IN DALMIA JAIN CO . LTD. (81 ITR 754 SC), THE HONBLE SUPREME COURT HELD THAT WHERE LITI GATION EXPENSES ARE INCURRED BY AN ASSESSEE FOR THE PURPOSES OF CREATIN G, CURING OR COMPLETING ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 23 THE ASSESSEE'S TITLE TO CAPITAL, THEN THE EXPENDITU RE INCURRED MUST BE CONSIDERED AS CAPITAL BUT IF LITIGATION EXPENSES AR E INCURRED TO PROTECT THE BUSINESS OF THE ASSESSEE THEY MUST BE CONSIDERED AS REVENUE EXPENDITURE. 24. IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE THAT HON BLE DELHI HIGH COURT IN SOUTH ASIA INDUSTRIES PVT. LTD. (132 ITR 144 DEL .) HELD THAT EXPENDITURE INCURRED TO PROTECT BUSINESS AND REPUTATION OF THE COMPANY IS A AMOUNTS SPENT FOR SAFEGUARDING AND SAVING THE ASSETS OF THE ASSESSEE'S BUSINESS AND KEEPING IT ON A SOUND FOOTING EXPENDITURE INCURRED FOR THIS PURPOSE IS ALLOWABLE EXPENDITURE. FURTHER, HONBLE DELHI HIGH COURT IN GOPALDASS ESTATES & HOUSING PVT. LTD. (103 TAXMANN.COM 334 DE L.) HELD THAT COMPENSATION PAID BY THE ASSESSEE DEVELOPER TO ALLO TTIES OF COMMERCIAL SPACES FOR SURRENDER OF THEIR RIGHTS, THEREIN COULD NOT BE SET TO BE DISALLOWED ON THE GROUNDS OF SUCH PAYMENTS HAVING B EING MADE FOR EXTRANEOUS CONSIDERATIONS. ASSESSEE HAS A PLAUSIBLE EXPLANATION FOR MAKING SUCH PAYMENTS OF COMPENSATION TO PROTECT ITS BUSINESS INTEREST. WHILE IT IS TRUE THAT THERE WAS NO CONTRACTUAL OBLI GATION TO MAKE PAYMENT, IT IS PLAIN THAT THE ASSESSEE WAS ALSO LOOKING TO B UILD ITS OWN REPUTATION IN THE REAL ESTATE MARKET. THE COURT FURTHER HELD THAT THE RECIPIENTS TREATED THE SAID PAYMENTS AS CAPITAL GAINS IN THEIR HANDS IN TH EIR RETURNS WOULD NOT BE RELEVANT IN DECIDING THE ISSUE WHETHER THE PAYMENT BY THE ASSESSEE SHOULD BE TREATED AS BUSINESS EXPENDITURE. IT WAS ARGUED T HAT WHILE RENDERING THIS DECISION, THE DELHI HIGH COURT HAD RELIED ON THE DE CISION OF SHAHAZADA ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 24 NAND & SONS (108 ITR 358), NAINITAL BANK LTD. (62 I TR 638), SHARADA BINDING WORKS (102 ITR 187). IN CIT VS. NAINITAL BA NK LTD. (62 ITR 638 (SC) THE HON'BLE SUPREME COURT HELD THAT 'A LARGE Q UANTITY OF JEWELLERY PLEDGED WITH ASSESSEE BANK BY ITS CONSTITUENTS WERE STOLEN BY DACOITS FROM PREMISES OF BANK. BANK PAID THE MARKET VALUE OF THE JEWELLERY PLEDGED BY THE CONSTITUENTS AND CLAIMED THE SAME AS EXPENDITUR E WHICH IS ALLOWED' THE LD. AR ALSO RELIED ON CASE LAW IN CIT V IS. PAN BARI TEA CO. LTD. 57 ITR 422(SC) WHEREIN IT HAS BEEN HELD THAT 'IT IS NO T THE FORM BUT THE SUBSTANCE OF THE TRANSACTION THAT MATTERS. THE NOME NCLATURE USED MAY NOT BE DECISIVE OR CONCLUSIVE BUT IT HELPS THE COURT, H AVING REGARDING TO THE OTHER CIRCUMSTANCES, TO ASCERTAIN THE INTENTION OF THE PARTIES.' THE LD. AR SUBMITS THAT IN SUMATI DAYAL V/S. CIT, (214 ITR 801 (SC), IT HAS BEEN HELD THAT APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT APPARENT IS NOT REAL AND TH AT TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING REA L TEST OF HUMAN PROBABILITIES. 25. THE LD. AR ALSO REFERRED THE DECISION OF HON'BLE BO MBAY HIGH COURT IN THE CASE OF CIT V/S. CHEMOSYN LTD. (371 ITR 427), WHERE IN IT HAS BEEN HELD THAT 'DUE DIFFERENCE BETWEEN GROUPS, ASSESSEE COMPA NY WAS DIRECTED TO BUY 34 PER CENT OF SHAREHOLDING OF ONE OF WARRING G ROUP, AS SAID ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 25 EXPENDITURE WAS INCURRED ONLY TO ENABLE SMOOTH RUNN ING OF BUSINESS, IT WAS A DEDUCTIBLE EXPENDITURE'. 26. IT WAS ARGUED THAT IN THIS CASE THE DISPUTE IS BET WEEN THE ASSESSEE AND THE SHAREHOLDERS OF THE MOHAN ENTERTAINMENT PVT. LTD. F ROM WHOM THE ASSESSEE HAS ACQUIRED THE DEVELOPMENT RIGHTS. THE L D. AR SUBMITS THAT HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V/S. S ARADA BINDING WORKS, (102 ITR 187), HELD THAT IN ORDER TO DECIDE WHETHER SOME PARTICULAR EXPENDITURE OF A TRADER SHOULD BE BROUGHT INTO ACCO UNT, FOUR TESTS, SIMILAR TO THOSE CONSIDERED IN RELATION TO RECEIPTS, SHOULD BE APPLIED. FIRST, IS THE EXPENDITURE WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSES OF THE TRADE. IF NOT, IT WILL BE EXCLUDED. SECONDLY, IS THE EXPEN DITURE OF REVENUE, AND NOT OF A CAPITAL IN NATURE. UNLESS IT IS OF A REVENUE N ATURE IT WILL BE EXCLUDED. THIRDLY, MAY TAX BE DEDUCTED AND RETAINED ON PAYMEN T. IF SO, IT WILL BE EXCLUDED. FINALLY, IS THERE SOME OTHER SPECIAL PROV ISION OF THE INCOME-TAX ACT WHICH PERMITS, OR REQUIRES, THE PAYMENT TO BE B ROUGHT IN OR LEFT OUT OF ACCOUNTS. 27. THE LD. AR OF THE ASSESSEE HAS ALSO FILED THE FOLLO WING DOCUMENTS IN THE FORM OF PAPER BOOK AND CERTIFIED THAT ALL THE DOCUM ENTS WERE FILED ON THE RECORD OF LOWER AUTHORITIES. SR. NO. PARTICULARS PAGE NO. 1. STATEMENT OF TOTAL INCOME FOR AY 2012-13 1 2. ACKNOWLEDGEMENT FOR FILING OF RETURN OF INCOME F OR AY 2012- 13 2 ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 26 3. AUDITED FINAL ACCOUNTS FOR MARCH 2012 3 -20 4. COPY OF THE AGREEMENT DTD.27.09.2003 FOR ASSIGNM ENT OF DEVELOPMENT RIGHTS BETWEEN THE ASSESSEE AND MOHAN ENTERTAINMENT LTD. 21- 32 5. COPY OF THE SUBSTITUTED AGREEMENT DTD.15.02.2012 33 -74 6. COPY OF THE ADDENDUM DTD.18.03.20 12 T O THE SUBSTITUTED AGREEMENT DTD.15.02.2012. 75 - 84 7. COPY OF THE ADDENDUM DTD.18.05.20 12 T O THE SUBSTITUTED AGREEMENT DTD.15.02.2012 85 - 90 8. COPY OF THE COMMUNICATION DTD.18.05.2012 ADDRESS ED BY THE REDDY FAMILY TO HAWARE GROUP. 90A - 90B 9. COPY OF THE RECEIPTS DTD.09.12.2011, 0 3.12.2011, 09.12.2011, 09.12.2011, 09.12.2011, 09.12.201 1, 14.04.2012, 09.12.2011, 03.02.2012, 13.03.201 2, 14.04.2012, 18.05.2012, 09.12.2011, 03.02.201 2, 14.02.2012, 13.03.2012, 14.04.2012, 14.04.201 2, 14.04.2012, 18.05.2012, 12.11.2012, 12.11.2012, 12.11.2012,09.12.2011,03.02.2012, ALL ISSUED BY THE REDDY FAMILY. 91 - 114 10. SUMMARY OF THE PAYMENTS MADE TO THE REDDY FAMIL Y BY THE APPELLANT. 115 11. SUMMARY OF THE LITIGATION DISPOSED OF F WITH THE SETTLEMENT AS A RESULT OF THE COMPROMISE. 116-118 12. COPY OF THE CORRIGENDUM AGREEMENT TO DEVELOPMENT OF PROPERTY. 119 - 130 13. COPY OF OCCUPANCY CERTIFICATE ISSUED BY NMMC. 131 - 133 14. COPY OF THE CIVIL JUDGE (S.D.) THANE, SPL. CIVI L SUIT NO.758 OF 2011 IN THANE CITY CIVIL COURT BEING SUIT FOR CANCE LLATION OF AGREEMENT, DECLARATION FOR INJUNCTION & FOR CONSEQU ENTIAL RELIEF. 134 - 236 15. COPY OF THE ORDER DTD.13.12.2011 DIRECTING THE ASSESSEE TO MAINTAIN STATUS- QUO TILL DISPOSAL OF SUITE NO.758 OF 2011. 237 - 239 16. COPY OF PUBLIC NOTICE DTD.29.02.2012 ISSUED BY REDDY FAMILY IN THE TIMES OF INDIA, HYDERABAD AND LATER ON, ON 29.03.2012 ISSUED IN THE TIMES OF INDIA, MUMBAI, CAUTIONING PEOPLE NOT TO ENTER ANY AGREEMENTS WITH THE ASSESSEE IN RESPECT O F THE PROPERTY - FANTASIA. 240 17. COPY OF THE APPLICATION DTD.14.12.2012 & PRAYER FIL ED BY MOHAN ENTERTAINMENT CO. LTD. & REDDY FAMILY IN SPECIA L CIVIL SUIT NO.: 758/2011 (CITY CIVIL JUDGE, (SD) THANE AT THAN E COURT) WITHDRAWING THE SUIT FILED AGAINST THE ASSESSEE AND ITS DIRECTORS. AT PAGE 242 ON 14.12.2012, THE J UDGE ALLOWS THE PLAINTIFF TO WITHDRAW THE SUIT. 241 - 246 18. COPY OF THE APPLICATION DTD.14.12.2012 IN CITY CIVIL SUIT NO.: 759/2011 FILED BY FILED BY MOHAN ENTERTAINMENT CO. LTD. & 247 - 252 ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 27 REDDY FAMILY IN SPECIAL CIVIL SUIT NO.: 759 /2011 (CITY CIVIL JUDGE, (SO) THANE AT THANE COURT) WITHDRAWING THE SUIT FILED AGAINST THE ASSESSEE AND ITS DIRECTORS. AT PAGE 248 ON 14.12.2012, THE JUDGE ALLOWS THE PLAINTIFF TO WITHD RAW THE SUIT. 19. COPY OF THE ACKNOWLEDGEMENT AND COMPUTA TION OF INCOME FOR AY 2013- 14, INCLUDING REVISED RETURN OF INCOME. 253 - 256 20. AUDIT FINANCIAL STATEMENT FOR THE YEAR ENDED MARC H 2013. 257 - 279 21. CHART PERTAINING TO BREAKU P OF AGREEMENT VALUES OF RS.153.75 CRORES CONSIDERED BY THE AO IN THE ASSE SSMENT ORDER. 280 - 301 22. COPY OF ASSESSMENT ORDER FOR AY 2013-14. 302 - 319 28. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. T HE LD. DR FURTHER SUBMITS THAT DURING THE SURVEY AT THE REDDY GROUP, THE FAMILY MEMBER OF REDDY GROUP ADMITTED THAT THEY WERE IN RECEIPT OF R S. 110 CRORE TOWARD THE SHARE TRANSFERRED TO THE ASSESSEE. CLAUSE 6(D)( II) OF SETTLEMENT AGREEMENT CLEARLY SPELT OUT THAT SHARES OF MECL SHA LL BE TRANSFERRED TO NOMINEE OF HAWARE GROUP OR LUMPSUM COMPENSATION OF RS. 110 CRORE, OUT OF WHICH RS. 50 CRORE WERE ALREADY RECEIVED AND BALANCE WERE RECEIVABLE ON OR BEFORE 15.06.2012. THE SAID CLAUSE CLEARLY SPELT OUT THAT PAYMENT OF RS. 110 CRORE TOWARD THE TRANSFER OF SHA RE BY REDDY GROUP TO THE ASSESSEE. WHEN THE AGREEMENT CLEARLY SPECIFIED THE SAME THERE IS NO AMBIGUITY IN THE INTERPRETATION OF AGREEMENT CLAUSE . THE LD. DR FOR THE REVENUE PRAYED FOR CONFIRMING THE ORDER OF LD. CIT( A). 29. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE INCOME TAX ACT DOES NOT DEFINE THE TERMS CAPITAL EXPENDITURE AND REVENUE EXPENDITURE, ONE ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 28 HAS TO DEPEND UPON THEIR NATURE MEANING AS WELL AS DECIDED CASES. IT IS SETTLED POSITION THAT CAPITAL EXPENDITURE IS ACQUIR ED, EXTENDING OR IMPROVING ITS FIXED ASSETS, WHEREAS REVENUE EXPENDI TURE IS INCURRED IN THE NORMAL COURSE OF BUSINESS AS A ROUTINE EXPENDITURE. CAPITAL EXPENDITURE PROVIDES BENEFIT FOR SEVERAL PREVIOUS YEARS, WHEREA S REVENUE EXPENDITURE IS CONSUMED WITHIN A PREVIOUS YEAR. SIMILARLY CAPIT AL EXPENDITURE MAKES IMPROVEMENT IN EARNING CAPACITY OF A BUSINESS AND O N THE OTHER HAND, THE REVENUE EXPENDITURE, MAINTAINS THE PROFIT MAKING CA PACITY OF BUSINESS. FOR DETERMINING WHETHER EXPENDITURE IS OF CAPITAL O R REVENUE IN NATURE, IT IS IMMATERIAL HOW THE RECIPIENT TREATED THE MONEY IN T HEIR HAND. THOUGH, THE DIVIDING LINE BETWEEN THE CAPITAL AND REVENUE EXPEN DITURE IS REAL, YET SOME TIME IT BECOME DIFFICULT TO DRAW THAT LINE. THEREFO RE, A DECISION HAS TO BE TAKEN IN EACH CASE ON THE FACTS AND SURROUNDING CIR CUMSTANCES. 30. DURING THE ASSESSMENT, THE ASSESSING OFFICER RECEIV ED LETTER FROM DIT (INV.)/133A/2014-15 DATED 05.03.2015 THAT ASSESSEE HAS CLAIMED REVENUE EXPENDITURE OF RS. 109.60 CRORE AS REVENUE EXPENDIT URE (FOR F.Y. 2011-12 RS. 49.65 CRORE AND F.Y. 2012-13 RS. 59.94 CRORE) T OWARD PROJECT COST. IT WAS NOTED BY ASSESSING OFFICER THAT THE SAID PAYMEN TS WERE MADE FOR ACQUISITION OF SHARE OF MECL. ON VERIFICATION OF BR EAK-UP OF WORK-IN- PROGRESS FURNISHED DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER RECORDED THAT ASSESSEE CLAIMED PAYMENT OF RS. 50.84 CRORE FOR PAYMENT OF DEVELOPMENT RIGHTS FROM REDDY GROUP. THE ASSESSEE W AS ISSUED SHOW- ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 29 CAUSE NOTICE AS TO WHY THE CLAIM OF RS. 50.84 CRORE SHOULD NOT BE DISALLOWED. THE ASSESSEE FILED ITS DETAILED REPLY D ATED 25.03.2015. THE SUM AND SUBSTANCE OF REPLY IS THE SAME AS EXPLAINED BY LD. AR OF THE ASSESSEE IN HIS SUBMISSION. THE ASSESSEE CLAIMED THAT THE EX PENSES WERE INCURRED EXCLUSIVELY, SOLELY AND ONLY FOR THE PURPOSE OF BET TERMENT OF ITS DEVELOPMENT RIGHT WHICH WERE WRONGFULLY DENIED BY R EDDYS AFTER THE DEATH OF THEIR FOUNDER DIRECTOR. THE ASSESSEE UNDER DURESS AND TO GET RID OF VARIOUS CASES AS WELL AS PROHIBITORY ORDER PASSED B Y CIVIL COURT AND OCCUPANCY CERTIFICATE WAS STAYED BY ADMINISTRATOR O F NAVI MUMBAI, THE PAYMENTS WERE MADE, IT WAS NOTHING BUT REVENUE EXPE NDITURE. THE EXPLANATION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSI NG OFFICER. THE ASSESSING OFFICER CONCLUDED THAT IN THE SURVEY COND UCTED UNDER SECTION 133A ON THE REDDY GROUP, THE INVESTIGATION WING CAM E TO CONCLUSION THAT THE PAYMENT IS NOTHING BUT PAYMENT MADE FOR ACQUISI TION OF SHARE OF MECL. THE ASSESSING OFFICER ALSO RECORDED THE BIFUR CATION OF PAYMENTS RECEIVED BY VARIOUS FAMILY MEMBERS WAS DISALLOWED. THE ASSESSING OFFICER REDUCED THE SAID EXPENSES FROM THE WORK-IN-PROGRESS SHOWN BY THE ASSESSEE. 31. DURING FIRST APPELLATE STAGE THE ASSESSEE FILED DET AILED WRITTEN SUBMISSIONS, WHICH ARE RECORDED BY LD. CIT(A)IN HIS ORDER. IT WA S EXPLAINED THAT THAT THE ASSESSEE PAID COMPENSATION OF RS. 110 CRORE TO REDD Y GROUP. THE ENTIRE PAYMENTS CONSIST ON ACCOUNT OF TRANSFER OF SHARE OF MECL, SETTLEMENT OF ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 30 ALL PENDING ISSUES IN VARIOUS COURTS, ACQUISITION O F CLEAR DEVELOPMENT RIGHTS REGARDING THE PLOT WHERE THE ASSESSEE WAS UNDERTAKI NG DEVELOPMENT PROJECT AND FOR THE SMOOTH FUNCTIONING OF ITS PROJECT. THE PAYMENTS TO REDDY GROUP WERE MADE IN VARIOUS TRENCHES, AS EXPLAINED I N THE SUBSTITUTED AGREEMENT AND WERE SHOWN TO LEARNED CIT(A). IT WAS CLAIMED THAT ON PAYMENT OF COMPENSATION THE ASSESSEE WOULD GOT THE RIGHT TITLE OF THE PROJECT ALONG WITH THE SHAREHOLDING OF MECL. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE WAS IN RECEIPT OF ADVANCE OF RS. 8090 CRORES FROM VARIOUS CUSTOMERS FOR PROJECT IT HAD COMPLETED WORK OF RS. 38.90 CRORES. HAD THE ASSESSEE NOT ENTERED INTO SETTLEMENT AGREEMENT, IT WOULD HAVE A LONG RUN DISPUTE AND WOULD HAVE CREATED A HUGE FINANCIAL LOS SES TO THE ASSESSEE. THE ASSESSEE ALSO EXPLAINED THAT ONLY RS. 39,90,9000/-W AS PAID FOR ACQUISITION OF SHARES AND THE BALANCE CONSIDERATION OF RS. 109, 60,01,000/-WAS EFFECTIVELY AND ESSENTIALLY FOR THE PROJECT FANTAS IA, WITHOUT PAYMENT OF THIS MONEY THE ASSESSEE WAS NOT IN A POSITION TO CA RRY OUT FURTHER DEVELOPMENT AT SITE. ALL DETAILS OF CRIMINAL COMPL AINTS, CIVIL SUITS AND OTHER LITIGATION PENDING IN VARIOUS OTHER LEGAL FOR UMS WERE ALSO EXPLAINED. AFTER CONSIDERING THE SUBMISSION AND EXPLANATIONS F URNISHED BY ASSESSEE, THE LEARNED CIT(A) APPEAL CONCLUDED THAT ONCE THE P AYMENT IS MADE FOR ACQUISITION OF SHARES, IT IS THE PAYMENT FOR CAPITA L INVESTMENT AND THEREFORE, CAPITAL IN NATURE. THE ASSESSEE EXPLAINED THAT COMP ENSATION OF RS. 110 CRORE WAS PAID TO ENSURE THAT IT RUN THE PROJECT FA NTASIA SMOOTHLY AND TO ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 31 ACQUIRE THE SHARE OF MECL AND THAT ALL COMPLAINTS L ODGED AGAINST THE ASSESSEE WERE WITHDRAWN. THE RELIANCE BY ASSESSEE O N CASE LAW OF HONBLE BOMBAY HIGH COURT IN CHEMOSYN LTD. (APPEAL NO. 361 OF 2013) WAS ALSO DISTINGUISHED BY LD. CIT(A) HOLDING THAT FACTS OF T HE SAID CASE ARE DIFFERENT. ISSUES INVOLVED IN THE SAID CASE WERE OF FAMILY SET TLEMENT, HOWEVER, IN THE PRESENT CASE, THE ADDITIONAL AMOUNT INCURRED TO ACQ UIRE FURTHER STEP IN MECL. THE OTHER CASE LAW RELIED BY ASSESSEE IN EMPI RE JUTE COMPANY LTD. (1980) 3 TAXMAN 69 (SC) WAS ALSO DISTINGUISHED . THE LD. CIT(A) CONCLUDED THAT ISSUE IN THAT CASE WAS THE NATURE OF PURCHASE OF LOOMS WAS CAPITAL OR REVENUE, WHEREAS IN THE PRESENT CASE, TH E ISSUE IS COMPLETE ACQUISITION OF SHARE OF ANOTHER GROUP IN ASSESSEES FAVOUR. THUS, THE LD. CIT(A) CONCURRED WITH THE FINDING OF ASSESSING OFFI CER. 32. NOW LET US EXAMINE THE FACTS OF THE CASE AND THE CI RCUMSTANCES UNDER WHICH ASSESSEE PAID/INCURRED THE EXPENSES OF RS. 50 .84 CRORE WAS MADE BY THE ASSESSEE. FROM THE FACTS AS NARRATED ABOVE, IT IS BROUGHT ON RECORD THAT COMPLETE PROJECT NAMELY FANTASIA ON THE PLOT WAS HA NDLED INCLUDING FINANCIAL, CONTRACTUAL, LEGAL AND OTHER TECHNICAL I NPUTS. THERE WAS NO SIGNIFICANT VALUE REMAINED WITH MEPL. DUE TO DISPUT E BETWEEN THE REDDY GROUP AND ASSESSEE GROUP, CIVIL COURT RESTRAINED TH E ASSESSEE FROM SELLING UNIT OR CREATING ANY THIRD PARTY INTEREST. THE DISP UTES WERE ULTIMATELY SETTLED ON PAYMENT OF RS. 110 CRORE BY ASSESSEE GRO UP TO REDDY GROUP. THE REDDY GROUP WHILE ACKNOWLEDGING THE RECEIPT OF, PART OF SETTLEMENT ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 32 AMOUNT CLEARLY MENTIONED ON THE RECEIPT THAT THE PA YMENTS WERE MADE TOWARDS DEVELOPMENT RIGHT. THE ASSESSEE HAS APPROPR IATED A SUM OF RS. 39.99 LAKHS AS PAID TO REDDY FAMILY ON ACCOUNT OF A CQUISITION OF SHARES. THE BALANCE AMOUNT OF RS. 109.06 CRORE WAS CLAIMED BY THE ASSESSEE AS PAID ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND CLAIM EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. AS WE HAVE NOTED EARLI ER THAT DURING THE SURVEY ACTION ON THE REDDY GROUP. THE REDDY GROUP C LAIMED THAT THE SAID AMOUNT WAS RECEIVED ON ACCOUNT OF TRANSFER OF SHARE S. AS PER THE SUBSTITUTED AGREEMENT EXECUTED ON 15.02.2012, THE A SSESSEE AGREED TO PAY RS. 110 CRORE TO REDDY GROUP AGAINST TRANSFER OF EQ UITY SHARE OF MEPL, SETTLEMENT OF ALL PENDING LITIGATION BEFORE VARIOUS FORUMS, ACQUISITION OF CLEAR DEVELOPMENT RIGHT AND TO BUY PEACE. THE LD. A R OF THE ASSESSEE ALSO VEHEMENTLY SUBMITTED THAT THE ASSESSEE HAS MADE HUG E INVESTMENT IN THE PROJECT AND A NUMBER OF INVESTOR INVESTED SUBSTANTI AL INVESTMENT. THE ASSESSEE UNDER THE COMPELLING CIRCUMSTANCES HAS NO OPTION EXCEPT TO ACCEPT THE UNREASONABLE DEMAND AND PAYMENT OF RS. 1 10 CRORE, OUT OF WHICH ONLY RS. 39.90 LAKHS WAS PAID FOR TRANSFER OF SHARES. THE AMOUNT WAS INCURRED FOR COMMERCIAL EXPEDIENCY AND ALLOWABL E AS BUSINESS EXPENSES FOR THE PREVIOUS YEAR. 33. THE HONBLE SUPREME COURT IN SHAHAZADA NAND & SONS (SUPRA) HELD THAT IF THE PAYMENT IS MADE THROUGH COMMERCIAL EXPEDIENC Y, THE SAME WOULD BE ALLOWED AS BUSINESS EXPENDITURE. FURTHER HONBLE SUPREME COURT IN ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 33 MALAYALAM PLANTATION (SUPRA) HELD THAT THE EXPRESSI ON WHOLLY AND EXCLUSIVELY LAID OUT OR EXPENDED FOR THE PURPOSE OF BUSINESS NEED NOT NECESSARILY BE CONSTRUED FOR THE PURPOSES OF EARNIN G PROFITS. FOR THE PURPOSE OF BUSINESS IS WIDER THAN THE SCOPE OF EXPR ESSION FOR THE PURPOSES OF EARNING PROFITS. ITS RANGE IS SO WIDE, IT MAY TA KE IN NOT ONLY THE DAY TO DAY RUNNING OF A BUSINESS AND FOR PROTECTION OF ITS ASSETS AND PROPERTY FROM EXPROPRIATION COERCIVE PROCESS OR ASSERTION OF HOST ILE TITLE. 34. FURTHER, IN MEENAKSHI MILLS LTD. (SUPRA) THE HONBL E SUPREME COURT HELD THAT THE EXPRESSION FOR THE PURPOSES OF BUSINESS IS WIDER THAN THE PURPOSE OF EARNING INCOME. THE FORMER WOULD INCLUDE WITHIN ITS SCOPE EXPENDITURE INCURRED ON THE GROUNDS OF COMMERCIAL EXPEDIENCY. 35. IN DALMIA JAIN CO. LTD. (SUPRA), THE HONBLE SUPREM E COURT HELD THAT WHERE LITIGATION EXPENSES ARE INCURRED BY AN ASSESS EE FOR THE PURPOSES OF CREATING, CURING OR COMPLETING THE ASSESSEE'S TITLE TO CAPITAL, THEN THE EXPENDITURE INCURRED MUST BE CONSIDERED AS CAPITAL BUT IF LITIGATION EXPENSES ARE INCURRED TO PROTECT THE BUSINESS OF TH E ASSESSEE THEY MUST BE CONSIDERED AS REVENUE EXPENDITURE. 36. THE HONBLE DELHI HIGH COURT IN SOUTH ASIA INDUSTRI ES PVT. LTD. (SUPRA) HELD THAT EXPENDITURE INCURRED TO PROTECT BUSINESS AND REPUTATION OF THE COMPANY IS A AMOUNTS SPENT FOR SAFEGUARDING AND SAV ING THE ASSETS OF THE ASSESSEE'S BUSINESS AND KEEPING IT ON A SOUND FOOTI NG EXPENDITURE INCURRED FOR THIS PURPOSE IS ALLOWABLE EXPENDITURE. ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 34 37. FURTHER, HONBLE DELHI HIGH COURT IN GOPALDASS ESTA TES & HOUSING PVT. LTD. (SUPRA) HELD THAT COMPENSATION PAID BY THE ASS ESSEE DEVELOPER TO ALLOTEES OF COMMERCIAL SPACES FOR SURRENDER OF THEI R RIGHTS, THEREIN COULD NOT BE SET TO BE DISALLOWED ON THE GROUNDS OF SUCH PAYMENTS HAVING BEING MADE FOR EXTRANEOUS CONSIDERATIONS. ASSESSEE HAS A PLAUSIBLE EXPLANATION FOR MAKING SUCH PAYMENTS OF COMPENSATION TO PROTECT ITS BUSINESS INTEREST. WHILE IT IS TRUE THAT THERE WAS NO CONTRACTUAL OBLI GATION TO MAKE PAYMENT, IT IS PLAIN THAT THE ASSESSEE WAS ALSO LOOKING TO B UILD ITS OWN REPUTATION IN THE REAL ESTATE MARKET. THE COURT FURTHER HELD THAT THE RECIPIENTS TREATED THE SAID PAYMENTS AS CAPITAL GAINS IN THEIR HANDS IN TH EIR RETURNS WOULD NOT BE RELEVANT IN DECIDING THE ISSUE WHETHER THE PAYMENT BY THE ASSESSEE SHOULD BE TREATED AS BUSINESS EXPENDITURE. THE HONBLE DEL HI HIGH COURT RELIED ON THE DECISION OF SHAHAZADA NAND & SONS (SUPRA), N AINITAL BANK LTD. (62 ITR 638), SHARADA BINDING WORKS (102 ITR 187). 38. IN CIT VS. NAINITAL BANK LTD. (SUPRA) THE HON'BLE S UPREME COURT HELD THAT 'A LARGE QUANTITY OF JEWELLERY PLEDGED WITH ASSESSE E BANK BY ITS CONSTITUENTS WERE STOLEN BY DACOITS FROM PREMISES O F BANK. BANK PAID THE MARKET VALUE OF THE JEWELLERY PLEDGED BY THE CONSTI TUENTS AND CLAIMED THE SAME AS EXPENDITURE WHICH IS ALLOWED' 39. THE HONBLE SUPREME COURT IN CIT V/S. PANBARI TEA C O. LTD. (SUPRA) HELD THAT 'IT IS NOT THE FORM BUT THE SUBSTANCE OF THE T RANSACTION THAT MATTERS. THE NOMENCLATURE USED MAY NOT BE DECISIVE OR CONCLU SIVE BUT IT HELPS THE ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 35 COURT, HAVING REGARDING TO THE OTHER CIRCUMSTANCES, TO ASCERTAIN THE INTENTION OF THE PARTIES.' 40. IN SUMATI DAYAL V/S. CIT, (SUPRA), THE HONBLE APEX COURT HELD THAT THAT APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT APPARENT IS NOT REAL AND THAT TAXING A UTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING REAL TEST O F HUMAN PROBABILITIES. 41. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V/ S. CHEMOSYN LTD. (371 ITR 427), HELD THAT 'DUE DIFFERENCE BETWEEN GR OUPS, ASSESSEE COMPANY WAS DIRECTED TO BUY 34 PER CENT OF SHAREHOL DING OF ONE OF WARRING GROUP, AS SAID EXPENDITURE WAS INCURRED ONLY TO ENA BLE SMOOTH RUNNING OF BUSINESS, IT WAS A DEDUCTIBLE EXPENDITURE'. 42. KEEPING IN VIEW THE ABOVE REFERRED CASE LAW VIS A V IS THE FACTS AND SURROUNDING CIRCUMSTANCES OF THE PRESENT CASE. WE A RE OF THE VIEW THAT ASSESSEE INCURRED/PAID EXPENSES OF RS. 50.84 CRORE FOR REMOVING ENCUMBRANCES, SETTLEMENT OF PENDING ISSUES IN VARIO US LEGAL FORUMS, ACQUISITION OF CLEAR DEVELOPMENT RIGHT PERTAINING T O CLOCK UNDERNEATH THE PROJECT FANTASIA. THEREFORE, THE DISALLOWANCE MADE BY ASSESSING OFFICER AND REDUCING THE SAME FROM WORK-IN-PROGRESS WAS NOT JUSTIFIED. THUS, HE WE SET-ASIDE THE ORDER OF LOWER AUTHORITIES AND DIR ECT THE ASSESSING OFFICER TO TREAT THE EXPENSES AS REVENUE EXPENDITURE. IN TH E RESULT, THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE ALLOWED. ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 36 43. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ITA NO. 1185/MUM/2018 BY REVENUE 44. THE LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER . THE LD. DR FOR THE REVENUE SUBMITS THAT ONCE THE OCCUPANCY CERTIFICATE WAS ISSUED, THE PROJECT WAS COMPLETED FOR ALL PRACTICAL PURPOSE. TH E ASSESSEE INSTEAD OF OFFERING THE REVENUE IN THE YEAR UNDER CONSIDERATIO N HAS OFFERED IN SUBSEQUENT ASSESSMENT YEAR. THUS, THE LD. DR STRONG LY RELIED UPON THE ORDER OF ASSESSING OFFICER. 45. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD. CIT(A). THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE IN THE ASSESSMENT ORDER HAS CLEARLY RECORDED THAT THE ASSE SSEE WAS CONSISTENTLY FOLLOWING THE PROJECT COMPLETION METHOD FOR REVENUE RECOGNITION. IN EARLIER YEARS, THE EXPENSES ON PROJECT IS TAKEN BUT WORK-IN-PROGRESS. THE LD. AR FURTHER SUBMITS THAT ASSESSEE RECEIVED THE OCCUP ANCY CERTIFICATE OF PROJECT ON 21.10.2011 ISSUED BY NMMC, HOWEVER, THE SAME WAS STAYED BY NMMC ON 13.12.2011 ON THE APPLICATION/OBJECTION MAD E BY ROHIT REDDY VIDE APPLICATION DATED 18.12.2011. THE LD. AR OF TH E ASSESSEE FURTHER SUBMITS THAT THERE WAS NO INJUNCTION ORDER DATED 13 .12.2011 PASSED BY CIVIL JUDGE, (SR. DIVISION, THANE) RESTRAINING THE ASSESSEE AND TO MAINTAIN STATUS QUA UNTIL THE DISPOSAL OF SUIT. THE REDDY GR OUP HAD WITHDRAWN THE SUIT ON 14.12.2012. THUS, THE ASSESSEE-COMPANY HAS TAKEN THE PROJECT COMPLETION IN ASSESSMENT YEAR 2013-14. THE LD. AR F URTHER SUBMITS THAT ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 37 IN ASSESSMENT YEAR 2013-14, THE ASSESSEE HAS OFFERE D INCOME FROM PROJECT AND FURNISHED THE COPY OF ASSESSMENT ORDER DATED 30 .03.2016 PASSED UNDER SECTION 143(3). THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT IN APPEAL FOR ASSESSMENT YEAR 2009-10 AND 2007-08 ON SIMILAR ISSUE OF PROJECT COMPLETION METHOD WAS ACCEPTED. COPY OF ORDER OF TR IBUNAL FOR ASSESSMENT YEAR 2007-08 & 2008-09 IS ALSO PLACED ON RECORD. 46. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE WAS FOLLO WING THE PROJECT COMPLETION METHOD AND HAD RECEIVED THE OCCUPANCY CE RTIFICATE ON 29.10.2011 FROM NAVI MUMBAI MUNICIPAL CORPORATION ( NMMC). ONCE THE OCCUPANCY CERTIFICATE IS RECEIVED, THE PROJECT IS C OMPLETE. THE ASSESSING OFFICER AFTER CONSIDERING THE AGREEMENT VALUE OF SA LES AND CONSIDERING THE WORK TILL PROGRESS SHOWN THE BOOKS AND AFTER DEDUCT ING ADDITION ON ACCOUNT OF CAPITAL EXPENDITURE WORKED OUT THE PROFIT OF PRO JECT AND ADDED THE SAME TO THE INCOME OF ASSESSEE. DURING THE FIRST APPELLA TE STAGE, THE ASSESSEE FILED DETAILED WRITTEN SUBMISSION AND EXPLAINED THE FACT THAT THE ASSESSEE WAS RESTRAINED FROM CREATING THIRD PARTY INTEREST I N THE UNITS CONSTRUCTED IN THE PROJECT AND THE OPERATION OF OCCUPANCY CERTIFIC ATE WAS STAYED BY LD. CIVIL JUDGE, THANE VIDE ORDER DATED 13.12.2011. ROH IT REDDY ALSO FILED APPLICATION BEFORE NMMC FOR CANCELLATION OF OCCUPAN CY CERTIFICATE AND THE OPERATION OF OCCUPANCY CERTIFICATE WAS ALSO STA YED BY NMMC. THE LD. ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 38 CIT(A) AFTER CONSIDERING THE EXPLANATION AND WRITTE N SUBMISSION FURNISHED BY ASSESSEE OBSERVED THAT BY SPECIFIC ORDER OF CITY CIVIL COURT DATED 13.12.2011, THE ASSESSEE WAS RESTRAINED AND DIRECTE D TO MAINTAIN STATUS QUA IN RESPECT OF PROJECT TILL THE DISPOSAL OF APPEAL ( IN CIVIL SUIT) BY REDDY GROUP AND MECL. BY FOLLOWING THE ORDER OF CIVIL COU RT, THE ASSESSEE DID NOT RECOGNIZE THE REVENUE WHICH WOULD LEAD TO CONTE MPT OF COURT. THE LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE AND THE SURROUNDING CIRCUMSTANCES CONCLUDED THAT THE ASSESSEE COULD NOT CARRIED OUT THE ACTIVITIES OF BUY OR SALE OR LEASE OR ANY OTHER REL ATED ACTIVITIES OF THE PROJECT AND HAD TO MAINTAIN THE STATUS QUO. THE OCCUPANCY C ERTIFICATE WAS ITSELF IN LITIGATION. THE ASSESSEE WAS NOT IN A POSITION TO C ARRY OUT ANY ACTIVITIES IN THE PROJECT DUE TO DIRECTION OF CIVIL COURT TO MAIN TAIN STATUS QUO. ON THE ABOVE OBSERVATION, THE LD. CIT(A) CONCLUDED THAT AS SESSEE HAS RIGHTLY NOT RECOGNIZED THE REVENUE AND DIRECTED THE ASSESSING O FFICER TO DELETE THE ADDITION. 47. THERE IS NO DISPUTE THAT INITIALLY OCCUPANCY CERTIF ICATE OF THE PROJECT WAS ISSUED ON 21.10.2011 BY NMMC. THE OPERATION OF OCCU PANCY CERTIFICATE WAS STAYED BY NMMC ON THE APPLICATION OF ROHIT REDD Y. IT IS AN ADMITTED FACT THAT LD. CIVIL JUDGE OF CITY CIVIL COURT RESTR AINED THE ASSESSEE AND DIRECTED TO MAINTAIN STATUS QUO TILL THE DISPOSAL O F SUIT. THE REDDY GROUP WITHDREW THE SAID SUIT ON 14.12.2012, DURING THE AS SESSMENT YEAR 2013- 14. THE ASSESSEE HAS SHOWN THE PROJECT COMPLETION I N ASSESSMENT YEAR ITA NO. ITA NO 1208 & 1185 MUM 2018-HAWARE INFRAST RUCTURE PVT. LTD. 39 2013-14. THE TREATMENT OF REVENUE RECOGNITION ON PR OJECT COMPLETION IS NOT IN DISPUTE. THEREFORE CONSIDERING THE FACTS TH AT THE ASSESSEE WAS RESTRAINED TO HANDOVER THE UNITS IN THE PROJECT BY THE ORDER OF CIVIL COURT AND THE OCCUPANCY CERTIFICATE WAS ALSO STAYED BY OP ERATION OF INJUNCTION ORDER. THE INJUNCTION ORDER WAS LIFTED ON THE WITHD RAWAL OF THE CIVIL SUIT ON 14.12.2013. THE ASSESSEE HAS SHOWN THE COMPLETION O F THE PROJECT IN ASSESSMENT YEAR 2012-13, THEREFORE, THE ACTION OF T HE ASSESSING OFFICER IN BRINGING THE PROFIT IN THE YEAR UNDER CONSIDERATION WAS NOT JUSTIFIED. THUS, WE AFFIRM THE VIEW TAKEN BY THE LD CIT(A). IN THE R ESULT, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REJECTED. 48. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/05/2019. SD/- SD /- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 31.05.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI