Dy. Commissioner of Income Tax, Hyderabad V. M/s.Lahari Homes, Hyderabad

ITA 1331/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74549 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 04-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: I SOLGY JOSE T KOTTARAM
• Assessee Lawyers: GVVS MURTHY
• Keywords: Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1331/HYD/13 : ASSESSMENT YEAR 2007 - 08 DY. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE 6, HYDERABAD V/S. M/S LAHARI HOMES, HYDERABAD (PAN A ACFLL 2062 M ) (APP EL LANT) (RESPONDENT) APP ELL ANT BY : SHRI I SOLGY JOSE T.KOTTARAM DR RESPONDENT BY : S HRI G.V.V.S.MURTHY DATE OF HEARING 5 . 02 .201 4 DATE OF PRONOUNCEMENT 5.02.2014 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME - TAX( APPEALS) I, HYDERABAD DATED 10.7.2013 FOR THE ASSESSMENT YEAR 2007 - 08. 2. EFFECTIVE GROUNDS OF THE RE VENU E IN THIS APPEAL R E AD AS FOLLOWS - .. 1 ) IN THE FACTS AND CIR C UMSTANC E S OF THE CA S E, WHETHER THE LEARNED CIT(A)S DECISION OF RESTRICTING THE DISALLOWANCE OF EXPENDITURE TO A LOWER PERCENTAGE IS RIGHT ER R ED IN ACCEPTING CLAIM O F THE ASSESSEE FOR DISALLOWANCE OF EXPENDITURE AND R ESTRI C TIN G THE DISALLOWANCE TO LOWER PERCENTAGE. 2) WH E TH E R THE DECISION OF LEARNED. CIT(A) REMITTING BACK THE IS SUE TO THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS IS R IGHT AS PER THE LAW. 3) .. 3. BRIEF FACTS OF THE CASE LEADING TO THE FILING OF THE PRESENT APPEAL ARE THAT THE A SSESSEE IS ENGAGED IN REAL ESTATE BUSINESS. IT IS THE ITA NO. 1331 / HYD/201 3 M/S.LAHARI HOMES, HYDERABAD 2 PART DISALLOWANCE OF THE E XPEN SES CLAIMED BY THE ASSESSEE, ON SITE DEVELOPMENT AND CONSTRUCTION , AND THE DECISION OF THE CIT(A) IN RELATION THERETO, IN THE IMPUGNED ORDER DATED 10.7.2013, WHICH HAS GIVEN RISE TO THE PRESENT APPELLATE PROCEEDINGS BEFORE THIS TRIBUNAL. 4. IT IS EVIDENT FROM THE IMPUGNED ORDERS THAT THE SEARCH ACTION UNDER S.132 OF THE AC T ON THE RESIDENTIAL PREMISES OF THE PARTNERS OF THE ASSESSEE FIRM, AND CON SE QUENT SURVEY PROCEEDINGS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE UNDER S.133A OF THE ACT, LED TO INITIATION OF PROCEEDINGS UNDER S.153C OF THE ACT. IN THE COURSE OF THE ASSESSMENTS THAT WERE MADE UNDER S.143(3) READ WITH S.153C FOR VARIOUS Y E A R S FROM 2005 - 06 TO 2008 - 09 , THE ASSESSING OFFICER DISALLOWED EXPENDITURE VARYING FROM 20% TO 60% FOR VARIOUS YEARS , AND FOR THE YEAR UNDER APPEAL, THE ASSESSING OFFICER DISALLOWED 25% OF THE TOTAL EXPENSES CLAIM E D OF RS.1,04,75,702 , SUCH DISALLOWANCE THUS WORKING OUT T O R S .26,18,925. THE REASON S STA T ED FOR THE SAID DISALLOWANCE OF PART OF SITE DEVELOPMENT EXPENSES AND CON S TRUC T ION EXPENSES BY THE ASSESSING OFFICER ARE THAT THE PU R CHA S ES BY THE ASSESSEE ARE FROM UNORGANIZED REAL ESTATE SECTOR SUCH AS SAND, M E TAL, LABOU R , WOOD AND BRICKS ETC. AN D THE ASSESSEE COULD NO T SUBSTANTIATE THE EXPENDITURE WITH SUPPORTING EVI D ENCE AND MOST O F THE EXPENSES WERE PAID IN CASH AND TH E R E FORE, THE GENUINENESS O F THE EXPENDITURE IS NOT FULLY VERIFIABLE. 5. ON APPEAL, THE CIT(A) , ORIGINALLY DISMISSED THE APPEAL IN LIMINE, ON ACCOUNT OF NON - PAYMENT OF ADMITTE D TAXES BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08. THE TRIBUNAL, VIDE ITS CONSOLIDATED ORDER FOR ASSESSMENT YEARS 2005 - 06 TO 2008 - 09, DATED 11.1.2013, IN ITA NOS.1418 TO 1421/HYD/2012, INSOFAR AS ASSESSMENT YEAR 2007 - 08 IS CONCERNED, VIDE PARA 9, S ET ASIDE THE O R DER OF THE CIT(A), AND RESTORED THE MATTER TO THE FILE OF THE CIT(A), WITH A DIRECTION TO RE - DISPOSE OF THE APPEAL O F THE ASSESSEE ON M E RITS, AFTER CON S I D ERIN G THE REQUEST OF THE ASSESSEE ITA NO. 1331 / HYD/201 3 M/S.LAHARI HOMES, HYDERABAD 3 FOR CONDONATION OF DELAY IN FILING THE APPEAL , IN ACC ORDANCE WITH FACTS AND LAW. 6. IN PURSUANCE OF THE SAID DECISION OF THE TRIBUNAL INSOFAR AS IT RELATED TO ASSESSMENT YEAR 2007 - 08, THE CIT(A) IN THE SECOND ROUND OF APPELLATE PROCEEDINGS BEFORE HIM , BY THE IMPUGNED ORDER DATED 10.7.2013 , IN THE FIRST PLACE , CONDONED THE DELAY IN THE FILING OF THE APPEAL BY THE ASSESSEE, AND THEN PROCEEDED TO DECIDE THE APPEAL ON MERITS, FOLLOWING THE VERY SAME ORDER OF THE TRIBUNAL DATED 11.1.2013 IN SO FAR AS IT RELATED TO ASSESSMENT YEARS 2005 - 06, 2006 - 07 AND 2008 - 09, BEING ITA NOS.1418, 1419 AND 1421/HYD/2012 RESPECTIVELY . IN THE SAID ORDER IN IN RELATION TO THE CORRESPONDING ADDITIONS MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A), THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE MAD E IN CHEQUE AND RESTRICT THE DISALLOWANCE TO 15% OF THE CASH PAYMENTS MADE OUT OF THE ITEMS OF EXPENDITURE CONSIDERED BY THE ASSESSING OFFICER . THE CIT(A) FOLLOWING THIS DIRECTING OF THE TRIBUNAL, DIRECTED THE ASSESSING OFFICER TO EXAMINE THE DETAILS OF P AYMENT AND ALLOW THE CHEQUE PAYMENTS AND RESTRICT THE DISALLOWANCE MADE TO 15% OF THE CASH PAYMENTS MADE ON SPECIFIC ITEMS OF EXPENDITURE. 7. AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A) ON MERITS, REVENUE PREFERRED THE PRESENT APPEAL BEFORE US. 8. WE HEARD THE SIDES AND PERUSED THE MATERIAL ON RECORD. IN THE LIGHT OF THE ABOVE DISCUSSION, IT COULD BE SEEN THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL , VIZ. PART DISALLOWANCE OUT OF THE EXPENSES CLAIMED ON SITE DEVELOPMENT AND CONSTRUCTION, IS C OVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CA S E FOR ASSESSMENT YEARS 2005 - 06 , 2006 - 07 AND 2008 - 09 IN ITA NOS.1418, 1419 AND 1421/HYD/2012 (SUPRA). IN THE SAID ORDER DATED 11.1.2013, THE TRIBUNAL VIDE PARA 15 THEREOF, WITH REGARD ITA NO. 1331 / HYD/201 3 M/S.LAHARI HOMES, HYDERABAD 4 TO PART DISA LLOWANCES MADE BY THE ASSESSING OFFICER FOR THOSE YEARS, HELD AS FOLLOWS - 15. WE HAVE CONSIDERED THE ISSUE. EVEN THOUGH THE LEARNED ASSESSING OFFICER HAS LISTED OUT VARIOUS EXPENDITURES FOR DISALLOWANCE, HE HAS NOT EXAMINED WHETHER THE ENTIRE EXPENDITURE WAS PAID IN CASH OR BY CHEQUE. WE ALSO NOTICE THAT THE DISALLOWANCE IS NOT INV OKING THE PROVISIONS OF S.40A(3) BUT DISALLOWANCE IS UNDER S.37(1), BEING UNVERIFIABLE NATURE OF EXPENDITURE. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THERE ARE CHEQUE PAYMENTS ALSO INVOLVED IN THE EXPENDITURE CONSIDERED BY THE ASSESSING OFFI CER, WHICH COULD HAVE BEEN SUBJECTED TO VERIFICATION. SINCE THESE DETAILS ARE NOT FURNISHED BEFORE THE AUTHORITIES EARLIER, WE DIRECT THE ASSESSING OFFICER TO EXAMINE THESE ASPECTS AND EXCLUDE THE CHEQUE PAYMENTS OUT OF THE DISALLOWANCE. WITH REFERENCE T O THE QUANTUM OF DISALLOWANCE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE AND THE DETAILS OF EXPENDITURE INCURRED ON VARIOUS SITE DEVELOPMENT AND CONSTRUCTION ACTIVITIES, INCLUDING LABOUR PAYMENTS AND THE DIFFICULTY IN MAINTAINING PROPER VOUCHERS, WE CONSIDER IT FIT TO RESTRICT THE DISALLOWANCE TO 15% OF THE CASH PAYMENTS SO MADE OUT OF THE ITEMS OF EXPENDITURE CONSIDERED BY THE ASSESSING OFFICER. GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE THE CHEQUE PAYMENTS AND THEN RESTRICT THE DISALLOWANCE TO 15% OF THE BALANCE EXPENDITURE INCURRED IN CASH IN THESE TWO YEARS. 9. THE CIT(A), IN THE IMPUGNED ORDER FOR THE ASSESSMENT YEAR 2007 - 08 HAS FOLLOWED THE SAID ORDER OF THE TRIBUNAL AND DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE PAYMENTS MADE BY CHEQUE FROM THE PURVIEW OF DISALLOWANCE, AND WITH REGARD TO BALANCE PAYMENTS, TO RESTRICT THE DISALLOWANCE TO 15% OF CASH PAYMENTS MADE ON ACCOUNT OF SUCH ITEMS OF EXPENDITURE WHICH HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER . CONSISTENT WITH THE VIEW TAKEN BY THIS TRIBUNAL FOR THE OTHER YEARS NOTED ABOVE, AND IN THE ABSENCE OF ANY MATERIAL TO CONTRADICT THE FINDINGS FO THE CIT(A) BROUGHT ON RECORD BY THE REVENUE, WE FIND NO INFIRMITY IN THE IMPUGNED ORD ER OF THE CIT(A). WE ONLY DIRECT THE ASSESSING OFFICER FURTHER TO STRICTLY COMPLY WITH THE DIRECTIONS OF THE TRIBUNAL IN THE SAID ORDER FOR THE ASSESSMENT YEARS 200 506, 2006 - 06 AND 2008 - 09 AS EXTRACTED HEREINABOVE AND RE - QUANTIFY THE ADDITION THAT MAY BE CALLED FOR, IN ITA NO. 1331 / HYD/201 3 M/S.LAHARI HOMES, HYDERABAD 5 ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 10 . IN THE RESULT, SUBJECT TO THE ABOVE, REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 05.02.2014 SD/ - SD/ - (CHANDRA POOJARI) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED/ - 5 TH F EBRUARY, 2014 COPY FORWARDED TO: 1 M/S. LAHARI HOMES, H.NO.8 - 3 - 833, FLAT NO.303, KRISHNA MEADOWS, SRINAGAR COLONY, HYDERABAD 2 DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 6, HYDERABAD 3 COMMISSIONER OF INCOME - TAX(A) I, HYDERABAD 4 COMMISSIONER OF INCOME - TAX (CENTRAL) , HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S