Wellworth Developers Pvt. Ltd, New Delhi V. Deputy Commissioner of Income-tax, New Delhi

ITA 1346/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3929 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 09-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VERMA
• Assessee Lawyers: AJAY BHAGWANI
• Keywords: Search and seizure; Question of law; Revenue expenditure
• Section: 40A(3); 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: BENCH D NEW DELHI BEFORE SRI G.D.AGRAWAL, HON BLE PRESIDENT AND SMT. BEENA A PILLAI, JM ITA NO.1 346 /DEL/2015 A.Y. 20 06 - 07 WELLWORTH DEVELOPERS PVT.LTD. VS . DY.CIT, CIRCLE 32 M 11, MIDDLE CIRCLE NEW DELHI 110 055 CONNAUGHT CIRCUS NEW DELHI 110 001 PAN: AAACW1092K (APPELLANT) (RESPONDENT) APPELLANT BY: SRI AJAY BHAGWANI, CA RESPONDENT BY: SRI VIJAY VERMA, CIT, D.R. DATE OF HEARING : DATE OF PRONOUNCEMENT ORDER PER BEENA A PILLAI, JUDICIAL MEMBER T HE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER DATED 21/11/14 PASSED BY LD.CIT(A) - 30 FOR ASSESSMENT YEAR 2006 - 07 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDERS PASSED BY THE AO AND CIT(A) - XXX, NEW DELHI ARE BAD IN LAW AND VOID AB - INITIO. 2. THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW THE CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF RS.13,43,600/ - U/S ITA NO.1346/DEL/2015 ASSESSMENT YEAR : 2006 - 07 WELLWORTH DEVELOPERS PVT.LTD. VS. DY.CIT, NEW DELHI 2 40A(3) OF THE IT ACT DESPITE THE FACT THAT NO DEDUCTION IN RESPECT OF SAID SUM WAS CLAIMED IN THE COMPUTATION OF INCOME FROM BUSINESS. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTE R OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING.' 2. BRIEF FACTS OF THE CASE ARE AS UNDER : O RIGINAL ASSESSMENT IN PRESENT CASE WAS COMPLETED ON 31/12/08 UNDER SECTION 143(3), WHEREIN DISALLOWANCE OF RS. 13,43,600/ - WAS MADE UNDER SECTION 40A(3) IN RESPECT OF CASH PAYMENT MADE FOR PURCHASE OF LAND. ASSESSEE IS A GROUP COMPANY OF M/S BPTP LTD . , ENGAGED IN THE DEVELOPMENT OF R EAL ESTATE. FOR THE YEAR UNDER CONSIDERATION SEARCH AND SEIZURE WAS CARRIED OUT AT VARIOUS PREMISES OF M/S BPTP LTD . , AND ITS GROUP CONCERNS ON 07/12/10. ACCORDINGLY NOTICE UNDER SECTION 153A OF THE A CT WAS ISSUED IN RESPONSE TO WHICH ASSESSEE FILED ITS RETURN ON 27/01/12 DECLARING TOTAL INCOME OF RS. 4,08,230/ - . 2.1. LD. AO WHILE PASSING ORDER UNDER SECTION 153A READ WITH SECTION 143(3) MADE ADDITION OF RS. 13,43, 0 00/ - BY OBSERVING AS UNDER: 5. SINCE THE ADDITION OF RS.13,43,600/ - MADE IN THE EARLIER A SSESSMENT YEAR ON ACCOUNT OF DISALLOWANCE U/S 40A(3) OF THE ACT HAS BEEN CONFIRMED BY THE CIT(A), THE SAME IS BEING MADE TO THE RETURNED INCOME OF THE ASSESSEE FOR REASONS DISCUSSED IN DETAIL IN THE ASSESSMENT YEAR AS WELL AS IN THE APPELLATE ORDER OF CIT( A). ITA NO.1346/DEL/2015 ASSESSMENT YEAR : 2006 - 07 WELLWORTH DEVELOPERS PVT.LTD. VS. DY.CIT, NEW DELHI 3 2.2 . AGGRIEVED BY THE ASSESSMENT ORDER PASSED ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT (A) WHO CONFIRMED THE ADDITION MADE BY LD. AO. 3. AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE IS IN APPEAL BEFORE US NOW. 3.1 . LD. A.R. SUBMITTED THAT LD. CIT (A) DECIDED THE ISSUE V IDE ORDER DATED 28/12/12 FOR THE YEAR UNDER CONSIDERATION IN AN APPEAL FILED BY ASSESSEE AGAINST ORIGINAL ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE A CT. HE SUBMITTED THAT LD.CIT(A) THEREIN UPHELD TH E DISALLOWANCE MADE UNDER SECTION 40 A (3). LD. A.R. SUBMITTED THAT SUBSEQUENT TO THE ORDER PASSED BY LD.CIT(A) IN ORIGINAL ASSESSMENT PROCEEDINGS, ASSESSEE PREFERRED APPEAL BEFORE THIS T RIBUNAL AND THIS T RIBUNAL DECIDED THE ISSUE AS UNDER: AS FAR AS THE ASSESSEE'S APPEAL I.E. I .T.A. NO. 1761 /DEL/2013 IS CONCERNED, AFTER GOING THROUGH ALL THE RELEVANT RECOR DS AND AFTER GIVING A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS , IT IS SEEN THAT THE FACT REMAINS UNASSAILED ON RECORD THAT THE EXPENDITURE DISALLOWED BY THE A O , WHICH HAS BEEN UPHELD BY THE LD.CIT(A), WAS NEVER CLAIMED AS AN EXPENSE BY THE ASSESSEE. SECTION 40A STARTS WITH THE NON - OBSTANTE CLAUSE SETTING OUT THAT P ROVISIO NS OF THIS SECTION SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISIONS OF THE ACT RELATING TO THE COMPUTATION OF INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. SUB - SECTION (3) OF SECTION 40A IS AN EXCEPTION TO THE DEDUCTIBILITY OF EXPENDITURE UNDER THE COM PUTA TION PROVISIONS OF 'PROFITS AND GAINS OF BUSINESS OR P ROFESSIO N '. THUS CONSEQUENTLY WHAT DOES NOT FALL WITHIN THE C OMPUTATION OF INCOME WILL NOT ATTRACT THE PROVISIONS OF SECTION 40A (3). ON THIS ISSUE THE JUDGEMENT OF THE HON'BLE RAJASTHAN HIGH COURT IN TH E CASE OF MOTILAL KHATRI (2008) 218 CTR 602 (RAJ.) IS VERY CLEAR. THEIR LORDSHIPS BEFORE ARRIVING AT THEIR ITA NO.1346/DEL/2015 ASSESSMENT YEAR : 2006 - 07 WELLWORTH DEVELOPERS PVT.LTD. VS. DY.CIT, NEW DELHI 4 DECISION CATEGORICALLY TOOK NOTE OF THE FACT THAT THE PROVISIONS OF SECTION 40A (3) HAD BEEN LOOKED AT AND THEREAFTER THE POSITION IS VERY CLEAR IN A S MUCH AS WHEN THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OF ANY EXPENDITURE THE QUESTION OF NOT ALLOWING ANY PART OF THAT EXPENDITURE AS DEDUCTION DOES NOT ARISE. FOR READY REFERENCE, WE EXTRACT THE RELEVANT FINDING OF THEIR LORDSHIPS FROM THE SAID JUDGEM ENT: - IN OUR VIEW, A BARE READING OF THE LANGUAGE OF THIS SUB - SECTION IS ENOUGH TO SHOW, THAT IN THE CIRCUMSTANCES OF THE CASE, PROVISIONS OF S.40A(3) ARE NOT ATTRACTED WITH RESPECT TO EITHER OF THE TRANSACTIONS; OBVIOUSLY BECAUSE IT ONLY PROHIBITS ALLOW ING OF DEDUCTION, AS EXPENDITURE. EXPENDITURE OBVIOUSLY MEANS EXPENDITURE ADMISSIBLE TO BE DEDUCTED FROM OUT OF THE INCOME, WHICH MAY INCLUDE THE EXPENDITURE ON PURCHASE AND THE LIKE, AND THE SUB - SECTION PROVIDES THAT IF ANY SUCH EXPENDITURE IS INCURRED A FTER SPECIFIED DATE, IN A SPECIFIED MANNER, THEN 20 PER CENT OF SUCH EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION. IN THE PRESENT CASE THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OF ANY EXPENDITURE OF RS. 3,88,000/ - OR RS. 7,35,000 / - AND THEREFORE, THER E IS NO QUESTION OF NOT ALLOWING ANY PART OF THAT EXPENDITURE, AS DEDUCTION. THUS, THE FINDING ARRIVED AT IN THIS REGARD, BY THE LEARNED C IT (A ) , AND THE LEARNED TRIBUNAL CANNOT BE SAID TO BE WRONG. QUESTION NO.2 IS ACCORDINGLY ANSWERED IN FAVOUR OF THE AS SESSEE AND AGAINST THE REVENUE. 17. SIMILARLY, IT IS SEEN THAT THE JUDGEMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF C I 'I' VS ALPHA TOYO LTD. (2008) 174 TAXMANN 427 (P & H) ALSO FULLY SUPPORTS THE VIEW TAKEN. FOR READY - REFERENCE, WE REP RODUCE PARAS 6 & 7 OF THE SAID JUDGEMENT: - WE HAVE HEARD LEARNED COUNSEL FOR THE REVENUE. THE TRIBUNAL HAS FOUND AS A FACT THAT THE ANNUAL REPORTS FOR THE ASSESSMENT YEAR 1989 - 90 OF THE ASSESSEE CLEARLY SHOWS THE OUTSTANDING LOANS TO THE THREE PARTIES AS ON 1 - 4 - 1989. COPIES OF THE LOAN ACCOUNT OF THE THREE PARTIES FOR THE PERIOD COMPRISING THE PREVIOUS YEAR ARE ALSO AVAILABLE ON THE RECORD. THE PLEA OF THE ASSESSEE THAT THE PAYMENTS WERE MADE ITA NO.1346/DEL/2015 ASSESSMENT YEAR : 2006 - 07 WELLWORTH DEVELOPERS PVT.LTD. VS. DY.CIT, NEW DELHI 5 IN RESPECT OF THE CAPITAL ACCOUNT HAVE BEEN RIGHTLY ACCEPTED BY THE COMMISSIONER OF INCOME TAX. (APPEALS). THE ASSESSING OFFICER WITHOUT GIVING ANY FINDING ON THE ISSUE HAS MERELY GONE ON THE PRESUMPTION THAT THE BOOKS OF ACCOUNT HAVE BEEN MANIPULATED. THE ASSESSING OFFICER HAS ALSO NOT GIVEN A FINDING THAT THE SUM IN QUESTION WAS ACTUALLY REVENUE EXPENDITURE WHICH WERE CLAIMED AS DEDUCTION IN PROFIT AND LOSS ACCOUNT. (EMPHASIS SUPPLIED). IN VIEW OF THE ABOVE FINDING OF FACTS) THE TRIBUNAL HAS RIGHTLY CONCLUDED THAT THE PAYMENT IN QUESTION WERE MADE ON ACCOUNT OF CAPITAL ACCOUNT) THEREFORE) PROVISIONS OF SECTION 40A(3) OF THE ACT WERE NOT A TTRACTED. THUS , WE DO NOT FIND A17 - Y MERIT IN THIS APPEAL AND NO SUBSTANTIAL QUESTION OF LAW ARISES FOR DETERMINATION OF THIS COURT. HENCE THIS APPEAL IS DISMISSED.' 18. ACCORDINGLY ON A CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND CONSI DERING THE RELEVANT PROVISION OF THE ACT NAMELY SECTION 40A(3), WE HOLD FOR THE DETAILED REASONS GIVEN HEREINABOVE THAT SECTION 40A(3) OF THE ACT HAS BEEN WRONGLY INVOKED AS ADMITTEDLY NO EXPENSES RELATABLE TO THE ADDITION HAS BEEN CLAIMED. ACCORDINGLY THI S GROUND OF THE ASSESSEE'S APPEAL IS ALLOWED. 3.2. LD. A.R. SUBMITTED THAT IN VIEW OF THE ABOVE THIS ISSUE STANDS COVERED BY ORDER OF THIS T RIBUNAL IN ASSESSEE S OWN CASE FOR THE SAME ASSESSMENT YEAR IN THE ORIGINAL ASSESSMENT PROCEEDINGS. 3.3. LD. CIT , D R SUPPORTED THE ORDER PASSED BY AUTHORITIES BELOW. 4. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 4.1. IT IS OBSERVED THAT IN THE ASSESSMENT UNDER SECTION 153A FOR THE YEAR UNDER CONSIDERATION LD.AO SHOULD HAVE STARTED THE ASSESSMENT FROM THE LAST ASSESSED INCOME , INSTEAD OF STARTING WITH THE RETURNED INCOME. IT IS OBSERVED THAT ASSESSING OFFICER IN THE PROCEEDINGS UNDER SECTION 153A OF THE ACT AGAIN MADE SAME DISALLOWANCE, MADE BY HIS PREDECE SSOR IN ORIGINAL ASSESSMENT ITA NO.1346/DEL/2015 ASSESSMENT YEAR : 2006 - 07 WELLWORTH DEVELOPERS PVT.LTD. VS. DY.CIT, NEW DELHI 6 PROCEEDINGS, WHICH HAS BEEN DELETED BY THIS TRIBUNAL IN ITA NO. 1761/DEL/2013 V IDE CONSOLIDATED ORDER DATED 10/02/16, THE RELEVANT EXTRACT OF WHICH HAS BEEN REPRODUCED HEREINABOVE. 4.2. RESPECTFULLY FOLLOWING THE SAME WE DELETE THE ADDITION MADE BY LD. AO UNDER SECTION 40A (3) OF THE A CT. 4.3 . ACCORDINGLY GROUNDS RAISED BY THE ASSESSEE STANDS ALLOWED. 5 . IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JANUARY, 2018. SD/ - SD/ - (G.D.AGRAWAL) (BEENA A PILLAI) PRESIDENT JUDICIAL MEMBER DT. 17 TH JANUARY, 2018 *MV COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA NO.1346/DEL/2015 ASSESSMENT YEAR : 2006 - 07 WELLWORTH DEVELOPERS PVT.LTD. VS. DY.CIT, NEW DELHI 7 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON DRAGON 15.01.2018 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 16.01.2018 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER