ITO, Ward - 16(2), Hyderabad V. M/s Narne Construction P Ltd, Secunderabad

ITA 1347/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1862 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Keywords: Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1347/HYD/2014 ASSESSMENT YEAR: 2009-10 INCOME-TAX OFFICER, WARD 16(2), HYDERABAD. VS. NARNE CONSTRUCTION P. LTD., SECUNDERABAD. PAN AAACN9975A (APPELLANT) (RESPONDENT) REVENUE BY : SHRI PRABHAT KUMAR GUPTA ASSESSEE BY : SHRI S. RAMA RAO DATE OF HEARING : 29-07-2015 DATE OF PRONOUNCEMENT : 05-08-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 28/02/2014 OF LD. CIT(A) V, HYDERABAD FOR THE AY 2009-10. 2. THE REVISED GROUNDS RAISED BY THE DEPARTMENT ARE AS UNDER: 1. THE LD. CIT(A) AT PARA (II) A TO G OF THE ORDER , HAS MENTIONED VARIOUS DOCUMENTS RELATING TO LAND GRABB ING DISPUTE, ULC CORRESPONDENCE, HMDA CORRESPONDENCE & PETITIONS FILED BY THE ASSESSEE BEFORE VARIOUS AUT HORITIES. ON GOING THROUGH THE RECORDS, THE DOCUMENTS MENTIONED BY THE CIT(A) AT PARA 5(II) A TO G WERE NOT FILED DURING THE COURSE OF ASSESSMENT. THEREFORE, ADDITIONAL EVIDENCE IS FILE D BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDING S BEFORE THE CIT(A). 2. THE LD. CIT(A) OUGHT TO HAVE GRANTED AN OPPORTU NITY TO THE AO IN CONNECTION WITH ADDITIONAL EVIDENCE FILED. 2 ITA NO. 1347 /HYD/2014 NARNE CONSTRUCTION P. LTD. 3. BRIEFLY THE FACTS ARE, ASSESSEE A COMPANY IS ENG AGED IN THE BUSINESS OF PURCHASE AND SALE OF PLOTTED LANDS. FOR THE AY UNDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 11/02/2010 DECLARING TOTAL LOSS OF RS. 32,57,615. DURING THE A SSESSMENT PROCEEDING, AO ON VERIFICATION OF DETAILS FURNISHED BY ASSESSEE FOUND THAT ASSESSEE HAD DECLARED SALE PRICE OF EACH PLOT RANGING FROM 498 SQ.YD. TO RS. 2300 PER SQ.YD. HOWEVER, AS PER THE S ALE DEEDS THE MARKET RATES OF THE PLOTS ARE MUCH HIGHER THAN THE VALUE DECLARED BY ASSESSEE AND RANGES FROM RS. 4800 PER SQ.YD. TO RS. 12,000 PER SQ.YD. AS OBSERVED BY AO, ON THE BASIS OF INFORMATI ON AVAILABLE, HE CONDUCTED AN ENQUIRY WITH SOME PURCHASERS OF THE PL OTS, ONE OF THEM BEING SMT. VARANASHI SHANTI, WHO STATED TO HAVE PAI D AN AMOUNT OF RS. 14,26,422 (RS. 4755 PER SQ.YD.) TOWARDS PLOT N. 135, IN ROLLING MIDDOWS PROJECT AGAINST SALE VALUE OF RS. 4,50,000 (RS. 1500 PER SQ.YD.) DECLARED BY ASSESSEE. AO BRINGING TO THE NO TICE OF ASSESSEE ABOVE DISCREPANCY PROPOSED TO ADOPT THE SALE VALUE OF RS. 8400 PER SY.YD. TOWARDS SALE OF PLOTS DURING THE YEAR UNDER CONSIDERATION IN A LETTER ISSUED TO ASSESSEE. OBJECTING TO THE PROPOSE D VALUE TO BE ADOPTED BY AO, ASSESSEE SUBMITTED A DETAILED EXPLAN ATION STATING THEREIN THAT THE VALUE DECLARED BY ASSESSEE IS ACTU ALLY THE VALUE RECEIVED FROM THE PURCHASERS OF LAND AND WHICH IS A LSO THE MARKET VALUE. EXPLAINING THE DIFFERENCE BETWEEN CONSIDERAT ION MENTIONED IN THE SALE DEED AND AMOUNT ACTUALLY STATED TO HAVE BE EN PAID BY THE PURCHASER, ASSESSEE STATED THAT THE ACTUAL COST OF PLOT IS MENTIONED IN THE SALE DEED WHEREAS IN ADDITION TO THE ACTUAL COST OF PLOT OTHER AMOUNTS SUCH AS DEVELOPMENT CHARGES ON THE BASIS OF ACTUAL DEVELOPMENT EXPENSES INCURRED, REGISTRATION CHARGES , INTEREST FOR DEFAULT IN PAYMENT OF INSTALMENTS ETC. ARE ALSO REC OVERED FROM THE PURCHASERS. IT WAS SUBMITTED THAT THE PLOT ARE REGI STERED IN THE NAME OF BUYERS AFTER RECEIPT OF ALL SUCH PAYMENTS. ASSES SEE FURTHER STATED THAT AS PER THE ACCOUNTING POLICY OF THE COMPANY AM OUNTS RECEIVED ON ACCOUNT OF COST OF PLOTS ARE TRANSFERRED TO SALE AC COUNT FROM ADVANCE AGAINST SALE OF PLOTS ACCOUNTED IN THE YEAR OF REGI STRATION OF THE PLOT 3 ITA NO. 1347 /HYD/2014 NARNE CONSTRUCTION P. LTD. IN FAVOUR OF THE CUSTOMER. THEREFORE, THE GOVT. MAR KET VALUE PREVAILING ON THE DATE OF REGISTRATION OF PLOT HAS NO RELEVANC E TO THE ACTUAL SALE PRICE OF THE PLOT, HENCE, CANNOT BE DEEMED AS THE I NCOME OF ASSESSEE. 3.1 ASSESSEE FURNISHING THE STATEMENT SHOWING CUSTO MER WISE DETAILS OF AMOUNTS COLLECTED UNDER VARIOUS HEADS AS WELL AS THEIR UTILIZATION, SUBMITTED THAT DEVELOPMENT CHARGES ARE COLLECTED ON ACTUAL BASIS AND HENCE WERE ADJUSTED AGAINST DEVELO PMENT EXPENSES INCURRED BY COMPANY. THEREFORE, THE AMOUNTS COLLECT ED TOWARDS DEVELOPMENT CHARGES ARE NEITHER CREDITED NOR DEBITE D TO THE P&L A/C. SPECIFICALLY EXPLAINING THE CASE OF SMT. VARANASHI SHANTI REFERRED TO BY AO, ASSESSEE SUBMITTED THAT AN AMOUNT OF RS. 5,3 0,000 WAS COLLECTED FROM HER TOWARDS STAMP DUTY AND REGISTRAT ION CHARGES OF THE PLOT, HENCE, IT CANNOT BE TREATED AS INCOME OF ASSE SSEE. AFTER EXAMINING THE EXPLANATION OF ASSESSEE, AO CALLED UP ON ASSESSEE TO FURNISH LEDGER ACCOUNTS IN SUPPORT OF ITS CLAIM OF HAVING ACCOUNTED FOR INCOMES UNDER DIFFERENT HEADS. HE ALSO ASKED ASSESS EE TO PRODUCE BOOKS OF ACCOUNT. HE OBSERVED THAT ASSESSEE DID NOT RETURN THE AMOUNT RECEIVED TOWARDS CAUTION DEPOSITS EVEN AFTER REGISTRATION OF THE PLOTS. HE, THEREFORE, CALLED UPON ASSESSEE TO E XPLAIN WHY SUCH AMOUNTS SHALL NOT BE TREATED AS INCOME OF ASSESSEE. AS NOTED BY AO, THOUGH, ASSESSEE APPEARED, BUT, HE FAILED TO SUBMIT ANY AGREEMENT WITH THE CUSTOMERS TO SHOW THAT THE LAND COST WAS F IXED WITH THE CUSTOMERS FINALLY. FURTHER, AO OBSERVED, THOUGH, A SSESSEE HAD STATED THAT IT IS FOLLOWING A PARTICULAR METHOD OF ACCOUNTING, VARIOUS RECEIPTS, BUT, BOOKS OF ACCOUNT WERE NOT SUBMITTED TO SUBSTANTIATE SUCH STATEMENT. HE OBSERVED THAT ASSESSEE ALSO FAIL ED TO FURNISH ANY SATISFACTORY EXPLANATION AS TO WHY CAUTION DEPOSITS HAVE NOT BEEN REFUNDED TO THE CUSTOMERS. THUS, AFTER OBSERVING AS ABOVE, AO PROCEEDED TO ESTIMATE THE COST OF LAND SOLD DURING THE YEAR. HE OBSERVED THAT AS PER THE SALE DEEDS MARKET RATES OF THE PLOTS WERE RANGING FROM RS. 4800 PER SQ.YD TO RS. 12,000 PER S Q.YD, WHICH ARE 4 ITA NO. 1347 /HYD/2014 NARNE CONSTRUCTION P. LTD. MUCH HIGHER THAN THE SALE PRICE DECLARED BY ASSESSE E. IN THIS CONTEXT, SPECIFICALLY REFERRING TO ENQUIRY MADE WITH PURCHAS ERS, WHO PURCHASED PLOTS FROM ASSESSEE, AO ADOPTING THE VALUE OF PLOT AT RS. 8400 SQ.YDS. INFERRED THAT ASSESSEE HAS SUPPRESSED SALE VALUE OF PLOT IN RESPECT OF 8 INSTANCES OF SALE OF PLOT. THUS, THE D IFFERENCE BETWEEN THE SALE VALUE DECLARED BY ASSESSEE AND THE VALUE D ETERMINED BY AO WAS WORKED OUT TO RS. 1,83,19,257 FOR TWO PROJECTS, NAMELY, CENTRAL PARK PROJECT AND ROLLING MEADOWS PROJECT AND THE DI FFERENTIAL AMOUNT WAS TREATED AS UNACCOUNTED INCOME OF ASSESSEE AND A DDED TO THE INCOME OF THE YEAR. BEING AGGRIEVED OF SUCH ADDITIO N, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 4. BEFORE LD. CIT(A), APART FROM REITERATING WHAT W AS SUBMITTED BEFORE AO, ASSESSEE SUBMITTED THAT ASSESSEE APART F ROM THE COST OF LAND HAS RECEIVED VARIOUS OTHER AMOUNTS SUCH AS DEV ELOPMENT CHARGES, REGISTRATION CHARGES ULC CHARGES (CAUTION DEPOSIT), MAINTENANCE CHARGES ETC, ON ACTUAL BASIS. IT WAS SU BMITTED, ASSESSEE ALSO HAD TO INCUR EXPENDITURE AS THE LAND SOLD WERE UNDER VARIOUS DISPUTES/LITIGATIONS/LAND GRABBING ETC. IT ALSO DEL AYED THE REGISTRATION OF PLOTS AND IN THE PROCESS OF APPROVAL FOR LAY OUT BY HMDA ALSO GOT DELAYED. IN THIS CONTEXT, LD. CIT(A) REFERRED TO CE RTAIN DOCUMENTARY EVIDENCES PRODUCED BEFORE HIM BY ASSESSEE. ON GOING THROUGH THE SAID DOCUMENTARY EVIDENCES, LD. CIT(A) FOUND THAT A SSESSEE HAD INCURRED VARIOUS INCIDENTAL EXPENSES LIKE DEVELOPME NT CHARGES, CAUTION DEPOSIT ETC, ULC CHARGES, MAINTENANCE ETC. THUS, HE OBSERVED THAT TOTAL CONSIDERATION AS TAKEN BY ASSES SEE ALSO INCLUDES THE ORIGINAL COST OF PLOT, MEMBERSHIP FEES, MAINTEN ANCE CHARGES, ADDITIONAL DEVELOPMENT CHARGES AND VARIOUS OTHER CH ARGES BY DIFFERENT STATUTORY AUTHORITIES. FROM THE AFORESAID DOCUMENTARY EVIDENCES, LD. CIT(A) CONCLUDED THAT AS ASSESSEE HA S INCURRED VARIOUS EXPENSES FROM OUT OF DEVELOPMENT CHARGES CO LLECTED FROM THE CUSTOMERS, THE SAME CANNOT FORM PART OF THE TOTAL CONSIDERATION OF THE PLOT. HE FURTHER HELD THAT SINCE DUE TO VARIOUS 5 ITA NO. 1347 /HYD/2014 NARNE CONSTRUCTION P. LTD. LITIGATIONS/DISPUTES/LAND GRABBING CASES ETC, REGIS TRATION OF THE PLOTS GOT DELAYED WHICH RESULTED IN PAYING HIGHER REGISTR ATION CHARGES BY THE CUSTOMERS AT THE PREVAILING RATE, THE SAME CANN OT BE CONSIDERED TO DETERMINE THE VALUE OF THE LAND SOLD BY ASSESSEE . ON THE AFORESAID BASIS, LD. CIT(A) HELD THAT AO WAS NOT JUSTIFIED IN ADOPTING THE MARKET RATE OF RS. 8400 PER SQ.YD FOR DETERMINING THE VALU E OF PLOTS SOLD BY ASSESSEE. ACCORDINGLY, HE DELETED THE ADDITION OF R S. 1,83,19,257 MADE BY AO. 5. LD. DR SPECIFICALLY REFERRING TO THE OBSERVATION S MADE BY AO AT PARAGRAPHS 3.3 TO 3.5 OF THE ASSESSMENT ORDER SUBMI TTED, THOUGH, AO CALLED FOR VARIOUS INFORMATIONS FROM ASSESSEE WITH REGARD TO THE VALUE OF THE OF PLOT DECLARED BY ASSESSEE, BUT, ASSESSEE FAILED TO SUBSTANTIATE THE COST OF PLOT BY FURNISHING ANY EVI DENCE INCLUDING BOOKS OF ACCOUNT. WHEREAS BEFORE LD. CIT(A), ASSESS EE PRODUCED VARIOUS DOCUMENTS BY WAY OF ADDITIONAL EVIDENCE, UP ON CONSIDERING WHICH LD. CIT(A) DELETED THE ADDITION. LD. DR SUBMI TTED, SINCE ON THE BASIS OF DOCUMENTARY EVIDENCES, LD. CIT(A) GRANTED RELIEF TO ASSESSEE WHICH WERE NOT BEFORE AO, LD. CIT(A) SHOULD HAVE AL LOWED OPPORTUNITY TO AO TO EXAMINE THOSE ADDITIONAL EVIDENCES BEFORE DECIDING THE ISSUE. THUS, IT WAS SUBMITTED BY LD. AR, AS THE ADD ITIONAL EVIDENCES WERE ACCEPTED BY LD. CIT(A) IN VIOLATION OF RULE 46 A, THE IMPUGNED ORDER OF LD. CIT(A) SHOULD BE SET ASIDE GIVING OPPO RTUNITY TO AO TO DECIDE THE ISSUE AFTER EXAMINING THE ADDITIONAL EVI DENCE. 6. LD. AR, ON THE OTHER HAND, THOUGH, ADMITTED THAT CERTAIN DOCUMENTARY EVIDENCES WERE SUBMITTED BEFORE LD. CIT (A) FOR THE FIRST TIME, BUT, AT THE SAME TIME, HE SUBMITTED THAT THOS E EVIDENCES DO NOT HAVE MUCH RELEVANCE AS FAR AS ADDITION MADE BY AO I S CONCERNED, HENCE, THERE IS NO NEED TO SET ASIDE THE IMPUGNED O RDER OF LD. CIT(A). 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS VERY MUCH EVIDENT FROM THE ASSESSMENT ORDER, ON THE BASIS OF 6 ITA NO. 1347 /HYD/2014 NARNE CONSTRUCTION P. LTD. CERTAIN ENQUIRY DURING THE ASSESSMENT PROCEEDING, A O FOUND THAT SALE CONSIDERATION SHOWN BY ASSESSEE FOR THE PLOTS SOLD ARE MUCH LESSER THAN THE ACTUAL MARKET VALUE OF THE PLOTS SOLD AS P ER THE VALUE ADOPTED BY THE REGISTERING AUTHORITY. IN THIS CONTE XT, HE ALSO FOUND ON ENQUIRY MADE FROM CERTAIN PURCHASERS THAT THEY HAVE PAID MORE TO ASSESSEE THAN WHAT WAS MENTIONED IN THE SALE DEED T OWARDS SALE CONSIDERATION. THUS, ON THE BASIS OF SUCH ENQUIRY, AO ESTIMATED THE SALE VALUE OF PLOTS BY ADOPTING THE RATE OF RS. 840 0 PER SQ.YD. AS COULD BE SEEN FROM THE OBSERVATIONS MADE BY LD. CIT (A) IN PARAGRAPH 5(II) OF HIS ORDER, IT APPEARS THAT IN COURSE OF PR OCEEDING BEFORE LD. CIT(A), ASSESSEE HAD PRODUCED VARIOUS DOCUMENTARY E VIDENCES, SOME OF WHICH WERE NOT EVEN IN EXISTENCE AT THE TIM E OF ASSESSMENT PROCEEDING. IN ANY CASE OF THE MATTER, NONE OF THES E DOCUMENTS WERE PRODUCED BEFORE AO NOR THE BOOKS OF ACCOUNT WERE PR ODUCED, WHICH IS VERY MUCH EVIDENT FROM THE OBSERVATIONS MADE BY AO IN PARAGRAPH 3.5 OF HIS ORDER. IT IS ALSO QUITE CLEAR THAT ON TH E BASIS OF THESE ADDITIONAL EVIDENCES PRODUCED FOR THE FIRST TIME BE FORE LD. CIT(A), HE HAS CONCLUDED THAT SINCE ASSESSEE INCURRED VARIOUS EXPENSES INCIDENTAL TO THE SALE OF PLOT AND FURTHER SINCE AC TUAL REGISTRATION OF THE PLOTS GOT DELAYED DUE TO VARIOUS LITIGATIONS, T HE VALUE OF THE PROPERTY COULD NOT HAVE BEEN ADOPTED BY TAKING THE VALUE AS ON THE DATE OF REGISTRATION. THUS, AS COULD BE SEEN, DOCUM ENTARY EVIDENCES PRODUCED BEFORE LD. CIT(A) BY ASSESSEE HAD A DIRECT BEARING ON THE ULTIMATE DECISION TAKEN BY LD. CIT(A) IN ACCEPTING THE VALUE DECLARED BY ASSESSEE AND CONSEQUENTLY, DELETING THE ADDITION MADE. THEREFORE, IN OUR VIEW, BEFORE DECIDING THE ISSUE O N THE BASIS OF ADDITIONAL EVIDENCES PRODUCED BEFORE HIM, LD. CIT(A ) IN THE INTEREST OF EQUITY, FAIR PLAY AND NATURAL JUSTICE, SHOULD HAVE GIVEN OPPORTUNITY TO AO TO EXAMINE THESE DOCUMENTS AND OFFER HIS COMMENT S. LD. CIT(A) HAVING NOT FOLLOWED THE MANDATORY PROCEDURE AS PROV IDED UNDER RULE 46A, THERE IS A VIOLATION OF STATUTORY PROVISION BY LD. CIT(A), WHICH MAKES THE IMPUGNED ORDER OF LD. CIT(A) VULNERABLE. IN VIEW OF THE AFORESAID, WE ARE INCLINED TO SET ASIDE THE IMPUGNE D ORDER OF LD. 7 ITA NO. 1347 /HYD/2014 NARNE CONSTRUCTION P. LTD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO VERIFY THE ADDITIONAL EVIDENCES AND DECIDE THE ISS UE ACCORDINGLY AFTER DUE OPPORTUNITY OF BEING HEARD TO ASSESSEE IN THE M ATTER. 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS ALLOW ED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 5 TH AUGUST, 2015 KV COPY TO:- 1) ITO, WARD 16(2), ROOM NO. 615, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004. 2) M/S NARNE CONSTRUCTION PVT. LTD., NO. 1, GUNROCK ENCLAVE, KHARKANA, HYDERABAD 3) CIT(A) V, HYDERABAD 4) CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.