ACIT, New Delhi V. M/s Sarawswati Kunj Infrastructure (P) Ltd., New Delhi

ITA 1369/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86887 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 03-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: V S RASTOGI
• Keywords: Loose papers
• Section: 40A(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G NEW DELHI BEFORE SHRI G.D.AGRAWAL , V.P. AND SHRI GEORGE GEORGE K, J.M. ITA NO. 1369 / DEL/20 1 3 ASSESSMENT YEAR : 20 07 - 08 A CIT, CENTRAL CIRCLE 23 VS. SARASWATI KUNJ INFRASTURCTURE P.LTD. NEW DELHI M 11, MIDDLE CIRCLE, CONNAUGHT CIRCUS NEW DELHI 110 001 PAN: AAKCS 2021 A & ITA NO. 1766/ DEL/20 13 ASSESSMENT YEAR : 20 07 - 08 SARASWATI KUNJ INFRASTRUCTURE P.LTD. VS. ACIT, CC - 23 NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT ) APPELLANT BY : - SH. BRR KUMAR, SR.D.R. RESPONDENT BY : - SH. V.S.RASTOGI, ADV. O R D E R PER GEORGE GEORGE K , JUDICIAL MEMBER TH ESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF THE LD. CIT(APPEALS) - XXX III, NEW DELHI DT. 24.1 2.201 2 , PERTAINING TO THE ASSESSMENT YEAR 20 07 - 08 . 2. WE SHALL FIRST ADJUDICATE THE REVENUE S APPEAL. ITA 1369/DEL/13 (REVENUE S APPEAL) : - THE SOLE EFFECTIVE GROUND RAISED IN THE REVENUE S APPEAL READS AS FOLLOWS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.15,75,107/ - MADE BY THE A.O. ON ACCOUNT OF INTEREST ON POST DATED CHEQUES PAID OUT OF BOOKS OF ACCOUNTS. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLL OWS. DURING ASSESSMENT PROCEEDINGS ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY IS ONE OF 2 THE GROUP COMPANY OF BPTP GROUP . THE ASSESSEE HAD PURCHASED SEVERAL TRACT OF LAND, IN THE NCR (NATIONAL CAPITAL REGION). THE ASSESSEE COMPANY HAS MADE ONLY PART PAYMENT OF SALE CONSIDERATION TO THE SELLER AT THE TIME OF EXECUTING SALE DEED AND BALANCE PAYMENT IS MADE BY WAY OF POST DATED CHEQUES (PDCS). DURING THE ASSESSMENT , THE A.O. OBTAINED DETAILS OF SUCH PDCS GIVEN AT THE TIME OF REGISTRATION TO THE S ELLER AND DATE OF ENCASHMENT . THE A.O. APPLIED RATE OF 15% INTEREST PER ANNUM PAID FOR THE PERIOD FROM SALE DEED TO DATE OF ENCASHMENT, ON THE AMOUNT OF PDCS ON THE BASIS OF SEIZED MATERIAL. THE A.O. GAVE THE FINDINGS IN THE ASSESSMENT ORDER THAT TOTAL SUCH INTEREST PAYABLE COMES TO RS.15,75,107/ - ON PDCS AND SUCH INTEREST IS PAID IN CASH OUT SIDE OF BOOKS OF ACCOUNT. THEREFORE, SUCH INTEREST IS ADDED AS UNACCOUNTED/UNEXPLAINED EXPENSES. 4. A GGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST A PPELLATE AUTHORITY. THE CIT(A) AFTER EXAMINING THE SEIZED PAPERS/DOCUMENTS DIRECTED TO RECOMPUTED THE INTEREST ON PDCS. THE CIT(A) WAS OF THE VIEW THAT INTEREST ON PDCS IS TO BE CALCULATED AFTER SIX MONTHS FROM THE DATE OF THE ISSUE OF THE PDCS. THE RE VENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 5. AT THE VERY OUTSET THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN QUESTION IS COVERED BY THE ORDER OF THE TRIBUNAL IN THE GROUP CASE OF THE ASSESSEE NAMELY M/S IAG PROMOTERS AND DEVELOPERS PVT .LTD. IN ITA NO.1674/DEL/2013 & 1752/DEL/2013 VIDE ORDER DATED 31.10.2014 FOR THE A.Y. 2008 - 09. THE LD.D.R. RELIED ON THE ASSESSMENT ORDER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE GROUND RAISED BY THE REVENUE IS M ISCONCEIVED BECAUSE THE CIT(A) HAS NOT DELETED THE ADDITION OF RS.15,75,107/ - . THE CIT(A) HAS ONLY DIRECTED THE A.O. TO RECOMPUTED THE INTEREST ON POST DATED CHEQUES AFTER SIX MONTHS FROM THE DATE OF ISSUE OF PDCS. IN THE GROUP CASE AN IDENTICAL/SIMILAR ORDER OF THE CIT(A) WAS CONFIRMED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S IAG PROMOTERS AND DEVELOPERS PVT.LTD. (SUPRA). THE RELEVANT FINDING OF THE HON BLE CO - ORDINATE BENCH OF THE TRIBUNAL READS AS FOLLOWS. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. AT THE OUTSET, THE GROUND RAISED BY THE REVENUE IS MISCONCEIVED BECAUSE LD.CIT(A) HAS NOT DELETED THE ADDITION OF RS.5,06,625/ - BUT HAS ONLY DIRECTED TO RECALCULATE THE INTEREST. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE LD.CIT(A) AND ALSO THE SUBMISSIONS OF BOTH THE PARTIES AND WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A). AFTER EXAMINING THE LOOSE PAPERS SEIZED AT THE TIME OF SEARCH AT THE ASSESSEE S PREMISE S, IT WAS NOTICED THAT INTEREST IS PAID ON THE PDCS ONLY DURING THE PERIOD OF EXTENSION OF PDCS AND, THEREFORE, HE DIRECTED THE A.O. TO RECOMPUTED THE 3 INTEREST ON PDCS AT THE TIME OF EXTENSION OF THE PDCS. HE HAS FURTHER OBSERVED THAT IF IT IS NOT POSSIBL E TO WORK OUT THE EXTENSION OF PDCS IN EACH CASE, THEN THE A.O. IS DIRECTED TO RECOMPUTED INTEREST ON PDCS AFTER SIX MONTHS FROM THE DATE OF ISSUE OF THE PDCS. THEREFORE, THE GROUND OF APPEAL OF THE REVENUE THAT THE CIT(A) DELETED THE ADDITION OF RS.5,06, 625/ - MADE BY THE A.O. ON ACCOUNT OF INTEREST ON PDCS IS FACTUALLY INCORRECT AND CONTRARY TO THE ORDER OF THE CIT(A). THE CIT(A) DIRECTED TO RECALCULATE THE INTEREST ON PDCS AND THERE WAS A SOUND LOGIC FOR SUCH DIRECTION. HIS DIRECTION IS BASED ON MATE RIAL FOUND AND SEIZED AT THE TIME OF SEARCH. IN VIEW OF THE ABOVE , WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LD.CIT(A) IN THIS REGARD AND ACCORDINGLY, WE REJECT GROUND NO.1 OF THE REVENUE S APPEAL. 7. IN VIEW OF THE CO - ORDINATE B ENCH ORDER OF THE TRIBUNAL IN THE GROUP CONCERN OF THE ASSESSEE IN THE CASE OF M/S IAG PROMOTERS AND DEVELOPERS PVT.LTD.(SUPRA), WE HOLD THAT THE CIT(A) S ORDER IS CORRECT AND NO INTERFERENCE IS CALLED FOR. IT IS ORDERED ACCORDINGLY. 8 . IN THE RESULT THE GROUND RAISED BY THE REVENUE IS REJECTED. 9 . ITA NO.1766/DEL/2013 (ASSESSEE S APPEAL ) : - IN THE ASSESSEE S APPEAL SIX GROUNDS ARE RAISED. IN THE COURSE OF HEARING THE LD.COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR GROUND NOS. 1, 2, 3, 3.1, 5 AND 6. THE SURVIVING GROUNDS NAMELY GROUND NO.4 AND 4.1 READS AS FOLLOWS. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE U/S 40A(3) IN RESPECT OF WHICH NO DEDUCTION WAS CLAIMED BY THE APPELLANT. 4.1. THAT EVEN ON MERITS THE DISALLOWANCE WAS NOT JUSTIFIED. 10. BRIEF FACTS IN RELATION TO THE ABOVE GROUND ARE AS FOLLOWS. THE ASSESSEE COMPANY HAS MADE CASH PAYMENT FOR ACQUIRING CERTAIN LAND. THE TOTAL CASH PAYMENT WAS RS.4,50,000/ - . THE A.O. INV OKING THE PROVISIONS OF S.40A(3) OF THE ACT DISALLOWED 20% OF RS.4,50,000/ - AMOUNTING TO RS.90,000/ - . 11. THE ASSESSEE BEING AGGRIEVED FILED THE APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ORDER OF THE A.O. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS. 6.7. FINDINGS : - I HAVE CONSIDERED THE ASSESSMENT ORDER, ARGUMENT OF LD.A.R. TO DECIDE THE ISSUE OF DISALLOWABILITY U/S 40A(3) POINTED OUT BY LEARNED AR, IT IS PROPER TO EXAMINE THE TERMS OF COLLABORATION AGREEMENT AND FACTS OF THE CASE. THE APPELLANT PURCHASES THE L AND FROM VARIOUS FARMERS/LAND OWNERS IN ITS OWN NAME BY ENTERING INTO SALE DEED. REGISTRATION IS DONE IN THE NAME OF ASSESSEE. THE PAYMENT IS MADE BY ASSESSEE. AS PER THE COLLABORATION AGREEMENT, THE ASSESSEE COMPANY WOULD 4 ACQUIRE THE LAND AND TRANSFER 100% OF ITS DEVELOPMENT RIGHT TO M/S CWPPL. THE ASSESSEE COMPANY IS SHOWN AS OWNER OF THE LAND. IN LIEU OF TRANSFERRING THE DEVELOPMENT RIGHT, THE ASSESSEE COMPANY GETS COST OF LAND PLUS RS.35,000 PER ACRE FOR CWPPL. THIS BEING THE CASE, WHAT IS TRANSF ERRED IS THE DEVELOPMENT RIGHT, THE OWNERSHIP REMAINS WITH ASSESSEE. THEREFORE, IT IS DIFFICULT TO ACCEPT THE LD.AR S CONTENTION THAT THE COST OF LAND IS REIMBURSED BY CWPPL. IF THE LAND WOULD HAVE BEEN SOLD TO CWPPL, VIEW MIGHT HAVE BEEN THAT THE ASSESS EE IS ONLY WORKING AS AN AGENT OF CWPPL AND EXPENDITURE PERTAINS TO CWPPL AND THE ASSESSEE IS ONLY RECEIVING THE COST OF LAND AS REIMBURSEMENT OF EXPENDITURE. I AGREE WITH THE FINDING OF AO THAT OWNERSHIP CONTINUES WITH THE ASSESSEE AND ONLY DEVELOPMENTAL RIGHT IS TRANSFERRED TO CWPPL. IN THAT SCENARIO, THE ASSESSEE COMPANY CAN BE SAFELY TERMED AS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE. WHAT HE RECEIVES I.E. COST OF LAND AND RS.35,000 PER ACRE IN RECEIPT IN ITS HAND FOR THE TRANSFER OF DEV ELOPMENT RIGHT AND THE PAYMENT FOR PURCHASE OF LAND IS ITS EXPENDITURE. ON THESE FACTS IN MY OPINION THE PAYMENT MADE TO LAND OWNER IS EXPENSE IN APPELLANTS HAND AND ENTIRE RECEIPTS INCLUDING COST OF LAND PLUS RS.35,000 PER ACRE IS REVENUE RECEIPT IN ITS HAND. AS COST OF LAND IS AN EXPENDITURE IN APPELLANT S HAND, SECTION 40A(3) IS APPLICABLE, AS THE EXPENDITURE HAS BEEN INCURRED. THIS EXPENDITURE IS NOT CLAIMED EXPLICITLY IN ITS P&L A/C AS THE RECEIPT AND PAYMENT TO THE SAME EXTENT GETS SQUARED UP TO TH E EXTENT OF COST OF LAND. THIS ACCOUNTING TREATMENT CANNOT OVER RIDE THE TRUE NATURE OF TRANSACTION. IT IS SETTLE LAW THAT THE PROVISION OF I.T.ACT WOULD PREVAIL OVER THE SYSTEM OF ACCOUNTING. RELIANCE IS PLACED ON HON BLE S.C. DECISION IN THE CASE OF T UTICORIN ALKALIES CHEMCIALS AND FERTIFLISERS LTD. VS. CIT (1997) 227 ITR 172. 12 . THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US. 13 . THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBUNAL IN THE CASE OF GLITZ BUILDERS AND PROMOTERS PVT.LTD. 1747/DEL/2013 DT. 2.1.2015 FOR THE A.Y. 2006 - 07 AND IN THE CASE OF WESTLAND DEVELOPERS PVT.LTD. IN ITA 1752/DEL/2013 VIDE ORDER DT. 22.8.2014 FOR THE A.Y. 2006 - 07 . THE LD.D.R. WAS UNABLE TO CONTROVERT THE SUBMISSIONS MADE BY THE LD.AUTHORISED REPRESENTATIVE. 14 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE TRIBUNAL IN THE GROUP CASES OF THE ASSESSEE ON IDENTICAL FACTS HAVE HELD THAT THE PAYMENT MADE FOR ACQUISITION OF LAND WAS NOT CLAIMED AS A DEDUCTION AND HENCE THE PROVISIONS OF S.40A(3) OF THE ACT IS NOT APPLICABLE . THE RELEVANT FINDING OF THE HON BLE TRIBUNAL IN THE CASE OF GLITZ BUILDERS AND PROMOTERS PVT.LTD. (SUPRA) READS AS FOLLOWS. THE ABOVE FACTS STATED BY THE LEARNED COUNSEL DURING ASSESSMENT PROCEEDINGS HAVE NOT BEEN FOUND TO BE INCORRECT OR NON GENUINE. AS PER THE COLLABORATION AGREEMENT, THE ASSESSEE WAS TO PURCHASE THE LAND FOR AND ON BEHALF OF CWPPL AND WHATEVER WAS THE PURCHASE PRICE INCLUDING THE 5 ADDITIONAL PAYMENT WAS DEBITED TO CWPPL AND THE ASSESSEE ONLY RECEIVED FIXED REMUNERATION I.E. RS.35,000/ - PER ACRE. THUS, WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTIO N IN RESPECT OF COST OF THE PURCHASE OF THE LAND, WHETHER ORIGINAL OR ADDITIONAL PAYMENT. WHEN THE COST OF THE LAND AS WELL AS ADDITIONAL PAYMENT IS NOT CLAIMED BY THE ASSESSEE AS DEDUCTION, THE QUESTION OF ANY DISALLOWANCE U/S 40A(3) OR OTHERWISE IN THE CASE OF THE ASSESSEE DOES NOT ARISE. WE, THEREFORE, DELETE THE ENTIRE DISALLOWANCE MADE BY THE A.O. U/S 40A(3) AS WELL AS ADDITIONAL PAYMENT. 14.1 . A SIMILAR VIEW HAS BEEN TAKEN BY THE HON BLE TRIBUNAL IN THE CASE OF WESTLAND DEVELOPERS PVT.LTD. (SUPRA). IN VIEW OF THE COORDINATE BENCH ORDER S OF THE TRIBUNAL , WE HOLD THAT INCOME TAX AUTHORITIES ARE NOT JUSTIFIED IN INVOKING THE PROVISIONS OF S.40A(3) OF THE I.T.ACT AND DISALLOW A SUM OF RS.90,000/ - . HENCE GROUND NOS. 4 AND 4.1 RAISED BY THE ASSESSEE AR E ALLOWED. 15. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 0 4 T H MARCH, 2015 . S D / - S D / - (G.D.AGRAWAL) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER DATED: THE 0 4 T H MARCH, 2015 *MANGA 6 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR