M/s. Landtech India Condominiums Pvt. ltd, Bangalore V. ACIT, Bangalore

ITA 137/BANG/2011

• Counselvise Citation: 13721114 RSA 2011
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 14-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 40A(3); 143(3); 133A; 234B

Judgement Text

PAGE 1 OF 14 ITA NOS.137, 58 & 157/BANG/2011 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.137/BANG/2011 (ASST. YEAR 2006-07 M/S LANDTECH INDIA CONDOMINIUMS PVT. LTD., NO.2, AVS COMPOUND WALL, 80 FEET ROAD, 4 TH BLOCK, KORAMANGALA, BANGALORE-34. PA NO.AABCL 1320 J VS THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE- 11(5), BANGALORE. (APPELLANT) (RESPONDENT) ITA NOS.157 & 58/BANG/2011 (ASST. YEARS 2006-07 & 2007-08) (BY REVENUE) DATE OF HEARING : 03.10.2012 DATE OF PRONOUNCEMENT : 30.11.2012 ASSESSEE BY : SHRI NAGINCHAND KHINCHA, C.A. REVENUE BY : SHRI FARHAT HUSSAIN QURESHI, CI T-II ORDER PER JASON P BOAZ : THERE ARE CROSS APPEALS BY BOTH THE ASSESSEE AND THE REVENUE, DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-I, BANGALORE DT.30.11.2010 FOR ASSESSMENT YEAR 2006-07 . FOR THE ASSESSMENT PAGE 2 OF 14 ITA NOS.137, 58 & 157/BANG/2011 2 YEAR 2007-08, THE REVENUE HAS FILED AN APPEAL AGAINS T THE ORDER OF THE CIT(A) DATED 8.11.2010. ALL THESE THREE APPEALS ARE BEING DISPOSED OFF BY WAY OF A COMMON ORDER AS COMMON ISSUES ARE INVOLVED AND FOR THE SAKE OF CONVENIENCE. 2. THE FACTS OF THE CASE, IN BRIEF ARE AS UNDER : 2.1 THE ASSESSEE COMPANY (HEREINAFTER REFERRED TO AS THE ASSESSEE), INCORPORATED IN MAY, 2005, IS IN THE BUSINESS OF DEV ELOPMENT OF LAYOUT AND SALE OF SITES AND THIS WAS THE FIRST YEAR OF ITS OPERATI ONS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 30/11/2006 DECLARING AN INCOME OF RS.9,22,817/-. A SURVEY ACTION UNDER SECT ION 133A OF THE I T ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS CON DUCTED AT THE ASSESSEES BUSINESS PREMISES ON 22.2.2007. IN THE COURSE OF S URVEY, THE STATEMENT OF SRI PAUL FERNANDEZ, M.D. OF THE ASSESSEE WAS RECORDED I N RESPECT OF DISCREPANCIES NOTICED ON THE BASIS OF WHICH THE ASSESSMENT WAS CO MPLETED BY AN ORDER UNDER SECTION 143(3) OF THE ACT ON 29/12/2008 DETERMINING THE INCOME OF THE ASSESSEE AT RS.8,46,25,150/- AS AGAINST THE RETURNE D INCOME OF RS.9,22,817/-. IN DOING SO, THE ASSESSING OFFICER MADE THE FOLLOWI NG ADDITIONS TO INCOME/DISALLOWANCES OF EXPENSES CLAIMED:- (I) UNDISCLOSED INCOME ON SALE OF SITES RS. 4,33,92 ,670 (II) UNDISCLOSED CLOSING STOCK RS. 1,34,41,013 (III) BROKERAGE OUTSIDE BOOKS RS. 1,14,00,000 (IV) PAYMENT TO LAND OWNERS OUTSIDE BOOKS RS. 55,96,630 (V) CASH PAYMENT FOR LAND PURCHASE RS. 36,00,000 (VI)CONSULTANCY CHARGES DISALLOWED U/S 40(A)(IA) RS. 33,00,000 (VII) CASH PAYMENT DISALLOWED U/S 40A(3) RS. 3,90,025 PAGE 3 OF 14 ITA NOS.137, 58 & 157/BANG/2011 3 (VIII) DISALLOWED U/S 40(A)(IA) AS PER 3CD (TAX AUDIT REPORT) RS. 25,81,992 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR THE AS SESSMENT YEAR 2006-07 DATED 29/12/2008, THE ASSESSEE WENT IN APPE AL BEFORE THE CIT(A)-I, BANGALORE WHO AFTER HEARING THE ASSESSEE AND CALLING FOR A REMAND REPORT FROM THE ASSESSING OFFICER, ON DETAILS FILED BY THE ASSESSEE, DISPOSED THE APPEAL BY ORDER DATED 20/11/2010 ALLOWING THE AS SESSEE PARTIAL RELIEF AS UNDER:- SL. NO . DETAILS AMOUNT ADDED/ DISALLOWED BY ASSESSING OFFICER RS. RELIEF ALLOWED RS. ADDITION CONFIRME D RS. 1 UNDISCLOSED INCOME ON SALE OF SITES 4,33,92,67 0 2,50,16,0 51 1,83,76,6 19 2 UNDISCLOSED CLOSING STOCK 1,34,41,01 3 73,04,79 6 61,36,21 7 3 BROKERAGE OUTSIDE BOOKS 1,14,00,00 0 1,14,00,0 00 NIL 4 PAYMENT TO LAND OWNERS OUTSIDE BOOKS 55,96,630 55,96,63 0 NIL 5 CASH PAYMENT FOR LAND 36,00,00 NIL PAGE 4 OF 14 ITA NOS.137, 58 & 157/BANG/2011 4 PURCHASE 36,00,000 0 6 CONSULTANCY CHARGES DISALLOWED U/S 40(A)(IA) 33,00,000 NIL 33,00,00 0 7 CASH PAYMENTS DISALLOWED U/S 40A(3) 3,90,025 NIL 3,90,025 8 DISALLOWED U/S 40(A)(IA) AS PER FORM 3CD 25,81,992 NIL 25,81,99 2 TOTAL 8,37,02,330 5,29,17,4 77 3,07,84, 853 2.3 FOR ASSESSMENT YEAR 2007-08, THE ASSESSEE FILED THE RETURN OF INCOME DECLARING A LOSS OF RS.36,05,244/-. THE RET URN WAS PROCESSED UNDER SECTION 143(1) AND THE CASE WAS TAKEN UP FOR SCRUTI NY PURSUANT TO THE SURVEY ACTION UNDER SECTION 133A OF THE ACT, BY ISSUE OF NO TICE UNDER SECTION 143(2) OF THE ACT. THE ASSESSMENT WAS COMPLETED BY AN ORDER UNDER SECTION 143(3) OF THE ACT ON 30/12/2009 DETERMINING THE ASSESSEES IN COME AT RS.5,82,87,870/-, ON THE BASIS OF THE STATEMENTS MADE BY THE MANAGING DIRECTOR SRI PAUL FERNANDEZ IN THE COURSE OF SURVEY ACTION WHEREBY THE FOLLOWING ADDITIONS WERE MADE:- (I) UNDISCLOSED INCOME ON CLOSING STOCK : RS.6,0 6,43,114 PAGE 5 OF 14 ITA NOS.137, 58 & 157/BANG/2011 5 (II) UNDISCLOSED INCOME (ADVANCES FOR PROPERTY PURCHASES) : RS. 12,50 ,000 2.4 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR THE AS SESSMENT YEAR 2007-08 DATED 30/12/2009, THE ASSESSEE WENT IN APPE AL BEFORE THE CIT(A)-I, BANGALORE WHO DISPOSED THE APPEAL BY ORDER DATED 8/1 1/2010 ALLOWING THE ASSESSEE PARTIAL RELIEF. THE LEARNED CIT(A) DELET ED THE ADDITION OF RS.6,06,43,114/- IN RESPECT OF CLOSING STOCK. ITA NOS.137 AND 157/BANG/2011 (ASSESSMENT YEAR 2006- 07) 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT( A)-I, BANGALORE FOR THE ASSESSMENT YEAR 2006-07 DATED 30/11/2010, BO TH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE THIS TRIBUNAL. 3.1 THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AR E AS UNDER:- (2) THE LEARNED CIT(A) HAS ERRED IN DELETING THE A DDITION TO THE EXTENT OF RS.2,50,16,051/- OUT OF THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED INCOME ON SALE OF SITES AND ALLOWING RELIEF OF RS.73,04,796/-OUT OF ADDITION MADE ON ACC OUNT OF UNDISCLOSED CLOSING STOCK OF SITES, MADE BY THE ASSE SSING OFFICER, WITHOUT APPRECIATING THE FACTS AND CIRCUMS TANCES UNDER WHICH THE ADDITION WAS MADE BY THE ASSESSING O FFICER BASED ON THE SWORN STATEMENT OF THE MANAGING DIRECT OR OF THE ASSESSEE COMPANY DURING THE SURVEY PROCEEDINGS. (3) THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ONS OF RS.1,14,00,000/-, RS.55,96,630/-, RS.36,00,000/- MA DE ON ACCOUNT OF BROKERAGE PAID OUTSIDE THE BOOKS, PAYMENT TO LAND OWNERS OUTSIDE THE BOOKS, AND CASH PAYMENT FOR LAND OWNERS FOR PURCHASE OF LAND UNDER SECTION 40A(3) RESPECTIVELY, MADE BY THE ASSESSING OFFICER, WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES UNDER WHIC H THE PAGE 6 OF 14 ITA NOS.137, 58 & 157/BANG/2011 6 ADDITION WAS MADE BY THE ASSESSING OFFICER BASED ON THE SWORN STATEMENT OF THE MANAGING DIRECTOR OF THE ASS ESSEE COMPANY DURING THE SURVEY PROCEEDINGS. (4) THE LEARNED CIT(A) WAS NOT JUSTIFIED IN ALLOWING RE LIEF AND DELETING THE ADDITIONS AS ABOVE ACCEPTING THE ASSES SEES CONTENTION THAT ADDITIONS WERE MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE STATEMENT GIVEN BY ITS M ANAGING DIRECTOR DURING THE SURVEY PROCEEDINGS, WHICH WAS G IVEN WITHOUT UNDERSTANDING THE FACTS, WHEREAS HE HAS REL IED, INTER-ALIA, ON THE SAME STATEMENT OF THE MANAGING D IRECTOR FOR SUSTAINING THE ADDITION MADE BY THE ASSESSING OF FICER ON THE OTHER ISSUES LIKE CONSULTANCY CHARGES, DISALLOWA NCE OF OTHER CASH PAYMENTS UNDER SECTION 40A(3) ETC. (5) THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT TH E MANAGING DIRECTOR OF THE ASSESSEE COMPANY, WHO HAS B EEN INVOLVED IN THE LAND DEVELOPMENT AND REAL ESTATE BU SINESS OF THE ASSESSEE COMPANY, IS SUPPOSED TO BE THE PERSON W ITH A KNOWLEDGE OF ALL THE AFFAIRS OF THE COMPANY AND THE STATEMENT GIVEN BY HIM ON OATH UNDER SECTION 133A CA NNOT BE SAID TO HAVE BEEN WITHOUT APPLICATION OF MIND. 3.3 THE GROUNDS RAISED BY THE REVENUE IN THIS APPEA L (FOR ASSESSMENT YEAR 2006-07) ARE AS UNDER:- (1) THE LEARNED ASSESSING OFFICER HAD ERRED IN PAS SING THE ORDER IN THE MANNER PASSED BY HIM AND THE LEARNED CI T(A) HAS ERRED IN PARTIALLY CONFIRMING THE SAME. THE ORD ERS PASSED ARE BAD IN LAW AND ARE LIABLE TO BE QUASHED. (2) IN ANY CASE AND WITHOUT PREJUDICE, THE AUTHORITIES B ELOW HAVE NOT PROPERLY APPRECIATED THE FACTS OF THE CASE AND EVIDENCES AVAILABLE. THE ORDERS PASSED ARE ON SURM ISES AND CONJECTURES ARE TO BE QUASHED. (3) THE LEARNED ASSESSING OFFICER HAD ERRED IN MAKING T HE VARIOUS ADDITIONS MERELY ON THE BASIS OF ERRONEOUS S TATEMENT PAGE 7 OF 14 ITA NOS.137, 58 & 157/BANG/2011 7 GIVEN BY THE DIRECTOR AT THE TIME OF SURVEY. THE LEA RNED CIT(A) INSTEAD OF DISREGARDING THE ERRONEOUS STATEM ENT IN TOTO HAS ERRED IN PARTIALLY RELYING ON THE SAME. 4.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN ADDING A SUM OF RS.4,33,92,670 AS UNDISCLOSED INCOME ON SALE OF SIT ES AND THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDI TION TO THE EXTENT OF RS.1,83,76,619/-. THE ADDITION AS MADE/CONFIRMED ARE ON ERRONEOUS PREMISE IS TO BE DE LETED AND THE INCOME AS OFFERED BY THE APPELLANT IS TO BE ACCEPTED. 4.2 THE AUTHORITIES BELOW HAVE ERRED IN NOT APPRECIATIN G THE FACT THAT (I) THE RECEIPT OF RS.14,06,37,840/- WAS COMPRISED OF AN ELEMENT OF ADVANCES RECEIVED AGAINST SALE OF SITES ALSO AND ERRED IN TREATING THE ENTIRE RECEIPT AS SALE CONSIDERATION OF THE SITES SOLD. (II) THE APPELLANT IS ACTING AS A MERE AGENT OF LAND OWNERS. (III) THE APPELLANT WAS EXCLUSIVELY CARRYING ON SINGLE PROJECT DURING THE FINANCIAL YEAR RELEVANT TO YEAR UNDER APPEAL. 4.3 THERE IS NO UNDISCLOSED INCOME AT ALL. 5.1 THE LEARNED ASSESSING OFFICER HAD ERRED IN ADDING A SUM OF RS.1,34,41,013 AS UNDISCLOSED CLOSING STOCK IN THE HANDS OF THE APPELLANT AND THE LEARNED CIT(A) HAS ERRED IN C ONFIRMING THE ADDITION TO THE EXTENT OF RS.61,36,217. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW APPLICABLE, T HE ADDITION BEING BAD IN LAW IS TO BE DELETED IN ENTIR ETY. 5.2 THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THE FACT THAT THE LAND OWNERS HAVE CONSIDERED THE ENTIRE CLO SING STOCK AS THEIR CLOSING STOCK IN THE BOOKS FOR THE R ELEVANT ASSESSMENT YEAR. ON PROPER APPRECIATION OF FACTS AN D THE PAGE 8 OF 14 ITA NOS.137, 58 & 157/BANG/2011 8 LAW APPLICABLE THE ADDITION AS MADE/SUSTAINED IN TH E HANDS OF THE APPELLANT IS NOT WARRANTED. 6. THE APPELLANT DENIES THE LIABILITY TO PAY INTEREST UNDER SECTION 234B AND 234C OF THE ACT. THE INTEREST HAV ING BEEN LEVIES ERRONEOUSLY IS TO BE DELETED. 7. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER PASSED BE QUASHED OR ATLEAST THE ADDITIONS AS CONFIRMED BY COMMISSIONER OF INCOME TAX (APPEALS) WITH RESPECT T O SALE OF SITES AND CLOSING STOCK BE DELETED, AND INTEREST LEVIED BE ALSO DELETED. 3.4 THE GROUNDS RAISED BY THE REVENUE IN THIS APPEA L (FOR ASSESSMENT YEAR 2007-08) ARE AS UNDER:- (2) THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.6,06,43,114/- MADE ON ACCOUNT OF UNDISCLOSED IN COME ON CLOSING STOCK, BASED ON THE SWORN STATEMENT OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY DURING THE SURVEY PROCEEDINGS, WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ADDITION WAS MADE BY T HE ASSESSING OFFICER. (3) THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETING TH E ADDITION MADE ON ACCOUNT OF UNDISCLOSED INCOME ON C LOSING STOCK ON THE BASIS OF THE ASSESSEES CONTENTION THA T THE STATEMENT GIVEN BY ITS MANAGING DIRECTOR IS WITHOUT UNDERSTANDING THE FACTS, WHEREAS HE HAS RELIED, INT ER-ALIA, ON THE SAME STATEMENT OF THE MANAGING DIRECTOR FOR SUS TAINING THE ADDITION MADE BY THE ASSESSING OFFICER ON THE IS SUE OF ADVANCES MADE. (4) THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT TH E ISSUE WAS DISCUSSED WITH THE MANAGING DIRECTOR IN THE COU RSE OF THE ASSESSMENT PROCEEDINGS ALSO AND HE HAD CONFIRME D THE UNDISCLOSED INCOME ON CLOSING STOCK. PAGE 9 OF 14 ITA NOS.137, 58 & 157/BANG/2011 9 (5) FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER O F THE CIT(A) BE REVERSED IN SO FAR AS THE ABOVE MENTIONED ISSUE IS CONCERNED AND THAT OF THE ASSESSING OFFICER BE REST ORED. 4. THE LEARNED AR OF THE ASSESSEE ASSAILED THE ORD ER OF ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07 AS BEING COMPLETED L ARGELY ON CONJECTURE, SUSPICION AND SURMISE. IT WAS SUBMITTED BY THE LEAR NED AR THAT THE ASSESSEE WAS A COMPANY INCORPORATED IN MAY, 2005 AND THEREFORE THE CURRENT PERIOD RELEVANT TO ASSESSMENT YEAR 2006-07 WAS ITS FIRST YEA R OF OPERATION. IT WAS SUBMITTED THAT ON 22/2/2007 THE INCOME TAX DEPARTME NT CONDUCTED A SURVEY ACTION UNDER SECTION 133A OF THE ACT AT THE BUSINES S PREMISES OF THE ASSESSEE. IN THE COURSE OF SURVEY, STATEMENTS WERE RECORDED FR OM THE MANAGING DIRECTOR OF THE ASSESSEE WHEREIN HE MADE CERTAIN ADMISSIONS/ DECLARATION FOR CERTAIN ADDITIONAL INCOME. IT WAS SUBMITTED THAT, HOWEVER, WHILE FILING THE RETURN OF INCOME, THE ASSESSEE DID NOT INCLUDE THEREIN, THE E XTRA INCOME DECLARED AT THE TIME OF SURVEY. IN THE COURSE OF ASSESSMENT PROCEED INGS, IT WAS SUBMITTED, THAT THE ASSESSEE MADE CERTAIN CONCESSIONS AND AGRE ED TO OFFER TO TAX MOST OF THE INCOME WHICH WAS DISCLOSED AT THE TIME OF SURVE Y. THE LEARNED AR SUBMITTED THAT A PERUSAL OF THE ORDER OF ASSESSMEN T ALSO SHOW THAT THE ASSESSING OFFICER HAS MADE ADDITIONS/DISALLOWANCES ON THE BASIS OF DECLARATION MADE IN THE COURSE OF SURVEY AND THE CONCESSIONAL LE TTER GIVEN BY THE MANAGING DIRECTOR IN THE COURSE OF ASSESSMENT PROCEEDINGS. 4.1 THE LEARNED AR SUBMITTED THAT WHEN THE MATTER WAS TAKEN UP IN APPEAL BEFORE THE LEARNED CIT(A), THE MAIN THRUST O F THE ASSESSEES ARGUMENT WAS THAT THE STATEMENT MADE BY THE MANAGING DIRECTOR IN THE COURSE OF SURVEY PROCEEDINGS AND ALSO THE CONCESSIONS MADE IN THE CO URSE OF ASSESSMENT PAGE 10 OF 14 ITA NOS.137, 58 & 157/BANG/2011 10 PROCEEDINGS, WERE MADE WITHOUT UNDERSTANDING THE EX ACT NATURE OF THE TRANSACTIONS. IT WAS THE SUBMISSION OF THE LEARNED AR THAT THE ASSESSEES CONTENTION IN APPELLATE PROCEEDINGS WAS THAT THE ST ATEMENTS AND CONCESSION WERE MADE ON THE PREMISE THAT THE ASSESSEE WAS THE ABSOLUTE OWNER OF THE LAND, WHEREAS THE FACT WAS THAT THE LAND DID NOT BE LONG TO THE ASSESSEE BUT TO OTHERS, ON WHOSE BEHALF THE ASSESSEE WAS DEALING. IT WAS FURTHER CONTENDED THAT CERTAIN PORTIONS OF INCOME SOUGHT TO ADD IN TH E HANDS OF THE ASSESSEE WAS ACTUALLY ALREADY ASSESSED IN THE HANDS OF THE LAND OW NERS AND RELIED ON CERTAIN DOCUMENTS TO ESTABLISH ITS POINT. IT WAS SUBMITTED BY THE LEARNED AR THAT THE LEARNED CIT(A) IN HIS ORDER HAS ACCEPTED THE ARGUME NT OF THE ASSESSEE ABOUT THE MISDIRECTED DECLARATION IN THE STATEMENTS OF TH E MANAGING DIRECTOR IN THE COURSE OF SURVEY AND DID NOT RELY ON THE DECLARATION AND CONCESSIONS MADE AND PROCEEDED TO RE-DETERMINE THE INCOME OF THE ASSESSE E. 4.2 IT WAS SUBMITTED BY THE LEARNED AR THAT THIS (I .E. ASSESSMENT YEAR 2006-07) IS THE FIRST YEAR OF OPERATION OF THE ASSES SEE IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. IT WAS ALSO SUBMITTED THAT IN THE RELEVANT PERIOD, THE ASSESSEE ENTERED INTO AN AGREEMENT ON 19/9/2005 WIT H THREE LANDOWNERS FOR DEVELOPMENT OF PROPERTIES OWNED BY THEM AND AGREED T O SECURE THEM CERTAIN PRICE PER SQ FT OF LAND TO THE LANDOWNERS AND THE B ALANCE WAS TO BE COLLECTED BY THE ASSESSEE TOWARDS DEVELOPMENT CHARGES AND PROFIT . THE LAND SHARING RATIO WAS 60% TO THE LAND OWNERS AND 40% TO THE ASSESSEE. THIS PROJECT, IT WAS SUBMITTED BY THE LEARNED AR, WAS THE SINGLE PROJECT WHICH THE ASSESSEE WAS PURSUING AND THAT THE ASSESSEE DID NOT OWN ANY LAND. IT WAS FURTHER SUBMITTED BY THE LEARNED AR THAT IN APPELLATE PROCEEDINGS, THE LEARNED CIT(A) GAVE PARTIAL RELIEF TO THE ASSESSEE ON THE GROUND THAT THE STATE MENT OF THE MANAGING PAGE 11 OF 14 ITA NOS.137, 58 & 157/BANG/2011 11 DIRECTOR WAS GIVEN ON ERRONEOUS FACTS AND ALSO REST RICTED THE ASSESSEES SHARE OF INCOME ETC. TO ITS SHARE OF 40% IN THE PROJECT. THE LEARNED AR CONTENDED THAT THE LEARNED CIT(A) WHILE WORKING OUT THE INCOM E OF THE ASSESSEE AT PARA 7.3 ON PAGE 13 OF HIS ORDER HAS ALLOWED ONLY THE SET OFF OF DIRECT EXPENSES AND HAD NOT ALLOWED THE CLAIM FOR INDIRECT EXPENSES TO THE EXTENT OF RS. 91,99,248/- (BREAK UP OF EXPENSES ON PAGE 7 OF PAPER BOOK OF THE ASSESSEE). IT WAS FURTHER CONTENDED BY THE LEARNED AR THAT EVEN THE LEARNED CIT(A) HAS DISREGARDED THE BOOKS OF ACCOUNTS WHILE EXAMINING T HE ASSESSEES CLAIMS AND POINTED OUT THAT THE DISALLOWANCE UNDER SECTION 40( A)(IA) OF THE ACT, SUSTAINED BY THE LEARNED CIT(A) AT PAGE 23 OF HIS ORDER, OUGHT NOT TO HAVE BEEN MADE AS THE SAME ARE ALSO CONSIDERED IN ESTIMATION OF DIREC T EXPENSES. 4.3 IN THE COURSE OF HIS ARGUMENTS, THE LEARNED AR HAS POINTED OUT THE FOLLOWING DISCREPANCIES IN THE ORDER OF ASSESSMENT: - AT PARA 5.2 ON PAGE 3 OF THE ORDER WHILE CALCULATIN G THE PROFIT, THE CLOSING STOCK FIGURE IS REDUCED FROM SALE PRICE WHEREAS ACTUALLY FOR CALCULATING PROFIT, THE CLOSING STOCK V ALUE HAS TO BE ADDED TO SALE PRICE OR IS TO BE REDUCED BY THE COST. - AT PAGE 4 OF THE ORDER AT PARA 6.1, WHILE CALCULATI NG THE VALUE OF CLOSING STOCK, DEVELOPMENT COST OF RS.2,12,50,886/- HAS BEEN CONSIDERED. HOWEVER, THIS DEVELOPMENT COST IS NOT CONSIDERED FOR THE PURPOSE OF CALCULATING PROFIT AT PARA 5.2. - AT PARA 7 ON PAGE 5 OF THE ORDER, A SUM OF RS.1.14 CRORES IS ADDED AS BROKERAGE PAID, BUT THE ALLOWABILITY THEREO F FOR THE PURPOSE OF PROFIT CALCULATION IS NOT CONSIDERED. - FOR CALCULATION OF PROFIT AS WELL AS CLOSING STOCK, THE ENTIRE AREA INCLUDING THAT OF THE OWNER IS CONSIDERED WHEREAS A CTUALLY ONLY THE AREA OF LAND COMING TO THE SHARE OF THE ASSESSE E, AS THE DEVELOPER, IS TO BE CONSIDERED. - IN THE REMAND REPORT OF THE ASSESSING OFFICER (AT P AGE 123 TO 126 OF THE ASSESSEES PAPER BOOK) REFERENCE IS MADE TO PAGE 12 OF 14 ITA NOS.137, 58 & 157/BANG/2011 12 AGREEMENT DATED 19/9/2005 WHICH IS A REGISTERED JDA (WHICH IS AT PAGE 32 TO 45 OF ASSESSEES PAPER BOOK). THE REFORE, IT IS NOT RIGHT ON THE PART OF THE ASSESSING OFFICER TO S AY THAT HE WAS NOT AWARE OF THE JDA. 4.4 THE LEARNED AR ALSO CLAIMED THAT THERE WERE DI SCREPANCIES IN THE LEARNED CIT(A)S ORDER, SOME WHICH ARE AS UNDER: - IN PARAS 7.0 TO 7.5 FROM PAGES 10 TO 14 OF THE ORDE R (I) THE LEARNED CIT(A) HAS TAKEN THE ENTIRE SALE PRICE IN ASSESSMENT YEAR 2006-07, WHEREAS THE CLAIM OF THE ASSESSEE IS THAT THE SALE PRICE RELATES TO TWO YEARS I.E. ASSESSMENT YEARS 2006-07 AND 2007-08. (II) THE LEARNED CIT(A) HAD WORKED OUT THE INCOME ON SAL E OF LAND BY DEDUCTING THE ESTIMATED NET COST OF THE DEVELOPMENT OUT OF THE SALE PROCEEDS RELATABLE TO T HE ASSESSEE. (III) HAVING DONE SO, IN PARAS 8 TO 8.5 AT PAGES 14 TO 17 OF THE ORDER, THE LEARNED CIT(A) HAS AGAIN ADDED THE VALUE OF THE CLOSING STOCK WHICH IS NOT RIGHT, IN AS MUCH AS WHILE ARRIVING AT THE ESTIMATED COST OF DEVELOPMENT, THE NET DEVELOPMENT COST ONLY HAS BEEN TAKEN. (IV) FROM THE PROFIT CALCULATED AS ABOVE (WHICH IS NOTHI NG BUT GROSS PROFIT), NO DEDUCTION IS GIVEN FOR INDIRECT E XPENSES DEBITED TO PROFIT AND LOSS ACCOUNT. (V) IN PARA 7 AT PAGES 17 TO 19, THERE IS A REFERENCE T O UNACCOUNTED BROKERAGE BY THE CIT(A). (VI) IN PARA 12 AT PAGE 23 OF THE ORDER, THERE IS A REFE RENCE TO DISALLOWANCE OF RS.25,81,992/- UNDER SECTION 40( A)(IA) OF THE ACT, WHICH HAS BEEN ADMITTED BY THE ASSESSEE. HOWEVER, THESE EXPENSES ON WHICH TDS WAS NOT DEDUCTED/NOT PAID INCLUDED DIRECT EXPENSES LIKE SEW AGE LINES EXPENSES, CONSTRUCTION EXPENSES, LABOUR EXPEN SES, ELECTRIC WORK, ETC., WHICH CANNOT BE DISALLOWED/ADD ED BACK AGAIN IN VIEW OF THE WORKING OF NET DEVELOPMEN T COST AS STATED ABOVE. PAGE 13 OF 14 ITA NOS.137, 58 & 157/BANG/2011 13 (VII) FURTHER, AS SEEN FROM THE ORDERS, THE EXACT INCIDEN CE, AND EFFECT OF TWO REGISTERED DOCUMENTS HAVE NOT BEE N CONSIDERED. (VIII) THE LEARNED AR SUBMITTED THAT THESE FEW DISCREPANCI ES POINTED OUT (SUPRA) IS NOT EXHAUSTIVE BUT CLEARLY IN DICATES AND ESTABLISHES THAT THE ORDERS OF THE AUTHORITIES BELOW SUFFERS FROM GRAVE SHORTCOMINGS THAT RESULTED IN FR AMING OF ABSURD AND ERRONEOUS ORDERS. IN THIS VIEW OF TH E MATTER, THE LEARNED AR PLEADED THAT IN THE INTEREST OF JUSTICE TO BOTH, THE ASSESSEE AND THE REVENUE, THE ASSESSMENTS FOR BOTH THE ASSESSMENT YEARS 2006-07 AN D 2007-08 BE REMITTED BACK TO THE FILE OF THE ASSESSI NG OFFICER TO BE CARRIED OUT AFRESH. 5.0 THE LEARNED DR WAS HEARD IN SUPPORT OF THE GRO UNDS RAISED BY THE REVENUE. IN THE COURSE OF SUBMISSIONS, THE LEARNED DR SUBMITTED THAT HE HAD NO OBJECTION TO THE PROPOSAL OF THE LEARNED AR THAT TH E ASSESSMENTS FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR DE-NOVO CONSIDERATION. 6.0 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD. ON PERUSAL OF THE ORDERS OF THE AUTHORITIE S BELOW, IT IS SEEN THAT THERE ARE A NUMBER OF DISCREPANCIES THEREIN AS POINTED OU T BY THE LEARNED AR AND PARTICULARLY AS LISTED OUT (SUPRA). WE ARE OF THE VIEW THAT THESE DISCREPANCIES GO TO THE VERY FUNDAMENTAL BASIS ON WHICH THE ORDERS OF ASSESSMENT/APPEAL REST. IN THIS VIEW OF THE MATTER, WE ARE OF THE CO NSIDERED OPINION THAT IN ORDER TO ENSURE THAT THE CORRECT INCOME IS COMPUTED AND B ROUGHT TO TAX, IT WOULD BE NECESSARY TO RE-EXAMINE THE ISSUES KEEPING IN MIND T HE CORRECT FACTS, THE PRINCIPLES OF ACCOUNTANCY AND LAW. WE, THEREFORE, DEEM IT FIT TO SET ASIDE THE ASSESSMENTS FOR BOTH THE ASSESSMENT YEARS 2006-07 AN D 2007-08, AND REMIT THE MATTER OF ASSESSMENT TO THE FILE OF THE ASSESSI NG OFFICER, WHO SHALL AFTER PAGE 14 OF 14 ITA NOS.137, 58 & 157/BANG/2011 14 AFFORDING THE ASSESSEE REASONABLE OPPORTUNITY OF BEI NG HEARD, RE-DETERMINE THE INCOME OF THE ASSESSEE FOR BOTH THESE YEARS IN ACCO RDANCE WITH LAW. 7. IN THE RESULT, BOTH THE APPEALS OF REVENUE AND THAT OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF NOVEMBER, 2012. SD/- SD/- (P. MADHAVI DEVI) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT( A) 5. DR, - A BENCH. 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE MSP/-