ACIT, CHENNAI V. Kugek Developers Pvt. Ltd., CHENNAI

ITA 1371/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5937 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Keywords: Depreciation; Opportunity of being heard

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 1371/MDS/2017 / ASSESSMENT YEAR : 2008-09 ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -4(2), CHENNAI 600 034. VS. M/S. KUGEL DEVELOPERS PVT. LTD., TIMES PARTNER, NO. 58, PERAMBUR BARRACKS ROAD, VEPERY, CHENNAI 600 007. [PAN: AADCK 3129N] ) / APPELLANT) ) / RESPONDENT) % & / APPELLANT BY : SHRI. N. MADHAVAN, JCIT )*% & / RESPONDENT BY : NONE & /DATE OF HEARING : 14.08.2017 & /DATE OF PRONOUNCEMENT : 24.10.2017 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-8, CHENNAI, IN ITA NO. 125 /2010-11 DATED 27.03.2017. 2. M/S. KUGEL DEVELOPERS PVT LTD., THE ASSESSEE, PR OVIDES PLACEMENT OF CONSTRUCTION SERVICES. FOR THE ASSESSMENT YEAR 200 8-09, THE ASSESSEE :-2-: ITA NO. 1371/MDS/2017 CLAIMED RS.4,55,27,000/- TOWARDS LAND DEVELOPMENT E XPENSES. THE AO REQUIRED THE ASSESSEE TO FURNISH , INTER ALIA, DET AILS ABOUT THE LAND WHICH WAS DEVELOPED, HOW IT WAS DEVELOPED, AGREEMENT BETWEEN THE OWNER OF THE LAND AND THE ASSESSEE, PAYMENT REGISTER FOR THE DAILY W AGES CLAIMED TO HAVE BEEN MADE , TO PRODUCE AND PROOF FOR THE PAYMENTS MADE E TC,. SINCE THE ASSESSEE COULD NOT FURNISH THEM, HE DISALLOWED IT. AGGRIEVE D , THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) . THE CIT (A) ON THE BASI S OF THE ORDERS OF THE CIT (A) AND THE ITAT FURNISHED BY THE ASSESSEE IN RESPECT OF THE APPEALS FILED BY ITS SISTER CONCERNS VIZ SUPRASNATH PROMOTERS PV T. LTD. ETC, DIRECTED THE ASSESSING OFFICER TO RESTRICT THE INCOME OF THE ASS ESSEE TO 2.24% AND PARTLY ALLOWED THE ASSESSEES APPEAL . AGGRIEVED AGAINST THE CIT(A) ORDER, THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUND S . 1. THE ORDER OF THE CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THE CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OF EXPENDITURE INCURRED ON LAND DEVELOPMENT OF RS4,55,27,000/- TO 2.24% OF THE INCOME OF THE ASSESSEE. 2.1. THE CIT(A) ERRED IN NOT APPRECIATING THE CONTE NTION OF THE AO THAT THE ASSESSEE HAD CLAIMED HUGE EXPENDITURE OF RS 4,55,27 ,000/- ON LAND DEVELOPMENT WITHOUT ANY DOCUMENTARY EVIDENCE LIKE V OUCHERS/BILLS/RECEIPTS ETC. 2.2. THE CIT(A) ERRED IN NOT APPRECIATING THE CONTE NTION OF THE AO THAT THE EXTRACT OF THE LEDGER ACCOUNT OF LAND DEVELOPMENT E XPENSES FURNISHED BY THE ASSESSEE DID NOT CONTAIN ANY DETAILS SUCH AS TO WHOM THE PAYMENTS HAVE BEEN MADE, NUMBER OF LABOURERS TO WHOM PAYMENT S WERE MADE ETC. 2.3. THE CIT (A) FAILED TO APPRECIATE THAT NO PROOF OR EVIDENCE IN CONNECTION WITH EXPENDITURE INCURRED ON IMPROVEMENTS AND AGREE MENT BETWEEN THE OWNER OF THE LAND AND THE ASSESSEE COMPANY WERE PRO DUCED BEFORE THE AO. :-3-: ITA NO. 1371/MDS/2017 2.4. THE CIT(A) ERRED IN NOT APPRECIATING THAT THE BURDEN WAS ON THE ASSESSEE TO PRODUCE ALL THE EVIDENCE IN SUPPORT OF THE CLAIMS MADE IN THE RETURN OF INCOME AND THE ASSESSEE FAILED TO DISCHAR GE ITS BURDEN OF SUBSTANTIATING ITS HUGE CLAIM ON THE LAND DEVELOPME NT EXPENSES. HENCE THE CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE AO IN DISALLOWING THE LAND DEVELOPMENT EXPENSES OF RS 4,55,27,000/-. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) M AY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. NONE APPEARED FOR THE ASSESSEE ALTHOUGH THE NOTI CE WAS SERVED BY REGISTERED POST WITH THE ACKNOWLEDGMENT ON RECORD. THE DR INVITING OUR ATTENTION TO THE ASSESSMENT ORDER SUBMITTED THAT BE FORE THE AO, THE ASSESSEE IN SUPPORT OF LAND DEVELOPMENT EXPENSES OF RS.4,55, 27,000/- , HAS JUST FILED AN EXTRACT OF THE LEDGER ACCOUNT ONLY. THE AO FOUND FROM IT THAT THE ASSESSEE CLAIMED TO HAVE INCURRED LABOUR PAYMENTS BY CASH F OR THE PERIOD FROM 7.12.2007 TO 31.03.2008 (IE., CONTINUOUSLY FOR FOUR MONTHS WITHOUT ANY HOLIDAYS IE., ON SUNDAYS, MOHARARN, CHRISTMAS, NEW YEAR, PONGAL (HARVEST FESTIVAL) ETC., WHICH INCLUDED RS. 40,000/- TOWAR DS 'SUPERVISOR PAYMENT' FOR EACH MONTH. BUT, SUCH A LEDGER ACCOUNT COPY DID N OT CONTAIN ANY DETAILS SUCH AS TO WHOM THE IMPUGNED PAYMENTS HAVE BEEN MAD E, NUMBER OF LABOURS TO WHOM SUCH PAYMENTS WERE MADE ETC. FURTHE R, THE AO NOTICED FROM THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET THAT T HE ASSESSEE DID NOT OWN ANY FIXED ASSETS (NIL DEPRECIATION CLAIMED) AND HEN CE ASKED THE ASSESSEE AS TO WHETHER THE LAND DEVELOPMENT WAS DONE THROUGH HI RING OF EARTH MOVING MACHINES LIKE BULL DOZERS, POWER TILLERS, TRACTORS ETC AND IF IT WAS HIRED :-4-: ITA NO. 1371/MDS/2017 WHETHER TDS WAS DEDUCTED ETC. THE ASSESSEE'S REPRES ENTATIVE REPLIED THAT THE LAND DEVELOPMENT WAS DONE WITH MANUAL LABOUR ONLY A ND NO MACHINERY WAS UTILIZED FOR LAND DEVELOPMENT. SUBSEQUENTLY, A QU ESTION WAS PUT TO THE ASSESSEE, IF LAND DEVELOPMENT TO AN EXTENT OF 651 A CRES WAS DONE MANUALLY AS CLAIMED, WHETHER THE ASSESSEE HIRED/OWNED ANY DE VELOPMENT CUM AGRICULTURAL EQUIPMENTS LIKE HAND AXE, SPADE, CRO W BAR, SICKLE, PAN ETC. THE ASSESSEE COULDN'T GIVE PROPER EXPLANATION . THE AO REQUIRED THE ASSESSEE , INTER ALIA, TO FURNISH DETAILS ABOUT THE LAND WHICH WAS DEVELOPED, HOW IT WAS DEVELOPED, AGREEMENT BETWEEN THE OWNER OF THE LAND AND THE ASSESSEE, PRODUCTION OF PAYMENT REGISTERS FOR THE DAILY WAGES CLAIMED TO HAVE MADE AND PRODUCE PROOF FOR THE PAYMENTS MADE ETC,. SINCE THE ASSESSEE COULD NOT FURNISH THEM, THE AO HELD THAT THE ASSESSEE COULD N OT PROVE ITS CLAIM OF DEVELOPING THE LAND TO AN EXTENT OF 651 ACRES WITHI N A SPAN OF 4 MONTHS BY USING LABOUR ONLY (IE WITHOUT USING ANY EARTH MOVIN G MACHINERY /LAND DEVELOPMENT EQUIPMENTS) THAT TOO CONTINUOUSLY DURI NG EVEN THE FESTIVE AND HARVEST SEASON AND HENCE DISALLOWED THE CLAIM. EVEN BEFORE THE CIT (A), AS IS SEEN FROM THE ORDER OF THE CIT (A), THE ASSES SEE HAS NOT FURNISHED ANY MATERIAL WITH RESPECT TO THE ISSUES UND ER CONSIDERATION. THE CIT (A) WITHOUT APPRECIATING THE FACTS OF THIS CASE PROPERL Y , WITHOUT EXAMINING WHETHER THE ASSESSEE HAD SIMILAR BUSINESS IN THE E ARLIER YEARS OR IN SUBSEQUENT YEARS AND WHETHER THE OPERATIONAL RESU LTS ARE SIMILAR OR NOT ETC DECIDED THE ISSUE . FURTHER, THE CIT (A) HAS WITH OUT EXAMINING WHETHER THE FACTS AND CIRCUMSTANCES OF THE CASES ON WHICH HE RE LIED ON HAS ANY :-5-: ITA NO. 1371/MDS/2017 COMMONALITY WITH THE FACTS AND CIRCUMSTANCES THE AS SESSEES BUSINESS HAS DECIDED THIS CASE . THEREAFTER, THE D R TOOK US T O EACH OF THE GROUNDS OF APPEAL AND SUBMITTED THAT THE ORDER OF THE CIT (A ) BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 4. WE HEARD HIM, GONE THROUGH THE ORDERS AND FIND M ERIT IN THE SUBMISSIONS. EVEN BEFORE THE CIT (A), AS SEEN FROM HIS ORDER , THE ASSESSEE HAS NOT FURNISHED ANY MATERIAL WITH RESPE CT TO THE ISSUES UNDER CONSIDERATION. ON THE FACTS AND CIRCUMSTANCES POINTED OUT BY THE AO, AS IS SUMMED UP BY THE D R , SUPRA, IT IS CLEAR THAT THE CIT (A) HAS NOT APPRECIATED THE CASE IN PROPER PERSPECTIVE. THE A O HAS DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE AS IT HAS NOT DISCHARGED ITS ONUS. THE CIT (A) HAS NOT EXAMINED AS TO WHAT PREVE NTED THE ASSESSEE IN FURNISHING EVEN THE RUDIMENTARY RECORDS IN RESPECT OF ITS CLAIM. FURTHER, IT IS SEEN FROM THE ASSESSMENT ORDER, THE A O HAS NOT RECORDED ANYTHING ABOUT THE BOOKS OF ACCOUNT. WHEN THE AO HAS NOT ES TIMATED THE INCOME BY REJECTING THE BOOKS OF ACCOUNT, THE CIT (A) CAN NOT REJECT THE BOOKS ACCOUNT AND ESTIMATE THE INCOME UNLESS OTHERWISE HE RECORDS THE REASONS BASED ON RELEVANT MATERIAL AND WHEN FRESH MATER IALS IS/ ARE RELIED ON, THE AO SHOULD HAVE BEEN DUE GIVEN OPPORTUNITY OF BEING HEARD . IN THIS CASE, AS POINTED OUT SUPRA, THE CIT (A) HAS NOT RECORDED ANY REASON BASED ON THE MATERIAL CONNECTED WITH THE ASSESSEES BUS INESS AS TO WHETHER OF THE CURRENT YEARS OR EARLIER YEARS OR OF THE SUBSEQU ENT YEARS DATA . RESULTS ETC. :-6-: ITA NO. 1371/MDS/2017 FURTHER, THE CIT (A) HAS ALSO NOT RECORDED AS TO WHETHER THE FACTS AND CIRCUMSTANCES OF THIS CASE IS ON PAR WITH THE C ASES ON WHICH HE RELIED ON, BOTH ON THE BUSINESS ENVIRONMENTS , LOCATIONAL AS WELL AS THE PERIOD (TIME), AND ON THE FINANCIAL ASPECTS WITH SPECIFIC REFEREN CE TO THE FINDINGS RECORDED BY THE A O ON THE ISSUES UNDER CONSIDERATION. THE C IT (A) HAS NOT EVEN RECORDED AS TO HOW AND FOR WHAT REASONS THE CASE S ON WHICH HE RELIED ON, COULD BE CONSIDERED AS SISTER CONCERNS OF THIS ASS ESSEE . HENCE, WE DEEM IT FIT TO SET ASIDE THE ORDER OF THE CIT (A) AND RESTORE THE MATTER TO FILE OF THE CIT (A). THE CIT (A) WOULD DECIDE THE ISSUE, AFRES H, IN ACCORDANCE WITH LAW, AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE / THE A O AS THE FACTS AND CIRCUMSTANCES WARRANT . 5. IN THE RESULT, THE REVENUES APPEAL IS TREATED A S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 24 TH OCTOBER, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) ! /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ! /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 24 TH OCTOBER, 2017 JPV & )12 32 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ) (/CIT(A) 4. 4 /CIT 5. 2 ) /DR 6. 7 /GF