ACIT, Circle-9(1), Hyderabad V. M/s Anantha Sai Realtors, Hyderabad

ITA 1420/HYD/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6154 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 27-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SITHARAM
• Keywords: Opportunity of being heard; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1420/HYD/2014 ASSESSMENT YEAR: 2007-08 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 9(1), HYDERABAD. VS. M/S ANANTHA SAI REALTORS, HYDERABAD. PAN AANFA 1691 G (ASSESSEE) (RESPONDENT) REVENUE BY : SHRI SITHARAM ASSESSEE BY : SHRI MOHD. AFZAL DATE OF HEARING 23-12-2015 DATE OF PRONOUNCEMENT 22-01-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS)- V, HYDERABAD, DATED 31.03.2014 FOR AY 2007-08. 2. BRIEFLY THE FACTS OF THE CASE ARE, THAT DURING T HE COURSE OF ASST. PROCEEDINGS FOR THE A.Y.2009-10, THE ASSESSING AUTH ORITY INVESTIGATED INTO THE ASSESSEE'S CLAIM OF LAND DEVELOPMENT EXPEN SES OF RS. 81,95,600 FOR THAT YEAR AND HELD THE ENTIRE CLAIM OF LAND DEVELOPMENT EXPENSES AS BOGUS. BASED ON THIS FINDING, ASSESSMEN TS FOR THE AYS 2007-08 AND 2008-09 HAD TO BE REOPENED AS SIMILAR C LAIM WAS INVOLVED IN BOTH THE ASSESSMENT YEARS. 2.1 THE BUSINESS OF THE ASSESSEE FIRM COMMENCED ON 23-10-2006. DURING THE F.Y.2006-07 RELEVANT TO A.Y.2007-08, THE RE WERE NO SALES AND THEREFORE, THE ASSESSEE CARRIED FORWARD ITS ENT IRE EXPENDITURE AS 2 ITA NO. 1420/HYD/2014 M/S ANANTHA SAI REALTORS, HYD. WORK IN PROGRESS, AS ON 31-3-2007 IT WAS RS.32,46,5 61/. OUT OF THIS, THE ASSESSEE CLAIMED RS.22,97,571 AS LAND DEVELOPME NT CHARGES. DURING THE COURSE OF ASST. PROCEEDINGS, THE ASSESSE E SUBMITTED A STATEMENT SHOWING CASH WITHDRAWALS FROM BANK FOR TH E PERIOD FROM 30-10-2006 TO 31-3-2007. IT WAS ALSO MENTIONED THAT AN AMOUNT OF RS.26,09,035 WAS SPENT TOWARDS STAMP DUTY, LAND REG ISTRATION CHARGES AND LAND DEVELOPMENT EXPENSES. THE SOURCE F OR THE SAID EXPENDITURE WAS STATED TO BE CASH WITHDRAWALS BETWE EN THE PERIOD 30-10-2006 TO 29-3-2007. EXCEPT SUBMITTING, THE ASS ESSEE COULD NOT PRODUCE ANY OTHER EVIDENCE FOR SUBSTANTIATING THE E XPENDITURE CLAIMED TOWARDS LAND DEVELOPMENT CHARGES. THE A.O. FOR HIS DETAILED REASONS MENTIONED IN THE ASST. ORDER, DISALLOWED TH E CLAIM OF RS.22,97,571/- TOWARDS LAND DEVELOPMENT CHARGES AS NOT PROPERLY SUBSTANTIATED WITH NECESSARY EVIDENCES. ACCORDINGLY , OUT OF THE ENTIRE EXPENDITURE OF RS.32,46,561 CLAIMED BY THE ASSESSEE AS WORK IN PROGRESS, AN AMOUNT OF RS.22,97,571 WAS DISALLOWED AND THE BALANCE EXPENDITURE WAS ALLOWED TO BE CARRIED FORWARD TOWAR DS WORK IN PROGRESS AND RESTRICTED THE WORK IN PROGRESS TO RS. 9,48,990. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARRI ED THE MATTER IN APPEAL BEFORE THE CIT(A). 4. THE SUBMISSIONS MADE BY THE ASSESSEE WERE EXTRAC TED BY THE CIT(A) AT PAGES 3 & 4 AND AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE, THE CIT(A) PARTLY ALLOWED THE ASSESSEES APPEAL BY OBSERVING AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER. I FIND FORCE IN THE CONT ENTIONS OF THE ASSESSEE FOR THE FOLLOWING REASONS: (I) THE ASSESSEE PURCHASED THE LAND IN ANKUSHAPUR VILLAGE NEAR GHATKESAR, FOR AN AMOUNT OF RS.3,04,72,035 AND SUB SEQUENTLY PURCHASED IS RS.38,37,500 AND REGISTRATION CHARGES AT RS.2,52,420 TOTALLING RS.3,45,61,955. IN EFFECT, T HE ASSESSEE PURCHASED ACRES 39.21 GUNTAS AND PARTLY SOLD THE L AND OF ACRES 12.39 GUNTAS TO M/S VSR CONSTRUCTIONS AND PROPERTY 3 ITA NO. 1420/HYD/2014 M/S ANANTHA SAI REALTORS, HYD. DEVELOPERS FOR A SUM OF RS.2 CRORES ON 6-9-2007 L. E. RELEVANT TO A.Y.2009-10, VIDE DOCUMENT NO.9504/2007. AFTER THE SALE OF LAND, THE BALANCE LAND OF 26 ACRES WHOSE COST IN T HE BOOKS OF ASSESSEE WAS ONLY RS.L,45,61,955 (RS.3,45,61,955 RS.2,OO,00,000), WHICH HAS FETCHED THE ASSESSEE RS.38,52,86,610, WHICH WAS SOLD TO MIS BHOOMI 1900 JA SHELTERS (P) LIMITED, BOMBAY, IN THE A.Y.2009-10. THIS WAS ONLY POSSIBLE DUE TO DEVELOPMENT OF THE LAND UNDER TAKEN BY THE ASSESSEE FROM THE MONTH OF OCTOBER, 2006 ONWARDS, THOUGH THE LANDS WERE REGISTERED IN THE MONTH OF NOVEMBER, 20 06. (II) THE DEVELOPMENT ACTIVITY UNDERTAKEN BY THE AS SESSEE INITIALLY BY ENGAGING LABOUR AND BY PURCHASING MOR RUM, FOR WHICH IT HAD TO MAINTAIN THE EXPENDITURE BY SELF M ADE VOUCHERS, WHICH IS COMMON IN THIS LINE OF REAL ESTATE. ONLY DUE TO THIS DEVELOPMENT OF THE LAND, THE ASSESSEE RECEIVED AN ADVANCE OF RS. 1 CRORE BY WAY OF CHEQUES DATED 18-12-2006, 19 -12-2006 AND 26-3-2007 AMOUNTING TO RS.25 LAKHS, RS. 25 LAK HS & RS.50 LAKHS RESPECTIVELY FROM M/S VSR CONSTRUCTIONS. SUB SEQUENTLY, THE LAND OF 12 ACRES WAS SOLD TO THIS PARTY DURING THE A.Y.2008- 09 FOR RS.2 CRORES. (III) THE FACT OF RECEIVING ADVANCE OF RS. 1 CRORE FROM M/S VSR CONSTRUCTIONS FOR THE PURCHASE OF A PART OF PROPER TY IN THE MONTH OF DECEMBER, 2006 I.E. AFTER TWO MONTHS FROM DEVELOPMENT OF LAND IN OCTOBER, 2006, ITSELF PROV ES THAT THE ASSESSEE DEVELOPED THE RAW MATERIAL AS FINISHED GO ODS/ SALEABLE PRODUCT. (IV) IT IS ALSO A FACT THAT THE DEPARTMENT DID NOT DENY THAT THE ASSESSEE SOLD THE LAND WITHOUT ANY DEVELOPMENT, WH ICH WAS CONFIRMED BY THE REPORT OF INSPECTOR, AS DISCUSSED IN A.Y.2009- 10. 4.3 THE A.OS MAIN ALLEGATION WAS THAT THE ASSESSEE COULD NOT PRODUCE THE EVIDENCE LIKE PAKKA BILLS FROM THE REC IPIENT AND PAYMENT BY CHEQUE. 4.3.1. WITH REGARD TO THE A.OS OBSERVATION ABOVE, IN THE BUSINESS OF REAL ESTATE, IT. IS A COMMON PRACTICE TO INVOLVE DAILY WAGES WORKERS FROM UNORGANIZED SECTOR, WHO ARE ILL ITERATE AND IT IS NOT POSSIBLE TO MAINTAIN FOOL PROOF VOUCHERS I N RESPECT OF THE EXPENDITURE INCURRED AND THE ASSESSEE HAD NO O PTION BUT TO ESTABLISH THE EXPENDITURE ONLY THROUGH SELF-MADE V OUCHERS, WHICH FACT WAS RECORDED IN THE BOOKS OF ACCOUNT SU BMITTED BEFORE THE A.O. IN THE FORM OF A SOFT COPY AND THE ASSESSEE ALSO PRODUCED CASH FLOW STATEMENT WHEREIN THIS EXP ENDITURE WAS RECORDED. HOWEVER, THE ENTIRE EXPENDITURE IS O NLY SUPPORTED BY SELF MADE VOUCHERS WHICH INDICATES CA SH PAYMENTS OF LESS THAN RS.20,000. TO COVER UP ANY DEFICIENCY IN THIS ASPECT, I DEEM IT JUSTIFIED TO DISALLOW 25 % OF THE TOTAL 4 ITA NO. 1420/HYD/2014 M/S ANANTHA SAI REALTORS, HYD. EXPENDITURE OF RS. 22,97,571 CLAIMED TOWARDS DEVEL OPMENT EXPENSES I.E RS. 5,74,393 AND ALLOW THE BALANCE AM OUNT OF RS. 17,23,178. THE AO IS DIRECTED TO RESTRICT THE VALU E OF WORK IN PROGRESS TO BE CARRIED FORWARD TO RS. 26,72,168 AS AGAINST RS. 32,46,561. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL: 01. THE ORDER OF LD. CIT(A) IS AGAINST FACTS OF T HE CASE. 02. WHETHER THE LD. CIT(A) IS CORRECT IN LAW IN AL LOWING 75% OF THE EXPENDITURE CLAIMED ON 'LAND DEVELOPMENT EXPENSES' HOLDING THAT THE' ENTIRE EXPENDITURE IS ONLY SUPPORTED BY SELF-MADE VOUCHERS WHICH INDICATES CASH PAYMENTS OF LESS THAN RS.20,000/- WHEREAS THE ASSESSEE HAD NOT FURNISHED ANY KIND OF PROOF IN SUPPORT OF THE SAID EXPENDITURE, BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 03. WHETHER THE LD. CIT(A) IS CORRECT IN LAW IN HO LDING THAT THE EXPENDITURE CLAIMED TOWARDS LAND DEVELOPMENT EXPENDITURE IS SU PPORTED BY SELF-MADE VOUCHERS, WITHOUT AFFORDING AN OPPORTUNITY TO THE ASSESSING OFFICER, IN VIEW OF THE FACT THAT, THE SAME EVIDENCE WAS NOT PRODUC ED BEFORE THE ASSESSING OFFICER, AS PER THE ASST. ORDER, AS THE SAME CONST ITUTE ADDITIONAL EVIDENCE UNDER RULE 46 A OF THE INCOME-TAX RULES. 6. LD. DR SUBMITTED THAT ASSESSEE HAD NOT SUBMITTED ANY KIND OF PROOF IN SUPPORT OF LAND DEVELOPMENT EXPENSES DURIN G THE ASSESSMENT PROCEEDINGS, BUT, THE CIT(A) HAD ALLOWED 75% OF THE EXPENDITURE AS ALLOWABLE. ALL THE VOUCHERS SUBMITTED BEFORE THE CI T(A) WERE SELF- MADE VOUCHERS. HE ALSO SUBMITTED THAT CIT(A) HAD NO T AFFORDED AN OPPORTUNITY TO THE AO TO REPRESENT HIS VIEW AS THE ASSESSEE HAD NOT SUBMITTED ANY EVIDENCE FOR THE DEVELOPMENT EXPENDIT URE DURING THE ASSESSMENT PROCEEDINGS. HE CONTENDED THAT THE SUBMI SSIONS OF SELF- MADE VOUCHERS AMOUNTS TO ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME-TAX RULES. FURTHER, HE RELIED ON THE ASSESSM ENT ORDER. 7. LD. AR RELIED ON THE ORDER OF CIT(A). 8. CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSELS AND PERUSING THE MATERIAL FACTS ON RECORD, WE OBSERVE THAT THE A O DISALLOWED THE LAND DEVELOPMENT EXPENDITURE DUE TO NON-SUBMISSION OF ANY PROOF FOR MAKING SUCH EXPENDITURE EXCEPT SUBMISSION OF BANK W ITHDRAWAL DURING THIS AY 2007-08. ASSESSEE SUBMITTED THE SELF -MADE VOUCHERS BEFORE THE CIT(A) AND THE CIT(A) CONVINCED WITH THE ABOVE 5 ITA NO. 1420/HYD/2014 M/S ANANTHA SAI REALTORS, HYD. SUBMISSIONS ALONG WITH THE FACT THAT THE ASSESSEE I S IN BUSINESS OF LAND DEVELOPMENT AND SALE OF PLOTS. IN THIS LINE OF BUSINESS, ASSESSEE HAD TO ENGAGE WORKERS AND EQUIPMENT FROM UNORGANIZE D SECTOR. THE ENGAGEMENT OF WORK MOSTLY ON DAILY WAGE BASIS, THER EFORE, IT IS NORMAL TO CREATE PROOF OF SUCH EXPENDITURE BY ASSES SEE ITSELF IN THIS LINE OF BUSINESS. CIT(A) STILL DISALLOWED 25% OF SU CH EXPENDITURE ON ESTIMATION BASIS. WE ARE OF THE VIEW THAT THE CIT(A ) EITHER COULD HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE OR DECLIN ED TO ENTERTAIN THE ASSESSEES SUBMISSIONS. THE CIT(A) HAD NOT ESTA BLISHED THE METHOD OF SUCH ESTIMATION AND THE BASIS OF SUCH APP ROACH. MOREOVER, THE CIT(A) HAD NOT GIVEN AN OPPORTUNITY TO AO PARTI CULARLY WHEN THE EVIDENCE PRODUCED BEFORE HIM WAS NOT SUBMITTED BEFO RE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING. IT IS C LEARLY AGAINST THE RULE 46 A OF THE IT RULES. IN OUR CONSIDERED VIEW, IT IS APPROPRIATE TO REMIT THE FILE BACK TO THE FILE OF THE AO TO VERIFY THE VOUCHERS OF THE EXPENDITURE AND DIRECT HIM TO ACCEPT THE SELF-MADE VOUCHERS AS PROOF OF SUCH EXPENDITURE CONSIDERING THE NATURE OF BUSIN ESS OF THE ASSESSEE. IT IS IMPERATIVE TO MENTION THAT THE ASSE SSEE MAY BE GIVEN PROPER OPPORTUNITY OF BEING HEARD AND THE VOUCHERS MAY BE VERIFIED AND ALLOWED AS PER THE PROVISIONS OF THE ACT. 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 22 ND JANUARY, 2016. KV 6 ITA NO. 1420/HYD/2014 M/S ANANTHA SAI REALTORS, HYD. COPY TO:- 1) ACIT, CIRCLE 9(1), BLOCK NO. 2D, INCOME TAX TO WERS, AC GUARDS, HYDERABAD 500 004 2) M/S ANANTHA SAI REALTORS, 16-2-10/16, 2 ND FLOOR, SAI KRUPA MARKET, HYDERABAD. 3 CIT(A)- V, HYDERABAD 4) CIT - VI HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.