M/s Gurkirat Promoters & Developers Pvt. Ltd., Zirakpur V. DCIT, Mohali

ITA 145/CHANDI/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2584 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 07-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Tax effect
• Section: 133A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.RANO JAIN, ACCOUNTANT MEMBER ITA NO. 683/CHD/2011 & ITA 145/CHD/2013 A.Y. : 2007-08 & 2006-07 M/S GURKIRAT PROMOTERS & VS THE DCIT, DEVELOPERS P.LTD., CIRCLE 6(1), #97, NEAR PREET PALACE, MOH ALI. VILLAGE BALTANA, NAC (PRESENTLY C/O SHRI HARJIT SINGH # 841, SECTOR 2, PANCHKULA. PAN: AACCG5057C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SING H RESPONDENT BY : SHRI SUSHIL KUMAR DATE OF HEARING : 14.01.2016 DATE OF PRONOUNCEMENT : 19.01.2016 O R D E R PER BHAVNESH SAINI,JM THIS ORDER SHALL DISPOSE OF BOTH THE APPEALS FILED BY THE ASSESSEE. ITA 683/2011 IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) CHANDIGARH DATED 01.03.20 11 FOR ASSESSMENT YEAR 2007-08. ITA 145/2013 IS DIREC TED AGAINST THE ORDER OF LD. CIT(APPEALS) CHANDIGARH DA TED 05.11.2012 FOR ASSESSMENT YEAR 2006-07. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT IN ASSESS MENT YEAR 2007-08, THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF RS. 1,57,84,670/-. SURVEY UNDER 2 SECTION 133A OF THE INCOME TAX ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 22.03.2007 . THE ASSESSEE DISCLOSED AN AMOUNT OF RS. 2.5 CRORES DURING THE COURSE OF SURVEY. THE SURRENDER LETTER A LSO DISCLOSED THAT DISCLOSURE OF 2.5 CRORES WAS MADE IN THE HANDS OF THE ASSESSEE COMPANY AND TWO OF ITS DIRECT ORS SHRI GURMEET SINGH AND SHRI HARJIT SINGH IN THE ASSESSMENT YEAR 2006-07 AND 2007-08. THE ASSESSING OFFICER MADE CERTAIN ADDITIONS ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE. FURTHER, AS PER PROFIT & LOSS ACCOUNT SUBMITTED BY ASSESSEE, IT WAS NOTED TH AT ASSESSEE COMPANY HAS SHOWN INCOME FROM SALE OF LAND FOR RS. 3,45,82,206/-. THE ASSESSEE WAS ASKED TO GI VE BREAK-UP OF THE SAME AND ASSESSEE FURNISHED SALE DE ED OF THE LAND SOLD IN KHANPUR BY THE ASSESSEE COMPANY . IT WAS NOTED THAT OUT OF 80 SALE DEEDS, 62 HAD BEEN DO NE PRIOR TO 31.03.2006 I.E. DURING ASSESSMENT YEAR 200 6-07 AND ONLY SALE DEED OF RS. 59,64,000/- HAVE BEEN DON E IN ASSESSMENT YEAR 2007-08. THE ASSESSEE SUBMITTED BEFORE ASSESSING OFFICER THAT RS. 2.5 CRORES WAS SURRENDERED TO COVER UP THE PAST DISCREPANCIES AND TO PURCHASE PEACE OF MIND AND AVOID ANY LITIGATION. T HE AMOUNT WAS SURRENDERED IN THE HANDS OF THE ASSESSEE COMPANY AND TWO OF ITS DIRECTORS. THE BREAK-UP OF THE SAME WAS GIVEN AS UNDER : ASSESSEE COMPANY A.Y. 2006-07 RS. 26.22 LACS 3 A.Y. 2007-08 RS. 157.84 LACS DIRECTORS RS. 66 LACS TOTAL : RS. 2.5 CRORES 3. IT WAS SUBMITTED THAT ASSESSEE PAID THE TAXES ON THE SAME. THE SURRENDER WAS MADE TO COVER UP THE DISCREPANCIES IN SALE/PURCHASE OF LAND, PLOTS ETC. THE ASSESSING OFFICER CONSIDERED REPLY OF THE ASSESSEE AND NOTED THAT REVENUES CAN BE RECOGNIZED ONLY IN THE Y EAR IN WHICH THEY ACCRUE. IT WAS NOTED THAT ASSESSEE I S FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THEREFOR E, SALE OF RS. 59,64,000/- COULD BE RECOGNIZED IN ASSESSMENT YEAR 2007-08 AND REMAINING OF RS. 2,86,18,206/- COULD BE CONSIDERED IN ASSESSMENT YEA R 2006-07. THE ASSESSMENT WAS ACCORDINGLY COMPLETED BY MAKING MINOR ADDITIONS. THE ASSESSEE CHALLENGED MI NOR ADDITIONS BEFORE LD. CIT(APPEALS) WHICH WERE CONFIR MED AND APPEAL OF THE ASSESSEE HAS BEEN DISMISSED. 4. IN ASSESSMENT YEAR 2006-07, A.O. CONSIDERED RS. 2.86 CR AS SALES AS ABOVE AND AFTER DEDUCTING EXPEN SES ON ACCOUNT OF PURCHASES OF LAND AND DEVELOPMENT EXPENDITURE, PROFIT WAS DETERMINED AT RS. 28,36,772 /- WHICH WAS ADDED IN ASSESSMENT YEAR 2006-07. CERTAI N OTHER EXPENSES WERE ALSO DISALLOWED. 5. THE ASSESSEE CHALLENGED THE ADDITIONS ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE BEFORE LD. CIT(APPEA LS) 4 WHICH ARE NOT IN CONSIDERATION BEFORE US. HOWEVER, AS REGARDS ADDITION OF RS. 28,36,772/- ON ACCOUNT OF P ROFIT ON SALE CONSIDERATION. THE ASSESSEE SUBMITTED THAT THE AMOUNT OF PROFIT HAS ALREADY BEEN SURRENDERED IN ASSESSMENT YEAR 2007-08 THEREFORE, IT WOULD AMOUNT TO DOUBLE ADDITION. THE, LD. CIT(APPEALS), HOWEVER, DI D NOT ACCEPT PLEA OF THE ASSESSEE AND DISMISSED THIS GROU ND OF APPEAL OF THE ASSESSEE BECAUSE THE INCOME IS EARNED IN THIS YEAR, THEREFORE, SHALL HAVE TO BE TAXED IN ASSESSMENT YEAR 2006-07 AND DISMISSED THIS GROUND O F APPEAL OF THE ASSESSEE. 6. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE LD. COUNSEL FOR THE ASSESSEE ONLY PRESSED THE ADDITION OF RS. 28,36,772/- IN ASSESSMENT YEAR 2006 -07 AND REST OF THE GROUNDS IN BOTH THE APPEALS HAVE NO T BEEN PRESSED AND HAVE BEEN WITHDRAWN. 7. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE V IEW ADDITION OF RS. 28,36,772/- IN ASSESSMENT YEAR 2006 -07 WOULD AMOUNT TO DOUBLE ADDITION. IT IS NOT IN DISP UTE THAT SURVEY WAS CONDUCTED IN THE CASE OF THE ASSESS EE ON 22.03.2007 AND ASSESSEE SURRENDERED RS. 2.5 CR I N THE HANDS OF THE ASSESSEE AS WELL AS TWO OF ITS DIR ECTORS IN BOTH ASSESSMENT YEARS UNDER APPEAL AND ASSESSEE ALSO PAID TAXES THEREON. IN ASSESSMENT YEAR 2006-0 7, ASSESSEE SURRENDERED RS. 26.22 LACS AND IN ASSESSME NT YEAR 2007-08 ASSESSEE SURRENDERED RS. 157.84 LACS A ND 5 PAID THE TAXES THEREON. THE REST OF THE AMOUNT WAS SURRENDERED IN THE HANDS OF THE DIRECTORS. PB-31 I S THE TRADING AND PROFIT & LOSS ACCOUNT ENDING 31.03.2007 IN WHICH ASSESSEE HAS DECLARED SALES OF LAND AT RS. 3. 45 CR AND THE NET PROFIT AS PER SURRENDER IS SHOWN AT RS. 157.84 LACS. IN NORMAL COURSE, SUCH A HUGE PROFIT C OULD NOT HAVE BEEN EARNED ON THE SALE OF RS. 3.45 CR. T HUS, ASSESSEE DECLARED THE ENTIRE SALE CONSIDERATION IN ASSESSMENT YEAR 2007-08 AND DECLARED INCOME THEREON AND ALSO PAID THE TAXES ON THE SAME. THUS THE INCOM E OF RS. 157.84 LACS DECLARED IN ASSESSMENT YEAR 2007-08 WOULD BE ON THE TOTAL SALES OF RS. 3.45 CR. THE ASS ESSEE IN THE SURRENDER LETTER EXPLAINED THAT THIS SURREND ER IS MADE TO COVER UP THE PAST DISCREPANCIES IN THE SALE/PURCHASE OF LANDS ETC. THEREFORE, IF ASSESSIN G OFFICER WANTED TO BIFURCATE THE FIGURE OF SALES OF RS. 3.45 CR IN TWO ASSESSMENT YEARS ABOVE, THEN THE CORRESPONDING SURRENDER IN ASSESSMENT YEAR 2007-08 SHOULD HAVE ALSO BEEN REDUCED FOR THE PURPOSE OF MAKING ADDITION IN ASSESSMENT YEAR 2006-07. THE ASSESSING OFFICER, HOWEVER, DID NOT DO SO AND ACCEP TED THE SURRENDERED INCOME IN BOTH THE ASSESSMENT YEARS AS PER RETURN OF INCOME FILED BY THE ASSESSEE. WHILE PASSING THE ASSESSMENT ORDER ALSO, NO CORRESPONDING REDUCTION HAVE BEEN MADE IN ASSESSMENT YEAR 2007-08 . THEREFORE, ASSESSEE RIGHTLY CONTENDED THAT IT WOULD AMOUNT TO DOUBLE ADDITION BECAUSE ON ONE HAND, ASSESSING OFFICER ACCEPTED SURRENDERED INCOME IN BO TH 6 THE ASSESSMENT YEARS BUT WHILE MAKING ADDITION IN ASSESSMENT YEAR 2006-07 OF RS. 28,36,772/- ON THE BASIS OF BIFURCATION OF THE SALES OF RS. 3.45 CR, N O FURTHER BENEFITS HAVE BEEN ALLOWED TO THE ASSESSEE BY REDUCING THE INCOME FROM COMPUTATION OF INCOME IN ASSESSMENT YEAR 2007-08. 8. SINCE ASSESSEE EXPLAINED THAT SURRENDER WAS MADE TO COVER UP DISCREPANCIES IN THE SALES, THEREFORE, THE COURSE ADOPTED BY THE ASSESSING OFFICER TO TAKE THE VALUATION OF SALES IN TWO DIFFERENT YEARS WOULD BE WHOLLY INAPPROPRIATE AND UNJUSTIFIED. WE MAY ALSO NOTE TH AT THE ASSESSING OFFICER IN THE COMPUTATION OF TAX LIA BILITY, HAS TAXED THE INCOME OF THE ASSESSEE @ 33.66% IN BO TH ASSESSMENT YEARS. THEREFORE, RATE OF TAX IS SAME FO R BOTH THE ASSESSMENT YEARS UNDER APPEALS AND AS SUCH, WHETHER HIGHER SURRENDER IS MADE IN ASSESSMENT YEAR 2007-08, WOULD NOT MAKE ANY DIFFERENCE AND REVENUE IS NOT GOING TO LOOSE ANYTHING IN THIS WAY. 9. HON'BLE SUPREME COURT IN THE CASE OF CIT VS EXCE L INDUSTRIES LTD. & ANOTHER 358 ITR 295 HELD AS UNDER : 32. THIRDLY, THE REAL QUESTION CONCERNING US IS THE YEAR IN WHICH THE ASSESSEE IS REQUIRED TO PAY TAX. THERE IS NO DISPUTE THAT IN THE SUBSEQUENT ACCOUNTING YEAR, THE ASSESSEE DID MAKE IMPORTS AND DID DERIVE BENEFITS UNDER THE ADVANCE LICENCE AND THE DUTY ENTITLEMENT PASS BOOK AND PAID TAX THEREON. THEREFORE, IT IS NOT AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. WE ARE TOLD THAT THE RATE OF TAX REMAINED THE SAME IN THE PRESENT ASSESSMENT YEAR AS WELL AS IN THE SUBSEQUENT ASSESSMENT 7 YEAR. THEREFORE, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX EFFECT. THERE WAS, THEREFORE, NO NEED FOR THE REVENUE TO CONTINUE WITH THIS LITIGATION WHEN IT WAS QUITE CLEAR THAT NOT ONLY WAS IT FRUITLESS (ON MERITS) BUT ALSO THAT IT MAY NOT HAVE ADDED ANYTHING MUCH TO THE PUBLIC COFFERS. 10. CONSIDERING THE ABOVE DISCUSSION IN THE LIGHT OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F EXCEL INDUSTRIES LTD.(SUPRA), WE SET ASIDE THE ORDE RS OF AUTHORITIES BELOW FOR ASSESSMENT YEAR 2006-07 AND DELETE THE ADDITION OF RS. 28,36,772/-. RESULTANTL Y, THE REMAINING GROUNDS OF ASSESSEE IN ASSESSMENT YEAR 20 06- 07 WOULD STAND DISMISSED AS NOT PRESSED. APPEAL OF ASSESSEE IN ASSESSMENT YEAR 2007-08 WOULD STAND DISMISSED AS NO FURTHER INTERFERENCE IS CALLED FOR IN THE MATTER. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IN ASSESS MENT YEAR 2006-07 IS PARTLY ALLOWED AND APPEAL OF THE ASSESSEE IN ASSESSMENT YEAR 2007-08 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (BHAVNE SH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19 TH JANUARY, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD