DCIT, Mangalore V. Shri. Vivek Plus Fernandes, Mangalore

ITA 1458/BANG/2012

• Counselvise Citation: 145821114 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Revised return
• Section: 40A(3); 143(3); 153A; 37(1); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N.V. VASUDEVAN , JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO. 1458 /BANG/201 2 (ASSESSMENT YEAR : 200 8 - 0 9 ) DY. COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE , MANG ALORE. VS. SHRI VIVEK PIUS FERNANDES, PROP. VISHAL ENTERPRISES, D>NO.4 - 3 - 305/5, ASSISSI COMPLEX, BIJAI CHURCH ROAD, NEAR PINTO BAKERY, BIJAI, MANGALORE - 575 004 PAN AAEPF 8387R APPELLANT RESPONDENT. C.O. NO. 64/BANG/201 3 S.P. NO.177/BANG/2014 (IN I.T. A. NO.1458/BANG/2012 ) (ASSESSMENT YEAR : 2008 - 09) (BY ASSESSEE) REVENUE BY : SHRI FARHAT HUSSAIN QURESHI, CIT - III (D.R) ASSESSEE/C.O/PETITONER BY : SHRI V. SRINIVASAN, C.A DATE OF H EARING : 19.3.2015. DATE OF P RONOUNCEMENT : 24.04. 201 5 . O R D E R PER SHRI JASON P. BOAZ, A.M. : THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPE ALS) - VI, BANGALORE DT.23.8.2012 FOR ASSESSMENT YEAR 2008 - 09. THE ASSESSEE HAS ALSO PREFERRED CROSS OBJECTIONS (IN SHORT C.O. ) AGAINST THE SAID ORDER OF THE CIT 2 ITA NO. 1458 /BANG/ 20 1 2 C.O. NO.64/BANG/2013 & S.P. NO.177/BANG/2014 (APPEALS). BOTH THE APPEAL AND C.O. BEING HEARD TOGETHER ARE DISPOSED OFF BY WAY OF THIS ORD ER. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - 2.1 THE ASSESSEE, AN INDIVIDUAL ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT AND WORKS CONTRACT, FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2008 - 09 ON 14.11.2009 DECLARING INCOME OF RS.28, 91,040. THE INCOME RETURNED RELATED TO THE PROFIT FROM SALE OF LAND MEASURING 2.81 ACRES AT KODIALBAIL VILLAGE , ( BEJAI AUTOMATRIX LAND ) AT MANGALORE FOR A DECLARED CONSIDERATION OF RS.3,55,65,000 WHICH WAS RECEIVED OVER THREE FINANCIAL YEARS ENDING WIT H THE YEAR UNDER CONSIDERATION. AFTER CLAIMING EXPENDITURE OF RS.3,22,03,455 IN CONNECTION WITH THE SALE AND ADMINISTRATIVE EXPENSES, THE ASSESSEE RETURNED INCOME OF RS.28,91,040. 2.2 ON 13.2.2009 A SEARCH UNDER SECTION 132 OF THE INCOME TAX ACT, 19 61 (HEREIN AFTER REFERRED TO AS 'THE ACT') WAS CONDUCTED AT THE PREMISES OF ONE SRI DENZIL D SOUZA, DENIDA COTTAGE, JAYASHREE GATE, BIKA RA NAKATTE, MANGALORE. IN THE COURSE OF SEARCH, INCRIMINATING DOCUMENTS MARKED A/DDS/2 DT.13.2.2009 W ERE SEIZED, WHEREIN PAGES 21 TO 26, 38 TO 43 AND 44 TO 48 THEREOF WAS A MOU BETWEEN SRI DENZIL D SOUZA AND THE ASSESSEE REGARDING THE TRANSACTION OF 2.81 ACRES OF LAND AT KODIALBAIL VILLAGE (BEJAI AUTOMATRIX LAND) MENTIONED ABOVE. BASED ON THE AFORESAID INCRIMINATING DOCU MENTS PERTAIN ING TO THE ASSESSEE, NOTICE UNDER SECTION 153A RWS 153C OF THE ACT WAS ISSUED TO THE ASSESSEE ON 21.10.2010. IN RESPONSE THERETO, THE ASSESSEE FILED A RETURN OF INCOME ON 3 ITA NO. 1458 /BANG/ 20 1 2 C.O. NO.64/BANG/2013 & S.P. NO.177/BANG/2014 29.6.2010 DECLARING TOTAL INCOME OF RS.2,13,41,040. IN THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSEE FILED A REVISED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2,33,74,876. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) RWS 153A OF THE ACT VIDE ORDER DT.24.12.2010, ADOPTING THE INCOME AT RS.2,33,74,876 AS PER THE REVISED RETURN OF INCOME AND MAKING A FURTHER ADDITION OF RS.1,00,00 ,000 RECEIVED BY THE ASSESSEE F R OM THE SALE OF BE JAI AUTOMATRIX LAND AT KODIALBAIL, MANGALORE AND ALSO PROTECTIVELY ASSESSING THE CAPITAL GAINS OF RS.2,04,83,886 ON SALE OF BE JAI AUTOMATR IX LAND AT KODIALBAIL, MANGALORE. IN THIS MANNER, THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.3,34,18,880 IN THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2008 - 09. 2.3 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2008 - 09 DT.24.12.2010, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (APPEALS) VI, BANGALORE. THE LEARNED CIT(A) DISPOSED OFF THE ASSESSEE'S APPEAL VIDE ORDER DT.23.8.2012 ALLOWING THE ASSESSEE PARTIAL RELIEF. WHILE DISPOSING OFF THE APPEAL, THE LEARNED CIT(A) HAS RECORDED A FINDING THAT THE INCOME FROM THE LAND TRANSACTION AT KODIALBAIL, MANGALORE HAS TO BE ASSESSED FOR ASSESSMENT YEAR 2008 - 09 AND THAT THE ASSESSEE HAD RETURNED THE INCOME THEREFROM IN HIS RETURN OF INCOME. IN THAT VIEW OF THE MATTER, THE LEARNED CIT(A) DEL ETED THE ADDITION OF RS.1 CRORE MADE BY THE ASSESSING OFFICER IN THE ORDER OF ASSESSMENT, AS THE SAME WAS ALREADY REFLECTED AS A PART OF THE RECEIPTS OF RS.3,55,65,000 SHOWN BY THE ASSESSEE A S PART OF THE SALE PROCEEDS OF THE LAND AT KODIALBAIL, MANGALORE. IN ADDITION THERETO, THE LEARNED CIT(A) HAS ALSO DELETED THE PROTECTIVE ADDITION TOWARDS CAPITAL GAINS AS SHE HELD 4 ITA NO. 1458 /BANG/ 20 1 2 C.O. NO.64/BANG/2013 & S.P. NO.177/BANG/2014 THAT THE INCOME SHOULD BE ASSESSED UNDER THE HEAD BUSINESS . THE LEARNED CIT(A) ALSO HELD THAT, OUT OF THE EXPENSES OF RS.3,22,03,485, DISALLOWANCE OF RS.1,84,50,000 REQUIRES TO BE MADE UNDER SECTION 40A(3) OF THE ACT, SINCE THE SAID AMOUNT WAS CLAIMED AS PAYMENTS TO TENANTS IN CASH AND THEREFORE IT AMOUNTED TO VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE CIT (APPEALS) VI, BANGALORE FOR ASSESSMENT YEAR 2008 - 09 DT.23.8.2012, REVENUE HAS PREFERRED THIS APPEAL, RAISING THE FOLLOWING GROUNDS : - GROUND NO.1. THE LEARNED CIT (APPEALS) ERRED IN LAW AND IN FACT IN CONFIRMING THE DISALLOWA NCE OF RS.1,84,50,000 UNDER SECTION 40A(3) OF THE INCOME TAX ACT IGNORING THE FACT THAT THE EXPENSES ARE NOT ALLOWABLE UNDER SECTION 37(1) OF THE INCOME TAX ACT AS THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE EXPENDITURE. GROUND NO.2. THE LEARN ED CIT (APPEALS) ERRED IN LAW AND IN FACT IN DIRECTING TO COMPUTE THE BUSINESS INCOME AFTER DISALLOWING RS.;1,84,50,000 OUT OF THE EXPENSES OF RS.3,22,03,445 CLAIMED THEREBY CONFIRMING THE TOTAL INCOME AT RS.2,13,81,040 AS AGAINST THE TOTAL INCOME OFRS.2,3 3,74,876 DECLARED IN THE REVISED RETURN OF INCOME. 4.1 THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS IN RESPECT OF THE IMPUGNED ORDER OF THE CIT (APPEALS) FOR ASSESSMENT YEAR 2008 - 09 WHICH ARE AS UNDER : - 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE CROSS - OBJECTOR/RESPONDENT ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN DIRECTING THE LEARNED ASSESSING OFFICER TO MAKE A DI SALLOWANCE OF RS.1,84,50,000 IN TERMS OF SECTION 40A(3) OF THE ACT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CROSS - OBJECTOR S CASE. 3. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE CROSS - OBJECTION, YOUR RESPONDENT / CROSS - OBJECTOR HUMBLY PRAYS THAT THE APPEAL FILED BY THE APPELLANT A.O. IN RESPECT OF THE RELIEF GRANTED BY THE CIT (APPEALS) MAY BE DISMISSED AND GROUNDS OF THE CROSS - OBJECTION MAY BE ALLOWED AND JUSTICE RENDERED. 5 ITA NO. 1458 /BANG/ 20 1 2 C.O. NO.64/BANG/2013 & S.P. NO.177/BANG/2014 4.2.1 IN THE COURSE OF PROCEEDINGS BEFORE US, THE ASSESSEE HAS ALSO URGED ADDITIONAL GROUNDS OF C.OS WHICH ARE AS UNDER : - 1. THE ORDER OF ASSESSMENT PASSED UNDER SECTION 153C RWS 143(3) OF THE ACT IS BAD IN LAW AND VOID AB - INITIO IN AS MUCH THERE WAS NO MATERIAL WAS FOUND DURING THE C OURSE OF PERSON SEARCHED INDUCING A BELIEF THAT THE SAME BELONGED TO THE CROSS - OBJECTOR AND THEREFORE, THERE WAS NO JUSTIFICATION TO ISSUE THE NOTICE UNDER SECTION 153C OF THE ACT AND THE ORDER OF ASSESSMENT PASSED IS OPPOSED TO LAW CONSEQUENTLY THE IMPUGN ED ASSESSMENT ORDER DESERVES TO BE CANCELLED. 3. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE CROSS - OBJECTION, YOUR RESPONDENT / CROSS - OBJECTOR HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. 4.2. 2 THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THESE ADDITIONAL GROUNDS (SUPRA) WERE NOT URGED BEFORE THE LEARNED CIT(A) INADVERTENTLY. IT IS SUBMITTED THAT THESE GROUNDS DO NOT INVOLVE ANY INVESTIGATION OF FACTS OTHER THAN WHICH ARE ALREADY O N RECORD AND BEING PURE QUESTIONS OF LAW OUGHT TO BE ADMITTED AND DISPOSED OFF IN THE INTEREST OF JUSTICE AND EQUITY. WE HAVE PERUSED AND CONSIDERED THE SUBMISSIONS PUT FORTH BY THE LEARNED AUTHORISED REPRESENTATIVE, IN RESPECT OF THE ADMISSION OF THE ADDI TIONAL GROUNDS RAISED, AND ARE OF THE VIEW THAT THE ADDITIONAL GROUNDS RAISED ARE PURELY LEGAL GROUNDS AND OUGHT TO BE ADMITTED IN THE INTEREST OF EQUITY AND JUSTICE AND ACCORDINGLY ADMIT THE SAME. 5.2 IT IS SEEN FROM THE RECORD THAT THE TOTAL RECEI PTS OF THE ASSESSEE FROM THE SALE OF LAND AT KODIALBAIL, MANGALORE ARE SPREAD OVER THREE DIFFERENT FINANCIAL YEARS AND THE TOTAL RECEIPTS ARE RS.3,55,65,000 WHICH HAS BEEN SHOWN IN THE RETURN OF INCOME FILED ON 14.11.2009. IN THE SAID RETURN OF INCOME, TH E ASSESSEE HAD COMPUTED HIS INCOME FROM THE 6 ITA NO. 1458 /BANG/ 20 1 2 C.O. NO.64/BANG/2013 & S.P. NO.177/BANG/2014 SALE OF LAND AT RS.28,91,040 WHICH IS AT PAGE 6 OF THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND IS EXTRACTED HEREUNDER : - 1. TOTAL RECEIPTS RUPEES A.Y. 2006 - 07 2,05,65,000 A.Y. 2007 - 08 50,00,000 A.Y. 200 8 - 09 1,00,00,000 TOTAL RECEIPTS 3,55,65,000 2. TOTAL PAYMENTS : A PAYMENTS TO TENANTS 1,84,50,000 B LAND DEVELOPMENT EXPENSES (AY 2006 - 07) 78,43,455 C PAYMENTS TO TENANTS (2003 - 04) 30,10,000 D PAYMENTS TO TENANTS (2005 - 06) 11,00,000 E PAYMENT TO R OHAN 18,00,000 TOTAL 3,22,03,455 PROFIT FROM ABOVE AS PER BOOKS OF ACCOUNTS. 35,61,545 NET PROFIT AFTER ADMINISTRATION AND OTHER EXPENSES. 28,91,040 5.3 IT IS SEEN THAT SUBSEQUENTLY THE ASSESSEE HAD, FILED A RETURN OF INCOME ON 29.6.2010 IN R ESPONSE TO THE NOTICE UNDER SECTION 153A RWS 153C OF THE ACT DECLARING INCOME OF RS.2,13,41,040. THE DIFFERENCE IN INCOME IN BOTH THESE RETURNS, I.E. THE ORIGINAL RETURN OF INCOME FILED ON 14.11.2009 DECLARING INCOME OF RS.28,91,040 AND THE RETURN OF INCO ME FILED ON 29.6.2010 IN RESPONSE TO NOTICE ISSUED UNDER SECTION 153A RWS 153C OF THE ACT DECLARING INCOME OF RS.2,13,41,040 APPEARS TO BE THE SUM OF RS.1,84,50,000 CLAIMED AS PAYMENTS TO TENANTS. IT IS SEEN THAT SUBSEQUENTLY, THE ASSESSEE FILED ANOTHER R ETURN OF INCOME DECLARING AN INCOME OF RS.2,33,74,836 IN WHICH INCOME FROM THE SALE OF LANDS WAS OFFERED UNDER THE HEAD CAPITAL GAINS. THOUGH THE ASSESSING OFFICER HAS REJECTED THE 7 ITA NO. 1458 /BANG/ 20 1 2 C.O. NO.64/BANG/2013 & S.P. NO.177/BANG/2014 THEORY RELATING TO ASSESSMENT OF THE INCOME UNDER THE HEAD CAPITAL GAINS , THE ASSESSING OFFICER ADOPTED THE INCOME AS DECLARED IN THIS RETURN OF INCOME IN THE ORDER OF ASSESSMENT. IT APPEARS TO US THAT BOTH THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A), WHO HELD THAT THE INCOME FROM THE TRANSACTION OF THE KODIALBAIL LAN D REQUIRES TO BE COMPUTED CONSIDERING THE SAME AS BUSINESS INCOME ARE CORRECT AS EVEN BEFORE US THERE IS NO CLAIM THAT THE INCOME REQUIRES TO BE ASSESSED AS CAPITAL GAINS. IN THE FACTUAL MATRIX, WE FIND THAT THE ASSESSEE'S BUSINESS IS THAT OF PURCHASE AND SALE OF LAND AND THEREFORE THE INCOME IS ASSESSABLE UNDER THE HEAD BUSINESS ONLY. 5.4 IN RESPECT OF THE ORIGINAL RETURN OF INCOME FOR ASSESSMENT YEAR 2008 - 09 FILED ON 14.11.2009 DECLARING INCOME OF RS.28,91,040 AND THE RETURN FILED ON 29.6.2010 IN RE SPONSE TO NOTICE UNDER SECTION 153A RWS 153C OF THE ACT WHEREIN THE INCOME DECLARED IS RS.2,13,41,040, WE FIND THAT THE DIFFERENCE BETWEEN THE INCOME DECLARED IN BOTH THESE RETURNS PRECISELY RELATES TO THE SUM OF RS.1,84,50,000, THE FINDINGS IN RESPECT OF WHICH ARE CONTESTED BY BOTH REVENUE AS WELL AS THE ASSESSEE. WHILE REVENUE S CASE IS THAT THE AFORESAID PAYMENTS ARE HIT BY THE EXPLANATION TO SECTION 37(1) OF THE ACT, THE ASSESSEE HAS QUESTIONED THE ACTION OF THE LEARNED CIT(A) IN INVOKING THE PROVISION S OF SECTION 40A(3) OF THE ACT TO SUSTAIN THE DISALLOWANCE WITHOUT GIVING ANY OPPORTUNITY TO ASSESSEE TO PRESENT ITS POSITION AND VIEWS AND EXPLANATIONS IN THE MATTER. 8 ITA NO. 1458 /BANG/ 20 1 2 C.O. NO.64/BANG/2013 & S.P. NO.177/BANG/2014 5.5 THE ASSESSEE HAS ALSO CHALLENGED THE JURISDICTION INVOKED UNDER SECTION 153C OF THE ACT IN THE CASE ON HAND, BY WAY OF RISING OF ADDITIONAL GROUNDS OF APPEAL, WHICH HAVE BEEN ADMITTED. 5.6 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT IT WOULD BE IN THE INTEREST OF JUSTICE AND EQUIT Y IF THE MATTER OF ASSESSMENT IS RESTORED TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL CONSIDER THE AFORESAID ISSUES AFRESH AND PASS ORDERS IN ACCORDANCE WITH LAW AFTER AFFORDING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS AND SUBMISSIONS REQUIRED. WE MAKE IT ABSOLUTELY CLEAR THAT THE ASSESSEE IS AT LIBERTY TO URGE ALL CONTENTIONS BEFORE THE ASSESSING OFFICER INCLUDING THE VALIDITY OF ASSUMPTION OF JURISDICTION UNDER SECTION 153C OF THE ACT BY THE ASSESSING OFFICER AND SIMILAR LY THE ASSESSING OFFICER IS ALSO AT LIBERTY TO CAUSE SUCH ENQUIRY TO BE MADE AS IS REQUIRED TO ARRIVE AT THE PROPER DETERMINATION OF INCOME ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSING OFFICER SHALL, THEREAFTER, PASS THE ORDER OF ASSESSMENT A FRESH BEING UNINFLUENCED BY ANY OF THE EARLIER ORDERS AND SHALL CONCLUDE THE PROCEEDINGS IN ACCORDANCE WITH LAW. IT IS ORDERED ACCORDINGLY. 6. IN THE RESULT, BOTH REVENUE S APPEAL AND THE C.OS OF THE ASSESSEE FOR ASSESSMENT YEAR 2008 - 09 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. THE ASSESSEE HAS ALSO FILED A STAY PETITION ( S.P. ) IN S.P. NO.177/BANG/2014 FOR ASSESSMENT YEAR 2008 - 09. SINCE THE APPEAL AND C.OS FOR ASSESSMENT YEAR 2008 - 09 HAVE 9 ITA NO. 1458 /BANG/ 20 1 2 C.O. NO.64/BANG/2013 & S.P. NO.177/BANG/2014 BEEN DISPOSED OFF BY US (SUPRA), THE S.P. IS RENDERED INFRUCTUOUS AND IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH APRIL, 201 5 . SD/ - (N.V.VASUDEVAN) JUDICIAL MEMBER SD/ - (JASON P BOAZ) ACCOUNTANT MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - B BENCH. 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, BANGALORE