Palace Infratech Pvt Ltd., Ludhiana V. The Dy Commissioner of Income Tax, Ludhiana

ITA 155/CHANDI/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6680 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 26-09-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 20-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH GUPTA
• Keywords: Business income; Depreciation; Income from undisclosed sources
• Section: 40A(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! '# $ % & '# , () BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 155/CHD/2017 / ASSESSMENT YEAR : 2013-14 PALACE INFRATECH PVT. LTD., B-XIX-546, COLLEGE ROAD, CIVIL LINES, LUDHIANA THE DCIT, CENTRAL CIRCLE-III, LUDHIANA ./PAN NO: AAGCP3488G / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI ASHWANI KUMAR, CA - PROXY FOR SHRI TEJ MOHAN SINGH, ADVOCATE ' ! / REVENUE BY : SHRI ASHISH GUPTA, CIT DR # $ % /DATE OF HEARING : 31.01.2019 &'() % / DATE OF PRONOUNCEMENT : 28 .02.2019 (* / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 25.11.2016 OF THE COMMISSIONER OF INCOM E TAX (APPEALS )- 5, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A) HAS GROSSLY ERRED BOTH IN LAW A ND ON FACTS IN SUSTAINING AND OF RS. 34,63,800/- LAC WITH NO SUCH SUSTENANCE WAS CALLED FOR. 2. THAT THE LD. CIT(A) HAS FURTHER GROSSLY ERRED IN LA W AND FACTS HOLDING THAT THE PROVISIONS OF SECTION 40A(3) WERE CLEARLY APPLICABLE FOR AMOUNT PAID AS ADVANCE FOR PLOT ITA NO. 155/CHD/2017- PALACE INFRATECH PVT. LTD, LUDHIANA 2 AMOUNTING TO RS. 11,30,000/- WITHOUT APPRECIATING T HE DEDUCTION OR EXPENSE HAD BEEN CLAIMED OF THE SAID AMOUNT TO JUSTIFY INVOCATION OF SECTION 40A(3) OF T HE ACT. 3. THAT THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER OR TAKE FRESH GROUND EITHER BEFORE OR DURING THE COURSE OF HEARING. 4. THAT THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER OR TAKE FRESH GROUND EITHER BEFORE OR DURING THE COURSE OF HEARING. 3. VIDE GROUND NO.1, THE ASSESSEE HAS AGITATED THE ADDITION OF RS. 34,63,000/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF DENIAL OF SET OFF OF LOSSES AGAINST INCOME SURRENDERED DURING SEARCH ACTION. DURING THE SEARCH / SURVEY ACTION AT THE PREEMIES OF THE ASSES SEE, THE ASSESSEE OFFERED RS. 1.90 CRORES AS ADDITIONAL INCOME. HOWEVER, THE ASSESSEE WHILE OFFERING THE SAID ADDITIONAL INCOME FOR TAXATION CLAIMED SET OFF OF BUSINESS LOSSES. THE ASSESSING OFFICER, HOWEVER, HELD THAT THE SAID SURRENDERED INCOME WAS NOT THE BUSINESS INCOME AND DENIED THE SET OFF OF B USINESS LOSSES AND MADE THE IMPUGNED ADDITION WHICH HAS BEEN FURTHER CONFIR MED BY THE LD. CIT(A). 4. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE IMPUGNED ASSESSMENT ORDER AS WELL AS THE ORDER OF T HE CIT(A) AND OTHER DOCUMENTS ON THE FILE TO DEMONSTRATE THAT THE AFORE SAID SURRENDER WAS MADE BY THE ASSESSEE ON ACCOUNT OF CERTAIN DOCUMENTS FO UND DURING SEARCH / SURVEY ACTION. IN THE SAID DOCUMENTS, THE ASSESSEE WAS SHOWN TO HAVE RECEIVED ADVANCES AGAINST PLOTS. THE DETAILS SUCH A S THE NUMBER OF PLOT AND AMOUNTS WERE MENTIONED. THE ASSESSEE ADMITTED BEFOR E THE SURVEY / SEARCH PARTY THAT THE ASSESSEE HAD RECEIVED CERTAIN ADVANC ES AGAINST PLOTS AND ITA NO. 155/CHD/2017- PALACE INFRATECH PVT. LTD, LUDHIANA 3 OFFERED TO SURRENDER THE ADDITIONAL INCOME ON THIS ACCOUNT. IT IS PERTINENT TO MENTION THAT THE AFORESAID SURRENDER WAS NOT ON ACCOUNT OF ANY CASH FOUND DURING THE SEARCH ACTION, RATHER, WAS ON ACC OUNT OF DOCUMENTS WHICH CLEARLY WERE RELATED TO THE UNACCOUNTED INCOME FROM THE BUSINESS ACTIVITY OF THE ASSESSEE ON THE SALE AND PURCHASE OF THE PLO TS. THE ASSESSEE DULY SURRENDERED THE AFORESAID AMOUNT AS HIS UN-ACCOUNTE D BUSINESS INCOME. UNDER THE CIRCUMSTANCES, THE ASSESSEE WAS ALSO ENTI TLED TO CLAIM THE SET OFF OF BUSINESS LOSS IN THIS RESPECT. HENCE, THE ORDER OF THE LOWER AUTHORITIES FOR DENIAL OF BUSINESS LOSS AGAINST THE SURRENDERE D INCOME IN THIS CASE IS NOT JUSTIFIABLE. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE AND THE ADDITION MADE BY THE LOWER AUTHORITIES OF R S. 34,63,800/- IS ORDERED TO BE DELETED. 5 . GROUND NO.2 : VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED THE ACTION OF THE LOWER AUTHORITIES IN MAKING THE DISAL LOWANCE UNDER THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT ON AC COUNT OF AMOUNT PAID AS ADVANCE FOR PURCHASE OF PLOT. 6. ON BEING ASKED TO EXPLAIN IN THIS RESPECT, THE A SSESSEE REPLIED BEFORE THE ASSESSING OFFICER THAT THE AMOUNT OF RS. 11,30, 000/- PAID IN CASH FOR PURCHASE OF PLOT HAS NEVER BEEN BOOKED AS AN EXPEND ITURE. THAT THE SAID PLOT WAS PURCHASED TO USE AS AN OFFICE SPACE AND WA S PART OF THE FIXED ASSETS OF THE ASSESSEE AND EVEN NO DEPRECIATION WAS EVER CLAIMED ON THE SAME. SINCE THE ASSESSEE HAS NOT CLAIMED THE AFORE SAID AMOUNT OF RS. 11,30,000/- PAID IN CASH FOR PURCHASE OF PLOT AS AN EXPENDITURE AND EVEN THE SAID PLOT DOES NOT FORM PART OF TRADING ASSETS OF THE ASSESSEE, THEREFORE, ITA NO. 155/CHD/2017- PALACE INFRATECH PVT. LTD, LUDHIANA 4 NO DISALLOWANCE AS PER THE PROVISIONS OF SECTION 40 A(3) OF THE ACT IS ATTRACTED. THE DISALLOWANCE MADE BY THE LOWER AUTH ORITIES IN THIS RESPECT IS THEREFORE, ORDERED TO BE DELETED. 7. GROUND NO.3 : THIS IS GROUND IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.2019. SD/- SD/- ( $ % & '# / ANNAPURNA GUPTA) () / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 28.02.2019 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR