RIGHT CHANEEL CONSTRUCTIONS, MUMBAI V. ACIT 15(2), MUMBAI

ITA 155/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3418 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 01-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S L JAIN SHRI A RAMACHANDRAN
• Keywords: Business income; Maximum Marginal Rate; Competent authority

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , , !' #$, % , & BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM / I.T.A. NO.155/MUM/2013 ( % ' (' / ASSESSMENT YEAR: 2009-10) M/S. RIGHT CHANEEL CONSTRUCTIONS C/O. M/S. JAGDISH BANSAL AND ASSOCIATES 1214L, NAVJEEVAN COMMERCIAL BLDG. NO.3, LAMINGTON ROAD, MUMBAI - 400008 / VS. ACIT 15(2) ROOM NO.113,MATRU MANDIR INCOME TAX OFFICE, TARDEO, GRANT ROAD (WEST) MUMBAI - 400007 ./ ./ PAN/GIR NO. : AAGFR9157H ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 10.06.2016 !' /DATE OF PRONOUNCEMENT: 19.08.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL FILED AGAINST THE ORDER DATED 09. 11.2012 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL) 2 6, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y.2009-10. ASSESSEE BY: SHRI S.L.JAIN DEPARTMENT BY: SHRI A. RAMACHANDRAN CIT-DR ITA NO.155/MUM/13 A.Y.2009-10 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN THE LAW THE LEARNED COMMISSIONER OF INCOME TAX APPEAL 26 ERROR TREATING THE BUSINESS PROFIT OF RS.70,00,000/ - ON THE SALE OF TDR, WHICH WAS GENERATED AFTER PURCHASE OF LAND BY THE APPELLANT, AS A BUSINESS INCOME . WHILE THE RE WAS NO COST FOR TDR. SECONDLY, IT IS ALSO COMPLETELY W RONG TO SAY ON THE PART OF THE LEARNED COMMISSIONER OF INCO ME TAX APPEAL 26 THAT THERE WAS NO RIGHT REMAINING BECAU SE THE LAND PURCHASED BY THE APPELLANT WAS SAID IS FULLY ENCROACHED BY SLUM DEVELOPERS THE DEPUTY COLLECTOR (ENC) AND COMPETENT AUTHORITY. THIRDLY, IT IS ALSO COMPLETELY WRONG TO SAY ON THE PART OF THE LEARNED COMMISSIONER OF INCOME TAX APPEALS 26 THAT THE RESERVED AREA THERE WAS SOME SURPLUS LAND LEFT IN T HE HANDS OF THE APPELLANT. YOUR HONOR IS REQUESTED TO DELETE UNNECESSARY ADDI TION OF RS.70,00,000/- MADE BY THE LEARNED COMMISSIONER OF INCOME TAX APPEAL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN THE LAW THE LEARNED ASST. COMMISSIONER OF INCOME TAX ER RED MAKING DISALLOWANCE @ 10% OF THE VARIOUS EXPENSES A D- HOCLY WITHOUT SPECIFYING ANY VOUCHER WITHOUT ANY BA SES. YOUR HONOR IS REQUESTED TO DELETE UNNECESSARY AD H OC & ARBITRARY DISALLOWANCE 10% OF THE VARIOUS EXPENSES WHILE ALL THE EXPENSES HAS BEEN USED EXCLUSIVELY FOR BUSI NESS PURPOSES AND THERE WAS NO PERSONAL ELEMENT. 3. PENALTY PROCEEDINGS U/S. 271(1)(C)OF THE INCOME TAX ACT, 1961. THE LEARNED COMMISSIONER OF INCOME TAX APPEA L 26 HAS WRONGLY INITIATED PENALTY PROCEEDINGS U/S.27 1(1)(C) OF THE INCOME TAX ACT 1961, SINCE THE APPELLANT HAS NOT CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS AT THE TIME OF THE ASSESSMEN T. HENCE THERE WAS NOT FAULT ON THE PART OF THE APPELLANT FO R SUBMITTING INACCURATE PARTICULARS OF INCOME. ITA NO.155/MUM/13 A.Y.2009-10 3 IN VIEW OF THE ABOVE, THE PENALTY PROCEEDING U/S.2 71(1)(C) OF THE INCOME TAX ACT 1961 INITIATED THE LEARNED COMMISSIONER OF INCOME TAX APPEAL 26 SHOULD BE DROPPED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED HIS RETURN OF INCOME ON 29.09.2009 DECLARING TOTAL INCO ME TO THE TUNE OF RS.58,26,316/-. THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). THE CA SE WAS SELECTED FOR SCRUTINY UNDER CASS. NOTICE U/S.143(2) OF THE ACT WAS ISSUED ON 19.08.2010 AND SERVED UPON THE ASSESSEE. THEREAFTE R NOTICE U/S.142(1) OF THE ACT DATED 25.05.2011 WAS ISSUED A ND SERVED UPON THE ASSESSEE. ON PERUSAL OF THE BOOKS OF ACCOUNTS, IT CAME INTO NOTICE THAT THE ASSESSEE HAS GIVEN THE ADVANCE FOR TRANSFE RABLE DEVELOPMENT RIGHT (TDR) FOR RS.50,00,000/- AND ASSESSEE HAS ALS O RECEIVED ADVANCE AGAINST TDR TO THE TUNE OF RS.1,20,00,000/- . THE NOTICE WAS GIVEN TO THE ASSESSEE AND THE ASSESSING OFFICER HAD ARRIVED AT THIS CONCLUSION THAT THE ASSESSEE HAS PURCHASE THE TDR F OR SUM OF RS.50,00,000/- AND SOLD THE SAME IN SUM OF RS.1,20, 00,000/-. THEREFORE, THE DIFFERENCE TO THE TUNE OF RS.70,00,0 00/- WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS ALSO CLAIMED THE EXPENSES TO THE TUNE OF RS.42,06,947/- AND THE ASSE SSING OFFICER DISALLOWED THE 10%. ON APPEAL THE CIT(A) DISALLOWE D THE 5% BUT HE ASSESSEE WAS NOT SATISFIED HENCE THE ASSESSEE HAS F ILED THE PRESENT APPEAL BASICALLY ON THE ABOVE SAID TWO GROUNDS. ITA NO.155/MUM/13 A.Y.2009-10 4 ISSUE NO.1:- 4. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE ADDITION TO THE TUNE OF RS.70,00,000/- ON SALE OF TDR. THE CONTENT ION OF THE ASSESSEE IS THAT THE ASSESSEE PURCHASED THE LAND WHEN NO TDR WAS ACCRUED HOWEVER THE TDR WAS ACCRUED LATERON, THEREFORE THE INCOME TO THE TUNE OF RS.70,00,000/- IS NOT LIABLE TO BE ADDED T OWARDS THE INCOME OF THE ASSESSEE. IN SUPPORT OF THIS CONTENTION THE LE ARNED REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWIN G DECISIONS: 1. COMMISSIONER OF INCOME TAX VS. SAMBHAJI NAGAR CO - OP HSG SOCIETY LTD. (HIGH COURT OF BOMBAY) 2. JETHALAL D. MEHTA VS. DEPUTY COMMISSIONER OF INC OME TAX (ITAT, MUMBAI D BENCH) 3. COMMISSIONER OF INCOME TAX VS. B.C.SRINIVASA SET TY (SUPREME COURT OF INDIA) 4. NEW SHAILAJA CO-OPERATIVE HOUSING SOCIETY LTD. V S. INCOME TAX OFFICER (ITAT, MUMBAI B BENCH) 5. COMMISSIONER OF INCOME TAX VS. H.H. SRI RAJA RAJAGOPALA THONDAIMAN BY LR. (HIGH COURT OF MADRAS) ITA NO.155/MUM/13 A.Y.2009-10 5 6. COMMISSIONER OF INCOME TAX VS. HINDUSTAN HOUSING & LAND DEVELOPMENT TRUST LTD. (SUPREME COURT OF INDIA) 5. ON THE OTHER HAND THE LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS ARGUED THAT IN VIEW OF THE MOU FOR SALE OF TDR DATED 30.04.2007, IT IS QUITE CLEAR THAT THE ASSESSEE HAS PURCHASED THE TDR, THEREFORE, IN VIEW OF THE SAID CIRCUMSTANCES THE IN COME FROM THE SALE OF TDR IS LIABLE TO BE TAXABLE HENCE THE LEARNED CI T(A) HAS RIGHTLY PASSED THE ORDER WHICH IS NOT REQUIRE TO BE INTERFE RED WITH AT THIS APPELLATE STAGE. BY GIVING THE CAREFUL THOUGHTS T O THE CONTENTION RAISED BY THE LEARNED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD, WE FOUND THAT THE ASSESSEE PURCHASED CERTAI N PROPERTY / LAND SITUATED AT VILLAGE PAHADI VILLAGE, GOREGAON (EAST) , MUMBAI BEARING CTS NO.255 ADMEASURING APPROX. 4085.50 SQ. MTS. OR THEREABOUTS MORE PARTICULARLY DESCRIBED IN THE FIRST SCHEDULE A S LARGE PROPERTY. THE PROPERTY WAS ACQUIRED BY THE VENDOR UNDER SANAD DATED 18 TH AUGUST 1962. THE PROPERTY WAS RESERVED FOR FOLLOWI NG PURPOSE:- (A) AN AREA ADMEASURING APPROX. 1173 SQUARE METRES OUT OF THE SAID PROPERTY IS RESERVED BY THE MMRDA FOR A RA IL OVER BRIDGE (ROB); (B) AN AREA ADMEASURING APPROX. 771 SQUARE METRES O UT OF THE SAID PROPERTY IS RESERVED FOR D.P.ROAD; AND ITA NO.155/MUM/13 A.Y.2009-10 6 (C) AN AREA ADMEASURING APPROX. 2141 SQUARE METRES OUT OF THE SAID PROPERTY IS RESERVED FOR A PARKING LOT. 6. AT THE TIME OF THE SALE OF THE PROPERTY, THE PUR CHASER / ASSESSEE CAME TO KNOW EACH AND EVERY ASPECT OF THE ASSESSEE. HE KNEW THAT HE WOULD ONLY ENTITLED FOR THE TDR WHICH COULD BE SUBS EQUENTLY SOLD. NOW, HE PURCHASED THE SAID PROPERTY IN SUM CONSIDER ATION OF RS.50,00,000/-. SUBSEQUENTLY, THE PURCHASER / ASSE SSEE SOLD THE TDR IN SUM OF RS.1,20,00,000/-, THEREFORE, AN AMOUNT OF RS.70,00,000/- WAS ADDED TO THE INCOME OF THE ASSESSEE ON THE GROU ND OF THAT THE ASSESSEE PURCHASED THE TDR. THE ASSESSEE MOVED AN APPLICATION FOR TDR ON 09.07.2007 AS PER EXIT B. THE ASSESSEE RE CEIVED THE TDR ON 13.05.2008 BY VIRTUE OF LETTER DATED 13.05.2008 AS PER EXIT C. IN VIEW OF THE SAID CIRCUMSTANCES APPARENTLY ON 30. 04.2007 THE DATE OF THE EXECUTION OF THE MOU NO TDR WAS IN EXISTENCE . THE TDR COST WAS NIL, THEREFORE RIGHT TO ELIMINATE IS NOT T AXABLE. THE MOU SPEAKS ABOUT THE PURCHASE OF LAND HOWEVER, THE WORD PURCHASE OF TDR RIGHT HAS ALSO BEEN MENTIONED BUT AT THE TIME O F EXECUTION OF MOU DATED 30.04.2007 NO TDR RIGHT WAS IN EXISTENCE IN FAVOUR OF THE SELLER AS WELL AS PURCHASER. MOREOVER, IT COME INTO NOTICE THAT THE SELLER WAS OWNER OF THE SAID LAND BY VIRTUE OF SANA D DATED 18 TH AUGUST 1962. THE TDR RIGHT IF ANY WAS GOING TO BE ACCRUED THEN THE SAME IS GOING TO ACCRUED IN FAVOUR OF THE OWNER. THE ASSE SSEE PURCHASED THIS SAID LAND WHEN NO TDR WAS ACCRUED IN FAVOUR OF EAR LIER OWNER. ITA NO.155/MUM/13 A.Y.2009-10 7 ASSESSEE DID NOT PURCHASE TDR RIGHT FROM OWNER. NO DOUBT FACTUAL POSITION OF THE LAND WAS WELL WITHIN THE KNOWLEDGE OF THE PARTY BUT THIS FACT CANNOT BE DENIED THAT THE TDR RIGHT ON TH E LAND FIRST TIME WAS ACCRUED IN FAVOUR OF ASSESSE WHICH WAS SOLD BY THE ASSESSEE FOR SUM OF RS.1,20,00,000/-. IN VIEW OF THIS PECULIAR FACT S AND CIRCUMSTANCES AND IN VIEW OF THE LAW RELIED BY THE LEARNED REPRES ENTATIVE OF THE ASSESSEE MENTIONED ABOVE, WE ARE OF THE VIEW THAT H E SAID AMOUNT IN QUESTION IS NOT TAXABLE IN ACCORDANCE WITH LAW, THE REFORE, WE DELETE THE SAID ADDITION AND ALLOWED THE APPEAL OF THE ASS ESSEE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGA INST THE REVENUE. ISSUE. NO. 2:- 7. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE TO THE EXTENT OF 5% ON THE EXPENSES TO THE TUNE OF RS. 42,06,947/-. AT THE TIME OF EXAMINATION OF THE DOCUMENTS / ACCOUNTS, TH E ASSESSING OFFICER FOUND THAT ALL THE EXPENSES WERE MADE IN CA SH AND WERE NOT SUPPORTED WITH THIRD PARTIES EVIDENCE AND MANY VOUC HERS WERE SELF MADE. IN SOME EXPENSES PERSONAL ELEMENT COULD NOT BE RULED OUT THEREFORE THE ASSESSING OFFICER DISALLOWED TO THE 1 0% OF THE TOTAL EXPENDITURE, HOWEVER IN APPEAL BEFORE THE CIT(A), CIT(A) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 5%. NO JUSTIFIAB LE MATERIALS HAVE BEEN PLACED ON RECORD. HOWEVER, ASSESSEE TOOK THE PLEA OF PRE- AUDITED ACCOUNTS BUT THIS FACTUAL SITUATION WAS ALS O THERE AT THE TIME OF FILING AN APPEAL BEFORE THE CIT(A). WHEN WE CONSID ER THE REASONS OF ITA NO.155/MUM/13 A.Y.2009-10 8 DISALLOWANCE TO THE EXTENT OF 5% OF THE EXPENDITURE THEN WE FOUND THAT THE DOCUMENTS OF THE ACCOUNTS WERE NOT SUPPORT ED BY THIRD PARTY EVIDENCE AND THE VOUCHERS WERE SELF MADE WHICH CAN BE CONSIDERED AS COGENT AND CONVINCING EVIDENCE IN SUPPORT OF THE CL AIM OF THE ASSESSEE. THEREFORE WE FOUND THAT THE CIT(A) HAS R ESTRICTED THE DISALLOWANCE TO THE EXTENT OF 5% OF THE EXPENSES CL AIMED BY THE ASSESSEE WHICH IS QUITE REASONABLE, THEREFORE, THE OBSERVATION OF THE CIT(A) IS NOT REQUIRED TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. ISSUE NO.3 8. SINCE THE PENALTY HAS NOT BEEN LEVIED, THEREFORE , CHALLENGING THE SAME IS NOT JUSTIFIABLE THEREFORE THIS ISSUE IS NOT REQUIRED TO BE ADJUDICATION ON THIS STAGE. 9.. IN RESULT THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST , 2016. SD/- SD/- (B.R.BASKARAN) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 19 TH AUGUST, 2016 MP MP MP MP ITA NO.155/MUM/13 A.Y.2009-10 9 * + ,%'#- .-(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. * / BY ORDER, - & //TRUE COPY// //$ ! /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI