ACIT, New Delhi V. M/s Jasmine Buildtech (P) Ltd., New Delhi

ITA 1679/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3356 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 15-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 22-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V S RASTOGI SH AJAY BHAGWANI
• Keywords: Business income; Loose papers
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K. NARSIMHA CHARY, JUDICIAL MEMBER ITA NO.-1679/DEL/2013 ( ASSESSMENT YEAR: 2007-08) ACIT CENT. CIRCLE 23, NEW DELHI. VS JASMINE BUILDTECH (P) LTD. M-11, MIDDLE CIRCLE, CANNAUGHT CIRCUS NEW DELHI. AABCJ6865E & ITA NO.-1767/DEL/2013 ( ASSESSMENT YEAR: 2007-08) JASMINE BUILDTECH (P) LTD. M-11, MIDDLE CIRCLE, CANNAUGHT CIRCUS NEW DELHI. AABCJ6865E VS ACIT CENT. CIRCLE 23, NEW DELHI. ASSESSEE BY SH. V.S. RASTOGI SH. AJAY BHAGWANI, CA REVENUE BY SH. AMIT JAIN, SR. DR ORDER PER SHRI K.N. CHARY, J.M. THESE TWO APPEALS ARE FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY CHALLENGING THE ORDER DATED 18.12.2012 IN APPEAL NO. 495/09-10/284 PASSED BY THE LD. COMMISSIONER OF INC OME TAX DATE OF HEARING 16.11.2017 DATE OF PRONOUNCEMENT 21.11.2017 2 ITA NOS. 1679 & 1767/DEL/2013 (APPEALS)-XXXIII, NEW DELHI (HEREINAFTER FOR SHORT CALLED AS THE LD. CIT(A)). 2. FATS RELEVANT FOR THE DISPOSAL OF THE APPEAL ARE THAT THE ASSESSEE IS A COMPANY INCORPORATED UNDER COMPANIES ACT, 1956 AND IS DEALING IN THE REAL ESTATE DEVELOPMENT AND O PERATIONS. FOR THE AY 2007-08 THEY HAVE FILED THEIR RETURN OF INCOME ON 22.10.2007 DECLARING THE LOSS OF RS. 9,050/-. ASSE SSING OFFICER DURING THE SCRUTINY U/S 143(3) OF THE INCOME TAX AC T, 1961 (FOR SHORT CALLED AS THE ACT) MADE THREE ADDITIONS NAM ELY A SUM OF RS. 43,88,201/- ON ACCOUNT OF THE INTEREST PAID IN RESPECT OF THE POST DATED CHEQUES ISSUED BY THE ASSESSEE TO THE VE NDORS OF THE LAND, RS. 97,45,249/- ON ACCOUNT OF THE ADDITIONAL PAYMENTS MADE OVER AND ABOVE THE SALE CONSIDERATION MENTIONED IN THE AGREEMENT OF SALE AND A FURTHER SUM OF RS. 4,56,502/- ON ACCO UNT OF THE CASH PAYMENTS MADE FOR PURCHASE OF LAND FROM THE FARMERS BY INVOKING SECTION 40(A)(3) OF THE ACT. 3. IN APPEAL LD. CIT (A) FOUND THAT WHEREVER THE DA TE OF POST DATED CHEQUE WAS EXTENDED, INTEREST WAS PAID AT 15% P.A. IN CASH OUT OF BOOKS OF ACCOUNT AS WAS EVIDENT FROM THE SEI ZED MATERIAL, 3 ITA NOS. 1679 & 1767/DEL/2013 THEREFORE, THE INTEREST ON PDC TO THE EXTENT OF EXT ENSION PERIOD WAS LOGICAL. LD. CIT (A), THEREFORE, DIRECTED THE AO TO RE-COMPUTE THE INTEREST ON PDC EITHER ON THE SALE CONSIDERATIO N OR ADDITIONAL PAYMENT TO THE EXTENT OF EXTENDED PERIOD OF PDCS BY THE AO AND IN CASE THE WORKING OUT OF THE SAME IS NOT POSSIBLE , TO RE-COMPUTE THE INTEREST ON PDCS AFTER SIX MONTHS FROM THE DATE OF ISSUE OF PDCS I.E. DATE OF SALE, AS SIX MONTHS IS TAKEN AS R EASONABLE PERIOD FOR GIVING PDC AS PER SALE DEED. IN RESPECT OF THE ADDITIONAL PAYMENT OF RS. 97,45,249/- LD. CIT (A) DIRECTED THE DELETION OF RS.97,27,124/- ON THE GROUND THAT SUCH PAYMENTS WER E MADE TO THE OWNERS OF THE LAND OR THEIR IMMEDIATE FAMILY ME MBERS WHO HAVE GOT SOME LEGAL CLAIM OVER SUCH LAND, ON ACCOUN T OF ENHANCED RATE OF LAND AT THE TIME OF REALIZATION OF PDC, AND SINCE THE SAME IS NOT COVERED BY INCLUDED FOR STAMP DUTY. HOWEVER, H E CONFIRMED THE REST OF THE DISALLOWANCE STATING THAT ANY PAYME NT ON ACCOUNT OF PLANTS, TREES, TUBE WELLS OR BUILDINGS CANNOT BE ALLOWED AS DEDUCTION AS THE SAME WILL FORM PART OF SALE CONSID ERATION AND STAMP DUTY IS LEVIABLE. LASTLY, LD. CIT (A) CONFIR MED THE ADDITIONS MADE U/S 40(A)(3) OF THE ACT STATING THAT THE OWNER SHIP OF THE LAND WAS CONTINUED WITH THE ASSESSEE AND THE CONTENTION OF THE 4 ITA NOS. 1679 & 1767/DEL/2013 ASSESSEE THAT THE COST OF LAND WAS REIMBURSED BY CW PPL WAS NOT ACCEPTABLE, AS SUCH THE CASH PAYMENTS IN EXCESS OF RS.20,000/- ARE HIT BY SECTION 40A(3) OF THE ACT. 4. CHALLENGING THE FINDINGS OF THE LD. CIT (A) IN G RANTING RELIEF TO THE ASSESSEE IN RESPECT OF INTEREST ON PDCS, AND AL SO THE ADDITIONAL PAYMENT, THE REVENUE IS IN APPEAL BEFORE US; WHEREAS CHALLENGING THE FINDINGS OF THE LD. CIT (A) IN RESP ECT OF SUSTAINING THE INTEREST ON PDCS FOR THE PERIOD BEYOND SIX MONT HS, SUSTAINING A PART OF THE ADDITIONAL PAYMENTS AND THE DISALLOWA NCE U/S 40(A)(3) THE ASSESSEE IS IN APPEAL. 5. NOW COMING TO THE ASPECT OF INTEREST ON PDCS, IT IS AN ADMITTED FACT THAT THE ASSESSEE IS A PART OF BPTP G ROUP AND SIMILAR ADDITIONS WERE MADE IN RESPECT OF MANY GROU P ENTITIES. SOME MATTERS WERE DISPOSED OF BY THE TRIBUNAL ALSO. LD. AR SUBMITTED BEFORE US THAT IN RESPECT OF THE INTEREST ON PDCS, WHEN A SIMILAR ADDITION WAS MADE IN THE CASE OF M/S IAG PROMOTERS AND DEVELOPERS PVT. LTD., A COORDINATE BENCH OF THIS TR IBUNAL IN ITA NO. 1674/DEL/2013 EXAMINED THE ISSUE AT LENGTH AND REAC HED A CONCLUSION THAT THE DIRECTIONS GIVEN BY THE LD. CIT (A) TO 5 ITA NOS. 1679 & 1767/DEL/2013 RECALCULATE THE INTEREST ON PDCS WAS ON A SOUND LOG IC AND WAS UPHELD. THE OBSERVATIONS OF THE TRIBUNAL, VIDE PAR AGRAPH NO. 5 ARE AS FOLLOWS: AFTER EXAMINING THE LOOSE PAPERS SEIZED AT THE TIM E OF SEARCH AT THE ASSESSEE'S PREMISES, IT WAS NOTICED THAT INTEREST I S PAID ON THE PDCS ONLY DURING THE PERIOD OF EXTENSION OF PDCS AND, TH EREFORE, HE DIRECTED THE ASSESSING OFFICER TO RECOMPUTED THE INTEREST ON PDCS AT THE TIME OF EXTENSION OF THE PDCS. HE HAS FURTHER OBSERVED T HAT IF IT IS NOT POSSIBLE TO WORK OUT THE EXTENSION OF PDCS IN EACH CASE, THEN THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTED INTERES T ON PDCS AFTER SIX MONTHS FROM THE DATE OF ISSUE OF THE PDCS. THEREFOR E, THE GROUND OF APPEAL OF THE REVENUE THAT THE CIT(A) DELETED THE A DDITION OF `5,06,625/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF INTEREST ON PDCS IS FACTUALLY INCORRECT AND CONTRARY TO THE ORD ER OF THE CIT(A). THE CIT(A) DIRECTED TO RECALCULATE THE INTEREST ON PDCS AND THERE WAS A SOUND LOGIC FOR SUCH DIRECTION. HIS DIRECTION IS BA SED ON MATERIAL FOUND AND SEIZED AT THE TIME OF SEARCH. IN VIEW OF THE AB OVE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LE ARNED CIT(A) IN THIS REGARD 6. NOW COMING TO THE ADDITIONAL PAYMENT OVER AND AB OVE THE AGREEMENT PRICE, A SIMILAR PAYMENT WAS INVOLVED IN THE CASE OF M/S IAG PROMOTERS AND DEVELOPERS PVT. LTD. AND VIDE PARAGRAPH NO. 11, THE TRIBUNAL CONSIDERED THIS ISSUE AND FOUN D THAT THERE WAS NEITHER ANY FINDING BY THE LD. CIT (A) NOR BY T HE ASSESSING OFFICER ON THE ASPECT OF WHETHER SUCH A PAYMENT WAS CLAIMED AS AN EXPENDITURE WHILE COMPUTING ITS BUSINESS INCOME, AS SUCH, THE ISSUE WAS SET ASIDE TO THE FILE OF THE AO DIRECTING HIM TO VERIFY WHETHER THE ASSESSEE HAS CLAIMED SUCH PAYMENT AS AN 6 ITA NOS. 1679 & 1767/DEL/2013 EXPENDITURE, AND IN CASE NO DEDUCTION WAS CLAIMED T HE QUESTION OF ANY DISALLOWANCE WOULD NOT ARISE, AND ITS ONLY IF T HE DEDUCTION WAS CLAIMED THEN THE AO WOULD WORK OUT THE DISALLOW ANCE AS DIRECTED BY THE LD. CIT. RELEVANT OBSERVATIONS ARE AS FOLLOW: 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES. SO FAR AS THE LEGAL PRINCIPLE IS CONCERNED, WE AGREE WITH THE LEGAL PROPOSITION MADE BY THE LEARNED COUNSEL TH AT WHEN NO EXPENDITURE IS CLAIMED BY THE ASSESSEE, THE QUESTION OF DISALLOWING THE SAME BY THE ASSESSING OFFICER DOES N OT ARISE. IT WAS EXPLAINED BY THE LEARNED COUNSEL THAT THE ASSESSE E WAS PURCHASING THE LAND FOR AND ON BEHALF OF ANOTHER COMP ANY OF BPTP GROUP VIZ., M/S COUNTRYWIDE PROMOTERS PVT.LTD. AND WHATEVER PAYMENT IS MADE BY THE ASSESSEE TO LAND OWN ERS OR THEIR RELATIVES FOR PURCHASE OF LAND WAS DEBITED BY T HE ASSESSEE TO THE ACCOUNT OF CWPPL AND THE PAYMENT FOR PURCHASE OF LAND WHETHER AS PER STAMP DUTY OR ADDITIONAL PAYMENT HAS NOT BEEN CLAIMED AS AN EXPENDITURE BY THE ASSESSEE. WE FIND TH AT ON THIS FACTUAL ASPECT, THERE IS NEITHER ANY FINDING BY THE CIT(A) NOR BY THE ASSESSING OFFICER. THE ITAT IN THE CASE OF M/S WESTLAND DEVELOPERS PVT.LTD. (SUPRA) HAS ALSO ACCEPTED THE PR INCIPLE THAT WHEN THE EXPENDITURE IS NOT CLAIMED BY THE ASSESSEE, THE SAME CANNOT BE DISALLOWED. IN FACT, THERE CANNOT BE ANY D ISPUTE TO THE SAID LEGAL PROPOSITION. HOWEVER, THE QUESTION STILL REMAINS WHETHER SUCH PAYMENT I.E. ADDITIONAL PAYMENT MADE BY THE ASSESSEE TO LAND OWNERS OR THEIR RELATIVES IS CLAIME D BY THE ASSESSEE AS A DEDUCTION OR NOT. WE, THEREFORE, SET A SIDE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER AND DIR ECT HIM TO VERIFY WHETHER THE ASSESSEE HAS CLAIMED THE PAYMENT OF RS.1,01,32,501/- AS AN EXPENDITURE WHILE COMPUTING ITS BUSINESS INCOME. IF NO DEDUCTION IS CLAIMED, THEN THE QUESTIO N OF ANY DISALLOWANCE WOULD NOT ARISE. IF THE DEDUCTION IS CLAI MED, THEN THE ASSESSING OFFICER WOULD WORK OUT THE DISALLOWANC E AS DIRECTED BY THE CIT(A). 7 ITA NOS. 1679 & 1767/DEL/2013 7. NOTHING CONTRARY IS BROUGHT TO OUR NOTICE ON EIT HER OF THE ASPECTS. HENCE, WHILE RESPECTFULLY FOLLOWING THE AB OVE, WE UPHELD THE FINDINGS OF THE LD. CIT (A) AND DISMISS THE GRO UNDS OF APPEALS OF BOTH ASSESSEE AND THE LD. CIT (A) ON THE ASPECT OF INTEREST ON PDCS AND SET ASIDE THE ISSUE RELATING TO THE PAYMEN TS MADE IN ADDITION TO THE AGREEMENT AMOUNT TO THE FILE OF LD. AO FOR VERIFICATION AS TO WHETHER THE ASSESSEE HAS CLAIMED THE PAYMENT OF AS AN EXPENDITURE WHILE COMPUTING ITS BUSINESS INCO ME. IF NO DEDUCTION IS CLAIMED, THEN THE QUESTION OF ANY DISA LLOWANCE WOULD NOT ARISE. IF THE DEDUCTION IS CLAIMED, THEN THE AS SESSING OFFICER WOULD WORK OUT THE DISALLOWANCE AS DIRECTED BY THE CIT(A). 8. NOW COMING TO THE DISALLOWANCE U/S 40(A)(3), SIM ILAR PLEAS TAKEN BY THE ASSESSEE TO THE EFFECT THAT WHEN NO PA YMENTS WERE CLAIMED AS EXPENSE THE QUESTION OF DEDUCTION DOES N OT ARISE AND IN THE CASE OF A GROUP COMPANY NAMELY WESTLAND DEVELOP ERS P. LTD. VS. ACIT, I.T.A .NO. 1752/DEL/2013 (ASSESSMENT YEAR -2006-07) A COORDINATE BENCH OF THIS TRIBUNAL HELD AS FOLLOWS: 10. WE HAVE ALSO TAKEN OURSELVES THROUGH THE JUDGEM ENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS INDU STRIAL ENGINEERING PROJECTS PVT. LTD. (CITED SUPRA) WHICH H AS BEEN RELIED UPON BEFORE US FOR THE PROPOSITION THAT REIMBURSEME NT OF EXPENSES CANNOT BE TREATED TO BE A REVENUE RECEIPT. HOW THE J UDGEMENT OF 8 ITA NOS. 1679 & 1767/DEL/2013 THE APEX COURT IN TUTICORIN ALKALI CHEMICALS & FERT ILIZERS IS APPLICABLE TO THE FACTS OF THE PRESENT CASE HAS NOT BEEN SET OUT IN THE ORDER OF THE AUTHORITIES NOR HAS THE LD. DR BEEN ABLE TO ADDRESS THE APPLICABILITY OF THE SAID JUDGEMENT TO THE ISSU E AT HAND. WE HAVE TAKEN OURSELVES THROUGH THE SAID JUDGEMENT AND S EEN THAT IT PROCEEDS ON ENTIRETY DIFFERENT FACTS AND CIRCUMSTANC ES AND HAS NO APPLICABILITY TO THE FACTS OF THE PRESENT CASE. CON SEQUENTLY, IT IS SEEN THAT FROM THE RATIO OF THE JUDGEMENTS RELIED UP ON BEFORE THE CIT(A) AND ALSO BEFORE US WHICH HAVE BEEN DISCUSSED I N THE EARLIER PART OF THIS ORDER NO ARGUMENTS HAVE BEEN ADVANCED BY THE REVENUE SO AS TO CONTEND HOW THEY ARE NOT APPLICABLE TO THE CASE AT HAND, NO DISTINGUISHING FACT, CIRCUMSTANCE OR POSITI ON OF LAW HAS BEEN RELIED UPON SO AS TO COME TO A CONTRARY FINDING THAN THE ONE ARRIVED AT. ACCORDINGLY ON A CONSIDERATION OF THE PE CULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND THE JUDGEMENTS RELIED U PON CONSIDERING THE RELEVANT PROVISION OF THE ACT NAMELY SECTION 40A(3), WE HOLD FOR THE DETAILED REASONS GIVEN HEREINABOVE TH AT SECTION 40A(3) OF THE ACT HAS BEEN WRONGLY INVOKED AS ADMITT EDLY NO EXPENSES RELATABLE TO THE ADDITION HAS BEEN CLAIMED AND THE ASSESSEE HAS SUCCESSFULLY DEMONSTRATED THAT THE PAYME NT WERE RE- IMBURSEMENT MADE BY CWPPL. 9. WE HAVE PERUSED THE ORDERS IN THE GROUP COMPANY S CASES AND IT IS HELD IN BOTH M/S IAG PROMOTERS AND DEVELO PERS PVT. LTD. AND WESTLAND DEVELOPERS P. LTD. THAT WHEN THE PAYME NTS ARE NOT CLAIMED AS EXPENSE NO DISALLOWANCE ARISES. WE, THE REFORE, HOLD THAT DISALLOWANCE U/S 40(A)(3) IS NOT SUSTAINABLE A ND THE SAME HAS TO BE DELETED. WE DIRECT THE AO TO DO SO. GRO UNDS OF APPEAL ON THIS ASPECT ARE ANSWERED ACCORDINGLY. 10. IN VIEW OF OUR FINDINGS IN THE PRECEDING PARAGR APH, THE FINDINGS OF THE LD. CIT (A) IN RESPECT OF THE INTER EST ON THE PDCS IS 9 ITA NOS. 1679 & 1767/DEL/2013 UPHELD, THE MATTER RELATING TO THE ADDITIONAL PAYME NTS IS RESTORED TO THE FILE OF THE AO FOR RE-COMPUTATION AS DIRECTE D ABOVE AND THE DISALLOWANCE U/S 40(A)(3) IS DIRECTED TO BE DELETED . 11. IN THE RESULT, THE APPEALS OF THE BOTH REVENUE & ASSESSEE ARE ALLOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21.11.2017 SD/- SD/- (G.D. AGRAWAL) (K. NARSIMHA CHARY ) PRESIDENT JUDICIAL MEMBER DATED: 21.11.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI