ACIT, New Delhi V. M/s Ferrous Infrastructure Pvt. Ltd., Gurgaon

ITA 171/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8025 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 13-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Proportionate interest
• Section: 69C; 40(a)(ia); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.171/DEL/2016 ASSESSMENT YEAR: 2012-13 ACIT, CIRCLE-9(1), NEW DELHI. VS FERROUS INFRASTRUCTURE PVT. LTD., 1 ST FLOOR, BLOCK-B, GOLF COURSE ROAD, SECTOR-54, VATIKA TOWERS, GURGAON. PAN: AAACF9776H (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MS RINKU SINGH, SR. DR DATE OF HEARING : 12.03.2019 DATE OF PRONOUNCEMENT : 16.04.2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 9 TH OCTOBER, 2015 OF THE CIT(A)-3, NEW DELHI, RELATING TO ASSESS MENT YEAR 2012-13. 2. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHA LF OF THE ASSESSEE. IT WAS FURTHER SEEN THAT ON THE PREVIOUS OCCASIONS ALSO NO BODY WAS APPEARING ON BEHALF OF THE ASSESSEE. THEREFORE, THIS APPEAL IS BEING DECIDED O N THE BASIS OF THE MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DR. ITA NO.171/DEL/2016 2 3. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UN DER:- 1. LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CAS E IN DELETING THE DISALLOWANCE OF INTEREST EXPENSES OF RS.22,21,526/- . 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF REAL-ESTATE DEVELOPMENT. IT FILED ITS RETURN OF INCOME ON 24 TH SEPTEMBER, 2012 DECLARING TOTAL INCOME OF RS.1,47,74,910/-. TH E ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE COMPANY HAS RAISED UNSECURED LOAN/OTHER CREDITS FROM VARIOUS PARTIES A GGREGATING TO RS.12,74,14,410/-. THE ABOVE AMOUNT INCLUDED A SUM OF RS.1,95,50,000/- FROM SHAKUN CHANDHOK AND RS.2,25,00,000/- FROM SHRI SURENDER SETH ON WHICH T HE ASSESSEE HAS PAID INTEREST OF RS.21,44,988/- AND RS.55,50,167/- RESPECTIVELY WHIC H AGGREGATES TO RS.76,95,155/-. DESPITE BEING ASKED BY THE ASSESSING OFFICER, THE A SSESSEE DID NOT EXPLAIN THE PURPOSE FOR TAKING THE LOAN FROM THESE TWO PARTIES. THE AS SESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCE OF RS. 8,80,92,500/- TO VARIOUS PARTIES AND CLAIMED THE SAME AS ADVANCE GIVEN FOR LAND PROCUREM ENT. ON BEING ASKED BY THE ASSESSING OFFICER TO EXPLAIN THE PURPOSE FOR WHICH THE ADVANCE HAS BEEN GIVEN TO THE PARTIES AND THE SOURCE OF PAYMENT MADE TO THESE PAR TIES AND TO FURNISH THE COPY OF AGREEMENTS ENTERED INTO WITH THE RESPECTIVE PARTIES , IT WAS SIMPLY STATED THAT THE ADVANCE WAS GIVEN FOR PURCHASE OF LAND. IT WAS ARG UED THAT PURCHASE OF LAND IS PART OF ITS CORE ACTIVITY OF REAL-ESTATE DEVELOPMENT BUSINE SS. THESE ADVANCES WERE GIVEN TO ACQUIRE LAND FOR DEVELOPMENT AND SALE PURPOSE WHICH IS THE ONLY BUSINESS OF THE ITA NO.171/DEL/2016 3 ASSESSEE COMPANY. IT WAS FURTHER ARGUED THAT THE U NSECURED LOANS WERE RECEIVED MUCH BEFORE THE ADVANCES FOR PURCHASES OF LAND. 5. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. IN ABSENCE OF FURNISHING OF ANY AGR EEMENT FOR PURCHASE OF LAND OR ACQUISITION OF LAND FROM THESE PARTIES, THE ASSESSI NG OFFICER DISBELIEVED THE ARGUMENTS ADVANCED BY THE ASSESSEE. SINCE THE ASSESSEE DID N OT FURNISH THE COPY OF AGREEMENT OR SALE DEED OR ANY OTHER EVIDENCE TO JUSTIFY THAT THE PAYMENTS HAVE BEEN MADE FOR THE PURPOSE OF BUSINESS TO DIFFERENT COMPANIES WHO ARE ALSO ENGAGED IN SIMILAR LINE OF BUSINESS, THE ASSESSING OFFICER, INVOKING THE PROVI SIONS OF SECTION 36(1)(III), MADE ADDITION OF RS.22,21,526/- BEING THE PROPORTIONATE INTEREST ON DIVERSION OF BORROWED FUNDS FOR NON-BUSINESS PURPOSE. 6. IN APPEAL, THE LD.CIT(A), FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S TAPARIA TOOLS PVT. LTD ., DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ADVANCES H AVE BEEN GIVEN BY THE COMPANY PURELY FOR THE PURPOSE OF BUSINESS NEEDS AND THE AD VANCES HAVE NOT BEEN GIVEN TO ANY SISTER/ASSOCIATED CONCERN. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REV ENUE IS IN APPEAL. 8. THE LD. DR STRONGLY CHALLENGED THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. SHE SU BMITTED THAT WHEN THE ASSESSEE DID NOT FURNISH ANY DOCUMENTARY EVIDENCE TO SUPPORT ITS CONTENTION THAT THE ADVANCES ITA NO.171/DEL/2016 4 WERE GIVEN TO DIFFERENT NON-RELATED PARTIES AS ADVA NCE FOR PROCUREMENT OF LAND WHICH WERE ALSO ENGAGED IN SIMILAR LINE OF BUSINESS, THE LD. CIT(A) SHOULD NOT HAVE DELETED THE DISALLOWANCE WITHOUT VERIFYING THE FACTS PROPER LY. SHE ALSO RELIED ON THE FOLLOWING DECISIONS:- (I) PUNJAB STAINLESS STEEL INDS. VS. CIT (2011) 196 TA XMAN 404 (DEL); (II) THUKRAL REGAL SHOES VS. CIT (2016) 72 TAXMANN.COM 192 (P&H); (III) ABHISHEK INDUSTRIES LTD. VS. CIT (2006) 156 TAXMAN 257 (P&H); (IV) CIT VS. R MOHAN (2011-TIOL-687-HC-MAD-IT); AND (V) CIT VS. CORNERSTONE EXPORTS (P) LTD. (2016) 67 TAX MANN.COM 345 (GUJ). 9. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THE ASSESSIN G OFFICER DISALLOWED AN AMOUNT OF RS.22,21,526/- U/S 36(1)(III) OF THE ACT BEING THE PROPORTIONATE INTEREST ON BORROWED CAPITAL DIVERTED FOR NON-BUSINESS PURPOSE ON THE GR OUND THAT THE ASSESSEE COULD NOT SUBSTANTIATE WITH EVIDENCE THAT SUCH ADVANCE WERE M ADE TO DIFFERENT PARTIES ENGAGED IN SIMILAR LINE OF BUSINESS AS THAT OF THE ASSESSEE FO R PROCUREMENT OF LAND. WE FIND THE LD.CIT(A), FOLLOWING THE DECISION OF M/S TAPARIA TO OLS PVT. LTD., DELETED THE DISALLOWANCE ON THE GROUND THAT THE ADVANCES HAVE B EEN GIVEN BY THE COMPANY PURELY FOR BUSINESS NEEDS AND HAVE NOT BEEN GIVEN TO ANY S ISTER OR ASSOCIATED CONCERN. THE SAME HAVE BEEN GIVEN TO COMPANIES ENGAGED IN THE BU SINESS OF REAL-ESTATE AND WAS NO WAY CONNECTED WITH THE COMPANY OR ITS PROMOTERS. W HILE WE ACCEPT THE PROPOSITION AS LAID DOWN BY THE LD.CIT(A) IN PRINCIPLE, HOWEVER, T HE FACT REMAINS THAT NO EVIDENCE ITA NO.171/DEL/2016 5 WAS FILED EITHER BEFORE THE ASSESSING OFFICER OR BE FORE THE CIT(A) TO SUGGEST THAT SUCH ADVANCES WERE GIVEN TO COMPANIES/PARTIES ENGAGED IN THE BUSINESS OF REAL-ESTATE AND, IN FACT, THE ASSESSEE HAS EITHER PURCHASED LAND FRO M THE SAID PARTIES OR HAS ENTERED INTO ANY AGREEMENT WITH THE SAME PARTIES. THE ASSESSMEN T ORDER CLEARLY REVEALS THAT DESPITE OPPORTUNITIES GRANTED BY THE ASSESSING OFFICER, THE ASSESSEE FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE TO SUPPORT ITS CLAIM THAT THE ADVANCES WERE GIVEN FOR PURCHASE OF LAND. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSES SEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION THAT THE ASSESSEE HAS GIVEN ADVANC ES FOR PROCUREMENT OF LAND WHICH IS THE BUSINESS OF THE COMPANY. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACT AND LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE REVEN UE ON THIS ISSUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND OF APPEAL NOS.2, 3 AND 4 OF THE REVENUE READ AS UNDER:- 2. LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CAS E IN DELETING THE DISALLOWANCE OF FOREIGN TRAVEL EXPENSES OF RS.30,08 ,000/-. 3. LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF BUSINESS PROMOTION EXPENSES OF RS.3 2,10,556/-. 4. LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF REBATE OF RS.19,14,551/- ITA NO.171/DEL/2016 6 11. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.52,08,210/- TOWARDS FOREIGN TRAVEL EXPENSES. FRO M THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, HE NOTED THAT THE ABOVE AMOUNT INCLUD ES A SUM OF RS.30,08,000/- TOWARDS FOREIGN TRAVEL MADE BY THE DIRECTORS OF THE ASSESSE E COMPANY. THE ASSESSING OFFICER, THEREFORE, ASKED THE ASSESSEE TO FURNISH THE DETAIL S OF PLACES VISITED, PERIOD OF VISIT, AMOUNT INCURRED ON EACH VISIT ALONG WITH COPY OF IN VOICES/BILLS AND JUSTIFICATION OF EXPENSES WITH REGARD TO THE BUSINESS REQUIREMENT. THE ASSESSEE IN ITS SUBMISSION STATED THAT THE FOREIGN TRAVEL EXPENSES HAVE BEEN I NCURRED BY THE DIRECTORS FOR VISITING FOREIGN COUNTRIES IN ORDER TO STUDY PROPERTY TRENDS AND LOOK FOR OVERSEAS FINANCIAL TIE- UPS FOR THE PROJECTS OF THE COMPANY. HOWEVER, IN A BSENCE OF ANY SUPPORTING DOCUMENTS TO SUPPORT THE ABOVE SUBMISSION, THE ASSE SSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE AND MADE DISALLOWANCE OF RS.30,08,0 00/- WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 12. THE ASSESSING OFFICER SIMILARLY DISALLOWED AN A MOUNT OF RS.32,10,556/- OUT OF BUSINESS PROMOTION EXPENSES ON THE GROUND THAT THE PAYMENTS WERE MADE BY THE CREDIT CARD BEING USED BY THE DIRECTORS OF THE ASSESSEE CO MPANY AND THE ASSESSEE FAILED TO FURNISH THE DETAILS AS ASKED FOR SUCH AS COPY OF IN VOICES/BILLS OF EXPENSES AND THE STATEMENT OF CREDIT CARD. 13. SO FAR AS THE DISALLOWANCE OF REBATE IS CONCERN ED, THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS CLAIMED A SUM OF ITA NO.171/DEL/2016 7 RS.19,14,551/- ON ACCOUNT OF REBATE BEING ALLOWED T O CUSTOMERS THROUGH BROKER. THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY THE SAME BY FURNISHING THE REQUISITE DETAILS AND SUBSTANTIATE THAT SUCH REBATE WAS WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSEE FILED THE REQUISITE DETAILS GIVING THE BREAK-UP OF THE REBATE ALLOWED TOTALING TO RS.19,14,551/-. HOWEVER, THE A SSESSING OFFICER WAS NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE ON THE GROUND THAT THE REBATE CLAIMED IN THE BOOKS IS ON ACCOUNT OF M/S OOMA DREAMHOMEZ PVT. LTD. AND THE AMOUNT BEING NOT RECOVERABLE FROM IT WAS DEBITED TO REBATE ACCOUNT. HE, THEREFORE, MADE ADDITION OF RS.19,14,551/-. 14. IN APPEAL, THE LD.CIT(A) DELETED ALL THE THREE ADDITIONS BY OBSERVING AS UNDER:- 4.1 HAVING GONE THROUGH THE SUBMISSIONS, THE ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER AND THE FACTS AVAILABLE ON THE RE CORD, IT EMERGES THAT THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS. 3 0,08,000 OUT OF THE TRAVELLING EXPENSES ON ACCOUNT OF FOREIGN TRAVEL AN D THE ENTIRE EXPENDITURE OF RS. 32,10,556 OUT OF BUSINESS PROMOTION EXPENSES. IT IS PERTINENT TO NOTE HERE THAT DURING THE ASSESSMENT PROCEEDINGS THE ATTENTION OF THE ASSESSING OFFICER WAS DRAWN TO THE FACT THAT THE ASSESSEE DURING THE COUR SE OF SURVEY U/S 133 OF THE ACT ON 07.10.2011 HAS VOLUNTARILY SURRENDERED AN AMOUNT OF RS. 461.15 LACS TOWARDS DISALLOWANCES U/S 40A(3)/ 40(A)(IA) AND U/S 68 AND 69C OF THE ACT AND OTHER UNEXPLAINABLE DOCUMENTS/ ENTRIES AND THEREFORE NO A DDITION SHOULD BE MADE ON ACCOUNT OF DISALLOWANCE OF ANY EXPENDITURE AS THE A MOUNT OF SURRENDER MADE HAS ALREADY BEEN ADDED TO THE INCOME OF THE ASSESSEE. I T WAS TO COVER POSSIBLE DISALLOWANCES OUT OF EXPENSES LIKE TRAVELLING AND B USINESS PROMOTION THAT THE VOLUNTARY SURRENDER WAS MADE BY THE ASSESSEE DURING THE SURVEY. IN SPITE OF THE SAME, THE ASSESSING OFFICER HAS GONE AHEAD TO MAKE DISALLOWANCES ON ACCOUNT OF FOREIGN TRAVEL AND BUSINESS PROMOTION EVEN THOUGH C OMPLETE ACCOUNT OF THE SAME WAS SUBMITTED TO HIM DURING THE ASSESSMENT PROCEEDI NGS. THE ASSESSING OFFICER HAS COMPLETELY IGNORED THE FACT THAT THE BUSINESS O F SELLING THE REAL ESTATE PROPERTIES MAY INVOLVE ESSENTIAL EXPENDITURE IN THE FORM OF BUSINESS PROMOTION FOR MEETING AND ENTERTAINING THE VARIOUS STAKE HOLD ERS LIKE PROMINENT BROKERS, ADVERTISEMENT PERSONNEL, HIGH NET WORTH INDIVIDUALS ETC. AND THEY HAVE ESSENTIALLY TO BE ENTERTAINED IN ORDER TO ATTRACT I NVESTMENT IN THE PROJECTS. HE HAS DISALLOWED THE ENTIRE EXPENDITURE ON BUSINESS PROMO TION WITHOUT CONSIDERING THAT THE SAME WAS ESSENTIAL FOR THE BUSINESS OF THE ASSE SSEE AND THE COMPANY ITSELF ITA NO.171/DEL/2016 8 HAD SURRENDERED THE EXPENDITURE MUCH MORE THAN THAT DURING THE COURSE OF THE SURVEY. THE ADDITIONS MADE BY THE ASSESSING OFFICER AMOUNTS TO DOUBLE ADDITION AND ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED T O DELETE SUCH ADDITIONS AND MODIFY THE ORDER OF ASSESSMENT ACCORDINGLY. 15. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. 16. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY T HE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FAC T THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE DID NOT FURNISH THE DETAI LS AS CALLED FOR BY THE ASSESSING OFFICER FOR WHICH HE DISALLOWED FOREIGN TRAVELLING EXPENSES OF RS.30,08,000/- AND BUSINESS PROMOTION EXPENSES OF RS.32,10,556/-. ALT HOUGH THE LD.CIT(A) DELETED THE ADDITION/DISALLOWANCE ON THE GROUND THAT THE ASSESS EE HAS SURRENDERED AN AMOUNT OF RS.461.15 LAKH TOWARDS DISALLOWANCE U/S 40A(3)/40(A )(IA) AND U/S 68 AND 69C OF THE ACT AND OTHER UNEXPLAINABLE DOCUMENTS/ENTRIES FOR W HICH NO ADDITION IS CALLED FOR, HOWEVER, IT IS A FACT THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB(10) ON THE ADDITIONAL INCOME SO DECLARED. THEREFORE, IT CANNO T BE SAID THAT THE ADDITIONAL INCOME SURRENDERED BY THE ASSESSEE WILL COVER THE DISALLOW ANCE OF THE ABOVE EXPENDITURE FOR WANT OF BILLS AND VOUCHERS AND THE EXPENDITURE WHIC H IS BEING CLAIMED BY THE ASSESSEE. WE, THEREFORE, REVERSE THE ORDER OF THE CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE AN OPPOR TUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION REGA RDING THE ALLOWABILITY OF THE ABOVE EXPENDITURE. GROUND OF APPEAL NOS.2, 3 AND 4 RAISED BY THE REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.171/DEL/2016 9 17. GROUND OF APPEAL NO.5 BEING GENERAL IN NATURE I S DISMISSED AS SUCH. 18. IN THE RESULT, THE APPEAL FILED BY THE RE VENUE IS ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 1 6.04.2019. SD/- SD/- (KULDIP SINGH) (R.K. PANDA) JUDICIAL MEMBER ACCO UNTANT MEMFBER DATED: 16 TH APRIL, 2019 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI