ACIT, CHENNAI V. Baskara Construction Pvt. Ltd., CHENNAI

ITA 1716/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77419 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 06-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAMOD NANGIA
• Assessee Lawyers: M KARUNAGARAN
• Keywords: Cost of acquisition

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 1716/MDS/2013 ( / ASSESSMENT YEAR: 2008-09) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(2), CHENNAI-34. VS M/S. BASKARA CONSTRUCTION PVT.LTD., EAST COASTCENTRE,VI FLOOR, 553, ANNA SALAI, TEYNAMPET, CHENNAI-600 018. PAN: AAACB3636N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. PRAMOD NANGIA, CIT /RESPONDENT BY : MR. M.KARUNAGARAN, ADVOCATE / DATE OF HEARING : 19 TH JUNE, 2014 /DATE OF PRONOUNCEMENT : 31 ST JULY, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNA I DATED 27.02.2013 FOR THE ASSESSMENT YEAR 2008-09. 2. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE DISALLOWANCE OF BROKERAGE COMMISSION TO THE TUNE OF ` 31,00,000/-. THE ASSESSING OFFICER WHILE COMPLETIN G THE 2 ITA NO. 1716/MDS/2013 ASSESSMENT FOUND FROM THE PROFIT AND LOSS ACCOUNT THAT ASSESSEE HAS DEBITED AN AMOUNT OF ` 31,00,000/- TOWARDS BROKERAGE COMMISSION FOR PURCHASING LAND IN KANAGA PATTU VILLAGE. THE TOTAL PURCHASE COST OF LAND WAS SHOWN AT ` 65,27,000/- . SINCE THE BROKERAGE COMMISSION WAS N EARLY ABOUT 48% OF THE TOTAL LAND COST, THE ASSESSEE WAS REQUIRED TO SUBMIT DETAILS OF COMMISSION PAID ON LAND DEALIN GS AND PROOF FOR THE PAYMENT. THE ASSESSEE SUBMITTED THAT PAYMENT WAS MADE THROUGH BANK ACCOUNT AND TDS AMOUNT @ 5% H AS BEEN DEDUCTED. HOWEVER, THE ASSESSING OFFICER DISAL LOWED THE SAID COMMISSION OBSERVING THAT ASSESSEE HAS NOT SUBMITTED ANY AGREEMENT OR ANY OTHER DOCUMENT IN SU PPORT OF THE COMMISSION PAID BY THE ASSESSEE TO MR. R.SANTHAKUMAR AND MR. A.Y.NASSER. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE AGAINST WHICH REVENUE IS IN APPEAL BEF ORE US. 3. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN DISALLOWING COMM ISSION PAID FOR ACQUIRING LAND AS THE ASSESSEE FAILED TO F URNISH DETAILS WHATSOEVER ABOUT THE RECIPIENTS OF THE COMM ISSION. 3 ITA NO. 1716/MDS/2013 DEPARTMENTAL REPRESENTATIVE SUBMITS THAT COMMISSIO NER OF INCOME TAX (APPEALS) ACCEPTED THE SUBMISSIONS OF TH E ASSESSEE THAT THERE WAS A PROBLEM IN PURCHASING TH E PROPERTY IN KANAGAPATTU VILLAGE AS THE LOCAL PEOPLE HAVE CREATED A PROBLEM IN THE LAND WHERE THE ASSESSEE EN TERED INTO AN AGREEMENT . IT WAS THE SUBMISSION OF THE AS SESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THA T LOCAL PEOPLE HAVE BURIED A DEAD BODY IN THE LAND AND THEY WANTED TO USE THE LAND AS BURIAL GROUND. SINCE THE ASSESSE E PAID ADVANCE OF ` 50,00,000/- AND TO GET BACK THE ADVANCE AMOUNT WITHOUT LOSS AND TO AVOID ANY CRIMINAL ACTIO N, COMPROMISE WAS MADE THROUGH LOCAL POLITICIANS AND BROKERS. IN THE PROCESS, MR. A.Y.NASSER AND MR. R.SANTHAKUMA R, WHO ORGANIZED COMPROMISE AND TACKLE THE LOCAL PEOPLE PR ESSURE WERE PAID A SUM OF ` 31,00,000/- AS SERVICE CHARGES. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT AT THE TI ME OF COMPLETION OF ASSESSMENT, ASSESSEE HAS NEVER SUBMIT TED ANY DETAILS WITH REGARD TO COMMISSION PAID TO MR. R.SANTHAKUMAR AND MR. A.Y.NASSER AND THE SUBMISSION MADE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS ) WAS AN AFTERTHOUGHT. 4 ITA NO. 1716/MDS/2013 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE S EEMS TO HAVE NOT FILED ANY DETAILS OR BASIS FOR PAYMENT OF COMMISSION ON THE LAND DEALINGS PAID TO MR. R.SANTH AKUMAR AND MR. A.Y.NASSER EXCEPT SUBMITTING TWO SELF-MADE VOUCHERS. THE ASSESSEE ALSO DID NOT FURNISH ANY ADD RESSES OR OTHER PARTICULARS OF R.SANTHAKUMAR AND A.Y.NASSE R. IN THE COURSE OF PROCEEDINGS BEFORE THE COMMISSIONER OF IN COME TAX (APPEALS), ASSESSEE MADE WRITTEN SUBMISSION THA T COMPANY ENTERED INTO AN AGREEMENT DATED 11.6.2006 W ITH S.P.JALAJAKSHI AND 5 OTHERS FOR PURCHASE OF 8.07 C RORES OF LAND IN KANAGAPATTU VILLAGE FOR CONSIDERATION OF ` 3.88 CRORES. THE PRICE ARRIVED WAS FOR 3.16 CRORES @ ` 50 LAKH PER ACRE AND 4.91 ACRES @ ` 47,00,000/- PER ACRE. IT IS STATED THAT OUT OF 8.07 ACRES , 1.07 ACRES OF LAND WAS REGISTERED IN THE NAME OF ASSESSEE ON 16.6.2007 FOR A CONSIDERATION O F ` 65,27,000/- @ ` 61 LAKH PER ACRE. IT IS STATED THAT ASSESSEE SOLD 1.07 ACRES ON 20.6.2007 AND 22.6.2007 FOR A CONSIDERATION OF ` 90.50 LAKHS. IT IS STATED THAT LOCAL PEOPLE HAVE CREATED A PROBLEM IN THE LAND FOR WHICH AGREEM ENT WAS ENTERED INTO BY THE ASSESSEE . IT IS STATED THAT LO CAL PEOPLE 5 ITA NO. 1716/MDS/2013 HAVE BURIED A DEAD BODY IN THE LAND AND THEY WANTED TO USE THE LAND AS BURIAL GROUND ANDAS THE COMPANY HAS AL READY PAID ` 50,00,000/- AS ADVANCE AND TO GET BACK THE ADVANCE MONEY WITHOUT ANY LOSS AND TO AVOID ANY CRIMINAL AC TION, COMPROMISE THROUGH LOCAL POLITICIANS AND BROKERS WA S ARRIVED AT AND IN THE PROCESS COMMISSION WAS PAID TO R.SANTHAKUMAR AND A.Y.NASSER. THESE FACTS WERE NOT PLACED BEFORE THE ASSESSING OFFICER IN THE COURSE OF ASSES SMENT PROCEEDINGS AND FOR THE FIRST TIME, THE ASSESSEE M ADE THESE SUBMISSIONS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE GENUINENESS AND THE NECESSITY OF THE PAYMENT OF SUCH HIGHER BROKERAGE COMMISSION IS NOT ESTABLISHED BEYOND DOUBT. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THIS MATTER HAS TO BE EXAMINED THOROU GHLY BY THE ASSESSING OFFICER AND ASCERTAIN THE FACTS SUBM ITTED BY THE ASSESSEE AND DECIDE THE ISSUE AFRESH IN ACCORDA NCE WITH LAW. THUS, WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER AND ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH AFT ER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. THEREFORE, WE ALLOW GROUNDS NOS. 2 TO 2.4 FOR STATISTICAL PURPOSES AS A BOVE. 6 ITA NO. 1716/MDS/2013 5. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS T HAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) ON THE B ROKERAGE COMMISSION PAID. THE ASSESSING OFFICER DISALLOWED COMMISSION PAYMENT OF ` 31,00,000/- NOT ONLY FOR WANT OF DETAILS BUT ALSO FOR REASON THAT ASSESSEE HAS NOT D EDUCTED TDS ON SUCH PAYMENTS. THE SUBMISSIONS OF THE ASSES SEE THAT TDS WAS DEDUCTED BY SHRI M. BASKARAN, MANAGIN G DIRECTOR OF THE COMPANY IN HIS INDIVIDUAL TAN NUMB ER AND PAID INTO GOVERNMENT ACCOUNT . HOWEVER, THE ASSESSI NG OFFICER HELD THAT TDS DEDUCTED ON COMMISSION WHICH IS PAID INTO GOVERNMENT ACCOUNT FROM BASKARANS TAN NUMBER CANNOT BE TREATED AS TDS PAYMENT MADE FROM THE ASSE SSEE COMPANY. THE ASSESSING OFFICER ALSO OBSERVED THAT THERE IS A SHORTFALL IN MAKING TDS AND HE WAS OF THE VIEW T HAT TDS SHOULD BE MADE AT 10% INSTEAD OF 5% SAID TO HAVE B EEN MADE BY THE ASSESSEE. THE COMMISSIONER OF INCOME T AX (APPEALS) ACCEPTED THE SUBMISSION OF THE ASSESSEE T HAT TDS WAS DEDUCTED ON BEHALF OF THE COMPANY BY THE MANAG ING DIRECTOR IN HIS INDIVIDUAL CAPACITY AND MR. M. BASK ARAN ALSO FILED INDEMNITY BOND DATED 29.12.2010 WHEREIN IT I S STATED 7 ITA NO. 1716/MDS/2013 THAT TDS HAS BEEN DEDUCTED ON BEHALF OF THE COMPANY M/S.BASKARA CONSTRUCTIONS PVT. LTD. AND ALSO THAT H E HAS NOT CLAIMED ANY TDS NOR HE WILL MAKE SUCH CLAIM IN FUTU RE. THEREFORE, COMMISSIONER OF INCOME TAX (APPEALS) ACC EPTED THAT PAYMENTS ARE NOT TO BE DISALLOWED UNDER SECTIO N 40(A)(IA) OF THE ACT. 6. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER IN DISALLOWING SUCH COMMISSIO N PAID FOR WANT OF TDS. 7. COUNSEL FOR THE ASSESSEE RELIES ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 8. ON HEARING BOTH THE PARTIES, WE ARE IN AGREEMENT WITH THE CONCLUSION OF THE COMMISSIONER OF INCOME TAX (A PPEALS) THAT TDS DEDUCTED BY MR. BASKARAN, MANAGING DIRECTO R IN HIS INDIVIDUAL CAPACITY ON BEHALF OF THE COMPANY CAN BE TREATED AS COMPLIANCE OF DEDUCTING TDS BY THE COMPANY FOR T HE PURPOSE OF SECTION 40(A)(IA) OF THE ACT. THUS, DISA LLOWANCE CANNOT BE MADE ON THIS GROUND ESPECIALLY WHEN THE 8 ITA NO. 1716/MDS/2013 MANAGING DIRECTOR HAS GIVEN AN INDEMNITY BOND STATI NG THAT TDS WAS MADE ON BEHALF OF THE COMPANY AND HE HAS NO T CLAIMED ANY CREDIT FOR SUCH TDS NOR HE WILL MAKE AN Y SUCH CLAIM IN FUTURE. THEREFORE, WE REJECT THE GROUND NO S 3 TO 3.4 OF GROUNDS APPEAL RAISED BY THE REVENUE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, TH E 31 ST DAY OF JULY, 2014 AT CHENNAI. SD/- SD/- ( A.MOHAN ALANKAMONY ) ( CHALLA NAGEND RA PRASAD ) . ( ' )* ) ACCOUNTANT MEMBER / , JUDICIAL MEMBER/ ) , ) /CHENNAI, - /DATED, 31 ST JULY, 2014 SOMU /0 10 /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 2 () /CIT(A) 4. 2 /CIT 5. 0 6 /DR 6. /GF .