M/s Druzba Overseas Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 1739/DEL/2013

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3120 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 26-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH SENIOR
• Assessee Lawyers: AJAY BHAGWANI
• Keywords: Tax effect; Set aside
• Section: 40A(3); 143(3); 37(1); 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.1739/DEL./2013 (ASSESSMENT YEAR : 2007-08) M/S. DRUZBHA OVERSEAS PVT. LTD., VS. ACIT, CENTRAL CIRCLE 23, M-11, MIDDLE CIRCLE, NEW DELHI. CONNAUGHT CIRCUS, NEW DELHI 110 001. (PAN : AABCD5112E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY BHAGWANI, CA REVENUE BY : SHRI JAGDISH SINGH, SENIOR DR DATE OF HEARING : 22.10.2020 DATE OF ORDER : 10.11.2020 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. DRUZBA OVERSEAS PVT. LTD. (HEREINAF TER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 18.12.2012 PASSE D BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXXIII, NEW DE LHI QUA THE ASSESSMENT YEAR 2007-08 ON THE GROUNDS INTER AL IA THAT :- ITA NO.1739/DEL./2013 2 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN REJECTING APPELLANT'S CONTE NTION THAT ASSESSMENT ORDER MADE BY ASSESSING OFFICER WAS BAD IN LAW AND VOID AB-INITIO ON THE GROUND THAT IT OUGHT TO HAVE BEEN MADE U/S 153C OF THE INCOME TAX ACT, AND NOT, AS WAS DONE U/ S 143(3) OF THE INCOME TAX ACT. 2. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRCUMS TANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN RELYING UPON THE MATERIAL SEIZED IN THE CASE OF SEARCH ON M/S BPTP GROUP OF CASES DESPITE:- I) THAT SUCH MATERIAL HAD NO NEXUS/RELEVANCE WITH THE CASE OF THE APPELLANT AND, II) THAT THE CIT(A} HIMSELF HOLDING THAT SUCH MATE RIAL DID NOT BELONG TO THE APPELLANT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN HOLDING TO QUOTE, 'THAT SEI ZED DOCUMENTS DEFINITELY PROVE THAT INTEREST IS PAID ON PDC DESPI TE- I. THAT THE SEIZED RECORD ON THE BASIS OF WHICH ABO VE FINDING WAS GIVEN, EVEN ACCORDING TO HIS OWN FINDING BY THE CIT(A), DID NOT BELONG TO THE APPELLANT AND, II. THAT NO ENQUIRIES WERE MADE FROM ANY OF THE ALLEGED RECIPIENTS OF THE INTEREST AND NONE WAS CONFRONTED WITH RELEVANT DOCUMENT(S}. 3.1 THAT THE FINDING OF THE CIT(A} IS BASED ON MER E SURMISES AND CONJECTURES WITHOUT PROOF AND CORROBORATION BY INDEPENDENT EVIDENCE. 3.2 THAT WITHOUT PREJUDICE THE CIT(A) ERRED IN UPHO LDING THE ADDITION OF INTEREST FOR THE PERIOD FOR WHICH PDC'S WERE EXTENDED. 3.3 THAT WITHOUT PREJUDICE THE CIT(A) ERRED IN NOT QUANTIFYING THE ADDITION AND INSTEAD GIVING AMBIGUO US DIRECTIONS TO COMPUTE THE INTEREST AFTER SIX MONTHS FROM THE D ATE OF SALE. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN NOT ACCEPTING THE APPELLANT 'S CONTENTION THAT ADDITIONAL PAYMENTS HAVING NOT BEEN CLAIMED AS DEDUCTION BY APPELLANT, NO DISALLOWANCE COULD HAVE BEEN MADE IN THE HANDS OF THE APPELLANT. ITA NO.1739/DEL./2013 3 4.1 THAT WITHOUT PREJUDICE THE CLT(A) ERRED IN UPH OLDING THE DISALLOWANCE OF ADDITIONAL PAYMENTS MADE TO THE REC IPIENTS WHO WERE NOT THE OWNERS OF LAND AND TO THE PAYMENT MADE IN CASH. 4.2 THAT WITHOUT PREJUDICE THE CIT(A) ERRED IN NOT HIMSELF QUANTIFYING THE ADDITION TO BE MADE. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE U/S 40A(3) IN RESPECT OF WHICH NO DEDUCTION WAS CLAIMED BY THE AP PELLANT. 5.1 THAT EVEN ON MERITS THE DISALLOWANCE WAS NOT J USTIFIED. 6. THAT THE ORDERS PASSED BY THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS)-XXXIII, NEW DE LHI ARE BAD IN LAW AND VOID AB-INITIO. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE COMPANY BELONGS TO BPTP GROUP WHICH IS INTO THE REAL ESTATE BUSINESS IN THE NCR AREA. A SEARCH OPERATION WAS CARRIED OUT ON BPTP AND SOME O F ITS GROUP COMPANIES ON 15.11.2017 BY DIRECTORATE OF INVESTIGA TION, DELHI, HOWEVER NO SEARCH WAS CARRIED OUT ON THE ASSESSEE C OMPANY. HOWEVER, FROM THE DOCUMENTS, CERTAIN DISCREPANCIES AND TRANSACTIONS OF SUPPRESSION OF INCOME IN THE CASE O F ASSESSEE WERE NOTICED AND ASSESSMENT HAS BEEN FRAMED UNDER SECTIO N 143 (3) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) AFT ER MAKING ADDITIONS TO THE TUNE OF RS.29,28,201, RS.51,21,875 /- AND RS.40,000/- ON ACCOUNT OF INTEREST ON PDC, DISALLOW ANCE U/S 37(1) AND DISALLOWANCE U/S 40A(3) OF THE ACT RESPECTIVELY . ITA NO.1739/DEL./2013 4 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING THE APPEAL WHO HAS PARTLY ALLOWED THE APPEAL BY GIVING RELIEF OF RS.29,28,201/- & RS.51,21,875/- ON ACCOUNT OF IN TEREST ON PDC AND DISALLOWANCE U/S 37(1) OF THE ACT ON ACCOUNT OF ADDITIONAL PAYMENT, HOWEVER CONFIRMED THE DISALLOWANCE OF RS.4 0,000/- MADE U/S 40A(3) OF THE ACT BY THE AO. FEELING AGGR IEVED BY THE ORDER PASSED BY THE LD. CIT (A), BOTH THE REVENUE A S WELL AS ASSESSEE FILED THE CROSS APPEAL BUT THE APPEAL FILE D BY THE REVENUE REPORTED TO HAVE BEEN DISMISSED ON ACCOUNT OF LOW TAX EFFECT AND NOW THE PRESENT APPEAL FILED BY THE ASSESSEE PERTAI NS TO ONLY ONE GROUND OF DISALLOWANCE OF RS.40,000/- U/S 40A(3) OF THE ACT. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. AO, AFTER NOTICING THAT OUT OF THE TOTAL PAYMENT OF RS.2,62,000/- MADE IN CASH FOR PURCHASE OF LAND FRO M FARMERS AND VILLAGERS, A SUM OF RS.2,00,000/- WAS PAID IN CASH IN EXCESS OF THE LIMIT PROVIDED U/S 40A(3). DECLINING THE EXPLANATI ON MADE BY THE ASSESSEE, AO DISALLOWED 20% OF RS.2,00,000/- I.E. R S.40,000/- AND MADE ADDITION THEREOF TO THE TOTAL INCOME OF THE AS SESSEE. LD. CIT(A) CONFIRMED THE DISALLOWANCE. ITA NO.1739/DEL./2013 5 6. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNED DISALLOWANCE CONTENDED INTER ALIA THAT IN VIEW OF T HE COLLABORATION AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND M/S . COUNTRYWIDE PROMOTERS (P) LTD. (CWPPL), AVAILABLE A T PAGES 24 TO 36 OF THE PAPER BOOK, THE ASSESSEE COMPANY HAS RECE IVED REIMBURSEMENT OF ALL AMOUNTS PAID RELATING TO TRANS ACTIONS OF PURCHASE OF LAND, STAMP DUTY, REGISTRATION CHARGES ETC. AS PER CLAUSE 3(B) OF THE AGREEMENT; THAT SUCH PAYMENT HAS NOT BEEN CLAIMED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCO UNT; THAT ORAL EVIDENCE CANNOT OVERWEIGH THE WRITTEN AGREEMENT; TH AT IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ITS GROUP COMPANY CASE CITED AS M/S. WESTLAND DEVELOPERS PVT. LTD. IN ITA NO.1752/DEL/2013 ORDER DATED 22.08.2014 , AVAILABLE AT PAGES 42 TO 76 OF THE PAPER BOOK. 7. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVEN UE RELIED UPON THE ORDERS PASSED BY THE AO AS WELL AS LD. CIT (A) AND SOUGHT DISMISSAL OF THE APPEAL. 8. UNDISPUTEDLY, ASSESSEE HAS PURCHASED THE LAND AN D MADE PART OF THE PAYMENT OF RS.40,000/- IN CASH AND VIDE COLL ABORATION AGREEMENT, DEVELOPMENT RIGHTS AND LAND IN QUESTION WERE ASSIGNED IN FAVOUR OF CWPPL. IT IS ALSO NOT IN DISPUTE THAT BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY HAVE BEEN ACCEPTED BY THE L OWER REVENUE ITA NO.1739/DEL./2013 6 AUTHORITIES. IT IS ALSO NOT IN DISPUTE THAT PURCHA SE OF LAND IS NOT TREATED AS STOCK-IN-TRADE. IT IS ALSO NOT IN DISPU TE THAT AS PER COLLABORATION AGREEMENT, ONLY DEVELOPMENT RIGHT OF THE PROPERTY HAS BEEN TRANSFERRED AND THE OWNERSHIP OF THE SA ME REMAINED INTACT WITH THE ASSESSEE. 9. IN THE BACKDROP OF THE AFORESAID UNDISPUTED FACT S AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW INTER ALIA THAT WHEN THE ASSESSEE HAS NOT DEBITED THE AMOUNT O F COST OF LAND IN ITS PROFIT & LOSS ACCOUNT, AVAILABLE AT PAGE 17 OF THE PAPER BOOK, AND WHEN NO EXPENSES RELATABLE TO THE ADDITION IN Q UESTION HAVE BEEN CLAIMED, PROVISIONS CONTAINED U/S 40A(3) OF TH E ACT ARE NOT ATTRACTED. 10. MOREOVER, ASSESSEE COMPANY HAS PROVED ON RECORD THAT THE PAYMENT IN QUESTION WAS MERE REIMBURSEMENT MADE BY CWPPL. FURTHERMORE, PURCHASE OF LAND IN THE INSTANT CASE W AS NOT TREATED AS STOCK-IN-TRADE. MOREOVER, PARA 3(B) OF THE COLLABO RATION AGREEMENT, AVAILABLE AT PAGE 27 OF THE PAPER BOOK, CATEGORICALLY PROVIDES THAT CWPPL SHALL REIMBURSE ALL COSTS AND E XPENSES INCURRED BY THE ASSESSEE WITH RESPECT TO THE ACQUIS ITION OF THE SAID LAND AND ACCORDINGLY IN THE BOOKS OF ACCOUNT WHICH HAVE OTHERWISE BEEN ACCEPTED BY THE REVENUE, THE SAID AMOUNT RECEI VED FROM CWPPL WAS SHOWN AS REIMBURSEMENT. ITA NO.1739/DEL./2013 7 11. IDENTICAL ISSUE HAS BEEN DECIDED BY THE COORDIN ATE BENCH OF THE TRIBUNAL IN THE CASE CITED AS M/S. WESTLAND DEVELOPERS PVT. LTD. (SUPRA) IN FAVOUR OF THE ASSESSEE. OPERATIVE PART THEREOF IS EXTRACTED FOR READY PERUSAL AS UNDER :- 10.10. WE HAVE ALSO TAKEN OURSELVES THROUGH THE JU DGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS INDUSTRIAL ENGINEERING PROJECTS PVT. LTD. (CITED SUPRA) WHICH HAS BEEN RELIED UPON BEFORE US FOR THE PROPOSITION THAT REIM BURSEMENT OF EXPENSES CANNOT BE TREATED TO BE A REVENUE RECEIPT. HOW THE JUDGEMENT OF THE APEX COURT IN TUTICORIN ALKALI CHE MICALS & FERTILIZERS IS APPLICABLE TO THE FACTS OF THE PRESE NT CASE HAS NOT BEEN SET OUT IN THE ORDER OF THE AUTHORITIES NOR HA S THE LD. DR BEEN ABLE TO ADDRESS THE APPLICABILITY OF THE SAID JUDGEMENT TO THE ISSUE AT HAND. WE HAVE TAKEN OURSELVES THROUGH THE SAID JUDGEMENT AND SEEN THAT IT PROCEEDS ON ENTIRETY DIF FERENT FACTS AND CIRCUMSTANCES AND HAS NO APPLICABILITY TO THE F ACTS OF THE PRESENT CASE. CONSEQUENTLY, IT IS SEEN THAT FROM TH E RATIO OF THE JUDGEMENTS RELIED UPON BEFORE THE CIT(A) AND ALSO B EFORE US WHICH HAVE BEEN DISCUSSED IN THE EARLIER PART OF TH IS ORDER NO ARGUMENTS HAVE BEEN ADVANCED BY THE REVENUE SO AS T O CONTEND HOW THEY ARE NOT APPLICABLE TO THE CASE AT HAND, NO DISTINGUISHING FACT, CIRCUMSTANCE OR POSITION OF LA W HAS BEEN RELIED UPON SO AS TO COME TO A CONTRARY FINDING THA N THE ONE ARRIVED AT. ACCORDINGLY ON A CONSIDERATION OF THE P ECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND THE JUDGEMENTS RE LIED UPON CONSIDERING THE RELEVANT PROVISION OF THE ACT NAMEL Y SECTION 40A(3), WE HOLD FOR THE DETAILED REASONS GIVEN HERE INABOVE THAT SECTION 40A(3) OF THE ACT HAS BEEN WRONGLY INVOKED AS ADMITTEDLY NO EXPENSES RELATABLE TO THE ADDITION HAS BEEN CLAI MED AND THE ASSESSEE HAS SUCCESSFULLY DEMONSTRATED THAT THE PAY MENT WERE RE- IMBURSEMENT MADE BY CWPPL. ACCORDINGLY GROUND NO-4 IS ALLOWED. 12. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FO LLOWING THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNA L IN ASSESSEES GROUP COMPANY CASE (SUPRA), WE ARE OF THE CONSIDERE D VIEW THAT WHEN THE ASSESSEE HAS NOT DEBITED THE AMOUNT OF COS T OF LAND IN THE PROFIT & LOSS ACCOUNT NOR CLAIMED ANY DEDUCTION IN RESPECT OF COST ITA NO.1739/DEL./2013 8 OF LAND BY WAY OF COMPUTATION, PROVISIONS CONTAINED U/S 40A(3) ARE NOT ATTRACTED, SO AO/CIT(A) HAVE ERRED IN MAKIN G / CONFIRMING THE DISALLOWANCE OF RS.40,000/- BY INVOKING THE PRO VISIONS CONTAINED U/S 40A(3) OF THE ACT AND AS SUCH ORDERED TO BE DELETED. CONSEQUENTLY, THE APPEAL FILED BY THE ASSESSEE IS H EREBY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 10 TH DAY OF NOVEMBER , 2020. SD/- SD/- (ANIL CHATURVEDI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 10 TH DAY OF NOVEMBER, 2020 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXXIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.