M/s Gag Construction Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 1764/DEL/2013

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9599 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 25-04-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 26-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARAMITA M BISWAS
• Assessee Lawyers: AJAY BHAGWANI
• Section: 40A(3); 143(3); 201; 143(2)

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI BHAVNESH SAINI , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 1764/DEL/2013 (ASSESSMENT YEAR: 2006 - 07 ) GAG CONSTRUCTION PVT. LTD, M - 11, MIDDLE CIRCLE, CONNAUGHT CIRCUS, NEW DELHI PAN: AABCG3001H VS. ACIT, CENTRAL CIRCLE - 23, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY BHAGWANI, CA REVENUE BY: MS. PARAMITA M. BISWAS, CIT DR DATE OF HEARING 09/10 / 201 9 DATE OF PRONOUNCEMENT 0 8 / 01 / 2020 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - XXXIII, NEW DELHI DATED 28.12.2012 FOR THE ASSESSMENT YEAR 2006 - 07. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT( A) ERRED IN REJECTING APPELLANT'S CONTENTION 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 A CT. 2. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRCUMSTANCES 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 MATERIAL DID NOT BELONG TO THE APPELLANT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN NOT ACCEP TING 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. PAGE | 2 3.1 THAT WITHOUT PREJUDICE THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF AD DITIONAL PAYMENTS MADE TO THE RECIPIENTS WHO WERE NOT THE OWNERS OF LAND AND TO THE PAYMENT MADE IN CASH. 3.2 THAT WITHOUT PREJUDICE THE CIT(A) ERRED IN NOT HIMSELF QUANTIFYING THE ADDITION TO BE MADE. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE U/S 40A(3) IN RESPECT OF WHICH NO DEDUCTION WAS CLAIMED BY THE APPELLANT. 4.1 THAT EVEN ON MERITS THE DISALLOWANCE WAS NOT JUSTIFIED. 5. THAT THE ORDERS PASSED BY THE ASSESSING OFFICER AND COMMISSION ER OF INCOME TAX (APPEALS) - XXXIII, NEW DELHI ARE BAD IN LAW AND VOID AB - INITIO. 3. GROUND NO. 1 IS AGAINST REJECT I ON OF THE ARGUMENT THAT ORDER SHOULD HAVE BEEN MADE U/S 153C OF THE ACT INSTEAD OF 143(3) OF THE ACT. 4. GROUND NO . 2 IS CHALLENGING THE ACTION OF THE LD CIT(A) IN UPHOLDING ACTION OF THE LD ASSESSING OFFICER IN RELIANCE PLACE D ON MATERIAL SEIZED IN CASE OF SEARCH OF BPTP GROUP DESPITE HAVING NO NEXUS WITH THE FACTS OF THE CASE OF THE APPELLANT AND SUCH MATERIAL NOT BELONGING TO THE ASSESSEE. THE GROUND NO. 3 IS WITH RESPECT TO THE ADDITION ON ACCOUNT OF ADDITIONAL PAYMENTS AND GROUND NO. 4 IS WITH RESPECT TO DISALLOWANCE U/S 40A(3) OF THE ACT. 5. THE FACTS OF THE CASE SHOWS THAT ASSESSEE IS A COMPANY WHO FILED RETURN OF INCOME ON 02.11.2006 FOR RS. 207090/ - . SUBSEQUENTLY, NOTICE U/S 143(2) WAS ISSUED ON 23.11.2007. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DERIVING INCOME FROM ACQUIRING LAND AND TRANSFERRING IT TO OTHER COMPANY IN PURSUANCE OF COLLABORATION AGREEMENT. THE ASSESSMENT U/S 143(3) WAS MADE BY THE LD ASSESSING OFFICER ON 31.12.2008 AT RS. 1515832/ - . THE LD ASSESSING OFFICER HAS MADE AN ADDITION OF RS. 859495/ - U/S 40A(3) BEING 20% OF THE AMOUNT PAID OF RS. 4297469/ - AND THE ADDITION ON ACCOUNT OF ADDITIONAL PAYMENTS MADE OF RS . 386248/ - FOR PURCHASE OF LAND. 6. THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD AO PREFERRED APPEAL BEFORE THE LD CIT(A) , WHO CONFIRMED THE ADDITION U/S 40A(3) OF THE ACT VIDE PARA NO. 4.7 AND ADDITION ON ACCOUNT OF ENHANCED PAYMENT WAS PARTLY ALLOWED. TH EREFORE, THE ASSESSEE BEING AGGRIEVED WITH THE ABOVE ORDER HAS PREFERRED THIS APPEAL BEFORE US. 7. THE LD AUTHORISED REPRESENTATIVE SUBMITTED THAT DISALLOWANCE U/S 40A(3) OF THE ACT HAS BEEN CONSIDERED AND DECIDED IN FAVOUR OF THE ASSESSEE BY 31 PAGE | 3 DECISIONS O F THE COORDINATE BENCH AND MAINLY WESTLAND DEVELOPERS PVT. LTD IN ITA NO. 1752/DEL/2013 . WITH RESPECT TO THE ADDITIONAL PAYMENTS THE ISSUE HAS BEEN COVERED BY THE 27 DECISIONS OF THE COORDINATE BENCH. HE SUBMITTED A LIST OF SUCH JUDICIAL PRECEDENT. THUS, B OTH THE ISSUES ARE COVERED IN FAVOUR OF ASSESSEE AS SUBMITTED. 8. THE LD DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUBMITTED THAT THE ISSUE IS NOT COVERED IN FAVOUR OF THE ASSESSEE AS WESTLAND DEVELOPERS WAS RENDERED ON ITS OWN FACTS. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE FIRST DISALLOWANCE U/S 40A(3) ON IDENTICAL FACTS AND CIRCUMSTANCES IS DECIDED BY THE SEVERAL OF THE COORDINATE BENCHES IN THE GROUP CASES HOLDING THAT PROVISIONS OF SECTION 40A(3) DOES NOT APPLY TO TH E FACTS OF THE CASE. THE DECISION IN CASE OF WESTLAND DEVELOPERS PVT. LTD DATED 28.02.2014 IN ITA NO 1752/DEL/2013 HAS HELD THAT THE PROVISIONS OF SECTION 40A(3) HAS BEEN WRONGLY INVOKED AS NO EXPENSES RELATED TO THE ADDITION HAS BEEN CLAIMED BY THE ASSESS EE BUT THE AMOUNT WAS SHOWN IN THE CAPITAL WORK IN PROGRESS AT THE TIME OF PURCHASE OF LAND WHICH WAS REIMBURSED. THE FACT SHOWS THAT ASSESSEE WAS ACQUIRING THE LAND FROM THE VARIOUS FARMERS BY PAYING CASH TO THEM AND DEBITING IT TO THE CAPITAL WORK IN PRO GRESS ACCOUNT. THIS SUM WAS NOT CLAIMED AS AN EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, THERE WAS NO QUESTION OF CLAIMING DEDUCTION OF THIS SUM. THE LAND WAS ACQUIRED ON BEHALF OF THE OTHER COMPANY WHO PAID THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUE. SUCH SUM WAS CREDITED IN THE CAPITAL WORK IN PROGRESS ACCOUNT. THE WHOLE TRANSACTION OF PURCHASE OF LAND AS WELL AS TRANSFER TO THE SISTER CONCERN WAS NOT RO U TED THROUGH PROFIT AND LOSS ACCOUNT BUT WERE SHOWN IN THE BALANCE SHEET. ON THESE FACTS , COORDINATE BENCH HELD THAT PROVISION OF SECTION 40A(3) OF THE ACT DO NOT APPLY. SUBSEQUENTLY, SERIES OF DECISIONS WERE RENDERED BY THE COORDINATE BENCHES FOLLOWING THE ABOVE DECISION. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH , WE REVERSE THE ORDER OF THE LD CIT(A) AND DIRECT THE LD ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS. 859495/ - MADE U/S 40A(3) OF THE ACT. ACCORDINGLY, GROUND NO. 4 OF THE APPEAL IS ALLOWED. 10. GROUND NO. 3 OF THE APPEAL IS WITH RESPECT TO THE DISALL OWANCE/ ADDITION ON ACCOUNT OF ADDITIONAL PAYMENTS FOR PURCHASE OF LAND. PAGE | 4 11. THE ASSESSEE SUBMITS THAT AS ASSESSEE HAS NOT CHALLENGED THAT THE DEDUCTION OF PURCHASE OF LAND HAS NOT BEEN CLAIMED BY THE ASSESSEE AND THEREFORE, NO DISALLOWANCE COULD HAVE BEEN MA DE , THE LD CIT(A) IN HIS ORDER HAS DIRECTED THE LD ASSESSING OFFICER TO QUANTIFY THE DISALLOWANCE WHICH WAS MADE BY THE LD ASSESSING OFFICER OF RS. 386248/ - . THE LD ASSESSING OFFICER AFTER QUANTIFICATION RESTRICTED THE DISALLOWANCE OF RS. 22760/ - . 12. IDENTIC AL DISALLOWANCES WERE MADE IN CASE OF THE OTHER GROUP CONCERNS AND ALSO IN CASE OF WESTLAND DEVELOPERS PVT. LTD WHEREIN THE COORDINATE BEN CH VIDE ORDER DATED 22.08.2014 IN ITA NO. 1752/DEL/2013 FOR AY 2006 - 07 HAS DELETED THE IDENTICAL ADDITION. IN CASE OF COUNTRYWIDE PROMOTERS PVT. LTD IN ITA NO. 6303/DEL/2013 IN PARA NO. 8 THE ABOVE ISSUE IS WITH RESPECT TO THE ADDITIONAL PAYMENTS MADE WAS ALSO CONSIDERED. IN MOST OF THE ORDERS OF THE COORDINATE BENCHES THE SIMILAR FACTS ARE NOTED. IN VIEW OF THE SERIES OF DECISIONS OF THE COORDINATE BENCHES DELETING THE ABOVE ADDITIONAL PAYMENTS, RESPECTFULLY FOLLOWING THE SAME WE DIRECT THE LD ASSESSING OFFICER TO DELETE THE ABOVE ADDITION OF RS. 22760 / - AS WE DO NOT FIND ANY REASON TO SUSTAIN THE ORDER OF THE LD CIT(A). ACCORDINGLY , GROUND NO. 3 OF THE APPEAL IS ALLOWED. 13. AS WE HAVE ALREADY DIRECTED THE LD ASSESSING OFFICER TO DELETE THE DISALLOWANCES/ ADDITIONS SUSTAINED BY THE LD CIT(A), ALL OTHER GROUNDS OF APPEAL HAVE BECOME INFRUCTUOUS AND THEREFORE, SAME ARE DISMISSED. 14. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 8 / 01 / 2020 . - SD/ - - SD/ - ( BHAVNESH SAINI ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 8 / 01 / 2020 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI