M/s. Pearl Plaza, Hyderabad V. ITO, Hyderabad

ITA 18/HYD/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9743 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 04-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI G.C. GUPTA, VP & SHRI CHANDRA POOJARI, AM I.T.A. NO. 18/HYD/2011 (ASSESSMENT YEAR 2007-08) M/S. PEARL PLAZA, HYDERABAD PAN: AAIFP6847N VS. INCOME - TAX OFFICER WARD 6(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI V. SIVA KUMAR RESPONDENT BY: SHRI K.V.N. CHARYA O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-IV, HYDERABAD DATED 29.10.2010 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE. IT HAD ADM ITTED GROSS DEVELOPMENT CHARGES AT RS. 26,50,000 AND CLAI MED EXPENDITURE TOWARDS FENCING, LABOUR, SECURITY, ETC. , TOTALLING TO RS. 25,16,826 AND HAD ADMITTED THE NET PROFIT AT RS. 1,33,174 AFTER DEDUCTING THE SAME. WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUBSTANTIAT E THE VARIOUS EXPENSES CLAIMED UNDER DIFFERENT HEADS, THE ASSESSEE VIDE LETTER DATED 2.6.2009 STATED THAT DUR ING THE YEAR THE FIRM HAD NOT STARTED ANY ACTIVITY. IT WAS SUBMITTED THAT THE INCOME RECEIVED HAD BEEN TAKEN A S I.T.A. NO.18/HYD/2011 M/S. PEARL PLAZA ================= 2 INCOME FROM OTHER SOURCES AND THAT THE EXPENDITURE RELATING TO REALISATION OF THE SAID INCOME HAD ONLY BEEN CLAIMED AS EXPENDITURE OF THE FIRM. THE ASSESSEE, VIDE ORDER SHEET NOTING, DATED 10.12.2009 ADMITTED THAT NO BOOKS OF ACCOUNTS WERE AVAILABLE AND THAT NO VOUCHE RS IN RESPECT OF EXPENDITURE INCURRED TOO WERE AVAILABLE. EVEN ON SUBSEQUENT OCCASION, I.E., ON 23.12.2009, THE AR REITERATED THE SAME POSITION AND EXPLAINED THAT THE ADVANCE RECEIVED FROM M/S. PRASAD EDIFICE PVT. LTD. HAD BEEN SPENT TOWARDS THE COST OF THE PROJECT. HE HOW EVER, EXPRESSED HIS INABILITY TO PRODUCE ANY EVIDENCE IN SUPPORT OF SUCH EXPENDITURE. 3. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA D ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. PRAS AD EDIFICE P. LTD. ON 10.3.2006 TO DEVELOP THE PROPERT Y OF THE ASSESSEE AT JALPALLY (V), SAROORNAGAR MANDAL. PURS UANT TO THE SAID DEVELOPMENT AGREEMENT, M/S. PRASAD EDIFICE P. LTD. PAID A SUM OF RS. 26,50,000 TO THE ASSESSEE DU RING THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2007-08. THE DE VELOPER COMPANY ALSO CONFIRMED THAT THE SAID PAYMENT WAS A REFUNDABLE ADVANCE AND ALSO PRODUCED LEDGER ACCOUNT OF THE ASSESSEE APPEARING IN ITS BOOKS OF ACCOUNT. TH E ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS TH E OWNER OF THE PROPERTY GIVEN FOR DEVELOPMENT AND IT WAS TH E I.T.A. NO.18/HYD/2011 M/S. PEARL PLAZA ================= 3 DEVELOPER, WHO HAD TO INCUR EXPENDITURE IN DEVELOPI NG THE SAME. HOWEVER, IN THIS CASE THE DEVELOPER PAID THE SUM OF RS. 26,50,000 TO THE ASSESSEE. THOUGH THE SAME WAS CLAIMED TO BE A REFUNDABLE ADVANCE, THE ASSESSEE HA D CREDITED THE SAME TO THE PROFIT AND LOSS A/C. AND H AD ALSO CLAIMED EXPENDITURE AGAINST IT. THE ASSESSING OFFI CER WONDERED AS TO HOW IF THE SAID AMOUNT WAS AN ADVANC E, THE SAME BEING A BALANCE SHEET ITEM, COULD HAVE BEE N CLAIMED AS INCOME FROM OTHER SOURCES, BESIDES CLAIM ING EXPENDITURE AGAINST THE SAME. THE ASSESSING OFFICE R ALSO NOTED THAT ON BEING REQUIRED TO SUBSTANTIATE THE EXPENDITURE CLAIMED, NEITHER THE BOOKS OF ACCOUNT N OR THE DETAILS OF SUCH EXPENDITURE WERE PRODUCED. IN THE ABSENCE OF ANY PROOF, THE TOTAL EXPENDITURE OF RS. 26,50,00 0 WAS DISALLOWED BY THE ASSESSING OFFICER. 4. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN AN ASSESSEE UNDER WRONG ADVICE OFFERS AN AMOUN T TO TAX WHICH IS AGAINST THE PRINCIPLE OF LAW, THE SAME SHOULD NOT SUFFER TAX. IN THIS REGARD, THE ASSESSEE RELIE D ON THE DECISION OF THE APEX COURT IN CIT VS. VMRP FIRM, 56 ITR 67, 74 WHEREIN THE APEX COURT HELD AS UNDER: I.T.A. NO.18/HYD/2011 M/S. PEARL PLAZA ================= 4 THE DOCTRINE OF APPROBATE AND REPROBATE IS ONLY A SPECIFIC OF ESTOPPELS; IT APPLIES ONLY TO TH E CONDUCT OF PARTIES. AS IN THE CASE OF ESTOPPELS, IT CANNOT OPERATE AGAINST THE PROVISIONS OF A STATUTE. IF A PARTICULAR INCOME IS NOT TAXABLE UNDER THE INCOME-TAX ACT, IT CANNOT BE TAXED ON THE BASIS OF ESTOPPELS OR ANY OTHER EQUITABLE DOCTRINE. EQUITY IS OUT OF PLACE IN TAX LAW; A PARTICULAR INCOME IS EITHER EXIGIBLE TO TAX UNDER THE TAXING STATUTE OR IT IS NOT. IF IT IS NOT, THE INCOME-TAX OFFICER HAD NO POWER TO IMPOSE TAX ON THE SAID INCOME. 6. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED HIS RELIANCE ON THE FOLLOWING DECISIONS: 1. A. VENKATARAMAIAH, 57 ITR 185 (SC) 2. PULLANGODE RUBBER & PRODUCE CO. LTD., 91 ITR 18 (SC) 3. BHARAT GENERAL RE-INSURANCE CO. LTD., 81 ITR 303 (DEL) 7. FURTHER THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE LIGHT OF THE ABOVE PRINCIPLES ENUNCIATED BY THE APEX COURT THE FACT THAT THE ASSE SSEE DECLARED THE INCOME UNDER A WRONG IMPRESSION CANNOT BE TREATED AS A CONCESSION. THE ASSESSING OFFICER HIM SELF HELD THAT THE RECEIPT IS A REFUNDABLE ADVANCE AND CONSTI TUTES A BALANCE SHEET ITEM. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER OBSERVED THAT THE SAID ADVANCE WA S CREDITED INTRIGUINGLY IN THE PROFIT AND LOSS A/C. AND EXPENDITURE WAS CLAIMED FROM THE SAID ADVANCE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ONC E THE ASSESSING OFFICER HAD COME TO A CONCLUSION THAT THE RECEIPT IS CAPITAL IN NATURE AND A BALANCE SHEET ITEM ON TH E BASIS I.T.A. NO.18/HYD/2011 M/S. PEARL PLAZA ================= 5 OF HIS OWN ENQUIRY WITH THE DEVELOPER, HE HAS STOPP ED TREATING THE AMOUNT AS A REVENUE RECEIPT AND TAX IT UNDER OTHER SOURCE. THE ACTION OF THE ASSESSING OFFICER IS CONTRADICTORY AS THE ASSESSING OFFICER HELD THAT TH E AMOUNT DOES NOT REPRESENT REVENUE RECEIPT BUT A BALANCE SH EET ENTRY BUT DREW AN INCORRECT INFERENCE BY TAXING THE SAME RECEIPT IN ITS ENTIRETY. THE ASSESSING OFFICER WIT HOUT ANY VALID REASON SHOULD NOT HAVE SUBJECTED TO TAX THE A MOUNT WHICH IS IN THE NATURE OF A CAPITAL RECEIPT UNDER T HE HEAD OTHER SOURCE. 8. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IF INCOME DOES NOT RESULT AT ALL THE RE CANNOT BE A TAX EVEN THOUGH IN BOOK-KEEPING AN ENTRY IS M ADE ABOUT A HYPOTHETICAL INCOME WHICH DOES NOT MATERI ALISE. WHERE INCOME HAS, IN FACT, BEEN RECEIVED AND IS SUBSEQUENTLY GIVEN UP, IN SUCH CIRCUMSTANCES IT REM AINS THE INCOME OF THE RECIPIENT AND THE TAX MAY BE PAYA BLE. IN ASSESSEE CASE THE INCOME DID NOT ACCRUE BECAUSE THE AMOUNT IS A REFUNDABLE ADVANCE WHICH IS AN UNDISPUT ED FACT ON RECORD. FOR THIS PURPOSE HE RELIED ON THE DECISION OF THE SUPREME COURT IN CIT VS. SHOORJI VALLABHDAS & CO., 46 ITR 144. HE FURTHER SUBMITTED THAT THE CIT(A) R EJECTED THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE A SSESSEE IS NOT ENTITLED TO GO BACK ON THE NATURE OF THE REC EIPT. THE I.T.A. NO.18/HYD/2011 M/S. PEARL PLAZA ================= 6 CIT(A) ALSO HELD THAT THE CASE LAW RELIED ON BY THE ASSESSEE CANNOT BE APPLIED. THE LEARNED COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE CIT(A) FAILED TO APPRECIATE THAT THE ASSESSING OFFICER HAS ALREADY OBTAINED CONFIRMATION FROM THE DEVELOPER WHICH SHOWED THAT THE AMOUNT OF RS. 26,50,000 IS REFUNDABLE ADVANCE. THE LEARNED COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A) OUGH T NOT TO HAVE UPHELD THE ASSESSMENT AND REQUESTED THE TRIBUN AL TO KEEP ASIDE THE ORDER OF THE CIT(A). 9. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO THE AFFIDAVIT FILED BY S. KRISHNAN, PA RTNER OF THE ASSESSEE FIRM AFFIRMING THAT THE AMOUNT OF RS. 26.5 0 LAKHS IS A REFUNDABLE SECURITY DEPOSIT IN THE NATURE OF A DVANCE AND THAT THE SAME WAS SHOWN AS A REVENUE RECEIPT UN DER MISTAKEN IMPRESSION OF LAW AND INCOME WAS COMPUTED CLAIMING THE EXPENDITURE. 10. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 11. WE HAVE HEARD THE PARTIES AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE DEVELOPMENT AGRE EMENT WAS ENTERED BY THE ASSESSEE WITH M/S. PRASAD EDIFIC E PVT. LTD. ON 10.3.2006 AS PER WHICH THE ASSESSEE IS IN R ECEIPT OF RS. 50 LAKHS WHICH REPRESENTS REFUNDABLE DEPOSIT AN D THE I.T.A. NO.18/HYD/2011 M/S. PEARL PLAZA ================= 7 SAME WAS TO BE RETURNED TO THE SAID PARTY AFTER COM PLETION OF THE SAID PROJECT. THERE IS NO STIPULATION REGAR DING ANY FURTHER REFUNDABLE DEPOSIT HAS TO BE PAID TO THE AS SESSEE IN THE AGREEMENT. THE ASSESSEE HAS NOT PRODUCED ANY MATERIAL TO SUBSTANTIATE THE CLAIM FOR THE RECEIPT OF ANY ADDITIONAL REFUNDABLE DEPOSIT OVER AND ABOVE THE RS . 50 LAKHS REFUNDABLE DEPOSIT. IN THE ABSENCE OF EVIDEN CE IT IS NOT POSSIBLE TO US TO HOLD THAT THE ASSESSEE HAS AC TUALLY RECEIVED RS. 26.50 LAKHS AS REFUNDABLE DEPOSIT FROM M/S. PRASAD EDIFICE PVT. LTD. FURTHER THE ASSESSEE ITSE LF HAS SHOWN RS. 26.50 LAKHS AS REVENUE RECEIPT AND ALSO C LAIMED EXPENDITURE IN PROFIT AND LOSS A/C. TO THE TUNE OF RS. 25,16,825. WHEN THE ASSESSING OFFICER ASKED THE AS SESSEE TO FURNISH THE DETAILS OF EXPENDITURE AND EVIDENCE FOR THIS EXPENDITURE, THE ASSESSEE EXPRESSED ITS HELPLESSNES S TO PRODUCE THE SAME. THE FACTS OF THE CASE SHOW THAT ASSESSEE MADE AN ATTEMPT TO CLAIM UNSUBSTANTIATED EXPENDITURE WHICH WAS NOTICED BY THE ASSESSING OFFI CER. WHEN IT WAS NOTICED BY THE ASSESSING OFFICER, THE A SSESSEE ONCE AGAIN TRIED TO SHOW THAT THE AMOUNT CREDITED I N THE PROFIT AND LOSS A/C. AT RS. 26.5 LAKHS IS IN THE NA TURE OF CAPITAL RECEIPT. EVEN AFTER CLAIMING IT AS A CAPIT AL RECEIPT, THE ASSESSEE COULD NOT SUBSTANTIATE IT AS A CAPITAL RECEIPT. FURTHER THE CONFIRMATION FURNISHED BY THE ASSESSEE FROM M/S. PRASAD EDIFICE PVT. LTD. IS A SELF-SERVING DOC UMENT I.T.A. NO.18/HYD/2011 M/S. PEARL PLAZA ================= 8 WHICH WAS PROCURED AFTER THE ASSESSEE WAS CAUGHT AN D IT CANNOT BE RELIED UPON. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR OPINION, THE ASSESSEES REQUEST CANNOT BE ENTERTAINED. ACCORDIN GLY, THE ORDERS OF THE LOWER AUTHORITIES ARE CONFIRMED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH, 2011. SD/- (G.C. GUPTA) VICE PRESIDENT SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 25 TH MARCH, 2011 TPRAO COPY FORWARDED TO: 1. M/S. PEARL PLAZA, PLOT NO. 690, 6-3-249/7/1/B, NAVE EN NAGAR COLONY, HYDERABAD. 2. INCOME-TAX OFFICER, WARD 6(1), I.T. TOWERS, A.C. GU ARDS, HYDERABAD. 3. THE CIT(A)-IV, HYDERABAD 4 THE CIT-III, HYDERABAD 5. THE DR A BENCH, ITAT, HYDERABAD