DCIT, CHENNAI V. T.S.Narayanaswamy, CHENNAI

ITA 1925/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3835 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 24-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Reopening of assessment; Business income; Business expenditure; Additional evidence; Revised return
• Section: 45(2); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ' # , $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ ITA NOS.1925, 1926, 1927, 1928 & 1929/MDS/2016 $ ' (' / ASSESSMENT YEARS : 2007-08 TO 2011-12 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2), CHENNAI - 600 034. V. SHRI T.S. NARAYANASWAMY, NO.4, A & B CORAL, 8/22, RAHAVIAH ROAD, T. NAGAR, CHENNAI - 600 017. PAN : AVMPS 1049 N (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT ,-*+ . / / RESPONDENT BY : SHRI K. BALASUBRAMANIAN, ADVOCAT E ' . 0 / DATE OF HEARING : 14.09.2016 12( . 0 / DATE OF PRONOUNCEMENT : 26.09.2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: REVENUE HAS FILED THESE APPEALS AGAINST THE SIMIL AR ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNA I. SINCE SIMILAR FACTS AND CIRCUMSTANCES EXIST IN THESE APPE ALS, FOR THE SAKE OF CONVENIENCE, WE TAKE UP THE FACTS NARRATED FOR A SSESSMENT YEAR 2008-09 IN I.T.A. NO.1926/MDS/2016. 2 I.T.A. NOS.1925 TO 1929/MDS/16 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 2.1 THE CIT(A) ERRED IN ALLOWING 95% OF THE EXPE NDITURE AS BUSINESS EXPENDITURE WITHOUT VERIFYING THE CLAIM. 2.2 THE CIT(A) ERRED IN ALLOWING THE ADDITIONAL E XPENSES CLAIMED BY THE ASSESSEE WHEN THE SAME WERE NOT C LAIMED IN THE REVISED RETURN ALSO. 2.3 THE CIT(A) FAILED TO APPRECIATE THE HONBLE S UPREME COURTS DECISION IN THE CASE OF M/S GOETZ INDIA W HEREIN IT HAS BEEN HELD THAT THE FRESH CLAIM BEFORE THE AO CAN BE MADE ONLY BY FILING A REVISED RETURN AND NOT OTHERWISE . 2.4 THE CIT(A) OUGHT TO HAVE AFFORDED AN OPPORTUN ITY TO THE AO UNDER RULE 46A WHILE ADMITTING THE ADDITIO NAL EXPENDITURE CLAIMED BY THE ASSESSEE. 2.5 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE BILLS AND VOUCHERS PRODUCED BEFORE THE AO WERE MOSTLY SELF- GENERATED AND HENCE THE AO DISALLOWED THE EXPENDI TURE CLAIMED BY THE ASSESSEE. 2.6 THE CIT(A) IN FOLLOWING THE AOS ALLOWANCE AT 95% OF THE EXPENDITURE FOR THE A.Y. 2013-14 AS YARDSTICK , FOR THE ASSESSMENT YEAR ALSO. 3. THE ASSESSEE, WHO IS IN THE BUSINESS OF DEVELOPM ENT OF PLOTS AND ALSO DIRECTOR OF M/S UNICARD MARKETING PV T. LTD., FILED RETURN OF INCOME ON 12.04.2009 WITH TOTAL INCOME OF ` 9,59,240/-, INCLUDING AGRICULTURAL INCOME OF ` 1,00,000/-. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TA X ACT, 1961 (IN SHORT 'THE ACT'). SUBSEQUENTLY, THE REVENUE HAS FO UND THAT THE ASSESSEE HAS CONVERTED THE AGRICULTURAL LAND HELD B Y HIM AND DEVELOPED PLOTS AND SOLD IT. THIS FACT WAS NOT BRO UGHT ON RECORD 3 I.T.A. NOS.1925 TO 1929/MDS/16 AND NO CAPITAL GAIN WAS REFLECTED IN THE COMPUTATIO N OF INCOME. NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED. IN COMPLIANCE TO THE NOTICE, THE ASSESSEE FILED A REVISED RETURN ON 28.04.2014 DECLARING A TOTAL INCOME OF ` 16,46,380/-, INCLUDING AGRICULTURAL INCOME. IN THE ASSESSMENT PROCEEDING, THE LD. AR O F THE ASSESSEE FILED DETAILS AS CALLED FOR BY THE ASSESSING OFFICE R AND ALSO THE LD. AO PROVIDED REASONS FOR REOPENING OF ASSESSMENT AND AFTER EXAMINING THE DETAILS AND THE FACTS AND SUBMISSIONS OF THE LD. AR, THE ASSESSING OFFICER NOTICED THAT IN THE FINANCIAL YEAR 2007-08, THE ASSESSEE HAS DECLARED A CAPITAL GAIN ON SALE OF LAN D AT ` 85,50,779/- AND CLAIMED AS EXEMPT. IT WAS SUBMITTED THAT THE A SSESSEE HAS OBTAINED THE LAND FROM SARAVAMBAKKAM PANCHAYAT UNIO N AND OBTAINED APPROVAL FOR HOUSING SITES. THE ASSESSEE HAS ALSO SUBMITTED DETAILS ON THIS ISSUE. 4. THE CONTENTION OF THE LD. AR WAS THAT THE ASSESS EES CASE FALLS WITHIN THE PROVISIONS OF SECTION 45(2) OF THE ACT AND TREATED THE VALUE OF LAND AS STOCK-IN-TRADE. THE ASSESSING OFF ICER HAD REJECTED ON THE GROUND THAT THERE IS NO EVIDENCE PRODUCED TH AT THE AGRICULTURAL LAND WAS CONVERTED INTO STOCK-IN-TRADE NOR DID THE ASSESSEE PRODUCE ANY FINANCIAL STATEMENT TO SUBSTAN TIATE THE CLAIM. AS PER THE ASSESSEES SUBMISSIONS, THE LAND WAS PUR CHASED WITH AN 4 I.T.A. NOS.1925 TO 1929/MDS/16 INTENTION OF INVESTMENT AND SUCH LAND WAS PURCHASED DURING DIFFERENT YEARS. THE ASSESSEE HAS CLAIMED THE LAND AS STOCK-IN- TRADE AND FILED THE DETAILS OF AGRICULTURAL LAND AN D DETAILS OF SALE CLAIMING THE SAME AS BUSINESS INCOME. THE ASSESSEE HAS INCURRED DEVELOPMENT AND OTHER EXPENSES IN CONNECTION WITH T HE BUSINESS OF PLOTS. BUT, AFTER GOING THROUGH THE DETAILS OF EXP ENDITURE AND VERIFICATION OF THE FACTS, THE LD. AO IS OF THE OPI NION THAT THE STRATEGY ADOPTED BY THE ASSESSEE TO TREAT AS PER THE PROVISI ONS OF SECTION 45(2) OF THE ACT CANNOT BE ACCEPTED. BASICALLY THE INTENTION OF THE ASSESSEE WAS TO PURCHASE THE LAND AND SELL LATER FO R PROFIT. THE BUSINESS EXPENDITURE AND DEVELOPMENT EXPENDITURE CL AIMED BY THE ASSESSEE WERE NOT SUPPORTED WITH VOUCHERS AND THERE IS A DOUBT ON THE GENUINENESS OF THE VOUCHERS. THEREFORE, THE LD . AO IS OF THE OPINION THAT THE EXPENDITURE CLAIMED BY THE ASSESSE E CANNOT BE ALLOWED. WITH THIS FINDING, THE LD. AO BY RELYING ON THE DECISION OF APEX COURT IN GOETZ INDIA V. CIT (284 ITR 323), HEL D THAT THE CLAIM BEFORE THE ASSESSING OFFICER CAN BE MADE ONLY BY RE VISED RETURN AND NOT OTHERWISE. SO, CONSIDERING THESE FACTS, TH E STAND OF THE ASSESSEE TO CONSIDER IT AS LONG TERM CAPITAL GAIN O N SALE OF LAND CANNOT BE ACCEPTED AND THEREFORE, THE CONSIDERATION RECEIVED ON SALE OF AGRICULTURAL LAND BY DEVELOPING INTO PLOTS AT ` 85,50,779/- WAS 5 I.T.A. NOS.1925 TO 1929/MDS/16 BROUGHT TO TAX AND ORDER UNDER SECTION 143 R.W.S. 1 47 OF THE ACT DATED 25.02.2015 WAS PASSED. 5. AGGRIEVED, THE ASSESSEE HAS FILED APPEAL BEFORE THE CIT(APPEALS). IN THE APPELLATE PROCEEDING, THE LD. AR ARGUED WITH GROUNDS, EXPLAINED WITH FACTS AND ALSO REITERATED T HE SUBMISSIONS MADE IN THE ASSESSMENT PROCEEDING ALONG WITH EVIDEN CE THAT THE ASSESSEES CLAIM OF CAPITAL GAIN WAS NOT CONSIDERED AND THE TOTAL INCOME WAS TREATED AS BUSINESS INCOME. FURTHER THE LD. AO HAS DENIED THE CLAIM OF EXPENDITURE. IN THE COURSE OF APPELLATE PROCEEDING, THE LD. AR SUBMITTED THAT THE CONTENTIO N OF THE ASSESSEE WAS NOT CONSIDERED IN VIEW OF THE PROVISIO NS OF SECTION 45(2) OF THE ACT, BUT, IF THE INCOME IS TREATED AS BUSINESS INCOME, THE EXPENSES IN CONNECTION THE BUSINESS ARE TO BE A LLOWED. FURTHER THE ASSESSEE, APART FROM THE ABOVE SUBMISSIONS, SUB MITTED ALTERNATIVE PLEA ON 28.03.2016 AND THE SAME WAS REF ERRED BY THE LD. CIT(APPEALS) IN HIS ORDER AT 5.3.1, WHICH READS AS FOLLOWS:- WITHOUT PREJUDICE TO OUR APPEAL WE PRAY FOR AN ALTE RNATIVE SUBMISSIONS TO CONSIDER THE EXPENSES CLAIMED BY THE ASSESSEE IN THE REVISED RETURN OF INCOME OF `22,53,779/- AND ADDITIONAL EXPENDITURE OF `42,18,885/- INCURRED FOR TH E DEVELOPMENT AND SALE OF THE PROPERTY PERTAINING TO THE INCOME CLAIMED AS EXEMPTED AS BUSINESS EXPENDITURE WH ICH WERE NOT ORIGINALLY CLAIMED IN THE RETURN. IT IS T HE RIGHT OF THE ASSESSEE TO CLAIM THE GENUINE EXPENDITURES AS PR OVIDED 6 I.T.A. NOS.1925 TO 1929/MDS/16 IN THE ACT INCURRED IN EARNING THE INCOME THE DETAI LS OF WHICH ARE ENCLOSED AGAINST THE INCOME TO COMPUTE TH E TAXABLE INCOME. THE RIGHTS OF THE ASSESSEE CANNOT B E DENIED ONLY ON THE GROUND THAT THAT THE SAME WERE N OT CLAIMED IN THE ORIGINAL RETURN FILED BY THE ASSESSE E WHICH WILL RESULT IN ERRONEOUS COMPUTATION OF THE TAXABLE INCOME. WE PRAY TO THE HON. COMMISSIONER TO CONSIDER THIS ALTERNATIVE PLEA AND ALLOW THE EXPENDITURE AGAINST T HE INCOME AND OBLIGE. THE LD. CIT(APPEALS) CONSIDERED THE SUBMISSIONS MAD E ON 28.03.2016 AND ALSO THE CLAIM MADE BY THE ASSESSEE FOR ADDITIONAL EXPENDITURE OF ` 42,18,885/- AND SIMILARLY FOR OTHER ASSESSMENT YEARS, THE LD. CIT(APPEALS) CONSIDERED THE FINDINGS OF THE LD. AO AND SUBMISSIONS OF THE ASSESSEE AND JUDICIAL DECISI ONS, IS OF THE OPINION THAT THE INCOME ON SALE OF PLOTS IS A BUSIN ESS INCOME, THE EXPENSES IN RELATING TO EARNING OF BUSINESS INCOME HAS TO BE ALLOWED AS CLAIMED IN THE APPELLATE PROCEEDING AND ALSO RELIED ON THE ASSESSMENT ORDER OF THE ASSESSEE FOR SUBSEQUENT ASSESSMENT YEAR 2013-14. THE LD. CIT(APPEALS) HAVING PERUSED THE ASSESSEES SUBMISSIONS AND ALSO THE STAND OF THE LD . AO, WHERE THE ASSESSING OFFICER HAS ALLOWED 95% OF THE ASSESS EES CLAIM OF EXPENDITURE AND WITH HIS FINDING, THE LD. CIT(APPEA LS) DIRECTED THE ASSESSING OFFICER TO ASSESS THE SALE PROCEEDS FROM THE LAND AS BUSINESS INCOME AND ALLOW 95% OF BUSINESS EXPENDITU RE. THE LD. CIT(APPEALS) ALSO DIRECTED THE ASSESSING OFFICER TO RECOMPUTED THE 7 I.T.A. NOS.1925 TO 1929/MDS/16 ASSESSEES INCOME AS PER THE ANNEXURES GIVING EFFEC T TO HIS ORDER AND ALSO SUPPORTED WITH THE DECISIONS OF THE JURISD ICTIONAL HIGH COURT IN THE CASE OF RAMCO CEMENTS LTD. V. CIT (373 ITR 146) AND PARTLY ALLOWED THE APPEAL. 6. AGGRIEVED, THE REVENUE HAS FILED THE APPEALS BEF ORE THE TRIBUNAL. BEFORE US, THE LD. DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT THE ORDER OF THE CIT(APPEALS) IS ERR ED IN LAW AND THE CIT(APPEALS) HAS DIRECTED THE ASSESSING OFFICER TO ALLOW 95% OF EXPENDITURE AS BUSINESS EXPENDITURE WITHOUT VERIFYI NG THE CLAIM AND ALSO THE ASSESSEE HAS NOT CLAIMED THIS ADDITIONAL E XPENDITURE IN THE REVISED RETURN. FURTHER, MOST OF THE BILLS AND VOU CHERS PRODUCED BEFORE THE ASSESSING OFFICER WERE MOSTLY SELF-GENER ATED AND THE ASSESSING OFFICER HAVING NOT SATISFIED WITH THE CLA IM OF THE ASSESSEE, HAS NOT ALLOWED THE CLAIM. THE LD. CIT(A PPEALS) FOLLOWING THE ASSESSMENT ORDER OF THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2013-14 AS THE BASE, IS NOT AN ACCE PTABLE PROPOSITION AND IN THE APPELLATE PROCEEDING, WHEN T HE ASSESSEE HAS CLAIMED THE ADDITIONAL EXPENDITURE AS REFERRED IN T HE ORDER, THE LD. CIT(APPEALS) HAS NOT CALLED FOR THE COMMENTS OR REM AND REPORT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS NOT PROVIDED AN OPPORTUNITY TO VERIFY THE GENUINENESS OF THE CLA IM OF THE 8 I.T.A. NOS.1925 TO 1929/MDS/16 ASSESSEE AS THE SAME WAS NOT AVAILABLE DURING THE A SSESSMENT PROCEEDING. THE LD. D.R. PRAYED FOR SETTING ASIDE THE ORDER OF THE CIT(APPEALS) AND RESTORE THE ORDER OF THE LOWER AUT HORITY. 7. PER CONTRA, THE LD. AR OF THE ASSESSEE RELIED ON THE OBSERVATIONS AND FINDINGS MADE BY THE CIT(APPEALS) AND SUPPORTED WITH JUDICIAL DECISIONS AND OPPOSED TO THE GROUNDS RAISED BY THE REVENUE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE JUDICIAL DECISIONS CITE D. THE MAIN CONTENTION OF THE REVENUE IS THAT THE CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF BUSINESS EXPENDITURE BEING 95% IRRESPECTIVE OF THE FACT THAT THE ASSESSEE HAS NOT MADE ANY CLAIM IN THE REVISED RETURN AND AL SO THE EXPENDITURE WAS NOT VERIFIED. FURTHER THE PROVISIO NS OF RULE 46A OF THE INCOME-TAX RULES, 1962 WERE VIOLATED AS THE FRE SH EVIDENCE WAS FILED IN THE APPELLATE PROCEEDING AND NO REMAND REPORT WAS CALLED FOR. ON THE OTHER HAND, THE LD. AR OF THE A SSESSEE ARGUED THAT THE PROVISIONS OF SECTION 45(2) OF THE ACT ARE APPLICABLE AND BUSINESS EXPENDITURE HAS TO BE ALLOWED IRRESPECTIVE OF THE FACT THAT THE SAME WAS NOT CLAIMED. WE PERUSED THE ASSESSMEN T ORDER AND 9 I.T.A. NOS.1925 TO 1929/MDS/16 THERE IS NO REFERENCE TO THESE ADDITIONAL EXPENDITU RE CLAIMED BY THE ASSESSEE IN THE APPELLATE PROCEEDING. THEREFORE, T HIS CLAIM FOR ALLOWING THE DEDUCTION IS BASED ON THE SUBSEQUENT Y EARS ASSESSMENT ORDER OF THE AO, WHEREAS IN THE EARLIER ASSESSMENT ORDER, THE AO WAS DEPRIVED TO VERIFY AND EXAMINE TH E GENUINENESS OF EXPENDITURE. SO, CONSIDERING THE APPARENT FACTS , IN THE INTEREST OF JUSTICE, WE ARE OF THE OPINION THAT THE CLAIM OF AD DITIONAL EXPENDITURE BY THE ASSESSEE IN THE APPELLATE PROCEEDING IS IN T HE NATURE OF ADDITIONAL EVIDENCE AND THE ASSESSING OFFICER SHOUL D BE PROVIDED ADEQUATE OPPORTUNITY TO VERIFY AND ALLOW THE CLAIM. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(APPEALS) AND REMIT T HE DISPUTED ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THE CLAIM AND GENUINENESS. FURTHER, THE ASSESSEE SHOULD BE PROVI DED OPPORTUNITY TO MAKE SUBMISSIONS IN RESPECT OF SUCH CLAIM. 9. SINCE THE FACTS AND GROUNDS RAISED BY THE REVENU E IN OTHER APPEALS FOR OTHER ASSESSMENT YEARS 2007-08, 2009-10 , 2010-11 & 2011-12 ARE ALSO SIMILAR, OTHER APPEALS OF THE ASSE SSEE ARE ALSO REMITTED BACK TO THE ASSESSING OFFICER WITH ABOVE D IRECTION. 10. IN THE RESULT, ALL THE APPEALS FILED BY THE REV ENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 10 I.T.A. NOS.1925 TO 1929/MDS/16 ORDER PRONOUNCED ON 26 TH SEPTEMBER, 2016 AT CHENNAI. SD/- SD/- ( ) ( . ' #) (CHANDRA POOJARI) (G. PAVAN KUMAR) / ACCOUNTANT MEMBER $ /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 26 TH SEPTEMBER, 2016. KRI. 5 . ,$067 87(0 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. ' 90 () /CIT(A)-11, CHENNAI-34 4. PRINCIPAL CIT-3, CHENNAI 5. 7 :; ,$0$ /DR 6. ;<' = /GF.