ITO, New Delhi V. M/s. MRG Promoters P. Ltd., New Delhi

ITA 1959/DEL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5536 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEFALI SWROOP
• Section: 133(6); 194C; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1959/DEL./2014 (ASSESSMENT YEAR : 2009-10) ITO, WARD 6 (1), VS. M/S. MRG PROMOTERS P. LTD., NEW DELHI. 2332, 1 ST FLOOR, PEELI BUILDING, ARYA SAMAJ ROAD, KAROL BAGH, NEW DELHI 110 088. (PAN : AAECM1051G) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MS. SHEFALI SWROOP, CIT DR DATE OF HEARING : 09.04.2018 DATE OF ORDER : 13.04.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, INCOME TAX OFFICER, WARD 6 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE) BY FILIN G THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATE D 16.01.2014 PASSED BY LD. CIT (APPEALS)-IX, NEW DELHI QUA THE A SSESSMENT YEAR 2009-10 ON THE GROUNDS INTER ALIA THAT :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.11,06,69,987/-, MADE BY THE A.O U/S 40(A)(IA) FOR NON-DEDUCTION OF TDS U/S 194C, WITHOU T ITA NO.1959/DEL./2014 2 APPRECIATING THE FACT THAT DEDUCTION OF TDS ON PAYMENTS/ADVANCES MADE U/S 194C ? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.3,28,90,154/-, MADE BY THE A.O BY REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE P ROFIT @ 25% OF THE TOTAL VALUE OF COST BY ADOPTING THE PERCENTAGE COMPLETION METHOD OF ACCOUNTING, ENTIREL Y ON THE SUBMISSION OF THE ASSESSEE AND IGNORING THE DETAILED FINDINGS GIVEN BY THE A.O ? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE A.O THAT THE ADDITION OF RS.3,28,90,154/-, MADE BY THE A.O BY REJECTING THE BOOKS OF ACCOUNT AND ESTIMATIN G THE PROFIT @ 25% OF THE TOTAL VALUE OF COST BY ADOP TING THE PERCENTAGE COMPLETION METHOD OF ACCOUNTING, WAS BASED ON ASSUMPTION WITHOUT ADEQUATE ADVERSE MATERI AL INTO POSSESSION COMPLETELY IGNORING THE DETAILED DISCUSSION MADE BY THE A.O ON THE ABOVE ISSUE IN TH E ASSESSMENT ORDER? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) ERRED IN NOT ADJUDICA TING ON THE ISSUE OF NON-CONFIRMATION OF 29 CREDITORS, O UT OF 46 CREDITORS, IN RESPONSE TO THE NOTICES U/S 133(6) ISSUED BY THE A.O. AS THE ADDITION OF RS.5,79,88,516/- WAS NOT MADE U/S 68 BY THE A.O AS HE HAD ALREADY MADE THE ADDITION OF RS. 3,28,90,154/- ? 5. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AN D IS NOT TENABLE ON FACTS AND IN LAW. 6. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO EACH OTHER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSEE COMPANY IS INTO THE BUSINESS OF REAL ESTATE AS SUBSIDIARY OF AMR INFRASTRUCTURE LTD . (FOR SHORT ITA NO.1959/DEL./2014 3 AMR) AND HAS ENTERED INTO AN AGREEMENT WITH ITS M AJORITY SHAREHOLDER AMR INFRASTRUCTURE LTD. (99% HOLDING CO MPANY) FOR CONSTRUCTION OF A MALL AT KUNDLI. DURING THE YEAR UNDER ASSESSMENT, PARENT COMPANY RECEIVED AN AMOUNT OF RS.7,26,53,392.70 ON ACCOUNT OF ADVANCE AGAINST THE EXPENSES OF RS.11,06,69,987/-. IN P&L ACCOUNT, ASSESSEE COMPAN Y DECLARED NIL INCOME AND CLAIMED EXPENDITURE TO THE TUNE OF RS.81 ,137.20 WHICH IS SHOWN AS NET LOSS IN P&L ACCOUNT. AO BY TREATIN G ASSESSEE AND AMR AS TWO SEPARATE ENTITIES PROCEEDED TO CONCLUDE THAT THE ASSESSEE COMPANY WAS REQUIRED TO DEDUCT THE TAX AT SOURCE (TDS). AO, DECLINING THE CONTENTION RAISED BY THE ASSESSEE COMPANY THAT ALL THE PAYMENTS ARE MADE BY AMR AND THE ASSESSEE C OMPANY IS ONLY BOOKING THE EXPENSES OF AMR, TDS IS ALSO MADE BY AMR, DISALLOWED THE AMOUNT OF RS.11,06,69,987/- UNDER SE CTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) A ND MADE ADDITION THEREOF TO THE INCOME OF THE ASSESSEE COMP ANY. AO FURTHER MADE ADDITION OF RS.3,28,90,154/- BY REJECT ING THE BOOKS OF ACCOUNT AND ESTIMATING THE PROFIT @ 25% OF THE TOTA L VALUE OF THE COST BY ADOPTING THE PERCENTAGE COMPLETION METHOD O F ACCOUNTING. AO NOTICED FROM THE DETAILS SUBMITTED BY THE AMR SH OWING THE LIST OF CREDITORS, THEIR ADDRESSES AND AMOUNT TAKEN DURING THE YEAR AND IN ORDER TO VERIFY THEIR CREDITWORTHINESS ISSUE D NOTICES U/S ITA NO.1959/DEL./2014 4 133(6) OF THE ACT. OUT OF THE 46 NOTICES ISSUED, O NLY 17 REPLIED WITH THEIR CONFIRMATIONS BUT NO SEPARATE ADDITION O N THIS ACCOUNT HAS BEEN MADE BY THE ASSESSEE COMPANY AS THE ADDITI ON MADE BY MAKING DISALLOWANCE U/S 40(A)(IA) AND ESTIMATING TH E GROSS PROFIT WILL COVER THE DISALLOWANCE/ADDITION ON THIS ISSUE. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION OF RS.11,0 6,69,987/- U/S 40(A)(IA) AND ADDITION OF RS.3,28,90,154/- ON ACCOU NT OF GP RATE BY PARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PR ESENT APPEAL. 4. ASSESSEE HAS NOT PREFERRED TO PUT IN APPEARANCE DESPITE ISSUANCE OF THE NOTICE ON EARLIER OCCASIONS AND CON SEQUENTLY, WE PROCEEDED TO DECIDE THE PRESENT APPEAL WITH THE ASS ISTANCE OF THE LD. DR AS WELL AS ON THE BASIS OF DOCUMENTS AVAILABLE O N THE FILE. 5. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E FOR THE REVENUE 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. GROUND NO.1 6. UNDISPUTEDLY, TAX ON THE AMOUNT IN QUESTION HAS BEEN DEDUCTED AT SOURCE BY AMR AND PAID TO THE GOVERNMEN T. WHEN ITA NO.1959/DEL./2014 5 AMR, A 99% HOLDING COMPANY OF THE ASSESSEE COMPANY, WAS TO ACT ON BEHALF OF THE ASSESSEE COMPANY, PURCHASED THE RA W MATERIAL, CARRIED OUT ALL ADMINISTRATIVE WORK, MAKE ALL NECES SARY PAYMENTS ON ITS BEHALF AND ALSO ACCEPTED BOOKING AMOUNT, AMR MADE THE PAYMENT TO VARIOUS PERSONS AFTER DEDUCTING THE NECE SSARY TDS ON BEHALF OF THE ASSESSEE COMPANY, SECTION 194C IS NOT ATTRACTED AND PROVISIONS CONTAINED U/S 40(A)(IA) OF THE ACT ARE N OT APPLICABLE. WHEN LD. CIT (A) HAS DULY EXAMINED THE BANK ACCOUNT S OF AMR SHOWING ADVANCES RECEIVED FROM CLIENTS AND PAYMENT FOR EXPENSES AND HAS ALSO PERUSED THE LEDGER ACCOUNT OF THE PAYE E IN BOOKS OF AMR WHERE TDS HAS BEEN SHOWN AS DEDUCTED ON THE PAY MENT AND DEPOSITED IN THE PUNJAB NATIONAL BANK, KUNDLI, THE ASSESSEE COMPANY CANNOT BE PENALIZED U/S 40(A)(IA) OF THE AC T AS THE ENTIRE ARRANGEMENT FOR MAKING PAYMENT OF TDS IS IN ACCORDA NCE WITH THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND AMR (99% HOLDING COMPANY). SO, IN THESE CIRCUMSTANCES, WE FIND NO ILLEGALITY OR PERVERSITY IN THE DELETION MADE BY LD . CIT (A). CONSEQUENTLY, GROUND NO.1 IS DETERMINED AGAINST THE REVENUE. GROUNDS NO.2 & 3 7. AO MADE ADDITION OF RS.3,28,90,154/- BY REJECTIN G THE BOOKS OF ACCOUNT BY ESTIMATING THE PROFIT @ 25% OF THE TO TAL VALUE OF THE ITA NO.1959/DEL./2014 6 COST OF ADOPTING PERCENTAGE COMPLETION METHOD OF AC COUNTING, WHICH THE LD. CIT (A) HAS DELETED. AO HAS TAKEN IN TO ACCOUNT GP RATE OF DLF @ 20% AND STATED THAT IN CASE 20% OF GP IS APPLIED, THE PROFIT RATE WILL BE 25% OF THE COST. 8. PERUSAL OF THE ASSESSMENT ORDER GOES TO SHOW THA T AO APPLIED PERCENTAGE COMPLETION METHOD (POCM) ON WORK -IN- PROGRESS OF RS.13.15 CRORES DECLARED BY THE ASSESSE E COMPANY AND TREATED THE INCREASE IN WORK-IN-PROGRESS DURING THE YEAR AS PROJECT COMPLETED AND PROCEEDED TO ASSUME THAT 25% OF THE T OTAL VALUE OF WORK-IN-PROGRESS DURING THE YEAR IS RECOGNIZED AS P ROFIT OF THE YEAR. AO ARRIVED AT THIS PERCENTAGE BY APPLYING INDIRECT METHOD. SECONDLY, AO APPLIED 20% OF THE GP DECLARED BY DLF AND THEN PROCEEDED TO TAKE WORK-IN-PROGRESS OF RS.13.15 CROR ES AS AGAINST 25% OF THE SAME I.E. RS.3,28,90,154/- AS GROSS PROF IT. 9. HOWEVER, THE AO HAS NOT TAKEN INTO ACCOUNT THE F ACTS INTER ALIA THAT THE ASSESSEE COMPANY CANNOT BE COMPARED W ITH DLF BECAUSE OF ITS HUGE TURNOVER AND BRAND VALUE; THAT SINCE THERE IS NO SALE PROCEEDS OR INCOME IN THE HANDS OF THE ASSESSE E COMPANY THE ENTIRE EXPENDITURE IS CAPITALIZED; THAT NO PROFIT & LOSS ACCOUNT PREPARED AS THE EXPENDITURE IS WHOLLY CAPITALIZED A ND AS PER SCHEDULE OF EXPENSES GIVEN IN THE ASSESSMENT ORDER, THE CONSTRUCTION EXPENSES IS SHOWN AT RS.6,88,15,115/-. SO, THE AO ITA NO.1959/DEL./2014 7 HAS APPLIED POCM ON COST ON AN ASSUMED PERCENTAGE O F COMPLETION OR ON EXTRA POLATION BASIS WHICH IS NOT PERMISSIBLE AS PER ACCOUNTING PROCEDURE. SO, IN THESE CIRCUMSTANC ES, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT (A) BY EXAMINING A LL THESE FACTS HAVE RIGHTLY DELETED THE ADDITION WHICH NEEDS NO IN TERFERENCE. CONSEQUENTLY, GROUNDS NO.2 & 3 ARE DETERMINED AGAIN ST THE REVENUE. GROUND NO.4 10. THIS GROUND RAISED BY THE REVENUE IS TOTALLY MI SCONCEIVED AS NO SPECIFIC ADDITION HAS BEEN MADE BY THE AO TO BE CHALLENGED UNDER THIS GROUND WHO HAS RATHER RECORDED HIS FINDI NG ON THIS ISSUE AS UNDER :- AS SEEN FROM THE ABOVE CHART, OUT OF THE 46 NOTICE S ISSUED ONLY 17 REPLIED WITH THEIR CONFIRMATION. TH E TOTAL AMOUNTS CONFIRMED BY SUCH REPLIES BEING RS.1,46,64,876/-. THE BALANCE AMOUNT OF RS.5,79,88,516/- CLAIMED TO HAVE BEEN RECEIVED DURI NG THE YEAR STAND UNCONFIRMED INDEPENDENTLY. THIS IS ONE MORE REASON FOR REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. NO ADDITION BEING MADE UNDER DIFFERENT HEADS WILL COVER THE DISALLOWANCE/ADDITIO NS ON THIS ISSUE AS WELL. 11. LD. CIT(A) HAS RIGHTLY DEALT WITH THIS ISSUE BY TREATING THIS GROUND AS INFRUCTUOUS AS THE AO HAS NOT MADE ANY AD DITION ON THIS GROUND WHICH IS OTHERWISE COVERED UNDER EXPENSES AN D GP HEAD. SO, GROUND NO.4 IS DETERMINED AGAINST THE REVENUE. ITA NO.1959/DEL./2014 8 GROUNDS NO.5 & 6 12. GROUNDS NO.5 & 6 ARE GENERAL IN NATURE, HENCE D O NOT REQUIRE ANY ADJUDICATION. 13. RESULTANTLY, THE APPEAL OF THE REVENUE IS HEREB Y DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 13 TH DAY OF APRIL, 2018. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 13 TH DAY OF APRIL, 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-IX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.