Income Tax Officer-VI(I), Lucknow V. M/s Shivgarh Resorts Pvt.Ltd., Lucknow

ITA 200/LKW/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83247 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-07-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 16-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARE BEING DISPOSED OF
• Keywords: Opportunity of being heard; Revenue expenditure
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.200/LKW/2012 ASSESSMENT YEAR:2000 - 01 INCOME TAX OFFICER - VI(1), LUCKNOW. VS. M/S SHIVGARH RESORTS LTD., 5, PARK ROAD, LUCKNOW. PAN:AADCS0368M (APPELLANT) (RESPONDENT) ITA NO.681/LKW/2011 ASSESSMENT YEAR:2005 - 06 DY.C.I.T. - VI, LUCKNOW. VS. M/S SHIVGARH RESORTS LTD., 5, PARK ROAD, LUCKNOW. PAN:AADCS0368M (APPELLANT) (RESPONDENT) O R D E R PER A. K. GARODIA, A.M. BOTH THESE APPEALS ARE FILED BY THE REVENUE, WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LEARNED CIT(A), LUCKNOW AGAINST THE ORDER DATED 12 / 0 1/2012 FOR THE ASSESSMENT YEAR I.E. 200 0 - 0 1 AND AGAINST THE ORDER OF CIT(A) - II, LUCKNOW DATED 12/09/2011 FOR ASSESSMENT YEAR 2005 - 06. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. APPELLANT BY SHRI AMIT NIGAM, D.R. RESPONDENT BY SHRI R. S. GUPTA, ADVOCATE DATE OF HEARING 24/07/2014 DATE OF PRONOUNCEMENT 0 8 /08/2014 2 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2000 - 2001 I.E. I.T.A. NO.200/LKW/2012. I N THIS APPEAL , THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.31,53,145/ - MADE BY THE A.O. AN ACCOUNT OF MEMBERSHIP DEPOSITS TREATED AS INCOME FOR THE YEAR. 2. THE CIT (A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IS FAILING TO ENHANCE THE ABOVE ADDITION TO RS.76,34,515/ - AS POINTED OUT BY THE A.O. IN HIS REMAND REPORT SUBMITTED U/S 250(4) OF THE INCOME TAX ACT, 1961, AS THE FIGURE OF RS.31,53,145/ - WAS DUE TO AN ARITHME TICAL MISTAKE. 3. THE CIT(A) HAS ERRED IN HOLDING THAT THE ADDITION MADE BY THE A.O. IS COVERED BY THE AMOUNT OF RS.35,23,879/ - CREDITED TO THE PROFIT & LOSS ACCOUNT. HE FAILED TO APPRECIATE THAT NO SUCH CLAIM WAS MADE BY THE ASSESSES DURING 263 PROCEEDI NGS AND THEREFORE THIS AMOUNT HAS TO BE TREATED AS DIFFERENT FROM THE SUM ADDED BY THE A.O. 4. APPELLANT CRAVE LEAVES TO ADD OR AMEND ANY ONE OR MORE OF THE GROUNDS OF APPEALS, AS STATED ABOVE, AS AND WHEN NEED TO DOING SO ARISES WITH THE PRIOR PERMISSION OF THE HON'BLE COURT . 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSING OFFICER HAS MADE ONLY ONE ADDITION OF RS.31,53,145/ - . BEFORE US, THE REVENUE HAS RAISED FOUR GROUNDS BUT THE ONLY GRIEVANCE OF THE REVENUE IS REGARDING DELETION OF ADDITION MADE BY THE ASSESSING OFFICER OF RS.31,53,145/ - . WE FIND THAT THIS ISSUE WAS DECIDED BY CIT(A) AS PER PARA 4. 1 TO 4.4 OF HIS ORDER AND THE SAME ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 3 4.1 THE ASSESSING OFFICER HAS STATED THAT THE RECEIPTS UNDER VARIOUS SCHEMES ARE AS UNDER: SCHEME AMOUNT 1 YR SCHEME RS. 58,95,917/ - 3 YR SCHEME RS. 45,99,842/ - 5 YR SCHEME RS. 59,23,783/ - 7 YR SCHEME RS. 80,15,043/ - 15 YR SCHEME RS. 4,28,10,815/ - RS. 6,72.45,400/ - 4.1.1 AS DIRECTED IN THE ORDER U/S 263 (PASSED FOR A.Y. 2003 - 04) THESE DEPOSITS HAVE BEEN DIVIDED IN THE SAME PROPORTION AS ABOVE FIGURES TO ARRIVE AT THE FOLLOWING BREAK UP SCHEME WISE ADDITIONS : - SCHEME TOTAL DEPOSIT FOR THE SCHEME - 1 YR SCHEME RS. 58,95,917/ - 3 YR SCHEME RS. 15,33,281/ - 5 YR SCHEME RS. 11,84,757/ - 7 YR SCHEME RS. 11,45,007/ - 15 YR SCHEME RS 28,54,007/ - TOTAL DEPOSITS RS. 1,26,13,016/ - 4.1.2 THE ABOVE BIFURCATION OF THE TOTAL DEPOSITS HAS BEEN ADDED IN THE ASSESSMENT YEAR UNDER CONSIDERATION AS UNDER : SCHEME ADDITION 1 YR SCHEME RS. 44,81,370.0 3 YR SCHEME RS. 11,65,435.0 5 YR SCHEME RS. 90,509.4 7 YR SCHEME RS. 8,70,281.7 15 YR SCHEME RS 2 , 10 , 918.9 TO TAL DEPOSITS RS. 31,53,145.0 4.2 THE APPELLANT SUBMITS THAT DURING THE YEAR UNDER CONSIDERATION ONLY 20 YEARS SCHEME WAS IN EXISTENCE. IT IS STATED THAT THE MEMBERSHIP DEPOSIT STARTED IN F.Y. 1995 - 96. BEFORE 14/12 / 2001, THERE WAS ONLY ONE SCHEME FOR 20 YEARS AND ONLY SINCE 14 / 12 / 2001 DIFFERENT SCHEMES FOR DIFFERENT PERIODS WERE INTRODUCED. IT IS FURTHER SUBMITTED THAT THE MEMBERSHIP SECURITY DEPOSIT ACCOUNTABLE AS INCOME FOR THIS YEAR AMOUNTS TO RS.35,23,879 / - WHICH WAS TREATED AS INCOME FROM MEMBERSHIP DEPOSIT ACCOUNT AS THIS WAS TRANSFERRED TO THE ACCOUNT INCOME 4 FROM MOTEL OPERATION. THIS AMOUNT WAS MORE THAN THE AMOUNT O F RS.21,53,145/ - ADDED BY THE AO. 4.3 IT IS SEEN THAT THE AO HAS WRONGLY MENTIONED THE AMOUNT OF PROPOSED ADDITION AND ADDITION MADE AS RS.31,53,145/ - . GOING BY THE AMOUNTS MENTIONED BY THE AO ON PAGE 3 OF HIS ORDER THE CORRECT TOTAL SHOULD BE RS.76,34,51 5/ - . THIS TOTALING MISTAKE IS CONCEDED BY THE AO IN HIS REMAND REPORT SUBMITTED VIDE LETTER F.NO. DCIT/R - VI / LKO/ REMAND / 2011 - 12 DATED 08.08.2011. THE AO HAS, HOWEVER, OMITTED TO CLARIFY AS TO HOW THE DEPOSITS IN RESPECT OF SCHEMES NOT IN EXISTENCE COULD B E APPORTI ON ED AND TAXED AS INCOME FOR THE YEAR UNDER CONSIDERATION. BESIDES THE AO HAS ALSO NOT CLARIFIED AS TO HOW AND WHERE THE INCOME ASSESSED PROTECTIVELY IN THIS CASE HAS BEEN ASSESSED SUBSTANTIVELY. 4.4 I FIND THAT THE APPELLANT HAS ALREADY CREDITED RS.35,23,879 / - TO THE P&L ACCOUNT OF THE YEA R AND THUS SHOWN AS INCOME AND, THEREFORE, ADDITION MADE BY THE AO ON PROTECTIVE BASIS IS NOT CALLED FOR. GROUND NO. 3, THEREFORE, STANDS ALLOWE D. 4.1 FROM THE ABOVE PARAS FROM THE ORDER OF CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) THAT THE ASSESSEE HAS ALREADY CREDITED RS.35,23,879/ - TO THE PROFIT & LOSS ACCOUNT OF THE PRESENT YEAR. CIT(A) HAS ALSO GIVEN THIS FINDING THAT THE ASSESSING OFFICER HAS FAILED TO CLARIFY AS TO HOW THE DEPOSITS IN RESPECT OF SCHEMES NOT IN EXISTENCE COULD BE APPORTIONED AND TAXED AS INCOME FOR THE YEAR UNDER CONSIDERATION. IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) AND ALSO BEFORE US THAT UP TO 14/12/2013 , THERE WAS ONLY ONE SCHEME FOR 20 YEARS AND ONLY AFTER 14/12/2001 , DIFFERENT SCHEMES FOR DIFFERENT PERIODS WERE INTRODUCED. A CLEAR FINDING IS GIVEN BY CIT(A) THAT THE ASSESSING OFFICER COULD NOT CONTROVERT THIS ASSERTION OF THE ASSESSEE THAT TILL 14/12/20 01, THERE WAS ONLY ONE SCHEME FOR 20 YEARS AND AFTER 14/12/2001 DIFFERENT SCHEMES FOR DIFFERENT PERIODS WERE INTRODUCED. THIS FINDING OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND UNDER THESE FACTS, WE DO NOT FIND ANY REASON TO IN TERFERE IN THE ORDER OF CIT(A). 5 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 6. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005 - 06 I.E. I.T.A. NO.681/LKW/2011. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO APPRECIATE THAT THERE IS NO PROVISION IN THE I.T. ACT FOR ALLOWING 'DEFERRED REVENUE EXPENDITURE', ANY EXPENDITURE CAN ONLY BE CLAIMED AND ALLOWED IN THE YEAR IN WHICH IT ARISES. THEREFORE, DEFERRED REVENUE EXPENDITURE ALLOWED OF RS.27,88.260/ - OUT OF OPENING BALANCE IS NOT AN ALLOWABLE EXPENDITURE AND THE DISALLOWANCE NEEDS TO BE RESTORED. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN FAILING TO APPRECIATE THAT THE ASSESSEE FA ILED TO PRODUCE THE PERSONS FROM WHOM THE SO CALLED SHARE CAPITAL OF RS.33,50,000/ - WAS RECEIVED DURING THE YEAR. HE COULD ALSO NOT PROVIDE ANY 'CONFORMATION FROM THEM. SINCE THE BOGUS SNARE CAPITAL HAS BEEN INTRODUCED THROUGH A 'COLORABLE TRANSACTION DESI GNED TO EVADE TAX, THE SAME HAS TO BE ADDED TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO APPRECIATE THAT THE ASSESSEE HAS SUPPRESSED PROFIT ON SALE OF LAND TO BE 'SHRI AKLAVYA SI NGH' TO THE EXTENT OF RS.92,000/ - . THE SAID LAND WAS SOLD ON 24.09.2004 FOR RS.3,92,000/ - AS PER DETAILS COLLECTED FROM SUB - REGISTRAR, BUT THE ASSESSEE HAS SHOWN ONLY RS.3,00,000/ - IN HIS PROFIT AND LOSS ACCOUNT. THE ADDITION OF RS.92,000/ - MADE BY THE AO NEEDS TO BE RESTORED. 4. APPELLANT CRAVES LEAVES TO ADD OR AMEND ANY ONE OR MORE OF THE GROUNDS OF APPEALS, AS STALED ABOVE, AS AND WHEN NEED TO DOING SO ARISES WITH THE PRIOR PERMISSION OF THE HON'BLE COURT. 7. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). 6 8. WE HAVE CONS IDERED THE RIVAL SUBMISSIONS. WE F IND THAT REGARDING GROUND NO. 1 I.E. IN RESPECT OF ALLOWING DEDUCTION OF RS.2 7,88,260/ - ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE, IT IS NOTED BY CIT(A) ON PAGE NO. 2 OF HIS ORDER THAT THERE WAS OPENING BALANCE OF RS.83,64,781/ - OUT OF WHICH RS.27,88,260/ - WAS WRITTEN OFF IN THE PRESENT YEAR. IN THIS REGARD, THIS FINDING IS ALSO GIVEN THAT THIS MISC. EXPENDITURE RELATED TO PRELIMINARY EXPENSES AND PUBLIC ISSUE EXPENSES WHICH IS BEING AMORTIZED OVER A PERIOD OF 10 YEARS WHEREAS DEFERRED REVENUE EXPENDITURE RELATED TO ADVERTISEMENT, PUBLICITY AND INCENTIVES FOR ENROLMENT OF MEMBERS IS BEING AMORTIZED OVER A PERIOD OF 5 YEARS INSTEAD OF BEING CLAIMED IN A SINGLE YEAR AS REVENUE EXPENDITURE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT IN EARLIER YEAR , FULL DEDUCTION WAS ALLOWED BY THE ASSESSING OFFICER OR THAT IT IS NOT A REVENUE EXPENDITURE . THIS IS NOW SETTLED POSITION OF LAW THAT REVENUE EXPENDITURE IS ALLOWABLE IN VERY FIRST YEAR BUT WHEN THE ASSESSING OFFICER HAS NOT ALLOWED THE SAME IN THE YEAR OF INCURRING AND ASSESSING OFFICER IS ALLOWING PROPORTIONATELY IN EVERY YEAR , TH E SAME CANNOT BE DISALLOWED IN ONE SUCH SUBSEQUENT YEAR . CONSIDERING THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. 9. REGARDING GROUND NO. 2 OF THE APPEAL, WE FIND THAT CIT(A) HAS DELETED THIS ADDITION BY OBSE RVING THAT THE ASSESSEE HAS DISCHARGED ITS ONUS BY ESTABLISHING THE IDENTITY OF THE SHAREHOLDERS. NOW THIS IS SETTLED POSITION OF LAW THAT FOR FULFILLING THE REQUIREMENT OF SECTION 68, ESTABLISHING IDENTITY IS NOT SUFFICIENT AND THE ASSESSEE HAS TO ESTABL ISH CREDITWORTHINESS OF THE CREDITOR ALSO. IN THE PRESENT CASE, NO FINDING IS GIVEN BY CIT(A) THAT THE ASSESSEE HAS BEEN ABLE TO ESTABLISH THE CREDITWORTHINESS OF THE SHAREHOLDERS. UNDER THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF CIT (A) ON THIS ISSUE CANNOT BE SUSTAINED IN THE ABSENCE OF ANY FINDING REGARDING CREDITWORTHINESS OF THE SHAREHOLDERS. HOWEVER, IN THE INTEREST OF JUSTICE, WE RESTORE THIS MATTER BACK TO THE FILE OF CIT(A) FOR FRESH DECISION. HE SHOULD GIVE A CLEAR 7 FINDING AS TO WHETHER THE ASSESSEE WAS ABLE TO ESTABLISH ALL THE THREE INGREDIENTS OF SECTION 68 I.E. IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AS WELL AS GENUINENESS OF THE TRANSACTIONS. NEEDLESS TO SAY, CIT(A) SHOULD PASS NECESSARY ORDER AS PER LAW AFTER P ROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO BOTH SIDES . ACCORDINGLY, GROUND NO. 2 OF THE REVENUE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 10. REGARDING GROUND NO. 3, WE FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) AS PER PARA 9.3 OF HIS ORDER THAT THE BALANCE AMOUNT OF RS.92,000/ - HAS ALREADY BEEN RECEIVED AND SHOWN BY THE ASSESSEE IN EARLIER YEARS. THIS FINDING OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 3 IS REJECTED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS PARTLY ALLOWED. 12. IN THE COMBINED RESULT, THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2000 - 2001 IS DISMISSED AND APPEAL FOR THE A SSESSMENT YEAR 2005 - 06 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 0 8 /08/2014 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR