M/s. Ambattur Flats, CHENNAI V. ITO, CHENNAI

ITA 2038/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61178 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 13-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Cost of acquisition
• Section: 143(3); 147; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO.2038(MDS)/2011 ASSESSMENT YEAR : 2001-02 M/S.AMBATTUR FLATS, NOS.1&2, REDHILLS ROAD, AMBATTUR, CHENNAI-600 053. PAN AANFA4563B. VS. THE INCOME-TAX OFFICER, BUSINESS WARD XIII(1), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.KARUNAKARAN, ADVOCATE RESPONDENT BY : SHRI SHAJI P JACOB, IRS CIT DATE OF HEARING : 9 TH MAY, 2012 DATE OF PRONOUNCEMENT : 22 ND MAY, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2001-02. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-XI I AT CHENNAI, DATED 21-10-2011 AND ARISES OUT OF THE ORD ER PASSED - - ITA 2038 OF 2011 2 UNDER SECTION 143(3) READ WITH SECTION 254 OF THE I NCOME-TAX ACT, 1961. 2. IT IS THE CASE OF THE ASSESSEE THAT THE LOWER AUTHORITIES HAVE ENHANCED THE ASSESSMENT WHILE GIVI NG EFFECT TO THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL, WHE N THE TRIBUNAL NEITHER DIRECTED TO ENHANCE THE ASSESSMENT NOR ALTERED THE INCOME DETERMINED BY THE COMMISSIONER OF INCOME - TAX(APPEALS). THE DETAILED GROUNDS OF APPEAL FILED BY THE ASSESSEE ARE EXTRACTED BELOW:- 1. THE ORDER OF THE COMMISSIONER OF INCOME- TAX(APPEALS) CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) READ WITH SE CTION 254 IS ILLEGAL, ARBITRARY, AGAINST THE WEIGHT OF EV IDENCE AND ALL PROBABILITIES OF THE CASE. THE SAME IS NOT SUSTAINABLE IN LAW. 2. THE ASSESSING OFFICER ERRED IN PASSING AN ORDER UNDER SECTION 143(3) R/W 254 WHEN THE INCOME-TAX APPELLAT E TRIBUNAL HAS ONLY REMITTED A PARTICULAR ISSUE FOR CONSIDERATION BY THE ASSESSING OFFICER. - - ITA 2038 OF 2011 3 3. THE ASSESSING OFFICER IS NOT CORRECT IN INFERRIN G THAT THE ASSESSMENT WAS SET ASIDE BY THE INCOME-TAX APPELLAT E TRIBUNAL AND IN PASSING A REGULAR ASSESSMENT ORDER UNDER SECTION 143(3) R/W 254. 4. THE ASSESSING OFFICER ERRED IN ENHANCING THE ASSESSMENT BY DETERMINING THE TOTAL INCOME AT ` 32,69,228/- WHEN THERE WAS NO DIRECTION BY THE INCO ME- TAX APPELLATE TRIBUNAL TO DETERMINE SUCH ENHANCED INCOME. 5. THE LOWER AUTHORITIES ERRED IN ENHANCING THE ASSESSMENT WHILE GIVING EFFECT TO THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL WHEN THE INCOME-TAX APPELLATE TRIBUNAL NEITHER ENHANCED THE ASSESSMENT NOR ALTERED THE INCOME DETERMINED BY THE COMMISSIONER O F INCOME-TAX(APPEALS). 6. THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER HAVING SATISFIED THAT THE APPELLANT HAS PAID A SUM OF ` 20 LAKH FOR PURCHASE OF PROPERTY OUGHT TO HAVE ACCEPTE D THE INCOME DETERMINED BY THE COMMISSIONER OF INCOME- - - ITA 2038 OF 2011 4 TAX(APPEALS) AS HE WAS DIRECTED BY THE INCOME-TAX APPELLATE TRIBUNAL ONLY TO VERIFY THIS PARTICULAR I SSUE. 7. THE APPELLANT SUBMITS THAT THEY ARE NOT DEALER I N LANDS AND THE FLATS WERE SOLD ONLY AT A PARTICULAR RATE O N THE BASIS OF BUILT UP AREA SOLD ALONG WITH THE LAND. 8. THE LOWER AUTHORITIES OUGHT TO HAVE SEEN THAT TH E ASSESSING OFFICER HAS ONLY ESTIMATED THE PROFIT ON THE TOTAL CONTRACT RECEIPTS ORIGINALLY AT 8% AND SUBSEQ UENTLY AT 20% AND HAS NOT SPLIT UP THE CONTRACT RECEIPTS BETWEEN LAND AND BUILDING AT ANY POINT OF TIME OF ASSESSMENT. 9. THE APPELLANT SUBMITS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) ONLY SPLIT UP THE RECEIPTS BETW EEN LAND AND BUILDING AND MADE THE PARTNERS OF THE APPE LLANT TO AGREE FOR THE DETERMINATION OF THE TOTAL INCOME AT ` 16,12,679/- WHICH THE PARTNERS HAVE ACCEPTED WITHO UT GOING INTO THE DETAILS OF THE COMPUTATION AS THEY W ERE ALL IGNORANT OF THE PROVISIONS OF THE ACT AND HAD NO OT HER ALTERNATIVE EXCEPT TO THE COMPUTATION MADE BY THE COMMISSIONER OF INCOME-TAX(APPEALS) AS OTHERWISE TH E - - ITA 2038 OF 2011 5 APPEAL WOULD HAVE BEEN DISMISSED BY THE COMMISSIONE R OF INCOME-TAX(APPEALS). 10.THE ASSESSING OFFICER ERRED IN DETERMINING THE T OTAL INCOME AT ` 32,69,228/- WHEN THE INCOME ORIGINALLY DETERMINED WAS ONLY ` 28,11,700/- WHICH WAS REDUCED TO ` 16,12,679/- BY THE COMMISSIONER OF INCOME- TAX(APPEALS) WHICH INCOME WAS NOT ALTERED OR DISTUR BED BY THE INCOME-TAX APPELLATE TRIBUNAL. 11. THE ORDER OF THE ASSESSING OFFICER IS QUITE CON TRARY TO THE DIRECTIONS OF THE INCOME-TAX APPELLATE TRIBUNAL AND THEREFORE THE SAME IS LIABLE TO BE CANCELLED. 12. THE APPELLANT SUBMITS THAT THE DETERMINATION OF THE TOTAL INCOME AT ` 32,69,228/- ON THE GROSS RECEIPTS OF ` 1,40,58,540/- WORKS OUT TO 23.25% WHICH IS EXORBIT ANT, EXCESSIVE AND AGAINST THE NORMAL PROFITS EARNED IN THE CONSTRUCTION OF FLATS BY THE BUILDERS. 13. THE APPELLANT SUBMITS THAT THE PROFIT OF 20% AD OPTED BY THE ASSESSING OFFICER IS EXCESSIVE AND ARBITRARY AND NOT BASED ON THE PROFIT NORMALLY EARNED BY THE PERS ONS - - ITA 2038 OF 2011 6 CARRYING ON THE BUSINESS OF DEVELOPING AND CONSTRUC TING THE FLATS. 14. THE APPELLANT PRAYS THAT A REASONABLE PROFIT ON THE GROSS RECEIPTS MAY BE DETERMINED BY THE INCOME-TAX APPELLATE TRIBUNAL AS THE ASSESSING OFFICER HAS ONL Y ESTIMATED THE PROFIT ON THE GROSS RECEIPTS BOTH AT THE TIME OF COMPLETION OF THE ORIGINAL ASSESSMENT AND ALSO REASSESSMENT. 3. THE ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS O F BUILDER AND DEVELOPER. FOR THE IMPUGNED ASSESSMENT YEAR 2001-02, THE ORIGINAL ASSESSMENT WAS COMPLETED BY E STIMATING THE INCOME AT 8% OF THE TOTAL CONTRACT RECEIPTS OF ` 94,57,500/-. THE ASSESSMENT WAS REOPENED SUBSEQUENTLY UNDER SECT ION 147 ON THE GROUND THAT THE COMMON AREA OF THE CONSTRUCT ION WAS NOT TAKEN INTO CONSIDERATION. THE REASSESSMENT WAS COM PLETED ON 27-12-2006 DETERMINING THE TOTAL INCOME AT ` 28,11,700/-. THE ABOVE INCOME WAS DETERMINED BY THE ASSESSING OFFICE R BY ADOPTING A PROFIT RATE OF 20% OF THE GROSS PROFIT. THE REOPENED ASSESSMENT WAS TAKEN IN APPEAL BEFORE THE COMMISSIO NER OF INCOME-TAX(APPEALS). THE COMMISSIONER OF INCOME- - - ITA 2038 OF 2011 7 TAX(APPEALS) MODIFIED THE TOTAL INCOME IN THE HANDS OF THE ASSESSEE AT ` 16,12,679/-. THE ASSESSEE ACCEPTED THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS). BUT THE R EVENUE FILED AN APPEAL BEFORE THE TRIBUNAL. THE CONTENTIO N OF THE REVENUE WAS THAT THE COMMISSIONER OF INCOME-TAX(APP EALS) HAS ERRED IN GIVING A DEDUCTION OF ` 20 LAKHS AS COST OF THE LAND. THE TRIBUNAL FOUND THAT THERE IS NO DISCUSSION WHAT SOEVER ON THIS ISSUE AS THE ISSUE WAS NEVER RAISED BEFORE THE ASSESSING OFFICER. THEREFORE, THE TRIBUNAL REMITTED THE ISS UE OF DEDUCTING THE COST OF LAND TO THE ASSESSING OFFICER AND TO MA KE THE NECESSARY ADJUSTMENTS IN ACCORDANCE WITH LAW. 4. IT IS IN THE LIGHT OF THE ABOVE ORDER OF THE TR IBUNAL THAT THE ASSESSING AUTHORITY HAS PASSED THE IMPUGNE D ASSESSMENT ORDER CHALLENGED IN THE PRESENT APPEAL B EFORE US. AS DIRECTED BY THE TRIBUNAL, THE ASSESSING OFFICER PROCEEDED TO EXAMINE THE ISSUE OF COST OF LAND. THE ASSESSEE WA S ASKED TO PRODUCE DETAILS REGARDING THE PAYMENT MADE FOR PURC HASE OF LAND FOR ` 20 LAKHS. ACCORDING TO THE ASSESSING OFFICER NO D ETAILS WERE AVAILABLE WITH THE ASSESSEE. THEREFORE, THE S ELLERS OF THE PROPERTY WERE CONTACTED AND EXAMINED. IN THE COURS E OF - - ITA 2038 OF 2011 8 EXAMINATION, THE SELLERS CONFIRMED THE RECEIPT OF ` 20 LAKHS TOWARDS THE SALE OF THE LAND TO THE ASSESSEE AND AL SO STATED THAT THEY HAD OFFERED CAPITAL GAINS FOR TAXATION IN THEI R HANDS FOR THE ASSESSMENT YEAR 1998-99. ACCORDINGLY, THE ASSESSIN G OFFICER ACCEPTED THE CONTENTION OF THE ASSESSEE TOWARDS PAY MENT OF ` 20 LAKHS FOR PURCHASE OF LAND. AS SUCH, THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) GIVING DEDUCTIO N OF ` 20 LAKHS TOWARDS PURCHASE OF LAND STOOD VINDICATED . 5. THE ASSESSING OFFICER THEREAFTER PROCEEDED TO W ORK OUT THE INCOME OF THE ASSESSEE AGAIN AND ULTIMATELY DETERMINED THE TAXABLE INCOME AT ` 32,69,228/-. WHEN THIS ASSESSMENT ORDER PASSED UNDER SECTION 143(3), READ WITH SECTIO N 254, WAS TAKEN BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS ), HE FOUND THAT THE ASSESSING AUTHORITY IS JUSTIFIED IN ESTIMATING THE PROFIT AT 12%, WHICH IS ALSO THE RATE ADOPTED BY TH E COMMISSIONER OF INCOME-TAX(APPEALS) EARLIER. HE AC CORDINGLY UPHELD THE ORDER OF THE ASSESSING OFFICER. 6. IT IS AGAINST THE ABOVE THAT THE ASSESSEE HAS C OME IN APPEAL BEFORE US. - - ITA 2038 OF 2011 9 7. IN SHORT, IN THE ORIGINAL ASSESSMENT, THE INCOM E WAS DETERMINED BY THE ASSESSING OFFICER AT ` 7.56,600/-. IN THE REASSESSMENT ORDER THE INCOME WAS DETERMINED AT ` 28,11,700/-. THIS INCOME OF ` 28,11,700/- DETERMINED IN THE INCOME ESCAPING ASSESSMENT WAS CHALLENGED BEFORE THE COMMISSIONER O F INCOME-TAX(APPEALS). IT IS ONLY IN THAT APPELLATE ORDER THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS MODIFIED AN D DETERMINED THE INCOME OF THE ASSESSEE AT ` 16,12,279/-. IT IS AGAINST THE ABOVE ORDER OF THE COMMISSIONER OF INCO ME- TAX(APPEALS) THAT THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL DIRECTED THE ASS ESSING OFFICER TO EXAMINE A SINGLE ISSUE. THAT ISSUE IS WHETHER T HE ASSESSEE HAD INCURRED AN EXPENDITURE OF ` 20 LAKHS IN PURCHASING THE LAND. THIS ISSUE WAS EXAMINED BY THE ASSESSING AUTHORITY IN HIS ASSESSMENT PROCEEDINGS INITIATED UNDER SECTION 254 AND COMPLETED UNDER SECTION 143(3). THE ASSESSING OFFI CER HAS COLLECTED EVIDENCES FROM THE SELLERS AND THE ASSESS ING OFFICER ACCEPTED THE CONTENTION OF THE ASSESSEE THAT IT HAD PAID ` 20 LAKHS TOWARDS PURCHASE OF LAND. THEREFORE, IT IS SEEN THAT THE SINGLE ISSUE REMITTED BACK BY THE TRIBUNAL TO T HE FILE OF THE - - ITA 2038 OF 2011 10 ASSESSING OFFICER HAS BEEN EXAMINED AND IT WAS FOUN D THAT THE CONTENTION OF THE ASSESSEE WAS RIGHT. 8. AS ALREADY STATED, THE TRIBUNAL HAS DIRECTED TH E ASSESSING OFFICER TO EXAMINE JUST A SINGLE ISSUE; T HAT IS THE ISSUE OF PURCHASE COST OF ` 20 LAKHS. THE ASSESSING OFFICER SHOULD HAVE STOPPED THERE. BUT HE WENT FURTHER AND REWORK ED THE PROFIT AND ULTIMATELY DETERMINED THE INCOME OF THE ASSESSE E AT ` 32,69,228/-. THIS IS AGAINST LAW. IN AN ASSESSME NT COMPLETED UNDER SECTION 143(3), READ WITH SECTION 254, THE AS SESSING OFFICER SHOULD CONFINE HIMSELF TO THE DIRECTIONS IS SUED BY THE INCOME-TAX APPELLATE TRIBUNAL. HE DOES NOT HAVE JU RISDICTION TO GO BEYOND THE DIRECTION GIVEN BY THE TRIBUNAL. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS GONE BEYOND THE JUR ISDICTION GRANTED BY THE TRIBUNAL. HE HAS ERRED IN LAW IN RE -DETERMINING THE INCOME OF THE ASSESSEE EVEN AFTER GIVING A FIND ING THAT THE CLAIM MADE BY THE ASSESSEE FOR DEDUCTION OF ` 20 LAKHS WAS JUSTIFIED. 9. THEREFORE, WE FIND THAT THE ORDER OF THE ASSESS ING AUTHORITY UNDER SECTION 143(3), READ WITH SECTION 2 54, IS CONTRARY - - ITA 2038 OF 2011 11 TO LAW. IT IS SET ASIDE. AS A RESULT, THE ORDER O F THE COMMISSIONER OF INCOME-TAX(APPEALS) ALSO STANDS VAC ATED. 10. WE REMIT BACK THE MATTER TO THE ASSESSING OFFI CER TO DETERMINE THE INCOME AT ` 16,12,679/- AS DETERMINED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) AND CLOSE THE F ILE. IF ANY DEMAND IS PAYABLE BY THE ASSESSEE WITH REFERENCE TO THE INCOME OF ` 16,12,679/-, THAT MAY BE COLLECTED AND IF THERE IS ANY REFUND TO BE MADE, IT MAY BE MADE FORTHWITH. 11. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDERS PRONOUNCED ON TUESDAY, THE 22 ND OF MAY, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 22 ND MAY, 2012. V.A.P. COPY TO: 1. ASSESSEES 2. DEPARTMENT 3. CIT 4. CIT(A) 5. DR 6. GF.