ACIT, New Delhi V. M/s. Galaxy Nirman Pvt. Ltd., New Delhi

ITA 2038/DEL/2012

• Counselvise Citation: 203820114 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 02-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S GILL
• Keywords: Rejection of books of accounts; Business income; Business expenditure; Source of fund
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.2038 & 2039/DEL/2012 ASSESSMENT YEAR : 2007-08 & 2008-09 ACIT, GALAXY NIRMAN PVT. LTD., CENTRAL CIRCLE-12, 12-RING ROAD, LAJPAT NAGAR, JHANDEWALAN, NEW DELHI. V. NEW DELHI. AND CROSS OBJECTION NO.237 & 238/DEL/2012 IN I.T.A. NO.2038 & 2039/DEL/2012 ASSESSMENT YEAR : 2007-08 & 2008-09 GALAXY NIRMAN PVT. LTD., ACIT, 12-RING ROAD, CENTRAL CIRCLE-12, LAJPAT NAGAR, N. DELHI. V. JHANDEWALAN, N. DELHI . (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AACCG AACCG AACCG AACCG- -- -5553 5553 5553 5553- -- -D DD D APPELLANT BY : SHRI R.S. GILL, CIT-DR RESPONDENT BY : SHRI SALIL KAPOOR, ADVOCATE SHRI SANAT KAPOOR, ADVOCATE, SHRI MAHESH KUMNAR, C.A. & SHRI VIKAS JAIN, C.A. ORDER PER TS KAPOOR, AM: THESE ARE TWO APPEALS DIRECTED AGAINST THE ORDER OF LD CIT(A) BOTH DATED 29.2.2012. THE ASSESSEE HAS ALSO FILED CROSS OB JECTIONS AGAINST THE APPEALS FILED BY THE REVENUE. THE GROUND S OF REVENUES APPEALS AS WELL AS CROSS OBJECTIONS ARE AS UNDER:- ITA NO2038,2039,237&238/DEL/12 2 I.T.A. NO.2038/DEL/2012: I.T.A. NO.2038/DEL/2012: I.T.A. NO.2038/DEL/2012: I.T.A. NO.2038/DEL/2012:- -- - 1. THE ORDER OF THE LD CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS HOLDING THAT INT EREST INCOME OF ` .24,19,085/- IS TO BE TAXED UNDER THE HEAD INCOME F ROM BUSINESS AND PROFESSION AS AGAINST ASSESSED BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN RESTRICTING THE ADDITION OF ` .24,19,085/- TO ` .2,88,082/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INADMISSIBLE EXPENSES. 4. THE ORDER OF LD CIT(A) IS PERVERSE IN LAW AND ON FACT S. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AN ALL OF T HE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. I.T.A. NO.2039/DEL/2012: I.T.A. NO.2039/DEL/2012: I.T.A. NO.2039/DEL/2012: I.T.A. NO.2039/DEL/2012:- -- - 1. THE ORDER OF THE LD CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN DELETING THE AD DITION OF ` .24,19,085/- MADE BY THE ASSESSING OFFICER ON ACCOUNT O F ESTIMATING THE PROFIT UNDER PERCENTAGE COMPLETING ME THOD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN DELETING THE AD DITION OF ` .2,34,594/- MADE BY THE ASSESSING OFFICER AS INCOME FROM OTHER SOURCES. 4. THE ORDER OF LD CIT(A) IS PERVERSE IN LAW AND ON FACT S. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AN ALL OF T HE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. ITA NO2038,2039,237&238/DEL/12 3 C.O. NO.237/DEL/2012: C.O. NO.237/DEL/2012: C.O. NO.237/DEL/2012: C.O. NO.237/DEL/2012:- -- - 1. THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACT S IN REJECTING THE CONTENTION RAISED IN GROUND NO.1 THAT IMPUGNED ASSESSMENT ORDER IS ALSO BAD IN LAW BECAUSE THE ASSESSMENT AS WELL AS ADDITIONS OR COMPUTATION OF INCOME HAS NOT BEEN FRAMED/MADE ON THE BASIS OF ANY MATERIAL SEIZED PURSUANT TO AN ACTION TAKEN U/ S 132 OF THE ACT IN THE CASE OF RAJDARBAR GROUP WHICH ITSELF MAKES THE ASSESSMENT CONTRARY TO LAW, ILLEGAL LEADING TO BE QUASH ED. 2. THAT THE LD CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN NOT ALLOWING EXPENDITURE OF ` .2,88,082/- CONSISTING OF `.1,02,314/- ON ACCOUNT OF COMMISSION OF SALE OF PLOTS AND ` .1,85,768/- FOR BUSINESS PROMOTION REQUIRED TO BE ALLOWED AS BUSINESS EXPENDITUR E. 3. THAT LD ACIT HAS ERRED IN LAW AS WELL AS ON FACTS IN TAKING GROUND NO.2 BY STATING THAT CIT(A) TREATED INTEREST INCOME T O BE TAXED UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION AS AGAIN ST INCOME FROM OTHER SOURCES BECAUSE: A) CIT(A) HAS DECIDED CLAIM OF BUSINESS EXPENDITURE IN THE BOOKS OF ACCOUNTS WHICH WERE REQUIRED TOP BE ALLOWED AS ASSESSING OFFICER HIMSELF NOTICED THAT ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. B) THE BUSINESS EXPENDITURE, IF NOT ADJUSTED AGAINST INTER EST INCOME BEING ASSESSED AS INCOME FROM OTHER SOURCES THE BUSINESS LOSS TO BE ADJUSTED AGAINST INCOME FROM OTHER SOURCES U/S 71 OF THE INCOME TAX ACT, 1961. ITA NO2038,2039,237&238/DEL/12 4 C.O. NO.238/DEL/2 C.O. NO.238/DEL/2 C.O. NO.238/DEL/2 C.O. NO.238/DEL/2012: 012: 012: 012:- -- - 1. THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS I N REJECTING THE CONTENTION RAISED IN GROUND NO.1 THAT IMPUGNED A SSESSMENT ORDER IS ALSO BAD IN LAW BECAUSE THE ASSESSMENT AS WELL AS ADDITIONS OR COMPUTATION OF INCOME HAS NOT BEEN FRAME D/MADE ON THE BASIS OF ANY MATERIAL SEIZED PURSUANT TO AN ACTI ON TAKEN U/S 132 OF THE ACT IN THE CASE OF RAJDARBAR GROUP WHI CH ITSELF MAKES THE ASSESSMENT CONTRARY TO LAW, ILLEGAL LEADING T O BE QUASHED. 2. THAT LD ACIT HAS ERRED IN LAW AS WELL AS ON FACTS ION R AISING GROUND NO.2 IN DELETING THE ADDITION OF ` .24,19,085/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ESTIMATING THE PROFI T UNDER PERCENTAGE COMPLETION METHOD BECAUSE CIT(A) HAS APPRE CIATED WHICH ASSESSING OFFICER IGNORED THAT: A) THE ASSESSING OFFICER HAS NOT MADE AN ADDITION BUT ESTIMATED THE PROFITS. B) THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) WITHOUT ANY VALID REASONS. C) THE ASSESSING OFFICER HAS APPLIED METHOD OF ACCOUNTING NOT RELEVANT TO THE ASSESSEES BUSINESS WHILE ASSESSEE HAS ADOPTED AND OPTED STANDARD METHOD OF ACCOUNTING APPROVED B ACCOUNTING STANDARD OF ICAI. D) THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF CONSTRUCTION OF BUILDING OR STRUCTURES BUT ENGAGED IN THE BUSINESS OF DEVELOPMENT OF LAND/SELLING OF PLOTS OF LAND. E) THE ASSESSING OFFICER HAS ALSO FAILED TO APPRECIATE THAT SALE OF PLOT OF LAND IS MADE BY REGISTERED DOCUMENTS BY ITA NO2038,2039,237&238/DEL/12 5 HANDING OVER THE PLOT AND NO OWNERSHIP VEST IN THE PROPERTY BEFORE FINAL PAYMENT IS MADE WHILE IN CONSTRUCTION ACTIVITIES BUILDING IS MADE BY MAKING PAR T PAYMENTS ON CONSTRUCTION BASIS. BOTH THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAK E OF CONVENIENCE A COMMON ORDER IS BEING PASSED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. A SEARCH & SEIZU RE OPERATIONS WERE CARRIED OUT AT THE PREMISES OF THE ASSESSEE AT DELHI U/S 132OF THE INCOME TAX ACT, 1961. THEREFORE, NOTICES U/S 153A WE RE ISSUED AND ASSESSEE FILED RETURNS IN RESPONSE TO NOTICES. DURING ASSESSMEN T PROCEEDINGS FOR ASSESSMENT YEAR 2007-08 ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD STARTED A REAL ESTATE PROJECT IN TH E NAME OF NARSI VILLAGE, SHASTRI PURAM, AGRA AND HAD BOOKED EXPENSES INCURRED ON THE PROJECT UNDER THE HEAD WORK IN PROGRESS. IT WA S ALSO OBSERVED THAT DURING THE YEAR NOTHING WAS SOLD. THE ASSESSING OFFI CER FURTHER OBSERVED THAT ASSESSEE HAD EARNED AN INTEREST INCOME OF ` .24,19,085/- PARTLY FROM THE LOAN GIVEN TO SISTER CONCERN AND PART LY FROM BANK DEPOSITS AND AFTER CLAIMING VARIOUS EXPENSES THE NET PRO FIT WAS DECLARED AT ` .2,85,123/-. THE ASSESSEE WAS CONFRONTED AS TO WHY PART EXPENSES WERE CLAIMED AS CAPITAL WORK IN PROGRESS AND PA RT WERE DEBITED AGAINST INTEREST INCOME. THE ASSESSEE WAS FURTHER SHOW CAUSED AS TO WHY INTEREST INCOME DURING THE YEAR BE NO T TREATED AS INCOME FROM OTHER SOURCES AS THE SAME HAS BEEN EARNED O N INVESTMENT OF SURPLUS FUNDS AVAILABLE WITH THE COMPANY. THE ASSESSEE DID NOT SUBMIT ANY REPLY. THEREFORE, THE ASSESSING OFF ICER TREATED THE INCOME OF INTEREST AS INCOME FROM OTHER SOURCES AND DISA LLOWED THE AMOUNT EXPENSES DEBITED IN THE P&L ACCOUNT TREATING T HEM AS NOT ITA NO2038,2039,237&238/DEL/12 6 RELATED TO EARNING OF INTEREST INCOME, IN THE SUBSEQUE NT YEAR I.E. 2008-09 THE ASSESSING OFFICER OBSERVED THAT THOUGH THE A SSESSEE HAD RECEIVED ADVANCES TO THE EXTENT OF 90% OF TOTAL REC EIPTS BUT THE ASSESSEE HAD NOT BOOKED THESE AS SALE AS THE POSSESSION WAS NOT HANDED OVER TO THE PURCHASERS. THE ASSESSING OFFICER HEL D THAT BY NOT RECOGNIZING THE INCOME FOLLOWING THE PERCENTAGE COM PLETION METHOD, THE ASSESSEE WAS DEFERRING ITS TAX LIABILITY AND THEREFOR E THE ASSESSEE WAS ASKED TO FURNISH A CHART COMPUTING THE PROFIT DERI VED BY THE COMPANY DURING THE YEAR, HAD IT FOLLOWED THE PERCEN TAGE COMPLETION METHOD OF ACCOUNTING. FROM THE DETAILS SUBMITTED BY THE ASSESSEE THE ASSESSING OFFICER ARRIVED AT THE CONCLUSION THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION 44% OF PROJECT WAS COMPLETE AND ASSESSEE HAD ALSO RECEIVED OF SUBSTANTIAL AMOUNT AS ADVANCES. THE REFORE, ON THE BASIS OF 44% OF COMPLETED PROJECT, THE ASSESSING OFF ICER COMPUTED THE INCOME OF THE ASSESSEE AT ` .5,13,48,000/-. THE ASSESSING OFFICER FURTHER MADE AN ADDITION OF ` .2,34,594/- AS OTHER INCOME AS PER P&L ACCOUNT. BOTH THE ASSESSMENT ORDERS WERE CHALLENGED BEFO RE LD CIT(A) AND LD CIT(A) ON THE BASIS OF VARIOUS SUBMISSIONS FILED BY THE ASSESSEE PARTLY DELETED THE ADDITIONS MADE BY THE ASSESSING OFFIC ER IN RESPECT OF ASSESSMENT YEAR 2007-08 AND COMPLETELY DELETED THE A DDITION IN RESPECT OF ASSESSMENT YEAR 2008-09 BY HOLDING AS UNDER:- ASSESSMENT YEAR: 2007 ASSESSMENT YEAR: 2007 ASSESSMENT YEAR: 2007 ASSESSMENT YEAR: 2007- -- -08: 08: 08: 08: I HAVE CAREFULLY CONSIDERED THE SUBMISSION, PERUSED TH E ORDER OF ASSESSMENT AND EVIDENCE PLACED ON RECORD. THE DISPUTE AS RAISED BY THE APPELLANT, PERTAINS TO TREATING THE INT EREST INCOME OF ` .24,19,085/-AS INCOME OF OTHER SOURCES AND DISALLOWANCE OF THE EXPENDITURE AGAINST THAT INCOME BY THE ASSESSING OF FICER. IN VIEW OF THE ABOVE ANALYSIS OF THE ASSESSMENT ORDER OF THE ITA NO2038,2039,237&238/DEL/12 7 ASSESSING OFFICER VIS--VIS THE COMMENTS AND ARGUMENTS OF T HE AR OF THE APPELLANT, I HAVE REACHED TO THE CONCLUSIO N THAT ASSESSING OFFICER HAS PICKED AND CHOSE THE ITEM OF INCOME IN COMPLETE DISREGARD OF THE FACTS THAT THE MAIN BUSINESS O F THE APPELLANT COMPANY WAS THE REAL ESTATE DEVELOPMENT AND INTEREST EARNED WAS AN INCIDENTAL ACTIVITY TO THE MAIN BUSINESS TO UTILIZE PRUDENTLY THE SURPLUS FUND. THE ASSESSING OFFICER HAS NOT DENIED THAT THE APPELLANT WAS NOT DOING THE ABOVE BUSINESS ACT IVITY. TAKING INTEREST INCOME SEPARATELY UNDER INCOME FROM O THER SOURCES TO DISALLOW THE INDIRECT NECESSARY EXPENDITURE OF THE BUSINESS IS NOT A JUDICIOUS STEP. EVEN IF THE INCOME IS T AKEN UNDER INCOME FROM OTHER SOURCES THE LEGITIMATE EXPEND ITURE ARE DEDUCTIBLE. WHILE GOING THROUGH THE DETAILS OF THE I NDIRECT EXPENDITURE AMOUNTING TO ` .24,19,085/-, I FIND THAT THERE ARE EXPENDITURE ON COMMISSION ON SALE OF PLOTS ` .1,02,314/- AND BUSINESS PROMOTION ` .1,85,768/- WHICH ARE NOT LINKABLE TO THE NIL BUSINESS RECEIPT, HENCE CANNOT QUALIFY FOR EXPENDITURE FOR THE PURPOSE OF BUSINESS. THESE TWO EXPENDITURES ARE NOT ALLO WED AND WITH THIS REMARKS. I RESTRICT THE ADDITION TO THE TUN E OF ` .2,88,082/-. ASSESSMENT YEAR 2008 ASSESSMENT YEAR 2008 ASSESSMENT YEAR 2008 ASSESSMENT YEAR 2008- -- -09: 09: 09: 09: I HAVE CAREFULLY CONSIDERED THE SUBMISSION, PERUSED TH E ORDER OF ASSESSMENT AND EVIDENCE ON RECORD. THE DISPUTE AS RAISED B Y THE APPELLANT PERTAINS TO THE ESTIMATION OF THE PROFIT B Y THE ASSESSING OFFICER ON PERCENTAGE COMPLETION METHOD INSTE AD OF PROJECT COMPLETION METHOD. THE ASSESSING OFFICER HAS THE CONTENTION THAT PROJECT OF THE APPELLANT TAKES NORMA LLY 4-5 EARS BEFORE IT IS COMPLETED. THE APPELLANT RECEIVES ADVANC ES PRIOR TO ITA NO2038,2039,237&238/DEL/12 8 COMMENCEMENT OF THE CONSTRUCTION WORK AND CONTINUES T AKING INSTALLMENTS REGULARLY FROM THE BUYERS AS THE CONSTRUCTI ON PROGRESS. THEREFORE, INCOME SHOULD BE TAXABLE ON YEAR TO YEAR BASIS ON PERCENTAGE OF COMPLETION OF THE PROJECT. AGA INST THE CONTENTION OF THE ASSESSING OFFICER, AR HAS SUBMITTED THA T PLOTS ARE BEING SOLD ON PAYMENT BASIS WHICH IS VARYING FROM 4 5 DAYS TO 6 MONTHS. THE AR HAS ALSO STATED THAT DEPARTMENT CAN NOT COMPEL THE APPELLANT TO FOLLOW ANY PARTICULAR METHO D. INCOME TAX ACT DOES NOT FORCE ANY ONE TO FOLLOW ANY PARTICULAR ACCOUNTING STANDARD. THE APPELLANT WAS FOLLOWING PROJECT COMPLET ION METHOD WHICH IS IN ACCORDANCE OF THE EXISTING LAW AND IT IS T HE SETTLED LAW THAT IF ONE METHOD IS EMPLOYED, IT SHOULD REGULARLY B E EMPLOYED. AFTER CONSIDERING THE ARGUMENT OF BOTH AND IN VIEW O F THE JUDGMENT ANNOUNCED B THE HON'BLE DELHI HIGH COURT I N CASE OF CIT V. MANISH BUILD WELL (P) LTD. (HC)_ (2011) O63 D TR 369. I AM OF THE CONSIDERED OPINION THAT NO EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH TO SHOW THAT THE BOOKS OF ACCOUNT ARE NOT PROPERLY MAINTAINED BY THE APPELLANT. THE MAIN THRU ST OF THE ASSESSING OFFICER WHILE MAKING THE ADDITION IS THAT THE APPELLANT IS DEFERRING THE PAYMENT OF TAXES. HOWEVER, THIS ALLEG ATION OF THE ASSESSING OFFICER IS DEVOID OF MERITS AND CANNOT BE ACCE PTED BECAUSE THE APPELLANT IS CONSISTENTLY FOLLOWING A METHO D OF ACCOUNTING WHICH IS RECOGNIZED IN REAL ESTATE DEVELOP MENT BUSINESS. IT CANNOT BE SAID THAT THE PROJECT COMPLETION METHOD COULD RESULT IN DEFERMENT OF PAYMENT OF TAXES. IT HAS BEEN HELD BY THE HON'BLE HIGH COURT, DELHI IN ABOVE CASE THAT AS-7 ISSUED BY ICAI ALSO RECOGNIZES THE POSITION THAT IN CASE OF C ONSTRUCTION CONTRACTS THE APPELLANT CAN FOLLOW EITHER OF THE TW O METHODS. THIS PROJECT COMPLETION METHOD HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN EARLIER YEARS, HENCE ARGUMENTS OF TH E AR OF ITA NO2038,2039,237&238/DEL/12 9 THE APPELLANT HAS A STRONG ACCEPTANCE. THUS ESTIMATION OF PROFIT AMOUNTING TO ` .5,,13,48,000/- IN PLACE OF TOTAL TAXABLE INCOME DECLARED BY THE APPELLANT OF ` .15,83,923/- INCLUDING PROFIT ON PROJECT COMPLETION METHOD IS NOT ACCEPTED. THEREFORE , ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED AND THE RETURN OF INCOME OF ` .15,83,923/- FILED BY THE APPELLANT IS ACCEPTED. TH IS GROUND OF APPEAL IS ALLOWED. SIMILARLY, LD CIT(A) DELETED THE SECOND ADDITION OF ` .2,34,594/- HOLDING THAT SAME WAS ALREADY PART OF TAXABLE PROFITS OF THE COMPANY. 3. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE OUTSET, THE LD AR SUBMITTED THAT CROSS OBJECT IONS FILED BY THE ASSESSEE ARE NOT BEING PRESSED IN VIEW OF THE FACT TH AT PERIOD OF NOTICES FOR ISSUANCE OF NOTICE U/S 143(2) WAS NOT OVER A ND THEREFORE ASSESSMENTS FOR BOTH THE YEARS WERE PENDING AND THEREFORE ASSESSING OFFICER WAS EMPOWERED TO DISTURB THE PENDING ASSESSMENTS. 5. THE LD DR ARGUING REVENUES APPEALS HELD THAT IN T HE ASSESSMENT YEAR 2007-08, THE LD CIT(A) HAS WRONGLY HELD THAT INTEREST INCOME WAS FROM INCIDENTAL ACTIVITY OF THE ASSESSEE. IT WAS ARGUED THAT ASSESSEE WAS IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND INVESTMENT OF SURPLUS FUNDS FOR EARNING OF INTEREST INCO ME CANNOT BE SAID TO BE INCIDENTAL TO THE BUSINESS ACTIVITY. IT WAS F URTHER SUBMITTED THAT GRANTING OF LOAN AND EARNING OF INTEREST WAS NOT THE BUSINESS OF ASSESSEE. THEREFORE, THE ASSESSING OFFICER HAD RIGHTLY TREA TED THE INCOME AS INCOME FROM OTHER SOURCES. REGARDING NON ALLOWANCE OF EXPENSES IT WAS SUBMITTED THAT THESE EXPENSES WERE NOT FOR EARNING OF ITA NO2038,2039,237&238/DEL/12 10 INTEREST INCOME AND RATHER THESE WERE PART OF CAPITAL WORK IN PROGRESS. THEREFORE, THE ASSESSING OFFICER HAD RIGHTLY DISALLOWED THE EXPENSES. WITH RESPECT TO SECOND YEAR, THE LD DR HEAVILY RELIE D ON THE ASSESSMENT ORDER. 6. THE LD AR, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE WAS IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND HAD SET U P AN OFFICE FOR UNDERTAKING VARIOUS ACTIVITIES AND CERTAIN EXPENSES FO R RUNNING OF THE SAID BUSINESS WAS INCURRED WHICH WERE NOT RELATED TO A P ARTICULAR PROJECT AND THEREFORE WERE DEBITED IN THE P&L ACCOU NT. THEREFORE, THE LD CIT(A) AFTER APPRECIATING THE FACTS OF THE CASE H AS RIGHTLY DELETED THE DISALLOWANCE. IT WAS FURTHER SUBMITTED THAT EVEN IF INTEREST INCOME EARNED BY THE ASSESSEE WAS CONSIDERED AS INCOME FROM OTHE R SOURCES EVEN THEN THE BUSINESS LOSS IN THE FORM OF BUSINESS EXPENSES AGAINST NIL BUSINESS RECEIPT WAS ELIGIBLE FOR SET OFF AGAINST INC OME FROM OTHER SOURCES AND LD CIT(A) HAS RIGHTLY DONE THE SAME. OUR AT TENTION WAS INVITED TO LAST PARA OF LD CIT(A)S ORDER IN THIS RESPE CT. IT WAS FURTHER SUBMITTED THAT ALLOWABILITY OF EXPENSES UNDER THE BUSIN ESS HEAD WAS NOT DISPUTED AND RATHER LD CIT(A) HAD DISALLOWED TWO EXPENSES OUT OF EXPENSES DEBITED IN THE P&L ACCOUNT. IN VIEW OF THE A BOVE, IT WAS ARGUED THAT LD CIT(A) HAS RIGHTLY DELETED THE ADDITI ON. WITH RESPECT TO SECOND YEAR, THE LD AR HEAVILY RELIED UPON THE ORDER OF LD CIT(A) AS HE SUBMITTED THAT LD CIT(A) HAS RELIED UPON THE CASE OF M ANISH BUILD WELL (P) LTD. (SUPRA) AS DECIDED BY THE HON'BLE DELHI HIGH COURT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WITH RESPECT TO FIRST YEAR I.E. ASSESSMENT YEAR 2007-08 WE FIND THAT LD CIT(A) HAS WRONGLY ARRIVED AT THE CONCLUSION THAT INTEREST WAS EA RNED FROM INCIDENTAL ACTIVITY OF REAL ESTATE DEVELOPER. WE OBSE RVE THAT THE ITA NO2038,2039,237&238/DEL/12 11 INCOME WAS EARNED OUT OF SURPLUS FUNDS ADVANCED BY THE ASSESSEE TO ITS SISTER CONCERN WHICH WAS NOT A BUSINESS ACTIVITY OF TH E ASSESSEE AND NEITHER THE LD AR COULD PROVE THAT ADVANCES WERE GIV EN FOR BUSINESS PURPOSES. THEREFORE, WE DO NOT AGREE WITH THE FINDING S OF THE LD CIT(A) TO THIS EXTENT. HOWEVER, WE ARE IN AGREEMENT WITH T HE ARGUMENTS OF LD AR THAT EVEN IF THE INCOME IS TREATED UNDER THE H EAD INCOME FROM OTHER SOURCES EVEN THEN THE TOTAL INCOME OF THE ASSESSEE WOULD BE COMPUTED AFTER SETTING OFF LOSSES UNDER OTHER SOURCES INC LUDING UNDER THE HEAD PROFITS FROM BUSINESS. THE LD CIT(A) HAS ALSO HE LD IN THE LATTER PART OF HIS ORDER THAT EXPENSES WERE INCURRED AGAINST NIL BUSINESS RECEIPTS. THE REVENUE HAS ALSO NOT BROUGHT ANYTHING BE FORE US IN SUPPORT OF THE CLAIM THAT EXPENSES WERE NOT BUSINESS EXPE NSES. THE REVENUES ONLY CONTENTION IS THAT EXPENSES SHOULD HAVE B EEN CAPITALIZED AS WORK IN PROGRESS WHEREAS IN OUR OPINION THE EXPENSES OF RENT, ELECTRICITY, PRINTING, TELEPHONE CONVEYANCE, SECURITY EXPENSES, FILING FEE ETC. ARE COMMON EXPENSES WHICH ARE REQUIRE D TO RUN A BUSINESS. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF LD CIT(A) WHEREIN HE HAS CONSIDERED THE EXPENSES AS EXPENSE S ADJUSTABLE AGAINST OTHER SOURCES OF INCOME. IN VIEW OF THE ABOVE , THE APPEAL FILED BY THE REVENUE IS DISMISSED. 8. AS REGARDS ASSESSMENT YEAR 2008-09 WE FIND THAT LD CIT (A) HAS ELABORATELY DEALT WITH THE DELETION OF ADDITION THE ASSESSING OFFICER CANNOT FORCE ASSESSEE TO CHANGE THE METHOD OF ACCOUNTI NG SPECIALLY IN A CASE WHERE IN EARLIER YEARS THE METHOD EMPLOYED BY ASSESSEE WAS ACCEPTED BY DEPARTMENT AND WE THEREFORE DO NOT FIND ANY INFIRMITY IN HIS ORDER. THEREFORE, THE APPEAL FILED B THE REVENUE FOR ASSESSMENT YEAR 2008-09 IS ALSO DISMISSED. ITA NO2038,2039,237&238/DEL/12 12 9. AS REGARDS CROSS OBJECTIONS FILED BY THE ASSESSEE THESE AR E ALSO DISMISSED AS NOT PRESSED. 10. IN THE RESULT, THE APPEALS FILED BY THE REVENUE A S WELL AS CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON DAY OF SEPTEMBER, 2013. (R.K. GUPTA) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. .9.2013. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 26.9.2013 DATE OF DICTATION 26.9.2013 DATE OF TYPING 26.9.2013 DATE OF ORDER SIGNED BY BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED. ITA NO2038,2039,237&238/DEL/12 13