ACIT CIR 13(3), MUMBAI V. SUMAN O. KUKREJA, MUMBAI

ITA 208/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71643 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 143(3); 133A

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI .. , !'# $ $ $ $ %&. !.'.. $( ) !'# !* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM !./ I.T.A. NO. 208 /MUM/2011 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME TAX 13(3), ROOM NO. 430, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, NEW MARINE LINES, MUMBAI 400 020. ( ( ( ( / VS. MR. SUMAN O. KUKREJA, 4 TH & 5 TH SAI COMMERCIAL BUILDING, B.K.S. DEVSHI MARG, GOVANDI EAST, MUMBAI 400 088. #. !./ PAN : AAHPK 3756A ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) APPELLANT BY SHRI SHISHIR SRIVASTAVA RESPONDENT BY : SHRI NARESH KUMAR !($ 2 / // / DATE OF HEARING : 22-08-2013 34- 2 / DATE OF PRONOUNCEMENT : 23-10-2013 [ '5 / O R D E R PER P.M. JAGTAP, A.M . : .. , !'# THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) 24 MUMBAI DATED 15-10-2010. 2. IN GROUND NO. 1, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 8,93,093/- MADE BY THE A.O. TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF PROFIT FROM TH E PROJECTS TREATING THE SAME AS COMPLETED DURING THE YEAR UNDER CONSIDERATI ON. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND CONSTRUCTIO N IN THE NAME AND STYLE OF ITA 208/M/11 2 HIS PROPRIETARY CONCERN M/S OMPRAKASH & CO. THE RE TURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 2-11-2 007 DECLARING TOTAL INCOME OF RS. 2,36,37,642/-. THERE WAS A SURVEY CAR RIED OUT U/S 133A OF THE INCOME TAX ACT, 1961 ON 8-2-2007 DURING THE COURSE OF WHICH THE ASSESSEE HAD DECLARED A SUM OF RS. 1.35 CRORES AS HIS BUSINE SS INCOME ON THE BASIS OF PERCENTAGE COMPLETION METHOD FOLLOWED BY HIM. IN TH E ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 30-12-2009, THE A.O. HELD ON THE BASIS OF VARIOUS FACTORS DISCUSSED AT LENGTH THAT THE REAL E STATE PROJECT OF THE ASSESSEE WAS TOTALLY COMPLETED DURING THE YEAR UNDER CONSIDE RATION AS AGAINST 95% CLAIMED TO BE COMPLETED BY THE ASSESSEE AND ACCORDI NGLY THE ENTIRE PROFIT OF THE SAID PROJECT AMOUNTING TO RS. 1,31,07,453/- WAS TAXABLE IN THE HANDS OF THE ASSESSEE AS AGAINST RS. 1,22,14,360/- OFFERED B Y THE ASSESSEE. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT( A), ELABORATE SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE TO COUNTER ALL THE ADVERSE COMMENTS MADE BY THE A.O. ON THIS ISSUE AND AFTER DISCUSSING THE SAME IN DETAIL IN THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION OF RS. 8,93,093/- MADE BY THE A.O. ON THIS ISSUE FOR THE FOLLOWING REASONS GI VEN IN PARA NO. 2.3 OF HIS IMPUGNED ORDER:- I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSE L AND THE ABOVE ADDITION OF RS. 8,93,093/- IS DELETED BECAUSE THE A PPELLANT HAS SUCCESSFULLY PROVED THAT THE PROJECT WAS NOT COMPLE TE DURING THE YEAR IN QUESTION AND FOR WHICH THE APPELLANT HAS BROUGHT ON RECORD THE FACT THAT CONSTRUCTION FOR 4 TH TO 8 TH FLOORS WAS NOT COMPLETED AS ON 31.3.2007, WHICH IS EVIDENCED BY THE CERTIFICATE OF ARCHITECT IN RELATION TO THE WORK COMPLETED AND CERTIFICATE DTD 30.11.200 9 IN RESPECT OF BEST PROJECT. FURTHER THE LIFT WAS OPERATIONAL UPTO 3 RD FLOOR ONLY AND THE PAYMENT OF LIFT MAINTENANCE CHARGES CANNOT BE T HE DECIDING FACTOR TO CONCLUDE THAT THE CONSTRUCTION IS COMPLETE ON AL L THE FLOORS- THE LIFT WAS IN USE ONLY UPTO 3 RD FLOOR AND NO ADVERSE CONCLUSION COULD HAVE BEEN DRAWN ON THIS BASIS ONLY. THE OTHER RELATED FACT OF BROKERAGE EXPENSES PAID T O KAAMANA CONSULTANCY AND ASHOK CHABARIA ALSO RELATE TO PREMI SES GIVEN ON RENT ON 2 ND AND 3 RD FLOOR OF OMPRAKASH ARCADE AND THIS ALSO CANNOT L EAD TO ANY ADVERSE INFERENCE. ALSO PURCHASE OF TARPOLIN ETC ARE ONLY ROUTINE EXPENSES AND PART OF THE CONSTRUCTION COST AS THEY ARE USED FOR THE ITA 208/M/11 3 PURPOSE OF PROTECTING THE CEMENT BAGS AND CANNOT LE AD TO AN ADVERSE CONCLUSION THAT THEY RELATE TO MAINTENANCE EXPENSES WHEREAS IN FACT THEY REPRESENT PART OF THE CONSTRUCTION COST. AS RE GARDS THE MISCELLANEOUS CHARGES RECEIVED FROM THE CUSTOMERS/O CCUPANTS THE SAME WERE COLLETED ON BEHALF OF THE SOCIETY WHICH I S USUALLY FORM OF COMPLETION OF THE PROJECT AND THEY ARE HANDED OVER TO THE SOCIETY THEY ARE SHOWN ON THE ASSET SIDE OF THE BALANCE SHE ET AS SUNDRY DEBTORS ARID THIS IS A NORMAL METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT WHICH BY ITSELF CANNOT LEAD TO AN ADVERSE INFERENCE. THUS, THE DECLARATION MADE BY THE APPELLANT DURING THE COURSE OF SURVEY OF RS. 1,22,14,630/- IS THE CORRECT WORKING WHICH REQUIRES TO BE ACCEPTED AND IS BASED UPON THE ADVANCES RECEIVED OF RS. 4,45,51,901/- TILL DATE OF SURVEY AND THE PROPORTIONATE COST OF G OODS SOLD AT RS. 3,23,37,541/- ON WHICH THE GROSS PROFIT HAS BEEN WO RKED OUT. SINCE THE PROJECT WAS NOT COMPLETE DURING THE YEAR, BASED UPO N THE STATEMENT GIVEN DURING THE COURSE OF SURVEY THE SUM OF RS. 1, 22,14,360/- HAS BEEN TAKEN INTO ACCOUNT IN THE CLOSING WIP AND DE SERVES TO BE ACCEPTED. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS FOUND BY THE LD. CIT(A) IN HIS IMPUGNED ORDER ON THE BASIS OF DETAILS AND DOCUMENT S FURNISHED BY THE ASSESSEE, THE PROJECT WAS NOT COMPLETED DURING THE YEAR UNDER CONSIDERATION AND THE SAME WAS EVIDENCED EVEN BY THE CERTIFICATE ISSUED BY THE ARCHITECT. AS OBSERVED BY THE LD. CIT(A), THE CONSTRUCTION WOR K FOR 4 TH TO 8 TH FLOOR WAS NOT COMPLETED AS ON 31-3-2007 AND EVEN THE LIFT ON THAT DAY WAS OPERATIONAL ONLY UP TO 3 RD FLOOR. AS NOTED BY THE LD. CIT(A), THE PREMISES GI VEN ON RENT TO KAAMANA CONSULTANCY AND ASHOK CHABARIA WAS SITUATED ON THE 2 ND AND 3 RD FLOOR OF THE BUILDING AND THE INFERENCE DRAWN BY TH E A.O. ON THE BASIS OF BROKERAGE PAID FOR THE SAID TRANSACTION THAT THE PR OJECT WAS TOTALLY COMPLETED WAS WRONG. SIMILARLY, THE OTHER POINTS RAISED BY TH E A.O. TO ARRIVE AT THE CONCLUSION THAT THE PROJECT WAS COMPLETED WERE DULY CLARIFIED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND AFTER HAVING SATISFIED WI TH THE SAME, THE LD. CIT(A) DELETED THE ADDITION MADE BY THE A.O. ON THIS ISSUE HOLDING THAT THE PROJECT WAS NOT COMPLETED DURING THE YEAR UNDER CONSIDERATI ON AND THE PROFIT DECLARED BY THE ASSESSEE IN RESPECT OF THE SAID PRO JECT ON PERCENTAGE ITA 208/M/11 4 COMPLETION METHOD WAS CORRECT. AT THE TIME OF HEAR ING BEFORE US, THE LD. D.R. HAS NOT BEEN ABLE TO POINT OUT ANY INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND HAS MAINLY RELIED ON THE ORDER OF THE A.O. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(A) AND UPHOLDING THE SAME, WE DISMISS GROUND NO. 1 OF REVENUES APPEAL. 5. IN GROUND NO. 2, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN RESTRICTING THE DISALLOWANCE OF RS. 17,26,006/- MADE BY THE A.O. ON ACCOUNT OF MAINTENANCE CHARGES TO RS. 7,25,022/-. 6. IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE AC T, THE MAINTENANCE CHARGES CLAIMED BY THE ASSESSEE WERE DISALLOWED BY THE A.O. TO THE EXTENT OF RS. 17,26,006/- ON THE GROUND THAT THE SAME WERE PE RTAINING TO THE LET OUT PREMISES. DURING THE COURSE OF APPELLATE PROCEEDING S, DETAILS OF AREA-WISE MAINTENANCE CHARGES PAID WERE FURNISHED BY THE ASSE SSEE WHICH CLEARLY DISPLAYED THAT THE MAINTENANCE CHARGES WERE PAID BY THE ASSESSEE FOR THE TOTAL AREA OF 13365 SQ.FT. OUT OF WHICH AREA GIVEN ON RENT WAS ONLY 5909 SQ.FT. AS THE BALANCE AREA WAS EITHER VACANT OR USED BY TH E ASSESSEE FOR HIS BUSINESS PURPOSE. THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF MAINTENANCE WAS RESTRICTED BY THE LD. CIT(A) TO RS. 7,25,022/- BEING ACTUALLY ATTRIBUTABLE TO THE PREMISES GIVEN ON RENT. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIAL AVAILABLE ON RECORD, WE FIND NO INFIRMITY IN THE IM PUGNED ORDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE MADE BY THE A.O . ON ACCOUNT OF MAINTENANCE CHARGES TO RS. 7,25,002/- WHICH WAS ACT UALLY ATTRIBUTABLE TO THE AREA OF PREMISES GIVEN BY THE ASSESSEE ON RENT. TH E LD. D.R. HAS NOT BROUGHT ANYTHING ON RECORD TO DISPUTE THE FACT THAT THE ARE A GIVEN ON RENT WAS ONLY TO THE EXTENT OF 5909 SQ. FT. OUT OF THE TOTAL AREA OF 13365 SQ.FT. FOR WHICH THE MAINTENANCE CHARGES WERE PAID BY THE ASSESSEE. WE, THEREFORE, UPHOLD THE ITA 208/M/11 5 IMPUGNED ORDER OF THE LD. CIT(A) AND DISMISS GROUND NO. 2 OF REVENUES APPEAL. 8. IN GROUND NO. 3, 4 & 5, THE REVENUE HAS CHALLENG ED THE ACTION OF THE LD. CIT(A) IN RESTRICTING THE DISALLOWANCE OF RS. 2 LAC S, RS. 1 LAC AND RS. 2,45,019/- MADE BY THE A.O. ON ACCOUNT OF OFFICE EX PENSES, TELEPHONE EXPENSES AND TRAVELING EXPENSES TO RS. 25,000/-, RS . 15,000/- AND RS. 60,000/- RESPECTIVELY. OUT OF THE TOTAL EXPENSES O F RS. 12,30,968/- CLAIMED BY THE ASSESSEE, A SUM OF RS. 2,78,813/- WAS INCURR ED ON TELEPHONE EXPENSES WHILE A SUM OF RS. 6,81,,030/- WAS INCURRED ON ELEC TRICITY EXPENSES. SINCE THE COMPLETE DETAILS AND BIFURCATION OF THE EXPENSES CO ULD NOT BE FURNISHED BY THE ASSESSEE, THE A.O. DISALLOWED A SUM OF RS. 2 LA CS OUT OF OFFICE EXPENSES AND RS. 1 LAC OUT OF TELEPHONE EXPENSES. BEFORE TH E LD. CIT(A) IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE THAT THE ENTIRE OFFIC E EXPENDITURE AND TELEPHONE EXPENDITURE WAS INCURRED BY THE ASSESSEE IN RESPECT OF 4 TH AND 5 TH FLOOR OF THE BUILDING WHICH WERE OWNED BY THE ASSESSEE AND THE S AME THEREFORE WERE ALLOWABLE AS BUSINESS EXPENDITURE. AFTER CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) FOUND IT FAIR AND REASONAB LE TO RESTRICT THE DISALLOWANCE OUT OF OFFICE EXPENDITURE TO RS.25,000 /- AND OUT OF TELEPHONE EXPENDITURE TO RS. 15,000/-. SIMILARLY, THE DISALLO WANCE OF RS. 2,45,019/- MADE BY THE A.O. ON ACCOUNT OF TRAVELING EXPENSES W AS RESTRICTED BY HIM TO RS. 60,000/- OBSERVING THAT THE TRAVEL WAS UNDERTAK EN BY THE ASSESSEE AND HIS SON TO ARRANGE FINANCE FOR THE BUSINESS AND MER ELY BECAUSE THE ASSESSEE COULD NOT SUCCEED IN ARRANGING THE LOAN/FINANCE COU LD NOT BE A GROUND FOR THE DISALLOWANCE. AFTER CONSIDERING THE RIVAL SUBMISSIO NS AND PERUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD, WE FIND THAT A JUST AND FAIR VIEW OF THE MATTER HAS BEEN TAKEN BY THE LD. CIT(A) AFTER CONSI DERING ALL THE RELEVANT FACTS OF THE CASE AND SINCE THE DISALLOWANCE SUSTAINED B Y HIM ON ACCOUNT OF OFFICE EXPENDITURE, TELEPHONE EXPENDITURE AND TRAVELING, I N OUR OPINION, IS FAIR AND REASONABLE IN THE FACTS OF THE ASSESSEES CASE, WE UPHOLD THE IMPUGNED ORDER ITA 208/M/11 6 OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THESE ISSUES. GROUND NO. 3 TO 5 ARE ACCORDINGLY DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER, 2013. . '5 2 34- 6'(7 23-10-2013 4 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 6'( DATED 23-10-2013 $.)(.!./ RK , SR. PS '5 2 0)89 :9- '5 2 0)89 :9- '5 2 0)89 :9- '5 2 0)89 :9-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. ; () / THE CIT(A)24, MUMBAI. 4. ; / CIT 13, MUMBAI 5. 9$> 0))( , , / DR, ITAT, MUMBAI E BENCH 6. %, ? / GUARD FILE. '5(! '5(! '5(! '5(! / BY ORDER, !19 0) //TRUE COPY// @ @ @ @/ // /!A !A !A !A ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI