M/S GEM BUILDHOME PVT. LTD., JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 210/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1603 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 12-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA JCIT DHK
• Section: 40A(3); 143(3)

Judgement Text

+ VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA, AM VK;DJ VIHY LA -@ ITA NO. 210/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2012-13 M/S. GEM BUILDHOME PVT.LTD 5 TH FLOOR, K TOWER, MAHAVEER MARG, C-SCHEME, JAIPUR-302001 VS. I.T.O., WARD-5(4), JAIPUR LFKK;H YS[KK LA -@THVKBZVKJ LA-@ PAN/GIR NO.: AAECG2006K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI RAJEEV SOGANI (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. ROSHANTA MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15/04/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11/06/2019 VKNS'K@ ORDER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2, JAIPUR DATED 18/12/2017 FOR THE A.Y. 2012-13 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED, IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING A SUM OF RS.1,00,000/- U/S. 40A(3) OF THE INCOME TAX ACT, 1961. THE ACTION OF LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE OF RS.1,00,000/-. ITA NO.210/JP//2018 M/S GEM BUILDHOME P.LTD VS ITO 2 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED, IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING FOLLOWING EXPENSES FOR THE ALLEGED REASON OF BEING IN THE NATURE OF PREOPERATIVE EXPENSES:- NATURE OF EXPENSES AMOUNT INTEREST ON LOAN TAKEN 9,95,310 SALARY TO EMPLOYEES 93,210 OTHER EXPENSES 95,442 TOTAL 11,83,962 THE ACTION OF LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE OF RS.11,83,962/-. 3. THE ASSESSEE COMPANY CRAVES ITS RIGHT TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY PURCHASED A PIECE OF LAND THROUGH A REGISTERED DEED ON 10.02.2012 FOR A TOTAL CONSIDERATION OF RS. 1,78,00,000. OUT OF RS, 1,78,00,000, ONLY A SUM OF RS. 1,00,000 WAS PAID IN CASH ON 10.02.2012 I.E. ON THE DATE OF REGISTRY. HOWEVER, THE A.O. DECLINED THE ASSESSEES CLAIM BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT, WHICH WAS CONFIRMED BY THE LD. CIT(A). 4. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD I FOUND THAT THERE IS NO DOUBT RAISED BY THE LOWER AUTHORITIES ON EITHER THE PAYMENT OR THE SOURCE OR THE BUSINESS EXPEDIENCY OR THE PAYEE. ITA NO.210/JP//2018 M/S GEM BUILDHOME P.LTD VS ITO 3 THESE THINGS HAVE NOT BEEN DOUBTED. THEREFORE, DISALLOWANCE IS UNJUSTIFIED. THE ISSUE IS COVERED BY THE DECISION OF THE ITAT JAIPUR BENCH IN THE CASE OF A. DAGA ROYAL ART VS. INCOME-TAX OFFICER, WARD- 2(2), JAIPUR [2018] 94 TAXMANN.COM 401, IT APPEAL NO 1065. (CLC: 1-23). THE HEAD NOTES OF THE SAME ARE REPRODUCED FOR READY REFERENCE:- 'SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, READ WITH RULE 6DD OF THE INCOME-TAX RULES, 1962 - BUSINESS DISALLOWANCE - CASH PAYMENT EXCEEDING PRESCRIBED LIMIT (IMMOVABLE PROPERTY) - ASSESSMENT YEAR 2013-14 - ASSESSEE-FIRM HAD PURCHASED OF PLOT OF LAND FROM VARIOUS PERSONS FOR A TOTAL CONSIDERATION, OUT OF WHICH PART OF PAYMENT WAS MADE IN CASH AND BALANCE THROUGH CHEQUE - ASSESSEE SUBMITTED COPIES OF SALE DEED AND OTHER DETAILS WHICH CONTAINED NAME OF SELLER, DATE OF SALE DEED, PLOT NO., PURCHASE VALUE, STAMP DUTY, COURT FEE AND MODE OF PAYMENT (CASH/CHEQUE) - ASSESSEE SUBMITTED THAT PAYMENT FOR PURCHASE OF LAND HAD BEEN MADE IN CASH BECAUSE SELLERS WERE NEW TO ASSESSEE AND REFUSED TO ACCEPT PAYMENT THROUGH BANKS AND THAT DUE TO MODE OF PAYMENT, IT COULD HAVE LOST LAND DEALS - FURTHER CASH PAYMENTS WERE MADE FROM DISCLOSED SOURCES BEING AMOUNT WITHDRAWN FROM BANK - WHETHER SINCE IDENTITY OF SELLERS AND SOURCE OF CASH PAYMENTS AS WITHDRAWALS FROM ASSESSEE'S BANK ACCOUNT HAD BEEN ESTABLISHED, GENUINENESS OF TRANSACTION HAD ALSO BEEN ESTABLISHED AS EVIDENCED BY REGISTERED SALE DEEDS AND LASTLY, TEST OF BUSINESS EXPEDIENCY HAD BEEN MET, NO DISALLOWANCE UNDER SECTION 40A(3) WAS CALLED FOR - HELD, YES [PARAS 35-43]. 5. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH, I DO NOT FIND ANY MERIT IN THE DISALLOWANCE OF RS.1.00 LAC SO MADE BY THE A.O.. 6. THE A.O. HAS ALSO DISALLOWED INTEREST OF RS. 9,95,310/- AND SALARY OF EMPLOYEE OF RS. 93,210/- BY STATING THAT THE ASSESSE HAS NOT STARTED ITA NO.210/JP//2018 M/S GEM BUILDHOME P.LTD VS ITO 4 BUSINESS, THE SAME SHOULD BE CAPITALIZED. THE ACTION OF THE A.O. WAS CONFIRMED BY THE LD. CIT(A), AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE ITAT. 7. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 03.03.2011. DURING THE F.Y. 2011-12, ASSESSEE COMPANY COMMENCED ITS BUSINESS AND PURCHASED 10 PLOTS FOR AGGREGATE CONSIDERATION OF RS. 3,11,00,582. ALL THESE WERE SMALL PLOTS AND PURCHASED MAINLY FOR TRADING PURPOSES. ALL THESE PLOTS AT THE END OF THE YEAR REMAINED IN STOCK. THE AO DISALLOWED THE EXPENSES ALLEGING THAT NO BUSINESS ACTIVITY BY WAY OF SALE OF ANY OF THE PLOTS TOOK PLACE AND, THEREFORE, THE ENTIRE EXPENSE IS NOT ALLOWABLE AND IS TO BE ADDED TO THE CLOSING STOCK. FROM THE RECORD I FOUND THAT THE BUSINESS WAS COMMENCED BECAUSE AS MANY AS 10 PLOTS WERE PURCHASED DURING THE RELEVANT PREVIOUS YEAR. THE INTEREST WAS PAID ON WORKING CAPITAL FUND RAISED FOR PURCHASE OF STOCK IN TRADE. THE SAME IS ALLOWABLE UNDER SECTION 36(1)(III). SINCE, THE PLOTS WERE PURCHASED FOR TRADING, THE SAME CANNOT BE A QUALIFYING ASSET IN TERMS OF AS-16. I ALSO OBSERVE THAT ICDS-XI, BORROWING COST, REQUIRING INTEREST CAPITALIZATION ON INVENTORIES, ITA NO.210/JP//2018 M/S GEM BUILDHOME P.LTD VS ITO 5 CAME INTO FORCE FROM ASSESSMENT YEAR 2017-18. ACCORDINGLY, I DO NOT FIND ANY MERIT FOR THE DISALLOWANCE OF INTEREST AND SALARY TO EMPLOYEES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2019. SD/- JES'K LH 'KEKZ (RAMESH C SHARMA) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11 TH JUNE, 2019 *PP/SPS VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S GEM BUILDHOME PVT. LTD., JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE I.T.O., WARD 5(4), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 210/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR