Appeal details
Counselvise Citation
[2021] 108 COUNSELVISE.COM (IT) 2801 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-06-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
D
Next Hearing Date
15-06-2021
Assessment Year
2013-2014
Appeal Filed On
24-07-2019
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , . , % BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.2190/CHNY/2019 ( / ASSESSMENT YEAR: 2013-14) M/S. SHRI SAI VARSHA ENTERPRISES 9, TREVELYAN BASIN STREET, SOWCARPET, CHENNAI-600 079. VS THE DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-14, CHENNAI. PAN: ABSFS 9527D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. T.BANUSEKAR, C.A. /RESPONDENT BY : MS. R.ANITA, JCIT /DATE OF HEARING : 15.06.2021 /DATE OF PRONOUNCEMENT : 21.06.2021 / O R D E R PER G.MANJUNATHA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A)-7, CHENNAI DATED 28.06 .2019 AND PERTAINS TO ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANC ES OF THE CASE TO THE EXTENT PREJUDICIAL TO THE INTERESTS OF THE APPELLANT AND IS OPPOSED TO THE PRINCIPLES OF NATURAL JUSTICE , EQUITY AND FAIR PLAY. 2. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE ORDER OF THE ASSESSING OFFIC ER IS WITHOUT JURISDICTION. 2 ITA NO 2190/CHNY/2019 3. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN UPHOLDING THE DISALLOWANCES OF ARCHITECT FEES OF RS.2,00,000/- AND BROKERAGE OF RS.1,96,374/-. 4. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE ARCHITECT FEES AND BROKERAGE ARE ALLOWABLE EXPENDITURE. 5. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN UPHOLDING THE DISALLOWANCE OF SALES TAX AND SERV ICE TAX PAID OF RS.15,37,1891- AND RS.21,36,892/- RESPECTIVELY. 6. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THE FACT THAT THE COLLECTIONS FROM TH E CUSTOMERS WERE INCLUSIVE OF TAXES AND WERE INCLUDED IN GROSS RECEIPTS. 7. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THE FACT THAT THE APPELLANT HAD ADOPT ED COMPOUNDED RATE SCHEME IN VAT. 8. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THE EVIDENCES SUBMITTED BY THE APPELL ANT FOR THE PAYMENT OF SALES TAX AND SERVICE TAX. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DEVELO PMENT OF BUILDING AND PROMOTION OF FLATS FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 ON 30.09.2013 DECLARING TOT AL INCOME OF RS.64,83,280/-. THE CASE WAS TAKEN UP FOR ASSESS MENT AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED VARI OUS 3 ITA NO 2190/CHNY/2019 EXPENSES INCLUDING ARCHITECT FEE, BROKERAGE AND L AND DEVELOPMENT EXPENSES INCURRED IN RESPECT OF SRI PERUMBAKKAM PROJECT. HOWEVER, SAID PROJECT WAS NOT COMPLETED FOR THE YEAR UNDER CONSIDERATION AND HEN CE, OPINED THAT EXPENDITURE DEBITED INTO PROFIT & LOSS ACCOUNT CANNOT BE ALLOWED AS DEDUCTION. THEREFORE, SAID EXPENDITURE H AS BEEN DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE. SIMILARLY, THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS DEBITED SALES TAX & SERVICE TAX INTO PROFIT & L OSS ACCOUNT AND HENCE, OPINED THAT SALES TAX & SERVICE TAX COLL ECTED IN RESPECT OF FLATS SOLD TO CUSTOMERS IS NOT DEDUCTIB LE EXPENSES AND HENCE, DISALLOWED SAID EXPENDITURE AND ADDED B ACK TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE ASSESSEE CARRIED MATTER IN APPEAL BEFORE LEA RNED CIT(A) AND AGITATED ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS DISALLOWANCE OF EXPENSES AND DISALLOWANCE O F SALES TAX & SERVICE TAX PAID ON THE GROUND THAT EXPENSES INCURRED TOWARDS LAND DEVELOPMENT WAS NOT CLAIMED AS DEDUCTI ON, BUT ADDED IN WORK-IN-PROGRESS ACCOUNT, THEREFORE, SAME CANNOT BE DISALLOWED. THE ASSESSEE FURTHER CONTENDED THAT ARC HITECT FEE 4 ITA NO 2190/CHNY/2019 AND BROKERAGE EXPENSES ARE GENERAL IN NATURE WITHOU T SPECIFIC TO ANY PROJECT AND HENCE, SAME CANNOT BE DISALLOWED ,EVEN THOUGH, THE PROJECT WAS NOT COMPLETED IN THE RELEVA NT ASSESSMENT YEAR. THE LEARNED CIT(A), AFTER CONSIDER ING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO TAKE N NOTE OF DETAILS OF OPENING AND CLOSING WORK IN PROGRESS DE LETED DISALLOWANCE MADE BY THE ASSESSING OFFICER TOWARDS LAND DEVELOPMENT EXPENSES OF RS.13,74,384/-. HOWEVER, A S REGARDS, ARCHITECT FEE AND BROKERAGE, THE LEARNED C IT(A) OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED ANY EV IDENCE TO PROVE SAID EXPENDITURE AND HENCE, CONFIRMED ADDITI ON MADE BY THE ASSESSING OFFICER. SIMILARLY, AS REGARDS DISAL LOWANCE OF SALES TAX & SERVICE TAX, THE LEARNED CIT(A) HAS OBS ERVED THAT SALES TAX IS NOT AN EXPENSE AND HENCE, IT CANNOT BE DEBITED INTO PROFIT & LOSS ACCOUNT, THEREFORE, THERE IS NO ERROR IN THE ADDITION MADE BY THE ASSESSING OFFICER AND HENCE, CONFIRMED DISALLOWANCE OF SERVICE TAX & SALES TAX DEBITED IN TO PROFIT & LOSS ACCOUNT. AGGRIEVED BY THE LEARNED CIT(A) ORDER, TH E ASSESSEE IS IN APPEAL BEFORE US. 5 ITA NO 2190/CHNY/2019 5. THE LEARNED A.R FOR THE ASSESSEE SUBMITTED THA T THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF ARCHITECT FEE AND BROKERAGE EXPENSES DEBITED INTO PROFIT & LOSS ACCOUNT WITHOUT APPRECIATING THE FACT THAT ISSUE BEFORE THE ASSESSING OFFICER WAS WHETHER SAID EXPENDITURE WAS DEDUCTIBLE OR NOT, BUT THE ASSESSING OFFICER NEVER ASKED THE ASSESSEE TO FURNISH NECESSARY EVIDENCE. THEREFORE, ON THIS GROUND THE L EARNED CIT(A) CANNOT CONFIRM ADDITIONS MADE BY THE ASSESSI NG OFFICER. THE AR FURTHER SUBMITTED THAT SALE TAX & S ERVICE TAX DEBITED INTO PROFIT & LOSS ACCOUNT IS PAID ON SALE S MADE BY THE ASSESSEE FOR THE YEAR AND FURTHER, THE ASSESSEE IS FOLLOWING COMPOSITE METHOD OF PAYMENT OF SALES TAX, AS PER W HICH SALES TAX & SERVICE TAX CANNOT BE COLLECTED FROM CUSTOMER S. FURTHER, WHEN THE TAXES ARE NOT COLLECTED FROM CUSTOMERS AND PAID BY THE ASSESSEE, THEN SAME IS AN EXPENDITURE WHICH IS DEDUCTIBLE UNDER THE ACT. HOWEVER, FOR THE LIMITED PURPOSE OF VERIFICATION OF FACTS WITH REGARD TO NON-COLLECTION OF TAXES FROM S ALES, THE MATTER MAY BE SET ASIDE TO THE FILE OF THE ASSESSIN G OFFICER TO VERIFY RECORDS. 6 ITA NO 2190/CHNY/2019 6. THE LEARNED DR, ON THE OTHER HAND, SUPPORTING OR DER OF THE LEARNED CIT(A) SUBMITTED THAT THE ASSESSEE HAS FAILED TO FILE ANY EVIDENCE TO PROVE THAT EXPENDITURE DEBITED INTO PROFIT & LOSS ACCOUNT . FURTHER, THE ASSESSEE HAS NOT FILED ANY E VIDENCE TO PROVE THAT TAXES DEBITED INTO PROFIT & LOSS ACCOUNT WAS NOT COLLECTED FROM CUSTOMERS. HOWEVER, TO GIVE ANOTHER OPPORTUNITY TO THE ASSESSEE, THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. AS REGARDS DISALLOWANCE OF ARCHITECT FEE AN D BROKERAGE EXPENSES, THE ASSESSING OFFICER HAS DISALLOWED SAI D EXPENSES ONLY ON THE GROUND THAT SRI PERUMBAKKAM PROJECT WAS NOT COMPLETED FOR THE YEAR UNDER CONSIDERATION, BUT NE VER CALLED FOR ANY PROOF OF EXPENSES, WHEREAS, THE LEARNED CIT(A) HAS CONFIRMED ADDITIONS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT ASSESSEE HAS NOT FURNISHED ANY EVIDENCE . IT IS A CLAIM OF THE LEARNED AR FOR THE ASSESSEE THAT HAD B EEN THE ASSESSING OFFICER CALLED FOR EVIDENCE FOR EXPENSES , THE ASSESSEE COULD HAVE FURNISHED SAID EVIDENCE. THERE FORE, 7 ITA NO 2190/CHNY/2019 CONSIDERING THE FACT THAT THE ASSESSEE WAS NOT GIVE N OPPORTUNITY TO FURNISH NECESSARY EVIDENCE IN SUPPOR T OF IT EXPENSES, WE ARE OF THE CONSIDERED VIEW THAT ISSUE NEEDS TO GO BACK TO THE FILE OF THE ASSESSING OFFICER TO GIVE ANOTHER OPPORTUNITY TO THE ASSESSEE TO FILE NECESSARY EVIDE NCE IN SUPPORT OF ITS EXPENSES. 8. AS REGARDS DISALLOWANCE OF SALES TAX & SERVICE T AX, THE CLAIM OF THE ASSESSEE BEFORE LEARNED CIT(A) WAS THA T IT HAS OPTED FOR COMPOSITE SCHEME OF PAYMENT OF SALES TAX & SERVICE TAX AND AS PER SAID SCHEME, TAXES ON SALES CANNOT B E COLLECTED FROM CUSTOMERS. FURTHER, SALES TAX & SERVICE TAX IS AN ITEM OF EXPENDITURE, WHICH IS DEDUCTIBLE IN CASE SAME IS PAID BY THE ASSESSEE WITHOUT COLLECTING FROM CUSTOMERS. THEREF ORE, WE ARE OF THE CONSIDERED VIEW THAT ASSESSING OFFICER AS W ELL AS LEARNED CIT(A) WERE ERRED IN DISALLOWING SALES TAX & SERVICE TAX DEBITED INTO PROFIT & LOSS ACCOUNT BY HOLDING THAT SALES TAX& SERVICE TAX IS NOT AN EXPENSE. FURTHER, FACT WITH R EGARD TO WHETHER THE ASSESSEE HAS COLLECTED TAXES FROM CUSTO MERS OR NOT IS NOT COMING OUT FROM RECORDS. THEREFORE, TO A SCERTAIN THE FACTS, ISSUE HAS BEEN SET ASIDE TO THE FILE OF TH E ASSESSING 8 ITA NO 2190/CHNY/2019 OFFICER AND DIRECT HIM TO CAUSE NECESSARY ENQUIRIES AND IF THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS OPTE D COMPOSITE METHOD OF PAYMENT OF TAXES WITHOUT COLLEC TION OF TAXES FROM CUSTOMERS, THEN ASSESSING OFFICER IS D IRECTED TO ALLOW SALES TAX & SERVICE TAX PAID BY THE ASSESSEE AS DEDUCTIBLE EXPENSES. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2021 SD/- SD/- ( . ) ( . ) (V.DURGA RAO) (G.MANJUNATHA) ' % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER ' /CHENNAI, ( / DATED 21 ST JUNE, 2021 DS *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .
