ANJANI KUMAR COMPANY P. LTD, MUMBAI V. ACIT 2(1)(1), MUMBAI

ITA 2289/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7883 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 12-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVLD
• Keywords: Business income; Business expenditure; Revenue expenditure; TDS
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.2289/MUM/2018 ( / ASSESSMENT YEAR: 2013-14) ANJANI KUMAR COMPANY PVT.LTD. 306, RAJ CHAMBER, MANUBHAI ROAD MALAD (E), MUMBAI-400 097. / VS. A C IT - 2(1)(1) ROOM NO.561, 5 TH FLOOR AAYKAR BHAVAN MUMBAI-400 020. ! ./ ./PAN/GIR NO. AABCA-1474-E ( !# /APPELLANT ) : ( $!# / RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : SHRI RAJESH KUMAR YADAV - LD.DR / DATE OF HEARING : 22/04/2019 / DATE OF PRONOUNCEMENT : 22/04/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2013-14 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-4, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-4/IT-96/ITO-2(1)(3)/2016-17 D ATED 28/02/2018 QUA CONFIRMATION OF CERTAIN ADDITIONS. NONE HAS APPEARE D FOR ASSESSEE AND NO VALID ADJOURNMENT APPLICATION IS ON RECORD. LEFT WITH NO OPTION, WE PROCEED TO DISPOSE-OFF THE SAME ON THE B ASIS OF MATERIAL ON RECORD AND AFTER HEARING LD. DEPARTMENTAL REPRESENT ATIVE, WHO RELIED UPON THE ORDERS OF LOWER AUTHORITIES. 2 2.1 FACTS, IN BRIEF, ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN DEVELOPMENT AND CONSTRUCTIO N , WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 18/03/2016. DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THAT THE ASSE SSEE HAD SHOWN WORK-IN-PROGRESS [WIP] AND TRANSFERRED PROJECT RELATED EXPENSES DIRECTLY TO WIP ACCOUNT. THE TOTAL EXPENSES INCURRED DURING IMPUGNE D AY WERE RS.197.34 LACS OUT OF WHICH RS.149.01 LACS WAS TRAN SFERRED TO TWO PROJECTS AS WIP WHEREAS THE BALANCE OF RS.48.32 LACS WAS CLAIMED I N THE PROFIT & LOSS ACCOUNT AS REVENUE EXPENDITURE. H OWEVER, NOT SATISFIED WITH ASSESSEES WORKING, LD. AO PROCEEDED TO ALLOCA TE THE CLAIMED EXPENDITURE OF RS.48.32 LACS IN THE RATIO OF WIP TO TOTAL ASSETS AND CAME TO A CONCLUSION THAT AN AMOUNT OF RS.19.56 LAC S OUT OF RS.48.32 LACS WAS TO BE CAPITALIZED AS WIP. ACCORDINGLY, THE INCOME WAS ENHANCED BY CORRESPONDING AMOUNT. 2.2 ANOTHER ADDITION OF RS.72,359/- REPRESENT INTE REST INCOME REFLECTED IN ASSESSEES FORM 26AS BUT WHICH HAS NOT BEEN REFL ECTED BY THE ASSESSEE IN THE RETURN OF INCOME. 3.1 BEFORE LD. FIRST APPELLATE AUTHORITY, THE ASSES SEE PROVIDED THE DETAILS OF HEAD-WISE EXPENDITURE AND SUBMITTED THAT EXPENDITURE RELATED TO SPECIFIC PROJECTS WAS ALREADY TRANSFERRED TO WIP ACCOUNT AND CLAIMED EXPENDITURES WERE SORT OF FIXED COSTS WHICH WERE TO BE INCURRED UNDER ALL CIRCUMSTANCES AND NOT RELATED WITH ANY SPECIFIC PRO JECTS. THE ATTENTION WAS DRAWN TO ACCOUNTING STANDARD-7 & GUIDANCE NOTES ON ACCOUNTIN G FOR REAL ESTATE TRANSACTIONS TO SUPPORT THE ACCOUNTING METHODOLOGY. HOWEVER, LD. CIT(A) OBSERVED THAT THE ONLY REVENUE EARNED BY THE ASSESSEE DURING THE YEAR WAS TDR SALES RECEIPTS, INTEREST / DIVIDEND AND OTHER NON-OPERATING INCOME WHICH WOULD MEAN THAT THE ASSESSEE 3 HAD ABSOLUTELY NO BUSINESS INCOME DURING THE YEAR A ND THEREFORE, HAD NO JUSTIFICATION TO CLAIM THESE EXPENDITURE PARTICU LARLY KEEPING IN VIEW THE FACT THAT THE SAID EXPENDITURE WOULD GO ON THE REDU CE THE TAXABLE INCOME EARNED FROM SALE OF TDR / NON-OPERATING INCOME. 3.2 IN THE ABOVE BACKGROUND, LD. CIT(A) PROCEEDED T O EXAMINE THE ALLOWABILITY OF EACH EXPENDITURE WHICH WOULD BE NEC ESSARY TO COMPLY WITH STATUTORY REQUIREMENTS. FINALLY, AFTER EXAMINI NG EACH AND EVERY EXPENDITURE, LD. AO WAS DIRECTED TO CAPITALIZE THE FOLLOWING EXPENDITURE:- IN OTHER WORDS, THE ACTION OF LD. FIRST APPELLATE A UTHORITY RESULTED INTO ENHANCEMENT OF CAPITALIZATION FROM RS.19.56 LACS TO RS.25.42 LACS. THE STAND OF LD. AO IN MAKING ANOTHER ADDITION OF RS.0. 72 LACS WAS ALSO CONFIRMED. AGGRIEVED, THE ASSESSEE IS IN FURTHER AP PEAL BEFORE US. 4. AFTER CAREFUL CONSIDERATION, WE FIND FALLACY IN THE OBSERVATION OF LD. FIRST APPELLATE AUTHORITY THAT THE ASSESSEE WOULD N OT BE ENTITLED TO CLAIM OTHERWISE ALLOWABLE EXPENDITURE, IF HE HAD NO BUSIN ESS INCOME DURING IMPUGNED AY SINCE DEDUCTION OF LEGITIMATE BUSINESS EXPENDITURE WOULD NOT BE SUBJECT TO ACTUAL EARNING OF BUSINESS INCOME . ANOTHER NOTEWORTHY POINT IS THAT THE ASSESSEE HAS ONLY ONE HEAD OF INC OME I.E. BUSINESS INCOME DURING THE IMPUGNED AY WHICH IS EVIDENT FROM THE QUANTUM ASSESSMENT ORDER. THIS WOULD MEAN THAT WHATEVER AMO UNT WAS CREDITED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT EITHER AS TDR SALE OR AS NON-OPERATING INCOME, THE SAME WAS ASSESSED AS BUSI NESS INCOME ONLY NO. HEAD OF EXPENDITURE AMOUNT (RS.) 1. SECURITY SERVICE CHARGES 2,43,274/- 2. FINANCE COST 19,14,398/- 3. BUSINESS PROMOTION 1,59,300/- 4. WATER EXPENSES 2,25,379/- TOTAL 25,42,351/- 4 AND THEREFORE, THERE COULD BE NO REASON TO DENY THE LEGITIMATE BUSINESS EXPENDITURE. WITH THESE OBSERVATIONS, WE DEEM IT FI T TO RESTORE THE MATTER BACK TO THE FILE OF LD. CIT(A) FOR RE-ADJUDICATION AFTER APPRECIATING THE FACTUAL MATRIX IN THE CORRECT PERSPECTIVE WITH A DI RECTION TO THE ASSESSEE TO SUBSTANTIATE HIS STAND. 5. THE SECOND ADDITION OF RS.0.72 LACS REPRESENT CE RTAIN INCOME REFLECTED IN ASSESSEES FORM 26AS BUT WHICH HAS NOT BEEN OFFERED TO TAX BY THE ASSESSEE. THE PRIME ARGUMENT ADVANCED BY THE ASSESSEE BEFORE LOWER AUTHORITIES SEEMS TO BE THE FACT THAT NO MONE Y WAS RECEIVED FROM THE PAYERS AND THE ASSESSEE, ULTIMATELY, HAD TO WRI TE-OFF THESE BALANCES IN SUBSEQUENT YEARS. HOWEVER, THIS ARGUMENT WEAKENS BY THE FACT THAT PAYERS HAD DEDUCTED AS WELL AS DEPOSITED DUE TDS AG AINST THESE PAYMENTS. FURTHER, NOTHING ON RECORD SUBSTANTIATE T HE ASSESSEES SUBMISSIONS. THEREFORE, THIS MATTER ALSO STANDS REM ITTED BACK TO THE FILE OF LD. CIT(A) FOR RE-ADJUDICATION WITH A DIRECTION TO THE ASSESSEE TO SUBSTANTIATE HIS STAND, IN THIS REGARD. 6. RESULTANTLY, THE APPEAL STANDS ALLOWED FOR STATI STICAL PURPOSES IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND APRIL, 2019. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 22/04/2019 SR.PS, JAISY VARGHESE 5 ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ,- & . , . , / DR, ITAT, MUMBAI 6. -/01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.