LAVLESH CONSTRUCTION PVT. LTD., MUMBAI V. I.T.O. 9(2)(2), MUMBAI

ITA 2580/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2109 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 17-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Period of limitation
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEORE SHRI N.K.BILLAIYA, ACCOUNTNT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2567/MUM/2010 (ASSESSMENT YEAR : 2006-07) ITA NO. 2580/MUM/2012 (ASSESSMENT YEAR : 2006-07) M/S. LAVESH CONSTRUCTION PVT. LTD., DIAMOND PLACE, 1 ST FLOOR, HILL ROAD, BANDRA(W), MUMBAI 400 050 PAN: AAAC L 6656N .... APPELLANT VS. THE INCOME TAX OFFICER 9(2)(2), AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020. .... RESPONDENT APPELLANT BY : SHRI HARIOM TULSYAN RESPONDENT BY : SHRI A.RAMACHANDRAN DATE OF HEARING : 24/11/2015 DATE OF PRONOUNCEMENT : 30/11/2015 ORDER PER N.K.BILLAIYA,AM: ITA NOS.2567/MUM/2010 & 2580/MUM/12 ARE APPEALS B Y THE ASSESSEE AGAINST TWO SEPARATE ORDERS OF THE CIT(A)- 20, MUMBAI PERTAINING TO ASSESSMENT YEAR 2006-07. ITA NO.256 7/MUM/2010 RELATES TO AN ADDITION MADE IN THE ASSESSMENT AND I TA NO.2580/MUM/12 RELATES TO THE PENALTY LEVIED UNDER SECTION 271(1)(C) 2 ITA NO. 2567/MUM/2010& ITA NO. 2580/MUM/2012 (ASSESSMENT YEAR : 2006-07) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN RESPECT OF ADDITION SO MADE. 2. FIRST WE TAKE UP ITA NO.2567/MUM/2010. THE GR IEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS.79,71,370/- MADE BY THE ASSESSING OFFICER. THE ASSESSEE HAS RAISED ADDITIO NAL GROUND STATING THAT THE CIT(A)HAS ERRED IN TREATING RS.79,71,370/ - AS INCOME UNDER SECTION 28(1) OF THE ACT. 3. THE ASSESSEE IS A DEVELOPER ENGAGED IN THE BUSIN ESS OF DEVELOPMENT OF LAND AT MIRA ROAD FOR LOWER MIDDLE C LASS PEOPLE. THE RETURN FOR THE YEAR WAS SELECTED FOR SCRUTINY ASSES SMENT. ON GOING THROUGH THE STATEMENT OF ACCOUNTS, THE ASSESSING OF FICER NOTICED THAT UNDER SCHEDULE-E OF THE BALANCE SHEET THE ASSESSEE HAS SHOWN ADVANCES FOR BOOKING FLATS IN PHASE-II AT RS.97,81, 374/- WHICH WAS AT RS.92,51,187/- AS ON 31/3/2005. THE ASSESSEE WAS T O FURNISH DETAILS OF THE SAID PROJECT. THE ASSESSEE EXPLAINED THAT THE PROJECT WAS IN THE NAME LAVESH ENCLAVE AND IT WAS INFORMED THAT THE SAID PROJECT HAS BEEN SHELVED AND THE AMOUNT IS STANDING AS LIABIL ITY FOR BOOKING MADE FOR THE FLATS. THE ASSESSEE WAS FURTHER ASKED TO F URNISH COMPLETE DETAILS OF THE PERSONS BOOKING THE FLATS WITH THE DATE OF B OOKING AND THE AMOUNT RESPECTIVELY. THE ASSESSEE EXPLAINED THAT T HE AMOUNTS HAVE NOT BEEN REFUNDED AND ARE STILL DUE, THE NAMES AND ADDRESSES OF THE PERSONS WERE FURNISHED. TO VERIFY THE GENUINENESS OF THE TRANSACTION THE ASSESSING OFFICER ISSUED SUMMONS UNDER SECTION 131 OF THE ACT. HOWEVER, ONLY ONE PERSON HAS CONFIRMED OF HAVING AD VANCED A SUM OF RS.1.00 LAC TOWARDS BOOKING OF FLAT. THE OTHER PER SONS WHO HAD BOOKED 3 ITA NO. 2567/MUM/2010& ITA NO. 2580/MUM/2012 (ASSESSMENT YEAR : 2006-07) THE FLATS, THE ASSESSING OFFICER WAS OF THE OPINION THAT SIGNIFICANT PART OF THE AMOUNT SHOWN AS LIABILITY IS NOT REPAYABLE BY T HE ASSESSEE. THE ASSESSING OFFICER ALSO DID NOT ACCEPT THE CONTENTIO N OF THE ASSESSEE THAT THE BOOKINGS OF THE SHELVED PROJECT HAVE BEEN TRANS FERRED TO SOME OTHER PROJECT. THE ASSESSING OFFICER FINALLY CONCL UDED BY OBSERVING THEREFORE, I DISALLOW AN AMOUNT OF RS.79,71,374/- OUT OF THE ABOVE LIABILITY AFTER GIVING DISCOUNT FOR THE CONFIRMATIO N RECEIVED. SUPPORT WAS DRAWN FROM THE DECISION IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR SONS, 222 ITR 344(SC). 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE M ATTER BEFORE THE CIT(A) AND REITERATED WHAT HAS BEEN STATED DURING T HE COURSE OF THE ASSESSMENT PROCEEDINGS. AFTER CONSIDERING THE FACT S AND THE SUBMISSIONS, THE CIT(A) WAS OF THE STRONG BELIEF TH AT THE ASSESSEE HAS NO INTENTION TO REFUND THE MONEY AS THE ASSESSEE HA S NOT ADHERED TO THE POLICE COMPLAINTS AND NOTICES SENT BY THE LAW YERS. THE CIT(A) FURTHER OBSERVED THAT THE DEPOSITORS COULD NOT ENFO RCE RECOVERY AS IT IS BARRED BY LIMITATION. THOUGH THE ADDITIONS/DISALLO WANCES MADE BY ASSESSING OFFICER WAS NOT REFERRED TO ANY SPECIFIC SECTION OF THE ACT, THE CIT(A) UPHELD THE ADDITION TREATING THE DISALLOWANC E AS INCOME UNDER SECTION 28(1) OF THE ACT. AGGRIEVED BY THIS ASSESSE E IS BEFORE US. 5. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTE D THAT THE ASSESSING OFFICER HAS NOT MADE REFERENCE TO ANY SPE CIFIC SECTION OF THE ACT, THEREFORE, THE ASSESSEE IS NOT IN A POSITION T O DEFEND ITS CASE. IT IS THE SAY OF THE COUNSEL THAT THOUGH THE ADDITIONS HA VE BEEN CONFIRMED BY THE CIT(A) BUT OBVIOUSLY THE CIT(A) HAS DONE THE SAME UNDER SECTION 4 ITA NO. 2567/MUM/2010& ITA NO. 2580/MUM/2012 (ASSESSMENT YEAR : 2006-07) 28(1) OF THE ACT, WHICH IS AGAINST THE FACTS OF THE CASE, THEREFORE, THE ADDITIONS NEED TO BE DELETED. 6. PER CONTRA, LD. DR STRONGLY SUPPORTED THE FINDIN GS OF THE REVENUE AUTHORITIES. 7. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE OR DERS OF THE AUTHORITIES BELOW. UNDISPUTEDLY, THE ASSESSING OFF ICER AT PARA-5 ON PAGE-2 OF HIS ORDER HAS MENTIONED THAT RS.79,31,374 /- IS DISALLOWED. WE FAILED TO UNDERSTAND HOW AN AMOUNT, WHICH IS SHO WN AS LIABILITY, CAN BE DISALLOWED. WE FURTHER FIND THAT THOUGH THE ASS ESSING OFFICER HAD MADE DISALLOWANCE BUT THERE IS NO MENTION OF ANY SE CTION OF THE ACT. IT IS A SETTLED PROPOSITION OF LAW THAT TAXING STATUTE HAVE TO BE STRICTLY INTERPRETED, WHICH MEANS THAT EITHER A SECTION IS A PPLICABLE OR IT IS NOT APPLICABLE. THERE CANNOT BE ANY ASSUMPTION IN RESP ECT OF ANY SECTION. AS MENTIONED ELSEWHERE, THE ASSESSING OFFICER HAS N OT REFERRED TO ANY SECTION. ASSUMING THAT THE ADDITIONS HAVE BEEN MAD E UNDER SECTION 41(1) OF THE ACT, TREATING THE OUTSTANDING LIABILIT Y AS REMISSION OR CESSATION, IN OUR CONSIDERED OPINION MERELY BECAUSE THE PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT HAS EXPIRED WOULD NOT AMOUNT TO EXTINGUISHMENT OF THE DEBT. THIS HAS BEE N WELL SETTLED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS. SUGAULI SUGAR WORK P. LTD., 236 ITR 518(SC). 7.1 IT WOULD NOT BE OUT OF PLACE TO MENTION THA T THE BUILDERS AND DEVELOPERS CONSTRUCTING FLATS ARE COVERED BY THE MA HARASHTRA OWNERSHIP FLAT ACT, 1963, WHEREIN UNDER SECTION 5 O F THE ACT, IT HAS BEEN MENTIONED THAT THE PROMOTERS SHALL MAINTAIN SE PARATE ACCOUNT IN 5 ITA NO. 2567/MUM/2010& ITA NO. 2580/MUM/2012 (ASSESSMENT YEAR : 2006-07) BANK FOR THE ADVANCES OR DEPOSITS TAKEN AND HE HOL D THE MONEY FOR THE PURPOSE OF WHICH IT WAS GIVEN. SECTION 8 OF THE SA ID ACT FURTHER PROVIDES THAT THE PROMOTER SHALL BE LIABLE TO REFUN D THE AMOUNT WITH INTEREST IF HE FAILS TO GIVE POSSESSION IN ACCORDAN CE WITH THE AGREEMENT OF THE FLAT. THUS, IT CAN BE SAFELY CONCLUDED THAT THE LIABILITY IS NOT CEASED TO EXIST. THE FACT THAT THERE ARE FIRS LODG ED AGAINST THE ASSESSEE, THERE ARE LEGAL NOTICES SERVED UPON THE A SSESSEE SHOW THAT THE LIABILITY STILL EXISTS. 7.2 THE CIT(A) HAS UPHELD THE ADDITION TREATING THE SAME AS INCOME UNDER SECTION 28(1) OF THE ACT IS ALSO NOT CORRECT AS THE SAME HAS BEEN SHOWN UNDER THE HEAD LIABILITY IN THE BALANCE SHEET . THE NAMES AND ADDRESSES OF THE PERSONS HAVE BEEN FURNISHED BEFORE THE AUTHORITIES. THE GENUINENESS OF THE TRANSACTION HAS NEVER BEEN D OUBTED. THE ENTIRE ADDITIONS HAVE BEEN MADE MERELY ON THE FACT THAT TH E LIABILITY IS MORE THAN THREE YEARS OLD AND, THEREFORE, BARRED BY THE LIMITATION ACT. THIS CANNOT BE A GROUND IN THE LIGHT OF THE RATIO LAID D OWN BY THE HONBLE SUPREME COURT IN THE CASE OF SUGAULI SUGAR WORKS P. LTD.(SUPRA). 7.3 THE DECISIONS RELIED UPON BY THE FIRST APPEL LATE AUTHORITY ARE NOT IN CONSONANCE WITH THE FACTS OF THE CASE IN HAND AND A RE THEREFORE, MISPLACED. FOR EXAMPLE, THE DECISION IN THE CASE O F SOLID CONTAINERS VS. CIT, 308 ITR 417 (BOM) RELATES TO WAIVER OF LOA N UNDER THE CONSENT TERMS WHICH WAS TRANSFERRED TO P&L ACCOUNT. THERE IS NO WAIVER OF LOAN IN THE CASE IN HAND NOR THERE IS ANY CONSENT TERM A ND ALSO THERE IS NO TRANSFER TO P&L ACCOUNT. SIMILARLY, IN THE CASE OF T.V.SUNDARAM INYENGAR SONS(SUPRA), DEPOSITS WERE RECEIVED FROM THE CUSTOMERS 6 ITA NO. 2567/MUM/2010& ITA NO. 2580/MUM/2012 (ASSESSMENT YEAR : 2006-07) WHICH WERE NOT CLAIMED BY THEM AND, THEREFORE, TRAN SFERRED TO P&L ACCOUNT. HOWEVER, IN THE CASE IN HAND, THE DEPOSIT ORS HAVE FILED FIRS AND HAVE SENT LEGAL NOTICES FOR THE RECOVERY OF AMO UNT, THEREFORE, THE FACTS ARE DIFFERENT. 7.4 CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND ANY JUSTIFICATION IN THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING O FFICER TO DELETE THE ADDITION OF RS.79,71,370/- 7.5 THE APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. ITA NO.2580/MUM/2012:- 8. THE ADDITIONS HAVE BEEN DELETED BY US IN ITA NO.2567/MUM/2010. SUBLATO FUNDAMENTS CREDITOPUS , WHICH MEANS IN A CASE THE FOUNDATION IS REMOVED THE SUPERSTRUCT URE FALLS. SINCE FOUNDATION I.E. QUANTUM ADDITION HAVE BEEN REMOVED BY US THE SUPERSTRUCTURE I.E. PENALTY FALLS. 9. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/11/20 15. SD/- SD/- ( PAWAN SINGH) (N.K.BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 30/11/2015 7 ITA NO. 2567/MUM/2010& ITA NO. 2580/MUM/2012 (ASSESSMENT YEAR : 2006-07) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS