M/s. Sreenivasa Buildtech (India) Pvt Ltd., CHENNAI V. ITO, Pondicherry

ITA 282/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61200 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 14-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 18-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR YOGEH KAMATH I RS
• Assessee Lawyers: V JAGADISAN
• Keywords: Capital asset; Opportunity of being heard; Revised return
• Section: 143(3); 133A; 80IB; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.282 & 283(MDS)/2011 ASSESSMENT YEARS : 2005-06 & 2006-07 M/S.SREENIVASA BUILDTECH (INDIA) PVT. LTD., 193, RANGAPILLAI STREET, PONDICHERRY 605 001. PAN AAICS0970N. VS. THE INCOME-TAX OFFICER, WARD I(1), PONDICHERRY. (APPELLANT) (RESPONDENT) AND ITA NOS.506 & 507(MDS)/2011 ASSESSMENT YEARS : 2005-06 & 2006-07 THE ASSISTANT COMMISSIONER OF M/S. SREENIV ASA BUILDTECH INCOME-TAX, VS. ( INDIA) PVT. LTD., CIRCLE I, PONDICHERRY. PO NDICHERRY (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.JAGADISA N, FCA. DEPARTMENT BY BY : DR.YOGEH KAMATH, I RS, JCIT. DATE OF HEARING : 14 TH JUNE, 2012 DATE OF PRONOUNCEMENT : 14 TH JUNE, 2012 - - ITA 282 & 283 OF 2011, ETC. 2 O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THIS BUNCH OF APPEALS CONSISTS OF TWO APPEALS FIL ED BY THE ASSESSEE AND TWO APPEALS FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEARS ARE 2005-06 AND 2006-07. THESE CR OSS APPEALS ARE DIRECTED AGAINST THE ORDERS OF THE COMM ISSIONER OF INCOME-TAX(APPEALS)-XII AT CHENNAI, DATED 16-12-201 0. THE APPEALS ARISE OUT OF THE RESPECTIVE ASSESSMENTS COM PLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. IN THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06, TWO ISSUES ARE RAISED. TH E FIRST ISSUE IS IN RESPECT OF THE DISALLOWANCE OF ` 7,95,892/-. THIS SUM RELATED TO THE AMOUNT PAYABLE TO MR.ALPHONES LIGUOU RI. THE DISALLOWANCE WAS MADE ON THE GROUND THAT THE AMOUNT WAS NOT GENUINELY PAYABLE. THE SECOND ISSUE IS REGARDING T HE DISALLOWANCE OF ` 2,11,482/- MADE UNDER SECTION 40(A)(IA) OF THE ACT. THE CASE OF THE ASSESSEE IS THAT TDS WAS MADE UNDER - - ITA 282 & 283 OF 2011, ETC. 3 SECTION 194C AND, THEREFORE, THERE WAS NO PROVOCATI ON TO MAKE ANY DISALLOWANCE. 3. IN THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07, THE ONLY GROUND RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF ` 8,38,181/-, BEING THE AMOUNT PAYABLE TO MR. ALPHONES LIGUOURI ON THE GROU ND THAT THE AMOUNT WAS NOT IN FACT PAYABLE. 4. IN THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-06, THE GROUND IS AGAINST THE DECISION OF THE COMMISSIONER OF INCOME-TAX(APPEALS) ACCEPTING T HE CLAIM OF THE ASSESSEE FOR DEDUCTION BY WAY OF PROVISION MADE TOWARDS AMOUNTS PAYABLE TO LAND OWNERS. IT IS THE CASE OF THE REVENUE THAT THIS CLAIM WAS LATER ON MADE BY THE ASSESSEE O NLY AFTER IT WAS FOUND THAT THE CLAIM OF DEDUCTION UNDER SECTION 80IB INITIALLY RAISED BY THE ASSESSEE WAS NOT SUSTAINABLE IN LAW. 5. IN THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2006-07 AS WELL, THIS IS THE ONLY G ROUND. - - ITA 282 & 283 OF 2011, ETC. 4 6. WE HEARD SHRI V.JAGADISAN, THE LEARNED CHARTERE D ACCOUNTANT APPEARING FOR THE ASSESSEE AND DR. YOGES H KAMATH, THE LEARNED JOINT COMMISSIONER OF INCOME-TAX APPEAR ING FOR THE REVENUE. 7. IN FILING THE RETURNS OF INCOME FOR THE ASSESSM ENT YEARS 2005-06 AND 2006-07, THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION UNDER SECTION 80IB. THEREAFTER, THERE WA S A SURVEY UNDER SECTION 133A OF THE ACT. IN THE COURSE OF SU RVEY, IT WAS FOUND THAT THE ASSESSEE HAS NOT FULFILLED THE CONDI TIONS FOR CLAIMING DEDUCTION UNDER SECTION 80IB AND, THEREFOR E, THE ASSESSEE WAS NOT ENTITLED FOR SUCH DEDUCTION. THIS POSITION WAS ACCEPTED BY THE ASSESSEE AS WELL. THEREAFTER, THE ASSESSEE FILED REVISED RETURNS OF INCOME FOR THE IMPUGNED AS SESSMENT YEARS, WITHDRAWING THE EARLIER CLAIM OF DEDUCTION M ADE UNDER SECTION 80IB. IN THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER FOUND THAT EVEN THOUGH THE CLAIM OF DEDUCTION UNDER SECTION 80IB HAS BEEN WITHDRAWN BY THE ASSESS EE, IT HAS MADE A NEW CLAIM OF DEDUCTION AGAINST THE PROVISION FOR PAYMENTS TO LAND OWNERS. THE ASSESSEE IS BASICALLY ENGAGED IN - - ITA 282 & 283 OF 2011, ETC. 5 THE BUSINESS OF DEVELOPING AND PROMOTING OF RESIDEN TIAL FLATS. THE ASSESSING OFFICER FOUND THAT ON THE BASIS OF TH E AGREEMENT ENTERED INTO BETWEEN THE PARTIES INVOLVED THEREIN, THE ASSESSEE WAS NOT BOUND TO MAKE ANY SUCH PAYMENT TO LAND OWNE RS AND, THEREFORE, THE PROVISIONS MADE BY THE ASSESSEE IN T HE REVISED RETURNS WERE MADE ONLY FOR THE PURPOSE OF OFFSETTIN G THE IMPACT OF THE WITHDRAWAL OF THE EARLIER CLAIM OF DEDUCTION MADE BY THE ASSESSEE UNDER SECTION 80IB. THE PROVISIONS WERE D ISALLOWED AND THE ASSESSMENTS WERE COMPLETED. 8. THE ASSESSING OFFICER ALSO FOUND THAT THE PROVI SIONS MADE FOR SERVICE CHARGES PAYABLE TO MR.ALPHONES LIG UOURI COULD NOT BE HELD TO BE GENUINE. ACCORDINGLY, THOSE PROV ISIONS WERE ALSO DISALLOWED AND ADDED TO THE INCOME OF THE ASSE SSEE. THE CONSULTANCY CHARGE PAID TO SHRI V.J.KUMARAVEL WAS D ISALLOWED ON THE GROUND OF NON DEDUCTION OF TAX AT SOURCE. 9. WHEN THESE ADDITIONS AND DISALLOWANCES WERE TAKEN IN FIRST APPEAL BEFORE THE COMMISSIONER OF IN COME- TAX(APPEALS), THE COMMISSIONER OF INCOME-TAX(APPEAL S) HELD - - ITA 282 & 283 OF 2011, ETC. 6 THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DIS ALLOWING THE PROVISIONS MADE BY THE ASSESSEE TOWARDS PAYMENTS TO PLOT OWNERS. REGARDING THE OTHER TWO DISALLOWANCES, THE COMMISSIONER OF INCOME-TAX(APPEALS) CONFIRMED THE O RDERS OF THE ASSESSING AUTHORITY. BOTH THE ASSESSEE AS WELL AS THE REVENUE AGGRIEVED BY THE ORDERS PASSED BY THE COMMI SSIONER OF INCOME-TAX(APPEALS). THE REVENUE IS AGGRIEVED A S FAR AS THE ISSUE OF PROVISION FOR PAYMENT TO LAND OWNERS IS CO NCERNED. THE ASSESSEE IS AGGRIEVED ON THE ISSUES RELATING TO THE AMOUNTS PAYABLE TO MR. ALPHONES LIGUOURI AND THE DISALLOWAN CE OF PAYMENTS MADE UNDER SECTION 40(A)(IA). 10. AS FAR AS THE MATTER OF DEDUCTION OF PROVISION MADE BY THE ASSESSEE AGAINST PAYMENTS DUE TO LAND OWNERS IS CONCERNED, THE LOWER AUTHORITIES HAVE NOT BROUGHT O UT THE ENTIRE FACTS ON RECORD. THE CONTENTION OF THE LEARNED CHA RTERED ACCOUNTANT IS THAT THE LAND, ON WHICH FLATS WERE CO NSTRUCTED, WAS NOT SOLD TO THE ASSESSEE COMPANY. THERE WAS ONLY A N AGREEMENT TO BUILD FLATS ON THE LAND. THE LAND WAS FINALLY TRANSFERRED TO THE VARIOUS OCCUPANTS OF FLATS AS SP ECIFIED - - ITA 282 & 283 OF 2011, ETC. 7 UNDIVIDED RIGHT IN THE LAND, AS USUALLY DONE IN FLA T CONSTRUCTION. THEREFORE, HE ARGUED THAT THE ASSESSING OFFICER WAS WRONG IN COMING TO THE CONCLUSION THAT THE PAYMENTS TO THE L AND OWNERS WERE ALREADY SETTLED AT THE TIME OF PURCHASE OF LAN D. HE ARGUED THAT AS PER THE AGREEMENT, THE CONSIDERATION FOR TH E ULTIMATE TRANSFER OF LAND WAS TO BE PAID IN PROGRESSION TO T HE SALE PROCEEDS OF THE FLATS CONSTRUCTED BY THE ASSESSEE. THESE ARGUMENTS ARE VERY MUCH RELEVANT IN APPRECIATING TH E NATURE OF TRANSACTIONS ENTERED INTO BETWEEN THE ASSESSEE AND THE LAND OWNERS ON THE ONE SIDE AND BETWEEN THE ASSESSEE AND THE FLAT BUYERS ON THE OTHER HAND. IT IS ALSO TO BE SEEN TH AT AS PER THE AGREEMENT THE LAND OWNER HAD A FIFTY PER CENT SHARE IN THE PROFITS OF THE PROJECT. THESE MATTERS HAVE NOT BEEN CONSID ERED BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME-TAX( APPEALS), EVEN THOUGH MIGHT HAVE APPRECIATED THESE FACTS, HAV E NOT BROUGHT OUT THE SAME IN HIS ORDER. 11. AS FAR AS THE REVENUE IS CONCERNED, IT IS HIGH LY CARRIED AWAY BY THE WITHDRAWAL OF THE CLAIM MADE UN DER SECTION 80IB AND THE FRESH INTRODUCTION OF ANOTHER CLAIM TO WARDS - - ITA 282 & 283 OF 2011, ETC. 8 PROVISION FOR PAYMENT TO LAND OWNERS. AS THE SUBST ITUTION OF THESE CLAIMS HAPPENED CONSEQUENT TO THE SURVEY CARR IED OUT BY THE DEPARTMENT, THE STRONG IMPRESSION RIGHTFULLY CR EATED IN THE MIND OF THE REVENUE IS THAT THE ASSESSEE IS ONLY MA KING GOOD OF THE WITHDRAWAL OF THE EARLIER CLAIM UNDER SECTION 8 0IB. THE ASSESSING OFFICER HIMSELF HAS BEEN CARRIED AWAY BY THIS IMPRESSION WHICH MIGHT HAVE RESULTED IN NOT APPRECI ATING THE ENTIRE FACTS OF THE CASE. 12. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, WE ARE NEITHER IN A POSITION TO UPHOLD THE OR DER OF THE ASSESSING OFFICER, NOR IN A POSITION TO UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) ON THIS ISSUE. BOTH THE AUTHORITIES HAVE DISCUSSED ONLY HALF TRUTH. THE GR OUNDS DISCUSSED BY THEM IN THEIR RESPECTIVE ORDERS DO NOT CONCLUSIVELY LEAD TO THE FINDINGS ARRIVED AT BY THEM. 13. THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWE R AUTHORITIES ON THE ISSUE OF PROVISION MADE BY THE A SSESSEE FOR MAKING PAYMENTS TO THE LAND OWNERS AND THE MATTER I S REMITTED - - ITA 282 & 283 OF 2011, ETC. 9 BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION IN THE LIGHT OF THE TRUE CHARACTER OF THE TRANSACTIONS ENTERED INTO BETWEEN THE CONCERNED PARTIES. 14. LIKEWISE, THE CLAIM OF THE ASSESSEE TOWARDS TH E AMOUNT PAYABLE TO MR. ALPHONES LIGUOURI HAS NOT BEE N PROPERLY CONSIDERED BY THE LOWER AUTHORITIES. BOTH THE AUTH ORITIES HAVE NOT EXAMINED WHETHER SUCH SERVICES WERE REQUIRED IN THE BUSINESS CARRIED ON BY THE ASSESSEE. INSTEAD, THEY WERE RATHER LED BY TECHNICAL ASPECTS OF EVIDENCE AND DOCUMENTAT ION. IN THE CASE OF DISALLOWANCE UNDER SECTION 40(A)(IA) ALSO, IT IS SEEN THAT THE LOWER AUTHORITIES HAVE NOT COME TO A CONCLUSIVE FINDING. THEREFORE, WE FIND THAT ALL THESE APPEALS NEED TO B E REMITTED BACK TO THE ASSESSING OFFICER FOR FRESH CONSIDERATI ON OF THE ISSUES. 15. IN RESULT, THE ORDERS OF THE LOWER AUTHORITIES ON THE ISSUES AGITATED IN ALL THESE APPEALS ARE SET ASIDE AND THE ISSUES ARE REMITTED BACK TO THE ASSESSING OFFICER FOR FRES H CONSIDERATION IN THE LIGHT OF THE EVIDENCES AND THE EXPLANATIONS INCLUDING THE - - ITA 282 & 283 OF 2011, ETC. 10 AGREEMENTS ENTERED INTO BETWEEN THE ASSESSEE AND TH E CONCERNED PARTIES AND AFTER GIVING THE ASSESSEE AN EFFECTIVE OPPORTUNITY OF BEING HEARD. 16. IN RESULT, THE APPEALS FILED BY THE ASSESSEE A S WELL AS THE APPEALS FILED BY THE REVENUE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDERS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON THURSDAY, THE 14 TH OF JUNE, 2012 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 14 TH JUNE, 2012. V.A.P. COPY TO: 1. ASSESSEE 2. DEPARTMENT 3. CIT 4. CIT(A) 5. DR 6. GF.