DCIT, New Delhi V. M/s. Vatika Ltd., New Delhi

ITA 2978/DEL/2012

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6894 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 14-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VARMA
• Keywords: Rejection of books of accounts; Unexplained investment; Business income; Business expenditure; Loose papers; Proportionate interest; Corroborative evidences; Commercial expediency; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 133A; 80G; 139(5)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI D BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER, AND S HRI KULDIP SINGH , JUDICIAL MEMBER ITA NO. 2183/DEL/2012 [A.Y 2008 - 09]] M/S VATIKA L IMITED VS. THE D.C.I.T 621, DEVIKA TOWER CENTRAL CIRCLE - 20 6, NEHRU PLACE, NEW DELHI NEW DELHI PAN : AA BCV 5647 G ITA NO. 2978 /DEL/201 2 [A.Y 20 08 - 09 ] THE D.C. I.T . VS. M/S VATIKA LIMITD CENTRAL CIRCLE - 20 621, DEVIKA TOWER NEW DELHI 6, NEHRU PLACE, NEW DELHI PAN : AA BCV 5647 G [APPELLANT] [RESPONDENT] DATE OF HEARING : 1 8 . 0 7 .201 8 DATE OF PRONOUNCEMENT : 2 0 .0 7 .2018 ASSESSEE BY : SHRI C.S. AGGARWAL, SR. ADV SHRI RAVI PRATAP MAL, ADV SHRI D.B. JAIN, CA REVENUE BY : S HRI VIJAY VARMA, CIT - DR 2 ORDER PER N.K. BILLAIYA , ACCOUNTANT MEMBER, TH ESE TWO CROSS APPEAL S BY THE ASSESSEE AND THE REVENUE ARE PREFERRED AGAINST THE VERY SAME ORDER OF THE CIT(A) XXXI, NEW DELHI DATED 0 4 . 0 4 .201 2 PERTAINING TO ASSESSMENT YEAR 20 08 - 09 . BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE APPELLANT - COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND SALE OF REAL ESTATE AND HAS, OVER A PERIOD, DEVELOPED MANY OF THE PROJECTS IN AND AROUND GURGAON. FACTS ON RECORD SHOW THAT WITH THE AMALGAMATION OF M/S VATIKA SPACE MANAGEMENT PVT. LTD., THE APPELLANT COMPANY ALSO CARRIED ON THE BUSINESS OF MAINTENANCE OF BUILDING DEVELOPED BY ITS BUT HAD BEEN TRANSFERRED AFTER SA LE. 3. FACTS ON RECORD FURTHER SHOW THAT THE APPELLANT - COMPANY DID NOT FILE ITS RETURN OF INCOME U/S 139(1) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT']. PURSUANT TO THE NOTICE ISSUED U/S 142(1) OF THE ACT DATED 18.02.2009, THE ASSE SSEE FILED RETURN OF TOTAL 3 INCOME ON 30.04.2009. THE RETURNED INCOME WAS AT RS. 90,51,78,215/ . THE NET PROFIT AS REFLECTED IN THE PROFIT AND LOSS ACCOUNT WAS AT RS. 73,08,47,000/ - . IN ITS COMPUTATION OF INCOME, THE ASSESSEE COMPANY ADDED BACK CERTAIN EX PENSES AS HAD BEEN INCURRED AND WERE DULY DEBITED IN THE PROFIT AND LOSS ACCOUNT , WHICH WERE CONSIDERED AS NOT ALLOWABLE IN LAW. THIS MEANS THAT WHILE COMPUTING INCOME AT RS. 90.51 CRORES, THE ASSESSEE COMPANY HAD NOT CLAIMED DEDUCTION FOR SUCH OF THE EXP ENSES, WHICH IN THE OPINION OF THE AUDITORS, WERE NOT ELIGIBLE FOR DEDUCTION. 4. RETURN FILED ON 30. 04.2009 WAS REVISED ON 20.08.209 AND THE REVISED RETURN OF INCOME WAS AT RS. 76,82,44,979/ - . IN ITS REVISED RETURN OF INCOME, THE ASSESSEE CLAIMED DEDUCTI ON OF EXPENSES WHICH HAD BEEN DIRECTLY DEBITED IN THE BALANCE SHEET BUT WERE NOT CLAIMED IN THE RETURN OF INCOME FILED ON 30.04.2009. THIS MEANS THAT CERTAIN DEDUCTIONS WHICH WERE NOT CLAIMED IN THE ORIGINAL RETURN OF INCOME , UNDER MISCONCEPTION OF LAW , W ERE CLAIMED IN THE REVISED RETURN OF INCOME. 5. THE AO WAS OF THE OPINION THAT SINCE THE ASSESSEE DID NOT COMPLY WITH THE NOTICE U/S 142 ( 1) OF THE ACT AND SINCE RETURN FILED BY THE 4 ASSESSEE ON 30.04.2009 WAS NOT WITHIN THE TIME PRESCRIBED FOR FILING OF RE TURN PURSUANT TO NOTICE U/S 142(1) OF THE ACT, THE AO DID NOT ACCEPT THE REVISED RETURN AND TREATED THE SAME AS NON - EST . WHILE DOING SO, THE AO FURTHER OPINED THAT NO NOTICE U/S 142(1) OF THE ACT WAS ISSUED ON 18.02.2009 SINCE THE SAME IS NOT PLACED ON RE CORD. HOWEVER, THE AO CONSIDERED THE RETURN FILED ON 30.04.2009 BUT TREATED AS NOT FILED IN COMPLIANCE TO NOTICE U/S 142(1) OF THE ACT AS THE DATE OF COMPLIANCE EXPIRED ON 27.02.2009 AND THE RETURN WAS FILED ON 30.04.2009. 6. WE FIND CONTRADICTION IN THE FINDINGS OF THE AO IN SO FAR AS RETURN OF INCOME IS CONCERNED. IF THE RETURN FILED ON 30.04.2009 WAS NOT ACCEPTED IN COMPLIANCE TO NOTICE U/S 142(1) OF THE ACT, THEN THERE SHOULD BE NO RETURN OF INCOME AT ALL AND IF THE AO HAS CHOSEN TO PROCEED BY ACCEPT ING THE SAID RETURN, THEN, WE DO NOT FIND ANY REASON WHY THE REVISED RETURN WAS TREATED AS NON - EST . PROVISIONS OF SECTION 139(5) OF THE ACT AS STOOD AT THAT POINT OF TIME READS AS UNDER: IF ANY PERSON , HAVING FURNISHED A RETURN UNDER SUB - SECTION (1), OR IN PURSUANCE OF A NOTICE ISSUED UNDER SUB - SECTION (1) OF SECTION 142, DISCOVERS ANY OMISSION OR ANY WRONG THEREIN, HE MAY FURNISH A REVISED RETURN AT ANY 5 TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLET ION OF THE ASSESSMENT W HI C HEVER IS EARLIER IN THE LIGHT OF THE AFOREMENTIONED PROVISIONS, THE RETURN FILED ON 30.04.2009 IS WELL WITHIN THE TIME LIMIT PRESCRIBED UNDER THE AFORE - STATED PROVISION. 7. FURTHER, THE DATE FOR FILING THE RETURN WAS MENTION ED IN THE NOTICE U/S 142(1) OF THE ACT. BUT WE FIND THAT THE AO HAS CATEGORICALLY STATED THAT NO NOTICE U/S 142(1) OF THE ACT ISSUED ON 18.02.2009 IS PLACED ON RECORD. THIS OBSERVATION OF THE AO FINDS CONTRADICTION FROM THE LETTER DATED 26.03.2009 EXHIBI TED AT PAGE 1 OF THE PAPER BOOK BECAUSE IN THE SAID LETTER, THE ACIT, CENTRAL CIRCLE 20, NEW DELHI HAS MENTIONED THAT A NOTICE U/S 142 ( 1) OF THE ACT WAS ISSUED ON 18.02.2009. THOUGH THE PERIOD MENTIONED THEREIN TO FILE RETURN OF INCOME WAS 27.2.2009 , BU T SINCE THE AO HAS ACCEPTED THE RETURN FILED ON 30.04.2009, HE CANNOT BLOW HOT AND COLD AT THE SAME TIME FOR NOT TREATING THE SAME AS FILED IN PURSUANCE TO NOTICE U/S 142(1) OF THE ACT. ONCE THE RETURN HAS BEEN ACCEPTED AS BEING FILED U/S 142(1) OF THE AC T, THERE IS NO REASON WHY THE REVISED RETURN FILED ON 20.08.2009 SHOULD 6 NOT BE ACCEPTED. WE , ACCORDINGLY , DIRECT THE AO TO ACCEPT THE REVISED RETURN FILED ON 20.08.2009. 8. THE AO IS FURTHER DIRECTED TO CONSIDER THE CLAIM MADE IN THE REVISED RETURN OF INCOME AFRESH WHICH CAN BE UNDERSTOOD FROM THE FOLLOWING CHART: SL NO. AMOUNT (RS.) PARTICULARS OF CLAIM MADE IN THE REVISED RETURN OF INCOME I) 3,17,17,125/ - DISALLOWANCE MADE IN THE ORIGINAL RETURN U/S 40(A)(I ) OF THE ACT. IN OTHER WORDS, IN THE ORIGINAL RETURN OF INCOME, THE ASSESSEE COMPANY INADVERTENTLY CONSIDERED A DISALLOWANCE U/S 40A(IA) OF THE ACT OF RS. 14,00,99,718/ - (PAGE 68 OF THE PAPER BOOK); WHEREAS IN THE REVISED RETURN OF INCOME, THE SAME WAS RE VISED TO RS. 10,83,82,593/ - (PAGE 212 OF PAPER BOOK), SINCE IT WAS NOTICED THAT, SUM OF RS. 3,17,17,125/ - HAD NOT BEEN CLAIMED AS AN EXPENDITURE IN THE PROFIT AND, LOSS ACCOUNT AND AS SUCH, THERE COULD BE NO DISALLOWANCE MADE. II) 2,24,72,632/ - EXPENDITURE INCURRED AS UPFRONT FEE PAID TO M/S WDC VENTURE FOR SUBSCRIPTION OF DEBENTURE NOT CLAIMED IN THE ORIGINAL RETURN OF INCOME, AS THE SAME WAS CAPITALIZED BY DEBITING TO SECURITIES PREMIUM ACCOUNT. 7 III) 2,69,66,400/ EXPENDITURE ON PLACEMENT FEE PAID TO M/S BAER CAPITAL ALLOWABLE AS DEDUCTION U/S 35D OF THE ACT, BUT HAD INADVERTENTLY NOT BEEN CLAIMED IN THE ORIGINAL RETURN OF INCOME, AS THE SAME WAS CAPITALIZED BY DEBITING TO SECURITIES PREMIUM ACCOUNT. IV) 3,62,24,744/ - DEDUCTION STATUTORILY ALLOWABLE U/S 24 OF THE ACT, NOT CLAIMED IN THE ORIGINAL RETURN BUT CLAIMED IN REVISED RETURN. IN FACT, IN THE ORIGINAL RETURN OF INCOME, THE ASSESSEE HAD NOT COMPUTED RENTAL INCOME OF RS. 13,68,87,170/ - AS INCOME FROM PROPERTY BUT HA D BEEN REFLECTED IN THE PROFIT & LOSS ACCOUNT AS AN INCOME FROM HOUSE PROPERTY. V) 1,91,77,337/ - REPRESENTING SERVICE TAX PAYABLE INCORRECTLY ADDED BACK IN THE ORIGINAL RETURN OF INCOME DESPITE THE FACT THE SAME HAD BEEN NOT DEBITED IN THE PROFIT AND LOSS ACCOUNT. V I) 3,75,000/ - A CIAIM U/S 35AC OF THE ACT OUT OF DONATION WHICH WAS ORIGINALLY/DAIMED U/S 80G OF THE ACT.. 13,69,33,237/ - TOTAL 9. THE NEXT ISSUE TO BE CONSIDERED RELATES TO A SURVEY OPERATION WHICH WAS CONDUCTED U/S 133A OF THE ACT ON 04.02.2010 IN WHICH CERTAIN INCRIMINATING DOCUMENTS WERE IMPOUNDED. TH E HARD DISK OF THE COMPUTER WAS OPERATED AFTER DRAWING MEMORANDUM IN THE PRESENCE OF THE REPRESENTATIVE OF THE ASSESSEE. DURING THE COURSE OF SURVEY OPERATIONS, THE REPRESENTATIVE O F THE ASSESSEE COMPANY ADMITTED UNDISCLOSED INCOME OF RS. 31 CRORES AS ADDITIONAL INCOME. THIS UNDISCLOSED INCOME INCLUDED A SUM OF RS. 28.30 CRORES TOWARDS 8 UNEXPLAINED CASH DEPOSITS IN TWO BANK ACCOUNTS OF TWO GROUP COMPANIES, NAMELY, WONDER DEVELOPER PV T. LTD AND BROWZ TECHNOLOGIES PVT LTD. BALANCE OF RS. 2.70 CRORES WAS SURRENDERED TO COVER OTHER DISCREPANCIES IN THE IMPOUNDED MATERIAL . 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CONTENDED THAT THE ACCEPTANCE OF RS. 31 CRORES AT THE TIME OF SERVICE WAS AN ADHOC FIGURE AND AFTER GOING THROUGH THE IMPOUNDED DOCUMENTS, UNEXPLAINED DEPOSITS AGGREGATED TO THE TUNE OF RS. 28.30 CRORES AND , THEREFORE, THE SURRENDERED INCOME SHOULD BE TAKEN AT RS. 28.30 CRORES IN PLACE OF RS. 31 CRORES. IN T HE ALTERNATIVE, IT WAS PLEADED THAT IF THE INCOME IS STILL CONSIDERED AT RS. 31 CRORES, THEN THE ASSESSEE SHOULD GET THE BENEFIT OF SET OFF OF RS. 2.70 CRORES FROM THE OTHER ADDITIONS BASED UPON THE IMPOUNDED DOCUMENTS. 11. THE AO RUBBISHED THE CLAIM OF T HE ASSESSEE BY OBSERVING THAT THE ASSESSEE WAS REQUIRED TO FILE DETAILS OF TRANSACTI O NS AND RECONCILE THE SAME WITH THE BOOKS OF ACCOUNT. NO SPECIFIC REPLY WAS GIVEN AND IT WAS SIMPLY SUBMITTED THAT THE SAME IS OFFERED AS U NDISCLOSED INCOME. THE ASSESSIN G OFFICER FINALLY CONCLUDED BY HOLDING IT, THEREFORE, APPEARS THAT THIS AMOUNT IS EITHER UNQUESTIONED IN IMPOUNDED 9 DOCUMENT OR EMBED DED SOMEWHERE IN THE TRANSACTION CLAIMED AS RECORDED. THE TOTAL OFFER AMOUNT WAS TAKEN AT RS. 31 CRORES AND BENEFIT OF SET OFF WAS DENIED. 12. WE HAVE CAREFULLY CONSIDERED THE AFOREMENTIONED ISSUE IN THE LIGHT OF F A CTS EMANATING FROM THE RECORDS. THERE IS NO DISPUTE THAT THE AMOUNT OF TRANSACTION OF RS. 2 0.50 CRORES W AS FOUND IN THE CASE OF M/S BROW Z TECHNOLOGIES PVT LTD AND RS. 8.80 CRORES IN THE CASE OF WONDER DEVELOPER PVT. LTD. THESE AMOUNTS SUMMED UP TO RS. 29.30 CRORES AS AGAINST RS. 28.30 CRORES ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN TWO BANK A CCOUNTS. THE DIFFERENCE OF RS. 1 CRORE IS DUE TO THE FACT THAT AN AMOUNT OF THE SAME WAS WITHDRAWN FROM THE BANK ACCOUNT AND WAS AGAIN DEPOSITED AFTER A GAP OF 15 DAYS. THEREFORE, IN OUR CONSIDERED OPINION, TOTAL DEPOSIT SHOULD BE CONSIDERED AT RS. 28.30 CRORES ONLY. 13. THE ENTIRE ADDITIONS HAVE BEEN MADE SOLELY ON THE BASIS OF OFFER MADE IN THE STATEMENT RECORDED AT THE TIME OF SURVEY PROCEEDINGS. OTHER THAN SUCH STATEMENT, THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAS ACTUALLY DEPOSITED R S. 31 CRORES. THE AO HIMSELF HAS ADMITTED THAT THE TOTAL DEPOS I TS AGGREGATED TO RS. 29.30 CRORES , WHICH INCLUDES A SUM OF RS. 1 CRORE WHICH WAS WITHDRAWN AND REDEPOSITED AS 10 MENTION E D ELSEWHERE. IT IS ALSO TRUE THAT THE OFFER OF RS. 31 CRORES WAS ON ADHOC BASIS AND IN ANY CASE , OFFER MADE AT THE TIME OF SURVEY PROCEEDINGS IN A STATEMENT DOES NOT HA V E ANY LEGAL BINDING ON THE ASSESSEE AS HELD BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF S. KADAR KHAN 300 ITR 157 WHICH WAS SUBSEQUENTLY AFFIRMED BY THE HON'BLE SUPREME COURT. WE, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO CONSIDER THE SURRENDERED AMOUNT OF RS. 28.30 CRORES ONLY. 14. HAVING SAID ALL THAT, LET US NOW SEE WHAT THE ASSESSING OFFICER HAS DONE WHILE FRAMING THE ASSESSMENT ORDER U/S 143(3) OF THE ACT. INCOME AS SHOWN RS. 90,51,78,215 ADDITION = INADMISSIBLE COMPENSATION (PARA 5 , PAGE - 5) RS. 63,47,000 ADDITION = DISALLOWANCE OF UPFRONT FEE (PARA 6 , PAGE - 6) RS.2,24,72,631 ADDITION , UNEXPLAINED CAPITAL EXPENDITURE FOR REPURCHASE OF PROPERTY FROM SHRI K.L. VERMA AND FAMILY (PARA 7 , PAGE - 8 ) RS. 2,79,70,000 ADDITION : UNDISCLOSED INCOME TOWARDS UN - RECONCILED CASH IN HAND (PARA - 8 PAGE - 10) RS. 10,00,00,000 ADDITION : INADMISSIBLE COMPENSATION (PARA - 9 , PAGE - 11 RS. 7,31,50,595 ADDITION OF PROFIT PURSUANT TO REJECTION OF BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF INCOME TAX ACT 1961 (PARA - 10, PAGE - 20) 6,40,21,407 TOTAL ASSESSED INCOME RS119,91, 1,39,848 11 15. SINCE WE HAVE DIRECTED THE ASSESSING OFFICER TO CONSIDER THE REVISED RETURN AND DECIDE THE CL A IM OF EXPENSES AFRESH, THE INCOME SHOWN IN THE REVISED RETURN OF INCOME, IF ACCEPTED, SHALL BE THE STARTING POINT FOR COMPUTING THE ASSESSED INCOME. WE WILL NOW CONSIDER EACH ADDITION MENTIONED HEREINABOVE. FOR THE SAKE OF CLARITY, THE LD. CIT(A) HAS DELETED THE ADDITIONS MADE ON ACCOUNT OF REJECTION OF BOOKS OF ACCOUNT AMOUNTING TO RS. 6.40 CRORES, IN RECONCILING CASH IN HAND RS. 10 CRORES, INADMISSIBLE COMPENSATION RS. 7.31 C RORES AND HAS GIVEN PARTIAL RELIEF IN RESPECT OF COMPENSATION PAID TO CUSTOMERS AMOUNTING TO RS. 63.47 LAKHS. THE LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS. 2.79 CRORES BEING UNEXPLAINED INVESTMENT FOR PURCHASE OF PROPERTY FROM VERMA FAMILY. 16. THE RE VENUE IS IN APPEAL AGAINST THE DELETION OF THE ADDITIONS AND THE ASSESSEE IS IN APPEAL AGAINST THE CONFIRMATION OF ADDITIONS. WE WILL ADDRESS EACH ISSUE ONE BY ONE. 17. ADDITION OF RS. 6,40,21,407/ - DELETED BY THE LD. CIT(A) ON ACCOUNT OF REJECTION OF BO OKS OF ACCOUNT. 12 18. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS AND ON EXAMINATION OF IMPOUNDED DOCUMENTS, THE ASSESSING OFFICER NOTICED THAT ENTRIES FOUND RECORDED IN THE IMPOUNDED DOCUMENTS NEED RECONCILIATION FROM BOOKS OF ACCOUNT. ENTRIES AR E EXHIBITED AT PAGES 12 AND 13 OF THE ASSESSMENT ORDER. IN ITS REPLY DATED 28.12.2010, THE ASSESSEE EXPLAINED THE ENTRIES IN THE IMPOUNDED DOCUMENTS VIS A VIS THE BOOKS OF ACCOUNT. 19. THE ASSESSING OFFICER WAS OF THE OPINION THAT SINCE THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT RELATING TO EACH PROJECT, IT IS NOT POSSIBLE TO VERIFY THE CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER FURTHER OBSERVED THAT NON - MAINTENANCE OF INDIVIDUAL PROJECT - WISE ACCOUNTS FOR A COMPANY HAVING TURNOVER OF 400 CRORES IS NOT ACCEPTABLE. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE IS, IN FACT, MAINTAINING INDIVIDUAL PROJECT ACCOUNTS AS IS ENVISAGED FROM THE CONTENTS OF THE HARD DISK S . BY NOT PRODUCING THE PROJECT - WIS E BOOKS OF ACCOUNT, THE ASSESSEE IS CONCEALING THEM FROM SCRUTINY FOR INCOME - TAX ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO RECONCILE THE RECEIPTS OF VARIOUS BOOKINGS IN PROJECTS FOUND RECORDED IN THE IM POUNDED DOCUMENTS. ON THESE OBSERVATIONS, THE ASSESSING 13 OFFICER REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT AND ESTIMATED THE PROFIT @ 18% AND COMPUTED THE ADDITION AT RS. 6,40,21,407/ - . 19. WHEN THE MATTER WAS AGITATED BEFORE THE LD. CIT(A), TH E ASSESSEE WAS ASKED TO FILE UNDER SUB - SECTION (4) TO SECTION 250 THE FOLLOWING DOCUMENTS : (I) DETAILS OF PROJECT - WISE ADVANCE TAKEN FROM CUSTOMERS AND DUE ON 31.03.2008; (II) DETAILS OF REVENUE FOR ASSESSMENT YEAR 2004 - 05 TO 2008 - 09 EARNED BY THE COMPANY; & (III) DETAILS OF PERCENTAGE OF PROFIT BASED ON IMPOUNDED DOCUMENTS. 20. THE ASSESSEE COMPLIED WITH THE DIRECTIONS AND FILED REQUISITE DETAILS. IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE ASSESSEE HAS DULY EXPLAINED THE VARIOUS IMPO UNDED DOCUMENTS. IT WAS EXPLAINED THAT THE TRIAL BALANCE CONSIDER E D BY THE ASSESSING OFFICER FOR MAKING ADDITIONS AND FOR REJECTING THE BOOKS OF ACCOUNT ARE INCOMPLETE IN AS MUCH AS OUT OF 9 PROJECTS, TRIAL BALANCE OF ONLY TWO OF THE PROJECTS WERE FOUND, WHICH TOO ARE PART OF THE YEAR ONLY AND ALSO 14 DOES NOT CONTAIN ANY FIGURE OF TURNOVER OR OTHER INDIRECT EXPENSES TO MERELY RECORD INDIRECT RECEIPTS. 21. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, THE LD. CIT(A) SPECIFICALLY ASKED THE ASSESSING OFFICER TO PRESENT IN PERSON. THE LD. CIT(A) OBSERVED THAT THIS OPPORTUNITY WAS PURPOSEFULLY GIVEN SO THAT THE DETAIL S FILED BY THE ASSESSEE BE EXAMINED IN PRESENCE OF BOTH THE PARTIES. BUT THE ASSESSING OFFICER DID NOT ATTEND THE PROCEEDINGS. 22. AFTER CONSIDERING THE SUBMISSIONS AND DOCUMENTS SUBMITTED AT TH E BEHEST OF THE FIRST APPELLATE AUTHORITY, THE FIRST APPELLATE AUTHORITY WAS CONVINCED THAT THE ASSESSING OFFICER HAD NO GROUND FOR REJECTING THE BOOKS OF ACCOUNT OR TO ESTIMATE THE G.P. RATE. THE L D. CIT(A) OBSERVED THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS NEITHER BASED O N ANY DIRECT EVIDENCE NOR ANY INDIRECT OR CIRCUMSTANTIAL EVIDENCE. THE AMOUNT OF RS. 6,40,21,407/ - WAS DELETED. 23. BEFORE US, THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. 15 24. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 25. IT IS TRUE THAT T HE ASSESSING OFFICER HAS COMPUTED THE PROFIT MARGIN VARYING FROM 18.6 TO 72% ON THE BASIS OF DO CUMENTS WHICH DO NOT RELATE TO THE YEAR UNDER CONSIDERATION AND SOME OF THE DOCUMENTS DO NOT EVEN RELATE TO THE ASSESSEE COMPANY. IT IS EQUALLY TRUE THAT MOST OF THE TRIAL BALANCES WERE INCOMPLETE. THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT WITHOUT VERIFYING T HE RECORDS/BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHEN THE COMPUTER AND HARD DISKS WERE AVAILABLE WITH THE ASSESSING OFFICER. THERE IS NO DOUBT THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT ON F RIVOLOUS GROUNDS AND VAGUE OBSERVATIONS. WE FIND THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. CIT(A) CALLED FOR CERTAIN INFORMATION/DETAILS WHICH WERE DULY COMPLIED WITH. WE ALSO FIND THAT THE LD. CIT(A) ASKED THE ASSESSING OFFICER TO BE PRES ENT TO VERIFY THOSE DOCUMENTS ALONGWITH THE LD. CIT(A). BUT IN HIS WISDOM, THE ASSESSING OFFICER DID NOT CARE TO EXAMINE THE DETAILS/DOCUMENTS ALONGWITH THE FIRST APPELLATE AUTHORITY . CONSIDERING THE FACTS IN TOTALITY, WE AGREE WITH THE LD. CIT(A) THAT THERE IS NO VALID GROUND IN REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE PROFIT OF THE 16 ASSESSEE. THE LD. CIT(A) HAS RIGHTLY DELED THE ADDITION OF RS. 6,40,21,407/ - AND THEREFORE, NO INTERFERENCE IS CALLED FOR. THIS GROUND IN REVENUES APPEAL IS DISM ISSED. 26. SECOND ADDITION DELETED BY THE LD. CIT(A) RELATES TO THE ADDITION OF RS. 10 CRORES BEING UNRECONCILED CASH IN HAND. 27. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER EXAMINED PAG E S 2, 3, 5, AND 15 OF ANNEXURE A - 2. THE CONTENTS OF THE SAME ARE EXHIBITED AT PAGES 8 & 9 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS ASKED TO EXPLAIN THE ENTRIES/NOTINGS IN THESE PAGES. IN ITS REPLY, THE ASSESSEE STATED THAT THESE NOTINGS WERE MERE PROJECTIONS AND IT WAS AN EXERCISE OF RECONCIL ING CASH BALANCE WITH THE BOOKS OF ACCOUNT. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE ADDITION OF RS. 10 CRORES TOWARDS UNEXPLAINED CASH IN HAND MAY NOT BE MADE TO THE INCOME. IN ITS REPLY, THE ASSESSEE ONCE AGAIN EXPLAINED THAT NOTINGS ARE MERE PROJECTI ONS AND DO NOT REFER TO ANY CONCLUDED TRANSACTIONS. IT WAS STRONGLY CONTENDED THAT THERE IS NOTHING ON THESE NOTINGS TO SUGGEST THAT THE ASSESSEE HA S ACTUALLY RECEIVED RS. 10 CRORES AND THAT SUCH AMOUNT WAS IN THE NATURE OF INCOME IN THE HANDS OF THE ASSE SSEE COMPANY. EXPLANATION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE 17 ASSESSING OFFICER WHO WAS OF THE OPINION THAT THE ASSESSEE HAS NOT GIVEN ANY PROPER REPLY AND IT IS CLEAR THAT THE SOURCE OF RS. 10 CRORES IS NOT EXPLAINED. ADDITION OF RS. 10 CRO RES WAS ACCORDINGLY MADE. 28. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE ONCE AGAIN CONTENDED THAT THE ASSESSING OFFICER HAS MADE ADDITION ONLY ON THE GROUND THAT THE SOURCE OF CASH OF RS. 10 CRORES IS NOT EXPLAINED. IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE DETAILS AT PAGE 5 OF ANNEXURE A - 2 BELONGS TO M/S KOLINA DEVELOPERS PVT. LTD WHICH IS SEPARATE COMPANY AND, THEREFORE, NO ADDITION ON THIS AMOUNT COULD HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE COMPANY. ON THE DIRECTIONS OF TH E LD. CIT(A), THE ASSESSEE PRODUCED COPIES OF BANK ACCOUNT ALONGWITH COPIES OF STATEMENT OF RETURN OF INCOME AND BALANCE SHEET OF M/S KOLINA DEVELOPERS PVT. LTD. THE LD. CIT(A) FORWARDED THESE DOCUMENTS TO THE ASSESSING OFFICER FOR HIS COMMENTS WHO SIMPLY OBSERVED THAT THE ISSUE MAY BE ADJUDICATED AT THE APPELLATE STAGE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 29. THE LD. CIT(A) FOUND FROM THE BANK ACCOUNT OF M/S KOLINA DEVELOPERS P VT LTD A SUM OF RS. 10 CRORES WAS DEPOSITED ON 25.01.2008 AS F UNDS TRANSFERRED BY CHEQUE FROM M/S VATIKA LTD AND HAD BEEN 18 WITHDRAWN BY THE SAID COMPANY VIDE CHEQUE NO. 805226 IN CASH ON 25.01.2008. THE LD. CIT(A) CONCLUDED BY HOLDING THAT THE SAID AMOUNT HAS NOT BEEN RECEIVED IN THE ACCOUNT OF THE ASSESSEE COMPANY B UT HAS ACTUALLY GONE OUT OF THE ASSESSEE COMPANY TO ITS ASSOCIATE CONCERN M/S KOLINA DEVELOPERS PRIVATE LTD. THE LD. CIT(A), ON THESE FACTS, DELETED THE ADDITION OF RS. 10 CRORES. 30. BEFORE US, THE LD. DR COULD NOT POINT OUT ANY FACTUAL ERROR IN THE FINDINGS OF THE LD. CIT(A). 31. AS THE FINDINGS OF THE FIRST APPELLATE AUTHORITY ARE BASED ON FACTS AND AS TRANSACTIONS MENTIONED BY THE LD. CIT(A) WERE DONE THROUGH BANKING CHANNELS, WE D O NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). ADDITION OF RS. 10 CRORES HAS BEEN DELETED. THIS GROUND IS ALSO DISMISSED. 32. THE NEXT ADDITION DELETED BY THE LD. CIT(A) IS OF RS. 7,31,50,595/ - . WHILE SCRUTINISING THE RETURN, T HE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS PAID COMPENSATION ON A NUMBER OF PLOTS BOUGHT BACK BY IT. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS PAID COMPENSATION OF RS. 7.31 CRORES TO 51 FLAT OWNERS, WHICH, 19 ACCORDING TO HIM, WAS A CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE OUT OF UNDISCLOSED INCOME. THE ASSESSING OFFICER, ACCORDINGLY, MADE AN ADDITION OF RS. 7,31,50,595/ - . 33. WHEN THE MATTER WAS AGITATED BEFORE THE LD. CIT(A), THE LD. CIT(A) FOUND THAT THE ASSESSING OFFICER DID NOT TAK E ANY INDEPENDENT STEP TO VERIFY WHETHER ANY COMPENSATION WAS, IN FACT, PAID BY THE ASSESSEE TO 51 PERSONS NOTED IN THE SEIZED PAPER. THE LD. CIT(A) FURTHER OBSERVED THAT THE ADDITION HAS BEEN MADE MERELY ON THE BASIS OF IMPOUNDED RECORDS ON WHICH MERE PR OJECTIONS WERE WRITTEN WITHOUT ANY EVIDENCE OF ACTUAL BUY BACK OF PLOTS MADE BY THE ASSESSEE COMPANY. THE LD. CIT(A) FURTHER OBSERVED THAT A SUM OF RS. 7,31,50,595/ - MERELY REPRESENTED THE TOTAL SALES CONSIDERATION OF 51 PLOTS WHICH WAS NOT EVEN RECEIVED B Y THE ASSESSEE COMPANY. THEREFORE, THE SAME CANNOT BE MADE BASIS FOR MAKING ADDITION. 34. BEFORE US, THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. 35. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BE FORE THE LOWER AUTHORITIES. 20 36. IT IS TRUE THAT NOTINGS WERE FOUND IN THE IMPOUNDED DOCUMENTS WHEREIN IT HAS BEEN STATED THAT SOME OF THE PAYMENTS WERE MADE IN RESPECT OF 51 PLOTS. IT IS EQUALLY TRUE THAT THERE IS NO EVIDENCE ON RECORD WHICH COULD SUG G EST THAT THE ASSESSEE HAS ACTUALLY BOUGHT BACK 51 PLOTS AND HAS PAID COMPENSATION NOR THERE IS EVIDENCE TO SHOW THAT THE ASSESSEE HAS ACTUALLY DONE ANY TRANSACTIONS IN RESPECT OF THOSE 51 PLOTS. IT APPEARS TH A T THE ADDITION HAS BEEN MADE ONLY ON THE BASIS OF NOTINGS FOUND IN THE IMPOUNDED SHEET WITHOUT THERE BEING ANY CORROBORATIVE EVIDENCE ON RECORD. IT IS A SETTLED PROPOSITION OF LAW THAT ADDITIONS CANNOT BE MADE ONLY ON THE BASIS OF ASSUMPTIONS, SURMISES AND CONJECTURES. WE, THEREFORE, CONFIRM THE FINDIN GS OF THE LD. CIT(A). ADDITION OF RS. 7,31,50,595/ - STANDS DELETED. THIS GROUND IS ALSO DISMISSED. 37. NEXT ADDITION IS OF RS. 2,79,70,000/ - WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A). 38. PAGE 2 OF ANNEXURE A - 2 CONTAINS ENTRY RELATING TO SHRI K.L. VE RMA AND FAMILY WHEREIN IT HAS BEEN MENTIONED THAT THE ASSESSEE HAS AGREED TO BUY BACK FOUR UNITS FROM VERMA FAMILY AGGREGATING AREA OF 2797 S Q . FT. TOTAL BUY BACK TRANSACTION WAS TO THE TUNE OF RS. 2,09,77,500/ - . 21 THE ASSESSING OFFICER FURTHER FOUND THAT AS PER ANNEXURE A - 2, PAGE 4, THE RATE PER SQ FT. IS WORKED OUT AT RS. 17,500/ - WHEREAS THE SELLING RATE OF THE SAME PROPERTY IS MENTIONED AT RS. 7,500/ - PER SQ. FT. THE ASSESSING OFFICER FURTHER FOUND THAT A SUM OF RS. 27,86,994/ - WAS ALSO PAID TO SHRI K. L. VERMA. THE ASSESSEE WAS ASKED TO EXPLAIN THE TRANSACTIONS. IN ITS REPLY, THE ASSESSEE EXPLAINED THAT FOUR UNITS WERE BOOKED BY VERMA FAMILY AND THE SAID BOOKING WAS SUBSEQUENTLY CANCELLED. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE REPLY OF THE ASSESSEE AND WAS OF THE OPINION THAT THE COMMERCIAL SPACE SOLD TO VERMA FAMILY WAS PAID BACK AFTER PAYING AN AMOUNT OF RS. 2,79,70,000/ - WHICH IS NEITHER RECORDED IN THE BOOKS OF ACCOUNT NOR IS OTHERWISE ADMISSIBLE AS EXPENDITURE FOR BEING CAPITAL IN NAT URE. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS. 2,79,70,000/ - . 39. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 40. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT BOTH THE LOWER AUTHORITIES HAVE FAILED IN APPRECIATING THE FACTS AND ISSUE IN CORRECT PERSPECTIVE. THE LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT INITIALLY, VERMA F AMILY BOOKED FOUR FLATS IN UNIT . THE 22 COUNSEL FURTHER EXPLAINED THAT SINCE THE ASSESSEE WAS NOT ABLE TO H AND OVER THE FLATS , IT PROPOSED TO BUY BACK @ 7500 PER SQ FT. THE CHEQUES WERE ALSO GIVEN TO THE MEMBERS OF VERMA FAMILY. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THAT BUY BACK TRANSACTION COULD ALSO NOT MATERIALISE AND THE MATTER WAS ULTIMATELY S ETTLED BY THE ARBITRAR ATION AWARD BY WHICH THE ASSESSEE COMPANY ALLOTTED 5594 SQ. FT. TO THE MEMBERS OF THE VERMA FAMILY. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ADDITIONS HAVE BEEN MADE PURELY ON THE BASIS OF SURMISES AND CONJECTURES. 41. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. IT IS THE SAY OF THE LD. DR THAT THE IMPOUNDED DOCUMENTS ARE NOT DUMB DOCUMENTS AS CLAIMED BY THE ASSESSEE IN AS MUCH AS THE CHEQUE TRANSACTIONS MENTIONED THEREIN ARE AC TUALLY ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD. DR FURTHER STATED THAT THE DOCUMENTS MUST BE CONSIDERED AS A WHOLE AND SINCE PART OF THE TRANSACTION S ARE RECORDED IN THE BOOKS OF ACCOUNT , THE SAME CANNOT BE CONSIDERED AS DUMB DOCUMENT. 23 4 2. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. IT IS TRUE THAT 2797 SQ. FT OF AREA WAS AGREED TO BE SOLD TO MEMBERS OF VERMA FAMILY. IT IS EQUALLY TRUE THAT THE TRANSACTIONS COULD NOT REACH TO ITS CONCLUSION AND THE ASSE SSEE OFFERED TO BUY BACK THE SAID PROPERTY @ 7500/ - PER SQ FT. THERE IS ALSO NO DISPUTE THAT THE ASSESSEE HAD TENDERED MONEY TO THE MEMBERS OF VERMA FAMILY. WE FIND THAT THE CHEQUE AMOUNT WAS ENCASHED BY VERMA FAMILY. BUT, AT THE SAME TIME, WE FIND THAT THE SAID AMOUNT WAS RETURNED BACK TO THE ASSESSEE BY VERMA FAMILY. THERE IS NO DISPUTE THAT THE MATTER/DISPUTE WAS ULTIMATE LY SETTLED BY ARBITRATION AWARD BY WHICH MEMBERS OF VERMA FAMILY WERE ALLOTTED 5594 SQ FT. IRONICALLY, THOUGH THE ASSESSING OFFICE R MADE ADDITIONS ON THE BASIS OF NOTINGS IN THE IMPUGNED DOCUMENTS , BUT HE DID NOT CARE TO EXAMINE K.L. VERMA OR HIS FAMILY MEMBERS TO VERIFY THE IMPUGNED TRANSACTION. WE FIND THAT THE ASSESSING OFFICER HAS NOT EVEN EXAMINED THE REFUND OF BUY BACK AMOUNT GIVEN BY THE ASSESSEE. THE ENTIRE TRANSACTION CAN BE UNDERSTOOD FROM THE FOLLOWING CHART: 24 NAME AMOUNT ORIGINALLY RECEIVED IN UNIT NO. AREA ORIGINALLY ALLOTTED (PER SQ. FT) AMOUNT (IN RS.) OUTSTANDI NG SINCE BUYBACK @ 7500 CHEQUE NO. & DATE BANK AREA ALLOTTED IN EXCHANGE OF THE ORIGINAL ALLOTMENT (SQ FT) MRS. USHA VERMA VATIKA GREEN FIELD PRIVATE LIMITED IB - 02 547 12,03,400 07.02.2002 4,102,500.0 0 727911 31.12.07 INDUS IND BANK 1094 MR. K. L. VERMA VATIKA GREEN FIELD PRIVATE LIMITED IB - 01 750 16,50,000 06.02.2002 5,625,000.0 0 727912 31.12.07 INDUS IND BANK 1500 MR. PANKAJ VERMA VATIKA GREEN FIELD PRIVATE LIMITED IB - 03 740 16,28,000 06.02.2002 5,550,000.0 0 727913 31.12.07 INDUS IND BANK 1480 MR. VIKRAM VERMA VATIKA GREEN FIELD PRIVATE LIMITED IB - 04 760 16,72,000 06.02.2002 5,700,000.0 0 727914 31.12.07 INDUS IND BANK 1520 2797 400 500.00 5594 43. COPIES OF ARBITRATION AWARD ARE PLACED IN THE PAPER BOOK EXHIBITED AT PAGES 161 TO 208 OF THE PAPER BOOK. IN OUR CONSIDERED OPINION, IF THE FACTUAL MATRIX IS UNDERSTOOD IN ITS TRUE PERSPECTIVE, IN THE LIGHT OF ARBITRATION AWARD, WE FIND THAT THERE IS NO BASIS FOR ASSUMING THAT THE ASSESSEE HAS PAID RS. 17,500/ - PER SQ FT. TO VERMA FAMILY AS THE TRANSACTION WAS FINALLY SETTLED THROUGH ARBITRATI ON AND THE IMPUGNED AREA OF 2797 SQ FT WHICH FORMED BASIS FOR MAKING ADDITION WAS, IN FACT, SETTLED AT 5594 SQ. FT BY THE ARBITRATION AWARD. CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND ANY BASIS FOR MAKING THE IMPUGNED ADDITION. WE ACCORDINGLY DIRE CT THE ASSESSING OFFICER TO 25 DELETE THE ADDITION OF RS. 2,79,70,000/ - . THIS GROUND IN ASSESSEES APPEAL IS ALLOWED. 44. NEXT ADDITION IS OF RS. 63.47 LAKHS WHICH WAS ON ACCOUNT OF COMPENSATION PAID TO CUSTOMERS WHICH WAS PARTLY DELETED BY THE LD. CIT(A) A T RS. 15,61,366/ - BY UPHOLDING THE ADDITION AMOUNTING TO 48,24,444/ - . 45. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 48,24,444/ - AND RS. 10,95,616/ - AS COMPENSATION FOR NON ALLOTMENT OF PLOTS/FLATS. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THESE EXPENSES SHOULD NOT BE DISALLOWED. 46. WITH RESPECT TO COMPENSATION PAID OF RS. 48,24,,444/ - , THE ASSESSEE EXPLAINED THAT THE SAME WAS PAID TO SHRI K. NATWAR SINGH ON THE BASIS OF FUNDRAISED FROM HIM ON THE SECURITY OF PROPERTY. IT WAS EXPLAINED THAT HIS ACCOUNT WAS SETTLED BY PAYI NG A SUM OF RS. 48,24,444/ - OVER AND ABOVE THE AMOUNT RECEIVED FROM HIM AGAINST THE SECURITY GIVEN. WITH RESPECT TO RS. 10,95,616/ - , IT WAS SUBMITTED THAT THESE AMOUNTS WERE INCURRED FOR NON - ALLOTMENT OF P LOT. IT WAS EXPLAINED THAT THE ASSESSEE COMPANY COULD NOT ALLOT PLOTS AND, 26 THEREFORE, HAD TO COMPENSATE ITS CLIENTS BY PAYING A SUM OF RS. 10.95 LAKHS. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE REPLY OF THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS REACQUIRED RIGHT IN THE PLOTS WHICH HAVE BEEN ALLOTTED TO VARIOUS CUSTOMERS AND, THEREFORE, IT IS PART OF PURCHASES WHICH CAN ONLY BE CAPITALISED AND CANNOT BE ALLOWED AS REVENUE EXPENDITURE. ADDITION OF RS. 10.95 LAKHS W AS ACCORDINGLY MADE. 47. WHEN THE MATTER WAS AGITATED BEFORE THE LD. CIT(A), IT WAS EXPLAINED THAT THE AMOUNTS RECEIVED FROM ALLOTTEES OF THE PLOTS WERE ONLY SHOWN AS ADVANCE AND WA S NEVER CONSIDERED AS SALES. SINCE THE ASSESSEE COULD NOT COMPLETE THE SA LE TRANSACTION, ADVANCE RECEIVED FROM CLIENTS WAS REFUNDED ALONGWITH COMPENSATION OF RS. 10.96 LAKHS WHICH WAS PAID TO MAMTA GUPTA, S.K. GUPTA AND SHRI S.K. GUJRAL. SUPPORTING EVIDENCES WERE FURNISHED BEFORE THE LD. CIT(A) WHO AFTER VERIFYING DOCUMENTARY EVIDENCES WAS CONVINCED WITH THE CONTENTION OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 10,95,616/ - . HOWEVER, IN SO FAR AS ADDITION OF RS. 48,24,444/ - IS CONCERNED, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO VER IFY THE TRANSACTION AFTER VERIFYING THAT THE AMOUNT WHEN RECEIVED WAS NOT CONSIDERED AS SALE IN THE BOOKS BY THE ASSESSEE. 27 4 8 . THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 49. THE LD. DR VEHEMENTLY STATED THAT THERE IS NO EVIDENCE THAT THE ASSESSEE HAS NOT ALLOTTED THE PLOTS AND HAS ACTUALLY REFUNDED THE ADVANCE AMOUNT WITH COMPENSATION. 50. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW QUA THE ISSUE. IT IS NOT IN DISPUTE T HAT THE ASSESSEE HAS BEEN SHOWING THE AMOUNT RECEIVED FROM ITS CUSTOMERS AS ADVANCE. IT IS ALSO NOT IN DISPUTE THAT THE ADVANCE WAS REFUNDED BACK TO THE CUSTOMERS ON NON ALLOTMENT OF THE PLOTS. WE FIND THAT AN IDENTICAL ISSUE AROSE IN ASSESSMENT YEAR 200 1 - 02 AND THE TRIBUNAL VIDE ORDER DATED 21.6.2013 IN ITA NO. 2832/DEL/2012 HELD AS UNDER: 18. T HUS, THE TRANSACTION ENTERED INTO' BY THE ASSESSEE, SHOWN AS PAYMENT OF COMPENSATION AND CLAIMED AS A REVENUE EXPENDITURE, CANNOT BE SAID TO BE A MERE CAMOUFLAGE OR SUBTERFUGE DESIGNED BY THE ASSESSEE. THE ASSESSEE HAD RECEIVED ADVANCE AMOUNTS AGAINST THE BOOKING OF PLOTS. THESE AMOUNTS KEPT LYING WITH THE ASSESSEE FOR OVER A DECADE. HOWEVER, THE DEALS COULD NOT FINALISE AND THE PLOTS REMAINED UNDER THE OWNERSHIP AND POSSESSION OF THE ASSESSEE COMPANY ONLY. THE PAYMENT WAS ONLY A PART PAYMENT, WHICH WAS 28 RET URNED BY THE ASSESSEE ALONG WITH THE PROPORTIONATE INTEREST THEREON. THIS PAYMENT OF INTEREST IS NOT ONLY PAYMENT DUE TO THE DEPOSITOR, BUT IT IS ALSO PAYMENT MADE AS A SOUND BUSINESS POLICY, LEST OTHER PROSPECTIVE BUYERS BE SHOOED AWAY BY THE FACTUM OF NO N - PAYMENT OF INTEREST TO THE EARLIER CUSTOMERS, EVEN THOUGH THE ADVANCE AMOUNTS KEPT LYING WITH T HE ASSESSEE FOR YEARS TOGETHER. SINCE THE PAYMENT WAS IN THE COURSE OF BUSINESS OF THE ASSESSEE COMPANY, IT WAS RIGHTLY CLAIMED AS A BUSINESS EXPENDITURE. THE NOMENCLATURE OF THE PAYMENT BEING NOT DETERMINATIVE OF THE NATURE THEREOF, IT MATTERS LITTLE THAT IT WAS TERMED AS 'COMPENSATION' WHICH, OTHERWISE TOO, IT INDEED IS, AS DISCUSSED. THE PAYMENT, HOWEVER, HAS NEVER BEEN SHOWN TO BE SALE CONSIDERATION FOR RE - P URCHASING THE PLOTS, AS TRIED TO BE MADE OUT BY THE ASSESSING OFFICER. ONCE THE PLOTS NEVER LEFT THE OWNERSHIP AND POSSESSION OF THE ASSESSEE, THERE IS NO QUESTION OF THEIR BEING RE - PURCHASED BY THE ASSESSEE COMPANY. MOREOVER, IN EARLIER YEARS, SUCH PAYMEN TS BY THE ASSESSEE TO OTHER CUSTOMERS HAVE ALSO BEEN ALLOWED CONSISTENTLY TO THE ASSESSEE AS BUSINESS EXPENDITURE, AS TAKEN NOTE OF BY THE LD. CIT (A), AS OBSERVED IN PARA 16 ABOVE. 19 . THE LD. CIT (A) HAS PASSED AN ELABORATE SPEAKING ORDER AND WE EXTRACT HEREUNDER THE RELEVANT PORTION THEREOF: - 'B) . I HAVE SATISFIED MYSELF FROM THE RECORDS OF THE CASE THAT METHOD OF ACCOUNTING POLICY FOLLOWED BY THE APPELLANT IS TO CLAIM THE EXPENSES IN THE YEAR WHEN THE COMPENSATION WAS 29 PAID ON THE REVOCATION OF THE AG REEMENT ENTERED WITH THE CUSTOMERS. THE ASSESSMENTS HAVE BEEN FRAMED U/S 143 (3) OF THE INCOME TAX ACT, 1961 FROM THE ASSESSMENT YEAR 1995 - 1996 TO 1998 - 1999 WHEN SUCH A CLAIM OF EXPENSES HAS NOT BEEN DISALLOWED BY THE ASSESSING OFFICER AND THUS THE CLAIM STOOD ALLOWED. IN SO FAR ASSESSMENT YEARS 1999 - 2000 TO 2000 - 2001 ARE CONCERNED ASSESSMENT WERE NOT TAKEN UP FOR SCRUTINY ASS ESSMENT, HOWEVER, THE EXPENSES H AD BEEN INCURRED IN THOSE YEARS TOO. IN THE SUBSEQUENT ASSESSMENT YEAR 2002 - 2003 AND 2004 - 2005 THE A SSESSING OFFICER DID NOT DISALLOW THE EXPENSE INCURRED. IT IS ONLY IN THE YEAR 2003 - 2004, NO SUCH EXPENSE HAD BEEN INCURRED. FURTHER THE METHOD OF VALUATION OF CLOSING STOCK WAS THE COST METHOD WHICH DID NOT INCLUDE THE AMOUNT PAID AS COMPENSATION WHICH WA S NOT TREATED BY THE APPELLANT COMPANY AS THE CAPITAL COST AS IT REPRESENTED THE EXPENSES INCURRED ON ACCOUNT OF COMMERCIAL EXPEDIENCY. THUS ON FACTS I FIND THE SUBMISSIONS MADE BY APPELLANT AND RECORDED IN PARA 9 & 10 ABOVE ARE TRUE AND CORRECT. I FURTHER FIND THAT THE APPELLANT ITSELF HAS SHOWN THE INCOME FROM SALE OF AFORESAID LAND AND HAD SHOWN THE INCOME WITHOUT INCLUDING THE AFORESAID SUM AS COST OF THE LAND SOLD AND THUS IT HAS SHOWN THE INCOME AND THEREFORE THERE IS ALSO NO LOSS OF REVENUE. 30 'E) ON THE BASIS OF ABOVE AND FOR THE REASONS UNDER MENTIONED I HOLD THE COMPENSATION PAID AS REVENUE EXPENDITURE: - ( I ) THE SPACE SURRENDERED BY VARIOUS PROPOSED BUYERS WAS NEVER SOLD OR POSSESSION HANDED OVER TO THEM AND AS SUCH THE QUESTION OF REPURCHASING THE SAME IS TOTALLY A MISCONCEPTION AND AS AGAINST THE FACTS ON RECORD. ( II ) THE SHOWING OF THE AMOUNTS RECEIVED BY THE PAYEES FROM THE APPELLANT AS CAPITAL OR REVENUE ACCOUNT IS NOT RELEVANT FACTOR FOR DECIDING THE ISSUE AS THE SAME TRANSACTION CAN HAVE DIFFERENT EFFECT ON THE VARIOUS PERSONS KEEPING IN VIEW THE NATURE OF THEIR B USINESSES. NONE OF THE RECIPIENTS OF THE COMPENSATION WAS IN THE BUSINESS OF REAL ESTATE WHEREAS APPELLANT WAS IN THE BUSINESS OF REAL ESTATE AS SUCH APPELLANT RIGHTLY CLAIMED IT AS REVENUE EXPENDITURE. ( III ) ONE TIME PAYMENT THEORY ALSO, DOES NOT DETERMINE THE NATURE OF PAYMENT. ( IV ) IT WAS MERELY AN ADVANCE RECEIVED FROM THE BUYERS WHICH WERE REPAID WITH COMPENSATION. THERE IS NO TRANSFER OF TITLE TILL A SALE DEED IS EXECUTED OR POSSESSION OF THE PREMISE GIVEN IN PURSUANCE TO PART PERFORMANCE U/S 53A OF THE TRANSF ER OF PROPERTY ACT. THE COMPENSATION PAID WAS FOR UTILIZING THE FUNDS MADE AVAILABLE BY THE BUYERS. 31 ( V ) IN A BUSINESS, WHEN A COMPENSATION IS PAID IN RESPECT OF STOCK IN TRADE FOR NON - PERFORMANCE OF A CONTRACT, THE COMPENSATION PAID IS ALWAYS CONSIDERED AS REVENUE EXPENDITURE. ( VI ) IN A DECISION OF DELHI HIGH COURT IN THE MATTER OF CIT VS. BHAGVANDAS RAMESHWAR DAYAL 149 ITR 387 IT WAS HELD THAT 'IF A CONTRACT IS BROKEN FOR ANY REASON AND ONE PARTY IS UNABLE TO GIVE DELIVERY OR OTHER PARTY IS UNABLE TO'TAKE DELIV ERY, IT IS A CASE OF BREACH OF CONTRACT AND THE DAMAGE PAID ON ACCOUNT OF SUCH BREACH OF CONTRACT WAS A NORMAL LOSS INCIDENTAL TO BUSINESS.' I N A SIMILAR CASE OF M/S GOPAL DASS ESTATE AND HOUSING LTD. ITA NO.3096/DEL/2000 FOR A.Y. 1997 - 98 THE COMPENSATION WAS ALLOWED AS REVENUE EXPENDITURE. THE HON'BLE TRIBUNAL DELHI HAS HELD THAT THERE IS NO REPURCHASE OF THE PLOT (AGAINST THE COMPENSATION) AS THE PLOTS WERE NOT SOLD TO THE SAI D BUYERS.' 20. BEFORE US, THE CATEGORICAL FINDINGS RECORDED BY THE LD. CIT (A) HAVE REMAINED UNSHAKEN AND FOR THE REASONS DISCUSSED HEREINABOVE, THE ORDER UNDER APPEAL IS HEREBY CONFIRMED, REJECTING THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT. 32 21. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. 51. FINDING PARITY IN FACTS, WE RESPECTFULLY FOLLOW THE FINDINGS OF THE CO ORDINATE BENCH CONFIRMING THE DELETION OF RS. 10,95,616/ - . IN SO FAR AS PAYMEN T TO SHRI K . NATWAR SINGH AMOUN TING TO RS. 48,24,444/ - IS CONCERNED, WE DO NOT FIND ANY ERROR IN THE DIRECTIONS GIVEN BY THE LD. CIT(A). THE ASSESSING OFFICER CAN REVISIT THIS ISSUE AFRESH IN THE LIGHT OF DIRECTIONS GIVEN BY THE FIRST APPELLATE AUTHORITY. THIS GROUND IS PARTLY ALLOWED . 52. LAST GRIEVANCE RELATES TO UPFRONT FEE DISALLOWANCE OF RS. 2,24,72,631/ - . 53. WE HAVE ALREADY HELD THAT REVISED RETURN FILED BY THE ASSESSEE IS A VALID RETURN AND HA VE DIRECTED THE ASSESSING OFFICER TO CONSIDER THE CLAIM OF EXPENDITURE IN THE REVISED RETURN AFRESH. THIS ISSUE IS EMBEDDED IN THE CLAIMS MADE IN THE REVISED RETURN AND SHALL BE CONSIDERED BY THE ASSESSING OFFICER WHILE DECIDING THE SAME. 33 54. TO SUM UP, I N THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER IS PRON OUNCED IN THE OPEN COURT ON 2 0 .0 7 .2018. S D / - S D / - [ KULDIP SINGH] [ N.K. BILLAIYA ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 0 T H JU LY , 2018 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI 34 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER