Somani Bafna & Associates, V. ACIT,

ITA 308/PUN/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7666 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 05-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO. 308/PN/09 (ASSTT. YEAR 2001-02) M/S. SOMANI BAFNA & ASSOCIATES SOBA MANSION, 50B + 51, ERANDWANA NEAR MHATRE BRIDGE, PUNE-411004 PAN NO. AAHFS6879A .... APPELLANT VS. ACIT, CIRCLE-5, PUNE . RESPONDENT APPELLANT BY : SHRI M.R. BHAGWAT RESPONDENT BY : SHRI ABHAY DAMLE ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE CIT(A)-II, PUNE DATED 19/12/2008 FOR THE ASSESSMENT YEAR 2001-02 AND THE GROUNDS RAISED IN THIS APPEAL ARE AS UNDER:- 1) THE LEARNED COMMISSIONER (APPEALS) ERRED IN SUS TAINING THE UNDER MENTIONED ADDITIONS MADE TO ASSESSEES TO TAL INCOME: A) INTEREST PAID TO BANK RS. 966708/- B) INTEREST PAID ON OTHER UNSECURED LOANS RS. 206130/- 2) THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOL DING THAT THE AFORESAID INTEREST OUGHT TO HAVE BEEN CAPITALIZ ED ON WORK IN PROGRESS WITHOUT PROPERLY APPRECIATING TH E FACT THAT THE SAID INTEREST WAS NOT ATTRIBUTABLE TO WOR K IN PROGRESS. 3) THE ADDITIONS SUSTAINED AS ABOVE BE DELETED AND THE INCOME OF THE ASSESSEE FIRM BE REDUCED TO THAT EXTE NT. ITA NO. 308/PN/09 A.Y: 2001-02 PAGE 2 OF 3 4) SUCH OTHER ORDERS BE PASSED AS DEEMED FIT AND P ROPER. 2. BRIEFLY STATED, RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF THE CONSTRUCTION OF RESIDENTIAL FL ATS. DURING THE YEAR THE ASSESSEE IS ENGAGED IN THE PROJECT NAMED KOTHRUD SHI LP AND IT IS IN PROGRESS DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE CA PITALIZED THE EXPENDITURE AND DISCLOSED THE SAME AS WIP A/C. HOWEVER, IN THE RE TURN OF INCOME, THE ASSESSEE CLAIMED CERTAIN EXPENDITURE ON ACCOUNT OF IN TEREST PAYMENT AMOUNTING TO RS. 11,72,838/- AND IT CONSISTS OF INTEREST PAID TO BANK AND TO THE UNSECURED LOAN CREDITORS AMOUNTING TO RS. 966708/- AND RS. 2061 30/- RESPECTIVELY. DURING THE ASSESSMENT PROCEEDINGS A.O NOTICED THAT THE SAID INTEREST PAYMENT COULD NOT BE ALLOWED AS EXPENDITURE AS THE SAID INTEREST IS ATT RIBUTABLE TO THE CAPITALIZED WORK IN PROGRESS ACCOUNT. ACCORDINGLY, AO CAPITALIZED T HE SAID INTEREST DEBITS OF 11.72 LAKHS. THE CIT(A) DID NOT GIVE ANY RELIEF IN THIS REGARD TO THE ASSESSEE, DURING THE FIRST APPELLATE PROCEEDINGS. THEREFORE, AGGRIE VED WITH THE SAME ASSESSEE FILED A PRESENT APPEAL BEFORE US WITH ABOVE REFERRED GROUNDS. 3. LD. COUNSEL ESSENTIALLY RELIED ON THE SUBMISSIO NS MADE BY THE ASSESSEE BEFORE CIT(A) DATED 18-12-2008. AS PER THE SAID LETT ER ARGUMENTS OF LD. COUNSEL IS THAT AT THE MAXIMUM ONLY A SUM OF RS.171916/- OF INTEREST PAYMENT IS TO BE HELD ATTRIBUTABLE TO THE KOTHRUD SHILP PROJECT, WHIC H SHOULD BE CAPITALIZED AND THE REST OF RS.1000922/- SHOULD BE DISALLOWED AS THE SAID AMOUNT ARE RELATABLE TO THE VARIOUS ADVANCES GIVEN TO THE PURCHASE OF LAND, WHICH IS THE STOCK IN TRADE OF THE ASSESSEE FIRM. IN OTHER WORDS, LD. COUNSEL IS OF THE VIEW THAT THE LOANS RAISED FROM THE BANK AS WELL AS FROM THE UNSECUR ED LOAN CREDITORS WAS UTILIZED FOR THE PURPOSE OF PURCHASE OF LANDS WHICH WA S REFLECTED AS A STOCK IN TRADE. ON QUESTIONING FROM THE BENCH LD. COUNSEL COUL D NOT DEMONSTRATE AS TO WHICH ARE THESE LANDS? HOW SUCH LANDS ARE ACCOUNTED I N THE BOOKS OF ACCOUNTS? WHERE THEY WERE SHOWN AS THE CLOSING STOCK OR WHERE SUC H LANDS WERE UTILIZED BY THE ASSESSEE FOR THE PROJECTS LIKE KOTHRUD SHILP ETC ? LD. COUNSEL COULD ALSO NOT DEMONSTRATE IF SOME OF SUCH LANDS WERE USED FOR KOTH RUD SHILP PROJECT WHICH WAS CAPITALIZED AS WORK IN PROGRESS ACCOUNT IN THE BO OKS OF ACCOUNTS. SO IN THE ABSENCE OF THE DETAILS AND ASSESSEES UNREADINESS T O DEMONSTRATE THE FACTS, WE ARE OF THE OPINION THAT ASSESSEE HAS FAILED TO SUBST ANTIATE THE CLAIMS BY FAILURE TO DISCHARGE THE ONUS. FROM THE LANDS UTILIZED FOR KOTHRU D SHILP PROJECT, IT IS INFORMED TO US THAT SOME OF THE LANDS WHICH ARE PURCHA SED IN THE PAST WERE USED ITA NO. 308/PN/09 A.Y: 2001-02 PAGE 3 OF 3 FOR ASSESSEES HOUSING PROJECT SUCH AS KOTHRUD SHILP WHICH AS PER THE ASSESSEES BOOKS OF ACCOUNT IS CAPITALIZED. IN SUCH CIRCUMSTANCES THE ASSESSEES CLAIM THAT THE LOAN FROM THE BANK AND OTHER UNSECURE D LOAN CREDITORS WAS UTILIZED FOR PURCHASE OF THE LANDS WHICH WAS CONSIDERED AS STOC K IN TRADE LACKS MERIT. THEREFORE WE ARE OF THE OPINION THAT THE ORDER OF THE CI T(A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSE E ARE DISMISSED. 4. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DAY OF JANUARY, 2011. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 19 TH JANUARY, 2011 R COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ACIT, CIRCLE-5, PUNE 3. CIT(A)-II, PUNE 4. CIT-III,PUNE 5. D.R. ITAT A BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE