MAHARAJA BUILDERS P. LTD, MUMBAI V. ITO 9(2)(3), MUMBAI

ITA 3118/MUM/2010

• Counselvise Citation: 311819914 RSA 2010
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 21-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: ARVIND DALAL
• Keywords: Opportunity of being heard; Additional evidence
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI PRAMOD KUMAR (A.M) ITA NO.3118/MUM/2010(A.Y. 2004-05) MAHARAJA BUILDERS PRIVATE LTD., 4A, VIKAS CENTRE, S.V.ROAD, MUMBAI 54. PAN: AAACM 7464M (APPELLANT) VS. THE ITO 9(2)(3), AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (RESPONENT) APPELLANT BY : SHRI ARVIND DALAL RESPONDENT BY : SMT. ASHIMA GUPTA ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 2/3/2010 OF CIT(A)-20, MUMBAI RELATING TO THE ASSESSMENT YEAR 2 004-05. THE GROUNDS OF APPEAL OF THE ASSESSEE READS AS FOLLOWS: I. THE HONBLE CIT(A) ERRED IN PASSING ORDER IGNO RING THE PLEA OF APPELLANT THE APPLICATION PROCEEDINGS MAY BE BLOC KED AS THE APPELLANT FILED AN RECTIFICATION APPLICATION IN REG ARD TO THE ISSUE IN APPEAL. II. THE HONBLE CIT(A) HAS NOT CONSIDERED IN PROPE R PROSPECTIVE THE LETTER DATED 12/02/2010 REFERRED TO BY IN PARA 3 OF THE ORDER. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF REAL ESTATE DEVELOPMENTS AND TRADING IN PRECIOUS METALS. THE A O IN THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) NOTICED THAT AS PER THE ITA NO.3118/MUM/2010(A.Y. 2004-05) 2 SCHEDULE TO THE CURRENT LIABILITY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE A.Y 2003-04, THE ASSESSEE HAS T O PAY AS ON 31/3/2003 AN AMOUNT OF RS.11,67,38,505/- TO M/S. MEHA TRADIN G PVT. LTD., ON ACCOUNT OF PURCHASE MADE DURING A.Y 2003-04. AS PER THE G ROUPING OF THE BALANCE SHEET FILED AS ON 31/3/2004, THE SAID LIABILITY HAD COME DOWN TO RS.2,71,12,708/-. THE ASSESSEE HAD OFFERED THE PR EMISES IT OWNED AT TARDEO, MUMBAI AS SECURITY TO BANK OF PUNJAB LIMITE D FOR ADVANCES GIVEN BY IT TO M/S.MEHA TRADING PVT.LTD. DURING THE PREVIOU S YEAR BANK OF PUNJAB LTD., THE ASSESSEE AND M/S.MEHA TRADING PVT.LTD., E NTERED INTO AN ARRANGEMENT BY WHICH, THE ASSESSEE PAID OUTSTANDING AMOUNT OF M/S.MEHTA TRADING PVT.LTD., TO THE EXTENT OF RS.4,70,55,074 A ND BY DOING SO REDUCED THE OUTSTANDING THAT IT HAD TO PAY TO M/S.MEHA TRAD ING PVT. LTD. TO RS.2,71,12,708. THUS THE ASSESSEE GOT THE BENEFIT OF WAIVER OF ITS OUTSTANDINGS TO M/S.MEHA TRADING PVT. LTD. TO THE E XTENT OF RS.4,025,70,723/-. THE BANK ALSO HAD RELEASED THE CHARGE AND LIEN ON THE IMMOVABLE PROPERTY SITUATED AT TARDEO BELONGING TO THE ASSESSEE. THE TARDEO PROPERTY WAS SOLD AND CAPITAL GAIN ON SUCH S ALE WAS ALSO OFFERED TO TAX BY THE ASSESSEE. 3. ACCORDING TO THE AO, THE ASSESSEE HAS DISCHARGE D THE LIABILITY OF M/S. MEHA TRADING PVT. LTD. TO THE EXTENT OF RS.8,96,25, 797/- (OPENING BALANCE AS ON 1/4/2003 RS. 11,67,38,505/-. CLOSING BALANCE AS ON 31/3/2004 RS.2,71,12,708/-) BY PAYING ONLY RS.4,25,00,000/- T O BANK OF PUNJAB AS INSTRUCTED BY M/S. MEHA TRADING PVT. LTD. AND RS.45 ,55,074/- THROUGH THE SHIRPUR PEOPLES CO-OPERATIVE BANK LTD. TOTALLING T O RS.4,70,55,074/-. THUS THE LIABILITY TO THE EXTENT OF RS. 4,25,70,723/- HA S CEASED TO EXIST IN VIEW OF THE SETTLEMENT MADE WITH PUNJAB NATIONAL BANK, M/S. MEHA TRADING PVT. LTD. HOWEVER THIS AMOUNT HAS NOT BEEN OFFERED FOR TAX BY THE ASSESSEE AS PER THE PROVISIONS OF SECTION 41(1) OF THE I.T. ACT , 1961. THEREFORE, AN ITA NO.3118/MUM/2010(A.Y. 2004-05) 3 AMOUNT OF RS. 4,25,70,723/- BEING LIABILITY WHICH CEASED TO EXIST WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE UNDER SECT ION 41(1) OF THE INCOME TAX ACT, 1961. 4. ON APPEAL BY THE ASSESSEE THE CIT(A) BY AN ORDE R DATED 7/4/2008 SET ASIDE THE ORDER OF THE AO AND DIRECTED THE AO TO VE RIFY AS TO WHETHER LIABILITY OF THE ASSESSEE TO M/S. MEHA TRADING AROSE OUT OF T RADING LIABILITY AND THE CORRESPONDING ENTRY HAD BEEN MADE TO THE P&L ACCOUN T. PURSUANT TO THE ORDER OF THE CIT(A) THE AO PASSED AN ORDER GIVING E FFECT TO THE ORDER OF THE CIT(A) DATED 13/4/2009, WHEREIN HE OBSERVED THAT AS DIRECTED BY THE CIT(A) THE ASSESSEE FAILED TO FURNISH EVIDENCE TO SHOW TH AT THE LIABILITY OF THE ASSESSEE TO M/S. MEHA TRADING WAS NOT A TRADING LIA BILITY NOT ENTERED IN THE P&L ACCOUNT IN ANY PREVIOUS YEAR. THUS THE ADDITIO N MADE BY THE AO ORIGINALLY WAS RETAINED BY THE AO. 5. AGGRIEVED BY THIS ORDER OF THE AO THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A). BEFORE CIT(A) THE ASSESSEE POIN TED OUT THAT IT HAD FILED AN APPLICATION UNDER SECTION 154 OF THE INCOME TAX ACT , 1961 (THE ACT) BEFORE THE AO DATED 12/2/2010, WHEREIN THE ASSESSEE HAD PO INTED OUT THAT THE PROPERTY AT TARDEO FORMS A PART OF FIXED ASSETS WHI CH WAS MORTGAGED TO BANK OF PUNJAB LIMITED FOR LC FACILITY AVAILED BY M/S.ME HA TRADING. AS PART OF THE SETTLEMENT THE SECURITY WAS GIVEN UP BY THE BAN K HIS WAS A SUBJECT MATTER OF SETTLEMENT WITH THE BANK. THE ASSESSEE S OLD THE PROPERTY AT TARDEO AT MUMBAI AND THE STATEMENT OF SHORT TERM CA PITAL GAIN OF RS. 1,75,82,679/- WHICH THE ASSESSEE WORKED OUT AFTER C ONSIDERING THE AMOUNT RECEIVED AS BENEFIT BY WAIVER OF ITS OUTSTANDING TO THE EXTENT OF RS.4,61,20,469/- BY MEHA CORPORATION. THUS ACCORDI NG TO THE ASSESSEE, THE AMOUNT OF RS. 4,25,70,723/- CONSIDERED U/S. 41(1) W AS ALREADY CONSIDERED ITA NO.3118/MUM/2010(A.Y. 2004-05) 4 WHILE WORKING OUT SHORT TERM CAPITAL GAIN AS STATED ABOVE. THE ASSESSEE ALSO SUBMITTED BEFORE THE CIT(A) TO ADMIT ADDITIONAL EVI DENCE UNDER RULE 46A OF THE INCOME TAX RULES, 1962 TO SUBSTANTIATE ITS PLEA THAT THE AMOUNT TAXED BY THE AO UNDER SECTION 41(1) HAD ALREADY BEEN OFFE RED TO TAX BY THE ASSESSEE WHILE COMPUTING SHORT TERM CAPITAL GAIN ON SALE OF THE TARDEO PROPERTY. THE CIT(A) DISMISSED THE APPEAL OF THE A SSESSEE OBSERVING AS FOLLOWS: 4. I HAVE CONSIDERED THE ISSUE. THIS AUTHORITY C ANNOT BE USED AS A FACILITATOR FOR THE APPELLANT FOR OBTAINING MATERI ALS WHICH COULD BE USED AS ADDITIONAL EVIDENCE FOR ANY PURPOSE OR TO ALLOW IT TO ADDRESS DIFFERENT FORUM KEEPING THIS PROCEEDINGS IN ABEYANC E. THIS IS AN APPEAL AGAINST THE ORDER GIVING EFFECT TO THE ORDER PASSED BY CIT(A). THE ISSUE WAS CLEARLY ADJUDICATED HOLDING THAT THE IMPUGNED SUM WAS INCOME IN THE HANDS OF THE APPELLANT IF IT WAS A FA LL OUT OF TRADING LIABILITY. THE AO WAS DIRECTED ONLY TO MAKE CERT AIN VERIFICATIONS. HE COMPLIED WITH THE DIRECTION, GAVE OPPORTUNITY TO T HE APPELLANT AND HAS GIVEN A FINDING THAT THE LIABILITY AROSE ON ACCOUNT OF PURCHASES CHARGED TO THE P&L A/C. OF THE ASSESSMENT YEAR 2003-04. TH E APPELLANT HAS NOT BEEN ABLE TO ASSAIL THIS FINDING IN ANY MANNER. INSTEAD IT WANTS THIS AUTHORITY TO E A FACILITATOR FOR ENABLING IT T O PURSUE OTHER MATTERS. I FIND NO INFIRMITY IN THE ORDER OF THE AO AND CONF IRM THE SAME. 5. IN THE RESULT, THE APPEAL IS DISMISSED. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSE E HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. AS CAN BE SEEN FROM THE APPLICATION FIELD BY THE ASSESSEE BEFORE THE AO UND ER SECTION 154 OF THE ACT, THE ASSESSEE HAS CLEARLY EXPLAINED AS TO HOW THE SH ORT TERM CAPITAL GAIN ON SALE OF THE TARDEO PROPERTY ALSO INCLUDED AMOUNT TO WAIVER OF LOAN WHICH THE ASSESSEE HAD OBTAINED FROM M/S. MEHA TRADING PVT. L TD.. THESE DETAILS ARE AVAILABLE AT PAGE NO.15 TO 19 OF THE ASSESSEES PA PER BOOK. WE ARE OF THE ITA NO.3118/MUM/2010(A.Y. 2004-05) 5 VIEW THAT THE SAME INCOME CANNOT BE TAXED TWICE AND THE CLAIM OF THE ASSESSEE IF FOUND TO BE CORRECT, APPROPRIATE RELIEF SHOULD BE ALLOWED. IN FACT THE ASSESSEE BY A LETTER DATED 2/3/2011 HAS FURTHER REQUESTED THE AO TO PASS AN ORDER ON THE APPLICATION OF THE ASSESSEE UN DER SECTION 154 OF THE ACT. THE AO HAS NOT CONSIDERED THE SAME. IN OUR V IEW IT WOULD BE APPROPRIATE TO SET ASIDE THE ORDER OF THE CIT(A) AN D DIRECT THE AO TO CONSIDER THE GRIEVANCE OF THE ASSESSEE AS PROJECTED BY THE ASSESSEE IN ITS APPLICATION DATED 12/2/2004 UNDER SECTION 154 OF THE ACT FILED BEFORE THE AO. THE ASSESSEE WILL BE AT LIBERTY TO LET ANY EVIDENCE TO SUBSTANTIATE ITS CASE. THE AO WILL CONSIDER THE SAME AND PASS ORDER IN ACCORDA NCE WITH LAW AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. FOR STATISTICAL PURPOSES THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 8 TH DAY OF APRIL, 2011. SD/- SD/- (PRAMOD KUMAR ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 8 TH APRIL.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RF BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.3118/MUM/2010(A.Y. 2004-05) 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 1/4/2011 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 5/4/2011 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER