JAY VIJAY CONSTRUCTION CO., THANE V. CIT-I ( THANE), THANE

ITA 3123/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84455 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 09-12-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 13-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAV
• Keywords: Business income; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUM BAI .. , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 3123/MUM/2009 ( / ASSESSMENT YEAR: 2005-06) JAY VIJAY CONSTRUCTION CO. B-3, DEV ASHISH BUILDING, NEAR POLICE STATION, BHAYANDER (W), DIST. THANE-401 101 / VS. CIT-I 1 ST FLOOR, VARDHAN BUILDING, MIDC, WAGLE INDUSTRIAL ESTATE, THANE ./ ./PAN/GIR NO. AAAFJ 9115 F ( /APPELLANT ) : ( !' / RESPONDENT ) # $ / APPELLANT BY : SHRI MADHUR AGARWAL !' # $ / RESPONDENT BY : SHRI S. D. SRIVASTAV % &'( # )* / DATE OF HEARING : 09.12.2014 +,- # )* / DATE OF PRONOUNCEMENT : 17.12.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX-I, THANE (CIT FOR SHORT) DATED 19.0 3.2009, PASSED U/S.263 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2005-06. 2. THE ASSESSMENT IN THE INSTANT CASE WAS MADE AT A N INCOME OF RS.6,86,360/- U/S.143(3) OF THE ACT ON 26.03.2007, I.E., AS AGAIN ST THE RETURNED INCOME OF RS.6,36,360/- PER RETURN FILED ON 23.02.2006. NOTICE U/S.263 WAS SUBSEQUENTLY ISSUED BY THE OFFICE OF THE CIT ON 19.02.2009 IN EXERCISE OF HIS POWER OF R EVIEW UNDER THE ACT, RAISING SEVERAL ISSUES ON WHICH HE FOUND THE ASSESSMENT ORDER DEFIC IENT IN-AS-MUCH AS THE ASSESSING 2 ITA NO. 3123/MUM/2009 (A.Y. 2005-06) JAY VIJAY CONSTRUCTION CO. VS. CIT-I OFFICER (A.O.) HAD NOT MADE PROPER ENQUIRY IN THE M ATTER, SO THAT HIS ORDER WAS PER SE ERRONEOUS IN-SO-FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 3.1 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE (A R), THE ASSESSEES COUNSEL, WOULD TAKE US THROUGH THE FINDINGS ON EACH OF THE FIVE IS SUES ON WHICH THE SAME HAD BEEN RENDERED BY THE LD. CIT, TO IMPRESS UPON US THAT NO NE OF THE SAID FINDINGS WAS FACTUALLY OR LEGALLY TENABLE, SO THAT THE SAME WERE EITHER PERVE RSE OR INCONSISTENT WITH THE FACTS BORNE OUT OF THE MATERIAL ON RECORD OR OTHERWISE INVALID. IN FACT, THE ASSESSMENT PURSUANT TO THE IMPUGNED ORDER HAS SINCE BEEN FRAMED, WITH THE FIRS T APPELLATE AUTHORITY ALLOWING SUBSTANTIAL RELIEF, I.E., ON MERITS, SO THAT NONE O F THE ISSUES RAISED BY THE LD. CIT IN FACT SURVIVE (COPY OF THE SAID ORDER NOT ON RECORD). 3.2 THE LD. DEPARTMENTAL REPRESENTATIVE (DR), IN RE SPONSE, REFERRED TO THE ASSESSEES REPLY DATED 02.03.2009 O IN THE REVIEW PROCEEDINGS ON THE ISSUE REFERRED TO VIDE CLAUSE (F) THEREOF. THE LD. AR, IN REJOINDER, WOULD SUBMIT THA T THE SAID AMOUNT, LIKE OTHER AMOUNTS, WAS ALSO OUTSTANDING IN THE ACCOUNTS OF THE ASSESSE E FOR THE PAST FEW YEARS, AND DOES NOT PERTAIN TO ANY TRANSACTION DURING THE RELEVANT YEAR . THIS WAS IN FACT THE REASON FOR THE LD. CIT NOT RAISING THIS ISSUE VIDE HIS FINDINGS REFERR ED TO BY HIM. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE LAW IN THE MATTER IS WELL-SETTLED, AND LACK OF ENQUIRY WOULD RENDER AN ORDER PER SE ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE IN TEREST OF THE REVENUE (REFER, INTER ALIA, MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC); CIT VS. TOYOTA MOTOR CORPN. [2008] 306 ITR 49 (DEL) (AFFIRMED BY THE APEX COURT , VIDE ITS JUDGMENT AT [2008] 306 ITR 52 (SC)); CIT VS. DEEPAK KUMAR GARG [2008] 299 ITR 435 (MP); PT . LASHKARI RAM VS. CIT [2005] 272 ITR 309 (ALL.); CIT VS. ARUNABEN SUMANKUMAR [2003] 259 ITR 386 (GUJ); CIT VS. EXPORT HOUSE, AMRITSAR [2002] 256 ITR 603 (P&H)). SO, HOWEVER, PREJUDICE CAUSED OR MAY BE CAUSED TO THE REVENUE OU GHT TO REFLECT, SOME NEXUS BETWEEN THE TWO, I.E., LACK OF ENQUIRY AND THE PREJUDICE CA USED OR MAY BE CAUSED TO THE REVENUE, 3 ITA NO. 3123/MUM/2009 (A.Y. 2005-06) JAY VIJAY CONSTRUCTION CO. VS. CIT-I OUGHT TO ARISE, IN ORDER TO VALIDATE THE SAID PRESU MPTION IN LAW. THIS IS FOR THE SIMPLE REASON THAT FISHING AND ROVING ENQUIRIES COULD NOT BE POSSIBLY BE JUSTIFIED IN THE GARB OF THE EXERCISE OF THE POWER OF REVIEW, AS EXPLAINED B Y THE HONBLE COURTS ON A NUMBER OF OCCASIONS, TOWARD WHICH THE LD. AR WOULD BEFORE US CITE THE DECISION IN THE CASE OF CIT VS. GABRIEL INDIA LTD. [1993] 203 ITR 108 (BOM) AND CIT VS. VIKAS POLYMERS [1993] 236 CTR (DEL) 476. WE SHALL, QUA MERITS, BEGIN BY REPRODUCING THE FINDINGS OF THE LD . CIT, REPRODUCING VERBATIM FROM HIS ORDER (PGS. 3 TO 4): A) WITH REGARD TO THE INVESTMENT IN LAND THE ASSESSEE HAS SUBMITTED A LIST OF EXPENSES, HOWEVER THE ASSESSEE IN SUPPORT O F THE CLAIM HAS FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCES REGARDING THE EXPE NSES INCURRED. THE VERACITY OF THESE EXPENSES REQUIRES TO BE EXAMINED. B) IN RESPECT OF THE TDS ON RECONDITIONING CONTRACT, A LTHOUGH THE ASSESSEE HAS SUBMITTED A COPY OF TDS RETURN, YET NO EXPLANATION REGARDING THE 'TDS PAYABLE' SHOWN IN SUNDRY CREDITORS HAS BEE N FORWARDED. THIS REMAINS TO BE EXAMINED IN DETAIL. C) AS REGARDING THE LOANS TAKEN MERE CONFIRMATIONS HAV E BEEN SUBMITTED BY THE ASSESSEE. HOWEVER, THE IDENTITY, C REDITWORTHINESS & GENUINENESS OF THE LOAN CREDITORS STILL REMAIN TO B E PROVEN. THE ONUS IS ON THE ASSESSEE TO PROVE THESE. IN VIEW OF THE SAME FU RTHER VERIFICATIONS ARE REQUIRED. D) IN RESPECT OF THE DEPOSITS AND ADVANCES, THE ASSESS EE HAS SUBMITTED THAT A SUM OF RS.56,00,000/- IS RECEIVABLE FROM M/S . SIDDHIVINAYAK ASSOCIATES FOR SALE OF A PIECE OF LAND. HOWEVER, NO DETAILS REGARDING THE SAID SALE OR LAND HAVE BEEN PRODUCED. E) AS REGARDS SUNDRY DEBTORS, NO SATISFACTORY EXPLANAT ION HAS BEEN FORWARDED, NEITHER ANY DETAILS AND DOCUMENTARY EVID ENCES REGARDING THE FLATS OWNED BY THESE DEBTORS & POSSESSION HAS BEEN FORWARDED BY THE ASSESSEE. HENCE, THE ISSUE REQUIRES FURTHER VERIFIC ATION. WE SHALL TAKE UP EACH OF THESE FINDINGS IN SERIATIM , CONSIDERING THE SAME IN LIGHT OF THE JUDICIAL PRECEDENTS, EXPLAINING THE LAW IN T HE MATTER: 4 ITA NO. 3123/MUM/2009 (A.Y. 2005-06) JAY VIJAY CONSTRUCTION CO. VS. CIT-I A) THE LD. CIT HAS DIRECTED THE VERIFICATION OF THE ASSESSEES CLAIM FOR INVESTMENT IN LAND, WHICH APPEARS IN ITS BOOKS AT R S.57.52 LACS. ITS STAND EXPLAINED IN THE REVIEW PROCEEDING (VIDE THE ASSESSEES LETTE R DATED 02.03.2009/PB PGS.5-8) THAT THE LAND WAS PURCHASED ON 15.02.1988, I.E., AB OUT 20 YEARS BACK, AT A CONSIDERATION OF RS.53 LACS. THE ASSESSEE HAD FURTH ER ALSO CAPITALIZED ALL THE EXPENSES IN RELATION TO THIS PIECE OF LAND AS INCUR RED FROM YEAR TO YEAR; THE MATTER BEING DISPUTED AND SUBJUDICE BEFORE THE HONBLE HIG H COURT, AND WHICH SUBSISTS TO DATE. THIS ASPECT WAS ALSO REFERRED TO AND, ACCORDI NGLY, EXPLAINED TO THE A.O. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS (VI DE PARA 10 OF THE ASSESSEES LETTER DATED 10.11.2006/PB PGS.24-26 ). NO CLAIM FOR THE SAME; LAND BEING EVEN OTHERWISE A NON-DEPRECIABLE ASSET. THIS SUMS THE AS SESSEES CASE. AS PER THE ASSESSEE, THEREFORE, NO ADVERSE FINDINGS HAVE BEEN OR RATHER COULD ARISE IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, I.E., QUA THE SAID INVESTMENT, SO AS TO RENDER THE ASSESSMENT AS ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ASSESSEE IS IN CONSTRU CTION BUSINESS, SO THAT THE LAND COST COULD FORM A PART OF ITS PROJECT AND, THUS, DE DUCTIBLE IN COMPUTING ITS BUSINESS INCOME. EVEN IF MADE AS AN INVESTMENT, THE COST OF ACQUISITION AND IMPROVEMENT WOULD STAND TO BE ALLOWED ON ITS TRANSF ER TO DETERMINE THE INCOME UNDER THE HEAD CAPITAL GAINS. AS SUCH, WE DO NOT CONSIDER THE ASSESSEES ARGUMENT WITH REGARD TO THE IRRELEVANCE OF ANY INQU IRY INASMUCH AS ITS COST IS INCONSEQUENTIAL, AS VALID. HOWEVER, THE SAID INVEST MENT BEING MADE ABOUT 20 YEARS BACK, WE ARE UNABLE TO SEE AS TO HOW THE NON-VERIFI CATION BY THE A.O. IN RESPECT OF THE LAND COST COULD BE SAID TO RENDER HIS ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. AGAIN, AS APPARENT, THERE HAS BEEN AN ADDITION OF RS.1.26 LACS TO THE LAND ACCOUNT DURING THE CURRENT YEAR, R ESULTING IN THE OUTSTANDING BALANCE IN THE SAID ACCOUNT AS AT THE YEAR-END AT R S.58.78 LACS. AS SUCH, IN-AS- MUCH AS A CLAIM QUA LAND COST COULD FORM PART OF THE ASSESSEES CLAIM FOR DEDUCTION IN A SUBSEQUENT YEAR, ITS VERIFICATION, I N THE ABSENCE OF ANY SUCH BY THE A.O., COULD BE DIRECTED BY THE LD. CIT. WE, THEREFO RE, ENDORSE THE IMPUGNED ORDER TO THE EXTENT OF THE VERIFICATION QUA THE INCREASE IN THE LAND COST DURING THE RELEVANT YEAR. WE DECIDE ACCORDINGLY. B) IT STANDS EXPLAINED THAT TDS ON THE RECONDITIONI NG CONTRACT HAD BEEN DULY DEDUCTED, IN SUPPORT OF WHICH COPY OF THE TDS RETUR N FOR THE RELEVANT YEAR, ALONG WITH THE ACCOMPANYING LETTER, DULY ACKNOWLEDGED, WA S FILED BEFORE THE LD. CIT (PB PG.7). THE LD. AR WOULD STATE THAT A PERUSAL TH EREOF WOULD CLARIFY THAT TAX WAS DEDUCTED IN THE MONTH OF MARCH OF THE RELEVANT PREV IOUS YEAR AND DEPOSITED IN THE 5 ITA NO. 3123/MUM/2009 (A.Y. 2005-06) JAY VIJAY CONSTRUCTION CO. VS. CIT-I FOLLOWING YEAR. THE PURPORT OF THE OBJECTION BY THE LD. CIT, HE WOULD FURTHER ADD, WAS THUS NOT UNDERSTOOD. IN FACT, IT IS THIS THAT P ROMPTED THE ASSESSEE TO SUBSEQUENTLY FILE A GRIEVANCE PETITION BEFORE THE C HIEF COMMISSIONER OF INCOME TAX ON 08.04.2009, TAKING US THROUGH THE RELEVANT PART (PARA 3) THEREOF (PB PGS.20-23). WE ARE AGAIN AT A LOSS TO COMPREHEND THE NATURE OF THE ERROR. ONCE THE TDS RETURN HAS BEEN FILED BEFORE THE LD. CIT, IT WAS IN CUMBENT ON HIM TO ISSUE A FINDING IN ITS RESPECT, AND ONLY WHERE THE ASSESSEES EXPLA NATION FOUND WANTING, COULD HE ISSUE A FINDING WITH REGARD TO THE ASSESSMENT BEING ERRONEOUS AND PREJUDICIAL TO THAT EXTENT, SO THAT IT IS ONLY UPON SUCH A FINDING THAT HIS ORDER BECOMES A VALID ORDER U/S.263. C) THE MATTER, IT WAS EXPLAINED BY THE LD. AR, TAKI NG US THROUGH THE RELEVANT PART OF THE ASSESSEES LETTER DATED 10.11.2006 (SUP RA), WAS RAISED DURING ASSESSMENT BY THE A.O., WITH THE ASSESSEE SUBMITTING THE LOAN CONFIRMATIONS, EVEN AS IT WAS CLARIFIED THAT ALL THE LOANS ARE 5 TO 10 YEARS OLD, FALLING EVEN PRIOR TO THE BLOCK PERIOD [A.YS. 1991-92 TO 2001-02], ALSO FURNISHING THE COPIES OF THE ACCOUNT FOR THE YEAR ENDING 31.03.2002 TOWARD THE SAME. THIS IS SUE WAS IN FACT NOT RAISED BY THE LD. CIT VIDE HIS SHOW CAUSE NOTICE. WE ARE UNDER THE CIRCUMSTANCES; THE FACTS BEING UND ISPUTED, AGAIN, UNABLE TO APPRECIATE THE BASIS OF THE REVENUES GRIEVANCE AS MADE THROUGH THE LD. CIT. AS SOUGHT TO BE EXHIBITED PER THE MATERIAL ON RECORD S UBMITTED BEFORE THE A.O. THE LOANS PERTAIN TO AN EARLIER YEAR, SO THAT NO CAUSE OF ACTION WOULD ARISE FOR THE CURRENT YEAR. THE OBJECTION IS WITHOUT MERIT. D) THE AMOUNT WAS EXPLAINED DURING THE COURSE OF TH E ASSESSMENT PROCEEDINGS (REFER PARA 6 OF THE ASSESSEES LETTER DATED 10.11. 2006 (SUPRA)), TO BE IN RESPECT OF SALE OF LAND TO M/S. SIDDHIVINAYAK ASSOCIATES DURIN G THE YEAR 1996, AND IS YET TO BE RECOVERED, ALSO FURNISHING A COPY OF THE RELEVAN T AGREEMENT. THE COPY OF THE AGREEMENT ALSO STAND FURNISHED, WHICH WOULD EVIDENC E THE NATURE AND THE DATE OF THE TRANSACTION, WHILE THE VERY FACT THAT THE SAME OUTSTANDS IN ACCOUNTS, WOULD EXHIBIT OF IT BEING DULY RECORDED IN THE BOOKS OF A CCOUNT AT THE AGREED AMOUNT. WHAT WE WONDER, THEN, IS THE PURPORT OF THE ENQUIRY AS DIRECTED BY THE LD. CIT, WHICH WE FIND AS WITHOUT MERIT, MUCH LESS LEADING T O THE FINDING OF THE ASSESSMENT BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 6 ITA NO. 3123/MUM/2009 (A.Y. 2005-06) JAY VIJAY CONSTRUCTION CO. VS. CIT-I E) THE SUNDRY DEBTORS HAVE BEEN EXPLAINED BY THE AS SESSEE BEFORE THE ASSESSING AUTHORITY TO BE IN RESPECT OF FLAT SALES, SUBMITTING THE COPY OF THE RELEVANT SALE AGREEMENTS. THE ASSESSEE HAVING ALREA DY BOOKED THE REVENUE IN RESPECT OF THE SAID SALES, AND IN ACCORDANCE WITH T HE SALE AGREEMENTS, WE ARE AGAIN UNABLE TO APPRECIATE THE PURPORT OF THE ENQUIRY OR, RATHER, THE CHARGE OF LACK OF PROPER ENQUIRY BY THE A.O. BY THE LD. CIT, WHICH TH EREFORE WE FIND AS WITHOUT SUBSTANCE. IN FACT, THIS AS WELL AS THE RECEIVABLE AMOUNT OF RS.56 LACS FROM M/S. SIDDHIVINAYAK ASSOCIATES, ALSO FORMS THE SUBJECT MA TTER OF THE ASSESSEES GRIEVANCE PETITION BEFORE THE LD. CCIT. THOUGH A READING OF OUR ORDER, IN-AS-MUCH AS IT DOE S NOT BEAR REFERENCE TO THE ARGUMENTS BY THE LD. DR, I.E., ON THE FIVE ISSUES R AISED BY THE LD. CIT, MAY SUGGEST OUR HAVING NOT HEARD HIM IN THE MATTER OR, AT THE LEAST , TAKEN HIS ARGUMENTS ON RECORD, WE MAY CLARIFY THAT IT IS NOT SO. THE LD. DR, ON BEING CON FRONTED WITH THE SEVERAL ISSUES RAISED, I.E., WITH REFERENCE TO THE ASSESSEES SUBMISSIONS BEFORE THE A.O. AND THE LD. CIT, AS WELL AS THE IMPUGNED ORDER, COULD NOT REBUT ANY OF THE A SSERTIONS MADE BY THE LD. AR, WHICH ARE BORNE OUT BY THE RECORD. HE WOULD RATHER LIMIT HIS ARGUMENTS TO CLAUSE (F) OF THE ASSESSEES REPLY DATED 02.03.2009, WHICH STAND REFE RRED TO HEREINBEFORE. FURTHER, THOUGH THE LD. CIT HAS ALSO DIRECTED THE A.O. TO EXAMINE T HE OTHER ISSUES AS RAISED IN THE PROPOSAL U/S.263; THE ASSESSEE HAVING FURNISHED A REPLY, WHI CH WAS NOT FOUND WANTING IN ANY MANNER, NOR SHOWN TO US TO BE SO, WITH THE AMOUNT/S UNDER REFERENCE ( QUA THE ISSUE VIDE SAID CLAUSE (F)) IN FACT OUTSTANDING FROM AN EARLIE R YEAR, WE FIND NO BASIS FOR UPHOLDING THE SAID DIRECTION, IN-AS-MUCH AS A PRIMA FACIE NEXUS BETWEEN THE ABSENCE OF ENQUIRY AND THE PREJUDICE CAUSED (OR MAY BE CAUSED) TO THE REVE NUE OUGHT TO EXIST. 5. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED ON THE AFORE-SAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 17, 2014 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; /& DATED : 17.12.2014 7 ITA NO. 3123/MUM/2009 (A.Y. 2005-06) JAY VIJAY CONSTRUCTION CO. VS. CIT-I '.&../ ROSHANI , SR. 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