DCIT CC-4, V. PGF LTd,

ITA 3284/DEL/2007

• Counselvise Citation: 328420114 RSA 2007
• Duration Of Justice: 7 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 06-08-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 12-07-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR CHOPRA
• Assessee Lawyers: ASHWANI TANEJA; DR RAKESH GUPTA
• Keywords: Business income; Opportunity of being heard
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH. J.S.REDDY, ACCOUNTANT MEMBER I.T.A .NO S . - 3283 & 3284 /DEL/20 07 (ASSESSMENT YEAR S - 1999 - 2000 & 2000 - 2001 ) DCIT, CENTRAL CIRCLE - 4, ROOM NO - 318, IIIRD FLOOR, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI. (APPELLANT) VS M/S PGF LTD. (FORMERLY M/S PEARLS GREEN FOREST (LTD.), SCO, 1042 - 43, SECTOR - 22C, CHANDIGARH (RESPONDENT) APPELLANT BY SH. MANOJ KUMAR CHOPRA, SR. DR RESPONDENT BY D R. RAKESH GUPTA & SH. ASHWANI TANEJA, CA ORDER PER DIVA SINGH, JM THESE ARE TWO APPEALS FILED BY THE REVENUE AGAINST THE SEPARATE ORDER S DATED 24 .0 4 .20 07 PERTAINING TO 1999 - 2000 AND 200 0 - 0 1 ASSESSMENT YEARS ON MORE OR LESS IDENTICAL GROUNDS EXCEPT FOR THE DIFFERENCE IN AMOUNT S . FOR READY - REFERENCE GROUNDS FROM ITA NO. - 3283/DEL/2007 IS REPRODUCED HEREUNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT( A) HAS ERRED IN COMPUTING THE LOSS FROM BUSINESS (TAXABLE ACTIVITIES) AT RS.1,11,37,254/ - WITHOUT GIVING ANY BASIS FOR COMPUTING THE AFORESAID LOSS FROM BUSINESS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN COMPUTING THE INCOME FROM OTHER SOURCES AT RS.2,89,95,691/ - WITHOUT GIVING ANY BASIS FOR COMPUTING THE AFORESAID INCOME FROM OTHER SOURCES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,74,753/ - MADE BY THE A.O. FOR PAYME NTS MADE IN VIOLATION OF SECTION 40A(3) OF THE I.T. ACT, 961. 2 I.T.A .NO. - 3283 & 3284 /DEL/20 07 2. IN ITA NO. - 3284/DEL/2007, G ROU NDS NO. - 1, 2 & 4 ARE IDENTICAL TO GROUND NO. - 1, 2 & 3 IN THE EARLIER APPEAL AND THE ISSUE RAISED IN GROUND NO. 3 IN ITA NO. 3289/D/2007 WHICH IS NOT THERE IN THE EARLIER APPEAL READ S AS UNDER: - 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN COMPUTING THE NET INCOME FROM AGRICULTURAL PRODUCE (EXEMPT) AT RS.2,51,28,910/ - WITHOUT GIVING ANY BASIS FOR COMPUTING THE AFORESAID NET INCOME FROM AGRICULTURAL PRODUCES. 3. AT THE TIME OF HEARING LD. SR. DR , WAS REQUIRED TO ADDRESS THE GRIEVANCE POSED TO THE REVENUE. HE SUBMITTED THAT LET THE LD. AR ADDRESS THE FACTS FIRST AS HE WAS NOT ABLE TO ADDRESS THE FINDING UNDER CHALLENGE DUE TO THE FACT THAT THE IMPUGNED ORDER WAS NON - SPEAKING. LD. AR REFERRING TO THE ORDERS ON RECORD SUBMITTED THAT IN ALL FAIRNESS HOW THE LD. CIT(A) HAS ARRIVED AT THE FIGURES HE WAS ALSO UNABLE TO ADDRESS. IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CA SE THE COMMON REQUEST OF THE PARTIES BEFORE THE BENCH WAS THAT THE ISSUES MAY BE RESTORED TO THE AO AS THE CONCERNED PARTIES WER E UNABLE T O SPECIFICALLY ADDRESS THE FINDING UNDER CHALLENGE BY THE REVENUE. THE LD . AR AS OBSERVED WAS ALSO NOT IN A SITUATION TO THROW ANY LIGHT THEREON AND REQUESTED FOR A REMAND . IT WAS POINTED OUT BY THE PARTIES THAT AFTER THE LD. CIT(A) REFERRING TO THE FACTS AS CONSIDERED BY THE AO AND MAKING A REFERENCE TO THE ORDER OF THE ITAT PASSED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E 199 8 - 99 IN ITA NO. - 401/CHANDI/2003, T HE CIT(A) AFTER EXTRACTING FROM THE SAID ORDER HAS COME TO THE CONCLUSION FOR WHICH NO REASONING OR DISCUSSION IS SET OUT THEREIN. IN THE C IRCUMSTANCES IT WAS A JOINT REQUEST OF THE PARTIES THAT THE ISSUES BE RESTORED TO THE AO WITH THE DIRECTION THAT THE SAME MAY BE DECIDED DE NOVO AFTER HEARING THE PARTIES. 3.1. A PERUSAL OF THE RECORD SHOWS THAT AS PER THE ASSESSMENT ORDER DATED 28.11.2013 PASSED U/S 143(3)/148 OF THE INCOME TAX ACT, 1961. THE ASSESSEE COMPANY WAS STATED TO HAVE BEEN ENGAGED IN THE BUSINESS OF COLLECTING DEPOSITS FROM PUBLIC, WHICH IT C LAIM ED WERE IN THE FORM OF JOINT V ENTURE FUND. THE 3 I.T.A .NO. - 3283 & 3284 /DEL/20 07 PURPOSE FOR COLLECTING MONEY FROM PU BLIC WAS STATED TO BE FOR PURCHASING LAND IN THE NAME OF THE COMPANY AT DIFFERENT PLACES IN THE COUNTRY AND IT WAS CLAIMED THAT THE AGRICULTURAL ACTIVITIES SHALL BE DONE ON THE LAND AND THE YIELD FROM THE SAME SHALL BE PASSED ON TO THE SO CALLED JOINT VENT URE. AS PER RECORD, THE ASSESSEE HAD ALSO BEEN CARRYING ON THE FOLLOWING ADDITIONAL ACTIVITIES: - I) INTEREST ON FIXED DEPOSITS II) TIMBER BUSINESS III) DEALING IN COMMERCIAL LAND IV) DEALING IN AGRI. LAND (PLOT HOLDERS) V) REAL ESTATE ACTIVITIES 3.2. AGAINST THE ABOVE INCOME SHOWN FROM THE ABOVE THE ASSESSEE IS FOUND TO HAVE CLAIMED EXPENSES UNDER VARIOUS HEADS WHICH WERE H E LD TO BE HUGE BY THE AO . THE ASSESSEE WAS F OUN D TO HAVE SHOWN GROSS AGRICULTUR AL I NCOME OF RS.36 , 74 , 000.00 AND CLAIMED THE NET PROFIT OF RS.84 , 02 , 598.00 AS NET AGRICULTURAL INCOME AND CLAIMED REFUND OF RS.71 , 06 , 078.00. 3.3. THE RECORD SHOW S THAT THE ASSESSEE WAS REQUIRED T O EXPLAIN HOW THE INCOME OF RS.84,00,000/ - WAS CLAIMED TO BE EXEMPT WHEN ON RECORD THERE WAS ONLY SALE OF AGRICULTURAL PRODUC E OF RS. 36,00,000/ - EVEN FOR WHICH THE EXPLANATION WAS NOT SATISFACTORY. THE ASSESSEE WAS REQUIRED TO RECAST ITS ACCOUNTS AS THESE WERE FOUND TO HAVE BEEN MADE IN SUCH A MANNER THAT THE EXPENSES QUA THE ACTIVITIES COULD BE CONSIDERED AS IT WAS NOT POSSIBLE TO SEGREGATE THE EXPENSES ACCORDING TO THE ACTIVITIES. DESPITE THE GRANT OF OPPORTUNITY THE ASSESSEE WAS FOUND TO HAVE NOT BEEN ABLE TO PRESENT ITS DETAILS IN THE APPROPRIATE MANNER. THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE FOUND T O HAVE BEEN MAINTAINED IN SUCH A MANNER THAT EXPENSES DEBITED TO P&L A/C , IT WAS FOUND COULD NOT BE SEGREGATED PR ECISELY TOWARDS TAXABLE AND NON - TAXABLE ACTIVITIES. THE NET INCOME FROM AGRICULTURAL OPERATIONS WAS TAKEN AT RS.4,16,000/ - AND THE CLAIM THAT THERE WAS A NET PROFIT OF RS. 4 I.T.A .NO. - 3283 & 3284 /DEL/20 07 84,02,598/ - AS PER PAGE 4 OF THE ASSESSMENT ORDER WAS NOT ACCEPTED. THE AO FURTHER FOUND THAT THE ASSESSEE VIOLATED SECTION 40A(3). 3.4. APART FROM THAT THE AO REQUIRED THE ASSESSEE TO PRODUCE THE VALUATION OF CLOSING STOCK OF DIFFERENT ITEMS HOWEVER THE ASSESSEE DID NOT FURNISH THE VALUATION OF JOINT VENTURE LAND AND ITS DEVELOPMENT. THE AO OBSERVED FROM THE ACCOUNTS PRESENTED AND THE MATERIAL AVAILABLE ON RECORD THAT THE ASSESSEE HAS BEEN ACCEPTING DEPOSITS IN CASH FROM THE JOINT VENTURE ACCOUNTS MAINTAINED AT DIFFERENT BRANCHES IN VIOLATION OF SECTION 269SS OF THE ACT. AS A RESULT THEREOF THE TAXABLE INCOME OF THE ASSESSEE WAS CONCLUDED AT A FIGURE OF RS.1,17,00,229/ - . A PERUSA L OF THE IMPUGNED ORDER SHOWS THAT THE LD. CIT(A) AFTER NOTING THE ARGUMENTS ON BE HALF OF THE ASSESSEE EXTRACTED CERTAIN PORTIONS FROM THE ORDER OF THE TRIBUNAL WHICH ARE REPRODUCED HEREUNDER FOR READY - REFERENCE: - IN THIS CASE, IT IS PERTINENT TO REFER T O THE ORDER OF HON BLE ITAT IN THE ASSESSEE S CASE IN ITA NO.401/CHANDI/2003 FOR THE A.Y.1998 - 99. THE TRIBUNAL HAS OBSERVED AS FOLLOWS: - FROM THE DETAILS OF INCOME AND EXPENDITURE AS PER STATEMENT ON RECORD, THE ABOVE OBJECTS FOR WHICH THE COMPANY HAS BEEN FORMULATED, THERE CAN, IN OUR VIEW, HARDLY BE ANY DOUBT THAT THE ASSESSEE HAS CARRIED ON VARIOUS ACTIVITIES IN THE COURSE OF BUSINESS. THE ASSESSEE HAD CLAIMED THE ENTIRE RECEIPTS AS AGRICULTURAL INCOME. IN OUR CONSIDERED VIEW, THERE IS NO MERIT IN THE CLAIM OF THE ASSESSEE AND THE CLAIM OF THE ASSESSEE IN REGARD TO THE VARIOUS RECEIPTS AS BEING AGRICULTURAL INCOME HAD RIGHTLY BEEN REJECTED BY THE A.O. IN THIS CONNECTION, REFERENCE TO THE DECISION OF NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF FORES T DEVELOPMENT CORPORATION OF MAHARASTRA LTD. (SUPRA) WOULD BE RELEVANT. I N THE SAID CASE, IT WAS HELD THAT INTEREST FROM SHORT - TERM DEPOSITS AND FROM LOANS TO EMPLOYEES WAS NOT AGRICULTURAL INCOME AS THE IMMEDIATE SOURCE OF INCOME WAS NOT THE LAND. IT WA S FURTHER HELD THAT INTEREST ON BORROWED FUNDS CANNOT BE ADJUSTED AGAINST INTEREST PAID BY THE ASSESSEE ON BORROWINGS FOR ITS AGRICULTURAL BUSINESS. THE NAGPUR BENCH OF THE TRIBUNAL HAS PLACED RELIANCE ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE O F KARNATAKA FOREST PLANATATIONS CORPN LTD. 156 ITR 275 (KAR.). REFERENCE MAY ALSO BE RELEVANT TO THE DECISION OF THE PRIVY COUNCIL IN THE CASE OF RAJA BAHADUR KAMAKHAYA NARAYAN SINGH (SUPRA). IN THE SAID CASE, IT WAS HELD THAT INTEREST ON ARREARS OF RENT PAYABLE IN RESPECT OF LAND USED FOR AGRICULTURAL PURPOSES IS NOT AGRICULTURAL INCOME. IN THE PRESENT CASE, MOST OF THE RECEIPTS MENTIONED IN PARA 3 DO NOT EMANATE FROM THE AGRICULTURAL LAND. THE MERE FACT THAT THE ASSESSEE IS ALSO CARRYING ON AGRICULTURA L ACTIVITIES IN OUR VIEW IS NOT SUFFICIENT TO DETERMINE THE NATURE OF THE RECEIPTS. THE 5 I.T.A .NO. - 3283 & 3284 /DEL/20 07 TAXABILITY OF THE RECEIPTS IS DEPENDENT ON THE IMMEDIATE SOURCE OF RECEIPTS AND NOT MERELY BECAUSE IT IS RELATED TO THE LAND WHICH IS UTILIZED FOR AGRICULTURAL OPERATI ONS. WE ARE, THEREFORE, OF THE CONSIDERED VIEW THAT VARIOUS RECEIPTS IN COLUMN NO (III) PARA 3 OTHER THAN INCOME FROM AGRICULTURAL LAND DO NOT FALL WITHIN THE CATEGORY OF AGRICULTURAL INCOME. HOWEVER, SINCE THE ASSESSEE HAS NOT MADE ANY ATTEMPT TO DETERM INE THE QUANTUM OF NET INCOME FROM THE BUSINESS RECEIPTS WITH REFERENCE TO THE INCOME AND EXPENDITURE RELATING TO THE BUSINESS ACTIVITIES, WE CONSIDER IT APPROPRIATE TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR THE PURPOSE OF DETERMINATION OF THE QUANTUM OF INCOME, WHICH WE HAVE HELD TO FALL UNDER THE HEAD BUSINESS INCOME . THIS DISPOSES OF GROUND NO.2 RAISED BY THE REVENUE. 4. CONSIDERING WHICH THE INCOME OF THE ASSESSEE WAS COMPUTED AS UNDER: - IN COMPLIANCE OF THE ABOVE DIRECTIONS OF ITAT, THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER: - NET LOSS FROM BUSINESS (TAXABLE ACTIVITIES) 1 ,13,701,254/ - NET INCOME FROM SALE OF AGRICULTURAL PRODUCE(EXEMPT) 4,16,000/ - INCOME FROM OTHER SOURCES 28,995,691/ - NET LOSS 84,705,563/ - THE ABOVE INCOME HAS BEEN COMPUTED ON THE BASIS OF THE FOLLOWING: - 1. TRADING AND PROFIT/LOSS ACCOUNT OF TAXABLE ACTIVITIES (BUSINESS INCOME) 2. RECASTED TRADING AND PROFIT/LOSS ACCOUNT OF AGRICULTURAL ACTIVITIES. 3. PROFIT AND LOSS ACCOUNT OF IN COME FROM OTHER SOURCES. 4. JOINT VENTURE DEVELOPMENT ACCOUNT. 5. MANUFACTURING EXPENSES TIMBER (ACTUALS). 6. MARKETING EXPENSES. 7. BUSINESS DEVELOPMENT EXPENSES. 8. ALLOCATION OF YIELD EXPENSES. 9. MANAGEMENT AND OTHER EXPENSES. 4.1. IN VIEW OF THE STAND O F THE PARTIES BEFORE THE BENCH WHICH WE FIND GENUINE AS THE IMPUGNED ORDER IS SILENT AS TO ON WHAT BASIS COMPUTATION HAS BEEN DONE WE DEEM IT APPROPRIATE TO ACCEDE TO THE REQUEST AND ACCORDINGLY W E RESTORE THE ISSUE BACK TO THE AO WITH THE DIRECTION TO DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD AND TAKING INTO CONSIDERATION THE ORDER PASSED BY THE CO - ORDINATE BENCH AT CHANDIGARH IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. 5. I N THE RESULT THE APPEAL O F THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6 I.T.A .NO. - 3283 & 3284 /DEL/20 07 6. SINCE THE FACTS AND CIRCUMSTANCES IN REGARD TO HOW THE ISSUES HAVE BEEN DISCUSSED BY THE CIT(A) IN 2000 - 01 ASSESSMENT YEAR REMAINE D IDENTICAL AND NO SEPARATE ARGUMEN TS QUA THE SAME WERE ADVANCE D BY THE PARTIES WE, ACCORDINGLY HE R E IN ALSO , WE ACCEPT THE PRAYER OF THE PARTIES CONSIDERING THE MATERIAL AVAILABLE ON RECORD AND RESTORE THE ISSUES BACK TO THE AO WITH THE DIRECTION TO PASS AN ORDER IN ACCORDANCE WITH LA W AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD . 7. IN THE RESULT THE APPEAL S OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUN CED IN THE OPEN COURT ON 1 7 T H OF OCTOBER 2014. S D / - S D / - ( J. S. REDDY ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 7 /10 /2014 *AMIT KUMAR/SUBODH KUMAR COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI