ITO 2(1)(1), MUMBAI V. BASIC CHEMICALS AND ALLIED INDUSTRIES P. LTD, MUMBAI

ITA 3287/MUM/2010

• Counselvise Citation: 328719914 RSA 2010
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 27-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO
• Assessee Lawyers: NAYAK
• Keywords: Unexplained investment
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R.S. SYAL R.S. SYAL R.S. SYAL R.S. SYAL (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 3287/MUM/2010 ASSESSMENT YEAR-2006-07 THE ITO 2(1)(1), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. BASIC CHEMICALS & ALLIED INDUSTRIES PVT. LTD., 2 ND FLOOR, MALHOTRA HOUSE, OPP. G.P.O. MUMBAI-400 001 PAN-AAACB 1835F (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI GOLI SRINIVAS RAO RESPONDENT BY: SHRI NAYAK O R D E R O R D E R O R D E R O R D E R PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGA INST THE ORDER DATED 1.2.2010 PASSED BY THE LD. CIT(A)-4 FOR T HE ASSESSMENT YEAR 2006-07-. 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN CONSTRUCTION ACTIVITY. IT HAS COMPLETED PHASE I OF A PROJECT AT MALAD COMPRISING CONSTRUCTION OF INDUSTRIAL GALAS CALLED ADI TYA INDUSTRIAL ESTATE. DURING THE YEAR IT COMMENCED PHASE II COMPRI SING OF ADDITIONAL GALAS IN THE SAME PROJECT. FOR PHASE II IT PURCHASED TDR FOR RS. 1,43,04,413 AS UNDER: FROM AREA COST RAT E PER SQ.M. RELATING TO LAND AT M/S. SKYLINE CONSTRUCTIONS 600 SQ.MTRS RS.92, 03,220 15,338 GOREGAON M/S. SHAH DEVELOPERS 680 SQ.MTRS RS.46,84,4 93 6,889 KANJUR MARG -------------------------------------------------- --------------------------------------------------- ------------------------- - ITA NO. 3287/M/2010 2 - THE TDR AND OTHER COSTS INCURRED AGGREGATING RS.1,76,7 1,459 WERE REFLECTED AS CAPITAL WORK-IN-PROGRESS IN THE BALA NCE SHEET FOR THE YEAR ENDED 31-3-2006. - THE ASSESSEE HAD OBTAINED A TERM LOAN OF RS. 2 CRORES FRO M THE SMALL INDUSTRIAL DEVELOPMENT BANK OF INDIA (SIDBI) FOR CONSTRUCTION OF PHASE II. THE LOAN WAS SECURED AGAINST MORTGAGE - OF IMMOVABLE PROPERTIES. THE MORTGAGE DEED WAS EXECUT ED ON 26.9.2005, AND REGISTERED WITH THE STAMP AUTHORITIES A T BORIVALI. THIS TRANSACTION OF MORTGAGE WAS INCLUDED IN THE AIR DATA BY THE SUB-REGISTRAR. - DURING THE ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO CONFIRM THE AIR TRANSACTION VIDE LETTER DATED 12. 12.2008 - EXPLANATION OF THE ASSESSEE WAS SUBMITTED ALONG WITH COPY OF REGISTERED MORTGAGE DEED VIDE REPLY DATED 15.12.2008 AND 18.12.2008. - BY COMPARING COST OF TDR PURCHASED RS. 1.43 CRORE AND VALUE REFLECTED IN MORTGAGE DEED RS.2 CR, THE AO CONCLUDED THAT ASSESSEE HAD MADE AN EXPLAINED INVESTMENT. - ON THE BASIS OF THE RATE OF RS.28,500 OF FULLY CONSTRUC TED INDUSTRIAL BUILDING IN MALAD REFLECTED IN THE STAMP DUTY READY RECKONER, THE AO MADE AN ADDITION OF RS. 2,25,92,287 UNDER SEC.69B (MARKET VALUE @RS.28,500 RS.3,64,80,000 LESS COST DISCLOSED RS.1,38,87,713 = RS.2,25,92287/-. 3. ON FURTHER APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A) HELD AS FOLLOWS: I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A.R. AND I FIND THAT THE APPELLANT HAS EXPLAINED THE SOURCES OF P URCHASE OF TDR. THE ADDITION MADE BY THE A.O. IS ON ACCOUNT OF VALUATION OF TDR AT MARKET RATE OF BUILDINGS AS PER READY RECKONER IS NOT CORRECT AS THE RECKONER GIVES THE VALUATION OF LAND A ND BUILDING AND NOT TDR. THEREFORE, THE SAME RATE CANNOT BE APPL IED IN THE RESPECT OF TDR. FROM THE ABOVE, IT IS TO BE NOTED TH AT THE APPELLANT HAS EXECUTED A MORTGAGE DEED ON 26/09/2005 FOR CREATION OF MORTGAGE OF PLOT OF LAND HAVING C.T.S. 1068/C ITA NO. 3287/M/2010 3 INCLUDING INDUSTRIAL GALAS TO BE CONSTRUCTED THERE AS SE CURITY OF TERM LOAN OF RS. 2 CRORE AND THE SAME WAS REGISTERED W ITH OFFICE OF THE JT. SUB-REGISTRAR, BORIVALI, AND STAMP DUTY OF RS.1,00,000/- WAS PAID ON 18/10/2005. THE APPELLANT HAS SUBMITTED C OPY OF MORTGAGE DEED TO THE ASSESSING OFFICER ON 15.12.2008 FO LLOWED BY ANOTHER SUBMISSION DATED 18.12.2008. THE APPELLANT HAS ACQUIRED DURING THE YEAR UNDER APP EAL TDR FOR RS. 1,43,04,413/- FROM TWO PARTIES. COPY OF AGREEMENT FOR ACQUISITION OF TDR FROM BOTH PARTIES HAVE BEEN SU BMITTED TO THE ASSESSING OFFICER ON 14.11.2008. TRANSACTION OF CREATION OF MORTGAGE FOR AVAILING LOA N OF RS.2 CRORE HAS BEEN REGISTERED WITH REGISTRAR AND SAME I S REPORTED IN ANNUAL INFORMATION REPORT (AIR). THE A SSESSING OFFICER HAS ISSUED A LETTER ON 10.12.2008 SEKING EXPLA NATION AND CONFIRMATION OF AIR TRANSACTION OF RS. 2 CRORE. AS APP ELLANT DENIED TRANSACTION OF RS.2 CRORE, THE ASSESSING OFFICER CALLED FOR FURTHER INFORMATION U/S 133 (6) FROM THE SUB REGISTRA R, BORIVALI-4. ON RECEIPT OF FURTHER INFORMATION IN FORM OF INDEX II FROM THE SUB REGISTRAR, BORIVALI-4, THE ASSESSING OFFICER WROTE ANOTH ER LETTER ON 18.12.2008 STATING AS UNDER: IN THIS RESPECT, PLEASE FIND ENCLOSED COPY OF INFORMATION CALLED FOR AND RECEIVED U/S 133(6) OF TH E ACT FROM OFFICE OF THE JT. SUB REGISTRAR, BORIVALI REGIST RATION OFFICER, BORIVALI, IN RESPECT OF THE MARKET VALUE AN D THE STAMP DUTY PAID ON THE SAME REGARDING TDR PURCHASED ON PROPERTY BEARING CTS NO. 1068/C. AS IS EVIDENT ON A PERUSAL OF THE SAME, IT IS SEEN THAT THE MARKET VALUE O F THE TDR IS SHOWN TO BE RS.2,00,00,000/- ON WHICH STAMP DUTY OF RS.1,00,000/- HAS BEEN PAID WHICH AMOUNTS TO 0.5% O F THE MARKET VALUE. YOU ARE GIVEN AN OPPORTUNITY TO EXPLAIN THE DISCREPANCY BETWEEN THE AMOUNT DECLARED BY YOU A ND THE AMOUNT SHOWN IN THE STAMP VALUATION AS DESCRIBED ABOVE AND ALSO TO GIVE REASONS AS TO WHY THE DIFFERENCE BE NOT TREATED AS UNEXPLAINED INVESTMENTS WITHIN MEANING OF SECTION 69B OF THE I.T.ACT, 1961. THE ASSESSING OFFICERS ABOVE MENTIONED LETTER DATED 18 TH DECEMBER, 2008 SHOWS THAT WHILE EXAMINING AIR TRANSACT ION OF RS. 2 CRORE, THE ASSESSING OFFICER HAS MIXED UP THE AIR TRANSACTION OF RS. 2 CRORE WITH PURCHASE OF TDR OF RS. 1,43,04,413/- AND CONSEQUENTLY MADE ERRONEOUS CONCLUSI ON THAT THERE IS UNDISCLOSED INVESTMENT WITHIN MEANING OF SECTIO N 69B. THE APPELLANT HAS EXPLAINED AIR TRANSACTION VIDE SUBM ISSION DATED 15.12.2008 AND 18.12.2008 WITH SUPPORTING DOCU MENTS. ENTIRE ADDITION OF UNDISCLOSED INVESTMENT IN TDR HAS B EEN MADE ITA NO. 3287/M/2010 4 ON ERRONEOUS CONCLUSION REACHED BY MIXING UP OF AIR T RANSACTION OF RS. 2 CRORE FOR CREATION OF MORTGAGE AND PURCHASE OF TDR OF RS. 1,43,04,413/-. AFTER ERRONEOUSLY CONCLUDING ABOU T UNDISCLOSED INVESTMENT IN PURCHASE OF TDR, THE ASSESSING OF FICER MADE ADDITION BY ADOPTING RATE OF FULLY CONSTRUCTED UNIT AS PROVIDED IN STAMP DUTY READY RECKONER FOR RATE OF PU RCHASE OF TDR AND DIFFERENCE IN BOTH RATES MULTIPLIED BY AREA HAS BEEN TREATED AS UNDISCLOSED INVESTMENT IN PURCHASE OF TDR. THUS, THE ASSESSING OFFICER HAS MADE AN INCORRECT CONCLUSION THAT T HERE IS UNDISCLOSED INVESTMENT IN PURCHASE OF TDR AND HAS FURTHE R ERRED IN CALCULATING ADDITION BY ADOPTING RATE OF FULLY C ONSTRUCTED UNITS AS PROVIDED IN STAMP DUTY READY RECKONER. IN THIS CAS E THE ASSESSEE HAS EXPLAINED THE SOURCES OF INVESTMENT IN TDR. THEREFORE, NO ADDITION IS CALLED FOR U/S. 69B. THE A .O. IS DIRECTED TO DELETE THIS ADDITION. 4. WE HAVE HEARD BOTH THE PARTIES. THE LD. COUNSEL F OR THE ASSESSEE SHRI NAYAK SUBMITTED AT PAGE 1 OF THE PAPER BO OK A COPY OF READY RECKONER FROM WHICH IT IS CLEAR THAT THE SAME W AS MEANT FOR REFERENCE WITH RESPECT TO STAMP DUTY AND MARKET VAL UE OF FLATS IN MUMABI AND NOT REFERENCE FOR TDR RATES. THERE IS A W IDE VARIATION BETWEEN VALUE OF TDR AND VALUE OF FULLY CONSTRUCTED INDUSTRIAL BUILDING AND THE TWO VALUES ARE NOT COMPARABLE. AS RIGHTLY PO INTED OUT BY THE LD. CIT(A), THE AOS LETTER DT. 18.12.2008 SHOWS THAT WHILE EXAMINING THE AIR TRANSACTION OF `. TWO CRORES, THE AO HAS MIXE D UP THE AIR TRANSACTION OF TWO CRORES WITH PURCHASE OF TDR OF `. 1 ,43,04,413/- AND CONSEQUENTLY MADE ERRONEOUS CONCLUSION THAT THERE IS U NDISCLOSED INVESTMENT WITHIN THE MEANING OF SEC. 69B. FURTHER THE AO MADE ADDITION BY ADOPTING RATE OF FULLY CONSTRUCTED UNI T AS PROVIDED IN STAMP DUTY READY RECKONER FOR RATE OF PURCHASE OF TD R AND THE DIFFERENCE IN BOTH RATES MULTIPLIED BY AREA HAS BEEN TREATED AS UNDISCLOSED INVESTMENT IN PURCHASE OF TDR. THE AO HA S NOT APPRECIATED THAT TDR RATES DEPEND UPON MARKET FORCE AND ARE NOT AVAILABLE IN THE RECKONER. HENCE THE AO HAS TAKEN A WRONG BASIS FOR DETERMINING THE TDR RATES AND THEREFORE WE CONFIRM T HE ORDER OF THE LD. CIT(A) AND ALLOW THE ASSESSEES APPEAL. ITA NO. 3287/M/2010 5 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 29 TH DAY OF APRIL, 2011 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 29 TH APRIL, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR H BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 3287/M/2010 6 DATE INITIALS 1 DRAFT DICTATED ON: 27. 0 4. 2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 27. 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. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10. DATE OF DISPATCH OF ORDER: _________ ______