ACIT, CHENNAI V. Chettinad Structural & Engineering Ltd., CHENNAI

ITA 3443/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4011 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 22-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN JCITD R
• Assessee Lawyers: K B MURALIDHARAN CA
• Keywords: Gift; Business income; Depreciation; Cost of acquisition; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.3443/MDS./2016 / ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(2), CHENNAI 600 034. VS. M/S. CHETTINAD STRUCTURAL & ENGINEERING LTD., 6 TH FLOOR, RANI SEETHAI HALL, 603, ANNASALAI, CHENNAI 600 006. [PAN AAACS 8784 N ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.N.MADHAVAN,JCIT,D.R /RESPONDENT BY : MR.K.B.MURALIDHARAN,C.A / DATE OF HEARING : 24 - 05 - 2017 / DATE OF PRONOUNCEMENT : 12 - 07 - 2017 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, CHENNA I DATED 20.09.2016 PERTAINING TO ASSESSMENT YEAR 2006-07. ITA NO.3443/MDS./16 :- 2 -: 2. THE FIRST GROUND IN ITS APPEAL IS WITH REGARD T O CANCELLING THE RE-OPENING OF ASSESSMENT U/S.147 OF THE ACT. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07 ON 29.11.2006. AS PER THE STATEMENT OF FACTS FURNISHED BY THE ASSESSEE BEFORE US, THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 26.12.2008 ACCEPTING THE TOTAL INCOME OF ASSESSEE AT ` 2,61,22,804/-. THE AO FOUND THAT THE ASSESSEE HAD SOLD 5,22,050 SQ.FT. OF LAND FOR A RESIDENTIAL PROJECT AND OUT OF WHICH 2,10,405/- SQ. FT. WAS CONSIDERED AS NON-SALEABLE AREA AND THAT THE ASSESSEE HAD INCL UDED THE COST OF LAND OF 2,10,405 SQ.FT. IN THE COMPUTATION OF CAPIT AL GAINS. THEREFORE, THE AO REOPENED THE ASSESSMENT U/S.147 BY ISSUE OF NOTICE U/S.148 DATED 26.03.2013 AND THE ASSESSMENT U/S.143(3) R.W .S. 147 OF THE ACT WAS COMPLETED ON 31.03.2014 DETERMINING TOTAL INCOM E AT ` 2,95,05,500/- WITH CERTAIN ADDITIONS. REASONS RECOR DED FOR RE-OPENING OF ASSESSMENT U/S.147 OF THE ACT IS COMMUNICATED T O ASSESSEE VIDE LETTER DATED 08.05.2013 BY THE AO AS FOLLOW:- ASSESSEE HAS SOLD 5,22,050 SQ.FT. OF LAND WIT H RESIDENTIAL PROJECT OUT OF WHICH 21,405 SQ. FT. WAS CONSIDERED NON- SALEABLE. THE TRANSFER OF TITLE OF THE NON-SALEABLE AREA HAS NOT BEEN DISCLOSED FULLY. HOWEVER, IN THE COMPUTATION O F CAPITAL GAINS, THE ASSESSEE HAS EXCLUDED THE COST OF LAND O F 21,405 SQ.FT.. TO THAT EXTENT THERE IS AN UNDERSTATEMENT O F INCOME. ITA NO.3443/MDS./16 :- 3 -: HENCE, THERE IS A REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. WHILE COMPUTING THE ASSESSMENT U/S.143(3), THE AO MADE THE FOLLOWING DISALLOWANCES:- DISALLOWANCE U/S.40(A)(IA) 14,55,500 PROFIT ON SALE OF ASSETS 19,26,712 AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER, TH E ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD .CIT(A) QUASHED THE RE-ASSESSMENT ORDER. THEREAFTER, CIT(A) DELET ED THE ADDITION ALSO. AGAINST THE ORDER OF LD.CIT(A), NOW THE REVEN UE IS IN APPEAL BEFORE US. 4. BEFORE US, LD.D.R SUBMITTED THAT THERE IS NO FU LL AND COMPLETE DISCLOSURE OF THE FACTS REGARDING THE LAN D GIFTED TO TIRUCHIRAPPALI CORPORATION VIDE GIFT DEED 1573/2005 AND THE PROPORTIONATE COST OF THE LAND GIFTED CANNOT BE DEB ITED TO P&L A/C. SO, THERE IS NO CHANGE OF OPINION ON THIS ISSUE OF REOP ENING OF ASSESSMENT AND THE RE-OPENING OF ASSESSMENT IS TO BE CONSIDER ED AS VALID. FURTHER, LD.D.R SUBMITTED THAT RE-OPENING WAS NOT V IOLATIVE OF PROVISO TO SEC.147 FOR THE REASON THAT THE ASSESSEE WAS FUL LY AWARE OF THE NATURE OF TRANSACTIONS AND HAD NOT FURNISHED FULL F ACTS DURING THE ITA NO.3443/MDS./16 :- 4 -: ORIGINAL ASSESSMENT PROCEEDINGS FOR TREATING THE SH ARE TRANSACTIONS AS INVESTMENT TRANSACTIONS. HE RELIED IN THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF EXPORT CREDIT CORPORATION OF I NDIA LTD IN 30 TAXMANN.COM 211 (2013) WHEREIN IT WAS HELD THAT THE FAILURE OF THE AO TO APPLY HIS MIND DURING ORIGINAL ASSESSMENT PRO CEEDINGS TO POINTS ON WHICH THE ASSESSMENT IS SOUGHT TO BE REOPENED WO ULD FORM TANGIBLE MATERIAL AND REASONS TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT , IS VERY MUCH RELEVANT TO THE FACTS OF THIS CASE. 5. ON THE OTHER HAND, LD.A.R SUBMITTED THAT THE RE -OPENING OF THE ASSESSMENT AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND ALSO MERE CHANGE OF OPINION IS BAD IN LAW. FURTHER, LD.A.R SUBMITTED THAT THE POWER TO REOPEN AN ASSESSMENT IS CONDITIONAL ON THE FORMATION OF A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . THE POWE R IS NOT AKIN TO A REVIEW. LD.A.R PLEADED THAT THE AO HAD DISCUSSED AN D VERIFIED THE TOTAL INCOME OF ASSESSEE AND ACCEPTED IT AS IT IS I N THE ORIGINAL ASSESSMENT . THUS, HE HAD APPLIED HIS MIND WHEN PAS SING ORIGINAL ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07. FURTH ER, LD.A.R RELIED ON THE LETTER DATED 24.12.2008 FILED BEFORE AO WHIC H CONTAINS THE DETAILS OF THE PLOT SOLD AND EXPENSES WHEREIN THE C OMPUTATION OF COST OF THE LANDS SOLD WERE FURNISHED. COST OF LANDS SOL D INTERALIA INCLUDE ITA NO.3443/MDS./16 :- 5 -: COST OF LANDS (NON-SALEABLE) GIFTED TO TIRUCHIRAPPA LI CORPORATION WHILE OBTAINING APPROVAL FOR LAYOUTS. FURTHER, HE RAISED TO THE OBJECTION TO THE GROUND NO.2.3 RAISED BY THE AO THAT THE ASSESS EE HAD NOT FURNISHED FULL FACTS FOR TREATING THE SHARES TRANSA CTIONS AS INVESTMENT TRANSACTIONS DURING ASSESSMENT PROCEEDINGS AS THER E WERE NO SUCH TRANSACTIONS ENTERED INTO BY THE ASSESSEE AND FACTS STATED BY AO IS TOTALLY NOT CONNECTED THE ASSESSEES CASE. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF LD.A.R IS THAT IN TH IS CASE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT. THE ASSESSEE HAS FURNISHED ALL DETAILS TO THE AO AT THE TIME OF FILI NG OF RETURN OF INCOME AND ACCORDING TO THE A.R, THERE WAS NO FAILURE ON T HE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY F OR THE PURPOSE OF ASSESSMENT. HE SUBMITTED THAT THE REOPENING VIDE N OTICE U/S.148 OF THE ACT DATED 26.03.2013, IT IS ONLY A CHANGE OF OP INION. HE SUBMITTED THAT THE AO GOING THROUGH THE SAME DOCUMENTS, WHICH WERE ALREADY ON RECORD, WANTED TO RE-OPEN THE ASSESSMENT, WHICH IS NOTHING BUT REVIEW OF THE EARLIER OPINION, WHICH IS NOT POSSIBL E U/S.147 OF THE ACT. IN THIS CASE, THE ASSESSMENT WAS REOPENED AFTER REC ORDING THE REASONS THAT THERE WAS AN ESCAPEMENT OF INCOME WITH REFEREN CE TO NON- DISCLOSE OF TRANSFER OF NON-SALEABLE AREA OF LAND, WHILE COMPUTING CAPITAL GAINS. ITA NO.3443/MDS./16 :- 6 -: 7.1 ADMITTEDLY IN THIS CASE, THERE WAS ORIGINAL A SSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 26.12.2008. IT IS A SETTLED LAW THAT ON THE BASIS OF MATERIAL, PRIMA FACIE, AVA ILABLE BEFORE THE ASSESSING OFFICER, OPINED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT CAN BE FORMED. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IN CASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUP POSE THAT INCOME HAS ESCAPED ASSESSMENT, ACTION U/S 148 CAN BE TAKEN. BU T OBVIOUSLY, THERE SHOULD BE RELEVANT MATERIAL ON WHICH A REASONABLE M AN COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THIS MATERIAL(S) WOULD CONCLUSIVELY PROVE THE ESCAPEMENT OF INCOME IS NOT THE CONCERN A T THAT PARTICULAR STAGE. SO WHAT IS REQUIRED IS THE SUBJECTIVE SATISF ACTION OF THE ASSESSING OFFICER BASED ON OBJECTIVE MATERIAL EVIDE NCE. THE REASON WAS RECORDED AS DISCUSSED ABOVE. THE ARGUMENT OF TH E LD.AR IS THAT WHERE THERE WAS NO FRESH TANGIBLE MATERIAL TO REOPE N THE ASSESSMENT U/S 147, NO ACTION COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR THE ASSESSMENT FOR THAT ASSESSMENT YEAR, INTER ALIA. ITA NO.3443/MDS./16 :- 7 -: 7.2 AS SEEN FROM THE ASSESSMENT ORDER, IT GIVES A CLEAR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENC E TO FORM HIS OPINION FOR TAKING RECOURSE TO SECTION 147 R.W.S 14 8 OF THE ACT. THERE CANNOT BE TWO OPINIONS. AT THE POINT OF TIME WHEN T HE REASONS ARE RECORDED, FORMING OPINION OF ESCAPEMENT OF INCOME IS ONLY RELEVANT. HENCE, THIS PLEA OF THE LD.AR IS NOT TENABLE IN THE EYES OF LAW. IT IS TRUE THAT U/S 147, THE ASSESSING OFFICER CAN EITHER ASSE SS OR RE-ASSESS BUT FOR TAKING ACTION THERE UNDER, HE HAS TO RECORD REA SONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . IT IS AL SO MANDATED BY SECTION 148(2) TO RECORD REASONS IN WRITING. THE RE ASSESSMENT PROCEEDINGS U/S 147 ARE FURTHER SUBJECT TO SECTIONS 148,149,150,151,152 AND 153. BUT IN THE PRESENT CAS E, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTAKEN AFTER FOUR YEARS OF THE ASSE SSMENT YEAR IN QUESTION. THE ASSESSING OFFICER IS REQUIRED TO SEE IF THE CONDITIONS LAID IN EXPLANATION 2(C) ARE SATISFIED BECAUSE IN THIS C ASE NO ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. IN CASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIEF UNDER THIS ACT; OR (IV)EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THEN THE ASSESSING OFFICER WOULD HAVE VALID COGNIZA NCE U/S 147 OF THE ITA NO.3443/MDS./16 :- 8 -: ACT. THE REASONS RECORDED BY THE ASSESSING OFFICER CLEARLY SPEAK FOR THE UNDER ASSESSMENT OF TAX HENCE, THE CONDITIONS L AID ABOVE STAND FULFILLED IN SO FAR AS RE-ASSESSMENT PROCEEDINGS AR E CONCERNED. IN SO FAR AS THE REASONS RECORDED, EXTRACTED IN THE EARLI ER PORTION OF THIS ORDER, WE ARE SATISFIED THAT THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THIS F ACT CONFERS JURISDICTION ON HIM TO REOPEN THE ASSESSMENT. THE P OWER TO RE-ASSESS POST 1ST APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF THE WORDS RE ASON TO BELIEVE FAILING WHICH SECTION 147 WOULD GIVE ARBITRARILY POWERS TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE BASIS OF ME RE CHANGE OF OPINION, WHICH CANNOT BE, PER SE A REASON TO REOPE N THE CASE. THE ACT HAS NOT GIVEN POWER TO THE ASSESSING OFFICER TO REV IEW BUT HAS ONLY GIVEN POWER TO RE-ASSESS. THERE IS A CONCEPTUAL DIF FERENCE BETWEEN THE TWO ASPECTS AS THE ASSESSING OFFICER HAS NO POW ER AT ALL TO REVIEW THE ASSESSMENT. THE REASSESSMENT, AS STATED ABOVE, HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITIONS BUT THE CO NCEPT CHANGE OF OPINION HAS TO BE TAKEN INTO CONSIDERATION OTHERWI SE IT MAY GIVE UNBRIDLED POWER TO AN ASSESSING OFFICER TO REOPEN A NY AND EVERY ASSESSMENT ORDER WHICH WOULD SIMPLY AMOUNT TO A REV IEW. THE CONCEPT CHANGE OF OPINION IS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. SO, NOW ONLY WHEN T HE ASSESSING ITA NO.3443/MDS./16 :- 9 -: OFFICER HAS A TANGIBLE MATERIAL TO BASE HIS CONCLUS ION THAT THERE IS AN ESCAPEMENT OF INCOME FROM ASSESSMENT AND THE REASON S RECORDED HAVE A LINK WITH THE FORMATION OF HIS BELIEF, HE HA S THE POWER U/S 147 OF THE ACT. 7.3 IN THE PRESENT CASE, THE ASSESSEE HAS NOT SHO WN TRANSFER OF NON-SALEABLE AREA MEASURING 2,10,405 SQ.FT. AS PER EXPLANATION 2 OF SECTION147, IT IS VERY CLEAR THAT DUE TO NON-DIS CLOSURE OF THIS BY THE ASSESSEE, THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE ASSESSEE HAS NOT PRODUCED ANYTHING BEFORE THE COMMI SSIONER OF INCOME TAX (APPEALS) TO SHOW AS TO HOW THERE IS NO INCIDENCE OF TAX IN THIS ASSESSMENT YEAR. HENCE, THE ACTION OF COMM ISSIONER OF INCOME TAX (APPEALS) AND THAT OF ASSESSING OFFICER IS FUL LY COVERED BY THE PROVISIONS OF EXPLANATION 1 TO SECTION 147 OF THE A CT IS NOT CORRECT. THE SAID PROVISION READS AS UNDER: PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUN TS BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COUL D WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. IT IS POSSIBLE THAT WITH DUE DILIGENCE OF THE ASSES SING OFFICER WOULD HAVE ASCERTAINED THIS FACT AT THE TIME OF ASSESSMEN T, IF ANY ALSO, BUT IN VIEW OF THE EXPLANATION (1) IT DOES NOT MEAN THAT T HERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE. HENCE, REOPENING U/S. 147 IS HELD TO BE ITA NO.3443/MDS./16 :- 10 - : VALID. THE ASSESSEE HAS TRIED TO TAKE SHELTER UNDE R THE EXCEPTION PROVIDED IN THAT SECTION. BUT AS STATED ABOVE, WHE N THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY THE FACTS NECESSARY F OR THE ASSESSMENT AND THERE IS NO ASSESSMENT U/S.143(3) OF THE ACT, THIS PROVISO WILL NOT COME TO ITS RESCUE. CONSEQUENTLY, WE HOLD THAT THE ENTIRE REASSESSMENT PROCEEDING IN THIS CASE IS VALID AND T HEREFORE, THE ACTION OF THE ASSESSING OFFICER IS UPHELD. THIS GROUND O F REVENUE IS ALLOWED. 8. THE SECOND ISSUE IS THAT LD.CIT(A) ERRED IN HOL DING THAT THE COST OF THE GIFTED LAND WAS REQUIRED TO BE INCLUDED IN THE COST OF ACQUISITION WHILE ARRIVING AT THE PROFIT OF SALEABL E LANDS. 8.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD SOLD 5,22,050 SQ.FT. OF LAND FOR A RESIDENTIAL PROJECT A ND OUT OF WHICH 2,10,405/- SQ.FT. WAS CONSIDERED AS NON-SALEABLE A REA AND THAT THE ASSESSEE HAD INCLUDED THE COST OF LAND OF 2,10,405 SQ.FT. IN THE COMPUTATION OF CAPITAL GAINS. WHEN THE AO ASKED THE ASSESSEE WHEY THE COST OF ACQUISITION OF 2,10,405 SQ. FT. SHOULD NOT BE EXCLUDED IN THE COMPUTATION OF CAPITAL GAINS. IN RESPONSE, THE ASSE SSEE REPLIED THAT THE SAID LANDS HAD BEEN TREATED AS STOCK-IN-TRADE I N THE BOOKS AND NOT AS FIXED ASSETS. HENCE, THE PROFIT ON SALE OF SUCH LANDS HAD BEEN OFFERED AS BUSINESS INCOME AND NOT AS INCOME FRO M CAPITAL GAINS. THE AO REJECTED THE ASSESSEES CONTENTION AND HAD M ENTIONED THE ITA NO.3443/MDS./16 :- 11 - : INCOME AS PROFIT ON SALE OF LAND AS CAPITAL GAINS. THE TOTAL PROFIT ON SALE OF PLOTS WAS ARRIVED AT BY THE AO AS UNDER:- THE DIFFERENCE OF RS.19,26,712/- ( RS.77,06,950/- - RS.57,80,238/- (CONSIDERED BY THE ASSESSEE IN P&L A/C ) WAS ADDED BY THE AO TO THE TOTAL INCOME OF ASSESSEE. AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 8.2 ON APPEAL, LD.CIT(A) OBSERVED THAT THERE IS NO DISPUTE THAT THE ASSESSEE SURRENDERED 2,10,405 SQ. FT. TO THE LO CAL AUTHORITIES TOWARDS PUBLIC UTILITY AS A PART OF APPROVED LAYOUT FOR RESIDENTIAL PURPOSE. FURTHER, LD.CIT(A) OBSERVER THAT THE GIFT OF LAND WITHOUT WHICH THE PROJECT COULD NOT BE COMPLETED HAD TO BE CHARGED TO THE PROFITS OF THE ASSESSEE. HENCE, THE COST OF THE SAI D SURRENDERED AREA WAS ABSORBED AS COST OF SALEABLE PORTION OF THE LAN D AS PER THE GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND RECOGN IZED TOTAL AREA 5,22,050 SFT NON-SALEABLE AREA 2,10,405 SFT SALEBALE AREA 3,11,645 SFT TOTAL COST AS PER ASSESSEES WORKING RS.98,75,029 COST PER SQ.FT. (4/1) RS.18.92 AREA OF LAND SOLD DURING THE YEAR 1,50,880 SFT COST OF LAND ( 5 X 6) 28,54,650 SELLING RATE AS PER ASSESSEE RS.70 SFT COST PER SQ.F.T (5) RS.18.92 PROFIT PER SQ.FT. (8-9) RS.51.08 TOTAL PROFIT ON SALE OF 1,50,880 SQ.FT RS.77,06,950 ITA NO.3443/MDS./16 :- 12 - : PROPORTIONATELY IN THE YEAR OF SALE. ACCORDING TO L D.CIT(A), SURRENDER OF LAND TO TIRUCHIRAPPALI CORPORATION IS MANDATORY BEFORE THE ASSESSEE COULD PROCEED WITH DEVELOPING THE HOUSING SITES. TH EREFORE, THE LD.CIT(A) CAME TO A CONCLUSION THAT GIFTING OF LAND IS SINE QUA NON FOR GETTING DTCP APPROVAL FOR SELLING PLOTS IN THE FORM AND AS PER LAY OUT AND SET ASIDE THE ORDER OF AO. AGAINST THE ORDER OF LD.CIT(A), NOW THE REVENUE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD.CIT(A) OBSERVED THAT THERE IS A PRE- CONDITION BY TIRUCHIRAPPALI CORPORATION TO GIFT THE LAND MEASURI NG 2,10,405 SQ. FT SO AS TO GET DTCP APPROVAL FOR SELLING PLOTS AS PER LA Y OUT. THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SUGGEST S UCH GIFTING OF LAND TO TIRUCHIRAPPALI CORPORATION. THE LD.CIT(A) HAD NO T MENTIONED ON THE BASIS OF WHICH HE CAME TO THE CONCLUSION THAT THERE IS A CONDITION BY TIRUCHIRAPPALI CORPORATION REGARDING SURRENDERING O F 2,10,405 SQ. FT. BEING SO, IT IS APPROPRIATE TO REMIT THE ISSUE TO T HE FILE OF AO TO EXAMINE THE CONDITION LAID DOWN BY THE TIRUCHIRAPPA LI CORPORATION BEFORE SANCTIONING THE APPROVAL OF THE RESIDENTIAL LAY OUT. ONCE THERE IS A PRE-CONDITION FROM THE TIRUCHIRAPPALI CORPORATION , THEN ONLY THE CLAIM OF ASSESSEE COULD BE ALLOWED. WITH THIS OBSER VATION, WE REMIT THE ISSUE TO THE FILE OF LD. ASSESSING OFFICER FOR FRESH CONSIDERATION. ITA NO.3443/MDS./16 :- 13 - : 10. THE LAST GROUND IS WITH REGARD TO DISALLOWANCE OF ` 14,55,500/- U/S.40(A)(IA) OF THE ACT. 11. THE FACTS OF THE ISSUE ARE THAT THE AO FOUND T HAT THE ASSESSEE HAD DISBURSED AN AMOUNT OF ` 14,55,500/- TO SUB-CONTRACTORS SHRI ALGARI AND 6 OTHERS AFTER THE STIPULATED TIME U/S.200(1) OF THE ACT. THEREFORE, THE AO DISALLOWED THE SAME ON THE REASON THAT THE TAX HAS BEEN REMITTED TO THE GOVERNMENT MUCH AFTER THE PRES CRIBED TIME LIMIT U/S.200(1) OF THE ACT. AGGRIEVED BY THE ORDER OF L D. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A ). ON APPEAL, THE LD.CIT(A) OBSERVED THAT TDS ON A SUM OF ` 14,55,500/- DISBURSED TO SUB-CONTRACTORS WAS DEPOSITED BEYOND THE DUE DATE B UT BEFORE FILING OF THE RETURN. LD.CIT(A) PLACING RELIANCE IN THE CASE OF I.T.O. VS. M/S.SUSIRA ENGG. INDUSTRIES P LTD. IN ITA NO.1594/M DS./2012 FOR ASSESSMENT YEAR 2009-10 DATED 30.10.2012, DELETED T HE DISALLOWANCE. AGAINST THE ORDER OF LD.CIT(A), NOW THE REVENUE IS IN APPEAL BEFORE US. 12. BEFORE US, LD.D.R SUBMITTED THAT THE ASSESSEE H AD NOT REMITTED THE TDS AMOUNT BEFORE THE TIME LIMIT SPECIFIED U/S.200( 1) R.W.RULE 30. FURTHER, LD.D.R SUBMITTED THAT THE AMENDMENT TO SEC .40(A)(IA) SPECIFYING THAT DISALLOWANCE U/S.40(A)(IA) NEED NOT BE MADE IF ITA NO.3443/MDS./16 :- 14 - : REMITTANCE OF TDS AMOUNTS ARE MADE BEFORE THE FILIN G OF RETURN OF INCOME, WAS SUBSEQUENTLY THROUGH FINANCE ACT 2010 A ND THEREFORE IS NOT APPLICABLE TO THE ASSESSMENT YEAR 2006-07. 13. ON THE OTHER HAND, LD.A.R SUBMITTED THAT SEC. 40(A)(IA) CONTEMPLATED DISALLOWANCE, ONLY WHEN TAX HAD NOT BE EN DEDUCTED OR DEDUCTED BUT NOT PAID WITHIN DUE DATE U/S.200(1) OF THE ACT. SEC.220(1) R.W.RULE 30 AS IT STOOD THEN, PROVIDES A TIME LIMIT ONLY IN RESPECT OF TAX DEDUCTED AT SOURCE. THUS, THE DATE O F PAYMENT RECKONED FROM THE DATE OF DEDUCTION IS ALL WELL WITHIN THE T IME AND HENCE DISALLOWANCE CANNOT BE MADE. FURTHER, LD.A.R SUBMIT TED THAT THE AMENDMENT TO SEC.40(A)(IA) BY FINANCE ACT 2010 WHER EBY NO DISALLOWANCE WOULD BE MADE IF AFTER DEDUCTION OF TA X DURING THE PREVIOUS YEAR, THE SAME HAS BEEN PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN U/S.139(1). THUS, THE PROVISION IS MADE APPLICABLE EFFECTIVE ASSESSMENT YEAR 2010-11 AND SUBSEQUENT YE ARS, THE AMENDMENTS BEING CURATIVE IN NATURE, ITS EFFECT NEE D TO BE READ RETROSPECTIVELY IN OPERATION. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ACCORDINGLY, IF THE ASSESSEE DID NOT DEDUCT TDS AND REMIT TO THE CENTRAL GOVERNMENT ACCOUNT, THEN AO COULD INVOK E THE PROVISIONS OF THE SECTION 40(A)(IA) OF THE ACT AND EXPENDITURE COULD BE ITA NO.3443/MDS./16 :- 15 - : DISALLOWED. THIS VIEW IS ALSO FORTIFIED BY THE SUP REME COURT DECISION IN THE CASE OF PALM GAS SECURITIES VS. CIT IN CIVIL AP PEAL NO.5512 TO 5517 DATED 03.05.2017. HOWEVER, THE ARGUMENT OF THE LD.A.R IS THAT IT IS DULY REMITTED BY THE ASSESSEE BEFORE DUE DATE OF FILING OF RETURN OF INCOME. ACCORDINGLY, WE REMIT THE ISSUE TO THE FILE OF AO TO EXAMINE WHETHER THE ASSESSEE IS ACTUALLY REMITTED THE TDS B EFORE THE DUE DATE OF FILING OF RETURN OF INCOME. AT THIS STAGE, THIS ISSUE IS REMITTED TO THE FILE OF AO FOR FRESH CONSIDERATION. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 12 TH JULY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 12 TH JULY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF