Webcity Builders and Developers Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 3483/DEL/2012

• Counselvise Citation: 348320114 RSA 2012
• Duration Of Justice: 2 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 08-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 02-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Keywords: Cost of acquisition; Notional interest
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H NEW DELHI BEFORE SHRI H.S. SIDHU , JM AND SHRI J.SUDHAKAR REDDY, A.M. ITA NO. 3483 /DEL/201 2 AND ITA NO. 412 /DEL/201 1 ASSESSMENT YEAR : 20 07 - 08 WEBCITY BUILDERS AND DEVELOPERS P.LTD. VS. ACIT, CIRCLE 18(1) 1 E, NAAZ CINEMA COMPLEX NEW DELHI JHANDEWALAN EXTENSION NEW DELHI 110 055 PAN: AA ACW 6305 R & ITA NO. 816 /DEL/201 1 ASSESSMENT YEAR : 2007 - 08 ACIT, CIRCLE 18(1) VS. WEBCITY BUILDERS AND DEVELOPERS P.LTD. NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT ) APPELLANT BY : - SHRI PRADEEP DINODIA, C.A. SH. RK KAPOOR, C.A. RESPONDENT BY : - SH. J.P.CHANDRAKAR, SR. D.R. O R D E R PER J.SUDHAKAR REDDY, AM ITA 816/DEL/2011 AND ITA 412/DEL/2011 ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A ) - XXI, NEW DELHI DT. 26.11.2010 PERTAINING TO THE ASSESSMENT YEAR ( A.Y. ) AY 2007 - 08. ITA 3483/DEL/12 IS THE APPEAL FILED BY THE ASSESSEE FOR THE AY 2007 - 08 AGAINST THE ORDER OF THE LD.CIT(A) - XXI, NEW DELHI DT.26.4.2012. ITA 3483/DEL/12, AY : 2007 - 08 ITA 412/DEL/11 AY: 2007 - 08 ITA 816/DEL11, AY: 2007 - 08 WEBCITY BUILDERS & DEVELOPERS PVT.LTD. 2 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. 3. REVENUE S APPEAL : ITA 816/DEL/ 2011: - GROUND NO.1 IS AGAINST DELETION OF DISALLOWANCE OF RS.1,51,70,941/ - BY THE LD.CIT(A). THE DISALLOWANCE WAS MADE U/S 40A( 3 ) OF THE INCOME TAX ACT, 1961. (THE ACT). GROUND NO.2 IS AGAINST DELETION MADE BY THE FIRST APPELLATE AUTHORITY ON ACCOUNT O F DEDUCTION OF PURCHASE COST BY THE AO FROM THAT CLAIMED BY THE ASSESSEE. 4. THE REVENUE APPEAL IS ON THE ISSUE WHETHER THE AO WAS RIGHT IN CHARGING NOTIONAL INTEREST. 5. WE HAVE HEARD SHRI PRADEEP DINODIA, ALONG WITH SH RK KAPOOR, THE LD.COUNSEL FOR THE ASSESSEE AND SHRI J.P.CHANDRAKER, LD.SR.DR ON BEHALF OF THE REVENUE. 6. WE FIRST TAKE UP THE REVENUE S APPEAL. 7. ON THE FIRST ISSUE OF S.40A(3) WE FIND THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE DURING THE YEAR. THIS IS EVI DENT FROM THE COPY OF THE PROFIT AND LOSS A/C AT PAGE 4 OF THE PAPER BOOK. THE PURCHASES WERE MADE IN THE EARLIER YEAR. THE AO PASSED AN ORDER U/S 143(3) OF THE ACT ON 24.12.2008 FOR THE EARLIER AY 2006 - 07 AND HAS ACCEPTED THE PURCHASES MADE , WITHOUT ANY DISALLOWANCE. A COPY OF THE ASSESSMENT ORDER IS FILED BEFORE US. UNDER THESE CIRCUMSTANCES, WE HAVE NO OTHER ALTERNATIVE BUT TO UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY ON THIS ISSUE. ITA 3483/DEL/12, AY : 2007 - 08 ITA 412/DEL/11 AY: 2007 - 08 ITA 816/DEL11, AY: 2007 - 08 WEBCITY BUILDERS & DEVELOPERS PVT.LTD. 3 8. THE LD.DR SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED PARTICULARS OF THE PURCHASES MADE, THE MODE OF PAYMENT ETC. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT ENTIRE PURCHASES WERE MADE IN THE EARLIER YEAR AND THE MODE OF PAYMENT WAS BY WAY OF CROSSED CHEQUE. HE ALSO DREW ATTENTION OF THE BENCH TO PAGE 5 OF THE ASSESSMENT ORDER TO DEMONSTRATE THAT THE TOTAL COST OF PURCHASES OF THE LAND + THE AMOUNT INCURRED FOR STAMP DUTY RECORDED IN PAGE 5 OF THE ASSESSMENT ORDER, IS THE OPENING STOCK FOR THE IMPUGNED AY. AS THE ISSUE BEFORE US IS THE DISALL OWANCE U/S 40A(3) OF THE ACT AND AS THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE DURING THE YEAR, THE QUESTION OF UPHOLDING DISALLOWANCE U/S 40A(3) OF THE ACT DOES NOT ARISE. THE OTHER MATTERS RAISED BY THE LD.D.R. DID NOT EMANATE FROM THE RECORD. IN THE RESULT THIS GROUND OF REVENUE IS DISMISSED. 9. COMING TO GROUND NO.2, THE FIRST APPELLATE AUTHORITY AT PARA 6.8 HAS HELD AS FOLLOWS: I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF THE AO IN THE ASSESSMENT ORDER. REGARDING THE COMPUTA TION OF LOSS ON SALE OF LAND, IT IS SEEN FROM THE SUBMISSIONS MADE BY THE ASSESSEE AND ALSO FROM THE OBSERVATIONS OF THE AO THAT THE PURCHASE PRICE OF LAND, SUBJECT MATTER OF SALE, WAS RS.1,88,53,629/ - . THE AO HAS DISREGARDED A SUM OF RS.19,32,269/ - FROM THE PURCHASE PRICE WHICH REPRESENT THE AMOUNT PAYABLE TO THE CONSOLIDATOR. THERE IS NO DOUBT THAT THE ASSESSEE PAID FULL PRICE I.E. RS.1,88,53,629/ - ON PURCHASE OF IMPUGNED LAND WHICH HAS BEEN PAID TO THE LAND OWNERS OR TO THE CONSOLIDATOR. THE AO IS NO T JUSTIFIED IN REDUCING THE COST OF ACQUISITION AND HENCE MAKING AN ADDITION TO THE PROFIT ON SALE OF LAND. ITA 3483/DEL/12, AY : 2007 - 08 ITA 412/DEL/11 AY: 2007 - 08 ITA 816/DEL11, AY: 2007 - 08 WEBCITY BUILDERS & DEVELOPERS PVT.LTD. 4 NOTHING HAS BEEN BROUGHT ON RECORD THAT THE PURCHASE AND SALE ARE NOT GENUINE. IN VIEW OF THESE FACTS, THE ASSESSEE IS ENTITLED TO A RELIEF OF RS. 19,32,269/ - . 9.1. THE AMOUNT PAID BY THE ASSESSEE IS RS.1,88,53,629/ - . THE AO HAS ADOPTED A COST OF RS.1,69,21,360/ - . THE REASON GIVEN BY THE AO FOR SUCH DEDUCTION IS VAGUE AND DEVOID OF MERIT. THUS WE UPHOLD THE FINDING OF THE FIRST APPELLATE AUTHORIT Y AND DISMISS THIS GROUND OF REVENUE. 10. IN THE RESULT ITA 816/DEL/11 IS DISMISSED. 11. NOW WE TAKE UP ASSESSEE S APPEAL. 12. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE CONSIDERED OPINION THAT NOTIONAL INTEREST CANNOT BE CHARGED AS THERE IS NO SUCH P ROVISION IN THE ACT. AT BEST THE AO WOULD HAVE DISALLOWED INTEREST CLAIMED BY THE ASSESSEE. THE LD.COUNSEL FOR THE ASSESSEE POINTED OUT THAT NO EXPENDITURE ON ACCOUNT OF INTEREST HAS BEEN CLAIMED DURING THE YEAR. UNDER THE CIRCUMSTANCES THE ADDITIONAL OF NOTIONAL INTEREST IS HEREBY DELETED. WHILE DOING SO WE DRAW STRENGTH FROM THE DECISION OF HON BLE GAUHATHI HIGH COURT IN THE CASE OF HIGH WAY CONSTRUCTION CO.PVT.LTD. VS. CIT (1993) REPORTED IN 199 ITR 702, WHEREIN IT WAS HELD AS FOLLOWS. IF THE ASSE SSEE HAD NOT BARGAINED FOR INTEREST, OR HAD NOT COLLECTED INTEREST, WE FAIL TO SEE HOW THE INCOME - TAX AUTHORITIES CAN FIX A NOTIONAL INTEREST AS DUE, OR COLLECTED BY THE ASSESSEE. OUR ATTENTION HAS NOT BEEN INVITED TO ANY PROVISION OF THE INCOME - TAX ACT EM POWERING THE INCOME - TAX AUTHORITIES TO INCLUDE IN THE INCOME INTEREST WHICH WAS NOT DUE OR NOT COLLECTED . IN THE INSTANT CASE, THE ADDITION WAS MADE BY THE AO ON NOTIONAL INTEREST WHICH WAS ITA 3483/DEL/12, AY : 2007 - 08 ITA 412/DEL/11 AY: 2007 - 08 ITA 816/DEL11, AY: 2007 - 08 WEBCITY BUILDERS & DEVELOPERS PVT.LTD. 5 NOT IN THE EXISTENCE. SO, THE FIRST APPELLATE AUTHORITY AS WELL A S THE TRIBUNAL HAVE RIGHTLY DELETED. IN THE LIGHT OF ABOVE DISCUSSION AND BY CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO REASON TO INTERFERE WITH IMPUGNED ORDERS PASSED BY THE TRIBUNAL. THE SAME ARE HEREBY SUSTAINED ALON G WITH REASONS MENTIONED THEREIN. THE ANSWER TO THE SUBSTANTIAL QUESTIONS OF LAW ARE IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 12.1. RESPECTFULLY FOLLOWING THE SAME WE ALLOW THIS GROUND OF THE ASSESSEE. IN THE RESULT THIS APPEAL NO. ITA 3483 /DEL/2012 IS ALLOWED. 13. THE REVENUE S APPEAL DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - XXI, NEW DELHI DT. 26.4.2012, WHEREIN HE HAS CONFIRMED THE PENALTY LEVIED BY THE AO U/S 271(1)(C ) OF THE ACT ON THE ADDITION OF RS.30,35,000/ - MADE ON ACCOUNT OF NOTIONAL INTEREST. WE HAVE DEL ETED THE SAID ADDITION WHILE DISPOSING OF THE QUANTUM APPEAL IN ITA 3483/DEL/12. IN VIEW OF THE SAME WE ALLOW THIS APPEAL OF THE ASSESSEE I.E. ITA 412/DEL/2011. ORDER PRONOUNCED IN THE OPEN COURT ON 01 ST JUNE, 2015. SD/ - SD/ - ( H.S. SIDHU ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 01 ST JUNE, 2015 *MANGA ITA 3483/DEL/12, AY : 2007 - 08 ITA 412/DEL/11 AY: 2007 - 08 ITA 816/DEL11, AY: 2007 - 08 WEBCITY BUILDERS & DEVELOPERS PVT.LTD. 6 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR