DELLA ENCLAVE P.LTD, MUMBAI V. CIT (A)-10, MUMBAI

ITA 359/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7297 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 22-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI , ,, , , ,, , BEFORE S/SHRI RAJENDRA, A.M. AND SANDEEP GOSAIN,J.M . . .. ./ // / ITA NO. 359/MUM/2016 , / ASSESSMENT YEAR: 2010-11 DELLA ENCLAVE PRIVATE LIMITED, DELLA TOWER, 795 JAME JAMSHED ROAD PARSI COLONY, DADAR (E), MUMBAI-400 007. PAN: AACCM 4457 C VS. DCIT, CIRCLE -5 (2),ROOM NO.525, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400 020. ( / // / APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH KUMAR YADAV ASSESSEE BY: SHRI BHUPENDRA SHAH / // / DATE OF HEARING: 21/02/2018 / DATE OF PRONOUNCEMENT: 02/05/2018 , ,, , 1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , ,, , -PER RAJENDRA,AM: CHALLENGING THE ORDER DATED 27/10/2015 OF CIT(A)-10 , MUMBAI, THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSI NESS OF PROPERTY DEVELOPMENT AND CONSTRUCTION ACTIVITY,FILED ITS RETURN OF INCOME ON 15/10/2010 DECLARING TOTAL INCOME AT RS. NIL.THE ASSESSING OFFICER (AO)COMPLETED ASSESSMENT U/S.143(3),ON 05/03/2013, DETERMIN - ING THE INCOME OF THE ASSESSEE AT RS.42.53 LAKHS. 2. FIRST GROUND OF APPEAL IS ABOUT DISALLOWANCE OF RS . 21.31 LAKHS PAID TO R.R.TRADING (RRT). DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THA T THE ASSESSEE HAD DEBITED RS. 81.54 LAKHS UNDER THE HEAD STAFF WELFARE EXPENSES.HE DIS ALLOWED RS. 21.31 LAKHS PAID TO RRT, RS. 4.14 LAKHS PAID TO SURAJ NOVELTIES (SN) OUT OF THE ABOVE. THE AO FOUND THAT THE BILLS FOR RS. 23.31 LAKHS WERE RAISED IN THE NAME OF DELLA TECHNI CIA AND NOT IN THE NAMES OF THE ASSESSEE. HE HELD THAT THE EXPENDITURE LIMNED BY THE ASSESSEE WAS NOT ALLOWABLE AS THE EXPENSES BELONG TO ANOTHER ENTITY. 2.1. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA) AND MADE DETAILED SUBMISS IONS. AFTER CONSIDERING THE AVAILABLE MATERIAL, HE HELD THAT BILLS SUBMITTED BY RRT WERE IN THE NAME OF DELLA TECHNICIA AND NOT IN THE NAME OF DELLA ENCLAVE PRIVATE LTD., THAT THE AS SESSEE SUBMITTED THAT RRT HAD ERRONEOUSLY RAISE THE BILLS IN THE NAME OF DELLA TECHNICIA I.E. THE POPULAR NAME OF THE GROUP. HE HELD THAT 359/M/16 DELLA ENCLAVE PVT.LTD. 2 NO EVIDENCE WAS PRODUCED BEFORE THE AO DURING THE A PPELLATE PROCEEDINGS TO PROVE THAT RRT HAD ACCOUNTED THE AMOUNTS PROPERLY IN ITS BOOKS OF ACCOUNTS AND THAT THE EXPENDITURE WAS ACTUALLY INCURRED BY THE ASSESSEE, THAT IT WAS NOT KNOWN AS HOW THE ASSESSEE HAD APPROVED THE EXPENDITURE THAT WAS INCURRED BY DELLA TECHNICIA. F INALLY, HE UPHELD THE ORDER OF THE AO. 2.2. BEFORE US, THE AUTHORISED REPRESENTATIVE (AR) STATE D THAT THE GROUP WAS POPULARLY KNOWN AS DELLA TECHNICIA, THAT RRT BY MISTAKE RAISED THE BILLS IN THE NAME OF DELLA TECHNICIA, THAT LATER ON IT HAD ISSUED A CONFIRMATION LETTER STATIN G THAT GOODS WERE PURCHASED BY THE ASSESSEE, THAT RRT ALSO MADE IT CLEAR THAT IN THE BILLS IT IS BY MISTAKE THE NAME OF DELLA TECHNICIAN WAS MENTIONED. HE REFERRED TO PAGE NUMBER-32 OF THE PAP ERBOOK. THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA AND STATED THAT BILLS DID NOT BELONG TO THE ASSESSEE. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE FIND THAT THE ENTIRE CONTROVERSY HAS ARISEN AS THE BILLS ISSUED B Y RRT WERE THE NAMES OF DELLA TECHNICIAN AND NOT IN THE NAME OF THE ASSESSEE, THAT RRT IN IT S LETTER DATED 29/01/2013 HAS SPECIFICALLY MENTIONED THAT INADVERTENTLY BILLS BELONGING TO THE ASSESSEE WERE ISSUED IN THE NAME O F DELLA TECHNICIA. WE ARE UNABLE TO UNDERSTAND AS TO WHY TH E FAA DISCARDED THIS EVIDENCE THOUGH THE SAME WAS PRODUCED BEFORE HIM. HE COULD HAVE CALLED FOR REMAND REPORT OR COULD HAVE EXAMINED RRT IN THAT REGARD. BUT, HE SIMPLY CONFIRM ED THE ORDER OF THE AO. IN OUR OPINION THE COURSE ADOPTED BY THE FAA IS NOT AS PER THE LAW .AS A REPRESENTATIVE OF THE STATE, HE IS SUPPOSED TO BE AN INSTRUMENT IN COLLECTING DUE TAXE S AND PASS AND ADJUDICATION ORDER BASED ON THE EVIDENCES. AS HE HAS FAILED TO DO SO, THEREFORE , REVERSING HIS ORDER WE DECIDE FIRST GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. 3. GROUND NUMBER TWO DEALS WITH DISALLOWANCE OF RS.4.4 0 LAKHS OUT OF THE STAFF WELFARE EXPENSES. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD PURCHASED REFRIGERATORS, TELEVISION SETS AND MICROWAVE OVENS FROM SN,WORTH RS. 4.14 LAKHS. HE HELD THAT EXPENDITURE WAS NOT INCURRED FOR THE BUSINESS OF THE ASSESSEE. 3.1. IN THE APPELLATE PROCEEDINGS, THE FAA, AFTER CONSI DERING THE SUBMISSION OF THE ASSESSEE, OBSERVED THAT AO HAD DISALLOWED THE AMOUNT WHICH WE RE PAID FOR PURCHASE OF TWO TELEVISION SETS, THREE REFRIGERATORS, THREE WASHING MACHINES A ND TWO MICROWAVE OVENS, THAT THE ASSESSEE HAD CLAIMED THAT GOODS WERE PURCHASED FROM SN, THAT THE NATURE OF EXPENSES DID NOT SHOW THAT THEY WERE MEANT FOR STAFF WELFARE, THAT THE AS SESSEE HAD FAILED TO SUBSTANTIATE THAT THE 359/M/16 DELLA ENCLAVE PVT.LTD. 3 EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR ITS BUSINESS. FINALLY, HE UPHELD THE ORDER OF THE AO. 3.2. BEFORE US,AR CONTENDED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DEVELOPED 24 VILLAS AND A CLUBHOUSE NEAR LONAVALA, THAT THE AREA WAS FAR FROM THE CITY, THAT FOR THE CONVENIENCE OF THE MEMBERS OF THE STAFF TEL EVISION SETS AND REFRIGERATORS ETC. WERE PURCHASED, THAT EXPENSES FOR PURCHASING THOSE ITEMS WERE NECESSARY FOR CARRYING OUT THE BUSINESS OF THE ASSESSEE, THAT SAME WERE SPENT WHOL LY AND FULLY FOR STAFF WELFARE,THAT IT HAD TO PROVIDE FACILITIES TO THE STAFF AND THE WORKERS AT THE SITE. THE DR SUPPORTED THE ORDER OF THE FAA. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THERE IS NO DISPUTE ABOUT INCURRING OF EXPENDITURE. THE AO/FAA HAS NOT DOUBTED GENUINENESS OF THE EXPENDITURE. THEY HAVE DISALLOWED THE EXPENDITURE HOLDING THAT SAME WAS NO T INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. WE FIND THAT THE AO, ON T HE FIRST PHASE OF THE ASSESSMENT ORDER, HAS SPECIFICALLY MENTIONED THAT ASSESSEE WAS ENGAGED IN CONSTRUCTING VILLAS IN REMOTE AREA. CONSIDERING THE ABOVE FACT,IN OUR OPINION,EXPENDITU RE INCURRED FOR PURCHASING TELEVISION SETS, REFRIGERATORS ETC. CANNOT BE DISALLOWED. THE NECESS ITY OF THE BUSINESS IS TO BE DECIDED BY THE ASSESSEE ITSELF AND NOT BY THE AO. IT IS NOT THE CA SE OF THE REVENUE AUTHORITIES THAT THOSE ITEMS WERE USED BY THE FAMILY OF THE DIRECTORS OF THE COM PANY FOR BY THE FAMILIES OF THE OFFICERS OF THE COMPANY. IT IS SAID THAT AO.S SHOULD NOT STEP I NTO THE SHOES OF THE ASSESSEE. CONSIDERING THE PECULIAR FACTS OF THE CASE, WE ARE OF THE OPINI ON THAT THE FAA WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO. SO, REV ERSING HIS ORDER WE DECIDE GROUND NUMBER TWO IN FAVOUR OF THE ASSESSEE. 4. DISALLOWANCE OF RS. 10.10 LAKHS OUT OF THE PURCHASE S MADE BY THE ASSESSEES IS THE SUBJECT MATTER OF THIRD GROUND OF APPEAL. DURING THE ASSESS MENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD MADE PURCHASES TO THE EXTENT OF RS. 5. 31 CRORE, THAT CERTAIN BILLS WERE RAISED IN THE NAMES OF DELLA ENCLAVE SIGNATURE VILLAS, DELLA TECHNICIA, DELLA ADVENTURE PRIVATE LTD AND DELLA TECHNICIA OFFICE SYSTEM PRIVATE LTD. HE H ELD THAT THE BILLS RAISED IN THE NAMES OF ABOVE-MENTIONED ENTITIES DID NOT PERTAIN TO THE ASS ESSEE. HE MADE A DISALLOWANCE OF RS. 10, 10,768/-. 4.1. IN THE APPELLATE PROCEEDINGS THE FAA, FOLLOWING HIS ORDER FOR THE FIRST GROUND OF APPEAL, UPHELD THE ORDER OF THE AO HOLDING THAT THE BILLS W ERE NOT IN THE NAME OF THE ASSESSEE COMPANY. 359/M/16 DELLA ENCLAVE PVT.LTD. 4 4.2. BEFORE US,THE AR AND THE DR MADE THE SAME SUBMISSIO N THAT ARE PART OF THE SUBMISSIONS MADE FOR THE FIRST GROUND OF APPEAL.FOLLOWING OUR O RDER FOR THE FIRST GOA ,WE ALLOW GROUND NO.3. 5. DISALLOWANCE OF RS.1.51 LAKHS OUT OF THE LABOUR CHA RGES HAS BEEN CHALLENGED IN THE NEXT GROUND OF APPEAL. DURING THE ASSESSMENT PROCEEDINGS , THE AO FOUND THAT THE ASSESSEE HAD PAID LABOUR CHARGES TO 13 PARTIES, THAT IT DID NOT FURNISH ANY DETAILS ABOUT THE TAX DEDUCTED AT SOURCE. HE OBSERVED THAT OUT OF THE 13 PARTIES IT H AD FURNISHED FEW BILLS OF ONLY THREE PARTIES. AFTER CONSIDERING THE DETAILS HE HELD THAT LABOUR C HARGES PAYMENT WERE NOT HUNDRED PERCENT GENUINE. HE DISALLOWED 10% OF THE TOTAL LABOUR CHAR GES DEBITED IN THE BOOKS OF ACCOUNTS, AMOUNTING TO RS. 1, 51, 115/-. 5.1. BEFORE THE FAA, DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE MADE SUBMISSIONS AND STATED THAT NECESSARY DETAILS ABOUT EACH LABOUR PAY MENT WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AFTER CONSIDERING THE AVAIL ABLE MATERIAL, HE HELD THAT THE ASSESSEE HAD NOT FILED COMPLETE DETAILS ABOUT ALL THE PARTIE S, THAT THE AO WERE JUSTIFIED IN DISALLOWING 10% OF THE EXPENDITURE. 5.2. BEFORE US, THE AR STATED THAT THE AO HAD ARBITRATIO N MADE THE DISALLOWANCE OUT OF THE LABOUR CHARGES, THAT NECESSARY DETAILS WERE FILED. HE REFERRED TO PAGE NUMBER 36 OF THE PAPER BOOK. THE DR STATED THAT COMPLETE DETAILS WERE NOT FILED BEFORE THE DEPARTMENTAL AUTHORITIES. 5.3. WE HAVE GONE THROUGH THE PAGE NUMBER 36 OF THE PAP ER BOOK AND THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AO. WE FIND THAT MATTER NEEDS FURTHER VERIFICATION. THE DETAILS GIVEN BY THE ASSESSEE HAD TO BE FURTHER INVESTIGATE D. THEREFORE, IN THE INTEREST OF JUSTICE, WE ARE RESTORING THAT THE ISSUE TO THE FILE OF THE AO. HES DIRECT TO AFFORD A REASONABLE INTO THE ASSESSEE. THE ASSESSEE WOULD FIVE DETAILED SUBMISSI ONS AND EXPLANATION BEFORE THE AO. GROUND NUMBER FOUR IS DECIDED IN FAVOUR OF THE ASSE SSEE, IN PART. 6. LAST GROUND OF APPEAL PERTAINS TO DEDUCTION IN CLOS ING VALUE OF WORK IN PROGRESS BY RS. 42.53 LAKHS. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD NOT DECLARED ANY INCOME DURING THE YEAR UNDER CONSIDERA TION, THAT ALL THE EXPENSES INCURRED BY IT WERE CLAIMED UNDER THE HEAD WORK IN PROGRESS. HENCE HE REDUCED THE EXPENDITURE ON PROJECT WORK IN PROGRESS CLAIMED BY THE ASSESSEE FROM RS. 2 9.98 CRORE TO RS. 29.55 CRORE, AFTER ADJUSTING THE DISALLOWANCE MADE IN HIS ASSESSMENT O RDER. 6.1. THE FAA, DURING THE APPELLATE PROCEEDINGS, HELD THA T THE AO HAD ALLOWED THE CARRY FORWARD BENEFIT OF WORK IN PROGRESS AFTER REDUCING THE EXPENDITURE DISALLOWED BY HIM IN THE 359/M/16 DELLA ENCLAVE PVT.LTD. 5 ASSESSMENT ORDER,THAT THE ASSESSEE HAD ARGUED THAT DEDUCTION SHOULD BE RESTRICTED TO UNDISPUTED DISALLOWANCES ONLY. THE FAA, REJECTING T HE REQUEST OF THE ASSESSEE, HELD THAT HE HAD ALREADY CONFIRMED THE DISALLOWANCES, THAT THE A O WAS JUSTIFIED IN REDUCING RS. 42, 53, 450/- FROM THE TOTAL WORK IN PROGRESS OF THE ASSESS EE FOR THE YEAR UNDER CONSIDERATION. 6.2. BEFORE US,THE AR STATED THAT WORK IN PROGRESS SHOUL D BE RESTRICTED TO THE UNDISPUTED DISALLOWANCES ONLY. THE DR SUPPORTED THE ORDER OF T HE FAA. 6.3. WHILE DECIDING THE EARLIER GROUNDS,WE HAVE GIVEN RE LIEF TO THE ASSESSEE. WE HAVE RESTORED BACK ONE ISSUE TO THE FILE OF THE AO FOR THE ADJUDI CATION. IN THE CIRCUMSTANCES WE HOLD THAT NO REDUCTION CAN BE MADE AS FAR AS THE AMOUNTS INVOLVE D IN GROUNDS OF APPEAL NO.1-3 ARE CONCERNED. THE AO IS DIRECTED TO RESTRICT THE REDUC TION OF WORK IN PROGRESS TO THE UNDISPUTED DISALLOWANCES ONLY. LAST GROUND IS DECIDED IN FAVOU R OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. . ! ' #$%& % '( . ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MAY, 2018. ) #* +!$ 2 ,2018 SD/- SD/- ( /SANDEEP GOSAIN) ( %,)- / RAJENDRA) ) !. / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 02/05/2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR D BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.