ITO 18(2)(2)., MUMBAI V. ROYAL DEVELOPERS, MUMBAI

ITA 369/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70927 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-05-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 16-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: PRADIP N KAPASI
• Keywords: Business income; Additional evidence; Assessment record
• Section: 143(3); 2

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 369/M/2012 ( / ASSESSMENT YEAR : 2008 - 20 09 ) ITO - 18(2)(2), ROOM N O.111, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400 012. / VS. M/S. ROYAL DEVELOPERS, 15 - A, MODHVANIK VIDYARTHI BHAVAN, L.T. COLONY, ROAD NO.3, DADAR (E), MUMBAI - 14. ./ PAN : AAAFR 0339 K ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI C.G.K. NAIR, DR / RESPONDENT BY : SHRI PRADIP N. KAPASI / DATE OF HEARING : 13 .8.2013 / DATE OF PRONOUNCEMENT : 4.9 .2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 16.1.2012 IS AGAINST THE ORDER OF CIT (A) - 29, MUMBAI DATED 30.11.2011 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS W HICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE AND DELETING THE ADDITION OF RS. 1,50,00,000/ - MADE ON ACCOUNT OF BUSINESS INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN ACCEPTING ADDITIONAL EVIDENCE AND SUBMISSION, WHICH WAS NOT BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS, IN CONTRAVENTION OF RULE - 46A(3) OF IT RULES, 19 62. 3. ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) FAILED TO APPRECIATE THAT IN THE TERMS AND CONDITIONS OF AGREEMENT WITH SUCCESS DEVELOPES PVT. LTD. (SCPL) THERE WAS NO CLAUSE OF SECURITY DEPOSIT ON ACCOUNT OF SURPLUS FSI AS CLAIMED BY THE ASSESSEE BEFORE THE CIT (A). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD ALTHOUGH RECOGNIZED SALE OF TWO PROPERTIES WHICH WERE RECEIVED AS CONSIDERATION FOR TRANSFER OF BENEFIT OF CONSTRUCTION PE RMISSIBLE TO SDPL DURING THE FY 2007 - 2008, BUT NO ADJUSTMENT OF MONEY AMOUNTING TO RS. 1.5 CR RECEIVED FROM SDPL WAS SHOWN . 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITY OF REAL ESTATE DEVELOPE R. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 66,880/ - . THE RETURN WAS SCRUTINIZED U/S 143(3) OF 2 THE ACT AND THE ASSESSED INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 1,50,66,880/ - . DURING THE ASSESSMENT PROCEEDINGS, AO MADE A DDITION OF RS. 1.5 CRS BEING ADVANCES RECEIVED FRO M SUCCESS DEVELOPERS PVT. LTD. FACTS RELATING TO THE SAID ADDITION ARE THAT THE ASSESSEE OWNS CERTAIN RIGHTS CERTAIN RIGHTS BY WAY OF BENEFIT OF CONSTRUCTIONS PERMISSIBLE ON SION SIVAJI NAGAR COOP. HOUSING PROJECT ON LAKHAMSHI NAPPO ROAD. ASSESSEE TRANSFERRED THE SAID BENEFITS TO SDPL UNDER THE AGREEMENT AND THE SDPL MADE A PAYMENT OF REFUNDABLE ADVANCE OF RS. 1.5 CRS TO THE ASSESSEE , WHICH WAS DULY SHOWN IN THE BALANCE SHEET OF THE ASSESSEE. AO INITIATED T HE PROCEEDINGS LATE IN THE YEAR AND WANTED SOME DETAILS RELATING TO THIS TRANSACTION I NVOLVING PAYMENT OF RS. 1.5 CRS. A CCORDINGLY , A SHOW CAUSE NOTICE WAS ISSUED ON 28.12.2010 WHEN THE DUE DATE FOR COMPLETION OF THE ASSESSMENT WAS 31.12.2010 . ASSESSEE FIL ED REQUISITE DETAILS BEFORE THE AO AND THE SAID PAPERS WERE UNDISPUTEDLY FOUND IN THE ASSESSMENT RECORDS. WITHOUT GOING INTO THE DETAILS FURNISHED BY THE ASSESSEE, THE AO PROCEEDED TO MAKE ADDITION OF RS. 1.5 CRS AND DEEMED IT AS BUSINESS RECEIPTS. MAT TER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 4 . DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE BROUGHT ALL THE FACT LEADING TO THE SAID ADDITION AND FILED THE WRITTEN REPLY, THE EXTRACTS OF THE SAME ARE REPRODUCED IN PARA 3.3 OF THE IMPUGNED ORDER. IN THIS REPLY, ASSESSEE DEMONSTRATED THE FACTS ABOUT THE SAID TRANSACTION AND THE FACT OF FURNI SHING THE RELEVANT REPLIES. CIT (A) EXAMINED THE SAID SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE SAID AMOUNT OF RS. 1.5 CRS IS A KIND OF SECURITY DEPOSIT, WHICH IS REFUNDABLE TO THE SDPL AFTER COMPLETION OF THE PROJECT WITHOUT VIOLATING ANY GUIDELINES RELATING TO THE FSI. THE DETAILS ARE DISCUSSED IN PARA 3.4 OF THE IMPUGNED ORDER. CIT (A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND D ELETED THE ADDITION MADE BY THE AO. AGGRIEVED WITH THE DECISION OF THE CIT (A), REVENUE FILED THE PRESENT APPEAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5 . DURING THE PROCEEDINGS BEFORE US, LD DR READ OUT THE GROUNDS AND MENTIONED THAT CIT (A) HAS COMMIT TED THE ERROR IN DELETING THE ADDITION OF RS. 1.5 CRS AND ALSO ADMITTING THE ADDITIONAL EVIDENCES IN CONTRAVENTION OF THE RULE - 46A(3) OF THE IT RULES, 1962. OTHERWISE, LD DR RELIED ON THE ORDER OF THE AO. 3 6 . ON THE OTHER HAND, SHRI PRADIP N. KAPASI, LD C OUNSEL FOR THE ASSESSEE REFUTED THE ALLEGATION OF THE AO AND, IN THIS REGARD, HE BROUGHT OUR ATTENTION TO THE ADMITTING OF THE ADDITIONAL EVIDENCE REFERRED TO IN GROUND NO.2 , AND ARGUED VEHEMENTLY STATING THAT THE GROUND IS NOT CORRECT AS THE CITED EVIDE NCES WERE ALREADY FURNISHED ON 31.12.2010 TO THE AO WHICH WERE AVAILABLE ON THE ASSESSMENT RECORDS PRODUCED BEFORE THE COURT. REGARDING THE MERITS OF THE ADDITION, LD COUNSEL MENTIONED THAT THE AMOUNT OF RS. 1.5 CRS IS MERELY A REFUNDABLE DEPOSIT KEPT WIT H THE ASSESSEE AS A SECURITY TOWARDS VIOLATION OF GUIDELINES, IF ANY, BY THE SDPL. WITH REGARD TO THE FSI TRANSFER TO THE SDPL, THE SAID AMOUNT NEEDS TO BE REFUNDED ON COMPLETION OF THE PROJECT. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO CLAUSE 4(E) OF THE MEMORANDUM DATED 28.5.2007 ENTERED INTO BY THE ASSESSEE AND THE SDPL. 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. TO START WITH, WE HAVE GONE THROUGH THE MEMORANDUM DATED 28.5.2007 AND FOUND THAT THE SAID AMOUNT OF RS. 1.5 CRS IS PAYABLE TO THE ASSESSEE AS A SECURITY TOWARDS VIOLATION OF GUIDELINES, IF ANY, BY THE SDPL AND CLAUSE - 2 OF THE AGREEMENT PROVIDES FOR THE SAME. THE SAME AMOUNT IS REFUNDABLE VIDE AGREEMENT CLAUSE NO.4(E), WHICH READS AS UNDER : 4(E) THE PARTY OF THE FIRST PART WOULD REFUND TO THE PART OF THE SECOND PART THE SUM OF RS. 1,50,00,000/ - (RUPEES ONE CRORE FIFTY LACS ONLY) PAID BY THE PARTY OF THE SECOND PART TO THE PARTY OF THE FIRST PART AS INTEREST - FREE SECURITY DEPOSIT WITHIN TH REE MONTHS OF RECEIPT OF OCCUPATION CERTIFICATE FOR THE BUILDING OR ON THE SALE OF THE LAST PREMISES COMPRISED IN THE ENTITLEMENT OF THE PARTY OF THE FIRST PART, WHICHEVER IS LATER... 8 . FURTHER, WE HAVE ALSO GONE THROUGH THE PARA 3.4 OF THE IMPUGNED ORD ER. CONSIDERING THE SPEAKING NATURE OF THE SAID PARA, WE REPRODUCE THE SAME AS UNDER: 3.4 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ARGUMENTS OF THE AO AND THE WRITTEN SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. I FIND THAT THE AMOUNT OF RS. 1,50,00,000/ - WAS A DEPOSIT GIVEN BY T HE SUCCESS DEVELOPERS PVT LTD. OUT OF THIS RS. 1,45,00,000/ - WAS GIVEN BY THE SDPL IN THE PRECEDING PREVIOUS YEARS. THE DEPOSIT WAS GIVEN FOR THE PURPOSE OF SECURING THE APPELLANT AGAINST A POSSIBLE MISAPPROPRIATION OF FSI BELONGING TO APPELLANT WHICH WAS FOR THE LIMITED PURPOSE OF FACILITATING CONSTRUCTION TRANSFERRED IN THE MUNICIPAL RECORDS IN THE NAME OF SUCCESS DEVELOPERS, WHO WERE THE DEVELOPERS OF MATUNGA PLOT. ACCORDING TO THE AGREEMENT SUCC ESS DEVELOPERS PVT. LTD HAS TO CONSTRUCT FLATS AND HANDOVER CONSTRUCTED FLOORS TO THE APPELLANT FOR A CONSIDERATION 4 PAYABLE BY APPELLANT TO SDPL IN EFFECT THE APPELLANT USED ITS SURPLUS. FSI TO GET CONSTRUCTED AREA FOR SALE. THE APPELLANT ALSO AGREED TO PA Y SUCCESS DEVELOPERS PVT. LTD. A MUTUALLY AGREED PRICE PER SQ.FT FOR CARRYING OUT THE CONSTRUCTION. T HIS AMOUNT WAS A DEPOSIT FREE OF INTEREST AND TO BE REFUNDED BY THE APPELLANT ONCE THE SALE OF SAID FLOORS ARE COMPLETED . THE APPELLANT HAS ALSO PAID COST OF CONSTRUCTION TO SUCCESS DEVELOPERS PVT. LTD. THE COPY OF CONFIRMATION HAS BEEN FILED AND A LETTER FROM THE S AID DEVELOPER HAS BEEN FILED. THESE DOCUMENTS ARE CENTRAL TO THE ISSUE AND THEREFORE, THEY HAVE BEEN FILED AS REQUIRED BY THIS OFFICE DURING AP PEAL PROCEEDINGS. ACCORDING TO THE FACTS OF THE CASE, THE AMOUNT OF RS. 1,50,00,000/ - WAS A DEPOSIT AND CANNOT BE TREATED AS BUSINESS INCOME . IT HAS BEEN CLAIMED THAT THE APPELLANT HAS REFUNDED THIS DEPOSIT IN LATER YEARS . ACCORDING TO EXISTING FACTS, I T CAN BE SEEN THAT RS. 1,50,00,000/ - WAS NOT BUSINESS INCOME OF THE ASSESSEE AND THEREFORE, THE ADDITION MADE BY THE AO IS DELETED. 9 . FROM THE ABOVE, ON MERITS OF THE ADDITIONS, IT IS EVIDENT THAT THE SUM OF RS. 1.5 CRS AS AN INTEREST FREE SECURITY DEP OSIT/ ADVANCE, REFUNDABLE TO THE SDPL SUBJECT TO THE FULFILLMENT TO THE CONDITIONS SPECIFIED IN THE SAID AGREEMENT DATED 28.5.2007. ASSESSEE HAS DULY ACCOUNTED THE SAME IN THE BALANCE SHEET. IT IS AN UNDISPUTED FACT THAT THE SAID AMOUNT OF RS 1.5 CR IS SU BSEQUENTLY REFUNDED TOO. WE FIND NO REASON WHY THE AO RECOGNIZED THE SAME AS BUSINESS RECEIPT OF THE ASSESSEE. 10 . REGARDING THE VIOLATION OF RULE - 46A(3) OF THE IT RULES, 1962 AS ALLEGED BY THE REVENUE VIDE GROUND NO.2, WE FIND THE SO CALLED ADDITION AL EVIDENCES WERE ACTUALLY FURNISHED BY THE ASSESSEE VIDE THE COVERING LETTER DATED 31.12.2010, WHICH IS NOT REBUTTED BY THE REVENUE. IN FACT, AT THE DIRECTIONS OF THE BENCH, LD DR PRODUCED THE ASSESSMENT RECORDS BEFORE US AND IT IS NOTICED THAT THE SAID PAPERS WERE DULY FOUND IN THE ASSESSMENT RECORDS. UNDER THESE CIRCUMSTANCES, THE REVENUES GROUND NO.2 IS NOT SUSTAINABLE. THEREFORE, WE ARE OF THE OPINION THAT ALL THE ORDER OF THE CIT (A) IS REASONABLE AND THE SAME DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 11 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 4.9 .2013 . SD/ - SD/ - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 4.9 .2013 . . ./ OKK , SR. PS 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI