D.C.I.T Cir - 12,kolkata, Kolkata V. M/s JKM Investment Pvt Ltd., Kolkata

ITA 380/KOL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1726 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SOUMYAJIT DASGUPTA
• Assessee Lawyers: ANKIT JALAN
• Keywords: Wrong claim
• Section: 40A(3); 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, A CCOUNTANT M EMBER & SRI S. S. VISWANETHRA RAVI , JUDICIAL MEMBER ] I.T.A. NO. 380 / KOL/201 3 ASSESSMENT YEAR: 20 09 - 10 DCIT, CIRCLE - 12, KOLKATA .... . . ... APPELLANT P - 7, CHOWRINGHEE SQUARE AAYKAR BHAWAN 7 TH FLOOR KOLKATA - 700 069 M/S. JKM INVESTMENT PVT. LTD. . .. ... RESPONDENT 36, BIBHUTI BANDOPADHYAY SARANI KOLKATA 700 019 [PAN : AABCJ 2724 L ] APPEARANCES BY: SHRI ANKIT JALAN, ADVOCATE , APPEAR ED ON BEHALF OF THE ASSESSEE. SHRI SOUMYAJIT DASGUPTA , ADDL. CIT , DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : NOVEMBER 2 7 TH , 2017 DATE OF PRONOUNCING THE ORDER : JANUARY 19 TH , 201 8 O R D E R PER J. SUDHAKAR REDDY : - THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - XII , KOLKATA , (HEREINAFTER THE LD. CIT (A)), PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 30 / 11 /201 2 , FOR THE ASSESSMENT YEAR 20 09 - 10 . 2. THE ASSESSEE IS A COMPANY AND IS IN THE BUSINESS OF DEALING IN PROPERTY AND INVESTMENTS. IT FILED ITS RETURN OF INCOME ON 30/09/2009, DISCLOSING INCOME OF RS.10,42,91,660/ - . THE ASSESSING OFFICER COMPLETED ASSESSMENT U/S 143(3) OF THE ACT, DETERMINING TOTAL INCOME AT RS.16,52,56,120/ - , INTERALIA DISALLOWING THE CLAIM OF THE ASSESSEE OF EXPENDITURE ON ACCOUNT OF PAYMENT OF NON - COMPETE FEE TO M/S. MITTAL CORPORATION LTD., OF RS.1,51,00,000/ - . DISALLOWANCE OF LOSS ON SAL E OF LAND TO THE TUNE OF RS.3.55 CRORES, A DISALLOWANCE OUT OF LEVELING AND FENCING EXPENDITURE OF RS.57.27 LAKHS, ETC. 2 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD 2.1. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE LD. FIRST APPELLATE AUTHORITY, GRANTED PART RELIEF. THE REVENUE FILED THI S APPEAL DISPUTING THE FINDINGS OF THE LD. FIRST APPELLATE AUTHORITY ON THE FOLLOWING GROUNDS: - 1. WHETHER IN FACTS AND CIRCUMSTANCES, LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE LOSS FROM SALE OF RS.3,55,37,500/ - DESPITE THE FACT THAT THE LAND WAS NOT REGISTERED IN THE NAME OF THE ASSESSEE. 2. WHETHER IN FACTS AND CIRCUMSTANCES, LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE NON - COMPETE FEE OF RS.1,51,00,000/ - AS EXPENSE. 3. WHETHER IN FACTS AND CIRCUMSTANCES, THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE D ISALLOWANCE OF EXPENSE @10% AMOUNTING TO RS.18,78,161/ - WAS JUSTIFIED ON PRESUMPTIVE BASIS. 4. WHETHER IN FACTS AND CIRCUMSTANCES, THAT LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE LEVELING AND FENCING EXPENSES OF RS.55,17,084/ - 3. WE HAVE HEARD SHRI SOUMYAJ IT DASGUPTA , LD. SENIOR COUNSEL, D/R, ON BEHALF OF THE REVENUE AND SHRI ANKIT JALAN , LD. COUNSEL ON BEHALF OF THE ASSESSEE. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORIT IES BELOW AS WELL AS THE CASE - LAW CITED. WE HOLD AS FOLLOWS: - 3.1. GROUND NO.1, IS ON THE ISSUE OF ALLOWABILITY OF CLAIM OF LOSS ON SALE OF LANDS. THE FACTS RELEVANT TO THIS GROUND ARE AS FOLLOWS: - 3.1.1. THE ASSESSEE CLAIMS TO HAVE ENTERED INTO AN AGREEM ENT F OR PURCHASE OF LAND ON 31/1 0 /2008 , WITH SOME PERSONS WHO ARE AGENTS WHO PROCURED LAND FROM ORIGINAL LAND OWNERS FOR BIG COMPANIES . THIS AGREEMENT WAS EXECUTED ON A NON - JUDICIAL STAMP PAPER WORTH RS.100/ - . THE AGREEMENT WAS EXECUTED BETWEEN THE ASSESSE E COMPANY AND 5 PERSONS FOR PURCHASE OF LAND ADMEASURING 6.41 ACRES FOR A TOTAL CONSIDERATION OF RS.7, 05 ,3 8 ,500/ - . THE 5 PERSONS WERE MR S. SANTRA, KAVIT, KAMLA, SARITA & BIMLESH . A TOKEN ADVANCE OF RS.7 LAKHS/ - , WAS PAID AS CONSIDERATION FOR ENTERING INTO THIS AGREEMENT OF SALE DT. 31/10/2008. 3 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD 3.1.2. FURTHER THE ASSESSEE CLAIMED THAT ON A LATER DATE IT HAD ENTERED INTO AN AGREEMENT OF SALE TO SELL THESE LANDS PROPOSED TO BE AC QUIRED , VIDE THE AGREEMENT OF SALE DT. 31/10/2008, TO ONE M/S A ONE AGERCO PVT. LTD., FOR RS.3,50,00,000/ - . THE DIFFERENCE BETWEEN THE SALE CONSIDERATION IN THE AGREEMENT OF SALE DT. 31/10/2008, ENTERED INTO WITH THE SO - CALLED AGENTS OF THE LAND HOLDER S AND THE SALE CON SIDERATION IN THE AGREEMENT OF SALE ENTERED INTO WITH M/S A ONE AGERCO PVT. LTD., NEW DELHI , WAS CLAIMED AS BUSINESS LOSS . THE ASSESSEE CLAIMED LOSS OF RS.3,55,37,500/ - (7,05,38,500 3,50,00,000). THE ASSESSING OFFICER OBSERVED THAT, T HIS LOSS IS CLAIMED AS HAVING BEEN INCURRED WITHIN A PERIOD OF FIVE MONTHS. ON PERUSAL OF THE SUBSTANTIATING DOCUMENTS AND EXPLANATIONS FURNISHED BY THE ASSESSEE, THE FOLLOWING FACTS WAS NOTICED BY NOTICE OF THE ASSESSING OFFICER : - 1) AN AGREEMENT TO SALE WAS EXECUTED ON 31.10.08 BETWEEN 5 PERSONS AND THE ASSESSEE COMPANY. 2) THE SAID AGREEMENT TO SALE WAS EXECUTED ON NON - JUDICIAL STAMP OF RS.100/ - . 3) THE SAID DOCUMENTS WAS SIGNED BY ONE M/S KAVITA, ONLY. 4) THERE IS NO SIGNATURE OF ANY WITNESS ON THE SAID DOCUMENT. 5) THE DETAILS OF OWNERSHIP OF SPECIFIC PIECE OF LAND IS NOT MENTIONED IN, THE SAID DOCUMENTS. 6) AGAINST THE SAID AGREEMENT A N OMINAL AMOUNT OF RS.7,00,000 / - ONLY WAS PAID IN CASH TO THE SAID V EN DORS . 7) PHOTOCOPY OF POS SESSIO N LETTER WAS ALSO FURNISHED. ON PERUSAL IT IS NOTICED THAT THE SAID LETTER IS SIGNED BY ONLY SHRI ABHISEK MODI, DIRECTOR OF THE ASSESSEE COMPANY . NEITHER BY ANY VENDOR NOR ANY WITNESS SIGNED THIS POSSESSION LETTER . 8) AN AGREEMENT TO SALE WAS ALSO CLAIMED TO BE EXECUTED ON 24.03.09 ON A NON - JUDICIAL STAMP OF RS.100 / - BETWEEN THE ASSESSEE COMPANY AND ONE M / S. A ONE AGRO PVT. LTD. NEW DELHI FOR A CONSIDERATION OF RS.3,50,00,000 / - . 9) THE SAID M/S. A ONE A GRO PVT. LTD. PAID A NOMINAL SUM OF RS.1 ,00,000 / - ONLY IN CASH TO THE ASSESSEE AGAINST THE SO CALLED SALE CONSIDERATION OF RS.3,50,00,000 / - . 10) THERE WAS A TIME GAP OF ONLY 5 MONTHS IN THE SO CALLED PURCHASE AND SALE AGREEMENTS O F LAND. 4 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD 11) THE ASSESSEE DID NOT HAVE ANY RIGHT OVER THE SAID IMMOVABLE PROPERTY ON THE DATE OF SALE SINCE THE LAND WAS NOT REGISTERED WITH ANY SUB REGISTRAR IN THE NAME OF THE ASSESSEE. 4. THE ASSESSEE EXPLAINED THAT IT PROPOSED TO PURCHASE LAND FOR A WAREHOUSE AND INTENDED TO SELL THE SAME TO TATA REALITY. IT WAS SUBMITTED THAT TATA REALITY SELECTED TWO SITES, ONE OF WHICH WAS NEAR THE WAREHOUSE ZONE OF PATAUDI. THE ASSESSEE CLAIMS THAT IT WAS NOT ABLE TO ACQUIRE THE LAND NEAR PATAUDI BECAUSE THE FRONT OF THE LAND BELONGED TO A GRAM PANCHAYAT AND WITHOUT THIS LAND THERE IS NO APPROACH TO THE SITE. IT ALSO PLEADED THAT THE LAND USE COULD NOT BE CHANGED FOR THIS SITE AND HENCE IT SUSTAINED A LOSS. ON THE AGREEMENT BEING SIGNED BY ONLY ONE PERSON, IT WAS SUBMITTED THAT THIS IS THE CUSTOM AND PRACTICE. IT WAS SUBMITTED THAT THESE PERSONS WORK AS A GROUP AND ARE NOT OWNERS OF THE LAND A ND AS THEY WORK FOR ACQUIRING LAND FOR BIG CUSTOMERS, THERE IS NO REQUIREMENT OF SIGNATURES OF ALL THESE PERSONS WHO SELL THE LAND. A COPY OF THE CASH BOOK WAS ENCLOSED AND IT WAS CLAIMED THAT THE ASSESSEE HAD SUFFICIENT CASH OF RS.7 LAKHS/ - , TO BE PAID TO THE VENDORS ON THAT DATE . THE ASSESSING OFFICER REJECTED THIS CONTENTION OF THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE DEALS IN THE PURCHASE AND SALE OF LAND. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMS TO HAVE SOLD LAND TO M/S. DUET JKM IND IA HOTELS (INDORE) PVT. LTD., FOR AN AMOUNT OF RS.2 CRORES. THE ASSESSEE DECLARED PROFIT OF RS.18,55,68,024/ - , ON THE ABOVE SALE. AFTER MAK ING AND REPORTING HUGE PROFIT EARNED BY THE ASSESSEE, THIS BOGUS CLAIM WAS MADE. AT PAGE 4 AND 5 OF HE HELD AS FOLLOW S: - THE ABOVE SUBMISSION OF THE ASSESSEE HAS DULY BEEN CONSIDERED. THE FACTS AND MATERIAL AVAILABLE ON RECORD HAVE ALSO BEEN EXAMINED AND CONSIDERED. IT APPEARS THAT THE ASSESSEE HAS MADE A PLAN TO CLAIM A LOSS ON PURCHASE AND SALE OF LAND TO OFFSET THE HUGE PROFIT EARNED ON SALE OF LAND AT INDORE. SINCE THE ASSESSEE HAS EARNED A HUGE PROFIT OF ABOUT 18.50 CRORES THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES TO REDUCED ITS TAXABLE INCOME. THE ASSESSEE HAS CLAIMED THAT SINCE HE COULD NOT GET ULC IN RESPECT OF LAND AT TAURU VILLAGE HE SOLD IT AT A LOSS TO M/S. A ONE AGRO PVT. LTD. WITH A VIEW TO MINIMIZE ITS FURTHER LOSS. ON PERUSAL OF THE SO CALLED AGREEMENT DT. 30.02 .08 IT IS NOTICED THAT AS PER CLAUSE - ILL THE ASSESSEE WAS SUPPOSED TO PAY AN AMOUNT OF RS.3,00, 00,000/ - TO THE VENDOR AT THE TIME OF 5 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD APPLICATION FOR CLU TO THE APPROPRIATE AUTHORITIES. THE BALANCE PAYMENT OF RS.3,48,37,000 / - WAS SUPPOSED TO BE PAID TO THE VENDOR WITHIN 1 MONTH OF CLU APPLICATION OR WITHIN 15 DAYS FROM THE DATE OF RECEIPT OF CLU. THE ASSESSEE HAS NOT MADE THE SAID PAYMENTS AS SPECIFIED IN THE SAID AGREEMENT TO SALE. FURTHER IT IS NOTICED THAT AS PER CLAUSE 7 OF THE SAID AGREEMENT TO SALE - 'IN CASE THE VENDEE FAILS TO PAY THE BALANCE CONSIDERATION TO THE VENDOR WITHIN A STIPULATED TIM E (EVEN AFTER RECEIVED THE INTIMATION REGARDING THE SHEET OF PERMISSION) THE VENDOR SERVE ANY TITLE TO FORFEIT THE EARNEST MONEY BEING PAID HEREIN. EVEN IF THE PLEA OF THE ASSESSEE THAT HE WAS FORCED TO SALE LAND DUE PAID AS THE ASSESSEE COULD NOT GET CLU PERMISSION, THE ASSESSEE COULD HAVE ALLOWED THE VENDOR TO FORFEIT THE SAID EARNEST MONEY PAID TO THE ASSESSEE. IT IS FURTHER NOTICED THAT EVEN ON DATE OF REJECTION OF CLU APPLICATION THE ASSESSEE HAD NOT ENTERED INTO ANY AGREEMENT WITH M / S. A ONE AGRO PVT. LTD. AS A PRUDENT BUSINESS MAN THE ASSESSEE COULD HAVE ALLOWED THE VENDOR TO FORFEIT THE SAID AM OUNT OF RS.9,00,000/ - AND THERE WAS NO OCCASION TO ENTER INTO FURTHER AGREEMENT FOR SALE OF LAND AND THAT TOO AT A LOSS OF RS.3,55,50,000 / - . IT IS ALSO NOTICED ON PERUSAL OF THE AGREEMENT TO SALE WITH M / S. A ONE AGRO PVT. LTD. THAT THE SAID PARTY WAS SUPPOSED TO PAY THE BALAN CE AMOUNT OF RS.3,49,00,000/ - TO THE ASSESSEE AT THE TIME OF REGISTRATION. IT IS ALSO NOTICED IN CLAUSE - III OF THE SAID AGREEMENT TO SALE T HAT THE TIME PERIOD FOR THIS TRANSACTION WAS BY 31.03.2009. IT APPEARS THAT IN HASTE TO PREPARE A SELF SERVING DOCUMENTS IN ORDER TO CLAIM LOSS, THE ASSESSEE COULD NOT NOTICE THE FOLLO WING O B S ER V ATION IN THE SAID DOCUMENTS. IN CLAUSE - I OF THE SAID DOCUMENTS DATED 24.03.09 IT MENTIONED THAT 'IN PURSUANCE TO THE SAID UNDERSTANDING AND AN AGREEMENT AND IN CONSIDERATION AND RS.3,50,00,000 / - (RS.7,05,37,500/ - ONLY) BEING THE COST OF THE SAID LAND'. WHEN THE AGREEMENT FOR ACTUAL PURCHASE AND SALE OF IMMOV ABLE PROPERTY IS EXECUTED WITH REAL TRUE INTENTION TO EXECUTE THE SAME THE ABOVE MENTIONED VITAL MISTAKES ARE NEVER MADE. IT ONLY SHOWS THAT THE AGREEMENT WAS ONLY MADE FOR CLAIMING THE ABOVE MENTIONED LOSS. BY WAY OF THE ABOVE MENTIONED TWO DOCUMENTS IN R ESPECT OF PURCHASE AND SALE, THE ASSESSEE COMPANY PAID RS.7,00,000 / - IN CASH AGAINST PURCHASE AND RECEIVED ONE LAKH IN CASH AGAINST SALE. EVEN IF THE DOCUMENTS ARE CONSIDERED TO BE GENUINE, THE LOSS COULD NOT BE MORE THAN RS.6,00,000 / - . WHAT ASSESSEE IS CL AIMING IS LOSS OFRS.3,55,50,000 / - AGAINST THE ABOVE MENTIONED LOSS OF RS.6,00,000 / - . THESE DOCUMENTS ARE NOTHING BUT SELF SERVING DOCUMENTS PRODUCED THAT FEW TO CLAIM THE ABOVE MENTIONED LOSS. THEREFORE, IT IS SEEN THAT THE APPARENT IS NOT REAL AND HENCE T HE REAL MOTIVE AND PURPOSE BEHIND THE SO CALLED AGREEMENTS TO SALE HAS TO BE SEEN. IN THIS CONNECTION, 6 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD RELIANCE IS PLACED ON THE LANDMARK DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASES OF MCDOWELL INDIA LTD. AND DURGA PRASAD MORE. IN THE CASE OF MCDOW ELL & CO. LTD. V. CT O [1985) 154 ITR 148 (S C )., THE HON'BLE COURT HELD THE FOLLOWING: 'TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWORK OF LAW. COLOURABLE DEVICES CANNOT BE PART OF TAX PLANNING AND IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS HONOURABLE TO AVOID THE PAYMENT OF TAX BY RESORTING TO DUBIOUS METHODS. IT IS THE OBLIGATION OF EVERY CITIZEN TO PAY THE TAXES HONESTLY WITHOUT RESORTING TO SUBTERFUGES.' IN ANOTHER LANDMARK JUDGEMENT, THE HON'BLE SUPREME COURT IN THE CA SE OF C.I. T. VS DURGA PRASAD MORE (1971) 82 I . T .R, 540, HAS HELD THAT IT IS TRUE THAT AN APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TA X IS TO HAVE SOME RECITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. THE RATIO OF THE ABOVE DECISIONS ARE SQUARELY APPLICABLE IN THE CASE OF THE ASSESSEE. CONSIDERING THE ABOVE FA CTS AND CIRCUMSTANCES THE LOSS OF RS.3,55,50,000/ - CANNOT BE ALLOWED AND THE SAME IS ADDED TO THE TOTAL INCOME. PENALTY PROCEEDINGS U / S. 271(1)(C) READ WITH EXPLANATION 1 AND SECTION 274 ARE INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INC OME. WITHOUT PREJUDICE TO THE ABOVE DISCUSSION, IF THE CLAIM OF THE ASSESSEE IS ALLOWED THEN THE PROVISIONS OF SECTION 40A(3) WILL BE ATTRACTED IN RESPECT OF PAYMENT OF RS.71AKH IN CASH TO THE SO CALLED VENDORS OF LAND. 5. ON APPEAL THE LD. FIRST APPELL ATE AUTHORITY, ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS FOLLOWS: - AFTER GOING THROUGH THE F IND I NG OF THE A.O. AND WRITTEN SUBMISSION FILED BY THE A.R. IT IS CLEAR THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF PURCH A SE AND S ALE O F LAND DOES NOT HOLD LAND IN A STOCK FOR A LONGER PERIOD OF TIME SIMPLY BECAUSE IT ENGAGES THE C A SH OF THE ASSESSEE COMPANY. THEREFORE, THE ASSESSEE COMPANY AS THE A . R. HAS POINTED OUT SOLD THE LAND IN HARYANA EVEN AT THE COST OF SUFFERING LOSS INSTEAD OF H OLDING IT TILL THE CLU (CHANGE OF LAND USE) IS OBTAINED. THE A.R. HAS FURTHER BROUGHT ON RECORD THAT -- IN THE CASE OF COMMI S SI ONER OF INCOME TAX (CENTRAL) VS. M/S. ROC KMAN CYCLE INDUSTRIES PR I VATE LIMITED, [ITR NOS. 169 AND 170 OF 1996 ], A VERY VITAL IS SUE WAS 7 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD DISCUSSED AND D ECIDED BY THE HON'BLE HIGH COURT OF PUNJAB & HARYANA . THE ISSUE WAS, - ' WHETHER HAVING REGARD TO RELATIONSHI P BETWEEN DIFFERENT CONCERNS, WHERE A TRANSACTION WHICH IS PATENTLY IMPRUDENT TAKES PLACE, THE TAXING AUTHORITY SHOULD EXAM INE THE QUESTION OF BUSINESS EX PEDIENCY AND NOT GO MERELY BY THE FACT THAT THE ASSESSEE HAD TAKEN A DECISION IN ITS WISDOM WHICH MAY BE WRONG OR RIGHT? ' KEEPING IN VIEW, DISCUSSION ABOVE, I FIND THAT ALTHOUGH TH E DEPARTMENT IS REGULARLY POINTIN G OUT SORT COMINGS IN THE PROCES S AND PROCEDURES OF BUSINESS CONDUCTED BY THE ASSESSEE CO MPANIES, BUT ULTIMATELY IT IS THE ASSESSEE WHICH IS ULTIMA TELY RESPONSIBLE TO RUN THE SHOW OF ITS BUSINESS AND HERE THE DEP ARTMENT IS NOT ENTITLED TO TELL THE ASSESSEE COMPA NY H OW TO CONDUCT ITS BUSINESS. I N TH I S CASE, THE ASSESSEE HAS EARNED PROFIT IN ITS BUSINESS DEALING IN MADHY A PRADESH, BUT INCURRED SOME LOSS IN ITS BUSINESS IN HARYANA. ASSESSEE'S BUSINESS IS TO BE LOOKED INTO IN ITS TOTALITY AND NOT IN PIECE MEAL. THEREFORE, A SSESSEE'S APPEAL ON GROUND NO. 2 IS ALLOWED. 5.1. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. AFTER HEARING THE RIVAL CONTENTIONS, WE ARE OF THE CONSIDERED OPINION, THAT THE ASSESSEE, BY JUST PAYING A TOKEN AMOUNT OF RS.7 LAKHS/ - TO CERTAIN MEDIATORS, WHO ARE SAID TO BE A GROUP OF PEOPLE WHO ACQUIRE LAND FROM AGRICULTURAL LAND OWNERS FOR SELLING TH E SAME TO BIG CUSTOMERS AND ENTERING INTO AN AGREEMENT OF SALE WITH JUST ONE OF THE GROUP MEMBERS, CANNOT BE SAID TO HAVE ACQUIRED ALL THE RIGHTS IN THE SAID LAND OF 6.41 ACRES FOR RS.7,05,37,500/ - , AT TAURU, DISTRICT GURGAON, HARYANA. THE FACTS ARE CLEAR FROM THE FOLLOWING SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, WHICH IS EXTRACTED FOR READY REFERENCE: - FURTHER IT IS STILL A PREVAILING PRACTICE NOT ONLY IN THE STATE OF HARYANA, BUT ALSO IN OTHER STATES LIKE WEST BENGAL, UP, BIHAR AN D SO ON, THAT A GROUP OF PERSONS ENGAGE THEMSELVES IN PURCHASE AND SALE OF LAND FOR BIG CUSTOMERS. IN THAT CASE, WHILE BOOKING THE LAND ONE OR TWO MEMBERS OF THE GROUP USE TO MAKE SMALL ADVANCE AGAINST AN UNREGISTERED AGREEMENT FOR PURCHASE OF LAND MAINLY FROM THE FARMERS JUST TO TAKE THE LAND IN THEIR GRIP AND AFTER FINDING SUITABLE CUSTOMER THEY EXECUTE THE CONVEYANCE DEED IN FAVOUR OF THE CUSTOMER DIRECTLY FROM THE OWNERS OF THE LAND. THE MAIN PURPOSE BEHIND THIS TO RESTRICT THE SALE OF LAND TO OTHER PAR TIES. 8 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD SINCE THESE PERSONS WORK IN GROUP AND THEY ARE NOT AT ALL OWNER OF THE LAND THE SIGNATURE OF THE EACH & EVERY PERSON IN AGREEMENT TO SALE IS NOT NECESSARY. WE ARE ENCLOSING HEREWITH THE RELEVANT PAGE OF THE OUR CASH BOOK TO PR O VE THAT THERE WAS SUFFICIENT CASH TO PAY RS. 7,00,000 / - TO THE VENDORS VIDE ANNEXURE - 6 . 6.1. AT BEST THE ASSESSEE COULD HAVE ACQUIRED CERTAIN RIGHTS AGAINST THE INTERMEDIARIES/BROKERS/LAND P OO LING AGENTS. THERE IS NO PURCHASE OF LAND. SUCH AGREEMENTS CANNOT FORM PART OF STOCK - IN - TRADE OF THE ASSESSEE. THESE ARGUMENTS AT BEST GIVE RISE TO CERTAIN CLAIMS FOR REC OVERING OF MONEY. 6.2. INSTEAD OF FORFEITING THE AMOUNT OF RS.7 LAKHS/ - , PAID TO THE INTERMEDIARIES, THE ASSESSEE CLAIMS TO HAVE ENTERED INTO AN AGREEMENT OF SAL E OF THIS UNSPECIFIED LAND WHICH IS NOT PURCHASED WITH ONE M/S. A ONE AGERCO PVT. LTD. WITH A VIEW TO MINIMIZE ITS FURTHER LOSS. THE ASSESSEE CLAIMS THAT THIS AGREEMENT WITH M/S A ONE AGERCO PVT. LTD., WAS ENTERED INTO ON 24/03/2009 FOR THE SALE OF 6.41 A CRES OF LAND LOCATED AT TAURU, DISTRICT GURGAON, HARYANA FOR RS.3,50,00,000/ - , THUS INCURRING A LOSS OF RS.7,05,37,500/ - . THE ASSESSING OFFICER, IN OUR VIEW WAS RIGHT IN SAYING THAT, A PRUDENT BUSINESSMAN WOULD NOT HAVE TAKEN SUCH A DECISION. THE LD. ASSES SING OFFICER HAS ALSO POINTED OUT CERTAIN FACTUAL DISCREPANCIES IN THE AGREEMENT SUCH AS THE AGREEMENT OF SALE WITH M/S. A ONE AGERCO PVT. LTD., WAS ENTERED INTO 24/03/2009 AND THE PERIOD OF TRANSACTION WAS UP TO 31/03/2009 AND IN CLAUSE - I OF THE ONE OF TH E SALE DOCUMENTS IT WAS MENTIONED IN CLAUSE 1 PAGE 2 THAT IN PURSUANCE TO THE SAID UNDERSTANDING AND AN AGREEMENT AND IN CONSIDERATION OF RS.3,50,00.000/ - (RUPEES SEVEN CRORES FIVE LAKHS THIRTY SEVEN THOUSAND FIVE HUNDRED ONLY) BEING THE COST OF THE SAID LAND IS A BIG MISTAKE DEMONSTRATING H ASTE IN PREPARATION OF THE SELF - SERVING DOCUMENT. SUCH MISTAKES CANNOT OCCUR IN BIG DEALS BETWEEN TWO INDEPENDENT PARTIES. SIMILARLY, WHEN THE AGREEMENT WAS SAID TO HAVE BEEN ENTERED INTO ON 24/03/2009, ITS TIME PERIOD WAS ONLY UP TO 31/03/2009. ONLY RS.1 LAKH WAS TAKEN AS ADVANCE FROM M/S. A ONE AGERCO PVT. LTD., NEW DELHI. WHEN THE BENCH EXPRESSED ITS SURPRISE, AS TO HOW THE LD. CIT(A), ALLOWED THE CLAIM OF THE ASSESSEE ON THESE FACTS AND CIRCUMSTANCES, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ENTIRE AMOUNT HAS BEEN PAID TO THE VENDORS OF THE LAND BY THE ASSESSEE. T HIS SUBMISSION OF THE LD. A/R, IS CONTRARY TO THE RECORDING OF FACT BY THE ASSESSING OFFICER AT PAGE 4 OF HIS ORDER, WHERE HE STATES THAT THE ASSESSEE HAS NOT MADE THE SAID PAYMENTS AS SPECIFIED IN THE SAID AGREEMENT OF SALE. SIMILARLY, THERE IS NO PROOF OF M/S. A ONE AGERCO PVT. LTD. FULFILLING ITS OBL IGATION UNDER THE AGREEMENTS. ALL THESE DOCUMENTS IN OUR VIEW ARE SELF - SERVING DOCUMENTS. 9 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD 6.2.1 IN OUR VIEW, THIS IS NEITHER A PURCHASE NOR A SALE OF LAND. THE FINDING OF THE ASSESSING OFFICER HAS FORCE . A PLAIN EXAMINATION OF THE DOCUMENTS TAKE US TO A C ONCLUSION THAT THIS IS A FALSE AND BOGUS CLAIM. THE LD. CIT(A) HAS IN A SLIPSHOD MANNER ALLOWED SUCH HUGE CLAIM OF THE ASSESSEE . IN ANY EVENT, AS THERE IS CONTRADICTION IN THE FACTS OF THE CASE, AS HAS BEEN PRESENTED BY THE LD. COUNSEL FOR THE ASSESSEE AND THAT RECORDED BY THE ASSESSING OFFICER, WE SET ASIDE THIS ISSUE TO THE FILE OF THE LD. CIT(A), WITH A DIRECTION TO VERIFY WHETHER THE ASSESSEE COMPANY HAD MADE PAYMENTS TO THE TUNE OF RS. 7,05,37,500/ - , TO THE GROUP OF BROKERS FOR ACQUISITION OF LAND. THE LD. CIT(A), IS ALSO DIRECTED TO VERIFY WHETHER M/S. A ONE AGERCO PVT. LTD. HAD PAID THE ENTIRE MONEY TO THE ASSESSEE AND ACQUIRED THE LAND IN QUESTION. AS THE LD. CIT(A) FAILED TO EXAMINE THE APPLICABILITY OF SECTION 40A(3) OF THE ACT. WE DIRECT HIM TO DO SO. 6.3. IN VIEW OF THE ABOVE DISCUSSION, THE ISSUE IS RESTORED TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION, IN ACCORDANCE WITH LAW. IN THE RESULT, THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO. 2, IS ON THE ISSUE AS TO WHETHER THE LD. CIT(A) WAS RIGHT IN ALLOWING AS AN EXPENSE, THE CLAIM OF THE ASSESSEE ON PAYMENT OF NON - COMPETE FEES OF RS.1,51,00,000/ - . 7.1. FACTS IN BRIEF: - THE ASSESSEE CLAIMS TO HAVE PAID RS.1,51,00,000/ - TO M/S MITTAL CORPORATION LTD. , AS T HEY WERE SHOWING CERTAIN LANDS FOR SALE TO M/S. DUET JKM HOTELS (INDORE), TO WHOM THE ASSESSEE HAD ULTIMATELY SOLD ITS LAND FOR AN AMOUNT OF RS.20 CRORES. THE ASSESSING OFFICER ISSUED COMMISSION U/S 13 1 (I)(D) OF THE ACT, TO THE ASSISTANT COMMISSIONER OF I NCOME TAX, CIRCLE - 3(1), INDORE AND OBTAINED A REPORT DT. 21.12.2011, ON THIS TRANSACTION. A SWORN STATEMENT FROM SHRI MAHENDRA JAIN, CFO OF M/S. MITTAL CORPORATION LTD., WAS RECORDED U/S 131 OF THE ACT ON 15/12/2011 AND 19.12.2011. M/S MITTAL CORPORATION L TD. ACCEPTED THE FACT THAT IT HAD RECEIVED NON - COMPETE FEE OF RS.1,51,00,000/ - FROM M/S. JKM INVESTMENT PVT. LTD., IN RESPECT OF THE TRANSACTION AND THE AMOUNT WAS OFFERED TO TAX IN ITS COMPUTATION OF INCOME. THE AMOUNT WAS PAID BY AN ACCOUNT PAYEE CHEQUE AFTER DEDUCTION OF TAX AT SOURCE. 7.1.1. THE LD. CIT(A) IN HIS ORDER ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS FOLLOWS: - 10 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD I HAVE CONSIDERED THE FINDING OF THE A.O. AND THE SUBMISSION MADE BY THE A.R. DURING THE APPELLATE PROCEEDING. FROM ABOVE, IT IS CLEAR THAT M/S. MITTAL CORPORATION LTD. RECEIVED RS.1,51 CRORE AS NON - COMPETE FEES FROM THE ASSESSEE COMPANY. IT IS ALSO CLEAR THAT THE SAID AMOUNT RECEIVED BY M/S. MITTAL CORPORATION LTD. WAS OFFERED FOR TAXATION BY THIS COMPANY. IN THIS CIRCUMSTANCES , SIMPLY BECAUSE MR. JAIN OF M/S. MITTAL CORPORATION LTD. COULD NOT IDENTIFY DURING THE RECORDING OF STATEMENT, THE PIECE OF LAND FOR WHICH THE NON - COMPETE WAS RECEIVED DOES NOT MEAN THAT NON - COMPETE FEE WAS NOT PAID BY THE ASSESSEE COMPANY. THEREFORE, ASS ESSEES APPEAL ON GROUND NO. 3 IS ALLOWED 7.2. ON THE FACTS OF THIS CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). T HE AMOUNT WAS NOT RECEIVED BY M/S. MITTAL CORPORATION LTD., UNDER THE HEAD LEGAL AND PROFESSIONAL SERVICE AND HENCE THE STATEMENT OF THE LD. A/R, TO THAT EFFECT, HAS NO BEARING ON THE CLAIM OF THE ASSESSEE. AS THE ASSESSEE HAS PAID THE AMOUNT TO M/S. MITTA L CORPORATION LTD. AND AS THE AMOUNT RECEIVED WAS OFFERED TO TAX BY M/S. MITTAL CORPORATION LTD., THE REVENUE SHOULD HAVE NO GRIEVANCE IN THIS REGARD. IN THE RESULT, THIS GROUND OF THE REVENUE IS DISMISSED. 8. GROUND NO. 3, IS ON THE ISSUE OF THE LD. CIT( A), RESTRICTING THE DISALLOWANCE OF EXPENSES CLAIMED AT 10 PER CENT IN THE PLACE OF 1/3 RD , DISALLOWED BY THE ASSESSING OFFICER. 8.1. THESE ARE AD - HOC DISALLOWANCES. AS THE LD. D/R, DID NOT CONTROVERT THE FINDING OF THE LD. CIT(A) WHICH ARE AT PARA 7 PAGE 24 & 25 OF THE ORDER, WE FIND NO REASON TO INTERFERE IN THIS ISSUE OF PERCENTAGE OF AD - HOC DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE. IN THE RESULT, THIS GROUND OF THE REVENUE IS DISMISSED. 9. GROUND NO. 4 IS ON THE ISSUE OF ALLOWABILITY OF EXPENDITURE CLAIMED TOWARDS LEVELING AND FENCING. THE ASSESSING OFFICER DISALLOWED THE CLAIM AS THE ASSESSEE DID NOT FURNISH SUPPORTING DOCUMENTS FOR THE EXPENDITURE CLAIMED TO THE TUNE OF RS.57,27,558/ - . 9.1. THE LD. CIT(A), DISALLOWED THE CLAIM OF THE ASSESSEE BY H OLDING AS FOLLOWS: - APPEAL ON GROUND NO. 6 IS AGAINST THE DISALLOWANCE OF RS. 57,27,558/-OUT OF ASSESSEE'S CLAIM TOW A R DS L EVELIN G AND FENCING EXPENSES. THE AO HAS DISALLOWED RS. 57,27,558/ - OUT OF RS. 82 , 66 , 742/ - FOR LEVELING AND FENCING EXPENSES ON THE 11 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD G ROUND THAT THE AS SESSEE COMPANY COULD NOT PRODUCE RELEVANT DOCUMENTS. THE A . R. DUR I NG THE APPELLATE PROCEED HAS SUBMITTED THAT THE A.O. IN HIS ASSESSMENT ORDER ITSELF HAS MENTIONED THAT LEDGER ACCOUNT OF FENCING AND LEVELING EXP E NSES WERE PRODUCED BEFORE H IM. THE A. R HAS SUBMI TT ED COPIES OF SAME LEDGER ACCOUNTS BEFORE ME OF ALL PARTIES TO WHOM PAYMENTS WERE MADE FOR LE VELING AND FENCING AT INDORE. FROM THESE LEDGER ACCOUNTS IT IS SEEN THAT PAYMENTS WERE MADE MAINLY BY ACCOUNT PAYEE CHEQUE TO DIFFERENT PARTIES, BUT PAYMENT OF RS. 210474/ - HAS BEEN MADE EITHER IN CAS H OR BY CREDIT CARD. THEREFORE, I THINK THIS AMOUNT IS NOT ALLOWABLE AS THE PAYMENT WAS MADE TO ESTABLISHED PARTIES. THUS, DISALLOWANCES UNDER THIS HEAD I S RESTRICTED TO RS. 2,10,474/ - . HENCE, ASSESSEE'S APPEAL ON GROUND NO. 6 IS P A RTLY ALLOWED. 9.2. A PERUSAL OF THE SAME DEMONSTRATES THAT THE LD. CIT(A) HAS NOT CONTROVERTED THE FINDING OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT PRODUCED THE SUPPORTING DOCUMENTS OF HAVING INCURRED EXP ENDITURE TOWARDS LEVELING AND FENCING. MERE PRODUCTION OF A LEDGER ACCOUNT AND PAYMENTS BY WAY OF CHEQUES DOES NOT SUFFICE IN THIS CASE. AS THE ASSESSEE HAS NOT PRODUCED NECESSARY EVIDENCE, WE UPHOLD THE ORDER OF THE ASSESSING OFFICER AND REVERSE THE FINDI NG OF THE LD. CIT(A). IN THE RESULT, THIS GROUND OF THE REVENUE IS ALLOWED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED IN PART. KOLKATA, THE 19 TH DAY OF JANUARY , 201 8 . SD/ - SD/ - [ S.S. VISWANETHRA RAVI ] [ J. SUDHAKAR REDDY ] J UDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19 . 01 .201 8 {SC SPS} 12 I.T.A. NO. 380/KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S. JKM INVESTMENT PVT. LTD COPY OF THE ORDER FORWARDED TO: 1. M/S. JKM INVESTMENT PVT. LTD 36, BIBHUTI BANDOPADHYAY SARANI KOLKATA 700 019 2. DCIT, CIRCLE - 12, KOLKATA P - 7, CHOWRINGHEE SQUARE AAYKAR BHAWAN 7 TH FLOOR KOLKATA - 700 069 3. CIT(A) - 4. CIT - , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES