AKRUTI STEELFAB CORPORATION, MUMBAI V. DCIT CEN CIR 5(1), MUMBAI

ITA 381/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1468 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 25-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIRAL DOSHI
• Section: 143(3); 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D MUMBAI BEFORE SHRI D.T.GARASIA , JM AND SHRI RAJESH KUMAR, AM I.T.A. NO. 381 /MUM/20 1 6 ( / ASSESSMENT YEAR : 20 10 - 11 ) AKRUTI STEELFAB CORPORATION, 6 TH FLOOR, ACKRUTI TRADE CENTE R , ROAD NO.7, MAROL MIDC, ANDHERI (E), MUMBAI - 400093 / VS. DY . COMMISSIONER OF INCOME TAX - CEN CIR 5(1), MUMBAI. ./ PAN : AAHFA0288P ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI V IRAL DOSHI / RESPONDENT BY : SHRI PURUSHOTTAM KUMAR / DATE OF HEARING : 7 .3.2017 / DATE OF PRONOUNCEMENT : 5. 4 . 201 7 / O R D E R PER RAJESH KUMAR, A. M: THI S IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD.CIT(A) - 5 3, MUMBAI DATED 21.10.2015 FOR THE ASSESSMENT YEAR 20 10 - 11 . 2. ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF AMOUNT WRITTEN OFF OF RS.12,87, 085/ - TOWARDS 380 SQ.FT OF TRANSFERABLE DEVELOPMENT RIGHTS AS THE SAME WERE NOT RECOVERED AND HAS BECOME BAD. 2 I.T.A. NO. 381 /MUM/201 6 3. FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPMENT OF THE PROPERTIES AND FILED ITS RETURN OF IN COME ON 1 5.10.2010 DECLARING AN INCOME OF RS.NIL, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961. THEREAFTER THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE STATUTORY NOTICES WERE ISSUED UNDER SECTION 143(2) AND 142(1) AND DULY SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE A O FOUND THAT THE ASSESSEE FIRM HAS CLAIMED EXPENSES TO THE TUNE OF RS.12,27,085/ - ON ACCOUNT OF FSI /T D R WRITTEN OFF. THE A O VIDE ORDERSHEET ENTRY DATED 17.10.2012, CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT OF FSI WRITTEN OFF DURING THE YEAR SHOULD NOT BE DISALLOWED. IN REPLY, THE ASSESSEE SUBMITTED THAT THIS T D R FORMED PART OF STOCK IN HAND OF THE FIRM COMING OVER FROM THE EARLIER YEARS AS THE FIRM IS IN THE BUSI NESS OF CONSTRUCTION AND THEREFORE T D R HAS DIRECT CONNECTION WITH THE BUSINESS OF THE FIRM. THE L D.AR SUBMITTED THAT THE AMOUNT RECEIVABLE ON ACCOUNT OF T D R IS RECOGNIZED AS INCOME IN THE PROFIT AND LOSS ACCOUNT IN THE EARLIER YEARS AT THE TIME OF GENERATI ON OF T D R AND THE RESULTANT INCOME STANDS ASSESSED TO TAX THOUGH IN THE HANDS OF ONE OF THE PARTNERS. IT WAS ALSO SUBMITTED THAT THE PERIOD OF MORE THAN 10 YEARS HAVE ELAPSED AND AMOUNT OF T D R WAS NOT RECEIVED IN FAVOUR OF THE ASSESSEE AND THEREFORE THE AM OUNT WAS RIGHTLY WRITTEN OFF DURING THE YEAR. THE A O OBSERVED THAT THE TOR WAS GENERATED IN THE FINANCIAL YEAR 2000 - 2001 ON 3 I.T.A. NO. 381 /MUM/201 6 COMPLETION OF A REHABILITATION PROJECT BUT NOT RELEASED TILL THE DATE. THE AO WAS NOT CONVINCED WITH THE CONTENTION AND SUBMISSIONS OF THE ASSESSEE AND CAME TO THE CONCLUSION THAT WITHHOLDING OF TDR WAS DEFINITELY PENAL IN NATURE AND MERE WITHHOLDING THE TDR BY MUNICIPAL AUTHORITY COULD NOT BE TAKEN TO MEAN THAT TDR HAS BEEN DENIED TO THE ASSESSEE. THE AO ACCORDINGLY FRAMED THE ASSESSM ENT ORDER U/S 143(3) OF THE ACT BY ASSESSING THE TOTAL INCOME AT RS.12,10,701/ - VIDE ORDER DATED 5.11.2012 BY MAKING THE DISALLOWANCE OF TDS WRITTEN OFF. 4. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA, WHO ALSO DISMISS ED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ORDER OF THE AO AS UNDER : 4.3.4. UNDER THESE CIRCUMSTANCES, IT IS NOT DEAR AS TO HOW THE APPELLANT IS CLAIMING LOSS OF RS.12,27,085/ ON WRITE OFF OF SAID FSI/TDRS ADMEASURING 380 SQ.MT, WHICH WERE ACTUALL Y GRANTED TO AKRUTI NIRMAN PVT. LTD. RATHER THAN THE APPELLANT. THE APPELLANT HAS NOT PLACED ON RECORD EVEN AN IOTA OF EVIDENCE TO DEMONSTRATE AS TO HOW AND WHEN IT HAD ACQUIRED FSI STOCK/TDR OF 380 SQ.MT. OF SHIV SHAKTI PROJECT WHICH IS NOW CLAIMED TO HA VE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. THE AVERMENT OF SHRI VYOMESH SHAH (MD OF M/S.HUBTOWN LTD. WHICH WAS FORMERLY KNOWN AS AKRUTI NIRMAN PVT. LTD.) MADE IN HIS AFFIDAVIT REPRODUCED ABOVE THAT THE APPELLANT 'HAD UNDERTAKEN' SHIV SHAKTI PROJECT CANNOT BE ACCEPTED IN THE BACKGROUND OF PRIMARY EVIDENCES (VIZ. CORRESPONDENCES AND INTERNAL NOTINGS OF SRA) DISCUSSED IN THE TABLE ABOVE. ONCE IT IS FOUND THAT THE SAID TDR OF 380 SQ.M IN RESPECT OF SHIV SHAKTL PROJECT WAS GRANTED NOT TO THE APPELLANT BUT TO AKRUTI NIRMAN PVT. LTD. WHICH IS A SEPARATE ASSESSABLE ENTITY, IT IS HARD TO UNDERSTAND AS TO HOW THE APPELLANT CAN WRITE OFF THE VALUE OF THE SAID TOR IN ITS OWN BOOKS OF ACCOUNT AND CLAIM THE SAME AS A BUSINESS LOSS U/S.28(I) OF THE ACT. IN THESE CI RCUMSTANCES, THERE IS NO HESITATION 4 I.T.A. NO. 381 /MUM/201 6 IN HOLDING THAT NOT TO SPEAK OF PROVING THAT THE SAID BUSINESS LOSS HAD ARISEN OR OCCURRED DURING THE ACCOUNTING PERIOD RELEVANT TO THE A.Y. UNDER CONSIDERATION, THE APPELLANT HAS NOT EVEN BEEN ABLE TO ESTABLISH THE PRIM ARY FACT THAT IT HAD SUFFERED THE AFORESAID BUSINESS LOSS OF RS.12.27,085/ - ON ACCOUNT OF WRITE OFF OF 'FSI/TDR, DESPITE SUCH TOR HAVING ACTUALLY BEEN GRANTED BY THE SRA/MCGM TO AKRUTI NIRMAN PVT, LTD. THUS, THE APPELLANT'S CLAIM OF DEDUCTION OF FSI/TDR WRITTEN OFF TO THE EXTENT OF RS.12,27,085/ - AS BUSINESS LOSS REMAINS UNSUBST ANTIATED AND HENCE CANNOT BE ALLOWED. AGGRIEVED BY THE ORDER OF FIRST APPELLATE AUTHORITY, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE ID. AR VEHEMENTLY SUBMITTED BEFORE US THAT THE T D R WAS ALLOCATED TO MLS AKRUTI NIRMAN PVT. LTD. WHEN IT EXECUTED A SLUM REHABILITATION PROJECT AND THE SAID T D R WAS BROUGHT IN THE ASSESSEE FIRM AS CAPITAL CONTRIBUTION OF THE PA R TNER. 5INCE THE SAID TOR WERE BEING SHOWN IN THE PROFIT AND LOSS ACCOUNT AS STOCK IN TRADE SINCE THE FORMATION OF THE FIRM AND AS THE SAID TOR COULD NOT BE RECOVERED AND WAS RIGHTLY WRITTEN OFF BY THE ASSESSEE. THE ID. AR PLACED BEFORE US THE NECESSARY EVIDENCES QUA THE ACCRUAL OF T D R AND FURTHER BRINGING INTO THE FIRM BY STATING THAT THESE WERE NOT BEFORE THE AUTHORITIES BELOW. LASTLY THE ID AR SUBMITTED THAT IN VIEW OF THESE FACTS THE APPEAL OF THE ASSESSEE SHOULD BE ALLOWED. ON THE OTHER HAND THE LD. DR PRESSED TWO POINTS NAMELY THAT THE TORS WERE ACCRUED IN FAVOUR OF PARTNER MI5 AKRUTI NIRMAN PVT LTD AND NOT THE ASSESSEE AND SECOND , ALL THE EVIDENCES WERE VERY OLD WHICH WERE NOT BEFORE THE AUTHORITIES BELOW WHICH REQUIRED VERIFICATION AT THE LEVEL OF AO AND THEREFORE THE CASE SHOULD BE RESTORED TO THE 5 I.T.A. NO. 381 /MUM/201 6 FILE OF THE AO FOR APPRECIATION OF EVIDENCES AND ADJUDICATING ACCORDINGLY AS PER T HE EVIDENCES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS. AFTER EXAMINING THE RECORDS BEFORE US WE ARE OF THE CONSIDE RED VIEW THAT THE PARTNER IN THE ASSESSEE FIRM BROUGHT THESE T DRS INTO THE FIRM AS ITS CAPITAL CONTRIBUTION AND WAS TREATED AS PART OF STOCK IN TRADE OVER THE YEARS BEFORE BEING WRITTEN OFF DURING THE YEAR. WE ARE NOT IN AGREEMENT WITH THE CONCLUSION THE FIRST APPELLATE AUTHORITY ON THIS ISSUE THAT CLAIM OF THE ASSESSEE REMAINED UNSUBSTANTIATED. IN OUR CONSIDERED VIEW THE ASSESSEE HAS TO BE ALLOWED WRITE OFF OF THE SAID T D R WHEN IT FINALLY BECAME BAD. BUT FINDING MERIT IN THE ARGUMENTS OF LD.DR THAT THE D OCUMEN TS RELATING TO TDR WERE NOT BEFORE THE AO AND THE MATT ER SHOULD BE RESTORED BACK TO AO FOR VERIFICATION OF CLAIM OF THE ASSESSEE ON THE BASIS OF THE SAID PAPERS. THEREFORE, WE ARE OF THE VIEW IT WOULD BE IN THE INTEREST OF JUSTICE, IF THE ORDER OF TH E FAA IS SET ASIDE AND THE AO IS DIRECTED TO CONSIDER THE ISSUE OF ALLOCATION OF T D R DENOVO WITH FAIR AND REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF ID. CIT(A) AND DIRECT THE AO TO DECIDE THE ISSUE ON THE BASI S OF MATERIAL AVAILABLE ON RECORD AND ALSO EVIDENCE AS SUPPLIED BY THE ASSESSEE IN THE SET ASIDE PROCEEDINGS AND ALLOW THE CLAIM OF THE TDRS WERE FOUND TO BE BROUGHT IN BY THE PARTNER AS CAPITAL CONTRIBUTION. 6 I.T.A. NO. 381 /MUM/201 6 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4TH APRIL, 2017 . S D SD ( D.T.GARASIA ) ( RAJESH KUMAR) JUDI CIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 4. 4 .2017 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT( A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI