DCIT CIR 15(1), MUMBAI V. AAKASH DEVELOPERS, MUMBAI

ITA 3829/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1739 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K SHIVARAM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL, JUDICIAL MEMBER A ND SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER I.T.A. NO.3829/M/2011 ASSESSMENT YEAR:2007-2008 ACIT, CIRCLE-15(1), ROOM NO.104, MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI 400 007. VS. M/S. AAKASH DEVELOPERS, 1/13, ZAVERI BLDG., 305/309, RAJ RAMMOHAN ROY ROAD, MUMBAI 400 004. PAN:AAKFA8603R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANOJ KUMAR, CIT-DR RESPONDENT BY : SHRI K. SHIVARAM DATE OF HEARING:31.1.2013 DATE OF ORDER: 15.2.2013 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 11.5.2011 IS AG AINST THE ORDER OF CIT (A)- 26, MUMBAI 28.2.2011 FOR THE ASSESSMENT YEAR 2007-2 008. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROU NDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO OF RS. 50,00,000/- WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE BY AO OUT OF CASH EXPENDITURE OF RS. 2,00,000/-. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN BUILDING CONSTRUCTION ACTIVITIES. ASSESSEE COMMENCED A RESIDENTIAL HOUSING PROJECT CALLED GAGAN GALAXY AT VASAI ROAD (EAST) AS PER THE APPROVALS OF THE CIDCO IN FY 2004-2005. THE TOTAL PROJECT CONSTI TUTES OF 29,321 SQ FT. AND THE COST OF CONSTRUCTION WORKS OUT TO RS. 1.97 CR (ROUNDED OFF). THIS INCLUDES RS. 63,57,839/- WHICH WAS INCURRED SUBSEQUENT TO THE DA TE OF 12.12.2006. THE PROJECT IS COMPLETED IN THE YEAR UNDER CONSIDERATION. DAT E 12.12.2006 IS THE DATE ON WHICH 2 ASSESSEE IS SAID TO HAVE APPLIED TO CIDCO INTIMATING THE COMPLETION OF THE PROJECT. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTED THA T THE ASSESSEE INCURRED A SUM OF RS 63,57,839/- AFTER THE SAID DATE OF 12 TH DECEMBER 2006. QUESTIONING THAT WHY THIS INCOME INCURRED IF THE PROJECT IS REALLY COMPL ETED ON 12.12.2006, AO CAME TO THE CONCLUSION THAT THIS AMOUNT OF RS.63,57,839/- W AS INCURRED AFTER THE PROJECT IS COMPLETED AND THE SAID EXPENDITURE DOES NOT PERTAIN TO THE PROJECT G AGAN GALAXY . HE, HOWEVER, RESTRICTED THE DISALLOWANCE TO ONLY RS. 50 LACS AS PART OF HIS BEST JUDGMENT ASSESSMENT . FURTHER, HE ALSO DISALLOWED A SUM OF RS. 2 LACS FOR WANT OF VOUCHERS. OF COURSE, THE AO INVOKED THE PR OVISIONS OF SECTION 145(3) OF THE ACT FOR NON-MAINTENANCE OF STOCK REGISTER AND ALSO FOR WANT OF CERTAIN CLARIFICATION RELATING TO SOME INACCURACIES ALLEGED BY THE AO AS PER THE DISCUSSION GIVEN IN PARA 2 OF HIS ORDER. AGGRIEVED WITH THE ABOVE ORDER OF TH E AO IE DISALLOWANCE OF RS 52 LAKHS, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) AND MADE AN ELABORATE SUBMISSION AND QUESTIONED EVERY CONCLUSION OF THE A O. ASSESSEE ALSO CLARIFIED REGARDING THE INACCURACIES TO PROVE THAT THEY ARE N OT WELL FOUNDED. THE RELEVANT DISCUSSION IS GIVEN IN PARA 3.2.1 OF THE IMPUGNED O RDER. AFTER CONSIDERING THE DETAILED EXPLANATION OF THE ASSESSEE, THE CIT (A) C AME TO THE CONCLUSION THAT THE AO HAS NOT APPLIED HIS MIND PROPERLY AND NOT ANALYZED EVERY BILL AND VOUCHER IN FAVOUR OF THE DEBITS IN THE P & L ACCOUNT AND RE-WORKED OU T THE ALLEGED EXPENDITURE OF RS. 63,57,839/- AND HE TABULATED THE HEAD-WISE EXPENDI TURE GIVING DESCRIPTION OF RAW MATERIAL, PURCHASES AFTER 12.12.2006 AND REMARKS AG AINST EACH OF THE ITEMS. PARA 3.2 IS RELEVANT IN THIS REGARD. FINALLY, AFTER EXA MINING THE NATURE OF THE EXPENDITURE AND ITS NEXUS TO THE PROJECT GAGAN GALAXY, UPHELD THE GENUINENESS OF THE CLAIM OF THE ASSESSEE AS PER THE DISCUSSION GIVEN IN PARA 3. 2.1. CIT (A) GAVE COMPLETE RELIEF IN THIS REGARD. AGGRIEVED WITH THE SAME THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 4. DURING THE PROCEEDINGS BEFORE US, DR. SHIVARAM, LD COUNSEL FOR THE ASSESSEE FILED A FACTS SHEET AS USUAL AND STATED THAT THE AO IS IMPROPER IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT WHEN THERE IS AN EXPLANATION OF EACH OF THE ALLEGATION OF THE AO MADE IN HIS ASSESSMENT ORDER. DR SHIVARAM MENTIONED THAT THE 3 CIT(A) APPRECIATED THE SUBMISSIONS OF THE ASSESSEE AND ORDERED FOR DELETION OF THE ADDITIONS. FURTHER, HE ARGUED STATING THAT IT IS A CUSTOMARY, IN THIS LINE OF ACTIVITIES, THE ASSESSEE-BUILDER MAKES AN APPLICATION TO THE CID CO FOR WANT OF COMPLETION CERTIFICATE AND IT IS NOT THAT NO EXPENDITURE INCUR RED ONCE AN APPLICATION FOR SUCH COMPLETION CERTIFICATE IS MADE BY THE ASSESSEE. FU RTHER, HE MENTIONED THAT THE DATE 12.12.2006 IS AN ARTIFICIAL DATE, MAKING OF THE PAY MENT IS CONTINUOUS PROCESS AND IT CONTINUES TILL THE PROJECT IS LITERALLY COMPLETE. O THERWISE, THE IMPUGNED PAYMENTS WERE MADE TO THE LABOURER FOR THE SERVICES RENDERED TO THE PROJECT BEFORE AND AFTER THE SAID 12 TH DECEMBER 2006 AND ALSO TO THE OTHER SUPPLIERS TOWA RDS THE PURCHASE OF RAW MATERIAL USED IN THE PAST FOR THE CONSTRUCTION OF GALAXY PROJECT ONLY. HE RELIED ON THE BILLS FILED BEFORE US. MERE PAYMENT MADE BY THE ASSESSEE IE RS.30,25,896/- FOR PURCHASE OF RAW MATERIAL AND FREIGHT CHARGES AM OUNTING TO RS. 22,31,943/- AND THESE AMOUNTS WERE INCURRED IN CONNECTION WITH CERT AIN FINISHING WORK AS WELL AS CERTAIN INSTALLATION OF MATERIALS SUCH AS ELECTRICA L, PLUMBING, SANITATION, MODULAR KITCHENS, HARDWARE, DOOR FIXATION ETC AND THESE EXP ENDITURES ARE RELATING TO THE GALAXY PROJECT AND NOT TO ANY OTHER PROJECT. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE CIT (A). PARA 3.2 AND 3.2.1 ARE RELEVANT PORTIONS OF THE IMPUGNED ORDER AND THE SAME ARE REPRODUCED HERE UNDER IN VIEW OF ITS SIGNIFICANCE. 1. I HAVE CONSIDERED THE RIVAL SUBMISSION OF THE AP PELLANT AND FINDING OF THE ASSESSING OFFICER, CAREFULLY. I HAVE ALSO PERU SED THE EVIDENCE ON RECORD AND DETAILS OF EXPENSES SUBMITTED BY THE APPELLANT. I FIND THAT LD AO HAS ACCEPTED THE GENUINENESS OF PURCHASE OF VARIOUS GOO DS BUT HAS MERELY DOUBTED THE UTILIZATION OF THE SAME. HE HAS DISALL OWED THE CLAIM OF ALL SUCH EXPENSES MERELY ON THE BASIS OF PRESUMPTION, IGNORI NG THE FACTS THAT MOST OF THE EXPENDITURE AND RAW-MATERIALS ARE NECESSARY EVE N AFTER ISSUANCE OF LETTER OF COMPLETION OF THE PROJECT BY THE ARCHITECT. IT IS WIDELY KNOWN FACT THAT EVEN AFTER PRIMARY COMPLETION OF PROJECT, THERE REM AINS VARIOUS MISCELLANEOUS WORK WHICH IS COMPLETED AND CONTINUED UP TO THE DATE OF HANDING OVER THE POSSESSION TO THE FLAT OWNERS. FU RTHER, ONE IMPORTANT POINT DRAWS ATTENTION THAT COMPOUND WALL, DEVELOPMENT OF GARDEN, NORMAL REQUIREMENT OF FINISHED WORK, MISCELLANEOUS WORKS A T COMPOUND WALL, TERRACE, UNDERGROUND, OVERHEAD WATER TANKS, RE-ADJU STS, MINOR CHANGES, REPETITION, RE-FINISHING, ELECTRICAL WORK, PLUMPER WORK AND OTHER RELATED WORKS ARE DONE CONTINUOUSLY UP TO HANDING OVER THE FLAT. EVEN IN SOME, CASES, AFTER HANDING OVER OF FLAT, BUILDER HAS TO DO HUNDR EDS OF MISCELLANEOUS WORK 4 LIKE FITTING OF ALUMINIUM SLIDING, PAVING WORK, DEV ELOPMENT OF SURROUNDING AREA, FRONT GATE WORKS, MISCELLANEOUS PENDING WORKS AND SO ON. THEREFORE, I FIND NO SUBSTANCE IN THE ARGUMENT OF LD AO THAT AFT ER SUBMISSION OF LETTER DATED 13.12.2006 BY THE ARCHITECT TO THE LOCAL AUTH ORITIES FOR OBTAINING COMPLETION CERTIFICATE, NO SUCH WORK COULD HAVE BEE N DONE. IT APPEARS FROM THE ASSESSMENT ORDER THAT LD AO HAS NOT ANALYZED EA CH AND EVERY BILLS AND VOUCHERS AND HAS NOT APPRECIATED THE INDIVIDUAL EXP ENDITURE DEBITED BY THE APPELLANT IN PROFIT AND LOSS ACCOUNT. IN ORDER TO HAVE BETTER APPRECIATION OF FACTS INVOLVED IN THIS CASE, IT IS PERTINENT TO REP RODUCE THE DETAILS OF EXPENDITURE WITH NATURE THEREOF, HAS GIVEN BY THE A R. 3.2.1. AS CAN BE SEEN FROM THE ABOVE DETAILS THAT N ATURE OF ALL THESE EXPENSES ARE SUCH, WHICH ARE RELEVANT FOR SUCH HOUS ING PROJECT, THEREFORE, IN ULTIMATE ANALYSIS OF ALL THE EXPENSES, I REACH TO T HE CONCLUSION THAT FINDING OF THE LD AO IS NOT MATURED ENOUGH NOR IS HAVING PROPE R FOUNDATION FOR DISALLOWING THE GENUINE CLAIM OF THE APPELLANT WHER EAS APPELLANT HAS SUCCEEDED IN MAKING OUT ITS CASE AND EXPLAINING THE GENUINENESS OF EXPENDITURE REQUIRED TO BE INCURRED FOR ULTIMATE AN D SATISFACTORY COMPLETION OF THE PROJECT. THEREFORE, THE DISALLOWANCE SO MAD E BY THE AO OF RS. 50,00,000/-, IN ROUND FIGURE, IS DIRECTED TO BE DEL ETED FROM THE ASSESSMENT. 6. FROM THE ABOVE, IT IS EVIDENT THAT THE EXPENDITU RE IN QUESTION IS DIRECTLY CONNECTED TO THE PROJECT GAGAN GALAXY ONLY AND THE AO HAS NOT APPRECIATED THIS FACT BY CLOSELY EXAMINING THE MATERIAL AVAILABLE BEFORE HIM. FURTHER, THE CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE AFTER EXAMINING THE NATUR E OF THE EXPENDITURE AND THE GENUINENESS OF THE EXPENDITURE. THE DATE OF 12 TH DECEMBER 2006 IE THE DATE OF APPLICATION FILED BY THE ASSESSEE FOR WANT OF COMP LETION CERTIFICATE IN OUR OPINION, SHOULD NOT ASSUME SO MUCH OF SIGNIFICANCE SO AS TO MADE DISALLOWANCE OF RS 50 LAKHS, WHEN THE GENUINENESS AND BUSINESS CONNECTION TO THE GAGAN GALLAXY PROJECT IS ESTABLISHED. AS SUCH, WE FIND THAT THE AO DOES N OT HAVE ANY INCRIMINATING MATERIAL IN HIS POSSESSION TO DEMONSTRATE THAT THE IMPUGNED EXPENDITURE IS INCURRED IN CONNECTION WITH ANY OTHER PROJECT. IT IS THE CASE O F WILD ALLEGATION AGAINST THE ASSESSEE THAT THE SAID EXPENDITURE IS NOT INCURRED FOR GAGAN GALLAXY PROJECT AND IN OUR OPINION, SUCH ALLEGATION SHOULD ONLY BE MADE WH EN THE AO HAS SOME INCRIMINATING MATERIAL IN HIS POSSESSION. THEREFORE , WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A). REGARDING THE ADDITI ON OF RS 2 LAKHS, WE FIND THAT THE SAID DISALLOWANCE IS ARBITRARY AND WITHOUT ANY MERI T. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 5 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF FEBRUARY, 2013. SD/- SD/- (DINESH KUMAR AGARWAL) (D. KARUNAKA RA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 15.2.2013 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR A, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI