TELCONS REAL ESTATE P. LTD, MUMBAI V. ACIT (OSD) 2(3), MUMBAI

ITA 3949/MUM/2010

• Counselvise Citation: 394919914 RSA 2010
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 09-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D O P; PARTHASARATHI NAIK D O H
• Assessee Lawyers: VASANTI B PATEL
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER. I.T.A. NO. 3949/MUM/2010 ASSESSMENT YEAR : 2005-06. TELCONS REAL ESTATE PVT. LTD., ASSTT. COMMISSIONER OF 4 TH FLOOR, KAMANWALA CHAMBERS, VS . INCOME-TAX,(OSD)-2(3) SIR, P.M. ROAD, FORT, MUMBAI. MUMBAI 400 001. PAN AAACP 2946D APPELLANT. RESPONDENT. APPELLANT BY : MS. VASANTI B. PATEL. RESPONDENT BY : SHRI PARTHASARATHI NAIK. D.O.H. :02.04.2012 AND D.O.P.:06.06.2012 O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LEARNED CIT(APPEALS)-6, MUMBAI DATED 24-03-2010. 2. THE COMMON ISSUE RAISED IN GROUND NOS. 1 TO 4 OF THIS APPEAL RELATES TO THE ADDITION OF RS.2,05,161/- MADE BY THE AO AND CONFIR MED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF ALLEGED UNACCOUNTED SALE PROCEEDS OF FLATS. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS, INTER ALIA, ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF PRO JECTS. IN THE YEAR UNDER CONSIDERATION, CONSTRUCTION OF WADEGAON SHERI PROJE CT-1 CONSISTING OF RESIDENTIAL HOUSES WAS COMPLETED AND PROFIT THEREOF WAS OFFERED TO TAX. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT SALE CO NSIDERATION OF THE FLATS SOLD AS PER THE RELEVANT AGREEMENTS WAS MORE THAN THE AMOUN T CREDITED BY THE ASSESSEE 2 ITA NO.3949/MUM/2010 COMPANY IN ITS PROFIT & LOSS ACCOUNT ON ACCOUNT OF SALE OF FLATS. ALTHOUGH THE ASSESSEE MADE AN ATTEMPT TO EXPLAIN THE REASONS FOR SHORT RECOVERY OF SALE PROCEEDS FROM THE FLAT BUYERS, THE AO HELD THAT AS PER THE M ERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THE ENTIRE SALE CONSIDERA TION OF FLATS AS PER THE AGREEMENT SHOULD HAVE BEEN CONSIDERED BY THE ASSESSEE AS INCO ME. THE DIFFERENCE AMOUNT OF RS.2,05,161/-, THEREFORE, WAS ADDED BY HIM TO THE T OTAL INCOME OF THE ASSESSEE. BEFORE THE LEARNED CIT(APPEALS), THE SUBMISSIONS MA DE BEFORE THE AO WERE REITERATED ON BEHALF OF THE ASSESSEE POINTING OUT T HE VARIOUS REASONS DUE TO WHICH THE ENTIRE SALE AMOUNT AS PER AGREEMENT WAS NOT PAI D BY SOME OF THE FLAT BUYERS. THE LEARNED CIT(APPEALS), HOWEVER, DID NOT FIND MER IT IN THE SAID SUBMISSIONS AND CONFIRMED THE ADDITION MADE BY THE AO ON THIS ISSUE FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 4.3 OF HIS IMPUGNED ORDER : I HAVE CONSIDERED THE FACTS OF THE ISSUE AS WELL AS WRITTEN SUBMISSIONS FILED BY THE AR BUT DO NOT FIND MERIT IN THEM. THER E IS MERIT IN THE FINDINGS OF THE AO THAT SINCE THE APPELLANT WAS FOLLOWING ME RCANTILE SYSTEM OF ACCOUNTING, THE SALES PROCEEDS OF THE FLATS SHOULD HAVE BEEN REFLECTED AS INCOME TO THE CREDIT OF THE P & L ACCOUNT IMMEDIATE LY ON SALE. THE QUESTION OF RECOVERABILITY OR OTHERWISE OF THE SALE CONSIDER ATION COULD BE CONSIDERED SEPARATELY THEREAFTER. THERE IS NO MERIT IN THE SUB MISSIONS OF THE AR THAT SINCE CERTAIN AMOUNT WAS CONSIDERED DEDUCTIBLE BY T HE TWO FLAT BUYERS NAMELY; SHRI N.M.KHAN AND SHRI S.R. UPADHYAY ON ACC OUNT OF CERTAIN WORK DONE BY THEM, THE SAME COULD BE REDUCED FROM THE IN COME OF THE APPELLANT DIRECTLY. THE EXPENDITURE RELATING TO SUCH WORK DON E BY THE FLAT BUYERS WOULD ALREADY STAND DEBITED TO THE P & L ACCOUNT OF THE APPELLANT AND THEREFORE THE FULL SALE CONSIDERATION SHOULD HAVE B EEN TAKEN TO THE CREDIT OF THE P & L ACCOUNT. REGARDING THE DISPUTE BEFORE THE CONSUMER COURT, SINCE THE DECISION OF THE CONSUMER COURT IS DATED 20.10.2 005, THE SAID AMOUNT COULD NOT BE CLAIMED AS A DEDUCTION OUT OF INCOME O F THE A.Y. 2005-06. ALSO, THE PENDENCY OF A COURT CASE DOES NOT MEAN TH AT INCOME WILL NOT BE REFLECTED WITH REFERENCE TO THE AGREED SALE PRICE. THERE IS ALSO NO MERIT IN ARS SUBMISSIONS THAT THE INCOME COULD BE REDUCED TO THE EXTENT OF 3 ITA NO.3949/MUM/2010 PAYMENTS NOT RECEIVED DURING THE YEAR ON ACCOUNT OF SALES PROCEEDS. THE BUILDERS NEVER HAND OVER POSSESSION OF THE FLATS TI LL ENTIRE PAYMENT IS RELEASED BY THE BUYERS. AT ANY RATE, THE APPELLANT COULD HAVE CLAIMED DEDUCTION IN RESPECT OF THE AMOUNTS NOT RECOVERED I N THE YEAR IN WHICH THE SAME WERE CONSIDERED AS BAD DEBS. HENCE, THE ACTION OF THE AO IN MAKING THE IMPUGNED ADDITION IS CONFIRMED AND THIS GROUND IS DISMISSED. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ADMITTEDLY, MERCANTILE SYSTEM O F ACCOUNTING IS BEING FOLLOWED BY THE ASSESSEE AND AS RIGHTLY HELD BY THE AUTHORIT IES BELOW, THE ENTIRE SALE VALUE OF THE FLATS SOLD BY THE ASSESSEE AS PER THE RELEVANT AGREEMENTS SHOULD HAVE BEEN RECOGNIZED BY IT AS INCOME AS PER THE SAID METHOD. TOTAL CONSIDERATION RECEIVABLE AS PER THE SAID AGREEMENTS HAD ACCRUED TO THE ASSES SEE AS ITS INCOME AS PER THE MERCANTILE SYSTEM OF ACCOUNTING AND THE SAME TO THA T EXTENT SHOULD HAVE BEEN RECOGNIZED BY THE ASSESSEE AS ITS INCOME. AS RIGHTL Y HELD BY THE LEARNED CIT(APPEALS), ANY SHORT RECOVERY OF THE SALE PROCEE DS FOR WHATEVER REASON CONSTITUTED BAD DEBTS RELATING TO THE BUSINESS OF T HE ASSESSEE AND THE SAME SHOULD HAVE BEEN CLAIMED AS DEDUCTION IN ACCORDANCE WITH T HE RELEVANT PROVISIONS OF LAW. THE ASSESSEE, THEREFORE, WAS NOT CORRECT IN NOT OFF ERING THE AMOUNT OF RS.2,05,161/- RECEIVABLE ON ACCOUNT OF SALE OF FLATS AS PER THE A GREEMENT AS ITS INCOME AND THE ADDITION OF THE SAID AMOUNT MADE BY THE AO, IN OUR OPINION, WAS RIGHTLY CONFIRMED BY THE LEARNED CIT(APPEALS). WE, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS GROUND NOS. 1 TO 4 OF THE ASSESSEES APPEAL . 5. THE NEXT ISSUE RAISED IN GROUND NOS. 5 AND 6 AS WELL AS THE ISSUE RAISED IN GROUND NOS. 7 AND 8 RELATING TO DISALLOWANCE OF RS. 9,72,023/- AND RS.2,57,942/- BEING 10% OF PROJECT COST IN RESPECT OF WADEGAON SH ERI PROJECT-1 AND S.M.V. SCHOOL PROJECT RESPECTIVELY ARE SIMILAR. 4 ITA NO.3949/MUM/2010 6. IN SUPPORT OF THE EXPENSES CLAIMED UNDER THE VAR IOUS HEADS IN CONNECTION WITH WADEGAON SHERI PROJECT-1 AND S.M.V. SCHOOL PRO JECT, THE ASSESSEE COULD NOT PRODUCE ANY BILLS/VOUCHERS FOR THE VERIFICATION OF THE AO. IN THE ABSENCE OF SUCH DOCUMENTARY EVIDENCE, THE EXPENSES CLAIMED BY THE A SSESSEE IN CONNECTION WITH THE SAID TWO PROJECTS WERE DISALLOWED BY THE AO TO THE EXTENT OF 10% I.E. RS.9,72,023/- IN RESPECT OF WADEGAON SHERI PROJECT- 1 AND RS.2,57,942/- IN RESPECT OF S.M.V. SCHOOL PROJECT. ON APPEAL, THE LEARNED C IT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO AS THE ASSESSEE COULD N OT PRODUCE ANY SUPPORTING BILLS/VOUCHERS EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE HIM. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY TH E LEARNED COUNSEL FOR THE ASSESSEE, THE SUPPORTING BILLS/VOUCHERS FOR THE EXP ENSES CLAIMED BY THE ASSESSEE IN RESPECT OF TWO PROJECTS COULD NOT BE PRODUCED BEFOR E THE AUTHORITIES BELOW FOR WANT OF PROPER AND ADEQUATE OPPORTUNITY. AS FURTHER SUBM ITTED BY HIM, THE ASSESSEE HAS MAINTAINED SUCH SUPPORTING BILLS/VOUCHERS AND IF AN OPPORTUNITY IS GIVEN, THE SAME CAN BE PRODUCED FOR THE VERIFICATION OF THE AO. 8. KEEPING IN VIEW THIS SUBMISSION MADE BY THE LEAR NED COUNSEL FOR THE ASSESSEE, WE CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUPPORT AND SUB STANTIATE ITS CLAIM FOR EXPENDITURE IN RESPECT OF TWO PROJECTS BY PRODUCING THE RELEVANT BILLS/VOUCHERS FOR VERIFICATION OF THE AO. ACCORDINGLY, THE IMPUGNED O RDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE IS SET ASIDE AND THE MAT TER IS RESTORED TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME AFRESH AFTER GIVING THE ASSESSEE ADEQUATE AND PROPER OPPORTUNITY TO PRODUCE THE SUPPORTING BI LLS/VOUCHERS. GROUND NOS. 5&6 AND 7&8 ARE ACCORDINGLY TREATED AS ALLOWED FOR STAT ISTICAL PURPOSES. 5 ITA NO.3949/MUM/2010 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 6TH DAY OF JUNE, 2012 SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI, DATED: 6TH JUNE, 2012 . WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, E-BENCH. (TRUE COPY ) BY ORD ER ASSTT. R EGISTRAR, ITAT, MUMBAI BEN CHES, MUMBA I.