R.C. Sood & Co. Developers Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 4153/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65544 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 17-07-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 15-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VEENA JOSHI
• Keywords: Gift; Opportunity of being heard
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI T.S.KAPOOR, ACCOUNTANT MEMBER I.T.A .NO.-4153/DEL./2011 ASSESSMENT YEAR - 2008-09 R.C.SOOD & CO. DEVELOPMENT (P) LTD., VS. DCIT, S-1, AMERICAN PLAZA, CIRCLE -6, INTERNATIONAL TRADE TOWER, NEW DELHI. NEHRU PLACE, NEW DELHI-19 PAN : AAACW0250B (APPELLANT) (RESPONDENT) APPELLANT BY: SH. PRADEEP DINODIA, FCA RESPONDENT BY: SMT. VEENA JOSHI, SR. DR ORDER PER I.C.SUDHIR, JM THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER O N SEVERAL GROUNDS INVOLVING THE FOLLOWING ISSUES:- 1). AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN A SSUMING JURISDICTION FOR GIVING DIRECTION FOR DISALLOWING E XPENDITURE IN THE YEAR WHICH WAS NOT BEFORE HIM? [GROUND NOS.-1(A) TO (1D)]. 2). AS TO WHETHER LD. CIT(A) WAS JUSTIFIED IN UPHO LDING THE ADDITION OF RS. 2,06,800/- BEING 50% OF DISALLOWANC E ON BUSINESS PROMOTION EXPENSES MADE BY THE ASSESSING OFFICER? [ GROUND NOS.- 2(A) TO (2C)]. ISSUE NO:-1 2. THE ASSESSEE IS IN REAL ESTATE BUSINESS. THE AS SESSING OFFICER NOTED THAT AN AMOUNT OF RS. 2,75,025/- WAS OUTSTANDING IN THE BOO KS OF THE ASSESSEE TOWARDS CREDITORS FOR MORE THAN 3 YEARS AND WAS BEING SHOWN AS A LIABILITY FROM YEAR TO YEAR. HE NOTED FURTHER THAT THERE HAD BEEN NO TRAN SACTION IN THE INDIVIDUAL I.T.A .NO.-4153/DEL./2011 2 ACCOUNT FOR THE LAST 3 YEARS. IN ITS REPLY TO THE ASSESSING OFFICER, THE ASSESSEE EXPLAINED THAT THE OUTSTANDING AMOUNT PERTAINS TO T HE CREDITORS WHOSE AMOUNTS ARE OUTSTANDING DUE TO THE FACT THAT THESE ACCOUNTS ARE NOT FINALLY SETTLED BY THE CREDITORS. IN ABSENCE OF EVIDENCE, THE ASSESSING O FFICER DID NOT AGREE WITH THE EXPLANATION OF THE ASSESSEE AND MADE ADDITION OF RS . 2,75,025/- U/S 41(1) BY RELYING ON DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS T.V.SUNDARAM IYENGAR & SONS LTD. 222 ITR 344 (SC). LD. CIT(A) HELD THAT THE DECISION OF HON'BLE SUPREME COURT FOLLOWED BY THE A SSESSING OFFICER IS NOT APPLICABLE IN THE PRESENT CASE. HE HELD THAT SO LO NG AS THERE WAS NO CESSATION OF LIABILITY BY WRITING BACK THE SAME, NO ADDITION COU LD BE MADE U/S 41(1) OF THE ACT. IN THIS REGARD, HE PLACED RELIANCE ON SOME DE CISIONS. LD. CIT(A) HOWEVER, HELD THAT THE CREDIT BALANCE STANDING IN THE BOOKS OF THE ASSESSEE AGAINST THE PARTIES SHOWN IS BOGUS AND HE DIRECTED THE ASSESSIN G OFFICER TO REOPEN THE CASE U/S 150 OF THE ACT AND ADD THE CREDITS STANDING IN THE NAME OF THE ALLEGED CREDITORS IN THE RESPECTIVE YEARS. THE ASSESSEE HA S QUESTIONED THIS ACTION OF THE LD. CIT(A). 3. LD. AR CONTENDED THAT THE LD. CIT(A) HAS ISSUED DIRECTION TO REOPEN THE ASSESSMENT PERTAINING TO TRANSACTIONS WHICH TOOK PL ACE IN MARCH 2005 AND MARCH 2006 I.E RELEVANT TO AYS 2005-06 AND 2006-07. LD. CIT(A) WAS LEGALLY DEBARRED FROM ISSUING SUCH DIRECTIONS U/S 150(2) OF THE ACT. HE POINTED OUT THAT FOR THE AY 2005-06, THE ORIGINAL ASSESSMENT WAS MADE U/S 153A OF THE ACT. REASSESSMENT NOTICE U/S 148, IF ANY, COULD HAVE BEEN ISSUED BY 3 1.03.2010 I.E WITHIN 4 YEARS AS I.T.A .NO.-4153/DEL./2011 3 THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS ABOUT THE TRANSACTIONS. HE CONTENDED THAT THE ASSESSMENT ORD ER WAS PASSED ON 21.12.2010 I.E AFTER THE EXPIRY OF 4 YEARS FROM THE RELEVANT A Y. HE SUBMITTED THAT SECTION 150(2) OF THE ACT CLEARLY DEBARS THE OPERATION OF S ECTION 150(1) OF THE ACT, IF THE TIME LIMIT LAID DOWN IN SECTION 149/148 HAS ALREADY EXPIRED, WHEN THE DIRECTIONS U/S 150(1) ARE ISSUED AS THERE IS NO FINDING THAT T HERE IS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS NECESSARY F OR THE ASSESSMENT. HE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF CIT VS KELVINATOR OF INDIA 320 ITR 561(SC). LD. AR ALSO R EFERRED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ITO VS MURLIDH AR BHAGWAN DAS, 52 ITR 335 HOLDING THAT THE FINDING COULD ONLY BE THAT WHI CH WAS NECESSARY FOR THE DISPOSAL OF AN APPEAL IN RESPECT OF AN ASSESSMENT O F A PARTICULAR YEAR. LD. AR ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS :- (1). SUN METAL FACTOR (I) P. LTD. VS ACIT (2010) 1 24 (ITD) 14 CHENNAI. (2). MARUBENI INDIA (P) LTD. [2010] 328 ITR (DEL.) 306. (3). CIT VS SARDARI LAL & CO. 251 ITR 864 (DELHI) (FB). (4). CIT VS UNION TYRES 240 ITR 556 (DELHI). (5). CIT VS SHAPOORJI PALLONJI MISTRY 44 ITR 891(S C). (6). CIT VS RAI BAHADUR HARDUTROY MOTILAL CHAMARIA 66 ITR 443 (SC) (7). ABDUL WAHID GEHLOT VS ITO 93 TTJ 232 (JAIPUR) . 4. LD. DR, ON THE OTHER HAND, TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW ON THE ISSUE. HE SUBMITTED THAT EVEN BEFORE THE FIRST APPELLATE AUTHORITY, I.T.A .NO.-4153/DEL./2011 4 THE ASSESSEE COULD NOT FURNISH THE CONFIRMATIONS ET C. IN RESPECT OF THE OUTSTANDING LIABILITIES DESPITE A SPECIFIC DIRECTION WAS GIVEN BY THE LD. CIT(A) TO THE ASSESSEE TO FURNISH THE SAME. UNDER THESE FACTS, LD. CIT(A) WAS JUSTIFIED IN THE HOLDING THAT THESE CREDITORS WERE BOGUS AND IN DIRECTING TH E ASSESSING OFFICER TO REOPEN THE CASE U/S 150 OF THE ACT AND MAKE ADDITION, IN T HE YEAR IN WHICH THESE CREDITOR CAME INTO EXISTENCE. 5. CONSIDERING THE ABOVE SUBMISSIONS, WE IN VIEW OF THE PROVISIONS LAID DOWN U/S 150(2) OF THE ACT FULLY CONCUR WITH THE CO NTENTION OF THE LD. AR THAT PROVISIONS U/S 150(2) DEBARS THE OPERATION U/S 150( 1) OF THE INCOME TAX ACT, IF THE TIME LIMIT HAS LAID DOWN IN SECTION 149/148 HAS ALREADY EXPIRED WHEN THE DIRECTIONS U/S 150(1) ARE ISSUED. SINCE THESE MATE RIAL ASPECT OF THE CASE, AS TO WHETHER WHEN DIRECTION U/S 150(1) OF THE ACT WAS PA SSED BY THE LD. CIT(A), THE TIME LIMIT AS LAID DOWN IN SECTION 149/148 WAS ALRE ADY EXPIRED FOR THE AYS 2005- 06 & 2006-07 REMAINED TO BE EXAMINED, WE IN THE INT EREST OF JUSTICE SET ASIDE THE MATTER TO THE FILE OF THE LD. CIT(A) TO DECIDE THE ISSUE RAISED IN THIS REGARD GROUND NOS.-1A TO 1D, IN THE APPEAL BEFORE US AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THESE GROUNDS INVOLVI NG THE ISSUE ARE THUS ALLOWED FOR STATISTICAL PURPOSES. ISSUE NO:-2 6. THE ASSESSEE HAD CLAIMED RS. 4,42,830/-, ON ACCOUNT OF BUSINESS PROMOTION EXPENSES. ON VERIFICATION, THE ASSESSING OFFICER F OUND THAT OUT OF RS. 4,42,830/- I.T.A .NO.-4153/DEL./2011 5 ONLY RS. 29,231/- WAS INCURRED ON BUSINESS PROMOTIO N ACTIVITIES AND THE REST OF EXPENSES OF RS. 4,13,599/- WAS INCURRED BY THE DIRE CTORS FOR ENTERTAINMENT OF GUEST IN THE HOTEL/RESTAURANTS AND GIFT TO VARIOUS HIGH PROFILE PEOPLE FOR BUSINESS PURPOSE. THE ASSESSING OFFICER NOTED FURTHER THAT THE PAYMENTS WERE MAINLY MADE THROUGH CREDIT CARDS. SINCE THE ASSESSEE COUL D NOT FURNISH THE NAME OF THE PERSONS WHO WERE ENTERTAINED AND THE NAME OF THE PE RSONS TO WHOM THE GIFTS WERE GIVEN FOR BUSINESS PURPOSES, HE HELD THAT THE CLAIMED EXPENSES WAS NOT FOR BUSINESS PURPOSES AND DISALLOWED 50% OF THE EXPENSE S OF RS. 4,13,599/-. THE ASSESSING OFFICER HAS MENTIONED FURTHER THAT THE A SSESSEE AGREED TO THE SAID DISALLOWANCE PROPOSED BY THE ASSESSING OFFICER WITH THIS CONDITION THAT NO PENAL ACTION WILL BE TAKEN AGAINST THE ASSESSEE ON THIS I SSUE. IN THE RESULT, THE ADDITION OF RS. 2,06,800/- WAS MADE BY THE ASSESSING OFFICER . LD. CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND HAS UPHELD THE ADDITION. 7. BEFORE THE TRIBUNAL, LD. AR SUBMITTED THAT THE C LAIMED BUSINESS PROMOTION EXPENSES WERE INCURRED BY THE ASSESSEE ON DISTRIBUTING BLANC PEN TO VARIOUS PERSONS WHO HAD BOOKED THE PROPERTY AND WER E ALLOWED OR GIVEN POSSESSION OF PROPERTIES BY THE ASSESSEE AND THE SA ME WAS INTIMATELY CONNECTED WITH THE BUSINESS PROMOTION ACTIVITIES OF THE ASSES SEE. HE SUBMITTED FURTHER THAT THE NAMES OF THE PERSONS ETC. HAD BEEN PROVIDED TO THE ASSESSING OFFICER AS WELL AS LD. CIT(A). SINCE EXPENSES HAD BEEN INCURRED FU LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS BY THE ASSESSEE, THE SAME WERE FULLY ALLOWABLE SPECIALLY I.T.A .NO.-4153/DEL./2011 6 WHEN THE 20% OF THE EXPENSES HAS BEEN SELF-DISALLOW ED BY THE ASSESSEE UNDER THE PROVISIONS OF FRINGE BENEFIT TAX. 8. LD. DR, ON THE OTHER HAND TRIED TO JUSTIFY THE O RDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE ASSESSEE HAS THOROUGH LY FAILED TO DISCHARGE ITS ONUS TO ESTABLISH THE CLAIMED EXPENSES, HENCE DISALLOWAN CE MADE IN THIS REGARD WAS JUSTIFIED. 9. CONSIDERING THE ABOVE SUBMISSIONS, WE FULLY AGRE E WITH THE LD. DR THAT ONUS ALWAYS LIES ON THE CLAIMANT TO ESTABLISH THE G ENUINENESS OF HIS CLAIM. IN THE PRESENT CASE, THE ASSESSEE DESPITE OPPORTUNITY COUL D NOT FURNISH EVIDENCE TO SUPPORT ITS CLAIM THAT EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS NOR ANY MATERIAL WAS FURNISHED TO SHOW THAT GIFTING AS MONT BLANC PENS TO ITS CUSTOMERS ON BOOKING OF THE PROPERTY, WAS PART OF I TS SCHEME. WE HOWEVER, KEEPING IN MIND THE TOTALITY OF THE FACTS ON ISSUE, ARE OF THE VIEW THAT RESTRICTION OF THE DISALLOWANCE BY 20% OF THE CLAIMED EXPENSES WILL BE REASONABLE TO MEET THE END OF THE JUSTICE. WE ORDER ACCORDINGLY. THE GROUNDS INVOLVING THE ISSUE THUS PARTLY ALLOWED. 10. CONSEQUENTLY, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.09.2012. SD/- SD/- (T.S.KAPOOR) (I.C.SUDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28/09/2012 *AMIT KUMAR* I.T.A .NO.-4153/DEL./2011 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI