ACIT, New Delhi V. Sh Damodar Das Batra, New Delhi

ITA 4197/DEL/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5458 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA SENIOR
• Assessee Lawyers: SUDHIR SINGH SILWAL
• Keywords: Cost of acquisition; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B, NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.4197/DEL./2010 (ASSESSMENT YEAR: 2007-08) ACIT, CIRCLE 32 (1), VS. SHRI DAMODAR DASS BATRA, NEW DELHI. A 432, DEFENCE COLONY, NEW DELHI. ( PAN : AAEPB7061L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDHIR SINGH SILWAL, ADVOCATE REVENUE BY : SMT. NIDHI SRIVASTAVA, SENIOR DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF LD. CIT (APPEALS)-XXVI, NEW DELHI DATED 03.06.2010 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF COMMISSION AGENT IN THE REAL ESTATE BUSINESS AND HAS ALSO BEEN BUYING AND SELLING OF PROPERTY ON ITS OWN. 3. THE GROUNDS OF APPEAL TAKEN BEFORE US READ AS UN DER :- ITA NO.4197/DEL/2010 2 1. THE LD. CIT (A) HAS ERRED IN DELETING THE ADDIT ION OF RS.11,23,263/- MADE BY THE A.O. WITHOUT CONSIDERING THE FACT THAT THESE COMMISSION EXPENSES ARE BOGUS AND FICTIT IOUS AND COULD NOT BE FULLY SUBSTANTIATED BY THE ASSESSEE. 2. THE LD. CIT (A) HAS FURTHER ERRED IN DELETING TH E ADDITION OF RS.16,87,432/- ON ACCOUNT OF S.T.G.C. WITHOUT CO NSIDERING THE FACT THAT THE ASSESSEE COULD NOT FILE FULL DETA ILS OF TRANSACTION OF RS.16,87,432/- WHICH WAS DIRECTLY PAID BY THE BU YER TO THE BUILDER M/S DLF UNIVERSAL LTD. INSTEAD OF ROUTING I T THROUGH THE ASSESSEE. 4. IN THE GROUND NO.1, THE ISSUE INVOLVED IS DELETI NG THE ADDITION OF RS.11,23,263/- REGARDING COMMISSION EXPENSES. THE CIT (A) HAS DELETED THE ADDITION BY HOLDING AS UNDER :- GROUND NO.1: I FIND THAT THE APPELLANT HAS BEEN SE RVING AS A REAL ESTATE BROKER WHO BUYS AND SELLS PROPERTIES OF WELL-KNOWN DEVELOPERS/BUILDERS. AN ESTABLISHED FACT IN THIS TRADE IS THAT COMMISSIO N/REBATE/INCENTIVE, CALLED BY WHATEVER NAME, IS PASSED ON TO THE EARLY INVESTO RS OR THE INVESTORS WHO BUY THE BULK OF PROPERTY AND WHO MAKE THE READY CAS H ADVANCE. IT IS ALSO AN ESTABLISHED FACT THAT THE REAL ESTATE BROKER ALS O PASSES ON A PART OF SUCH COMMISSION, CALLED BY WHATEVER NAME, TO THEIR CLIEN TS. THEREFORE, THE COMMERCIAL EXPEDIENCY OF SUCH PAYMENTS IS VERY MUCH JUSTIFIED. SO FAR AS THE SPECIFIC RECIPIENTS OF SUCH COMMISSIO N ARE CONCERNED, WHICH WERE TREATED AS BOGUS BY THE LD. AO, I FIND THAT TH E AO HAD ACKNOWLEDGED THAT THE COMMISSION PAID TO MRS. RAJ RANA WAS A REB ATE IN RESPECT OF PROPERTY NO. S-106, 1ST FLOOR, SHALIMAR BAGH, NEW D ELHI. THE AO HAD ALSO ACKNOWLEDGED THAT MRS. RAJ RANA RECEIVED A REB ATE OF RS.1,61,000/- BUT NOT A COMMISSION FROM SHRI DAMODAR DAS BATRA. S IMILARLY, SHRI BHUPINDER SINGH DHALIWAL HAD ALSO CONFIRMED THAT TH E RECEIPT OF THE AMOUNT OF RS.58,437/- AS STATED BY THE APPELLANT TH AT IT WAS IN THE FORM OF A REBATE IN FAVOUR OF HIS SON WHO IS A NRI. THIS AM OUNT WAS TO BE ADJUSTED AGAINST THE CAPITAL COST OF THE PROPERTY BOOKED BY THEM. THE SAME ARGUMENTS WERE APPLICABLE TO OTHER PERSONS ALSO IN WHOSE NAME COMMISSION HAS BEEN SHOWN AS STATED BY THE LD. AO I N HIS ASSESSMENT ORDER EXCEPT SHRI PRAVEEN KUMAR AND SH. VIJAY RAINA WHO HAD ACCEPTED TO RECEIVE THE REBATE WHICH WAS ADJUSTED AGAINST TH E CAPITAL COST OF THE PROPERTY PURCHASED BY THEM. I FIND THAT THE AO HAS MERELY BASED HIS ITA NO.4197/DEL/2010 3 ARGUMENTS ON NOMENCLATURE AND NOT ON THE BASIS OF R ELEVANT FACTS IN ORDER TO ALLOW COMMISSION EXPENSES ON THE BASIS OF THEIR COMMERCIAL EXPEDIENCY. IN ANY CASE, I ALSO FIND THAT THE APPEL LANT HAD CLEARLY SHOWN THESE EXPENSES UNDER THE HEAD 'COMMISSION/REBATE/IN CENTIVE' AND HENCE, OBSERVATIONS OF THE AO WERE NOT CORRECT. FURTHER, R EGARDING SHRI SHAILENDER CHOUDHARY, MRS. ASHA NATH AND M/S TIGER SOFTECH, THE AO OBSERVED THAT THE LETTERS SENT TO THEM RETURNED BAC K BY THE POSTAL AUTHORITIES WITH THE REMARKS 'THESE PERSONS HAVE EI THER LEFT THESE PLACES OR ARE NON-EXISTENT'. THE LD. COUNSEL PLEADED THAT THI S FACT WAS NOT BROUGHT IN THE KNOWLEDGE OF APPELLANT AND MOREOVER, LATER C ONFIRMATIONS WERE SUBMITTED BEFORE THE AO WHO DID NOT TAKE COGNIZANCE THEREOF. IN VIEW OF THE ABOVE FACTS & CIRCUMSTANCES, I HELD THAT THE PAYMENT MADE BY THE APPELLANT TO THE VARIOUS SPECIFIC PERSONS NA MED IN PARA 4 OF THE ASSESSMENT ORDER, BE CALLED AS COMMISSION OR REBATE OR INCENTIVE, WAS FOR THE PURPOSE OF BUSINESS AND IN ACCORDANCE WITH THE PREVALENT BUSINESS TRENDS IN THIS TRADE HENCE, ALLOWABLE. ACCORDINGLY, THE ADDITION MADE BY THE AO OF RS.8,34,853/- IS BEING DELETED. FURTHER, I FIND THAT ON THE BASIS OF THE ABOVE ADVE RSE OBSERVATION IN RESPECT OF THE PERSONS NAMED IN PAGE 4 OF THE ASSESSMENT OR DER, THE AO WAS NOT SATISFIED WITH THE GENUINENESS OF THE BALANCE COMMI SSION PAYMENT OF RS.14,42,051/- WELL CONSIDERING ITS GENUINENESS AS 'VERY WEAK'. IN THE ABSENCE OF ANY COGENT ADVERSE FINDING, THE DISALLOW ANCE OF 1/5TH OF THE BALANCE COMMISSION OF RS.14.42 LACS IS ALSO BEING D ELETED. 5. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE F IND THAT IN THE ASSESSEES BUSINESS, IT IS A COMMON PRACTICE TO PRO VIDE REBATE OR COMMISSION OR INCENTIVE TO VARIOUS PERSONS WITH WHOM THE ASSES SEE HAS BROKERED THE DEAL, THEREFORE, WE FIND THAT COMMISSION HAS BEEN P AID FOR THE BUSINESS PURPOSE OF THE ASSESSEE. IN VIEW OF THESE FACTS, W E FIND NO MERITS IN THIS GROUND OF REVENUES APPEAL. ITA NO.4197/DEL/2010 4 6. IN THE GROUND NO.2, THE ISSUE INVOLVED IS DELETI NG THE ADDITION OF RS.16,87,432/- ON ACCOUNT OF SHORT TERM CAPITAL GAI N. THE CIT (A) HAS DELETED THE ADDITION BY HOLDING AS UNDER :- SINCE, THE APPELLANT HAD PAID TO THE BUILDER I.E. M/S DLF UNIVERSAL LTD., AN AMOUNT OF RS.4812568/- TILL 5.5. 2006 WHEN THE RECEIPT WAS ISSUED, THE BALANCE AMOUNT OF RS.16 ,01,432/- WAS DIRECTLY PAID BY THE BUYER TO THE BUILDER M/S D LF UNIVERSAL LTD. INSTEAD OF ROUTING IT THROUGH THE AP PELLANT. THE BALANCE INSTALLMENTS WERE ALSO TO BE PAID BY THE BU YER DIRECTLY TO THE SAID BUILDER I.E. M/S DLF UNIVERSAL. SINCE, THE PAYMENT OF RS.1601432/- PAID TO THE BUILDER DIRECTLY WAS ON LY ONE FORM OF PAYMENT OF INSTALLMENT BY THE APPELLANT EITHER T HE SAME SHOULD HAVE BEEN ADDED IN THE COST OF ACQUISITION A ND ALSO IN THE SALE PROCEEDS OR SHOULD HAVE BEEN ELIMINATED FR OM BOTH AS WAS DONE BY THE APPELLANT. THEREFORE, THE AO WAS UN REASONABLE IN ADDING THE SAME TO THE SALE CONSIDERATION WITHOU T ADDING IT TO THE COST OF ACQUISITION EVEN THOUGH THE RECEIPT DAT ED 5.5.2006 WAS CATEGORICALLY CLEAR IN THE MATTER. 7. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED T HE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS SOLD PROPERTY NO.C-192 , BELVEREDE PARK, GURGAON FOR A SALE CONSIDERATION OF RS.65 LACS VIDE SALE DEED DATED 23.04.2006. THE ASSESSEE HAS PAID TO THE BUILDER, M/S. DLF UNIVERSAL LTD. ONLY RS.48,12,568/- TILL 05.05.2006 AND THE BALANCE AMOUNT OF RS.16,01,432/- WAS DIRECTLY PAID BY THE BUYER TO TH E BUILDER, M/S. DLF UNIVERSAL LTD. THE ASSESSING OFFICER MADE THIS ADD ITION. THE CIT (A) DELETED THE ADDITION BY HOLDING THAT DIRECT PAYMENT TO M/S. DLF UNIVERSAL LTD. OF RS.16,01,432/- WAS ONLY ONE FORM OF PAYMENT OF INSTALLMENT TO ITA NO.4197/DEL/2010 5 BUILDER, M/S. DLF UNIVERSAL LTD. IN ONE WAY, IT HA S TO BE ADDED TO THE COST OF ACQUISITION IF THIS ADDED TO THE SALE PROCEEDS, THEREFORE, FOR WORKING OUT THE TAXABILITY, INCOME HAS NO IMPACT. HENCE, IN SU CH A SITUATION, IT WILL BE ACADEMIC EXERCISE TO MAKE THE ADDITION IN THE SALE PROCEEDS AND THEN REDUCING THE SAME FOR COST OF ACQUISITION, THEREFOR E, WE UPHOLD THE ORDER OF CIT (A) ON THIS ISSUE ALSO. 8. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 21 ST DAY OF FEBRUARY, 2014. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 21 ST DAY OF FEBRUARY, 2014 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) -XXVI, NEW DELHI 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.