DARSHAN DEVELOPERS, MUMBAI V. CIT 17, MUMBAI

ITA 4261/MUM/2013

• Counselvise Citation: 426119914 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANTOSH KUMAR
• Assessee Lawyers: M B SANGHVI
• Keywords: Assessment record; Tax effect; Revenue expenditure
• Section: 37; 263; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.4261/MUM/2013 ( / ASSESSMENT YEAR :2008-09) DARSHAN DEVELOPERS, B-10, SHANKESHWAR DARSHAN, SHETH MOTISHA LANE, MAZGAON, MUMBAI-400010 / VS. COMMISSIONER OF INCOME TAX- 17(2)(4), 4 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 ( / APPELLANT) .. ( !' / RESPONDENT) ./ $% ./ PAN/GIRNO.: AACFD4073E & / APPELLANT BY : SHRI M B SANGHVI, !' ' & /RESPONDENT BY : SHRI SANTOSH KUMAR ( ) ' * + / DATE OF HEARING : 9.9.2014 ,- ' * + / DATE OF PRONOUNCEMENT : 17.9.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 28.3.2013 PASSED BY LD COMMISSIONER OF INCOME TAX-1 7, MUMBAI U/S 263 OF THE INCOME TAX ACT, 1961 (THE ACT) AND IT RELATES TO TH E ASSESSMENT YEAR 2008-09. THE ASSESSEE, IN THIS APPEAL, IS CHALLENGING THE VA LIDITY OF THE REVISION ORDER PASSED BY THE LD. CIT. 2. THE ASSESSMENT IN THE CASE OF THE ASSESSEE FOR T HE YEAR UNDER CONSIDERATION WAS COMPLETED BY THE AO ON 27.12.2010 U/S 143(3) OF THE ACT. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REDEVELO PMENT OF PROPERTIES. THE AO COMPLETED THE ASSESSMENT DETERMINING THE TOTAL I NCOME AT NIL, SINCE THE PROJECT DEVELOPED BY THE ASSESSEE WAS UNDER CONSTRU CTION. THE AGGREGATE EXPENSES OF RS.13,15,08,653/- INCURRED UP TO THAT Y EAR END WAS BOOKED AS WORK IN PROGRESS AND TRANSFERRED TO THE BALANCE- SHEET. I.T.A. NO.4261/MUM/2013 2 3. ON EXAMINATION OF THE ASSESSMENT RECORD, THE CIT NOTICED THAT THE AO FAILED TO CONDUCT PROPER INQUIRIES RELEVANT TO THE DETERMINATION OF THE ASSESSEES INCOME. ACCORDINGLY, HE INITIATED RE-ASSESSMENT PR OCEEDINGS U/S 263 OF THE ACT ON THE FOLLOWING FOUR ISSUES : A) INCOME NOT OFFERED UNDER PERCENTAGE COMPLETION METHOD; B) NON-EXAMINATION OF ADVANCES OF RS.8,74,77,950 /- RECEIVED AGAINST THE SALE OF FLATS; C) NON-EXAMINATION OF UNSECURED LOAN CREDITORS OF RS.3,15,59,341/- AND; D) NON-EXAMINATION OF ALLOWABILITY OF EXPENDITURE OF RS.7,85,153/- RELATING TO THE PENALTY PAID TO THE ELEC TRICITY DEPARTMENT. 4. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE COMMISSIONER OF INCOME TAX ACCEPTED THE EXPLANATION FURNISHED IN RESPECT O F FIRST TWO ISSUES. WITH REGARD TO THE REMAINING TWO ISSUES, THE COMMISSIONE R SET ASIDE THEM TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THEM AFTER PR OVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. AGGRIEVED BY THE SAID ORDER OF CO MMISSIONER, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMI TTED THAT IN THE SET ASIDE PROCEEDINGS, THE AO HAS EXAMINED UNSECURED LOAN CRE DITORS AND HAS ACCEPTED THEM. HENCE, THE ASSESSEE IS NOT REALLY AGGRIEVED IN RESPECT OF THE SAID MATTER. HOWEVER, WITH RESPECT TO THE MATTER RELATING TO THE PENALTY OF RS.7,85,153/-, THE LD. AR SUBMITTED THAT THE SAID PENALTY IS NOT PAID FOR INFRINGEMENT OF ANY LAW AS PRESUMED BY THE COMMISSIONER, BUT IT ONLY REPRESE NTED THE ELECTRICITY CHARGES PAID ON ESTIMATED BASIS. THE LD. AR SUBMITTED THA T THE COMMISSIONER HAS NOTICED THE FACT OF PAYMENT OF ABOVE SAID AMOUNT FR OM THE TAX AUDIT REPORT FURNISHED BY THE ASSESSEE, WHEREIN THE TAX AUDITOR HAD REPORTED THE SAME UNDER THE COLUMN OTHER FINANCES AND PENALTY AND N OT UNDER THE COLUMN PENALTY FOR INFRINGEMENT OF LAW. ACCORDINGLY, TH E LD. AR SUBMITTED THAT THE COMMISSIONER WAS NOT RIGHT IN LAW IN PRESUMING THAT EXPLANATION BELOW SECTION 37 OF THE ACT SHALL BE APPLICABLE TO THE ABOVE SAI D CLAIM. 6. IN THE ALTERNATIVE, THE LD. AR SUBMITTED THAT TH E AO EXAMINED THE ELECTRICITY EXPENDITURE CLAIMED BY THE ASSESSEE DUR ING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND DID NOT MAKE ANY ADDITIO N. THE LD. AR SUBMITTED I.T.A. NO.4261/MUM/2013 3 THAT THE AO HAS TAKEN A PLAUSIBLE VIEW IN THIS MATT ER AND HENCE THE REVISION PROCEEDINGS ON THIS ISSUE SHALL NOT LIE. THE LD. A R FURTHER SUBMITTED THAT THE INQUIRIES MADE BY AO, EVEN IF IT IS CONSIDERED TO BE INADEQUATE, WOULD NOT CONFER ANY RIGHT TO THE COMMISSIONER TO INITIATE R EVISIONS PROVISIONS AS THERE IS APPLICATION OF MIND BY THE AO IN RESPECT OF ALL THE ISSUES. IN THIS REGARD, THE LD. AR PLACED RELIANCE ON THE DECISION OF HONBLE DELHI COURT IN THE CASE OF CIT V/S VIKAS POLYMERS (2012) 341 ITR 537 (DEL). 7. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE D ID NOT OFFER ANY INCOME DURING THE YEAR UNDER CONSIDERATION AS ITS PROJECT WAS UNDER CONSTRUCTION STAGE. THE ASSESSEE HAD BOOKED EXPENSES UNDER THE WORK IN PROGRESS AND HAS CARRIED IT TO THE BALANCE SHEET. THE LD A.R FURTHE R SUBMITTED THAT THE IMPUGNED EXPENDITURE, EVEN IF IT IS DISALLOWED, WOULD NOT HA VE ANY TAX EFFECT. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE IMPUGNED ORDER CANNOT BE CONSIDERED TO BE PREJUDICIAL TO THE INTERESTS OF REVENUE. THE LD A .R, BY PLACING THE RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF ( MALABAR INDUSTRIAL CO. LTD. V/S CIT (2000) 243 ITR 83 (SC), SUBMITTED THAT THE COMMISSIONER CAN INITIATE REVISION PROCEEDINGS ONLY IF THE TWIN COND ITIONS PRESCRIBED U/S 263 OF THE ACT ARE SATISFIED CUMULATIVELY, VIZ., THE ORDER PAS SED BY THE ASSESSING OFFICER IS NOT ONLY ERRONEOUS, BUT ALSO IT IS PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. ACCORDINGLY, HE SUBMITTED THAT THE IMPUGNED REVISIO N ORDER IS LIABLE TO BE SET ASIDE SINCE THE ASSESSMENT ORDER IS NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 8. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE A O DID NOT EXAMINE THE ISSUE OF PENALTY DURING THE COURSE OF ASSESSMENT PR OCEEDINGS. EVEN THOUGH THE AO HAS CALLED FOR THE DETAILS OF ELECTRICITY CHARGE S INCURRED BY THE ASSESSEE, YET THERE WAS NO INQUIRY WITH REGARD TO THE PENALTY CIT ED ABOVE AND HENCE IT CANNOT BE SAID THAT THE AO DID EXAMINE THE ISSUE AND APPLI ED HIS MIND AND TOOK PLAUSIBLE VIEW. INVITING OUR ATTENTION TO THE ASSE SSMENT ORDER, THE LD. DR SUBMITTED THAT THE IMPUGNED ASSESSMENT ORDER IS A C RYPTIC ONE WITHOUT CONTAINING OR WITHOUT DISCUSSING ANYTHING ABOUT THE DETAILS OF EXAMINATION CARRIED OUT BY THE AO. ACCORDINGLY, HE SUBMITTED THAT THE AO HAS FAILED TO MAKE ANY INQUIRY WITH REGARD TO THE ABOVE SAID PENALTY. THE LD A.R SUBMITTED THAT LACK OF INQUIRY BY THE AO WOULD RENDER THE ASSESSMENT ERRON EOUS AND PREJUDICIAL TO THE I.T.A. NO.4261/MUM/2013 4 INTEREST OF REVENUE. WITH REGARD TO THE SUBMISSION S OF LD. AR THAT THE ASSESSEE DID NOT DECLARE ANY INCOME AND HAS BOOKED EXPENDITU RES UNDER THE HEAD WORK IN PROGRESS, THE LD. DR SUBMITTED THAT THE ASSESSE E WOULD BE CLAIMING THE DEDUCTION OF WORK IN PROGRESS AT ONE STAGE AND SUCH A CLAIM WOULD INCLUDE THE PENALTY AMOUNT REFERRED SUPRA. ACCORDINGLY THE LD D.R CONTENDED THAT THE IMPUGNED ORDER IS PREJUDICIAL TO THE INTEREST OF RE VENUE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE RECORD. WITH REGARD TO THE ISSUE RELATING TO UNSECURED LOAN CREDITORS, IT IS A FACT THAT THE ASSESSING OFFICER DID NOT DISCUSS ANYTHING ABOUT THE SAME IN THE ASSESSMENT ORDER. HOWEVER, SINCE THE ASSESSING OFFICER HAS ACCEPTED T HE GENUINENESS OF THE LOAN CREDITORS, THE LD A.R DID NOT SERIOUSLY CONTESTED T HE SAME. HOWEVER, WITH REGARD TO THE ELECTRICITY PENALTY AMOUNT, THE LD A.R VEHEM ENTLY CONTENDED THAT THE SAME DOES NOT FALL IN THE CATEGORY OF PENALTY AT AL L, BUT IT WAS A PAYMENT MADE ON ESTIMATED BASIS. HE ALSO CONTENDED THAT THE TAX AU DITOR HAS ALSO REPORTED THE SAME AS OTHER PENALTY ONLY IN THE TAX AUDIT REPOR T. ACCORDINGLY HE CONTENDED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN PRESUMING T HAT THE SAID PENALTY IS PAID FOR ANY PURPOSE WHICH IS AN OFFENCE OR PROHIBITED BY LA W. THE LD A.R ALSO SUBMITTED THAT THE ASSESSEE MAY ALSO WAIVE ITS RIGH T TO INCLUDE THE SAME IN WORK IN PROGRESS. 10. HOWEVER, WE ARE CONCERNED WITH THE VALIDITY OF REVISION PROCEEDING INITIATED BY LD CIT. AS SUBMITTED BY LD D.R, WE NO TICE THAT THE ASSESSING OFFICER DID MAKE ENQUIRY WITH REGARD TO THE ELECTRICITY CHA RGES CLAIMED BY THE ASSESSEE AND IN OUR VIEW IT APPEARS TO BE GENERAL IN NATURE. EVEN THOUGH THE MATTER RELATING TO PAYMENT OF PENALTY WAS REPORTED IN THE TAX AUDIT REPORT, THE ASSESSING OFFICER DID NOT CHOOSE TO MAKE ANY ENQUIRY WITH REG ARD TO THE SAME. HENCE, WE ARE UNABLE TO AGREE WITH THE CONTENTIONS OF THE LD A.R THAT THE AO DID MAKE ENQUIRY WITH REGARD TO THE PENALTY PAYMENT. IN THE CASE OF MALABAR INDUSTRIAL COMPANY (SUPRA), THE HONBLE SUPREME COURT HAS HELD THAT THE LACK OF ENQUIRY ON THE PART OF THE AO WOULD RENDER THE ASSESSMENT O RDER ERRONEOUS. SINCE THE IMPUGNED ELECTRICITY PENALTY IS INCLUDED IN WORK IN PROGRESS, WHICH IN TURN, WOULD BE CLAIMED AS REVENUE EXPENDITURE IN SOME OTHER YEA R, BY WAY OF CASCADING EFFECT, IN OUR VIEW, IT WOULD BE PREJUDICIAL TO THE INTERESTS OF REVENUE. I.T.A. NO.4261/MUM/2013 5 ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT WAS JUSTIFIED IN INITIATING THE IMPUGNED REVISION PROCEEDINGS. 11. THE LD A.R VEHEMENTLY ARGUED THAT THE IMPUGNE D PAYMENT WILL NOT FALL IN THE CATEGORY OF PENALTY COVERED BY EXPLANATION TO SEC. 37 OF THE ACT. HOWEVER, THIS MATTER NEEDS TO BE EXAMINED AT THE END OF THE AO IN THE SET ASIDE PROCEEDINGS. ACCORDINGLY, WE DO NOT FIND ANY INFIR MITY IN THE REVISION ORDER PASSED BY LD CIT. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 17TH SEPT, 2014 . ,- ( . /0 1 2 17TH SEPT, 2014 - ' 3) 4 SD SD ( . . / H.L. KARWA ) ( . . , / B.R. BASKARAN) / PRESIDENT / ACCOUNTANT MEMBER / ( ) MUMBAI : 17TH SEPT, 2014 . . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. ( 6* ( ) / THE CIT(A)- CONCERNED 4. ( 6* / CIT CONCERNED 5. 6. 78 3 !*9 , + 9 , / ( ) / DR, ITAT, MUMBAI CONCERNED 3 : ) / GUARD FILE. ; ( / BY ORDER, TRUE COPY < $ (ASSTT. REGISTRAR) + 9 , / ( ) /ITAT, MUMBAI