DCIT CEN CIR 6, MUMBAI V. CONWOOD CONSTRUCTION & DEVELOPERS P. LTD, NAVI MUMBAI

ITA 4286/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62182 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 27-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 26-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Keywords: Reassessment proceedings
• Section: 143(3); 153A; 14A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI V.D. RAO , J.M. ITA NO. : 4286/MUM/2010 ASSESSMENT YEAR : 2001-02 ITA NO. : 4245/MUM/2010 ASSESSMENT YEAR : 2002-03 ITA NO. : 4246/MUM/2010 ASSESSMENT YEAR : 2003-04 ITA NO. : 4247/MUM/2010 ASSESSMENT YEAR : 2004-05 ITA NO. : 4268/MUM/2010 ASSESSMENT YEAR : 2005-06 ITA NO. : 4269/MUM/2010 ASSESSMENT YEAR : 2006-07 ITA NO. : 4270/MUM/2010 ASSESSMENT YEAR : 2007-08 DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-6 9 TH FLOOR OLD CGO BLDG. ANNEXE, M.K. ROAD MUMBAI-400 020. M/S. CONWOOD CONSTRUCTION & DEVELOPERS PVT. LTD. DYNAMIX HOUSE, YASHODHAM, GEN. A.K. VAIDYA MARG GOREGAON (E) MUMBAI-400 063. PAN NO: AAACA 0981 F (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI A.C. TEJPAL RESPONDENT BY : MS. AARTI VISSANJI DATE OF HEARING : 27.3.2012 DATE OF PRONOUNCEMENT : 11.4.2012 ITA NO. 4286,5245 TO 4247, 4268 TO 4270/M/10 A.Y.01-02 TO 07-08 2 O R D E R PER BENCH THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST DIFFE RENT ORDERS DATED 30.3.2010 OF CIT(A) FOR THE ASSESSMENT YEAR S 2001-02 TO 2007-08. IN ALL THESE APPEALS, IDENTICAL GROUND RAISED BY THE REVENUE IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, CIT(A) WAS NOT JUSTIFIED IN GIVING RELIEF BEYOND THE INCOME RETU RNED BY THE ASSESSEE. ALL THESE APPEALS ARE BEING DISPOSED OF BY A SING LE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY WHO W AS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF BUILDINGS WAS E XECUTING TWO PROJECTS VIZ. YASHODHAM PROJECT WHICH WAS MAINLY A RESIDEN TIAL PROJECT AND SHAGUN PROJECT WHICH WAS BOTH RESIDENTIAL AND COMME RCIAL PROJECT. NONE OF THE PROJECTS WERE COMPLETE. THERE WAS A SEARCH CONDUCTED UNDER SECTION 132 OF THE ACT ON THE RESIDENTIAL AND OFFICE PREMISES OF SHRI VINOD GOENKA AND HIS GROUP ON 22.3.2 007 DURING THE COURSE OF WHICH DOCUMENTS RELATING TO THE ASSESSEE COMPANY WE RE FOUND AND SEIZED. SUBSEQUENTLY PROCEEDINGS UNDER SECTION 153A WERE INITIATED. THE ASSESSMENTS FOR ASSESSMENT YEARS 2001-02 TO 2006-07 WERE COMPLETED UNDER SECTION 143(3)/153A AND ASSESSMENT FO R ASSESSMENT YEAR 2007-08 WAS COMPLETED UNDER SECTION 143(3) . THE ASSESSEE HAD BORROWED CERTAIN FUNDS IN RELATION TO SHAGUN PROJECT ON WHICH INTEREST HAD BEEN PAID. THE ASSESSEE HAD ALSO GIVE N INTEREST FREE ADVANCES TO ASSOCITE CONCERNS AND HAD ALSO MADE INVESTM ENT IN SHARES. THE ASSESSEE HAD CAPITALISED ENTIRE INTEREST PAID WITH THE WORK-IN-PROGRESS. THE AO IN THE ASSESSMENT DISALLOWED PAR T OF THE INTEREST RELATING TO THE INTEREST FREE ADVANCES AND INV ESTMENT IN SHARES ITA NO. 4286,5245 TO 4247, 4268 TO 4270/M/10 A.Y.01-02 TO 07-08 3 AND ALSO OTHER EXPENSES UNDER SECTION 14A. THE DETAILS O F DISALLOWANCES MADE BY AO FOR DIFFERNET YEARS ARE GIVEN IN THE TABLE BELOW WHICH RELATE TO THE SHAGUN PROJECT. THE AMOUNTS DISALLOWED HAD BEEN REDUCED FROM WIP AND INCOME ASSESSED WAS NIL AS THE A SSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING. ASSESSMENT YEAR DISALLOWANCE OF INTEREST RELATING TO INTEREST FREE ADVANCES AND INVESTMENT IN SHARES (14A) (IN RS.) DISALLOWANCE IF OTHER EXPENSES UNDER SECTION 14A 2001-02 80,71,491/- NIL 2002-03 9,75,225/- 3,14,962/- 2003-04 29,81,930/- 3,19,287/- 2004-05 20,50,354/- 3,07,379/- 2005-06 15,99,906/- 3,02,243/- 2006-07 13,43,199/- 3,35,096/- 2007-08 1,73,306/- 86,18,271/- 2.1 IN CASE OF YASHODHAM PROJECT, THE AO HAD ESTIMATED I NCOME @ 8% OF WIP, FOLLOWING THE ORDERS IN THE EARLIER YEARS. CIT(A) DELETED THE ADDITIONS FOLLOWING THE DECISION IN EARLIER YEARS WHICH HAD BEEN UPHELD BY THE TRIBUNAL AND ALSO BY THE HIGH COURT. TH E DEPARTMENT IS NOT IN APPEAL ON THIS ISSUE. 2.2 IN RELATION TO THE DISALLOWANCE OF INTEREST AND OT HER EXPENSES RELATING TO THE SHAGUN PROJECT, THE ASSESSEE SUBMITTED T HAT BORROWED FUNDS HAD BEEN UTILISED ONLY FOR THE PURPOSES OF BUSINESS . THE INTEREST FREE ADVANCES GIVEN TO ASSOCIATE CONCERNS WERE ONLY ON COM MERCIAL EXPEDIENCY AND WERE ALLOWABLE IN VIEW OF THE JUDGMEN T OF HON'BLE SUPREME COURT IN CASE OF S.A BUILDERS (288 ITR 1). CI T(A) FORWARDED ITA NO. 4286,5245 TO 4247, 4268 TO 4270/M/10 A.Y.01-02 TO 07-08 4 SUBMISSIONS OF THE ASSESSEE TO THE AO FOR EXAMINATION AND F OR GIVING REMAND REPORT, VIDE LETTER DATED 1.12.2009. CIT(A) OBSERVED IN THE APPELLATE ORDER THAT THE AO IN THE REMAND REPORT DA TED 9.2.2010 HAD QUANTIFIED DISALLOWABLE INTEREST IN RELATION TO LOANS AND ADVANCES, AND INVESTMENT IN SHARES. CIT(A) BASED ON THE REMAD REPORT ALLOWED RELIEF TO THE ASSESSEE. IN ASSESSMENT YEARS 2001-02 TO 2004-05, CIT (A) DELTED THE DISALLOWANCE OF INTEREST ENTIRELY, BASED ON THE REMAND REPORT AND CONFIRMED THE DISALLOWANCE OF OTHER EXPENSES MADE UNDER SECTION 14A. IN THE ASSESSMENT YEAR 2001-02 IN WHICH THE OTHER EXPENSES WERE NOT DISALLOWED BY AO UNDER SECTION 14A, CI T(A) DIRECTED THE AO TO MAKE THE DISALLOWANCE AS PER RULE 8D . IN RELATION TO ASSESSMENT YEARS 2005-06 AND 2006-07 ALSO, CIT(A) CONFI RMED THE DISALLOWANCE OF OTHER EXPENSES MADE UNDER SECTION 14A BUT IN RELATION TO DISALLOWANCE OF INTEREST CIT(A) CONFIRMED THE FOLLOW ING AMOUNTS BASED ON THE REMAND REPORT : ASSESSMENT YEAR ADDITION CONFIRMED IN RELATION TO INTEREST FREE ADVANCES (IN RS.) INTEREST CONFIRMED ON INVESTMENT IN SHARES (IN RS.) 2005-06 1,18,790/- 84,910/- 2006-07 22,84,110/ 1,24,961/- 2007-08 NIL 29,787/- 3. THE REVENUE HAS FILED THE PRESENT APPEALS CHALLENGIN G THE ORDER OF CIT(A). THE LD. DR APPEARING FOR THE REVENUE SUBM ITTED THAT IN THE ITA NO. 4286,5245 TO 4247, 4268 TO 4270/M/10 A.Y.01-02 TO 07-08 5 ASSESSMENT YEAR 2001-02, THE ASSESSEE ITSELF HAD DISALLOWED INTEREST RS.8,07,149/- AND THEREFORE, CIT(A) WAS NOT JUSTIFIED IN GIVING RELIEF BEYOND THE RETURNED INCOME. IT WAS ALSO SUBMITTED THAT CIT(A) WAS NOT CORRECT IN STATING THAT THE AO IN THE REMAND REPOR T HAD NOT RECOMMENDED ANY DISALLOWANCE. THE HEARING WAS ADJOURNED GIVING TIME TO THE LD. DR TO PRODUCE THE REMAND REPORT OR A NY OTHER EVIDENCE TO SHOW THAT THE ASSESSEE HAD DISALLOWED INTEREST IN THE R ETURN OF INCOME AND THAT RELIEF ALLOWED BY CIT(A) IN ANY OF T HE YEARS WAS BEYOND INCOME RETURNED BY THE ASSESSEE. THE LD. DR PLACED A COPY OF THE REMAND REPORT ON RECORD WHICH RELATED ONLY TO THE ASSESSMENT YEARS 2005-06 TO 2007-08. IN RELATION TO ASSESSMENT YEA R 2001-02, IT WAS SUBMITTED THAT THE DISALLOWANCE OF INTEREST OF RS.8, 07,149/- HAD BEEN CONFIRMED BY CIT(A) IN THE ORIGINAL ASSESSMENT AND ASSESSEE HAD ACCEPTED THE ORDER OF CIT(A) AS NO FURTHER APPEAL HAD BEEN FILED AND, THEREFORE, RELIEF ALLOWED IN RELATION TO INTEREST IN THESE PROCEEDINGS WAS NOT JUSTIFIED. 3.1 THE LD. AR ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAD MADE NO DISALLOWANCE OF INTEREST IN THE RETURN FILED U NDER SECTION 153A ON 29.12.2008. IT WAS POINTED OUT THAT THE AO AT TH E TOP OF PAGE OF ASSESSMENT ORDER HIMSELF HAD MENTIONED THAT THE ASSESSEE HA D DECLARED NIL INCOME. IT WAS FURTHER POINTED OUT THAT O NLY IN THE NOTE ANNEXED TO THE COMPUTATION OF INCOME FOR ASSESSMENT YEAR 2001-02 THE ASSESSEE HAD MENTIONED THE FACT THAT INTEREST HAD BEE N DISALLOWED UNDER SECTION 143(3). BUT, IN THE COMPUTATION OF INCOM E, NIL INCOME HAD BEEN SHOWN AND THEREFORE IT COULD NOT BE SAID THA T ASSESSEE HAD NOT DECLARED NIL INCOME. IN RELATION TO OTHER YEARS, IT WAS SUBMITTED THAT THERE WAS NO SUCH DISCREPANCY POINTED OUT BY THE LD . DR IN THESE YEARS ALSO EITHER THE DISALLOWANCE OF INTEREST WAS DELETE D OR PARTLY CONFIRMED BASED ON THE REMAND REPORT. REFERRING TO TH E REMAND REPORT ITA NO. 4286,5245 TO 4247, 4268 TO 4270/M/10 A.Y.01-02 TO 07-08 6 DATED 9.2.2010 A COPY OF WHICH WAS PLACED ON RECORD BY L D. DR, THE LD. AR POINTED OUT THAT IN THE SAID REPORT AO HAD RECOMME NDED DISALLOWANCE OF INTEREST IN RELATION TO INTEREST FREE A DVANCES AND INVESTMENT IN SHARES ONLY IN RELATION TO ASSESSMENT YEARS 2 005-06 TO 2007-08 AND CIT(A) PASSED THE ORDER BASED ON SUCH REPORT . THEREFORE THERE WAS NO REASON FOR THE DEPARTMENT TO BE AGGRIEVE D. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING RELIEF ALLOWED BY CIT(A) IN RELATION TO DISALLOWANCE OF INTEREST. THE ASSESSEE WAS E XECUTING TWO PROJECTS I.E., YASHODHAM PROJECT IN RESPECT OF WHICH ASSESSEE WAS FOLLOWING PERCENTAGE COMPLETION METHOD OF ACCOUNTING AN D SHAGUN PROJECT IN RESPECT OF WHICH PROJECT COMPLETION METHOD OF ACCOUNTING WAS BEING FOLLOWED. THE AO HAD MADE ESTIMATED ADDITIO N @ OF 8% OF THE WIP IN CASE OF YASHODHAM PROJECT WHICH HAD BEEN DELE TED BY THE CIT(A) FOLLOWING THE DECISION IN EARLIER YEAR WHICH HA S ALSO BEEN CONFIRMED BY THE HON'BLE HIGH COURT OF BOMBAY. THE DE PARTMENT HAS ACCEPTED THE ORDER OF CIT(A) ON THIS POINT AS NO SPECIFIC GROUND HAS BEEN RAISED. 4.1 THE DEPARTMENT HAS CHALLENGED THE ORDER OF CIT( A) IN RELATION TO SHAGUN PROJECT ON THE GROUND THAT CIT(A) HAS ALLOWED RELIEF BEYOND THE RETURNED INCOME. IT HAS BEEN SUBMITTED THAT THE A SSESSEE IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2001-02 UNDER SECTION 153A HAD ITSELF DISALLOWED INTEREST OF RS.8,07,149/-. THIS CLAIM, HOWEVER, IS NOT FOUND TO BE CORRECT. THE ASSESSEE HAS PLACED A COPY OF COMP UTATION OF INCOME FOR ASSESSMENT YEAR 2001-02 IN WHICH INCOME HAS BEE N DECLARED AS NIL. THE AO IN THE ASSESSMENT ORDER HAS MENTI ONED THAT THE ASSESSEE HAD DECLARED NIL INCOME UNDER SECTION 153A. HO WEVER, IT HAS BEEN ADMITTED BY THE LD. AR THAT INTEREST TO THE TUNE OF ITA NO. 4286,5245 TO 4247, 4268 TO 4270/M/10 A.Y.01-02 TO 07-08 7 RS.8,07,149/- HAD BEEN DISALLOWED IN THE ORIGINAL ASSE SSMENT UNDER SECTION 143(3), AND THE AMOUNT REDUCED FROM THE WIP. CIT(A) HAD CONFIRMED THE DISALLOWANCE, WHICH WAS ACCEPTED BY THE ASSESSE E AS NO APPEAL WAS FILED. THEREAFTER REASSESSMENT PROCEEDINGS WE RE INITIATED UNDER SECTION 153A IN WHICH THE ASSESSEE FILED RETURN SHOW ING NIL INCOME AND WITHOUT MAKING ANY DISALLOWANCE OF INTEREST IN RELATION TO SHAGUN PROJECT. THE PROCEEDINGS UNDER SECTION 153A ARE MEANT FOR ASSESSMENT OR REASSESSMENT OF ANY INCOME WHICH HAD NOT BEEN ASSESSED EARLIER. IN THESE PROCEEDINGS INCOME ALREADY ADDED OR ASSESSED AND ACCEPTED BY THE ASSESSEE CAN NOT BE DELETED. IN O THER WORDS NO RELIEF CAN BE GIVEN UNDER SECTION 153A IN RELA TION TO ANY ADDITION ALREADY MADE IN THE EARLIER PROCEEDINGS UNDE R SECTION 143(3) AND WHICH HAS BECOME FINAL. THEREFORE, IN OUR VIEW DI SALLOWANCE OF INTEREST OF RS.8,40,149/- MADE IN THE EARLIER ASSESSMENT UNDER SECTION 143(3) AND WHICH HAS BECOME FINAL HAS TO BE DISALLOWED IN THE ASSESSMENT UNDER SECTION 143(3)/153A. WE ALSO NOTE FROM TH E REMAND REPORT DATED 9.2.2010 OF AO THAT IT IS SILENT ON THE ISSUE OF DISALLOWANCE OF INTEREST FOR ASSESSMENT YEAR 2001-02. THIS CAN NOT BE INTERPRETED TO MEAN THAT THE AO RECOMMENDED NO DISALL OWANCE. THEREFORE, THE ORDER OF CIT(A) DELETING THE DISALLOW ANCE OF RS.8,07,149/- IN ASSESSMENT YEAR 2001-02 CAN NOT BE UPHE LD AND THE SAID ORDER IS SET ASIDE AND DISALLOWANCE IS UPHELD. 4.2 IN RELATION TO ASSESSMENT YEARS 2002-03 TO 2004-05 A LSO THE REMAND REPORT IS SILENT IN RELATION TO DISALLOWANCE OF INTEREST. IT HAS BEEN TREATED BY CIT(A) TO MEAN THAT THE AO RECOMMEND ED NO DISALLOWANCE. SUCH CONCLUSION OF CIT(A) IS NOT REASONABLE. THE REMAND REPORT DATED 9.2.2010 SHOWS THAT THE AO SUBMITTED REMA ND REPORT ONLY IN RELATION TO ASSESSMENT YEARS 2005-06 AND 2007-0 8. THEREFORE, CIT(A) WAS REQUIRED TO ASK THE AO TO SUBMIT REMAND REP ORT IN RELATION ITA NO. 4286,5245 TO 4247, 4268 TO 4270/M/10 A.Y.01-02 TO 07-08 8 TO ASSESSMENT YEARS 2001-02 TO 2004-05 ALSO FOR WHICH REPO RTS HAD BEEN CALLED. IT IS NOT CLEAR AS TO HOW THERE CAN BE NO DISALLOWANCE OF INTEREST IN THESE YEARS WHEN THERE IS DISALLOWANCE OF IN TEREST IN THE EARLIER YEARS AS WELL AS IN THE SUBSEQUENT YEARS. THE MATTER IN OUR VIEW, REQUIRES FRESH EXAMINATION BY CIT(A) AFTER GETT ING SPECIFIC REPORT FROM THE AO. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) IN RELATION TO DISALLOWANCE OF INTEREST FOR ASSESSMENT YEARS 2002-03 TO 2004-05 AND RESTORE THE MATTER BACK TO HIM FOR PASSING A FRESH O RDER AFTER OBTAINING CLEAR REPORT FROM THE AO ON THIS ISSUE. IN R ELATION TO ASSESSMENT YEARS 2005-06 TO 2007-08, THERE IS A CLEAR REPO RT OF THE AO REGARDING DISALLOWANCE OF INTEREST WHICH HAS BEEN FOL LOWED BY CIT(A). WE, THEREFORE, SEE NO ERROR IN THE ORDER OF CIT(A) IN RELATION TO THESE YEARS AND, THE SAME ARE, THEREFORE, CONFIRMED. 5. IN THE RESULT, (I) APPEAL OF THE REVENUE IN ASSESSMEN T YEAR 2001- 02 IS ALLOWED; (II) APPEALS OF THE REVENUE FOR ASSESSMENT YEARS 2002-03 TO 2004-05 ARE ALLOWED FOR STATISTICAL PURPOSES AND (III) APPEALS OF THE REVENUE FOR ASSESSMENT YEARS 2005-0 6 TO 2007-08 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.4.2012. SD/- SD/- ( V.D. RAO ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 11.4.2012. JV. ITA NO. 4286,5245 TO 4247, 4268 TO 4270/M/10 A.Y.01-02 TO 07-08 9 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.