INDERLOK INFRA-AGRO P.LTD ( FORMELRY KNOWN AS M.S, INDERLOK HOTELS P.LTD), MUMBAI V. ITO 5(2)(1), MUMBAI

ITA 4614/MUM/2012

• Counselvise Citation: 461419914 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 06-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 09-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI PRAKASH
• Assessee Lawyers: A H DALAL
• Keywords: Sale consideration of property below Jantri Value
• Section: 143(3); 133A

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL MUMBAI - I BENCH MUMBAI . . , / ! ! ! ! , '# '# '# '# BEFORE S/SH. H.L.KARWA,PRESIDENT & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 4614/MUM/2012, $ $ $ $ % % % % / ASSESSMENT YEAR 2006-07 INDERLOK INFRA-AGRO PVT. LTD. (FORMERLY KNOWN AS M.S.INDERLOK HOTELS PVT. LTD.) BLOCK NO.3, SOHNI MANSION AUGUST KRANTI MARG, GOWALAI TANK, MUMBAI- 400026 VS. ITO 5(2)(1), AAYAKAR BHAVAN,M.K.ROAD, MUMBAI-400020 PAN: AACI2899A ( &' / APPELLANT) ( ()&' / RESPONDENT) &' * / APPELLANT BY : SHRI A.H. DALAL ()&' + * / RESPONDENT BY : SHRI RAVI PRAKASH $ $ $ $ + ++ + ,- ,- ,- ,- / DATE OF HEARING : 06-05-2014 ./% + ,- / DATE OF PRONOUNCEMENT : 06 -05- 2014 $ $ $ $ , 1961 + ++ + 254 )1( ,0, ,0, ,0, ,0, '1 '1 '1 '1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM: CHALLENGING THE ORDER DATED 08.05.2012 OF CIT(A)-9, MUMBAI ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: (I) THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWA NCE OF 50% OF THE PAYMENT MADE TO THE CONTRACTOR OF RS. 51,75,224/- ON ACCOUNT OF THE FAC T THAT THE CONTRACTOR HAS STOPPED DOING THE WORK OF THE APPELLANT FOR THE ONLY PROJECT, WITHOUT ANY BASIS OF SUCH PERCENTAGE EVEN THOUGH, HE HAD CONFIRMED IN THE STATEMENT MADE TO THE A.O. THA T HE HAS RECEIVED THE PAYMENT WITHOUT ANY RESERVATION. (II) (A) THE CIT(A) FAILED TO APPRECIATE THAT MR. BAGHEL HAD CONFIRMED THE PAYMENT OF RS. 51,75,224/- AND SUDDENLY STOPPED THE WORK OF APPELLANT ON ACCOU NT OF ALLEGED IRREGULARITIES BY THE APPELLANT. (B) THE APPELLANT HAD EVEN DEDUCTED THE TAX ON THE ENTIRE AMOUNT OF PAYMENT TO HIM BUT THE TD CERTIFICATE WAS RETURNED BY HIM ON ACCOUNT OF THE F ACT THAT HE HAD NOT CARRIED OUT WORK DURING THE PREVIOUS YEAR OF THE ASSESSMENT YEAR. (C) AS THE CONTRACTOR HAD DISCONTINUED THE WORK IN A.Y. 2006-07, HE HAD CONFIRMED THE PAYMENT RECEIVED BY HIM WITHOUT GIVING THE CORRESPONDING BI LL FOR THE WORK DONE BUT HE HAD CARRIED OUT SMALL AMOUNT OF WORK IN 2006-07 FOR WHICH, HE HAD R ECEIVED THE PAYMENT AND ACCOUNTED THE SAME IN HIS RETURN OF INCOME FOR A.Y. 2006-07. (D) AS PER THE HONBLE ITATS DIRECTION IN CASE TH E ASSESSEE IS FOLLOWING PROJECT COMPLETION OF PROJE CT HAVE TO BE ALLOWED IN THE YEAR OF COMPUTATION SINCE THE PROJECT WAS COMPLETED IN A.Y. 2006-07, THE SAID EXPENDITURE IN NATURE OF CONSTRUCTION COST IS ALLOWABLE IN THE YEAR UNDER APPEAL. UNDER THE CIRCUMSTANCES, THERE IS NO QUESTION OF DI SALLOWING THE PAYMENT WITHOUT ANY PROOF BY THE A.O. THE APPELLANT CRAVES, LEAVE TO ADD, AMEND OR ALTER THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 2 ITA NO. 4614/M/2012 INDERLOK INFRA-AGRO PVT. LTD. 2. ASSESSE COMPANY ENGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION FILED ITS RETURN OF INCOME ON 16.10.2006 DECLARING TOTAL LOSS OF RS. 7,29,395/-. THE AO COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 30.12.2008 BY DISALLOWING RS.7 0,24,516/- AS THE SALE PRICE DISCREPANCIES VIS- -VIS STAMP DUTY VALUES OF THE FLATS SOLD.HE MADE F URTHER ADDITION OF RS.14,82,600/- AS THE PROCEEDS OF 10 CAR PARKING SPACES AND LABOUR CHARGE S OF RS.51,75,224/-.ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA),WH O UPHELD ALL THE THREE ADDITIONS.THE ASSESSEE COMPANY WENT IN FURTHER APPEAL BEFORE THE ITAT.VID E ORDER NO. ITA NO. 6034/M/2009 DATED 31.05.2010,ITAT RESTORED BACK THE MATTER OF LABOUR CHARGES TO THE FILE OF THE AO FOR FRESH EXAMINATION AND ALSO DIRECTED THAT IN CASE EVEN AFT ER FRESH EXAMINATION PROPER BILLS OF THE WORK DONE BY HARISHARAN BAGHEL(HB)WERE NOT AVAILABLE,THE EXPENDITURE COULD BE ESTIMATED AFTER OBTAINING DETAILS OF NATURE AND QUANTUM OF WORK DON E BY HIM IN CONNECTION WITH THE EXECUTION OF THE PROJECT.AS PER THE TRIBUNAL THE ASSESSEE WAS F OLLOWING PROJECT COMPLETE METHOD AND ALL EXPENSES INCURRED TILL THE COMPLETION OF THE PROJEC T HAD TO BE ALLOWED IN THE YEAR OF COMPLETION. DURING THE FRESH PROCEEDINGS,ASSESSEE WAS ASKED BY THE AO TO SUBMIT THE RELEVANT BILLS OF THE WORK DONE BY HB.IN RESPONSE TO THE DIRECTIONS OF TH E AO,AR REPORTED THAT AT THE TIME OF SURVEY IN FEB.2007,ALL PAPERS WERE IMPOUNDED BY THE MEMBERS O F THE SURVEY TEAM. AS DECISION OF ALLOWABILITY OF THE EXPENDITURE BASED ON VERIFICATI ON OF BILLS BE MADE.AS THE ASSESSEE COULD NOT PRODUCE THE NECESSARY BILLS FOR VERIFICATION,SO,HE DISALLOWED RS.25,87,612/-,BEING 50% OF THE TOTAL EXPENDITURE I.E.RS.51,75,224/-.RELEVANT PORTION OF THE ORDER OF THE AO READS AS UNDER: THE TRIBUNAL HAS HELD REGARDING BILLS AND VOUCHERS ETC. THAT AT THE TIME OF SURVEY IN FEBRUARY,2007 ALL THE PAPERS WERE IMPOUNDED BY THE AO AND THE ASSESSEE HAD NOT RECEIVED COPY OF THE SAME. THESE PAPERS HAD NOT BEEN LOOKED INTO. FURTHER, THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD AND SINCE THE PROJECT WAS COMPLET ED ONLY IN 2006-07, EXPENSES INCURRED EARLIER WERE WORK-IN-PROGRESS AND HAVE TO BE ALLOWED AS DED UCTION IN THE YEAR OF COMPLETION. THEREFORE,MERELY BECAUSE THE EXPENSES WERE DEBITED IN THE CURRENT YEAR WAS NO GROUND FOR NOT ALLOWING THE EXPENSES. IT WAS SUBMITTED THAT THE AM OUNT GIVEN TO MR.BAGHEL HAS BEEN TREATED AS ADVANCE IN THE EARLIER YEAR WHICH WAS CLEAR FROM TH E ACCOUNTS FOR THE YEAR ENDING 31.03.2005 PLACED AT PAGE 138 OF THE PAPER BOOK WHICH SHOWED A DVANCE OF RS.50,59,092/-AGAINST THE NAME OF MR.BAGHEL.IT IS THEREFORE, URGED THAT THE CLAIM FOR PAYMENT TO THE CONTRACTOR SHOULD BE ALLOWED. 3. IN THE APPELLATE PROCEEDINGS,AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, FAA HELD THAT DURING THE UNDER CO NSIDERATION, THE ASSESSEE HAD DEBITED RS.64,18,317/- IN ITS PROFIT AND ON ACCOUNT OF LABO UR CHARGES AND HAD CLAIMED TO HAVE PAID RS.54,54,441/- TO HB AS LABOUR CHARGES,THAT DURING THE ENQUIRY MADE UNDER SECTION 133A OF THE ACT R.W.S. 131(1) OF THE ACT SWORN STATEMENT OF THE HB WAS RECORDED BY THE AO,THAT IN HIS SWORN STATEMENT HB CONFIRMED THAT HE HAD NOT WORKED FOR T HE ASSESSEE COMPANY IN THE YEAR UNDER APPEAL,THAT THE STATEMENT OF THE ASSESSEE ABOUT IM POUNDING OF PAPERS BY SURVEY PARTY WAS FACTUALLY INCORRECT,THAT IN THE ABSENCE OF ANY BIL LS ISSUED BY HB THE GENUINENESS OF THE SERVICES RENDERED BY HIM WAS NOT PROVED,THAT THE AO COULD NO T VERIFY ANY BILLS BECAUSE NO SUCH BILLS WERE ISSUED BY HB,THAT THE E AR HAD CONCEDED THAT THE HB HAD NEVER ISSUED THE BILLS AT ALL,THAT HIS PREDECESSOR HAD GIVEN A FINDING OF THE FACT THAT TH E PAYMENTS MADE BY THE ASSESSEE TO HB WERE IN THE EARLIER YEARS AND NOT IN THE YEAR UNDER APPEAL, THAT THERE WERE NO EVIDENCES THAT PAYMENTS IN QUESTION WERE PAID TO HB, THAT NO CONFIRMATION OF H B HAD BEEN FURNISHED BY THE ASSESSEE,THAT IN ITS STATEMENT HB HAD GIVEN FULL DETAILS OF THE NAT URE OF THE WORK CARRIED OUT BY HIM FOR THE ASSESSEE,THAT IN THE YEAR 2006-07,THAT THE ASSESSEE HAD ALSO CLAIMED EXPENSES PERTAINING TO THE EARLIER YEAR,THAT CLAIM MADE BY THE ASSESSEE WAS N OT SUPPORTED BY ANY BILLS,THAT THE DETAILS OF NATURE OF WORK AND THE EXPENDITURE OF WORK WERE ALS O NOT AVAILABLE,THAT THE EXPENDITURE COULD BE ESTIMATED AFTER OBTAINING THE DETAILS OF NATURE AND THE QUANTUM OF WORK DONE BY THE CONTRACTOR IN COMPLETION OF THE PROJECT.FINALLY,HE HELD THAT THE AO HAD TAKEN A REASONABLE VIEW OF RESTRICTING THE EXPENDITURE TO 50% OF RS. 51,75,224/- AND CALCU LATED IT AT RS. 25,87,612/-, 3 ITA NO. 4614/M/2012 INDERLOK INFRA-AGRO PVT. LTD. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR) SUBMITTED T HAT THE ASSESSEE WAS FOLLOWING PROJECT COMPLETE METHOD,THAT AO HAD NOT POINTED OUT ANY DIS CREPANCY IN THE BOOKS OF ACCOUNTS,THAT BOOKS WERE NOT REJECTED BY THE AO,THAT HE HAD NOT G IVEN ANY BASIS FOR ESTIMATING THE EXPENDITURE,THAT HB HAD WORKED WITH THE ASSESSEE I N THE YEAR 2006-07,THAT ADDITION MADE BY THE AO CONFIRMED BY THE FAA WAS ON HIGHER SIDE.DEPARTME NTAL REPRESENTATIVE (DR) ARGUED THAT ESTIMATE MADE BY THE AO WAS JUSTIFIED AS THE ASSESS EE HAD NOT PRODUCED ANY EVIDENCE BEFORE HIM IN SUPPORT OF THE CLAIM MADE BY IT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE MATTER UNDER APPEAL TRIBUNAL HAD DIRECTED THE AO TO ESTIMATE THE EXPENDITURE REASONABLY,EVEN IF THE ASSESSEE WAS NOT ABLE TO PRODUCE THE BILL.WE F IND THAT NEITHER THE AO NOR THE FAA HAS GIVEN ANY REASON FOR RESTRICTING THE EXPENDITURE AT 50%.I T IS A FACT THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETE METHOD AND AS PER THE METHOD IT HAS TO CON SIDER THE EXPENDITURE IN A PECULIAR MANNER.BY RESTRICTING THE EXPENDITURE TO 50%,AO HAS ADMITTED THAT SOME EXPENDITURE WAS INCURRED BY IT FOR BUSINESS PRUPOSES.IN THE CASE UNDER CONSIDERATION T HE ESTIMATE OF AO HAS BEEN CHALLENGED BY THE ASSESSEE .IT IS A FACT THAT THE AO AND THE FAA HAVE ACCEPTED THAT 50% EXPENDITURE UNDER THE HEAD LABOUR CHARGES WAS JUSTIFIED.IT IS ALSO A FACT THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETE METHOD OF ACCOUNTING. FINALLY,ON COMPLETION OF THE PROJECT,ALL THE EXPENSES HAVE TO BE ACCOUNTED FOR. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION,WE ARE OF THE OPINION THAT END OF JUSTICE WILL MEET,IF THE DISALLOWANCE O F ESTIMATED EXPENDITURE IS RESTRICTED TO 12.5 LAKHS. EFFECTIVE GROUND OF APPEA L FILED BY THE ASSESSEE IS ALLOWED IN PART. AS A RESULT,APPEAL FILE D BY THE ASSESSEE STANDS PARTLY ALLOWED. 2,3 2,3 2,3 2,3 $4, $4, $4, $4, 5 5 5 5 '6 '6 '6 '6 + ++ + 0 0 0 0 1 7 1 7 1 7 1 7 #8, #8, #8, #8, + ++ + , , , , 9: 9:9: 9: . ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH MAY,2014. '1 + ./% ; <'$ 6 , 2014 / + 0 = SD/- SD/- ( . . / H.L.KARWA ) ( ! / RAJENDRA ) / PRESIDENT '# '# '# '# /ACCOUNTANT MEMBER / MUMBAI, <'$ /DATE: 06 . 05.2014 SK '1 '1 '1 '1 + ++ + (,? (,? (,? (,? @?%, @?%, @?%, @?%, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT (A) / A B , 4. THE CONCERNED CIT / A B 5. DR I BENCH, ITAT, MUMBAI / ?C0 (,$ , . . . 6. GUARD FILE/ 0 2 )?, )?, )?, )?, (, (,(, (, //TRUE COPY// '1$ / BY ORDER, D / 9 DY./ASST. REGISTRAR , /ITAT, MUMBAI