ACIT, Ghaziabad V. M/s. S.K. Sharma, Contractor, Ghaziabad

ITA 4729/DEL/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7787 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 29-02-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 29-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BANWAL
• Assessee Lawyers: L M AGGARWAL
• Section: 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4729/DEL/2010 AY: 20 04-05 ACIT, VS S.K. SHARMA, CONTRACTO R, CIRCLE-2, R-11/2, RAJ NAGAR, GHAZIABAD. GHAZIABAD. (PAN: AADFS8630H) ITA NO.4697/DEL/2010 AY: 20 04-05 ITA NO.5236/DEL/2014 AY: 20 05-06 C.O. NO. 378/DEL/2010 (IN ITA NO.4729/DEL/2010) AY: 20 04-05 S.K. SHARMA, CONTRACTOR, VS ACIT, GHAZIABAD. GHAZIABAD. (APPELLANT) (RESPONDEN T) APPELLANT BY : SMT. ANIMA BANWAL, SR. DR RESPONDENT BY : SHRI L.M. AGGARWAL, CA DATE OF HEARING: 29.02.2016 DATE OF PRONOUNCEMENT: 23.05.2016 ORDER PER BENCH I.T.A. NO. 4697/2010 HAS BEEN PREFERRED BY THE ASSE SSEE AGAINST IMPUGNED ORDER DATED 6.8.2010 PASSED BY THE LD. CIT(A), GHAZIABAD FOR ASSESSMENT YEAR 2004-05. I.T.A. 4729 /2010 HAS I.T.A. 4729/D/10, 4697/D/10, 5236/D/14 C.O.378/D/10 ASSESSMENT YEARS: 2004-05, 2005-06 2 BEEN PREFERRED BY THE DEPARTMENT FOR THE SAME YEAR. C.O. 378/2010 IS CROSS OBJECTION FILED BY THE ASSESSEE A GAINST THE DEPARTMENTS APPEAL. I.T.A. 5236/DEL/2014 HAS BEEN PREFERRED BY THE ASSESSEE AGAINST ORDER DATED 3.7.2014 PASSED BY THE LD. CIT(A)-XXIV, NEW DELHI FOR ASSESSMENT YEAR 2005-06. SINCE ALL THESE APPEALS/C.O. WERE HEARD TOGETHER, THE SAME AR E BEING DISPOSED OF THROUGH THIS COMMON ORDER. I.T.A. 4697/2010 2. AT THE OUTSET, THE LD. AR SUBMITTED THAT GROUND NOS. 2, 3 AND 4 OF THE ASSESSEES APPEAL PERTAINING TO INTERE ST PAID ON HOUSING LOAN, INTEREST PAID TO PARTNERS AND DISALLO WANCE U/S 40(A)(3) OF THE ACT WERE NOT BEING PRESSED. HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. THE ONLY EFFECTIVE GROUN D REMAINING FOR ADJUDICATION IS GROUND NO. 1 WHICH IS AS UNDER: - 1. THAT THE LD. CIT(A) ERRED IN LAW BY UPHOLDING THE DISALLOWANCE OF RS. 538042/- BEING EARNEST MONEY FORFEITED BY GIVEN OBSERVATION THAT THE SAME WILL BE ALLOWABLE IN THE A Y 2005-06 WHILE THE ASSESSEE F IRM CORRECTLY CLAIMED THE SAID EXPENSE. 3. IT WAS SUBMITTED THAT THE ASSESSEE FIRM HAD DEBI TED RS. 5,38,042/- IN ITS PROFIT/LOSS ACCOUNT ON ACCOUNT OF EARNEST MONEY FORFEITED. IT WAS SUBMITTED THAT THE ASSESSE E HAD DEPOSITED THE SAID EARNEST MONEY FOR THE WORK TENDE RED, BUT HAD I.T.A. 4729/D/10, 4697/D/10, 5236/D/14 C.O.378/D/10 ASSESSMENT YEARS: 2004-05, 2005-06 3 NOT DEPOSITED PERFORMANCE GUARANTEE OF RS.13,68,303 /- WITH THE P.W.D. (NCTD) AS THE PARTNERS OF THE ASSESSEE FIRM HAD DECIDED TO LEAVE THE WORK UNFINISHED. IT WAS SUBMITTED THAT T HE DECISION TO LET THE SECURITY MONEY BE FORFEITED WAS TAKEN BY TH E PARTNERS ON 29.03.2014 (DATE OF THE RESOLUTION) AND HENCE THIS LOSS WAS DEBITED IN FY 2003-04. HOWEVER, THE ASSESSING OFFI CER WAS OF THE OPINION THAT THE AMOUNT WAS FORFEITED BY PWD ONLY O N 8.4.2004 WHEN THE ASSESSEE FIRM DEFAULTED IN DEPOSITING THE PERFORMANCE GUARANTEE. THE ASSESSING OFFICER FURTHER OPINED TH AT THE DETERMINATION OF FORFEITURE WAS TO BE UNDERTAKEN BY THE BODY AWARDING THE CONTRACT AND NOT BY THE CONTRACTOR. H ENCE, AS PER THE ASSESSING OFFICER, THE EXPENDITURE ACCRUED IN F Y 2004-05 ONLY AND HENCE WAS NOT DEDUCTIBLE IN THE YEAR UNDER CONSIDERATION. ON APPEAL, THE LD. CIT (A) UPHELD T HE CONTENTION OF THE ASSESSING OFFICER AND DISMISSED ASSESSEES A PPEAL. 4. LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES B ELOW. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERU SED THE RELEVANT RECORDS. IT IS SEEN THAT THE LD. CIT (A) HAS ADJUDICATED THE ISSUE ON PAGE 21 PARA 4 OF THE IMPUGNED ORDER. THE SAME IS BEING REPRODUCED HEREIN UNDER FOR READY REFERENCE:- I.T.A. 4729/D/10, 4697/D/10, 5236/D/14 C.O.378/D/10 ASSESSMENT YEARS: 2004-05, 2005-06 4 GROUND NO.4 (B) AGAINST ADDITION OF RS.5,38,042/- : ON THIS ISSUE, I HOLD THAT THE FORFEITURE WAS EFFECTED VID E LETTER OF PWD (NCTD) DATED 26.04.2004, PRODUCED BY THE ASSESSEE ITSELF. AFTER THE DEFAULT OF PERFORMANCE GUARANTEE SCHEME, THE ACCRUAL OF LOSS BY WAY OF FOR FEITURE OF EARNEST MONEY WOULD ARISE ONLY ON THE DATE WHEN THE FORFEITURE HAS BEEN EFFECTED BY THE PWD I.E. THE BO DY WHO AWARDED THE CONTRACT. THE MUTUAL DECISION BY THE PARTNERS OF THE FIRM THAT THE FIRM SHOULD BE READY TO FOREGO THE EARNEST MONEY CANNOT DECIDE THE DATE OF ACCRUAL OF THIS LOSS; BUT ONLY DECIDE THE EVENT OF HAPPENING OF THE LOSS. IT IS CLEAR FROM THE AFOREMENTIONED LETTER DATED 26.04.2004 OF PWD, THE PRINCIPAL DECIDED TO FORFEIT THE EARNEST MONEY OF T HE ASSESSEE FIRM ON 26.04.2004. THUS I HAVE NO DOUBT THAT ALTHOUGH IT IS AN ALLOWABLE BUSINESS LOSS BUT THE S AME HAS TO BE CLAIMED IN ASSESSMENT YEAR 2005-06. IT IS THE LAW OF THE LAND THAT NOT ONLY THE CORRECT AMOUNT OF INCOME SHOULD BE TAXED BUT ALSO IT IS IMPERATIVE TH AT THE SAME IS TAXED IN THE APPROPRIATE ASSESSMENT YEAR AS PER THE NORMS OF ACCOUNTANCY AND THE LAW OF ACCRUAL OF LIABILITY. 5. HAVING GONE THROUGH THE IMPUGNED ORDER, WE ARE O F THE CONSIDERED OPINION THAT THE OBSERVATIONS AND THE FI NDINGS OF THE LD. CIT (A) DO NOT CALL FOR ANY INTERFERENCE. HENC E, WE CONFIRM THE DISALLOWANCE IN THIS YEAR WHILE AGREEING WITH THE O BSERVATIONS OF THE LD. CIT (A) THAT ALTHOUGH THE IMPUGNED DISALLOW ANCE WAS AN ALLOWABLE BUSINESS LOSS, THE SAME HAS TO BE CLAIMED IN ASSESSMENT YEAR 2005-06. WE ACCORDINGLY DISMISS GR OUND NO. 1 I.T.A. 4729/D/10, 4697/D/10, 5236/D/14 C.O.378/D/10 ASSESSMENT YEARS: 2004-05, 2005-06 5 OF ASSESSEES APPEAL. GROUND NO. 5 IS ALSO DISMISS ED AS BEING PREMATURE. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. I.T.A. 4729/DEL/2010 6. AS FAR AS I.T.A. 4729/DEL/2010 IS CONCERNED, THE LD. AR SUBMITTED A CHART SUBMITTING THAT THE DEPARTMENT IS IN APPEAL FOR DISPUTED DELETIONS OF ONLY RS.15,63,676/- ON WHICH THE DISPUTED TAX WILL WORK OUT TO APPROXIMATELY RS. 4,70,000/-. THEREFORE, IN VIEW OF CBDT CIRCULAR NO. 21/2015 DATED 10.12.2015 WHEREIN THE MONETARY LIMIT FOR DEPARTMENTAL APPEALS WAS RAI SED TO RS.10 LAKH, THIS APPEAL OUGHT TO BE DISMISSED. THE LD. D R COULD NOT CONTROVERT THE SUBMISSIONS OF THE LD. AR. WE ACCOR DINGLY DISMISS THE DEPARTMENTS APPEAL AS BEING BELOW THE PRESCRIB ED MONETARY LIMIT. C.O. 378/DEL/2010 7. THE CO OF THE ASSESSEE HAVING BEEN FILED AGAINST THE DEPARTMENTS APPEAL BECOMES IN FRUCTUOUS IN VIEW OF THE DISMISSAL OF THE DEPARTMENTS APPEAL. THE CO OF THE ASSESSEE IS DISMISSED. I.T.A. 4729/D/10, 4697/D/10, 5236/D/14 C.O.378/D/10 ASSESSMENT YEARS: 2004-05, 2005-06 6 I.T.A. 5236/DEL/2014 8. THE EFFECTIVE GROUND IN THIS APPEAL OF THE ASSES SEE PERTAINS TO REJECTION OF THE ASSESSEES APPLICATION U/S 154 OF THE INCOME TAX ACT, 1961 SEEKING DEDUCTION OF EARNEST MONEY FO RFEITED BY THE PWD WHICH THE ASSESSEE HAD CLAIMED AS A DEDUCTION I N ASSESSMENT YEAR 2004-05 BUT WHICH THE LD. CIT (A) H AD OPINED WAS TO BE ALLOWED IN ASSESSMENT YEAR 2005-06. THE ASSESSING OFFICER REFUSED TO ENTERTAIN THE RECTIFICATION APPL ICATION OF THE ASSESSEE U/S 154 OF THE ACT ON THE GROUND THAT IN T HE ORDER OF THE LD. FIRST APPELLATE AUTHORITY FOR ASSESSMENT YEAR 2 004-05, THERE WAS NO DIRECTION U/S 251 OF THE ACT TO GRANT THIS E XPENSE TO THE ASSESSEE. THE LD. CIT (A) IN THE IMPUGNED ORDER HA S ALSO UPHELD THE VIEW OF THE ASSESSING OFFICER. HOWEVER, IN VIE W OF OUR FINDINGS IN I.T.A. NO. 4697/DEL/2010 ON THIS ISSUE THAT THE AMOUNT SHOULD BE DEDUCTED IN ASSESSMENT YEAR 2005-06 AND I N ORDER TO BRING THE ENTIRE CONTROVERSY TO A LOGICAL END, WE D IRECT THE ASSESSING OFFICER TO GIVE BENEFIT OF THIS DEDUCTION TO THE ASSESSEE IN ASSESSMENT YEAR 2005-06. THE APPEAL OF THE ASSE SSEE IS ACCORDINGLY ALLOWED. 9. IN THE RESULT, ITA NO.4697/DEL/2010 , I.T.A. 4729/DEL/2010 & C.O. 378/2010 ARE DISMISSED AND ITA 5236/2014 IS ALLOWED. I.T.A. 4729/D/10, 4697/D/10, 5236/D/14 C.O.378/D/10 ASSESSMENT YEARS: 2004-05, 2005-06 7 ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2016. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT J UDICIAL MEMBER DATED: THE 23 RD OF MAY, 2016 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 4. DR, ITAT BY ORDER ASSTT. REGISTRAR