TANVEST Properties, Ernakulam V. ACIT, Ernakulam

ITA 481/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64928 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 13-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VARGHESE
• Assessee Lawyers: A GOPALAKRISHNAN
• Keywords: Principle of natural justice; Capital expenditure

Judgement Text

1 ITA NO.481/COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 481/COCH/2011 (ASSESSMENT YEAR 2007-08) TANVEST PROPERTIES VS THE ADDL.C.I.T., RANGE-2 FLAT NO.12A, EXPRESS ESTATE ERNAKULAM KALOOR, ERNAKULAM-682 017 PAN : AACFT9134G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A GOPALAKRISHNAN RESPONDENT BY : SMT. SUSAN GEORGE VARGHESE DATE OF HEARING : 09-10-2012 DATE OF PRONOUNCEMENT : 16-11-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE TAXPAYER IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME-TAX(A)-II, KOCHI DATED 28-02-2011 AND PERTAI NS TO ASSESSMENT YEAR 2007-08. 2. SHRI A GOPALAKRISHNAN, THE LD.REPRESENTATIVE FOR THE TAXPAYER SUBMITTED THAT THE TAXPAYER IS ENGAGED IN THE BUSINESS OF INVESTMENT I N LANDS AND PROPERTIES. DURING THE ASSESSMENT YEAR 2007-08, THE TAXPAYER INCURRED CAPI TAL EXPENDITURE OF RS.29,47,330 FOR DEVELOPMENT OF THE PROPERTIES. HOWEVER, THE SAID P ROPERTY COULD NOT BE SOLD DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDE R CONSIDERATION. THEREFORE, THE TAXPAYER INCLUDED THE COST OF DEVELOPMENT TO THE VA LUE OF THE CLOSING STOCK AS ON 31-03- 2007. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT THE EXPENDITURE OF RS. 29,47,330 WAS DEBITED TO THE PROFIT & LOSS ACCOUNT AND IT IS IN THE NATURE OF CAPITAL EXPENDITURE. 2 ITA NO.481/COCH/2011 ACCORDING TO THE LD.REPRESENTATIVE, THE TAXPAYER DI D NOT CLAIM THIS EXPENDITURE AS DEDUCTION IN THE COMPUTATION OF TOTAL INCOME. IT W AS ALSO NOT CLAIMED IN THE SUBSEQUENT YEARS, EVEN THOUGH IT WAS DEBITED TO THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31-03-2007. THE LD.REPRESENTATIVE FURTHER SU BMITTED THAT THE ASSESSING AUTHORITY RECORDED THE STATEMENT OF THE PARTNER OF THE FIRM, M/S BACKER DESIGN & BUILDERS BEHIND THE BACK OF THE TAXPAYER. THE COPY OF THE STATEMEN T WAS NOT PROVIDED TO THE TAXPAYER. MOREOVER, NO OPPORTUNITY WAS PROVIDED TO CROSS EXAM INE THE WITNESS. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE STATEMENT R ECORDED FROM THE PARTNER OF M/S BACKER DESIGN & BUILDERS CANNOT BE THE BASIS FOR MA KING THE ADDITION. 3. ON THE CONTRARY, SMT. SUSAN GEORGE VERGHESE, THE LD.DR SUBMITTED THAT VALUATION OF CLOSING STOCK IS DIFFERENT AND DEBIT I N THE PROFIT & LOSS ACCOUNT IS DIFFERENT. THE VERY FACT THAT THE TAXPAYER DEBITED THE EXPENDI TURE IN THE PROFIT & LOSS ACCOUNT SHOWS THAT HE INDIRECTLY CLAIMED THE DEDUCTION. ON A QUERY FROM THE BENCH AS TO WHY OPPORTUNITY WAS NOT GIVEN TO THE TAXPAYER TO CROSS EXAMINE THE WITNESS, THE LD.DR SUBMITTED THAT IN THAT CASE, THE MATTER MAY BE REMA NDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR GIVING AN OPPORTUNITY TO THE TAXPAYER. 4. WE HAVE CONSIDERED THE SUBMISSIONS ON EITHER SID E AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE TAXPAYER CONTEND ED BEFORE THE COMMISSIONER OF INCOME-TAX(A) THAT NO OPPORTUNITY WAS PROVIDED TO T HE TAXPAYER FOR CROSS EXAMINING THE WITNESS. THIS CONTENTION OF THE TAXPAYER WAS REJEC TED BY THE FIRST APPELLATE AUTHORITY ON THE GROUND THAT THE TAXPAYER WAS AWARE THAT THE ASS ESSING OFFICER WANTED TO EXAMINE THE PARTY; HENCE, THERE IS NO QUESTION OF DENYING A NY OPPORTUNITY TO THE TAXPAYER. AT THE BEST IT MAY BE SAID THAT THE TAXPAYER WAS AWARE THAT THE PARTNERS OF M/S BACKER DESIGN & BUILDERS WAS GOING TO BE EXAMINED BY THE A SSESSING OFFICER. ONCE THE ASSESSING OFFICER SUMMONED THE WITNESS AND EXAMINED, AN OPPOR TUNITY SHALL BE GIVEN TO THE TAXPAYER TO CROSS EXAMINE THE WITNESS. THE COMMISS IONER OF INCOME-TAX(A) PROCEEDED ON THE PRESUMPTION THAT IT IS THE TAXPAYERS WITNES S, THEREFORE, THERE IS NO QUESTION OF 3 ITA NO.481/COCH/2011 ANY CROSS EXAMINATION. IF THE WITNESS IS ON THE TA XPAYERS SIDE THEN ALSO THE TAXPAYER SHALL BE GIVEN AN OPPORTUNITY TO EXAMINE IN CHIEF. THE VERY FACT THAT THE TAXPAYER WAS NEITHER ALLOWED TO EXAMINE IN CHIEF NOR IN CROSS EX AMINATION SHOWS THAT THE TAXPAYER HAD NO OCCASION TO GO THROUGH THE STATEMENT RECORDE D BY THE ASSESSING OFFICER. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE STATEMENT RECO RD FROM SHRI ABOO BACKER WAS FURNISHED TO THE TAXPAYER. IN THESE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE WAS A GROSS VIOLATION OF PRINCIP LES OF NATURAL JUSTICE. THIS TRIBUNAL IS THEREFORE OF THE CONSIDERED OPINION THAT THE STATEM ENT RECORDED FROM SHRI ABOO BACKER BY THE ASSESSING OFFICER SHALL BE FURNISHED TO THE TAXPAYER AND AN OPPORTUNITY TO CROSS EXAMINE THE WITNESS MAY ALSO BE GIVEN. 5. IN VIEW OF THE ABOVE, THE ORDERS OF THE LOWER AU THORITIES ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE AS SESSING OFFICER. THE ASSESSING OFFICER SHALL PROVIDE AN OPPORTUNITY TO THE TAXPAYER AFTER FURNISHING THE STATEMENT RECORDED FROM SHRI ABOO BACKER AND OTHER WITNESSES AND THERE AFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY OF HEARING TO THE TAXPAYER. 6. IN THE RESULT, THE APPEAL OF THE TAXPAYER IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH NOVEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 16 TH NOVEMBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH