The DCIT, 1(1), Indore V. M/s Deepak Colonisers P. Ltd., Indore

ITA 485/IND/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1509 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 03-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S N AGRAWAL ALONG WITH SHRI
• Keywords: Rejection of books of accounts; Business income
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.485/IND/2012 A.Y. 2007-08 DCIT 1(1) INDORE :: APPELLANT VS M/S DEEPAK COLONISERS P. LTD. INDORE PAN AABCD 5829Q :: RESPONDENT APPELLANT BY SHRI R.A. VERMA RESPONDENT BY SHRI S.N. AGRAWAL ALONG WITH SHRI PANKAJ MOGRA DATE OF HEARING 2.1.2013 DATE OF PRONOUNCEMENT 14 .1.2013 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE REVENUE IS AGGRIEVED WITH THE ORDER DATED 22. 6.2012 OF THE LEARNED CIT(A), INDORE, ON THE GROUND THAT THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACT T HAT DURING THE YEAR 2 OUT OF THE CONSTRUCTED AREA SOLD AT THE FIRST FLOOR OF THE MALL, THE PRICES ARE DIFFERENT CONTRARY TO THE PRESCRIBED CIR CLE RATES AND IN DIRECTING THE ASSESSING OFFICER TO ADOPT BUSINESS R ESULTS DECLARED BY THE ASSESSEE WITHOUT CONSIDERING THE FLOORWISE RATE S OF THE CONSTRUCTED AREA SOLD TO RELATED AND UNRELATED PART IES. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I R.A. VERMA, THE LEARNED SENIOR DR AND SHRI S.N. AGRAWAL ALONG W ITH SHRI PANKAJ MOGRA, LEARNED COUNSEL FOR THE ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS IN SUPPORT TO THE ASSESSME NT ORDER AND IDENTICAL TO THE GROUND RAISED BY FURTHER SUBMITTIN G THAT THERE IS MUCH DIFFERENCE OF RATES FOR THE FYS 2006-07 WITH T HE RATES OF FY 2005-06. A PLEA WAS ALSO RAISED THAT SOME OF THE A REAS WAS SOLD TO THE RELATED PARTIES AT THE LESSER RATE IN COMPARISO N TO THE OUTSIDE PARTIES FOR WHICH OUR ATTENTION WAS INVITED TO PAGE 2 OF THE ASSESSMENT ORDER ALONG WITH PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31 ST MARCH, 2007 (PAGE 3 OF THE ASSESSMENT ORDER) WHERE IN THE INCOME AND EXPENDITURE CLAIMED BY THE ASSESSEE HAS BEEN MENTIONED. IT WAS ALSO PLEADED THAT BOOK RESULTS W ERE REJECTED BY THE ASSESSING OFFICER BY ADOPTING 6% OF THE TOTAL I NCOME FROM 3 CONSTRUCTION WORK. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER BY CO NTENDING THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS MET OUT T HE OBJECTIONS RAISED IN THE ASSESSMENT ORDER. IT WAS SUBMITTED T HAT THE RATES OF THE PREVIOUS YEAR ARE LESSER IN COMPARISON TO THE R ATES SHOWN IN THE IMPUGNED YEAR. OUR ATTENTION WAS INVITED TO VARIOU S PAGES OF THE PAPER BOOK. FROM PAGE 48 OF THE PAPER BOOK, IT WAS EXPLAINED THAT THE AREA SOLD TO THE RELATED PARTIES WAS NOT FULLY DEVELOPED RATHER DEVELOPMENT EXPENSES WERE PAID BY THE ASSESSEE AND EVEN THE PRICE WAS MORE THAN RS. 100/- PER SQ. FT. TO THE CIRCLE R ATE ANNOUNCED BY THE COMPETENT AUTHORITIES. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THOUGH THE REVENUE HA S PREFERRED FOUR GROUNDS BUT IN OUR VIEW THESE ARE ELABORATIVE ONE/I NTER-CONNECTED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DURING THE YEAR, UNDER CONSIDERATI ON, CONSTRUCTED A COMMERCIAL COMPLEX IN THE NAME OF MANGAL CITY MAL L, DECLARED TOTAL INCOME AT RS.1,75,46,320/- IN ITS RETURN FILE D ON 31.3.2008. THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT ON THE TOTAL 4 INCOME AT RS.2,69,51,300/-. THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT REJECTED THE BOOKS OF ACCOUNTS OF TH E ASSESSEE AND ESTIMATED THE INCOME OF THE PROJECT BY APPLYING 6% OF THE TOTAL RECEIPTS. THE REVISED INCOME FROM THE HEAD OF BUSI NESS, RENTAL AND CAPITAL GAINS, DECLARED BY THE ASSESSEE IS SUMMARIS ED AS UNDER :- PARTICUALRS BUSINESS RENTAL CAPITAL GAIN AS DECLARED IN THE RETURN 1,81,07,183 ( - ) 41,24,272 1,77,36,431 ADJUSTMENT ON ACCOUNT OF INTEREST ( - )54,70,160 (+) 54,70,160 NIL ON A/C OF OTHER EXP. ( - )32,94,236 (+) 32,94,236 NIL REVISED INCOME 93,42,787 46,40,124 1,77,36,431 THE ASSESSING OFFICER ASSESSED LEASE RENT INCOME FR OM RENTING OUT OF THE PROPERTY UNDER THE HEAD INCOME FROM HOUSE P ROPERTY AGAINST THE CLAIM UNDER THE HEAD BUSINESS INCOME. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE OF FINAN CIAL CHARGES AND HELD THAT THESE WERE INCURRED FOR THE PURPOSES OF B USINESS. VARIOUS ADDITIONS/DISALLOWANCES MADE BY THE LEARNED ASSESSI NG OFFICER ARE SUMMARISED AS UNDER :- 5 PARTICUALRS INCO ME RETURNED (IN RS.) INCOME ASSESSED (IN RS.) NET INCOME FROM BUSINESS 20,60,611 59,68,601 (ESTIMATED) INCOME FROM HOUSE PROPERTY NIL 54,96,991 TOTAL (A) 20,60,611 1,14,65,592 LONG TERM CAPITAL GAIN (B) 1,54,85,707 1,54,85,707 TOTAL INCOME (A + B) 1,75,46,318 2,69,51,299 THE ADDITIONS AND THE DISALLOWANCES MADE BY THE LEA RNED ASSESSING OFFICER ARE ON THE PLEA THAT THE ASSESSEE SOLD SHOP S/OFFICES AT THE LOWER RATES ON DIFFERENT FLOORS AND THE RATES ARE T OWARDS LOWER SIDE IN THE A.Y. 2007-08 IN COMPARISON TO A.Y. 2006-07. THE ASSESSING OFFICER HAS ALSO RAISED A SUSPICION THAT THE SALE M ADE TO THE RELATIVES IS TOWARDS LOWER SIDE IN COMPARISON TO OU TSIDE PARTIES. ANOTHER OBJECTION RAISED BY THE ASSESSING OFFICER I S THAT ON THE SAME FLOOR THE RATES ARE DIFFERING AND THE SALE PRI CES OF ALL THE OFFICES/SHOPS LOCATED AT DIFFERENT LOCATIONS SHOULD HAVE BEEN UNIFORM. FOR FAIR CONCLUSION OF THE ISSUE, IT IS OU R BOUNDEN DUTY TO ANALYSE THE RATES, THEREFORE, THE COMPARATIVE CHART OF THE AREA SOLD IS AS UNDER :- 6 ASSESSMENT YEAR 2006-07 ASSESSMENT YEAR 2007-08 PARTICULERS AREA SOLD RATE SALE VALUE AREA SOLD RATE SALE VALUE LOWER GROUND FLOOR 249 949 2,36,301 20,886 1,307 2,09,46,016 UPPER GROUND FLOOR 6,018 1,285 78,51,670 14,786 1,307 1,93,27,731 FIRST FLOOR 1,617 1,116 18,04,572 175 1,196 2,09,300 1,279 1,161 14,84,919 176 1,136 1,99,936 3,256 1,116 36,33,696 20,362 967 1,96,90,054 2ND FLOOR NIL 12,003 NIL 35,112 813.7 2,85,70,900 3 RD FLOOR NIL NIL NIL 12,003 670 80,42,030 4RTH FLOOR NIL NIL NIL 13,221 670 88,58,092 5 TH FLOOR NIL NIL NIL 10,808 670 72,41,387 TOTAL 7,884 98,92,543 1,32,064 11,82,04,805 IN TERMS OF PERCENTAGE 5.63% 94.36% BEFORE US, THE ASSESSEE HAS CHALLENGED ESTIMATION O F BUSINESS INCOME AT 6% OF THE CONSTRUCTION RECEIPTS. WE FIND THAT FOR THE PRICE PER SQUARE FEET FOR F.Y. 2005-06, THE CORRECT FIGUR E IS RS.1254/- PER SQ. FT. WHICH HAS BEEN WRONGLY MENTIONED AT RS. 15 24/- PER SQ.FT. THIS FACTUAL MISTAKE WAS ADMITTED BY BOTH THE SIDES DURING HEARING. IF THE AFORESAID CHART IS ANALYSED, WE FIND THAT FO R THE A.Y. 2006-07 (FY 2005-06) THE ASSESSEE SOLD SHOPS/OFFICES AT LOW ER GROUND FLOOR AND UPPER GROUND FLOORS AS WELL AS FIRST FLOOR. IN COMPARISON TO THE 7 A.Y. 2007-08 THE AREA SOLD IN A.Y. 2006-07 IS QUITE LOW AS THE AREA SOLD IN 2006-07 IS 249 SQ. FT. WHICH IS 20,886 SQ. FT. DURING THE A.Y.2007-08 AND THE RATES ARE IN THE INCREASING TRE ND. LIKEWISE, IN THE UPPER GROUND FLOOR THERE IS MUCH DIFFERENCE IN THE SALE OF THE AREA AND THE RATES ARE ALSO IN INCREASING TREND, TH EREFORE, THE FINDING OF THE ASSESSING OFFICER IS CONTRARY TO FAC TS AS HAS BEEN ALLEGED IN THE ASSESSMENT ORDER. ON THE FIRST FLOOR , THE TOTAL AREA SOLD IS 1617 SQ. FT. AND COMPARATIVELY MORE AREA HA S BEEN SOLD ON THE FIRST FLOOR. THE RATES ARE IN THE INCREASING TR END. SO FAR AS THE AREA SOLD AT RS. 967/- PER SQ. FT. IS CONCERNED, WE FIND THAT THE TOTAL AREA SOLD WAS 20,362 SQ. FT. IS ALSO NOT UNREASONAB LE AS MORE AREA WAS SOLD. IT IS PERTINENT TO MENTION HERE THAT THE BUSINESSMAN KNOWS ITS INTEREST WELL. SO FAR AS SECOND, THIRD, FOURTH AND FIFTH FLOORS ARE CONCERNED, NO AREA WAS SOLD IN THE A.Y. 2006-07. IF SUM AND SUBSTANCE OF THE SALE IS ANALYSED, WE FIND THAT DURING THE A.Y. 2006-07, THE TOTAL AREA SOLD WAS 7,884 SQ.FT. AND T HE TOTAL SALE VALUE IS ONLY RS. 98,92,543/- WHEREAS IN THE A.Y. 2007-08 THE AREA SOLD IS 1,32,064 SQ. FT. FETCHING THE SALE VALUE OF RS. 11, 82,04,805/-. IF THESE FIGURES ARE ANALYSED IN TERMS OF PERCENTAGE F OR THE A.Y. 2006- 07, IT COMES TO 5.63% AND FOR THE A.Y. 2007-08 IT C OMES TO 94.36%. 8 4. SO FAR AS THE SUSPICION OF THE LEARNED ASSES SING OFFICER THAT THERE IS MUCH DIFFERENCE OF RATES BETWEEN GROUND FL OOR AND UPPER FLOORS IS CONCERNED, IT WAS CLARIFIED BY THE LEARNE D COUNSEL FOR THE ASSESSEE THAT THE RATES ON THE UPPER FLOORS ARE ALW AYS TOWARDS LOWER SIDES AND CANNOT BE COMPARED WITH THE RATES AT GROU ND FLOOR OR FIRST FLOOR. WE FIND FORCE IN THIS EXPLANATION AS THE COM MERCIAL VIABILITY ON THE GROUND FLOOR IS ALWAYS HIGHER WHICH IS NORMA LLY TOWARDS LOWER SIDES ON UPPER FLOORS LIKE THIRD, FOURTH OR F IFTH FLOOR, THEREFORE, THIS SUSPICION OF THE LEARNED ASSESSING OFFICER IS WITHOUT ANY BASIS. 4.1 DURING HEARING THE BENCH RAISED VARIOUS QUERIES TO BOTH THE SIDES AND MORE SPECIFICALLY SOUGHT EXPLANATION FROM THE ASSESSEE ON THE OBJECTIONS RAISED BY THE ASSESSING OFFICER. TH E LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED ON SUCH OBJECTIONS WHICH IS IDENTICAL WITH THE EXPLANATION AS HAS BEEN MENTIONED IN THE I MPUGNED ORDER. WE FURTHER FIND THAT WHILE DISPOSING OF THE APPEAL, THE LEARNED FIRST APPELLATE AUTHORITY HAS ALSO DEALT WITH EACH OBJECT ION RAISED IN THE ASSESSMENT YEAR. TO SUM UP, SO FAR AS THE BUSINESS INCOME FROM CONSTRUCTION ACTIVITIES IS CONCERNED, THERE IS UNCO NTROVERTED FINDING 9 IN THE IMPUGNED ORDER THAT THE ASSESSEE HAS ALREADY CALCULATED HIGHER INCOME FROM SUCH ACTIVITIES IN COMPARISON TO ESTIMATION MADE BY THE ASSESSING OFFICER. SO FAR AS TAXING TH E AMOUNT OF RENTAL INCOME FROM MULTIPLEX AS INCOME FROM HOUSE P ROPERTY AGAINST BUSINESS INCOME OFFERED BY THE ASSESSEE IS CONCERNED, THE REVENUE HAS NOT RAISED SUCH GROUND BEFORE THIS TRIB UNAL, THUS, THE CONCLUSION DRAWN BY THE LEARNED CIT(A) HAS REACHED FINALITY, CONSEQUENTLY, WE REFRAIN OURSELVES IN COMMENTING UP ON THIS ISSUE. FINALLY, THE APPEAL OF THE REVENUE IS HAVING NO ME RIT, CONSEQUENTLY, DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14 TH JANUARY, 2013. SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14 TH JANUARY, 2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-2214