PEBBLE BAY DEVELOPERS P.LTD, MUMBAI V. DCIT 13(1)(2), KALYAN

ITA 4890/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3967 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 25-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Keywords: Business expenditure
• Section: 43B; 143(3); 12; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL , AM ./ I.T.A. NO S . 4890 /MUM/2016 ( / ASSESSMENT YEAR S : 2011 - 12 ) M/S. PEBBLE BAY DEVELOPERS P. LTD. RAHEJA CHAMBERS, LINKING ROAD, MAIN AVENUE, SANTACRUZ (WEST) MUMBAI 400054 / VS. DCIT 13(1)(2) 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI ./ ./ PAN/GIR NO. AACCG1645E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI NISHIT GANDHI / RESPONDENT BY : SHRI RAJEEV GUBGOT RA / DATE OF HEARING : 08.08.2018 / DATE OF PRONOUNCEMENT : 31.10 .2018 / O R D E R PER SA KTIJIT DEY , J . M.: TH E AFORESAID APPEAL BY THE ASSESSEE IS AGAINST ORDER DATED 24.05.2016 , OF THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) - 21 , MUMBAI FOR THE ASSESSMENT YEAR 2011 - 12 . 2 ITA NO. 4890 /MUM/2016 PEBBLE BAY DEVELOPERS P. LTD. 2. THE ISSUE OF CHALLENGE IN THE PRESENT APPEAL AS PE R THE CONCISE GROUNDS OF APPEAL IS CONFINE D TO THE ADDITION / DISALLOWANCE OF ` .2,31,76,750/ MADE ON PROTECTIVE BASIS. 3. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPUTE ARE , THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF BUILDER AND REAL EST ATE DEVELOPER. F OR THE ASSESSMENT YEAR UNDER DISPUTE THE ASSESSEE FILED ITS RETURN OF INCOME ON 08.02.2012 DECLARING TOTAL INCOME OF ` .25,99,76,112/ . 4 . DURING THE ASSESSMENT PROCEEDING WHILE VERIFYING THE COMPUTATIO N OF TOTAL INCOME FILED BY THE ASSES SEE ALON G WITH THE RETURN OF INCOME , THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF AN AMOUNT OF ` .2,35,62,535/ TOWARDS AMOUNT DISALLOWED UNDER SECTION 43 B OF THE INCOME TAX ACT, 1961 ( IN SH ORT THE ACT) IN THE PRECEDING YEAR BU T ALLOWABLE IN THIS YEAR. WHEN THE ASSESSING OFFICER CALLED UPON THE ASSESSE E TO JUSTIFY ITS CLAIM OF DEDUCTION , THE ASSESSEE SUBMITTED ITS EXPLANATION JUSTIFYING THE DEDUCTION. THE ASSESSING OFFICER FOUND THAT OUT OF THE TOTAL DEDUCTION CLAIMED BY THE A SSESSEE AN AMOUNT OF ` 2,76,544/ WAS ON ACCOUNT OF BONUS. SINCE , THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE TO DEMONSTRATE THAT THE AMOUNT HAS ACTUALLY PAID , T HE ASSESSING OFFICER DISALLOWED THE AMOUNT OF ` 2,76, 544/ . AS REGARDS THE AMOUNT OF ` .2,31,76, 750/ , THE ASSESSEE SUBMITTED THAT THE AMOUNT WAS PAID TO B RIHAT BANGALORE MAHANAGAR PALIK A (BBMP) ON 26.10.2010 TOWARDS MODIFICATION OF PLANNED SECTION AND OCCUPANCY CERTIFICATE WHICH ARE PART OF PROJECT EXPENSES AT BANGALORE. THE ASSESSING OFFICER AFTER CONSIDERING THE 3 ITA NO. 4890 /MUM/2016 PEBBLE BAY DEVELOPERS P. LTD. SUBMISSIONS OF THE ASSESSEE IN THE CONTE X T OF FACTS AND MATERIAL ON RECORDS OBSERVED THAT THE ASSESSEE HAS NOT BROUGHT ANY EVIDENCE TO PROVE THAT THE SAID AMOUNT WAS DISALLOWED IN ANY OF THE PREVIOUS YEARS. FURTHER, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED ANY COGENT REASON OR JUSTIFICATION FOR ALLOWABILITY OF THE AFORESAID AMOUNT . T HEREFORE, HE AGAIN CALLED UPON THE ASSESSEE TO JUSTIFY WHY THE DEDUCTION CLAIM ED SH OULD NOT BE DISALLOWED UNDER SECTION 43B OF THE AC T. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER , THE ASSESSEE VIDE LET T ER DATED 29.01.2014 , THOUGH , SUBMITTED THAT THE DEDUCTION WAS WRONGLY CLAIMED UNDER SECTION 4 3 B OF THE ACT , H OWEVER, THE ASSESSEE JUSTIFIED THE DEDUCTION CLAIMED BY STATING THAT IT IS ALLOWABLE U/S.36 OF THE ACT. IT WAS SUBMITTED BY THE ASSESSEE , SINCE THE AFORESAID AMOUNT WAS PAID TO BBMP AS PER THE DIRECTION OF HON'BLE HIGH COURT OF KARNATAKA AND IT RELATES TO CONSTRUCTION BUSINESS , IT IS AN ALLOWABLE EXPENDITURE. FURTHE R, THE ASSESSEE SUBMITTED THAT AS PER THE FINAL ORDER OF THE HON'BLE HIGH COURT THE ASSESSEE WOULD BE RECEIVING BACK THE AMOUNT PAID TO BBMP IN A.Y.2014 15 AND ON RECEIPT OF THE SAID AMOUNT IT WILL BE OFFERED AS INCOME IN THE SAID ASSESSMENT YEAR . THE ASSE SSING OFFICER HOWEVER DID NOT FIND MERIT IN THE SUBMISSION OF THE ASSESSEE . H E OBSERVED , SINCE THE ASSESSEE HAS NOT TREATED THE AMOUNT IN DISPUTE AS AN EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT BUT HAS SHOWN IT IN THE A S SET SIDE OF THE BALANCE SHEET UNDE R THE HEAD ADVANCE RECEIVABLE IN CASH AND KIND , THE CLAIM OF DEDUCTION CANNOT BE ALLOW ED . AS REGARDS ASSESSEES CONTENTION THAT THE AMOUNT IN QUESTION WILL BE OFFERED IN A.Y.2014 15 THE ASSESSING OFFICER OBSERVED THAT THE CLAIM OF THE ASSESSEE BEING 4 ITA NO. 4890 /MUM/2016 PEBBLE BAY DEVELOPERS P. LTD. PREMA TURE CANNOT BE ACCEPTED. ACCORDINGLY, HE DISALLOWED AND ADDED BACK THE AMOUNT OF ` .2,31,76,750/ ON PROTECTIVE BASIS. 5 . AFTER RECEIVING THE AFORESAID ASSESSMENT ORDER THE ASSESSEE FILED AN APPLICATION FOR RECTIFICATION UNDER SECTION 154 OF THE ACT S EEKIN G ALLOWANCE OF DEDUCTION CLAIM ED OF ` .2,31,76,750/ . T HE AFORESAID APPLICATION FILED BY THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER ON THE REASONING THAT THERE IS NO MISTAKE APPARENT ON RECORD WITHIN THE MEANING SECTION 154 OF THE ACT. AGAINST THE AFORESAID ORDER OF THE ASSESSING OFFICER ASSESSEE PREFERRED AN APPEAL BEFORE THE F IRST A PPELLATE A UTHORITY. LEARNED CIT(A) WHILE DECIDING THE APPEAL OF THE ASSESSEE HELD THAT THE ISSUE RAISED BY THE ASSESSEE IN THE APPLICATION UNDER SECTION 154 OF THE ACT DOES NOT COME WITHIN THE PURVIEW OF MISTAKE APPARENT ON THE FACE OF RECORD CANNOT BE ENTER TAINED . ACCORDINGLY, HE DISMISSED THE APPEAL OF THE ASSESSEE. 6 . THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED , THE ONLY REASON ON WHICH THE ASSESSING OFFICER DIS ALLOWED CLAIM OF ASSESSEE IS , THE PAYMENT MADE TO B BMP MUST HAVE BEEN SHOWN IN THE P&L ACCOUNT. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED , THE ENTRIES MADE IN THE BOOKS OF ACCOUNT ARE NOT CONCLUSIVE AND ASSESSEES CLAIM OF DEDUCTION HAS TO BE EXAMIN E D KEEPING IN VIEW THE PROVISION OF LAW. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED , THE DEPARTMENT AL AUTHORITIES HAVE NOT DISPUTED THE FACT THAT THE ASSESSEE HAS PAID AN AMOUNT OF ` .2,31,76,750/ AS PER THE DIRECTION OF HON'BLE HIGH COURT OF KARNA TAKA. HE SUBMITTED , THE ASSESSEE HAS BROUGHT EVIDENCE ON RECORD TO DEMONSTRATE THAT THE LIABILITY TO MAKE THE PAYMENT TO BBMP 5 ITA NO. 4890 /MUM/2016 PEBBLE BAY DEVELOPERS P. LTD. ACCRUED IN THE IMPUGNED ASSESSMENT YEAR AND THE AMOUNT WAS ALSO PAID DURING THE RELEVANT PREVIOUS YEAR. THUS , HE SUBMITTED , THE PAYMENT BEING MADE TO BBMP BEING RELAT ED TO CONSTRUCT ION BUSINESS IS ALLOW ABLE AS BUSINESS EXPENSES UNDER SECTION 36 OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED , BY VIRTUE OF FINAL ORDER OF HON'BLE KARNA TAKA HIGH COURT , THE ASSESSEE RECEIV ED BACK THE AMOUNT PAID TO BBMP ON 18.0 3.2014 AND ON RECEIVING THE SAID AMOUNT ASSESSEE OFFERED IT AS INCOME IN THE A.Y. 2014 - 15 . IN SUPPORT OF HIS CONTENTION THE LEARNED AUTHORIZED REPRESENTATIVE DREW OUR ATTENTION TO COPIES OF COMPUTATION OF INCOME AND RETURN OF INCOME FILED FOR THE A.Y. 2014 15. HE SUBMITTED , ASSESSMENT FOR A.Y.2014 15 WAS ALSO COMPLETED UNDER SECTI ON 143(3) OF T H E ACT ASSESSING SUCH INCOME. IN THIS CONTEXT HE DREW OUR ATTENTION TO COPY OF THE ASSESSMENT ORDER DATED 29.12.2016 FOR THE A.Y.2014 15. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED , WHEN THE INCOME HAS BEEN ASSESSED ON SUBSTANTIVE BASIS IN A.Y.2014 15 , THE ADDITION MADE ON PROTECTIVE BASIS IN THE IMPUGNED ASSESSMENT YEAR CANNOT SURVIVE . W ITHOUT PREJUDICE TO AFORESAID SU B MISSION , T HE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE AMOUNT PAID TO BBMP , SINCE , IS RELATED TO THE C ONSTRUCTION BUSINESS , IS ALLOWABLE AS BUSINESS EXPENDITURE . IN SUPPORT OF HIS CONTENTION THE LEARNED AUTHORIZED REPRESENTATIVE RELIED UPON FOLL OWING DECISIONS. 1 . KEDARNATH JUTE MANUFACTURING CO. LTD V/S. CIT. 1971, 82 ITR 363 (SC) 2 . CIT V/S. BHARAT CARBON AND RIBBAN MFG. CO. P. LT D., 1999 239 ITR 505 (SC). 6 ITA NO. 4890 /MUM/2016 PEBBLE BAY DEVELOPERS P. LTD. 3 . MEMA ENGINEERS AND CONTRACTORS PVT. LTD. V/S. ACIT ITA NO. 654/MUM/2011 DATED 13.06.2016. 7 . TH E LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE OBSERVATIONS OF THE CIT(A) AND ASSESSING OFFICER. 8 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. WE HAVE ALSO APPLIED TO THE MIND TO THE DECISIONS RELIED UPON . THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO ALLOWABILITY OF THE AMOUNT OF ` .2,31,76,750/ PAID TO BBMP TOWARDS MODIFICATION OF PLANNED SECTION AND OCCUPANCY CERTIFICATE OF THE BUILDING PROJECT DEVELOPED BY THE ASSESSEE. IT IS ALSO RELEVANT TO OBSERV E , THE AFORESAID AMOUNT WAS PAID BY THE ASSESSEE TO BBMP IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE AS PER THE DIRECTION OF THE HON'BLE KARNATAKA HIGH COURT . IT COULD BE SEEN FROM THE FACTS OF RECORD , IN THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR THE AS S ESSEE CLAIM ED THE AMOUNT PAID TO BBMP AS AN AL LOWABLE DEDUCTION UNDER SECTION 43B . HOWEVER, IN COURSE OF THE ASSESSMENT PROCEEDING THE ASSESSEE MODIF IED ITS STAND BY CLAIMING DEDUCTION ON ACCOUNT OF PAYMENT MADE TO BBMP AS BUSINESS EXPENDITURE UNDER SECTION 36 OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED THE PAYMENT MADE TO BBMP PRIMARILY ON THE GROUND THAT IT WAS NOT ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT . OF COURSE , THE ASSESS ING OFFICER MADE THE DISALLOWANCE / A DDITION ON PROTECTIVE BASIS. IT IS EVIDENT , THOUGH , SUBSEQUENTLY THE ASSESSEE MADE AN A PPLICATION UNDER SECTION 154 OF THE ACT STATING THAT THE AMOUNT HAS ALREADY BEEN AS INCOME FOR A.Y.2014 15 , THEREFORE , 7 ITA NO. 4890 /MUM/2016 PEBBLE BAY DEVELOPERS P. LTD. SEEKING D ELE TION OF THE DISALLOWANCE MAD E IN IMPUGNED ASSESSMENT ORDER. HOWEVER , THE APPLICATION FILED BY THE ASSESSEE W AS REJECTED. IT IS EVIDENT FROM THE ASSESSMENT ORDER , DURING THE ASSESSMENT PROCEEDING THE ASSESSEE HAD CONTENDED THAT BY VIRTUE OF FINAL ORDER PAS SED B Y THE HON'BLE KARNATAKA HIGH COURT, THE BBMP IS DIRECTED TO REFUND BACK THE AMOUNT OF ` .2,31,75,750/ TO THE ASSESSEE. THE ASSESSEE HA D ALSO SUBMITTED BEFORE THE ASSESSING OFFICER THAT AFTER RECEIVING BACK THE AMOUNT WOULD OFFER IT AS INCOME IN A.Y.2 014 15. FROM THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN OF INCOME FOR A. Y. 2014 15 , A COPY OF WHICH IS PLACED IN THE PAPER BOOK , P RIMA FACIE , IT APPEARS THAT AFTER RECEIVING BACK THE AMOUNT OF ` .2,31,76,750/ FROM BBMP ASSESSEE HAS OFFERED IT AS INCOME . IT IS ALSO SEEN THAT ASSESSMENT FOR A.Y. 2014 15 HAS ALSO BEEN COMPLETED UNDER SECTION 143(3) OF THE ACT. IT IS SETTLED LEGAL PRINCIPLE THAT A PARTICULAR ITEM OF INCOME CANNOT BE BROUGHT TO TAX AT THE HAND S OF THE ASSESSEE TWICE . T HEREFORE, IF TH E AMOUNT OF ` .2,31,75,750/ HAS BEEN OFFERED AS INCOME IN THE ASSESSMENT YEAR 2014 15 AND HAS ALSO BEEN ASSESSED TO TAX BY T HE ASSESSING OFFICER IT CANNOT BE BROUGHT TO TAX AGAIN IN THE IMPUGNED ASSESSMENT YEAR. MOREOVER, THERE IS NO DISPUTE THAT IN THE I MPUGNED ASSESSMENT YEAR THE ASSESSING OFFICER HAS ADDED THE AMOUNT OF ` .2,31,76,750/ ON PROTECTIVE BASIS , MEANING THEREBY , THAT THE ASSESSING OFFICER WANTED TO SAFEGUARD THE INTEREST OF REVENUE BY ENSUR ING THAT THE AMOUNT IN DISPUTE IS ASSESSED TO TAX ON SUBSTANTIVE BASIS IN ANY ONE ASSESSMENT YEAR. IF THE ASSESSEE CAN DEMONSTRATE THAT THE AMOUNT OF ` .2,31,76,750/ HAS BEEN ASSESSED TO TAX ON SUBSTANTIVE BASIS IN A.Y.2014 15, THE ADDITION MADE ON 8 ITA NO. 4890 /MUM/2016 PEBBLE BAY DEVELOPERS P. LTD. PROTECTIVE BASIS IN THE IMPUGNED ASSESSMENT YEAR CANNOT SURV IVE. IN VIEW OF THE AFORESAID , WE DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM THAT THE AMOUNT OF ` .2,31,76,750/ PAID TO BBMP ON BEING REFUNDED WAS OFFERED AS INCOME IN A.Y.2014 15 . I N CASE THE AFORESAID CLAIM OF THE ASSESSEE IS FOUND TO BE CO RRECT , THE ADDITION MADE OF ` .2,31,76,750/ ON PROTECTIVE BASIS IN THE IMPUGNED ASSESSMENT YEAR SHOULD BE DELETED. WITH THE AFORESAID OBSERVATION S, GROUNDS RAISED ARE ALLOWED FOR STATISTICAL PURPOSE S . 9 . IN THE RESULT, THE APPEAL IS ALLOWED FO R STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2018 SD/ SD/ ( MANOJ KUMAR AGGARWAL ) (S A KTIJIT DEY ) / A CCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 31.10.2018 MP 9 ITA NO. 4890 /MUM/2016 PEBBLE BAY DEVELOPERS P. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI