M/s Punarvasu Greenfields Private Limited, Hyderabad V. Income Tax Officer(OSD)-2, Central Range-1, Hyderabad

ITA 498/HYD/2014

• Counselvise Citation: 49822514 RSA 2014
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KIRAN KATTA
• Assessee Lawyers: K C DEVADAS
• Keywords: Unexplained investment; Source of fund; Cost of acquisition; Corroborative evidences
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.498/HYD/14 (ASSESSMENT YEAR 2007 - 08) M/S. PUNARVASU GREENFIELDS PVT. LTD., HYDERABAD (PAN AACCP 0279 K) V/S. INCOME TAX OFFICER (OSD) - 2, CENTRAL RANGE - 1, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI K.C.DEVADAS RESPONDENT BY : SHRI KIRAN KATTA DR DATE OF HEARING 18 .0 9 .2014 DATE OF PRONOUNCEMENT 24.09.2014 O R D E R PER P.M. JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) VII, HYDERABAD DATED 28.01.2013, AND THE GROUNDS RAISED THEREIN READ AS UNDER - 1. THE LEARNED CIT(A) - VII, HYDERABAD HAVING FOUND AS A MATTER FACT THAT THE SUM OF RS.2,16,044/ - COULD NOT BE ADDED U/S. 69 OF THE IT ACT OF 1961 ERRED IN GIVING THE FOLLOWING FINDING/DIRECTION WHICH IS NOT NECESSARY FOR THE DISPOSAL OF THE APPEAL AND IS THEREFORE TO BE DELETED. I . THE ORDER OF THE CIT(A) IN GIVING A FINDING/DIRECTION THAT THE ALLOWANCE OF EXPENDITURE AS COST OF ACQUISITION DEVELOPMENT CAN BE TAKEN UP AS AND WHEN THE LANDS ARE SOLD IN A FINDING DIRECTION NOT NECESSARY FOR THE DISPOSAL OF THE APPEAL AND THEREFORE, IS TO BE DE DELETED. I TA NO . 498 /H YD/20 1 4 M/S. PUNARVASU GREENFIELDS PVT. LTD., HYDERABAD 2 II . THE DIRECTION OF THE CIT(A) AT PARAGRAPH 6.4 OF HIS ORDER DIRECTING THE APPELL A N T TO FILE COMPL E TE DETAILS O F THE EXPENSES AND SUPPORTING EVIDENCES TO THE NO T ICE O F THE APP E LLATE AU T HO RI TY BY 15 TH FEBRUARY 2014 IN A F INDING WHICH IS NOT NECESSARY FOR THE DISPOSAL OF THE APPEAL AND THEREFORE TO BE DELETED. 2.. 2. THE ASSESSEE IN THE PRESENT CA S E IS A COMPANY WHICH IS CARRYING ON AGRICULTURAL AND ALLIED ACTIVITIES. IT BELONGS TO ONE OF TH E GROUP CO M PANIES ESTABLISHED BY SHRI B. RAMALINGA R A JU AND HIS FAMILY MEMBERS. THE RETURN O F INCOME F OR THE YEAR UNDER CONSIDE RATIO N WAS FIL E D BY TH E ASSESSEE CO MPANY ON 20.10.2010, DECLARING A TOTAL IN C OM E OF NIL. DURIN G TH E COU R SE OF ASSESSMENT P R O C EEDIN G S, IT WAS F OUND BY TH E ASSESSING OFFICER THAT ADDITION OF R S .2,16 ,044 HAS BEEN MADE BY TH E ASSESSEE COMPANY TO THE FIXED ASSETS DURING THE Y E AR UNDER CONSIDERATION . TH E SAID ADDITION CL A IM E D TO B E ON ACCOUN T O F DEVELOPMENT EXPENSES INCURRED IN R E SP E CT OF LAND COULD NO T BE SUBSTAN T IATED BY TH E ASSESSEE CO M PANY BY FILIN G THE RELEVANT DETAILS OR DOCUMENTARY EVIDE NC E. THE ASSESSING OFFICER , THERE F O R E, TREATED THE SAID ADDITION TO THE FIX ED ASSETS AS UNEXPLAINED INV ESTMENT AND THE AMOUNT OF RS .2,16,044 WAS A D DED BY HIM TO THE TOTAL INCOME IN THE ASSESSMENT COMPLETED UNDER S.143(3) OF THE ACT, VIDE ORDER DATED 24.12.2009 3. AGAIN S T THE ORD E R PASSED BY THE ASSESSING OFFICER UNDER S.143(3) , APPEAL WAS PREFERRED BY TH E ASSESSEE BEFORE THE LEARNED CIT(A) AND THE FOLLO W I N G SUBMISSIONS W E RE MADE ON ITS BEHALF BEFORE TH E LEARNED CIT(A) IN SUPPORT OF THE STAND THAT THE ADDITION M A D E BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED UNEXPLAINED IN VE STMENT WAS NO T SUSTAINABLE - I TA NO . 498 /H YD/20 1 4 M/S. PUNARVASU GREENFIELDS PVT. LTD., HYDERABAD 3 I) THE AO SHOULD HAVE APPRECIATED THAT THE EXPENDITURE RECORDED IN THE BOOKS DOES NOT REPRESENT UNEXPLAINED INVESTMENT. II) THE ASSESSING OFFICER, HAVING NOTICED THE INCREASE IN THE ADDITION TO THE ASSETS AS OBTAINING FROM THE AUDITED F INANCIAL STATEMENTS, SHOULD HAVE ALSO REALISED THAT THIS IS IN FACT A CONFIRMATION OF RECORDING OF ASSETS IN BOOKS AND HENCE IS NOT AN UNEXPLAINED INVESTMENT. III) THE ASSESSING OFFICER SHOULD HAVE REALI S ED THAT IT IS NO T AN EXPENDITURE DEBITED TO THE P & L A CCT AND CLAIMED AS AN EXPENDITURE , FOR IT TO BE DISA L LO W ED. IV) A DEBIT IN THE ASSET ACCOUNT O F THE BOOKS DOES NO T CON S TI T UTE INCOME. 4. THE LEARNED CIT(A) FOUND MERIT IN THE SUBMI S SION S MADE ON BEHALF O F TH E ASSESSEE AND HELD THAT THE ADDITION TO THE FI X ED ASSETS REPRESENTING DEVELOPM E N T EXPENDITURE COULD NO T BE TR E ATED AS UNEXPLAINED, AS THE SAME WAS EXTRACTED FROM APPLICATION OF FUNDS AS APPEARING ON THE ASSETS SIDE OF THE ASSESSEES BALANCE SHEET. HE HE LD THAT THE SOU R CE OF FUN D S FOR MAKING THE INVESTMENT IN ADDITION TO THE FIXED ASSETS, THUS WAS DULY E XPLAINED AND THE S A ME COULD NO T B E TR EA TED AS UN E XPLAIN E D IN VE STMENT OF THE ASSESSEE. HAVING DECIDED THIS ISSUE IN F A VOU R O F THE ASSESSEE, THE LEARNED CIT(A) HOWEVER, PROCEEDED ON A DIFFERENT FOOTING AND HELD T H A T IF THE DEVELOPMENT EXPENSES WERE CAP I TALISED, THE ALLOWABILITY O F THE SAME HAS TO BE CON S I D ERED IN THE SUBSEQUENT RELEVANT YEARS WHEN THE LAND IS SOLD. HE TH E R E FORE, DIRECTED THE ASSESSEE TO FILE THE COMPLETE DETAILS O F THE RELEVANT EXPENSES ALLOWING WITH SUPPORTING EVIDENCE, SO THAT THE CLAIM O F TH E I TA NO . 498 /H YD/20 1 4 M/S. PUNARVASU GREENFIELDS PVT. LTD., HYDERABAD 4 ASSESSEE ON ACCOUNT OF ADDITION TO FIXED ASSETS REPRESENTING COST OF ACQUISITION CAN B E CON S I D ERED IN THE REL E VANT YEAR. 5. AGGRIEVED BY THI S DIRECTION OF THE LEARNED CIT(A), ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL 6 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LEARNED REPR E SENTATIVES OF BOTH THE SIDES, A SI MILAR ISSUE INVOLVING IDENTICAL FACTS HAS COME TO BE DECIDED BY THE SMC BENCH OF THIS TRIBUNAL IN THE CA S E OF OTHER GROUP COMPANIES, VIZ. M/S. MANAS GREENLAND PVT. LTD., HYDERABAD AND TWO OTHERS FOR ASSESSMENT YEAR 2007 - 08, WHEREIN SIMILAR DIRECTIONS GI VEN BY THE LEARNED CIT(A) IN THAT C AS E S , HAVE BEEN SET ASIDE BY THE T RIBUNAL FOR THE FOLLOWIN G REASONS GIVEN IN PARAGRAPH 8 OF ITS ORD E R DATED 14.8.2014 PASSED IN ITA NO S .895, 896 AND 198/HYD/2014 - 8. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PURSED THE RECORD. ADMITTEDLY, ASSESSEES HAVE MADE INVESTMENTS IN FIXED ASSETS AND THE SOURCE OF SUCH INVESTMENTS WAS THE INFLOW AVAILABLE ON THE LIABILITY SIDE OF THE BALANCE SHEET. SINCE THE ASSESSIN G OFFICER HAS NOT PROPERLY APPRECIATED THE FACTS, BEFORE THE LEARNED CIT(A), THE SOURCE WAS EXPLAINED, AND THE SAME WAS ACCEPTED BY THE LEARNED CIT(A). HAVING ACCEPTED THE SOURCE OF FUNDS, THERE CANNOT BE ANY ADDITION MADE IN THIS YEAR AND EVEN IN THE SUB SEQUENT YEAR, I.E. IN THE YEAR OF SALE, THE SOURCE OF INVESTMENT CANNOT BE DISPUTED. THEREFORE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN GIVING DIRECTION TO THE ASSESSING OFFICER TO CONSIDER THE SOURCE OF INVESTMENT IN THE YEAR OF SALE. IN THESE CIRCUMSTAN CES, WE SET ASIDE THE DIRECTIONS OF THE LEARNED CIT(A) AND HOLD THAT IT IS NOT A FIT CASE FOR MAKING THE ADDITION UNDER S.69 OF THE ACT. KEEPING IN VIEW THE DECISION O F THE SMC BENCH OF THIS TRIBUNAL ON SIMILAR ISSUE, WE SET ASI D E THE DIRECTION S G I V E N BY THE LEARNED CIT(A) , FOR CON S I D ERIN G T H E S OU R CES OF INVESTMENTS IN THE Y E AR OF SALE, AND ALLOW THIS APPEAL OF THE ASSESSEE. I TA NO . 498 /H YD/20 1 4 M/S. PUNARVASU GREENFIELDS PVT. LTD., HYDERABAD 5 7. IN THE R E SULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 24.9.2014 SD / - SD/ - ( SAKTIJIT DEY ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 24 TH SEPTEMBER, 2014 COPY FORWARDED TO: 1. M/S. PUNARVASU GREENFIELDS PVT. LTD., PLOT NO.80, ROAD NO.9, JUBILEE HILLS, HYDERABAD 500 033 2 . INCOME TAX OFFICER (OSD) - 2, CENTRAL RANGE - 1, HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) VII , HYDERABAD COMMISSIONER OF INCOME - TAX, CENTRAL RANGE 3, HYD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S