ITO 20(3)(4), MUMBAI V. SUN DEVELOPERS, MUMBAI

ITA 5017/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9551 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 11-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Additional evidence
• Section: 143(3); 37; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 5017 / MUM/20 1 6 ( ASSESSMENT YEAR : 2007 - 08 ) ITO 20(3)(4) ROOM NO.616, 6 TH FLOOR PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012 V S. M/S. SUN DEVELOPERS 361 - A, JERBAI WADIA ROAD BHOIWADA, MUMBAI 400 002 PAN/GIR NO. ABAFS6419C APPELLANT ) .. RESPONDENT ) REVENUE BY MS. ARJU GARODIA ASSESSEE BY NONE DATE OF HEARING 21 / 08 /201 7 DATE OF PRONOUNCEME NT 13 / 09 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 32, MUMBAI DATED 17/05/2017 IN THE MATTER OF ORDER PASSED U/S.144 R.W.S. 254 OF THE IT ACT. 2. IN THIS APPEAL, FOLLOWING G ROUNDS HAVE BEEN TAKEN BY THE REVENUE: - (1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF AND AMOUNT OF RS. 42,10,0707 - BEING EXPENSES CLAIMED IN NATURE OF CONTINGENT/UNASCERTAINED LIABIL ITIES NOT ALLOWABLE U/S 37 OF THE INCOME TAX ACT, 1961.' (2) 'THE LD, CIT(A) FAILED TO APPRECIATE THE FACTS OF THE CASE PROPERLY AND THE ORDER BASED ON SUCH IMPROPER APPRECIATION OF THE FACTS AND PREVAILING JUDICIAL DECISIONS.' (3) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IGNORED THE FACT POINTED OUT BY THE AO THAT ASSESSEE HAS NOT PAID RENT TO MHADA TILL THE ASSESSMENT ORDER PASSED U/S 144 R.W.S. 254 OF THE IT. ACT, 1961 DATED 24.03.2014.' (4) 'ON THE FACTS AND IN THE C IRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ADMITTING ADDITIONAL EVIDENCE IN CONTRAVENTION OF RULE ITA NO. 5017/MUM/2016 M/S. SUN DEVELOPERS 2 46A AND NOT GIVING SPECIFIC OPPORTUNITY TO THE ASSESSING OFFICER AS REQUIRED UNDER RULE 46A OF THE INCOME TAX RULES.' (5) THE APPE LLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. (6) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 3. NOBODY APPEARED ON B EHALF OF THE ASSESSEE INSPITE OF GIVING OPPORTUNITY. EVEN ON EARLIER OCCASION, APPEAL WAS FIXED ON 04/07/2017, NOBODY APPEARED ON BEHALF OF THE ASSESSEE. ACCORDINGLY, BENCH DECIDED TO DISPOSE THE APPEAL AFTER CONSIDERING THE CONTENTION OF LEARNED DR AND TH E MATERIAL PLACED ON RECORD. 4. FROM THE RECORD WE FOUND THAT THE ASSESSEE FILED RETURN OF INCOME FOR A.Y. 2007 - 08 O 20/11/2007 DECLARING TOTAL INCOME AT RS.44,52,337/ - . SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 31/12/2009 DETERM INING TOTAL INCOME AT RS.86,62,410 / - . IN APPEAL, LD. CIT(A) - 29 HAS DELETED MAJOR ADDITIONS MADE. IN REVENUE APPEAL, HON'BLE ITAT E - BENCH VIDE ORDER NO.ITA NO.5017/M/ 11 AND ITA NO.4709/M/11 DATED 04/01/2013 HAS SET ASIDE THE ISSUE OF EXPENSES CLAIMED IN THE NATURE OF CONTINGENT / UNASCERTAINED LIABILITIES NOT ALLOWABLE U/S 37 OF THE ACT. 5. IN VIEW OF THE ABOVE POSITION, THE SET ASIDE ASSESSMENT PROCEEDINGS WERE INITIATED BY THE A.O. BY ISSUE OF STATUTORY NOTICES, FIXING HEARING ON 18/10/2013, 19/11/2013 AN D 18/12/2013 BUT NONE ATTENDED NOR WERE ANY SUBMISSIONS FILED. THE NOTICE WAS SERVED ALONGWITH QUESTIONNAIRE REQUESTING THE APPELLANT TO FILE THE SUBMISSIONS ON ADDITION MADE AT ITA NO. 5017/MUM/2016 M/S. SUN DEVELOPERS 3 RS.42,10,070 / - BEING EXPENSES CLAIMED IN THE NATURE OF CONTINGENT/UNASCERTAINE D LIABILITIES CLAIMED U/S 37. FINAL SHOW CAUSE WAS ISSUED BY THE A.O. FIXING HEARING ON 18/03/2014 FOR COMPLETING THE ASSESSMENT EX - PARTE U/S 144 OF THE ACT BUT NEITHER THE A SSESSEE NOR HIS AR FURNISHED THE DETAILS CALLED FOR. FURTHER THE A.O. NOTED THAT T H ERE WAS A SURVEY ACTION U/S 133 A AT THE BUSINESS PREMISES OF THE APPELLANT. DURING THE SURVEY, THE A SSESSEE HAD OFFERED THE PROFIT EARNED FROM THE PROJECT NAMELY SUN TOWER AT RS.45,29,685 / - BY FOLLOWING PROJECT COMPLETION METHOD. THE SAME FACT WAS OFFERED TO TAX IN THE RETURN OF INCOME BY THE A SSESSEE . 6. THE A.O IN THE ORIGINAL ASSESSMENT ORDER PASSED U/S 143(3) DATED 31/12/2009 HAD OBSERVED THAT VARIOUS PROVISIONS WERE MADE TOWARDS COST OF DEMOLITION, CONSTRUCTION OF COMPOUND WALL, CONSTRUCTION OF UNCOM PLETED GROUND FLOOR, RAIN WATER DRAINAGE AND MHADA RENT. THE THEN A.O. OBSERVED THAT THE PROVISIONS MADE WERE CONTINGENT IN NATURE AS REAL EXPENDITURE DEPENDS ON SOME FUTURE CLEARANCE FROM THE BMC AS WELL AS THE PROVISION OF RS.37,50,000 / - TOWARDS RENT PAY MENT TO MHADA DEPENDS ON SETTLEMENT OF DISPUTE AND THE LIABILITY WAS NOT AN ASCERTAINED LIABILITY AS ON 31/03/2007 ALTHOUGH THE PROVISION WAS MADE 2 YEARS BACK. THEREFORE, THE THEN A.O. DISALLOWED THE EXPENDITURES AS PER THE PROVISION OF SECTION 40(A)(IA). LD. CIT(A) DELETED THE ADDITIONS ON THE GROUND THAT THE EXPENSES, IF ANY, INCURRED IN FUTURE WOULD BE TAXABLE U/S 41 (1) OF THE ACT AND AS PER THE SUBMISSION, IT WAS EVIDENT THAT THERE WAS A CLAIM OF ITA NO. 5017/MUM/2016 M/S. SUN DEVELOPERS 4 RS.45,23,438 / - FROM MHADA. HENCE, THE ADDITION OF RS.37 ,50,000 / - MADE BY THE THEN A.O. WAS DELETED BY LD. CIT(A). HOWEVER , AMOUNT OF RS.42,10,070 / - BEING EXPENSES CLAIMED IN THE NATURE OF CONTINGENT / UNASCERTAINED LIABILITIES NOT ALLOWABLE U/S 37 OF THE IT. ACT. THE IT AT THEN SET ASIDE THE MATTER BACK TO THE AO FOR FRESH CONSIDERATION RESULTING IN THE PRESENT ASSESSMENT. 7. AS THE A SSESSEE DID NOT RESPOND TO THE SET ASIDE ASSESSMENT PROCEEDINGS DESPITE BEING GIVEN NUMBER OF OPPORTUNITIES BY THE A.O., THE A.O. DISALLOWED THE EXPENSES/LIABILITIES TO THE TUNE OF RS.8,00,000 AND MHADA RENT OF RS.37,50,000 AND THE SAME WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 8. BY THE IMPUGNED ORDER, CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: - 5.3 GROUND 3: THIS IS AGAINST THE ACTION OF THE AO IN DISAL LOWING A CLAIM OF RENT FROM I MHADA AGAINST THE APPELLANT. THE MHADA VIDE ITS DEMAND NOTICE DATED 18/09/2006 HAS RAISED A DEMAND OF RS 45,23,438 INCLUDING ARREARS OF RENT, PENALTY AND INTEREST. OUT OF THIS DEMAND, THE APPELLANT HAS MADE A PROVISION OF R S 37,50,000 IN HIS BOOKS. I FIND THAT THE / APPELLANT PAID A SUM OF RS 18,00,000 AS A REGULAR PAYMENT TO MHADA AND THE SAME HAS BEEN ALLOWED AS A DEDUCTION BY THE AO. OVER AND ABOVE THIS AMOUNT, MHADA HAS DEMANDED RS 45,23,438 FROM THE APPELLANT DURING THE PY RELEVANT TO THE AY 2007 - 08. THE APPELLANT SEEMS TO HAVE MADE A PROVISION TOWARDS THE ARREAR OF RENT ALONE AND HAS APPEALED AGAINST THE DEMAND OF MHA DA. ONCE AGAIN, THIS PROVISION IS TO BE ALLOWED AS THE SAME WAS EXISTING DURING THE PY RELEVANT TO T HE AY 2007 - 08, FOLLOWING THE DECISIONS OF THE HON'BLE SUPREME COURT CITED SUPRA. I ALSO FIND THAT MY PREDECESSOR IN OFFICE HAS ALLOWED THIS CLAIM OF THE APPELLANT ON THE SAME FACTS. I THEREFORE DIRECT THE AO TO ALLOW THE DEDUCTION OF RS.37,50,000/ - AS CLAI MED BY THE APPELLANT. GROUND 3 IS ALLOWED. 9. AGAINST THE ABOVE ORDER OF CIT(A) REVENUE IS IN FURTHER APPEAL BEFORE US. ITA NO. 5017/MUM/2016 M/S. SUN DEVELOPERS 5 10. IT WAS ARGUED BY LEARNED DR THAT BY ACCEPTING ADDITION EVIDENCE IN VIOLATION OF RULE 46A AND WITHOUT GIVING OPPORTUNITY TO THE AO, THE CIT(A) HAS DELETED THE ADDITION. 11. AS PER OUR CONSIDERED VIEW, IF ANY ADDITIONAL EVIDENCE IS FILED BEFORE THE CIT(A) UNDER RULE 46A, IT IS INCUMBENT ON THE CIT(A) THAT AO SHOULD BE GIVEN DUE OPPORTUNITY TO VERIFY THE SAID ADDITIONAL EVIDENCE AND ONLY AFTER CONSIDERING HIS REPORT ON THE ADDITIONAL EVIDENCE, THE CIT(A) MAY DECIDE THE ISSUE. HOWEVER, IN THE INSTANT CASE, EVEN DURING THE COURSE OF RE ASSESSMENT PROCEEDINGS, THE ASSESSEE DID NOT APPEAR BEFORE THE AO INSPITE OF GIVING VARIOUS OPPORTUNITIES AND THE CIT(A) HAS DELETED THE ADDITION BY ACCEPTING ADDITIONAL EVIDENCE AND WITHOUT GIVING AN OPPORTUNITY TO AO TO EXAMINE THE SAME AND GIVE HIS REPORT THERE ON. 12. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE CIT(A) AND AGAIN RESTORE THE MATTER B ACK TO THE FILE OF THE AO FOR DECIDING AFRESH AFTER CONSIDERING THE ADDITIONAL EVIDENCE FILED BEFORE THE CIT(A). ASSESSEE IS ALSO DIRECTED TO APPEAR BEFORE THE AO WITHIN A PERIOD OF 60 DAYS FROM THE DATE OF RECEIPT OF THIS ORDER. 13. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 13 / 09 /2017 S D/ - ( SANDEEP GOSAIN ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MU MBAI ; DATED 13 / 09 /201 7 KARUNA SR. PS ITA NO. 5017/MUM/2016 M/S. SUN DEVELOPERS 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//