ACIT, Meerut V. Shri. Man Mohan Nath, Meerut

ITA 5115/DEL/2010

• Counselvise Citation: 511520114 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 19-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTHY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI B.C. MEENA ITA NO. 5115/DEL/2010 ASSESSMENT YEAR: 2007-08 ASSISTANT COMMISSIONER OF IT, VS. SH. MAN MOHAN N ATH, CIRCLE 1, 101, SHANTI NIKETEN RD. MEERUT. CIVI LINES, MEERUT (UP). (PAN: AATPN2617H) (APPELLANT) ESPONDENT) DEPARTMENT BY : SMT. S. MOHAN THY, SR.DR ASSESSEE BY : SHRI CS ANAN D, ADV. DATE OF HEARING : 19.12.2011 DATE OF PRONOUNCEMENT : 13.01.2012 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 03.08.2010 PASSED FOR ASSESSMENT YEAR 2007-08. THE SOLITARY GRIEVANCE OF THE OF THE REVENUE IS THAT LE ARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.18,76,868 WHIC H WAS ADDED BY THE ASSESSING OFFICER BY MAKING A DISALLOWANCE OUT OF D EVELOPMENT CHARGES PAID BY THE ASSESSEE ON THE GROUND THAT THESE ARE N OT OF REVENUE NATURE. IN THE GROUND, REVENUE HAS CITED THE JUDGMENT OF HON'B LE GUJARAT HIGH COURT IN THE CASE OF VIKRAM MILLS LTD. VS. CIT (GUJ) 242 ITR 290 AND FURTHER PLEADED THAT IT WAS A PROVISION MADE BY THE ASSESSE E IN THE BALANCE SHEET AND, THEREFORE, IT IS NOT ALLOWABLE. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS FILED ITS RETURN OF INCOME ON 20.3.2008 DECLARING TOTAL INCOME OF RS.11 ,43,343. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) DATED 26.9.2008 WAS ISSUED AND SERVED UPON THE ASSE SSEE. LEARNED ASSESSING OFFICER HAD REPRODUCED THE SUBMISSIONS FILED BY THE ASSESSEE EXHIBITING THE TRADING ACCOUNT PREPARED BY IT REPRESENTING THE SAL E PROCEEDS FROM THE SALE OF PLOT MEASURING 448.73 SQ.MTRS. ASSESSING OFFICER HA S MADE THE ADDITION OF RS.18,76,868. HE WAS UNABLE TO CONSTRUE THE TRUE NA TURE OF THE CHARGES ALLEGED TO HAVE BEEN PAID BY THE ASSESSEE. THE BRIE F SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE CONCLUSIONS OF THE ASSE SSING OFFICER ARE WORTH TO NOTE IN THIS CONNECTION: IN RESPONSE, THE ASSESSEE HAS SUBMITTED THAT THE P LAN WAS SANCTIONED SUBJECT TO DEVELOPMENT CHARGES TO MDA. THE ASSESSEE HAD GOT ISSUED BANK GUARANTEE FOR THE DEVELOPMENT CHARGES IN FAVOU R OF MDA FROM PNB, KAISERGANJ. THE BANK ISSUED PAY ORDER ON 24.05 .2007 IN FAVOUR OF MDA TOWARDS DEVELOPMENT CHARGES SINCE SUCH PAYME NT HAS BEEN MADE PRIOR TO FILING RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS CAPITALIZED RS.18,74,535 TOWARDS D EVELOPMENT CHARGES. ACCORDINGLY, THE PROFIT ARISING FROM ON SA LE OF SUCH LAND HAS BEEN ACCOUNTED FOR AND ASSESSEE HAS CLAIMED PROPORT IONATE EXPENSES FROM LAND SOLD DURING THE YEAR. 3 THE ASSESSEES SUBMISSIONS HAVE BEEN CONSIDERED CAR EFULLY, BUT NOT FOUND TO BE CONVINCING AND TENABLE. THE ASSESSEE H AS NOT EVEN GIVEN THE COMPUTATION OF HOW THE EXPENSES ON DEVELOPMENT CHARGES PAID TO MDA, HAVE BEEN SPREAD OVER THE YEARS FOR THE EXPENS ES CLAIMED PROPORTIONATELY FOR THIS YEAR. AS MENTIONED EARLIER , THE PAYMENT HAS BEEN MADE AFTER THE COMPLETION OF RELEVANT A.Y. SO, THE EXPENSES DO NOT PERTAIN TO THIS YEAR. MOREOVER, NO BREAK UP OF THESE EXPENSES DIVIDED OVER THE YEARS OF PROJECT HAS BEEN SUBMITTE D BY THE ASSESSEE. THEREFORE, THESE EXPENSES CLAIMED CANNOT BE ALLOWED AS EXPENSES PERTAINING TO THIS YEAR. ACCORDINGLY, A DISALLOWANC E OF RS.18,76,868 IS MADE. 3. ON APPEAL, LEARNED FIRST APPELLATE AUTHORITY MAD E A DETAILED ANALYSIS OF THE NATURE OF CONTROVERSY AND HOW ADDITION COULD NOT BE MADE. THE FINDINGS OF THE LEARNED CIT(APPEALS) IN PARAGRAPH 4 .4 READ AS UNDER: 4.4 DECISION AND REASONS THEREFORE: I HAVE GONE THROUGH THE ORDER OF A.O. AND THE SUBMI SSIONS OF AR CAREFULLY. I FIND THAT THE A.O. HAS MISUNDERSTOO D THE FACTS AND THE ASSESSEES SUBMISSIONS RELATING TO THE DEVELOPMENT CHARGES AND ON A/C OF SUCH MISUNDERSTANDING, THE A.O. HAS MADE THE ADD ITION OF RS.18,76,868. I HAVE NOTICED THAT ONE OF THE OBJECT IONS OF THE A.O. IS THAT THE ASSESSEE HAS NOT GIVEN THE COMPUTATION OF HOW THE EXPENSES ON DEVELOPMENT CHARGES PAID TO MIDA HAVE BEEN SPREA D OVER THE YEARS FOR THE EXPENSES CLAIMED PROPORTIONATELY FOR THIS YEAR. THE OTHER OBJECTION OF THE A.O. IS THAT THE PAYMENT HAD BEEN MADE AFTER THE 4 COMPLETION OF RELEVANT ASSESSMENT YEAR, SO THE EXPE NSES DO NOT PERTAIN TO THIS YEAR. IN FACT THE ASSESSEE HAD NOT SPREAD T HE SAID AMOUNT OF DEVELOPMENT CHARGES OVER THE YEARS, BUT HAD SPREAD THE SAID AMOUNT OVER THE AREA OF THE PLOTS ADMEASURING 1950.74 SQ. MTRS. (THE OPENING STOCK AS ON 01.04.2006). SINCE THE TOTAL AMOUNT PAI D TOWARDS DEVELOPMENT CHARGES WAS RS.18,74,535 AND THE TOTAL AREA OF THE PLOTS WAS 1950.74 SQ. MTRS., IT GIVE THE PER SQ. MTR. RAT E OF RS.960.935. REGARDING THE OTHER OBJECTION, I FIND THAT SUCH EXP ENSES PERTAINED TO THE YEAR UNDER CONSIDERATION TO THE EXTENT OF THE L AND SOLD DURING THE YEAR. I HAVE NOTICED THAT THE ASSESSEE HAD IN FACT CLAIMED DEDUCTION ON A/C OF DEVELOPMENT CHARGES PROPORTIONATELY @ RS.960 .935 PER SQ. MTR. ON THE TOTAL LAND SOLD DURING THE YEAR (PLOT AREA 4 48.73 SQ. MTRS.), WHICH WORKED OUT AT RS.4,31,200 ONLY AND NOT RS.18, 76,868 OR RS.18,74,535, AS PRESUMED BY THE A.O. HENCE, I HOLD THAT THE A.O. WAS NOT JUSTIFIED IN MAKING THIS ADDITION OF RS.18, 76,868, BECAUSE THE ASSESSEE HAD NOT CLAIMED DEDUCTION ON A/C OF DEVELO PMENT CHARGES AT RS.18,76,868 OR RS.8,74,535. THE ASSESSEE HAD CLAIM ED PROPORTIONATE DEDUCTION ON A/C OF DEVELOPMENT CHARGES AT RS.4,31, 200 ONLY. I FURTHER HOLD THAT THE ASSESSEE WAS ENTITLED TO THE DEDUCTIO N CLAIMED BY HIM ON A/C OF DEVELOPMENT CHARGES. ACCORDINGLY, THE GROUND S OF APPEAL BEARING NOS. 1 AND 2 ARE ALLOWED. 4. LEARNED DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER WHEREAS LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE OR DER OF THE LEARNED CIT(APPEALS). ON DUE CONSIDERATION OF THE FACTS AN D CIRCUMSTANCES, IT REVEALED THAT THE ASSESSING OFFICER HAS MISERABLY F AILED TO CONSTRUE THE 5 TRANSACTION IN PROPER PERSPECTIVE. HE HIMSELF HAS O BSERVED THAT ASSESSEE HAS CAPITALIZED A SUM OF RS.18,74,535 TOWARDS DEVELOPME NT CHARGES. INSPITE OF THAT HE MADE THE ADDITION ON THE GROUND THAT IT IS A REVENUE EXPENSES WHICH IS CLAIMED BY THE ASSESSEE HOW BOTH THESE THINGS CA N HAPPEN TOGETHER. IF THE DEVELOPMENT CHARGES PAID BY THE ASSESSEE TO THE MDA AND CAPITALIZED IN THE ACCOUNTS, THEN HOW IT WOULD BE TREATED AS A REVENUE EXPENSES FOR MAKING THE DISALLOWANCE. ON THE OTHER HAND, LEARNED FIRST APP ELLATE AUTHORITY HAS OBSERVED THAT ASSESSEE HAS CLAIMED THE DEDUCTION OF THE CHARGES PAID TO THE MDA IN PROPORTIONATE TO THE SIZE OF PLOTS SOLD DURI NG THE YEAR. IN OTHER WORDS, LEARNED FIRST APPELLATE AUTHORITY HAD ARRIVE D AT A CONCLUSION THAT ASSESSEE HAS PAID DEVELOPMENT CHARGES @ 960.935 PER SQ. MTRS. IT ALLOCATED THE EXPENSE TO THE EXTENT AREA SOLD DURING THIS YEA R. THE ASSESSEE HAS SOLD 448.73 SQ.MTRS. IN SUCH SITUATION, THE TOTAL AMOUN T COULD NOT BE DISALLOWED. AFTER PERUSAL OF THE ORDER OF THE LEARNED CIT(APPEA LS) EXTRACTED SUPRA, WE DO NOT FIND ANY ERROR IN IT. CONSEQUENTLY, THE APPE AL OF THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 13.01.201 2 SD/- ( B.C. MEENA ) SD/- ( RAJP AL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 /01/2012 MOHAN LAL 6 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR