Seedheshwari Builders (Delhi) Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 524/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81595 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 27-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

ITA NO. 524/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 524/DEL/2012 A.Y. : 2006-07 M/S SEEDESHWARI BUILDERS (DELHI) PVT. LTD., 157, GROUND FLOOR, VILLAGE PATPARGANJ, DELHI 110 091 (PAN: AAACS3036R) VS. INCOME TAX OFFICER, CO. WARD 8(1), NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. CHANDRA SHEKHAR, CA DEPARTMENT BY : SH. RAKESH KUMAR, SR. DR DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : 27 2727 27- -- -8 88 8- -- -2014 2014 2014 2014 DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : 29 2929 29- -- -8 88 8- -- -2014 2014 2014 2014 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XI, NE W DELHI DATED 18.5.2010 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING FOR ADD ING BACK THE AMOUNT OF RS. 6,42,427/- IN THE ASSESSMENT ORDER AND SIMILARLY THE LD. CIT(A)-XI HAS MISCONCEI VED THE FACTS AND ITS TREATMENT. HENCE, THE ORDER PASSED IS UNJUSTIFIED. ITA NO. 524/DEL/2012 2 2. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER HAS WRONGLY ADDED THE AMOUNT OF RS. 642,427/- ON ACCOUNT OF LAND BUY BACK PREMIUM LAND BUY BACK PREMIUM LAND BUY BACK PREMIUM LAND BUY BACK PREMIUM WITHOUT CONSIDERING THE FACT THAT THE SAME AMOUNT IS ADDED IN THE VALUE OF STOCK. THEREFORE, ORDER PASSED IS UNJUSTIFIED. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE PAYMENT OF RS. 642,427/- ON ACCOUNT OF LAND BUY BAC K LAND BUY BACK LAND BUY BACK LAND BUY BACK PREMIUM/ SETTLEMENT AMOUNT PREMIUM/ SETTLEMENT AMOUNT PREMIUM/ SETTLEMENT AMOUNT PREMIUM/ SETTLEMENT AMOUNT IS ACTUALLY CAPITALIZED WITHOUT AFFECTING THE PROFIT / LOSS OF THE BUSINESS . HENCE, THE ORDER PASSED IS UNJUSTIFIED AND AGAINST THE FAC TS. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR MODI FY ANY GROUND OF APPEAL AT THE TIME OF HEARING. 3. THE BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF BOOKING/SALE/PURCHASE OF FLATS TO ITS CUSTOMERS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.11.2006 DECLARING TOTAL INCOME AT NIL. THE RETURNED WAS PRO CESSED U/S. 143(1) OF THE ACT AND THEREAFTER THE CASE WAS SELEC TED FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 5.12.08 COMPUTING TOTAL INCOME AT RS. 8,48,180/- AS AGAINS T RETURNED INCOME OF NIL. THE ADDITIONS / DISALLOWANCES INTER ALIA INCLUDE (I) ON ACCOUNT OF LAND BUY BACK PREMIUM (RS. 6,42,427/-). THE ASSESSMENT RESULTED IN A DEMAND OF RS. 3,79,711/-. 4. AGAINST THE ABOVE, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO AFTER ELABORATE DISCUSSION, DECIDED THE APPEA L EXPARTE AND SUSTAINED THE ADDITIONS MADE BY THE AO. 5. LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHO RITIES. ITA NO. 524/DEL/2012 3 6. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE I N SUPPORT OF HIS CONTENTION HAS FILED THE SYNOPSIS. FOR THE SAK E OF CONVENIENCE WE ARE REPRODUCING HERE-BELOW THE SYNOPSIS FILED B Y THE ASSESSEE. THE APPELLANT IS ENGAGED IN THE BUSINESS OF SALE/PURCHASE/BOOKING OF PLOTS / LAND AT ITS PROJEC T SHARAD CITY GHAZIABAD. ISSUE:- THE LD. ASSESSING OFFICER AND LD. CIT(A) HA S DISALLOWED THE LAND BUY BACK PREMIUM / SETTLEMENT AMOUNT CONSIDERING THE APPELLANT HAS CLAIMED IT AS REVENUE EXPENDITURE. LAND BUY BACK PREMIUM/ SETTLEMENT EXPENSES: LAND BUY BACK PREMIUM/ SETTLEMENT EXPENSES: LAND BUY BACK PREMIUM/ SETTLEMENT EXPENSES: LAND BUY BACK PREMIUM/ SETTLEMENT EXPENSES: IT IS THE AMOUNT PAID TO THE CUSTOMERS OVER AND ABOVE TO THE BOOKING AMOUNT RECEIVED EARLIER WHILE REFUNDING THE ENTIRE AMOUNT. WHEN THE CUSTOMER OPTED TO SURRENDER THE BOOKING OF PLOT TO THE COMPANY BEFORE PURCHASE THEN APPELLANT AND CUSTOMER MUTUALLY DECIDE THE PREMIUM AMOUNT IN ACCORDANCE TO THE PREVAILING MARKET RATES. THEN APPELLANT TOOK THE BOOKINGS BACK AND PAID THE LAND BUY BACK PREMIUM / SETTLEMENT AMOUNT TO THE CUSTOMER. THE AMOUNT PAID TO THE CUSTOMER OVER AND ABOVE HIS DEPOSIT AMOUNT IS CONSIDERED IN THE VALUATION OF STOCK IN HAND (PLOT/LAND) (P.6). IF WE COMPARE THE AMOUNT PAID AS PER SETTLEMENT EXPENSES/LAND BUY BACK PREMIUM AMOUNT (P.7) EVERY AMOUNT PAID IS INCLUDED IN THE COST OF CLOSIN G STOCK. THE TOTAL VALUE OF RS 89.51 LACS OF CLOSING STOCK IS ALSO REFLECTED IN THE BALANCE SHEET UNDER ITA NO. 524/DEL/2012 4 SCHEDULE D (P.15) IN OTHER WORDS THE AMOUNT WAS ALREADY CAPITALIZED AND ADDED IN CLOSING STOCK. THIS IS THE NORMAL PRACTICE OF PASSING THE ENTRIES IN THE BOOKS OF ACCOUNTS. ANY AMOUNT INCURRED FOR FIXED ASSET IS NOT ROUTED THROUGH P&L ACCOUNT BUT ANY AMOUNT INCURRED FOR ADJUSTMENT, MODIFICATION AND IMPROVEMENT OF STOCK, IT HAS TO BE ROUTED THROUGH P&L / TRADING / MANUFACTURING ALE. THERE ARE OTHER EXPENSES. ALSO WHICH ARE ROUTED THROUGH P&L A/C SUCH AS FREIGHT, CUSTOM DUTIES, INSURANCE ETC WHICH ULTIMATELY ALLOCATED ON CLOSING STOCK FOR VALUATION. THE APPELLANT CLARIFIED THE ISSUE VIDE LETTER DATED 17/11/2008 (P18) CLAUSE (IV) & (V). THE VALUATION O F STOCK CLEARLY SHOW THAT ALL AMOUNT PAID AS PREMIUM OR SETTLEMENT IS INCLUDED IN THE VALUE OF STOCK. (P 6) & (P7). THE SAME ISSUE WAS RAISED IN THE PREVIOUS ASSESSMENT YEAR I.E. A.Y. 2005-06. THE ORDER WAS PASSED IN FAVOUR OF APPELLANT BY THE ID CIT(A)-XI O N 18/12/2008 (P: 4-5). THE LD AO PASSED THE ORDER OF A.Y. 2006-07 ON 5/12/2008 (I.E. 13 DAYS BEFORE) WITHOUT ANY FINDING. HENCE, THE APPELLANT HAS DEMONSTRATED THAT THE ENTIRE AMOUNT IS CONSIDERED IN CLOSING STOCK AS CAPITAL EXPENDITURE WITHOUT AFFECTING THE PROFIT OF THE APPELLANT. THE FINDING OF LD ASSESSING OFFICER & LD CIT(A) IS FAULTY AND LIABLE TO BE DELETED. ITA NO. 524/DEL/2012 5 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT LD. CIT(A) HAS PASSED THE ORDER EXPART E WITHOUT GIVING SUFFICIENT OPPORTUNITY OF BEING HEARD TO BOTH THE P ARTIES. WE ALSO FIND CONSIDERABLE COGENCY IN SUBMISSIONS OF THE ASS ESSEE MADE IN AFORESAID SYNOPSIS THAT THE PREDECESSOR OF THE PRES ENT LD. CIT(A) IN THE ASSTT. YEAR 2005-06 PASSED THE ORDER ON THE SAM E ISSUE ON 18.12.2008 IN FAVOR OF THE ASSESSEE. IN OUR CONSID ERED OPINION, THE MATTER NEEDS TO BE EXAMINED THOROUGHLY AND LD. CIT( A) SHOULD HAVE PASSED A FRESH ORDER, KEEPING IN VIEW THE SUBMISS IONS MADE BY THE ASSESSEE IN HIS SYNOPSIS AS STATED ABOVE, AND ALSO KEEP IN MIND THE ORDER DATED 18.12.2008 PASSED BY HIS PREDECESSOR. A CCORDINGLY, WE REMIT THE ISSUE, TO THE FILE OF THE LD. CIT(A) TO C ONSIDER THE SAME AFRESH, IN LIGHT OF THE SUBMISSIONS MADE BY THE ASS ESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29/8/2014. SD/- SD/- [ [[ [S.V. MEHROTRA S.V. MEHROTRA S.V. MEHROTRA S.V. MEHROTRA] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 29/8/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 524/DEL/2012 6