DCIT, New Delhi V. M/s. Amrapali Homes, Noida

ITA 5273/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5180 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 26-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA
• Assessee Lawyers: AMIT GOEL ICA SMT NIPUR MITTAL
• Keywords: Validity of assessment; Notional interest
• Section: 143(3); 139

Judgement Text

ITA NO. 5273/DEL/2014 ASSESSMENT Y EAR: 2007 - 08 PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A BENCH NEW DELHI) BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER I N ITA NO. 5273 /DEL/201 4 IN CO NO. 155/DEL/2015 ASSESSMENT YEAR: 20 0 7 - 08 D CIT CENTRAL CIRCLE - 7 , NEW DELHI VS. AMARPALI HOMES, C - 56/40, SECTOR 62, NOIDA (APPLICANT) (RESPONDENT) (PAN: AALFA5526G ) REVENUE BY: S MT. APARNA, CIT DR ASSESSEE BY: SHRI AMIT GOEL, ICA, SMT. NIPUR MITTAL, CA DATE OF HEARING 1 1 / 0 8 /201 7 DATE OF PRONOUNCEMENT 1 8 / 0 8 /201 7 ORDER PER AMIT SHUKLA, JUDICIAL MEMBER : THE AFORESAID APPEAL AND CROSS OBJECTION HAS BEEN FILED BY THE REVENUE AS WELL AS BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 1 0 . 0 7 .20 1 5 , PASSED BY THE LD. CIT (APPEALS) - 1 , NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 1 53C R.W.S. 143(3) FOR THE A.Y. 20 7 0 - 08 . PAGE 2 OF 9 2. WE WILL FIRST TAKE UP THE REVENUE S APPEAL WHEREIN FOLLOWING GROUNDS HAS BEEN RAISED AS UNDER: - 1. THE ORDER OF LD . CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW IN CANCELLING THE ASSESSMENT AND ANNULLING THE ASSESSMENT ORDER ON THE GROUND THAT THE ASSESSMENT ORDER U/ 153C IS TO BE FRAMED WITHIN THE CONFINES OF THE MATERIAL FOUND DURING THE SEARCH. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 71,91,658/ - MADE BY ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INCOME FOUND & SURRENDERE D DURING SURVEY . 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 12,40,000/ - MADE BY ASSESSING OFFICER ON ACCOUNT OF INTEREST FREE LOAN & ADVANCES . 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 3. THE BRIEF FACTS QUA THE ISSUE RAISED ON MERITS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN BUSINESS OF BUILDING, CONSTRUCTION AND DEVELOPMENT OF RESIDENTIAL/COMMERCIAL PROJECTS. THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE U/S 139 ON 30.10.2007 . S UCH RETURN OF INCOME WAS ALSO SUBJECT TO SCRUTINY AND ASSESSMENT U/S 143(3) WAS PASSED VIDE ORDER DATED 29.12.2009. THE LD. ASSESSING OFF ICER IN THE ASSESSMENT ORDER HAS NOTED THAT AN ADDITION OF RS. 71,91,658/ - WAS MADE IN THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) , THEREFORE, T HE SAME ADDITION HAS BEEN REITERATED BY HIM IN THE IMPUGNED ORDER PASSED U/S 143( 3 ) R.W.S. 153C . APART FROM THAT PAGE 3 OF 9 THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE ON ACCOUNT OF PURCHASE SHOWN AT RS. 98,64,89,521/ - , WHICH IS AFTER THE DEDUCTION OF RECOVERY FROM THE MISCELLANEOUS STORE ITEMS AT RS. 10,33,799/ - . IN OTHER WORDS, RECOVERY FROM MISCELLANEOUS ITEMS HAS BEEN REDUCED FROM THE COST OF PURCHASE. SUCH RECOVERY WA S ON ACCOUNT OF SALE OF SCRAP AND OTHER WASTE ITEM WHICH ACCORDING TO ASSESSING OFFICER IS AN INCOME OF THE ASSESSEE AND THE REFORE SAME SHOULD HAVE BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT AND IN NO WAY SHOULD HAVE BEEN SET OFF FROM THE PURCHASES. ACCORDINGLY, HE MADE THE ADDITION OF RS. 10,33,799/ - . LASTLY, ON THE ISSUE OF DISALLOWANCE OF INTEREST, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS GIVEN LO AN / ADVANCES AMOUNTING TO RS. 2,02,31,850/ - WHICH INCLUDED ADVANCE TO TWO PERSONS NAMELY , SMT. PRATIBHA ARORA WHO WAS GIVEN OF RS. 1.50 CRORES AND SMT. SUNITA KUMARI FOR RS. 5 LACS. TH E S E LOANS WERE INTEREST FREE LOANS WHICH WERE OUTSTANDING UP TO A.Y. 2011 - 12. HE OBSERVED THAT THE ASSESSEE HA S NOT CHARGED ANY INTEREST IN RESPECT OF THESE ADVANCES AND AT THE SAME TIME HAS MADE PAYMENT OF INTEREST ON THE BORROWED FUNDS AT RS. 1,08,25,179/ - . THUS, HE HE LD THAT NOTIONAL INTEREST @ 8% ON THE INTEREST FREE ADVANCES AMOUNTING TO RS. 1.55 CRORE IS TO BE COMPUTED WHICH WAS DETERMINED AS RS. 12,40,000/ - AND THE SAME HAS BEEN ADDED ON ACCOUNT OF DISALLOWANCE OF INTEREST. 4. THE LEARNED CIT(APPEALS) HELD THAT F IRSTLY; AS REGARDS THE ADDITION OF RS. 71,91,658/ - ON ACCOUNT OF ALLEGED INCOME FOUND DURING THE COURSE OF SURVEY WHICH WAS MADE IN ORIGINAL ASSESSMENT ORDER , T HIS ADDITION HAS BEEN DELETED BY THE LEARNED CIT(APPEALS) IN THE FIRST APPELLATE ORDER , THEREFOR E, THE EARLIER ASSESSMENT ORDER HAS PAGE 4 OF 9 BEEN SUPERSEDED AND MERGED WITH THE FIRST APPELLATE ORDER , THEREFORE, THERE IS NO QUESTION OF MAKING SAME ADDITION HERE IN THIS ORDER. S ECONDLY , AS REGARD THE ADDITION OF RS. 10,33,799/ - , THE LD. CIT (A) RELYING UPON THE JUDGMENT O F HON'BLE SUPREME COURT IN THE CASE OF CIT VS. PUNJAB STAINLESS STEEL INDUSTRIES IN CA NO. 5592/2008 ( ORDER DATED 10.9.2008 ) HELD THAT IT IS PART OF THE TURNOVER, THEREFORE, THE ACTION OF THE ASSESSING OFFICER CANNOT BE UPHELD . L ASTLY, WITH REGARD TO THE DISALLOWANCE OF INTEREST, HE TOOK NOTE OF THE FACT THAT THE ASSESSEE HA D HUGE AVAILABILITY OF INTEREST FREE FUNDS WHICH IN THE EARLIER YEARS STOOD AT MORE THAN RS. 70.75 CRORES AND IN THE YEAR UNDER CONSIDERATION OF SURPLUS FUND IS AT RS. 10,26,447,001/ - . THEREFORE, DISALLOWANCE OF INTEREST COULD NOT HAVE BEEN MADE. 5 . BEFORE US, THE COUNSEL AT THE OUTSET SUBMITTED THAT SO FAR AS THE ISSUE RAISED IN THE GROUND NO. 1 IS CONCERNED S AME IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN THE ORIGINAL PROCEEDINGS U/S 143( 3 ) WHEREIN THIS ISSUE HAS BEEN DELETED ON MERITS. THEREFORE, THE SAID ADDITION CANNOT BE SUSTAINED IN THE IMPUGNED ASSESSMENT ORDER PASSED U/S 153C/143(3). AS REGAR DS, THE SECOND ISSUE OF ADJUSTMENT OF SALE OF SCRAP AGAINST PURCHASES HE SUBMITTED THAT THIS ISSUE IS AGAIN COVERED BY THE DECISION OF THE TRIBUNAL IN GROUP CONCERN , IN THE CASE OF ULTRA HOME CONSTRUCTION PVT. LTD. , IN ITA NO. 5622 TO 5624 ORDER DATED 19. 2.2016 , WHEREIN THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE. LASTLY, WITH REGARD TO THE DISALLOWANCE OF INTEREST, HE SUBMITTED THAT LOAN/ADVANCE WAS GIVEN IN THE EARLIER YEARS AND EVEN IN THAT YEAR ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS THAN TH E INTEREST BEARING PAGE 5 OF 9 FUNDS WHICH FACT HAS ALSO BEEN NOTED BY THE LEARNED CIT(APPEALS) . T HEREFORE, NO DISALLOWANCE OF INTEREST ON NOTIONAL BASIS CAN BE MADE. 6 . ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT SO FAR AS THE ISSUES OF DISALLOWANCE OF INTEREST IS CONCERNED , NOWHERE THE ASSESSEE HAS ESTABLISHED THAT ADVANCE WAS GIVEN FROM THE INTEREST FREE FUNDS OR IT WAS GIVEN FOR ANY BUSINESS PURPOSE, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE INTEREST. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AS WELL AS MATERIALS PLACED ON RECORD BEFORE US. SO FAR AS THE FIRST ISSUE RELATING TO ADDITION OF RS. 71,91,658/ - MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THIS ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) BEING DIFFERENCE BETWEEN INCOME DECLARED IN THE STATEMENT GIVEN DURING THE COURSE OF SURVEY AND INCOME AS PER THE INCOME TAX RETURN , WE FIND THAT T HIS ISSUE NOW STANDS DECIDED IN FAVOUR OF THE ASSES SEE BY THE TRIBUNAL IN ITA NO. 4779/DEL/2014 VIDE ORDER DATED 18.7.2012 , WHEREIN THE ORDER OF THE LEARNED CIT(APPEALS) DELETING THE SAID ADDITION HAS BEEN CONFIRMED IN SPEAKING ORDER. WHENCE, THE ADDITION HAS BEEN DELETED IN THE ORIGINAL ROUND OF PROCEEDIN GS , T HE N , THERE IS NO REASON TO SUSTAIN SUCH ON ADDITION OR CAN BE REITERATED AGAIN IN THE ASSESSMENT ORDER PASSED U/S 153C/143(3). PAGE 6 OF 9 8. SO FAR AS THE ISSUE OF ADDITION OF RS. 10,33,799/ - , WE FIND THAT THERE IS NO GROUND RAISED BY THE REVENUE ON THIS SCORE . THEREFORE, NO ADJUDICATION IS REQUIRED . HOWEVER, IN ANY CASE , TH IS ISSUE STANDS COVERED BY THIS DECISION OF THE TRIBUNAL AS STATED BY LD. COUNSEL. 9. LASTLY, AS REGARDS THE DISALLOWANCE OF INTEREST ON THE LOANS/ADVANCE GIVEN TO TWO PERSONS AGGREGATING TO RS. 1.55 CRORE, WE FIND THAT THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE AFTER IMPUTING NOTIONAL INTEREST @ 8% ON THE GROUND THAT THE ASSESSEE HAD MADE PAYMENT OF INTEREST ON THE BORROWED FUNDS. THERE IS A CATEGORICAL FINDING BY THE LEARNED CIT(APPE ALS) THAT THE ASSESSEE HA D HUGE INTEREST FREE FUNDS WHICH W E RE IN THE FOLLOWING MANNER: - PARTICULARS AS ON 31.3.2007 (RS.) AS ON 31.3.2006 (RS.) PARTNERS CAPITAL 16 , 74 , 49 , 608 13 , 84 , 41 , 196 ADVANCES FROM CUSTOMERS AGAINST BOOKING 85 , 89 , 97 , 393 61 , 87 , 44 , 790 TOTAL 102 , 64 , 47 , 001 75 , 71 , 85 , 986 THUS, WHEN THE LOAN WAS GIVEN IN THE EARLIER YEAR FOR SUM OF RS. 1.5 5 CRORE, THEN THE ASSESSEE HAD , HUGE INTEREST FREE FUNDS FOR SUMS OF RS. 75.72 CRORES . W HENCE THAT IS SO, THEN NO DISALLOWANCE OF INTEREST CAN BE MADE ON THE GROUND THAT INTEREST BEARING LOANS HAVE BEEN DIVERTED. NOW, THERE ARE CATENA OF JUDICIAL PRECEDENCE LIKE ; CIT VS. RELIANCE UTILITY AND POWER LTD. 313 ITR (BOM) 285 ITR; CIT VS. PREM HEAVY ENGINEERING WORKS PV T. LTD. (2006) 554; CIT VS. TIN BOX COMPANY LTD. 260 ITR 637 (DEL) ; WHEREIN IT HAS BEEN HELD BY THE HON'BLE COURTS THAT WHERE THE ASSESSEE HAS AVAILAB ILITY OF PAGE 7 OF 9 SURPLUS/SUFFICIENT INTEREST FREE FUNDS AND IF INTEREST FREE ADVANCES HAD BEEN GIVEN , THEN SAME SH OULD BE TREATED TO BE FULLY COVERED BY THE AMOUNT OF SUCH INTEREST FREE FUNDS. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILIITIES (SUPRA) HELD THAT WHERE THE FUNDS AVAILABLE BOTH INTEREST FREE AND INTEREST BEARING ARE AVAILABLE, THEN PRESUMPT ION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT. THUS, FOLLOWING THE ABOVE RATIO WHICH IS APPLICABLE HERE ON THE FACTS OF THE ASSE SSEE S CASE ALSO, WE UPHOLD THE ORDER OF THE LEARNED CIT(APPEALS) IN DELETING THE SAID ADDITION . 10. SO FAR AS THE ISSUE RELATING TO VALIDITY OF ASSESSMENT ORDER U/S 153C AS RAISED IN THE GROUND NO. 2 , THE SAME HAS BECOME INFRUCTUOUS BECAUSE W E HAVE ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON MERITS. 1 1 . SIMILARLY, IN THE CROSS OBJECTION THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE NOTICE U/S 153C OF INCOME TAX ACT, 1961, ISSUED IN THIS CASE IS ILLEGAL & WITHOUT JURISDICTION AND ACCORDINGLY, THE SAID NOTICE AND ALSO THE ASSESSMENT ORDER PASSED ON THE FOUNDATION OF SUCH NOTIC E ARE LIABLE TO BE QUASHED. 12. THE SAID GROUNDS TOO HAVE BEEN RENDERED ACADEMIC IN VIEW OF THE FINDINGS GIVEN ABOVE ON MERITS AND THEREFORE, THE CROSS OBJECTION RAISED BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. PAGE 8 OF 9 13 . IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION RAISED BY THE ASSESSEE ARE DISMISSED. ORDER P RONOUNCED IN THE OPEN COURT ON 1 8 . 0 8 .201 7. S D / - S D / - ( L.P. SAHU ) (AMIT SHUKLA) ( ACCOUNTANT MEMBER ) (JUDICIAL MEMBER) DATED: 1 8 . 0 8 .2017 NARENDER COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT (APPEALS) 5) DR: ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON 11 .0 8 .2017 DRAFT PLACED BEFORE AUTHOR 11 . 0 8 .2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. PAGE 9 OF 9 APPROVED DRAFT COMES TO THE SR.PS/PS 1 8 . 8 .2017 KEPT FOR PRONOUNCEMENT ON 1 8 . 8 .2017 FILE SENT TO THE BENCH CLERK 1 8 . 8 .2017 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.