M/sTemple Valley Farms & Infrastructure P. Ltd, Cochin V. DCIT, Cochin

ITA 531/COCH/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7552 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 12-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 18-12-2014
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: C B M WARRIER
• Keywords: Cost of acquisition
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NO.531/COCH/2014 ASSESSMENT YEAR : 2010-11 M/S. TEMPLE VALLEY FARMS AND INFRASTRUCTURE P. LTD., CARMEL BUILDINGS, (NEW BLOCK), BANERJI ROAD, KOCHI-682 018. [PAN:AABCT 9747M] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(2), KOCHI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI C.B.M. WARRIER, CA REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 12/01/2016 DATE OF PRONOUNCEMENT 22/01/2016 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE ARISES FROM THE OR DER OF THE LD. CIT(A)-II, KOCHI DATED 25/09/2014 FOR THE ASSESSMENT YEAR 2010 -11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: THE APPELLANT IS M/S. TEMPLE VALLEY FARMS AND INFRA STRUCTURE PVT. LTD., CARMEL BUILDING (NEW BLOCK), BANERJI ROAD, KOCHI, I N REGARD TO THE ASSESSMENT YEAR 2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(2), COCHIN HAS COMPLETED THE ASSESSMENT WI TH AT TOTAL INCOME OF RS.53,08,040/- AND THE COMMISSIONER OF INCOME TA X (APPEALS) HAS CONFIRMED THE ADDITION OF RS.25,00,000/- WHICH IS N OT IN ACCORDANCE TO THE LAW AND FACTS OF THE CASE. I.T.A. NO.531/COCH/2014 2 1. THE ASSESSING OFFICER HAS GONE WRONG IN DISALLOW ING THE DEVELOPMENT EXPENDITURE SPEND BY THE APPELLANT TO THE EXTENT OF RS.25,00,000/- WITHOUT REASON. 2. THE ASSESSING OFFICER HAS GONE WRONG IN NOT CON SIDERING THE SURVEY REPORT OF THE LAND GIVING DETAILS OF THE LAND DEVEL OPMENT REQUIRED AND DONE BY THE APPELLANT. 3. THE ASSESSING OFFICER HAS VISITED THE SITE OF TH E PROPERTY AND CONVINCED HIMSELF ABOUT THE DEVELOPMENT EXPENDITURE , BUT HAS GONE WRONG IN MAKING AN ADHOC ADDITION OF RS. 25,00,000/ - TO THE TOTAL INCOME WITHOUT ANY SPECIFIC REASONS. 4. THE ASSESSING OFFICER HAS DISALLOWED THE DEVELO PMENT EXPENDITURE TO THE EXTENT OF RS.25,00,000/- ON AN ESTIMATED BASIS WITHOUT SUPPORT OF ANY EVIDENCES. THE DISALLOWANCE IS HIGHLY EXCESSIVE AND ARBITRARY AND HENCE THE APPELLANT MAY SUBMIT THE ADDITION TO THE INCOME RS.25,00,000/- MAY BE CANCELLED. 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED HEREINBELOW FOR TH E SAKE OF CONVENIENCE: THE ASSESSEE PURCHASED A CONTIGUOUS AREA OF LAND, EXTENDING 1142.283 CENTS FROM VARIOUS SELLERS, DURING THE FINANCIAL YE ARS 2006-07 AND 2007- 08, AT A TOTAL COST OF RS.1,30,538/-. ASSESSEE HAS CLAIMED A TOTAL OF RS.1,72,42,073/- AS DEVELOPMENT COST TOWARDS IMPROV ING THE LAND. IT WAS EXPLAINED THAT THE LAND PURCHASED WAS AN ABANDONED BRICK LINE FROM WHERE CLAY WAS EXTRACTED, AND REQUIRED EXTENSIVE FI LLING TO BRING OUT THE LAND INTO USABLE CONDITION. IT WAS CLAIMED THAT, AS SESSEE HAS PURCHASED LANDFILL MATERIAL FROM VARIOUS CONSTRUCTION SITES A ND WASTE MUD FROM DIFFERENT PARTIES, AND USING LABOUR. SOME OF THE LA ND WAS FILLED AND INCURRED A TOTAL COST OF RS. 1,72,42,073/-. OUT OF THE TOTAL AREA OF 1142.283 CENTS, ASSESSEE SOLD 565.340 CENTS DURING THE PREVIOUS YEAR RELEVANT TO AY 2010-11, FOR RS.1,83,70,000/-. ASSES SEE HAS APPORTIONED THE EXPENSES INCURRED PROPORTIONATE TO THE LAND SOL D AND COMPUTED AN INCOME OF RS.28,08,037/-, FOR AY 2010-11, AFTER DED UCTING THE ADMINISTRATIVE EXPENSES AND FILED THE RETURN OF INC OME ON 31/03/2012. 2. SINCE THE INCOME RETURNED WAS MORE THAN RS.15,00 ,000/-,THE JURISDICTION LIES WITH CIRCLE-2, RANGE-4, KOCHI AND THE ASSESSMENT WAS TRANSFERRED TO THIS CIRCLE. NOTICE U/S. 142(1) WAS ISSUED ON 21/08/2012. I.T.A. NO.531/COCH/2014 3 THE MANAGING DIRECTOR OF THE COMPANY SHRI T.P. MURA LEEDHARAN ALONG WITH SHRI C.B.M. WARRIER ATTENDED THE HEARING. 3. THE PROPORTIONATE SHARE OF DEVELOPMENT EXPENDITU RE CLAIMED FOR THE PROPERTY SOLD DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2010-11, WAS RS.85,33,466/-. ASSESSEE HAS PRODUCED BILLS AND VOU CHERS OF PURCHASE OF LANDFILL MATERIALS AND LABOUR ENGAGED. ON VERIFICAT ION, IT WAS SEEN THAT ALL BILLS WERE NOT PROPERLY SIGNED AND NAME AND ADDRESS OF THE PARTIES WERE NOT CLEAR. IT WAS EXPLAINED THAT SINCE THE LANDFILL MATERIALS WERE SOURCED FROM MULTIPLE PARTIES, AND LABOURS WERE ENGAGED AS PER AVAILABILITY, PROPER BILLS/VOUCHERS WERE NOT AVAILABLE. VIDE LETTER DATE D 17/01/2013 ASSESSEE WAS REQUESTED TO FURNISH DETAILS OF WAGES PAID WITH NAME AND ADDRESS OF THE LABOR CONTRACTORS AND TOTAL AMOUNT PAID TO EACH CONTRACT. ASSESSEE WAS ALSO ASKED TO FURNISH THE DETAILS OF PURCHASE O F LANDFILL MATERIALS, TYPE OF LANDFILL AND ITS SOURCE, NAME AND ADDRESS OF THE SUPPLIER, INCLUDING THE PAYMENTS MADE TO EACH SUPPLIER. BUT ASSESSEE FAILE D TO PRODUCE ANY OF SUCH DOCUMENTS 4. I HAVE VISITED THE SITE AND IT WAS EXPLAINED BY THE MANAGING DIRECTOR THAT THE PARTY WHO PURCHASED THE LAND FROM ASSESSEE HAS NOT MADE ANY IMPROVEMENT SINCE THEIR PURCHASE, WHICH MEANS THE P RESENT STATUS OF THE LAND IS EXACTLY SAME AS AT THE TIME OF TRANSFER BY THE ASSESSEE. ON SITE INSPECTION, IT WAS GATHERED THAT A PORTION OF THE L AND WAS FILLED BUT THE DEVELOPMENT MADE IS NOT COMMENSURATE TO THE AMOUNT ASSESSEE CLAIMED TO HAVE SPEND (RS.17,72,42,073 FOR ENTIRE PARCEL OF THE LAND. NOTHING WAS VISIBLE THERE WHICH JUSTIFIES THE EXPENDITURE OF TH IS HUGE AMOUNT. THIS ALONG WITH THE FAILURE OF ASSESSEE TO PRODUCE THE D ETAILS OF SOURCE OF LANDFILL MATERIAL AND LABOUR EMPLOYED OF DEVELOPMEN T EXPENDITURE CONFIRM THE FACT THAT THE ENTIRE LAND DEVELOPMENT EXPENDITU RE IS NOT GENUINE. IN ORDER TO DISCOUNT THE IMPROPER VOUCHERS FAILURE OF THE ASSESSEE TO PRODUCE FULL DETAILS AN ADDITION OF RS.25,00,000/- IS MADE TO THE TOTAL INCOME. 4. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER. 5. THE LD. COUNSEL FOR THE ASSESSEE, SHRI C.B.M . WARRIER, CA ARGUED THAT THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4(2), KOCHI HAS COMPLETED THE ASSESSMENT WITH AN ADDITION OF RS.25 LAKHS TO T HE INCOME RETURNED. I.T.A. NO.531/COCH/2014 4 THE ASSESSEE PURCHASED 1142.283 CENTS OF LAND AT DE SOM, CHENGAMANAD VILLAGE, NORTH OF ALUVA DURING THE ASSESSMENT YEAR 2006-07 AND 2007-08 FOR A TOTAL PURCHASE PRICE OF RS.1,44,30,538/-. THE PRO PERTY PURCHASED WAS THE CLAY FIELDS FROM WHICH CLAY HAS BEEN TAKEN FOR MAKI NG WIRE CUT BRICKS WHICH IS BUILDING CONSTRUCTION MATERIAL BY THE SELLERS. T HE ENTIRE PROPERTY HAS BEEN DUG UP UPTO VARIOUS DEPTHS, RANGING FROM 3-6 METERS . THE AVERAGE PURCHASE PRICE IS RS.12,633/- PER CENT APPROXIMATEL Y. THE PROPERTY COULD BE PURCHASED AT A LOWER PRICE ONLY BECAUSE OF FILLING OF MUD REQUIRED FOR RAISING THE PROPERTY TO ROAD LEVEL. IT WAS SUBMITTED THAT T HE ASSESSEE HAS SPENT RS.1,72,42,073/- FOR THE LEVELING OF THE LAND. THE PROPERTY WAS SURVEYED AND REPORT AND CERTIFICATE FROM THE SURVEYOR WAS OB TAINED WHICH IS PLACED ON RECORD. AVERAGE COST INCURRED PER SQ. FT. IS RS. 35/-. THE RETURN OF INCOME WAS FILED ON 16.03.2012 AFTER THE RECEIPT OF NOTICE U/S. 142(1) ON 21.01.2012. BEFORE FILING RETURN OF INCOME, ON A DI SCUSSION WITH THE ASSESSING OFFICER WHO FOUND THE CLAIM OF EXPENDITUR E EXCESSIVE AND CONSEQUENTLY THE ASSESSEE REDUCED THE EXPENSES TO R S.25/- PER SQ. FT. THE EXPENDITURE INCURRED IS 35X565X432 =85,42,800. AS AGAINST THE ABOVE, AS PER THE RETURN OF INCOME FILED, THE EXPENDITURE TAK EN IS RS.25/SQ. FT. AND THE TOTAL EXPENDITURE IS RS.61,05,672/-. AS A RESUL T, THE ASSESSEE HAS REDUCED THE DEVELOPMENT EXPENDITURE BY RS.24,37,128 /-. THE DEPUTY COMMISSIONER OF INCOME TAX INSPECTED THE PROPERTY A S STATED IN THE ASSESSMENT ORDER IN PARA 4 AND HE WAS CONVINCED ABO UT THE DEVELOPMENT I.T.A. NO.531/COCH/2014 5 DONE BY THE COMPANY. THE LD. COUNSEL FOR THE ASSES SEE ARGUED THAT THE COMPANY PRODUCED ALL THE VOUCHERS FOR THE EXPENDITU RE AND AN AD-HOC ADDITION OF RS.25 LAKHS WAS MADE WITHOUT ANY REASON . IN VIEW OF THE DISALLOWANCE OF EXPENDITURE VOLUNTARILY MADE BY THE ASSESSEE TO THE EXTENT OF RS.24,37,128/-, A FURTHER DISALLOWANCE OF RS.25, 00,000/- WITHOUT ANY CONCRETE EVIDENCE IS UNWARRANTED. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE SURVEY REPORT AND EVI DENCE OF LAND FILLING, THE DISALLOWANCE IS NOT JUSTIFIED AND PRAYED THAT IT MA Y BE CANCELLED. 6. IT WAS FURTHER ARGUED BY THE LD. COUNSEL FO R THE ASSESSEE, SHRI C.B.M. WARRIER, CA THAT THE TOTAL DEVELOPMENT EXPENDITURE OF THE LAND WAS DONE FOR 565.340 CENTS WHICH WAS SOLD IN RESPECT OF WHIC H DEVELOPMENT EXPENDITURE IS IN DISPUTE. REST OF THE LAND IS LYIN G UNFILLED EVEN AS ON DATE. THE ASSESSEE HAS PRODUCED BILLS AND VOUCHERS WHICH WERE AVAILABLE BEFORE THE ASSESSING OFFICER BUT THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE SAID BILLS AND VOUCHERS. ACCORDINGLY, THE ASSESSEE SUBMITTED THE REPORT OF A FIRST GRADE SURVEYOR PLACED ON RECORD AT PB PGS. 3 &4 WHO VALUED THE COST AT RS.2,21,82,480/- ALONGWITH THE DRAWINGS OF THE L AND AT PB PG. 6. THE LD. DCIT HAS CONDUCTED THE INSPECTION AND HAS TAKEN INT O ACCOUNT THE UNSOLD LAND ALSO AND HAS LINKED THE TOTAL DEVELOPMENT EXPE NDITURE OF THE UNFILLED LAND ALSO. WHEREAS AS STATED HEREINABOVE, THE ASSES SEE HAS DEVELOPED ONLY 565.340 CENTS OF LAND WHICH IS THE SUBJECT MATTER O F DISPUTE WITH REGARD TO I.T.A. NO.531/COCH/2014 6 THE DEVELOPMENT EXPENDITURE. THE ASSESSING OFFICER OR THE LD. CIT(A) HAS NOT FOUND ANY DEFECT IN THE SURVEYORS REPORT OR TH E VALUATION MADE BY HIM WHICH ARE SUBMITTED ALONGWITH THE DRAWINGS AT PB PG S. 2 TO 5. IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE AD-HOC ADDITION OF RS.25 LAKHS MADE BY THE ASSESSING OFFICER INSPITE OF THE FACT THAT THE ASSESSEE HAS REDUCED T HE DEVELOPMENT EXPENDITURE TO THE EXTENT OF RS.24,37,128/- AND THA T TOO, BY HAVING DISCUSSIONS WITH THE ASSESSING OFFICER PRIOR TO THE FILING OF THE RETURN AND ACCORDINGLY, THE TOTAL EXPENDITURE CLAIMED WAS ONLY RS.61,05,678/- AS AGAINST THE DEVELOPMENT EXPENDITURE INCURRED DURING THE IMPUGNED YEAR AT RS.85,42,800/-. THEREFORE, FURTHER DISALLOWANCE OF RS.25 LAKHS WILL TANTAMOUNT TO DOUBLE DISALLOWANCE, ONE BY THE ASSES SEE GIVEN IN THE COMPUTATION OF INCOME AVAILABLE AT PB PG. 7 WHICH I S NOT IN DISPUTE AND SECONDLY, BY THE ASSESSING OFFICER HIMSELF WHICH IS NOT PERMISSIBLE IN LAW. ACCORDINGLY, THE LD. COUNSEL FOR THE ASSESSEE PRAYE D TO DELETE THE ADDITION SO MADE. 7. THE LD. DR ON THE OTHER HAND ARGUED THAT THE ASSESSEE HAS NOT PRODUCED PROPER BILLS AND VOUCHERS FOR THE LAND FI LLED AND THE ADDRESSES OF THE SUPPLIERS ETC. AND ACCORDINGLY, PRAYED TO CONFI RM THE ORDER OF THE LD. CIT(A). I.T.A. NO.531/COCH/2014 7 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE FACTS OF THE CASE. THE UNDISPUTED FACTS IN THE PRESENT CASE ARE THAT THE ASSESSEE PURCHASED 1142.283 CENTS OF LAND FROM VARIOUS SOURC ES AT A TOTAL COST OF RS.1,44,30,538/- AND HAS CLAIMED A TOTAL DEVELOPMEN T EXPENDITURE OF RS.1,72,42,073/-. IT WAS ALSO SUBMITTED AT PAGE 1 O F THE ASSESSING OFFICERS ORDER THAT THE LAND PURCHASED WAS AN ABANDONED BRI CK LINE FROM WHERE CLAY WAS EXTRACTED WHICH REQUIRED EXTENSIVE FILLING TO BRING THE LAND INTO USABLE CONDITION AND ACCORDINGLY, THE ASSESSEE PURC HASED THE LANDFILL MATERIAL FROM VARIOUS CONSTRUCTION SITES AND WASTE MUD FROM DIFFERENT PARTIES AND AFTER USING LABOUR, THE LAND WAS FILLED AND TOTAL EXPENDITURE OF RS.1,72,42,073/- HAD BEEN INCURRED. IT IS ALSO AN A DMITTED FACT THAT PROPERTY WAS APPORTIONED AND A PORTION OF THE SAME WAS SOLD WITHIN TWO TO THREE YEARS OF PURCHASE. THE SALE AMOUNT IS ALMOST IS TWICE THE COST OF ACQUISITION INCLUDING THE IMPROVEMENT. SUCH INCREAS E IN SALE PRICE OF LAND CANNOT BE JUSTIFIED WITHOUT INCURRING THE ABOVE MEN TIONED DEVELOPMENT EXPENDITURE. THE ASSESSEE HAS APPORTIONED THE EXPEN SES INCURRED PROPORTIONATE TO THE LAND SOLD AT RS.85,33,466/-. T HOUGH THE ASSESSEE PRODUCED ALL THE BILLS AND VOUCHERS FOR THE PURCHAS E OF LANDFILL MATERIALS AND LABOUR ENGAGED WHICH IN FACT WERE NOT FOUND TO THE SATISFACTION OF THE ASSESSING OFFICER. ACCORDINGLY, AS PART OF EXPLANAT ION TO SATISFY THE ASSESSING OFFICER, THE ASSESSEE CONTACTED A FIRST G RADE SURVEYOR WHO INSPECTED THE SITE SO FILLED AND SUBMITTED THE REPO RT ALONGWITH THE DRAWINGS I.T.A. NO.531/COCH/2014 8 WHICH IS AVAILABLE AT PB PGS.3, 4 & 5. THE VALUATI ON FOR THE TOTAL LAND WAS MADE BY THE SAID SURVEYOR AT RS.2,21,82,480/-. THE ASSESSING OFFICER OR THE LD. CIT(A) HAS NOT POINTED OUT ANY DEFECT IN TH E SAME. MOREOVER, THE ASSESSEE HAS MADE PRIOR DISCUSSIONS WITH THE CONCER NED ASSESSING OFFICER BEFORE FILING THE RETURN OF INCOME AND ACCORDINGLY, IT WAS STATED BY THE ASSESSING OFFICER THAT THE EXPENDITURE IS NOT COMME NSURATE TO THE SIZE OF THE PLOT AND ACCORDINGLY, THE ASSESSEE REDUCED THE DEVELOPMENT EXPENDITURE TO THE EXTENT OF RS.24,37,128/- TO THE SATISFACTION OF THE ASSESSING OFFICER. 9. THE LD. COUNSEL FOR THE ASSESSEE HAS STATED THAT THE LAND SOLD TO THE EXTENT OF 565.340 CENTS HAS BEEN FILLED TO MAKE THE SAME I N A USABLE CONDITION. IT IS ALSO UNDISPUTED THAT THE LAND PURCHASED WAS AN ABAN DONED BRICK LINE FROM WHERE CLAY WAS EXTRACTED WHICH REQUIRED EXTENSIVE F ILLING TO BRING THE SAME INTO A USABLE CONDITION. SUCH EXPLANATION WAS SUBMITTED BEFORE THE ASSESSING OFFICER AVAILABLE AT PAGE 1 OF THE ASSESSING OFFICERS ORDE R IN WHICH NO DEFECT HAS BEEN POINTED OUT. IN SUCH CIRCUMSTANCES AND FACTS OF TH E CASE, WE ARE OF THE VIEW THAT THE EXPENDITURE CLAIMED AT THE RATE RS. 25 PER SQ. FT. AT RS.61,05,672/- IS NOT EXCESSIVE EXPENDITURE AND MAKING A DISALLOWANCE OF RS.25,00,000/- AGAIN ONCE THE ASSESSEE HIMSELF HAS REDUCED THE DEVELOPME NT EXPENDITURE TO THE EXTENT OF RS.24,37,128/- WILL TANTAMOUNT TO DOUBLE DISALLOWANCE WHICH IS NOT PERMISSIBLE IN LAW. ACCORDINGLY, THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING SUCH I.T.A. NO.531/COCH/2014 9 DISALLOWANCE MADE BY THE ASSESSING OFFICER AND ACC ORDINGLY, THE ORDER OF THE LD. CIT(A) IS DIRECTED TO BE REVERSED. THUS ALL THE GRO UNDS OF THE ASSESSEE ARE ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A. NO.531/COCH/2014 IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22-01-20 16. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 22 ND JANUARY, 2016 GJ COPY TO: 1. M/S. TEMPLE VALLEY FARMS AND INFRASTRUCTURE P. L TD., CARMEL BUILDINGS, (NEW BLOCK), BANERJI ROAD, KOCHI-682 018. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4 (2), KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN