M/s Matrix Infrastructure, New Delhi V. ITO, New Delhi

ITA 5546/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3627 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure
• Section: 143(3)

Judgement Text

1 ITA NO. 5546/DEL/2013 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.- 5546/DEL/2013 (ASSESSMENT YEA R-2007-08) MATRIX INFRASTRUCTURE C-2/398, JANAKPURI NEW DELHI AANFM1157B (APPELLANT) VS ITO WARD 26(2) NEW DELHI (RESPONDENT) APPELLANT BY SH. SOMIL AGGARWAL, ADV. RESPONDENT BY SH. RAJESH KUMAR, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 31/7/2013 PASSED BY CIT(A)-XXIV-NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) NOT JUSTIFIED IN CONFIRMING PENALTY OF RS. 27,39,410/- IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE IT ACT, 19 61 WHEREAS THE ADDITION MADE BY THE A.O AND CONFIRMED BY THE LD.CI T(A) IS DUE TO DISALLOWING ENTIRE EXPENSES AND ALSO ASSED INTEREST INCOME AS INCOME FROM OTHER SOURCES. 3. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARI NG LOSS OF RS.51,19,900/- FOR THE RELEVANT ASSESSMENT YEAR 2007-08 ON 14/5/20 07. THE ASSESSEE IS A PARTNERSHIP CONCERN CONSISTING OF TWO PARTNERS NAME LY, M/S JRC GRID DATE OF HEARING 28.03.2017 DATE OF PRONOUNCEMENT 03.04.2017 2 ITA NO. 5546/DEL/2013 ENGINEERS (P) LTD. AND M/S CHANDNA DEVELOPERS (P) L TD., A SPECIAL PURPOSE VEHICLE WHICH CAME INTO EXISTENCE ON 28/12/2005 AS PARTNERSHIP DEED. AS PER DEED, THE FIRM IS ENGAGED IN BUSINESS OF CONSTRUCTI ON WORK, ACQUIRING LAND, DEVELOPING AND CONSTRUCTING BUILDINGS ON SUCH LAND. DURING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE ENTERED INTO AN AGREEME NT WITH ARMY WELFARE HOUSING ORGANIZATION (AWHO) FOR PURCHASING 110 ACRE S OF LAND AND BUILDING THE RESIDENTIAL ACCOMMODATION ON THAT LAND FOR AWHO . FOR THIS PURPOSE, AS PER THE AGREEMENT, THE ASSESSEE TOOK ADVANCE OF RS. 13 CRORES FROM AWHO AGAINST THE BANK GUARANTEE OF RS. 13.50 CRORES GIV EN BY THE ASSESSEE. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT, THE A.O NOTED THAT THE ASSESSEE HAS DEBITED RS. 67,36,671/- ON A/ C OF INTEREST PAYMENT ON ADVANCE OF AWHO AND OTHER EXPENSES AGAINST INTEREST INCOME OF RS. 26,43,583/- THEREBY COMPUTING A LOSS OF RS.52,35,79 7/-. DURING THE COURSE OF ASSESSMENT, THE A.O ALSO NOTED THAT THE ASSESSEE FI LED 3 DIFFERENT BALANCE SHEETS, AND P & L ACCOUNT FOR THE RELEVANT PERIOD D URING THE ASSESSMENT PROCEEDINGS. THE A.O REJECTED THE CLAIM OF INTERES T EXPENDITURE ON THE GROUND THAT IT WAS PENAL IN NATURE AND NO TDS WAS DEDUCTED BY THE ASSESSEE BEFORE MAKING THE PAYMENT OF INTEREST TO THE AWHO. THE A. O ASSESSED THE BUSINESS INCOME OF THE ASSESSEE AT NIL ON THE FACT THAT THE LOSS WAS NOT CARRIED FORWARD BY THE ASSESSEE AND THE BOOK RESULTS WERE NOT RELIA BLE. THE A.O ALSO WORKED OUT A SUM OF RS. 38.50 LACS AS INTEREST ACCRUED ON ADVANCE OF RS. 5,50 CRORES GIVEN TO VARIOUS PERSONS. THE A.O ALSO ASSESSED TH E INTEREST INCOME CREDITED BY THE ASSESSEE IN ITS P & L ACCOUNT AS INCOME FRO M OTHER SOURCES INSTEAD OF BUSINESS INCOME CLAIMED BY THE ASSESSEE. THE ASS ESSMENT WAS COMPLETED U/S 143(3) BY THE A.O VIDE ORDER DATED 31/12/2009. THE ADDITION WAS MADE ON ACCOUNT OF TWO HEADS I.E. INTEREST ON FD & UNDIS CLOSED INCOME. THE ASSESSING OFFICER OBSERVED THAT AS PER DOCUMENTS FI LED BY THE ASSESSEE, THE FIRM RECEIVED RS. 13 CRORES ON 4/9/2006 AGAINST WHI CH AN INTEREST OF RS. 69,95,774/- CLAIMED AS INTEREST PAID TO AWHO @ 9.05 . THE ASSESSEE FIRM CLAIMED THAT THE RATE OF INTEREST WAS 9.05% THOUGH IT WAS NOWHERE MENTIONED IN MOU. THE ASSESSEE WAS ASKED TO PRODUCE CERTIFI CATE OF INTEREST AND AS THE 3 ITA NO. 5546/DEL/2013 ASSESSEE WAS NOT LIABLE TO DEDUCT TDS ON PAYMENT OF INTEREST. IN RESPONSE TO ABOVE, NO REPLY HAS BEEN FIELD BY THE ASSESSEE. IN VIEW OF THE ABOVE, THE EXPENSE OF RS. 69,95,774/- DEBITED TO PROFIT AND LO SS ACCOUNT ON ACCOUNT OF INTEREST PAID WAS DISALLOWED. THE A.O ALSO INITIATE D PENALTY PROCEEDINGS U/S 272(1)(C) OF THE IT ACT FOR FURNISHING INACCURATE P ARTICULARS OF ITS INCOME BY THE ASSESSEE. 4. AGGRIEVED BY THE AFORESAID ADDITIONS/DISALLOWANC ES, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE. THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER I N ASSESSING THE INTEREST INCOME OF RS. 26,43,583/- AS INCOME FROM OTHER SOUR CES INSTEAD OF CLAIM OF THE ASSESSEE THAT OF BUSINESS INCOME. HOWEVER, THE CIT( A) DELETED THE NOTIONAL INCOME OF RS. 38.50 LACS COMPUTED BY THE ASSESSING OFFICER AS INTEREST ON ADVANCES MADE BY THE ASSESSEE. SUBSEQUENTLY, ORDER OF THE CIT(A) WAS UPHELD BY THE ITAT. 5. MEANWHILE, THE ASSESSING OFFICER ISSUED A SHOW C AUSE NOTICE UNDER SECTION 271(1)(C) TO THE ASSESSEE FOR FURNISHING EX PLANATION REGARDING INACCURATE PARTICULARS OF INCOME FURNISHED BY THE A SSESSEE. IN REPLY, THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THA T IT HAS SHOWN ALL THE FACTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE ACT OF THE ASSESSEE DOES NOT COME WITHIN THE PURVIEW OF SECTION 271(1)(C) OF THE ACT AS DISALLOWANCE OF EXPENSES DOES NOT AMOUNT TO CONCEALMENT. THE ASSESS ING OFFICER IMPOSED THE PENALTY OF RS. 27,39,410/-. 6. AGGRIEVED BY THE SAID ORDER THE ASSESSEE FILED A PPEAL BEFORE THE CIT(A) WHO DISMISSED THE APPEAL. 7. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS SHOWN ALL THE FACTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE ACT OF THE ASSESSEE DOES NOT COME WITHIN THE PURVIEW OF SECTION 271(1)(C) OF THE ACT AS DISALLOWANCE OF EXPENSES DOES NOT AMOUNT TO CONCEALMENT. 4 ITA NO. 5546/DEL/2013 8. THE LD. DR RELIED UPON THE ORDERS OF THE ASSESSI NG OFFICER AND THAT OF THE CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. IN FACT, THE QUANTUM APPEAL DECIDED BY THE CIT(A) AND BY THE ITA T HAS HELD THAT BUSINESS EXPENDITURE TO THE EXTENT OF RS. 11,42,700/- AND OT HER EXPENSES INCURRED BY THE ASSESSEE FOR PURCHASE OF LAND AND CLAIMED AS BU SINESS EXPENDITURE ARE ALLOWABLE SUBJECT TO OTHER PROVISIONS OF THE ACT. T HE ITAT ALSO ALLOWED THE INTEREST OF RS. 67,36,671/- AS BUSINESS EXPENDITURE SUBJECT TO THE ALLOWABILITY UNDER THE PROVISION OF SECTION 40(A)(IA) OF THE ACT . THE IMPOSITION OF PENALTY ON THE ENTIRE AMOUNT WHICH WAS LATER ON REDUCED BY THE CIT(A) AND ITAT IS NOT JUST AND PROPER. ALL THE DOCUMENTS WERE BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. THE CLAIM OF THE ASSESS EE BEING PARTICULAR INCOME AS BUSINESS INCOME DOES NOT AMOUNT TO CONCEALMENT. THERE IS NO CONCEALMENT ON PART OF ASSESSEE AS PER SECTION 271(1)(C) OF THE ACT. THEREFORE, ORDER OF THE CIT(A) AND THE ASSESSING OFFICER ARE SET ASIDE. 10. IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 03RD DAY OF APRIL, 2017. SD/- SD/- (R.S. SYAL) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 03/04/2017 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR 5 ITA NO. 5546/DEL/2013 ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 28.03.2017 PS 2. DRAFT PLACED BEFORE AUTHOR 29.03.2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS .04.2017 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK .04.2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.