ACIT, Meerut V. M/s. Madhur Malhar Dev. (P) Ltd., Meerut

ITA 5606/DEL/2011

• Counselvise Citation: 560620114 RSA 2011
• Duration Of Justice: 3 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 24-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 13-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJHA
• Keywords: Additional evidence
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH E EE E : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA, VICE , VICE , VICE , VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI N.K. SAINI N.K. SAINI N.K. SAINI N.K. SAINI, , , , ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO. .. .5606/DEL/2011 5606/DEL/2011 5606/DEL/2011 5606/DEL/2011 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2008 2008 2008 2008- -- -09 0909 09 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -1, 1,1, 1, MEERUT. MEERUT. MEERUT. MEERUT. VS VSVS VS. .. . M/S MADHU M/S MADHU M/S MADHU M/S MADHUR RR R MALHAR DEVELOPERS (P) MALHAR DEVELOPERS (P) MALHAR DEVELOPERS (P) MALHAR DEVELOPERS (P) LTD., LTD., LTD., LTD., 37, CHIPPI TANK, 37, CHIPPI TANK, 37, CHIPPI TANK, 37, CHIPPI TANK, MEERUT. MEERUT. MEERUT. MEERUT. PAN : AAECM6095L. PAN : AAECM6095L. PAN : AAECM6095L. PAN : AAECM6095L. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P. DAM KANUNJHA, SR.DR. RESPONDENT BY : SHRI SANDEEP SAPRA, ADVOCATE. DATE OF HEARING : 24.03.2015 24.03.2015 24.03.2015 24.03.2015 DATE OF PRONOUNCEMENT : 01.04.2015 01.04.2015 01.04.2015 01.04.2015 ORDER ORDER ORDER ORDER PER G.C. GUPTA PER G.C. GUPTA PER G.C. GUPTA PER G.C. GUPTA, VP , VP , VP , VP : :: : THIS APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2008-09 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A), MEERU T DATED 13 TH SEPTEMBER, 2011. 2. GROUND OF APPEAL NO.1 OF THE REVENUE IS AS UNDER :- WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE S, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.41,22,220/- RELYING UPON ADDITIONAL EVIDENCE WIT HOUT PROVIDING OPPORTUNITY TO AO AS PER RULE 46A(3) OF I .T. RULES 1962. 3. LEARNED DR SUBMITTED THAT THE CIT(A) HAS NOT REQ UIRED ANY REMAND REPORT FROM THE ASSESSING OFFICER IN THIS CA SE AND, THEREFORE, ITA-5606/DEL/2011 2 THERE WAS A VIOLATION OF RULE 46A OF THE INCOME-TAX RULES, 1962 IN THIS CASE. 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY ADDITIONAL EVIDENCE AND, THEREFOR E, THERE WAS NO ISSUE OF CALLING FOR THE REMAND REPORT BY THE CIT(A) FROM THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE ORDER OF THE ASSESSING OFFICER AND THE CIT(A). WE FIND THAT THE REVENUE COULD NOT POINT OUT ANY EVIDENCE WHICH COUL D BE SAID TO BE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE TH E CIT(A). ACCORDINGLY, WE DO NOT FIND ANY MERIT IN GROUND NO. 1 OF THE REVENUES APPEAL, WHICH IS ACCORDINGLY DISMISSED. 6. GROUND NOS.2 & 3 OF THE REVENUES APPEAL ARE AS UNDER:- 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASES, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN LAW IN DELETING THE ADDITION IGNOR ING THE PROVISIONS OF THE SECTION 37 OF THE I.T. ACT 1961 W HICH PROVIDES THAT ONLY THOSE EXPENSES WHICH ARE NOT OF PERSONAL OR CAPITAL NATURE AND HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE SHALL B E ALLOWED. 3. WHETHER LD.CIT(APPEAL) WAS JUSTIFIED IN ACCEPTIN G THE VIEW OF THE ASSESSEE IGNORING IN THE LAW AND FA CT THAT CONTINGENT LIABILITIES DO NOT CONSTITUTE AS EXPENDITURE AND CANNOT BE THE SUBJECT MATTER OF DEDUCTION EVEN UNDER THE MERCANTILE SYSTEM OF ACCOUNTING. THIS GET SUPPORTS FROM THE FOLLOWING C ASES :- 1) SHRI SAJJAN MILLS LTD. VS. CIT (1985) 156 ITR 58 5 (SC). 2) INDIA MOLASSES CO.PVT.LTD. (1959) 37 ITR 66 (SC) . ITA-5606/DEL/2011 3 3)_ MADRAS HIGH COURT DATED 5/02/2007 IN THE CASE O F CIT VS. ROTARK CONTROLS INDIA LTD. & OTHERS 293 ITR 311. 7. LEARNED DR SUBMITTED THAT THE ASSESSEE HAS CLAIM ED EXPENDITURE AS PROVISION FOR COST OF LIFT, PROVISIO N FOR CONSTRUCTION AND OTHER DEVELOPMENT EXPENSES, PROVISION FOR LAND COST OF PARKING, STAMPS AND OTHER EXPENSES ON PARKING LAND AND, TOTA L OF THESE EXPENSES COMES TO `41,22,220/-. HE SUBMITTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND, THER EFORE, THE AMOUNT IN QUESTION COULD NOT BE ALLOWED AS DEDUCTION TO TH E ASSESSEE AS THESE EXPENSES WERE NOT ACCRUED IN THIS YEAR. HE REFERRE D TO THE RELEVANT PORTION OF THE ASSESSMENT ORDER IN SUPPORT OF THE C ASE OF THE REVENUE. 8. LEARNED COUNSEL FOR THE ASSESSEE HAS OPPOSED THE SUBMISSIONS OF THE LEARNED DR. HE SUBMITTED THAT THE SALE OF S HOPS/OFFICES WAS STARTED DURING THE YEAR AND THE BUILDING UNDER CONS TRUCTION DID NOT REACH FINALITY. HE SUBMITTED THAT THE COST OF EACH UNIT COULD NOT BE INDIVIDUALLY/SEPARATELY WORKED OUT. HE SUBMITTED T HAT THERE IS NO MISTAKE IN THE METHOD ADOPTED BY THE ASSESSEE FOR C ALCULATING THE COST OF AREA SOLD AND THE ESTIMATION OF THE COST OF INCO MPLETE WORK WAS MADE ON THE BASIS OF AVAILABLE CIRCUMSTANCES. THE COST OF LIFT WAS ALREADY SETTLED BETWEEN THE ASSESSEE AND ITS SUPPLI ERS. THE COST OF PARKING SPACE WAS RELATABLE TO THE TOTAL SALEABLE A REA DEVELOPED BY THE ASSESSEE. HE SUBMITTED THAT THE PROJECT HAS AL READY BEEN COMPLETED AND ITS PROFIT/LOSS HAS ALREADY BEEN ACCO UNTED FOR AND DECLARED IN THE RETURN OF INCOME BY THE ASSESSEE FI LED YEAR AFTER YEAR. HE RELIED ON THE ORDER OF THE LEARNED CIT(A). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE ORDER OF THE ASSESSING OFFICER AND THE LEARNED CIT( A). WE FIND THAT THE BASIC FACTS OF THE CASE ARE NOT IN DISPUTE. THE UN ITS OF SHOPS/OFFICES WERE UNDER DEVELOPMENT DURING THE YEAR AND THE SALE OF UNITS STARTED ITA-5606/DEL/2011 4 DURING THE YEAR. THE BUILDING UNDER CONSTRUCTION D ID NOT REACH FINALITY AND, ACCORDINGLY, THE CIT(A) FOUND SUBSTANCE IN THE SUBMISSION OF THE ASSESSEE THAT THE COST OF EACH UNIT SOLD COULD NOT BE INDIVIDUALLY/SEPARATELY WORKED OUT. THE CIT(A) HAS GIVEN A FINDING THAT THE METHOD ADOPTED BY THE ASSESSEE FOR CALCULATING THE COST OF AREA SOLD COULD NOT BE HELD TO BE DEFECTIVE IN ANY MANNE R. HE FURTHER OBSERVED THAT THE ESTIMATION OF THE COST OF INCOMPL ETE WORK WAS MADE ON THE BASIS OF AVAILABLE CIRCUMSTANCES. THE COST OF LIFT WAS ALREADY SETTLED BETWEEN THE ASSESSEE AND ITS SUPPLIERS. TH E CIT(A) HAS OBSERVED THAT THE COST OF PARKING SPACE IS RELATABL E TO THE TOTAL SALEABLE AREA DEVELOPED. THE COST OF CONSTRUCTION HAS ALSO BEEN RIGHTLY CALCULATED AFTER ESTIMATING THE COST OF INC OMPLETE CONSTRUCTION WORKED. THE CIT(A) HAS CONCLUDED THAT THE ESTIMATI ON OF INCOMPLETE DEVELOPMENT WORK, COST OF LIFT AND PARKING SPACE HA S RIGHTLY BEEN MADE BY THE ASSESSEE AND MADE PART OF COST CALCULAT IONS. WE FIND THAT THE PLEA OF THE LEARNED COUNSEL FOR THE ASSESSEE TH AT THE BUILDING PROJECT WAS ALREADY COMPLETED AND ITS PROFIT/LOSS H AS ALREADY BEEN ACCOUNTED FOR AND DECLARED IN THE RETURN OF INCOME FILED YEAR AFTER YEAR, COULD NOT BE CONTROVERTED ON BEHALF OF THE RE VENUE. IN THESE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER AND, ACCORDINGLY, THE ORDER OF LEARNED CIT( A) ON THIS ISSUE IS CONFIRMED AND GROUND OF APPEAL NOS.2 & 3 OF THE REV ENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 1 ST APRIL, 2015. SD/- SD/- ( (( ( N.K. SAINI N.K. SAINI N.K. SAINI N.K. SAINI ) )) ) (G. (G. (G. (G. C. GUPTA C. GUPTA C. GUPTA C. GUPTA ) )) ) ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER VI VIVI VI CE PRESIDENT CE PRESIDENT CE PRESIDENT CE PRESIDENT VK. ITA-5606/DEL/2011 5 COPY FORWARDED TO: - 1. APPELLANT : ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -1, MEERUT. 1, MEERUT. 1, MEERUT. 1, MEERUT. 2. RESPONDENT : M/S MADHU MALHAR DEVELOPERS (P) LTD ., M/S MADHU MALHAR DEVELOPERS (P) LTD., M/S MADHU MALHAR DEVELOPERS (P) LTD., M/S MADHU MALHAR DEVELOPERS (P) LTD., 37, CHIPPI TANK, MEERUT. 37, CHIPPI TANK, MEERUT. 37, CHIPPI TANK, MEERUT. 37, CHIPPI TANK, MEERUT. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR