The ITO, Ward-8(4), Ahmedabad V. Virat Buildcon Pvt.Ltd., Ahmedabad

ITA 578/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89456 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: S V AGRAWAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) I.T. A. NO.578/AHD/2011 (ASSESSME NT YEAR: 2007-08) THE I.T.O., WARD-8(4), AHMEDABAD V/S VIRAT BUILDCON PVT. LTD. 11, KRISHNA COMPLEX, HATTHIPURA, MADHUPURA, AHMEDABAD-380004 (APPELLANT) (RESPONDENT) PAN: AABCV4279N APPELLANT BY : SMT. SONIA KUMAR, SR. D.R. RESPONDENT BY : SHRI S. V. AGRAWAL, A.R. ( )/ ORDER DATE OF HEARING : 08-05-2015 DATE OF PRONOUNCEMENT : 15 -05-2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-XIV, AHMEDABAD DATED 19.10.2010 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF CONSTRUCTION OF BUILDING. ASSESSEE FILED ITS RETURN OF INCOME FO R A.Y. 2007-08 ON 30.10.2007 DECLARING TOTAL INCOME AT RS. NIL. THE C ASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U NDER SECTION 143(3) VIDE ORDER DATED 29.12.2009 AND THE TOTAL INCOME WAS DET ERMINED AT RS. ITA NO 578/ AHD/2011 . A.Y. 2007-0 8 2 25,86,721/-. AGGRIEVED BY THE ORDER OF A.O., ASSES SEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 19.10.2010 G RANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER O F LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWIN G GROUNDS;- 1. THE LD. CIT(A)-XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.2,51,289/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST EXPENDITURE ON BORROWED FUND. 2. THE LD. COMMISSIONER OF INCOME-TAX (A)-XIV, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE ASSESSIN G OFFICER U/S.41(1) OF THE ACT AMOUNTING TO RS. 16,36,073/-. 3. THE LD. COMMISSIONER OF INCOME-TAX (A)-XIV, AHMEDAB AD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.10,60,876/- MA DE BY THE ASSESSING OFFICER ON ACCOUNT OF FORFEITURE OF BOOKING ADVANCE. 1 ST GROUND IS WITH RESPECT TO DELETION OF DISALLOWANCE OF INTEREST OF RS. 2,51,289/-. 4.DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT AS ON 31.03.2007 ASSESSEE WAS SHOWING SUNDRY DEBTOR OF RS . 77,30,473/-, WAS HAVING SURPLUS FUND BY WAY OF BOOKING ADVANCE OF RS . 64,34,500/- AND HAD SUNDRY CREDITORS OF RS. 22,93,883/-. HE WAS OF THE VIEW THAT IN SUCH CIRCUMSTANCES, THERE WAS NO JUSTIFICATION OF TAKING INTEREST BEARING FUNDS FROM THE DIRECTORS OF COMPANY AND THEREFORE THE REA SONABLENESS OF PAYMENT OF INTEREST WAS NOT JUSTIFIED BY THE ASSESS EE. HE ACCORDINGLY DISALLOWED THE CLAIM OF INTEREST OF RS. 2,51,289/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITIO N BY HOLDING AS UNDER:- 8. I HAVE GONE THROUGH THE- FACTS OF THE CASE & SUBMIS SIONS/ EXPLANATIONS GIVEN BY LEARNED A.R. THE RECEIPT & UTILIZATION OF BORROWED FUNDS AS EXPLAINED BY A.R., IT IS SEEN ITA NO 578/ AHD/2011 . A.Y. 2007-0 8 3 THAT THE BORROWED MONEY HAS BEEN UTILIZED FOR PAYME NT TO SUPPLIERS, PRINTING OF SCHEME BROCHURE, PURCHASE OF STEEL, PAYMENT TO LOCAL AUTHO RITY I.E. MUNICIPAL CORPORATION FOR PASSING OF PLAN, PAYMENT OF OFFICE EXPS, PAYMENT TO ENGINEERS & ARCHITECTURE & CHARTERED ACCOUNTANTS, ETC. IT IS SEEN THAT THERE IS NO SINGL E TRANSACTION OF UTILIZATION OF BORROWED FUNDS FOR GIVING INTEREST FREE LOANS. THE APPELLANT COMPANY HAS PROVED THE NEXUS OF BORROWED FUNDS & ITS UTILIZATION. FURTHER, THE APPE LLANT COMPANY HAS DEDUCTED TAX AT SOURCE ON INTEREST PAID & DEPOSITED WITH THE GOVERN MENT. THERE WAS NO SURPLUS FUND AS SHOWN IN ABOVE CHARTS BUT, IT IS SEEN THAT BORROWED FUNDS HAVE BEEN INVESTED IN INVENTORY & DEBTORS. THEREFORE, THERE IS NO CASE OF DISALLOWA NCE OF INTEREST PAID ON BORROWED FUNDS. THE DISALLOWANCE MADE BY A.O. IS DELETED & T HIS GROUND OF APPEAL IS ALLOWED. 4. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE LD. CIT(A) A ND SUPPORTED HIS ORDER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, A.O ON THE BASIS OF BALANCE SHEET OF THE ASSESSEE WAS OF THE VIEW THAT THERE WAS NO JUSTIFICATION ON THE PAR T OF ASSESSEE TO BORROW FUNDS. WE FIND THAT LD. CIT(A) WHILE DECIDING THE I SSUE IN FAVOUR OF THE ASSESSEE HAS GIVEN A FINDING THAT THERE WAS NO TRAN SACTION OF UTILIZATION OF BORROWED FUNDS FOR GIVING INTEREST FREE LOANS AND A SSESSEE HAS PROVED THE NEXUS OF BORROWED FUNDS WITH ITS UTILIZATION. HE HA S FURTHER GIVEN A FINDING THAT THE BORROWED FUNDS HAVE BEEN INVESTED IN INVEN TORY AND DEBTORS AND USED FOR THE PURPOSE OF BUSINESS. BEFORE US, REVEN UE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD . CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. GROUND NO. 2 IS WITH RESPECT TO DELETION OF ADDITIO N MADE U/S. 41(1). ITA NO 578/ AHD/2011 . A.Y. 2007-0 8 4 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING THE DETAILS OF SUNDRY CREDITORS, A.O NOTICED THAT ASSESSEE WAS REQ UIRED TO PAY AGGREGATE AMOUNT OF RS. 16,36,073/- TO THE 3 CREDITORS LISTED ON PAGE 5 OF THE ASSESSMENT ORDER. HE FURTHER NOTICED THAT THE AFORE SAID CREDITORS WERE OUTSTANDING SINCE A.Y. 2006-07. THE ASSESSEE WAS TH EREFORE ASKED TO SHOW CAUSE AS TO WHY THE OUTSTANDING SUNDRY CREDITORS WH ICH HAS REMAINED UNPAID NOT BE DISALLOWED BY INVOKING OF PROVISIONS OF SECT ION 41(1). THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABL E TO THE A.O. HE THEREFORE BY INVOKING PROVISIONS OF SECTION 41(1) M ADE ADDITION OF RS. 16,36,073/-. AGGRIEVED BY THE ORDER OF A.O., ASSESS EE CARRIED THE MATTER BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE AND AFTER RELYING ON THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF NITIN S. GARG VS. ACIT 2010 5 TAXMAN.COM 115 (AHD) AND THE D ECISION OF BOMBAY HIGH COURT IN THE CASE OF S.I GROUP INDIA LTD. VS. ITAT 5 TAXMAN.COM 90 (BOM) DELETED THE ADDITION BY HOLDING AS UNDER:- 11. I HAVE GONE THROUGH THE SUBMISSIONS OF A.R. & A CCOUNTS OF CREDITORS FOR A.Y. 1999- 2000 TO 2007-08. IT IS SEEN THAT THE ACCOUNTS ARE O PERATIVE AND THERE ARE ENTRIES FOR PURCHASES / LABOURS & PAYMENTS ARE MADE BY A/C. PAY EE CHEQUES. THE CREDITORS HAVE ALSO FILED CONFIRMATIONS OF CREDITORS WITH THE A.O. CONF IRMING THE OUTSTANDING BALANCE RECEIVABLE FROM APPELLANT COMPANY. THE CONFIRMATION S ARE ALSO PRODUCED BEFORE ME. IT IS SEEN THAT THESE ARE NOT DEAD ACCOUNTS. IT IS PERTIN ENT TO NOTE THAT IN BASE OF LABOUR RAMSINGH MISTRY, THE APPELLANT COMPANY HAS DEDUCTED TDS & PAID TO THE CREDIT OF CENTRAL GOVT. THE CREDITORS ARE STANDING IN THE BAL ANCE SHEET OF APPELLANT COMPANY. THE APPELLANT COMPANY HAS NOT CLOSED THE ACCOUNTS OF CR EDITORS & NOT CREDITED THE AMOUNT OF CREDITORS TO THE PROFIT & LOSS A/C. FROM THE FACTS IT REVEALS THAT IT CAN NOT BE SAID THAT THERE IS UNCLAIMED LIABILITY OF THE CREDITORS. IN V IEW OF THESE FACTS IT IS HELD THAT THERE IS NO CESSATION OF LIABILITY. THE A.O. OBSERVED THAT SINC E, THERE WAS SURPLUS MONEY BY WAY OF BOOKING DEPOSIT THERE IS NO QUESTION OF NOT MAKING PAYMENT TO UNPAID SUPPLIERS & HENCE THEY ARE NOT GENUINE. THE SOURCE & APPLICATION OF F UNDS IS EXPLAINED BY APPELLANT COMPANY WHICH SHOWS THAT THE UNPAID CREDITORS ARE S HOWN IN THE INVENTORY & DEBTORS. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED UPON BY A.R. WHICH ARE SQUARELY APPLICABLE TO THE CASE OF APPELLANT COMPANY ITA NO 578/ AHD/2011 . A.Y. 2007-0 8 5 IN VIEW OF THE FACTS OF THE CASE & LAW DECIDED BY H ONORABLE JURISDICTIONAL AHMEDABAD ITAT & BOMBAY HIGH COURT (SUPRA) I HOLD THAT THERE IS NO CESSATION OF LIABILITY & DISALLOWANCE MADE BY A.O. OF RS. 16,36,073/- IS DEL ETED. THIS GROUND OF APPEAL IS ALLOWED. 8. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US. 9. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. SUBMITTED THAT THE AFORESAID CREDITORS HAVE BEEN PA ID IN SUBSEQUENT YEARS AND FURTHER REITERATED THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE HAS GIVEN A FINDING THAT THE ACCOUNTS OF CREDITORS ARE OPERATIVE, THEIR CONFIRMATIONS HAVE BEEN FILED, THE ASSESSEE HAS NO T CLOSED THEIR ACCOUNTS AND NOT CREDITED THE AMOUNT OF CREDITORS TO PROFIT AND LOSS ACCOUNT AND THUS THERE WAS NO CESSATION OF LIABILITY AND FOR WHICH R ELIANCE WAS ALSO PLACED BY LD. CIT(A) ON THE DECISION OF AHMEDABAD TRIBUNAL AN D BOMBAY HIGH COURT. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD. CIT(A) NOR HAS BROUGHT ANY CONTRARY BINDING DECISION IN ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS, WE FIND N O REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THIS GROUND OF REV ENUE IS DISMISSED. GROUND NO. 3 IS WITH RESPECT TO DELETION OF ADDITIO N OF RS. 10,60,876/- ON ACCOUNT OF FORFEITURE OF BOOKING ADVANCE. ITA NO 578/ AHD/2011 . A.Y. 2007-0 8 6 11. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PER USING THE DETAILS OF BOOKING ADVANCE A.O NOTICED THAT THE ASSESSEE WAS S HOWING BOOKING ADVANCES FROM PERIOD RELEVANT TO A.Y. 2003-04. HE A LSO NOTICED THAT THE CONSTRUCTION ACTIVITY WAS COMPLETED BY 31.03.2004 A ND THEREFORE ALL THE BOOKING ADVANCE RECEIVED SHOULD HAVE BEEN ALLOCATED AGAINST THE CONSTRUCTION AND THE INCOME GENERATED THEREON SHOUL D HAVE BEEN OFFERED TO TAX. HE THEREFORE CONSIDERED THE BOOKING ADVANCE RE CEIVED BY THE ASSESSEE TO BE THE INCOME OF THE ASSESSEE AND AFTER GIVING T HE CREDIT AGAINST THE INVENTORY, MADE ADDITION OF RS. 10,60,870/-. AGGRIE VED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 12. I HAVE CONSIDERED THE SUBMISSIONS OF A.R. AND ASSES SMENT ORDER OF A.O. IN THIS CASE IN GROUND NO. 1, I HAVE ACCEPTED THE METHOD OF ACCOUNT ING FOLLOWED BY APPELLANT COMPANY ON PROJECT COMPLETION METHOD I.E. ACCRUAL OF INCOME IN THE YEAR OF EXECUTION OF SALE DEEDS. THEREFORE, FOLLOWING THE SAME THE TAXING OF BOOKING AMOUNT ON THE BASIS .OF PERCENTAGE COMPLETION METHOD IS NOT ACCEPTABLE. THE APPELLANT COMPANY HAS EXECUTED SALE DEEDS OUT OF BOOKING DEPOSITS IN A.Y. 2008-09, 2009-10 & 2010-11. THERE IS NO EVASION OF TAX IN THE FORM OF BOOKING DEPOSITS. FUR THER DECISION RELIED ON BY A.R. OF JURISDICTIONAL GUJARAT HIGH COURT (SUPRA) IS SUPPOR TING THE CASE OF THE ASSESSEE COMPANY. THEREFORE, THE DISALLOWANCES MADE BY A.O. OF BOOKING DEPOSITS RS. 10,60,876/- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 13. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US. 14. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE LD. CIT(A) A ND SUPPORTED HIS ORDER. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE GRANTING THE RELIEF TO T HE ASSESSEE HAS GIVEN A FINDING THAT BY FOLLOWING THE ACCOUNTING METHOD REG ULARLY FOLLOWED BY ITA NO 578/ AHD/2011 . A.Y. 2007-0 8 7 ASSESSEE, THE BOOKING ADVANCE HAS BEEN OFFERED TO T AX IN SUBSEQUENT YEARS AND THUS THERE WAS NO EVASION OF TAX. HE HAD FURTHE R RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M OTILAL C. PATEL & CO. 173 ITR 666 (GUJ) . BEFORE US, REVENUE HAS NOT BROU GHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD CIT(A) NOR HAS POINTED TO ANY CONTRARY BINDING DECISION IN ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. C IT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 16. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 15 - 05 - 2015. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD