Asstt.CIT, Cen.Cir.1, Nashik, Nashik V. Deegesh Hotels Pvt. Ltd., Nashik

ITA 586/PUN/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2498 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 21-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DOSHI
• Keywords: Business income; Search and seizure
• Section: 153A; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 586/PN/2012 $& ' !(' / ASSESSMENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, NASHIK ....... / APPELLANT )& / V/S. M/S. DEEGESH HOTELS PVT. LTD., DURGESH RESIDENCY APPT. ANANDWALLI, GANGAPUR ROAD, NASHIK PAN : AABCD5874D / RESPONDENT ASSESSEE BY : SHRI S.N. DOSHI REVENUE BY : SHRI SUDHENDU DAS / DATE OF HEARING : 22-12-2015 / DATE OF PRONOUNCEMENT : 18-03-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 03-01 -2012 FOR THE ASSESSMENT YEAR 2005-06. THE REVENUE HAS RAISED 7 GROUNDS IN APPEAL ASSAILING THE SOLITARY ISSUE OF DELETING THE ADDITION OF 2 ITA NO. 586/PN/2012, A.Y. 2005-06 ` 23,50,59,504/- ON ACCOUNT OF UNDISCLOSED SALE PROCEEDS OF FLATS BY THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE RECO RDS ARE: A SEARCH AND SEIZURE ACTION U/S. 132 OF THE INCOME TAX AC T, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS CARRIED OUT IN THE CASE OF SINGH BHUTADA GROUP ON 28-06-2007. NO RETURN OF INCO ME WAS FILED BY THE ASSESSEE COMPANY U/S. 139 OF THE ACT. NOTICE U/ S. 153A WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO NOTICE, THE ASS ESSEE FILED RETURN OF INCOME ON 11-12-2009 FOR THE ASSESSMENT YEAR UNDER APPEAL DECLARING LOSS OF ` 11,516/-. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION/CATERING. THE ASSESSEE PROPOS ED TO DEVELOP A HOUSING PROJECT CALLED DURGESH REGENCY. THE ASSESSEE HAD ACCEPTED ADVANCES TO THE TUNE OF ` 23.51 CRORES AGAINST BOOKING OF FLATS IN THE AFORESAID PROJECT. THE PURCHASERS OF THE FLAT PAID FULL COST OF THE FLATS TO THE ASSESSEE BY ARRANGING LOANS FROM UNITED BANK OF INDIA , NASHIK. THE BANK ON THE DIRECTIONS OF THE PURCHASERS OF THE FLAT HAD DIRECTLY CREDITED THE LOAN AMOUNT TO THE ACCOUNT OF ASSESSEE. H OWEVER, THE ASSESSEE DID NOT START CONSTRUCTION OF THE FLATS DESPITE THE FACT THE PURCHASERS OF FLATS HAD PAID THE ENTIRE CONSIDERATION AMOU NT TO THE ASSESSEE. THE ASSESSING OFFICER HELD THAT THE AMOUNT PAID BY THE PURCHASERS OF THE FLATS TO THE ASSESSEE IS THE INCOME AN D ACCORDINGLY, MADE ADDITION OF ` 23,50,59,504/- IN THE INCOME RETURNED BY THE ASSESSEE. AGGRIEVED BY THE ASSESSMENT ORDER DATED 30-12-2009, T HE ASSESSEE PREFERRED AND APPEAL BEFORE THE COMMISSIONER OF INCOME TAX 3 ITA NO. 586/PN/2012, A.Y. 2005-06 (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THA T THE LOAN WAS TAKEN BY THE ASSESSEE FROM BANK FOR CONSTRUCTION O F FLATS ON BEHALF OF THE CUSTOMERS IN THE PROPOSED HOUSING PROJECT. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ENTIRE ADDITION OF ` 23,50,59,504/- ON THE GROUND THAT THE ASSESSING OFFICER HAS ERRED IN MA KING ADDITION OF THE NON-EXISTING INCOME. AGAINST THE FINDINGS OF THE COM MISSIONER OF INCOME TAX (APPEALS) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI SUDHENDU DAS REPRESENTING THE DEPARTMENT SUBM ITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER HAS E RRED IN RECORDING THE FACT THAT THE LOAN WAS OBTAINED BY THE AS SESSEE FROM UNITED BANK OF INDIA FOR CONSTRUCTION OF FLATS ON BEHALF OF TH E CUSTOMERS IN THE PROPOSED CONSTRUCTION PROJECT. IN FAC T, THE LOANS WERE TAKEN BY THE PURCHASERS OF THE FLATS FROM THE UNITED BAN K OF INDIA. IN SUPPORT OF HIS SUBMISSIONS, THE LD. DR REFERRED TO LETTER OF THE BANK DATED 12-05-2007 AT PAGES 5 TO 12 OF THE PAPER BOOK . THE LD. DR SUBMITTED THAT A PERUSAL OF THE SAID LETTER WOULD SHOW TH AT THE LOANS WERE TAKEN BY THE PURCHASERS OF THE FLATS AND MR. AMIT D IGVIJAY SINGH STOOD GUARANTEE FOR THE SAID LOANS. THE LD. DR FURTHER RE FERRED TO LETTER FROM THE UNITED BANK OF INDIA DATED 10-11-2004 AT PAGE 13 OF THE PAPER BOOK TO FURTHER SUBSTANTIATE HIS ARGUMENTS THAT THE HOUSING LOANS AGGREGATING TO ` 23,37,50,483/- WERE SANCTIONED AND DISBURSED TO 94 PERSONS. THE LD. DR FURTHER REFERRED TO LETTER DATED 10-11-2004 WRITTEN BY SHRI AMIT D. SINGH ADDRESSED TO THE GENERAL MANAGER, UNITED BANK OF INDIA ACKNOWLEDGING THE FACT THAT HOUSING LOANS WERE SANCTIONED TO 94 CUSTOMERS WHICH ARE BACKED BY HIS 4 ITA NO. 586/PN/2012, A.Y. 2005-06 PERSONAL GUARANTEE. THE LD. DR SUBMITTED THAT THESE DO CUMENTS ON RECORD CLEARLY SHOW THAT THE LOANS WERE TAKEN BY THE BUYERS OF THE FLATS AND NOT THE ASSESSEE. THUS, THE PRIMARY RESPONSIBILITY TO REPAY LOANS IS THAT OF THE BUYERS OF THE FLATS. THE ASSESSEE EVEN AFT ER RECEIVING THE ENTIRE CONSIDERATION FOR FLATS DID NOT START CONSTRUCTION O F THE HOUSING PROJECT LEAVING THE BUYERS OF THE FLATS IN LURCH. THE ASSE SSEE PLAYED FRAUD ON THE BANK AS WELL AS THE BUYERS OF THE FLATS. THOUG H THERE WERE NO FLATS IN EXISTENCE STILL ASSESSEE ISSUED POSSESSION LETTER S OF THE FLATS TO 94 BUYERS, EXECUTED REGISTERED DEED WITH STAMP DUTIE S FULLY PAID IN RESPECT OF NON EXISTING FLATS AND REALIZED ENTIRE SALE CONSID ERATION OF FLATS. THE AMOUNT PAID BY THE BUYERS OF THE FLATS TO THE ASSESSEE EITHER BY TAKING LOANS OR FROM OWN FUNDS IS INCOME IN THE HANDS OF THE ASSESSEE. THE LD. DR PRAYED FOR SETTING ASIDE THE IMPUGNE D ORDER AND RESTORING THE FINDINGS OF THE ASSESSING OFFICER. 4. SHRI S.N. DOSHI APPEARING ON BEHALF OF THE ASSESSEE ADMIT TED THE FACT THAT THE LOANS WERE TAKEN BY THE CUSTOMERS WHO H AD BOOKED THE FLATS. THE LD. AR OF THE ASSESSEE SUBMITTED THAT ONLY S ALE AGREEMENT WITH RESPECT TO THE FLATS WAS EXECUTED AND THERE WERE NO SALE DEED. THE POSSESSION OF THE FLATS WAS NOT GIVEN ALTHOUGH POSSESSION LETTERS WERE GIVEN TO THE ALLOTTEES OF THE FLATS ONLY TO SECURE LOAN FRO M THE BANK. SINCE, THE HOUSING PROJECT DID NOT TAKE OF THE BANK HAS TAKEN THE POSSESSION OF LAND AND THE DEBTS RECOVERY TRIBUNAL HAS O RDERED FOR THE AUCTION OF LAND TO RECOVER THE AMOUNT. IN SUPPORT OF H IS SUBMISSIONS THE LD. AR PLACED ON RECORD A COPY OF AUCTION NOTICE PUB LISHED IN THE NEWSPAPER. THE LD. AR VEHEMENTLY SUPPORTING THE FINDINGS OF THE 5 ITA NO. 586/PN/2012, A.Y. 2005-06 COMMISSIONER OF INCOME TAX (APPEALS) STATED THAT AMOUNTS RECEIVED BY THE ASSESSEE FROM PURCHASERS OF FLATS ARE NOT THE INCOME OF THE ASSESSEE. THE LD. AR OF THE ASSESSEE MADE AN ALTERNATE SUBMISSION THAT WITHOUT PREJUDICE TO HIS EARLIER SUBMISSIONS EVEN IF IT IS PR ESUMED THAT ` 23 CRORES ARE RECEIPTS OF THE ASSESSEE, THE ENTIRE AMOU NT CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THERE WERE CERTAIN EXPENDITURES INCURRED BY THE ASSESSEE WHICH HAVE TO BE ALLOWED. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DOCUMENTS PLACED ON RECORD IN THE FORM OF PAPER BOOK BY THE DEPARTMENT AS WELL AS THE ASSESSEE. THE ONLY ISSUE RAISED IN THE APPEAL IS DELETING OF ` 23,50,59,504/- AS INCOME OF THE ASSESSEE FROM SALE OF FLATS BY THE COMMISSIONER OF INCOME T AX (APPEALS). THE FACTS NARRATED ABOVE ARE NOT IN DISPUTE. T HE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITI ON ON THE GROUND THAT THE SAID AMOUNT REPRESENT LOAN TAKEN BY THE ASSESSEE FROM THE BANK, THEREFORE, THE SAME IS NOT THE INCOME OF THE A SSESSEE. FROM THE PERUSAL OF RECORDS WE FIND THAT THE COMMISSIONER OF IN COME TAX (APPEALS) HAS RECORDED WRONG FINDING OF FACT WITH REGARD TO THE LOAN. THE LD. DR HAS SUBSTANTIATED FROM THE DOCUMENTS ON RECO RD THAT LOANS WERE TAKEN BY THE PURCHASERS OF THE FLATS FROM UNITED BA NK OF INDIA. THE LOAN AMOUNTS WERE DIRECTLY CREDITED TO THE CURRENT ACCOUNT OF THE ASSESSEE ON THE INSTRUCTIONS FROM THE BUYERS OF THE FLATS . THIS FACT HAS BEEN ADMITTED BY THE LD. AR OF THE ASSESSEE. THE HOUSING PROJECT FOR 6 ITA NO. 586/PN/2012, A.Y. 2005-06 WHICH THE LOAN WAS TAKEN BY THE PURCHASERS DID NOT COM MENCE AND APPARENTLY THE LOAN AMOUNTS DIRECTLY TRANSFERRED TO THE BANK A CCOUNT OF ASSESSEE WAS SWINDLED BY THE ASSESSEE. WE FIND FORCE IN T HE ARGUMENT OF THE LD. DR THAT THE AMOUNT PAID AS CONSIDERATION FOR PU RCHASE OF FLATS TO THE ASSESSEE BY THE PURCHASERS EITHER THROUGH SEEKING LOANS OR FROM OWN FUNDS, THE SAME ARE BUSINESS RECEIPT OF THE ASSE SSEE. SINCE, THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FROM SUC H RECEIPTS, THE ENTIRE AMOUNT OF RECEIPTS FROM SALE OF FLATS IS INCOME OF THE ASSESSEE. 6. THE LD. AR OF THE ASSESSEE HAS SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) THAT RECEIPTS IN THE H ANDS OF THE ASSESSEE CANNOT BE TAXED IF THEY DO NOT REPRESENT INCO ME. WE DO NOT CONCUR WITH THE FINDINGS OF COMMISSIONER OF INCOME TAX (APP EALS) IN THE FACTS OF THE PRESENT CASE. WE HAVE ALREADY POINTED OUT THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN RECORDING INCORRECT FACTS OF THE CASE. THE LD. AR OF THE ASSESSEE HAD MADE AN ALTERNATE SUBMISSION THAT THE ENTIRE AMOUNT CANNOT BE BROUGHT TO TAX AS THE ASSESSEE HAS MADE CERTAIN EXPENDITURE OUT OF THE AMOUN T RECEIVED. THE LD. AR PRAYED THAT IF AN OPPORTUNITY IS GIVEN, THE ASSE SSEE CAN PLACE ON RECORD NECESSARY DOCUMENTS TO SHOW THAT CER TAIN EXPENDITURES WERE INCURRED BY THE ASSESSEE FOR THE HOUSING PROJECT. 7. AFTER EXAMINING THE FACTS OF THE CASE, WE ARE OF THE CO NSIDERED OPINION THAT THIS ISSUE NEEDS A REVISIT TO THE FILE OF ASSESS ING OFFICER. IN THE INTEREST OF JUSTICE WE GRANT AN OPPORTUNITY TO THE ASSESSEE TO PLACE ON RECORD DOCUMENTS TO THE SATISFACTION OF ASSESSING OFFICE R IN SUPPORT 7 ITA NO. 586/PN/2012, A.Y. 2005-06 OF ITS CLAIM OF EXPENDITURE. THE ASSESSING OFFICER AFTER VERIF YING THE GENUINENESS OF THE CLAIM OF ASSESSEE SHALL DECIDE THIS ISSUE AFRESH, IN ACCORDANCE WITH LAW AND IN THE LIGHT OF OUR ABOVE FINDINGS. 8. IN THE RESULT, THE IMPUGNED ORDER IS SET ASIDE AND T HE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY, THE 18 TH DAY OF MARCH, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 18 TH MARCH, 2016 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-I, NASHIK 4. ' / THE CIT-(CENTRAL), NAGPUR 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE