ACIT CEN CIR 7, MUMBAI V. SAMARTHA DEVELOPMENT CORPORATION, MUMBAI

ITA 5963/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0691 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 24-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VISHWAS MUNDHE LD
• Assessee Lawyers: RUTURAJ GUJAR LD
• Keywords: Business expenditure; Additional evidence
• Section: 143(3); 80G; 154

Judgement Text

ITA NO.5963//M/2014 SAMARTHA DEVELOPMENT CORPORATION ASSESSMENT YEAR-2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.5963/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-7 ROOM NO. 804, 8 TH FLOOR OLD CGO ANNEXE M.K.ROAD MUMBAI 400 020 / VS. SAMARTHA DEVELOPMENT CORPORATION 11A, SUYASH DADAR (W) MUMBAI 400 028 !' ./ ./PAN/GIR NO. AABFS-7753-D ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) A SSESSEE BY : RUTURAJ GUJAR, LD. AR RE VENUE BY : VISHWAS MUNDHE, LD. DR / DATE OF HEARING : 25/04/2017 / DATE OF PRONOUNCEMENT : 12/05/2017 ITA NO.5963//M/2014 SAMARTHA DEVELOPMENT CORPORATION ASSESSMENT YEAR-2010-11 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT Y EAR [AY] 2010-11 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-36 [CIT(A)], MUMBAI DATED 22/07/2014 QUA DELETION OF CERTAIN ADDITION U/S 41(1) FOR RS.39,61,150/- & RS.11,11,326/- ON ACCOUNT OF VAT P AID ON BEHALF OF OTHERS. 2. FACTS LEADING TO THE DISPUTE ARE THAT THE ASS ESSE, BEING RESIDENT FIRM, WAS ASSESSED U/S 143(3) AT RS.128,90,64,930/- VIDE ASSE SSING OFFICER [AO] ORDER DATED 22/03/2013 AFTER CERTAIN ADDITIONS / DISALLOW ANCES AS AGAINST RETURNED INCOME OF RS.128,39,92,460/- E-FILED BY THE ASSESSEE ON 28/09/2010. THE ASSESSE WAS ENGAGED IN CONSTRUCTION ACTIVITIES DURING THE IMPUGNED AY AND SUFFERED ADDITIONS OF RS.11,11,326/- FOR VAT PAID O N BEHALF OF A TRUST AND RS.39,61,150/- U/S 41(1) ON ACCOUNT OF REMISSION / CESSATION OF CERTAIN TRADING LIABILITY. BOTH THE ADDITIONS ARE SUBJECT MATTER OF THIS APPEAL. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSESSEE CREDITE D A SUM OF RS.406.23 LACS FROM A TRUST NAMELY VJCT AND DEBITED THE SAME AMOUNT IN PROFIT & LOSS ACCOUN T AND FURTHER DEBITED A SUM OF RS.11,11,326/- ON ACCO UNT OF VAT PAID ON BEHALF OF THIS TRUST. THE ASSESSEE ATTRIBUTED THE SAME TO VAT DEDUCTED BY THE TRUST AGAINST EXECUTION OF WORKS CONTRACT UNDERTAKEN BY T HE ASSESSEE FOR TRUST. IN THE ALTERNATIVE, THE ASSESSEE REQUESTED THE AO TO TREAT THE SAME AS DONATION GIVEN TO THE SAID TRUST BY THE ASSESSEE AND PROVIDE DEDUC TION U/S 80G. HOWEVER, NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE SAME WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. FURTHER, A PER USAL OF SUNDRY CREDITORS REVEALED THAT THE LEDGER BALANCES OF THREE CREDITOR S DID NOT MOVE SINCE THE PERIOD PRIOR TO 01/04/1993. THE ASSESSEE CONTENDED THAT THE SAME WERE MERE ITA NO.5963//M/2014 SAMARTHA DEVELOPMENT CORPORATION ASSESSMENT YEAR-2010-11 3 DEPOSITS AND NOT SUNDRY CREDITORS BUT COULD NOT ADD UCE ANY EVIDENCE IN SUPPORT WHICH LED THE AO TO TREAT THE SAME AS REMISSION / C ESSATION OF LIABILITY U/S 41(1) AND RESULTED INTO IMPUGNED ADDITIONS. 3. AGGRIEVED, THE ASSESSEE CONTESTED BOTH THE ADDIT IONS WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 22/07/2014 WHE RE LD. CIT(A) QUA ADDITION U/S 41(1) CONCLUDED THAT THE SAME WAS NOT APPLICABL E AS NO DEDUCTION WITH RESPECT TO THESE CREDITORS WERE EVER ALLOWED TO THE ASSESSEE AND THE SAME WERE MERE DEPOSITS. SIMILARLY, THE LD. CIT(A) FOUND THAT THE VAT PAYMENT, BEING IN THE NATURE OF BUSINESS EXPENDITURE, WAS ALLOWABLE T O THE ASSESSEE. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US AGAINST THE RELI EF PROVIDED BY LD. CIT(A). 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] FIRST O F ALL DREW OUR ATTENTION TO THE FACT THAT THE CORRECT AMOUNT IN DISPUTE U/S 41( 1) IS RS.29,61,150/- AND NOT RS.39,61,150/- AS AN ARITHMETICAL ERROR HAD CREPT I N THE COMPUTATIONS THEREOF DURING QUANTUM ASSESSMENT. THE ASSESSEE FILED RECTI FICATION U/S 154 AGAINST THE SAME WHICH HAS SINCE BEEN ALLOWED. THE LD. COUNSEL FOR ASSESSEE SECONDED THE SAME. THIS BEING THE FACTUAL POSITION, WE PROCE ED FURTHER BY HOLDING THAT THE QUANTUM OF AMOUNT UNDER DISPUTE U/S 41(1) IS RS.29, 61,150/- AND THEREFORE, OUR FINDINGS SHALL APPLY TO THAT EXTENT ONLY. 5. PROCEEDING FURTHER, THE LD. DR CONTENDED THAT TH E RELIEF HAS BEEN GRANTED BY LD. CIT(A) WITHOUT ANY MERITS AS NO EVIDENCES CO ULD BE ADDUCED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM THAT THE SUNDRY CREDITORS WERE MERE DEPOSITS IN NATURE. FURTHER, THE ASSESSEE DISCHARGED VAT LIABIL ITY OF A THIRD PARTY AND THEREFORE, THE SAME COULD NEVER BE CLASSIFIED AS EX PENDITURE PARTICULARLY IN VIEW OF THE FACT THAT THE ASSESSEE, IN THE ALTERNATIVE, PLEADED FOR GRANT OF DEDUCTION U/S 80G AGAINST THE SAME BY HOLDING / TREATING THE SAME AS DONATIONS. 6. PER CONTRA, LD. COUNSEL FOR ASSESSEE [AR] SUBMITTED VARIOUS DO CUMENTS IN PAPER-BOOK BY WAY OF EVIDENCES TO SUGGEST THAT THE SUNDRY CRE DITORS WERE MERE DEPOSITS IN NATURE, THE EXPENDITURE AGAINST WHICH W AS NEVER CLAIMED BY THE ITA NO.5963//M/2014 SAMARTHA DEVELOPMENT CORPORATION ASSESSMENT YEAR-2010-11 4 ASSESSEE. THE LD. AR EXPLAINED THAT THE ASSESSEE A CQUIRED CERTAIN LAND AT VERSOVA FOR CONSTRUCTION OF RESIDENTIAL HOUSES IN THE YEAR 1974-75 FROM OHSIWARA LAND DEVELOPMENT COPORATION [OLDC] BUT THE SAME GOT CANCELLED SUBSEQUENTLY DUE TO NON-OBSERVANCE OF PAYMENT SCHED ULE BY THE ASSESSEE. HOWEVER, IN THE MEANTIME, THE ASSESSEE HAD SUB-DIVI DED THE PLOT IN SMALLER PLOTS AND TRANSFERRED ITS RIGHTS THEREIN TO VARIOUS BUILDERS AND RECEIVED CONSIDERATION FROM THESE PARTIES WHICH WERE OFFERED TO TAX IN RESPECTIVE YEARS. HOWEVER, THE ASSESSEE HAD RECEIVED CERTAIN ADVANCES FROM SOME OF THE ENTITIES PENDING ALLOTMENT OF RIGHTS BUT THE SAME COULD NEVE R BE ALLOTTED BY THE ASSESSEE IN VIEW OF THE CANCELLATION OF HIS OWN RIGHT BY OLDC . SINCE, THE ASSESSEE HAD CONTESTED THE CANCELLATION BEFORE THE COURT, THESE PARTIES, IN THE HOPE OF FAVORABLE ORDER, CONTINUED THEIR ADVANCES WITH THE ASSESSEE. THEREFORE, THESE ARE, IN FACT , SUNDRY DEBTORS WITH CREDIT BALANCES AND MERE DEPO SITS WHICH COULD NOT BE ADDED U/S 41(1) AS THE SAME DO NOT APPLY TO THE FACT OF THE CASE. IN SUPPORT, THE ASSESSEE HAS FILED SEVERAL FINANCIAL S TATEMENTS OF VARIOUS YEARS STARTING FROM YEAR ENDING 31/03/1985 ALONG WITH COP Y OF LEDGER ACCOUNTS / EXTRACTS OF RESPECTIVE PARTIES AND TAX AUDITOR CERT IFICATE. RELIANCE HAS BEEN PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS TO CONTEN D THAT AS THERE WAS NO REMISSION OR CESSATION OF TRADING LIABILITY AND THE SE AMOUNTS WERE MERE DEPOSITS /ADVANCES, ADDITIONS THEREOF U/S 41(1) COULD NOT BE MADE. 7. REGARDING VAT PAYMENTS, THE LD. AR HAS CONTENDED THAT THE ASSESSEE PROVIDED SERVICES WORTH RS.4.06 CRORES TO THE TRUST WHICH WAS INCLUSIVE OF VAT AND THEREFORE, VAT PAID BY THE ASSESSEE OUT OF THE SAME REPRESENTED BUSINESS EXPENDITURE OF THE ASSESSEE AND HENCE ALLOWABLE. FU RTHER, VAT TO THE EXTENT OF RS.9,34,092/- HAS BEEN PAID / DEDUCTED BY THE TRUST ON BEHALF OF THE ASSESSEE AND THE ASSESSEE HIMSELF HAS PAID VAT OF RS.1,77,23 4/-, NEVERTHELESS, THE SAME CONSTITUTE VAT EXPENDITURE OF THE ASSESSEE AS GROSS AMOUNT OF SERVICES HAS BEEN CREDITED IN THE PROFIT & LOSS ACCOUNT. THE COP IES OF RESPECTIVE VAT ITA NO.5963//M/2014 SAMARTHA DEVELOPMENT CORPORATION ASSESSMENT YEAR-2010-11 5 CHALLANS AND VAT RETURNS FOR RELEVANT PERIOD HAVE B EEN PLACED IN THE PAPER BOOK. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. SO FAR AS ADDITION U/S 41(1) FOR RS.29,61,1 50/- IS CONCERNED, A PERUSAL OF VARIOUS DOCUMENTS / CONTENTIONS / SUBMISSIONS PRIMA FACIE LENDS SUPPORT TO THE ARGUMENTS OF LD. AR THAT THE SAID AMOUNTS WERE MERE SUNDRY DEBTORS WITH CREDIT BALANCES AND NOT THE SUNDRY CREDITORS. THE ASSESSEE HAS SUBMITTED ADDITIONAL DOCUMENTS IN THE SHAPE OF FINANCIAL STATEMENTS OF V ARIOUS YEARS, RESPECTIVE LEDGER EXTRACTS, TAX AUDITORS CERTIFICATE ETC., WH ICH, BEING ADDITIONAL EVIDENCES, REQUIRES APPRECIATION AT THE LEVEL OF LD. AO. SIMIL ARLY, THE ASSESSEE, IN SUPPORT OF VAT CLAIM HAS ADDUCED ADDITIONAL EVIDENCES IN THE F ORM OF VAT RETURNS, CHALLANS ETC. THEREFORE, PRIMA FACIE, FINDING STRENGTHS IN THE ARGUMENTS OF THE LD. AR AGAINST BOTH THE ADDITIONS, WITHOUT DELVING MUCH DEEPER INTO THE MERITS OF THE CASE, WE DEEM IT FIT TO RESTORE BOTH THE ISSUES BACK TO THE FILE OF LD. AO FOR RE-APPRECIATION AND FRESH ADJUDICATION AS PER LAW I N THE LIGHT OF ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE. THE ASSESSE, I N TURN, IS ALSO DIRECTED TO SUBSTANTIATE HIS CLAIM FORTHWITH IN THIS REGARD FAI LING WHICH THE LD. AO SHALL BE AT LIBERTY TO DECIDE THE SAME ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 9. RESULTANTLY, THE REVENUES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MAY, 2017. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :12.05.2017 SR.PS:- THIRUMALESH ITA NO.5963//M/2014 SAMARTHA DEVELOPMENT CORPORATION ASSESSMENT YEAR-2010-11 6 / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. %- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI