JOGANI & SACHDEV DEVELOPMENTS, MUMBAI V. ADDL.C.I.T. RG.12(1), MUMBAI

ITA 6300/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79241 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 27-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 15-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ./I.T.A. NO. 6300/M/2012 ( AY: 200 9 - 20 10 ) JOGANI & SACHDEV DEVELOPMENTS, 20, RAJABAHADU MANSION, AMBALAL DOSHI MARG, FORT, MUMBAI 400 023. / VS. ADDL. CIT, RANGE 12(1), AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. ./ PAN : AAAFJ 2811 J ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSE E BY : SHRI ASHOK PATIL / REVENUE BY : SHRI JEEVAN LAL LAVIDIYA / DATE OF HEARING :25 .6.2014 / DATE OF PRONOUNCEMENT :25 .6.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 15.10.2012 IS AGAINST THE ORDER OF THE CIT (A) - 23, MUMBAI DATED 28.8.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE LD CIT (A) ERRED IN TREATING THE INTEREST PAID OF RS. 25,06,158/ - AS PROJECT COST AND NOT ALLOWING THE SAME FROM INTEREST RECEIVED OF RS. 73,75,173/ - WHILE DO SO SHE AMONGST OTHER FAIL TO APPRECIATE THAT: - A) THE ASSESSEE HAD SURPLUS FUND ON WHICH THEY HAVE EARNED THE INTEREST O F RS. 73,75,173/ - DURING THE YEAR. B) THE ASSESSEE BEING BUILDER AND FOLLOWED THE PROJECT COMPLETION METHOD OF ACCOUNTING. HOWEVER, THEY HAVE INVESTED THEIR OWN FUND IN OTHER PROJECT AND ALSO ADVANCED TO PARTIES, WHERE THEY HAVE EARNED THE INTEREST. 3. AT T HE OUTSET, SHRI ASHOK PATIL, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AND MENTIONED THAT THE CIT (A) ERRED IN TREATING THE INTEREST PAID AS PROJECT COST AND NOT ALLOWING THE SAME FROM INTEREST RECEIVED . BEFORE US, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDERS & DEVELOPERS AND HAS NUMBER OF PROJECTS ON HAND. 2 ASSESSEE RECOGNIZED INCOME IN RESPECT OF THREE TOWERS SUCH AS JOGANI APARTMENTS, KHENI TOWER AND JEWEL APARTMENTS. ANOT HER 2 PROJECTS, IN RESPECT OF WHICH ASSESSEE MADE HUGE INVESTMENTS ARE M/S. KAMANWA LA HOUSING CONSTRUCTION LTD AND KAMAL REAL ESTATE HOUSING PVT LTD. ASSESSEE HAS NOT RECOGNIZED ANY INCOME DURING THE YEAR IN RESPECT OF THESE TWO PROJECTS. WHILE FILING THE RETURN OF INCOME, ASSESSEE PAID AN AMOUNT OF RS. 2,25,42,068/ - IN RESPECT OF UNSECURED LOANS BORROWED FROM FRIE NDS AND RELATIVES . ASSESSEE ALSO RECOGNIZED INTEREST INCOME RECEIVED FROM THE DEBTORS. IN THIS REGARD, T HE QUESTION CAME UP WHY THE ASSESSEE INCURRED INTEREST PAID EXPENDITURE AND HOW THIS PARTICULAR EXPENDITURE IS RELATABLE TO THE SAID THREE TOWERS , WH ICH ARE COMPLETED AND THE INCOME IS OFFERED IN THE YEAR UNDER CONSIDERATION. AO PROPOSED TO TREAT THE SAID INTEREST PAID EXPENDITURE AS RELATABLE TO M/S. KAMANWALA HOUSING CONSTRUCTION LTD AND KAMAL REAL ESTATE HOUSING PVT LTD. THIS FINDING OF THE AO VID E PARA 6.4 THAT THEREFORE, IT APPEARS THAT THE ASSESSEE HS UTILIZED THE BORROWED FUNDS FOR INVESTMENT IN OTHER PROJECTS AND HAS CLAIMED THE INTEREST PAID ON THE SAME AS EXPENSE FROM THE INCOME OF THIS PARTICULAR COMPLETED PROJECT. THE SAID FINDING OF THE AO IS AMBIGUOUS AND IT DOES NOT CATEGORICALLY MENTIONED WHETHER THE INTEREST BEARING FUNDS WERE UTILIZED. ACCORDINGLY, AO MADE ADDITION OF RS. 25,06,158/ - AFTER MAKING CERTAIN ADJUSTMENTS IN VIEW OF THE FINDINGS IN PARA 6 OF HIS ORDER. AN AMOUNT OF RS . 35,910/ - IS SAID TO HAVE BEEN PAID TO A BANK FOR CAR LOAN WHICH IS NOT CONSIDERED FOR ADDITION BY THE AO. 4. DURING THE FIRST APPELLATE PROCEEDINGS, THE CIT (A), AFTER EXTRACTING THE CONTENTS FROM THE ASSESSMENT ORDER, HELD AGAINST THE ASSESSEE VIDE PARA 2.3 OF THE IMPUGNED ORDER WHICH READS AS UNDER: 2.3. THE APPELLANT HAS NOT REBUTTED THE FINDINGS OF THE ASSESSING OFFICER, BUT HAS MERELY STATED THAT THE INTEREST PAID IS FROM INTEREST RECEIVED ACCOUNT AND THE SAME ARE NOT CLAIMED AS EXPENSES FROM THE PR OJECT. THE ASSESSING OFFICER HAS FURTHER NOTED THAT THE ASSESSEE HAS PAID INTEREST AMOUNTING RS. 2,25,42,068/ - TO CERTAIN PARTIES ON BORROWED FUND AND CLAIMED THE SAME AS EXPENSE IN THE PROFIT AND LOSS ACCOUNT. THE APPELLANT HAS NOT SHOWN ANY NEXUS BETWE EN THE INTEREST RECEIVED AND THE INTEREST PAID BY WAY OF DIRECT FLOW OF FUNDS FROM INTEREST RECEIPTS TO INTEREST PAYMENTS. THE ASSESSING OFFICER HAS GIVEN COGENT BASIS FOR HIS ADDITION WHICH HAS NOT BEEN REBUTTED BY THE APPELLANT. ACCORDINGLY, THE ADDITION IS CONFIRMED. 5. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE FAIRLY MENTIONED THAT THE ASSESSEE IS MAINTAINING MIXED ACCOUNTS AND THE ASSESSING OFFICER DID NOT EXAM INE THE PROJECT WISE ANALYSIS OF THE EXPENSES AND THE 3 INVESTMENTS. IN SUCH CIRCUMSTANCES, THE FINDING OF THE AO THAT THE IMPUGNED INTEREST PAYMENTS RELATE TO THE INVESTMENTS MADE IN THE PENDING PROJECTS IS FAR FROM REALITY. ASSESSEE PROPOSED TO DEMONSTRATE THE SAME BEFORE THE ASSESSING OFFICER IF AN OPPORTU NITY IS GIVEN AND ADDITIONAL PAPERS ARE ADMITTED BY THE AO IN THE SET ASIDE PROCEEDINGS. 6. ON THE OTHER HAND, LD DR RELIED ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT THERE IS NO CLARITY AS TO THE SOURCE OF INVESTMENT INTO THE SAID TWO PROJECTS PENDING FOR COMPLETION. THERE IS NO CLEAR CUT FINDING OF THE AO THAT THE IMPUGNED UNSECURED LOANS HAVE NOT GONE INTO THE COMPLETED PROJECT IN RESPECT OF WHICH INCOME IS RECOGNIZED IN THE YEAR UNDER CONSIDERATION . IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ISSUE RAISED IN THE GROUNDS NEEDS TO BE REMANDED TO THE FILES OF THE AO FOR EXAMINATION AND UNAMBIGUOUS CONCLUSIONS. IN THE REMAND PROCEEDINGS, AO IS DIRECTED TO PASS A SPEAKING ORDER ON THE ISSUES RAISED IN THE GROUNDS AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 2 5 T H JUNE, 2014. S D / - S D / - ( SANJAY GARG ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 5 .6 .2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 4 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI