ARCHANA DEVELOPERS, THANE V. ITO WD 3(2), KALYAN

ITA 641/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55533 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 12-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 27-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PARTHASARTHY NAIK
• Keywords: Unexplained cash credit
• Section: 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, MUMBAI. BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.641/ MUM/2010 ASSESSMENT YEAR: 2006-07 ARCHANA DEVELOPERS, .. APPELLANT GUPTA BHAVAN, KATEMANIVLI, PUNE LINK ROAD, KALYAN(E), MUMBAI-421306 PA NO. AAHFA 2181 K VS INCOME TAX OFFICER, WD 3(2) .. RESPONDEN T KALYAN RAANI MANSION, MURBAD ROAD, KALYAN(W). KALYAN APPEARANCES: SUBODH L RATNAPARKHI, FOR THE APPELLANT PARTHASARTHY NAIK , FOR THE RESPONDENT DATE OF HEARING : 12.10.2011 DATE OF PRONOUNCEMENT : 14-10-2011 O R D E R PER PRAMOD KUMAR: 1. THIS ASSESSEES APPEAL IS DIRECTED AGAINST CIT(A)S ORDER DATED 30 TH SEPTEMBER, 2009, FOR THE ASSESSMENT YEAR 2006-07. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES: I.T.A NO.641/ MUM/2010 ASSESSMENT YEAR: 2006-07 2 1A. THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF RS.11,54,160 ON ACCOUNT OF AMOUNT RECEIVED BY THE AP PELLANT FROM ONE M/S. LAXMI DEVELOPERS, BY HOLDING THE SAME TO BE I NCOME LIABLE TO TAX U/S.68 OF THE I.T.ACT AS UNEXPLAINED CASH CRED IT. B. THE LD CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT AMOUNT RECEIVED BY THE APPELLANT FROM M/S. LAXMI DEVELOPERS BEING TOWARDS SALE OF DEVELOPMENT RIGHTS WAS OUT SIDE THE AMBIT OF TH E PROVISIONS OF SE.68 OF THE I.T.ACT, 1961. C. THE LD CIT(A) ERRED IN IGNORING THE FACT THAT TH E INCOME ARISING FROM SALE OF DEVELOPMENT RIGHTS WAS LIABLE TO TAX IN T HE YEAR IN WHICH THE SAID DEVELOPMENT RIGHTS WERE SOLD BY THE APPELLANT FIRM AND NOT IN THE YEAR UNDER APPEAL. 3. TO ADJUDICATE ON THIS GROUND OF APPEAL, ONLY A FE W MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING O FFICER NOTICED THAT WHILE BALANCE SHEET FILED BY THE ASSESSEE DISCLOSES AMOUNT OF RS.27,78,450 AS UNSECURED LOAN PAYABLE TO ONE LAXMI DEVELOPERS, THE SA ID LAXMI DEVELOPERS HAS DECLINED HAVING GIVEN ANY LOAN OR ADVANCE TO THE ASSE SSEE. THE ASSESSING OFFICER ALSO NOTED THAT EVEN AS PER THE ASSESSEE, NO LOAN IS TAKEN FR OM LAXMI DEVELOPERS. IT WAS THUS CONCLUDED THAT THE AMOUNT OF RS.27,78,450 IS UNEX PLAINED CREDIT LIABLE TO BE TAXED IN THE HANDS OF ASSESSEE U/S.68 OF THE ACT. AGGRIE VED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT MUCH SUCCESS. WHILE THE ADDITION WAS CONFIRMED IN PRINCIPLE, QUANTUM OF ADDITION WAS R EDUCED TO AMOUNT ACTUALLY RECEIVED IN THE YEAR I.E. RS.11,54,160. THE ASSESSEE I S NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 4. SHRI SUBODH L RATNAPARKHI, LEARNED COUNSEL FOR TH E ASSESSEE SUBMITS THAT WHILE THERE IS CERTAINLY AN ERROR IN TREATING LAXMI DEVELOPERS AS A LOAN CREDITOR INASMUCH AS THE AMOUNT WAS RECEIVED BY THE ASSESSEE AS PART OF SALE CONSIDERATION FOR A PLOT, AGREEMENT FOR WHICH HAD TAKEN PLACE WAY BACK IN THE YEAR 2000, THIS AMOUNT COULD NOT BE TREATED AS UNEXPLAINED CASH CREDI T. THE AMOUNT HAS BEEN RECEIVED BY CHEQUE, THE BONAFIDES OF TRANSACTION OR M EANS OF PERSON MAKING PAYMENT ARE NOT CALLED INTO QUESTION, AND THE CREDIT APPEARING IN ASSESSEES ACCOUNT CANNOT BE TREATED AS UNEXPLAINED. LEARNED COUNSEL IN VITES OUR ATTENTION TO THE WORDINGS OF SECTION 68, AND SUBMITS THAT ONLY WHEN AN A MOUNT CREDITED IN I.T.A NO.641/ MUM/2010 ASSESSMENT YEAR: 2006-07 3 ASSESSEES BOOKS REMAINS UNEXPLAINED EITHER BECAUSE ON ACC OUNT OF GENUINENESS OF TRANSACTION OR ON ACCOUNT OF LACK OF MEANS OF PERSONS M AKING THE PAYMENT, SECTION 68 CAN BE INVOKED. LEARNED COUNSEL THEN TAKES US THR OUGH THE DETAILS OF TRANSACTION FOR SALE OF LAND, IN THE YEAR 2000, TO DEMONSTRATE TH E PURPOSE FOR WHICH PAYMENT WAS MADE. HE ALSO SUBMITS THAT THIS ASPECT OF THE MATTER , I.E. GENUINENESS OF TRANSACTION FOR WHICH PAYMENT HAS BEEN MADE WAS NOT CA LLED INTO QUESTION BY THE REVENUE AUTHORITIES. WE ARE THUS URGED TO DELETE THE IMPUGNED ADDITION. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMI TS THAT ADMITTEDLY WHAT HAS BEEN SHOWN AS LOAN TO THE ASSESSEE DOES NOT CONSTITUTE A L OAN, NOR IS IT A RECEIPT WHICH IS ALREADY INCLUDED IN INCOME OFFERED TO TAX, AND, THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED TO BRING THE SAME TO TAX. LEARN ED DEPARTMENTAL REPRESENTATIVE TOOK US THROUGH THE ORDERS OF THE AUTHORITIES BELOW, J USTIFIED THE SAME AND VEHEMENTLY RELIED THEREON. WE WERE THUS URGED TO CO NFIRM THE ORDERS OF THE AUTHORITIES BELOW AND DECLINE TO INTERFERE IN THE MA TTER. 5. WE SEE MERITS IN LEARNED COUNSELS PLEA. WE FIND TH AT MONEY IS RECEIVED THROUGH BANKING CHANNELS, IDENTITY AND MEANS OF PERSON MAKING THE PAYMENT HAVE NOT BEEN CALLED INTO QUESTION, AND THE ASSESSEE HAS A RE ASONABLE EXPLANATION WHICH REMAINS UNCONTROVERTED BEFORE US, FOR TRANSACTION IN R ESPECT OF WHICH THIS MONEY IS RECEIVED. WE FIND THAT THE ASSESSEE HAD RECEIVED THESE MONIES AS PART OF SALES CONSIDERATION FOR A PLOT IN RESPECT OF WHICH ASSESSEE EN TERED INTO A DEVELOPMENT AGREEMENT IN THE YEAR 2000, AND, AS PER THIS AGREEM ENT, THE ASSESSEE WAS TO GET MONIES IN PROPORTION TO AREA DEVELOPED AS AND WHEN I T IS SOLD. THE AUTHORITIES BELOW HAVE NOT EVEN QUESTIONED BONAFIDES OF THIS ARRANGEMENT . ON THESE FACTS, BY NO STRETCH OF LOGIC, AMOUNTS CREDITED BY THE ASSESSEE CANNOT BE TREATED AS UNEXPLAINED CREDIT. THE FACT THAT THE ASSESSEE HAS NOT INCLUDED IN COME ON SALE OF PLOT IN THE YEAR OF AGREEMENT, OR EVEN IN THE YEAR OF RECEIPT OF CON SIDERATION HAS NO BEARING ON THE ISSUE BEFORE US. EVEN IF TAXES HAVE NOT BEEN PAID BY T HE ASSESSEE ON GAINS ARISING FROM SALE OF RIGHTS IN THE PLOT, IT IS NOT ASSESSING OFFI CERS CASE THAT ENTIRE RECEIPTS CAN BE TREATED AS TAXABLE INCOME. REMEDY TO MISCONDUCT OF THE ASSESSEE, EVEN IF THAT BE SO, DOES NOT LIE IN TREATING THE PART OF SALE CONSIDERA TION, RECEIVED IN THIS YEAR, AS UNEXPLAINED CREDIT U/S.68. WE, THEREFORE, UPHOLD TH E GRIEVANCE OF THE ASSESSEE AND I.T.A NO.641/ MUM/2010 ASSESSMENT YEAR: 2006-07 4 DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADD ITION OF RS.11,54,160. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 6. GROUND NO.1 IS THUS ALLOWED. 7. IN GROUND NO.2, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.5,47,879 AS UNEXPLAINED MONEY U/S.69A OF THE I.T.ACT BY HOLDIN G THE SAID AMOUNT TO BE UNACCOUNTED WIP OF THE APPELLANT, IGNO RING THE FACT THAT THE LD AO HAD ARRIVED AT THE DIFFERENTIAL AMOU NT OF WIP FROM THE BOOKS OF ACCOUNT ALREADY REJECTED UNDER THE PROVISION S OF SECTION 145 OF THE I.T.ACT. THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION ON A CCOUNT OF DIFFERENCE IN WIP FIGURES IGNORING THAT A SUM OF RS.2, 59,354 OFFERED BY THE APPELLANT AS PROFIT FOR THE YEAR UNDER APPEA L AROSE FROM SUCH WIP CREDITED TO P&L ACCOUNT AND TO THAT EXTENT THE ADDITION WAS A DOUBLE ADDITION. 8. SO FAR AS THIS GROUND OF APPEAL IS CONCERNED, IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT WHILE WIP(WORK IN PROGRESS) CREDITED IN THE PROFIT AND LOSS ACCOUNT IS RS.5,50,000, THE WIP SHOWN IN THE BALANCE SHEET IS TAKE N AT RS.2,131 THE BALANCE HAS BEEN BROUGHT TO TAX AS UNEXPLAINED MONEY U/S.69A OF T HE ACT. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. NOT SATISFIED, THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 9. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PER USED THE MATERIAL ON RECORD, WE SEE NO REASONS TO INTERFERE IN THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE. LEARNED COUNSEL HAS NOT SERIOUSLY CHALLENGED THE ADDITION PER SE AND HE FAIRLY ADMITS THAT HE CANNOT EXPLAIN AS TO WHY WIP IS UNDERST ATED IN THE BALANCE SHEET BY RS.5,47,879. HIS ONLY SUBMISSION IS THAT OUT OF WIP OF RS.5,50,000 SHOWN IN THE CREDIT OF THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAS AL READY SHOWN PROFIT OF RS.2,53,660, AND, TO THAT EXTENT, THE IMPUGNED ADDIT ION WILL AMOUNT TO DOUBLE TAXATION. THIS ARGUMENT, HOWEVER, OVERLOOKS THE FACT THAT ADDITION HAS BEEN MADE ON ACCOUNT OF UNDERSTATING THE VALUE OF AN ASSET IN THE B ALANCE SHEET, AND THAT IT ONLY SHOWS CLEARLY INCORRECT ACCOUNTS. WHAT HAS BEEN OFFERE D TO TAX IN THE PROFIT AND LOSS ACCOUNT IS INCOME BUT WHAT HAS BEEN BROUGHT TO TAX, BY WAY OF IMPUGNED ADDITION, IS I.T.A NO.641/ MUM/2010 ASSESSMENT YEAR: 2006-07 5 UNDERSTATEMENT OF THE VALUE OF THE ASSET IN BALANCE SHE ET, WHICH COULD BE ATTRIBUTED TO A VARIETY OF FACTORS SUCH AS SALE OF THIS WIP OUT OF BOOKS OF ACCOUNT. NO EXPLANATION WHATSOEVER HAS BEEN OFFERED FOR THE DISCRE PANCY. UNDER THESE CIRCUMSTANCES, AND IN VIEW OF LIMITED ARGUMENT OF TH E ASSESSEE-WHICH WE HAVE REJECTED ON MERITS, WE CONFIRM THE ACTION OF THE AUT HORITIES BELOW AND DECLINE TO INTERFERE IN THE MATTER. 10. GROUND NO.2 IS THUS DISMISSED. 11. IN THE RESULT, APPEAL IS PARTLY ALLOWED IN THE TE RMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER, 2011 SD/- (D.K.AGARWAL) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 14 TH OCTOBER, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),1, THANE 4. COMMISSIONER OF INCOME TAX, -1, THANE 5. DEPARTMENTAL REPRESENTATIVE, BENCH D MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI