ITO 6(1)(4), MUMBAI V. B.P. GANGAR CONSTRUCTION P. LTD, MUMBAI

ITA 6692/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62214 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 17-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: AMBRISH MEHTA
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE SHIRI G.E. VEERABHADRAPPA, HON'BLE PRESIDENT AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.6692 /MUM/2010 ASSESSMENT YEAR: 2006-2007 ITO 6(1)(4) , R.NO.506, 5 TH FLOOR, AAYAKR BHAVAN, M.K.RD., MUMBAI-400 020. M/S B. P. GANGAR CONSTRUCTION P. LTD. EMPIER MAHAL, DADAR IT, MUMBAI-14 PAN NO.AAACB2078C APPELLANT-REVENUE VS. RESPONDENT-ASSESSEE APPELLANT-REVENUE BY : MR. P.C.MAURYA RESPONDENT-ASSESSEE BY : MR. AMBRISH MEHTA DATE OF HEARING : 10 TH APRIL 2012 DATE OF PRONOUNCEMENT : 20 TH APRIL 2012 O R D E R PER AMIT SHUKLA (J.M.) : THE PRESENT APPEAL HAS BEEN F ILED BY THE REVENUE, BEING AGGRIEVED BY THE ORDER DATED 30-6-2010, PASSED BY CIT(A)-14, MUMBAI FOR THE QUANTUM OF ASSESS MENT FOR THE ASSESSMENT YEAR 2006-2007 ON THE FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.(CIT(A) ERRED IN ADMITTING NEW EVIDENCE VIOLATING THE PROVISION OF RULE 46A AS THE ASSESSEE HAS ITSELF ADMITTED BEFORE THE A.O. THAT THE PERSONS FOR WHOM ASSESSEE PAID THE KEYMAN INSURANCE PREMIUM, WERE NOT DIRECTORS OF THE COMPANY. 2. WHETHER ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.(CIT(A) ERR ED IN ALLOWING THE EXPENDITURE AMOUNTING TO RS.18,45,709/- PERTAINI NG TO DEVELOPMENT CHARGES AS ITA NO : 6692/MUM/2010 2 ACIT.CIR.6(1),MUM. VS. M/S BHARAT BIJLEE LTD. THE SAME PERTAINS TO THE YEAR 1982 WHEREAS THE ASSESSEE HAD STARTED ITS BUSINESS ACTIVITY IN YEAR 1997. 2. THE FACTS RELEVANT FOR ADJUDI CATION OF GROUND NO.1 ARE THAT THE, ASSESSEE IS A COMPANY CARRY ING ON BUSINESS AS BUILDER AND DEVELOPER OF THE REAL ESTATE. SINC E INCEPTION OF THE PROJECT, THE ASSESSEE HAS BEEN FOLLOWING THE PROJECT COMPLETION METHOD FOR OFFERING ITS INCOME FROM THE PROJECTS UNDERTAKEN BY IT. DURING THE YEAR, THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF PAYMENT OF PREMIUM ON KEYMAN INSURANCE FO R A SUM OF RS.4,99,992/- AND OUT OF THE SAID SUM, A SUM OF RS.3,00,000/- WAS PAID IN THE NAME OF THREE DIRECTORS EACH FOR RS.1, 00,000/- IN THE NAME OF S/SHRI PRABODH D. GANGAR, CHETAN K. GANGAR AND PRAGNESH J GANGAR. THE ASSESSING OFFICER DISALLOWED THE SAID AMOUNT OF RS.3,00,000/- ON THE GROUND THAT THEY WERE NOT THE DIRECTORS OF THE COMPANY. 3. BEFORE THE CIT(A), THE ASSESSEE POINTED OUT THAT DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE HAD FILED EVIDENCES IN THIS REGARD VIDE REPLY DATED 24-8-2008, WHICH INCLUDES FORM NO.32 ALONG WITH RECEIPT ISSUED BY THE R EGISTRAR OF THE COMPANIES DATED 3-8- 2004, CLEARLY EVIDENCING THE APPOINTMENT OF THE ABOVE THREE DIRECTORS. 4. THE LEARNED CIT(A), ON PERUSAL OF THESE DOCUMENTS (WHICH HAVE BEEN PLACED IN THE PAPER BOOK BEFORE US FROM PAGES 3 TO 5), ACCEPTED ITA NO : 6692/MUM/2010 3 ACIT.CIR.6(1),MUM. VS. M/S BHARAT BIJLEE LTD. THE CONTENTION OF THE ASSESSEE AND AL LOWED RELIEF AFTER OBSERVING AND HOLDING AS UNDER :- 6. I HAVE CAREFULLY CONSIDERED T HE SUBMISSIONS OF THE APPELLANT AND ALSO PERUSED THE ORDER OF T HE ASSESSING OFFICER. THE ISSUE INVOLVED UNDER THIS GROUND OF APPEAL IS DISALLOWANCE OF EXPENDITURE CLAIMED BY THE APPELLANT ON PAY MENT OF PREMIUM ON KEYMAN INSURANCE IN RESPECT OF THREE DIRECTORS TO THE TUNE OF RS.3 LAKHS ON THE GROUND THAT THE PERS ONS WERE NOT DIRECTORS OF THE COMPANY. I FIND THAT APPELLANT HAD FILED EVID ENCES BEFORE THE ASSESSING OFFICER ON 24.12.2008 BEFORE THE COMPLETI ON OF ASSESSMENT ON DATED 26- 12-2008 TO ESTABLISH THE FACT THAT TH REE PERSONS ARE DIRECTORS OF THE COMPANY AND, THEREFORE, KEYM AN. DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS FURN ISHED PHOTOCOPY OF THE NOTING DATED 24-12-2008 OF THE ASSESSMENT PROCEEDINGS. THUS, THE APPELLANT HAS BEEN ABLE TO SUBSTANTIATE THE FACT THAT THE THREE PERSONS WERE DIRECTORS DURING THE PERIOD UNDER APPEAL. IN VIEW OF THIS FACT, THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER IS UNJUSTIFIED. ACCORDINGLY THE A.O. IS DIRECTED TO ALLOW THE EXPENSES CLAIMED AS PAYMENT OF PREMIUM FOR DIRECTORS AS KEYMAN. 5. THE LEARNED SENIOR DR SUBM ITTED THAT THE APPOINTMENT DETAILS OF THE DIRECTORS WERE NOT BEFORE THE ASSESSING OFFICER AND THE EVIDENCES WHICH WERE FILED IN FORM NO.32 ARE IN THE NATURE OF ADDITIONAL EVIDENCES AND THE MA TER SHOULD BE RESTORED BACK FOR VERIFICATION BEFORE THE A.O. 6. CONTRARY TO THIS, LEARNED AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT THESE DETAILS WERE FURNISHED BEFORE THE AO ON 24-12-2008 AND IN SUPPORT OF THE SAME THE ASSESSEE HAD SHOWN ORDERSHEET ENTRY AS PER THE RECORD MAINTAINED BY THE ASSESSEE FOR THE ASSESSMENT ITA NO : 6692/MUM/2010 4 ACIT.CIR.6(1),MUM. VS. M/S BHARAT BIJLEE LTD. PROCEEDINGS THAT THE DETAILS AND FO RM NO.32 WAS FILED ON 24-12-2008 BEFORE THE AO AND THE ASSESSMENT ORDER WAS PASSED ON 26-12-2008 I.E. AFTER THE FILING OF SUCH DETAILS. 7 . WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTIES AND ALSO PERUSED THE MATERIAL ON RECORD. THE CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAD FIL ED THOSE EVIDENCES BEFORE THE ASSESSING OFFICER ON 24-12-2008 I.E BEFORE THE COMPLETION OF ASSESSMENT ON 26-12-2008, TO ESTABLISH THAT THE THREE PERSONS ARE THE DIRECTORS OF THE COMPANY AND, THER EFORE, WERE THE KEYMEN. ONCE THESE EVIDENCES I.E. FORMNO.32 FILED WITH THE REGISTRAR OF THE COMPANIES CLEARLY SHOWS THAT T HE THREE PERSONS NAMELY, S/SHRI PRABODH D. GANGAR, CHETAN K. GANGAR AND PRAGNESH J GANGAR WERE APPOINTED AS DIRECTORS W.E.F. 2.8.2004, THE SAME CANNOT BE, THEREFORE, HELD TO BE ADDITIONAL EVIDENCES IN TERMS OF RULE 46A. THE DEPARTMENT HAS NOT BROUGHT ANYTHING ON RECORD THAT THESE EVIDENCES WERE NOT FILED BEFORE THE A.O. 8. MOREOVER, FORM NO.32 FILED BEFORE THE REGISTRAR OF COMPANIES IS A PUBLIC RECORD WHIC H DOES NOT REQUIRE ANY VERIFICATION OR INVESTIGATION ON FACTS STATED THEREIN. THEREFORE, IN VIEW OF THE ABOVE FACTS AND THE CATEGORICAL FINDING OF THE CIT(A), WE HOLD THAT THE AMOUNTS PAID TO KEYMEN INSURANCE IN THE NAME OF THREE DIRECTORS ITA NO : 6692/MUM/2010 5 ACIT.CIR.6(1),MUM. VS. M/S BHARAT BIJLEE LTD. SHOULD BE ALLOWED. ACCORDINGLY GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 9 . IN GROUND NO.2, THE DEPARTMENT HAS CHALLENGED THE ALLOWANCE OF EXPENDITURE BY THE CIT(A) AMOUNTI NG TO RS.18,45,709/- PERTAINING TO DEVELOPMENT CHARGES. THE AO NOTED THAT OUT OF TOTAL DEVELOPMENT CHARGES OF RS.33,05,709/- FILED BY THE ASSESSEE, IT ALSO INCLUDED AN EXPENDITURE AMOUNTING TO RS.18, 45,709/- WHICH PERTAINS TO THE EXPENDITURE INCURRED AFTER THE YEAR 1982. IN THE STATEMENT RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS, THE ASSESSEE HAD STATED THAT THE COMPANY IS DOING ACTIVITY OF CONSTRUCTION SINCE THE YEAR 1997. FROM THIS STATEMENT THE ASSESSING OFFICER INFERRED THAT THE PROJECT ITSELF WAS STARTED IN THE YEAR 1997 ONLY AND ACCORDINGLY HE DISALLOWED THE SAID EXPENDITURE, BEING NOT RELATED TO WORK-IN-PROGRESS. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT PROJECT WAS STARTED IN THE YEAR 1982 AND THE EXPENDITURE INCURRED WAS IN THE FORM OF MUNICIPAL TAXES, ARCHITECT FEES, LEGAL FEES, SECURITY C HARGES, ELECTRIC CHARGES ETC.. IT WAS SUBMITTED THAT THESE EXPENDITURES WERE ACCOUNTED AS PART OF THE WORK-IN-PROGRESS AND SINCE IT HAS BEEN FOLLOWING THE PROJECT COMPLETION METHOD FOR OFFERING THE INCOME, THE ACCOUNTING OF THE ABOVE EXPENDITURE AS PART OF THE WO RK-IN-PROGRESS WILL NOT ALTER THE OVERALL RESULT ON PROFIT IN THE YEAR OF COMPLETION OF THE PROJECT. ITA NO : 6692/MUM/2010 6 ACIT.CIR.6(1),MUM. VS. M/S BHARAT BIJLEE LTD. 10 . LEARNED CIT(A) APPRECIATED THE CONTENTION OF THE ASSESSEE AND ALLOWED THE ASSESSEES APPEAL AFTER OBSERVING AND HOLDING AS UNDER :- 10. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND ALSO PERUSED THE OR DER F THE ASSESSING OFFICER. UNDER THIS GROUND OF APPEAL, THE ASSESSING OFFICER HAS DISALLOWED EXPENDITURE AMOUNTING TO RS.18,45,709/- PERTAINING TO DEVELOPMENT CHARGES OUT OF T HE TOTAL CLAIM OF RS.33,05,709/- ON ACCOUNT OF THE REASON THAT THE AMOUNT DISALLOWED PERTAINS TO THE YEAR 1982 ONWARDS. THIS DI SALLOWANCE HAS BEEN MADE MORE PARTICULARLY IN VIEW OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY WHEREIN THE ASSESSEE HAD STATED THAT THE COMPANY HAS STARTED ITS CONSTRUCTION ACTIVITIES SINCE THE YEAR 997. I FIND THAT THE A.O. HAS NOT DOUBTED THE EXPENDITURE AS THE SAME IS ALSO SUPPORTED BY THE DETAILS. THE PAYMENTS ARE MAINLY MADE AS SECURITY CHARGES, MUNICIPAL TAXES AND LEGAL FEES ETC. WHICH CANNOT BE DOUBTED AS THE SAME ARE VERY WELL CONNECTED WITH THE PRESENT PROJECT/WORK IN PROGRESS. SO FAR AS THE STATEMENT RECORDED RUING THE COURSE OF SURVEY IS CONCERNED, THE ASSESSING OFFICER HAS NOT UNDERSTOOD THE SAME IN THE CORRECT PERSPECTIVE. ACCORDING TO THE APPELLANT, THE CORRECT MEANING OF THE STATEMENT IS THAT THE ACTUAL ACTIVITY OF CONSTRUCTION WAS STARTED IN THE YEAR 997 BUT THE APPELLANT HAD MADE CERTAIN EXPENDITURE IN CONNECTION WITH THIS PROJECT SINCE LONG BACK AFTER THE ACQUISITION OF PROPERTY. I AGREE WITH THE APPELL ANT THAT THE EXPENSES INCURRED BEFORE 997 ARE RELATED TO THE PROJECT AND THE SAME ARE ALLOWABLE AS EXPENDITURE. IN VIEW OF THE ABOVE SUBM ISSION AND MATERIAL PLACED ON RECORD, I DIRECT THE ASSESSING OFFICER TO ALLOW THE ENTIRE EXPENDITURE CLAIMED AS DEVELOPMENT CHARGES BY THE APPELLANT6. ACCORDINGLY, THIS GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE APPELLANT. ITA NO : 6692/MUM/2010 7 ACIT.CIR.6(1),MUM. VS. M/S BHARAT BIJLEE LTD. 11 . LEARNED DR VEHEMENTLY RELIED UPON THE FINDINGS OF THE AO AND SUBMITTED THAT ONCE THE CONSTR UCTION HAS BEEN STARTED IN 1997, THE EXPENSES OF MUCH EARLIER YEARS CANNOT BE ALLOWED. 12 . ON THE OTHER HAND, LEARNED AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE PROJECT WAS CO NCEIVED AND STARTED WAY BACK IN THE YEAR 1982. SINCE THERE WERE LOT OF LITIGATIONS RELATING TO PROJECT AND THERE WERE SEVERAL TENANTS AND UNAUTHOR ISED OCCUPANTS, IT TOOK LOT OF TIME FOR CLEARING THE LAND AND HENCE, THE CONSTRUCTION STARTED IN THE YEAR 1997. HOWEVER, THE EXPENSES LIKE I.E. MUNICIPAL TAXES, SECURITY CHARGES, LEGAL FEES ETC. WERE INCURRED. THE DETAILS OF SUCH DEVELOPMENT CHARGES HAVE BEEN PLAC ED AT PAGE 9 OF THE PAPER BOOK. 13 . WE HAVE HEARD THE RIVAL CONTENT IONS OF THE PARTIES AND PERUSED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDERS AND MATERIAL ON RECORD. THE SOLE BASIS FOR DISALLOW ANCE BY THE ASSESSING OFFICER WAS THE STATEMENT RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS WHEREIN THE ASSESSEE HAD STATED THAT COMPANY IS DOING CONSTRUCTION ACTIVITY SINCE YEAR 1997. HOWEVER, NOWHERE FROM THE SAID STATEMENT ITSELF, IT CAN BE INFERRED THAT THE ENTIRE PROJECT WA S NOT IN EXISTENCE PRIOR TO YEAR 1997. WHEN THE ASSESSEE HAS CLAIMED THAT THERE WERE SEVERAL OCCUPANTS ON THE LAND ON WHICH THE PROJECT WAS TO BE STARTED AND TOOK SEVERAL YEARS IN LITIGATION AND THE RELATED EXPENSES INCURRED DURING THAT INTERREGNUM PERIOD, THERE IS NO REBUTTAL OF THIS FACT BY THE ITA NO : 6692/MUM/2010 8 ACIT.CIR.6(1),MUM. VS. M/S BHARAT BIJLEE LTD. ASSESSING OFFICER. HE HAS ALSO NOT DOUBTED THE GENUINENESS OF THE EXPENDITURE AND ALSO THE METHOD OF ACC OUNTING I.E. PROJECT COMPLETION METHOD, FOLLOWED BY THE ASSESSEE. IN ABSENCE OF ANY DETAIL OR ADVERSE MATERIAL ON RECORD, WE DO NOT THINK FIT TO DEVIATE FROM THE FINDING RECORDED BY THE CIT (A). 14 . MOREOVER, THE NATURE AND DETAILS OF EXPENSES AS GIVEN AT PAGE 9 OF THE PAPER BOOK CLEARLY SHOWS THAT IT RELATES TO MUNICIPAL TAXES, ARCHITECT FEES, LEGAL FEES, SECURI TY CHARGES, ELECTRIC CHARGES AND THE AMOUNT PAID FOR TENANCY ETC. FOR THE COMMENCEMENT OF THE PROJECT. THESE EXPENSES CERTAINLY RELATE TO DEVELOPMENT OF THE PROJECT ONLY WHICH HAVE BEEN SHOWN BY THE A SSESSEE AS WORK-IN-PROGRESS. HENCE, NO ADVERSE INFERENCE CAN BE DRAWN. 15 . IN VIEW OF THESE FACTS AND CIRC UMSTANCES OF THE CASE, WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE DEPARTMENT AND, THEREFORE, THE SAME IS DISMISSED. 16 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 20 TH DAY OF APRIL, 2012. SD/- SD/- ( G.E. VEERABHADRAPPA ) ( AMIT SHUKLA ) PRESIDENT JUDICIAL MEMBER MUMBAI, DT: 20 TH APRIL, 2012 ITA NO : 6692/MUM/2010 ACIT.CIR.6(1),MUM. VS. M/S BHARAT BIJLEE LTD. 9 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI PKM