DCIT, Chandigarh V. M/s Silver City Housing & Infrastructure Ltd., Chandigarh

ITA 691/CHANDI/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9776 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Initiation of penalty proceedings; Non passing of speaking order; Commercial expediency
• Section: 80IB; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 691/CHD/2013 ASSESSMENT YEAR: 2009-10 THE DCIT, VS M/S SILVER CITY HOUSING & CIRCLE-1(1), INFRASTRUCTURE LTD., CHANDIGARH. HOUSE NO. 89, SECTOR 8-A, CHANDIGARH. PAN: AAKCS4654H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL RESPONDENT BY : SHRI TEJ MOHAN SINGH DATE OF HEARING : 12.07.2016 DATE OF PRONOUNCEMENT : 18.07.2016 O R D E R PER BHAVNESH SAINI, JM THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS), CHANDIGARH DATED 04.03.2013 FOR ASSESSMENT YEAR 2009-10 ON THE FOLLOWING GROUNDS : '1. WHETHER ON FACTS AND CIRCUMSTANCES THE LD. CI T(A) HAS ERRED IN DELETING THE DISALLOWANCE OF DEDUCTION U/S 80IB(10) OF IT. ACT, 1961 AT RS.84,77,436/- AS THE ASSESSEE FAILED TO PRODUCE SE PARATE BOOKS OF ACCOUNTS, FOR PROJECTS FOR WHICH DEDUCTION U/S 80-I B HAS BEEN CLAIMED BY THE ASSESSEE, DURING THE COURSE OF ASSESSMENT PR OCEEDINGS. 2 2. 'WHETHER ON FACTS AND CIRCUMSTANCES THE LD. CIT( A) HAS ERRED IN FOLDING THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80- IB OF THE INCOME TAX ACT, 1961 AND ASSERTING THAT THE DISALLOWANCE OF RS .5,85,206/- MADE BY THE AO ON ACCOUNT OF DEPRECIATION ON HOUSE PROPERTY WILL RESULT INTO INCREASING THE DEDUCTION U/S 80-IB AND SO THE DISAL LOWANCE WILL NOT MATERIALLY AFFECT THE TOTAL INCOME AS THE DECISION OF THE ID. CIT(A) ON THE ISSUE OF DEDUCTION U/S 80-IB IS ALSO RIOT ACCEP TABLE AS PER GROUND OF APPEAL NO.1.' 3. 'WHETHER ON FACTS AND CIRCUMSTANCES THE LD. C IT(A) HAS ERRED IN HOLDING THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80- IB OF THE INCOME TAX ACT, 1961 AND ASSERTING THAT THE DISALLOWANCE OF BUSINESS EXPENDITURE OF RS.33,83,483/- MADE BY THE AO U/S 3 6(1) OF THE INCOME TAX ACT, 1961 WILL RESULT INTO INCREASING THE DEDUC TION U/S 80-IB AND SO THE DISALLOWANCE WILL NOT MATERIALLY AFFECT THE TOTAL INCOME AS THE DECISION OF THE ID. CIT(A) ON THE ISSUE OF DEDUCTIO N U/S 80-IB IS ALSO NOT ACCEPTABLE AS PER GROUND OF APPEAL NO,1.' 4. 'WHETHER ON FACTS AND CIRCUMSTANCES THE LD. CIT( A) HAS ERRED IN HOLDING THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961 AND ASSERTING THAT THE DISALLOWANCE O F RS.79,95,958/- MADE BY THE AO ON ACCOUNT OF 25% DIRECT AND INDIREC T EXPENSES AS NON- GENUINE EXPENDITURE WILL RESULT INTO INCREASING THE DEDUCTION U/S 80-IB AND SO THE DISALLOWANCE WILL NOT MATERIALLY AFFECT THE TOTAL INCOME AS THE DECISION OF THE ID. CIT(A) ON THE ISSUE OF DEDUCTIO N U/S 80-IB IS ALSO NOT ACCEPTABLE AS PER GROUND OF APPEAL NO.1.' 5. 'WHETHER ON FACTS AND CIRCUMSTANCES THE LD. CIT(A) HAS ERRED IN HOLDING THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961 AND ASSERTING THAT THE DISALLOWANCE O F RS.24,52,005/-, MADE BY THE AO U/S 36(1)(III)OF THE IT ACT, 1961 ON ACCOUNT OF DIVERSION OF FUNDS TO RELATED PARTIES WITHOUT ANY B USINESS OR COMMERCIAL EXPEDIENCY, WILL RESULT INTO INCREASING THE DEDUCTION U/S 80-IB AND SO THE DISALLOWANCE WILL NOT MATERIALLY A FFECT THE TOTAL INCOME AS THE DECISION OF THE ID. CIT(A) ON THE ISSUE OF D EDUCTION U/S 80-IB IS ALSO NOT ACCEPTABLE AS PER GROUND OF APPEAL NO.1. 3 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE FILED RETURN OF INCOME DECLARING NIL INCOME AFTER CLAIM ING DEDUCTION UNDER SECTION 80IB(10) OF THE INCOME TAX ACT. THE ASSESSING OFFICER NOTED IN THE IMPUGNED ORDER VARIOUS FACTS IN WHICH ASSESSEE WAS DIRECTED TO PRO DUCE COMPLETE BOOKS OF ACCOUNT AND SUPPORTING DOCUMENTS BUT ASSESSEE DID NOT PRODUCE THE SAME IN SUPPORT OF THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. TH E ASSESSING OFFICER ALSO NOTED IN PARA 6 OF THE ASSES SMENT ORDER VARIOUS DATES OF HEARING WHEN ASSESSEE WAS REQUIRED TO FURNISH SEVERAL DETAILS WHICH INCLUDES PRODUCTION OF THE BOOKS OF ACCOUNT, DETAILS OF EXPE NSES AND OTHER RELATED DETAILS OF HOUSING PROJECT RAISED BY THE ASSESSEE, HOWEVER, NO DOCUMENTS AND BOOKS OF ACCOUN T WERE PRODUCED BEFORE ASSESSING OFFICER THEREFORE, ASSESSING OFFICER PROCEEDED TO PASS EX-PARTE ASSESS MENT ORDER UNDER SECTION 144 OF THE INCOME TAX ACT AND M ADE THE ABOVE ADDITIONS. 3. THE ASSESSEE CHALLENGED THE ADDITIONS BEFORE LD. CIT(APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER IN WHICH ASSESSEE BRIEFLY EXPLAINED THAT ASSESSEE IS ELIGIBLE FOR CLA IMING DEDUCTION UNDER SECTION 80IB(10) OF THE ACT AS THE ASSESSEE IS ENGAGED IN THE BUSINESS OF HOUSING AND COMPLIED WITH CONDITIONS OF SECTION 80IB(10) OF THE ACT FOR TWO PROJECTS I.E. SILVER CITY GREENS AND SILVER CITY HEIGHTS. THE LD. CIT(APPEALS) ACCEPTED THE CONTENT ION OF 4 THE ASSESSEE AND ALLOWED THE CLAIM OF ASSESSEE UNDE R SECTION 80IB(10) OF THE ACT AND DELETED THE ABOVE ADDITIONS. HIS FINDINGS IN PARA 3.3 TO PARA 7 OF T HE APPELLATE ORDER ARE REPRODUCED AS UNDER : 3.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL. I HAVE ALSO GONE THROUGH THE VARIOUS REPLIES FILED BY THE APPELLANT BEFORE THE ASSESSING OFFICER. A PERUSAL O F THESE REPLIES REVEALS THAT THE APPELLANT HAD DULY FILED EXPLANATI ON TO THE VARIOUS QUERIES MADE BY THE ASSESSING OFFICER. THE LD. COUN SEL HAS EXPLAINED THAT ALL THE CONDITIONS ENUMERATED IN SEC TION 80IB(10) WERE FULFILLED IN THE CASE OF THE TWO PROJECTS, NAMELY - SILVER CITY HEIGHTS AND SILVER CITY GREENS. THE APPELLANT IS ALSO MAINT AINING SEPARATE BOOKS OF ACCOUNTS IN RESPECT OF THE PROJEC TS, ELIGIBLE FOR DEDUCTION U/S 80IB(10) AND THE SAME HAVE BEEN PRODU CED EVEN IN THE APPELLATE PROCEEDINGS. THE OTHER OBSERVATIONS O F THE ASSESSING OFFICER IN PARA 6 OF THE ASSESSMENT ORDER, THOUGH N OT RELEVANT FOR DISALLOWING DEDUCTION U/S 80IB, WERE REPLIED BY THE APPELLANT, WHICH IS EVIDENT FROM THE COPIES OF REPLIES FILED I N THE APPELLATE PROCEEDINGS. THE APPELLANT IS MAINTAINING SEPARATE BOOKS OF ACCOUNTS AND FULFILLS ALL OTHER CONDITIONS MENTIONE D IN SECTION 80IB(10) AND SO IS ELIGIBLE FOR DEDUCTION U/S 80IB. HENCE, THE DISALLOWANCE OF DEDUCTION CLAIM ED U/S 80IB IS DELETED. GROUNDS OF APPEAL NOS. 4 AND 5 ARE ALLOWED . 4. GROUND OF APPEAL NO. 6 IS AGAINST DISALLOWANCE OF D EPRECIATION OF RS. 5,85,206/- IN RESPECT OF HOUSE NO. 241, SECT OR-15-A, CHANDIGARH, BEING USED AS OFFICE BY THE APPELLANT A ND AGAINST INITIATING PENALTY PROCEEDINGS U/S 271(L)(C) OF TH E ACT. AS THE APPELLANT HAS BEEN HELD ELIGIBLE FOR DEDUCTION U/S 80IB, ANY DISALLOWANCE OF BUSINESS EXPENDITURE WILL RESULT IN TO INCREASING THE DEDUCTION U/S 80IB AND SO THE DISALLOWANCE WILL NOT MATERIALLY AFFECT THE TOTAL INCOME. REGARDING INI TIATION OF PENALTY PROCEEDINGS, IT MAY BE MENTIONED THAT THIS GROUND I S PREMATURE, SINCE PENALTY HAS NOT BEEN LEVIED. HENCE THIS GRO UND OF APPEAL IS TREATED AS PARTLY ALLOWED. 5 5. GROUND OF APPEAL NO. 7 IS AGAINST THE DISALLOWANCE OF EXPENDITURE OF RS. 33,83,483/- AND AGAINST INITIATI ON OF PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT. AS THE APPEL LANT HAS BEEN HELD ELIGIBLE FOR DEDUCTION U/S 80IB, ANY DISALLOWANCE O F BUSINESS EXPENDITURE WILL RESULT INTO INCREASING THE DEDUCTI ON U/S 80IB AND SO THE DISALLOWANCE WILL NOT MATERIALLY AFFECT THE TOTAL INCOME. REGARDING INITIATION OF PENALTY PROCEEDINGS, IT MAY BE MENTIONED THAT THIS GROUND IS PREMATURE, SINCE PEN ALTY HAS NOT BEEN LEVIED. HENCE THIS GROUND OF APPEAL IS TR EATED AS ALLOWED. 6 GROUND OF APPEAL NO. 8 IS AGAINST THE DISALLOWANC E OF 25% OF DIRECT AND INDIRECT EXPENSES OF RS. 79,95,928/- AS NON-GENUINE EXPENDITURE AND AGAINST INITIATING PENALTY PROCEEDI NGS U/S 27L(L)(C) OF THE ACT. AS THE APPELLANT HAS BEEN HELD ELIGIBLE FOR DEDUCTION U/S 80IB, ANY DISALLOWANCE OF BUSINESS EX PENDITURE WILL RESULT INTO INCREASING THE DEDUCTION UNDER SECTION 80IB AND SO THE DISALLOWANCE WILL NOT MATERIALLY AFFECT THE T OTAL INCOME. REGARDING INITIATION OF PENALTY PROCEEDINGS, IT MAY BE MENTIONED THAT THIS GROUND IS PREMATURE, SINCE PENALTY HAS NOT BEEN LEVIED. HENCE THIS GROUND OF APPEAL IS TREATED AS A LLOWED. 7. GROUND OF APPEAL NO. 9 IS AGAINST THE DISALL OWANCE OF INTEREST OF RS. 24,52,002/- U/S 36(L)(III) OF THE ACT AND AGAIN ST INITIATING PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT. AS TH E APPELLANT HAS BEEN HELD ELIGIBLE FOR DEDUCTION U/S 80IB, ANY DISA LLOWANCE OF BUSINESS EXPENDITURE WILL RESULT INTO INCREASING TH E DEDUCTION U/S 80IB AND SO THE DISALLOWANCE WILL NOT MATERIALLY AF FECT THE TOTAL INCOME. REGARDING INITIATION OF PENALTY PROCEEDINGS , IT MAY BE MENTIONED THAT THIS GROUND IS PREMATURE, SINCE PENALTY HAS NOT BEEN LEVIED. HENCE THIS GROUND OF A PPEAL IS TREATED AS ALLOWED. 4. THE LD. DR CONTENDED THAT LD. CIT(APPEALS) DID N OT PASS ANY SPEAKING ORDER AS REQUIRED BY LAW AND THAT ASSESSEE DID NOT PRODUCE THE REQUIRED DETAILS BEFOR E 6 ASSESSING OFFICER AT ASSESSMENT STAGE, THEREFORE, T HE DOCUMENTS PRODUCED BEFORE LD. CIT(APPEALS) SHOULD B E REMANDED TO THE ASSESSING OFFICER FOR FILING A REMA ND REPORT. ON THE OTHER HAND, LD. COUNSEL FOR THE ASS ESSEE REITERATED THE SUBMISSIONS BEFORE LD. CIT(APPEALS) AND SUBMITTED THAT ASSESSEE PRODUCED COMPLETE DETAILS A S WELL AS PRODUCED THE BOOKS OF ACCOUNT BEFORE LD. CIT(APPEALS) AND SATISFIED THAT ASSESSEE HAS FULFIL LED CONDITIONS OF SECTION 80IB(10) OF THE ACT. WHEN LD . COUNSEL FOR THE ASSESSEE WAS DIRECTED TO SHOW FROM THE FINDINGS OF LD. CIT(APPEALS) WHETHER LD. CIT(APPEAL S) HAS CONSIDERED THE CONDITIONS OF SECTION 80IB(10) OF TH E ACT IN THE IMPUGNED ORDER, LD. COUNSEL FOR THE ASSESSEE WAS NOT ABLE TO EXPLAIN ANYTHING ON THIS ISSUE. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE FINDINGS OF AUTHORITIES BELOW. THE ASSESSING O FFICER NOTED IN THE ASSESSMENT ORDER THAT ASSESSEE MADE A CLAIM OF SECTION 80IB(10) OF THE ACT AND WAS ASKED TO PRODUCE BOOKS OF ACCOUNT ALONGWITH SUPPORTING BILLS AND VOUCHERS WHICH HAVE NOT BEEN PRODUCED AT ASSESSMENT STAGE. SINCE ASSESSEE IS IN THE BUSINESS OF HOUSIN G AND REAL ESTATE AND ENGAGED IN CONSTRUCTION OF VARIOUS HOUSING PROJECTS, THEREFORE, ASSESSING OFFICER WAS JUSTIFIED IN ASKING FOR COMPLETE DETAILS AND PRODUC TION OF BOOKS OF ACCOUNT IN ORDER TO SATISFY THE CONDITI ONS OF SECTION 80IB(10) OF THE ACT. THE ASSESSING OFFICER NOTED SEVERAL DETAILS SPECIFICALLY IN THE ASSESSMENT ORDE R 7 WHICH HAVE NOT BEEN COMPLETED WITH BY THE ASSESSEE WHICH INCLUDES PRODUCTION OF THE COMPLETE BOOKS OF ACCOUNT. THE ASSESSING OFFICER, THEREFORE, FEELING NO ALTERNATE, PROCEEDED EX-PARTE AND MADE THE BEST JUDGEMENT ASSESSMENT UNDER SECTION 144 OF THE ACT. IF ACCORDING TO LD. COUNSEL FOR THE ASSESSEE, ASSESSEE PRODUCED BOOKS OF ACCOUNT AND COMPLETE DETAILS BEFO RE ASSESSING OFFICER, IT WAS DUTY OF THE LD. CIT(APPEA LS) TO MENTION IN HIS FINDINGS THAT EX-PARTE ORDER UNDER SECTION 144 PASSED BY THE ASSESSING OFFICER WAS INCORRECT OR WAS AGAINST THE FACTS OF THE CASE. T HE LD. CIT(APPEALS) DID NOT GIVE ANY SUCH FINDING IN THE IMPUGNED ORDER. ACCORDING TO SECTION 80IB(10) OF T HE ACT, THE AUTHORITIES BELOW SHALL HAVE TO CONSIDER V ARIOUS CONDITIONS BEFORE GRANTING DEDUCTION UNDER SECTION 80IB(10) OF THE ACT I.E. AS TO WHEN THE ASSESSEE HAS UNDERTAKEN AND COMMENCED THE HOUSING PROJECT/DEVELOPMENT/RAISED CONSTRUCTION OF HOUSING PROJECT, THE APPROVAL FROM THE LOCAL AUTHORITY, ARE A OF THE HOUSING PROJECT, PART OF COMMERCIAL ESTABLISHME NT RAISED IN HOUSING PROJECT AND WHETHER ONE OR MORE RESIDENTIAL UNITS HAVE BEEN ALLOTTED TO ONE INDIVID UAL OR NOT, MEANING THEREBY, THERE ARE SEVERAL CONDITIONS PRESCRIBED UNDER SECTION 80IB(10) OF THE ACT WHICH SHALL HAVE TO BE SATISFIED BY THE ASSESSEE BY PRODUCING B OOKS OF ACCOUNT AND RELEVANT DOCUMENTS. THE ASSESSING OFFICER SPECIFICALLY NOTED THAT ASSESSEE DID NOT PR ODUCE 8 ANY MATERIAL BEFORE HIM TO SATISFY THE ABOVE CONDIT IONS OF SECTION 80IB(10) OF THE ACT. 5(I) THE LD. CIT(APPEALS) MERELY ACCEPTED THE CONTENTION OF THE ASSESSEE WITHOUT DISCUSSING THE EVIDENCE OR MATERIAL IN THE IMPUGNED ORDER AS TO HO W THE ASSESSEE HAS SATISFIED THE CONDITIONS OF SECTIO N 80IB(10) OF THE ACT, THEREFORE, THE ORDER OF THE LD . CIT(APPEALS) IS CLEARLY NON SPEAKING ORDER WITHOUT CONSIDERING THE EVIDENCE AND MATERIAL ON RECORD AS WELL AS WITHOUT SATISFYING THE CONDITIONS OF SECTION 80I B(10). IF LD. CIT(APPEALS) CONSIDERED THE EVIDENCES PRODUC ED BEFORE HIM AT APPELLATE STAGE WHICH WERE NOT PRODUC ED BEFORE ASSESSING OFFICER, LD. CIT(APPEALS) SHOULD H AVE REMANDED THOSE EVIDENCES AND MATERIAL TO THE ASSESS ING OFFICER FOR FILING REMAND REPORT BY THE ASSESSING O FFICER BUT NOTHING HAS BEEN DONE IN THE MATTER. 6. CONSIDERING THE ABOVE DISCUSSION, WE ARE OF THE VIEW THE ORDER OF THE LD. CIT(APPEALS) CANNOT BE SUSTAINED IN LAW. WE, ACCORDINGLY, SET ASIDE THE O RDER OF LD. CIT(APPEALS) AND RESTORE THE APPEAL OF THE ASSESSEE TO HIS FILE WITH DIRECTION TO RE-DECIDE TH E APPEAL OF THE ASSESSEE STRICTLY IN ACCORDANCE WITH LAW BY PASSING REASONED ORDER CONSIDERING THE EVIDENCES AN D MATERIAL ON RECORD. THE LD. CIT(APPEALS) SHALL GI VE REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS WELL AS TO THE ASSESSING OFFICER AND MA Y 9 ALSO CALL FOR THE REMAND REPORT FROM THE ASSESSING OFFICER. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA GUPTA) (BHAVNESH SA INI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH JULY, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD