Sanjeev Laroia, New Delhi V. DCIT, Circle-27(1), New Delhi

ITA 6934/DEL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6589 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 20-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Assessee Lawyers: RAJEEV MAGGO
• Keywords: Capital asset; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER ITA NO.6934/DEL/2017 ( ASSESSMENT YEAR: 2012-13) SA NJEEV LAROIA, 504, SAVITRI CINEMA COMPLEX, GR. KAILASH-II, NEW DELHI. V S DCIT CIRCLE 27 (1) NEW DELHI. ASSESSEE BY SHRI RAJEEV MAGGO, CA REVENUE BY SH. S.L. ANURAGI , SR. DR ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASSA ILING THE CORRECTNESS OF THE ORDER DATED 16.10.2017 OF CIT(A) 13 DE LHI PERTAINING TO 2012-13 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS :- 1. THAT THE LD. CIT(A) 13, NEW DELHI HAS WRONGLY INTE RPRETED THE PROVISIONS OF SECTION 57(III) OF THE ACT THUS MAKING THE ORDER PA SSED BAD IN LAW. 2. THE LD. CIT(A), NEW DELHI ERRED IN FACT AND LAW IN UPHOLDING THE DISALLOWANCE OF INTEREST OF RS. 13,20,445.00 CLAIMED U/S 57 (III) W HICH ACT OF THE CIT(A) IS CONTRARY TO THE FACTS OF THE CASE AND AGAINST PROVISIONS OF LAW. 3. THE LD. CIT(A) FAILED TO APPRECIATE THE NATURE OF I NTEREST PAYMENT MADE OF RS. 13,20,445.00 AS ALSO THE CONSEQUENT RECEIPT OF INTE REST OF RS. 12,00,240.00 WHILE UPHOLDING THE DISALLOWANCE, WHICH ACT OF THE LD. CI T(A) IS WRONG BOTH ON FACTS AND IN LAW. 2. LD. AR INVITING ATTENTION TO THE ASSESSMENT ORDE R SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS RECEIV ED INTEREST OF RS. 12,00,240/- FROM ERA LANDMARK, NOIDA AGAINST SPACE BOOKE D IN THEIR UPCOMING PROJECT AT GREATER NOIDA. FOR ACQUIRING THE SAID PROPERTY, THE ASSESSEE HAD AVAILED LOAN OF RS. 75,75,000/- FROM ICIC I HOME FINANCE CO. AND PAID INTEREST OF RS. 13,20,445/- DURING THE RELEVANT ASSESSMENT YEAR. THE SAID INTEREST, IT WAS SUBMITTED, HAS BEEN SET OFF AGAINST THE INTEREST RECEIVED FROM ERA LANDMARK. INVITIN G ATTENTION TO PAGE 2 OF THE ASSESSMENT ORDER IT WAS SUBMITTED THAT T HE ASSESSEE WITHOUT GOING THROUGH THE SPECIFIC AGREEMENT ON A MISUNDE RSTANDING OF FACTS MADE AN INCORRECT SUBMISSION STATING THAT THE INTER EST HAD BEEN RECEIVED ON ACCOUNT OF DELAY IN COMPLETION OF THE PROJECT. THE SAID SUBMISSION, IT WAS SUBMITTED, HAS BEEN EXTRACTED IN PARA (C )OF THE ASSESSMENT ORDER. THE ASSESSEE EXPLAINED THE CORRECT FA CTS BEFORE THE DATE OF HEARING 03 .07 .2018 DATE OF PRONOUNCEMENT 27.07. 2018 ITA-6934/DEL/2017 PAGE 2 OF 4 CIT(A) AND INVITED ATTENTION TO THE IMPUGNED ORDER. IT WA S SUBMITTED THAT THE ASSESSEE HAD INVITED ATTENTION OF THE CIT(A) TO THE BUYERS AGREEMENT DATED 23.7.2008 AND HAD INVITED SPECIFIC ATTENTIO N TO THE VARIOUS PLANS LIKE DISCOUNTED CASH DOWN PAYMENT PLAN REFERRED TO IN PARA 2B(I) EXTRACTED AT PAGES 4 AND 5 OF THE IMPUGNED O RDER. REFERRING TO THE CLAUSE 3 OF CASH DOWN PLAN SPECIFICALLY SUB-CLAUSE (D) APPLICABLE TO THE ASSESSEE WAS REFERRED TO. HOWEVER THE CIT(A) WHILE PASSING THE ORDER THOUGH REFERRED TO THESE SUBMISSIONS, HOWEVER CO NFUSED HIMSELF ON FACTS INCORRECTLY HOLDING THAT THE RECEIPT OF PAYMENT WAS ON ACCOUNT OF DELAYED CONSTRUCTION OF THE PROJECT. 3. IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE IT WA S HIS SUBMISSION THAT CONSIDERING THE CORRECT FACTS NECESSARY RELIEF MAY BE GRANTED. 4. LD. SR. DR RELYING UPON THE ORDERS THROUGH CONCEDING THAT THERE APPEARS TO BE A CONFUSION ON FACTS, HOWEVER, IT WAS HIS RE QUEST THAT THE ISSUE MAY BE REMANDED TO THE A.O. FOR FRESH CONSIDERATION AND NOT THE CIT(A). THE SAID REQUEST WAS NOT OPPOSED BY THE LD. AR AND HE AGREED THAT IT MAY BE REMANDED. 5. I HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATER IAL AVAILABLE ON RECORD. I FIND THAT ON ACCOUNT OF INCORRECT SUBMISSION ON FACT BY THE ASSESSEE DESPITE THE FACT THAT THE BUYER AGREEMENT WA S AVAILABLE BEFORE THE A.O. THE MISTAKE HAS OCCURRED. I ALSO FIND THAT THE S PECIFIC CLAUSES HAVE BEEN EXTRACTED IN THE WRITTEN SUBMISSIONS BEFORE TH E CIT(A)., HOWEVER THE RELEVANT FACTS APPEAR TO HAVE BEEN IGNORED WHILE PASSING THE ORDER. IN THESE PECULIAR FACTS AND CIRCUMSTANCES I D EEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER ACCEPTING T HE ORAL PRAYER OF THE SR. DR AND RESTORE THE ISSUE BACK TO THE FILE OF THE A.O. THE RELEVANT FACTS ON RECORD AS EXTRACTED IN THE IMPUGNED ORDER ITSE LF WHICH HAS REMAINED IGNORED IS REPRODUCED FROM THE IMPUGNED ORDER HEREUNDER :- A. IN MAKING THE DISALLOWANCE THE LD. AD. WHILE REFER RING TO THE PROVISION OF SECTION 57(III) HELD THAT THE INTEREST INCURRED FOR ACQUISITION OF CAPITAL ASSET IS CAPITAL IN NATURE. B. THE AO RELIED ON ASSESSEE'S SUBMISSIONS MADE DUR ING ASSESSMENT PROCEEDINGS WHEREIN IT WAS CONTENDED THAT THE DEVELOPERS HAD BE EN PAYING INTEREST TO THE ASSESSEE FOR DELAYED COMPLETION OF THE PROJECT AND DID NOT AGREE WITH IT. 2. ASSESSEE'S SUBMISSIONS A. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A COPY OF THE BUYER'S AGREEMENT DATED 23.07.2008 ENTERED BY HIM WITH ERA LANDMARKS (INDIA) LIMITED, THE DEVELOPERS'. THE AGREEMENT ENTERED WAS FOR PURCHASE OF A COMMERC IAL UNIT MEASURING 1,750 SQ. FT. APPROXIMATELY' THE DEVELOPERS PROJECT 'L. T . SQUARE', AT GREATER NOIDA, ITA-6934/DEL/2017 PAGE 3 OF 4 UTTAR PRADESH, INDIA. THE ASSESSEE WAS ALLOTTED UNI T C-03 IN THE SAID BUILDING UNDER CONSTRUCTION. B. THE COST OF THE BUILDING, AS PER THE AGREEMENT W AS RS.92,75,OOO.00 APP. @ RS.5,300.00 PER SQ. FT .. AS PER THE BUYER'S AGREEM ENT, THE DEVELOPER HAD OFFERED VARIOUS OPTIONS FOR MAKING THE PAYMENT OF T HE SALE PRICE AS MENTIONED IN CLAUSE A.2 OF THE AGREEMENT:- I. DISCOUNTED CASH DOWN PLAN IN THIS PLAN, THE INTENDED ALLOTTEE GETS A DISCOUNT OF RS.12,36,243.00 THEREBY REDUCING THE SALE PRICE OF THE UNIT TO RS.80,38,757 .00 COMPUTED AT RS.4,593.57 PER SQ. FT. II. CONSTRUCTION PLAN THIS PLAN IS CONSTRUCTION LINKED PAYMENT IN INSTALL MENT PLAN COMPRISING OF A CERTAIN PERCENTAGE OF DOWN PAYMENT AND BALANCE TO B E PAID IN INSTALLMENTS AS AND WHEN THE CONSTRUCTION REACHES A CERTAIN STAGE O F COMPLETION. III. CASH DOWN PLAN IN THIS PLAN ALSO, THE INTENDED BUYER AGAIN MAKES A BULLET PAYMENT AS IN CASE OF DISCOUNTED CASH DOWN PLAN. C. THE BUILDING WAS PROJECTED TO BE COMPLETED BY 30 TH SEPTEMBER 2009 AT THE OUTSET AND BE READY FOR OCCUPATION BY 30TH OCTOBER 2009 AS PER THE AGREEMENT. THERE WAS NO PROVISION IN AGREEMENT FOR PAYMENT OF INTEREST BY THE DEVELOPER ON DELAYED COMPLETION / HANDOVER OF THE PROPERTY. T HE DEVELOPER OFFERED TO PAY AT THE TIME OF POSSESSION PROPORTIONATE DISCOUNT BA SED DISCOUNT PROVIDED ON BOOKING IN CASE OF ANY DELAY IN OFFER OF POSSESSION BEYOND STIPULATED DATE. D. THE DEVELOPER HAS BEEN PAYING INTEREST TO THE AS SESSEE UNDER THE CLAUSE THAT WHERE THE ALLOTTEE (BUYER) HAS OPTED TO THE CASH DO WN PLAN (LATER MODIFIED TO INCLUDE DISCOUNTED CASH DOWN PLAN BY MUTUAL AGREEME NT) THE DEVELOPER SHALL PAY SUCH INTENDING ALLOTTEE RS. PER MONTH AS ASSURED RETURN ON THE AMOUNT SO RECD , (REFER PAGE 5 OF THE BUYER'S AGREEME NT) AT PAGE 18- 32 OF THE PAPER BOOK. E. THE ASSESSEE, IN ORDER TO EARN INTEREST ON THE I NVESTMENT, MADE A ONE TIME PAYMENT OF RS. 75,75,007.00 VIDE CHEQUE DRAWN ON CI TIBANK DATED 01.06.2008 THROUGH LOAN AVAILED FROM 'WIZARD - GE MONEY HOUSING FINANCE'. BALANCE R S.4,63,750.00 WAS TO BE PAID ON OFFER OF POSSESSION. THE AGGREGATE CONSI DERATION OF THE FLAT WAS RS.80,38,757.00 AS AGAINST RS.92,75,000.00 TO BE PA ID UNDER CONSTRUCTION LINKED INSTALLMENT PLAN. F. ON ACCOUNT OF THE BULLET PAYMENT MADE BY THE ASS ESSEE, THE DEVELOPER PAID INTEREST W.E.F 01.04.2009 @ RS. 1,00,020. 00 P.M. F OR WHICH COPIES OF FORM 16A WERE FILED FOR THE ASSESSMENT YEAR. COPIES OF FORM 16A FOR THE YEAR ENDED 31.03.2012 AR E ENCLOSED AT PAGES 35-42 OF THE PAPER BOOK. G. THE FACT THAT THE ASSESSEE WAS RECEIVING INTE REST FROM THE DEVELOPERS, IT WAS CONSTRUED THAT IT ATTRIBUTED TO DELAYED CONSTRUCTION, WHICH WAS AN ERRONEOUS UNDERSTANDING / INFERENCE AND MISR EADING THE TERMS OF CLAUSE RELATING TO ASSURED RETURN ON ALLOTTEE OPTING FOR T HE CASH DOWN PAYMENT PLAN. A READING OF THE BUYER'S AGREEMENT WILL REVEAL THAT THERE IS NO PROVISION FOR THE DEVELOPER PAYING INTEREST TO THE ALLOTTEE FOR DELAY IN HANDING OVER POSSESSION. H. A COPY OF THE BUYER'S AGREEMENT WAS SUBMITTED TO THE A.O. DURING THE ASSESSMENT PROCEEDINGS. I. THE ASSESSEE, OPTED FOR MAKING DISCOUNTED CASH D OWN PAYMENT TO ENSURE EARNING INTEREST AND SUBSEQUENTLY ASSURED RETURNS. J. IF THE INTENT OF THE ASSESSEE WAS JUST TO ACQUIR E THE PROPERTY, THEN AS A PRUDENT PERSON HE WOULD HAVE OPTED FOR CONSTRUCTION LINKED PAYMENT PLAN. THIS IS NORMALLY DONE IN MAJORITY OF TRANSACTIONS. HERE THE INTENT WAS CLEARLY NOT TO JUST ACQUIRE THE ASSET BUT THE EARN INCOME THERE FR OM AS INTEREST AND THEREAFTER ASSURED RETURN WHICH NECESSITATED THE MAKING OF BUL LET PAYMENT FOR WHICH THE LOAN WAS AVAILED. 5.1. ACCORDINGLY, IN THE LIGHT OF THE SUBMISSIONS OF THE PARTIES BEFORE THE BENCH FOR THE DETAILED REASONS GIVEN HEREIN ABOVE, TH E IMPUGNED ITA-6934/DEL/2017 PAGE 4 OF 4 ORDER IS SET ASIDE BACK TO THE AO WITH A DIRECTION TO PA SS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. SAID ORDER WAS PRONOUNCED I N THE OPEN COURT AT THE TIME OF HEARING ITSELF. 6. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ON 27.07. 2018. SD/- (DIVA SINGH) JUDICIAL MEMBER VEENA/POONAM(CHD) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI