ACIT, CHENNAI V. M/s. Pranam Foundations, CHENNAI

ITA 696/CHNY/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4703 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 12-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Document seized; Block assessment; Documents seized
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH B : CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER] I.T.A.NO.696/MDS/2007 ASSESSMENT YEAR : 2001-02 THE ACIT CIRCLE XIII CHENNAI VS M/S PRANAM FOUNDATIONS G-112, ANNA NAGAR CHENNAI - 40 [PAN - AAEFP8019N ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.B.SEKARAN, CIT/DR RESPONDENT BY : SHRI S. SRIDHAR O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE, FOR ASSES SMENT YEAR 2001-02, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), CHENN AI, DATED 6.12.2006. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 24.10.2001 ADMITTING A TOTAL INCOME OF ` 49,540/-. CONSEQUENTLY, REGULAR ASSESSMENT WAS MA DE ON 29.3.2004 ON A TOTAL INCOME OF ` 21,12,840/-. THE ASSESSEE IS A PARTNERSHIP FIRM AND ITS OFFICE PREMISES WERE SEARCHED U/S 132 OF TH E ACT ON 26.9.2000. THE ASSESSEE-FRIM IS DOING THE BUSINESS ACTIVITIES OF BUILDING ITA 696/007 :- 2 -: CONTRACTORS/FLAT PROMOTERS. BLOCK ASSESSMENT U/S 158BC FOR THE BLOCK PERIOD 1.4.1992 TO 26.9.2000 WAS COMPLETED ON 30.9.2000 ASSESSING TOTAL TAXABLE UNDISCLOSED INCOME AT ` 70,48,297/-. FOR ASSESSMENT YEAR 2001-02, THE ASSESSEE DISCLOSED NIL INCOME. THE ASSESSEE HAD DEBITED EXPENSES IN THE BOOKS OF ACCOU NT AS CONSTRUCTION EXPENSES AGAINST GROSS RECEIPTS. THE ASSESSING OFF ICER TREATED THESE EXPENSES AS INFLATION OF COST OF CONSTRUCTION AND A RRIVED AT A FIGURE OF ` 49,78,863/- OF SUCH INFLATION OF CONSTRUCTION EXPEN DITURE AFTER CALCULATING PROPER CONSTRUCTION EXPENSES AND TALLYI NG IT WITH AVERAGE COST AS PER ASSESSEES OWN WORKING AS ON 31.3.2000 @ ` 502/- PER SQ FT. THIS AMOUNT F ` 49,78,863/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME. HOWEVER, FOR THE BLOCK PERIOD ENDING 26.9 .2000, THE DISALLOWANCE WAS PROPORTIONATELY WORKED OUT WITH RE FERENCE TOTAL SALES MADE UNTIL 26.9.2000 AND WORKED OUT RELATABLE DISAL LOWANCE, AT ` 30,79,298 AND THE BALANCE AMOUNT OF ` 18,99,564/- WAS CONSIDERED AS DISALLOWANCE IN ASSESSMENT YEAR 2001-02 WHICH IS UN DER CONSIDERATION. BEING AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFO RE THE LD. CIT(A), WHO, AFTER CONSIDERING THE WRITTEN SUBMISSION OF T HE ASSESSEE, HAS DELETED THE ENTIRE ADDITION. NOW THE REVENUE IS AG GRIEVED AND HAS RAISED THE FOLLOWING GROUNDS: ITA 696/007 :- 3 -: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY T O LAW AND FACTS OF THE CASE. 2. THE DECISION RELIED BY THE CIT(A) IN RESPECT OF THE BLOCK PERIOD IS NOT ACCEPTED BY THE DEPARTMENT AND APPEAL HAS BEEN PREFERRED AND THE SAME IS PENDING. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE DISALLOWANCE REPRESENTS THE MONEY PAID TOWARDS ILLE GAL GRATIFICATION OF VARIOUS AUTHORITIES AND PROTECTION MONEY PAID TO ANTI SOCIAL ELEMENTS. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADD UCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING O FFICER RESTORED. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ANXIO USLY CONSIDERED THE AVAILABLE EVIDENCE IN CONJUNCTION TH EREWITH. THE WRITTEN SUBMISSIONS OF THE ASSESSEE PRODUCED BEFOR E THE LD. CIT(A) ARE AS UNDER: THE ISSUES INVOLVED ARE TWO FOLD: THE ASSESSEE IS ENGAGED IN CONSTRUCTION OF RESIDENTIAL FLATS AT BANGALORE. A SEARCH U/S 132 O F THE IT ACT TOOK PLACE ON 26-09-2000 IN THE ASSESSEE'S OFFI CE AT BANGALAORE AND RESIDENCE OF THE PARTNER AT CHENNAI. DURING THE SEARCH, NO UNACCOUNTED JEWELLERY WAS FOU ND AND ONLY A CASH OF ` 2.10 LAKHS WAS FOUND IN EXCESS OF CASH BALANCE RECORDED IN THE BOOKS. DURING THE ENQUIRY, IT WAS FOUND THAT THERE WAS A RECEIPT OF ` 93,23,261/- FROM THE FLAT OWNERS ON VARIOUS DATES TOWARDS THE EXTRA AMENITIES PROVIDED FOR THE EXISTING FLATS. THESE RECEIPTS HAVE TO BE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT BUT OUT OF THIS ONLY A SUM OF ` 53,54,262/- HAS BEEN ACCOUNTED FOR AND OFFERED AS RECEIPTS, LEAVING A BALANCE OF ` 39,68,999/- VIDE PAGES 7 & 8 OF THE ASSESSMENT ORDER FOR THE BLOCK PERIOD. TO OVERCOME THIS, THE ASSESSEE HAS OFFERED A SUM OF ` 40 LAKHS ROUNDLY AS UNDISCLOSED INCOME IN THE RETURN I N FORM ITA 696/007 :- 4 -: NO.2D FOR THE BLOCK PERIOD ENDING 26-09-2000. IN EF FECT THERE IS NO ADDITION CALLED FOR TO BE MADE EITHER I N THE BLOCK PERIOD OR IN THE RESIDUAL PERIOD ON THE ABOVE FACTS. HENCE NO ADDITION HAS BEEN MADE ON THIS ISSUE AS TH E FACTS HAS BEEN FULLY APPRECIATED AND ACCEPTED BY TH E AO. THE SECOND ISSUE IS WITH REGARD TO THE EXPENDITU RE DETAILS FOUND IN SPIRAL NOTE BOOK WHICH IS IN THE S EIZED MATERIALS. ACCORDING TO THIS, THE AMOUNT OF EXPENSE S INCURRED FOR THE CONSTRUCTION IS ` 90,08,500/- AND ACCOUNTED FOR SINCE IT IS COVERED BY THE RECEIPT OF ` 93,23,261/- SEPARATELY RECORDED FOR WHICH EXPLANATI ON HAS ALSO BEEN OFFERED AND ACCEPTED BY THE DEPARTMEN T AS NARRATED IN PREVIOUS PARA. THE SPIRAL NOTE BOOK, HA S ALREADY BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT ON WHICH THERE IS NO DISPUTE, BUT WHILE ADMITTING SO, THE AO HAS ESTIMATED ` 49,78,863/- AS DISALLOWABLE EXPENSES NOT TO BE ALLOWED AND HAS MADE AN ADDITION BIFURCATING THE SAME AS ` 30,79,298/- RELATING TO THE BLOCK PERIOD AND THE BALANCE OF ` 18,99,564/- FOR THE RESIDUAL PERIOD IN THE SAME YEAR. FACTUALLY, NO ADDITION NEEDS TO BE CALLE D FOR SINCE THE RECEIPTS OF ` 93,23,261/- I.E. ` 53,54,262 + ` 40,00,000/- OFFERED IS AVAILABLE FOR THIS TOTAL EXP ENSES OF ` 95,08,500/- RECORDED IN THE SPIRAL NOTE BOOK. IN SP ITE OF THIS, THE CIT[APPEALS] HAS TAKEN A DIFFERENT VIEW A ND HAS COME TO A CONCLUSION THAT ` 15,39,501/- ALONE NEED TO BE CONSIDERED AS DISALLOWABLE EXPENDITURE FOR THE ENTI RE PROJECT LEAVING NO BALANCES FOR THE RESIDUAL PERIOD . WHEN OUR CONTENTION IS THAT ON THE FOREGOING FACTS NO AD DITION AT ALL IS CALLED FOR, STILL THE CIT[APPEALS] RESTRICTE D THE ADDITION TO ` 15,39,501/- FOR THE ENTIRE PROJECT AND CONSIDERED THE SAME IN THE BLOCK PERIOD ITSELF LEAV ING NO AMOUNT TO BE CONSIDERED FOR THE RESIDUAL PERIOD UND ER APPEAL. HENCE THE ADDITION MADE IN THE RESIDUAL PERIOD ASSESSMENT YEAR 2001-02 IS NEITHER WARRANTED NOR JUSTIFIED AND OUGHT TO BE DELETED. 4. AFTER CONSIDERING THE ABOVE SUBMISSION, THE LD. CI T(A) HAS CLEARLY OBSERVED IN PARA 6.1 OF HIS ORDER AS UNDER: ITA 696/007 :- 5 -: 6:1. THE LEARNED AR SUBMITTED BEFORE ME THAT THE A PPEAL AGAINST THE BLOCK ASSESSMENT HAS BEEN DECIDED IN IT A NO.153/ 02-03 DT. 16-03-2005 BY THE LEARNED CIT[A], CENTRAL-I, CHENNAI, WHEREIN THE EXPENDITURE THAT HAD TO BE DIS ALLOWED WAS ARRIVED AT ` 15,39,501/- ONLY FOR THE ENTIRE PROJECT PENDING UPTO THE END OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL AND THERE IS NOTHING T O BE ASSESSED FOR THE RESIDUAL PERIOD AS ERRONEOUSLY DON E BY THE LEARNED AO. I HAVE EXAMINED THE ISSUE CAREFULL Y AND IT IS FOUND THAT THE LEARNED CIT[A] CENTRAL-I, CHENNAI , WHILE DEALING WITH THE APPEAL OF THE APPELLANT FOR THE BL OCK ASSESSMENT HAD CONSIDERED THE ENTIRE EXPENDITURE OF ` 95,08,500/- RELATING TO THE ENTIRE PROJECT OF CONST RUCTION OF FLATS UNDERTAKEN BY THE APPELLANT AND HAD COME TO T HE CONCLUSION THAT ONLY A SUM OF ` 15,39,501/- COULD ONLY BE DISALLOWED TAKING INTO ACCOUNT OF THE FACTORS. IN M Y CONSIDERED VIEW THERE IS NO REASON TO DIFFER FROM T HE FINDINGS OF THE LEARNED CIT[A], [SUPRA] ON THIS BAS IS AND IT IS HELD THAT ON THE SAME BASIS THE ADDITION OF ` 18,99,564/- MADE IN THE IMPUGNED ASSESSMENT ORDER IS SUPERFLUOU S AND IS NOT WARRANTED. ACCORDINGLY, THE IMPUGNED DISALLOWANCE OF ` 18,99,564/- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. FROM THE ABOVE, WE HAVE FOUND THAT THE ENTIRE EXPE NSES, WHICH WERE DISALLOWED AS PER THE SEIZED DOCUMENTS I N THE BLOCK PERIOD HAVE BEEN CONSIDERED AND NOTHING REMAINED BEHIND T O BE CONSIDERED IN THE RELEVANT PERIOD. IT IS NOTICED THAT TOTAL AMOUNT OF ` 93,23,261/- RECEIVED FROM FLAT OWNERS ON DIFFERENT DATES TOWAR DS PROVIDING EXTRA AMENITIES IN THE EXISTING FLATS, STOOD ACCOUNTED FO R TO THE EXTENT OF ` 53,54,262/- AND ALSO OFFERED FOR TAX. THE BALANCE AMOUNT OF ` 39,68,999/- STAND NEUTRALIZED BY THE OFFERED AMOUNT OF ` 40 LAKHS WHICH WAS SHOWN AS UNDISCLOSED INCOME IN THE RETURN FILED IN FORM ITA 696/007 :- 6 -: NO.2D FOR THE BLOCK PERIOD ENDING 26.9.2000. THESE FACTS WERE NOT DISPUTED BEFORE US. RESULTANTLY, NOTHING CAN BE AD DED THEREAFTER EITHER IN THE BLOCK PERIOD OR IN THE RESIDUAL PERIO D. THAT IS WHY THE ASSESSING OFFICER HAS NOT MADE ANY FURTHER ADDITION IN THIS REGARD. IN A SPIRAL NOTEBOOK FOUND AND SEIZED DURING SEARCH, T HE EXPENSES INCURRED FOR THE CONSTRUCTION HAVE BEEN SHOWN AS ` 95,08,500/- AND THIS SUM IS ALSO ACCOUNTED FOR IN THE BOOKS OF ACCO UNT, ON WHICH FACT ALSO THERE IS NO DISPUTE. BUT THE ASSESSING OFFICE R HAS ESTIMATED IT AT ` 49,78,863/- AS DISALLOWABLE EXPENSES AND HAS BIFUR CATED THE SAME AS ` 30,79,298/- RELATING TO THE BLOCK PERIOD AND BALAN CE OF ` 18,99,564/- RELATING TO THE RESIDUAL PERIOD IN THE SAME YEAR. IN FACT, THE RECEIPTS OF ` 93,23,261/- [ ` 53,51,262 + ` 40,00,000] IS AVAILABLE FOR THE ENTIRE EXPENSES OF ` 95,08,500/- WHICH IS RECORDED IN THE SPIRAL NOTEBO OK. LEAVING ASIDE THE FINDING OF THE LD. CIT(A) IN BLO CK ASSESSMENT CASE, WHERE HE HAS TAKEN A VIEW THAT ONLY ` 15,39,501/- COULD BE CONSIDERED AS DISALLOWABLE EXPENDITURE FOR THE ENTIRE PROJECT LEAVING NO BALANCES FOR THE RESIDUAL PERIOD. BUT TO OUR MIND IN THE GI VEN CASE, THE IMPUGNED ADDITION IS NOT AT ALL WARRANTED. OTHERWI SE, IT WOULD LEAD TO OVERLAPPING OF ADDITIONS WHICH IS NOT PERMITTED UND ER THE INCOME-TAX ACT, 1961. THEREFORE, IN OUR CONSIDERED OPINION, T HE IMPUGNED DELETION IS JUSTIFIED AND DESERVES NO INTERFERENCE AT OUR END. ITA 696/007 :- 7 -: 6. IN THE RESULT, THE APPEAL STANDS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 11.7.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 11 TH JULY, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR