VIJAY GRIHNIRMAN P. LTD, MUMBAI V. DCIT CC 3(1), MUMBAI

ITA 7028/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7382 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 11-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Keywords: Rule of consistency
• Section: 143(3)

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL F BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO. 7028/MUM/2017 (ASSESSMENT YEAR 2013-14 ) ITA NO. 7029/MUM/2017 (ASSESSMENT YEAR 2014-15 ) M/S VIJAY GRIHNIRMAN PVT. LTD. 205, MARINE CHAMBERS, 43, NEW MARINE LINES, MUMBAI-400020 . PAN: AAACV2806N VS. DCIT CC-3(1) 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021 APPELLANT RESPONDE NT APPELLANT BY : SHRI MANI JAIN (AR) RESPONDENT BY : SHRI RAJEEV GUBGOTRA (DR) DATE OF HEARING : 09.07.2019 DATE OF PRONOUNCEMEN T : 17.07.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS TWO APPEAL BY ASSESSEE ARE DIRECTED AGAINST TH E SEPARATE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-51 [THE LD . CIT(A)], MUMBAI DATED 21.09.2017 FOR ASSESSMENT YEAR 2013-14 & 2014-15. THE ASSESSEE HAS RAISED CERTAIN COMMON GROUNDS OF A PPEAL. THEREFORE, BOTH THE APPEALS WERE CLUBBED, HEARD AND ARE DECIDE D BY COMMON ORDER. FOR APPRECIATION OF FACT, THE APPEAL FOR ASS ESSMENT YEAR 2013- 14 WAS TREATED AS LEAD CASE. THE ASSESSEE HAS RAISE D FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT' S CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION OF ITA NO . 7028 & 7029 MUM 2017-M/S VIJAY GRIHNIRMAN PVT. LTD 2 RS. 1,38,916/ - MADE BY THE LD. AO ON ACCOUNT OF AN NUAL LETTING VALUE OF UNSOLD FLATS HELD AS STOCK IN TRADE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT' S CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE ACTION OF LD. A.O. IN DISALLOWING' A SUM OF RS. 4,21,039/- ON ADHOC BASIS BEING 10% OF THE EXPENSES CLAIMED IN PROFIT AND LOSS ACCOUNT ON ACCOUNT OF COMMUNICATION EXPENSES, TRAVELLING AND CONVEYANCE E XPENSES, POWER AND FUEL EXPENSES AND CONVEYANCE EXPENSES AS PER THE GR OUNDS STATED IN THE ORDER OR OTHERWISE. 3. THE APPELLANT CRAVES LEAVES TO ADD, TO AMEND, AL TER, MODIFY AND / OR WITHDRAW ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, EACH OF WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION, BUILDER AND DEVELOPERS, F ILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 ON 30.09.2013 DE CLARING TOTAL INCOME AT RS. 2.95 CRORE. THE SCRUTINY ASSESSMENT W AS COMPLETED UNDER SECTION 143(3) ON 28.03.2016. THE ASSESSING O FFICER DURING THE ASSESSMENT PROCEEDING NOTED THAT ASSESSEE HAS SHOWN CLOSING STOCK OF FINISHED GOODS I.E. FLATS LYING UNSOLD OF RS. 4.82 CRORE. THE ASSESSEE WAS ISSUED SHOW-CAUSE NOTICE AS TO WHY THE ANNUAL L ETTING VALUE (ALV) OF SUCH UNSOLD FLAT BE NOT CONSIDERED AS INC OME FROM HOUSE PROPERTY IN THE HANDS OF ASSESSEE. THE ASSESSEE FI LED ITS REPLY STATING THEREIN THAT ASSESSEE IS IN THE BUSINESS OF CONSTRU CTION OF BUILDING AND NOT IN THE BUSINESS OF LETTING OUT OF THE PROPERTY. THE UNSOLD FLATS ARE STOCK-IN-TRADE BEING A PART OF INVENTORY AND NO INV ESTMENT OR FIXED ITA NO . 7028 & 7029 MUM 2017-M/S VIJAY GRIHNIRMAN PVT. LTD 3 ASSETS. THE ASSESSEE HAS NOT LET OUT THESE PROPERTI ES. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICER WHILE RELYING ON THE DECISION OF HONBLE DELHI HIGH COURT IN CIT VS. ANSAL HOUSING FINANCE & LEASING CO. LTD. (2013) 354 ITR 180 (DEL) DETERMINED THE ALV OF UNSOLD FLAT AT THE HAND OF A SSESSEE UNDER SECTION 23 OF THE ACT. THE ALV OF SUCH UNSOLD FLAT WAS WORKED OUT BY ASSESSING OFFICER AT RS. 1,38,916/- AND AFTER GI VING STATUTORY DEDUCTION OF 30%, THE ASSESSING OFFICER ADDED RS. 9 7,242/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSING OF FICER ALSO NOTED THAT THE ASSESSEE HAS SHOWN TRAVELLING EXPENSES, PO WER & FUEL EXPENSES AND CONVEYANCE EXPENSES AND THAT MAJORITY OF EXPENSES WERE INCURRED THROUGH SELF-MADE VOUCHERS AND THAT N O BUSINESS ELEMENT OF EXPENSES INVOLVED IN THOSE EXPENDITURE. THE ASSESSING OFFICER DISALLOWED 10% OF THE EXPENSES. 3. ON APPEAL BEFORE THE LD. CIT(A), BOTH THE ACTION OF ASSESSING OFFICER WAS UPHELD. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. GROUND NO.1 RELATES TO ADDITION ON ACCOUNT OF DEEMED ALV OF UNS OLD FLAT. THE LD. ITA NO . 7028 & 7029 MUM 2017-M/S VIJAY GRIHNIRMAN PVT. LTD 4 AR OF THE ASSESSEE SUBMITS THAT THE ASSESSING OFFIC ER RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN ANSAL HOUSI NG FINANCE & LEASING CO. LTD. (SUPRA), HOWEVER, THERE IS CONTRAR Y DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. NEHA BUILDERS PVT. LTD. (2008) 296 ITR 661 (GUJ.) IT WAS HELD THAT WHERE TH E PROPERTY WAS HELD AS STOCK-IN-TRADE OF THE ASSESSEE, THAN THE SAID PR OPERTY WOULD PARTAKE CHARACTER OF STOCK AND ANY INCOME DERIVED FROM STOC K WOULD BE INCOME FROM BUSINESS AND NOT FROM HOUSE PROPERTY. T HE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THIS TRIBUNAL IN A NU MBER OF DECISIONS FOLLOWED THE DECISION OF HONBLE GUJARAT HIGH COURT . THE LD. AR FURTHER SUBMITS THAT IF THERE ARE TWO DIVERGENT VIE W TAKEN BY TWO DIFFERENT NON-JURISDICTIONAL HIGH COURT, THEN THE D ECISION FAVOURABLE TO ASSESSEE SHOULD HAVE TO BE ADOPTED AS PER THE DECIS ION OF HONBLE SUPREME COURT IN CIT VS. VEGETABLE PRODUCTS (88 ITR 192 (SC). THE LD. AR FURTHER MADE THE RELIANCE ON THE FOLLOWING D ECISION: 1. ITO VS. ARIHANT ESTATES PVT. LTD. IN ITA NO. 6037/M UM/2016. 2. RUNWAL CONSTRUCTIONS VS. ACIT IN ITA NO. 5408 & 5409/MUM/2016. 3. C.R. DEVELOPMENT PVT. LTD. VS. JCIT IN ITA NO. 427 7/MUM/2012. 4. CHAMBER CONSTRUCTION PVT. LTD. VS. DCIT IN ITA NO. 4418/MUM/2017. 5. ACIT VS. HAWARE CONSTRUCTION PVT. LTD. IN ITA NO. 3321 & 3172/MUM/2016. ITA NO . 7028 & 7029 MUM 2017-M/S VIJAY GRIHNIRMAN PVT. LTD 5 6. PROGRESSIVE HOMES VS. ACIT IN ITA NO. 5082/MUM/2016 . 7. SARANGA ESTATES PVT. LTD. VS. DCIT IN ITA NO. 4420/ MUM/2017. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE STRONGLY RELIED UPON THE DECISION OF HONBL E DELHI HIGH COURT IN ANSAL HOUSING FINANCE & LEASING CO. LTD. (SUPRA) AND THE FINDING OF LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE A LSO DELIBERATED ON VARIOUS CASE LAWS RELIED BY LOWER AUTHORITIES AND T HE LD. REPRESENTATIVE OF THE PARTIES. WE ARE CONSCIOUS OF THE FACT THAT A MENDMENT BROUGHT IN SECTION 23 BY INSERTING NEW SUB-SECTION (5) IS APPL ICABLE W.E.F. 01.04.2018. THE AMENDMENT IN SECTION 23(5) IS EFFEC TIVE FROM ASSESSMENT YEAR 2018-19 ONWARD AND CANNOT APPLY RET ROSPECTIVELY. THE ASSESSING OFFICER MADE THE ADDITION BY MAKING R ELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN CIT VS. ANS AL HOUSING FINANCE & LEASING CO. LTD. (SUPRA). THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER HOLDING THAT THE ASSESS EE HAS NOT OBJECTED ABOUT THE WORKING OF ALV OF THE ASSESSEE. THE LD. C IT(A) ALSO RELIED UPON THE DECISION OF KARANPURA DEVELOPMENT CO. LTD. VS. CIT [1962] 44 ITR 362 (SC). ADMITTEDLY, THE ASSESSEE HAS TREAT ED THE UNSOLD FLAT AS STOCK-IN-TRADE.THERE IS NO DISPUTE THAT ASSESSEE NOT LET OUT THE UNSOLD FLAT TO ANY PERSON, RATHER THE UNSOLD FLAT ARE IN P OSSESSION OF ASSESSEE AS ITA NO . 7028 & 7029 MUM 2017-M/S VIJAY GRIHNIRMAN PVT. LTD 6 STOCK-IN-TRADE FOR THE PURPOSE OF ITS BUSINESS. THE LD. AR OF THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF NEHA BUILDERS PVT. LTD. (SUPR A) IS IN FAVOUR OF ASSESSEE. IT IS SETTLED LAW THAT WHEN THERE ARE CON TRARY VIEW TAKEN BY TWO DIFFERENT NON-JURISDICTIONAL HIGH COURTS ON SIM ILAR ISSUE, THEN THE DECISION FAVORABLE TO THE ASSESSEE SHOULD BE FOLLOW ED AS HELD BY HONBLE SUPREME COURT IN CIT VS. CIT VS. VEGETABLE PRODUCTS (SUPRA). 7. WE HAVE FURTHER NOTED THAT THE CO-ORDINATE BENCH OF TRIBUNAL IN SARANGA ESTATES PVT. LTD. (SUPRA) WHILE CONSIDERING THE SIMILAR GROUND OF APPEAL DELETED THE ADDITION MADE ON ACCOUNT OF A LV IN RESPECT OF UNSOLD FLAT. THE SIMILAR VIEW WAS TAKEN IN RUNWAL C ONSTRUCTIONS VS. ACIT, ACIT VS. HAWARE CONSTRUCTION PVT. LTD. & CHAM BER CONSTRUCTION PVT. LTD. (SUPRA). THEREFORE, RESPECTF ULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCHES OF TRIBUNAL, WE DIR ECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF A LV OF UNSOLD/STOCK-IN-TRADE FLAT OF THE ASSESSEE. 8. IN THE RESULT, GROUND NO.1 OF THE APPEAL IS ALLOWED . 9. GROUND NO.2 RELATES TO ADHOC DISALLOWANCE OF VARIOU S EXPENSES CLAIMED IN PROFIT & LOSS ACCOUNT. THE LD. AR OF THE ASSESSE E SUBMITS THAT ASSESSEE IS A CORPORATE ENTITY AND INCURRED VARIOUS EXPENSES. THE ASSESSING OFFICER MADE DISALLOWANCE OF 10% OF EXPEN SES WITHOUT ITA NO . 7028 & 7029 MUM 2017-M/S VIJAY GRIHNIRMAN PVT. LTD 7 VALID REASONS. THE ASSESSING OFFICER TOOK THE VIEW THAT THE EXPENSES WERE INCURRED THROUGH SELF-MADE VOUCHERS. THE ASSES SING OFFICER HAS NOT IDENTIFIED THE DEFICIENCIES OF THE VOUCHERS. TH E LD. CIT(A) ALSO CONFIRMED THE ACTION OF ASSESSING OFFICER DESPITE T HE FACT THAT ASSESSEE BROUGHT TO THE NOTICE OF CIT(A) THAT NO SUCH DISALL OWANCE WAS MADE BY ASSESSING OFFICER IN SUBSEQUENT YEARS. 10. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THE ASSESSEE HAS DEBITED COMMUNICATION EXPENSES OF RS. 9,57,828/-, TRAVELLING AND CONVEYANCE EXPENSES OF RS. 12,52,140 /-, POWER & FUEL EXPENSES OF RS. 9,86,881/- AND CONVEYANCE EXPE NSES OF RS. 5,78,908/-. THE ASSESSING OFFICER DISALLOWED 10% OF AGGREGATE OF THE EXPENSES. THE ASSESSING OFFICER DISALLOWED THE EXPE NSES BY TAKING VIEW THAT EXPENSES WERE INCURRED THROUGH SELF-MADE VOUCHERS. WE HAVE NOTED THAT NO SPECIFIC REASON WAS GIVEN BY ASS ESSING OFFICER TO DISALLOW 10% OF THE EXPENSES. BEFORE THE LD. CIT(A) , THE ASSESSEE BESIDES OTHER CONTENTION, CONTENDED THAT THE ASSESS ING OFFICER HAS NOT MADE ANY ADDITION IN SUBSEQUENT YEAR. THE LD. CIT(A ) REJECTED THE CONTENTION OF ASSESSEE HOLDING THAT THE ASSESSEE CA N RELIED UPON THE ASSESSMENT ORDER OF PRECEDING AND NOT THE SUBSEQUEN T YEARS. ITA NO . 7028 & 7029 MUM 2017-M/S VIJAY GRIHNIRMAN PVT. LTD 8 11. IN OUR VIEW, WITHOUT SPECIFYING ANY SPECIFIC REASON , THE DISALLOWANCE ON ADHOC BASIS IS NOT SUSTAINABLE. THEREFORE, KEEPI NG IN VIEW THAT THE ASSESSEE IS A CORPORATE ENTITY AND WITHOUT SPECIFYI NG THE SPECIFIC REASON FOR ADHOC DISALLOWANCE, THE DISALLOWANCE IS NOT SUS TAINABLE IN THE EYES OF LAW. HENCE, WE DIRECT THE ASSESSING OFFICER TO D ELETE THE ADHOC DISALLOWANCE OF 10% ON ACCOUNT OF VARIOUS EXPENSES. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 7029/MUM/2017 FOR A.Y. 2014-15. 13. GROUND NO.1 OF APPEAL IS IDENTICAL TO THE GROUND NO .1 IN APPEAL FOR ASSESSMENT YEAR 2013-14 EXCEPT VARIATION OF FIGURES . CONSIDERING OUR DECISION ON IDENTICAL GROUND WHICH WE HAVE ALLOWED. THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE GROUND OF APPEAL RAISED BY ASSESSEE IS ALLOWED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/07/2019. SD/- SD/- G. MANJUNATHA PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: .07.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE ITA NO . 7028 & 7029 MUM 2017-M/S VIJAY GRIHNIRMAN PVT. LTD 9 BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI