ITO, Bangalore V. M/s Nam Estates Pvt. Ltd., Bangalore

ITA 706/BANG/2011

• Counselvise Citation: 70621114 RSA 2011
• Duration Of Justice: 1 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 40A(3); 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.705 & 706/BANG/2011 (ASSESSMENT YEARS : 2006-07 & 2007-08) INCOME TAX OFFICER, WARD 12(1), BANGALORE. . APPELLANT. VS. M/S. NAM ESTATES PVT. LTD., NO.150, 1 ST FLOOR, EMBASSY POINT, INFANTRY ROAD, BANGALORE-560 001. .. R ESPONDENT. C.O. NO.14/BANG/2012 (IN ITA NO.705/BANG/2011) (ASSESSMENT YEAR : 2006-07 (BY ASSESSEE) APPELLANT /DEPARTMENT BY : SHRI ETWA MUNDA. RESPONDENT/CROSS OBJECTOR BY : SHRI G. SITHARAM. DATE OF HEARING :18.9.2012. DATE OF PRONOUNCEMENT : 05.10.2012. O R D E R PER SHRI JASON P. BOAZ : THESE APPEALS OF REVENUE ARE D IRECTED AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-III, BANGALORE BOTH DT.23.2.20 11 FOR ASSESSMENT YEARS 2006-07 & 2007- 08. THE CROSS OBJECTIONS ARE FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2006-07. SINCE CROSS APPEALS AND COMMON ISSUES ARE INVOLVED IN THESE APP EALS, THEY ARE BEING HEARD TOGETHER AND DISPOSED OFF BY WAY OF A COMMON ORDER. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE COMPANY (HEREIN AFTER REFERRED TO AS THE COMPANY), ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT FILED ITS RETUR N OF INCOME FOR ASSESSMENT YEAR 2006-07 ON 2 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 4.12.2006 DECLARING INCOME OF RS.3,48,240. A SURVE Y UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') WAS C ONDUCTED AT THE ASSESSEES BUSINESS PREMISES BEING PART OF THE EMBASSY GROUP. FOR ASSESSMENT YE AR 2007-08, THE RETURN OF INCOME WAS FILED DECLARING A LOSS OF RS.43,03,250. IN BOTH YEARS, T HE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENTS WERE COMPLETED BY ORDERS UNDER SECTION 143(3) OF THE ACT DETERMINING THE INCOME OF THE ASSESSEE AT RS.3,08,96,240 FOR ASSESSMENT YE AR 2006-07 AND AT RS.2,83,04,610 FOR ASSESSMENT YEAR 2007-08 DT.29.12.2008 AND 18.12.200 9 RESPECTIVELY. 2.2 AGGRIEVED BY THE ORDERS OF ASSESSMENT FOR THE I MPUGNED ASSESSMENT YEARS, THE ASSESSEE PREFERRED APPEALS BEFORE THE CIT(A). THE LEARNED C IT(A) DISPOSED OFF THE ASSESSEES APPEALS FOR ASSESSMENT YEAR 2007-07 BY ORDER DT.23.2.2011 G IVING THE ASSESSEE PARTIAL RELIEF. FOR ASSESSMENT YEAR 2007-08, THE LEARNED CIT(APPEALS) A LLOWED THE ASSESSEES APPEAL BY ORDER DT.23.2.2011. 3. REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE O RDERS FOR BOTH THE ASSESSMENT YEARS 2006-07 & 2007-08. THE ASSESSEE HAS FILED CROSS OB JECTIONS FOR ASSESSMENT YEAR 2006-07. ITA NO.705/BANG/2011 (A.Y.2006-07) 4. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS OPP OSED TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT (APPEALS) ERRED IN DELETING T HE ADDITION OF RS.3,05,48,000 MADE UNDER SECTION 2(22)(E) BY ERRONEOUSLY ACCEPTING THE ASSESSEES VERSION THAT THE AMOUNT SHOWN AS LOAN IN THE BALANCE SHEET WAS AN AD VANCE RECEIVED FOR SALE OF LAND ON THE BASIS OF AN MOU WITH M/S. DYNASTY DEVELOPERS PV T LTD. THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECIATED THE FACTS AND CIRCUMSTANCES IN AS MUCH AS THE MOU DT.15.6.2004 HAS NO BUSINESS SENSE OR SIGNIFICA NCE AS THE ASSESSEE, AT THAT POINT OF TIME, WAS NOT THE OWNER OF THE LAND AGREED TO BE SOLD TO THE ABOVE COMPANY. THE CIT (APPEALS) OUGHT TO HAVE ENQUIRED INTO THE S UBSEQUENT STATUS OF THE DEAL BEFORE PLACING RELIANCE ON SUCH A DOCUMENTS PRODUCE D BY THE ASSESSEE. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT (APPEALS) IN SO FAR AS IT RELATED TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT THE ASSESSING OFFICER MAY BE R ESTORED. 3 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED. 5. THE GROUNDS RAISED AT S.NOS.1, 3 AND 4 ARE GENERAL IN NATURE AND NO ADJUDICATION IS CALLE D FOR THEREON, THEY ARE DISMISSED AS INFRUCTUOUS. 6.1 IN THE GROUND RAISED AT S.NO.2 , REVENUE HAS CHALLENGED THE LEARNED CIT(APPEALS)S ORDER DELETING THE ADDITION OF RS.3,05,48,000 MADE UNDER SECTION 2(22)(E) OF THE ACT. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE LEAR NED CIT(APPEALS) ERRED IN ACCEPTING THE ASSESSEES CLAIM THAT THIS AMOUNT SHOWN AS LOAN IN THE ASSESSEES BALANCE SHEET WAS NOT A LOAN BUT AN ADVANCE RECEIVED FOR SALE/PURCHASE OF LAND O N THE BASIS OF A MOU DT.15.6.2004 WITH M/S. DYNASTY DEVELOPERS PVT. LTD., WHEN IN REALITY THE M OU HAD NO BUSINESS SIGNIFICANCE AT THAT POINT SINCE THE LAND IN QUESTION WAS NOT SOLD TO THE ASSE SSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE LEARNED C IT(APPEALS) OUGHT TO HAVE ENQUIRED INTO THE SUBSEQUENT STATUS OF THE DEAL BEFORE BLINDLY PLACIN G RELIANCE ON DOCUMENTS PRODUCED BY THE ASSESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE DREW OUR ATTENTION TO THE LEARNED CIT(APPEALS)S ORDER. HE POINTED OUT THAT THE LEAR NED CIT(APPEALS) HAD FAITHFULLY RECORDED THE WRITTEN AND ORAL SUBMISSIONS OF THE ASSESSEE FROM P ARA 5 TO PARA 7 ON PAGES 3 TO 14 OF THE ORDER AND THEN IN PARA 8, CONSISTING OF ABOUT 8 LINES, AL LOWED THE ASSESSEES APPEAL ON THIS ISSUE OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT WITHOUT ANY DISCUSSION OF THE FACTS OF THE CASE ON THIS ISSUE, THE LEGAL POSITION OR ASSIGNING ANY REASONS FOR TAKING THE DECISION HE TOOK. IN SHORT, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT THERE WAS NO SPEAKING ORDER PASSED BY THE LEARNED CIT(APPEALS). HE, THEREFORE, PRAYED THAT THE MATTER OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT REQUIRED TO BE RE MITTED BACK TO THE FILE OF THE CIT(APPEALS) FOR DE NOVO CONSIDERATION IN THE INTEREST OF JUSTIC E. 4 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 6.2 THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(APPEALS), BUT SUBMITTED THAT HE HAD NO OBJECTION IF THE ISSUE OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT BE REMANDED TO THE FILE OF THE CIT(APPEA LS) FOR CONSIDERATION AFRESH. 6.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSE D THE MATERIAL ON RECORD. WE HAVE PERUSED THE ORDER OF THE LEARNED CIT(APPEALS) ON TH E ISSUE OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT AND AGREE WITH THE CONTENTION O F THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE LEARNED CIT(APPEALS) MERELY RECORDED THE S UBMISSIONS OF THE ASSESSEE AT PARAS 6 & 7 FROM PAGES 3 TO 14 OF HIS ORDER AND THEN IN PARA 8 ALLOWED THE APPEAL OF THE ASSESSEE IN A SUMMARY MANNER, BEREFT OF ANY DISCUSSIONS OF THE FA CTS OF THE CASE AS BROUGHT OUT BY THE ASSESSING OFFICER AND THE ASSESSEE AND WITHOUT ASSI GNING ANY REASONS FOR REACHING THE FINDING HE MADE. WE, THEREFORE, REPRODUCE HEREUNDER THE RE FERRED PARA 8 ON PAGE 14 OF THE CIT(APPEALS)S ORDER WHICH WILL CLARIFY THE SITUATI ON : 8.0 CONSIDERING THE FACTS AND CIRCUMSTANCES OF T HE CASE AND FOLLOWING THE RATIONALE OF THE ABOVE DECISIONS, I HOLD THAT THE ADVANCE OF RS. 3,05,48,000 RECEIVED BY THE APPELLANT FROM ANOTHER COMPANY, ALSO ENGAGED IN REA L ESTATE DEVELOPMENT S TOWARDS SALE OF PROPERTY IN THE COURSE OF BUSINESS AND CONS IDERING THE FACTS OF THE CASE, SUCH ADVANCES ARE NOT HIT BY THE PROVISIONS OF SECTION 2 (22)(E) OF THE ACT. THE ADDITION OF RS.3,05,48,000 MADE TO THE INCOME AS DEEMED DIVIDEN D AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS DELETED. PARA 8 (SUPRA) REINFORCES OUR VIEW THAT THE LEARNED CIT(APPEALS) FAILED TO PASS A SPEAKING ORDER ON THE ISSUE AT HAND. NOT ONLY THAT, WHEN THE LEAR NED DEPARTMENTAL REPRESENTATIVE PRAYED FOR REMITTING THE ISSUE OF DEEMED DIVIDEND UNDER SECTIO N 2(22)(E) OF THE ACT TO THE FILE OF THE LEARNED CIT(APPEALS) FOR PASSING A SPEAKING AND REA SONED ORDER THEREON, THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT OBJECT TO THE LEARNED DEPARTME NTAL REPRESENTATIVES PLEA. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AS DISCUSSED ABOVE, WE A RE OF THE VIEW THAT IN THE INTEREST OF EQUITY AND JUSTICE IT WOULD BE IN THE FITNESS OF THINGS FO R THE ISSUE OF DEEMED DIVIDEND UNDER SECTION 5 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 2(22)(E) OF THE ACT TO BE REMITTED TO THE FILE OF T HE LEARNED CIT(APPEALS) FOR DE NOVO CONSIDERATION BY HIM TAKING INTO CONSIDERATION THE FACTS OF THE CASE, THE FINDINGS OF THE ASSESSING OFFICER IN ORDER OF ASSESSMENT, THE SUBMI SSIONS OF THE ASSESSEE, THE JUDICIAL DECISIONS CITED AND TO PASS FRESH SPEAKING ORDERS THEREON. I T IS ORDERED ACCORDINGLY. 7. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES. C.O. NO.14/BANG/2012 (A.Y. 2006-07) 8. IN CROSS OBJECTION, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LEARNED CIT(APPEALS) SUSTAINING THE FOLLOWING ADDITIONS : I) PAYMENT FOR PURCHASE OF LAND : RS.17,58,527 II) DISALLOWANCE OF COMMISSION & BROKERAGE : RS.4, 44,342 III) DISALLOWANCE UNDER LEVELING AND FENCING CHARGE S : RS.7,32,280 WE WILL CONSIDER AND DISPOSE THEM IN SERIATIM. THE GROUNDS RAISED IN CROSS OBJECTION ARE AS FOLLOWS : A. PAYMENT FOR PURCHASE OF LAND DISALLOWED UNDER SECTION 40A(3) RS. 17,58,527. I) HE FAILED TO APPRECIATE THAT THE PAYMENTS WERE M ADE TO AGRICULTURISTS AND FARMERS WHO INSISTED ON CASH PAYMENTS; II) THE RESPONDENT SUBMITS THAT THE CIT (APPEALS), HAVING ACCEPTED THAT THE TRANSACTIONS WERE GENUINE, SHOULD NOT HAVE SUSTAINE D THE ADDITIONS SINCE THE PAYMENTS WERE MADE UNDER EXCEPTIONAL AND UNAVOIDAB LE CIRCUMSTANCES. B. DISALLOWANCE OF COMMISSION AND BROKERAGE OF RS. 4,44,342. I) HE FAILED TO APPRECIATE THAT THE ENTIRE PAYMENT S WERE SUPPORTED BY VOUCHERS. II) THE CIT (APPEALS) FAILED TO APPRECIATE THAT NON -DEDUCTION OF TAX COULD NOT BE A REASON FOR DISALLOWANCE OF EXPENDITURE. C. DISALLOWANCE UNDER LEVELLING AND FENCING CHARGES RS. 7,32,280. I) THE CIT (APPEALS), HAVING HELD THAT THE LEVELING CHARGES WERE ALLOWABLE SHOULD NOT HAVE SUSTAINED THE ADDITION OF RS. 7,32,280. II) HE FAILED TO APPRECIATE THAT THESE EXPENSES, B Y ITS VERY NATURE, COULD BE SUPPORTED BY SELF-MADE VOUCHERS AND CASH RECEIPTS. III) THE APPELLANT SUBMITS THAT, IN ANY CASE, THE A DDITIONS MADE ARE EXCESSIVE AND UNREASONABLE. 6 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 III) THE APPELLANT, THEREFORE PRAYS THAT THE ADDITIONS MAY BE DELETED. 9. PAYMENTS FOR PURCHASE OF LAND DISALLOWED UNDER SECTION 40A(3) : RS.17,58,527. 9.1 THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION THAT THE LEARNED CIT(APPEALS) F AILED TO APPRECIATE THAT THE PAYMENTS WERE MADE TO AGRICULTURISTS AND FARMERS WHO INSISTED ON CASH PAYMENTS. IT IS FURTHER SUBMITTED THAT THE LEARNED CIT(APPEALS) HAVING ACCEPTED THAT THE T RANSACTIONS WERE GENUINE SHOULD NOT HAVE SUSTAINED THE ADDITION SINCE THE PAYMENTS MADE WERE UNDER EXCEPTIONAL CIRCUMSTANCES. IN VIEW OF THIS, THE LEARNED COUNSEL FOR THE ASSESSEE PLEAD ED THAT THE DISALLOWANCE MADE UNDER SECTION 40A(3) BY THE ASSESSING OFFICER AND SUSTAINED BY T HE LEARNED CIT(APPEALS) BE REVERSED AND THE ASSESSEES APPEAL BE ALLOWED. 9.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE ON HIS PART STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW SUBMITTING THAT THE ASSESSEE WAS NOT ABLE TO CONTROVERT THE FINDINGS OF THE ASSESSING OFFICER AND LEARNED CIT(APPEALS) ON T HE DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT AND THEREFORE ITS GROUNDS WERE LIABLE TO BE DISMISSED. 9.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSE D AND CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN THAT IN THE COURSE OF ASSESSMENT PROCEED INGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD MADE PAYMENTS TOWARDS PURCHASE OF LAND IN THE DEVANAHALLI TALUK OF BANGALORE DISTRICT OUT OF WHICH SUMS AMOUNTING TO RS.87,92,63 5 WERE FOUND TO HAVE BEEN PAID IN CASH IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3) O F THE ACT. THE ASSESSEES EXPLANATION IN LETTER DT.18.12.2008, THAT THE PAYMENTS WERE MADE A T PLACES WHICH WAS NOT SERVED WITH ANY BANKING FACILITIES WAS NOT ACCEPTED BY THE ASSESSI NG OFFICER FOR THE REASON THAT DEVANAHALLI TALUK IS A WELL DEVELOPED SUBURB OF BANGALORE HAVIN G A LARGE NUMBER OF BANKS AND THE RECIPIENTS OF THE CONSIDERATION WERE RESIDING IN THAT AREA AN D SOME OF THEM WERE IN RECEIPT OF GOVERNMENT 7 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 COMPENSATION FOR LAND ACQUISITION AND HAD ACCOUNTS AND DEPOSITS IN SUCH BANKS. IN THIS VIEW OF THE MATTER, THE ASSESSING OFFICER HELD THAT THE PRO VISIONS OF SECTION 40A(3) OF THE ACT WAS APPLICABLE IN THE PRESENT CASE AND CONSEQUENTLY DIS ALLOWED A SUM OF RS.17,58,527 (BEING 20% OF THE AMOUNT PAID IN CASH I.E. RS.87,92,635). IN APP EAL, WE FIND THE LEARNED CIT(APPEALS) AFTER EXAMINATION OF THE FACTS UPHELD THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER AS HE WAS OF THE VIEW THAT THE ASSESSEE COULD NOT DEMONSTRATE WI TH ANY COGENT EVIDENCE THAT THERE WAS ANY BUSINESS EXPEDIENCY OR SUFFICIENT CAUSE FOR SUCH CA SH PAYMENTS TO VARIOUS PARTIES IN THE RELEVANT PERIOD. BEFORE US, THE LEARNED COUNSEL FO R THE ASSESSEE MERELY REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(APPEALS). ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSE ES ARGUMENTS THAT THE TRANSACTIONS WERE GENUINE; THAT THE CASH PAYMENTS WERE MADE IN THE AB SENCE OF PROPER BANKING FACILITIES BEING AVAILABLE IN DEVANAHALLI, THAT THE PAYMENTS WERE MA DE ON CONSIDERATION OF BUSINESS EXPEDIENCY, ETC ARE NOT ACCEPTABLE AS THE ASSESSEE HAS FAILED T O PROVE WITH ANY COGENT EVIDENCE THAT IT WAS COVERED BY EXCEPTIONAL CIRCUMSTANCES AS PER THE EXE MPTION CLAUSE UNDER SECTION 40A(3) R.W.S. RULE 6DD. IT IS ALSO SEEN THAT THE ASSESSEE HAS FA ILED TO ESTABLISH THAT DEVANAHALLI TALUK OF BANGALORE DISTRICT HAD NO BANKING FACILITIES AT THE TIME THESE PAYMENTS WERE MADE. IN THIS VIEW OF THE MATTER, WE HAVE NO HESITATION IN UPHOLDING A ND SUSTAINING THE DISALLOWANCES OF RS.17,58,527 (BEING 20% OF THE AMOUNT PAID IN CASH I.E. RS.87,92,635) MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) OF THE ACT. CONSEQUEN TLY, THE ASSESSEES OBJECTION IS DISMISSED. 10. COMMISSION & BROKERAGE EXPENSES : RS.4,44,3 42 . 10.1 THE LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE LEARNED CIT(APPEALS) WAS WRONG IN SUSTAINING THE DISALLOWANCE OF COMMISSION AND BROKERAGE EXPENSES TO THE EXTENT OF RS.4,44,342 OUT OF TOTAL CLAIM OF RS.92,20,663 AS H E HAD FAILED TO APPRECIATE THAT THE ENTIRE 8 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 PAYMENT OF THESE EXPENSES WERE SUPPORTED BY VOUCHER S. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AND PRAYED THAT THE DISA LLOWANCE OF RS.4,44,342 SUSTAINED BY THE LEARNED CIT(APPEALS) NEEDS TO BE DELETED IN TOTO BY ACCEPTING THE ASSESSEES ARGUMENTS. 10.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, STRONGLY OBJECTED TO THE ASSESSEES CLAIM. IT WAS SUBMITTED THAT THE LEARNE D CIT(APPEALS) AFTER EXAMINING THE ENTIRE EXPENSES OF RS.92,20,663 DEBITED UNDER THE HEAD BRO KERAGE AND COMMISSION, HELD THAT EXPENSES TO THE EXTENT OF RS.87,76,321 ON WHICH TDS HAD BEEN DEDUCTED WERE GENUINE AS THEY WERE INCURRED FOR THE PURPOSE OF THE ASSESSEES BUSINESS AND DISALLOWED ONLY THE BALANCE OF RS.4,44,342 FOR WHICH NO COGENT EVIDENCE WAS PRODUC ED. IT WAS SUBMITTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT IN THESE CIRCUMSTA NCES, THE ASSESSEE WAS NOT ELIGIBLE FOR ANY FURTHER RELIEF IN THE MATTER AND ITS GROUND BE ACCO RDINGLY DISMISSED. 10.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUS ED THE MATERIAL ON RECORD. OUT OF THE TOTAL EXPENSES OF RS.92,20,663 CLAIMED UNDER THE HE AD BROKERAGE AND COMMISSION, WE FIND THAT ASSESSING OFFICER HOLDING THAT IN THIS LINE OF BUSI NESS OF LAND TRANSACTION THE AVERAGE PERCENTAGE OF COMMISSION AND BROKERAGE IS 1%, DISAL LOWED THE BALANCE OF RS.33,52,658. IT IS SEEN THAT THE LEARNED CIT(APPEALS) EXAMINED THE MAT TER IN DETAIL AND CAME TO THE VIEW THAT EXPENSES ON COMMISSION AND BROKERAGE CHARGES, ON WH ICH TDS HAD BEEN DEDUCTED AND REMITTED TO THE TREASURY IN THE INSTANT CASE WERE GENUINE A S PER THE FACTS PLACED BEFORE HIM AND ACCORDINGLY ALLOWED THE ASSESSEE RELIEF OF RS.29,10 ,316 AND SUSTAINED THE DISALLOWANCE TO RS.4,42,342. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS MERELY REITERATED THE SUBMISSION MADE BEFORE THE LEARNED CIT(APPEALS). N O COGENT EVIDENCE HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT ANY PART OF THE EXPENSES, BROKERAGE AND COMMISSION OUT OF RS.4,42,342 WERE GENUINE. IN THIS VIEW OF THE MATTER, WE FIND THERE IS NO REASON TO INTERFERE WITH THE 9 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 FINDING OF THE LEARNED CIT(APPEALS) AND, THEREFORE, UPHOLD THE DISALLOWANCE OF RS.4,42,342 OUT OF COMMISSION AND BROKERAGE CHARGES AS SUSTAINED B Y THE LEARNED CIT(APPEALS). THE ASSESSEES GROUND IS ACCORDINGLY DISMISSED. 11.0 LEVELLING & FENCING CHARGES : RS.7,32,280 . 11.1 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(APPEALS) SHOULD NOT HAVE SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS .7,32,280. IT WAS ARGUED THAT THESE EXPENSES BY THEIR VERY NATURE COULD ONLY BE SUPPORT ED BY SELF VOUCHERS AND CASH RECEIPTS AND DID NOT CALL FOR ANY DISALLOWANCE AND THAT THE DISA LLOWANCES MADE WERE EXCESSIVE AND UNREASONABLE. IT WAS SUBMITTED THAT, IN THESE CIRC UMSTANCES, THE DISALLOWANCE BE DELETED AND THE ASSESSEES APPEAL ON THIS ISSUE BE ALLOWED. 11.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE POINTED OUT THAT THE ASSESSING OFFICER HAD MADE AN ADHOC DISALLOWANCE OF RS.91,53, 500 I.E. 25% OF THE EXPENDITURE OF RS.3,66,14,000 CLAIMED ON LEVELING AND FENCING CHAR GES. THE LEARNED CIT(APPEALS) HAD EXAMINED THE ENTIRE DETAILS OF THESE EXPENSES FROM THE BOOKS OF ACCOUNT FOR EACH PROPERTY AND AS PER THE CONCERNED AGREEMENT FOR THIS WORK. IT WAS SUBMITTE D THAT AFTER EXAMINING THESE DETAILS WHILE THE LEARNED CIT (APPEALS) WAS OF THE VIEW THAT SUC H EXPENSES APPEAR TO BE GENUINE AND ARE GENERALLY INCURRED IN THE COURSE OF ASSESSEES LINE OF BUSINESS, HE ALSO FOUND THAT SOME OF SUCH EXPENSES ARE SUPPORTED ONLY BY SELF VOUCHERS AND CA SH RECEIPTS WHICH ARE NOT VERIFIABLE, AND THEREFORE RESTRICTED THE DISALLOWANCE TO RS.7,32,28 0 (I.E. 2% OF RS.3,66,14,000) AS AGAINST DISALLOWANCE OF RS.91,53,500 (I.E. 25% OF RS.3,66,1 4,000) MADE BY THE ASSESSING OFFICER. IN THIS VIEW OF THE MATTER, THE LEARNED DEPARTMENTAL R EPRESENTATIVE SUBMITTED THAT THE DISALLOWANCES AS SUSTAINED BY THE LEARNED CIT(APPEA LS) AT RS.7,32,280 BE UPHED. 10 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 11.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUS ED THE MATERIAL ON RECORD. WE FIND FROM THE RECORD THAT THE LEARNED CIT(APPEALS) HAS EXAMIN ED THIS ISSUE IN DETAIL, LOOKING INTO THE BOOKS OF ACCOUNTS AND THE AGREEMENTS FOR SUCH WORK FOR EACH PROPERTY BEFORE COMING TO THE VIEW THAT SUCH FENCING AND LEVELING EXPENSES BEING NORMALLY INCURRED IN THIS LINE OF BUSINESS APPEAR TO BE GENUINE. THE LEARNED CIT(APPEALS) ALS O NOTED THAT SOME OF SUCH EXPENSES HAVE BEEN CLAIMED ONLY ON THE BASIS OF SELF VOUCHERS AN D CASH RECEIPTS AND WERE NOT VERIFIABLE AND THEREFORE ON THIS ACCOUNT SUSTAINED THE DISALLOWANC E TO THE EXTENT OF RS.7,32,280 (I.E. 2% OF RS.3,66,14,000) OUT OF THE DISALLOWANCE OF RS.91,53 ,500 (I.E. 25% OF RS.3,66,14,000) MADE BY THE ASSESSING OFFICER THEREBY GIVING THE ASSESSEE RELIE F OF RS.84,21,220. BEFORE US EXCEPT FOR MAKING THE PLEA, THE ASSESSEE HAS NOT FURNISHED ANY COGENT EVIDENCE TO ESTABLISH THAT THE EXPENSES OF RS.7,32,280, WHICH STOOD DISALLOWED, WE RE VERIFIABLE. IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THERE IS NO REAS ON OR CAUSE FOR US TO INTERFERE WITH THE FINDING OF THE LEARNED CIT(APPEALS) AND THEREFORE S USTAIN THE DISALLOWANCE OF RS.7,32,280 OUT OF LEVELING AND FENCING CHARGES. THE CROSS OBJECTIO N OF THE ASSESSEE ACCORDINGLY STANDS DISMISSED. 12. IN THE RESULT, THE CROSS OBJECTION OF THE ASSES SEE IS DISMISSED. ITA NO.706/BANG/2011 (ASSESSMENT YEAR 2007-08) 13. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWIN G GROUNDS : 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS OPP OSED TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT (APPEALS) ERRED IN DELETING T HE ADDITION OF RS.3,26,07,860 MADE UNDER SECTION 2(22)(E) BY ERRONEOUSLY ACCEPTING THE ASSESSEES VERSION THAT THE AMOUNT SHOWN AS LOAN IN THE BALANCE SHEET WAS AN AD VANCE RECEIVED FOR SALE OF LAND ON THE BASIS OF AN MOU WITH M/S. DYNASTY DEVELOPERS PV T LTD. THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECIATED THE FACTS AND CIRCUMSTANCES IN AS MUCH AS THE CONSIDERATION FOR SALE AS PER MOU WAS ONLY RS. 3.50 CRORES WHEREAS, HAVING ALREADY RECEIVED BY THE ASSESSEE DURING THE RELEVANT PREVIO US YEAR WAS FAR IN EXCESS OF THE AGREED CONSIDERATION AND, IN SUCH CIRCUMSTANCES, TH E AMOUNT RECEIVED CANNOT BE TERMED AS ADVANCE. 11 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT (APPEALS) IN SO FAR AS IT RELATED TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT THE ASSESSING OFFICER MAY BE R ESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED. 14. THE GROUNDS OF APPEAL AT S.NOS.1, 3 & 4, ARE GENERAL IN NATURE AND NO ADJUDICATION BEING CALLED FOR THEREON, THEY ARE DISMISSED AS INFRUCTUO US. 15.1 IN THE GROUND RAISED AT S.NO.2 , REVENUE HAS CHALLENGED THE LEARNED CIT(APPEALS)S ORDER DELETING THE ADDITION OF RS.3,26,07,860 MADE UNDER SECTION 2(22)(E) OF THE ACT. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE LEAR NED CIT(APPEALS) ERRED IN ACCEPTING THE ASSESSEES CLAIM THAT THIS AMOUNT SHOWN AS LOAN IN THE ASSESSEES BALANCE SHEET WAS NOT A LOAN BUT AN ADVANCE RECEIVED FOR SALE/PURCHASE OF LAND O N THE BASIS OF A MOU DT.15.6.2004 WITH M/S. DYNASTY DEVELOPERS PVT. LTD. IT WAS SUBMITTED THAT AS PER THE MOU, THE SALE CONSIDERATION WAS ONLY RS.3.50 CRORES, WHEREAS THE ASSESSEE HAD A LREADY RECEIVED AN AMOUNT OF RS.3,05,48,000 IN THE PRECEDING YEAR AND TOGETHER WITH THE RS.3,26 ,07,860 RECEIVED IN THE RELEVANT PERIOD THE AMOUNT RECEIVED BY THE ASSESSEE WAS FAR IN EXCESS O F THE AGREED CONSIDERATION. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE LEARNED CIT(APPEALS) OUGHT TO HAVE ENQUIRED INTO THE MATTER BEFORE BLINDLY PLACING REL IANCE ON DOCUMENTS PRODUCED BY THE ASSESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE DREW OUR AT TENTION TO THE LEARNED CIT(APPEALS)S ORDER. HE POINTED OUT THAT THE LEARNED CIT(APPEALS ) HAD FAITHFULLY RECORDED THE WRITTEN AND ORAL SUBMISSIONS OF THE ASSESSEE FROM PARA 2 TO PAR A 5.5 ON PAGES 2 TO 13 OF THE ORDER AND THEN IN PARA 6, CONSISTING OF ABOUT 8 LINES, ALLOWED THE ASSESSEES APPEAL ON THIS ISSUE OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT WITHOUT ANY DISCUSSION OF THE FACTS OF THE CASE ON THIS ISSUE, THE LEGAL POSITION OR ASSIGNING ANY REA SONS FOR TAKING THE DECISION HE TOOK. IN SHORT, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THERE WAS NO SPEAKING ORDER PASSED BY 12 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 THE LEARNED CIT(APPEALS). HE, THEREFORE, PRAYED TH AT THE MATTER OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT REQUIRED TO BE REMITTED BACK TO THE FILE OF THE CIT(APPEALS) FOR DE NOVO CONSIDERATION IN THE INTEREST OF JUSTICE. 15.2 THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(APPEALS), BUT SUBMITTED THAT HE HAD NO OBJECTION IF THE ISSUE OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT BE REMANDED TO THE FILE OF THE CIT(APPEA LS) FOR CONSIDERATION AFRESH. 15.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUS ED THE MATERIAL ON RECORD. WE HAVE PERUSED THE ORDER OF THE LEARNED CIT(APPEALS) ON TH E ISSUE OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT AND AGREE WITH THE CONTENTION O F THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE LEARNED CIT(APPEALS) MERELY RECORDED THE S UBMISSIONS OF THE ASSESSEE AT PARAS 2 TO 5.5 FROM PAGES 2 TO 13 OF HIS ORDER AND THEN IN PAR A 6 OF HIS ORDER ALLOWED THE APPEAL OF THE ASSESSEE IN A SUMMARY MANNER, BEREFT OF ANY DISCUSS IONS OF THE FACTS OF THE CASE AS BROUGHT OUT BY THE ASSESSING OFFICER AND THE ASSESSEE, AND WITH OUT ASSIGNING ANY REASONS FOR REACHING THE FINDING HE MADE. WE, THEREFORE, REPRODUCE HEREUNDE R THE REFERRED PARA 6 ON PAGE 14 OF THE CIT(APPEALS)S ORDER WHICH WILL CLARIFY THE SITUATI ON : 6. CONSIDERING THE FACTS AND CIRCUMSTANCES OF TH E CASE AND FOLLOWING THE RATIONALE OF THE ABOVE DECISIONS, I HOLD THAT THE ADVANCE OF RS.3,26,07,860 RECEIVED BY THE APPELLANT FROM ANOTHER COMPANY, ALSO ENGAGED IN REA L ESTATE DEVELOPMENT IS TOWARDS SALE OF PROPERTY IN THE COURSE OF BUSINESS AND CONS IDERING THE FACTS OF THE CASE, SUCH ADVANCES ARE NOT HIT BY THE PROVISIONS OF SECTION 2 (22)(E) OF THE ACT. THE ADDITION OF RS.3,26,07,860 MADE TO THE INCOME AS DEEMED DIVIDEN D AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS DELETED. PARA 6 (SUPRA) REINFORCES OUR VIEW THAT THE LEARNED CIT(APPEALS) FAILED TO PASS A SPEAKING ORDER ON THE ISSUE AT HAND. NOT ONLY THAT, WHEN THE LEAR NED DEPARTMENTAL REPRESENTATIVE PRAYED FOR REMITTING THE ISSUE OF DEEMED DIVIDEND UNDER SECTIO N 2(22)(E) OF THE ACT TO THE FILE OF THE LEARNED CIT(APPEALS) FOR PASSING A SPEAKING AND REA SONED ORDER THEREON, THE LEARNED COUNSEL FOR 13 ITA NOS.705 & 706/BANG/11 C.O. NO.14/BANG/2012 THE ASSESSEE DID NOT OBJECT TO THE LEARNED DEPARTME NTAL REPRESENTATIVES PLEA. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AS DISCUSSED ABOVE, WE A RE OF THE VIEW THAT IN THE INTEREST OF EQUITY AND JUSTICE IT WOULD BE IN THE FITNESS OF THINGS FO R THE ISSUE OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT TO BE REMITTED TO THE FILE OF T HE LEARNED CIT(APPEALS) FOR DE NOVO CONSIDERATION BY HIM TAKING INTO CONSIDERATION THE FACTS OF THE CASE, THE FINDING OF THE ASSESSING OFFICER IN ORDER OF ASSESSMENT, THE SUBMI SSIONS OF THE ASSESSEE, THE JUDICIAL DECISIONS CITED AND TO PASS FRESH SPEAKING ORDERS THEREON. I T IS ORDERED ACCORDINGLY. 16. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05.10.2012. SD/- SD/- (N.V. VASUDEVAN) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER