ACIT, CHENNAI V. M/s. Jayabheri Properties Pvt. Ltd., CHENNAI

ITA 71/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61298 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-07-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 12-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH CHENNAI SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER .. I.T.A. NO.71/MDS/2012 ASST. YEAR : 2004-05 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE II(3), CHENNAI. V. M/S. JAYABHERI PROPERTIES PVT. LIMITED, NO.28/21 DE MONTE COLONY ALWARPET, CHENNAI-600 018 PAN: AAACM5296R (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI KEB RENGARAJAN, JCIT. ASSESSEE BY : SHRI VIKRAM VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 19 TH JULY 2012 DATE OF PRONOUNCEMENT : 19 TH JULY 2012 O R D E R PER BENCH : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE CIT(APPEALS)-III, CHENNAI, DATED 28.10.2011 PASSED IN ITA NO.722/2010- 11/A.III FOR ASST. YEAR 2004-05. THE RELEVANT PRO CEEDINGS ARE UNDER SEC.143(3) READ WITH SEC.254 OF THE INCOME TAX ACT, 1961, IN S HORT THE ACT. I.T.A. NO.71/MDS/12 2 2. THE ONLY SUBSTANTIAL GROUND RAISED BY THE REVEN UE IS THAT THE CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION TOW ARDS PROVISION MADE BY THE ASSESSEE FOR MAINTENANCE WORK AMOUNTING TO E.3.5 CR ORES. 3. THE BRIEF FACTS OF THE CASE MAY BE NOTICED AS F OLLOWS. 4. THE ASSESSEE IS ENGAGED IS ENGAGED IN THE BUSIN ESS OF REAL ESTATE. IT FILED ITS RETURN ON 1.11.2004 ADMITTING INCOME O F E.11,66,627/-. THE ASSESSING OFFICER COMPLETED ASSESSMENT UNDER SEC.143(3) OF TH E ACT ON 18.12.2006 DETERMINING TAXABLE INCOME AS E.8,37,10,200/-. THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(APPEALS) WHICH WAS PARTLY ALLOWED I N RESPECT OF CLAIM TOWARDS PROVISION FOR MEETING COST OF UNFINISHED PORTION OF THE PROJECT, BEING ACCEPTED AS E.7,23,50,000/-. 5. THE REVENUE FILED APPEAL AGAINST THE ORDER OF THE CIT(APPEALS) BEFORE ITAT, CHENNAI IN ITA NO.1284/MDS/2008 WHEREI N THE ISSUE INVOLVING CLAIM MADE BY THE ASSESSEE TOWARDS PROVISION FOR E. 7,23,50,000/- UNDER THE HEAD COST OF PROJECT IN PROGRESS WAS REMITTED BAC K TO ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS:- WE NOTE THAT THE ASSESSEE HAS NOT FURNISHED ANY RE CORD OR A COMPUTATION BASED ON THE SCIENTIFIC METHOD OF ESTIM ATION. EVEN THE ASSESSING OFFICER ALSO DID NOT EXAMINE THE CORR ECTNESS OF THE ESTIMATE AND OUT RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE IN TOTO. ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPEALS) ALSO HAD NOT GOT THE ESTIMATES VERIFIED AND ALLOWED THE CLAI M. WE ARE OF THE VIEW THAT THE CLAIM OF THE ASSESSEE IS ALLOWABL E SUBJECT TO THE I.T.A. NO.71/MDS/12 3 CORRECTNESS OF THE ESTIMATES BASED ON SCIENTIFIC ME THOD. SINCE, THE PERIOD OF FIVE YEARS HAS ALREADY EXPIRED AND BY THIS TIME THE ACTUAL EXPENDITURE WOULD HAVE ALREADY BEEN INCURRED IN RESPECT OF THE PROVISION MADE BY THE ASSESSEE, WE SET ASIDE TH E ORDERS OF THE LOWER AUTHORITIES, QUA THIS ISSUE AND REMIT THE SAME TO THE RECORD OF THE ASSESSEE FOR PROPER VERIFICATION AND EXAMINATION AND ACCORDINGLY PASS E FRESH ORDER AFTER GIVING AN OPPO RTUNITY TO THE ASSESSEE. 6. IN THIS MANNER, THOUGH THE CO-ORDINATE BENCH AC CEPTED THE ASSESSEES CLAIM REGARDING ALLOWABILITY, ONLY EMBA RGO AS STIPULATED WAS THAT ITS CORRECTNESS OF THE ESTIMATION HAD TO BE BASED ON SC IENTIFIC METHOD ADOPTED BY ASSESSEE. 7. IN REMAND PROCEEDINGS, THE ASSESSING OFFICER AG AIN TOOK UP THE MATTER AS DIRECTED AND OBSERVED THAT DURING THE PER IOD UNDER REFERENCE THE ASSESSEE COMPANY HAD DEBITED AN AMOUNT OF E.46,27,4 0,628/- TOWARDS COST OF PROJECT IN PROGRESS INCLUDING AN AMOUNT OF E.7,23,5 0,000/- TOWARDS PROVISION FOR VARIOUS EXPENSES. IN SUPPORT OF THIS CLAIM, THE AS SESSEE ALSO FURNISHED COPY OF LEDGER ACCOUNT IN RESPECT OF DIFFERENT FLATS FOR TH E PERIOD FROM 01.4.203 TO 31.3.2005 AND SUBMITTED THAT THE PROJECT IN PROGRES S COMPLETED WITHIN THE MEANING OF ACCOUNTANCY STANDARD 7 AS PRESCRIBED BY ICAI AND ALSO TENDERED AN EXPLANATION THAT THE ACTUAL EXPENDITURE INCURRED BY THE COMPANY HAD FAR EXCEEDED THE PROVISION MADE. I.T.A. NO.71/MDS/12 4 8. REGARDING MAINTENANCE ASSESSEES PLEA WAS THAT THE SAME HAD BEEN CARRIED ON FROM 01.4.2004 TO 31.12.2005 (E.1,2 2,50,000/-) FOR 1 YEAR AND 9 MONTHS AND THE BALANCE AMOUNT OF E.2,27,50,000/- HA D BEEN TRANSFERRED TO M/S JAYABHERI PROPERTIES AND SERVICES PVT. LTD IE. ITS SISTER CONCERN FROM 01.1.2006. THE ASSESSING OFFICER, VIDE ASSESSMENT ORDER DATED 31.12.2010 DID NOT ACCEPT THE ASSESSEES BREAK UP OF EXPENSES OF E.7,23,50,00 0/- WHICH WAS AS UNDER :- MATERIAL (INCLUDING ADVANCES PAID) : 1,51,00,000 EXPENSES (INCURRED UPTO 15.10.04) : 74,00,000 LABOUR CHARGES : 42,50,000 OTHER EXPENSES : 6,00,000 PENDING WORKS : 1,00,00,000 MAINTENANCE EXPENSES : 3,50,00,000 TOTAL : 7,23,50,000 ACCORDINGLY, THE ASSESSING OFFICER CAME TO THE CONC LUSION THAT VERIFICATION OF LEDGER ACCOUNT FILED BY THE ASSESSEE DEMONSTRATED T HAT IT HAD TRANSFERRED A SUBSTANTIAL AMOUNT TOWARDS MAINTENANCE DEPOSIT, AND AFTER TRANSFER, THE AMOUNT OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE TOWA RDS BALANCE WORK COVERS THE CLAIM UNDER THE PROVISIONS FOR EXPENSES OTHER THAN MAINTENANCE. THEREFORE, PER ASSESSING OFFICER THE ASSESSEE HAD COLLECTED SUBSTA NTIAL AMOUNTS TOWARDS MAINTENANCE DEPOSIT UNDER THE HEAD MAINTENANCE DEP OSITS AT THE RATE OF E.100/- PER SQ. FT. AND INTEREST EARNED FROM SAID C ORPUS HAD TO BE REALIZED TOWARDS COMMON MAINTENANCE CHARGES. HENCE, IT COUL D NOT BE SAID THAT ESTIMATION OF E.3.50 CRORES (SUPRA) WAS BASED ON AN Y SCIENTIFIC METHOD. I.T.A. NO.71/MDS/12 5 REGARDING TRANSFER OF THE AMOUNT WITH EFFECT FROM 0 1.1.2006 TO THE ASSESSEES SISTER CONCERN, M/S. JAYABHERI PROPERTIES AND SERVI CES PVT. LTD. AS A WHOLE, THE ASSESSING OFFICER HELD THAT THE SAME COULD NOT BE T REATED AS HAVING BEEN INCURRED FOR THE PURPOSE OF MAINTENANCE. IN THIS MANNER, THE ASSESSING OFFICER MADE ADDITION OF E.3.50 CRORES BY HOLDING THAT THE PROVISION MADE BY THE ASSESSEE WAS NOT ALLOWABLE EXPENDITURE UNDER SEC.36 AND OF THE ACT. IN THIS MANNER, THAT THE ASSESSING OFFICER ASSESSED THE ASS ESSEES INCOME AS E.4,63,60,200/-. 9. THE ASSESSEE CARRIED THE MATTER BEFORE CIT(APPE ALS) IN APPEAL WHEREIN ITS PLEA OF HAVING INCURRED THE ADDITIONAL AMOUNT OF E.3.50 CRORES HAS BEEN ACCEPTED BY HOLDING THAT THE ASSESSING OFFICER S FINDINGS TO THE EFFECT THAT THERE WAS NO BASIS FOR ESTIMATING THE MAINTENANCE E XPENSES, WAS NOT AS PER TRUE FACTUAL POSITION. WHILST ALLOWING THE ASSESSEES APPEAL, THE CIT(APPEALS) HAS ALSO RELIED ON THE CASE LAW OF HONBLE SUPREME COUR T IN THE CASE OF CALCUTTA CO. LTD V. CITM (37 ITR 1), HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. TRIVENI ENGG. & INDUSTRIES LTD. (196 TAXMAN 94), HONBLE S UPREME COURT IN THE CASE OF BHARAT EARTH MOVERS V. CIT (112 TAXMAN 61), F.F.E MINERALS INDIA (P) LTD. V. JCIT (142 TAXMAN 110) CHENNAI(MAG), CIT V. AGARWAL ENTERPRISES (100 TAXMAN 360)(ALL) AND CIT V. DEVELOPMENT TRUST (P) LTD. (55 TAXMAN 200 (ALL). IN THIS MANNER THE CIT(APPEALS) HAS TREATED THE PROVISION FOR MAINTENANCE EXPENSES AS ALLOWABLE UNDER SEC.37(I) OF THE ACT 10. THEREFORE, THE REVENUE IS AGGRIEVED. I.T.A. NO.71/MDS/12 6 11. BEFORE US, THE REVENUE HAS REITERATED THE VARI OUS PLEAS RAISED IN THE GROUNDS AND PRAYED FOR ACCEPTANCE OF THE APPEAL . ON BEHALF OF THE ASSESSEE THE AR STRONGLY SUPPORTED THE FINDINGS OF THE CIT(A PPEALS). 12. WE HAVE HEARD BOTH REPRESENTATIVES AND ALSO PE RUSED THE RELEVANT PAPER BOOK WHICH COMPRISES BASIS FOR MAINTENANCE EX PENDITURE, EXPENDITURE INCURRED FOR JAYABHERI SILICON COUNTRY DURING ASST. YEAR 2005-06, PROFIT AND LOSS ACCOUNT OF JAYABHERI PROPERTIES AS ON 31.3.2005, PR OVISION FOR EXPENSES AS ON 31.3.2006, PROFIT AND LOSS ACCOUNT OF JAYABHERI PRO PERTIES SERVICES PVT. LTD AS ON 31.3.2007, PROFIT AND LOSS ACCOUNT OF JAYABHERI PROPERTIES SERVICES AS ON 31.3.2009 AND AGREEMENT FOR FINISHING WORKS OF FLAT S/DUPLEX PREMISES. THE FACTUAL POSITION OF THE CASE IS NOT IN DISPUTE. TH IS IS THE SECOND ROUND OF LITIGATION. IN THE FIRST ROUND THE ALLOWABILITY OF THE ASSESSEES CASE HAS BEEN ACCEPTED BY THE CO-ORDINATE BENCH(SUPRA). THE ONLY DIRECTION WHICH WAS GIVEN TO THE ASSESSING OFFICER WAS TO EXAMINE THE EXPENDI TURE CLAIM ON SCIENTIFIC BASIS. WE FIND FROM THE ORDERS OF ASSESSING OFFICER AS WEL L AS CIT(APPEALS) THAT THE ONLY THING WHICH HAS BEEN CONSIDERED IS THAT THE AS SESSEE HAD INCURRED THE EXPENDITURE WHICH STOOD DECLINED BY THE ASSESSING O FFICER BY HOLDING THAT THE SAME IS NOT COVERED BY SEC.36 AND 37 OF THE ACT WHE REAS THE CIT(APPEALS) HAS AGREED TO ASSESSEES PLEA BY APPLYING SEC.37(1) OF THE ACT. ADMITTEDLY, THE ASSESSEE HAD TRANSFERRED ITS MAINTENANCE ACCOUNT WI TH EFFECT FROM 01.1.2006. THEREAFTER, THE SUM OF RS.2,27,50,000/- IS STATED T O HAVE BEEN SPENT BY THE ASSESSEES SISTER CONCERN, NAMELY M/S JAYABHERI PR OPERTIES AND SERVICES PVT. I.T.A. NO.71/MDS/12 7 LTD. IN THE FINDINGS BEFORE US WE NOTICE THAT THER E IS NO DETAILED EXAMINATION OF THE EXPENDITURE INCURRED BY ASSESSEES SISTER CONCE RN SUBMITTED IN SUPPORT OF THE CLAIM AMOUNT. THIS, IN OUR VIEW, IS NOT SUBSTANTIV E COMPLIANCE OF THE ORDER PASSED BY THE CO-ORDINATE BENCH(SUPRA). AT THE SAM E TIME, WE ARE ALSO OF THE VIEW THAT SO FAR AS THE AMOUNT SPENT BY THE ASSESSE E ITSELF IS CONCERNED, IE. RS.1,22,50,000/- FROM 01.4.2004 TO 31.12.2005, IT H AS SUCCESSFULLY DISCHARGED ITS ONUS IN FILING CORROBORATIVE EVIDENCE HEREINABOVE. HENCE, IN ORDER TO ENSURE APPROPRIATE COMPLIANCE WITH THE DIRECTIONS OF THE C O-ORDINATE BENCH ORDER IN TRUE LETTER AND SPIRIT AS WELL AS IN VIEW OF OUR DISCUS SION HEREIN ABOVE, WE AGAIN REMIT THE CASE BACK TO THE ASSESSING AUTHORITY TO RE-EXAM INE THE ISSUE IN HAND AFTER AFFORDING ADEQUATE OPPORTUNITY OF HEARING TO THE AS SESSEE ONLY QUA THE SPENT AMOUNT OF RS.2,27,50,000/- TRANSFERRED TO ASSESSEE S SISTER CONCERN FOR THE PURPOSE OF MAINTENANCE OF THE PROJECT. WE ALSO GR ANT OPPORTUNITY TO THE ASSESSEE TO PROVE ITS CASE BY LEADING FURTHER EVIDE NCE, IF ANY, IN ACCORDANCE WITH LAW. 13. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 14. ORDER PRONOUNCED IN THE OPEN COURT AFTER HEARI NG THE APPEAL ON THURSDAY, THE 19 TH OF JULY 2012 AT CHENNAI. ( ABRAHAM P. GEORGE ) (S .S. GODARA) ACCOUNTANT MEMBER JUDICI AL MEMBER CHENNAI, DATED : JULY 2012 I.T.A. NO.71/MDS/12 8 JLS. COPY TO:- 1) ASSESSEE 2) ASSESSING OFFICER 3) CIT(APPEALS) 4) C.I.T 5) D.R. (6) GUARD FILE