I.T.O 25(1)(2), MUMBAI V. OMKAR REALTORS, MUMBAI

ITA 7107/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4261 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 05-12-2013
• Court: TRIBUNAL
• Department Lawyers: C W ANGOLKAR
• Assessee Lawyers: VARSHA DHAMEJA
• Keywords: Business income
• Section: 143(3)

Judgement Text

, , C, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.7107/MUM/2013 ASSESSMENT YEAR: 2007-08 I.T.O 25(1)(2) , ROOM NO. 204, C-11 PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400051 / VS. OMKAR REALTORS FIRST FLOOR, SAMIR COMPLEX, ST. ANDREWS ROAD, BANDRA (W) MUMBAI-400050 ( ASSESSEE ) ( RESPONDENT ) P.A. NO. AABCC9418Q REVENUE BY SHRI C.W. ANGOLKAR ( D R) RESPONDENT BY MS. VARSHA DHAMEJA (A R) * + , - / DATE OF HEARING : 11/04/2016 , - / DATE OF ORDER: 11/04/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI- 35 {(IN SHORT CIT(A)}, DATED 10.09.2013 PASSED AG AINST OMKAR REALTORS 2 ASSESSMENT ORDER U/S 143(3) R.W.S. 147 DATED 31.12. 2012 FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUND S: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.45,00,000/- AS BUSINESS RECEIPT BY THE ASSESSEE FROM M/S. DECCAN CONSTRUCTIONS FOR ADMISSIONS IN JOINT VENTURE. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING EXPENDITURE OF RS.45,06,007/- AS GENUINE WITHOUT FURTHER VERIFYING THE GENUINENESS OF THE EXPENDITURE INCURRED. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y MS. VARSHA DHAMEJA, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI C.W. ANGOLKAR, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE R EVENUE. 3. THE SOLITARY ISSUE RAISED BY THE REVENUE IS WITH RE GARD TO THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION O F RS. 45,00,000/- MADE BY THE AO ON THE GROUND THAT THE A SSESSEE HAD RECEIVED THE AFORESAID AMOUNT OF COMPENSATION F OR ADMITTING M/S. DECCAN CONSTRUCTIONS FOR ADMISSION I N JOINT VENTURE. 3.1. THE BRIEF FACTS OF THE ISSUE INVOLVED ARE THAT ON 10.11.2005, THE ASSESSEE ENTERED INTO A JOINT VENTU RE AGREEMENT WITH M/S. DECCAN CONSTRUCTIONS AND FORMED OMKAR REALTORS AND DECCAN CONSTRUCTIONS JOINT VENTU RE. IN PURSUANCE TO THE SAID AGREEMENT, THE ASSESSEE BROUG HT INTO THE JV ITS STOCK AMOUNTING TO RS.45,00,000/- TOWARD S ITS CAPITAL CONTRIBUTION TO THE JV. SIMILARLY, M/S. DEC CAN OMKAR REALTORS 3 CONSTRUCTIONS ALSO AGREED TO CONTRIBUTE A SUM OF RS.45,00,000/- TOWARDS IT SHARE OF CAPITAL CONTRIBU TION. 3.2. FURTHER IN ASSESSMENT A.Y.2007-08, THE ASSESSEE OBTAINED A LONG TERM AMOUNT OF RS. 45,00,000/- FROM THE SAID J.V. VIDE THREE CHEQUES AGGREGATING TO RS.45,00,000 /-. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 1 43(3), THE ASSESSEE SUBMITTED BALANCE SHEET FOR ASSESSMENT YEA R 2006- 07 AS WELL AS ASSESSMENT YEAR 2007-08 TO SHOW THAT CAPITAL CONTRIBUTION WAS REFLECTED AT RS. 45,06,007/- AS ON 31.03.2006 AND LOAN RECEIVED OF RS.45,00,000/- WAS REFLECTED IN THE BALANCE SHEET AS ON 31.03.2007. IN THE ORIGI NAL ORDER PASSED U/S 143(3), THE AO ACCEPTED THESE TRANSACTIO NS. BUT, SUBSEQUENTLY HE REOPENED THE CASE U/S 147 AND TREAT ED THE AFORESAID AMOUNT OF RS.45,00,000/- OF LOAN AS COMPE NSATION RECEIVED FROM J.V., TOWARDS CONTRIBUTION OF M/S. DE CCAN CONSTRUCTIONS AS J.V. PARTNERS. 3.3. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) WHEREIN IT WAS SUBMITTED THAT ENTERING I NTO AN J.V. AGREEMENT IN A.Y. 2006-07 AND TAKING A LOAN FROM TH E SAID J.V. IN A.Y. 2007-08 WERE TWO SEPARATE TRANSACTIONS AND COULD NOT BE CO-RELATED TO EACH OTHER. IT WAS SUBMITTED T HAT, THE AMOUNT BORROWED WAS UTILIZED FOR PUTTING CERTAIN LI ABILITIES TOWARDS THIRD PARTIES OF THE ASSESSEE. THESE FACTS WERE NOT DISPUTED BY THE AO. THUS, THERE WAS NO BASIS FOR PR ESUMING THE LOAN AS NOT GENUINE, IT WAS FURTHER SUBMITTED T HAT THE BALANCE SHEET OF THE J.V. CLEARLY SHOWED THIS AMOUN T AS OMKAR REALTORS 4 RECEIVABLE ON THE ASSET SIDE AND NOT AS EXPENDITURE . IT WAS THUS, CONTENDED THAT BY NO IMAGINATION THE IMPUGNED AMOUNT COULD BE PRESUMED AS INCOME OF THE ASSESSEE. THE AS SESSEE MADE FEW OTHER ARGUMENTS TO ASSAIL THE ORDER OF THE AO. 3.4. LD. CIT(A) CONSIDERED THE ORDER OF THE AO AND SUBMISSIONS OF THE ASSESSEE IN DETAIL AND HELD WITH DETAILED REASONING THAT IMPUGNED AMOUNT COULD NOT BE HELD AS INCOME OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) IS REPRODUCED BELOW: THE FACTS OF THE CASE ARE THAT M/S. OMKAR REALTORS WAS INCORPORATED ON 30-10-2005. THE PROJECT GIVEN TO T HEM IN THEIR CAPACITY AS A BUILDER AND DEVELOPER WAS AT 20 5, TPS- III, MAHIM OF SHREE SAINATH SAHAKARI VYAPARI SANKUL SANSTHA. THE SAID PROJECT WAS TRANSFERRED TO JOINT VENTURE IN THE NAME OF OMKAR REALTORS & DECCAN CONSTRUCTION JV. THE SIGNING OF JOINT VENTURE HAPPENED ON 10-11-2005 . THE ISSUE BEFORE US IS RECEIPT OF RS.45LAKHS BY OMKAR R EALTORS IN THE YEAR I.E. AY 2007-08. THE CONTENTIONS OF THE AO IS THAT RS.45 LAKHS REPRESENTS COMPENSATION PAID BY M/ S. DECCAN CONSTRUCTIONS TO M/S. OMKAR REALTORS FOR JO INING IN AS JOINT VENTURE PARTNER. THE APPELLANT ON THE C ONTRARY HAS SUBMITTED THAT THIS 45 LAKHS RECEIVED REPRESENT S LOAN GIVEN BY M/S. DECCAN CONSTRUCTIONS TO OMKAR REALTOR S SINCE CERTAIN EXPENSES WERE SHOWN AS PAYABLE AS ON 31.03.2006 AT RS.42,82,407/-. I HAVE GONE THROUGH T HE FACTS AND SUBMISSIONS OF THE APPELLANT IN THIS REGA RD AND FOUND THAT IN FACT EXPENSES TO THE TUNE OF RS.45,06 ,007/- WERE INCURRED BY OM REALTORS BEFORE IT BECAME JOINT VENTURE BY OR&DC JV. THE AO HAS FOUND NO FACTUAL ER ROR AND HAS NOT GIVEN ANY FACTS TO DOUBT THE VERACITY O F THE SAME. THE AO HAS FOUND NO EVIDENCE TO CONTRADICT TH E SUBMISSIONS OF THE APPELLANT AND THE ACCOUNTING ENT RIES IN THIS REGARD AS PER THE AGREEMENT RS.45 LAKHS BEING THE SHARE CAPITAL OF DECCAN CONSTRUCTION IN THE JOINT V ENTURE AND GIVING LOAN BY DECCAN CONSTRUCTION TO M/S. OMKA R REALTORS. THE AO FAILED TO BRING ANY EVIDENCE TO PR OVE THAT OMKAR REALTORS 5 THESE ENTRIES ARE TWO SEPARATE TRANSACTIONS, MERELY .ON THIS THE AO HAS HELD, THAT THE SAID AMOUNT RECEIVED IN AY 2007-08 IS TO BE TREATED AS COMPENSATION PAID BY DE CCAN CONSTRUCTION TO OMKAR REALTORS AND HAS TAKEN IT AS THE INCOME OF THE APPELLANT. THE ISSUE RAISED BY THE AO THAT NO PRUDENT BUSINESS MAN WILL GIVE ENTRY TO OTHER PE RSON TO SHARE HIS PROFITS ON THE PARTICULAR RIGHTS 'WITHOUT OBTAINING ANY COMPENSATION FROM THE NEWLY ADMITTED PERSON AND THEREFORE IT CANNOT BE HELD TO TAKEN AS COMPENSATIO N IS MERELY A CONJECTURE NOT BACKED BY EVIDENCE. IT IS I MPORTANT TO NOTE THAT IN FACT ON THE BASIS OF THE LOAN RECEI VED DURING THE YEAR 2007-08 THE APPELLANT HAS CLEARED OUTSTAND ING DUES AS UNDER: ALC.NAME NAME OF PARTY AMOUNT CHQ. NO. DATE PAID AMT. WEAR & TEAR/ DEVELOP EXP. POOJA TRADERS 2,89,400 98,250 584865 21-11-06 387650 WEAR & TEAR/ DEVELOP EXP. DHARMESH TRDG 285740 ARMESH TRADING 294060 584866 28-11-06 427650 DHARMEH TRDG. 263120 584864 21-11-06 415270 FENCING EXP . HARSHA ENTERPRISES 350480 5584863 21-11-06 462180 SITE EXP. MEHUL TRADERS 222710 SITE EXP. MEHUL TRADERS 428620 584671 13-12- 06 651350 SITE EXP. MEHUL TRADERS 280969 SITE EXP. MEHUL TRADERS 137500 584875 19-12-06 418310 SITE EXP. DESAI & CO. 288900 584873 1 1-12- 06 288900 LABOUR CHARGES VIKAS CHIKHALE 387500 TDS 584874 584870 15-12-06 19-12-06 3,79,362 8,138 LABOUR CHARGES RAVI CONSTRUCTION 391880 TDS 584877 584878 13-01-07 13-01-07 383650 8,794 LABOUR CHARGES SUBHASH MORE 275380 TDS 584878 584880 13-01-07 13-01-07 269762 5,618 IN THE LIGHT OF THE FACTS OF THE CASE THE ADDITION MADE ON THIS ACCOUNT IS DELETED . 3.5. DURING THE COURSE OF HEARING BEFORE US, LD. DR WAS NOT ABLE TO POINT OUT ANYTHING WRONG IN THE FACTUAL ANA LYSIS AND OMKAR REALTORS 6 REASONING GIVEN BY THE LD. CIT(A) WHILE DELETING TH IS ADDITION. IT IS NOTED THAT THE AO HAD MADE THIS ADDITION WITH OUT PROPERLY APPRECIATING THE FACTS OF THE CASE. THE AS SESSEE HAD GIVEN PROPER DETAILS IN SUPPORT OF THE AMOUNT RECEI VED BY IT. THE AO PRESUMED THE SAID AMOUNT AS COMPENSATION ON THE BASIS OF HIS SURMISES AND CONJECTURES. THERE WAS NO THING WITH THE AO TO CONTRADICT THE SUBMISSIONS OF THE ASSESSE E SUPPORTED WITH PROPER AGREEMENT AND OTHER EVIDENCES . THE AO HAD WRONGLY MIXED TWO SEPARATE TRANSACTIONS INTO ON E. LD. CIT(A) HAS APTLY THRESHED OUT THE FACTS AND DELETED THE ADDITION AFTER METICULOUS APPRECIATION OF ACCOUNTIN G ENTRIES AND OTHER EVIDENCES. WE FIND NO REASON TO INTERFERE IN THE FINDINGS OF LD. CIT(A) AND THEREFORE, THESE ARE UPH ELD. THE GROUNDS RAISED BY THE REVENUE ARE NOT SUSTAINABLE I N LAW OR ON FACTS AND THEREFORE, THESE ARE DISMISSED. 4. THE LD. COUNSEL HAD ALSO DRAWN OUR ATTENTION ON TH E JURISDICTIONAL GROUND WITH REGARD TO REOPENING TAKE N BY THE ASSESSEE UNDER RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES 1963. BUT, SINCE WE HAVE DECIDED THE ISSUE ON MERITS IN FAVOUR OF THE ASSESSEE, WE DO NOT FIND IT NECESSARY TO GO INTO THAT ASPECT AND DISMISS THE SAME AS INFRUCTUOUS AT THIS STAGE. OMKAR REALTORS 7 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISM ISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 TH APRIL, 2016. SD/- ( JOGINDER SINGH) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER * + MUMBAI; / DATED 11 / 04 /2016 CTX? P.S/. . . #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. 123 / THE APPELLANT 2. 4523 / THE RESPONDENT. 3. 6 6 * 7 ( 1 ) / THE CIT, MUMBAI. 4. 6 6 * 7 / CIT(A)- , MUMBAI 5. :; 4< , 6 1- <= , * + / DR, ITAT, MUMBAI 6. >? @+ / GUARD FILE. / BY ORDER, 5:1 4 //TRUE COPY// / (DY./ASSTT. REGISTRAR) , * + / ITAT, MUMBAI