CITIZEN CO-OPERATIVE HOUSING SOCIETY (PROPOSED), MUMBAI V. ITO 18(1)(2), MUMBAI

ITA 728/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88636 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence; Reasonable cause; Bad and doubtful debts; Difference of opinion

Judgement Text

, LH LHLH LH INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. , , BEFORE S/SH.VIJAY PAL RAO, JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA/728/MUM/2012, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2008-09 M/S CITIZEN CO-OPERATIVE HOUSING SOCIETY (PROPOSED), C/O CHATURVEDI SOHAN & CO. CHARTERED ACCOUNTANTS, 320, TULSIANI CHAMBERS, 212, NARIMAN POINT, MUMBAI-400021 PAN: AAAAC2476K VS ITO 18(2)(1), PIRAMAL CHAMBERS, LOWER PAREL EAST), MUMBAI. ( #$ / ASSESSEE) ( %&#$ / RESPONDENT) ! ! ! !'( '( '( '( ) ) ) ) / ASSESSEE BY : SHRI PIYUSH CHATURVEDI * ) / REVENUE BY : SHRI PREMANAND J. ! ! ! ! * ** * (+ (+ (+ (+ / DATE OF HEARING : 10 .03.2015 ,-' * (+ / DATE OF PRONOUNCEMENT : 18 .03.2015 ! ! ! ! 1961 * ** * 254(1) (.( (.( (.( (.( / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! : CHALLENGING THE ORDER DATED 03.11.11 OF THE CIT(A)- 29, MUMBAI THE ASSESSEE HAD RAISED FOLLOWING GROUND OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW: 1) THE LD. CIT(A) HAS GROSSLY ERRED IN NOT PROVIDING S UFFICIENT OPPORTUNITY OF BEING HEARD. HE OUGHT TO HAVE PROVIDED THE SPECIFIC OPPORTUNITY WHE N HE COULD NOT UNDERSTOOD THE MATURE OF TRANSACTIONS. 2) THE LD CIT(A) ERRED IN PASSING THE ORDER IN SUMMARY MANNER AND FAILED TO APPRECIATE THE TRUE NATURE OF TRANSACTIONS AND ALSO FAILED TO APPRECIAT E THE DOCUMENT AVAILABLE ON RECORD. 3) THE LD CIT(A) ERRED IN NOT ADMITTING THE ADDITIONAL EVIDENCE WHICH GO TO THE ROUTE OF THE MATTER AND FAILED TO DISCHARGE HIS POWER PROVIDED B Y SECTION 250(4) IN A JUDICIOUS MANNER. HE ALSO FAILED TO UNDERSTAND THAT RULE 46A DOES NOT TA KE AWAY THE POWER OF CIT(A) TO MADE FURTHER INQUIRY WHEN THE CIRCUMSTANCES REQUIRED TO DO SO. 4) THE LD. CIT (A) HAS ERRED IN SUSTAINING THE AMOUNT OF RS.31,90,484/- DISALLOWED BY THE AO ON A/C OF IRRECOVERABLE AMOUNT WRITTEN OFF WITHOUT APP RECIATING THE FACTS OF THE CASE. 5) THE LD. CIT (A) HAS ERRED IN SUSTAINING THE ADDITIO N OF RS. 5,25,360/- MADE BY AO AS SALES RETURN WITHOUT APPRECIATING THE FACTS OF THE CASE. 6) THE ORDER OF THE LD. CIT (A) IS ERRONEOUS, BAD-IN-L AW AND AGAINST THE NATURAL JUSTICE WHICH DESERVES TO BE SET ASIDE AND THE APPEAL OF THE APPE LLANT DESERVES TO BE ALLOWED. 7) THE APPELLANT LEAVES TO CRAVE, TO MODIFY, TO ALTER, TO ADD AND TO DELETE ANY OF THE GROUND LATER ON. THE RETURN OF INCOME WAS FILED DECLARING LOSS OF RS .5,90,558/- AS AGAINST WHICH THE ASSESSING OFFICER(AO)COMPLETED THE ASSESSMENT ON AN INCOME OF RS. 27,73,000/-.THE AO MADE FOLLOWING DISALLOWANCES,WHILE COMPLETING THE ASSESSMENT: 2 ITA NO. 728/M/12 CITIZEN CO-OP. HSG SOCIETY. L . IRRECOVERABLE AMOUNT WRITTEN OFF RS. 31,90,4 86/- 2. SALES RETURN RS. 5,23,360/- 3. MAINTENANCE EXPENSES RS. 53,210/- TOTAL RS. 31,76,498/- 2. DURING THE ASSESSMENT PROCEEDING,THE AO FOUND THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 31,90,486/-AS IRRECOVERABLE AMOUNT IN THE PROFIT AN D LOSS ACCOUNT AND ACCORDINGLY SAME WAS WRITTEN OFF AND CLAIMED AS DEDUCTION FROM THE PROFI T OF THE YEAR UNDER TWO HEADS -SOCIETY MAINTENANCE AT SITE(SMAS) OF RS. 14,70,691/-)AND SO CIETY MAINTENANCE RECOVERY(SMR) OF RS.17,19,795/-.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE AO HELD THAT THE ASSESSEE HAD SUBMITTED 30 ENTRIES TOTALING TO RS. 31,90,486/ - RELATING TO SOCIETIES FROM WHOM THE AMOUNTS WERE DUE BUT HAD NOT BEEN RECEIVED,THAT THE COPIES OF LEDGER ACCOUNTS WERE RIGHT FROM FY.2001-01 TO 2007-08,THAT THE CLAIM OF THE ASSESSEE WAS NOT A CCEPTABLE,THAT THE ASSESSEE HAD FILED ONLY LEDGER ACCOUNT AND HAD FAILED TO PRODUCE THE CONFIRMATION OF ACCOUNT,THAT IT HAD NOT SUBMITTED DETAILS OF REGISTRATION OF THE SOCIETIES AS PER THE SOCIETIES ACT. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE FIELD AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).AS PER THE FAA DURING APPEAL PROCEE DING VOLUMINOUS SUBMISSIONS REGARDING THE CONFIRMATION FROM VARIOUS SOCIETIES WERE PRODUC ED WITH A REQUEST THAT SAME MIGHT BE ADMITTED UNDER RULE 46A OF THE INCOME TAX RULES,1962.HE HELD THAT THAT THE FRESH EVIDENCE COULD NOT BE ADMITTED WITHOUT REASONABLE CAUSE,THAT THE CONFIRMA TIONS WERE NOT SUBMITTED DURING ASSESSMENT PROCEEDINGS, THAT NO EXPLANATION WAS GIVEN BEFORE T HE AO ABOUT THE SMAS OR SMR,THAT THE ASSESSEE WAS TAKING CONTRADICTING STAND,THAT IT WAS GIVEN ADEQUATE OPPORTUNITY BY THE AO TO EXPLAIN THE ENTRIES AND TO FILE THE CONFIRMATIONS.F INALLY,HE CONFIRMED THE ADDITION MADE BY THE AO. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR)CONTENDED TH AT THE ASSESSEE,A PROPOSED HSG. SOCIETY, WAS FORMED FOR THE PURPOSE OF ALLOTTING RESIDENTIAL FLATS TO LOW EARNING PEOPLE FROM MINORITY COMMUNITY,THAT THE OBJECT OF THE SOCIETY WAS NOT TO EARN ANY PROFIT BUT TO GIVE FLATS ON COST TO COST BASIS,THAT PROJECT OF THE SOCIETY WAS ON NO PROFIT NO LOSS BASIS WHICH MEANT AT THE END OF THE PROJECT, IF THE PROMOTEES HAD COLLECTED EXCESS AMOU NT THE SAME WAS TO BE RETURNED/REFUNDABLE TO THE FLAT PURCHADERS AND IF SHORT COLLECTED SAME WAS TO BE RECOVERED FROM THEM,THAT THE ASSESSEE HAD CONSTRUCTED THE BUILDINGS AND ALL THE BUILDINGS HAD FORMED THEIR INDIVIDUALLY HOUSING SOCIETIES,THAT AS AND WHEN ALL THE SOCIETIES WERE R EGISTERED AND MANAGEMENT HANDED OVER THE BUILDING TO THE ELECTED MANAGING COMMITTEES AN APEX BODY WOULD BE REGISTERED AND THE CONVEYANCE WOULD BE GIVEN BY THE ASSESSEE TO THE AP EX BODY ON WHICH ALL THE SOCIETIES WOULD BE MEMBERS,THAT THE INCOME FROM PROPERTY DEVELOPMENT A CTIVITY WAS RECOGNISED ON THE BASIS OF COMPLETION OF PROJECT METHOD BASED ON COST INCURRED ,THAT THE TURNOVER REPRESENTED THE VALUE OF BUILDING COMPLETED DURING THE PARTICULAR YEAR ON TH E BASIS OF OCCUPATION CERTIFICATE, THAT BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE YEAR UNDER APPEAL H AD DULY BEEN AUDITED UNDER THE PROVISIONS OF 44AB OF THE ACT, THAT THE ASSESSEE HAD CONSTRUCTED 29 BUILDINGS IN CITIZEN HOUSING COMPLEX, NAIGAON(E),DISTRICT- THANE AND AFTER DELIVERING THE POSSESSION OF THE BUILDINGS TO THE FLAT OWNERS,THAT 29 HOUSING SOCIETIES WERE FORMED SEPARA TELY,THAT THERE WAS NO MUNICIPAL WATER IN THAT AREA,THAT THE ASSESSEE WAS BUYING THE WATER TANKERS AND SUPPLYING TO THE INDIVIDUAL SOCIETY,THAT IT WAS ALSO INCURRING OTHER EXPENSES LIKE, COMMON ELEC TRICITY AND SECURITY OF THE COMPLEX AS A WHOLE,THAT FOR SUPPLYING FOR WATER AND PROVIDING OT HER FACILITIES THE ASSESSEE WAS CHARGING TO THE BUILDING-WISE HOUSING SOCIETY MONTHLY,THAT THE INDI VIDUAL BUILDING WISE EXPENSES LIKE WATCHMEN, 3 ITA NO. 728/M/12 CITIZEN CO-OP. HSG SOCIETY. SWEEPER, REPAIR ETC.WERE TAKEN-CARE BY THE INDIVIDU AL SOCIETY FOR WHICH THEY WERE CHARGING TO THEIR INDIVIDUAL FLAT OWNERS,THAT THE ASSESSEE WAS ACTING AS A BUILDER,THAT THE ASSESSEE WAS ISSUING THE MONTHLY BILLS TO ALL 29 BUILDING-WISE SOCIETY FOR W ATER CHARGES ETC WHILE ISSUING THE BILLS IT WOULD DEBIT THE ACCOUNT OF ALL 29 SOCIETY AND CREDIT THE AN ACCOUNT CALLED SMAS WHICH WAS A REVENUE ACCOUNT,THAT THE ASSESSEE DEBITED THE SMAS ACCOUNT FOR THE ACTUAL EXPENSE ON WATER, ELECTRICITY ETC AND THUS THE NET FIGURE POSITIVE OR NEGATIVE WA S SHOWN IN TO THE PROFIT & LOSS ACCOUNT,THAT THE INDIVIDUAL SOCIETIES WERE NOT PAYING THE AMOUNT SIN CE 2001-02,THAT AFTER MARCH 2005 IT STOPPED THE WATER SUPPLY AND PURSUED HARD FOR RECOVERY,THAT INSTEAD OF PAYING THOSE 29 SOCIETIES UNITED TOGETHER AND FILED A CASE AGAINST THE ASSESSEE FOR NOT SUPPLYING THE WATER,THAT AFTER LONG PERSUASION OF COURT CASES,THE ASSESSEE CHOOSES TO WRITE OFF TH IS UNRECOVERABLE AMOUNT WHICH WAS NOTHING BUT BAD DEBTS. 4.A. WITH REGARD TO SMR IT WAS STATED THAT THE ASSESSEE WAS ALSO HAVING UNSOLD FLATS,THAT OWNERS HAD NOT TAKEN POSSESSION IN THOSE INDIVIDUALS BUILD INGS,THAT IN THE REGISTER OF THE BUILDING WISE SOCIETIES THE NAME OF FLAT OWNER IN THE CASE OF UNS OLD FLAT AS WELL AS THE FLATS FOR WHICH THE POSSESSION WAS NOT TAKEN WAS OF THE ASSESSEE ONLY,T HAT THOSE BUILDINGS WISE SOCIETIES WERE ISSUING BILLS FOR THOSE FLATS TO THE ASSESSEE ONLY AND DEBI TING THE ASSESSEE ACCOUNT IN THEIR BOOKS,THAT THE ASSESSEE AFTER RECEIVING THE BILL DEBITED THE ACCOU NT OF INDIVIDUAL FLAT OWNER WHO HAD NOT TAKEN THE POSSESSION AND CREDITED THE ACCOUNT OF INDIVIDUAL S OCIETY,THAT THE ASSESSEE PURSUED HARD FOR RECOVERY OF AMOUNT FORM THE INDIVIDUAL FLAT OWNER B UT COULD NOT RECOVER, THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE DECIDED TO WRITE AMOUNT IN QUESTION. 4.B. IT WAS FURTHER ARGUED THAT DURING THE COURSE OF ASS ESSMENT PROCEEDING THE COMPLETE LEDGER ACCOUNT OF ALL THE SOCIETIES WERE FILED,THAT THE AO DID NOT CONSIDER THE SAME AND DISALLOWED THE ABOVE LIABILITY MAKING THEREBY ADDITION OF THIS AMO UNT IN THE INCOME OF THE ASSESSEE ON THE GROUND THAT CONFIRMATIONS OF THE CONCERNED SOCIETIE S AS WELL AS THEIR REGISTRATION NUMBER AS PER SOCIETIES ACT HAD NOT BEEN FILED, THAT BEFORE THE F AA ALSO THE ASSESSEE FILED THE COPY OF LEDGER ALONG WITH THE REGISTRATION NUMBER OF ALL 29 SOCIET IES,THAT WHEN THE AO WAS HAVING THE FULL ADDRESS OF THE ALL 29 SOCIETIES THE DISALLOWANCE SH OULD NOT HAVE BEEN MADE JUST IN ABEYANCE OF REGISTRATION NUMBER,THAT IT WAS NOT POSSIBLE TO GET A CONFIRMATION FORM A DEBTORS WHO WAS NOT PAYING THE AMOUNT AND WOULD FIGHT THE CASE IN COURT AGAINST THE ASSESSEE,THAT THE REGISTRATION NUMBER OF ALL 29 SOCIETIES WHICH COULD NOT BE SUBMI TTED EARLIER DUE TO NON AVAILABILITY AT THAT POINT OF TIME BUT WERE FURNISHED BEFORE THE FAA WIT H A REQUEST TO ADMIT THE SAME AS ADDITIONAL EVIDENCE,THAT IT ALSO FILED FURTHER DETAILS OF SOCI ETY MAINTENANCE RECOVERY FOR MORE CLARITY,THAT THE FAA MIXED UP THE ISSUE, THAT HE FAILED TO UNDERSTAN D THE DIFFERENCE BETWEEN THE SMAS AND SMR, THAT THE FAA DID NOT PROVIDE AN OPPORTUNITY OF BEIN G HEARD.DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. WE WILL DECIDE THE FIRST EFFECTIVE GROUND OF APPEAL ALONG WITH THE NEXT GROUND. 5. SECOND GROUND OF APPEAL IS AGAINST ADDITION OF RS.5 ,23,360/-,BEING THE AMOUNT OF SALES RETURN TO THE INCOME OF THE ASSESSEE.AS PER THE AO,AS PER ORD ER SHEET NOTING 1.12.2010 HE HAD REQUESTED THE ASSESSEE TO SUBMIT THE DETAILS OF SALES RETURN WHIC H WERE REDUCED FROM THE SALES IN THE P&L ACCOUNT ALONG WITH SUPPORTING DOCUMENTS WITH NAMES AND ADDRESS OF THE FLAT BUYERS WHO HAD CANCELLED THE BOOKINGS.AS PER THE AO IT DID NOT SUB MIT THE DETAILS,SO HE HAD TO ADD THE DISPUTED AMOUNT TO THE INCOME OF THE ASSESSEE. 4 ITA NO. 728/M/12 CITIZEN CO-OP. HSG SOCIETY. 6. DURING APPEAL PROCEEDINGS,AS PER THE FAA,VOLUMINOUS DETAILS WERE SUBMITTED INCLUDING THE DETAILS RELATING TO THE SALES RETURN. HOWEVER HE HE LD THAT THAT FRESH EVIDENCE COULD NOT BE ADMITTED, THAT THERE WAS NO EXTENUATING CIRCUMSTANCE AND THE ASSESSEE HAD NOT CITED ANY REASONABLE CAUSE WHICH WOULD WARRANT ADMISSION OF ADDITIONAL EVIDENC E.THE FAA UPHELD THE ORDER OF THE AO. 7. BEFORE US,IT WAS STATED THAT CERTAIN PERSONS HAD BO OKED THEIR FLATS WITH THE ASSESSEE SOCIETY,THAT SUBSEQUENTLY THEY WERE NOT INTERESTED IN TAKING POS SESSION OF THE FLATS,THAT AN AMOUNT OF RS.5, 23,360/- WAS RETURNED TO THEM THROUGH ACCOUNT PAYEE CHEQUES,THAT THE COMPLETE COPY OF LEDGER ACCOUNT CONTAINING THE DETAILS OF PERSONS (WITH NAM E AND ADDRESS) WHO BOOKED THEIR FIATS WITH THE ASSESSEE SOCIETY ALONG WITH THE AMOUNT RECEIVED FRO M THEM AND THE AMOUNT RETURNED TO THEM WAS SUBMITTED BEFORE THE AO,THAT THE SALES WERE ALSO RE DUCED BY THE ABOVE AMOUNT,THAT IT WAS EVIDENT FROM THE AUDITED PROFIT AND LOSS ACCOUNT,THAT DISPU TED AMOUNT WAS WRONGLY ADDED THE ABOVE AMOUNT TO THE INCOME OF THE ASSESSEE,THAT IT WAS NO T THE INCOME BUT WAS THE AMOUNT RECEIVED AGAINST BOOKING OF FLATS WHICH WAS LATER ON RETURNE D,THAT BEFORE THE FAA IT WAS SUBMITTED THAT THE AO WAS FACTUALLY INCORRECT IN SAYING THAT NAME OF T HOSE FLAT OWNERS WERE NOT SUBMITTED,THAT FOR THE SAME PERSON THE DEPARTMENT WAS ACCEPTING THE SA LE BUT NOT THE SALES RETURN, THAT THE SALE CANCELLATION DEED WAS PRODUCED BEFORE THE FAA AND H E WAS REQUESTED TO ADMIT THE SAME AS ADDITIONAL EVIDENCE,BUT THE FAA DID NOT ACCEPT THE EVIDENCE AND PASSED THE ORDER IN SUMMARY MANNER,THAT NON CONSIDERATION OF EVIDENCE CAUSED A GREAT PREJUDICE TO THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PRODUCED BEFORE US.UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE WAS DEALING WITH 29 CHSS.,THAT IT WAS SUPPLYING WATER TO THOSE SOCIETIES INITIALLY,THAT IT WAS ALSO INCURRIN G EXPENDITURE FOR ELECTRICITY ETC.,THAT LATER ON BECAUSE OF DIFFERENCE OF OPINION BETWEEN THE ASSESS EE AND SOCITIES MATTER WENT UP TO THE COURT,THAT THE ASSESSEE HAD NOT PRODUCED CERTAIN DOCUMENTS BEF ORE THE AO,THAT DURING THE APPELLATE PROCEEDINGS IT FURNISHED ADDITIONAL EVIDENCE WITH R EGARD TO SMAS AND SMR BUT SAME WERE NOT CONSIDERED BY THE FAA WHILE DECIDING THE APPEAL.SIM ILARLY,THE FAA REJECTED THE REQUEST MADE BY THE ASSESSEE TO ADMIT ADDITIONAL EVIDENCE WITH REGA RD TO SALES RETURN ALSO.WE FIND THAT ASSESSEE COULD NOT SUBMIT NECESSARY EVIDENCES BEFORE THE AO DUE TO NON AVAILABILITY OF THE DOCUMENTS.IT IS NOT POSSIBLE TO PERSUADE A PARTY WHO HAS FILED COUR T CASE AGAINST A PERSON TO ISSUE CONFIRMATION IN FAVOUR OF THE OPPONENT. EVEN THEN BY THE TIME APPEL LATE PROCEEDINGS STARTED,THE ASSESSEE WAS IN POSITION TO PRODUCE ALL THE DOCUMENTS.IN OUR OPINIO N,IN THE INTEREST OF JUSTICE,MATTER SHOULD BE REMITTED BACK TO THE FILE OF FOR FRESH ADJUDICATI ON,SO THAT ALL THE DOCUMENTS COULD BE CONSIDERED TO DETERMINE THE DUE TAX LIABILITY OF THE ASSESSE E.SIMILARLY,IN OUR OPINION,THERE WAS NO JUSTIFICA - TION IN REJECTING THE DETAILS FILED ABOUT SALES RET URN.WE HAVE FOUND THAT THE ASSESSEE FURNISHED THE DETAILS ABOUT THE TRANSACTION,SO,SAME SHOULD HAVE B EEN CONSIDERED.IN THESE CIRCUMSTANCES,ISSUE OF SALES RETURN IS ALSO RESTORED BACK TO FILE OF THE A O FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.E FFECTIVE GROUNDS OF APPEAL FILED BY THE ASSESSEE ARE DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. AS A RESULT,THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ' 1 !'( * / 2 3 * ( 45. SD/- SD/- ( / VIJAY PAL RAO) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER 5 ITA NO. 728/M/12 CITIZEN CO-OP. HSG SOCIETY. / MUMBAI, 7! /DATE: 18.03 . 2015. SK / / / / * ** * %( %( %( %( 8'( 8'( 8'( 8'( / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT(A)/ 9 : , 4. THE CONCERNED CIT / 9 : 5. DR C BENCH, ITAT, MUMBAI / ;. %(! LH LHLH LH , . . . 6. GUARD FILE/ . < &( &( &( &( %( %(%( %( //TRUE COPY// /! / BY ORDER, = / 4 DY./ASST. REGISTRAR , /ITAT, MUMBAI