HARSH DEVELOPERS, MUMBAI V. ACIT 15(2), MUMBAI

ITA 7525/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8205 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 26-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K MEHTA
• Assessee Lawyers: MRS ARATI VISSANJI
• Keywords: Business expenditure
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 7525/MUM/2010 ASSESSMENT YEAR 2007-08 HARSH DEVELOPERS, 205, HEMU CLASSIC, S.V. ROAD, MALAD WEST, MUMBAI 400 064. PAN: AACFH 5342 L VS. ACIT 1 5 ( 2 ), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : MRS. ARATI VISSANJI, REVENUE BY : SHRI N.K. MEHTA DATE OF HEARING : 26-07-2012 DATE OF PRONOUNCEMENT : 01-08-2012 ORDER PER RAJENDRA, A.M. THE APPELLANT HAS FILED THE FOLLOWING GROUNDS OF AP PEAL AGAINST THE ORDER OF THE CIT(A)-26, MUMBAI DATED 30.08.2010: 1. THE LEARNED COMM OF INCOME TAX (APPEALS) 26, H AS ERRED IN DISALLOWING THE EXPENSES OF RS.54,85,579/- CLAIMED BY THE ASSESSEE. 2. THE LEARNED COMM OF INCOME TAX (APPEALS) 26, HAS GROSSLY ERRED IN DISALLOWING THE INTEREST OF RS 29,43,751/- DEBITED TO THE P & L ACCOUNT. 3. THE LEARNED CIT (APPEALS) FAILED TO APPRECIATE T HAT THE AMOUNT OFFERED DURING SURVEY U/S 133A CARRIED OUT ON 13/02/07 WAS NOT OFF ERED AS ANY CASH OR OTHER INVESTMENTS WERE RECOVERED DURING THE SURVEY, BUT A S THERE WERE MERE ENTRIES WITHOUT ANY NARRATION AS TO THEIR NATURE BEING RECEIPTS OR PAYMENTS. 4. THE LEARNED CIT (A) 26, HAS GROSSLY ERRED IN CON CLUDING IN PARA 4.3 PAGE 7 THAT UNACCOUNTED CASH OF RS 3.05 CRORES WAS UNEARTHED BY THE SURVEY AUTHORITIES. ITA NO. 7525/MUM/2010 HARSH DEVELOPERS, 2 5. THE LEARNED CIT (A) 26, HAS GROSSLY ERRED IN CON CLUDING THAT THE APPELLANT HAS FAILED TO ESTABLISH THE ACTUAL BUSINESS ACTIVITIES CARRIED OUT. 6. THE LEARNED CIT (A) WAS NOT JUSTIFIED IN BRINGIN G TO TAX THE INCOME EARNED OUT OF MONIES OF THE BUSINESS DEPOSITED WITH BANKS, AND NO T ALLOWING THE OFFSET OF INTEREST PAID ON THE SOURCE OF THESE MONIES, IE THE UNSECURE D LOANS. 7. WITHOUT PREJUDICE TO THE ABOVE, AND ALTERNATIVEL Y, THE LEARNED CIT (APPEALS) - SHOULD HAVE APPRECIATED THAT IF THERE IS WAS NO PRO JECT UNDERTAKEN DURING THE YEAR, THE BUSINESS WAS NOT DISCONTINUED AND ROUTINE EXPEN SES TO KEEP THE OFFICE FUNCTIONAL AND BUSINESS ACTIVITIES WERE IN PROGRESS, HENCE NOR MAL EXPENSES SHOULD HAVE BEEN ALLOWED AS CLAIMED BY THE ASSESSEE. 8. THE APPELLANT CRAVES, TO CONSIDER EACH OF THE AB OVE GROUNDS OF APPEAL WITHOUT PREJUDICE TO EACH OTHER AND CRAVES LEAVE TO ADD, AL TER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 2. THE ASSESSEE-FIRM, A BUILDER AND CONTRACT FILED ITS RETURN OF INCOME AND 31.10.2007 DECLARING TOTAL INCOME OF RS.2,56,89,255 /-. ASSESSMENT WAS FINALISED U/S.143 (3) OF THE INCOME-TAX ACT, 1961 (ACT) ON 14 . 12.2009 DETERMINING THE TOTAL TAXABLE INCOME AT RS.3,15,77,408/-. A SURVEY U/S.1 33A OF THE ACT WAS CONDUCTED ON 13.02.2007 AT THE OFFICE PREMISES OF THE ASSESSEE. A LOOSE PAPER FILE ALONG WITH A SMALL DIARY WAS IMPOUNDED DURING THE COURSE OF SURV EY. IN RESPECT OF THE ENTRIES APPEARING ON PAGE NUMBER 7-9 OF THE DOCUMENTS THE A SSESSEE-FIRM ADMITTED AN UNDISCLOSED INCOME OF RS.3.05 CRORES. ASSESSEE WA S FOLLOWING PERCENTAGE COMPLETION METHOD AND WAS OFFERING ITS INCOME ACCOR DINGLY IN RESPECT OF BUILDING PROJECTS. 3. WHILE FILING THE RETURN OF INCOME FOR THE ASSESSMEN T YEAR UNDER CONSIDERATION, THE ASSESSEE-FIRM, DEBITED VARIOUS EXPENSES TO THE EXTENT OF RS.54.85 LAKHS, THUS RETURNING TAXABLE INCOME AT RS.2.56 CRORES. AFTER G OING THROUGH THE DETAILS FILED BY THE ASSESSEE DURING THE SCRUTINY ASSESSMENT PROCEED INGS, ASSESSING OFFICER(AO)HELD THAT THERE WAS NO BUSINESS ACTIVITIES DURING THE RE LEVANT YEAR, THAT PROJECT WAS ALREADY COMPLETE DURING THE FINANCIAL YEAR 2005-06, THAT IN ABSENCE OF ACTUAL BUSINESS ACTIVITIES EXPENDITURE DEBITED IN P&L ACCOUNT COULD NOT BE ALLOWED. THE AO FURTHER DISALLOWED INTEREST PAID ON UNSECURED LOANS AMOUNTI NG TO RS.29.43LAKHS. HE ALSO ADDED RS.10.77 LACS UNDER THE HEAD INCOME FROM OTHE R SOURCES BEING BANK INTEREST AND INTEREST ON FDRS RECEIVED BY THE ASSESSEE FOR T HE AY UNDER CONSIDERATION. 4. ASSESSEE FIRM PREFERRED AN APPEAL BEFORE THE FIRS A PPELLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE APPELLANT AND THE FINDINGS OF THE AO HE HELD THAT MOST OF THE EXPENDITURE HAD BEEN INCURRED WITH A VIEW TO INFLATE THE EXPENDITURE FOR THE YEAR UNDER CONSIDERATION, THAT APPELLANT HA D DEBITED INTEREST OF RS. 29.43 LAKHS WITHOUT ANY VALID REASONS, THAT INTEREST EXPENDITUR E WAS NOT A BUSINESS EXPENDITURE, THAT IT WAS INFLATED TO REDUCE TAX LIABILITY. HE F URTHER HELD THAT ASSESSEE HAD NOT DISCHARGE HIS LIABILITY OF PROVING THAT THE INTERES T EXPENDITURE WAS RELATED TO ANY PROJECT, THAT IN REALITY THERE WAS NO BUSINESS ACTI VITY AFTER THE COMPLETION OF PROJECT FOR THE AY. 2006-07.FAA UPHELD THE ADDITION MADE BY THE AO AMOUNTING TO RS. 10.77 LACS ON ACCOUNT OF BANK INTEREST AND FDR INTEREST RECEIVED. ITA NO. 7525/MUM/2010 HARSH DEVELOPERS, 3 BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITTE D THAT EXPENDITURE INCURRED UNDER VARIOUS HEADS WAS ALLOWED BY THE AO IN THE SUBSEQUE NT AS WELL AS IN THE PREVIOUS ASSESSMENT YEARS, THAT EVIDENCES REGARDING TDS PAYM ENTS AND PROFESSIONAL SERVICES WERE SUBMITTED TO AO DURING THE ASSESSMENT PROCEEDI NGS, THAT DETAILS OF LOANS AND INTEREST PAYMENTS WERE AVAILABLE WITH BOTH THE LOWE R AUTHORITIES, THAT CASH AMOUNTING RS. 3.05 CRORES WAS NOT FOUND DURING THE SURVEY ACT ION, THE DETAILS OF BROKERAGE PAID FOR SELLING FLATS WERE ALSO SUBMITTED BEFORE THE AO , THAT THE BUSINESS WAS NEVER CLOSED, THAT THERE WAS NO CONSTRUCTION ACTIVITY BUT OFFICE WAS WORKING IN AY UNDER CONSTRUCTION. AR REFERRED TO PG. NOS. 4, 5, 20, 30 , 31-33 OF THE PAPER BOOK. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT NO BUSINESS ACTIVITY WAS CARRIED OUT DURING THE YEAR UNDER CONSIDERATION, THAT THE L ETTER OF SUNEEL PROPERTIES WAS NOT PRODUCED BEFORE THE LOWER AUTHORITIES, THAT SHOPS W ERE SOLD IN THE EARLIER YEARS, THAT BROKERAGE WAS PAID THIS YEAR FOR THE WORK CARRIED O UT IN THE PREVIOUS ASSESSMENT YEAR. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS . AFTER GOING THROUGH THE MATERIAL AVAILABLE, WE ARE OF THE OPINION THAT IT CANNOT BE HELD THAT THERE WAS NO BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION . THE ASSESSEE-FIRM IS A DEVELOPER AND CONTRACT, SO, IT IS NOT NECESSARY THAT IN EVERY ASS ESSMENT YEAR ACTUAL CONSTRUCTION ACTIVITY SHOULD BE CARRIED OUT . FROM THE DETAILS AVAILABLE FOR THE SUBSEQUENT AND PREVIOUS ASSESSMENT YEARS, IT IS FOUND THAT AO HAS ALLOWED THE EXPENDITURE INCURRED UNDER THE SAME HEADS FOR WHICH DISALLOWANCE HAS BEE N MADE FOR THE YEAR UNDER CONSIDERATION . DETAILS OF TAX DEDUCTED AT SOURCE, BROKERAGE PAID, INTEREST PAID, SALARY PAID TO THE EMPLOYEES OF THE FIRM WERE MADE AVAILAB LE TO THE AO DURING THE ASSESSMENT PROCEEDINGS. CONSIDERING THE PROVISIONS OF TAX DEDUCTED AT SOURC E, WE ARE OF THE OPINION THAT AO SHOULD HAVE TAKEN THESE PAYM ENTS FOR CONSIDERATION WHILE FINALISING THE ASSESSMENT ORDER FOR THE AY 2007-08. IN OUR OPINION, ROUTINE EXPENSES TO KEEP THE OFFICE FUNCTIONAL SHOULD HAVE BEEN ALSO ALLOWED. UNDER THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT IN THE IN TEREST OF JUSTICE MATTER SHOULD BE RESTORED BACK TO THE AO. HE IS DIRECTED TO PASS A FRESH ADJUDICATION ORDER A FTER CONSIDERING THE MATERIAL SUBMITTED BEFORE US. ASSESSEE SHOULD FURNISH ALL THE DOCUMENTARY EVIDENCES, SUBMITTED BEFORE US, TO THE AO DURING FRESH ASSESSMENT PROCEEDINGS . GROUND NOS. 1- 8 ARE ALLOWED, PARTLY . AS A RESULT, APPEAL FILED BY THE ASSESSEE FOR STAN DS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST AUGUST, 2012. SD/- SD/- (B.R. MITTAL) (RAJENDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATE 1 ST AUGUST, 2012 ITA NO. 7525/MUM/2010 HARSH DEVELOPERS, 4 TNMM COPY TO: 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI