ACIT, CIRCLE- 26(1), NEW DELHI V. VEERA APARTMENTS PVT. LTD., NEW DELHI

ITA 780/DEL/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5882 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 31-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift; Corroborative evidences; TDS
• Section: 131; 68; 69; 145; 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘F’ NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA No.780/Del/2018 Assessment Year: 2012-13 ACIT, Circle-26(1), New Delhi Vs. M/s. Veera Apartments Pvt. Ltd., B-3/58, Safdarjung Enclave, New Delhi PAN :AAACV0503A (Appellant) (Respondent) ORDER PER SAKTIJIT DEY, JM: Captioned appeal by the Revenue arises out of order dated 28.09.2017 of learned Commissioner of Income Tax (Appeals)-10, New Delhi, for the assessment year 2012-13. 2. In ground no. 1, the Revenue has challenged deletion of disallowance of sales promotion expenses amounting to Rs.15,24,394/-. Appellant by Sh. Atiq Ahmed, Sr.DR Respondent by Sh. Gautam Jain, Advocate Date of hearing 29.03.2022 Date of pronouncement 29.03.2022 2 ITA No. 780/Del/2018 AY: 2012-13 2.1 Briefly the facts are, the assessee, a resident company, is engaged in the business of real estate development. In course of assessment proceedings, the Assessing Officer noticing that the assessee has debited sales promotion expenses of Rs.15,24,394/- called upon the assessee to furnish the details of such expenses with evidences. Alleging that the assessee failed to justify the claim with supporting evidences, the Assessing Officer disallowed the entire amount of Rs.30,30,503/-. While deciding the issue in appeal, learned Commissioner (Appeals) relying upon the decision of his predecessor in assessee’s own case in assessment year 2011-12, sustained the disallowance to the extent of Rs.14,88,109/- and deleted the balance amount. 2.2 Before us, learned counsel appearing for the parties agreed that the issue is squarely covered by the decision of the Tribunal in assessee’s own case in assessment year 2011-12. We find, while deciding identical issue in assessee’s own case in assessment year 2011-12, the Tribunal in ITA No. 4687/Del/2015, dated 9 th February, 2018, has held as under: “27. On ground No.1, assessee challenged the addition of Rs.16,14,800 on account of sale promotion expenses. The A.O. noted that there is an abnormal increase in sale promotion expenses at Rs.26,12,584 as against last year of Rs.6,91,259. The assessee merely submitted that assessee-company was constrained to incur the said expenditure to increase the business activity and the said 3 ITA No. 780/Del/2018 AY: 2012-13 expenditure were incurred wholly and exclusively for the purpose of business only. The assessee further wrote in the letter that the details of sale promotion expenses are enclosed with the submissions. However, it was noted that no details are attached with the submissions. The assessee failed to justify the claim of sale promotion expenses and failed to produce copy of the ledger account of the said expenses. From the perusal of the bank book of the Federal Bank submitted by assessee, it was noticed that assessee has incurred expenses on account of sale promotion totaling to Rs.25,98,569 through cheques which were personal in nature and not for the purpose of business. The details are noted at page-20 of the assessment order. The A.O. noted that the said expenditure were made for credit card in the name of the Director of the Company and also amount of Rs.16,14,800 was spent to buy watch from Johnson & Company. Thus, the said payment were made to fund Luxurious expenditure of personal nature of the Director and not for business purpose. The A.O. accordingly, disallowed Rs.25,98,569. The assessee submitted that the sale promotion expenses have been allowed in earlier year and the percentage of sale promotion to the sales was 2.21%, 0.94% and 1.67% in A.Ys. 2009-2010, 2010-2011 and 2011-2012 (under appeal). It was submitted that if the expenditure incurred for watches of Rs.16,14,800 towards purchase of two Rolex Watches are excluded the percentage of expenses will come to .64%. It was further submitted watches were not purchased for the Directors of the assessee-company but were purchased for the purpose of promoting sales of the properties developed by it and was in fact given to the customers at the time of purchase of the property. The assessee produced the details before Ld. CIT(A) for his verification. The Ld. CIT(A) accepted the contention of assessee with regard to sale promotion expenses except to the extent of Rs.16,14,800 for purchase of two watches. The Ld. CIT(A) noted that assessee failed to establish that this expenditure was incurred wholly and exclusively for the purpose of business. Therefore, addition was restricted to Rs.16,14,800. 28. After considering the rival submissions, we are of the view that no interference is called for in the matter. Learned Counsel for the Assessee submitted that watches were purchased for promotion of the sales which were given to the customers at the time of purchase of the property. Copy of the ledger account is filed in the paper book. However, assessee has failed to establish that watches were purchased for the purpose of business. Assessee failed to explain why only two watches were purchased for customers. The assessee purchased two Rolex Watches which are very costly item and it is not explained as to which of the two customers watches have been given and why the watches have not been given to the other customers. The assessee also failed to explain the policy of the 4 ITA No. 780/Del/2018 AY: 2012-13 assessee company for giving such costly gifts to the customers. In the absence of complete details filed on record and in the absence of satisfactory explanation, the authorities below were justified in restricting the addition to Rs.16,14,800 on account of purchase of Rolex Watches. The assessee failed to explain that watches were purchased for the business purpose. Ground No.1 of the appeal of the Assessee is accordingly dismissed.” 2.3 Facts being identical, respectfully following the decision of Coordinate Bench, as referred to above, we uphold the decision of learned Commissioner (Appeals) on the issue. Ground raised is dismissed. 3. In ground no. 2, the Revenue has contested the deletion of construction and development expenditure of Rs.4,65,38,681/-. 3.1 Briefly the facts are, in course of assessment proceedings, the Assessing Officer noticed that the assessee has debited an amount of Rs.14,75,39,634/- as construction and development expenditure. Noticing this, the Assessing Officer called upon the assessee to furnish the details with supporting evidences. As alleged by the Assessing Officer, the assessee merely submitted copy of ledger account of construction and development expenses and did not produce any bills/vouchers for verification. Being of the view that in absence of documentary evidences the entire expenditure is not verifiable, he disallowed 30% out of the total expenditure claimed. Ultimately, the disallowance was quantified 5 ITA No. 780/Del/2018 AY: 2012-13 at Rs.4,65,38,681/-. While deciding the issue, learned Commissioner (Appeals), being satisfied with the submissions made and evidences furnished, deleted the disallowance. 3.2 We have considered rival submissions and perused the materials on record. It is evident, by merely alleging that the assessee failed to furnish complete set of bills and vouchers, the Assessing Officer has disallowed 30% of the total expenditure claimed on purely ad-hoc basis. Whereas, as rightly observed by learned Commissioner (Appeals), the assessee maintained project- wise accounts and no discrepancy or defect was found by the Assessing Officer in the books of account maintained by the assessee. Thus, when assessee’s books of account are subjected to statutory audit and they have not been rejected by the Assessing Officer under section 145 of the Act, no such ad-hoc disallowance could have been made by making general allegations. 3.3 In view of the aforesaid, we do not find any infirmity in the decision of learned Commissioner (Appeals) in deleting the disallowance. Ground raised is dismissed. 6 ITA No. 780/Del/2018 AY: 2012-13 4. In ground no. 3, the Revenue has contested the deletion of disallowance made under section 40A(3) of the Act for an amount of Rs.27,98,133/-. 4.1 Briefly the facts are, in course of assessment proceedings, the Assessing Officer, while verifying the bank book and bank statement, noticed that the assessee has incurred certain expenses relating to cost of construction and development in excess of Rs.20,000/- by issuing bearer and self cheques. Holding that such expenses exceeding the amount of Rs. 20,000/- tantamount to payment made in cash, the Assessing Officer invoked the provisions of section 40A(3) of the act and disallowed it. While deciding the issue in appeal, learned Commissioner (Appeals) relying upon his predecessor’s decision in assessee’s own case deleted the disallowance. 4.2 We have heard the parties and perused the materials on record. It is a common point between the assessee and the Revenue that the issue is squarely covered by the decision of the Coordinate Bench in the assessee’s own case in assessment year 2011-12. On perusing the order of the Tribunal in assessment year 2011-12, as referred to above, it is observed while deciding identical issue, the Bench held as under: 7 ITA No. 780/Del/2018 AY: 2012-13 “12. We have considered the rival contentions and do not find any justification to interfere with the order of the Ld. CIT(A) in deleting the addition. The proviso to Section 40A(3A) provides that the consideration of business expediency and other relevant factors could be considered for not disallowing amount under the above provisions. The assessee is a developer and collaborator and incurred expenditure on construction and development which is the main expenditure to run the business. The substantial payments have been made through cheques and only small amount have been incurred through bearer cheques/self-cheques at the insistence of the parties. The A.O. did not doubt the genuineness of the expenditure and existence of the parties to whom such payments have been made. The assessee filed copy of the bank statement, ledger account and TDS certificate of these parties to whom payments have been made. Therefore, Ld. CIT(A), considering the genuineness and bonafide transactions and consideration of business expediency and other relevant business factors, correctly deleted the addition. No interference is called for. Ground No.2 of appeal of the Revenue is dismissed.” 4.3 Facts being identical, respectfully following the decision of the Coordinate Bench, as noted above, we uphold the decision of learned Commissioner (Appeals) by dismissing the ground. 5. In ground No. 4, the Revenue has challenged deletion of addition of Rs.11,39,095/- made by the Assessing Officer under section 69 of the Act, towards unexplained investment. 5.1 Briefly the facts are, in course of assessment proceedings, the Assessing Officer while examining the bank book and bank statement maintained with Federal Bank, noticed that, though, the assessee has withdrawn cash from the bank on various dates, however, they were not reflected in the books of account. Treating such unaccounted withdrawal from the bank account as 8 ITA No. 780/Del/2018 AY: 2012-13 unexplained investment under section 69 of the Act, the Assessing Officer added back to the income of the assessee. While deciding the issue in appeal, learned Commissioner (Appeals) deleted the addition. 5.2 We have considered rival submissions and perused the materials on record. It is very much clear, while making the addition in the assessment order, the Assessing Officer has not given any valid reasoning. By merely stating that the cash withdrawals made from the bank were not reflected in the books of account, he has made the addition under section 69 of the Act. However, on a perusal of the observations made by learned Commissioner (Appeals) in paragraph 3.6 of the impugned order, it is very much clear that the Assessing Officer has completely misdirected himself while observing that the cash withdrawals have not been recorded in books of account. It is very much clear from the observations of learned Commissioner (Appeals) that each item of cash withdrawal has been recorded in the books of account. Even otherwise also, as rightly observed by learned Commissioner (Appeals), the cash withdrawals made from assessee’s own bank account cannot be regarded as unexplained investment under section 69 of the Act. In view of the aforesaid, 9 ITA No. 780/Del/2018 AY: 2012-13 we uphold the decision of learned Commissioner (Appeals) on this issue. Ground raised is dismissed. 6. In ground No. 5, the Revenue has challenged the deletion of addition of Rs.9,93,400/- and Rs.35,00,000/- under section 68 of the Act. 6.1 Briefly the facts are, on perusing the bank book, the Assessing Officer noticed that the assessee has shown cash withdrawal of Rs.9,93,400/- from the Federal Bank account which has been debited to cash in hand in the bank book/books of account. Whereas, no such cash withdrawal was reflected in the bank statement. Thus, treating such cash withdrawal as unexplained cash credit under section 68 of the Act, he added back to the income of the assessee. 6.2 After considering the submissions of the assessee in the context of facts and materials on record, learned Commissioner (Appeals) deleted the addition. 6.3 We have considered rival submissions and perused the materials on record. From the factual finding recorded by learned Commissioner (Appeals) in paragraph 3.7 of the impugned order, it appears that, though, there were errors in entries in the dates of posting in books of account, however, they were properly 10 ITA No. 780/Del/2018 AY: 2012-13 reconciled by the assessee with reference to the entries made in the bank account and the bank statement. No contrary material has been brought on record to controvert the factual finding of learned Commissioner (Appeals). In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals) on this issue. Ground raised is dismissed. 7. The next issue which arises for consideration is the addition of Rs.35 lakhs. As could be seen from the facts on record, in course of assessment proceeding, the Assessing Office noticed that the assessee had received cash aggregating to Rs.35 lakhs on various dates, which as per the books of account have been shown as demolition charges received from a party. Alleging that the assessee has not produced any documentary evidence to prove the identity, source, creditworthiness and genuineness of the cash received, the Assessing Officer treated it as unexplained cash credit under section 68 of the Act and added back to the income of the assessee. Being satisfied with the submissions of the assessee and the evidence furnished, learned Commissioner (Appeals) deleted the addition. 7.1 We have considered rival submissions and perused the materials on record. It is evident, the assessee has entered into a 11 ITA No. 780/Del/2018 AY: 2012-13 Memorandum of Understanding (MoU) with one Sh. Dayal Singh for demolition work in respect of immovable property. As per the terms of the agreement, the assessee was to receive a sum of Rs.35 lakhs for the work. In support of its claim that the amount of Rs.35 lakhs was received towards demolition work, the assessee has furnished receipts as well as Memorandum of Understanding. No contrary material has been brought on record by the Assessing Officer to counter the claim of the assessee. This, being the factual position, we do not find any reason to interfere with the decision of learned Commissioner (Appeals). This ground is dismissed. 8. In ground no. 6, the Revenue has challenged deletion of addition of Rs.19,50,000/- made on account of unsecured loans received by the assessee. 8.1 Briefly the facts are, in course of assessment proceeding, while examining the balance sheet of the assessee, the Assessing Officer noticed that the assessee had received certain unsecured loans during the year. Alleging that the creditors did not have creditworthiness to advance loans, he treated the amount of Rs.19,50,000/- as unexplained cash credit under section 68 of the Act and added back to the income of the assessee. However, 12 ITA No. 780/Del/2018 AY: 2012-13 being satisfied with the submissions of the assessee, learned Commissioner (Appeals) deleted the addition. 8.2 We have considered rival submissions and perused the materials on record. It is a common point between the assessee and the Revenue that the issue is squarely covered by the decision of a Coordinate Bench in assessee’s own case in assessment year 2011-12. It is also observed, in assessment year 2011-12 the assessee had availed unsecured loans from the very same party. While deciding the issue relating to similar addition made by the Assessing Officer, the Tribunal in the order, referred to above, has held as under: “17. After considering the rival contentions, we do not find any merit in this ground of appeal of the Revenue. The assessee has filed all the above documentary evidences before A.O. as well as before Ld. CIT(A). The assessee has given a certificate in the paper book also that all these documents were filed before A.O. and Ld. CIT(A). No material have been produced on record to contradict the certificate given by the assessee. Therefore, the contention of the Ld. D.R. is rejected that assessee did not produce the documentary evidences before A.O. Whatever documents A.O. asked the assessee to produce, have been produced, on which, no further enquiry have been made by the A.O. If A.O. was having any doubt about the documentary evidences filed on record, he could have summoned the creditors for recording their statements under section 131 of the I.T. Act in order to verify the genuineness of the transaction in the matter. The assessee also explained before authorities below that all the creditors are assessed to Tax. The A.O. in his findings noted that all the creditors are family members of the assessee. In this view, even A.O. could have directed the assessee to produce these creditors for examination if A.O. was not satisfied with the documentary evidences filed on record. The assessee explained that total unsecured loans were of Rs.3.45 crores, out of which, assessee received Rs.2.59 crores from 15 parties and Rs.86,47,496 was from the Directors of the assessee-company. Therefore, considering the 13 ITA No. 780/Del/2018 AY: 2012-13 huge unsecured loans shown in the books of account at the end of the year which have not been doubted by the A.O. would also support the explanation of the assessee that assessee did not receive any bogus loan or accommodation entry from any such person. The contention raised by the Ld. D.R. is, therefore, rejected that documentary evidences were not filed before A.O. Since no other arguments have been raised on behalf of the Department, therefore, we do not find any infirmity in the order of the Ld. CIT(A) in deleting the addition. Ground No.4 of the appeal of the Revenue is dismissed.” 8.3 Facts being identical, respectfully following the decision of the Coordinate Bench in assessee’s own case, we uphold the decision of learned Commissioner (Appeals) by dismissing ground raised. 9. In ground no. 7, the Revenue has challenged deletion of addition of Rs.4,50,000/- being share application money received by the assessee. 9.1 It is a common point between the parties that identical issue arising in assessee’s own case in assessment year 2011-12 has been decided in favour of the assessee by the Tribunal. On perusal of the order of Tribunal in assessment year 2011-12 (supra), it is observed, while deciding identical issue, the Tribunal has held as under: “14. After considering the rival submissions, we do not find any justification to interfere with the order of the authority below. The A.O. made addition of Rs.4 lakhs on account of unexplained share capital because the cheque issued by the share applicant did not appear in the account of the payer nor the same was also credited in the account of the assessee. The assessee, however, explained that 14 ITA No. 780/Del/2018 AY: 2012-13 the cheque in question was not account payee cheque. Therefore, it was not reflected in the bank account of the payee nor the name of the payee will appear in the bank account of the payer. The assessee produced sufficient evidence before A.O. to explain the identity of the creditor, genuineness of the transaction and creditworthiness of the Investor. Reasons given by the A.O. that name of the assessee is not appearing in the account of the investor was wholly incorrect because when the cheque issued to the assessee was not on account of payee cheque, therefore, the name of assessee would not appear in the bank account of the payer. The reason given by the A.O. have been properly considered by the Ld. CIT(A) in which no infirmity have been pointed out. Therefore, addition of Rs.4 lakhs have been correctly deleted by the Ld. CIT(A).” 9.2 Facts being, more or less, identical in the impugned assessment year, respectfully following the decision of the Coordinate Bench, as referred to above, we uphold the order of learned Commissioner (Appeals) on this issue by dismissing the ground. 10. In ground no. 8, the Revenue has challenged the deletion of addition of Rs.35 lakhs made on account of difference in actual sale consideration received and shown in respect of immovable property. 10.1 At the time of hearing, learned counsel appearing for the assessee submitted that the ground has been wrongly taken by the Revenue, as, such issue does not arise, either from the assessment order or the order of learned Commissioner (Appeals). 15 ITA No. 780/Del/2018 AY: 2012-13 10.2 Learned Departmental Representative also subscribed to the submission made by learned counsel for the assessee. 10.3 Having perused the materials on record, we find, the issue raised in this ground does not arise out of the proceedings before the departmental authorities. Therefore, the ground taken, being totally misconceived, does not merit consideration, hence, dismissed. 11. Ground no. 9, being of general nature, is dismissed. 12. In the result, the appeal is dismissed. Order pronounced in the open court on 29 th March, 2022 Sd/- Sd/- (N.K. BILLAIYA) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29 th March, 2022. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi