MID CITY BHOMI DEVELOPERS P. LTD, MUMBAI V. ASST CIT 4(2), MUMBAI

ITA 7808/MUM/2011

• Counselvise Citation: 780819914 RSA 2011
• Duration Of Justice: 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI. BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NOS. 4642 & 7808/ MUM/2011 ASSESSMENT YEAR: 2006-07 MID-CITY BHOOMI DEVELOPERS PVT LTD., .. APPELLANT 4 TH FLOOR, DHEERAJ PLAZA OPP- BANDRA POLICE STATION, HILL ROAD, BANDRA (WEST), MUMBAI-400 050 PA NO.AACCM 6805 E VS ASST. COMMISSIONER OF INCOME TAX 4(2) .. RESPONDENT MUMBAI. APPEARANCES: SANJEEV M SHAH & RAMESH VORA, FOR THE APPELLANT PRAVIN VERMA , FOR THE RESPONDENT DATE OF HEARING : 21.12.2011 DATE OF PRONOUNCEMENT : 28 -12-2011 O R D E R PER PRAMOD KUMAR: ITA NO.4642/M/2011 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF CIT(A)S ORDER DATED 13 TH MAY, 2011, IN THE MATTER OF ASSESSMENT UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESS MENT YEAR 2006-07. 2. GROUND NOS. 1 TO 6, WHICH ARE INTERCONNECTED AND WHICH WE WILL TAKE UP I.T.A NOS. 4642 & 7808/ MUM/2011 ASSESSMENT YEAR: 2006-07 2 TOGETHER, ARE AS FOLLOWS: 1. THE LD CIT(A) ERRED IN ASSUMING JURISDICTION TO ENHANCE THE INCOME OF THE APPELLANT UNDER SECTION 251 OF THE IN COME TAX ACT. 2. THE LD CIT(A) ERRED IN APPROVING THE REJECTION O F THE BOOKS OF ACCOUNT BY THE AO. 3. THE LD CIT(A) ERRED IN DISALLOWING EXPENDITURE O F RS.8,72,05,181 ON THE PREMISE THAT THE AFORESAID EXPENSES ARE NOT OF THE APPELLANT. 4. THE LD CIT(A) FURTHER ERRED IN THIS CONNECTION I N HOLDING THAT THE APPELLANT HAD ACQUIRED THE RIGHT TO RECEIVE THE ACT UAL COST OF CONSTRUCTION OF THE BUILDING CONSTRUCTED BY THE APP ELLANT AS PER AGREEMENT DTD.29.4.2004. 5. THE LD CIT(A) FURTHER ERRED IN THIS CONNECTION I N HOLDING THAT DESPITE REQUISITION VIDE LETTER DATED 23.3.2011, TH E APPELLANT DID NOT FURNISH THE COST OF CONSTRUCTION IN RESPECT OF LAND ADMEASURING 735.894 SQ.MTR OF NANDADEEP SOCIETY. 6. THE LD CIT(A) FURTHER ERRED IN THIS CONNECTION I N RECKONING THE COST OF CONSTRUCTION AT RS.18,40,97,633 FOR COMPUTING TH E AFOREMENTIONED DISALLOWANCE OF RS.8,72,05,181 BEING COST OF CONSTR UCTION ALLEGEDLY ATTRIBUTABLE TO NANDADEEP SOCIETY. 3. TO ADJUDICATE ON THESE GRIEVANCES, ONLY A FEW MA TERIAL FACT NEEDS TO BE TAKEN NOTE OF. THE ASSESSEE IS ENGAGED IN THE BUSINESS A S DEVELOPER AND BUILDER. DURING THE COURSE OF ITS ASSESSMENT U/S.143(3), CERTAIN D ISALLOWANCES WERE MADE BY THE ASSESSING OFFICER. THE ASSESSEE CARRIED THIS GRIEV ANCES, AGAINST SUCH DISALLOWANCES, IN APPEAL BEFORE THE CIT(A) AND WAS SUCCESSFUL IN A PPEAL. HOWEVER, THIS SUCCESS TURNED OUT TO BE HOLLOW BECAUSE WHILE DELETING THE DISALLOWANCE OF RS.3,13,88,943, AS MADE BY THE ASSESSING OFFICER, THE CIT(A) MADE A DISALLOWANCE OF RS.8,72,05,981 WHICH IS SUBJECT MATTER OF THIS APPEAL BEFORE US. LEARNED CIT(A) NOTED THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH NANDADE EP CO-OPERATIVE HOUSING SOCIETY LTD., HAVING TWELVE SPECIFIED MEMBERS, FOR CONSTRUCTION OF A BUILDING ON THE LAND OWNED BY THE SAID SOCIETY, AND AS PER TERMS OF THE SAID AGREEMENT, THE ASSESSEE WAS TO RECEIVE PAYMENT, FOR THE CONSTRUCTION SO DON E, FROM THE HOUSING SOCIETY. I.T.A NOS. 4642 & 7808/ MUM/2011 ASSESSMENT YEAR: 2006-07 3 LEARNED CIT(A) WAS OF THE VIEW THAT SINCE THE ASSES SEE HAS NOT RECEIVED ANY MONEY TOWARDS CONSTRUCTION COST OF BUILDING, NO EXPENDIT URE INCURRED BY THE CONTRACTOR(ASSESSEE) FOR CONSTRUCTION OF BUILDING A S PER AGREEMENT DATED 29.4.2004 CAN BE TREATED AS ASSESSEES EXPENDITURE BUT HAS TO BE CONSIDERED AS THE EXPENDITURE OF OWNER SOCIETY. THE CIT(A) FURTHER NOTED THAT A GREEMENT DATED 29.4.2004 WAS NEITHER RESCINDED NOR AMENDED AND, THEREFORE, THE AMOUNT SPENT BY THE ASSESSEE ON CONSTRUCTION OF BUILDING CANNOT BE TREATED AS EX PENDITURE OF THE ASSESSEE, AND THAT, AS PER THE SAID AGREEMENT, THE EXPENSES SO IN CURRED WERE TO BE PAID FOR BY THE HOUSING SOCIETY. ACCORDINGLY, THE CIT(A) CONCLUDED THAT IN VIEW OF THE ABOVE DISCUSSIONS, THE AMOUNT OF COST OF CONSTRUCTION OF THE BUILDING CONSTRUCTED AS PER AGREEMENT DATED 29.4.2004 HAS TO BE DISALLOWED AS BEING NOT THE EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSESSEE IS AGGRIEV ED AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 5. WE HAVE TAKEN NOTE OF ASSESSEES CONTENTION THAT CONSIDERATION, WHICH ASSESSEE WAS ENTITLED TO RECEIVE UNDER THE AGREEMEN T FOR CONSTRUCTION AND ALLIED OBLIGATION, HAS BEEN RECEIVED BY THE ASSESSEE FROM MEMBERS OF THE SOCIETY. WHETHER THIS CONSIDERATION IS RECEIVED THROUGH THE SOCIETY OR DIRECTLY FROM TWELVE MEMBERS SPECIFIED UNDER THE AGREEMENT, IT HAS NO IMPACT ON TAXABILITY OF ASSESSEES INCOME. ALL THAT IS NECESSARY IS THAT CONSIDERATION FOR WOR K DONE BY THE ASSESSEE HAS TO BE TAKEN INTO ACCOUNT WHETHER RECEIVED THROUGH THE S OCIETY OR DIRECTLY. ONCE THE CONSIDERATION FOR CONSTRUCTION WORK IS FOUND TO HAV E BEEN TAKEN ACCOUNT, IT IS ONLY COROLLARY THERETO THAT EXPENSES INCURRED TO FULFILL RELATED OBLIGATION ARE TO BE ALLOWED AS DEDUCTION. IN OTHER WORDS, AS LONG AS C ONSIDERATION RECEIVED OR RECEIVABLE BY THE ASSESSEE IS FOUND TO HAVE BEEN AC COUNTED FOR, EXPENSES INCURRED FOR THE SAID PURPOSE ARE TO BE ALLOWED. WITH THE C ONSENT OF THE PARTIES, THEREFORE, WE REMIT THE MATTER TO THE FILE OF THE ASSESSING OF FICER FOR LIMITED PURPOSES OF I.T.A NOS. 4642 & 7808/ MUM/2011 ASSESSMENT YEAR: 2006-07 4 VERIFICATION OF ASSESSEES PLEA THAT CONSIDERATION FOR CARRYING OUT CONSTRUCTION WORK ETC, HAS BEEN DULY RECEIVED FROM MEMBERS DIRECTLY A ND, AS SUCH, PROPERLY ACCOUNTED FOR. IN CASE THIS PLEA IS FOUND TO BE CORRECT, THE IMPUGNED DISALLOWANCE OF RS.8,72,05,981 STAND DELETED. 6. GROUND NOS.1 TO 6 ARE THUS ALLOWED FOR STATISTIC AL PURPOSES IN THE TERMS INDICATED ABOVE. 7. IN GROUND NO.7, THE ASSESSEE HAS RAISED GRIEVANC E AGAINST LEVY OF INTEREST U/S.234B AND 234C BUT THAT SEEKS ONLY CONSEQUENTIAL RELIEF. NO SPECIFIC ADJUDICATION IS THEREFORE, CALLED FOR. THE ASSESSEE WILL, HOWEV ER, GET THE CONSEQUENTIAL RELIEF. 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES IN THE TERMS INDICATED ABOVE. ITA NO.7808/M/2011: 9. THIS APPEAL RELATES TO LEVY OF PENALTY OF RS.2,9 3,53,263 UNDER SECTION 271(1)(C) OF THE I.T.ACT, 1961 FOR THE ASSESSMENT YEAR 2006-0 7. 10. AS QUANTUM ISSUE STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER, THE PENALTY MATTER ALSO STANDS REMITTED TO ASSESSING OF FICERS FILE FOR FRESH ADJUDICATION, IF NECESSARY, ONLY AFTER DECIDING QUANTUM ISSUE. 11. IN THE RESULT, APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER, 2011 SD/- (N.V.VASUDEVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 28 TH DECEMBER 2011 PARIDA I.T.A NOS. 4642 & 7808/ MUM/2011 ASSESSMENT YEAR: 2006-07 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-8 4. COMMISSIONER OF INCOME TAX, 4 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI I.T.A NOS. 4642 & 7808/ MUM/2011 ASSESSMENT YEAR: 2006-07 6 I.T.A NOS. 4642 & 7808/ MUM/2011 ASSESSMENT YEAR: 2006-07 7