M/s. Fairland Development Pvt. Ltd., Kolkata V. CIT-II, Kolkata, Kolkata

ITA 786/KOL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3365 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 17-05-2012
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Keywords: Unexplained cash credit; Revision of order; Source of fund
• Section: 143(3); 142(1); 133(6); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH D, KO LKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM] ITA NO.786/KOL/2012 ASSESSMENT YEAR : 2007-08 M/S. FAIRLAND DEVELOPMENT (P)LTD. .-VERSUS- C.I.T, KOLKATA-I, KOLKATA KOLKATA (PAN:AABCF0094K) (APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT : SHRI NIRAJ KUMAR, CIT(DR) DATE OF HEARING : 21.12.2015. DATE OF PRONOUNCEMENT : 20.01.2016. ORDER PER SHRI N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE DIREC TED AGAINST THE ORDER DATED 27.03.2012 OF CIT- I, KOLKATA PASSED U/S 263 OF THE INCOME TAX AC T, 1961 (ACT) RELATING TO A.Y.2007-08. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF LAND DEVELOPMENT AND SALE. IT FILED THE RETURN OF INCOME FOR A.Y.2007-08 DECLARING TOTAL INCOME AT RS.NIL. ORDER OF ASSESSMENT WAS PASSED ON 30.12.2009 U/S 14 3(3) OF THE ACT IN WHICH THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT RS.48,78,240 /-. 3. THE CIT IN EXERCISE OF HIS POWERS U/S 263 OF THE ACT WAS OF THE VIEW THAT THE PREVIOUS YEAR RELEVANT TO A.Y.2007-08 WAS THE FIRST YEAR OF THE BUSINESS OF THE ASSESSEE. THE CIT FOUND THAT THE ASSESSEE HAD INVES TED A SUM OF RS.1,01,04,668/- IN LAND PURCHASE AND DEVELOPMENT. THE ASSESSEES OWN F UNDS WERE ONLY RS.2,00,000/-. CIT FURTHER FOUND THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAD AVAILED OF UNSECURED LOAN OF RS.1,60,000/- ONLY. CIT FOUND THAT THE ASSE SSEE HAD RECEIVED MONEY FROM ITA NO.786/KOL/2012 M/S. FAIRLAND DEVELO PMENT PVT. LTD. A.YR.2007-08 2 PROSPECTIVE BUYERS OF DEVELOPED LAND WHICH WAS REFL ECTED AS LIABILITY TOWARDS PLOT HOLDERS OF RS.1,23,01,089/-. THIS AMOUNT WAS INCLUD ED IN THE CURRENT LIABILITIES AS ON 31.03.2007. ACCORDING TO CIT AO WHILE COMPLETING T HE ASSESSMENT HAD NOT CALLED FOR THE DETAILS OF SUCH HUGE LIABILITIES NOR HAD HE MAD E ANY INQUIRY IN RESPECT OF ADVANCE RECEIVED FROM THE PLOT HOLDERS. ACCORDING TO CIT, I T IS UNLIKELY THAT IN THE FIRST YEAR OF THE BUSINESS, THE ASSESSEE WOULD RECEIVE ADVANCE FR OM PLOT HOLDERS IN SUCH HUGE QUANTITY. HE, THEREFORE, CONCLUDED THAT AOS ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AS NO PROPER INQUIRY HA D BEEN MADE WITH REGARD TO THE SOURCE OF INVESTMENT IN LAND PURCHASE AND WITHOUT V ERIFICATION OF LIABILITIES SHOWN AGAINST THE PLOT HOLDERS. CIT ACCORDINGLY ISSUED A SHOW CAUSE NOTICE U/S 263 OF THE ACT . 4. IN RESPONSE TO THE SHOW CAUSE NOTICE DATED 24.0 2.2012, THE ASSESSEE FILED A REPLY DATED 07.03.2012 IN WHICH THE ASSESSEE POINTED OUT THAT AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AFTER THOROUGH EXAMINATION OF BOOKS OF ACCOUNT AND SUPPORTING DOCUMENTS FILED IN THE COURSE OF ASSESSMENT PROCEED INGS. HE CONTENDED THAT THE AO HAD APPLIED HIS MIND AFTER PROPER INQUIRY AND CONCL UDED THE ASSESSMENT. THE ASSESSEE POINTED OUT THAT WITH REGARD TO THE LIABILITY OF RS .1.23 CRORES RECEIVED FROM PROSPECTIVE BUYERS OF THE DEVELOPED LAND THE AGREEM ENT WITH THE LAND HOLDERS WERE DULY EXAMINED BY THE AO ON A TEST CHECK BASIS. IT W AS ALSO POINTED OUT THAT IN THE CASE OF A COMPANY WHICH WAS THE FIRST YEAR OF THE OPERAT ION THERE CANNOT BE ANY ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT. IN THIS REGARD THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE C ASE OF BONGAIGAON REFINERY AND PETROCHEMICALS 287 ITR 120 (GAU). THE ASSESSEE ACCO RDINGLY PRAYED THAT THE PROPOSAL FOR REVISION U/S 263 OF THE ACT SHOULD BE DROPPED. 5. CIT, HOWEVER WAS OF THE VIEW THAT THE AO HAD NO T MADE PROPER ENQUIRIES WITH REGARD TO THE ADVANCE OF RS.1.23 CRORES RECEIVED F ROM PROSPECTIVE PURCHASERS OF LAND. CIT OBSERVED AS FOLLOWS :- AS PER THE BALANCE SHEET, THE ASSESSEE INVESTED RS .1,01,04,668/- IN LAND PURCHASE AND DEVELOPMENT DURING THE YEAR, BUT THE ASSESSEE'S OWN FUND WAS RS. 2 LAKH ONLY. BESIDES, UNSECURED LOAN OF RS.1,60,600/- ONLY IS REFLECTED I N THE ACCOUNTS. IT IS APPARENT THAT THE ITA NO.786/KOL/2012 M/S. FAIRLAND DEVELO PMENT PVT. LTD. A.YR.2007-08 3 INVESTMENT WAS MADE MAINLY OUT OF MONEY RECEIVED FR OM PROSPECTIVE BUYERS OF DEVELOPED LAND IN PROJECT FROM THE ASSESSEE COMPANY , WHICH IS REFLECTED AS LIABILITY TOWARDS 'LAND HOLDERS' OF RS.1.23 CRORE INCLUDED IN CURRENT LIABILITIES IN THE BALANCE SHEET. BUT NO DETAILS WERE OBTAINED NOR ANY ENQUIRY /VERIFICATION WAS MADE IN RESPECT OF SUCH ADVANCE RECEIVED BY THE ASSESSEE FROM LAND HOL DERS. IT IS ALSO NOT CLEAR HOW THE ADVANCES COULD BE RECEIVED BY THE ASSESSEE COMPANY BEFORE ACTUAL PURCHASE OR POSSESSION OF LAND BY THE ASSESSEE COMPANY FOR THE PROJECT. IT IS ALSO SEEN FROM RECORD THAT SOME PAYMENTS FOR PURCHASE OF LAND WERE MADE I N CASH. THERE IS NOTHING ON RECORD ABOUT SUCH CASH RECEIPTS/AVAILABILITY OF CASH. IN V IEW OF THIS, WAS ALL THE MORE NECESSARY TO ENQUIRE AND VERIFY ABOUT THE SOURCES OF THE INVE STMENT IN LAND/LAND DEVELOPMENT MADE BY THE ASSESSEE COMPANY DURING THE YEAR. BUT T HERE IS NOTHING ON RECORD IN THIS RESPECT NOR ANY ENQUIRY/VERIFICATION WAS MADE DURIN G THE ASSESSMENT. CIT ACCORDINGLY SET ASIDE THE ORDER OF ASSESSMENT W ITH THE DIRECTION TO FRAME ASSESSMENT AFTER MAKING THOROUGH ENQUIRY REGARDING THE SOURCE OF FUNDS CLAIMED AS ADVANCE BY THE ASSESSEE RECEIVED FROM PROSPECTIVE P LOT PURCHASERS AND ALSO TO EXAMINE THEIR IDENTITY, CREDITWORTHINESS AND GENUIN ENESS OF THE TRANSACTION. 6. AGGRIEVED BY THE ORDER OF CIT THE ASSESSEE PRE FERRED THE PRESENT APPEAL BEFORE TRIBUNAL. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. A PERUSAL O F THE RECORDS REVEALS THAT THERE WERE 23 HEARINGS IN THE PROCEEDINGS BEFORE THE AO, BEFORE CONCLUSION OF THE ASSESSMENT PROCEEDINGS. COPY OF THE ORDER SHEET IN RESPECT OF THE PROCEEDINGS U/S 143(3) OF THE ACT ARE PLACED AT PAGES 17 TO 24 OF T HE ASSESSEES PAPER BOOK. THE AO HAD SPECIFICALLY ISSUED NOTICE U/S 142(1) OF THE AC T DATED 29.09.2009 IN WHICH HE HAD SPECIFICALLY CALLED UPON THE ASSESSEE TO SUBMIT THE NAMES AND ADDRESSES, AMOUNT OF PAYMENT, EVIDENCE OF PARTIES WHO HAVE ADVANCED FOR LAND. THE AO ALSO CALLED UPON THE EVIDENCE IN THE FORM OF PLOT HOLDER AGREEMENT. THE ASSESSEE HAD FILED A LIST OF PROSPECTIVE PURCHASES OF THE PLOT WHO HAD GIVEN ADV ANCES TOGETHER WITH THEIR ADDRESSES THE SAME WAS FILED BEFORE THE AO DURING T HE PROCEEDINGS U/S 143(3) OF THE ACT. THE DETAILS IN THIS REGARD HAD BEEN FILED AT P AGES 25 TO 27 OF THE ASSESSEES PAPER BOOK PHOTO COPIES OF THE AGREEMENT BETWEEN THE ASS ESSEE AND THE PROSPECTIVE PURCHASERS OF THE LAND WAS ALSO FILED BEFORE THE AO . THE SAME ARE AT PAGES 29 TO 58 OF THE ASSESSEES PAPER BOOK. IT IS ALSO SEEN THAT AT THE TIME OF CONCLUSION OF THE ASSESSMENT PROCEEDINGS THE AO EVEN MADE ENQUIRIES W ITH THE ALIPORE REGISTRAR OFFICE ITA NO.786/KOL/2012 M/S. FAIRLAND DEVELO PMENT PVT. LTD. A.YR.2007-08 4 WHICH IS THE JURISDICTIONAL SUB-REGISTRAR OFFICE WH ERE THE LAND DEVELOPED BY THE ASSESSEE WAS LOCATED. IT IS FURTHER SEEN THAT ON 01 .10.2009 ORDER SHEET ENTRY OF PROCEEDINGS BEFORE AO CLEARLY REVEALS THAT THE AO A LSO MADE ENQUIRIES WITH REGARD TO THE BANK ACCOUNTS OF THE ASSESSEE AND EVEN DEPUTED AN INSPECTOR TO GET THE REPLY TO NOTICE ISSUED U/S 133(6) OF THE ACT ISSUED BY THE A O. 8. IN THE LIGHT OF THE ABOVE ENQUIRIES MADE BY THE AO BEFORE CONCLUDING THE ASSESSMENT PROCEEDINGS IT CANNOT BE SAID THAT THE A O FAILED TO MAKE PROPER ENQUIRIES WITH REGARD TO THE MONEY RECEIVED FROM PROSPECTIVE BUYERS OF DEVELOPED LAND. THE JURISDICTION OF THE CIT U/S 263 OF THE ACT CAN BE E XERCISED ONLY WHEN HE FIND THAT ORDER OF THE AO WHICH IS SOUGHT TO BE REVIEWED U/S 263 OF THE ACT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LAW IS WELL SETTLED THAT FAILURE OF THE AO TO MAKE AN ENQUIRY WHICH HE OUGHT TO HAVE MADE BEFO RE CONCLUDING THE ASSESSMENT, RENDERS HIS ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE QUESTION BEFORE US IS AS TO WHETHER IN THE PRESENT CASE THE AO MADE THE NECESSARY ENQUIRY WITH REGARD TO THE MONEY RECEIVED BY THE ASSESSEE FROM P ROSPECTIVE BUYERS OF THE DEVELOPED LAND. AS WE HAVE ALREADY SEEN, THE AO MAD E ENQUIRIES WHICH HE OUGHT TO HAVE MADE WITH REGARD TO RECEIPT OF ADVANCE FROM PR OSPECTIVE PURCHASERS OF PLOT FROM THE ASSESSEE TO ASCERTAIN WHETHER THE IDENTITY, CAP ACITY AND GENUINENESS OF THESE PERSONS. 9. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS SUNBEAM AUTO LTD. 332 ITR 167 (DEL.) HAD TAKEN A VIEW THAT ONE HAS TO SEE FRO M THE RECORD THAT THERE WAS APPLICATION OF MIND BY THE AO TO AN ISSUE IN QUESTI ON. ONCE THE RECORD REVEALS THAT THERE WAS APPLICATION OF MIND BY THE AO THEN IT CAN NOT BE SAID THAT THERE WAS LACK OF ENQUIRY MADE BY THE AO. THE HONBLE DELHI HIGH COUR T MADE DISTINCTION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY . THE H ONBLE COURT FURTHER HELD THAT PROVISION U/S 263 OF THE ACT CAN BE INVOKED ONLY WH EN THERE WAS LACK OF ENQUIRY AND NOT IN CASE CIT FEELS THAT THERE WAS INADEQUATE INQ UIRY CONDUCTED BY THE AO. THIS PROPOSITION HAS ALSO BEEN REITERATED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ITA NO.786/KOL/2012 M/S. FAIRLAND DEVELO PMENT PVT. LTD. A.YR.2007-08 5 DIT VS JYOTI FOUNDATION 357 ITR 388 (DELHI) AND CIT VS. ANIL KUMAR SHARMA 335 ITR 83 (DEL.). 10. WE ARE OF THE VIEW THAT IN THE LIGHT OF THE MA TERIAL AVAILABLE ON RECORD THE AO HAD CONDUCTED INQUIRIES WITH REGARD TO THE MONEY RECEIP T BY THE ASSESSEE FROM PROSPECTIVE BUYERS OF DEVELOPED LAND. THE CIT THEREFORE COULD N OT HAVE INVOKED THE JURISDICTION U/S 263 OF THE ACT ON THE GROUND THAT THERE WAS LAC K OF INQUIRY ON THE PART OF THE AO. WE, THEREFORE QUASH THE ORDER U/S 263 OF THE ACT AN D ALLOW THE APPEAL OF THE ASSESSEE. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 20.01.2016. SD/- SD/- [WASEEM AHMED] [N.V.VASUDEVAN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 20.01.2016. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S. FAIRLAND DEVELOPMENT PVT. LTD., SUITE NO.9A , 47, PARK STREET, KOLKATA-700016. 2 THE C.I.T.-I, KOLKATA. 3. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES