The ITO, Ward-1(3), Surat V. M/s. Maloo Construction Pvt.Ltd., West Bengal

ITA 864/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9597 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Business expenditure; Principle of natural justice; Corroborative evidences
• Section: 143(3)

Judgement Text

, A, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH BEFORE S/SHRI G.D. AGRAWAL, VICE-PRESIDENT AND KUL BHARAT, JUDICIAL MEMBER) ITA NO.864/AHD/2011 [ASSTT.YEAR : 2007-2008] ITO, WARD-1(3) SURAT. /VS. M/S. MALOO CONSTRUCTION PVT. LTD. C/O. C.S. BHATT & CO. 5013, TRADE HOUSE NR. RISHUBH PETROL PUMP RING ROAD, SURAT 395 002, GUJARAT. PAN : AABCM 5690 A ( / APPELLANT) ( / RESPONDENT) REVENUE BY : SHRI DINESH SINGH, SR.DR ASSESSEE BY : NONE DATE OF HEARING : 1 ST JUNE, 2015 DATE OF PRONOUNCEMENT : 11 TH JUNE, 2015 O R D E R PER KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (A)-I, SURAT DATED 21.1.2011 FOR THE ASSTT.YEAR 2007-08. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THE APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE O N ACCOUNT OF DISALLOWANCE OF 10% OF LAND DEVELOPMENT EXPENSES OF RS.34,87,850/- INSPITE OF THE ASSESSEES FAILURE TO PRODUCE BOOKS OF ACCOUNTS AND EVIDENCES TO PROVE ITS CLAIM. ITA NO.864/AHD/2011 -2- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A) MAY BE SET ASIDE AND THAT OF THE AO MAY BE RESTORED TO THE ABO VE EXTENT. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE CA SE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS F RAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT). BY FRAMING THE ASSESSMENT, THE AO MADE DISALLOWANCE OUT OF LAN D DEVELOPMENT EXPENSES AT THE RATE OF 10% AMOUNTING TO RS.34,87,850/- . AGAIN ST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO, AFTER CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION ON ACCOUNT OF LAND DE VELOPMENT EXPENSES. 4. THE ONLY GROUND RAISED IN THE APPEAL IS AGAINST THE DELETION OF THE LAND DEVELOPMENT EXPENSES. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE AP PEAL WAS EARLIER FIXED FOR HEARING ON 19.6.2014, BUT NONE APPEARED AND THE CAS E WAS ADJOURNED TO 11.8.2014. THE CASE WAS AGAIN ADJOURNED AND NOTICE OF HEARING WAS SENT TO THE ASSESSEE FOR 30.9.2014 AND SERVED UPON THE ASSESSEE . BUT NONE APPEARED ON BEHALF OF THE ASSESSEE. THEREAFTER, MATTER WAS FUR THER ADJOURNED TO 18.11.2014, WHICH WAS SUBSEQUENTLY ADJOURNED TO 5.1.2015 AND TO 16.2.2015. FINALLY THE CASE WAS FIXED FOR HEARING ON 1.6.2015. THE NOTICE OF HEARING FIXING THE HEARING ON 1.6.2015 WAS RETURNED WITH REMARK UNCLAIMED. THE INCOME TAX OFFICER HAS VIDE LETTER DATED 26.11.2014 INFORMED THAT THE NOTICE HAS BEEN SERVED AT THE LAST KNOWN ADDRESS OF THE ASSESSEE BY AFFIXTURE. U NDER THESE FACTS, THE CASE WAS TAKEN UP FOR HEARING IN THE ABSENCE OF THE ASSESSEE AND PROCEEDED TO DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE-RESPONDENT. 6. APROPOS GROUND NO.1, THE LEARNED DR, SHRI DINESH SINGH, ARGUED THAT THE ORDER OF THE CIT(A) IS NON-SPEAKING AND SUBMITTED T HAT BEFORE THE AO, DESPITE GIVING SUFFICIENT OPPORTUNITY, THE ASSESSEE FAILED TO FURNISH SUPPORTING EVIDENCES ITA NO.864/AHD/2011 -3- WITH REGARD TO THE LAND DEVELOPMENT EXPENSES. HE S UBMITTED THAT UNDER THESE CIRCUMSTANCES, THE CIT(A) WAS NOT JUSTIFIED IN DELE TING THE ADDITION. THE LD. DR REITERATED THE SUBMISSION MADE IN THE STATEMENT OF FACTS AS UNDER: IN THIS CASE, THE ASSESSEE COMPANY HAD FILED ITS R ETURN OF INCOME FOR THE A.Y. 2007-08 ON 31.10.2007 BY SHOWING TOTAL INCOME OF RS. NIL. THE SCRUTINY ASSESSMENT WAS COMPLETED U/S.143(3) O F THE ACT ON 30.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT R S.34,76,110. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE WAS REQUESTED TO FURNISH COMPLETE DETAILS OF LAND DEVELOPERS EXPE NSES (LABOUR PAYMENT) OF RS.3,48,78,5007- ALONGWITH DOCUMENTARY EVIDENCES . HOWEVER, INSPITE OF AFFORDING SUFFICIENT OPPORTUNITIES TO THE ASSESS EE COMPANY, THE ASSESSEE FAILED TO FURNISH THE DETAILS CALLED FOR. AND THERE BY SUCH EXPENSES ARE NOT VERIFIABLE AND ULTIMATELY IT CANNOT BE PROVED THAT THE SAID EXPENSES WERE WHOLLY AND EXCLUSIVELY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF HER BUSINESS. THEREFORE, IN ABSENCE OF ANY DETAILS, 10% OUT OF THE LAND DEVELOPMENT EXPENSES WHICH COMES TO RS.34,87,850 WE RE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. LD. CIT(A)-I, SURAT WHILE RELYING ON THE ASSESSEE'S SUBMISSION HAS DELETED THE ADDITION OF RS.34,87,850 ON ACCOUNT LAND DEVELO PERS EXPENSES ON THE FOLLOWING GROUND: 1. THE A.O.'S ACTION OF DISALLOWING 10% OF LAND DEV ELOPMENT EXPENSES IN NOT ACCORDANCE WITH THE SETTLED LAWS ME NTIONED BY THE APPELLANT 2. THE A.O. HAS NOT DONE PROPER HOMEWORK BEFORE COM ING TO HIS DECISION. 3. THE A.O. HAS SIMPLY DISALLOWED THIS AMOUNT WITHO UT LOOKING IN TO THE EARLIER YEAR'S RECORD. 4. IN VIEW OF THE CASE LAWS QUOTED BY THE APPELLANT , THE ADDITION WAS HEREBY DELETED. THE DECISION OF THE LD.CIT(A) IN DELETING THE ADDIT ION MADE BY THE AO OF RS.34,87,850 ON ACCOUNT OF DISALLOWANCE BUT OF LAND DEVELOPMENT EXPENSES OF IS NOT ACCEPTABLE FOR THE FOLLOWING REA SONS: (I) RIGHT FROM THE OUTSIDE, IT IS SEEN THAT TH E ASSESSEE COMPANY WAS NOT INTERESTED IN FURNISHING THE DETAILS CALLED FOR . IT IS SEEN FROM THE RECORD THAT INSPITE OF AFFORDING SUFFICIENT O PPORTUNITIES IN THE INTEREST OF NATURAL JUSTICE TO THE ASSESSEE COMPA NY, THE ASSESSEE FAILED TO FURNISH THE REQUISITE DETAILS. EVEN AFTER SUMMONS U/S.131 OF THE INCOME-TAX ACT 1961 WAS ALSO ISSUED AND SERV ED TO SHRI ITA NO.864/AHD/2011 -4- RAJEEV KUMAR AND SHRI S.CJAIN, DIRECTORS OF M/S. MA LOO CONSTRUCTION PVT. LTD., TO ATTEND PERSONALLY AND TH EY WERE REQUESTED TO SUBMIT THE CERTAIN DETAILS. HOWEVER, SHRI RAJEEV KUMAR AND SHRI S.C.JAIN, DIRECTORS OF THE COMPANY W ERE NOT ATTENDED AND ALSO THE DETAILS CALLED FOR WERE NOT S UBMITTED. IN THESE CIRCUMSTANCES, THE EXPENSES CLAIMED IN THE RE TURN OF INCOME FOR A.Y. 2007-08 WERE NOT VERIFIABLE AS THE DOCUMEN TARY EVIDENCES/PROOF WERE NOT SUBMITTED FOR VERIFICATIO N. THEREAFTER, YET ANOTHER SHOW CAUSE LETTER DATED 21-12-2009 WAS ISSUED WHICH TOO HAS REMAINED UN-COMPLIED WITH. MEANWHILE, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COMPANY ATTENDED ON 29-12-2009, BUT WITHOUT ANY EXPLANATION TO THE ABOVE SHOW CAUSE LETTER DATED 21.12.2009. THESE FACTS CLEARLY INDICATE THE NON COOPERATIVE ATTITUDE OF THE ASSESSEE COMPANY TOWARDS THE DEPARTMENT BY NOT FURNISHING THE DETAILS AND EVEN NOT RESPONDING TO THE SUMMONS ISSUED U/S.131 OF THE ACT. II) THE ASSESSEE COMPANY HAD FAILED TO PRODUCE BOOK S OF ACCOUNTS AND EVIDENCES IN SUPPORT OF CLAIM MADE UNDER THE HEAD O F LAND DEVELOPMENT EXPENSES.(THE EXPENSES CLAIMED COULD NO T BE TREATED CORRECT TILL THE SAME ARE VERIFIABLE, WITH THE SUPP ORTING EVIDENCES AND OTHER DETAILS. THE EXPENSES CLAIMED WERE ACTUAL LY/FULLY UTILIZED FOR THE PURPOSE OF LAND DEVELOPMENT EXPENSES WAS TH US REMAINED UNANSWERED WHILE FINALIZING THE ASSESSMENT. IN ABSE NCE OF DETAILS, THE GENUINENESS AND CORRECTNESS OF EXPENSES CLAIMED WAS NOT ALLOWED BY THE AO FULLY. THE ASSESSEE COMPANY HAD A LSO FAILED TO PROVE THE REASONABLENESS OF LAND DEVELOPMENT EXPENS ES CLAIMED. AS SUCH, THE AO WAS JUSTIFIED IN DISALLOWING 10% OF THE LAND DEVELOPMENT EXPENSES WHICH COMES TO RS.34,87,850. (III) THE LD.CIT(A) HAS NOT APPRECIATED THAT TH E NEXUS BETWEEN THE EXPENDITURE AND THE BUSINESS, IN CONNECTION WIT H WHICH EXPENDITURE HAS BEEN INCURRED HAS TO BE ESTABLISHED BEFORE THE ASSESSEE GET ENTITLED TO DEDUCTION U/S 37(1), IN TH IS CASE ASESSEE HAD FAILED TO ESTABLISH THE NEXUS IN RESPECT OF DEV ELOPMENT CHARGES WITH SUPPORTING EVIDENCES. HENCE, THE CLAIM FOR DED UCTION IS NOT ADMISSIBLE IN VIEW OF RATIO LAID DOWN BY THE FOLLOW ING COURT IN THE CASE OF CIT V/S CALCUTTA AGENCY LTD. 19 ITR 191 (SC ) UNDER THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DEPARTMENT IS AGGRIEVED FROM THE ORDER OF LD. CIT(A ) AND APPEAL TO THE ITAT IS PREFERRED AS PER THE GROUNDS OF APPEAL ANNE XED. ITA NO.864/AHD/2011 -5- 7. WE HAVE HEARD THE LEARNED DR, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. WE F IND THAT THE AO IN PARA-8 OF HIS ORDER, HAS OBSERVED AS UNDER: 8. THE ASSESSEE COMPANY HAS FAILED TO PRODUC E BOOKS OF ACCOUNTS AND EVIDENCES IN SUPPORT OF CLAIM MADE UNDER THE H EAD OF LAND DEVELOPMENT EXPENSES. THE EXPENSES CLAIMED COULD NO T BE TREATED CORRECT TILL THE SAME ARE VERIFIABLE TO THE SUPPOR TING EVIDENCES AND OTHER DETAILS. THE EXPENSES CLAIMED WERE ACTUALLY/ FULLY UTILIZED FOR THE PURPOSE OF LAND DEVELOPMENT EXPENSES, ARE STILL UNA NSWERED. IN ABSENCE OF DETAILS, THE GENUINENESS AND CORRECTNESS OF EXPENSES CLAIMED COULD NOT BE ALLOWED IN TOTTO. FURTHER, THE ASSESSEE COMPANY HAS ALSO FAILED TO PROVE THE REASONABLENESS OF LAND DEVELOPMENT EXPENSES CLAIMED. ACCORDINGLY, 10% OUT OF THE LAND DEVELOPMENT EXPENSES ARE DISALLOWED WHICH COMES TO RS.34,87,850/- (10% OF RS.3,48,78,500) AND SAME IS ADDED TO THE TO TAL INCOME OF THE ASSESSEE COMPANY. SINCE THE ASSESSEE HAS FILED INAC CURATE PARTICULAR OF ITS INCOME AND CONCEALMENT OF INCOME, THE PENALT Y PROCEEDING U/S.271(L)(C) IS INITIATED. 8. HOWEVER, THE LD.CIT(A) DELETED THE ADDITION BY O BSERVING AS UNDER: 6. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND HA VE CONSIDERED THE RIVALS CONTENTIONS. I AM OF THE OPINION THE AOS ACTION OF DISALLOWING 10% OF LAND DEVELOPMENT EXPENSES IS NOT IN ACCORDAN CE WITH THE SETTLED LAWS AND THE VARIOUS CASE LAWS MENTIONED BY APPELLA NT THE COPIES OF WHICH HAVE BEEN SUBMITTED BEFORE ME. THE AO HAS NO T DONE PROPER HOMEWORK BEFORE COMING TO HIS DECISION. HE HAS SIM PLY DISALLOWED THIS AMOUNT WITHOUT LOOKING INTO THE EARLIER YEARS RECO RD. HENCE, IN VIEW OF THE CASE LAWS QUOTED BY THE APPELLANT, THE ADDITION MADE IS HEREBY DELETED AND THE APPEAL IS ALLOWED. 9. WE FIND THAT, BEFORE THE LEARNED CIT(A), IT IS S UBMITTED BY THE ASSESSEE THAT IT HAD FILED AUDITED ACCOUNT BOOKS, HOWEVER, D UE TO PAUCITY OF TIME, THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT BEF ORE THE LD.AO. IT IS ALSO SUBMITTED BY THE ASSESSEE THAT THE HEAD OFFICE OF T HE COMPANY WAS IN KOLKATA AND THE DIRECTORS RESIDE THERE AND THIS BEING A TIM E BARRING ASSESSMENT, THE AO WAS IN A HURRY TO PASS THE ORDER. IT IS NOT COMIN G OUT OF THE ORDER OF THE CIT(A) THAT WHETHER THE ASSESSEE HAD PRODUCED BOOKS OF ACC OUNTS BEFORE THE LD. CIT(A), AND THE LD.CIT(A) HAS BASED ITS FINDINGS ON THE BAS IS OF THE BOOKS OF ACCOUNTS, ITA NO.864/AHD/2011 -6- OR ANY OTHER SUPPORTING EVIDENCES IN THE FORM OF BI LLS, VOUCHERS ETC. WERE CONSIDERED. THE AO HAS GIVEN A CATEGORICAL FINDIN G THAT DESPITE GIVING VARIOUS OPPORTUNITIES, THE ASSESSEE FAILED TO PRODUCE THE E VIDENCES IN SUPPORT OF THE EXPENDITURE SO CLAIMED. IT IS ALSO ADMITTED FACT T HAT THE BOOKS OF ACCOUNTS WERE NOT PRODUCED BEFORE THE AO. THE LD.CIT(A) HAS ALSO NOT GIVEN ANY FINDINGS WHETHER THE BOOKS OF ACCOUNTS WERE PLACED BEFORE HI M. IT IS A SETTLED POSITION OF LAW THAT THE ASSESSEE IS REQUIRED TO PROVE WITH SUP PORTING EVIDENCES, THE EXPENDITURE CLAIMED TO BE BUSINESS EXPENDITURE, FOR CLAIMING THE DEDUCTION. IN THE PRESENT CASE, THERE IS NOTHING ON RECORD TO SUG GEST THAT THE ASSESSEE HAS PRODUCED SUPPORTING EVIDENCES IN SUPPORT OF THE EXP ENDITURE SO CLAIMED, THEREFORE, EVEN, THE LD.CIT(A) HAS NOT GIVEN ANY FI NDINGS WHETHER THE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE HIM, AND HE HAD VERIF IED THE GENUINENESS OF THE EXPENDITURE FROM THE BOOKS OF ACCOUNTS. UNDER THES E CIRCUMSTANCES, THE FINDINGS OF THE CIT(A) CANNOT BE CONFIRMED. FURTHE R, THE AO HAS DISALLOWED ONLY 10% OF THE TOTAL LAND DEVELOPMENT EXPENDITURE, BUT THE BASIS OF SUCH DISALLOWANCE IS NOT GIVEN. THEREFORE, THE ISSUE RE QUIRES FRESH ADJUDICATION AT THE END OF THE AO. THEREFORE, WE RESTORE THIS ISSUE BA CK TO THE FILE OF THE AO FOR DECISION AFRESH ON THIS ISSUE. NEEDLESS TO MENTION , THE AO SHALL PROVIDE REASONABLE OPPORTUNITY TO THE ASSESSEE TO PRODUCE R ELEVANT MATERIAL IN SUPPORT OF ITS CASE. THUS, THIS GROUND OF APPEAL OF THE REVEN UE IS ALLOWED FOR STATISTICAL PURPOSE. 10. THE GROUNDS NO.2 AND 3 BEING GENERAL IN NATURE, NEED NO ADJUDICATION. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( G.D. AGRAWAL) VICE-PRESIDENT (KUL BHARAT) JUDICIAL MEMBER