R.P.Darrmalingam, CHENNAI V. DCIT, CHENNAI

ITA 872/CHNY/2011

• Counselvise Citation: 87221714 RSA 2011
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N DEVANATHAN
• Section: 143(3); 6; 10; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER ITA NO.872(MDS)/2011 & S.P. NO.61(MDS)/2011 ASSESSMENT YEAR : 2006-07 SHRI R.P.DHARMALINGAM, NO.1379-C, GOLDEN VILLA, 1 ST BLOCK, 6 TH ST., VALALAR KUDIYERUPPU, 18 MAIN RD., ANNA NAGAR, CHENNAI-40. PAN AEAPD7363R. VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE II(3), CHENNAI. (APPELLANT/PETITIONER) (RESPONDENT) APPELLANT BY : SHRI N. DEVANATHAN, ADVOCATE RESPONDENT BY : SHRI P.MADH ANASEKARAN, IRS, JT. COMMISSIONER OF INCOME-TAX. DATE OF HEARING : 30TH NOVEM BER, 2011 DATE OF PRONOUNCEMENT : 9 TH DECEMBER, 2011 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2006-07. THIS IS A REVISION APP EAL FILED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX , CHENNAI-I - - ITA 872 & SP 61 OF 2011 2 AT CHENNAI. THE COMMISSIONER OF INCOME-TAX HAS PAS SED THE REVISION ORDER ON 9-3-2011. 2. THE ASSESSMENT IN THIS CASE WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 THROUGH THE PROCEEDINGS OF THE ASSESSING AUTHORITY DATED 8-7-20 08. THEREAFTER, THE COMMISSIONER OF INCOME-TAX WENT THR OUGH THE RECORDS OF THE CASE. THE COMMISSIONER OF INCOME-TA X FOUND THAT THE ASSESSING OFFICER HAS NOT GONE THROUGH CERTAIN MATTERS RELEVANT TO THE ASSESSMENT. THE RELEVANT PORTION IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX IS REPRODUCED BELOW: - IT IS FOUND THAT THE ASSESSMENT SUFFERS FROM THE F OLLOWING: (I) PURCHASE OF LAND TO THE TUNE OF ` 18,60,60,292/- HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT, BUT TH E ASSESSING OFFICER HAS NOT OBTAINED THE DETAILS THER EON AND HAS NOT MADE ENQUIRIES REGARDING THE GENUINENES S AND BUSINESS NECESSITIES OF THE PURCHASES. (II) DEVELOPMENT CHARGES AMOUNTING TO ` 8,97,72,125/- HAVE BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. THE DETAILS OF THE SAME HAS NOT BEEN OBTAINED AND THE GENUINENESS AND BUSINESS NECESSITIES OF PAYMENT TO - - ITA 872 & SP 61 OF 2011 3 EACH PAYEE HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER. (III) AN AMOUNT OF ` 88,47,910/- HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD COMMISSION AND BROKERAGE. THE DETAILS OF WHICH HAVE NOT BEEN OBT AINED BY THE ASSESSING OFFICER AND THE GENUINENESS AND BUSINESS NECESSITIES OF THE SAME REMAINS TO BE VERI FIED AGAIN. (IV) THE ASSESSEE HAS SOLD LAND VALUED AT ` 45,46,62,148/- TO M/S JUBILEE PLOTS & HOUSING PRIV ATE LIMITED, BUT THE PURCHASER HAS SHOWN AN AMOUNT OF ` 44,42,63,916/- AS THE AMOUNT PAYABLE TO THE ASSESS EE. NO RECONCILIATION IN THIS REGARD HAS BEEN MADE BY T HE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT. IN THE LIGHT OF THE ABOVE OBSERVATIONS, A SHOW CAUS E NOTICE WAS ISSUED TO THE ASSESSEE AND REPLY WAS OBTAINED. AFT ER GOING THROUGH THE DETAILED SUBMISSIONS MADE BY THE ASSESS EE, THE COMMISSIONER OF INCOME-TAX STILL HELD HIS ORIGINAL VIEW GOOD AND CONCLUDED THAT FULL DETAILS HAVE NOT BEEN COLLECTED REGARDING THE PURCHASE OF LAND, DEVELOPMENT CHARGES, BROKERAGE AN D - - ITA 872 & SP 61 OF 2011 4 COMMISSION, ETC. AND THEREFORE THE ASSESSMENT HAS T O BE MADE AFRESH. HE ACCORDINGLY SET ASIDE THE ASSESSMENT OR DER WITH A DIRECTION TO THE ASSESSING AUTHORITY TO MAKE THE AS SESSMENT AFRESH AFTER COLLECTING AND EXAMINING ALL THE DETAI LS PERTAINING TO PURCHASE OF THE LAND, DEVELOPMENT CHARGES, BROKERAG E AND COMMISSION, ETC. 3. THE ASSESSEE IS AGGRIEVED AND, THEREFORE, IN AP PEAL BEFORE US. 4. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE, DEVELOPMENT AND SALE OF LAND AND PLOTS. IT IS IN THE ABOVE CONTEXT THAT THE ASSESSEE HAD TRANSACTED A NU MBER OF DEALINGS IN RESPECT OF LAND AND INCURRED EXPENDITUR E IN DEVELOPING LAND, ETC. 5. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER OF INCOME-TAX, THE ASSESSEE HAD FILED DETAILED SUBMISSIONS IN RESPECT OF THE VARIOUS TRANSACTIONS ENTERED INTO BY HIM. THE FIRST OBJECTION MADE BY THE COMMISSION ER OF INCOME-TAX IS THAT THE ASSESSING OFFICER HAS NOT OB TAINED THE NECESSARY DETAILS ON THE PURCHASE OF LAND TO THE TU NE OF ` 18,60,60,292/-, WHICH WAS DEBITED IN THE PROFIT AN D LOSS - - ITA 872 & SP 61 OF 2011 5 ACCOUNT. IT IS ALSO THE OBSERVATION OF THE COMMISS IONER OF INCOME-TAX THAT THE ASSESSEE HAD FURNISHED ONLY THE NAMES AND ADDRESSES OF THE PARTIES AND THE RESPECTIVE AMOUNTS WERE NOT FURNISHED. THE ASSESSEE HAS REPLIED THAT THE ASSES SEE IS SUBJECTED TO AUDIT UNDER SECTION 44AB AND, THEREFOR E, ALL THE DETAILS AS PRESCRIBED BY THE STATUTE HAVE BEEN MADE AVAILABLE BY THE ASSESSEE AND THEREAFTER REPORTED UPON BY THE AU DITORS. EVERY SIGNIFICANT MATTER HAS BEEN REFLECTED IN THE AUDIT REPORT AND ANNEXURES. THE ASSESSEE HAS FURTHER EXPLAINED THAT IT IS NOT PROPER TO SAY THAT NAMES AND ADDRESSES OF THE PARTI ES ALONE WERE FURNISHED. IT IS THE CASE OF THE ASSESSEE THA T THE RESPECTIVE AMOUNTS WERE ALSO MENTIONED, WHICH IS EVIDENT FROM THE LETTER DATED 23-4-2008. THE ASSESSEE ALSO SUBMITTED THAT THE BOOKS WERE PRODUCED BEFORE THE ASSESSING AUTHORITY AT THE TIME OF ASSESSMENT AND THE BOOKS WERE EXAMINED BY THE ASSES SING AUTHORITY. 6. THE SECOND OBJECTION RAISED BY THE COMMISSIONER OF INCOME-TAX IS THAT THE DEVELOPMENT CHARGES OF ` 8,97,72,125/- WERE NOT VERIFIED BY THE ASSESSING AUTHORITY. THE ASSESSEE HAS REPLIED THAT THE ASSESSING AUTHORITY HAS EXAMINED A LL THE - - ITA 872 & SP 61 OF 2011 6 VOUCHERS AND THE ASSESSING OFFICER HAS EVEN MADE DISALLOWANCES AGAINST THE EXPENDITURE CLAIMED BY TH E ASSESSEE. THE ASSESSING AUTHORITY MADE ADDITIONS IN RESPECT O F LORRY HIRE CHARGES, TIPPER HIRE CHARGES, TRACTOR HIRE CHARGES AND BULLDOZER EXPENSES, ETC. THE ASSESSEE HAS FURTHER EXPLAINED THAT EVEN MATTERS RELATING TO TDS HAVE BEEN DISCUSSED IN RESP ECT OF DEVELOPMENT CHARGES, WHICH GOES TO SHOW THAT THE IS SUE WAS THOROUGHLY EXAMINED BY THE ASSESSING AUTHORITY. SI MILAR ARGUMENTS WERE PLACED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME-TAX IN RESPECT OF THE REMAIN ING ITEMS AS WELL. 7. WE HEARD SHRI N.DEVANATHAN, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE AND SHRI P.MADHANASEKARA N, THE LEARNED JOINT COMMISSIONER OF INCOME-TAX, APPEARING FOR THE REVENUE. 8. ON GOING THROUGH THE ASSESSMENT ORDER, WE FIND THAT THE ASSESSING AUTHORITY HAD EXAMINED IN DETAIL , THE PARTICULARS RELATING TO THOSE VERY ITEMS MENTIONED BY THE COMMISSIONER OF INCOME-TAX IN HIS REVISION ORDER. IN RESPECT OF THE PURCHASE OF LAND, COPIES OF SALE DEEDS WERE FUR NISHED BY THE - - ITA 872 & SP 61 OF 2011 7 ASSESSEE. THE ASSESSEE HAS ALSO FURNISHED THE NAME S AND ADDRESSES OF THE PARTIES AND ALSO THE RESPECTIVE AM OUNTS. IT IS AFTER CONFIRMING THE FACTUM OF PURCHASE OF LAND AFT ER VERIFYING THE ACCOUNTS AND DETAILS THAT THE ASSESSING AUTHORITY H AS PROCEEDED TO DISCUSS THE ADMISSIBILITY OF THE CONSEQUENTIAL E XPENDITURE ON DEVELOPMENT OF THE LAND. THE ASSESSING AUTHORITY H AS DISCUSSED SUCH ITEMS OF EXPENDITURE RELATING TO LAND DEVELOPM ENT UNDER DIFFERENT SUB-HEADS, NAMELY, LAND DEVELOPMENT CHARG ES, BULLDOZER CHARGES, DISALLOWANCE UNDER SECTION 40A(3 ), TIPPER HIRE CHARGES, TRACTOR HIRE CHARGES, LAND LEVELLING EXPEN SES AND JELLY METAL EXPENSES. THE ASSESSING AUTHORITY HAS MADE T HE DISALLOWANCES AND ADDITIONS UNDER ALL THE ABOVE HEA DS OF EXPENDITURE. THEREFORE, A READING OF THE ASSESSMEN T ORDER MAKES IT ABUNDANTLY CLEAR THAT THE ASSESSING OFFICE R HAD EXAMINED ALL THE EXPENSES IN DETAIL IN THE LIGHT OF THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE AND THE OTHER SUPP ORTING EVIDENCES AVAILABLE ON RECORD. ANOTHER IMPORTANT F ACTOR TO BE CONSIDERED IS THAT THE CASE OF THE ASSESSEE IS COVE RED BY COMPULSORY AUDIT UNDER SECTION 44AB OF THE INCOME-T AX ACT, 1961 AND THE AUDITORS HAVE SUBMITTED A DETAILED AUD IT REPORT AND - - ITA 872 & SP 61 OF 2011 8 OTHER ANNEXURES AND ALL THESE MATERIALS HAVE BEEN C ONSIDERED BY THE ASSESSING AUTHORITY WHILE COMPLETING THE ASS ESSMENT. THEREFORE, IT IS NOT PROPER TO SAY THAT THE ASSESSI NG AUTHORITY HAS FAILED TO EXAMINE THE RELEVANT DETAILS RELATING TO THE PURCHASE OF LAND AND THE EXPENSES INCURRED THEREON FOR DEVELOPM ENT. 9. IN RESPECT OF THE AMOUNT COMING OUT OF SALE OF LAND TO M/S.JUBILEE PLOTS & HOUSING PVT. LTD., THE ASSES SEE HAS ALSO EXPLAINED THAT THE ASSESSEE IS FOLLOWING CASH SYSTE M AND M/S.JUBILEE PLOTS & HOUSING PVT. LTD. WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND, THEREFORE, THE DIFFERENCE AT THE END OF THE PREVIOUS YEAR. 10. ANOTHER SERIOUS OBSERVATION MADE BY THE COMMISSIONER OF INCOME-TAX IN RESPECT OF THE ITEMS MENTIONED BY HIM IS THAT THE ASSESSING AUTHORITY HAS NOT MADE ENQUIRIES REGARDING THE BUSINESS NECESSITIES OF PURCHASES AND EXPENSES . IT IS A SETTLED PRINCIPLE OF LAW THAT BUSINESS NECE SSITY IS NOT A MATTER TO BE EXAMINED BY AN INCOME-TAX AUTHORITY. THAT MUST BE WELL LEFT TO THE ASSESSEE, WHO IS RUNNING THE BUSIN ESS. BUSINESS NECESSITY IS A MATTER TO BE DECIDED BY THE ASSESSEE HIMSELF, WHO IS CARRYING ON THE BUSINESS. IF AT ALL THAT BUSINE SS NECESSITY IS - - ITA 872 & SP 61 OF 2011 9 PUT TO EXAMINATION, DEFINITELY THERE WILL BE MORE T HAN ONE VIEW ON THE QUESTION WHETHER IT WAS NECESSARY OR NOT NECESS ARY. THEREFORE, THE SAID GROUND IS NOT A SOUND REASON TO HOLD THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE. 11. ANOTHER ASPECT POINTED OUT BY THE COMMISSIONER OF INCOME-TAX IS THAT THE ASSESSING AUTHORITY HAS NOT MADE ENQUIRIES REGARDING THE GENUINENESS OF THE PURCHASE S. IT IS TO BE SEEN THAT THE ONLY BUSINESS CARRIED ON BY THE ASSES SEE IS PURCHASE AND SALE OF PLOTS AS A REAL ESTATE DEALER. THE GENUINENESS OF THE PURCHASE OF PLOTS IS DEMONSTRATE D BY THE CORRESPONDING SALE OF PLOTS. THE INCOME RETURNED B Y THE ASSESSEE AT ` 1,79,16,498/- ITSELF HAS ARISEN OUT OF THE BUSINESS OF PURCHASE AND SALE OF LAND PLOTS. THEREFORE, IT IS QUITE UNFIT IN THE SCHEME OF FACTS OF THE PRESENT CASE TO HOLD A V IEW THAT THE ASSESSING AUTHORITY OUGHT TO HAVE DOUBTED THE GENUI NENESS OF THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE. 12. TO BRIEFLY STATE THE CASE OF THE PRESENT APPEA L, WE FIND THAT THE ASSESSING AUTHORITY HAS GONE THROUGH ALL THE MAJOR HEADS OF EXPENDITURE IN A DETAILED MANNER, WHICH IS EVIDENT FROM - - ITA 872 & SP 61 OF 2011 10 THE ASSESSMENT ORDER ITSELF. THE EXAMINATION OF TH E RELEVANT HEADS OF EXPENDITURE MADE BY THE ASSESSING AUTHORIT Y IS APPARENT IN THE ASSESSMENT ORDER ITSELF WHEN IT IS FOUND THAT THE ASSESSING AUTHORITY HAS MADE A NUMBER OF DISALLOWANCES/ADDITIONS UNDER DIFFERENT HEADS OF EX PENDITURE. REGARDING THE GENUINENESS AND NECESSITY OF THE TRAN SACTIONS, WE DO NOT FIND ANY LEGAL SUPPORT TO THE OBSERVATION S MADE BY THE COMMISSIONER OF INCOME-TAX. 13. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE ASSESSMENT ORDER IS NOT ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE. IT IS SEEN THAT THE COMM ISSIONER OF INCOME-TAX HAS PASSED THE REVISION ORDER ONLY ON TH E BASIS OF SURMISES AND CONJECTURES. HE HAS NOTHING ON RECORD TO POINT OUT AS TO HOW THE ASSESSMENT ORDER COULD BE HELD TO BE ERRONEOUS. THEREFORE, WE FIND THAT THE REVISION ORDER PASSED B Y THE COMMISSIONER OF INCOME-TAX IS NOT SUSTAINABLE IN FA CTS AS WELL AS IN LAW. THE REVISION ORDER IS ACCORDINGLY SET A SIDE. 14. THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED. - - ITA 872 & SP 61 OF 2011 11 15. SINCE THE APPEAL FILED BY THE ASSESSEE ITSELF STANDS DECIDED, THE STAY PETITION FILED BY THE ASSESSEE HA S BECOME INFRUCTUOUS AND ACCORDINGLY DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 9 TH OF DECEMBER, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 9 TH DECEMBER, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.