Ajay Enterprises Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 898/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2687 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 13-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: R K KAPOOR
• Keywords: Capital asset converted into stock in trade; Business income; Depreciation; Business expenditure; Opportunity of being heard; Commercial expediency; Revised return
• Section: 37

Judgement Text

IN THE INCOME - TAX APPELLATE TRIBUNAL, DELHI BENCH A , NEW DELHI BEFORE : SHRI I.C. SUDHIR , JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO S . 898 & 899/DEL./2013 ASSESSMENT YEAR: 2008 - 09 & 2009 - 10 AJAY ENTERPRISES PVT. LTD., 8 TH FLOOR, EROS CORPORATE TOWER, NEHRU PLACE, NEW DELHI. PAN AAACA1967D (APPELLANT) VS. DCIT, CENTRAL CIRCLE - 6, NEW DELHI. (RESPONDENT) ITA NO S . 1348 & 1349/DEL./2013 ASSESSMENT YEAR: 2008 - 09 & 2009 - 10 DCIT, CENTRAL CIRCLE - 6, NEW DELHI. (APPELLANT) VS. AJAY ENTERPRISES PVT. LTD., 8 TH FLOOR, EROS CORPORATE TOWER, NEHRU PLACE, NEW DELHI. (RESPONDENT) A SSESSEE BY SH. PRADEEP DINODIA, C.A. & SH. R.K. KAPOOR, C.A. RE VENUE BY SH. S.K. JAIN, SR. DR ORDER PER L.P. SAHU, A.M.: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDERS OF THE LD. CIT(A) - I, NEW DELHI DATED 07.12.2012 FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 RESPECTIVELY. FOLLOWING GROUNDS HAVE BEEN RAISED BY BOTH THE PARTIES IN THEIR RESPECTIVE APPEALS : DATE OF HEARING 25.05.2017 DATE OF PRONOUNCEMENT 31 .0 7 .2017 ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 2 GROUND RAISED BY ASSESSEE: A.Y. 2008 - 09: 1. ACTION OF THE CIT(A) IN CONFIRMING THE ACTION OF AO OF NOT ALLOWING RS.7,90,230/ - INCURRED OUT OF REPLACEMENT FUND IS UNJUST, ILLEGAL, ARBITRARY AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. A.Y. 2009 - 10: 1. ACTION OF THE CIT(A) IN NOT ALLOWING LOSS ON DWARKA PROJECT IN FULL AND ALLOWING RS.4,12,00,000/ - ONLY OUT OF DISALLOWANCE MADE AMOUNTING TO RS.10,50,00,0 00/ - BY THE AO IS UNJUST, ILLEGAL, ARBITRARY AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND RAISED BY REVENUE: A.Y. 2008 - 09: 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND ON FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.93,040/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CESSATION OF LIABILITY U/S. 41(1)/28 OF INCOME TAX ACT, 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAD ERRED IN DEL ETING THE DISALLOWANCE OF RS.72,199/ - ON ACCOUNT OF EXCESSIVE DEPRECIATION ON PRINTERS/UPS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES TO RS.2,00,000/ - . 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAD ERRED IN DIRECTING TO ALLOWING THE ASSESSEE S CLAIM OF ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 3 LOSSES AMOUNTING TO RS.18,52,00,000/ - IN THE DWARKA PROJECT DESPITE THE FACT THAT THE LOSSES WORKED OUT BY THE ASSESSEE WAS ON ESTIM ATE BASIS AND UNSCIENTIFIC. A.Y. 2009 - 10: 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND ON FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAD ERRED IN DIRECTING TO RESTRICT THE DISALLOWANCE OF LOSS OF RS.10,50,00,000/ - TO RS.6,38,00,000/ - IN THE DWARKA PROJECT DESPITE THE FACT THAT THE LOSSES WORKED OUT BY THE ASSESSEE WAS ON ESTIMATE BASIS AND UNSCIENTIFIC. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDI TION OF RS.1,32,355/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CESSATION OF LIABILITY U/S. 41(1)/28 OF INCOME TAX ACT, 1961. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAD ERRED IN DELETING THE DISALLOWANCE OF RS.99,445/ - ON AC COUNT OF EXCESSIVE DEPRECIATION ON PRINTERS/UPS. 2. WE FIRST TAKE UP THE APPEAL OF ASSESSEE FOR THE ASSESSMENT YEAR 2008 - 9. IN THIS APPEAL, THE SOLE ISSUE TO BE DECIDED IS WHETHER THE LD. CIT(A) WAS JUSTIFIED TO DISALLOW RS.7,90,230/ - INCURRED/ADJUSTED O UT OF REPLACEMENT FUND/CONTINGENCY FUND. THIS CLAIM WAS NEITHER MADE BEFORE THE AO NOR IN THE RETURN OF INCOME FILED NOR THE AO MADE ANY DISALLOWANCE OF THIS SUM IN THE ASSESSMENT ORDER. THEREFORE, THIS ISSUE DID NOT EMERGE OUT OF THE IMPUGNED ASSESSMENT O RDER, BUT WAS RAISED BEFORE THE LD. CIT(A) ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 4 FOR THE FIRST TIME . THE LD. CIT(A), HOWEVER, DID NOT ENTERTAIN THIS GROUND OF APPEAL RAISED BEFORE HIM HOLDING THAT NO SUCH CLAIM WAS MADE IN THE RETURN FILED BY THE ASSESSEE. 3. THE LD. AR SUBMITTED THAT BASED ON THE JUDGMENT OF HON'BLE ITAT IN THE CASE OF A GROUP CONCERN M/S RC SOOD & CO. PVT. LTD THE ASSESSEE RAISED THIS GROUND O F APPEAL BEFORE THE CIT (A) FOR ALLOWING RS. 7,90,230 / - OUT OF THE CONTINGENCY FUND, ACTUALLY EXPANDED BY THE ASSESSEE DURING T HE YEAR UNDER CONSIDERATION. THE LD. CIT (A) WRONGLY REFUSED TO ENTERTAIN THE CLAIM MERELY ON THE GROUND THAT THE ASSESSEE SHOULD HAVE MADE TH IS CLAIM IN THE RETURN OF INCOME . THE LD. CIT(A) HAS IGNORED THE FACT THAT LEGAL ISSUE CAN BE RAISED AT ANY POIN T OF TIME. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS : 1. JUTE CORPORATION OF INDIA LTD. VS. CIT(A) (1991)187 - ITR 688 2. ABHISHEK INDUSTRIES LTD VS. CIT (2007) 290 ITR 655 (P&H) 3. HINDUSTAN CONSTRUCTION CO. LTD VS. CIT (1994) 208 ITR 291 (BOM.) 4. CIT VS. PRUTHVI BROKERS & SHAREHOLDERS (2012) 349 ITR 336 5. CIT VS. JAIPARBOLIC SPRING (2008) 306 ITR 42 6. CIT VS. ASPENTECH INDIA PVT. LTD. (ITA NO. 1233/2011 28.11.2011). 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(A). ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 5 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT IMPUGNED CLAIM WAS NEITHER MADE BY THE ASSESSEE IN ITS RETURN OF INCOME NOR FILED ANY REVISED RETURN. IT IS ALSO BORNE OUT ON RECORD THAT T HE ASSESSEE HAD NO WHISPER OF THIS CLAIM BEFORE THE AO ALTHOUGH THE DECISION OF TRIBUNAL REFERRED BY ASSESSEE WAS AVAILABLE EVEN BEFORE FILING OF RETURN AND THE ASSESSEE HAD ONE - YEAR TIME TO REVISE THE RETURN . THE ASSESSING OFFICER HAS ALSO NOT MADE ANY DI SALLOWANCE OF THIS AMOUNT IN THE ASSESSMENT ORDER. FOLLOWING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF GOETZ ( INDIA ) LTD. VS CIT 284 ITR 0323 (SC) , WE CAN DECIDE THE ISSUE WHICH WAS NOT CLAIMED IN THE RETURN OF INCOME OF THE ASSESSEE BUT TAKEN GROUNDS REGARDING THE ISSUE BEFORE THE APPELLATE AUTHORITY. WHILE GOING THROUGH THE BALANCE SHEET , THE ASSESSEE HAS SHOWN REPLACEMENT FUND UNDER THE HEAD CURRENT LIABILITIES AT SCHEDULE 11 . THE A.O. IS DIRECTED TO SEE WHETHER THE REPLACEMENT FUND IS A LIABILITY UNDER ANY AGREEMENT OR EXPENDITURE WHICH WAS NECESSARY TO INCUR THE EXPENSES TO RUN THE BUSINESS AND ALLOWABLE U/S 37 (1) OF THE INCOME TAX ACT , 1961. THE ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 6 A.O. HAS TO FURTHER EXAMINE WHY AND HOW IT HAS BEEN CREATED AND WHETHER IT WAS DEBITED INTO THE PROFIT AND LOSS ACCOUNT AND CONSIDERED AS INCOME AT THE TIME OF FILLING OF RETURN OF INCOME IN THE EARLIER YEARS / CURRENT YEAR . THEREFORE, WE THINK THE MATTER SENT TO THE AO FOR EXAMINATION AND GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . THEREFORE, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 6. NOW, WE TAKE ALL THE REMAINING THREE APPEALS, I.E., APPEALS OF THE REVENUE FOR BOTH THE YEARS AND APPEAL OF ASSESSEE FOR A.Y. 2009 - 10 SIMULTANEOUSLY FOR THE SAKE OF CONVENIENCE, AS THE ISSUES INVOLVED IN THESE APPEALS ARE ALMOST SIMILAR. 7. BY WAY OF GROUND NO. 2 AND GROUND NO. 3 RAISED BY REVENUE IN APPEALS FOR A.YRS. 2008 - 09 AND 2009 - 10, REVENUE HAS CHALLENGED THE DELETION OF ADDITIONS OF RS.93,040/ - AND RS.1,32,355/ - MADE ON ACCOUNT OF CESSATION OF LIABILITY U/S. 41(1)/28 OF THE ACT. FROM THE DETAILS FILED, TH E AO NOTICED THAT THE ABOVE LIABILITIES TOWARDS SUNDRY CREDITORS WERE BEING CARRIED FORWARD SINCE LAST THREE YEARS. THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THESE LIABILITIES ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 7 SHOULD NOT BE TREATED AS REMISSION OF LIABILITY U/S. 41(1). THE ASSESSEE EX PLAINED THAT THE AFORESAID BALANCES HAVE NOT BEEN CLAIMED AND HAVE BEEN SHOWN AS PAYABLE AND ARE STILL PAYABLE . T H ERE IS NO STEP TAKEN BY THE ASSESSEE TO WRITE BACK THESE LIABILITIES IN THE PROFIT AND LOSS ACCOUNT. THE PROVISIONS OF SECTION 41(1) ARE APPLI CABLE IN THE CASES WHERE THERE IS ANY BENEFIT BY WAY OF REMISSION OR CESSATION OF ANY LIABILITY BY THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT, WHICH IS NOT THE CASE HERE. THE AO DID NOT ACCEPT THIS CONTENTION OF ASSESSEE AND HELD THAT THE ASSESSEE DID NOT A DDUCE ANY SATISFACTORY EVIDENCE TO PROVE THAT THE SAID LIABILITIES STILL EXIST OUTSTANDING FROM THE ASSESSEE. HE THEREFORE, OBSERVED THAT THE ASSESSEE HAS NOT TO PAY THESE BALANCES ANY LONGER AND THE LIABILITIES CEASED TO EXIST. ACCORDINGLY, HE ADDED THE A BOVE AMOUNTS TO THE TOTAL INCOME OF ASSESSEE U/S. 41(1)/28 OF THE ACT , RELYING ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGAR & SONS LTD., 222 ITR 344(SC). THE LEARNED CIT(A) DELETED THESE ADDITIONS VIDE IMPUGNED ORDER. BEIN G AGGRIEVED, THE REVENUE HAS CHALLENGED THE DELETION OF THESE ADDITIONS AS NOTED ABOVE. ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 8 8. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE LEARNED DR REITERATED THE OBSERVATIONS OF THE AO WHEREAS THE LD. AR RELI ED ON THE ORDERS OF THE FIRST APPELLATE AUTHORITY, FURTHER SUBMITTING THAT THE DECISION IN THE CASE OF T.V. SUNDARAM IYENGAR & SONS(SUPRA) IS NOT APPLICABLE AS IN THAT CASE THE AMOUNTS WERE WRITTEN BACK BY THE COMPANY IN THEIR PROFIT AND LOSS ACCOUNT, WHER EAS THE LIABILITY IS STILL EXISTING IN THE CASE OF ASSESSEE IN THE BOOKS OF ACCOUNT. WE FIND THAT THE REVENUE HAS FAILED TO REBUT THE CONTENTION OF THE ASSESSEE THAT THE IMPUGNED LIABILITIES STILL EXIST IN THE BOOKS OF ACCOUNT OF ASSESSEE. THE LD. CIT(A) APPEARS TO HAVE COMMITTED NO ERROR WHILE HOLDING THAT THE PROVISIONS OF SECTION 41(1) CANNOT BE INVOKED IN THE INSTANT CASE, AS THERE IS NO CESSATION OR REMISSION OF LIABILITY BY ASSESSEE COMPANY IN ITS BOOKS OF ACCOUNTS. HON BLE DELHI HIGH COURT IN THE CA SE OF CIT VS. JAIPUR JEWELERS (EXPORTS), 187 TAXMAN 169 HAS HELD THAT SO LONG AS THERE IS NO CESSATION OF LIABILITY BY WRITING BACK THE SAME, NO ADDITION CAN BE MADE UNDER SECTION 41(1). HON BLE APEX COURT IN THE CASE OF SINGRAULI SUGAR WORKS, 236 ITR 518 HAS OBSERVED THAT THE LIMITATION OF TIME DOES NOT EXTINGUISH THE DEBT. SIMILAR VIEW HAS BEEN TAKEN BY HON BLE PUNJAB ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 9 & HARYANA HIGH COURT IN CIT VS. SMT. SITA DEVI JUNEJA, 187 TAXMAN 96. IN VIEW OF THESE DECISIONS, WE FIND NO JUSTIFICATION TO INTERFERE WIT H THE DECISION REACHED BY LD. CIT(A) ON THIS COUNT. ACCORDINGLY, GROUNDS NOS. 2 IN APPEAL FOR A.Y. 2008 - 09 AND GROUND NO. 3 IN APPEAL FOR A.Y. 2009 - 10 OF THE REVENUE ARE DISMISSED. 9. GROUND NO. 3 AND GROUND NO. 4 IN APPEALS OF THE REVENUE PERTAIN TO EXCE SSIVE DEPRECIATION ON PRINTERS/UPS. THE AO NOTICED THAT THE ASSESSEE CLAIMED HIGHER DEPRECIATION ON PRINTERS/UPS @ 60% & 30% FOR ADDITION IN ASSETS MADE BEFORE AND AFTER 30.09.2007 RESPECTIVELY. THE AO REJECTED THE CLAIM OF ASSESSEE AND ALLOWED DEPRECIATIO N @ 15% AND 7.5% AS APPLICABLE ON OFFICE EQUIPMENTS AFTER RELYING ON CERTAIN DECISIONS OF ITAT AND ACCORDINGLY MADE ADDITIONS ON ACCOUNT OF EXCESS DEPRECIATION ON PRINTERS/UPS TO THE EXTENT OF RS.72,199/ - AND RS.99,445/ - RESPECTIVELY FOR BOTH THE YEARS. TH E LD. CIT(A) IN APPEALS, DELETED THESE ADDITIONS VIDE IMPUGNED ORDER. AGGRIEVED, THE REVENUE HAS CHALLENGED THESE ADDITIONS IN THESE APPEALS. ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 10 10. THE LD. DR RELYING ON THE ORDER OF THE AO SUBMITTED THAT THE ASSESSEE WAS NOT ENTITLED TO HIGHER DEPRECIATION ON PRINTERS/UPS , AS ALSO HELD BY THE TRIBUNAL IN THE DECISIONS RELIED BY THE AO. THE LD. CIT(A) WAS, THEREFORE, NO JUSTIFIED TO DELETE THE ADDITIONS. ON THE OTHER HAND, THE LD. AR RELIED ON THE ORDER OF THE LD. CIT(A). 11. HAVING CONSIDERED THE RIVAL SUB MISSIONS, WE FIND THAT THIS ISSUE ALREADY STANDS SETTLED IN FAVOUR OF THE ASSESSEE BY HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BSES YAMUNA POWER LIMITED 358 ITR 47 (DEL.), WHEREIN THE HON BLE COURT CATEGORICALLY HELD THAT THESE COMPUTER ACC ESSORIES AND PERIPHERALS ARE INTEGRAL PART OF THE COMPUTER SYSTEM, AS THE SAME CANNOT BE USED WITHOUT COMPUTER AND THEREFORE, THE SAME ARE ENTITLED TO DEPRECIATION AT THE HIGHER RATE OF 60%. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED TO DELETE THE IMPUGNED AD DITIONS AFTER RELYING ON THIS DECISION. ACCORDINGLY, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THIS COUNT. AS A RESULT, GROUND NO. 3 IN APPEAL FOR A.Y. 2008 - 09 AND GROUND NO. 4 IN APPEAL IN A.Y. 2009 - 10 OF THE REVENUE DESERVE TO BE D ISMISSED. ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 11 12. BY WAY OF GROUND NO. 4 IN APPEAL FOR A.Y. 2008 - 09, THE REVENUE HAS ALSO CHALLENGED THE ACTION OF THE LD. CIT(A) FOR RESTRICTING THE DISALLOWANCE ON FOREIGN TRAVEL TO RS.2,00,000/ - AS AGAINST RS.4,00, 082 / - DISALLOWED BY THE AO. 13. THE BRIEF FACTS OF THE ISSUE ARE THAT IN THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT ONE OF THE DIRECTORS OF THE COMPANY MR. AVNEESH SOOD ALONGWITH HIS WIFE MRS. TITHI SOOD HA D VISITED UAE FROM 28.12.2007 TO 04.01.2008. MR S . TITHI SOOD WAS STATED TO BE AN EMPLOYEE OF THE COMPANY. THE AO OBSERVED THAT THE VISIT OF THE DIRECTOR ALONGWILH HIS WIFE CANNOT BE EXCLUSIVELY TREATED AS BUSINESS EXPENDITURE AND EXPENSES INCURRED ON HER VISIT APPEAR TO BE PERSONAL EXPENSES IN NATURE. THE CONTENTION OF THE ASSESSEE WAS THAT THESE FOREIGN TRAVELS WERE CONDUCTED FOR THE BUSINESS PURPOSE OF THE ASSESSEE COMPANY , I.E., PAYMENT OF FBT AS MENTIONED IN ANNEXURE - II OF TAX AUDIT REPORT . THE AO OBSERVED THAT THE ELEMENT OF PERSONAL NATURE OF EXPENSES ON THE VISIT OF THE WIFE O F DIRECTOR CANNOT BE RULED OUT AND THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM THAT THE SAID VISIT WAS MADE FOR BUSINESS PURPOSES. HE, THEREFORE, DISALLOWED THE EXPENSES INCURRED ON ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 12 FOREIGN TRAVEL OF DIRECTOR S WIFE AMOUNTING TO RS.4,00,082/ - (RS.51,586/ - TOWARDS HER AIR TICKET) + (RS. 3,48,496/ - REPRESENTING 50% OF RS. 6,96,993 / - INCURRED TOWARDS BOARDING/LODGING ETC.), AND ADDED THE SAME BACK TO THE TOTAL INCOME OF ASSESSEE, TREATING THE SAME AS PERSONAL EXPENDITURE OF DIRECTOR S WIFE. 14. THE LEARNED DR RELYING ON THE ORDER OF THE AO, SUBMITTED THAT THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION IGNORING THE FACT THAT THE EXPENDITURE INCURRED ON FOREIGN TRAVEL OF DIRECTOR S WIFE WERE PERSONAL IN NATURE AND THE ASSESSEE FAILED TO J USTIFY ANY BUSINESS PURPOSE FOR WHICH THE FOREIGN TRAVEL WAS UNDERTAKEN BY HER. SIMPLY BECAUSE SHE WAS STATED TO BE THE EMPLOYEE OF ASSESSEE COMPANY WOULD NOT CONSTITUTE THE FOREIGN TRAVEL FOR THE BUSINESS PURPOSE. HE, THEREFORE, URGED FOR SUSTENANCE OF TH IS DISALLOWANCE. 15. ON THE OTHER HAND, THE LD. AR RELIED ON THE DECISION OF THE LD. CIT(A). 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. IT IS NOTABLE THAT ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 13 THE AO SPECIFICALLY ASKED THE ASS ESSEE TO EXPLAIN THE PURPOSE OF BUSINESS WHICH WAS ASSIGNED TO DIRECTOR S WIFE FOR UNDERTAKING THE FOREIGN TRAVEL WITH HER HUSBAND. THE ASSESSMENT ORDER CATEGORICALLY S PEAKS THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM IN THIS REGARD AS TO WHAT BUSIN ESS PURPOSE COULD BE SERVED BY FOREIGN VISIT OF DIRECTOR S WIFE. MOREOVER, THERE IS NOTHING ON RECORD BEFORE US TO SHOW AS TO WHAT PORTFOLIO WAS ASSIGNED TO HER, BEING THE EMPLOYEE OF THE IN THE COMPANY. THE AO HAS ALREADY ALLOWED THE FOREIGN TRAVEL EXPEND ITURE OF THE DIRECTOR . THEREFORE, SIMPLY BECAUSE SHE WAS EMPLOYEE IN THE ASSESSEE COMPANY, THE EXPENDITURE INCURRED BY HER ON FOREIGN TRAVEL CANNOT BE ACCEPTED UNLESS IT IS PROVED THAT THE SAID EXPENDITURE WERE LAID SOLELY AND EXCLUSIVELY FOR THE PURPOSE O F BUSINESS. WE ARE, THEREFORE, NOT INCLINED TO ENDORSE THE DECISION REACHED BY THE LD. CIT(A) ON THIS COUNT AND RESTORE THE ASSESSMENT ORDER ON THIS ISSUE. ACCORDINGLY, GROUND NO. 4 OF APPEAL OF REVENUE FOR A.Y. 2008 - 09 DESERVES TO BE ALLOWED. 17. THE ONL Y ISSUE WHICH REMAINS FOR ADJUDICATION IN BOTH THE APPEALS OF THE REVENUE AND IN APPEAL OF ASSESSEE FOR A.Y. 2009 - 10, ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 14 IS WITH RESPECT TO CLAIM OF LOSSES MADE BY THE ASSESSEE ON DWARIKA PROJECT IN ASSESSMENT YEARS 2008 - 09 AND 2009 - 10. 18. THE BRIEF FACTS O F THE ISSUE ARE THAT THE ASSESSEE CLAIMED LOSS ES ON CONSTRUCTION OF PROJECT OF DWARIKA EROS METRO MALL OF RS.18.52 CRORES IN ASSESSMENT YEAR 2008 - 09 AND RS.25.48 CRORES IN A.Y. 2009 - 10. ON PERUSAL OF PROFIT AND LOSS ACCOUNT, THE AO NOTICED THAT A REFERENCE NOTE WAS GIVEN BY THE AUDITORS OF THE ASSESSEE . NOTE NO. 2 OF PART B OF SCHEDULE - 21 OF THE AUDIT REPORT READS AS UNDER : LOSS OF RS.18.52 CRORES HAS BEEN WRITTEN OFF IN A COMMERCIAL PROJECT, AS THE ESTIMATED TOTAL CONTRACT COST AND REVENUE INDICATE A LOSS . FOR A.Y. 2009 - 10, THE AUDITOR OF THE ASSESSEE IN NOTE NO. 1 OF PART - B OF SCHEDULE 21 OF THE AUDITOR S, HAS REPORTED AS UNDER : LOSS OF RS.25.48 CROES(PREVIOUS YEAR 18.52 CRORES) HAS BEEN WRITTEN OFF IN A COMMERCIAL PROJECT OF EROS METRO MALL AS THE ES TIMATED TOTAL CONTRACT COST AND REVENUE INDICATE THE LOSS. 19. THE ASSESSING OFFICER OBSERVED THAT THE COMMENTS OF THE AUDITORS ITSELF SHOW THAT THE LOSS WAS CLAIMED ON ESTIMATED BASIS. IT WAS NOTED BY THE AO THAT THE LOSS PERTAINED TO A PROPOSED ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 15 SHOPPING MALL PROJECT AT PLOT NO. 8, SECTOR 14, D WARKA, AN UPCOMING SUB - CITY OF DELHI. IN THIS REGARD, THE ASSESSEE WAS REQUIRED TO EXPLAIN THE BASIS OF LOSS CLAIMED ON CONSTRUCTION PROJECT WRITTEN OFF AMOUNTING TO RS.18.52 CRORES AND RS.25.48 CRORES WITH NECESSARY DETAILS FOR BOTH THE YEARS. THE ASSESSEE FILED THE DETAILS OF ESTIMATED COST OF THE PROJECT, ESTIMATED SALES, ESTIMATED LOSS ON CONSTRUCTION PROJECT, BUILT UP AREA, SELLABLE AREA, SOLD ARE, RATES OF SOLD AREA, SALE VALUE, UNSOLD ARE, ESTIMATED RA TE FOR UNSOLD AREA AND SALES VALUE COMPUTED BY THE ASSESSEE. HE SUBMITTED THE DETAILS FOR BOOKING OF LOWER GROUND FLOOR, GROUND FLOOR, FIRST FLOOR, SECOND FLOOR AND THIRD FLOOR AND THE DETAILS OF TOTAL NUMBER OF UNITS, NAME OF THE CLIENTS BY WHOM THE PLOTS WERE BOOKED, DATE OF BOOKING, SIZE OF UNIT, RATE PER SQ. FEET AND TOTAL SALE VALUE. ACCORDINGLY, THE TOTAL SALES VALUE WAS WORKED OUT AT RS.197,54,86,707/ - . HE ALSO SUBMITTED THE BASIS ON WHICH LOSSES WERE BOOKED IN THE PROFIT AND LOSS ACCOUNT AVAILABLE O N THE PAPER BOOK. THE ASSESSEE ALSO SUBMITTED THE DETAILS OF SALES MADE AS ON 31.03.2009, AS ARE AVAILABLE ON PAPER BOOK PAGE 160 TO 166. THE ASSESSEE ALSO SUBMITTED PENDING PAYMENT STATUS UPTO 31.03.2011 FOR THE SALES MADE DURING THE FINANCIAL YEAR 2007 - 0 8 AND 2008 - 09. ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 16 COPY OF THREE AGREEMENTS MADE WITH CUSTOMERS IS PLACED ON PAPER BOOK PAGES 201 TO 224. THE ASSESSING OFFICER AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE FOR CLAIMING LOSSES, CALCULATED THE SALES VALUE AND ACCORDINGLY DISALLOWE D THE LOSSES BOOKED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT FOR RS.18.52 CRORES FOR THE ASSESSMENT YEAR 2008 - 09 AND RS.10.50 CRORES IN THE A.Y. 2009 - 10 AS AGAINST RS.25.48 CRORES BOOKED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY AND FILED DETAILED WRITTEN SUBMISSIONS TO JUSTIFY THE CLAIM OF LOSSES BOOKED IN THE PROFIT AND LOSS ACCOUNTS ON CONSTRUCTION OF DWARIKA EROS METRO MALL. HE ALSO SUBMITTED THE DETAILS OF YEAR - WISE LOSS ES FOR FI VE YEARS AS UNDER : A.Y. COST OF THE PROJECT AS PER POCM & AS PER AUDITED BOOKS AMOUNT ACTUALLY SPENT % OF PROJECT COMPLETED LOSS ALLOCABLE LOSS AMOUNTS IN RS. CRORE ENTITLED LOSS LOSS CLAIMED LOSS TO BE ALLOWED 2008 - 09 176.1 126.81 72.0 45.72 32.9 32.9 18.52 18.52 2009 - 10 173.26 142.61 82.3 45.72 37.6 4.7 25.48 19.1 2010 - 11 173.26 153.06 88.3 45.72 40.4 2.8 - 2.8 2011 - 12 175.25 167.56 95.6 45.72 43.7 3.3 0.79 3.3 2012 - 13 174.98 174.98 100.0 45.72 45.7 2.0 0.73 2.0 ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 17 20. THE LD. CIT(A) ALLOWED THE CLAIM OF LOSS ES BOOKED FOR THE ASSESSMENT YEAR 2008 - 09 OF RS.18.52 CRORES AND RESTRICTED THE DISALLOWANCE OF LOSS TO RS.4.12 CRORES, THEREBY ALLOWING THE LOSS ES OF RS.6.38 CRORES IN A.Y. 2009 - 10. THE REVENUE IS IN APPEALS AGAINST THE RELIEF GRANTED BY CIT(A) IN BOTH THE YEARS WHEREAS THE ASSESSEE IS IN APPEAL AGAINST THE SUSTENANCE OF PARTIAL LOSS IN A.Y. 2009 - 10. 21. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 22. ON THE OTHER HAND, THE LD. AR MADE A WRITTEN SUBMISSION ON THE IMPUGNED ISSUE WHICH READS AS UNDER : GROUND NO.5: LOSSES IN THE DWARKA PROJECT RS. 18.52.00.0007 - A.Y. 2008 - 09. GROUND NO.2: LOSSES IN THE DWARKA PROJECT RS. 6.38.00.0QO/ - / - A.Y. 2009 - 10. CROSS GROUND NO. 1: LOSSES IN DWARKA PROJECT IN ITA NO. 899/DEL/2013 - ASSESS EE'S APPEAL. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE AT PAGES ITO 12 OF HIS ORDER. THE AO OBSERVED THAT AUDITORS IN THEIR AUDIT HAD GIVEN A NOTE NO. 2 THAT 'LOSS OF RS. 18.52 CRORE HAS BEEN WRITTEN OFF IN A COMMERCIAL PROJECT AS THE ESTIMATED TOTAL CONTRACT COSTS AND REVENUE INDICATE A LOSS. ' (PAGE NO. 1 OF HIS ORDER). THE AO THEREAFTER, NOTED THAT NOTE OF THE AUDITORS INDICATE THAT SUCH LOSS WAS CLAIMED ON ESTIMATED BASIS. THEREAFTER, THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE BASIS OF CLAIMING T HE LOSS WITH NECESSARY DETAILS AND DOCUMENTS. THE ASSESSEE IN RESPECT OF SUCH REQUIREMENTS OF AO EXPLAINED THAT IT HAD ACQUIRED A PLOT FOR DEVELOPING A COMMERCIAL SITE IN AUCTION FROM THE DDA FOR WHICH THE TOTAL COST CAME TO BE RS. 122.98 CRORES. IT WAS FURTHER EXPLAINED THAT ASSESSEE PURPOSED TO DEVELOP A SHOPPING MALL FOR WHICH INITIALLY THERE WAS A GOOD RESPONSE FROM THE PUBLIC. HOWEVER, THERE WAS SUDDEN FALL IN THE ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 18 DEMAND OF REAL ESTATE PROPERTIES IN VIEW OF 'SUB - PRIME CRISIS' IN USA AND BECAUSE OF GL OBAL RECESSION. IT WAS FURTHER EXPLAINED THAT MOST OF THE LARGE CORPORATE HOUSES IN THE REAL ESTATE POSTPONED THEIR PROJECTS AND SUDDENLY THE AVAILABILITY OF SPACE IN THE REAL ESTATE MARKET EXCEEDED THAN THE DEMAND DUE TO WHICH THERE WAS SUDDEN AND UNCONTR OLLABLE CRASH IN THE MARKET PRICES. IT WAS FURTHER EXPLAINED THAT ANOTHER GROUP COMPANY WHO HAD ALSO GIVEN A BID OPTED TO SURRENDER THE PLOT TO DDA AT A HUGE LOSS. HOWEVER, TO KEEP A FACE AND REPUTATION INTACT IN THE MARKET, THE ASSESSEE OPTED TO CONTINUE THE PROJECT. IT WAS FURTHER EXPLAINED THE LOSS HAS BEEN CALCULATED AND CLAIMED IN ACCORDANCE WITH THE ACCOUNTING STANDARD (7) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THE PROJECT COST AND REVENUES AS COMPUTED AS ACCORDANCE WITH THE SAID A CCOUNTING STANDARDS WERE ALSO FILED WITH THE ASSESSING OFFICER. IT WAS EXPLAINED THAT PERCENTAGE OF COMPLETE METHOD HAS BEEN CONSISTENTLY FOLLOWED BY ASSESSEE IN RESPECT OF ALL ITS PROJECTS. IT WAS EXPLAINED TO THE AO THAT SALES AND COST HAVE BEEN ESTIMATED ON THE PERCENTAGE COMPLETION METHOD. RELYING UPON THE EXTRACTS FROM THE ACCOUNTING STANDARD 7, IT WAS HIGHLIGHTED TO CONTEND THE LOSS CLAIMED WAS IN ACCORDANCE WITH THE ACCEPTED RULES AND LAW ON THIS ISSUE. THE ASSESSEE FURTHER RELIED UPON CERTAIN JUDGMENTS WHICH HAD DECIDED THE ISSUE OF ACCOUNTING FOR PROJECT LOSS BASED ON ACCOUNTING STANDARD 7, SOME OF WHICH ARE AS UNDER: - 1. JACOBS ENGINEERING INDIA PVT. LTD. VS. ACIT (ITA NO. 335/MUM./2007 & 336/MUM./2007). 2. HON'BLE BOMBAY TRIBUNAL IN THE CASE OF MAZAGAON DOCK LIMITED VS. JCIT (29 SOT 356). 3. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. WOODWARD GOVERNMENT OF INDIA PRIVATE LIMITED (294 ITR 451). 4. HON'BLE SUPR EME COURT AND HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR OF LNDIA PVT. LTD. (SUPRA) 312 ITR 254 (SC). ON THE PROPOSITION THAT REASONABLY ESTIMATED LIABILITY ON THE DATE OF DRAWING THE ACCOUNTS HAS TO BE ACCOUNTED FOR AND ARE LEGALLY ALLOWABLE, FOLLOWING JUDGMENTS ARE RELIED UPON: 1. SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS (2004) 245 ITR 428 (SC). 2. METAL BOX COMPANY OF I NDIA LTD. V. THEIR WORKMEN (1969) 73 ITR 53 (SC). 3. CALCUTTA CO. LTD. V. CIT (1959) 37 ITR 1 (SC). 4. CI T V. INSILCO LTD. 179 TAXMAN 5 (DELHI) THEREAFTER, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE BASIS OF COMPUTATION OF LOSS WHICH WAS FURNISHED. SIMILARLY, OTHER DETAILS AS REQUIRED BY THE AO IN RESPECT OF TOTAL SALABLE AREA, TOTAL AREA ACT UALLY SOLD AND AGREED SALES REALIZATION IN RESPECT OF AREA SOLD, TOTAL UNSOLD AREA AND THE RATE AT WHICH SUCH UNSOLD AREA HAS BEEN ESTIMATED WERE CALLED FOR WHICH WERE ALSO ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 19 FURNISHED BY THE ASSESSEE AS RECORDED BY THE AO AT PAGE NO. 7 OF HIS ORDER. THE COM PLETE DETAILS OF TOTAL PROJECT COST AT RS. 176.10 CRORES WERE GIVEN (PAGE 6 OF HIS ORDER). SIMILARLY, TOTAL ESTIMATED SALES REVENUE CALCULATED AT RS. 157.58 CRORES WERE GIVEN (PAGE 7 COLUMN 10 OF HIS ORDER). THEREAFTER, THE AO CALLED FOR FURTHER INFORMAT ION IN RESPECT OF THE SAID PROJECT DETAILS WHICH WAS ALL SUBMITTED TO THE AO. THE MAIN GRIEVANCE OF THE ASSESSING OFFICER WAS THAT VERY SMALL AMOUNT OF EXPENDITURE HAD BEEN INCURRED BY THE ASSESSEE ON THE PROJECT IN SPITE OF THE FACT THAT ALMOST 30% OF THE AREA IN RESPECT OF THAT PROJECT HAD ACTUALLY BEEN BOOKED BY THE ASSESSEE AND NECESSARY REVENUE HAD BEEN RECOGNIZED IN RESPECT OF THE SAME. THIS ASPECT HAS BEEN RECORDED BY THE AO IN COLUMN NO. 6 AT PAGE 10 OF HIS ORDER. THE OTHER REASONING OF THE AO WAS THAT IN ARRIVING AT ESTIMATED LOSS BY THE ASSESSEE, THE SALE VALUE ADOPTED FOR UNSOLD AREA OF THE PROJECT BY THE ASSESSEE WAS LOWER THAN THE RATES AT WHICH THE ASSESSEE HAD ACTUALLY SOLD PART OF THE PROJECT DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER THEREAFTER NOTED THE FACTS AND FIGURES GIVEN BY THE ASSESSEE AT PARA 10 PAGE 11 OF HIS ORDER. THE AO HELD THAT IF AVERAGE AREA RATE OF THE ACTUAL AREA SOLD DURING THE YEAR BY THE ASSESSEE WERE TO BE CONSIDERED FOR THE UNSOLD AREA THEN THE SALES REALIZATION COMES OUT TO RS. 197.55 CRORES AS AGAINST RS. 157.58 CRORES ESTIMATED BY THE ASSESSEE. THE ASSESSING OFFICER DID NOT MAKE ANY SERIOUS CHALLENGE TO THE COST OF THE PROJECT WHICH WAS ESTIMATED BY THE ASSESSEE AT 176.10 CRORES. THE AO CONCLUDED THAT THE CALCULATION BASED ON THE ACTUAL SALE RATES WOULD BE MORE APPROPRIATE AND ARRIVED AT THE CONCLUSION THAT THERE CAN BE NO LOSS ON THE PROJECT AS ESTIMATED AND CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER ALSO (IN PARA 11 OF PAGE 11 OF HIS ORDER) CHALLENGED THE CLAIM OF THE ASSESSEE THAT THERE WAS DECREASING TREND IN THE MARKET IN THE RATES OF PROPERTIES WERE THE BEARISH RATHER THAN BULLISH. THE AO COMMENTED THAT ASSESSEE HAS INTENTIONALLY KEPT QUITE ABOUT THE POSITIVE ASPECTS OF THE REAL ESTATE MARKET IN THE COUNTRY TO FORTIFY ITS INADMISSIBLE AND ILLEGITIMA TE CLAIM IN RESPECT OF THE LOSS. HOWEVER, THE AO DID NOT BRING OUT ANY SUCH POSITIVE ASPECTS IN THE REAL ESTATE SEGMENT, WHICH WERE RELEVANT WHILE MAKING SUCH OBSERVATIONS. THE LD. CIT (APPEALS) HAS DISCUSSED THIS ISSUE AT PAGES 8 TO 34 OF HIS ORDER. FROM PAGES 8 TO 12, AO'S ORDER HAS BEEN REPRODUCED VERBATIM. FROM PAGES 12 TO 31 VARIOUS SUBMISSIONS OF THE ASSESSEE DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT(APPEALS) HAVE BEEN REPRODUCED/REFERRED. FROM PARA 4.4 AT PAGE NO. 41, CIT(APPEALS) HAS GI VEN HIS OWN VIEWS AND JUDGMENT ON THE ISSUE. ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 20 THE ASSESSEE EXPLAINED THE FACTS TO THE CIT APPEAL AND THE MAIN CONTENTIONS AS EXPLAINED TO THE CIT(APPEALS) WERE AS UNDER - 1. THAT THE ASSESSEE SUBMISSIONS THAT THERE WAS A DECLINING TREND IN THE REAL ESTATE MARKET IS ALSO PROVED BY THE FACT THE COST MARKET SENSEX HAD COME DOWN FROM PEAK OF 21,078 POINTS IN JANUARY 2008 TO 15,975 POINTS IN MARCH 2008 THAT IS WITHIN THE PERIOD OF JUST 3 MONTHS. 2. THAT THE REALITY INDEX BSE RECORDED MORE SHARP BY DECL INE BY 67.63% DURING THE PERIOD FROM ITS RECORD HIGH OF 13,848.09 ON 08.01.2008 TO 4,068.03 ON 02ND JULY, 2008 (5 MONTHS). 3. THAT OUT OF 29 COMMERCIAL SITES/PLOTS ALLOTTED BY THE DDA DURING THE LAST FEW YEARS, CONSTRUCTIONS NEVER STARTED ON 18 PLOTS. 2 PLOTS WERE SURRENDERED AND ONE OF THE SURRENDERED PLOTS WAS BY A GROUP CONCERNS M/S R. C. SOOD AND COMPANIES ON A LOSS OF ABOUT 30 CRORES. 4. THAT THE DDA BROUGHT DOWN THE RESERVE PRICE FOR AUCTION OF CERTAIN PLOTS FROM RS. 118.20 CRORES IN MARCH 2009 TO RS. 79.39 CRORES IN AUGUST 2011, EVEN THEN NO BIDDER WAS AVAILABLE AT SUCH REDUCED PRICES. THIS SHOWED THE DRASTIC CRASH IN REAL ESTATE MARKET. 5. THAT FAR LAND RATE ALSO CAME DOWN FROM ITS PEAK OF RS. 24,303 ON JANUARY 15, 2007 TO RS. 11,778 ON OCTOBER 20, 2010 AND FURTHER RS. 6,756 ON AUGUST 03, 2011. 6. THAT THE FACTS OF THE ASSESSEE'S CASE ARE GOVERNED BY ACCOUNTING STANDARD (7) AND ALL THE COMPUTATION AND CLAIM OF LOSS HAVE BEEN FILED IN ACCORDANCE WITH THE SAID ACCOUNTING STANDARD. 7. THAT THE ESTIMATES OF THE PROJECT COST MADE BY THE ASSESSEE WERE REALISTIC BASED ON THE RELEVANT COST FOR THE SIMILAR PROJECTS AND IN CASE AO ENTERTAINED ANY DOUBT ABOUT THE SAID COST, HE SHOULD HAVE GONE FOR INDEPENDENT VALUATION. THE SAME WAS REQUIRED IN VIEW OF THE VARIOUS JUDGMENTS, SOME OF WHICH ARE AS UNDER: HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. TRIVENI ENGG, & INDUSTRIES LIMITED (2011) 196 TAXMAN 94 (DELHI) AFTER CONSIDERING THE RATIO LAID DOWN BY APEX COURT IN CALCUTTA CO. LTD. VS. CI T (1956) 37 ITR 1 (SC). 8. THAT THE CHART PRODUCED BY THE ASSESSING OFFICER IN HIS ORDER AT PAGES NO. 10 & 11 ALSO INDICATE THE DECLINING TREND AND IN ANY CASE, THE AO IGNORED THE SALES TRANSACTIONS WHICH WERE FURTHER RECORDED IN ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 21 RESPECT OF THIS PROJECT AT RATES WHICH WERE STILL LOWER THAN ENTERED DURING THE YEAR. 9. THAT GOING FORWARD, THE ACTUAL LOSS ON THE PROJECT WAS MUCH HIGHER THAN WAS PROJECTED DURING THE YEAR UNDER CONSIDERATION. THE MAJOR IMPACT CAME FROM THE LAND COST WHICH HAD ALREADY BEEN INCURRED BY THE ASSESSEE BY THE REDUCTION IN THE FAR RATIO AS EXPLAINED IN POINT 5 ABOVE. 10. THAT THE ESTIMATES OF THE RATES BY THE ASSESSEE IN CALCULATING THE ESTIMATED SALES PRICE WERE CLOSURE TO THE ACTUAL TRANSACTIONS THAT HAD TAKEN PLACE IN THE NEAR FUTURE, AS RECORDED AT PAGES 17 & 18 OF CIT(APPEAL'S) ORDER. 11. THAT A GROUP COMPANY, WHICH WAS ALSO ALLOTTED AN IDENTICAL PLOT BY THE DDA FOR COST OF RS. 122.52 CRORES WAS SURRENDERED TO DDA BECAUSE OF THE MISERABLE MARKET CONDITIONS IN THE REAL ESTATE AND THAT GROUP COMPANY SUFFERED THE LOSS OF RS. 30.63 CRORES ON THE SURRENDER OF PLOT ITSELF. IT WAS A CLEAR EVIDENCE OF DECLINING MARKET IN THE REAL ESTATE. 12. THAT OBSERVATION OF THE AO ABOUT THE POSITIVE ASPECT OF THE REAL ESTATE INDUSTRY WAS ACTUALL Y SURMISES, CONJECTURES, IMAGINATION OF THE AO WITHOUT ANY CORROBORATIVE EVIDENCE ON THE SAME AND WAS LIABLE TO BE DISMISSED. THE ALLEGATION OF THE AO IN THIS REGARD THAT ASSESSEE INTENTIONALLY SUPPRESSED SUCH POSITIVE ASPECTS WAS NON - EXISTING AND HAS NO B ASIS WHATSOEVER. 13. THAT THE ASSESSEE HAD CONTINUOUSLY FOLLOWED THE PERCENTAGE OF THE COMPLETION METHOD IN RESPECT OF I T S OTHER PROJECTS YEAR AFTER YEAR. THE AO HAD NO OBJECTION TO ALL OTHER PROJECTS AND CHALLENGED THE DWARKA PROJECT ONLY WHICH WAS ALSO IN ACCORDANCE WITH ACCOUNTING STANDARD (7). THE OBJECTION OF THE AO WAS BASED ON SURMISES, CONJECTURES AND ASSUMPTIONS. RELEVANT PARA 35 OF ACCOUNTING STANDARD 7 IS REPRODUCED AS UNDER FOR READY REFERENCE: - RECOGNITION OF EXPECTED LOSSES WHEN IT IS PROBA BLE THAT TOTAL CONTRACT COSTS WILL EXCEED TOTAL CONTRACT REVENUE, THE EXPECTED LOSS SHOULD BE RECOGNIZED AS AN EXPENSE IMMEDIATELY. 14. THAT EVEN SOME OF THE PARTIES WHO HAD BOOKED THE PLOTS EARLIER WERE LOOKING FOR REFUND BECAUSE OF THE DECLINING TREND I N THE MARKET. ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 22 NAMES AND ADDRESSES OF SUCH PARTIES WERE SUBMITTED BEFORE THE AO (PAGE 21 OF CIT (APPEAL'S) ORDER). 15. THAT THE ASSESSEE HAS BEEN CONTINUOUSLY AND REGULARLY FOLLOWING THE METHOD OF ACCOUNTING IN ACCORDANCE WITH ACCOUNTING STANDARD (7) I.E. PERCENTAGE OF COMPLETION METHOD AND REGULARLY METHOD OF ACCOUNTING CANNOT BE DISTURBED BY THE AO UNLESS IT IS PROVED THAT SUCH METHOD DOES NOT RESULT INTO THE CORRECT TAXABLE INCOME. RELIANCE WAS MADE ON THE FOLLOWING JUDGMENTS: - CIT VS. BILAHARI INVEST MENT (P) LTD. 299 ITR 1 (SC). CIT VS. REALEST BUILDERS & SERVICES LTD. 307 ITR 202 (SC). CIT VS. WOODWARD GOVERNOR INDIA (P) LTD. 312 ITR 254 (SC). 16. THAT THE ESTIMATION OF LOSS MADE BY THE ASSESSEE WERE STRICTLY IN ACCORDANCE WITH THE ACCEPTED ACCO UNTING POLICIES AND THE CLAIM IN RESPECT OF ESTIMATED LIABILITY CANNOT BE REJECTED ON SURMISES AND CONJECTURES FOR WHICH FOLLOWING JUDGMENTS ARE RELIED UPON: - BHARAT EARTH MOVERS (2004) 245 ITR 428 (SC). METAL BOX COMPANY OF INDIA LTD. VS. THEIR WORKM EN (1969) 73 ITR 53 (SC). CALCUTTA CO. LTD. V. CIT (1959) 37 ITR 1 (SC). CIT V INSILCO LTD. 179 TAXMAN 5 (DELHI) 17. THAT GOING FORWARD, THE ASSESSING OFFICER HIMSELF IN ASSESSMENT YEAR 2009 - 10, WHICH IS ALSO INCIDENTALLY POSTED FOR HEARING ALONG WITH THIS APPEAL HAS ACCEPTED THE FACT THAT THE PROJECT IS RUNNING INTO LOSS AND HAS ALLOWED PART OF THE LOSS IN THE NEXT ASSESSMENT YEAR. THE AO HAS ACCEPTED THE SALE PRICE AT THE REDUCED RATES FOR THE SAME PROJECT IN THE NEXT YEAR, WHICH HE DECLINED TO DO IN THIS YEAR. BY THIS SINGLE ACTION OF THE AO IN THE IMMEDIATELY SUCCEEDING YEAR, THE CLAIM OF THE AO IN THIS YEAR IS NULLIFIED AND CIT (A)'S ORDER NEEDS TO BE UPHELD. ON APPRECIATION OF ALL THESE FACTS AND TAKING INTO COGNIZANCE OF THE FACT THAT THE PROJEC T HAS ACTUALLY BEEN SOLD BY THE ASSESSEE TILL ASSESSMENT YEAR 2012 - 13 (PARA 4.5 PAGE 33 OF CIT(APPEALS)) ORDER, THE CIT(APPEALS) AT PAGE 34 CONCLUDED THAT THE AO'S ACTION REGARDING DISALLOWING THE LOSS ON DWARKA PROJECT IS INCORRECT ESPECIALLY WHEN THE PRO JECT COST I.E. ACTUAL EXPENDITURE INCLUDED ON THE PROJECT AND FINAL SALE PRICE OF THE PROJECT TILL AY 2012 - 13 IS NOT DISPUTED. THE AUDITED ACCOUNTS OF THE ASSESSEE HAS NOT BEEN REJECTED BY THE AO, THEREFORE, ACCORDING TO THE LD. CIT (APPEALS) ONLY DISPUTE THAT REMAINED WAS THE ALLOCATION OF LOSS OF THE DWARKA PROJECT WHICH WORKED OUT TO BE RS. 45.72 CRORES IN FIVE ASSESSMENT YEARS STARTING FROM ASSESSMENT YEAR 2008 - 2009 TO ASSESSMENT YEAR 2012 - 2013. THE LD. ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 23 CIT (APPEALS) OBSERVED THAT THE CORRECT METHOD OF ALLOCATING THE LOSSES TO DIFFERENT YEARS WOULD BE THE PCM (PROJECT COMPLETION METHOD). THEREAFTER, THE LD. CIT (APPEALS) DETERMINED THE LOSS YEAR WISE. IT WOULD BE WORTHWHILE TO HIGHLIGHT THAT AS AGAINST RS. 18.52 CRORES LOSS CLAIMED BY THE ASSESSEE FOR TH E A.Y. 2008 - 09, THE LD. CIT (APPEALS) HELD THAT RS. 32.90 CRORES THAT SHOULD HAVE BEEN CLAIMED AND ALLOWED TO THE YEAR UNDER CONSIDERATION. SIMILARLY, THE LD. CIT (APPEALS) ALLOCATED THE ALLOWABLE LOSS TO DIFFERENT YEARS AS PER THE CHART GIVEN AT PAGE 34 O F HIS ORDER. THE LD. CIT (APPEALS) AT PAGE 33 PARA 4.5 OF HIS ORDER HAS CATEGORICALLY HELD THAT THE ACCOUNTING STANDARD PRESCRIBED BY THE CENTRAL GOVERNMENT/CBDT ARE MANDATORY. THE CENTRAL GOVERNMENT HAS PRESCRIBED ACCOUNTING STANDARD 1 VIDE NOTIFICATION NO. S. O. 69(E) DATED 25.01.1996 U/S 145(2) OF THE INCOME TAX, WHICH IS REQUIRED TO BE FOLLOWED BY ALL THE ASSESSEES FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. IT IS RESPECTFULLY SUBMITTED THAT THIS ACCOUNTING STANDARD PRESCRIBED BY THE CENTRAL GOVERNM ENT IS REPORTED IN 218 - ITR (STATUTES) PAGE 1 (COPY ENCLOSED) IS PARAMETRIC WITH ACCOUNTING STANDARD 7 IN VIEW OF PARA 4(I) UNDER THE HEAD 'PRUDENCE' WHICH FOR THE SAKE OF READY REFERENCE IS REPRODUCED AS UNDER: - PRUDENCE PROVISIONS SHOULD BE MADE FOR AL L KNOWN LIABILITIES AND LOSSES EVEN THOUGH THE AMOUNT CANNOT BE DETERMINED WITH CERTAINTY AND REPRESENTS ONLY A BEST ESTIMATE IN THE LIGHT OF AVAILABLE INFORMATION. ' THUS AO WAS NOT JUSTIFIED IN DISALLOWING ANY PART OF THE ESTIMATED LOSSES AND LD. CIT (APPEALS) HAS FOLLOWED THE CORRECT LAW TO ALLOW THE CLAIM. FURTHER SUBMISSIONS: 1. THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2008 - 09 INITIALLY ALSO CHALLENGED THE COST ESTIMATES. HOWEVER, IN THE ASSESSMENT YEAR 2009 - 10, THE COST ESTIMATES OF THE ASSESSEE WERE ACCEPTED BY THE AO HIMSELF. THEREFORE THE FIRST REASON OF THE AO FOR ASSESSMENT YEAR 2008 - 09 BECOMES GROUNDLESS AND NON - EXISTING AS COST ESTIMATES ARE NOT IN DISPUTE. 2. FOR ASSESSMENT YEAR 2008 - 09, THE ASSESSING OFFICER ESTIMATED THE SALE ABLE VALUE OF UNSOLD STOCK WITHOUT CONSIDERING THE REDUCING TREND IN PRICES OF THE REAL ESTATE. THE AO TOOK THE AVERAGE SALE PRICE ACTUALLY REALIZED BY THE ASSESSEE DURING THE YEAR ITSELF TO ARRIVE AT THE FIGURE OF UNSOLD STOCK TO CONCLUDE THAT DWARKA PROJ ECT WILL NOT GIVE LOSSES. HOWEVER, GOING FORWARD IN ASSESSMENT YEAR 2009 - 10, THE AO HIMSELF ACCEPTED THAT THE CONTENTION OF THE ASSESSEE AND TOOK THE LAST TRADED RATE FOR VALUING UNSOLD STOCK. THEREFORE, THE FINDINGS OF THE AO IN ASSESSMENT YEAR 2008 - ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 24 09 AR E INCONSISTENT WITH HIS OWN ORDER FOR ASSESSMENT ORDER 2009 - 10. TO THAT EXTENT THE OBJECTIONS OF THE AO IN ASSESSMENT YEAR 2008 - 09 TO VALUE THE UNSOLD STOCK ALSO DO NOT SURVIVE. THIS IS EVIDENT FROM THE FACT THAT WHEREAS IN ASSESSMENT YEAR 2008 - 09, THE AO CONJECTURED THAT DWARKA PROJECT WILL NOT RESULT INTO LOSS, THE AO HIMSELF ALLOWED AND WORKED OUT SOME LOSS FOR ASSESSMENT YEAR 2009 - 10. THE AO, HOWEVER, REDUCED THE LOSSES IN A.Y. 2009 - 10, BY ALLEGING THAT SALE PRICE AT A DISCOUNT OF 31.5% AT THE LAST TRAD ED PRICE WAS NOT JUSTIFIED. 3. THE REASON IN AY 2009 - 10 TO RESTRICT THE LOSS FROM RS. 44.00 CRORES TO RS. 14.98 CRORES BY THE ASSESSING OFFICER WAS THAT HE DID NOT APPROVE OF DISCOUNT ALLOWED BY THE ASSESSEE IN THE SALE PRICE. THE ASSESSEE HAD ALLOWED 3 1.5% DISCOUNT ON THE SALE PRICE OF SELLING THE UNSOLD STOCK TO ONE OF ITS SISTER CONCERNS. AS AGAINST THIS, THE ASSESSING OFFICER ALLOWED ONLY 5% DISCOUNT ON ESTIMATED BASIS. THE AO WHILE ALLOWING ONLY 5% DISCOUNT, DID NOT APPRECIATE THAT AS AGAINST 5%, TH E ASSESSEE USUALLY INCURRED A COST OF ABOUT 9% OF SELLING ITS PROPERTY BY WAY OF COMMISSION TO AGENT, ADVERTISEMENT AND OTHER OVERHEAD COST. APART FROM THIS, THE INTEREST COST OF CARRYING THE STOCK @ 13.5% PER ANNUM ALSO WEIGHED VERY HEAVILY ON THE MIND OF THE ASSESSEE. THE ASSESSING OFFICER BASICALLY FOR ASSESSMENT YEAR 2009 - 10, WAS TRYING TO SUGGEST AS TO WHAT EXTENT THE DISCOUNT SHOULD HAVE BEEN GIVEN AND HOW ASSESSEE SHOULD HAVE CONDUCTED ITS BUSINESS. SO LONG AS THE TRANSACTION IS GENUINE, WHICH TRANSA CTION HAS NOT BEEN DOUBTED BY THE AO, IT IS THE PREROGATIVE OF THE ASSESSEE TO DECIDE ITS BUSINESS TRANSACTIONS AND AO, IT IS RESPECTFULLY SUBMITTED, CANNOT SIT IN THE BUSINESSMAN'S CHAIR TO DECIDE HOW THE TRANSACTIONS SHOULD HAVE BEEN CONCLUDED OR STRUCTU RED. SO LONG AS THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THE AO CANNOT QUESTION ON THE QUANTUM OF THE EXPENDITURE. THE REASONABLENESS OF EXPENDITURE, THE TEST OF COMMERCIAL EXPEDIENCY WOULD REQUIRED TO BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN, AS HAS BEEN HELD IN CIT VS. PANIPAT WOOLEN & GENERAL MILLS LIMITED 103 ITR 66 (SC). IT HAS BEEN HELD THAT EVEN THE VOLUNTARY PAYMENTS MADE FOR THE SERVICES RENDERED ARE ALLOWABLE, AS IT IS THE BUSINESSMAN'S PRERO GATIVE TO DECIDE THE QUANTUM OF PAYMENT. FOLLOWING FURTHER JUDGMENTS SUPPORT THIS VIEW: - 1. SASOON J. DAVID & NCO. PVT. LTD. VS. CIT 118 ITR 261 (SC). 2. CIT VS. WALCHAND & CO. 65 ITR 381 (SC). 3. J. K. WOOLEN MILLS VS. CIT 72 ITR 612 (SC). 4. ALUMINIUM C ORPORATION VS. CIT 86 ITR 11 (SC). 5. CIT VS. DELHI SAFE DEPOSIT 133 ITR 756 (SC). 6. SA BUILDERS LTD. VS. CIT 288 ITR 1 (SC). ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 25 4. FURTHER, THE AO HAS INVOKED SECTION 40A(2) FOR THE SALES MADE TO SISTER CONCERN. SECTION 40A(2) DOES NOT INVOLVE SALE/REVENUE, BUT IT IS FOR EXPENSES INCURRED. MOREOVER, THE COST PAID BY THE SISTER CONCERN HAS BEEN ACCEPTED IN THE ASSESSMENT PROCEEDINGS OF THAT CONCERN. 5. FURTHER THE LOSSES RETURNED ON DWARKA PROJECT BY THE ASSESSEE IN A.Y. 2011 - 12 & 2012 - 13, HAV E BEEN ACCEPTED BY THE AO HIMSELF. IT MAY BE POINTED THAT AO IN A.Y. 2010 - 11 ALSO ACCEPTED CIT(APPEALS) ORDER AND ALLOWED RS. 2.8 CRORES OF LOSS ALLOCATED BY CIT(APPEALS) TO THAT ASSESSMENT YEAR IN APPEAL EFFECT. NO APPEAL HAS BEEN FILED BY DEPARTMENT IN A .Y. 2010 - 11 ON THIS ISSUE. SO THE DEPARTMENT'S STAND ON THIS ISSUE IS CONTRADICTORY. IT IS, THEREFORE, PRAYED THAT KEEPING IN MIND THE TOTALITY OF FACTS, IT MAY PLEASE BE HELD THAT TOTAL LOSSES AS CLAIMED BY ASSESSEE ON DWARKA PROJECT SHOULD BE ALLOWED AS PER ITS RETURN. THIS WOULD ALSO MEAN THAT UNCHALLENGED LOSS OF RS. 2.80 CRORES ALLOWED BY AO IN A.Y. 2010 - 11 WILL HAVE TO BE WITHDRAWN. PRAY ACCORDINGLY. 23. AFTER HEARING BOTH THE SIDES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE NOTED THAT THE ASSESSEE HAS BOOKED LOSSES ON CONSTRUCTION PROJECT OF EROS METRO MALL DWARIKA, WHICH WAS COMPLETED WITHIN FIVE YEARS, BUT MAJOR AMOUNTS OF LOSSES HAVE BEEN BOOKE D IN ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 ON THE BASIS OF ESTIMATED COST OF THE PROJECT AND ESTIMATED SALES. THE ASSESSEE HAS FOLLOWED PERCENTAGE OF COMPLETION METHOD CONSISTENTLY AS PER AS - 7. THE ASSESSEE HAS SUBMITTED THE DETAILED WRITTEN SUBMISSIONS FOR JUSTIFYING ESTIMATED LOSS SUFFERED. THE ASSESSEE HAS ALSO SUBMITTED COPY OF THREE AGREEMENTS ONLY MADE WITH THE CUSTOMERS WHICH IS ON PAPER BOOK PAGE NO. 201 TO 224. ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 26 ON PERUSAL OF AGREEMENT DATED 25.02.2009 MADE WITH MRS. SUSHILA SINGH, PLACED AT PAGES 20 1 TO 208 OF THE PAPER BOOK, SHOWS THAT THERE WAS A TOTAL PAYMENT RECEIVED FROM SMT. SUSHILA SINGH OF RS.15 LACS (2 LACS + 3 LACS + 5 LACS + 5 LACS) BY WAY OF CHEQUES. BUT ON PERUSAL OF THE DETAILS OF PENDING PAYMENTS STATUS UPTO 31.03.2011 FOR THE SALES MA DE DURING F.Y. 2007 - 08 AND 2008 - 09 PLACED AT PB PAGE 192 TO 195, WE FIND THAT AT SL. NO. 41, IN COLUM N OF PAYMENT RECEIVED FOR F.Y. 2007 - 08 AND 2008 - 09, A SUM OF RS.20 LACS HAS BEEN SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSEE. AFTER EXAMINING SCHEDULE A OF THE AGREEMENT, SMT. SUSHILA SINGH HAD TO PAY RS.15 LACS AS EARNEST MONEY AND RS.10 LACS AS EARNEST MONEY ON OR BEFORE 25.03.2009, BUT AS PER PENDING PAYMENT STATUS UPTO 31.03.09, RS.20 LACS HAS BEEN SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSEE AS DOWN PAYM ENTS. THIS DISCREPANCY NEEDS PROPER EXAMINATION AND EXPLANATION OF THE ASSESSEE. 24. SIMILARLY, IN CASE OF OPTICAL PALACE, UNIT NO. 20 BOOKED AT FIRST FLOOR VIDE AGREEMENT DATED 14.03.2009, PLACED AT PAGES 217 TO 224 OF THE PAPER BOOK, THE SALE VALUE, AS PER AGREEMENT, WAS AGREED AT RS.21555/ - PER SQ. FT. FOR 584 SQ. FT. AREA AND VALUE THE REOF ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 27 ACCORDINGLY COME TO RS.1,25,88,120/ - . AS PER THE LAST PAGE OF THE AGREEMENT PLACED AT PAGE NO. 224 OF PAPER BOOK, THE SAID CUSTOMER HAS PAID RS.22,65,800/ - THROUGH CHEQUE NO. 433494 DATED 22.12.2007. THE CONTENTS OF THE LAST PARAGRAPH WRITTEN BY HAND READ AS UNDER : PAID A SUM OF RS.22,65,800/ - (RUPEES TWENTY TWO LAC SIXTY FIVE THOUSAND EIGHT HUNDRED ONLY) VIDE CHEQUE NO. 433494 DTD. 22.12.07, DRAWN ON BANK OF BARODA, NEW DELHI, AS EARNEST MONEY, 28% DISCOUNT SHALL BE ALLOWED ON MAKING THE PAYMENT UPT O 21.09.2008 I.E., (TWENTY FIRST JUNE - 2008). ALL FURTHER PAYMENT WILL BE MADE ACCORDANCE WITH ANN ATTACHED TO THIS AGREEMENT. 25. ON PERUSAL OF THIS HAND WRITTEN NOTE, IT IS OBVIOUS THAT THE CUSTOMER HAS BEEN PROMISED TO GIVE DISCOUNT OF 28% IN CA SE IT MAKES PAYMENT UPTO 21.06.2008. THIS DATE HAS BEEN TEMPERED BY THE ASSESSEE MENTIONING IT AS 21.09.2008, AS IS EVIDENT FROM OVERWRITING ON THE DATE AND THE DATE WRITTEN IN WORDS. SUCH TEMPERING OF DATE HAS ALSO BEEN MADE ACCORDINGLY IN SCHEDULE A OF T HE AGREEMENT. ON PERUSAL OF PENDING PAYMENT STATUS SUBMITTED BY THE ASSESSEE, IT APPEARS THAT IN CASE OF OPTICAL PALACE, THE ASSESSEE HAS SHOWN RATE PER SQ. FT. AT RS.15,520/ - AFTER GIVING DISCO U NT OF 28% ON AGREED RATE OF 21,555/ - PER SQ. FT. EVEN IF THE TEMPERED DATE IS TAKEN AS 21.09.2008, THE SAID CUSTOMER WAS ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 28 ELIGIBLE FOR DISCOUNT IN CASE IT HAD MADE TOTAL PAYMENT OF RS.90,63,446/ - UPTO 21.09.2008. HOWEVER, THE SCHEDULE OF PENDING PAYMENT STATUS SHOWS THAT SAID CUSTOMER HAD PAID ONLY RS.74,65,800/ - UPT O THE YEAR 2008 - 09. STILL THE ASSESSEE HAS SHOWN TO HAVE GIVEN DISCOUNT TO THE ABOVE CUSTOMER WHICH IN TERMS OF AGREEMENT DOES NOT APPEAR ACCEPTABLE. AGREEMENTS OF ALL OTHER CUSTOMERS ARE NOT AVAILABLE ON RECORD FOR EXAMINATION BEFORE US. 26. ON EXAMINA TION OF PAPER BOOK, WE ALSO FIND THAT BROKERS M/S. AIANA BUILDERS AND PROMOTERS (P) LTD. ISSUED ITS COMMISSION BILL (PB - 227) TO THE ASSESSEE COMPANY SHOWING THE SALE OF UNIT NO. 37 - GROUND FLOOR, TO MRS. SHABINA DEOL FOR RS.1,23,25,884/ - THROUGH HIM, WHEREA S THE PENDING PAYMENT STATUS DETAILS FILED BY THE ASSESSEE SHOW THE SALE OF THIS UNIT TO MR. YOGENDRA KUMAR FOR RS.53,12,160/ - AND NOT TO MRS. SHABINA DEOL. THE CORRECT POSITION NEEDS EXAMINATION BY THE ASSESSING OFFICER. 27. IN PRESENCE OF ABOVE DISCREPANCIES OBSERVED BY US IN THE TWO AGREEMENTS, COMMISSION BILL AND DETAILS OF PENDING PAYMENT STATUS FILED BY ASSESSEE, WE ARE OF THE OPINION THAT THE ENTIRE ISSUE ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 29 RELATING TO CLAIM OF IMPUGNED LOSSES NEEDS THOROUGH ENQUIRY AND VE RIFICATION AT THE STAGE OF ASSESSING OFFICER. WE THEREFORE THINK IT FIT TO RESTORE THIS ISSUE BACK TO THE ASSESSING OFFICER WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH AFTER PROPERLY EXAMINING, THE TERMS AND CONDITIONS OF THE AGREEMENTS, PAYMENT TERMS, D ISCOUNTS OFFERED WHETHER IN CONSONANCE WITH THE TERMS OF AGREEMENTS OR NOT, ETC. IT HAS ALSO TO BE EXAMINED THAT IN CASE THE PURCHASER S HAVE NOT MADE PAYMENT S IN TERMS OF ORIGINAL AGREEMENT S FOR OBTAINING DISCOUNTS, WHETHER ANY REVISED AGREEMENT S HAVE BE EN MADE FOR PAYMENTS TO JUSTIFY THE DISCOUNTS SO OFFERED. THE AO SHALL ALSO EXAMINED THE AMOUNTS OF ACTUAL PAYMENTS MADE ALONGWITH DATES, FROM THE RECORDS OF SUCH CUSTOMERS WHO ARE STATED BY THE ASSESSEE TO HAVE MADE PAYMENTS LESSER THAN THE AGREED AMOUNTS AS PER AGREEMENT S AND SHALL ASCERTAIN WHETHER THE PAYMENTS SO MADE BY SUCH CUSTOMERS TO THE ASSESSEE COMMENSURATE TO THE PAYMENTS SHOWN TO HAVE BEEN RECEIVED BY ASSESSEE IN ITS BOOKS OF ACCOUNT. AFTER MAKING SUCH A DEEP EXERCISE, THE ASSESSING OFFICER SHA LL DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW BY WAY OF SPEAKING ORDER. NEEDLESS TO SAY, THE ASSESSEE SHALL BE AFFORDED REASONABLE OPPORTUNITY OF BEING HEARD . ITA NOS. 898 & 899 AND 1348 & 1349/DEL./2013 30 ACCORDINGLY, THE RELEVANT GROUNDS RAISED BY THE ASSESSEE AND THE REVENUE IN THEIR RESPECTIVE APPEALS, ARE ALLOWED FOR STATISTICAL PURPOSES. 28. IN THE RESULT, THE APPEAL S OF THE ASSESSEE FOR A.Y. 2008 - 09 AND FOR A.Y. 2009 - 10 ARE ALLOWED FOR STATISTICAL PURPOSES. BOTH THE APPEALS OF REVENUE FOR A.Y. 2008 - 09 AND 2009 - 10 ARE PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.2017 . SD/ - SD/ - ( I.C. SUDHIR ) ( L.P. SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31.07.2017 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI