GOMES NAGAR DEVELOPERS P. LTD, MUMBAI V. ACIT 8(1), MUMBAI

ITA 9/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9078 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 19-12-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 03-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 09/MUM/2011 ASSESSMENT YEAR : 2004-05 GOMES NAGAR DEVELOPERS PVT. LTD. ORCHID PRIDE, GROUND FLOOR SUIT NO.2 CONVENT AVENUE, S.V. ROAD, SANTACRUZ-(W) MUMBAI-400 054. PAN NO.AACCG 3156 C VS. ASSTT. COMMISSIONER OF INCOME TAX -8(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJESH SHAH RESPONDENT BY : SHRI MOHIT JAIN DATE OF HEARING : 19.12.2012 DATE OF PRONOUNCEMENT : 21.12.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25.10.10 OF CIT(A) FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON TWO DIFFERENT GROUND S. 2. THE FIRST DISPUTE IS REGARDING ADDITION OF RS.2,56, 814/- ON ACCOUNT OF WORK-IN-PROGRESS OF GORAI PROJECT. THE AO NO TED THAT THE SAID AMOUNT HAD NOT BEEN DECLARED IN P&L ACCOUNT BUT HA D BEEN TAKEN ITA NO. 09/M/11 A.Y. 04-05 2 TO BALANCE SHEET AS WORK-IN-PROGRESS. THE ASSESSEE DID NOT FILE ANY DETAILS OR CONFIRMATIONS FROM THE PARTIES ON WHOSE ACCOUNT EXPENDITURE HAD BEEN INCURRED. THE AO THEREFORE, TRE ATED THE SUM OF RS.2,56,814/- AS UNEXPLAINED INVESTMENT AND ADDED TO T HE TOTAL INCOME. IN APPEAL CIT(A) AGREED WITH THE AO THAT AMO UNT WHICH WAS TAKEN TO BALANCE SHEET WAS UNDER A SHROUD OF MYSTERY A ND, THEREFORE, COULD NOT BE TAKEN AS EXPLAINED INVESTMENT AND ACCORDING LY CONFIRMED THE ADDITION AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2.1 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD AND, THEREFORE , EXPENDITURE INCURRED IN RESPECT OF PROJECT HAD BEEN SHOWN AS WORK-IN- PROJECT. IT WAS ALSO SUBMITTED THAT THE AMOUNT WAS ACCOUNTED AND DULY SHOWN IN THE BALANCE SHEET AND, THEREFORE THE SAME COULD NOT BE ADDED AS UNEXPLAINED INVESTMENT. THE LD. DR PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 2.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTE R CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS.2,5 6,112/- AS UNEXPLAINED INVESTMENT . THE ASSESSEE IS A BUILDER WHO H AD SHOWN EXPENDITURE INCURRED AS WORK-IN-PROGRESS AS THE ASSESSEE WA S FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING AND P ROJECT WAS NOT ITA NO. 09/M/11 A.Y. 04-05 3 COMPLETE. THE AMOUNT HAD BEEN DULY ACCOUNTED AND SHOWN IN THE BALANCE SHEET AND, THEREFORE WE AGREE WITH THE SUBMISSI ON OF THE ASSESSEE THAT THE AMOUNT COULD NOT BE ADDED AS UNEXPLAINE D INVESTMENT. THE EXPENDITURE SHOWN WAS BOGUS COULD BE RED UCED FROM WORK-IN-PROGRESS WHICH COULD BE TAKEN AT NIL BUT THE SAM E COULD NOT BE ADDED AS UNEXPLAINED INVESTMENT. THE ADDITION MADE IS THEREFORE DELETED. 3. THE SECOND DISPUTE IS REGARDING ADDITION OF RS.10.00 LACS ON ACCOUNT OF PAYMENT TO GOODWILL CO-OP HSG. SOCIETY (GOOD WILL CHS). THE FACTS IN BRIEF ARE THAT THE AO DURING ASSESSMENT PRO CEEDINGS NOTED THAT THE ASSESSEE HAD PAID A SUM OF RS.10.00 LACS TO GOODWILL CHS IN TERMS OF CLAUSE-2 OF CONSENT TERMS SIGNED BETWEEN TH E TWO PARTIES. AS PER CONSENT TERMS, THE ASSESSEE WAS REQUIRED TO PROVIDE VARIOUS FACILITIES AND SERVICES TO THAT SOCIETY AND IT HAS A LSO TO PAY RS.10.00 LACS FOR FORMATION OF SOCIETY AND OTHER EXPENSES SPENT BY THE SOCIETY. THE AO OBSERVED THAT THE EXPENDITURE HAD NOT BEEN INCURRED FOR CONSTRUCTION OF BUILDING AND IT WAS ALSO NOT ACCOUNTE D. THE AO, THEREFORE, TREATED THE AMOUNT AS UNEXPLAINED EXPENDI TURE AND ADDED THE SAME TO THE TOTAL INCOME. IN APPEAL THE ASSESSEE SUBM ITTED THAT THE EXPENDITURE WAS DULY ACCOUNTED AND, THEREFORE COULD NOT BE ADDED AS UNEXPLAINED EXPENDITURE. HOWEVER, CIT(A) NOTED THA T THE AMOUNT HAD BEEN PAID BY THE ASSESSEE BECAUSE OF DISPUTE WITH THE SOCIETY AND ITA NO. 09/M/11 A.Y. 04-05 4 AS PER MUTUAL AGREEMENT. THE PAYMENT WAS NOT FOR BUSIN ESS OF THE ASSESSEE WHICH WAS CONSTRUCTION AND DEVELOPMENT. THE PAYMEN T WAS NOT ON BUSINESS CONSIDERATION. CIT(A) THEREFORE CONFIRME D THE ADDITION AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE T RIBUNAL. 3.1 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT EARLIER THE ASSESSEE HAD CONSTRUCTED THE BUILDING WHICH WAS MANAGED BY G OODWILL CHS FORMED BY THE OCCUPANTS. THERE WAS A DISPUTE WITH TH E SOCIETY WHICH WENT TO THE COURT AND FINALLY THE CONSENT TERMS W ERE SIGNED BETWEEN TWO PARTIES UNDER SEAL OF THE COURT AS PER WHI CH ASSESSEE WAS TO PAY RS.10.00 LACS TO GOODWILL CHS. IT WAS POINTED OUT THAT THE OCCUPANTS OF THE SOCIETY WERE BLOCKING CONSTRUCTION WORK BEI NG DONE BY THE ASSESSEE IN THE ADJACENT PLOT. THE ASSESSEE HAD THER EFORE, SETTLED THE MATTER WHICH WAS FOR SMOOTH CONDUCT OF BUSINE SS. THUS EXPENDITURE INCURRED WAS FOR BUSINESS AND HAS TO BE ALLO WED AS REVENUE EXPENDITURE. THE LD. DR PLACED RELIANCE ON TH E ORDER OF AUTHORITIES BELOW. 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTE R CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF EX PENDITURE OF RS.10.00 LACS INCURRED BY THE ASSESSEE ON PAYMENT TO GOODWI LL CHS. THE ASSESSEE HAD CONSTRUCTED THE SAID BUILDING BUT HAD DISP UTES WITH THE OCCUPANTS WHO HAD FORMED A SOCIETY. IT HAS BEEN CLAIM ED THAT THE ITA NO. 09/M/11 A.Y. 04-05 5 OCCUPANTS OBSTRUCTED THE WORK OF BUILDING CONSTRUCTION BE ING DONE BY THE ASSESSEE IN THE ADJACENT PLOT AND, THEREFORE, A LEGA L DISPUTE WAS RAISED WHICH HAD TO BE SETTLED THROUGH COURT BY WAY OF CONSENT TERMS. THE CLAIM THAT OCCUPANTS WERE OBSTRUCTING THE WORK DONE B Y THE ASSESSEE IS SUPPORTED BY CLAUSE-7 OF THE CONSENT TERMS AS PER WHICH BOTH PARTIES HAD AGREED TO HAVE COMMON ACCESS OF 21 FEET WIDE. IN ANY CASE, THE PAYMENT HAD BEEN MADE TO SETTLE THE DISPU TE IN RESPECT OF BUILDING CONSTRUCTED BY THE ASSESSEE EARLIER AS PART OF THE BUSINESS. THE BUSINESS OF THE ASSESSEE IS STILL IN EXISTENCE WHICH HAD NO T BEEN DISPUTED AND, THEREFORE, ANY PAYMENT MADE TO SETTLE T HE DISPUTE IN CONNECTION WITH CONSTRUCTED BUILDING IS REQUIRED TO BE AL LOWED AS REVENUE EXPENDITURE. MOREOVER, IN THIS CASE THE AMOUNT WAS FOR SMOOTH CONDUCT OF OTHER CONSTRUCTION WORK. THEREFORE, WE SEE NO JUSTIFICATION FOR DISALLOWING THE CLAIM. ACCORDINGLY THE ORDER OF CIT(A) IS SET ASIDE AND THE CLAIM OF THE ASSESSEE IS ALLOWED. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.12.2012. SD/- SD/- ( VIVEK VARMA ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 21.12. 2012. JV. ITA NO. 09/M/11 A.Y. 04-05 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.