M/s. Lumbini Constructions Ltd, Secunderabad V. DCIT, Circle-16(1), Hyderabad

ITA 917/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53626 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 13-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: K C DEVADAS
• Section: 69; 6; 263; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.917/H/2011 ASSESSMENT YEAR 2006-07 M/S LUMBINI CONSTRUCTIONS LTD., SECUNDERABAD (PAN AAACL 6610 J) VS THE DCIT, CIRCLE 16(1), HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI K.C. DEVADAS RESPONDENT BY : SHRI V. SRINIVAS DATE OF HEARING : 22.8.2011 DATE OF PRONOUNCEMENT : ORDER PER CHANDRA POOJARI, A.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRE CTED AGAINST THE ORDER PASSED U/S 263 OF THE INCOME TAX ACT, 1961 BY THE CIT, HYDERABAD DATED 25.3.2011 AND PERT AINS TO THE ASSESSMENT YEAR 2006-07. 2. THE FIRST GROUND RAISED BY THE ASSESSEE IN HIS APPEAL IS WITH REGARD TO ASSUMING THE JURISDICTION BY THE CIT U/S 263 OF THE IT ACT. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE DO NOT FIND ANY FORCE IN THE ARGUMENTS OF THE ASSESSEES COUNSEL REGARDING ASSUMING THE JURISDICTION U/S 263 OF THE ACT BY THE CIT. AS SEEN FROM THE FACTS OF THE CASE, THERE WAS AN INCOR RECT ASSUMPTION OF FACTS AND NON APPLICATION OF MIND WIT H ITA NO.917/H/2011 M/S LUMBINI CONSTRUCTIONS, SECUNDERABAD 2 REFERENCE TO CERTAIN ISSUES TAKEN UP BY THE CIT WHI CH IS DISCUSSED ELSEWHERE IN THE ORDER. HENCE, WE ARE IN CLINED TO DISMISS THIS GROUND. 4. THE NEXT GROUND IS WITH REGARD TO DIRECTION OF T HE CIT TO TREAT 70% COST OF THE LAND TO BRING TO TAX (I.E. 1,86,96,165 I.E. 70% OF 2.78 CRORES) (194,60,000 7,65,835/-) AS UNDISCLOSED INCOME OF THE ASSESSEE. 5. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT DATED 18.11.20 05 ALONG WITH SHRI P. SUKENDER REDDY AND SHRI G. HARI PRASAD REDDY FOR DEVELOPMENT OF THE PROPERTY OF 3455 SQ. Y ARDS (INCLUDING 1190 SQ. YARDS OF LAND OWNED BY THE ASSE SSEE) SITUATED AT JUBILEE HILLS, HYDERABAD. THE DETAILS ARE AS UNDER: SL. NO. DOCUMENT DATE NAME OF THE LAND OWNER LOCATION OF THE PROPERTY EXTENT OF LAND SQ. YARDS VALUE OF THE PROPERTY (IN RS.) 1 17812/05 DT.18.1.05 P SUKENDAR REDDY G. HARIPRASADA REDDY 1-62/K/1, PLOT NO.1 KAVURI HILLS, GUTTALA, BEGUMPET 1020 1,25,00, 000 2 4457/05 DT. 16.11.200 5 DO 8-2- 293/82/A/718/1, ROAD NO.37 JUBILI HILLS, HYDERABAD 845 1,03,00, 000 3 4458/05 DT. 16.11.05 DO DO 400 50,00,00 0 4 4459/05 DT. 16.11.200 5 LUMBINI CONSTRUCTIONS LTD. 8-2-293/82/A/719, ROAD NO.37, JUBILEE HILLS, HYDERABAD 1190 1,45,00, 000 6. AS PER THE DEVELOPMENT AGREEMENT THE ASSESSEE I S ENTITLED FOR 70% OF TOTAL LAND AND TOTAL BUILT UP C OVERED AREAS, FLOOR SPACES, PARKING SPACES, BASEMENTS OF T HE ENTIRE BUILDING. FURTHER, THE LAND OWNERS, SHRI P. SUKEND ER ITA NO.917/H/2011 M/S LUMBINI CONSTRUCTIONS, SECUNDERABAD 3 REDDY AND SHRI G. HARIPRASADA REDDY IS THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY AND ANOTHER LAND O WNER, SHRI G. HARIPRASADA REDDY IS THE WHOLE TIME DIRECTO R OF THE ASSESSEE COMPANY. THE POSSESSION OF LAND WAS ALSO GIVEN TO DEVELOPER. THUS THE PROPERTY WAS CONVERTED INTO STOCK IN TRADE FROM THE DATE OF AGREEMENT. IT IS SEEN THAT RS.1,94,60,000/- I.E. THE 70% OF LAND VALUE OF RS.2,78,00,000/- WAS NOT SHOWN IN THE BOOKS OF ACCO UNTS. THE ASSESSEE HAD SHOWN WORK IN PROGRESS OF ONLY RS.7,65,835/- INSTEAD OF RS.1,94,60,000/-. ACCORD ING TO CIT, THE BALANCE AMOUNT OF RS.1,86,94,165/- TO BE BROUGHT TO TAX. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE DIRECTION OF TH E CIT IS TOTALLY MISCONCEIVED. EVEN IF THE ABOVE PROPERTY HAD BECOME THE ASSET OF THE ASSESSEES COMPANY; IT CANN OT BE BROUGHT TO TAX U/S 69 OF THE ACT. IF THE ABOVE LAN D IS OWNED BY THE ASSESSEE AS AN ASSET, THERE IS A CORRESPONDI NG LIABILITY ATTACHED TO THE ASSESSEE I.E. EQUIVALENT AMOUNT OF VALUE OF THE ASSET IS DUE TO THE VENDOR I.E., THE L ANDLORD. BEING SO, THERE IS A CONTRA-LIABILITY ATTACHED TO T HE ASSET. IN OTHER WORDS, EVEN IF THE ASSESSEE IS REQUIRED TO PA SS AN ENTRY IN THE BOOKS OF ACCOUNTS, IT IS IN THE FORM O F JOURNAL ENTRY DEBITING THE LAND PURCHASE A/C AND CREDITING THE LANDLORDS A/C FOR AN EQUAL AMOUNT. IN THAT CIRCUMS TANCES, THERE IS NO EFFECT OF THIS TRANSACTION IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND IT CANNOT BE SAID THAT THE ASSESSEE MADE ANY UNACCOUNTED TRANSACTIONS. IN THE SE CIRCUMSTANCES, WE ARE OF THE OPINION THAT PROVISION S OF SECTION 69 CANNOT BE INVOKED. ACCORDINGLY, THE DIR ECTION OF ITA NO.917/H/2011 M/S LUMBINI CONSTRUCTIONS, SECUNDERABAD 4 THE CIT CANNOT BE UPHELD. THIS GROUND OF THE ASSES SEE STANDS ALLOWED. 8. THE NEXT GROUND IS WITH REGARD TO DIRECTION OF CIT TO THE ASSESSING OFFICER TO MAKE AN ADDITION OF RS.7,4 1,430/- IN RESPECT OF UNDERSTATEMENT OF COST OF LAND MEASUR ING AT 1190 SQ. YARDS. 9. BRIEF FACTS OF THE ISSUE ARE THAT THERE IS A N ON DISCLOSURE OF THE COST OF LAND ADMEASURING 1190 SQ. YARDS ACQUIRED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AR HAD SUBMITTED AND CLARIFIED THA T THE SAID AMOUNT HAS BEEN SHOWN IN THE BALANCE SHEET UND ER SCHEDULE VIC, THAT IT HAS BEEN NARRATED AS LAND AT JUBILEE HILLS PROJECT AND THE VALUE SHOWN AT RS.1,78,58,250 /-. ON EXAMINATION OF THE RELEVANT RECORDS, THE SUBMISSION OF THE AR ON THIS POINT IS FOUND TO BE CORRECT AND HENCE A CCEPTED BY THE ASSESSING OFFICER. BUT THE VALUE OF THE LAN D HAS APPARENTLY BEEN UNDERSTATED. IT IS THE CASE OF THE ASSESSEE THAT THE COST OF THE LAND IS RS.1.45 CRORES THAN AN AMOUNT OF RS.30 LAKHS WAS INCURRED BY WAY OF REIMBURSEMENT TO EARLIER SALE CUM GPA HOLDER OF THE PROPERTY. GOING THROUGH THE COPY OF THE SAID SALE DEED RELATING TO 1190 SQ. YARDS IT IS NOTICE ON THE DOCUMENTS WHICH READS AS FOLLOWS: THIS DOCUMENT HAS BEEN EXECUTED ON 16.11.2005 ON S TAMP PAPER WORTH RS.10,15,000 (DEFICIT STAMP DUTY OF RS.11,180+900 ALONG WITH REGISTRATION FEE OF RS.71,630+870 AND USER CHARGES OF RS.100 BEEN REMITTED/PAID IN THE SBH, HYDERABAD VIDE RECEIPT NO . ITA NO.917/H/2011 M/S LUMBINI CONSTRUCTIONS, SECUNDERABAD 5 CHALLAN NO.835532 AND 835594 DATED 16.11.2005 AND 19.11.2005. 10. THUS, IT IS EVIDENT THAT THE COST OF THE LAND MEASURING 1190 SQ. YARDS WOULD BE RS.1.45 CRORES + 30,00,000 (AS CLAIMED BY THE ASSESSEE ) + RS.10,15,000 + 11,180 + 900 + 71,630 + 870 + 100 = 1,85,99,680/- AS AGAINST RS.1,78,58,250/- SHOWN BY THE ASSESSEE IN ITS BALAN CE SHEET. THUS, THERE IS EVIDENT UNDER STATEMENT OF T HE VALUE OF THE ASSET. THIS UNDER STATEMENT IS AT RS.7,41,4 30/-. THE UNDER STATEMENT IS ALSO CORROBORATED BY SCHEDULE -7 TO THE ASSESSEES BALANCE SHEET AS ON 31.3.2008. IN THE B REAK UP UNDER CURRENT ASSETS I.E. IMMEDIATELY BELOW THE LAN D VALUE RS.1,789,58,250/- AN AMOUNT OF RS.6 LAKHS HAS BEEN STATED AGAINST SURVEY NO.718/719. THE SURVEY NO.719 PERTA INS TO THE ASSESSEE COMPANYS LAND ADMEASURING 1190 SQ. YA RDS. UNDER THE COLUMN MEANT FOR THE PRECEDING YEARS, THE CORRESPONDING FIGURE FOR THIS LAND SHOWN AT NIL. T HIS AMOUNT OF RS.6 LAKHS DOES NOT AND CANNOT REPRESENT WORK IN PROGRESS OF ANY KIND AS THERE IS A SEPARATE SCHE DULE FOR WORK IN PROGRESS. IT IS EVIDENT THAT THIS PARTICUL AR PROPERTY WAS UNDER STATED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND LATER ON THE UNDERSTATEMENT TO TH E EXTENT OF RS.6 LAKHS HAS BEEN SOUGHT TO MAKE GOOD I.E. IN THE ASSESSMENT YEAR 2008-09. HENCE, CIT DIRECTED THE ASSESSING OFFICER TO BRING TO TAX THE UNDER STATED VALUE OF THE ASSET I.E. RS.7,41,430/-. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, THERE I S AN ERROR COMMITTED BY THE ASSESSING OFFICER ON THIS ISSUE AS SEEN FROM THE FACTS OF THE CASE AS NARRATED ABOVE. THE A R TRIED ITA NO.917/H/2011 M/S LUMBINI CONSTRUCTIONS, SECUNDERABAD 6 BEFORE US TO EXPLAIN THAT THERE IS NO UNDERSTATEMEN T AS ALLEGED BY THE CIT. HOWEVER, WE ARE NOT CONVINCED ABOUT THE CORRECTNESS OF THE DISCLOSURE MADE BY THE ASSES SEE IN ITS BOOKS OF ACCOUNT WITH REFERENCE TO THE IMPUGNED ISSUE. ACCORDINGLY, IN OUR OPINION, THE CIT IS JUSTIFIED I N GIVING THE DIRECTION TO BRING AN AMOUNT OF RS.7,41,430/- TO TA X. THE FINDINGS OF THE CIT(A) ON THIS ISSUED IS CONFIRMED. THIS GROUND OF THE ASSESSEE STANDS DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 23. 9.2011 SD/ - (G.C. GUPTA) SD/ - (CHANDRA POOJARI) VICE PRESIDENT ACCOUNTANT M EMBER DATED THE 23 RD SEPT., 2011 COPY FORWARDED TO: 1. M/S LUMBINI CONSTRUCTIONS LTD., 6-3-666/A, LUMBINI TOWERS, PUNJAGUTTA, SECUNDERABAD. 2. DCIT, CIRCLE 16(1), HYDERABAD 3. THE CIT, HYDERABAD 4. THE DR, ITAT, HYDERABAD NP/