ITO,Ward-2(2), Hyderabad V. M/s Gorlas Constructions Private Limited, Hyderabad

ITA 968/HYD/2013

• Counselvise Citation: 96822514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 11-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: S RAMA RAO
• Keywords: Opportunity of being heard; Non-deduction of tax
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 968/HYD/2013 ASSESSMENT YEAR : 2007-08 INCOME-TAX OFFICER, WARD 2(2), HYDERABAD M/S GORLAS CONSTRUCTIONS PVT. LTD., HYDERABAD PAN AACCG8480G (APPELLANT) (RESPONDENT) REVENUE BY SHRI Y.V.S.T. SAI ASSESSEE BY SHRI S. RAMA RAO DATE OF HEARING 24-09-2014 DATE OF PRONOUNCEMENT 10-10-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORD ER DATED 11/03/2013 OF CIT(A), VIJAYAWADA FOR AY 2007-08. 2. THE DEPARTMENT HAS RAISED THE FOLLOWING EFFECTIV E GROUNDS: 2. THE CIT(A) ERRED ON FACTS IN TREATING THE AMOUNT BOOKED BY THE ASSESSEE IN ITS BOOKS UNDER THE HEAD LAND DEVE LOPMENT EXPENSES AS MERE REIMBURSEMENT OF EXPENSES. 3. THE CIT(A) ERRED IN LAW IN NOT GIVING OPPORTUNIT Y OF HEARING UNDER RULE 46A TO THE AO 4. THE CIT(A) ERRED ON FATS AND IN LAW IN NOT TREAT ING THE DIRECTORS OF THE ASSESSEE AS CONTRACTORS OF THE ASS ESSEE FOR WORK OF LAND DEVELOPMENT EXECUTED BY THEM. 2 ITA NO.968/HYD/2013 M/S GORLAS CONSTRUCTIONS PVT. LTD. 3. THE ONLY ISSUE ARISING OUT OF THE GROUNDS RAISED BY REVENUE IS RESPECT OF DISALLOWANCE OF RS. 22,31,408 MADE BY A O U/S 40(A)(IA), BUT, DELETED BY CIT(A). 4. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE, ASSESSEE A COMPANY IS ENGAGED IN REAL ESTATE BUSINESS. FOR THE AY UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 30/ 12/2008 DECLARING INCOME OF RS. 2,38,217. DURING THE SCRUTINY ASSESSM ENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS CREITED RS. 19,19,010 AND RS. 3,12,398 TO SHRI G. SAIBABU AND SMT. G. SAILAJA BY CLAIMING IT TO BE EXPENDITURE INCURRED TOWARDS LAND DEVELOPMENT EXPEN SES. AS NO TAX WAS DEDUCTED ON THE PAYMENT SO MADE, AO WAS OF THE VIEW THAT THE CONDITIONS OF SECTION 194C WAS NOT COMPLIED. ACCORD INGLY, HE PROPOSED TO DISALLOW THE EXPENDITURE CLAIMED. OBJEC TING TO THE PROPOSED DISALLOWANCE, ASSESSEE SUBMITTED THAT IT H AD PURCHASED LAND FROM SRI G. SAIBABU AND SMT. SAILAJA ON 28/12/ 2006 . APART FROM SALE CONSIDERATION AS PER THE REGISTERED SALE DEED ASSESSEE WAS ALSO REQUIRED TO PAY AN AMOUNT OF RS. 19,19,010 AND RS. 3,12,398 TO SHRI G. SAIBABU AND SMT. G. SAILAJA RESPECTIVELY TOWARDS EXPENDITURE INCURRED BY THEM ON THE DEVELOPMENT OF LAND AS ON T HE DATE OF TRANSFER. IT WAS EXPLAINED BY ASSESSEE THAT THE AFO RESAID EXPENDITURE THOUGH IS PART OF THE COST OF LAND, IT HAS NOT BEEN INCLUDED IN THE REGISTERED SALE DEED TO MINIMIZE THE STAMP DUTY. IT WAS SUBMITTED THAT IN VIEW OF THIS ASSESSEE HAS SEPARATELY BOOKED THE TRANSACTION AS LAND DEVELOPMENT EXPENSES IN ITS BOOKS OF ACCOUNT. IT WAS SUBMITTED THAT PAYMENT MADE IS NOTHING BUT REIMBURSEMENT OF E XPENSES INCURRED BY SHRI G. SAIBABU AND SMT. G. SAILAJA TOW ARDS DEVELOPMENT OF LAND. IT WAS FURTHER SUBMITTED THAT SHRI G. SAIB ABU AND SMT. G. SAILAJA, DIRECTORS OF THE COMPANY AND ARE NOT CONTR ACTORS, BUT, VENDORS OF THE LAND. THUS, IT WAS SUBMITTED THAT RE IMBURSEMENT OF EXPENSES CANNOT BE CATEGORIZED AS CONTRACTUAL PAYME NT TO BRING IT WITHIN THE AMBIT OF SECTION 194C. THE AO, HOWEVER, REJECTED THE SUBMISSIONS OF ASSESSEE AND HELD THAT AS THE ASSESS EE HAS NOT 3 ITA NO.968/HYD/2013 M/S GORLAS CONSTRUCTIONS PVT. LTD. DEDUCTED TAX ON THE PAYMENTS MADE TOWARDS LAND DEVE LOPMENT EXPENDITURE, THE EXPENDITURE HAS TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT. HE, ACCORDINGLY, MADE ADDITION OF RS. 22,32,40 8. BEING AGGRIEVED OF THE ADDITION MADE BY AO, ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). CIT(A) ALSO CONFIRMED THE ADDITI ON. AGAINST THE ORDER OF CIT(A), ASSESSEE CARRIED AN APPEAL BEFORE THE ITAT. IN COURSE OF HEARING OF THE APPEAL REGISTERED AS ITA N O. 940/HYD/2011, ASSESSEE REQUESTED FOR GRANTING ONE MORE OPPORTUNIT Y TO PLACE NECESSARY EVIDENCE BEFORE THE CIT(A) TO PROVE ITS C LAIM OF EXPENDITURE. CONSIDERING THE SUBMISSIONS OF ASSESSE E, THE TRIBUNAL VIDE ORDER DATED 28/03/2011 REMITTED THE MATTER BAC K TO THE FILE OF CIT(A) FOR CONSIDERING AFRESH WITH THE FOLLOWING DI RECTIONS: 4. AT THE TIME OF HEARING, THE LEARNED AR FOR THE A SSESSEE HAS PLEADED FOR AN OPPORTUNITY TO PLACE NECESSARY E VIDENCE BEFORE THE CIT(A) TO PROVE THE ASSESSEES CLAIM ON THE ABOVE EXPENDITURE. WE ACCEDE TO THE REQUEST OF THE ASSESS EES COUNSEL. ACCORDINGLY, WE SET ASIDE THE ENTIRE ISSUE TO THE FILE OF THE CIT(A) FOR FRESH CONSIDERATION. AT THIS STAGE, WE REFRAIN FROM GOING INTO THE MERIT OF THE ISSUE INVOLVED HEREIN O R APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOM E-TAX ACT, 1961. IN PURSUANCE TO THE DIRECTION OF THE TRIBUNAL, CIT( A) HEARD THE APPEAL AGAIN. IN COURSE OF HEARING OF APPEAL BEFORE CIT(A) , ASSESSEE APART FROM REITERATING THE SUBMISSIONS MADE IN COURSE OF EARLIER PROCEEDING, SUBMITTED A CONFIRMATION FROM SHRI G. SAIBABU AND SMT. G. SAILAJA CERTIFYING THAT THE EXPENDITURE OF RS. 22,32,408 WA S INCURRED BY THEM TOWARDS CONSTRUCTION OF THE COMPOUND WALL AND FENCI NG. ON THE BASIS OF THE SAID CERTIFICATE, THE CIT(A) CONCLUDED THAT THE AMOUNT PAID BY ASSESSEE TO SHRI G. SAIBABU AND SMT. G. SAILAJA DOE S NOT REPRESENT ANY PAYMENT IN PURSUANCE OF A CONTRACT RATHER IT RE PRESENTS THE EXPENDITURE INCURRED BY OWNERS OF LAND FROM WHOM AS SESSEE PURCHASED THE LAND. HE, THEREFORE, CONCLUDED THAT A S IT IS ONLY REIMBURSEMENT OF EXPENDITURE INCURRED, PROVISIONS O F SECTION 194C WILL HAVE NO APPLICATION. THE CIT(A) ALSO NOTED THA T THE AMOUNT OF RS. 4 ITA NO.968/HYD/2013 M/S GORLAS CONSTRUCTIONS PVT. LTD. 22,32,408 WAS PAID DURING THE YEAR AND NOTHING REMA INED UNPAID, HENCE, PROVISIONS OF SECTION 40(A)(IA) WILL HAVE NO APPLICATION. WITH THE AFORESAID OBSERVATION, LD. CIT(A) DELETED THE A DDITION MADE BY AO. 5. LEARNED DR SUBMITTED BEFORE US THAT THOUGH IN TH E EARLIER PROCEEDING BEFORE THE TRIBUNAL, ASSESSEE HAS UNDERT AKEN TO PRODUCE FRESH EVIDENCE IN SUPPORT OF ITS CLAIM OF INCURRING THE EXPENDITURE, BUT, IN FACT, NO EVIDENCE WAS PRODUCED BEFORE THE C IT(A), HENCE, THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION B Y ACCEPTING THE CLAIM THAT THE PAYMENTS WERE TOWARDS REIMBURSEMENT OF EXP ENDITURE INCURRED BY SHRI G. SAIBABU AND SMT. G. SAILAJA. LE ARNED DR SUBMITTED THAT THE LEDGER ACCOUNT OF ASSESSEE, WHIC H WAS SUBMITTED BEFORE THE AO CLEARLY INDICATE THAT THE AMOUNT OF R S. 22,32,408 WAS SHOWN AS PAYABLE AS ON 31/03/2007. THEREFORE, IGNOR ING THIS FACT, CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 6. LEARNED AR ON THE OTHER HAND SUBMITTED THAT ASSE SSEE HAS PRODUCED CONFIRMATION FROM THE DIRECTORS CONFIRMING THE INCURRING OF EXPENDITURE BY THEM. THEREFORE, AS THE CIT(A) HAS D ELETED THE ADDITION AFTER CONSIDERING SUCH EVIDENCE, THE ORDER OF CIT(A) CANNOT BE CALLED INTO QUESTION. FURTHER, LEARNED AR SUBMIT TED THAT SO FAR AS GENUINENESS OF THE EXPENDITURE IS CONCERNED, AO HAS NO DOUBT IN RESPECT OF THE SAME AS HE HAS ONLY DISALLOWED THE E XPENDITURE FOR THE REASON OF NON-DEDUCTION OF TAX AT SOURCE. HOWEVER, LEARNED AR SUBMITTED THAT THE ENTIRE ISSUE RELATING TO INCURRI NG OF EXPENDITURE CAN BE VERIFIED AGAIN BY AO. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OT HER MATERIAL ON RECORD. AS CAN BE SEEN FROM THE DIRECTION OF THE T RIBUNAL REPRODUCED HEREIN BEFORE ASSESSEE IN COURSE OF HEARING BEFORE THE TRIBUNAL HAD UNDERTAKEN TO PRODUCE FRESH EVIDENCE IN SUPPORT OF THE EXPENDITURE 5 ITA NO.968/HYD/2013 M/S GORLAS CONSTRUCTIONS PVT. LTD. CLAIMED. HOWEVER, BEFORE THE CIT(A) APART FROM SUBM ITTING THE CONFIRMATION FROM SHRI G. SAIBABU AND SMT. G. SAILA JA, NO OTHER EVIDENCE TOWARDS INCURRING OF EXPENDITURE WAS FURNI SHED BY ASSESSEE. THE CIT(A) HAS ALSO ACCEPTED ASSESSEES CLAIM ONLY ON THE BASIS OF THE SAID CONFIRMATION WITHOUT MAKING ANY ENQUIRY TO ASCERTAIN THE EXACT FACT OR CALLING UPON AO TO VERIFY THE GENUINE NESS OF ASSSSEES CLAIM. IN THESE CIRCUMSTANCES, CIT(A)S ORDER CANNO T BE UPHELD. IN THE AFORESAID VIEW OF THE MATTER, WE REMIT THE MATTER B ACK TO THE FILE OF AO FOR VERIFYING ASSESSEES CLAIM WITH REGARD TO IN CURRING OF THE EXPENDITURE TOWARDS DEVELOPMENT OF LAND. IF THE ASS ESSEE IS ABLE TO PROVE THAT THE PAYMENTS MADE TO SHRI G. SAIBABU AND SMT. G. SAILAJA WAS TOWARDS REIMBURSEMENT OF EXPENDITURE ACTUALLY INCURRED BY THEM EARLIER TOWARDS LAND DEVELOPMENT, THEN, IT CANNOT B E A PAYMENT COMING WITHIN THE PURVIEW OF SECTION 194C. WITH THE AFORESAID OBSERVATIONS, WE SET ASIDE THE ORDER OF CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO. AO MUST AFFORD REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE MATTER. 8. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 10/10/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 10 TH OCTOBER, 2014 KV 6 ITA NO.968/HYD/2013 M/S GORLAS CONSTRUCTIONS PVT. LTD. COPY TO:- 1) ITO, WARD 2 (2), ROOM NO. 836, C-BLOCK, 8 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD. 2) M/S GORLAS CONSTRUCTIONS PVT. LTD., D.NO. 8-2-5 80 & 574/C, FLAT NO. 202, NAJAF APARTMENT, ROAD NO. 7&8, IMAM KOMEINI ROAD, BANJARA HILLS, HYDERA BAD 3) CIT(A), VIJAYAWADA. 4) CIT-II, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.