ITO, Ward 1(1), Aurangabad V. Zambad Udyog Ltd., Aurangabad

ITA 977/PUN/2013

• Counselvise Citation: 97724514 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Keywords: Unexplained expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 977/PN/2013 (ASSESSMENT YEAR 2009-10) ITO, WARD-1(1), AURANGABAD .. APPELLANT VS. ZAMBAD UDYOG LTD., 2 ND FLOOR, TAPARIA TERRACES, ADALAT ROAD, AURANGABAD .. RESPONDENT PAN NO.AAACZ1318F ASSESSEE BY : NONE REVENUE BY : SHRI P.S. NAIK DATE OF HEARING : 16-10-2014 DATE OF PRONOUNCEMENT : 27-10-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 22-02-2013 OF THE CIT(A), AURANGABAD RELATING TO A.Y. 2009-10. 2. DESPITE SERVICE OF NOTICE NONE APPEARED ON BEHAL F OF THE ASSESSEE. THEREFORE, THIS MATTER IS BEING DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY AND FILED ITS RETURN OF INCOME ON 30-09-2009 DECLAR ING TOTAL INCOME OF RS.6,63,590/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED FROM THE AUDITED PROFIT AND LOSS ACCOUNT T HAT THE ASSESSEE SOLD AND PURCHASED THE PROPERTIES TO THE EXTENT OF RS.5,70,79,000/- 2 AND RS.4,08,75,975/- RESPECTIVELY. IN VIEW OF THE SUBSTANTIAL TRANSACTIONS ENTERED INTO BY THE COMPANY FOR THE FI RST TIME, THE AO ASKED THE ASSESSEE TO FURNISH COPIES OF AGREEMENTS, CONVEYANCE DEEDS, DEVELOPMENT AGREEMENTS OR PURCHASE AND SALE DEEDS EXECUTED INCLUDING THE PURCHASE OF LAND AT RS.4,08, 75,975/- WHICH INCLUDES AN AMOUNT OF RS.1,16,17,775/- ON ACCOUNT O F DEVELOPMENT EXPENSES. THE AO ALSO ASKED THE ASSESSEE TO FURNIS H LEDGER EXTRACT ALONG WITH DETAILED ADDRESSES OF ALL THE PERSONS TO WHOM SUCH EXPENSES HAVE BEEN PAID ALONG WITH NATURE, DATE, MO DE OF PAYMENTS JUSTIFYING THE EXPENSES SO CLAIMED. THE AO ALSO AS KED THE ASSESSEE TO FURNISH THE DETAILS OF CREDITORS SHOWN IN THE B OOKS OF ACCOUNTS IN RESPECT OF VARIOUS PERSONS INCLUDING M/S. YOG INDUS TRIES, AURANGABAD AND PATNI BUILDERS, PROPRIETOR SHRI ABDU L PATNI, AURANGABAD. 3.1 IN RESPONSE TO THE SAME, THE ASSESSEE FURNISHED CERTAIN DETAILS. SUBSEQUENTLY, THE ASSESSEE ALSO FURNISHED THE DETAILS IN RESPECT OF CONFIRMATION, PAN AND ADDRESSES OF YOG I NDUSTRIES LTD., AURANGABAD AND M/S. PATNI BUILDERS, AURANGABAD. HO WEVER, IN ABSENCE OF FURNISHING OF ANY DETAILS IN RESPECT OF NATURE OF DEVELOPMENT WORK DONE ALONG WITH COPIES OF BILLS RA ISED FOR THESE PARTIES INCLUDING THE MOU OF LAND PURCHASES AND DET AILS OF PAYMENTS MADE TO A.D. PAWAR AND M. BHARAT SOPAN OF RS.1,77,340/- RS.7 LAKHS RESPECTIVELY, THE AO HELD THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE DEVELOPMENT EXPENSES DEB ITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE GENUINENE SS OF THE TRANSACTIONS. FROM THE VARIOUS DETAILS FURNISHED B Y THE ASSESSEE, HE 3 OBSERVED THAT THE ASSESSEE HAS SOLD THE DEVELOPMENT RIGHTS IMMEDIATELY AFTER PURCHASE OF THE SAME. IN CERTAI N CASES THE DEVELOPMENT RIGHTS WERE HELD BY THE ASSESSEE FOR A PERIOD OF 14 TO 18 DAYS AND HAS EARNED GROSS PROFIT TO THE EXTENT O F RS.2,78,23,000/- OUT OF THE TOTAL SALE OF RS.5,70,00,000/- THE DETAI LS OF WHICH ARE AS UNDER : SR. NO. DATE OF PURCHASE OF DEVELOPMENT RIGHTS. AMOUNT (RS.) DATE OF SALE AMOUNT (RS.) PERIOD OF HOLDING. 1 15.04.2008 12656000/ - 30.04.2008 29954000/ - 14 DAYS 2 12.08.2008 2900000/ - 14.08.2008 3100000/ - 01 DAY 3 12.08.2008 4000000/ - 14.08.2008 7750000/ - 01 DAY 4 24.09.2008 3000000/ - 25.09.2008 5425000/ - 00 DAY 5 24.09.2008 4500000/ - 25.09.2008 7750000/ - 00 DAY 6 17.12.2008 2200000/ - 02.01.2009 3100000/ - 18 DAYS TOTAL 29256000/ - 57079000/ - 3.2 SINCE THE ASSESSEE ACCORDING TO THE AO COULD NO T PROVE THE GENUINENESS OF SUCH DEVELOPMENT EXPENSES, THE AO HE LD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE AMOUNTING TO R S.1,16,17,775/- AS UNEXPLAINED EXPENDITURE U/S.69C OF THE I.T. ACT. 3.3 HE OBSERVED FROM THE LEDGER EXTRACTS OF 31-03-2 009, I.E., ON THE LAST WORKING DAY OF THE ASSESSEE THAT THE ASSES SEE HAS DEBITED AN AMOUNT OF RS.1,00,40,435/- AND RS.14 LAKHS IN THE N AMES OF YOG INDUSTRIES LTD. AND PATNI BUILDERS AND DEVELOPERS R ESPECTIVELY AND MADE TDS OUT OF THE SAID AMOUNT AND THE REMAINING A MOUNT IS SHOWN AS SUNDRY CREDITOR FOR EXPENSES IN THE BOOKS OF ACCOUNT BY PASSING A SINGLE ENTRY WITHOUT ANY SUPPORTING EVIDE NCE NARRATING AS TO WHY AND THE BASIS OF WHICH SUCH EXPENSES HAVE BE EN DEBITED IN A 4 SINGLE ENTRY. HE ALSO DISBELIEVED THE COPY OF THE WORK ORDER ISSUED BY YOG INDUSTRIES LTD. DATED 30-09-2008 ON THE GROU ND THAT THE ASSESSEE WAS NOT HAVING ANY RIGHT OVER LAND ON THE DATE OF WHICH THE ASSESSEE HAS ISSUED THE WORK ORDER. IN VIEW OF THE ABOVE AND IN VIEW OF THE NON-SUBMISSION OF CERTAIN DETAILS TO HI S SATISFACTION, REGARDING THE GENUINENESS OF THE EXPENDITURE INCURR ED, THE AO DISALLOWED AN AMOUNT OF RS.1,14,40,435/- BEING THE PAYMENTS MADE TO THE TWO CONCERNS NAMELY YOG INDUSTRIES LTD. (RS. 1,00,40,435/-) AND PATNI BUILDERS AND DEVELOPERS (RS. 14 LAKHS). 4. BEFORE CIT(A) THE ASSESSEE FILED COPIES OF AFFID AVITS EXECUTED BY LAND OWNERS SAYING THAT THEY HAVE ORALL Y ALLOWED THE ASSESSEE TO CARRY OUT DEVELOPMENT WORK SUCH AS CLEA NING, LEVELING, FENCING ETC., ABOUT 5 MONTHS BEFORE THEY HAD EXECUT ED MOUS ASSIGNING DEVELOPMENT RIGHTS TO ASSESSEE. IT ALSO FILED CONFIRMATIONS FROM THE TWO CONCERNS SAYING THAT THE Y HAD INTURN CARRIED OUT THE DEVELOPMENT WORK ON THE BASIS OF AS SESSEES VERBAL INSTRUCTIONS TO THEM WHICH THE ASSESSEE HAD ISSUED WITH THE CONSENT OF THE LAND OWNERS MUCH BEFORE THE TRANSACTIONS OF TRANSFER OF DEVELOPMENT RIGHTS BETWEEN THE LAND OWNERS ON THE O NE PART AND THE ULTIMATE BUYER COMPANY AND THE ASSESSEE ON THE OTHE R PART. 5. BASED ON THE SUBMISSIONS MADE BY THE ASSESSEE TH E LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. AFTER CONSIDERING THE COMMENTS OF THE ASSESSEE TO SUCH RE MAND REPORT THE LD.CIT(A) DELETED THE ADDITION O RS.1,14,40,435/- B Y OBSERVING AS UNDER : 5 6.4 ON PERUSAL OF THE FACTS OF THE CASE IT HAS BEEN NOTICED THAT THE BUSINESS OF THE APPELLANT IS TO FIRST FIND PROSPECTIV E SELLERS OF LAND, THEN TO DEVELOP THE PLOTS OF LAND WITH THEIR C ONSENT SO AS TO BRING THE PLOTS A MORE PRESENTABLE AND SALABLE CONDITI ON AND THEN FIND PROSPECTIVE BUYERS OF THE PLOTS. THE APPELLANT EA RNS ITS PROFIT BY INCURRING VARIOUS DEVELOPMENT EXPENSES ON THE PLOT S AND THEREBY SELLING THE PLOTS AT QUITE A HIGHER RATE THAN THE PURCHASE PRICE. THIS IS EVIDENT FROM THE TABLE PRESENTED BY THE A.O. IN HIS ASSESSMENT ORDER IN PARA 3.2, WHERE THE TOTAL SALE PRIC E OF THE PLOTS SOLD IS RS.5,70,79,000/- AS AGAINST THE TOTAL PURCHASE PR ICE OF RS.2,92,56,000/-. AS THE A.O. HAS RIGHTLY POINTED OUT THE MAXIMUM DIFFERENCE BETWEEN PURCHASE RATE AND SALE RATE IS 18 D AYS, SO IT CAN BE CLEARLY INFERRED THAT THE APPELLANT COULD NOT HA VE SOLD THE PLOTS AT SUCH A BIG MARGIN IN SUCH A SHORT PERIOD WITHOUT IN CURRING ANY EXPENSES FOR IMPROVEMENT/DEVELOPMENT OF THE PLOTS. 6.5 IN SUPPORT OF THE CLAIM OF INCURRING THE DEVELOP MENT EXPENDITURE, THE APPELLANT HAS PRODUCED COPIES OF AFF IDAVITS EXECUTED BY LAND OWNERS IN SUPPORT OF THE CLAIM THAT THE WORK OF DEVELOPMENT OF THE SUBJECT PLOTS WAS COMMENCED MUCH BE FORE THE MOUS WERE SIGNED BETWEEN THE LAND OWNERS AND THE APPEL LANT COMPANY. THE ID. A.O. HAD NO WHERE DISPUTED THE FACT UAL POSITION OR COMMENTED UPON FRESH EVIDENCE OR AFFIDAVITS PUT FORTH BY THE APPELLANT. FURTHER THE APPELLANT HAS ALSO PRODUCED EV IDENCES FOR DEVELOPMENT EXPENSES IN THE FORM OF WORK ORDERS AND CONFIRMATIONS RECEIVED FROM THE CONTRACTORS. THE ABOV E EVIDENCES ALONGWITH THE FACT THAT THE PAYMENTS HAVE BEEN MADE AFTER DEDUCTING TDS ALSO PROVE THAT THE SAID EXPENSES HAVE AC TUALLY BEEN INCURRED BY THE APPELLANT COMPANY. 6.6 THE A.O. HAS COMMENTED THAT THE APPELLANT HAS FAI LED TO PRODUCE THE CONTRACTORS FOR EXAMINATION, HOWEVER, TH E A.O. IS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE APPELLANT ON LY ON THE ABOVE BASIS AS HE HAS NOT DISPROVED THE AFFIDAVITS OF THE LAND OWNERS, CONFIRMATIONS OF CONTRACTORS FILED BY THE APPELLANT B Y VERIFYING THE LAND OWNERS AND THE CONTRACTORS BY ISSUING SUMMONS TO T HE SAID PERSONS. THE AO HAS NOT BROUGHT ON RECORD ANY CORROBO RATIVE EVIDENCE TO DISPROVE THE CLAIM OF THE APPELLANT ABOU T DEVELOPMENT EXPENDITURE INCURRED. 6.7 IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT, THE AO IS NOT JUSTIFIED IN MAKIN G ADDITION OF RS.1,14,40,435/- DISALLOWING THE DEVELOPMENT EXPENSES U/S.37(1) OF THE I.T. ACT. THE ADDITION OF RS.1,14,40,435/- I S THEREFORE DELETED. GROUND NO.1 STANDS ALLOWED. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,14,40,435/ - ON ACCOUNT OF DEVELOPMENT (LEVELING ETC.,) IGNORING THE FACT THAT THE ASSESSEE HAD FAILED TO FURNISH CORROBORATIVE EVIDENCE TO SUPPORT T HE CLAIM. 6 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,14,40,435/ - RELYING MERELY ON THE AFFIDAVITS MADE BY THE LAND OWNERS FILE D DURING APPELLATE PROCEEDINGS. 3. THE ORDER OF THE CIT(A) BE VACATED AND THAT OF T HE AO BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER O R DELETE ANY GROUNDS OF APPEAL. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY REL IED ON THE ORDER OF THE AO. HE SUBMITTED THAT WHEN THE ASSESS EE FAILED TO FURNISH THE CORROBORATIVE EVIDENCE TO SUPPORT THE C LAIM, THEREFORE, THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADD ITION OF RS.1,14,40,435/- RELYING MERELY ON THE AFFIDAVITS M ADE BY THE LAND OWNERS FILED DURING THE APPEAL PROCEEDINGS. HE ACC ORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ORDER OF THE AO BE RESTORED. 8. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND DURING THE COURSE OF ASSESSMENT PR OCEEDINGS THE ASSESSEE HAD FILED THE CONFIRMATION LETTER FROM THE SAID TWO PARTIES. FURTHER, THE ASSESSEE HAS DEDUCTED TDS FROM THE PAY MENTS MADE TO THEM. ALTHOUGH THE ASSESSEE HAD FILED THE AFFIDAVI TS OF THE SAID PERSONS DURING THE REMAND PROCEEDINGS THE AO HAS NE ITHER PROVED THE AFFIDAVITS TO BE INCORRECT OR UNTRUE, NOR SUMMO NED THE ABOVE TWO PARTIES BY ISSUING SUMMONS U/S.131. THE AFFIDA VITS EXECUTED BY THE LAND OWNERS IN SUPPORT OF THE CLAIM THAT THE DEVELOPMENT OF THE SUBJECT PLOTS WAS COMMENCED MUCH BEFORE THE MOU S WERE SIGNED BETWEEN THE LAND OWNERS AND THE ASSESSEE COM PANY HAS NOT BEEN PROVED TO BE FALSE OR UNTRUE DURING THE REMAND PROCEEDINGS. 7 WE ARE OF THE OPINION THAT WITHOUT INCURRING ANY DE VELOPMENT EXPENSES IT IS VERY UNLIKELY THAT THE ASSESSEE WILL SELL THE LAND AT RS.5,70,79,000/- AS AGAINST PURCHASE PRICE OF RS.2, 92,56,000/-. SINCE THE ASSESSEE IN THE INSTANT CASE HAS PRODUCED THE WORK ORDER, FILED THE AFFIDAVITS OF THE LAND OWNERS TO SUPPORT THE CLAIM OF DEVELOPMENT WORK CARRIED OUT ON THE SAID PLOTS AND SINCE THE ASSESSEE HAS ALSO MADE TDS AGAINST THE LAND DEVELOP MENT EXPENSES, THEREFORE, WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE CIT(A). IN VIEW OF THE ABOVE AND IN VIEW OF THE DE TAILED REASONING GIVEN BY THE LD.CIT(A) WHICH IN OUR OPINION IS A RE ASONED ONE, WE FIND NO INFIRMITY IN THE SAME. WE ACCORDINGLY UPHO LD THE SAME. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY D ISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27-10-2014. SD/- SD/- (SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE DATED: 27 TH OCTOBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), AURANGABAD 4. THE CIT, AURANGABAD 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE