The ACIT, Central Circle-1(1), Ahmedabad V. M/s. Navratna S.G. Highway Properties Pvt.Ltd., Ahmedabad

ITSSA 345/AHD/2011

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0591 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER . IT(SS)A. NOS. 344 & 345/AHD/2011 (ASSESSMENT YEARS:2006-07 & 2007-08) A.C.I.T., CENTRAL CIRCLE 1(1), AHMEDABAD AP PELLANT VS. NAVRATNA S. G. HIGHWAY PROPERTIES PVT. LTD., 2 ND FLOOR, KAYCREST, OPP: GUJARAT GAS CO. LTD., NR. PARIMAL CROSSING, AHMEDABAD RESPONDENT & C.O. NOS. 155 & 156/AHD/2011 (ASSESSMENT YEARS:2006-07 & 2007-08) NAVRATNA S. G. HIGHWAY PROPERTIES PVT. LTD., 2 ND FLOOR, KAYCREST, OPP: GUJARAT GAS CO. LTD., NR. PARIMAL CROSSING, AHMEDABAD APP ELLANT VS. A.C.I.T., CENTRAL CIRCLE 1(1), AHMEDABAD RESPONDE NT IT(SS)A. NOS. 344 & 345/AHD/11 & C.O. NOS. 155 & 156/AHD/11 FOR A.YS. 2006-07 & 2007-08 (ACIT VS. M/S. NAVRATNA S. G. HIGHWAY PROPERTIES PVT. LTD.) PAGE 2 PAN: AACCN2111Q / BY REVENUE :SHRI O. P. VAISHANV, CIT.D.R. / BY ASSESSEE : SHRI DEEPAK SONI, A.R. / DATE OF HEARING :23.03.2015 !' / DATE OF PRONOUNCEMENT :27.03.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M: SINCE, BOTH THESE REVENUES APPEALS AND ASSESSEES CROSS OBJECTIONS ARE ARISING OUT FROM THE CONSOLIDATED OR DER OF CIT(A)-I, AHMEDABAD, DATED 25.02.2011 FOR A.Y. 06-0 7 & 07- 08, SO THEY ARE BEING DISPOSED OF BY WAY OF COMMON ORDER FOR SAKE OF CONVENIENCE. 2. IN IT(SS)A NO. 344/AHD/2011 FOR A.Y. 2006-07, RE VENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1) LD.CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTIN G THE A.O.TO PASS A SPEAKING ORDER WHILE GIVING EFFECT TO CIT(A)'S ORDER AFTER VERIFYING THE PART DETAILS FUR NISHED BY THE ASSESSEE DURING ASSESSMENT PROCEEDING AND BY CALLING FOR FURTHER DETAILS FROM THE ASSESSEE. 2) ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.C IT(A) OUGHT TO HAVE DECIDED THE ISSUE ON THE BASIS OF DET AILS FILED BY THE ASSESSEE BEFORE HIM AND OUGHT NOT TO H AVE DIRECTED THE A.O.TO RECONSIDER HIS OWN DECISION. IT(SS)A. NOS. 344 & 345/AHD/11 & C.O. NOS. 155 & 156/AHD/11 FOR A.YS. 2006-07 & 2007-08 (ACIT VS. M/S. NAVRATNA S. G. HIGHWAY PROPERTIES PVT. LTD.) PAGE 3 3) ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.C IT(A) OUGHT TO HAVE UPHELD THE ACTION OF A.O.IN DISALLOWI NG THE EXPENSES FROM WORK-IN-PROGRESS, AS THE ASSESSEE HAS NOT FURNISHED ANY CORROBORATIVE EVIDENCE TO PRO VE GENUINENESS OF THE EXPENSES AS WELL AS BUSINESS NEX US THEREOF. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A)OUGHT TO HAVE UPHELD THE ORDER AN D NOT DIRECTED THE A.O. TO VERIFY THE SUBMISSION OF T HE ASSESSEE IGNORING THAT SUCH DIRECTION AMOUNTED TO SETTING ASIDE OF THE ASSESSMENT ORDER WHICH HE NO LONGER CAN DO AFTER 01/06/2001. 2.1 IN CROSS OBJECTION NO. 155/AHD/2011 FOR A.Y. 20 06-07, ASSESSEE HAS FILED THE APPEAL ON THE FOLLOWING GROU NDS: THE ASSESSEE BEING DISSATISFIED WITH THE ORDER PAS SED BY THE CIT(A) PRESENTS THESE CROSS OBJECTION AGAINS T THE SAME ON THE FOLLOWING AMONGST OTHER GROUNDS. 1.0 THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN PARA 2.1 ARE GROSSLY INCORRECT AND CONTRARY TO THE FACTS . THE ASSESSEE SUBMITS THAT EACH AND EVERY NOTICE ISSUED BY THE ASSESSING OFFICER WAS COMPLIED WITH. THE ASSESSEE S UBMITS THAT EACH AND EVERY DETAILS WAS PLACED ON THE RECOR DS OF THE ASSESSING OFFICER AND/OR WAS PRODUCED BEFORE THE AS SESSING OFFICER. THE OBSERVATION BEING CONTRARY TO THE FACT S AND BAD IN LAW BE QUASHED. 3.0 THE CIT(A) ERRED ON FACTS AND IN LAW IN DIRECTI NG THE AO TO VERIFY DETAILS ETC. THE CIT(A) OUGHT TO HAVE HELD THAT RS. 8,52,32,051/- WAS INCURRED BY THE APPELLANT ON CAPITAL ACCOUNT AND WAS ELIGIBLE FOR ALL DEDUCTIONS UNDER T HE INCOME TAX ACT, 1961. 3.1 THE ASSESSING OFFICER ERRED IN HOLDING THAT EXP ENSES OF RS. 8,52,32,051/- ARE TO BE DISALLOWED. THE ASSESSE E SUBMITS THAT THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN VARIOUS PARAS OF THE ASSESSMENT ORDER INCLUDING IN PARA 3.1 REGARDING PART EXPENDITURE NOT RECORDED IN BOOK S AND IT(SS)A. NOS. 344 & 345/AHD/11 & C.O. NOS. 155 & 156/AHD/11 FOR A.YS. 2006-07 & 2007-08 (ACIT VS. M/S. NAVRATNA S. G. HIGHWAY PROPERTIES PVT. LTD.) PAGE 4 PARA 3.5 ETC. ARE GROSSLY INCORRECT, CONTRARY TO TH E FACTS. THE OBSERVATION REGARDING PART OF INVESTMENT NOT RECORD ED IN BOOKS AND GENUINENESS OF THE EXPENSES AND THE BUSIN ESS NEXUS HAD BEEN MADE BY THE ASSESSING OFFICER WITHOU T ANY MATERIAL AND EVIDENCE. 3.2 THE ASSESSEE WITHOUT PREJUDICE TO ABOVE FURTHER SUBMITS THAT THE DISALLOWANCES MADE BY THE ASSESSIN G OFFICER ARE INCOMPREHENSIBLE AND THE SAID DISALLOWA NCES ARE CONTRARY TO THE FACTS AND LAW. THE ASSESSEE SUBMITS THAT EACH AND EVERY DISALLOWANCE MADE BY THE ASSESSING O FFICER BE QUASHED. THE ASSESSEE SUBMITS THAT EACH AND EVER Y EXPENDITURE WAS INCURRED AND EACH AND EVERY EXPENDI TURE WAS INCURRED FOR THE PROJECT AND THEREFORE EACH AND EVERY EXPENDITURE IS FORMING PART OF THE PROJECT. THE ASS ESSEE SUBMITS THAT IT BE SO HELD. 3. AT THE OUTSET OF HEARING, LEARNED AUTHORIZED REPRESENTATIVE POINTED OUT THAT HE IS NOT PRESSING CROSS OBJECTIONS IN BOTH THE YEARS BECAUSE OF SUBSEQUENT DEVELOPMENT. IN VIEW OF ABOVE, CROSS OBJECTIONS FI LED BY ASSESSEE ARE DISMISSED AS NOT PRESSED. 4. COMING TO REVENUES APPEAL, BRIEFLY STATED FACTS OF CASE ARE THAT GULMOHAR PARK, A COMMERCIAL PROJECT CONSTR UCTED BY ASSESSEE IS SITUATED NEAR FUN REPUBLIC, SARKHEJ-GAN DHINAGAR HIGHWAY, AHMEDABAD. LAND OF THE PROJECT ORIGINALLY BELONGED TO MEMBERS OF GULMOHAR SOCIETY, A RESIDENTIAL FLAT SCHEME. THE LAND WAS PURCHASED IN F.Y.2005-06 AND THIS PROJECT WAS ALSO STARTED IN THE SAME YEAR. THIS PROJECT BELONGS TO COMPANY M/S. NAVRATNA S.G. HIGHWAY PROPERTIES PVT. LTD. THE COMPANY NAVRATNA S.G. HIGHWAY PROPERTIES PVT. LTD. IS A SPE CIAL PURPOSE VEHICLE FOR THE PURPOSE OF CONSTRUCTION AND DEVELOPMENT OF THIS COMMERCIAL PROJECT 'KSHITIJ PRO JECT'. THE IT(SS)A. NOS. 344 & 345/AHD/11 & C.O. NOS. 155 & 156/AHD/11 FOR A.YS. 2006-07 & 2007-08 (ACIT VS. M/S. NAVRATNA S. G. HIGHWAY PROPERTIES PVT. LTD.) PAGE 5 EQUITY CAPITAL OF NAVRATNA S.G. HIGHWAY PROPERTIES PVT LTD. WAS HELD BY M/S. NAVRATNA ORGANIZERS & DEVELOPERS PVT. LTD. (NODL) AND KSHITIJ VENTURE CAPITAL FUND IN THE RATI O OF 10% & 90% RESPECTIVELY. KSHITIJ VENTURE CAPITAL FUND WAS A VENTURE CAPITAL CONTROLLED AND MANAGED BY M/S. PANTALOON RE TAIL INDIA LTD. OF PANTALOON GROUP. 4.1 DURING ASSESSMENT PROCEEDING, ASSESSEE WAS ASKE D TO PROVE THE GENUINENESS OF EXPENSES CLAIMED AND WAS A LSO ASKED TO FURNISH SUPPORTING EVIDENCES REGARDING EXPENSES INCURRED FOR PROJECT. ASSESSING OFFICER OBSERVE THAT ASSESS EE HAD APPEARED AT THE FAG END I.E. ON 26.02.2008 AND FILE D DETAILS FOR THE FIRST TIME. HOWEVER, AS THE CORROBORATIVE EVIDE NCE OF INCURRING THESE EXPENSES AND BUSINESS NEXUS HAS NOT BEEN ESTABLISHED, THEREFORE, ASSESSING OFFICER DISALLOWE D THE FOLLOWING EXPENSES FROM WORK IN PROGRESS ACCOUNT:- SR.NO. A.Y. DISALLOWANCES 1. 2006-07 RS.8,52,34,051/- 2. 2007-08 RS.7,74,27,638/- FOR BOTH THE ASSESSMENT YEARS INVOLVED, ASSESSING O FFICER HAS COMPUTED TOTAL INCOME AT RS.NIL. HOWEVER, ASSESSIN G OFFICER HAS CARRIED OUT DISALLOWANCE FROM WORK IN PROGRESS ACCOUNT. HE FURTHER MENTIONED THAT WHEN PROJECT WOULD BE COM PLETED AND BUSINESS OF ASSESSEE WOULD COMMENCE, THEN, ASSE SSEE WOULD NOT BE ENTITLED TO DEPRECIATION AS WELL AS OT HER CLAIMS ON THESE EXPENSES WHICH HAVE BEEN CAPITALIZED BY ASSES SEE WITH THE COST OF PROJECT. IT(SS)A. NOS. 344 & 345/AHD/11 & C.O. NOS. 155 & 156/AHD/11 FOR A.YS. 2006-07 & 2007-08 (ACIT VS. M/S. NAVRATNA S. G. HIGHWAY PROPERTIES PVT. LTD.) PAGE 6 4.2 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN EFFECTIVE GROUNDS RELATE TO DISALLOWANCES O F RS.8,52,34,051/- IN A.Y. 2006-07 AND RS.7,74,27,638 /- IN A.Y. 2007-08 FROM WORK-IN-PROGRESS ACCOUNT AND VARIOUS CONTENTIONS WERE RAISED IN THIS REGARD. IN APPEAL, CIT(A) DECIDED AS UNDER: 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT. IT HAS BEEN REPRESENTED BEFORE ME THAT THE MEMORANDUM OF UNDERSTANDING HAS BEEN ENTERED BETWEEN NAVRATNA ORGANIZER AND DEVELOPERS PVT.LTD. (NODPL), A PRIVAT E LIMITED COMPANY AND M/S. KSHITIJ VENTURE CAPITAL FUN D (KVCF), A SEBI REGISTERED TRUST HAVING ITS REGISTERE D OFFICE AT MUMBAI ON 01.10.2005. VIDE THE MEMORANDUM OF UNDERSTANDING, SUPRA, NOPDL AND KVCF HAVE AGREED TO DEVELOP A MULTI-STORIED SHOPPING MALL THROUGH MEDIU M OF SPECIAL PURPOSE VEHICLE (SPV). IN THIS VENTURE, NOPD L SHALL CONTRIBUTE 10% OF THE PROJECT COST AND BALANCE 90% OF THE PROJECT COST WOULD BE FUNDED BY KVCF. IN PURSUANCE O F MOU, THE NODPL SHALL BILL THE SPV THE PROFESSIONAL F EES, AS SPECIFIED AT PAGE 4 CLAUSE 'G' OF THE MOU AGREEMENT . IT HAS ALSO BEEN REPRESENTED BEFORE ME THAT MULTI-STORIED MALL HAS ALREADY BEEN CONSTRUCTED BY SPV AND ALL EXPENSES ARE VOUCHED AND ACCOUNTED. IN OTHER WORDS, IT IS A CONT ENTION OF THE APPELLANT THAT BUSINESS OF THE SPV HAD ALREADY COMMENCED. 7. CONSIDERING THE FACTS IN TOTALITY, I AM OF THE O PINION THAT IT IS NOT JUST AND PROPER TO DENY THE BENEFITS OF T HE EXPENSES INCURRED BY THE APPELLANT IN THE CONSTRUCTION OF MU LTI STORIED MALL. ACCORDINGLY, THE ASSESSING OFFICER I S DIRECTED THAT WHILE GIVING EFFECT TO THE INSTANT APPELLATE O RDER, VERIFY THE EXPENSES INCURRED AND CLAIMED BY THE APPELLANT IN A.Y. 2006-07 AND A.Y.2007-08 AS PER THE DETAILS SUBMITTE D BY THE APPELLANT ON 26.12.2008. THE ASSESSING OFFICER IS FURTHER DIRECTED TO VERIFY THE BUSINESS NEXUS OF SU CH EXPENSES. FOR THIS PURPOSE, THE ASSESSING OFFICER I S FREE TO CALL FOR ANY FURTHER DETAILS FROM THE APPELLANT. TH E ASSESSING OFFICER IS DIRECTED TO PASS A SPEAKING ORDER ABOUT THE IT(SS)A. NOS. 344 & 345/AHD/11 & C.O. NOS. 155 & 156/AHD/11 FOR A.YS. 2006-07 & 2007-08 (ACIT VS. M/S. NAVRATNA S. G. HIGHWAY PROPERTIES PVT. LTD.) PAGE 7 GENUINENESS OF EXPENSES INCURRED AND BUSINESS NEXUS THEREOF. THESE GROUNDS OF APPEAL ARE DISPOSED OFF ACCORDINGLY. 4.3 GRIEVANCE OF REVENUE BEFORE US IS THAT CIT(A) E RRED ON FACTS IN DIRECTING THE ASSESSING OFFICER TO PASS OR DER WHILE GIVING EFFECT TO CIT(A)S ORDER AFTER VERIFYING PAR T DETAILS FURNISHED BY ASSESSEE DURING ASSESSMENT PROCEEDING AND BY CALLING FOR FURTHER DETAILS FROM ASSESSEE. CIT(A) OUGHT TO HAVE DECIDED THE ISSUE ON THE BASIS OF DETAILS FILED BY ASSESSEE BEFORE HIM AND OUGHT NOT TO HAVE DIRECTED THE ASSES SING OFFICER TO RECONSIDER HIS OWN DECISION. CIT(A) OUGHT TO HA VE UPHELD THE ACTION OF ASSESSING OFFICER IN DISALLOWING THE EXPENSES FROM WORK-IN-PROGRESS AS ASSESSEE HAS NOT FURNISHED ANY CORROBORATIVE EVIDENCE TO PROVE GENUINENESS OF EXPE NSES AS WELL AS BUSINESS NEXUS THEREOF. CIT(A) OUGHT TO HA VE UPHELD THE ORDER OF ASSESSING OFFICER AND NOT DIRECTED THE ASSESSING OFFICER TO VERIFY THE SUBMISSION OF ASSESSEE IGNORI NG THAT SUCH DIRECTION AMOUNTED TO SETTING ASIDE OF ASSESSMENT O RDER WHICH HE NO LONGER CAN DO AFTER 01.06.2001. SO, ORDER OF CIT(A) BE SET ASIDE. ON OTHER HAND, LEARNED AUTHORIZED REPRE SENTATIVE SUBMITTED THAT CIT(A) WAS JUSTIFIED IN RESTORING TH E ISSUE WITH HAVING DECIDED THE ISSUE IN PRINCIPLE IN FAVOUR OF ASSESSEE. 4.4 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT CIT(A) HELD THAT ASSESSING OFF ICER WAS NOT JUST AND PROPER TO DENY THE BENEFIT OF EXPENSES INC URRED BY ASSESSEE IN THE CONSTRUCTION OF MULTI STORIED MALL. HE FURTHER DIRECTED THE ASSESSING OFFICER THAT WHILE GIVING EF FECT TO THE IT(SS)A. NOS. 344 & 345/AHD/11 & C.O. NOS. 155 & 156/AHD/11 FOR A.YS. 2006-07 & 2007-08 (ACIT VS. M/S. NAVRATNA S. G. HIGHWAY PROPERTIES PVT. LTD.) PAGE 8 INSTANT APPELLATE ORDER, VERIFY THE EXPENSES INCURR ED AND CLAIMED BY ASSESSEE IN A.Y. 2006-07 AND A.Y.2007-08 AS PER DETAILS SUBMITTED BY ASSESSEE ON 26.12.2008 AND ASS ESSING OFFICER WAS FURTHER DIRECTED TO VERIFY BUSINESS NEX US OF SUCH EXPENSES. FOR THIS PURPOSE, ASSESSING OFFICER WAS F REE TO CALL FURTHER DETAILS FROM ASSESSEE. ACCORDINGLY, ASSESS ING OFFICER WAS DIRECTED TO PASS A SPEAKING ORDER ABOUT THE GEN UINENESS OF EXPENSES INCURRED AND BUSINESS NEXUS THEREOF. ACCO RDING TO US, HAVING DECIDED THE MAIN ISSUE IN FAVOUR OF ASSE SSEE BY OBSERVING THAT IT WAS NOT JUST AND PROPER TO DENY T HE BENEFIT OF EXPENSES INCURRED BY ASSESSEE IN THE CONSTRUCTION O F MULTI STORIED MALL. CIT(A) DIRECTED THE ASSESSING OFFICE R TO MAKE CERTAIN INQUIRIES WITH REGARD TO GENUINENESS OF EXP ENSES INCURRED AND BUSINESS NEXUS BY PASSING SPEAKING ORD ER. IT AMOUNTS TO SETTING ASIDE THE ISSUE TO ASSESSING OFF ICER WHICH IS NOT PERMITTED. ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ISSUE TO HIM WITH DIRECTION TO DECI DE THE SAME AS PER FACT AND LAW AND IN THE LIGHT OF OUR OBSERVA TION DISCUSSED ABOVE AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. AS A RESULT, REVENUES APPEAL IN THE YEAR UNDER CONSIDERATION IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN A.Y. 2007-08, SIMILAR ISSUE AROSE IN REVENUE S APPEAL. FACTS BEING SIMILAR AS DISCUSSED ABOVE, SO FOLLOWIN G SAME REASONING, THE GROUND IN REVENUES APPEAL IS RESTOR ED TO CIT(A) IT(SS)A. NOS. 344 & 345/AHD/11 & C.O. NOS. 155 & 156/AHD/11 FOR A.YS. 2006-07 & 2007-08 (ACIT VS. M/S. NAVRATNA S. G. HIGHWAY PROPERTIES PVT. LTD.) PAGE 9 WITH SIMILAR DIRECTIONS AS GIVEN IN A.Y. 2006-07 AB OVE IN PARA 4 OF THIS ORDER. 7. IN RESULT, REVENUES APPEALS FOR BOTH YEARS ARE ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE AND ASSESSE ES CROSS OBJECTIONS FOR BOTH YEARS ARE DISMISSED AS NOT PRES SED. PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF MARCH, 2015. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 27/03/2015 TRUE COPY S.K.SINHA # # # # %& %& %& %& '&' '&' '&' '&' / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. ,, - / CONCERNED CIT 4. -- / CIT (A) 5. &12 %, , / DR, ITAT, AHMEDABAD 6. 256 78 / GUARD FILE. BY ORDER / # , 9/ , , ;