The DCIT, Central Circle-1., Surat V. M/s. Surat Textile Mills Ltd., Surat

ITSSA 648/AHD/2011

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0716 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-04-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 02-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Tax effect
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G. D. AGARWAL , VICE PRESIDENT AND SHRI S.S. GODARA JUDICIAL MEMBER IT ( SS ) A NO . 648 /AHD/2011 A. Y . 200 3 - 0 4 DCIT, CENTRAL CIRCLE - 1, SURAT. VS M/S. SURAT TEXTILE MILLS LTD., GARDEN MILL COMPLEX, SAHARA GATE, SURAT. PAN: AADCS 4562M (APPELLANT) (RESPONDENT) CO NO.27/AHD/2012 A.Y .2003 - 04 M/S. SURAT TEXTILE MILLS LTD., GARDEN MILL COMPLEX, SAHARA GATE, SURAT. PAN: AADCS 4562M VS DCIT, CENTRAL CIRCLE - 1, SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUBHASH BAINS , CIT - D.R. . ASSESSEE(S) BY : SHRI J.P. SHAH, A.R. / DATE OF HEARING : 07 / 0 4 /201 5 / DATE OF PRONOUNCEMENT : / 04 /201 5 / O R D E R PER: S. S. GODARA , JUDICIAL MEMBER THIS REVENUE S A PPEAL AND A SSESSEE S C ROSS O BJECTION FOR A.Y.2003 - 04 ARISE FROM ORDER OF CIT(A) - II AHMEDABAD DATED 15.09.2011 IN CASE A PPEAL NO .CIT(A) - II/CC.1/ 163 /2010 - 11 , IN PROCEEDINGS U/S. 143(3) R.W.S. 153A OF THE INCOME TAX ACT (IN IT (SS) A NO. 648 /AHD /201 1 & CO NO.27/AHD/2012 SURAT TEXTILE MILLS LTD. FOR A.Y. 200 3 - 0 4 - 2 - SHORT THE ACT ). THE DCIT, CENTRAL CIRCLE - 1, SURAT HAD FRAMED ASSESSMENT IN THIS CASE VIDE ASSESSMENT ORDER DATED 31.12.2010. 2. THE REVENUE S SOLE SUBSTANTIAL GROUND READS AS FOLLOWS: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO GIVE RELIEF TO THE ASSESSEE OF RS.19,82,342/ - ON TH3E DISALLOWANCE OF PROJECT EXPENSES EVEN THOUGH IT WAS CATEGORICALLY ANALYZED IN THE BODY OF THE ASSESSMENT ORDER THAT THE ALLOWABLE PROJECT EXPENDITURE AS PER THE WORKING COMES TO RS.17,40,756/ - AND NOT RS.37,23,098/ - . 2.1 THE A SSESSEE IN ITS C ROSS O BJECTION IS AGGRIEVED AGAINST THE CIT(A) S ORDER UP HOLDING VALIDITY OF SECTION 153 A PROCEEDINGS INITIATED BY THE A SSESSING A UTHORITY. 3. TH IS APPEAL APPEARS TO BE SECOND ROUND OF LITIGATION UPTO THE TRIBUNAL QUA IMPUGNED DISALLOWANCE OF RS.19,82,342/ - PERTAINING TO PROJECT EXP ENSES. THE A SSESSEE - COMPANY HAD INITIALLY FILED ITS RETURN ON 30.03.2010. IT CLAIMED PROJECT EXPENSES OF RS.37,23,098/ - OUT OF THE TOTAL EXPENDITURE OF RS.88,48,469/ - . TH E SAME INCLUDED IMPACT FEE OF RS.31,95,436/ - AND MUNICIPAL TAX AMOUNTING TO RS.1,91,112/ - TOTALING RS.33 ,86,548/ - . THE ASSESSING OFFICER IN A SSESSMENT FRAMED ON 28.03.2006 HELD THE AFORESAID SUM OF RS.33,86,548/ - A S NOT ALLOWABLE UNDER THE PROVISIONS OF THE ACT. HE TREATED THE REMAINING SUM OF RS.54,61,921/ - AS PROJECT EXPENDITURE TO BE PROPORTIONATELY ALLOW ABLE AS PER SALES EXECUT ED IN EACH IT (SS) A NO. 648 /AHD /201 1 & CO NO.27/AHD/2012 SURAT TEXTILE MILLS LTD. FOR A.Y. 200 3 - 0 4 - 3 - ASSESSMENT YEAR. THE ASSESSEE HAD SOLD ONLY AREA MEASURING 64,663 SQ. FT. OUT OF 2,01,973 SQ. FT. THE ASSESSING OFFICER IN ASSESSMENT ORDER COMPUTED A PROPORTIONATE EXPENDITURE AT RS.17,40,756/ - RESULTING IN CONSEQUENTIAL DISALLOWANCE OF RS.19,82,342/ - . 4. THE A SSESSEE PREFERRED AN A PPEAL. THE CIT(A) IN HIS ORDER DATED 30 TH JANUARY, 2007 DELETED THE AFORESAID DISALLOWANCE AS UNDER: 'I HAVE CONSIDERED THE SUBMISSION AND FIND THAT THE AO HAS WORKED OUT THE PROJECT EXPENSES ON THE BASIS OF TOTAL AREA SOLD BY THE APPELLANT. I AM NOT IN AGREEMENT WITH THIS METHOD ADOPTED BY THE AO, SINCE THE SALE VALUE OF SHOPS AND FLATS WOULD DEPEND UPON A NUMBER OF FACTORS LIKE FLOOR, LOCATION ETC. THE SALE VALUE WOULD BE HIGHER IN THE CASE OF A SHOP LOCATED ON THE GROUND FLOOR OR ON THE FIRST FLOOR. SIMILARLY, THE SALE VALUE OF A FLAT WOULD ALSO DEPEND UPON THE FACT WHETHER IT IS ON A PARTICULAR FLOOR, IS FACING THE MAIN ROAD OR WHETHER IT IS A CORNER SHOP OR FLAT. THERE CANNOT BE ANY UNIFO RMITY OF SALE PRICE AS ADOPTED BY THE AO WHEREIN HE HAS TAKEN EXPENSES ON THE BASIS OF AREA SOLD. IN VIEW THEREOF, I AM INCLINED TO AGREE WITH THE APPELLANT THAT AO'S ACTION IN DISTURBING THE METHOD ADOPTED BY THE APPELLANT WAS NOT IN ORDER AND DISALLOWANC E ON THIS GROUND IS DIRECTED TO BE DELETED.' 4. THE REVENUE APPEARS TO HAVE FILED ITA NO.1360/AHD/2007 BEFORE THE T RIBUNAL . A C O - ORDINATE B ENCH IN ITS ORDER DATED 18.08.2010 DISMISSED THE SAME FOR LOW TAX EFFECT. IN THIS MANNER, ASSESSMENT PROCEEDINGS ATTAIN FINALITY IN THE FIRST ROUND OF LITIGATION. 5. I N THE MEANTIME, THE D EPARTMENT CONDUCTED A SEARCH/SURVEY IN A SSESSEE S CASE ON 12.06.2008. THIS CULMINATED IT (SS) A NO. 648 /AHD /201 1 & CO NO.27/AHD/2012 SURAT TEXTILE MILLS LTD. FOR A.Y. 200 3 - 0 4 - 4 - IN ISSUANCE OF A SECTION 153A NOTICE DATED 06.08.2009. THE A SSESSEE FILED ITS RETURN ON 31.08.2009 ADMITTING NIL INCOME. THE ASSESSING OFFICER FRAMED ASSESSMENT ON 31.12.2010 DISALLOWING THE VERY SUM OF RS.19,82,342/ - HOLDING THAT COST - WISE OR YEAR - WISE, THE ASSESSEE S CLAIM OF EXPENDITURE TOTA LL ING RS.37,23,078/ - HAD TO BE PROPORTIONATELY ALLOWED . THIS RESULTED YET ANOTHER DISALLOWANCE OF THE VERY SUM IN QUESTION. 6. THE ASSESSEE PREFERRED A PPEAL. IT WOULD CHALLENGE IN ITIA TION OF SECTION 153A PROCEEDINGS ON LEGALITY ISSUE AND MERITS OF THE IMPUGNED DISALLOWANCE. T HE CIT(A) HAS REJECTED THE FORMER PLEA AND ACCEPTED THE LATER ONE. HE DOES NOT FIND ANY FAULT WITH THE SECTION 153A NOTICE (SUPRA). O N MERITS , HE HOLDS THAT PECULIARITIES O F T HE ASSESSEE S BUSINESS IN SELLING DEVELOPED AREA LOCA TION BASED AND FLOOR - WISE ; DO NOT WARRANT THE IMPUGNED PROPORTIONATE DISALLOWANCE . THIS LEAVES BOTH PARTIES AGGRIEVED. 7. WE HAVE HEARD BOTH SIDES AND PERUSED THE CASE FILE. ADMITTED FACTUAL POSITION STANDS NARRATED IN THE PRECEDING PARAGRAPHS. T HE A SSESSING A UTHORITY HAS INVOKED TH IS PROPORTIONATE DISALLOWANCE AS MADE IN THE EARLIER ROUND OF LITIGATION. THE L OWER A PPELLATE A UTHORITY IN ITS EARLIER ORDER (SUPRA) HAD CONSIDERED PECULIAR REQUIREMENT S OF THE A SSESSEE S BUSINESS . T HE SAME FACTUAL POSITION CONTINUES NOW. THE CIT(A) IT (SS) A NO. 648 /AHD /201 1 & CO NO.27/AHD/2012 SURAT TEXTILE MILLS LTD. FOR A.Y. 200 3 - 0 4 - 5 - FINDS NO DISTINCTION ON FACTS VIS - - VIS THOSE INVOLVED IN THE EARLIER ROUND. T HERE IS ALSO NO FACTUAL EVIDENCE PLACED ON RECORD SO AS TO PRESS FOR RESTORATION OF THE IMPUGNED DISALLOWANCE. THE REVENUE ASSERTS THAT THE CO - ORDINATE B ENCH (SUPRA) HAD REJECTED ITS APPEAL ON LOW TAX EFFECT ONLY. THERE IS NO DENIAL ABOUT TH E SAME . THE FACT ALSO REMAINS THAT THE REVENUE FAILS TO REBUT THE CIT(A) ORDER ON MERITS SO AS TO FORM A DIFFERENT CONCLUSION IN TH IS ROUND OF LITIGATION. IT S SOLE SUBSTANTIAL GROUND SEEKING RE STORATION OF THE PROPORTIONATE PROJECT DISALLOWANCE OF RS.19,82,342/ - IS REJECTED. TH IS RENDERS A SSESSEE S C ROSS O BJECTION S AS ACADEMIC. 8. THE REVENUE S A PPEAL IS DISMISSED AND ASSESSEE S C ROSS O BJECTION S ARE DISMISSED AS HA VING BECOME INFRUCTOUS. ORDER PRONOUNCED ON 17.4.2015 SD/ - SD/ - ( G. D. AGARWAL ) ( S.S. GODARA ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 17 / 0 4 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . S / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD