DCIT, Tirupathi v. P.Hari Babu,, Udayagiri

ITA 1652/HYD/2010 | 2007-2008
Pronouncement Date: 30-03-2012 | Result: Dismissed

Appeal Details

RSA Number 165222514 RSA 2010
Assessee PAN AIKPP6931D
Bench Hyderabad
Appeal Number ITA 1652/HYD/2010
Duration Of Justice 1 year(s) 3 month(s) 7 day(s)
Appellant DCIT, Tirupathi
Respondent P.Hari Babu,, Udayagiri
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-03-2012
Date Of Final Hearing 30-05-2011
Next Hearing Date 30-05-2011
Assessment Year 2007-2008
Appeal Filed On 23-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH HYDERABAD BEFORE SHRI D.KARUNAKARA RAO ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA NO.1652/HYD/2010 ASSTT. YEAR: 2007-08 DCIT CENTRAL CIRCLE TIRUPATI. VS SHRI P. HARI BABU TIRUPATI. (PAN: AIKPP6931D) APPELLANT RE SPONDENT APPELLANT BY : SRI C.R. PATI RESPONDENT BY : SRI S. RAMA RAO DATE OF HEARING : 06-03-2012. DATE OF PRONOUNCEMENT : 30 -03-2012. ORDER PER SAKTIJIT DEY J.M. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 30-10-2010 PASSED BY THE CIT (A)-VI I HYDERABAD IN ITA NO.163/TR/DCIT.CC/TPT/CIT(A)- VII/10-11 PERTAINING TO THE ASSESSMENT YEAR 2007-08 . 2. THE REVENUE RAISED THE FOLLOWING GROUNDS BEFORE US. 1. THE CIT (A) HAS ERRED ON LAW AND FACT WHILE ALLOWING APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE MADE BY THE ASSESSING OFFICER. ITA NO.1652/H/2010 SRI P. HARI BABU TIRUPATI. =============================== 2 2. THE CIT (A) OUGHT TO HAVE CONSIDERED THE FACT THE IN THE RELEVANT YEAR THE ASSESSEE HAS PURCHASED ONLY THE LAND AND NO SALE WAS EFFECTED AND HENCE AL L THE EXPENDITURES OUGHT TO HAVE CAPITALISED. RATHER THE ASSESSEE HAS DEBITED INTO PROFIT AND LOSS ACCOUNT AND CLAIMED LOSS. 3. THE CIT (A) ALSO FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE CLAIMED THOSE EXPENSES AGAINST INCOME FROM OTHER SOURCES WHERE AS THE EXPENDITU8RES ARE RELATED TO INCOME FROM BUSINESS OR PROFESSION. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS CARRYING ON BUSINESS IN REAL ESTATES. THE ASSESSEE S ACTIVITIES INCLUDED PURCHASE OF LAND FROM DIFFERENT PERSONS DEVELOPING THEM INTO LAYOUT AND ULTIMATELY SELL SUCH DEVELOPED PLOTS TO THE CUSTOMERS. FOR DEVELOP MENT OF THE LAND THE ASSESSEE CLAIMS EXPENDITURE FOR TH E CONSTRUCTION OF COMPOUND WALL LAYING OF ROADS PRO VISION FOR DRAWINGS AND DEVELOPMENT OF PARKS AS PER THE NO RMS OF BANGALORE URBAN DEVELOPMENT AUTHORITY. ON 27- 9- 2007 A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE. IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT THE ASSESSEE FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1 75 130/- 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER WHILE GOING THROUGH THE ASSESSEE S ACCOUNTS FOUND THAT THE ASSESSEE HAS CLAIMED LAND ITA NO.1652/H/2010 SRI P. HARI BABU TIRUPATI. =============================== 3 DEVELOPMENT EXPENSES OF RS.19 55 000/- AND INDIRECT EXPENSES OF RS.35 79 555/- AND SHOWN THE NET PROFIT AT NIL SO FAR THE REAL ESTATE BUSINESS IS CONCERNED. THE ASSESSING OFFICER DISALLOWED EXPENSES CLAIMED UNDER BOTH THE HEADS AND COMPLETED THE ASSESSMENT BY DETERMINI NG THE TOTAL INCOME AT RS.57 09 357/-. THE ASSESSEE BEING AGGRIEVED CHALLENGED THE ASSESSMENT ORDER BEFORE TH E CIT (A). THE CIT (A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE AND EXAMINING THE MATERIALS PRODUCED BEFOR E HIM FOUND THAT THIS WAS THE FIRST YEAR OF THE ASS ESSEES BUSINESS. THE ASSESSEE HAS PURCHASED LAND AND HAS INCURRED EXPENDITURE FOR DEVELOPING THE SAME. SINC E NO SALE OF LAND WAS EFFECTED DURING THE YEAR THE ASSE SSEE HAS CLOSING STOCK OF PLOTS READY FOR SALE IN THE NE XT ASSESSMENT YEAR. THE CIT (A) AFTER EXAMINING THE B ILLS AND PAYMENTS MADE THROUGH CHEQUES TO THE CONTRACTOR S WHO CARRIED OUT THE DEVELOPMENT WORK FOUND THE EXPENSES TO BE GENUINE AND DELETED THE ADDITION OF RS.19 55 000/-. SO FAR AS THE INDIRECT EXPENSES O F RS.35 79 227/- ARE CONCERNED THE CIT (A) AFTER EXAMINING THE MATERIALS PLACED BEFORE HIM FOUND THA T THE MAJOR EXPENSES ARE TOWARDS INTEREST PAYMENTS ON SECURED LOANS TAKEN FOR THE PURPOSE OF THE BUSINESS . CONSIDERING THE FACT THAT THE ASSESSEE HAS TO MAINT AIN HIS OFFICE THE CIT (A) ALSO DELETED THE ADDITION OF RS.35 79 227/-. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D BEFORE US THAT THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE EXPENSES IN THE ABSENCE OF PROPER ITA NO.1652/H/2010 SRI P. HARI BABU TIRUPATI. =============================== 4 EVIDENCE. HE FURTHER SUBMITTED THAT THE CIT (A)S ORDER IS NOT A SPEAKING ONE. 6. ON THE OTHER HAND THE LEARNED AR FOR THE ASSESS EE SUBMITTED THAT THE ASSESSEE HAS ALREADY COMMENCED H IS BUSINESS. THIS BEING THE FIRST YEAR OF HIS BUSINE SS THE ASSESSEE HAD TO MAKE INVESTMENT IN PURCHASE OF LAND AND DEVELOPING THE SAME. TO MEET SUCH INVESTMENT THE ASSESSEE HAD TO TAKE UNSECURED LOANS FROM DIFFERENT PERSONS FOR WHICH THE ASSESSEE HAD PAID INTEREST TO THE PERSONS CONCERNED THROUGH ACCOUNT PAYEE CHEQUES. T HE DETAILS OF PERSONS TO WHOM THE PAYMENTS WERE MADE WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER. T HE LEARNED AR BROUGHT TO OUR NOTICE COPIES OF CHEQUES THROUGH WHICH THE PAYMENTS WERE MADE. THE LD. A R OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD TO INC UR EXPENDITURE FOR MAINTAINING HIS OFFICE AND WORK FOR CE WITH SUFFICIENT NUMBER OF VEHICLES. THE ASSESSEE HIMSEL F HAS DEDUCTED A SUM OF RS.1 20 223/- FROM THE EXPENSES F OR PERSONAL USE OF VEHICLES. SO FAR AS THE DIRECT EXP ENSES OF RS.19 55 000/- ARE CONCERNED THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD PAID THE AMOUNT THROUGH CHEQUES TO ONE CONTRACTOR SRI MADAN MOHAN REDDY FOR CONSTRUCTION OF FENCING FOR TWO DIF FERENT LAYOUTS. IN THIS REGARD OUR ATTENTION WAS DRAWN T O THE BILLS RAISED BY THE CONTRACTOR WHICH ARE AT PAGES 1 0 AND 11 OF THE PAPER BOOK. IN VIEW OF THE AFORESAID FAC TS THE LD. AR SUBMITTED THAT THE CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION. ITA NO.1652/H/2010 SRI P. HARI BABU TIRUPATI. =============================== 5 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE MATERIALS PLACED BEFORE US. IT IS A FAC T THAT DURING THE FINANCIAL YEAR THE ASSESSEE HAD PURCHASE D LAND DEVELOPED THEM AS PER THE LAYOUT AND HAS MADE THEM READY FOR SALE TO PROSPECTIVE BUYERS. IN FACT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH M/S AISHARAYA LINES BANGALORE FOR MARKETING. THOUGH N O SALE REGISTRATION HAS TAKEN PLACE AND NO POSSESSION IS GIVEN ADVANCES HAVE BEEN RECEIVED FROM THEM. IN VI EW OF THESE FACTS THERE IS NO DOUBT THAT DURING THE F INANCIAL YEAR THE ASSESSEE HAS COMMENCED ITS BUSINESS ACTIV ITIES. IN THE PROFIT & LOSS A/C THE ASSESSEE HAS ALSO SHO WN A GROSS PROFIT OF RS.35 79 227.71. REGARDING DISALLOW ANCE OF RS.19 55 000 IT IS SEEN FROM THE ORDER THAT THE ASSESSING OFFICER HAS HIMSELF OBSERVED THAT THE AS SESSEE HAD PRODUCED BILLS AND VOUCHERS BEFORE HIM. SURPRI SINGLY HOWEVER HE HAS DISALLOWED THE EXPENSES BY SIMPLY OBSERVING THAT THEY ARE NOT VERIFIABLE. THE ASSESS ING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO S HOW WHAT ENQUIRY HE HAS MADE TO COME TO SUCH A CONCLUSI ON. WHEN THE ASSESSEE HAS MADE THE PAYMENT THROUGH CHEQUES AND FURNISHED THE IDENTITY OF THE PERSONS T O WHOM IT WAS PAID IT WAS NOT PROPER ON THE PART OF THE ASSESSING OFFICER TO REJECT THE CLAIM OF THE ASSESS EE ON MERE CONJECTURES AND SURMISES. WE THEREFORE UPHOLD THE ORDER OF THE CIT (A) AND DISMISS THE GROUND NO.1. SO FAR AS THE CLAIM OF INDIRECT EXPENSES OF RS.35 79 227 IS CONCERNED IT IS SEEN THAT FINANCIAL YEAR 2006-07 B EING THE FIRST YEAR OF COMMENCEMENT OF BUSINESS THE ASS ESSEE HAD TO INVEST HUGE SUMS NOT ONLY IN PURCHASING OF THE LAND BUT ALSO HE HAD TO INCUR EXPENDITURE FOR DEVEL OPING ITA NO.1652/H/2010 SRI P. HARI BABU TIRUPATI. =============================== 6 THE LAND ACCORDING TO THE SANCTIONED LAYOUT. FOR T HIS PURPOSE THE ASSESSEE HAS RAISED FINANCE BY TAKING UNSECURED LOANS FROM DIFFERENT PERSONS. THE ASSESSE E HAS TO PAY INTEREST TO THESE PERSONS WHICH WERE PAID TH ROUGH ACCOUNT PAYEE CHEQUES. THE ASSESSEE HAD PRODUCED A LL DETAILS REGARDING IDENTITY OF PERSONS AND PAYMENT M ADE TO THEM BEFORE THE ASSESSING OFFICER. THE ASSESSEE HAD TO ALSO INCUR EXPENDITURE TOWARDS PAYMENT OF SALARY AN D MAINTENANCE OF THE VEHICLES WHICH WERE REQUIRED FOR THE PURPOSE OF RUNNING HIS BUSINESS. IT IS SEEN FROM T HE ORDER THAT THE ASSESSING OFFICER HAS NOT BEEN ABLE TO GIV E ANY REASON WHATSOEVER WHILE DISALLOWING THE CLAIM OF TH E ASSESSEE. THE ASSESSING OFFICER HAS DISALLOWED EXP ENSES OF RS.35 79 227/- ON SUSPICION ONLY WITHOUT BRINGIN G ANY COGENT MATERIAL TO DISPUTE THE ASSESSEES CLAIM. W HEN THE IDENTITY OF THE PERSONS HAVE BEEN FURNISHED THE PAYMENTS HAVE BEEN MADE THROUGH CHEQUES WE FIND NO REASON FOR DISALLOWANCE OF ANY EXPENDITURE. HENCE THERE IS LITTLE SCOPE FOR INTERFERING WITH THE FINDING O F THE CIT (A). IN VIEW OF THE ABOVE FINDING WE DISMISS GROU ND NOS. 2 AND 3. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON -03-20 12. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER DATED THE 30 TH MARCH 2012. ITA NO.1652/H/2010 SRI P. HARI BABU TIRUPATI. =============================== 7 COPY FORWARDED TO: 1. DCIT CENTRAL CIRCLE TIRUPATI. 2. SHRI P. HARI BABU NO.8 VIDYANAGAR COLONY MAIN ROAD TIRUPATI. 3. CIT (A)-VII HYDERABAD. 4. THE CIT CONCERNED HYDERABAD 5. THE DR ITAT HYDERABAD JMR* ITA NO.1652/H/2010 SRI P. HARI BABU TIRUPATI. =============================== 8