ACIT, New Delhi v. M/s DCM Ltd., New Delhi

ITA 2440/DEL/2011 | 2004-2005
Pronouncement Date: 14-07-2011 | Result: Dismissed

Appeal Details

RSA Number 244020114 RSA 2011
Bench Delhi
Appeal Number ITA 2440/DEL/2011
Duration Of Justice 2 month(s) 2 day(s)
Appellant ACIT, New Delhi
Respondent M/s DCM Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 14-07-2011
Assessment Year 2004-2005
Appeal Filed On 12-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA 2440(DEL)2011 ASSESSMENT YEAR: 2004-05 ASSTT.COMMISSIONER OF INCOME TAX M/S. DCM LT D. 4 VIKRANT TOWER CIRCLE 10(1) NEW DELHI. V. RAJE NDRA PLACE NEW DELHI. (APPELLANT) (RESPONDENT ) APPELLANT BY: SHRI SALIL MISHRA SR. DR RESPONDENT BY: S/SHRI PR ADEEP DINODIA V.P.GUPTA& BASANT KUMAR ADV. ORDER PER A.D. JAIN J.M. THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2004-05 AGAINST THE ORDER DATED 23.02.2011 PASSED BY THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS)XVII NEW DELHI CANCELLING THE PENALTY OF ` 1 25 56 250/- LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT. 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE COMPANY HAS BEEN ENGAGED IN THE BUSINESS INTER ALIA OF REAL ESTATE DEVELOPMENT AT BARA HINDU RAO SINCE ASSESSMENT YEAR 1993-94. EXPENSES INCUR RED IN CONNECTION WITH PROJECT WERE BEING CLAIMED ON ACCRUAL BASIS AND SAM E WERE ALSO BEING ITA 2440(DEL)2011 2 ALLOWED IN THE ASSESSMENTS OF THE COMPANY IN PROPOR TION TO THE AREA SOLD IN THE RESPECTIVE YEARS. DURING THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR 2004-05 THE COMPANY HAD TRANSFERRED ITS REAL ESTATE PROJECT TO ANOTHER COMPANY VIZ. DCM ESTATE INFRASTRUCTURE LIMITED NO W KNOWN AS PUREARTH INFRASTRUCTURE LIMITED UNDER THE SCHEME OF ARRANGEM ENT (SOA) APPROVED BY THE HIGH COURT OF DELHI VIDE ITS ORDER DATED 29. 10.2003. 3. IN THE RETURN OF INCOME FILED BY THE ASSESSEE CO MPANY THE ASSESSEE COMPANY HAD COMPUTED INCOME CHARGEABLE UNDER THE BU SINESS HEAD IN RESPECT OF SALE/TRANSFER OF REAL ESTATE PROJECT AND IN COMPUTATION IT HAD CLAIMED TOTAL EXPENDITURE ON ACCRUAL BASIS RELATING TO THE PROJECT WHETHER INCURRED OR TO BE INCURRED AS PER THE SOA/AGREEMENT WITH THE TRANSFEREE COMPANY. IT HAD ENCLOSED STATEMENT REGARDING COMPU TATION OF PROFIT FROM REAL ESTATE BUSINESS WITH THE STATEMENT OF TAXABLE INCOME SUBMITTED WITH THE ORIGINAL RETURN OF INCOME AS WELL AS WITH THE REVI SED RETURN OF INCOME. THE CLAIMS WERE ALSO EXPLAINED IN THE COVERING LETTER F ILED WITH THE ORIGINAL LETTER AND ALSO VIDE NOTES GIVEN IN THE STATEMENT OF COMPU TATION OF TAXABLE INCOME FILED WITH THE REVISED RETURN. FULL DETAILS AND CONTENTIONS OF THE ASSESSEE COMPANY REGARDING ALLOWABILITY OF ALL THE ITEMS OF EXPENSES CLAIMED IN THE STATEMENT OF COMPUTATION OF TAXABLE INCOME RELATING TO REAL ESTATE PROJECT WERE DULY EXPLAINED DURING THE COURSE OF ASSESSMEN T PROCEEDINGS. THE ITA 2440(DEL)2011 3 COMPANY HAS SUBMITTED COPY OF SOA AS WELL AS COMPUT ATION OF TAXABLE INCOME FILED WITH THE ORIGINAL RETURN AND REVISED R ETURN AND ALSO COVERING LETTER SUBMITTED WITH THE ORIGINAL LETTER AND LETTE RS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS EXPLAINING THE CLA IMS IN THE PAPER BOOK FILED BEFORE US. 4. THE ASSESSING OFFICER PASSED THE ORDER UNDER SEC TION 143(3) OF THE ACT AND DISALLOWED THE PROJECT EXPENDITURE BY OBSER VING THAT SUCH EXPENSES ARE ALLOWABLE ON PAYMENT BASIS AND NOT ON ACCRUAL B ASIS. HE HAD ALSO GIVEN A FINDING TO THE EFFECT THAT DEDUCTION WILL BE ALLO WED AS AND WHEN EXPENSES ARE ACTUALLY INCURRED. AGGRIEVED WITH THE DISALL OWANCE MADE BY THE AO THE ASSESSEE FILED THE APPEAL AND THE LD. CIT(A) VI DE HIS ORDER DATED 24.06.2008 ALLOWED THE CLAIMS OF THE ASSESSEE HOLDI NG IN PRINCIPLE THAT DEDUCTION WILL BE ALLOWABLE ON ACCRUAL BASIS NOTWIT HSTANDING THAT THE EXPENDITURE IS ACTUALLY INCURRED IN SUBSEQUENT YEAR S. THE LD. CIT(A) WHILE ALLOWING CLAIMS FOLLOWED THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF CALCUTTA COMPANY LIMITED V. CIT 37 ITR 1 . ACCORDINGLY ALL THE CLAIMS MADE BY THE COMPANY IN REGARD TO EXPENSES IN CURRED/TO BE INCURRED WERE ALLOWED ON ACCRUAL BASIS BY THE LD. CIT(A). THE SAID ORDER OF THE LD. CIT(A) HAS BEEN UPHELD BY THE TRIBUNAL VIDE ITS ORD ER DATED 30.10.2009. ITA 2440(DEL)2011 4 5. THE AO HAD INITIATED PENALTY PROCEEDINGS VIDE HI S ASSESSMENT ORDER DATED 29.12.2006 PASSED U/S 143(3) OF THE ACT. PU RSUANT TO THE INITIATION OF PENALTY PROCEEDINGS HE PASSED ORDER DATED 30.07.20 10 U/S 271(1)(C) LEVYING THE PENALTY OF ` 1 25 56 250/-. IN THE IMPUGNED PENALTY ORDER THE AO LISTED ALL THE CLAIMS MADE BY THE COMPANY IN REGARD TO EXPENSES ON THE LAND DEVELOPMENT. HE ALSO NOTED IN THE ORDER THAT ALL T HE CLAIMS WERE ALLOWED BY THE CIT(A). HOWEVER THE AO LEVIED THE PENALTY WIT H REFERENCE TO TWO CLAIMS OF THE ASSESSEE COMPANY I.E. EXPENDITURE T O BE INCURRED ON APPROVALS AND PERMISSIONS AMOUNTING TO ` 10 CRORES AND EXPENDITURE TO BE INCURRED FOR QUARTERS VACATION AMOUNTING TO ` 4 CRORES AGAINST WHICH THE LD. CIT(A) HAD ALLOWED DEDUCTION OF ` 7 CRORES AND ` 3.5 CRORES RESPECTIVELY MEANING THEREBY THAT THE DISALLOWANCE HAD BEEN UPHELD TO TH E EXTENT OF ` 3 CRORES AND ` 0.50 CRORES RESPECTIVELY. THE ORDER OF THE CIT(A ) WAS ALSO UPHELD BY THE TRIBUNAL. 6. BY VIRTUE OF THE IMPUGNED ORDER THE LEARNED CIT (A) CANCELLED THE PENALTY LEVIED BY THE AO. AGGRIEVED THE DEPARTME NT IS IN APPEAL. ITA 2440(DEL)2011 5 7. THE LEARNED DR CHALLENGING THE IMPUGNED ORDER H AS CONTENDED THAT THE LD. CIT(A) HAS GONE WRONG IN CANCELLING THE PEN ALTY VALIDLY LEVIED BY THE AO; THAT THE LD. CIT(A) HAS FAILED TO CONSIDER THAT THE AVERMENT OF THE ASSESSEE COMPANY THAT IT HAS DISCLOSED THE PARTICUL ARS OF ITS INCOME HAS NO FORCE IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ZOOM COMMUNICATIONS PVT. LTD. IN ITA NO. 7/2010 DATED 24.5.2010 WHEREIN IT HAS BEEN HELD THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE IF THE CLAIM BESIDES BEING INCORRECT IS MALA FIDE EXPLANATION 1 TO SECTION 271 OF THE ACT WOULD COME INTO PLAY; THAT THE LD. CIT(A) HAS ALSO FAILED TO CONSIDER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA V. DHARMENDRA TEXTILES PROCESSORS & ORS. 306 ITR 277 WHEREIN IT HAS BEEN HELD THAT THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1)(C) OF THE ACT AND THE E XPLANATION TO THE SAID SECTIONS HAS BEEN SO AS TO PROVIDE FOR REMEDY OF LO SS OF REVENUE THE PENALTY PROVIDED THERE-UNDER IS A CIVIL LIABILITY AND WILLF UL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING THE CIVIL LIABI LITY; AND THAT THE LD. CIT(A) ALSO OVER-LOOKED THE FACT THAT THE TRIBUNAL CONFIRM ED THE DISALLOWANCES RESTRICTED BY THE CIT(A) IN PART. 8. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND HAS STRONGLY SUPPORTED THE IMPUGNED ORDER; THAT FULL DISCLOSURE IN RESPECT OF CLAIMS HAD ITA 2440(DEL)2011 6 BEEN MADE IN THE ORIGINAL RETURN AS WELL AS IN THE REVISED RETURN; THAT THE CLAIMS WERE DULY EXPLAINED BEFORE THE AO; THAT CLA IMS OF ` 10 CRORES AND ` 4 CRORES ON ACCOUNT OF APPROVALS AND PERMISSIONS A ND FOR VACATION OF QUARTERS WERE DULY SUPPORTED BY SOA APPROVED BY THE HIGH COURT; THAT THE ESTIMATE OF SUCH EXPENSES WAS NECESSARILY TO BE MAD E FOR ALLOWABILITY THEREOF SINCE THESE EXPENSES HAVE TO BE INCURRED I N THE SUBSEQUENT PERIOD; THAT QUANTUM THEREOF WAS ON THE BASIS OF THE BEST P OSSIBLE ESTIMATES; THAT EVEN THE LD. CIT(A) HAD MADE HIS OWN ESTIMATES OF ` 7 CRORES AND ` 3.5 CRORES AND HAD RESTRICTED THE DEDUCTION OF SUCH AMO UNTS SUBJECT TO ADJUSTMENT OF THE EXCESS OR SHORTAGE IN THE YEAR OF ACTUAL INCURRENCE OF THE EXPENDITURE; AND THAT BESIDES IN THE ASSESSMENT ORD ER WHILE INITIATING THE PENALTY PROCEEDINGS NO SATISFACTION WAS RECORDED B Y THE AO. 9. HAVING CONSIDERED THE RIVAL CONTENTIONS IN THE L IGHT OF THE MATERIAL AVAILABLE ON RECORD IT IS SEEN THAT UNDISPUTEDLY THE ASSESSEE COMPANY HAD MADE ADJUSTMENT WITH REGARD TO PROFIT/LOSS ON ITS REAL ESTATE PROJECT IN THE STATEMENT OF COMPUTATION OF TAXABLE INCOME. SUCH STATEMENT OF COMPUTATION OF TAXABLE INCOME WAS DULY SUBMITTED BE FORE THE AO ALONG WITH THE ORIGINAL RETURN. IT WAS ALSO FURNISHED AL ONG WITH THE REVISED RETURN FILED. COMPLETE DETAILS OF THE AMOUNT OF PROFIT/L OSS ADJUSTED WERE GIVEN ITA 2440(DEL)2011 7 THEREIN CONCERNING ALL THE ITEMS OF EXPENDITURE CL AIMED I.E. PERMISSION/APPROVAL EXPENSES AND EXPENDITURE ON VAC ATION OF QUARTERS. THE LETTER DATED 28.10.2004 I.E. THE COVERING LETTER ACCOMPANYING THE ORIGINAL RETURN CONTAINED THE ASSESSEES CLAIMS REGARDING TH E REAL ESTATE PROJECT GIVING THE FULL FACTUAL BACKGROUND THEREOF. THE NOTES AP PENDED TO THE REVISED COMPUTATION OF TAXABLE INCOME AS SUBMITTED ALONG W ITH THE REVISED RETURN ALSO CONTAINED THESE COMPLETE DETAILS. THAT APART VIDE LETTER DATED 14.6.2006 FILED BEFORE THE AO THE ASSESSEE HAD FU LLY EXPLAINED THE CLAIMS MADE. NOT ONLY THIS THE ACCOUNTS OF THE EXPENDITU RE CLAIMED STOOD MENTIONED IN THE SOA APPROVED BY THE HONBLE HIGH C OURT. FACTUALLY THE SCHEME MENTIONED THE AMOUNTS OF ` 10 CRORES AND ` 5 CRORES. THE AMOUNT OF ` 5 CRORES WAS WITH REGARD TO VACATION OF QUARTERS. THIS HOWEVER WAS RESTRICTED TO ` 4 CRORES SINCE THE BALANCE AMOUNT WAS RELATABLE TO LEASEHOLD AND DURING THE YEAR ONLY THE PROJECT ON THE FREEHO LD LAND STOOD TRANSFERRED. IN THE ASSESSMENT ORDER THE CLAIMS WERE DISALLOWED SINCE THE AO WAS OF THE VIEW THAT IT WAS A CONTINGENT LIABILITY WHICH WAS NOT ALLOWABLE. THE AO HAD HOWEVER BEEN OF THE OPINION THAT THE ASSES SEE COULD CLAIM DEDUCTION IN THE YEAR OF ACTUAL INCURRENCE OF THE E XPENDITURE. THE LD. CIT(A) FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ITA 2440(DEL)2011 8 CALCUTTA COMPANY LIMITED V. CIT(SUPRA) AND ALLOW ED THE CLAIM. IN THE FIRST APPELLATE PROCEEDINGS IN THE QUANTUM MATTER DETAILS OF ACTUAL EXPENSES UPTO THE TIME OF PASSING OF THE CIT(A)S ORDER HAD BEEN CALLED FOR WHICH DIRECTION HAD DULY BEEN COMPLIED BY THE ASSESSEE. IT WAS ON THE BASIS OF THE ACTUAL EXPENDITURE INCURRED UPTO DECEMBER 2007 TH AT THE ALLOWABLE AMOUNT OF DEDUCTION CAME TO ` 7 CRORES AND ` 3.5 CRORES RESPECTIVELY AS DETERMINED BY THE LD. CIT(A). LIKE THE AO THE CIT(A) ALSO O BSERVED THAT THE DEDUCTION WAS ALLOWABLE SUBJECT TO ALLOWABILITY/ADD ITION FOR ANY DIFFERENCE WITH REFERENCE TO ACTUAL EXPENSES INCURRED IN THE S UBSEQUENT YEARS. IT WAS HELD THAT IF THE ASSESSEE INCURRED EXPENSES LESS TH AN ` 7 CRORES AND ` 3.5 CRORES THE PROVISIONS OF SECTION 41(1) WOULD BE AP PLICABLE. BOTH THE PARTIES HAD APPROACHED THE TRIBUNAL BY WAY OF APPEALS AGAIN ST THE CIT(A)S ORDER WHICH WERE DISMISSED ON THE ISSUE OF EXPENSES. 10. THE LD. CIT(A) DULY TOOK THE ABOVE FACTS INTO C ONSIDERATION WHILE CANCELLING THE PENALTY. THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158(SC) HAS RIGHTLY BEEN RELIED ON. THE BASIS OF THE CLAIM OF DEDUCTION WAS THE FIGURES OF ESTIMATE CONTAINED IN THE SCHEME OF RECONSTRUCTI ON WHICH STOOD APPROVED BY THE HONBLE JURISDICTIONAL HIGH COURT. FURTHER THE LD. CIT(A) HAD ITA 2440(DEL)2011 9 PROCEEDED ON ESTIMATE BASIS IN CONFIRMING THE DISAL LOWANCE OF EXPENDITURE TO THE EXTENT OF ` 3 CRORES AND ` 0.50 CRORES. THUS IT WAS A CASE OF ESTIMATE MADE BY THE TAXING AUTHORITIES VERSUS AN ESTIMATE M ADE BY THE ASSESSEE. 11. THUS THE ASSESSEE CANNOT AT ALL BE SAID TO HAV E FURNISHED ANY INACCURATE PARTICULARS OF ITS INCOME AND THE PENALT Y LEVIED HAS CORRECTLY BEEN CANCELLED BY THE LD. CIT(A). 12. THE ORDER OF THE LD. CIT(A) IS THUS UNASSAILABL E AND IS HEREBY CONFIRMED. 13. IN THE RESULT THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.07.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14.07.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITA 2440(DEL)2011 10 TRUE COPY BY ORDER DEPUTY REGISTRAR