TULSIDAS V. PATEL P.LTD, MUMBAI v. DCIT 5(3), MUMBAI

ITA 2817/MUM/2012 | 1996-1997
Pronouncement Date: 31-07-2015 | Result: Allowed

Appeal Details

RSA Number 281719914 RSA 2012
Assessee PAN AAACT1639H
Bench Mumbai
Appeal Number ITA 2817/MUM/2012
Duration Of Justice 3 year(s) 3 month(s) 4 day(s)
Appellant TULSIDAS V. PATEL P.LTD, MUMBAI
Respondent DCIT 5(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 31-07-2015
Date Of Final Hearing 27-07-2015
Next Hearing Date 27-07-2015
Assessment Year 1996-1997
Appeal Filed On 26-04-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE S/SHRI A.D.JAIN (JM) AND RAJENDRA (AM) . . ./ I.T.A. NO. 2817 / MUM/20 1 2 ( / ASSESSMENT YEAR : 1996 - 97 ) M/S TULSIDAS V PATEL PVT.LTD. KANCHANJUNGA 72 PEDDER ROAD MUMBAI - 400026 / VS. THE ASSTT. COMMISSIONER OF INCOME TAX 5( 3) AAYAKAR BHAVAN M K ROAD MUMBAI - 400020 ( / APPELLA NT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAACT1639H / APPELLANT BY SHRI PRAKASH K JOTWANI / RSPONDENT BY SHRI S S RANA / DATE OF HEARING : 2 7. 7 . 201 5 / DATE OF PRONOUNCEMENT : 31 . 7. 201 5 / O R D E R PER A D JAIN ( J M) TH IS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007 - 08 TAKING THE FOLLOWING GROUNDS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW: - 1 . THE LEARNED CIT(A) ERRED IN QUANTIFYING THE PROFITS FOR THE YEAR UNDER CONSIDERATION IN WHICH THE KANCHANJUNGA PROJECT WAS DEEMED TO COMPLETED WITHOUT GIVING EFFECT TO THE EXPENSES PAYABLE TO COMPLETE THE SAID PROJECT. 2 . THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE COMPENSATION EXPENSES INCURRED FOR FEW FLATS CANCELLED AND RESOLD ALTHOUGH THE ADDITIONAL EVIDENCES FOR THE SAME WERE DULY VERIFIED AND ACCEPTED BY THE LEARNED ASSESSING OFFICER VIDE HIS REMAND REPORT DATED ITA NO. 2817 / MUM/20 12 2 08 - 03 - 2011 & 25 - 03 - 2 011 . 2 . THE B RIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A COMPANY ENGAGED IN THE CONSTRUCTION OF MULTI - STORIE D BUILDINGS AND SALE OF FLATS. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961 ON 18.3.1999 AT A TOTAL INCOME OF RS.1 26 24 540 / - AS AGAINST A RETURNED LOSS OF RS( - )437971/ - . THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE THE ASSESSEE WAS NOT SHOWING THE S A LE PROCEEDS FROM THE S A LE OF FLATS AT ITS INCOME BUT AS ADVANCES AGAINST THE PROJECT DU RING T HE FILING OF RETURN . THE ASSESSEES FIST APPEAL WAS ALLOWED BY THE LD. CIT(A) HOLDING THAT THE PROJECT WAS NOT COMPLETE. THE DEPARTMENT FILED A SECOND APPEAL AGAINST THE DECISION OF THE CIT (A). THE MUMBAI BENCH OF THE TRIBUNAL IN THE ASSESSEES CASE IN ITA NO.2363/MUM/2000 (AY - 1996 - 97) DATED 2.4.2007 VACATED THE RELIEF GIVEN BY THE FIRST LD. CIT(A). THE TRIBUNAL REMITTED THE MATTER OF QUANTIFICATION OF PROFITS TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE IN ACCORDANCE WITH LAW AND BY WAY OF A SPEAKING ORDER DEALING WITH THE CONTENTIONS /OBJECTIONS OF THE ASSESSEE. THE AO THEREAFTER COMPLETED THE ASSESSMENT VIDE ORDER DA T ED 24.12.2008 WHICH WAS D ISPUTED BEFORE THE CIT(A). THE AO HELD THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM OF ADDITIONAL EXPENSES CLAIMED TO HAVE BEEN INCURRED UP TO FINANCIAL YEAR 2004 - 05 WITH DOCUMENTARY EVIDENCE AND THAT SO THE SAME COULD NOT BE ALLOWED TO ARRIVE AT THE PROFIT /LOSS FROM THE KANCHANJUNGA PROJECT . THUS ONLY THE EXPENDITURE INCURRED BY THE ASSESSEE AS PER THE EARLIER ORDER OF THE A SSESSING O FFICER PASSED UNDER SECTION 143(3) OF THE ACT ON 18.3.1999 WAS ALLOWED. THE ASSESSEES INCOME FROM THE KANCHANJUNGA PROJECT WAS WORKED OUT AT RS.1 26 74 1 72/ - . 3 . WHEN THE MATTER WAS BEFORE THE LD.CIT(A) THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. THE AO FURNISHED REMAND REPORT DA TED 8.3.2011 BEFORE THE LD.CIT(A) . A COPY THEREOF HAS BEEN FILED BY ITA NO. 2817 / MUM/20 12 3 THE ASSESSEE AT ASSESSEES PAPER BOOK PAGES 93 - 10 1. A FURTHER REMAND REPORT DATED 25.3.2011 WAS ALSO FILED BY THE AO BEFORE THE LD. CIT(A). A COPY THEREOF HAS BEEN PLACED AT PAGES 102 TO 105 OF THE ASSESSEES PAPER BOOK. IN THE LA T TER REMAND REPORT THE AO OBSERVED (APB PG.105) THAT THE DOCUMENTARY EVI DENCE SUBMITTED BY THE ASSESSEE INCLUDED SUIT PAPERS AND THE ORDERS PASSED BY THE HONBLE HIGH COURT PURSUANT TO THE CONSENT TERMS AGREED TO BETWEEN THE ASSESSEE AND THE LITIGATING PARTIES UNDER WHICH THE ASSESSEE HA D PAID COMPENSATION OF RS.1 87 50 000 TO F OUR DIFFERENT PARTIES IN AY S 1999 - 2000 AND 2000 - 2001 AND THE NET EFFECT OF WHICH WAS DULY REFLECTED IN THEIR BOOKS OF ACCOUNT ; THAT HE ( THE AO) HAD EXAMINED THESE EVIDENCES FILED BY THE ASSESSEE BEFORE THE LD.CIT(A) AND HAD FOUND THEM TO BE TRUE A ND CORRECT AND PERTAINING TO THE EXPENSES AS CLAIMED BY THE KANCHANJUNGA PROJECT ; AND THAT HE ( THE AO) AGREED WITH THE ASSESSEES CONTENTION THAT SUCH EXPENSES BE ALLOWED AS DEDUCTION. 4 . THE LD. CIT(A) HOWEVER DISMISSED THE APPEAL FILED BY THE ASSESSEE. AGGRIEVED THE ASSESSEE IS BEFORE US. 5 . CHALLENGING THE IMPUGNED ORDER THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD.CIT(A) HAS ERRED IN QUANTIFYING THE PROFITS OF THE ASSESSEE FO R THE YEAR UNDER CONSIDERATION IN WHICH THE KANCHANJUNGA PROJE CT WAS DEEMED TO HAVE BEEN COMPLETED ; THAT WHILE DOING SO THE LD.CIT(A) HAS ERRED IN NOT GIVING EFFECT TO THE EXPENSES PAYABLE BY THE ASSESSEE IN ORDER TO COMPLETE THE PROJECT; THAT THE LD.CIT(A) HAS ERRED IN NOT ALLOWING HE COMPENSATION EXP ENSES INCURRED FOR A FEW FLATS CANCELLED A ND RESOLD EVEN THOUGH IN THE REMAND REPORT THE AO HAD DULY VERIFIED AND ACCEPTED THE SAID EXPENSES. 6 . THE LD. DR ON THE OTHER HAND HAS PLACED STRONG RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW AND HAS CONTENDED THAT SIN CE THE ITA NO. 2817 / MUM/20 12 4 ASSESSEE HAD FAILED TO PRODUCE PROPER EVIDENCE AND RELIABLE MATERIAL TO SHOW THAT THE EXPENSES HAD NOT BEEN CORRECTLY RECORDED IN THE ASSESSMENT YEARS 1997 - 08 TO 2009 - 10 SUCH EXPENSES WERE CORRECTLY CONFIRMED AS DISALLOWABLE. 7 . HAVING HEARD T HE PARTIES AND HAVING PERUSED THE MATERIAL ON RECORD WE FIND THAT THE GRIEVANCE OF THE ASSESSEE IS JUSTIFIED. THE ASSESSEE HAD MADE PROVISION OF EXPENSES DUE TO COURT CASES OF CUSTOMERS TO WHOM THE POSSESSION COULD NOT BE GIVEN. EVIDENCES IN THIS REGAR D WERE DULY FURNISHED BY THE ASSESSEE BEFORE THE AO IN THE REMAND PROCEEDINGS WHEN THE MATTER WAS REMITTED TO THE AO BY THE LD. CIT(A) IN THE SECOND ROUND OF LITIGATION. THE AO IT IS SEEN DULY TOOK ALL THE EVIDENCES INTO CONSIDERATION AND IT W A S THER EON THAT THE AO ACCEPTED THE EXPENSES TO BE ALLOWABLE TO THE ASSESSEE. IT WOULD BE APPROPRIATE TO REPRODUCE HEREUNDER THE RELEVANT PORTION OF THE AOS REMAND REPORT DATED 25.3.2011: THE DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE INCLUDE SUIT PAPER S AND THE ORDERS PASSED BY THE HONBLE HIGH COURT PURSUANT TO THE CONSENT TERMS AGREED BETWEEN THE ASSESSEE AND THE LITIGATING PARTIES UNDER WHICH THE ASSESSEE HAD PAID COMPENSATION OF RS.1 87 50 000 TO FOUR DIFFERENT PARTIES IN AY 1999 - 2000 AND 2000 - 200 1 AND THE NET EFFECT OF WHICH WAS DULY REFLECTED IN THEIR BOOKS OF ACCOUNT. NOW THAT THE ASSESSEE HAVING FILED THE RELEVANT DOCUMENTARY EVIDENCES BEFORE YOU AND I HAVING PERUSED THEM TO BE TRUE AND CORRECT AND PERTAINING TO THE EXPENSES AS CLAIMED BY THE ASSESSEE TOWARDS THE COST OF THE PROJECT KANCHANJUNGA AND AGREE WITH THE ASSESSEES CON T ENTION TH A T SUCH EXPENSES BE ALLOWED TO THEM AS DEDUCTIONS IF APPROVED 8 . THE LD. CIT(A) HOWEVER HAS WHILE WRONGLY CONFIRM ING THE DISALLOWANCE REMA INED OBLIVIOUS OF THE AFORESAID REMAND REPORT OF THE AO WHICH REMAND REPORT WAS CALLED FOR BY THE LD CIT(A) HIMSELF. IN ANY CASE THOUGH IN THE COMPUTATION OF ESTIMATION OF PROFIT (ASSESSEES PAPER BOOK PAGE - 1 THE ASSESSEE HAS CLAIMED RS.7 78 28 901/ - AS PROVISION FOR DAMAGES CLAIMED BY PERSONS WITH WHOM AGREEMENT S FOR ITA NO. 2817 / MUM/20 12 5 S A LE OF FLATS WERE ENTERED AND WHICH HAVE BEEN TERMINATED/ ABANDONED. THE LD. COUNSEL FOR THE ASSESSEE HAS STA T ED AT THE B AR THA T THE ASSESSEE SHALL REST SATISFIED IF THE ALLOWANCE AS PROPOSED BY THE AO IN THE REMAND REPORT (SUPRA) I.E. THE AMOUNT OF RS.1 87 50 000/ - IS ALLOWED. 9 . WE FIND THE STAND OF THE ASSESSEE TO BE JUSTIFIABLE. WE HAVE HEREINABOVE REPRODUCED THE RELEVANT PORTION OF THE REMAND REPORT. THE AO HAS WORKED OUT THE ALLOWA BLE EXPENSES ON THE BASIS OF DOCUMENTARY EVIDENCES. THE LD.CIT(A) HAS NOT TAKEN ANY OF THESE EVIDENCES INTO CONSIDERATION AND HAS WRONGLY OBSERVED THAT NEITHER PROPER EVIDENCES NOR RELIABLE MATERIAL WAS PLACED BEFORE HIM. THE REMAND REPORT OF THE AO DOE S NOT FIND EVEN AS MUCH AS A MENTION IN T HE IMPUGNED ORDER. THEREFORE THE ORDER UNDER APPEAL IS A RESULT OF COMPLETE MISREADING AND NON - READING OF MATERIAL DOCUMENTARY EVIDENCE BROUGHT ON THE FILE BY THE ASSESSE E AND THE REMAND REPO RT OF THE AO WHICH WAS MADE ON THE FACTUAL APPRECIATION OF SUCH DOCUMENTARY EVIDENCES. 10 . FOR THE ABOVE FINDING MERIT IN THE GRIE VANCE OF THE ASSESSEE THE SAME IS ACCEPTED AND THE AO IS DIRECTED TO ALLOW THE SUM OF RS.1 87 50 000/ - AS COMPENSATION EXPENSES INCURRED FOR NEW FLATS CANCELLED A ND RESOLD BY THE ASSESSEE. 11 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. PRONOUNCED ACCORDINGLY ON 31ST JULY 2015. 31 ST JULY 2015 SD SD ( / RAJENDRA) ( . . / A.D. JAIN ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ITA NO. 2817 / MUM/20 12 6 MUMBAI: JULY 2015 . . . ./ SRL SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / T HE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. / DR ITAT MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER TRUE COPY (ASSTT. REGISTRAR) /ITAT MUMBAI