Unity Yugal Builders & Devleopers, Pune v. Asst.CIT,Central Cir.2(2), Pune, Pune

ITA 365/PUN/2011 | 2007-2008
Pronouncement Date: 29-10-2013 | Result: Allowed

Appeal Details

RSA Number 36524514 RSA 2011
Assessee PAN AABFU8956C
Bench Pune
Appeal Number ITA 365/PUN/2011
Duration Of Justice 2 year(s) 6 month(s) 27 day(s)
Appellant Unity Yugal Builders & Devleopers, Pune
Respondent Asst.CIT,Central Cir.2(2), Pune, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 29-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-10-2013
Date Of Final Hearing 10-09-2013
Next Hearing Date 10-09-2013
Assessment Year 2007-2008
Appeal Filed On 01-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE: SHRI G. S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO. 365 /PN/201 1 ASSESSMENT YEAR : 2007 - 08 UNITY YUGAL BUILDERS & DEVELOPERS O FFICE NO. 10 11 12 4 TH FLOOR SUYASH PLAZA 976/58 BHANDARKAR ROAD PUNE VS. ASST. COMMISSIONER OF INCOME TAX CENTRAL CIR. - 2(2) PUNE (APPELLANT) (RESPONDENT) PAN NO. AABFU8956C APPELLANT BY: SHRI CHETAN A. KARIA RESPONDENT BY: SMT. M.S. VERM A DATE OF HEARING : 10 - 09 - 2013 DATE OF PRONOUNCEMENT : 29 - 10 - 2013 ORDER P ER R.S. PADVEKAR JM : - IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(CENTRAL) PUNE DATED 07 - 02 - 2011 PASSED U/S. 263 OF THE INCOME - TAX ACT 1961 FOR THE A.Y. 2007 - 08. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN PASSING ORDER U/S. 263 DIRECTING DISALLOWANCE OF RS. 1 18 00 000/ - AND THE SAME IS WITHOUT JURISDICTION AND BAD IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN HOLDING THAT ASSESSMENT ORDER U/S. 143(3) DATED 31.12.2008 PASSED BY ASST . COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(2) PUNE IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3. THE LEARNED COMMIS SIONER OF INCOME TAX ERRED IN HOLDING THAT EXPENSES AMOUNTING TO RS. 1 18 00 000/ - ARE DISALLOWABLE UNDER PROVISO TO SECTION 69C. 4. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN HOLDING THAT DISALLOWANCE OF THE SAID AMOUNT IS CALLED FOR IN A Y 2007 - 08. 2. THE BRIEFLY STATED FACTS ARE AS UNDER. THE ASSESSEE IS BUILDERS AND DEVELOPERS. THERE WAS A SEARCH AND SEIZURE OPERATION U/S. 132 OF THE 2 ITA NO. 365/PN/2011 UNITY YUGAL BUILDERS & DEVELOPERS PUNE INCOME - TAX ACT AGAINST ONE SHRI N.K. MUNDADA ON 16 - 11 - 2006 AND IN THE SEARCH AND SEIZURE OPERATION CERTAIN LOOSE PA PERS WERE FOUND FROM WHICH IT WAS REVEALED THAT THE PAYMENT OF RS.1 18 80 000/ - IS MADE IN RESPECT OF PURCHASE OF FOUR PLOTS OF LAND IN BANER AT PUNE. SHRI N.K. MUNDADA IS PARTNER OF THE ASSESSEE FIRM. THE SEARCH WAS ALSO CARRIED OUT U/S. 132 OF THE ACT IN THE CASES OF THE SELLER OF PLOTS I.E. SHRI TINDER SINGH AHLUWALIA AS WELL AS AGAIN THE ASSESSEE FIRM ON 20 - 11 - 2006. THE ASSESSEE ADMITTED THE PAYMENT ON THE ON - MONEY AND DECLARED UNDISCLOSED INCOME OF RS.1.18 CRORES IN THE HANDS OF THE ASSESSEE FIRM TO WARDS ON - MONEY PAYMENT SPREADING OVER INTO THE TWO ASSESSMENT YEARS. ASSESSMENT YEARS AMOUNT 2006 - 07 RS.15 00 000/ - 2007 - 08 RS.1 03 00 000/ - ________________ _ TOTAL RS.1 18 00 000/ - 3. THE ASSESSMENT OF THE ASSE SSEE FIRM HAS BEEN COMPLETED FOR THE A.Y. 2006 - 07 U/S. 153A R.W.S. 143(3) AND FOR THE A.Y. 2007 - 08 U/S. 143(3) OF THE ACT. SUBSEQUENTLY THE LD. CIT EXERCISING HIS POWERS U/S. 263 OF THE I.T. ACT SET ASIDE THE ASSESSMENT ORDER BY HOLDING THAT THE ASSESSME NT ORDER PASSED BY THE ASSESSING OFFICER FOR THE A.Y . 2007 - 08 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND DIRECTED THE ASSESSING OFFICER TO RE - COMPUTE THE INCOME OF THE ASSESSEE FOR THE A.Y. 2007 - 08 AFTER DISALLOWING THE DEDUCTION CLAIM ED BY THE ASSESSE FOR RS.1.18 CRORES. THE REASONS GIVEN FOR EXERCISING HIS POWERS U/S. 263 BY THE LD. CIT(A) IN THE SHOW CAUSE NOTICE ARE REPRODUCED IN THE IMPUGNED ORDER WHICH ARE AS UNDER: 'DURING THE COURSE OF A SEARCH OPERATION IN SOLAPUR AT THE RESID ENCE OF SHRI. N. K. MUNDADA ON 16 TH AND 17 TH NOV. 2006 CERTAIN LOOSE PAPERS FOUND INDICATED THAT THE FIRM M/S UNITY YUGAL BUILDERS AND DEVELOPERS PUNE IN WHICH SHRI. N. K. MUNDADA IS A PARTNER (2% SHARE) HAD MADE 'ON - MONEY' PAYMENT OF RS. 1 18 80 000/ - TO THE SELLER OF 4 PLOTS OF LAND IN BANER AREA IN PUNE. ON THE BASIS OF THIS INFORMATION AN ACTION U/S 132 WAS CONDUCTED IN THE CASES OF SELLER I.E. SHRI TINDER SINGH AHLUWALIA AS WELL AS BUYER 3 ITA NO. 365/PN/2011 UNITY YUGAL BUILDERS & DEVELOPERS PUNE OF THE LAND I.E. M/S UNITY YUGAL BUILDERS AND DEVELOPERS ON 20 .11.2006. DURING THE COURSE OF THE SEARCH BOTH THE PARTIES ADMITTED TO THE ON MONEY TRANSACTION. AS THE SOURCE OF THIS EXPENDITURE COULD NOT BE EXPLAINED SHRI. MUKESH KARWA WHO IS THE MAIN PERSON MANAGING THE AFFAIRS OF M/S UNITY YUGAL BUILDERS AND DEVE LOPERS MADE A DISCLOSURE OFRS. 1.18 CRORES IN THE HANDS OF THE FIRM ON ACCOUNT OF THE CASH PAYMENT. YOU FILED YOUR RETURN OF INCOME ON 31.07.2007 DECLARING INCOME OF RS. 1 01 29 840/ - . THE PROFIT AND LOSS ACCOUNT FOR A. Y. 2007 - 08 IS GIVEN BELOW: - PARTICUL ARS AMOUNT RS. PARTICULARS AMOUNT RS. TO TRANSFER FROM PLOT A/ C 28074089. 00 BY CIVIL WORK CHARGES 167636.00 TO MATERIAL PURCHASED TO DIRECT EXPS ADVERTISEMENT 109064.50 BHOOMI PUJAN EXPS. 7540 .00 BOREWELL EXPS. 1000.00 COMPUND WALL EXPS. 4485.00 DEPARTMENTAL LABOUR 20 8812.00 ELECTRICITY EXPS. 1 8200. 00 GOVT. LEGAL EXPS. 326839.00 LIASONING EXPS. 86650.00 PROFESSIONAL/SUPERVISION 162665.50 SITE DEVELOPMENT EXPS. 155045.00 ARCHITECT FEES 25000.00 INTEREST 286913.00 139 2214.00 TO GROSS PROFIT 33527.00 BYCLOSING STOCK & WIP 31714668.00 31882304.0 0 31882304.00 TO ACCOUNT WRITING CHARGES 12000.00 BY GROSS PROFIT 33527.00 TO BANK CHARGES 50555.00 BY INTEREST INCOME TO DEPRECIATION 9300.00 INTERES T ON FDCC 3115.00 TO LEGAL EXPS (BANK) 105780.00 INTEREST ON LOAN 14169.00 TO BANK INTEREST 26901.00 INTEREST ON SDR 12119.00 57403.00 TO POSTAGE & COURIER 1485.00 TO PROFESSIONAL FEES 25732.00 BY INCOME DECLARED U/S. 132(4) TO TENDER FEES 10000.00 FOR A. Y. 2006 - 07 1500000.00 TO SUNDRY EXPS. 3854.00 FOR A.Y. 2007 - 08 10300000.00 10300000.00 ( 11800000.00 TO NET PROFIT U/S. 44AD 13411.00 NET PROFIT 11625412.00 11638823 11890930 11890930.00 4 ITA NO. 365/PN/2011 UNITY YUGAL BUILDERS & DEVELOPERS PUNE IT IS SEEN THAT THE PLOT WHICH WAS SHOWN AS INVESTMENT IN A.Y. 2006 - 07 AT RS.1 62 74 089/ - HAS BEEN TRANSFERRED TO THE DEBIT OF PROFIT & LOSS ACCOUNT AFTER ADDING THE UNEXPLAINED EXPENDITURE OF RS.1 18 00 000/ - . THUS THE DEBIT TO THE PROFIT & LOSS ACCOUNT IS OF RS.2 80 74 089/ - (1 62 74 089 + 1 18 00 000). THE AMOUNT OF RS. 1 18 00 000/ - IS INCLUDED IN THE CLOSING STOCK OF RS. 3 17 14 668/ - AND THERE IS ALS O A SEPARATE CREDIT FOR RS. 1 18 00 000/ - IN THE PROFIT & LOSS ACCOUNT. AS PER THE PROVISIONS OF SECTION 69C OF THE INCOME TAX ACT UNEXPLAINED EXPENDITURE IS DEEMED TO BE THE INCOME OF THE ASSESSES FOR THE FINANCIAL YEAR IN WHICH THE EXPENDITURE IS INCURR ED. THE CREDIT OF RS.1 18 00 000/ - TO THE PROFIT AND LOSS ACCOUNT TAKES CARE OF THIS STIPULATION. HOWEVER YOU HAVE ALSO CLAIMED DEDUCTION FOR THIS EXPENDITURE BY MAKING IT A PART OF THE PLOT ACCOUNT WHICH IS DEBITED TO THE PROFIT & LOSS ACCOUNT. AS PER TH E PROVISO TO SECTION 69C SUCH UNEXPLAINED EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION UNDER ANY HEAD OF INCOME. THE DEDUCTION CLAIMED FOR RS.1 18 00 000/ - WAS THEREFORE REQUIRED TO BE DISALLOWED WHILE COMPUTING YOUR TOTAL INCOME FOR A. Y. 2007 - 08. TH E AO HAS NOT DISALLOWED THE DEDUCTION. THE ORDER U/S 143(3) FOR A.Y. 2007 - 08 DATED 31.12.2008 IS THUS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. YOU ARE THEREFORE REQUESTED TO SHOW CAUSE AS TO WHY THE SAID ORDER SHOULD NOT BE SET ASIDE OR MODI FIED.' 4. THE ASSESSEE FILED THE REPLY RESISTING THE ACTION OF THE LD. CIT. T HE ASSESSEE STATED BEFORE THE LD. CIT THAT THE ASSESSEE HAS OFFERED THE ENTIRE AMOUNT FOR TAX AND THE SAID DISCLOSURE WILL NOT HIT BY PROVISO TO SEC. 69C OF THE ACT. IT WAS FURT HER STATED THAT AS THE ASSESSEE HAS DECLARE D THE INCOME TO THE EXTENT OF RS.1.18 CRORES THE COST IS EXPLAINED AND IT CANNOT BE SAID THAT THE SOURCE REMAINS TO BE UNEXPLAINED. THE ASSESSEE ALSO EXPLAINED THAT AS THE AMOUNT OF ON - MONEY PAYMENT WAS PERTAINI NG TO THE PURCHASE COST OF THE PLOT S OF LAND THE SAME WAS ADDED TO THE WIP IN THE A.Y. 2006 - 07 AND THE SAME WAS TAKEN AS A N OPENING WIP IN THE A.Y. 2007 - 08 AND AGAIN THE SAID AMOUNT IS SHOWN AS A WIP IN THE SAID YEAR. THE ASSESSEE ALSO PLEADED THAT THE FACTS ARE MISAPPROPRIATED BECAUSE THE 5 ITA NO. 365/PN/2011 UNITY YUGAL BUILDERS & DEVELOPERS PUNE CLOSING STOCK IS INCREASED BY COST OF PLOT S INCLUSIVE OF RS.1 18 00 000/ - AND THE SAME IS CARRIED FORWARD IN THE SUBSEQUENT YEAR S . THE ASSESSEE ALSO CONTENDED THAT THE ASSESSEE HAS TAKEN THE DOUBLE EFFECT BY WAY OF IN CLUSION OF ON - MONEY PAYMENT IN THE COST OF THE PLOT S AND SHOWING FURTHER AS AN OPENING STOCK IN THE A.Y. 2007 - 08 AND AT THE SAME TIME SHOWING THE SAME AMOUNT IN THE CLOSING STOCK / WIP. THE ASSESSEE ALSO SUBMITTED THAT OTHERWISE ALSO PROVISO TO SEC. 69C HAS NOT APPLICA BLE TO THE AMOUNT DECLARED BY THE ASSESSEE. THE LD. CIT WAS NOT IMPRESSED WITH THE EXPLANATION OF THE ASSESSEE AND HE HELD THAT THE ASSESSMENT ORDER FOR THE A.Y . 2007 - 08 PASSED U/S. 143(3) DATED 31 - 12 - 2008 IS ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE AND DIRECTED THE ASSESSING OFFICER TO RE - COMPUTE THE INCOME AFTER DISALLOWING THE DEDUCTION TO THE EXTENT OF RS.1 18 00 000/ - . THE OPERATIVE PARTS OF THE REASONS GIVEN BY THE LD. CIT ARE AS UNDER: I. IT IS THE CLAIM OF THE ASSESSE E THAT THE MOMENT THE AMOUNT OF RS. 1 18 00 OOO/ - IS OFFERED FOR TAX THE SOURCE OF THE EXPENDITURE NO MORE REMAINS UNEXPLAINED. I AM UNABLE TO ACCEPT' THIS ARGUMENT OF THE ASSESSEE. THE ASSESSEE IS FORGETTING THE FACT THAT IN THE FIRST INSTANCE THE AMOUN T WAS OFFERED FOR TAX PRECISELY BECAUSE THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE SOURCE OF THE EXPENDITURE. THE EXPENDITURE WAS ON PAYMENT OF 'ON - MONEY' FOR PURCHASE OF LAND. THIS EXPENDITURE WAS NOT RECORDED IN THE ASSESSEE'S BOOKS AND HE WAS OTHERWISE UN ABLE TO EXPLAIN THE SOURCE OF THE EXPENDITURE. THE NATURE OF THE EXPENDITURE AS ONE THE SOURCE OF WHICH IS UNEXPLAINED IS NOT ALTERED BY OFFERING THE AMOUNT FOR TAX. II. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE DISALLOWANCE CANNOT BE MADE AS THE AS SESSEE HAS PAID TAX ON THE DECLARED INCOME OF RS.1 18 00 000/ - . THE DECLARATION OF THE AMOUNT OF RS. 1 18 00 000/ - AND PAYMENT OF TAX THEREON TAKES CARE OF THE STIPULATION IN THE MAIN PART OF SECTION 69C. AS PER THE SAID SECTION IF AN ASSESSEE HAS INCURRE D ANY EXPENDITURE AND HE FAILS TO EXPLAIN THE SOURCE OF THE EXPENDITURE THE AMOUNT COVERED BY SUCH EXPENDITURE IS DEEMED AS ASSESSEE'S INCOME FOR THE FINANCIAL YEAR IN WHICH THE EXPENDITURE IS INCURRED. THE ASSESSEE'S CLAIM OF DEDUCTION FOR THE EXPENDITUR E ON THE OTHER HAND IS REQUIRED TO BE 6 ITA NO. 365/PN/2011 UNITY YUGAL BUILDERS & DEVELOPERS PUNE DISALLOWED BY VIRTUE OF THE PROVISO TO SECTION 69 C. AS PER THIS PROVISO NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THE ACT SUCH UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE THE INCOME OF THE ASS ESSEE SHALL NOT BE ALLOWED AS DEDUCTION UNDER ANY HEAD OF INCOME. THE ASSESSEE'S CONTENTION THAT AS THE AMOUNT IS TAXED THE DISALLOWANCE CANNOT BE MADE IS THEREFORE NOT CORRECT. SECTION 69C READ WITH ITS PROVISO PROVIDES FOR BOTH TAXING OF THE UNEXPLAIN ED EXPENDITURE AS ALSO DISALLOWANCE OF DEDUCTION FOR THE EXPENDITURE. III. THE ASSESSEE'S NEXT ARGUMENT IS THAT THE DEBIT OF RS. 1 18 00 000/ - TO THE PROFIT AND LOSS ACCOUNT IS NULLIFIED BY INCLUSION OF THE SAME AMOUNT IN THE CLOSING STOCK WHICH APPEARS ON THE CREDIT SIDE OF THE PROFIT AND LOSS ACCOUNT. I AM UNABLE TO ACCEPT THIS ARGUMENT ALSO. THE EXPENDITURE OF RS.1 18 00 000/ - HAS BEEN INCURRED ON PURCHASE OF LAND WHICH IS STOCK IN TRADE. THIS AMOUNT IS THEREFORE REQUIRED TO BE CONSIDERED IN THE VALUE OF THE CLOSING STOCK AS THE ASSESSEE HAS VALUED THE STOCK AT COST. THE INCLUSION OF THE AMOUNT IN THE VALUE OF CLOSING STOCK CANNOT HOWEVER TAKE CARE OF THE DISALLOWANCE AS REQUIRED BY THE PROVISO TO SECTION 69C. THE DISAL LOWANCE IS REQUIRED TO BE MADE DESPITE THE INCLUSION OF THE AMOUNT IN THE VALUE OF CLOSING STOCK. IT IS TRUE THAT BUT FOR THIS PROVISO THE ASSESSEE WOULD HAVE BEEN ENTITLED TO DEBIT THE SAID AMOUNT TO THE PROFIT AND LOSS ACCOUNT AS IT IS ASSESSEE'S BUSIN ESS EXPENDITURE. HOWEVER BECAUSE OF THIS PROVISO THE ASSESSEE IS NOT ENTITLED TO DO SO. IV. THE ASSESSEE'S NEXT CLAIM IS THAT THE CREDIT OF THE SALE ONSIDERATION OF RS. 5 64 43 260/ - IN THE A.Y. 2009 - 10 WHEN THE LAND IN QUESTION WAS SOLD REPRESENTS THE COST OF THE LAND INCLUSIVE OF RS. 1 18 00 000/ - AND PROFIT MARGIN THEREON. IT IS CLAIMED THAT IN VIEW OF THIS CREDIT IN A.Y. 2009 - 10 THERE IS NO NEED FOR DISALLOWANCE IN ASSESSMENT YEAR 2007 - 08. THIS CONTENTION OF THE ASSESSEE HAS NO FORCE. THE SAID SALE CONSIDERATION IS REQUIRED TO BE CREDITED TO THE PROFIT AND LOSS ACCOUNT IN THE YEAR OF SALE AS PER NORMAL ACCOUNTING PRINCIPLES AND THE ASSESSEE WOULD GET DEBIT FOR THE OPENING STOCK WHICH IS INCLUSIVE OF THE AMOUNT OF RS. 1 18 00 000/ - . THE DISALLOWANCE IN A.Y. 2007 - 08 AS ALREADY INDICATED IS BY VIRTUE OF THE PROVISO TO SECTION 69C. V. THE ASSESSEE HAS POINTED OUT THAT ITS GROSS PROFIT PERCENTAGE IN A.Y. 2009 - 10 IN WHICH THE LAND IN QUESTION WAS SOLD IS 15.16%. IF 7 ITA NO. 365/PN/2011 UNITY YUGAL BUILDERS & DEVELOPERS PUNE THE AMOUNT OF RS. 1 18 00 000/ - WHICH I S DEBITED TO THE PROFIT AND LOSS ACCOUNT IN A.Y. 2007 - 08 AS PART OF THE LAND COST IS DISALLOWED THEN THE GROSS PROFIT PERCENTAGE IN A.Y. 2009 - 10 WILL GO UP TO 36.06% WHICH IS EXORBITANT IN THE ASSESSEE'S LINE OF BUSINESS. THE ASSESSEE THEREFORE CLAIMS TH AT THERE IS NO CASE FOR THE DISALLOWANCE OF THE EXPENDITURE. IT SHOULD BE STATED IN REPLY THAT WHAT IS PROPOSED IS ONLY THE DISALLOWANCE OF THE EXPENDITURE OF RS.1 18 00 000/ - WHICH IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OF A. Y. 2007 - 08. THERE IS NO P ROPOSAL TO REVISE THE CLOSING STOCK OF A.Y. 2007 - 08 AND THEREBY THE OPENING STOCK OF A.Y. 2009 - 10. THE OPENING STOCK OF A.Y. 2009 - 10 WILL REMAIN THE SAME AND THE PROFIT PERCENTAGE FOR THAT YEAR WILL ALSO REMAIN THE SAME. VI. THE LAST CONTENTION OF THE ASSE SSEE IS THAT NO DEDUCTION IS CLAIMED FOR THE EXPENDITURE IN A.Y. 2007 - 08 AS IT FORMS PART OF THE CLOSING STOCK OF THE YEAR WHICH IS CARRIED FORWARD TO THE NEXT YEAR. THIS IS NOT CORRECT. IT IS EVIDENT FROM THE PROFIT AND LOSS ACCOUNT FOR THE A.Y. 2007 - 08 T HAT THE EXPENDITURE IN QUESTION IS DEBITED TO THE ACCOUNT AS A PART OF THE PLOT ACCOUNT. THE ASSESSEE DOES NOT CONTEST THIS. THE ASSESSEE HAS THUS CLAIMED DEDUCTION FOR THE EXPENDITURE IN A.Y. 2007 - 08. NOW THE ASSESSEE BEING AGGRIEVED BEFORE US. 5. WE HA VE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LEARNED COUNSEL SUBMITS THAT THE AGREEMENT TO SALE OF THOSE PLOTS WAS EXECUTED ON 09 - 01 - 2006. HE SUBMITS THAT THE ASSESSEE DECLARED RS.1 18 00 000/ - EVEN THOUGH NO INCRIMINATING MA TERIAL WAS FOUND IN THE SEARCH AND SEIZURE OPERATION AGAINST THE ASSESSEE FIRM. HE ARGUES THAT THE ASSESSEES CASE IS COVERED U/S. 69B AND NOT U/S. 69C OF THE ACT. THE INVESTMENT WAS NOT MADE BY THE ASSESSEE FIRM BUT WAS MADE BY THE PARTNERS. HE FURTHER ARGUES THAT PRESUMING THAT SEC. 69C IS APPLICABLE BUT ADMITTEDLY IN THE A.Y. 2007 - 08 THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION AND HENCE NO DISALLOWANCE AT LEAST IN THE A.Y. 2007 - 08 CAN BE MADE. THE LEARNED COUNSEL ALSO EXPLAINED THE PROFIT AND LOSS AC COUNT FOR THE A.Y. 2007 - 08 AND SUBMITS THAT AS IN THE OPENING 8 ITA NO. 365/PN/2011 UNITY YUGAL BUILDERS & DEVELOPERS PUNE BALANCE OF THE WIP/STOCK (TRANSFER FROM PLOT ACCOUNT) THE AMOUNT DECLARED TOWARDS ON - MONEY PAYMENT IS INCLUDED AS A PURCHASE COST OF THE PLOT S AND S AME WAY IN THE CLOSING STOCK / WIP I.E. RS.3 17 14 668/ - THE SAID AMOUNT IS ALSO INCLUDED. HE SUBMITS THAT SO FAR AS THE PLOTS OF LAND ARE CONCERNED NO WORK WAS DONE NOR THERE IS ANY SALE IN THE A.Y. 2007 - 08. HE SUBMITS THAT IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAS SHOWN THE INCOME OFFERED T O THE EXTENT OF RS.1 18 00 000/ - AND DECLARED THE PROFIT OF RS. 1 16 38 823/ - . HE THEREFORE PLEADED THAT AS OTHERWISE ALSO THE ASSESSEE HAS NOT CLAIM ED ANY EXPENDITURE THERE IS NO QUESTION THAT PROVISO TO SEC. 6 9C IS APPLICABLE. PER CONTRA THE LD. DR SUPPORTED THE ACTION OF THE LD. CIT AND ALSO FILED RETURN SUBMISSION WHICH IS TAKEN INTO CONSIDERATION. 6. IN THE PRESENT CASE WE NEED NOT GO TO THE DEBATE ON THIS ISSUE WHETHER THE AMOUNT DECLARED BY THE ASSESSEE FIRM TOWARDS ON - MONEY PAYMENT IS RIGHT OR WRONG AS ADMITTEDLY THE ASSESSEE HAD PAID THE TAX ON THAT AND ALSO ADMITTED THAT THERE WAS UNACCOUNTED PAYMENT MADE TOWARDS PURCHASE OF THE PLOT S OF LAND AT BANER IN PUNE. ADMITTEDLY AS THE ASSESSEE IS A BUILDERS AND DEVELOPERS AND THE ASSESSEE HAS SHO WN ON - MONEY PAYMENT AS A COST OF THE PLOT S OF LAND AND THE SAME IS TREATED AS STOCK - IN - TRADE THEN WHAT IS COVERED IN THE DECLARATION MADE BY THE ASSESSEE FIRM TOWARDS ON - MONEY PAYMENT IS EXPENDITURE. THIS TRIBUNAL HAS AN OCCASION TO EXPLAIN THE SEC. OF SE C. 269C IN THE CASE OF CHANDULAL SADHURAM KHEMANI VS. ACIT (CENTRAL) CIRCLE - 2 NASHIK AND VICE VERSA IN ITA NOS. 370 TO 376 AND 383 TO 389/PN/2008 AND IT IS HELD AS UNDER: 55. NOW THE REVENUE HAS RAISED THE GRIEVANCE AGAINST THE ACTION OF THE LD CIT(A) DEL ETING THE ADDITIONS MADE BY THE A.O BY APPLYING THE PROVISO TO SEC. 69C TO THE PRORATE COST OF THE LANDS WHICH WERE SOLD IN THE RESPECTIVE ASSESSMENT YEARS. THERE ARE TWO ISSUES TO BE CONSIDERED (1) WHETHER THE LD CIT(A) IS JUSTIFIED IN HOLDING THAT THE I NVESTMENT MADE BY THE ASSESSEE IN THE STOCK OF THE PROPERTIES/LAND SHOWN AS ON 1.4.1997 IS COVERED U/S. 69 AND NOT U/S. 69C AS THE SAME AMOUNTS TO INVESTMENT AND (2) THE PROVISO TO SEC. 69C IS NOT APPLICABLE AS THE SAME WAS BROUGHT ON THE STATUTE W.E.F. 1. 4.1999 9 ITA NO. 365/PN/2011 UNITY YUGAL BUILDERS & DEVELOPERS PUNE AND ASSESSEES INVESTMENT IN THE STOCK IN TRADE OF LAND/PROPERTIES IS PRIOR TO INSERTION OF THE SAID PROVISO. 56. SEC. 69C AFTER THE INSERTION OF PROVISO READS AS UNDER: 69C. WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF OR THE EXPLANATION IF ANY OFFERED BY HIM IS NOT IN THE OPINION OF THE [ASSESSING] OFFICER SATISFACTORY THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF AS THE CASE M AY BE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR:] [PROVIDED THAT NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT SUCH UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE SHALL NOT BE ALLOWED AS A DEDUCTION UNDER ANY HEAD OF INCOME.] 57. SO FAR AS THE PRESENT ASSESSEE IS CONCERNED IT IS NOT DISPUTED THAT HE IS IN THE BUSINESS OF REAL ESTATE AND LAND DEVELOPMENT. AS PER THE FACTS ON RECORD HE PURCHASES THE LAND CARRIES OUT THE DE VELOPMENTS LIKE MAKING THE LAY OUT PLOTTING ETC. AND SELL THE SAME AS DISCUSSED EARLIER. THE ASSESSEE CLAIMED THAT THE EXPENDITURE ON THE PURCHASE OF LANDS IS ALLOWABLE AS THE DEDUCTION ON PRO RATA BASIS AGAINST THE SALE PRICE WHENEVER THE SAID LANDS ARE SOLD. THE A.O. WAS OF THE OPINION THAT AS THE ASSESSEE WAS NOT THE INVESTOR BUT HE WAS IN THE BUSINESS OF DEVELOPING AND TRADING OF THE LANDS HENCE WHATEVER PURCHASE PRICE HE HAS INCURRED FOR ACQUIRING THE STOCK OF LANDS DECLARED BY THE ASSESSEE AS ON 1.4.1997 IS COVERED U/S. 69C OF THE ACT. IN OUR OPINION THE VIEW TAKEN BY THE A.O IN RESPECT OF THE APPLICABILITY OF SEC. 69C IS THE CORRECT VIEW AS NOWHERE IT IS THE CASE THAT HE IS THE INVESTOR AND NOT IN THE BUSINESS OR DEVELOPMENT OF LANDS. SEC. 69 C SPECIFICALLY DEALS WITH THE EXPENDITURE AND SEC. 69 DEALS WITH THE INVESTMENT. 58. NOW THE NEXT QUESTION IS WHETHER THE PROVISO INSERTED TO SEC. 69C IS APPLICABLE TO THE ASSESSEE MORE PARTICULARLY IN THE CONTEXT OF THE EXPENDITURE INCURRED FOR ACQUIRIN G STOCK OF THE LANDS WHICH WAS DECLARED BY THE ASSESSEE AS ON 1.4.1997. ADMITTEDLY IN THE PRESENT CASE THE STOCK OF THE LANDS DECLARED BY THE ASSESSEE AS ON 1.4.1997 WAS NEVER OFFERED FOR TAXATION NOR THE SOURCE OF THE SAID AMOUNT WAS EXPLAINED. THE AS SESSEE WAS GIVEN RELIEF IN HIS APPEALS DUE TO THE REASON THAT THERE ARE LIMITATIONS IN THE CONTEXT OF THE PERIOD ON THE POWERS OF THE A.O. AS PER PROVISIONS OF SEC. 153A(1)(B) TO ASSESS OR RE - ASSESS THE INCOME OF THE SEARCHED PERSON BEYOND THE PERIOD OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE A.Y RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH IS CONDUCTED. AS THE ASSESSEE SUCCEEDED IN GETTING THE RELIEF AS HIS TRANSACTIONS ARE PRIOR TO THE PERIOD PROVIDED U/S. 153A(1)(B) IT DOES NOT MEAN THAT ALL HIS TRANSACTIONS IN LAND ARE DISCLOSED TRANSACTIONS BUT THE SAME REMAINED UNEXPLAINED AND IN FACT COVERED WITHIN THE PROVISO TO U/S. 69C BUT CANNOT BE BROUGHT TO TAX. SO FAR AS THE PROVISO TO SEC. 69C IS CONCERNED THE SAME IS INTRODUCED BY FIN ANCE (NO.2) ACT 1998 W.E.F. 1.4.1999 AND EFFECTIVELY THE SAME IS APPLICABLE FROM THE A.Y. 1999 - 2000. IT IS WELL SETTLED RULE IF INTERPRETATION IF THE LEGISLATURE HAS SPECIFIED THE 10 ITA NO. 365/PN/2011 UNITY YUGAL BUILDERS & DEVELOPERS PUNE DATE WHILE INTRODUCING OR AMENDING ANY STATUTORY PROVISIONS THEN THE SAID PROVISION WILL BE APPLICABLE FROM THE DATE SPECIFIED BY THE LEGISLATURE. IN OUR OPINION THE PROVISO TO SEC. 69C IS A SUBSTANTIVE PROVISION AND CAN NOT HAVE RETROSPECTIVE APPLICATION AS IT AFFECTS SUBSTANTIVE RIGHT OF THE PERSON. WE HAVE ALREADY HELD T HAT TO THE EXTENT OF THE 5 TRANSACTIONS THOSE ARE PRIOR TO 1.4.1997 AND 3 TRANSACTIONS WE HAVE SET ASIDE TO THE FILE OF A.O FOR VERIFICATION. IT IS ALSO WELL SETTLED PRINCIPLE THAT IF THE TRANSACTION IS DONE INTO A PARTICULAR FINANCIAL YEAR THEN THE LAW APPLICABLE TO THAT F.Y. WILL GOVERN. ADMITTEDLY THE PROVISO TO SEC. 69C IS APPLICABLE FROM THE A.Y. 1999 - 2000 THE SAME WILL NOT APPLY TO THE COST INCURRED BY THE ASSESSEE FOR ACQUIRING THE STOCK OF LAND PRIOR TO 1.4.1997. WE THEREFORE CONFIRM THE VIEW TAKEN BY THE LD CIT(A) THAT NO DISALLOWANCE CAN BE MADE BY APPLYING PROVISO TO SEC. 69C TO THE PRO RATA COST OF THE LANDS SOLD BY THE ASSESSEE IN THE A.YS. BEFORE US OUT OF THE STOCK OF LAND HELD BY HIM AS ON 1.4.1997. 7. IN THIS CASE EVEN IF ON PRI NCIPLE WE AGREE WITH THE LD. CIT THAT THE AMOUNT DECLARED BY THE ASSESSEE TOWARDS THE ON - MONEY PAYMENT WILL COVER UNDER PROVISO TO SEC. 69C AND BUT AT THE SAME TIME AS THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION IN RESPECT OF THE SAID AMOUNT AND AS PER THE STATEMENT MADE BY THE LEARNED COUNSEL THERE IS NO SALE OF ANY PLOT OR ANY INCOME PERTAINING TO THE SAID PLOT S SO AT LEAST IN THE A.Y. 2007 - 08 ORDER CANNOT BE SAID TO BE ERRONEOUS. THE AMOUNT DECLARED BY THE ASSESSEE TOWARDS THE ON - MONEY PAYMENT TOWARDS T HE PURCHASE OF THE PLOT S OF LAND IS IN THE NATURE OF THE REVENUE EXPENDITURE AND THE DISALLOWANCE OF THE SAME CAN BE CONSIDERED WHEN THE ASSESSEE HAS CLAIMED THE DEDUCTION SUBSEQUENT TO THE A.Y. 2007 - 08 BUT NOT IN THIS YEAR. 8. THE LAW IS WELL SETTLED BY THE PLETHORA OF DECISION S INCLUDING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC) THAT TWO MANDATES MUST BE FULFILL FOR EXERCISING THE POWERS U/S. 263 BY THE LD. CIT I.E. (I) THE ORDER MUST BE ERRONEOUS AND (II) IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN OUR OPINION AS THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION IN THE A.Y. 2007 - 08 EVEN IF THE COST OF PURCHASE OF THE PLOT IS ADDED TO 11 ITA NO. 365/PN/2011 UNITY YUGAL BUILDERS & DEVELOPERS PUNE THE STOCK - IN - TRADE PROVISO TO SEC. 69C CANNOT BE APPLIED AT LEAST IN THE A.Y. 2007 - 08 AND HENCE THE ASSESSMENT ORDER FOR THE A.Y. 2007 - 08 CANNOT BE SAID TO BE ERRONEOUS. WE THEREFORE ALLOW THE GROUNDS TAKEN BY THE ASSESSEE AND QUASH THE ORDER PASSED BY THE LD. CIT U/S. 263 DATED 07 - 04 - 2011. THE LEARNED COUNSEL SUBMITS THAT HE IS NOT PRESSING GROUND NO. 4. AS GROUND NO. 4 IS NOT PRESSED THE SAME IS DISMISSED AS NOT PRESSED . 9. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29 - 10 - 2013 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE DATED : 29 TH OCTOBER 20 1 3 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(C) PUNE 4 THE CIT PUNE 5 THE DR ITAT A BENCH PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE