DCCC-9, MUMBAI v. FALGU INTERNATIONAL, MUMBAI

ITA 5128/MUM/2009 | 2007-2008
Pronouncement Date: 18-03-2011 | Result: Dismissed

Appeal Details

RSA Number 512819914 RSA 2009
Assessee PAN AAAFF1714C
Bench Mumbai
Appeal Number ITA 5128/MUM/2009
Duration Of Justice 1 year(s) 6 month(s) 10 day(s)
Appellant DCCC-9, MUMBAI
Respondent FALGU INTERNATIONAL, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 18-03-2011
Date Of Final Hearing 23-02-2011
Next Hearing Date 23-02-2011
Assessment Year 2007-2008
Appeal Filed On 08-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI P.M. JAGTAP ACCOUNTANT MEMBER I.T.A.NO . ASSESSMENT YEAR 5122/MUM/2009 2001-02 5123/MUM/2009 2002-03 5124/MUM/2009 2003-04 5125/MUM/2009 2004-05 5126/MUM/2009 2005-06 5127/MUM/2009 2006-07 5128/MUM/2009 2007-08 THE ASST. COMMISSIONER OF INCOME- TAX CENTRAL CIRCLE -9 8 TH FLOOR OLD CGO BLDG. ANNEX. M.K. ROAD MUMBAI 400 020 VS. M/S. FALGU INTERNATIONAL 5 TH FLOOR GITANEEL ARCADE 85 HILL ROAD BANDRA (W) MUMBAI 400 050. PAN: AAAFF 1714 C (APPELLANT) (RESPONDENT) C.O. NO. ARISING OUT OF I.T.A.NO . ASSESSMENT YEAR 57/MUM/2010 5122/MUM/2009 2001-02 58/MUM/2010 5123/MUM/2009 2002-03 59/MUM/2010 5124/MUM/2009 2003-04 60/MUM/2010 5125/MUM/2009 2004-05 61/MUM/2010 5126/MUM/2009 2005-06 62/MUM/2010 5127/MUM/2009 2006-07 M/S. FALGU INTERNATIONAL 5 TH FLOOR GITANEEL ARCADE 85 HILL ROAD BANDRA (W) MUMBAI 400 050. PAN: AAAFF 1714 C VS. THE ASST. COMMISSIONER OF INCOME- TAX CENTRAL CIRCLE -9 8 TH FLOOR OLD CGO BLDG. ANNEX. M.K. ROAD MUMBAI 400 020 (CROSS OBJECTOR) (APPELLANT IN APPEAL) REVENUE BY : SMT. ASHIMA GUPTA (SR.A.R.) RESPONDENT BY : SHRI J.D. MISTRY O R D E R PER P.M. JAGTAP AM : THESE SEVEN APPEALS FILED BY THE REVENUE AGAINST A CONSOLIDATED ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS) CENTRAL-VII MUMBAI DATED 07.07.2009 FOR THE ASSESSMENT YEARS 2 001-02 TO 2007-08 INVOLVE COMMON ISSUES AND THE SAME THEREFORE ARE BEING DI SPOSED OF BY THIS SINGLE ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 2 COMPOSITE ORDER ALONG WITH THE CROSS OBJECTIONS FI LED BY THE ASSESSEE BEING C.O. NOS. 57 TO 62/MUM/2010. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH ESE APPEALS AND CROSS OBJECTIONS ARE AS FOLLOWS: THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAG ED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND FINANCE. A SEARCH AND S EIZURE ACTION UNDER SECTION 132(1) WAS CONDUCTED ON 04.10.2006 IN THE CASES BE LONGING TO REHAB GROUP. DURING THE COURSE OF THE SAID ACTION CERTAIN LOOSE PAPERS IDENTIFIED AS PAGE NOS. 129 AND 130 OF ANNEXURE A-3 WERE FUND AND SEIZED F ROM THE PREMISES OF M/S. REHAB HOUSING LIMITED. AS THE ENTRIES FOUND RECORDE D IN THE SAID DOCUMENTS WERE ALLEGEDLY PERTAINING TO THE ASSESSEE NOTICES UNDER SECTION 153C WERE ISSUED BY THE ASSESSING OFFICER ON 26.03.2007 IN RESPONSE TO WHICH RETURNS WERE FILED BY THE ASSESSEE FOR ALL THE 7 YEARS UNDER CONSIDERATIO N DECLARING THE SAME AMOUNT OF INCOME AS DECLARED IN THE RETURNS FILED REGULARLY E ARLIER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S.153C READ WITH SECTION 1 43(3) THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS EARNED SUBSTANTIAL IN TEREST INCOME AND AFTER CREDITING THE SAID INTEREST TO THE PROFIT & LOSS AC COUNT VARIOUS EXPENSES WERE DEBITED SHOWING FINALLY A NOMINAL PROFIT FOR ALL TH E SEVEN YEARS UNDER CONSIDERATION AS UNDER: SR.NO. ASST. YEAR INTEREST CREDITED TO P&L ACCOUNT EXPENSES DEBITED TO P&L A/C. NET PROFIT SHOWN 1 2001-02 RS.42 19 048/- RS. 38 16 244/- RS.4 02 804/- 2 2002-03 RS.12 74 985/- RS. 11 31 617/- RS. 1 43 368/- 3 2003-04 RS. 7 57 699/- RS. 6 48 513/- RS. 1 14 277/- 4 2004-05 RS. 4 79 938/- RS. 5 00 000/- RS. 8 72 050/- RS. 1 07 888/- 5 2005-06 RS. 6 93 260/- RS. 5 78 659/- RS. 1 14 601/- 6 2006-07 RS. 2 27 185/- RS. 1 83 694/- RS. 43 491/- 7 2007-08 RS. 1 44 286/- RS. 1 24 102/- RS. 20.184/- 3. THE ASSESSING OFFICER FURTHER NOTED THAT TWO CON STRUCTION PROJECTS NAMELY GOREGAON F STRUCTURE PROJECT AND WADALA SLUM PROJECT WERE UNDERTAKEN BY THE ASSESSEE DURING THE RELEVANT PERIOD AND AS F AR AS GOREGAON PROJECT WAS ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 3 CONCERNED THE FIGURE OF WORK-IN-PROGRESS HAD REMAI NED THE SAME IN ALL THE SEVEN YEARS UNDER CONSIDERATION WITHOUT ANY CHANGE. AS R EGARDS THE PROJECT AT WADALA HE NOTED THAT THERE WAS ONLY A SLIGHT INCREASE IN T HE WORK-IN-PROGRESS FROM RS. 28 64 515/- IN THE ASSESSMENT YEAR 2001-02 TO RS.59 51 749/- IN THE ASSESSMENT YEAR 2007-08. ACCORDING TO THE ASSESSING OFFICER EVEN THE WADALA PROJECT THUS WAS MOVING AT VERY SLOW. HE HELD THAT VARIOUS EXPEN SES HOWEVER WERE DEBITED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT ON THE BASIS OF CORRESPONDING INTEREST INCOME EARNED IN RESPECTIVE YEARS AND SINCE THE ASS ESSEE COULD NOT OFFER ANY SATISFACTORY EXPLANATION AS TO HOW THE SAID EXPENSE S WERE RELATED TO THE EARNING OF INTEREST INCOME HE HELD THAT THE SAID EXPENSES CLA IMED BY THE ASSESSEE COULD NOT BE ALLOWED AS DEDUCTION. HE HOWEVER ALLOWED THE S AID EXPENSES TO THE EXTENT OF RS. 25 000/- IN EACH YEAR ON THE GROUND THAT THE AM OUNT TO THAT EXTENT WAS REQUIRED TO BE SPENT TO MEET THE STATUTORY AND OTHE R ROUTINE EXPENSES. THE AMOUNT OF INTEREST INCOME RECEIVED BY THE ASSESSEE WAS HELD BY HIM AS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER THUS MADE A DISALLOWANCE OUT OF VARIOUS EXP ENSES CLAIMED BY THE ASSESSEE IN ALL THE SEVEN YEARS UNDER CONSIDERATION TO THE E XTENT OF THE FOLLOWING AMOUNTS IN THE ASSESSMENTS COMPLETED UNDER SECTION 153C READ W ITH SECTION 143(3) VIDE COMMON ORDER DATED 10.12.2008. SR.NO. ASSESSMENT YEAR AMOUNT OF DISALLOWANCE OF EXPENSES 1 2001-02 RS.37 91 244 2 2002-03 RS.11 06 617 3 2003-04 RS. 6 23 513 4 2004-05 RS. 8 47 050 5 2005-06 RS. 5 53 659 6 2006-07 RS. 1 58 694 7 2007-08 RS. 99 102 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 153C READ WITH SECTION 143(3) APPEALS WERE FILED B Y THE ASSESSEE BEFORE THE ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 4 LEANED CIT(A) CHALLENGING THEREIN THE VALIDITY OF T HE SAID ASSESSMENTS MADE BY THE ASSESSING OFFICER AS WELL AS DISPUTING THE ADDITION MADE THEREIN ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES ON MERITS. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) THE FOLLOWIN G CONTENTIONS WERE RAISED ON BEHALF OF THE ASSESSEE WHILE CHALLENGING THE VALIDI TY OF ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 153C READ WITH SECT ION 143(3): (I) NOTICE WAS ORIGINALLY ISSUED BY THE ASSESSING OFFIC ER UNDER SECTION 153A AND NOT U/S.153C AND IN THE ABSENCE OF ANY SEARCH WARRANT ISSUED IN THE NAME OF THE ASSESSEE U /S.132 THE SAID NOTICE ISSUED BY THE ASSESSING OFFICER U/S .153A WAS NOT VALID; (II) EVEN IF THE NOTICE WAS ISSUED U/S.153C AS CLAIMED B Y THE ASSESSING OFFICER THE REQUISITE SATISFACTION BEFOR E ISSUING THE SAID NOTICE WAS NOT RECORDED BY THE ASSESSING OFFIC ER AS REVEALED FROM THE INSPECTION OF RELEVANT RECORDS. IN VIEW OF THE ABOVE SUBMISSIONS IT WAS CONTENDED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(A) THAT THE INITIATION OF AS SESSMENT PROCEEDINGS ITSELF FOR ALL THE SEVEN YEARS UNDER CONSIDERATION EITHER BY ISSUA NCE OF NOTICES U/S. 153A OR U/S.153C WAS BAD IN LAW AS THE REQUISITE PRE-CONDI TIONS BEFORE ISSUANCE OF THE SAID NOTICES WERE NOT SATISFIED. 5. THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE B EFORE HIM WHILE CHALLENGING THE VALIDITY OF ASSESSMENTS MADE U/S.15 3C READ WITH SECTION143(3) WERE FORWARDED BY THE LEARNED CIT(A) TO THE ASSESS ING OFFICER FOR FACTUAL VERIFICATION AND COMMENTS. IN THE REMAND REPORT SU BMITTED TO THE LEARNED CIT(A) THE ASSESSING OFFICER SUBMITTED THAT CERTA IN LOOSE PAPERS WERE FOUND DURING THE COURSE OF SEARCH CONDUCTED IN THE CASES BELONGING TO REHAB GROUP AND SINCE THE TRANSACTIONS FOUND RECORDED THEREIN WERE RELATED TO THE ASSESSEE FIRM RECOURSE WAS TAKEN UNDER SECTION 153C TO VERIFY THE SAID TRANSACTION. IT WAS SUBMITTED BY THE ASSESSING OFFICER THAT NOTICES TH EREFORE WERE ISSUED TO THE ASSESSEE UNDER SECTION 153C AND THE MISTAKE INITIAL LY COMMITTED BY THE THEN ASSESSING OFFICER CENTRAL CIRCLE 10 MUMBAI IN ME NTIONING SECTION 153A IN THE ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 5 NOTICES INSTEAD OF 153-C WAS SUBSEQUENTLY CORRECTED AS PE THE AGREEMENT ARRIVED WITH THE ACCOUNTANT OF THE ASSESSEE. AS REGARDS THE RECORDING OF SATISFACTION BY THE ASSESSING OFFICER AS A PRE-CONDITION TO ISSUE NOTICES UNDER SECTION 153C IT WAS SUBMITTED IN THE REMAND REPORT THAT SUCH SATISF ACTION WAS INCORPORATED BY THE ASSESSING OFFICER IN THE FIRST PARAGRAPH OF THE ASS ESSMENT ORDER ITSELF. IT WAS SUBMITTED THAT SUCH SATISFACTION SEPARATELY RECORDE D BY THE THEN ASSESSING OFFICER CENTRAL CIRCLE 10 MUMBAI HAD BEEN KEPT IN THE SEP ARATE FOLDER AND THE SAME COULD NOT THEREFORE BE MADE AVAILABLE TO THE ASSE SSEE AT THE TIME OF INSPECTION. COPY OF THE SAID SATISFACTION NOTE WAS ALSO FURNISH ED BY THE ASSESSING OFFICER ALONG WITH THE REMAND REPORT SUBMITTED TO THE LEARNED CIT (A). 6. WHEN THE REMAND REPORT SUBMITTED BY THE ASSESSIN G OFFICER WAS CONFRONTED BY THE LEARNED CIT(A) TO THE ASSESSEE I T WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THERE WAS NO SUCH AGREEMENT EVER ARRIVED AT BETWEEN ITS ACCOUNTANT AND THE ASSESSING OFFICER TO CHANGE SECT ION 153A MENTIONED IN THE NOTICE TO SECTION 153C. THE ASSESSEE SUBMITTED THAT IT WAS EVEN OTHERWISE NOT PERMISSIBLE TO CONVERT THE NOTICE ISSUED UNDER SECT ION 153A TO THE NOTICE U/S.153C AND EVEN THE RELEVANT ORDER SHEET ENTRIES MADE BY T HE ASSESSING OFFICER WERE SUFFICIENT TO SHOW THAT THE SAID NOTICES WERE ISSUE D BY THE ASSESSING OFFICER UNDER SECTION 153A ONLY. IT WAS CONTENDED THAT WHEN THE N OTICES WERE INITIALLY ISSUED BY THE ASSESSING OFFICER UNDER SECTION 153A THERE WAS NO QUESTION OF RECORDING ANY SATISFACTION BY HIM FOR ISSUANCE OF SUCH NOTICES AN D NON-RECORDING OF SUCH SATISFACTION WAS DULY ESTABLISHED FROM THE FACT THA T NEITHER THE NOTICES ISSUED UNDER SECTION 153C NOR THE SATISFACTION RECORDED BY THE ASSESSING OFFICER WERE FOUND ON RECORD WHEN THE INSPECTION WAS TAKEN BY TH E ASSESSEE. THE ASSESSEE SUBMITTED THAT THESE DOCUMENTS WERE VERY VITAL AND IT WAS UNBELIEVABLE AND UNACCEPTABLE THAT THE ASSESSING OFFICER DID NOT HAV E THE SAME WITH HIM IN THE ASSESSMENT RECORDS AT THE TIME OF INSPECTION. THE A SSESSEE STRONGLY OBJECTED TO ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 6 AND DENIED THE STAND TAKEN BY THE ASSESSING OFFICER THAT THE FOLDER CONTAINING SATISFACTION NOTE WAS KEPT SEPARATELY AND THAT THE SAME WAS MISPLACED AT THE TIME OF INSPECTION. IT WAS CONTENDED THAT RECORDING OF SUCH SATISFACTION IF ANY WAS CLEARLY AN AFTER THOUGHT AND THE SAME WAS RECORDED ONLY AFTER THE REMAND REPORT WAS SOUGHT BY THE LEARNED CIT(A) ON THE OBJECTIONS RAISED BY THE ASSESSEE. 7. THE LEARNED CIT(A) DID NOT FIND MERIT IN THE SUB MISSIONS MADE ON BEHALF OF THE ASSESSEE WHILE CHALLENGING THE VALIDITY OF A SSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 153C READ WITH SECTION 143(3) AND REJECTING THE SAME HE UPHELD THE VALIDITY OF THE SAID ASSESSMENT FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPHS 6 AND 6.1 OF HIS IMPUGNED ORDER: I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS AND DO NOT FIND ANY MERIT IN THE CONTENTIONS OF THE APPELLANT. THERE IS NO DISPU TING THE FACT THAT IN THE COURSE OF SEARCH IN THE GROUP CERTAIN PAPERS WERE SEIZED WHICH PERTAINED TO THE APPELLANT AND ACCORDINGLY IT WAS LIABLE TO PROCEEDINGS U/S.153C OF THE ACT. IN SO FAR AS LACK OF RECORDED SATISFACTION IS CONCERNED IT WOULD SUFFICE TO STATE HERE THAT FROM THE BODY OF THE ORD ER IT IS QUITE APPARENT THAT THE AO TOOK RECOURSE TO THE PROVISIONS OF SECT ION 153C SO AS TO VERIFY THE TRANSACTIONS RECORDED THEREIN. IT MUST BE UNDER STOOD HERE THAT RECORDING OF SATISFACTION SO AS TO SHOW EXISTENCE O F UNDISCLOSED INCOME IS NOT A PRE-REQUISITE UNDER THE PROVISIONS OF SECTION 153C WHICH ARE DISTINGUISHABLE FROM THE PROVISIONS OF SECTION 158B D OF THE ACT WHICH RELATED TO BLOCK ASSESSMENTS. THE LITERAL MEANING O F SECTION 153C IS THAT ONCE DOCUMENTS ETC. ARE HANDED OVER TO THE AO OF TH E OTHER PERSON WHICH INCIDENTALLY IS THE SAME AO THE PROVISIONS OF SECT ION 153A ARE MADE APPLICABLE AND THEREFORE EVEN IF SUCH ASSETS ETC. ARE RECORDED OR DISCLOSED TO THE DEPARTMENT BY SUCH OTHER PERSON THE ASSESSM ENTS MAY HAVE TO BE FRAMED FOR ALL SEVEN ASSESSMENT YEARS. THE OTHER P RECONDITION IS THAT THE OTHER PERSON SHOULD BE THE OWNER OF SUCH ASSETS ETC . WHICH IS NOT DISPUTED AT ALL IN THE PRESENT CASE BY THE APPELLANT. THE RE QUIREMENT OF SECTION 153C WITH REFERENCE TO SATISFACTION SEEMS TO BE ONLY PRI MA FACIE SATISFACTION AND NOT A CONCLUSIVE SATISFACTION. THUS THE AO MUST BE PRIMA FACIE SATISFIED THAT THE ASSETS ETC. BELONG TO OTHER PERSON THAN TH E PERSON SEARCHED. FURTHER THERE IS NOTHING IN THE PROVISIONS TO SHOW THAT SUCH SATISFACTION HAS TO BE RECORDED IN WRITING. MOREOVER IN THE PRE SENT CASE SUCH SATISFACTION HAS BEEN STATED TO HAVE BEEN RECORDED AS PER THE REMAND REPORT AND I HAVE NOTHING TO DOUBT THE ACTION OF TH E AO IN THIS RESPECT AS IS BEING MADE BY THE APPELLANT. 6.1 IN SO FAR AS THE CONTENTION THAT THE PROCEEDING S WERE NOT INITIATED U/S.153C BUT U/S.153A OF THE ACT . I DO NOT FIND AN Y MERIT IN IT IT IS EVIDENT FROM THE BODY OF THE ASSESSMENT ORDER ITSELF THAT T HE AO HAS TAKEN RECOURSE TO THE PROVISIONS OF SECTION 153C AND MERE LY BY MISTAKE MENTIONING SECTION 153A IN THE NOTICE ISSUED WOULD NOT LEAD TO THE CONCLUSION THAT ENTIRE ORDER IS VITIATED. MOREOVER AS REPORTED IN THE REMAND REPORT SUCH TYPOGRAPHICAL MISTAKE WAS DULY R ECTIFIED IN CONSULTATION WITH ACCOUNTANT OF THE APPELLANT AND SUCH A CONTENT ION HAS NOT BE CONTROVERTED BY THE APPELLANT. APART FROM SUCH FACT S IT IS RIGHTLY POINTED ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 7 OUT THAT THE PROVISIONS OF SECTION292B OF THE ACT T AKE CARE OF SUCH MISTAKES FOR WHICH THE PROCEEDINGS COULD NOT BE CONSIDERED I NVALID. 8. AS REGARDS THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF VARIOUS EXPENSES DEBITED IN ITS PROFIT & LOSS ACCOU NT AND CLAIMED AS DEDUCTION THE ASSESSEE SUBMITTED THAT IT WAS PRIMARILY ENGAGE D IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND DURING THE RELEVANT PERIOD TWO PRO JECTIONS ONE AT GOREGAON AND THE OTHER AT WADALA WERE UNDERTAKEN BY IT. IT WAS SUBMITTED THAT THE VARIOUS EXPENSES DEBITED IN THE PROFIT & LOSS ACCOUNT WHICH WERE IN THE NATURE OF ADMINISTRATION AND GENERAL OVERHEADS HAD BEEN INCUR RED IN THE COURSE OF ITS BUSINESS OF REAL ESTATE DEVELOPMENT AND MERELY BECA USE THERE WAS NO GENERATION OF ANY INCOME FROM THE SAID BUSINESS DURING THE YEA RS UNDER CONSIDERATION THE SAME COULD NOT BE DISALLOWED AS BUSINESS OF THE ASS ESSEE OF REAL ESTATE DEVELOPMENT WAS IN EXISTENCE. IT WAS SUBMITTED THAT THE ASSESSEE NEVER CLAIMED THAT THE SAID EXPENSES WERE INCURRED BY IT FOR EARN ING THE INTEREST INCOME AND THE ASSESSING OFFICER DID NOT APPRECIATE THIS POSITION IN THE RIGHT PERSPECTIVE. THE POSITION OF BOTH THE PROJECTS WAS EXPLAINED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) BY GIVING THE RELEVANT DETAILS IN ORDER TO S HOW THAT THE BUSINESS OF REAL ESTATE DEVELOPMENT WAS BEING CARRIED ON BY IT DURI NG THE YEARS UNDER CONSIDERATION. IT WAS CONTENDED ON BEHALF OF THE AS SESSEE THAT THE EXPENSES INCURRED BY IT IN RELATION TO THE SAID BUSINESS BEI NG OF THE NATURE OF GENERAL OVERHEADS AND ADMINISTRATION OVERHEADS THUS WERE AL LOWABLE AS DEDUCTION UNDER SECTION 37(1) AND THE ASSESSING OFFICER WAS NOT JUS TIFIED IN MAKING THE DISALLOWANCE OF THE SAME. 9. THE LEARNED CIT(A) FOUND MERIT IN THE SUBMISSION S MADE ON BEHALF OF THE ASSESSEE BEFORE HIM ON THIS ISSUE AND DELETED THE D ISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF VARIOUS EXPENSES DEBITED B Y THE ASSESSEE TO THE PROFIT & ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 8 LOSS ACCOUNT OF ALL THE YEARS UNDER CONSIDERATION F OR THE FOLLOWING REASONS GIVEN IN PARAGRAPH 10 OF HIS IMPUGNED ORDER. ON CAREFUL CONSIDERATION OF THE ABOVE FACTS I FIN D FORCE IN THE CONTENTIONS OF THE APPELLANT. THE AO HIMSELF HAS ADMITTED THAT BUSINESS ACTIVITIES WERE BEING CARRIED ON AS EVIDENT FROM TWO ONGOING PROJEC TS ON HAND I.E. STRUCTURE PROJECT GOREGAON (WEST) AND SLUM PROPERT Y AT WADALA AND APART FROM THIS THE APPELLANT WAS ALSO HOLDING READY FLA TS AS ITS STOCK-IN-TRADE FOR TRADING PURPOSE. HE HAS ALSO ACCEPTED THE FACT THA T WADALA SLUM PROJECT WAS IN PROGRESS SINCE AYS. 2001-02 TO 2007-08 AND T HE AMOUNT OF EXPENDITURE THEREON HAS PROGRESSIVELY INCREASED FRO M RS.28 64 LAKH IN AY 2001-02 TO RS. 59.51 LAKH TILL AY 2007-08. THUS BU SINESS OF THE APPELLANT WAS VERY MUCH IN EXISTENCE AND HAD NEITHER BEEN DIS CONTINUED NOR CEASED ALTOGETHER. THE EXPENSES DEBITED ON ACCOUNT OF SALA RIES LEGAL AND PROFESSIONAL FEES AGREEMENT FEES MAINTENANCE AND OUTGOINGS FOR FLAT RATES AND TAXES CONVEYANCE ETC. ARE DIRECTLY RELA TED TO THE BUSINESS BEING CARRIED ON FOR ALL THESE YEARS. IT IS ALSO WORTH NO THING THAT ONE OF ITS ONGOING PROJECTS KNOWN AS SLUM PROPERTY AT WADALA H AD BEEN SOLD OFF DURING AY 2008-09 AND INCOME HAD BEEN RETURNED AS I NCOME FROM BUSINESS. MOREOVER IT IS NOT THE CASE OF THE AO T HAT THE EXPENSES WERE UNREASONABLE/EXCESSIVE OR EVEN NON GENUINE. IT IS A LSO NOT THE CASE OF THE AO THAT THE EXPENSES DO NOT RELATE TO BUSINESS. MOR EOVER THE NATURE OF EXPENSE REVEAL THAT THE SAME WERE BASICALLY FOR DAY TO DAY RUNNING OF THE BUSINESS WHICH WAS VERY MUCH IN EXISTENCE AND HAD N OT CEASED TO OPERATE OR CLOSED. THE FACT THAT THERE IS NO INCOME IN A P ARTICULAR YEAR DOES NOT MEAN THAT THE APPELLANT IS NOT ENGAGED IN THE BUSIN ESS. ACCORDINGLY IT IS HELD THAT THERE WAS NO SUFFICIENT JUSTIFICATION FOR DISALLOWING THE EXPENSES. THE RESULTANT ADDITIONS MADE IN DIFFERENT YEARS ARE THEREFORE DELETED. 10. THE LEARNED CIT(A) THUS DELETED THE ENTIRE ADDI TION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE MADE O UT OF VARIOUS EXPENSES DEBITED BY THE ASSESSEE TO ITS PROFIT & LOSS ACCOUN T. HE HOWEVER UPHELD THE ACTION OF THE ASSESSING OFFICER IN TREATING INTERES T INCOME EARNED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES. THE LEARNED CIT(A) THUS PARTLY ALLOWED THE APPEALS FILED BY THE ASSESSEE BEFORE HIM BY HIS IMP UGNED ORDER AND AGGRIEVED BY THE SAME THE REVENUE HAS FILLED THE PRESENT APPEAL S CHALLENGING THE ACTION OF THE LEARNED CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES WHEREAS THE ASS ESSEE HAS FILED ITS CROSS OBJECTIONS CHALLENGING THAT PART OF THE ORDER OF TH E LEARNED CIT(A) WHEREBY HE UPHELD THE VALIDITY OF ASSESSMENTS MADE BY THE ASSE SSING OFFICER UNDER SECTION 153C READ WITH SECTION 143(3). ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 9 11. FIRST WE SHALL TAKE UP THE APPEALS OF THE REVEN UE WHEREIN THE SOLITARY COMMON ISSUE INVOLVED IS RELATING TO THE DELETION B Y THE LEARNED CIT(A) OF THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F DISALLOWANCE OF VARIOUS EXPENSE DEBITED BY THE ASSESSEE TO ITS PROFIT & LOS S ACCOUNT. 12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OB SERVED THAT THE DISALLOWANCE ON ACCOUNT OF VARIOUS EXPENSES DEBITED BY THE ASSESSEE TO ITS PROFIT & LOSS ACCOUNT FOR THE YEARS UNDER CONSIDERATION WAS MADE BY THE ASSESSING OFFICER MAINLY ON THE GROUND THAT THERE WAS NO INCOME FROM ITS MAIN B USINESS OF REAL ESTATE DEVELOPMENT THAT WAS CREDITED BY THE ASSESSEE TO T HE PROFIT & LOSS ACCOUNT AND THAT THE ASSESSEE COULD NOT EXPLAIN SATISFACTORILY AS TO HOW THE VARIOUS EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT WERE INCURRED IN RELATION TO EARNING OF INTEREST INCOME WHICH WAS MAINLY CREDITED TO THE PROFIT & LO SS ACCOUNT. THE AO HOWEVER IGNORED THE FACT THAT VARIOUS EXPENSES DEBITED TO T HE PROFIT & LOSS ACCOUNT WERE NEVER CLAIMED BY THE ASSESSEE AS HAVING BEEN INCURR ED FOR EARNING INTEREST INCOME. AS A MATTER OF FACT THE ACTION OF THE AS SESSING OFFICER IN TREATING THE SAID INTEREST INCOME AS INCOME FROM OTHER SOURCES H AS BEEN UPHELD BY THE LEARNED CIT(A) AND THE ASSESSEE HAS NOT CHALLENGED THE SAME IN ITS CROSS OBJECTIONS. THIS CLEARLY SHOWS THAT VARIOUS EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNTS WERE CLAIMED BY THE ASSESSEE AS BUSINESS EXPENDITURE DED UCTIBLE U/S.37(1) OF THE ACT AND THE SAID EXPENSES BEING IN THE NATURE OF OFFIC E AND ADMINISTRATIVE EXPENSES WHAT WAS RELEVANT TO BE SEEN IS WHETHER THE ASSESSE E COMPANY WAS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT OR NOT. AS RIGHTLY HELD BY THE LEARNED CIT(A) IN THIS CONTEXT THE FACT THAT THERE WAS NO INCOME FROM BUSINESS OF REAL ESTATE DEVELOPMENT IN THE YEARS UNDER CONSIDERATION DID NOT MEAN THAT THE ASSESSEE WAS NOT ENGAGED IN THE SAID BUSINESS AND T HE SAME HAD CEASED TO EXIST. IF ALL THE RELEVANT FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE ARE APPRECIATED IN ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 10 THE PROPER PERSPECTIVE IT BECOMES CLEAR THAT THE A SSESSEE COMPANY CONTINUED TO ENGAGE IN THE BUSINESS OF REAL ESTATE DEVELOPMENT A ND THE SAID BUSINESS HAD NOT CEASED TO EXIST. 13. AS ADMITTED BY THE ASSESSING OFFICER HIMSELF IN HIS ORDER THERE WERE TWO PROJECTS OF REAL ESTATE DEVELOPMENT UNDERTAKEN BY T HE ASSESSEE DURING THE RELEVANT PERIOD VIZ. GOREGAON PROJECT AND WADALA P ROJECT. NO DOUBT GOREGAON PROJECT HAD NOT MOVED AT ALL DURING THE YEARS UNDER CONSIDERATION FOR ONE REASON OR THE OTHER BUT THE SUBSTANTIAL AMOUNT OF RS.45 26 370/- INVESTED BY THE ASSESSEE IN THE SAID PROJECT WAS CONSISTENTLY SHOWN AS WORK IN PROGRESS IN ITS BOOKS OF ACCOUNT. THE SECOND PROJECT AT WADALA HOWEVER HA D MADE CERTAIN PROGRESS WHICH WAS EVIDENT FROM THE FACTUAL POSITION NOTICED BY THE ASSESSING OFFICER HIMSELF IN HIS ORDER SHOWING THAT THE WORK-IN-PROGR ESS OF THE SAID PROJECT HAD INCREASED FROM RS.28 64 5765/- IN THE ASSESSMENT YE AR 2001-02 TO RS. 59 51 749/- IN THE ASSESSMENT YEAR 2007-08. MOREOV ER THE UNSOLD FLATS OF THE PROJECTS COMPLETED IN THE PAST WERE SHOWN BY THE AS SESSEE AS ITS STOCK IN-TRADE IN THE BOOKS OF ACCOUNT. HAVING REGARD TO ALL THESE FA CTS OF THE CASE WE FIND OURSELVES IN AGREEMENT WITH THE LEARNED CIT(A) THAT THE ASSESSEE CONTINUED TO BE IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND THER E BEING NO CESSATION OF THE SAID BUSINESS IT WAS ENTITLED TO CLAIM DEDUCTION ON ACC OUNT OF VARIOUS EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT WHICH WERE IN THE NATU RE OFFICE AND ADMINISTRATIVE EXPENSES SUCH AS SALARY PROFESSIONAL FEES PRINTI NG AND STATIONERY DEPRECIATION ETC. AS IS CLEARLY EVIDENT FROM THE DETAILS OF SUCH EXPENSES PLACED AT PAGE NOS. 21 TO 27 OF THE ASSESSEES PAPER BOOK. WE THEREFORE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(A) DELETING THE D ISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF VARIOUS OFFICE AND ADMINIS TRATION EXPENSES DEBITED BY THE ASSESSEE TO ITS PROFIT AND LOSS ACCOUNT FOR ALL THE SEVEN YEARS UNDER CONSIDERATION AND UPHOLDING THE SAME WE DISMISS THE APPEALS FILE D BY THE REVENUE. ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 11 C.O. NOS.57 TO 62/MUM/2010 : 14. IN ITS CROSS OBJECTIONS FILED FOR THE SIX YEARS UNDER CONSIDERATION I.E. ASSESSMENT YEARS 2001-02 TO 2006-07 THE ASSESSEE HA S CHALLENGED THE VALIDITY OF ASSESSMENTS MADE BY THE ASSESSING OFFICER U/S.153C READ WITH SECTION 143(3) MAINLY ON THE SAME GROUNDS AS RAISED BEFORE THE LEA RNED CIT(A). 15. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE. ALTHOUGH THE LEARNED COUNSEL FOR THE ASSESSEE HAS MADE VARIO US SUBMISSIONS POINTING OUT SEVERAL INFIRMITIES IN THE ASSESSMENTS MADE BY THE ASSESSING OFFICER U/S.153C READ WITH SECTION 143(3) FOR ALL THE YEARS UNDER CONSIDE RATION IN ORDER TO SHOW THAT THE SAME ARE BAD IN LAW IT IS OBSERVED THAT AS A RESUL T OF CONFIRMATION BY US OF THE LEARNED CIT(A)S ACTION IN DELETING THE ENTIRE AD DITION MADE BY THE ASSESSING OFFICER IN THE SAID ASSESSMENTS WHILE DISPOSING OF THE APPEALS FILED BY THE REVENUE THE ISSUES RAISED BY THE ASSESSEE IN ITS CROSS OBJE CTIONS CHALLENGING THE VALIDITY OF THE ASSESSMENTS HAVE BECOME ONLY ACADEMIC. 16. IN THE CASE OF ITO V. MAHAVIR PRASAD REPORTED IN (1981) 11 TTJ 27 THE REASSESSMENT PROCEEDINGS WERE QUASHED BY THE FIRST APPELLATE AUTHORITY HOLDING THAT THE SAME WERE NOT VALIDLY INITIATED. EVEN THE ADDITIONS MADE IN THE RE- ASSESSMENT WERE DELETED BY THE FIRST APPELLATE AUTH ORITY ON MERITS. AGAINST THE ORDER OF THE FIRST APPELLATE AUTHORITY REVENUE PRE FERRED APPEAL BEFORE THE TRIBUNAL CHALLENGING ONLY THE QUASHING OF THE RE-ASSESSMENT PROCEEDINGS. THE DECISION OF THE FIRST APPELLATE AUTHORITY DELETING THE ADDITION S MADE IN THE RE-ASSESSMENT ON MERIT HOWEVER WAS NOT CHALLENGED IN THE SAID APPE AL. IN THESE FACTS AND CIRCUMSTANCES THE TRIBUNAL DECLINED TO DECIDE THE ISSUE RAISED BY THE REVENUE IN ITS APPEAL AND DISMISSED THE SAID APPEAL HOLDING TH AT THE ISSUE RAISED THEREIN WAS ONLY ACADEMIC AND THERE WAS NO NEED TO DECIDE SUCH ACADEMIC ISSUE. IN CASE OF CIT VS. G.B.H. EXPORTERS (271 ITR 545) THE PENALTY IMPOSED UNDER SECTION 271(1)(C) WAS CANCELLED BY THE TRIBUNAL AFTER RECOR DING A FINDING THAT THERE WAS NO ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 12 CONCEALMENT OF INCOME BY THE ASSESSEE. THE TRIBUNA L ALSO HELD THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSEE WAS ENT ITLED TO IMMUNITY UNDER EXPLANATION 5 TO SECTION 271(1)(C). IN ITS APPLICA TION FILED UNDER SECTION 256(1) OF THE ACT THE QUESTION REFERRED BY THE REVENUE FOR THE OPINION OF THE HONBLE RAJASTHAN HIGH COURT WAS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE AS SESSEE WAS ENTITLED TO IMMUNITY UNDER EXPLANATION 5 TO SECTION 271(1)(C) AND CONSEQ UENTLY CANCELLING THE PENALTY. THE FINDING OF THE TRIBUNAL THAT THERE WAS NO CONC EALMENT OF INCOME BY THE ASSESSEE HOWEVER WAS NOT CHALLENGED BY THE REVENU E AND HONBLE RAJASTHAN HIGH COURT THEREFORE DECLINED TO ANSWER THE QUEST ION RAISED BY THE REVENUE IN THIS APPLICATION U/S.256(1) OBSERVING THAT THERE WA S NO NECESSITY TO ANSWER A QUESTION OF FACT OR QUESTION OF LAW WHICH IS PUREL Y ACADEMIC OR HAS NO BEARING ON THE DISPUTE BETWEEN THE PARTIES. ELABORATING FURTHE R HONBLE RAJASTHAN HIGH COURT OBSERVED THAT IT IS HIGH TIME THAT THE COURTS ARE T O BE VERY CAUTIOUS CARFUL AND CONSIDERATE THAT ITS VALUABLE AND PRECIOUS TIME IS NOT WASTED OR CONSUMED IN DECIDING MATTERS OF ACADEMIC NATURE. IT WAS ALSO OB SERVED THAT THE DECISION GIVEN ON SUCH ISSUES WHICH ARE ONLY ACADEMIC EITHER WAY WILL NOT HAVE ANY BEARING OR EFFECT ON THE ULTIMATE RESULT TO WHICH THE SUBORDIN ATE COURT OR AUTHORITY REACHED MEANING THEREBY THAT EVEN IF SUCH ISSUES ARE DECIDE D IN FAVOUR STILL IT WILL NOT RESULT IN GRANT OF ANY RELIEF. 17. KEEPING IN VIEW THE RATIO OF THE AFORESAID JUDI CIAL PRONOUNCEMENTS AND HAVING REGARD TO THE FACT THAT AS A RESULT OF CONFI RMATION BY US OF THE DELETION OF ENTIRE ADDITION MADE IN THE ASSESSMENTS THE ISSUE RAISED IN THE CROSS OBJECTIONS FILED BY THE ASSESSEE CHALLENGING THE VALIDITY OF T HE SAID ASSESSMENTS HAS BECOME ACADEMIC WE DO NOT DEEM IT NECESSARY OR EXPEDIENT TO ADJUDICATE UPON THE SAME. IN OUR OPINION CROSS OBJECTIONS FILED BY THE ASSES SEE INVOLVING SUCH ACADEMIC ITA NOS.5122 TO 5129/M/2009 C.O. NOS. 57 TO 62/MUM/2010 M/S. FALGU INTERNATIONAL 13 ISSUE HAVE BECOME INFRUCTUOUS AND THEY ARE ACCORDIN GLY DISMISSED AS HAVING BECOME INFRUCTUOUS. 18. IN THE RESULT THE APPEALS OF THE REVENUE AS W ELL AS THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 8 TH DAY OF MARCH 2011. SD. SD. (R.V. EASWAR) (P.M. JAGTAP) PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED THE 18 TH MARCH 2011. KN COPY TO: 1. THE ASSESSEE 2. THE AIT CENTRAL CIRCLE-9 MUMBAI 3. THE CIT CENTRAL I MUMBAI 4. THE CIT(A)-VII MUMBAI 5. THE DR F BENCH MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR ITAT MUMBAI