M/s One City Promoters Pvt. Ltd., New Delhi v. ITO, New Delhi

ITA 5862/DEL/2010 | 2007-2008
Pronouncement Date: 30-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 586220114 RSA 2010
Assessee PAN RULES1962P
Bench Delhi
Appeal Number ITA 5862/DEL/2010
Duration Of Justice 1 year(s) 3 month(s) 8 day(s)
Appellant M/s One City Promoters Pvt. Ltd., New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 30-03-2012
Date Of Final Hearing 14-03-2012
Next Hearing Date 14-03-2012
Assessment Year 2007-2008
Appeal Filed On 22-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI K.D. RANJAN ACCOUNTANT MEMBER I.T.A.NO.5862/DEL/2010 ASSESSMENT YEAR : 2007-08 M/S. ONE CITY PROMOTERS PRIVATE LTD. VS. ITO WA RD 13(4) D-2 KALINDI COLONY NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL KAPOOR & SHRI VIKAS JAIN ADVOCATE RESPONDENT BY : SHRI R.S. NEGI SR. DR O R D E R PER K.D. RANJAN ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE FOR ASSTT. YEAR 2007-08 ARISES O UT OF ORDER OF LD. CIT(A) XVI NEW DELHI. THE GROUNDS OF APPEAL ARE REPRODUCED AS UNDER :- 2. THERE WAS NO JUSTIFICATION EITHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE NOT TO HAVE DELETED THE ADDITION BY THE LEARNED CIT (APPEALS) INSTEAD ERRED IN CONFORMING THE ADDITION OF ` 52 71 033/- AND ` 12 52 779/- MADE BY THE ASSESSING OFFICER WITHOUT ANY BASIS JUSTIFICATION AND MERIT. 3. THE ADDITION OF ` 52 71 033/- AND `12 52 779 /- REPRESENTING THE PAYMENT MADE TO THE GDA FOR THE ENHANCEMENT OF THE AREA TO BE BUILT IS HIGHLY INCORRECT ARBITRARY AND CONTRARY TO THE FACTS BROUGH T ON RECORD. 2 4. THE LEARNED CIT (APPEALS) NEW DELHI ERRED IN FAC T AND IN LAW IN CONFORMING THE PAYMENT MADE TO GDA AS PENALTY RATHER AS ADDITIONAL PAYMENT FOR THE ENHANCEMENT OF FAR 5. ON THE FACTS BROUGHT ON RECORD THE LEARNED CIT (APPEALS) NEW DELHI HAS GROSSLY OVERLOOKED THE CIRCUMSTANCE AND REQUIREMENTS UNDER WHICH THE APPELLANT HAS MADE CASH PAYMENTS OF ` 5.00 LAC AND ` 17.43 LACS AND HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITIONS MADE BY LEARNED ASSESSING OFFICER U/S SECTION 40A(3) OF THE INCOME TAX ACT. 2. THE FIRST ISSUE FOR CONSIDERATION RELATES TO CONFIRMI NG THE ADDITION OF ` 52 71 033/- AND ` 12 52 779/- ON ACCO UNT OF PAYMENT MADE TO GDA FOR ENHANCEMENT OF AREA TO BE BUILT BY THE ASSESSEE. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSE E DURING THE YEAR UNDER CONSIDERATION WAS ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT & BUILDERS ACTIVITIES. DURING THE YEAR UN DER CONSIDERATION THE ASSESSEE MADE PAYMENT OF ` 52 71 033/- TO VICE CHAIRMAN GDA FOR COMPOUNDING DRAWING FEES PAYMENT OF ` 12 52 779/- REGARDING LAND AT ONE SQUARE AS COMPOUNDI NG CHARGES. THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE PA YMENT MADE SHOULD NOT BE DISALLOWED U/S 37(1) OF THE ACT. HOWEVER IN ORDER TO ENSURE THE NATURE OF AFORESAID FEE CHARGED BY GDA TH E AO ISSUED SUMMONS TO CHAIRMAN GDA AND ASSTT. ENGINEER (ENFORCEME NT) GDA. IN RESPONSE TO THE SHOW CAUSE NOTICE THE LD. AR OF THE ASSESSEE FILED ITS REPLY DATED 21 ST DECEMBER 2009 SUBMITTING THAT NO AMOUNT HAS BEEN PAID TO ANY SUBSEQUENT REGULARIZATION OF ILLEGAL WORK. THE AO DEPUTED HIS INSPECTOR TO VISIT THE OFFICE OF GDA AND T O COLLECT THE REPLY 3 SO THAT THE FACTUAL POSITION ABOUT THE NATURE OF FEES CHARGED BY GDA COULD BE ASCERTAINED. THE INSPECTOR OF INCOME TAX CAM E TO KNOW THAT REPLIES HAVE ALREADY BEEN SENT BY JOINT SECRETARY GD A. AS PER THE SAID LETTER THAT COMPOUNDING FEE AMOUNTING TO ` 52 7 1 033/- AND ` 12 52 779/- HAVE BEEN CHARGED FROM M/S. S.K. SERVICE S P. LTD. IN RESPECT OF ADDITIONAL CONSTRUCTION MADE AS AGAINST THE APPROVED PLAN. FROM THE REPLY OF GDA THE AO INFERRED THAT THE AMOU NT CLAIMED BY ASSESSEE WAS ACTUALLY PAID TO SAVE THE UNAUTHORIZED CONSTR UCTION MADE BY THE ASSESSEE. AS REGARDS THE PAYMENT MADE IN THE NAME OF M/S. S.K. SERVICES P LTD. AND CLAIMED BY THE ASSESSEE IT WAS SUBMITTED BY THE AR OF THE ASSESSEE THAT M/S. S.K. SERVIC ES P. LTD. WAS THE ORIGINAL ALLOTTEE OF THE AFORESAID LAND. THE ASSESSEE FILED THE COPY OF AGREEMENT BETWEEN THE ASSESSEE AND M/S. S.K. SER VICES P. LTD. IT WAS ALSO CONTENDED BY THE ASSESSEE THAT COMPOUNDI NG FEE PAID WAS DEBITED TO COST OF THE PROJECT. THE AO PLACED REL IANCE ON THE DECISION OF HONBLE HIGH COURT IN THE CASE OF CIT VS. MAMTA ENTERPRISES 266 ITR 356 WHEREIN IT HAS BEEN HELD THA T COMPOUNDING FEE PAID BY THE ASSESSEE A BUILDER CARRYING ON THE BUSI NESS OF CONSTRUCTION AND SALE OF APARTMENT TO THE BANGALORE C ITY CORPORATION TO SAVE THE UNAUTHORIZED CONSTRUCTION PUT UP CONSTITUT ED A PENALTY AND WAS NOT DEDUCTIBLE IN VIEW OF EXPLANATION TO SECT ION 37 OF THE ACT. IN RESPONSE TO THE SHOW CAUSE IT WAS SUBMITTED BY THE ASSESSE E THAT THERE WAS NO INFRINGEMENT OF LAW. THE ASSESSEE HAD MADE PAYMENT 4 FOR PURCHASE OF ADDITIONAL FAR. HE PLACED RELIANCE O N THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. LOKEN ATH & CO. 17 TAXMAN 209 DELHI. AO HOWEVER HELD THAT PAYMENT MAD E BY THE ASSESSEE FOR REGULARIZATION OF CONSTRUCTION WAS IN NATUR E OF PENALTY WHICH WAS ALSO EVIDENT FROM THE LETTER OF JOINT SECRE TARY WHEREIN IT WAS INFORMED THAT ASSESSEE HAD PAID COMPOUNDING FEE. 3. BEFORE LD. CIT(A) THE LD. AR OF THE ASSESSEE SUBMIT TED THAT AS PER POLICY NO. 1157 DATED 9.3.1999 OF GDA ( UNDER T HE OVERALL POLICY OF THE UTTAR PRADESH GOVERNMENT) THE CONCEPT OF PUR CHASEABLE FAR WAS INTRODUCED IN THE INTEREST OF FASTER GROWTH OF THE AREA AND ALSO TO REDUCE THE PRESSURE OF RISING REAL ESTATE PRICES IN NC T OF DELHI. UNDER POLICY AN ALLOTTEE / OWNER CAN APPROACH THE C ONCERNED AUTHORITY OF GDA FOR THE PURCHASE OF ADDITIONAL FAR (AGAIN OVERALL POLICY OF GDA) AND AFTER GETTING APPROVAL FROM THE CONCERNED AUTHORITY COULD BUILT UP PROPERTY AS PER APPROVED AD DITIONAL FAR AFTER PAYING THE COMPOUNDING FEE AS WILL BE APPLICABLE ON THE PRE APPROVED ADDITIONAL FAR. IT WAS ALSO SUBMITTED THAT TO PURCHASE THE ADDITIONAL FAR THE OWNER HAS TO PRE-DEPOSIT THE REQUIRED FEE (T ERMED AS COMPOUNDING FEE)AND GET THE APPROVAL OF THE ARCHITE CT FOR THE DESIGN AND LAY OUT COVERING THE ADDITIONAL FAR. IT IS ONLY AFTER PRE-COMPLETION OF ALL LEGAL FORMALITIES THAT THE DESIGN AND LAY OUTS HAVING ADDITIONAL FAR WERE SENT FOR PRE APPROVAL AND ONLY AFTER THE F INALIZATION OF THE COMPOUNDING FEE / FEE PAYABLE ON THE ADDITIONAL FAR UNDER THE ABOVE 5 REFERRED POLICY THE ABOVE SAID PAYMENTS WERE SAID TO BE HAVE BEEN MADE. 4. IT WAS ALSO SUBMITTED THAT THE ACTUAL AREA UTILIZED WAS MUCH LESS THAN THE SANCTIONED AREA AND HENCE THERE WAS NO QU ESTION OF IMPOSING PENALTY BY THE GDA AS ASSUMED BY THE AO. UNLE SS THE ASSESSEE HAD VIOLATED ANY LAW OF THE LAND OR ENTERED IN TO ANY ACT WHICH WAS CONTRARY TO THE PROVISIONS OF THE SANCTIONED PLAN THE SAME CANNOT BE TREATED AS PENAL IN NATURE. LD. AR OF TH E ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. LOKENATH &NCO. (SUPRA) ; PUNJAB & HARYANA HIGH CO URT IN THE CASE OF CIT VS. HERO CYCLE LTD. 178 TAXMAN 484 (P & H). 5. LD. CIT(A) RELIED ON THE LETTER ISSUED BY SECRETAR Y GDA WHEREIN IT HAS BEEN INFORMED THAT COMPOUNDING FEE HAS BEEN CH ARGED IN RESPECT OF PLOT NO. SK-3/653/1 DUE TO ADDITIONAL C ONSTRUCTION MADE BY THE ASSESSEE AS PER APPROVED PLAN . SIMILAR IS THE POSI TION WITH REFERENCE TO PLOT NO. SK-3/68/1 LD. CIT(A) THERE FORE CONCLUDED THAT SUM OF ` 52 71 033/- AND ` 12 52 779/- WERE PAID AS COMPOUNDING FEE FOR CARRYING OUT ADDITIONAL CONSTRUCTION ACTIVIT IES AGAINST THE APPROVED CONSTRUCTION PLANS IN RESPECT OF THE TWO PLOT S AND THEREFORE THE PROVISIONS OF EXPLANATION TO SECTION 37 WERE ATTRA CTED. HE PLACED RELIANCE ON THE DECISION OF HONBLE KARNATAKA HIGH C OURT IN THE CASE OF CIT VS. MAMTA ENTERPRISES 135 TAXMAN 393. AS REGARD S THE RELIANCE OF ASSESSEE IN THE CASE OF CIT VS. LOK NATH AND COMPANY 6 (SUPRA) LD. CIT(A) OBSERVED THAT THE JUDGMENT WAS DEL IVERED BY HONBLE COURT BEFORE SECTION 37(1) WAS AMENDED BY INSE RTION OF EXPLANATION THERETO. LD. CIT(A) THEREFORE CONCLUDED THAT COMPOUNDING FEE PAID BY THE ASSESSEE WERE PENAL IN NATURE AND THERE FORE WAS TO BE DISALLOWED IN VIEW OF THE DECISION OF HONBLE KARN ATAKA HIGH COURT IN THE CASE OF CIT VS. MAMTA ENTERPRISES (SUPRA) 6. BEFORE US LD. AR OF THE ASSESSEE SUBMITTED THAT ASSESSEE H AD PAID COMPOUNDING FEE FOR PURCHASE OF ADDITIONAL FAR. THE ASSESSEE HAS DEBITED IT TO THE COST OF CONSTRUCTION OF THE PROJ ECT. THE ASSESSEE HAD PAID THE AMOUNT FOR PURCHASE OF ADDITIONAL FAR I N VIEW OF DECISION OF UP GOVT. FOR REDUCING THE PRESSURE BY ALLO WING ADDITIONAL FAR. THE ASSESSEE HAD NOT VIOLATED ANY NORMS STIPULATED I N CONSTRUCTION PLAN. MERELY BECAUSE GHAZIABAD DEVELOPME NT AUTHORITY HAS TREATED IT AS COMPOUNDING FEE THE SAME CANNOT BE C ALLED AS PENALTY FOR INFRINGEMENT OF ANY LAW. THEREFORE EXPL ANATION TO SECTION 37 (1) IS NOT APPLICABLE. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- (I) CIT VS. PRAKASH COTTON MILLS PVT. LTD. REPORTED IN 201 ITR 684 (SUPREME COURT) (II)CIT VS. AHMEDABAD COTTON MFG. CO. LTD. LTD. REP ORTED IN 205 ITR 163 7. ON THE OTHER HAND LD. SR. DR SUBMITTED THAT THE A SSESSEE HAS PAID COMPOUNDING FEE AFTER CONSTRUCTION AND THEREFOR E EXPLANATION TO 7 SECTION 37 IS APPLICABLE SINCE ASSESSEE HAS VIOLATED CONSTRU CTION NORMS. HE THEREFORE SUPPORTED THE ORDER OF LD. CIT(A ). 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH T HE MATERIAL AVAILABLE ON RECORD. THE COMPOUNDING FEE PAID BY TH E ASSESSEE HAS BEEN DEBITED TOWARDS COST OF THE PROJECT. ACCORDING T O THE AO AS WELL AS CIT (A) THE COMPOUNDING FEE OF ` 52 71 033/- AND ` 12 52 779/- HAS BEEN CHARGED FROM M/S. S K SERVICES (P) LTD. IN RESPEC T OF ADDITIONAL CONSTRUCTION MADE AGAINST THE APPROVED PLAN. ON THE O THER HAND CONTENTION OF ASSESSEE IS THAT IT HAS PURCHASED ADDITIONAL FAR IN ACCORDANCE WITH THE NOTIFICATION ISSUED BY GOVT. OF U P UNDER WHICH ADDITIONAL FAR COULD HAVE BEEN PURCHASED. WE HAVE GO NE THROUGH THE WORKING OF COMPOUNDING FEE MADE BY GDA. THE AMO UNT OF ` 52 71 033/-WAS DETERMINED VIDE NOTE DATED 28.12.2006 AND ` 12 52 779/- VIDE NOTE DATED 7.3.2006. THE ASSESSEE HAD MADE PAYMENT OF THE COMPOUNDING FEE OF RS. 52 71 033/- VI DE CHEQUE NO. 417319 DRAWN ON AMERICAN EXPRESS BANK WHICH WAS CLEARE D ON 23 RD JANUARY 2007. THE PAYMENT OF ` 12 52 779/- WAS CLEA RED ON 1.5.2006 VIDE DD NO. 389565 DRAWN ON AMERICAN EXPRESS BANK. FR OM THE FACTS STATED ABOVE IT IS NOT CLEAR AS TO WHEN THE ORIGINAL M AP WAS APPROVED FOR CONSTRUCTION OF BUILDING BY GDA. IT IS ALSO NOT CL EAR WHETHER THE ADDITIONAL FAR WAS PURCHASED BEFORE STARTING THE CONSTR UCTION OR AFTER CONSTRUCTION WAS STARTED. THESE FACTS ARE NECESSARY FOR DE CIDING THE ISSUE BEFORE US. IN A CASE THE ASSESSEE HAD PURCHASED ADDIT IONAL FAR 8 AT THE TIME OF ORIGINAL APPROVAL OF THE SITE PLAN I T WILL BE ON A DIFFERENT FOOTING THEN FAR PURCHASED AFTER CONSTRUCTION OF THE BUILDING. SINCE THESE FACTS ARE NOT AVAILABLE BEFORE US WE FEEL IT AP PROPRIATE TO SET ASIDE THE MATTER TO THE FILE OF AO WITH THE DIRECTIO N TO OBTAIN NECESSARY INFORMATION AS TO WHEN THE ORIGINAL MAP FOR CONSTRUCTION OF BUILDING WAS SUBMITTED. WHETHER IT CONCLUDED ADDITION AL FAR OR NOT. WHEN CONSTRUCTION OF BUILDING WAS STARTED AND WHAT STAG E THE ADDITIONAL FAR HAS BEEN PURCHASED WHETHER IT WAS AFTER DETECTION BY THE COMPETENT AUTHORITY ? WE WOULD LIKE TO CLARIFY THAT OUR OBSERVATIONS WILL NOT IMPAIR THE CASE OF ASSESSEE NOR WOUL D SUPPORT THE CASE OF REVENUE. THE AO WILL DECIDE THE ISSUE WHET HER THE AMOUNT IS IN NATURE OF PENALTY OR IS A SIMPLE PURCHASE OF ADDITIONAL FAR AND DECIDE THE ISSUE AFTER EXAMINING THE SCHEME UN DER WHICH ADDITIONAL FAR HAS BEEN PURCHASED. THE AO WILL PROVID E NECESSARY OPPORTUNITY TO ASSESSEE BEFORE DECIDING THE ISSUE. 9. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DISALLOWA NCE MADE U/S 40A(3) OF THE ACT. THE FACTS OF THE CASE ARE THAT ASSESSEE MADE PAYMENT OF ` 5 00 000/- AND ` 17.43 LACS TO M/S DOON HEIGHT DEVELOPERS PVT. LTD. IN CASH. IT WAS SUBMITTED BY THE ASSESSEES CASE FELL UNDER RULE 6DD ( K ) OF THE ACT. THE PAYMENT WAS MADE IN CASH TO ASSESSEES AGENT FOR THE PURPOSE OF GOODS ON BEHALF OF THE ASSESSEE. HOWEVER AS PER THE REVENUE RULES 6 DD(K) OF INCOME T AX RULES 1962 PROVIDED THAT NO DISALLOWANCE U/S 40A(3) SHALL BE MADE WHERE THE 9 PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PA YEE DRAFT EXCEEDS TO ` 20 000/- IF THE PAYMENT IS MADE BY ANY P ERSON THROUGH ITS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS AND SERVICES ON BEHALF OF SUCH OTHER PERSONS. IF THE ASSESSEE W AS NOT ABLE TO EXPLAIN UNDER WHAT CIRCUMSTANCES THE PAYMENT FOR PROPERTY IN CASH WAS MADE RATHER THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DEMAND DRAFT THE AMOUNT WAS TO BE DISALLOWED U/ S 40A(3) OF THE ACT. SINCE THE ASSESSEE COULD NOT SUBSTANTIATE EITHE R BEFORE AO OR BEFORE LD. CIT(A) THE DISALLOWANCE WAS UPHELD. 10. BEFORE US LD. AR OF THE ASSESSEE SUBMITTED THAT THE P AYMENT IS COVERED UNDER RULE 6DD(K) BUT ACCORDING TO REVENUE PROVISION OF RULE 6DD(K) ARE NOT APPLICABLE. 11. WE HAVE HEARD BOTH THE PARTIES UNDER RULE 6DD(K) NO DISALLOWANCE U/S 40A(3) SHALL BE MADE AND NO PAYMENT SH ALL BE DEEMED TO BE THE PROFIT AND GAINS OF BUSINESS OF PROFESSI ON WHERE A PAYMENT OR AGGREGATE OF PAYMENT MADE TO A PERSON OTH ERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON BANK OR ACCOUNT PAYEE DEMAND DRAFT EXCEEDS ` 20 000/- IN THE CASES WHERE TH E PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAK E PAYMENT IN CASH FOR GOODS OF SERVICES ON BEHALF OF SUCH PERSONS. NEIT HER BEFORE AO NOR BEFORE LD. CIT(A) OR BEFORE US LD. AR OF THE ASSESSEE COULD GIVE THE DETAILS SO AS TO PROVE AS TO HOW THE PAYMENT W AS REQUIRED TO 10 BE MADE IN CASH FOR GOODS OR SERVICES BY THE AGENT ON B EHALF OF THE ASSESSEE. IN THE ABSENCE OF ANY SUCH DETAILS IN OUR CONSIDE RED OPINION PROVISION OF RULES 6DD(K) CANNOT BE APPLIED. SINCE TH E ASSESSEE HAD NOT BEEN ABLE EXPLAIN THE CIRCUMSTANCES UNDER WHICH T HE PAYMENT IN CASH WAS MADE BY ASSESSEES AGENT IN OUR CONSIDERED OPINION LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE. A CCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT (A). 12. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 30 TH MARCH 2012. SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (K.D. RANJAN) ACCOUNTANT MEMBER DATED : 30.3.2012 VEENA COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER DEPUTY REGISTRAR ITAT