The ACIT, 2(1), v. M/s Kamla Hotels & Properties P. Ltd.,

ITA 644/IND/2004 | 1998-1999
Pronouncement Date: 23-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 64422714 RSA 2004
Assessee PAN AABCK6380K
Bench Indore
Appeal Number ITA 644/IND/2004
Duration Of Justice 5 year(s) 8 month(s) 14 day(s)
Appellant The ACIT, 2(1),
Respondent M/s Kamla Hotels & Properties P. Ltd.,
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 23-04-2010
Date Of Final Hearing 13-04-2010
Next Hearing Date 13-04-2010
Assessment Year 1998-1999
Appeal Filed On 09-08-2004
Judgment Text
- 1 - IN THE INCOME TAX APPELATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER ITA NO. 644/IND/04 A.Y. 1998-99 ASSTT. COMMR. OF INCOMETAX 2(1) BHOPAL APPELLANT VS M/S KAMLA HOTELS & PROPERTIES PVT. LTD. BHOPAL PAN AABCK 6380 K RESPONDENT APPELLANT BY SMT. APARNA KARAN SR. DR RESPONDENT BY SHRI H.P. VERMA AND SHRI ASHISH GOYAL CA O R D E R PER V.K. GUPTA ACCOUNTANT MEMBER THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COMETAX (APPEALS) DATED 28 TH MAY 2004 FOR THE ASSESSMENT YEAR 1998- - 2 - 1999 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PER USED THE MATERIAL ON RECORD. 3. GROUND NO. 1 RELATES TO TREATING THE SALE PROCEE DS OF FLATS AND SHOPS UNDER THE HEAD CAPITAL GAINS BY T HE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AS AGAINST BUS INESS INCOME TREATED BY THE ASSESSING OFFICER. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPA NY ENTERED INTO JOINT VENTURE AGREEMENT WITH SAMRADHI BUILDERS ROHIHT BUILDERS ASHOKA & COMPANY AND TILAKRAJ &N S ONS AS PER WHICH THESE PARTIES WERE TO UNDERTAKE THE WORK OF CONSTRUCTION OF SHOPS AND FLATS ON THE LAND OWNED B Y THE ASSESSEE. AS PER THE AGREEMENT THESE PARTIES WERE TO MAKE THE INVESTMENTS IN THE CONSTRUCTION AND AFTER THE C ONSTRUCTION WAS OVER THE ASSESSEE AND THESE PARTIES WOULD SHAR E THE SHOPS AND FLATS. DURING THE YEAR UNDER CONSIDER ATION THE ASSESSEE SOLD 19 FLATS AND RECEIVED SALE CONSIDERAT ION OF RS. 39 54 500/- ON WHICH A NET PROFIT OF 8% AMOUNTI NG TO RS. 3 16 360/- WAS DECLARED. THE ASSESSEE AFTER DEDUC TING THE NET PROFIT FROM THE TOTAL RECEIPTS TREATED THE BAL ANCE AMOUNT OF RS.36 38 140/- IN EXCHANGE FOR TRANSFER OF CAPITAL ASSETS BY THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE - 3 - HAD WORKED OUT RS.31 76 732/- AS TAXABLE CAPITAL GAINS AND RS.1 56 284/- AS BUSINESS INCOME FROM THE SALE OF FLATS AND SHOPS. THE ASSESSING OFFICER OBS ERVED THAT THE ASSESSEE COMPANY WAS INCORPORATED FOR THE EXPLI CIT PURPOSE OF CARRYING ON THE BUSINESS OF CONSTRUCTION OF BUILDINGS AFTER ACQUIRING LAND AND SELLING THE SA ME. THE MEMORANDUM OF ASSOCIATION CLEARLY LAID DOWN THE OBJ ECT OF THE ASSESSEE COMPANY IN JOINT VENTURE AS CONSTRUCTION AND SALE OF SHOPS AND FLATS ON THE LAND OWNED BY IT. HE FUR THER NOTED THE CERTAIN VITAL OBJECTS OF THE ASSESSEE COMPANY A S UNDER :- OBJECT NO. 2 . TO ACQUIRE THE PIECES OF LAND SITUATED IN BHOPAL O F THE PROMOTERS OF THE COMPANY AND TO CONSTRUCT BUILDING OR BUILDINGS ON SUCH LAND TO SUIT THE NEEDS OF MARKET COMPLEX OFFICE BUILDINGS AND HOTEL. OBJECT NO. 4 TO SELL SUCH PORTION OF BUILDINGS CONSTRUCT ON SUC H LAND OBJECT NO. 14 TO ENTER IN THE PARTNERSHIP OR ANY OTHER AGREEMENT FOR - 4 - SHARING PROFITS UNION OF INTEREST JOINT VENTURES .. IN ANY BUSINESS OR TRANSACTION WHICH THIS COMPANY IS AUTHORISED TO CARRY ON. IN VIEW OF THE OBJECTS AFORESTATED THE ASSESSING OFFICER HELD THAT PURCHASE OF LAND CONSTRUCTION OF FLATS/SHOPS ON THE SAME AND FINALLY SELLING THESE ARE PART OF THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER ACCORD INGLY CAME TO THE CONCLUSION THAT THE ASSESSEE COMPANY WA S DOING BUSINESS IN ACCORDANCE WITH LAW AND THE OBJECTS LAI D DOWN IN THE MEMORANDUM IN A SYSTEMATIC MANNER. HE THEREFO RE TREATED THE ENTIRE GROSS RECEIPTS OF RS. 39 54 500/ - ON ACCOUNT OF SALE OF FLATS AND SHOPS AS REVENUE RECEIPT AND T REATED THE SAME UNDER THE HEAD PROFITS & GAINS OF BUSINESS. 5. FELT AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AND FILED WRITTEN SUBMISSIONS. MOREOVER IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE COMPANY WAS INCORPORATE D ON 7 TH OCTOBER 1977 WITH ITS MAIN OBJECTION VIDE OBJECT N O. 1 AS RUNNING OF HOTEL AND HOTEL RESTAURANT OR SIMILAR OT HER BUSINESS OR BUSINESSES AS MENTIONED IN THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE COMPANY FOR WHICH THE A SSESSEE COMPANY IS ESTABLISHED. THE ASSESSEE APART FROM HI GH- - 5 - LIGHTING THE OTHER ANCILLARY OBJECTS SUBMITTED THA T THE ASSESSING OFFICER HAS OVERLOOKED THIS FIRST AND PRI MARY OBJECT FOR WHICH THE ASSESSEE COMPANY WAS CONSTITUTE. IT W AS ALSO SUBMITTED THAT THE ASSESSEE COMPANY WITH A VIEW TO START CONSTRUCTION OF ITS HOTEL APPLIED FOR PROJECT REPO RT IN THE OFFICE OF M.P. CONSULTANCY ON 31.12.1984 AND INCURRED A SU BSTANTIAL SUM FOR THE IMPROVEMENT OF THE LAND BUT BECAUSE OF VARIOUS CONSTRAINTS THE ASSESSEE COMPANY COULD NOT ACHIEVE ITS OBJECT. THE ASSESSEE COMPANY THEREFORE WITH A VI EW TO ACHIEVE ITS OBJECT ENTERED INTO A JOINT VENTURE WI TH FOUR DIFFERENT CONCERNS (SUPRA) FOR CONSTRUCTION OF FLAT S AND SHOPS ON THE LAND FOR CONSIDERATION AGAINST WHICH THE ASS ESSEE COMPANY GOT CERTAIN FLATS AND SHOPS. THE ASSESSEE COMPANY SOLD 18 FLATS AND 1 SHOP AND RECEIVED AN AMOUNT OF RS. 39 54 500/- (RS. 32 45 000/- STRUCTURAL LEVEL AND R S. 7 09 500/- FINISHED CONSTRUCTION) FROM TWO CONCERNS I.E. M/S S AMRADHI BUILDERS AND M/S ASHOKA & COMPANY OUT OF THE ABOVES TATED FOUR CONCERNS. 6.1 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) THA T THE ASSESSING OFFICER HAD WRONGLY ASSESSED THE SALE PRO CEEDS AS BUSINESS INCOME AGAINST CAPITAL GAINS DECLARED BY T HE - 6 - ASSESSEE. IT WAS ALSO SUBMITTED THAT BECAUSE OF TH E CONSTRAINTS THE ASSESSEE COMPANY COULD NOT START CONSTRUCTION ACTIVITIES AND WITH A VIEW TO ACHIEVE ITS OBJECT THE ASSESSEE COMPANY HAD NO CHOICE BUT TO ENTER INTO A JOINT VENTURE (SUPRA) AND TO GET THE FLATS AND SHOPS CON STRUCTED ON THE LAND OWNED BY IT. IT WAS ALSO PLEADED THAT HE DID NOT CONSIDER THE MAIN OBJECTS OF THE ASSESSEE COMPANY A ND AS SUCH HE WAS NOT JUSTIFIED IN CONCLUDING THAT THE IN COME WAS FROM AN ADVENTURE IN THE NATURE OF TRADE. IT WAS FU RTHER SUBMITTED THAT HAD THE CONSTRUCTION OF BUILDING AND SELLING THEREOF BEEN ITS MAIN OBJECT THE ASSESSEE COMPANY WOULD NOT HAVE WAITED FOR SO MANY YEAR TO TAKE THE DECISION O F ENTERING INTO JOINT VENTURE AND THIS DECISION WAS TAKEN AS T HE ASSESSEE COMPANY DID NOT HAVE ANY ALTERNATIVE WITH IT. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO INVITED THE ATTENTION OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) TO THE FOLLOWING JUDICIAL PRONOUNCEMENTS IN SUPPORT HIS STAND :- (I) CIT V. ASIAN DRY DOCK CO.; 108 ITR 822 (BOM) (II) CIT V. PKN CO. LTD.; 60 ITR 65 (SC) (III) LAXMINARAYAN RAM GOPAL & SONS LTD.; 25 ITR 4 49 (SC) (IV) BALGOWINE LAND TRUST LTD. V. IRC; 14 TC 684 (E NG. CASE) (V) CIT V. KASTURI ESTATES (P) LTD.; 62 ITR 578(MAD ) (VI) CIT V. RAJASTHAN MINES LTD.; 78 ITR 45 (SC) (VII) GORDHANDAS TIRKAMBHAI PATEL & ANR.V.CIT; 118 ITR - 7 - 81 (GUJ) (VIII) BARAMATI TULKA SAHAKARI DOODH PURVATHA SANGH ;75 ITD 284 (IX) ITO V. SMT.SARASWATIBAI JAISWAL; 60 TTJ (JAB) 189 6.2 THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AFTER CONSIDERING THE WRITTEN SUBMISSIONS AND THE ARGUMEN TS OF THE ASSESSEE IN VIEW OF THE FACTS OF THE CASE AND THE LEGAL PRONOUNCEMENTS CITED BEFORE HIM HELD THAT THE ACTI VITIES OF THE ASSESSEE COMPANY WERE NOT FOR THE PURPOSE OF BU SINESS OR TRADE AS THE ASSESSEE COMPANY HAS NEVER PURCHAS ED ANY OTHER LAND EXCEPT THE LAND PURCHASED IN THE YEAR 19 83-84 ON WHICH THE FLATS AND SHOPS WERE CONSTRUCTED UNDER CO MPELLING CIRCUMSTANCES. IT WAS ALSO OBSERVED BY LEARNED COMM ISSIONER OF INCOMETAX (APPEALS) THAT THE ASSESSEE COMPANY AL SO MADE VARIOUS EFFORTS FOR OBTAINING PERMISSION FROM THE M UNICIPAL CORPORATION BHOPAL FOR CONSTRUCTION OF HOTEL BUIL DING. HE FURTHER HELD THAT THE JOINT VENTURE AGREEMENT EXECU TED BETWEEN THE ASSESSEE COMPANY AND THE BUILDERS ON TH E STAMP WORTH RS. 20/- WAS VALID AS BOTH THE PARTIES TO THE AGREEMENT HAD ADHERED TO THE TERMS AND CONDITIONS AS MENTIONE D THEREIN. IT WAS ALSO OBSERVED THAT THE PARTNERS/PR OPRIETORS OF THE JOINT VENTURE AGREEMENT WERE ALSO NOT THE FAMIL Y MEMBERS BECAUSE SOME PERSONS BELONGED TO OTHER FAMILY NOT R ELATED TO - 8 - THE MD OF THE ASSESSEE COMPANY AND SOME PERSONS WER E FROM OTHER COMMUNITY. THE BOOKS OF ACCOUNT OF THE A SSESSEE COMPANY HAD DULY BEEN AUDITED. THE INCOME HAD BEEN SHOWN FROM SALE OF FLATS AND SHOPS SALE OF GRASS AND FRO M HOUSE PROPERTY. THE NET PROFIT SHOWN @ 8% IS TRUE AND CO RRECT BECAUSE THIS HAS BEEN SHOWN ON SALE OF FLATS AND SH OPS. SINCE THE BOOKS OF ACCOUNT HAD BEEN AUDITED THEREF ORE THE CLAIM OF EXPENSES WAS ALSO TO BE CONSIDERED. HE TH EREFORE CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE HELD THAT THE INCOME ARISING OUT OF THE SALE PROCEE DS OF FLATS AND SHOPS WAS ASSESSABLE UNDER THE HEAD CAPITAL GA INS . 7. NOW THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ABOVE FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 7A. ON THE OTHER HAND THE LEARNED SENIOR DEPARTMEN TAL REPRESENTATIVE SUBMITTED THAT THE ORIGINAL INTENTI ON OF THE ASSESSEE COMPANY WAS ALWAYS TO CONSTRUCT A HOTEL ON THE SAID PIECE OF LAND AND IN THE UNAVOIDABLE CIRCUMSTA NCES THE ASSESSEE ENTERED INTO A JOINT VENTURE FOR THE CONST RUCTION OF SHOPS/FLATS ON SUCH PIECE OF LAND AND THEREFORE H AVING REGARD TO THE ORIGINAL/INITIAL INTENTION THE TRANSACTIONS ARISING TO THE ASSESSEE COMPANY FROM SUCH ACTIVITY WERE TO BE TRE ATED AS - 9 - CAPITAL GAIN ONLY. THE LEARNED COUNSEL FOR THE ASS ESSEE ALSO SUBMITTED THAT THE ASSESSEE COMPANY INFACT MADE SUBSTANTIAL EFFORTS TO CONSTRUCT THE HOTEL AND IN T HIS REGARD REFERRED TO PAGES 13 AND 14 OF THE APPELLATE ORDER WHEREIN THE ASSESSEES EFFORTS TO GET VARIOUS APPROVAL FROM THE CONCERNED AUTHORITIES AT DIFFERENT POINT OF TIME WERE MENTIONED. HENCE THE ASSESSING OFFICERS OBSERVATI ON THAT THE ASSESSEE COMPANY DID NOT MAKE EFFORTS TO OPEN T HE HOTEL ON THE SAID LAND WAS NOT CORRECT. THE LEARNED COUN SEL FOR THE ASSESSEE FURTHER DREW OUR ATTENTION TO THE MAIN OBJ ECT AS MENTIONED IN THE MEMORANDUM OF ASSOCIATION OF THE A SSESSEE COMPANY AND SUBMITTED THAT THE ASSESSEE COMPANY PERSUADED ONLY MAIN OBJECT RELATING TO CONSTRUCTION OF HOTEL ON THE SAID PIECE OF LAND. HE FURTHER PLACED RELIANCE ON THE ORDER OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS). 7B. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS O F THE AUTHORITIES BELOW. WE HAVE ALSO PERUSED THE MEMORAN DUM OF ASSOCIATION OF THE ASSESSEE COMPANY WHEREIN THE MAI N OBJECT CLAUSE NO. 4 GIVES THE POWER TO THE ASSESSEE COMPAN Y TO ENTER INTO CONSTRUCTION BUSINESS. WE HAVE ALSO PER USED THE SEQUENCE OF EVENTS AND THE EFFORTS MADE BY THE ASSE SSEE - 10 - COMPANY TO CONSTRUCT THE HOTEL ON THE SAID PIECE OF LAND. HOWEVER IN OUR VIEW THE MAIN OBJECT CLAUSES AND S UCH EFFORTS CANNOT BE SO BINDING SO AS TO IGNORE THE ACTUAL CON DUCT OF THE ASSESSEE. IT IS ALSO PERTINENT TO MENTION THAT ONL Y CHANGE IS CONSTANT AND IN THE PRESENT CASE DUE TO NON-APPROV AL BY THE CONCERNED AUTHORITY THE ASSESSEE HAS CHANGED ITS B USINESS PLAN THOUGH AFTER SUBSTANTIAL EFFORTS OF CONSTRUCT ING A HOTEL. THE INTENTION OF THE ASSESSEE TO ENTER INTO BUSINES S ACTIVITY OF CONSTRUCTION OF FLATS AND SHOPS AS EVIDENT BY THE FACT THAT THE ASSESSEE HAS ITSELF OFFERED THE INCOME FROM THE SAM E TRANSACTIONS PARTLY AS BUSINESS PROFIT AND PARTLY A S CAPITAL GAIN. WE FURTHER FIND THAT THIS IS THE FIRST YEAR OF SUCH OPERATION AND IN THE SUBSEQUENT YEARS AS STATED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON ENQUIRY FROM T HE BENCH THE ASSESSEE COMPANY HAS SOLD A NUMBER OF SHOPS/FLA TS. IT IS ALSO A SETTLED PRINCIPLE THAT TO REACH TO A CONCLUS ION THE FACTS FROM THE BEGINNING TILL THE END HAVE TO BE TAKEN IN TO CONSIDERATION AND IF THE SUBSEQUENT YEARS EVENTS O F CONSTRUCTION AND SALE OF FLATS/SHOPS ARE ALSO CONSI DERED THEN IT IS ABUNDANTLY CLEAR THAT THIS IS A CASE OF ORGAN ISED BUSINESS ACTIVITY WHETHER TAKEN VOLUNTARILY OR UNVOLUNTARILY . ONCE IT IS SO THEN IN OUR VIEW THE PROFITS FROM SUCH ACTIVI TY SHOULD BE - 11 - ASSESSED AS BUSINESS PROFITS. WE ALSO HOLD THAT TH E MERE FACT THAT THE ASSESSEE HAS NOT PURCHASED ANY OTHER LAND WOULD NOT ALTER THIS POSITION. HENCE THE VIEW OF THE LE ARNED COMMISSIONER OF INCOMETAX (APPEALS) ON THE BASIS OF THE FACT THAT THE ASSESSEE HAD NOT PURCHASED ANY PIECE OF LA ND IN OUR OPINION IS NOT CORRECT. 7C. IN THE RESULT THIS GROUND OF THE REVENUE STAN DS ALLOWED. 8. GROUND NO. 2 RELATES TO DELETION OF THE AMOUNT O F RS.7 39 000/- RECEIVED ON ACCOUNT OF BOOKING OF FLA TS AND SHOPS AS UNEXPLAINED CASH CREDIT BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS). 9. THE FACTS IN BRIEF ARE THAT THE ASSESSING OFFI CER DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT IN THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER APPEAL THE ASSESSEE COMPANY HAD ACCEPTED DEPOSITS OF RS.7 39 000/- FROM THE OUTSIDE PARTIES. HE FURTHER OBSERVED THAT THE NATURE OF THESE DEPOSITS WAS STATED TO BE THE ADVANCE AGAINST SHOPS AND FLATS AND THE ASSESSEE WAS ASKED TO PRODUCE THE CONFIRMATION LETTERS FROM THESE CREDITO RS ALONG WITH IDENTITY GENUINENESS OF THE TRANSACTION AND C REDIT WORTHINESS. ON EXAMINATION OF CONFIRMATION LETTERS IT WAS FOUND BY HIM THAT THESE ARE INCOMPLETE IN MANY RESP ECTS SUCH - 12 - AS AMOUNT MODE OF TRANSACTION ETC. AND THE IDENTI TY OF THE CREDITORS AND THEIR CREDIT WORTHINESS AS WELL AS NO ORIGINAL LETTERS WERE PRODUCED. THE ASSESSING OFFICER ACCOR DINGLY ADDED THE ABOVE SUM OF RS.7 39 000/- TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CREDIT ENTRIES WITHIN THE M EANING OF SECTION 68 OF THE ACT . 10. ON APPEAL IT WAS SUBMITTED BEFORE THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) THAT THE ASSESS EE HAD GIVEN FULL DETAILS OF ADVANCES OF RS. 7 00 500/- RS .3 10 500/- AND RS. 7 39 000/- RECEIVED DURING THE ASSESSMENT Y EARS 1996-97 1997-98 AND 1998-99 RESPECTIVELY. THE AS SESSING OFFICER HAD ALSO IN HIS REMAND REPORT SPECIFIED C OMPLETE NAMES AND ADDRESSES OF THE DEPOSITORS MODE OF DEPO SITS CHEQUE NUMBERS AND ALSO THE MODE OF REPAYMENT. IT W AS THEREFORE PLEADED BEFORE THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE SAME AS UNEXPLAINED AND A DDING IT TO THE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT . 11. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE REMAND REPORT FURNISHED BY THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD FILED THE DETAILS OF THE TOTAL CREDITS OF RS. - 13 - 7 39 000/-. HE ALSO RECONCILED THE ADVANCE DEPOSIT S FROM THE STATEMENTS FURNISHED BY THE ASSESSEE BEFORE HIM. TH E LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AFTER CONSIDER ING THESE FACTS HELD THAT THE ASSESSING OFFICER WAS NOT JUST IFIED IN TREATING THE DEPOSITS OF RS.7 39 000/- AS UNEXPLAIN ED WITHIN THE MEANING OF SECTION 68 OF THE ACT. 12. AGAINST THE ABOVE FINDINGS OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) THE REVENUE HA S COME UP IN APPEAL BEFORE US. 12A. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIV E PLACED STRONG RELIANCE ON THE ORDER OF THE ASSESSIN G OFFICER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE PLACED STRONG RELIANCE ON THE ORDER OF THE LEARNED COMMISSIONER O F INCOMETAX (APPEALS). 12B. WE FIND THAT A NOTICE UNDER SECTION 251(2) OF THE ACT WAS ALSO ISSUED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) IN REGARD TO THE ADVANCES RECEI VED BY THE ASSESSEE AGAINST BOOKING OF FLATS AND SHOPS. W E ALSO FIND THAT THE SUCCEEDING LEARNED COMMISSIONER OF INCOMET AX (APPEALS) HAS ALSO TAKEN INTO CONSIDERATION VARIOUS FACTS EMERGING FROM SUCH ACTION AS ALSO THE EARLIER REPOR T SUBMITTED BY THE ASSESSING OFFICER. WE FURTHER FIND THAT THE ASSESSEE - 14 - COMPANY HAS SUBMITTED THE DETAILS OF TOTAL DEPOSITS RECEIVED BY THE ASSESSEE FROM THE ASSESSMENT YEARS 1996-97 T O 1998- 99 AND A PROPER RECONCILIATION HAS ALSO BEEN MADE. IT IS ALSO NOTED THAT THE AMOUNT SO RECEIVED HAS BEEN ADJUSTED AGAINST THE SALE CONSIDERATION OF FLATS AND SHOPS CONSTRUCT ED BY THE ASSESSEE. IT IS FURTHER TO BE NOTED THAT THE FINDI NGS OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) WHILE DELETING THE ADDITION HAVE REMAINED UNCONTROVERTED. IN VIE W OF THESE FACTS WE FIND NO INFIRMITY IN THE ORDER OF THE LEA RNED COMMISSIONER OF INCOMETAX (APPEALS). ACCORDINGLY WE CONFIRM THE DECISION OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS). THUS THIS GROUND OF THE REVE NUE IS ALSO DISMISSED. 13. GROUND NO. 3 RELATES TO DELETION OF ADDITION OF RS. 1 60 331/- BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) WHICH WAS MADE BY THE ASSESSING OFFICER O N ACCOUNT OF VARIOUS EXPENSES. 14. THE FACTS IN BRIEF ARE THAT THE ASSESSEE CLAI MED TOTAL EXPENSES OF RS.1 17 601/- UNDER DIFFERENT HEADS EXC LUDING DEPRECIATION ON CAR OF RS. 42 730/- (WRONGLY MENTIO NED BY THE ASSESSING OFFICER AT RS.46 340/-). THE ASSESSING OF FICER NOTED THAT DURING THE ASSESSMENT PROCEEDINGS NO BIL LS AND - 15 - VOUCHERS WERE PRODUCED BEFORE HIM. HE THEREFORE DISALLOWED THE CLAIM OF THE ASSESSEE. 15. ON APPEAL IT WAS SUBMITTED BY THE ASSESSEE BEF ORE THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) THAT T HE BOOKS OF ACCOUNTS ALONG WITH BILLS AND VOUCHERS WERE PROD UCED BEFORE THE ASSESSING OFFICER. COPIES OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET WERE ALSO FILED. IT WAS FURTHER CONTENDED THAT THE ASSESSEE WAS A COMPANY AND THE B OOKS OF ACCOUNT WERE AUDITED AND THE EXPENSES HAD BEEN FULL Y INCURRED FOR THE PURPOSE OF BUSINESS. 16. THE LEARNED FIRST APPELLATE AUTHORITY AFTER CO NSIDERING THE DETAILS OF EXPENSES FOUND THAT THE BOOKS OF AC COUNTS OF THE ASSESSEE WERE AUDITED AND THE ASSESSEE HAS INCL UDED THE BUSINESS INCOME OF RS. 3 16 360/- ON SALE OF FLATS. AS SUCH THERE WERE BOUND TO BE CERTAIN EXPENSES. HE FURTHE R HELD THAT SINCE THE ASSESSEE HAD PRODUCED COPIES OF VOUCHERS/ BILLS THERE WAS NO IRREGULARITY IN CLAIMING THE SAID EXPE NSES. HE THEREFORE DELETED THE ADDITION OF RS.1 60 331/- MA DE BY THE ASSESSING OFFICER. 17. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 17A. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIV E PLACED STRONG RELIANCE ON THE ORDER OF THE ASSESSIN G OFFICER - 16 - WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE PLACED STRONG RELIANCE ON THE ORDER OF THE LEARNED COMMISSIONER O F INCOMETAX (APPEALS). 17B. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS O F THE AUTHORITIES BELOW. IT IS NOTED THAT THE ASSESSING O FFICER DISALLOWED THESE EXPENSES FOR WANT OF BILLS AND VOU CHERS AND THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) HAS DELETED THE ADDITION FOR THE REASON THAT THE BOOKS OF ACCOU NT OF THE ASSESSEE WERE AUDITED AND THE ASSESSEE PRODUCED THE COPY OF THE VOUCHERS BEFORE HIM WHICH REVEALED THAT THE RE WAS NO IRREGULARITY IN CLAIMING THE SAID EXPENSES. THESE FINDINGS OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) HAV E REMAINED UNCONTROVERTED BEFORE US HENCE WE CONFIR M THE SAME 17C. THUS THIS GROUND OF THE REVENUE IS ALSO DISM ISSED. 18. THE NEXT GROUND RELATES TO ALLOWING THE SET OFF OF EARLIER LOSS BY THE LEARNED COMMISSIONER OF INCOMETAX (APPE ALS). 19. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN T HE RETURN OF INCOME CLAIMED DETERMINED LOSS OF RS. 91 450/- TO B E BROUGHT FORWARD FROM THE PREVIOUS ASSESSMENT YEAR. THE ASS ESSING OFFICER WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) OF - 17 - THE ACT DID NOT GIVE SET OFF OF LOSS OF RS. 91 45 0/- WITHOUT MENTIONING ANY REASON THEREFOR. 20. ON APPEAL THE ASSESSEE IN SUPPORT OF ITS CLAI M FILED A COPY OF THE ASSESSMENT ORDER DATED 28 TH MARCH 2003 FOR THE EARLIER ASSESSMENT YEAR I.E. 1997-98. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) CONSIDERING TH E SAME DIRECTED THE ASSESSING OFFICER TO ALLOW SET OFF AGA INST THE BUSINESS INCOME FOR THE ASSESSMENT YEAR 1998-99. 21. AGAINST THE ABOVE FINDING OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) THE REVENUE IS IN APPEAL BEFORE US. 21A. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATI VE PLACED STRONG RELIANCE ON THE ORDER OF THE ASSESSIN G OFFICER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE PLACED STRONG RELIANCE ON THE ORDER OF THE LEARNED COMMISSIONER O F INCOMETAX (APPEALS). 21B. ON CONSIDERATION OF FACTS AND CIRCUMSTANCES O F THE CASE AND THE ARGUMENTS ADVANCED BY THE PARTIES WE FIND NO INFIRMITY IN THE FINDINGS OF THE LEARNED COMMISSION ER OF INCOMETAX (APPEALS) HENCE WE DISMISS THIS GROUND OF THE REVENUE. - 18 - 22. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD APRIL 2010 SD SD (JOGINDER SINGH) (V.K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER APRIL 23 2010 COPY TO APPELLANT RESPONDENT CIT CIT(A) DR GUA RD FILE *DN/